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Mutual fund companies such as BlackRock, BNY Mellon, T. Rowe Price, Dreyfus and Legg Mason took advantage of federal assistance. Banks that provide money market funds to customers — including JPMorgan Chase, Goldman Sachs, Morgan Stanley and Wells Fargo — also participated.
Despite the enormous size of the guarantees, the Treasury collected only $1.2 billion in fees from the participating funds. By Wilson’s calculation, most participating funds paid just 0.04 percent, or 4 basis points, for a year’s worth of insurance.
Treasury used $50 billion from an account set aside for exchange rate stabilization to fund the program. Those funds can be spent at the Treasury Secretary’s discretion—even when it takes a pretty creative logical leap to connect the expenditures to exchange rates.
“Clearly, the tie between exchange rates and money-market mutual funds is very weak,” Wilson points out. “Moreover, it is not clear that $50 billion was enough to guarantee over $2 trillion in assets.”
Guaranteeing the money-market funds was not without risk. Although money-market funds have rarely seen their values drop below a dollar, guaranteeing the funds, it could be argued, encouraged moral hazard as investors lost the incentive to police the quality of fund management.
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