Client Alert

Federal Reserve Announces Money Market Investor Funding Facility

November 03, 2008

The Investment Management Practice

On October 21, 2008, the Federal Reserve announced the creation of the Money Market Investor Funding Facility (MMIFF), a credit facility designed to support a private sector initiative to help provide liquidity to money market funds. Pursuant to the MMIFF, money market funds needing liquidity in order to meet redemption requests will be able to sell certain commercial paper, bank notes and certificates of deposit having remaining maturities of 90 days or less and satisfying certain ratings criteria (Eligible Assets) to special purpose vehicles (SPVs) administered by J.P. Morgan Securities Inc. (JPMSI). These SPVs have entered into liquidity arrangements with the Federal Reserve Bank of New York (Fed Reserve of NY) which will provide the necessary financing to the SPV to make these purchases. Money market funds selling Eligible Assets to the SPV will receive cash and asset-backed commercial paper of the SPVs (Commercial Paper Notes). The MMIFF will provide up to $600 billion to SPVs to purchase Eligible Assets. The SPVs will cease purchasing Eligible Assets on April 30, 2009, unless the Federal Reserve extends the MMIFF.

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