Background: During the Global Financial Crisis in 2008/2009, Money Market Mutual Funds in the USA suffered a severe liquidity crisis. The crisis began when a large MMMF, the Reserve Primary Fund, "broke the buck" in September 2008. Please answer the following questions

Q1. What is a Money Market Mutual Fund (MMMF)? What do MMMFs invest in?

Q2. MMMFs are particularly popular in the USA. From an investors' perspective, what are the advantages and disadvantages of investing in MMMFs, compared to say, a bank deposit?

Q3. On September 16, 2008 (the day after the collapse of Lehman Brothers), the Reserve Primary Fund "broke the buck". What does this mean? Why did this happen? What subsequently happened to the Reserve Primary Fund?

Q4. This started a "run" on MMMFs. Some funds suffered more than others. Which funds were the most vulnerable? How did the MMMFs respond to this problem?

Q5. How did the run on the MMMFs affect the rest of the US economic system? [The Secretary of the Treasury, who played a major role in managing the GFC for the US Government, was Hank Paulson. He wrote a book called "On The Brink", which includes a section on the MMMF crisis]

Q6. What steps did the US government take to deal with this crisis? Was this intervention successful? Did this intervention have any disadvantages or risks?

Q7. After the crisis was over, there were several different proposals for stricter regulation of MMMFs, to prevent such problems from recurring. Describe three such proposals, and point out the pros and cons of each proposal.

Q8. What changes were actually made to the regulations governing MMMFs in the years after this liquidity crisis?

Q9. At present (March 2020), in response to the coronavirus pandemic, the Federal Reserve is once again taking action to support the MMMFs. Describe the recent developments in relation to MMMFs.

Note: in this assignment we have focussed on MMMFs in the USA. Some other countries also have liquidity problems with MMMFs. In Australia, ASIC did a study of our MMMFs and decided that no additional regulation was needed. If you are interested in this, you can look up Report 324 Money Market Funds on ASIC's website.