Finally, the central role played by money market funds in the 2011 episode is a reminder of the fragility of these funds themselves – and of the risk created by their combination of risky asset holdings, stable-value demandable liabilities, and zero-capital buffers.
The events following the Lehman Brothers bankruptcy in 2008 provide even starker evidence of the risks that money market funds pose for the broader financial system. In light of these vulnerabilities, I welcome the recent proposed recommendations by the Financial Stability Oversight Council for further money market fund reforms.8 To conclude: Financial globalization undoubtedly brings with it substantial benefits.