The shortcomings associated with either of these one-dimensional approaches demonstrate why liquidity regulation and LOLR should be viewed as complements and not substitutes.3  2  Note that financial entities that do not use debt financing can nevertheless experience liquidity pressures that are structurally similar to bank runs.
For example, in the context of various pooled investment vehicles, investors may have an incentive to redeem their shares early because the costs of the redemptions are effectively borne by remaining investors. The resulting “first-mover advantage” contributed to runs on money market mutual funds in the fall of 2008 and could, at least in theory, lead to runs on other open-end fund vehicles.