How The Covid Shock Nearly Destroyed The Financial System
Why the Federal Reserve had to step in again to sop runs on money market mutual funds and keep the financial system from imploding.
Topics covered include:
- What are the differences between shocks and vulnerabilities
- What are the four main vulnerabilities the Federal Reserve monitors
- How deleveraging and demands for liquidity lead to market stresses
- What are the types of money market funds and how were they impacted by the Covid 19 shock
- How was Treasury bond trading impacted by the Covid shock
- Why the Federal Reserve stepped in to stop the market contagion from spreading
- What are the downsides to central bank interventions
- What individual investors can do to protect against future shocks
For more information on this episode click here.
U.S. Credit Markets Interconnectedness and the Effects of the COVID-19 Economic Shock by S.P. Kothari, Dalia Blass, Alan Cohen, Sumit Rajpal, and SEC Research Staff—U.S. Securities and Exchange Commission