The Wall Street Journal recently wrote, "Money-​Market Funds Buckled in Two Crises in a Row. Regulators Look to Fix Them Again." The article comments, "The start of the Covid-​19 pandemic led to a familiar wave of stress in money-​market funds, which companies and consumers use like checking accounts to store their ready cash. The Federal Reserve had to step in to keep these funds operating. It was a dysfunction that wasn'​t meant to happen. Several rounds of reforms globally had aimed to strengthen money-​market funds after they buckled during the 2008 financial crisis. Now the Financial Stability Board, which brings together regulators from around the world, has proposed another round of changes in an attempt to minimize the likelihood that central banks ever have to step in and support markets. The FSB, which is chaired by Randal Quarles, the Fed'​s vice-​chair for supervision, is focusing on reforms that would discourage investors from pulling out cash at times of stress, or ensure the private-​sector, not taxpayers, support funds in a liquidity crisis. The latter could include requiring money funds to be backed by equity capital in the way that banks are -- although similar proposals have been rejected before. To discourage investors from running, other proposals would discount the value of shares in money funds when lots of investors all want to cash them in simultaneously." The Journal piece continues, "​The rush out of prime funds in March 2020 caused a crunch in short-​term corporate debt. Borrowing costs in this market rose to their highest levels since 2008, according to the President'​s Working Group on Financial Markets, which combines the Treasury, Securities and Exchange Commission, Federal Reserve and Commodity Futures Trading Commission.... Some money-​market fund managers think any fixes are bound to fail unless broader problems are addressed concerning the ease with which they can trade short-​term debts. 'Money-​market funds are only part of the puzzle,' said David Callahan, head of money markets at Lombard Odier Investment Managers.'" They also quote, "J. Christopher Donahue, chief executive of Federated Hermes, a major money-​market fund manager, said the Fed needs to play a part. The central bank could facilitate trading by allowing lenders to swap unwanted paper from good companies at the Fed'​s discount window for cash at any time, without stigma. '​It will never happen that the Fed won’​t have a role when market players have a crisis,” said Mr. Donahue.'"

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