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The Fed is treating this run on the shadow financial system as a liquidity run but the Fed has no idea of whether such institutions are insolvent.
In other words, broker-dealers have largely exited their market making/liquidity buffer role in the high yield market leaving mutual/ETF fund, pension fund and hedge fund investors directly and immediately exposed to a liquidity run.
It was not a liquidity run, but a run on one major financial institution after another because the creditors to those institutions suspected that they were being taken or that other creditors had reached this conclusion and were going to get their money out first.
Similar(57)
On Wall Street, there would be margin calls, liquidity runs, and other disturbing developments that inevitably accompany market breaks.
The danger, however, is that this causes the sort of liquidity runs that wreaked havoc after the demise of Lehman Brothers last September.If bond investors are forced to share the pain, they may at least want some potential gain.
"Lehman has ample liquidity to run its business," Citi's analysts wrote in a report Friday.
"I doubt I'll be seriously hit but I'm sure my clientèle will drop as liquidity will run dry".
The audit put a fine point on previous disclosures by CDNow that its liquidity would run out before the end of the year.
We believe the most effective and transparent path for pre-IPO secondaries is through regular liquidity events run by private companies.
However millions of low income working class people, poor and roadside small businesses and traders hoard cash because they need the liquidity to run their lives and also, because there is no bank where they live.
Liquidity is running out, given the extensive deposit withdrawals over the last weeks due to political uncertainty (2,5 billion Euros in a month).
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com