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620 Notes to Chapter 20

Sections 105 and 365 of the Bankruptcy Code to Establish Procedures for the Settlement or Assumption
and Assignment of Prepetition Derivatives Contracts, Lehman Brothers Holdings Inc., et al., No. 08-
13555 (Bankr. S.D.N.Y. Nov. 13, 2008) [Docket No. 1498], p. 4; Debtors’ Motion for an Order Approving
Consensual Assumption and Assignment of Prepetition Derivatives Contracts, Lehman Brothers Hold-
ings Inc., et al., No. 08-13555 (Bankr. S.D.N.Y. Jan. 16, 2009) [Docket No.2561], p. 3.
9. Money market fund holdings of all types of taxable commercial paper decreased from $671 billion
at the end of August 2008 to $505 billion at the end of September (data provided by ICI/Crane to the
FCIC). BNY Mellon, in its role as tri-party clearing bank, reported that Treasury-backed repos rose from
$195 billion (13%) to $466 billion (27%) of its tri-party business between March 31 and December 31,
2008 (data provided by BNY Mellon to the FCIC).
10. Harvey Miller, interview by FCIC, August 5, 2010.
11. The Reserve Fund, Semi-annual report to shareholders, March 2006.
12. Complaint, SEC v. Reserve Management Company Inc., Resrv Partners Inc., Bruce Bent Sr., Bruce
Bent II, and The Reserve Primary Fund (S.D.N.Y. May 5, 2009), p. 12 (para. 35); “Fidelity, BlackRock,
Dreyfus, Reserve Make Big Gains Past 12 Months,” Crane Data News Archives, September 12, 2008.
13. The Reserve Primary Fund management, interview by FCIC, March 25, 2010.
14. SEC Complaint against Reserve Management Company Inc., pp. 2, 18 (paras. 3, 59), p. 30 (para.
101); The Reserve, “The Primary Fund: Plan of Liquidation and Distribution of Assets,” December 3,
2008, p. 2.
15. SEC Complaint, pp. 26–33 (paras. 88–113); The Reserve, “The Primary Fund: Plan of Liquida-
tion,” p. 2.
16. SEC Complaint, p. 35 (para. 121). The SEC notes that the Primary Fund likely broke the buck
prior to 11:00 A.M. on September 16 because of the redemption requests and the valuation of Lehman’s
debt; moreover, RMCI announced on November 26, 2008, that owing to an administrative error, its NAV
should have been calculated as $0.99 between 11:00 A.M. and 4:00 P.M. on September 16 (pp. 34–33, paras.
119, 120).
17. Moody’s Investors Service articles, “Sponsor Support Key to Money Market Funds,” August 9,
2010, p. 4; “Moody’s Proposes New Money Market Fund Rating Methodology and Symbols,” September
7, 2010.
18. Patrick McCabe and Michael Palumbo, interview by FCIC, September 28, 2010.
19. Ibid.
20. Investment Company Institute, Historical Weekly Money Market Data. While nongovernment
funds lost $434 billion during the period between September 10 and October 1, 2008, government
funds—investing in Treasuries and GSE debt—increased by $357 billion during the same period.
21. McCabe and Palumbo, interview.
22. FCIC survey of money market mutual funds. Holdings for the five firms decreased from $58 bil-
lion to $29 billion from September 12, 2008, to September 19, 2008. See FCIC website for details.
23. Timothy Geithner, testimony before the FCIC, Hearing on the Shadow Banking System, day 2,
session 2: Perspective on the Shadow Banking System, May 6, 2010, transcript, p. 135.
24. McCabe and Palumbo, interview.
25. “Treasury Announces Guaranty Program for Money Market Funds,” Treasury Department press
release, September 19, 2008. President George W. Bush approved the use of existing authorities by Secre-
tary Henry M. Paulson Jr. to make available as necessary the assets of the Exchange Stabilization Fund
(ESF) for up to $50 billion to guarantee payments to support money market mutual funds. The original
objective of the ESF, established by the Gold Reserve Act of 1934, was to stabilize the value of the dollar
in the depths of the Depression. It authorized the treasury secretary, with the approval of the president, to
“deal in gold, foreign exchange, and other instruments of credit and securities” to promote international
financial stability.
26. The program was called the Asset-Backed Commercial Paper Money Market Mutual Fund Liq-
uidity Facility (AMLF).
27. Neel Kashkari, interview by FCIC, November 2, 2010.
28. John Mack, interview by FCIC, November 2, 2010.
29. New York Federal Reserve, internal email, October 22, 2008, p. 2.
30. David Wong, email to Fed and SEC officials, September 15, 2008.