JPMorgan Remains the Second Largest Money Market Fund Manager, Despite Needing Billions in Money Market Bailouts from the Fed in 2020

[Gunnar Larson]

https://wallstreetonparade.com/2024/04/jpmorgan-remains-the-second-largest-money-market-fund-manager-despite-needing-billions-in-money-market-bailouts-from-the-fed-in-2020/


By Pam Martens and Russ Martens: April 30, 2024 ~

The Office of Financial Research (OFR), the federal agency created after
the financial crash of 2008 to keep federal banking regulators on top of
threats to financial stability, has posted an interactive chart showing the
largest managers of Money Market Mutual Funds in the U.S. Alarmingly, the
parent of the largest and riskiest bank in the United States – JPMorgan
Chase – is also the second largest Money Market Mutual Fund manager.

According to the OFR, as of March 31, 2024, JPMorgan was managing $657.9
billion in money market funds, second only to Fidelity, which on the same
date was managing $1.3 trillion in money market funds. The data comes from
Securities and Exchange Commission Form N-MFP2.

JPMorgan’s federal regulators have failed to stem the bank’s growth despite
the fact that JPMorgan Chase has been tapping massive bailouts from the
Federal Reserve since the last quarter of 2019, as well as being charged
with nonstop crimes.

During the COVID-19 pandemic in 2020, the Fed created an alphabet soup of
emergency lending programs, one of which was the Money Market Mutual Fund
Liquidity Facility (MMLF). When the Fed finally released the granular
details two years later of which firms tapped the emergency facilities, it
showed that 10 of JPMorgan’s money market funds needed to borrow a combined
$8.97 billion on the MMLF’s very first day of operation. The $8.97 billion
represented 32 percent of the $27.15 billion in funds loaned that day by
the Fed’s MMLF.

JPMorgan money market funds’ liquidity problem on March 23, 2020 appears to
have centered on JPMorgan’s tax-free money market funds holding billions of
dollars in New York City’s Metropolitan Transportation Authority’s (MTA’s)
short-term revenue notes. Those were prominent among the instruments
submitted as collateral to the Fed for loans from the MMLF. The MTA notes
apparently could not be sold by JPMorgan to meet redemption requests
without causing the money market fund to break the buck. Money market
mutual funds are expected to trade at a stable $1.00 per share. It is known
as “breaking the buck” when money market funds trade for less than $1.00
per share. Breaking the buck occurred at several money market funds during
the financial crisis of 2008 and increased the financial panic occurring at
the time. To stem the run on money markets in 2008, the U.S. Treasury was
forced to take the unprecedented step of guaranteeing money market mutual
funds.

Why JPMorgan’s money market funds had such concentrated exposure to one
municipal issuer’s notes should warrant the attention of its regulators.

JPMorgan was also an outsized user of the Fed’s Primary Dealer Credit
Facility. The transaction data released by the Fed showed that at the end
of the first 11 business days of operation of the PDCF, on April 3, 2020,
the Fed had an outstanding balance in the PDCF of $49.5 billion and the
trading unit of JPMorgan had borrowed $14 billion of that, or 28 percent of
the total.

JPMorgan’s need to tap the emergency repo loans from the Fed, which began
on September 17, 2019 – months before there were any reported cases of
COVID-19 anywhere in the world – was also deeply alarming. According to the
quarterly data releases by the Fed for its emergency repo loans (after a
delay of two years), the trading unit of JPMorgan (J.P. Morgan Securities)
borrowed $2.59 trillion in term-adjusted cumulative repo loans in the
fourth quarter of 2019 (see chart below) and another $3.6 trillion in the
first quarter of 2020.

Fed's Repo Loans to Largest Borrowers, Q4 2019, Adjusted for Term of Loan

When the Fed released the shocking details showing that a unit of the
largest bank in the United States needed enormous sums of emergency cash in
the fall of 2019, it should have made front page headlines in every
newspaper in America. Instead, there was a complete news blackout among
mainstream media and the major business press.
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