Money Market Mutual Funds: Are they a Close Substitute for Accounts at Insured Depository Institutions?

In recent years, the financial services industry has undergone extensive change, including a substantial increase in the amount of assets held in money market mutual funds. Money funds are particularly interesting, because they offer investors the principal characteristics of many accounts at insure...

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Bibliographic Details
Published in:Antitrust bulletin 1999-06, Vol.44 (2), p.365-385
Main Author: PILLOFF, STEVEN J
Format: Article
Language:English
Subjects:
Antitrust laws
Bank acquisitions & mergers
Banking
Checking accounts
Deposit insurance
Households
Money market deposit accounts
Money market mutual funds
Mutual funds
Savings accounts
Studies
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Summary:In recent years, the financial services industry has undergone extensive change, including a substantial increase in the amount of assets held in money market mutual funds. Money funds are particularly interesting, because they offer investors the principal characteristics of many accounts at insured institutions - safety, liquidity, accessibility, and convenience. These features of money market mutual funds, along with their rapid growth, have led some to believe that money funds are a close substitute for accounts at insured institutions. The issues of substitutability, however, remains an unanswered question. This study addresses the question by analyzing a variety of data to determine whether money market funds are a close substitute for deposits at insured institutions. It is concluded that although money funds offer high levels of safety, liquidity, accessibility, and convenience, they do not appear to be a close substitute for accounts at federally insured depositories.
ISSN:0003-603X
1930-7969
DOI:10.1177/0003603X9904400206