How Banks Gave Up $1 Trillion to Money Market Funds: QuickTake

For well over a decade, “interest-earning savings account” was almost an oxymoron — interest rates offered to depositors were near zero almost everywhere. Then the US Federal Reserve started rapidly increasing rates in early 2022 to fight inflation. US banks raised their deposit rates a little; money market funds (MMFs) raised theirs by much more. What followed was a wave of more than $1 trillion in bank deposit withdrawals, perhaps the biggest, fastest outflow ever, while MMF assets surged by $1.3 trillion. Consumers and businesses who switched saw their interest earnings grow but faced new risks. And bank loans to ...