Fidelity Investments and Vanguard Group are planning to create an emergency pool of cash to avoid a repeat of the run on money-market funds, Bloomberg reports. Funds will pay a fee to a new venture, the Liquidity Exchange Bank, which will build a cash reserve to help them handle investor withdrawals during a financial crisis.
The new bank, which will buy securities at face value from the funds, may also apply for emergency support from the Federal Reserve discount window. The liquidity bank is designed to offer cash to help funds meet redemptions.
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