As money market mutual funds, repo, ABCP and AIG’s credit default swaps all came into question, the shock waves spread far beyond the United States. Among the investments most favored by the money market funds were European bank debts. They were a key source of dollar funding for the European megabanks.32 With the mutual funds pulling back, how were the European banks to fund their large books of dollar assets? With interbank lending shutting down, the European banks resorted to a variety of roundabout mechanisms to obtain dollar funding. A measure of their desperation was the price that they
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