Prime money-market funds had been a crucial source of liquidity for all kinds of businesses, since they buy commercial paper, a type of short-term debt that businesses use to fund their operations. Because the commercial paper they hold is generally diversified and highly rated, these funds are usually considered almost riskless—like CDs or bank deposits. But a few prime funds took losses when Lehman failed, specifically the Reserve Primary Fund, which “broke the buck” on September 16. Fears that others might take losses caused many investors to pull their money.
