Web Extra: Read an Excerpt of David Stockman's New Book

In truth, the "run" was almost entirely within the money market mutual fund sector, with the debit going to the "prime" funds and the credit to the "government" funds. Indeed, this migration frequently involved nothing more than investors hitting the send button! They simply moved their deposits between these two types of accounts at the same fund management company.

Bernanke, Paulson, and the other bailsters focused exclusively on the gross outflow from the prime funds and waved this $430 billion bloody shirt incessantly. Needless to say, they did not bother to tell Congress that only a net amount of $60 billion, or 2 percent of total assets, had actually left the money market fund industry during the three weeks before the October 3 TARP vote.

Nor did they mention that most of the $60 billion which did leave the money market sector had gone into CDs and other bank deposits, and that none had ended up in mattresses. Moreover, all of this data was published in real time by the Investment Company Institute, so it should have been evident to policy makers, even in the heat of the crisis, that the circular flow from "prime" funds into "government only" money funds and banks (which got the $60 billion) posed no threat whatsoever to financial system stability.

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