These aren't just banks. These are all corporations in the modern world, period. Everyone from Target to Citi issues notes in the money markets.
And yes, the banks are required to have more assets than liabilities. But that has nothing to do with the money markets or day to day operations.
Here's a crappy, but workable analogy. What do you do in a modern computer? Have enough money for all the programs that are running, up front? Or do you have some shared virtual pool of memory?
The money market is kind of like that. It's silly for each and every corporation to have all the cash on hand it needs for day to day operations. That would require a lot of money that would be sitting around doing nothing. A much more efficient system is to have lenders who dole out short term loans (that pay darn little but are almost guaranteed to pay back) to the corporations as they need them.
Suppose that January is just a nasty month, and Target has to dole out lots of money to its health insurance benefits. That's fine, they'll just issue more commercial paper, and it will all work out when they tally up the bills at the end of the quarter.
Without that money market, what would happen instead is that Target would either have to keep a lot more money lying around, or run into a brick wall if something bad happened. It's like forcing everyone to buy many times more memory for their computer than they would need in everyday situations.
And yes, the banks are required to have more assets than liabilities. But that has nothing to do with the money markets or day to day operations.
Here's a crappy, but workable analogy. What do you do in a modern computer? Have enough money for all the programs that are running, up front? Or do you have some shared virtual pool of memory?
The money market is kind of like that. It's silly for each and every corporation to have all the cash on hand it needs for day to day operations. That would require a lot of money that would be sitting around doing nothing. A much more efficient system is to have lenders who dole out short term loans (that pay darn little but are almost guaranteed to pay back) to the corporations as they need them.
Suppose that January is just a nasty month, and Target has to dole out lots of money to its health insurance benefits. That's fine, they'll just issue more commercial paper, and it will all work out when they tally up the bills at the end of the quarter.
Without that money market, what would happen instead is that Target would either have to keep a lot more money lying around, or run into a brick wall if something bad happened. It's like forcing everyone to buy many times more memory for their computer than they would need in everyday situations.