The Investment Company Institute published, "Retirement Assets Total $42.4 Trillion in Third Quarter 2024," which includes data tables showing that money market funds held in retirement accounts jumped to $842 billion (up from $810 billion) in the latest quarter, accounting for 13% of the total $6.424 trillion in money funds. MMFs represent just 6.3% of the total $13.4 trillion of mutual funds in retirement accounts. (Note: Thanks again to those who attended and supported our Money Fund University last week in Providence! Attendees and Crane Data Subscribers may access the MFU Conference Materials here. Merry Christmas and Happy Holidays!)
This release says, "Total US retirement assets were $42.4 trillion as of September 30, 2024, up 4.1 percent from June. Retirement assets accounted for 33 percent of all household financial assets in the United States at the end of September 2024. Assets in individual retirement accounts (IRAs) totaled $15.2 trillion at the end of the third quarter of 2024, an increase of 4.6 percent from the end of the second quarter of 2024."
It continues, "Defined contribution (DC) plan assets were $12.5 trillion at the end of the third quarter, up 4.7 percent from June 30, 2024. Government defined benefit (DB) plans—including federal, state, and local government plans -- held $8.8 trillion in assets as of the end of September 2024, a 3.6 percent increase from the end of June 2024. Private-sector DB plans held $3.4 trillion in assets at the end of the third quarter of 2024, and annuity reserves outside of retirement accounts accounted for another $2.5 trillion."
The ICI tables also show money funds accounting for $631 billion, or 10%, of the $6.608 trillion in IRA mutual fund assets and $211 billion, or 3%, of the $6.808 trillion in defined contribution plan holdings. (Money funds in 401k plans totaled $142 billion, or 3% of the $5.412 trillion of mutual funds in 401k's.)
In other news, the Federal Reserve Bank of New York’s Liberty Street Economics blog published, "Anatomy of the Bank Runs in March 2023," which says, "Runs have plagued the banking system for centuries and returned to prominence with the bank failures in early 2023. In a traditional run -- such as depicted in classic photos from the Great Depression -- depositors line up in front of a bank to withdraw their cash. This is not how modern bank runs occur: today, depositors move money from a risky to a safe bank through electronic payment systems. In a recently published staff report, we use data on wholesale and retail payments to understand the bank run of March 2023. Which banks were run on? How were they different from other banks? And how did they respond to the run?"
The piece states, "Banks send most large payments through the Fedwire Funds Service (from now, Fedwire), which moves money between banks' accounts at the Federal Reserve. When depositors run on a bank and wire large amounts of money to other banks, the run-on bank suffers large and unusual payment outflows but no compensating inflows. To check for unusual outflows in March 2023, we standardize each bank's daily net payment flows by subtracting the mean and dividing them by their standard deviation."
The blog tells us, "[A chart] shows the most extreme payment flows between January 1 and March 31, 2023, by plotting the 1st, 5th, 95th, and 99th percentiles of the daily cross-section of standardized net payments for a sample of banks that are active in Fedwire. As the chart shows, the 1st percentile drops significantly on Friday, March 10 -- following the run on Silicon Valley Bank (SVB) -- and on Monday, March 13, which means that 1 percent of sample banks suffered unusually large outflows on these two days. Even the 5th percentile of net payments notably declines on Monday, March 13. The outflows stop on March 14 with the runs stopping just as quickly as they started. In other words, the March 2023 run was very short-lived, with banks suffering highly unusual outflows over a period of only two days."
It explains, "We identify run-on banks as those banks whose net payments were more than five standard deviations below normal during the four business days window from Thursday, March 9, to Tuesday, March 14. Using this method, we identify twenty-two run-on banks, five of which suffered a run on Friday and nineteen on Monday (so two suffered a run on both days); this is far above the number of banks which failed during the episode (only two). The value of outgoing wire transfers from these banks more than tripled on the run days. Furthermore, the average size of run payments was more than three times what would have been expected absent the run, confirming that the run was mainly initiated by larger depositors."
The post adds, "Run banks had significantly lower tier-1 capital, consistent with the idea that depositors run on a bank when they are concerned with the bank’s fundamental solvency. Run banks also had significantly lower cash holdings, consistent with the idea of liquidity-driven runs as depositors try to withdraw before the bank is out of cash. Further, run-on banks had significantly more uninsured deposits and these were significantly more concentrated, consistent with the presence of stronger panic element when there are 'large players.' Finally, run-on banks were overwhelmingly banks that are publicly traded on the stock market; this points to a role for public information that we will discuss in a subsequent blog post."
It concludes, "In a recently issued staff report, we use payments data to study the March 2023 bank run. We find that the run was concentrated on only two days and was driven mainly by a relatively small number of large depositors. However, a large set of banks were run on, far in excess of the banks that ultimately failed. Although run-on banks had on average worse fundamentals, there are large overlaps between the balance sheet characteristics of run and non-run banks. Banks react to their run by increasing their borrowing, mainly from FHLBs and only as a last resort from the discount window."
