Money market mutual funds, which many regard as safe investments, lend cash to banks, brokerage firms and asset managers for one day at a time. The next day by mutual consent, the loans are turned over. The "repo market" is a huge $4.6 trillion. Everything is cool until it's not. Using short term borrowing to cover long term investments such as mortgages is inherently vulnerable to changes in expectations. If one party becomes nervous and does not renew, the market collapses as it did for Lehman and Bear Sterns five years ago.
Sorry, but markets are not automatic and wonderful.
(For background see NYT, Sept. 13, 2013.
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