American money market funds - the ones that, when they broke the buck, got an instant bailout from a weird depression era Treasury rainy day fund - are deeply invested, to the tune of 44% or so of assets, in short term European bank debt. That's the debt that's most at risk should there be sovereign defaults in the Eurozone, and both Matthew Yglesias and Brian Buetler remind us that Dodd-Frank purported to serously restrict the ability of the government to bail out anyone, let alone money market funds.
The industry could accordingly collapse - they don't have an insurance program for MMFs, IIRC (though see William Birdthistle for developments here), which mean the sector is prone to a run on the bank. And if that happens, commercial paper funding, which pays our paychecks and so on, will also be threatened, though less so now than it was in 2008, as CP has become less attractive to the MMFs, and more attractive to hedge funds.
I don't predct crisis part II coming from a Eurodefault. But it is interesting to consider the new pressure Dodd-Frank is putting on the problem.
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