When big withdrawals occur, the money market funds have to raise cash to pay investors who want to exit. To do that, they try to sell assets to banks, stop investing so much in commercial paper and make fewer short-term “repo” loans to Wall Street banks. The banks use these loans to help finance their huge inventories of stocks and bonds. Companies suddenly lose a source of borrowing, which may prompt them to draw down credit lines they have with banks. Wall Street firms also lose an important source of financing and, as a result, may sell or hold fewer securities, which can cause disruption in the markets.

What did the Fed do about it?

It set up loans that banks can use to finance the purchase of commercial paper and other assets from the prime money market funds. This means the funds will be able to find buyers for their assets and, as a result, have sufficient cash to pay investors who are exiting. The Treasury Department has agreed to protect the Fed from up to $10 billion of losses.

Will this be enough?

Most likely. The objective is to stop fear from feeding on itself. If the withdrawals from prime funds continue and stress remains in the commercial paper market, it’s possible that a money market fund might “break the buck.” That means the per-share value of a fund’s assets, usually very close to $1, falls below 99.5 cents. When that happened in 2008 to a money market fund that held Lehman Brothers debt, pandemonium ensued. The Fed’s new emergency loans, and separate support to the commercial paper market introduced on Tuesday, should stop that happening, experts say.

“These actions should save the money fund business,” said Peter Crane, the head of Crane Data. “They may have survived anyway, but it was looking pretty grim.”

Is it a bailout?

Congress and regulators overhauled the money market fund sector after the 2008 crisis to curb the unraveling that occurred in recent days. That the funds became a problem so quickly is a sign to some that the measures did not go far enough. One big remaining problem is that retail investors treat money market funds as if they were as safe as federally insured bank deposits, when it is clear they are not, said Gregg Gelzinis, senior policy analyst at the Center for American Progress.