Wednesday, October 14, 2009

Government Is Actively Spooking Money Market Fund Shareholders

What the hell is this about?

A member of the President’s Working Group on Financial Markets, a.k.a. The Plunge Protection Team, is out spooking investors.

If money market funds experience another run similar to the one that happened in September 2008, the money fund industry is unlikely to survive in its current form, according to an SEC official who has done extensive work on money fund regulation, according to Investment News.

Investmnet News continues:
To avert such a disaster, the SEC couuld finalize a proposal by the end of the year aimed at reducing money market fund risk and improving disclosures about the funds, Robert Plaze, associate director of the SEC’s Division of Investment Management, said at a panel discussion sponsored by the District of Columbia Bar Association.
Note: Reducing risk when these funds are generally risk averse is to get them to buy even more U.S. Treasury securities.

Plaze as co-chairman of the money market fund subgroup of the President’s Working Group on Financial Markets is to issue a report by Dec. 1 making recommendations on whether changes are necessary to reduce money fund’s susceptibility to runs.

Even if the SEC institutes new regulations, “the larger context is whether money market funds as a model will survive. And I suspect if there’s another event similar to last September they may not,” Plaze said.

Plaze may argue that he is not implying that money market fund shareholders will be at risk in any future run, but even suggesting another September 2008 money market panic could occur is playing with fire, especially given the fragile state of the financial sector.

But, he has an agenda, to cram through new regulations, which, judging by these comments, are going to be much more broad based and intrusive then even I anticipated. The United States government, for all practical purposes, is going to takeover the financial sector via regulation. And they will spook and or crash any sector that gets in the way.

1 comment:

  1. Hmmm

    So if the "government" is "spooking" shareholders that really means that the Fed and Goldman Sachs are "spooking" shareholders. Virtually all decision making at treasury is controlled by former wall street types with goldman sachs leading the way. And of course you could not do this without the feds permission. So Goldman and the fed are now in total control of our monetary system. God help the rest of us