Wednesday, July 23, 2014

BREAKING: SEC Appears Ready to Approve Rules That Would Allow Money Market Funds to Limit Investor Withdrawals in Times of Market Stress

As I warned yesterday (SEE: ALERT: Pull Your Money From Money Markets Now!), the SEC appears ready to approve rules that will allow money market funds to limit investor withdrawals in times of market stress. WSJ reports:
 [R]ules, expected to be approved at a Securities and Exchange Commission meeting on Wednesday, are aimed at avoiding a repeat of the investor stampede out of the $2.6 trillion industry that threatened to freeze corporate lending during the 2008 financial crisis.

[T]e SEC plan...would allow all funds to temporarily stop investors from redeeming shares in times of market tumult or impose fees on them to do so, these people said, meaning corporations and other investors may not always have immediate access to their cash...

The prospect of losing immediate access to their cash, or risk to principal, already has caused some corporate treasurers to shift money away from the industry. Verett Mims, assistant treasurer at Boeing Co., said in a conference call Tuesday that the aircraft maker's pension unit has already moved cash into separately managed accounts in anticipation of the new rules.
Times of market tumult are exactly when you would want access to your funds quickly. Pull your money out of money market funds now.



  1. Golly, I wonder what the unintended consequences of this rule will be?

  2. Please consider that the world central banks will develop macroprudential policies and macroprudential tools for financial system stability, and in so doing will lead the way into regional fascism.

    Liberalism, meaning freedom from government, was fathered by Milton Friedman, who heralded monetary freedom through his Free To Choose Doctrine, and was characterized by wildcat finance, a Doug Noland term, where bankers waived magic wands of credit creating prosperity.

    The new paradigm of authoritarianism is emerging. It was heralded by Angela Merkel who said said on November 8, 2013, “We cannot stop halfway. We have to be creative: We have to find our own new solutions.” (The EurActiv Institute, “Merkel Preaches Federalism to MEPs, Warns Britain against EU Exit”.) It is fathered by Mario Draghi, and is characterized by wildcat governance, where regional fascist leaders waive heavy clubs of diktat enforcing austerity.

    The ECB chairman on June 5, 2014, in NIRP and Targeted LTRO Announcement called for a charge on money held at the ECB,, and on June 14, 2014, in ECB Press Announcement called for shared sovereignty.

    Both Mario Draghi, announcements are designed to address secular stagnation, defined as low growth, low employment, and low inflation; yet both introduce monetary controls.

    Mike Mish Shedlock posts Spain Issues Retroactive 0.03% Tax on Bank Deposits to "Boost Economic Growth and Job Creation". Via translation from Libre Mercado, Spain will retroactively tax bank deposits to January 1, 2014 stating the move will boost growth and job creation

    Yes, Spain is coming out with "A tool for economic growth and job creation".

    There will be many such mandates, that is economic diktat, coming from Eurozone leaders, especially the ECB. The forthcoming diktat; will be "macroprudential regulation tools" designed for financial system stability, as central bank leaders turn away from traditional interest rate policies.

    David Wessel posts in the WSJ Central Bankers Appear to Line Up their Defenses ... And Create The Macroprudential Maginot Line. It looks like there has been some international coordination of monetary policy rhetoric lately.

    With price and wage inflation not a concern right now, we aren’t going to raise interest rates and throw a lot of people out of work to avoid excesses in financial markets or to head off possible asset bubbles, they said. There may come a day when our worries about financial stability will prompt us to hike interest rates, but rates are “the last line of defense.” Not now. The “first line of defense” is making the financial system more resilient so it can better withstand shocks and using our supervisory and regulatory “macroprudential tools” to rein in excesses, as we are doing now.

    This inquiring mind asks, just what are “macroprudential policies”, and “macroprudential tools” for financial system stability? And what might they include?

    Macroprudential tools are central bank regulations designed for financial stability; frankly they are quite blunt central bank clubs; these tools might be exit taxes from bond funds, another might be capital controls, and yet another might be for banks everywhere to be integrated with the government and be known as the government banks or gov banks for short. In the US most every bank, that is Money Center Banks and Regional Banks, have US Government Treasury Notes, TLT, residing at the Fed. As the Benchmark Interest Rate, $TNX, rises banks might be tempted to withdraw these monies from Mother Fed. So I believe the Fed will put a hold on such action and start to integrate banks into the Fed.

    The Fed will be changing and morphing into the North American Fed, and will become the Atlantic compliment to the ECB, that is a North American Continent, that is Canada, Mexico, and America Regional Central Bank, which will serve as the singular banking institution for CanMexAmerica, that is the Regional Financial Hub, for the soon coming North American Union.