The Investment Company Institute, which last week held its annual General Membership Meeting, will host another semiannual meeting of its two-year old Institutional Money Market Fund Committee on Thursday, May 15. The IMMFC group was formed in "an effort to share best practices and to discuss how companies are dealing with ongoing regulatory changes in the industry" founding Chairman Bob Deutsche told us in the July 2006 issue of Money Fund Intelligence."
While previous meetings have been hushed, low key affairs, those gatherings also didn't have any particular pressing concerns. But attendance should be heavy at this latest meeting, considering the problems that have beset money fund advisors this year. A number of new invitees will be in attendance this time too, so the discussions and debate should be lively.
Concerns by some over the appearance of collusion too may have limited the effectiveness and scope of previous discussions. But new Chairman Bill Hoppe hopes to gather a consensus and rally the industry around a few action points. We suggest the Committee focus its attention on educating the broader public about the safety of money market funds in general, and about the safety and mechanics of asset-backed commercial paper and other money market securities in particular.
Knee-jerk panic reactions by large investors, funds and others bear much of the blame for the current turmoil in the money markets. While fund investors and corporate treasurers were, in the main, well-versed in the products and potential risks, their bosses and the public at large were all too quick to pull the ripcord on major segments of the commercial paper market. This irrational liquidity panic caused much, if not all, of the damage we've seen to date. We believe a more spirited defense of the safety of extendible ABCP and SIV related CP and MTNs could have prevented much of the flight, meltdown and losses.
