USA Today writes "Proposed money market mutual fund rules draw fire". It says, "The Securities and Exchange Commission is considering proposals they say will make money market mutual funds safer — and the mutual fund industry loathes them. Money market funds, unlike bank money market accounts, are uninsured mutual funds that invest in high-quality, short-term debt issued by the government, corporations and municipal entities. The funds have $2.6 trillion in assets. The two proposals, each considered an alternative to the other, will be put out for public comment in late March or early April. Money funds would abandon the accounting convention that lets them keep share prices at a constant $1. The change would drive home the point to investors that money funds aren't federally insured, thus discouraging panic if a fund's share price fell below $1 -- breaking the buck, in fund parlance.... Money funds would have to keep a capital reserve in case of large redemptions. They would also put a 30-day hold on 3% to 5% of an account — a move also aimed at discouraging massive redemptions. Stevens argues that funds would have a hard time raising capital when yields are an average 0.02%, as they are now. And the 30-day hold could cause problems from brokers and other intermediaries, he says. Why the extra rules? One of the darkest moments of the 2008 financial meltdown was when the Reserve fund, one of the oldest money funds, broke the buck because of its large holdings of short-term IOUs issued by Lehman Bros."
