Forbes.com Contributor on MMF Regs
Forbes.com features the behind-the-curve titled, "Bank of America Pulls Out Of Money Market With New SEC Regulations." It says, "As the second largest bank in the United States, Bank of America plans to simplify their investment options as increased regulation looms on the horizon –– and other investment groups seem to be planning on doing the same. After the financial hardships of 2008, The Security Exchange Commission (SEC) passed new regulations aimed at reducing risks for money market funds. These new regulations are set to go into action in October of this year, and will dramatically change investing practices." The piece asks, "Why is this happening? In many cases, money market accounts can be extremely volatile. During the financial crisis of 2008, failed money market funds left shareholders in treacherous waters, which led to the subsequent invocation of increased regulation from the government." (Note: Bank of America had gotten out of the money fund business several months ago; see our April 19 News, "BlackRock Completes BofA Funds Merger; Now 2nd Largest MMF Manager.") In other news, last week Bloomberg featured the editorial, "Money-Market Funds Should Tell the Truth." It says, "New rules aimed at strengthening one of America's most popular savings products -- the money-market mutual fund -- are causing a minor tempest in financial markets, drawing complaints about unintended consequences. Actually, where they've been applied, the rules are working as they should. To avoid the unintended consequences, they need to be applied more comprehensively.... Why didn't the SEC apply the change to all money-market funds -- as the Financial Stability Oversight Council recommended back in 2012? Because the exempted funds, it argued, were less susceptible to runs: Retail investors didn't pull much out of money-market funds in 2008, and funds that invest in government debt actually attracted money. In other words, the SEC says it's OK to maintain the buck-a-share fiction as long as investors believe it. This is a poor foundation for financial stability."
