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On Friday afternoon, CNBC'​s "​Street Signs" ran a segments entitled, "​Is Your Money Market Fund Safe?" which discussed money funds' exposure to European banks and which featured Crane Data President Peter Crane. The introduction to the story, by Kate Kelly, said, "​Now to a financial fear that could bring the Greek crisis right back to Main Street USA. Money market accounts [​funds] here in the states are worth nearly $​3 trillion and managers have been investing in European banks and they say they'​re going to keep on doing it.... Kate, do the money market funds really know what they'​re getting into here?" (​See also, CNBC'​s "​Is Your Money Market Fund Safe?.)

Kelly says, "​They would of course say yes, Mandy. Something like 50% of the big funds are invested in Europe. About 7 out of the 10 of their major asset plays are European names. They would say they'​re focused on the core, whether it'​s France, Germany or UK, have never been in Greece, have not been in those peripheries for quite some time now. They would even say we'​ve done our own credit research based on the stress test of last summer and we feel comfortable with the French bank'​s exposures to Greece, for example. Having said that, there are a couple of questions here. Certainly they'​re looking for yield, and there may be higher yield available in Europe than there is say in the U.​S. There'​s more supply as well of European paper than there is of Asian paper. However, do they really want to be involved in these names?"

CNBC'​s Mandy Drury says, "​Let'​s bring in money market analyst Peter Crane, president of Crane Data. What'​s your take on all this, Peter? How much should we be worried with regard to the money market funds and their exposure to the European banks?" Crane answers, "​Money funds are clearly watching the situation closely. They'​ve never invested in Greece so they don'​t have any direct Greek exposure, and they do have heavy holdings of French banks. There'​s no doubt about that. But they'​re only investors in the largest, the systematically most important. These banks have $​1 trillion of reserves on their balance sheets, so the odds of them defaulting or losing liquidity any time soon are slim to none."

The piece continues, "Peter, how confident are you in what the money market funds are investing in?" Crane responds, "They'​ve gotten smarter, they'​ve gotten more liquid. Banks are gotten more liquid as well. You'​re not going to see the leverage of a Lehman Brothers. Comparing this to Lehman Brothers is a long stretch. The landscape was littered with bombs and defaults.... They'​ve been invested in Europe for many years now and may be tip-​toeing back, but they'​re not exactly stampeding away."

Kelly also asks, "​With all due respect to the money market funds and research they'​ve done already, do we even know enough, are there enough facts out there about this European financial paper in order to make qualified judgments?" Crane comments, "The bulk of these [​assets] are now straightforward, plain vanilla CDs. So the esoteric securities that had been growing in the markets in the '​90s, I mean pieces of those are gone entirely. So things are a lot more transparent and a lot more straightforward.... The money funds that I'​ve talked to over the last couple of days -- certainly they may be shortening maturities and letting some of the maturing paper roll off -- but they'​re still comfortable with the large, systematically important European credits."

Drury asks, "Are you at all fearful we could see nervous investors selling out of money market funds? Quite often this just has to do with confidence as opposed to the facts." Crane responds, "That'​s the key. Our data shows money funds have seen tiny inflows the last three days. There is a very modest shift out of Prime money funds and into Treasury money funds in the last few days. But investors have heard this story three or four times before and they haven'​t blinked, so there is no reason to think they'​ll blink this time."

See also, WSJ'​s (​Blog) "​Smart Money Lightening up on Money Funds Exposed to Europe?". Also, look for our latest asset totals in today'​s Money Fund Intelligence Daily and look for coverage of last week'​s Crane'​s Money Fund Symposium later this week and in the upcoming issue of Money Fund Intelligence.

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Reuters' Kerber writes "​Split on money fund reforms driven by asset levels". The article says, "In a rare split, the clubby mutual funds industry is divided over how to backstop the $​2.​6 trillion kept in money market funds. It is a hot issue after one of the largest funds struggled during the financial crisis and ultimately '​broke the buck,' failing to maintain the $​1 per-​share net asset value considered sacrosanct by many investors. Regulators have already put tighter rules in place and are considering more, perhaps even doing away with the $​1 per share standard and allowing net asset values to "​float." Fund companies fear that change would be so drastic it would drive hundreds of billions of dollars away from their products and into traditional bank accounts." The piece quotes Peter Crane, "​whose Cranedata.​com site follows the industry," "The floating NAV is seen as the biggest threat to money funds as we know them." Reuters says, "​Within the industry, however, the dispute is over how much reform is needed to stave off the floating NAV. The fault lines gelled in May when three of the largest managers proposed each money market mutual fund should set aside some extra money for times of trouble, called an '​NAV buffer.' Proponents included Fidelity Investments, the largest money fund operator, plus powerhouses Charles Schwab Corp and Wells Fargo. With each fund maintaining its own buffer, the plan would avoid subsidizing smaller competitors or eroding the appeal of the largest managers as the safest. Most of the industry favors a broader approach that would spread out the risks, however, a plan rolled out in January by trade group the Investment Company Institute and backed by big players like Federated Investors and Vanguard Group Inc, as well as by smaller firms. The plan would feature a "​liquidity bank" to buy securities from troubled funds during a crisis, into which all fund families would pay." Finally, Kerber writes, "​The fate of all the proposals now lies with the Financial Stability Oversight Council, made up of top financial regulators and charged by Congress with reviewing risks to the financial system. A spokesman for the SEC, leading money fund reviews, said its next steps have not yet been determined."

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Friday'​s Wall Street Journal writes "​In Stashing Cash, Look Ahead". It says, "The returns on low-​risk savings these days range from just about zilch to a little more than nothing. With interest rates at rock bottom, money-​market funds, bank accounts and ultrashort-​debt funds have been cranking out uniformly terrible returns. But investors should remember a crucial fact: Rates won'​t stay low forever. And when they rise, low-​risk vehicles may turn in very different results, since they have very different structures and investment philosophies. In looking at the various options, investors "​should think about how they will perform with certain interest-​rate changes," says Allan Roth, a financial adviser in Colorado Springs, Colo. Many economists believe in the first half of next year the Fed will start raising short-​term interest rates from its current target range of 0% to 0.​25%. And when the Fed does start raising rates, that might mean "​hikes as far as the eye can see," says Peter Crane, president of Crane Data LLC, which tracks money funds. Between June 2004 and June 2006, the Fed'​s rate-​setting committee boosted its target rate at 17 consecutive meetings. Here'​s a look at four low-​risk alternatives for savings and how they could be affected by the next increase in rates...." Friday'​s Journal also featured "​Should Investors Worry About Money Funds?", which featured the "​con" opinion piece, "​Why Investors Should Worry About Money Funds" and the "​pro," "​Why Investors Shouldn'​t Worry About Money Funds". Finally, see the press release, "Stradley Ronon Attorney to Speak at Crane'​s Money Fund Symposium."

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