Bloomberg writes, "EU's Money Market Cash-Buffer Plan Faces Irish Opposition". The article says, "Ireland, home to almost a third of the European Union's E1 trillion money-markets industry, is set to oppose EU plans to make funds build up cash buffers against future crises. The proposal could force European funds, an important source of short-term financing for banks, companies and governments, to shut down, said Finance Minister of State Simon Harris. Ireland seeks support from other EU states against the plan to enforce "crude" cash buffers, which may have "horrendous" unintended consequences, he said. "Ireland shares the EU view and the commission's view that we have to better regulate shadow banking," Mr. Harris said. "To go ahead with a capital buffer structure as a regulatory instrument would damage the industry here, but also throughout the EU, and could lead to an outflow of investment from Europe." The EU money-market fund industry is concentrated in France, Ireland and Luxembourg. Funds domiciled in these three countries account for more than 95% of the EU market, according to European Commission data.... Almost E273bn of CNAV funds are domiciled in Ireland, making it the main base in the EU for such assets under management, according to EU data published last year." In other news, The New York Times published "Post-Lehman, Money Market Fund Protections Still Weak." Author Jennifer Taub, professor at Vermont Law School looks at the industry since the Lehman Brothers bankruptcy 6 years ago. "Filed before dawn on Sept. 15, 2008, the bankruptcy of Lehman Brothers Holdings Inc. spread panic through the financial system. Within hours of the filing that Monday morning, what should have been the contained demise of a venerable investment house turned into a widespread financial crisis. That part is old news. But what still deserves attention are these questions: What actually precipitated Lehman's collapse, how did the contagion spread from the firm to the credit markets and broader economy, and has this problem been fixed? A direct cause of Lehman's failure, and its spread to the credit markets, was money market funds.... Let's recall. One week before it failed, Lehman owed an astonishing $200 billion in overnight "repo" loans. Some large money market funds and other wholesale lenders, nervous about the mortgage-linked collateral backing those loans, demanded their cash. Short of a government-backed rescue, Lehman was done for. Unlike those fast-acting repo lenders that protected themselves (and their own investors) by bringing Lehman to its knees, other short-term creditors that did not run on Lehman were infected. These included the Reserve Primary Fund. Reserve Primary held about $785 million in short-term "repo" loans [sic] and other debt issued by Lehman, all worthless after Lehman's failure. Though that was a small percentage of Reserve Primary's total $62 billion portfolio, its panicked investors pulled $40 billion from the money market fund in the two days after Lehman went under. After the market closed on Tuesday, Sept. 16, the sponsor announced that Reserve Primary "broke the buck" and was now valued at 97 cents a share. The failure of Reserve Primary inspired a huge run on other money market funds.... Nervous investors redeemed $300 billion in cash that week alone…To stop the run on the money market funds, the government stepped in on the Thursday of Lehman week.... Today, the problems remain unsolved. Giant banks and broker dealers are still vulnerable to the sudden withdrawal of short-term financing by money market funds and other wholesale lenders. And despite two sets of new rules by the Securities and Exchange Commission -- one in 2010 and the other in 2014 -- investors in money market funds still have reasons to run with their cash at the first hint of trouble." Finally, see ICI's "Money Market Mutual Fund Assets", which says, "Total money market fund assets1 decreased by $16.72 billion to $2.58 trillion for the week ended Wednesday, September 17." Note that Sept. 15 is a corporate tax payment date.
