WSJ Editorial on MMFs
The Wall Street Journal features an odd editorial that appears to support a floating NAV reform entitled, "Taxpayers and Money Market Funds". It says, "The list of regulatory flaws that Congress failed to correct with last year's 'Wall Street reform' runs even longer than Dodd-Frank's 2,300 pages. But amid this Beltway forest it's important to focus on a few giant redwoods of moral hazard. One of them will be the subject of a forum tomorrow hosted by the Securities and Exchange Commission. The agenda is 'mitigating systemic risks associated with money market funds.' The better goal would be ending taxpayer risks associated with this $2.7 trillion market. Money funds typically invest only in short-term debt from creditworthy institutional borrowers, so the funds are almost always a model of stability. Washington needs a sturdier policy for those rare moments when they aren't. The simple solution is to clarify for investors that the funds can lose value. This means allowing fund share prices to float like the securities that they are, and not remain fixed like the bank deposits they are not." In other news, see FT's "Basel III to hit money fund sector".
