Dow Jones writes "Former Fed Chairman Volcker:Money-Market Funds Need More Oversight". The brief article says, "Former Federal Reserve Chairman Paul Volcker warned Friday that money-market mutual funds are vulnerable to "disturbing runs" in troubled times and are adding to the problems of European banks. Volcker said the funds are adding to the European debt crisis by withdrawing investment from European banks." It quotes Volcker in remarks prepared for an International Monetary Fund meeting Friday night, "Money market funds today have trillions of dollars heavily invested in short-term commercial paper, bank deposits, and notably recently, European banks. Without the backstop of official liquidity, they are actively withdrawing those funds, adding to the strains on European banking stability.... The time has clearly come to harness money market funds in a manner that recognizes both their structural importance in diverting funds from regulated banks and their destabilizing potential." Dow Jones adds, "Volcker said that money-market funds are "truly hidden in the shadows of banking markets" and divert money from deposits in the regulated banking system. Volcker said that the funds need to be regulated like ordinary mutual funds." See also, FT's "BNP Paribas rules out external help".
