AP writes "Ill-timed fight erupts over money-market funds". The article says, "A fight is breaking out between the money-market mutual fund industry and federal regulators. Whatever the outcome, investors will question whether they can continue to rely on money funds as a safe place to keep cash readily accessible. The Securities and Exchange Commission staff is drafting proposals that Chairman Mary Schapiro says are needed to safeguard the industry and the investing public in the event of another financial crisis. It's an attempt to fix weaknesses exposed when a large money-market fund collapsed in 2008, creating a scare that led the government to temporarily guarantee money fund assets so investors could be assured they'd be protected from losses. Although the SEC strengthened its rules two years ago by further restricting how money funds operate, Schapiro says more needs to be done. There's still a risk, she says, that money funds won't be able to withstand a potential spike in investor withdrawals from another shock like the Lehman Brothers bankruptcy, the event that triggered the Reserve Primary Fund's failure.... The industry largely agreed with the rules adopted a couple years ago. Since then, money funds have held up to a host of threats, from the debt crisis in Europe, to last summer's downgrade of the federal government's credit rating and near-zero short-term interest rates that have left investors earning practically nothing. Now, months after Schapiro outlined more potential safeguards, the industry is objecting loudly. Industry leaders say the moves would undercut the key rationales for investing in money funds, rather than keeping cash in a bank. They warn that the proposed fixes will make money funds so unattractive that investors will begin to pull out of them altogether." In other news, see ICI's weekly "Money Market Mutual Fund Assets" report.
