NYT on Baby Steps on Money Funds
Saturday's New York Times writes "Some Baby Steps on Money Funds". It says, "When the Securities and Exchange Commission tried last year to safeguard investors in money market mutual funds, Mary L. Schapiro, its chairwoman at the time, ran into a buzz saw of opposition from industry lobbyists. Last week, Ms. Schapiro's successor, Mary Jo White, tried her hand at bringing change to this $2.9 trillion market. Given the onslaught of lobbying against Ms. Schapiro’s efforts, it is perhaps not surprising that Ms. White’s proposal is much more incremental than her predecessor's.... The S.E.C.'s proposal "targets precisely the funds that ran the most in 2008," said Norm Champ, director of the S.E.C. division of investment management, in an interview. "The S.E.C.'s staff economic study showed that institutional investors redeemed from money market funds at a much higher rate than retail investors during the 2008 financial crisis." It's likely, though, that the panic would have spread to retail funds if the government hadn't stepped in with its insurance program. The proposal offers another attempt to prevent a run: a redemption charge.... The fund industry may not like some of this, but it is sure to be delighted about what is absent from the S.E.C.'s proposal. Unlike last year's version, this one does not require money market funds to set aside capital to protect against mass redemptions. Setting aside capital is the best way to protect shareholders from funds that take excessive risks, as well as from the perils of a panic, says David S. Scharfstein, a professor of finance and banking at Harvard Business School and an expert on money funds."
