The New York Times writes "An Advantage Vanishes for Money Funds". It says, "When money market mutual funds were invented back in 1971, they offered something new. Investors could earn higher yields than on bank deposits, with nearly the same liquidity and safety. But that has changed. Currently, a money market deposit at Citibank pays about five times as much interest as an investment in the Fidelity Cash Reserves fund -- though, in today's low-rate environment, the yields are minuscule. The bank's advantage appears to be a trend. In early 2007, money market mutual funds typically paid almost four percentage points more than bank deposit accounts, according to the Investment Company Institute, a trade association. But ever since 2009, bank money market deposit accounts have consistently paid more, on average, than their mutual fund counterparts." They quote our Peter G. Crane, a founder of the money market fund information company Crane Data, "The zero-interest-rate environment has been brutal on money market funds. They have lost their yield advantage." The piece adds, "The difference between 0.05 percent and 0.01 percent may not look like very much. But then again, the appeal of a money market mutual fund in the first place was that you could earn more than you could get from your bank. That helps explain a surge of outflows from money market mutual funds in 2010 and 2011." See also, Gretchen Morgenson's latest anti-Wall Street and anti-fund rant, "Bailout Risk, Far Beyond the Banks".
