NY Times: MF Reforms Won't Be Easy
The New York Times wrote an article entitled, "The Financial Crisis the World Forgot," earlier this week, which briefly mentions money market funds. It says, "The Federal Reserve crossed red lines to rescue markets in March 2020. Is there enough momentum to fix the weaknesses the episode exposed?" They explain, "As March wore on, each hour incubating a new calamity, policymakers were forced to cross boundaries, break precedents and make new uses of the U.S. government's vast powers to save domestic markets, keep cash flowing abroad and prevent a full-blown financial crisis from compounding a public health tragedy. The rescue worked, so it is easy to forget the peril America's investors and businesses faced a year ago. But the systemwide weaknesses that were exposed last March remain, and are now under the microscope of Washington policymakers." The article tells us, "The question policymakers and lawmakers are now grappling with is how to fix those vulnerabilities, which could portend problems for the Treasury market and money market funds if investors get seriously spooked again. The Fed's rescue ramps up the urgency to safeguard the system. Central bankers set a precedent by saving previously untouched markets, raising the possibility that investors will take risks, assuming the central bank will always step in if things get bad enough." It adds, "There's some bipartisan appetite for reform: Trump-era regulators began a review of money markets, and Treasury Secretary Janet L. Yellen has said she will focus on financial oversight. But change won't be easy. Protests in the street helped to galvanize financial reform after 2008. There is little popular outrage over the March 2020 meltdown, both because it was set off by a health crisis -- not bad banker behavior -- and because it was resolved quickly. Industry players are already mobilizing a lobbying effort, and they may find allies in resisting regulation, including among lawmakers. 'I would point out that money market funds have been remarkably stable and successful,' Senator Patrick J. Toomey, Republican of Pennsylvania, said during a Jan. 19 hearing." In other news, ICD published a press release entitled, "Institutional Investors Search for Yield in Cash Portfolios," which tells us, "Treasury teams are keeping cash safe and liquid in the first half of 2021 but are going further out on the curve in search of yield, according to a recent survey from ICD, treasury's trusted independent portal provider of money market funds and other short-term investments. According to the ICD 2021 Client Survey, 70% of Americas respondents said they are expanding their investment portfolios to include new products beyond traditional cash investments." ICD CEO Tory Hazard comments, "With more visibility into operating cash requirements, companies are feeling more confident with T+1 versus same-day liquidity in exchange for a higher return.... Currently these products are yielding significantly more than traditional cash investments." The release continues, "According to Crane Data, short duration bond funds, for example, were yielding 32 times government money market funds, on average, as of February 28, 2021."
