During the month of June and the start of summer, Crane Data is normally preoccupied with our big Money Fund Symposium conference, money fund outflows and, occasionally, turmoil in the money markets. While our main event has been moved back to September this year (MFS is 9/21-23 in Philadelphia), we are seeing the normal seasonal weakness that the June 15 tax date and June quarter end bring. Thankfully, though, we aren't seeing the stresses and danger that sometimes happen during this time of the year. Of course, the month isn't over, and another debt ceiling is approaching. Today, we look back at one of those episodes, the 10 year anniversary of the European debt (followed by debt ceiling) crisis. Looking back at our Crane Data News during that week, we see the following stories: "WSJ Editorial on Money Market Mayhem; ICI's Stevens Responds (Again) (6/28/11); "Crane Discusses Money Market Funds' European Bank Exposure on CNBC" (6/27/11); "Bullard Defends MMFs, Stevens, Donahue, Goebel Statements to House (6/24/11); "Bernanke and Bair Say Greece Not a Problem for Money Funds, U.S. (6/23/11); and, "Collins and Plantier Correct Media Reports on MMFs' European Debt" (6/22/11). Our "Crane Discusses Money Market Funds' European Bank Exposure" story says, "CNBC's "Street Signs" ran a segments entitled, "Is Your Money Market Fund Safe?" which discussed money funds' exposure to European banks and which featured Crane Data President Peter Crane. The introduction to the story, by Kate Kelly, said, "Now to a financial fear that could bring the Greek crisis right back to Main Street USA. Money market accounts [funds] here in the states are worth nearly $3 trillion and managers have been investing in European banks and they say they're going to keep on doing it.... Kate, do the money market funds really know what they're getting into here?" (See also, CNBC's "Is Your Money Market Fund Safe?.) Kelly says, "They would of course say yes, Mandy. Something like 50% of the big funds are invested in Europe. About 7 out of the 10 of their major asset plays are European names. They would say they're focused on the core, whether it's France, Germany or UK, have never been in Greece, have not been in those peripheries for quite some time now.... CNBC's Mandy Drury says, "Let's bring in money market analyst Peter Crane, president of Crane Data. What's your take on all this, Peter? How much should we be worried with regard to the money market funds and their exposure to the European banks?" Crane answers, "Money funds are clearly watching the situation closely. They've never invested in Greece so they don't have any direct Greek exposure, and they do have heavy holdings of French banks. There's no doubt about that. But they're only investors in the largest, the systematically most important. These banks have $1 trillion of reserves on their balance sheets, so the odds of them defaulting or losing liquidity any time soon are slim to none." The piece continues, "Peter, how confident are you in what the money market funds are investing in?" Crane responds, "They've gotten smarter, they've gotten more liquid. Banks are gotten more liquid as well. You're not going to see the leverage of a Lehman Brothers. Comparing this to Lehman Brothers is a long stretch. The landscape was littered with bombs and defaults.... They've been invested in Europe for many years now and may be tip-toeing back, but they're not exactly stampeding away.... The bulk of these [assets] are now straightforward, plain vanilla CDs. So the esoteric securities that had been growing in the markets in the '90s, I mean pieces of those are gone entirely. So things are a lot more transparent and a lot more straightforward.... The money funds that I've talked to over the last couple of days -- certainly they may be shortening maturities and letting some of the maturing paper roll off -- but they're still comfortable with the large, systematically important European credits." See also, WSJ's (Blog) "Smart Money Lightening up on Money Funds Exposed to Europe?". To look back at our coverage of the debt ceiling crisis, see our July 2011 and August 2011 News articles.
