Friday, August 24, 2012

SEC Refuses to Vote for New Rules Aimed at Securing Money Market Funds

Majia here: Two articles dated 8/24/2012 in the Wall Street Journal examine this development:

Straw that Broke SEC Vote: Schapiro's Release of Report on Money Funds Solidified Colleague's Opposition by A. Ackerman and K. Grind p. 8/24/2012 C1

[paraphrasing] SEC Chairman Schapiro gave legislators a report on the risks of money market funds without approval of other commissioners so the commissioners decided they would not back her vote designed to protect the funds against destabilizing runs. The report names actual money market funds that are at risk.

[excerpted] "The SEC report listed hundreds of mutual funds that the SEC says need internal bailouts from their parent companies or similar rescues, a charge that several funds firmly disputed."

Schapiro had recommended that funds be required to "set aside capital to absorb sudden losses int he value of the asset holdings and to hold back a small portion of investor cash when they redeem all of the shares at once, to reduce a customer stampede"

Majia here: Why did she make such strong recommendations?

Well, the second article in the WSJ on this development - "Toothless SEC Caves on Money-Market Funds" - tells us that money markets manage nearly $2.6 trillion in assets (8/24/2012, p. C10).

Wonderful. SEC Chairman Schapiro sees a potential run on money market funds that could collapse funds holding trillions in dollars of assets owned by cautious investors trying to flee unstable markets.

Apparently, Schapiro didn't think the corrupt SEC would do anything about the problem so she circulated the report to Congress.

Congressional representatives are now probably pulling their money out of risky funds, perhaps even precipitating the crisis Schapiro is warning about.

Meanwhile the average investor is in danger of losing everything.

This formula sounds familiar: Banksters Escape all Justice while Raping and Pillaging Persists

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