January 29, 2010
Got Money Market? Too Bad.
“I’m not worried about the return ON my money. It’s the return OF my money I’m worried about.”
—Will Rogers
The following is reprinted from http://www.zerohedge.com/ by way of www.lemetropolecafe.com on Jan 27, 2010:
"Suspending Money Market Redemptions Is Now Legal; SEC Approves New Money Market Regulation In 4-1 Vote.”
Zero Hedge discussed a month ago the disastrous prospects of what would happen if the new proposal contemplated by the SEC, which would allow the suspension of redemptions from Money Market Funds, were to pass. Well, in a nearly unanimous vote, Money Market Funds now have the ability to suspend redemptions, courtesy of the SEC's just passed 4-1 vote. This explains the negative rate on bills: at this point, should there be another meltdown, money market investors will not, repeat not, be able to withdraw their money purely on the whim of Mary Schapiro. As the SEC noted: "We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares." Too bad investors' hardships considerations ended up being completely irrelevant.
Anyone who sees this regulation and feels safe leaving their money in money market funds needs to have their head examined.
The "intent"of this SEC rule is obviously to prevent a "run" on money market funds when the next crisis hits. And the passage of such a regulation signals the high probability of such a crisis happening.
As alluded to in the post, the rate on 1-month T-bills has gone negative today.
Filed under Commodities, GATA, Gold and Monetary Metals, Investing, Money, Silver, Wall Street by Financial Foghorn
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