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ARCHIVE
The Volcker Illusion: Why Bank Regulation Won't Work for Money Market Funds
By Paul Schott Stevens
October 24, 2011
Today I submitted the following letter to the editor of the New York Times:
Paul A. Volcker opposed the development of money market funds during his days as chairman of the Federal Reserve, and 30 years later he maintains his campaign of misinformation against these funds. His comments to Gretchen Morgenson (“How Mr. Volcker Would Fix It,” October 22) represent another attempt to use the financial crisis—a crisis rooted in banks and banking regulation—to deprive the economy of the enormous benefits that these funds bring investors, businesses, and governments.
Money market funds are subject to the tightest risk-limiting regulations of any financial product. They invest in diversified portfolios of short-term, highly liquid securities. They are required to ensure that the securities they own pose minimal credit risk. And they disclose every security they own to the public every month. Money market fund regulation differs from the bank regulation that Mr. Volcker favors precisely because banks’ portfolios don’t meet those same strict requirements.
Contrary to the writer’s assertion that “few in Washington seem willing to discuss” reform of money market funds, our industry led the way on comprehensive regulations that tightened credit, maturity, liquidity, and disclosure standards. We continue to work tirelessly with the Securities and Exchange Commission and other regulators on measures that will make money market funds more resilient without undermining their critical role in the economy.
Mr. Volcker’s solution—imposing bank-style regulation—would wreak enormous damage by destroying money market funds without solving any problems. After all, the track record of banking regulation was exposed by Mr. Volcker himself, in a remark at the Securities and Exchange Commission’s roundtable on money market funds this past May. Told that the U.S. had approximately 650 money market funds, Mr. Volcker said they should all be converted to banks. “This country could use 650 more banks,” he said. “We just lost about 1,000 during the crisis.”
For more on money market funds, visit ICI’s money market funds resource center and www.preservemoneymarketfunds.org.
Paul Schott Stevens is President and CEO of the Investment Company Institute.
TOPICS: Fund RegulationMoney Market Funds
ICI Responds to Hearing on Exchange-Traded Funds
By Stephanie Ortbals-Tibbs
October 19, 2011
ICI issued the following statement in response to today’s hearing in the Senate Banking Subcommittee on Securities, Insurance, and Investment, “Market Microstructure: Examination of Exchange-Traded Funds.”
TOPICS: Exchange-Traded FundsFinancial MarketsFund Regulation
The Facts Missing From a Wall Street Journal Column on Money Market Funds
By Mike McNamee
October 18, 2011
Misinformation lurks in a recent column from Wall Street Journal Money & Investing editor Francesco Guerrera, “Hidden Dangers Lurking in Money Market Funds.” Given the vital role that money market funds play in our economy, regulators and investors alike need the best information possible on this topic. So let’s correct the record with a few key facts.
Money Market Funds’ Prudent Response to European Challenges
By Sean Collins and Chris Plantier
October 14, 2011
The ongoing debt crisis in the eurozone poses challenges for portfolio managers of U.S. prime money market funds, as those managers actively continue to adjust their holdings to meet new developments. The latest monthly data on money market funds’ holdings demonstrate that these funds are carefully managing their risks in Europe, and have been gradually reducing eurozone holdings for some time now.
TOPICS: Financial MarketsMoney Market Funds
Investors and Their Long-Term Commitment to Saving
By Paul Schott Stevens
October 14, 2011
This week, I had the pleasure of addressing members of the Rotary Club of Seattle on “The Outlook for Investors and Investing.” My speech approached this subject in part by examining our present situation in the historical context of past market bubbles and downturns.
TOPICS: Financial Markets
Global Markets: ICI Urges Measured Policy Approaches to Reforms
By Ari Burstein
October 12, 2011
Across the globe, regulators remain active in examining possible rule changes and other initiatives to bolster the integrity of financial markets. As these efforts proceed, ICI has urged balanced policy responses that can strengthen markets while preserving and enhancing efficiency that benefits funds and their shareholders.
TOPICS: Financial Markets
A New Voice for Global Investment Funds
By Paul Schott Stevens
October 10, 2011
Over the past two decades, the world has witnessed the rise of asset managers as global financial intermediaries. The fund industry has been at the forefront of this movement, vigorously expanding its international reach and offering investors opportunities to diversify and to access new markets.
TOPICS: ICI GlobalInternational
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