Monkeying with Money Market Funds

Two years ago, in January 2010, Zero Hedge wrote "This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied" which became one of our most read stories of the year. The reason? Perhaps something to do with an implicit attempt at capital controls by the government on one of the primary forms of cash aggregation available: $2.7 trillion in US money market funds. The proximal catalyst back then were new proposed regulations seeking to pull one of these three core pillars (these being no volatility, instantaneous liquidity, and redeemability) from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal would give money market fund managers the option to "suspend redemptions to allow for the orderly liquidation of fund assets." In other words: an attempt to prevent money market runs (the same thing that crushed Lehman when the Reserve Fund broke the buck). This idea, which previously had been implicitly backed by the all important Group of 30 which is basically the shadow central planners of the world (don't believe us? check out the roster of current members), did not get too far, and was quickly forgotten. Until today, when the New York Fed decided to bring it back from the dead by publishing "The Minimum Balance At Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market Funds". Now it is well known that any attempt to prevent a bank runs achieves nothing but merely accelerating just that (as Europe recently learned). But this coming from central planners - who never can accurately predict a rational response - is not surprising. What is surprising is that this proposal is reincarnated now. The question becomes: why now? ...

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PMBug said:

Potentially very significant news:

More: http://www.zerohedge.com/news/gover...r-money-market-account-has-been-denied-sequel

:flail:

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benjamen said:

With the laughable interest rates generated by a MM account, why even bother with them?

My big concern is if governments start going after 401k, IRA, retirement type accounts. While it would not be easy to do in the U.S. (see below), what happens if governments get desperate.
http://cashmoneylife.com/can-the-us-government-seize-your-401k-or-ira/

It has already happened elsewhere:
http://www.zerohedge.com/article/following-hungary-and-ireland-france-next-seize-pension-funds

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