Daily Links Archives: March, 2012

The latest weekly "Money Market Mutual Fund Assets" report says, "Total money market mutual fund assets decreased by $17.16 billion to $2.605 trillion for the week ended Wednesday, March 28, the Investment Company Institute reported today. Taxable government funds decreased by $4.26 billion, taxable non-government funds decreased by $10.35 billion, and tax-exempt funds decreased by $2.55 billion." Money funds have lost assets for 5 straight weeks (-$60.5 billion) and are at their lowest level since the debt ceiling crisis hit on Aug. 3, 2011. Year-to-date, assets are down $90 billion, or 3.3%. In other news, ICI responded to a recent CFO Journal piece "Floating NAV Money-Market Funds Don't Float Much", saying, "At ICI, the national trade association for mutual funds, we agree that "floating" money market funds are not very likely to float in value very much, if at all. The high-quality, short-term securities that money market funds hold do not fluctuate significantly in value. That's not a cause to accept the SEC's proposals for "floating" funds, however. This blog item misses a key point: "floating" funds that don't actually float will bring very high costs for investors, funds, and the economy -- without providing any of the benefits that regulators are seeking. They won't change investor behavior or reduce systemic risk. High costs and zero benefits are a bad deal all around."

"Money funds ain't broke, don't need fixing" editorializes Investment News. The commentary says, "Here's a bit of advice to SEC Chairman Mary Schapiro, who has made it abundantly clear that she intends to make further changes to regulations governing money market funds: Quit while you are ahead. Ostensibly in an effort to make money funds safer for investors, she seems determined to compel changes that likely would make it more expensive for investors to buy money market funds, thereby reducing their already paltry yields and perhaps forcing many of them out of the business. If their usefulness as a cash management tool is significantly reduced by the changes being considered, there is a risk that investors will turn to vehicles that are far less stable, regulated and transparent. Rather than regulate money market funds out of business, the Securities and Exchange Commission should continue to monitor the effectiveness of the dramatic rule changes it made in 2010."

Bloomberg writes "Money Markets Signal Fed Rise in 2013, Credit Suisse Says". The article says, "Money-market derivatives signal traders expect the Federal Reserve will most likely lift its target rate for overnight loans between banks in the second quarter of 2013, according to Credit Suisse Group AG analysis. The chance the Fed will begin raising borrowing costs as early as 2012 is 12 percent, while an initial increase in 2013 or 2014 each carries a 24 percent probability, Credit Suisse analysis using a gamma probability distribution of forward overnight index swap rates shows. Treasury yields surged and money-market rates rose after Federal Open Market Committee members raised their assessment of the U.S. economy on March 13 while reiterating that borrowing costs would probably stay low through at least late 2014. The policy statement led money-market derivative traders to bring forward the time when they predict the Fed will first lift its target of zero to 0.25 percent." Bloomberg quotes Carl Lantz, head of interest-rate strategy at Credit Suisse Securities, "If you take the pricing in the futures market at face value, it shows a gradual increase in the fed funds rate starting in 2013. However, the futures only show an average of many possible paths for fed funds. Our model and the use of the gamma distribution allow us to tease out the implied path that is most likely."

Investment News writes "Plaze worries about money fund contagion risk". It says, "Past events plague Robert E. Plaze, deputy director of the Securities and Exchange Commission's Division of Investment Management, who fears that mistakes made by one money market fund could spread throughout the industry and cause another run on such funds." They quote Plaze, "There have been hundreds of money fund bailouts, where the funds would have broken the buck if the manager hadn't stepped in. We continue to see risks, and we're worried that another event could occur.... There's a lot of room for creative investment minds. If one fund makes a mistake, it's going to spread to the other funds." IN adds, "Mr. Plaze said that he is particularly concerned about "outliers" that are able to deliver a high yield in a low-yield world. The average yield on money market funds is just 0.02%, down from 4.7% at money market funds' peak in June 2007. Publicly traded companies that offer money market funds also are under increased pressure to generate more fees from the funds to generate more profits. Last year, firms waived $5.7 billion of money market fees, while collecting just $4.7 billion, for example."

Treasury Strategies writes "Proposed Holdback Requirement for Money Market Mutual Funds: Ineffective & Crippling Regulation". The paper says, "In response to recent calls by regulators to impose a capital requirement on money market mutual funds, Treasury Strategies, Inc. has prepared the following analysis and critique. Treasury Strategies (TSI) is the world's leading Treasury consulting firm working with corporations and financial institutions in the areas of treasury, liquidity, and payments. Regulators have periodically called for money market mutual fund (MMF) reforms in recent years, despite their nearly flawless track record. During their 40-year history there have only been two instances of any MMF investors incurring even a small loss. Although it has demonstrated remarkable reliability, the $2.6 trillion MMF industry is in danger of being dismantled by the current ill-considered reform proposals. One ill-conceived proposal discussed by regulators is a holdback provision on redemptions. Although regulators have not shared specifics with the industry and the general public, the broad outlines are that 3% to 5% of each MMF redemption be withheld from the investor for a thirty-day period, thereby discouraging redemptions in the first place."

Bond Buyer writes "A Moody's B of A Downgrade Could Crimp Money Funds". It says, "When Moody’s Investors Service put the short-term credit rating of Bank of America under review for a downgrade back in February, that stirred up the water for tax-exempt money market funds. In fact, Moody's placed the credit ratings of many large financial institutions under review. But BofA provides the credit backing for a huge amount of short-term municipal securities -- variable-rate demand notes and obligations -- that money market funds have purchased. And if Moody's actually lowers the short-term rating for the bank even one notch to tier 2 from its current tier 1 status, that could force tax-exempt money market funds to sell many of their VRDOs. [Crane Data Note: This is incorrect. Rule 2a-7 rarely forces selling and a single downgrade wouldn't make anything "tier 2".] In turn, the downgrade of so large a player in the short-term market would drive down the interest rates for credits backed by the few remaining tier 1 liquidity providers. Alternatively, it would reset at higher interest rates the paper supported by the now-tier-2-rated bank." In other news, ICI released its latest "Money Market Mutual Fund Assets", which says, "Total money market mutual fund assets decreased by $15.49 billion to $2.622 trillion for the week ended Wednesday, March 21, the Investment Company Institute reported today. Taxable government funds decreased by $5.33 billion, taxable non-government funds decreased by $9.51 billion, and tax-exempt funds decreased by $650 million."

Yesterday's USA Today wrote, "Bernanke: U.S. money funds could still be hurt by Europe". The article said, "Federal Reserve Chairman Ben Bernanke says the threats from Europe's debt crisis have eased, but U.S. money market funds remain exposed to risky European assets. In testimony prepared for a congressional hearing Wednesday, Bernanke noted developments that have minimized the danger. He pointed to bailout support that European leaders provided in exchange for deep budget cuts by the Greek government and he highlighted the agreement by private creditors to reduce Greece's debt. But he said Europe must take further steps, including strengthening its banking system even more and making "a significant expansion of financial backstops" to guard against troubles in one country spilling over to other nations." The piece quoted Bernanke, "Europe's financial and economic situation remains difficult, and it is critical that the European leaders follow through on their policy commitments to ensure a lasting stabilization," in remarks prepared for the House Committee on Oversight and Government Reform." USA Today added, "While U.S. financial institutions have reduced their exposure to Europe, Bernanke said roughly 35% of assets in U.S. prime money market funds are in European holdings.

Investment News writes "Money market funds still face contagion risk: SEC's Plaze". The article says, "What keeps Robert E. Plaze up at night? The deputy director of the Securities and Exchange Commission's Division of Investment Management no doubt loses sleep over the thought that mistakes made by one money market fund could spread throughout the industry and cause another run on money market funds." IN quotes Plaze, "There have been hundreds of money fund bailouts, where the funds would have broken the buck if the manager hadn't stepped in. We continue to see risks and we're worried that another event could occur." The piece adds, "He's particularly concerned about 'outliers' that are able to deliver a high yield in a low-yield world. The average yield on money market funds is just 0.02% today, down from 4.7% at money market funds' peak in June 2007. Publicly traded companies that offer money market funds also are under increased pressure to generate more fees from the funds to generate more profits. Last year, firms waived $5.7 billion of money market fees, while collecting only $4.7 billion, for example.... That's why Mr. Plaze believes that further regulation of money market funds is necessary, he told attendees at the Investment Company Institute's 2012 Mutual Fund and Investment Management Conference, although he wouldn't commit to which of the rumored proposals would be best."

Bloomberg writes "Top Money Funds Doubled French Bank Holdings Last Month". The article says, "The 10 biggest prime U.S. money market mutual funds more than doubled their holdings in French banks in February, as lending from the European Central Bank bolstered investor confidence. French bank holdings rose to $18.2 billion from $8.8 billion in the month, according to data compiled and published in today's Bloomberg Risk newsletter. Funds run by New York- based JPMorgan Chase & Co. (JPM) and Boston's Fidelity Investments accounted for one-third of the total increase." Bloomberg quotes us, "It appears the risk trade is back on, but funds are still staying very cautious," Peter Crane, president of research firm Crane Data LLC in Westborough, Massachusetts." The piece adds, "The top U.S. money market funds have boosted lending to French banks for two straight months after withdrawing from them for most of 2011 because of concern that Europe's sovereign-debt crisis might lead to defaults. The European Central Bank offered three-year loans to the banks in December and February, easing funding worries surrounding French banks since August."

A new research paper entitled, "Shooting the Messenger: The Fed and Money Market Funds", was released recently. Written by Melanie Fein of Fein Law Offices, the abstract says, "The Securities and Exchange Commission is considering regulatory proposals that may threaten the future viability of money market funds ("MMFs"). Industry members believe the SEC is acting under pressure from the Federal Reserve Board to address Fed concerns that MMFs are "susceptible to runs," part of an unregulated "shadow banking system," and pose a "systemic threat" to the financial system. According to industry members, the Fed's narrative on MMFs distorts the facts and obscures the true sources of systemic risk in the financial system. Some in the industry believe that the Fed's attack on MMFs is intended to deflect blame for the financial crisis from itself and the regulated banking industry. Many in the industry surmise that the Fed's ultimate goal is to eliminate MMFs as competitors of banks. This paper examines the Fed's narrative on MMFs and finds it to be inaccurate and misleading in key respects. Among other things, this paper finds no basis for the view that MMFs are "susceptible to runs." It shows that the "run" that started the financial crisis was not a run on MMFs but a run on bank-sponsored commercial paper during which risk-averse investors fled to MMFs for safety. The "run" by MMF shareholders that did occur in 2008 was caused by the Fed's sudden reversal of its lender of last resort policy that ignited a massive run on the entire financial system." (Look for more excerpts in a future Crane Data "News" piece.)

The latest Comment Letter posted on the SEC's site for feedback on the `President's Working Group proposals is from a host of organizations. Signed by the following: American Public Power Association, Council of Development Finance Agencies, Council of Infrastructure Financing Authorities, Government Finance Officers Association, International City/County Management Association, International Municipal Lawyers Association, National Association of Counties, National Association of Health and Educational Facilities Finance Authorities, National Association of Local Housing Financing Agencies, National Association of State Auditors, Comptrollers and Treasurers, National Association of State Treasurers, National Council of State Housing Agencies National League of Cities, and the U.S. Conference of Mayors, it says, "The organizations listed above representing state and local governments would like to bring to your attention the vital role money market mutual funds (MMMFs) play for our members. As we have stated in previous comments to the Securities and Exchange Commission, notably to proposed changes to SEC Rule 2a-7 in 2010, we support initiatives that would strengthen money market funds and ensure investors are investing in high-quality securities. However, we are alarmed by recent reports that the SEC may alter the nature of these products and eliminate or impede state and local governments' ability to invest in these securities. As issuers of municipal securities, we also are concerned that such changes would dampen investor demand for the bonds we offer and therefore increase costs for the state and local governments that need to raise capital for the vital infrastructure and services they provide to their citizens. The possibility of changing the stable net asset value (NAV) -- the hallmark of money market funds -- to a floating net asset value greatly concerns us. Such a move would be very harmful to state and local governments and the entire MMMF market. The fixed NAV is the fundamental feature of money market funds. Forcing funds to float their value likely would eliminate the market for these products by forcing many investors, including state and local governments, to divest their MMMF holdings, and discouraging others from using these funds." See also, ICI's latest "Money Market Mutual Fund Assets."

Reuters writes "FSA wants radical rules for shadow banks". They say, "Regulators won't fully understand the complexity of "shadow banks" and should therefore opt for radical rule changes, Britain's Financial Services Authority (FSA) said on Wednesday. Policymakers say the opaqueness of the $60 trillion (38.27 trillion pounds) shadow banking system -- a web that includes money market funds, securities lending and repos -- which operates alongside mainstream lenders contributed to the financial crisis. Leaders of the world's top 20 economies (G20) have called on their regulatory task force, the Financial Stability Board (FSB), to come up with draft rules by the end of this year.... Responses could include higher capital levels in the banking system, ensuring that lenders hold bail-inable [sic] debt, and capital requirements such as minimum initial margins on individual contracts. The task of regulating shadow banks is challenging, not least in defining what is shadow banking and exactly how it has contributed to financial instability in the past, he said. `Shadow banking is not "something parallel to and separate from the core banking system, but deeply intertwined with it"."

The latest FOMC Statement says, "Information received since the Federal Open Market Committee met in January suggests that the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated.... Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.... The Committee expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook.... To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.... Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014."

Reuters writes "U.S. repo rates elevated before FOMC". It says, "A key borrowing cost for banks and bond dealers slipped on Monday, but remained at elevated levels ahead of a Federal Reserve policy meeting, which might hint at a move that could push up short-term interest rates. What banks and dealers charge each other on overnight loans secured by U.S. Treasuries fell to about 19 basis points from 21 basis points on Friday. This interest rate on overnight repurchase agreements (repos) is roughly 10 basis points above the recent low seen 2-1/2 weeks ago when investors scrambled for Treasuries in this corner of the funding market worth $1.6 trillion. Since then, the overnight repo rate had risen on a combination of factors including fading expectations that the European Central Bank will inject more cheap funds into the region's banking system and a modest increase in weekly Treasury bill supply since mid-February.... Last week, a Wall Street Journal article added upward pressure on dollar repo rates. It said should the Fed decide to buy more bonds to boost growth, it could borrow back the money it used to buy those bonds for short periods of time at low interest rates. By engaging in "reverse repos," the Fed would take that money out of circulation, or "sterilize" it. Such a Fed move could reduce the amount of the cash in the financial system, resulting in banks and dealers bidding more aggressively for short-term funds."

Wells Fargo Advantage Fund's latest "Overview, strategy, and outlook as of February 29, 2012: Money market overview by Dave Sylvester" says, "We wrote about the credit situation in Europe at some length in our commentary dated January 31, 2012. At that time, we talked about investors who, reassured by the European Central Bank's (ECB's) first Long-Term Refinancing Operation (LTRO) on December 21, 2011, were once again buying paper from European issuers, thereby driving yields lower. Recall that through the LTRO, the ECB offers unlimited amounts of collateralized loans to its banks for a three-year term at its benchmark rate of 1%. The banks also have an option to repay the loans after the first year. The twin objectives of the LTRO seem to be to get the banks over the hump of refunding their maturing 2012 debt, as well as enable them to purchase large amounts of sovereign debt.... The LTRO has been variously described as a rate cut, quantitative easing, and bank capital injection all in one.... Just as things were starting to cool down on the European credit front, Moody's threw a little gas on the bank credit quality fires when, on February 15, the rating agency announced that it would review the ratings on 17 "global capital markets intermediaries," with the average standalone credit assessment moving down a couple of notches, from A2 into the range of Baa. This announcement probably shouldn't have been the surprise to the market.... But, surprised the markets were. It might have been due to the general reasoning for the review.... Well, it's pretty hard to argue with [Moody's comments] especially the part about the "more fragile funding conditions" and "wider credit spreads," since it clearly gets more challenging and expensive to borrow money with a P-2 short-term rating rather than P-1, as may now happen to nine of these 17 firms. Still, even if all nine institutions that could potentially be downgraded to P-2 were, they would still remain First Tier-eligible investments for Rule 2a-7 money market funds, as long as they retain their top-tier ratings from at least two other rating agencies. Already, there has been some movement to drop ratings from Moody's and add Fitch ratings to securities that receive credit support from some of these institutions. Therefore, a P-2 rating does not preclude investments by money funds that are, after all, required to make their own independent assessment of credit quality. But with the backdrop of the still-shaky credit picture in Europe, and the possibility of sweeping changes in the regulations governing money market funds, let us just say that while the action by Moody's might be justified, it was not exactly a confidence builder."

The Investment Company Insitute's latest "Money Market Mutual Fund Assets" shows money fund assets declining for the second straight week. It says, "Total money market mutual fund assets decreased by $7.04 billion to $2.645 trillion for the week ended Wednesday, March 7, the Investment Company Institute reported today. Taxable government funds decreased by $6.40 billion, taxable non-government funds decreased by $1.96 billion, and tax-exempt funds increased by $1.32 billion." Year-to-date, money fund assets have declined by $50 billion, or 1.8%, while they have declined by $105 billion, or -3.8%. Institutional assets have fallen by $28 billion YTD (-1.6%) and $90 billion (or 5.0%) over 52 weeks, and retail assets have fallen by $21 billion (-2.2%) YTD and just $16 billion (1.7%) YTD. ICI's weekly explains, "Assets of retail money market funds decreased by $2.27 billion to $917.83 billion. Taxable government money market fund assets in the retail category decreased by $1.38 billion to $191.01 billion, taxable non-government money market fund assets decreased by $1.56 billion to $531.91 billion, and tax-exempt fund assets increased by $670 million to $194.92 billion. Assets of institutional money market funds decreased by $4.77 billion to $1.727 trillion. Among institutional funds, taxable government money market fund assets decreased by $5.02 billion to $705.01 billion, taxable non-government money market fund assets decreased by $390 million to $928.13 billion, and tax-exempt fund assets increased by $650 million to $94.29 billion."

Money Fund Symposium, Crane Data's annual money market mutual fund conference (the 4th one will be in Pittsburgh, June 20-22), is featured in Meeting Planning firm Kinsley Associates' latest "In the Know" newsletter, in an article entitled, "5 Keys to Successful Conferences and Meetings for Small Businesses." The article cites the show's dramatic growth in its first three years and says, "Many small companies fall prey to the belief that only large companies are poised to include conferences and meetings in their solution offerings. Admittedly, larger companies may have more advantages due to their size, but smaller companies can reap the same benefits if they partner with the right company and utilize best practices. In fact, smaller companies can achieve fantastic results because they are small and nimble. Crane Data, a company with just seven employees hired Kinsley Meetings to help with its initial conference. These are the keys to success we employed for Crane Data that prove small companies can successfully navigate conferences and meetings: 1. Plan Ahead. 2. Speakers and content drive the momentum. 3. Leverage existing products/services. 4. Destination is key. 5. Hire the right company. Hosting a conference or meeting takes strategic planning and attention to detail. Finding the right partner is crucial to conducting a successful conference or meeting.... In the case of Crane Data, Kinsley Meetings handles all the logistics for the conferences, including the destination, venue, registration, and all the fine details. This well-defined separation of responsibilities enables Peter to focus on the educational content of the meeting, and Kinsley to focus on its core strength: meetings." For more on Crane's Money Fund Symposium, visit http://www.moneyfundsymposium.com.

We learned from mutual fund news publication ignites that shareholder servicer DST Systems has filed the most recent Comment Letter under the SEC's "President's Working Group Report on Money Market Fund Reform (Request for Comment)". DST writes, "We understand the Securities and Exchange Commission is reviewing potential additional money market reform options. DST Systems, Inc. respectfully submits our thoughts for your consideration. Our comments focus on U.S. money market funds and the significant impacts potential redemption restriction reform options will have on systems, operations and shareholder behavior that could cripple if not destroy money market funds as a shareholder convenience." They say about redemption restrictions, "The systems and operational implications of this reform are pervasive and would be expensive for questionable benefit, and would likely be destructive to the money market fund product. It would require systems and operational changes for all parties involved in the money market mutual funds product delivery cycle.... As with a transaction based approach, a minimum account balance approach would similarly require pervasive and expensive systems and operational changes for a wide variety of parties that deliver money market mutual funds to investors. Additional tracking systems for calculating and reporting minimum balances would require significant programming."

The Wall Street Journal writes "Money-Fund Plan Hits Resistance". It says, "A Securities and Exchange Commission plan to shore up the $2.7 trillion U.S. money-market mutual-fund industry is struggling to overcome opposition within the agency. SEC Chairman Mary Schapiro is leading the push for stricter money-fund regulation, which would follow a round of rule tightening in 2010. The effort is aimed at avoiding a repeat of 2008, when the collapse of Lehman Brothers Holdings Inc. sparked a financial panic and threatened the savings of millions of investors. Last month, the SEC's staff said it is working on a three-part plan that includes forcing funds to hold a capital buffer against the assets in their portfolios. Ms. Schapiro wants to unveil the proposal as soon as late March.... Any new rules would require "yes" votes from three of the SEC's five commissioners. But in an interview, Democratic Commissioner Luis Aguilar warned that the rules under consideration might add more risk to the financial system by pushing money outside the U.S. or to less-regulated investments." They quote Aguilar, "Before fundamentally altering money funds, wouldn't you want full transparency into all of the vehicles, regulated and unregulated, that are used for short-term cash management?"

Institutional Cash Distributors (ICD) announced "the results of a client survey on the following MMF reform actions currently under SEC consideration: 1) additional capital buffer requirements; 2) principle redemption holdbacks; and 3) conversion to a floating net asset value." A press release says, "The ICD survey findings that are discussed in a new ICD Commentary: Costs and Consequences revealed that nearly all of the survey's respondents would decrease their MMF investments if the proposed reform options are enacted. Thirteen clients stated they would exit MMF investments entirely, with the average net estimated reduction of all respondents totaling 41%. Total institutional MMF investments are approximately 66% of the $2.6 trillion in U.S. MMF investments. Applying the survey's 41% asset reduction across U.S. institutional MMFs, these SEC proposed MMF regulations would result in an estimated loss of $714 billion in MMFs. MMFs currently invest in about 38% of total commercial paper assets. Assuming a 27% (66% x 41%) MMF reduction, their contribution to commercial paper financing would decrease by $110 billion. This would challenge companies like General Electric, Johnson & Johnson, Harley-Davidson, Procter & Gamble and other enterprise companies who rely on commercial paper as a means to finance accounts receivable, maintain inventories and meet short-term liabilities." Tory Hazard, ICD's COO/CFO comments, "The significant corrective reforms made to Rule 2a-7 by the SEC in 2010 are working, witnessed by MMF steadiness and control during the 2011 U.S. debt ceiling showdown, U.S. credit rating downgrade and the ongoing Eurozone debt crisis. To add further unnecessary regulation will negatively impact U.S. corporations, municipalities and the U.S. Treasury with more expensive financing at the worst possible time." ICD's Commentary can be downloaded at: http://www.icdportal.com/downloads/ICD-Commentary_Costs_and_Consequences.pdf.

The New York Federal Reserve's "Liberty Street Economics" Blog asks "Is Risk Rising in the Tri-Party Repo Market?" The posting by Antoine Martin says, "At the New York Fed, we follow the repo market closely and, with some of my colleagues, I've tried to keep readers of this blog informed about how the market works, how it's being reformed, and what risks remain. We're always encouraged when others share our interest in this market, so we read a recent Fitch report -- "Repo Emerges from the 'Shadow'" -- closely. At first glance, the report is a bit worrisome, as it argues that the repo market has recently seen a large increase in riskier types of collateral. So we decided to take a close look at some data to see if we could validate this finding. In this post, I use data made publicly available by the Tri-Party Repo Infrastructure Reform Task Force (the Task Force) to show that there is in fact no evidence of a broad-based increase in riskier types of collateral. The Task Force's objective in publishing the data was to give a comprehensive view of the market, so the data represent 100 percent of the market's volume. In contrast, the Fitch study is based on data from a sample of prime funds, representing only 5 percent of the market's size." In other news, see ICI's latest "Money Market Mutual Fund Assets," which says, "Total money market mutual fund assets decreased by $13.11 billion to $2.652 trillion for the week ended Wednesday, February 29, the Investment Company Institute reported today. Taxable government funds decreased by $4.57 billion, taxable non-government funds decreased by $6.53 billion, and tax-exempt funds decreased by $2.01 billion."

Yesterday's Wall Street Journal featured the Opinion piece "Money-Market Funds Aren't What You Think" written by former Citi exec Sallie Krawcheck. She writes, "The Securities and Exchange Commission is reportedly finishing a proposal to increase regulation on money-market funds, the $2.7 trillion industry that provides corporations with an important short-term funding source and individuals and institutions with an alternative to traditional bank deposits. The SEC's aim is to reduce the risk of a meltdown in the event of another 2008-style panic. Its proposal is said to include mandating capital backing for money funds and ending their convention of reporting assets at a fixed $1 net asset value -- instead having it "float" to represent the funds' underlying value, as with other mutual funds. The industry opposes additional regulation, arguing that earlier SEC actions are sufficient. But meaningful risk -- and significant misunderstanding of this risk—remains in this business, and additional reforms can help.... Here's what individual investors in money funds know: They know that on their brokerage statements, their money funds are always valued at 100 cents on the dollar, in good times and bad --giving them a sometimes-false sense of stability and safety. They know that money funds are reported in the "cash" section of their statements -- again strongly implying safety. And some know that, even during periods of significant market instability, money-fund providers have gone to painful lengths to return that 100 cents on the dollar—not to "break the buck.""

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