Your Legal Right To Redeem Your Money Market Account Has Been Denied

zero hedge ^ | 1/3/02 | Tyler Durden

[blackminorca]

Yet new regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to pull one of these three core pillars 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 in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets." You read that right: this does not refer to the charter of procyclical, leveraged, risk-ridden, transsexual (allegedly) portfolio manager-infested hedge funds like SAC, Citadel, Glenview or even Bridgewater (which in light of ADIA's latest batch of problems, may well be wishing this was in fact the case), but the heart of heretofore assumed safest and most liquid of investment options: Money Market funds, which account for nearly 40% of all investment company assets. The next time there is a market crash, and you try to withdraw what you thought was "absolutely" safe money, a back office person will get back to you saying, "Sorry - your money is now frozen. Bank runs have become illegal."

[stefanbatory]

the cattle have been fattened, now it is time for the cowboys to ride in and slaughter them...

[OafOfOffice]

On that week in September, we came within a few hours of complete melt-down of the markets in the US. There was no enough cash or “slack” in the system to allow the redemption of that much money in so short a time.

So what is your take on this article? Is this new rule to stop this from happening again?

[Nam Vet]

Typing in a hurry .....Ta pan is : Tax plan.

OK , and here I thought you were on to some fancy Japanese investment thingy.

Nam Vet

[OafOfOffice]

Make a ta pan, liquidate your accounts, buy land with it,and / or get establish perfectly legal accounts off shore which are not subject to direct US regulation.

Obama didn't end off shore accounts he won't find and tax?

This GVMT action could virtually destroy anyone retired,right?

[Zeneta]

unlikely due to Lehman.

It is more likely that they bought short Treasuries. Look at their Avg maturity. If fund managers expect rates to increase they will start to shorten their maturities in order to have cash to move into higher yielding longer maturities. I would be curious what the change in average maturities occurred since July of 09.

If they are a large MM fund that has been moving money into shorter and shorter maturities we are F..ked.

The yield curve has/is gone vertical.

There are no choices left, but to get as close to cash as possible, that means T-Bills at 0 or less.

The Fed and SEC know this.

We have moved way beyond return on investment, to return OF INVESTMENT.

It's that return of investment that is being co-opted by these new rules.

[PAR35]

Which is why all of my money market funds are now safely esconced in an off shore bank outside US jurisdiction.

One of those Icelandic banks? Or do you want to invest in the Caribbean with 'Sir' Stanford?

[Oorang]

Thanks for the ping, I appreciate it. Although I am now quite confused.

[dennisw]

If I had that kind of cash and gold etc a big part of it would be in Australian and Canadian banks. Part of this being physical gold and silver sitting in Australian and Canadian safe deposit boxes. And if I owned stocks they would be via Canadian and Australian brokerages. You can buy Australian T-Bills too. Their equivalent

To me that is offshore enough. Far away from 0bama and his socialist ilk

[OafOfOffice]

We know we can safely put our money in off shore accounts in Palau where the Uighurs went.

[wtc911]

My IRA is with Dreyfus. Six months ago I received a notice that only a certain dollar amount in MM was secure, iow, anything I had in MM above that number could be lost to me.

I turn 59 early this year. The date that I turn 59.5 I liquidate my IRA entirely.

[Candor7]

Come on you can do better than that, surely. LOL.

[goat granny]

I would change just a little your list of things to buy, its ammo, spam and twinkies....all will outlast a nuclear bomb. Oh yea don't forget toilet paper and lots of water..

[virgil]

I wish I could liquidate my 401k, but I am nowhere near 59.5

[Candor7]

Obama didn't end off shore accounts he won't find and tax? >>>>>>>>>>>>>>>>>>

No. Obama sent the IRS after Swiss numbered bank accounts on which Americans had not paid taxes. having an off shore account is perfectly legal, as long as you declare your income, pay taxes on it, and inform dept treasury through form Form TD F 90-22.1 of the existance of the account ( filed with Treasurey Dept, not IRS, only takes 5 minutes to fill it out.) http://nestmannblog.sovereignsociety.com/2009/04/foreigners-in-or-doing-business-in-the-usa-get-ready-to-bare-your-financial-soul.html

[Candor7]

LOL, You are giving me a stitch!

Maybe a Tai Pan stitch.ROFLMAO.

[Czar]

Mark for later.

[Hang'emAll]

the cattle have been fattened, now it is time for the cowboys to ride in and slaughter them......

I think it is time to saddle-up-—

“Take all the rope in Texas
Find a tall oak tree, round up all of them bad boys
Hang them high in the street for all the people to see that

Justice is the one thing you should always find
You got to saddle up your boys
You got to draw a hard line
When the gun smoke settles we’ll sing a victory tune
We’ll all meet back at the local saloon
We’ll raise up our glasses against evil forces
Singing whiskey for my men, beer for my horses “

[azishot]

Thanks for the ping, Candor7. Yes, this is HUGE!

Think I’ll forward this to our financial guy who will probably tell us not to sell anything...just sit tight and everything will work out. Yeah, right (eye roll).

[OafOfOffice]

Financial secrecy list.

Biden’s Delaware Number 1

http://www.financialsecrecyindex.com/2009results.html

[NVDave]

Yes, this is the Ivy Leaguers’ attempt at a rule that will make it possible to “stop bank runs.”

But these morons from Harvard (eg), for all their alleged brilliance, know little to nothing about human nature and how the world really works.

What’s the fastest way to incite panic among the population about the stability of the banking sector?

Simple: When someone tries to withdraw their money during a panic, tell them “no, you can’t have your money.”

Just telling a few people, be they large depositors or small, that they cannot get at their money will be cause for full-flight bank runs. That’s the way bank runs work: someone is told “you can’t have your money ‘now’ - could you come back tomorrow and we’ll have 50% of it ready for you?”

And that person storms out of the bank, tells three friends, two of whom try to get their money (and might not be able to), one tells yet other friends... and before you know it (and especially in this highly-connected age of instant widespread communication), you have a no-holds-barred bank run.

You see, the bank grifters want our cake, they want to be able to eat our cake and they don’t want to have to say “We’re sorry.” Rather than tell depositors a) that they may experience liquidity issues during times of severe market stress, b) that failures of non-backstopped backs (eg, like Lehman) could result in a loss in the NAV of the money market fund, etc - they’re going to pretend that they’re “still safe as cash” while at the same time making sure that they can’t be forced to sell positions for redemptions.

What should happen is a top-to-bottom evisceration of the debt rating agencies, set up a true evaluation of the risks in credit instruments and then regulate money market funds into being able to invest in only those instruments which are a) safe enough and b) liquid enough to not suffer losses. Rather than trying to plump up yields with all that short-term corporate paper, they should be in Treasury bills, for example.

This sort of rulemaking is one of the reasons that my top criteria for future presidential candidates goes like this: “Do you have an Ivy League degree? Yes? OK, don’t expect my vote. I’ve had four of you clowns in a row now, and I don’t want any more of your idiocy.”