Posted on 01/03/2010 11:29:24 AM PST by 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."
(Excerpt) Read more at zerohedge.com ...
The name of the investment game is to prepare for inflation, sure to happen with the Fed monetizing the debt.
Many FAs are instructed not to tell clients to change anything for fear that oit wiill begin a destabilizinng trend.
Change to a real FA. Most folks are buying land, gold , silver, mining stocks ( gold and silver mines). The Chinese are also doing this big time.
The regulation is in part a way to prevent capital from going into commodities like gold and silver. WHen the government prevents you from getting your money when you want to use it for sommething elese, they are in fact TAKING youer money for their own systemic benefit to prevent capitalism/free market forces from working.
Its easy to act soon to avoid the problem entirely.
Investing only in Canadian Commodity Companies is one good bet.
When they say money market funds do they also mean bank money market accounts, which are like checking/savings accounts with a teeny bit more interest?
I’m thinking these are not the same kinds of funds but someone please clarify. Thanks.
Yes, this also affects money market accounts at commercial banks.
pingy!
You do not feel there was a conspiracy last year on the electronic draw down? I feel Soros created the run on banks through his multiple alliances so obama would get ahead in the polls due to the horrible economy they would mention over and over that Bush created. I have no proof other than Soros market manipulations of the past.
“Do you have an Ivy League degree? Yes?
In this video if you missed it, A CEO questions Romer why Obama has no business people in his admin. He said he had never seen that before. Watch her answer about being a teacher of economics. Then in the end, shared prosperity under her breath.
http://bit.ly/6hpPsC
Thank you for your information too.
There was no “550 billion draw down” of money market funds other than in the imagination of the New York Post and Rep Kanjorski. If you can find data to back up his claim then I imagine Kanjorski would be as surprised as everyone else.
Thanks. I will read the website and catch up. I have such a suspicious mind. I can see the treasury department at some point saying all that money is American money and they want it.
MM funds never were intended to carry a guarantee. The Treasury announced that it would begin a temporary one in order to put an end to the panic that was developing after the Reserve Fund broke the buck.
You might want to talk to a CPA before you liquidate your IRA, you’re liable to incur some tax consequences.
The main reason to be in MMs right now is that the alternatives may be even riskier. It’s a case of looking for the return of capital rather than a return on capital.
Re: “Yes, this also affects money market accounts at commercial banks.”
****************
So that means ALL monies in any banks, like regular old checking and savings, too?? Makes sense — why would it be OK to take out all those other funds but not money market?
Otherwise every security vehicle is a Ford Pinto........
The amount of money that was flying around the debt markets in Sep/Oct 2008 dwarfed any single bank’s or fund’s size.
To take down the money market funds in the US, we’re talking of moving hundreds of billions of dollars in a few hours. The Fed went into full panic when they saw in excess of $550 billion move out of money market funds in two hours.
Soros is rich, but he isn’t that rich, and he can’t affect that much money in such a coordinated fashion. The money flows can be easily explained in the height of a panic among “professional” money managers who saw all of their assumptions about how markets worked being broken in quick succession.
Its like Social Security, They take your money for years, and then when you retire tell you that you can’t have it back? They tell you that you can’t get your MM funds , what are they doing with YOUR money? Its pretty much the same as confiscation.Your money and they won’t let you have it?
Eff them.
Commercial paper is very short term so the withdrawal delay would never be very long. You just wouldn’t be able to liquidate on demand. Hyperinflation shouldn’t cause the sort of problem that would lock you into your MM fund. There will be other, much greater problems to worry about than that.
If we are going to get hyperinflation then the smart move is to load up on the maximum amount of debt possible. The biggest possible mortgage, credit cards maxed out. And use all that debt to buy hard assets. But I don’t see that scenario playing out, there are just too many people betting on the dollar continuing to fall apart. I suspect that the coming big surprise will be interest rates spiking up and the dollar getting harder.
>>”Bank of Sealy”
First Innerspring Bank?
Booty-Rest?
The trouble with that is that all you actually have is green-printed pieces of paper. I have concluded that there is no longer any real connection between government revenues and government spending. I think they will spend whatever they want, on whatever they want. The huge debt will just be the excuse they will use to increase the tax burden on whoever they want to punish/impoverish.
If taxes don’t do the job, hyperinflation will. Consider, also, the NK currency exchange: you will only be allowed to exchange so many old dollars for new dollars.
DG
The IRS just recently hired “hundreds” of new agents to go ‘wealth hunting’ and also, many offshore account holders were offered ‘amnesty’ to come ‘forward’.
To me, a lay person, it sounds like no matter what you do, where you go, this traitorous administration will find your funds or change the rules so drastically, that you will be SOL if you try to pull any. Gold/Silver at this time sounds good but if they can succeed at this, it sounds like they will be able to do just about anything...i.e. outlaw precious metals etc...
” if the new rules require you to shorten your maturities and restrict access or reorganize under Fed oversight with the Guarantee’s provided with the condition you purchase longer term Treasuries,”
Again, where are you finding that supported in the article? The only point supported by the article is that MMs will be subject to delays in withdrawal in order to effect an orderly liquidation of the fund’s assets. That’s about as frightening as having to wait for a CD to mature.
It would be hard to “shorten the maturities” of the assets held by MMs anymore than they already are, it’s short term commercial paper.
Yep. The “cash” in those money market funds are short term loans from banks to banks or businesses. They are normally very liquid and trade easily. In the meltdown nobody would buy them for any price. So the funds themselves couldn’t raise cash. Normally money market funds can invest in short term CD’s, CP and BA’s that mature no longer than nine months in the future. But that doesn’t mean squat if you need that cash today.
In subsequent hearings, Kanjorski put the question directly to Hank Paulson whether the figure was accurate or not. By that time, people were saying what you are saying here - that the number was in Kanjorski’s imagination, promulgated by the NY Post.
Paulson ducked the question, but more importantly, he did not say “no.”
Now, let’s put aside what was *said* and instead focus on what people *did*, since actions speak louder than words.
In the week following Sep 17/18 2008, the Fed increased the M2 supply (non-seasonally adjusted) by $110 billion, when in the prior quarter, it had increased only about $10 billion.
The Fed clearly thought something big was going on to grow M2 at that rate.
The Treasury put out the policy to backstop all money market funds as of Sep 19th, 2008.
The Fed then stepped in and accepted applications from Goldman and Morgan to become “bank holding companies” which would give them access to the discount window - that was as of 9/21/08.
Within the next month, the Fed started programs to buy short-term asset-backed commercial paper, up to hundreds of billions of same.
Kanjorski got certain details wrong in his recollection; he got the details of Treasury vs. the Fed stepping up with the “Treasury injected $105 billion” (as he recalled it, when it was the Fed and $110 billion), but there’s no doubt from the Fed and Treasury’s actions in just three days after September 17/18 that the Federal Reserve, the US Treasury and the Congress were acting in full-flight panic. There’s no doubt in my mind of that at all, because the evidence in the markets of what they did to the money supply, the absurd alphabet blizzard of programs the Fed put out, the TARP program, the “pulling a number out of the air” that Paulson did for the price tag of TARP - all showed that they were in a panic.
A number under $100 billion would not have caused full-flight panic, IMO. They’re used to pissing away tens of billions of dollars every day and night in NYC and DC. Tens of billions had been flowing out of various asset classes day after day in the week before Sep 17/18.
Hundreds of billions? In a short timeframe?
Yea, that still gets attention.
I believe that Kanjorski screwed up in that he spoke the truth when he wasn’t supposed to. As more and more details emerge of what was going on in that timeframe, it has proven to be more accurate to assume the worst level of incompetence out of Wall Street than to assume that they had any semblance of understanding of the charlie-foxtrot they lit off. The actions of the Fed, the SEC and others in this mess showed (quite amply) that the government had no clue just how interconnected this web of debt was, they had no clue what was going to happen when they let Lehman fail, they had no clue (especially academics like Bernanke) when they said that “sub-prime will be contained.”
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