Simple: When someone tries to withdraw their money during a panic, tell them “no, you can’t have your money.”
You're right on this, Dave - it's the fastest way to panic people. That said, does this apply to stock Mutual Funds ? Can a hold be put on all redemptions? My Vanguard's Prime Money Market Fund would have a "hold" but not my "gold and precious metals" fund? Is that it? Or does this apply to all "funds"?
The feds must know what you know - the FDIC was set up to assure people their money was safe - to stop bank runs - this regulation does the opposite. It creates fear. They must understand human nature - right?
Sure - they could put a hold on entire markets. Remember that Woodrow Wilson closed the whole stock market for months - July 31st to November 27th, 1914. Truly normal operations on the NYSE didn’t resume until April 15th of the following year. Wilson, was of course, another Ivy League academic, just like our current occupant of 1600 Penny Ave.
The market was closed for days following 9/11. If a market disruption happens again (and they will - we just don’t know when, how bad and for how long, but a big terrorist attack or a huge panic in the markets might bring about an emergency closing), there will be times you cannot sell commodities, stocks, bonds, options, etc unless you’re doing it “on the curb” — ie, between individuals, outside of the markets. That works if you actually have stock or bond certificates, or physical commodities in your possession, but if your assets are held in a brokerage account, especially if they’re “held in street name,” you’re not going to be able to do anything with them until the markets re-open.
If a redemption hold is placed on MMF’s, market closures (and possibly bank holidays) are not far behind.
To deal with this, you should have cash in hand or in a bank in cash. Not in MMF’s. I’m not saying to put all your cash under the mattress and sleep on it, I’m just saying that it should be part of people’s contingency planning - like keeping some water in the basement, some beans and rice, some spare ammo, etc. Keep some money in your portfolio in real cash, out of MMF’s or other short-term bond funds, that you can get to without needing the markets to operate.
This regulation is just another part of Wall Street’s agenda of undoing Glass-Steagall. They want to be able to run riot with all money that they have control over, no matter how stupid the idea. This is yet another part of the reason why I think conservatives are taking a very, very untenable position by arguing for “deregulation” of the financial industry. We shouldn’t be allowing the Democrats to get away with what they’re doing right now, which is making regulations that are favorable to the big fraudster banks - eg, Barney’s gift to the i-banks in the most recent legislation - but Republicans and conservatives have this ideological blind spot about this stuff. They think that all regulations are bad. Not so, especially in the financial industry.
As recent events have proven, the “financial professionals” cannot be trusted - not even with the preservation of their own jobs and companies. These people in finance today are so short-sighted that they’re willing to burn down their entire neighborhood just to prove that they know how to light a bar-b-que with gasoline so they can finish grilling their steaks faster than their next door neighbors.
Too many conservatives are ready to spout such bromides as “deregulation” when that’s exactly what the banks want to hear now. They’ve proven that they can’t be trusted to regulate themselves.
Since we have no leadership in DC on the issue, it is up to everyone to know that your banker/broker is not your friend and deal with him accordingly - as tho you were playing poker with him, he’s known for being a card sharp (and sometimes an outright cheat), and he thinks you’re the easy mark at the table.
Don’t be the easy mark. That’s all.