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.”
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.
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?