On Tuesday, the Financial Stability Oversight Council will meet to discuss potential money-market mutual fund regulation reform. Hold on! Keep reading!
From the people who brought you Occupy Wall Street comes Occupy the SEC and the Alternative Banking Group, which pair real Wall Street experience with a passion for change. They want you to learn about the way money works because “you need to understand the technicalities to be part of [the debate].” That’s why they made the deck of cards that introduces you to some of the major players in the run-up to the 2007 financial crisis.
And that’s why they’ve posted a primer to this money-market mutual fund regulation business—as an introduction to an open letter with recommendations they’ve sent to Treasury Secretary Tim Geithner and SEC Chariman Mary Schapiro. Previous such letters have been widely praised.
Here’s a taste of the primer:
What are MMFs?
Money market funds make up the overall money market, which is a way for banks and businesses to finance themselves with short-term debt. It sounds really boring, but as it turns out it’s a vital issue for the functioning of the financial system.
Really simply put, money market funds invest in things like short-term corporate debt (like 30-day GM debt) or bank debt (Goldman or Chase short-term debt) and stuff like that. Their investments also include deposits and U.S. bonds.
People like you and me can put our money into money market funds via our normal big banks like Bank of America. In face I was told by my BofA banker to do this around 2007. He said it’s like a savings account, only better. If you do invest in a MMF, you’re told how much over a dollar your investments are worth. The implicit assumption then is that you never actually lose money.
