Skip to main content

ve1276c.jpg Chris Van Es

Money-Market Resistance

The US Securities and Exchange Commission recently rejected proposed rules that were aimed at making money-market funds safer in a financial crisis – a decision that caused consternation among many outside regulators and observers. It is not hard to see why.

CAMBRIDGE – The United States Securities and Exchange Commission (SEC) recently rejected proposed rules aimed at making money-market funds safer in a financial crisis – a rejection that has caused consternation among observers and other regulators. Given the risks that money market funds can pose to the global financial system, as shown by their destabilizing role in the 2008 financial crisis, it is not hard to see why they are worried.

Money-market funds take excess cash from investors and use it to purchase short-term IOUs from businesses, banks, and other financial institutions. They mimic bank accounts by allowing investors to write checks and promise that their investment’s value will not fall.

In 2012, American “prime” money-market funds, which buy bank and corporate debt, were worth nearly $1.5 trillion. The money flowing through these funds went to many of the world’s largest banks, including not just the obvious US suspects (JP Morgan Chase, Bank of America, and Citi), but also major European and Japanese banks such as Barclays, Deutsche Bank, Bank of Tokyo, Sumitomo, Credit Suisse, and ING. These six international banks alone accounted for nearly 20% of the prime money-market funds’ value.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.


Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.;
  1. drew47_Drew AngererGetty Images_trumpgiulianasmiling Drew Angerer/Getty Images

    Will Trump Be Removed from Office?

    Elizabeth Drew

    Assuming the US House of Representatives votes to impeach President Donald Trump, the fact remains that there are far fewer votes in the Senate than will be needed to convict him and remove him from office. But the willingness of Congress – including the Senate – to continue tolerating his dangerous conduct is now truly in question.

  2. rudd9_Darrian TraynorGetty Images_climateprotestburningaustralia Darrian Traynor/Getty Images

    Unsustainable Australia

    Kevin Rudd

    Before the current conservative government came to power in 2013, Australia was well-positioned to make the necessary transition to a low-carbon economy. But now, the country is heading in reverse, and has already fallen behind most developed countries, and even China, on reducing emissions and building resilience against climate change.


Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions