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Rating:A Georgetown Prof Predicts the Elimination of Money Funds Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, June 19, 2012

A Georgetown Prof Predicts the Elimination of Money Funds

News summary by MFWire's editors

It's not just insiders resisting SEC chairman Mary Schapiro's proposal for money market reforms. An academic, via a U.S. Chamber of Commerce-commissioned analysis, also joined the fray in lambasting floating NAVs, Liz Skinney reports for InvestmentNews.

According to Georgetown University professor James Angel, floating NAVs will result in the "elimination or at the very least a major shrinkage" of the $2.6 trillion money market fund industry.

“These proposals have the effect of saying, 'Let's get rid of the industry or make it so expensive that no one will want to use it,” Angel said.

He advised that regulators should evaluate how well the 2010 reforms have stood up to market stress and whether they have produced desired results of improving the industry before proposing new changes.

The 2010 reforms called for changes including minimum liquidity mandates, restrictions on lower quality Second Tier securities, shorter maturity limits, stress test requirements, independent credit analyses of every security purchased, and strengthened repurchase agreements. 

Edited by: Irene Park

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