just proposed creating a special bank to backstop money market mutual funds, but not all of the biggest money fund firms are on board. That's one of the tidbits revealed
yesterday by Bloomberg
's Christopher Condon.
The Wall Street Journal
's Eleanor Laise also covered
Fund firms would pump in $350 million to start up the bank and pay three basis points on an ongoing basis, giving the bank $24 billion in debt and equity after a decade (and another $30 billion accessible via a window from the Federal Reserve). By comparison, investors withdrew about $230 billion from money funds in the three days after the Reserve Primary Fund
broke the buck in September 2008 after the collapse of Lehman Brothers.
Money market giants Federated
] and Vanguard
] are all on board. Yet BlackRock
's [see profile
] Simon Mendelson
(managing director) worries that the bank might encourage risk-taking by money fund PMs, and Fidelity
] isn't backing the idea.
"We have concerns that the costs, infrastructure and complications associated with private liquidity facilities are not worth the minimal liquidity that would be provided," Fidelity's general counsel, Scott Goebel
, wrote to the SEC
The ICI's proposal appears to be an attempt to forestall more drastic proposals under consideration, including the creation of floating NAVs for some money funds (or the requirement of their use by all) and the threat of designation by the Fed of money funds as systemically important (which would put them under the Fed's power).
Neil Anderson, Managing Editor
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