SEC’s Retreat Leaves Money Funds Vulnerable to a Crisis

If we don’t learn from the financial crisis of 2008, George Santayana’s famous dictum tells us we’ll have to repeat it someday. Unfortunately, the Securities and Exchange Commission just flunked a lesson from one of the crisis’ scariest moments.

When investors pulled $300 billion out of money-market mutual funds in a single week, it was the modern equivalent of a run on the bank. One fund’s losses on Lehman Brothers investments had shaken confidence in the multitrillion-dollar industry.

SEC Chairwoman Mary Schapiro figured, then, that regulators should make money funds safer. She proposed a set of rule changes, but ran into opposition from the mutual fund industry. Read more about this story at St. Louis Post Dispatch.


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