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Kaltbaum Capital Management’s Gary Kaltbaum and Bankrate.com Senior Analyst Greg McBride on the proposed regulations of the money market mutual fund...
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Well many critics of these new rules are worried about regulation overkill joining me now -- called on president of -- on capital management and Greg McBride senior financial analyst for Bankrate dot com.
Greg I'll start with you is this overkill.
I they -- -- as Jerry I mean first of all.
-- appeal here to individual investors the people at home watching us right now.
Is to fall it's not high returns as the fact that you're gonna be able to get to your money when you need it day and that for every hundred dollars you putting -- going to be able to get a hundred dollars out when you needed.
If you take away or restrict those two appeals.
Frankly people have alternatives they'll put their money elsewhere they'll put their money in an online savings account or short term bond fund.
We're thinking you know oh by the way get better returns and Richard getting in the money funds right now.
Well Gary I mean I think Greg makes the right point here you know if you wanted to be in CD is.
And have your money tied up for three months six months a year whatever you could lead -- people are in money market funds because they -- to be able to get out when ever they need that -- and it seems to me eight.
That the very point in time when they might make restrictions on getting out whether it's financial restrictions restrictions or closing this temporary -- That's exactly when you would wanna get access to weigh in an emergency.
What do you set.
It's a mistake all the way around first off number one money markets right now paying 0%.
Now they were paying 5% like -- Back in 2006.
And that they want to take up percent of you.
Different story but you're not making any money off -- money markets right now so would be a lost number two this -- idea is stupid.
You have to let markets be if you get into another market crisis and all of a -- you tell a bunch of people -- you cannot get out of your money market funds.
For right now when they opened those funds ticket to get out of -- Everybody's gonna jump -- once and then there's gonna be even a bigger problem they gonna create a motion of motions in the people and more worry that there are four I think it's a big mistake.
So is the unintended consequences that it's really the thing you don't -- to do they get into trouble with these regulations.
CEO I want to respond to this.
Christopher -- -- speaking out on these issues he said this regulation will kill the industry kill the industry.
He was on our air today Chris Donahue federated CEO saying the government has been standing over money market funds with a club since the 1970s trying to kill them.
-- -- of the possible rules would cause enormous amounts of money to move from money market funds into other instruments.
What do you make of this -- mean.
It's sort as you pointed out at the top of this block it's the point of the industry to be able to get an -- to get back to be perfectly liquid.
If you remove that does that mean everybody gets somewhere else and let's keep in mind here we were talking about.
Lots of American investors and these but it's also companies.
It's also pension funds governments are in these money market funds it matters very much what happens to them.
You're absolutely right Jerry I was explaining -- the somebody the other day he said you know what kind of sounds like what you're saying is that the cure is worse than the disease.
I don't think that sums up because.
These money funds are very safe.
Okay they're not guaranteed but they're very say for me.
They break the buck what about the frequency of haley's comet so -- coming up with these type of proposals.
Better frankly gonna just cause people and institutions the put their money elsewhere.
Has a very detrimental effect from an economic perspective because of the fact that a lot of companies were -- and being able to issue short term debt in the money market so that they can.
By inventory so that they can be -- they were all.
There and that's why they stabilize these money funds back in 2008 to begin -- which by the way didn't end up costing taxpayers a dime well.
