August 30, 2012

Regulators´ occurrences often represent the most dangerous quicksand

I fully agree with John Gapper when he finds not “unreasonable” the proposal by Mary Chapiro, the SEC Chairman, that money market funds would have to, “either become more like investments funds by allowing their net asset value to float, or more like banks by raising a buffer capital”, “Don´t leave the financial system on quicksand” August 30. 

That said, with respect of that “buffer capital” I hope he, and Ms Chapiro, mean one same capital requirement for any type of assets. This because since most investors are currently convinced their buck is already broken, or will be broken, their main interest is it becoming broken as little as possible. 

And, as we should know by now, nothing guarantees a super-large breakage of the buck more, than when besserwisser regulators, full of hubris, believe themselves to be the risk managers of the world, and start interfering by mean of risk-weights, with the markets´ own risk assessments. 

And, so, when regulating the money market funds (and the banks) please never forget that regulatory occurrences can also often represent the most dangerous quicksand.