The Perceived Guarantee of Bank-Affiliated Money Market Funds

27 Pages Posted: 7 Oct 2010 Last revised: 4 Jun 2011

Date Written: October 6, 2010

Abstract

Excerpts from letters to the Federal Reserve Board and other federal banking regulators concerning the growing investor perception that banking organizations are effectively guaranteeing their affiliated money market funds. The letters show how bank regulatory policies are fostering this perception and address moral hazard and other concerns. The letters provide supporting data and suggest steps banking regulators can take to avoid the perception of a guarantee. A recommendation by the ABA Task Force on Regulatory Reform is appended.

Keywords: Money Market Fund, Guarantee, Bank, Bank Holding Company, Regulation, Policy Statement, Bailout, Bank-Affiliated, Moral Hazard, Systemic Risk, Financial Support, Capital, Bank-Affiliated Money Market Fund

Suggested Citation

Fein, Melanie L., The Perceived Guarantee of Bank-Affiliated Money Market Funds (October 6, 2010). Available at SSRN: https://ssrn.com/abstract=1688434 or http://dx.doi.org/10.2139/ssrn.1688434

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