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It Ain’t Money-Good No More

Bruce Krasting's picture




 

 

 

Elisse Walter is an interesting choice to be the next top-dog at the SEC. She's been at the Agency for six-years, so she knows where the bathrooms, and the dirty laundry can be found. She certainly looks mean enough for the job, but she has one big flaw on her resume. She's a big-time Democratic supporter.

Obama did not "nominate" Walter, he "designated" her to take over the job. This is an important difference as the President's tactics eliminated any problems that might have come up in a Senate confirmation hearing. This is a bit unusual, so far there has not been a fuss. But this is DC and nothing is certain these days. My guess is that Elisse is a Temp as the head of the SEC. I'm also thinking she has been told to sit tight, and not rock the boat for a few months as the dust settles on the other issues floating around Washington.

 

I bring this up because there is a very import issue on the SEC’s table right now. The clock started ticking a month ago. An alarm will go off on January 18, 2013, and ninety days later, the financial markets will go through a major transformation. The changes will be some of the most significant to occur over the past thirty-years. Millions of savers and $3 Trillion of deposits are now up in the air. As a result of the uncertainty, very big money may have to move around in the months to come. One never knows what will happen when, in a short period of time, the odd trillion changes its “address”. We’re almost certain to find out.

 

The details:

 

- A part of Dodd-Frank was to set up the Financial Services Oversight Council (FSOC). FSOC was charged with coming up with recommendations about what to do with Money Market Funds.

 

- FSOC came up with a plan. There is a window for public comment that ends on January 18, 2013.

 

- After Jan. 18, the 90-day countdown to implementation begins. There is nothing stopping implementation save, heaven help us, The SEC. From a Treasury report today (Link):

 

If the SEC moves forward with meaningful structural reforms of MMFs before April 21, 2013, it is expected that the Council would not issue a final recommendation.

 

Okay, so if the SEC sits on its hands until spring, the FSOC plan comes into being. So what is the plan? Simple:

 

Floating net asset value -

Would require that MMFs’ share prices reflect the actual market value of their portfolio holdings.

 

It will not be so long after April that some MMF breaks the buck, and then who knows what?

 

For what it’s worth, I never thought there should be a “rule” that insures that MMFs can’t trade below 1.00. After all, the assets are primarily short-term IOUs of financial institutions that are not so highly rated. Add to the asset problem, the little issue of ZIRP. With no yield, there can’t be a cushion. So I agree that MMFs should be forced to float, and maybe its best that the SEC sits idly by, and lets it happens.

 

But it would be a mistake to think that this will not have repercussions. There are too many zeros involved. Some shuffling of money from place to place is likely over the next few months. Basically, this will be a hit to the unsecured debt market, also know as the Shadow Banking System.

 

Probably will be no problem at all, right?

 

 

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Wed, 11/28/2012 - 00:29 | 3016502 jonjon831983
jonjon831983's picture

Damn MMF changes... been tellin my parents, why hold onto these things with the crappy interest anyways...

Tue, 11/27/2012 - 23:36 | 3016400 malek
malek's picture

So let me get this straight:
In September 2008, when one MMF broke the buck, the Fed stepped in and guaranteed pretty much all MMF [will never break the buck].

And now DONK (Dodd-Frank) will lead to all MMF floating in April 2013, and shortly thereafter a large number of them will break the buck at least temporarily?
Yeah sure.

Wed, 11/28/2012 - 00:38 | 3016482 FleaMarketPete
FleaMarketPete's picture

 

I work in the institutional space and there is no way in hell they would/can tolerate a floating rate for their liquid reserves.  I don't know what the alternative would be.  Maybe BK can enlighten us.

 

Wed, 11/28/2012 - 07:46 | 3016826 Bruce Krasting
Bruce Krasting's picture

T-Bills? I don't know where the money might go.

Tue, 11/27/2012 - 22:22 | 3016233 Zer0head
Zer0head's picture

Like it or not Obama won and won convincingly, apart from the banksters who are big-time supporters of President O, part of his base thinks SEC is some sort of Carbon sequestration enterprise while the other part of his base thinks SEC is an abbreviation for eternal security as in Social Security. 

Have you been on an airplane lately? How bout to a casual dining establishment?  look around and you're either surrounded by skin and bones soccer moms glued to their smart phones as little jenny flicks food with her spoon or alternatively some 300 pound Walmart Mama who slaps little joey on the side of the head as she slurps up a diet Coke as joey gets ready to consume his third ice cream sundae from the pig trough.

 

America is in sad and serious decline and has been for at least 3 decades.

Wed, 11/28/2012 - 07:55 | 3016838 bunnyswanson
bunnyswanson's picture

Who cares what you think.  Now that we have that straightened out, I will tell you what I think.

Americans are our only hope. If they go down, we are fucking doomed.

Tue, 11/27/2012 - 22:08 | 3016209 Zer0head
Zer0head's picture

Elise has a horrible resume, just read some of the BS she wrote in the early 2000s

this is a repost

Elisse Walter New SEC Chair

Hearing on Money Laundering

Firms that continue to disregard their obligations to develop and implement anti-money laundering compliance programs that contain all the necessary procedures will face NASD Enforcement actions that could lead to substantial fines, suspensions and even expulsion from the industry. http://www.finra.org/Newsroom/Speeches/Walter/P011088

That was our new SEC chair Elise Walter back in  2002 getting tough on money laundering.

in the ensuing 10 years trillions have and continue to be laundered with slap on the wrist fines eg  Buffett's Wells Fargo  was charged with laundering $378 billion -- equal to one-third of Mexico's gross national product. The bank paid a $50 million fine

http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs

 

I heard Goldman broke out the Krug in the dining room at lunch Monday (ususally not permitted until din din). The reason according to sources "November 26, 2012 wiil go down as  fucking Blue Ribbon Two Bagger Day, we just scored the UK and renewed our SEC franchise" 

Tue, 11/27/2012 - 22:10 | 3016181 Widowmaker
Widowmaker's picture

Mark to market in a total crock of shit market is mark to shit.

Money died long ago - confidence is heading straight down as the great paper debt note lie is exposed.

Maybe the finance faggots aren't wearing enough lipstick.

Tue, 11/27/2012 - 21:23 | 3016118 Big Ben
Big Ben's picture

MMFs first became popular in the late 70s because they paid much higher interest rates than banks. Now both MMFs and banks pay practically no interest. So if MMFs and bank accounts both pay negligible interest but MMFs are riskier, who would want to have money in an MMF?

Tue, 11/27/2012 - 21:32 | 3016135 willwork4food
willwork4food's picture

Personally, I prefer the 30yr USTs.

Wed, 11/28/2012 - 10:27 | 3017239 cranky-old-geezer
cranky-old-geezer's picture

 

 

Then your "investment" is losing 10% - 15% / yr from inflation.

People just don't seem to recognize how fast USD is losing value.

Tue, 11/27/2012 - 21:12 | 3016084 are we there yet
are we there yet's picture

Money is getting confusing... Why aren't the Rothschilds or Rockifeller somehwere on the 100 wealthiest men worldwide list.  If they can hide from that list, who else is hiding.

http://veritas6464.blogspot.com/2010_08_01_archive.html

Tue, 11/27/2012 - 20:43 | 3016013 FleaMarketPete
FleaMarketPete's picture

BK, I've also heard politicians propose limiting withdrawals from MMFs because "runs on MMFs created the financial crisis".   Is this a serious proposal?  Wouldn't it be the end of MMFS?

Tue, 11/27/2012 - 22:34 | 3016259 Bruce Krasting
Bruce Krasting's picture

The End.

It would be a noisy end if they did this. Like I say, it's hard to predict what happens when you get a $2T bowling ball rolling.

Tue, 11/27/2012 - 19:42 | 3015830 nmewn
nmewn's picture

Thanks for the update Bruce.

Tue, 11/27/2012 - 19:40 | 3015822 piceridu
piceridu's picture

BK, you are a badass plain and simple.

These are things that most people would never know was coming...

Thank you again for keeping us well informed.

Tue, 11/27/2012 - 19:21 | 3015769 duckhook
duckhook's picture

The minute that a mmf breaks the buck is the end of the industry.People put money in MMF not to earn a return but to remain safe.

Tue, 11/27/2012 - 19:29 | 3015796 cougar_w
cougar_w's picture

Well we did get that. And the UST quickly swept it under the rug. But I think the key was, it was one fund.

If we get two funds going tits-up in short order I suspect the stampede will start no matter what the Treasury says about it. There is no doubt a lot of hot money in MMF now, money already fleeing massive melt-downs in REITs and Munis, and in European bonds. Those investors are already deer-in-the-headlights and I can't see them sitting in a zero-rate MMF if anything looks like it's going to go south.

Wild days are coming. Eveyone needs to tie themselves to a tree, and hang on.

Tue, 11/27/2012 - 18:50 | 3015683 darteaus
darteaus's picture

"Oh, and one last thing.  Sit on that Corzine thing until the statue of limitations expires.  We don't need none of that coming up."

Tue, 11/27/2012 - 18:42 | 3015657 cougar_w
cougar_w's picture

The Fed's current $80B/month QE float is not going to cover even a small run against the shadow funds market. QE barely covers for ongoing deflation. They'll have to issue more promises to backstop everyone on the planet no matter what business they are in. And do notice that an unregulated shadow economy with sovereign backstops/bailouts signals the end of the game, people.

And we're what -- maybe 6 months from that happening?

Tue, 11/27/2012 - 18:48 | 3015676 fonzannoon
fonzannoon's picture

All your points are correct couger. However we seem to be perpetually "maybe 6 months away from that happeneing".

Tue, 11/27/2012 - 19:18 | 3015756 cougar_w
cougar_w's picture

These guys are getting really good at kicking the can, aren't they? You have to give them credit.

This entire thing should have blown the fuck up in September of 2008. It didn't. They were on their knees begging for bailouts and got them. Then the global financial markets started freezing up and it looked like a total train wreck was on the way, but it never arrived, and we find out later they've been manipulating LIBOR. QE1 and QE2 came and went, no solutions just hand waving and delay. Nothing really blew up, but nothing got any better. QE3 comes to town, works for maybe a week, then we're back in the shitter.

Yapping. Fapping. Lying through their teeth.

It works fine right up until it doesn't. They keep pushing back the day of reckoning with all their furious bluster. They work harder at it all the time burning bridges as they go, until they've gone a bridge too far and all the compromises, IOUs and weak-tea solutions grind against the rocks of reality like a latter-day financial Titannic.

I think it means, they are that afraid. When they lose this battle with gravity there is probably no bottom after that.

Tue, 11/27/2012 - 22:48 | 3016284 honestann
honestann's picture

The problem is... none of that really matters.  They have been in control, they have been at fault, but they are predators and they are in power.  Therefore, no matter how utterly and completely they destroy mankind and the world economy, they will insist that they stay in power.  When predators-that-be get in big trouble, they start even more wars, more horrific wars, and overt wars on "their own" people.  They are already well into this stage (the "PatriotAct", TSA, endless abuses of 4th ammendment, etc).

When they lose the battle with gravity, and there is indeed no bottom after that, these scumsucking predators will make absolutely certain they take everyone else with them, nuclear fallout included.

Never in the history of mankind have the predator-class been so utterly and completely in control of everything, everywhere.  The balance is so far beyond the point of no return, the likely result is the end of mankind... or at least the vast, vast majority of mankind.  And frankly, given how utterly sheepled the sheep have become, one can only conclude "good riddens" in the vast majority of cases.  Mankind doesn't deserve to survive... certainly not the predators-that-be and predator-class, and certainly not the sheeple.  How many others remain?  I used to think 5% to 10%.  Now I realize the answer is substantially below 1%.

Tue, 11/27/2012 - 23:34 | 3016399 Escapeclaws
Escapeclaws's picture

Unless you can identify these so-called predators by name you are just spouting conspiracy theories. We can get that from Alex Jones.

Wed, 11/28/2012 - 01:02 | 3016547 brettd
brettd's picture

Buffet Corzine Geitner Bernanke Schumer Dodd Immelt.

B of A; Countrywide; Fanny; Freddie. 

Your turn....

Wed, 11/28/2012 - 02:19 | 3016610 Larry Dallas
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No Rubin?

Wed, 11/28/2012 - 00:38 | 3016512 honestann
honestann's picture

Though many top tier predators do hide, plenty of others don't bother.  Just for starters, everyone involved in every central bank is a predator.  Everyone in federal or state government who signed or voted for bills or regulations that violate individual rights.  Everyone in federal or state departments who wrote regulations that violate individual rights.  Everyone in federal or state judiciaries who accepted violation of individual rights.  Every federal or state or county or city cop who violated indivdual rights.  Every TSA employee.  Shall I continue?

Pretty much 100% of everyone in those fictitious entities qualifies as a predator, perhaps even Ron Paul (though that might be quite a bit more difficult to prove).  Once those folks are strung up for their crimes against humanity, we can go hunting for others.  Fair enough?

Tue, 11/27/2012 - 19:26 | 3015791 fonzannoon
fonzannoon's picture

Here is what I know. Bernak said in 2006 "I don't buy the premise" of a housing bubble. He spent most of late '09 early '10 discussing how interest rates were going to start going up in 2011 so the economy does not overheat. Now, in 2012 he assures us rates need to stay at 0% until 2016. He also seems more down on growth and the economy lately. That is my base case for an economic recovery and a rise in rates. The guy is just so damn inaccurate.....

Wed, 11/28/2012 - 10:21 | 3017218 cranky-old-geezer
cranky-old-geezer's picture

 

 

In 2002 he said money supply has to be kept small or dollar loses value. 

In 2008 he started printing like crazy.

The man has no principles.  He changes like the wind.

Wed, 11/28/2012 - 00:39 | 3016293 honestann
honestann's picture

Bernanke is not inaccurate, not at all.  Everything Bernanke says is designed to manipulate the dumb money to do what he says (the wrong thing)... so his insider buddies (later called the smart money) can easily, safely and massively clean up by taking the opposite side of all the stupid bets inspired by Bernanke public statements.

EVERYTHING predators like Bernanke say in public is a setup to enrich the predator banksters who cut their paychecks.

Tue, 11/27/2012 - 22:04 | 3016198 disabledvet
disabledvet's picture

i would argue "he is patterned." That's why i've never understood all the handwringing in these here parts. A bogeyman? HARDLY. there is no doubt he was handpicked to be Alan Greenspan's replacement so that he could re-inflate the bubble and "keep the glory days of Bush" going. He hasn't disappointed on rates...of course. But I would argue "the fact that there is no generalized inflation" is a policy failure of immense magnitude. How does a Bank survive without carry again?

Tue, 11/27/2012 - 20:00 | 3015874 LawsofPhysics
LawsofPhysics's picture

Don't sweat any of this unless you make your living trading "markets". History shows that this kind of limbo, where fraud is the status quo, can go on for longer than 99% of us can remain solvent. Nothing will change until real goods and services that are essential to survival can no longer be delivered. Same as it ever was.

Wed, 11/28/2012 - 01:03 | 3016548 brettd
brettd's picture

Food.

Tue, 11/27/2012 - 20:05 | 3015897 cougar_w
cougar_w's picture

True, very true. But notice how global trade, resource speculation and the financialization of everything have closed the gap between what happens on Wall Street and what is delivered on Main Street. We're probably one global financial suicide and then 30 days away from having nothing on the shelves.

Tue, 11/27/2012 - 22:08 | 3016208 disabledvet
disabledvet's picture

nothing a nuclear shooting gallery in the Middle East can't solve. Trust me..."this thing's been war gamed." My money's on the Russians: http://www.airpower.au.af.mil/airchronicles/aureview/1979/mar-apr/jenson... got a love a country that thinks they can fight a nuclear war...and win. needless to say "the Middle East is a perfect proving ground for them."

Tue, 11/27/2012 - 20:12 | 3015915 LawsofPhysics
LawsofPhysics's picture

Bullshit. ALL economies are local my friend. Maybe on the shelves of a major city. What's that saying again? Location, location, location (and many close and trusted friends with vast real skill sets).

Tue, 11/27/2012 - 20:30 | 3015975 cougar_w
cougar_w's picture

I was in fact thinking about the shelves of major cities/regions when I made the comment. You know, regions where most Americans actually have to live and work? And while we're on the subject I'll add that 30 days after the shelves empty in New Jersey a lot of those people will arrive in Ohio and Indiana looking mean and desperate. Skill set probably isn't gonna save anyone then, unless someone is skilled at seige warfare.

Tue, 11/27/2012 - 20:55 | 3016045 fonzannoon
fonzannoon's picture

I don't know about this whole collapse secnario where NJ poeple are wandering into Indiana etc. If they can take over healthcare they can takeover financial services they can take over agriculture etc. etc. etc. 

Tue, 11/27/2012 - 21:25 | 3016112 LawsofPhysics
LawsofPhysics's picture

Wrong. Good luck taking anything from our co-op. Whenever fraud becomes the status quo, possession becomes the law. Lots of veterans around here.

Tue, 11/27/2012 - 21:31 | 3016130 fonzannoon
fonzannoon's picture

Laws I am not saying that my cousin vinny will wander onto your farm. He will be in NYC on a breadline. I think your problem will be the military. But their resources could be so stretched they just don't have the means. I generally agree with your viewpoint about the true value of labor being realized. That's probably very accurate.

Tue, 11/27/2012 - 21:39 | 3016145 LawsofPhysics
LawsofPhysics's picture

Most of us served, some still serving. In life, the company you keep is always important. In the end, the military may be the only thing that saves America.

Wed, 11/28/2012 - 01:06 | 3016553 brettd
brettd's picture

Family.  

Sometimes a pain in the ass, but in times like these, 

a good one is priceless.

Tue, 11/27/2012 - 19:13 | 3015741 swmnguy
swmnguy's picture

"maybe 6 months away from that happeneing"

Indeed.  I've been thinking in that timeframe for, what, 6 years now, about various things.  The popping of the mortgage bubble being the first of them.  The enormous wealth and resiliency of America was beyond my judgment, and lately it's seemed I've wildly underestimated our normalcy bias and willingness to go along to get along and accept bald-face lies and blatant fraud, rather than deal with a scary reality.  Most of the people and institutions we come into contact with are actually completely insolvent, and that's a bit of a pickle.  There's a lady down the alley who's raising chickens, but she's only got about 4 of them.  As for everyone else I know, unless they've got something buried in the garden (figuratively or not) like I may or may not, they don't actually have anything worth trading for.

One of these 6-month periods, I'll turn out to be right.  And I won't be any happier about it than anybody else, I assure you.

Wed, 11/28/2012 - 10:16 | 3017203 cranky-old-geezer
cranky-old-geezer's picture

 

 

Yes, seems like can-kicking goes on forever.

But something is happening, USD getting weaker, quitely, nobody paying much attention to it.

USD collapse is when your 6 months suddenly becomes reality, and yes it'll happen very quickly, catching everybody off guard.

Tue, 11/27/2012 - 18:59 | 3015631 THE DORK OF CORK
THE DORK OF CORK's picture

Maybe Walter should be her first name..............

 

No that was baddddddd

 

I seem to remember Ellen Brown talking about this in this long october interview.

 

http://www.kpfa.org/archive/id/85493

 

36 minutes to 52 minutes , looking at MBS history rather  more then MMFs

What a mess.

The system is designed this way (opaque) so that extraction is politically sustainable I guess.

Tue, 11/27/2012 - 18:15 | 3015580 dexter_morgan
dexter_morgan's picture

New boss, same as the old boss. But didn't fauxcohontas win her election? She is going to clean all this mess up, right?

Tue, 11/27/2012 - 18:10 | 3015558 crzyhun
crzyhun's picture

Poor girl, she looks so sad...a total spell caster.

I worry about what's next as an RIA!

Tue, 11/27/2012 - 18:40 | 3015649 dexter_morgan
dexter_morgan's picture

kinda looks like she has gas or something.....

Tue, 11/27/2012 - 19:00 | 3015711 Dexter Morgan
Dexter Morgan's picture

That's just what I was thinking!

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