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It Ain’t Money-Good No More
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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She took the job, but she didn't like the terms at all.
Bruce is right. Either she's a temp/ringer with no real power handed a crappy exit strategy, or the whole industry is about to implode and it no longer matters who's sitting at the desk.
The election is over, bring on the crises.
Where are all the old white men ... why is every post being filled by, you know 'non old white men'? rhetorical only
Oh, you didn't hear...my Yale educated buddy gleefully explained to me that "white men need to understand, they just don't run everything like they used to..." which is what makes Obama such a neat Globalists/Bankster trick, eh?
If less than 10% of the derivatives outstanding go sideways, there will be no " float " for the MMFs. They'll sink straight to the bottom. Just another very good reason to continue loading up on physical.
Great important focus from Mr Bruce Krasting here ...
Our early warning of money market fund meltown 2013 ... same as what nearly blew up the whole Western financial world 84 hours after the 2008 Lehman bankruptcy
From the classic ZeroHedge article,
'How The World Almost Came To An End At 2PM On September 18':
« On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn't be further panic out there.
If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.
We are no better off today ... »
http://www.zerohedge.com/article/how-world-almost-came-end-2pm-september-18
All you need to know is that she wouldn't get the position unless she plays ball. Relax, banksters.
Obama's got your back....and the repubs still do, too.
Quoted:
Correction: We've levered-up way more by today (e.g., at least 6-8x from then).
If they break the buck, more likely some of that money will end up in Munis or stocks. Hmm, who would want that result?
That's the idea. Or maybe it just ends up going into the savings bank.
Funny, my entire 401k has been in an MMF for the last 8 years, as it is the lowest risk offering available. #winning
Well, there you go. If you've been in a MMF for the past 8 years, you have a very low risk appetite. Nothing wrong with that.
But the nice folks at Treasury did send out a note today. The link is in the piece. This is part of the "Red Flags" that things are in the process of changing.
So now you have a risk, and you don't like that, and the MMF is paying you next to nothing for taking a risk. What will you do?
Maybe join those moving deck chairs on the Titanic?
Sorry, there is no safe place anymore.
Sorry, there is no safe place anymore.
nobody said it would be easy. fuck the gub is the easy acid test, after that it gets more complicated. for me (a real estate guy); 1) land investment 2) P.M. 3) cash outside the gub system(banks). 4) mucho durable tools including bikes. 5 )wild card idea: not "give a shit" attitude about all these matters that we have no control over...
Nice that they want MMFs to float but let the TBTF banks hid their mark to markets...fuck the sec
They want the money in MMF to go somewhere else and play. Somewhere like -- say -- stocks and treasuries.
The financial markets died outright in 2008. It's been nothing but a shell game since.
Buy a Powerball lottery ticket! The jackpot is up to $500 million.
The drawing is tomorrow night, details and arithmetic:
http://tinyurl.com/br9okzg
dupe, sorry
Agree, those same full faith and credit medicine men backing MMFs are also backing the cds issued by corrupted bankers. I need a bigger mattress.
That's the point Bruce, specific to the 401(k) accounts. The client can stop contributing. But they can't (usually) access the funds. Very few plans allow for "in service withdrawals". If you are over 59.5 you have a shot at being able to withdraw the funds. Otherwise your employer has now saddled you with a retirement plan against your will, that does not have a "risk free" component. I have a feeling Cellino and Barnes will be all over this. They have that catchy jingle too. I may call them just to hear the jingle. Plus they tell me they are looking out for me. Anyway I digresse, I am not psychic but I see lawyers making money in the future. I know, call me crazy.
Yup. 401(k)s are starting to look like a Long Con done brilliantly.
For years, you've told Average Joe that saving through a 401(k) is the best way to save for retirement. Now you pull the plug on MMFs, his one risk-free savings option. Average Joe's retirement savings cannot be accessed absent a (10+tax)% penalty, so he is forced to "save" by either paying away points to faceless managers to gamble on equities or loan money to the Federal government @ less than inflation. Either way, you've suckered him into a trap.
Of course, after a period of market trauma, the government will ride in on a white horse to save Average Joe and his money by absorbing his remaining 401K into the warm bosom of the government and guaranteeing Joe a safe and prosperous retirement, ala Social Security.
Of course, after a period of market trauma, the government will ride in on a white horse to save Average Joe and his money by absorbing his remaining 401K into the warm bosom of the government and guaranteeing Joe a safe and prosperous retirement, ala Social Security.
Excellent observation.
Yes, MMF mark-to-market might just be the "sales pitch" convincing folks their 401k is better off taken over (confiscated) by the govt.
It's way better to sell people on the idea so they do it voluntarity, rather than force it.
And it's so obvious. Nothing else will be marked to market that I'm aware of.
If you're under 60, take the 10% hit and buy gold, now.
401k has always been a scam. how people fall for this shit tells the whole story. shit is getting worse every day it seems. some component in this giant ponzi will give and then all bets are off.