Courtesy of Pam Martens.
Mary Schapiro, Chair of the SEC
As we’ve mentioned here before, expect to see a lot of anti-consumer news surrounding Wall Street being released in the waning days of August. Media strategists know two things: drop bombs on Friday so the buzz will hopefully be gone by Monday; or, when possible, wait for the lazy last days of summer when vacations, school shopping, and beach going fill the public’s mind.
So it was to be expected that Mary Schapiro, Chair of the SEC, would announce yesterday that she will not proceed with any further reforms on money market funds because “Three Commissioners, constituting a majority of the Commission, have informed me that they will not support a staff proposal to reform the structure of money market funds. The proposed structural reforms were intended to reduce their susceptibility to runs, protect retail investors and lessen the need for future taxpayer bailouts.”
If it sounds like déjà vu back to 2007, it should. Regulators were busy back then turning their backs on a house on fire at Citigroup. Here’s an excerpt from an article I wrote on November 6, 2007:
Dave Serchuk, a reporter for Securities Week at the time, reported in its February 2, 2004 issue that Citigroup had bundled essentially worthless Parmalat debt and sold it in the form of asset backed commercial paper to what U.S. investors thought were among the safest and most liquid investments: money market funds. Unfortunately, the incendiary Parmalat/Citigroup money market story failed to get picked up by mainstream media.
Now, once again, one of the most troubling aspects of the current Citigroup debacle that has gone unreported is the extent to which these opaque and convoluted debt instruments managed by Citigroup, called CDOs (collateralized debt obligations), got dumped into Cayman Islands [Structured Investment Vehicles] SIVs, transmuted into AAA-rated commercial paper, landed in the so-called safe money market funds in the U.S., including an astonishing amount at Citigroup’s competitor, Merrill Lynch.
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