This is a follow-up to my previous article, A Collateral Proposal, in which I suggested that MMFs be consolidated with the sponsors’ books for capital calculation purposes.
Recent proposals go farther than that, largely due to the effect of the Reserve Primary buck-breaking and its global ramifications. Look for the research link!
Links to source documents are available in the draft version.
[…] I have argued that the Volcker proposals for MMF regulation be implemented. Nothing will ever guarantee that commercial paper won’t default; the only thing that will seriously affect the incidence of buck-breaking is a formalization of the current nod-and-wink guarantee by the sponsor; it will then require a double-default to break the buck. […]
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[…] is credit quality – and these rules do absolutely nothing to improve credit quality, which requires mandatory support from the sponsor. But why would a regulator worry about what might actually […]