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Schwab calls for compromise on money market reform

Nov 26 2012 John McCrank, Reuters

Charles Schwab Corp, one of the largest U.S. brokerages, has called for compromise on reform for the $2.5 trillion money market, throwing its support behind an idea largely rejected by others in the fund industry. Schwab supports requiring certain money market funds to have a floating net-asset value rather than a share price pegged at $1, Schwab Chief Executive Walt Bettinger said on Friday in an opinion editorial in the Wall Street Journal. "As far as risk goes, not all money-market funds are alike," Bettinger said. Money market reform has been in the spotlight since 2008 when heavy exposure to collapsed investment bank Lehman Brothers caused the Reserve Primary Fund's net asset value to fall below $1 per share, or "break the buck." That sparked a run of withdrawals, freezing a major lending source across the economy. Schwab believes that some prime money market funds, which invest in short-term fixed-income securities issued not by the U.S. government but

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