Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (548263)	2/5/2010 2:06:26 PM
From: Brumar89	Respond to of 1576124

The SEC v. Investors 03 February, 2010 The Wall Street Journal The Securities and Exchange Commission under Chairman Mary Schapiro is turning into a special-interest refuge. Along with her instruction to add global warming to corporate disclosures, last week she bowed twice to the mutual fund lobby, also at the expense of investors. [Special interests? Gee, its almost like we have a President who got a lot of Wall St money or something. ] The SEC voted last week to keep recognizing a select group of private credit-ratings agencies to determine if money-fund assets are safe. The mutual fund industry loves this, and lobbied hard for it, because the policy lets fund managers avoid the hard work and expense of making these judgments on their own. But the individual investor suffers when the credit raters turn out to be spectacularly wrong, as they were last decade. To its credit, even the king of the anointed credit judges, Standard & Poor's, is calling for an end to this flawed regulatory scheme. "We support removing investor rating requirements and believe the market -- not government mandates -- should decide the value of our work," S&P president Deven Sharma recently wrote in these pages. The raters contributed to the credit crisis by slapping their triple-A seals of approval on mortgage-backed securities. That's why the House recently passed a bill removing all references to these so-called Nationally Recognized Statistical Rating Organizations from federal rules as well as laws. But Ms. Schapiro's SEC remains the last bulwark against investor-friendly reform, even as the chairman has lately been posing as a reformer. Appearing before the Financial Crisis Inquiry Commission last month, she noted the progress the agency has been making in reducing reliance on the ratings agencies, and added, "So I think it is important across the government that we start to move in this direction." But her part of the government was already moving in this direction. Progress at the SEC has now ground to a halt with her decision to block reform of the money fund rule. Speaking of blocking reform, Ms. Schapiro also stiff-armed the proposal by fellow Commissioner Kathleen Casey to encourage money funds to transition to floating net asset values. Money funds are now allowed, thanks to a 1983 SEC rule, to employ a novel accounting method. This allows them to claim that each share of a fund is worth $1, even if that's not exactly true based on market prices of the fund's underlying assets. The rule has helped the industry market funds as ultra-safe, stable investments akin to bank savings accounts but with a higher yield. The perception created is that funds never "break the buck," i.e., their values never fall below that $1 floor. Ms. Casey has correctly argued that a floating net asset value would give investors more accurate information, and it would ensure that breaking the buck is not a cataclysmic event threatening the financial system. The fund industry is delighted if investors think that all of America's thousands of money funds are too big to fail and eligible for federal rescue, as they were when the government guaranteed them in the autumn of 2008. In both of last week's decisions on mutual funds, Ms. Schapiro has emerged as an obstacle to a financial reform that doesn't rely on government favoritism and guarantees. As disturbing as this is for individual investors, it could be even more costly for individual taxpayers.