You know that, I know that. So what is the whole spectacle all about? Just go on with your "education of the masses". Ohh, by the way, you might stop asking for a permission to comment. It doesn't make a good impression, you know.
I don't know whatever it is that you think you know. As to me asking permission to comment, I have no idea what you might be referring to. To be brutally honest, I am having some general difficulty folowing your reasoning here.
Well, from what I can see Reserve Primary had $23bn of assets before Leh. If we assume they only lost $785MM on writing down Leh paper to 0, that's a loss of smth like 3c on the dollar. This is a rough estimate.
The real problem here is that commercial paper is thought to be supersafe. It's one of those things that is until it isn't. Lehman's default on its cp was reminiscent of what happened when Penn Central defaulted on its cp in 1970 and then, just as in 2008, the Fed stepped in with a guarantee to prevent a total collapse of the cp market. So it's not really a problem with money market funds; it's a problem with cp.
I disagree... Nothing inherently more "unsafe" about CP than other unsecured debt and people who own it on a normal, prudent mark-to-market basis deal with it. For example, the original Canadian ABCP blowup in 2007 was, while messy, dealt with. The problem is the fundamental mismatch between offering investors instant liquidity without mark-to-mkt and applying this to your entire asset base. MMF is the only type of institution that offers this to retail clients without any sort of a explicit minimal backstop. That, IMHO, is a disaster waiting to happen (well, it's happened already, actually).
It was tedious reading 5 pages of this thread. Zdreg, thanks for the article links at the onset they were worth the read. Mghoul and responders: you could skip all the meta coversation and this would be a 1 page thread. The elephant in this room is that at Zero short term interest in confident credit there is no profit in the MMF industry. People who have big money need to put somewhere for short terms, if they can't put it in MMF, then it has to go somewhere else. Banks, with no loan demand can't use it very well...it will all end up as increased excess reserves. Looks like the short term U.S. TBills will be low for at least into 2014 whether Barananke wants it or not. How can you ask sponsors that are already making no money to raise capital to support that result?