Long-overdue rules to prevent a repeat of the 2008 run on money-market mutual funds may not be passed this year, thanks to a provision just inserted in a funding bill before Congress by Representative Jo Ann Emerson, Republican of Missouri.
This is unfortunate but unsurprising. Because real reforms jeopardize the very existence of money-market funds, opposition from the industry has been fierce. There is a way out, however: Pairing such reforms with a creative alternative to the current model could make the demise of money funds palatable even to their sponsors.
We propose extending a government program called TreasuryDirect, which allows investors to buy Treasury securities directly from the government in accounts held with the Treasury Department. Banks and brokerages should embed a more user-friendly version of TreasuryDirect in their accounts - - call it a (new) U.S. Money Fund.
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