VIDEO: Money Market Mutual Funds Work for American Businesses, Investors, and Cities

May 7, 2012

What’s the Issue?

Money market mutual funds (MMMF) play a critical role in meeting the short-term capital needs of American businesses, investors, and cities.  MMMFs provide a safe, convenient, liquid investment vehicle for individuals, Main Street businesses, state and local governments, and other organizations to invest cash until it is needed.  Money market mutual funds also provide much of the necessary capital to fund short-term financing instruments, such as commercial paper.   Learn more about MMMFs.

MMMFs help companies meet working capital needs; allow banks to finance credit cards, home equity, and auto loans; and help local governments build roads, bridges, schools, and hospitals.

The SEC already made significant changes to money market mutual fund regulation in 2010. Since then, these funds have proven to be strong and resilient, capable of withstanding continued market turbulence.  Despite that, regulators are contemplating additional changes that threaten to destroy the utility and viability of money market mutual funds.  If the suggested changes are implemented, many investors will reduce their investment or stop investing in money market mutual funds altogether.

There are still too many unanswered questions for the SEC to push through these reforms: Why more regulation? Why these proposals? and Why now?

Who Should Care? YOU!

 Money market mutual funds touch your daily life in ways you may not even realize. Just a few examples of the people who rely on these funds include:

  • Main Street Businesses: Because companies can have cash fluctuations in the millions of dollars each day, money market funds provide the liquidity necessary for these companies to earn dividends on excess cash while being able to withdraw funds quickly to pay expenses.  
  • Individuals:   Like businesses, individuals enjoy the convenience and liquidly of MMFs to park excess cash, such as when purchasing a house and waiting for closing or between major transactions, such as college tuition payments. 
  • State and Local Governments:  Not only do municipalities park their excess cash in MMFs, but their short-term bonds are also sold to these funds.  The financing pays for projects such as building schools, repairing roads and bridges, creating jobs, and spurring local economic activity.
  • Other Organizations:  Universities, endowments, charities, port authorities, and nonprofit organizations use money market funds as a safe, liquid, and affordable cash management tool.

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