What Could Go Wrong?
By Arnold Kling
From Bloomberg News.
The Federal Reserve Bank of New York said money-market fund investors should be prohibited from withdrawing all their assets at once as a way to make the $2.5 trillion industry “safer and more fair.”
I do not think it is too difficult to come up with a model under which this policy increases, rather than decreases, the frequency and severity of fear-driven withdrawals from these funds. My guess is that it is harder to come up with a model that suggests otherwise.