the speculation of investors on money market mutual funds are likely to be rescued by their parent companies during a crisis

Federal Reserve chairman, Ben S. Bernanke said the speculation of investors on money market mutual funds are likely to be rescued by their parent companies during a crisis could undermine the stability of the industry that manages $ 2790000000000.

Bernanke, in a December 09 letter to Anthony J. Carfang, a partner at Chicago consultancy Treasury Strategies said the market developments that reinforce the speculation whether the money funds can be rescued are a "concern" and the support of sponsors should be addressed in the context of reforms envisaged in the industry .

Carfang in November criticized a proposal that Moody's Corp. ratings on money funds, consider the possibility of rescuing the parents in case of losses. Bernanke, in his letter, Carfang encouraged to submit their views on the Moody's proposal to the Securities and Exchange Commission.

"I think he's saying he wants the word to go, but he would not do directly," Carfang said today in an interview.

Barbara Hagenbaugh, a spokesman for the Federal Reserve, Bernanke confirmed he sent the letter and declined to comment on it.

Money market funds have been under increasing regulatory scrutiny since September 2008, the collapse of Fund $ 62,500,000,000 Reserve Primary, only the second fund to expose investors to losses. Its closure caused an industry-wide performance that helped the markets global credit freeze.

The SEC this year to comply with new rules requiring funds to boost cash holdings of cash and easy to sell, reduce your level of lower-rated debt and reveal more about what they have.

Money Reform Fund

President's Working Group on Financial Markets, an advisory body to the White House, Bernanke, a member, has reviewed the proposed regulations and urged market participants to submit comments to the SEC.

Bernanke, in his letter, before the conclusions of the working group's report that "uncertainty among investors about the actual availability of the discretionary aid during crises can contribute to the vulnerability of money market funds 'run' ".

"An evolution in market conventions that would reinforce this dynamic is worrying, and I think it is important to address support of the sponsors of money market funds in the broader context of reforms that can make funds less vulnerable to Pops, "Bernanke wrote Carfang.

Carfang has called the Moody's proposal "fundamentally disturbing," the rating firm would have no objective way to measure whether a money manager of a fund to support problems. Fund prospectuses explicitly tell customers that their investments are not guaranteed.

Qasim Abbas, a spokesman for Moody's, said he could not comment immediately.

The Primary Reserve Fund closed after writing to zero $ 785 million in debt issued by Lehman Brothers Holdings Inc. The fund gained 98 percent of the money from customers during the two years following closing.