Publication: Yahoo! Finance

Author: Simon Johnson

10/24/2012 —Prior to September 2008, few officials focused on “systemic risk” — the idea that a single firm or a particular asset class could create a vulnerability that would bring down the financial system and do great damage to the real economy. Then Lehman Brothers failed and the repercussions threatened to shut down the global financial system.

The Dodd-Frank financial reform legislation of 2010 created a new Financial Stability Oversight Council (FSOC), charged with helping to identify and coordinate regulatory efforts to address systemic risk. Now the FSOC faces its first serious challenge — ironically, on an issue that was central to the crisis events of fall 2008: money market mutual funds.

Money market funds were originally created, in the high inflation environment of the 1970s, as a way for investors to earn higher returns than they could on bank deposits. And many investors see their money market accounts as essentially the same as their bank accounts — they appear to have a stable principal value, interest accrues, and you can write checks.

Read the full article, It’s Time to Fix Money Market Funds: Simon Johnson, on the Yahoo! Finance website.