What appears to be a crusade within the SEC to protect us from money market funds has taken a bizarre turn as a top regulator tries to silence industry critics.
Elisse Walter is one of the SEC's five commissioners and was appointed in July 2008, right when the wheels were coming off the global credit markets.
However, that doesn't explain her commitment to changing the way the money markets work -- even though fund managers claim their portfolios work just fine.
Walter recently warned members the Investment Company Institute to "stay away from media statements" on the issue or risk "destructive disengagement."
It's a strange attempt to squelch debate on what was already a strange issue for the SEC.
Mary Schapiro has made MMF reform a top priority and it looks like Walter is in her corner.
Other SEC commissioners have balked at the push as "premature and possibly unnecessary."
And while the industry has protested what they see as a pointless attempt to kill the entire asset class, I haven't seen much of the "emotional, strident and, to a certain extent some of us are losing our heads" behavior that Walter is complaining about.
If ending the fixed NAV and enforcing new capital reserve requirements would kill MMFs as we know them, then that's just how it is.
Saying so doesn't represent anyone "losing their heads."
But we still don't know why the SEC has turned money market funds into investor enemy No. 1.
Are we poised for another Reserve Primary-style collapse? Short-term interest rates have been so low for years that these funds are slowly bleeding out -- they've had to waive fees simply to avoid breaking the buck on an after-cost basis, so scale works against them.
Has the entire $2.6 trillion asset class started to rot, but Walter, Schapiro, and company don't want to cause a panic?
At this point, nobody's talking about why MMF reform is such an overriding priority at the SEC. If this is an emergency, tell us. If not, the SEC has plenty of other things to worry about.
And as a result, the people who run those funds aren't necessarily the ones who look like they're losing their equilibrium.