As you may remember, we blogged the hell out of Reserve Primary Fund's breaking the buck last fall.  Now the SEC has charged its operators with fraud.  As far as I can tell, their big crime is talking up their own health--claiming that they were less exposed to Lehman than they turned out to be.

What's interesting to me about this is that as I understand it, the fund didn't take in much new money on these claims; the talk was to existing investors, who didn't flee because they thought their money was safer than it was.  But on a social level, this did no harm.  It changed the distribution of the losses, but there were few-to-no extra losses as a result of their claims.  For every person they made worse off, someone else recovered more than they otherwise would have.  Yet we punish them as if they'd actively defrauded new investors, in order to maintain confidence in the system.