SEC Goes After Reserve Funds

More

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. 

Jump to comments
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Get Today's Top Stories in Your Inbox (preview)

An Eerie Tour of Chernobyl's Wasteland

"Do not touch the water. There is nothing more irradiated than the water itself."


Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Is Technology Making Us Better Storytellers?

The minds behind House of Cards and The Moth weigh in.

Video

A Short Film That Skewers Hollywood

A studio executive concocts an animated blockbuster. Who cares about the story?

Video

In Online Dating, Everyone's a Little Bit Racist

The co-founder of OKCupid shares findings from his analysis of millions of users' data.

Video

What Is a Sandwich?

We're overthinking sandwiches, so you don't have to.

Video

Let's Talk About Not Smoking

Why does smoking maintain its allure? James Hamblin seeks the wisdom of a cool person.

Writers

Up
Down

More in Business

Just In