At last, the government is proposing new rules, which are supposed to make MMFs less risky. The funds would have to raise new capital, and some minor withdrawal limitations would be imposed on customers. They would also have to offer a floating net asset value instead of the current "guarantee" that if you deposit a dollar, you'll always get at least that dollar back.
The last is all by itself disastrous for these funds, whose main attraction is that they act like bank accounts. As for the rest, in a normal interest rate environment, this would be onerous. But with interest rates as low as they are, there's no way for MMFs to absorb the hit by offering a lower return; it looks to me as if the interest rate would probably have to be negative. Which is to say, your MMF would actually be charging you for the privilege of giving you their money.
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