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MarketScreener Homepage  >  Equities  >  Nyse  >  Crane Co.    CR

CRANE CO.

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Money market turmoil in March shows past reforms may be insufficient-U.S. Treasury official

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09/29/2020 | 03:00pm EDT

WASHINGTON/BOSTON, Sept 29 (Reuters) - Turmoil in money market mutual funds sparked by the coronavirus pandemic shows that decade-old reforms to the $4.4 trillion industry may not be enough to avert major outflows during a future crisis, Deputy U.S. Treasury Secretary Justin Muzinich said on Tuesday.

The remarks were the latest to raise expectations a new round of rulemaking may be on the way for money funds, which faced turbulence this spring as the COVID-19 pandemic shook Wall Street before Washington officials stepped in.

Muzinich told a New York Federal Reserve conference that the Money Market Mutual Fund Liquidity Facility created in March was critical to restoring financial market functioning as broad shutdowns of the U.S. economy got underway.

But high demand for fund withdrawals was due to different metrics than those operating during the 2008 financial crisis, he said.

In 2008, the Reserve Primary Fund "broke the buck" when its net asset value fell below $1 as a banking crisis accelerated, causing a stampede of fund withdrawals that were quelled only by a U.S. Treasury backstop for over $3 trillion in fund assets.

The 2010 Dodd-Frank financial reform legislation required money market mutual funds to hold 30% of their assets in instruments that are liquid within a week, among other reforms. But Muzinich said that when some funds neared this threshold in March, withdrawal requests accelerated.

"The events of this past March show that those reforms may not be enough," Muzinich said. "For example, one might ask whether we have exchanged one psychological bright line for another."

Muzinich said such lines have the potential to create "run dynamics" in markets as they are approached. But he stopped short of calling for further specific reforms.

"While policymakers were able to avert a run, it is worth asking whether there are ways to enhance the liquidity resources available to funds without using a bright-line test, or whether there are ways to draw a line without creating a first-mover advantage," Muzinich added.

Peter Crane, founder of money fund research company Crane Data, said the remarks add to expectations new rules will be created for money funds, sometimes seen as rivals by more closely-regulated banks.

"Certainly from the looks of it new money fund regulations might be coming," Crane said.

He also noted a Sept. 24 speech by Dalia Blass, the top fund regulator of the U.S. Securities and Exchange Commission, who said her division will analyze the events of March and look to build a resilient market "while preserving the important role of money market funds in the short-term funding markets."

Low yields on U.S Treasuries and other debt have forced big money fund sponsors to waive fees just to keep investors in their products this year, or to close them to new investors. (Reporting by David Lawder and by Ross Kerber; editing by John Stonestreet and Richard Pullin)


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Financials (USD)
Sales 2020 2 893 M - -
Net income 2020 190 M - -
Net Debt 2020 709 M - -
P/E ratio 2020 17,0x
Yield 2020 3,10%
Capitalization 3 200 M 3 200 M -
EV / Sales 2020 1,35x
EV / Sales 2021 1,21x
Nbr of Employees 11 111
Free-Float 67,8%
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Mean consensus BUY
Number of Analysts 6
Average target price 72,60 $
Last Close Price 55,14 $
Spread / Highest target 45,1%
Spread / Average Target 31,7%
Spread / Lowest Target 19,7%
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Managers
NameTitle
Max Homer Mitchell President, Chief Executive Officer & Director
James Luther Lyman Tullis Chairman
Richard Andrew Maue Chief Financial Officer & Senior Vice President
Carey A. True Chief Information Officer
Donald G. Cook Independent Director
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