Magazine article American Banker

Breeden: Mutual Funds Help Ease Credit Crunch

Magazine article American Banker

Breeden: Mutual Funds Help Ease Credit Crunch

Article excerpt

Mutual funds are more than just another hot product. They have, in fact, "become a principal source of financing for the overall U.S. economy," said Richard Breeden, chairman of the Securities and Exchange Commission.

In a speech to bankers last week, the nation's top securities regulator said mutual funds were helping to transform the way business is funded.

As bank lending has declined, businesses have turned more frequently to the securities markets for capital.

A Shift in Investment

Mutual funds have helped ease the transition by investing in the equity and debt that companies issue, Mr. Breeden told a Consumer Bankers Association conference in Atlanta.

The conference, which drew 100 bankers, focused on the banking industry's increasing involvement in the rapidly growing mutual fund business.

Mutual fund assets grew from $335 billion in 1982 to $1.6 trillion at the end of last year.

"There are already 3,800 funds and hundreds of new types are created each year to meet every conceivable sector of the market," he said.

The sheer bulk of the mutual fund industry has helped to keep markets liquid so that securities can be easily bought and sold, he added.

"We're seeing an end of intermediary lending and a shift toward securitization of credit and the use of the securities market to supply it," Mr. Breeden said.

Still Has an Agenda

Appointed to head the SEC by former President Bush, Mr. Breeden became a lame duck with the election of Bill Clinton. …

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