Magazine article American Banker

Comments: Money Fund Assets Ripe for Poaching

Magazine article American Banker

Comments: Money Fund Assets Ripe for Poaching

Article excerpt

I always learn something from a luncheon with Lawrence Cohn.

Mr. Cohn has had an exciting career and a varied one-- as a senior bank officer in New York, an investment banker, a research analyst honored more than once with an award from Institutional Investor magazine, and now as the operator, working out of Maplewood, N.J., of a financial services hedge fund.

It's worth noting that his portfolio is thriving, even though about one-fifth of hedge funds collapsed last year. Many funds that had a backlog of losses to recoup decided to return what money was left and start over -- sort of like a store going bankrupt to wipe out its loans and working from a clean slate the next day, Mr. Cohn said.

But at our latest get-together, it was Mr. Cohn's insights on banking that interested me most.

"What amazes me in today's market is why the banks don't try to win back some of the billions they have lost as depositors have switched to the money market funds," he said.

"When they weren't allowed by law to pay enough interest to outbid the funds for the public's savings, the banks lost billions to the brokerage firms and independently operated money funds. And while rates were extremely high in the money market, they could not afford to pay what the funds could offer even when this Regulation Q interest rate ceiling was removed."

But banks have an opening today, he says.

"Now look at what the money funds are paying! My latest statement showed I am earning about half a percent on my money. …

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