Don’t throw the baby out with the bath water.That, essentially, is the message from Vanguard Chairman John Brennan to the Securities and Exchange Commission, in response to the SEC’s plan to change a rule governing money market funds - making Vanguard the first major mutual fund company to protest the proposed change.In response to the subprime crisis, and the apparent failure of ratings agencies to properly grade the securities, the SEC is proposing shifting the responsibility for assessing short-term debt from Moody’s, Standard & Poor’s and Fitch, to squarely on the shoulders of asset management firms.That would be a mistake, Brennan argues, that could harm investors in the $3.5 trillion money market mutual fund industry.“It is our view that the proposed elimination of ratings would remove an important investor protection from Rule 2-a7, weaken investment standards and, potentially, pose a risk to the long history of stability of the $3.5 trillion money market fund industry,” Brennan wrote in a letter to the SEC.“Ratings, even if occasionally imperfect, protect investors by establishing a uniform, minimum credit quality for all money market funds. Removing that investor protection is akin to outlawing seat belts.”

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