In September 2008, the Treasury stepped in when Reserve Primary Fund "broke the buck" — i.e. when its net asset value fell below $1 per share, meaning investors in the money market fund would lose money. The SEC alleged that the Reserve Management Company, Inc. (RMCI), its Chairman, Bruce Bent Sr., its Vice Chairman and President, Bruce Bent II, and Reserve Partners, Inc., failed to provide key material information to investors, the fund's board of trustees and rating agencies as Lehman Brothers filed for bankruptcy protection on September 15.

Money Markets are instruments with potentially large risks that have financial activities that are grossly similar to banks. However, unlike banks, they are not regulated by the same bodies nor are they required to have defined capital reserves. Instead, Money Markets are regulated by the SEC. They have long been viewed as sufficiently different from banks because they focus on short-term financing of less than 13 months for entities with high credit ratings whereas banks usually serve the medium- to long-term financing opportunities.

Taking all that at face value, it's still true that the Reserve Primary Fund's losses of $785 million shook the financial world and played a contributing factor to Lehman Brothers' meltdown. Had this organization been regulated like a bank, would the outcome have been the same? Earlier in the year, a "unified financial regulator" was highly touted as part of President Obama's regulatory overhaul. The Obama administration was considering a single regulatory agency that would combine existing government watchdogs and have stronger powers with greater visibility into many of the now siloed financial organizations. House Financial Services Chairman Barney Frank (D-Mass.) is not supportive. "The suggestion that we're going to get to a unilateral bank regulator, something equivalent to the Financial Services Authority, is simply wrong," said Frank, who is overseeing the congressional effort at regulatory reform. "I don't think you're going to see something singular," he said. "The model for that, obviously, is the Financial Services Authority in England. They've now acknowledged that model didn't work very well."

Nevertheless, as the definitions blur between banking, brokerage and insurance, wouldn't it make sense that a certain amount of "blending" also occur on the authorities that regulate them?