Federal Deposit Insurance Corp. Chairman Sheila Bair calledmoney-market mutual funds “destabilizing” to the financial systemand said investors would be served just as well if share pricesfloated.

“Money-market funds are maintaining a fiction of a stable”net-asset value, as shown by the September 2008 failure of the$62.5 billion Reserve Primary Fund, Bair said yesterday at around-table meeting of fund-company executives and regulatorsarranged by the U.S. Securities and Exchange Commission inWashington. “That is skewing investment dollars into a structurethat is highly unstable in a crisis.”

Former Federal Reserve Chairman Paul A. Volcker called afloating share price the “simplest” solution to the risk posed bymoney funds, which trade at a constant $1 a share.

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