4.01  For more than two decades after World War II, inflation had been virtually non-existent in the US. The late 1960s ushered in the highest inflation in generations due to President Lyndon Johnson’s decision to finance the war in Vietnam and new domestic programmes through massive deficit spending. Joseph Nocera reported:

In 1967, the cost of living, as measured by the Consumer Price Index, rose 3 percent. The following year the CPI rose another 4.7 percent. And on it went: 6.2 percent in 1969; 5.6 percent in 1970...In 1974, as a result of the Arab oil embargo, the Consumer Price Index rose an almost unthinkable 12 percent.²

4.02  Consumer borrowing costs on homes, automobiles, and other purchases shot up as interest rates soared.

4.03  On the investment side, institutions and wealthy individuals were able to earn market rates of interest by purchasing Treasury bills in amounts of $10,000 or higher and bank certificates of deposit in excess of $100,000. But the overwhelming majority of Americans, who were paying record rates of interest on their (p. 86) borrowings, were limited to earning less than 5 per cent on their savings. This was because most people saved by means of passbook savings accounts, and federal banking Regulation Q imposed interest rate ceilings of 4.5 per cent on bank and 4.75 per cent on savings and loan (S&L) passbook accounts.³ Regulation Q was designed to limit excessive bank competition for deposit funds, which caused bank failures in the early 1930s.⁴ Banks and S&Ls certainly had a great deal: they borrowed money from millions of consumers at 4.5 to 4.75 per cent interest and then loaned it out at double-digit rates of return. However, this regulation disadvantaged most Americans: they paid 10 per cent or more on their borrowings but earned less than 5 per cent on their savings.

4.04  In hindsight, it is not surprising that a number of individuals had the same idea: create a mutual fund that would invest in Treasury bills, jumbo certificates of deposit, and other short-term instruments; earn high interest on those instruments; and pay out that interest less expenses to fund shareholders. What is somewhat surprising is that the idea for money market funds did not originate with people in the mutual fund industry. The first such fund, the Reserve Fund, was started in New York in September 1972 by two former employees of the Teachers Insurance and Annuity Association—College Retirement Equities Fund (TIAA-CREF), Henry Brown and Bruce Bent. A few weeks later, across the country in San Jose, California, a former Merrill Lynch broker, James Benham, started the Capital Preservation Fund. There were favourable stories in the media about these funds, and money began flowing to them.⁵

4.05  Seeing the success of the first money market funds, traditional mutual fund groups brought out their own funds. In early 1974, Dreyfus launched the Dreyfus Liquid Assets Fund, accompanied by a massive advertising campaign. Fidelity countered with the Fidelity Daily Income Trust, the first money fund to offer redeemability through cheques. The funds were favourably received by investors and were aggressive rivals.⁶

4.06  Initially, most fund firms viewed money funds as temporary mechanisms (‘reserve’ funds or ‘cash management’ funds) to capture money that was leaving the stock market. When an investor called to redeem equity fund shares, a service representative would ask if he or she wanted to place the proceeds in the firm’s money market fund pending the investor’s return to the stock market. Some fund groups came to view money funds quite differently. Howard Stein, the head of Dreyfus, was a (p. 87) bear on the stock market and recognized money market funds as a long-term product for retail investors. A number of groups like AIM brought out money funds designed to help large institutions manage their cash more efficiently, whether the stock market was up or down. Federated developed programmes whereby small bank trust departments could sweep clients’ dividends and interest into its money funds on a daily basis. Securities firms swept customers’ cash balances into the firms’ money funds. Merrill Lynch developed the Cash Management Account that combined aspects of a money fund with a cheque book, a sweep account, and a credit/debit card for its brokerage customers. In short, a product that had been seen originally as a temporary holding tank for cash until the stock market righted itself soon took on a wide number of permanent uses.

4.07  Money market fund assets increased at a rapid pace, growing from less than $2 billion in 1974 to $11 billion in 1978, and to $76 billion in 1980. In that year, money fund assets exceeded those of all other mutual funds combined. In 1997, money fund assets crossed the $1 trillion mark and in 2009 reached their highest level of nearly $4 trillion.⁷ Money market funds totally changed the fund industry. Before the advent of money funds, the industry consisted almost entirely of equity funds. Money funds ended this overdependence on equities. In addition, they introduced millions of Americans to investing through mutual funds. They started out in money funds, and when the stock and bond markets finally improved, they moved to mutual funds investing in those markets. In 1982 the Investment Company Institute’s (ICI) President, David Silver, reported on a survey: ‘It is clear that money market funds have the youngest, best educated group of customers of any financial institution.’⁸ He went on to predict, correctly: ‘These young, intelligent and increasingly affluent shareholders will be a major source of business for years to come.’⁹ Money funds also revolutionized the banking and S&L industries by leading to the end of interest rate controls on deposits.¹⁰

4.08  Money market funds raised unique issues under the federal securities laws. Different funds with similar portfolios and expenses quoted different yields because they used different formulas. The formulas were all legitimate, but there was a need to agree on a single method so investors could compare funds. The ICI convened a (p. 88) meeting of the major money funds to agree on a single formula to be recommended to the Securities and Exchange Commission (SEC) as the standard method for computing yields. At the first meeting, there was an angry disagreement as to the proper formula, with Dreyfus leading one camp and Fidelity the other. The author of this chapter, who was at that time the ICI’s Associate Counsel and Dave Silver, then General Counsel of the ICI, urged attendees to further review their proposals and reconvene at the ICI at a later date. The same group met two weeks later to learn that as had been suggested, both Dreyfus and Fidelity had thought the matter over, but now Dreyfus supported Fidelity’s initial position and Fidelity backed Dreyfus’s original formula. Both sides were insistent on their respective approaches. For the only time in the author’s experience, the ICI provided the SEC with two alternatives.¹¹ The SEC then adopted one alternative to create a single industry-wide way to calculate yield.

4.09  Under the Securities Act of 1933, issuers of securities, including mutual funds, pay the SEC registration fees based on the amount of securities proposed to be sold.¹² This system had always been unfair to mutual funds because the fee was based on gross sales with no credit for redemptions. The creation of money market funds, where investors move money in and out on a rapid basis, magnified the inequity. For example, for the 12 months ending on 30 September 1975, money funds had sales of $7.7 billion and paid registration fees of over $1.5 million. The funds had redemptions of $5.6 billion; had fees been based on net sales ($2.1 billion), they would have amounted to only $431,000. The ICI raised this inequity with the SEC, and in 1977 the SEC adopted a rule permitting mutual funds to pay SEC registration fees based on net sales.¹³ The change has saved mutual funds and their shareholders hundreds of millions of dollars.

4.10  The defining characteristic of a mutual fund is that its shares are redeemable;¹⁴ ie on any business day an investor can tender shares to the fund and receive a price based on the current value of the fund’s portfolio.¹⁵ In addition, most funds continuously issue new shares to investors, again at a price based on the portfolio’s current value.¹⁶ Therefore, each day a mutual fund must value its portfolio securities by reference to the current market prices for those securities, and then must price its own (p. 89) shares for purposes of redemptions and sales. Thus, the price of a typical mutual fund share goes up or down each day as the value of the fund’s portfolio changes.

4.11  Sponsors of money funds learned that many shareholders wanted to invest in funds that had a constant share value. For example, Federated Investors, which specialized in sponsoring money funds for use by bank trust departments, found that: ‘Trustees could not put their clients’ money in any investment that had a fluctuating net asset value, no matter how high the returns might be, for fear of losing the money through a sudden market change.’¹⁷

4.12  Therefore, to maintain a constant $1 net asset value per share, some funds added or subtracted any realized or unrealized gains and losses on their portfolio securities from their daily dividends. Federated and other funds used another approach and valued portfolio securities according to a procedure known as amortized cost valuation. Under amortized cost, a debt instrument is assumed to increase in value on a straight line basis until maturity. Thus if an instrument is purchased at $90 today and will come due in ten days at $100, its amortized cost value tomorrow will be $91, the next day $92, and so on. Still other fund groups, including Merrill Lynch, made use of a procedure known as penny-rounding, whereby the current net asset value per share is rounded to the nearest cent based on a share value of $1.

4.13  In 1977, the SEC issued a release prohibiting the use of amortized cost valuation for securities with more than 60 days to maturity.¹⁸ Several money funds sought SEC exemptive orders permitting them to use amortized cost or penny-rounding.¹⁹ The SEC staff opposed these applications, a public hearing was held, and the commission granted the orders subject to numerous conditions, notably that the portfolio must consist of high-quality, short-duration investments. Other funds obtained similar exemptive relief, and eventually the SEC codified the standards for the use of amortized cost and penny-rounding by all money market funds in Rule 2a-7.²⁰ The rule has been amended a number of times, most recently following the 2008 financial crisis when Reserve Primary Fund broke a dollar a share.²¹ As discussed later and in more detail in Chapter 10, this event touched off a broader international debate as to whether money funds should be required to have fluctuating net asset values or to maintain reserves.²²

4.14  Because money market funds presented severe competition to banks and S&L associations, they quickly drew the attention of federal bank regulators, who proposed a number of actions to impede money fund growth.²³ In 1976, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Federal Home Loan Bank Board proposed to prohibit the sale of large-scale ($100,000 or more) certificates of deposit to money market funds.²⁴ The ICI, consumer groups, leading members of the Senate and House banking committees, a number of large banks, and the American Bankers Association vigorously opposed the proposal, which was then withdrawn.²⁵ The comptroller of the currency initially took the position that bank trust departments were prohibited from investing in money market funds. The ICI and individual fund organizations discussed this matter with the comptroller, who reversed his position.²⁶ Bank trust departments have become major investors in money market funds. Similarly, the National Credit Union Administration initially took the position that federally regulated credit unions could not invest in money funds, but subsequently changed that position.²⁷

4.15  Banks launched their own efforts to restrict money market funds. In October 1979, the Bowery Savings Bank wrote to federal and state regulators asserting that the cheque writing privileges of money funds violated banking law.²⁸ The US Department of Justice swiftly rejected this assertion.²⁹ Other banks urged laws imposing interest rate ceilings, similar to Regulation Q, on money market funds.³⁰

4.16  The banks’ most common call was for legislation imposing reserve requirements on money market funds that offered cheque writing. Federal Reserve Chairman Paul Volcker favoured legislation that would give the Federal Reserve Board ‘standby authority’ to impose reserve requirements on money funds if conditions warranted. At that time banks were required to maintain reserves for their cheque accounts but not for their savings accounts. The fund industry’s response was that studies by several Federal Reserve banks and the ICI demonstrated that fund shareholders rarely drew cheques, so money funds resembled bank savings accounts, which were not subject to reserve requirements, as opposed to bank cheque accounts, which did have such requirements. However, every time the author of this chapter, (p. 91) then the ICI’s general counsel, and David Silver, then the ICI President, met with Federal Reserve Board Chairman Paul Volcker, he said that his wife, a bookkeeper for a small company in New York, paid the company’s bills by cheques drawn on the Dreyfus Liquid Assets Fund. We were concerned that public policy might be driven by Mrs Volcker’s personal experience rather than by careful economic studies.

4.17  The ICI’s President and its general counsel formulated a response should the banking and S&L industries launch an all-out drive for legislation in Congress that would impose interest rate ceilings or reserve requirements on money market funds. This author and David Silver, then the ICI President, conceived the idea of an advertisement aimed at money market fund shareholders, urging them to write to their senators and representatives in Congress. The slogan of this advertisement would be: ‘To America’s Money Market Fund Shareholders: Don’t Let Them Take it Away.’

4.18  In January 1980, the Subcommittee of Financial Institutions of the Senate Banking Committee held oversight hearings on money funds. The SEC’s testimony emphasized the significant legal and practical distinctions between money market funds and banks, stated that existing regulation successfully protects fund shareholders, and noted that fund growth had not resulted in substantial regulatory problems.³¹ The tenor of the testimony of all four bank regulatory agencies was that money market fund growth underscored the need to lift regulatory restrictions on banks rather than imposing new restrictions on these funds. In particular as to reserves, Fed Governor Charles Partee stated that money funds did not then pose a critical problem for monetary control purposes, but that if these funds over time began to exhibit more clearly the characteristics of bank transaction (cheque) accounts, the possibility of extending reserve requirements might be reconsidered.³²

4.19  Based on the regulators’ testimony and money market funds’ popularity with the public, it appeared that in the absence of a crisis, money market funds had a good chance of avoiding punitive legislation or regulation. But a crisis struck.

4.20  On 14 March 1980, the Carter administration sought to dampen inflation through the imposition of credit controls. One control required every money fund to maintain a non-interest bearing deposit with the Federal Reserve equal to 15 per cent of the increase in the fund’s assets over their 14 March level. The credit controls, including the money market fund provisions, were extremely cumbersome and difficult to administer and ultimately failed in their goal of curtailing inflation. The only good thing about them was that they were temporary. Just as they were being imposed, there were press reports that the banking and S&L industries, (p. 92) which normally fought with one another, were about to join together in a major effort to have permanent restrictions placed on money market funds.³³ The start of a major congressional battle was expected.

4.21  In late March 1980, a reporter in Nashville called the ICI with questions about an amendment that had been offered to a bill in the Tennessee legislature. This amendment would prohibit the offer and sale of shares of money market funds in the state. The battle had begun, but in state capitals rather than in Congress.

4.22  Money market funds faced an extremely difficult situation in the states. Banks and S&Ls had offices and employees in every city and town and usually had well-connected lobbyists in state capitals. In contrast, in most states there were no mutual fund firms. Even in states such as California, Massachusetts, and New York, where there were a number of fund firms, they had relatively few offices and employees. Mutual fund firms tended not to be politically active. Money market funds had only one thing going for them: there were thousands of satisfied shareholders in every state. If the ICI could learn of anti-money fund proposals in time to alert and mobilize fund shareholders, its staff might be able to avoid the normal state political process and defeat anti-money fund legislation.

4.23  Tennessee presented the first challenge. The banks and S&Ls were politically powerful: the amendment had been drafted by a lobbyist for the Tennessee Savings and Loan League and had been offered by a state senator who was a banker from Chattanooga. No money market fund firms were located in Tennessee. But some 33,000 Tennesseans invested in money market funds. The ICI senior staff drafted an advertisement with the headline: ‘To Tennessee’s Money Market Fund Shareholders: Don’t Let Them Take it Away.’ ICI staff flew to Tennessee to place the advertisement in newspapers in cities around the state. The ICI contacted money market funds and brokerage firms so that they could alert their Tennessee shareholders and customers to the amendment.

4.24  The ICI’s efforts resulted in a groundswell of fund shareholder activism, where the shareholders themselves contacted their state legislators to urge defeat of the amendment. The state insurance commissioner, who also regulated securities, slammed the proposal. The Tennessee press had a field day and particularly enjoyed pointing out that the sponsor was a banker. The sponsor withdrew the amendment.

(p. 93) 4.25  In the course of the next two years, legislation to outlaw or restrict money market funds was introduced in Alaska, Arkansas, Connecticut, Georgia, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, Texas, Utah, and Washington.³⁴ The anti-money market fund proposals took a number of forms. Some, like the amendment in Tennessee, would have explicitly prohibited the offer and sale of money market fund shares in the state. Others would have imposed on the funds reserve, community reinvestment, or other requirements based on the value of fund shares sold in the state. Such a requirement would have affected the fund as a whole and thus its shareholders in all states. Therefore, if a particular state were to enact such a requirement, money market funds would have to cease offering shares in that state so as not to harm shareholders in other states.

4.26  In 1980, the ICI’s first task was to create a surveillance system to identify anti-money market fund proposals in states. There were no nationwide or even single-state monitoring services to which to subscribe. Bills and amendments did not have clear titles, such as ‘A Bill to Prohibit the Sale of Money Market Funds’. Proposals could be introduced quietly with little or no notice. The ICI needed someone on the ground in each state capital, who would constantly be on the alert. The ICI succeeded in building a 50-state surveillance system of lobbyists, mutual fund employees, brokers, and consumer groups. At times, state securities officials or newspaper reporters would alert the ICI. The ICI’s surveillance system was cobbled together. But it worked.

4.27  Once the ICI learned of legislation in a particular state, one of its staff would immediately go there to meet in person with the sponsor to urge him to withdraw the proposal. Arkansas was a typical case. The ICI received a call from a local resident in Little Rock that a legislator was about to introduce an anti-money market fund bill. The ICI General Counsel met with the legislator who had introduced the bill to explain its likely impact, who then decided to withdraw it. The ICI was similarly successful in North Carolina and Washington.

4.28  In other states, there was no time for meetings because the sponsors attempted to rush the legislation through as quickly and stealthily as possible. For example, in Kansas a bill that had passed the state Senate was amended on the House floor to place reserve requirements on money funds. Thus there were no hearings on the bill. In these situations, the ICI could not run newspaper advertisements in time. So the ICI engaged in the tactic, highly unusual at that time, of running radio advertisements, typically during rush-hour drive times, urging money market fund shareholders to contact their legislators to demand a hearing. In some cases, (p. 94) local radio announcers and disc jockeys supported the cause and on their own urged listeners to contact their state legislators.

4.29  The ICI was able to obtain hearings in several states. In these cases, the ICI worked with state officials to arrange for witnesses, including consumer groups, law professors, economists, and, if they existed, local funds. Some hearings were chaired by the very legislators who had introduced the anti-money market fund legislation and became quite contentious.

4.30  On several occasions the ICI faced battles in two or three states at the same time, and had to enlist the services of every professional at the organization. For example, the ICI put Bill Tartikoff, its pension attorney, in charge of the hearing in North Dakota. Tartikoff and an expert witness, who was a salesman, were able to defeat the passage of the bill at the committee meeting. This grass-roots success was replicated at each state hearing where the proposed anti-money market fund legislation died.

4.31  The toughest battle was in Utah.³⁵ The state had not had a new banking law in decades, and the anti-money market fund provision was tied to a much-needed modernization bill. The Utah banks were extremely powerful. Before the ICI learned of the proposed legislation, they had succeeded in portraying the fight as the people of Utah against Merrill Lynch. David Silver went to Utah to try to take the spotlight off Merrill Lynch and shift the perception of the fight to the people of Utah versus the bankers. The Utah Senate passed the bill, and everyone expected the House would do the same. A few days before the House vote, the ICI’s attorneys in Utah advised the ICI to cease the efforts because its chances of success were minimal.

4.32  On the evening of 10 March 1981, Steve Paggioli, an ICI attorney, and the author sat in the House gallery to watch the vote on an electronic scoreboard. The banks were ahead, when suddenly, a number of votes switched in favour of money market funds 39 to 36. The speaker announced that voting was over and money market funds had won. It turned out that under the rules of the Utah House, a legislator must vote in favour of a measure to seek to recall it. The ICI opponents had failed to coordinate among themselves. By error, four of them had switched to the side of money market funds to be able to seek a recall. They demanded a recall, only to be reminded that the rules provided that in the last three days of a session, a two-thirds vote was needed for a recall. Money funds had won, due to a parliamentary blunder by their opponents.

4.33  Money market funds’ only legislative defeat was in Rhode Island, where the ICI did not learn of the legislation until it had passed one house and was being voted on by the other. After the bill passed the second house, there were mounting protests from fund shareholders and concern expressed in the media. Fund industry representatives met with Governor John Garrahy, who vetoed the legislation. The (p. 95) last major state battle was Kentucky. David Silver went to Frankfort, met the sponsor of the bill and learned that the sponsor had hoped to entirely eliminate money market funds. The ICI’s General Counsel travelled to Kentucky to prepare the ICI witnesses for a hearing. In this state, there was a local fund representative, an executive from Hillard-Lyons, a Kentucky securities firm that sponsored a money market fund. The ICI defeated the bill in Kentucky, which was called Senate Bill (SB) 306. After the defeat, the opponent introduced a resolution providing ‘it is the desire of the Senate that the number SB 306, as a legislative number, be hereby retired, never to be used again—on any piece of legislation’.

4.34  Looking back today, it might seem as though the state money market fund battles, with the final score approximately 23 to nothing, must have been straightforward. They were not. There were many difficult moments and a number of close calls. In the end, money market funds and their defenders changed history. Money market funds provided millions of average investors with market rates of return similar to those earned by wealthy investors and institutions. They led to the removal of interest rate ceilings on bank and S&L deposits. They provided the mutual fund industry with millions of new shareholders, many of whom went on to invest in stock and bond funds. Money market funds were clearly the most important product innovation in the history of the mutual fund industry.

4.35  One reason for money market funds’ success is the SEC Rule 2a-7, which permits the funds to maintain $1 per share net asset values, provided specified conditions relating to matters such as the short duration and high quality of the portfolio are followed.³⁶ Since the adoption of Rule 2a-7 there have been numerous instances in which events—such as a sharp rise in short-term interest rates or a default by an issuer of commercial paper—threatened to cause a money market fund to ‘break a buck’. Each time, the fund’s adviser purchased a security from the fund or took other steps to maintain the fund’s $1 per share net asset value.³⁷

4.36  In 1994, a money market fund created by several banks for the investment of their reserves, Community Bankers U.S. Government Money Market Fund, became the first money fund to break a dollar per share.³⁸ Just before the fund ‘broke the (p. 96) buck’ several of the bankers visited the ICI office. The bankers alleged that they had read reports of the ICI’s ‘secret bailout agreement’ to rescue money market funds that were in trouble, and asked what the ICI was prepared to do for Community Bankers U.S. Government Money Market Fund. In reality, there was no such agreement and the ICI could do nothing to help the failing fund. The fund then broke a dollar and its net asset value per share fell to 96 cents a share. There was a hope that the event would not be so large as to cause a panic, but that it would help to educate the public that the $1 per share was not guaranteed. However, because the fund was so small and had no retail investors the event received little notice.

4.37  The 2008 financial crisis resulted in the first major money fund breaking the buck.³⁹ This event revived the old debates as to whether the funds should be permitted to attempt to maintain the $1 net asset value per share and whether they should be made subject to bank-type regulation. It even brought on stage some of the old debaters such as Bruce Bent and Paul Volcker. On 15 September 2008, the financial crisis reached a critical point when a major broker-dealer, Lehman Brothers, failed. Primary Fund, the successor to Reserve Fund, the first money fund, had 1.2 per cent of its assets invested in Lehman commercial paper and notes.⁴⁰ The fund’s adviser, headed by Bruce Bent, was unable to provide assistance to the fund, and its share price fell to $0.97, the first time in history that a major money market fund had broken the buck. There ensued a major flight to quality. Institutional investors moved from money funds owning commercial paper to ‘government-only’ funds; many money funds, particularly those designed for institutional investors, were hit with massive redemptions; and the commercial paper market, already under pressure, tightened further.⁴¹ The federal government stepped in on a massive scale; notably the Treasury Department offered to temporarily guarantee the one dollar per share of participating money funds.⁴² This and other government actions improved market liquidity.⁴³ A heated debate about the future regulation of money funds followed.⁴⁴

4.38  Paul Volcker, a former Chairman of the Federal Reserve Board, who headed a steering committee on financial reform of the Group of Thirty (a private international body of financial experts), contributed to the debate. The committee’s (p. 97) report recommended that money market funds be regulated as banks.⁴⁵ The ICI countered with a white paper calling for the tightening of standards in Rule 2a-7 and the maintenance of the fixed one dollar net asset value regime.⁴⁶ Next, the Administration of President Obama proposed a two-prong approach—that the SEC would tighten Rule 2a-7 and that the President’s Working Group on Financial Markets would look into requiring the use of floating net asset values or access to private sources of liquidity.⁴⁷

4.39  In June 2009, the SEC proposed amendments to Rule 2a-7, generally along the lines that had been recommended by the ICI.⁴⁸ These amendments were adopted by the SEC in February 2010.⁴⁹ SEC Chairman Mary Schapiro then had the SEC staff prepare a release inviting public comments on proposals to require money funds to have floating net asset values or to maintain capital buffers and require investors who redeem shares to receive 97 per cent of the proceeds, with the remainder held by the fund for 30 days as additional capital. However, three of the five SEC Commissioners declined to support publication of the release, and therefore it was not issued.⁵⁰

4.40  Normally the battle over the future regulation of money funds would end here because traditionally the SEC is the only federal agency that can regulate money funds. However, in response to the 2008 financial crisis, Congress enacted the Dodd-Frank Act, which among other matters, created the Financial Stability Oversight Council.⁵¹ The council is made up of the heads of ten federal agencies, and has authority: (1) to make recommendations to regulatory agencies to impose more stringent regulation; and (2) to place a non-bank financial company under the supervision of the Federal Reserve Board if it appears that the company poses a threat to US financial stability. The role of the council regarding the future regulation of money market funds is discussed in the next chapter.⁵²(p. 98)