Money market funds melted into a pandemic panic. Now they are under control.
The Trump-era task force suggested a variety of fixes. Some would revise when barriers and fees kick in, while another would create a private sector safety net. This would essentially admit that the funds might have some trouble, but try to make sure that the government money is not on the line.
If history is a guide, pushing through the changes is unlikely to be an easy task.
In 2012, the effort included a President’s Working Group Report, a commentary process, a roundtable and proposals from SEC staff. But those plans were scrapped after three of the five SEC commissioners signaled they would not back them.
“The question is too important to investors, to our economy and to taxpayers to put their heads in the sand and wish it,” Mary Schapiro, then president of the SEC, said in August 2012, after his fellow commissioners made their opposition known.
In 2014, rules establishing fees, portals and floats for institutional funds invested in corporate paper have been approved in a close vote under new SEC head Mary Jo White.
Kara M. Stein, a commissioner who challenged the final version, argued in 2014, savvy investors would be able to feel trouble brewing and withdraw their money before the delays were imposed – exactly what appears to have happened in March 2020.
“These reforms were known to be insufficient,” said Ben S. Bernanke, former Fed chairman. during an event January 3.
The question now is whether better changes are possible or whether the industry will fight again. While asking a question at a hearing this year, Sen. Patrick J. Toomey, Republican of Pennsylvania and chairman of the banking committee, made a statement that downplays the role of funds.
“I want to stress that money market funds have been remarkably stable and prosperous,” said Toomey.
Alan rappeport contribution to reports.