Systemic Risk Council
January 18, 2013
Dear Financial Stability Oversight Council:
The Systemic Risk Council (SRC) is writing to commend and support the FSOC for seeking public comment on proposals to reform money market funds. It has been more than four years of study since taxpayers were forced to guarantee money market funds and the structural risks remain. We believe strong reform – namely strong capital or a floating NAV – is essential to protecting the financial markets from the systemic risks posed by money market funds. Never again should policymakers be forced to choose between a financial meltdown or a taxpayer bailout of money market funds.
The Systemic Risk Council Supports the FSOC’s Efforts to Reform Money Market Funds. As we have previously noted, the SRC believes prompt and decisive action is needed to curb systemic risks posed by money market mutual funds. When the Reserve Primary Fund “broke the buck” in 2008, extraordinary actions were required to back-stop and calm investors in money market funds and protect the short-term lending markets. The risk that emergency government support may again be needed to stem destabilizing runs from money market funds remains a serious challenge for policymakers. The SRC applauds former SEC Chairman Mary Schapiro, FSOC Chairman and Treasury Secretary Timothy Geithner, and members of the FSOC for their vigilance on this issue and we support strong capital or floating NAV as appropriate policy responses.
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