Sheila Bair, chair of the Systemic Risk Council, released the statement below following the SEC’s meeting on Wednesday, July 23:
“I know this has been a difficult issue for the SEC, and I commend Chairman Mary Jo White for her strong leadership in guiding the agency to final rulemaking. I also applaud the SEC for standing up to lobbying pressure and requiring a floating NAV for prime institutional funds as well as for improving the floating NAV pricing and tightening the definition of government funds.
I remain concerned however, that this approach may be too limited to address the systemic risks posed by money market funds, and that the new gates and fees could exacerbate it. A better, and simpler, approach would be to apply a floating NAV to all money funds just like other mutual funds which have operated well without systemic risk, or implicit support, since 1940.
That said, the new floating NAV for prime institutional funds marks an important step forward in the area that suffered the greatest runs during the financial crisis– runs which stopped only after taxpayers stepped in with a bailout.
I also commend Treasury Secretary Lew and the Financial Stability Oversight Council for remaining steadfast in their efforts to ensure that the systemic risks posed by money funds be addressed.
We will review the rule closely to better assess its potential impact, and I encourage the Financial Stability Oversight Council to do the same. If structural weaknesses remain that put the markets and taxpayers at risk, the FSOC should continue to take the steps necessary to ensure that they are addressed.”