The Senate Banking Committee convened a hearing today on money market mutual funds (MMFs), with senators on both sides of the aisle opposing the new SEC rules urged by Chair Schapiro, FRB officials and Secretary Geithner. Ms. Schapiro cited the systemic threat she said MMFs pose as the rationale for rules beyond those imposed during the crisis (see FSM Reports in the MUTUALFUND and MMF series). Senators pressed on the consequences that MMF reforms will have on municipal financing and cash management, and questioned whether Ms. Schapiro even had the support of her fellow commissioners. In response to inquiries about potential systemic designation of MMFs or money-market activities by the FSOC, Ms. Schapiro opposed designation of individual firms on grounds that risk can arise across the industry. She also opposes FRB regulation of MMFs, which would come with firm systemic designation. This client report analyzes today’s hearing.
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