The U.S. Chamber of Commerce's Center for Capital Markets Competitiveness sent a letter to U.S. Department of the Treasury Secretary Timothy F. Geithner and members of the Financial Stability Oversight Council Wednesday, "signed by organizations representing thousands of American businesses, State and Local governments, and nonprofit organizations that depend on money market mutual funds (MMMFs) as an efficient and critical financial tool to the FSOC today urging them not to proceed with any regulatory actions on MMMFs." The letter says, "We, the undersigned organizations representing thousands of American businesses, State and Local governments, and nonprofit organizations that depend on money market mutual funds (MMMFs) as an efficient and critical financial tool, write to you as the Chair of the Financial Stability Oversight Council (FSOC) to urge the FSOC not to proceed with any planned regulatory actions with respect to Rule 2a-7."
It explains, "Many of the changes you outlined in the letter to your fellow Council members in September -- such as a floating net asset value (NAV) and "minimum balance at risk" redemption holdbacks -- are the same proposals that the SEC rejected. These proposals were rejected because they would fundamentally alter MMMFs and harm the ability of the organizations we represent to finance basic operations. The negative repercussions of such changes would impede our ability to sustain economic growth and create jobs."
The Chamber writes, "Following the 2008 financial crisis, the SEC amended Rule 2a-7 to further reduce the susceptibility of MMMFs to the isolated problems seen during the financial crisis. These changes included requiring MMMFs to hold a higher proportion of their assets in highly liquid, high-quality assets; to diversify even more broadly; and to disclose their holdings monthly. MMMFs are now better able to withstand financial market turbulence and fluctuations in the economy than at any time in their 40-year history."
They add, "The regulatory changes being considered will have a significant and adverse impact on the vitality of the organizations that we represent -- American businesses, State and local governments, and nonprofits -- that rely on MMMFs as a secure, efficient means to provide short-term funding for business expansion, daily operations, and critical infrastructure maintenance and expansion. MMMFs are the largest investors in short-term municipal bonds, holding $288 billion in assets and approximately 57 percent of all outstanding short-term municipal debt. These funds also provide funding to nearly 40 percent of the corporate commercial paper market."
The letter continues, "Implementing a floating net asset value, redemption restrictions, or other regulatory changes that disrupt the existing structure and characteristics of MMMFs will cause many investors to divest a significant percentage of their holdings in MMMFs, denying low-cost capital to businesses and municipalities and driving assets into less regulated vehicles. In light of the foregoing concerns, we again urge the FSOC to avoid moving forward with recommendations for any additional regulations related to MMMFs at this time."
The Chamber adds, "We need a different approach that begins with the SEC focusing only on necessary reforms that will strengthen rather than destroy a product we rely on. Our economy simply cannot afford for regulators to act in haste and propose measures that will have a very real and negative impact on a critical financing vehicle that is a trusted and essential resource for our members."
The letter is signed by the following organizations: Agricultural Retailers Association, American Association of State Colleges and Universities, Association for Financial Professionals, Education Finance Council, Financial Executives International, Government Finance Officers Association, International City/County Management Association, International Municipal Lawyers Association, Mortgage Bankers Association, National Association of College and University Business Officers, National Association of Corporate Treasurers, National Association of Counties, National Association of Health and Educational Facilities Finance Authorities, National Association of State Auditors, Comptrollers and Treasurers (NASACT), National League of Cities, Property Casualty Insurers Association of America, Retail Industry Leaders Association (RILA), U.S. Chamber of Commerce, and the U.S. Conference of Mayors.
