Mass Municipalities Oppose Reforms
Another recent comment letter comes from Geoffrey C. Beckwith, Executive Director, Massachusetts Municipal Association. He writes, "On behalf of the 351 cities and towns of the Commonwealth of Massachusetts, the Massachusetts Municipal Association appreciates the opportunity to offer comment on the proposed rule changes regarding the regulation of money market mutual funds (MMMFs). We respectfully oppose the proposed rule changes, and we are very concerned that the proposals would harm local governments by taking away an important cash management tool, increasing market instability, and making municipal bonds less attractive to investors. We urge the SEC to retain a fixed NAV as an important component of both established municipal financial practices and continued economic growth. We understand that the Securities and Exchange Commission (SEC) has proposed switching from a fixed net asset value (NAV) for MMMFs to a floating NAV, and has proposed implementing investor redemption restrictions. These proposed regulatory changes would require MMMFs to sell and redeem shares based on the present market-based value of the securities in their underlying portfolios, and would also make it more difficult for investors to redeem MMMFs.... The SEC has not proposed subjecting Treasury and government money market funds to further regulation, recognizing that these funds have largely different characteristics from prime MMFs. Municipal MMFs behave similarly to Treasury and government funds during times of market stress, maintaining high levels of asset liquidity. They did not experience the same runs during the financial crisis of 2008 that prime MMFs experienced. Given the highly negative consequences that would result, there is no compelling reason to regulate municipal MMFs as if they were prime MMFs, rather than regulating them similarly to the Treasury and government MMFs with which they share numerous characteristics."
