Senate Banking Committee Chairman Tim Johnson (D-SD) held a hearing
titled “Perspectives on Money Market Mutual Fund Reforms.”
Below is Chairman Johnson’s statement as prepared for delivery:
“Today, we are here to review the current state of regulations
responsible for providing stability to the money market mutual funds and
protecting investors. More than fifty million municipalities, companies,
retail investors and others use money market mutual funds. There are
$2.6 trillion invested in these funds, which are often viewed as
convenient, efficient and predictable for cash management, investment
and other purposes. With Americans so heavily invested in these funds
this Committee has a responsibility to conduct oversight to see to it
that the Securities and Exchange Commission is doing its part and has
the resources and authority necessary to effectively regulate this
critically important financial market.
“Market uncertainty during the financial crisis in 2008 destabilized the
money market mutual fund industry, prompting the Treasury Department to
temporarily guarantee funds’ holdings. That one-year guarantee prevented
a potential systemic run on the money market mutual fund industry.
“In response, the SEC adopted significant new rules in 2010 designed to
increase the funds’ resilience to economic shocks and to reduce the
risks of runs. The key reforms required funds to shorten maturities of
portfolio holdings, increase cash holdings, improve credit quality, and
report their portfolio holdings on a monthly basis.
“The adoption of these rules has no doubt improved investor protection,
but questions still remain about what risk the funds present to
investors and the American economy, and whether more action needs to be
taken to address that risk.
“Some regulators and economists have raised concerns that money market
funds pose significant risks to financial stability, and have argued for
further structural changes in addition to the 2010 reforms. They have
proposed floating the net asset value, requiring a capital buffer and
imposing redemption restrictions.
“At the same time, some funds and users, including municipalities,
corporations and retail investors, have urged caution, arguing that
further reforms should wait until the impact of the 2010 reforms can be
more fully studied. They have raised concerns that new regulatory
changes might increase risks or disrupt or damage their operations.
the diversity of views on this topic, today’s hearing is an opportunity
to examine the SEC’s current regulation of the funds, including the
impact of the 2010 reforms, and to better understand whether additional
regulations are needed.
“Our witnesses today represent many interested parties and a broad range
of perspectives, including the industry’s regulator, the industry
itself, users of the industry’s products, and an academic expert.
“I hope to hear from our witnesses about the health and stability of
money market funds today, the impact of the 2010 reforms, the potential
positive and negative consequences of the additional proposed reforms,
and how funds have performed during recent severe economic events such
as the European debt crisis.
“I look forward to hearing their testimony and recommendations as we
continue our rigorous oversight of the financial markets.”