Whether you work for a small business, non-profit institution or the state and local governments, it can be predicted that you were affected by the financial crisis of 2007-2009 in some way or another, particularly the issues facing money market mutual funds. Since the crisis, policymakers have made great progress in making money market funds even stronger. Here, at the Financial Services Institute (FSI), we are pleased that just last week the Senate Banking Committee explored the issues facing money market mutual funds and their investors.
Last Thursday, June 21, the Committee held a hearing entitled “Perspectives on Money Market Reforms.” FSI submitted a statement for the record documenting our concerns regarding proposed changes to the structure of money market funds, particularly our strong opposition to proposals that would force these funds to abandon their stable $1.00 per-share price and instead “float” their net asset values (NAVs). In our view, forcing money market funds to float their NAVs would harm investors and the broader U.S. economy. Therefore, to force floating NAVs would take away these benefits while risking the following negative effects: hobbling cash management, driving up the cost of investing and doing business, increasing the cost of financing, depriving investors of tax-exempt income and creating a financing gap.
Here at FSI, we represent independent broker-dealers (IBD) and the independent financial advisors affiliated with them. For these individuals we represent, money market funds provide a high degree of liquidity, diversification, and convenience, along with a market-based yield. The stable NAV is central to these benefits. For the IBDs we represent, we were pleased that the Committee held a hearing to explore the issues facing money market mutual funds and their investors.
As Treasury Secretary Timothy Geithner said recently, any further changes to money market funds must be made “without depriving the economy of the broader benefits that these funds provide.”