In all of the back and forth on the issue, I have been confident that money market funds will be reformed to either have a floating NAV or some sort of capital support provided by the management firm. That confidence looked misplaced when the proposal failed to achieve the support of a majority of commissioners. However, I noted that the Financial Stability Oversight Council (FSOC) had expressed the opinion that the money market fund industry represented a systematically important financial institution, and, thus, worthy of regulation to ensure its continuity.
Now, Investment News is reporting that Timothy Geitner is urging the FSOC to issue its own regulations for money market funds. The article suggests that the FSOC will be more difficult to influence away from reform, presumably because it falls under the Treasury Department's purview. That may so, but it still appears that money funds will have to either adopt a floating NAV or raise subordinated capital. perhaps the best that the industry can hope for is a choice.
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