In light of the Securities and Exchange Commission's inability to bring money market fund reforms to a vote, Treasury Secretary Timothy Geithner has announced that the Financial Stability Oversight Council will take the matter in hand. Specifically, Geithner announced in a
September 27, 2012 letter that the FSOC will propose its own set of options for further money fund reform, which will be open for public comment. Based on the proposal and the comments received, the FSOC will put together a reform proposal which will be submitted to the SEC, who will, pursuant to the Dodd-Frank Act, be required to adopt it, or explain to the FSOC and Congress why it failed to. The FSOC is expected to approve a draft proposal at its November meeting.
As its Chairperson, I urge the Council to use its authority under section 120 of the Dodd-Frank Act to recommend that the SEC proceed with MMF reform. To do so, the Council should issue for public comment a set of options for reform to support the recommendations in its annual reports. The Council would consider the comments and provide a final recommendation to the SEC, which, pursuant to the Dodd-Frank Act, would be required to adopt the recommended standards or explain in writing to the Council why it has failed to act. I have asked staff to begin drafting a formal recommendation immediately and am hopeful that the Council will consider that recommendation at its November meeting.
It is unclear what effect this kind of pressure will have on the Commissioners who oppose further money market reforms. Some,
including members of Congress believe, despite the differences of opinion on amongst the Commissioners, sufficient common ground exists to build on the initial money fund reform proposal from Chairman Mary Schapiro. No doubt the FSOC proposals will attempt to find this common ground. If the SEC fails to act yet again, however, their Congressional overseers have made clear that Congress will act on money market fund reforms themselves.