U.S. Securities and Exchange Commission Chairman Mary Schapiro will tell a Senate panel today that money-market mutual funds are vulnerable to runs and must face rules to avoid taxpayer bailouts.
“Unless money-market fund regulation is reformed, taxpayers and markets will continue to be at risk that a money-market fund can transform a moderate financial shock into a destabilizing run,” Schapiro said in testimony prepared for a Senate Banking Committee hearing. “In such a scenario, policy makers would again be left with two unacceptable choices: a bailout or a crisis.”
“These are significant differences,” she said in the prepared remarks. “If there had been real credit losses last summer, the level of redemptions in some funds could very well have forced a money-market fund or funds to break the buck, leading to the type of destabilizing run experienced in 2008.”