Money-Fund Fight Moves to Dodd-Frank Panel

The Financial Stability Oversight Council is likely to take up the debate over regulating money funds now that Schapiro has cancelled the SEC's vote on the matter.

The asset-management industry scored a victory yesterday as U.S. Securities and Exchange Commission Chairman Mary Schapiro abandoned her quest to impose tougher rules on money-market mutual funds.

Three of the four other SEC commissioners didn’t support a four-year effort to make money funds more stable, Schapiro said in a statement that urged other policy makers to take action. Two Federal Reserve bank presidents, Eric Rosengren of Boston and William Dudley of New York, and Treasury Secretary Timothy Geithner had backed Schapiro’s proposals, which had been opposed by fund companies including Federated Investors Inc. and Fidelity Investments.

Republican Opposition

Schapiro’s plan was supported by only one other commissioner, Democrat Elisse B. Walter. Republicans Troy Paredes and Daniel M. Gallagher opposed it.

‘No Back-Up’

The run following the Reserve Primary failure abated only after the Treasury guaranteed money-fund holdings against default for a year and the Fed financed the purchase of fund assets at face value to help the funds raise cash to meet redemptions.

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