Dealmaking on Money Fund Rules Resumes

Geithner breaks logjam by forcing SEC to put issue back on its agenda.

One month ago, a U.S. Securities and Exchange Commission proposal to tighten rules for the $2.6 trillion money-market mutual fund industry was declared dead. Now, it’s coming back to life.

The revival was sparked by Treasury Secretary Timothy F. Geithner, who added fuel to a new round of dealmaking among regulators, funds and banks when he used the 2010 Dodd-Frank Act to force the issue back onto the SEC’s agenda.

Compromise Plan

The SEC is already laying the ground for compromise and passage of a new plan. In response to a request on Sept. 17 from the three commissioners, SEC staff members have begun studying whether the rules could disrupt money market funds and short-term credit markets, according to two people familiar with the matter. The study could be completed within six weeks.

BlackRock Proposal

New York-based BlackRock Inc., the world’s biggest asset manager, released a new proposal today, a signal that some firms are still actively looking for a resolution. The plan, detailed in a note sent to clients and regulators, backed the concept of redemption “gates” included in Geithner’s letter.

Schapiro Statement

Still, a week before the scheduled Aug. 29 vote, Schapiro was forced to give up on her plan when the three commissioners -- Republicans Gallagher and Troy Paredes and Democrat Luis Aguilar -- told her they wouldn’t vote for it. In a statement that day, she urged “other policy makers” to take up the issue instead -- a comment widely understood as referring to FSOC, established by Dodd-Frank as a cross-regulator to protect the economy from systemic crises.

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