Fed’s Tarullo Says Money Funds Pose Systemic Risk

Fed governor calls for SEC to tighten oversight of money fund industry.

Federal Reserve Governor Daniel Tarullo joined a call for the Securities and Exchange Commission to tighten oversight of the $2.5 trillion money market fund industry, which he said puts financial market stability at risk.

“Money market funds remain a major part of the shadow banking system and a key potential systemic risk even in the post-crisis financial environment,” Tarullo said in a speech today at the University of Pennsylvania Law School in Philadelphia.

‘Move Forward’

“The protective tools available to the rest of us do not fit the problem precisely and thus will not regulate at the least cost to the funds while still mitigating financial risk,” Tarullo said. “My hope, of course, is that recent indications that other SEC commissioners are now willing to move forward with reforms will lead to the SEC adopting first-best measures in the near-term.”

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