U.S. Securities and Exchange Commission Chairman Mary Schapiro's abandonment of her quest to impose tougher rules on money-market mutual funds is a "national disgrace," said former SEC Chairman Arthur Levitt.

"There's clearly a need to do something about money-market funds," Levitt, 81, said today in a Bloomberg Radio interview with Tom Keene and Ken Prewitt. "Everything else is marked to the market. This should be marked to the market in the interest of investors. The fact that Mary Schapiro couldn't get her three members of the commission to support this is really a national disgrace."

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. That could move the fight over how to regulate the industry's $2.6 trillion in funds to the Financial Stability Oversight Council, a panel of regulators created by the Dodd-Frank Act.