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Friday, November 09, 2012

The Feds Don't Care for Fink's Reform Plan

News summary by MFWire's editors

Remember the alternative plan for money market reform floated last month by BlackRock [profile], Fidelity [profile], and Vanguard [profile]? Don't expect it to get very far.

Wall Street Journal reporters Scott Patterson and Andrew Ackerman write that this scheme has received a "chilly reception from federal regulators." According to the story, "[p]eople close to the SEC" think the industry's plan is too weak and could "trigger the type of destabilizing runs on money markets seen most recently during the collapse of Lehman Brothers."

The plan, which originated with BlackRock, calls for "circuit breakers" to slow fund redemptions in times of stress. The proposal was in response to FSOC chairman Tim Geithner's signaling that he was ready to push forward Mary Schapiro's reform proposals. The FSOC has the power to force the SEC to implement the reforms.

The two WSJ reporters say that the industry is seeking a deal with the SEC, rather than the FSOC, because its sees Schapiro's agency as "a friendlier regulator."

The two reporters quote law professor William Birdthistle, a money fund expert, who says the industry plan is "a bit of a farce. They're basically agreeing to alter their business during a time when no constraints on their business would be enforced."

Full story is here

Edited by: Chris Cumming

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