The President’s Working Group on Financial Reform issued an unusually inconclusive report on Money Market Mutual Funds.  Published thirteen months after it was originally expected, the report simply encourages the newly formed Financial Services Oversight Committee to take up the matter.

Treasury Strategies partner, Anthony J. Carfang, notes that conspicuously absent from the report were a ‘conclusions’ section and a ‘recommendations’ section.  It was, rather, an enumeration of the pros and cons of already widely discussed policy options.  Carfang suggests that this omission was a tacit acknowledgement that none of these options are superior to the status quo.

Importantly though, the report concedes that all these options, ranging from a floating NAV, to insurance, to a two-tiered fund structure, have serious unintended consequences.  The primary concern stated in the report is that corporate and institutional investors can easily move their money out of money market funds and into instruments or geographies that are beyond the jurisdiction of U.S. regulators.  It would be unwise for regulators to drive this important funding source for public and private section borrowers offshore. 

Treasury Strategies, a consulting firm specializing in treasury and liquidity for banks and corporations, has reported consistently over the past two years that onerous regulation of money funds would push capital offshore.  Corporate treasurers understand the risk – reward tradeoff and they have the tools to manage their funds from any point around the globe.

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