Paul Schott Stevens, president and chief executive officer of the Investment Company Institute, gave his perspectives on money market reforms today in front of the Committee on Banking, Housing, and Urban Affairs in Washington, DC.
Stevens, who pulled no punches in delivering his testimony, said that the Securities and Exchange Commission’s misperceptions that money market funds are susceptible to runs and that the government can’t bail out these funds in a future crisis “are based in myths”.
Actually, Stevens noted that the Reserve Primary’s breaking the dollar did not trigger the tightening of the commercial paper market—investors of all types began abandoning that market days before Reserve Primary failed. Also, he said investors did not flee from the money market fund structure. Rather, they fled from securities of financial institutions and sought the refuge of U.S. Treasury securities—by buying shares in money market funds invested in government securities.
“Our shareholders realize that money market funds are investments—and they bear the risk of loss. No one in the investment community believes that these funds carry a government guarantee—and no one in our industry wants one. Period—full stop,” he said.