The Trump-era working group suggested several solutions. Some would overhaul when gates and fees came in, while others would create a backstop for the private sector. That would essentially admit the funds might run into problems, but try to make sure the government’s money is not at stake.
If the story is a guide, enforcing change is likely not an easy task.
As early as 2012, efforts included a report from the President’s working group, a comment process, a round table, and suggestions from SEC staff. However, those plans were abandoned after three out of five SEC commissioners signaled that they would not support them.
“The issue is too important for investors, our economy and taxpayers to bury our heads in the sand and wish it away,” said Mary Schapiro, then chairwoman of the SEC, in August 2012 after her fellow commissioners announced their opposition.
In 2014, rules that introduced fees, gates and variable values for institutional funds invested in corporate securities were passed in close consultation under new SEC director Mary Jo White.
Kara M. Stein, a commissioner who debated the final version, argued in 2014 that discerning investors could sense brewing issues and withdraw their money before the delays were imposed – which appears to have happened in March 2020.
“These reforms were known to be inadequate,” Ben S. Bernanke, a former Fed chairman, said at an event on Jan. 3.
The question now is whether better changes are possible or whether the industry will fight back again. At a hearing earlier that year, Senator Patrick J. Toomey, Republican from Pennsylvania and chairman of the banking committee, asked a question in which he minimized the role of funds.
“I would like to point out that money market funds have been remarkably stable and successful,” said Toomey.
Alan Rappeport contributed to the coverage.
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