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May 8, 2020

Taxpayers Have Been Forced Yet Again to Bail Out the Trillion-Dollar Money Market Fund Industry Because the SEC Has Been Derelict

Friday, May 8, 2020
Contact:  Pamela Russell, 202-618-6433 or
Washington, D.C.  –  Dennis M. Kelleher, President and Chief Executive Officer of Better Markets, issued the following statement on Better Markets’ comment letter calling on regulators to finish the job of regulating money market funds (MMFs) so they are no longer so vulnerable to crisis and dependent on taxpayer bailouts. 
“Another crisis and another trillion-dollar taxpayer bailout for money market funds (MMF), which are fragile and unstable trip-wires because of their very high run-risk. Just as in 2008, financial market stress and panic appears first in MMFs as investors’ withdrawals skyrocket, which causes widespread asset fire sales to generate cash to pay those redemptions. That in turn causes the short-term money markets to freeze up, which results in illiquidity and more asset fire sales. This triggers a vicious downward cycle of sales, repricings, and margin calls as the contagion spreads. 
“If regulators at the Securities and Exchange Commission (SEC) had done their job after this happened during the 2008 crash,  taxpayers would not be bailing MMFs out again now. Then it was for $3.4 trillion; today, it’s $4.7 trillion. This is indefensible. Adding insult to injury, the solutions to vulnerable MMFs are well-known: a floating NAV, capital buffers, and other measures to require them to internalize the costs that they externalize to taxpayers, as Better Markets has argued repeatedly in the past. 
“This particular rule, necessitated now that we’re in the middle of a crisis, is not the problem. It’s the barn door being closed after the SEC knowingly left it wide open. This was the foreseeable and predictable – indeed, predicted – result of regulatory failure due to regulatory capture of the SEC by the industry it is supposed to regulate and their lobbyists. This has been enabled by the Trump administration’s de facto killing of the Financial Stability Oversight Counsel (FSOC), which is supposed to be the failsafe backstop to prevent frontline regulators like the SEC from being derelict. Now taxpayers are – once again – paying the price.  The SEC should immediately propose and finalize the reforms necessary to prevent this from happening again. Otherwise, we’ll continue the same outrageous cycle: MMFs will reap their profits in good times and make U.S. taxpayers cover their losses whenever a crisis hits.”   
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit
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