SEC chairwoman Mary Schapiro found a new backer for her proposal to increase regulation of the $2.5 trillion mutual fund industry, the Boston Globe reports. Eric Rosengren, head of the Boston Federal Reserve, has come out in support of the proposal Schapiro introduced last month.

At a conference held at the Dutch Central Bank in Amsterdam, Rosengren emphasized the risks of money market funds, and said that money managers "may be inviting trouble" by promoting funds as essentially risk free [speech text].

He announced his support of the plan Schapiro floated late last month to either let money markets float in value or require firms to hold capital to protect against losses.

In his speech, Rosengren highlighted the danger of a 2008-style run on money market mutual funds, and noted that in another crisis neither the government nor the fund sponsors may be able to backstop a troubled fund. He said that he is "very supportive" of Schapiro's efforts, and he proposed "admittedly partial" alternatives in the case the SEC's proposed reforms don't go through: including the cost of bailing out money market funds in institutions' stress tests. 

Edited by: HFD


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