Schapiro Surrenders
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Thursday, August 23, 2012

Schapiro Surrenders

The summer-long saga is over. Mary Schapiro lost the money market reform vote even before it was taken.

Yesterday the SEC chairman issued a statement, posted by the Wall Street Journal, revealing that three of the four other SEC commissioners "will not support a staff proposal to reform the structure of money market funds" by mandating floating NAVs and capital buffers.

In announcing the defeat, Schapiro called for unnamed "other policymakers" to step in to force money market reforms. Multiple pubs wonder if this defeat means that the Financial Stability Oversight Council, of which Schapiro is a member and which is chaired by U.S. Treasury Secretary Tim Geithner, might answer Schapiro's call for "other policymakers" to step in.

The Wall Street Journal and the New York Times both offer in-depth coverage of Schapiro's surrender, including comments from both Schapiro and from the commissioner, Democrat and ex-Invesco exec Luis Aguilar, whose turn to oppose Schapiro was the final straw.

"I'm not comfortable supporting the proposal as is," Aguilar told the Journal. "We're hearing one thing from the staff, we're hearing another thing from the industry, on the eve of a major proposal that may result in billions of dollars going to an unregulated market and I'm saying to myself, 'Why are we in such a rush to do it, especially when our economy is still fragile.'"

"It's a tragedy that serious thoughtful proposals to shore up a major weakness in the financial system and protect American taxpayers from the potential need to bail out this industry can't even receive public comment and debate," Schapiro told the Times. "The issue is too important to investors, to our economy and to taxpayers to put our head in the sand and wish it away."

The Times also included input from one of the two Republican commissioners, Daniel Gallagher, who had already revealed his opposition to Schapiro's plans. Both Aguilar and Gallagher insisted that they're open to other reform proposals.

Reuters also scored an interview with Aguilar. The wire service also offered insight from John Hunt, a partner at Nutter McClennen & Fish. Hunt speculated that it's "unlikely" that "any concrete regulation of money market funds could be drafted and proposed before the election, much less adopted as a final rule."

Bloomberg also covered the news.

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