August 14, 2012
Securities and Exchange Commission
Dear Chairman Schapiro:
I wish to go on record as strongly opposed to the proposals under consideration at the Securities and Exchange Commission to change the fundamental nature of money market funds (MMFs), including proposals that would force MMFs to abandon their stable $1.00 per-share price and proposals to impose both unrealistic capital buffers and redemption freezes that would deny investors full access to their cash when they need it.
Money market funds play a vital role in both cash management and public financing for municipal governments. As investors, state and local governments rely upon MMFs as the most flexible way to invest and accumulate cash in anticipation of short-term needs. MMFs provide a current market yield on a diversified, fully disclosed portfolio.
While municipalities invest in MMFs, these funds also invest in America's cities, counties, and states. Money market funds hold almost three-quarters of all short-term municipal debt, providing financing for operations and public works. These funds' ability to pass through tax-exempt interest to investors helps ensure an active and liquid market for state and local debt issues.
The stable share price and liquid access to investors' money are key features of MMFs. Groups representing millions of investors have said that impairing these features will drive investors and their cash out of these funds. Indeed, many state and local governments are barred from using "floating value" instruments for cash management.
Driving investors out of these funds will limit financing options available to state and local governments, which could lead to higher financing costs, reduced services, increased taxes, and layoffs. It would be a severe setback to an economy in recovery.
I urge the SEC not to propose regulations that would change the fundamental nature of money market funds and undermine this vital source of investment and public funding.