August 7, 2013
Secretary, Securities and Exchange Commission
100 F Street, NE
Dear Elizabeth Murphy:
Dear Commission Members:
We are extremely concerned about the potential impact of the Commission's money market fund proposal on the cost and availability of financing for our organization. Municipal money market funds are a vital source of cost-efficient, short-term financing for organizations such as ours. We rely on municipal money market funds to purchase our fixed and variable rate demand bonds that were sold to finance multiple capital outlays that enable us to provide health care to the communities we serve.
Well over one-half of all short-term municipal debt in the U.S. is held by municipal money market funds. Any regulatory changes that impede the operation of these funds will have harmful repercussions in the market for municipal debt such as ours. It has become increasingly challenging for organizations like us to raise funds in the municipal bond market, and the Commission's proposal could cause a potentially devastating contraction of short-term financing, which has already contracted from its high in 2008.
In particular, we believe the floating NAV for institutional municipal funds will make these funds significantly less useful and attractive to institutional investors who will invest their assets elsewhere. Institutional municipal money market funds of necessity will reduce their aggregate holdings of municipal debt, and the cost of municipal funding will rise. Banks and other financial institutions simply cannot provide municipal finance as cost effectively as money market funds.
We also want to point out that municipal money market funds were not a source of any problem in 2008. Therefore, municipal money market funds should be treated like government money market funds, i.e. allow their portfolio securities to be valued and amortized cost.
We question the need for such drastic changes to an industry that has operated safely and successfully for decades. The Commission's 2010 reforms have enhanced the ability of all money market funds, including municipals, to withstand market stresses such as occurred in 2008 and improved investor awareness of their risk characteristics. All money market funds enjoy a high level of investor confidence well-earned and unmatched by almost any other type of financial institution. The Commission should not burden this industry with unnecessary and overly complex regulations that appear more likely to trigger contagion than prevent it, and that will significantly increase the cost to municipalities and their taxpayers of providing public services.
We appreciate your attention to our concerns.
R. Mark Keener