Over the weekend, the Wall Street Journal was all money fund concerns, what with the impending expiration of the Dodd-Frank Deposit Insurance Provision at year-end and U.S. Treasury Secretary Tim Geithner's missive to the Financial Stability Oversight Council (FSOC) last Thursday.

As MFWire covered last week, the letter from Geithner, who also serves as chairman of the FSOC, signals that, contrary to speculations that money-fund reform efforts would end with SEC chairwoman Mary Schapiro's surrender, the battle very much wages on. So writes senior editor Vipal Monga for the WSJ on Friday.

A story yesterday from Jessica Holzer and Victoria McGrane explore the impacts of the letter. This is the first time the FSOC has moved to "encroach on an independent regulator's turf," they write.

The SEC may still have time to act on its own and stop the FSOC from taking full control, since Treasury officials can't complete policy recommendations to the SEC until March at the earliest. However, if the SEC fails to act, the FSOC could circumvent the agency to regulate on the industry or individual firms, they write.

Back to Monga: He quotes individuals like Tory Hazard, COO and CFO of Institutional Cash Distributors, a company that works with companies investing in money market funds. Hazard talked to the impact of Geithner's proposed reforms, which run closely to Schapiro's propositions.

"If the floating NAV comes about, there are going to be some significant consequences," Hazard said. "Our clients that invest in money funds have indicated there would be a significant reduction in their investments in money funds."

But a story from Monga's colleagues Cynthia Lin and Anusha Shrivastava yesterday begs to differ. The two reporters write that money-market funds expect massive inflows once the Dodd-Frank Deposit Insurance Provision, a program that guarantees non-interest-bearing deposits at banks , ends at the end of this year. Industry analysts expect that about $1.6 trillion in deposit-account money will need a new home, and that much of this money will go to safe-haven Treasurys or money-market funds.

"Money-market funds will be the first stop for this corporate and institutional money," Tom Nelson, chief investment officer at Reich & Tang, told the WSJ.

Most analysts don't expect the provision to be extended, despite some community banks' efforts to make this happen.  

Edited by: Irene Park


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