Timothy Massad, Columnist

Money Market Reform Awaits Gensler at the SEC

The pandemic was another reminder that the U.S. financial system shouldn't have to depend on emergency government help to protect against investor runs.

March 18, 2021 at 10:30 AM UTC

By Timothy Massad

Timothy Massad is a research fellow at the John F. Kennedy School of Government at Harvard University. He served as chairman of the Commodity Futures Trading Commission from 2014 to 2017 and was the U.S. Treasury Department's assistant secretary for Financial Stability and oversaw the Troubled Asset Relief Program.

Gary Gensler, Biden’s SEC nominee, will need to turn his attention to money market reform after confirmation.
Photographer: Bloomberg

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Gary Gensler, who has been nominated to run the Securities and Exchange Commission, was asked several times at his recent confirmation hearing about the WallStreetBets/GameStop Corp. saga and whether he would require greater disclosure on climate change risks and corporate political contributions. None of that was surprising; nor were his answers.

What was surprising was that no senator asked about regulatory reform of money market funds. That should be at the top of Gensler’s to-do list because the federal government has had to rescue the industry twice in 12 years. Last March, when the pandemic caused market convulsions, the Federal Reserve quickly provided a liquidity backstop to prevent runs. That was a replay of what took place in September 2008, when the Treasury provided a sweeping guarantee of all money market funds after Lehman Brothers Holdings Inc. failed.