In a letter to the SEC, former Comptroller of the Currency John D. Hawke, Jr. cautioned that requiring money market funds to utilize a floating NAV would accelerate the flow of assets to “Too Big to Fail” banks, further concentrating risk in that sector. The former federal official, now with the Arnold & Porter firm, noted that, even bank regulators have acknowledged that a broad shift of institutional cash to the banking system could lead to a large increase in uninsured, “hot money,” deposits, which would increase systemic risk. Similarly, and importantly, he noted that requiring a floating NAV would force current users of money market funds to less regulated and less transparent products, which alternatives may be more susceptible to market risk. More broadly, he said that a review of the record developed by the SEC over the past three and a half years reveals no evidence of any benefits that would be derived from requiring money market funds to use a floating NAV.
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