State Street is the latest to comment to the FSOC, saying, "Overall, given the critical function money market mutual funds ("MMMFs") play in today's financial markets, State Street urges the FSOC to proceed cautiously with any regulatory changes for money market mutual funds. We are concerned that the adoption of the Proposed Reform, by effectively eliminating the viability of MMMFs for many of their current uses, will negatively impact the global economy, and urge the FSOC to adopt a more measured approach. MMMFs allow investors to achieve a liquid, diversified portfolio of high quality, short-term assets, managed by professional investment managers at a reasonable cost. For State Street's clients, such as state and private pension funds, endowments, and other institutional investors, use of MMMFs to effectively manage cash flows, invest temporary excess cash, and as a tool to manage cash collateral received as a component of a securities lending program improves returns and reduces expenses, ultimately adding to funds available to beneficiaries. This is of particular benefit to smaller institutional investors, who do not have the resources and tools to establish sophisticated treasury functions dedicated to cash management, nor sufficiently large balances to justify segregated cash management arrangements with professional money managers. In addition, MMMFs are important investors in a wide variety of securities, particularly for borrowers seeking to issue short-term funding instruments. Eliminating MMMFs as a market for such instruments will have significant negative impacts on the real economy. While, as the FSOC notes, there are options in the marketplace offering features similar to MMMFs, we share the broader industry view that none of these options offers a suitable substitute, particularly at the very large asset levels currently offered by MMMFs. Bank deposits, in particular, are an imperfect substitute for MMMFs in today's markets, due to capital, leverage, and other constraints limiting banks' ability to accept such large inflows of deposits on a profitable basis, and the inability of banks to replace MMMFs as buyers of short-term securities.... In considering MMMF reform, we encourage the FSOC to fully consider existing and emerging regulations that already impact how banks interact with MMMFs, as well as best practices in the context of how banks manage exposures to such funds.... Reducing the potential for MMMFs to impact bank balance sheets in a stress scenario is therefore an important consideration in any proposed reform that impacts MMMFs. This issue, however, is already being addressed by banking regulators, outside of any MMMF reform."
