(Reuters) – Football fan Christopher Donahue is not dancing in the end zone.
The Federated Investors Inc chief executive has been one of the leading critics of tightening rules on money market mutual funds and was widely seen as scoring a win last month when the Securities and Exchange Commission abandoned an effort to further clamp down on the $2.5 trillion money fund industry.
But some regulators worry the sector still poses risks to the U.S. financial system and further reviews are under way such as on whether money funds need capital buffers, floating net asset values, or other changes to make them more resilient. Donahue said on Monday he does not expect a final resolution to the debate in Washington any time soon.
“This is an endless playoff series” with no “final Super Bowl,” Donahue said on a webcast from the Barclays 2012 Global Financial Services Conference in New York.
“There are no victors, there’s only surviving until the next round,” he said of the money funds debate.
Donahue also worked in a reference to his hometown Pittsburgh Steelers National Football League team — who lost their season opener on Sunday to the Denver Broncos 31-19 — and said of the status of the money funds debate: “There will be no spiking the ball.”
Federated Investors, with roughly three-quarters of its $356 billion of managed assets in money funds, is one of the largest money fund sponsors and one of the most vocal companies opposed to more rules after the financial crisis.
Fund executives worry more changes would destabilize the sector, which plays a central role in financial markets buying debt. Technically, they got a boost last month when SEC Chairman Mary Schapiro said she had failed to muster the votes to move forward with more reforms beyond changes made in 2010 to make the funds more liquid and transparent.
Schapiro urged other regulators to pick up the ball, such as the Financial Stability Oversight Council (FSOC), chaired by Treasury Secretary Timothy Geithner. On August 23, the U.S. Treasury Department said it was consulting with other agencies. Officials have said little since then and observers say the FSOC faces many political and legal hurdles.
Donahue said money funds have faced similar regulatory uncertainty ever since their rise in the 1970s, when they emerged as an alternative to traditional bank accounts under more direct supervision. “We have been in this situation for all the life of money funds,” he said.
Some of the sharpest criticism of the funds has come from the Federal Reserve. Donahue said one possibility now is that Fed regulators “do some things behind the curtain,” such as review how much banks rely on financing from money funds that buy debt. But those steps would not have much impact on money funds themselves, he said.
“It has been apparent the Fed preferred the SEC to have its fingerprints on the gun and pull the trigger if money market funds were to be severely injured,” he said.
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Meanwhile, it is not clear the council overseen by Geithner would step in, Donahue said. “You have to question whether FSOC wants to own the problems” that would be created by changes, he added.
(Reporting By Ross Kerber; Editing by Bernard Orr)