This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Money Fund Fight Could Last Forever: Street Whispers

NEW YORK ( TheStreet) -- Fresh from his victory over a proposed Securities and Exchange Commission rule that would have placed tighter restrictions on money market funds, Federated Investors (FII - Get Report) CEO Christopher Donahue isn't doing an end zone dance--in fact, he doesn't sound like he'll ever do one.

Money market reform has been an important goal for regulators ever since the 2008 financial crisis exposed their vulnerability to losses. Over a two day period after the investors in the Reserve Primary Fund saw the value of their holdings decline in value, prime money market funds lost $200 million in assets as a massive run ensued. The Treasury was forced to step in and guarantee money market funds. Since then the Federal Reserve and the Treasury have been pushing for ways to reduce the possibility of future bailouts.

Though Federated and other big mutual fund companies were able to convince three SEC commissioners to block Chairman Mary Schapiro, Donahue fully expects the Federal Reserve to keep the fight alive.

"Use of the word resolution, I can't get to, because I don't think at this point that the Fed will change their opinion about money market funds, and they haven't changed it since the beginning. So, I think that will continue," Donahue said during a presentation at the Barclays Financial Services Conference Monday.

The Fed has been silent since Schapiro announced in August that she did not have enough votes to go ahead with money market reform. However, in a speech in June, Fed governor Daniel Tarullo alluded to "several second-best alternatives," for regulating the funds should Schapiro's efforts fall short. These could include placing limits on the degree to which banks can borrow from money market funds.

Citing this and other possible moves, Donahue sounded defiant on Monday.

"The Fed can certainly do some things both behind the curtain with capital at banks and directly with banks in terms of managing their short-term financing. But these things would not injure money funds or really change the lay of the land very much."

Investors appear to agree. They have pushed Federated shares higher by more than 38% year to date even as the threat of reform has hung over the industry. It is possible that no company has more at stake than Federated, which has some 75% of the assets it manages in money market funds, according to Barclays.

-- Written by Dan Freed in New York.

Follow this writer on Twitter.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FII $31.62 0.67%
TSLA $240.85 -2.80%
YHOO $36.65 0.16%
AAPL $93.70 -1.20%
FB $117.62 0.76%


Chart of I:DJI
DOW 17,778.54 -52.22 -0.29%
S&P 500 2,063.56 -12.25 -0.59%
NASDAQ 4,771.9090 -33.3820 -0.69%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs