After that stalled effort, Geithner called on the FSOC to use its new powers, granted by the Dodd-Frank financial reform law, to compel the SEC to act. Under the law, the FSOC has the power to make recommendations to a financial regulator on a course of action, which the regulator would then have to either accept and implement or explain in writing its inaction.
"Without further reform of MMFs, our financial system will remain vulnerable to runs and instability," Geithner wrote. "With the failure of the SEC to act, the Council should now move forward with the tools provided by Congress."
Meanwhile, the Chamber has been leading an industry charge against efforts to beef up oversight of the funds. In the latest letter, it argues that the SEC, and now the FSOC, have failed to conduct the necessary research on funds to determine appropriate action.
These funds, which seek to maintain a share price of $1, are thought to be a highly secure investment, on par with bank deposits. However, unlike bank deposits, they are not guaranteed by the government. When the high-profile Reserve Primary Fund "broke the buck" at the height of the financial crisis after taking substantial losses in the bankruptcy of Lehman Brothers, it set off a run on the market that settled only when the government stepped in to guarantee more than $3 trillion in investments.
The chamber contended that investors know the risks that come with using the funds, adding that they are a major source of funding for state and local governments.