SIFMA Supports MSRB Proposal To Extend Money Market Fund Guarantee Program

The Securities Industry and Financial Markets Association (SIFMA) today issued the following statement supporting the Municipal Securities Rulemaking Board’s (MSRB) proposal to extend the temporary money market fund guarantee program, which will expire on April 30, 2009 unless the Department of the Treasury elects to extend it:

“We strongly encourage the Department of the Treasury to extend its successful Temporary Guarantee Program for Money Market Funds. This program is very important to the funds, who are the main investors in variable rate demand obligations (VRDOs), as well as to banks,” said Leslie Norwood, managing director and associate general counsel at SIFMA. “If the VRDOs are tendered for purchase at par by money market funds and cannot be remarketed to other investors, banks must purchase them. If individual investors draw significant amounts of their investments out of money market funds, it will be impossible to remarket most of the VRDOs and the banks will have to buy them. This outcome may leave some financial institutions unable to meet their repurchase obligations, which impacts the balances at the money market funds. We also recognize the hardship that the ‘term out’ provisions would cause to many issuers, if their obligations failed to be remarketed for an extended period of time. It is essential that the guarantee program be extended as soon as possible to protect against investor uncertainty in tax exempt money market funds and the downstream ramifications on fund balances and issuers.”