The American Bankers Association today cautioned officials at the U.S. Treasury and the Federal Reserve that the government plan to guarantee money-market mutual funds could undermine the U.S. banking system.
ABA CEO Edward Yingling warned in a letter to the governmental agencies that essential issues need to be addressed before the program is finalized, including the fact that guaranteed money-market funds will pay a higher interest rate than bank deposits.
As a result, the vast majority of U.S. banks, which have healthy balance sheets, would find themselves limited in their ability to get deposits and extend loans to clients, according to Mr. Yinglings letter.
The Managed Funds Association, a hedge fund lobbying group, also voiced its opposition to the SECs temporary ban on short-selling 799 financial stocks and the emergency order requiring money managers to report their daily short positions each week.
We stand firm in opposing restrictions to short selling and maintain that short selling is an essential risk management tool and a critical component of ensuring market stability, not a contributor to market volatility, MFA CEO Richard Baker said in a statement.
MFA also opposes the SECs requirement for institutional investment managers to publicly disclose their short positions, Mr. Baker said, adding that MFA is seeking immediate exemptions from the rule.