In a recent speech, Federal Reserve Governor Daniel Tarullo publically voiced his concern that money market funds are a systemic risk and need additional regulation. His first choice is for the SEC to take additional regulatory action because “the protective tools available to the [other regulators] do not fit the problem precisely and thus will not regulate at the least cost to the funds while still mitigating financial risk.” However, he does not rule out action by the FSOC or the Fed if necessary:
“These alternatives could include FSOC designation of money market funds as systemically important and thus subject to the prudential requirements promulgated under Dodd-Frank. They could also include action by FSOC member agencies, such as the bank regulatory agencies imposing restrictions on regulated financial institutions' ability to sponsor, borrow from, invest in, or provide credit to money market funds that do not have structural protections.”