|Christopher Rowland, Globe Staff|
But when she arrived at the soaring glass lobby of the
Her trip to meet with the
The saga, unresolved until this year, played out in the shadow of higher-profile debates roiling
“The lobbying pressure was relentless,’’ said
The story also offers a window into the public policy agenda of one of Boston’s richest corporate sectors.
Among mutual funds, Fidelity had the most to lose.
Today Fidelity manages by far the largest amount of assets in money market funds in the world, with
But the seeming bedrock of the money market business cracked wide open at the peak of the 2008 financial crisis, when a
A Fidelity executive accused the
Fidelity mobilized, alone retaining enough new
Washington’s most vociferous financial industry watchdogs, Fidelity’s home-state lawmakers
With no cavalry in
Breaking the buck
It may seem paradoxical that a bare-knuckled
Until suddenly in 2008 they emerged as neither dull, nor low-risk.
That fund’s failure and inability to meet the
The danger to the machinery of global credit was so dire that an official at the Federal Reserve Bank of
As investors sucked
Looking for a fix
With the immediate crisis averted, attention quickly turned to fixing the system. To the
“The reality is we had a significant fund break the buck and start a run. It’s not hypothetical,’’ Schapiro, who is now a private consultant, said in an interview. “It’s not a matter of regulators sitting in their offices trying to think up what could be a doomsday scenario and trying to plan for it. We know what happened.’’
On the other side, Fidelity was joined by a handful of mutual fund companies that also managed large money market funds:
Those heavy-hitters and their trade group, the
But the mutual fund leaders dug in their heels in late 2011 once it became clear Schapiro and her
They hotly opposed the SEC’s plan to strip away the fixed
The companies also hated the SEC’s idea of imposing stiffer capital reserve requirements.
Industry executives said both proposals would eliminate the simplicity and sense of security of the funds that make them a prized investment tool.
“Ultimately the industry made a decision: instead of working with the
Fidelity said it felt obligated to take a hard stand for a investment vehicle relied upon by millions of investors.
“It was an important issue to Fidelity because it was an important issue to our customers,’’ said
Two months before
The message on the posters, including one affixed to the floor, said that money market funds are vital to corporations and American cities, so “Why risk changing them now?’’
Johnson heads to D.C.
She met with Obama administration officials, including
Neither side would disclose details of what transpired behind closed doors when Johnson visited Schapiro at the
Fidelity was already on the record with dire warnings. Eliminating the fixed
While the warning struck some as exaggerated, the importance of the businesses to Fidelity is hard to understate.
From an office complex in
Johnson’s visit to the
Fidelity’s spending on
Fidelity also reshuffled its lineup of outside lobbyists. Not only did it retain eight former Capitol Hill staffers, it added former White House and financial regulators to the mix.
Among the high-wattage players was
Another pivotal insider Fidelity hired was
It was Segel’s second trip through Washington’s revolving door. He registered as a lobbyist for the
Segel did not speak with Frank about money market fund regulations once he went back to work for the investment industry, the former congressman said.
Frank, who lost his chairman’s gavel when Republicans took control of the House in 2010 and left office in
“I never got into the weeds on the specifics of the money market fund. I was in the minority, and I didn’t have any problem with what [the
Assuming Schapiro had the votes proved to be a mistake.
In a dramatic statement, she cited a “false sense of security’’ in money market funds exposed by the 2008 crisis.
“The issue is too important to investors, to our economy, and to taxpayers to put our head in the sand and wish it away,’’ she said.
The swing vote against Schapiro’s initiative was
In an echo of the big question marks on the advertisements in the Metro’s
He had too many doubts.
Fidelity’s lobbying fight was not over. The collapse of Schapiro’s initiative opened up another round of intense wrangling. Frustrated Obama administration officials including Treasury Secretary
Last year, the agency came out with a new proposal. Gone were capital requirements, but the idea of “floating’’ share prices remained.
New objections then came from both
Warren’s position appeared to represent a shift in tone. As chairwoman of a federal bailout oversight panel five years earlier (three years before her
“It distorts the market and changes risk-taking behavior, and that can’t be right,’’ Warren said in a 2009 interview with
Her latest statements were more nuanced. Calling the
‘A qualified victory’
Five years of trench warfare lurched to a close this year, in July, when the
It was billed as a compromise, but reformers said industry got the best of the deal.
The “floating’’ share price will be required, but only for funds that serve large institutional investors — the category that experienced the biggest runs in 2008. The fixed
For Fidelity and others, it represented “a qualified victory,’’ said
At the time of passage,
“Money funds are far more resilient than they were in 2008,’’ said
Not everyone is so sure.
Measuring investor psychology is an inexact science, but many observers and regulators say the threat of destabilizing investor stampedes remains — and may, in some new respects, be worse.
The rules will allow money market managers to slam down a “gate’’ in times of distress to temporarily block investors from cashing out their shares. Mutual fund executives supported that concept.
“It will stop the run at the first fund, but if you are sitting at any of the other funds, you are going to want to get out before the gates are imposed,’’ said
“There’s still an incentive to get out,’’ he said, “before there’s a fire sale.’’
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