September 8, 2009

The Obama administration delayed recommendations for new regulations on the $3.5 trillion money- market mutual-fund industry by 11 weeks to Dec. 1.

The President's Working Group on Financial Markets, a White House advisory panel, wants more time to consider public comments due today on the U.S. Securities and Exchange Commission's proposed rule changes, Meg Reilly, a Treasury Department spokeswoman, said Friday in an e-mail.

"It's a very, very delicate operation revising money- market funds because of their importance to debt issuers and investors, so it's better to take a reasonable pace," Joan Swirsky, an attorney at the Philadelphia law firm of Stradley Ronon Stevens & Young LLP who specializes in money-market funds, said today in an interview.

The working group was directed in June to consider whether money funds should be forced to abandon their stable $1 share price. Industry executives say the change would make money funds much less attractive to investors and disrupt financing provided to short-term corporate borrowers.

The industry has faced scrutiny from regulators since the $62.5 billion Reserve Primary Fund collapsed in September 2008 because of losses on debt issued by bankrupt Lehman Brothers Holdings Inc. Reserve Primary's failure sparked an industrywide run on funds that buy commercial paper, leading to a freeze in credit markets.

The SEC's proposals would restrict what funds can buy, reduce the average maturity of securities they hold and require them to keep more cash.

The working group is headed by Treasury Secretary Timothy Geithner and includes Federal Reserve Chairman Ben S. Bernanke, SEC Chairman Mary Schapiro, and Commodities Futures Trading Commission Chairman Gary Gensler.