Shadow banking is an "absolutely accurate"
name as it refers to institutions that lie outside a formal banking entity, said Mike Konczal, fellow at Roosevelt Institute.
"It gives you a sense of how it has emerged in a way that creates systemic risk, that creates contagion risks."
"We want to understand regulations as overlapping in a good way because they were designed to do that," said Mike Konczal, fellow at Roosevelt Institute.
Risk-weighting assets is "pro-cyclical," level of importance depends on where economy is in the credit cycle; works opposite to the leverage ratio.
FSOC, SEC aren't "devoting enough resources to a cumulative impact study," said Thomas Deas Jr., chairman of National Association of Corporate Treasurers. "There's an interaction and they haven't studied that."
I don't think anyone, including the SEC, imagined $1.2 trillion was going to leave prime funds. That exceeded everyone's worst-case scenario," according to Anthony Carfang, managing director at Treasury Strategies. Regarding
slowing prime fund outflows as stable is like "falling off a cliff and saying you survived. Surviving is not what I'd call stable."
"When we get into more strained conditions, we'll see the effects of money market reforms," said Thomas Deas Jr., chairman of the National
Association of Corporate Treasurers, said during hearing.
"When money flows out of prime money market funds, they increase the cost of financing for our businesses."
"Gates and fees, as well as floating NAVs, are all problems," said Anthony Carfang
, managing director at Treasury Strategies.
Floating NAV is the "threshold issue," gates and fees are a "longer-run problem."
"We already know what money market stress looks like in a fixed NAV market," said Mike Konczal, fellow at Roosevelt Institute.
"Regulations that target the same risk with overlapping rules may weigh on vital market functions," said Robert Toomey, managing director and associate general counsel at SIFMA.
"Significant regulations that have been proposed have direct impact on short-term funding markets."
SLR, LCR, NSFR may impact short-term funding in "different ways but the overall interaction of the rules is unclear."
Creates concerns "conflicts may become evident during stressed situations."
Since the SEC passed money market regulation in July 2014, "
prime funds have been crushed, decimated," Anthony Carfang, managing director at Treasury Strategies, said during testimony.
SEC reforms were intended to improve transparency of money funds, while being "successful in providing safety and soundness without impairing funds."
The three biggest regulations - Basel, Dodd-Frank and money fund reform - are 'bold experiments.' All
experiments went into the test tube at the same time and we're now seeing the uncontrolled reaction of that."
To read witness testimony: