SEC Chairman Schapiro's Exit Interview

In an interview with David Greene, outgoing Securities and Exchange Commission Chairman Mary Schapiro reflects on her tenure at the agency, and the disappointment that she wasn't able to overhaul money market funds. She leaves the job on Friday.

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DAVID GREENE, HOST:

And now to one of the country's most important financial regulators, Mary Schapiro steps down today from her post as chairman of the Securities and Exchange Commission.

Earlier this week, she spoke to us about her legacy and her regrets. And she says one major disappointment was her failure to fully reform money market funds.

RENEE MONTAGNE, HOST:

Money market funds are pools of money that are invested in short-term bonds - either government or corporate bonds. Many investors consider them as safe as a bank account. But they're not. They're risk became painfully clear during the financial crisis, when one of the biggest money market funds in the country suffered when Lehman Brothers melted down.

GREENE: The fund's value per share dropped below the critical $1 Level. And Mary Schapiro records what happened.

MARY SCHAPIRO: Hundreds of billions of dollars were pulled out of money market funds during a one week period. Investors panicked. The short-term credit markets froze up. And it was only stopped by the intervention of the Treasury Department and the Fed, essentially guaranteeing with taxpayer money a $4 trillion investment product.

GREENE: And we spoke to Mary Schapiro more about what she calls unfinished business when it comes to these money market funds.

SCHAPIRO: They are still susceptible to runs. And I'm very hopeful that even after I'm gone, because I've kept this issue alive and at the forefront of a public debate, that we will in fact have further money market fund reform in the near future.

GREENE: It sounds like you had some ideas and you were hoping for a vote to approve them on a commission and it didn't happen, and part of it was a very intense lobbying campaign.

SCHAPIRO: There was a very intense lobbying campaign. It was really quite extraordinary. We did not have three votes on the commission in August to go forward with a plan that had a couple of different options in it. One was to require money market funds to have a small capital buffer, the way banks have a capital buffer, to absorb losses. The other was to have them float their share value to reflect the underlying investments. When we didn't have a vote I went to the Financial Stability Oversight Council, which is composed of all the Fed or all financial regulators and asked the FSOC, as it's called, to get involved in this issue. FSOC published a couple of weeks ago, a set of recommendations that included the two that I was championing and those are out for comment right now. So I think there's a lot of focus on these issues and it's deep appreciation across the regulatory world, at least, including around the world, that money market funds are a source of systemic risk, unless we go forward with either capital or a floating share price.

GREENE: But is this not an example, that lobbying campaign, of when the industry just doesn't want something that they have the power to stop it?

SCHAPIRO: You know, industry can be very powerful and they have legitimate views and concerns that the regulators should always be willing to hear. But I think at the end of the day, regulators have to go forward and do what we believe is in the broader public interest. So while the industry was able to delay the SEC's going forward back in August, I don't think over the long run the industry will be successful on stopping money market fund reform.

GREENE: Some of your critics have painted you as more of a consensus builder - that's the term we often hear in Washington. And it suggested that that means, though, that you don't act as boldly as they would like, that you spend more time kind of looking for consensus. I mean is that a fair assessment?

SCHAPIRO: Well, it strikes me so interesting that consensus building has become a negative term in Washington. And I think I'm proud to be a consensus builder. I am enormously proud of what we've accomplished by virtue of my being willing to hear all perspectives and here all views. But at the end of the day from my perspective, it's way more important to get things done than it is to stand on principle, sometimes, to the point of not being able to accomplish anything.

GREENE: And that outgoing chairman of the Securities and Exchange Commission, Mary Schapiro.

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