out, money market funds remain a major part of the shadow banking system and a key potential systemic risk even in the post - crisis financial environment. in fact, the industry ’ s survival in its present form is likely due in no small part to the unprecedented interventions by the treasury and the federal reserve in providing insurance and liquidity support, respectively, to the industry in response to the run prompted by the failure of the reserve primary fund in 2008. the interesting point here is that a regulatory agency, the securities exchange commission ( sec ), has ample regulatory authority to address the systemic risk problem. indeed, the legality of money market funds continuing to publish a fixed net asset value ( nav ) of one dollar per share, even as the actual value of the underlying assets varies within a modest range, is itself the consequence of the sec ’ s rule 2a - 7, which exempts money market mutual funds from the requirement of a floating nav generally applicable to open - end mutual funds. in amending its rules in 2010, the sec took some good first steps to improve the resilience of money market funds, but many – including chairman schapiro – do not believe these are sufficient to mitigate the run potential in money market funds. unfortunately, a majority of the current sec commissioners has to this point been opposed to moving forward with the reform measures chairman schapiro has proposed. the fsoc, meanwhile, has endorsed further reform along these general lines. the question, then, is how the fsoc and its other member agencies should proceed given that the sec has declined to act. i should note here that, during the debates preceding dodd - frank, some versions of proposals for what eventually became the fsoc would have empowered the fsoc to override agency action or inaction within its sphere of authority. others, including many who favored strong reforms, opposed this power, which would have created a kind of super - agency with veto authority over all the regulators. instead, the fsoc has the more limited authority to present an agency with recommendations for action and the right to receive an explanation should the agency not accept those recommendations. as you may have seen, two weeks ago treasury secretary geithner sent a letter to the members of the fsoc in his capacity as its chair, in which he urged the council to use its authority under section 120 of dodd - frank, and to consider alternative actions to reduce the structural vulnerabilities associate

##s more quickly. before i suggest how, let me emphasize that here i am speaking for myself only, since the full board will address these issues only in future orders. we have already suggested a limited presumptive safe harbor where an acquisition involves less than $ 2 billion in assets or results in a firm with less than $ 25 billion in total assets. 38 personally, i would set the size of the resulting firm higher than $ 25 billion, but somewhat lower than the $ 50 billion dodd - frank threshold over which a firm is subject to special prudential standards. at the other end of the spectrum, i would urge a strong, though not irrebuttable, presumption of denial for any acquisition by any firm that falls in the higher end of the list of global systemically important banks developed by the basel committee for purposes of assessing board of governors of the federal reserve, capital one financial corporation, mclean, virginia, order approving the acquisition of a savings association and nonbanking subsidiaries ( pdf ), frb order no. 2012 - 2 ( feb. 14, 2012 ) at p. 28. board of governors of the federal reserve, order approving acquisition, pp. 28 – 29. board of governors of the federal reserve, order approving acquisition, p. 30. bis central bankers ’ speeches capital surcharges. 39 firms at the lower end of the basel committee list, or that u. s. authorities may later designate as domestic systemically important banks under a parallel basel committee exercise, 40 might have a slightly less robust, but still significant presumption against acquisitions. i would not apply the presumption in the case of certain de minimis acquisitions or in cases where asset dispositions were judged to offset any increase in systemic risk from the proposed new acquisition. it is reasonable to ask why these negative presumptions are appropriate, given my general view that the absence of both experience and consensus theory make a case - by - case approach necessary. one answer is that, notwithstanding the fact that analytic tools for assessing a firm ’ s systemic footprint are in a relatively early stage of development, everything we do know suggests that the firms on the basel committee list strongly implicate the kinds of systemic considerations mentioned by congress. second, it does seem incumbent on us to provide at least some guidance to firms where we can, particularly to inform smaller, less connected firms of the kinds of mergers that are unlikely to raise financial stability concerns and, conversely