René Stulz, Everett D. Reese Chair of Banking and Monetary Economics at Fisher, provided testimony to the U.S. House Subcommittee on Capital Markets and Government Sponsored Enterprise on June 24. The subcommittee was holding hearings on the mutual fund industry to provide policymakers information on the long-term stability of money markets.
Stulz, the only expert from a business school to testify, was joined by industry legal experts and scholars and top executives from investment firms. The hearing had heightened relevance in light of the debt crisis in Greece and its impact on money market mutual funds. Stulz, along with other experts, maintained that one failure should not be regarded as a systemic problem.
Stulz told subcommittee members: "The failure of a player in that industry in performing its role does not create a systemic risk. If one player runs into trouble, another player can take its place. In general, difficulties with one player would not mean that the investors in the funds managed by that player would be at risk for regulated funds because the monies of the investors are segregated. Should a firm that manages mutual funds fail, the funds have boards that can replace the manager. There is no reason for that transition to be problematic."