That’s Not a Clown Question, Bro
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Nationals rookie center fielder Bryce Harper recently shrugged off a non-relevant question by a reporter by famously saying “That’s a clown question, Bro.”
Last week, CCMC is hosted an event entitled, “The Cumulative Impact of Financial Regulations: Are We Hindering Our Economic Recovery?” Now that’s not a clown question. That’s a serious query, to which many experts, businesses, and local and state governments are answering “yes.”
As we have mentioned before, the Dodd-Frank Act and its hundreds of implementing regulations might be aimed at the financial sector, but the real impacts are felt by companies when they raise capital or mitigate risk.
Interestingly, governmental bodies sometimes raise the same concerns. The Conference of Mayors passed resolutions opposing expected SEC proposals on Money Market Mutual Fund (MMMF) regulations and calling on the Volcker Rule to be fixed. Why do the mayors care?
With the unevenness of tax collection local and state governments must manage their cash flow and use MMMFs to insure that they have the money to pay the bills. Destruction of money market mutual funds or making them inefficient will crimp state and municipal finances at a time when they are in the most precarious state in decades. The inability to engage in cash management could force state and local governments to lay off workers and raise taxes.
Similarly, State and municipal bonds are not exempt from the Volcker Rule while Treasuries are. This means that state and municipal bonds are not only disadvantaged, but the underwriting of these instruments will have to go through the Volcker Rule regulatory scrutiny and the uncertainty that it brings. This will not only make it more expensive and uncertain as to how State and local governments can raise debt, but capital projects such as school construction, road projects and park development will become more expensive or have to be scrapped all together.
Regulations impacting businesses and local governments-- not a good recipe during an economic slow-down.
When the Conference of Mayors comes out swinging against the MMMFs and the Volcker Rule, then you know the regulators just can’t shrug off the questions.