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Federal Involvement in the Money Markets

Financial insolvencies in the banking sector and the government securities industry have resulted in investment losses for several governmental entities. While deregulation of the financial services industry has improved market efficiency, the resulting volatility and instability of markets and participating institutions have created unprecedented threats to public funds.

In order to preserve efficient money markets, the Government Finance Officers Association (GFOA) encourages Congress and federal agencies to use restraint in adopting additional legislation and regulations. The GFOA encourages the financial services industry to voluntarily comply with capital adequacy guidelines and other measures that would protect public funds.

GFOA recognizes that no amount of regulation can replace good management. Thus, the Association strongly urges public finance professionals to be cognizant of the responsibilities and risks inherent in the investment of funds through the financial services industry. Governments are encouraged to conduct business only with those parties that comply with capital adequacy guidelines and other prudential standards.

GFOA urges federal agencies to encourage meaningful disclosure and dissemination of financial information by financial service industry participants in the money markets, accompanied by education regarding its uses and limitations.

Adopted: May 28, 1985