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SEC Regulatory Analysis 365 and Budget's Office of Information and Regulatory Affairs (OIRA) reviews these regulatory impact analyses. 5 The question of whether the President should and could extend the executive orders and OIRA review obligations to independent regulatory agencies has been debated for some time, but no President has sought to do so. 6 Although the executive orders have not, to date, been extended to the SEC, the SEC has statutory analysis requirements. Most important among these obligations is a requirement that whenever the SEC has to consider whether a rulemaking is consistent with the public interest, the agency must "consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation." 7 If it is to be more than a superficial box-checking exercise, consideration of a rulemaking's effect on efficiency, competition, and capital formation requires an analysis of the rule's benefits and costs. As Professors Paul Rose and Christopher Walker explained, "a failure to provide a reasoned explanation of the agency's consideration of efficiency-in other words, its analysis of the costs and benefits of the proposed regulatory action-would be arbitrary and capricious under the [Administrative Procedure Act]." 8 Section 23(a)(2) of the Securities Exchange Act of 1934 (the Exchange Act) also requires rulemakings under that act to include a "determination that any burden on competition imposed by such rule or regulation is necessary or appropriate." 9 In addition, a number of discrete statutory provisions require the SEC to consider economic effects of rules adopted pursuant to those provisions. 10 In fulfillment of these statutory obligations, the SEC typically 5. See Exec. Order No. 12,866, supra note 3, § 2(b) (directing OIRA to review executive agency rulemakings). 6. The former head of OIRA "encouraged" independent agencies "to give consideration to"

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School of Government. He formerly was the project coordinator for the Regulatory Studies Program and Financial Markets Working Group at the Mercatus Center at George Mason University. We are grateful to Ted Bolema and two anonymous peer reviewers for their assistance with this project. 1094 PACE LAW REVIEW [Vol. 34:3 "Act"). 2 MMF shares generally are bought and sold at one dollar per share. This feature, together with the ease with which shares can be bought and sold, makes MMFs serve as the functional equivalent of a bank account in the eyes of many investors. MMFs are an important cash management tool for corporate treasurers and a vital source of short-term funding for banks, municipalities, and corporations. MMFs cater to both institutional and retail investors and come in several different forms: government MMFs, which invest in Treasury securities and agency securities; prime MMFs, which invest government securities and in other short-term securities such as commercial paper; and taxexempt MMFs, which invest in municipal securities. The SEC adopted reforms to the regulation of MMFs in 2010 that the agency viewed as a first step towards revamping MMF regulation in response to the crisis. The reforms being considered for the second step have been the subject of heated debate by industry, regulators, MMF investors, and academics. Many of the suggested reforms are unworkable or threaten the core of the industry. This article argues for a more measured reform that offers the promise of addressing the issues that we witnessed during 2008 without eliminating a useful investment and funding mechanism. Our proposal relies on MMF boards to freeze redemptions whenever and for as long they determine is in the best interests of the fund. This approach would entrust boards with a responsibility that is consistent with other responsibilities they exercise, would serve as a stark reminder to MMF investors that they are not equivalent to bank accounts, and would give MMF advisers, boards, and investors an incentive to limit MMF risk-taking in order to safeguard ready redeemability. This article proceeds as follows. Part I outlines briefly the background of MMFs. Part II discusses the role of the board of directors in governing MMFs, a role upon which our proposal would build. Part III discusses MMF-related events during the financial crisis of 2007-2008 and describes the government's response to these events. Part IV describes the reforms the SEC instituted in 2010. Part V outlines options for further reform. Part VI outlines and discusses benefits and drawbacks of our proposed solution-unrestricted discretionary gating by fund boards. Part VII concludes.

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