Fed spokeswoman Barbara Hagenbaugh and John Nester, an SEC spokesman, declined to comment.

Funds Vulnerable

SEC Chairman Mary Schapiro and other regulators have repeatedly said that money-market funds are vulnerable to runs during times of crisis when investors rush to redeem shares. They cite the example of the $62.5 billion Reserve Primary Fund, which collapsed in September 2008, contributing to a system-wide credit freeze. The U.S. Treasury Department stepped in to guarantee the funds and stabilize the system.

In 2010, the SEC increased liquidity requirements for the funds as a stopgap measure to prevent further bailouts. All the same, money-market funds can and do lose money, forcing their sponsors to make up the difference. The biggest U.S. money funds are sponsored by Fidelity Investments, Vanguard Group Inc. and JPMorgan Chase & Co., with assets of more than $100 billion each.

Schapiro told the Senate Banking Committee on June 22 that the agency has found at least 300 examples of money-fund sponsors stepping in to provide or line up capital support to prevent the funds' share price from falling below the guaranteed $1, called "breaking the buck." Three of those instances, she said, happened after the SEC imposed the 2010 liquidity rules.

'Capital Drain'

There has been a "pattern of support" for mutual funds by the banks that sponsor them, "without an explicit recognition that such funds can be a capital drain" on the banks during times of stress, Rosengren said in his speech in Amsterdam.

Consumers and retail investors often confuse money-market funds with federally insured banking products, such as savings and checking accounts. Fed Chairman Ben S. Bernanke told the Senate Banking Committee in March that some investors turn to money funds "because they think they're absolutely a hundred percent safe," which is "not true."

Bernanke and Treasury Secretary Timothy F. Geithner have also warned of risks posed by the banking sector's reliance on short-term funding in the form of money-market cash and repurchase transactions. Money-market funding accounts for 1.6 percent of Bank of America Corp.'s short-term liabilities and 1.3 percent at JPMorgan, according to a June 22 report from Fitch Ratings.

No Majority

The SEC proposal doesn't have majority support on the five- member commission. The two Republican members, Troy Paredes and Daniel Gallagher, have joined with Luis Aguilar, a Democrat, in resisting the rules.

The Fed's push could weaken opposition to regulation inside the SEC, said former agency Chairman Harvey Pitt, a Republican.