"If the Fed says we need rules, the SEC is going to be hard-pressed to say, 'No we don't,'" he said.
Industry groups who oppose the proposed rules contend that the SEC's job is to monitor the markets, not regulate banks.
"If there's a problem in the banking system that banks are too dependent on short-term financing, then obviously that's something that should be addressed through bank regulation," said Paul Schott Stevens, president of the Investment Company Institute, a Washington-based trade group.
Systemic Risks
Gallagher said that systemic risks on Wall Street shouldn't be the SEC's concern. In an interview, he said he wouldn't object if the Fed, which has broader systemic risk responsibilities, chose to make it harder for banks to work with money funds.
"Governor Tarullo identified a path that banking regulators could take to remedy perceived problems with short- term funding markets, including the role played by money-market funds. Fed officials have also raised the idea of expanding stress tests to incorporate support for bank-sponsored money- market funds," Gallagher said. "If the banking regulators feel they have the basis and need to take action in that space, then such action would be entirely appropriate."