New rules could also cause a further decline in the share of Americans' savings put into money market funds. The $2.5 trillion parked in these funds has stayed at close to the same level for the past decade, while bank deposits have grown. Bank deposits now total $14 trillion, according to Federal Deposit Insurance Corp. data. A decade ago, the total was $8 trillion. Money market funds held about one-quarter of the amount banks held 10 years ago. That's slipped to 17 percent now.
Discussions over how to regulate money market funds have dragged on for years following the 2008 crisis. Back then, money markets were at the center of the storm after Lehman Brothers, a large money market player, triggered an unprecedented event. Its failure left an unknown amount of bad debt in the banking system and no one knew who was safe to deal with. The credit process used to fund companies throughout the country froze as a result, and the market balked at buying all kinds of formerly easy-to-sell securities. Ultimately, the U.S. government stepped in to guarantee money market funds' safety.
The latest rules are designed to protect taxpayers and investors from a systemic failure while maintaining such funds as a vital source of short-term funding for a sizeable swath of the economy. Money market funds remain big buyers of the sort of corporate debt that's key to the day-to-day operation of the financial system.
"These measures, if adopted, would reduce the likelihood of a run on money market funds," says Jay Baris, a lawyer who runs the investment management practice Morrison Foerster and is vice chairman of the Committee on Federal Regulation of Securities of the American Bar Association's Business Law Section.
[Read: 7 Mutual Funds That Make Huge Bets.]
He says the proposals, which will require another SEC vote after the 60-day review period, will also face scrutiny from a wide range of private- and public-sector participants who will have differing views. Most notably, the FDIC has been critical of the proposals for not going far enough to guard against a run on the funds.
Mary Schapiro, former SEC chief and the most vocal advocate for reform, proposes that all money market funds, even retail ones, be priced based on net asset value, the same way other funds are, and not priced based on the fictional "buck" level. Schapiro warned that the dollar guarantee gives investors "a false sense of security" about the health of their fund holdings. She has also pushed a plan to limit withdrawals to 97 percent of an investor's assets if their fund is targeted by heavy withdrawals. The remaining 3 percent would be used to help the fund recover and could be returned to the investor after 30 days.
"It's a delicate balancing act," Baris says."There are a lot of moving parts, and they are trying to do a lot of things at once."