The House Financial Services Committee approved two bills regarding the authority and transparency of the Financial Stability Oversight Council (“FSOC”).
H.R. 4881, which was agreed to as amended, places a one-year moratorium on the authority of the FSOC to make financial stability determinations. The bill was approved 32-27 and would prevent the FSOC from designating any new insurance companies or asset managers as “systemically important” for one year as Congress continues to review the FSOC’s process for deeming bank and non-bank institutions to be significant.
H.R. 4387, or the FSOC Transparency and Accountability Act, was approved 32-27, as amended. The bill would amend Dodd-Frank Section 111 to subject FSOC to both the Government in the Sunshine Act and the Federal Advisory Committee Act. Additionally, the bill would allow members from agencies such as the SEC, the FRB and the CFTC to attend and participate in FSOC meetings, as well as allow members of the Committee on Financial Services and the Committee on Banking, Housing and Urban Affairs to attend all FSOC meetings, even if the meetings are not open to the public.
Lofchie Comment: One of the well founded criticisms made of the FSOC is that it deviates from an important tradition of bipartisanship. Since the membership of the FSOC allows for only a single representative from the SEC and the CFTC, representation is that of only a single party. (The Board of Governors, unlike the SEC and the CFTC, is not expressly required to contain members of both parties, but it always has; further, it has a strong tradition of being non-partisan.) Decision-making by the FSOC should be based upon deliberations of the other agencies and FSOC’s recommendations should be taken into account by the other agencies. Accordingly, it seems reasonable to allow the Commissioners of the SEC and the CFTC, as well as all Federal Reserve Board of Governors, to attend FSOC meetings. Shutting out senior regulators of one party from at least observing discussions of regulatory policy does not build trust or consensus between the parties, does not allow for an exchange of opposing beliefs and would not likely lead to reasonable public policy.
See: Complete Markup of Bills and Webcast of the Meeting; House Financial Services Committee Press Release.
Related news: House Financial Services Committee Schedules Markup of FSOC Bills (June 18, 2014); House Financial Services Committee Hearing: “Examining the Dangers of the FSOC’s Designation Process and Its Impact on the U.S. Financial System” (May 22, 2014).