The House Financial Services Committee today reported to the House floor along party lines two bills that would effectively shut down the operations of the Federal Stability Oversight Council (FSOC) for at least the next year.
The bills were passed by a 32-27 party line vote today.
However, analysts give long odds that these bills will become law.
It responds to concerns by MetLife specifically, and the money management and mutual fund industries in general, that designation of firms in their sectors as systemically important would be harmful and could make these companies uncompetitive.
They were pushed through the committee by conservative members who believe in less regulation, led by Rep. Jeb Hensarling, R-Texas, chairman of the committee, and Rep. Scott Garrett, R-N.J., who heads the panel’s Capital Markets Subcommittee.
One bill, H.R. 4881, would bar the FSOC from designating any systemically significant financial institutions for a year.
The chief sponsor of that bill, Rep. Randy Neugebauer, R-Texas, chairman of the Housing and Insurance Subcommittee, said in support of it Thursday that “I strongly believe that FSOC’s structure and its process for designating systemically important firms are fatally flawed.”
He said that, “Rather than using data, history, and economic analysis to justify SIFI designations, FSOC has used far-fetched, highly speculative ‘worst-case scenarios’ to justify an aggressive expansion of regulatory power from Washington.”
And, Neugebauer added, recent evidence shows that rather than making its own determinations about the systemic significance of large U.S. non-bank financial institutions, the FSOC has instead rubber-stamped decisions made by the G-20’s Financial Stability Board.”
Rep. Maxine Waters, D-Calif., ranking minority member of the committee, railed against it during Thursday’s debate.
“Under the guise of concerns about transparency, Republicans want the FSOC to halt its work, even if it has identified a firm that poses a risk to the economy, a threat to my constituents who want to buy a house, a car, or simply purchase groceries at the store. “No, this is not a good-faith effort to increase transparency, because ultimately my colleagues on the other side of the aisle want to end the FSOC altogether,” Waters added.
The other bill, H.R. 4387, would allow all members of the commissions and boards represented on the FSOC — such as the Securities and Exchange Commission, the Federal Reserve, the Commodity Futures Trading Commission, and the National Credit Union Administration — to attend and participate in the FSOC’s meetings.
The bill also requires that before the principal of a Commission or Board represented on the FSOC votes as an FSOC member on an issue before the FSOC, the Commission or Board must vote on the issue, and the principal must follow that vote at the FSOC meeting.