House panel passes bill blocking FSOC actions

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.

The bill permits Members of the Committee on Financial Services and the Committee on Banking, Housing, and Urban Affairs to attend all FSOC meetings, whether or not the meeting is open to the public.

In introducing the bill, Garrett said that, “The council meets in secret, refuses to disclose substantive transcripts, and blocks any requests by other regulators or Members of Congress for a more open and transparent process.” In April, Garrett was denied access to an FSOC meeting.

He noted the “tremendous changes” that the FSOC is considering in the way capital and credit are allocated and said “it is imperative these changes are not carried out in secret or behind closed doors.”

In debate on the bills Thursday, Waters said that Garrett’s bill politicizes membership by adding in all of the regulators’ commissioners and board members, and, in what may be considered unconstitutional, gives each member of this committee as well as our colleagues on the Senate Banking Committee a right to participate in closed door meetings related to systemic risk. 

“We are not dealing with a good faith effort to address many of the transparency concerns a bipartisan group of members have raised,” Waters said. “Rather, this is an effort by Republicans to make the FSOC decision-making impossibly difficult.”  

At the same time, Rep. Bill Huizenga, R-Mich., offered and then withdrew an amendment Treasury that would require federal officials “to halt” negotiating European-centric, bank-like capital standards for internationally active U.S. insurers. This is consistent with a letter recently sent by 49 members of the House signed a letter demanding legislative and report language in a financial services appropriation bill that would require federal officials to stop negotiating any such agreements with international regulators.

Hensarling has twice called on the FSOC to “cease and desist” on SIFI designations until Congress learns more about the process.

The FSOC’s justification for its inquiries is contained in its 2014 annual report. It highlights the risks to the financial system posed by several nonbank financial services companies, which have continually drawn scrutiny from federal regulators

The bill’s immediate impact would likely be on the designation of MetLife as a systemically significant financial institution or SIFI. MetLife is in Stage III or the final stage, of the SIFI designation process. MetLife has been lobbying against designation as a SIFI for more than a year, and the FSOC has responded by slowing its decision-making process on MetLife to ensure it has all its ducks in a row before making a decision.

But, it would also impact money market mutual funds and money managers, who have been notified they are under scrutiny for possible designation as SIFIs. The FSOC already has designated three non-banks — American International Group, General Electric Capital Corp. and Prudential Financial, Inc. — as SIFIs.