House Financial Services Committee Republicans said in a report released today that the Financial Stability Oversight Council’s process for designating firms as “systemically important” was “arbitrary and inconsistent.”
Chairman Jeb Hensarling published the findings of the panel’s investigation ahead of Treasury Secretary Steven Mnuchin’s first FSOC meeting on Thursday. The Treasury secretary chairs the panel of top financial regulators. Congress created FSOC in the 2010 Dodd-Frank law.
Hensarling has proposed scrapping the council’s authority to label firms as systemically important financial institutions, a label that carries with it increased oversight by the Federal Reserve. FSOC has been fighting in court to defend its SIFI designation of MetLife, after it was overturned. Prudential Financial and American International Group remain SIFIs.
According to the report, committee staff found that FSOC did not follow its own guidance when it came to designations and “repeatedly evaluated similar aspects of different companies differently.” Committee staff said it appeared that FSOC lacked “sufficient rationale” for its designations.
“The Obama Treasury Department tried to keep Congress and the American people in the dark about how FSOC exercises its sweeping powers,” Hensarling said in a statement. “The release of this staff report brings some much-needed transparency and oversight to FSOC, and the information contained in the documents clearly demonstrates the need for the accountability reforms Republicans have proposed in the Financial CHOICE Act.”
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