In a nearly four-hour hearing held on December 8, 2015, members of the House Financial Services Committee grilled the heads of the Financial Stability Oversight Council (FSOC), accusing the FSOC of a poor transparency and lack of responsiveness to legislators’ requests for information.
Led by Representative Jeb Hensarling (R-TX), the House Financial Services Committee heard testimony from eight of the ten FSOC members, including the heads of the SEC, CFTC, FDIC, OCC and the FHFA. The Treasury Secretary and Federal Reserve Chair did not testify.
Rep. Hensarling, in both his opening remarks and in questioning, faulted the FSOC on what he termed a lack of transparency, noting that two-thirds of the FSOC’s meetings were conducted behind closed doors and disclosures about the meetings were almost devoid of details. According to Rep. Hensarling: “FSOC has earned bipartisan condemnation for its lack of transparency. Two-thirds of its proceedings are conducted in private. Minutes of those meetings are devoid of any useful substantive information on what was discussed.”
One FSOC member pointed out that Congress itself had framed the FSOC’s mandate as essentially one-sided. For example, in describing the Council’s authority to raise the regulatory standards for certain systemically-important nonbank financial companies, Comptroller of the Currency Thomas Curry reminded the Committee members that Dodd-Frank "does not provide these companies with the opportunity to contest the application of these standards."
Similarly, Rep. Scott Garrett (R-NJ) faulted the FSOC for the exclusionary and partisan nature of its meetings, noting that while FSOC members and staff may attend, other commissioners of the SEC and CFTC are excluded. SEC Chair White and CFTC Chair Massad indicated a willingness to include their fellow commissioners in the future, something they both said they would discuss with the other FSOC members. In addition, Chair White noted several February 2015 improvements to the SIFI designation process.
On other matters, Rep. Sean Duffy (R-WI) said that he was dissatisfied with the thoroughness of responses to 13 questions the Committee had posed to the FSOC, saying: "We’re the U.S. Congress. We were created by Article One of the U.S. Constitution. We’re the ones who are actually elected representatives of the American public. And we’re the ones who send you all those pesky letters that you all routinely ignore."
As another example of selective evaluation, Rep Hanserling pointed out that, "The Council warns of reduced liquidity in the capital bond markets, yet never acknowledges that Dodd-Frank’s Volcker rule and other regulations have drastically reduced liquidity."
The FSOC did have some supporters amongst the Committee, however. Ranking member Maxine Waters, (D-CA), defended the mandate of the FSOC and its vital work to protect financial stability, noting that the Committee’s fiercest criticisms of the FSOC came from colleagues who “seem to have caught a convenient case of amnesia about this important mandate. … This work is central to preventing the types of contagion and risk that nearly crashed Main Street just seven years ago.”