Although Democrats rose to FSOC’s defense several times today at a House FinServ Oversight and Investigations Subcommittee hearing, the Treasury-led body was still pummeled from both sides of the aisle. Legislation to improve transparency, especially with regard to redacted transcripts, would have wide support in concert with a more open SIFI-designation procedure that gives targeted firms a greater opportunity to protest. GAO released a very critical report on FSOC that led to much of this criticism, although it also highlighted perhaps more significant issues regarding the manner in which FSOC and OFR identify emerging risk. GAO found it largely backward-looking, with FSOC forced to concede that risk identification is largely done in a committee construct in which different agencies raise concerns rather than in a directed, analytical fashion. Much of the session reiterated GOP views that SIFI designation reinforces TBTF for designated firms, with some Democrats here coming to FSOC’s aid. However, Rep. Maloney (D-NY) suggested FSOC should focus more on activity-and-practice designations, moving away from firm-specific ones. This report analyzes a very acrimonious session in which Treasury’s witness, while junior, was shown little mercy by the GOP. Chairman Hensarling (R-TX) was thus given considerable ammunition for his pending campaign to repeal the SIFI-designation process in concert with orderly liquidation.
The full report is available to retainer clients. To find out how you can sign up for the service, click here