House Financial Services Subcommittee Chairman Introduces Legislation to Reform FSOC (with Lofchie Comment)

Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, introduced the Financial Stability Oversight Council ("FSOC") Transparency and Accountability Act in order to correct concerns about transparency and accountability at the FSOC.

Upon introducing the legislation, Rep. Garrett stated that, over the last two years, "it has become increasingly apparent that the Financial Stability Oversight Council (FSOC), created by the Dodd-Frank Act, is in serious need of reform. 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."

According to Rep. Garrett, the Department of Treasury refused his request to attend the FSOC meeting on March 27, 2014. He stated that there have been other public reports of the FSOC's barring financial regulators from attending meetings.

Rep. Garrett noted that, when Congress granted FSOC the authority to decide unilaterally on which private U.S. nonbank companies posed a systemic risk to the United States, "there was little thought given to what steps should be included to ensure appropriate accountability and oversight of this new body - prompting bipartisan concern."

Intending to correct "some of the most egregious and indefensible concerns about transparency and accountability of this body," Rep. Garrett stated that his introduced legislation would:

• subject the FSOC to the Government in the Sunshine Act;
• subject the FSOC to the Federal Advisory Committee Act;
• allow for the participation of all members of represented Commissions and Boards at all FSOC meetings;
• require that any vote taken by the principal of a Commission or Board represented must first be taken by that Commission or Board and the principal must then in turn vote on that same decision at the Council; and
• allow for members of Congress on the Congressional oversight committees of FSOC to be able to attend all FSOC meetings.

Lofchie Comment: When Dodd-Frank was adopted, the creation of FSOC seemed to be a good idea, since it provided a forum for different regulators to talk to each other. As it turns out, the FSOC is altering the way that government works by imposing a one-party agency on an otherwise largely bipartisan regulatory structure - an agency that is not subject to the same transparency requirements as the rest.Section 111 of Dodd-Frank establishes the membership of FSOC, which draws from numerous government agencies at both the federal and state level. Ideally, it provides for a broad range of input. Unfortunately, the FSOC does not seem to have material expertise in handling any particular issue. The FSOC is failing to pass even minimal standards we expect from our agencies. Political bias, lack of transparency, and incompetence should not be acceptable.

See: Rep. Garrett's FSOC Transparency and Accountability Act. Related news: SEC Commissioner Aguilar Gives FSOC Thumbs-Down on Mutual Funds, Discusses Cybersecurity and Reg. NMS (with Lofchie Comment) (April 2, 2014).