The House Financial Services Committee considered Financial Stability Oversight Council ("FSOC") recommendations to mitigate risks in the financial markets contained in its Annual Report, and testimony by Treasury Secretary Steven Mnuchin. Separately, the committee considered legislation addressing the financial risk of climate change.
In its annual report, the FSOC made a number of recommendations to mitigate risks currently facing the financial market:
The FSOC recommended that:
the FSOC recommended:
Alternative Reference Rates
The FSOC warned that with the ending of LIBOR, adequate preparation is necessary in order to avoid "significant disruptions" across the financial market. To make the appropriate preparations for the transition away from LIBOR, the FSOC emphasized the importance of:
Prolonged Credit Expansion and Nonbank Mortgage Origination and Servicing
The FSOC highlighted several areas of progress within the housing market, including an increase in the value of residential and certain types of commercial real estate since the 2008 financial crisis. The FSOC suggested:
The FSOC stated that as financial innovation concerning digital assets and distribution ledgers advances, regulators must continue to examine the possible risks.
The FSOC emphasized the importance of housing finance reform in addressing the conservatorships of Fannie Mae and Freddie Mac, codifying existing reforms and implementing a stable housing finance system.
Statement of Secretary Steven T. Mnuchin
Mr. Mnuchin highlighted the growth of the U.S. economy, stating that since the last annual report was released by the FSOC in 2018, the economy has performed "extremely well." Specifically, he stated that the United States surpassed fellow G7 members in growth and that unemployment rates have reached a 50-year low.
The House Committee on Financial Services also considered H.R. 5194, the "Climate Change Financial Risk Act of 2019," which would require the FSOC to create a subcommittee focused on emerging threats to financial stability arising from climate change. Additionally, the bill would mandate that the Federal Reserve Board select climate scientists and climate economists to design climate change scenarios for financial stress tests.