SIFMA AMG and the Association of Institutional Investors Submit Letter to Treasury Regarding FSOC's Conference on Asset Management (with Lofchie Comment)
The Asset Management Group of SIFMA ("SIFMA AMG") and the Association of Institutional Investors submitted a letter to the U.S. Treasury Department in response to the Financial Stability Oversight Council's ("FSOC") conference on asset management. The letter provided a summary of statements by academic and industry experts regarding asset management and its potential impact on the U.S. financial system.
The letter noted, among other things, the following three key themes:
- the ways in which fundamental attributes of the asset management business significantly reduce the potential for it to create systemic risk;
- how asset management reduces systemic risk and enhances financial stability (for example, by facilitating diversification and long-term investment, by financing assets with equity, by investing programmatically through retirement savings accounts, with countercyclical rebalancing, and with the opportunistic buying of assets the prices of which are falling); and
- when hypothetical risks were raised that conference participants deemed worthy of study, participants acknowledged that the existence of actual risks had not been proven.
Lofchie Comment: The letter's arguments against treating asset managers as "systemically important financial institutions" seem quite compelling – so compelling, in fact, that they raise the questions of how FSOC and its staff came to suggest that asset managers might be "SIFIs" in the first place, and whether there is sufficient participation in FSOC by those with experience in the securities industry or capital markets. Similarly, I note that the insurance industry has questioned whether FSOC includes sufficient input by those with experience in that industry. To put the question another way, is the constituency of FSOC weighted toward those with experience in bank regulation and, if so, is that appropriate when FSOC could oversee other industries?
See: SIFMA Comment Letter.