House Financial Services Committee Chairman Jeb Hensarling (R-Texas) recently called on Treasury Secretary and Financial Stability Oversight Council Chairman (FSOC) Jacob Lew to stop designating financial institutions as “too big to fail” until Congress has greater oversight of the council.
The FSOC was charged by the Dodd-Frank Act with monitoring and responding to risks to the U.S. financial system. The council consists of 10 voting members and five non-voting members. Last year, the FSOC voted to designate AIG, Prudential and GE Capital as the first nonbank systematically important financial institution (SIFIs).
During a committee hearing last Thursday, Hensarling pressed Lew on the council’s decision-making process. He asked Lew to describe how the methodology the council uses when making SIFI determinations.
“There is increasingly bipartisan concern about the immense discretionary power that FSOC has and how frankly little transparency it has…incredible ability to take these non-bank institutions and effectively put them into a bailout position, with very little transparency, with very little indication of the methodology used by which to make these decisions and adjudications,” Hensarling said. “I would simply call upon you as head of FSOC to cease and desist with these designations until all of our questions can be answered fully and Congress can exercise its oversight authority over this incredible process.”