WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – attended today’s hearing entitled, “FSOC Accountability: Nonbank Designations.” Brown’s opening statement, as prepared for delivery, follows:
Ranking Member Sherrod Brown
“FSOC Accountability: Nonbank Designations”
March 25, 2015
Thank you Chairman Shelby, and thank you, Secretary Lew, for being here today. Welcome to the witnesses on the second panel as well.
As one of our witnesses on Tuesday pointed out, regulators did not cover themselves in glory leading up to the 2008 financial crisis.
Congress certainly played a role as well. we had a patchwork financial framework that allowed financial institutions to evade oversight and often pitted regulators in a race to the bottom.
Non-banks like AIG and Bear Stearns built up risks by moving activities to unregulated spaces.
American taxpayers paid the price in lost homes and jobs and billions of bailout dollars.
In response, Secretary Lew’s predecessor, Secretary Geithner, proposed the FSOC to fill gaps in the regulatory framework and create a forum for agencies to resolve issues.
The idea had the support of regulators appointed by both President Bush and President Obama.
In my view, the FSOC is working. If anything, it is working too slowly.
Since FSOC’s creation five years ago it has only designated four non-banks as Systemically Important – by my math, that’s less than one a year.
They have also designated eight systemically important financial market utilities, without any objections that I am aware of.
This is a critical responsibility, given the increased importance of clearinghouses under the derivatives clearing mandates in Dodd-Frank.
FSOC provided a forum to force reforms to the structure of some money market mutual funds.
And it has been responsive to consumer and industry group concerns about transparency.
We hear a lot about transparency and accountability because they are concepts that no one should oppose.
But I am concerned by proposals that would tie the FSOC’s hands, making it too burdensome for FSOC to designate any institutions and taking us back to a time when no entity was responsible for watching over the entire financial system.
I look forward to hearing more from Secretary Lew about the work that FSOC is doing to identify and address risk, wherever it builds up in the financial system.
Thank you, Mr. Chairman.