U.S. Financial Rules Panel Should Improve Transparency, GAO Says
Sep 13, 2012 -
(Bloomberg) -- A panel of U.S. regulators created to monitor financial stability faces challenges in achieving its mission of identifying risks and should improve its transparency, according to a report by the Government Accountability Office.
The Dodd-Frank law created the Financial Stability Oversight Council to highlight systemic risk to the economy and enhance cooperation among its 10 voting regulatory members. The law also created the Office of Financial Research to aid the panel, known as FSOC, with data to carry out its risk monitoring.
“Key FSOC missions -- to identify risks and respond to emerging threats to financial stability -- are inherently challenging, in part, because risks to financial stability do not develop in precisely the same way in successive crises,” the GAO wrote in a report posted on the House Financial Services Committee website.
The government audit group said cooperation among FSOC’s members, who include Federal Reserve Chairman Ben S. Bernanke and are led by Treasury Secretary Timothy F. Geithner, remains challenging with each representing independent agencies. The accountability office said the research arm, known as OFR, faces the challenge of building an organization while meeting short-term goals.
The GAO recommended that FSOC and OFR strengthen transparency and accountability by collecting and sharing financial risk indicators, keeping detailed records of closed-door sessions, and developing forward-looking plans to help “prioritize the threats.”
Mary Miller, Treasury undersecretary for domestic finance, responded to the GAO in a letter dated Sept. 5 that the department broadly supports the recommendations. FSOC has already “moved quickly to fulfill its statutory mission” and promote greater collaboration among its members,” she wrote.
Spencer Bachus, the chairman of the House Financial Services Committee, in a letter dated today, asked Geithner to ensure that the FSOC and the research office “will operate transparently and efficiently, without imposing an undue burden on the nation’s financial system.”
Bachus, an Alabama Republican, in the letter co-signed by Texas Republican Randy Neugebauer, chairman of the committee’s oversight and investigations subcommittee, agreed with the GAO’s assertion that the FSOC lacks a strategic plan and needs to draw “clear lines of responsibility.” The letter was obtained by Bloomberg News.