Chairman Hensarling Calls on Secretary Lew to ‘Cease and Desist’ Too-Big-To-Fail Designations
May 8, 2014 -
During a hearing with Treasury Secretary Jacob Lew on Thursday, House Financial Services Committee Chairman Jeb Hensarling (R-TX) said the Financial Stability Oversight Council (FSOC), which Secretary Lew chairs, “should cease and desist” from designating more financial firms as “too big to fail” until there is an opportunity for greater congressional oversight of the council’s decision-making process.
“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,” Chairman 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.”
On Wednesday, the FSOC released its annual report analyzing potential threats to the financial system. The FSOC has enormous power because it can designate non-banks as “systemically important,” signaling to market participants that the government views these firms as “too big to fail.”
During a question-and-answer exchange with Secretary Lew at today’s hearing, Chairman Hensarling also pressed the Treasury secretary to explain FSOC’s decision making. The full question and answer session with Secretary Lew can be found here.