Rep Cmte Financial Services

Hensarling Opening Statement at FSOC Oversight Hearing

Washington, Sep 22 -

Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today’s full committee hearing with Treasury Secretary Jacob Lew on the Financial Stability Oversight Council (FSOC):

With today being the official start of Fall, it’s disappointing that the Financial Stability Oversight Council has delivered the equivalent of a summer rerun. Its 2016 annual report is basically identical to its 2015 annual report, breaking little new ground and adding little new value.

FSOC, charged with identifying risks to our financial stability, continues to mention only in passing the need for fundamental housing finance reform. It fails to adequately analyze the substantial risk that Fannie Mae and Freddie Mac – institutions at the epicenter of the last financial crisis – pose for precipitating the next.

Furthermore, since the advent of Dodd-Frank, we are losing on average one community financial institution a day in America as they are crushed by a federal regulatory burden. The big banks have only grown bigger. Banking system consolidation can clearly contribute to heightened financial system risk, yet there is absolutely no mention in FSOC’s report of federal regulatory risk brought on by Dodd-Frank—a glaring omission.

Yet the most scandalous omission remains FSOC’s conspiracy of silence regarding the existential threat posed by America’s unsustainable national debt and our staggering unfunded obligations. Since President Obama came to office, the national debt has increased by a mind-boggling 84 percent.

The Congressional Budget Office noted in a recent report that the President’s 2017 budget would add nearly $7.5 trillion to our publicly held debt, equivalent to $59,609 for every American household. CBO recently warned that such high and rising amounts of debt have “serious negative long-term consequences for the economy and would constrain future budget policy.” On this, again, FSOC remains silent and, thus, its annual report loses credibility.

Although FSOC’s annual report is disappointing, this committee’s focus must remain on FSOC’s frightening and likely unconstitutional powers.

FSOC’s open-ended and virtually standard-less SIFI designation process clearly gives Federal regulators broad license to concentrate immense economic power in their own hands. The designation authority is taking our financial system regrettably one step closer to a government-controlled utility model. A model whereby Washington will allocate credit to politically favored classes at the cost of our freedom and our prosperity. This must change.

Finally, FSOC’s highly politicized structure and penchant for secrecy are emblematic of a shadow regulatory system that is antithetical to American democratic principles. That is why it was so important that last week this committee favorably reported the Financial CHOICE Act.

The Financial CHOICE Act will help bring about economic growth for all and bailouts for none. It ends bailouts once and for all by removing FSOC’s ability to designate privileged Too Big to Fail firms, and replaces bailouts with bankruptcy. It would protect our financial system with high levels of loss absorbing private capital, and impose the strictest fines and penalties ever on those committing financial fraud. It would hold FSOC accountable and focus its mission solely on the vital task of monitoring emerging threats to our financial system.

It is undoubtedly a better way forward.