Patrick McHenryChairman

Washington, May 22, 2013 - Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today's full committee hearing with Treasury Secretary Jacob "Jack" Lew: 

“This morning we welcome Treasury Secretary Jack Lew for his first appearance before the Financial Services Committee.  Today the Secretary is here to present, according to statute, the third annual report of the Financial Stability Oversight Council, or FSOC.

“The FSOC is an amalgamation of regulators heading agencies that either helped cause the financial crisis or were largely negligent in preventing it the first place, notwithstanding they had the regulatory power to do so.

“Yet we know the root cause of the crisis was not deregulation, it was dumb regulation.  Federal policy strong armed and incented institutions to loan money to people to buy homes that ultimately they could not afford.  This dramatically eroded historically prudent underwriting standards.  Of the subprime and Alt-A mortgages that led to the financial crisis, more than 70% were incented and backed by the federal government through Fannie Mae, Freddie Mac, the FHA and other programs. This speaks for itself.

“So in many respects as we examine FSOC, the regulators that helped precipitate the last crisis are now put in charge of preventing the next.

“And according to the Government Accountability Office, after three years they don’t have much to show for it. Just last month we received testimony from the GAO that FSOC has still ‘not developed a structure that supports having a systematic or comprehensive process for identifying potential, emerging threats.’ Yet, FSOC has been granted sweeping new powers within our economy, and this is disconcerting to many.

“Because as we know, on occasion, regulators may not just be dumb, they may not just be negligent, they may actually be criminal.

“Just down the hall, as we speak, the House Oversight and Government Reform Committee is holding a hearing where, according to her attorney of record, top IRS official Lois Lerner is pleading the Fifth for having led a IRS division which trampled upon the First.

“The American people are appalled that the most feared government agency has been permitted to attack their most sacred rights. The American people are appalled at the arrogance of the agency, they are appalled by this abuse of power.

“And for the last 2 ½ months, and for the foreseeable future, this agency, the IRS, just like the FSOC, reports to you, Mr. Secretary.

“And although the IRS is clearly accountable to you, the Consumer Financial Protection Bureau and the Office of Financial Research – two agencies that are part of FSOC – are not.  Neither the bureau nor the financial research office answers to anyone.  A single director who cannot be removed by the President at will heads both.  Spending by both agencies is unaccountable to Congress or the administration.  Neither is bound by the constraints of the government pay-scale and both agencies have subpoena power.

“Something else both these FSOC agencies have in common is that they are engaged in gathering massive amounts of information about private American citizens.  At the same time the IRS – thanks to the enforcement powers that it gained with Obamacare -- is building the largest personal information database the government has ever seen, the CFPB is monitoring how millions of Americans interact with their lenders, and the OFR is working to gather enough information in its computers that would equal all the data held in all the U.S. academic research libraries combined.

“This is big data for big brother.  As the IRS scandal reminds us, the freedom of every American is endangered when a government agency abuses its power and misuses sensitive information entrusted to it. 

“In light of the recent scandals, this is an appropriate time to remind everyone that our Committee maintains on its website a confidential way for Americans to report evidence of abuse of power by the federal agencies under our jurisdiction.  We encourage all concerned and informed citizens to use it. 

“Secretary Lew, we look forward to discussing these issues and many others with you in detail at today’s hearing.”