During today’s full committee hearing to discuss the Financial Stability Oversight Council’s annual report with Treasury Secretary Jack Lew, Congresswoman Maxine Waters (D-CA), Ranking Member of the Financial Services Committee applauded the critical work of the Council in identifying risks to the financial system and protecting American consumers and the overall stability of the economy.
The top Democrat criticized efforts by Republicans to undermine the Council, noting that a major contributing factor to the crisis was an absence of oversight of the entire financial system. FSOC was created as part of the Dodd-Frank Wall Street Reform Act to address this critical gap, and is now responsible for examining the entire system for possible vulnerabilities while also ensuring its health and stability.
Waters delivered the following remarks.
“Thank you, Mr. Chairman and welcome back, Secretary Lew.
Today, we receive the annual report of the Financial Stability Oversight Council (FSOC), as required by law.
As we all know, this year marks the fifth anniversary of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It’s hard to believe it was just five years ago that we were coming to grips with the magnitude of the financial crisis, which caused the greatest loss of wealth in a generation.
All told, the financial crisis cost our nation more than $13 trillion dollars in economic growth and $16 trillion dollars in household wealth, not to mention the devastation of an unemployment rate topping 10 percent in many states.
In the lead-up to the crisis, nobody in the private sector or in government was looking at the stability of our financial system as a whole. Nobody was looking at the big picture – and nobody had the responsibility to deal with emerging threats before they caused damage to our economy.
That is why we created the Financial Stability Oversight Council as part of Dodd-Frank. FSOC filled that void – looking at every aspect of our financial system for possible weaknesses and risk. And it serves as an advanced warning system to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the economy.
The Council has ensured, for the first time, that our financial regulators are working collaboratively to identify and respond to emerging threats to financial stability. And with their February announcement outlining enhanced engagement and opportunities for public input, they’ve re-doubled their efforts to engage with the industry and Congress in a transparent manner.
In its 2015 Annual Report, the FSOC noted substantial progress to protect Americans from another crisis. And indeed, we have taken important steps to prevent another economic disaster from happening, including making our large banks more resilient through stronger capital, leverage and liquidity standards; covering oversight gaps in our financial system by designating complex, interconnected nonbanks for consolidated supervision; and reforming key markets like asset-backed securities and money market mutual funds.
However, five years after Dodd-Frank became law, my Republican colleagues remain fighting the battles of the past. They continue to believe that if only we rolled-back all the rules of the road, the financial system would magically unlock growth and the market would suddenly police itself. And they continue to ignore the lessons of the last crisis, by doing all they can to undermine FSOC under the guise of “oversight.” By focusing merely on dismantling Dodd-Frank, my colleagues on the other side of the aisle impede Congress’s ability to focus on the new, emerging threats to financial stability identified in FSOC’s 2015 Annual Report.
Like the Consumer Financial Protection Bureau, destroying FSOC has become a leading component of the Republican deregulatory agenda. And while they waste countless hours working to undermine it, engines of job growth and American competitiveness – like the Export-Import Bank – face a possible shutdown in just five legislative days. Rather than renew a proven job creator like the Ex-Im Bank, Republicans are spending their time bogging the FSOC down in countless document requests and inquiries – an obvious effort to undercut its ability to protect homeowners, consumers and the American economy.
So welcome Secretary Lew, and thank you for your resilience in the face of efforts to stop the Council from its important work. I look forward to your insight on areas of systemic risk the Council has identified, and hope to learn more about what FSOC is currently doing to monitor for such risk and promote financial stability.
As we hear additional details from you, I will be interested to hear whether Republicans believe FSOC should take any action to address them, or simply wait for another crisis.