On March 25, Aaron Klein, director of the Financial Regulatory Reform Initiative, submitted written testimony to the Senate Banking, Housing, and Urban Affairs Committee as part of a hearing on how to improve the Financial Stability Oversight Council (FSOC). The hearing examined ways to strengthen FSOC’s transparency, accountability, and the process for designating so-called “systemically important financial institutions,” or SIFIs.
Klein’s testimony cited the Bipartisan Policy Center’s recent overview of FSOC reform measures and highlighted a number of potential policy changes, including strengthening transparency with improved minutes and developing a more formal “de-designation” process for firms that FSOC deems to be SIFIs. He praised FSOC’s recent adoption of several new measures to address these challenges, but also called for additional action.
“These reforms are important steps in the right direction and FSOC should be applauded for taking them,” Klein said in the written statement. “FSOC still has a long way to go in order to address legitimate concerns regarding its opaque processes, to improve its communication with companies under consideration for SIFI designation and those already designated, and to create a robust and implementable de-designation process.”
Senate Banking Committee Chairman Richard Shelby (R-AL) took notice. During the hearing, he cited Klein’s testimony when he asked a panel of experts whether they agreed with BPC’s assessment that “it would be troubling if no real process emerges to realistically allow a company to become undesignated.”
“Do all of you agree, yes or no?” Shelby asked the panel.
Douglas Holtz-Eakin, president of the American Action Forum, said he agreed 100 percent, as did Gary Hughes, executive vice president of the American Council of Life Insurers, and Paul Schott Stevens, president of the Investment Company Institute. Dennis M. Kelleher, president of Better Markets Inc., said he agreed “with the headline, not the details.”
Not a bad example of forging a bipartisan consensus.
This post was updated on March 26, 2015 to reflect comments from the hearing.