Garrett Brings NY Fed Into FSOC Issues

The other bill, H.R. 4387, would allow all members of the commissions and boards represented on the FSOC — such as the Securities and Exchange Commission, the Federal Reserve, the Commodity Futures Trading Commission, and the National Credit Union Administration — to attend and participate in the FSOC's meetings. The bill also requires that before the principal of a Commission or Board represented on the FSOC votes as an FSOC member on an issue before the FSOC, the Commission or Board must vote on the issue, and the principal must follow that vote at the FSOC meeting. The bill also permits House FSC members to attend all FSOC meetings, whether or not the meeting is open to the public.

In introducing the bill, Garrett said that "the council meets in secret, refuses to disclose substantive transcripts, and blocks any requests by other regulators or Members of Congress for a more open and transparent process." In April, Garrett was denied access to an FSOC meeting.

He noted the "tremendous changes" that the FSOC is considering in the way capital and credit are allocated and said "it is imperative these changes are not carried out in secret or behind closed doors."

The bill was reported out by the House FSC along party lines. During debate on the measure, Rep. Maxine Waters, D-Calif., ranking minority member of the House FSC, said: "we are not dealing with a good faith effort to address many of the transparency concerns a bipartisan group of members have raised. Rather, this is an effort by Republicans to make the FSOC decision-making impossibly difficult."  

In his letter today, Garrett acknowledged that "it is understandable" that the Federal Reserve Board may rely on information from individual Fed banks in assessing companies located in their districts or overseen by those banks. "However, considering the lack of disclosure and general air of secrecy surrounding FSOC designations, and the tremendous stakes involved, it is imperative that we understand the role your bank has played in these decisions," Garrett added.

The spotlight turned on money managers last September when an FSOC report prepared by the Treasury Department's Office of Financial Research identified activities of 20 of the largest U.S. money managers as possible sources of risk.

And, at the annual meeting of the Investment Company Institute May 21, Paul Schott Stevens, president and CEO, said that designating mutual funds as SIFIs "would impair the single best tool available to average Americans for retirement saving and individual investment — as well as a key source of financing in our economy."

Treasury Secretary Jacob Lew heads the FSOC, which was created by the Dodd-Frank financial services reform law.

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Check out House Committee Votes to Block SIFI Designations on ThinkAdvisor.