[Congressional Record Volume 164, Number 58 (Wednesday, April 11, 2018)]
[House]
[Pages H3119-H3128]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FINANCIAL STABILITY OVERSIGHT COUNCIL IMPROVEMENT ACT OF 2017
Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 780, I call
up the bill (H.R. 4061) to amend the Financial Stability Act of 2010 to
improve the transparency of the Financial Stability Oversight Council,
to improve the SIFI designation process, and for other purposes, and
ask for its immediate consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 780, an
amendment in the nature of a substitute consisting of the text of Rules
Committee Print 115-64, modified by the amendment printed in part A of
House Report 115-600, is adopted, and the bill, as amended, is
considered read.
The text of the bill, as amended, is as follows:
H.R. 4061
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Financial Stability
Oversight Council Improvement Act of 2017''.
SEC. 2. SIFI DESIGNATION PROCESS.
Section 113 of the Financial Stability Act of 2010 (12
U.S.C. 5323) is amended--
(1) in subsection (a)(2)--
(A) in subparagraph (J), by striking ``and'' at the end;
(B) by redesignating subparagraph (K) as subparagraph (L);
and
(C) by inserting after subparagraph (J) the following:
``(K) the appropriateness of the imposition of prudential
standards as opposed to other forms of regulation to mitigate
the identified risks; and'';
(2) in subsection (b)(2)--
(A) in subparagraph (J), by striking ``and'' at the end;
(B) by redesignating subparagraph (K) as subparagraph (L);
(C) by inserting after subparagraph (J) the following:
``(K) the appropriateness of the imposition of prudential
standards as opposed to other forms of regulation to mitigate
the identified risks; and''; and
(3) by amending subsection (d) to read as follows:
``(d) Reevaluation and Rescission.--
``(1) Annual reevaluation.--Not less frequently than
annually, the Council shall reevaluate each determination
made under subsections (a) and (b) with respect to a nonbank
financial company supervised by the Board of Governors and
shall--
``(A) provide written notice to the nonbank financial
company being reevaluated and afford such company an
opportunity to submit written materials, within such time as
the Council determines to be appropriate (but which shall be
not less than 30 days after the date of receipt by the
company of such notice), to contest the determination,
including materials concerning whether, in the company's
view, material financial distress at the company, or the
nature, scope, size, scale, concentration,
interconnectedness, or mix of the activities of the company
could pose a threat to the financial stability of the United
States;
``(B) provide an opportunity for the nonbank financial
company to meet with the Council to present the information
described in subparagraph (A); and
``(C) if the Council does not rescind the determination,
provide notice to the nonbank financial company, its primary
financial regulatory agency and the primary financial
regulatory agency of any of the company's significant
subsidiaries of the reasons for the Council's decision, which
notice shall address with specificity how the Council
assessed the material factors presented by the company under
subparagraphs (A) and (B).
``(2) Periodic reevaluation.--
``(A) Review.--Every 5 years after the date of a final
determination with respect to a nonbank financial company
under subsection (a) or (b), as applicable, the nonbank
financial company may submit a written request to the Council
for a reevaluation of such determination. Upon receipt of
such a request, the Council shall conduct a reevaluation of
such determination and hold a vote on whether to rescind such
determination.
``(B) Procedures.--Upon receipt of a written request under
paragraph (A), the Council shall fix a time (not earlier than
30 days after the date of receipt of the request) and place
at which such company may appear, personally or through
counsel, to--
``(i) submit written materials (which may include a plan to
modify the company's business, structure, or operations,
which shall specify the length of the implementation period);
and
``(ii) provide oral testimony and oral argument before the
members of the Council.
``(C) Treatment of plan.--If the company submits a plan in
accordance with subparagraph (B)(i), the Council shall
consider whether the plan, if implemented, would cause the
company to no longer meet the standards for a final
determination under subsection (a) or (b), as applicable. The
Council shall provide the nonbank financial company an
opportunity to revise the plan after consultation with the
Council.
``(D) Explanation for certain companies.--With respect to a
reevaluation under this paragraph where the determination
being reevaluated was made before the date of enactment of
this paragraph, the nonbank financial company may require the
Council, as part of such reevaluation, to explain with
specificity the basis for such determination.
``(3) Rescission of determination.--
``(A) In general.--If the Council, by a vote of not fewer
than \2/3\ of the voting members then serving, including an
affirmative vote by the Chairperson, determines under this
subsection that a nonbank financial company no longer meets
the standards for a final determination under subsection (a)
or (b), as applicable, the Council shall rescind such
determination.
``(B) Approval of company plan.--Approval by the Council of
a plan submitted or revised in accordance with paragraph (2)
shall require a vote of not fewer than \2/3\ of the voting
members then serving, including an affirmative vote by the
Chairperson. If such plan is approved by the Council, the
company shall implement the plan during the period identified
in the plan, except that the Council, in its sole discretion
and upon request from the company, may grant one or more
extensions of the implementation period. After the end of the
implementation period, including any extensions granted by
the Council, the Council shall proceed to a vote as described
under subparagraph (A).'';
(4) by amending subsection (e) to read as follows:
``(e) Requirements for Proposed Determination, Notice and
Opportunity for Hearing, and Final Determination.--
``(1) Notice of identification for initial evaluation and
opportunity for voluntary submission.--Upon identifying a
nonbank financial company for comprehensive analysis of
[[Page H3120]]
the potential for the nonbank company to pose a threat to the
financial stability of the United States, the Council shall
provide the nonbank financial company with--
``(A) written notice that explains with specificity the
basis for so identifying the company, a copy of which shall
be provided to the company's primary financial regulatory
agency;
``(B) an opportunity to submit written materials for
consideration by the Council as part of the Council's initial
evaluation of the risk profile and characteristics of the
company;
``(C) an opportunity to meet with the Council to discuss
the Council's analysis; and
``(D) a list of the public sources of information being
considered by the Council as part of such analysis.
``(2) Requirements before making a proposed
determination.--Before making a proposed determination with
respect to a nonbank financial company under paragraph (3),
the Council shall--
``(A) by a vote of not fewer than \2/3\ of the voting
members then serving, including an affirmative vote by the
Chairperson, approve a resolution that identifies with
specificity any risks to the financial stability of the
United States the Council has identified relating to the
nonbank financial company;
``(B) with respect to nonbank financial company with a
primary financial regulatory agency, provide a copy of the
resolution described under subparagraph (A) to the primary
financial regulatory agency and provide such agency with at
least 180 days from the receipt of the resolution to--
``(i) consider the risks identified in the resolution; and
``(ii) provide a written response to the Council that
includes its assessment of the risks identified and the
degree to which they are or could be addressed by existing
regulation and, as appropriate, issue proposed regulations or
undertake other regulatory action to mitigate the identified
risks;
``(C) provide the nonbank financial company with written
notice that the Council--
``(i) is considering whether to make a proposed
determination with respect to the nonbank financial company
under subsection (a) or (b), as applicable, which notice
explains with specificity the basis for the Council's
consideration, including any aspects of the company's
operations or activities that are a primary focus for the
Council; or
``(ii) has determined not to subject the company to further
review, which action shall not preclude the Council from
issuing a notice to the company under subparagraph (1)(A) at
a future time; and
``(D) in the case of a notice to the nonbank financial
company under subparagraph (C)(i), provide the company with--
``(i) an opportunity to meet with the Council to discuss
the Council's analysis;
``(ii) an opportunity to submit written materials, within
such time as the Council deems appropriate (but not less than
30 days after the date of receipt by the company of the
notice described under clause (i)), to the Council to inform
the Council's consideration of the nonbank financial company
for a proposed determination, including materials concerning
the company's views as to whether it satisfies the standard
for determination set forth in subsection (a) or (b), as
applicable;
``(iii) an explanation of how any request by the Council
for information from the nonbank financial company relates to
potential risks to the financial stability of the United
States and the Council's analysis of the company;
``(iv) written notice when the Council deems its
evidentiary record regarding such nonbank financial company
to be complete; and
``(v) an opportunity to meet with the members of the
Council.
``(3) Proposed determination.--
``(A) Voting.--The Council may, by a vote of not fewer than
\2/3\ of the voting members then serving, including an
affirmative vote by the Chairperson, propose to make a
determination in accordance with the provisions of subsection
(a) or (b), as applicable, with respect to a nonbank
financial company.
``(B) Deadline for making a proposed determination.--With
respect to a nonbank financial company provided with a
written notice under paragraph (2)(C)(i), if the Council does
not provide the company with the written notice of a proposed
determination described under paragraph (4) within the 180-
day period following the date on which the Council notifies
the company under paragraph (2)(C) that the evidentiary
record is complete, the Council may not make such a proposed
determination with respect to such company unless the Council
repeats the procedures described under paragraph (2).
``(C) Review of actions of primary financial regulatory
agency.--With respect to a nonbank financial company with a
primary financial regulatory agency, the Council may not vote
under subparagraph (A) to make a proposed determination
unless--
``(i) the Council first determines that any proposed
regulations or other regulatory actions taken by the primary
financial regulatory agency after receipt of the resolution
described under paragraph (2)(A) are insufficient to mitigate
the risks identified in the resolution;
``(ii) the primary financial regulatory agency has notified
the Council that the agency has no proposed regulations or
other regulatory actions to mitigate the risks identified in
the resolution; or
``(iii) the period allowed by the Council under paragraph
(2)(B) has elapsed and the primary financial regulatory
agency has taken no action in response to the resolution.
``(4) Notice of proposed determination.--The Council
shall--
``(A) provide to a nonbank financial company written notice
of a proposed determination of the Council, including an
explanation of the basis of the proposed determination of the
Council, that a nonbank financial company shall be supervised
by the Board of Governors and shall be subject to prudential
standards in accordance with this title, an explanation of
the specific risks to the financial stability of the United
States presented by the nonbank financial company, and a
detailed explanation of why existing regulations or other
regulatory action by the company's primary financial
regulatory agency, if any, is insufficient to mitigate such
risk; and
``(B) provide the primary financial regulatory agency of
the nonbank financial company a copy of the nonpublic written
explanation of the Council's proposed determination.
``(5) Hearing.--
``(A) In general.--Not later than 30 days after the date of
receipt of any notice of a proposed determination under
paragraph (4), the nonbank financial company may request, in
writing, an opportunity for a written or oral hearing before
the Council to contest the proposed determination, including
the opportunity to present a plan to modify the company's
business, structure, or operations in order to mitigate the
risks identified in the notice, and which plan shall also
include any steps the company expects to take during the
implementation period to mitigate such risks.
``(B) Grant of hearing.--Upon receipt of a timely request,
the Council shall fix a time (not earlier than 30 days after
the date of receipt of the request) and place at which such
company may appear, personally or through counsel, to--
``(i) submit written materials (which may include a plan to
modify the company's business, structure, or operations); or
``(ii) provide oral testimony and oral argument to the
members of the Council.
``(6) Council consideration of company plan.--
``(A) In general.--If a nonbank financial company submits a
plan in accordance with paragraph (5), the Council shall,
prior to making a final determination--
``(i) consider whether the plan, if implemented, would
mitigate the risks identified in the notice under paragraph
(4); and
``(ii) provide the nonbank financial company an opportunity
to revise the plan after consultation with the Council.
``(B) Voting.--Approval by the Council of a plan submitted
under paragraph (5) or revised under subparagraph (A)(ii)
shall require a vote of not fewer than \2/3\ of the voting
members then serving, including an affirmative vote by the
Chairperson.
``(C) Implementation of approved plan.--With respect to a
nonbank financial company's plan approved by the Council
under subparagraph (B), the company shall have one year to
implement the plan, except that the Council, in its sole
discretion and upon request from the nonbank financial
company, may grant one or more extensions of the
implementation period.
``(D) Oversight of implementation.--
``(i) Periodic reports.--The Council, acting through the
Office of Financial Research, may require the submission of
periodic reports from a nonbank financial company for the
purpose of evaluating the company's progress in implementing
a plan approved by the Council under subparagraph (B).
``(ii) Inspections.--The Council may direct the primary
financial regulatory agency of a nonbank financial company or
its subsidiaries (or, if none, the Board of Governors) to
inspect the company or its subsidiaries for the purpose of
evaluating the implementation of the company's plan.
``(E) Authority to rescind approval.--
``(i) In general.--During the implementation period
described under subparagraph (C), including any extensions
granted by the Council, the Council shall retain the
authority to rescind its approval of the plan if the Council
finds, by a vote of not fewer than \2/3\ of the voting
members then serving, including an affirmative vote by the
Chairperson, that the company's implementation of the plan is
no longer sufficient to mitigate or prevent the risks
identified in the resolution described under paragraph
(2)(A).
``(ii) Final determination vote.--The Council may proceed
to a vote on final determination under subsection (a) or (b),
as applicable, not earlier than 10 days after providing the
nonbank financial company with written notice that the
Council has rescinded the approval of the company's plan
pursuant to clause (i).
``(F) Actions after implementation.--
``(i) Evaluation of implementation.--After the end of the
implementation period described under subparagraph (C),
including any extensions granted by the Council, the Council
shall consider whether the plan, as implemented by the
nonbank financial company, adequately mitigates or prevents
the risks identified in the resolution described under
paragraph (2)(A).
``(ii) Voting.--If, after performing an evaluation under
clause (i), not fewer than \2/3\ of the voting members of the
Council then serving, including an affirmative vote by the
Chairperson, determine that the plan, as implemented,
adequately mitigates or prevents the identified risks, the
Council shall not make a final determination under subsection
(a) or (b), as applicable, with respect to the nonbank
financial company and shall notify the company of the
Council's decision to take no further action.
``(7) Final council decisions.--
``(A) In general.--Not later than 90 days after the date of
a hearing under paragraph (5), the Council shall notify the
nonbank financial company of--
``(i) a final determination under subsection (a) or (b), as
applicable;
``(ii) the Council's approval of a plan submitted by the
nonbank financial company under paragraph (5) or revised
under paragraph (6); or
``(iii) the Council's decision to take no further action
with respect to the nonbank financial company.
[[Page H3121]]
``(B) Explanatory statement.--A final determination of the
Council, under subsection (a) or (b), shall contain a
statement of the basis for the decision of the Council,
including the reasons why the Council rejected any plan by
the nonbank financial company submitted under paragraph (5)
or revised under paragraph (6).
``(C) Notice to primary financial regulatory agency.--In
the case of a final determination under subsection (a) or
(b), the Council shall provide the primary financial
regulatory agency of the nonbank financial company a copy of
the nonpublic written explanation of the Council's final
determination.'';
(5) in subsection (g), strike ``before the Council makes
any final determination'' and insert ``from the outset of the
Council's consideration of the company, including before the
Council makes any proposed or final determination''; and
(6) by adding at the end the following:
``(j) Public Disclosure Requirement.--The Council shall--
``(1) in each case where a nonbank financial company has
been notified that it is subject to the Council's review and
the company has publicly disclosed such fact, confirm that
the nonbank financial company is subject to the Council's
review, in response to a request from a third party;
``(2) upon making a final determination, publicly provide a
written explanation of the basis for its decision with
sufficient detail to provide the public with an understanding
of the specific bases of the Council's determination,
including any assumptions related thereof, subject to the
requirements of section 112(d)(5);
``(3) include, in the annual report required by section
112, the number of nonbank financial companies from the
previous year subject to preliminary analysis, further
review, and subject to a proposed or final determination; and
``(4) within 90 days after the enactment of this
subsection, publish information regarding its methodology for
calculating any quantitative thresholds or other metrics used
to identify nonbank financial companies for analysis by the
Council.
``(k) Periodic Assessment of the Impact of Designations.--
``(1) Assessment.--Every five years after the date of
enactment of this section, the Council shall--
``(A) conduct a study of the Council's determinations that
nonbank financial companies shall be supervised by the Board
of Governors and shall be subject to prudential standards;
and
``(B) comprehensively assess the impact of such
determinations on the companies for which such determinations
were made and the wider economy, including whether such
determinations are having the intended result of improving
the financial stability of the United States.
``(2) Report.--Not later than 90 days after completing a
study required under paragraph (1), the Council shall issue a
report to the Congress that--
``(A) describes all findings and conclusions made by the
Council in carrying out such study; and
``(B) identifies whether any of the Council's
determinations should be rescinded or whether related
regulations or regulatory guidance should be modified,
streamlined, expanded, or repealed.''.
SEC. 3. RULE OF CONSTRUCTION.
None of the amendments made by this Act may be construed as
limiting the Financial Stability Oversight Council's
emergency powers under section 113(f) of the Financial
Stability Act of 2010 (12 U.S.C. 5323(f)).
SEC 4. REDUCTION OF SURPLUS FUNDS OF FEDERAL RESERVE BANKS.
(a) In General.--Section 7(a)(3)(A) of the Federal Reserve
Act (12 U.S.C. 289(a)(3)(A)) is amended by striking
``$7,500,000,000'' and inserting ``$7,451,428,571''.
(b) Effective Date.--Subsection (a) shall take effect on
June 1, 2018.
The SPEAKER pro tempore. The gentleman from Texas (Mr. Hensarling)
and the gentlewoman from California (Ms. Maxine Waters) each will
control 30 minutes.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days in which to revise and extend their remarks
and submit extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise today in support of H.R. 4061, the Financial
Stability Oversight Council Improvement Act of 2017.
I want to commend two friends, Mr. Ross from Florida on the
Republican side of the aisle and Mr. Delaney on the Democrat side of
the aisle, for their collective leadership on bringing forth this truly
bipartisan bill, a strong, bipartisan bill, which has 58 different
cosponsors, half from each side of the aisle.
Before talking a bit about the bill, there has been a lot of news
today, Mr. Speaker. Part of the news, that I just could not overlook,
is the fact that my dear friend and colleague from Florida announced
that he would be retiring at the end of this Congress. I do want to say
what a pleasure and honor it has been to work with the gentleman from
Florida. I have appreciated his leadership, I have appreciated his
knowledge, and I have appreciated his calm demeanor and his ability to
further strong, bipartisan measures that will help create greater
credit opportunities for hardworking Americans. I would say I will miss
him, but I will be gone as well. Maybe he will invite me down to the
Florida coast for some deep sea fishing. I look forward to receiving
that invitation at the appropriate time.
Now back to business, Mr. Speaker.
The Financial Stability Oversight Council is charged with identifying
emerging threats to our financial stability. However, during the
previous administration, the FSOC, as it is called, went far beyond
identifying this risk and, instead, just concocted incredibly
irrational speculative scenarios about sectors of the financial markets
that had nothing to do with the financial crisis. In turn, they have
caused more harm to the financial system than added stability.
It bears highlighting at the outset that this bill does not strip the
FSOC of its ability to designate a nonbank financial company as a SIFI,
or systematically important financial institution. Frankly, Mr.
Speaker, it would be a better bill if it did. It also wouldn't be a
bipartisan bill. That is not what this bill is trying to do. Rather,
this bill simply brings needed transparency and accountability to the
designation process.
Mr. Ross and Mr. Delaney, in H.R. 4061, do this by reversing the
presumption that government bureaucrats should dictate the business
models and operational objectives of private businesses in requiring
the FSOC to approach the potential designation of a nonbank by
encouraging companies to address the risk prior to designating them as
SIFIs in order to actually reduce systemic risk.
Let me sum it up, Mr. Speaker. All this is saying is that a nonbank
financial institution that the Financial Stability Oversight Council
feels may be creating undue risk in the system, give them an
opportunity to remedy that before you designate them as a too-big-to-
fail institution backed up with a taxpayer bailout fund. At least give
them an opportunity to remedy the risk that you are concerned about.
What could be more common sense? What could be more reasonable? That
is why it is such a strong, bipartisan bill coming out of the House
Financial Services Committee.
{time} 1530
Specifically, Mr. Speaker, applying bank-like regulation to nonbanks,
such as asset managers, broker-dealers, insurance companies, and
private investment funds just doesn't make sense. Nonbanks do not have
access to the deposit insurance fund, they don't have access to the
Federal Reserve's discount window or lending facilities. Nonbanks take
far larger capital haircuts on the assets they hold. Nonbanks, when
they fail, fail very differently from banks.
If an individual mutual fund were to fail, the shareholders of that
fund would bear the losses, not the taxpayer. There is no reason to
apply the same system to them.
So the bill would bring, again, clarity and accountability to the
FSOC designation process. That should be self-evident.
To date, the FSOC has designated four nonbank financial companies as
systemically important financial institutions. Today, only one remains
designated and it is unclear for exactly how long.
The de-designation of these companies seems to point to a recognition
that these companies do not present a potential risk that FSOC first
claimed that they did. MetLife, one of them, actually challenged FSOC's
SIFI determination in court, and FSOC's designation was found by an
Article III judge to be fatally flawed, arbitrary and capricious, and a
critical departure from FSOC's own standards.
Based on that case alone, it certainly seems appropriate for Congress
to ensure there are proper guardrails put in place in this designation,
because at
[[Page H3122]]
the end of the day, the designation doesn't just affect, again, Wall
Street, it is felt directly by Main Street households who are trying to
save for college, save for retirement. They would see their costs rise
and their investment returns fall on a mutual fund if it was
designated, simply because investors would be required to bail out
other too-big-to-fail firms.
So this is a common sense piece of legislation, it is strongly
bipartisan, and I urge all Members to support it.
Mr. Speaker, I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I rise in opposition to H.R. 4061, the so-called
Financial Stability Oversight Council Improvement Act.
The bill would recklessly complicate the process used by the
Financial Stability Oversight Council, also referred to as FSOC, to
designate nonbank firms for heightened oversight and protect the
economy.
The bill would also give companies more avenues to delay by at least
4 years or block these designations even when the designations are
warranted.
According to former Treasury Secretary Lew, who previously chaired
FSOC and strongly opposed this bill last Congress: ``An extensively
long 4-year process to designate large, complex firms that pose
significant risk to the financial system is not an improvement;
instead, it would effectively render meaningless one of the most
important tools we in future councils should have to address threats to
financial stability.''
The nonpartisan Congressional Budget Office confirmed this view,
finding that H.R. 4061 would increase the risk that undesignated
systemic nonbank firms will fail.
Let me be very clear: This bill is a thinly veiled attempt to hinder
and needlessly delay FSOC's existing ability to designate firms for
heightened oversight.
Americans for Financial Reform has also underscored that this bill
would: ``Provide giant, global financial firms numerous opportunities
to use insider lobbying and the courts to delay or prevent actions that
banking regulators are attempting to take to safeguard economic
stability.''
One of the reasons Congress created FSOC was to make sure that large,
interconnected firms like Bear Stearns, AIG, or Lehman Brothers would
never again devastate the stability of our financial system and
jeopardize our country's strong economy with their risky practices and
relentless demand for profits over safe and sound operations.
So I simply cannot support this bill, which would add hurdles to
prevent FSOC from fulfilling its vital role of identifying
interconnected, huge companies that warrant enhanced safeguards.
I also reject the myths Republicans continue to spread about the
Dodd-Frank Act in their effort to roll back so many of its critical
reforms. The majority has claimed that Dodd-Frank has caused tremendous
burden on the financial industry and resulted in lenders denying
affordable access to credit to consumers and families, but the numbers
tell the real story of the success of Dodd-Frank and the need to
maintain its regulatory regime, including the FSOC. Why? Because bank
profits and share prices have skyrocketed and are now far above pre-
recession heights.
In addition, business lending has increased 80 percent and community
banks are doing well.
What is more, pay for bank executives is through the roof. CEO pay on
Wall Street is back up to levels we last saw in 2006. Even Wells
Fargo's CEO, yes, the recidivist megabank that has violated numerous
laws and harmed millions of consumers, was paid $17.5 million last
year. In fact, the CEO was paid 291 times the median salary for Wells
Fargo employees.
While Wall Street has fully recovered, Main Street has not. As Neel
Kashkari, a Republican former Treasury official who now serves as the
president of the Federal Reserve Bank of Minneapolis argued in a
Washington Post op-ed on March 8, 2018: ``The Great Recession pushed
millions of Americans out of the labor force, some of whom still
haven't returned. Although the headline unemployment rate has fallen
from a peak of 10 percent during the recession to 4.1 percent this past
January, that statistic ignores people who have given up looking for
work. A different measure of people in their prime working years
suggests that more than 1 million Americans are still on the
sidelines.''
Keep in mind, these are warnings from a Republican official. In fact,
he goes on to say: ``Big banks still threaten our economy.''
So I will continue to oppose measures like H.R. 4061 that would
return our regulatory regime back to a system that encouraged
interconnected, huge firms to grow at all costs and that cheered as
these firms devised new and so-called innovative products, many of
which are only innovative in terms of how risky and unsound they were.
As so many have noted, if we undermine the ability of FSOC to stand
guard, as this bill would do, then we risk opening the door once again
to the wolves of Wall Street to wreak havoc with our economy again.
This bill, in effect, recreates the moral hazard in Wall Street's
corporate culture that promotes profits before consumers. This bill
would put the interests of corporate America before protections of
consumers, the interests of the public, and the stability of the U.S.
economy.
So, we must all remain vigilant against bills like this or we risk
another financial crisis. I, therefore, urge my colleagues to learn
from the mistakes of the past and oppose H.R. 4061.
Mr. Speaker, I am absolutely weary of coming to this floor with bills
that deregulate megabanks. I am absolutely tired of coming to this
floor having to remind my colleagues over and over again about the
crisis that we had to be presented with and had to work through in
2008.
I don't know why it is our Members find so much time to protect the
biggest banks in America, the richest banks in America, the CEOs who
are making millions of dollars, while, in fact, the consumers come
second or third in the work that they are doing.
This is simply about deregulation. This is about giving the banks
more power. This is about disregarding the fact that we have had to
fine them over and over again and they still find ways to defraud and
to cheat the consumers of America.
As the chairman just mentioned about the fines of Wells Fargo, well,
they are up for another fine of about a billion dollars because they
cheated their clients, they cheated their customers, they created
accounts in their names that they didn't know anything about, they
forced insurance on them that they didn't need, many of them already
had insurance, and it goes on and on and on.
I hope that we could convince our Members that we need to spend more
time on some of the issues that are really confronting America.
I am on this committee as the ranking member. We don't have any bills
or any sessions about homelessness. We are not talking about the people
who are on the street all over America. We are not talking about the
housing crisis where the average family even that is employed working
every day can't afford to buy a home, now can't even afford to lease a
place to live. It is off the scale.
I could go on and recount all of the things we should be addressing
just in our committee, not to talk about the other things and issues in
this Congress of the United States that we should be looking at, we
should be paying attention to.
We have had all of the gun issues, we have all the issues that are
going on now about Syria, and on and on and on, and yet we find the
time to come to this floor day in and day out, time and time again, to
talk about how we can make the biggest banks in America richer and more
profitable.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds just to say as
the jihad against banks continues, if you read the bill, it doesn't
have to do with banks, it has to do with nonbanks. And the apocalyptic
vision that is described by the ranking member is supported by a
majority of Democrats on the committee.
Mr. Speaker, I yield 5 minutes to the gentleman from Florida (Mr.
Ross),
[[Page H3123]]
who serves as the vice chairman of our Subcommittee on Housing and
Insurance and is the Republican sponsor of this piece of legislation.
Mr. ROSS. Mr. Speaker, I thank the chairman for yielding, for his
kind words, for his leadership, and more importantly, for his
friendship.
Mr. Speaker, I wish to also thank the staff of the Financial Services
Committee in the work they have taken on behalf of the people of this
country.
Mr. Speaker, as some of you may know, the Financial Services
Committee has been operating at a breakneck speed in the 115th
Congress. In fact, we have had Financial Services bills on the floor 17
of the last 18 weeks that the House has been in session.
I am proud to highlight that the majority of these bills have been
passed out of this Chamber by strong bipartisan majorities.
Throughout this process, we have demonstrated that the House can find
bipartisan agreement on commonsense measures that will benefit our
constituents.
Mr. Speaker, I rise today in support of a bill that continues this
streak of bipartisanship in the service of Americans back home, H.R.
4061, the Financial Stability Oversight Council Improvement Act.
My good friend from Maryland, Congressman John Delaney, and I have
been working this bill for nearly 5 years, with the shared goal of
improving resiliency of our financial system, while protecting
Americans from costly and unnecessary regulations that create barriers
to achieving their financial goals.
By codifying procedures to increase the transparency of the nonbank
systemically important financial institutions, or SIFIs, designation
process, and providing a chance for nonbank firms to work with their
primary regulators to reduce risks prior to designation, our
legislation achieves this goal.
Mr. Speaker, we must be clear that simply designating more companies
as systemically important financial institutions does not make our
system safer. That is especially true for nonbank firms, like asset
managers and insurers, that don't fit well into the bank-centered
regulatory regime for SIFIs.
Handing down a SIFI designation to a nonbank financial firm is like
using a sledgehammer to catch a butterfly. Not only are you unlikely to
succeed, but you are also likely to destroy the very thing you set out
to protect.
After all, it is the family saving for the downpayment on a home or
retirement or the children's education that suffer when FSOC uses a
heavy-handed regulation of last resort as the primary line of defense
against threats to our economy.
The American Action Forum has found that additional capital
requirements resulting from a SIFI designation of asset management
firms could cost American retirees at least $100,000 in potential
savings over the lifetime of their investment. That is significant.
That is why these reforms included in H.R. 4061 are critical to the
more than 90 million investors who rely on the services of asset
managers to achieve their most important financial goals.
{time} 1545
To be sure, FSOC has begun to recognize the benefits of providing
increased transparency and, in 2015, FSOC made welcome reforms to
improve the nonbank SIFI designation process. Many of these are
codified in this bill.
Importantly, our legislation will also give FSOC the authority it
needs to work with primary regulators who have institutional knowledge,
skill, and experience overseeing nonbank firms to address threats to
our economy without jeopardizing our constituents' financial
opportunities.
After 8 years, if we don't take steps to address the obvious
shortcomings of FSOC, like the nonbank designation process, the
regulator intended to protect the financial stability could very well
become the liability.
Again, I am proud to have worked with my colleague and friend, John
Delaney, on this great bill, and I appreciate the support of Chairman
Hensarling in moving it through committee and now onto the House floor.
This bill does have 58 original cosponsors--29 Democrats, 29
Republicans. It passed out of the Financial Services Committee 45-10.
Our legislation demonstrates that there can be broad bipartisan support
for increased transparency of the FSOC SIFI designation.
I believe we can do even more, and I welcome the opportunity to work
with my colleagues on additional bipartisan reforms beyond those we are
considering today to better address systemic risk by firming up the
cooperative relationship between FSOC and the primary regulator to
ensure substantive engagement that can result in swift resolution of
FSOC's concerns prior to all SIFI designations.
Mr. Speaker, I urge my colleagues to support this bill.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
I would like to just walk through some of what happens with FSOC with
these nonbank designations and the process, because I have always
wanted to be sure that the process would give these nonbanks an
opportunity to basically convince FSOC that they were safe and they
were sound and they didn't present any risk, and all of that.
Of course, a lot of this was triggered by AIG. If you remember AIG
and what happened with this nonbank who was involved in credit default
swaps without the collateral to back them up, this certainly was
informative, and it helped to develop this process.
Stage 1, the metrics: minimum quantitative metrics for a nonbank
financial company to be eligible for designation.
Stage 2, preliminary review, 6 months: staff analyzes preliminary
data and meets with the company, consults with existing regulators.
Stage 3, in-depth review, 14 months: staff analyzes extensive data,
meets with company, consults with existing regulators, FSOC deputies
meet with company.
Proposed designation and hearing on the final designation, 4 months.
FSOC provides written basis of proposed designation, oral hearings,
provides lengthy written basis of final designation.
Total time from outset of analysis to final designation, 2 years.
Judicial and annual reviews: any designated company may challenge
FSOC's determination in court; every designated company is re-reviewed
by FSOC every year to consider de-designation.
I want you to know what is being proposed in this bill is quite
different and, instead of the 2 years that I have just walked through,
it would take approximately 4.3 years. At such time, you could have one
of these nonbanks in trouble, presenting great risk, and you would not
be able to do very much about it.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from
Michigan (Mr. Huizenga), who serves as the chairman of our Capital
Markets, Securities, and Investments Subcommittee.
Mr. HUIZENGA. Mr. Speaker, I want to say I am going to miss both the
chairman and the gentleman from Florida (Mr. Ross) after they leave
this term.
I am going to try to address the ranking member's timing issue, but
the fact is that much of this bill simply codifies what FSOC's current
process is and, thus, is not changing that timing.
Mr. Speaker, I rise today in support of H.R. 4061, the Financial
Stability Oversight Council Improvement Act of 2017, which would
enhance transparency and procedural fairness for the nonbank
systemically important financial institutions designation process.
Dodd-Frank created FSOC and charged it with identifying risks to the
financial stability of financial companies that would pose a threat to
our overall financial stability. The problem with this is that FSOC has
the authority to designate a nonbank financial institution, such as an
asset manager or an insurance company, and subject the institution to
heightened prudential supervision and regulation by the Federal
Reserve.
All you hear from the other side is that this is about megabanks. It
is the exact opposite. It is about these insurance companies and these
asset managers and broker dealers.
In 2014, FSOC designated MetLife, a life insurance company, for
``heightened prudential supervision'' by the
[[Page H3124]]
Federal Reserve. However, in 2016, a Federal district court rescinded
FSOC's SIFI designation of MetLife, finding that it was ``arbitrary and
capricious'' and that the FSOC had ``made critical departures'' from
its own standards from making designation determinations.
Now, I wasn't there when Dodd-Frank was created, but I have been
dealing with the echo effect of it for the last 7 years, and I don't
believe this is what Congress intended. I don't believe that the
architects--in fact, I can't believe that the architects--of Dodd-Frank
intended for bank regulators to rewrite the rules of insurance
companies.
As The Wall Street Journal wrote: ``It's as if a committee of
baseball umpires rewrote the rules of football despite protests from
the NFL players, owners, and referees.''
Let me give a personal example. My political science degree should
then qualify me to be a chemical lab scientist. Hey, they both have
science in the title.
It doesn't make sense.
In fact, even Barney Frank, the law's namesake, told Congress that,
in general, he did not believe that companies ``that just sell
insurance'' should be designated as systemic.
Well, today we have the ability to right the ship. By passing this
important bill, Congress has the opportunity to bring about
commonsense, bipartisan reforms to this designation process. And this
is what American, hardworking taxpayers expect out of us: an ability to
find a solution.
Specifically, the Financial Stability Oversight Council Improvement
Act of 2017 would amend the Dodd-Frank Act to require FSOC to determine
whether to subject a U.S. or a foreign nonbank financial company to
supervision by the Federal Reserve, must consider the appropriateness
of imposing heightened prudential standards as opposed to other forms
of regulation to mitigate identified risks to the financial stability.
In other words, as my friend from Florida said, don't go butterfly
hunting with a sledgehammer.
H.R. 4061 directs FSOC to reevaluate, both annually and periodically,
final determinations of systemic risk regarding a nonbank financial
company under supervision.
Finally, the bill directs the FSOC to study the impacts of its
determinations to nonbank financial companies to Fed supervision and
prudential standards and whether such determinations have the intended
result of improving domestic financial stability every 5 years.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. HENSARLING. I yield the gentleman from Michigan an additional 30
seconds.
Mr. HUIZENGA. I would like to commend the bipartisan work of my
colleagues and friends, Representative Ross and Representative Delaney.
They have done a great job on this. Their bipartisan approach enhances
the ability of FSOC to mitigate risk, a very important element, but it
also ensures that affected nonbank--again, nonbank--financial
institutions are afforded the opportunity and the ability to question
and engage--not veto, but to question and engage--the FSOC prior to a
final SIFI designation being made.
This is good work that gives hardworking taxpayers a solution, and
this is what they expect: commonsense, bipartisan solutions. I
encourage all of my colleagues to vote ``yes'' on this important bill.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I would like to share with Members a statement from the
former Secretary of the Treasury who had the responsibility to head
FSOC, and that is Jacob J. Lew. He said, and I will read from his
communication to us:
Unfortunately, none of the legislation the committee plans
to consider this week--referring to this bill--would
strengthen the Council's ability to address the very real
risk the largest and most complex financial firms could pose.
Instead, these proposals would be a big step backwards for
regulatory tools to prevent the same kinds of threats. These
bills would severely undermine and impair the Council. One of
the proposals would require the Council to spend 4 years
analyzing a firm before taking action to address any risk the
firms may propose, doubling the time period for designation
review.
I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 2-1/2 minutes to the gentleman
from Maryland (Mr. Delaney), the lead Democratic cosponsor of the
legislation and a hardworking member of the Financial Services
Committee.
Mr. DELANEY. Mr. Speaker, I thank the chairman for giving me an
opportunity to rise in support of H.R. 4061, a bipartisan bill that I
worked very closely on with the gentleman from Florida (Mr. Ross), and
I thank him for giving me the opportunity to partner with him on this
bill. This is a bill, as has already been stated, that came out of the
Financial Services Committee with the support of the majority of the
Democrats.
Mr. Speaker, about 10 years ago, we had a financial crisis; and
during that financial crisis, 19 of the 20 largest financial
institutions in this country failed or needed support from the Federal
Government. More importantly, tens of millions of Americans lost their
jobs, lost their homes, lost their retirement savings.
In the wake of that crisis, it was very appropriate for Congress to
do something, and we did, with Dodd-Frank legislation, which is
legislation that I strongly support. As part of the Dodd-Frank
legislation, FSOC was established, the Financial Stability Oversight
Council; and the job of FSOC was to reduce systemic risk in the
financial services sector, which is a mission that I also support.
But they were given very limited tools to fulfill that mission.
Effectively, their one tool was to designate companies as systemically
risky to the system. So they had the power to designate; they didn't
really have the power to de-risk the system, which should be their job.
What this piece of legislation--again, this piece of strongly
bipartisan legislation--does is effectively empower FSOC with the
ability to reduce risk in the financial services system by working in a
collaborative manner with companies that it is considering designated
and the primary regulators of those companies to develop plans to de-
risk those companies.
Mr. Speaker, wouldn't we be better off with a financial services
system that has less risk in it, fewer companies that are considered
systemically risky in substance, as opposed to having a system that is
inherently more risky or has greater risk and has more companies
designated?
In other words, designation doesn't, in and of itself, reduce risk.
What reduces risk is primary regulators working with FSOC and companies
that it deems potentially worthy of designation to develop strategies
and plans to de-risk those companies. That is precisely what this
legislation does.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. HENSARLING. I yield the gentleman from Maryland an additional 30
seconds.
Mr. DELANEY. That is precisely what this designation does, which is
why so many Democrats supported this bill, because we believe, as do
many of my Republican colleagues, that the mission of FSOC is worthy
and that we should be empowering FSOC to do its job and de-risk the
financial industry of the United States of America.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I do think that it is important that we share as much
information as we can about FSOC because not a lot is known by the
average person about FSOC, and when we talk about it, we oftentimes
fail to talk about who makes up FSOC.
We are talking about 10 voting members, headed by Treasury, the
Treasury Secretary. You have on FSOC all of the experts. You have the
Federal Reserve. You have the FDIC. You have the OCC. You have the
NCUA. You have the CFPB, the FHFA, the SEC, the CFTC, and an
independent insurance expert. So here you have convened on the FSOC all
of these experts, and they are looking at nonbanks that could present
great risk to our economy, like AIG.
I have to keep reminding people about AIG because AIG was this
nonbank that we bailed out to the tune of about $182 billion, $183
billion.
{time} 1600
Don't forget, they were involved with credit default swaps that were
not
[[Page H3125]]
collateralized. They were basically putting insurance out there that,
when the time came due for them to have to pay off, they couldn't
because they didn't have the collateral to do that.
So with these experts, with the experiences that we have gone
through, FSOC makes a lot of sense. And when it is said that all they
can do is designate, that is extremely important because that gives the
companies an opportunity to go back and take a look at themselves and
see what they can do to reduce this risk to become more stable, and
this has happened already.
As a matter of fact, I think to designate a nonbank, FSOC must have a
vote of two-thirds of its members, including the Treasury Secretary. So
this is not easily done.
Again, designation gives the companies an opportunity to go back and
take a look. At least one of them has decided to downsize.
Let me just share this with you. First, FSOC is certainly not running
a Hotel California. A designated firm like GE Capital was able to make
the kind of risk-reducing structural reforms that led to their de-
designation under the annual review process required by Dodd-Frank. So,
no, designated firms are not stuck with their designation forever.
Don't forget, they get reviewed every year. Don't forget, they can
make changes. Don't forget, they can take the advice. They can come in
and they can continue to work on putting themselves in order so that
they can get de-designated. And I think that is extremely important and
that should not get lost.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from
Illinois (Mr. Hultgren), who serves as the vice chairman of our Capital
Markets, Securities, and Investment Subcommittee.
Mr. HULTGREN. Mr. Speaker, I thank Chairman Hensarling for his work
on this and some of the other things. When you look at the number of
bipartisan bills that have passed out of the Financial Services
Committee this session, it is really impressive, and I am grateful for
his work.
I also want to thank Dennis Ross and John Delaney and all my
colleagues who have worked so diligently on H.R. 4061, the Financial
Stability Oversight Council Improvement Act of 2017, which I strongly
support.
I think it is fair to say that a Financial Stability Oversight
Council chaired by Secretary Mnuchin is not extremely likely to subject
nonbanks to enhanced prudential supervision.
In fact, I understand they are considering removing some
designations.
However, Congress still should take the appropriate steps to make the
law that provides this authority to the Treasury much more practical.
Furthermore, I would like to point out that although I was happy to
see many great provisions of the regulatory relief package put together
by Chairman Crapo over in the Senate, including a number of bills I
have offered with my colleagues in the House, I was extremely
disappointed with the fact that the legislation didn't include this
legislation or something similar to it.
I don't understand how Congress can justify a regulatory reform
package that does so little to ease Dodd-Frank's cost on investors,
especially when the Financial Services Committee in the House has taken
demonstrated steps, a strong record of bipartisan success, in making
reforms to FSOC's nonbank SIFI designation authority.
The Financial Stability Oversight Council Improvement Act amends the
Dodd-Frank Act to require the FSOC, when determining whether to subject
a U.S. or foreign nonbank financial company to supervision by the Fed,
to consider the appropriateness of imposing heightened prudential
standards.
In other words, it provides these nonbanks the opportunities to
adjust their business models before being subjected to supervision by
the Federal Reserve, thereby acknowledging that these companies might
wish to change their business model after such a designation in order
to be free of these substantial regulatory costs.
It is important that we have well-defined processes in place so these
nonbanks understand the rules of the road. The government provides
these companies some reasonable due process when proposing to
dramatically interrupt their business with a slew of new regulatory
requirements.
Finally, let's remember that investors bear the costs of
inappropriate regulation being applied to nonbanks, like mutual funds.
The asset management industry is modeled in a fundamentally different
way, and our regulatory system should reflect that. Investors take on
the risk and manage those risks in order to receive returns to pay for
things like retirement or education for their children. Safety and
soundness regulation, as the Fed applies it to the banks, is completely
inappropriate.
At a minimum, we should be providing nonbanks like mutual funds a
chance to work with the FSOC to address their concerns before slapping
investors with new regulatory costs.
Finally, we should never forget, again, that this was a strong
bipartisan bill that received 45 votes in committee, and we ought to
all consider supporting it here on the floor. I am going to, and I
encourage my colleagues to support it as well.
Ms. MAXINE WATERS of California. Mr. Speaker, I reserve the balance
of my time.
Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from
Colorado (Mr. Tipton), who serves as the vice chairman of our
Subcommittee on Oversight and Investigations.
Mr. TIPTON. Mr. Speaker, I thank the chairman for yielding me time.
Mr. Speaker, I thank my colleague from Florida (Mr. Ross) for
introducing this important measure being considered today.
Mr. Speaker, the Dodd-Frank Act introduced into our Nation's capital
a new culture of regulatory burden where a select few Washington
bureaucrats dictate how our Nation's financial institutions should run
themselves. While I support the necessary regulations from our Nation's
fiduciary rule makers that upholds the goals of safety, soundness, and
fair play, far too often our regulators have overstepped their
boundaries and entered into dangerous territory of overregulation.
Section 113 of the Dodd-Frank Act gave the Financial Stability
Oversight Council immense deliberate power to declare nonbank financial
companies as systemically important to the financial stability of the
United States.
Once that determination is made, these nonbank financial institutions
become subject to extraordinarily stringent prudential supervision and
regulation by the Federal Reserve. This is a power that should not be
taken lightly.
FSOC's systemically important designation carries with it a
significant regulatory burden, a new public perception, and a new
regulator.
Mr. Ross' legislation would require the FSOC, when deliberating on
whether or not to designate a nonbank as systemically important, to
consider the appropriateness of imposing new burdens on the
institution, as opposed to pursuing other forms of regulation to
mitigate identified risk to the financial stability of the United
States.
Mr. Speaker, Mr. Ross' legislation would help end the culture of
overregulation in Washington and alleviate the intense burden that has
been imposed on many institutions that have unsparingly received this
designation.
This is not to say that FSOC's power to designate institutions as
systemically important should not be used, but rather that FSOC should
exercise its authority judiciously and in its intended manner.
Mr. Ross' bill ensures that the FSOC's designations going forward
will be prudent, shrewd, and most important, necessary.
The good news out of Washington is that the culture of overregulation
is changing. A new era has been ushered in that thinks twice before
regulating, thoughtfully revisits the necessity and effectiveness in
past regulations, and considers the burden of future regulations.
Much of this has to do with the changes in leadership at the
regulatory agencies and the good work being pursued there. But changes
in who creates and enforces the regulations aren't enough.
In order for our small towns to be able to prosper, our small
businesses to grow, and our families to succeed, we must continue to
pursue legislative changes to regulations that sustain
[[Page H3126]]
this new era of regulatory cautiousness and predictability.
By pursuing legislative fixes to regulatory problems, we can provide
the certainty required by our financial sector, both big and small, to
once again provide a bright future for the American economy and for
American families.
Mr. Speaker, Mr. Ross' legislation being considered on the floor
helps to cement that certainty, and I encourage my colleagues to
support the measure here today.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, a moment ago, I identified the 10 voting members that
serve on FSOC. I did not add to that the nonvoting members. To show you
the expertise that is involved with FSOC, they also have these
nonvoting members: Estate Insurance Regulator, Estate Bank Regulator,
State Securities Regulator, and the Federal Insurance Office.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman
from California (Mr. Sherman), one of the Democrat cosponsors of the
legislation.
Mr. SHERMAN. Mr. Speaker, I support the committee system. The
Democratic Caucus has put roughly 25 of its members on the Financial
Services Committee. We are the members of the Democratic Caucus
assigned to study and debate legislation on Financial Services issues.
We did just that. And 60 percent of the Democrats assigned to the
Financial Services Committee, 15 Democrats, voted in favor of this
bill, while 10 opposed it.
So if members of our caucus wonder what would our caucus position be
if all the members of our caucus had a chance to really analyze bills
in this particular technical area, one would expect that 60 percent of
our caucus would support this legislation.
The reason for that is that the purpose of regulation is to reduce
risk rather than having risk be the reason to have regulation.
This bill focuses on getting companies to reduce their risk. There
are those that say if we just designate more companies as SIFIs, we
will get more regulation.
No, you won't.
What you get is more companies designated, but then you get pressure
to have less regulation on all the designated companies.
What we need is to reserve the SIFI designation for those who are
clearly exposing our economy to the risk of another meltdown, and we
need to encourage companies to be less of a risk to our economy.
The ranking member, who is bearing a substantial oratorical
challenge, being, I think, the only speaker opposing the bill,
correctly points out that AIG was a risk to our economy.
That is right.
This bill would have put it to AIG that you are going to get
designated and regulated if you don't get out of the credit default
business.
Had they done that, the meltdown in 2008 would have been much less
significant.
So let us encourage these companies to de-risk, and let us have
heightened regulation on those who refuse to do so or who by their very
size pose a risk to our entire economy.
Mr. Speaker, I urge my colleagues in the Democratic Caucus to have
some faith in the 60 percent majority who have been assigned to the
Financial Services Committee and voted in favor of this bill.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
One of the wonderful things about working and living in a democracy
is that people have an opportunity to have opinions and to voice them
and to act out on them. And certainly we don't always agree on
everything. The Republicans don't always agree in their caucuses.
Sometimes they walk lockstep for all kinds of reasons, but they do
disagree sometimes when they feel it is safe to do so.
But Democrats do not always agree, and we disagree perhaps more in
our caucus than Republicans do, and we feel free to do that because we
understand the importance of the democracy and what it permits and
allows you to do.
So in saying that, we take every effort in my committee to make sure
that all of our members have the information that they need. My staff
is available to provide any assistance that we can provide. So we are
very pleased and proud that I, as the ranking member, operate the
committee in a way that respects all of its members.
And even those members who come to the floor who are opposed,
perhaps, to a bill or are supporting a bill that I and others may
oppose, I respect that. That is how democracy works.
So today, we do have Democratic members who are supporting this bill.
For whatever reasons, they believe that FSOC perhaps is too tough on
some of the companies, that somehow they really don't achieve their
mission of reducing risk. Whatever it is they believe, they certainly
have a right to do that. And I respect that.
{time} 1615
Having said that, I believe that the lesson that we learn, as a
result of 2008 and the recession that we went through, and AIG, the
nonbank, in particular, that we bailed out when we saw the weakness of
AIG, and the fact that they had basically dealt with these credit
default swaps, and that it had created such a problem in our economy, I
am so pleased that we had the foresight and the wisdom to come up with
a way by which to identify this risk of the nonbanks so that they do
not create the kind of turbulence and problems that we had in 2008.
Having said that, I am very pleased about the wide breadth of
expertise that is on the FSOC. And I certainly believe that having gone
through the steps that they take, that those steps will allow everyone
to understand and see how fair they are, what kind of time it takes;
and it gives every opportunity to be de-designated from being
identified as a SIFI.
So I am very pleased and proud that I am able to say to my
colleagues--no matter how they vote--that I believe that the FSOC is an
important reform in the Dodd-Frank reforms. I would ask them to oppose
this bill, but if they do not support it, I respect that. I think we
should all remember that each and every one of us--elected by the
people who send us here--have a voice and we have a right to represent
our constituents in the best way that we see possible.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield myself 5 seconds just to say I
take note that the ranking member respects her Democrat Members who
disagree with her, but, apparently, not enough to yield them any of her
time.
Mr. Speaker, I am pleased to yield 2\1/2\ minutes to the gentleman
from North Carolina (Mr. Budd), yet another hardworking member of the
Financial Services Committee.
Mr. BUDD. Mr. Speaker, I thank my colleague from Florida (Mr. Ross)
for leading the fight on this issue, and also for the support across
the aisle on this issue.
Mr. Ross' bill corrects another oversight of the Dodd-Frank Act by
reforming the nonbank SIFI designation process.
Mr. Speaker, this bill does not take away FSOC's ability to designate
nonbank financial institutions with the SIFI tag. It simply gives these
institutions a greater opportunity to be heard before their final
designation from FSOC.
FSOC should not be able to simply dish out this designation to these
institutions, subjecting them to Federal Reserve requirements, without
explaining their reasoning. Unfortunately, we have seen FSOC do this in
the past. This is especially important since nonbank financial
institutions are clearly different entities than banks are. Capital
requirements, for example, might not be suitable to address the risk
profile of nonbank financial institutions, so why even subject them to
these requirements.
This is not a smart regulation, Mr. Speaker. Simply put, the nonbank
SIFI designation process is not fair in its current form. Again, this
bill is a smart, targeted step that I am confident will benefit
investors and benefit our economy. Transparency and fairness should be
welcome and not rejected.
Mr. Speaker, I urge adoption of this bill.
[[Page H3127]]
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
In these debates, oftentimes we find ourselves explaining to people
how our committees work, and that is very good that we take the
opportunity to do that because I think that, in this complicated system
that we work in, people need to understand what we do and how we do it.
I am very appreciative to the chairman for recognizing and giving
time to some of our Members today, and I think he will remember that I
have done that for him also. I can recall on flood insurance, the
National Flood Insurance bill, I was very gracious and I gave Members
on the Republican side of the aisle an opportunity to have a say. And
not only that, Ex-Im Bank was another instance where I gave time to the
Members from the opposite side of the aisle, so I would not like people
who are listening to think that somehow this is unusual.
We do use the influence and power of our positions to determine when
that makes good sense for us, and I would like to say to the chairman
of our committee: There will be other times when I will afford
Republicans an opportunity to speak and have their say when you don't
feel that that is the proper thing for you to do at that time. So let
us all remember how this system works.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I believe I have the right to close. I
have no further speakers, so I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself the
balance of my time.
Mr. Speaker, week after week, the majority is continuing to push
through bills to roll back critical reforms that Democrats put in place
to protect consumers, investors, and our economy. Let's recount some of
the bills that the majority has recently pushed through the House:
In recent months, they have passed legislation to allow payday
lenders to evade State interest rate caps, decrease operational risk
capital requirements, and roll back enhanced prudential standards for
the Nation's largest banks; weaken customer protections for mortgages;
undermine efforts to combat discriminatory and predatory lending;
reduce consumer privacy protections; weaken rules that the financial
services industry finds inconvenient; undermine protections for mom-
and-pop investors; and allow financial institutions to challenge rules,
financial regulations, in court, if they believe them not to be
uniquely tailored to their business needs.
Every week, the list of harmful legislation put forth by the majority
for House passage grows. H.R. 4061, the so-called Financial Stability
Oversight Council Improvement Act is the latest example of the
majority's misguided and reckless agenda.
H.R. 4061 helps financial institutions to delay or block heightened
oversight and weakens FSOC's ability to protect our economy. Mr.
Speaker, this bill ignores th lessons of the past and invites the
return to the risky financial system that led to the financial crisis.
Mr. Speaker, I urge my Members to oppose the bill, and I yield back
the balance of my time.
Mr. HENSARLING. Mr. Speaker, may I inquire how much time I have
remaining.
The SPEAKER pro tempore. The gentleman from Texas has 3\1/4\ minutes
remaining.
Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, why is this important, and what does this bill do? Let
me try to make it very succinct. Dodd-Frank gave the Federal Government
the power to designate firms to be too big to fail and backed them up
with a taxpayer fund, a bailout fund. We think that is wrong.
But that is not what this bill does. The bill doesn't repeal the
bailout fund. It simply says to nonbanks--not banks, nonbanks--mutual
funds, insurance companies: You know what? Before we knock you upside
the head with a sledgehammer, we are going to give you a chance to get
your act together.
That is essentially what this bill does. And why is that important?
It is important because we have people who are trying to capitalize
small businesses. It is important because we have people who are trying
to save for their retirement. Enhanced prudential standards, which is
the legal term of art for coming down with a ton of bricks onto a
company, that can cost people.
In fact, it has been estimated that these enhanced prudential capital
requirements imposed with a SIFI designation, a too-big-to-fail
designation on a mutual fund, could trim as much as 25 percent or
$108,000 for a mutual fund investor's returns over a lifetime of
investing. That comes out of the pockets of our seniors. That is why
this is so important.
Contrary to what you hear on the other side of the aisle, the FSOC,
the Financial Stability Oversight Council, will still have full ability
to designate an institution as too big to fail. But it says: You know
what? Before you do that, consider some other methods: consider
seniors, consider small businesses, and consider the impact of what you
are going to do.
Look at what happened to GE Capital. This was one of the great
financing companies in America, and they were basically a coyote in a
trap that had to chew its leg off. There is hardly anything left of
them. They used to fund furniture retailers, bread bakeries, Jack in
the Box franchises. They provided credit to startups all over America,
$31 billion in 2010 to 1.2 million small and midsized businesses, and
now, next to nothing. Next to nothing, because they were designated as
a nonbank SIFI.
The ranking member brings up AIG, but guess what? AIG was regulated
by a Federal regulator who had full ability to stop anything they were
doing for safety and soundness. And guess what? The regulator, in which
many on the other side of the aisle put total faith into, they missed
it. They screwed up. They said under oath in our committee: Yeah, we
had full authority to stop it, and we just missed it. We just missed
it.
So it is time, Mr. Speaker, that we improve this Financial Stability
Oversight Council. I urge all Members to support H.R. 4061.
Mr. Speaker, I yield back the balance of my time.
Mr. LUETKEMEYER. Mr. Speaker, I rise in strong support of H.R. 4061.
Among other important provisions, a key component of this bill is the
creation of a new subsection K within Sec. 113 of the Dodd Frank Act.
This section calls on FSOC to consider ``the imposition of prudential
standards as opposed to other forms of regulation to mitigate the
identified risks.'' I am confident that members of both parties in the
House and the Senate share the common goal of avoiding future financial
crises--our debates since the enactment of Dodd Frank have been around
how best to achieve this overarching goal. That's why I believe that if
we were considering language today calling on all financial regulators,
both state and Federal, to meet on an ongoing basis, to compare notes
and make recommendations on steps that each agency could take to
achieve this goal, it would pass by unanimous consent.
Asset managers, insurers, and other financial intermediaries serve a
critical role in helping our constituents manage the financial risks
they will face throughout their lives and meet their financial needs
and objectives. Managing assets, whether personal or as part of a
retirement plan such as a 401(k), has increasingly become the
responsibility of individuals who are well served by asset managers and
the products they provide. And managing longevity and mortality risks
are just two areas of expertise that insurers are uniquely situated to
help. I think we would agree these essential products and services
should be well regulated, but in an efficient manner that allows
providers the room to innovate and serve their customers' needs
New subsection K of this bill is a charge for regulators to act, on
an ongoing basis, to take the steps necessary to help companies operate
in a safe and sound manner as the first line of defense against future
economic stress. In other words, this bill encourages regulators to
determine what activities are potentially risky, using, among other
tools, the process set forth in section 120 of the Dodd Frank Act, and
calls on the appropriate prudential regulator to ensure they
appropriately address such activities on an ongoing basis. This
approach makes eminent sense, can help prevent a future crisis, and I
am pleased to support this provision and the entire legislation.
The SPEAKER pro tempore (Mr. Mitchell). All time for debate has
expired.
Pursuant to House Resolution 780, the previous question is ordered on
the bill, as amended.
[[Page H3128]]
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. HENSARLING. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, this 15-
minute vote on passage of H.R. 4061 will be followed by 5-minute votes
on:
The motion to recommit on H.R. 4293; and
Passage of H.R. 4293, if ordered.
The vote was taken by electronic device, and there were--yeas 297,
nays 121, not voting 10, as follows:
[Roll No. 135]
YEAS--297
Abraham
Aderholt
Aguilar
Allen
Amash
Amodei
Arrington
Babin
Bacon
Banks (IN)
Barletta
Barr
Barton
Beatty
Bera
Bergman
Beyer
Biggs
Bilirakis
Bishop (MI)
Bishop (UT)
Black
Blackburn
Blum
Blunt Rochester
Bost
Boyle, Brendan F.
Brady (TX)
Brat
Bridenstine
Brooks (AL)
Brooks (IN)
Brown (MD)
Brownley (CA)
Buchanan
Buck
Bucshon
Budd
Burgess
Bustos
Byrne
Calvert
Carbajal
Cardenas
Carter (GA)
Carter (TX)
Chabot
Cheney
Clark (MA)
Coffman
Cole
Collins (GA)
Collins (NY)
Comer
Comstock
Conaway
Cook
Cooper
Correa
Costa
Costello (PA)
Crawford
Crist
Cuellar
Culberson
Curbelo (FL)
Curtis
Davidson
Davis (CA)
Davis, Rodney
Delaney
DelBene
Denham
Dent
DeSantis
DesJarlais
Diaz-Balart
Donovan
Duffy
Duncan (SC)
Duncan (TN)
Dunn
Emmer
Estes (KS)
Esty (CT)
Faso
Ferguson
Fitzpatrick
Fleischmann
Flores
Fortenberry
Foster
Foxx
Frelinghuysen
Gaetz
Gallagher
Garrett
Gianforte
Gibbs
Gohmert
Gonzalez (TX)
Goodlatte
Gosar
Gottheimer
Gowdy
Granger
Graves (GA)
Graves (LA)
Graves (MO)
Griffith
Grothman
Guthrie
Hanabusa
Handel
Harper
Harris
Hartzler
Heck
Hensarling
Herrera Beutler
Hice, Jody B.
Higgins (LA)
Hill
Himes
Holding
Hollingsworth
Hudson
Huizenga
Hultgren
Hunter
Hurd
Issa
Jenkins (KS)
Jenkins (WV)
Johnson (LA)
Johnson (OH)
Johnson, Sam
Jordan
Joyce (OH)
Katko
Keating
Kelly (MS)
Kelly (PA)
Kennedy
Kihuen
Kilmer
Kind
King (IA)
King (NY)
Kinzinger
Knight
Kuster (NH)
Kustoff (TN)
Labrador
LaHood
LaMalfa
Lamborn
Lance
Larsen (WA)
Latta
Lawson (FL)
Lewis (MN)
Lipinski
LoBiondo
Loebsack
Long
Loudermilk
Love
Lucas
Luetkemeyer
Lujan Grisham, M.
MacArthur
Maloney, Sean
Marchant
Marino
Marshall
Massie
Mast
McCarthy
McCaul
McClintock
McEachin
McHenry
McKinley
McMorris Rodgers
McSally
Meadows
Meehan
Meeks
Meng
Messer
Mitchell
Moolenaar
Mooney (WV)
Moulton
Mullin
Murphy (FL)
Neal
Newhouse
Noem
Norcross
Norman
Nunes
O'Halleran
Olson
Palazzo
Palmer
Paulsen
Payne
Pearce
Perlmutter
Perry
Peters
Peterson
Pittenger
Poe (TX)
Poliquin
Posey
Quigley
Ratcliffe
Reed
Reichert
Renacci
Rice (NY)
Rice (SC)
Roby
Roe (TN)
Rogers (AL)
Rogers (KY)
Rohrabacher
Rokita
Rooney, Francis
Ros-Lehtinen
Roskam
Ross
Rothfus
Rouzer
Royce (CA)
Ruiz
Ruppersberger
Russell
Rutherford
Sanford
Schneider
Schrader
Schweikert
Scott, Austin
Scott, David
Sensenbrenner
Sessions
Sewell (AL)
Sherman
Shimkus
Shuster
Sinema
Smith (MO)
Smith (NE)
Smith (NJ)
Smith (TX)
Smucker
Stefanik
Stewart
Stivers
Suozzi
Taylor
Tenney
Thompson (CA)
Thompson (PA)
Thornberry
Tipton
Trott
Turner
Upton
Valadao
Vargas
Veasey
Vela
Wagner
Walberg
Walden
Walker
Walorski
Walters, Mimi
Weber (TX)
Webster (FL)
Wenstrup
Westerman
Williams
Wilson (SC)
Wittman
Womack
Woodall
Yoder
Yoho
Young (AK)
Young (IA)
Zeldin
NAYS--121
Adams
Barragan
Bass
Blumenauer
Bonamici
Brady (PA)
Butterfield
Capuano
Carson (IN)
Cartwright
Castor (FL)
Castro (TX)
Chu, Judy
Cicilline
Clarke (NY)
Clay
Cleaver
Clyburn
Cohen
Connolly
Courtney
Crowley
Cummings
Davis, Danny
DeFazio
DeGette
DeLauro
Demings
DeSaulnier
Deutch
Dingell
Doggett
Doyle, Michael F.
Ellison
Engel
Eshoo
Espaillat
Evans
Fudge
Gabbard
Gallego
Garamendi
Gomez
Green, Al
Green, Gene
Grijalva
Gutierrez
Hastings
Higgins (NY)
Hoyer
Huffman
Jackson Lee
Jayapal
Jeffries
Johnson (GA)
Johnson, E. B.
Jones
Kaptur
Kelly (IL)
Khanna
Kildee
Krishnamoorthi
Langevin
Larson (CT)
Lawrence
Lee
Levin
Lewis (GA)
Lieu, Ted
Lofgren
Lowenthal
Lowey
Lujan, Ben Ray
Lynch
Maloney, Carolyn B.
Matsui
McCollum
McGovern
McNerney
Nadler
Napolitano
Nolan
O'Rourke
Pallone
Panetta
Pascrell
Pelosi
Pingree
Pocan
Polis
Price (NC)
Raskin
Richmond
Rosen
Roybal-Allard
Rush
Ryan (OH)
Sanchez
Sarbanes
Schakowsky
Schiff
Scott (VA)
Serrano
Sires
Smith (WA)
Soto
Speier
Swalwell (CA)
Takano
Thompson (MS)
Titus
Tonko
Torres
Tsongas
Velazquez
Visclosky
Wasserman Schultz
Waters, Maxine
Watson Coleman
Welch
Yarmuth
NOT VOTING--10
Bishop (GA)
Cramer
Frankel (FL)
Moore
Rooney, Thomas J.
Scalise
Shea-Porter
Simpson
Walz
Wilson (FL)
{time} 1653
Mses. BARRAGAN, JACKSON LEE, and Mr. NADLER changed their vote from
``yea'' to ``nay.''
Ms. ESTY of Connecticut, Messrs. MEEKS, HECK, and Mrs. BEATTY changed
their vote from ``nay'' to ``yea.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
Stated against:
Ms. WILSON of Florida. Mr. Speaker, had I been present, I would have
voted ``nay'' on rollcall No. 135.
____________________