[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.

                          ____________________