[Congressional Record Volume 172, Number 27 (Monday, February 9, 2026)]
[House]
[Pages H2074-H2076]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FINANCIAL STABILITY OVERSIGHT COUNCIL IMPROVEMENT ACT OF 2025
Mr. HILL of Arkansas. Mr. Speaker, I move to suspend the rules and
pass the bill (H.R. 3682) to amend the Financial Stability Act of 2010
to require the Financial Stability Oversight Council to consider
alternative approaches before determining that a U.S. nonbank financial
company shall be supervised by the Board of Governors of the Federal
Reserve System, and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 3682
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 2025''.
SEC. 2. FINANCIAL STABILITY OVERSIGHT COUNCIL.
Section 113 of the Financial Stability Act of 2010 (12
U.S.C. 5323) is amended--
(1) in subsection (a)--
(A) in paragraph (1), by striking ``The Council'' and
inserting ``Subject to paragraph (3), the Council''; and
(B) by adding at the end the following:
``(3) Initial determination.--The Council may not vote on a
proposed determination with respect to a U.S. nonbank
financial company under paragraph (1) unless the Council
first determines, in consultation with the company and the
primary financial regulatory agency with respect to the
company, that a different action by the Council or the agency
(including the application of new or heightened standards and
safeguards under section 120), or by the company under a
written plan that is submitted promptly to the Council, is
impracticable or insufficient to mitigate the threat that
material financial distress at the company, or the nature,
scope, size, scale, concentration, interconnectedness, or mix
of the activities of the company, could pose to the financial
stability of the United States.''; and
(2) in subsection (f)(1), by striking ``subsection (e)''
and inserting ``subsections (a)(3) and (e)''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Arkansas (Mr. Hill) and the gentlewoman from Ohio (Mrs. Beatty) each
will control 20 minutes.
The Chair recognizes the gentleman from Arkansas.
General Leave
Mr. HILL of Arkansas. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days to revise and extend their remarks
and include extraneous material on this measure.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Arkansas?
There was no objection.
Mr. HILL of Arkansas. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise today in support of this fine bill offered by Mr.
Foster and Mr. Huizenga. It is a bipartisan bill, Mr. Speaker, the
Financial Stability Oversight Council Improvement Act, after a decade
of collaboration across four Presidential administrations that has led
to this consensus on this measure.
The Financial Stability Oversight Council, FSOC, created in the
aftermath of the global financial crisis, plays an important role in
understanding and examining nonbanks, and that is because many
nonbanks, large nonbanks, are not subject to the same regulations and
supervision as traditional banks, so the Congress created this process.
Unfortunately, its own structure, as composed by political
appointees, can inhibit the Council's ability to effectively critique
fellow agencies or itself when monitoring potential systemic risk to
financial stability by a large nonbank.
H.R. 3682 requires the FSOC to explore alternatives to designating a
nonbank for enhanced supervision by the Federal Reserve. This is at the
heart of the collaboration in this bill.
If a nonbank were improperly designated, it could hinder innovation
and make the United States' financial system less competitive as a
result.
This bill will impose rigorous procedural guardrails and enhance due
diligence protections and a stronger analytic framework before a firm
can be designated as a systemically important financial institution, or
SIFI.
I thank, again, the gentleman from Illinois (Mr. Foster) and the
gentleman from Michigan (Mr. Huizenga) for their collaboration in
producing this solid, bipartisan bill that will protect U.S.
competitiveness and deliver financial stability consistent with FSOC's
mission, but do that in a thoughtful, analytic way that can support a
review of systemic risk.
Mr. Speaker, I urge my colleagues to support the bill, and I reserve
the balance of my time.
Mrs. BEATTY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of H.R. 3682, the Financial Stability
Oversight Council Improvement Act of 2025, sponsored by Representative
Foster.
Let me start by thanking the bill sponsor and our ranking member for
our Financial Institutions Subcommittee for his leadership on these
matters.
Representative Foster has helped raise the alarm regarding the
financial stability threats posed by the AI boom. He has introduced
additional bills that would strengthen our financial stability,
including one to reverse Trump's dangerous budget and staffing cuts to
the Financial Stability Oversight Council and Office of Financial
Research.
[[Page H2075]]
Mr. Foster introduced another bill to close a regulatory gap to
oversee third-party vendors used by credit unions and the GSEs. I know
Republicans have some concerns with the former, but the latter bill has
bipartisan support in the Senate and is timely. Given how our community
financial institutions increasingly rely on these vendors, helping them
access technology to compete, the least we can do is ensure that there
is good oversight to address vulnerabilities like cybersecurity
threats.
Turning to this bill, H.R. 3682, let's step back and remember why we
have a Financial Stability Oversight Council in the first place.
Congress established FSOC following the 2008 global financial crisis to
close regulatory gaps and enhance oversight of large, nonbank financial
firms like AIG or Lehman Brothers that can pose a threat to our
financial stability.
Congress gave FSOC various tools, including the power to designate a
large nonbank company as a systemically important financial institution
for enhanced oversight and regulation. In Trump's first term, they
severely weakened the nonbank designation process. In a letter, former
Treasury Secretaries Geithner, Lew, and Yellen, along with former Fed
Chair Bernanke, warned: ``These changes would make it impossible to
prevent the build-up of risk in financial institutions whose failure
would threaten the stability of the system as a whole.''
Biden's FSOC addressed these concerns and improved procedures for
designations, while importantly ensuring there is due process and
opportunities to consider alternatives to designation that might better
mitigate systemic risks. They also made clear that the Council should
not prioritize designation over other options.
Mr. Foster will make sure that FSOC gives a company and its primary
regulators an opportunity to present alternatives to be promptly
considered by the Council; otherwise, they may proceed and follow the
regular procedures to designate a firm if need be.
The bill also allows FSOC to revise and waive these considerations if
doing so would promote financial stability. Given all of that, Mr.
Speaker, I will support H.R. 3682, and I reserve the balance of my
time.
Mr. HILL of Arkansas. Mr. Speaker, I yield 4 minutes to the gentleman
from Michigan (Mr. Huizenga), who is the vice chairman of our full
committee and the author of this important bill.
Mr. HUIZENGA. Mr. Speaker, I thank my friend and colleague, Mr.
Foster, on the other side for working on this.
Mr. Speaker, I rise today in strong support of Mr. Foster's
legislation, the Financial Stability Oversight Council Improvement Act,
and urge its immediate adoption.
Mr. Speaker, in response to the 2008 financial crisis, Congress,
under the Dodd-Frank Act, created the Financial Stability Oversight
Council, known as FSOC, as the chairman was talking about, and tasked
them with preventing systemic risk. It was absolutely a worthwhile and
needed endeavor.
However, in the early years, the FSOC was given broad-reaching
authorities to designate nonbanks as systemically important financial
institutions, otherwise known as SIFIs.
During President Trump's first administration, the FSOC moved to an
activities-based approach in 2019, which I think was an appropriate
response in a post-MetLife court case world where the Federal
Government lost because of aggressive overreach. In fact, the judge
used the phrase ``excessive and capricious.''
Four years later in 2023, under former President Biden, I believe the
FSOC snapped right back into using those faulty analytical frameworks
for identifying and dealing with systemic risks.
Just last week, in testimony before the House Committee on Financial
Services, Treasury Secretary Bessent emphasized on multiple occasions
that the so-called activities-based approach would be preferred.
We agree.
{time} 1620
Unfortunately, this back-and-forth guidance has not allowed
businesses to plan for the future or make new investments.
Mr. Speaker, why does a SIFI designation actually matter? Many people
watching might ask themselves that. Well, as history has taught us, it
is a broad-reaching issue that can have some very negative
consequences. Excessive regulatory scrutiny and additional costs can
change the way nonbanks conduct business.
Mr. Speaker, we cannot continue applying banklike regulations to
nonbanks that have fundamentally different business models and roles
within the American economy.
The Financial Stability Oversight Council Improvement Act, on which I
am a proud co-lead with Mr. Foster, makes a critical improvement to the
current law.
Before a vote to designate a financial company as a SIFI, the FSOC
must first consult with the company and then its primary regulator to
determine whether alternative actions that could be proposed would be
sufficient or insufficient to address risks to U.S. financial
stability.
Well, amazingly, Mr. Speaker, those two things didn't exist
previously. There was no consultation or discussion with the companies,
and there was no consultation with those regulators. That was a flaw.
Importantly, the Council may not then vote on a proposed designation
unless this determination is made.
Let me remind my colleagues that the SIFI designation process has
been flawed from the start. First, it targeted individual companies for
designation without any process or notice.
Second, it failed to evaluate whether designation would actually
mitigate risks or weigh the costs and benefits to the company, its
shareholders, and ultimately the financial system.
Third, the old system failed to give SIFI designees due process or an
opportunity to address the perceived risk before designation. As a
reminder, the MetLife case took years to settle.
Lastly, it failed to incorporate the views of the primary regulator,
who typically would have better insight into a company's financial
standing.
Mr. Speaker, I believe H.R. 3682 adequately addresses these concerns
and improves the Council's approach to addressing financial stability
risks while creating a stronger, more predictable, and more stable
regulatory environment for all.
Mr. Speaker, I again thank my colleague for yielding, and I urge my
colleagues to support the Financial Stability Oversight Council
Improvement Act.
Mrs. BEATTY. Mr. Speaker, I yield 3 minutes to the gentleman from
Illinois (Mr. Foster), the ranking member of the Subcommittee on
Financial Institutions and the sponsor of this bill.
Mr. FOSTER. Mr. Speaker, I rise in support of the FSOC Improvement
Act.
Following the 2008 financial crisis, Congress enacted the Dodd-Frank
Wall Street Reform and Consumer Protection Act to protect working
families, taxpayers, and the broader economy from consequences of
unchecked financial risk.
Dodd-Frank created the Financial Stability Oversight Council, or
FSOC, to identify risks to financial stability, promote market
discipline, and respond to emerging threats to our economy.
FSOC brings together the heads of 15 financial regulatory bodies,
giving it a unique, systemwide view of the American financial system.
Among its authorities is the ability to designate certain nonbank
financial companies as systemically important financial institutions,
or SIFIs, when their activities or potential failure pose significant
risk to financial stability.
Past attempts by FSOC to designate an entity as systemically
important, however, have been controversial and short-lived. In 2013
and 2014, FSOC designated four nonbank firms, but those designations
were later rescinded following legal challenges, corporate
restructuring, and policy shifts across administrations.
Since its creation, Congress and administration officials have
debated whether FSOC should focus on mitigating the specific activities
that pose the greatest risk, or if FSOC should take a broader, entity-
wide view of the firm's risk profile. Both activities-based and entity-
based approaches can be appropriate, depending on circumstances.
As someone who was present on the Financial Services Committee during
[[Page H2076]]
the global financial crisis, I recall vividly Fed Chair Bernanke
referring to AIG as a giant, well-run insurance company with a hedge
fund grafted onto it, where the risk was concentrated.
In some cases, risks identified by FSOC may be addressed more
effectively through action taken by the company itself, by FSOC, or
through its primary regulator. My bipartisan bill, the FSOC Improvement
Act, promotes a more consistent and transparent process for a SIFI
designation by clarifying that FSOC should work with a firm and its
primary regulator to attempt to mitigate the risks of specific
activities before designating the company as a whole as systemically
important.
Regulators are encouraged to use the full range of available tools
and proceed to designation only when other forms of activity-based
mitigation are found to be ineffective.
Through activity-based mitigation, FSOC will work with firms and
their primary regulators to address risks more quickly and effectively,
drawing on the expertise of the regulatory bodies who work most closely
with the specific firms and industries.
Importantly, this legislation fully preserves FSOC's authority to
take swift action in emergency situations and does not alter the
authorities of FSOC's member agencies to take enforcement actions. If
an emergency arises, FSOC can march in and, with a few quick votes,
designate a firm.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mrs. BEATTY. Mr. Speaker, I yield an additional 30 seconds to the
gentleman from Illinois.
Mr. FOSTER. Mr. Speaker, this bill strengthens FSOC's capability to
execute its mission by improving consistency, accountability, and
outcomes for our financial system.
I appreciate also Ranking Member Waters' support for this bill in
committee and urge my colleagues to support this legislation.
Mr. HILL of Arkansas. Mr. Speaker, I include in the Record the CBO
estimate on this bill.
EFFECTS ON DIRECT SPENDING AND REVENUES OF LEGISLATION CONSIDERED UNDER SUSPENSION OF THE RULES IN THE HOUSE OF
REPRESENTATIVES WEEK OF FEBRUARY 9, 2026
----------------------------------------------------------------------------------------------------------------
Additional
Information on
Bill Number Title Effect on Direct Effect on Revenues Direct Spending
Spending and Revenue
Effects
----------------------------------------------------------------------------------------------------------------
H.R. 3682....................... Finanical Increase by Less Increase by Less Would change
Stability Than $500K. Than $500K. deficits by less
Oversight Council than $500K,
Improvement Act direction
of 2025, as unknown.
amended.
----------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
Mr. HILL of Arkansas. Mr. Speaker, I am prepared to close, and I
reserve the balance of my time.
Mrs. BEATTY. Mr. Speaker, I yield myself the balance of my time to
close.
Mr. Speaker, at a time when threats to our financial stability are
growing, Congress should be doing more to address these concerns,
including closing oversight gaps regarding third-party vendors,
advancing deposit insurance reform and, yes, holding the President
accountable for all of the ways his corruption and chaos erodes trust
and stability.
Again, I thank Representative Foster for his leadership on promoting
financial stability. I also appreciate the way he improved this bill,
which I will support, and I yield back the balance of my time.
The SPEAKER pro tempore. Members are reminded to refrain from
engaging in personalities toward the President.
Mr. HILL of Arkansas. Mr. Speaker, I yield myself the balance of my
time to close.
Mr. Speaker, I thank the gentleman from Illinois and his
collaboration with the gentleman from Michigan to tackle and bring
definition to something that has been a big issue for the past decade,
which is what is the proper method, style, and oversight of designating
a nonbank a systemically important financial institution.
I congratulate them on their bipartisan work. For the reasons I have
stated, I urge a ``yes'' vote, and I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Arkansas (Mr. Hill) that the House suspend the rules and
pass the bill, H.R. 3682, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
____________________