Financial Stability Oversight Council Improvement Act of 2017

Floor Speech

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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.

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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.

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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.

Don't forget, they were involved with credit default swaps that were not 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.

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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.

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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.

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.

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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.

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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 the 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.

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