Introduction of the Systemic Risk Mitigation Act

Floor Speech

BREAK IN TRANSCRIPT

Mr. GARCIA of Illinois. Madam Speaker, I rise today to introduce the Systemic Risk Mitigation Act with my colleague, Representative Katie Porter of California.

``Shadow banks'' are large, interconnected and complex firms--they include insurance companies, hedge funds, asset managers and others-- that drive many of the risky practices that economists and regulators have warned about for years. The Trump Administration's deregulatory approach only puts us at greater risk. And as the public health crisis brought on by COVID-19 drags our country into a recession and threatens to ignite underlying problems like corporate debt, it is up to Congress to ensure that regulators address the risks these firms pose to our financial system before it's too late.

Since Trump took office, AIG and Prudential Financial have been de- designated as systemically important and now no non-banks currently carry that designation. Shadow banks like these two are central to our financial system, but by avoiding the designation of ``systemically important'' they escape oversight requirements such as strong capital and liquidity rules and annual stress tests.

Our bill strengthens the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR), regulators created by Dodd-Frank, to identify and mitigate systemic risks in the financial system. The Systemic Risk Mitigation Act:

Automatically designates shadow banks above a certain size and riskiness as ``systemically important.'' These large, complex, and interconnected shadow banks would be subjected to strong capital and liquidity rules, annual stress tests, living wills requirements, and other crucial safeguards;

Provides a process for de-designation of firms that are found not to meet the standard of systemic importance;

Strengthens the FSOC by giving the Council rule-making authority to address systemically risky activities across the financial system;

Provides the FSOC and OFR with more resources and increases their transparency;

Creates a Climate Risk Subcommittee of the FSOC to assess the risk posed by climate factors to the stability of the U.S. financial system.

I urge this body to advance this legislation.

BREAK IN TRANSCRIPT

Source