Financial Stability Oversight Council Improvement Act of 2025

Floor Speech

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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 In 2013 and 2014, FSOC designated four nonbank firms, but those designations were later rescinded following legal challenges, corporate restructuring, and policy shifts across administrations.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 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.

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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.

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