Today, Congresswoman Maxine Waters (D-CA), the top Democrat on the House Financial Service Committee, released this statement following the latest move by the Financial Stability Oversight Council (FSOC) – which sits within the U.S. Department of Treasury – to rescind former U.S. Treasury Secretary’s guidance on nonbank systemically important financial institutions (SIFIs).

“When Trump’s former Treasury Secretary Steve Mnuchin worked to undermine the Financial Stability Oversight Council, most notably by curbing FSOC’s ability to designate nonbank financial companies that pose a risk to financial stability for heightened oversight, I sounded the alarm, along with Secretary Janet Yellen and others. Today, I applaud Secretary Yellen and the other FSOC members for proposing to rescind this harmful Trump-era guidance, which only served to hamstring our government’s ability to promote financial stability. I also commend FSOC for proposing an updated plan to better monitor, analyze, and address any potential systemic risk utilizing all available tools that Congress provided it with.

“Last month’s unexpected failure of SVB and Signature Bank and resulting bank crisis, serve as a stark reminder that FSOC and our regulators must remain vigilant and seek to quickly address vulnerabilities in our financial system without delay. Trump’s deregulatory agenda clearly contributed to these bank failures, so I repeat a recommendation I made several years ago: FSOC must not be shy in combatting systemic risk and working to reverse the litany of deregulatory actions that left our system more vulnerable to a financial crisis.

“To that end, FSOC should use its powers under Dodd-Frank to promptly make recommendations to the Federal Reserve and other regulators to strengthen enhanced prudential standards and other requirements that would promote safety and soundness for our banking system. FSOC should also consider using its designation tools wherever appropriate, including to ensure that any large bank without a bank holding company, like Signature Bank, is subject to enhanced prudential standards like other large banks.

“There’s more work ahead, but FSOC’s actions mark a key milestone towards fulfilling the vision Congress had for it to promote financial stability for the benefit of our constituents.”

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Background:

• On December 5, 2019, Congresswoman Waters convened a House Financial Services Committee hearing entitled, “Promoting Financial Stability? Reviewing the Administration’s Deregulatory Approach to Financial Stability.”
  
  
• On December 4, 2020, Congresswoman Waters wrote then President-elect Biden, making a number of recommendations to him and his appointees, including highlighting a letter that Janet Yellen and other former Treasury Secretaries and Fed Chairs wrote describing how Mnuchin’s FSOC designation procedures 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.” In the same letter, Waters also wrote that, “FSOC should discuss how to immediately reverse the litany of deregulatory actions that have left the financial system more vulnerable to a financial crisis.”
  
  

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