Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Republican senators want review of 'too big to fail' process

Published 03/28/2017, 05:21 PM
Updated 03/28/2017, 05:30 PM
Republican senators want review of 'too big to fail' process

Republican senators want review of 'too big to fail' process

WASHINGTON (Reuters) - Republican lawmakers on Tuesday asked the U.S. Treasury secretary to review the process a government council uses to label non-bank institutions "too big to fail," saying the additional capital requirements and regulations are too onerous.

The current designation process "lacks transparency and accountability, insufficiently tracks data, and does not have a consistent methodology for determinations," wrote 10 Republican senators to Treasury Secretary Steve Mnuchin, who chairs the Financial Stability Oversight Council.

The council "has created substantial new regulatory costs while putting taxpayers on the hook for any future bailout to these firms," said the letter, signed by Arkansas Senator Tom Cotton and Idaho Senator Mike Crapo, who chairs the Senate's banking committee.

Treasury did not immediately comment on the letter.

The Financial Stability Oversight Council was created by the Dodd-Frank Wall Street reform law, which former Democratic President Barack Obama signed in 2010 to prevent a repeat of the 2007-09 financial crisis.

Republicans consider the designations of non-banks one of the most egregious extensions of federal power included in the law. Only two insurers, American International Group Inc (NYSE:AIG) and Prudential Financial Inc (NYSE:PRU) currently have the label, which triggers tougher oversight and requires them to hold more capital in case they come into crisis.

A judge last year struck down the designation of MetLife Inc (NYSE:MET), and the government under Obama appealed the ruling. Until the appeal is decided, MetLife is not considered systemically important.

While an overhaul of Dodd-Frank is progressing in the House of Representatives, reform efforts are moving slowly in the Senate. Representative Ann Wagner, a Republican from Missouri, on Tuesday said the Republican plan, called the CHOICE Act, would make the council more accountable.

As chair of the council, Mnuchin may be able to make changes faster than lawmakers. He has said he would like to review the council's work and Republican President Donald Trump has said he wants to cut a lot out of Dodd-Frank.

A spokeswoman for Cotton said there were moves Mnuchin, appointed by Trump, could make without legislation, such as dropping the MetLife appeal, releasing FSOC's criteria for labeling non-banks as systemically important, or providing steps that designated companies can follow to have the label lifted.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.