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As the Financial Stability Oversight Council works through its checklist of jobs mandated by the Dodd-Frank Act and continues a project to spur reform of the money market mutual funds, the big question is: What will the interagency body focus on next?
January 4
WASHINGTON — Sen. Bob Corker raised concerns Tuesday about whether the Financial Stability Oversight Council could unwind a healthy bank solely due to concerns about whether the institution is "too big to fail."
Corker, a senior member of the Senate Banking Committee, pointed to section 121 of the Dodd-Frank reform law in a March 12 letter, asking the ten voting members of the FSOC whether the provision means "that an institution has to be unhealthy to pose a threat to the financial system."
Section 121 of the law dictates that the FSOC can vote to order the Federal Reserve Board to break up an institution if the Fed finds that it's unable to "mitigate a threat to the financial stability of the United States."
"Is it possible for an institution that is solvent to pose a threat simply by being too large, too interconnected with other participants in the financial system, or too complex in its structure?" Corker asks in the letter, requesting information about any plans to issue interpretative guidance on the conditions that would cause the group to consider an institution a threat, despite mitigation efforts.
The Tennessee Republican also raised the issue at a confirmation hearing Tuesday for Consumer Financial Protection Bureau Director Richard Cordray, and Mary Jo White, who has been nominated to chair the Securities and Exchange Commission.
"Is it your understanding that the FSOC has the ability to wind down an institution, even if it's healthy, because it poses a threat to our country, if it were to have problems?" Corker asked Cordray.
Cordray responded that the group has not discussed the issue at meetings he's attended, adding that "it's been an assumption that the failure of an institution, or the impending failure of an institution, and therefore the eminent weakness of the institution, would itself pose a potentially systemic threat to the financial system."
Corker then asked White, who would join the FSOC if confirmed, to review his letter at another time.
