In a March 12 letter, Sen. Bob Corker, a senior member of the Senate Banking Committee, raised concerns about whether the Financial Stability Oversight Council would wind down a healthy institution due to concerns regarding whether the bank is "too big to fail."
The Tennessee Republican pointed to section 121 of the Dodd-Frank reform law asking 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,'" writes American Banker's Victoria Finkle.
Corker also raised the issue at a confirmation hearing Tuesday for Consumer Financial Protection Bureau Director Richard Cordray.
"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, stating 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."
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