Oversight over financial regulators offers a constitutional check on bureaucracy
As a member of Congress, it is part of my job to listen to my constituents, to those who hired me. A great desire for more transparency and accountability in our state and federal government is something that I have heard ever since I first ran for office. The other part of my job is to actually do something about the concerns of my constituents. Unfortunately, that part of the job has grown increasingly difficult and sometimes impossible for representatives.
When the Founding Fathers wrote the U.S. Constitution they established three coequal branches of government: the executive, the legislative and the judicial. Unfortunately, throughout the history of our great country, the executive branch has grown more powerful. This is much to the detriment of not only our system of checks and balances, but also to our democracy and the American people.
Two prime examples
In America, we now have agencies controlled by unelected and unaccountable bureaucrats that often wield more power and influence than some of our elected representatives in the House or Senate. Two prime examples are the Financial Stability Oversight Council (FSOC) and the Office of Financial Research(OFR).
Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, FSOC is authorized "to identify risks to the financial stability of the United States.” This authority allows FSOC to designate nonbank institutions as Systemically Important Financial Institutions (SIFIs), which in turn increases supervision of and regulation on these firms by the federal government. The OFR, also established under Dodd-Frank, was created to provide the research and analysis necessary for FSOC to perform its statutory mandate.
However, FSOC has made some dubious nonbank SIFI designations and has completely failed to share with Congress the methodology used to make such determinations. In fact, a judge who recently overruled the designation of MetLife as a nonbank SIFI found that FSOC’s designation process was “fatally flawed” and “unreasonable.”
Compounding the problem even further, both former Sen. Christopher Dodd and former Rep. Barney Frank – the authors of the legislation that created both FSOC and OFR – have acknowledged that they never intended insurance companies like MetLife to be designated. Yet, FSOC has taken it upon itself to designate three insurance companies as nonbank SIFIs.
In addition to the troubling lack of transparency and accountability of FSOC, its budget is now five times larger than it was in 2010 due in large part to the fact that it sets its own budget without any approval from Congress.
OFR has received its fair share of criticism too. In 2013, its Asset Manager Report was not only condemned by the industry, but the Securities and Exchange Commission (SEC) also expressed concern.
According to a Reuters report, the SEC was concerned that the people who conducted the study “lacked a fundamental understanding of the fund industry itself” and “the Treasury’s research arm failed to take a number of the SEC’s critical feedback into account.” Thus, the SEC created its own comment period for the report. Better Markets, a group that regularly advocates for increased government regulations, criticized OFR for “the inexplicably and indefensibly poor quality of the work presented in the report.” Despite all of this and the fact that Rep. Frank also condemned the idea of designating asset managers, many fear that FSOC is moving forward with plans to designate them too.
It is important to note that imprudent nonbank SIFI designations have real consequences that hurt real Minnesotans. With the added regulations that come with a designation, so do the costs of complying with them. These costs are passed directly onto consumers, making insurance policies and loans more expensive for American families and businesses.
As I have heard throughout Minnesota’s Sixth Congressional District over the past 15 months, everyday Minnesotans have real stories about the negative effects these harmful regulations are having on their lives. This is why I introduced the FSOC Reform Act last July.
Reasserting 'power of the purse'
By subjecting FSOC and OFR to the congressional appropriations process under this legislation, Congress will reassert its “power of the purse” restoring critical checks and balances that are fundamental to our democracy. This legislation also enhances OFR reporting requirements, allows Americans to weigh in on OFR rules and regulations and saves American taxpayers $1.3 billion in direct spending over the next 10 years.
I am proud that the U.S. House of Representatives passed my legislation on April 14. This bipartisan legislation will bring much needed transparency and accountability to the federal government while also reducing the price of credit for consumers.
While there is a place for regulation in government, it is clear to me that if regulations are made behind closed doors without the input of the American people and the oversight of Congress, then more often than not, they will hurt Minnesotans more than it will help them.
I want to make it abundantly clear: Throughout my time representing you in the People’s House I will do everything I can to restore constitutional checks and balances that have made our country great.