U.S. Representative

Reuters
March 14, 2013

U.S. lawmakers on Thursday pressed a new financial risk council to release more details about closed-door meetings, saying the public needs to know more about what regulators are doing to prevent the next financial crisis.

A government watchdog had previously criticized the Financial Stability Oversight Council, which is made up of the heads of U.S. financial regulatory agencies, for not providing insight about what it does, even when the information is not market-sensitive.

"The current FSOC manner of disclosure is simply not working," said Representative Patrick McHenry, a North Carolina Republican who heads the House of Representatives Financial Services Committee's oversight panel.

Congress created the FSOC as part of the 2010 Dodd-Frank financial law to boost coordination between regulators and to ramp up efforts to spot potential problems in the financial system before they create trouble.

The council, a key part of the U.S. response to the 2007-09 financial crisis, has been working on identifying non-bank financial firms for heightened oversight by the Federal Reserve, encouraging new regulation of money market funds and other issues.

But the council has faced criticism from lawmakers and others that it has not disclosed enough information about its activities.

An audit by the Government Accountability Office last year called out FSOC for being secretive in its deliberations on major regulatory responsibilities and for sharing little information about its views on big market events, such as the European debt crisis.

"The GAO report found that the public cannot easily monitor FSOC's progress toward fulfilling its statutory purpose because it does not maintain sufficiently detailed records of its meetings and has not implemented a satisfactory policy to disclose those records," said Representative Dennis Ross, a Florida Republican.

The GAO raised similar concerns about the Treasury's Office of Financial Research, or OFR, another new office created by the Dodd-Frank law to analyze data about market threats.

Nicole Clowers, director of the GAO's financial markets and community investment division, which prepared the report, said FSOC could be more like the Federal Reserve, which provides greater detail in its meeting minutes. Other regulatory agencies also publish detailed agendas ahead of each meeting.

Amias Gerety, the Treasury Department's deputy assistant secretary for FSOC, said the council is required to hold public meetings at least twice a year and tries to open more of its meetings. The group announces its meetings on its website and publishes minutes afterward.

Gerety also said that because so much of its work involves individual financial firms or potential risks to financial markets, the council has to be careful not to disclose confidential or otherwise harmful information.

"On a number of the topics that have been discussed here today, there has been tremendous pressure (in) the other direction," Gerety said.

"The council has always tried to strive to protect confidential supervisory information so we have an open dialogue within the regulatory community while also publishing and getting public input on decisions made by the council," he said.

BUDGET CUTS
The FSOC and its research arm, the OFR, are also grappling with how to continue operating in light of across-the-board government spending cuts known as sequestration that kicked in on March 1.

Although both divisions are now funded through industry fees and not taxpayer funds, they are subject to budget cuts due to a quirk in the law, according to the Office of Management and Budget.

The Financial Research Fund, which pays for the FSOC and the research office, was subject to cuts of 7.6 percent, or $12 million, the OMB has said.

"It certainly will affect us, and we're developing a plan to make sure that we're as effective as we can be given the law," Gerety said on Thursday.