WASHINGTON, D.C. — Rep. Spencer Bachus (R-AL6) on Wednesday expressed concerns that the regulatory reach of the U.S. Federal Reserve has been extended too far and may be crushing smaller insurance companies and asset managers.
During a hearing in the the House Financial Services Committee, Bachus pushed Federal Reserve Chair Janet Yellen to implement more transparency into their regulatory decision-making process.
The Financial Stability Oversight Council, of which The Fed is a member, has the power to label companies as “systemically important financial institutions (SIFIs),” which is a designation intended for large financial institutions whose failure could pose threats to the U.S. economy. The label carries with it a higher regulatory burden and raises operating costs that are ultimately passed on to consumers.
Unfortunately, Bachus says the label is now being placed on smaller companies, which was not the original intent. On Wednesday, Bachus urged Yellen to provide companies with specific reasons why they are receiving the label, and to give them steps they could take to shed it.
“My experience is that there is often greater resistance to a designation or ruling when parties feel they have not been consulted or when the process is not transparent enough,” said Bachus. “One of the approaches attracting interest is to require that companies being considered for such a designation be provided with specific reasons why and also a description of steps they could take so they might not be named a SIFI.”
Bachus said this “reasonable approach” would lead to more certainty and confidence in the decision-making of the Financial Stability Oversight Council. The Federal Reserve is a key member of the powerful panel, which was created in the wake of the 2008 financial crisis to monitor major potential risks to the economy.
Today’s hearing marked the final time that Bachus will participate in the twice-annual appearance of the Federal Reserve Chair before the committee. Bachus announced last year that he would not seek an eleventh term in the U.S. House.
During more than two decades on the committee, including a six-year leadership term, Bachus has heard testimony from and questioned Fed Chairs Alan Greenspan, Ben Bernanke, and Dr. Yellen, the most recent presidential appointee.
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