Two federal regulators under the Dodd-Frank Act are not fulfilling their missions, according to a report from the Government Accountability Office (GAO).
The Financial Stability Oversight Council (FSCO) and the Office of Financial Research (OFR) were created by Dodd-Frank to identify and address threats to financial stability.
However, despite having had adequate time and ample resources to support their operations, GAO found that FSOC and OFR have not developed a comprehensive approach to identifying threats to the financial system.
Some of the concerns raised by GAO in its report include both FSOC and OFR need to enhance better sharing of key financial risk information with other regulators.
Facilitating information sharing and coordination, GAO believes, would help to eliminate gaps in the regulatory structure.
Also of concern calling for greater transparency is that FSOC does not publish a public agenda prior to meeting, nor does it provide advance public notice of its meetings.
Because of this, the public cannot monitor the council’s activities because it has conducted almost two-thirds of its meetings in private sessions, despite the law requiring it to hold public meetings “whenever possible.”
The public cannot also monitor FSOC’s progress toward fulfilling its statutory purpose because the Council does not maintain detailed records of meetings, nor has it implemented a policy to disclose those records.
The findings have drawn support from members of the House Committee on Financial Services, some of which are asking for documents and information to determine which financial institutions the Obama Administration believes are “too big to fail,” and “too big to jail.”
“By examining FSOC’s efforts to coordinate regulatory action among agencies and to identify systematic risks, including OFR’s efforts in aid of those functions, it seems that neither FSOC nor OFR are presently equipped to discover potential future threats to the financial system and to proactively mitigate them,” said Subcommittee Chairman Patrick McHenry (R-NC).
Appropriate accountability and transparency mechanisms must be established to determine whether FSOC and OFR are effective and to ensure that the public and Congress have enough information to hold these entities accountable for results, writes GAO.
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