WASHINGTON—Comptroller of the Currency Jonathan V. Gould today issued remarks at the Financial Stability Oversight Council (FSOC) meeting about the FSOC’s framework for considering the designation of a nonbank financial company.
In his remarks, Comptroller Gould shared the OCC’s support for the proposed framework, which wisely reverts to a common-sense approach consistent with the law.
Thank you, Mr. Secretary.
Earlier in my career, I was directly involved in matters relating to the nonbank designation process. I was part of the team of lawyers and consultants that assisted MetLife over a dozen years ago during FSOC’s attempt to designate and thus subject MetLife to Federal Reserve supervision and bank-like regulation.
The government’s efforts back then were, and remain, among the most egregious abuses of government power that I have seen in my 25-year career. Both the substance and process of the Council’s MetLife designation were deficient, and a court ultimately overrode FSOC’s action. But it took significant resolve and resources to fight this blatant government overreach.
In the years since, I have watched as different iterations of the FSOC have alternatively taken a step towards a more rational framework, only to take a step back.
Today’s proposal wisely reverts to a common-sense approach consistent with the law. It would re-center the Council on an activities-based approach, focusing on identifying and addressing risks at their source, in coordination with primary regulators, before resorting to considerations of company designation.
I support the proposal’s acknowledgement of both the legal necessity and inherent desirability of conducting a cost-benefit analysis should we ever feel the need to embark on a nonbank designation in the future. Cost-benefit analysis also affords an opportunity to determine whether, among other things, subjecting the nonbank financial company to bank-like regulation would actually mitigate the identified risks to financial stability posed by the company. Given the considerable cost and invasiveness of bank-like regulation, and the narrow purposes for which such regulation was designed, the nonbank designation process should be approached with caution and restraint.
I also appreciate the proposal’s restoration of a likelihood-of-distress analysis, a more meaningful definition of what constitutes a threat to U.S. financial stability, and the identification of a clear off-ramp within the designation process.
All of this creates a more rational framework for considering the designation of a nonbank financial company.
I look forward to supporting the proposal and working with my colleagues on the Council as we advance this effort.
Thank you.
