Two new bills are pending in the House that relate to the Financial Stability Oversight Council and its ability to designate which parts of the financial system are “too big to fail” and thus in need of greater regulatory scrutiny. Both show how political the entire issue has become.
The first bill puts a moratorium on any more such designations until after the November elections. It does not spell that out explicitly, but it might as well. It says no more designations for six months. That’s not exactly subtle. And perhaps for that reason, it has apparently been put forward by a sponsor to be named later.
Even less subtle is the bill introduced by Representative Scott Garrett, Republican of New Jersey and a member of the House Financial Services Committee, which purports to be aimed at increasing transparency at the council.
But its real aim is clearly to muck up the workings of the council, which was created as part of the Dodd-Frank financial overhaul law.
The council is supposed to coordinate all the various federal regulatory agencies and has the power to decide which parts of the financial system need extra regulation. Those subject to extra regulation are also potentially subject to liquidation, should they fail, under the new Orderly Liquidation Authority of Title II of Dodd-Frank.
The council is led by the Treasury secretary, and its 10 voting members include the heads of the Securities and Exchange Commission, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Commodity Futures Trading Commission and the National Credit Union Administration Board, among others.
The Garrett bill would expand the council to include all the members of each agency — all the S.E.C. commissioners, for example — but still give each agency only one vote. They are going to need to find a bigger table for the meeting room and block off more time for all the additional confabulation.
But the fun does not stop there. The real interesting provision of the bill provides that “all meetings of the council, whether or not open to the public, shall be open to the attendance by, and participation of, members of the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate.”
I’m no constitutional law expert, but the phrase “separation of powers” jumped right into my head when I read that. When I talked to a colleague who is an expert, he mentioned the “Incompatibility Clause,” too. As a history major, I recall that having something to do with “placemen” in Britain, when members of Parliament would be appointed to cushy positions in the government.
You see, Congress cannot pass a law and then run over to Treasury to help enforce it. Members of Congress cannot make themselves part of the executive branch. You would think a congressman would have remembered that.
Sure, it does not provide these select members of Congress with a vote, but what about the “participation of” bit? Could members of Congress sit in on Justice Department decisions about who to prosecute and give their two cents?
If this is constitutional, is there any reason the speaker of the House couldn’t be empowered to sit in on Cabinet meetings, or the chairman of a foreign relations committee empowered to sit in on meetings of the secretary of state and his assistants?
In short, this bill is aimed at thwarting the council, at least until it can be removed altogether.