Republican lawmakers on Tuesday asked the U.S. Treasury secretary to review the process a government council uses to label non-bank institutions “too big to fail,” saying the additional capital requirements and regulations are too onerous.
The current designation process “lacks transparency and accountability, insufficiently tracks data, and does not have a consistent methodology for determinations,” wrote 10 Republican senators to Treasury Secretary Steve Mnuchin, who chairs the Financial Stability Oversight Council.
The council “has created substantial new regulatory costs while putting taxpayers on the hook for any future bailout to these firms,” said the letter, signed by Arkansas Senator Tom Cotton and Idaho Senator Mike Crapo, who chairs the Senate’s banking committee.
Treasury did not immediately comment on the letter.
The Financial Stability Oversight Council was created by the Dodd-Frank Wall Street reform law, which former Democratic President Barack Obama signed in 2010 to prevent a repeat of the 2007-09 financial crisis.
Republicans consider the designations of non-banks one of the most egregious extensions of federal power included in the law. Only two insurers, American International Group Inc and Prudential Financial Inc currently have the label, which triggers tougher oversight and requires them to hold more capital in case they come into crisis.
A judge last year struck down the designation of MetLife Inc, and the government under Obama appealed the ruling. Until the appeal is decided, MetLife is not considered systemically important.
While an overhaul of Dodd-Frank is progressing in the House of Representatives, reform efforts are moving slowly in the Senate. Representative Ann Wagner, a Republican from Missouri, on Tuesday said the Republican plan, called the CHOICE Act, would make the council more accountable.
As chair of the council, Mnuchin may be able to make changes faster than lawmakers. He has said he would like to review the council’s work and Republican President Donald Trump has said he wants to cut a lot out of Dodd-Frank.
A spokeswoman for Cotton said there were moves Mnuchin, appointed by Trump, could make without legislation, such as dropping the MetLife appeal, releasing FSOC’s criteria for labeling non-banks as systemically important, or providing steps that designated companies can follow to have the label lifted.
(Reporting by Lisa Lambert; Editing by Lisa Shumaker)