Financial Stability Oversight Council FSOC

The 2008 financial crisis showed that no regulator was responsible for risks that cut across banks, insurers, investment firms, and markets. The Dodd-Frank Act, signed July 21, 2010, created the Financial Stability Oversight Council to fill that gap. It is chaired by the Secretary of the Treasury and has ten voting members: the heads of the Federal Reserve, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the Securities and Exchange Commission, the FDIC, the Commodity Futures Trading Commission, the Federal Housing Finance Agency, and the National Credit Union Administration, plus an independent member with insurance expertise. State regulators and others sit as nonvoting members.

The council monitors risks, issues an annual report to Congress, and can recommend tougher standards. Its sharpest tool is designating a nonbank financial company as systemically important, which places it under Federal Reserve supervision. It designated AIG, GE Capital, Prudential, and MetLife between 2013 and 2014, but a federal court rescinded the MetLife designation in 2016 and the others were lifted by 2018. It has also designated key payment and clearing systems. The Office of Financial Research, a Treasury office, supplies data and analysis.

Supporters say a forum that looks at the whole system is the main lesson of 2008, pointing to its work on money market funds, Treasury market stress, and the 2023 regional bank failures. Critics from the industry and some lawmakers say designations were opaque and unfair, and the council shifted in 2019 to focusing on risky activities rather than firms, a policy it reversed in 2023. Others say a council of separate agencies, each with its own priorities, lacks the power to act quickly in a crisis.