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114th Congress   }                                       {      Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                       {     114-507

======================================================================



 
                FSOC TRANSPARENCY AND ACCOUNTABILITY ACT

                                _______
                                

 April 19, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3557]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3557) to amend the Financial Stability Act of 
2010 to require the Financial Stability Oversight Council to 
hold open meetings and comply with the requirements of the 
Federal Advisory Committee Act, to provide additional 
improvements to the Council, and for other purposes, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                          Purpose and Summary

    On September 8, 2015, Representative Scott Garrett 
introduced H.R. 3557, the ``FSOC Transparency and 
Accountability Act,'' which amends Section 111 of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (P.L. 111-
203) to improve the transparency, operations and accountability 
of the Financial Stability Oversight Council (FSOC). H.R. 3557 
subjects the FSOC to both the Government in the Sunshine Act 
and the Federal Advisory Committee Act. The bill allows all 
members of the Commissions and Boards represented on the FSOC--
such as the Securities and Exchange Commission (SEC), the 
Federal Reserve, the Commodity Futures Trading Commission, and 
the National Credit Union Administration--to attend and 
participate in the FSOC's meetings. The bill also requires that 
before the principal of a Commission or Board represented on 
the FSOC votes as an FSOC member on an issue before the FSOC, 
the Commission or Board must vote on the issue, and the 
principal must follow that vote at the FSOC meeting. Finally, 
H.R. 3557 permits Members of the Committee on Financial 
Services and the Committee on Banking, Housing, and Urban 
Affairs of the Senate to attend all FSOC meetings, whether or 
not the meeting is open to the public.

                  Background and Need for Legislation

    The Dodd-Frank Act concentrates in the hands of the 
unelected and the unaccountable a level of discretionary power 
that is extraordinary in a democratic system of checks and 
balances. Nowhere is this bias in favor of regulatory fiat and 
technocratic expertise more evident than in the operations of 
the FSOC.
    The proponents of the FSOC believed that by creating a 15-
member committee that brought together the heads of the major 
financial regulatory agencies that had missed the last crisis--
along with the heads of some newly-created agencies--they had 
succeeded in reducing the likelihood of future crises. There 
is, however, a significant flaw in the FSOC's theory of 
regulation by super-committee: simply getting regulators in a 
room does not make them any more expert about the subjects over 
which they have jurisdiction, and it certainly does not give 
them expertise in the subjects over which they have no 
jurisdiction. Rather than leveraging the expertise of the 
regulators having primary responsibility for particular areas 
and institutions in the financial system, the FSOC's voting 
structure ensures that FSOC Members who know little or nothing 
about these matters will vote on questions affecting entire 
industries.
    Despite relying on the collective wisdom of regulators, the 
FSOC may well be the nation's least transparent federal agency. 
Most of the time, the FSOC's meetings are closed to the public, 
and the FSOC keeps sparse documents about its deliberations. 
Through March 2016, the FSOC had held 56 meetings at which 
substantive matters were considered, but the minutes for those 
meetings did not describe the FSOC members' perspectives and 
insights concerning the matters discussed. A GAO official noted 
that the FSOC's ``current practices do not provide detailed 
records even for policymakers, including members of FSOC, to 
assess decisions.'' Instead, the minutes simply list the names 
of persons attending each meeting, the names of presenters, and 
the subjects of their presentations together with cursory 
descriptions of them; it is impossible for anyone reading the 
minutes to know what the FSOC's principals said or thought 
about the matters discussed at the meetings because that 
information is not summarized in the minutes. The minutes are 
often not more than five and a half pages long, with half the 
pages devoted to memorializing attendees' names and the 
resolutions considered.
    The FSOC's secrecy about its meetings stands in stark 
contrast to the Federal Reserve, which is itself hardly a 
paragon of open government. The Federal Reserve releases 
transcripts of meetings of the Federal Open Market Committee 
(FOMC), its interest rate-setting committee, as well as 
background material relied on by meeting participants and 
lengthy minutes that describe in detail the issues considered 
and the participants' perspectives on those matters. Given the 
sensitive nature of the FOMC's work and the matters discussed, 
the FOMC releases information on a delayed basis after each 
meeting, thus striking a balance between protecting sensitive 
information that could move markets or affect financial 
institutions and allowing the public, Congress, and the media 
access to information that is of public concern. The FOMC's 
transparency demonstrates that the FSOC can and should do 
better at providing the public with information about its 
meetings.
    The minimal detail of the FSOC's meeting records is of 
particular concern because the public cannot easily monitor the 
FSOC. The public cannot attend FSOC meetings because 
approximately two-thirds of them take place in executive 
session, even though the FSOC's governance documents exhort it 
to hold public meetings ``whenever possible.'' The FSOC has 
also sealed off its meetings to regulators who are not FSOC 
members. For example, the FSOC denied the requests made by 
former SEC Commissioner Daniel Gallagher and current SEC 
Commissioner Michael Piwowar to attend FSOC meetings. And the 
FSOC has refused to allow Members of Congress to attend FSOC 
meetings: in 2014, Capital Markets and Government Sponsored 
Enterprises Subcommittee Chairman Scott Garrett asked to attend 
a FSOC meeting. His request was summarily denied.
    Even Dennis Kelleher, the Chief Executive Officer of Better 
Markets, a non-profit that has consistently advocated for more 
intrusive regulation of the financial sector, is bothered by 
the FSOC's lack of transparency:

          The FSOC's proceedings make the Politburo look open 
        by comparison. No one in America even knows who they 
        are. At the few open meetings they have, they snap 
        their fingers and it's over, and they are all scripted. 
        They treat their information as if it were state 
        secrets.

                                Hearings

    The Committee on Financial Services' held no hearings 
examining matters relating to H.R. 3557.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 3, 2015 and ordered H.R. 3557 to be reported favorably 
to the House without amendment by a recorded vote of 33 yeas to 
24 nays (recorded vote no. FC-70), a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote in Committee was a motion by Chairman 
Hensarling to report the bill favorably to the House without 
amendment. That motion was agreed to by a recorded vote of 33 
yeas to 24 nays (record vote no. FC-70), a quorum being 
present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 3557 
will bring accountability and transparency to the FSOC's 
proceedings by allowing for the participation of all members of 
the Commissions or Boards that are represented on the FSOC, 
requiring that any vote cast by a voting member of the FSOC 
represent a majority position of the Commission or Board 
chaired by such member, and to allow members of Congress on the 
congressional committees with jurisdiction over the FSOC to 
attend all FSOC meetings.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 10, 2016.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3557, the FSOC 
Transparency and Accountability Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Nathaniel 
Frentz.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 3557--FSOC Transparency and Accountability Act

    H.R. 3557 would allow all members of the governing bodies 
of certain agencies that are represented on the Financial 
Stability Oversight Council (FSOC)--the Securities and Exchange 
Commission (SEC), the Commodity Futures Trading Commission 
(CFTC), the Board of Governors of the Federal Reserve System 
(FRS), the Federal Deposit Insurance Corporation (FDIC), and 
the National Credit Union Administration (NCUA)--to become 
voting members of the FSOC. The bill, however, would allow only 
a single vote to be cast by each entity. Further, H.R. 3557 
would require each of those entities to determine its vote on 
FSOC issues following the voting process already in place at 
each agency.
    The bill also would require the FSOC to comply with the 
Federal Advisory Committee Act (FACA) and to follow the 
``Government in the Sunshine Act,'' which allows members of the 
public access, with certain exceptions, to agency meetings.
    CBO estimates that enacting H.R. 3557 would reduce revenues 
by $8 million and increase direct spending by an insignificant 
amount over the 2016-2026 period. We estimate that implementing 
the bill would increase net discretionary costs by $4 million 
over the 2016-2021 period. Because enacting H.R. 3557 would 
affect both direct spending and revenues, pay-as-you-go 
procedures apply.
    CBO estimates that enacting H.R. 3557 would not increase 
net direct spending or on-budget deficits by more than $5 
billion in any of the four consecutive 10-year periods 
beginning in 2027.
    Based on information from the Federal Reserve, CBO 
estimates that H.R. 3557 would reduce the Federal Reserve's 
remittances to the Treasury, and therefore revenues, by $8 
million over the 2016-2026 period. That reduction in revenue, 
which would amount to less than $500,000 in 2016 and about $1 
million in each subsequent year, reflects increased costs for 
the Federal Reserve to hire additional staff to support members 
of the Board of Governors regarding voting on items to be 
considered by the FSOC.
    Based on information from the Department of the Treasury, 
FDIC, and NCUA, CBO estimates that enacting H.R. 3557 would 
have an insignificant effect on net direct spending over the 
2016-2026 period. CBO expects FDIC and NCUA would spend less 
than $500,000 per year to provide support to members of the 
governing board that would be voting on items to be considered 
by FSOC; further, those costs would be offset by fees charged 
by those agencies. CBO expects the annual costs to FSOC to 
comply with the new administrative requirements under the bill 
would be minimal in each year, and total less than $500,000 
over the 2016-2026 period. In addition, FSOC is authorized to 
levy an assessment on certain financial institutions to offset 
its operating costs. CBO expects FSOC would exercise that 
authority to offset the additional costs associated with H.R. 
3557. We estimate that the annual increase in revenues from 
that levy also would be minimal, and also would total less than 
$500,000 over the 2016-2026 period.
    Based on information from the SEC and the CFTC, CBO 
estimates that the costs to both agencies to provide support to 
commission members that would be voting on items to be 
considered by FSOC would be roughly equal--about $500,000 each, 
per year. Under current law, the SEC is authorized to collect 
fees sufficient to offset its appropriation each year. 
Therefore, we estimate that the net cost to the SEC would be 
negligible each year, assuming appropriation action consistent 
with that authority. CBO estimates that implementing this 
provision would cost about $4 million over the 2016-2021 period 
for CFTC's portion of the total cost, assuming appropriation of 
the necessary amounts.
    H.R. 3557 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contacts for this estimate are Sarah Puro 
(for federal costs) and Nathaniel Frentz (for federal 
revenues). The estimate was approved by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 3557 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 3557 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 3557 contains no directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 3557 as the ``FSOC Transparency and 
Accountability Act.''

Section 2. Financial stability oversight council transparency

    Amends section 111 of the Financial Stability Act of 2010 
to make the FSOC subject to the Federal Advisory Committee Act 
and to insert a new subsection (g) to require the FSOC to abide 
by the Government in the Sunshine Act. Further, the bill amends 
Section 111(b) of the Act, to allow all members of the 
Commission and Board to attend and participate in FSOC 
meetings, and requires that each Commission or Board vote on 
the issue prior to the FSOC meeting and that the principal 
follow that vote in the FSOC meeting. Lastly, the bill amends 
Section 111(e) of the Act to allow Members of the Committee on 
Financial Services and the Committee on Banking, Housing, and 
Urban Affairs to attend all FSOC meetings.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

           SECTION 111 OF THE FINANCIAL STABILITY ACT OF 2010


SEC. 111. FINANCIAL STABILITY OVERSIGHT COUNCIL ESTABLISHED.

  (a) Establishment.--Effective on the date of enactment of 
this Act, there is established the Financial Stability 
Oversight Council.
  (b) Membership.--The Council shall consist of the following 
members:
          (1) Voting members.--The voting members, [who shall 
        each] who shall, except as provided below, each have 1 
        vote on the Council shall be--
                  (A) the Secretary of the Treasury, who shall 
                serve as Chairperson of the Council;
                  [(B) the Chairman of the Board of Governors;]
                  (B) each member of the Board of Governors, 
                who shall collectively have 1 vote on the 
                Council;
                  (C) the Comptroller of the Currency;
                  (D) the Director of the Bureau;
                  [(E) the Chairman of the Commission;
                  [(F) the Chairperson of the Corporation;
                  [(G) the Chairperson of the Commodity Futures 
                Trading Commission;]
                  (E) each member of the Commission, who shall 
                collectively have 1 vote on the Council;
                  (F) each member of the Corporation, who shall 
                collectively have 1 vote on the Council;
                  (G) each member of the Commodity Futures 
                Trading Commission, who shall collectively have 
                1 vote on the Council;
                  (H) the Director of the Federal Housing 
                Finance Agency;
                  [(I) the Chairman of the National Credit 
                Union Administration Board; and]
                  (I) each member of the National Credit Union 
                Administration Board, who shall collectively 
                have 1 vote on the Council;
                  (J) an independent member appointed by the 
                President, by and with the advice and consent 
                of the Senate, having insurance expertise.
          (2) Nonvoting members.--The nonvoting members, who 
        shall serve in an advisory capacity as a nonvoting 
        member of the Council, shall be--
                  (A) the Director of the Office of Financial 
                Research;
                  (B) the Director of the Federal Insurance 
                Office;
                  (C) a State insurance commissioner, to be 
                designated by a selection process determined by 
                the State insurance commissioners;
                  (D) a State banking supervisor, to be 
                designated by a selection process determined by 
                the State banking supervisors; and
                  (E) a State securities commissioner (or an 
                officer performing like functions), to be 
                designated by a selection process determined by 
                such State securities commissioners.
          (3) Nonvoting member participation.--The nonvoting 
        members of the Council shall not be excluded from any 
        of the proceedings, meetings, discussions, or 
        deliberations of the Council, except that the 
        Chairperson may, upon an affirmative vote of the member 
        agencies, exclude the nonvoting members from any of the 
        proceedings, meetings, discussions, or deliberations of 
        the Council when necessary to safeguard and promote the 
        free exchange of confidential supervisory information.
          (4) Voting by multi-person entity.--
                  (A) Voting within the entity.--An entity 
                described under subparagraph (B), (E), (F), (G) 
                or (I) shall determine the entity's Council 
                vote by using the voting process normally 
                applicable to votes by the entity's members.
                  (B) Casting of entity vote.--The 1 collective 
                Council vote of an entity described under 
                subparagraph (A) shall be cast by the head of 
                such agency or, in the event such head is 
                unable to cast such vote, the next most senior 
                member of the entity available.
  (c) Terms; Vacancy.--
          (1) Terms.--The independent member of the Council 
        shall serve for a term of 6 years, and each nonvoting 
        member described in subparagraphs (C), (D), and (E) of 
        subsection (b)(2) shall serve for a term of 2 years.
          (2) Vacancy.--Any vacancy on the Council shall be 
        filled in the manner in which the original appointment 
        was made.
          (3) Acting officials may serve.--In the event of a 
        vacancy in the office of the head of a member agency or 
        department, and pending the appointment of a successor, 
        or during the absence or disability of the head of a 
        member agency or department, the acting head of the 
        member agency or department shall serve as a member of 
        the Council in the place of that agency or department 
        head.
  (d) Technical and Professional Advisory Committees.--The 
Council may appoint such special advisory, technical, or 
professional committees as may be useful in carrying out the 
functions of the Council, including an advisory committee 
consisting of State regulators, and the members of such 
committees may be members of the Council, or other persons, or 
both.
  (e) Meetings.--
          (1) Timing.--The Council shall meet at the call of 
        the Chairperson or a majority of the members then 
        serving, but not less frequently than quarterly.
          (2) Rules for conducting business.--The Council shall 
        adopt such rules as may be necessary for the conduct of 
        the business of the Council. Such rules shall be rules 
        of agency organization, procedure, or practice for 
        purposes of section 553 of title 5, United States Code.
          (3) Staff access.--Any member of the Council may 
        select to have one or more individuals on the member's 
        staff attend a meeting of the Council, including any 
        meeting of representatives of the member agencies other 
        than the members themselves.
          (4) Congressional oversight.--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.
          (5) Member agency meetings.--Any meeting of 
        representatives of the member agencies other than the 
        members themselves shall be open to attendance by, and 
        participation of, staff of the Committee on Financial 
        Services of the House of Representatives and the 
        Committee on Banking, Housing, and Urban Affairs of the 
        Senate.
  (f) Voting.--Unless otherwise specified, the Council shall 
make all decisions that it is authorized or required to make by 
a majority vote of the voting members then serving.
  [(g) Nonapplicability of FACA.--The Federal Advisory 
Committee Act (5 U.S.C. App.) shall not apply to the Council, 
or to any special advisory, technical, or professional 
committee appointed by the Council, except that, if an 
advisory, technical, or professional committee has one or more 
members who are not employees of or affiliated with the United 
States Government, the Council shall publish a list of the 
names of the members of such committee.]
  (g) Open Meeting Requirement.--The Council shall be an agency 
for purposes of section 552b of title 5, United States Code 
(commonly referred to as the ``Government in the Sunshine 
Act'').
  (h) Assistance From Federal Agencies.--Any department or 
agency of the United States may provide to the Council and any 
special advisory, technical, or professional committee 
appointed by the Council, such services, funds, facilities, 
staff, and other support services as the Council may determine 
advisable.
  (i) Compensation of Members.--
          (1) Federal employee members.--All members of the 
        Council who are officers or employees of the United 
        States shall serve without compensation in addition to 
        that received for their services as officers or 
        employees of the United States.
          (2) Compensation for non-federal member.--Section 
        5314 of title 5, United States Code, is amended by 
        adding at the end the following: ``Independent Member 
        of the Financial Stability Oversight Council (1).''.
  (j) Detail of Government Employees.--Any employee of the 
Federal Government may be detailed to the Council without 
reimbursement, and such detail shall be without interruption or 
loss of civil service status or privilege. An employee of the 
Federal Government detailed to the Council shall report to and 
be subject to oversight by the Council during the assignment to 
the Council, and shall be compensated by the department or 
agency from which the employee was detailed.

                             MINORITY VIEWS

    H.R. 3557 is designed to diminish and obstruct the 
Financial Stability Oversight Council's (the Council's) 
functions to protect our nation's economy. H.R. 3557, imposes 
restrictions on the Council (even though Congress specifically 
excluded the Council in the Dodd-Frank Act), politicizes its 
membership by adding in all of the regulators' commissioners 
and board members, and, in what is likely unconstitutional, 
gives each Member of the House Financial Services and Senate 
Banking Committees a right to participate in closed door 
Council meetings related to systemic risk.
    The minority believes that transparency is essential to 
ensure that the American people are best served by their 
government. H.R. 3557 neither adds transparency nor increases 
the government's effectiveness. Rather, H.R. 3557 creates 
additional administrative burdens on the Council, potentially 
inhibits its ability to respond to financial crises, and 
creates the specter of political meddling in what should be 
independent, objective, and effective executive decision 
making.
    For these reasons we oppose H.R. 3557.

                                   Maxine Waters.
                                   Denny Heck.
                                   John C. Carney.
                                   Al Green.
                                   Ruben Hinojosa.
                                   Stephen F. Lynch.
                                   Gregory W. Meeks.
                                   Gwen Moore.
                                   Wm. Lacy Clay.
                                   Carolyn B. Maloney.
                                   Keith Ellison.
                                   Joyce Beatty.

                                  [all]