A member of Congress is demanding that the New York FederalReserve Bank share with him any information provided by the Bank tomembers of the Financial Stability Oversight Council (FSOC)regarding the process of designating non-banks as systemicallyimportant financial institutions(SIFI).

In a letter to NYFed President William C. Dudley, Rep. ScottGarrett, R-N.J., notes that while the NYFed "is not formallyincluded" as a member of the FSOC, it acts as a resource inproviding financial data to FSOC members regarding financialindustries and companies the FSOC is eyeing as potential threats tothe financial system.

A spokesman for the NYFed acknowledged the agency had receivedthe letter, but declined further comment.

Garrett is acting on behalf of insurance companies, mutual fundsand money managers who have been informed by the FSOC that they areunder scrutiny for possible designation as SIFIs, and are voicingdeep concern about the negative impacts such a designation wouldhave on their business.

Citing the FSOC's recent annual report, securities analysts alsonote that the FSOC is taking a hard look at mortgage servicers andmortgage REITs for possible SIFI designation.

The FSOC already has designated three non-banks—AmericanInternational Group, General Electric Capital Corp. and PrudentialFinancial, Inc. — as SIFIs.

In his letter, Garrett asks Dudley that the NYFed provide himwith "any document, research report, chart or other material thatyou or FedNY staff have presented to members or staff of the FSOC,or any of its member agencies, or the Financial Stability Board, orany of its members, or other personnel, in relation to thepotential designation of firms as SIFIs."

Garrett's request is consistent with legislation reported out bythe House Financial Services Committee (FSC) June 20 that wouldeffectively shut down the operations of the Federal StabilityOversight Council (FSOC) for at least the next year.

One bill, H.R. 4881, would bar the FSOC from designating anyfinancial institution as systemically significant for a year.

The other bill, H.R. 4387, would allow all members of thecommissions and boards represented on the FSOC—such as theSecurities and Exchange Commission, the Federal Reserve, theCommodity Futures Trading Commission, and the National Credit UnionAdministration—to attend and participate in the FSOC'smeetings.

The bills' immediate impact would likely be on the designationof MetLife as a systemically significant financial institution, orSIFI. MetLife is in Stage III or the final stage, of the SIFIdesignation process. MetLife has been lobbying against designationas a SIFI for more than a year, and the FSOC has responded byslowing its decision-making process on MetLife to ensure it has allits ducks in a row before making a decision.

In introducing the second bill, Garrett said, "The council meetsin secret, refuses to disclose substantive transcripts, and blocksany requests by other regulators or Members of Congress for a moreopen and transparent process." In April, Garrett was denied accessto an FSOC meeting.

The bill was reported out by the House FSC along party lines.During debate on the measure, Rep. Maxine Waters, D-Calif., rankingminority member of the House FSC, said, "We are not dealing with agood faith effort to address many of the transparency concerns abipartisan group of members has raised. Rather, this is an effortby Republicans to make the FSOC decision-making impossiblydifficult."  

In his letter, Garrett acknowledged "it is understandable" thatthe Federal Reserve Board may rely on information from individualFed banks in assessing companies located in their districts oroverseen by those banks. "However, considering the lack ofdisclosure and general air of secrecy surrounding FSOCdesignations, and the tremendous stakes involved, it is imperativethat we understand the role your bank has played in thesedecisions," Garrett added.