(Updates with bill by New Jersey Republican in third paragraph.)
June 23 (Bloomberg) -- U.S. Treasury Secretary Jacob J. Lew pushed back against Republican efforts to curtail the work of a council of regulators charged with preventing another financial crisis and said a failure to examine potential risks could lead to “large-scale problems.”
“If we avoid or are discouraged from asking questions” altogether, “our financial system will be more exposed to unseen risks, potentially leading to large-scale problems,” Lew said in testimony prepared for a hearing tomorrow before the House Committee on Financial Services.
A bill by Representative Scott Garrett, a New Jersey Republican, would allow members of Congress into the council’s meetings.
The FSOC is authorized by the 2010 Dodd-Frank law to designate non-bank financial companies as systemically important and subject them to Federal Reserve oversight.
American International Group Inc., Prudential Financial Inc. and General Electric Co.’s finance arm have been named, and MetLife Inc. has been in the final stage of the designation process for almost a year.
Under Dodd-Frank, bank-holding companies with more than $50 billion in assets are overseen by the Fed.
Voting along party lines, the financial services committee approved Garrett’s proposal along with one by Representative Randy Neugebauer of Texas.
Neugebauer’s bill imposes a one-year moratorium on FSOC systemic-risk designations. The bills would need Democratic support to pass the Senate.
As Treasury secretary, Lew is chairman of the council, whose 10 voting members also include the chairmen of the Fed, the Securities and Exchange Commission and the Federal Deposit Insurance Corp.