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Oversight over financial regulators offers a constitutional check on bureaucracy

As a member of Congress, it is part of my job to listen to my constituents, to those who hired me. A great desire for more transparency and accountability in our state and federal government is something that I have heard ever since I first ran for office. The other part of my job is to actually do something about the concerns of my constituents. Unfortunately, that part of the job has grown increasingly difficult and sometimes impossible for representatives.

Rep. Tom Emmer

When the Founding Fathers wrote the U.S. Constitution they established three coequal branches of government: the executive, the legislative and the judicial. Unfortunately, throughout the history of our great country, the executive branch has grown more powerful. This is much to the detriment of not only our system of checks and balances, but also to our democracy and the American people.

Two prime examples

In America, we now have agencies controlled by unelected and unaccountable bureaucrats that often wield more power and influence than some of our elected representatives in the House or Senate. Two prime examples are the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR).

Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, FSOC is authorized “to identify risks to the financial stability of the United States.” This authority allows FSOC to designate nonbank institutions as Systemically Important Financial Institutions (SIFIs), which in turn increases supervision of and regulation on these firms by the federal government. The OFR, also established under Dodd-Frank, was created to provide the research and analysis necessary for FSOC to perform its statutory mandate.

However, FSOC has made some dubious nonbank SIFI designations and has completely failed to share with Congress the methodology used to make such determinations. In fact, a judge who recently overruled the designation of MetLife as a nonbank SIFI found that FSOC’s designation process was “fatally flawed” and “unreasonable.”

Compounding the problem even further, both former Sen. Christopher Dodd and former Rep. Barney Frank – the authors of the legislation that created both FSOC and OFR – have acknowledged that they never intended insurance companies like MetLife to be designated. Yet, FSOC has taken it upon itself to designate three insurance companies as nonbank SIFIs.

Ballooning budget

In addition to the troubling lack of transparency and accountability of FSOC, its budget is now five times larger than it was in 2010 due in large part to the fact that it sets its own budget without any approval from Congress.

OFR has received its fair share of criticism too. In 2013, its Asset Manager Report was not only condemned by the industry, but the Securities and Exchange Commission (SEC) also expressed concern.

According to a Reuters report, the SEC was concerned that the people who conducted the study “lacked a fundamental understanding of the fund industry itself” and “the Treasury’s research arm failed to take a number of the SEC’s critical feedback into account.” Thus, the SEC created its own comment period for the report. Better Markets, a group that regularly advocates for increased government regulations, criticized OFR for “the inexplicably and indefensibly poor quality of the work presented in the report.” Despite all of this and the fact that Rep. Frank also condemned the idea of designating asset managers, many fear that FSOC is moving forward with plans to designate them too.

It is important to note that imprudent nonbank SIFI designations have real consequences that hurt real Minnesotans. With the added regulations that come with a designation, so do the costs of complying with them. These costs are passed directly onto consumers, making insurance policies and loans more expensive for American families and businesses.

As I have heard throughout Minnesota’s Sixth Congressional District over the past 15 months, everyday Minnesotans have real stories about the negative effects these harmful regulations are having on their lives. This is why I introduced the FSOC Reform Act last July.

Reasserting ‘power of the purse’

By subjecting FSOC and OFR to the congressional appropriations process under this legislation, Congress will reassert its “power of the purse” restoring critical checks and balances that are fundamental to our democracy. This legislation also enhances OFR reporting requirements, allows Americans to weigh in on OFR rules and regulations and saves American taxpayers $1.3 billion in direct spending over the next 10 years.

I am proud that the U.S. House of Representatives passed my legislation on April 14. This bipartisan legislation will bring much needed transparency and accountability to the federal government while also reducing the price of credit for consumers.

While there is a place for regulation in government, it is clear to me that if regulations are made behind closed doors without the input of the American people and the oversight of Congress, then more often than not, they will hurt Minnesotans more than it will help them.

I want to make it abundantly clear: Throughout my time representing you in the People’s House I will do everything I can to restore constitutional checks and balances that have made our country great.

Republican Rep. Tom Emmer represents Minnesota’s Sixth Congressional District in the U.S. House of Representatives.


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Comments (5)

  1. Submitted by joe smith on 04/25/2016 - 03:23 pm.

    Nothing to see here Rep Emmer

    All you have to do is listen to the main stream media to understand that “all is well” not only here in Minn but in our country…. The true reality is Dodd/Frank has been a disaster in its original purpose of changing the too big to fail bank problem that led to huge bailouts. I never understood how folks on the left thought the legislation written by bank lobbyists, Wall Street and elites would eliminate the very problem they created. Politicians claim they want transparency but we very seldom see it. Obama claimed he would run the most transparent presidency ever and has run a presidency that Bob Woodward has said surpasses Nixon Watergate years in lack of transparency.

    The non elected folks running these special agencies without congressional oversight are ripe for balloted budgets and fraud. The good news is a few folks in congress have seen this all too often and maybe, just maybe, are willing to do something about it…. We shall see.

  2. Submitted by Robert Helland on 04/25/2016 - 04:11 pm.

    “Everyday Minnesotans”? Ha!

    If by “everyday Minnesotans” he means “banks and insurance companies”. What a joke. I’m optimistic the people of this state will see through this thin special interest smoke-screen. This is just mumbo jumbo to de-regulate and de-fund independent oversight of multi-billion dollar (aka >$50Bn) mega-conglomerates that jeopardized our economy and put their own rewards over our risks. The fact that he panders on the line “saves American taxpayers $1.3 billion in direct spending over the next 10 years” makes his motive clear: make independent regulators dependent on the special interests of congressional lobbyists who fund the campaigns of people like Rep. Emmer.

    “As I have heard throughout Minnesota’s Sixth Congressional District over the past 15 months, everyday Minnesotans have real stories about the negative effects these harmful regulations are having on their lives. This is why I introduced the FSOC Reform Act last July.”

    Jobs? Are you kidding me? As a former “government regulator” I can assure you that, if anything, financial scrutiny and enhanced compliance create more and more higher-paying jobs than they lose. The Congressman wants to see corporate profits, not jobs.

    Finally, the fact that Congress HAS oversight and the judiciary HAS provided a check to power shows the system is functioning as founders intended.

    ~Bob Helland, candidate for US House (MN-6)
    Your best bet to remove and replace Rep. Tom Emmer

  3. Submitted by Jon Kingstad on 04/25/2016 - 07:54 pm.

    Price of credit

    The “price of credit” in common parlance is known as “interest”. Why does Rep. Emmer beat around the bush about what the FSOC and the OFR or “systemically important financial institution” really are or what their purposes are? Why does he really believe it’s necessary to provide some check on these agencies rather than on the behemoths they are attempting to regulate?

    Wikipedia, which seems to have more information about a “systemically important financial institution” than Rep. Emmer is willing to share with his constituents: “a bank, insurance company or other financial institution whose failure might trigger a financial crisis.”

    In other words, a bank or insurance company which is “too big to fail.” A number of former regulators, like Paulsen and Bernanke, expressed regret that they “bailed out” Bear Stearns but not Lehman Brothers, which then went into bankruptcy. Neither of these concerns were banks or bank holding companies or subject to any meaningful regulation. As the 2008 financial crisis made clear, these unregulated institutions were also “too big to fail”. Their irresponsibility were direct factors in worsening an already bad crisis.

    If Rep. Emmer is really concerned about reducing the “price of credit” for his constituents, he’d propose legislation repealing the loophole that allows national banks to locate in states that have no usury limits so they can issue credit cards charging usurious interest rates. That’s for starters. He might then consider making other credit card issuers subject to usury regulations, repealing the preemption clauses in legislation allowing alternative mortgage loans, and get laws passed making pay-day loans illegal. Who’s side is Rep. Emmer really on here?

  4. Submitted by Paul Udstrand on 04/26/2016 - 11:56 am.

    Anti governmentism under the guise of transparency

    If you want to make something more transparent, make it more transparent. Emmer’s problem is that “transparency” in this case means disclosing information about the financial sector that the financial sector would rather not have disclosed. So this isn’t about “transparency” this is about interfering with regulation, de-funding it, and suppressing government agencies under the guise of “oversight”.

    Emmer knows full well that no government agency can exceed the statutory authority granted it by legislators; and the idea that a republican would complain about excessive Executive power is outright hilarious. How many Pawlenty and Bush initiatives were declared unconstitutional? Yet we’re going to restore Executive limits, not by actually limiting the Executive, but by dialing back regulations.

    Just when you think Emmer might be a republican voice of some modicum of reason, he pens this anti-government mumbo jumbo. You’re not fooling anyone Mr. Emmer, and this de-regulation of yours created the financial meltdown in the first place so don’t claim to be working on behalf of your constituents who got slammed by the Great Recession as you try to set the stage for yet another Great Recession.

  5. Submitted by Hiram Foster on 04/26/2016 - 01:20 pm.

    Congressional power

    My own view is that it’s not the executive branch that’s become more powerful, it’s Congress that has become less powerful. Congress, over the last couple of hundred years, has created a system of traditions and rules that have limited it’s ability to exercise power creating a vacuum that in our system of balances, the other two branches have filled.

    Consider the recent Supreme Court nomination. The senate has a great deal of influence over a nomination to the Supreme Court should they choose to use it. But for political reasons and the rules of the senate, the senators currently holding office have chosen abrogate their responsibilities, which by default has resulted in an increase in power of current members on the court. That’s just one example. If Rep. Emmer and his colleagues want a greater role in government it really is up to them to reform the way they do business, and to reject the self imposed system that limits their influence on the American political system. This is within their power. If they can’t do it, the American people can’t do it for them.

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