House Republican investigators have asked five U.S. financial regulators to produce records showing the extent to which their rulemaking has been influenced by the Financial Stability Oversight Council.
The House Government Oversight and Reform Committee sent the request Wednesday after obtaining what its members say is evidence of interference by the FSOC in rulemaking by the Securities and Exchange Commission last year. Those records show former SEC Chairman Mary Schapiro and her aides coordinated with FSOC officials to build support for and write a money-market mutual funds rule before other SEC commissioners had seen the proposal.
FSOC is an umbrella group of financial regulators led by the Treasury secretary. It was created by the Dodd-Frank Act to identify and respond to threats to financial stability. The SEC is an independent agency charged with overseeing capital markets.
“The committee is concerned that the council may be structured and operating in a manner that vitiates the independence and core competence of the council’s constituent regulatory bodies,” committee chairman Darrell E. Issa and Representative Jim Jordan wrote in a letter seeking more records by July 21.
The letters were sent to Federal Reserve Chairman Ben S. Bernanke, Commodity Futures Trading Commission Chairman Gary Gensler, Federal Deposit Insurance Corp. Chairman Martin J. Gruenberg, National Credit Union Administration Chairman Debbie Matz, and SEC Chairman Mary Jo White.
Judy Burns, an SEC spokeswoman, didn’t immediately respond to a request for comment.
Robert E. Plaze, a former SEC official who previously oversaw regulation of money funds and participated in the drafting of the rule, said cooperation among regulators to address systemic risk was required by the Dodd-Frank Act. Issa’s investigation could harm the willingness of regulators to communicate about threats to the financial system, Plaze said in a telephone phone interview.
“Everything you see going on, the dynamics and the correspondence, was set up by Congress in Dodd-Frank,” said Plaze, now a partner at Stroock & Stroock & Lavan LLP. “One can argue that Dodd-Frank compromised the SEC’s independence, but if so, this is a product of that.”