FSOC Conflicts of Interest

The Dodd-Frank  legislation creates this Financial Stability Oversight Council (FSOC). The major voting members of this board are all drawn from other Government departments, agencies and bureaus. They include Secretary of the Treasury, Chairman of the Federal Reserve, Comptroller of the Currency, Chairman of the SEC, heads of the FDIC and CFTC, etc. One of their major duties is “…to identify risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace…”

If these people had the capacity to identify risks to financial stability, where were they in the years-long runup to the ongoing financial crisis that began in 2007? Where have they been since? But what is more significant is that the Treasury, as part of the Government, and the FED are two units that generated (caused) systemic risks to financial stability. These and other members were also involved in failed regulations (including so-called deregulations). And going forward, how can they identify risks when they themselves are the source of such risks? There is a huge conflict of interest here. They are bound to be insensate when it comes to their own doings and that of the Government of which they are a part. In fact, it is in their interest to avoid recognizing risks and/or to blame scapegoats for their presence or to use supposed risks as excuses for controlling the economy.

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9:50 am on November 5, 2011