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June 5, 2013

Financial firms face new clampdown

“Led by Treasury Secretary Jack Lew, the 10-member Financial Stability Oversight Council (FSOC) voted during a closed meeting to move forward with plans to designate “an initial set” of undisclosed firms, Treasury spokeswoman Suzanne Elio said.

“Today, the Council took another important step forward by exercising one of its principal authorities to protect taxpayers, reduce risk in the financial system, and promote financial stability,” Lew, the panel’s chairman, said in a written statement.

Under the proposed designation, firms labeled as “systemically important” would be subject to increased new regulations imposed by the Federal Reserve, which traditionally supervises banks.

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The long-anticipated action is among the boldest moves to date by the FSOC, which was created by the Dodd-Frank Wall Street reform bill in the aftermath of the 2008 economic crisis.

It is a step toward clamping down on the “shadow banking” world, which was virtually unregulated before the crisis, said Dennis Kelleher, president of Better Markets, a nonprofit group that promotes the public interest in the financial markets.

“Banks and nonbanks have to be regulated, or else we’re going to have another crash,” he said.”

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Read full Hill article here

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