WASHINGTON, D.C. – Dennis M. Kelleher, Cofounder, President and CEO, issued the following statement in connection with the closed-door meeting of the Financial Stability Oversight Council (Stability Council) taking place tomorrow:

“The Financial Stability Oversight Council (Stability Council) is one of the most important, if low profile, financial regulatory agencies charged with protecting the country from financial crashes and taxpayer bailouts. The good news is that the Stability Council will hold its first meeting of the Trump administration tomorrow. The bad news is that it has the wrong priorities and, rather than protect the American people, it is likely going to endanger them.

“That’s because the Treasury Secretary, who is the Chair of the Stability Council, stated ‘deregulating the financial sector’ is a ‘critical aspect of [Trump’s] domestic economic agenda.’ After more than four decades of deregulation, including two major and one significant financial crash, the last thing the American people need is further deregulation of the financial industry.

“The Stability Council exists to regulate the largest, most dangerous, systemically significant nonbanks, those that are most likely to cause crashes, economic devastation, and need taxpayer bailouts. That’s what Bear Stearns, AIG, Lehman Brothers, money market funds, and so many more nonbanks did in 2008. Unfortunately, Trump’s first administration caved to the financial industry, gutted the Stability Council, and deregulated systemically significant nonbanks. As a result, there is not one systemically significant nonbank in America that is designated and regulated as such. That is extremely dangerous because the biggest threats lurk in the unregulated darkness of the financial system.

“Those dangers are amplified particularly now that the nonbank financial sector accounts for more than a 60 percent share of financial assets in the U.S. For example, even after the Archegos debacle, family offices (with more than $3 trillion AUM) and hedge funds (with more than $4 trillion AUM) are woefully opaque and unregulated, as are the private markets (almost $12 trillion AUM). At the same time, bank to nonbank lending and interconnections are hitting all-time highs.

“However, none of these threats are on the Stability Council’s meeting agenda. Rather, on Thursday, the Stability Council is scheduled to receive updates on the Treasury markets, cybersecurity, and homeowners insurance and natural disaster developments. While those topics are important, what’s missing is even a discussion of—much less an analysis of—a host of other key sources of risk, and more importantly, any public explanation of the work being done to address those risks. There simply does not appear to be any urgency to focus on the drivers of systemic instability and prevent financial crashes that will undoubtedly have devastating consequences for our economy and Main Street. Worse, while the Stability Council is supposed to get an update on the U.S. Treasury markets, transparency in those markets is being undermined at the same time by a Stability Council member agency, the SEC, which just delayed implementation of a key Treasury market financial stability rule.

“The Stability Council is mandated to take action against financial risks, promote market discipline, and respond to emerging threats to our financial system. It has very powerful tools to do this work, such as designating nonbank firms for heightened supervision or making recommendations to primary financial regulatory agencies to rein-in risky activities. There is no indication any of that is being done or taken seriously.”

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Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.