What the FSOC’s Prudential decision tells us about SIFI designation

• In September 2013, the Financial Stability Oversight Council (FSOC) designated Prudential Financial as a systemically important financial institution (SIFI); its rationale was perfunctory and data-free, suggesting that the FSOC sees no need to justify its designation decisions.
• Thus far, the FSOC has been following—and is expected to implement in the US—the decisions and policy positions of the Financial Stability Board, a group of mostly European central banks and regulators that has been designating US firms as global SIFIs.
• If this pattern continues, large sectors of the financial system beyond banking—particularly the securities and capital markets—will be swept into bank-like regulation by the Fed, and firms considered too big to fail may come to dominate currently competitive financial industries. Congress must step in, and quickly.

In September 2013, the Financial Stability Oversight Council (FSOC) determined that Prudential Financial Inc., one of the country’s largest insurers, was a systemically important financial institution (SIFI). Under the Dodd-Frank Act, accordingly, Prudential was turned over to the Federal Reserve for what the act calls “stringent” regulation. In the context of the act, this appears to mean bank-like regulation and supervisory control of risk taking.

The FSOC is a creation of the Dodd-Frank Act and is a uniquely powerful body within the executive branch of the US government. It consists of 15 members, of which 9 are the chairs of other federal financial regulatory agencies. Five are nonvoting members.[1] The secretary of the Treasury is the chairman and has an effective veto over any major FSOC action because the act requires his affirmative vote. In addition, because the members are the chairs of various regulatory agencies, they have all been appointed by the presidential administration in power and are likely to follow the lead of the Treasury secretary on policy simply because he is the highest-level political official at the table.

Insurance is regulated at the state level in the United States, so no federal agency has expertise in insurance. For this reason, the Dodd-Frank Act authorizes the president to appoint (with the consent of the Senate) one voting member of the FSOC who is called the “independent member with insurance expertise.”

The Prudential decision was the second FSOC decision involving an insurance-related firm. In July 2013, the agency designated American International Group (AIG) as a SIFI. That decision was expected, perhaps even politically compelled; AIG had famously been bailed out by the Treasury and the Federal Reserve during the financial crisis. If the SIFI idea has any validity, it would have to apply to AIG. The Prudential decision, however, was the first to designate a nonbank financial institution as a SIFI when that firm had not suffered any significant financial distress during the financial crisis.

Dodd-Frank enjoins the FSOC 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 non-bank financial companies” (Section 112). The decision to designate Prudential as a SIFI was made under Section 113, which authorizes the FSOC to designate a nonbank financial firm as a SIFI if “the Council determines that material financial distress at the US nonbank financial company . . . could pose a threat to the financial stability of the United States.”

The first thing to be said about this language is that it is a remarkable grant of authority and essentially permits the FSOC to determine the scope of its own jurisdiction. Although the courts frown on this when it is called to their attention, it is possible that this grant of authority will never be challenged; regulated firms, fearing retaliation, are very reluctant to
challenge the legal authority of their regulators. In addition, because the key terms the FSOC must apply to take jurisdiction over any particular firm—“financial distress” and “market instability”—have no clear meaning, and because both involve making predictions about the future, they amount to a grant of discretionary authority to the FSOC that may be an unconstitutional delegation of legislative power.

Although the doctrine of unconstitutional delegation has not been used since the 1930s, the two cases to which it was applied by the Supreme Court have not been overruled. If ever there were a candidate for a holding of unconstitutional delegation in the modern era, the grant of authority to the FSOC would be it.[2] As I will discuss, the fact that the FSOC was unable to develop any intelligible principle on which to designate Prudential as a SIFI strongly suggests that Congress delegated the vast discretionary authority that, constitutionally, it alone can exercise. Still, if a firm should in the future challenge its SIFI designation as an unconstitutional delegation or on any other ground, the case is likely to move slowly up to the Supreme Court. During that time, the Financial Stability Board (FSB) and the FSOC may continue to designate SIFIs, ultimately creating a fait accompli in which many firms are already functioning under the control of the Fed by the time the Supreme Court hands down its ruling.

In its Prudential decision, the FSOC makes full use of its discretionary authority; it failed to develop or implement any intelligible standard for determining whether a particular financial firm is a SIFI. The same was true of its prior designations of AIG and GE Capital, which are both equally devoid of any coherent or rational standards. The most descriptive word for all these decisions is “perfunctory.” If it can continue to get away with this, the agency will be free to implement in the United States the designations and other decisions of the FSB. In September 2013, the FSB announced that it plans to extend what it calls the “SIFI framework” to securities firms, asset managers, mutual funds, hedge funds, and others that operate in the capital markets.

Unless Congress intervenes, and soon, to tell the FSOC that it wants to have a say in how SIFIs are designated, large portions of the US financial system will be brought under bank-like regulation by the Fed. This will not only slow the growth of the American economy but also almost certainly create a too-big-to-fail problem in industries that have previously been competitive.

The Prudential Decision

Dodd-Frank sets out the standards that the FSOC is required to use in determining whether a nonbank financial institution threatens the stability of the US financial system. About a dozen factors can be taken into account, but the key ones are

• Leverage;
• Off-balance-sheet exposures;
• The nature, scope, size, scale concentration, interconnectedness, and mix of activities; and
• Reliance on short-term funding.

Whether any or all of these applied to Prudential can only be guessed at by reading the document the FSOC published in support of its decision. In that paper, entitled Basis for the Financial Stability Oversight Council’s Final Determination Regarding Prudential Financial, Inc. (the Basis), the FSOC summarizes its decision as follows:

Prudential is a significant participant in financial markets and the U.S. economy and is significantly interconnected to insurance companies and other financial firms through its products and capital markets activities. Because of Prudential’s interconnectedness, size, certain characteristics of its liabilities and products . . . material financial distress at Prudential could lead to an impairment of financial intermediation or of market functioning that would be sufficiently severe to inflict significant damage on the broader economy.[3]

Although this statement is only a summary, we will see that the agency never adduced any specific evidence to back its assertions. That explains why the two members of the FSOC who had insurance expertise (and were not employees of the Treasury Department) dissented from the FSOC’s decision. On the other hand, the banking regulators—who have no experience or knowledge in this area—all voted for it, following the Treasury’s lead.

The dissent by Roy Woodall, the presidentially appointed independent member with insurance expertise, was particularly stinging:

In making its Final Determination, the Council has adopted the analysis contained in the Basis. Key aspects of said analysis are not supported by the record or actual experience; and, therefore, are not persuasive. The underlying analysis utilizes scenarios that are antithetical to a fundamental and seasoned understanding of the business of insurance, the insurance regulatory environment, and the state insurance company resolution and guaranty fund systems. As presented, therefore, the analysis makes it impossible for me to concur because the grounds for the Final Determination are simply not reasonable or defensible, and provide no basis for me to concur.[4]

The FSOC’s discussion of how Prudential might cause financial instability in the US market was organized under two key subjects, called the asset liquidation channel and the exposure channel. A third channel, critical functions or services, did not add anything to the discussion in the other two and will not be covered in this Outlook.

Asset Liquidation Channel. In its asset liquidation channel argument, the FSOC argued that if policyholders choose to terminate their relationships with Prudential in sufficient numbers, or to seek the cash surrender value of their policies, this could cause Prudential to “liquidate a substantial portion of its general account assets to meet redemption and withdrawal requests.”[5] This in turn “could cause significant disruptions in key markets.”[6] However, the FSOC never explained what a “substantial portion” of Prudential’s assets was, how many policyholders would have to withdraw their funds, or what actual effect that might have on markets.

The FSOC’s liquidation channel argument would be plausible only if there were some likelihood that it might occur. On this question, Woodall again dissented:

While there have in fact been liquidity runs on life insurance companies, no historical, quantitative or qualitative evidence exists in the record which supports a run of the scale and speed posited, or to support a rapidly spreading sector-wide run. The asset liquidation analysis appears to assume a contemporaneous run against the general and separate accounts by millions of life insurance policyholders and a significant number of annuity and other contract holders of products with cash surrender value—a scale for which there is no precedent, and for which the likelihood is believed by most experts to be extraordinarily low.[7]

Nevertheless, the FSOC could have made an argument for its liquidation channel scenario if it had data to show that Prudential substantially relied on leverage and short-term funding. In that case, a sharp change in the availability of short-term credit in the market could cause a lack of confidence in Prudential that might lead to fund withdrawals.

But the FSOC apparently did not have such data or did not bother to present it. In fact, its decision paper did not discuss leverage and noted that Prudential did not use short-term funding. Without either unusual leverage or major short-term funding, it is highly unlikely that policyholders would run in the event of a financial downturn, even a severe one.

Insurance firms, unlike banks, match their assets with their long-term liabilities. The claims of policyholders are the long-term liabilities of insurers and are generally supported by long-term assets like corporate bonds or mortgages. A collapse in the short-term funding market, as occurred in 2008, would not put policyholders in any danger.

The Exposure Channel and Interconnectedness. The question addressed in the exposure channel was whether Prudential’s failure would harm the rest of the market because of the firm’s interconnections. As in its discussion of the liquidation channel, the FSOC simply says that Prudential’s interconnections are “significant” but does not define what that means for either Prudential or its counterparties. Without that clarification, it is impossible to determine what the FSOC considered significant or sufficient to cause financial instability in the market as a whole. The FSOC said:

The financial system is exposed to Prudential through the capital markets, including as derivatives counterparties, creditors, debt and equity investors, and securities lending and repurchase agreement counterparties. . . . Prudential also uses derivatives to hedge various exposures related to its assets and liabilities. Prudential’s derivatives counterparties include several large financial firms, which aresignificant participants in the global debt and derivatives markets. . . . Prudential’s off-balance sheet exposures could serve as a mechanism by which material financial distress at Prudential could be transmitted to banks and to financial markets more broadly. For example, Prudential’s total off-balance sheet exposure due to derivatives counterparty and credit facilities commitments with large global banks is significant.[8] [emphasis added]

The word “significant” is used 47 times in the 12-page FSOC document—mostly to describe the effect that a Prudential failure might have on the markets and on counterparties—but the FSOC made no effort to support its characterizations with the kind of numerical data that would give the word some meaning. Again, the same is true of the designation decisions on GE Capital and AIG, with the word “significant” used 42 times in the 14 page AIG decision and 32 times in the 14 page GE Capital decision. Indeed, in all these decisions, the only useful numbers are page numbers.

In any event, the interconnectedness idea is invalid as a basis for designating a firm as a SIFI.[9] It posits that when a large financial institution fails, its interconnections with others will have knock-on effects, causing others to weaken or fail. The notion that interconnectedness among large financial institutions is a source of danger to the financial system is at the heart of the Dodd-Frank Act. The reason for designating certain bank and nonbank financial firms as SIFIs and subjecting them to bank-like and other stringent regulation by the Fed was to prevent them from failing and then, supposedly, causing a financial crisis by dragging down others.

But we know from the Lehman Brothers bankruptcy that interconnectedness was not a factor in the financial crisis.[10] Lehman’s failure, to be sure, caused chaos in the financial markets, but no major (or even minor) financial institution failed as a result. This was true, even though Lehman, with over $600 billion in assets, was one of the largest financial firms in the world and was active in such inherently “interconnected” activities as the credit default swap market—and even though the financial markets were in the midst of an unprecedented panic so great that banks were refusing to lend to one another, even overnight.

The only serious knock-on effect of the Lehman bankruptcy was the inability of one money market mutual fund, the Reserve Primary Fund, to maintain the value of its shares at $1 per share. The fund had continued to hold Lehman commercial paper (probably expecting that Lehman, like Bear Stearns, would be bailed out by the government), and its potential losses in the bankruptcy were great enough to reduce its net asset value to less than $1 if the Lehman paper was uncollectible. This is known as “breaking the buck.”

In the midst of a panicky market and a general flight to quality, this produced what has been called a “run” on the fund, but in the end the losses to the Reserve Fund shareholders were minimal, about 1 or 2 percent. Whatever might be said about the Reserve Fund’s “breaking the buck,” it was not akin to a firm’s being dragged into bankruptcy by the failure of a counterparty; it was simply a firm encountering an unexpected 1–2 percent loss.

Some also occasionally argue that AIG’s bailout following the Lehman failure is an example of the dangers of interconnectedness, but this idea also fails under any serious examination. First, AIG had virtually no exposure to Lehman. In addition, despite a lot of speculation in the media about the Fed’s reasons for rescuing AIG two days after Lehman was allowed to fail, the officials involved at the Treasury and Fed have never said anything other than that they stepped in to rescue AIG because it was so large that its bankruptcy—in the midst of the post-Lehman panic—would have caused a complete meltdown of the financial system. It is not then a case of interconnectedness, but of the Treasury and Fed’s view of market psychology at a time of particular turmoil.

Although interconnectedness had no role in the financial crisis, the idea is catnip for regulators because it provides a basis for more comprehensive regulation of financial institutions—something they arguably know how to do. The old adage comes to mind: if all you have is a hammer, everything looks like a nail. Thus, the Dodd-Frank Act assumes that stringent regulation can keep large financial institutions such as Prudential from failing and bringing down other firms with which they are “interconnected.”

The FSOC’s use of the interconnectedness idea in its Prudential decision could have been barely persuasive—at least in theory—if the FSOC had shown that Prudential’s counterparties and creditors had unusually large exposures to Prudential. But as in the AIG and GE Capital decisions, the FSOC did not even attempt to demonstrate this.

The failure of the FSOC to justify its Prudential or earlier decisions in any intelligible or coherent way suggests two possibilities. First, the agency did not want to articulate any standard because this would restrict its discretion in the future. Or second—perhaps more troubling—is the likelihood that there is in fact no intelligible standard for determining whether a firm is a SIFI. In this extremely important area with major implications for the US economy, the FSOC is making what can only be called a political or ideological decision—choosing to designate firms as SIFIs for no other reason than that it wants to increase the government’s regulatory control of the financial system. The same question arises when we get to a discussion of the Financial Stability Board.

The Role of the Financial Stability Board

As noted earlier, the FSB is an international group of central banks, government ministers, and financial regulators. In November 2008, shortly after the financial crisis, the G-20 leaders met in Washington and directed the FSB to reform the international financial system so that a financial crisis would not recur.[11] Since then, the FSB has been aggressive in designating large banks and insurers as SIFIs, and it is beginning a program for doing the same in the securities and capital markets industry, which is what the FSB and US regulators call “shadow banking.”[12] Both the Treasury and the Fed are members of the FSB—and probably its most influential members. It is inconceivable that the designations of three US insurers would have gotten through the FSB without the express approval of the Fed and the Treasury.

Thus, the principal players in the FSOC—the Treasury and the Fed—had already approved designating Prudential as a SIFI before the FSOC took any action. In other words, the entire Prudential decision process was a kind of show trial; the issue had already been decided. A sham proceeding, in turn, was necessary because the Dodd-Frank Act seems to require the FSOC to do an analysis of some kind before it determines that a particular financial institution is a SIFI, but the Treasury and the Fed had already decided the issue through their membership in the FSB and their participation in the FSB’s earlier designation of Prudential as a global SIFI. Obviously, the Treasury and the Fed cannot continue to both participate in decisions of the FSB that designate US firms as SIFIs and then turn around and act as though the same decision by the FSOC is a case of first impression.

In the FSOC’s defense, it might be possible to argue the FSB did the kind of analysis about the three US insurers that the FSOC should have done, and therefore that the FSOC’s failure to create any intelligible standard about the “SIFIness” of Prudential can be excused. The FSB’s test for SIFIs is whether they are “institutions of such size, market importance, and global interconnectedness that their distress or failure would cause significant dislocation in the global financial system and adverse economic consequences across a range of countries.”[13] This language stresses international effects, but if an insurer is considered to create systemic risk globally, it will certainly have a systemic effect in its home country. Accordingly, the FSB standard is not materially different from Dodd-Frank’s reference to “instability in the US financial system,” and thus FSB designations could involve roughly the same judgments about what factors will constitute a SIFI as the Dodd-Frank and FSOC standard.

However, it appears that FSB did no such analysis. The FSB purported to base its decision on a methodology developed by the International Association of Insurance Supervisors (IAIS) for determining whether an insurer is a SIFI.[14] The methodology was reasonably thorough, showing that if the FSOC had actually been interested in doing a serious analysis of whether Prudential was a SIFI it could have done so by adopting and publishing a similar methodology.

But in the end the FSB did no more than what the FSOC had done; in fact, it did less. It designated ninelarge insurers as SIFIs—including AIG, Prudential, and MetLife—but gave no indication of how, or even whether, the IAIS methodology had been applied to each of them. Moreover, the IAIS methodology differs substantially from the “channels” structure the FSOC uses, so the FSOC clearly did not implicitly adopt the IAIS methodology. For example, the IAIS methodology assigned weights to specific activities of insurers, assigning 45 percent weight to engaging in bank-like activities and only 5 percent to size. None of this shows up in the FSOC decision paper.

Since the FSB is completely opaque and does not allow independent observers or the media at its meetings, it is impossible to know for certain if the IAIS methodology was used. However, given that none of the nine insurers that were designated as SIFIs made any public statement accepting the FSB’s decision or disputing the facts it used, it seems likely that none of the insurers had any idea what facts, if any, the FSB used to designate them as SIFIs or how the methodology was applied.[15]

The nontransparent, indeed secretive, role of the FSB raises a question about what effect the FSB’s SIFI designations are expected to have in the US. Thus far, the FSB has been acting as though it is another Basel Committee on Bank Supervision. Since at least the mid-1980s, the Basel Committee has functioned as a supranational decision-making body on bank capital regulation; the committee agrees on capital regulations for banks and expects all members of the organization to implement these decisions within their respective jurisdictions. Congress has generally not interfered with bank capital regulation, but it is not clear how and when US regulators were authorized to participate in what is essentially the development of rules that may not meet the requirements for rule making under the Administrative Procedure Act (APA) or have never been specifically authorized by Congress.

The issue becomes more acute when the Treasury and the Fed participate in the FSB’s SIFI decisions, if these decisions are ultimately to apply in the United States. On its face, this seems inconsistent with both the APA and the Dodd-Frank Act, especially because the outcome of these decisions may be far more consequential for the US economy than bank capital regulations.

Thus far, it appears that the FSOC is simply implementing the earlier FSB policy and designation decisions. For example, the FSB has recommended that if money market mutual funds do not adopt a floating net asset value, they should be subject to capital requirements like banks.[16] The FSOC then pressured the US Securities and Exchange Commission to adopt similar rules for money market funds. The FSB indicated that all asset managers with assets of more than $100 billion may be subject to prudential regulation.[17] Then, the Office of Financial Research, another Treasury agency created by Dodd-Frank, produced two reports at the request of the FSOC to support the idea that large asset managers should be designated as SIFIs. The FSB has designated three US insurance firms as SIFIs—AIG, Prudential, and MetLife—and the FSOC has already designated AIG and Prudential as SIFIs and is currently investigating MetLife for a possible SIFI designation. These parallel policy pronouncements and decisions again suggest that, unless Congress asserts its interests, the SIFI designation process—despite the requirements of the APA and Dodd-Frank—will devolve into the implementation of policies and decisions of the FSB.

An Unprecedented Opportunity for Increasing Regulatory Power

The financial crisis has in many ways changed the rules that formerly confined financial regulators to a limited range of powers. Bank-like regulation—which includes supervisory control of risk taking and minimum capital requirements—was previously approved for federal regulators only where government support, such as deposit insurance, threatened to create moral hazard. However, the narrative that came out of the 2008 financial crisis was that any large financial institution could cause another financial crisis if it failed. This provided the authority for the FSOC and the FSB to adopt prudential bank-like standards for the largest financial institutions—not just banks—because any one of them could, under the prevailing theory, cause a financial crisis if it failed.

For this reason, the FSOC (empowered by the Dodd-Frank Act) and the FSB (empowered by the G-20) were given what seems to be quasi-judicial authority to make decisions about specific institutions and not just general rules. The FSB, as mentioned earlier, has already outlined an aggressive program that could eventually result in the designation of SIFIs in many other financial fields, reporting in September 2013 that it is “reviewing how to extend the SIFI Framework to global systemically important non-bank non-insurance (NBNI) financial institutions” (emphasis added). This category of firms, the FSB continued, “includes securities broker-dealers, finance companies, asset managers and investment funds, including hedge funds.”18 When those designations occur, it seems the firms so designated will be required by the Dodd-Frank Act to have bank-like capital requirements, as well face stress tests and liquidity coverage ratios that regulators have prescribed for banks under the Basel standards.

All of the participants in this process—the G-20 leaders who authorized the FSB, the FSB itself, the FSOC, and the Fed—are government or regulatory organizations. For this reason, the FSB and the FSOC have an interest in increasing regulation of the largest financial institutions—not just because the conventional narrative holds that any of these institutions could cause the next financial crisis—but more importantly because regulators always want more power. This is not a new idea; one of the fundamental elements of what is known as public choice theory is that it models the actions of government officials as self-interested.[19] The narrative about the financial crisis has given the regulators an unprecedented opportunity to extend their power, and they are not likely to waste it.

This is a key point that those representing institutions under threat of SIFI designation must bear in mind. The lack of a factual basis or clear standards behind FSB’s decision on nine large insurers and the FSOC’s Prudential and other decisions demonstrate that their discretion is essentially unbounded. Decisions of this kind—especially when they serve the interests of regulators rather than the public—are too important for Congress to ignore. If the FSB and FSOC intend to follow the precedents set by the Basel Committee on Bank Supervision, they will expect that the international agreement of regulators on what firms are SIFIs would be supported in the United States through decisions of the FSOC.

Given the incentives of regulators and the prospect for vastly enlarging regulatory control, it is very doubtful that either the FSB or the FSOC will be responsive to factual presentations in the future. The benign interpretation of the Prudential decision is that the FSOC does not want to limit its discretion in designating SIFIs by articulating any standards. The more troubling interpretation is that the FSOC has no idea how to determine whether a particular firm is a SIFI. The famous remark about pornography by former Supreme Court Justice Potter Stewart, “I know it when I see it,” should not be acceptable in a process as important to the US economy as determining whether a multibillion-dollar business ought to be turned over to bank-like regulation by the Fed. Yet that is where we seem to be heading with the designation of SIFIs by both the FSB and the FSOC.

If this happens, the consequences for the US economy could be dire. The designation of SIFIs is a statement by the government that the designated firms are too big to fail. We can see the effects of ignoring this danger in the condition of the banking industry today. We have no way of knowing whether the gigantic banks we have created are dangerous because of their size or what size they ought to be to eliminate the danger. What we do know is that in other industries, particularly insurance, there has never been a sense that any firm is too big to fail or would be treated as such by the government if it exhibited financial distress. With the designation of SIFIs among insurers, we are paving the way for these large firms to claim that they are safer investments and safer sources of insurance protection than their smaller competitors because the government has determined that they cannot be allowed to fail.

It is worth noting that the chairman of AIG, Robert Benmosche, welcomed AIG’s SIFI designation because he believed that it implied that the government had endorsed the safety and soundness of his firm—what he called a government “seal of approval.”[20] This raises the possibility—never fully explored by Congress—that SIFI designations may extend the spread of too-big-to-fail firms beyond the banking industry. Accordingly, although expanding these designations may be in the interests of regulators, it decidedly does not serve the interests of the US economy.

Moreover, it is not a mitigating factor that a firm designated as a SIFI then becomes eligible for the “orderly liquidation” process set up by Title II of Dodd-Frank. Under the act, the secretary of the Treasury has the power to seize any financial firm—whether or not the firm is a SIFI—and turn it over to the Federal Deposit Insurance Corporation (FDIC) for liquidation if he believes that its financial distress will cause “instability in the US financial system.” Thus, any firm, whether or not designated as a SIFI, can be placed in the orderly liquidation process of the FDIC through a decision of the Treasury secretary that involves discretionary power at least as unbounded as the SIFI designation itself.

Conclusion

A close study of the FSOC’s Prudential decision tells us several important things.

1.  Either the FSOC does not take seriously its responsibility to designate SIFIs or it is unable to develop a coherent or intelligible set of standards for performing this function. In either case, the agency should not be permitted to proceed with these designations without further review by Congress.

2.  The participation of the Treasury and the Fed in the FSB’s opaque process for designating SIFIs is inconsistent with the idea that the FSOC will do a full and fair analysis before designating a firm as a SIFI.

3.  The new powers to designate SIFIs offer an unprecedented opportunity for regulators, both at the FSB and the FSOC, to enhance their control over the financial system. With this incentive, it is highly unlikely that they will stop the SIFI designation process before all large financial firms—in all financial industries—have been designated.

4.  The designation of SIFIs is likely to spread the dangers of too big to fail beyond the banking industry to industries such as insurance, securities, and capital markets.

The only way to slow or stop this train will be through some action by Congress. That does not necessarily mean that Dodd-Frank must be amended at this point, but only that the FSOC, Treasury and Fed should be advised by members of Congress that SIFI designations are not just another version of the Basel Committee process. A resolution in the House or a joint letter by a large number of influential lawmakers in the House and Senate might be enough to stop or significantly slow the movement currently underway.