Financial Stability Oversight Council Open Session
Financial Stability Oversight Council
Open Session
Thursday, March 26, 2020
Council Updates
Steven Mnuchin, Secretary, U.S. Department of the Treasury
In his statement, Mnuchin said that it is important to note that this is not a financial crisis, but rather a response to the pandemic that has shut down significant portions of the U.S. economy and that the economy can open back up once the outbreak is defeated. He discussed Phase III of the stimulus package, approved on March 25 by the Senate, applauding the “unprecedented” bipartisanship. He highlighted that the package is focused on protecting American workers and businesses and contains provisions to support small business lending, tax credit programs, enhanced unemployment insurance, and funds for hospitals and states to combat the pandemic. He expressed that the Financial Stability Oversight Council (FSOC) was established as a means of examining systemic issues and coordinating across agencies, calling it an important forum now as the country confronts a unique situation. Mnuchin also stated that the FSOC will continue to communicate on various issues, specifically forbearance and liquidity issues in the nonbank mortgage servicing market. He emphasized that he intends to work with the regulators and exchanges to ensure markets remain open. He concluded that while there may be consideration of limited trading hours should it become necessary, the preference is to maintain normal operations so investors can continue to access the markets.
Jerome Powell, Chariman, Board of Governors of the Federal Reserve System
Powell said that the U.S. is facing an unprecedented situation, and the Federal Reserve (Fed) has taken aggressive actions to address it. He said the first priority for the Fed is using its tools to support households and businesses across the country so they can access the financial resources they need and to increase the availability of credit as well as the capacity of financial instutions to lend. He noted that the Fed lowered interest rates and intends to keep it where it is for the time being. Powell also highlighted that the Fed has taken a number of steps to increase liquidity and lending and support the flow of credit to households and businesses. He concluded that the Fed is committed to using all of its tools to safeguard the economy and serve the American public.
Jay Clayton, Chairman, Securities and Exchange Commission
Clayton explained that the Securities and Exchange Commission (SEC) is focused on the continuing operations of the financial markets, saying this is an essential factor in responding to this crisis as many other elements of the response depend on the flow of capital and credit. Clayton said the continued orderly functioning of the securities markets must be consistent with health and safety directives of the federal, state and local governments, including ensuring that business continuity plans are consistent with state and local directives. He noted that the exchanges, clearinghouses and other critical components of the system have functioned in an orderly manner, which was accomplished in the face of record volatility and capital flows.
Heath Tarbert, Chairman, Commodity Futures Trading Commission
Tarbert said the Commodity Futures Trading Commission (CFTC) is actively monitoring the derivatives markets and is in frequent contact with trading venues, focusing on the critical pipes of the clearinghouses through which trades are margined and settled. He said the CFTC is responding quickly to provide targeted relief and has issued nine no-action letters, encouraging market stakeholders to identify further relief that is needed. He noted that while this is one of the most volatile periods that derivatives markets have ever experienced, the markets have acted as shock absorbers for this volatility.
Jelena McWilliams, Chair, Federal Deposit Insurance Corporation
McWilliams said that the rapid spread of COVID-19 has affected the economy and increased volatility in the global markets, but assured the public that U.S. banks are safe through this economic shock. She continued that banks are well-positioned to deliver needed capital and liquidity across the U.S. and noted that the Federal Deposit Insurance Corporation (FDIC) is encouraging banks to take prudent steps to work with borrowers struggling in this environment. She said the FDIC will work tirelessly to maintain stability and public confidence in the financial system. McWilliams concluded that consumers should be wary of fraud during this time.
Joseph Otting, Comptroller, Office of the Comptroller of the Currency
Otting said that the banks the Office of the Comptroller of the Currency (OCC) oversees are open for business to support households and businesses across the U.S., adding that the federal banking system is a source of strength for the national economy in both the near- and long-term. He noted that the OCC has quickly provided greater flexibility to banks to meet current challenges, and taken additional steps to ease pressures in the short-term including regarding troubled debt restructuring, small dollar lending, and appraisals for commercial loans.
Mark Calabria, Director, Federal Housing Finance Agency
Calabria said that the Federal Housing Finance Agency (FHFA) has seen disruptions in both the primary and secondary mortgage markets. He noted that bottlenecks are emerging in the mortgage origination process, and in the secondary markets, agency liquidity in mortgage-backed securities has declined, though Fed intervention brought stability. He noted that the Federal Housing Administration (FHA) has directed the enterprises to suspend all foreclosures and evictions as well as streamline the appraisal process during this time.
Kathleen Kraninger, Director, Consumer Financial Protection Bureau
Kraninger said that the Consumer Financial Protection Bureau (CFPB) is diligently working to protect consumers and provide Americans with peace of mind during this crisis. She said regulators joined to provide guidance to financial institutions, encouraging them to work constructively with their customers and borrowers, adding that institutions want to help their customers navigate this period. She said the CFPB is actively engaged with regulated entities and other stakeholders to provide appropriate flexibilities to allow financial institutions to best serve consumers during this time, including delaying reporting requirements.
Rodney Hood, Chairman, National Credit Union Administration
Hood said that the credit union system is liquid, well-capitalized, and stands ready to provide safe and affordable financial services to consumers. He noted that the National Credit Union Administration (NCUA) is encouraging credit unions to work with their members to provide relief and greater access to credit, including by offering or expanding small dollar loan products, offering payment accommodation, and easing credit terms for new loans.
Dr. Dino Falaschetti, Director, Office of Financial Research
Falaschetti said that the Office of Financial Research (OFR) will continue to support the FSOC and its members by providing data and research so they may better understand the complex risks in the financial system at this time. He said the OFR continues to measure stress in the financial markets, and while that risk assessment is elevated, it is still well below the peaks seen during the 2008 financial crisis.
Charles Cooper, Commissioner, Texas Department of Banking
Cooper noted that state banking regulators are in constant contact with the institutions they supervise and are working with governors to ensure banking is treated as an essential service as they consider “stay at home” orders. He said that while banks are facing logistical issues, he is proud of their resilience and focused work to support their clients.
Eric A. Cioppa, Superintendent, Maine Bureau of Insurance
Cioppa said that state insurance regulators continue to monitor the impact of COVID-19 on the insurance sector, individual insurers and their operations. He said the industry is specifically designed to manage risk and prepare for situations such as this, adding that there will likely be few if any immediate insolvency issues.
Melanie Senter Lubin, Commissioner, Maryland Securities Division
Lubin explained that state securities regulators have been working together closely to provide the relief needed while ensuring investors are protected from fraud. She noted that 30 states have so far taken steps to extend deadlines and provide relief from certain requirements, and the North American Securities Administrators Association (NASAA) has aided these efforts by drafting a model emergency order to grant temporary relief from form delivery requirements. She said they are diligently monitoring for fraudulent activities and are issuing advisories to investors to safeguard against fraud.
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