This story appeared in Bank Digest.
Federal Housing Finance Agency Director Mark A. Calabria has issued a statement on the recent Financial Stability Oversight Council principals meeting, at which the Council approved final guidance regarding nonbank financial company designations. Calabria noted in his statement that one of the FSOC's core purposes under the Dodd-Frank Act is to end bailouts, but he said he was concerned that actions taken just over a decade ago, such as the establishment of the Troubled Asset Relief Program, reinforced the expectation of bailouts.
Calabria went on to say that he believed the guidance on nonbank designations the FSOC had approved was an important step towards ending bailouts. According to Calabria, "Some of the previous nonbank designations were done in such a manner that raised the possibility that designated entities would be perceived as 'too big to fail.' In doing so, the Council ran the risk that a designation would distort market expectations and reduce market discipline, contrary to its statutory purposes. I believe the approach the Council adopted yesterday reduces that risk."