The economic fallout from COVID-19 has highlighted systemic concerns about commercial real estate exposure, business debt and short-term wholesale funding, the Financial Stability Oversight Council said in an annual report.
President-elect Joe Biden will likely have to contend with a Republican-controlled Senate. That could have important implications for his approach to financial services policy.
FSOC’s statement on the FHFA’s proposed capital rule raises questions for market participants trying to anticipate a post-conservatorship secondary mortgage market, should the incoming administration go through with the GSEs’ exit from governmental control.
The Financial Stability Oversight Council said the mortgage giants may need a bigger capital cushion than their regulator has proposed, but stopped short of designating them as “systemically important financial institutions.”
The council created by the Dodd-Frank Act to identify systemic risks launched a review of the market as part of an activities-based approach that shifts focus away from targeting individual firms.
After budget cuts and a strategic transition, the interagency body conceived by Dodd-Frank to identify systemic threats has largely been silent as the pandemic roils the economy.
Policymakers could recommend banks establish backup facilities and the Federal Reserve could stand ready with emergency loans to limit economic shock waves.
Years after criticizing the Dodd-Frank Act, the Democratic presidential candidate and former New York City Mayor Michael Bloomberg is now taking a page from the Elizabeth Warren playbook.
