In the years leading up to the financial crisis, the United States was ill-equipped to address the growing risks in the financial system. Our antiquated regulatory structure was unable to keep up with the changing financial marketplace, and no single entity had accountability for protecting the stability of the entire system. Even worse, some of the largest, riskiest nonbank financial companies in the world – like AIG – weren't subject to adequate oversight.
To close these regulatory gaps, President Obama championed and Congress passed theDodd-Frank Wall Street Reform and Consumer Protection Act in 2010. Among its crucial reforms, the law created the Financial Stability Oversight Council – a body that brings the entire financial regulatory community together to identify and respond to risks across the financial system in order to help prevent another crippling financial crisis. Unfortunately, some are now seeking to hamstring the FSOC, threatening to turn back the clock and potentially pave the way for a future crisis. Here's why that's a mistake.