Courtesy of Pam Martens.
Patrick McHenry, Chair of the House Financial Services' Oversight and Investigation Subcommittee
One day after terrorists set off a bomb at the Boston Marathon leaving a tragic trail of senseless human suffering, the U.S. House of Representatives held a scheduled hearing to debate another form of terrorism – the kind of economic terrorism that gripped the United States from 2008 to 2010 and lingers today in the form of 46 million Americans living in poverty, mass underemployment, stagnating wages, a shaky housing market, tepid GDP growth and ballooning national debt. The House was debating the “grave threat” to the Nation posed by the too-big-to-fail banks. You likely didn’t hear about the hearing because the media was focused on the Boston Marathon and its more easily understood, visually shocking form of terrorism.
On April 16, 2013, members of the House Oversight and Investigation Subcommittee of the Financial Services Committee wanted to learn more about two words, “grave threat,” that appear just twice in the Dodd-Frank financial reform legislation that was passed in 2010 but has yet to be fully enacted.
Scott Alvarez, the General Counsel of the Federal Reserve Board of Governors, who was present at the hearing, explained the use of the phrase in Section 121 of the Dodd-Frank legislation:
Scott Alvarez, General Counsel of the Federal Reserve Board
Alvarez said: “…Section 121 allows the Federal Reserve, in consultation with F-SOC [Financial Stability Oversight Council], not the FDIC, to require large firms to sell assets. However, it imposes a high hurdle on the requirement. We must find, and the F-SOC must agree – two-thirds of the F-SOC must agree – that the institution poses a ‘grave threat,’ not just any threat, a ‘grave threat,’ to financial stability. And, we are required by statute to consider a variety of alternatives first, including restrictions on growth, restrictions on activities, conditions on operations, many other things as precursors to the sale of assets. The sale of assets is the last on the list.”
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