Memorandum on the Financial Stability Oversight Council
Issued 2017-04-21 by Donald J. Trump
Plain-English Overview
AI-generated summary explaining what this action does, who it affects, and why it matters
This memorandum directs the Secretary of the Treasury to review how the Financial Stability Oversight Council decides which financial companies should be labeled as risky enough to require special federal supervision. Under the Dodd-Frank Act passed after the 2008 financial crisis, this council can determine that certain nonbank financial companies could threaten the stability of the entire U.S. financial system if they get into trouble. Companies that receive this designation must then be supervised by the Federal Reserve and follow stricter rules.
The action affects nonbank financial companies that might be reviewed or designated as systemically important, as well as certain financial market utilities. The memorandum asks the Treasury Secretary to examine whether the current process gives companies fair treatment, whether it creates an expectation that the government will bail out designated firms, and whether companies get enough information about how to reduce their risk and avoid designation. The review must be completed within 180 days.
This matters because being designated as systemically important has serious consequences for financial companies, potentially affecting how they operate and compete. The memorandum suggests concern that the designation process may not adequately balance financial stability goals against fairness to the companies involved and the costs of increased regulation.
AI-generated summary for educational purposes
Constitutional Analysis
How this action fits (or doesn't) within Article II authority and existing law
This memorandum ("Memorandum on the Financial Stability Oversight Council") directs the withholding, freezing, or delayed spending of congressionally appropriated funds. The stated rationale: "that these processes for making determinations and designations promote market discipline and reduce systemic risk." The Impoundment Control Act of 1974 specifically prohibits this type of action. Congress passed that law in response to President Nixon's refusal to spend appropriated funds, and it remains the governing framework today.
The power of the purse belongs to Congress under Article I, Section 9. When money is appropriated by law, the executive branch is obligated to spend it as directed. A memorandum directing agencies to withhold, pause, or slow-walk spending conflicts with this constitutional structure. Courts have consistently sided with Congress in impoundment disputes.
Official Summary
Administration of Donald J. Trump, 2017 Memorandum on the Financial Stability Oversight Council April 21, 2017 Memorandum for the Secretary of the Treasury Subject: Financial Stability Oversight Council The Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111–203 (the "Dodd-Frank Act"), authorizes the Financial Stability Oversight Council (FSOC) to determine that a nonbank financial company's material financial distress—or the nature, scope, size, scale, concentration, interconnectedness, or mix of its activities—could pose a threat to the financial stability of the United States. If the FSOC makes such a determination, the affected nonbank financial company shall be subject to supervision by the Board of Governors of the Federal Reserve System (Federal Reserve Board) and certain prudential standards. The Dodd-Frank Act similarly authorizes the FSOC to designate certain financial market utilities and financial activities as "systemically important," and thus subject to certain risk management standards, among other things. These determinations and designations have serious implications for affected entities, the industries in whic