By Benjamin Goad - 07/09/13 09:54 PM EDT
Regulators on Tuesday voted to place the controversial “systemically important” tag on a pair of nonbank financial institutions, bringing the firms under the supervision of the Federal Reserve.
The Council was created by the Dodd-Frank Wall Street Reform law, which also empowered it to regulate nonbank firms whose failure would threaten the economy at large. Such firms are known as systemically important financial institutions (SIFI).
“Today, the Council has taken a decisive step to address threats to U.S. financial stability and create a safer and more resilient financial system,” Lew said in a written statement. “These designations will help protect the financial system and broader economy from the types of risks that contributed to the financial crisis.”
The Council, whose voting members include Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairwoman Mary Jo White and other agency heads, proposed the designation in early June.
AIG and GE Capital will be required to register with the Federal Reserve and comply with a host of regulations. But critics, including some congressional Republicans, say the SIFI label amounts to designating the companies as “too big to fail,” setting them up for preferential treatment and, potentially, a government bailout.
Neither firm invoked its right to challenge the SIFI tag.
Prudential Financial Inc., also proposed for designation, is contesting the action and is awaiting a hearing on the issue.