Financial Stability Watchdog Subject to Data Quality Act
The mission of the Financial Stability Oversight Council, an entity created by the Dodd-Frank financial reform legislation, includes identifying "threats to the financial stability of the United States" and responding "to emerging risks to the [financial] stability...."
Underneath the seemingly passive descriptions of the organization's activities, such as monitoring and coordination, are substantial powers over bank and non-bank financial companies whose boundaries have yet to be clearly established.
The question, therefore, is who watches the watchdog? More specifically, what checks are there to prevent the Council from acting in an arbitrary, capricious or non-transparent manner? This issue was raised by the acting Special Inspector General (SIG) of the Troubled Asset Relief Program (TARP) in Congressional testimony.
In prepared remarks, the TARP SIG explained that the Council "must be transparent about how it will apply both objective and subjective criteria to a failing institution. Even if some aspects of systemic significance are necessarily subjective and dependent on the nature of the crisis at the time, an emphasis on the development of clear, objective criteria in advance of the next crisis would significantly aid decision makers."
The TARP SIG and other stakeholders should recognize that there is already an established mechanism in place to hold the Council's objectivity to account - the Data Quality Act. Since the Council is an Executive Branch organization, it is subject to the DQA just as all the organizations which are represented on the Council are subject to the DQA.
Even though there is not a set of Council-specific implementing DQA guidelines, the Council's information disseminations are subject to OMB's government-wide guidelines including the provisions carrying out the statute's requirement for an administrative process which allows affected persons to "seek and obtain" correction of information not meeting quality standards.
If used correctly, Requests for Correction under the DQA of Council documents have the potential to be a potent tool to ensure the objectivity and accuracy of Council criteria and decisions. On this point it should be noted that under the D.C. Circuit's decision in the Prime Time case, agency DQA actions are subject to judicial review.
Thus, substantive DQA challenges are the primary watchdog over the Financial Stability Oversight Council.
See D.C. Circuit Beats 9th Circuit to the Punch: The Data (Information) Quality Act is Subject to Judicial Review
See U.S. Risk Council Needs Clear Criteria, Bailout Watchdog Says