By Brady Dennis
Washington Post Staff Writer
Monday, November 22, 2010; 10:07 PM
The new council of regulators empowered by Congress to head off potential risks to the financial system has met only once, but already its work is garnering plenty of attention.
If the Financial Stability Oversight Council's second meeting Tuesday produces as much public input as it did after its initial gathering last month, the panel might need to hire more staff.
The council, led by Treasury Secretary Timothy F. Geithner and composed of top regulators from the Federal Reserve, Federal Deposit Insurance Corp. and other agencies, sought public comment last month on two of the most contentious questions to emerge from the debate over new financial rules: How should regulators go about designating non-bank firms that are "systemically significant," thus subjecting them to potentially more stringent oversight? And how should regulators implement the Volcker Rule, which seeks to prohibit firms from trading on their own accounts, a practice known as proprietary trading?
In recent weeks, those questions generated more than 1,500 public comments, far outpacing comments on proposed rules by other agencies, according to www.regulations.gov, a government Web site that tracks federal rule-making.
The responses poured in from industry executives, consumer advocates and ordinary citizens, most either with a stake in the outcome of the new regulations or a strong opinion about the shape they should take.
The comments ranged from extensive essays from financial firms about the intricacies of individual provisions and why their firms should not be deemed systemically important, to one-paragraph letters urging agency leaders to institute tough new regulations to reign in Wall Street.
"After what we have been through the last few years, we should not start the bank regulatory process with exceptions and special deals," Nick Morris wrote.
"Please protect the people of the U.S. and keep our financial markets strong. We depend on you to act our behalf," Tamara Melton-Villali wrote.
As that debate continues to unfold in coming months, the oversight council will push forward with new business Tuesday, holding a private session in the morning before opening the proceeding to the public at noon.
Treasury officials said several items are on the agenda. The group will provide an update on what various agencies are doing to investigate widespread paperwork problems that have called into question millions of foreclosures across the country, as well as how regulators are coordinating with the Department of Justice, state attorneys general and other officials who are scrutinizing the mess.
In addition, the council will release minutes from the private portion of its October meeting, hash out details about the group's structure and responsibilities going forward, and invite comments on how best to determine which financial market utilities - companies such as exchanges and clearinghouses that operate as the plumbing of the financial markets - should be deemed systemically significant.
The new oversight council grew out of a realization in the wake of the financial crisis that no single regulatory entity was responsible for identifying and curbing systemic risks.
That allowed insurance giant American International Group, for example, to grow so large and interconnected with other firms that its downfall in late 2008 threatened to bring down the entire financial system.