The Annual Report of the Financial Stability Oversight Council

Digital Assets and Bank RegulationHouse Financial Services · 2026-02-04 · 119th Congress
The House Financial Services Committee held its annual hearing on the Financial Stability Oversight Council (FSOC), examining the council's 2025 annual report under Treasury Secretary Scott Bessent, who chairs FSOC. Begins at 0:19:39
Transcript
Highlights

Title

FSOC 2025 Annual Report: Deregulation, Tariffs, and Bank Capital Debate

Purpose

The House Financial Services Committee held its annual hearing on the Financial Stability Oversight Council (FSOC), examining the council's 2025 annual report under Treasury Secretary Scott Bessent, who chairs FSOC. Republicans used the hearing to highlight deregulatory efforts, community bank tailoring legislation, and economic growth data, while Democrats pressed Bessent on tariffs and inflation, housing affordability, crypto conflicts of interest, consumer protection rollbacks, and Federal Reserve independence. Begins at0:19:39

Who spoke

Chairman French Hill (R-AR)0:20:10: Argued economic growth under President Trump has outperformed 2024 recession predictions, citing inflation nearly 1 point below forecast and a budget deficit falling to 5.4% of GDP0:22:44; touted the Main Street Capital Access Act and bipartisan housing legislation0:23:14; later questioned Bessent on community banking and the Genius Act's stablecoin implementation0:38:150:41:19.

Ranking Member Maxine Waters (D-CA)0:24:31: Said consumer confidence hit a 12-year low under Trump and blamed his trade wars for rising grocery, clothing, and furniture prices0:24:31; criticized repeal of credit card late-fee rules and the shuttering of the CFPB, which she said had returned $21 billion to consumers0:25:27; accused the administration of a "baseless" criminal investigation into Fed Chair Jerome Powell0:26:21.

Rep. Andy Barr (R-KY), Financial Institutions Subcommittee Chair0:28:38: Praised FSOC's deregulatory approach and touted the Tier Act and Community Bank Regulatory Tailoring Act0:29:06.

Rep. Bill Foster (D-IL), Financial Institutions Ranking Member0:29:49: Warned of a "multi-trillion dollar asset bubble" tied to AI-related circular investment structures0:29:57; later pressed Bessent on FSOC staffing devoted to monitoring the AI bubble risk and got no specific number1:46:44; also challenged Bessent on dollar strength/manufacturing employment trends under Republican vs. Democratic presidents1:48:16.

Secretary Scott Bessent, FSOC Chair0:31:25: Outlined FSOC's 2025 report focus on four areas—Treasury market resilience, cybersecurity, regulatory modernization, and AI—and said the council moved away from labeling nearly every market a "vulnerability"0:36:23; said community banks have declined by roughly 50% since the 2008 financial crisis due to "regulation by reflex"0:38:40; said he prefers an activities-based rather than institution-based approach to systemic risk0:55:21; said tariffs are not inflationary per San Francisco Fed data0:43:58, while acknowledging he wrote in 2024 that "tariffs are inflationary"0:42:48; said Treasury does not have authority to invest tax dollars in bitcoin but is "retaining seized Bitcoin"0:57:530:58:19; declined to commit to halting OCC review of bank charters linked to World Liberty Financial1:07:14.

Rep. Andy Bar (R-KY) — see above.

Rep. Bill Foster (D-IL) — see above.

Rep. Brad Sherman (D-CA)0:53:36: Argued FSOC should focus on activities rather than assets in defining systemic risk0:53:36; pressed Bessent on whether Treasury could direct banks to buy bitcoin, which Bessent denied having authority to do0:57:53.

Rep. Frank Lucas (R-OK)0:58:56: Asked about targeted expansion of deposit insurance for non-interest-bearing transaction accounts, with Bessent saying it would help stem deposit flight from small banks during stress periods0:59:281:00:32.

Rep. Gregory Meeks (D-NY)1:02:34: Raised the Keating Five scandal as historical parallel and asked Bessent to commit to pausing OCC review of any bank charter linked to World Liberty Financial pending investigation of UAE-linked investment; Bessent said no1:06:451:07:18.

Rep. Pete Sessions (R-TX)1:08:43: Asked about reports of travelers carrying up to $1 million cash through airports to leave the country; Bessent said Treasury issued a geographic targeting order lowering the reporting threshold to $3001:10:35.

Rep. Stephen Lynch (D-MA)1:14:42: Cited a Public Citizen analysis that the Trump administration halted or dismissed over 100 enforcement actions worth $3.1 billion in potential penalties in its first two months1:14:59; noted FSOC's 2024 report flagged AI bias/discrimination risks in credit decisions, which are absent from the 2025 report; Bessent said explainability "could be a concern" but is not a financial-stability priority1:19:22.

Rep. Ann Wagner (R-MO), Capital Markets Subcommittee Chair1:19:59: Highlighted the bipartisan Invest Act's 22 bills passed with 87 Democratic votes and asked about barriers to capital formation; Bessent cited that 38% of Americans don't own equities and touted Trump accounts1:22:43.

Rep. Al Green (D-TX)1:25:14: Pressed Bessent on whether Trump's Truth Social post ("It's a great time to buy... DJT") ahead of a tariff-pause announcement, which coincided with a $415 million single-day rise in Trump Media stock, should be investigated; Bessent said no1:27:471:29:12.

Rep. Andy Barr (R-KY)1:30:16: Asked Bessent to respond to "lectures" and discussed Trump savings accounts, the Main Street Capital Access Act, and the "Fight China Act" outbound investment law1:31:161:34:53.

Rep. Emanuel Cleaver (D-MO)1:35:40: Questioned Bessent on Federal Reserve independence versus political interference, referencing comments about the Fed losing "trust" over inflation1:37:151:39:36.

Rep. Roger Williams (R-TX), Small Business Committee Chair1:40:44: Discussed the Main Street Capital Access Act, merger process review, and merchant banking modernization bills1:42:36.

Rep. Bill Foster (D-IL) — see above, second round1:46:07.

Rep. Jim Himes (D-CT)1:56:22: Asked Bessent about a $8 credit-card late-fee cap and Trump's proposed 10% interest rate cap, and about GSE conservatorship reform, noting mortgage-to-Treasury spreads are near record lows1:57:342:00:42.

Rep. Warren Davidson (R-OH), National Security Subcommittee Chair2:01:48: Asked about Export-Import Bank capital needs for critical mineral supply chains and confirmed there are no administration plans for a central bank digital currency2:02:412:05:22.

Rep. Emilia Sykes (D-OH)2:07:08: Pressed Bessent on delayed CDFI Fund disbursements for affordable housing, asking for yes/no answers, which Bessent did not directly give2:08:39; also asked about the stalled process of putting Harriet Tubman on the $20 bill2:10:27.

Rep. John Rose (R-TN)2:12:41: Discussed a Wall Street Journal op-ed on deposit insurance limits for community banks and Trump savings accounts rollout, noting over a million children signed up2:16:49.

Rep. Juan Vargas (D-CA)2:17:56: Criticized Bessent's tone as "flippant" and "performative" throughout the hearing and declined to ask further questions2:19:12.

Rep. Bryan Steil (R-WI), Digital Assets Subcommittee Chair2:20:36: Gave Bessent time to elaborate on immigration's effect on housing costs, citing a Wharton study that rent rose roughly 1% for every 1% population increase from illegal immigration2:23:22; asked about the July 18 Genius Act stablecoin rule deadline, which Bessent said Treasury expects to meet2:24:56.

Rep. Sean Casten (D-IL)2:25:39: Questioned Bessent on the legal/statutory authority for Treasury's custody and disbursement of Venezuelan oil proceeds, citing a $200 million balance in a Qatari bank, and pressed on the lack of an auditor agreement2:26:142:28:44; also challenged Bessent's prior denial of writing that "tariffs are inflationary"2:29:56.

Rep. William Timmons (R-SC)2:30:52: Discussed trade renegotiation, bank capital thresholds for category 2-4 banks, and the Smart Act on combining compliance exams2:32:422:34:11.

Rep. Ayanna Pressley (D-MA)2:36:13: Pressed on the lack of tariff exemptions for baby products like car seats, contrasting with an asbestos exemption, and got Bessent to commit "advocacy" for an exemption2:36:432:38:39; also asked Bessent to commit to analyzing Black unemployment rates and report findings by March 62:40:072:40:39.

Rep. Rob Bresnahan (R-PA)2:41:21: Discussed manufacturing growth, capital framework modernization, and Minnesota benefits fraud enforcement2:44:392:45:34.

Rep. Josh Gottheimer (D-NJ)2:46:42: Asked about lowering 10-year Treasury yields to reduce mortgage rates, AI adoption in financial services, and declining international tourism to the U.S.2:47:092:49:462:51:15.

Rep. Erin Houchin (R-IN)2:51:48: Yielded to Chairman Hill for AI oversight questions, then discussed grocery price inflation comparisons between the Biden and Trump administrations2:54:00.

Rep. Rashida Tlaib (D-MI)2:56:57: Challenged Bessent using a Kansas City Fed chart showing community banks hold nearly double the tier-one leverage ratio of the largest "G-SIB" banks (10.83% vs. roughly half that), arguing large banks pose more systemic risk while lending less to the real economy2:58:262:59:36; cited a rule cutting G-SIB capital requirements by about $219 billion (28%)3:00:47.

Rep. Young Kim (R-CA)3:00:12: Thanked Bessent for the SALT deduction increase and asked about FSOC's plans for new non-bank designation guidance in 2026 and California fraud investigations3:03:003:06:38.

Rep. Ritchie Torres (D-NY)3:07:15: Pressed Bessent on whether the president can remove Fed officials over policy disagreements and on Federal Reserve independence3:07:33; cited a Wall Street Journal report contradicting Trump's factory construction claims and got Bessent to confirm roughly 70,000 net manufacturing jobs lost and nine months of PMI contraction since April 2025 tariffs3:09:283:10:37.

Rep. Andrew Garbarino (R-NY), Homeland Security Committee Chairman3:12:23: Discussed SALT relief, the phase-out of paper Treasury checks, financial access for the unbanked, and cybersecurity at financial regulators after OCC/CFPB breaches3:13:043:16:59.

Rep. Sylvia Garcia (D-TX)3:17:41: Challenged Bessent's claim that immigration drives up housing costs, questioning the Wharton report's methodology3:18:02; asked about ICE spending and climate risk to mortgage availability, and cited a Nature retraction of a climate economics paper Bessent referenced3:21:593:22:37.

Rep. Scott Fitzgerald (R-WI)3:23:00: Asked about credit risk transfer programs for GSEs and regulatory tailoring efforts3:23:19.

Rep. Nikema Williams (D-GA)3:25:57: Cited Atlanta's large racial wealth gap and Black-owned businesses generating $212 billion in revenue in 2022, and criticized the dismantling of the Minority Business Development Agency3:27:203:28:40.

Rep. Mike Lawler (R-NY)3:31:15: Asked about keeping dollar-denominated stablecoin activity onshore under Genius Act rules and about combating fraud/scam centers3:31:353:34:16.

Rep. Jimmy Panetta / Rep. Sam Liccardo (D-CA)3:36:36: Questioned Bessent on FinCEN's targeting of informal remittance systems and the HR1 remittance tax, arguing it could push people toward less-safe informal channels3:38:433:39:55.

Key moments

Rep. Waters said Trump's trade wars are raising grocery, clothing, and furniture prices while Republicans "protected corporate profits" instead of consumers0:25:01.

Bessent acknowledged writing in 2004 that "tariffs are inflationary" but told the committee tariffs "do not cause inflation" per 150 years of San Francisco Fed data, an exchange Waters called contradictory to his earlier Senate testimony0:43:190:43:58.

Rep. Al Green pressed Bessent on Trump's Truth Social post urging people to "buy... DJT" hours before a tariff-pause announcement that coincided with a $415 million single-day gain in Trump Media stock; Bessent said it should not be investigated1:27:131:27:47.

Bessent confirmed Treasury is "retaining seized Bitcoin" (about $500 million grown to over $15 billion) but denied authority to invest tax dollars in crypto, after Rep. Sherman pressed him on a potential "bail out Bitcoin" scenario0:58:47.

Rep. Meeks asked Bessent to commit to pausing OCC review of any bank charter tied to World Liberty Financial, a Trump-family crypto venture with a UAE-linked investor, citing national security concerns; Bessent answered "no"1:07:141:07:30.

Rep. Torres got Bessent to confirm roughly 70,000 net manufacturing jobs were lost and the manufacturing PMI was below 50 for nine consecutive months since the "Liberation Day" tariffs of April 20253:09:383:10:37.

Rep. Tlaib cited Kansas City Fed data showing community banks hold a 10.83% tier-one leverage ratio versus roughly half that for the largest "G-SIB" banks, and that a recent rule cut G-SIB capital by about $219 billion (28%)2:58:263:00:47.

Rep. Sykes said she would let the record show Bessent "refused to answer" yes/no whether CDFI Fund monies would be released for affordable housing2:09:53.

Bessent told Rep. Steil that a Wharton study found rents rose roughly 1% for every 1% population increase due to illegal immigration, a claim Rep. Garcia later challenged as based on rental rather than $500,000 home-sale prices2:23:533:18:20.

Rep. Garcia noted Nature magazine retracted the climate-economics paper ("KLW24") Bessent cited to justify dropping climate risk from FSOC's report3:22:243:22:37.

Metadata

CommitteeHouse Financial Services
Chamber / CongressHouse · 119th Congress
Date2026-02-04
TypeHearing
Witnesses
The Honorable Scott Bessent — Chairperson, Financial Stability Oversight Council
Videoyoutube
Transcript820 caption blocks · 31,907 words · 3:42:04 runtime
EventCongress.gov 118925