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Minutes of the Financial Stability Oversight Council

July 14, 2020

PRESENT: 

Steven T. Mnuchin, Secretary of the Treasury and Chairperson of the Financial Stability 

Oversight Council (Council)

Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve System (Federal 

Reserve)

Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation (FDIC) 

Jay Clayton, Chairman, Securities and Exchange Commission (SEC)

Heath P. Tarbert, Chairman, Commodity Futures Trading Commission (CFTC)

Kathleen Kraninger, Director, Consumer Financial Protection Bureau (CFPB)

Mark Calabria, Director, Federal Housing Finance Agency (FHFA)

Brian Brooks, Acting Comptroller of the Currency, Office of the Comptroller of the Currency

(OCC)

Rodney Hood, Chairman, National Credit Union Administration (NCUA)

Thomas E. Workman, Independent Member with Insurance Expertise 

Dino Falaschetti, Director, Office of Financial Research (OFR), Department of the Treasury

(non-voting member)

Steven Seitz, Director, Federal Insurance Office (FIO), Department of the Treasury (non-voting 

member)

Charles G. Cooper, Commissioner, Texas Department of Banking (non-voting member)

Eric Cioppa, Superintendent, Maine Bureau of Insurance (non-voting member)

Melanie Lubin, Securities Commissioner, Maryland Office of the Attorney General, Securities 

Division (non-voting member)

GUESTS: 

Department of the Treasury (Treasury)

Kipp Kranbuhl, Principal Deputy Assistant Secretary for Financial Markets

Howard Adler, Deputy Assistant Secretary for the Council 

Eric Froman, Assistant General Counsel (Banking and Finance) 

Stephen Ledbetter, Director of Policy, Office of the Financial Stability Oversight Council, and 

Executive Director of the Council

Board of Governors of the Federal Reserve System

Randal Quarles, Vice Chairman for Supervision

Andreas Lehnert, Director, Division of Financial Stability

Federal Deposit Insurance Corporation

Travis Hill, Deputy to the Chairman for Policy
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Securities and Exchange Commission

Jeffrey Dinwoodie, Chief Counsel/Senior Policy Advisor for Market and Activities-Based Risk

Commodity Futures Trading Commission

Jaime Klima, Chief of Staff and Chief Operating Officer

Consumer Financial Protection Bureau

Thomas Pahl, Policy Associate Director 

Federal Housing Finance Agency

Sandra Thompson, Deputy Director, Division of Housing Mission and Goals

John Roscoe, Chief of Staff, Office of the Director

Comptroller of the Currency

Blake Paulson, Senior Deputy Comptroller of the Currency and Chief Operating Officer

National Credit Union Administration

Andrew Leventis, Chief Economist

Office of the Independent Member with Insurance Expertise

Charles Klingman, Senior Policy Advisor

Federal Reserve Bank of New York

John Williams, President and Chief Executive Officer 

Sandra Lee, Senior Vice President

Office of Financial Research

Alexander Pollock, Principal Deputy Director for Research and Analysis 

Federal Insurance Office

Bruce Saul, Senior Insurance Regulatory Policy Analyst

Texas Department of Banking

James Cooper, Senior Vice President, Policy, Conference of State Bank Supervisors (CSBS)

Maine Bureau of Insurance

Mark Sagat, Assistant Director, Financial Policy and Legislation, National Association of 

Insurance Commissioners

Maryland Office of the Attorney General, Securities Division

Vincente Martinez, General Counsel, North American Securities Administrators Association 
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PRESENTERS:

Federal Reserve Stress Tests

• Randal Quarles, Vice Chairman for Supervision

• Lisa Ryu, Senior Associate Director (available for questions)

Secondary Mortgage Market Activities

• Howard Adler, Deputy Assistant Secretary for the Council

• Stephen Ledbetter, Director of Policy, Office of the Financial Stability Oversight 

Council, and Executive Director of the Council (available for questions)

Executive Session

The Chairperson called the executive session of the meeting of the Council to order at 

approximately 12:34 P.M. The Council convened by conference call.

The Chairperson began by outlining the meeting agenda, which had previously been distributed 

to the members together with other materials. The agenda for the executive session of the 

meeting included (1) the Federal Reserve’s stress tests, (2) secondary mortgage market activities, 

(3) Coronavirus Disease 2019 (COVID-19), and (4) a vote on the minutes of the Council’s 

meeting on May 14, 2020.

1. Federal Reserve Stress Tests

The Chairperson introduced the first agenda item, the Federal Reserve’s stress tests, and turned 

to Randal Quarles, Vice Chairman for Supervision at the Federal Reserve. 

Mr. Quarles reviewed the process and results of the Federal Reserve’s stress tests, which were 

announced in June 2020. He noted that the stress test process has evolved continually over the 

last decade. He also explained that the Federal Reserve was in the transition period for 

implementing the Stress Capital Buffer. 

Mr. Quarles stated that in early February, the Federal Reserve had published the hypothetical 

scenarios for the stress tests. He stated that those scenarios included stresses in leveraged 

lending markets. With the onset of the COVID pandemic, he stated that the largest banking 

organizations voluntarily suspended all share repurchases. He stated that the Federal Reserve 

also adjusted the stress test process to apply additional sensitivity analyses, with three alternative 

downside scenarios: a V-shaped recession and recovery; a slower, U-shaped recession and 

recovery; and a W-shaped double-dip recession. He stated that the banking system remained 

well-capitalized even in the harshest scenario. He noted, however, that uncertainty remained 

regarding how COVID could evolve; as a result, he stated that all large banks would be required 

to reevaluate and resubmit their capital plans later in 2020. He also stated that share repurchases 

would be suspended through the third quarter of 2020 and that the banks would not be allowed to 

increase their dividends or pay dividends exceeding their recent income. He stated that the 

Federal Reserve would review these capital restrictions in the fourth quarter of 2020 and could 

modify them. He also noted that the Federal Reserve would assess the banks’ new capital plans 
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in the fourth quarter. With respect to whether stress capital buffers would be updated as part of 

firms’ resubmission of capital plans, he noted that the Federal Reserve’s capital framework 

emphasizes the value of not increasing capital requirements under stress and thus exacerbating a 

downturn, for example from a reduction of lending. 

2. Secondary Mortgage Market Activities

The Chairperson then introduced the next agenda item, secondary mortgage market activities. 

He turned to Mark Calabria, Director of the FHFA. 

Director Calabria stated that the Council’s review of mortgage market activities was a step 

toward the Council fulfilling its statutory mission and promoting market discipline. He stated 

that risks in the mortgage market have not fundamentally changed since 2008 and that he 

supported the Council’s review of risks and mitigants, including the FHFA’s proposed capital 

framework for Fannie Mae and Freddie Mac.

Howard Adler, Deputy Assistant Secretary for the Council at Treasury, then presented on plans 

for a working group of staff of Council member agencies to assess risks and mitigants related to 

the provision of secondary mortgage market liquidity by Fannie Mae and Freddie Mac. He 

explained that the working group’s efforts would be guided by the four framing questions for the 

Council’s activities-based approach, set forth in the Council’s interpretive guidance on nonbank 

financial company designations, which address how the potential risk could be triggered; how 

the adverse effects of the potential risk could be transmitted to financial markets or market 

participants; what impact the potential risk could have on the financial system; and whether the 

potential risk could harm the non-financial sector of the U.S. economy. Mr. Adler stated that the 

working group would consider risk mitigants including the FHFA’s proposed capital rule and 

stress tests. He noted that the working group would leverage the FHFA’s expertise in this area 

and provide an update to the Council at its next meeting. 

Members of the Council then discussed the importance of this issue to U.S. financial stability.

3. COVID-19

The Chairperson then introduced the next agenda item, COVID-19. He noted efforts to pass 

additional legislation addressing the economic effects of COVID-19. Council members then 

provided updates regarding their agencies’ responses to the COVID-19 pandemic. Council 

members shared information about actions they were taking to monitor various sectors of the 

financial system. They also described information-sharing and collaboration among state and 

federal regulators. Among other things, Council members highlighted the positive effects of the 

emergency liquidity facilities established by the Federal Reserve. With respect to the banking 

system, Council members noted that bank earnings would be affected by the pandemic, but that 

deposits had increased and liquidity remained strong. Council members also noted that, although 

trading volumes and volatility were high, financial markets were resilient and continued to 

function. It was also noted that nonbank mortgage servicers had increased their liquidity. 

Council members also cited their focus on investor protection and consumer education.
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4. Resolution Approving the Minutes of the Meeting Held on May 14, 2020

BE IT RESOLVED, by the Financial Stability Oversight Council (the “Council”), that the 

minutes attached hereto of the meeting held on May 14, 2020 of the Council are hereby 

approved.

The Chairperson asked for a motion to approve the resolution, which was made and seconded. 

The Council approved the resolution by unanimous vote.

The Chairperson adjourned the meeting at approximately 1:25 P.M.