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Minutes of the Financial Stability Oversight Council

Held November 3, 2014 

PRESENT: 

Jacob J. Lew, Secretary of the Treasury and Chairperson of the Financial Stability Oversight 

Council (Council) 

Janet Yellen, Chair, Board of Governors of the Federal Reserve System (Federal Reserve) 

Martin J. Gruenberg, Chairperson, Federal Deposit Insurance Corporation (FDIC) 

Mary Jo White, Chair, Securities and Exchange Commission (SEC) 

Timothy Massad, Chairman, Commodity Futures Trading Commission (CFTC) 

Richard Cordray, Director, Consumer Financial Protection Bureau (CFPB) 

Melvin Watt, Director, Federal Housing Finance Agency (FHFA) 

Thomas J. Curry, Comptroller of the Currency, Office of the Comptroller of the Currency (OCC) 

Debbie Matz, Chairman, National Credit Union Administration (NCUA) 

Roy Woodall, Independent Member with Insurance Expertise 

Richard Berner, Director, Office of Financial Research, Department of the Treasury (non-voting 

member)

Michael McRaith, Director, Federal Insurance Office, Department of the Treasury (non-voting 

member)

John P. Ducrest, Commissioner, Louisiana Office of Financial Institutions (non-voting member) 

Adam Hamm, Commissioner, North Dakota Insurance Department (non-voting member) 

David Massey, Deputy Securities Administrator, North Carolina Department of the Secretary of 

State, Securities Division (non-voting member) 

GUESTS: 

Department of the Treasury 

Sarah Bloom Raskin, Deputy Secretary of the Treasury 

Matthew Rutherford, Acting Under Secretary for Domestic Finance 

Christopher J. Meade, General Counsel 

Patrick Pinschmidt, Deputy Assistant Secretary and Executive Director of the Council 

Board of Governors of the Federal Reserve System 

Daniel K. Tarullo, Governor 

Scott Alvarez, General Counsel

Federal Deposit Insurance Corporation 

Jason Cave, Special Advisor to the Chairman for Supervisory Matters 

Securities and Exchange Commission 

Lona Nallengara, Chief of Staff

Commodity Futures Trading Commission

Lawranne Stewart, Special Counsel
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Consumer Financial Protection Bureau

Ron Borzekowski, Deputy Assistant Director 

Federal Housing Finance Agency 

Mario Ugoletti, Special Advisor to the Director 

Comptroller of the Currency 

Christina E. Benson, Associate Deputy Comptroller for Bank Supervision Policy 

National Credit Union Administration 

John Worth, Chief Economist 

Office of the Independent Member with Insurance Expertise

Diane Fraser, Senior Policy Advisor 

Federal Reserve Bank of New York 

William Dudley, President and Chief Executive Officer 

Office of Financial Research

Patricia Mosser, Deputy Director for Research and Analysis

Federal Insurance Office

Steven Seitz, Acting Deputy Director (Financial Stability)

Louisiana Office of Financial Institutions 

Margaret Liu, Senior Vice President, Conference of State Bank Supervisors 

North Dakota Insurance Department

Mark Sagat, Counsel and Manager, Financial Policy and Legislation, National Association of 

Insurance Commissioners

North Carolina Department of the Secretary of the State, Securities Division

Christopher Staley, Counsel, North American Securities Administrators Association
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PRESENTERS:

Nonbank Financial Company Annual Review 

• Steven Seitz, Acting Deputy Director (Financial Stability), Federal Insurance Office 

• Bruce Saul, Senior Policy Advisor, Federal Insurance Office 

• Eric Froman, Deputy Assistant General Counsel for the Council, Treasury 

Recent Market Activity

• Kenneth Danger, Associate Director, Policy Review & Systems Support, CFTC 

• Vince McGonagle, Director, Division of Market Oversight, CFTC 

• Matthew Hunter, Deputy Director, Division of Market Oversight, CFTC 

• Nellie Liang, Director, Office of Financial Stability Policy and Research, Federal 

Reserve

Executive Session 

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

approximately 5:03 P.M. (EST). He outlined the meeting agenda, which had previously been 

distributed to the members together with copies of the resolutions and other materials. The 

agenda for the executive session of the meeting included the following subjects: (1) the annual 

reevaluation of a previously designated nonbank financial company, Prudential Financial, Inc. 

(Prudential); (2) an update on recent market activity; and (3) consideration of, and a vote on, a 

resolution approving the minutes of the Council’s meeting on October 6, 2014. 

1. Annual Reevaluation of Designated Nonbank Financial Company 

The Chairperson introduced the first agenda item, the annual reevaluation of a nonbank financial 

company, Prudential, that the Council had designated in 2013 under section 113 of the DoddFrank Wall Street Reform and Consumer Protection Act. Under the Dodd-Frank Act, the 

Council is required annually to reevaluate each previous designation and rescind a designation if 

the Council determines that the company no longer meets the statutory standards. The 

Chairperson introduced Steven Seitz, Acting Deputy Director (Financial Stability) of the Federal 

Insurance Office; Bruce Saul, Senior Policy Advisor at the Federal Insurance Office; and Eric 

Froman, Deputy Assistant General Counsel for the Council at Treasury. Mr. Seitz and Mr. Saul 

presented on the analysis and conclusions related to Prudential, including regarding information 

submitted by the company to the Council during the annual reevaluation and material changes 

since the Council designated the company, in light of the standard for designations under section 

113. The staff recommended that the Council not rescind its final determination with respect to 

Prudential. Members of the Council then asked questions and had a discussion, including 

relating to the extent of changes since the company’s designation in September 2013. Mary Jo 

White, Chair of the SEC, recused herself from participating in the discussion and the vote. 

The Chairperson then presented to the Council the following resolution regarding the 

reevaluation of the Council’s determination regarding Prudential.

“WHEREAS, section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act 

(the “DFA”) authorizes the Financial Stability Oversight Council (the “Council”) to determine 
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that a nonbank financial company shall be supervised by the Board of Governors of the Federal 

Reserve System (the “Federal Reserve”) and shall be subject to enhanced prudential standards 

if the Council determines that material financial distress at the nonbank financial company, or 

the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the 

nonbank financial company, could pose a threat to the financial stability of the United States; 

and 

WHEREAS, section 113(d) of the DFA requires the Council not less frequently than annually to 

reevaluate each determination regarding a nonbank financial company under section 113 and 

rescind any such determination if the Council determines that the nonbank financial company no 

longer meets the standards for a determination under section 113; and 

 

WHEREAS, the Council issued a final rule and accompanying interpretive guidance (the “Rule 

and Guidance”), codified at 12 C.F.R. Part 1310, that describes the processes and procedures 

by which the Council will reevaluate each currently effective determination; and 

WHEREAS, on September 19, 2013, the Council made a final determination, in accordance with 

the DFA and the Rule and Guidance, that Prudential Financial, Inc. (“Prudential”) shall be 

supervised by the Federal Reserve and shall be subject to enhanced prudential standards under 

the DFA; and 

WHEREAS, in connection with the Council’s reevaluation of its determination regarding 

Prudential, the Council provided Prudential an opportunity to submit written materials to the 

Council to contest the Council’s determination; and 

WHEREAS, Prudential submitted materials to the Council in connection with the Council’s 

reevaluation of its determination regarding Prudential; and 

 

WHEREAS, the Council has considered a broad range of information available through existing 

public and regulatory sources, as well as information submitted to the Council by Prudential; 

and 

 

WHEREAS, based on the reevaluation of Prudential, the staffs of the Council Members and their 

Agencies recommend that the Council not rescind its determination regarding Prudential; and 

WHEREAS, the members of the Council have considered the issues and the record in connection 

with the following actions.

NOW, THEREFORE, BE IT RESOLVED, that, based on the information, considerations, and 

analysis set forth in the attached “Notice Regarding the Financial Stability Oversight Council’s 

Reevaluation of the Determination Regarding Prudential Financial, Inc.” (the “Reevaluation 

Notice”), and on a review of the administrative record, the Council hereby does not rescind its 

determination, pursuant to section 113 of the DFA, that material financial distress at Prudential 

could pose a threat to the financial stability of the United States and that Prudential shall be 

supervised by the Federal Reserve and shall be subject to prudential standards, in accordance 

with Title I of the DFA.
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BE IT FURTHER RESOLVED, that the Council hereby authorizes the Reevaluation Notice to be 

sent to Prudential. 

BE IT FURTHER RESOLVED, that the Council hereby delegates authority to the Chairperson, 

or his designee, to make technical, nonsubstantive, or conforming changes to the text of the 

Reevaluation Notice.”

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

The Council approved the resolution by a vote of 8 to 1, with Mr. Woodall dissenting and Chair 

White recused from the vote. 

2. Update on Recent Market Activity 

The Chairperson introduced the next agenda item, an update on recent market activity. The 

Chairperson introduced Kenneth Danger, Associate Director, Policy Review & Systems Support 

at the CFTC; Vince McGonagle, Director, Division of Market Oversight at the CFTC; Matthew 

Hunter, Deputy Director, Division of Market Oversight at the CFTC; and Nellie Liang, Director, 

Office of Financial Stability Policy and Research at the Federal Reserve. Chairman Massad 

provided an introduction, and the CFTC then presented on its preliminary analysis of the activity 

in the Treasury futures market on the morning of October 15, 2014. The members of the Council 

asked questions and had a discussion. The Chairperson noted the importance of understanding 

this activity and asked the CFTC, the Federal Reserve, and Treasury to work together to further 

the analysis and report back to the Council. 

3. Resolution Approving the Minutes of the Meeting held on October 6, 2014. 

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

minutes attached hereto of the meeting held on October 6, 2014 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 5:40 P.M. (EST).