A man walks by an American International Group (AIG) building in New York City.
If designated a SIFI, AIG would finally fall under what Angel calls the "tremendous power" of one government entity: the Fed.
But the FSOC has yet to designate non-bank SIFIs, to the chagrin of watchdogs. Christy Romero, special inspector general for the Troubled Asset Relief Program, vented her frustration to MarketWatch in an interview published today: "A key problem with AIG is that so far there is no regulator for AIG's financial business," she said. "I am absolutely frustrated that it is taking so long to designate AIG as a SIFI." However, she said she is hopeful that the Fed will soon take over, now that the Treasury is no longer in charge.
A spokesman for the Federal Reserve gave no comment when asked if there is a timeline on labeling those institutions. Exactly why the FSOC hasn't yet declared AIG a SIFI is unclear. One potential reason is that there was no need to hurry as long as the company was under Treasury ownership, says Thomas Cooley, a professor of economics at NYU's Stern School of Business.
Another is the mind-boggling complexity of new financial regulations.
"Because it's a complicated bill, implementation of the Dodd-Frank Act has been going along fairly slowly, I would say," says Cooley.
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And, he adds, firms will lobby hard to avoid the regulatory hand of the central bank.
AIG has no comment on whether it expects to be designated a SIFI, but it seems likely that it will happen, says Douglas Elliott, a fellow at the Brookings Institution. He's "confident" that the company will earn the label partly because of its size and reach, and "partly because the regulators would open themselves to strong attacks if they did not so designate it."
Even so, there is always the question of whether Dodd-Frank regulations will be enough to prevent a future meltdown. And not everyone is convinced. Angel thinks that Congress "botched the opportunity" to truly fix financial regulation.
As a result, he says, "It will probably take another crisis before we think about how to restructure our regulations."
Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at dkurtzleben@usnews.com.
Correction: An earlier version of this article stated that the Federal Reserve designates SIFIs. The Financial Stability Oversight Council will have the task of determining SIFIs.
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