U.S. regulators expressed confidence in the financial sector's ability to withstand the coronavirus pandemic and discussed potential risks around nonbank mortgage originations during a March 26 Financial Stability Oversight Council meeting.
"This is not like a financial crisis," Treasury Secretary Steven Mnuchin, who chairs the interagency FSOC group, said at an open session of its meeting, adding that he looks forward to health professionals continuing to make "significant progress so that once we kill this disease, we can open up the economy."
The pandemic has caused U.S. economic activity to grind to a halt, prompting a record 3.28 million Americans to file for weekly unemployment benefits in the week ended March 21.
Fed Chairman Jerome Powell, who gave a rare national TV interview earlier in the day during which he said the U.S. "may well be in a recession," said during the FSOC meeting that the Fed has cut its benchmark interest rate to near-zero and has pledged to keep it there until it is confident the U.S. economy has weathered the storm.
"This is unquestionably a challenging time, and the Fed is committed to using all of our tools to safeguard the economy," Powell said.
The FSOC's other members include the heads of the Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Housing Finance Agency and the National Credit Union Administration.
The group has continually discussed concerns around nonbank financial companies increasingly underwriting mortgages, and it did so again during its closed session at the March 26 meeting. The FSOC's readout of the meeting provided few details besides Treasury staff giving FSOC members an update on the issue.
But Mnuchin said at the end of the open session that he has asked several FSOC members to establish a task force and report back in the coming days, noting that the mortgage industry could experience liquidity issues as policymakers encourage forbearances on loans.
Mnuchin has in the past noted that FSOC members have "significant" concerns about the growth on nonbank mortgage lending. One of those has been FHFA Director Mark Calabria, who told reporters in February that the FSOC should start to look at ways to increase its oversight of the mortgage market given that it is likely systemically important.
"I think it's important for FSOC to look at this," he said at the time. "I am certainly encouraging FSOC to look at the mortgage market more broadly."
FDIC Chair Jelena McWilliams also said at the meeting that banks are "well positioned to deliver much needed capital and liquidity to communities" affected by the pullback in economic activity. She emphasized the current crisis did not originate in banks and that "our banks are safe," as are their customers' FDIC-insured deposits.
"The FDIC was born out of a crisis, and it has witnessed many crises," McWilliams said. "We will get through this one together. Since 1933, no depositor has lost a penny of insured deposits in an FDIC bank, and that will not change."