SE Nebraska News

Today, U.S. Congressman Mike Flood delivered remarks during the debate on H.J. Res. 109, a measure that seeks to repeal the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121, also known as SAB 121.

During his address, Congressman Flood expressed his support for the bipartisan resolution, which he co-authored with Congressman Nickel and Senator Lummis. He began by explaining the nature of staff accounting bulletins as technical accounting guidance for public entities. He stressed that these bulletins are not rules and should not dictate significant policy changes.

The congressman highlighted that SAB 121 requires banks to include digital assets held in custody on their balance sheets, a practice that deviates from traditional custodial practices. He quoted the Federal Reserve Chairman saying, “custody assets are off-balance sheet, always have been.” The congressman argued that this bulletin effectively prevents banks from participating in this market sector, which is detrimental to consumers and investors.

Congressman Flood also criticized the SEC's process in issuing SAB 121. He pointed out two major issues: firstly, the SEC did not consult with regulators before issuing this bulletin affecting core banking activity; secondly, the nonpartisan Government Accountability Office (GAO) determined that this bulletin is effectively a rule, implying that the SEC tried to bypass due diligence requirements.

The congressman suggested that the easiest solution would be for the SEC to rescind the bulletin themselves and collaborate with prudential regulators on an alternate solution. However, given their unwillingness to discuss changes despite its faulty issuance process and negative implications for banks and retail investors, he called upon Congress to act through the Congressional Review Act to rescind SAB 121.

Addressing arguments made by Ranking Member Waters and some Democratic colleagues against applying the Congressional Review Act to an accounting bulletin, Congressman Flood emphasized that failure to pass this resolution would allow regulators to bypass proper regulatory processes without consequences. He urged support for the resolution as a necessary check on Executive Branch power.

Before concluding his remarks, Congressman Flood requested unanimous consent to insert four letters into the record. These letters were from Fed. Vice Chair Michael Barr, FDIC Chairman Gruenberg, the Conference of State Bank Supervisors, and the American Bankers Association, all discussing various aspects of SAB 121's impact.