The Financial Stability Oversight Council released an array of recommendations this week, but it has yet to take action on its main mandate listed in the Dodd-Frank bill. 

One of the council’s explicit charges is to monitor and measure systemic risk, but members have not yet defined systemic risk. There are credible, market-based ways to do this, but they have not employed any of these tools. Using credit default swap spreads and bond prices are just a few examples.

The council may be hesitant to specify the data they will be looking at because if a problem occurs that is not captured in that data, they will be accused of being asleep at the switch.

The opaqueness of their statements may actually cause more of a disruption and panic then whatever underlying systemic risk they’ve identified. Possibly the worst thing they could do is periodically release statements saying they are watching all the important indicators and everything looks fine, and then one day come out and saying the sky is falling.