In the financial crisis of 2008, America’s regulators, policymakers and elected officials were repeatedly shocked to learn about one failing systemically significant financial institution after another.

Due to this lack of knowledge and warning, the government was unprepared for the crisis and was forced to respond on an ad hoc basis, bailing one institution out here only to find another one needed to be bailed out over there.

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It was chaos and the American taxpayers ended up footing the bill.

The first big surprise was that an insurance company — AIG — had turned itself into a giant, unregulated global hedge fund and had guaranteed hundreds of billions of dollars of complex derivatives to the world’s biggest banks.

The bankruptcy of Lehman Brothers required AIG to pay up, but it didn’t have the money and was bankrupt itself just a day after Lehman. The next surprise was a single money market fund holding Lehman debt “broke the buck,” which began a run on the $3.7 trillion industry.

A day later, surprise again, the investment banks of Morgan Stanley and Goldman Sachs were on the verge of bankruptcy, with Goldman referred to as “toast” if not also bailed out.

If AIG was allowed to file bankruptcy and not pay what it owed to the biggest banks in the U.S. and around the globe, then those banks would all fail as well, which would then cause other banks and financial institutions to go bankrupt.

That would cause the financial system to freeze, preventing non-financial companies from paying their bills and their employees.

This is the definition of an overly interconnected financial system — contagion leaps from one institution to another throughout the country, then the globe, until the entire financial system collapses, followed by the economy, resulting in a second Great Depression.

To prevent such a calamity, U.S. taxpayers bailed out AIG with more than $180 billion. The U.S. government guaranteed the $3.7 trillion money market fund industry.

Goldman Sachs and Morgan Stanley were bailed out, as were virtually all other banks and nonbank financial institutions in the country and overseas. These bailouts ultimately amounted to tens of trillions of dollars.

Everyone agreed that the American people needed to be protected from similar unseen and unregulated systemic risks in the future before it was too late and bailouts were inevitable. That’s why the Financial Stability Oversight Council (FSOC) was created.

Unlike the other regulatory agencies, which are focused on specific areas of the financial system, FSOC is the only entity in the U.S. government with the mandate to monitor the entire U.S. financial system for new and emerging systemic risks wherever they may arise.

A quick review of any of its annual reports proves how well it is fulfilling this mission, which amounts to “no more surprises; no more AIGs; no more bailouts.”

To do this, it is also charged with designating systemic risks from gigantic non-bank financial firms, like AIG and money market funds, the so-called “shadow banking system.”

The creation of FSOC had very broad, bipartisan and industry support.

For example, in 2009, the Financial Services Forum said “One of the reasons this crisis could take place is that while many agencies and regulators were responsible for overseeing individual financial firms and their subsidiaries, no one was responsible for protecting the whole system from the kinds of risks that tied these firms to one another.”

The American Bankers Association said that it “strongly supports the creation of a systemic regulator. In retrospect, it is inexplicable that we have not had a regulator that has the explicit mandate and the needed authority to anticipate, identify, and correct, where appropriate, systemic problems.”

Finally, in 2010, former Treasury Secretary Henry Paulson said, “We must create a systemic risk regulator to monitor the stability of the markets.”

Since 2010, FSOC has regulated systemic risk, carefully, diligently and conservatively.

Even though numerous nonbanks had to be bailed out and rescued in 2008, FSOC has designated just five nonbanks as systemically important in seven years, requiring greater regulation and monitoring.

In the case of one of those designations, GE Capital, the company was de-designated by FSOC after it reduced its systemically risky activities. This demonstrates that the system of identifying, regulating and reducing nonbank systemic risks is working.

FSOC has another important function — it makes sure other regulators do their job and, if they don’t, prods them to do so.

For example, when the SEC failed to regulate money market funds after the crisis, even though taxpayers had to guarantee the $3.7 trillion industry to prevent it from collapsing in 2008, FSOC stepped in.

It did an analysis of the industry and the options for appropriate regulation, which spurred the SEC to act.

The FSOC is a crucial and indispensable early warning system for America’s financial system, providing regulators with the broadest and deepest view of the entire system.

The Secretary of the Treasury serves as the Chairman of FSOC, which means that, if confirmed, Steve Mnuchin will be in charge. Some close to the Trump transition have questioned the need for FSOC and its role and actions.

Mr. Mnuchin should be carefully questioned about his views on FSOC and how he will protect America’s families from new and emerging systemic threats from gigantic nonbanks at his nomination hearing Thursday.

Dennis Kelleher is president and CEO of Better Markets, a Washington-based independent, nonpartisan, nonprofit organization that promotes the public interest in financial reform, financial markets and the economy.

The views of contributors are their own and not the views of The Hill.