Today a group of free market groups released a letter supporting Sen. Ted Cruz (R-Texas) and Rep. Ted Budd’s (R-N.C.) legislation to eliminate the Office of Financial Research.
Established under the Dodd-Frank Wall-Street Reform and Consumer Protection Act, the Office of Financial Research is a regulatory agency that collects data provided by financial institutions, such as bank holding companies. The data is used to examine financial market risks and supports the Financial Stability Oversight Council. This data is commonly volunteered by financial institutions. However, Dodd-Frank provides wide latitude for the Office’s Director to use their subpoena power to demand the data.
OFR receives funding outside the congressional appropriations process through fees the agency collects from the financial institutions that it regulates. As a result, the agency avoids direct congressional oversight, allowing OFR to determine what their budget should be almost unilaterally. For the fiscal year 2020, the OFR had a $62.7 million budget and about 100 full-time staffers.
The Office of Financial Research is redundant and duplicative. Its mission to research the stability of financial institutions has been conducted by roughly 20 other federal agencies, well before the enactment of Dodd-Frank, including the Department of Treasury’s Office of Economic Policy, the Federal Deposit Insurance Corporation’s Center for Financial Research, and the Federal Reserve’s Division of Financial stability
The previous Republican Administration took steps to shrink the Office and reduce its regulatory burden on the financial services industry. However, the current Director of the OFR, President Trump appointee Dino Falaschetti, has reversed his stance on agency cuts and called for more funding and increased staffing. Additionally, the newly appointed Secretary of Treasury Janet Yellen acknowledged in her written testimony before the Senate Finance Committee that she would reassess the Office’s cuts and expanding the agency’s footprint to research the economic effects of climate change.
Furthermore, a new Director under a Biden Administration could potentially weaponize the Office’s subpoena power to collect information from financial institutions lending activity to publicly shame institutions from servicing certain industries.
The organizations who joined this coalition letter are proud to support Senator Cruz’s efforts to curb further government overreach by unaccountable agency bureaucrats.
Click here or see below to view the letter.
Dear Senator Cruz & Congressman Budd:
On behalf of the undersigned organizations, we write to express our support for your legislation eliminating the unaccountable Office of Financial Research. This agency was established in 2010 by the Dodd-Frank Act and operates outside the Congressional appropriations process, receiving its funding from industry fees collected from financial institutions.
In response to the financial crisis of 2008, Congress quickly passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, expanding the federal government’s role in oversight of the financial marketplace and created several new regulators. The Office of Financial Research serves as a data collection agency that supports the Financial Stability Oversight Council, another regulator initiated by Dodd-Frank. While much of the data collected by OFR is voluntarily provided by private financial institutions, Congress granted the Office’s Director subpoena power to collect information from bank holding companies as he sees fit.
OFR receives its funding through fees collected predominantly from the bank holding companies it regulates, insulating itself from Congressional oversight. Congress has no authority to review OFR’s operations and how it spends its fees, shielding the Office from Congressional accountability. For bank holding companies, there are limited options other than surrendering capital to fund their regulator.
The Office of Financial Research’s mission to support the Financial Stability Oversight Council with financial research is duplicative in nature. Nearly 20 other agencies, departments, bureaus, and committees exist and already conducts similar research, including the Department of Treasury’s Office of Economic Policy, the Federal Deposit Insurance Corporation’s Center for Financial Research, and the Federal Reserve’s Division of Financial Stability. OFR is housed within the Treasury and operated on an annual budget of $62.7 million for the 2020 fiscal year. Furthermore, despite OFR’s significant outlays, the bureau has a history of producing incomplete and analytically unsound research.
Concerningly, the current Director of the OFR, President Trump appointee Dino Falaschetti, is now calling for more funding and increased staffing to increase the agency’s scope. The Trump administration took steps to shrink the Office and limit its intrusion among financial institutions. But, Secretary of the Treasury Janet Yellen discussed reassessing the Office’s cuts and expanding the Office’s scope to include climate research during her confirmation hearing before the Senate Financial Committee.
Under the Biden Administration, a Democrat-appointed Director could weaponize the Office and abuse its subpoena power to liberally collect information from financial institutions. Specifically, the Office could be used as a backdoor collection point for banks to surrender information regarding their lending activity in an attempt to publicly shame institutions and discourage them from lending to certain industries. For these reasons, we, the undersigned organizations, strongly support your legislation to eliminate the Office of Financial Research in its entirety.
Sincerely,
Grover Norquist
President, Americans for Tax Reform
Adam Brandon
President, FreedomWorks
Andrew F. Quinlan
President, Center for Freedom and Prosperity
Heather R. Higgins
CEO, Independent Women’s Voice
Pete Sepp
President, National Taxpayers Union
Maureen Blum
Executive Director, USA Workforce
Phil Kerpen
President, American Commitment
Matthew Kandrach
President, Consumer Action for a Strong Economy
Iain Murray
Vice President, Competitive Enterprise Institute
Tom Schatz
President, Council for Citizens Against Government Waste