It took President Obama a while to nominate a candidate for the inaugural Director of the Office of Financial Research. (Rumor has it that the new body was not popular among some Administration officials). Now Senators Grassley and Kirk have put a hold on the nominee, Richard Berner, to protest what they see as the Treasury Department’s inadequate response to the LIBOR scandal.
The long odyssey of the Office of Financial Research is a shame, and a surprising one. Like Brett McDonnell and Dan Schwarcz, I saw this new Office as being one of the hidden gems in Dodd-Frank: an agency tasked with gathering information about systemic risk. It promised to serve as a mix between an early warning system for future financial crises and a think-tank for improving financial regulation. But sometimes the least controversial bodies in Washington are the most likely to be used as pawns in other chess games.
On the bright side, the Treasury Department did announce an all-star advisory board of economists for the Office of Financial Research. Although, at a glance, it doesn’t appear that there are any lawyers (other than Damon Silvers). Does this create a blind spot in terms of understanding how policies translate into concrete legal rules or tracking regulatory arbitrage?
For a new agency – the tone at the top is critical, and this agency still lacks a permanent leader.
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