Resurrecting the OFR

The Office of Financial Research (“OFR”) was created to address the gaps in data availability and analysis that hampered governmental authorities in their response to the financial crisis of 2008. It was hoped that the OFR would serve as a type of “early warning system” that would detect emerging systemic risks through data collection and analysis, but the OFR never had the opportunity to live up to its promise. During the Obama administration, it suffered from an unsupportive Treasury Secretary and pushback from other federal financial regulatory agencies; under the Trump administration, the staff and resources of the OFR have been decimated. The next administration should seize the opportunity to rebuild the OFR – not only to fulfil the OFR’s initial data collection and analysis functions, but also to address new sources of systemic risk that have emerged since 2010. In particular, the OFR should be rebuilt with the new types of expertise needed to address the growing systemic threats that may arise from climate change and fintech innovation. At present, climate, complexity, computer and data science expertise are largely unrepresented in the financial regulatory agencies, but financial regulation – particularly financial stability regulation – can no longer be fully effective without them. A resurrected OFR could serve as a hub of these types of expertise, drawing upon them to monitor new types of systemic risks, research innovative solutions to those risks, and also to assist the other US financial federal regulatory agencies with technical expertise as the need arises.