Source: United States Senator for Rhode Island Jack Reed
OFR has not adequately used critical data collection tools to safeguard the financial system from risks
WASHINGTON, DC – U.S. Senators Elizabeth Warren (D-MA) and Jack Reed (D-RI), both members of the Banking, Housing, and Urban Affairs Committee, sent a letter to Dino Falaschetti – the Trump-appointed Director of the Office of Financial Research (OFR) in the U.S. Department of the Treasury – urging the OFR to use its critical tools to collect data to safeguard the financial system from stability risks.
With the passage of the Dodd Frank Wall Street Reform and Consumer Protection Act, Congress established OFR as an agency to identify and analyze sources of risk to our financial system – giving OFR authority to collect data on financial stability risks. However, even as OFR identifies ongoing and emerging risks where regulators lack complete data, the agency is not taking the steps needed to fill these data gaps.
“Under Falaschetti’s leadership, OFR has overwhelmingly failed to collect data to provide regulators with the critical information they need to assess the risks to our economy. At the same time, OFR has failed to aggressively recruit and expand staff to carry out its functions,” Senator Warren said in a statement. “Falaschetti needs to step up and ensure OFR is using the tools granted by Congress to mitigate serious risks to financial stability to help protect consumers and our economy.”
“The COVID-19 pandemic has revealed new risks and vulnerabilities in the financial system and reinforced the need for OFR’s mission and monitoring capabilities. OFR must step up and use its power to safeguard consumers, businesses, and the economy. OFR was designed to enhance financial stability by analyzing market trends, spotting potential gaps in regulators’ view of risks, and serving as an early detection and warning system. But I am concerned that OFR is not using all of the tools that Congress provided the agency to collect and examine data on key risks and vulnerabilities in the financial system. OFR must be committed to transparency and oversight in the financial marketplace,” said Senator Reed.
As part of its responsibilities, each year OFR reports potential threats to financial stability of the United States to Congress. In the 2021 report, OFR identified several important areas that warrant much greater attention from regulators but failed to articulate how OFR itself would address these risks.
These areas include climate change, cryptocurrencies, repos, private funds and synthetic leverage, and cybersecurity.
Senators Warren and Reed have requested OFR share plans to collect the data necessary to address these ongoing sources of risk no later than January 28, 2022.