The Consumer Financial Protection Bureau isn’t the only Dodd-Frank Act agency poised for change in the new year. With the
Since its inception, the office has largely remained out of the public eye. But it’s tasked with an important role: collecting and standardizing complex market data and conducting research to help the Financial Stability Oversight Council root out the next financial crisis.
Now the office’s functioning — and independence — may be under threat.
Treasury has promised to
The department recommended in June that the office should become “a functional part of Treasury” — with its director appointed by the secretary and removable at will. The office’s budget, which is currently paid for by bank assessments, would also be determined by Treasury.
If the president selects a director whose views about the office mirrors his own, that will be a marked contrast with the intentions of those who originally conceived of the OFR.
In the wake of the mortgage meltdown, a group of academics called for the creation of a fully
Critics have said a
And, to be sure, the office has struggled since its inception. Some observers have been disappointed with what the bureau has accomplished. They say the OFR should be producing more and higher profile work. The office has also been
It’s very possible this dysfunction will be used as a stalking horse for bringing the office under Treasury’s full control.
Yet there’s a good argument to be made for increasing the agency’s independence at this stage — not reducing it further. An independent office is better able to call out problems in the economy as it sees them, without succumbing to political pressures. Ideally, its warnings would spur robust public debate among regulators and Congress about what needs to be done to reduce those risks.
The Treasury Department is, by design, less well suited to this role. For starters, it’s an arm of the administration. And because of its stature in the economy, Treasury’s top officials are not necessarily incentivized to speak openly and frankly about looming threats, lest they spook the financial markets.
Those who dreamed up the OFR in the wake of the crisis made a strong case for an independent watchdog. But it now appears the office may be heading even further in the other direction.