“One of the better ideas to surface during the early financial reform discussions was to create some form of national institute of finance, an independent body that could support outstanding research and help develop a broader understanding of lurking risks. In the Dodd-Frank Act of 2010, largely through the efforts of Senators Jack Reed, Democrat of Rhode Island (who introduced specific legislation),and Mark Warner, Democrat of Virginia, this became the Office of Financial Research.

“Unfortunately, while the office had well-intentioned parents, it was also cursed at birth by a modern Carabosse (the bad fairy who curses Sleeping Beauty). Timothy Geithner, then Treasury secretary, strongly opposed the creation of an independent body focused on diagnosis and assessment of systemic risks. Not being able to talk the Senate out of taking some action in this direction, Mr. Geithner fell back on a standard bureaucratic trick – he took the Office of Financial Research into the Treasury and set about ensuring that it would never be particularly effective.

“Four years down the road, it looks as though Mr. Geithner largely got his way. It would take a sweeping change and perhaps new leadership for the vision of Senators Reed and Warner to become something close to reality.

“There are many excuses offered for the Office of Financial Research’s lackluster results. It is still hiring (as reflected in a recent report to Congress), its mandate overlaps those of other agencies (the Federal Reserve and the Securities and Exchange Commission have proved hard to work with), and the analytical problems are daunting.”

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“And the office’s most high-profile product was its report on asset management, about which Dennis Kelleher of Better Markets had this to say in a blistering comment letter:

It appears to confirm some of the worst suspicions that O.F.R. is influenced by and biased toward the too big-to-fail sell-side banks that dominate Wall Street. After all, rather than focusing on the known systemic risks that they pose, which materialized just five years ago and which inflicted widespread economic wreckage across the country, O.F.R. chooses to take aim at the asset management buy-side of the financial industry, which, by comparison, presents much lower risk and played no role or virtually no role in the most recent financial crash.

It is all very disappointing, particularly given that the office’s annual budget is running at a remarkable $86 million (see Page 119 of the 2013 report).”

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Read full NY Times article here