Statement on the Oversight of the Office of Financial Research and Financial Stability Oversight Council
Thank you, Mr. Chairman. I would also like to thank our distinguished witnesses for agreeing to participate this afternoon.
Next week marks the one-year anniversary of the Dodd-Frank Act becoming law. This legislation brought sweeping reforms to our financial regulatory system so that we can avoid another economic meltdown similar to that of 2008.
One of the central components of this reform is in Title I of Dodd-Frank, which creates a new Office of Financial Research (OFR) and a new Financial Stability Oversight Council (FSOC). These vital agencies are respectively tasked with gathering information about the U.S. financial system and monitoring it for potential weaknesses.
In order for us to protect our country from future economic catastrophes, our regulators need robust powers for data collection. Incomplete information, uncoordinated data, and a lack of investigatory authority were some of the key causes of this latest crisis. Consumers didn't know what they were buying, regulators didn't understand the banks they were regulating, and nobody was watching non-bank players such as AIG.
The Federal Reserve and other regulators had 48 hours of warning before the fall of AIG. They had 72 hours before the collapse of Bear Sterns. This was a system where the most powerful watchdogs in the nation had no idea what was going on inside these institutions.
The new data collection authority at the OFR will be central to understanding financial crises in real-time, and preventing systemic risk from spreading through our financial system.
Thank you, I yield back the balance of my time.