The Most Important Agency You’ve Never Heard Of

The Office of Financial Research is meant to be the early-warning system for the next financial crisis. Is it doing its job?

by Victoria Finkle

Among the many lessons learned from the 2008 financial crisis, one thing stands out: ignorance—willful or otherwise—drove the system to the brink of collapse. While banks were busily writing mortgages destined to default, there was a blithe, system-wide failure to recognize what those toxic mortgages could do to the economy. Not only were regulators asleep at the wheel, they didn’t even know the car was moving.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, took a number of steps aimed at righting the wrongs of the financial crisis. One was the creation of a new agency, the Office of Financial Research (OFR), tasked with ensuring that Washington would never get caught so flat-footed ever again. Headquartered in a nondescript office building in downtown D.C., the 225-person bureau collects data and produces reports aimed at identifying potential threats to the financial system. Although technically part of the Treasury Department, the body is by law independent. Its budget, $99 million in fiscal year 2016, is funded through fees paid by the country’s largest banks. To help the OFR carry out its mission, Congress granted it sweeping powers, including the right to demand certain data from banking regulators and financial institutions, either voluntarily or with a subpoena, as well as from banking regulators.