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Repeal the Office of Financial Research
Washington,
Jun 19 -
OPINION CONTRIBUTOR
Repeal the Office of Financial Research
By REP. FRANCISCO CANSECO | 6/19/12 9:38 PM EDT
Just when cases of identity theft are increasing, an obscure but powerful government bureaucracy, particularly susceptible to cyberattack, stands ready to begin stockpiling private financial information and monitoring confidential financial transactions.
This new bureaucracy — the innocuous sounding Office of Financial Research — is described as “a hacker’s dream and a civil libertarian’s nightmare” in our committee report because it lacks accountability and oversight and stores so much sensitive financial information in one place.
Congress created this office as part of the 2010 Dodd-Frank Act, the 2,300-page behemoth supposed to end “too big to fail” and save the U.S. from the next financial crisis. Yet today, banks “too big to fail” when President Barack Obama signed Dodd-Frank are now even bigger. The notion that this law can anticipate the events that will lead to the next crisis has been derided, as The Economist recently did, as “delusional.”
This office has received relatively little public attention — unlike the Consumer Financial Protection Bureau, the other independent agency created by Dodd-Frank.
Yet it warrants closer scrutiny. We learned, during two House Financial Services Committee hearings, that this office can raise its own money, spend as much as it wants and use subpoena power to fill its massive computer database with whatever information it deems necessary.
The office’s scope, mission, cost and intrusiveness are limited only by the imagination of the unelected bureaucrat that is ultimately selected to lead it.
OFR “may decide that it needs to monitor the transfers that we make among bank accounts,” Hester Peirce, a former Securities and Exchange Commission counsel, recently wrote, “the type of insurance we are buying, our ATM withdrawals, and the rate at which we are paying off our credit card debt and car loans. The only limit on this power is the self-restraint of the director, who has ‘sole discretion’ over how to do his job.”
Testimony from expert witnesses and from OFR’s acting director and chief operating officer revealed that the office spent $33 million last year. It is spending $122 million this year and plans to spend at least $158 million in 2013.
The office is allowed, under Dodd-Frank, to take this money directly from the Federal Reserve until July 2012. After that, it can raise its own funding by assessing a tax on financial companies — a cost that will most likely be passed on to consumers.
Richard Berner, the acting director, conceded in his congressional testimony that there is no statutory limit on how much OFR can spend or how large a tax it can assess. These points were made even more clearly in our follow-up hearing with the office’s COO Michele Shannon.
Our panel also examined concerns about the vast amounts of private data that OFR will likely collect and store. It may prove such an attractive target for both individual hackers and state-sponsored cybercriminals that it could likely be under constant assault.
Efforts by our committee to get some assurance about the limits on what information can be collected were met with unsatisfying answers. Berner would only say that the office “will not collect data for collection’s sake.”
His words offered little comfort to those who may be subpoenaed based solely on the director’s determination that they possess needed information.
With these two hearings, we gave OFR the opportunity to allay concerns about its collection of private financial information, susceptibility to cyberattacks and lack of accountability. After the testimony, however, many committee members became convinced that OFR must be eliminated.
The premise that a government agency — run by unaccountable bureaucrats with an unlimited budget who can demand information about our buying habits — will somehow prevent the next economic downturn is preposterous.
In more practical terms, this creation of new layers of bureaucracy provides additional burdens that the American economy should not be forced to bear.
Last year, I introduced a bill to repeal OFR, which the Financial Services Committee recently approved as an amendment. It saves taxpayers an estimated $270 million over 10 years, according to the Congressional Budget Office, and it passed the House as part of a larger deficit-reduction proposal.
This proposed financial research office is, at its core, a testament to the belief that government can accomplish any goal if only it is given more authority. That is foolish and misguided. With OFR, it is also dangerous to the security of private financial information.
Rep. Francisco Canseco (R-Texas) serves on the Financial Services Committee.
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