Financial Regulators Need Better Data
May 6th, 2010 - 27 Comments
Writing in today’s Financial Times with former Chairman of the Federal Housing Finance Board Allan Mendelowitz, Smeal’s John Liechty argues that Washington needs to collect more and better financial data to effectively regulate financial markets and prevent another great recession. Liechty and Mendelowitz, founding members of the Committee to Establish the NationaI Institute of Finance, argue in favor of the establishment of the Office of Financial Research (OFR), as proposed in the financial reform bill currently on the floor of the Senate, which would collect and analyze complex financial data to respond to systemic financial threats.
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Irrespective of the new authorities that are included in the final bill, regulators and policy-makers charged with exercising these authorities cannot use them effectively to improve the safety and stability of our financial markets if they are flying blind. The data the OFR will collect and the research and analysis that the OFR will undertake are essential to the success of the core legislative objective of enhancing financial market stability; and, they are critical for the ultimate success of broader financial reform.
The OFR will enable regulators to better understand complex financial products, more effectively uncover fraud, better monitor risks from large financial institutions, and for the first time see the critical linkages between important institutions in the market.
Only the most ardent opponent of regulation would oppose providing regulators and policy-makers with the data, research, and monitoring tools needed to provide for the safety and security for our financial markets. The cost of regulators continuing to fly blind is a cost that the U.S taxpayers cannot afford.