Sarbanes Oxley on Steroids: Big Government Bureaucracy to stop future crisis

The current financial reform bill would create, perhaps, the largest new financial bureaucracy to come around in 50 years.  It is called the Office of Financial Research (OFR) and will create a whole host of regulations which at best will make things more difficult for financial companies to do business, and at worst makes thing the next crisis more severe.  In spite of all the power that Congress wants to give the OFR, the bill only devotes a scant 20 pages of the 1300+ page monstrosity to it. 

The OFR, also referred to as the National Institute of Finance in another bill, is a proposed new risk body designed to give financial regulators the data and analytic tools they need to prevent and contain future financial crises. GARP reports:
It would, in effect, be a kind of "canary in the coal mine" for the entire financial system, providing early warnings of possible collapses.

Its role, according to (Senator) Reed's Feb. 4 statement upon introducing his bill, is crucial. "Any new regulatory structure will be ineffective," he said, "unless we also equip it with a strong, independent and well-funded data, research and analytic capacity to fulfill its mission."

Reed says the proposed body will support the community of financial regulatory agencies by collecting and standardizing the reporting of data on the financial market; performing applied and essential long-term research; and developing tools for measuring and monitoring systemic risk.
I get it.  If only government would have been more informed, then we could have stopped this crisis.  Hmm... That woud be reassuring if they can find me one person within government that raised their voice in concern. 
The second piece is the Financial Stability Oversight Council (FSOC), which is envisioned as a kind of "College of Cardinals" composed of the heads of existing regulatory agencies. 

The OFR is what Kurt Schacht, managing director for standards and advocacy of the Chartered Financial Analyst Institute, calls the "guts of the system" of risk oversight being proposed by Congress. It will be tasked with setting up the systems and operations to track and aggregate systemic risk, he explains.

The OFR will in turn feed information into the FSOC, which will make the decisions about what to do with it.

"The OFR ... will set up all the systems to track and aggregate systemic risk across the system," Schacht explained in an interview. "The information will be fed into the Financial Stability Oversight Council, which decides what to do with it."

You can't do systemic risk regulation without gathering the appropriate data." As far as organizational specifics, both the House and Senate reform bills include a data center and a research center within the OFR.
So from the financial crisis, we get a brand new centralized financial data center which will collect all kinds of financial information from banks, private equity funds, hedge funds, non-bank financial.  We have a whole host of well paid bureacrats to parade in front of congress when they get things wrong the next time.  This whole bill is Sarbanes Oxley on steroids.

If the reason the financial crisis happened was not enough government, let's look how the most informed people in government did with the information they had.

Ben Bernanke of the US Federal Reserve:



Barney Frank, the Chair of the House Financial Services Committee:



Do we really want to create another bureacracy which will give us the false peace of mind that this won't happen again?

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