Senate Banking Subcommittee Holds Hearing on Annual Report and Oversight of OFR (with Delta Strategy Group Summary) (with Lofchie Comment)
The Senate Banking Committee, Subcommittee on Economic Policy, held a hearing, titled "The Annual Report and Oversight of the Office of Financial Research ("OFR")," to discuss the 2013 OFR Annual Report and its evaluation of the state of the U.S. financial system, as well as the September 2013 Asset Management and Financial Stability Report.
Lofchie Comment: Since its release, the Asset Management and Financial Stability Report has drawn substantial criticism from market participants and lawmakers who found the report misleading. One example, which is indicative of a general misunderstanding in the report, comes on the first page. Immediately after conceding that the activities of asset managers differ from those of banks by being activities that are conducted on an agency basis, the OFR report states: "[S]ome types of asset management activities are similar to those provided by banks and other nonbank financial companies, and increasingly cut across the financial system in a variety of ways. For example, asset managers may create funds that can be close substitutes for the money-like liabilities created by banks; they engage in various forms of liquidity transformation, primarily, but not exclusively, through collective investment vehicles; and they provide liquidity to clients and to financial markets." Remarkably, this assertion seems to ignore the statement made in the prior paragraph: that asset managers act only as agents - while they may manage vehicles that "provide liquidity," they do not do so themselves. In blurring this essential distinction, the OFR has called its own work into question.
Click here for a summary of the hearing by Delta Strategy Group.
See: OFR Asset Management and Financial Stability Report; 2013 OFR Annual Report; SEC Commissioner Piwowar Speaks on SEC Priorities and Issues of Regulatory Structure (with Lofchie Comment) (in which Commissioner Piwowar criticizes the FSOC for intruding into the SEC authority over advisers); NFA Requests Comments Regarding CPO/CTA Capital Requirement and Customer Protection Measures (with Lofchie Comment).Related news: SIFMA AMG and IAA Criticize OFR Report on Asset Management (with Lofchie Comment) (November 4, 2013).