Committee to Establish the
 
National Institute of Finance
Providing the data and analytic tools needed to safeguard the U.S. financial system
Home FAQs: Role of the NIF
FAQs - Role of the NIF
Why is the OFR Critical to the Success of Financial Reform Legislation?  E-mail
In September of 2008, with the U.S. economy poised on the edge of a second Great Depression, Secretary of the Treasury Paulson made a number of fateful and costly decisions without any clear understanding of what was happening in the financial markets. He lacked the data and analysis needed to make good decisions; he was in effect flying blind. The OFR will enable regulators and the Treasury to better understand complex financial products, more effectively uncover fraud, better monitor risks from large financial institutions, and for the first time be able to see the critical linkages between important institutions in the market. Going forward we should never again have a government where actions from the regulators run the risk of making a crisis worse, because the regulators do not understand what is going on in the financial markets.
 
Does the OFR represent any kind of threat to personal privacy?  E-mail

Absolutely not. The OFR has limited authority; it can only collect data that is needed to assess risks to the stability of the U.S. financial system. This would require the collection of systemically important data regarding the transactions and positions of financial institutions, which is the type of data that is needed in order to understand the critical connections between financial institutions. For some structured products, such as asset backed securities, the OFR will need data on the characteristics of the underlying assets (for example information on the underlying mortgages or credit cards). This type of information is essential in order to understanding when these securities might become toxic assets and as a result contribute to a future freezing of the credit markets. Although there is a need to know something about these types of loans, this will not require knowing any personally identifiable information; there is no need to collect and no intent to collect information that could threaten personal privacy. The OFR should not be confused with the Bush Administration’s U.S.A. Patriot Act, which gave the federal government unlimited authority to pry into individual citizens finances.

The purpose for creating the OFR is to ensure that the regulators can provide for the safety and security of our financial system and that does not require an invasion of personal privacy. There are clear limits to the type of data that the OFR can and will be collecting.

 
How would the NIF affect the commercial data vendors?  E-mail

By establishing and maintaining reference databases for financial entities and financial instruments and making these available to the public, the NIF would subsume a function currently carried out by commercial data vendors. For these vendors, the maintenance of reference databases constitutes an expensive necessity, rather than a substantial commercial opportunity. The standardization of reference databases would lower costs for the financial data vendors, allowing them to focus their resources on higher-value activities.

Last Updated on Wednesday, 10 March 2010 13:01
 
Can the government really do this?  E-mail

The effort and level of expertise required to establish and maintain the National Institute of Finance will be comparable to those needed for existing large-scale federal entities such as the National Weather Service, Oak Ridge National Laboratory, or Lawrence Livermore National Laboratory. The capacity to develop and maintain the NIF lie well inside the demonstrated capabilities of the U.S. Federal government.

 
How would the creation of the NIF affect jobs?  E-mail

The NIF can be expected to increase the efficiency and productivity of financial firms. As required upgrades to IT systems, needed to standardize reporting, are implemented across the industry, there would be increases in operational efficiency.  This would likely lead to  a decrease in demand for  lower-skill jobs  involved with routine collection and manipulation of financial data, and an increase in demand for  higher-skill and higher paying jobs involved with systems integration and the development of analytic tools and software.

 
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