A little-noticed agency tucked inside the Treasury Department is bracing for big cuts.
The Office of Financial Research, an independent bureau charged with supporting the Financial Stability Oversight Council and conducting research about systemic risk, is beginning a significant round of layoffs, according to internal documents obtained by American Banker.
Agency staff have been asked to attend one of several two-hour sessions this week with an official from the Office of Personnel Management “to discuss RIF process at OFR,” according to an internal meeting notice sent to employees. (RIF stands for “reduction in force,” more generally known as layoffs.)
The plan has been in the works for some time. President Trump's budget proposal last May called for a reduction of up to 84 full-time workers — roughly 38% of its total staff — and a 25% budget cut. The changes come despite the fact that the agency’s budget comes from assessments on the largest banks, not federal tax dollars. An announcement about upcoming cuts was made to employees late last year.
Another internal message, obtained by American Banker, was circulated to employees several weeks ago with informational links to Office of Personnel Management sites describing RIF procedures and severance. It also contained links on retirement and early retirement as well as voluntary separation incentive payments.
Layoffs are expected to be finalized later this year.
The agency has been struggling for some time, plagued by low morale and frustrations with management. Data from last year’s employee viewpoint survey, obtained by American Banker, show that problems persist.
Just 27.7% of respondents said they were satisfied with the policies and practices of senior leaders, compared to 42.9% at the Treasury Department. Less than half of survey takers, 38.9%, said the agency has been successful at accomplishing its mission, compared to 72% at Treasury.
Still, the vast majority of employees, 76.2%, said they feel the work they do is important (compared with 88.8% at Treasury). Survey responses were also generally positive in describing the actions of direct supervisors, such as supporting employee development and promoting work-life balance.
Richard Berner, the office’s director, abruptly resigned in November, roughly a year before his six-year term expired. The office is now overseen by an acting director, Ken Phelan, who is also Treasury’s chief risk officer. He continues to serve in that capacity simultaneously, and it is not yet clear who the White House will name to fill the role permanently. A Treasury report from June recommended that the office be folded into the department and that its budget be determined by Treasury. A spokeswoman for Treasury did not respond to a request for comment on the status of the RIF or the employee survey.
Office of Financial Research supporters argue that the bureau still deserves a chance to perform its mission of researching possible systemic threats and sounding an early alarm about those risks.
Notably, a report by the consulting firm Charles River Associates, which was tasked with investigating the inner workings of the agency, concluded last year that OFR has suffered in part because it received minimal political backing, stemming back to its inception under the Dodd-Frank Act.
“Employees explained that throughout the history of OFR, a lack of strong political support has reduced confidence and motivation, which created feelings of uncertainty and vulnerability,” the report says.
“This aspect of OFR is truly unique and in a very negative way that must be considered as a central factor in evaluating its success. The organization has always existed in an environment characterized as not fully supportive, and now it is under a more extreme external threat.”
While the agency was targeted by a handful of Republican lawmakers early on, it’s largely suffered from what might be seen as benign neglect by Washington, other regulators and the public at large.
That’s in marked contrast to the Consumer Financial Protection Bureau — another Dodd-Frank agency — that has faced outright hostility from conservatives but has also been enthusiastically embraced by many progressives under founder Sen. Elizabeth Warren, D-Mass., and her successor Richard Cordray.
The consumer bureau is facing its own existential threat under acting Director Mick Mulvaney, but every decision Trump’s budget chief makes in that capacity is done under a microscope of media and congressional scrutiny. The same can hardly be said for OFR.
Without more active public discussions about the agency’s future — or the kind of strong backing that Warren has long provided for the embattled CFPB — that future remains in doubt.
“CFPB has a patron — and OFR is an orphan,” said Edward Mills, a policy analyst at Raymond James.
Still, Mills said, the work the agency was set up to do has real value, even if it has largely remained behind the scenes.
“The lack of data provides an asymmetrical playing field for the industry against a regulator, and OFR has the potential of being the great equalizer,” he said. “It’s one of those things where you might not miss it until it’s actually gone,” he said.