McHenry Criticizes Treasury Research as Berner Defends Study

The head of a House oversight panel criticized the Treasury Department’s financial research arm while the division’s director defended its report on asset managers.

The Treasury’s Office of Financial Research “has failed to provide useful information about the biggest risks facing our economy,” North Carolina Republican Patrick McHenry, chairman of a House Financial Services subcommittee on oversight and investigations, said at a hearing in Washington today. “The OFR really needs to show its value to the American people.”

Richard Berner, the office’s director, reiterated his position that the September study called “Asset Management and Financial Stability” was fair. The study wasn’t intended to evaluate individual firms and doesn’t by itself suggest that asset managers will be subjected to stricter oversight, he said.

The OFR provides information to the Financial Stability Oversight Council, a group of regulators headed by Treasury Secretary Jacob J. Lew. The council evaluates which non-bank financial companies could pose a threat to stability if they were to fail and can put those firms under Federal Reserve supervision. The central bank can then impose stricter capital, leverage and liquidity requirements and demand stress-testing.

“The OFR report did not focus on individual firms, but instead on asset-management activities,” Berner said in testimony prepared for today’s hearing. “The OFR report alone could not be used as the basis for designating any particular firm.”

BlackRock Inc., Fidelity Investments and the Investment Company Institute, the mutual-fund industry’s trade group, have said money managers aren’t a threat to financial stability. The ICI said in November that the OFR report fell far short of providing the analysis that the oversight council needs.

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