Regulating through Financial Engineering: The Office of Financial Research and Pull of Models
21 Pages Posted: 30 Sep 2019
Date Written: 2019
This Essay explores the ways in which establishing The Office of Financial Research (OFR), one of the policy responses to the 2008 crisis, represents the extension of financial engineering into the realm of government regulation. The argument is that quant culture has become so pervasive that we are at a point at which quantitative models are at the center of financial regulation. While the push for the OFR was guided by a desire to better regulate, the result has been an overconfidence in the ability to regulate via measuring risk. Thus, ironically, the OFR may actually contribute to a culture that avoids direct regulation of financial institutions, such as by restricting their size — and thus makes our financial system less safe.
Keywords: Office of Financial Research, OFR, regulation
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