Last week, Mainft jumped on potentially wild implications of an obscure but explosive provision buried deeply in the Budget bill of the Trump administration.
Article 899 of the bill adopted by the House of Representatives last week would allow the United States to impose additional taxes on businesses and investors from countries it deems to have “discriminatory” tax policies. As George Saravelos said Deutsche Bank, he represents the potential “weapon of the American capital markets”, given the thousands of billions that foreign investors have in the United States.
Well, here is another hidden humbinger, which you can find almost halfway through the word ca 160k “A great act of bill“:
SECOND. 50005. Financial research funds.
Article 155 of the 2010 Financial Stability Act (12 USC 5345) is modified by adding to the end the following:
(e) Limitation of assessments and the financial research fund.
(1) Limitation of evaluations. —— The evaluations cannot be collected under paragraph (d) if the evaluations led
A) The financial research fund exceeding the amount of the average annual budget; Or
(B) Total assessments collected during a single financial year exceeding the amount of the average annual budget.
(2) Transfer of excess funds. – Any amount of the financial research fund exceeding the amount of the average annual budget will be deposited in the General Treasury Fund.
(3) amount of the average annual budget defined .– In this paragraph, the term “amount of the average annual budget” designates the annual average, during the last 3-financial year completed, of the council expenses in the execution of the rights and responsibilities of the council which were paid by the office using the amounts obtained by assessments under subsection (d).
It is . . . Potentially quite problematic, if we have read correctly.
The American legal jargon-political is difficult to analyze, but the understanding of Alphaville is that it could in practice kill the financial research office of the American Treasury, an organization created as a kind of early alert system for financial crises after 2008. Here is how and why it would be a big problem.
The financial research fund referenced to article 50005 finances both the operations of Financial stability supervisory board – A primordial organization which includes all the main American financial regulators and is chaired by the American secretary of the Treasury – and the OFR which supports it. The FRF draws its money from a small annual sample from the major American banks.
The bill seems to place a ceiling on these charges, equal to the average annual budget of the “council”, which probably means the FSOC in this context. But the FSOC budget is tiny compared to OFR, which consumes the share of the money lion collected by the banking costs of the financial research fund.
Apparently restricting these charges to a maximum of only The average annual FSOC budget, the budget bill would de facto kill OFR by finishing it, without the hassle of having to really adopt legislation to do so officially (a favorite game book of the Trump administration)
Again, it is difficult to be safe, given the disorderly language of the bill, but our interpretation of the wording seems to correspond to that of the Congress budget office and the Congress Research Service. As the latter noted, with the accent put by Alphaville below:
. . . Article 50005 would limit both these annual evaluations and the balance of the FRF to the FSOC Middle budget in the previous three years, which, from the financial year 20123 at the 201025 financial year, was $ 16 million (assuming that the transfer of the FSOC to the Federal Deposit Insurance Corporation would be eligible). The funding higher at the limit would be transferred to the General Treasury Fund. This is compared to combined combined obligations of FSOC and OFR of $ 136 million, OFR assessments of $ 124 million in 201025 and a balance not obliged by the FRF of $ 74 million in April 2025. Thus, this section would result in a significant decrease in annual assessments and OFR expenses (and potentially FSOC). CBO believes that this section would reduce the deficit of $ 292 million over 10 years.
The interest of the 2010 Dodd-Frank-Frank act was to bring together stupidly complex patchwork of regulators And prevent the type of cataclysmic failure that contributed to the 2008 financial crisis. But to do this, it needed data, research and analysis, which is why the OFR was installed inside the American Treasury.
You might say that the FSOC can continue to play the same global role and convene financial regulators without OFR to help it. Some of his research is inevitably duplicating the work carried out elsewhere in the federal government or by the IMF. In addition, $ 16 million should be sufficient to finance dotti from FSOC / OFR herds. Alternatively, the Treasury could request additional funding thanks to normal budget avenues to maintain OFR.
However, if nothing changes, it would certainly require an abandonment all The collection, cleaning, dissemination and analysis of the information made by OFR. Its data, technology and research centers costs approximately $ 83 million a year, and produce good things as it is Cover fund instructor And Monetary Market Monitor (Alphaville used the first to This storyAnd the latter for an upcoming). OFR also played a central role in obtaining the Legal entity identifier ground database.
Consequently, the OFR plays an important role in the collection of a large part of the data underlying the Secure funding rate overnight – Libor’s successor as the most important interest rate reference in the world.
Contrary to LiborSFR is a reference to interest rate derived from real financial transactions, rather than vibrations and everything that was practical for certain P&L traders. More specifically, it is based on the US reference markets overnight, where US treasury bills serve as a guarantee for short -term loans between banks and other financial institutions.
The New York Federal Reserve is Director of SofrBut the crucial raw data comes from the New York Mellon bank, the Clearing Corporation – and OFR income. Oops.
In other words, after years of work hard by regulators, central bankers and officials of the Ministry of Finance around the world to wean the global financial system for the dependence of its Libor, the Trump administration could now sabotage its main successor just as it is starting to gain from the field.
In a statement to FT Alphaville concerning the impact of the Budgetary Bill on OFR, and the potential violin impact on SFR, a treasury spokesperson would only say: “The Treasury considers its role in the guarantee of the proper functioning of financial markets as one of its highest priorities.”
It is true that even if the OFR becomes a zombie agency, its role of collection / Sofr data storage could in theory be simply taken up by someone else, perhaps the federal reserve of New York itself. But these repo data are very messy, and there are probably a myriad of legal property problems involved. The movement of the SFR data collection from one agency to another is therefore certainly not a simple process.
Are the financing of OFR and the potential damage to Sofr planned, or simply a SNAFU? It’s hard to say. But OFR’s motto is “a transparent, responsible and resilient financial system”. It seems that none of these things are desirable in America in 2025.
