Opening Remarks Delivered at the OFR’s 2024 Rising Scholars Conference

Views and opinions expressed are those of the author and do not necessarily represent official positions or policy of the OFR or U.S. Treasury.

On May 3, 2024, the Office of Financial Research and the Review of Corporate Finance Studies hosted the annual Rising Scholars Conference in Washington, D.C. Attendees received their Ph.D. within the last six years.

Good morning. It is my pleasure to welcome you to the 2024 Rising Scholars Conference: The Future of Financial Stability.

To set the stage, I want to put today in historical perspective.

The Office of Financial Research (OFR) and the Financial Stability Oversight Council were created in 2010 in the aftermath of what was then the worst financial crisis since the Great Depression. The financial crisis of 2008 and 2009 brought to light vulnerabilities that had been building within the financial system yet went undetected because of a lack of data and a lack of imagination in piecing together the available information.

The Dodd-Frank Act established the OFR to help promote financial stability by looking across the financial system to measure and analyze risks, perform essential research, and collect and standardize financial data. Our job is to shine a light into the dark corners of the financial system to identify risks, assess the potential threat, and evaluate policies that might mitigate these risks.

This day and this conference are significant for at least three reasons.

First, the OFR is finalizing a rule to close an important gap in data on the market for repurchase agreements, or repos. The U.S. repo market links many banks and nonbank financial institutions that borrow and lend for short periods, often overnight, with securities pledged as collateral. The wide range of participants in the repo market underscores the market’s critical role in our financial system’s plumbing.

A significant factor in the 2008-09 financial crisis was what has been called “a run on repo.” Theories about why the run occurred have evolved as we have filled gaps in repo market data. The OFR’s new rule will collect data on non-centrally cleared bilateral repo and complement the OFR’s earlier rule, which collects data on centrally cleared repo. The new data will provide ongoing insights into the repo market.

A second reason today’s conference is significant is because this day marks the unofficial start of graduation season. This season’s newly minted college graduates were about seven years old when the 2008 financial crisis exploded. The youngest new Ph.Ds. were not yet teenagers.

Remembering and understanding history matters. To quote George Santayana, “Those who cannot remember the past are condemned to repeat it.” With each year that passes, the collective memory of past financial crises fades. While no two crises are identical, they all have vulnerabilities that build slowly over time and often go unnoticed. The less we remember that fact, the faster vulnerabilities tend to grow.

That leads me to the third reason today is significant, which is that the OFR is hosting our second Rising Scholars Conference. Hosting conferences is one way that the OFR shines a light on financial stability issues. Our Rising Scholars conference in particular provides a platform for early-career researchers working to examine the many open questions about financial stability.

The decision to showcase rising scholars is intentional. Combating future threats to financial stability requires both remembering the past and identifying how vulnerabilities can grow. Old, well-understood risks can emerge in new ways; last year’s bank runs, for example, illustrated how the adoption of mobile communications has altered run risk. New risks can emerge gradually, as the rise of decentralized finance and cryptocurrencies demonstrates. Sometimes, trends transform overnight to pose new risks, as with the sudden maturation of generative AI. Staying ahead of these developments requires the best ideas from the most promising new scholars, and that is what motivates this conference.

This year, we received more than 80 papers for consideration and selected seven papers for inclusion. Today’s conference focuses on the future of financial stability. The papers cover timely topics, like wholesale funding markets, private funds, fintech, interest rate risk, and climate risk.

I want to thank everyone whose tireless efforts made this conference a reality, including our co-host, the Review of Corporate Finance Studies. We look forward to collaborating on many more conferences. I hope you have a successful, thought-provoking conference.

Stacey Schreft is the Deputy Director for Research and Analysis