The most important agency you've never heard of: the Office of Financial Research is meant to be the early-warning system for the next financial crisis. Is it doing its job?

• Author: Finkle, Victoria

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Among the many lessons learned from the 2008 financial crisis, one thing stands out: ignorance--willful or otherwise--drove the system to the brink of collapse. While banks were busily writing mortgages destined to default, there was a blithe, system-wide failure to recognize what those toxic mortgages could do to the economy. Not only were regulators asleep at the wheel, they didn't even know the car was moving.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, took a number of steps aimed at righting the wrongs of the financial crisis. One was the creation of a new agency, the Office of Financial Research (OFR), tasked with ensuring that Washington would never get caught so flat-footed ever again. Headquartered in a nondescript office budding in downtown D.C., the 225-person bureau collects data and produces reports aimed at identifying potential threats to the financial system. Although technically part of the Treasury Department, the body is by law independent. Its budget, $99 million in fiscal year 2016, is funded through fees paid by the country's largest banks. To help the OFR carry out its mission, Congress granted it sweeping powers, including the right to demand certain data from banking regulators and financial institutions, either voluntarily or with a subpoena, as well as from banking regulators.

Yet given its vital role, the OFR is a body that is surprisingly--perhaps worryingly--low-key. Its director, Richard Berner, hasn't testified before Congress since 2014. Its numerous reports are highly technical, specialized, and rarely grab headlines. And given its vast powers, it's unclear why it hasn't collected more data from financial institutions or exercised its subpoena power to do so. Nearly six years after its creation, the OFR has yet to establish the credibility and influence its champions had hoped for, leading some to worry whether it will be able to fulfill its mission of averting the next financial crisis. "OFR was created to be the beating heart of the financial circulatory system for the U.S. government," says Dennis Kelleher, president and chief executive of Better Markets, an advocacy group. "I don't think anybody would claim that it's lived up to that goal."

The idea for the OFR took root in early 2009 during the fallout from the financial crisis. Regulators struggled to make decisions during the height of the meltdown in part because they lacked real-time information about which banks were connected through financial relationships, and how. The crisis also exposed how little federal regulators knew about the world of "shadow banking," such as the vast market for...