Sen. Elizabeth Warren (D-Mass.) has expressed concerns about conflicts of interest in a study critical of the Labor Department’s fiduciary proposal — and that has forced the resignation of one of its authors.
According to a report in The Hill, the left-leaning Brookings Institution has forced one of its top economists to resign. According to a number of published reports, Robert Litan, Brookings’ nonresident senior economics fellow, formally submitted his resignation Sept. 29.
According to the report, Warren sent a letter to Brookings earlier this week suggesting that Litan used his Brookings affiliation to lend credibility to a study that’s critical of the Obama administration’s proposed fiduciary regulations. “I am concerned about financial conflicts of interest in a recent study authored by [Litan],” Warren wrote in the letter to Brookings President Strobe Talbott, according to the report. The Washington Post said in her letter Warren calls their report “highly compensated and editorially compromised work on behalf of an industry player seeking a specific conclusion.” She cited the $85,000 combined fee that Litan and his co-author received from The Capital Group, an investment firm, according to the report.
Litan’s study estimated that the fiduciary rule “could cost investors as much as $80 billion” during a future market downturn. He argues that advisers would raise fees and costs to comply, making it harder for lower-income people to get personalized advice.
Litan, a former Clinton Office of Management and Budget (OMB) associate director, was a witness at the Senate HELP Committee hearing on the fiduciary rule in July and submitted the study, coauthored with Hal Singer, a senior fellow at the Progressive Policy Institute, to DOL at the close of the initial comment period. He did not, however, testify at DOL’s Public Hearing in August.
Economists, Inc. commissioned the study, which is marketed as an Economists, Inc., study. Brookings is mentioned only as one of Litan’s titles, according to The Hill. While the report’s sponsorship was disclosed, Warren says that in follow-up questions with Litan after the Senate HELP hearing, Litan disclosed that Capital Group also provided feedback and editorial comments on a draft. That, she said, according to Reuters, ran counter to his claim at the hearing that he and Singer were “solely responsible” for the study's conclusions.
For his part, Litan admits to a “minor technical violation” in identifying himself as a Brookings scholar at that July Senate hearing, despite a recent internal rule change that prohibits nonresident fellows from affiliating themselves with the think tank at congressional hearings.
Ironically, the study was titled, “Good Intentions Gone Wrong: The Yet-to-Be Recognized Costs of the Department of Labor’s Proposed Fiduciary Rule.”
However, the resignation won’t hit Litan’s bank account — his position at Brookings was unpaid.