Top Brookings economist forced out over biz-backed study

The left-leaning Brookings Institution is forcing one of its top economists to resign, amid questions from Sen. Elizabeth Warren (D-Mass.) about an economic study funded by the business community.

Robert Litan, Brookings’ nonresident senior economics fellow, will formally submit his resignation Tuesday afternoon, according to three sources familiar with the issue.

Warren sent a letter to Brookings earlier Tuesday suggesting that Litan used his Brookings affiliation to peddle an industry-backed study that’s critical of the administration’s proposed regulations for financial advisers. Industry groups, congressional Republicans and roughly 100 congressional Democrats oppose the so-called fiduciary rule, which is championed by Warren and President Obama.

“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.

Litan, a former Clinton Office of Management and Budget (OMB) associate director, and Hal Singer, a senior fellow at the Progressive Policy Institute, published a study raising concerns about the proposal.

Economists, Inc., which is supported by the business community, commissioned the study, which is marketed as an Economists, Inc., study. Brookings is mentioned only as one of Litan’s titles.

Litan’s resignation has already ignited a firestorm within the financial services industry over what has become a contentious policy fight over Obama’s proposal to tamp down on financial advisers.

“Senator Warren has chosen not to combat the facts and this sets a terrible precedent,” said one senior level financial services source who opposes the administration’s proposal. “The message is clear: If you are an academic who challenges data supporting her ideas, you stand to put your job at risk.”

Comment from Litan, Brookings and Warren was not immediately available.

Warren’s letter comes as Democratic support for Obama’s regulatory proposal has deteriorated in recent weeks.

Last week, 96 House Democrats signed onto a letter calling on Department of Labor officials and Obama to significantly change the proposal, citing concerns that it would end up raising financial advice costs on low- and moderate-income Americans.

Obama and Warren have pushed for new disclosure requirements to ensure that consumers understand that their financial advisers might receive payments financial institutions after selling them advice.

The industry has convinced Republicans and half the House Democrats caucus that the regulations aren’t needed and would raise costs.

This story was updated at 2:10 p.m.