WASHINGTON — A longtime fellow at the Brookings Institution abruptly cut ties with the prestigious think tank Tuesday hours after Senator Elizabeth Warren sent a letter to the institution complaining about an industry-funded study he cowrote.
“I think the Warren letter has created discomfort at Brookings,” Robert Litan said by phone. “I don’t want to make people there feel any more uncomfortable than needed.”
Litan said he believes Warren’s complaints were largely unfounded, noting that he disclosed the funding source for his study during Senate testimony he gave on it over the summer. He also said that Warren didn’t attack the substance of his argument — only the perceived conflict.
“I’m very disappointed in the outcome,” he said. “I stand by everything I wrote in that report.”
The development was the latest win for Warren in Washington, where she has sought to highlight areas where the financial services industry seeks to influence government. Washington’s network of think tanks produce much of the research that lawmakers and regulators rely on when assessing new rules, and Brookings is among the most highly regarded.
Litan, a nonresident senior fellow at Brookings who has been affiliated with the institute for roughly four decades, used an industry-funded study he conducted as the basis for Senate testimony. He criticized a proposed Department of Labor rule intended to protect investors seeking advice on retirement funds.
Warren took issue with two aspects of the study: Litan was paid roughly $40,000 to do it by the Capital Group, a company that stands to benefit from the study’s conclusions. Also, a draft of the study was reviewed by the Capital Group before it was published.
“The funding sources of some Brookings-affiliated researchers call into question the independence of their research and its conclusions,” Warren wrote in her letter to Brookings.
Warren’s letter was first reported Tuesday morning by the Washington Post’s Daily 202.
David Nassar, a Brookings spokesman, said that Litan violated a Brookings policy by touting his affiliation when he gave testimony on his study before Congress. Nassar said that the study “was not connected with Brookings in any way.”
A Wall Street Journal op-ed by Litan on the proposed rule, based on the same Capital Group-funded study, was featured on the Brookings Institution website Tuesday afternoon. It includes a disclaimer noting the funding source.
The president of Brookings, Strobe Talbott, said he accepted Litan’s resignation with regret, calling him a highly respected researcher.
“He has acknowledged that he made a mistake in not following Brookings regulations designed to uphold the independence of the institution,’’ Talbott said.
“We wish him the best of luck.’’
The Department of Labor’s proposed change would apply a fiduciary standard to investment advisers requiring them to provide advice that is in their clients’ best interest.
The financial services industry is fiercely opposed. Under current law, these brokers are subject to a looser rule, which requires investments they recommend be “suitable’’ for a client.
In his Senate testimony Litan was introduced with his Brookings affiliation and went on to say the rule could cost investors as much as $80 billion. The higher costs would come in part because middle class investors would have to shoulder more of the costs for advice — making up for commissions that brokers would lose. Also, he said, middle class investors would be losing money because they’d no longer have access to a broker who could persuade them to hold on to assets and ride out market fluctuations.
Litan’s written testimony includes a footnote saying that it was based on a study supported by the Capital Group, which is described as “one of the largest mutual fund asset managers in the United States.”
In response to follow up questions from Warren after the hearing, Litan disclosed that the Capital Group provided about $85,000 to fund the study and that Litan received about $38,800 for his work on it. He said the Capital Group provided “feedback on our initial outline and some editorial comments.”
Warren also wrote to the Department of Labor calling attention to what she called “financial conflicts of interest” with the study. She sent the letter last Thursday — as the federally mandated comment period for the rule closed.
She noted that the study had been prominently featured by critics of the proposed rule in their public opposition to it.
“Families and small investors deserve access to unbiased advice about their finances and financial decisions,” she wrote, “and it is equally important that the Department of Labor also relies on unbiased input from experts.”
Annie Linskey can be reached at firstname.lastname@example.org. Follow her on Twitter @annielinskey.