The research office is only now beginning to attract attention for the unusually strong powers Congress granted it to force financial companies to turn over confidential information and help spot potential market blowups. In a nod to its abilities to peer into the uncharted depths of the financial system, lobbyists are calling it the CIA of financial regulators.

The analogy may not be far off. Housed within the Treasury, the office will have both data collection and analysis arms. The law says it can demand “all data necessary” from financial companies, including banks, hedge funds, private equity firms, and brokerages. That would include previously secret details such as who the counterparties are for credit default swaps and information on individual loans such as interest rate and maturity. If companies aren’t forthcoming, the director of the office can issue subpoenas.

It’s about time someone profiled the Office of Financial Research, a new agency created when President Obama signed the Dodd-Frank Act into law in July, and Bloomberg’s Robert Schmidt does a great job with his piece.

Some important takeaways:

But what do these takeaways actually mean?

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“It’s hard to know how much of [bank profits from prop trading] will be affected by the various new rules. But suppose trading revenue at Morgan Stanley could fall by 30 percent from existing levels. All else being equal, a third of the company’s business would still come from trading, more than from any other single business line.”

Here’s the problem with this paragraph from a post this morning on Reuters Breakingview that is otherwise pretty good: It’s plainly impossible at this point to come close to predicting, with any expectation of accuracy, the losses prop desks at investment banks could see.

Financial reform was just signed into law earlier this month. That’s the legislative part of it all. The regulation – the specific ways that legislation will be deployed onto the markets – has hardly been explored in any meaningful way, let alone made. It’s still all a very new thing to virtually everyone connected to the markets.

Plenty of news outlets make the ridiculous assumption that because legislation has been passed, the regulation associated with it is already reliably predictable – and it’s all well and good to fling around these kinds of estimates like a frisbee when it fits into a post. I just wish the Reuters writer would have quoted a source on the 30 percent estimate. That would’ve made the number seem like less of a guess and put a name behind the prediction just in case something ridiculous happens, like prop-trading profits remaining steady despite the new regulations.

Sans my own commentary, here’s what the compromise on Sen. Blanche Lincoln’s controversial derivatives reform proposal looks like. House and Senate leaders today said they will approve the new legislation by July 4, which should pave the way for financial reform.

The deal, negotiated between the White House and Sen. Blanche Lincoln, D-Ark., eliminated one of the last major sticking points.

Derivatives are complex securities often used by corporations to hedge against market fluctuations. But they also have become speculative instruments for financial institutions, the most notorious of which were credit default swaps that hedged against loan failures.

In the House, moderate Democrats and members of the New York congressional delegation fought to remove Lincoln’s language.

Under the agreement banks would only spin off their riskiest derivatives trades. Banks get to keep some of their lucrative business based on trades in derivatives related to interest rates, foreign exchanges, gold and silver. They could even arrange credit default swaps, the notorious instruments blamed for the meltdown, as long as they were traded through clearing houses. Banks could trade in derivatives with their own money to hedge against market fluctuations.

More, via the Associated Press.