Brooksley Born being given JFK award for derivatives warning...

[slipslidingaway]

http://www.jfklibrary.org/JFK+Library+and+Museum/News+and+Press/2009+Profile+in+Courage+Award+Recipients+Announced.htm

"...Brooksley Born, Former Chair, Commodity Futures Trading Commission (CFTC)

In 1998, as chair of the Commodity Futures Trading Commission, Brooksley Born unsuccessfully tried to bring over-the-counter derivatives under the regulatory control of the CFTC. She warned that unregulated financial contracts, such as credit default swaps, could pose grave dangers to our economy. The government’s failure to regulate such financial deals has been widely criticized as one of the causes of the current financial crisis..."

[Kdillard]

1. Good nice to see deserving people getting recognized.

[slipslidingaway]

6. Yes it is :) n/t

[KittyWampus]

2. But some on DU would have us believe there are no other qualified people to take Geithner

or to work in Treasury.

[slipslidingaway]

7. At the very least it would be good to have her input on how we

move forward with regulating the OTC derivatives market, maybe the administration has already been in touch with her.

[terisan]

3. Weird decision to give Treasury over to Geithner and Summers instead of Born nt

[depakid]

5. Actually her fit was at regulatory agencies

Where the administration has chosen insiders responsible lax regulation- or in the case of the CFTC, someone avidly and actively involved in creating the mess-

Not exactly a confidence builder among those of us hoping for change on that front.

[slipslidingaway]

8. As depakid stated below there was probably a better position

for her in a regulatory agency...if she even wanted a position.

[Metta]

4. This is amazing since Summers and someone else from Clinton's Treasury thugged over her.

Good for her.

[slipslidingaway]

9. Yes and now they are back...

The Woman Greenspan, Rubin & Summers Silenced

http://www.thenation.com/blogs/edcut/370925/the_woman_greenspan_rubin_summers_silenced?rel=hpbox

"...But more than a decade ago, a woman you're likely never to have heard of, Brooksley Born, head of the Commodity Futures Trading Commission-- a federal agency that regulates options and futures trading--was the oracle whose warnings about the dangerous boom in derivatives trading just might have averted the calamitous bust now engulfing the US and global markets. Instead she was met with scorn, condescension and outright anger by former Federal Reserve Chair Alan Greenspan, former Treasury Secretary Robert Rubin and his deputy Lawrence Summers. In fact, Greenspan, the man some affectionately called "The Oracle," spent his political capital cheerleading these disastrous financial instruments.

On Thursday, the New York Times ran a masterful and revealing front page article exposing the culpability of Greenspan, Rubin and Summers for the era of dangerous turbulence we live in.

What these "three marketeers" --as they were called in a 1999 Time magazine cover story--were adept at was peddling the timebombs at the heart of this complex crisis: exotic and opaque financial instruments known as derivatives--contracts intended to hedge against risk and whose values are derived from underlying assets. To cut to the quick, Greenspan, Rubin and Summers opposed regulating them. "Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury," recalls Alan Blinder, a former Federal Reserve board member and economist at Princeton University, in the Times article.

In 1997, Brooksley Born warned in congressional testimony that unregulated trading in derivatives could "threaten our regulated markets or, indeed, our economy without any federal agency knowing about it." Born called for greater transparency--disclosure of trades and reserves as a buffer against losses..."


http://www.motherjones.com/mojo/2008/11/obama-taps-larry-summers-recalling-summers-days-regulation-foe

"....Even "small regulatory changes," Summers cautioned, could throw the whole system out of whack. Determined to slap down the CFTC, his Treasury Department, the Fed, and the Securities and Exchange Commission crafted a proposal that would prohibit the CFTC from issuing new rules regulating any swap or "hybrid instrument."

Summers told the Senate he and his fellow economic bigfoots were not slamming Born and the CFTC cavalierly:

We understood the seriousness of making this proposal. To question an independent agency's concept of its jurisdiction and then to propose legislation that would temporarily curtail that agency's ability to act is not something we do lightly. We concluded, however, that such legislation was necessary to avoid disruption and dislocation in the market while the underlying issues were being considered by Congress.

Congress in late 2000 did end up implementing the Summers approach, when Senator Phil Gramm, then the head of the Senate banking committee, used a back-room maneuver to slip into a must-pass spending bill a measure that prevented the CFTC or the SEC from regulating derivatives.

During that 1998 Senate appearance, Summers did acknowledge that there could be problems with derivatives:..."

[Skwmom]

20. Rubin, Summers, Greenspan and Geithner are a bunch of good old boy idiots.

It's not like these guys just made small mistakes. They totally screwed things up (when anyone with an ounce of sense would have seen the warning bells). These idiots pushed for deregulation AFTER the S&L debacle. And it's not only the financial industry that they ruined. Look how well FREE trade has worked out for this country.

The whole thing is simply mind-boggling. Why didn't they just run an ad for the economic team that read: Major screw-ups wanted. Must have a track record of making mistakes on a monumental level. Candidates responsible for only minor screw-ups need not apply. Prefer candidates with a proven track record of dishonesty (e.g., cheating on your taxes).

[slipslidingaway]

25. I agree that these are not small mistakes...

and the China trade bill has worked out well for the American people.

:sarcasm:

There was a great report by the EPI months before the China trade bill which projected the job losses and growth in our trade inbalance that would result if we granted permanent trade relations with China...think they had it correct as well.

It really does give me pause when those who fought against regulation are some of the same people pushing for broader authority in the future and also are charged with cleaning up the curent disaster.



"Why didn't they just run an ad for the economic team that read: Major screw-ups wanted."

:)

[elleng]

14. Also Greenspan and Rubin.

'While on the commission and after becoming its chair two years later, Born sought comments on the need to regulate derivatives, specifically swaps that are traded at no central exchange, known as the dark market, and thus have no transparency except to the two counter-parties (no actual regulatory scheme was proposed at the time). The request for comments, called the "Concept Release," stated that the growth of trade in derivatives had prompted to CFTC to re-examine its regulatory scheme. <1> The request for comments was opposed by Federal Reserve chairman Alan Greenspan and Treasury Secretaries Robert Rubin and Lawrence Summers.<2> Specifically, on May 7, 1998, former SEC Chairman Arthur Levitt joined the other members of the President’s Working Group – Treasury Secretary Rubin and Federal Reserve Board Chairman Greenspan – in objecting to the issuance of the CFTC’s concept release, in which Born attempted to shed light on the dark market, citing grave concerns about the possible consequences of the CFTC’s action. In particular, these concerns focused on the risk that such discussion would increase legal uncertainty concerning swaps and other OTC derivative instruments and, thus, destabilize what had become a significant global financial market. They claimed potential turmoil created by the report and concerns about the imposition of new regulatory costs also might have stifled innovation and pushed transactions offshore.<3> As the financial crisis of 2008 gained momentum, newspapers began reporting on what might be some of its causes, including the adversarial relationship Greenspan, Rubin and Levitt had with Brooksley Born, <4> with Greenspan leading the opposition, and how Born's recommendations were suppressed.<2> She is retired from Arnold & Porter and has declined to comment on the unfolding crisis.'

http://en.wikipedia.org/wiki/Brooksley_E._Born

[slipslidingaway]

10. Rep. Marcy Kaptur - March 24, 2009

http://www.c-spanarchives.org/congress/?q=node/77531&id=8946845

"Ms. KAPTUR. I thank the Speaker very much for that, and wish to say that I recently entered into the Congressional Record an account of some of the key legislative history and executive actions that have led our Nation into our current economic crisis, a meltdown of people's accumulated savings, a loss of value in their homes and pensions, a 26-year high in unemployment, and major damage to our financial institutions and their ability to lend.

One of the individuals I talked about was the woman who headed the Commodity Futures Trading Commission back in 1998, in the late 1990s, and her name was Brooksley Born. She was an esteemed attorney, and she knew the field of regulation well. She said we had to regulate derivatives and, if we didn't, we would get in trouble. She was prescient and she was right.

Three of the men that ultimately caused her resignation were pictured on the front of Time Magazine about a year later: Alan Greenspan who then headed the Federal Reserve, Robert Rubin who chaired Citigroup, and Larry Summers who was then Secretary of Treasury.

You know, it is good to remember history so you are not doomed to repeat it....


....And, finally, we ought to investigate, investigate, investigate. In an article last week titled, ``Then It's Securities Fraud,'' journalist Froma Harrop wrote that law professor William Black of the University of Missouri Kansas City, who is also renowned for his work in ethics, has mounted a campaign for a new Pecora-type investigation here in the Congress. That was a series of hearings held by the Senate Banking Committee into financial wrongdoing at the end of the Great Depression.

Harrop writes, ``As the bottom was falling out of derivatives trading, AIG was reporting healthy profits. That's not allowed under the law. Meanwhile, the company created a short-term bonus system for its top executives.''

Professor Black's call for a Pecora Commission should not go unheeded by this Congress. The issue of securities fraud is not a small matter.

The first order of business is to get the financial system righted so the ship doesn't sink. We owe that to the American people who are trying to hold on to their own dreams.

Then the Congress must launch an investigation like no other into the causes of this crisis. And frankly, it is a conundrum to this Member why that set of investigations has not already begun. We need to learn every detail about what happened and why and bring the wrongdoers to justice so that this never, ever happens again..."

[elleng]

11. Great to see this

but Caroline didn't need guts to do this, as would have someone in admin???

[slipslidingaway]

12. There are chosen by a 14 member committee...

but I'm not sure about the nominating process.

[slipslidingaway]

13. Senator Byron Dorgan calls for financial crimes to be investigated

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5331090&mesg_id=5331090

[slipslidingaway]

17. Video of Senator Dorgan with Rachel Maddow this evening...

http://www.youtube.com/watch?v=Q_hbezbsJ8s

[bvar22]

21. Dorgan was GREAT....

...and my respect for him went UP two stars after realizing that he PERFECTLY predicted the inevitable results of the banking deregulation signed by Bill Clinton.

He mentioned that 8 other Senators voted AGAINST this in 1999.
If I have the time today, I will look up the identity of the other 8 Senators.
It is NOTHING but Spin and Propaganda to blindly insist that Geithner and Summers are the ONLY people "qualified" to head Obama's Economic Team.
It is enough to make me puke to see that repeated endlessly at DU by the cheerleaders.

[slipslidingaway]

23. Yes he was, here are the 8

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=106&session=1&vote=00354

The first vote was much closer, but many were swayed to vote for the bill by November.

Some additional links in this thread
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x289053


Link to all his speeches that year, 11/4 or 5/6 in particular.
http://www.c-spanarchives.org/congress/?q=node/77530&pid=2318&begdate=1999-01-01&enddate=2000-01-01

[camera obscura]

15. What happened to her is inexcusible in my mind, the so-called financial geniuses have no shame

I can't believe she wasn't given a job in the administration. Yes, it's possible she was offered one and said no, but even then I have to believe we'd have been given a leak to the press.

[slipslidingaway]

16. Why people who fought regulation are being brought in to

solve this mess makes no sense to me.

:(

[stillcool]

24. if she wasn't interested..

why would there be a 'leak'? I'm not sure if people realize that working in government is not attractive at all, to many people. And why would it be? Especially for her.

[slipslidingaway]

18. k n/t

[Skwmom]

19. And the guy who got it wrong is being rewarded with a job in the Obama administration.

And it's Born's old job. :rofl:

Oh wait, I forgot, he's learned from his mistakes just like Geithner, Rubin, and Summers. :sarcasm:

Of course, applying that kind of "logic" why don't we bring back Rumsfeld and let him head up the Defense Department b/c surely he's learned from his mistakes. :rofl:


http://www.thenation.com/doc/20090406/scheer?rel=hp_picks


Sanders gets right to the point: "Mr. Gensler worked with Senator Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of AIG and has resulted in the largest taxpayer bailout in US history."

After Rubin left to take a $20-million-a-year job at Citigroup, which he helped run into the ground, Lawrence Summers, his protege and replacement at Treasury, elevated Gensler to be an undersecretary. Gensler then performed as Summers' point man in advocating for deregulation legislation that enabled the current debacle.

What irony that Gensler is being rewarded with Born's old job for getting it wrong.

[slipslidingaway]

22. It's a strange world indeed, glad Senator Sanders has

shed light on this aspect.