One week ago Tuesday I sat in front of my Television spellbound watching PBS Frontline’s profile of Brooksley Born, a former Clinton Administration agency head who has since been termed the “Credit Crisis Cassandra” by the media. As the show ended all of my questions regarding the ineptitude of Obama’s economic team were answered and then some. Before we get to the answers we must first explore how Ms Born, as head of a sleepy federal agency in the Commodity Futures Trading Commission, tried to rein in and regulate over the counter derivatives of the same kind that imploded our financial system back in late 90’s. Lets begin with a story the Washington Post ran on the subject last May for the background:
A little more than a decade ago, Born foresaw a financial cataclysm, accurately predicting that exotic investments known as over-the-counter derivatives could play a crucial role in a crisis much like the one now convulsing America. Her efforts to stop that from happening ran afoul of some of the most influential men in Washington, men with names like Greenspan and Levitt and Rubin and Summers — the same Larry Summers who is now a key economic adviser to President Obama.
She was the head of a tiny government agency who wanted to regulate the derivatives. They were the men who stopped her.
The same class of derivatives that preoccupied Born — including the now-infamous “credit-default swaps” — have been blamed for accelerating last fall’s financial implosion. But from 1996 to 1999, when Born was the chairman of the Commodity Futures Trading Commission, the U.S. economy was roaring and she was getting nowhere with predictions of doom.
So, upstairs in the big house in Kalorama, Born tossed and turned. She woke repeatedly “in a cold sweat,” agonizing that a financial calamity was coming, she recalled one recent afternoon.
“I was really terribly worried,” she said. Continue reading The Warning: The Incredible Story of Brooksley Born. How the Financial Crisis Might Have Been Averted.