I love this picture of Brooksley Born.
Who would have guessed that 30 some years later she would be scorned as “irascible, difficult, stubborn, unreasonable “?
Her crime? Suggesting that derivatives traded over the counter were not transparent enough and needed oversight.
Time Magazine’s 1999 Committee to Save the World disagreed.
In a now-infamous quote, Larry Summers (the guy on the right) reportedly told her: “I have 13 bankers in my office and they say if you go forward with this you will cause the worst financial crisis since World War II.” She was head of the Commodities Futures Trading Commission at the time, with 20 years of private practice experience in derivative markets.
The Wall Street Journal said “the nation’s top financial regulators wish Brooksley Born would just shut up.”
Meanwhile, Long Term Capital Management used derivatives to leverage $5 billion into more than $1 trillion, and in 1998 imploded, threatening the entire financial system.
The federal reserve galloped to the rescue, organizing a bailout. Sound familiar?
Born warned the LTCM crash “should serve as a wake-up call about the unknown risks in the over-the-counter derivatives market.” Unperturbed, Congress passed a law prohibiting the Brooksley’s agency, the CFTC, from regulating over-the-counter derivatives.
Brooksley resigned and in April 1999 went back to private practice.
What has she done since? In 2009 she was awarded the John F. Kennedy Profiles in Courage Award in recognition of the “political courage she demonstrated in sounding early warnings about conditions that contributed to the current global financial crisis”.
She’s retired, goes sailing with her husband, dotes on four grandchildren, enjoys birdwatching. “I’m very happily retired,” she says. “I’ve really enjoyed getting older. You don’t have ambition. You know who you are.”
Born is on the 10-member Financial Crisis Inquiry Commission, which is examining the causes of the 2008 financial crisis. Wonder if anyone will listen this time?