Clinton and Bush Officials Should Have Listened to the Female Regulators

If only the Clinton and Bush officials had listened about derivatives.

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By Bonnie Erbe, Thomas Jefferson Street blog

If the Clinton and Bush administrations had listened to two women regulators, perhaps we would not be in the recessionary trough from which we're trying to escape today. Both women were honored for their outspokenness yesterday in Boston. From the Huffington Post:

Two U.S. federal regulators who sounded early warnings on the financial crisis (and a Liberian peace activist who helped end that nation's civil war) were honored for their efforts Monday at the John F. Kennedy Library in Boston.

Federal Deposit Insurance Corp. chair woman Sheila Bair, (and) former chairwoman of the Commodity Futures Trading Commission Brooksley Born...were presented with Profile in Courage Awards, annual honors named for a 1957 Pulitzer Prize-winning book written by John F. Kennedy.

...

Bair was one of the first to speak out about the subprime lending crisis, and Born warned a decade ago that unregulated financial contracts, including credit default swaps, could pose dangers to the economy.

I've been meaning to blog about Brooksley Born, the Clinton administration's Commodities Futures Trading Commission chief, named to head the agency in 1996. This award allows me to do so, and go back to an article in the May issue of the American Bar Association Journal that profiled Born's visionary powers to spot disaster ahead of time. The article was aptly entitled, " The Born Prophecy."

Born was among if not the first to warn Alan Greenspan and regulatory titans that left unfettered, the financial derivatives markets could provoke extraordinary economic consequences. It was, the article notes, the 45 trillion dollar credit-default swap market that fueled the housing boom and just as quickly, the bust, when debt obligations on derivatives came due and banks were unable to cover them.

Ms. Born told the Journal, "she takes no pleasure from the turn of events" and "was just doing her job based on the evidence in front of her. Looking back, she laments what she says the outsize influence of Wall Street lobbyists on the process and the refusal of her fellow regulators, especially Greenspan, to discuss even modest reforms."

Born is an unsung heroine to whom no amount of unjustified awards could be given.

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