Behind the Meltdown and Bailouts Pt1

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission (CFTC). In the late 1990's she not only warned of the potential for economic meltdown, but also tried to convince the country's key economic power brokers to take actions that could have helped avert the crisis. In the devastating aftermath of economic meltdown, The Warning sifts through the ashes for clues about why it happened and examines critical moments when it might have gone much differently."They were totally opposed to it," Born says of her warning. "That puzzled me. What was it that was in this market that had to be hidden?"

The Warning unearths the hidden history of North America's worst financial crisis since the Great Depression. At the center, veteran PBS producer Michael Kirk (Inside the Meltdown) discovers Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multi-trillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."

Category:

Entertainment

Tags:

• Brooksley Born
• Alan Greenspan. Robert Rubin
• Washington
• Michael Greenberger
• Larry Summers

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[BatusaiJack]

ohhh this is shaping out to be on juicy story...on to pt2

[exenrontexas]

@lorigee2 I agree that there are many who are disappointed the Obama has not waterboarded the terrorists from the BUSH adminstration and his supporters at ENRON. If they ever do, I GUARANTEE a FULL CONFESSION.

[exenrontexas]

@lorigee2 WRONG! The first collapse was under REAGAN was due to Reaganomics. Remember the S&L criminal collapse, the '87 market crash and the Reagan DEregulation of banks and large corporations that was continued by Mitch McConnell and Phil Gramm? Gramms wife, Wendy, was making a MILLION a year as an ENRON director.

[exenrontexas]

@lorigee2 ENRON perps punished under BUSH??? NOT REALLY. Ken Lay faked his death to get out of his conviction and keep ALL of his millions. Skilling is now appealing before the Republican Supreme Court. The BUSH Attorney General, Alberto Gonzales, Mr. Torture, was HIMSELF a former ENRON lawyer who aided Ken Lay in setting up his scam. THAT is what is REALLY PATHETIC. NO justice under BUSH.

[lorigee2]

At least during the Bush Administration, the perps were taken away in handcuffs. That includes the crooks from Enron. I haven't noticed any perp walks associated with any of this. I wonder why that's NOT happening under the Obama Administration, civil charges only. That is pathetic.

[lorigee2]

@exenrontexas Mr. Summers is currently with the Obama administration. As is Timothy Geitner, you know the former president of the New York Federal Reserve. The man that told AIG NOT to disclose the truth about their finances? You might want to check out a company called LTCM, the first WARNING ignored. This occured in 1998 and everything that happened in 2008 is directly related to that.

[lorigee2]

@exenrontexas @exenrontexas Actually the first collape was during the Clinton administration, ever heard of LTCM. Ms Born fought the good fight but was defeated by Alan Greenspan and Robert Rubin. For the record prior to being appointed by Bill Clinton, Bob Rubin was president of Goldman Sachs. When Rubin left office he went on to head Citibank/Citigroup. Another player that worked against Ms Born was one, Larry Summers.

[exenrontexas]

Brooksley Born's warning and the subsequent collapse of the economy under BUSH and DEregulation is a total repudiation of Ayn Rand's objectivist ideas. Free markets do NOT work and NEVER worked. Free markets is like giving birth to a child and then requiring it to feed, cloth and raise itself.

[exenrontexas]

Greenspan reminds me of Jeff Skilling. He talks in an obtuse style of nebulous concepts meant to foster obfuscation and obtuse ideas. Example: Greenspan's idol was Ayn Rand who believed in total DEregulation. It was that DEREGULATION, first begun by Reagan, that allowed ENRON to happen. Jeff Skilling promoted the "marked to market" accounting concept even STILL used by some companies today. It is FRAUD and Skilling was CONVICTED of FRAUD.