When Ronald Reagan became President of the United States, a new economic future for the country was born. The idea was to let business be business and get big government off the backs of business so as to allow profits to bring the stock market into life. The obstacle to the realization of these goals was a Democratic congress and regulations imposed upon business and upon the market by legislation passed in 1933 to prevent a collapse of the market as had occurred in 1929. This legislation was under what was called the Glass-Steagall Act.
The Republican Party and the Republican Administration worked asiduously to overturn Glass-Steagall but the Democratic Party stood in the way. After the Reagan and Bush I administrations failed to overturn it, Bill Clinton drank the Kool-Aid and pushed the Democrats to support overthrow. In May of 1998, Democrats still opposed overthrow with
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Credit
Crisis Cassandra
Brooksley Born's Unheeded Warning Is a Rueful Echo 10 Years
On
PHOTOS
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As head of the Commodity
Futures Trading Commission in the late '90s, Born would wake up at night
"in a cold sweat,"; her fears, as we know too well, came to pass. (By Carol Guzy -- The Washington Post)
Washington Post Staff Writer
Tuesday, May 26, 2009
Tuesday, May 26, 2009
Friends
nudge the woman who saw the catastrophe coming.
They want
Brooksley Born to say four words, four simple words: "I told you so."
Ah, but she
won't -- not at legal conferences or dinner parties. Not even in a quiet moment
in her living room, giving her first interview with a major news organization
since last fall's economic collapse.
She just
smiles, perched ever so properly in an upholstered armchair at her Kalorama
home.
"More
coffee?" she asks daintily, changing the subject.
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.
Before
taking office, Born had been a high-octane attorney, an American Bar
Association power player, a noted advocate of feminist causes and co-founder of
the National Women's Law Center. But none of that carried much weight when she
crossed over into government; for all her legal experience, she was a woman who
wasn't adept at playing the game. She could be unyielding and coldly
analytical, with a litigator's absolute assertions of right and wrong. And she
was taking on Beltway pros, masters of nuance and palace politics. She marched
into congressional hearing after congressional hearing -- pin neat, always with
a handbag -- but no one really wanted to listen.
The Wall
Street Journal declared that "the nation's top financial regulators wish
Brooksley Born would just shut up." The Bond Buyer newspaper compared her
to a salmon "swimming against raging currents."