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
» This Story:Read +| Comments
Credit Crisis Cassandra
Brooksley Born's Unheeded Warning Is a Rueful Echo 10 Years On
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)
Brooksley Born in 1964, the first female president of the Stanford Law Review. She was also the first woman to finish at the top of the class. (Photos By Carol Guzy -- The Washington Post)
Born holds a photo of herself with President Carter in the late '70s at a meeting of the ABA's federal judiciary committee, of which she was the first female head. (Carol Guzy - Carol Guzy/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."