Brooksley Born finally gets to tell her story on national TV.  Note the pathetic apology by Arthur Levitt below for being part of the Greenspan-Rubin-Summers gang that tried to ruin Ms. Born’s career in Washington in the name of making the world safe for OTC derivatives.  And notice that this was one of the early good works of the President’s Working Group on financial services, an unconstitutional entity that should be outlawed.  Fortunately there has been enough continuing interest in the media to get the story out.   Chris

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FRONTLINE INVESTIGATES THE ROOTS OF THE FINANCIAL CRISIS

FRONTLINE Presents
The Warning
Tuesday, October 20, 2009, at 9 P.M. ET on PBS

www.pbs.org/frontline/warning

“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) — who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country’s key economic powerbrokers to take actions that could have helped avert the crisis. “They were totally opposed to it,” Born says. “That puzzled me. What was it that was in this market that had to be hidden?”

In The Warning, airing Tuesday, Oct. 20, 2009, at 9 P.M. ET on PBS (check local listings), veteran FRONTLINE producer Michael Kirk (Inside the Meltdown, Breaking the Bank) unearths the hidden history of the nation’s worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-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.”

The Warning is a FRONTLINE co-production with Kirk Documentary Group. The writer and director is Michael Kirk. The producers are Michael Kirk, Jim Gilmore and Mike Wiser. The reporter is Jim Gilmore. FRONTLINE is produced by WGBH Boston and is broadcast nationwide on PBS. Funding for FRONTLINE is provided through the support of PBS viewers. Major funding for FRONTLINE is provided by The John D. and Catherine T. MacArthur Foundation. Additional funding is provided by the Park Foundation. FRONTLINE is closed-captioned for deaf and hard-of-hearing viewers and described for people who are blind or visually impaired by the Media Access Group at WGBH. FRONTLINE is a registered trademark of the WGBH Educational Foundation. The executive producer of FRONTLINE is David Fanning.

pbs.org/pressroom
Promotional photography can be downloaded from the PBS pressroom.

Press contact
Diane Buxton (617) 300-5375 diane_buxton@wgbh.org

Category: Markets, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “Brooksley Born on PBS Frontline Tonight Talking About the Financial Crisis”

  1. bsneath says:

    I just heard on TV that in a Madoff related lawsuit, JPM is accused of being Madoff’s banker, knowing in advance that he was operating a ponzi scheme and then, doing the right thing, buying derivative contracts to profit off of the entire mess.

  2. Thor says:

    Can’t wait, I love Frontline

  3. franklin420d says:

    Thor: I thought you were on your way out of the country.

  4. Thor says:

    F420 – flight leaves tomorrow night buddy.

  5. franklin420d says:

    Oh.

  6. franklin420d says:

    Guess I should do less of that 420 stuff.

  7. bsneath says:

    Its legal now in 10 States.

  8. MRegan says:

    “They were totally opposed to it,” Born says. “That puzzled me. What was it that was in this market that had to be hidden?”

    Answer: Theft.

  9. CNBC Sucks says:

    Ritholtz, this is the active thread of the evening, I presume?

    Thanks to my man Bergsten, I have learned that your friend Happy Wanker has managed to annoy all the peeps to distraction on a daily basis, not only on your blog, but on that Andy’s Sigma Nu Clubby Elitist Traders’ Orgy Blog.

    Well, this state of affairs does not sit well with The Great CNBC Sucks!

    I am APPALLED — appalled, I say! — that Happy Wanker has managed to outdo The Great CNBC Sucks in the people annoyance department. How is this possible, I asked my man Bergsten this evening? The Great CNBC Sucks is widely acclaimed as a grand master of annoyance. I have pulled out every trick in the book — called you everything from Barry the Commie to Republican Ritholtz, made fun of Libertarians and Southerners, made sexist remarks (well, I guess that’s OK with you guys…and I do mean guys) and inane off-topic comments about everything from emo and indie to my preference for Burger King with abandon — and you peeps still prefer to be annoyed with Wanker instead of me?

    THIS, Ritholtz, is a sorry state of affairs!

  10. madman130 says:

    What a piece of garbage! Typical NPR.

    1. Women good, men bad.
    2. Republicans are evil, most democrats aren’t. Clinton was a good guy but he had bad people Rubin and Summers. But still Summers and Rubin are way better than Greenspan and Evil republicans.
    3. We need more government laws and regulations.
    4. Capitalism is bad and government is good.
    5. Greenspan doesn’t want to prosecute frauds, but the woman refuses to talk about it. He says, she says. Greenspan sucks ass because he doesn’t even believe in prosecuting frauds and on top of that he follows the ideology of a ugly woman who’s hard to understand.
    6. She is David. Greenspan, Summers and Rubin are Goliath, Clinton is still good.

    I am out. Couldn’t stomach this BS.

  11. number2son says:

    madman130, it sounds like you need to get laid.

  12. teraflop says:

    Gramm’s honey knew exactly what a derivative was and what was at stake – no one questioned whether he had any conflicts of interest at the time he pounded on Ms. Born.

    What a heroine – France can keep their Jeanne D’Arc, we have our own.

  13. fusionbaby says:

    Immorality (greed, special interests, hidden agendas and artifice) continues to reign. Yet, this is a step in the right direction. Well done Frontline. More fodder to hopefully add to the outrage of thinking, concerned Americans (indeed a minority, but a growing minority). Keep it coming. A quiet revolution (moreso an evolution) is what is so desperately necessary to save our country.

  14. thomases says:

    I just watched it. Born predicts more economic collapses until the derivatives are regulated. It’s like we just had an earthquake but it may later be seen as an introductory tremor. Will history judge the American taxpayer bailout of Wall Street as the ultimate irony–orchestrated by the former titans of Goldman Sachs? Obama recently paid lip service to reforming Wall Street–but their lobby is the most powerful in the country and the OTC derivative trading continues unabated. I hope the President watched the program. At the end Born predicted it will take more “melt downs” before the powers that be recognize meaningful regulation of these financial instruments is essential to the survival of our nation. The “dark market” continues.

  15. teraflop says:

    fusionbaby, agree, but Frontline viewers can’t compete in number with bailout-recipients and illiterate voters that like hearing sweet noises.

  16. thfiv says:

    Arthur Levitt is a disappointment.

  17. thfiv says:

    Brooksley Born for president.

  18. Melvis says:

    I watched the PBS special and thought it was quite good. During the time period in question I had lunch with a derivatives trader from PNC along with two local bank managers who tried to sell me on doing a multi-million dollar Interest Rate Swap contract. I was not interested but it was clear that the bank managers had no idea what they were selling. They tried to tell me that the full faith and credit of PNC bank would guarantee the contract but that was simply false as they had the right to sell the contract to a third party (AIG?) who would then have been responsible. How do you think that would have worked out? The trader knew his stuff and finally did admit that yes it was true that there was a significant principal risk if interest rates moved the wrong way plus a number of hidden fees, penalties and other traps.

    The banks are still trying to pull this crap. Today in the newspaper a local bank is advertising a 2.5% interest 6 month CD. It caught my interest and looked for the catch since the interest rate should have been about .50%. In order to get that rate you have to invest an equal amount in a 36 month CD whose interest rate would be tied to the performance of the S&P with only the principal being guaranteed by the FDIC. That extra 200 basis point yield has to be made up by ripping people off on the derivative based CD portion.

    Congress again seems to be stalling on doing any serious changes to how these instruments are regulated and sold. It is like gambling at a casino where the dealers can lie, cheat and steal and if you do win, refuse to pay. I’m sorry, I mean to restructure.

  19. Melvis says:

    Arthur Levitt though was refreshingly honest.

  20. mister_x says:

    Wow. Feel so f*cking depressed and sad after watching that.

  21. ewan says:

    It’s decent of Arthur Levitt to cop to this.

    Then again, he’s on Bloomberg all the time (as some sort of member of the editorial board or something like that) pontificating about regulation of the financial system.

    In America, is there no sanction for failure? None at all?

    He botched the job. And therefore shouldn’t be a leading counsel to anyone, vis-a-vis regulation.

  22. Melvis says:

    The depressing thing is that the same feckless cast of characters is still making the decisions and I have little confidence in them. Pessimists think the wind is never going to stop, the optimist is sure it will soon, the realist adjusts the sails.

  23. Jim Greeen says:

    To: madman130 Say:

    What you say may very well be correct. But you cannot over look the Mia culpa from Greenspan at that Congressioal hearing shown at the end of the program. That was pretty stuning admission on his part.

    Give a lot of validity to the idea that, in the end, when all is said and done, the proof really is in the pudding.

  24. greenback says:

    The amazing thing to me is that Born, and transparency, got shut down as LTCM was blowing up. LTCM was a 100-foot high neon sign that screamed “The financial markets needs some updated regulation!” To miss that big a sign does not speak well of either the intelligence or integrity (video of Phil Gramm was an appropriate choice) of our leaders in Washington.

  25. Frontline is in a league by itself. Watch the Obama’s War episode online, it’s equally insightful. You
    can trash Levitt if you want, but the real rats avoid the camera completely.
    I’m still waiting for the disgorgement of Rubin.

  26. dan10400 says:

    On a good note, the show seems to have peaked some interest – from google trends:

    “brooksley born” 7th most popular search in the past hour.

    Of course it is below people searching for meteor showers, custom bobble heads,
    and somebody named kanye west who got in a car accident.

  27. franklin420d says:

    TGCNBCSucks – Sorry I missed your previous post, this evening. Maybe you read this maybe you do not, who knows. I do not know Mr.Ritholtz and I am beginning to be glad I do not.

    For him to allow someone of TuckFard Wangers character to call people names and high borrow them is not good form, but he does control the ink, so it is his rules.

    I have two main theories on why he is allowing TuckFard Wanger to drive very good and decent people from his site, perhaps I can share them at some point.

    This is Mr. Ritholtz sandbox he built it, but when he allows an asshat monkey like Wanger to call decent folks like Thor, Ahab, mannwich and others stupid or inept, does he believe the outcome will be mild?

    Anyway as you may/may not know I am all about learning, sometimes faster then others, but I also know what my strengths are.

    Thank you for calling out what you see and I will continue to do what I need to do.

    And good luck this weekend.

  28. madman130 says:

    Not trying to defend Greenspan or evil republicans. They deserve all the scorn.
    I was pointing out that it was a just typical PBS/NPR presentation with bunch of predictable memes.

    Greenspan is a pussy. He sort of blamed capitalism for his own failures. That’s why the bailout still seems so mind boggling. I would have liked to see all these big bankers sell their homes and their kids college funds to cover their losses. It would have been the ultimate punishment and in unfettered Capitalism that’s exactly would have happened.

  29. Moss says:

    It should be no mystery as to how the culture of Wall Street lost all sense of ethical behavior.
    The fact that Greenspan believed that fraud would be worked out by the market is the most stunning aspect of the whole drama and goes a long way in explaining how the unethical culture grew so wide and deep.

  30. FrancoisT says:

    In a culture that worship money and money makers, these outcomes cannot be surprising in the least. After all, money is how financiers keep score of who’s who in the pecking order, which is how worth and self-worth is socially defined within their club.

    It is like corporations at large; they’ve completely lost sight of any fiduciary duties, including the much-touted shareholder value. What matters is the quarterly result,, the rest be damned.

    As for Congress, (which did not play a small role in this debacle) I entirely subscribe to Mark Twain chosen quips about them. Just seeing Gramm’s fuckface pontificating like he did in the documentary was enough to remind me that Twain was way too generous about the Collective of Idiots they are. Bought and paid for, locks and barrels is an apt description.

    I do not know of any civilization that has been able to stay prosperous on a long-term horizon with such a mindset. We are no different.

  31. number2son says:

    Greenspan rejecting his Randian philosophy before a Congressional committee was a rare moment of high drama and will endure as a key moment in the history of this disaster.

    That today the banks and Wall Street continue to do business as if nothing happened is a testament to the toxic influence of money in politics (in D.C., there are 5 lobbyists from the financial industry for every congress person). I don’t think Obama fully comprehends how his failure to enact genuine change has damaged his reputation among people who care about these issues. Is he counting on the fact that most people only pay attention to this stuff when they are hungry? As an enthusiastic supporter of his run for President last year, I am thoroughly disappointed.