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In The Warning, veteran FRONTLINE producer Michael Kirk 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.”

Category: Video

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9 Responses to “Frontline: The Warning (full episode)”

  1. AndrewBW says:

    Memo to Larry Summers: I want your resignation on my desk by 9 a.m.

  2. Through the Looking Glass says:

    This is good news. Now we are getting down to the nitty gritty. That nauseating feeling that the US government is a branch of the financial heirarcy has been overcoming me lately. It will be good to see the who sewed the seeds of this mess we used to be proud of.
    We must first reshuffle the deck by firing those that screwed up the worlds economy , they must go.

    My call to all is : Fire The”BEST AND BRIGHTEST” Now!”

  3. davossherman@gmail.com says:

    Great piece.

    Summers, Geithner, Bernanke, Rubin, Greenspan.

    Utter and absolute morons – forget resignations. Try then for treason!!!!!!!!!!!!

  4. holulu says:

    Did you notice when Mrs. Born was asked about what Greenspan told her, she declined to answer and said ” I do not want to talk about it”. What did that weasel told her?

  5. Moss says:

    I wonder who the 12 bankers were…

    Who were the CEO’s of the TBTF at the time. They are the real culprits.

  6. [...] compensation by a long shot when it comes to needed reform. You’ll see how our heroine, Brooksley Born is shut down by the evil trio of Robert Rubin, Larry Summers and Alan Greenspan. Then there’s [...]

  7. nroheneg says:

    Mamy thanks to Frontline for an solid reporting job on the history and Born.

    While Born is right about derivatives needing to be regulated, there is no evidence that this would have or will solve the problem.

    The dilemma is that the latest financial crises resulted from many problems:

    1. Government regulators who did not investigate or regulate.
    2. Auditors who did not audit.
    3. Wall Streeters who succumbed to risk, leverage and greed.
    4. Stock analysts who did not analyze.
    5. Credit rating agencies who did not rate.
    5. Consumers who did not save.
    6. Consumers who speculated on real estate.
    7. Politicians who listened to lobbyists.
    8. Politicians who insisted everyone should own a house.
    9. Real estate appraisers, mortgage underwriters and brokers who rode the wave.
    10. Government advisers who knew it all.

    The real question is where do we start. My suggestion is that we start with the politicians.

  8. [...] week, PBS “Frontline” produced a story that describes how Bob Rubin, Easy Al, Larry Summers and others prevented [...]

  9. [...] the way, there’s an excellent Frontline episode about this clusterfuck that is worth your time. My favorite is the gendered language here: “I [...]