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Frontline Special On Brooksley Born's Attempt To Tame Derivatives
Think Blanche Lincoln's attempts to tame derivative trading are new? Think again. During the 1990's, its was the CFTC's Brooksley Born who was the original crusader, attempting to warn about the dangers posed by an unregulated and out of control explosion in synthetic exposure. And just like Lincoln's current role reprisal will likely end up being neutered by the Dodd-Frank tag team, so Born's warnings continuously fell on deaf and conflicted ears. To see how 12 years ago one person was predicting precisely what may happen if JPM got its way to drown the world in $1.2 quadrillion of derivatives, watch this Frontline video "The Warning" from late last year: a fascinating hour-long adventure into the shadowy Over The Counter world which everyone has an opinion on, yet so few understand.
h/t TwentypercentTV
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we seemed to have a chance in the 90's./
Smart women are hot. Brooksley Born is most definitely "all that and a bag of chips".
As long as they don't try to tame integrals or man-bear-pig will attack.
note the ubiquitous evil of larry summers.
If we want to save derivatives reform we need to put Summers and Geithner into a Deep Horizon diving bell for the entire months of June, July and August.
AMERICAN DERIVATIVES XXX:
http://williambanzai7.blogspot.com/2010/06/american-derivatives-xxx.html
“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…
http://www.ritholtz.com/blog/2009/11/the-king-report-brooksley-born-vs-summers-greenspan-rubin/
Some of the stories go well beyond complaints about his manners. Brooksley Born, chairwoman of the Commodity Futures Trading Commission, received a call in March 1998 in her office in downtown Washington. On the other end was Deputy Treasury Secretary Summers. According to witnesses at the CFTC, Summers proceeded to dress her down, loudly and rudely. "She was ashen," recalls Born's deputy Michael Greenberger, who walked in as the call was ending. "She said, 'That was Larry Summers. He was shouting at me'." A few weeks before, Born had put out a proposal suggesting that U.S. authorities begin exploring how to regulate the vast global market in derivatives. Summers's phone call was the first sign that her humble plan had riled America's reigning economic elite.
Rubin, Fed chairman Alan Greenspan and Summers were concerned that even a hint of regulation would send all the derivatives trading overseas, costing America business. Summers bluntly insisted that Born drop her proposal, says Greenberger. According to another former CFTC official who would recount the episode only on condition of anonymity, Born was "astonished" Summers would take the position "that you shouldn't even ask questions about a market that was many, many trillions of dollars in notional value—and that none of us knew anything about."
Arthur Levitt, who was head of the SEC at the time of Born's proposal, today admits flatly that she had things right about derivatives while he, Rubin, Greenspan and Summers didn't. ("All tragedies in life are preceded by warnings," Levitt says. "We had a warning. It was from Brooksley Born. We didn't listen.")
http://www.newsweek.com/2009/02/20/the-reeducation-of-larry-summers.html
About that dual purpose mission of the Fed. So long as it is chartered to seek full employment while controlling for inflation, it's one bubble to the next.
The Higher Education bubble has 12 months until it implodes.
All one has to do is look at who got their way. And who got promoted to understand that the smartest man in any room and his sidekicks continue to fail up at a magnitude that is almost equal to America failing down.
Financial Innovation may prove to be America's last great export.
I think you are right, our soul got sold a while ago.
Or is our current "Financial Innovation", nothing more than "Financial Terrorism"?
Hah. Wake up friend. Our "financial innovation" is the product of trying to satisfy the world's demand for growth at the same time we're tasked with maintaining a stable reserve currency.
We agreed to do this. It's turning out to be the one weapon that can destroy us.
.
Triffin's Dilemma
As usual, well said lizzy.
I always forget, I know Larry, but which is Curly and which is Moe? Or is one Shemp in the picture above?
Shemp (aka Bob Rubin) is on the left....
I knew when I saw the appointments of Geithner and Summers that the Administration had been 'bought', paid for and delivered whole to the people that really run the country. Hank Paulson, when he went to Congress for the 'wealth transfer', I mean bailout, asked and received a 'get out of jail free' card in the form of 'Immunity from Prosecution' from any and all 'fallout' from the bank bailout-AIG-money-laundering-conduit-thingy. There was a moment when the President could have taken the reigns, nationalized the banks, fired everyone and taken the country somewhat toward solvency and fiscal rectification but thought: "Nah, I wanna live".
The Frontline piece on Brooksley Born was heartbreaking to watch. I kept throwing up in my mouth! And another thing, why the hell isn't Allan Greenspan in JAIL!?
Didn't you know that Jews never( with few exceptions) go to jail ?
Only exception is if they steal from each other like Madoff. I mean they only go to a jail if another one sends him.
Your Führer sold you a bill of goods.
They are the Master Race you are the tattooed tar ball.
Very well said. Why aren't ANY of these fuckers in jail? I ask myself that every single day. Actually, jail and/or the death penalty or even assassination is too kind. They need to taste cruel and unusual punishment, PUBLIC style, for the whole world to see. These evil fuckers are the TRUE TERRORISTS!!! FWMDs indeed!!!!
I wanted to smack Phil Gramm's brain matter out through his nose, during his charming cameo. BP should have used his carcass in the Deepwater Horizon junk shot.
I like the Time magazine front page: three Jews who greatly contributed to the destruction of the American Empire.
Two of them are presently in charge of running the Obama administration economic policies.
PS
Just facts and nothing else.
yep i think i see the protocols peeking out of Rubin's chest pocket
LMAO! Nothing better to do than laugh at these a**holes.
Do you have a problem with people taking note of the monoethnicity of the financial elite?
Or are you just willfully stupid?
Do you suppose it's possible that these three Jews were preceded by generations of equally idiotic, if not actually stupider goys, or have you forgotten how to say Jimmy Carter, Gerald Ford, Dan Rostenkowski, Tip O'Neill, Edward M. Kennedy or Bill Clinton? I thought the John Birch Society and their hobgoblin of an International Zionist Conspiracy had closed up offices a long time ago but I guess stupidity and willful foolishness have an indefinite shelf life. BTW, if the ethnicity is the point, would the same statements be made if they were Puerto Rican?
BTW, having spent my career on Wall Street, if you want a list of stupid WASPs and Catholics at the pinnacle of financial power, who were there when the Hunt brothers (no prayer shawls on them) cornered the silver market and almost took down the banking system I'll be happy to provide along list of sample names.
"stupid evil" or "smart evil". same shit, different race. one just smells longer.
Let's try it this way: For centuries, this country has been run (and is still run) by a WASP elite that has recently found it convenient to put out a bunch of Jews as straw men to receive the mud gobbing and dead catting of the booboise. The board of directors that hired Janie Dimon as chairman of JPM was hardly the membership roll of the Park Avenue Synagogue and his predecessors, Bill Harrison and Walter Shipley (you can add in David Rockefeller in the per-merger days and whoever was chairman of Morgan in teh per-merger days) were not often known to cover their heads with yarlmukes. I don't see JohnMack and all of his predecessors at Morgan Stanley at Saturday services very often either. Are the last three chairmen of Merrill and BofA Jewish?
The foundation for today's Wall Street robbery and thievery was laid down many years ago and was not laid down exclusively by Jews and was derived from an institutional power structure that historicallty has been controlled by WASPs that all claim to have come over in the Mayflower (try to be Jewish and become a member of about 80% of the really good country clubs in the New York area).
WASPS ain't it, Jews ain't it. Folks, I think you need to find some other way of thinking about this besides racial terms. This does not help me see something I did not see before, nor does it help me plot a plan of action to do something about our problems (or even my problems).
You are all too smart to fall for this. Don't you know this is all aborted boomer gay aliens' faults?
+1000!
True, except for that fact that this last 20 years of financial armageddon the fiasco that has brought down the Sword upon our necks is nearly entirely monopolized, dominated by the New York and London Jews. While they get even richer than Solomon.
You are either nieve, completely ignorant, stupid or, what is most likely, all three. Nonetheless, as long as you continue to believe that what you see, and the conclusions that you, a below average (to be very diplomatic) plebian, have drawn are what it is, you and yours will continue to be the slaves you have always been.
geithner,orszag,bernanke,summers,greenspan,rubin,friedman,fuld,frank,gensler,blankfein,shapiro,yellin, fink,cohn,dugan,kagan,lippman,madoff.....
....and I'm naive???
Milbank, go fuck yourself.
John Birch's Hobgoblin? Let's check out the protest of fellow Jews against the extremist Zionists: http://www.youtube.com/watch?v=5uEK7zaMEBg
Goy? Hmmm.... interesting word. Does that have anything to do with Talmudic views on non-Jews as "cattle."
Is there not one set of "Laws" for interaction between "Jews" and one set for "Jew-Goyim" interaction?
Why this Goy/Jews separation in Judeaism anyway? Interesting.
So how and why do Jews separate Non-Zionist Jews and Zionist Jews?
Obviously, from the video above they do. And from the video it is apparent that the non-Zionist Jews are very opposed to the existed of the State of Israel. And just as a very interesting side note on changes in history and philosophy, what is that six pointed star all about? Was it or was it not associated with Judeaism prior to 1947? Hint: not. So how do these crafted changes and divisions in philosophies and peoples get created and who crafts them?
Who takes an entire Eastern European Khazarian people (nee Asiatic) (Ashkenazim) and makes them adhere to Judeaism as of 800 A.D? What historic plans are in store for this non-Semitic newly coined Jewish population? How do the crafters of history use these populations to craft their world? How does this population of "Jews" relate to their Semitic Sephardic brethren? Do Khazarian Ashkenazim [no Semitic blood] (95%+ of present "Jewish" census world-wide) have cause to throw stones using the words "Anti-Semite"? Is it not actually this population that has committed a told and untold number of atrocities against actual Semitic peoples of the Middle East?
How can the same non-Semitic Ashkenazim have a claim to "right of return"? To their ancestral homeland? Ummm...that would be Eastern Europe / Russia. Or in even earlier times, points East of that. That would be like saying the millions of Chinese Muslims have a "right of return" to one or the other Middle Eastern nation, just because of their religious philosophy. Truly an argument that dies in its own idiocy, but one that continues on because the facts of the issue are unknown.
How foolish all this seems when the light comes out and shines, is it not?
And who is behind the scenes the whole time, hiding your own ethnic history? Destroying the tracks of information, so that you don't even know you are being played with this ideology that causes so many knee jerk "must fight" "get a big hard-on" reactions.
Yeah, the Great Gamers, that's who.
As long as we are completely unwilling to discuss every issue without clouds of crap being stirred up our own crafted error filled ego, the games and lies of the "history writers" and "ideology creators" will never be addressed.
I am not trying to start an issue. I am trying to reach into your issue and defuse it before someone uses philosophical judo on you and makes you destroy yourself for their gain.
You pick figureheads, puppets fo your example?
Who the hell do you think backs the clintons? Kennedy? Rosty? Didn't Hillary say, to secure the jewish vote in New York that her grandparent was jewish?
Marc Rich is a polish peasant, huh?
None are so blind as those who will not see.
no, three of them, if you watch the video you will see that Timothy Geithner was also there, he was the deputy of Rubin.
He also ran some devastatingly counterproductive IMF "rescues". It's amazing how some people can fail their way to the top. Silly me, I got one of these typical engineering jobs where cause and effect comes into play.
Hey Fred, haven't you got it yet? Government is the opposite pole to private enterprise. In private enterprise you are promoted on your capital returns to the company. (There is an argument in that statement these days, I know). In government institutions (they are not enterprises) the reverse is the norm. It's how much you are able to spend of other people's money that gets you to the top. The clincher is: there's no accountability!!
Gee Al. Who owns the FED (the true employer of these folks) and aren't they very happy with the returns from Timmay's activities? So how did he get promoted? Because he succeeded!
Hey, LB. Thanks for the correction on where he works. I got all twisted in my exuberance to vocalize my contempt for the destruction of wealth by governments and included Timmah in their ranks. He is part of the machine and has been very successful in his post, as far as his employer is concerned. Ask the janitors cleaning up his messes how they feel after his successes though.
I stand corrected.
I know the truth hurt greatly.
There is no ways to "argue". The only options left are: lies, censorship, and names calling.
PS
Let us see what is The Zero Hedge standing for? Mouth-diarrhea or meaningful discussions?
After reviewing "the Front Line", I concluded that "The Front Line" is incorrect. This Front Line program
- Is not about risks and/or preserving a free market system through financial markets self regulations
- Instead, it is all about "chosen people" imposing their social & political views and agendas on the US society and substituting a free-market economy by a fraud-driven criminal WallStreet oligarchy. Alan Greenspan put it bluntly: US government should not interfere with fraudulent and criminal financial operations.
- Finally, the people responsible for the present economic catastrophe are the same people who are now running the Obama administration
The Bottom LineIt is a very sad time for America and its people. The criminal and corrupt cartel is now in control of the USA. I can see catastrophic consequences. Well, we are not alone in this situation. Both China and Russia are being run by a mafia.
Oh Jeez. In your rush to affirm your paradigms, you focus on irrelevant minutia and miss what's really going on. You didn't point out all 3 are men. They all live on the east coast. They are all probably Ivy League. So? Instead, you focus on the fact they're Joooos. The problems of the country can be improved if laws on the books are enforced and people like this are prosecuted and jailed. No one if being held to account for the fraud.
Let us suppose for a minute that all these East Coast jews were instead named Solozzo, Corleone, Soprano, Tattaglia, Chianese, Palmintieri, Pellegrino, Lucca, Capone.
Think about that.
And Rhodes (named for the famous slaver and thief) Scholar Clinton was just a dupe?
We won't need a 6-sigma event. Just 1.5 ticks will do. Market structure is improbably top-heavy as a result of excessive derivatives. The threshold for cascading forced sales, margin calls and blow ups has been diminished contrary to the original goal of derivatives. True pyramiding.
Bingo. And there is not enough ink at the Fed to fix that, or would it be a data entry event? Too quick for the Bazooka trick to work next time.
Just saw a Fat Tailed Black Swan fly past the window. I think it said its name was Hernando. It was flying South.
Hey Gary Gensler, have you seen this yet? Oh that's right, they took those powers away from the CFTC back then because of Brooksley Born. So you have your thumb up your ass all day long and really have nothing to do, right?
Box office futures will save the system.
Gensler still controls the curtain to reveal the irregular short selling in gold and silver futures.
I watched this months ago when it came out. Paints Greenspan, Rubin and Jabba Summers in a particularly bad (but likely true) light.
Although I think Frontline doesn't dig deep enough I think they did a decent job on this. I hope that she feels somewhat vindicated.
They did pretty well for the hour they had.
It would have been a mini-series otherwise.
Not a bad idea that.
Arent there enough people on this site to produce Zerohedge's own version of this FRONTLINE special???
Why won't Greedscam die? WTF? He's like a million frikken years old already.
He said that he is watching everyday 10 yrs treasury bond prices.
I guess when they hit 6%+ he will die, mission accomplished.
He was bitten by GS, so now he is immortal, feeding on the blood of mutual fund investors.
Au shucks. He has a heart of gold.
Zero Hedge should do the Frontline for the Flash Crash --- show what happened and then show the quotes from all the exchanges and broker dealers state that it was a "hardware issue" and they have replaced the older servers.
How many times is Wall Street allowed to blow up the economy?
Two, three, four? No limit?
I think the "financial reform" bill states "no limit." -Oh wait, that was Bernanke's request regarding leverage for the banks by removal of reserve requirements. Sorry, no need for concern. Nothing to see here, move along.
A great Frontline expose on the deriative ponzi scheme.
Brooksley Born tried to pull the curtain back and expose the wizard(s) playing the organ but the three geniuses on the cover of Time magazine did everything they could to make her hurricane warning go away. Of course that is easy when you have a bought and paid for congress.
We will look back one day and say we warned but took no action.
I don't mean to dumb down this discussion but; man was she ever hot when she was younger!
No, that is in line
http://www.henryckliu.com/page211.html
This special does a fantastic job of explicating the intellectual and moral bankruptcy of the Chicago School of economics.
If only Murray Rothbard and Ayn Rand hadn't beaten the crap out of one another for petty personal reasons (maybe that's understating it in a few areas), Alan Greenspan might've never gone into government.
Ultimately, I think Milton Friedman and his intellectual acolytes have done more harm to the cause of liberty than any socialist could have ever dreamed of. Even Hayek to a certain extent believed in the efficacy of laying down with the state.
Fuck them, their legacies are shit.
Capital can't rob, rape and pillage without the state.
It was true for Columbus, true for the East India Company, and it's true for Goldman Sachs and Wal-Mart today.
That a certain strain of economists have chosen to ignore the functioning of capital in their analysis while demonizing the state, the great facilitator of capitalist exploitation, explains Greenspan's failing.
And how many times have we heard the claim "Nobody could have foreseen this?"
It was foreseen, at the appropriate levels, and was smothered.
Ayn Rand was rolling over in her grave when she saw the Keynesian damage that Grenspan caused.
So according to Greenspan, I can pass bad checks because the market will sort things out. Ohh wait I am not an insider, silly me. Fraud should/is be illegal only if committed against our betters.
Greenspan is the PERFECT disciple of Ayn Rand:
When put into the real world, the force of history and the true needs of capital smash right up against the Hank Reardon-esque delusions one harbors.
Gold and Economic Freedom by Alan Greenspan
http://www.usagold.com/gildedopinion/greenspan.html
Either he sold out - with or without personal sadness, or he decided that the only way to destroy fiat was through overdose. His appearances at the BIS during the William White years must have been something to behold, as The Maestro knew he was being schooled.
So all the mess would be avoided, if only (female)bureaucrats would have taken control of the "free" markets?
No mention about near zero interest rate for decade, Fanny & Freddy corruption, subsidising and forcing mortgages to unemployed buyers, out of control government deficit spending, bailouts for the incompetent giants?
Brooksley Born a true patriot. When asked why she was doing this (trying to regulate derivatives) she replied to protect the taxpayers (paraphrased). There is no excuse for our government throwing her under the bus except that they are treasonous bastards.
Or, Born was acting to protect taxpayers based on what information she had. Certainly she didn't have Summers' data sets. He had the string pullers in his office telling him the truth. Regulate derivatives and the bankers will require new capital, which doesn't exist, so credit markets will retract, which will lead to job losses, which stirs 3am phone calls to the NYFRB.
It's all a trap. We chartered the temple to protect us. To do that they now rule us. They have to. Our asks dwarf the bids. The temple provides the liquidity.
So now we dig a deeper hole. Someday we will have to face it, and it won't get any easier as time goes by.
As suggested earlier, the EURUSD daily chart is giving bullish signals.
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
LaRouche knew before her. Decades in fact. But that's just semantics. The important thing is, it was known.
I even remember my high school government teacher explain to us in 1995-1996 that the press was on to remove glass/steagall, that the firewalls would be removed, what exactly all that meant, related it back to 1929, etc. Once removed, probably around a decade later, kaboom.
All this just goes to show you NONE of this was an unknown.
Anybody that wasn't oblivious, stupid, or complicit, knew exactly what we were getting ourselves into. The complicit were drinking the kool-aid, and the oblivious didn't care to know.
BB wasn't the first, but at least, it's on record and everybody can see it, and chew on what that means.
But for the record, this didn't start in 1999. It started in the early 70's with the Inter-Alpha group, expanded after the '87 crash by Greenspan, and finally put on steroids with Glass/Steagall's repeal in '99.
IF you want to cure the disease you have to find Typhoid Mary or Patient Zero and thus find out who's been spreading it. Then look at what their next pet projects are. Now from the creators of this synthetic black hole comes cap and trade. No, they can't be wrong a second time, right?
In a sense looking at Brooksley Born however is a bit like a researcher first finding AIDS in the blood supply and trying to figure out where to go from there.
You need to go back further to find the cause, not necessarily start from such a late point and go forward.
It's great for context, definitely a piece of the puzzle, but doesn't show the whole picture. We shouldn't be focusing on 1999-2010, we should be focusing on 197X-2010, of which BB and repeal of Glass/Steagall would be chapter 3 or 4 within it. Because that's the time-frame these things have been used, if we want the best answers, we need to look at the whole time-frame.
ZH is doing a great job, and I'm sure much more will be coming.
Fish Gone Bad,
You're spot on about smart women. Brooksley Born, Janet Tavakoli, Elizabeth Warren, all very smart. While RoboTrader's and Leo's pictures are nice from the eye candy point of view, I know with whom I'd rather spend time!
DavidC
But Alan (THE MAJOR FUCKING GENIUS) Greenspan and Rubin (THE SCUMBAG) shut her down.
Bill (I GOT INTERNS TO FUCK) Clinton said: Derivatives??? What in tarnation is a derivative??? Monica, get back on that thing. Where is my cigar???
TD, thanks for posting the video. Had not seen it.
Greenspan gives away the game when he says markets will punish fraud. There is some truth in that. They will, via bankruptcy if that course is allowed to be pursued. However, he did not have the stomach for it when push came to shove with LTCM. Interesting how the bankers always push the "end of the world" panic button when it comes to them taking a haircut.
Ayn Rand was explicit in many different articles and venues: a limited government is necessary to secure rights; that is, to punish the initiators of force OR fraud. Greenspan never seemed to grasp that aspect of the philosophy. Indeed, he was the perfect incarnation of Robert Stadler, thinking he thought he could have it both ways. In the end, however, he destroyed himself. Yes his body continues to haunt us; however, it is but a corpse. Somebody please bury him for goodness sake.