Frontline: The Warning

Last April I wrote a post about Brooksley Born, the Stanford Law School graduate who headed the Commodity Futures Trading Commission in the Clinton administration. Her mid-1990s warnings about the dangers of over-the-counter derivatives were quashed by Alan Greenspan, Bob Rubin, and Larry Summers. These securities--sold by AIG and other financial companies--ended up being key factors in bringing about the Great Recession of the 21st century.

My dad and my friend Dat both gave me heads up on Frontline's new episode out about Born entitled "The Warning." Highly recommended! Watch it here or on Netflix.

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....

"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."