Eleven years ago, U.S. economic leaders should have listened to Brooksley Born.
Then head of the Commodity Futures Trading Commission (CFTC), Born was concerned about new and unregulated futures markets. They were growing at tremendous rates, yet their risks were not fully understood. She was especially wary of the lack of transparency in trading over-the-counter private "derivatives," so she issued a call for comments about the need for regulation and oversight.
As Narda Zacchino and Robert Scheer point out in their piece about Born in the just-released Fall issue of Ms. magazine, instead of recognizing Born's foresight, "they shot the messenger." The old boys' club of U.S. economic advisors -- including former treasury secretary Robert Rubin, former Federal Reserve chair Alan Greenspan and the current director of the National Economic Council Lawrence Summers -- did everything they could to stop Born from asking more questions and to block Congress from taking action.
We all know where that head-in-the-sand approach got us: into a deep recession, triggered in large part by unregulated derivatives trading.
But it's do-over time: Will the U.S. Congress listen to the echoes of Born's voice when they tackle forthcoming legislation to better regulate the over-the-counter derivatives market?
So far, the news is frustrating. The bill that passed out of the House Finance and Agriculture Committees in October has loopholes big enough to drive billions of dollars through. "If people are paying attention they will see that there is still a house of cards and that these loopholes are going to codify that," Sen. Maria Cantwell (D-Wash.) told the Boston Globe. Yes, there will be more regulations, but, as the legislation now stands, large banks and financial institutions can still escape much of the needed oversight.
As Born told Ms., "I did feel to some extent as though I was the little boy saying, 'The emperor doesn't have any clothes.' I was absolutely mystified that both the industry and the other financial regulators did not even want to ask questions about an enormous financial market [about $600 trillion] that none of us had any insight into."
After the financial meltdown, much insight has been gained. And more will certainly be learned when the Financial Crisis Inquiry Commission, a 10-member group appointed by Congress which includes Born, delivers its report in December 2010. But the emperor that is the U.S. Congress is still displaying a lot of naked flesh. If it doesn't tighten regulations further when the bill comes to the floor of the House this month, and then on to the Senate, we risk a replay of the economic crisis.
"There was nothing inevitable about the current financial meltdown other than the stupidity, greed and arrogance that enabled it," wrote Zacchino and Scheer in Ms. "The price for not heeding Brooksley Born will be paid for generations to come."
So Congress, don't ignore the warning again.
For the complete Ms. article on Brooksley Born, "They Shot the Messenger," look for the Fall issue of Ms. on newsstands now, or have it delivered to your door by joining the Ms. community.
Bruce Judson: Glass-Steagall 2.0: The American People Deserve An Explanation
With so much at stake, the American people deserve a full explanation for why one vision of the financial system is superior to another.
Andrew Rich: Financial Crisis Inquiry Commission: Summoning the Ghost of Ferdinand Pecora
The ghost of Pecora -- and indeed, of FDR himself -- can be sensed in D.C. this week as Congress announces a new, modern-day version of what came to be known as the "Pecora Commission."
Loading comments… 
Here’s an idea:
Stop shooting the messengers
Nota bene: I have no doubts at all that he/she is naked. I'm taking that for granted. In fact: I know it.
But why is it congress? Why is it not the lobbyists? Or the bankers? Or the voters? Or the Rumpelstil
Well, let's see how far we can get with respect to that crucial task - of finding out precisely who it is that is stark naked:
If you'll allow, I will take a certain simplifica
Who would that be? The Nobel Laureates? The columnists
Oh boy!
Are we getting confused?
No!
It is those who don't know that unless you can't price an asset, you can't trade it. Well, to be perfectly honest, it is those who don't know that this applies to derivative contracts as well.
unless you CAN price an asset, you can't trade it.
Absolutely true. Now that's been further verified by Greenspan admitting he was wrong in his programs. The damage he did was truly incalculab
It's not enough to disprove and show our displeasur
We need to elevate and make very public the leaders who are standing up for the right thing, people who are representi
Brooksley Born, Elizabeth Warren, Marcy Kaptur, Maria Cantwell, et al. The country now has some role models who should be elevated in the media. This could bring other leaders to the forefront who truly want to do right.
I'm a liberal and voted for Clinton, but I worked in trust and investment
I thought derivative
Had Born prevailed, last year wouldn't have happened.
The American people will not be refused their toys.
Are we in April 1930 or July 1931? The recovery so far is just like October 1929 to April 1930 and then the other shoe dropped...
If we don't listen to Brooksley Boorne now, I fear the other shoe will drop with $200 trillion in unregulate
On The Road To Economic Recovery Or On The Eve Of A Great Depression
http://mca
President Bush unleashed the subprime monster, and the blame for the credit crisis is squarely on him, not Clinton. If Bush had a brain, or if Greenspan had elected to use the regulatory authority he already had over subprime, it's highly unlikely the credit crisis of 2008 would have happened, and Born would be a forgotten doomsayer.
Also, nobody is saying what reforms and regulation
America is one big rigged Casino...r
We're a government of the bankers, by the bankers, and for the bankers, not the people..no
In my opinion it was not caused by unregulate