Let Us Now Praise Uppity Women
On the day of the dead, Nov. 1, the news media reported the story of CIT's* impending bankruptcy. Cassandra, take a bow. This time, her name is Brooksley Born. She saw it all coming almost 20 years ago.
Born was the lone woman in a group of powerful men when she tried to persuade Congress to regulate the novel financial instruments known as over-the-counter derivatives during the 1990s. She served as head of the Commodities Futures Trading Commission, and legally had jurisdiction over the side bets that banks and insurance companies made with each other to hedge their risky investments. Except nobody was keeping score, and nobody was required to actually have money on hand to pay up. Born thought that should change, because too much of the American people's money was at risk.
She was defeated by the financial titans of Robert Rubin, Larry Summers, and Alan Greenspan -- at the time Secretary of the Treasury, assistant secretary, and chairman of the Federal Reserve. The triumvirate portrayed her as that worst of all possible beasts in Washington officialdom, a "difficult" woman.
Greenspan believed "The Market" would police itself of fraud because he was a devoted acolyte of Ayn Rand, the radical individualist and author of Atlas Shrugged. Not exactly an inspiring metaphor for a Fed Chairman during a global economic meltdown.
But as Born knew, fraud is the mortal enemy of any supposedly free market. Unless investors can be confident that their money is safe from fraud, capitalism cannot survive. A system rife with fraud is a death star, imploding upon itself. Derivatives, houses, tulips--the object of the exchange does not matter if the information it is based on is knowingly false. Such a system is based on patsies, not investors.
Let's not forget that fraud is, after all, a crime. Saying the government should not regulate fraud is like saying it should not regulate murder. Sure, private means can redress the grievance, but in the end the whole society suffers. That is, assuming that suffering matters. It didn't to Ayn Rand.
All the New Deal securities regulations boil down to preventing fraud. Insider trading, churning, margin requirements--the premise is that traders cannot hold themselves out to be something they are not if they are soliciting, in Louis Brandeis' immortal phrase, "other people's money."
Ever late to the scene of a catastrophe, Congress is now considering new regulations for the financial markets, in the wake of the Great Recession.
Brooksley Born recently gave the PBS series Frontline her latest warning:
I think we will have continuing danger from these markets, and that we will have repeats of the financial criss--it may differ in details, but there will be significant financial downturns and disasters attributed to this regulatory gap, over and over until we learn from experience.
Women have a long history of being whistleblowers in systems dominated by men. Perhaps this time Congress -- and the American people -- will listen.
*Correction note: This has been corrected from an original version that mistakenly said Citi rather than CIT.
Arianna Huffington: Obama One Year Later: The Audacity of Winning vs. The Timidity of Governing
David Plouffe has written the most important political book of the year. The Audacity to Win arrives at a crossroads moment for the Obama administration -- exactly one year after the election. While reading it, I found myself wondering what Candidate Obama would think of President Obama. Would he wonder how the candidate who got into the race because he decided "the people were getting hosed" became the president who decided that the American people can only have as much change as Olympia Snowe will allow? How did the candidate who told a stadium of supporters in Denver that "the greatest risk we can take is to try the same old politics with the same old players and expect a different result" become the president who has surrounded himself with the same old players trying the same old politics, expecting a different result?
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Where did this bizarre idea of Ayn Rand being opposed to laws against fraud come from? Whatever nonsense Greenspan might hold, he didn't get that idea from Rand, who thought protecting against fraud was one of the few legitimate functions of government.
amen x2....once again, a credible and VERY smart woman was shunned and basically ridiculed for her views of the impeding disaster she predicted....the good ol' boys club won again....very sheepishly, greenspan admitted to being wrong....BUT, the real problem is that the foxes are once again guarding the chicken coop....geithner, rubin and summers....if you haven't watched "the warning" from frontline on pbs, it's frightening how she was abused and disregarded....check it out....
http://www.pbs.org/wgbh/pages/frontline/warning/view/?utm_campaign=homepage&utm_medium=proglist&utm_source=proglist
Amen. Brooksley Born did a notable thing in standing up for what's right and in standing against the financial titans who did everything they could to discredit her. I've seen the Frontline documentary twice and have recommended it to other people. Pres. Obama should publicly acknowledge her contribution, and how she was dismissed and/or suppressed by the people who led the financial downfall of the country for the past 30 years.
I've seen two other advocates for U.S. citizens who are doing positive things in trying to inform the country of what's happened and is happening. Elizabeth Warren has confronted Geitner as Brooksley took on Greenspan. Also, Marcy Kaptur (D-OH) has faced off with JP Morgan CEO Jamie Dimon.
We need more capable leaders like these to stand up for the American taxpayer. These ladies have demonstrated concern and ability to the point that they should be in higher positions of authority in the U.S. government.
"Except nobody was keeping score, and nobody was required to actually have money on hand to pay up. Born thought that should change, because too much of the American people's money was at risk."
This drives me so nuts that these guys are nothing but a bunch of welshers! They placed bets they lost and instead of breaking their legs we let them take out a huge loan. So they could place more bets.
An excellent article by Attorney Monk. When Rubin, Summers, and Greenspan refused to listen to Brooksley Born, they allowed speculators to create TWO PARALLEL UNIVERSES of investments. In the FIRST PARALLEL UNIVERSE the banks had normal securitized loans that had been easily maintained under the old bankruptcy rules. When a mortgage went into default, the debtor could reorganize it under Chapter 13 or the bank could foreclose. Either way, the property was preserved, the bank was protected, and the debtor might lose a little cash. Enter the derivatives and default swap whiz kids. They took the securitized loans and created a SECOND PARALLEL UNIVERSE. In the new universe theY created new instruments which basically insured investors against nasty risks such as sub-prime mortgages. The problem was that these banking engineers did not know when to stop. From the SECOND PARALLEL UNIVERSE, they created additional levels of speculation called TRANCHES. The tranches are different "classes" or slices of instruments. They can be called Class A, B, C, or D tranches springing off the original loans back in the FIRST PARALLEL UNIVERSE.
Anyway, I do not feel the instruments or tranches created in that second parallel universe can be called negotiable instruments under our Uniform Commercial Code. They look like and function more like insurance policies for speculators.
THE PROBLEM IS THAT ALL OF THE SPECULATORS IN THE SECOND UNIVERSE OF TRANCHES WANT AMERICANS AND OTHERS IN THE WORLD TO PAY OFF THE OBLIGATIONS.
SHOULD WE REWARD CRIMINAL FRAUD?
Very well said Whitley. I was against the bail outs from the beginning and felt the banks in trouble should go into receivership.
I would not bet on Citi's future.
But hear , hear on the post. Seldom have a I read such a clear summary. Both points ring true: 1) free markets need protection from fraud to function. I agree that is one of the few absolutely essential roles of government in the financial system. 2) women continue to be marginalized due to their gender, esp in male-dominated fields. Information coming from a woman doesn't get as much attention, since women have less power in male-dominated organizations.
Am happy to hope that info coming from L Monk, however, does get attention!
If Brooklyn Borm saw this coming too, she must indeed be a remarkable woman. CIT was a specialist lender to small business - nothing at all to do with OTC derivatives.
Derivatives were certainly instrumental in Citi's troubles, but now since we're now talking about CIT, Ms. Born is irrelevant, robbing the article of its premise.
So you are arguing that the damage and fallout from the derivatives market was and is limited to only the major derivatives players like Citibank, JP Morgan Chase, and Bank of America?
And that the economy as a whole was unaffected, and that none of CIT's loans to small business went into default as a consequence?
lolll...oh, I see. CIT filed for bankruptcy for kicks and grins, and not out of any need arising from the derivatives impacting the entire width and breadth of the American economy.
The Frontline documentary on the history behind the deriviatives and financial crisis that has led to our current economic woes was an eye-opener. I have to applaud Ms. Brooksley Born for her efforts to get these financial instruments regulated also twenty years ago. A good women of Ms. Born's caliber is hard to keep down; it appears her predictions were quite "on the money".
I used to have so much respect for Greenspan and Rubin; now, I just wish they would go away. Their blatent disprespect for Ms. Born and their blind eye to fraud, greed, recklessness, arogance and overt scheming has caused way to much heartache in the last year. Those boys need to go live on Pluto and leave their money with us, since it is their lack of foresight that has led to the current economic situation. In fact, President Obama needs to get rid of the Summers and his ilk; the people, who didn't believe fraud was a crime. It is time the "masters of the universe" stop playing their games; if they wish to continue, then let them use their own money for their schemes. The rest of us have suffered enough.
Agreed and fanned.
We need to give the 'UPPITY' word a knew meaning. Like you bet your sweetness I'm an UPPITY CHICK, ya wanna talk about it? I'll give you a PIECE of my mind, BUDDY.
Unless she is conventionally considered attractive (in today's society, that means plastic-surgeried and under 35) or she takes off her clothes, no, she will not be listened to. America has become ADHD Nation, with a strangely 50s-ish sexist twist.
Women have always taken a backseat to men, I think it comes from the old days. Like the days when they walked one step behind their men. I for one like uppity women and find that once listened to, they usually seem more intelligent than most men. That is to say, intelligence is not attached to gender.
If intelligence is not attached to gender, then I wonder what the point is of the focus on this person's argument, instead of this childish "uppity woman" focus? I suspect the point is that "uppity women" are sometimes smarter than men, and uh, so what? That's trivially true. Is there any one who argues that men are always right and women are always wrong?
You are missing the point. The article is highlighting the discrimination Ms.Born's intellect and participation was subjected to due to her gender. The terms 'difficult' or 'uppity' have long been code words used against women (and others) that convey a conscience effort to dismiss and 'keep women in their place' (a phrase we heard replayed in the recent media)
Would Ms.Born's voice have been heard had she been a male? That's something we'll never know but we can be pretty sure that it would not have been so easily dismissed and ignored had it been a couple octaves lower.
If you haven't watched the PBS special on this, I suggest you do, it presents this case in all it's shame.
I saw the Frontline article on Mrs.Born. All of her hard work and dedication to this country were to amount to nothing but a hill of beans to the big boys on the hill. I was sickened by the way she was treated.
I was appalled by the actions of the men involved. I am sure there were a few women who didnt listen either. The were to afraid to stand up to the man. I can only hope the likes of Pres.Obama hss the wherewithall to find Ms.Born and seek her counsel. She deserves to have Mr.Geitner's job just on experience only.
Thank you for noting that episode and bringing the hard work of Ms.Born to light. Every American should see and hear of her efforts. There are people out there who see a wrong and try to right it.
I saw the Frontline episode about Brooksley Born and thought she was right on the money. I'm a libertarian and was disppointed to hear Greenspan argue that the market didn't need the government's protection from fraud. I happen to think that's one of the few roles that government has to play. It provides stability, predictability and breeds confidence. While it's true that more sophisticated investors are better able to protect themselves by conducting expensive due dilligence, the masses need more protections as so much of our economic investment tools have become commoditized (sp?) with the 401(k) and growth of mutual funds as well as securitization of mortgages.
That said, it is far from certain that had Born's regulatory scheme been adopted that we wouldn't have had any of these problems. As most of you know, there were many factors that casued these problems and eliminating (more likely just reducing the impact) of one such factor wouldn't have necessarily change the outcome for the better.
Finally, I'm proud of Brooksley Born for standing up for her position because she was correct, not because she was a correct woman - Dave
I love uppity women,... my wife of 15 years is exactly that personality type and I love her for it.
Women bring a different perspective to life than us guys and in my experience do tend to think more cooperatively, and more long-term on average than guys do.
We all could do with a more vocal, 'uppity', and empowered population of women.
Cheers to your comment!
They gamble and we lose. Exactly how does that work ? I go set down in Vagas gamble and lose who do I send the bill to ??????
Guess you have to be a Republican to understand it because not enforing the RICO Laws and the mortage fraud laws has to lead to this banking failure. Espically when the FBI was reporting record numbers in mortage fraud from 2002 and 2004.
Did the Republicans just decide to steal the Social Security and retirement funds after failing to get them invested in the stock market ????
Linda Monks comments were right on in her interview on MSNBC. Think on this the love of money is the root of all kinds of evil. sooner or later credit has to be paid for. If all those billions were given to working people instead of the banks the economy would be booming now.
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