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THE WARNING: FRONTLINE INVESTIGATES THE ROOTS OF THE FINANCIAL CRISIS
By Culturekiosque Staff
NEW YORK, 10 FEBRUARY 2010 Looking back into the 1990s, Frontline producer/director Michael Kirk (Inside the Meltdown, Breaking the Bank) unearths early warnings of the crash, reveals an intense battle among high-ranking members of the Clinton administration and uncovers a concerted effort not to regulate the emerging, highly complex and lucrative derivatives markets, which would become the ticking time-bomb within the American economy leading to the worst financial crisis since the Great Depression. At the center of it all, he finds Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multi-trillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.
"We didnt truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency the Commodity Futures Trading Commission (CFTC) who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the countrys key economic power brokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"
"I didnt know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clintons 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 (nicknamed "The Wizard") and former Treasury Secretary Robert Rubin convinced him that Borns attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."
Borns battle behind closed doors was epic, Kirk finds. The members of the presidents Working Group vehemently opposed regulation especially when proposed by a Washington outsider like Born.
"I walk into Brooksleys 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. "Shes hanging up the telephone; she says to me: That was [former Assistant Treasury Secretary] Larry Summers. He says, "Youre 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 another one.
"Itll happen again if we dont 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.".
Pictured above in headline: (L to R) Robert Rubin, U.S.
Secretary of the Treasury, 1995-1999; Alan Greenspan, chairman of the
Federal Reserve, 1987-2006; and Lawrence Summers, U.S. Secretary of the
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