on May 26, 2010
An objective and fact-based account of how derivatives impacted our 2008 economic depression. Sadly, many people fail to understand that these financial instruments are essentially "vaporware" -- the exclusive side-bets of uber-wealthy insiders that have no intrinsic value or sustainable wealth creation. The complete lack of federal regulation and the absence of transparency is virtually casino capitalism in a black box.
Alongside derivatives exist credit default swaps, securitized debt instruments, and the entire smorgasbord of pseudo-transactions of Wall Street. Ironically, the gains from these transactions are privatized, while the losses are socialized... the ultimate in corporate welfare. Given the well-documented nefarious tactics of Summers, Rubens and Greenspan to shield the derivatives market, the courageous efforts of Brooksley Born to bring this debacle to light are extraordinary.
After viewing this presentation (or any of the numerous documentaries on our current economic catastrophe), it is astounding that any thinking person would object to the need for appropriate market regulation or mandated transparency in our public and private institutions. As Justice Louis Brandeis once remarked, "We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both."
This is the story of one woman who was the lone wolf in the financial world who tried to sound the alarm of the impending financial disaster. Her warning would make her an enemy of very powerful people who would attempt to shut her up and shut her down. Unfortunately, they would succeed.
Brooksley Born who is appointed Chairperson of the Commodities Futures Trade Commission (CFTC). As chairman of the CFTC, Born was authorized to regulate agriculture futures and derivatives. The men she would go up against are Allan Greenspan, Chairman of the Federal Reserve, Robert Rubin, who served as Assistant to the President for Economic Policy under Bill Clinton, and Tim Geitner. Rubin's top deputy would be Harvard Economist, Larry Summers. Together they formed a powerful influence. When these men spoke, Government and Wall Stree listened.
Over-the-counter derivatives soon get her attention for its lack of regulation. Derivatives, or swaps, are essentially insurance policies that companies enter into to protect themselves against unforeseen calamities. It is a twenty-seven trillion dollar market that was hidden from public view. In 1993 Proctor & Gamble sued Bankers' Trust for losses in the millions from swaps. Proctor & Gamble employees find secret tapes of conversations between Bankers' Trust representatives bragging how they played P & G knowing they would lose. The only way the Federal Trade Commission found out about the fraud was from the high profile lawsuit. The largest banks are operating in secret. There is no recordkeeping, reporting, or regulation of swaps and their failure could take down the entire financial system.
Worried about an out-of-control financial instrument, Brooksley Born decides to attempt regulation by issuing a concept release. She will not only face the economic and banking titans, but also the most powerful lobby ever--the banking lobby. Their immediate push only heightens Born's suspicion, and she continues her regulatory action, which her agency is empowered to do. She is only answerable to the president. The "President's Working Group reacts. It consists of Greenspan, Geitner, Summers, Arthur Levitt, the SEC chairman, the head of the FTC, and other members picked by Rubin. Their intent is to browbeat Born into retracting her concept release, but she refuses.
The Working Group gets both houses of Congress to hold meetings immediately in the Summer of 1998. The old boys' network led by Senator Phil Gramm believes the good old boys, and Born is battered by the hearings. With no support or political clout Congress does nothing, but it doesn't take long for her prophecy to develop. In fact, it takes only six weeks when a hedge fund called Long Term Capital Management (LTCM) starts to melt down, exactly what what worries Born. Members of Congress begin to call for regulation but Allan Greenspan has no intention of yielding, and Congress backs him up. There will be no regulation against fraud, no transparency, no capital reserve requirements, and no record of transactions. The only action Congress takes is against the CFTC. Congress imposes a regulatory freeze on the CFTC because Born is the bearer of bad news, and not viewed as a team player. Powerless, she resigns. Wall Street is left to regulate itself at Greenspan's urging, and the last two years of the Clinton administration turns out to be the heyday of the derivative. By 2007, the OTC derivatives market grows to $595,000,000,000,000--that's trillion. Almost ten years after the collapse of LTCM the worst crash since the Depression occurs.
Robert Rubin eventually leaves government to join top management at Citibank. After the crash, the government gives the bank 100 billion to keep Citi afloat. Larry Summers and Tim Geitner have become Barack Obama's chief financial advisors. Allan Greenspan retires just before the crisis of 2006. He realizes that his life-long belief a self-regulating free market is flawed. Larry Summers now says that he is very much in favor of derivative regulation. The Treasury Dept. releases a proposal with some of the same ideas Born made more than a decade ago. The banking industry still opposes regulation. Without it, Brooksley Born a modern day Cassandra, predicts the same thing again in a different form until we learn from our experience. She epitomizes the meaning of public servant.
The question remains, if Brooksley Born's prophecy was heeded, would a financial crisis had been averted? The answer is yes.
Finally, the CFTC is still powerless as a watchdog agency for the public.
This is a phenomenal account of what happened, and who is to blame for the financial crisis from which this country still reels. For anyone who wants to understand what happened, this will inform you in 60 minutes.
PBS' website where the discussion of the financial crisis continues, and a timeline of deregulation over the decades is offered.
Leopold, Les, "The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity." Chelsea Green Publishing, White River, VT. 2009
on June 17, 2011
So why don't we all know more aout Brooksly Born? All these men, who were portrayed as great and powerful oz's with the characters of common schoolyard bullies are still better known than the woman whose voice might have prevented all of this. Why is congress still hesitating to regulate derivatives? It has been shown in a number of bank-sized petri dishes that greed, not wisdom rules in black box situations. These people may have known what was best, but were in no way compelled to act that way. One has to wonder why Americans will allow themselves to be beaten and robbed this way while the real criminals are never charged and live out their days in excessive luxury. I think if I were president, I'd want opposing opinions for important matters. Ms. Born should be hailed as an American hero and whistle blower.
on June 9, 2013
We all look at past generations and opine how stupid and ridiculous they must have been because of this or that. Well, we are still stupid. By "WE" I refer to the middle and lower classes in America. This documentary names names and gives dates and places. It talks of millions, billions and trillions. It is impossible to ignore the evidence that the American government is really just a tool of the capitalist upper class, sucking blood all over the world. But there are two tragedies here. One is that many people made millions and billions in the American financial meltdown of 2007-09 while millions of families went broke. The other, more serious tragedy, in my view, is that the public will ignore this valuable report about how the capitalist system is really a neo-feudalist system sucking blood from regular, working Americans. Something is very wrong with America, but as George Carlin said: "Nobody seems to notice, nobody seems to care." God help us all.
on August 30, 2014
The Warning investigates the hidden history that led to the financial meltdown that occurred during the period of 2007 to 2008.In it,Michael Kirk interview many people particularly those from the CTFC (Commodity Trading Futures Commission like its former chairwoman,Brooksley Born who who speaks about her failed campaign to regulate the secretive, multi-trillion-dollar derivatives market,which is responsible for triggering the financial meltdown. Her battle for regulation behind closed doors was opposed by the Federal Reserve particularly its former Chairman,Allan Greenspan,who treated her as an outsider.
While it may not be as good and complete like other documentaries from about the same issue,it will definitely provide some information of how the unregulated derivatives market contributed to the meltdown.It will definitely allow the viewer to realize how its unchecked accountability hurt the financial sector and the US economy.Unfortunately,one has to realize that it wasn't the only reason for the financial meltdown as what it appears to be watching this documentary. There are too many other factors that weren't explored in it like the fraud in Wall Street and how much influence the financial lobbyists has had to the politicians of both parties in Washington.It is worth noting that other effects of the meltdown were not fully explored like the financial collapse that the country is headed,the US debt that it rising exponentially and the increasing gap between the rich and the poor as the years go by.
For a great and more complete documentary about the issue,I suggest the viewer watching the Matt Damon-narrated documentary,Inside Job.
on September 19, 2012
This is an exceptional documentary!!!! It is a very clear indicator that the majority of the politicians knew that there was a severe problem with the banking industry after Pres. William Jefferson Clinton signed the bill to abolish the Glass-Steagall Act!!! The information contained in this documentary clearly proves that the political insiders turned their back on all indicators that the economical crash of 1929 was repeating itself!!! These insiders still maintain their jobs at all levels of our government from the Federal Reserve Bank to the Treasury Department.... It is even more alarming that the principles involved in managing the banks that corrupted our economic system circumvented the laws that protected the American people and put hundreds of millions of dollars in their back pockets.
The documentary titled "Inside Job" preceded this documentary by dateline and paralleled a lot of the information from that documentary from a government insider's perspective. Both documentaries are highly informative.
Another video titled "Chasing Madoff" contains information compiled by a Boston-based securities analyst, Harry Markopolos, uncovered the evidence that Bernie Madoff was running a Ponzi scheme. In his investigation he exposed the fact that the majority of the large banks that have thrown us into an economic depression and $16 trillion of debt knew and invested in Bernie Madoff's Ponzi scheme. Each and every one of these very large banks made profits from directing their investors into his scheme. The banks made profit from the fees charged for referring people into Madoffs scheme!!
There's a video on YouTube titled "Fierce Free Lancer.com" that shows how each and every one of these very large banks made over $100,000 from the FDIC for each and every bank foreclosure that they conducted!!!
Dateline also just completed a PBS television documentary in August of this year(2012) that shows even more information about the political insiders, lobbyists and their banks took apart all of the protections of the American people so that the banks and large corporations could reap trillions of dollars in profits!!!
The corruption goes on and on and on!!!
I highly recommend this video and the others!!!! We all need to keep educating ourselves in an attempt to stop the political and corporate corruption in this country!!!!
on June 5, 2014
Isn't it amazing that when told of an impending disaster, the people in authority do nothing, yet they seem NEVER to be held accountable. This is fascinating, but also something that could anger people and make them very resentful. I suggest if the financial situation of our gov't is important to you, you pick up this DVD.