Bill Clinton was warned about this collapse and did nothing.
"Born and the OTC Derivatives Market:
Brooksley E. Born is an American attorney and former public official who, from August 26, 1996, to June 1, 1999, was chairperson of the Commodity Futures Trading Commission (CFTC), the federal agency which oversees the futures and commodity options markets. During her tenure on the CFTC, Born lobbied Congress and the President to give the CFTC oversight of off-exchange markets for derivatives in addition to its role with respect to exchange-traded derivatives,[3] but her warnings were opposed by other regulators.[4]
Born was appointed to the CFTC on April 15, 1994 by President Bill Clinton. Due to litigation against Bankers Trust Company by Procter and Gamble and other corporate clients, Born and her team at the CFTC sought comments on the regulation of derivatives,[3] a first step in the process of writing comprehensive regulations. Born was particularly concerned about swaps, financial instruments that are traded over the counter between banks, insurance companies or other funds or companies, and thus have no transparency except to the two counterparties and the counterparties' regulators, if any. CFTC regulation was strenuously opposed by Federal Reserve chairman Alan Greenspan, and by Treasury Secretaries Robert Rubin and Lawrence Summers.[4] On May 7, 1998, former SEC Chairman Arthur Levitt joined Rubin and Greenspan in objecting to the issuance of the CFTC’s concept release. Their response dismissed Born's analysis and focused on the hypothetical possibility that CFTC regulation of swaps and other OTC derivative instruments could create a "legal uncertainty" regarding such financial instruments, hypothetically reducing the value of the instruments. They argued that the imposition of regulatory costs would "stifle financial innovation" and encourage financial capital to transfer its transactions offshore.[8] The disagreement between Born and the Executive Office's top economic policy advisors has been described not only as a classic Washington turf war,[6] but also a war of ideologies,[9] insofar as it is possible to argue that Born's actions were consistent with Keynesian and neoclassical economics while Greenspan, Rubin, Levitt, and Summers consistently espoused Austrian, neoliberal, and neoconservative laissez faire policies.
The market continued to grow unregulated nearly throughout both terms of George W. Bush's administration, but began to stumble in the early months of 2007. On September 15, 2008, the bankruptcy of Lehman Brothers forced a broad recognition of a financial crisis in both the US and world capital markets, a crisis which has inflicted egregious long-term damage, as these characteristic costs of private financial accumulation are transferred to the detriment of social infrastructure, communities, labor's economic security, social mobility, families and individuals, democratic law, and political pluralism in the US, Europe, Africa, and East Asia. As Lehman Brothers' failure temporarily reduced financial capital's confidence, corporate newspapers began reporting on some of the failure's possible causes, including the ongoing and continual reassurances of Greenspan, Rubin, Summers, and Levitt, who had long insisted that the capital markets could be trusted to regulate themselves, and the Presidential administrations' continued rejection of Born's (and thus the CFTC's) urgent warnings for the necessity of regulation to stave off just such a collapse.[4][10]
http://en.wikipedia.org/wiki/Brooksley_Born
"Born and the OTC Derivatives Market:
Brooksley E. Born is an American attorney and former public official who, from August 26, 1996, to June 1, 1999, was chairperson of the Commodity Futures Trading Commission (CFTC), the federal agency which oversees the futures and commodity options markets. During her tenure on the CFTC, Born lobbied Congress and the President to give the CFTC oversight of off-exchange markets for derivatives in addition to its role with respect to exchange-traded derivatives,[3] but her warnings were opposed by other regulators.[4]
Born was appointed to the CFTC on April 15, 1994 by President Bill Clinton. Due to litigation against Bankers Trust Company by Procter and Gamble and other corporate clients, Born and her team at the CFTC sought comments on the regulation of derivatives,[3] a first step in the process of writing comprehensive regulations. Born was particularly concerned about swaps, financial instruments that are traded over the counter between banks, insurance companies or other funds or companies, and thus have no transparency except to the two counterparties and the counterparties' regulators, if any. CFTC regulation was strenuously opposed by Federal Reserve chairman Alan Greenspan, and by Treasury Secretaries Robert Rubin and Lawrence Summers.[4] On May 7, 1998, former SEC Chairman Arthur Levitt joined Rubin and Greenspan in objecting to the issuance of the CFTC’s concept release. Their response dismissed Born's analysis and focused on the hypothetical possibility that CFTC regulation of swaps and other OTC derivative instruments could create a "legal uncertainty" regarding such financial instruments, hypothetically reducing the value of the instruments. They argued that the imposition of regulatory costs would "stifle financial innovation" and encourage financial capital to transfer its transactions offshore.[8] The disagreement between Born and the Executive Office's top economic policy advisors has been described not only as a classic Washington turf war,[6] but also a war of ideologies,[9] insofar as it is possible to argue that Born's actions were consistent with Keynesian and neoclassical economics while Greenspan, Rubin, Levitt, and Summers consistently espoused Austrian, neoliberal, and neoconservative laissez faire policies.
The market continued to grow unregulated nearly throughout both terms of George W. Bush's administration, but began to stumble in the early months of 2007. On September 15, 2008, the bankruptcy of Lehman Brothers forced a broad recognition of a financial crisis in both the US and world capital markets, a crisis which has inflicted egregious long-term damage, as these characteristic costs of private financial accumulation are transferred to the detriment of social infrastructure, communities, labor's economic security, social mobility, families and individuals, democratic law, and political pluralism in the US, Europe, Africa, and East Asia. As Lehman Brothers' failure temporarily reduced financial capital's confidence, corporate newspapers began reporting on some of the failure's possible causes, including the ongoing and continual reassurances of Greenspan, Rubin, Summers, and Levitt, who had long insisted that the capital markets could be trusted to regulate themselves, and the Presidential administrations' continued rejection of Born's (and thus the CFTC's) urgent warnings for the necessity of regulation to stave off just such a collapse.[4][10]
http://en.wikipedia.org/wiki/Brooksley_Born
