Born to Predict Crisis

About Born to Predict Crisis

Brooksley Born, chair of the Commodity Futures Trading Commission, warned in 1998 that unregulated over the counter derivatives posed systemic risks. She was aggressively opposed by Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and Deputy Secretary Larry Summers, who argued that regulation was unnecessary and dangerous. They convinced Congress to strip the CFTC of authority over OTC derivatives. Born resigned. The unregulated derivatives she warned about, particularly credit default swaps, were central to the 2008 financial crisis. The episode is a case study in regulatory capture and the dismissal of women experts by powerful men. Born was vindicated by events but the damage was already done.