Long before the economic
meltdown, one woman tried to warn about the thread to the financial
"We didn't 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 country's key
economic powerbrokers to take actions that could have helped avert the
"They were totally opposed to it," Born says. "That puzzled me.
What was it that was in this market that had to be hidden?"
In The Warning, veteran FRONTLINE producer
Michael Kirk unearths the hidden history of the nation's worst financial
crisis since the Great Depression.
At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed
campaign to regulate the secretive, multitrillion-dollar derivatives market
whose crash helped trigger the financial collapse in the fall of 2008.
"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a
member of President Clinton's 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 and former Treasury Secretary Robert Rubin
- convinced him that Born's attempt to regulate the risky derivatives market
could lead to financial turmoil, a conclusion he now believes was "clearly a
Born's battle behind closed doors was epic, Kirk finds.
The members of the
President's Working Group vehemently opposed regulation - especially when
proposed by a Washington outsider like Born.
"I walk into Brooksley's 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.
"She's hanging up the telephone; she says to me:
'That was [former Assistant Treasury Secretary] Larry Summers. He says,
"You're 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
Now, with many of the same men who shut down Born in key positions in the
The Warning reveals the complicated politics that led
to this crisis and what it may say about current attempts to prevent the
"It'll happen again if we don't 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."
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