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PBS Frontline: The Warning -- How Greenspan, Summers & Rubin Conspired To Silence Derivatives Whistleblower Brooksley Born (Complete VIDEO)

Frontline did a re-broadcast of this episode last night.  I watched it again and was even more angry at Greenspan, Rubin & Summers (and Clinton) than the first time.  Still without words that Obama has chosen the architects of regulatory failure to run the show in his administration.  Summers should be a night-shift janitor at Wellesley.


Broadcast October 20, 2009...complete 55-minute video is above and two shorter youtube clips are at the bottom of this post.

PBS Frontline: Brooksley Born, Larry Summers, Alan Greenspan and Robert Rubin


 "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 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?"

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 mistake."

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 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 the next one.

"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."



In this clip from "The Warning," airing Tues, Oct. 20, FRONTLINE traces back to the Clinton Administration and the pro-business, anti-regulation powerbrokers Robert Rubin, Larry Summers, and the man referred to as "The Wizard," Chairman of the Federal Reserve Alan Greenspan (4:17).



In this clip from "The Warning," airing Tues, Oct. 20, FRONTLINE examines the long road that led Brooksley Born to her post as the chairperson of the federal regulatory agency Commodities Futures Trading Commission—a position that pit her directly against the president's pro-business, anti-regulation economic powerbrokers, including Chairman of the Federal Reserve Alan Greenspan.

In the devastating aftermath of the economic meltdown, FRONTLINE sifts the ashes for clues about why it happened and examines critical moments when it might have gone much differently. Looking back into the 1990s, veteran FRONTLINE producer/director Michael Kirk ("Inside the Meltdown," "Breaking the Bank") discovers 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 that would become the ticking time bomb within the American economy.


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Reader Comments (37)

Oct 21, 2009 at 1:14 AM | Registered CommenterDailyBail
Is it just me, or is the SEC Chairperson required to be...um, not quite razor sharp? Think: "Mmm. Catfish."
Oct 21, 2009 at 1:39 AM | Unregistered CommenterJames H
Levitt was a failure undoubtedly...i watched this tonight on pbs...was very impressed...
Oct 21, 2009 at 1:47 AM | Registered CommenterDailyBail
Perks keep rolling at rescued banks
From jets to country club fees, CEOs’ fringe benefits rose 4 percent last year
Oct 21, 2009 at 1:48 AM | Registered CommenterDailyBail
Nice to see some semblence of MSM catching up to the blogoshpere.

Brooksley mentions from April:

And June:

It's interesting to witness the evolution of the media's reporting of events within the context of linear blog entries. These written archives will serve as incriminating evidence.
Oct 21, 2009 at 8:44 AM | Unregistered CommenterWil Martindale
Fellow Americans

Why no revolt yet? Too much screaming on the web?

This sets a dangerous precedent on two levels. First, if the dealer community, recently expanded to consist of such middle-market banks as Jefferies which allegedly has over $20 billion on its balance sheet compliments of various Fed repo actions, is unable to satisfy reverse repos of this size, a big question mark appears as to what is the illiquid collateral backing the Dealer community, if it is unable to comply with a $100 billion liquidity withdrawal. Second, it indicates that reverse repos as a source of liquidity extraction by the Fed will be contained to the very precarious money market industry. All that is needed, in today's hair-trigger mindset on liquidity, is for another systemic glitch to be made apparent to all market participants, before yet another run on money markets occurs. As readers will recall, money markets were recently stripped of their implicit Federal guarantees: as such, this is the biggest potential threat to a nascent "recovery."

We will follow this topic closely, as the rumor now is that the Fed will no longer attempt dealer-based reverse repos after Monday's failure, but confine them exclusively to money markets. Whether or not the Fed is correct in gambling with the $3 trillion+ money market industry when it should be doing all it can to extract liquidity out of the very same dealer community it has so generously been rewarding for over 7 months, is very much open to debate.
Oct 21, 2009 at 1:34 PM | Unregistered CommenterKen


Oct 21, 2009 at 1:48 PM | Unregistered CommenterKen
Fellow Americans

Our Tax Dollars and your jobs in INIDA

Capital One: Shred Your Wallet (COF)

Time to call out the outrageous actions this "bank" has taken.

Let's first start with the fact that Capital One, along with most of the other "big banks", took TARP money. Why did they need/take TARP money? Simple: They were incompetent in their risk underwriting and thus got in trouble. That's a fact.

Now let's add the other sin, to which the other big banks are also subscribed: These same firms have all front-run the legislation passed by Congress to bar certain practices, such as universal default and two-cycle billing, by raising rates and fees in front of the changes.

Boycott Capital One
Oct 21, 2009 at 1:51 PM | Unregistered CommenterKen
Volcker Fails to Sell a Bank Strategy

Listen to a top economist in the Obama administration describe Paul A. Volcker, the former Federal Reserve chairman who endorsed Mr. Obama early in his election campaign and who stood by his side during the financial crisis.

“The guy’s a giant, he’s a genius, he is a great human being,” said Austan D. Goolsbee, counselor to Mr. Obama since their Chicago days. “Whenever he has advice, the administration is very interested.”

Well, not lately. The aging Mr. Volcker (he is 82) has some advice, deeply felt. He has been offering it in speeches and Congressional testimony, and repeating it to those around the president, most of them young enough to be his children.

Oct 21, 2009 at 2:42 PM | Unregistered CommenterKen

3,500 DOW points imaginary, fake fiat currency
printed up to buy up the markets to make things 'look good', and try to prevent 7.2 million newly unemployed and bankrupt from rioting.
So the govt gave 28 trillion free of charge to the worlds banks, courtesy of the U.S. taxpayer in order to pump up the markets for Messiah Obamas arrival, and people ask what the TECHNICAL market moves are next going to be? Utter insanity. Anything can happen and will. .


When Will you Revolt?

Tyranny must be fought...............now
Oct 21, 2009 at 8:00 PM | Unregistered CommenterKen

The US Federal Reserve continues to talk about their urgent Exit Strategy. My theory is they will be doing mostly talking and almost no doing. The nations that talk the least will be hiking interest rates the most, like Australia. The United States might be dead last in hiking interest rates. The credibility of the USFed will in the process continue to be harmed much more than already, which is rock bottom. The Dollar Carry Trade and the lost Petro-Dollar advantage will work to destroy the USDollar as the global reserve currency. The USFed will have to resort to unusual means to keep the world ‘interested’ and ‘involved’ in the USDollar at all. When they lose interest and involvement, the US$ will descend into the Third World. The USDollar will then be forced to find its true value, based on its own merit.

Outsized federal deficits, widespread insolvency, absent industry, refusal to reform the financial sector, bad bank loans festering on balance sheets, Goldman Sachs still in syndicate control of the USGovt finance ministry, the costly drain of endless wars, these are the new fundamentals for the USDollar. It is certain to descend by 30% to 50% in the coming few years. The word on the street has it that with the new IMF role in establishment of a currency basket, the USDollar is isolated sufficiently for a massive devaluation. The maestros have a tough challenge though, as they must halt the move of gold to $2000 and must avert an outright USDollar collapse.
Oct 21, 2009 at 8:09 PM | Unregistered CommenterKen

Would you stop it with the petty insults? When are *you* going to revolt? That would seem the relevant question here. Please don't tell me you're waiting for people like us to just up and join you. You do see the irony here, no?
Oct 21, 2009 at 8:13 PM | Unregistered CommenterJames H
It sure would shake things up if Barry Soetoro was brought to court and asked to bring a genuine birth certificate. Ken's revolution would be off to a great start.
Oct 21, 2009 at 8:56 PM | Unregistered Commentergobias
Okay, what have they done with the Jake Tapper? Robert Gibbs must have pissed him off because Jake is starting to ask some tough question about what Obama is up to. I have not been shy to pick on Jake as an Obama plant so I have to give him some credit. Of course, none of this was on camera. Gibbs and Obama have special off camera briefings which is a complete joke. Sometimes we get the audio but usually not. Rahm, Gibbs and the other Obama thugs meet for lunch with all the media plants so maybe they better stop stuffing their faces and get back on the same page. If they are not careful, more of the truth will spill out.
Oct 21, 2009 at 9:22 PM | Unregistered Commentergobias
James H.

Even cowards will join the Revolution later and when?
Oct 22, 2009 at 12:11 PM | Unregistered CommenterKen
It has gone from irritating to nauseating listening to media market-pumpers talking about an “U.S. economic recovery” which has supposedly already begun. Indeed, the hype has gone from a debate about whether the “recession” is over, to an inane debate about whether the U.S. is experiencing a “V-shaped recovery” or may suffer a “double-dip recession” or W-shaped “recovery”.

In the real world, however, all that has occurred is that an U.S. economic collapse, which was in a near-vertical drop, has eased to a more moderate rate of decline. The “double-dip” talked about by some semi-realistic analysts is in fact nothing more than the ongoing collapse regaining downward momentum. There is no “debate” here. It is a matter of simple arithmetic that the U.S. economy cannot recover.

First of all, in the “big picture”, the U.S.'s $11-trillion economy (all that remains once statistical “padding” is removed) is much too small to service the more than $57 trillion in existing public and private debt. Even if we pretend the U.S. still has a $14 trillion economy (despite the government's own numbers that this economy has shrunk by more than 10%), it is still much too small to service its debts. Meanwhile, lurking in the near future are roughly $70 trillion in additional “unfunded liabilities”.

Great rants on the web with fat asses farts..........lol

Oct 22, 2009 at 12:42 PM | Unregistered CommenterKen
Oct 22, 2009 at 1:01 PM | Unregistered CommenterKen
Well then,

I fart in your general direction!

Oct 22, 2009 at 1:04 PM | Unregistered Commenterallie

what a load a crap ??lol

Reveals your character.....screaming and bashing on the web and you got a revolution?lol
Oct 22, 2009 at 2:46 PM | Unregistered CommenterKen
Ken, you're obviously a battle-hardened Cut-and-paste Commando, but explain to me (just once) how what you're doing is different from what the rest of us are doing. And you're helping to stop the bailouts, how? By doing what? Also, LOL lol LOL!! .......lol and LOL!!!, etc. back at you.
Oct 22, 2009 at 3:13 PM | Unregistered CommenterJames H

Monty Python reveals my character? ...awesome.

Chill out. You are the one trying to instigate 'bashing', and screaming with your liberal use of capital letters. Just in case you haven't heard, it's annoying. The lols are a little weird too. You can't possibly be laughing out loud that much. I do appreciate some of your links, but then you go off the deep end with these rants. Ugh... why bother finishing this... You're going to type some lame comeback, followed by an "lol" and then proceed to your rant about something that I will scroll over.
Oct 22, 2009 at 3:38 PM | Unregistered Commenterallie

Out of great concern for Ken, I just checked my property for hidden minions of dastardly deeds, since I have fallen and do not know it yet. I thought I saw something hiding behind a couple of hundred pound pumpkin, upon placing a 168 grain 7.62x51 into the pumpkin, to scare out the evil offender, and force a surrender, a rabbit took off. No sign of activity on the trails thru the woods, range stakes are intact, perimiter secure.

Thanks Ken, the hydrostatic shock just blew my grandsons jack-o-lantern into three pieces... he is going to be pissed.

"I fart in your general direction! "


what a load a crap ??"

Allie, good one, I think Ken is saying your fart had chunks in it, and they got on him. LOL.
Oct 22, 2009 at 4:07 PM | Unregistered CommenterS. Gompers
Twenty two fifty two hundred hours, complete infra-red scan of property reveals nothing...All fields of fire are open, nothing revealed on trail timers, or trip cameras. Ken take your medication... I think it is safe to go to sleep.
Oct 22, 2009 at 10:58 PM | Unregistered CommenterS. Gompers

Attack of the titans

Be proud of your dailybail rants and typing revolution..lol

How many are here ranting?3 or more/lol

Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall.
All the King's horses, And all the King's men
Couldn't put Humpty together again!
Oct 23, 2009 at 12:49 AM | Unregistered CommenterKen
Ken, what part of the country are you living under martial law in? The propaganda ministers (news media) reveal nothing.The tri- state area here is business as usual... I like Humpty Dumpty, and he is fine, been living in my chicken coop for years.

Do you ever see black helicopters...
Oct 23, 2009 at 9:09 AM | Unregistered CommenterS. Gompers

ALEX JONES "Fall of the Republic" exposed it all

Fall Of The Republic 11/14: The Presidency Of Barack H Obama

So all collection from the web here, what objective does it achieve?
Oct 23, 2009 at 11:16 PM | Unregistered CommenterKen
"Twenty two fifty two hundred hours, complete infra-red scan of property reveals nothing...All fields of fire are open, nothing revealed on trail timers, or trip cameras. Ken take your medication... I think it is safe to go to sleep."

Thank you for the laugh.
Oct 24, 2009 at 11:16 AM | Registered CommenterDailyBail
Ken wrote: "Be proud of your dailybail rants and typing revolution..lol"

Typing revolution you say...so you would be a part of the 'pasting' revolution...?

Oct 24, 2009 at 11:17 AM | Registered CommenterDailyBail
"Out of great concern for Ken, I just checked my property for hidden minions of dastardly deeds, since I have fallen and do not know it yet. I thought I saw something hiding behind a couple of hundred pound pumpkin, upon placing a 168 grain 7.62x51 into the pumpkin, to scare out the evil offender, and force a surrender, a rabbit took off. No sign of activity on the trails thru the woods, range stakes are intact, perimiter secure.

Thanks Ken, the hydrostatic shock just blew my grandsons jack-o-lantern into three pieces... he is going to be pissed."

another good chuckle..thanks gomp...
Oct 24, 2009 at 12:04 PM | Registered CommenterDailyBail


That isi all you got?lol"

A wise man never reveals his hand...

"Attack of the titans"

The Titan missile program was terminated in 2005, just one more step in making America a third world nation. As we pound our weapons into plowshares, the rest of the world is taking those plowshares and pounding them into weapons. Both parties are involved...

"another good chuckle..thanks gomp..." Times like these everyone can use a good laugh every now and then, I liked yours about the pasting revolution.

A man never falls unless he allows it, a nation never falls as long as it is filled with freedom loving individuals. The individuals just have to learn that salvation does not lay in the parties... Politicians must follow party doctrine for endorsement, both party doctrines are designed to weaken America.
Oct 25, 2009 at 11:21 AM | Unregistered CommenterS. Gompers
James H,

Ken uses CAPS a lot more than you, which means he's more serious and dedicated than us predominately lower cases poseurs.

Feb 17, 2010 at 7:25 PM | Unregistered Commentermark mchugh
USA 2010. The Government spends more time lying to us than telling the truth. 40% percent of the population is so fat they can't run 40 feet. Our inner-city school systems are producing adults who can't read or write and don't care. History, Geography, Art have no meaning for them. Our health care is abysmal. The Countries infrastructure is a joke. The general population has had so much propaganda shoved up their butts by the government and elite controlled media that if Jesus appeared in the heavens telling us to change our ways, they'd have to go check FOX, CNN, or MSNBC on TV to make sure it was OK. At this point in time Americans are incapable of revolution. Hell we may never be capable of it, our society and culture is so riddled with corruption and decadence we may be done dancing. Or as some would say, the fat ladies song is finished.
Feb 17, 2010 at 9:36 PM | Unregistered CommenterSagebrush
Finally got a chance to watch the whole video. For Obama to surround himself with the likes of Summers proves he is unworthy of the office.
Feb 19, 2010 at 12:17 AM | Unregistered Commentermark mchugh
If one would invest 100 million in derivatives and it turned in to 5 billion (nobody would know) therefore they did not pay taxes on the profit.. These people are not paying taxes.
Mar 2, 2010 at 8:12 PM | Unregistered Commenterallan warrick
In light of all the HFT ruse is (finally) getting, this new Reuters article sheds more light on HFT and Dark markets. Re- read the main DB article first then this in its entirety.

Dark markets may be more harmful than high-frequency trading

(Reuters) - Fears that high-speed traders have been rigging the U.S. stock market went mainstream last week thanks to allegations in a book by financial author Michael Lewis, but there may be a more serious threat to investors: the increasing amount of trading that happens outside of exchanges.

Some former regulators and academics say so much trading is now happening away from exchanges that publicly quoted prices for stocks on exchanges may no longer properly reflect where the market is. And this problem could cost investors far more money than any shenanigans related to high frequency trading.

When the average investor, or even a big portfolio manager, tries to buy or sell shares now, the trade is often matched up with another order by a dealer in a so-called "dark pool," or another alternative to exchanges.

Those whose trade never makes it to an exchange can benefit as the broker avoids paying an exchange trading fee, taking cost out of the process. Investors with large orders can also more easily disguise what they are doing, reducing the danger that others will hear what they are doing and take advantage of them...

...Top internalizers include units of KCG Holdings (KCG.N), Citadel, UBS (UBSN.VX), and Citigroup (C.N). Dark pool operators include Credit Suisse (CSGN.VX) and Morgan Stanley(MS.N). All of the firms declined to comment, or did not respond to requests for comment for this story.

With the incentive to use the public market eroding, many traders increasingly see exchanges, which are often described as "lit" markets because of the pricing transparency, as battlegrounds for high frequency traders, said Rhodri Pierce, of the CFA institute.

The result is an increasingly splintered market.

"So much of the U.S. equity order flow is in now in the dark, or siphoned off, that it never hits the lit exchanges, and there is just a lot less in the way of trading opportunities," said Mark Gorton, CEO of high frequency trading firm Tower Research Capital LLC.

In an attempt to win back some of the retail orders, exchanges such as IntercontinentalExchange Group's (ICE.N) New York Stock Exchange, Nasdaq OMX Group (NDAQ.O), and BATS Global Markets, have allowed brokerages to place dark pool-style orders on their platforms, with the trade hidden until after it is executed. NYSE, Nasdaq, and BATS declined to comment.
Apr 6, 2014 at 9:18 AM | Unregistered Commenterjohn

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