A Bureaucrat Who Held Fast to Convictions

January 17th, 2011
Jim Thomas

INTEGRITY, first in rank of the cardinal virtues, radiates adhesion. The adherence is a capacity to stand by the right ideas, even when difficult and unprofitable. Brooksley Born, chairperson ofAn obscure, though important Federal agency, demonstrated INTEGRITY in exemplary fashion.

Born was a partner in the prominent Washington, D.C. law firm of Arnold & Porter, where she practiced in the area of securities arbitration and litigation. Extensive experienced convinced her American securities markets require a measure of governmental oversight. Otherwise, they become susceptible to fraud and improper manipulation.

On august 26, 1996, she became chairperson of the Commodities Futures and Trading Commission. The CFTC is a tiny agency that oversees the futures and commodity options markets. At the time, the economy was growing. The stock market was creating enormous wealth. Unemployment was below five percent.

At the CFTC she began review of a new market that was expanding and morphing into a juggernaut—the $27 trillion over-the-counter derivates market. It was free of all regulation. On wall street, it was known as the “black box.” Those engaged in the deal making had access to the transactions and records, but no one else. As a dark market with no transparency whatsoever, Born believed it was wide open for fraud and monetary debacle. In her view, governmental oversight at the CFTC was mandatory.

She confronted a choice of great magnitude. She could remain silent and do nothing. No law or regulation, then in place, required action on her part. . Alternatively, based on information and belief, she could speak out, sound an alarm, and seek reform. After deliberation and a succession of sleepless nights, she chose the latter course. Her’s was the sole and only voice of opposition and warning throughout the government.

She met with the three highest officials in the Clinton Administration with authority to act. She submitted evidence concerning the derivatives market. . She expressed concern. She tendered proposals for legislative language. There were numerous phone calls and a series of face-to-face conferences. To no avail. Her warnings were blandished. Her proposals were rejected, and she herself was intimidated, to the great misfortune of all. When Congress, too, turned its head, Born resigned from the CFTC.

By and by, the U.S. and much of Europe plunged into the financial crisis of 2008. The great recession came. Later identified as a major culprit was the unregulated derivatives market trading in subprime mortgage-backed securities—very market Born identified and upon which she placed her upright perceptive finger.

She received the John F. Kennedy Profile in Courage award in 2009. The commendation read in part “…in appreciation of a far-sighted public servant who acted on principle to protect the people’s interest.”



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