In a comment to CindyCasella's diary yesterday, Ammo Hauler pointed to a fascinating article about Brooksley Born in Stanford's alumni magazine. Below the fold I point out a part of the article they missed. It explains the economic meltdown in the proverbial nutshell.
Born's is an incredible story. One of seven women in the Law School's Class of '64, graduated top of the class, the first woman to edit a major law review, and, eventually, appointed to head the Commodities Futures Trading Commission in 1996.
In that position, she came up against Alan Greenspan, Robert Rubin, Lawrence Summers, Arthur Levitt and other fanatical opponents of regulation. As Born tells the story, she had a 1996 lunch with Greenspan at which the conversation included:
"Well, Brooksley, I guess you and I will never agree about fraud," ...
"What is there not to agree on?" Born says she replied.
"Well, you probably will always believe there should be laws against fraud, and I don’t think there is any need for a law against fraud," she recalls. Greenspan, Born says, believed the market would take care of itself.
"I don’t think there is any need for a law against fraud" pretty much sums up why the US and world economies are in the state they are. Of course, as part of his desperate campaign to deflect blame for the disaster, Greenspan denies everything:
He says Born’s characterization of the lunch conversation she recounted does not accurately describe his position on addressing fraud. "This alleged conversation is wholly at variance with my decades-long held view," he said in an e-mail, citing an excerpt from his 2007 book The Age of Turbulence, in which he wrote that more government involvement was needed to root out fraud. Born stands by her story.
History shows that Born, who struggled and failed to regulate derivatives in the face of opposition from Wall Street and their puppets in Congress and the Clinton Administration, was right.
