Commodity Futures Modernization Act
Passed in the final hours of the Clinton administration, inside a larger omnibus budget bill. Explicitly exempted over-the-counter derivatives from CFTC oversight. The 'Enron Loophole' (for energy derivatives) was a specific carve-out. The Act created the legal space in which CDOs and credit default swaps could grow without disclosure requirements.
The CFMA passed 377 to 4 in the House. Almost no one debated it. Eight years later its consequences were the central mechanism of the 2008 crisis, which Brooksley Born had explicitly warned against in her 1998 concept release.
05 · The Deregulation Era
The late 1990s and early 2000s saw the most dramatic loosening of financial regulation since the 1920s. Glass-Steagall was repealed. OTC derivatives were explicitly exempted from CFTC oversight. When Enron and WorldCom showed what the new environment produced, Congress responded with Sarbanes-Oxley — but only on corporate accounting, not on the structural changes that had already happened inside the banks themselves.
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