Brooksley Born's Warning
CFTC chair published a concept release on over-the-counter derivatives, asking whether the growing, opaque market needed oversight. The response from Treasury and the Fed was to publicly attack her position and move to strip the CFTC of jurisdiction.
Greenspan, Rubin, and Summers issued a joint statement calling Born's concerns harmful to financial innovation. In 2000, Congress passed the Commodity Futures Modernization Act, which explicitly exempted OTC derivatives from regulation.
06 · Dodd-Frank
The risk was named in 1994. Brooksley Born, chair of the CFTC, warned that unregulated derivatives could threaten the financial system. She was overruled by Greenspan, Rubin, and Summers. In 2008 the thing she warned about happened. In 2010, two years after the crisis, Congress passed Dodd-Frank.
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