The Women Who Warned Us - Building Gender Balanced Business

Two women have been awarded the John F. Kennedy Profile in Courage Award for their prescient and dogged attempts during the boom years to warn the public, government, and regulators about the inherent dangers that were building up.

Brooksley Born

• In 1998, Brooksley Born, then the Chair of the US Commodity Futures Trading Commission (CFTC), bravely called for the shadow world of Over the Counter (OTC) derivatives to be brought under regulatory control. In 2008, these were worth as much as $680 trillion in notional value, greater than the total gross national product of all the countries in the world, Born said in her acceptance speech at the John F Kennedy Library Foundation on May 18, 2009.

• Born’s attempts to introduce new regulatory controls were opposed by the vested interests in politics and finance, including three highly influential men who then had critical roles in financial oversight: the Fed Chairman, Alan Greenspan; the Secretary of the Treasury, Lawrence Summers (who is now a leading economic adviser to President Barack Obama); and Senator Phil Gramm.

• Basking in the economic success of the late 1990s, Born’s adversaries won the day. Senator Gramm fought successfully to bar Federal regulation of OTC derivatives.

• The failure to regulate OTC derivatives is recognised today to be one of the main causes of the financial crash of 2008, leading to one of the worst recessions since the 1930s.

• In her acceptance speech at the JFK Library, Born said she had felt it was her duty to bring the dangers of non-regulation to the attention of the public, Congress, and other regulators. She left the OFTC in 1999 to return to her career in public interest law. Today, she is still warning that the dark world of derivatives must be brought into the light.

• Since the crisis, Greenspan has acknowledged that he was wrong to oppose Born, and today, Summers supports a call by the current Treasury Secretary, Timothy Geithner, for stronger regulation.

Sheila Bair

• As the Chair of the US government-owned corporation that guarantees the safety of deposits of member banks, the Federal Deposit Insurance Corporation (FDIC), Sheila Bair became known as the “lone voice in the wilderness” for her early warnings about the sub-prime lending crisis and for her tireless criticism of Wall Street’s and the Federal Government’s management of the subsequent sub-prime meltdown.

• As early as 2001, Bair was calling for a set of best practices for sub-prime lenders. Since the crisis, she has fought hard on behalf of those who were at high risk of losing their homes. The Government has implemented her mortgage-modifications proposals to slow down the increase in property foreclosures.

Honoring the 2 women’s efforts

• Presenting their Profile in Courage Awards in May, Caroline Kennedy, President of the John F. Kennedy Library Foundation, said, “Sheila Bair and Brooksley Born recognised that the financial security of all Americans was being put at risk by the great negligence and opposition of powerful and well connected interests.”