The Warning

In a new DVD, the origins of last year's financial crisis is exposed. Our nation's leaders demonized the top official of the commodity futures exchanges, Brooksley Born, former head of the Commodity Futures Trading Commission (CFTC). She attempted to regulate the over-the-counter (OTC) derivatives market, which ultimately caused the economic meltdown and financial crisis in 2008. In hindsight, she was eerily prescient, even against a backdrop of naysaying government officials who still rule the roost. Instead of preventing it, former Fed Chairman Alan Greenspan, former Treasury Secretary Robert Rubin and current National Economic Council Director Lawrence Summers caused the financial crisis by allowing derivatives traders to run amuck. Lauded as financial heroes, they actually enabled these weapons of financial mass destruction to fluorish, instead of reeling them in. Unfortunately, these same players and their financial progeny haven't fixed the structural problems, and another financial crisis is looming. The same perps who got us into this mess in the first place are back again in government and at leading banks trying to undo it. Good luck to us all.

http://www.pbs.org/wgbh/pages/frontline/warning/view/

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

"I didn't know Brooksley Born," says former SEC Chairman Arthur Levitt, a member of President Clinton's powerful Working Group on Financial Markets. "I was told that she was irascible, difficult, stubborn, unreasonable." Levitt explains how the other principals of the Working Group -- former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin -- convinced him that Born's attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was "clearly a mistake."

Born's battle behind closed doors was epic, Kirk finds. The members of the President's Working Group vehemently opposed regulation -- especially when proposed by a Washington outsider like Born.

"I walk into Brooksley's office one day; the blood has drained from her face," says Michael Greenberger, a former top official at the CFTC who worked closely with Born. "She's hanging up the telephone; she says to me: 'That was [former Assistant Treasury Secretary] Larry Summers. He says, "You're going to cause the worst financial crisis since the end of World War II."... [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'"

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

"It'll happen again if we don't take the appropriate steps," Born warns. "There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience."