T H U R SD AY, NOVE MB E R 1 9 , 2 0 0 9THE BORN CONSPIRACY (redux) ... STARRING ELIZABETH WARRENOne of the more exciting series Ive watched is the Bourne trilogy, starring Matt Damon.Painted as an out of control experiment gone bad, Jason Bourne is pursued by powerfulforces trying to protect both themselves and a turf they believe others simply dontunderstand. The Bourne reference to Elizabeth Warren will become clearer below ...In 2007 Elizabeth Warren, head of the Congressional Oversight Panel for the Troubled AssetRelief Program, penned an article that argued for a new model of financial regulation.She wrote that financial products should be subject to the same - and by now routine - safetyscreens that "governs every toaster, washing machine, and childs car seat." You know, thekind of government-driven safety measures that we all take for granted and assumeare "market-driven." As is the case with all good legislation, Warren was clear that the focusshould be "primarily on consumer safety rather than corporate profitability." Specifically,Warren wrote:No one expects every customer to become an engineer to buy a toaster that doesn’t burst intoflames, or analyze complex diagrams to buy an infant car seat that doesn’t collapse onimpact. By the same reasoning, no customer should be forced to read the fine print in 30-plus-page credit card contracts to determine whether the company claims it can seizeproperty paid for with the credit card or raise the interest rate by more than 20 points if thecustomer gets into a dispute with the water company.After what weve learned about the financial sectors abuses of consumers and their ownmarkets in 2008 and 2009 one would think that developing a financial product safetycommission that focuses on the economic health of consumers would be a slam dunk. Thinkagain.
Thomas Cooley, dean of New York University’s Stern School of Business, is part of growinggroup of special interests - led by the Chamber of Commerce, the American BankersAssociation and the Financial Services Roundtable - who sees a wild-eyed fundamentalist inElizabeth Warren. Cooley argues that her regulatory efforts make her little more than “anideological crusader” who will "stir up a lot of trouble.” Using the same tired arguments builtaround "free markets" and their magical powers to reign in stupidity, greed, and fraud,Cooley is effectively arguing that the same markets that helped create and fund lendingactivities before the 2008 market collapse only need to be tinkered with by "thoughtfulpeople" doing "thoughtful analysis." Elizabeth Warren, according to Thomas Cooley, is notone of these people.Accusing her of “waging a self-righteous holy war” Cooley makes the same arguments thatwere made about Brooksley Born, former head of the Commodity Futures TradingCommission (CFTC), who warned about the dangers of an unregulated derivatives market inthe mid-1990s.Born, whose warnings were famously ignored and criticized at the time by Alan Greenspan(Federal Reserve Chair), Larry Summers (Clintons Council of Economic Advisors), RobertRubin (Treasury Secretary), and Arthur Levitt (SEC Chair), was labled as an out of controlzealot. Because of her efforts to audit and regulate the derivative market, which helpedbring down the American economy in 2008, Born was painted as an "irrascible, difficult,stubborn" woman who was "unreasonable" when it came to judging the power of markets.
The logic of the market was presumed to be so powerful at the time that AlanGreenspan even went so far as to argue that fraud could be handled by the market and shouldnot be regulated. This is all discussed in the Frontline video, The Warning (Arthur Levitt isnot pictured in this Frontline ad/promo; presumably because he later regretted going afterBorn, and was interviewed saying as much).For her efforts, Greenspan, Summers, Rubin, and Levitt conspired to work against Born,eventually forcing her from her post as director of the CFTC. In many respects their effortscould have been labled The Born Conspiracy.Cooley revives this anti-regulatory mentality, implying that Warren is devoid of "rational andclear-headed perspective." He even goes so far as to disparagingly suggest that Warrensgoals are Crusade-like and little more than her war of "faith" on markets. The implication isclear. Like Jason Bourne in the trilogy - and Brooksley Born in the 1990s - regardless of thetalent, skill, and motives involved in her efforts, Elizabeth Warren is viewed as an out ofcontrol force that needs to be stopped.That this kind of mentality exists, so close to the market collapse, is troubling. It also helpsexplain how, if we continue to do nothing to discipline or regulate market players, weresetting ourselves up for another market collapse.