A Lone Voice in the Wilderness

The New York Times has a well-written analysis of Alan Greenspan tenure as the Federal Reserve chairman. He was called "the Oracle" and was revered by all - hence hardly anybody questioned his knowledge or authority regarding regulation. One person, Brooksley E. Born, tried to introduce more regulation as she saw the perils of the derivatives market, but she was stopped forcefully by those who were enjoying the money-ride.
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NYT: In 1997, the Commodity Futures Trading Commission, a federal agency that regulates options and futures trading, began exploring derivatives regulation. The commission, then led by a lawyer named Brooksley E. Born, invited comments about how best to oversee certain derivatives.

Ms. Born was concerned that unfettered, opaque trading could “threaten our regulated markets or, indeed, our economy without any federal agency knowing about it,” she said in Congressional testimony. She called for greater disclosure of trades and reserves to cushion against losses.

Ms. Born’s views incited fierce opposition from Mr. Greenspan and Robert E. Rubin, the Treasury secretary then. Treasury lawyers concluded that merely discussing new rules threatened the derivatives market. Mr. Greenspan warned that too many rules would damage Wall Street, prompting traders to take their business overseas.


He [Alan Greenspan] had a way of speaking that made you think he knew exactly what he was talking about at all times,” said Senator Tom Harkin, a Democrat from Iowa. “He was able to say things in a way that made people not want to question him on anything, like he knew it all. He was the Oracle, and who were you to question him?”