Issue link: http://cp.revolio.com/i/24680
ERIKA LARSEN/REDUX According to a retrospective Wall Street Journal article by Michael Schroeder in 2001, derivatives deal- ers ranging from J.P. Morgan & Co. to Enron quickly complained to Con- gress and other regulators “that the uncertainty Ms. Born was creating could destabilize their markets.” She was even summoned from her daugh- ter’s hospital bed by Rep. James Leach (R-Iowa, currently head of the National Endowment for the Hu- manities) to an emergency meeting, where “regulatory staff and lawmak- ers berated Ms. Born for more than two hours in a fruitless effort to per- suade her to stop her campaign.” Yet three months later, after the hedge fund Long-TermCapital Man- agement collapsed under the weight of $1.25 trillion worth of derivative contracts backed by only $4 billion in capital, Leach had to offer a grudging acknowledgement that Born wasn’t crazy: “You are welcome to claim some vindication,” Leach told Born at a congressional hearing. But Born had also aroused the hos- tility of corporate lobbyists, especially the formidable machine of Enron, which, according to Schroeder’s sources, was “fanatical about prevent- ing any hint of derivatives regulation.” “I was absolutely mystified that both the industry and the other finan- cial regulators did not even want to ask questions about an enormous financial market that none of us had any insight into,” Born told Ms. “And it con- cerned me gravely that the market was so fragile that people felt questions could not be asked about it.” Inside the White House, Born’s coprincipals on the four-member President’s Working Group on Fi- nancial Markets—Treasury Secretary Robert Rubin, Securities and Ex- change Commission chair Arthur Levitt and Federal Reserve chair Alan Greenspan—rather than showing www.msmagazine.com FALL 2009 | 35