The Financial Crisis
My daughter’s perspective
My daughter. Beautiful, loving, kind, compassionate and sweet. Her perspective has always been interesting to me, not because she’s my daughter, but because she’s far more intelligent than I’ll ever be. Take her perspective on the financial crisis of late. Having lived through the financial crisis my 21 year old daughter had always heard different explanations to what happened in the years leading up to the worst financial crisis since the Great Depression. Friends, family, neighbors, everyone was affected by it in some way. She heard a lot of words like “housing bubble” and “subprime mortgage loans” and “irresponsible banks.” It is a complex situation and so I think she tried to piece things together as much as she could to make sense of what has happened.
By way of background, she is in her fourth year at a large university and will graduate with a bachelors and masters degree in less than five years. Her major? Accounting. So, of course she has been introduced to stocks, bonds, and derivatives and likely has adequate knowledge of what they are and how they work. She’s heard names like Alan Greenspan and Arthur Levitt getting tossed around from time to time at the dinner table. The most striking thing to me is that before yesterday, she had never even heard of Brooksley Born, and did not know the impact that over-the-counter derivatives had on our markets. After she watched a film called “The Warning”, she feels she has a better understanding of what really happened in the years leading up to the financial crisis, but the news does not make her feel very optimistic about our government. This is the perspective of our college -educated future generation.
To her, it is upsetting to know that Brooksley Born was basically crucified throughout her entire career. Born did her research. She knew the impact that unregulated over-the-counter derivatives would eventually destroy our financial system. She was well educated and well informed but she had the misfortune of being a woman in a male dominated field. It did not matter their qualifications, women were simply not given the same respect at that time. She respects the fact that when Born was ignored, she did everything in her power to fight for what she truly believed was a danger to our markets. When she was being ignored she made herself impossible to ignore. She fought tooth and nail to be heard. When men found her to be too threatening to their egos, they shut her down. She believes that this is a problem that we have in society. Women are not trusted with the same authority as men. If Born had been part of the Boys Club, her ideas might have at least been considered.
Then there was a trend going around about free markets. Allan Greenspan, Robert Rubin, and Arthur Levitt would go around preaching free markets and anti-regulation and people loved it because everything looked like it was working. It shows how people can be blind to the truth when they are comfortable. When everything looks good, why rock the boat? People hang on to their beliefs and then fight for them even harder when confronted with misinformation. It is a dangerous cycle. Greenspan was not going to look into Born’s research. He was a rock star at the time, why would he risk hurting his ego anyway? It took over twenty years for his bogus theory to come crashing to the ground, and it was not until then that he even acknowledged his ignorance.
Who knows what could have happened if there was at least one person who listened to Brooksley Born? Perhaps we would not be talking about a financial crisis at all. It seems strange to her, my 21 year old college student, that our nations politicians have to learn from our mistakes — twice. Brooksley Born was able to see it. An entire segment of the market was completely unregulated and people thought that it was somehow a good thing. We say that we can learn from history, and yet here we are, talking about another financial crisis that could have been prevented. It goes to show what can happen when people cling to an idea that seems like it is working.
We cannot prevent history from repeating itself by just simply learning about it. We have to fully understand our history, and we have to be willing to learn concepts outside of what we think we know.
I love her.
