In 1998, as chair of the Commodity Futures Trading Commission (CFTC), Brooksley Born unsuccessfully tried to bring over-the-counter financial derivatives under the regulatory control of the CFTC. The government’s failure to regulate such financial deals has been widely criticized as one of the causes of the current financial crisis. In the booming economic climate of the 1990’s, Born battled other regulators in the Clinton Administration, skeptical members of Congress and lobbyists over the regulation of derivatives, warning that unregulated financial contracts such as credit default swaps could pose grave dangers to the economy. Her efforts brought fierce opposition from Wall Street and from Administration officials who believed deregulation was essential to the extraordinary economic growth that was then in full bloom. Her adversaries eventually passed legislation prohibiting the CFTC from any oversight of financial derivatives during her term. She stepped down from the CFTC in 1999 and returned to a distinguished career in public interest law.
Federal Officials who Championed Fiscal Responsibility Honored with 2009 JFK Profile in Courage Award
-- Peace Activists of Liberia Recognized for Courage --
Boston, MA, May 18, 2009 – Sheila Bair, chair of the Federal Deposit Insurance Corporation (FDIC), and Brooksley Born, former chair of the Commodity Futures Trading Commission (CFTC), were presented the prestigious John F. Kennedy Profile in Courage Award™ today by Caroline Kennedy at the John F. Kennedy Presidential Library in recognition of the political courage each demonstrated in sounding early warnings about conditions that contributed to the current global financial crisis.
Also honored as profiles in courage at today’s ceremony were Liberian peace activist Leymah Gbowee and the many women who worked with her in pushing for peace and paving the way for democracy after years of violent conflict in their country. Gbowee was joined by Vaiba Flomo and Janet Johnson Bryant in accepting the award on behalf of their countrywomen.
“Sheila Bair, Brooksley Born and Leymah Gbowee and her countrywomen all share uncommon courage,” said Caroline Kennedy, President of the John F. Kennedy Library Foundation. “From the corridors of wealth and power in the United States government, to the violent and impoverished streets of Liberia these women were not afraid to risk their careers, their relationships, their reputations, and even their lives, to speak truth to power and advocate for the powerless millions they represented. As appointed officials and citizen activists, they have inspired all those who wish to bring about meaningful change to their political systems.
“Sheila Bair and Brooksley Born recognized that the financial security of all Americans was being put at risk by the greed, negligence and opposition of powerful and well connected interests,” Kennedy said.” The catastrophic financial events of recent months have proved them right. Although their warnings were ignored at the time, the American people should be reassured that there are far-sighted public servants at all levels of government who act on principle to protect the people’s interests.
“Leymah Gbowee and the women of Liberia assumed personal responsibility for their national destiny, demonstrating the power of citizen activism to change history,” Kennedy continued. “By bringing together women of all religions, ethnic groups and walks of life, to stand up, sit in, and speak out against violence and in favor of peace, reconciliation and progress, they played a crucial role in restoring democracy to their war-torn country. The election of the first woman head of state in Africa – President Ellen Johnson-Sirleaf – is due in no small part to these courageous women. They have shown the world the power of women’s voices united for peace, inspired citizens around the world, and empowered women to seek political change.”
The John F. Kennedy Profile in Courage Award is presented annually to public servants who have made courageous decisions of conscience without regard for the personal or professional consequences. The award is named for President Kennedy’s 1957 Pulitzer Prize-winning book, Profiles in Courage, which recounts the stories of eight U.S. senators who risked their careers, incurring the wrath of constituents or powerful interest groups, by taking principled stands for unpopular positions. The John F. Kennedy Library Foundation created the Profile in Courage Award™ in 1989 to honor President Kennedy’s commitment and contribution to public service. It is presented in May in celebration of President Kennedy’s May 29th birthday. The Profile in Courage Award is represented by a sterling-silver lantern symbolizing a beacon of hope. The lantern was designed by Edwin Schlossberg and crafted by Tiffany & Co.
Sheila Bair, Chair, Federal Deposit Insurance Corporation (FDIC)
Sheila Bair has been called a “lone voice in the wilderness” for her early warnings about the sub-prime lending crisis and for her dogged criticism of both Wall Street’s and the government’s management of the subsequent financial meltdown. As early as 2001, Bair was urging sub-prime lenders to agree on a set of best practices to prevent abuses. Since the onset of the current crisis, she, more than any other government official, has pushed for direct assistance to distressed homeowners as part of the overall effort to stabilize the financial system, a move fiercely resisted by many leaders in both the public and the private sectors. Recently, however, the government has begun to implement many of her mortgage-modification proposals in an effort to slow the alarming increase in foreclosures. Sheila C. Bair was sworn in as the 19th Chairman of the Federal Deposit Insurance Corporation (FDIC) on June 26, 2006, and is currently serving a five-year term.
Brooksley Born, Former Chair, Commodity Futures Trading Commission (CFTC)
In 1998, as chair of the Commodity Futures Trading Commission, Brooksley Born unsuccessfully tried to bring over-the-counter financial derivatives under the regulatory control of the CFTC. The government’s failure to regulate such financial deals has been widely criticized as one of the causes of the current financial crisis. In the booming economic climate of the 1990’s, Born battled other regulators in the Clinton Administration, skeptical members of Congress and lobbyists over the regulation of derivatives, warning that unregulated financial contracts such as credit default swaps could pose grave dangers to the economy. Her efforts brought fierce opposition from Wall Street and from Administration officials who believed deregulation was essential to the extraordinary economic growth that was then in full bloom.
Her adversaries eventually passed legislation prohibiting the CFTC from any oversight of financial derivatives during her term. She stepped down from the CFTC in 1999 and returned to a distinguished career in public interest law.
Leymah Gbowee and the Women Peace Activists of Liberia
Leymah Gbowee, Janet Johnson Bryant and Vaiba Flomo accepted the Profile in Courage Award on behalf of the women of Liberia. After watching her native Liberia devolve into a decade-long civil war in which violence, rape, and murder became part of daily life, Leymah Gbowee brought together several dozen women to pray for peace. This effort launched a movement of ordinary Christian and Muslim women who rose up together to help put an end to Liberia’s civil war. Gbowee and her colleagues – among them, Janet Johnson Bryant, Vaiba Flomo, Yatta Moore, and Etty Weah – risked their lives to stop the cycle of violence and oppression that had kept dictators and warlords in power for decades. Their remarkable struggle for peace eventually paved the way for the election of Ellen Johnson-Sirleaf to the presidency of Liberia – the first democratic election of a female head of state anywhere in Africa. This extraordinary story of courage is told in the film Pray the Devil Back to Hell.
Senator Edward M. Kennedy of Massachusetts was presented the 2009 Profile in Courage Award on March 8, 2009 by his niece Caroline Kennedy during a star-studded celebration of the Senator’s 77th birthday at the John F. Kennedy Center for the Performing Arts in Washington. Kennedy, who is nominated every year for the award that celebrates his brother’s legacy, was not eligible for the honor while he served on the Profile in Courage Award selection committee. This year, members of the bipartisan award committee were unanimous in their decision to present Senator Kennedy with the award.
This year’s recipients of the John F. Kennedy Library Foundation’s prestigious award for political courage were selected by a distinguished bipartisan committee of national, political, and community leaders. Al Hunt, Washington managing editor of Bloomberg News, chairs the 14-member Profile in Courage Award Committee. Committee members are Michael Beschloss, author and presidential historian; David Burke, former president of CBS News; U.S. Senator Thad Cochran (R-Mississippi); Marian Wright Edelman, president of the Children’s Defense Fund; Antonia Hernandez, president and chief executive officer of the California Community Foundation; Elaine Jones, former director-counsel of the NAACP Legal Defense and Education Fund; Caroline Kennedy, president of the John F. Kennedy Library Foundation; Paul G. Kirk, Jr., chairman of the board of directors of the John F. Kennedy Library Foundation; Shari Redstone, President, National Amusements, Inc; John Seigenthaler, founder of the First Amendment Center at Vanderbilt University; U.S. Senator Olympia Snowe (R-Maine); and Patricia M. Wald, former judge of the International Criminal Tribunal for the former Yugoslavia. John Shattuck, chief executive officer of the Kennedy Library Foundation, staffs the Committee. Mr. Shattuck is a former U.S. Assistant Secretary of State and a former U.S. ambassador to the Czech Republic.
The John F. Kennedy Presidential Library and Museum is a presidential library administered by the National Archives and Records Administration and supported, in part, by the John F. Kennedy Library Foundation, a non-profit organization. The Kennedy Presidential Library and the Kennedy Library Foundation seek to promote, through educational and community programs, a greater appreciation and understanding of American politics, history, and culture, the process of governing and the importance of public service. For more information about the Profile in Courage Award and the Kennedy Presidential Library and Museum, visit www.jfklibrary.org.
Further Information: Rachel Day (617) 514-1662
I would like to thank the John F. Kennedy Library Foundation for this wonderful and unanticipated honor. John F. Kennedy has been one of my heroes for more than 50 years, and to receive an award for courage in his name is truly thrilling and truly humbling.
I would also like to thank a number of colleagues who served with me at the U.S. Commodity Futures Trading Commission. Their assistance and support at the CFTC was invaluable and indeed essential to my efforts.
I would like to recognize my spouse Alex Bennett and our children, whose love and confidence in me have always sustained me.
When I spoke out a decade ago about the dangers posed by the rapidly growing and unregulated over-the-counter derivatives market, I did not do so in expectation of award or praise. On the contrary, I was aware that powerful interests in the financial community were opposed to any examination of that market. Yet I spoke out because I felt a duty to let the public, the Congress and the other financial regulators know that that market endangered our financial stability and to make every effort I could to address that problem.
My voice was not popular. The financial markets had been expanding, innovation was thriving, and the country was prosperous. The financial services industry argued that markets had proven themselves to be self-regulating and that the role of government in market oversight and regulation should be reduced or eliminated.
All of us have now paid a large price for that fallacious argument. We are in the midst of the most significant financial crisis since the Great Depression, and regulatory gaps including the failure to regulate over-the-counter derivatives have played an important role in the crisis.
It is now critically important to identify and eliminate these regulatory gaps and to strengthen our financial regulatory structure. Without significant regulatory reform, our financial system will be exposed to continuing dangers and repeated crises.
No federal or state regulator has market oversight responsibilities or regulatory powers governing the over-the-counter derivatives market or indeed has even sufficient information to understand the market’s operations. The market is totally opaque and is now popularly referred to as “the dark market.” It is enormous -- the reported size of the market as of last June exceeded $680 trillion dollars of notional value, more than ten times the amount of the gross national product of all the countries in the world.
While over-the-counter derivatives have been justified as vehicles to manage financial risk, they have in practice spread and multiplied risk throughout the economy and caused great financial harm. They include the credit default swaps disastrously sold by AIG and many of the toxic assets held by our biggest banks. Warren Buffett has dubbed them “financial weapons of mass destruction.”
We now have a unique opportunity -- a narrow window of time -- to fashion and implement a comprehensive regulatory scheme for these instruments. Existing U.S. laws governing the futures and options markets provide a model for regulating the closely related instruments traded in the over-the-counter derivatives market. The new regulatory scheme should provide that the instruments must be traded on regulated derivatives exchanges and cleared by regulated derivatives clearing houses to the extent feasible. This would allow government oversight and enforcement efforts, insure price discovery, openness and transparency, reduce leverage and speculation, and limit counterparty risk. If any residual over-the-counter market is to be permitted, it must also be subject to robust federal regulation.
These measures would go far toward bringing this enormous and dangerous market under control. They must be adopted and implemented if we hope to avoid future financial crises caused by this market. Special interests in the financial services industry are beginning to advocate a return to business as usual and to argue against any need for serious reform. We have to muster the political will to overcome these special interests. If we fail now to take the remedial steps needed to close the regulatory gap, we will be haunted by our failure for years to come.
Remarks of Brooksley Born on accepting the 2009 Profile in Courage Award, May 18, 2009.
As Prepared for Delivery
It’s an honor to be here this morning to present the 2009 Profile in Courage Awards, and a special honor to present the awards to three women who have inspired all those who seek to bring about change in their political system. We honor Shelia Bair, Chairman of the Federal Deposit Insurance Corporation, and Brooksley Born, former Chair of the Commodity Futures Trading Commission, and Leymah Gbowee, the Liberian peace activist and the women who worked with her, including Vaiba Flomo and Janet Johnson Bryant, who are also here with us today.
These annual awards were first presented 19 years ago as a special tribute to my father, President Kennedy, and they are named after the famous brook he wrote in 1957. They honor the high ideals which inspired his own public life. He believed very deeply that public service is a noble profession, in large part because it often demands courage to do the right thing in the face of intense opposition. He understood that America would not be America without courageous officials willing to go against the grain, and he was constantly concerned that such courage so often seemed absent in public life.
These awards are our effort to pay tribute to the very best in contemporary public service in the United States and around the world and they mean a great deal to all of us in the Kennedy family. We salute this year’s honorees, and we commend them for their courage….
Like Sheila Bair, Brooksley Born showed great courage in standing up for the public interest in the face of opposition from powerful private interests.
In the booming economic climate of the 1990’s, as the size and complexity of the financial industry exploded, large parts of the industry went entirely unregulated.
As chair of the Commodity Futures Trading Commission from 1996 -1999, an agency charged with overseeing options and futures trading, Brooksley Born became concerned about the lack of transparency and inadequate regulation of complex financial transactions now infamously known as derivatives and swaps.
In 1998, her concerns were underscored by the near-failure of a major hedge fund whose losses stemmed in part from trading in derivatives. She made a clear call for new regulations and disclosures that would bring more transparency and stability to these transactions.
But it was a lonely call. She drew fierce opposition from the Federal Reserve, the Department of Treasury, and the Securities and Exchange Commission, all of which blocked her efforts to shine a light on what had become a major component of the financial industry. Her political opponents eventually succeeded in stripping her agency of all regulatory authority over derivatives.
As we all now know, time has proved that Brooksley Born was right. President Obama has now called for thorough reform and restructuring of financial regulation system, just as she had called for.
For her foresight and her principled independence in preserving the integrity of our financial institutions, we present Brooksley Born with the 2009 Profile in Courage Award.
Remarks delivered by Caroline Kennedy, President of the Kennedy Library Foundation, in presenting the 2009 John F. Kennedy Profile in Courage Awards, March 18, 2009.