The earliest C-Span video featuring Born is from congressional testimony on Hedge Fund Operations Risks from October 1, 1998.
At the top of this clip, the chairman of the hearing, Jim Leach says:
For a return visit on a similar subject, Miss Born. You're welcome to claim some vindication if you want.To which Born replies:
I certainly will not do so Mr. Chairman.The reason Leach says this is because Born had been warning of the lack of regulations in the financial industry, including hedge funds, for years, and the failure and the September 1998 bail-out of Long-Term Capital Management had proven Born had been correct. As it says in Wiki:
Long-Term Capital Management did business with nearly everyone important on Wall Street. Indeed, much of LTCM's capital was composed of funds from the same financial professionals with whom it traded. As LTCM teetered, Wall Street feared that Long-Term's failure could cause a chain reaction in numerous markets, causing catastrophic losses throughout the financial system. After LTCM failed to raise more money on its own, it became clear it was running out of options. On September 23, 1998, Goldman Sachs, AIG, and Berkshire Hathaway offered then to buy out the fund's partners for $250 million, to inject $3.75 billion and to operate LTCM within Goldman's own trading division. The offer was stunningly low to LTCM's partners because at the start of the year their firm had been worth $4.7 billion. Warren Buffett gave Meriwether less than one hour to accept the deal; the time period lapsed before a deal could be worked out.
Seeing no options left the Federal Reserve Bank of New York organized a bailout of $3.625 billion by the major creditors to avoid a wider collapse in the financial markets. The principal negotiator for LTCM was general counsel James G. Rickards. The contributions from the various institutions were as follows:Much of Born's speech is a rehash of her agency, the CFTC's Concept Release paper.
- $300 million: Bankers Trust, Barclays, Chase, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, Merrill Lynch, J.P.Morgan, Morgan Stanley, Salomon Smith Barney, UBS
- $125 million: Société Générale
- $100 million: Lehman Brothers, Paribas
- Bear Stearns declined to participate.
But even this vindication of Born didn't stop Congress from shutting down the CFTC's attempts to regulate derivatives, through its newspeak-named Commodity Future's Modernization Act of 2000.