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The Cassandras of Our Time: Brooksley Born and Ann Ravel

No one listened when Brooksley Born warned of a financial crisis; let’s not make the same mistake in campaign finance with Ann Ravel.

September 6, 2016

The views expressed are the author’s own and not neces­sar­ily those of the Bren­nan Center for Justice.

“Beware of Greeks bear­ing gifts,” Cassandra said of the Trojan horse that sacked Troy. In Greek myth­o­logy, Cassandra also warned of the kidnap­ping of her sister Helen by Paris, the ensu­ing Trojan War and the fall of Troy. No one believed her proph­es­ies. They all came true.

We have our own modern Cassandras in the form of two bril­liant lawyers. In the 1990s, during Bill Clin­ton’s pres­id­ency, the deriv­at­ives market was taking off and Brook­s­ley Born was chair of the Commod­it­ies Futures Trad­ing Commis­sion.  She warned that unreg­u­lated deriv­at­ives trad­ing posed a risk to the nation’s finan­cial stabil­ity.  She wanted more trans­par­ency of this dark market. 

But Born was under­cut in her efforts by no less than Treas­ury Secret­ary Robert Rubin, Federal Reserve Chair­man Alan Green­span, Deputy Secret­ary of the Treas­ury Larry Summers and SEC Chair Arthur Levitt.  This boys club turned out to be dead wrong. But they had the power. They convinced Congress to strip the CFTC of its power to regu­late deriv­at­ives.

The rest is history. Unreg­u­lated deriv­at­ives were at the heart of the 2008 finan­cial collapse which brought the economy to its knees.  As Prof. Jennifer Taub notes, deriv­at­ives magni­fied the risk in the hous­ing market to such a level that it felled finan­cial giants like Bear Stearns and Lehman Broth­ers. 

For a theat­rical take on the history of the unchecked deriv­at­ives market, check out the movie “The Big Short.” For a more sober look at this history, see Front­line’s “The Warn­ing.”  With hind­sight, it’s easy to see that Amer­ica should have listened to Brook­s­ley Born. And it took forti­tude for her to stand alone during the boom­ing economy of 1990s and say that everything was not well.  She richly deserved the JFK Profiles in Cour­age Award she received in 2009.

In today’s Wash­ing­ton, Ann Ravel could be a modern-day Cassandra. She is currently a commis­sioner at the Federal Elec­tion Commis­sion (FEC), the agency in charge of campaign finance in federal elec­tions. Through a long­stand­ing federal law the FEC also has juris­dic­tion over keep­ing foreign money out of all Amer­ican elec­tion­s—in­clud­ing state and local contests.  

Ravel has been trying to get the FEC to take this respons­ib­il­ity seri­ously. Last year she tried to get the agency to address a viol­a­tion by a European porno­grapher (not an exag­ger­a­tion), who spent $327,000 in a Los Angeles ballot fight. The FEC did noth­ing. 

Revel­a­tions by Jon Schwarz and Lee Fang in The Inter­cept showed that a company called APIC (Amer­ican Pacific Inter­na­tional Capital, Inc.), which was really owned   by two Chinese nation­als, dumped $1.3 million into the Right to Rise super PAC,  which backed Jeb Bush’s doomed run for the Repub­lican nomin­a­tion. In the wake of this news, Ravel called for a ban on contri­bu­tions from U.S. subsi­di­ar­ies of foreign corpor­a­tions. FEC is set to hold a hear­ing on Ravel’s proposal Sept. 15.  

Ravel is right to worry about the possible impact of foreign money on U.S. elec­tions. As it is, $650 million has in already been poured into elec­tions since 2010 whose origins are unknown and some could be from over­seas.   

But like Born’s admon­i­tions, Ravel’s warn­ings may fall on deaf ears. They should­n’t. Born was right then; and Ravel is right now.  The FEC should take this threat seri­ously and adopt Ravel’s sens­ible proposal because corpor­ate struc­tures are the Trojan horses of our time.

(Photo: Flickr/Abraxas3d)