Lessons Learned? Brooksley Born & the OTC Derivatives Market (A) Harvard Case Solution & Analysis

On May 7, 1998, the U.S. Commodity Futures Trading Commission, chaired by Brooksley Born, issued a "Concept Release," inviting public comment on the relevance and appropriateness of existing regulation of the over-the-counter (OTC) derivatives market, a market with a notional value of $29 trillion dollars. The CFTC Concept Release, frequently a precursor to regulatory suggestions, sought investigation of "the benefits and burdens of any possible regulatory modifications in light of current marketplace realities." The Release wasn't welcomed by other regulators or by the Clinton administration.

Only hours after it was printed, U.S. Treasury Secretary Robert Rubin, Federal Reserve Board Chairman Alan Greenspan, and Securities and Exchange Commission Chairman Arthur Levitt declared their "serious concerns" about it in an unusual joint press release that minced no words. This case explores the battle between Born, on the one hand, as well as a high number of business representatives and policymakers, regulators, legislators, on the other, over whether and how greater regulatory oversight should be applied to the OTC derivative market. Born was defeated in her attempts; OTC derivatives played a central role in the 2008-09 fiscal catastrophe.

PUBLICATION DATE: November 04, 2010 PRODUCT #: 311044-HCB-ENG

This is just an excerpt. This case is about  FINANCE & ACCOUNTING

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