Question

Based upon our viewing of the Brooksley Born video, explain whether you would have acted in the same manner as Brooksley did if you were in the situation she encountered relating to non-regulation of derivatives.

Answer 1

Brooksley Born says in the interview that she noticed that the Over the Counter transactions of derivatives were not regulated by any governing body. There was no regulatory body that could ensure that these transactions were in public interest. In fact, there were several members who did not know how these derivatives were being traded and how they functioned. So, she took the initiative of collecting information about the derivatives and how it is being traded. It led to the realization that the traders did not believe that the derivatives market required any sort of regulation. They believed that the market was self-regulatory and there was no need for any regulations. This feeling finally led to the great recession of 2008. If I would have been in place of Brooksley Born then I would also have done things little differently. First I would have made the ignorance about derivatives clear to the concerned authorities. Then I would have spread the word about the risks involved in the derivatives market.