Commodities Regulator Says She Will Step Down

Brooksley Born, who raised the hackles of bankers and other Clinton administration officials through her efforts to regulate derivatives, said Tuesday that she would resign as chairwoman of the Commodity Futures Trading Commission rather than seek another term.

In a letter to President Clinton, Ms. Born said she would leave the commission "in April or shortly thereafter" and return to private legal practice.

Ms. Born argued that the commission, which already regulates the exchanges where many kinds of derivatives contracts are traded, should also have jurisdiction over so-called over-the-counter derivatives, which are privately negotiated agreements between banks and other counterparties.

The derivatives market has grown exponentially in recent years, to about $32.6 trillion of notional value as of Sept. 30 in U.S. banks alone, according to the Office of the Comptroller of the Currency.

Ms. Born argued that if Long Term Capital Management had to report its over-the-counter derivative positions, it would not have been able to get into the deep financial trouble that forced the Clinton administration to broker its takeover in September.

"This episode should serve as a wake-up call about the unknown risks that the over-the-counter derivatives market may pose to the U.S. economy and to financial stability around the world," Ms. Born told the House Banking Committee in October.

But her views apparently were not shared by the Treasury Department, the Securities and Exchange Commission, and the Federal Reserve Board.

Congress even passed a law forcing her to delay any further implementation of derivatives regulation.

During a December Congressional hearing, three of the Commodity Futures Trading Commission's five board members said they would support continued delays.

Faced with the loss of support of her board and opposition from the Clinton administration, Ms. Born "was rendered inoperative," said one banker close to the situation.

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