Interview: Brooksley Born

• HIGHLIGHTS
• What are the dangers of the OTC derivatives market?
• The effectiveness of the financial lobby
• Long-Term Capital Management -- exactly what she worried about
• The advantages of derivatives
• Lessons from the current crisis

As head of the Commodity Futures Trading Commission [CFTC], Brooksley Born became alarmed by the lack of oversight of the secretive, multitrillion-dollar over-the-counter derivatives market. Her attempts to regulate derivatives ran into fierce resistance from then-Fed Chairman Alan Greenspan, then-Treasury Secretary Robert Rubin and then-Deputy Treasury Secretary Larry Summers, who prevailed upon Congress to stop Born and limit future regulation. This is the edited transcript of an interview conducted on Aug. 28, 2009.

So let's start with September 2008 as we all sat there and watched the economy melting down and heard about things called credit default swaps [CDS]. It wasn't the first time you'd heard of these sophisticated financial instruments. What did you think when you were watching it happen?

It was like my worst nightmare coming true. I had had enormous concerns about the over-the-counter derivatives [OTC] market, including credit default swaps, for a number of years. The market was totally opaque; we now call it the dark market. So nobody really knew what was going on in the market.

And then it became obvious as Lehman Brothers failed, as AIG [American International Group] suddenly appeared to be on the brink of tremendous defaults and turned out had been a major credit default swap dealer and needed hundreds of billions of dollars to keep it alive, the contagion in the marketplace from those failures brought many, many of our biggest financial services companies to the brink of collapse. And it was very frightening.

... How did it happen?

I think it happened because there was no oversight of a very, very big, dynamic, growing market. Market participants don't look out for the public interest. Traditionally, government has had to protect the public interest by overseeing the marketplace and keeping the extreme behavior under some check.

We had no regulation. No federal or state public official had any idea what was going on in those markets, so enormous leverage was permitted, enormous borrowing. There was also little or no capital being put up as collateral for the transactions. All the players in the marketplace were participants and counterparties to one another's contracts. This market had gotten to be over $680 trillion in notional value as of June 2008 when it topped up. I think that was the peak. And that is an enormous market. That's more than 10 times the gross national product of all the countries in the world.

... This was something that you discovered, heard about, came across, back in the mid-1990s?

Yes. When I was chair of the Commodity Futures Trading Commission [CFTC], I became aware of how quickly the over-the-counter derivatives market was growing, how little any of the federal regulators knew about it.

And also, we were seeing some very dangerous things happening in that market. There were some major fraud cases. There was use of over-the-counter derivatives to manipulate the price of commodities. And there were some spectacular failures by institutions that were speculating in the over-the-counter market with little or no restraint. For example, Orange County, Calif., was brought down, went into bankruptcy because of its speculation, gambling with public money in the over-the-counter derivatives market on interest rate swaps.

I became very concerned. This market had been under the jurisdiction of my agency and had been expanding for about three years when I came into office because one of my predecessors had led an effort to exempt these transactions from a requirement of exchange trading. So, by an exemption, the commission had permitted the over-the-counter market to grow. And in the few years, three years, it had grown to something like $25 or $30 trillion in notional value. ...

And the astonishing thing, at least for me as I began to learn about this, was nobody in government knew how much, how big, where, who the parties were, at all.

That's correct. None of the other financial regulators knew about it, either. And it seemed to me we all needed to know. There needed to be some light shone on this market so that we knew what kind of risks might be being created there.

We knew who the participants were. We did know that our biggest banks and investment banks were the dealers in the market, and that they were being very profitable in their dealing in the market.

But who the buyers were, what the deal was, the spreading of the risk, was still, as you say, opaque?

We just didn't have information. ...

What was the danger to the public that you were concerned about in the over-the-counter derivatives market?

First of all, we didn't truly know the dangers in the market because it was a dark market. There was no transparency. But generally, in any financial market, if there is not government oversight to control abuses like fraud and manipulation, to limit speculation, to make sure that a major default won't cause a domino effect throughout the economy, the public interest is exposed and in danger.

Beyond that, and perhaps on a more specific level, I knew that the entities participating in the market were ones that all the people actually had interest in. They were the companies that people had invested in; they were the employers of many people; they were the pension funds for many retirees; they were the insurance companies for many people who were depending on those companies for their insurance. So I knew that all the people had an investment in stability in that market. ...

When you first got there, the Procter & Gamble lawsuit against Bankers Trust had already happened. Did it serve as a cautionary tale? Or had you known about it when it was happening? ...

I had known about it at the time it happened because my law practice was in the derivatives area. I'd practiced derivatives law for more than 20 years. So I kept apprised of notable cases, and certainly Procter & Gamble and Gibson Greeting Cards' suits against Bankers Trust -- Bankers Trust being their over-the-counter derivatives dealer -- were very well known. So I was aware of that.

I was also aware that there had been some spectacular failures, collapses, by speculators in the market and that big institutions and a broad range of companies -- from pension funds to public entities like Orange County to corporations -- were speculating in the markets. But I did not have any idea of the size and complexity that the market had arrived at until I got to the CFTC and my staff began to say how big this was and how little information they had about it.

... People said: "Wait a minute, these are consenting adults in a swap, in a derivative deal. As sophisticated investors, they don't need regulation to protect them." Is what Orange County represents that maybe people are not sophisticated? ...

These are very complex instruments, and the way they work is pretty complicated. Highly sophisticated computer models are used by the OTC derivatives dealers to figure out values and the circumstances under which they would profit highly and the counterparty would lose. And those tools weren't available to the other parties, what we then called the end users of the over-the-counter derivatives.

The other aspect of this was it may well be that Orange County was a big, sophisticated entity; let's assume it was. But it was using the taxpayers' money, so every single taxpayer in Orange County lost when Orange County lost. And it was the public interest that I was mostly interested in, not so much the particular interest of individual players in the market.

... Did you know it was a territory you needed to get into to exercise your responsibilities as a public official?

I thought it was very important to do that. One thing I should make clear, too, is that while the CFTC had exempted the market from most of our regulation, ... my predecessors had retained fraud and manipulation prohibitions against the market. And I, when I got into office, thought, well, how can we detect these malfeasances? How do we deter them? And I realized there was no record-keeping requirement imposed on participants in the market. There was no reporting. We had no information. The only way the CFTC found out about the Bankers Trust fraud was because Procter & Gamble and others filed suit. ...

How formidable a challenge is it for the head of the CFTC, this slightly off-to-the-side agency, to forge forward and make a mark in this burgeoning world?

It was a small agency, is a small agency today. And I didn't think that we could send out demands to the biggest banks to report to us, even though all of them were registered with us as futures and options traders. ...

But I felt that we did need to learn more about the market, and we needed to test whether the balance that the commission had earlier struck between exemption and keeping regulatory powers was appropriate.

So our Division of Trading and Markets, under Michael Greenberger, began, at my request, to prepare a list of questions that we needed answers to about the nature of the market. They prepared a document that listed the grounds for concern: the previous fraud, the collapses in the market, the rapid growth, the fact that we didn't keep any enforcement tools to let us effectively police the markets for fraud and manipulation.

And it asked questions about the market. It also asked questions about whether certain changes needed to be made to the regulatory regime. Did there need to be record keeping? Should there be reporting to some federal regulator? Would clearing the transactions in a clearinghouse help protect against counterparty risk default on the part of one side or the other?

We called this paper the concept release [a report released to the public outlining a proposed rule change]. And eventually in May 1998, we published that in the Federal Register, asking the market participants and the over-the-counter derivatives dealers for their input voluntarily to tell us about the market.

... Were you aware of the reaction that would befall you, the CFTC, as a result of just even talking about the concept release?

I thought asking questions couldn't hurt, and I was shocked that there was a strong negative reaction to merely asking questions about a market. I had considered this as one of three options before we went this direction. One was to pretend that the market wasn't there, which to some extent had been going on as the market was growing. I didn't think it would be a responsible act to ignore it when it seemed to at least pose the possibility of a real threat to the public interest.

Another possibility would have been to ask our enforcement division to bring actions against the largest banks and investment banks for violating the terms of the exemption, because the exemption as it was initially adopted by the CFTC in '93 exempted only customized contracts. It did not exempt standardized or fungible contracts, because fungible contracts could be traded on exchange. And the philosophy was that they should be traded on exchange.

In fact, the way it became obvious to me that the way the market had evolved in the three years since the exemption was adopted was a lot of the market had become standardized and was not really appropriately exempted under the terms of the exemption. And that's one of the questions we asked in the concept release: Should we broaden the exemption to cover what's actually being traded out there in the over-the-counter market?

[What was the response?]

I wasn't too surprised at the reaction of the over-the-counter derivatives dealers, because they believed in no regulation. Their position was that markets were self-regulatory, that this market was taking care of itself, there were no risks in the market, and they thought there was no need for any government oversight or regulation.

I was more surprised at the other financial regulators who also were quite ignorant about this market, because I would have thought they would have welcomed information. And I had hoped that they would work with us to learn more about the market, decide whether there was an appropriate regulatory regime for it. And if so, what?

But my reading of the times was there was no impulse to regulate; there was an impulse to deregulate. Everything was going just fine, thank you very much.

Well, that's true. We had had 15 years of deregulation up until then, really, and there was a great belief in the ability of the market to police itself without government intervention. Certainly that had shown itself in a lot of deregulatory actions that had been taken previously.

I was concerned about it because it seemed to me it overlooked the fact that market participants, obviously and quite rightly, would pursue their own interests rather than a broader public interest. And if systemic risk was being built up in the system, no individual participant would have any interest particularly in blowing a whistle or changing its behavior.

There were, of course, counterarguments made. These markets are going to leave America; they're going to go to London. Your response?

... It is true that there was a suggestion that merely asking questions would drive our biggest banks and investment banks to London. That puzzled me. You know, what was it that was in this market that had to be hidden? Why did it have to be a completely dark market? So it made me very suspicious and troubled.

The other argument is this would abrogate deals that were already under way. ...

That was certainly said. This was called legal uncertainty. But we had made it clear in the concept release that we were looking forward; we were not concerned with existing contracts. We would not change the regulatory regime as to the existing contracts. Nor were we looking to police the market with respect to the legality or illegality of those contracts. What we were asking was, should the regulatory regime be changed in the future?

As to the other regulators, the other people in the President's Working Group, was it your sense that they understood derivatives, how it was working? ...

... People there at the CFTC and people who had practiced law in the area as I had were, I'm sure, more aware of it than people who were essentially banking supervisors or securities regulators. There were securities options, of course, which are a kind of a derivative contract, so the SEC did have some experience in that area.

I was not sure how much understanding there was of the derivatives markets by the other regulators. And in fact, one of the things we tried to do in the President's Working Group meetings was to explain our markets and what the concerns were.

But it fell on deaf ears?

Yes, there was very little interest in doing this. The markets were doing very well; the country was very prosperous. There was a lot of financial innovation in this area. In fact, I know [former Federal Reserve Board Chairman] Alan Greenspan at one point in the late '90s said that the most important development in the financial markets in the '90s was the development of over-the-counter derivatives.

You think he understood what that meant?

Well, he has said recently that there was a flaw in his understanding.

When you proposed the concept release, there's an extraordinary statement from Greenspan, Rubin and [former SEC head Arthur] Levitt that says Congress should pass legislation that prevents CFTC from oversight. How did you hear about it? Did you get a phone call? Do you remember?

I don't remember.

It was an extraordinary moment. What did you think?

I was very surprised, because of course we were an independent federal agency, and we were acting within our jurisdiction. And ordinarily, the tradition has been and the understanding has been that independent regulatory agencies should be permitted to do their job as they saw fit. But obviously, the other financial regulators thought that this was terribly important for them to step in and condemn.

Why?

I think the reasons varied from department or agency. But one of the reasons was that some of the people involved really were purists in terms of belief in free markets and were absolutely, from a doctrinal point of view, opposed to regulation.

I think others were concerned with keeping the big banks and the investment banks happy and making sure that they were responsive to the demands of those entities.

One thing we have to remember is that the financial services industry was the largest campaign finance contributor then -- and perhaps even now, I'm not sure -- and it was very effective in lobbying both the executive branch and Congress.

Could you feel that?

Yes. Oh, I felt that from the day I went into office as chair of the CFTC.

How?

I had all kinds of interest groups coming to meet with me on a daily basis to tell me how they wanted me to regulate. So I was the focus of some of these lobbying efforts. ...

There was an argument that was made ... that what you were proposing ... would precipitate -- the quote was "the worst financial crisis since World War II." Did you hear that charge?

I did hear that, and that, too, puzzled me, since we'd had a lot of financial ups and downs since World War II. And I, again, could not conceive of why asking questions about whether the public interest was adequately served by the limited degree of regulation of this market would be so inflammatory.

Actually, some of the economists at the CFTC did do a study at the time to see if the over-the-counter derivatives market was being roiled by the concept release, and they never found any evidence of it.

[So why were they so worried?]

I think the over-the-counter derivatives dealers were concerned that some additional regulation might be considered seriously. I certainly thought some was probably needed, and the more resistance there was, the more I thought there probably was a need. And I think they were totally opposed to it.

Of course, this became a major profit center in each of the over-the-counter derivatives dealers business. [It] was something like 40 percent of the profits of many of these big banks as recently as a couple of years ago.

In the summer after the concept release, the summer of '98, Long-Term Capital Management [LTCM] has a problem. How do you hear about the problem?

Yes, I got a call from the Treasury Department probably the weekend that it nearly collapsed. This was in actually September '98. And I was told that the very large hedge fund was almost collapsing, that it had $1.25 trillion in notional value of over-the-counter derivatives, and it only had $4 billion in capital to support that enormous investment, and that the markets had turned against it, ... so that it was going to default in a very major way, leaving the counterparties in the derivatives contracts -- who happened to be the big OTC derivatives dealers -- in the lurch in a major way. And I was told that the Federal Reserve Bank of New York was trying to facilitate an arrangement whereby the large over-the-counter derivatives dealers took over LTCM by buying it out.

What did you think when you heard that?

I thought that it was exactly what I had been worried about. None of us, none of the regulators had known until Long-Term Capital Management phoned the Federal Reserve Bank of New York to say they were on the verge of collapse.

Why? Because we didn't have any information about the market. They had enormous leverage. Four billion dollars supporting $1.25 trillion in derivatives? Excessive leverage was clearly a big problem in the market. Speculation? I mean, this was speculation, gambling on prices, on interest rates and foreign exchange rates of a colossal nature. Prudential controls? I mean, all these big banks had in essence ... extended unlimited loans to LTCM, and they hadn't done their homework. They didn't even know the extent of LTCM's exposures in the market or the fact that the other OTC derivatives dealers had been lending to them as well.

They thought they were the only bank, and there were 13 others on the list, right?

Well, at least there was a suggestion of that. There was some reporting of great surprise.

The other thing it showed me, which I hadn't really been aware of before, was the risk from tremendous contagion. Not only did these instruments, which supposedly are useful for managing risk, it multiplied risk and spread it around throughout the economy, but because of counterparty risk, one institution's failure could potentially bring down or adversely affect a large number of our biggest financial institutions.

The Federal Reserve opinion was that had the OTC derivatives dealers not stepped in and taken responsibility, this could have had a widespread, adverse, systemic impact on the financial system.

Meltdown?

Yes. A mini-2008, in effect.

One decade before?

Exactly. ...

So much for the argument that the market will somehow take care of itself and we don't need regulation, I guess?

It disproved it to me. I had never believed that. I think anybody who has been a lawyer practicing in areas involving business regulation realizes that the public interest is not fully protected by the marketplace and the participants in the marketplace.

So LTCM happens, and for a brief period there is this eagerness to regulate. ... But it very quickly evaporates. Why?

Because everything was all right. Because all the big banks did step in and solve the problem by taking over LTCM and incurring losses themselves. But they protected the fabric of the economy. And Congress was told by the over-the-counter derivatives dealers, by some of the other regulators, that this was an anomaly, this was not indicative of dangers in the market.

And I think any consideration of regulation probably came and went within a few days, because it was less than a month later that Congress passed a statute saying that the CFTC could take no regulatory action in the over-the-counter derivatives market for the next six months.

A moratorium.

Yes.

On Born?

True. Congress also said that it would like the President's Working Group to do a study of hedge funds like LTCM and of the over-the-counter derivatives market and report back to Congress about whether or not there were problems in the areas.

[House Banking Committee Chair] Jim Leach [R-Iowa] offers you an opportunity to take a victory lap, claim vindication. Why don't you at that moment in front of Congress?

Because it seemed to me that the important thing was to focus on the dangers to the public and the need for reform. It was not whether somebody had predicted a danger that existed. I didn't think it was appropriate to take credit for something that was so potentially disastrous.

We've talked to people ... who say you worried a lot, a sleepless kind of worry. How accurate are those descriptions of how potent this felt to you?

I was extremely concerned, and because of the way our statute was written, it was the CFTC who had regulatory responsibility for these markets. I felt that responsibility very heavily, which was why I felt that it was extremely important for me to stick to my guns and repeat to Congress and the other regulators the reasons that I thought something needed to be done to close the regulatory gap that existed.

There are many people I've talked to, reporters and others, who say they can't remember such fierce fire ever being directed at somebody as was directed at you during those times. How did you withstand it?

I felt it was my public duty. I felt that I was doing my job.

Hard to do?

No. When I took the job, I knew that it was my responsibility in that position to look out for the interests of all of us, not just for the interests of some of the regulated parties like the over-the-counter derivatives dealers. And I felt as long as I was in that position, that's what I should do.

Now, once Congress created the moratorium, I felt that Congress and the administration, by passing the statute, had relieved the commission of the responsibility. I did continue to speak, I think, after that, about how important it was to address the issue. But I no longer thought it was my duty as chair of the CFTC to make sure that something bad didn't happen in the market.

You really thought something bad could happen, would happen?

Yes. LTCM was the sort of thing that I was concerned about. I did not foresee then the kind of pervasive and enormous collapse that we've experienced in the last year, partly because the market wasn't that big yet, partly because I didn't realize until LTCM happened how pervasive the contagion could be.

And how pervasive could it be?

I think it could include thousands of financial services industry participants and other large institutions all over the world. And I think that's what happened. As the market continued to grow, with even less oversight and regulation, until it reached more than $680 trillion in notional value, an enormous potential for disaster had grown.

What happened after I left the agency in June 1999 was the President's Working Group did come out with an over-the-counter derivatives report (PDF) to Congress that strongly suggested that ... there was no need for regulation.

And as a result of that report, a statute was passed in 2000 called the Commodity Futures Modernization Act [CFMA] that took away all jurisdiction over over-the-counter derivatives from the CFTC. It also took away any potential jurisdiction on the part of the SEC, and in fact, forbids state regulators from interfering with the over-the-counter derivatives markets. In other words, it exempted it from all government oversight, all oversight on behalf of the public interest. And that's been the situation since 2000.

When the CFMA is passed, how do you feel? ... The end?

Of course it's never the end, because I hope we can have regulation now. But at the time, I certainly strongly disagreed with the decision to do it. I mean, it was a terrible mistake. And I felt as though we as a society were much more vulnerable than we should have been.

So we're the losers. Who were the winners?

I think the profits made by the over-the-counter derivatives dealers, by our largest banks and investment banks, were the upside of this. And that was shortsighted. It was short-term benefit for a few major institutions at the expense of all the people who have lost their jobs, who have lost their retirement savings, who have lost their homes.

... What's the message that you're trying to spread now in the ashes of what happened in 2008 and '09?

I think we have to close the regulatory gap. ... We cannot afford as a society to go forward with an enormous unregulated market that poses this kind of danger because it’ll happen again if we don't take the appropriate steps. ... We need to take a lesson from the existing futures markets where exchange trading has been safe. As much as possible of the over-the-counter derivatives market should be traded on a regulated derivatives exchange. The transaction should be cleared on a regulated clearinghouse. There should be robust federal regulation of any remaining OTC derivatives market. And personally, I think that remaining market should be limited as much as possible to no more than the customized contracts that are needed for specific businesses to hedge particular business risks. ...

If this moment passes again, the consequences are what from your perspective?

I think we will have continuing danger from these markets and that we will have repeats of the financial crisis. It may differ in details, but there will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.

And the lesson you learned from your government experience?

It's an interesting question. I think the lesson is that a public servant has to do what she believes is right and carry her responsibility even if there are very adverse consequences in terms of criticism and other difficulties. That's one's job.

My parents were both public servants, and I think I learned from them. My father was the director of public welfare in San Francisco for 35 years, and my mother was a high school English teacher. They felt that public service was the highest calling, that this was the way to give back to the society for all we enjoy every day. And one of the things you have to do is put aside self-interest, put aside ambition and do what's right for the people. And that's what I tried to do. ...

Congress is the one, in the end, that had oversight over the regulators. How good a job were they doing? ...

Of course Congress has a critically important role since they, along with the administration, have to decide on any kind of statutory reform. I think it's very difficult for a member of Congress to be an expert in every field. This is a complicated field. ... They had a lot of other things on their plate. They were hearing from very respectable sources that there was no problem, and they chose to rely on those people. And I think that was understandable. I think it was unfortunate, but I think it was very understandable. ...

When your term expires, why did you leave the agency?

I was asked by the White House whether I would like another five-year term. I had gone into the position thinking I would fill out the existing term and return to the practice of law, which was what I really loved to do. But by the time I was considering whether I wanted to stay on for another term, it was pretty clear, because of the attitudes of the other financial regulators, because of the congressional action tying our hands, that there was not anything effective that was going to happen in the over-the-counter derivatives area. And I felt as though because of that, I had done what I could to help protect the public, and there wasn't much left for me to do, and that perhaps the agency would benefit from new blood who came in with new priorities.

... Did you know then [the advantages of derivatives]? Did you know enough about it to be able to understand why these things would have been invented and why they would be catching on like wildfire?

Oh, definitely, because futures and options are used the same way. They are a wonderful means of hedging risk or shifting risk from one entity to another. The whole reason we have derivatives exchanges is because commercial interests, agricultural interests, can in effect ensure against price changes or interest rate changes or other adverse business events by hedging through these instruments.

So in that sense, they're a good thing?

Exactly. And I would never say derivatives should be banned or forbidden.

So what's the problem?

The problem is that they can be extremely misused. These instruments offer two different roles to entities using it. One is to hedge price risk; the other is to gamble on price risk. And there are means within the over-the-counter market to gamble on price changes in an enormous way, putting up very little up-front money so that entities are tremendously leveraged. And that means that they can make tremendous profits when the price moves right for them. But when it moves wrong, they can collapse like AIG did. ...

So what do the American people need to know about why this is so important to get after right now, and why it was so important for you?

Because this is a market that can impact each of us. It's AIG's collapse. It's the toxic assets on the books of many of our biggest banks that are over-the-counter derivatives and that caused the economic downturn that made us lose our savings, lose our jobs, lose our homes. We can't face repeated harm like this from a totally black market, a dark market.

Do you think most people know there's no government regulation in this territory?

I don't know if they do or not. All other financial markets have some kind of government oversight protecting the public interest.

But not this?

Not this one. This one had very good lobbyists. The very same entities that are lobbying today to limit the effectiveness of a new regulatory reform are the people who in 2000 and 1999 deregulated these markets entirely. ...

... I wonder about the extent to which your gender affected what happened with the members of the working group, the other regulators. What do you think?

I don't want to comment on that. I do think that some people, some men, may have problems in dealing with women as equals or listening to women's voices, particularly dealing with their disagreement with them.

Arthur Levitt says, "You know, if she just would have gotten to know us, ... maybe it would have gone a different way." Arthur now expresses true affection for you and says what a lovely person [you are] and that he was wrong and you were right and all this. He says it on camera. But he says, "Oh, if only she would have --" What do you say?

I'm reminded of something that Michael Greenberger once said to me, which is, "They say you weren't a team player, but I never saw them issue you a uniform." And I didn't feel as though I was being invited to be part of the team. ...

What was it like being one of the few women in Stanford Law School?

It was unusual, because I'd come from coeducation institutions before, including undergraduate studies in Stanford, and it was strange to enter into a male-dominated institution like that. I think there were about five of us who graduated with my class out of a class of 100, five women. But on the other hand, I found that I made a lot of friends, worked on the Law Review and had a very good time with a lot of colleagues and enjoyed myself.

The stories about your not getting a Supreme Court clerkship opportunity, how did that feel?

Remember, the society was very different then, and I was part of the society, so I understood why there was reluctance. There had never been a woman law clerk on the Supreme Court before. There had never been a woman president of the Stanford Law Review before. So I realized that this was change and that people have trouble adjusting to change. Our society was very different then and was used to having women in very traditional roles. ...

I was very disappointed not to be put up for a Supreme Court clerkship because I really, really was interested in doing that, and I thought it was wrong. But I wasn't outraged, because I could understand what the motives were.

... You had an interview with President Clinton to be attorney general. How did that go?

I did. I had a good interview with him, and I wasn't offered the job. I don't know why. It was his prerogative to decide who he wanted, and he wanted Zoë Baird.

Was it a disappointment?

It was on one level. I remember it happened right before Christmas, and I remember sitting Christmas morning in my living room with my five children, all of whom were fairly mature by then -- they were in their 20s and early 30s -- and the Christmas tree and all the presents and the sunshine flowing into the living room and thinking, "You know, the privacy and the personal life of a private person has something to offer it." So it was not an unmitigated disappointment.

Did the CFTC feel like a consolation prize?

No, I had no feeling that that's what it was. I had really decided, after the attorney general issue, that I would not try to go into the administration in any role, that I was happy in my practice, that I enjoyed it, and that I would serve out the rest of my career in private practice without going into the government.

What did they say to you to get you to do it?

They were very encouraging. I was approached by the administration, and a number of people were very encouraging. And of course it had been the area of my practice for 20-some-odd years, so it had that kind of appeal. It also was appealing to think about being in an institution that, unlike a law firm, was a hierarchical institution where, as chair, I would have administrative responsibilities and other responsibilities you just don't see as a lawyer in private practice. ...

The famous Alan Greenspan lunch, did it actually happen?

I'm not going to talk about it. I'm not going to talk about it on camera.