In the 1990′s, Brooksley Born, who chaired the Commodity Futures Trading Commission at the time, tried to warn federal bank regulators, including Federal Reserve Chairman Alan Greenspan, about the dangers of over-the-counter derivatives. To put it mildly, her alarm-sounding did not go over well:

Born’s proposal stirred an almost visceral response from other regulators in the Clinton administration, as well as members of Congress and lobbyists. The economy was sailing along, and the growth of derivatives was considered a sign of American innovation and a symbol of the virtues of deregulation. The instruments were also a growing cash cow for the Wall Street firms that peddled them to eager takers. Ultimately, Greenspan and the other regulators foiled Born’s efforts, and Congress took the extraordinary step of enacting legislation that prohibited her agency from taking any action.

Of course, as we now know, the huge, opaque derivatives market helped to unleash a financial cataclysm, particularly by imploding the insurance giant AIG. “No federal or state public official had any idea what was going on in those markets, so enormous leverage was permitted, enormous borrowing,” Born said. “There was also little or no capital being put up as collateral for the transactions.”

Since Born saw the problems with the derivatives market where so many others didn’t, it’s significant that she has lent her support to the financial regulatory reform package that passed the House this week and is due for a vote in the Senate when the July 4th recess ends. “[The bill] is an important step forward in regulating the over-the counter derivatives market and I very much hope it is enacted into law,” Born said.

Despite the unfortunate watering down of the provision forcing banks to spin their derivatives trading desks into separately capitalized entities, the derivatives title of the Dodd-Frank financial reform bill is quite strong. It places standardized derivatives trades onto public exchanges (like the stock exchange) and forces customized trades to be cleared by clearinghouses (avoiding an AIG-type situation where one party to a trade has insufficient capital on hand to back it up). This is getting lost in the drama surrounding Sen. Scott Brown’s (R-MA) hemming and hawing over the bill, but it’s an important set of reforms that needs to become law.

Today, the Bureau of Labor Statistics released its latest jobs report, and the data is disappointing for those hoping that May’s weak job report was not going to recur and that we’d go back to seeing numbers like those in April. Alas, it’s seeming more likely that April was the anomaly, as in June private sector payrolls grew by just 83,000 and total payrolls dropped by 125,000, due to 225,000 temporary Census jobs coming to an end.

Due to discouraged workers leaving the workforce, the unemployment rate actually fell to 9.5 percent. The wider U-6 measure of underemployment also held fairly steady, falling from 16.6 to 16.5. There are 14.6 million persons who are unemployed, and 45 percent of them have been out of work for at least six months. As Calculated Risk pointed out, “employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early ’80s recession with a peak of 10.8 percent was worse)”:

All of these numbers — paired with the Federal Reserve’s latest economic report, which stated that “financial conditions have become less supportive of economic growth on balance” — scream for more job creation steps to be taken. But due to a Republican filibuster — joined repeatedly by Sen. Ben Nelson (D-NE) — the Senate couldn’t even extend unemployment benefits, much less take important steps like providing aid to states or boosting small business lending, before departing for its July 4th recess.

To get a sense of how far we have to go to get out of the current jobs rut, consider that “if we added 218,000 private-sector jobs each month from now on—the highest monthly payroll increase seen so far this year in the private sector—it would still take almost five years to fill the hole.” But will Republicans (and Ben Nelson!) let any serious steps be taken to get us there, or are they content to muddle through the unemployment crisis? Will they continue to filibuster everything in sight, while espousing the same supply-side economic theory that led to a business cycle with “the weakest jobs and income growth in the post-war period”?