cnn chief national correspondent john cain on the way technology has changed cnn, and cox business senior vice president to fill needs and the small business focus on other communicator's tonight at:00 on c-span2. tomorrow attorney-general eric holder testifies before the senate judiciary committee on his recent decision to appoint u.s. attorney's to review

several information. earlier today the house oversight committee scheduled a hearing to consider a citation against mr. holder. this news comes as part of an investigation into operation fast and furious where the government knowingly allowed weapons to be smuggled across the border with mexico. mr. holder is expected to testify on both those issues live tuesday at 10:00 a.m. eastern on c-span2. >> puts a prize-winning author david maraniss travel the globe to research his new book, barack obama, the story, as in places like kenya and kansas to examine the president's family tree. book tv would give you a preview with pieces of pictures and video, including our trip to kenya with the author in january january 2010. join us sunday at 6:00 p.m. eastern and later at 730 the same night telephone calls, e-mails, and tweets on c-span2 book tv. >> next, a discussion about the

role of the securities and exchange commission and the u.s. financial system. from washington journal, this is 40 minutes. >> and starting today we will have a regular segment this week on the financial agencies involved in regulation and enforcement of the rule's impact in the u.s. financial systems. some are we will have commodity futures trading commission and will talk up the commodity futures trading commission with the chairman. on wednesday we will look at the treasury department with mary miller, undersecretary for domestic finance. on thursday our focus will be on the federal deposit insurance corporation with she lobar, fdic chairman from 2006-11. on friday we will look at the recently formed consumer financial protection bureau with hubert skip humphrey of the office, the older americans. today, we will look at the securities and exchange commission with harvey pitt, a former sec chairman from 2001-3. thank you for joining us.

give us the broad outline of what the fcc's mission is and how it is different from all those other agencies that we just went over there. >> well, the sec mission is fundamentally to protect investors and to promote capitol four nations so that new companies can get started with great new ideas and employed people and help boost our economy. the distinctions between the sec and the other agencies you mentioned are, first, that the cftc, for example, is largely devoted to commodity regulation, whereas the sec is devoted to securities regulation. however, the distinction between the two is blurring and has been for the last 30 years. the difference between the sec and some of the banking agencies you mentioned is that the sec

has jurisdiction over bank holding companies in terms of disclosure, in terms of their relationships with shareholders, but it does not regulate the act of banking. that is done by the banking regulators. and so that is the distinction and, indeed, those distinctions are part of the problem the we have had with our regulaty system. when you have so many different agencies to all working on things that coalesce and converge, sometimes it is hard for the left hand to know what the right hand is doing. >> have there been calls to merge a lot of these different agencies? >> there have, but it is a virtual impossibility. congress has been very reluctant to give up its jurisdiction over the specific agencies, and so

there is little likelihood in the senate that you could merge the agencies. >> well, if you have questions about the sec, how it works, what to investigate, give us a call. the republican line is (202)737-0002. (202)737-0001. independent (202)638-0205. give people a sense of the size of the sec. the staff is about 3500 people according to their website. some of the security exchange groups that they oversee are about 11,700 investment advisers , 4,500 broker-dealers, 450 transfer agents, nine national recognized statistical rating organizations, eight active clearing agencies, and reviews more than 9,100

reporting companies. but, take us back to 1934 and the beginning of the sec and what it was originally intended to do to get to the expansion that we have today. >> our markets for much simpler back then. in essence, the main devices were equities securities and also debt securities. equity securities our interests that give people a chance to share in the profitability of a corporation. it gives them an ownership interest. debt securities are ways for people to lend money to corporations and get a return, not only of the amount that the lens to the companies, but also interest on that. today the world is far more complex and, indeed, the dodd-frank act which was passed two years ago in 2010 basically created jurisdiction over swaps or derivatives and split that

authority between the sec and the cftc. and the market for swaps is over $600 trillion, which is more than the combined equity and debt markets that the sec was originally authorized to regulate. >> well, if you look at the about the section on the sec website of the 19 page report, it makes it clear that the sec first and foremost is an enforcement agency. take us through some of the various enforcement @booktv forssmann mechanisms. what with the sec be knocking on your door for? >> let me say first that i disagree with that characterization, although you are reading correctly. i think the sec is a regulatory agency with enforcement power. i do think that it's website suggests as an enforcement agency with regulatory power. a big difference, but for

purposes of your question, it seems to me, the sec, first, can investigate any allegations or concerns about potential wrongdoing. that gives the sec the ability to subpoena people, compel them to give testimony under oath, and its enforcement staff will then make a judgment as to whether they think the law has been violated. if they think the law has been violated they can then recommend an enforcement action of one type or another to the five commissioners to sit at the head of the agency into are presidential appointees. >> we should note, democrats and republicans no more than three from the same party. is that correct? >> that is correct. the agency is required both to be independent and bipartisan. and the two major forms of

enforcement action that can be brought our and injunctive action, which the sec has to go into court, federal court and asked the court to provide some element of relief against people the sec alleges have engaged in wrongdoing. the alternative is an administrative proceeding, and the sec has broad authority to bring its cases before a so-called administrative law judge. that is also a judge, but someone who sits only to hear sec cases. there is a trial in each case, and individuals who are found to have violated the law can then be subject to sanctions. >> some of those violations include insider trading, what are some other actions that can lead to an sec investigation? >> insider trading is, of course , one that has been quite

prominent in the news. also financial fraud where corporations claimed that they are doing well, but, in fact, are not doing well. there are cases involving giving of this advice to investors or for professionals in the markets , people who don't fall fell to the high responsibilities that the law places on anyone who deals with the public and tries to help them make securities investments >> let's take a few calls on this. bill is on the republican line from seattle, washington. you are on with former chairman pat. >> caller: hello. thank you for your time this morning. i would just like to know, why the private banks and insurance agencies have so much control over the credit defaults swaps

derivatives that are owed to the united states treasury department's. >> guest: i'm not sure i fully understand the question, but to up until the dodd-frank act, credit defaults obligations and credit defaults swaps work essentially a function of private negotiations between parties. one of the things that dodd-frank has insisted upon is that these instruments be standardized, that they be treated over the equivalent of an exchange of some sort. and that they be cleared essentially so that there is greater u.s. control over both the creation of these instruments and the credit that

gets involved with these issues. but i am not sure that fully response to where your question was. >> let's try eric on the democratic line from atlanta, georgia this morning. go ahead, eric. >> caller: hello. i have a comment and the question. my comment is, corporations have a conflict of interest with consumers. and because corporations have a conflict of interest with consumers, they have a conflict of interest of voters because voters are consumers. and because corporations have a conflict with voters who are consumers, corporations should not be allowed to give info through our media. corporate media is the route to all evil. now, my question, were derivatives under the sec umbrella, were they, i should say, regulated?

does that provide a big cloud over the world market, the world economy, the world financial market? how did it get to 600 trillion before anybody decided to mike, we should take a look at this and maybe put some rules and regulations to this river of market. >> caller: let me start by saying that although i understand your point about the potential for conflict, well wind -- well run corporations would you the interests of their consumers to be consistent with their own interest and are wise to promote the interests of consumers and not to treat consumers as if there are people with whom they have adverse and trusts. that is, on, and a side. the important point, i think, in response to your question, is that the sec has authority in

the swaps markets only overt security based swaps. the cftc has authority over all other based swaps, and therefore there is a face lift of jurisdiction, even though the instruments are required to be treated similarly under dodd-frank. but the notion behind dodd-frank was that by regulating these instruments corporations can get the advantage of these derivative instruments which allowed them to hedge risk and allowed them to pursue profitable results and goals while at the same time protecting investors to make sure that we are not going to have another meltdown. it is a separate issue as to

whether the loss exceeded on that cold, and only time will tell, but the fact of the matter is that the whole purpose of dodd-frank, at least in title seven dealing with derivatives was to eliminate any potential conflict of interest and make certain that those who trade in derivative instruments do so for the public interest. >> again, we are talking with the 26 chairman of the united states securities and exchange commission from 2001 and 2003. also, a former sec commissioner from 68 to 78 and now ceo. >> it is a global strategic consulting firm. we help governments and businesses deal with very complicated issues as well as corporations. >> let's go to texas. thomas is on the republican line this morning. your honor of mr. pet. >> good morning.

i have an idea that you can eliminate all these protections, money and rules and regulations by simply making an new standard for the securities exchange commission whereby if you buy one share or 100 million shares of -- shares of any given stock, less talk can never be worth less than what you purchased it at. it can only be more, but never less. what do you think about that? >> well, i think it would be fabulous the people who invested knew that stocks would never go below a certain level, but the way our system operates is that the investment and securities is a risk and the risk is that the corporation that is involved made to well, it may do poorly. the laws are intended to prevent

that risk from being subject to the winds of the people who run the company. no one should be at risk that a public company will be run fraudulently or that people will steal assets from a company or any of the shenanigans we have seen over time. but, with respect to what happens, if companies are badly managed or if their competitors to a better job of taking over a particular portion of the market , that is a risk that investors take and one that has to be well understood the. >> a couple questions on twitter. jenrette cent, should the sec investigate congress for insider trading? >> it is a very difficult question as to whether the sec should investigate congress. congress has passed the so-called stock act. now individuals on the hill who

trade on the basis of material, nonpublic information can be pursued for insider trading and as a result, if anyone takes advantage of his or her position on capitol hill, they could very well be liable for the equivalent of insider trading. >> and when does that go into effect? >> guest: the bill past several months ago, and i believe it is in effect as of now. >> host: what caused the memento? >> guest: for years there have been issues that have been raised about the fact that people on the hill, for example, may know that they are working on a provision of the bill. let's take, for example, hypothetical, the obamacare legislation. they know that certain provisions if adopted by the

committee may well help certain health care providers and therefore those people might go out and trade in the shares of health care providers knowing in what direction congress is winning. it was up by virtue of the possibility that congress should be subject to the same kinds of restraints and the bill passed quite handily by both houses of congress. the president signed into law. >> host: let's go to rule on the democratic plan. >> caller: good morning. i realize i may not get an answer from the gentleman, the question i'm going to ask. the role of not criticizing the people let go after you were never. if you could, said that -- the charges from 2003, how do you

feel that the apartment was doing after you left? especially with the testimony i saw in front of congress where, you know, they guy was basically telling how his company was to weigh stuff that was basically ignored. it does seem like the sec, after he left, did not do their job, asleep at the wheel or were letting things go to benefit certain people. so how do you feel personally that the apartment was run after you left? >> i think that is a very pertinent question, and i have no hesitation in answering it. i think that the sec has made mistakes. i think there have been incidents in the fcc's history which are unfortunate and

reflect problematic behavior, but having worked there, both as a young lawyer, as the agency's general counsel, and then as its chairman, the one thing i know is that the people who work at the sec, as a group, very bright to my very hard-working, very committed to the public interest . that won't prevent them from making mistakes and in some cases serious mistakes. i think the best that the agency can do is acknowledge those mistakes and try to improve. i think under the current chairman, mary schapiro, the sec has made enormous strides to improve things where their performance may have been lacking. but the one concern i have, and it is a continual one, is that very often people like to find a scapegoat for everything that

goes wrong, and there is what i call a fair amount of bashing of the sec, much of which is unfair i think the important thing for people to do is recognize the importance mission the sec has and assist the agency in doing its utmost to fulfil its important mandate. >> host: a short question, but perhaps the longer answer. mr. pitt, do we need dodd-frank? >> guest: we need something. unfortunately i think dodd-frank was not the answer. we had a severe problem with our financial regulatory system. it failed us, and that is why we had the meltdown. dodd-frank was an effort to try and fix all that, but i think it was an inadequate effort. and i'm fond of saying only partially facetiously that god

was able to tell the human race what it needed to do in ten commandments. congress told the financial services industry what to do in 2,313 pages. that ought to give you some sense of why i think the dodd-frank bill did not do what we needed it to do. >> host: let's go to mesquite, texas. cindy and the independent line. >> caller: hello. you know, a lot of people were mad because they did not go after the bank's. and the government bailed out the banks. more or less the banks were pardoned, right? and they have ever replace the regulators that were supposed to regulate and make sure something like this to not happen? >> guest: i'm sorry, i missed. >> host: replace the

regulators to allow the financial crisis in the first place? >> guest: first, let me say many of the people who were in office at the time of the crisis are no longer there. we have a lot of different people in place. some of the people are not only still in place, but in more important positions than they were at the time of the crisis. so the short answer is, not everyone has been replaced. the problem in my view was that the system was not functioning properly. then you had on top of that, regulators here did not react well and did not protect the public interest. i think it is a mistake to think

that any of the people who are in office actually caused the problems, but i do think that they could have been more useful in solving those problems. unfortunately for all of us they did not do so. >> host: let's go to james and the independent line from woodhaven, mich. you are on. >> caller: good morning. thank you for taking my call. i was wondering, being that the federal reserve is our major get older, we owe them more than china, why is it that there is no oversight and we have no idea what they do? is there anything, maybe, we could do about that? >> guest: that is a very interesting question. much of what the fed does is in connection with monetary policy. monetary policy, by definition, needs to be confidential until sometime after decisions are made so that the efforts of the fed are not compromised by

people trying to take economic advantage of their decisions, not withstanding that i think your point is a very valid one. we need a great deal more transparency for all financial regulators, and figuring out what the policies are, how the agencies are trying to a compliment them and what the potential risks as well as the benefits of those policies are, things that need to be disclosed. and disclosed in a way that all of us, you and me, can understand as opposed to legalese and the like. i think their is a lot of room for more transparency in financial regulation. >> host: i want to point of the securities and exchange commission that your request in 2013, but 18 and a half% on that 2012 request. 2012 was about $1 billion, what

they were eventually funded for in 2013, the request is one-and-a-half billion dollars. is it enough? do you think they deserve and 18 and a half% increase? >> i think their is a need for more money. it is not enough. and one of the things that amazes me is when i took over in 2001 at the sec our budget was about $300 million. that was at the time thought to be an earth shattering amount of money. a problem you have is that one of the things that dodd-frank did his it increased the sec obligation and responsibility exponentially. as a result, the sec needs more expertise, it needs more tools at its disposal. the way to solve the problem, however, is not by strictly speaking, increasing the budget

of the sec but rather, giving the sec the ability that many bank regulators have to find its own operations by charging the people who benefit from its regulation so that a, in effect, the taxpayer does not wind up paying for this regulation. >> host: do you remember what the budget was at the time you left the sec? there is a very big law passed, sarbanes oxley in 2002, that you had to start incorporating. >> guest: yes. and we more than doubled the budget. it was well ensued, i think, about $700 million. i'm doing this strictly from memory, so i could be wrong. there is no question that the budget increased dramatically. the problem is that no regulator is ever going to think that he or she has enough money. therefore, the question becomes,

how do you make sure that the agency gets all the funding it needs but avoids, particularly in difficult economic times, putting the burden on the u.s. taxpayer, and that is why coming out with self funding for the sec is a better way to approach these budget issues. >> host: oakland, california. ban on the democratic line. you're on the washington journal. >> caller: good morning. i had a question. they created market, the $600 trillion, how much of it is still going to be unregulated, per say, because of one derivative created and comes at private. how can the sec or anybody keep up with them? the provisions, you know, the law that gives the sec some kind of leeway in discovering what is

going on privately. >> guest: eight is very difficult for any financial regulator to keep up with new product, new services, developments, and the financial markets. you have very bright and creative people who have the profit -- the proper motivation behind them and in effect are providing an impetus to come up with new ways to make money. four of financial regulator, the problem is to stay abreast of all of these developments. one way to do that is by hiring people with far greater expertise than the sec has had in the past, and that is one of the things that the sec and the chairman are definitely trying to do, bring in people who have actually been on the firing line in the private sector and who to put it in the vernacular know

where the bodies buried. that is the kind of talent that the sec is now recruiting and that it clearly needs in order to do the kinds of jobs congress has imposed upon it. >> host: let's go to harry on the republican line. go ahead. >> caller: my first job out of law school in 1970 was with the wall street law firm whose clients, among others, was the new york stock exchange. and back then self regulation was under challenge because of breakdowns in the back offices of member firms, that was before there was a lot of technology. and we had a task force. it was a fairly boring job, as you can imagine, trying to get through the records. self regulation came under challenge by the sec. and it was in jeopardy. but what was born out of that was said extra security investor

protection corporation. my second job was as to be commissioner for the state of wisconsin, securities. pat lucy was governor. and they hired me. here is my question, though. this is best for to more recent times. i submitted an article to barron's in september of 2010 in which i had -- i hired an independent ph.d. in finance to figure my returns over three years from august 1st of 7 through july 301st of 10, during that very rough time. >> host: give us the question. >> caller: the question is, i challenged in the article, any a registered investment adviser in america to come up with one auditor id result per client that beat my performance which, by the way, i have 49% return.

and the person who figured my returns to the hypothetical using diversification fiduciary plus three that portfolio would have lost about 2%. they refuse to published article . >> host: giving us an insight into his own portfolio. we will go up to texas. pete is on the independent line waiting to talk. go ahead. >> my question deals with the fine. i remember the housing meltdown in the story i read. i believe it was 2007. the dow 140 million in profit. then the fines that the sec were able to levy against him were in the $60 million range, and those

were paid by bank of america or whoever took cover countrywide. he did not have to admit any wrongdoing. this seems like a joke. trying to create financially. i would tell them there are crooks. china has something right when their executives hurt the people they do executions. is there any way the sec might be able to get to that point? >> well, let me just say, the whole question of sec fines has come under scrutiny, a very bright and thoughtful judge, federal judge in new york, judge j. did great has questioned some of the sec settlements. those issues are now under review and in an appellate court. but with respect to your

question, one thing that i think becomes very important is to understand that when a corporation pays a fine, that money comes out of usually the corporations coffers, its treasury, and that treasury espy the possession of all the shareholders. so one of the things that has to be balanced is recounting one class of investors through the funds that are now being held by another glass of investors. so this becomes a more complex question, and that is one of the reasons why the issue, i think, is now under new your view. >> let's go to houston, texas on the republican line this morning. go ahead. >> yes.

good morning. i am an ex compliance officer when they moved glass stiegel and allow banks to get into the broker-dealer business. one of the other concerns we had at the time was interest-rate swaps because they did not have any accounting rules on the dance decent bastide. so they used to put those dollar amounts on balance sheets which have the effect of bank holding companies captive. now, one of the things that i have always been confused about is, you're investing in liabilities. so is that liability an asset or does it remain a liability? the other point i want to make is that banks are not regulated by the sec. they're regulated by the occ who has no concept of the securities or the interest-rate swap and are in a conflict of interest on interest rate swaps and the commercial side. that is why i love all street and banking because of this

nonsense. >> well, let me just say, i think your comments really highlights a very important points. that is, that the agencies of government need to work together and share information. one of the original proposals before dodd-frank took the form that it to take was that all of the financial regulators would be merged into a single body of sorts so that the left hand of government would know what the right hand of government was doing. that was not politically feasible. and so we have kept effectively this bifurcated system that we have in place where people are regulated based on what they were born as as opposed to being regulated by what they're

currently doing, and that is why it died frank needed to be revised. >> host: let's go to waynesboro, georgia. leases out and on the democratic line. thank you for calling in. >> caller: yes. >> host: go ahead. >> caller: okay. my question is, why a person that has less than two months out of 58 years get more security than a person who has worked over half of a lifetime? >> host: what do you mean? rear taqueria the federal finance substitutions. when you say more security, what do you mean? >> caller: security. >> host: that is not something we're talking about today. we're talking about the sec. do you have a question about the federal financial system? >> caller: okay. i'm sorry. i got the wrong show, then. >> host: you have the ratio, but another subject. we will go out said new mexico.

don is on the independent round. >> caller: good morning. good morning. during the financial meltdown was tree was described as a casino. and one of the aspects of that casino i see as high-frequency trades. so, my question to you this morning regarding high-frequency trade is, should they be regulated and should there be a transaction fee for these trades to make because it seems to me, when two-thirds of all the trades on wall street are high-frequency trades, the average investor has no hope whatsoever of making any money. >> guest: let me say this. first of all, high-frequency trading does raise some significant issues. the sec has adopted and, in fact quite recently, and number of rules to try to prevent some of

the dislocations that we have seen occur on may 6th of 2010 the stock market dropped 1,000 points precipitously. it recover that amount, but it caused a great deal of confusion and chaos. so the sec has been hard at work at coming up with new rules and knew proposals. many of them are just now taking effect. so the first part of your question, should there be regulations, the answer is clearly yes. second, should there be transaction fees? there are. and whether or not there should be higher fees for people who engaged in in and out trading is, i think, a very interesting point. i think the government in whatever ways it can, without preventing people from trading in any way that they want to,

should encourage people to be long-term investors and therefore higher transaction fees may well be a solution to some of those problems. >> host: the last minute we have here on the washington journal today, a lot of changes at the sec in the last decade or so. are you optimistic about the future of the sec, its stability? >> guest: i am. i think the sec has made great strides, particularly under its current leaders. i am quite optimistic, as long as we can keep the bashing to a minimum. >> host: and former securities and exchange commissioner from 2001-2003. thank you so much for joining us speak to my pleasure. >> on washington journal tomorrow morning, our guests include national review's senior editor. he will look at politics and the economy, and next week's house committee vote on what if a whole attorney-general eric holder in contempt of congress.

discussing the book are divided political heart, the battle for the american ideal in an age of discontent. the chairman of the commodity futures trading commission will take your questions about the role of his agency. washington journal is live on c-span every day at 7:00 a.m. eastern. >> tonight to c-span president john skipper on the networks expression to a different media platforms. cnn's steve national correspondent dan king and the waste technology as chains cnn and fox business the vice-president and the small business focus on the communicator's tonight at it:00 on c-span2. tomorrow, attorney-general eric holder testifies before the senate judiciary committee on his recent decision to appoint u.s. attorneys to investigate leaks of classified information about u.s. trust rights and cyber attacks. earlier today the house oversight committee scheduled a hearing to consider a contempt citation against mr. holder.

this move comes as part of an investigation into operation fast and furious, where the government knowingly allowed weapons to be smuggled across the border with mexico. mr. holder is expected to testify on both issues live tuesday at 10:00 a.m. eastern on c-span. >> pulitzer prize-winning author david maraniss traveled the globe to research his new book, barack obama the story, as in places like canyon and kansas to examine the president's family tree. book tv would give you a preview of the system pictures and video, including a trip to kenya with the author in january 2010. join us sunday at 6:00 p.m. eastern and later at 730 that same night, phone calls, e-mails, and treats for david maraniss on c-span2 book tv. >> next, a look at what republicans and democrats in congress are doing to prepare for the supreme court decision on the health care law expected this month. this is from washington journal.

>> host: i want to take you to one of those headlines from this morning, the supreme court is weighing in on whether parts or all of the health care law will be overturned. it is announcing its decision siege monday in june, and the opinions could come out as early as this morning. we are joined now by gail new hauser of roll-call to talk about this decision. thank you for joining us today. what side feels like it has more on the line politically with this health care decision that is going to be announced? >> guest: well, certainly barack obama probably has the most on the line politically. what's his name, or lease that is how has been branded. if it is struck down even partially it would be a huge blow to the president. >> host: and it may not come out today. is that correct? they are announcing their decision each monday of june?

>> guest: there is really no telling. some people think today. other people have said, you know, more likely next week of the week after, but certainly this month. >> host: and are members of congress drafting legislation or talking about what they're going to do after this decision does come out, whenever it does? >> guest: yes. yes. both sides are sort of talking about it. republicans more so. here is what is clear, there is not going to be any comprehensive legislation to replace health care. democrats went wrong, the american people don't want a big health care bill. democrats basically say to you know, why rush. there is no reason to rush to replace this one when they should probably wait and see if it indeed is struck down. also, they don't have the votes in the past -- votes in the house to pass.

but republicans are saying that if it struck down partially or fully there will put on the house floor and a full repeal measure and start voting of some of the more popular elements, stand-alone bills, piecemeal approach, taking some of the things. [inaudible] health insurance, covering pre-existing conditions, things like that that have proven really popular out there in the electorate. >> guest: tebow. >> host: before we let you go, what is the white house doing? of a stay mostly silent are bracing for an impact? >> in the statements, most democrats at the executive level have said that this thing is going to be upheld. there have been some press reports saying that obama is te