i'm flying this weekend for yet another international meeting on monday and tuesday on these matters. so we've got to get it right with the transparency to protect the public here. and there's been good progress internationally, as well. over here and then we'll go to the front table. >> john bookman with e-trade financial and a member of the adjunct faculty. we heard earlier this morning that in the context of legislation drafting that sometimes mistakes can be made if actions are taken -- >> not in title 7. >> no, no, that's not where i'm going. if actions are taken too quickly, and i would say perhaps the latest example of that would have been possibly the mmf global situation where money was

being traded from accounts that contained both mmf global funds and customer moneys. and so do you see to try to prevent something like this from happening again, that you should have a complete segregation of client funds and firm funds? and if not, how do you prevent another mmf global from happening again? >> let me just say i'm not participating in that matter because it's an ongoing investigation that i'm not participating in. but in terms of the overall question that you're asking, congress really, with a focus on the crisis, gave us one year to complete the implementing rules of these financial reforms. now it's nearly two years since congress passed the law. so, of course, we're taking our time. i think we're doing it in a balanced way, taking into consideration commenters. we have 28,000 comment letters

and summary like legal briefs. some are 300 page long comment letters. some are one pagers thankfully. we've had 1,300 meetings, and you can go to our website. we've had 16 round tables around the globe and close to 1,000 meetings with other regulators. we're also doing this with an eye towards the need, the american public needs this reform. with regard to seg gagsregatios that's a core foundation of the futures and swaps world. we tightened up, rightfully tightened up in december, where customer funds can be invested. it's something i felt we needed to do. we proposed it in 2010 and some people said slow down, and i'm very proud of the staff that

recommended it and the commissioners that supported it throughout. and we finalized that in december. we've enhanced the clearinghouses by something called gross margining. we in january finalized rules for the clearinghouse segregation of funds in the swaps marketplace, which was a historic move where there's going to be legal segregation down to the clearinghouse that didn't exist earlier. and yet to exist in the futures market place. so we've made some very good progress, but we also just completed two full days of public round tables to hear from the public what else can we do, and to the extent a consensus forms we'll seek public comment on further reforms. up here and then back in the corner. >> there's some concern that the big bank dealers who have historically dominated the over the counter market are going to

try to dominate some of these new central counterparties and other clearing facilities. is the cftc and sister agent sis, what are they doing to stop that domination from occurring? >> a number of things. these swaps markets have been rather concentrated around something called the g-14. you might have thought it was countries, but there's a group of 14 dealers around the globe. and there's a lot of things to create a more access to the market, democratization of markets. when you bring access to markets and transparency you get greater competition. it's why there's been pushback. there are a lot of comments opposed to this, they're being rational actors. you shift the information advantage to the public by shining a light on a market.

you provide equal access. actually the statute says it has to be open access to clearinghouses, and access to the trading platforms. so we finalized rules last october on the open access to the clearinghouses. significantly took down some of the barriers and there were, frankly, some -- they sort of were put there in place at one time for risk management purposes. but upon further reflection, probably not needed in the same way. we're looking at some rules in about a month on a very technical area called client clearing documentation. and it is a very important rule for access. and it seems like the comment letters were 5 or 6 to 1 to do it. but you can imagine the 1 out of 5 or 6 on the other side were the -- frankly from some of the

dealers, because these client clearing documentation rules are so critical for access to the market. so those are some of the things we're doing. back in the corner. >> my name is andrea. i am a financial sector analyst and i'm a member of the new york society of security analysts and i serve on the shareholder rights committee and the socially responsible investing committee and the committee for improved corporate reporting. >> congratulations for all that. >> they cut me slack when i wasn't working, so they let me do these other things. so my concern, however, is related to the power of bank management to in effect proliferate the contracts so they've inplated their balance sheets with these contracts and their capability in effect of this proliferation of contracting, which the boards utterly failed themselves to

rein in, so i'm curious what power you would have or the commission has to be able to service some restraint from management, especially from the banks, because they're pretty abusive. profit an by.n able to get away where can you step in and clean up this mess? >> there's some of that that you addressed that is addressed in a rule we finalized last week. and others are really around what the securities and exchange commission does with generally accepted accounting principles. but that which we've done is financial reform said we should put in place about risk management, recordkeeping

reporting and firewalls. so we completed these rules last week about the internal risk management of the desk, which includes, of course, the risk management of the usual things you would hope it would include. interest rate risk and liquidity risk, et cetera. but it also includes supervision. very key rules of the road about responsibilities to supervise the desks and so forth or sof policies and procedures in place for that. and firewalls between the trading side and the clearing side and firewalls, as i mentioned, with research. but the second piece that you're talking about relates much more to the securities and exchange commission authority and ultimately the folks in connecticut that set the accounting standards. they're still in connecticut, right? yeah. and i guess even the public -- the pcob that you heard from steve harris that was here

earlier, because a lot of what you're talking at is also accounting. but what we were able to do is say you've got to have supervision and things have to be brought up. the second thing i would say is, transparency in markets, the more that's on a transactional basis reported to the public makes it a wonderful thing for the accountants when they're trying to see what are the values of things on the books. because everybody benefits by the discipline of seeing where the last transaction occurred. so you take a very dark market, and you move it to something like the corporate bond market where you have to report each transaction. that changes a lot of the ability to manage the valuations. >> warren buffett only had 300 of these instruments. i don't know what the notional of that is.

and grant it, he's a much more cautious investor so to speak, but he called them in effect financial weapons of mass destruction, because there was no regulation, and banks just to be able to abusively contract, but are you saying that you think that this could serve to restrain some of this proliferation? >> i think the transparency is a critical piece of risk management, as well. the transparency of markets shines a light inside a company on the value of the transactions that you're booking, either that day or last year. so that's a critical piece of this transparency helps the end users and in the risk management of these institutions. i had a lively discussion with mr. buffet last year when he called in to tell us to keep doing what we're doing. so that was encouraging.

>> you mentioned the aspiration that 90% of the contracts will be cleared on clearinghouses. >> 90% -- this is based on bank of international sentiment statistics. approximately 90% of the net notional amount -- >> net notional -- >> is between financial entities. so about a third of the markets between dealers to dealers. 55% is between the dealers and financials and 9%, 10% is what we call end users. not all of that 90% will come to clearing because some of it won't be standard enough. >> this is the derivative exemption. some people have expressed a concern that's the loophole that could swallow the n is, what sto you think the cftc will take ultimately to get to that 90% goal? >> again, it will be less than 90%, because there's a part of the government that's

legitimately customized. but whatever portion of those 90 points can come to clearing, can be standardized, will have to go through a period of public comment, as well. i would envision that this determination of what's called the clearing mandate, or what is clearable or standard enough, our hope is that that will begin some time in t the clearinghouses just in the last two weeks have given their first draft submissions to us, the large clearinghouses. so we're starting to walk through those submissions. the interest rate swap market right now, there's a clearinghouse out of london that clears i think it's a quarter of a $250 trillion of dealer-to-dealer swaps. the emergency swap markets, the two u.s. clearinghouses and a london clearinghouse, between the three of them, clear the vast large significant sums in

that market place. credit to default swap market, a quarter to half is already cleared all voluntarily. but it gives you evidence how clearable this marketplace is. >> i'll go here and then there and there. >> can you explain under -- >> can you give me your name? >> jeff with iv capital. how are you? can you explain the cost benefit analysis regarding the implementation of dodd-frank? in other words, under section 15-a of the commodities futures act, companies are refusing to supply the ft at times information. in other words, how is the cftc supposed to let alone implement and weigh a cost benefit analysis as required by

dodd-frank? >> just to say a little bit more on this, under the commodities and exchange act, not dodd-frank, we're required to consider cost benefits. it's not analysis, just to give you a little of the technical side. but all this matters when people take these things to court. and they will. that's part of our democracy. we as commissioners are to consider the cost and benefits along these five factors in this section 15-a of the commodities and exchange act, and we do so. when we go out into the proposal stage, we ask a lot of questions and try to seek public input on the qualitative and quantitative aspects of it. but often we don't get a lot of input, because of that because t

to give away their information. part of it might be that they don't know yet. this is a very new regime. but what we do is we go through the comments, we go through our economic analysis, economists, and his office is involved and each one has to sign off on each one of these, the policy folks and the lawyers have to sign off, as well. and the five commissioners weigh in. i think that we're doing exactly what the commodities and exchange act tells us to do, is to weigh it, to consider it, and to seek public comment on it. >> david warden. do you have a view on the best way to fund the commission? should it be funded with assessments unregulated industry? and if so, are you worried that that might tie the agencies'

interests too closely with that of the industry? >> david's question is how best to fund the agency. number two, would it be good to do it with some fee, and three, would it tie us too close to the industry. i think it's critical to be funded. i look forward to working with congress any way congress wants to. i mean, to be only a 700 person agency, and we have very significant challenges as americans with the budget situation. so to go to congress and ask for a 50% increase in the size of the agency, from a $200 million agency to a $308 million agency, i do that with deep respect for what the congress and president has to do, but i think it's a very good investment for the american public. t.a.r.p. was $700 billion.

i'm not going to say a well regulated swaps market was all that was needed to avert t.a.r.p., but it's like buying insurance to have a well funded cftc. and any way congress wants to do it. both republican and democratic presidents suggested to congresses controlled by all parties to consider a fee, if that's what our overnight committees and the appropriators wanted to work on. i stand ready to work with any way that we can get funding. if that's not the way, i would just keep advocating with congress for the funds that are appropriate for this very expanded mission. >> nice to see you. chairman bernanke said before house and senate financial committees that it won't be

ready by july 21 when it is to be enforced. in his words, they obviously, his words, won't enforce it if there's no rule. your views? what's your forecast? the trading account was the home of some of the most problematic financial positions. some of which are purview. when you expect to begin enforcing the volcker rule? >> it's a collaborative effort between six regulators and the department of treasury. we published a rule for comment a little after the others, because we had capacity issues. just moving through all the matters congress has asked us to do. so we just published ours in the last week or two. and our comment period closes april 16. so any of you want to comment, we look forward to that comment

on how to best protect the public through this means. and i would assume that we would work with the other five regulators and, again, in a balanced way to complete what congress laid out. and the challenge is as well known. it's to prohibit proprietary trading and that's to protect the taxpayers. that banking entities that have some support from the federal deposit insurance corporation, in essence in some form of safety from thean the fdic, pro proprietary trading but permit eight or nine other activities including market making. so it's how to deal with prohibiting proprietary trading, permitting market making, and not having one swallow up the other in the final rule. and i think that's the core

challenge that 17,000 comment letters have already come in to the bank regulators. was there one other just to wrap? >> you're welcome to stay as long as you want to. >> i'll take one last one. it's a friday. i might be standing between you and a golf course or something. >> you're right on time. thank you very much for those remarks. [ applause ] i was right, the country is in good hands to have you as the chairman of the cftc and we were delighted to have you here at the george washington university law school. as a token of our appreciation -- >> sit worth less than $20? >> it's a cheap clock and a coffey mug. you're welcome to come back any time. thank you very much. [ applause ]

>> i'm taking the mug. anybody want a clock? >> we got the mug here. nip want a clock? looks like under $20. >> there we go. i'll take this. you never know what the clock costs. no, that's over $20. >> all right. we'll auction off the clock after lunch. thank you very much. [ applause ] thank you very much. >> and now more from this event hosted by george washington university law school. fdic acting chairman talked about new regulations contained in the 2012 financial regulations law and the role of community banks in enforcing regulations. this is 40 minutes.

>> i would like to welcome everybody back for the afternoon program, please. we hope you enjoyed a good lunch. we've had a very interesting morning. we're delighted now to have the privilege and honor of hearing from chairman martin gruenberg. he has a number of distinctions. he worked very actively on the senate banking committee for a number of years. served under senator paul sarbaines and professor goldschmidt was certainly involved. obviously steve harris also

we've heard from this morning. so we have a number of folks with us this morning that are veterans of that effort and can give us perspective on that statute. the chairman served on the senate banking committee, i believe i'm right in saying from 1987 until 2005. previously, he had received his law degree from case western reserve and his undergraduate degree from princeton. he became vice chairman of the federal deposit insurance corporation in august of 2005. and then became acting chairman when chairman powell stepped down and more recently became acting chairman when chairman sheila baira stepped down last july. so he certainly is a person who

has had broad experience in the legislative branch. obviously for the last several years has been deeply involved in the regulatory policy arena. the fdic has been at the center of efforts to contain the financial crisis. certainly very much at the center of legislative drafting efforts with the dodd-frank act. certainly that's picked up some major new systemic risk responsibilities under dodd-frank. so we're delighted to welcome the chairman to speak to us today. i suspect he'll be telling us something about the fdic's new responsibilities under dodd-frank and how those are being implemented. he's kindly agreed to take a few questions after his prepared remarks. please join me in welcoming chairman gruenberg. [ applause ]

>> all right. thank you very much for that kind introduction. art's an old friend. he served as a valued adviser to us on any number of bills that we considered on the senate banking committee while i was there. this is a bit of an old home week. i know steve harris was here earlier. gary just left. professor goldschmidt is here, all of whom played really central roles in the formulation of sarbaines-zoxly. you made reference to sheila baird who i think was really an outstanding leader of the fdic. sheila told me two things before she left. she said, one, being chairman of the fdic is a very tough job. and i can now vouch for that. so she was right on that point.

the second thing she told me was, everything will be okay. that she wasn't quite as right. >> she didn't tell you about europe? >> and some other things, as well. but if nothing else, it's been an interesting and challenging experience, and i think the role of the fdic during the course of this financial crisis really has been a very important one. and i think if i may say, i think history will look back upon the performance of the fdic over these past three or four years and i think the performance will hold up pretty well. two things that i really wanted to talk with you about this afternoon. i want to take just a moment to talk about the condition of the banking industry. just earlier this week on tuesday, the fdic released its

quarterly banking profile, so i wanted to share some of the results of that with you. and i'll spend the remainder of the time talking about the big new responsibility that the fdic has under the dodd-frank act, which is the responsibility for the resolution of systemically important financial institutions. that is really one of the key new authorities as provided under the dodd-frank legislation. and i believe is a -- is crucial if we're to deal with the issues of systemic risk and too big to fail. and under the legislation, the fdic really has the core responsibility for carrying out that very, very challenging responsibility. but if i may, let me start for a minute on the condition of the banking industry.

2011 represented the second full year of improving performance by the banking system. the latest data, as i indicated, we released it earlier this week in our quarterly banking profile, indicate that banks have continued to make steady progress in recovering from the financial market turmoil and severe recession that up folded from 2007 through 2009. during the past two years, the barnging industry has undergone a difficult process of balance sheet strengthening, capital has been increased, asset quality has improved, and banks have bolstered their liquidity. i think it's fair to say that the industry today is in a much better position to support the economy through expanded lending. however, levels of troubled assets and problem banks are

still high. and while the economy is showing signs of improvement, downside risks clearly remain a concern. the fdic data does show a continuation during the fourth quarter of last year of a trend in overall improvement in the condition of insured institutions. industry earnings have grown over the past eight consecutive quarters. the percent of noncurrent loans on the books of fdic insured institutions has declined for seven consecutive quarters, reflecting improved credit quality. the number of institutions on the problem bank list declined for the third consecutive quarter. that was after five consecutive years of increases on the problem bank list. the deposit insurance fund, which had been as much as $20 billion in the red, moved into positive