choices, and people got themselves way overextended and way overlevered and many millions of americans are still paying the price of that. what we need and what we now have is someone who will make sure that disclosure is clear, that people understand the basic choices that are available to them and that they will not be taken advantage of out in the marketplace in ways that are bad for them, but also as we've just now experienced horrible for the system overall. >> peter, i built and ran a brokerage firm. i know the industry. i know that the industry feels they're better off in a well-regulated environment with a strong s.e.c. and a strong cftc. the efforts to emasculate those institutions do grievous harm to our markets. and if there is not trust in our markets, there won't be jobs. it's as simple as that. >> i'm not sure we're going to get total agreement on this issue, so let me raise another one. and i'm not sure we'll get

agreement on this one either. five banks held $8.5 trillion in assets at the end of 2011, equal to 56% of the u.s. economy. arthur levitt, is that a good thing? >> it's beneath err good thing nor a bad thing. there are a lot of other aspects to that. i think that in and of itself is not a bad thing. >> for those people calling for the return of glass-steagall at this point, breaking up the big banks, your message then is what? >> i think that community banks are part of this process. i think that i would feel we had a healthier environment if we had more banks, more investment banks. and i wish we hadn't broken up glass-steaga glass-steagall, frankly. >> neil? >> peter, if you look across the major economies of the world, if you look at, for example, the ocd countries, our banks are smaller by a lot than the banks of -- relative to gdp, relative to the size of our economy, than

any of those countries. we are much less highly concentrated. we have many, many more banks than any other major economy in the world. so i think that's the first point. the second point is, you know, the dodd/frank statute includes a whole range of things that include knew kinds of concentration limits and a set of disincentives for banks to grow bigger and to do riskier things that are about making sure that the regulatory system, which it hasn't been very well in the past, is calibrated toward making sure that if you're bigger and if you're more complicated and if you're doing riskier kinds of activities, you will have to hold more capital, you will have more onerous requirements that apply to you. and this is, of course, a disincentive to growth or at least a way to make sure that people who do do those things have appropriate protections in place to seiche guard the broader financial system and the broader economy. >> they've got to be coordinated internationally or it won't

work. we can't have regulatory arbitrage. we have to work with other dome sils in a globalized market. >> you want to weigh in here? >> this may be a point we do agree on, as far as whether they're good or bad, the fact they're all as large as they are. where we disagree is where we're going because of dodd/frank, because of the 2,300-page bill, dodd/frank and the burdensome regulations it is imposing not necessarily on the big guys, the smaller guy, the community banks, the regional banks. we've had panels come and testify and say i cannot afford to put another loan officer on or commercial loan officer on, i have to hire a regulator -- i mean someone to deal with compliance instead. what does that mean? we're going to have more consolidation, more of these small banks being put out of business and more money and more consolidation in the larger banks not because of the market effect at all, which it should be directed by, but rather because of regulatory impact. >> my colleague, mike riley, has some questions from the audience.

>> we do have some questions from the audience out there. this is directed to all three gentlemen. do you see money market mutual funds posing systemic risk to the financial system? >> arthur, want to tack that will first? >> yes. i do. i believe that the abortive effort of the s.e.c. to have the money markets mark to the market is a real danger point for the future of the economy. i am very sorry that regulation is unlikely to see the light of day. >> secretary? >> yeah. i think the s.e.c. made important improvements with respect to money market mutual funds last year, the collateral they hold, the kind of liquidity they're require today maintain. we think there is more room there and we worry that runs on money market mutual funds in a stress circumstance could be the start of something that's very dangerous, and we think it's prudent to start to look for

safer ways to make sure that those are not a source of a stress and contagion for our financial system. >> very briefly, i agree with the first part. i think the secretary -- the commissioner has done a great job as far as the initial regulations they've laid out there for them, and i think we need to give that appropriate time to see what the impact and effect of that would be and a cost-benefit analysis to be done before going further on this. >> my time is up. maybe we'll sneak one last question in? >> one last question. we'll move quickly on this. how would you evaluate how well mary s mary schapiro has done as chairman of s.e.c.? this is to chairman levitt, but i'm sure any of you can chime in. >> i think she's done a fine job under very, very difficult circumstances. she's not had the support of those parts of government that should support her. she's had constant harassment from appropriators, from congressional overseers.

>> let's hear from the administration. >> she's done an outstanding job by any account under very, very difficult circumstances. >> oversight over the s.e.c.? >> and i think she's done an admirable job, as you said, in a difficult time that she came into the position. and i think she attempts to be responsive to the demands of congress. but -- and i think she also understands that that is the role of congress, is of oversight and it's appropriate that we have her before congress. i think we heard 42 or 43 times already. but that's the role of oversight and that's -- >> i don't think any chairman of the s.e.c. has ever faced the problems and the issues, the harassment, the bedevilment that mary schapiro has faced. >> it's congress performing its elected -- constitutional responsibility. >> and on that note, i want to thank the three of you very much for a lively conversation here.

very much appreciate it, congressman joining us. secretary wolin and arthur levitt as well. thank you so much. >> and as they are descending, let me introduce the next panel. my colleague, susan goldberg, the executive editor here in washington of the local, state, and federal government will be the moderator. we have steve case, who needs no introduction, the chairman and ceo of revolution now, the co-founder of america online. we have carly fiorina, who is the chair now of carly fiorina enterprises and the vice chairman of the national republican senatorial committee. and we have edmund s. fell ms, mcvicar professor of political economy and the director of the center of capitalism and society at columbia and is also a nobel prize laureate. thank you. >> thanks, mike. good afternoon, everybody, and thank you all for being here today. this panel is about jobs, so why don't we start out talking about the latest jobs report. in march we had a very

disappointing jobs report, only about 120,000 jobs created, which was worse than even the most pessimistic forecast. and the jobless rate is stubbornly remaining at 8.2%. now, friday we're going to get another jobs report. it's supposed to be a little better, but most people think that the unemployment rate is going to remain at 8.2%. so professor phelps, i wanted to ask you, in the '90s, at some point, the unemployment rate was low as at 5% or 6%, and we saw it practically double to almost 10%. how do we get back to a 5% or 6% rate? is that even possible? >> well, it's probably a bridge foo far right now. that's something we have to work on for at least a decade or so. but let me say by way of prefacin prefacing, that i think the economy has a pretty good head of steam. i think the short-run dynamics

are all in favor of expansion. we had a little more time, maybe i'd explore that with you. but i think the crux of the problem is that the recovery is not going to go very far. 5.6% unemployment was the old normal in the middle of the '90s before things got a little dicey with the first internet boom and then the artificial housing boom, and we scarcely know where the normal is now. but my seat of the pants feeling is the new normal is in the neighborhood of 7%. could be 6.5%, could be 7.5%. of course -- and who knows what -- extraneously, who knows what events might strike. but we're not looking at an economy nearly as healthy as it was i think in the middle of the '90s and on the eve of the internet boom.

>> let me ask you, if there is a new normal at around 7%, that is going to leave an awful lot of folks out of work. and right now we've got about 40% of the people who have been unemployed have been unemployed for more than six months. what are the things that government should be doing to fix what looks to be almost a structural problem? >> well, i think there are three things. first, my own view is one of the principipal reasons that our economic recovery isn't very robust and i don't think we should accept a new normal at 7%, but i don't quarrel with his assessment, is that small business is doing poorly. and small business is critically important because they create virtually all of the net new job growth in this country over the last 40 years, they innovate at 11 times the rate of big business, and, if you looked at the data, you would see that we are forming fewer small businesses now and more small businesses are failing now than

at any time in the last 40 years. so the engine of job creation and innovation in this country is not humming along. secondly, the second structural problem is i think in large measure that is because we have a tax and regulatory structure which is not only uncompetitive as compared to the rest of the world, we now have the highest business tax rate in the world, but it's also so complex that it is causing small businesses, risk taker, entrepreneurs, innovators to say, oh, my gosh, i can't get through this. and finally, and i think this is also a structural problem, we have an education system that is failin failing, in the quantity of the education we deliver, the quality of the education we deliver, and therefore we're sitting in a situation where companies have positions to fill and they can't find qualified people to fill them. when we have 5.5 million unemployed people, that's a tragedy. so we have to take long-term

steps to fundamentally reform our education system. i think we have to take very difficult but very important political steps to fundamentally simplify and reform our tax and regulatory structure, both of which will help to get the entrepreneurial foundation of this nation rebuilt, which is critical. >> you know, steve, everybody says the key to job growth is innovation, and i'm sure that's true, but innovation is a little built of a two edged sword too in that it can take jobs away, as well. and a lot of these jobs that used to be good middle-class jobs have disappeared because of variation innovations. is there going to be a time, do you think, when innovation is going to help more people get jobs than lose jobs? >> sure, sure. >> and building on what carly said, the history of america is not just of patriots building the nation but entrepreneurs building the nation. we didn't just become the leading economy in the world by accident. it was the work of entrepreneurs taking risk, building not just

companies but entire industries. you can look at the last two century, and there are different chapters where entrepreneurs were essentially ushering in a new era of innovation and economic growth and job growth. we sometimes lose sight of that and kind of take that for granted. and we shouldn't. as carly said, all of that job creation, according to the kaufman foundation, is is from high-growth companies. also she said, it's true, new start-ups are down 23% in the last five years. we have to get back to focusing on the role of start-ups and entrepreneurs, to drive economic innovation and job growth and job creation. there's not a lot of positive things to say, but there was broad bipartisan support in the last six months that came together with leadership from the white house, strong leadership from the house with eric cantor and, you know, president obama and rick cantor don't seem to agree on a lot of thing, but they did agree this was an important thing to focus on, passed the house and the senate with overwhelming

support. it was signed by the president a few weeks ago. it's called jump-starting our start-ups act. it focused on access to capital. so something got done, and it was important. but there are other things that still need to get done. i think the most important one, there was an interesting editorial of your competitor, the "wall street journal," this morning, that i think is worth looking at, is winning the battle on talent, which gets to the issue of high-skill immigration. anything about immigration is sensitive, particularly in an election year, but almost half of the high-growth companies are started by first- or second-immigration immigrants. if you want a job creation movement going, you have to be a magnet from talent. we are, getting from people all around the world, coming to our universities to get ph.d.s, but then we kick them out and force them to create companies at home instead of here. if we lure people from china to our naval academy, train them on our naval secrets and force them to gok go back to china to be

part of the chinese navy, nobody would think that's sensible. but that's exactly what we're doing. over half of the people getting ph.d.s at carnegie mellon, stanford, m.i.t., half are from other parts of the world and once they get the education we kick them out. those are job creators because they are the ininnovators. >> i think that most people would probably agree that they would love to see, you know, highly skilled, well-trained, educated immigrants come here and be able to stay. what you hear from people in congress, though, is it's completely unrealistic just to be able to solve that piece of the immigration problem without solving the bigger piece. >> yeah. i don't -- there's something a little bit off pitch, i think, about focusing so much on high tech and silicon valley and high education. i'm an educator, so i feel uncomfortable saying those

things. but i think talking about 19th century america, which is a remarkable story that i'm actually writing act these days, it was -- you had innovativeness over the whole breadth of the economy, not exclutding farm, the plow that broke the plains. that was a huge thing. and you had people at the grassroots waking up every morning, rushing to get to work and tinker with that thing that they want to make better or make different for something. i don't have the -- i yield to our ceos here, but i don't have the impression that business life is all that oriented around chain and novelty and constant embrace of uncertainty, and let's try it, let's leap into

the void. i understand there's a lot of cost consciousness. i understand that american corporations are the wonder of the world and how effectively they minimize unit costs. but i'm talking about another dimension of business life. >> and i agree with you a thousand percent, because when i talk about small business, yes, some of those small companies will grow into aol or google. but the truth is most of those small businesses are the ones i started out. i started out as a secretary in a nine-person real estate firm. the dry cleaners, the car dealerships, the community banks, the restaurants, the real estate brokers. these are the backbone of a community, and, yes, there's plenty of opportunity for innovation unless you're just strangling under a whole set of, you know, rules and business conditions that make it very difficult. so i completely agree with you on that.

and it's small business in general that we have to focus on. but i want to come back to your political question for a moment, because, you know, as a business person, i ran for office. i ran for the u.s. senate in california. and the reason i did that, clearly i lost, but the reason i did it and the reason i encouraged more people to get into politics is because i think -- first, i think we have so many professional politics who honestly have no other experience than running for political office, and it's a valuable experience but it's not the breadth of experience. we were intended to be a citizen government. it's how our founding fathers thought about it. actually until maybe 60 years ago we actually were a citizen government. you know, people went into public service and they departed again to private life. and here's one very clear difference. in private life in business,

small business, big business, it doesn't matter, if you have a big problem, you don't start out trying to solve the whole thing. you start out trying to solve the bits you can solve and that you can agree on. that's how we work big problems in our families. it's how we work big problems in business. so a business person wouldn't say, oh, my gosh, we have this huge comprehensive immigration problem, let's not do anything until we can get absolutely everythi everybody to agree on everything. no, we say let's go get that done. >> nothing about the jobs act, about high tech companies. it was really about lifting that up. the fastest growing companies are restaurants or companies like jaund underarmour. also ecosystems around the nations are less reliant on a few such as silicon valley, point one. point number two, there is a difference between big business, small business, and the other.

big business, large companies, the way i think of them are defenders trying to protect the status quo. small business, as carly said, are the backbone of the nation, and those restaurants and dry cleaners on main street are critically important and account for a lot of jobs. but the real leverage in terms of job creation and economic growth are these high-growth companies across many different sectors. that's where the focus of the jobs act has been and the focus of other initiatives, how do you unlock that sector and make sure it's growing across the nation, across many different parts of the economy, not just a few. >> let's talk a little bit about the jobs act. i think right before you came in, arthur levitt was saying that it's going to destroy jobs and it was the most investor unfriendly thing he'd ever seen and everybody who ever voted for it would come to regret it. >> i missed that. >> just from the other point of view. and i think one of the criticisms of it is that it rolls back a lot of the protects for investors that really came

home to hurt people during the dotcom buzz. you know, a lot of those conflict of interest issues. you know, so that didn't work great the first time. why is this going to be so much better now? >> well, i understand there are some concerns. i think any of these concerns, it's a balancing act. how do you make sure you have access to capital that can fuel these entrepreneurial companies and innovate and create jobs and be xet fif in a global world. at the same time, how do you protect investors. i think what was put in place struck a reasonable balance. the s.e.c. is writing specific rules that won't go into effect until early next year so, there's a lot of work to be done. but the basic framework makes sense. i remind you the securities act with some of these things were kind of based on, you know, 1933. 80 years ago. other things out there were 30 years ago. 80 years ago most people were not individual investors, mutual funds didn't exist, the internet didn't exist. to say nothing should change doesn't make sense. the issue of ipos is important

because when aol went public 20 years ago, we raised $10 million. nobody goes public now and raises $10 million. what happens is they go public later or get sold. more often they get sold. when they get sold, job growth decelerates, when they go public, it accelerates. companies that have been around for five years and have exactly the same rules as a company with $100 billion of revenue around for 100 years doesn't make sense. even sarbanes/oxley put in place records. set the bar in terms of the market value too low. i totally understand and am sympathetic to the concerns about protecting investors. we also need to make sure we're not just focusing on keeping bad stuff from happening but also enabling good stuff to happen. i think that struck a reasonable balance and that's why they had such broad bipartisan support. it's up to the regulators to put the rules in place and up to the industry to put the self-regular ga lagss in place. it maximizes some of the benefit

and minimizes some of the risk. >> if we take the discussion about immigration or this act where there was bipartisan agreement to do not everything but something that was perhaps small but important, can't seem to get the same agreement to move forward on immigration, let's just bring that principle back for a moment to tax policy, because i think we could actually get, even in this town, quite broad spread agreement that if you lowered the rates -- business rates, which are now the highest in the world -- if you lowered rates and closed loopholes, that warren buffett would effectively end up paying more taxes, that we would actually raise revenues, we would vastly simplify the tax code, which would be hugely important for small bases and innovators and entrepreneurs. i think there's broad based agreement and i don't expect

anything to get done, sadly, but that would be an example of taking on not the whole problem but a piece of the problem of solving it. >> we have just lived through a year in which, you know, i don't think that anybody in the american public would say has been very laudatory, how congress operated and how the branchs of government worked together. so we've got a budgetary train wreck headed our way come the end of this year. you know, what is going to happen if there is not some kind of agreement there? i mean, what is going to happen to our economy? what is going to happen to jobs? >> it's going to be a bad situation. and i think -- someone was making the point, perhaps it was arthur levitt, that uncertainty is killing to job creation, and that's true. so you have this major train moving down the track, which is a lot of bad news at the end of this year. i don't know. i am sometimes eternally optimistic, and i do think that

politicians on both sides of the aisle are keenly aware, i hope, that, while they may be able to postpone the public's appetite for action and problem resolution until the election in november, they will not be able to postpone it after that election. people are expecting something to happen, because it needs to happen. so to me, if people were finding the areas of agreement that we could come up with a solution on now, that would be time well spent. >> i also think -- i respect anybody willing to serve, and people like carly willing to run. i'm not. i want to be an entrepreneur, and that's my, you know, core strength. anybody who's willing to do it, it's a tough job. >> i agree. >> i respect that. and at the time i spent, particularly the last six months, working in a bipartisan way on this jobs act, i had discussions with dozens of dozens of people, republicans, democrats, house, senate, they

are really frustrated too. they understand everybody's frustrated with this do-nothing congress. they are equally if not more frustrated because they didn't come to washington and give up other things in their lives to be arguing. they want to get important stuff done. they are frustrated. how do you come together? the jobs act, even though it was a small part of the broader economy, even only a piece of the broader entrepreneurship agenda that was important for entrepreneurship and job creation, and an important signal that maybe people can focus and come together on some things where they do agree it's important, they don't get exactly everything they want, but they move the ball forward in a constructive way. hopefully, we can build on that spirit of bipartisanship. i thought it was great when the president was signing the jobs act and eric cantor was standing behind him. i think that was a signal not just for entrepreneurship but people who want to come together and get stuff done. >> let me ask your nobel economist, what is it the government needs to do to get job growth going again? >> i think it -- it needs to do

everything we can think of that will stimulate creativity and acceptance of uncertainty and adventuresome spirit in the business world. there's just nothing that -- anything that looks halfway promising, we should go for that. but specifically, i think of a couple of things. one is that corporate governance in this country seems to me to have gotten so bad in recent decades. it was bad already in 1932, w n when -- at columbia it was gardner mains or -- somebody have it? famous book, 1932 -- wrote about

the divorce of ownership and control. the managers had seized control of the ship. the owners were not able to defend their interest. it's much worse now it seems to me. then we have the problem of mutual funds who threaten ceos with dumping the stock unless they hit their quarterly earnings targets. my god, that breeds short termism. it's just the opposite, i'm sure you agree. >> that's right. >> just the opposite of what we need in american corporations. >> corporate governance, short-term thinking. >> the financial sector. what's happened to the small banks who used to lend to those small businesses and new businesses? they got gobbled up by the big banks. maybe that was in part a by-product of legislation in recent years.

we have to somehow reconstitute this face-to-face lending from banker to entrepreneur that once used to be so basic to american innovation. >> i'm sure you hear from small business owners that they can't get the loans they need. >> it's true. and, you know, this is a tall order, what i'm about to say, so let's stipulate that it's an aspirational goal. if you think about steve started a small business that became a big business. i started out in a small business, but most of my career was in big businesses -- at&t, hewlett-packard. here's what i know. the tax and regulatory structure of our nation is written by, negotiated with, gerrymandered by big business, big government, and big labor, because they have big lobbying money. so what you have are these very complex structures, tax and regulatory, that people who