stopping them at random with no apparent reason. they put up roadblocks to stop everyone. host: you do not believe they're doing racial profiling? caller: no, the majority are white. host: thanks to all those who participated today. we want to tell you briefly about who will be on the program tomorrow. gov. bill richardson, governor of new mexico. he will talk about the role of states in encouraging job growth. we will also have a call frwho was a former world bank person. we'll finish with rusty of the u.s. institute of peace, their

iraq programs director. . thank you for watching this edition of "washington journal" and we will see you again tomorrow morning at 7:00 a.m. eastern. . .

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> we are very pleased to welcome virginia democrat mark warner, just as the senate is about to embark on a serious discussion to the amendment of the financial regulation.

>> thanks for having me. >> let me introduce our two reporters. damian of the "wall street journal" and brady of the "washington post." let's start but for questions. >> sure. let's start broadly. this is a very large bill. 1400 pages, a lot of elements, a lot of complex language we've heard over the past week. for the everyday american, talk about why this matters, how it may affect them and if it protects them. >> i think there's three or four overriding goals that both political parties have. and we want to make sure that we never get to where the american public was forced to bail out large financial institutions the way we had to in the fall of 2008. we didn't have any kind of early warning system to prevent institutions from getting too big to fail and we put a series of i'll call them speed bumps

and we can go into detail, for these large institutions. and if they somehow get passed that how do we unwind one of these institutions and put it out of business? so ending taxpayer bailouts, number one. number two, we want to make sure that this very complicated area, and i know we'll get into the weeds, but the weeds are the significance of this issue. is we want to bring out a lot more transparency to this marketplace so that there's an ability for people who invest in the stock market to have at least in a relative level playing field some of the big wall street firms and not have the kind of opaques in around the drivetist market. number three, we want to make sure there is some better protection for consumers. you know, one of the things we found in financial products that brought about the crisis in 2007-2008 was a lot of folks got sold or conned into

mortgages they couldn't afford. so how do we put some rules of the road in place for both banks but also for the nonregulated half of the financial industry around consumer protection in a way that strikes the balance right. and finally, hopefully what lell do and why we want a bipartisan bill is that we can create something that's not too far on either end of the extreme so it will stand the test of time. one of the thing that is the markets want most is predictability. and back in the 30s, the last time we overhauled our financial rules, those rules basically will stay in place for the next 60, 70 years. now maybe too much to say we'll create the rules for the 21st century but we hope to create a set of rules that will last for decades to come. >> the parties were sort of accusing each other of allowing too big to fail to continue or not having a pragmatic approach. how can americans be sure this is going to be air tight so in an emergency this bill can be activated and used in a way

that taxpayer money won't be put at risk? >> i think we'll do everything we can, and there's an amendment that will be voted on, overwhelmingly supported that -- by senator boxer from california that again says one more time no taxpayer money can ever be put at risk. i think the bill does that. but if there's ways to strengthen it i'm for it. one of the things i've been frustrated in debate is we focused on what happens if we have to put one of these firms out of business. hopefully, the normal process of bankruptcy will work and hopefully we won't ever have to use what's called resolution authority. because we're going to require these large firms -- not just size. i think it's more of their risk taking and interconnectedness. but require these larger firms to have added capital requirements. we're going to look at their leverage rates so for every dollar of equity, leverage up 50 or 100-1 like some did.

we're going to look at their risk management plans much closer. create two new categories of hurdles that these large and interconnected firms will have to deal with. one will be a whole new area of their capital structure of contingent debt that will -- funds that will actually convert to equity and dilute existing shareholders in advance, so it will be a check on management from taking too risky of behavior. then, require these firms to work with regulators to show how they would unwind themselves, put themselves out of business through bankruptcy. and if they can't prove that through the regulators, this early warn system will be able to break up some of these firms. so i hope, and i wish some of my colleagues would spend more time focusing on resolution, and if there is resolution, we'll make sure there is different ways to go about it. i know chairman dodd and shell

bi are looking at trying to tighten it up. there may be ways to try to -- some of the initial ideas will change. but the financial industry will ultimately pay for any resolution. because you need to make sure, i use these terms, you have got to have some money available so that you can keep the firm alive long enough to put it out of business in an orderly way. you can't have like in lehman where there was a panic because everybody tried to grab their assets because they didn't know how the firm would unwind. you have to have an orderly process. that capital has got to come from someplace. and the industry has to pay for that. >> one thing, one of the few bipartisan is the animosity towards wall street from both parties. do you think that's unhealthy and do you think wall street's been contrite enough? have they shown enough humilityty? >> yes, and no.

i think that there's some ot rhetoric has been a little overheated. we want to remain the center for capital markets for the world. we want to make sure that whether you're a startup entrepreneur the way i was 30 years ago when i was starting my business career, whether you're a small business that you need the flow of capitol to keep the capital moving and we can sometimes demonize wall street, which is the center. but at the same time, part of that has come about because, as somebody who familiar and actually believed the financial services sector provides a critical part of our economy, i have been so frustrated that there has not been a level of recognition that almost all of these firms were in jeopardy of going out of business back in the fall of 2008. and if the american taxpayer hadn't put up the funds, to help get them through this crisis, the crisis that the

taxpayers didn't create yet now we have these firms saying we didn't need the money or it wasn't really that important, bologne. and you know, i had been as a pro-finance sector, been very frustrated with the lack of willingness to say to the american taxpayer thank you. and a little bit of sensitivity that, as the capital markets have returned and the dow has gone back to 11,000 and there's been i think a real lack of sensitivity in this sense of well, if we don't -- the markets are back so back to the glory days of large bonuses, and then this constant refrain of, well, if you do anything, all of the capital market is going to move to london or mover to shanghai. i think it has been an enormously tin ear in terms of an appreciation for the kind of disruption that this financial crisis caused and continues to cause for so many american families.

>> along that same lines, when you're talking about the anger towards wall street and the financial industry, the weeks ahead everyone is expecting a lot of amendments to be proposed, a lot of debate on it. a lot of populous amendments could arise, efforts to break up big banks, to make them spin off their derivatives units. so talk a little bit about those, if you would, and also how you manage to have a full debate in the senate worthy of such a big bill but also steer clear of things that may cause more harm than good. >> that's one of the reasons why i want us to have a bipartisan effort. because you can have populism from the left and the right. and i know, and can sympathize with some of the anger and this kind of attitude almost of rhett bution in some case. but if you're going to -- one of the goals that i spoke about earlier, let's put rules of the

road in place that can stand the test of time. what we don't want to do in a moment, 18 months now after the crisis, end up creating a set of rules that doesn't allow america to be the tap cal market center of the country, that in effect slows the flow of capital out to main street, allow the next generation of entrepreneurs, the way i benefited, i was in the telecom business for a number of years, access to capital markets that helped create jobs, build a business, and we want that to continue. so i think, for example, the attack on size alone, i understand it but i'm not sure that's the right focus. i think the focus ought to be risk-taking and interconnectedness. if we look to our neighbor to the north, canada has got a much more concentrated financial industry than the united states does and yet they drnt experience near any of the

crisis because they had a better or more focused regulatory system, that looked at risk management in a better way. out of the top ten size banks in the country -- in the world, we only have one. we don't have a single american bank in the top five banks in the world. and out of the top 50 banks, we only have four american banks. in terms of size in the world. so sties alone hasn't meant the concentration of -- hasn't precluded america from being the capital market center. so i don't think size is the right cite yafplt and we're going to try to make that case and there will be sides that counter. and that's what the floor should be. >> maybe this is a more philosophical question. some level of taxpayers were a party to it. people who bought houses knowingly that were more than they could afford or use their houses as piggy banks when they did equity loans. what is your philosophical role

about personal responsibility or how much regulation can protect people from taking on risk themselves? >> that's a great question and i do think that while a lot of the anger is appropriately directed at wall street, all of us, all of us need to look in the mirror a little bit as well. we all got overleveraged as you mentioned. families who took out mortgages they knew they couldn't afford. i remember trying to talk to one of my siblings. and no matter, it's going to pop up a few years later. but there was that kind of only this immediate, hey, the note is going to be much smaller the first year or two. not oble everybody has a wealthy brother to bail them out. maybe we had a wealthy uncle sam to bail out the financial system. so i do think consumers and businesses got overleveraged as well. traditional rules of kind of

the economy got thrown out in the last 8 or 9 years with these exotic products that were all about supposedly better pricing risk that we ended up finding at the end of the day created greater risk and actually more about generation than about lowering risk in many ways. so the responsibility, though there has to be some level of broader buyer beware, we have to have more transparency. if we have practices that where there are products that even the c.e.o.s of the institutions didn't understand, there's got to be some consumer watchdog. but there also has to be this sense of personal responsibility. because at the end of the day, the government can't bail out every wrong business decision. as a matter of fact, the vibrancey of the american economy has been that businesses fail. they should be allowed to fail. as a matter of fact, what we're trying to do in this process for these larger institutions

is given them a path to failure in a way that doesn't bring the financial system to its knees. so getting that balance right between personal responsibility and making sure the consumer has got enough knowledge to sort through this is something where i think we're going to struggle through. >> consumer protection is the one issue where the democrats and republicans have just been at odds and there's been a lot of efforts to find a middle groubd but it doesn't look like there's a lot of support from the republicans with what the democrats are advancing. how difficult is it to convince the americans that this plan is going to protect them from exotic harmful products but still allow capital to flow through the system? because we won't know until the system recovers and by then the rules will be in place. >> you're right. and that's why we hear some of the rhetoric on both sides. i've yet to see how this bill is going to affect -- which is some of the concerns i've heard. you know, on the other hand, i do think there is a very real possibility that this consumer bureau that's going to put out

these rules, some of these rules need to have some additional level of review and there needs to be some appeals process. we also need to make sure, i think, i hear a lot from my smaller banks in my state and around around the country, basically in most cases were not the cause, they operate on relatively thin margins. and they have a fairly good level of regulation already. so the notion that you're going to have a consumer regulator come in on monday and a safety and soundness regulator come in on wednesday, could actually provide a conflict that you don't think is healthy. so trying to get right the enforcement process that doesn't overburden some of these smaller institutions. trying to make sure if there is a way that that dentist who is putting a payment plan in place for a patient's kids' ortsdz don'tist, that shouldn't fall under this. so how do we make sure that there is something that could be corrected. i actually still think there's

a way to find common ground here. i've yet to hear any of my republican colleagues who say they don't think we need enhanced financial production. i've not heard anybody from the banking industry for example that hasn't said we absolutely need stronger financial rules, especially fr the two thirds that's currently unregulated, the pay day lenders and check cashers, and some continuity of a level playing field across the field. and what i hope we end up doing is looking at financial products and putting rules of the road in place for those around consumer rules. and look at the financial product not so much look at the charter of the organization that's issuing the product. >> for a bill -- i want to go back to the partisan thing because we've seen it play out in the house and in various ways in the senate. and i think you're right that everyone has expressed the same goals generally. so -- and also has expressed the sentiment that there's no reason that this thub a partisan piece of legislation.

so why, in so many steps along the way has it broken down along those lines? >> you know, i'm a new guy. i still dent get it. i've been -- don't get it. i've been working with a great partner, bob corker. you know, we were both business guys. we both realize that even though we'd been around markets for years that we still had a lot more to learn, and candidly, a lot of the assumptions i came in with a year and a half later i've had to change. and as i kind of got a deeper level of knowledge. this should not be partisan. there's no democratic or republican answer on financial fixes. and senator corker and i say we didn't get the memo that we weren't supposed to get stuff done. that we weren't supposedly occasionally to check our democratic and republican hats at the door. we've taken some grief from our parties and if we can't get a

bipartisan bill in this area, then it really is going to disappoint me. because i campaigned for this job as a bipartisan radical centrist, which i don't think is an oxy more ron. but, boy, oh boy, it's going to test my optimism if we can't find a way. and i do think we'll find our way. 18 months after the meltdown on wall street, we've got to put new rules of the road in place. >> put this in context with the health care debate, the rhetoric was hysterical on both sides. here we have a lot of the same people, the major issues -- is this something you hear about? >> the level of anxiety isn't near as high as it was around health care. and health care, i think there were legitimate philosophical differences about the role of government and the moral or economic imperative to make sure everybody had some level of coverpbl. i mean, i think the rhetoric

got inflamed and i think the health care bill is not as good or as bad as some of the biggest advocates. and the real question around health care is how do we implement it and how do we have to come back and readdress the cost containment. on this bill, there doesn't seem to be that kind of -- everybody realizes there needs to be a role for government, there needs to be a role for regulator. we all believe in the market, but there needs to be rules of the road in place. and i also think that part of the reason why people haven't perhaps got as -- my phones aren't ringing as hard is this stuff, trying to explain derivatives and section 106 capempleshns, we've had these -- capempleshns. i couldn't explain it a year and a half ago and i spent a year and a half around the financial market. so this is why i think we got hired. folks hired us to go up there and kind of check our partisan hats and learn this enough and put rules of the road in place.

and recognize that even whatever knowledge we have is -- we can only set the parameters. ultimately the regulators are going to have to do their job. and the two thing -- >> a lot of americans might say, we have the same regulators with more power. so how can we trust them this time? >> one of the things that i think is a valid point is we're going to give the regulators additional power. we're going to try to make them focus on specific events, trip wires, things like capital requirements, leverage in a greater way, requiring them to bless a funeral plan of a large institution of how it will put itself out of business in a bankruptcy. the regulator will be on the hot seat if they don't get that right. so it's not a perfect solution set. the thing that i don't think you can do is have congress write with specificity all of the rules today because what you will end up having is there will always be a way for wall

street to find a way around the rules in a legal sense. so what we want to try to do is align, and keep in mind the draconian consequences he would out there if wall street violates the rules that we all agree to. for example, one of the areas around derivatives, people have talked about the need for industrial companies, and i agree with this, to kind of hedge their risks. if you're a company that uses aluminum or steel, you want to lock in your price of steel eight or nine, 12 months in advance. you ought to be able to do that. but suddenly if that exemption for the amount of capital required to have that kind of contract gets abused, perhaps you could have the draconian consequences come in on the bank. so how we get the incentives in line is something i've been trying to focus on. >> you've been a big advocate in this effort to overhaul the financial regulations, and have

written key parts of the bill. what do you think, what -- put it this way. what amendments have you considered proposing? where does it maybe not go far enough or go too far? >> i'm anxious to see what chairman dodd and senator she will by com up with this week. i'm sure i'm going to have some amendments. i'm working on some with senator corker. but i'd like to let this play out and see what the chair bhen come up with. i know one of the areas that senator corker and i have talked about and i think they're going to correct already is trying to make sure that angel investors, people who invest in startup companies and i was a venture capitalist in my earlier life. i think the ability for young folks with ideas or not so young folks with ideas, entrepreneurs to get access to capital and get a chance to get started, that we ought not put barriers in place to those activities. there were is certain parts of the bill that restricted the

ability for angel investors to invest. i think chairman dodd has heard those concerns and is going to change those so we continue to allow entrepreneurs to live out their own version of the american dream. so i'm hoping that some of these other things -- i don't ware who offers the amendments, i just hope we get them in. >> you talked about unintended consequences. are you comfortable with where it is? >> i'm never going to be comfortable. but there are so many people that can come in and say, here are all the unintended consequences, that they always start we want financial reform but not for our particular sector. then they try to scare you with unintendeded consequences and then leave you back at the status quo. the status quo is not working. >> what in the back of your mind are you worried about is going to happen? >> if either side digs in and draws bright lines in the sand on issues where i don't think

there's that great of policy difference, where the form becomes more important than the subset. i think about the republican leaders attack on the notion of whether you prefund or post fund a fee that would be paid for by the industry to unwind some of these funds. >> you know, that was a -- there's legitimate arguments on both sides. but to take something out of context, i think it will be taken out be funded now by the industry after the fact, after a crisis. but pick out some of these items that you haven't studied and worked on them, and make them for colleagues who maybe haven't spent as much time on the legislation into these bright lines. that would be very disappointing for an area that is complicated that we do need to get it right. >> were you -- we heard it's not possible to unwind. >> i think we can't unscramble

those eggs. i think a lot of senators wish they would have had those votes back in 1999 when they did away with the balls and barriers between investment banking and banking that glass spiegel had in place. the world has changed. we only have four of the 50 largest banks. those other 46 banks have got this financial super markt in place and i don't want to put america at a competitive disadvantage. >> but there will be a vote to try to unscramble the eggs. there will be an amendment to establish the depression era glass spiegel law. and with populism, depending on where things are in a couple of weeks, the amendment may have a chance. >> i that's why i think the structure that we put in place, so we can look at these institutions, not just securities business here or the banking business here, we actually force the regulators to talk to each other. and if the regulators see that a large firm, we'll pick

goldman sachs in the news a lot, can't be unwound in an orderly process, then this can break up these institutions. but let's let them make that judgment in an orderly fashion rather than potentially putting american firms at a large disadvantage to an increastingly international world. >> what's more important, given the election time tables, speed or doing it right? >> well, i actually think the senate seems to have a relatively short attention span so i think we'll get this done before memorial day. and i think at some point that this has been vetted for the last couple years, hundreds of hearings or dozens of hearings and hundreds and hundreds of meetings. and if we get done before memorial day that will strike the right balance. >> thank you for being with us. >> thank you. >> "newsmakers" is back with brady dennis of the "washington post" and damian. we just talked to mark warner of virginia. as the senate begins the amendment process on the

financial regulation bill. how challenging is this for the leaders both the committee leaders and the party leaders in the senate to put together a framework for this debate? >> i think it's a real challenge, because unlike a lot of bills that go through the legislature, this encompasses so many elements across the financial spectrum. that will affect not just wall street but potentially small businesses, community banks, and so i think while there is wide agreement on the goals, you know, as senator warner spoke, there's a lot of disagreement on exactly how to get there and how to strike the right balance. >> like houmt amendments can be offered is going to be critical to the process? >> absolutely. and we don't know the answer to that question. and the more amounts offered and the less structure for debate, the more difficult it could be to see how this is all going to come together. and i think one of the things