to we're also going to have deal with revenue. and that's something that the american people instinctually understand -- that if we do this in a balanced way, we can solve our problems. this is not a situation that is analogous to greece. we don't have to cut by 25 percent and raise taxes by 25 percent. that's not the situation we find ourselves in. these are relatively modest adjustments that can stabilize our economy, give you the kind of business confidence you need to invest, and make sure that america wins for the future. i'm prepared to be a partner in that process. but we're going to have to have everybody pulling together. the business community is going to have an important voice in how that moves forward. so with that, i want to thank you again, and i look forward to the questions and the comments. [applause]

the >> next, and a house hearing for the securities and exchange commission. and your calls and comments on key to washington journal." -- "washington journal." mary schapiro appeared to testify on the 2013 budget accord request. they have requested 1.6 $5 million, an increase from 2012. this is 90 minutes. i would like to welcome our witness. thank you for being here today. thanks to my colleagues as well. a decided not to talk baseball since both of our teams lost

yesterday. we are sad but it is only the beginning. so hopefully it will all turn out well acted and. we will be playing each other in the world series. again, welcome chairman shapiro. sec has the mission of protecting investors, maintaining efficient markets and facilitating capital formations' wall not over regulating our markets and hindering economic recovery. the committee must be vigilant in our oversight of for agencies like the sec that play an influential role in the economy and have the power to help and hinder mender -- american consumers and businesses. the budget has increased over 200%. despite this growth, the sec failed to detect a ponzi schemes, the u.s. financial

system collapse, and judges question their settlements and regulations. sec has also had several embarrassing management lapses such as purchasing a space, destroying documents, and repeating weaknesses and the financial statements, to name a few. i believe many of these problems are symptoms of fundamental problems within the organization and structure. the fiscal year 2013 request proposes another substantial funding increase of 18.5% over 2012. i think this body is reticent to throw my arm money at sec until you have proven you have addressed the problems from within in a comprehensive way. we want confidence the sec is doing sound analysis that to stand up in court and taking strong actions against

individuals committing fraud and helping facilitate access to capital for american businesses and managing the resources provided to run your operations. just because the sec is funded through -- does not absolve you from managing the funding entrusted to the sec and does not absolve the committee from providing accent -- extensive oversight. you are faced with many challenges, including dodd frank. i encourage you not to rush or throw money at these challenges. there's something to be said for getting it right the first time. deliberate changes necessary to make the markets work better on behalf of the american public. we recognize you have an incredibly difficult job. and now that you and your staff are working very hard to meet

today's challenges. we appreciate your efforts in. i look forward to your testimony. for now, i would like to recognize my friend and ranking member. >> leo is mentioned baseball except that it is early. in october, we will be talking to each other. november, we will not be talking to each other. that is how it goes. i would like to join you in welcoming the chairman of the securities and exchange commission, the honorable mary schapiro. all of us agree with the important mission the sec place in protecting consumers and investors. if the financial crisis highlighted the need to have a robust cop on the beat to make sure the american people are protected. dodd frank gave new responsibilities in this regard, enforcing the changes of all law is a vital part of making sure

the sec can better address the abuses of the securities markets and protect investors. i know that you have implemented 75% of the regulations mandated. that is some of the -- some of the most crucial changes are upcoming. there is much to ensure that past problems are not repeated. your budget request asks for new resources. i was heartened to see the focus on some of the core activities. these areas are crucial to the bad behavior. with a record number of enforcement last year, and it is clear that the -- sec takes its mission seriously. new resources will help. i would also like to commend the progress on your upgrades and a note that the most recent order found no material weaknesses.

i look forward to hearing more about the future challenges the sec faces as well as how your increases will be used to address those challenges. we welcome you and so many of us in congress speak about not having what happened before happening again. many people will be responsible for making sure it does not happen again. no one is more responsible than that sec. it confuses me that some people would attack it without mercy. i am not talking about anybody on this committee, without understanding that without you and your oversight, kings cannot change. one last point, i have been in congress 22 years. in years past, this was the only commission that every said we do

not need more money. they did not want to enforce what they had to enforce. i think it has changed and we are responsible for what happened in the past is not happening again. >>, we recognize, the chairman for an opening statement. if you could keep your comments to 5 minutes, that will give us more time for questions. >> thank you so much. members of the subcommittee, and thank you for the opportunity to testify in support of the 2013 request of $1.5 billion for the securities and exchange commission and how we would make use of those funds. over the past three years, the sec has significantly improved its core operations, revitalized restructured our enforcement and examination functions, taken critical steps to enhance safeguards for investor assets, improve collaboration within the ace

signature and improve our risk as isment capacity. in 2011 the commission filed more enforcement actions than it has ever before filed, obtained order for more than $2.8 billion in penalties and disgourjment and added to the total number of financial crisis related cases by filing actions against an additional 16 ceos, cfos and other senior corporate officers. in addition our broader activities have benefitted from a more sophisticated use analytics to identify and act on suspicious actions earlier. we activated a risks examination program and completed over 1,600 exams, results in improved guidance to the function industry and inactionability information for sec enforcement investigations. we implemented a new whistleblower program that is already providing high quality information regarding difficult

to detect wrong doing and permitting investigators to efficiently. focus resources more we improved our internal financial controls, which resulted in a gao audit opinion for fq 2011 with no material weaknesses. sec staff with the assistance of targeted contracted expertise implemented a number of internal reforms designed to improve the agency's structure, strengthen capabilities, improve internal controls and enhance workplace competencies and obtained specialized expertise in the areas of quantity tafive -- quantitative analysis, computerized trading and structured products. in addition to improving core operations woorks we've worked to improve significant responsibilities assigned to the act. agency and you the dodd frank the sec has proposed or adopted rule for over 3/4 of the provisions that require sec rule making.

additionally the sext has -- sec has finalized 13 of the required study and report. while the agency's budget has grown in recent years, so have our responsibilities and the size and complexity of the markets we oversee. during the past decade trading volume in the equity markets has more than doubled as have assets under management with investment visors. at the same time we recognize that it is incumbent upon us to maximize our efficiencies and continue our organizational modernization efforts. as we protect investors, we have an obligation to be good stewards of the resources provided to us and to carefully review our activities to identify efficiencies and cost savings wherever possible. our request for 2013 would permit to us add approximately

to improve core operations and implement our new responsibilities and it could be fully offset of the matching collections of fees on security transas. it would allow to us achieve four initial tifts. it would allow the commission toin hance investor investment activities and continue to implement and develop robust models that identify regulated entities with high-risk profiles. second, these resources would support staffing levels sufficient to speed capital formation by eliminating regulatory bottle neck, improving economic analysis and more quickly providing authorizations to foufrms to engage in new lines of business. third, these funds would allow to us strengthen market stakt efforts. currently the sec has fewer than 25 staff to monitor the eight agencies that clear and settle an average of $6.6 trillion in transactions every day.

we believe a greater presence is needed. increased funding also would enable us to improve efforts against cyber security threats. and support investment in date a management, diskoshier review, internal accounting, election tronic reporting and electronic discovery it would fund much needed modernization of the sec.gov, which is such an important portal for investor information and is one of the federal government's most visited web sites with 450 for three years the million hits per month. subcommittee's support for increased funding of the sec has allowed to us fashion a better equipped, more expert and effective agency. i like forward to working with you to build on this progress in fy 2013 and of course i'm

happy to answer any questions you might have. >> i appreciate your testimony. we have talked, you outlined in your testimony what you would spend half and added increase, several hundred million dollars. $245 million. last year, it was $200 million over the previous year. i realize that you do have a lot of added responsibilities but most agencies have not received increases like y'all. despite the fact that it is funded, we take our role

seriously. it worries me that in spite of how much money we threw into the sec that we still missed madoff. we had so many issues. can you tell me how investors have benefited from such large funding increases? >>i'd be happy to. i want to start by saying we're very grateful for the funding increases we have received. we recognize that we have been not quite unique but close to unique mng federal agencies. i do believe the the agency was underfunded for many years and the task of regulating these enormously divorce and important and complex markets far outstrip the agency's responsibilities. we're responsible for about 35,000 regulated entity, some of which engage in some the most complex financial transactions anywhere on the earth. and it was incumbent upon to us do a number of things to keep up with the markets and to

remedy the flaws that were exposed by things like the failure to catch madoff or the failure of the consolidated supervised entity program. in the first instance we have tried to restructure -- we have successfully restructured the enforcement program to create specialized units that focus on particularly high-risk activities. for example, the construction and sale of structured product, violations of the foreign corrupt practices act, insider trading, fraud in connection with municipal securities. we took a layer of management out of the enforcement division and put people back on the front lines of investigating. the results of that -- we created an office of market intelligence to try to keep up with new issues and trends and weep developed technology to take all those many hundreds of thousands of tips and complaints that come into the agency and collect them and triage and cohesive way. one coherent and so with respect to enforcement, i think thi the changes have been quite

dramatic and the results are clearly demonstrating the wisdom of the choices we have made. we had a record year as i mentioned in our enforcement program. the other area where i think really fundamental change has taken place there are lots of changes in the agency but two others. one is the examination program where we're used a much more risk-based approach. so that we're focusing our efforts and our energy on those regulated institutions that create the highest level of risk for the public. and then we're transforming our technology as you mentioned if your remarks in rather dramatic ways to catch up to where our fellow regulators had been for a while but where the sec has lagged for a long time. so all of which is putting y'all on the rye track i know. are there any areas within the sec that you think you could manage more efficiently or better? >> without a doubt.

and i'm pretty humble about that. there are lots and lots of things to continue to work on within the agency. when i arrived three years ago, there was a lot to fix. and we have systematically gone through the organization and worked on enforcement, worked on examination. we are aided very much by new leadership across the board and tremendous new talent that's come in with very pressure and -- vreery fresh and current understanding of the markets, of trading, of products and so forth. we're now working on reforms in a number of important infrastructural areas that our job. really support our ability to do so human resources is going through a redesign, the office of financial man angment is going through a redesign. we are offloading our financial management system to the department of transportation because we think that they have core skills in that area that we'd rather not build we shall would rather rely on another

agency to provide. there are a number of areas puerto rico we are very focused. we're analyzing to see if we have the right offices in the right places. there are lots of, lots of efforts on going to continue to improt the improve the agency. >> i will ask about some of those things. do you find that you may be competing now with the consumer financial protection bureau for staff? i'm just curious. >> i don't think we have been. we tend to hire people with particular expertise in securities markets, options, derivatives. so i don't think we've had any head-to-head competitions that i know of at any point. >> i'm curious, this is a real process question. do you -- there a couple

exactly questions. number one, how do you put your budget together? exactly how do you come up with it? are the other commissioners involved? do they have any input? i'd be curious about that. and then i would like to know, then, how omb works with you all in paraing down and enhancing precisely how that works. >> sure the way we put the budget together is to ask our senior leadership for what their expectations are for the needs for that particular fiscal year, what legislative changes -- for example, dodd frank obviously influences the budget rather dramatically in 2012 and 2013 because of all the other week we have to do. so we ask our senior management evaluation of what resources will be necessary to fulfill their obligations, what are the

risks that if we don't have sufficient resources, how will we prioritize responsibilities that we have, where can we make cuts, where can we delay certain activities, particularly in the i.t. area, if the funding isn't sufficient. the chairman under something called reorganize plan 10 at the sec has responsibility for the budget. we do share with the commissioners the justification and they -- but they don't -- we don't vote at the sec on the full commission on the budget. and then i think we work with emb much the wave other agencies do. we provide them with our budget. under dad frank we provide it at the same time that we provided it to congress, which is a simultaneous you'll budget. omb oversee the spending of your fees with the same rigor

appropriations? that it oversees reggae i -- i'm just curious. >> i appreciate that. i was just curious more than anything. 00:21:01 so they're sometimes easy and sometimes difficult to work with on appropriations issues. so i wondered about the fee structure. i'm going to hold the rest of my questions, which are many in nature, pass it along to you, joe. >> thank you, thank you. the president's budget request is an increase of $245 million. the budget request will support 676 new positions. i have a question, what would happen to what you want to

accomplish if you're not to get these new positions? if you were to get them, how quickly could you hired? >> well, if we were not to get the new positions or that level of funding, a couple of things would be implicated, investments in information technology, which are sorely needed to make us a more efficient and more agile and frankly more expert regulator would be severely implemented. and we have a number of major technology programs that are of deep interest not just to us and how we do our jobs but to public corporations and to investors generally, the modernization of the edgar system which tests 21 million corporate filings in it and is how public experiences file their information with us but how investors search public company information and investor.gov, sec.gov, which is our web site, which as i said has an extraordinary amount of

public interaction with it. we would also reduce our enforcement coverage and our examination coverage and, as you know, we are already examining in my view far too little of our regulated entities on an annual basis. only about 8% of investment advisers and 10% of mutual funds. we have $12 trillion in assets of regular americans resides and i don't think that's adequate coverage. those numbers would be further strained, i believe, if our budget is cut. i'm sorry, the second part of your question was? >> if you got it -- yes. >> i mean, these are large numbers obviously. but in fiscal year 2010 where we also had a budget increase we were able to hire over 500 people into the sec. and one of the reasons for the our human resources department is actually to enable to better support the hiring pipeline,

the identification of the specialized skill sets that we need and to make us more efficient. we're also making use of the accepted hiring authority that we have and become much more efficient over the last several years in the hiring process. i believe we will be able to do it. >> let me ask you a question related to that. is it -- this is an easy one to answer if you want to spin on behalf of the agency. is it because people want to work for you folks or is it because the labor market is weak for folks with those little expertise? >> it's probably a little bit of both, though i'd like to believe it's because the sec is a great place work. i've been blown away by the talent. people who have very important positions in investment banks, exchanges, rating agency, at

trading desks, markets that wanted too come to the sec. it's important. new toolts are being provided to do that work. it's an opportunity to sit on our side of the table, which many people and clearly all of you want the opportunity to serve the public and so do a lot of people in the securities industry. we've been able to tap into that and bring in amazing talent to supplement our great career civil servants. >> let me ask you to elaborate a little bit more. if in the last few years there's been a very serious -- there are signs showing that's getting much better. where would you want it to be, say, in two two or three years from now in terms of the it infrastructure? >> our chief technology officer

is here today. tom beard has done a good job in a relatively short period of time. really improving the sec so that we are thoughtful and wearful and prioritize how we are going to spend our money and also bringing depth of knowledge about technologies generally to the agency. i would hope in two or three years that the edgar system that was build in the 1990s, lad modernized in 2001 would be a simple to use positive user friendly experience for both public apps and sec staff that you have to use and investors have to use it so that there's -- and that we decrease the costs of operation and maintenance of that system rather dramatically. that sec.gov, which was designed in the 90s and has never been the gate way to medical ger and -- to edgar and

many other sources 6 sext information is updated, works in real time to get information. and again, we believe we can cust the costs of operating that system by as much as 45 percent. we would like to person, a data where house. -- warehouse. they can pull data at a fixed -- out of so that we don't replicate and have all of these siloed data systems within the agency. there will be cost savings, there would be securities, benefits fromming that as well. we have lots of individual systems that can benefit from enhancements and updates throughout the agency. >> yeah, we're getting quite a good show to my left. not my lit call left but my left. i'm just going to take one

second to ask you can you describe briefly the progress in implementing dodd frank. how far along do you think you are? >> we had more than 90 required rule makings under dodd frank. we have adopted or mostly proposed three quarters of that pem we have put in place, though, the registration system for hedge funds, the whistle blower program is in place. we've proposed all. -- all of the rules. we will finalize the rules on conflict minerals from the democratic republic of the condo, so we have accomplished a number of things, particularly in the area of the hedge fund registration. we have proposed many rules in the area of title 7 derivatives.

municipal advisers and some of the other areas. >> you are about three/four there. >> to be honest, some of the of the -- heavy lifting is still on the way. for example, the vogel rules. there is a lot of work to do. >> let me ask a follow-up. of those that you have not finished or of the 75 you have, how many of those are the ones that have to be coordinated? >> many of the title seven rules, they are all done in coordination. the ones that are joint rules are definitions of the entities that will be subject to the security based to swap dealers and the products. what is a swap, what is next.

those have to be done jointly. those are complicated to do. we also have to do asset backed security rules jointly with the bank regulators. and everything we are trying to do in coordination with all of our colleagues. >> your goal for getting them at the end of the year? >> i would hope title seven would be done by the end of the year. some other areas, conflict minerals, mining safety, is already done. municipal advisers this year also. >> i am sorry to have done that. mr. alexander.

>> to do i go before the mayor? >> yes. >> thank you and good morning. i would like to ask you a question about the vogel rule and how it applies to insurance companies. i am concerned that the rule does not capture the congressional intent or follow the statute by exempting insurance company's ability to engage in trading. while it exams or it does not extend the exemption to the investment. because of that ability to interest companies to make those investments and would impact the constituents. they depend on interest companies to guarantee

protection from the uncertainties in life. the goal of the volcker rule was not to make retirement or long- term care better for americans but that would be the result if the regulators embraced the proposed rule as it is. my question is, i can you give us your thoughts on whether there is any flexibility within the statute which would allow the agencies to extend the exemption to allow insurers to invest in covered fines? >> i am happy to do that. as you point out, the proposed rule expressly permitted proprietary trading by an insurance company but it not allow for investment in covered funds. we received a lot of comment on that issue when, "volcker rule was out for comment. -- when the volcker rule was out

for comment. this is an important issue. we understand that. our staff has met with a large group of insurance companies to talk about this issue. we are looking at whether there could be flexibility on this point. we have exempted of authority but the standards are high. we can exempt to promote the stability of the u.s. financial system and the safety of the banking system. that said, we are looking carefully at whether there is a possibility to provide further exemption here. we follow the statutory language but we and stand it it may be more permissive than that. >> your agency has been vocal about the need for additional reform to money-market funds.

it has only been two years when you implemented changes by enhancing the credit quality of the underlying assets, shortening the average maturity and the portfolio and increasing transparency for each fund. these were substantial changes that made the fund's stronger and more able to withstand pressure. have you done analysis to show that those changes, i recognize that is a very controversial issue i'm very proud of the changes that we made to money market funds to do the things that you stated. i did say at the time as did our senior republican commissioner that more needed to be done because money market funds are still suseptable to a run that could be very destabilizing.

the fed stepped in with a liquid di program and that experience i think is very sobering from my perspective and that of other regulators. we will be very thoughtful and have been very thoughtful as we approach this issue. the president's working group issued a report in october of 2010 that laid out all of the concerns of the collective regulators with respect to money market funds' potential for runs and laid out six different options for how we might deal with that. we are focusing on several options now, capital requirement or floating net asset value but we will put those ideas out if there are three votes to do so for public

comment and debate and discussion we will hear what people have to say, we will refine those ideas and go from there. but we appreciate the money market funds which have 2.5 trillion of assets are important to investors, to corporations, to the fund industry but we also never want the taxpayer to be on the hook again for a potential failure. >> thank you. >> mr. womeack. >> thank you and i totally understand the tremendous pressure that your organization is under given the last several years of issues that have already been articulated in this hearing and in other hearings. but i want to go back to some of your numbers to be clear you

said you had a record number of enforcement actions and looking at the testimony the number was 735 and an impressive list of different actions involving c.e.o.s, cfos, and senior corporate officers, broker dealers, et cetera. but of those 735, it is my understanding that a significant percentage of these actions are really follow-on administrative actions. and i realize they count in the numbers. but if i am looking at the numbers correctly between 2009 and 2011, the number of original cases is actedly down. now, am i reading these numbers wrong? >> well, a couple of things. first these are apples to apples comparisons. we count both in the 2009 and the 2011 numbers.

but i think the point that's been perhaps lost in some of the commentary that i've read at least about this is that administrative proceedings that are follow-on are absolutely critical to our ability to enforce the securities laws. it is only through that vehicle that we are able to bar people from continuing activity in the securities industry so that if we want to bar somebody from acting as an investment adviser or broker dealer or really any other capacity, we have to use a follow-on administrative proceeding. some of those are hotly contested, some of them aren't. some of them follow naturally from the sil proceeding but they are an absolutely critical tool for us to utilize in ensuring that people who violate it had securities laws don't keep coming back over and over and over again. >> i don't argue that point at all but i'm going back to the numbers.

on one hand we're talking about 735 enforcement actions. but less than 500 of those are original actions and there were more than 500 original actions in 2009. now, the reason i make this point is because we're sitting here today looking at a -- the better part of a quarter of a billion dollar increase for an agency and we're making the argument that this enforcement restructuring or this enforcement action by the s.e.c. is demonstrating its enormous success, if you will, in what it's doing. now, either the numbers are misleading or the actions that we're talking about are just much more complicated actions so i'm giving you an opportunity to help me through this. >> i appreciate that. and i don't believe the numbers are misleading at all. i do believe that the actions are far more complex than they ever have been historically. if you look at the many

financial crisis cases involved incredibly complex structure products and sales practices. and of course our disgorgement and penalty number is also very significant for this year, 2.8 billion. but i think helps to recognize or represent the complexity of the kinds of cases we're bringing. we have brought cases against firms for improper sell to school districts. we have brought cases for misleading investors in the sales of crmp dos. we have brought cases bid rigging in the securities markets. obviously the entire web of insider trading cases that has involved an enormous amount to connect all of the people who are in a conspiracy really to insider trade. we've brot -- brought very

complex cases. so i think the numbers don't give the full story. that the complexity of the cases that we're bringing and the number of senior people that we're naming in cases are also important factors in showing the efficacy of the enforcement program. >> the additional funding that you've had last year was, how do you break down that funding insofar as how much of it went into enforcement related activities? >> in last years numbers we had an increase of 400 positions, 63 of which i believe went to enforcement to focus on risk assessment litigation building up our trial capabilities as we are i believe litigating more cases than we have historically. the largest number last year or in this current fiscal year went to trading and markets division which is responsible for all of the regulation and

oversight of the securities markets and much of the dodd-frank implementation, the regulatory regime, and then issues of market structure like high frequency trading and colocation, dark pools, the response to the may 6 flash crash and all of those efforts. >> can i assume that one of your rolls there or one of your functions is to continually evaluate the structure and the investment that the federal government is making in the organization to ensure that the proper resources for the proper emerging issues are being effectively and appropriately allocated? >> absolutely. i view that as one of most important parts of what i am there to do is to make sure that we are good stewards of the resources that we have, that we are acting smarter and faster than we ever have before. the last three years have required significant rebuilding

of the infrastructure of the agency to support these major initiatives to reorganize our enforcement and our examination program. and to build the technology to support them. but we are very much i think headed in the right direction. >> i have one more question madam chairwoman if i may. and that is the relationship between the -- and i call it an information technology platform, whatever you call it in your agency. what can you just briefly describe what your request, what you're attempting to do insofar as your automated platforms are designed to do and how that may be able to save the agency money and at the same time reduce our continued dependence on more and more additional personnel? >> sure. we believe we can dramatically cut our o and m costs for a number of systems just by

modernizing them and getting them off 10-15-year-old infrastructure. and those savings for edgar and s.e.c..gov could be as much as 45%. but i believe that also by eliminating the siloed structure of our technology and our data and allowing our staff to access one layer or a data ware house without having to go in and out of multiple systems to do their job could save us tremendously on staff efforts and increase productivity. those are just a couple of examples. >> thank you for your answers. i yield back. >> thanks. i would like to ask that for us to have a separate meeting with your i.t. director, please, because i want to know exactly how fast we could work together to get that it system unsiloed because i think obviously perhaps in the past before in

between the times that you were there if you had been able to put in the name bernie madoff just for example and have found any kind of filings that he and his company did in several different places, maybe we could have found something faster. but i would like to have a separate meeting so that we can discuss how much it would cost to get this up and running and to totally modernize your system in the shortest amount of time possible. >> and if i could just add to that we would be happy to actually demonstrate for you the new examination system called trends that allows examiners to have all information at their fingertips instead of having to search multiple data bases and to also talk about the tips complaints and referral system that we talked about a lot in this system last year that the agency deployed last year and we intend to spend some of our

technology dollars to enhance and refine that system so that again tips that come in from disparate places into the agency come into one place and can be linked together so that bernie madoff's name would show all of the tips that might have come in about his conduct. >> well, i will look forward to do that because i think it's absolutely critical and we've been able by doing that at the internal revenue service just for example it has made life a lot easier. and it's become more efficient and quite frankly they need fewer people to do a lot, perform a lot of those tasks. >> well be happy to do that. >> thank you. mr. deezeblart. >> thank you motch and good to see you again. i would like to go back to the proposed 298 page vocal rule. it's my understanding that the s.e.c. and other agencies have received more than 17,000 public comments that was already spoken about a little while ago.

commissioner gal ger said in a speech yesterday, even a quick review of the many substantial comment letters the commission received revealed widespread fears regarding the fact the proposed rule and the proper functioning of global markets and the competitiveness. he goes on to say that these are fears that i share. so with so many concerns surrounding the proposed rule and so much at stake, wouldn't you agree that it would be a good idea to take a step back and go back to the drawing board and start over again? we're dealing with a very substantial rule here obviously. >> congressman, we did get 15,000 or 17,000 comment letters, which is a lot. but i will say what's actually more striking to me on voker is the length and depth and quality of the comment letters we did receive, a smaller number but ones that offered some very real concern and issues for the agencies to

collectively think about. so whether we start right from the beginning again or not, i can tell you that we will very carefully and are very carefully reviewing the comment letters and i have certainly not read them all. and rethinking how we should approach the statutory requirement. our depole at the s.e.c. and i believe i can speak for all regulators, is to try to fulfill the obligations but not to the detriment of our markets and particularly not to the detriment of market making which we as a capital markets regulator in particular fully appreciate and understand is absolutely critical to capital formation and the successful operation of markets. >> and there are obviously fears that that could happen. >> we have absolutely have heard those and we've had hundreds of meetings with industry and we have a lot of issues to work through. and i think charne bernanke said last week it would be very unlikely and impossible for us to get this done by the statutory deadline of july.

and i think our goal would be to take the time to get it right, not to get it fast. >> now, a separate question. dodd-frank requires the s.e.c. and the cftc to issue joint rules defining swap entities and products and are the agencies working together to make sure that the definitions are consistent? >> yes, we are. and one reason it's taken so long is that it is a challenge. we have different, we have one dodd-frank act but we have different statutory regimes upon each of us are building and there are some differses for which we have responsibility and the swap market for which the cftc has responsibility. so it's created a lot of challenges in the joint rule making but we are working together to try to make those definitions as consistent as we possibly can. i don't want to tell you we'll be identical but we appreciate the goal of consistency here.

and we're working through some final issues between the two agencies. >> lastly, and i see my time is running out. regarding mf global issue. what actions has the s.e.c. taken to recover those missing funds? >> it is a tremendous tragedy what has happened with respect to mf demrobal. and i will say that the s.e.c. has been deeply involved although there were only about 318 active securities accounts at the firm while there were close to 40,000 futures accounts. so our role has necessarily been somewhat more secondary. we've worked very closely with pacific trustee who is marshalling assets and trying to determine exactly what has happened, what the final days of the firm are like and where money has gone and then we'll seek to claw back money where appropriate. under siffic which applies again on the securities side but not the futures account the trustee's expectation is that

85% of customers will get 100% of their funds back when it is resolved. but we're working closely with them and of course we'll have an enforcement view into this as well. >> thank you for that. and you're right, it is a huge tragedy for so many people. lastly section 5 -- 953 of the dodd frank act requires the s.e.c. prom gate regulations for the so-called pay ratio disclosure provision. have you heard and what have you heard in terms of the compliance issues and the corresponding costs relating to the implementation of the pay ratio provisions? >> well, we've heard a lot. we've had many meetings. the statute is fairly previptive. i should say it's quite prescriptive and creates some challenges for us as we write the rule and did not have a deadline so we haven't missed a deadline yet although there's

obviously interest in our getting this done. but some of the challenges relate to the fact that many companies have hundreds or thousands or tens of thousands of employees overseas, how to count them, how to arrive at an average compensation number, whether to count employees who are part time or employees of joint ventures, for example, there are a lot of technical issues but there are a lot of burdens to making the calculation because it is an average of all employees that firms are really struggling with. and we're trying to work through. >> thank you. obviously highlights the complexity of these issues. >> as a matter of fact, i've heard some nightmares on trying to accumulate some of the data that it takes much longer for those people who haven't worked in the private sector for example it takes a lot longer to -- and you're a multinational corporation, it's very hard to accumulate the data because you have to go to different governments.

>> there are many operational issues. >> it always sounds easier on the surface. but when you kind of dig into it, sometimes i think we ask for more than we can expect to get. >> well, this case particularly because it's quite a prescriptive provision. it's not just that we could take the 2 -- w-2 forms and compare it to the c.e.o.'s compensation. it's much more complex than that. >> thank you. mr. yoder. >> thank you. and thanks for being here today. and i want to kind of pick up where the chair was leaves off there regarding some of the heavy burdens that congress ultimately has placed in your lap. we send a lot of direction your way that has you spinning a lot of plates in the air. similarly, we spend a lot of time as members of congress out in our districts talking with small business owners, entrepreneurs, folks who create

the jobs that make the country go and ultimately create the type of prosperity that everyone in this room wants to see for their kids. with that goal in mind there's a twin set of challenges that really can be affected by agencies like yourself. first of all, the regulatory uncertainty in this country many business owners, many folks throughout the country, many investors express concern with the regulatory uncertainty and its impact. and certainly when the rules of engagement through dodd frank, whatever we're working on remain up in the air, many folks i think express a concern how that impanths investment, risk-taking, when the rules of engagement aren't fully known by the folks who were expecting to take risks and make the economy go. and our second challenge is that we have a huge budget

crisis in washington that is pertinent to its conversation as we try to find ways to cut spending we are asking your agency essentially to quickly resolve and make clear information to the free market system that we want to promote in this country while at the same time finding ways to do it in a cheaper fashion. in a sense what we're asking you to do is what entrepreneurs have to do every day in this country which is produce a better product with less resources and less time. so my question for you is, how do we work together with congress and with the s.e.c. to find ways to produce better results in a more predictable fashion in one that doesn't require additional federal resources? is it that we are creating too many demands upon the commission at once? is it that we need to work together to reprioritize some

of the thing soss we're making sure the important critical things affect good economy and job creation, that we're emphasizing those and other items? is it duplication? are we asking too many agencies to do too many things? but when i'm out in my district it's not just the s.e.c., it's agency after age sifment we are under a mountain of new uncertainty. i hear it from banks, small business owners and we're expecting these people to create jobs. how do we work together to resolve this in a way that can reduce expenditures and agencies like yours and promote certainty in the economy? >> i guess i have a couple thoughts about that. one is on your point about regulatory uncertainty. i absolutely agree it impacts the willingness of businesses to take risks to invest because it is uncertain what the reward might be or whether they might not p be able to follow through on something they've started. and that's intentioned with -- it's in conflict with our

desire to get these rules right. so when congress passes a statute and asks us to implement something like the voker rule, when we get that done there will be some more certainty. but it's taken a long time to get it done because we want to do it the right way. so there is i think always going to be a certain amount of uncertainty coming from washington that makes it harder for businesses to plan and perhaps there's more now just because of the volume of work that's come to all of the banking and financial regulatory agencies as a result of dodd-frank. on the small business aspect, we are very focused. one of the -- not dodd frank things that we're working on today are areas where we think we can relieve some of the burden on small businesses and capital formation while at the same time not reducing really critical investor protections so people are comfortable allocating their must be in the market but that small businesses have is the

opportunity maybe to get their feet on the ground before they are subject to the full panoply of federal securities regulations through ideas like onramping and scale disclosure. we're looking at things like whether the 500 shareholder trigger for public reporting is the right number or it should be higher and higher for community banks, for example. and looking at restrictions on communications in the offering process. so we have a full plate of small business capital formation initiatives that we are looking at. we are also looking in areas within the s.e.c. where we can cut spending, where we can save money. we have two things in that regard. we have a continuous improvement program one of the recommendations out of a large study that was done of the s.e.c. by a boston consulting group was to create a continuous improvement program. and through that initiative and as well as others we've identified $8.3 million in savings just over the next two years.

with a relatively small lift in terms of other savings that we think that we can find. and then we have in our technology group a very conscious effort to spend money to save money. so if i can give you an example. we spent $7.6 million to replace 500 servers with virtual servers. we will recoup that 7.6 million in 16 months and over the next 5 years we will save close to $19 million. we can take that money and redeploy it towards better, more useful purposes within the agency and we're doing that on a consistent basis throughout our program tightening up contracts, putting in higher service level agreements and performance metrics that will allow us to catch problems earlier, contract support agreements. and therefore lower our costs of delivering technology. so it's a long-winded way of answering multiple parts of

your question but the last thing i would say is that of course while this is not -- we must be good stewards of the appropriation that we receive -- our funding is fully offset by fees that are paid on securities transactions, about two cents per thousand dollars of transactions. >> and i noted that in your testimony and certainly i appreciate that. and i also appreciate your acknowledgment that many of these investors and these businesses and folks that we hope will create jobs are dependent upon or affect bid the regulations coming out of the s.e.c. and other agencies. so our ability to work with private industry and to come up with regulation that is make sense, that are acceptable, that create certainty, i think it's just really critical towards getting our economy back on track not all the folks on this panel were supporters of many of those things that were thrown your way so we know some of these are politically devicive topics but in general

i think we could agree across the aisle and across executive and legislative branch that anything we can do to create a certain environment will help capital flow and help put people back to work so we've got to be partners on that. >> i agree with that and wherever we can we think about whether we can scale disclosure, we can delay implementation dates and do other things that put less burden on small businesses while of course being conscious of the fact that we want to protect investors because fraud in this area will not help anybody. >> certainly. so i appreciate that. and then i had one other question related to some of your proposed rules related to conflict minerals and i don't know if you recall last year when you appeared i asked you about this as well. there's a concern amongst some companies in the country related to really minimal amountses of materials that are very increasingly difficult for a small device manufacture to be able to track and just a few

questions just buzz through them and you can answer. what are the anticipated date for the adoption of the final rule regarding conflict minerals? has there been any conversation given to setting clear guidelines for the amount of a conflict mineral that would trigger the proposed requirements? and i think last year we discussed if it's possible to create some sort of deminmuss level in which there had been enough latitude given to the s.e.c. in federal statute that allows you to do that? certainly there's some broad discretion in terms of implementation of these amounts. and then also, would the s.e.c. consider moving to a category for indetermine nant original for situations where no origin can be determined in these minimal amounts? is there a way that we can resolve that so some of these companies that make small devices? for example, i have garmen in my district who is affected by this. are there situations where companies like that could work

with the s.e.c. to come up with a rule that was actually feasible to be implemented? >> congressman, as you point out, this is a particularly complex rule again a fairly prescriptive statutory provision requiring companies to disclose whether there are conflict minerals in the congo. we missed the deadline on this quite some time ago because it is so complex and so out of the ordinary for the s.e.c. commissions working to finalize the adoption, and i'm hopeful we will be done. we have met with many industry participants as well as many ngos, the jezzwut conference, the conference of catholic bishops, people on the ground experience in the congo and understand as i think we all do the good intention, the important intention behind this provision. and so we're working to finalize it.

we held a roundtable where we could also hear from industry about the particular issues that they were concerned about. i don't believe a deminmuss exception is possible under the statute. and but the rule will try to give latitude and flexibility in some areas that i think will be helpful to different kinds of businesses in order to comply. we will have a phase-in period. i don't know how long that will be, to give sufficient time to mechanisms to be developed and put in place. we are looking closely in terms of guidelines. so it's still a bit of a work in progress. >> i appreciate your efforts to work with the industry to try to find a rule that can be workable and feasible and certainly the conversation we're having previously relating to just that uncertainty, this is another thing that affects private

industry's ability to create and grow jobs in this country. so these rules frustrate and affect sometimes very negatively some of our folks that we are asking to grow and be great companies. so anything you can do to resolve these in a way that actually -- sometimes these companies look at these rules and say i can't explement this. this is just infeasible. and your response may be congress needs to give us new direction. the law was written very prescriptively. in some cases it's just an impossibility for some of these companies way down the chain with a very immall amount to track all of this back to the point of origin. you can imagine the expense and effort and not understating the impact to the region that we're trying to protect and make sure that this is not happening. but the effort to sort of pin point every single mineral that's coming into a small device, multiple steps down the chain can be very cumberss and difficult.

but thank you for your efforts there. thank you. >> i might add that jauvens times these things come about because the people who were righting the laws don't have a clue what it's like to work in the private sector. and that begs the question then , chairman shaprio, with regard to your division or department in the s.e.c. that actually houses your economists, if you will. and i'm curious because i don't know how often you utilized your economists in determining the economic impact of a certain type of regulation. but certainly with regard to what mr. yoder is saying it seems to me that regardless of the intent of congress, that in fact the economic impact on a company such as garmen who needs to use some of those minerals because you can't get them anywhere else or they would become anti-competitive

should be subject to some kind of economic analysis. do you actually ask those folks within your organization to help on this? >> absolutely. we have significantly expanded the size of our economics group in the last two years. they are involved right from the beginning in the cost benefit analysis of the regulation that is we might propose, helping us analyze the cost of different alternatives if those are possible. they help us craft a request for comment on both the cost benefit analysis we do but also in asking industry and others for data that would help inform the public policy choices that we are making. so we have a superb new chief economist in the last year and have built up that function significantly. but they are deeply involved in rule making. they are also deeply involved actually in enforcement and in studies and in helping us do things like reconstruct trading after the flash crash. so they're well integrated into

the organization. >> so would you use them also, for example, to -- this is just, i'm just using this as an example. i wasn't going to bring up the money market issue again. however, within the discussion of the rule making, i mean, do they get involved in trying to fully consider, if you will, the economic impact of those proposed solutions to like broader capital markets or the like? >> yes. they're very involved in the money market fund work that we're doing right now. >> ok. >> and when we did the rules two years ago, implement the increased credit quality and other standards. they were very involved. >> so how many economist doss you have for example versus how many lawyers? >> well, we have many more lawyers and i can get you the exact numbers but we have a lot of phd economists. we actually have 16 offers

outstanding to join the s.e.c. when the school year is over. and we use them throughout the agency. >> how do you find these folks just for example they're aul just finishing their phds right now? >> i think many do this. we attend a big conference every year where lots of candidates come and we can super view many of them at once. the staff will have gone to that conference having read anything those people have written, learned as much about them as they can, select the ones we want to super view and then make offers to them. and we also bring in economists from the industry as well when we have the opportunity to do that. >> i would think the competition would be pretty fierce for them these days. >> the competition is fierce. but again, the s.e.c. because of our market regulation function is really very interesting police for economists because it is not

just -- it's not a singular focus. you can be involved in something like money market funds and mutual fund regulation but you can also be involved in the impact of high frequency trading in our markets and looking at issues around how broker dealers compete. there's so many different facets. >> do they also get involved in review of what might be obsleet or outdated regulations for you? i mean, i know the administration is trying to push the agencies as well as the congress i might add toward trying to get rid of outmoded regulations that are on the books that actually cost the private sector money but yet don't do anything because markets have changed so much or other circumstances have changed. how do you do that review process? or do you?

>> we do do it. we do it now but also already but we also will be doing it pursuant to the executive order that was siped in july that it does apply to the independent agencies asking them to develop a plan for a retrospective rule review. that plan is currently with our commissioners await their comments and their input to it. and the economists will be involved in that as well as the fact that one reason for a big increase for our economics group in this 2013 proposed budget is that the ten-year review of the sarbanes ox liz rules will fall about that time. so there will be an enormous amount of economic work that needs to be done in connection with that. >> can you divvy up some of that rule regulatory review among the commissioners so that each of you that you assign to each of the commissioners, while -- not you because you still have to run the place.

but the other four different responsibilities and then -- >> i hadn't thought about it. it's an interesting idea to have people take the lead on different parts of that and we'll certainly talk about that. >> i'm just trying to figure out that way you have more hands in and trying to get it all done. on the regional office i was please that had you mentioned the review of the 11 regional offices. how do you suspect you will go through the process of trying to figure out whether or not some of those could be closed with -- but not lose the function nalt of what those people do? >> one of the recommendations as you know that came out of the broad dodd-frank required study of operations was that we look at our regional office strategy. and as you can imagine, they grow up over many, many years for all sorts of different reasons. and our regional offices do a tremendous amount of the

agency's work. that's where most of our examiners and our enforcement staff are located. so we want to go about this in a very sort of constructive and thoughtful and careful way. we will analyze issues around productivity, around proximity to industry, proximity to investors, coverage for the country because it's a big country and we're a small agency when you think about it. we're about the size of the d.c. police department but we have responsibility for policing financial markets across the entire country. we will look at a whole range of different metrics. it's being brought up by our enforcement director and head of examinations groom -- group. it is one of those areas we need contract support to do the kind of detailed and in-depth analysis that at the end of the day may say we have it right. may say we are not in all the

right places. and we just don't have any preconceived notion about that at all right now. but we'll need contractor support. and while i would like to focus on just three or four of the bcg initiatives for the coming year, that's one that we will keep our eye on. >> it just seems that i can understand why you would have to have the examiners in certain locations, although with technology as it is and if in fact you're at least perhaps not in the immediate near term but serm in the near future if everything works on the it front, i suspict you can get an awful lot attended to in addition to having your folks come up to a company. >> i went through this in the private sector and we ended up closing one office and actually opening a satellite office in the new york area to get better coverage in new york where the ippedstri was more heavily located. but there's also sometimes

great stability and depth of knowledge and expertise in some regional offices that also has to be considereded. we don't want to lose that. also, some offices are in very -- are in very inexpensive parts of the country so it might make sense to keep an office open. it might make sense to grow it so long as air fares and other conversations to get them to other areas are not exorbitant. so there are a lot of factors we need to look at. rir i appreciate that. >> last year the s.e.c. faced some very serious problems in its leasing policies leading to a policy in the anti-deficiency act. please tee scribe the steps you've taken to remedy this concern and to make sure this problem never faces you again. >> thank you. let me start by saying that i take responsibility for the agency's missteps with respect to leasing a constitution center. and the staff, the inspector

general's report explains a number of the flaws in the process that the staff utilized in determining what our space needs would be. but based on an expectation that the agency would be given the resources to do the new responsibilities under dodd frank and a dubbling of our budget authorization which i understand is not the same as an appropriation, we did go ahead and lease space. we moved very quickly to mitigate this situation. two third of that space has been sublet or released now to other federal agencies that are nonappropriated agencies. the occ and the federal housing finance agency. the fhsa has already moved into the space. one third of the space is left. we are excessing that to the g stnch a. they have informed us that they

have tenants for that space and they are working through that process. we expect to excess it in the next 30 day ors so. i revoked all delegations to staff to sign real property leases and on august 1st of this past year i signed an mou to turn over all of our leasing responsibilities to the general services administration which has deep and long experience, and we will leverage them and they will enter all real property leases on behalf of the s.e.c. on a going forward basis. >> i'm tempted to say that should make the chairwoman very happy but i'm being sar castic. >> i'm sure i understand. i mean, i actually am pleased that you all are giving that responsibility over to the gsa. we'll deal with them on another day. but they are more suited to do it and we all know that.

>> we're little. and it's really the same motivation for us transferring our systems to federal service provider at d.o.t. we can use our resources much more critically for our mission, protecting investors, making sure the markets operate with integrity. and i think it's the appropriate thing for us to do. >> for anybody scratching their head, the chairwoman is very clear and very good at her oversight over the general services administration. >> thank you. >> well, i knew that this -- but she's right. how is that? >> you were being sar castic. >> yes but profoundly sar castic which is a whole different thing. but i do agree with emerson that this is probably where it best plongs and hopefully this will never happen again.

let me ask. i think the s.e.c. has been more vigorous than ever in pursuing wrong doing. however, i am concerned about the various reports regarding the s.e.c. settlement policies with those accused of unlawful activities. in some cases the s.e.c. has obtained settlements with individuals in which they neither have to admit or deny guilt even those same individuals have pled guilty to criminal charges elsewhere. do you think the s.e.c. is doing enough to obtain admissions of guilt in settlement agreements? do you think the s.e.c. can do enough in which an entity doesn't admit any wrong doing? now, we've also seen press reports say that if they had to admit guilt and you could get into some legal proceedings that would eat up resources. but just on the face of it it seems strange to many of us that somebody would do something wrong and would

simply go oops and that's the end of it. and i would like you to tell us why you think that's a good policy. >> our policy with respect to cases where there's been a prallell criminal proceedings and there's been a finding of a plea or a guilty verdict is we do not allow people to neither admit nor deny in the civil preeledings. so that policy changed a number of months ago. i will say with respect to just our purely civil proceedings, this is how we approach the issue of allowing people to neither admit nor deny. if we can get in a settlement back to investors about the same amount of money and penalty that we would get if we lit gated the case without the uncertainty of litgation, the possibility of losing litigation or the tremendous delay sometimes of years of litigation, we think that's a good deal for investors to for us to get that money back to

them much more quickly. and i realize people feeling a bit unsatisfied. they would like an admission of guilt. people won't settle if they have to admit guilt. they might as well just litigate with us and delay this as long as they can. so we do lit gate many cases but where we can get in settlement what we would get after years of a trial if we were to win we think it's a good deal for us. >> but if part of your mission is to try to make sure that what happened that put us into this hole we're in right now doesn't happen again -- and there is, you know, people tend to have sort memories so we're all now during an election cycle trying to figure out how we got into this mess and claiming certain residents at the white house having caused it all. but i remember, unless i'm totally incorrect, that we got into this mess when a lot of things happened in the financial ippedstri.

that had ramifications and domino effect throughout the economy. now, no one is going to be found guilty of anything, then what's to stop people from doing it again and again and again knowing that all that's going to happen is we're going to have to repay what they took, if you will? that there's something missing there. that doesn't happen to a person down the street from me in the bronx. they usually have to pay more than that for stealing a car hfment i don't know if there are any lawyers on the panel. i'm not a lawyer but is this a common practice? >> i will tell you that every other federal agency and virtually every other financial regulatory agency allows the settlement of cases on a neither admit nor deny basis. in fact d.o.j. and others actedly allow the person that's been sued to deny all of the allegations except for the

jurisdiction of the agency. we don't ever allow anyone to deny the allegations. we just don't require them to admit they will. so we actually have to have a settlement posture than most other agencies. if you look at a complaint that we file in a case, we lay out the facts pretty clearly. we quote the e-mails, we talk about the conduct so it shouldn't leave anybody to doubt what it is we believe the wrong doing was and gives a pretty full picture and description of what went wrong. and again we do litigate a lot of cases and we name a lot of individuals in the cases we bring. >> well, let me just close with this. there was some folks in the past including folks in your agency that didn't want any oversight to take place. there are some people in government and there are people in this society who may not in our country who may not want

you to be vigorous in our oversight. so please make sure in doing what you feel is right that you are not opening the door for people to think that they can get away with thippings. because there are plenty of folks out there who would want it just that way under the heading of we shouldn't have too many regulations and they don't seem to understand that some regulations are in place to stop bad things from happening. >> i understand and i just want to reassure you we are a law enforcement agency. we are many things but we are a law enforcement agency. we take it very seriously. we have brought on board a lot of top notch prosecutors into the s.e.c.'s enforcement program so that we can go up against the biggest and strongest and best funded defendants that exist and we'll continue to do that. >> thank you. >> i'm demrad you brought this issue up. you did say earlier in a question that wasn't specific

to this exact issue was with regard to the big bank settlements for example. that you wanted more litigators, and i'm assuming -- let me ask if this is so you could possibly have more opportunities to pursue cases and not have to settle with no consequence. >> sure. i would say now we won't settle a case if we don't believe we're getting the appropriate remedies and we won't bring a case we don't think we could win because that would be irresponsible. but the expectation is as we bring in more cases we will have to lit gate more of them and we need experienced trial counsel and paralegals to support them. >> do you ever contract out for those services? like some agencies actually do. >> i believe we have a paraleel contract. i don't believe we contract

out. and we obviously have expert witnesses from time to time under contract and that is another expense of going to trial. the fact is needing expert witnesses. but i don't believe we contract out any of our core enforcement functions. >> i was just curious. for example, for a certain specific trial that d.o.j. needs some extra help with, for example. i'm just curious. all right. >> i associate mifes with the remarks by the ranking member on settlement because there is a -- we need to strike a very careful balance between settlement and litigation because of the impact it has on what i term some measure of risk. and we have to be careful as they do in criminal proceedings that if you dovente do

something from time to time that elevates that risk by prospective perpetrators, then if you are just settling for what you would normally get then to me it doesn't do anything about the risk factor. so i just make that kind of an observation. you said a minute ago talking about capital formation caught my attention because last year i worked with jim himes on a bill that as you know elevates the threshhold or registration number for community banks from 2500 to 2,000. that same language is coming back in a bill this week as you know. the s.e.c. has the, i guess the authority. it's within its purview to do that within its own. we had 420-votes? >> it was overwhelming. yes.

>> it was pretty decisive. help me with that. >> sure. and let me add to it that we have a new advisory committee at the s.e.c. on small and emerging business which has been a tremendous resource to us over the last six or eight months in looking at a lot of these issues and they recently recommended to us that we raise that 500 trigger to 2,000 for communities banks and 1,000 for other public companies. so this is something we're looking at very carefully and we would have to engage in rule making which may take longer than actually passing legislation would take. but the staff is working very hard and there's a lot of i want rist at the commission in moving forward. >> well, my experience in a short period of time is in being a member of congress. i'm not so sure that legislative activity is any faster or slower than rule

making. i just, i haven't been convinced yet. but we'll see going forward. i was also pleased that you mentioned in your, in discussing cost benefit analysis i mentioned in passing high cost low cost areas. when you add 670-some people in a given year, if all of those personnel additions -- and i know you've indicated they're going to be spread out around a lot of offices but if they were all located in say the district of columbia or in my friend mr. serrano's beloved bronx, we're talking about a sizeable amount of costs associated with people living in some of those locations where as if they were to be in cape gerardo missouri. >> and northwest arkansas. >> fort smith, arkansas. >> no, no. stop it. >> the cost associated with people located in those areas that have nice qualities of

life, cities, communities run by some of america's mayors having been one of those, there's some merit to having people in these areas and help reduce that cost. now, i know it's not a lot in the overall scheme of things but every little bit helps. >> i agree with you completely. and the largest number of flaws would go for examiners who are not in washington, d.c. because there's have very little securities industry in washington, d.c. to be regulating and they would be spread around the country in places from salt lake to forth worth to boston, philadelphia. so part of this regional strategy, regional office strategy that the chairwoman and i were discussing really needs to look at things like where we can most affordably how's and hire people and give them a quality of life as you

point out and hopefully have them stay with the agency for a long time. >> thank you. yeeble. >> thanks. mr. deezeblart. mr. yoder. mr. serrano. well, everybody seems to be good. and we'll let you off the hook early today. do you all have questions that you want to submit for the record? if it's so we'll submit them to you if we could possibly request a response within 30 days. that would be terrific. you don't have to do it by tomorrow. but chairman shaprio we really thank you very, very much. you do have a tough job. and it is a responsibility that few others in this government have. i know it -- so thanks for the good job you do. and our job is to make it easier for you to do your job but please understand that we also want to be as efficient as we possibly can. >> we understand.

we want to be as efficient as we can, too, because then we can spend the money on things that really matter. but i appreciate it. >> well just paying the debt down. you know? thank you very much. >> thank you. >> next live your calls and comments on "washington journal." then "newsmakers" with michigan senator karl 11. after that, president obama's tuesday news conference.

>> hoover stands alone. he's like the washington monument. he stands alone like a statue encased in grime. as one of the most powerful men who ever served in washington in the 20th century. 11 presidents, 48 years from wilson to nixon. there's no one like him. and a great deal of what we know or we think we know about j. edgar hoover is myth and legend. >> enemies, a history of the f.b.i. tonight at 8:00 on c-span's q&a. >> this morning former shell oil president discusses the future of gas prices