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senior women on wall streets in the executive suites of both citibank and banc of america. fortune magazine called her one of the last legal analysts. and she has some ideas. joining me now, is

banks" appears in the june issue of "the harvard business review." pretty nice stuff. this is not like mad magazine -- >> i know. >> i waited through this. you used all of these crazy terms like capitol structure. explain what is the capitol structure of a bank and why does it matter in terms of how you pay people. >> this is how a bank funds themselves. they are shareholders equity and then has quite a bit of debt fixed income that help the banks make loans -- >> the leverage ratio. >> the leverage ratio, and the higher the leverage ratio the higher the risk. >> and when the market began to drop equity disappeared and the banks were essentially

insolvent. >> that's exactly correct. we are essentially conducting an experiment which is if we have another downturn by making the banks less risky is that enough? bypassing dodd-frank -- >> have you read the whole thing? >> yes. >> i read a summary. too many footnotes. >> yes we talked about greed as being a driver but what we haven't talked about a complexity, and these banks are very complex. still highly leveraged. and the article actually started as a note to the board of directors to say your job is hard verging on impossible what are some big-picture ideas to reduce the risk. >> explain how you want to

change the way ceo's are paid. >> i don't know that it is so complicated, because coming out of the downturn we are now paying senior executives more in stock. do you think dick fuld didn't have enough stock in lehman brothers. >> right. >> now tell me when you buy stock, do you buy stock hoping it will go up stay flat or go down? go up. >> right. >> and in order for it to go up what do you need to take? risk. >> right. >> so we have some out of the downturn paying for senior executives stock. and when you buy a bond what is the most you hope for? that you get back 100 cents on

the dollar. so rather than pay executives fully in stock and cash how about stock, cash and debt. >> and say them in the same ratio as the bank capital structure, and therefore their risk incentives or the same as the banks. >> if a bank is funded a dollar of equity a dollar of fixed income, pay the in a ratio of one to one, that executive will balance between i want the equity to go up and the fixed income to go down apay them $40 of fixed income for a dollar of equity. are they going to pay attention to getting back their 40 bucks or increasing the value of their one, right? >> so if in essence they would

be more concerned with stability and not take the risks they took back in '07 and '08. >> jpmorgan i have no idea what happened with the whale or the squid -- >> right. >> what is interesting is that senior management team didn't know about that loss. >> right. this goes to the issue of complexity. >> bingo. here is the point not just if you pay the ceo in this ratio, but if you paid the whale in this ratio, the whale is more risk adverse. >> and the traders running those debts were being paid 20 $50 million. >> exactly. and if you pay in fixed income they will become much more fix adverse. >> what has the response been

within the world of ceo's, the chattering class who worries about these issues. >> i think the first reaction is huh. >> nobody has thought about it before. i head and i said this is one of those epiphany moments. why hasn't this been done? >> i don't know. but it is a chance for boards to modify the plan. there is a bit of a huh, that's worth her article "four ways to fix banks" appears in the june issue of "the harvard business review," if you read it and understand it you get a degree from harvard business school. we appreciate y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y really? no. it comes with a hat. see, airline credit cards promise flights for 25,000 miles, but... [ man ] there's never any seats for 25,000 miles. frustrating, isn't it?

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coming up, major bloom beginning would not like to buy the world a coke at least not one bigger than 16 ounces. and mitt romney may be running for president of a country, and when it doesn't fit anywhere else we put it in the viewfinder. >> he came from never being behind to clench the republican nomination. they said it could be done and against no odds he achieved the impossible. >> today it's romney. or is it? he was born on american soil. guess he wasn't born in kenya, or was he? [ dramatic music ] [ applause ] >> i am also pleased, mr.

president, that when you were wondering these halls as you wrestle with tough decisions, you'll now be able to gaze at this portrait and ask, what would george do? [ laughter ] >> has television been a boom to people's knowledge and information about politics or has it not? >> what did you learn about poverty that surprised you? >> nothing. >> the new now results in some news just being partisan political propaganda. >> he hasn't missed a single opportunity for the personal credit for the no-brainer osama bin laden kill call. >> they introduced a new iphone

app with a huge misspelling. ♪ [ cheers and applause ] >> on the next gavin newsom show: google's sergey brin and anne wojcicki give gavin a hands on look at google's glasses. >>that's facinating.

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i'm reza, culinary manager. and i sea food differently. first he outlawed smoking in bars then banned trans-fats in restaurants. now new york east mayor michael bloomberg is at it again, and if he gets his way it will be

illegal to sell sugary drinks bigger than 16 ounces. why? because more than half of new york city is overweight. if in place, this would be legal, this right here. but this would let's bring in hosts the nationally syndicated radio show ring of fire as well as the web radio program the majority report. all right. sam explain to me under what logic legal, illegal, what is going on here? i don't oppose government regulation, but come on. >> i can't speak to the efficacy of it but the data is pretty clear in terms of children. soda is more or less a toxin, it really is hurting kids. i don't know -- is that somewhat arbitrary, yes, i guess. maybe you could tax the sodas and achieve the same goal but i think the point behind it is not a bad one.

>> i think we could all agree getting kids to drink less high-sugar f-content drinks is probably a good thing. as you pointed out, the real way to do that is as we have done with cigarettes drive up the price. but saying you can't buy it if it's 20 ounces but you can if it is 16 it just means they are going to buy two of these if they want more. this doesn't make sense to me as a practical matter. >> as a practical matter there may have been better ways to do it. they tried to get a state-wide tax on sodas and sugary drinks. but what is the real problem? i also can't buy a 3-ounce soda? >> i don't see this as a fundamental civil liberty issue. i was for raising tax on sugary

drinks as a way to discourage kids. but this i just don't think works, and that strikes me as the fundamental flaw. >> what is the cost here? it may work. it may move the discussion forward. for those people who produce sodas, we subsidize them with our tax dollars. >> explain that. >> we subsidize corn over anything, and that makes it cheaper than sugar or anything really to sweeten up these drinks. >> we also subsidize sugar. >> but not to the same extent because something like 90% of our processed food products contain corn. so we're already on one level already engaged in this type of micro managing of our food we're just doing it in a way that in some ways poisons kids. >> i'm not adverse to the motion

where we want to get kids -- obesity is a problem, and laids to heart disease and all of the things we know about. if you are sitting down and saying i want to deal with obesity, is this where you start? >> no i would like to see bloomberg put more money into schools and have health classes, have more gym class. this is as far as i'm concerned, the best benefit of this is this conversation, but the way people are talk about this if you a black teenager in this city the chances of you getting stopped and frisked is somewhere around 110% if you are walking around on the streets, so there are much bigger issues. >> efficacy is issue number one to me.

the nanny state. we don't want to live in a city that tells us how to drink, what to smoke, what we can do what are the limits in terms of our saying to government come on guys, let me lead my life. >> we're all -- not only are we subsidizing the corn we are paying for the health care of a lot of people that are becoming obese. if you don't like it move to paramus. >> is he going to ban all-you-can-eat buffets? is that next? >> if you show me a data set that all you can eat buffets are

causing obesity in kids -- >> how about there has s a scale, and you get on that scale and if it says you are fat, you can't get a sec helping -- >> no i think you have to do it across the board. >> sam, i think you will be available for the next nationally syndicated radio show ring of fire as well as the web radio program the majority report. thank you for being here. >> thank you, elioioioioioioioioioioioioioioioioioioioioioioioioioioioio >> we're not through just yet, mr. vice president. >> they're swimming against the tides.

coming up we talk to phil angelides, and who reported what

our government did wrong in america's fiscal meltdown. but first let's check in with jennifer grandholm in "the war room." what is up tonight? >> i'm so glad you have phil on. he has been a great guest. perfect person to talk about who is going on today. we have dennis in the house to talk about billionaires buying democracy. and talk about the turf wars between the president and mitt romney today. and then i have former bain capital managing director coming by. that's going to be very interesting, because he contents the rich getting richer is a good thing for everyone in america. that and more at the top of the hour. >> that's an amazing line upof guests. there is a piece of his book in the "new york times," pretty radical stuff. he says the rich aren't rich enough. >> right. can't get too rich.

>> would love to see a debate between him and phil angelides. >> send phil my way when you are jennifer granholm is politically direct on current tv. >>the dominoes are starting to fall. (vo) granholm is live in the war >> what should women be doing? >> electing women to office. (vo) she's a political trailblazer. >>republicans of course didn't let facts get in the way of spin. >>do it, for america. >>(narrator) gavin newsom, lieutenant governor of california, and former mayor of san francisco is on current tv. >>every night on cable news networks everyone's focusing on what's wrong. i want this show to move past that. i love creative people, and with all the vexing problems we have we need creative thinking. >>(narrator) with interviews with notables from silicon valley, hollywood, and beyond.

>>at the end of the day this show's simple. it's about ideas. ideas are the best politics. ideas can bring us together. >>(narrator) the gavin newsom show. friday at 11 eastern/8 pacific. only on current tv. a year has passed since the arab spring swept leaders aside. and while the results are not precisely what we might have hoped, the move towards democracy and freedom is encouraging. assad is reigning violence mayhem murder and cruelty down on his own citizens with over 10,000 killed and countless tortured meanwhile we have been waiting for others to lead. waiting for the russians to join

us in abandoning their ally and by waiting we permit assad's methods to go unchecked placing the risk of another bossnyia in our hands. but there is much we can do that falls far short of putting troops on the grounds. those while symbolic are still important, and those that are actually tangible that will increase pressure on the syria government or provide direct assistance. first symbolic. delegitimate ah said by filing charges against him. isolate russia force russia over and over to veto a resolution before the un security crown council, and provide arms so they can fight

back impose sanctions on any company we believe is shipping arms to assad, and impose functions eakin to what we have imposed on iran. this is no longer a situation where basic humanitariaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaiaia

>>the dominoes are starting to fall. (vo) former two term governor, jennifer granholm, is politically direct on current tv >> what should women be doing? >> electing women to office. and who doesn't want 50% more cash? ugh, the baby. huh! and then the baby bear said "i want 50% more cash in my bed!"

phhht! 50% more cash is good ri... what's that. ♪ ♪ you can spell. [ male announcer ] the capital one cash rewards card. the card for people who want 50% more cash. what's in your wallet? ha ha. ♪ ♪ wall street is still broken. that should be clear to anyone paying attention so what were the lessons of the crisis of 2008 and why haven't we learned them? nobody can answer that report better than former chairman of

the financial crisis inquiry commission phil angelides. i want you to know i make the students in my class read your report because it is hands down the best critique of where we went wrong. what happened. >> in very short order here is what went wrong. let's not believe that wall street wants everybody to believe. this was avoidable. egregious predator lending, a lot of alarm bells going off. it was a failure of public oversight. allen greenspan has convinced people it would equal out, and the regulators were not at their post, and recklessness, unbridled, unconstrained recklessness by wall street firms and their ceos driven by compensation that rewarded them for making the big deal without

regard to the long-term consequence. >> you referred cases to doj, and you said to the department of justice, there are cases to be made you sent evidence to them. >> correct. >> they have been inadequate in following up on that. >> it has been perplexing at best, troubling at the worst. >> the lessons that should have been learned, did we fix any of these structural problems with dodd-frank? >> dodd-frank is an improvement over where we were. but there are two issues here. first of all did we go far enough? a lot of good people pushed it as far as they could, and now as you know there has been this rear guard action for two years, now four years from the crisis where each and every day the banks spend hundreds of millions of dollars, and the derivatives

market still in the dark still unregulated. the voelker rule a modest attempt to try to take some of the riskiest trading out of insured banks, backed by the taxpayers of the us. bottled up with a full scale from the financial industry so sadly little as changed. >> the banks are bigger than they were before. >> they control 77% of the banking assets in this country, the big five have 95% of the over the counter derivatives, $305 trillion in over the counter derivatives. >> you gave a speech today in which you laid out your solution to this problem. you said what we have done isn't enough. what was your answer? >> this takes me a while to get here. because i went through a year

and a half investigatory effort and now i have watched for a year as policy makers and a lot of good people tried to put new rules in place, and i see a financial industry that has learned nothing. they very spared by trillions of dollars, and they have changed not at all, and shown no willingness to change. and they even -- active effort to blame this on on some government housing project. i look at this today and see banks that are too big to fail, too big to manage too big to regulate, and who have enormous political and financial power. there was a study done last year, that show that all of the

claims that would bring us more efficient financial markets, the cost is more expensive than a hundred years ago. >> can i put that in english, big doesn't mean more efficient. >> yes. so i have come to the conclusion that the only way out of this both -- politically and for our financial industry we have to break these banks apart. will rogers said these old wall street guys are fighting awfully hard not to have a cop on their corner, and i think we need to break then up. >> so you would need an act of congress so say we're going to cap you. >> sure. brown has the safe act. he has 33 centers obviously.

we have to build a broader political movement. eliot, i think first you have to make the decision you are going to do it. there are plenty of ways to break them up. when you broke up standard oil they could have done it geographically. they should not be in the over the counter derivatives business, they shouldn't be underwriting securities. first make the decision you are going to brake them up -- >> once you make the decision there are many ways to do it. i want to end on this one, there are people from the left right, and center who have come to this point who say that what we're doing, run an investigate bank and said this is bad for america for all of the reasons you just articulated. you have ten seconds to make your closing argument. >> [ inaudible ] -- >> beneficials as well. >> and the same talent pool out there will be there and more