sec operates. the house bill doubles the review. hopefully, this hearing will be one of the last areas of this gloomy opera. the proverbial that lady has begun to sing and we must now complete our work. >> the gentleman from alabama is recognized for four minutes. >> in response to reading the accounts of revolutions of the accounting manipulations by the lehman brothers' bankruptcy examiner last month, i called on chairman frank to hold this hearing and want to thank him for his prompt response. one must ask, was lehman too big or interconnected to blow the whistle on? the court-appointed bankruptcy examiner has provided us with an exhaustive report on their actions and regulators failures. as we consider how to reform our system, his report serves as both a case study and cautionary tale of what can only be described as a gross of failure. the regulations and powers needed to address the misconduct were in place. they simply were not utilized. when mr. valukas released his report, he unveiled a troubling narrative many had suspect

the sec.>> a fully disclosed it when we were granting csc status because of the statement and we are going to violate the statement and they informed the sec which took no action. >> they stated in that position that it was a hard limit. they subsequently took the view that it was a soft limit and the sec's position was as long as they disclosed it to senior management that the sec and senior management reviewed it which they did, it would satisfy the sec. so when lehman brothers says they make full disclosure they did not do that. >> thank you, my time is expired. >> thank you for being here today. i very much appreciate your report. it is very useful in performing this sort of autopsy to find out more of what was going on and from our point of view the policy implications. there are some real world implications of what happened. people in ohio, california and colorado and other states as well worked their lives, pension funds and ohio public employees, teachers, police officers. and pension

the sec, eg noted that while the sec has had a bounty program in place for more than 20 years for rewardingwhistle-blowers for insider trading tips, they're has been very few payments under the program. likewise, the sec hasn't received a large number of applications from individuals seeking the bounty over the 20 year period. the inspector general also found the program hasn't widely been recognized either inside or outside your agency. and inspector general's indicate although the sec is seeking expanded offer ready to reward whistle-blowers who bring forward substantial evidence about others significant federal securities law violations, the current sec bounty program is not fundamentally well designed to be successful. they call for a long list of improvements by the inspector general to make the application more user-friendly. establish internal policies and procedures to assist the stuff in assessing the contributions made by whistleblowers and making the bounty award determinations. routinely provide status reports to the whistle blowers regarding the bounty implications. tracks the

you know the sec coming after goldman sachs. but, i feel like this is gonna be one of those greece situations. where, you know you initially have this like frenzy at all. the market sells off and any time the market goes down, you have to be a buyer. i inflect goldman sachs. i am short a little bit of volatility. the volatility on friday in may went up about 13 points. and in the back months it spiked about five points. volatility yesterday got crushed. the front month was down about 15 points, and then the back months was down about 2 1/2 points. for people might not understand the volatility game, basically it sounds like you're saying some of the risk is starting to come out of the stock. is that accurate? exactly. i mean goldman is gonna have earnings i think it's this week. and the volatility is going to go even lower after that. for example, the may 160 straddle on friday, i think it closed around $18. and today it's trading around $15. even though the stocks moved a couple of dollars, the straddles inconsiderably. and aft

>> the sec has never contacted me about any of the things i have attempted to learn the sec about. >>u took evidence of fraud. >> i didn't take them in secret letter to them. the foll

>> i am not sure on this particular sec deal. i brought a lot of material on it. -- i am not sure that they had not violated the law by not telling people that paul's and pick the securities that would be in the cbo, because of the ability of the people on the other side to get information. i think there is a bigger problem here, which is you've got too much of our growth in the last decade in finance, and ever since we went off the gold standard, which was necessary for economic management purposes, if you look at we had a global financial economy before we have a global trade economy, and certainly before we had a global environmental and labor surplus. ever since then, economic inequality has increase. the only time the bottom 20% in come increased more than the top 20%, since then, was the second four terms of mind -- set four years of my term because unemployment got so tight. and there were some other support things that were done. i think the fundamental problem is articulated by your friend, a good republican, who pioneer

>> guest: the sec adopted the proposal. there is starting the whistle-blower and paying rewards for people to come in with information and when you come in you to come to career risks and maybe the members of a ticket out of the industry but to come in with a smoking gun e-mail and the transaction but as a fraudulent or with a set of cooked books the government knows nothing about that is worth paying for because it saves the government tons of money and invested resources the would have never figured out on their own and it's not the problem on its small that it gets so big the entire economy it puts tens of millions of americans out of work something as simple as forcing these hedge funds to the trade through many different financial restitutions and have a trade confirmation sent directly to the customers would that have helped a great deal you have a rule that says madoff has to do the trade through five different firms whether it is a big firm, a small brokerage firm and then the customers are getting the conference ma

helpless dissect this, where the examiners at the sec confidence? was this simply an honest case of too much work to do and not able to ferret out every from sir? and should the free market be the first line of defense? if so, how can the sec help them and if not what should be the first line of defense? .. and put competent people in there, nothing really will change because those people can enforce the old rules that we had. now you want to give the more complex rules and give the broader responsibility. how are they going to achieve that? >> host: we better figure that out before they have the responsibility of looking out for an entire financial system and lot and that's exactly what senator dowd wants to do in creating the systemic risk regulator and if they can't find madoff after he caught and and warn them including an mmo with a title, what was the title of your memo? >> the worlds largest fund as a fraud maybe i was too subtle? >> host: u. said u. modeled that after the bin laden memo from the summer of 2001 and yet still you got nothing f

you know, were these examiners at the sec combatant?as this simply an honest case of having too much work to do, not been able to figure out every five. and should free markets be the first line of defense. if so, how can the sec help them? if not, what should be the first line of defense? >> guest: you don't want the counterparty sniffers on defense. we've proven that didn't work too in the crisis. all those checks and balances failed. i would challenge the assumption that the sec investigators are confident because in fact they were not. they're an combatant, not trained. and they didn't understand finance format good and so, they should not have their job. and neither should the banking regulators. not one of them did their job. he missed cds, yellows and if you miss auction rate securities, early madoff, lehman, bear stearns, aig and a whole host of other problems. you can change all the rules in the world if you don't change people manning the agencies and put competent people in there, nothing really will change because those peop

if investors see the sec coming, will they pull out?hat kind of influence is this sec new-found manhood? >> i think the investors really are looking at what the strategies are. they're not looking at regulatory issues that are outstanding and external to what is going on in the market right now. they're specifically focusing on being much more circumvent on the strategies as far as the hedge fund managers and exactly what the strategy is. in fact, they're looking at liquid strategies how much they can negotiate with fees as far as the size that they're getting. i think it's a much more microissue here than a macroissue dealing with the larger picture you're talking about. >> i want you to bring up two points. i agree with you on most points except for the sec regulation. sec regulation and banking legislation, we're going to see two tremendous impacts in the next year or so. in the last couple of days the congress proposed to a banking tax on 50 largest banks. i think we're going to see banks splitting up because nobody is going to want

take a listen. >> the sec is by law an independent agency.ot coordinate with the white house, and we received no advanced notice of any enforcement action. >> president obama is going to wall street thursday to push the plan that would tighten the reins on banks, including limiting predator lending and making banks hold on to a certain percentage of the loans they make. former new york governor eliot spitzer said today the suit against goldman is no coincidence. something he might not a little bit about. spitzer very aggressively went after wall street and won an historic $1.4 billion settlement from ten different financial firms, including goldman sachs. we's with us to talk about all of this. >> welcome to you. let me just ask you to start by explaining to viewers what it is goldman allegedly did in the simplest terms. >> pretend i'm goldman sachs and i teeming you a very complicated financials instrument and i pretend it's a good investment. what i don't tell you is that somebody else chose the elements of that instruments, put it together

why did the sec pick this one?ling among some this might be a tough sell for the sec and gold man sachs said these are unfounded charge, going on the offensive, talking to clients saying this is politically motivated. it's going to be a hard case? >> the sec has certainly set itself up for a situation in which they can't afford to fail. it's a very high profile case. the sec announcing to the world it is prepared to take on the biggest of the big boy. goldman-sachs doing that, too. goldman did have an option to settle. and that's what normally happens in these cases. i mean, presumably the calculation in goldman is that it's such a high-profile case, to settle would be dangerous, but what i think is really interesting about this is the extent to which we are at kind of a cultural watershed, and i think people now are starting to ask in the wake of the financial crisis, with this case crystallizing it, what is all of this for? what is the social benefit of these raids? what is the social benefit of this market? >> b

. >> what did you represent to the sec? >> what we represented it to them was that given our -- the same thing, given our level of revenues. let me explain risk appetites in what it was to put it in context. i do not want to be too technical, but it is important that you understand it. risk appetite was the amount the firm could lose in a year and a still pay all of its expenses in create an after-tax of eight to 10%. >> here is the bottom line. my time is limited. mr. lucas said lehman brothers made representations to the sec that the limits were breached. do you agree or disagree? >> the binding limits was at 8%- 10%. our risk appetite was set at $4 billion. had we lost 3 billion, that would have triggered a 12.5% r.o.e. >> do you agree or disagree with the assertion? >> we were not supposed to go below 8%-10%. >> on the fourth page of the testimony of mr. lucas, he said day design programs to determine if there were historical areas. lehman brothers did not include many of its riskiest assets in its stress testing such a

megyn: the former sec chairman came out with an interesting piece. he is suggesting this thing stinks. he says it was -- they are trying to protect parties who are sophisticated. then he said this was apparently filed without giving goldman advance notice. also without exploring possible settlement. and he says the sec split along political lines. >> the bigger issue is you make the case to the american people. republicans are saying i don't want to fight that hard to reform wall street. suddenly turning against reform versus democrats in the white house. that's the argument main street will hear and i guess they will decide whether they want a party that's going reform the system or one that many happen why it way things have been. >> you raise a good point. if they had taken 62% of the donations from goldman sachs and not investigated them -- >> you are making my case. megyn: alan colmes, thank you so much. one is a pundit, the other is a comedian. wait until you see what bernie goldberg has to say about jon stewart and stewart's reply heavily edit

. >> news started out the week cal, about the sec investigation of goldman sachs. a lot of speculation about the timing. beating up on wall street in the same giant wall street firm at the sometime the president is getting ready to crackdown on wall street. rahm emanuel went on the charlie rose show and said that. listen to this and then your reaction. >> how is it "the new york times" knew about in before goldman sachs did, the filing of the complaint? >> i have no idea. >> soon thereafter, literally within an hour or so the white house was in terms of information -- >> everybody at the white house found out like everybody else, when it hit the news. >> when it hit "the new york times." ? >> no when it hit the news. sec is an independent agency, operates independently, nobody at the white house knew anything ahead of anybody else. >> there you go. >> if you google goldman sachs and sec it takes you to barack obama web page where you are invited to sign up presumably for petitions on this anybody who believes rahm emanuel on this >> you think his nose was growing?

here you hit us with an sec investigation for fraud, mr. president. >> second place. >> we have our money back. >> the city of california. >> yeah. >> who gave $1.5 million. a lot of cools gave money, harvard university and microsoft and google as well so what if those companies were corrupt, would they have to give the money back? that's what the issue is now, you guys are wondering if obama should return some of this money from -- >> yeah, it's one of the biggest supporters, close to a million dollars and he's had the c.e.o.'s of these wall street firms into the white house a number of times. he's talked with them a number of times about when we've tried to revive the market and revive our economy. so you have to wonder with close to a million dollars with goldman-sachs contributing, j.p. morgan chase, over $700,000. morgan stanley. if they're all going to be targeted and all the reform is going to come wall street's way is the president in an odd spot having accepted all this money and has to step on their -- the back of their next and s

forget wall street, the watch dogs at the sec have been watching this. oh, yeah ♪ [ music ] >> the inspector general who uncovered this, well, so to speak. >> neil: bernie madoff almost got away with it and we may know why. the folks at the sec were watching this. ♪ [ music ] any questions? >> yeah, lots of them. like porn, why were so many watching porn? according to a memo, some senior staffers at the sec spent more time looking at pornography than fighting crime. one guy in excess of 8 hours a day and he was the top attorney. reportedly visiting website like naughty.com. u porn and skank wire. all right. with us, the guy who uncovered this, so to speak, the sec inspector general, david kotz. this builds on early fears this was just something limited to lower ranking officials, but it went up the food chain. do you know how many were involved? >> we found instances, as we said, 33. i know of 31 in particular since i joined the sec as the inspector general in the past 2 1/2 years. 31 instances in the last 2 1/2 years. some were senior officials. >> neil

what was happening at the sec while our financial world nearly collapsed?l, the folks were supposed to be watching the banks, were watching porn, take a listen. >> some of them were senior officials, enforcement officials who were involved in cases, cases that should have been brought. case that is should have been worked on, rather than having folks sit there and as you said, spend several hours a day looking at pornography. >> we are joined this morning by former sec spokesman michael robinson, he joins us from d.c. good morning to you, sir, how happy are you that you are the former spokesperson for the sec? >> well, i don't know about being happy about it. look, i think when i heard about this news i was both disappointed and disgusted. disgusted by the very nature of what it is and disappointed that, you know, a handful of selfish individuals took it upon themselves to put their interests ahead of those of the investors and taxpayers. that's not their job, their job is to be the cop on the beat and clearly they were in the donut shop. >> it's difficult

the sec has filed charges. the sec charges are civil charges.e not criminal charges. >> that's right. that's all sec charges are civil charges. the sec has no criminal jurisdiction. this has just come out, just came out on friday. but clearly a very big embarrassment for goldman sachs which has been saying we did nothing wrong. as a matter of fact, have a look at "businessweek" from just a couple of weeks ago. in this issue, goldman says, hey, you know, we've gotten a lot of blame for the collapse of the housing market, for the aig problems, for being in bed with aig. hey, we were just doing business. we did nothing wrong. the sec now begs to differ. >> in fairness to goldman sachs, on a lot of fronts, that's true, they were doing business, but this is a specific thing that the sec is charging. that is not business as usual. >> exactly. the sec is saying, look, you know, you cannot tell your investors that a third, independent party is picking the mortgages that are going to be in your investment when, at the same time, you've got a hedge fund t

tonight the sec is in damage control. more on the fallout next. >>> plus, this guy is accused of posting a craigslist ad as a prank on his neighbor. find out how it backfired on him big time. >>> brian, the caps had a chance to close out their first round series tonight against montreal. they blew it. bruce boudreau did not minutes words aft game and did -- after the game and did not hesitate about pointing some fingers. that and highlights of the game that went awry coming up as the news edge at 11:00 continues.  >>> a newly released memo claims some high level workers were watching hours of porn. in the last five years there were 33 investigations. 31 of those while the economy was going downhill. stacey cohan has the details. >> reporter: the come hither pitch of internet pornography proved irresistible for a handful of securities and exchange employees. new details from a three-month investigation by the inspector general were revealed in a memo obtained by the associated press. here are some highlights. an accounta

sec workers caught surfing the net for sex during the financial meltdown. >>> and a dollar a dream. a missouri man down to his last 30 bucks wins a quarter of a billion dollars. >> i got lots of text messages and stuff from my friends, is it true, you know. >> this is the "cbs morning news" for friday, august 23rd, >> this is the "cbs morning news" for friday, august 23rd, 2010. captioning funded by cbs >>> good morning. thanks for joining us. i'm emily smith in for michelle gielan. rescue crews searched, but still no sign of those 11 missing oil rig workers. two empty lifeboats were recovered. the oil rig itself has gone under creating a potential for a major oil spill and sparking fears of environmental catastrophe. terrell brown has our report. >> reporter: more explosions rocked the deepwater horizon oil rig. after burning for 36 hours, it sunk. rescue teams in the gulf of mexico are still focused on locating the 11 missing workers, even though hope for their survival has faded. >> based upon reports from our crew members we met as they came in last night, at the time of the inc

or will the sec bring more? if they do, people will certainly be asking what the sec, the fed, and the regulators knew about these deals. guest: i think it will be interesting to see how many additional cases there are. this case is narrowly focused on this one deal out of a number of deals. as far as i know, all the banks are looking very closely at their deals, making sure their disclosures were accurate, and looking for where they might have problems. as far as the administration officials go, there will of course the scrutiny. i'm sure there has already been scrutiny. congress has had a number of hearings. if there is something, i think it will be some time before we get an answer to that. host: george on the independent line from jackson. . let ms. but the questions and have for our guests. on the justice department, where are they? guest: they are investigating a number of companies, a.i.g., they are also looking at statements that lehman brothers officials made in the course of 2008 when the company was t

the sec's kansas? guest: the sec's case will have to be fought on its own merits and i think for some it is going to be very, very hard to prove. the sec -- the insider-trading investigations often have a very difficult time and and unsettling. in this case it is not being flanked by the justice department and the fbi. it is really on its own. the idea of probable deniability, i think, is still there potentially on goldman's side and it is going to be hard to prove that there was a call -- kabal, a back room conspiracy to play both sides of the trade. but at least in the public arena, goldman sachs lost big yesterday. this is enormous for them. reputation and reputation all capital is what they trade on and if this kind of grilling dissuade people from wanting to work at goldman sachs -- inconceivable as it sounds -- or dissuades clients from going to a firm in the cross hairs right now, you could see how expensive it could be. host: what about the stock of goldman sachs? how did a fair? guest: the sta

we were talking about this agency and the sec. look, here is the sec that does such a great job, it turns out they can actually find porno, but can't find bernie madoff. these are the type of people. >> with clothes off. >> listen, i work alone (laughter) >> the bigger issue, when we look at common sense, let's take common sense, which is not to add another level of bureaucracy that is from a failed business model that can't find their way out of-- >> do you rell think consumers know where to go if they've been defrauded that they know where to go? this way they can have 1-800 number and call up and say, hello, government, this guy told me he was going to charge me $100 and he charged me $500. >> mark, credit is not a social right. >> i don't have a right to defraud you. >> they slapped other fees on and paid it off and shut my account down, it's not a social right. >> actually if you buy the furniture on the installment plan and know what you're paying, you're point the government nanny state needs to tell me. how about the buyer

or will the sec bring more? if they do, people will certainly be asking what the sec, the fed, and the regulators knew about these deals. guest: i think it will be interesting to see how many additional cases there are. this case is narrowly focused on this one deal out of a number of deals. as far as i know, all the banks are looking very closely at their deals, making sure their disclosures were accurate, and looking for where they might have problems. as far as the administration officials go, there will of course the scrutiny. i'm sure there has already been scrutiny. congress has had a number of hearings. if there is something, i think it will be some time before we get an answer to that. host: george on the independent line from jackson. . the reason why i became an independent is because of this very fact. when someone is accused of a crime, and a titular at goldman sachs, the republicans -- are to go to ed goldman sachs, the republicans talk about politics . >> limits of the question in half capi. guest:

we are told that there are only top people in the top program at sec. say that we only had 24 people is to give an edition. secretary geithner said that this brought the financial system to d link of collapse. we sent 50 credit people to the largest savings and loan in america. we had a whole lot less staff. we replaced the ceo and we did that not through regulation but because the power of leverage as creditors. who had more leverage in 2008? the fed? incomprehensible greater leverage. it simply was not used. we have known that this is a common scam in which every major bank that was approached by enron agreed to help them deceive creditors and investors. what happened? there was a proposal before shi'a on when your nation is on the brink of economic collapse, they are engaged in fraud. would you continue business as usual? and they met a lot. they said they only had a nuclear stick, that says that you are a good one to use if you are on the brink of the system. that is not what the said hasted do. the fed is the central bank and they have gotten rid o

>> guest: the sec has adopted the proposal. they are starting with the whistle-blower and they will be paying rewards for people to come in with inflation because when you take and you take risks and may be running a ticket but if you can come with a smoking gun e-mail and the transaction documents under fraudulent or come with a book the government does nothing about that is worth paying for because it saves the government tons of money and resources they would have never figured out on their own and it stops the fraud when it's small before they get so big it threatens the entire economy and put tens of millions of americans out of work. >> host: something as simple as forcing the funds to the trade through many different financial institutions and have the trade confirmations and directly to the customers. would that have helped a great deal you have a rule that says madoff has to do the street through five different firms whether it is a big firm, a small firm and then the customers are getting to the conference and may be

the sec is going after us. why don't you go after the other guys? i'm going to say there is a lot broken here. we have a firm of tens of thousands of people. 99% of them are good. i want to be one of the guys that cleans it up. we'll restructure goldman. derivatives are going away. blah, blah, blah. wouldn't that be a visionary leader at this point and protect his company at the same time and maybe get people a little less angry? >> i think without going into the specifics of what, you know, that goldman does believe this guy didn't do anything wrong but just saying you know what? from now on everything we do you're going to see. we'll list everything on the new york stock exchange or on the chicago merck. there will be no hidden derivatives. we hear the message of washington. jamie dimon does very much of this in his annual report. not all the way. i think we'd say you know what? goldman gets it and right now it feels like goldman doesn't get it. >> jim, we'll take a break. when we come back i want you to give the pulpit to investors, a guy worth $

the sec says that the goldman should have disclosed the involvement of the huge fund guy. goldman says it didn't have to and it wasn't required under the law and that goldman gave them all the data, including all of the lists of the packages of the mortgages to analyze and could make a decision to buy or not based on the disclosure documents. >> the assumption is that the players are intimately knowledgeable about how these things work and that they can look at the disclosure documents and understand what's in them. >> reporter: and that is the basis of the sec's case, that had these sophisticated investors had this information about the participation. hedge fund guy they might have thought twice about getting involved. >> shepard: have you beened in elevator today? >> i have not been. we don't have it was. >> shepard: there are was tv's n the elevators. >> i'm going to jump on line. >> it's coming. the sec i'm -- i'm nor concerned about the elevators, why is "fox business" -- it's the only place in the whole day where you get a moment of quiet and i'm listening to you in

does the sec have a strong case here? >> i've got it tell you, i read the complaint, and it looks very beefy. it does look like they have a very strong case, if they have evidence to support all the allegations that are in that complaint, i would say this is going to be a horse race here. and typically, you know, the sec really blew it with the madoff investigation. they dropped the ball and i think they have a chip on their shoulder. the commission has something to prove here. and by alleging that the golden boys of wall street engaged in this type of fraud, that is very, very significant. >> matt, let me play devil's advocate. if they only made $15 million off this transaction, goldman, why would they take such a risk, assuming these allegations are true, when right now they're just allegations, but why would they take such a risk for $15 million? that's a lot for any citizen, but on wall street for goldman sachs, you know, for the money they make, that's not that much. >> we don't know the entire story here. i've also

or they think their lawyers can outsmart the sec's top guns. who knows. definitely gonna be interesting to see that all unfolds. now, moving on to another viewer e- mail. yeah, i mean he's right. thank you for that e-mail. let's take a look at these numbers. they are very scary paul. those are some scary numbers. i think we are all looking at raising taxes. even on the middle class, even though that doesn't seem popular. i and everyone maybe agrees with keith that they probably hate the notion but they realize that it's likely a reality. yeah. well, thank you very much for sending in your comments. keep them coming because we always want to hear from you. call us or e-mail us. coming up, trader dan deming talks about consumer spending and how it's helping some of the etf's. the sector's clear, captain. seems that way. but they're here. [ beeping ] we have an intruder! 30 meters... 20 meters... 12...8... 5... [ beeping ] beep...beep...beep... i thought you guys were cleaning out here. uhh, we are... we're...uhh...sweeping. yeah, for space aliens. yeah, for

. >>> sec workers in trouble. dozens are caught downloading porn while they were supposed to be policing financial markets. >>> good morning i'm kelley mcpherson some dread it, others don't mind it at all, we're talking about your morning commute. where do you think baltimore ranks as far as the longest commute in major cities? come back to eyewitness news and we'll tell you. >>> things are looking beautiful now, but are we in for a day of rain? meteorologist tim williams has the answer in his first warning weather forecast. eyewitness news starts now. >>> good morning, welcome to eyewitness news i'm andrea fujii temperatures are comfortable. >>> good morning. it's dry for right now. >> for right now. >> as you mentioned, as you alluded to, that may change in the next few hours. calm winds. that's not a bad thing. calm readings ahead of a storm system. doppler radar shows what's on the horizon. we have a few showers to our south. dry air is in place. the rain is not penetrating the metro area. but as the afternoon

the sec, ms. corbett, i think is conducting an investigation of s&p. they conducted an investigation, and found many problems, including staffing levels may have impacted verse aspects of the rate -- various aspects of the ratings process, is that true the sec made the finding? >> i -- i don't know, sir. >> okay. they found that s&p made changes to its rating criteria without publishing those changes? s&p, like moody's has undocumented policies, i'm quoting, and procedures for rating rmbss and cdos, were you familiar with that finding. >> i'm not familiar with that finding, no. >> the sec found relative to moody's that you had nad cat staffing levels which impacted the rating process, that moody's analysts were using unpublished models and moody's analysts could be influenced in their ratings by the fees charged the issuers, that they were unable to find all the records surrounding a moody's rating. and, moody's failed to retain or document certain significant steps in the rating process which made it difficult for the staff to assess compliance with t

, prompting republicans on capitol hill to suggest the sec is doing major damage control right now. congressman darrell issa on the government reform committee issued a statement about this widespread violation of government ethics rules, saying, quote, this stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the sec more authority, rather than exercising its regulatory authority, sec officials were preoccupied with other distractions, of course, some, allegedly. now the sec just released a statement saying it will not tolerate the transgressions of a very few and that every offending employee has been or is being disciplined, and also, we should mention that the sec inspector general david katz will join neil cavuto on fox at 4:00. that's a can't miss interview. jane: and neil does it better than anybody else. he'll get the details. thanks. jon: that's going to be a good one. >>> in a push to crack down on wall streetit hithing a road block on capitol hill, senate majority leader harry reid plans to call a key vote on the fi

the sec charges goldman sachs with fraud. wall street responds saying, this is not coincidental, as evidenced by durbin's remarks in terms of timing for regulatory efforts, explain. >> goldman sachs gets together a pool of mortgages slicing them up sells little parts around the world and tells investors, good investment. unbeknownst to those investors goldman sachs has asked for help in an stemling that pool from a hedge fun. the hedge fund is betting against that investment. playing two sides of the fence. investors were never told that the hedge fund was betting against those investments and made a billion dollars doing it. >> sean: if the people knew that they would say wait a minute you don't have confidence in this. >> of course. >> sean: if they did that, it would mean a major fraud was committed. >> if they did that as charged it is fraud and a very bad thing. >> i that i is in dispute the lawyers will work it out. the audacity of timing is what i call this. it is amazing the white house went out and said nobody in the

had the presidency and these sec in 2006-2008 and the sec did not do anything any new it was going onst: well, fact is, we actually did something. cftc filed a couple of cases against individuals that they thought were manipulating the market and those cases were filed against individuals that they thought of by looking at the types of trades that they had available to them, that that was the case. the problem is, tim, that no regulator -- cftc nor the sec, was looking at the swaps and derivatives markets because they did not have to be cleared. they did not have to report the contracts with anybody. that is what we are seeking to change right now. there is general agreement, whether sec or cftc, that they need to look at those agreements on a daily basis, hourly basis, what ever it may be. that simply has not been the case and nobody did know that there were things going on in 2001 through 2006 that were going to disrupt the marketplace. these credit defaults swaps were around of that time, following the passage of the 2000 commodities futures modernization act -- we saw an increase

as a matter of fact when the sec came before the oversight committee we were surprised as some of theregard to that organization. now, with mr. shapiro, they are more aggressive but need to move within the rules we have and add some but the derivatives, what you find is that it seems as if the market is ahead of the law. and in many instances we find such a fast-paced society we're in, sometimes the -- that we are behind actually the pace of developments in the market. so i think we need to do -- we need to do both. enforce what we have and we probably need to add some additional things. and as my colleague, mr. defazio said, those are the things we need to do. >> neil: are you worried with the best of intentions, what will happen is people will look at the move toward regulation and say the u.s. is overtaxed, overregulated, we'll go elsewhere. we'll invest elsewhere. >> % well, we are still the largest economy in the world. you know, i -- in -- for instance if you're talking about taxing or regulating, britain has a financial transaction tax, hasn't driven people out of the london. p

will the sec's case overshadow his leadership or is this just a hiccup for mr. blankfein? in today's market the smart money is in 4 x. >>> big earn report of the day is goldman sachs. looking at these headlines here, lots of surging across the board. the net nearly doubled to $3.3 billion on a per share basis, that's $5.59. the target on wall street, $4.01. safe to say they blew past those numbers. stock has been down slightly on the the new revenue was up 35% and about $2 billion ahead of expectations. so, will the sec's fraud charges against goldman be the ultimate test of lloyd blankfein's leadership in here to discuss, susan craig who covers goldman sachs for "the wall street journal". glad to have you with us. what's your perspective on how he's coming through this so far? is he gaining support or losing it? >> i think it depends in what -- where you look for that. i think internally and among the constituents be it his board and employees, i think they're sort of rallying inside. i think publicly this has been a very devastating blow to goldman. i think it sort of de

the sec filed suit. those executives were under fire today. from the moment they arrive, goldman sachs employees were under attack. protesters and prison guards called them gangsters. than senators got their turn. >> the damage was widespread. >> of their behavior was unethical. >> you are like a pit bull in loss vegas -- in las vegas -- you're like a pit boss in last las vegas. >> they have the mills that prove that goldman sachs was making bad deals. >> does that bother you at all? >> i did not say that. >> who did? your people did come internally. you knew about it and the e- mails show it. >> considering that goldman may have contributed to the bubble collapses and bright of the profits, is there not a code of ethics asked the senator's. >> i do believe that we were acting as investment advisers for our clients. >> critics say that the two million pages of documents prove that. the benefit is not criminal, they say that it must be exposed. >> we will take as long as it takes to get the answers. >> carl levin says he will wait until after t

when we make it easier for the sec to depose directors when they say directors should be independent, and here are some tests of independence, we know right away if you sit on his board in determining his compensation, he is not independent when it deserving -- when determining yours. the reaction to the flood compensation system we have is upsetting. did sarbanes oxley get it exactly right? no. is it possible to have too much risk aversion? yes. all of these things are possible. but it seems to me the least possible way to preserve capitalism is to have a system where the ceo rex a company walks up into the sunset with his golf badg slung over his shoulder and a multimillion- dollar goodbye. directors are more interested in preserving the nice atmosphere of their country club. first of all this is wrong. remember wrong? there was a word wrong ones. it is not even a relatively wrong. it is absolutely wrong. i think that, to the extent that conservatives do not recognize that, they get themselves in a position where they cannot get heard. that is really one of our problems. i do not wa

they say that this is the sec just trying to win political points. so it was rare for there not to be a settlement, but right now it pretty much come down to going to trial. host: cliff on the republican line. caller: i see this as a sure great to take the blame away from where it really belongs. if you look at the time line, the cra forced banks to make loans that they would not have otherwise made. fannie and freddie created the market which pushed up prices which made everyone happy. people could make money from their house, local governments could increase property taxes, everybody was happy. about five years before this came down, alan greenspan said that we have a housing problem, and. the bankers -- housing problem coming. the bankers knew that this is on the way. to make goldman sachs guilty for doing their job, i think, is wrong. the whole point is to obscure the fact that sarbanes ardsley -- sarbanes oxley changed things. guest: well, you mentioned every key issue in the past 10 years. this financial crisis clearly had all lot of causes, in

what is the sec alleging happened to goldman?s the allegation. they presented a product to the market that was stuffed with these bonds that had been chosen by somebody who was trying to bet against them then they placed the bets themselves. in essence what they were doing was misleading people. that's the nub. accusation, it's a civil charge, nobody is going to go to jail over this. there are questions of whether or not it was illegal. >> the inner workers of these exotic financial instruments, or whatever you want to say, there was sort of an internal battle, that the housing bubble was not going to continue and they raised the red flag but found a way to hedge their bets against the housing market tanking. >> whether you admire them or not, whether you like what they did or not, this is a very big and diverse firm, 30,000 people. some people were in the business at goldman sachs of packaging up mortgages and selling them off to investors around the world. other people at goldman sachs took a different view in december of 2006

with the sec? >> i earlier reaction was last. my reaction with the sec was lower than my reaction with the site and the occ. i can't speak to the frequency of interaction in other parts of the firm with the sec. >> and could you talk a little bit about their approach to supervising that entity? the investment bank. >> would you like me to address that? >> either when for both of you. >> i think that i too saw relatively less of the sec unexpired regulatory context good they were there and a lot of times the regulators did try to share information that would send each other their exam report of different trading desks or different editions throughout the world good and this included not only the occ and the fed and the fed and the occ, but i see on regulators certainly the large regulators would get a piece of that. the sec, in some instances of key pieces of that, but not inscrutably. i would say when i saw them groups of regulators, the fed was always there, the occ was always there. i mentioned t

>> i do not know the degree to which what the sec alleges -- i think the sec was pretty clear in the naming in that suit who was involved. >> but we'll have to go back and let anybody who was -- but will you have to go back and look at anybody who was with goldman at that time? >> i am not sure. >> are you planning to change the way you deal with the press? are you unhappy with it? >> am i unhappy? no. i will say this. i think as long as there is a press, and a press office, there will always be some level of adversity. in the words of the very astute helen thomas. we had a very cordial meeting with the white house correspondents association. we talked to them about -- they changed -- they talked to me about changes they would like to see. i discussed a few things that were of concern to me, not the least of which was the sheer level of support that our office seemed to provide on overseas trips. i think there were some good -- on each side of it there were hopefully some good suggestions that we can all incorporate. >> do you think access is going to change? do you think you are as

the sec says it's already disciplined the offending staffers.oming up on the news edge at 11:00, the stunning amount of time investigators say the employees spent surfing porn at work. >>> the search for survivors for an oil rig explosion is over. they believe the men never made it off the platform that erupted into a giant fireball. 126 people were aboard the deep water horizon rig. workers who made it out alive say these high-tech boats helped save their lives. >> there's enough fuel to operate the boat at six knots which is about 7 miles an hour for 24 hours. there's an air spup ply which -- air supply which gives a positive pressure inside the boat so it doesn't let any smoke or gas come inside the boat. fortunately this type of equipment saved those people. >> the coast guard says it will resume the search if ships in that area see anything. >>> a consumer alert. another car maker recalling tens of thousands of its vehicles. plus, parents of students listen up. we have the list of top earning college degrees. >>> plus, you can call this dog

the chairman of the sec and chairman genachowski has been charged by his boss, the president, and the administration was trying to implement new policies. it just came out with the national guard and planned trying to look at all loads the challenges that we face as an nation and how broadband can address some of those challenges are they see this as a vital infrastructure, which is right. they're trying to encourage investment. they want innovation in the space while this is good but they're trying to work with the statute that is a structure for this area. and i tank when we look at this world of the internet, we know we don't want it to be a wild wild west. we want to be governed by the rule of law. empress really have to determine what other principles for the rule of law and who has the power to enforce and oversee quake >> host: we're talking with tom tauke come to executive vice president for verizon. when he messes jim hart was a technology reporter and also writes the silicon valley pattern. >> or you tom? last week in your speech you talk a lot about how everyone is kind of

>> the taxpayers really believe that the financial meltdown was due to much more at the fcc -- the sec? >> i don't know about that, but i can see how it has some direct correlation. >> he was blunt in his criticism. >> it is reckless, it indicates a contempt for the taxpayer. >> the initial report was first shown in february. this is an update requested by charles grassley, the timing if he is -- and criticized by some on wall street and many republicans. >>> the sec says it has cracked down on employees since the first report came out in february. the latest report found the most recent pornography incident just happened four weeks ago. >>> there is a tough immigration enforcement bill. president obama called that misguided. >> arizona and basically undermines basic notions of fairness. >> everyone here in our state lawfully -- >> the arizona law makes it a crime to be in this country illegally and it felt -- it forces police to question anyone they suspect is here illegally. it will deter hispanics from reporting crimes, and the law could violate civil rights. he has instructed the j

. >>> the sec has been accused of being asleep at the switch as the financial crisis unfolded. it turns out that some officials were wide awake watching pornography on company time. >> in the midst of the wall street meltdown, several sec watchdogs were watching something else, porn, lots of it. >> it is reckless and indicate contempt for the taxpayer and the taxpayer interest in monitoring financial markets. these guys feel they can do whatever they want. we talk about the arrogance of wall street? look at this. >> the most senior violators include a senior attorney in washington, who spent up to eight hours a day accessing internet porn and had boxes full of pornographic cds and dee d -- and dvds in his office. another is accused of attempting to access websites 1800 times at a two-week period, and she had 600 pornographic images on our government hard drive. and a senior enforcement attorney had a drive connected to a computer with the five videos depicting hard-core pornography. >> these guys are at, at no question about it. this will not end unless someone puts a stop to i

the sec is joining the investigation. >>> still ahead, the flying man in the iron suit. he's coming back. we will take you to the california premier of the summer sequel to "ironman." weatherman howard standing by. >> looking forward to ironman and the forecast looking better by the second half of the week. a few clouds now and the rain has helped with the allergens in the air. we will look at the allergy update. it is incomplete due toe rain yesterday. but tree pollen is moderate, grass, weeds and mold with the moisture has come up. full forecast around the corner. almost everything irritates my skin. (announcer) gold bond ultimate soothing fragrance free lotion. soothes red, irritated skin. fragrance free gold bond ultimate soothing. (together) this stuff really works! >>> he has nemeses he's not aware of. he has all kinds of struggles in the lab trying to keep his motor running. so we figured that that would be the smartest way to kind of people -- keep people engaged in tony's emotional struggle and enjoy the ride. >> he is the lead in ironman two. stars were on the