>> reporter: alan schwartz who succeeded cayne as c.e.o. in january of 2008, told the panel leverage wasn't the firm's problem. he says the fault lies with an over-reliance on credit ratings of those complex mortgage-backed securities. >> the lack of transparency in the instruments made it impossible to determine which ones on anybody's balance sheets were actually very risky versus less risky, so there was a reliance on ratings to figure out what somebody's balance sheet looked like, and then when the ratings failed, there was no other way to distinguish who was holding risky instruments and who as holding safe instruments. >> reporter: regulators were also in the spotlight. the securities and exchange commission oversaw the big five investment banks, which included bear stearns. former s.e.c. chairman chris cox says regulators didn't have the muscle to reign the firms in. >> you're going tell goldman sachs, and you're going to tell morgan stanley, and you're going to tell every one of these firms, you don't understand your own risk models

yesterday, when james cayne and alan schwartz testified, i ask them what they thought of the idea ofrequiring investment bankers to take some of their fees and the securities they had and whether that might enhance the diligence and align the interests seven vans -- investors more closely with those of the underwriters. of course, they both said that sounded like a great idea but mr. cayen said they would not like it. , about the investment bankers. i want to hearken back to your successor at goldman sachs y s a similar question of that our first hearing in january. he said that we could take those securities but we would hedge them. essentially, there would not have the exposure to it. they3Ñr all idea it would for tm to be long on and so in your underwriting obligations when you are representing that these were sound investments, you'd be side by side with them in the long haul. all this leads me to a question which i really think there's more on your experience at goldman sachs and on the street that the treasury. -- than at the treasury. how could such a motion be implemented in

alan schwartz, former bear stearns executive speaking right now. jimmy cayne the former ceo just finished his remarks. we will monitor them and bring you the headlines as news warrants. tyler? >> all right, thanks very much, sue. welcome back to "power lunch" our next guest has a hand in diverse economies including banking, real estate, autos, hotel, travel, the whole thing. here with me exclusively from the business council is robert johnson. mr. johnson, welcome back. good to have you. >> tyler, thank you very much. >> we'll talk about the business council survey which was just out, but you have heard over the past 36 hours from the president and the chairman of the federal reserve and the head of the omb and the treasury secretary, what is your sense of where they see the country right now economically? >> well, they both see, all of the above see the economy as growing and becoming very positive in all the indicators. the same thing is shared by members of the business council. they see jobs beginning to increase, they see inflation staying dow

and yesterday wind james kaine and alan schwartz, the last two ceos of bear stearns testified, i askedthem when they fall of the idea of requiring investment bankers to hold, take some of their fees and at show securities they create what it that might enhance the diligence and align the interests of the investors more closely with those of the underwriters. and of course they both said the sound like a great idea but mr. kaine said, you know, they are not going to like it. [laughter] about the investment bankers. so, and i just want to hearken back to your successor at goldman sachs who i asked a similar question of back at the first hearing in january and he said well we could take those securities that then we would do ase hedge them and essentially not, you know, not effectively have the exposure to lead and of course i said well, the whole idea would be to be long, so that in your underwriting obligations when you are representing to investors these would be sound investments you would actually be side-by-side with them in the long haul. so, all of which is to lead me to a questio

yesterday and when james kane and alan schwartz the last two ceos of the bears stearns testified i askedng when they thought of the idea of requiring investment banks to take some other fees in the actual securities that trade and whether that might enhance the diligence and align the interests of investors were more closely with those of the underwriters. of course, they both said that sound like a great idea but mr. kane said they're not going to like it. about the investment bankers. would -- i want to hearken back to your successor at goldman who asked a similar question back of her first hearing in january and he said, well, we could take the securities but we would hedge them. essentially not effectively have the exposure to it and, of course, i said the whole idea would be for you to be long on it so in your underwriting obligations representing to investors in these should be sound investments he would actually be side by side with them in the long run. we love so all of which two leave me to a question which i think there's more on your experience at goldman sachs and on the str

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