we did two important things in dodd-frank to address this. by eliminating the hiding places from regulation and ending too big to fail. first we gave the fsoc, the financial stability oversite council the authority to require federal supervision of nonbank financial companies that pose systemic risk and required the fed to impose heightened regulatory requirements on these companies, as well as any bank holding company. with at least $50 billion in assets. these changes also leveled the playing field between nonbanks and banks. secondly, if a company does fail, in spite of the heightened requirements in supervision, we also provided an orderly liquidation authority entitle inn title ii of dodd-frank, so that regulators would not be faced with the horrible choice between either bailing a company out, at taxpayers' expense, which we did with aig, or letting it fail to the great detriment of the broader financial system. designation of nonbank companies is a two-step process. the entities must first be identified as nonbank entities and must be

almost two years after the passage of dodd-frank giving the cftc and the sec joint jurisdiction over the swap markets, they have still not agreed on the desfinition of a swap, yet somehow finalize rules based upon swap activities, defining and govern earning swap dealers. if market prarticipants don't know which activities fall under the swap, how can expect to know whether these are subject to the patchwork of registration, recordkeeping, clearing and trading rules, and if market participants do not know if their activities will cause them to be classified as a swap dealer or a major swap participant, how can they be expected to know when to submit comments? this is just one example that i'm bringing out here of how dodd-frank in its implementation have created unnecessary uncertainty in our markets. as the american economy continues to struggle with high unemployment, sluggish growth and the fallout from the ongoing european crisis, the last thing i believe we need are self-inflicted wounds. this includes those inflicted by congress, regulators and most recently poorly conceived tr

>> go ahead. >> will you vote to repeal dodd-frank? >> we've tried to look at dodd-frank and realize which portions need to be modified, changed, improved upon, reform if will you and do so in a bipartisan manner. your opening comment with regards to the jobs bill was case in point. it wasn't a republican initiative. it became the senate the house. i was in the conference committee, i saw how that went through and anyone who believes that bill is perfect the way that it is and should not be reformed, i think it would be remiss in understanding how the legislative process works and was it good for the marketplace. >> what part would you repeal? >> as much of the part doing damage to the economy you talk about the volcker rule. i don't know where anyone made the comment that pro pry tree trading was -- i've not heard any expert come to the panel and say the fact we don't have more consumer protection is we have a lack of '08. these are all things out there that said how can we add to to a bill and they threw it in to a 123 page bill to t

that included portions of dodd/frank. anyone who believes that 2,300-page bill that was rushed through and the derivative sections added literally at 3:00 in the morning, because i was on the conference committee, su sau it go through, believes that bill is perfect and should not be reformed i think it would be remiss in understanding how the legislative process works and what is good for the marketplace. >> would you vote to repeal it, though? >> i would repeal parts of it that are doing damage to the economy and incurring uncertainty in the marketplace, parts of it also that have nothing do with what brought us this situation. you talked about the volcker rule. i don't know where anyone made the argument that proprietary trading was the cause of '08. i don't have an expert that said the lack of registration of hedge funds was a cause of '08. the i have not heard any expert come to the panel and said the fact we don't have more consumer protection through another agency was the reason we went through '08. these were all

there is no assign yaigs for sfis in the dodd-frank bill. we're leaving those kind of threats and identification up to the fcoc, and i agree that the crisis that we had a few years ago, the j.p. morgan situation, certainly got to be avoided but we got to make sure that any additional regulation for our financial institutions, including both banks and non-banks will not stifle the growth of our economy and the creation of american jobs. that is the most important thing before us today. we have got to create jobs. we have to get this economy better. we got to also make sure that the forces that generate the capital that, disburse the capital, that lend and keep this economy going is not put in a straight jacket. i say that as a proud sponsor of dodd-frank and also as one who understands we got to make sure that the abuses don't happen, but all i am simply saying is it has got to pass that delicate balance test foremost economic growth, not be stifled. now, we're making great progress here. jobless rate is coming down, all of this, so all i am

in writing and passing the dodd-frank two years ago, i believe we created a sound framework. i state i believe we created a sound framework that would allow us to stay ahead of the curve with the systemic important institutions basically to make sure that we regulate them and also that we do a lot of the enforcement that needs to be done. it's not just regulating them, but how are we going to enforce them and what action will actually be taken to make sure we don't develop additional crisis and that we solve the problems. this framework will allow the regulators to work with the market to participate in creating efficient and secure regulatory structures. at the same time it will allow the market to continue to operate in a free manner that will not be dictated by the needs and deems of the regulators. finally a firm does not run into trouble. the market has the confidence that the mistakes of a few will not impact it the actions of many others. and that's only if the action is taken and it's brought before us to make sure that it doesn't affect a lot of the consumers or indi

according to a recent report regulators met only one third of the dodd-frank rule making deadlines. while there is no question that the rule writing process mandated by dodd-frank makes it very difficult to meet some of the deadlines, the regulators share culpability here. for example, all the cftc and serk have proposed numerous new rules from did he active tifz, they have still, still not proposed rules that clarify the definition of a swap. let me repeat that. almost two years after the passage of dodd-frank giving the cftc and the sec joint jurisdiction on the swap markets, they have still not agreed on the definition of a swap yet somehow they finalized rules based among swap activities defining and governing swap dealers and major swap participants. if market participants don't know which of their activities will fall under the swap definition, how can they be expected to know whether these activities will be subject to the patchwork of registration, record keeping, clearing and trading rules? if market participants do not know if their activities will cause them to be classif

dodd frank go far enough or should we have done more to take apart big banks? i know the amendment allows for breaking up banks based on very high standard of risk. should they just be smaller? >> so, what we'll be doing as we implement dodd/frank is to impose higher capital and other standards on the largest banks. we will be doing that in a graduated way that imposed the highest capital standards, for example, on the largest banks and less stringent capital standards on the smaller banks. so we'll have the effect of tilting the incentives away from becoming large simply for the sake of becoming large because the largest banks will be subject to even the capital is your charge eventually once the is your charge is implemented in the u.s. so whether it will work or not, i think, remains to be seen. we have a lot of work to implement that. but for now, it is going in the direction of putting in the requirements and less stiff requirements for smaller companies. and that is what we're implementing now. >> why have, apparently, entirely discreet lines of business

now, dodd-frank does give us the mechanism to do that. it's whether we have the will going forward. now we have even larger institutions accumulating greater risk and concentration, so the will part will be even more difficult to come forward. what the proposal i put forward says is let's take these high-risk activities and let's move them out into the market and let the market be the judge there. and the part that was meant to be protected by the safety net, the payment system, the settlement system, the intermediation process, let's allow that to continue to be protected. but we take these others where the subsidy has allowed the leverage to move up and take that away, then dodd-frank becomes even more, i think, powerful in the sense of resolving institutions that in fact fail with the next crisis. and i think that's where we have an opportunity to strengthen our hand going forward. and i want to comment on the fact that if you -- people say if you take this away, we won't be as competitive, but in the '80s and '90s before the repeal of glass-steigel, the united states had the mos

dodd-frank has a lot of very positive aspects to it. i think improvement of capital ratios, capital planning, resolution planning, lick we digs authority, improvements in government and risk management. those are all positive aspects. i think the financial system is much better off for many of those. but you did a great job in your testimony laying out some of those. frf the standpoint of mr. frost, real solution. even though we're not in a lot of the businesses, senator, i think it's a

we put out a second proposal. >> i know how this all came down with regard to dodd frank. normally during a thoughtful and deliberative piece of legislation i think the fed would be responsive to what that legislation is. i'm not sure whether we are talking about the same thing. i know there was concern by the industry, various industries when there was talk about the fed being able to designate nonbank financial institutions. so there was specific amendment adopted into the law. what it said was engaged in financial activities as defined under existing law section 4 k of the bank holding act. now the fed has gone beyond that because here in dodd frank it describes predominantly engage in financial activities is described as section 102 a 6 to mean a company that derives 1 or 2% from activities financial in nature. in section 102 b further provides that the board of governors shall establish by regulation if a company is predominantly engaged in those sections as described in action a-6. it seems as though it is laying out pretty clearly in the statute that financial activ

gibson, title i of dodd-frank defines a non-bank financial company as a company that is predominantly engaged in financial activities. however, there has been some confusion over what it means to be engaged in financial activity. doesn't this confusion need to be resolved before fsoc can start designating non-bank financial companies for supervision by the federal reserve. >> the federal reserve has a proposed rule out for comment that would define the phrase in the dodd-frank act activities that are financial in nature which defines the set of non-bank financial companies that are possible to be designated. we issued a proposed rule in february of 2011. we received a lot of comment on that proposed rule. in response to the comments we issued a supplemental proposed rule in april of this year that clarifies certain aspects of that definition, but the fsoc has noted that they don't believe that they have to wait until the federal reserve's rule is final to designate the companies. >> so how do the federal -- how did the fed determine which activities are financial? >> so what we have d

fed has proposed a rule to define financial activity through the definitions and purpose of dodd/frank. it appears that a few additional lists of financial activities that are different from what dodd frank had intended and from those activities defined under the bank holding companies are now included. in other words, dodd frank clearly says that the fed has the authority to define the criteria for falling into this category but it doesn't give the fed the option to redefine terms that are already set forth in dodd frank. so i guess my opening question is, why do you think the fed has this authority to go beyond what dodd frank is explicitly setting forth as far as defining of terms? >> i'm not aware of any ways that the proposed rule is going beyond or trying to redefine terms. i think that the proposed rule which has been reproposed is responding to comments we received in response to the first proposal that there were some suggested changes. and in order to incorporate those, we put out a second proposal. >> i know how this all came down with regard to dodd frank. normally during a

as dodd-frank recognized. they did not appropriately regulate the activities of aig financial products. insurance law and insurance regulators would not have permitted the activities to occur in the same manner within a regulated insurance company. if fsoc names only certain insurance companies it will be picking winners and losers in the insurance industry. some believe naming metlife and other insurance companies would give us a competitive advantage over the smaller rivals. we are indeed, too big to fail. and if we got in financial trouble, the federal funds would be used to rescue the firm. at the other end are those who believe they would be placed in a competitive disadvantage. they would reduce returns on equity for shareholders and impose higher prices on customers. they would have to deal with two levels of regulation compared with one for the rest of the industry. i've been forced to stand on the sideline including all the regulators returned the capitol to shareholders while bank rules prevented us

it's not enough for mitt romney to say that the bill was wrong, that frank/dodd, dodd/frank was wrongcause that sounds like all these rich guys on wall street are going to have their way, and they're going to do what goldman did, which was really a $100 billion investment and they lost $2 billion. edward, your pal mitt romney has to come up with a position that makes some sense that doesn't sound like he's catering to all his wall street buddies. how does he do that, edward? >> i think obama if he wants to get reelected, he is going to have to grow this economy more than he has. and vilifying the banks, vilifying successful risk takers, loading -- threatening successful risk takers with significantly higher taxes, there is no way that is going to produce the kind of growth that will be required to get him reelected. so he can go down this path, but jpmorgan is a red herring. it doesn't solve the problem. he won't get the growth and he won't get elected if he doesn't get the growth. >> i'm sorry, i'm down to 30, 40 seconds. romney's got to have a position, because then people are going

i believe this dodd/frank was sort of shotgun approach. are we going to come back and take some of the pellets out of the bullets and go back to a rifle approach? take some of those back off the smaller institutions and nonbank lending folks? >> so the fsoc regularly discusses existing upcoming regulations part of dodd slash fra -- dodd/frank and i suspect it will continue to do so. consistency across the agencies as they develop their rule making process and that help ensure that any rules that are -- regulations that are promulgated are dealt with appropriately. >> they're not going to make them more streamlined or more appropriate to just the bigger folks who are the problem areas here and alleviate the smaller folks? >> fsoc itself is only -- not a regulatory agency and most of the -- >> certainly could provide some guidance, could it not? >> its members, many of its members are regulatory entities and they do discuss the -- their upcoming regulations with other council members. i don't know what those agencies plans are for -- >> okay

the other part of dodd frank i just mentioned because in a way it's the heart of it, dodd frank says no failing financial institution is going to be rescued. tlt be liquid dated, merged, sold, but the stockholders will be gone. creditors will be at risk the management will be gone. that's different obviously from what happened in 2008-2009 in the midst of the crisis that raised all the questions about too big to fail. there's lots of skepticism in the market as to you're aware. whatever the law says when push comes to shove, the government will act presumably against the law to continue rescuing with government money. i think that skepticism is over done but it's got to be dealt with. and in the case of these big banks, the failure and the management of the bank after the failure gets very complicated internationally. i just want to say that while i'm obviously on the sidelines here, i have been impressed by the amount of effort going on particularly between the fdic and the uk authorities on this issue. where there's a meeting of minds near as i can see in the euro zone generally. b

dodd frank didn't work. >> always less. no dodd frank didn't go far enough. let's turn to bart. good to have you with us. let's cut right to the chase. you have got the biggest banks doing whatever they want to do and until we break them up, it's going to be business as usual. the climate in washington is there's not going to be anymore regulation put on wall street. what do you think? >> in general, i think as regulators we were are sort of chumps. we keep thinking the banks are going to do what's expected but we know what they will do is what's inspected. that's why we need to put the meat on the bones of dodd frank. they passed the law two years ago, but we still, two-thirds of the regulations aren't even in place. the things that jpmorgan was doing, as you say, they were totally legal, but regulators didn't have a view of what it was. that needs to change. >> what can the cf do, if anything, about this? i think it's very little. >> they have done nothing illegal. all regulators will take a look at losses. it's free enterprise. they can lose money. sometimes these things can

some of which dodd frank tries to do, but very awkwardly. the second is to assign responsibility in the government to read the data, analyze it and then disperse the data to the mark place because uninformed markets are markets that are ripe for panic. the third thing is a simple empowering of government to set trip wires. so if trends took you in a certain direction, the government would have the power not to rush into regulation, but simply to say, okay, we're going to stop this process in its tracks. we're going to look at it and we're going to try to think through what it means. is this a bad trend? is it a good trend? do we need some farther reaching regulation? that would have i think given us some hope that the next crisis which i think is a lot closer than many people believe might be avoided or at least contained. i don't think dodd frank gives us that kind of chance. >> we have some questions from the group. >> we're going to squeeze in one question and wrap things up here. it is most appropriately put to commissioner summers and c

so you are saying dodd-frank is not what we thought it would be. >> right. voelker rule has now been delayed, the consumer financial protection bureau which is under constant attack, and then the other thing was the derivatives portion of dodd-frank, title seven, which is now there is an avalanche of new bills which would riddle it full of holes. >> bay i presume you think dodd-frank was a mistake in the first place. >> you presume right. >> what would you do instead? what lessons do we take from the cataclysm of '08? >> it is a fair question and what the governor wants to do is not only repeal it, but replace it. because we recognize something had to be done we just think congress does what it does when it sees a problem is overreact. this is a burden on the private sector. what do you do in its place? obviously transparency is key. also you need to have -- the increased capital was really important that we have those limits that went up there. derivatives have to be regulated, we agree. but they should be simple and predictable without having to hire hundr

it's what has been going on ever since dodd-frank passed.re has been a gorilla war out there in which the largest financial institutions have been doing everything they can to make sure financial regular laces don't get put in place, and if they do get put in place they are loaded are loopholes and not that effective. >> next we turn to new york and krystiia freedland. welcome back inside "the war room." >> good to be with you. >> how is this -- this issue with jpmorgan chase going to impact the overall economy? >> i think the big picture is that jamie dimon really was probably the best banker on wall street. he steered jpmorgan through the crisis and crucially through the precrisis period admirably. and that gave him a real position of strength after 2008 2009. he said if you had been a good banker like me no one would have gotten into all of this trouble. it was about bad management, not about a bad system. and that is why we had seen -- you know as elizabeth warren was suggesting there has been a tremendous pushback from wall street again

there's a reason mitt romney did not talk about repealing dodd-frank today. >> if it reminds them againwhy aren't things different? that's why we changed presidents? >> the fact of the matter is, things are different. i saw your interview with barney frank. he talked the fact there are rules in place thanks to the reform that they've put in place that now makes firms like jpmorgan, make sure that they have the captain so taxpayers aren't on the hook. >> nothing was done illegally and the shareholders took the hit. that's the free market. romney should explain more about the free market rather than say we need more government programs to protect this from happening. >> i talked about something else. he needs a plan. his plan is repeal what obama did. i don't any anyone thinks that's enough. >> and in light of this -- >> but it was designed to be, to stop too big to fail, too big to work, the big dodd-frank bill. >> this is a problem of him getting out of the primaries and having a primary message focused on conservatives just being against everything obama was for. he hasn't really put f

d dodd-frank deals with derivatives, exploding all over the place. continues to explode after the crisis. it may be a smaller volume, but everything is relative. i'm told that 700 trillion of derivatives outstanding in the world today. 700 trillion. and you wonder whether they are all directed towards some explicit protection with explicit risk that can be dealt with by derivatives or whether they are themselves a kind of trading operation. dodd-frank does call upon simplification in that area, tries to put as much of it as possible through clearing houses an organized settlement arrangement. that's fiercely contested by banks. but that can be done with a great mass of derivatives, it'll be a help. other institutional factor concerning what banks can or cannot do is restrain on pro proprietary trading and equities fupd funds, that somehow has my name attached to it. i would only say this n that connection that talked about as truly a risk factor. it is a risk factor. no question. but its influence goes far beyond a particular risk involved and partic

but the rule in the dodd frank act for those firms that could affect the stability of the united states, those firms that could pose such a threat are subject to enhanced prudential standards. >> does it seem prudent to impose bank-like regulations on nonbanks? >> what we have proposed in section 165 and 166 is focused on the banks. that section applies to both bank-holding companies that are both 50 billion and above and any nonbank companies designated by the council. the standards that we have proposed are focused on the banks, but we have been given the authority in dodd frank to tailor the standards to the characteristics of a particular company, a nonbank company that is designated. and we have said that we will use those -- that authorization to tailor the standards as appropriate. >> and has the fsoc conducted a thorough cost benefit analysis on the designation of nonbanks as systemically important, specifically in regards to asset managers? >> so the agencies are obviously concerned about their costs and benefits of their actions and they want to bear in mind that this rule was

that is what dodd-frank attempts to do. we will limit systemic risk by controlling everything you can do increase detail. let me give you an example. chairman mary schapiro gave the challenges of the market-making company rules that we will barred from the day-one offer from office moves. -- subsequent market moves. we will have rules for market that will take out the two. whether we can quantify these things at the level of the individual trader or will we have several traders or the entire trading floor. how will we do this? we will have rules that will establish which kinds of classes other assets -- of assets are permitted to hedge which kinds of risk. can you short the s&p 500 onthis has a huge cost, not just the cost of compliance, but it has the cost of less liquidity because traders have fewer because people will be prescribed narrowly. when people decide it is better to avoid this incredible micromanagement and go somewhere else. this is why i think we have gone down the wrong road here. people do what they want to

instance, amy friend was a general council ever the senate banking committee during bailouts and dodd-frankdd thanked her repeatedly from the senate floor for her work on the bill. in january 2011 she left capitol hill for a financial group a politically connected consulting firm for big banks and other financial companies. when they hired amy friend they noted her work on dod franks and explained she would work for the firm's client on quote the regulatory implementation of the dodd-frank wall street reform which is the 2300 page says one of the most complex and wide ranging overhauls of the financial regulatory framework in decades. next through the revolving door came daniel need chief council to barney franks financial services committee. need cashed out to k street firm hogan lufls in march 211. the firm described him as quote a principal draft person of the dodd-frank wall street reform, unquote. hogan explained that need would represent financial firms quote impacted by dodd-frank. mega bank credit swooes and other firms are lobbying client. friend and need are only two of the exampl

it was eight teachable momen but right now someone like mitt romney would not want to enfce dodd-frank it is certainly a controversial thing with is loss. i would not be surprised to see obama campaigign tried to feed on this with mbe an advertisement pointing out that dodd-frank is not put in place, something like this could happen many times over.. >> julia amidst a owly recoveri economy, you are known for your ergy and enthussm to teaching region for teachg the nt generation not be afraid of business. how do you when part that message when young people see how difficult oan economy this is? >> the youth on employment rate is so high, and we are teaching kids that you do not get to go to work at mcdonald'd'ss or eight records store. -- a record store. we are saying make a job. take your passion and hobbyby and see how y you can start a small businesse have e been scang in america's schools teachining young people in low-income communities thatat they could ta charge of their destiny start a small business. >> it amazing to see the impact you are having. you are started by a forr entr

as a matter of fact, you'd have to wonder what congress' intent was with all of dodd-frank when it was put in place from that standpoint. but what do you think is driving regulators to ignore this cost/benefit analysis and set themselves up for major setbacks down the road? >> i'm hoping that they're not. i'm not privy to the internal processes so i don't want to say anything specific about any particular process, but i think a lot of regulations -- a lot of regulatory processes, more than 100 i believe, were set in train by dodd-frank with a relatively tight timetable, so that perhaps may have put some constraints on the ability to take as much time to gather the data and do the analysis that's necessary. this is one of the issues that's come up with the many questions that were in the volcker rule proposal. a lot of them involved requests for data, which i think is exactly the right thing for the regulators to do. and if it need be that it takes a little bit more time to do the analysis to be able to draw the lines appropriately to really try to minimize unintended consequences and i

dodd-frank created the agency to have a simple mission.s to major sure that the consumer finance markets work for american families. markets like mortgage and credit card and student lending. people should know what they're getting into. people should understand the risks what they're signing up for. they should be able to participate in markets where there are clear rules and where cheaters don't prosper. there's a reasonable set of aspirations. a pretty reasonable set of objectives, but getting it right, just like anything worth doing is hard work and i'm proud to assemble a team of economists and lawyers and market experts and former bankers and i.t. specialists who are up to the task. it's hard but we take it seriously. >> the article by elizabeth warren, in some ways the genesis of this entire bureau, she talks about the consumer product safety commission. consumer product safety commission has to clear products before they can go on the market. she has a great analogy. in you sold a toaster that had a one in three chance of blowing u

do we need dodd/frank?m president of the united states. >> what's your reaction to it? >> that's a very sad commentary. when i think about all of my quae constituents who have lost money. when i think about shareholders all over this country who have lost big time and then i remember all the testimony we had where people actually did a lot of things that i consider fraudulent and wrong on wall street, let me tell you something, i think mr. romney is absolutely wrong, and he needs to rethink this. he really does. we cannot afford to go through what we've been going through for the last several years, that this president has tried to deal with. keep in mind the republicans after the 2010 election, the first thing they wanted to do was to repeal dodd/frank, and they wanted, of course, to repeal the health care law. and we cannot go back to that. we're better than that. >> and yet the fact remains, sir, that dodd/frank has barely been inl pose mposed. >> that's exactly right, and they have done everything they

in fiscal year '12, we asked for 116 new positions for dodd/frank implementation. we did get a very good budget for fy '12. again, not as good as had we been self-funded. but we were very grateful to get an increase at a time when many agencies didn't. the hiring is going on right now for those new positions. and i will say we are fortunately able to attract tremendous talent to the s.e.c. in very different skill sets than we have traditionally had. >> what about investment in technology which is often more than a one-year deal? >> yes it is. and we have made technology investment a significant focus of our additional resources. and have been able to make dramatic improvements, i think, in the agency's core technology. that said, we are still way outgunned by the firms we regulate in terms of technology. but we're making, i would say, steady progress in that regard. for fy '13 when many of these new rules will be in effect and we will have the clear responsibilities for oversight and monitoring of the security-based swaps market, we've asked for an additional 273 p

i think most people don't realize that the dodd-frank wall street reform legislation has not been fully implemented, not nearly. in fact the rules that are being developed by the department of the treasury and the fdic and the other relevant agencies are still being promulgated. not helped by the fact that the republicans have done everything they could to slow down and block president obama's nominees for the staff of the department of the treasury. so it's absolutely the example of why we need to make sure that the reforms that president obama championed and democrats in congress passed are fully implemented so we can strike a balance between ensuring that businesses have an opportunity to thrive, but at the same time that consumers have the protection that they need. and that did not exist before and what's really disturbing is that in part this election is going to be a clear choice between president obama, who wants to strike that balance and wants to continue to champion the protection of consumers and the strength and opportunity for business to thrive. mitt romney wants to do a

those dodd/frank regulations coming out of the fed need five affirmative votes. right now there are five members of the board of governors. so they need to reach complete unanimity with regard to those regulations. when the negative impact, possible impact of those regulations is such a threat, i think that requires unanimity and is healthy and a real protection. these two new members of the fed change the math, change the requirement from needing five out of five to needing five out of seven. i think that will significantly push these regulations to the left, if you will, and require and, therefore, produce less consensus that those with economic viewpoints such as mine would like to see continue. and in the same vein, the fed is certainly significant not only regulating the mega banks, but in instances like two years ago bailing out the mega banks and they have that authority and they have that role. just as with dodd/frank regulations, that requires five affirmative votes of the fed board. again, right now before these two confirmations, that would mean five o

>> well, dodd frank is a common sense law. it was a compromise law, in fact. this was not a perfect law from any direction. it was a compromise law. and for him to say repeal the only law we have, which is to regulate the excesses of wall street, means we are right back where we started from. no cop on the beat. deregulation. let the market do whatever the market wants to do. and that put us right into a recession. so i don't know what he would substitute this common sense language with, but if he say has something effective, he needs to propose the language saying repealing dodd frank puts us back into the soup and the recession. >> before i let you go, do you think this incident is going to have any legislative consequences on capitol hill or any impact on the national debate about regulation of wall street? >> i hope it has an impact on the regulators. the regulators wrote in a proposed regulation, an exception for what they called portfolio hedging. that is such a huge hole that i hope that they do not adopt that kind of a big hole in the law and ignores t

dodd frank seems to be working a little bit. >> in this instance it does. eliot, what this is about, everybody knows that the middle class is shrinking, property is increasing, and the people on top are doing phenomly well. and their effective tax rates have gone down which is one of the reasons why we have a deficit crisis . but what people are saying look, especially on wall street, when these are the guys, dishonesty, their illegal behavior, their recklessness caused this recession that has caused so many their jobs, their homes, their life savings, and now for these same people to be rewarded with obscene salaries is unfair. i think you're beginning to hear a shot that will increasingly be heard around the world, that these guys cannot get outrageous salaries. >> eliot: we both think that dodd frank should have been stronger, and on paper giving shareholders the opportunity to say you're giving away our money and you're paid too much. mitt romney who is now going to be the republican nominee said that dodd frank was an encroachment on our freedom. i don

and my view is dodd frank's motivations are all good. the idea that you can somehow protect these kinds of mistakes i think is wrong. and i think it creates false comfort. it also raises costs because it lowers liquidity in all financial markets. >> which drives the cost of credit. >> yeah. you have to look at this as a one-off event. >> i don't really -- i don't disagree with the notion that you can't protect people from mistakes. i don't think anyone is arguing you should protect people from mistakes. the problem is when you get a market that is so complicated that ordinary investors aren't really playing by the same set of rules and don't understand what financial institutions are doing, you have to provide a system that restores their confidence, that there's some transparency and that there are cops on the beat who are watching if something is not what it appears to be. >> and may i add here, jamie dimon has shown in its complete naked ugliness. i think it's working. >> the s.e.c. is going to open an investigation. >> yes. >> to thi