done not on an industry by industry basis but a firm by firm basis. so, to the degree that an asset management firm is largely -- has its activities in custody and on behalf of customers and as a result does not pose a threat to financial stability, it is unlikely to be designated. to the degree it engages in activities that could pose the threat to financial stability, the council would likely make a designation, but that assessment will be done on a firm by firm basis. >>> will the fsoc evaluate business models, as intended by congress before further pursuing designations? >> so, as part of its designations, the council will look at all those factors you mentioned for each individual firm to see whether or not, in total, that firm could pose a threat to the financial stability of the united states. >> thank you very much, miss chairwoman. >> thank you. mr. royce for five minutes. >> thank you, madame chairwoman. i would like to ask a question of mr. auer, just to get his feedback on a problem i see here, that i don't think is going to go away. and t

to screen out other firms. it's very explicit in stages two and three that the council plans to look at all, to take an individualized look at each particular naub bank financial company under consideration. to look at all of its activities, all of its businesses, the types of business it is in. the types of activities it engages in. so that it can, take into account the specific factors of that firm, of that industry and coming up with a final proposal for the council. >> thank you, mr. gibson. >> so we have made it clear in our proposal that we do intend to tailor the standards to the characteristics of the companies designated by the council. what we've proposed is a single set of standards that's applying to both the bank holding companies and the nonbank companies. but we have said that once the firms are designated, we will consider tailoring the standards and the dodd-frank act explicitly gives us the authority to do that. now we understand there's some nonbank companies for which the bank-like standards

or a small firm very very simple it is the smaller firms even the mature firms when they're not when they don't have the access to capital when they don't have in terms of banks to securitization methods when all they're doing is simply going on the short end and trying to loan on the long and these compliance costs just proportionately more and when it disproportionately affects smaller mid-size banks more which i imagine this is already happening with dodd frank what is the impact of that on the financial system or the economy is there any kind of broader big red flag that you see. there is going to be a wave of consolidation it's already begun to begin again in two thousand and eight but there is we're at the beginning of another one and it's not just failed banks that are going to be resolved by the sea there's going to be a wave of mergers in which it was issued and which is being helped along by tarp the very system that was supposed to have helped these things or at least provided them a lifeline in the first place in two thousand and eight and two thousand and nine. this down

the loss is about:01 of the firm's $180 billion net worth and roughly .0001 of the firm's 2.3 trillions in assets. even with this loss, i believe they're one of the most profitable financial institutions in the country. and unless the facts are diametric little different from what we've heard, there is no risk from this loss to depositors or to taxpayers. they remain a very profitable, viable institution. thank you, madame chairman. >> thank you, mr. back ca for two minutes. >> thank you, madame chair. i want to thank you for hosting this hearing along with the ranking member. i also want to thank both of the panelists for being here with us today to offer their insight on this important topic. as we know in the financial service committee, greenspan came to us many times and said trust them, they noam what they're doing. i guess we're still trying to figure out if we should trust them and apparently we shouldn't have have not have trusted them but we did. one of the biggest development during the crisis in 2008 was the realization how much of the impact could be felt from the collapse

however, the council is very clear that it wants to look in stages 2 and 3 on a firm by firm basis and the rule and guidance lay out a specific framework for it to do so. interconnectedness is one of the elements that the council will be looking at in stages 2 and in stages 3, but it is one of six broad categories of frameworks. the others are size, interconnectedness -- substitutability, leverage. >> how do you find interconnectedness? >> so interconnected -- the council does not believe after much analysis work that there is a single metric or formula that can measure interconnectedness. the council believes that rather than trying to have a one-size-fits-all measure of interconnectedness, it is simply one of the measure it is must look at when it looks at any particular firm and different firms might be interconnected in different ways which is why you can't have a formula for calculating that factor. again, the final determination of a firm for enhanced credential standards and federal supervision is if that firm could pose a threat to the financial stability of the united states w

multinational firms.two or three countries may be dozens of countries, and so collaboration with other countries and figuring out how we would work together to help a large multinational firm fail as safely as possible is part of what is going on now as we work internationally. we tried during a crisis to cooperate and mostly at hawk way we were in touch with regulations in the u.k. and elsewhere but given the time frame and the lack of preparation, we didn't do as much as we would be able to do with a lot more lead time. so i think that was a weakness of international collaboration. for the most part though, the countries cooperated in dealing with the financial institutions based in their own country. aig was an american company and we dealt with that whereas the company to be true european company was dealt with by the europeans. also, there was a lot of cooperation between the central bank's. and i may have a chance to say that more about this, but there were a lot of the european banks that used doll

firm may or may not be designated. that would prejudge the outcome. >> the cart before the horse seems to be the theme for the day. i yield back. >> i thank the chair and the gentleman on the panel. 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 bee

who wish to -- nonbank financial firms who wish to -- nonbank firms may indeed decide to choose not to hedge certain risks, in which case, have we not perhaps concentrated more risk where we don't want it? maybe they will go naked on these positions. and so has that been considered by fsoc? mr. gibson, i will go to you first. >> so, the federal reserve has a proposed rule out for comment on the definition of what our financial activities that would make a firm potentially subject to designation. there has to be predominantly financial, very high percentage financial. >> the activities i described financial or not financial or does it depend upon the motives? does it depend upon the underlying business entity? what does it depend on? >> it depends on the particular activities as they're defined in the current bank holding company regulations for what are permissible activities. some are being used for the definition of financial here but it's a high threshold. a commercial company that does a small amount, hedging or financing, typically would not be deemed freedom it nantly financia

before continuing the analysis, they can provide a firm with all the reasons that the firm may or may not be designated. prejudge the outcome. >> thank you so much. i yield back. >> five minutes. >> and i thank the chair and the gentleman on the panel. to define the financial activity for the purposes of dodd-frank. but it would appear a few additional list of activities different from what dodd-frank had intended 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 doesn't give the fed the option to redefine terms already set forth in dodd-frank. why do you think they have the authority to go beyond what dodd-frank is explicitly setting forth as far as defining terms. >> i'm not aware of any ways that the rule is going beyond or trying to redefine terms. i think the proposed rule, which has been reproposed is responding to the comments we received in response to the first proposal that there were suggested changes and in order to incorporate those, we put out a second proposal. normally i t

>> if any firm makes it to stage three, that firm will be provided a notification that it is in stage three. that begins the process of having discussion with the firm. the firm has the opportunity to provide comments, arguments, and data to the fsoc and the member agencies about why it should or should not be designated. >> the company may have to disclose the information that they've been put in stage three. all they have the ♪ification with no explanation. do you see how that could be for these companies? >> i think that the desire was put in the request. whether or not they would be under consideration while the exact composition of what will be in the notice is yet to be rm

he basically made a goldman-sized bet at a firm that was only a sliver of goldman's size. >> the firm's stock is getting crushed yet again this morning, and mf's credit rating was cut to junk by moody's overnight. >> how can something like this be allowed to happen? how can n e individu completely shape the destiny of this firm and ultimately its demise? >> these two stories on this special ededion ontline. >> frontline is made possible by contributions to your pbs station from viewers like you. thank you. and by the corporation for public broadcasting. major funding is provided by the john d. and catherine t. macarthur foundation, committed to building a more just, verdant, and peaceful world. and by reva and david logan, committed to investigative journalism as the guardian of the public interest. additional funding is provided by the park foundation, dedicated to heightening public awareness of critical issues. and by tfrontline journalism fund, supporting investigative reporting and enterprprprprprpp >> martin smith: it's one of america's most dangerous jobs. >> people have no idea

. >> this rule does not -- as i said, put in place any restrictions or limitations on firms. what it does is it helps explain the council's process by which you will identify nonbank financial entities. >> we leave it up to the regulators to enforce? >> yes. >> what's your enforcement mechanism? >> the same enforcement tools for enforcing the enhanced prudential standards on nonbank companies that we currently have. >> which are what? >> supervisory tools, examinations. >> what's your enforcement? if they're bad actors and do something wrong, what will you do? >> impose upon them written agreements, civil money penalties, the full range of tools we currently have with bank holding companies. >> whenever you designate someone as a sifi, is this going to be public knowledge or something that's internal between your agencies and the individual company? >> the final designation of any particular firm for enhanced prudential standards would be a public event. >> one of the things that i quite frankly like about the dodd frank bill is that each one of these agencies -- or entities

bungled trades cost the firm $2 billion in losses. ina drew headed the bank's investment strategy division. her employees botched trades on derivative financial products in an effort to hedge against risk. drew was regardedad one of the top female sxut executives on wall street. jpmorgan chase has not disclosed details of the trades that led to drew's resignation. but analysts suspect her group made the wrong bets on credit default swaps in london and other markets. those swap deals are used as an insurance against possible defaults on debt insured instruments. >>> the job situation in looking better for japan's college graduates with more of them finding employment this year than last year. the labor ministry surveyed over 4,700 people who graduated this past march. results show that as of april 1st, 93.6% had landed jobs. the ratio is up 2.6 percentage points from last year when the figure marked a record low. the labor ministry says despite the improvement, some 25,000 students are estimated to have graduated from college without j

is a pita obviously along i he was working with the firm at mann financial before it spun out he came from peta. you see before he went to work for man financial so he's an accounting expert he's actually a sort of a technical guru kind of guy and if they were doing something special with regard to the sovereign debt trades that corps and did himself or if they were hiding something or not managing it well he's someone that should have known because he's worked with other companies in that situation so what's the message we should be taking from this that we need a different system of auditing or of happy hiring auditors or allowing them to work for certain periods of time. well i think we definitely shareholders and the citizens need to be more skeptical they're not necessarily friendly they're also looking to maintain relationships and make fees so there has been talk about auditor rotation not letting an audit firm stay with a company for too long that may or may not help but in this case the best case scenario is that they didn't raise their hand when things got out of control whe

, a very small number of firms to use it to compute the market risk. we make them back test and provide us with tul full information about why their estimates of losses were so far off. >> thank you. >> senator schumer? >> we heard a lot of people being critical. why didn't you know more about this. that takes staff. it's one of the reasons things are taking longer than they should and run of the reasons you're not everywhere. that would have allowed all of the little levy on transactions, supposed to fund the sec. we had a fight here in the appropriations committee insisted on not doing that. they've increased your funding, but not to the extent it would have been under dodd-frank. so could you talk about the funding issue and how vital it is, especially in relationship to the oversight you're being asked to do by everyone on both sides of the aisle? >> as you point out, we've been asked to take on very significant irresponsibilities. not only the county derivatives but hedge funds that are overseen by the se skrrc. they will add many new registrants.

>> if any firm makes it to stage three that firm will be provided a notification that it is in stage three that begins the process of having discussion with the firm. the firm has the opportunity to provide comments, arguments and data to the fsoc and member agencies about why it should or should not be designated. >> so a company may have to disclose this information that they have been put in stage three but all they have is a notification with no explanation. can you see how that is untenable for these company snz. >> i think that that desire to create a stage three was put specifically at the request of companies in the comments that we have received on the various stages of developing the rule where they wanted an advanced notice of whether or not they were up for consideration. the composition of what is in the notice is to be determined. the council can't before finishing the analysis provide a firm with all of the reasons it thinkathize firm may or may not be designated. that would prejudge the outcome. >> the cart before the horse seems to be the theme for the day. i yield b

global auditors have seemingly escape scrutiny from regulators and investigators in that firm's bankruptcy. what's that about we're talk about it and we all know that jamie diamond has egg on his face over this two billion dollar trading loss the london whale last look you can see there he's quite literally has egg on his face that's what protesters did to his photo reportedly but did his reputation and j.p. morgan's reputation allow the bank to escape scrutiny it's an interesting question and here to answer that and more is francine mckenna she is author of the blog read a regarding the auditors and a columnist for forbes and american banker and she's done a really good interesting work on all of this stuff and first of all francine thank you so much for being on the show and welcome to capital account thank you thanks for having me absolutely now let's just touch on facebook because we cannot avoid it today it is everywhere we've talked about it on the show before we've talked about it with people like reggie middleton who was not enthusiastic about this company at all said this is a sto

but if you look, pena worked at a private equity firm, as well, and is a manager at a firm responsibleng thousands of jobs. so if obama feels people who work in private equity are evil and engaged in vulture capitalism, why doesn't he distance himself from pena? it does not make sense. >>eric: and we pointed out a couple others two guys that worked as part of president obama's jobs council, and, then, john that -- jonathan lavine who is at bain capital and no one mentions him. >> if you look at the numbers, obama got over 3.5 million in 2008 if -- for the election campaign from those who work at private equity firms, so, last week, obama is talking about how evil private equity firms are but just a couple of hours after me says that, he went to new york to a campaign fundraiser, $35,000 a plate fundraiser for himself. can you hear me? >>eric: i am agreeing. michelle, once every week or so i get new e-mail from someone from the obama campaign saying, sarah jessica parker, george clooney, send me $3 and you could have dinner with me. >>guest: the people at fundraiser if new york, arrange

the firm does. but then there's a compliance program and the regulators would -- >> but the whole point of the rule is ultimately for you to set bands and say this is permitted and that's not. and that's the purpose of the rule? >> it is, though, as written, it's -- i would consider it more a principles based and compliance regime that the firm has to have policies and procedures to ensure that their hedges are reasonably correlated to the specific risks. >> but again, i think the ultimate question in hedging is a question whof gof who gets to decide. there's an inherent risk in hedging. there's always some residual risk and there's always a subjective judgment call in large, complicated liquid markets like ours. there's a lot of options for anyone that wants to hedge any given portfolio. my concern that goes to the heart of what dodd/frank is all about. i think they are given an impossible task. and the task is to micromanage the activities of these institutions. that's what dodd/frank attempts to

-either ietween firms.nopolize or t aual t ofonopizin dfoexampl tre havbeen mes in the past where a company controlling a large percent of the sports shoe rket dels a gazine and th runs spting s evuaon and happe rthhe bt. so that noing just a bett product obung a tt map ah toelbusein a scheme so that they pture the market without s inteed tcr. and kwhatctions the grocery chains pe to ha taken. the qution, of crse,is did te the sherman act? >> the grocers here would undoubtedly argue that while they did get together for some casual shop talk, there is no direct evidence that ty agreed to fix prices. that could be an obstacle to the government, because the sherman act does require evidence of an actual agreement to fix prices. >> but horizontal price-fixing occurs when competitors agree, either explicitly or implicitly on what prices they'll offer their goods and services. rties rarely put price-fixing agreements in writing, but courts can infer such agreements by the mere conduct of the parties. >> the condu

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firm. several u.s. media reported the ipo is scheduled for may 18th. >>> nissan motor and its french partner reno are planning to jointly invest about $750 million to acquire a controlling stake in russia's largest carmaker avtovaz. the nissan renault alliance will set up a joint venture to purchase 74.5% of avtovaz's stocks. it is schedule for completion later. carlos ghosn said it will help modernize the leader of russia's auto industry. four years ago, renault acquired 25% of avtovaz's shares. renault has been negotiating a larger stake in the firm as part of its strategy to boost its market share in the emerging economy. russian automakers have not kept pace with the growing market and have been slow in developing new models. analysts say the russian government is hoping to revitalize its car industry through foreign tie-ups. >>> with the rapidly aging population, japanese companies are looking for new markets for their products. one company is looking to sell its products to muslims overseas. that

i wish i owned a private equity firm. however, what we want to convey to the american people is this is what he did for a living. given what he did for a living putting people out of work making millions of dollars for himself, should we then put him in the white house. it's as simple as that. it's not about attacking private equity firms. it is pointing out what this man has done for a living. >> ari, in your opinion is it about attacking private equity? is it hypocritical? >> yeah. that was one absurd sentence after another. even the president's former top economic adviser, steve ratner, who came from the auto industry to help bail out the auto industry, called this ad unfair. and it really is. it's unfair, but it's worse than that because it's really an indication of the president's world eye view. you wonder why the business community is not generating jobs and jobs are being suppressed in the obama economy, it's because they're sitting on their cash because they don't trust president obama. he's so anti-business. he

or at the firm generally. >> but you are. when you're describe b private equity -- >> the lessons in values and experiences that governor romney took from that and whether he'd apply the same lessons and values to the oval office. it's not focused on economic security for the middle class. >> cory booker also said both sides on this is nauseating. don't these ads that you're running -- don't they attack his personal values? you know, people saying he's the opposite of robin hood. you have one where one person says you can tell by the way he talks and acts he doesn't care about the middle class and lower class people. isn't that personal? >> you know what mayor booker also said was in a discussion of romney's tenure was legitimate. >> yes that's what he said in the edited version you tweeted out. in the original comments that's what he said. isn't -- do you deny that you're engaging in any kind of personal attacks on mitt romney? or is it okay to do that? i'm not saying it's not. >> governor romney believes that any discussion

these firms are highly -- >> the market is back you belie believe? >> across the financial services market, you have much more active services than before dodd-frank. people forget the cost of efficient regulation, which was trillions of dollars are lort wealth, lost homes and jobs and an economy that was brought to its -- i think the consumer protection pieces of this were core because the causes were multi-facetted but that they didn't understand, where they didn't have fair disclesh your around, where they are didn't understand their essential choices and what happens was people got themselves way overextended and way overlevered and millions and millions of american are paying the price for that. what we need and now have is someone who will make sure that disclosure is clear, that people understand the choices available to them and will not be taken arrange of that are bad for them but as we've experienced horrible for the system overall. >> i ran a broke ran firm. the industry feels they're better off with n a well regulated environment with a

the aim is to bring together producers with tv and other multimedia firms. established media giants are not the only targets. here, a government official welcomes the head of a japanese venture firm who came to seek advice. the singapore government even has an investment fund to support new content producers. >> translator: they have a variety of plans like hiring support and preferential treatment in finding offices. we hope to build a base here and enter partnership with the local firm to start a new web business. becau >> because we believe very strongly in the international potential of the media industry, we believe we are one of the best places in the world for home grown companies as well as foreign companies to come and do things and create new media products and services. and this is one of our key tools for developing long-term. >> reporter: dna is a leading japanese provider of mobile phone games. the firm opened an office in singapore last year. this man is the director of market development. he recently invited local developers of game software

or the pirate equity firm bain capital is predicting that should he be elected president and by the end of his first term the unemployment rate will be at six percent even though the current unemployment rate is eight point one percent romney's prediction is not all that big a deal the congressional budget office is already predicting that unemployment will be by two thousand and sixteen six percent based on president obama's current economic policies. so you just have to wonder how mitt romney's doing his math here considering that he's given the glowing endorsement of and will model he says his economic plan after the paul ryan budget which slashes government investments in the middle class great economic policy institute the ryan budget will lead to four point one million americans losing their jobs that's not exactly the way to lower unemployment you see there's a common theme here between the ryan budget which gives a trillion dollar tax cut to the super rich mitt romney's i'm an economic vision for america and what the technocrats and banks are doing in europe with their auste

a private equity firm like bain that cut payroll and companies.s weekend's events with mayor booker show why many within the president's own party think the obama campaign's bain strategy is a double edged sword. joining me tonight, ben labold. ben, how can president obama attack mitt romney on his time in private equity highlighting times when bain cost company jobs and at the same time, hold high priced fund-raiser with another private equity firm? >> mitt romney hasn't been forthright with the american people about what he did during his tenure as a corporate buyout specialist and what his goals were. he's been campaigning across the country telling people that he was a job creator, he's never been able to sfan shubstantiate number of jobs that were created. his partners admitted the goal was wealth creation for themselves. it wasn't a focus on this middle class family across the country. for his wealth creation. >> private equity is about wealth creation for investors. that's not what he's saying, that's what it is about. i don't understand wh

i mean, wall street law firms work. they do great work. they do the best practice of law that is done in the country. and if you don't believe that, you're just wrong. [laughing] >> no. the death penalty, appellate lawyers do the best work in the country. their objective is valid. and their industry matches your industry and the competency that you speak of. >> this could be fun. >> i disagree. >> ok. i think we can agree that, you know, when you're talking about the law, it's really a question of whose interest you serve. and when you talk about, you know, for example, defending poor people or the criminal courts, the resources just aren't there. it is interesting. i met the public defender in england. they told me -- he told me there that an indingon person can go to any of the big law firms, like morris and forestier, and ask them to represent you and the government will pay for it. they will pay every penny. and he told me that they spend something like $1.5 billion there on representing poor people in criminal cases. and they spend le

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firms to invest in the country, including oil and gas companies, and mining interests and central firms. the u.s. will maintain its arms embargo. >> we will keep our eyes wide open to try to ensure that anyone who abuses human rights or obstructs reforms or engages in corruption do not benefit financially from increased trade and investment with the united states, including companies owned or operated by the military. >> clinton said u.s. officials will continue to urge leaders in myanmar to release more political prisoners and to engage in peace negotiations with ethnic minorities. >>> u.s. sanctions in iran, meantime, are having their intended effect. japan's largest bank has suspended transactions with the government and central bank. other firms warn their businesses operations might come to a standstill, too. a court in new york ordered the bank earlier this month to freeze up to $2.6 billion held by tehran and disclose the details of those accounts. the bank of tokyo mitsubishi ufj said on thursday that it would freeze all transactions. the order stems from a u.s. court decision t

these firms are -- >> it goes back, you believe? >> i think across the financial services markets you have much stronger, much more active markets than before dodd/frank. and i think, you know, people talk about the cost of regulation, they forget what the cost of having insufficient regulation was, which was trillions of dollars of lost wealth, enormous numbers of lost homes and jobs and an economy that was was brought to its heel. i guess the last point i'd make in response to the congressman is i think the consumer protection pieces of this legislation were core because, you know, the causes of the crisis were multifactoral but one was millions of americans taking on credit burdens that they didn't understand, that they didn't have fair disclosure around, where they didn't understand