another one on the issue of sarbanes oxley compliance. remember the president's jobs council headed by mr. immelt from general electric recommended a permanent exemption from sarbanes oxley, the audit requirement for all companies below a billion dollars in revenue. so the jobs act provision that gives this onramp of one to five years depending on the size of the company is much more limited than that recommendation from the president's jobs council. and again, any newly public company has up to two years under prior law before it has to comply. it's really changing two to five in terms of sarbanes oxley. >> one could argue, given the two-year exemption for all companies, before the jobs act that the requirement to eliminate that for the initial public offering, for the two succeeding years may have been a little more generous than was necessary. we already recognized in dodd -- in sarbanes oxley that companies coming online may not be as well prepared. mr. moscowitz, your comments about this whole area? >> with regard to the jobs act, yo

significant amount of reporting that we have to do on those type of items when you go back to sarbanes oxley so obvious actually was driven and should have been focused on more of the commute of the larger banks than the community banks nonetheless the community banks had to fulfill those obligations on the reporting side and spend hundreds and hundreds of thousands of dollars for a community bank that's a lot of money for these big banks it's not the same and when we go back i want to talk more about this two tiered kind of system where where where small banks are disadvantaged big banks have the advantage and something like regulations makes that even more pronounced so i want to talk more specifics when we get back or a break we'll have more with a ronald de paul chairman and c.e.o. of eagle bank. also still ahead in the midst of the local debt crises affecting cities and states across the country a suburb in georgia has adopted a different model of government no long term debt no pension obligations either well look at the privatization of their city hall but first your closing market nu

companies that qualify as emerging growth companies don't have to comply with the sarbanes oxley act. it also allows them to make fewer financial disclosures, use a new confidential s.e.c. review process for ipos and let's their banks communicate more freely. the more sophisticated players under investment bank. underwriting the growth companies is a big business on wall street. investment banks are expected to take full advantage of the new, less stringent requirements. as a result, retail investors may be denied critical information that is essential to making sound investment decisions. unfortunately, during the expedited process used to pass the jobs act, improving the efficiency and transparency of the existing ipo system was not really discussed. with full and fair information for investors, our capital markets are more efficient and transparent and can better facilitate the capital formation so important to our nation's economy. clearly, all investors face certain risks when contributing capital to either small or large companies. in fact, the panel has made the case quite clea

they can avoid sarbanes-oxley reporting?y can do this until they get to the size of $1 billion in revenue which seems to me a company with $1 billion in revenue can afford to have audit standards and afford other things which would protect whatever their shareholders, but the reality is that you don't have to have one extra job to be an emerging growth company; is that correct? >> yes, sir. several appointments in response -- points in response to your very good questions there. the profit and loss system of the markets in our free enterprise system intends for profit and loss. we can want -- this goes -- we cannot -- this goes back to regulation versus disclosure and now in mind -- hindsight, they talk about dot-coms and how they are examples of bad ideas. nobody knew at the outset whether they were bad ideas. the investors had to choose and pick winners and losers, and some of the companies are long forgotten, but many are around today creating new industries changing the way we purchase products so that's one thought. ano

under the sarbanes oxley act of 2002 the s.e.c. was encouraged to hit executives where it hurts in the wallet. if they certified financial results that turpped out to be bogus. this was supposed to keep managers honest. they would have to hold back incentives pay like bonuses even if they themselves did not fudge the account. that was the idea anyway. the record suggests a bark decidedly worse than bite. the s.e.c. brought its first case under section 304 of sar box in 2007. by late 2011 it had filed cases demanding that only 31 executives at 20 companies return some pay. in 2007 and 2008 most of the cases involved shenen gans relating to stock option and produced some big recoverice for the s.e.c. in the wake of the financial crisis the dollars recupid have amounted to an as strisk. from the beginning of 2009 through 2011, the s.e.c. pursued 18 executeives at ten companies. and has recovered a total of $12.2 million from nine former executives. other cases are pending. half the companies pursued by the s.e.c. during the past three

in terms of sarbanes oxley, plants, -- , sarbanes oxley compliance, they have been exempted under dodd-frankaudit. note of those aspects relating to shell companies has changed as a result of the jobs act. >> this might be the most ironic aspect, there is nothing in the bill that requires in the creation of jobs to qualify for the protections and all of the benefits of the jobs act. is that accurate? >> the premise underlying the ipo on-ramp, going back to the competitive nature of the capital formation process and if you have an early stage company that needs to provide a return to its early investors who bet on the company when it was just an idea, that type of the company can pursue one cantwo paths. it can sell the company and be part of a larger enterprise and have redundant positions eliminated, or it can raise its own capital to be independent. in tracing your own capital to become an independent enterprise, you're going to road business, and you need more employees. you will need to hire people, and you can think of cities around our nation that are almost synonymous with certain maj

the court invalidated of the famous financial law sarbanes oxley, even though there was no severabilitye, they found-- >> if they find the mandate to be unconstitutional really they'd have to wipe away the rest of it. >> interesting, and the question, nancy pelosi said look, the the individual mandate in large measure drives the financial portion this have bill. in other words, it's interesting, all the extra reporting that the company is going to have to do the administrative work, the theory was, we're going to make that up by sending all kinds of new patients, as it were, by forcing them to buy insurance. or money for the fines they'd be paying. >> exactly. >> if they don't want to participate. >>, but the fact of the matter is, is that a lot of people are saying that there may be a situation like sarbanes oxley like i just mentioned strike down the individual mandate and a lot of the other provisions are popular, extension of medicaid, not denying on pre-existing conditions, expanding care for the elderly, allowing children to remain on your policy until they're 26. that's popular,

and that's i think a lot of what sarbanes-oxley and 1.6 and 1.13 have revolved around. one thing i think we haven't looked at enough is our role as a moral adviser. if the rules don't permit it or demand it, should we at least be counseling our xhints about what is right in trying to be persuasive and influential and it doesn't raise concerns about chilling our conversations, because it might reach our confidentiality, and the model rules, as you look how they progressed since 1 the908, our as the moral compass has been diminished as we move toward the black letter regulatory code for lawyers. less room for that. and that's sort of one thing we can think about. >> do you think it would have made a difference? >> the thing that we talk about a lot, the whole idea of leverage, lawyers can, and a lot of lawyers do, council their clients to do the right thing and a lot of times you found them not being followed. you have to get them to do the right things, the way the rules are set up right now, the idea is you tell them to do this, and give them the choice of doing it, and

it's worth pointing out that ipos doubled from that level following the research and passed sarbanes oxley. addressed some of the worst abuses of the dot com bubble in ensuing years. but the jobs act does many of these reforms for nine out of ten companies coming public. to remedy these problems, our objective should be to level the playing field and restore trust in the ipo process by maximizing transparency and useful disclosure. there are three recommendations. first, extend the application and enforcement of regulation fair disclosure to the beginning of the ipo process. this will help to improve the flow of information to all investors and reduce one of the most preventful information asymmetries between underwriters and their favorite clients versus ordinary investors. second, require the companies and underwriters allocate shares to the initial offering in a more inclusive and efficient manner. companies like google, morning star and interactive brokers have successfully employed variations on a dutch auction process which give all investors the opportunity to participate in buying

global i'd like to know i mean isn't sarbanes oxley if you sign off on accounts aren't you held responsible as the c.f.o. ok let me let me let me let me let me finally kind of ask this question because it seems like we have interview lots of folks on the show from different perspectives but there is a need for for capital markets there is a need for the distribution of risk and reward there is a need for. some kind of unit of exchange in a banking system and you've come up now for thirty years and you've seen a progression. stand which as we. moved away from the underlying utility value of these markets into something which is approaching pure casino capitalism so with staying with an industry still trying to do something about it by raising awareness is that the is that what you're trying to do or i think there are still guys out there that think that the markets can you know i always i'm an optimist eternal optimist even if you read my book and everybody's going to say that i'm pessimistic because it's a plan a ponzi ponzi ponzi but i think that what the world needs to be a better place a

sarbanes-oxley tried to regulate that outside members on the compensation committee. >> also you in the book talk about preferring stock options to make ceos but stock options with the health care qwest the stock option is a better way to go? >> spec everything is complicated. the then to make a lot of profits. but then to milk the company for profits the only ceo is only there for a few years. that that does not work as well based on the stock price. but it is still in perfect. and it pushes the stock price up. so it has to keep experimenting to move forward. and to think about motivating will meeting people. but if you recruit-- recruit somebody it changes the atmosphere. so there could be other ideas to come forward later. >> what role should corporate governance analysis play in the investment portfolio? >> you mean studying how it works? >> and we have not focused on bad enough. we went through up period in the united states green is good mentality predominated. it was associated with the hypophysis. in reaction and to abuses those that filtered money to themselves. a famous quote

customer accounts without their prior consent. >> reporter: give me a simple version of what sarbanes oxleythe type of crimes, quote/unquote, that should be able to be brought to the courts using sarbanes oxley. give me a simple version? >> it exists so the officers of a publicly held company have to certify their financial statements and adequacy of internal controls. it was -- it became a law due to enron. >> reporter: this transaction, something adjusted on the books that shouldn't have been, was there a signoff by all the principles at some point in time? >> there were internal control deficiencies known within the firm dating back to 2010 as documented by the trustees' report. there's a long-standing pattern of failing -- >> reporter: a pattern? we're going to have to go but when i hear pat earp and fraud, maybe rico should be talked about. at drexel they threw that out against the employees and had far less, in my opinion, to go on. carl, back to you. >> thanks so much, rick santelli, with big muse today. bring in simon hobbs to talk about the close in europe. there's been a lot going

look at sarbanes oxley. it has become ingrained in our business world.i am not sure it has accomplished what we wanted it to other than providing full employment for a whole lot of lawyers and accountants. i realize some of the questions might come from reporting. when i talk to people inside who are more closely tied to compliance reporting, at the end of the day, from a practical sense of being an employer and doing the work that we do, it does not change our behavior. we are so mission-focused. he worked the we have -- the work that we have is for missions that are very mission- focused. we will do what we do it anyways. one way or the other, it is not wanted change. >> i think it is time that we step back and see what does it mean for the government to impact the problem? there are meaningful ways we can. the new gi bill is one way we can get our act together and figure out that he will have a special place -- the people that will have a special place. organizations and web sites, those are the things that will make a difference. and cackling the gua

i know you were talking about sarbanes-oxley.many causes, not just regulation compliance, spitzer's cutback on research of small firms is a problem. but the real elephants in the room excessive compliance and taxation, sarbanes-oxley is one of the elephants, dodd/frank is one of the elephants and new one fatca is a problem, imposed this year, which requires disclosure of the identity of recipients from financial institutions from american countries whether recipient is belgian or american taxpayers, tremendous compliance and bookkeeping costs on the firms and probably cost companies foreign institutions not to do business in america. we need to soften up, lower our regulation, lower our compliance and make it more friendly and free to the raising of capital. capital is the life blood of capitalism. raising capital. money moves where it's treated back, frankfurt or toronto, that's where it will move. >> we don't have a lot of time left. we believe in regulation. it's just that you and i believe in less good solid regulation. you'r

companies, look at sarbanes-oxley. it has become engrained in our business world, and i'm not sure it accomplished what we wanted it to accomplish other than providing a full-time employment for a whole lot of lawyers and knts. and account ants. >> and when i talk to poem close to man tech more into compliance and reporting, at the end of the day in a practical sense of what we do, it doesn't change our behavior any, because we're still mission-focused. the work we have are for positions required by the government that are very mission-focused, so we're going to do what we need to do anyway. and it's -- so it's not one way or the other, it's not going to change our behavior. >> yes. i think it's time to step back from all this and look at what is a meaningful way to impact government? because i don't think it's a way to impact it. think g.i. bill is one way if we can get our act together and get these people who have a special place in you know where for not doing one iota like that and getting the benefits, those are

we can think of sarbanes-oxley which did some good things, but all in all across the board there wasn good done by that piece of legislation. >> carly fiorina, former chairman and ceo of hewlett-packard, republican and c dplib cnbc contributor. >> european stocks are rallying as investors await today's outcome of today's ecb meeting. a "wall street journal report" says the fed is weighing whether to step in. and spain's finance minister says the government is not seeking immediate aid for banks. they are awaiting the out come of audits. optionsxpress, where you can trade your favorite products, all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com. a living, breathing intelligence teaching data how to do more for business. [ beeping ] in here, data knows what to do. because the network finds it and tailors it a

under the sarbanes-oxley act, the sec was encouraged executives where it hurt, in the wallet.supposed to keep managers honest. they would have to hand back incentive pay, like bonuses, even if they themselves did not fudge the accounts. that was the idea. the records just embarked worse than the bite. the first case bosh records suggest a dark worse than the bike. -- records a barked worse than than the bite. most of the cases involved stock options. they produced big recoveries. in the wake of the financial crisis, the dollar recovered have amounted to an asterisk. the sec pursued 18 executives at 10 companies. it has recovered $12.2 million from 9 executives. other cases are pending. half of the companies pursued have been small and relatively obscure. for those interested in accountability, the case brought by the sec against new century financial, now defunct, is a severe disappointment. a partner at a law firm and the bankruptcy investigator uncovered seven different types of accounting fraud. it fattened the pay of top executives. during those years, he found brad morris

with sarbanes-oxley and the other regulations, we have been suffocating our banks. i think we need to stop that. i think we have regulation. we need to make sure we're following them and investigating them. host: do you think dodd-frank made things tougher? do they strengthen the regulations that we had before them? caller: may be. i would say yes. host: thank you. we appreciate the calls. you can continue the conversation on our facebook page. hear bing is the question -- our current banking regulations strong enough? we will replay the hearing with jamie dimon tonight at 8:00 p.m. eastern. next tuesday, the jpmorgan head will testify before the house financial services committee. the house is out this week. we will carry that hearing next week at 10:00 a.m. eastern on c- span3. next, a look at part of today's hearing. >> we will come to order. i ask the capitol police to please remove anyone in the audience who is interrupting the hearing. before we proceed, i will remind my audience that any interruption of the hearing will not be permitted, and you'll be escorte

you know, this is -- look, this is a sarbanes/oxley issue, put internal systems in control. >> put it we've had people like jack welsh and steve schwartz and other people say in the grand scheme of jpmorgan this is completely irrelevant. >> correct. >> is it or not? >> it's what they do. they win and lose all the time as i've said. but the key issue here is you had management come out and i think make false statements in public about the nature of this loss. now we're e -- >> you are saying it's a fraud. >> i'm saying that they didn't act -- >> a fraud is a -- >> it's a failure to disclose but if you deliberately put out misinformation as i think jamie dimon did when he went after bloomberg and said, no, no, we're wrong and then we go to hedging with the conference call and tomorrow i think we'll hear a further evolution of the story. >> i don't understand the difference between hedging and proprietary trading -- >> it's a big difference. >> but there are some gray areas or, no, you make it sound like there's not at all. >> all i can say there's a big difference between running a shor

in sales, whose market cap of 700, which is the upper limit, can really afford to comply with sarbanes-oxley. >> you can find the rest of this hearing online as we take your live now to the senate floor american progress in washington, d.c. for comments by the president and ceo of the export-import bank, fred hochberg. >> we will be discussing a new and annual competitive, competitiveness report the bank puts it. here at us and we believe the best way to revitalize u.s. economy is through policies and investments that create that and ensure everyone can participate in as we look at changes in u.s. economy over the last several years, exports have been a key driver of growth. and so, fred's work to do exports has been central to the bright spot that we are seeing in the u.s. economy. today, the u.s. economics position is, however, being challenged like never before. the driving force for our economy is being squeezed at u.s. companies and workers are finding it harder and harder to maintain and exceed levels of prosperity that americans traditionally enjoyed. one of the key managed in which w

us know who did an excellent job as the chief counsel for senators sarbanes and exxon work on sarbanes-oxley, and i think you have been with the fdic for about seven years and chairman since last year. we welcome you back before the committee. we always welcome your testimony. >> thank you very much mr. chairman. chairman bachus ranking member frank and members of the committee, thank you for the opportunity to testify this morning on behalf of the federal deposit insurance corporation. >> mr. chairman can you have them pull them i closer? >> bank supervision and risk management as a concerns -- state poll it real close to you. don't lean over. pullet so close that you don't have to lean over. >> as a concerns in recent trading losses of jpmorgan chase. jpmorgan chase revealed certain risks with large complex financial institutions. they also highlighted the significance of effective risk controls and governance at these institutions. before fdic insured subsidiaries in the jpmorgan chase firm that $2 trillion in assets and $842 billion in domestic deposits. as the deposit insurer and backup

there is a very big law passed, sarbanes oxley in 2002, that you had to start incorporating. >> guest: yes. and we more than doubled the budget. it was well ensued, i think, about $700 million. i'm doing this strictly from memory, so i could be wrong. there is no question that the budget increased dramatically. the problem is that no regulator is ever going to think that he or she has enough money. therefore, the question becomes, how do you make sure that the agency gets all the funding it needs but avoids, particularly in difficult economic times, putting the burden on the u.s. taxpayer, and that is why coming out with self funding for the sec is a better way to approach these budget issues. >> host: oakland, california. ban on the democratic line. you're on the washington journal. >> caller: good morning. i had a question. they created market, the $600 trillion, how much of it is still going to be unregulated, per say, because of one derivative created and comes at private. how can the sec or anybody keep up with them? the provisions, you know, the law that gives the sec some kind