You for your time. Up next in a monday round table on the washington journal, we discuss what walls what mighttion exists and what be needed. Earlier, the center for strategic had an event about the ron deal. [video clip] well understood by the iranians that we are only talking about one category of our sanctions to be relieved as part of this deal. Were put inons place the last several years specifically to address Irans Nuclear deal. That is not mean all our sanctions will go away. A number of sanctions remain in place that were specifically and obviously put in place to address irans support for terrorism. Those remain in place. There were sanctions put in place for irans human rights abuses. There are sanctions that respond to iranian support for the regime in syria. One of the fundamental ones that will stay in place are those that relate to individuals and entities that have been resonated by the department of treasury for their support of terrorism. This is one of the core things we have done to disrupt the flow of funds to Illicit Networks around the world. This will stay in place. All entities marked for their support of hezbollah or such will stay sanctioned. That includes an iranian bank that was involved in hezbollah funding. It may not sound like a lot. The powerful aspect of this is part of these sanctions that were imposed under the iranian e a bill passed by congress in 2010. It said if you are a foreign bank and you do business with one of the people on this list, if you help them transmit money from iran to lebanon or from iran to london, it does not matter. That bank can get cut off from its axis to the u. S. Financial system. That is still in place and well understood by iranians. Host to watch the entire event, go to cspan. Org. A monday roundtable, we are focusing on the stock market and wall street regulation. We are joined by Mark Calabria of the cato institute, Michael Roosevelt the institute. Michael, as we look at the volatility of the past 10 days on the stock market, are very regulatory rules in place that helped wall street weather this storm better than in 2008 and the stress on the stock market than . Compared to 2008, which was a large catastrophe in terms of the losses, this was relatively mild. It was a straightforward response to the news coming out of china and maybe out of europe. There are things in place. Over 50 billion have stress tests, were they are required to see how they would manage certain crises. They are tested for a stock market crash or 50 or 60 . We are talking 10 , at worst. What is telling is that some of the worries people had about the financial avenue regulations that would make it harder to trade or harder for wall street to provide liquidity in times of stress market did not pan out. Minor even in the u. S. , compared to china or other places. Some of the original things we were worried about did not pan out. Host should the federal government do more to secure market turmoil . Is fundamentally, it you should not change the fundamentals. We knew that the boom in china andd slow and probably badly. I still think there is more ahead of us. Once that happens, we lower the Federal Reserve. It was called the green standpoint and then the bernanke put. Tanks andly saves investors on the downside of risk taking. We find out in september. You do need to worry. We have gone the route of reducing the diligence investors in theirace in looking own investments. There are limits to what the government can do to guarantee your downside in equity markets. Host if you want to join in on this segment, republicans can call 202 7488001. Democrats, 202 7488000. Independencts, 202 7488002. Page, they talk through some of the volatility we have been talking about. If l as much as 12. 4 from the market high to the closing low last tuesday, the first time investors have been subjected to a correction since 2011. Investors watched as this nearly 2 trillion value was he raced in the s p 500 in days. Stocks are racing pack, narrowing the losses from a high to a 6. 7 , leading investors to wonder if the pain is over. We are asking viewers to join in as we talk regulation on the stock market and the financial industry. Can you talk about the major federal bodies in charge of relating the Financial Sector now and what powers they actually have to help this turmoil . Guest there is a ton of big events. As mark emphasized, this is a normal reaction to news coming out of china. Huges growth slowing has implications for u. S. Consumption. You do not want to over regulate the twists and turns of the normal business cycle. In terms of the big things with doddfrank, there is a lot of things. A couple things worth emphasizing on is if there was, a huge correction and a major bank went under, it is likely the fdic would have powers to take over and wind down and Investment Bank the same it does for an fdic insured bank. It is controversial, but it was deemed necessary after the Lehman Brothers collapsed. That is one thing that could have come into play if there was a big correction. Another thing is that the Federal Reserve now has extra powers to mandate capital requirements. It is the source of a lot of debates. It says that banks have to be insured. More broadly. And also against liquidity or financial panics. That has madeing i do not think the stock market would have thrown off wall street, but that is one thing we would have looked at. Host this is a major stress test, or at least decent sized of the past two weeks. Does it show there are places where doddfrank has overreached or was unnecessary . Not think so. Most of the places doddfrank has reached is not related to the stock market. We should step back and remember. The sec has historically taken a disclosure approach. The real reaction is we will tell investors the financial based onon this is what extent is were done before exchanges have their own rules. Like circuit rakers. When stocks fall is certain amount, they may stop trading in thats. The approach of the sec is not that we make sure you make a good investment, but we will give you the information as an investor to make these decisions. One of the hard part is Financial Disclosures are generally good at helping you figure out where executives engaged in fraud. If someone is cooking the books. Which is we can tell, despite the fact we probably see prosecutions and china, this is primarily a macroeconomic event. It is hard to get disclosure for that. As an investor, markets go up and down. You should prepare for that. How we deal with the longer view , i do not think you can fix that with regulation. Host phones are open. Republicans, 202 7488001. Democrats, 202 7488000. Independents, 202 7488002. We begin with the independent line. John in minnesota. Caller good morning. I would like have the folks there address the Federal Reserve the influence be Federal Reserve has on 2 inflation. It seems like a gimmick so we can pay off our debt with cheaper dollars. Graduateen i was in school, we thought of zero inflation as zero. There is somehow this metamorphosis where zero equals two. There is still debate on whether that iss price stability or not. But it is important to keep in mind that Central Banks were founded fundamentally for fiscal purposes. The fact that the Federal Reserve has bought in mortgages and treasuries has reserve has reduced the are roaming cost of the government. Some see it as a blessing. I see it as a curse. You have to look at this consolidated balance sheet. The Federal Reserve as over here and the treasury over here, when they are closely related. Host Mark Calabria is with the cato institute. What is that . Guest we are a nonpartisan think tank. We do not take governmental money. We work on a broad range of social economic issues. We are loosely libertarian but associate with any particular party. Host Michael Konczal with the roosevelt institute. Guest we are dedicated to keeping franklin and Eleanor Roosevelt live in todays economy. Host howard you funded . Guest various forms of nongovernment money, primarily through the foundation of the fdr library. Host jim is waiting in new jersey, line for democrats. Good morning. Caller good morning. Thank you for taking my call. Is there any country where capitalism has been successful . Where you do not need to practice some kind of austerity to make up for overspending . That is my question. Thank you. Guest lets define a few terms for the viewers. At is aftergetting the recession, it a lot of countries ran deficits. Stampoyment, food automatically goes up and tax receipts go down because the economy is declining. Some of this is cyclical. And we have longerterm fiscal. What you see is the debate over how do you create confidence . There is an economic debate of an academic debate about this. Youre either going to shrink government, or raise taxes and do something to both of your deficits. Like we see in greece, where austerity has taken the form of tax increases and not a lot of Government Spending cuts. The to try to increase consumption. I do not think we have a lot of good empirical evidence to say what the decision is in this case. Guest i would say that historically, governments do not reduce their debt load by essentially saving up. What they do is stabilize the debt load or grow out of it. This is what the u. S. Did after world war ii. It is what england did after the napoleonic wars. Thehave a debt load, but country and population grows, and if it comes less a burden relative to the size of government. This is what the imf is to towing around recommending for the u. S. The idea we should not raise taxes or cut spending in such a significant amount it would lower the debt. There is also concern there is not enough that. Because federal debt is a safe, stored asset did you can use as collateral. Banks use it to provide liquidity. Becomeender the benefits adjournments when do the benefits become detriments . Guest you have to separate u. S. And global. Reserve currency. People will take dollars around the world. People are more questionable whether if greece will go back to the drachma. Places, it is not, in my of thing and, fair to say that sovereign debt is risk free. Or a lack of in those countries. We haveregularize to recognize the u. S. Has a lucky situation. We will not have it forever. At the longook term. There are a handful of examples. You look at postworld war ii. 40 and cut spending by the economy grew almost 10 . A famous economist said that if will go greater into a Great Depression and it did not happen. Anybody could pick examples where we cut Government Spending or the other way. That is why the empirical evidence is mixed in terms of whether austerity works or not. Host Mark Calabria of the cato institute, Michael Konczal of the roosevelt institute. Republicans, 202 7488001. Democrats, 202 7488000. Independents, 202 7488002. Ithael konczal, bringing back to the stock market and the activity of recent weeks. I saw you have written that the marketns in the stock impact more people today because of the rise of 401 k s and less pensions from companies. What you think that happened. Guest one was a government choice. Tax shelters for 401 k s in the 1980s. There has been a move to a lot more wealth in the stock market. Youre talking a growth from three chilean dollars in 1982 about 15 trillion now. Just a lot more going on in mutual funds and other forms of private saving. It is a huge source of boom and risk. A lot of people do not have the sophistication to actively manage a fund. Headlines andof people say stock market is going down, should i sell . Probably not. If youre investing for retirement and you are an ordinary person, you should not think in terms of weeks and months in terms instead of years. When people panic, it is difficult for people to manage and think through what they are going through. Even the most sophisticated people screw it up. You saw the headlines were individual investors were having trouble accessing their stocks, where the big firms had no problem making moves as the market was moving quickly. Guest i do not know specifics on those. In one sense, people should not overreact to the information. The market have corrected itself. It does not seem like people selling at the moment when the stock market was the lowest, it was not the best choice for them. It is also differential. Toe people have access frontline equipments. And most retail consumers do not. Guest there was a study that found that people whose determine find to perform the best were people who forgot they had it. And there were studies they did. That woman get that her performance in the stock market because men trade too much. There is a concern that we have had a greater variety of stock ownership. You have seen me duffers for the typical household, your major asset is your home, which is highly volatile and linked to the value of your job. You may be in the same job market. So the time you lose your job is probably the same time you lose your health and values. So we need to think about ways families can be more diversified financially. When all your eggs are in one basket in your home and job, it that is a tremendous risk. That is also a reason the housing bubble tends to be more disruptive to the economy because housing is more widely owned. When you see a decline in homes, youre like a to see a decline in consumption. And for the typical household, even the declines last week will have minor defects in terms of consumption. The bigger effects is this concern about the chinese economy and its impact on the u. S. , rather than direct impacts. Interested to hear from viewers on how it impacted you the past two weeks. What did you do when you saw these this roller coaster ride. Lets get back to the phone. Richard, east china, michigan, line for independents. Caller good morning. I would like to know if these gentlemen would tell me if the regulator will ever get around to keeping the corzines out and letting the average investor gets in with the mutual funds. They have preferential treatment. If i were in individual and work to get into the stock market, i cannot go on and trade in do like the take guys big guys. Withhould be able to computers. I was wondering if one of them could let me know if that would ever happen . Because it is not fair the way it is now. To i am going to try corzine has a lot of baggage. Caller ist the getting out is we have something called accredited investment role. Line, you above this can take a lot of risk voluntarily without this disclosures and safeguards that people below the line would have. It is usually tied to some amount of wealth and income. That has not been indexed. There is debate on whether we should open that more. So this gets into discussions about crowdfunding, alternative investment vehicles. Hedge funds exist because they only take edited investors. They are not subject to the same Disclosure Rules that a typical fund or investor is, because they narrowed the debt worth. That is an area for debate. Part of me feels this is a that raises big questions. The attempt is to protect the little guy from making mistakes where we think the big guy can make mistakes and walk away from it. We think that should be reexamined. Guest there has been a big extension of the jobs act. We will see how that plays out in terms of markets and whether or not that will induce fraud or innovation. Part of it will be market structure. A lot of market funds are structurally not like mutual funds, where they can take small investment that has higher turnover. They need a lot of capital for the long haul, often because of their investment strategies, which are higher year. I think there are reasons we want to make sure there is a limitation on these investments, because a lot are highfee. That people risks may not straightforwardly understand. It is not just about the market going up and down, but also and thinkstum mathematicians trying to figure out. Those markets are not as transparent. There is not the standardized disclosure that you would seen the mutual fund market. If there was an extension of that transparency to things like credit funds in equity, that would open the door for a Broader Investor base. Host mobile, alabama where will on the is calling democrat line. Caller in the 1990s, Interest Rates on savings was generous. Now Interest Rates on savings is significantly low. Embarrassingly low. Why is this an wife has interest on savings not shown any recovery whatsoever . Host Michael Konczal . Guest in the late 1990s, you had a looming economy. You had a steady rate of inflation. 2 to 3 . A lot of wage growth, particularly in the lower half of the income distribution. Differentvery economy. High investments, consumption, and wage growth since the Great Recession imploded and the fall housing bubble. We have seen a very low Interest Rate environment. The Federal Reserve has kept rates low to try to stimulate demand. Inflation has remained below. Talk about a global pool oflut, which is a capital trying to save, which is not happening now. It is a different economy. Are differentls from a 1980s and 1990s. Host d want to make a prediction for when the fed might raise the Interest Rate, as they have been talking about . Guest i have no idea. No reason, given the low rate of inflation. Not do it on the stock market, but on fundamentals from europe and china, i see no wage pressure, no Inflationary Pressure out there. The next move may even be expansionary. Bill from my thank friends in mobile who like term army the first mardi gras is there. Do not get into an argument about that. This is a different economy than it was in the 1990s. That is correct. Inflation is lower. But the flipside is what you get on your savings is the flipside of what people are willing to pay to invest. If investment demand is weaker, you get less savings. I do think the Federal Reserve liquidity ingested in the system has reduced the overall rate you savings but for that. There is a number of factors. One is Federal Reserve policy. Regulatory policy plays a role as well. Such as the government on doddfrank which made it more expensive to run a checking account. What you get is a return on your savings is what the bank can return to you. The thing is, there are half a dozen reasons here. All of them are important. Some are beneficial, some are not. If we get back to the question of when they raise rates, if you chairman to vice stanley fischers comments at jackson hole, it it indicated the rate increase in september is still possible. I think he clearly put that on the table. It is far past time. The reason i believe this is twofold. We are far past whatever Employment Benefit we will get. Usually with a Monetary Policy, in about a year to two years, you get a bump and unemployment effect. Years later, usually that same employment policy, you have gone the benefits out of that. I would be worried about the financial instability. If i close my eyes and pretend, i feel like i am back in 2000 three, where we had a building housing bubble. The conversation then is we do not want this fed to move now because wage growth and job growth is not where we want to be. It feels like it is that way every cycle. The bond markets, the equity markets, and the property markets are quite strong. I will not say a bubble at this point. Raisesset prices significant concerns in terms of Financial Stability. Host two different views on whether to raise the rates in usa today. It would agree with Mark Calabria. The fed must be bold, hike rates in september. 10 good reasons why it should not be swayed. From bloomington, illinois, line for republicans. Caller good morning. I have a question and a grief comment. Brief comment. I believe the proliferation of regulations is on has been, especially since president obama took office, strangling to the economy. I have a question for mr. Calabria i hope i pronounced his name correctly of the cato institute. Commented that paul economist the former professor at m. I. T. , i believe, predicted that cutting spending after 1946 by 40 would cause another recession or depression. Instead, the economy grew 10 . I found that interesting. I wonder if mr. Calabria could tell us if he knows that whether or not professor simmons and attempted to explain his error. In terms ofas it the decrease in military spending at the end of the war to world war ii . Fromntup consumer demand prewar rationing. I would be interested in mr. Calabrias comments. Guest certainly, most of that decline was due to military spending. Obviously, i was not there at the time, despite a couple of gray hairs. A lot of concern at the time was you would have a lot of troops come home, there would not be jobs, there would not be sufficient demand. There was even concerns about the price and wage control. I would certainly say, not picking on particularly president professor samuelson. It was a real worry the economy would not be able to absorb. I think the concern was we would float back into the depression and at that time there was this view that it was world war ii that got us out of depression. Others have published a question of whether that is what did it or not, and that is very much in controversy. I am not picking on professor samuelson, but i love the fact that if you picked up his textbook published just before the fall of the berlin wall, he talks about how great the soviet economy is. I am not sure he ever had a forecast record. Forecasting is not something i would bet much on for anyone. Guest the economy is radically different than what you would see now. Essentially ag planned economy with wage controls, price controls. The transition to a consumptionbased economy went smoothly, or smoothly then people would have anticipated at the time. It is tough to broadly generalize. Essentially when the economy was booming during the 1940s because of all of this Government Investment and military spending, you are building things that were going to immediately explode. That was a low standard. Host lets go to fred waiting in indianapolis, line for independents. Caller i would like to comment on your panels interpretation of the highfrequency trading, and these etfs. It is almost like a russian oligarchy. If you are not take enough to be in and do have all the talking heads waving your finger at the small independent trader not to get in, and these markets fall out from underneath the smaller companies. , they try and scare you to stay out of the srket, and these etf highfrequency trading losses in this mass roller coaster, it is almost like the games red. The game is rigged. You people are not smart enough and Tech Knowledge he is so good and the velocity is so much that you need to stay out but investor money when madison avenue sells you and etf, it is ridiculous. Angeris such apathy and at the talking heads, and i do not care what individual money man you are talking about. It is not a free market. It is to international, and the velocity of highfrequency trading just makes it red. You guys all wear nice ties and have such a high opinion of yourself, but basically youre just saying, do not invest and if you need to, let the hedge weds guys worry about it and will waive our finger at you if you get into quick. Host lets let our panel jump in. Lets start on highfrequency trading, and you can sense the frustration in the callers comments. Guest there is a lot of debate about the net effect of High Frequency trading for retail consumers. There is a lot that talks about highfrequency trading teaming liquidity providers. There is a little bit of free writing for individuals with bigger pockets that are providing deep liquidity. Intothe caller might look is essentially to stagger a lot of the trading every 25 milliseconds. You can auction it off at a lowfrequency. That sounds like a short period but especially with the premiums on highfrequency trading, it is an important thing. It is not just retail people or people with small portfolios. If you can cut milliseconds off, you are willing to pay a lot because it is essentially, you get first in line for better or worse. It is not clear to me that there is a huge amount of economic boom coming from price discovery of a millisecond earlier than another millisecond. If there is fairness concerns, there are ways to deal with it that are pretty market preserving. I appreciate guest i appreciate his comment on my tie. I appreciate those immigration stories. Let me separate, because from a andfrequency trading highfrequency funds are connected. I think the success of people on wall street is exaggerated. The average hedge fund loses money. Theres a perception that you have the guys making a lot of money and there is a lot of money in it. They are taking money from each other, and that is a lot to keep in mind. I do not think the system, in terms of Retail Investors of who is paying, i think it is more these hedge funds taking on goldman rather than hedge funds taking on the retaile investor. Have a free market in the securities market, absolutely agree with that. The highly regulated, regimented system, unfortunately when the sec was created you had a lot of regional exchanges and choice. Sec a sickly, the came in and applied the New York Stock Exchange rules to everything else. , think ultimately this growing what is criticized as fragmentation, to me is a benefit. We have seen the New York Stock Exchange market share i think that is important, but i think the regulatory structure, very complicated, distorts the market , and i think needs to be rethought. No one is going to pretend that our Securities Markets are a free market. 20 minutesve about left. Our guests, Mark Calabria of the cato institute, michael konszal of the roosevelt institute. Calling in on the line for democrats, good morning. Caller im calling to ask, i would like to know why the federal government and banks are discouraging people from saving money. There is no way a person can save any money these days. 05use when you get interest on money you have in your savings account, you get zero, and the banks invest your money and make all kinds of money off of it. I know it is supposed to be for the debt, but it is doing the American People a miss justice sjustice because they cannot save any money. Why should you put it in a bank if they are not going to pay you anything for it . Just put it in a can and there it. You have seen fed chairman bernanke articulate, part of the strategy of various rounds of quantitative easing was to force investors into higher risk assets. To create this wealth effect in the other markets, and part of that strategy has been that you get nothing on your bank account , and it is absolutely true. Again, the point is to try to make it unattractive so that you will invest in other things which are supposed to get the economy going. I am skeptical that it has worked in this way. There are a number of other reasons the economy was different in the past that i do not think you can blame policy in washington on. But i think there are some that you can actually lay at the Federal Reserve. There are half a dozen other impacts here as well. In my opinion, Monetary Policy is a big contributor. Guest given note Interest Rates are low and banks, the rate that banks are lowering loading them out are lower as well. Are not necessarily making out with murder on these kind of events. It is really unpleasant to hear, but in some way, Interest Rates are too high. They could not go negative because people would not put any money in banks. Ainly, if you years ago few years ago, rates had to be even lower in order to try to clear the market and stimulate the demand necessary to keep us at full employment. The fed cannot set negative Interest Rates, and that is unpleasant for people with savings. I would argue that the corollary is a higher level of Interest Rates, which would increase unemployment, would be harder on the American People. I think this is where we are going to disagree to which, the extent to which the lower has increased employment. Host on the question of when to raise Interest Rates, mylan writes in, there is no reason to raise Interest Rates. A question a bit from left field, how much should be investing in Virtual Currency . How stable are bitcoins . ,uest they are pretty risky and i think anyone who goes into it i am a fan of virtual currencies. I will note there are 300 plus some of them. Bitcoin certainly has most of the market. I do think that i would caution anybody from putting a significant amount of their wealth into it. And i think that is true with any one investment, you should not put all your eggs in one basket. Those are the things you learn from your mom and dad when youre a kid. There is a reason that those things actually resonate, because it is true. Same with bitcoin, there is certainly going to be volatility. It looks more volatile compared to other currencies. I think we are going to see Digital Currencies developed in the future. Who the winner of this game is, im not Strong Enough smart enough to say. The question on when to raise Interest Rates, i find it a little puzzling the definition of zero. We have low levels of inflation, higher levels of inflation. Anybody who is struggling to pay rent or buy groceries has noticed there is price increases. Anyone trying to buy a new computer, that is great. New york fed president dudley was criticized widely, that is where the deflation has been. Stanley fischer touched upon this over the weekend, has come from transitory declines in energy prices. It is cheaper to put gas in your car and it might be more expensive to pay rent. The reason i think we need to before, is and do it worry about the asset bubbles. We are going to go through another 20052006 bubble and will and badly so financials ability Financial Stability is my number one concern. That is really not something i want to go through again. Host michael konszal. Itst to talk about bitcoin, is useful for viewers to separate three things out from bitcoin. There is a recordkeeping function, which i think will revolutionize wall street. Essentially bitcoin is kind of like a debit card that is electronic. It will be interesting to see how that will evolve, whether merchants will want to take it. Bitcoin and other crypto currencies, a friend just came up to me and said, i think i will keep my money in euros for fun to see if i can enjoy the risk. I said, do you have any debt denominated in euros . I say, you probably do not want to take on currency risk for fun, unless you are a gambling. Erson who d it is incredibly volatile and inherently inflationary currency. Michaelts go to waiting in gerard, illinois, on the line for independents. We do not see any regulation of the stock market on wall street. I am a Small Business owner. We see money loaned. I go to a local bank. With a 700 credit score i cannot get a loan to buy a bobcat. You talk about the 2008 collapse, not one person held accountable. In my small town, you bounce a check for 18 and the police come to your home to take you to jail. Yet, big banks can bounce checks for 750 million and nothing happens. They are never held accountable, never going to jail. Our banks do nothing for us but charge us. Host michael konszal, start on this issue, no one was held accountable. Guest there was very little criminal investigation of wall street. Theres a bunch of transfer. One is the interlocking of the leaf and finance and washington. Second, concerns about what happened after arthur anderson. It put a chill in a lot of the investigations about the proper way to do it and instead, folks rely more on large fines. Essentially, do not admit. People say they did not do anything wrong but will cut a check. We see that in a lot of fields, it is not just finance. That said, there has been investigations, fines, and reworking of the financial system. It is unfair and unfortunate that a lot of people got away with murder during this crisis, and overcriminalization of oferty and criminalization everyday life has expanded in the past couple of decades. I think we also want to think forward about how do we balance these needs. Honestly, i am disturbed by it and i think it is very unfortunate and frustrating. Guest let me say, i share that frustration. I think there are some nuances of why it might see it slightly different, but i largely see at the same. I do not think people have been held to account and i do not think regulators who repeatedly bailed, i do not think anybody has been held to account in any big way. Mike touched on the over criminalization, you want some of these criminal cases to be hard. I do not think we should sacrifice due process as we are upset. Some of these cases have got to be lost, what you have to have the case to begin with. A lot of the problem is the ,ncentives facing the sec, doj and the companies, is to settle quickly. A long trial or would you like to write us a big check . Host where does that money go . All these big fines we are hearing about. Guest we have the big 50 state ag settlement where the money went to the states. Settlement, more money went to the State Government than homeowners who were foreclosed upon. Some State Governments had laws that it had to go into the general fund. Specifically for mortgage relief, and no accountability in how any of that has actually gone so essentially that money disappeared in the states. Same thing with the tobacco settlement, where all of that was supposed to be used for health care, states spent it on all stuff unrelated. Fa has been very aggressive with banks in trying to get money back on assets that were sold to fannie and freddie. You cannot let things pass on bad assets to the government. The lack of criminal prosecutions, they are just a whole lot harder to do and take a whole lot more crime, and you are more likely not to succeed on them. That does not mean you should not do them, that in less you hold politicians and the political process accountable, it will not do that. It will take the path of least resistance. Mike brought up his inability to get money for a bobcat. The regulation we have, the capital standards, our riskweighted. The weight on a Small Business loan is 100 . You are going to make it 1 million Small Business loan, you would have to hold 80,000 in capital against the bank. If you were to buy when Million Dollars in greek debt, you would hold zero capital. System, i have yet to learn of a financial crisis in history caused by Small Business lending. It is not the stuff you think that is risky that gets you in trouble, it is the things that you think are safe. We treated fannie mae debt as safe, and that is what blew up the system. Host time for a few more calls, about 10 minutes left if you want to call in on the republican line, 202 7488000, democrats, 202 7488001, independents, 202 7488002. Caller the criminal activity of the stock market is ongoing as we speak. You look no further than mr. Picard connected with the fiasco in new york with that ponzi scheme, and you will see that four times i can document i think it is more like 7 people connected with that getting money back, mostly in florida, with percentages off the charts. Banksind money in swiss and the man in the moon brings money back, but on a friday, i can document four times now without blinking an eye that they have gotten money back. The reason is because their nieces and nephews of the retired people are the ones that stole it in the first place. People around the country should realize we all lost tons of money, but there is one group that are getting money back as we speak. They put it in the papers in new york on friday in a small caption, but slowly but surely, these people are getting their money back. I would like to have you two gentleman look into that. Guest one thing i mentioned, because he made the point about nieces and nephews, if you look at the fraud, if you look at crime, it is people you know. I do not want to be cynical about it, but you more often are likely to get ripped off your relatives than anyone else, and that especially comes for financial advice. The overwhelming majority of Identity Theft is from family members. Host is it a trust issue . Guest do not let your guard down if your cousin or brother comes to you with an investment scheme. A bigger issue i find frustrating with the sec, really is this focus on big banks and institutions rather than retail investor. The most shocking example, the Inspector General report for the stanford investigation was a big ponzi scheme out of texas. When the examiner brought it to his supervisor, the supervisor said do not bring me cases like this, ring me wall street cases. Six months later, that supervisor left to defend stanford. The sec goes after highly specialized cases, mostly because the employees of the sec can leave and get big dollars doing defense in this work, whereas the typical ponzi scheme, there is not a lot of money for sec lawyers in that field and they do not put the emphasis on protecting Retail Investors. Going after goldman to protect some German Commercial Bank that said it was an expert. I think the sec has let down the retail investor. Host does it have its priorities wrong . Caller i would back up and say in terms of actual risks, in terms of being ripped off or losing profitable investments, properk of diversification in 401 k s and other types of Retail Investment vehicles has me a little more worried. Into aly, if you fall ponzi scheme, that is terrible and as mark said, keep your guard up for things that sound a little too good to be true. When it comes to things like the fiduciary role that is now being debated by their department of labor the department of labor, people end up in accounts that have two high fees for the risks they face. That is a skim off the entire full of savings for retirement that goes straight to wall street. We do not think about it as a problematic thing but it is something that really does impact peoples savings compounded decade after decade. T patricia insane john, illinois, the line for independents. Caller talking about definedbenefit pensions versus the stock market vehicles like wondering how we really got into this position that we are in right now. I see the one gentleman smiling. We are talking here about the common good of our country. It is really difficult for me to understand, just coming from where i have an Different Things that i was taught as i was growing up, i was taught about the common good, civic responsibility, conscience, those kind of things. Weust do not understand why are devastating our own people. Can you and to that . I am talking about corporations. Im talking about wall street, i am talking about responsibility to people in our own country. What is happening and why . There are so many bright people who were in positions where you can inform the discussion and and people are not doing it, people in those positions. Host patricia, lets let michael konszal start. Guest i would say one thing you can do is defend Social Security. The move away from definedbenefit pensions is long and multipronged why it is happening, but it is happening among a wide friday of corporations, and i do not think that trend will reverse itself. In old age is a real societal problem and it does affect the common good. One way you can do that is to make sure there is a public pension available to people, one that they cannotmisinvest or outlive, that is there for them when necessary. Also, more public forms of 401 k s or iras. Numbers, butexact derekrationally they argue rationally divided among the top earners. Why arent corporations doing this . Greed is obviously part of it, but also changing fundamentals. It is hard to have a longterm company like gm provide this huge ok of Social Security risk workers. I do not think we can look to corporations anymore. I think we need to look to things like expanding and defending Social Security. Guest i share patricias concern, and i spent seven years on capital good on capitol hill working, and i rarely saw the emphasis on common good. One of the most shocking quotes to me was in the wall street journal, when the kids start paying dues, then wall street will care about them. I would say it is the responsibility of our politicians to look out for the common good and not give in to the variety of special interest. Strength on many occasions to say no, so i know it is possible to do that. This is a very difficult question. To me, the number one reason we moved against decline benefits plans, because companies did not have to account for them. You can make all these promises and never keep it on your books. Wheree moved to a system once the benefit was defined and given, the company had to put aside money in reserve for that. I wish we had done that for Public Pensions as you can look at california and illinois, where the public Pension System is destroying those states. We are seeing in states where money on education is cut so and retired firefighters policemen, who i like firefighters and policemen, but when you see these guys getting Million Dollar pensions and you have to cut the school pension, that is not defending the common good. I think we need honest accounting. It is the same problem with Social Security. Reform allwe can these programs in a way that addresses poverty and protects the poor. Bill gates does not need his Social Security. Sustainable,hem target those in need, and recognize that for what it is, a Poverty Reduction strategy, rather than promise a bunch of goodies to everyone who we cannot deliver on. 100 of theke wealth of every millionaire in america and it will not be enough to fund our gap in Social Security. Work weto reform this are going on the path of looking like italy, looking like greece, spain, portugal. We have an opportunity to turn our ship now and if we do not, we are working against the common good. Host michael in massachusetts, independent line. Go ahead. Caller i want to jump back to the lack of criminal prosecution as far as the financial crisis went. If it is not financially feasible to prosecute these crimes and instead have them pay a fine, does it simply mean that criminality is the cost of Business Today . If that is the case, why pass the laws to begin with . Host we have about a minute left. Mark calabria, i will let you start. Andt i share that concern i think it is too easy for executives to pay with shareholders money than their responsibility. There was a tremendous amount of criminality and fraud, i think the crisis was drawn by dad macro