from investors during the ipo process. now, specifically they are talking about forecasts that revenue would be lower in 2012. facebook tells cnn, by the way, that the lawsuit is without merit. ron is a former s.e.c. investment attorney. henry blodgett, ceo of business insider, a website. back in 2003 henry settled a civil securities charge with s.e.c. he was banned from the securities industry. he's a good friend of our show. henry, i say this because it's relevant to our discussion. you probably know more about this now than most people do. >> unfortunately. >> if no laws were broken, no regulations breached, and it's quite possible that's the case, this still has some kind of stink that makes investors think the system is stacked against them. >> that's right. this highlighted a set of rules that really are grossly unfair to individual investors. it was similar in my case. when i got in trouble analysts working closely with bankers and ipos after the dot-combust. that's ludicrous. we've got to change the rules. again, we've got to change the rules. in this situation facebook preannounced a lousy quarter. analysts not just morgan stanley but all found out about it and that was whispered to investors. individuals didn't know about it. it had an impact on what institutions were going to pay for the sock. >> ron, what's your take. >> the timing of the communication, in light of the changes made to the prospectus provided to investors and retail alike. the world stacked all together, if i buy clothes on the internet i'm going to look at different prices and compare. it's a function of being an educated consumer -- >> can my viewer by enough of an educated consumer. am i as a retail investor at a disadvantage to pros. >> if you're comparing retail presuming retail means novice, every industry every novice is at a disadvantage against a professional. if you feel you're at a disadvantage, work with people that are professionals and go to the fight with the same-sized gun as your competitor. >> henry, your take on this, may be the take rp for my viewers right now, we shouldn't have been involved in this ipo. >> i think that is the takeaway. this highlighted one of many ways individuals are disadvantaged. the good news is, you can buy index funds, exposed to u.s. equities, exposed to american capitalism, make money but you're not competing day to day. >> they don't have the excitement. this ipo, the most hyped ipo -- >> anybody who wants to play the markets, speculate, fine, as a form of entertainment, it's great. people go to las vegas they know they are going to use, it's still fun. you can do the same thing in the stock market. my point is if you're actually serious about investing for retirement, everything else, there are much, much smarter ways to do it than try to outtrade professionals. >> kcan the laws, s.e.c. and finra have enough in place that my ability to invest is fair and protected, i'm on a level playing field. >> law is a dynamic world. >> we make laws because we find out something went wrong. >> sometimes by way of examples laws go too far. i would argue in some ways the industry is overregulated. >> that's a good point. henry, you and i talked about this. one of the reasons why morgan stanley the underwriter didn't come out to everybody and say this is the specifics of what facebook will look like, there's a regulation that sort of prevents them from doing that. >> it's designed to not get research in advance, the company didn't live up to the forecast so people would get swindled. it's best of intentions, law of unintended consequences. big investors had very, very important information small investors didn't get. again, look at the laws. >> highlight one of my concerns, why i want to know the substance of what was communicated. if the analyst is communicating, looked at public information and analyzed in such a way that some of their clients should get the benefit of their brain power, that's one thing versus if the analyst had access to information not everybody had access to. >> very clear it was facebook. facebook proactively reached out to 21 analysts to say basically take your numbers down. the new number were all very much in unison with one another. >> you know that happens. it does happen. you're saying it shouldn't have happened. >> certainly in this case, it should have been made available to everybody. >> how, given the current laws. >> it could have been published. >> facebook could have helped out, instead of adding vague language to the prospectus. >> growing faster in the third quarter, but not to me, a securities analyst, that's different than second quarter coming in weaker than we thought, the year is weaker than we thought. if they had said that, okay, fine, everybody gets the same information and we go from there. >> you're suggesting more granular information. >> much clearer. >> the legal option they provide inconsistent with prospectus prior to the ipo. >> do people pursuing have a case. >> we still don't know the details. there's a lot more variables to be considered. quite frankly who is bringing it. not a tale of two cities but three cities. cases against morgan stanley, facebook and nasdaq. people bringing cases against nasdaq seem on its face to initially have the stronger cases. >> all right, guys. thanks for clearing this up. it's a complicated issue. henry blodgett, ron geffner. coming up next, not just facebook's debacle has us scratching our head about the debacle, jpmorgan a few weeks ago. all this taken together enough to give president obama another chance to reform wall street? when we come back i'll ask the woman who dared to challenge wall street, said we need to hold accountable the industry that runs us wild. elizabeth wild joins us next. what?! it's not bad for you. it just tastes that way. 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[ male announcer ] wells fargo. with you when you're ready to move. jpmorgan chase, one of america's soundest financial institutions, a big-time wall street bank considered too big to fail. it recently admitted to losing $2 billion on complicated trades involving credit default swaps. sources tell cnn money the losses could be as high as $7 billion. credit default swaps are like insurance but they are not. they are more complicated and highly volatile. let me explain, investors buy insurance on some underlying thing. let's say a loan. they give money to the bank, sort of like a premium. if that loan doesn't get paid, the bank has to give money to those investors. but in this case they were betting on something that didn't even exist and that neither the bank nor the investors had any underlying interest in. this is the same mess that wreaked havoc in 2008 almost bankrupting insurance giant aig. if you recall, and you probably do, the u.s. government spent more than $180 billion to bail out aig because it was, like jpmorgan chase is today, too big to fail. while that crisis spurred some financial regulation, what happened then could entirely repeat itself today. now that jpmorgan chase ceo jamie dimon who really pushed back on regulation has egg on his face, could this be the time for president obama to get it right with respect to regulation on wall street? one of the best known advocates for financial reforms joins me now. elizabeth warren was one of the main architects of consumer financial protection, the consumer financial protection bureau. she was brought in by the obama administration to get the consumer watchdog group off the ground. she's now a democratic candidate for senate in massachusetts. elizabeth, good to see you. thank you for being with us. >> it's good to be here. >> elizabeth, four years after the financial crisis, are we or are we not better equipped to shield the economy from risky bets made by institutions like jpmorgan? >> well, we are better equipped. there are some changes that have been made like consumer financial protection bureau. that means we're feeding a little less risk into the system. but the real question is are we adequately equipped? i think what the jpmorgan chase problem shows, there has been no change in attitude out there. the banks still want to load up on risk in order to juice their profits. they are still not adequate oversight of that. so long as that exists we're at risk purchase why should i care jpmorgan chase, a private company with lots of money is taking risky bets. my mind goes back to 2008 and aig. i think, i don't care if you do it for you and your shareholders but at some point it starts to risk the entire economy. am i overstating the case here? >> no, you're not. that's exactly the point. if these banks load up on too much risk, as long as it all pace off they take the profit home. as soon as it reverses the property on the rest of us. never forget what happened in 2008. it meant people lost their jobs. it meant small businesses couldn't get the money they needed in loans to keep their businesses afloat. it meant people lost their pensions. it meant this whole economy nearly went over the edge. what makes it so important is that burn me once, shame on you. burn me twice, shame on me. this is now the point where the american public says, wait a minute, we bailed you guys out. the understanding was there was going to be a new day here. there was going to be some change. but the financial institutions instead of saying, okay, we've got it. we made a terrible mistake, thank you for bailing us out. instead they fought back against regulations. they hired the biggest lobbying force ever assembled on the face of the earth. they fought those regulations and when dodd/frank passed they continued to guerilla warfare. they continued to lobby congress, regulatory agencies to delay implementation of the rules, put loophole in implementation of the rules, to tangle the rules up, to undercut the regulators so they wouldn't have adequate funding to supervise. and that leaves us in the same old stew. >> elizabeth warren, always a pleasure to talk to you. thank you for joining us. >> always good to talk to you. >> coming up jpmorgan that has long and colorful history in washington. this week was no exception as the banking committee took up debate on its debacle. would wall street reform really prevent another financial crisis in my next guest says no. stephen moore joins us when we return. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers. i tell you what i can spend. i do my best to make it work. i'm back on the road safely. and i saved you money on brakes. that's personal pricing. before the break we heard from elizabeth warren running for senate in massachusetts about why banks need to be regulated. my next guest says regulation would not have prevented jpmorgan's hedging losses and they don't have anything to do with taxpayers anyway. stephen moore an editorial writer with "wall street journal." i consider him a friend. today, stephen, i think you're crazy. how can you say that risks taken by banks don't have anything to do with the taxpayer? were you living in malta in 2009? >> look, let's go back to the financial crisis in 2008 and 2009 when the banks collapse. >> right. >> it's important for people to understand, the main reason that those banks collapsed, and we saw these massive hundreds of billions of dollars of losses, what were the banks investing in? they were investing in exactly what federal regulators told them to invest in, mortgages and mortgage-backed securities which turned out to be worthless. it wasn't fancy financial instruments, it wasn't derivatives, wasn't so much hedge funds. >> the mortgages were the underlying problem. there's no question if home prices hadn't gone down and people weren't under water, this wouldn't have happened. we created this much, much bigger world by having bets on bets on bets of things synthetic, derived. >> that's true. >> ultimately, aig, sure, if mortgages hadn't gone sour wouldn't have gone down but regulators didn't know what they were betting on. >> this is my point, though. oftentimes we have this mentality, i think you have this mentality, ali, sometimes, that these regulators have super wisdom. >> it's a dream, not a mentality, a dream. i fantasize they will do this. >> look, they don't. do you think the federal regulators would have seen some of the folly in what jpmorgan was investing in? i think not. the other point i would make to what elizabeth warren was saying on the show, look, it was two years ago dodd/frank was signed into law. two years ago. this was supposed to be the most sweeping financial regulation of the banks and other financial institutions that we passed in 50 years and it didn't go anything to prevent the crisis that's going on. >> because republicans worked very hard to water this down. elizabeth warren running for senate. she would have been the head of the consumer protection bureau but for a handful of senators that wouldn't let that happen. >> here is my concern with the rush to regulate. i think you would agree with this. the united states, if we remain the economic superpower, we have to be the financial capital of the world. we have to be the place where deals get done, the most efficient capital markets. here is where i disagree with you, ali. i think this massive push to impose new regulations on our financial institutions is not going to make them safer. i think what you're going to see is a lot of this business moving to tokyo, london, beijing. >> regulation has got to be smart. let me ask you this, do we agree, sunk a nonpartisan issue even in america that it's dangerous to have too many too big to fail financial institutions. >> that is a very tough question. we've been struggling with that at the "wall street journal" editorial page because we have created this sense in the market that these large insurance companies, these large banks, brokerage firms have become too big to fail. therefore they have this kind of taxpayer safety net. i hate that. i hate the whole idea of bailouts. i'm not sure what the best solution is. the fact is we will bail out these institutions if they fail. >> that's the danger. the dangers isn't that jpmorgan goes and makes bets with its own money, why do i care about that? if they do something bad to the economy we're going to have people in iowa that can't make home loans, major companies that have to fire people. that's the connection. >> there's something special about banks. i want to make this point. the reason we care about banks as opposed to insurance companies and brokerage firms, banks also have deposit insurance, right? the taxpayer stands behind that. you could make the case there should be special regulations on the way banks invest because they have the special protection of fdic insurance. i don't see that necessary for other types of financial institutions. maybe what we need to do is separate out the banks from other financial institutions. >> let's go to a place we agree. i have a fantasy regulators should regulate what jpmorganan did. the regulator is somebody in that chief investment office in london. i don't know why this stuff happens in london. looking over the books with them as a partner, not as an outside eye but somebody who says, what would happen if this didn't go your way in what would happen if this bet you made went the wrong way. would be able to say, that's dangerous to the global economy, can we do something else? i'm not asking forensic work for the smartest people in finance, is there not some way you can have regulation that's effective that way? >> the one area i would agree with with elizabeth warren, we do need more transparency in these trades. here is an interesting point i would challenge you on. if you look at what jpmorgan was raising money on hedge fund bets, hedging against risks. in other words, they were trying to reduce their risks with hedge bets. they didn't turn out so well. i'll tell you this. theta me ask you this question, ali, how many people in united states congress understand what a hedge fund is, derivative is, credit default swap is. you're asking these members of congress who have no knowledge of these markets to be regulating them. it's another reason i'm skeptical the brains in washington are going to be able to avoid these kinds of financial catastrophes. >> i share a lot of views on that. i'm not sure that's a reason not to do it. it's a good discussion. you're always up for it even though you're a little dose of crazy. >> i think i'm working on you. >> stephen moore an editorial writer and great thinker with the "wall street journal." uh-oh, another election about plupers. >> your job as president is to promote the common good. that doesn't mean the private equity guys are bad guys, they are not. but that no more qualifies you to be president than being a plumber. >> he didn't say plumber, did he? 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