The second half of the battle for effective regulation

>>> on wednesday attorney general eric holder responded to questioning from chuck grassley asking whether a too big to jail mentality the justice department prevents them from prosecuting major banks.

>> i am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy , perhaps even the world economy . and i think that is a function of the fact that some of these institutions have become too large.

>> dodd / frank wall street reform, one of the most hard fought achievements in the president's first team, through a number of regulations to be iron the out. big banks and allies have responded to the legislative defeat of dodd /frank with assault on rule-making progress and agency's task of carrying it out without little public scrutiny. they've been successful. according to david polk, 176 of the 398 required rules have been missed, missed proposed dead lines. only 148 of the rules have been finalized. 74 still have future dead lines. the domestic legislative achievements of first term are massive if they can be codified into actual law enforced. if they cannot, the legislative accomplishments of first term will be negated. first term of barack obama will in some ways be negated. in is the effective battle for government and legislature. joining me to discuss is alex goldstein, former vice president of merrill lynch , bob ney from ohio and author of "sideswiped" which details his political career and downfall culminating in a three-month prison sentence . raj data and deepak bhargava. great to have you here. there's a way we try to vouch -- we try to guard the public's interest against public malfeasance and bad actors or externalties, right? the power of the political system in state in brought to bear in private spheres and often they don't like it because it's going to be less profits or more regulation or they feel hamstrung and they fight back. one of the ways they fight back is in congress. i want to talk to you first about this. you're famous for the abramoff scandal and being part of that and in the circle. it was a very extreme example of something much broader which is the kind of economy of favors that happen. and i guess i would say to you, was your experience in congress even after a bill was passed, would people come to you to want you to weigh in on their side on the actual rule-making progress as congressman because that would have some extra force?

>> every letter i wrote for jack abramoff asking for favors, i wrote 100 for somebody else. hundreds. it faeled in comparison. have you the law, they come to you, special interest groups , whatever side, they say, we don't want this question don't want that. if the law passes they say this rule-making process. your staff runs in and they say, so and so called, this lobby group . can you do a letter? they seek powerful people, chairman, people that have jurisdiction. if it's housing, they try to get me to head the letter up. sometimes i would say to a colleague, i don't want to be a front person, you do it. okay. we talked about --

>> no, no, i know --

>> i went to prison.

>> i know.

>> before prison, no. now i'm very candid.

>> seems in some ways that's a intervention for you. no one's going to pay any attention to that letter but it's going to have some effect and curry some favor with the group.

>> absolutely. look, the group louses it to say, the hill is upset, here's what they say. i passed a law. the agency said to me on trailers one time, they said, that's not what ney meant. no it wasn't. yes, it it was. so, it can work in reverse.

>> you've been in the regulatory process. are you looking over your shoulder about what the hill is going to do or concerns by members of congress?

>> i was at consumer financial protection bureau, like --

>> insulated.

>> -- has advantages. bank regulators are not appropriated so they're not going up to the hill every six months, help and pleas, fund us for another year. that's a gigantic advantage for the staff and the ability to hire people who know what they're doing so they don't get whip-sawed.

>> there's another problem, though, right? the flipside of that coin is a place like the occ, right? you are -- if you're independent, you have a revenue stream, you can view banks as your customers because you're dependent upon your regulation of them, right? one of the things that happened in the run-up to the financial crisis was this competition between regulators. banks choosing their own regularity. once you have competition amongst regularities you defeat the whole purpose.

>> there are many insane aspects before dodd /frank. the most insane is you had bank regulators competing with each other, who's the most permissive. after dodd /frank that's much less the case.

>> i don't know if i would necessarily agree with that. i've met with regularities, i've talked to people in d.c. i'm curious what you think about this but two quick points i want to make. one is a lot of times in the financial service community, the bills coming out of republican side and sometimes democratic side are straight out of lobbyists' e-mails.

>> verbatim.

>> drafting the questions, the bills, going back and forth. i'm curious to know if that was the case --

>> i charged oversight subcommittee. they came to me and others and said, you need us? what for?

>> ofeo --

>> i can't remember --

>> acronym?

>> yes. it's congressional speak. sorry, i had a flashback. they oversaw fannie and freddie. they changed that whole system. but they said, you need us. they didn't look at the auditing procedure correctly. as far as what you say, we even had a case where accidentally one of the staffers of a member of congress, and i'm not compute literal but they took something, cut and pasted it and someone was able to electronically say that was is from that lobbist's e-mail. you're 150% correct.

>> that's one problem. the other problem is regulators are paying attention to what congress is doing, what's in the media. for example, we have -- as one specific example commissioner weegan of the cftc, there's a rule out about -- we're trying to bring more transparency to the over-the-counter derivatives market, so a swap execution facility and there's debate at ftc, how many prices do you need to ask for? you think about internet shopping , the more prices you get, the cheaper the deal. if you just call a store you get a pretty bad surprise. used to be they would have five prices and now it's going down to two because of commissioner weejen. you hear him parroting the lines the banks use.

>> this gets to the line, deepak, the problem is the battles are happening at such high levels of technical complexity and so far outside of the spotlight of media attention that there is this built-in assem tri, right, to who is lobbying. we have an amazing graphic that shows this in spatial terms. as someone that organizes people, works with community groups i want to