So I wanted to tell you about insurance of corporate accounts. We have the SIPC, which I'll come to in a minute, which was created in response to failures of brokerage firms. So Goodbody & Company in 1970 was a brokerage firm which failed in 1970. It went bankrupt. Now what does a brokerage firm do? Well, there are members of that firm are stockbrokers. You have to call a stockbroker. They didn't have online brokerage back then. You would get on the phone. If you want to buy shares, you'd say, who is a good broker, and your friends would tell you, call so and so at Goodbody. And then you would call this person and say, I'd like to buy 100 shares of Ford Motor Company stock. And the guy would execute the order for you on the floor of the New York Stock Exchange. And then you would own the shares. Then the broker would send you a statement and show you how many shares you own. But the funny thing is, that the standard was that the shares, unless you asked for the certificates, you could say I want the certificates mailed to me. And then the broker would tell you, well, I can do that but do you really want to worry about those? I can just hold them for you. And then it's easier when you want to sell it. You don't have to mail them back to me and all that. So then most people said, okay, fine. That meant that the shares were held by the brokerage service on your behalf and actually, as far as the company knew, they didn't even know that you existed. You were now shareholder in the company. Until the brokerage service reports your name to the company, they're just held in what's called street name. So the Goodbody & Company is the official owner of the security although they're operating on your behalf as a stockholder. So what happened when Goodbody went bankrupt? Well, this was a big issue because it could threaten the public confidence in the whole brokerage system. So the financial community, Merrill Lynch, took over Goodbody. The New York Stock Exchange pledged 30 million to cover losses. And in fact, none of Goodbody's retail customers lost anything. But it wasn't because of the government. It was because the financial community had some sense of integrity. What was happening in Goodbody, they weren't running the business right. And so, yeah, they held your shares, but they were doing something else. And they just got wiped out, but nobody lost. But it led them to thinking that we have to do something. So if Senator Ed Muskie took that example of Goodbody & Company to think that we need something like deposit insurance for shareholders in securities, if we're going to have things held in street name, it's just like a bank. You have to trust them that they really have the shares for you. So they created a public insurance. Well, it's like the FDIC, the Federal Deposit Insurance Corporation. The SIPC is Securities and Investor Protection Corporation. And like the FDIC, it has limits on how much they'll support you for. So the current limit is $500,000 per account. And also, separately, you might also have a cash account at your stockbroker that you would deposit in. You could write a check to your broker for $100,000, and say, we're going to think about what I'll invest it in. You hold the $100,000 for me. Well, that kind of account is only limited to $100,000. So there have been a lot of complaints about SIPC. The SIPC, over the years, has been very worried about its own integrity. It is on its own feet as a corporation that, well, it would probably be bailed out by the government if it failed, but [LAUGH] it disallows claims that aren't filed properly, claims against bad behavior of your stockbroker. And it doesn't cover everything. And it's also extremely slow to pay. Nonetheless, it's a positive thing. The 2008 financial crisis, a lot of our regulation is always a reaction to crisis. So we've talked about the 2008 crisis. So in the 2008 crisis, it was substantially a mortgage crisis. Banks lent to homeowners under mortgages, on their homes, to buy their home, and it became a period, as we've talked about, of high leverage. Banks were allowing homeowners to borrow a lot against their home. And banks often conceal their liabilities in what's called off balance sheet accounting which needed to be regulated more. Home appraisers were, in effect, bribed by mortgage lenders. Well, it wasn't a literal bribe, where they would hand you a suitcase full of $100 bills. It was simple, very simple. When you take out a mortgage, okay, part of due diligence in approving a mortgage is to find out, is that house really worth what you paid for it? Because you could be playing tricks on the broker, you might have paid too much for a house. The other side of the transaction was your crony is going to pocket the money. So you have a sales certificate for a lot of money, but it's phony. So in order to protect against that, banks have to hire someone to go look at the house and appraise it, give it an independent guess of what the house is worth. Unfortunately, some of the banks would tell the appraiser what the sale price was. And then the appraiser would come back with a value slightly above that all the time. So you'd think that the bank would catch onto that. You know, this guy's a sleazy appraiser. There has to be some times where he disagrees with the purchase price. If he's constantly coming out with an appraisal just a little bit above the purchase price, this guy is a phony, right? I mean, there has to be some instances, but banks didn't care. That's partly because that was before the 5% retention rule and a qualified residential mortgage regulation. So they just didn't care and, in fact, some brokers which were the more reliable and of higher integrity, who didn't play that game, they just wouldn't get called back by the bank anymore. The bank just wanted to see it approved. It became cynical. So there are other examples they give you like rating shopping. Banks who are issuing mortgages or other mortgage originators would call the ratings services, Moody's and S&P and Fitch and others. And they would say, we're thinking of floating this kind of security. Can you give us any indication of what the rating would be before we send it to you and have you officially rate it? And if the rating agency gave it on the phone a bad rating, they'd say, okay, I think we'll rethink that, we'll talk to you later. And they never called them back. That's called rating shopping. So if you have a number of raters and you only submit your securities to be rated to the one that told you on the phone they'd give it a good rating, then something's wrong. So Dodd-Frank Act created the Financial Stability Oversight Council, which is FSOC, which is headed by a number of regulatory agent heads which is supposed to look at all these problems that might lead to another crisis. And it also created the Bureau of Consumer Financial Protection, CFPB, usually, Consumer Financial Protection Bureau, cfpb.gov. That was Elizabeth Warren's idea, who is now a US Senator. Similar things happened in Europe, again, in response to the financial crisis. The European Systemic Risk Board, the European Banking Authority, European Securities Market Authority, and European Insurance and Occupational Pension Authority. They spread them over different cities, that's the European Union style. >> So how do you think they actually balance the innovation of financial institutions while also trying to risk management? >> Right, now here is a problem. The government agencies tend to become bureaucratic. And they assign specialized functions to different people, so what tends to happen is they have rules with numbers, and they have different kinds of vehicles with numbers and letters associated with them. And you come into this maze of rules that they themselves can't even change overnight. If you want to appeal to changing some basic rule that they have, they're going to have to put it up for comment, they're going to have 10,000 comments. It becomes hard for any individual, even a well-meaning regulator, to do the right thing. These are just occupational hazards. The regulators that I've met, I've been impressed, as I think many people are attracted to the job as a regulator. You might think, why would anyone want to do that? [LAUGH] Well, I can see why one wants to do it. Because one's interested in, let's say finance, if it's a financial regulator, and one is a well-meaning person. Isn't it an interesting job to be trying to get the system to work well? Now some people say I'm naive to suspect that anyone would be interested in doing that. But I kind of feel that I know that they are because I met these people and it seems like it's a good thing to do. And not everyone is motivated the same way. So I think that this is something that's not mentioned enough in finance discussions, that we do really have well-meaning people who are confronted with a system that may not always function well for them to feel good about what they're doing, and so they want to fix it.