Money & Politics --- Mike (fast)
NYSE --- Deb (fast)
Interview: SEC Chairman
>> i’m michael mckee. welcome back to “money & politics.” in business news, it was a very busy day for commodities investors. crude oil rose to a two-month high and gasoline jumped on concern refiners won’t produce enough to keep up with peak demand this summer. crude oil closing up more than 1%. gasoline finishes up five cents higher. heating oil also up although natural gas declined on the day. the real action today was in the gold pits. gold in new york climbing above $600 an ounce for the first time in 25 years as investors bet metals will fetch better returns than stocks and bonds. it closed just under that, but still up on the day. gold has gained more than $100, or about 20%, since the end of november. chain store retailers reported the slowest sales growth in more than a year as cold weather, higher gasoline prices and a late easter limited spending last month. the international council of shopping centers saying their same-store sales index increased 1.9%, the smallest gain since november 2004. they collect data from 60 retailers. the goldman sachs same-store sales index gained 1.6%, that’s less than that firm’s forecast of a 2% gain. the rise in oil and drop in spending took a toll on the stock market today. the dow jones industrials closing down by 23 points, the s&p 500 by 2.5 and the nasdaq, 1.5 points higher on the day. gold may have surged to that 25-year high but stocks and bonds, as we mentioned, finishing down. deborah kostroun has more on today’s action in stocks from the new york stock exchange. deb?
>> thanks a lot, mike. the dow jones industrial average, at one point, it was down 72 points. so not faring all that badly, down 23 points. but we’ve had three days of gains, monday, tuesday and wednesday, so the stock rally fizzling after that gain. one of the biggest reasons, gold rising above $600 an mountains. jack ablin with harris private bank saying that gold is creating a psychological dark cloud over this market right now. other factors, of course, with crude oil rising to a two-month high, that also adds to concern about inflation and consumer spending. and with those concerns about inflation and consumer spending, what we did see, treasuries falling on concern that the fed will likely keep raising interest rates. those yields on the 10-year notes rising near the four-year highs again. of course, what we also have in tomorrow’s marketplace, the jobs report. many traders are telling me that they’re going to be watching that closely because the expectation is that the u.s. would have added 190,000 jobs and with the job market being very robust, that also gives the fed more fuel to the fire to be raising those rates. now, in today’s session, we saw lots of records. the midcaps, the russell, the transports and the cyclicals all hitting records in today’s session. and of course, closing at records on most of those. oil service stocks also coming in at records. however, schlumberger and weatherford closing a little bit lower. you saw integrated oil stocks mixed on the day even though crude oil was higher. metals stocks all performing well. metal, gold stocks doing really great. 3m, the biggest contributor in the dow and without 3m, this market probably would have been down a lot more. they said their first-quarter profit would be higher than the company’s earlier forecast. they report earnings april 18.
>> deborah kostroun at the new york stock exchange. small companies say the sarbanes-oxley rules requiring outside auditors to certify their procedures costs too much and stifles growth. securities and exchange ommission chairman christopher cox says they won’t get a waiver but he wants to make the rules work. he joins us to explain. thank you for joining us. four out of the five commissioners who have spoken publicly, including yourself, say it won’t be a waiver of the rules. what might it be that we will see?
>> well, of course, we are all on the securities and exchange commission guided by the law. in this case, the sarbanes-oxley act that requires of companies, large and small, public companies, that they do an audit of their internal controls. so we intend to apply the law as it was written, but in a way that takes into account the rather significant differences between very large multinational companies on the one hand, and very smalluble companies on the other. it’s simply a matter of flexibility. we want to make sure that both the rules themselves and their administration take into account the very significant differences between organizations of varying size. >> give me some examples of the kind of flexibility you might be looking at. >> as one might imagine, internal controls on the expenditure of funds come right down to procedures and how your company operates. if you have only a few people who work for the company, rather clearly you’ve got fewer internal controls and you’ve got a lot more simplicity in their execution than if you’ve got worldwide operations and far-flung employees and money moving back and forth among all of these different parts of the company. so the controls and the backup and the backup to the backup that is required have to very significantly, depending on those very divergent circumstances.
>> what about a suggestion that companies of a certain size maybe perform their outside audits once every two years instead of every year?
>> as you know, some suggestions of this type will come to us from an advisory group that the s.e.c. itself set up, an advisory group on smaller public companies. other suggestions are going to come in the way of comments to the commission. we’re taking all of these inputs into account and there are some very good suggestions along those lines that we’ll be looking at.
>> when do you expect to have some kind of ruling on this? what can companies look to?
>> we have some deadlines coming up. already we have extended for some time the compliance of smaller companies, whether we extend it further or whether or not we have a phase-in of some adjusted compliance with section 404 with smaller companies, i think we will decide this summer.
>> a couple of other issues before you. you’ve been there for nine months, now and some of your most porn senior positions haven’t been filled. when can we expect people named to some of the important job? s?
>> i assure you that they all will be filled by the time i’ve been in the job for nine months. it’s been seven. i was? the―i was in the hospital unfortunately but i’m back in action. already we have recruited and filled the position of secretary of the commission, the director of the division of corporation finance, the general counsel and we’ll keep moving on the director of the divisions of investment management and also market regulation. at the same time, we’re taking a look through a more elaborate process at the chairmanship of the pcaob. so these are all important vacancies i think you can expect to see news on in the near future.
>> hedge funds, refco’s collapse seems to suggest that companies can go offshore if regulations are bearing down on them here. critics say it shows the s.e.c. can’t hope to do anything with regulation.
>> if you’re talking about international securities fraud, which is something that we have to worry about at all times, increasingly, the securities and exchange commission is finding itself in a position of needing strong partnerships with securities regulators abroad. to that end, i’m going to be getting together very soon for a full day and evening with my counterpart at the f.s.a. in the united kingdom. we’re going to be talking anticipateoraly about issues we see arising in markets that are going global and in cross-border regulation. we’re having similar conversations with literally dozens of countries at the moment and we may be concluding further agreements with those countries such as the one i just signed with the united kingdom.
>> we are maybe a little over a month and a half into the s.e.c.’s registration of hedge funds. what use have you made of the information? has it been useful so far?
>> you’re absolutely right that this information is now starting to come in. it’s a new rule. what we’re seeing is, for the forst time, information not on the hedge funds themselves, but on their advisers. this is a compromise approach that the s.e.c. has taken. we haven’t yet decided to register hedge funds themselves but we are getting information from the advisers in the form of adviser reg superstition. we aren’t finished yet. we expect to see more of this information coming in throughout 2006. but right now, i think it’s possible to say that this is useful census information, it is going to help our examination staff across the country to formulate the kinds of questions and focus their energies in better ways than they could have previously. i think we’re going to have to wait and see until we get through this whole cycle by the end of the year what the lessons learned might be and whether going forward there should be more or less of this kind of thing. there’s a great deal of resources that will be required to look at what is truly a large and growing industry, nearly $1 trillion in assets now being accounted for in the form of hedge funds.
>> thank you very much, s.e.c. chairman christopher cox. thank you for joining us.
>> happy to join you.
>> pete domenici represents new mexico and knows a lot about immigration controversies and as chairman of the energy committee, he’s taking on another controversy, global warming. senator domenici joins us for our weekly “chairman’s corner.” thank you very much for joining us. let me start with immigration. it’s a big issue in your state. what do you think of the compromise today? you were part of the agreeing group.
>> yes, sir. well, look, i am part of it. i think we got a deal, an agreement. looks like it’s a bipartisan and if there’s plenty of senators and yet i’m hearing a lot of commotion that things aren’t over yet. with that preface, i’m not part of that commotion. i think it’s over so let me just say i think the proposal is one that, if it could be the law -- if we could pass it, it could do on through the house, it’s signed by the president, it would be a very good satisfactory conclusion to a horrendous problem.
>> can―it can get through the house, do you think? their bill is vastly different.
>> i just said, if we could, i think it would be a great conclusion to this issue for the american people and the illegal aliens and workers of the future here and in mexico. but that’s a big if. nonetheless, i think it is a great achievement if we can get it done.
>> let me ask you about climate change. you held a hearing this week. utility company executives came to you and said we would be willing, perhaps, to have additional regulations. is that something you’re going to pursue?
>> i was kind of shocked―it was kind of surprising. on the other hand, when you read through all of it, there’s not anything like a great migration of stakeholders, people affected at the utility and then business, that are all out there saying let’s start to tax carbon or have a mandatory program of exchanging carbon. but we learned a lot and we learned that there are a lot more people out there thinking about it and worrying about it and that, indeed, it could be done but in the united states it’s much harder to implement a program than it is in any other part of the world and so to reach a consensus is still going to be tough. that’s what i conclude.
>> even if industry is backing you?
>> well, what i said to you, we heard some industry backers, but we have to now, to answer your question and say is industry backing it, yes or no, you have to find out a lot more than you heard. you heard from some that are but there are probably many, many more that don’t. at all different levels, so it’s still a big battle.
>> another issue today, you introduced legislation to go ahead and fund and open yucca mountain, the nuclear waste repository, in nevada. is that going to go through? still a lot of objections from members of the nevada delegation.
>> i introduced legislation at the request of the administration. it’s not my legislation, it’s theirs. they’ve worked long and hard on it and so i toll them―told them i would introduce it in their behalf, what we call per their request. i’m trying to draft some with my co-short, senator bingaman, that would be different and that would be bipartisan. this bill of theirs leaves a big vacuum and the vacuum’s going to be there but i’m not sure they solved it right and that is, how long is it going to take --
>> we have to leave it there, senator. unfortunately, we are out of time.
>> ok, very good.
>> fufor joining us, senator pete domenici of new mexico. stay with us on “money & politics.” we will look at
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Listen Interview: Detroit Mayor
>> continuing this week’s series of conversations with america’s mayor, we go north to detroit. a city unable to pay its bills now faces the possibility of an auto strike. on wednesday, i asked detroit mayor kwame kilpatrick how much detroit depends on autos and auto workers.
>> our revenue structure is inverted. most people get most of their revenues in their city from property taxes. here in th city of detroit, nearly 50% of the revenue we get comes from income taxes so when you hear about the thousands of layoffs, at g.m. and ford. when you hear about plants closing, it directly impacts us, even those plants immediately adjacent to the city of detroit. nearly 30% of the people that work in those facilities live in the city of detroit, so our income tax dollars are shrinking and therefore it’s a huge pressure that we’re putting on our budget.
>> g.m., to survive, is offering to buy out any of its workers that want to go, delphi is cutting all kinds of jobs, ford is reducing employment. that doesn’t suggest there’s much of a future for detroit.
>> well, actually, that’s not true. i believe that the diversification of those industries, what they’re doing with their financial arms, it had to happen. we had a huge run in being these large manufacturing corporations. but detroit has already started to diversify its economy, to be a part of the next wave of the manufacturing industry. we’ve made a little over $60 million investment in fuel-cell technology, a new industry here to engage the hydrogen technology economy. we’re going after more service oriented businesses in detroit. our healthcare center at the detroit medical center is growing and full with it’s new dynamic technology it’s using. so we’re diversifying our industry base at the same time the manufacturing industry is going through its change and detroit will be fine. we’re building new houses and fixing more roads than we ever have in this town and people will see that.
>> detroit may be on its way back, as you say, but the papers there are reporting that next week you’ll announce wholesale cuts in city departments to get to the point where you can afford the deficit you’re facing.
>> yeah, you know, it’s unfortunate. the papers will report. we have been making cuts. when i took office, there were about 21,000 city employees. we really blew up city government to the point where we could never sustain it. we’ve cut city government down to under 15,000 employees, right around 14,000 now. so this budget i’m announcing next week will not have significant cuts in it. we’re leaner as a government, we’re addressing the needs of what we need do but we have revolutionary changes inside the budget, moving from millage-based systems to fee-based systems, moving a couple of our departments into more outsourcing positions. so there are some different things that we’re doing but necessarily the wholesale cuts, that’s not happening. we’re now working on the overall efficiencies in city government, not just cutting.
>> what are you trying to do in terms of outsourcing?
>> well, we just finished our zoo operations. we now have outsourced the management of that to the zoological society,. our historical museum is another place where we did that, outsourcing some of those things. we’re looking at certain functions inside city government where the city will stale maintain the authority over that but looking to the smaller functions. when you talk about overall security, jan torl services, looking at the whole procurement process, looking to improve efficiencies within city government. i have 48 bargaining units inside city government so it’s kind of tough to wholesale move something without tremendous amount of negotiation, which we’re going through now. but the biggest problem we have, mike, is healthcare. we’re a microcosm of the auto industry. healthcare and pension benefits are what’s doing us in right now. we have 20,000 people that are retired and only 14,000 people working that we’re taking care of right now and our healthcare costs have spiraled out of control so we structurally have to get that in order.
>> how are you going to do that? a lot of companies are declaring bankruptcy and walking away from their pension obligations.
>> we can’t do that. we’re at the table now with our 48 bargaining units. we had a couple of unions sign up last week and we’re going through them one at a time of the we had our big 10 unions and two have signed up to our new healthcare strategy, our new retirement plan and we’re doing them one at a time. it’s a long process, it’s an intense process. but i think we have our men and women who work in organized labor in our city, they understand that we have to have a change and how we get there sometimes we disagree, but everybody agrees we have to change what we’ve been doing and it’s working. it’s working right now, we want to continue on this path.
>> if that’s the case, you must be scared about the possibility of a lengthy g.m. strike arising out of the delphi negotiation.
>> absolutely. i was reading, rick wagoner said earlier. i have a tremendous amount of respect for him. it would be a great loss to g.m. to lose him, as well, and to our city but he said it this morning, we have to find a solution to the delphi situation and i agree wholeheartedly. a tremendous amount of that work force live in the city of detroit, pay income taxes in detroit. but it also involves overall morale of our city. michigan is 50 out of 50 states in unemployment so we’re diversifying our base, moving to applied science, hi tech, high-skill work force. we have to do it together but we have to stabilize our indigenous industry of manufacturing. we’re known as motown no matter what we do so the delphi situation is very important.
>> mayor kwame kilpatrick speaking to us from detroit. congress is working on immigration law but do americans want changes? “poll of the day” is next.
