tv [untitled] December 8, 2011 4:30pm-5:00pm EST
good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and from goldman sachs to governor to grilling john corazon former c.e.o. of the now bankrupt m.f. global testifies on capitol hill he claims he is clueless about the possible one point two billion dollars of his client's money that is missing simply do not know where the money you are one of the accounts of not going to work and for good. but how is all of this happening three years after the financial crisis when wall
street was supposed to be reined in and will poor design ever pay personally himself only at least pay for falls advertising. sometimes you wish people didn't agree with you all the time at m.f. global we do you what's good for you. looking back we have seen plenty of wall street executives get grilled by congress in the wake of the financial crisis and then go right back to business as usual why are you was official is saying criminal prosecutions for financial executives may just be too tough to what is the truth we'll talk to the regulator during the savings and loan crisis oversaw more than ten thousand criminal referrals were hundreds of bankers did go to jail and the golden boys of wall street have their goldman tentacles spread over the m.f. global case the head of the c f.t.c. m.f. global's regulator has recused himself from m.f. global's probe why because he worked with john for a zine goldman sachs this is the same c f.t.c.
that delayed voting earlier this year on an m.f. global rule because of heavy lobbying from joy and john are we seeing the power of the squid here let's get to today's capital account. the m.f. global saga of bankruptcy missing money and possible fraud and corruption is the latest huge red flag hitting us in the face that wall street really has not been reined in since the financial crisis and today was kind of the culmination of a lot of anticipation we finally heard from john corazon the former c.e.o. of m.f. global on the hill now we have been covering this pretty much every day on capital
account but i want to give everyone a refresher to put this all in context so first let's recall who exactly junk or resign is and where he comes from c.e.o. of goldman sachs from ninety four to ninety nine he went on to be u.s. senator for new jersey two thousand and one to two thousand and six then he went on to continue his political career as the governor of new jersey from two thousand and six to two thousand and ten he was defeated for reelection in two thousand and nine and went on to be where we now know him to have just died down for from march two thousand and ten he was named chairman and c.e.o. of m.f. global now he was defeated for reelection i should mention despite a little help from his friends. research. and even though he left politics his friends would still call him up for policy advice. i literally picked up the phone called john cores on you tube john i want
you to do. more me go wrong. to speak your eyes we knew he knew about the economy. about how we had to respond. to the would we knew. what do you know and he was still a big political donor to democrats when you follow the money look at that you can see right there how it breaks down and how much m.f. global employees john corazon and others gave to democrats now let's look at how he got to the hot seat today so on october thirty first that's when m.f. global filed for chapter eleven bankruptcy and when the new york fed finally announced they're no longer a primary dealer days later november third john corazon voluntarily resigns and then we've seen that the trustee estimated six hundred million dollars from customer accounts is missing then we saw them revise that number to possibly one
point two billion dollars of missing customer money now thousands of customers have had their money frozen and then later after all of this unraveled december fifth the c.f.d. see the regulator unanimously approved what's been dubbed the global rule putting tighter restrictions on how money for brokerages can be used now the customers whose money is frozen range from farmers who are left out in the cold can't buy seeds because their money is frozen to economic pundits we have had on this show. maybe the name and thinking the first word of the i.m.f. is now over and we could put the all the word in there is the usual magic. you can see that that was gerald celente very angry because his money was frozen as a result of all of this as for the m.f. global rule it was passed limiting how the brokerage industry can invest customer money now the c f.t.c.
i should mention plan to finish it months ago but they delayed it why reportedly because of strong opposition from john i should also tell you that the head of the c f.t.c. gary gensler worked with corazon at goldman sachs as a result he has recused himself from the c.f. two c's probe and the global so what are we going to see this is really the big question this is the rears after the financial crisis and this case looks worse so we'll ever face prosecution will anybody to talk about this former financial regulator william k. black he's really the guy because during the savings and loan crisis the agency he works for made over ten thousand criminal referrals to the f.b.i. ok bankers went to jail people got felony convictions what changed since then that's really the big question thank you so much for being on the show i want to start with john corazon and today you know he didn't plead the fifth maybe you know
should of or might as well have he said he couldn't answer a lot of questions because he didn't have records since he left the firm and he also said i'm not part of the day to day business there i really removed from a lot of that but is c e o of this firm is that a viable defense for him not of dollars of. the underlying problem if you take that much in terms of going from is because you've got a huge problem. that has to been something that the c.e.o. would have been dealing with him not just on a daily basis but an hourly basis and he would liquidity problems like that are a single day that would have been building up for months perhaps even over a year so i think you'll find that this was in fact what course i'd spent most of his time on so if it is found out that m.f.
global did in fact break rules break regulations and use customer money and lose it in ways that they shouldn't have under what circumstances could john corazon a state being held personally responsible. well i mean there are many kinds of responsibility. and he's taken responsibility as captain of the ship but says as captain of the ship he couldn't really be bothered to know that he was steering it aground. in terms of civil rights thora to responsibilities already been sued by employees association it's almost certain that they'll be suits by the securities and exchange commission and the c.f.o. to see as well. by all kinds of a customer to course but in terms of in minutes trade of actions there are those enforcement actions are almost certain but the dog that has refused to bark for about a decade is the justice department and that's
a big question we just saw in the wall street journal a u.s. official come out and say that basically the justice department has thrown up its hands and decided that it's too tough these criminal prosecutions against a lot of these financial executives that it's better left to regulators which can only take civil action is that really the best we can get for the for the damage we've seen mr black. well i'm old enough to remember that when the barbie doll got huge criticism for saying it had the words math is hard i'm old enough to remember that how even now this is the most pathetic excuse for not prosecute of course it's are you going up against the best criminal defense lawyers in the world the people where nice suits they're very glib they're great talkers. cetera et cetera et cetera make deliberately create all kinds of layers between them but nevertheless in the savings and loan crisis in similar circumstances
actually in more complex frauds in many ways we convicted over a thousand elite. executives of felonies the total number of convictions was over three thousand so this is just the major cases and we prioritize with the f.b.i. the justice department to create the absolute worst six or seven hundred and we prosecuted virtually all of them we have a ninety percent conviction rate so yeah it's very hard it takes an entire team of thousands of people working for many years it's not something you do as a p.r. campaign and at the peak we had over a thousand f.b.i. agents working the savings and loan cases right now we have about three hundred fifty working all aspects of fraud out of this crisis including
all the little mortgage frauds. so it's absurd there's so much more i want to get into on this but i just want to ask you to hold tight there for one moment dr black i want to explain one thing to our viewers about this whole case and then we will continue because i'm sure our viewers are waiting with bated breath to hear what else you really think has changed between when you were there saying that bankers were prosecuted and now when nobody has the political well or maybe the funding i don't know we'll get to it but that's dr black and we'll be right back with you. all right it's time now for word of the day where we break down a financial term or concept for our very smart viewer but just maybe not the financial expert and because we are talking about m.f. global and regulations we wanted to break down the commodity exchange act because
it's within this act that the rules governing customer accounts are defined in the case of m.f. global so first let's take a look at what it is this is our breakdown of it was an act of one thousand nine hundred thirty six the act provides federal regulation of all commodities and futures trading activities and requires all futures and commodity options to be traded on organized exchanges now that is obviously pretty broad so we want to look specifically at section four d. and of course i'm not a legal expert but looking into it we found that it spells out that customer funds shall not be co-mingled with the funds of the future commission merchant so in this case that is what m.f. global is so that money is supposed to be kept separately now we heard about it at the m.f. global hearing just today to sell play a bit of that to take customer money out of a forty segregated account and transfer it to pay some other debt do not happen that's a violation of the act. so that is
a violation as we just told you fair enough so it looks like and that's global broke the law if the one point two billion dollars in customer money is truly missing but wait there's more the act does also differentiate between customer accounts and proprietary trading accounts so proprietary trading accounts could be futures accounts held by certain partnerships like had funds or family trusts and in that case it seems much more unclear whether m.f. global would have been breaking the law if it had dipped into these accounts however all accounts were frozen by regulators which means if you were a retail customer and you legally had protection you still can't get your money as you heard gerald celente be so angry about so regardless of whether m.f. global broke the law or not it doesn't help the farmer who is missing deadlines to buy seeds for next brings corn crops because his two hundred thousand bucks hasn't
been returned from m.f. global now as i mentioned earlier the december fifth rule vote by the commodity futures trading commission passed a new rule to tighten rules for brokerages using customer money but again if you're farmer and your money is frozen and you can't get it doesn't do much for you. still ahead don't go anywhere here on the capital account it is not the most glamorous thing to pick up but what if it offered a handsome reward we'll tell you about the standard taiwan is setting with gold the first your closing stock numbers. you just put a picture of me when i was like nine years old i want to tell the truth.
i'm a confession i am a total get a friend that i love rap and hip hop music and pretty. much he was kind of the jester day. i'm very proud of the will without you she has played. oh. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything you thought you knew you don't know i'm sorry welcome to the big picture.
what drives the world the fear mongering used by politicians who makes decisions to break through it's already been made who can you trust no one who is you know view with a global missionary see where we had a state controlled. capitol school sessions when nobody dares to ask we do our t.v. question more. welcome back sticking to m.f. global it is really the latest symbol of wall street fraud risk and corruption but is it a sign that nothing has changed since the financial crisis or that maybe it's worse and will anything be done to punish fraud and rein in wall street i want to bring back in william k. black he is associate professor of economics and law at the university of missouri
kansas city and as i was as he was telling us before the break he was a regulator during the savings and loan crisis where he saw bankers c.e.o.'s prosecuted he said it was a hard task but they did it so why aren't they doing it now so i want to continue this conversation because you mentioned some of the things that are different that the f.b.i. there are a lot fewer agents that are tasked with these kind of things but aside from that i'm curious if there are other things you can pinpoint that have really changed to where we saw ten thousand criminal referrals during your time and we've seen zero now. well that's the most obvious there is zero criminal referrals out of the stadium agency that i work for and that's because they eliminated the entire function of making criminal referrals and since prosecutions have to start with criminal referrals from the regulatory agencies that eliminated any effective ability to deal with sophisticated crimes where people have to understand is the
regulators are the regulatory cops on the beat if you had called up the used in policed the apartment and said you know i think something funny is happening and runs books they would have hung up the pony on you but yes there's an f.b.i. but the f.b.i. does not patrol only the regulators are actually in need institutions on a regular basis and of course what you have disc actually didn't come through clearly in the early parts of the testimony today but it is clear in the testimony of the last panel is that this is the most amazing hodgepodge of regulation you have ever seen if you focused on the c. f.t.c. and the f.c.c. for appropriate reasons but this was you know you have to remember the role politics this was the house controlled by republicans seeking to go after democrats largely. but most of the regulation the lead
regulation in these cases. is actually. by the industry itself this is so for a delusion believing regulator of m.f. global was an acronym for c m e nobody outside the traders even know exists ok so that's i mean that's a whole can of worms so can regulators even do their jobs and there's what is really the issue because we hear about them being underfunded we hear about cronyism with a kind of goldman sachs for eternity we hear about cases where they have indications of there was a report from the f.c.c. watchdog of of fraud on the account of a hedge fund that was just never pursued so so why aren't they able to do their jobs. well you know they are able to do their jobs their own willing to do their jobs it's quite true that you can never have adequate resources as
a regulator it's part of the trade but here we're just weeks ago again it's actually the republicans in the house voted to slash the funding of the c f t c which already had deeply in adequate funding it you know didn't even have computers that could look into things like the flash crash by the way the s. the c. he doesn't have in-house computer capacity to evaluate the flash crash either. so it starts with will and leadership and now in model defense of gary gensler who i opposed when he was appointed given his background of support for the commodities future modernization act which was one of the really obscene acts of deregulation that kicked off this crisis and still not been repealed but i have to admit that gensler perhaps it's you know the one eyed man in
the valley of the blind but he has been the most effective financial regulator with the possible exception of the f.d.i.c had in the new crew ok so if he is the most effective financial regulator and something like an m.f. global happens and that's a sign that i mean it's so much worse than we're even finding out about now well yes absolutely it's a sign i mean that's the first point is. why would you didn't need even regulators to stop this after all what course i did was to take every mistake that had been made two years earlier fact a year and a half or earlier when he did it and say you know what i'm going to repeat that mistake except i'm going to go even bigger in that area of mistake this. supposedly one of the brightest people in the world and such but it shows you that the most exalted financial leadership the squid as you say are government sachs
is actually composed of people that don't know the most basic things prudent investment because they haven't done prudent investments in decades or they don't they know but they don't care because they think that you know they're going to get bailed out by a government that now. you know socializes the losses of wall street possibly but the you know it with m.f. global it's kind of small to predict that somehow it was going to get bailed out in the same way pretty much it's clear the corps i guess dream was to recreate his own investment bank for a demo of global was not an investment bank it did very prosaic stuff and corps signed decided to change it entirely into juniors squid and of course as i said he repeated every mistake that had just been made and mr dr
black it remains to be seen if those that tentacles are going to be cut off and if they grow right back which is really the miracle of the vampires what its health we're going to leave it at that for today if that's all we have time for i certainly appreciate you being on the show on this very important day for everything we're talking about that was dr william black. all right so we have given you everything that we can in this short amount of time and if lobel and on wall street corruption and really the state of things and why people are being arrested so now let's kind of light up some something lighter than a rat so i want to bring in our producer jimmy trick of fairness as well as shannon
donahoe to talk about this exciting story thousands of u.f.o. believers were hoping for a breakthrough last month when they signed petitions on the we the people website so this is where the white house announced that there was a site that people can get their questions answered and they said that there was no evidence of alien life much like in the movie independence day until this. that's not. matter. which party. all right u.f.o. believers are not giving to new petitions are circulating on the site in the hopes of collecting twenty five thousand signatures for the white house to respond so does this show just i don't know strength in numbers of how powerful. the you know quest for these aliens who have stolen our gold is what we need more when you more
but that i mean we can't we can't even get enough that this is to prosecute wall street how are we going to petitions to figure out what's going on there if you want and all our gold you know could have stolen from south africa been covered but there seems that yeah right i know we covered the u.f.o. conference said that aliens were stealing gold from the united states and that's really what they wanted but i would venture to say that there is more of a will and support for this because they've gotten their questions answered because of all of this support more so than we've seen will prosecutions on wall street shannon. why. are you one of these u.f.o. questioners i think the white house should definitely respond but i have to fly off that i've only been so shooters but in the meantime i'm going to protect my i'm going to protect myself from the aliens that you come all right well i'm glad that you have your protection now that we know that shannan going to be ok what's the story with him how does that show how does two four hope the bridge that is that
like basically a protection radiowaves it's in the movie signs just watch it ok and protect from having your gold stolen which would come in handy if you won this prize officials in taiwan have come up with and really inventive way to clean up their city dog and you know hooper take a look and so i want dog poop on the streets is such a big problem that the government began giving away lottery tickets in exchange for picking up after your pick the winner will take home gold nuggets worth two thousand u.s. dollars. that is a really good prize and as a result more than four thousand people collected fourteen thousand bags of excrement a woman in her fifty's won the top prize of gold worth twenty two hundred dollars so they can gold really not only benefit aliens but really clean up the streets of major cities we love to cover girl in the show and you know the developing world as we've covered the indian car company that created the car gold and in general
people in asia india love gold they know it's it's not people just in asia and it is all over coveting gold more and more these days absolutely but the people in the east are particularly in there with gold we had that guy in our lives who tried to turn his craft into gold one by burning it so you know in other literal way as learning crap into gold right so literally now this these guys are like oh we're going to give a prize it's going to gold you know this is going to be if you can stimulate people to clean up the streets of dog poop given gold nuggets shannon would you rather have gold or money does it show that kind of gold is ruling over dollars. i still feel like dollar is king though because home. white they went on with rary and what a break with the we official line of the show show you got out of that girl i wrote on her over king dollar go roseanne going rogue she's got protection against the aliens but there's a protection against us that's all we have time for thank you so much for tuning in please bilbray to follow me on twitter at lauren lyster and give us feedback on the
show at youtube dot com slash capital account you can see all of our past episodes and interviews out there i'm lauren lester until next time from everyone here at capital account thanks for watching and have a great night. wealthy british style. time to write. down the. markets why not. find out what's really happening to the global economy with mike stronger for a no holds barred look at the global financial headlines tune in to gaza report on