tv [untitled] May 10, 2012 3:31pm-4:01pm EDT
that time brings you up to date that's it for me and the news team for the moment with more in half an hour in the meantime mexico is a state that tell you all about the wall street bankers you continue to line their pockets with all money all in broad daylight the report is next. easy. to see. max keiser this is the kaiser report well jamie diamond c.e.o. of j.p. morgan has opened his whole again so. yes max your favorite trend in new york city he's back here somewhere well i mean we know he's going to toss it together and go roust well last wednesday in fact he was up in new york fed along with a bunch of other c.e.o.'s of the banks diamond sites give and take after bank chiefs meet at fed j.p.
morgan chase and company chief executive jamie diamond said there was give and take when bank leaders met with federal reserve officials to discuss industry oversight in new york last week oh yeah well we get he takes you know a little tape worm. we did tape one. any money for me to steal. and then obama says we can look back we have to go forward let's pass laws to make it easier for tapeworms like james is still money. in the money. and he goes back into the warmth of his lair as equal uncrossed of leora where he lives a little family of tape worms. but i mean because of that tape. and lenders including new york based j.p. morgan the largest and most profitable u.s. bank are resisting fed efforts to impose tougher restrictions on too big to fail
firms whose collapse could hurt the broader economy the banks have pressed the fed to explain assumptions used on this year stress test and have criticized the central banks proposed rules including limits on counter party risk now here's what jamie dimon says it's great that. people get together and collaborate talk about the facts and the analysis all the interest in having a great financial system the better we do here the better it will be for the u.s. economy well let's get something clear first of all they don't they don't make profits they are gifted money from oss the taxpayer in the same bers who take money out of our pockets and stuff it into his pocket but doesn't make money in the classic sense that he's competing he doesn't compete at all the too big to fail got too big to fail or they're bigger but they're not failing even other grander scale the competition's wiped out the stock called competition that's not even american what taliban group was jamie diamond from what frickin jihad is he working for so
anyway he says the better we do here wall street the better it will be for the us economy so i wanted to go back and look at the charts to see the percentage of finance as percentage of the g.d.p. and then compare it to how the us economy is doing well here's a chart that goes back to eight hundred sixty and that shows the finance sector as a percentage of g.d.p. you can see that it peaked at six percent in one thousand twenty nine and then promptly the economy collapsed and then it peaked at eight percent in two thousand and seven two thousand and eight and as we know we have collapse but we've gone nowhere down to the mean of two percent as a percentage of g.d.p. because of the miracle of medicine and science station we now know that ninety nine percent of all tapeworms have jamie diamond's face. we know that we looked under the microscope of a tape worm comes out of a strange thing of somebody's house or somewhere into i know and there's jamie diamond face picking up from us i mean tape or i'm
a parasite doing more money because i'm a greedy i was born to greedy peacher disagree my parents are greedy no good i live for the stealing of your money i'm ok i'm a pathological psychological tyrant. i steal therefore i. tape were donated and then max you mentioned stealing from simon johnson we have from one thousand seventy three to one nine hundred eighty five the financial sector never earned more than sixteen percent of domestic corporate profits in one thousand nine hundred six that figure reached nineteen percent and then i know it also lead to between twenty one in thirty percent higher than it had ever been in the post-war period this decade it reached forty one percent so they're getting more and more of the profits they're shaking down all the corporations not just us but the corporations as well they're shaking down everybody and taking more of the profit oh yeah that's a tape worm of their business model of stealing and larceny of turning a healthy economy into a cancer spreads throughout the corporate world so general electric for example
most of their money comes from jamie's tapeworm program so jeff. i like jamie tapeworms so i dictate more. and this goes on and on another some of these corporations are basically mimicking because there's a lot of jamie diamond can print this money without having to answer to any laws whatsoever why shouldn't gen x. or why shouldn't exxon why should these companies apple computer do the exact same thing of no is going to enforce the law what incentive is there for any of these corporations to abate a law there is no one because there's no justice department there's no leadership and that's a very good analogy to the tape worm because the tape worm lives inside you and you don't feel sick you don't feel ill nothing seems bad on the surface but underneath they're actually taking all the nutrients that you require to actually build over the long term to to live over the long term so with these tape we're like the day we die when as i'm so eloquently demonstrate. you know the economy is becoming
sicker and sicker and sicker until it just drops dead one day that's right walk on the streets of new york people are like oh i don't feel good oh i feel very sick i'm not sure what it is they have jamie tate warming they've got jamie tapeworm center on their entire lives are being eaten out from inside by this greedy little taper and then jamie yeah that one day you're just going to see this entire skyline behind us max fall collapse you know that and then risk is that people from other countries like asia accompanied the people that of collapse of the street then they get the tapeworm. oh i think that already happened ok so we have this big sort of road show going on it's like a carnival where they're pretending i think it's pretend this whole fake meeting with the bad and jamie diamond out there putting his face out there boy blankfein they're all concerned about this ten percent counterparty risk number they're
saying it's a big deal but there are other people who are also suspicious max parceling bank lobbyist dire warnings and derivatives rules the derivatives market is concentrated in the hands of a tiny number of large bags just for banks account for eighty five percent of total credit exposure to derivatives that american banks j.p. morgan chase the largest derivatives bank has three hundred forty eight billion dollars in total credit exposure from derivatives and as capital plus look bad loan reserves of two hundred nineteen billion therefore using the temper some exposure threshold invision to under the new rule j.p. morgan won't be able to have exposure of more than twenty two billion to a single entity but that may be a hard ceiling to achieve in the concentrated derivatives market says twenty two billion dollars is only six percent of its derivatives exposure right in the market cap of the entire company is roughly one hundred sixty billion so the equity of j.p. morgan stock is worth if you're buying j.p. morgan stock it's a suicide mission just blow your brains out
a lot cheaper well of course it's possible to have the lobbyists were exaggerating their findings to make the impact of the rule to look more severe than it would be predicting dire scenarios is common in letters opposing the financial overhaul in fact the footnotes accompanying the exposure study did flag areas up imprecision as a result exposures under the new rules may turn out to be much lower than lobbyists say and implementing the rules that would therefore not be disruptive now that the fed did the stress test and fifteen of the nineteen of the banks passed in an extreme scenario even while still maintaining their dividends so. how is that possible and this is what the lobbyist group for the banks is arguing that they need to see this for real from the fed that one of four of them failed this stress test well one hundred percent of the banks in the united states failed the stress test of two thousand and eight so who are these fifteen that passed this time well the stress test is ben bernanke he's under stress because jamie puts
a gun to his said says either you shut up and stop this talk about minimum capital requirements are going to blow your brains out like the minimum capital requirements that banks are supposed to file a list of top basil three whatever the international requirement is they're in violation of i'll say that with no bones about it they violate that been violence now for years same thing with j.p. morgan same thing with all these wall street banks they break the law every single day diamond would break the law go in the men's room he's a serial lawbreaker how he's not just is is is the beauty of the obama administration did to protect the guilty it's a remarkable achievement and i know you're speaking to chris whalen in the second half but basil three you know u.s. banks as smith from making capitalism point out they never followed basel two they never it here to that so why they're making a big brouhaha i think it's really just a dog and pony show i think they're pretending there's obama he's the dog barking
around going on across to you and the united states saying i'm being tough on the banks and jamie dimon is playing his role especially if he wants to be treasury secretary he has. bumming you're being so hard on us why are you doing that and so it gives legitimacy to obama's claim that he's being hard on the banks and therefore jamie dimon can be treasury secretary the whole argument comes down to the value of collateral whether it's money that's on the balance sheet that's tier one capital that can be used as collateral to borrow one hundred cents on the dollar or if you're a complication scandal in london you can borrow infant. all the against that collateral that your one capital or in the u.s. it's one hundred forty percent but then they get into the minutia of debating well what is tier one capital i mean a we have it here in a segregated account which we've just shown that we can rip up at any time since i really segregated accounts you can't really call that tier one capital minister to capital or jira three capital maybe to tear up the jamie words to bed every night while he's licking you know the the entrails of his tape or in providing physical
matter we don't know the exact details but what i can tell you is that the last time in history we've had such nonsense when you've got three or four cardinals sitting around discussing how many angels can dance on the head of a pin you talk about these bankers discussing what's the rule collateral value more to one capital it's just your lawbreaking how about that could show you some sloppy joes or try to go out own privately you mention fraud and i read a headline here m.f. global implosion congressman grimm sends a message so this is from janet to have a calling in january m.f. global began work on a crisis plan called stress an aureole analysis downgrade potential impact on m.f. global it wasn't completed until around eighteen days before the bankruptcy m.f. global worried that it wouldn't have enough cash and liquid assets of its own to meet calls for collateral margin calls among other things in the event of a ratings downgrade and she points out that the document poses
a question on page eleven. m.f. global is asking itself how quickly do we want to send cash back to clients what is the message if we do not send immediately so she's looking at this document that m.f. global wrote for a year before the collapse and one of her banking friends said it reads like a fraud playbook yes it's the playbook of lehmann brothers we now know shortly before the collapse the executive dick fuld took seven hundred million dollars all that in a report that to the f.c.c. or any regulatory body they just. all the money so m.f. global j.p. morgan say well they're not going to prosecute lehman brothers so we'll just do the same thing with m.f. global it'll collapse but before that it collapses we're going to steal a quarter of a billion dollars because there's no laws against it because that there's legal yeah you cynical dance sad very sad ok stacy ever thanks so much for being on the kaiser report thank you max don't go away much more coming your way so stay right
senior managing director of tangent capital chris whalen welcome to the kaiser report thank you max all right chris whalen what has the fed done to our economy well what have they done they're basically trying to keep everything the way it was beautiful stay sis this means no debt reduction no taking apart the big banks and no going after the people who ran the big banks and did all of the various acts of fraud that we've seen over less say ten years the fed is really the bad guys here on for. actually because they are trying their hardest to stoke up inflation but we have a deflationary scenario at the moment so they're kind of fighting the last war and you know as much as we tell them look you really need to let interest rates go up a little bit so the banking system doesn't collapse next year but they don't seem to want to hear this so i would characterize it is the fed fighting the last war i
think that's the best way to describe it but they're also not really interested in restructuring and renewal which is the only way we're going to get any job growth in this country or you know globally really so christopher is enabling these too big to fail banks yet it's payoff the coupons on the bonds in they that they hold but as in terms of viewing these bonds as collateral on the balance sheets of these banks they're they are continually being impaired correct i mean the collateral that balance you these banks is collapsing but it we don't see it because the fed keeps allowing them to pay off the coupon of the interest rate so it looks on the surface like oh everything is great but underneath the surface is crumbling correct well correct because you know most banks if you think of how they make money about a third of their profits comes from kerry in other words just interest rates that they earn on assets on your money on other people's money so that's been taken off the table since the fed is keeping rates at zero in an effort to stoke consumer
activity they say what we're really doing is taking income taking earnings potential out of banks out of insurance companies and particularly out of the hands of savers if you look at the people who did the right thing in our society they're being punished and the bankers are being facilitated and subsidized so there's a political in an economic dimension to what we're doing here that i don't think people fully understand because look at morgan stanley look at all the distress of debt firms and al a big part of that is because they're not making any money on their inventory same thing with gold. saxo all the securities they own all the bonds and everything else that they have they hold for customers they can't lend that out they can't make money on it because of the fed's zero rate policy so we're in effect i think almost stoking the fires of deflation through the fed's policies and i really i'm very concerned about where the u.s. banks are going to be a year from now because if you think about it you know i own part of the rating
agency on california the first quarter of last year was the best quarter we've seen for u.s. banks since the crisis so we've essentially been going sideways and review and seeing signs of deterioration in terms of operating leverage things like that so a year from now if we keep these policies in place i think you're going to see some real problems in the u.s. banking sector concentrated in the biggest banks all right let's talk about one of those banks wells fargo that made a big move into new york in the commercial and residential mortgage market. for the feeds but when you drill down a little bit what you find is that just like this carry that you discuss in terms of the interest in supporting the assets to support the interest that these are just there to mask a deteriorating earnings picture and isn't this lehman brothers all over again well it is i've been very critical of wells fargo they had their c.f.o. depart less year very suddenly without explanation i think their accounting is
suspect i think they're very aggressive in the way that they book fees for example if they wrote you a mortgage today max not only would they price mortgage half a point lower than any other bank would make that same loan too but then they'll say well we're going to sell max another three and a half products from the wells fargo platform let's figure out what the total value of max is this quarter and book all the profits that we're going to earn from him over his lifetime relationship with wells fargo this quarter that's dot com accounting that's that's phony baloney in my book and i think wells fargo. as a poster child for accounting fraud i really do i've had problems with their disclosure from day one and i don't care if they've got warren buffett new shareholder list it doesn't matter i think it's too good to be true what they're showing you with the f.c.c. filings and i think if you talk to other banks about the way wells fargo is behaving in the marketplace today it raises real concerns this mark this bank has
almost one third market share in a national market for mortgages to the united states all the other big banks max are well below ten percent there would drawing from the market so wells fargo is celeste me and standing in this marketplace for mortgages both commercial and residential well let's talk about somebody who has become the self anointed representative of the too big to fail banks a man who has got ninety trillion dollars on his balance sheet of derivatives and other unsecured liabilities i'm speaking of course of jamie dimon at j.p. morgan he is arguing with the government that he needs less regulation he needs to be able to increase the amount of leverage he has on his books and he needs this swaps market deregulated so just for those out there in the international audience just briefly explain a swap and then what's jamie's problem well jamie is problem i mean in some respects i agree with him when it comes to basel two and three and all the rest of it dodd frank is a disaster we're actually hurting the u.s.
economy with all of these initiatives through because they're kind of like calvinists punishment really we're going to punish the big banks because we bailed them out that's one part of the derivatives and everything else which a.p. morgan is very important because if you look at jamie diamond's unregulated over the counter derivatives business it makes the bank pale by comparison the banks almost a trivial concern so you know he's talking about two very different things one is the we want to put more regulation on credit creation in the u.s. answer is no the whole dodd frank construct i think has to be revisited but when you look at over the counter derivatives they're not regulated at all. jamie dimon got everything he wanted out of the over the counter derivatives negotiations for dodd frank so i don't really see what more he could possibly ask for because the banks have wired the bankruptcy laws if you look at m.f. global look at made off we even look at lehman brothers and every one of those cases the over the counter derivatives market was subsidized by the other creditors
they're given special treatment they're not subject to the automatic stay in bankruptcy eccentric cetera so o.t.c. derivatives is already a special ghetto and i don't know what else we could give jamie diamond to satisfy his conserves well quick note on this jamie dimon character because he like all other bankers on wall street having worked there myself and he exemplifies this idea that he will do what he wants to do and if he breaks the law well the problem is that the law needs to be changed at run it comes a battle two or basil three they're saying well you know these requirements reserve requirements we don't really think they're consistent with what we think the law should be so we're going to do whatever we want to do and you can pass a law if you want to but we don't we don't have to answer to anyone's law i mean that's a very bad example isn't it chris whalen well it's not just banks so if you think about it the stock corporation is the problem today big corporations are not accountable to their shareholders and they basically do whatever management wants
but we don't have shareholder democracy in this country we still have an indirect kind of democracy much like our political system so big companies tend to be antithetical towards openness they tend to be ethical towards democratic processes because big corporations are fascist by definition and so when you get into this whole area of regulation you know jamie dimon is caught between his investors on the one hand who still aren't valuing j.p. morgan sufficiently so that the stock is trading above book value and then on the other hand you have the regulatory communities and so we need more capital. when people like sheila bair say this to me it's a dog crystal you agree with us we need more capital i say no we have to stop doing stupid things but the problem is that if we had a more sane financial market banks like j.p. morgan wouldn't be that profitable jamie dimon has to take a lot more risk than we really want him to in order to hit those earnings targets for wall street so he's kind of caught in the middle and you have to understand
that dynamic because he lives in terror that the buy side is going to move out of his stock and into bay constrain it half a book value jamie dimon and loses his job so those are the interconnects here aside all just about public policy it's about the big institutional investors who own j.p. morgan stock right i'm just about this point about corporate governance in general being bad in the u.s. and banks fall under that category however the financial sector has gobbled up a huge percentage of overall profits of the economy under the one industry that destroy anything in the u.s. economy any many ways but i want to ask you about another fraudulent situation m.f. global if you get a knock on it a bit you're in the money management business yourself chris whalen has the crimes committed by m.f. global impacted your business it went amell marketing our new hedge fund what interesting comments i get is their clients don't want to put money into the fund and they certainly don't want to use a broker dealers or custody and because of m.f.
global but they like to have their money managed by my group in a separately managed account the custody to a big bank so what m.f. global has done is essentially destroyed broker dealers as independent custodians for customer funds and since we haven't prosecuted anyone you know john chorus on was one of the biggest financial supporters of president obama but there's no sign that this man is going to be prosecuted for what seem like obvious acts of fraud you know in my business if you don't safeguard customer funds you're guilty of fraud and you can be prosecuted it's fine. years five thousand dollars per count barack obama refuses to prosecute the wrongdoers and m.f. global is a grotesque example max i mean it is done more damage to wall street and more damage to the credibility of wall street firms for use of the big institutional customers than anything i can think of now chris you're currently managing money as
as you mentioned and you've got a real specialty in the banking sector and the reason i bring this up is that people say after the crash of two thousand and eight and etc that of course the entire sector. they paint the entire banking sector with a black brush that it's all corrupt but of course that's not true that too big to fail banks are a separate category there is a whole nother world of banking out there that when people say well we couldn't just let these banks crash could we well yeah because a lot of other banks that are competent that could have picked up the slack that the government just handed the ball to they did to the banks they weren't breaking the law all right there are plenty of law abiding banks in the country out there well there are and you know you always got to factor in the cowardice and the inertia of the regulators they don't want to be bothered breaking up a big bank i'm not talking about my friends at the f.d.i.c who i think would enjoy it but the fed the comptroller the other regulators they just live in terror of the idea of breaking up a bank america or a citi bank but it has to be done i've said for
a while i think we talked about it on the show max so we should break up bank america you could end up with five banks the size of u.s. bancorp and it would help the competitive atmosphere in the market it would definitely help to turn those assets back into. useful assets or could generate employment generate growth in the economy but the politicians are so cowardly and so craven and they're bought off to you we need to say that that they don't want to go into these institutions even though they have the legal power now and restructure them so we're just going to muddle along you have more than half of the banking assets in the u.s. basically locked up inside these. so that means the economy is going to drag all right chris whalen right of time thanks for being on the kaiser report my pleasure take you back all right that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert and with my guest chris whalen going to send me an email please do so at kaiser reported r t t v dot ru until next time x. guys are saying well you know.
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