tv [untitled] May 23, 2012 4:30pm-5:00pm EDT
good afternoon and welcome to capital account i'm more in the store here in washington d.c. here are your headlines for wednesday may twenty third two thousand and twelve as an informal summit of european leaders has observers worried about a greek exit and seeking signs to show where the eurozone is headed look at the market german thirty year bonds tell well below two percent for the first time ever meanwhile for the privilege of lending your money to the german government for two years you can get paid a stunning wait for it zero per cent now these rates aren't suppressed by q.e. years are up like in the u.s. so we'll talk about what this indicator says about the fear that is building and according to media reports the guessing game is underway for who will replace
timothy geithner as the u.s. treasury secretary now you may be asking why would anyone want to try to tackle trillion dollar budget deficit and a tax overhaul for a salary on hundred fifty times less than their wall street buddies like jamie diamond well we're wondering that too so we'll ask a former treasury official if this is a public service or a one way ticket to a massive private sector pay off also in the wake of facebook's i.p.o. full lop we see small investors suing regulators subpoena and u.s. lawmakers supposedly searching for answers now retail investors for one are asking if they were fleeced but we'll show you how this could have all been avoided if they just watch capital account let's get to today's show.
let's step back and take a look at the bigger picture than the headlines that i just went over so america once prided itself on being the beacon of freedom and the land of opportunity we saw immigrants flock here by the millions from countries all over the world and it wasn't just america's physical dimensions its untapped resources its rich landscape but also its unique commitment to individual liberty and the rule of law that made it such a tempting destination for those looking to escape the futile architecture of the old world now it would be overly simplistic to pick a specific date after which things began to change for the worse in this country the spanish-american war the establishment of the federal reserve the establishment of a permanent military architecture after world war two the end of bretton woods the
deregulation of the financial sector the patriot act the list goes on and on you can choose what you like best what is clear though is that a lot of americans for them the future looks less promising than the past and unless you work in one of america's highly subsidized industries such as wall street or defense you're stressed but if you're one of the many maybe working in these two anointed industries things perhaps have never looked so good now there was a time when wall street grew earnings and profits off the back of real economic growth and the purpose of banking was to finance investment and aid in the movement of capital from savers to investors the end result was a real economic growth today the financial services industry resembles more like a giant parasite sucking the life blood of capital out of the economy it derives
its profits by doing exactly the opposite of what it was tasked to do by siphoning off capital from savers and moving it into the trading accounts of speculators and . executives at banks who pay themselves disgustingly outrageous bonuses all under the guise of being systemically important so they say or systemically dangerous as more of our guests say now americans aren't stupid they know they're being fleeced they see images like that of police pepper spraying defenseless women and this is all while building barricades around the ivory towers of wall street bankers who continue to plunder the wealth of a generation of americans and cumbered and in europe of course you see greeks revolting against the same kind of plundering of their country now this has observers looking to meetings of european leaders like the ones going on today for signs of where this is going next here to talk about it with us is paul craig roberts he's an economist and also former assistant secretary of the u.s.
treasury that was under ronald reagan first dr roberts thanks for being on the show welcome back to capital account thank you yes thank you now let's start our discussion with we just gave a long sermon on wall street let's talk about who regulates it because you used to work at the treasury and now people are starting to wonder and think about who's going to be the next treasury secretary because timothy geithner has made it clear that it's not going to be him we know timothy geithner his background we know that he was at the new york fed before the treasury we know he has ties to wall street do you think that over the years this position has gone from being a public servant to a lobbyist for wall street of sorts. but. the treasury and the financial. gain share. well let's go back let's go back and talk about that because the clinton administration was when some very key things happened in terms of financial deregulation you've
written about the costs of that deregulation to society what would you say the main costs are. we're all out we the main cost is the financial. industry the united states no longer serves a useful social purpose it's just a gambling casino that serves the purpose. of the people running it and at the expense of society because they pass on their losses to the average person who really not have an income gain in twenty years or so or the cost is that they have totally privatized profits to the extent that they don't even pay income taxes so that is the banks themselves but all the losses are dumped on to the taxpayer so this is this is a net loss to society the american financial system is a net drain on society if we didn't have it we would be better off before my trip
trillions of dollars better oh so it doesn't perform his the social function and if you had to pinpoint any act of deregulation any bills that were thawing or that were repealed what would they be that have created this situation yes for you know glass steagall which now lets them gamble with the positives deposits depositors money. and the removal of position limits on speculation which now lets these huge financial institutions dominate commodity markets. and drive up. prices of fuel food. and also they now are able to leverage their little bit of equity to extreme lengths in order to maximize the return on equity say that the higher the return on equity if the way you get it is to have tremendous debt so you take
a little bit of equity and you live rich leverage it dramatically and then your eternal mornings go way up the only trouble is if you make the wrong bet then you dump all the losses on society so it's. these these are the main things that are to so you so you mentioned the repeal of glass steagall and that happened under president bill clinton and you know he also did another thing which was sign the commodities future modernization act which made it so that derivatives really couldn't be regulated so let's talk about who deregulation has paid off for not just wall street but these politicians and officials because matt miller. cavill capitalism wrote a really good post about this speaking fees from banks that president bill clinton received in the decade after he left the presidency and you have banks paying him a hundred fifty thousand dollars for
a one hour speech this is amounted to eight to ten million dollars for that decade or no excuse me eight to ten million dollars a year for that decade dr roberts what in the world are these banks pay him a hundred fifty thousand dollars an hour to say what their idea what they're paying him for for deregulation. and. you know will be paid as well he'll do have some huge job and you say. it's more than revolving door goes in and now even if you have a big job. for example balls and moves the c.e.o. of goldman sachs you come into the treasury in order to get. more contacts better contacts not just here but all over the world so that your so that you don't censor embarrass and expand expand and when you leave you can more
valuable so it's there's no service or there's no public service involved anymore it's all whose interest can i best serve to have this pay off for me. could those could that way off your service in the treasury could it pay off a less you are still a member in the political class and go along with what wall street wants or advance their interest is that necessary in order to secure the u.s. eking fees that's that's how it works right when and when did this change because you said that you don't think it's always been this way i'm just curious because you were at treasury and eighty one i believe what changed. well. what changed was the deregulation because this let them realize that there were there was no constraints left on them that there was no reason they had to behave
at the cli ethically or properly and if you weigh the pros all the constraints are gone there's a sense. or now also. of washington's effort to protect its worldwide economic interests so they have washed and put pressure on the euro they don't washington short of gold and silver to protect the dollar and the banks or wall street the big banks are now just out of the federal government's self protective mechanism and so in effect they're part of the government there and that's why they don't get prosecuted for their crimes if you if you look at all the crimes that are associated with the financial crisis and nothing has happened to anybody and this is where some strange and so when president and in my opinion it's because the banks now serve as and jumps to washington and the political class and the political class serves as
a lobbyist for the banks just to give our audience a little bit more context to a former treasury secretary because i looked into this so robert rubin who was also under bill clinton he went on to work at citi group made one hundred twenty six million dollars during his time there reportedly and larry summers who has been in and out of public service and a aca done academic his rate did ok when i looked back at what he reported for two thousand and eight two point seven million dollars that year in what is no speaking fee a lot of them from the big banks five million dollars from a hedge fund so there is really seems to be the payoff for deregulation that just isn't there for regulation dr roberts when we get back i want to talk about all of this. looking at europe which is switching gears but still some of these issues there look like you wanted to to say a finishing thought you have a couple seconds if you want to do. well didn't reuben come into the treasury for him right you did is he a chairman of goldman sachs so he comes he comes to go and say actually treasury
goes back to the back it's the revolving door we know that the speaking fees are really the alarming thing to me i thank you we will be back with more with dr paul craig roberts economist and former assistant secretary of the treasury under reagan . still ahead despite calls from columnists and pundits jamie diamond remains on the board of the new york fed but not for long if two senators going to bed will give you our three cents on a bill targeting federal reserve conflicts the first or closing market numbers. 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 the global machinery to see where are we heading state controlled capitalism
is called sessions when nobody dares to ask we do our tea question more. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else and you sure see some other part of it and realize everything. i'm charged is a big issue. here is what you want. but in the alona so we'll get the real headlines with none of the most of the problem with the mainstream media today is that they're completely disconnected from the viewers and for what actually matters to those viewers and so that's why young people don't watch t.v. anymore if they want news they go online and read it but we're trying to take those
stories that people actually care about and transfer them back to t.v. . all right welcome back so we've been talking to paul craig roberts about conflicts of interest you could say about the fine men that have served the united states as u.s. treasury secretary and then go on to make millions a lot more than they make as treasury secretary when they go serve wall street or give a speech to wall street banks now despite all this is just one example we haven't seen people in the u.s. get angry to the extent that we've seen it in europe where they have a debt crisis that maybe you could argue has affected them a lot more close to their lives especially in the situation of greece where they've seen immense cuts to the public let's talk about it because right now eurozone
leaders are meeting to talk about a lot of people are wondering if they're talking greek greece exit contingency plans or euro bonds we don't know but here to talk about what really is going on in europe as you see it is sees it as paul craig roberts economist and former assistant secretary of the u.s. treasury under reagan so kind of segue in from our last conversation dr roberts why do you think it is that we have not seen the kind of unrest in the united states that we have seen in europe in response to economic strife and turmoil. because the cost have not been pushed on to the american public. anywhere near the extent that they've been pushed on to the european public you see the bailout of the banks here and there's a lot of talk about well we'll have to cut social security medicare and all that sort of thing but they haven't really done it. but in europe they have gone and you know greece they've cut the pensions they cut all kinds of social services
employment and people are actually feeling the consequences of paying for the mistake of the private banks who over invested in sovereign debt and that hasn't happened yet here and so that's the real reason that the greeks are in the streets with multi cocktails throwing them at the police and people here are sort of insouciant as to the gathering storm do you think just to follow up on that briefly if there were cuts to medicare medicaid social security anything never get them out we would see this in the united states. well that affects mainly the older people who have a hard time that they're rioting if but in the sense that if it comes back to their children. you know mom and dad can't. exist independently
anymore and we don't have anything really to spare then yes in that sense it filters down to the younger set up i think this type of. dissatisfaction. can certainly rise sharply in the united states but that's only if they actually follow through this tall and you see is as long as the federal reserve can simply purchase the debt monetize the debt. which is something the greek central bank can't do or the spanish or the talent and it's something under the charter that the european central bank can't do so the big difference is that in the united states the federal reserve can act as credit to washington and purchase its debt but in europe the central by the there's no no way for it to do that and so the pain comes to the people. directly in much quicker and let's talk
about some of the reaction by the financial markets to this because you see borrowing costs for germany they've dropped to zero per cent in the case and some of those some of those bonds a two year by that we talked about earlier meanwhile the government of greece is effectively shut out of the bond market and has to rely on direct funding from the i.m.f. from the troika making it i guess you could call it a qualified protectorate this is a need to greece in either i mean you could see this happening in other countries that are severely indebted in spain or in italy so do you think the markets are just going to continue to keep the pressure on these countries until the system or rakes or do you think the european federalists will succeed in keeping the union together by force. well that i think that would be have to germany i don't think german is quite decided and you see the reason the german bonds you know now don't paint thing is it's a safe place to be because. the german economy is the strongest in europe they
don't trust banks people are afraid to have the money in the bank because they don't know if the bank has to match greek debt. and and so there's no place else to put it so the german bonds they say is safe and is also coming here and they mistakenly think that that this is a safe haven united states so they buy treasuries and the treasuries the interest rate goes close to zero and they and they get into dollars but of course the problem here the debt problem is it's probably even greater it's in europe and the banks of properly and even worse situation so the whole notion that they're in a safe havens at all. is a very strange well before we go we just have a minute but you're it sounds like you think that europe is kind of kept some scrutiny away from the u.s. dollar what do you think is in store for the u.s.
dollar. well i think if once the european situation is over the focus will turn to the dollar. and then it will be. the outcome will depend on also the formation of the group by russia china india brazil south africa if they actually form this bank and use it for their own trade and financing then this sort of cuts into the role of the dollar is research currency and so the whole thing starts getting through the skids and if the dow loses its reserve currency rule and finds its severely modified then the united states will experience all kinds of problems obviously and it sounds like maybe europe is helping out the u.s. and the u.s. dollar and having that situation under control might have unintended consequences that whoever is the next prez recycler terry since we've been talking about him or
her don't be too happy to see on their watch thank you so much for being on the show that was dr paul craig roberts economist former assistant secretary of the u.s. treasury under ronald reagan. all right let's wrap up with loose change dimitris shannon we all know that it is messed up that jamie diamond sits on the board of the new york bed we've talked about it before long before whale gate came along well now well hey look bernie sanders barbara boxer two senators are introducing a bill targeting federal reserve complex take a listen. you know who were the people quote unquote regulating the banks
all the exact same people who are being regulated if this is a clear example of the fox guarding the hen house i don't know what is. so they're trying to do something about it presumably with this bill where it goes we don't know but we wanted to point out a couple of the other fed conflicts because jamie dimon has been the most prominent but c.e.o. of g.e. jeff immelt he was on the board of the new york fed the same time the fed authorized an emergency loan of sixteen billion dollars to aig and in two thousand and eight the chairman of the new york fed sat on the board of directors for goldman sachs when the bank applied was approved to become a bank holding company allowing goldman to receive billions in federal reserve loans also the g.a.o. found that at least eighteen current and former fed board members were affiliated with the banks and companies they received emergency loans from the fed so do you think this bill is going to go anywhere because there are a lot of vested interests that will not want to even i mean it's a it's
a small i mean i applaud british senator drawing it but the entire i mean bernie sanders version is going to take this the federal reserve has taken the treasury all right i think you just get it all together and you have the same conflicts i mean come on one of the first is i didn't know that any private it's run by the banks but if it's run by the u.s. government that's not any better they're doing i mean if you look at its structure it's freshest ok it's a public private enterprise so i mean it's got shareholders but they can't sell the shares it's not. just to get rid of it completely the fact that. they're trying to pull thing here and there but i mean i wouldn't even concern myself with giving jamie off because that's that's that's channeling the wind that's part of the good it's part of the deal if you have a failure don't just get rid of the think entirely get rid of it oh so you're saying as long as we have a fed you're going to have jamie diamond on the board and of course the name of the game a senator you want to add me think. the senators want to watch out for their pac funding and their funding for their reelection campaigns because obviously a lot of it may come from the banks. i think if you're if you're if you're exactly
i mean that's why they're not going to get any support from this and my view and i'm sure they will see that play out. right let's move on as the economy gets worse it seems businessmen are looking for more ways to keep more secure business through bribes like this. one of the business world thinks you think one hundred years ago you were living under intense in the desert chopping each other's heads off and that's exactly where you're going to be in another country so yes on behalf of my firm i accept your money. just business as usual maybe it is ernst and young found in its annual global fraud survey that fifteen percent of top exacts and leading firms said they would be willing to pay cash to secure a business that's up nine percent from two thousand and ten so it does this show that crony capitalism is increasingly paying off this is the stupidest in the world going to why do you like those articles that are you know that inform us the commission the study all this money was spent and yes fried chicken is bad for you
in that well obviously this is happening i mean we know the broad support of business that goes on i one of the some of the tell me this yes i mean this what is washington but the serious some of that really shows that it is increasingly paying off and that this is a better way to do business for for everybody in the way that we talk about on this show a lot we have why it was washington when i came to washington when i was amazed is about the amount of money that circulates here and how insulated it's a it is that people have lots of cash to spend or how do they get it is supposed to be published royce good eggs or bing let's move on we really want to get to this story because we've heard all the facebook reports congressional committees are looking into the i.p.o. shareholders are suing the underwriter morgan stanley has been subpoenaed question is did big institutional investors get material important information about facebook before its i.p.o. that smaller and individual investors didn't was it illegal did it hurt those individuals small retail investors that didn't know that i know that the pricing
was all wrong well you know what i don't know what's going to happen but this all could have been avoided if these retail investors watch capital account in the beginning of may reggie middleton laid it out very plainly. it take a good story you give it to a very very good salesperson and what you have you create for off. now froth and investment potential madness is same thing no matter what metric e.u. price to sales price to earnings and value cash flow facebook is grossly over value . on the rise of china push it. so when you have plenty of people crunching the numbers coming out saying things like that and the very public ways there is no case for these small investors just don't follow the herd do some research they should be reading bus blog and not listening to their to suck to their to their and to yeah border rollovers going down the river examining the stock this is not being suckers but you know that's why we have have your mission yeah and that's why we
have no more time thanks for watching the show be sure to come back tomorrow and in the meantime you can follow me on twitter al gore and lister give us feedback at youtube dot com slash capital account and have a great night. for sure is that so much money going which of course you want on its own terms of unity of nato but it would be the approach that summit in chicago this military alliance decided many things in principle like ending the occupation of iraq. is the key to.