tv Prime Interest RT July 3, 2013 8:30pm-9:01pm EDT
good afternoon and welcome to prime interest i'm bob english here in washington d.c. here is a story worth telling today happy birthday franz kafka and old dodd frank two years ago president obama's side into law a twenty three hundred page bill that was supposed to fix our financial woes. gary gensler was given regulatory control as head of the sea up to see over the lion's share of the seven hundred trillion dollar derivatives industry and he went to task
on creating thousands of new regulations but he forgot something he was supposed to stay on top of the futures industry which is why this the up p.c. was created in the first place let's see it stands for a commodity so his old boss at goldman sachs that would be john who are going to profile today he blew up in the global and he threw the entire futures industry into disarray and mr gensler did nothing for four days then promptly recused himself from the entire matter we're going to talk about this with james cook tulis president of the commodity customer coalition in just a bit well gensler is on the way out ever had after having lost a major battle over to reduce regulation with his fellow commissioners in just nine days a key provision that governs the ability of u.s. banks like j.p. morgan to skirt the dodd frank it will expire if the exemption is not renewed brilliance and derivatives could be thrown into disarray meanwhile the latest jobs report beat expectations today good news for. wrong at least for mr market because
that means the fed might be getting out of the money printing business sooner than expected it's a topsy turvy world but we're going to lay it all out for you today as we deliver what's in your mind then for. almost two years after he tanked m.f. global john corazon returns to the spotlight in two thousand and eleven the former new jersey senator is firm dipped into customer accounts in attempts to cover losses on european sovereign debt trades a scheme with uncanny similarities to our favorite ok playing juvenile delinquent.
if you had access to a car like this would you take it back right away. neither would i. well corazon had access to the m.f. global car borrowing customer money for short periods of time usually returning it by a day and that is until and until the car crashed and dealer i mean corazon he got away scot free now earlier i spoke with james could tulis co-founder of the commodity customer coalition about the new c f t c suit against john corazon i first asked him if it's possible we will see criminal charges as well. my legal opinion but he definitely committed crimes and m.f. global and i think it's occurring at the f.t.c. as a step and now. done just about all that they could do on the civil side but now it's up to d.o.j. to do their job and as we know fortunately we have an attorney general. i don't
think really have the country's best interest are and have been a very good job prosecuting financial crimes in his involvement in syria so why are taking orders. really now on air older. to try to act like he's not completely corrupt and then either a perjury case which is something i think you really went all or more difficult it's still. well let's talk about your last part let's talk about the possible perjury case now john corey's mind was in front of congress he basically said i didn't know what was going on do there's new evidence out in the civil case that kind of contradicts that so what is that evidence and how could it be used against them. sure i mean they're hurt personally i thought there was enough evidence it could have referred very trusty gettin releases or or. about
a year ago. or it shows the corps i was intimately involved in the cash management activities of the firm he knew. how severe money was at risk days before the bankruptcy when he went before congress he said well i simply don't simply don't know where the money is and we know from those the c.s.t. c. complaint which cites numerous recorded phone calls he knew damn well where the money went. and also the trustees report showed that j.p. morgan's chief risk officer barry super zero call course on three days before the bankruptcy to say hey we think customer money is at risk here j.p. morgan was the custodian. i mean they were going to a same count basically m.f. global sent two hundred million dollars i believe over to j.p. morgan and then j.p. morgan want wanted what's called a comfort letter that said this was not customer money and the person handling that
was laurie ferber she's an ex goldman sachs employee who at the time was the general counsel of and that's global and she kind of hemmed and hawed over the weekend as i understand about that letter and it was never signed and i'm just wondering why are we seeing any charges against her i think that's a good question and quite frankly i think from day one for bernstein champ who is the oh and right level have really gotten in explicable path. i believe they were all paid by louis freeh who is the trustee for the chapter eleven eleven and three cited. privilege and. general already we're investigating some documents on their behalf even though these these two players were right in the middle of this whole. fraud and. high level executives let's talk about them basically because of the bankruptcy structure maybe you can
talk about this a little the foxes were allowed to rule the hen house in those early days i mean can you talk about the problems with chapter eleven versus seven. sure chapter eleven is known as a reorganization type of bankruptcy where a company is expected to emerge after restructuring its a.m.r. go through chapter eleven with ironically the same judge. as that of all judge glenda new york but they want to chapter eleven to renegotiate contracts with their pilots and their unions are back to holders and then you have a legitimate business here that has some kind of chance of going on but that was not the case with m.f. global exactly and the day before the bankruptcy or a firm or who is m.f. global's general counsel sent e-mails to the f.c.c. m a c s u c indicating that there was a significant shortfall in the customer segregated accounts yet the next day
november first in bankruptcy court m.f. global's bankruptcy counsel cans them on scat and went before the judge and misrepresented it saying that there were no. he specifically said there was no shortfall in the broker dealer and then a c f t c attorney stood up shortly after that nobody corrected this and they were headlines out that day that said the money that there's no shortfall and this was one of the events that led the futures industry into a shortfall after it was discovered that there was a shortfall so i mean you started out with the customer commodity customer coalition you helped found it to deal with the fact that there was nobody looking out for the futures industry at that time and what was it like in those early days . i mean it was actually. i'm a licensed attorney but i've never practiced a day of all my life i've never taken a class on bankruptcy so at the time i'm a thirty year old hedge fund manager with no experience whatsoever but due to this
complete boy a customer happened i was put in this position where. i was essentially directly representing ten thousand customers and indirectly representing the entire class of summers and having to go up again like j.p. morgan and louis freeh who was the former director and i think if you're going to actually credit cancel one of your credit cards after you started this whole movement. yeah it was funny i was on the n.b.c. outlining all the conflicts of interest j.p. morgan had in the bankruptcy being that they were the clearing agent from what was proper and they were their biggest lender. they were the custodian of the customer on and they were able to go into m.f. global stock and in the one metals exchange i don't know some opaque process in the u.k. they were also able to. get trade. cores i'm glad i was on the dollar store
and they got a really nice deal out of i didn't think they made like six percent. so and i was pretty good trade for them and again with no oversight. and so i almost say and i'm walking home to buy my girlfriend flowers pay my credit card klein next day i get a letter in the mail saying that they wish all my my checking accounts all personally and for our edge. and that my holding company get them out of the bank and i rent a car have been terminated and retaliation i guess the message is don't mess with jamie dimon and he's feeling a little bit more heat now these days let's talk about gary gensler he was the head of the the f.t.c. at the time he still is and he's another ex goldman sachs guy an inspector general report came out and said that it was not necessary for him to recuse himself and what when he was at the helm of the c.s.c.
i think one of the problems was there was a lack of leadership and the inspector general came out and they said he doesn't have to recuse himself is gary gensler. is he that the epitome of the regulator who has not done his job. i mean look i'm no gambler fan just to play devil's advocate once back after him he was kind of damned if he was damned if you know damned well he was all there given his relationship with i feel that if you never accuse him then we'd be talking about how or if i got special treatment because again her was still involved right so i mean we even have a great option there but the timing of his refusal is a bit earlier and that he waited about four days after the bankruptcy guys are accused well and this was after the basically see f.t.c. gave the handling of the bankruptcy. which is securities insurance company.
rather than saying that the f.t.c. should be involved despite the fact that there were only about one hundred million and the securities that counts and i'm all versus about six point four billion and . right i think there are maybe three hundred accounts total in the securities accounts forty thousand stooges accounts and let's talk about that we've already talked about the problem with the bankruptcy structure of the holdings company but there was another company and that was m.f. global inc that was the brokerage firm where all of the customer money was and why did we see a securities industry protection association resolution of what was really just a futures brokerage firm. yeah i mean. basically argue because we're unsure and part of this we should handle a bankruptcy and the law isn't one hundred percent clear as to whether the c.n.c. so you would have had to step aside are not but they did essentially step aside. and that made things very difficult of the early going so we had instilled the
trust be there and he had handled what you built about one hundred sixty billion in fees for him for handling way about. all and they did very good job transferring. margin positions basically like a day or two after the bankruptcy but then get ins and said we're only going to give customers sixty percent of their money back nine months after the bankruptcy. state suing because we're going to tackle more and that's global john corazon shenanigans with the president of the co-founder of the commodity customer coalition the james cook tulis then perry and boring profiles that done himself john honey i blew up the futures industry corps i finally i will jules with our t.v. producer rachel curteous over the role of uncle sam in health care and housing.
well we are back with more of my interview with james cook tulis i asked him what needs to be done to increase confidence in the futures industry here's what he said . to do one justice. would be done to help you know seeing him behind bars would show that even if you're a friend of the president if you break the law you going to jail we haven't seen that yet on the regulatory side there have been a number. only work with several members of congress including the house and senate activities as part of the body exchange act reauthorization what changes are you trying to put forward. our big change the. the way customer funds are and old and bankruptcy and if there happens to be
a shortfall in the customer accounts like we saw them at all which was an unprecedented event but it draws it begs the question you know if this was an unprecedented event can we actually fix the bankruptcy code is what you're doing going to be able to overcome the changes that were made back in two thousand and five and can we finally see protection for the future as customers. yeah i mean changing the bankruptcy code is very difficult. basically the kind of one precedent that's against commodity summers comes from a. broken train and i have a ninety nine i am aware of. the case of a shortfall in customer property customers get treated it's general creditors from from a balance that ruling was later. after a settlement our customers all their money back on precedent was cited. in this case so what we're trying to do is create a situation of subordination where if there's a customer shortfall all of our lenders would then have to wait until customers.
get their money back in order for them to get it and that would result in much quicker return than what we saw and i don't know more soon. that was my interview with the president and co-founder of the commodity customer coalition james could tell us. i i. i i i. one of the most miserable experiences can be he said she said to us as one person's word against another and with little evidence and evil doer can walk free however i think the business is extremely important and sometimes these tiffs can ruin. well let's talk about m.f.
global let's profile john cores on the missing customer funds are is still a contentious issue brokerage firms are required by law to have customers funds in segregated accounts to safeguard customers assets however it during a liquidity crisis at m.f. global over eight high. a million dollars of customer's funds were transferred from a customer account to a broker dealer account and then c.e.o. john corazon denied having any knowledge of this when questioned by congress. i was stunned when i was told sunday october thirtieth two thousand and eleven the name of could not and the school could not for many hundreds of millions of dollars more simply do not know where the money is. but not everyone is buying his story u.s. representative michael grimm is calling on the attorney general to bring criminal
perjury charges against him for m.f. global this is based on evidence filed in a c f t c complained that corazon spoke to an employee by a telephone telephone to strategize how they could use customer segregated fives to clear m.f. global's trades but this isn't the first time john corazon has tried to conceal his affair as governor of new jersey he spent approximately one hundred twenty seven thousand dollars of taxpayer funds to keep the e-mails between him and his girlfriend car like cats secret carly cats it was the president of an employment telecommunications labor union and this union negotiated a labor deal with ministration and allegations of potential conflicts of interest during these negotiations were brought up against and ended up being ruled that course i did not break the governor's code of conduct but he did manage to keep the majority of these emails sealed mind you carla katz was married to someone else
when they met john corazon and it was married to. for thirty three years they have three children and joanne was quoted saying that john did what his family down and no probably new jersey down to regarding his affairs with the c.w.a. president casts another act. concealment from corazon was when he ran for u.s. senate in one nine hundred ninety nine he refused to release his income tax return records claiming a confidentiality agreement with goldman sachs he was the former head of goldman and it was speculated that he had the politically unpopular investments but nothing prevented him from putting his investments and a blind trust corps on was indoctrinated into the goldman i claim in one nine hundred seventy five when he was hired as a broker trader over two decades he worked his way up to chairman and c.e.o. he's responsible for converting the firm from a private partnership to a publicly traded corporation he made about three hundred million dollars on the
partnership conversion better the firm went public coast c.e.o. henry paulson forced him out and this is when he went through the revolving door and turned politics he was a democrat from new jersey in the u.s. senate for five years he then ran for governor of new jersey i'm sure losing his real act as governor he had up his ally from his golden days days the flowers who helped him into his position as chairman and c.e.o. of m.f. global powers own a temp of percent stake and and was actively engaged in the last minute negotiations of until m.f. global declared bankruptcy the missing customer funds have pushed john chorus line and to another my word against his argument did he know or did he not know that is the question that could put corps i'm behind bars but now we know a little bit more about the profile of john quinn resign.
welcome to the daily door joining me is rachel courteous or to producer thank you so much glad to be here about all right we've got a couple stories we're going to talk about today this one is from w.s.j. healthy consumers could see insurance rates double or even triple when they look for individual cover under the federal health law later this year and while the premiums paid by sicker people are set to become more affordable and this is according to the w.s.j. again the exchanges the centerpiece of president barack obama's health care law looks likely to offer few if any of the policies that healthy people can now buy so according to the journal's analysis top prices look to be within reach for many
people who previously faced sky high premiums because of chronic illnesses or couldn't buy insurance so what's going to go on here well here's what i think i think first of all for people who are say feeling like they're going to be paying higher rates before previously for those people who were not covered by health insurance at all because of chronic conditions it wasn't that they weren't getting medical care it was that they were going to the e.r. at the last possible moment when they needed it and the government was only slightly paying you know we certainly have a convoluted healthcare structure because of the laws and this gets back to this gets back to the one nine hundred fifty s. and sixty's there were improper incentives and when it's kind of like the income tax people don't realize how much they pay in income tax because it's automatically deducted people don't realize when they take a job how much of their money that they could be getting otherwise is going to health care so people really don't have a choice in the system that even was before this latest thing the only service is going to do that's much better is that people who have chronic conditions yeah i think if people have chronic conditions who are now able to get preventive care is actually going to lower prices in general also the individual mandate which was pay
for all this people are already paying for it to say that the government isn't already paying for it is ridiculous but the government and i are the government pays for it ok but the government cannot continue to pay for it if the government is going to have the health care act rightists even if we can't continue even if health care costs are going to rise civilizing rise at a lesser rate than they would have. there was so listen i'm not going to sit here and defend the intricacies of obamacare i do think that that's a losing argument but what i am going to say is that the government does have an obligation to provide people with health care and if they are providing people with preventive health care and healthier choices from the get go that means that their costs are going to go down later on ok the problem is i stand by my assertion this cannot continue forever especially when interest rates rise but i'm going to move on to the next subject and this next story this next story is from forbes if you feel like you already paid for the financial crisis once or twice you might have that same old feeling so with failing institutions lost investments foreclosed properties the taxpayer funded bailouts taxpayers got it every which way and now
they could be getting it again citigroup says it will pay nine hundred sixty eight million dollars to fannie mae to resolve crime claims that breach representations and word to use on three point seven million residential mortgages and this is now three point seven million dollars three point seven million mortgages they really must stop here and they're paying one hundred sixty years in the us up here i mean buybacks have been an issue for banks ever since two thousand iraqis are precisely and i think that having a settlement like this is good news because it it gets rid of some of the confusion banks have been putting aside their quarterly earnings significant money to have to deal with these buybacks so they're going to the federal reserve is subsidizing these very big so i think we've seen a zombie bank structure especially with the too big to fail banks and we're in a much worse situation than we would have been had they been allowed to fail in the first place and face these seriously and i think that with fannie and freddie in particular there's a huge question of what we're going to do with them right there don frank bill didn't mention these government sponsored enterprises even though it looks like we might even get a new entity so why why bother getting rid of frank and freddie if we're just going
to do the same thing over and it's it would be fannie and freddie by another name and i think that there's a really what it's mostly i mean it would think you perhaps but i think the question here is is mainly you know freddie was brought in to the equation much later on because the risk exactly because fannie was getting so big and so powerful i think that the main thing the government can do here. is make that implicit guarantee explicit guess what we've got to wrap this up rachel thank you so much for joining me if you want to weigh in on today's show be sure to like us on facebook at facebook dot com slash prime interest and don't forget you can follow rachel on twitter it serious underscore rachel and you can follow me on english p.i. rachel thank you so much for joining me today glad to be here. it
was a kafkaesque day here a prime interest we learned there's no honor for old new jersey senators who rob peter to pay j.p. morgan and ferber ferber we got your number and much like the alamo we will not forget dodd frank turns three and is going through some growing pains at least we know they're in the terrible twos and kafka himself turns one hundred thirty which would actually be a decent sentence length for john the done corps i would that would you deal jay finally get its act together and get serious about these bankers guys and go well it's us independence day tomorrow and we're going to celebrate independence we once had and yearn for once more and the fed thanks for watching to make sure to come back tomorrow and from everyone here a prime interest of a great night. is
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