tv Prime Interest RT July 13, 2013 12:29am-1:01am EDT
that afternoon and welcome to prime interest i'm perry i'm boring and i'm bob english let's get seats today's headlines are the road scampering off the so you can ship the ship being the fed elizabeth two just rode her own pink slip yesterday in a surprising turn of events this is ahead of the expected departure of treatment that bernanke will likely not seek a third term this january all while the media is busy floating larry summers as bernanke replacement but let's not forget he's the guy who held tainted the harvard endowment fine ignoring warnings from now and that it was loaded with toxic to revenue so let's just put him in charge of the fads three trillion dollar balance sheets. and speaking of derivatives today was
a critical deadline were an exemption the dodd frank was set to expire the likes of j.p. morgan have been able to trade in london and evade u.s. rules we know how that worked out thanks to a certain city of london will but a turf war compromise has been reached between the u.s. and europe so don't worry the seven hundred trillion dollar derivatives juggernaut will continue unabated. and could there finally be at fannie and freddie wind down and the words congress has been debating here for a while and house republicans are pushing for a bill that would quote virtually remove the government from the housing market except it won't because the replacement would be an insurance scheme is similar to the student the current student loan. inskeep and there's an additional sticking point according to various castings i knew a shareholder lawsuit against the mortgage giant when make it difficult to exterminate mortgage giants saved because bob will talk and troll fraud with william black the guy who expose corruption in congress relating to the savings and
loan scandal two decades ago and perry and will present the new ron paul channel coming to an internet near you this summer we also have an interview with chris receiving from economic policy journal and the ron paul institute and here is why i think your prime interest. in. the savings and loan crisis was one of the biggest financial scandals in u.s. history at the time five senators known as the keating five were accused of trying to prevent an investigation into lincoln savings and loan association this was a loan bank and the collapse of which cost taxpayers over three billion dollars i
spoke earlier with william black associate professor at university of missouri kansas city about his interaction with the keating five. got five u.s. senators to meet with us and to ask us to take no inforce an action against the largest violation of our rules adopted as part of regulation in the history of our agency and we said no but then they got new head of the agency and they intimidated him and he removed our jurisdiction we were the regional regulators in. california he removed our jurisdiction over lincoln savings because we refused to withdraw our recommendation that the government take it over and lincoln savings was allowed to grow in its frauds to increase and it became the most expensive for audit in the savings and loan debacle it also finally put
a public face on the victims usually because of federal deposit insurance you don't have an addendum flyable human victim of these frauds it's all of us as taxpayers but in the case of charles keating he sold useless worthless junk bonds of the holding company which were not federally insured and he targeted widows so finally there was a face on the savings and loan debacle and that face with your grandmother. and we saw actually a thousand bankers go to jail during that time why are we saying that now what is a problem too big to jail ivette it. no that's not it at all although that's the excuse for it in the savings and loan debacle i mentioned that the reregulation began immediately after the deregulation act and that reregulation was
run by the chairman of the regulatory agency is nameless and when gray and gray also be on the changes where he said our top priority is to remove the frauds from control of the savings and loans stop them from causing greater damage and our second priority is to get them convicted and so we that began a process that took many years. and resulted in super criminal referrals and criminal referrals are what are absolutely essential if the prosecutors are going to success. slick prosecute a sophisticated financial fraud this time because as you would probably figure somebody running the bank they're going to make sure that the bank doesn't make a criminal referral against them so these criminal referrals can only come from the
regulatory agencies at least in any significant number and our agency made over thirty thousand criminal referrals now the savings and loan debacle was one of the seven the the size of the current crisis in the united states and of course that's not even talking about the crisis elsewhere in the world which is also largely driven by control fraud. we convicted over a thousand. people in jail and that's just in cases designated as major by the f.b.i. and that understates the degree of prioritization because we made a big effort to get the hundred worst fraud schemes it was about three hundred savings and loans and about six hundred individuals virtually all of them were prosecuted and we had a ninety percent conviction rate and of course white collar criminals have the best
defense lawyers in the world and they'll spend money like water to stay out of prison so that was an extraordinary success but again it all comes back to asked to begin with the criminal referrals well clash or to the current crisis certainly let's flash forward to the current crisis it was actually predicted as far back as two thousand and it has to do with an interesting angle that you've been writing about called appraisal fraud. right so what happened in two thousand is that of significant number of honest appraisers a benchley the number became eleven thousand over eleven thousand drafted a petition and signed it and sent it to washington d.c. saying hey there is really widespread appraisal fraud and the lenders are leading this appraisal rod and the way they're doing it is they're extorting
appraisers if you give an honest appraisal you get blacklisted and here's the kicker. the lenders want us to inflate the appraisal in other words the house is really worth three hundred thousand dollars they want us to say that it's worth three hundred eighty thousand dollars so they can make a loan for three hundred eighty thousand dollars and charge additional things well you know no honest lender would ever inflate an upright. because the property being pledged as security for the loan is what protects you from loss so when you get widespread appraisal fraud you know first it has to come from the lenders because they're the only ones that can do it and second you know they must be covering up an underlying fraud and that underlying fraud was something that we now call liar's loans these are loans made without verifying the borrower's income and we know from
investigations that it was overwhelmingly lenders who put the law he's in liar's loans and what did they do again it was a matter of inflating the borrowers into to make it look like they could actually afford the three hundred eighty thousand dollar home loan that i just gave you as an example so these are integrated frauds you can think of them as a twin barrel assault from a shotgun where there's overlapping field of fire between the two barrels sounds pretty dire let's talk about all of these settlements that the banks have been making with the government and state attorneys general they have a number of reps and warranties problems that stem from the origination of these liar's loans how much fraud is still imbedded in the system and how do we get it out if at all. well and that's where we bring back a story together you asked me about how many criminal referrals were made in the
say the loan crisis i told you over thirty thousand i told you this crisis is the least seventy times larger and has a vastly more fraud than in the savings and loan crisis the same agency that i work for the office of thrift supervision jurisdiction over some of the worst fraudulent lenders like countrywide made zero criminal referrals in this crisis the office of the comptroller of the currency which. supposed to regulate the largest banks in america made zero criminal referrals we know of no criminal referrals by the federal reserve the f.d.i.c is smart enough to refuse to answer the question and. that was my interview with william black associate professor at the university of missouri kansas city and now we turn to the former u.s. congressman and presidential nominee dr ron paul he recently announced that he is launching the ron paul channel this summer that will be broadcast exclusively over
the internet and focused on his message of peace and prosperity perry and boring has more. representative ron paul retired from congress last year after an eight term stent but the seventy eight year old has not retired from what he calls the revolution and he just announced he will be launching the ron pollack channel this summer but he's not finished he's looking for a way to contribute to continue to advance the ball down the field and this is certainly a good way for him to do that i wouldn't expect him to just retire on a rocking chair out there on a porch in texas dr paul ran for president twice in his last election he felt he didn't get fair media coverage peter schiff agrees i think he got a fair shake he'd a won iowa early to won new hampshire he would have had a lot of momentum he might have actually been our nominee and i think if ron paul
had been the republican nominee he would be retired now doing the ron paul channel because i think he could have beaten barack obama and he would now be the present united states so you know the media though didn't want that to happen his colleague tom woods from the mrs institute said when ron paul left the campaign he was discouraged and ticked off at the media when it comes to the media refusing to allow people to hear the full spectrum of opinion that exists well yeah that does actually tick him off and frankly i find it encouraging to see him ticked off you should be soon after the campaign ron paul resigned from congress and started the ron paul institute for peace and prosperity daniel mcadams is the executive director of the institute a mission is to carry on and to accelerate what congressman paul was doing through his years in congress and before that working for a noninterventionist foreign policy working for a reduction in our military spending reduction in the empire and also protection of civil liberties at home it's here that he is challenging the establishment ideas
are very radical things to educating people in informing them about things that there have not been exposed to you know. it can be a very radical thing and it can be a lightning thing as well during his time in congress he spoke out against all foreign aid and that would include egypt he recently wrote that despite the egyptian government being overthrown by a military coup the obama administration will not utter the word coup because acknowledging reality would mean an end to u.s. assistance to the egyptian government and military he also went on a rant to warn americans of even if i program that's tucked in the immigration reform bill the national id mandatory event database will not only be used to prevent illegal immigrants from gaining employment instead it will eventually be used as another tool to monitor and control the american people since the mainstream media has never been his ally ron paul is taking matters into his own hands turn off your t.v.
turn on the truth harry i'm boring. the future to consume media is moving online and dr paul is headed in that direction the ron paul channel could bring endless possibilities to his message of liberty and coming out of that presidency me from the ron paul institute and economic policy journal is here to discuss the business cycle theory then bob heads to the daily door with our team correspondent a little wall over apple's antitrust price fixing lawsuit. old . technology innovation all the developments around russia we've got the future are covered.
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there's been a lot of talk about bubbles lately and the boom bust cycle where does it come from the fed maybe here to present the austrian side that would be the austrian business cycle theory is chris rossini is a columnist at the economic policy journal dot com and the ron paul institute i talked to him earlier and began by asking him about the causes of the boom part of the cycle. the boom is actually where the damage is done in the business cycle a lot of people the focus is on the crisis afterwards but the boom is that that is where the damage occurs and that's where the federal reserve pushes down interest rates artificially by printing money buying up and injecting money into the economy and it gives. the false impression to business is that savings have increased and
that people have decided to withhold consumption but that's not the case if we were living in a market the interest rate would be higher in a free market but the fed instead distorts the picture by proportion down interest rates and it stimulates all loans all these loans that really should not a car and we saw it in the dot com bubble were companies without revenues and barely any business plans were receiving money hand over fist we saw in the housing boom were houses skyscrapers neighborhoods were all built shopping centers are all built and they should not have been built now they are sitting empty in many places throughout the country so the fed only creates that but they get away with it because during the boom it actually appears like wealth is being created and it's called the wealth effect and people see their stock prices go up they see housing prices go up the whole triple quadruple and it feels like real wealth is being
created but it's not what they have done this sort of the economy and the damage is revealed when they start raising interest rates later on well let me play devil's advocate here i kind of know your position on this but paul krugman he says that aggregate demand is what codes and we had keynes who actually invented helped invent g.d.p. gross domestic product in the mid forty's he was a big proponent of aggregate demand why shouldn't we just look at that as a solution. to tell you the truth aggregate demand. ignores the other side of the cycle which is supply and what would builds wealth in society is an abundance of capital goods products that people can. consume and enjoy and find you telling you. to focus only on demand and to thing. that's a handout but to create money out of thin air or to hand out. all the stimulus it
is whether it be even there are some people suggesting that the government should start handing out strength to people they should just write checks to now this this is a total fallacy and that this bring about wealth wealth cannot come for any purpose wealth comes from hard work creation entrepreneurship and savings people then restricting some of their spending not spending every dollar that they have and more and with those savings providing funding for new ventures and for businesses to expand ok so we talked about the boom part of this cycle let's talk about the bus can you walk us through that exactly what happens when the fed has to rein in monetary policy yes the fed eventually this is after and it could last for a long time that we sold throughout two thousand with the stock market and the housing lasted for a while ultimately because consumers have not decided to
see and withhold consumption it means they're also they're consuming and businesses are investing at the same so everybody is spending what's and it's it's crazy and ultimately that ends up pushing up prices well but i don't you know i'm sorry go ahead. the fed begins to worry they supposedly are worried about inflation then they're supposedly there to keep inflation down when in truth there be only source of inflation so once they see prices get out of hand in their own minds they begin to taper back chris start creating less money buying less bonds and what happens is all the bad mal investments that were made during the boom are now exposed hey let me ask you what is in store for the future of the u.s. given what you've just talked about what is your projection of what's going to happen when the fed finally does and this q.e. policy and would they have to restart it again at some time in the future. that
seems to be the trend. to but he seemed to blow up all holes and then pop them and then blow him up again and they have plenty of. support in media and writers that say that the cure is the do it do it all again that's this the only cure when what's happening is the market is trying to cure itself all the mal investments have been exposed unfortunately people have to be laid off unfortunately. houses have to remain empty until they come down to their market price unfortunately businesses have to close we saw plenty of dot coms go on there they should have never been started to be good to begin with but they had to go on there and that's basically a market saying hey let's get back to reality the federal reserve distorted the market and the market tries to bring back reality. that was my
interview with chris rossini columnist with economic policy journal dot com and the ron paul institute. joining me is liz wall are two correspondent thank you for joining me today liz great to be here all right let's just jump in to our first story just this week a federal judge ruled that apple played a role in conspiring to set ebook prices apple was accused of working with five major publishers in an attempt to force amazon dot com a major e-book seller to change its pricing model so i give the floor to you. i know you i know your kind of school of thought there and i know you love love that free market i'm not saying definitely not saying that the bad thing but i think in this case the judge was
trying to find out whether or not the this in this case apple broke the law and what the judge found was that yeah when apple work too with these other companies to fix prices that they took it a step too far and did violate the law well here's the problem with the law is it's completely arbitrary what the what apple did is it conspired you can use that word but it met with a bunch of publishers and so we want to exclusive rights to your material and yes they set prices they were able to raise prices in the market but apple took a gamble this could have failed apple could have lost a model a lot of money and it's really up to the consumers to decide whether or not they're going to buy a particular product the problem with the department of justice going after these kinds of cases is they can go after it in a very arbitrary way yeah and certainly that's that we're waiting to see what the effects of this are going to have but you have to remember that these laws were put into place for a reason back in the late one nine hundred in the days of rockefeller when. he was getting when he was going to others and i guess is being scrutinized for. for you
know unfairly the oil i think the competition out and we had the robber barons but let me tell you about the real reason we got these laws and they were actually based off of state antitrust laws and i think the model in particular was used by missouri and the reason was there were a bunch of cattle farmers and hog farmers who were upset that all the business was being done more efficiently in chicago so they got a state law passed an antitrust law to push these guys out and to artificially set prices based on this supposed antitrust scheme and when the u.s. came up and they wanted an antitrust law they adopted that so it really has nothing to do with what you're saying i'm afraid you don't think so well i don't i can say i can only speak from the standpoint of what was you know from back then and why these laws were implemented things like the sherman act in one nine hundred eighty saying that you know what when there is a you trying to prevent these monopolies from happening from happening and so that there is a fair environment so a free market can happen and so that the market isn't just one monopoly and then
there are able to be multiple participants and and this case it's not even they're not even saying it's against the law to have a monopoly but even if there is a big company that is running very successful in grabbing a big share of the market that there are some regulations and there are some limitations set in place at least there are some rules just to make sure that there is a fair game and these are the laws that are in place that works and then let's talk about microsoft because over a decade ago the justice department launch an antitrust suit against microsoft it cost them hundreds of millions of dollars and unfortunately that marked a turning point in microsoft and from there some could say that it was their the beginning of their demise they weren't able to innovate anymore and it was just a big waste of money because who was the biggest competitor to microsoft to emerge it was google and it had nothing to do with microsoft's browser domination at the time and if you look back at the oil barons in the wrong. and you know they would have broken up they might have broken up eventually they were you can only have
a monopoly if it's government enforced in other words that's my point yeah well i think there's always this kind of delicate balance between this free market and taken it too far and i think you're you say that back in the day with microsoft and a lot of people saying you know what this is going to hinder innovation but then we see something like apple and how how big that they have been saying you know people pointing out the fact that i pods are ubiquitous these days and they were able to become i got to rip you out here i must say the last word we don't have free markets if you want to weigh in on today's show be sure to like this on facebook at facebook dot com slash prime interest you can follow liz liz wall and you can follow me. liz thank you for joining me today to legal right to do well you know.
it was a watershed day here on prime interest following a split decision at the fed yesterday to taper are not to taper we learned that a key federal reserve governor elizabeth duke is tapering out earlier and that trillion dollar derivatives question was settled today except it really wasn't up to the what tricks the j.p. morgan uses to game the new rules think london where squared just like those at. dr paul is going to doctor the media complex all christmassy me break down the film by cycle and phil black is broken down and far turns out controls the pivotal finally the apple ruling marks a turning point and having to watch out because the brother is watching and more ways than thanks for tuning in from everyone at prime interests i'm harry and boring have a great. privacy
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