with the previously. you know free flow. and now we're here in moscow this is also the egypt gathering momentum as hundreds of thousands of people converge on a couple i wrote in the latest attempt to pull its president mubarak to step down so if all three hundred people who shouldn't be killed and they were three pounds of digits in the protests began over. and a day of a tribute to one of russia's most controversial on the eightieth anniversary of the country remembered it's late president but it's yeltsin whose legacy still has many

russians to find its. audience expelling a russian diplomats over spy related accusations doubling claims moscow's intelligence its new start of the ids of irish citizens to come for its agents in the u.s. it's. next financial analyst at month's kaiser explains how easing candy can actually help balance the budget in the u.s. all the details in the kaiser report. i am max kaiser and this is the kaiser report you can sum up the entire global situation in three headlines one we've got wal-mart of weed yes the wal-mart of we is looking to go public in america number two you've got another headline here

that thirty five states and now reporting decreases in payroll and number three consumer confidence is up in america it's a payrolls are down but they get given to people of dough they'll intern of munchies like potato chips and twizzlers to boost judy pig it all makes perfect economic sense i've calculated that you need to eat approximately thirty seven quadrillion twizzlers each of the next twelve months to balance the budget let's go to stay here because they say imax i like the way you put this on our website max keiser dot com he said what teens called animal spirits has been replaced by the munchies but you know it's not just potato chips and twizzlers there's also bath salts headline reads bath salts a growing drug problem officials say so police say they are seeing a growing number of americans suffering hallucinations paranoid thoughts and heart palpitations after snorting smoking or injecting chemicals sold as bath salts under

names like i every wave bliss white lightning and hurricane charley right so meth amphetamine is just don't do it for me i got it i get goaded into your parents kitchen the place where you prepare food it's different than a mcdonald's and find the largest frying pan you can pick it up and both a slap yourself on the head with it really hard but will give you the same effect you might need some bath salts actually for the next headline e-mails show bear stearns cheated clients out of billions. so former bear stearns mortgage executives who now run mortgage divisions of goldman sachs bank of america and ally financial have been accused of cheating and defrauding investors through the mortgage securities they created and sold while they were working at bear stearns according to e-mails and internal audits j.p. morgan had known about this fraud since the spring of two thousand and eight but

hid it from the public through legal maneuvers but last week a lawsuit filed in two thousand and eight by mortgage insure ambac assurance corporation against bear stearns and j.p. morgan was unsealed. the lawsuits supporting e-mails going back to as far as two thousand and five highlight bear traders telling their superiors that they were selling investors like ambac a quote sac well yeah right after they tried smoking it and then they just sold it apparently they knew that all of the mortgages in these mortgage backed securities were fraudulent bogus likely to default yes so they knew they were a sack of excrement yet they call it after funneling these misrepresented loans with and backs insurance they then according to the lawsuit implemented a trading strategy to profit from an bax potential demise by shorting banks with large exposure to mbak insured securities and again these are in e-mail

correspondence that they were shorting these banks just after they sold it so it's like think get their employees to take out life insurance and then they kill them or they take out a fire insurance on your house then they burn it down they take out insurance against the selling misselling of these securities and then they make huge bets against it this is the problem of this why american economy is being destroyed is because the banks are what i call suicide bankers they're pathologically ill they're lloyd blankfein jamie diamond these guys they are sick they are kleptocrats they're murderers they're financial assassins and this is a typical story exactly as we described it here they gamed the system the game the legal system and everyone is in on it the rating agencies knew about this fitch and moody's they knew about it they committed fraud the investment banks knew about it they committed fraud the justice department under bush and under obama they know about it they're committing fraud on a daily basis regarding the story here recall that it's very similar to the goldman

sachs a.i.g. deal and we saw this and we covered this here on the kaiser report a few months ago where senator carl levin was questioning goldman sachs including blankfein and he was asking about e-mails in which they also you. is the same word of this excrement this the foul word this four letter word for their deals that they were snowing really selling to their clients did anything ever come of that were they ever prosecuted were they ever charged with fraud no it was all just like their sort of language but i thought perhaps because there is so much of this. being sold and packaged by banks perhaps we could reclassify this as manufacturing and there they could be the world's largest dealer of agric fertilizer for example around the world fickle securities fickle back securities well basically when you put bluntly jamie diamond j.p. morgan lloyd blankfein of goldman sachs into a room they basically they crap in each other and their underwear then they they

rip that out and then they sell to each other for a fee and then when it turns out that what they sold which was the basis for the entire collateral of the american economy turned out to be nothing but the matter of jamie diamond and lloyd blankfein and their banks were threatened with insolvency they then get hank paulson it was a girl the actress then was working on the treasury to get out of front of congress put a gun for their head said either give us three quarters of a trillion dollars going to blow up your economy we were going to threaten martial law so they've got the goons they've got the physical model security sellers they've got the compromise legal precedents that have no rule of law it's a club talk or c. and they so with each other and they call this the economy american economy is based on selling pooh pooh from one bank to another for fees and then when it too much people when the system they declare bankruptcy they demanding a bailout which of then it is really it's like getting a clean underwear were they doing the clean underwear. oh there are more american securities i just showed you both as well there's more american securities let's

soames let's go to the dollar bonus oh i just made myself one of the bonus that's what wall street so about is just selling that's it it's worth nothing. also according to the article from terry bill a public hearing is currently scheduled to be held by the new york state assembly regarding whether legal action should be brought against banks for misleading and churches about mortgage related securities i wonder. well you know americans live in the sewer i mean this financed by these banks that point to this sewer and sewer just say that's a aaa rated government secured loan you should be happy you're living in that aaa rated government secured sewer well they're all at this wal-mart of weed smoking dope or breathing or inhaling or injecting bath salts so you know they don't know what it is that's going on on wall street and i think he's clearly addicted to

crack so is it going to get better mortgage lenders seeking court permission to destroy twenty two thousand one hundred boxes of our original loan document so they're this is what they're they've taken from this because there's been no justice all they're doing is like let's get rid of any evidence that remains and so that no lawsuit could ever be brought against us because their original documents will no longer exist. but as you saw into the company they want to be the wal-mart of weight and they can sell most rolling paper to go in there as well well mart of weight you buy a pound of sense a million and you get some of these original issue mortgage documents to go with it to roll up your dope with and you can be just like ben bernanke you actually gave me another idea because maybe all of these collateralized debt obligations that bear stearns was selling and now j.p. morgan owns that maybe they could sell them to the likes of month santo as a new sort of fertilizer like top up the paper and dump it in the you know agricultural it can definitely go in a current according to talk of a bell there's

a lawsuit against taco bell that the beef in their beef products is not actually beef so i'm sure chopped up mortgage paper would substitute what it's like the story we did last year about the chinese bun manufacturer that sold certain hemp cardboard and called it. so let's move on to the next headline also related to all of this mortgage giants leave legal bills to the taxpayers so even if bear stearns or j.p. morgan have to go to court to defend this it looks like you know the taxpayers. you know our being stiffed with all the bills since the government took over fannie mae and freddie mac. taxpayers have spent more than one hundred sixty million dollars defending the mortgage finance companies and a former top executives in civil lawsuits accusing them of fraud the cost was a closely guarded secret until last week of course the guy was keeping the secret was high on dope any let it go to wiki leaks yes this is in order to defend fannie mae and freddie mac. executives like franklin raines and timothy howard and of course fannie mae and

freddie mac. ball a lot of these bad mortgages from these banks as well as part of a huge gap because they got a government sponsored entities allows them to play a game the interest rate spread between government securities and government securities here's one prediction i made a list or i'm sticking by that before the end of this year fannie mae freddie make a five trillion dollar liability on america's balance sheet will be bought by the chinese and the biggest landlord in america will be china well they could end up being good short to short china because if bear stearns is correct about their assessment of what is in these mortgage backed securities those are huge sure bet on china now with jim china so i think the guy is short of enron he's short china so it could be the basis and so is it going to get better or worse well look at the chart of the day the housing double dip is excel or rating how home prices dive one point six percent in november so the trend is continuing down it appears that bear stearns was indeed correct max that what they sold and what is backing these

mortgage backed securities which is now owned by the taxpayer by a new accounting law introduced january sixth by the federal reserve bank is that remember they can no longer go insolvent because they could just transfer their bad liabilities to the treasury so they're just negative liabilities owned by the taxpayer those are the fed's balance sheet can expand exponentially and for night i'm to accommodate an infinite number of bad loans as the real estate market gets into a double crash which means banks go in. another crash which means another big bailout from congress a gun point or threaten martial law and it's all quite nightmarish for the us dollar resident all right thanks so much for being on the guys work thank you max don't go away much more coming away so stay right there.

welcome back to the kaiser reports on now to go to los angeles to talk to me pran is author of it takes a pillage an epic tale of power deceit and until trillions now available in paperback now me is a former managing director of goldman sachs and before that she ran the international analytics desk at bear stearns in london only welcome to the kaiser report and care only proves this is

a story that's breaking e-mails show that bear stearns traders telling their superiors they were selling investors like mbak quote a sack of your thoughts yeah that's pretty much what was going on as we all found out when the financial crisis reached everybody's ears in late two thousand and eight of course this was going on through late two thousand and seven and early two thousand and eight am back was one of the investors and also something called a wrapper they basically looked at the toxic assets of bear stearns created out of crappy loans out of defaulting loans out of things that were cheap for them to buy off of banks and stuff into toxic assets but they fail to tell back who is wrapping these assets or the rating agencies how crappy the loans they were stuffing into these assets really were this wasn't just bear stearns doing this of course this was every bank that was creating assets doing this when they could however they could but of course the lawsuit is coming out now the information

behind it is coming out now j.p. morgan chase now owns bear stearns it received bear stearns. with our money with our federal backing to the tune of twenty nine billion dollars during the spring of two thousand and eight which was around the same time the ambac opened its lawsuit against bear stearns so we are still looking at that fallout all right now let's look at the suit filed by ambac against j.p. morgan it states quote knowing that it's fraudulent and breaching conduct was resulting and would result in grave harm to ambac bear stearns then implementing implemented a training strategy to profit from and back to potential demolished by shorting banks with large exposure to mbak insured securities is a mount against the law unfortunately it's in that gray area where the law doesn't really keep up with what's going on it at these investment banks and it still doesn't what happened then was very similar to what happened with the goldman sachs case and and shorting loans that were going into their abacus deal for which they

then settled with the f.c.c. for five hundred fifty million dollars admitting no wrongdoing the same sort of thing in a little bit of a different set of details is really at play in this in this situation. bear stearns basically sold or shorted and back because they knew that ambac was wrapping crappy deals us a bear stearns getting in there and figuring out you know we're giving them crappy deals this is not going to work out well for and we're going to short it there is no legal problem with that it's a moral problem it's a gray line it should be legal because you're effectively misleading your wrapper you're not giving them time to figure out what assets you're stuffing into what they're wrapping what they're investing in and at the same time you're basically playing that they will blow up which effectively is what both ambac and bear stearns did but but but if i buy life insurance on somebody and then i kill them to collect the money or i'm buy a home insurance on a house and burn it down to the ground and collect the money is not illegal it's

the same exact same thing it's why is that legally the exact same thing that obviously is absolutely illegal and the. is that it's not exactly the same thing as because our regulatory system is is so so very very flawed that what's going to happen now is j.p. morgan's going to come out and say you know i will settle this we didn't really do anything wrong there stearns we took we were really part of them they didn't really do anything wrong they were just making trading positions that so happened to have been against the insurer the the investor in the crappy deals that they were putting together it should be illegal and i could argue that it actually is illegal because you are falsifying information in order to profit on the other side the f.c.c. so far hasn't found this to be legal in other situations where by law is the problem it should be it certainly is if you kill someone they've taken life insurance out of and effectively by shorting ambac they were killing and banks raiding before and

recchi even went bankrupt because that was basically by shorting and back they were they were increasing the value of its stock they were decreasing the value of and backs capital they were helping to force it into bankruptcy while they were shoving their loans and they're into toxic assets that ambac was rapping so the whole thing is completely shady should be legal the question is whether the f.c.c. can can figure it out this time or any time to actually declare it as being illegal but it's also an instance of insider trading and insider trading is clearly illegal but i want to move on to something else because you've been writing about it talking about a fraud ask like moment that's happening in the present and this is the goldman sachs face book deal. why is it worse than the crappy c.d.o. those that goldman was admitted lee selling referring back to what we were just talking about fearless sun on this latest scandal all of this is a spin on the investment bank knowing more than what it is letting on to to the

investors and trading on the back of that are being able to trade on the back of it and so therefore being able to profit on the back of withholding information and to a large extent. the facebook deal was like that it's a private deal so it doesn't fully fall under the same public purview and rules as as insider trading per se but well quillan basically did was raise a lot of capital and they just went off shore to raise this capital because of the scrutiny that was put on the steel in the united states i like to think also by some of the articles i and others were writing and they didn't want to be bothered and so they when they raised money for the facebook deal offshore and the reason it's shady in that respect is because facebook. in the course of the stealing yes that is private has not really disclose the information as to how it ticks financially facebook will not disclose this information until two thousand and twelve so basically fourteen months after investors have succumbed into going into this deal and have worked with goldman to raise capital to basically allow facebook

to be valued at fifty billion dollars as opposed to the ten billion dollars that it was valued at just a year ago and the way goldman has kind of structure the deal is they put in some seed money which is how c.d.o. is work c.d.o. has always worked on the basis of the investment bank we put in some money some hedge fund would put in some money and that would entice other investors to follow along and there was there was a cushion there someone was giving out a stamp of approval which is sort of what's happening with this facebook do now it's very possible if facebook is the be all end all in two thousand and twelve in two thousand and thirteen when goldman's investors are actually allowed to get out of the deal goldman of course can get out of the deal at any time as they could with the c.d.o. but you know it's also likely or possible that that won't be the case and the investors in the steel are paying ten percent to goldman in case it is even occurs that their value goes up in the steel when they can get out and fees to goldman in order to structure the still allow them to be involved in the first place and i

think the fact that they went offshore and they had to get outside investors from the united states is very telling them about where the sort of everything goes though the law is the. two to get more than five hundred best years. of some additional disclosure goldman sachs did was they decided to invent a new concept which was that they took one of those shares or one of those holders and they split it into a holding which would allow others to participate and that's an idea that they should have gone to seize opinion on before they went to the market and breached what is the standing legal statute they breached the law i mean that's not the way the law reads so why keep it in a c c opinion first was it always on wall street they break the law first and then they say well we're going to go ahead anyway and it's up to you to change the law they're always wanting people to change the law what about obeying the law absolutely but the thing is it works for them in this in

this particular situation they basically said to the f.c.c. we're going to create the sa sure vehicle we're going to have investors and it we're going to call them four hundred ninety nine when they could be like you know twenty thousand we don't know they're basically investors piled into investors and we're going to basically do that and by the way if we want we can get out we can short it we can do whatever we want we're just letting you know and the f.c.c. is is generally so far behind anything that happens that it has yet to even state an opinion facebook had to come out and say you know what we get this is a little bit weird so we'll tell you what in two thousand and twelve in april two thousand and twelve if we still have this many investors in our deal well i don't go public or we'll decide to disclose this information which we should be disclosing anyway because technically there are more than five hundred humans who are invested in the steel but that's not the case because the f.c.c. is really really behind things goldman stated it only then decided hey you know

what this is going to get a little bit dicey so we're just not even going to deal with the f.c.c. right now we're going to do this outside of the country and whatever happens. later will happen and any one of the things that some of the investors that goldman even went up to ask for money and i say it for them for jim clark who is the former netscape founder was was just you know like there's no way you would pertain in the still not not just well not actually he didn't say because of any potential illegality but you know just because of the fact that it was overvalued overfeed you know hello that's that's how these deals work the f.c.c. is yet again behind the laws it actually is supposed to enforce again right jim jim clark's comment was that. goldman sachs is putting their interests ahead of their clients' interests which again breaks vul law which is about to do sherry responsibility securities act of thirty three and thirty four quite clear on these points and they routinely break the law and the only reason why they're

allowed to do so is because the regulatory agency covering this particular aspect of law in america is understaffed so goldman sachs instead of maybe doing something that would help the overall economy of americans that of destroying it the size well this is our opportunity to make some more coin for us by simply abusing the fact that there is no legal entity covering us at this time now of course this comes on the back of goldman sachs becoming a bank holding company as part of the massive bailout which again that doesn't make any sense doesn't walk through that transition that what went down at goldman sachs and why this makes this even more problematic if you could know me this is coming down to something at the federal reserve did to us and by the way it's also relates what we're talking about j.p. morgan embarras stearns the federal reserve decided hey you know what j.p. morgan take bear stearns' will back whatever it is they did with money that will print and are still backing and the same thing in a different vein happened with goldman sachs and morgan stanley back in september

of two thousand and eight which is these firms did not have enough capital to survive the weekend. and so on a sunday night. they basically got to the fed and said you know what we need capital that might end up in the exact conversation but that's why banks go to the fed when they are in dire straits because they need capital but the problem was goldman sachs marcella were not classified as bank holding companies so technically this was a situation again where you push the law but then the law changes for you and in the case of the fed to nearly have to change that much the fed just said ok fine we're going to waive our five day anti-trust check it out period which we obviously did with j.p. morgan and bear stearns we're going to just keep on doing whatever we can to help you and we'll just call you bank holding companies now and as a result you'll be able to access our money our of our capital from us at very cheap levels you'll be able to use the fact that the federal reserve back in you means that you can also now go out into the market when the market's better and get

investors to give you money again because the fed is backing you and all of these things that are beneficial to a bank holding company because the fed and the government back you even though goldman and morgan stanley were not actually acting like the classic what should be considered a bank holding company which is a bank that holds the posits and loans for people one last question the federal reserve bank recently has said that we're going to change the way we do accounting so all this garbage on our balance sheet we're never going to have to pay for it we're just going to be we're going to keep it for infinite period of time because we've totally changed the way the whole concept of accounting works if you saw the story can you comment on that story well it's very much what the fed allowed to happen to the financial industry after the bell which is basically to change all their rules so they would have to value securities at market levels because there was no market the fed knows and has known that the stuff it has on its balance sheet has no value or has very limited value actually i continue to say it has no

value but it has limited limited value and particularly if the fed were decided to sell it back into the market reason the. that is not happening is because it can't the market doesn't want it and so what the fed is going to do is basically defer evaluating this stuff until it matures war or something of that nature so that it doesn't have to show how how risky how badly position the federal reserve is having dealt with the financial crisis and it continues and it can continue to pervade this myth that the fed did everything it did right and everything it had to do and we're actually in a much better state because of that that's really that what's behind the counting changes at the fat all right nomi prins thanks again for being on the kaiser report thank you all right and that's going to do it for this edition of the kaiser report me max kaiser and stays there but i will thank my guest nomi prins her book is now out in paperback and you can find out more information at her website nomi prins dot com and o m i p r i s dot com if you want to send me an e-mail please do so at

kaiser reporting r t t v are you until next time this is nice guys are saying well you know. home.

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