good evening welcome to the capital account i'm lauren lyster here in washington d.c. now libyan leader moammar gadhafi has reportedly been killed we see the images today of people purportedly celebrating on the streets of tripoli but who may be really celebrating khadafi death from a far this photo should give you a hint and griese continues to burn with the anger of protests on the streets over austerity meanwhile any little rumor of a wrinkle in the plans for an euro zone deal this weekend seems to send markets haywire but is the real solution to the eurozone debt crisis and politically unthinkable one and as u.s. president barack obama is expected to sign three free trade agreements tomorrow as the u.s. solar panel makers plead for tariffs and as regulators go after city group appearing to hold wall street i count a bold are they going after the wrong guy and that has room to act people are

reporting but are the fed's policies hurting the economy we ask is government the solution to u.s. economic problems or is it causing them all right let's get to the capital account . all right so u.s. regulators the f.c.c. has settled with citi group for two hundred eighty five million bucks in relation to a probe an f.c.c. probe the f.c.c. allege that the bank misled investors in a two thousand and seven war good related security and also charge the director in that c.d.o. structuring group as responsible it's a former city employee so does this show the government is finally holding wall street accountable or is this just a false flag and the u.s.

federal reserve reportedly has more room to stimulate growth if it needs to because the pace of u.s. consumer inflation measured by c.p.i. fell last month but is the current policy of operation twist showing that policies are a bust and as u.s. president obama prepares to sign three free trade agreements tomorrow into law for solar panel makers in the u.s. are essentially begging for tariffs on imports of panels from china and just to remind you if you aren't aware we've seen several of these solar panel makers declare bankruptcy and the past few months in the u.s. because they simply cannot compete so the big question here for all of these stories and for my next guests are government policies helping the economy or are they making things worse ever harrison is here to answer that he's founder and chief contributor to the financial web site credit write downs among other

brilliant accolades and achievements thanks for being on the show welcome to the capital account nice to see on a different set so first i want to talk a little bit about this citi group thing because the news comes out. two hundred eighty five million dollars charging director of the c.d.o. structuring group you know responsibility for it. does this mean anything to citigroup which just reported three point eight billion dollars in earnings in its last quarter and to ponder some low level guidance not even at the company. this was a juxtaposition of the three point going for a quarter versus two in the new five million dollars for this deal you know citigroup was making twenty billion dollars a year at the height of you know pre-crisis it is from an accounting perspective but that was the accounting game that made the reality is that you have to have a few sacrificial lives here and there last was goldman sachs remember that there was a record deal with goldman sachs that was done in order to show that you know things

were being done but by and large no. high level employees in any of these bags have faced any sort of charges and you know this is just chickenfeed in terms of you know what the banks can do is to compete if it's a tiny clash in the pan that essentially may look according to headlines like it's doing something i want to look at why that might be that kind of nothing bigger has happened i want to look at lobbying i want to bring up a couple charts so actually one chart so this is a logging into and the firm the put this together looks at the intensity of lobbying expenditure as a percentage of assets to create an index of fifty firms and this index has outperformed the s. and p. by a levin per cent a year i sensually one of the pieces of research they had was the return on investment for every lobbying dollar spent is two hundred and twenty dollars and if anybody is confused if wall street is

a large part of this they spent three point three billion from ninety eight to two thousand and nine goldman sachs alone spent over four million dollars last year more than two million something this year so wall street obviously spends a lot is this why washington doesn't go more after the big wall street firms you know in the case of the f.c.c. obviously. it's based upon their regulators so that you know you have to separate that from the legislative branch they don't go after it because they sit with the people who are appointed to the regulation agencies are anti regulatory they want to go soft on wall street but in a separate issue in terms of lobbying congress doesn't necessarily have the. skills and the. the huge ability to be able to look at the mine used in the all of these these issues so what happens is that people who are self interested lobbyist they get in there and they push their particular position and ultimately what been there for happens this is their position get implemented into the legislation that we

have also has the ability to start that c.c. and regulators of funding a one hundred percent and that's what they've done they've put in people who are not regulators who have an anti regulatory mindset in charge and starve them for funds at the same time and what they're saying basically is that this isn't a priority we don't want to be the government needs to get out of the way and let wall street do what they do because obviously these are the people who are making money for america that's the story but at the same time i've heard from investors that have small businesses that know a lot of small business owners they aren't huge wall street too big to fail firms dodd frank regulations are very difficult and expensive to comply with not worth it for some of them and then as you see investigation literally ruined their career here you know it hurts the little guy if you speak to small medium sized businesses you know who don't have the ability to staff up with

a huge you know regulatory component within them you know you can spread the cost if you're larger in addition but talk to anyone you know if you sell cars if you you know you have a gold. gold distributor of gold you know all sorts of little regulations in terms of paperwork to fill out the do nothing. the business but they do make it seem as if the government's doing something in terms of regulating the industry exactly so my question to you something like dodd frank it's supposed to rein in too big to fail but then in fact doesn't do that and hurts just small business owners and medium sized businesses that struggle more did these regulations help or hurt the economy will i think ultimately hurt the economy in number one in terms of those organizations small medium sized businesses not being able to compete on the same playing field but then simultaneously it gives an incentive for people to skirt the regulations instead of you know having less

regulation fewer regulators who actually apply the laws that are institute instead of looking the other way what we have is over regulation and it just creates an environment in which you know the regulation is a tax on business especially small medium sized business so is the solution something like occupy wall street lobbies for we can't get that money out of politics it would certainly i mean you know. i'm not in the political sphere but i think that's certainly part of it i think with regard to the regulation side of things what you really need to do is you need to have. the ability to have a redundant system in which failure is possible so you have regulators to actually apply the law you have a regulatory framework which is actually promote the incentives that you actually want to have happen and then you are able to deal with systemically important

institution. there bankruptcy because you set up the framework in a way to do that and you say washington isn't doing that quickly the fed because we hear that they have i know you've been critical of operation twist what should the fed you well in my personal belief is the fed is there a monopolist basically the central. as they control the interest what the fed really should do is allow the government that is the rest of the government that's the school legislative and executive branch to deal with any sort of policies from a. mother to palsy. except to the degree that you have a panic however we've heard him urged several times for fiscal leaders to do something and washington is a stalemate so essentially we went through a couple different issues and washington is doing the wrong thing and here you have making things worse. with you for right now but we are going to bring edward back to talk about europe because it's on the brink of collapse and we want to know if

it is able to be saved if they're even looking at the right thing that's that harrison with credit write downs. all right time now for the word of the day this is the fun part of the show if you're a financial expert turn off the t.v. for a second or take a break because this is for our very smart viewer but maybe not the experts have you can understand something very important so where is he has the word of the day . i thought nice as the. word of the day is. i wish you were still here i would like to see him say that three times fast anyway it is the european financial stability facility and this is very important because as we speak this is going on euro zone leaders are racing to agree on new steps to reduce greece's debt to strengthen the capital of banks and leverage the european

financial stability facility the f.s.f. euro backstop fund to stem contagion to bigger economies but progress appears slow so what exactly is this very important. well let's take a look at the definition it is an organization created by the european union to provide assistance to member states with unstable economies which is a lot of them right now the fund raises money by issuing debt and distributes the funds to euro zone countries so this is institutions that need to be recapitalized . as i said who need help managing their sovereign debt or who need financial stabilization so when you hear about the four hundred forty billion euro rescue fund and you hear calls were to be increased or leverage which we're hearing a lot of right now you have to remember that the f.s.f. does not have actual money but rather has the guarantee of euro area member states

that it uses in order to raise money in the credit markets it's a little bit like if say my father takes out a loan for me and then gives me the money he definitely has a better credit now here's the problem and vestas have not embraced the as it was hoped many don't like it structure in effect a giant collateralized debt obligation and you remember how scary those are from the financial crisis and it may change and undermine the value of its bonds that's according to a syndicate banker quoted by the financial times so you will definitely hear more about the f.s.f. because for one thing we're going to cover it our next segment but now you know exactly or basically what it is. now it's still ahead right here on the capitol how do you not go away libyan leader moammar gadhafi is reportedly dead we all know u.s. politicians are hailing u.s.

involvement in libya but. really be celebrating we will tell you a reality check coming up after the break but first closing numbers.

the count. all right welcome back to the capital account now protests continue in greece over austerity measures the streets of athens are basically a war zone as the government tries to avoid default everyone is looking to this e.u. summit this weekend to solve the eurozone debt crisis and the fears of contagion then today rumors that it might not happen reportedly rattled the markets if you're a believer that news rattles markets some are angela merkel for one council the

statement she was supposed to make on friday that was one thing that caused people to freak out so who knows how this will all pan out and what exactly leaders will do or be able to do but our question is that politically on thinkable this scenario that is missing from the table entirely really the solution to a true recovery edward harrison is back again with us because he is all over europe he is really the man so edward thanks for being back so every day it feels like more the same with europe more sovereign downgrades more protests in greece we've seen for months on and off more calls for bailouts now everybody is looking for this expansion of the e.s.f. whichever knows about as i explained it. as a solution to this debt crisis is that a solution. because the only solution basically is a tighter fiscal and wish and people are talking about is fiscal union some people derisively called transfer union or break up but what does that mean fiscal union who basically it means that you you have the central bank and the fiscal agent the

monetary and and the first words and together at the same level so that you know they're working for the use of we as a cohesive group know what you have is basically you have a united states of europe with the e.c.b. being the fed and all of the different. it's like the individual states in the united states but there's no federal government so how does that how's that going to work it's not so you have you so you see it's easier to say either are really united states of europe with a federal european government or breaks that exactly what about this i want to take a look at a couple countries that have defaulted obviously these are not entire you know i don't arizona but they're individual countries and i want to look at what's happened to g.d.p. after they truly defaulted so one is russia if we can bring up that chart so you can see in ninety eight there was a financial crisis they defaulted and look at the g.d.p.

i mean look at that how much it regained and look at that growth and then another example i want to look at argentina. you can see where they defaulted where it's it's circled right there and then you can see there really strong recovery after that would this be a solution for euro zone countries i think you know over the medium term it's definitely a good solution my view is that the debts in greece are pretty much unsustainable unless you have the e.c.b. backstop them indefinitely but at the same time the reality is that you know greece is not is an importer germany's exporter so the next session the next cycle you're going to the problems you get and then you have to make transfers so ultimately it's an unsustainable mix between the two that is going to occur again and again but default should happen for greece because the austerity as we were standing with the protests is just it's out of control austerity only reduces the the growth

and you need growth in order to be able to pay off the debt you can't pay debt with more debt or or grow with more debt. edward then the question becomes what happens to a country like greece if you let it default i mean in argentina the leaders had to leave in a helicopter well i think that the greeks. had enough of those to. there has been that it's on payable and they know that the people that are being eight are banks you know usually french and swiss and german banks so really there's a why should we go through as much austerity as we're going through in order to pay these banks off these banks lend money recklessly to. the greek government the greek government didn't live within its means and it's time to the thought of the real question is you know how do you apportion those losses between taxpayers in greece and the bondholders. recklessly gave the money to the greek

government well that question's easy the bondholders are going to win and that's aspheric are going to lose right and that's what we've seen so far and that's how it's going to be and will at some point it becomes unsustainable at that point that's when they're going to recognize yes we're going to fail so either way whether it's austerity or whether it's a default taxpayers and average people always lose and investors and bondholders always went generally speaking that's exactly the case because there's been the day who actually has a closer legions to the policy elite you know the banks obviously do and so they're going to get their position more closely and will of course the situation becomes untenable and in the united states you have the same thing thanks have you know the air of the political elite they are in their pockets and we've seen a lot of bailouts in the united states so is it analogous is this the same kind of a situation oh yeah definitely the real question is what happens if we had a double dip recession you know you see all of this turmoil with say bank of

america or citi group etc wells fargo they were downgraded recently the question is if we had a double dip recession they start taking all these credit write downs into their balance sheet what happens that would be build that's the question everyone's asking will done for actually work in that small ratings agencies are betting that they won't be dealt out. a lot of people say oh come on the government will bail them out which you think it would be i think that they will make an attempt to have some sort of backdoor bill but the people would be so rude about it that basically they would have to nationalize them and do what they've done with fannie and freddie and give haircuts to some of the bond hearing do you think we would see a situation as we see on the streets of greece in the u.s. or are we already see occupy wall street is something like those backdoor bailouts happen again would there be riots on the street you definitely without a doubt because at that point the economy would have already gone into recession we

would have instead of sixteen percent under employment and nine percent unemployment we'd have you know twelve fourteen percent unemployment and twenty percent underemployment so people would be thinking to themselves you know we can't sustain this any longer we really need to cut our losses yeah it's not good for anybody we're out of time but quickly i want to just do you think that the euro zone breaks up or unites basically as you said within the next five years there will be an accident i think that they will unite for this but want to. see who they are and if you're right that was edward harrison thanks so much for being on the show he's founder and chief contributor to the financial web site credit write down they got to check it out.

all right and our reality check segment tonight libyan leader moammar gadhafi has reportedly been killed and we are seeing images from the streets of libya of people purportedly celebrating this death but we want to ask there they are there you know these are reportedly people celebrating in tripoli we want to ask in the united states why people are really celebrating politicians namely being a front man first i want to play you senator john mccain and what he is saying today the libyans right now in a very grateful to me those are the norms goodwill that if we can help them succeed getting these weapons and they can help in the world or the nicest government of china in the weather window i think it will be a lot of for them will be right and that's important i think is first of all. ok so before you assess what he means by why it's important to have goodwill and this part of the world before you get to begin about democracy or anything like that i

want to play you john mccain speaking on a visit to tripoli with the u.s. congressional leaders in libya late last month american investors are more than eager to come and invest here in libya and we hope that and believe that they will be given an opportunity to do so and it's pretty clear that as long as fighting is going on it will be more difficult to attract. investment. american investors are very excited and we know that with libyan leader moammar gadhafi gone people are probably hoping this means that fighting is over so as the saying goes a picture is worth a thousand words we think this one says it all these are nike's on some of the libyan rebels and this probably sounds up who is maybe the most excited about moammar gadhafi he's just guys the limits now for corporations.

all right we've gone over some of the biggest headlines and our take on the most important financial and economic news intersecting with the nation's capital the capital policymaking today but now we want to go over some of the headlines that are important in the same way but but a little different so i had brought dimitri co fantasy as our producer and our contributor here to talk about these with me one thing first vietnam's new transport minister has banned cos why has he banned golf well he says that some senior officials were spending too much time on the putting green and as a result were underperforming at work which was hampering the country's traffic

problems this is a real story. is this the solution for us politicians dimitri i think absolutely remember it was pro president barack obama was giving a speech to congress recently. john boehner vice president joe biden were talking about their own firings or i don't know i don't play golf but i think this is a really good solution to vietnam is probably on the forefront of really creative policymaking here i mean there's a look golf is a distraction to our ministers in the structure to our government policy makers we have a traffic problem it's a transport ministry with some of these you banding regressions i call we should do the same thing to congress what would fox news have to complain about if they didn't have footage of president obama out golfing while something important was going on oh. well that's true. and i think this is very creative we endorse that all right moving along this is something we don't endorse ok johnson and johnson is

being sued over a that general bash implant and you can go google that i'm not going explain what it does. because it was based on a similar device pulled from the market more than a decade ago for safety reasons and as one pelvic doctor very interestingly put it the f.d.a. got caught with their pants down so this is johnson and johnson and we've seen a story where they're getting sued for something else in another state what is the deal this is when you j.j. . but also needing to the term the j.j. exactly so this is i think johnson and johnson was going to brand that probably now there was a rumor i heard oh going to a pharmaceutical executive for jay-jay product with. didn't work out the way they expected you know these companies they're dangerous i mean we've seen pharmaceutical companies do i think and they come up with a pill to promote the female orgasm it was in the works i don't know i'm not up on

it i don't know but i do know however that according to a study the public citizen the pharmaceutical industry. is the largest you broader of the u.s. government just after i wrote quickly before we go seeking to defraud ing investors might have been defrauded one of the rumors as to why people were freaked out and why market sold off late yesterday was because our cozy left to go see his new baby daughter with carla bruni the beautiful french singer is this just hysterical right well markets tank they thought that sarkozy and merkel were fired but it was actually it was a it was a was it was a. sarkozy going for his baby so it was a was a major crash a baby crash are right a flash crash baby crashes those are all the crashes for our show today things are changing and please follow me on twitter at lauren lyster until tomorrow show you can give us feedback at youtube dot com slash capital account and lauren lyster until tomorrow have a great night. wealthy

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