all right good evening welcome to the capital account i am lauren lyster here in washington d.c. european leaders reach a deal u.s. stocks surge but are u.s. banks off the hook for the eurozone debt crisis law not so fast we'll tell you why and why americans may have u.s. leaders to thank for their money being on the line and could bank of america be the first to go down three years after it got a bailout and despite help from the fed moving money around these days could the wave of bad mortgages and sovereign debt simply proved too heavy we'll talk to an analyst who called the fall of bear stearns the fall of lehman brothers and now has his eyes set on b. of a and the man who gave b. of a five billion bucks in a vote of confidence is reportedly throwing his support behind us president barack obama warren buffett investor is set to speak at

a chicago fundraiser for obama tonight as for the proposed buffett rule its fate is are less certain as the congressional debt reduction supercommittee remains at an impasse but is a deadline nears could the u.s. as a credit rating downgrade again i don't know let's get to the capital account. all right as i said european leaders reached a deal in the debt crisis that includes a voluntary haircut for fifty percent for private greek bond holders aiming to avoid of course a greek default it also includes more firepower for the euro zone's bailout fund stocks after the news so ored financial stocks in the u.s.

especially so for the u.s. banks exposed to the euro zone does this mean they're in the clear they from contagion i don't know here to help us figure it out though is reggie middleton he's an investor an analyst he called the housing crash he called the collapse of bear stearns and lehman brothers and he has been harping on the crisis in the eurozone banking system for years now and he's how it is eyes on the problems of one u.s. bank in particular in relation to it he also writes it boom bust blog dot com which is very popular and he's here to tell us what he thinks so thanks for being on the show but it's nice to see you again. thank you very much the pleasure seeing great so of course the big news since the last time we spoke european leaders have now come to a deal of course the haircut for greek on hold there is as i mentioned the ball and terry one part of that means and also an increase firepower for the euro zone bailout fund but the last time we talked you said that you were expecting

a lehman brothers times for when it came to the european banks after this news of this deal do you still expect lehman brothers times for in the european banking system. i don't see any change whatsoever if you take a look at what is important to the media. you have contradictions for instance as you noted the voluntary haircut i walk up to you when you. give me fifty percent of all your money. is into involuntary you know just think about it the implications are even worst because almost all of it head for swap for some which is protection contracts for protection of. third party. the european leaders stating that this would not be a credit event that will. default swaps if that's the case then you could default swap market is a sham and there is no protection if there is no protection then you have lost some

court left and right and we all know this is a very litigious country and on top of it anybody who supply these plans in the future system protection will price the restructuring sort of process that means they have just condemned already fragile market place shooting rates significantly higher and they did this by making a sham one of the c.d.s. market last summer was a show i made a very simple statement that statement still stands there is absolutely no way out of this without the destruction people have to lose money because there's no cap with it to support the provinces. rid of the fifty percent of the aged fifty percent haircut to be given so the group that does not seem to be enough to bring the creases in that is to a sustainable level right of course they were b. they were pushing for the seventy five percent of one point it sounded like i am not wanted for haircuts now you talked about the c.d.'s and everything that this brings up in relations to all of these credit default swaps but one of the things

we talked about too last time was you said that one of the problems for u.s. banks is that they wrote a vast majority of the credit default swaps against european sovereign debt so today of course we're seeing bank stocks for the u.s. so or does this mean they're in the clear now. the world. that i see. the is the international association i think this is the stance for europeans first spokespersons for european leaders said that they don't feel to be equated event i don't think any of them have any say so in it because most of these groups are for swaps. i'm negotiating between the parties i make a deal with you that says that you will pay if x. y. z. happens and you make a deal with me that you will not pay if you know you know it's p.c.t. happens we don't negotiate this what is there other european leaders because you're between ourselves if there's an event. is governed by the contract is put templates

. in just your industry except in templates but those templates are often customized so as to whether you're quoting him and i don't see where they have the specific say so but even if they did their teacher is going to come no matter what if i would have purchased a plan from someone else and then purchased could afford swap from you and pay you money for it expecting to be made whole if there was a significant before and there's a significant before. i have a beef with you it's just that simple and in that court just that simple you have a beef and now litigation is the big wildcard it sounds like i want to bring in our producer to me because i think you want to ask a question about that in the chair you hear. so when you talk about litigation two questions one what does that do for the c.d.s. market itself people start dumping c.d.'s because they become effectively worthless or do they they hold on to the victim if they can get somewhere and also what does that do in your view for the bond market for bonds that

a lot of people hold that are insured with credit default swaps that we see more field auctions that we see selling in this market because investors can't hedge those positions so they just sell them out right. yeah well it's a question of the. the c.d.s. market i'm not a c.d.s. streeter but i am very good of aviation and there's always a common sense issue if you pay for a contract now a contract is. going to mired in litigation it's worth less than it was when you know she paid for it so. again as i said earlier by making a sham out of c.d.s. market something to structure of fifty percent loss default without triggering. created i'm sorry an event of the fall you're basically destroying the c.d.s. market if you destroy the serious market and there is no way for the institutions the hedge cash will simply short the bonds or recourse of much much higher rate

for the class approaches another was. a lot but the european. leaders have done basically is they've destroyed an already significantly hampered an already fragile three thought they were paying higher yields before. or you could put much much higher yields now and the uncertainty that was there has been exacerbated it will lessen further into the future and raise you when you talk about the question i think you did a great job when you talk about this project all bond market and when you talk about this when it comes to the u.s. banks you've really had your eyes on one and not bank of america and we talked about how they moved a large portions of their derivatives books to a subsidiary that's backed by the f.b.i. you see insured deposit there was centrally putting u.s. taxpayers on the line for losses there but my question to you is what about bank of america makes you so worried. well bank of america.

unwisely i don't know maybe the voluntarily quote unquote as these other banks did with their fifty percent losses right voluntarily put this country in merrill lynch . at the behest of the government again voluntarily but they purchased obviously insolvent its missions that were very very large they were both the largest in their respective fields and one of the largest. in of itself is a litigation synchro you know. it's no reason we had to a country where it is done but in a nutshell they have litigation of the was through on top of occasion from a fundamental perspective they are mired in assets of the preceding. exponentially and even if they attempt to reclaim for recovery it's almost laughable because of the coverage they have with their mortgages and just. make them which is. which is overpriced property at the top of the bubble ok that is dropped to four

calls on certain properties. in two thousand and two thousand and eight i ran a study and i found that the bank of america. portfolio was approx the same its market cap. all of its mortgage problems away it was a moderately anymore it just took every mortgage problem way they still probably people about it so that. also means that they're essentially a distressed real estate company versus a pain you know you add on top of the depreciating mortgage yes it's just significant for the litigation on top of that and then you see workers. paid less and they were frequently what and then you know it was a negative purchase right there so much i want to get into you there because this ties in with all of our age market and i want to go in there and tap so i want to come back to you and couple minutes if you can just hold tight i we're going to go

to a break i also. i want to show for our viewers perspective because the derivatives of bank of america tie into this and we spoke a little bit about them in the transfer that they made i just want to show our viewers what think of america as the holding companies derivatives are as of june if we could bring that up because they were seventy five trillion dollars and you can see that when you compare that to global g.d.p. u.s. g.d.p. e.u. g.d.p. china's g.d.p. i mean putting that in perspective that is just a ton of money so i want to get back to you in just one second if you can hold tight and and we'll be right back with you. all right time now for word of the day this is the fun part where i can break down a financial term or concept for our very smart viewer but perhaps not the financial

expert in our audience so where it's because he should be the bearer of good news or low priced our associates used to looking nice for you to their work thank you for bringing me the word ok ok wow this is a this is a doozy we should have actually save this for all the wean if it wasn't so timely because this is kind of a scary one and we were talking a lot about its credit default swap as you just heard me and my guest talking about earlier that's one reason why you should know about it but another reason why it should be on your radar is the financial times reports it's been blamed by politicians for causing bigger ozone debt crisis and now politicians are seeking to take their revenge not just with the recent introduction of bans on some trading of credit default swaps but also in their attempts to ensure that any haircut on greek government bonds does not trigger a credit of that which you just heard my last guest talking all about and i also should tell you that credit default swaps played heavily into the two thousand and

eight financial crisis with the mortgage market which reggie and i were also talking about so what is the definition it is a swap designed to transfer the credit exposure of fixed income products between parties. so that it does not sound like it brings you any more clarity but i promise i have a really simple way for you think of it it is insurance and here is an example of how it worked during the housing crisis so ok people bought homes they bought a lot of them how did they buy these homes they took out mortgages what did banks do banks took those mortgages they've bundled and they sold them to investors and what's called a security. so investors bought bundles of those mortgages now in case something went wrong and best hers wanted to insure themselves so what did they do they went to a company like g.e. which everybody should know and they took out insurance on those mortgage backed securities and those are credit default swaps and of course the rest is history housing it tain't everyone needed their insurance to be paid on their credit

default swaps so a id tang's and gone bailed out and there are all sorts of people buying credit default swaps when maybe they didn't even own the same amount of mortgage backed securities in the first place but that's a naked c.d.'s and that is for an entirely different day but as we continue to talk about this more into our show as we get back with reggie middleton as it relates to bank of america now you for sure know what a credit default swap is. and you know go away stick around right here on capital count you're ready to talk about the mortgage giant countrywide will bank of america is still saddled with all of those foreclosed homes brought in on their books literally and not to mention tied up in litigation over them when we come back we'll talk to reggie middleton about what that means for b. of a and first here your closing numbers. you

just put a picture of me when i was like nine years old and just you know lived through. i'm obsessed and i am a total ghetto friends that i love rap and hip hop music and for. that he was kind of the jester that. i'm very proud of the world without you it's playing. oh. you know sometimes you see a story and it seems so please if you understand it and then you glimpse something

else hears you some other part of it and realize that everything you thought you knew you don't know i'm charged was a big issue. what drives the world of fear mongering used by politicians who makes decisions compelled to break through it sort of made who can you trust no one. soon view with a global city where we had a state controlled capitals school sessions when nobody dares to ask we do our t.v. question more. all right we are back with reggie middleton entrepreneurial investor and

independent analyst to talk about bank of america we got into it a little bit before the break we talked about the credit default swaps their exposure to the eurozone debt crisis and of course their acquisition of countrywide which saddled him with all of these foreclosed homes bad mortgages and litigation as well so i want to bring you back into the conversation because you were mentioning before the insolvency of bank of america and this is something you've been warning about since two thousand and eight so my question is why do you think that now is the time that this is going to reach a tipping point out if that's the case and this is what you're saying. because it's just a question from the size of bank of america before the break we discussed the courtyard acquisition making a purchase in my opinion were they paid less than zero for countrywide basically they had to pay to buy. the whole country likely to make it a felony acquisition also purchased merrill lynch which is one of the biggest

c.d.s. writers of their particular theory. and you can see where that got in the map of course of the u.s. banks can somehow wiggle out of credit of the floor event then the c.d.'s won't get paid out but it's a catch twenty two that someone's on the show i mean a very clear and simple term of the only out of this is that destruction when people have to do significant money to flow the capital in the same still stands let's assume that somehow through some miracle of financial engineering or fallen terry pressure that there is no could be fair and the c.d.'s don't keep it out that means that all these large banks that have so many hundreds of trillions of dollars of exposure. not hedge make it so bank of america goldman sachs c.e.o. j.p. morgan make it because their credit default swaps may i mean i could be because the

credit vent is the side of politicians somewhere in europe i doubt they have room somewhere so you're saying it is for him to take a train to their credit and then decided upon by politicians regardless of what the market is saying or what their reality is. that's what the politicians to say i've yet to be convinced of that but i'm just giving a hypothetical no matter which way it goes you know you don't have a fundamental basis for you know forty fifty point jump in the s. and p. five hundred monday things are not better they're not even the same they're worse than the road before they're worse than they were before so you say with this combined pressure on bank of america with countrywide with merrill lynch with all of this is going on kind of at a more macro level are you saying that bank of america is going to fail and the way that lehman brothers did. well i haven't read numbers in quite some time because there are bigger fish to catch in the sea but it's my off the cuff opinion that the

company green bank of america is either worth growth this is very close to the six hours that you see quoted on your screen it's give me basically i should be there. apparently you almost died in a flash were trading a lot higher six dollars of the street in triple digits just a couple of months before the collapse of lehman brothers trading at forty fifty dollars just a few months before it collapsed bank of america has been holding on by a thread there have a lot of work a lot of covert assistance but they also have much much larger problems than me from my perspective i'm just worked through the biggest a much larger god who the biggest problems in each industry wow ok so much larger part larger problem you say they're hanging by a thread if that's the case why isn't everyone out there saying what you're saying why is warren buffett given five billion bucks to. well result there which investor

i said the company could he's worth this one goes into preferred agree with special condition rates where he gets people for you would get paid if you go to be treated come into play stop that being said. from what i understand i wouldn't put the preferred either but you know it's one buffett. you know i don't want to denigrate if he's a. very successful man but you know i definitely disagree with their purchase i think there were other purchases that he made but you know that's what it's a trade this who says every trade and just quickly why are you out there saying what other people aren't. you know. very honest person and you. basically see what i see a lot of the pundits many of the media outlets a lot of the investors so the place to put the simply. not to denigrate many

investors but you know that's true i see it and reggie middleton we appreciate you coming on the show and telling us why you think that bank of america without all of the other influences that maybe some people they're going to have why you think it's essentially worthless and why all of this news out of europe the news of countrywide and what still exists there is all bad and you should believe that stock price i was writing middleton in our new york studio. all right so we have gone over some really happy stuff with all the bank. debt deals now let's talk about some more fun financial stuff so i have good nature here

our producer extraordinaire and also shannon dano in the control room to talk about berlusconi he's always in the news and the debt deal has just and all of these negotiations have given many more opportunities to hear about what he is up to and new wire taps that have been released of conversations between berlusconi and entrepreneur or. currently being investigated over allegations that he paid women to sleep with berlusconi. that's true that's true or nor is a basically. that's just more all of. it's going to all of these wiretaps the important part of the investigation for that is going to think what's really interesting i don't have a video yeah quickly we can show you know why berlusconi is so interested in these kind of endeavors just just watch him check out the prime minister or the danish prime minister and watch that. so you can see he walks by oh there you go as dexter

out can't miss the opportunity to see and slo mo ok. there he goes checking her out so no matter how bad is country is crumbling or how bleak the economic outlook is he does not miss the opportunity to check out women and sleep with prostitutes this is a guy remember this is why this is why we love him here he went to finland years ago if you so that he uses playboy charm of the prime minister who was a woman he said. lard ass so basically he has a real history in this regard i think. this is this is the hopes of europe's debt crisis. what is going to do with it so. there's that i just wonder if this is a bigger picture reflection of where men's minds just kind of always are no matter how serious situations are. and well unfair and on. and i don't know how this is so. there but

a lot of bernie madoff auctions. but this one is just kind of startling it doesn't surprise me that people bought his roll legs or some other very valuable items but someone spent a lot of money on fourteen pairs of his boxer shorts how much money did they spend to our books two hundred bucks yeah it was emotion and you know what i think because obviously look i mean this is when he was wearing them he was wearing this probably during the heyday you know when the cubans are coming over and there was a whole coke thing going on in miami that is that his place in palm beach so you know this is where bernie was sure. he was looking. i mean the make sense understand what he wanted to look about he looks who is great that's fantastic who would want the thing i would want to know if they just want to put money that's the only reason they see if they can get something off of exactly any opportunity to make a killing it's always surprising i've heard from people that the craziest things do well on e-bay is definitely fits into that category speaking of bizarre things that

you wouldn't expect as the world population passes seven billion there are calls for us to eat more in stacks to meet global demand for food i think we have a clip. but let me try one of these critters. so a locus this is done with so that's a rather unusual degree you know i think somebody would find the prospect of eating a bit disgusting. is what most. is this for real so you're asking we thought it was for real and it's for real on the b.b.c. they're saying this could be the solution for the global food crisis we've got to expand out you know you can't just rely any more on the traditional staples of human diet that we've been eating can consume for the past and present years now we have to we have to branch out and and what's really great there's you see the guy was eating chocolate covered scorpions. you know crickets and all sorts of the

beatles and the like that are on the record see remember indiana jones and he was there during during the castle do whatever that was the beatles there were adults casting and the most disgusting stand out was from a london restaurant honestly that's just gross and what it comes down to is when we have up to moms that's from the population out now we all have to yeah we have a way when people are having eight babies you have to eat things with eight legs and especially if the agriculture department is saying that food prices are expected to rise a lot more than they did in two thousand and ten i feel is driving this looks taste and that we have to our hotel room so we can hear how taste you think that looks we'll just have to hear about your experience when you go eat them because that is it for our show thanks so much for watching please follow me on twitter out more in leicester and give us feedback on the show at youtube dot com slash capital account nic you tube commenters and i and lauren was there and so next time from everyone here at capital account have a great night. wealthy

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common. for. each.