good afternoon and welcome to capital like how i am lauren lyster here in washington d.c. u.s. president barack obama you know he may seem calm when he talks about the eurozone crisis and if you proof just look at some comments that he gave on the meeting with european leaders earlier this week. these are always the most dramatic reading because we're all short. of some sort of chore to measure. but behind the scenes the financial times is reporting there is more big fear about a euro zone meltdown in the administration and vice president biden is heading to greece amidst austerity marches on the streets there so how does what happens on

another continent become as important to the health of the u.s. economy according to the obama camp as another big issue like job creation well it may boil down to banks we asked though has the meltdown already started on u.s. soil and who is next meanwhile the threat to the u.s. economy is not just coming from europe this week we learned housing prices fell back to two thousand three levels but is it worse than the numbers show that would jobless claims rising again this week we'll look at a possible prices that could hit very close to home quite literally also is an oversight or lack there of blood more reason to worry about a bank or a fund melting down or committing fraud at a senate hearing on m.f. global's failure and collapse calls into question one of its regulators this the f.t.c. . unfortunately in response to the financial crisis here's the issue if you see in

my view. has been off on a series of turns which and the watchdog for the securities and exchange commission reports as these these downpours discover now of fraud by a hedge fund manager and never her suit it will get into it though let's get to today's capital account. reportedly u.s. president barack obama's camp both in his administration and on his campaign are freaking out about the eurozone crisis that's according to the financial times they use slightly different words they used more big fear as opposed to my terms now as the obama camp though probably should be is the bigger takeaway because there may already be casualties washing up on us shore from this crisis we know m.f.

global declared bankruptcy after making bad bets on european sovereign debt ok m.f. global was betting on european bailouts now as the senate is investigating how and why m.f. global collapsed possibly taking customers money with it held a hearing today we asked is this financial firm just the first casualty of the eurozone crisis also with reports of poor oversight are we sure to see more of this senators pressed m.f. global regulators today drawing a goldman sachs connection between both the regulator and the head of the firm john or resign also a report came out from the securities and exchange commission watchdog today it says agency staffers discovered massive fraud by a hedge fund manager but never followed now that manager interestingly was listed as one of the talked one hundred five people responsible for the two thousand and eight financial crisis according to time magazine so here to help us figure out

where we're really going to see this fallout is entrepreneurial investor and independent analyst middleton he's author of the popular boom bust blog as many of our viewers may know he's also a predictor of this euro zone crisis and has been since two thousand and nine so he is just the guy hi reggie it's so nice to see you in new york let's get right to it because the last time you were on this show you were saying that there is going to be a lean times for episode coming as a result of this euro zone crisis now since then we've seen the bankruptcy of m.f. global which obviously is not lehman brothers in size but this is the seventh or eighth largest bankruptcy in u.s. history so ok it's not lehman but is this just the first body to wash up on shore as a result of this euro zone crisis to the u.s. do you think. perfectly is the first party most likely many who could be other bodies interested in making sure that ok so then the big question becomes

what's the next body going to be reggie. well it's very difficult. you know my bet is the date of my crystal ball so. it's not my forte but i can take a very very good look at the president of course the past is always available for exploration. problem the issue of m.f. global was several for first you had speculation on it i had one of my readers this is why it was stated i told them it was an implosion waiting to happen ok two years ago that's for everything is going as planned that doesn't necessarily mean the end of quote was wrong and i don't but they never had a chance. right there trees out. there fruition because there was a run on the back not mention the media much as what happened m.f. global's was a bank run old fashioned. but not so old fashioned because the state of. the produce which called liquidity. requests the multilateral support and because

of their. want to be negative consequences of it. but that didn't happen with other friends in the us the research was that the clients lost their money basically money went missing. the reason you put it was because the front. end of quote was from sources being segregated. they were audited by. four. companies in a conference in this country and the world didn't mention the name. figure who the same for other. goldman sachs right anyway let me let me get in your really quickly because i want to kind of keep the conversation going you mention a couple u.s. banks i know you guys across crystal ball but i know you're an analyst i know you've been bearish on a number of both u.s. banks and european banks where do you see the most major risks. well they made you

still photographs put on from there. that were purchased with the system which so basically borrowed too much to buy stuff that's worth you know fractions of what they bought it for that's pushing pressure on the parents because the parents are worthless liquidity is drying up they don't trust each other this is an exact replay of what happened in two thousand and eight because in the lessons were. put in place and basically. down the road and the road is ending is it in here ok it's a dead end maybe but you know we have heard of dollar funding agreement with the central banks so i guess my question to you is you know this money is going to starve european banks more than the funding itself is this a signal that regardless of what's going on with these banks the fed and other central banks all over the world are just simply not going to let a european bank or a u.s. bank for that matter fail. well i'm not sure which choice with letting it fail and

there's enough effort if you don't know if you can accomplish anything so put enough effort forth you can prevent group events from feeling put realize this is in harry potter is not a magic wand that we have to prevent the european brain from feeling the stresses of the spirit of the world other parents and other central banks other countries and eventually other taxpayers so the distress does not disappear it's simply shifted possibly dispersed but there's such concentration of distress in the system because both so for and so while you could stress that. countries should move from one point to another point to a concentration just displaced so let's talk about some of the risk in us banks if the people i want to bring out produce in their nature of happiness and to ask a question because he has a specific question about if you already do and so stand same with us banks we know that the five largest banks account for about ninety six percent over the counter is exposure and j.p. morgan's including that of the biggest one but goldman in relative terms is much

larger been the kind of golden boy of wall street for a long time do you think that they are at risk from what's happening in europe especially what could potentially occur in france with a possible downgrade and with french banks like the. being exposed to greece and also italy. of course the goldman sachs the golden boys wall street room with the finance business is to follow one hand you have investment in finance and the behavior of marketing is a whiz at marketing i don't necessarily. carry the belief that they're better than everybody else he basically hired the same people from the same schools from the same professors creating the same assets with the traits same techniques so in the same city so what makes goldman different marketing marketing connections goldman basically went bust in two thousand and eight see the parallels from united states

they are very susceptible to any game and you are right they are from the perspective and proportion of perspective of the risk you spend so mistreatment concentrations despite that they've actually traded some of the group exposure. and get exposure and they did it right at the tail end of it would have the explosion right the beginning of the server and get questionis which was basically the worst possible i have tried so my site show the servant exclusive right as the response was going down. and that's most likely why it's. coleman is very very heavy leverage in france. and what instruments. and instruments i want to continue this conversation i just want to break down really quickly for our viewers i want you to hang tight there and we'll get right back with reggie middleton will have more on where this crisis is going

to unfold. all right it's time now for word of the day where i breakdown a financial term or concept for our very smart viewers but just maybe not the financial expert in our audience and this one maybe financial experts wouldn't know and maybe some just smart viewers would but it's a funny one and it's one we were just talking about or hinting at with reggie refers to one of the banks that he did you will often see this term on his boom bust blog if we can bring that up it is a. squid what is this squid i don't know what reggie middleton is a hunter you see this other places to here is on a business insider post that refers to the evil vampire squid right there ok so this is where the term actually originated in its modern day

usage that we're talking about here and that's why equine and the phrase in a rolling stone article in two thousand and nine he said the world's most powerful investment bank is a great vampire squid wrapped around the face if you vanity relentlessly jamming its blood funnel into anything that smells like money now to evie was referring to goldman sachs and that is what this term has come to mean and modern financial lexicon the one that we're talking about so what exactly is a vampire squid both are curious what it actually is is a small deep sea cephalopod found throughout the temperate and tropical oceans of the world the vampire squid is also versatile if a predator would a bite off an armchair the vampire squid can regenerate it now the idea is that this wicked has its tentacles everywhere to not only can they regenerate but they can spread everywhere so when is this chart of euro zone leaders as you can see

this in action all of these guys previously worked for. goldman sachs you have people like the new prime minister of italy the new prime minister of greece the head of the european central bank mario draghi so present and past leaders all making financial decisions in the euro zone all having come from goldman sachs now you have lawmakers today talking about this we heard in a senate hearing on the bankruptcy of m.f. global listen to this. the collapse in bankruptcy of american. history or a collapse of the current unfortunately that actually wasn't what i was hoping for you to hear but what he basically said was that the head of the regulatory commission is a goldman sachs alum as you will recall john corazon is he was not just the former governor of new jersey but also the former chairman and c.e.o. of goldman sachs for nine hundred ninety four to one thousand nine hundred ninety nine out a help explain in a squid metaphor how the tentacles are wrapped around humanity so to speak listen

to what nomi prins a former goldman sachs managing director was telling us earlier this week about how the firm operates it turns to be a voice that returns to be in relationships within the firm when these people leave the firm that are cultivated over years you know that started in universities it started with family relationships i mean there's so much goes into this this so much that goes into this squid analogy and metaphor so when you see the vampire squid appear in the blogosphere now you know we are not talking about kalahari we are talking about goldman sachs. and stick around still ahead here on capital account is the u.s. and for a lost decade or two for housing prices we'll get the answer for you with reggie middleton and first your closing stock numbers.

because we just put a picture of me when i was like nine years old i want to tell the truth. i may confess and i am a total get over friends that i love driving because he's excellent and pretty. he was kind of the jester day. i'm very proud of the role without you she has played. oh oh oh. you know sometimes you see a story and the scene so is it you understand it and then you glimpse something else here's some other part of it and realize that everything is ok you don't know

i'm charged welcome to the big picture. what drives the world the fear mongering used by politicians who makes decisions to break through get through to people may who can you trust no one. is you view with a global missionary see where we had a state controlled capitalism school sessions when nobody dares to ask we do our tea quest. more. welcome back you know the dark cloud of the eurozone debt aside what about what's

going on at home in the u.s. right here are americans are continuing to lose their jobs jobless claims out today showed last week four hundred two thousand were filed the prior weeks numbers the revised ones came out three hundred ninety six thousand now the bigger takeaway from these numbers is that toggles claims are up now two weeks in a row meanwhile americans are still losing equity in their homes housing prices this week we found from the case shiller index are back to two thousand and three levels as you can see right there now this index is the leading measure of u.s. home prices and home prices in twenty metro areas are down three point six percent from a year ago but is the situation actually worse than could we in fact be headed for another real estate crisis in some form well entrepreneurial investor again and independent analysts reggie middleton predicted the housing crisis back a few years ago so let's talk about what he sees coming now read you before we do i just want to call up one more question on the whole issue of the banks and europe

because you mentioned the issue of contagion which is really kind of core to this so can you break down and i know you can really bearish on b.n.p. which is a european bank but could you break down how that could then ripple and affect u.s. banks or the united states if something goes awry. in the show he supports the apparent run because most of its funding is from short term funding that he can't hold onto overnight deposits could disappear within a night plus the. mass of. his own investments in italy etc issues if you'd be in people's plus the socialist french system would go to save it till it out b.m.p. itself is roughly about the size of france g.d.p. and that's that's just. the large french banks like credit agricole a structured cetera if france calls out their bill and france goes with. which they

will they will guarantee you the form of illicit prescription was actually creating a credit rating which they should have lost already put the rating agencies very very slow and realistic which is a story for another time a friend who says that francis is aaa rating and goes bust nose. and so france and some french banks will have issues. u.s. banks one of which happens to be vampires. goldman sachs so there you see it you have you have a day like the m.p. parry about which is literally the size the g.d.p. of france then could totally bring down france or bring down its credit rating and then could affect goldman sachs so there you see that circle right there with that scenario how likely is it we see france be italy and a year or two. well it's my opinion that france doesn't deserve a aaa rating now. it's. you know the rating agencies one of the much much

more skeptical of rating agencies. lowered france twice and i think. the way i think is. somewhere around there and they have been much more accurate and much more timely then if you're willing to see. i identify the agencies as a farm and that shows a part of burning ashes florals turning it off as a great metaphor and a topic for another day that we are definitely going to bring you want to discuss i want to quickly get to housing though because you crunch your own numbers on housing and case schiller came out they said housing prices are at two thousand three levels used you don't believe or accurately reflects housing at all do you think housing is worse. housing. in a way you can see this better prices are lower because. most of the.

housing such as investor flips foreclosures orioles basically things that are dragging housing pricing down is purposely folks that are cliche but it's not because it's a bad it's that was designed to be not of. those those variables that i mention a very volatile and they were very volatile on the way up and on the way down. copper because it was about it actually gives you a much more rosy picture actually is the case on the way up in the bubble not pessimistic picture of good and actually was the case. there are good. when you have things out of the fear from their fundamental average and in order to have a functioning society you have to have a few versions of me so if prices. for ten thousand dollars is worth ten thousand dollars the price of one hundred fifty thousand dollars that's good

for the person who might have benefited from that sale but good for everybody else they can't afford it so prices have to go down in order for prices to go down you have to take the excess out of the system and government policy is preventing that because government policy doesn't want to consider. all that i think i want to tell you really quickly because so many banks still oni's mortgages are these just blowing up silently on banks' balance sheets waiting on a future recovery. they're already blown up let's just go ahead for the regulators to ignore the explosion and not only other mode which is good to see about how bad the. housing is just sitting on the balance sheets or yours you know they have. four hundred fifty thousand one hundred twenty thousand dollars of the one hundred thousand that house is not worth fifty thousand so it's foreclosed on it they still have one hundred thousand carolina puts it on two thousand dollars at most they can

recall forty five thousand. plus expenses and that's. how this can be given away well that's a huge loss a lot of risk in the system reggie which you know so much about and i appreciate you being on the show to tell us all of that was reggie middleton he writes a blog he's also an analyst an investor. all right before we go we've talked about banks collapse staying at the housing market now let's talk about what's going on where people have a little fun in restaurants maybe not all of them though i want to bring in our producer to reach us as well as shannon donahoe in the control room to talk about

this a london restaurant has just started charging a three pound baby tax not pounds in baby pound as in the currency it's a little less than five dollars now the restaurant says that this policy is intended for toddlers who eat but not as much as a child now this restaurant isn't alone other restaurants head band children under the age of six listen to what the owner says this move was a good one. you told me since the band business has been up by twenty percent or more such a positive regard for your e-mails for thousands of continue to write all over the one in favor of what we've done so well all right so you know people in london their customers are outraged over this baby tax but hey you know you pointed out it's great for business so are you pro or against a baby tax look if you've got to raise taxes and then you could have to raise them i would raise them i'm very conscious we have a problem restaurant imposed taxes right what the restaurant so bad for the rest of

us with a restaurant so for us to raise revenues to pay the taxes that are increased for the state has been raised actually general so maybe that's why they raise the but i think you're going to raise taxes anyway but are raising a baby start at that age and also they can keep it there from population increases which is a problem going people seven billion people it's a lot of money you could raise if they go to a restaurant and you know it could also help with overpopulation if they are so deterred by the baby tax shannen are your priorities on baby tax i think this might change but right now i'm pro i might become a little bit later it's like looking really. late not so much as i thought you would have been against the very fact. i don't know just too much someone will be in favor of. knowing you can be you can be pro baby and pro tax i think i would be both because i love babies i adore them but i don't taxing their presence at restaurants is a great way to make it a better dining experience for everyone and let babies pay their fair share i think

this should be carried over to airplanes but that's a little another topic because we want to get to another one let's move on because now is the time of year you know it's the holiday season it's time for shopping also a time for shop lifting it is increased by six per cent in the u.s. compared with last year i'm sure that's not surprising of course given the economic downturn but you may be surprised what is on the list of the top ten shoplifted items you have all sorts of things displayed here including elmo and should dell number five per few what else designer clothing isn't surprising about the x. brand body wash razor blades electronic gadgets electric items expensive bottle because of out all expensive cuts of meat how do you steal an expensive cut of meat i don't even i don't know. but the thing is how do you i don't see a problem with that i look at the list i don't see the powder you have your instant

toothbrush ok if you have cuts of a hole and you've got tickle me elmo and. i totally think there's a through line ok it's not to make you look good it's death to make you get lucky with the lady. in the me you got to get her a little you got to give her the show momma her five and you got to smell good with the axe and get something for your kids too with elmo shannon. i mean i grew four and i think you know you got to show the woman a good time there you go. these are all geared toward their dating and that a you know modern society where people are strapped for cash. that's a final word dimitri i don't know we're going to have to see what you think because that's all we have time for thank you so much for tuning into our show feel free to follow me on twitter at lauren lyster and give us feedback on the show at youtube dot com slash capital account we will be back tomorrow with a fresh so we have a very exciting guest for you on this friday will speak to peter jo set to speak

a little more broadly and philosophically about the financial system you won't want to miss and i am more lester until next time from everyone here a capital account have a great night. wealthy british soil. is no time to explain something to. hide the. market why not. find out what's really happening to the global economy with much stronger for a no holds barred look at the global financial headlines tune into cars a report on our cheap. emission free. education free

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