technology innovation. to. russia. here in the russian capital. today. the majority of. the political. junkie credit. for. the move was part of last week's deal to.

stay with. the latest banking scandals and why the average person's bank account teeters on the brink the kaiser reports right now. backscratcher this is a kaiser report you know stacy who can forget run d.m.c. mary mary why you bug and the reason i think about that is from mary shapiro as you see chair why is she bugging maxwell she's responding to critics s c c defends no wrongdoing settlement the chairwoman of the securities and exchange commission mary

shapiro defended the agency's record of settling fraud cases with wall street companies saying quote people won't settle with us if they have to admit wrongdoing because it opens them to liability in civil damages lawsuits but because the settlements often carry terms that require a wall street firm to overhaul their compliance departments she said there is a deterrent effect. mary while you have both been. there is not a turn effect for one thing obviously because they don't stop committing the crimes number two they don't over all their compliance department they bribe the compliance department as i've explained on the show many times when i was working at paine webber oppenheimer shearson alex brown the first thing it is is you brought the compliance officer that's how they make their money they're in every office that's the key guy to bribe number three she says although be exposed to

some kind of civil lawsuits forget the civil lawsuits about the criminal lawsuits we want to see a people in jail big capital punishment needle in the arm death death to bankers mary shapiro you lamed milk toast eating slob as she says people won't settle with us if they have to admit wrongdoing but look at across america how many people have died from being tasered because they couldn't respond to an answer because they were having an epileptic fit for example so they get tasered how many people are presumed guilty and murdered in america for failing to comply why doesn't she just whip out her taser and say admit your guilt jamie diamond yeah well i mean that's an excellent point everywhere else in the legal system they assume guilt until proven innocent they taser people to death on suspicion of misdoings they will invade a country and they'll kill a million iraqis for example on suspicion that there might be

a weapons of mass financial destruction then george bush will go on t.v. and make a joke remember the joke used to make is there a weapon newser weapon there oh i killed a million people innocent people in cold blood are to appear i'm george w. bush then there's mary shapiro she's saying that we we can't have at all give the impression that these banks are committing crimes by pointing this out we can only give them this fine where they don't have to admit being criminals and because we're. pray that they might actually behave responsibly but also here is a regulator who is supposed to be operating on behalf of the population not protecting the banks from civil lawsuits well if they admit wrongdoing to us then they'll be open to civil liability well that's not her job to protect them from their own crimes but this right she's going to be a regulator not an enabler. because you're just a mabel in the criminality therefore she is as guilty as the bankers therefore she is subject to the same penalties as the bankers once justice is served shapiro then

added that repeat offenders remained a problem because quote people have short memories on wall street they would have very very long memories mary shapiro if you executed justice in the way it has been in america all the way up until the last ten twenty years but what jamie dimon and j.p. morgan they got caught three times the last eighteen months breaking the law they got hit with a fine and they have short term memory because it's not their economic interest to have the memory of paying the fine when it didn't mean anything to them or they get the government to pay all the belt for them now if i went into a bank i held them up at gunpoint and i forced them to give me a million dollars now if mary shapiro came along after i got caught and said stacey give us one hundred thousand of that back now well you can bet i would have a very short memory and i would go in and rob another bank but if they had

kneecapped me arrested me thrown me in prison for twenty years i would probably not do it again. there is no deterrent for financial crime this is why it's a huge growth industry this is what the people in greece need to understand instead of trying to fight the banking terrorism they need to get their brokers license incur a few trillion dollars in debt and force of back onto the troika given the good greece then here's again the recent missed serial criminals at these banks consumers hit by high rates after deregulation municipalities a local taxpayers haven't always been well served when government officials put their financial fate in the hands of wall street banks they first talk about j.p. morgan defrauding alabama and wiping out a whole municipality of jefferson county for more than five years the u.s. justice the. hartmann has led a probe that has revealed wall street banks during the same years when they were sowing the seeds of the financial crisis were also cheating city states and school

districts across the u.s. and using the unregulated derivatives markets to hide kickbacks paid in the schemes about one hundred minus a policy some thirty six states were victimized by just one of the participants u.b.s. of zurich which is agreed to reimburse the communities for their current. hoops we got caught there's a few bucks leave us alone we have other terrorist activities to conduct and i can just see it jamie dimon to lloyd blankfein that some elementary school and fly by state america is shaking down a kid for his five cent milk money and your five kid you know that's the whole business model is shaking down whether it's taking them households making them kids taking down students taking down governments taking down the pentagon taking down the weight of that's not their business model ok u.b.s. first of all barack obama has been photographed playing golf with the c.e.o. of u.b.s. america so he's in cahoots with them u.b.s.

is also as we covered just two or three episodes ago they were involved in rigging libel rates. that's right. that's right u.b.s. they're involved in of course a whole panoply of financial scandals and frauds of course after they bought paine webber my old firm in new york and the money launderers in washington in london decided the there to be a good way to take switzerland out of the money laundering business and now we've got that money laundering that we saw in switzerland has moved to london and good old united states of america ok so again we've just said that mary shapiro say these guys didn't have short term memories i don't know what it is maybe it's the drink of the drugs they take on wall street i don't know has nothing to do with our not enforcing the law well then they go on to houston consumers were supposed to get lower electricity rates from deregulations instead max they pay some of the nation's highest prices partly because of bonds goldman sachs group recently sold

for a local utility the wall street bank marketed one point seven billion dollars of securities for houston based center point energy last month that higher yields the most of the company's similar long term debt according to data compiled by bloomberg joseph. chief executive officer of a new york based saber partners a former texan visor on stranded cost deal said they sold a triple a utility like a b a deal well yeah they're talking. which for the longest time were regulated as a way to keep the cost of business keep look the chamber of commerce in america would want the cost of energy for utility to be as cheap as possible to keep businesses growing but allowing the financial deregulated financial terrorist on wall street to come in and deregulate the energy business now means the cost of

energy is going to skyrocket along with your banking services so this is why the united states is being bled like a stuck pig just like greece is the winners being frankfurt of course and wall street and other centers ok let's stay on the story here about the energy market in houston the home of enron so they should know about fraud this sale by goldman sachs shows how deregulation in texas backfired driving up costs for those promised savings texans paid some of the lowest rates in the country before the changes according to the u.s. energy information administration now they pay the fifth highest electricity prices the policy shift towards competition has also misfired in other states including california of course the home of where enron defrauded all those grannies right remember the enron story they openly bragged how they were putting grannies into the freezer by manipulating the energy markets and instead of using that as a cue to maybe regulate the terrorism instead what the white house said wow this is

a great way to make money for us so we're going to let this spread throughout the entire economy every state and then should now be run by energy terrorists because it's an energy paradise called the united states of terrorism and we're going to make amends and of course our cold clocking dollars twenty four seven three sixty five us the way they love it you're unemployed your face down in the mud by your expendable ok let's speak about more about bankers and the control they have over the u.s. economy in every single sector the banker wants. between you and the service or the products you want to buy here's why bankers deserve capital punishment read these two stories this is from barry ritholtz and both stories relate to the volcker rule and the lobbyist that have bastardized the whole thing the volcker rule made bloated a week yes they couldn't kill the rule instead they are getting congress and regulators to render it morbidly obese and bedridden so i guess the american population will

have sympathy for those you know people who have to be airlifted out of their beds well they've turned the volcker rule which of course is named after paul a vocal former chairman of the federal reserve and is meant to bar financial institutions that are protected and subsidized by the federal government from trading for their own accounts that is it's pretty simple traders shouldn't speculate for their own personal gain using the money you and i pay in taxes because there's no deterrent in other words they hit area bankers committing crimes but instead of prosecuting them for criminal behavior they said well let's create another piece of legislation the volcker rule and by four it gets into the marketplace it will be bloated up to six or seven hundred pages which provide enough loopholes for bankers to completely forget about any of those new rules and just continue on as if they've always done and therefore there is not a turn there is no end to the amount of fraud being perpetrated by the bankers paul volcker is being mocked as being he's being embarrassed by this and that it gets

back to what barry ritholtz of saying you need a true deterrent you need a true to turn what is a me throughout history that governments and the people have been have been faced with this problem how do you deter people from committing crimes and there's been a number of systems that have been employed over the years one of those systems is capital punishment as barry ritholtz is suggesting well the other thing is capital punishment is just remove all their capital let j.p. morgan collapse let goldman sachs collapse if these guys cannot. compete without rigging the market without manipulating every single market they enter because mary shapiro is afraid they might face a lawsuit well you know take all the money away from them and what's the easiest way to do that raise interest rates as volcker did in the late seventy's early eighty's to get rid of the last generation of predatory bankers and set the stage for the american century the whole american nineteen eighties to two thousand period of growth it was done on the back of higher rates to weed out the financial

crux now unless that happens again the us and grace of portugal and all these other free out currency fractional reserve bank currency nations are heading into the pit of her face never thanks i thought to bring on the geyser bart thank you max don't go away much more coming away stay right there. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything you thought you knew you don't know i'm time her becomes a big issue. i'm

asked has a welcome back to the kaiser report time now to go to niceville florida and speak with karl denninger of market hyphen ticker dot org karl welcome back to the kaiser report oh you are max very good now karl denninger the f.c.c. this week defended its no wrongdoing settlements claiming that they were a deterrent to banking crimes your thoughts okama you don't really believe that it's just a tax i mean i suppose if you track something you get less of it but a deterrent please all that happens is it gets passed on to the cost of borers and other people doing business with these banks there's no deterrent effect yeah i don't understand this because these big banks keep doing the same fraud over and over again they pay as you as you point out

a tax basically it's fully factored into this business model it's not a turns at all how can mary shapiro get away with a straight face and saying that this is a turn in lost she is part of the problem which i suspect that's the case carl. well of course she's part of the problem looked at the entire reason the scam goes on just take a look at the primary do you a list and start locking up some of these people and closing these institutions down and then tell me how treasury is going to sell the rights to the primary dealers are i think eighteen or nineteen these are the banks that get in between the fed the treasury and the market they make a market government debt but they're given tremendous latitude. would someone argue they're allowed to openly break the law but let's talk about this new vulcan rule it started off with the best of intentions and it's been bloated now to five hundred thirty pages and people in last year laughing about it because they've already figured out how to do a complete end run around it it is not also the way you made the situation go i

think it's even worse than that max the there was a report out yesterday afternoon that the banks actually lobbied to change the rules to play games with what would be allowed and not allowed under this new rule and then at the same time lobby for european institutions in american institutions to oppose it so essentially they put poison in the water then served it up everybody drank it now we're all choking on it oh this is terrible well this is the kind of game that goes on in washington d.c. all the time and the fact of the matter is is that what paul volcker essentially tried to do was put back in place the structures that came along with glass steagall which was not a perfect answer but it did keep the banking system reasonably safe for close to fifty years right sounding the banks are just openly making a joke out of any attempt to regulate them and there's not is there any fall of

washington pretty closely is there anybody in the washington right now who is in a position to do anything constructive on this i know elizabeth warren was going to be part of some consumer board he got knocked down basically is there any seed of hope or are we just going to live in this clump takar see for the foreseeable future i don't see any possibility that that we get a positive outcome here until there is a bond market revolt and the federal government is forced to stop the deficit spending because it's kind of like having a chief of police who is a heroin addict he's not going to arrest his own course or he might bust some of the other drug dealers in town. but he's not going to bust the guy it's given him is junk all right carl denham very much in the bond market revolt we used to have something called the bond vigilantes these are folks that would sell the bonds if they didn't like the policies coming out of washington force interest rates higher and then this would somehow force better policies but those bond vigilantes had been captured by quantitative easing is not correct for the time being but you know

this was the same idea that everybody was weaving it over agree so the rest of europe and you can see how well that's worked out over there the idea that we can somehow suppress interest rates and play this financial repression game for a long period of time is a fallacy we did it in the one nine hundred fifty s. and this is where the belief by ben bernanke you know others that they can get away with it again comes from we forget that in the one nine hundred fifty s. we just got done leveling the production facilities of the entire west west of rest of the western world other than ourselves and so we were essentially competing with out competitors that makes this sort of game fairly easy to sustain but we don't live in that kind of world anymore now we have manufacturing facilities throughout europe we have them in china we have them in india and know there's a little bit of a problem now trying to play that same game that eventually the market discerns that what you're really doing here is taking twenty dollar bills out of one pocket putting it the other and claiming to be richer right so this tune touch on us again

so in the fifty's after world war two the u.s. was running huge deficits there but they don't want to war and they were the only manufacturing power left standing so there was room to work that debt off so when people in washington now say well yeah there's a lot of debt but not as much debt as we had in the one nine hundred fifty s. and that was no problem so we can keep running debts but as you point out now there is a much more competitive landscape number one number two you didn't have the bank income tax or c. in place back in the fifty's it was still regulated under the reforms they came in under f.d.r. so that the endgame here if the the bond vigilantes. as you say eventually will come in and restore some order but at what point will be the trigger karl in your mind think to suddenly the game is over on this bubble what what will be the trigger i think you're seeing it now max the look at what's going on with oil prices is just one example people like to write this off as natural market forces in the saber rattling was

a random things like this but there's more to it than that when you get down to it what's happening is that people are saying you know what we don't believe that this recovery has legs that this is real that would you know people are becoming you were to the idea that all we're doing is blowing one bubble to rescue from the last bubble and so as that kind of mentality takes hold people say well you know all trade short term in the equity markets are all do this and that but what i won't do is form capital and build businesses because there's a very long lead time involved in doing that sort of thing and if you come to mean you say girl i want you to invest in a new enterprise and i say well you know i have to be able to reasonably think i'm going to be able to run this company for five or ten years in order to get a return but look at what we have going on here the federal government is spending money like it's water we have a nine percent increase roughly annually in the cost of medical care in this country in another ten years i'm going to be bankrupt i can't possibly make an

investment under that paradigm so i don't and as a result we have the situation we're facing now ok it's not a case of diminishing returns the money is being printed to balance the banks mythos now forcing oil prices higher which is coming right back and causing the economy to shrinks now it's a complete no where with three hundred sixty degree trip to nowhere's ville let's talk about london for a second because most of the biggest u.s. banking crimes happen they go through the city of london we recently cover the story about banks manipulating the library rates which again goes through london like a id lehman brothers made off and then. global they all went through london as the nexus of global financial fraud have you followed the libel rate manipulation story what are your thoughts oh it's not just libel or there's a nother situation here with young lawyer who or that is brewing up out of canada there apparently was a an allegation made by a whistleblower in the canadian banks and indy implicated some american

international banks as well so this sort of game appears to be very probable and the dia allegations if they prove up are going to be very damaging because the purpose behind us of course max is to try to move the swap instruments the various credit default instruments into the basis wops that are out there you're talking about multi-trillion dollar markets if you can move the rates by a couple of basis points you can make a billion dollars in an afternoon for a lot of people have to understand that in a world with seven hundred trillion dollars and the relatives are a libel rate that covers three hundred fifty trillion in transactions or the four x. market that i think some to four trillion dollars per day if you can move these rates even by one basis point you're talking about gains of billions of dollars booked immediately and if it's completely manipulated of course that money comes from the general economy which could have gone toward creating jobs and manufacturing now

one of the other bubble situations we see arising now in this bubble is this economy is nasdaq being pumped up again we've got these social networking sites in that facebook coming big i.p.o. hundred billion dollars mark zuckerberg a test tube trillionaire billionaire thirty billion dollars your thoughts and says zero max short it. we went through this in the one nine hundred ninety s. i saw the same thing going on tell me how facebook on a durable basis makes money to go facebook is inherently nothing other than a delivery mechanism forever ties ing when you look at the the value of. the advertising that is run facebook to mine it's a big fat goose egg so ultimately the value of the company is zero ok what does it take us out of the argument here and now facebook they get away less dollars per user than a fit then a google does but they really haven't really pushed into advertising as such

they're trying to build that base of a billion users first and secondarily when you look at their partners like zynga which has the popular game farmville they're getting into the currency business or the virtual currency business where people are four hundred bucks buying virtual currency to play games that allow them to buy virtual stuff like virtual tractors in the case of farmville or virtual strawberries so this there is obviously a huge markup on using your hard earned money to buy virtual strawberries but that's a profitable business is not a sustainable business it's the virtual currency business and virtual marketplace business is it isn't real or isn't pure puffery carl it is pure nonsense it's i mean i actually do like to buy some virtual sex. because i like you but not like that if i mean you're a nice guy and i know nice fellow they're very nice place to live but i'm not sure

that proposition really has got me thinking about getting a plane and flying to florida but i appreciate the offer i just don't understand you know that the whole concept of online gaming is of course been a profitable business for quite a while but the idea of buying virtual strawberries in virtual tractors makes absolutely no sense to me what i see is the difference between google and a company like facebook is it google's primary model used advertising that's what they do they attempt to link your be a viewer online to what you might want to purchase and then. display that is advertising to you facebook is primarily a social network it is a way to draw people together and then they're going to try to mine the data and there is a minefield there in that if you are taking information that i am sharing with my friends and using net for advertising purposes to display things to me and to my

friends the danger you run into is that i begin to see this is an intrusive invasion into my interaction with what i believe is my social circle my private interaction with my friends and i say you know what this doesn't have benefit to me this has cost and when you hear the stories of the government mining this data or for example health insurance companies start buying information like this things become very dicey and i don't believe that there is a business model your ultimate lee that relies on people giving up information for no tangible benefit to them all right let's say on the i.p.o. does we'll talk to him about it in the near future around a time karl denninger thanks so much for being on the concert report thank you all right now going to do it for this edition of the kaiser apart with me max kaiser and stacy herbert our thank my guest karl denninger you can find karl denninger at market hyphen ticker dot org he has sent me an e-mail and kaiser report on r t t v dot ru you can follow me on twitter as almost twenty five thousand people how are

the next time max keiser thank.