activist and a writer for the daily coast suggest the libretto. unfortunately that does it for now i will be back in about a half an hour but a lot of stories for you on our web site including a new look on the white house rules for indefinite detention and torture at all at our tea dot com now forget our you tube page r.t. dot com slash intersects. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and here are your headlines for february twenty ninth two thousand and twelve u.s. regulators are holding roundtable talks today about how to protect customer's money to keep it from basically being stolen this is of course in the aftermath of the m.f. global collapse we will speak to

a lawyer representing eight thousand and the global customers in the bankruptcy he says new u.s. regulations will not stop firms from going the way of m.f. global as long as they can go to the u.k. to take on virtually on limited leverage well tell us how m.f. global was getting around us leverage limits this way similar to a idea in two thousand and eight and why it's going on unchanged and credible reserve chief ben bernanke he gave his economic checkup to lawmakers today which meant a real acquaintance with republican presidential hopeful ron paul. something that i think would be a compromise that we could work along those of use. but first of all good to see you again because most people. that's always entertaining while in europe eight hundred banks hit the e.c.v. for liquidity the longer term refinancing operation for five hundred thirty billion euro will fill you in on the easy money makers of the central banking gene

meanwhile bank of america find yet another way to cash in on taxpayers and j.p. morgan c.e.o. jamie diamond find yet another way to cash in on attention as a drama queen or king i guess soundings gets a friend on regulation wall lashing out at us the us media will tell you what we think let's get to the day's capital. the u.s. commodity futures trading commission is having roundtable talks they wanted today gone tomorrow to talk about how to protect customer money in the aftermath of the n.f.l. o'boyle collapse you know remember the eighth largest bankruptcy in the u.s. where they are still looking for

a reported one point six billion dollars in missing customer money the firm run by former goldman sachs c.e.o. senator also new jersey governor john corazon well james good to less is our guest he's a lawyer representing eight thousand and that's global customers in the bankruptcy proceedings pro bono mind you so he tells me and he has told me that any new u.s. regulations won't be very effective as long as firms can just skirt skirt u.s. regulators by going through the united kingdom where they can take on essentially on limited leverage in the first place this was what m.f. global was doing this was what he was doing back in two thousand and eight this is what lehman brothers did through its english subsidiary to notice any similarity all of those firms imploded now bear with me because i have to break down a few things so that you can get the most out of my guest breaking down all of this first you need to know that there is reportedly no regulation t equivalent in the

u.k. or reg as it's known so read t. is the federal reserve board regulation that governs customer cash accounts and the amount of credit the brokerage firms and dealers may extend to customers for the purchase of securities now according to regulation t. you may borrow up to fifty percent of the purchase price of securities that can be purchased on margin this is known as the initial margin but where really comes into play in this story is with regard to really hypothecation of collateral first let me explain what hypothecation is this is where a borrower pledges collateral to secure a debt but the bar retains ownership of the collateral but it's controlled by the creditor. who has the right to take it if the borrower defaults so let me give you a really simple example because i think it's a little confusing to explain on t.v. so say this is the borrower this is the bank so the car goes to the bank and they borrow money to buy a house they keep the collateral even though they pledge this house as collateral

to the bank but the bank doesn't keep it okayed the borrower lives in the house and they keep it however if they default on their mortgage the bank can claim the house so that's hypothecation the bank as i populated the house as collateral now what if this bank pledges this collateral this house that the borrowers living in as collateral to somebody else that they are borrowing from or to cover trade that sort of thing that is really hypothecation and collateral can be papa katydid again and again that's known as turning so that is really hypothecation you need to know it now let's get back to reg. it says and do us a prime broker hypothecate assets to the value of one hundred forty percent of the clients liability to the prime broker let me give you an example and by the way big thanks to this example so if a customer has a closeted five hundred dollars in securities and other debt deficit of two hundred dollars there's three hundred dollars in equity the broker dealer can read

hypothecate up to two hundred eighty dollars ok for one hundred forty percent about two hundred dollars in the u.k. however there is no limit no statutory limit on the amount of money they can be right re hypothecated a broker dealer can really hypothecate all the assets deposited by clients one hundred percent of that five hundred dollars securities and this is where the plot thickens now let's bring in james good to list president and co-founder of commodity customer coalition and thank you so much for being on the show because i know you're in town for this roundtable and we feel very lucky and gets talking about this issue thank you. yeah so let's start first thank you for brain issue to life because i was tweeting about why is the u.k. so much tougher on banks than the us they claw back bonuses they take away knighthoods and you said hey you know talk to me when they have some kind of a quick line of regulation t t so you've been focused on this m.f.

global case great doubt how this whole issue comes into play with this two hundred million dollar margin call with j.p. morgan. so basically i'm a global had transferred a substantial portion of their assets into a sort of global u.k. subsidiary so we could take advantage of things like the absence of a right to. underscore zines watch. it was about thirty to one. on european sovereign debt for us ok and so then how did that and up in the two hundred million margin call and j.p. morgan. basically. this year there were concerns about greece defaulting. basically increased the amount of margin that was required to keep these positions and course i was utterly in love with it and rather than just reduce the sizes positions he wanted to keep the trades on and for which my. collateral from

anywhere that he had the firm prove it and they got it from customers to work with a locally ok let's talk about how publication allows for this so you mentioned they had global had transferred funds to its u.k. subsidiary and from what i understand it's very it looks it's very desirable for us firms to move money to the u.k. into subsidiaries in the u.k. to get around us regulators this is what am i thought global was doing right right in every us fight every major u.s. financial institution is doing every major u.s. financial institution is shifting their customer money to the u.k. to get around regulation you know so you know so just about every how do we know that. i mean that's a good question you know the. the people who you know of the existence of the existence of the system called the shadow banking system because it's done in the shadows so the way

a normal bank works is with fractional reserve one where is if you know you have one hundred dollars you could you know essentially nine hundred dollars ten times or a reserve requirement it is ten percent well with the shadow banking system it's all done with unregulated derivatives that are generally off balance and one of the u.k. there's no statutory limit on how many times you could cover it up so now thirty to forty one is a pretty common practice. for global financial institutions and none of us regulated. generally none of it shows up. on balance sheets or f.c.c. filings it's very hard for investors and regulators to figure out exactly what's going on right and this is the whole issue that is so much bigger than m.f. global but one thing i notice a lot of these firms that looks like they get around the customer money to the u.k. by it looks like they've basically put in a fine print and it looks like m.f. global did this it says you know we are there are people that had accounts and we

can use your money for hypothecation for rehab population so. does this make the case for m.f. global customers more difficult and does everybody need to be looking at the fine print of whoever they have an account with to make sure their money's not being moved in rehab propagated over and over again. quite frankly it's my belief that even if there are losses stemming from. us in the value of securities due to read about occasion that should not impact customers rights of recovery especially in this case for monies that were transferred to j.p. morgan chase the more it was the custodian of clients. they were also the primary lender global and they were clearing and settling the trades. you know how straight an operation because of this they had a lot of insight into the activities going on there and when they received. you

know several hundred million dollars in transfers that looks like it came out of customer money they asked for a comfort letter saying will you please sign this saying that we're not actually receiving customer funds the reason they did all this is because in two thousand and five there was a provision in the paper of c. code that was. providing for what's called a safe harbor which means if you are a counterparty accepting cash for the satisfaction of a margin call you don't have to do any due diligence. to ascertain whether that's a proper transfer or whether it's stolen money whether it's customer money or anything like that but the safe harbor does not apply if you actually know what's going on so our boy jamie diamond who is not a big fan of how much you get paid apparently parent we are is trying to hide behind this two thousand and five. at least three hundred forty million of customer funds i've seen some reports i think i have six hundred million or more of customer

phones here and they have a good back and in fact in the in the lehman bankruptcy. he took about seven billion of funds that were due to barclays that barclays that. you know put into. the bankruptcy process ok unwind this a little bit for me though because i understand the issue every have complications and firms moving their money to the u.k. to skirt these laws and you have all of these that all of this leverage and it creates all this the quality and that risk how does this underlying balance where i know the way that a bankruptcy was treated with m.f. global also plays a role in who gets paid you know dissect that for me and break that up for me how does this case where you have a couple different issues here so what we are part of this is. it makes a blow up or a failure of the firm a lot more likely so if you're thirty to one lab or if you have a move of about three point three percent against whatever you're you know

investing you're a marginal ok so you don't have any kind of cushion do to you know the leverage you know i'm a global basis goalie levered up their entire for and large fortune their customer accounts on one trade you know i mean they went all in on this one for a very very volatile trade due to. is there going to be a bailout is there going to be bailouts and bet that creates a lot of volatility in this european sovereign debt. so now the reason you know global customers are about and this is because they actually took most of my money to satisfy particles so in the future system. there has not been a shortfall in customer. bankruptcy in about seventy five years. there is a concept of a conservationist banker say it's never been violated there's very strict rules governing this and now m.f. global was trying to hide behind

a defense of our systems were so bad it was so chaotic that we didn't intend to use customer thought it was it was just an accident and they're trying to use that has been jailed by that i don't buy for one second. i want to continue the conversation i want to come back and talk more about how this case will work out in a little bit more about the shadow banking system and rehab population issue because it's a little dance for t.v. but it is so super important and i cannot stress it enough and i want to continue talking about it so we will have more we can get ulysses president and co-founder of community customer coalition. and still ahead if you thought bank of america debit card fees were a thing of the past think again we'll give you our three cents on how the bank is cashing in on one state's tax returns but first your closing market numbers.

you see a story. and then something else you hear or see some other part of it and realize that everything is. welcome to the big picture the same.

the emission free the bridge a should free zones for judges free the arrangements three. three. three legs. the old free blog video for your media project a free media. the bank . all right we're back with james good to is president and co-founder of the commodity customer coalition he's representing eight thousand people missing their money and that's global collapse he also runs a hedge fund so he is telling us all of the problems with regulation that are not likely to get fixed and will allow this to continue and possibly be worse so with

this issue we're talking about real hypothecation this is allowed unlimited amounts of real complication is called churning it's basically opening the door of unlimited leverage it goes on in the u.k. because there is no rule against it why is there no rule against it is my big question in the u.k. it's an absolutely huge money maker. for the u.k. it's one of the reasons that long term is one of the world's financial services because then every major financial institution is in danger in this practice. so they're really want to start you can do so there's really no incentive to stop because this is the moneymaker right ok i want to bring up was there he says is the cost of it ok they say that m.f. global is essentially an example an equivalent example to two thousand and eight of virtually unlimited leverage via the shadow banking system and which there are practically no hard assets backing the infinite layers of debt created above and

which when finally unwound will create a cataclysmic cataclysmic collapse of all financial institutions and this is because of the daisy chain of riyadh population of when that wind so my question to you i'm a global it's horrible the customers lost money it wasn't too big to fail it didn't bring down the system when it went bankrupt is there another a.i.g. out there and how would you even find it if all of this is off balance sheet and unregulated. probably i mean i think one of the. goals so to speak of the major financial institutions is to make sure that they take so much risk that if they win they're going to win big but if they lose they are going to lose so badly that they have to be and i mean we've seen this i think it sort of in this country is leading the collapse of long-term capital management when they were taking this kind of leverage and in a prime brokers of l.t.c. and were actually mirroring their trades which is one of the reasons the collapse

was so bad because it was you know everybody thought these guys were so smart that the brokers are like me too and that bad man you know the ultimate exposure for the financial system was the so great now what happened in two thousand and eight was many many many multiples bigger for l.t.c. i mean one thing that's changed we haven't done anything like outbreak and eight hundred fifty pages does nothing to address the core problem and it is the shadow banking system and so percent interest rates just enable why they enable that kind of money because when you actually have to borrow for leverage there's perhaps creating a market based restriction on how many times you would lever up when it's zero you know if i pay the interest rate you've got a. product important product this is this shadow banking system risk is kind of courtesy of the central banking regime i mean the whole system works together to to enable this i mean it's. you know it's essentially like

a drug i mean banks now you know lending it's not really a priority priority for them anymore i mean they could borrow from the fed window and zero they could say proceeds from that they can take their across a rapid shift shift them on a lot and you know invest thirty one and off alan she is a relative. a korean zero has j.p. morgan has over five hundred billion and we have was occasionally wow. let's talk a little bit more about john kerry thank you. if i don't get to this i'm going to i'm going to beat myself up there have been reports some sources told box news that there may not be a criminal case against it that there was some maybe shoddy accounting but it doesn't look like they can really pin him down on anything my question to you how is it possible that they could not build a criminal case against him it's not possible if there's a political will there's a case here i mean they were transferring. they transferred over three hundred million dollars on october thirty first outside of a global looks like three g.

morgan when they knew a bankruptcy filing what was going and they knew there was shortfall already and they're still sending money out the door i mean. i don't know what it is but how could he avoid having it pinned on him i mean shouldn't you is the c.e.o. be responsible. you write you should be responsible and you should be accountable but we don't we've forgotten those concepts in this country i mean any military officer worth his salt knows that you can delegate responsibility but you can never delegate accountability but those rules don't apply in our financial system and in corazon for example is obama's biggest fundraiser yeah i mean he personally contributed seventy thousand to this reelection campaign and bono another four hundred thirty thousand obama gave back to seventy but he kept the four hundred thirty so one of the things we're doing for c c c is we're asking obama to donate their four hundred thirty thousand dollars to the legal defense fund for clients who were our property and real quickly you mentioned integrate that why the heck is

j.p. morgan and all have it having its hands in all of these pots is this the result of having no glass steagall equivalent that's right and i mean the repeal of glass the eagles example the revolving door between wall street and washington ruben you know treasury secretary. led the charge to get glass to go removing the one over the city where he made over one hundred million dollars to get to basically sit there i mean as a reward. i mean glass steagall should exist i mean banks there are public policy is the whole deposits and to make loans and if they're going to do that then you could somewhat justified the bail keeping banks you know because he's a functioning economy needs a banking system yeah but if if they're going to sit there and borrowed zero percent from the they're going to make loans in very limited circumstances and they're just going to act like a giant hedge fund with customers money where the customers don't share in the upside and go to london and go thirty one leverage you know why are we propping

them up before we go broke with this yes or no answer are your customers going to get their money back you think they are right they will stand right there well thank you for being on our show to explain why they should and why there should be a criminal case against john prine and why you should be very afraid about the shadow banking system that was james could you list president co-founder of commodity customer coalition. all right before we go let's lighten it up a little bit something a little lighter than your money being rehired topic ated over and over and over again creating unlimited leverage and destruction or the potential for it's there and let's bring in dimitri kofi anna in the can and you're on the floor here in the

studio actually i don't know in the control room to talk about these stories which are actually incendiary on a different level so he thought they'd give america debit fees were annoying and i think in the past because people were so up in arms about them well think again if you are getting a tax return in south carolina because unless you state specifically that you want your tax return by check or direct deposit you'll get a bit of a credit card attached with these. two fifty for the withdrawal and a.t.m. old b. of a fan of dollars if you have to replace it more than once ten dollars for taking you know more than once dollars to close your account. ok evidently the state is doing this to save money this is b s bank of america gets to cash in on people's heart and money that they get back in their tax return this is absurd why don't they give this to a community bank let's bring. oh yeah cause they do this is just cool stuff.

morgan gets to make money off. earlier america was third on the list of banks getting money from the from the feds record facility during two thousand and seven the twenty third was over twenty billion dollars a day on average so it's absurd meme we talk about all the time these guys run a feudal system or cluster crowds all right you or i can borrow but they can take our lunch i mean it's crazy i just think it's very incendiary how it just there is no stopping them on any level they have create crept into every single aspect of lives to where they can even despite all of the and against them despite all of the anti banker sentiment they can still cash in on just average people's tax returns with five dollars here ten dollars there you know whatever fees to the merchants that you're using a challenge if you want to add anything go to a credit union and read your tax forms very carefully i think that i think the real

lesson to be learned here is read the fine print everywhere you look because that's where they're going to screw you let's move on to another banker jamie diamond is once again cashing in on attention from being a drama queen kind of like this. but you see what he just did hello. what do you do he blew a bubble gum while i was singing he can't sing. ok me i'm going reminds us of that character because he just seems like such a drama queen ok this he's of course the c.e.o. j.p. morgan anybody watching the show knows that he was quoted as saying this in the financial times at the company's investor day he said all the damned if we don't have a record profits for the next year or two when he was talking about regulation so down he's not worried about regulation even though he's been bitching about it time and time again that we've seen in the past and then he went on to criticize some of the members an audience aka the media saying worse you can't even make any

money i mean this really has no shame or humility we're digging it up yeah yeah yeah you're right he cries of riches whenever it isn't doesn't go his way and then when things are going well for him to gloat about it through the right interface we're looking we're facing i don't care for too good for the club owner i don't care who steal money from the big i guess what if i give. young people like i did yeah like i get that you're a factor because we were in there for working just as the public at all is garbage and. that's what they are at this point like you know what we really want to root for the crew we're going to steal money out of. that's we're going to do is that's . the thing that comes to mind there was a report that evidently the number of psychopaths in the financial services in wall street one out of ten are right here whereas one percent of the general population are psychopaths so to say i'm sorry but i feel like all of the evidence points in

fact that jamie dimon is a psycho social and so's lloyd blankfein is still junk or they're all social and this is just a lot ok and we're out of time the new good fellas that's all we have time for thank you so much for watching feel free to follow me on twitter at lauren mr give us feedback on the show at youtube dot com slash capital account and from everyone here at the show thank you for a walk. and have a great night. wealthy british style. markets finance scandal. find out what's really happening to the global economy with my next concert for

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