easy to. see. why from studios here in central moscow this is r.t. with you top stories now humanitarian aid enters the syrian city of homs officer government forces push the opposition from that stronghold. local support the rebels are still in the area and still counting. from those from presidential hopeful vladimir putin says an energized opposition helps the government response to the public mood of rejects calls for an early parliamentary election. because

the majority of e.u. nations saw the long delayed deal to make economic discipline compulsory critics fear unrealistic expectations will hit struggling nations i'll be back with some of those stories in half an hour from now and meantime financial headlines from across the atlantic voy is the latest edition of capital account with more on this start. good afternoon and welcome to capital account i'm laurin this year here in washington d.c. and here are your headlines for march first two thousand and twelve federal reserve chief did back on the hill today delivering his report card ben bernanke he talked of monetary policy economic forecasts and headwinds they're coming here to be will pick up gradually as these heard when street supported by a teacher knew where he should have a highly accommodative stands for monetary policy speaking of will look at how even the failing marks of central bankers and other economic decision makers get glossed over by the mainstream media ultimately forgotten in the public report card making

mr bubbles sound like a good legacy. the way. i feel. great credit default swaps will not be paid out to him close bill gross like it to a flood protection insurance policy that failed to pay out in the event of a flood so is it because decision makers are really worried about another a.i.g. type market paralyzing counterparty risk scare or is it about protecting the best interests of c.d.s. writers this time around and regardless of how you take your leverage we'll delve in delve further into one more way that the shadow banking system gets around capital requirements and acquitted restraints by using something called really hypothecation we'll break it down and another eurozone crisis meeting today euro finance ministers approve the bailout fund to raise money for greece's bond swap

reportedly in brussels for a summit of e.u. leaders but do you ever wonder what policymakers are really doing in the never ending string of debt crisis meetings we'll tell you when let's get to today's capital account. all right ben bernanke he was on the hill talking monetary policy today so let's talk about bubbles i've got some on set so we can be reminded of how big they can be blown up and how. damaging they can be when they are pop now when it comes to making big bubbles and then watching the economy implode when it does op

no one did it better perhaps for longer either than alan greenspan during his tenure as chairman of the fed from one thousand nine hundred seven to two thousand and six so much that he earned the nickname alan bubbles greenspan there's a headline from the new york times about mr bubbles from two thousand and five one reason well he cut interest rates to one percent in two thousand and three and two thousand and four many credited his easy money policies for creating the housing bubble and he's also credited by critics with contributing to prime crisis and the bus that it was look at this tour reportedly packed house in a speech back in two thousand and four when interest rates were still super low he said adjustable rate mortgages might be a better deal for homeowners let's pull out some quotes he said that americans preference for long term fixed rate mortgages means many are paying more than necessary for their homes he said also to if we could pull out the next line of that. despite rising debt levels of bankruptcy filings it appeared american

household finances were generally sound and he said that low interest rates and surging home prices had given consumers flexibility to manage debt now after recommending all of that he went on in the next few years to raise interest rates and that continued for a few years and we saw how that all turned out with the subprime mortgage crisis so after he gave bad advice as i said he began raising rates and then the rest is history now continuing on he was also opposed to regulating the then burgeoning derivatives industry along with larry summers back in the late ninety's look there they are in one thousand nine hundred nine the committee to save the world now time later progress has been on a list of twenty five people to blame for the financial crisis and in congressional testimony greenspan revealed his thinking on regulation was flawed. i made a mistake in presuming that the social interest of organizations specifically banks

and others for such is that they were best capable of protecting their own true holders. bubble in a pot to go past for a few years past the financial crisis in greece then is invited on to mainstream t.v. to talk about the economy the country's credit downgrade all sorts of things and as our next guest says even in late two thousand and eight you said people in the street were applauding greenspan's presence the media fawning over greenspan's book so what's that all about and who's really to blame as a comedian danny schechter author and blogger at newsday sector dot net is here to tell us he's also filmmaker of plunder and the crime of our time danny it's really nice to see you thanks for being on the show. and thank you i think you're doing a great job here and overall the people talking about business on television thank you for the happiest and the most incisive program. maybe you're not a ph d.

maybe you're not a ph d. economist makes it possible to do it you know that's a great point that's a great point you wouldn't be the first is made of but i really about a ph d. in economics but i really appreciate those very coming from you danny with a friend of this topic now that you've been writing about here you wrote a really good blog post about best and you know despite a lot of the reasons why you would imagine that greenspan's image would be tarnished reputation would be tarnished based on a lot of the evidence that i just laid out you make the case that he's still highly respected and has been bond over by the media so first layout how you come to that conclusion that he still highly respected you gave a really good personal anecdote in your in your story i actually i was going down the wall street actually to start filming my movie plunder and i had to take a little quick diversion into a borders bookstore a call of nature and all of that and as i was leaving there was alan greenspan himself leaving lets me and the two of us walk down the street together my crew was

shocked you know thinking like how does this guy know everybody you know that span actually autographed a dollar bill for me it turned out to be a federal reserve note which is what our dollar bills are not backed by any particular currency or gold or anything but you know he was supported in the street because he was perceived as sort of a savior of the economy and that man had more positive coverage almost than anybody in his status he was called the maestro because of his alleged brilliance the fact that he was married to an n.b.c. correspondent that he dated barbara walters i'm sure had nothing to do with his popularity in certain elite circles but what is not reported thin is his the deli. to a cult run by on rand who is the author of the fountain head and the author of atlas shrugged who was a believer in no regulation ever who believed in privatizing everything

who is actually a free enterprise or who says idiology has been adopted almost totally by the tea party and by the right wing political candidates will get your money and the support of yeah let me get in there because that's actually a question i had because and rand's philosophy and writings are often kind of synonymous with real free market capitalism now being the head of the federal reserve and setting interest rates or even having a bad bit that interest rate that all doesn't exactly prescribe to that kind of free market capitalism in a true free market the market would set interest rates so how does that jibe with what you're saying about alan greenspan is just one more contradiction you know in a story that's very tawdry you know. called him the undertaker because of the way he dressed as a very dour person always lugging around a big briefcase as if he had all the world secrets in it but you know he finally

admitted he was wrong not only about regulation but about the degree of fraud in the market place back in the early two thousand there was another fed gov graham which you know basically was pleading with him to do something about the subprime mortgages and all the fraudulent mortgages that were out there and basically greenspan did nothing he didn't take it seriously and so he actively was complicit in this crime against america's homeowners and the american economy which led to the collapse some years later do you blame getting first and foremost in mainstream media for what ends up being a pretty respectable portrayal of alan greenspan in the end. well you know what's interesting to know first of all is the mainstream media is part of this whole system first of all stake in billions of dollars in advertising from financial institutions and it you know it it also pays its own the media pays its own

chiefs like bankers giving them you know big salaries three compensation big bonuses and the like they had then a fire with and they're part of the culture and it's a new book out lauren called the pirates of manhattan which lists all the investments in media companies by mutual funds in other words wall street actually owns and controls most of the media but they don't disclose it they don't investigate it they don't reveal it so you have a system here which the media is one wing if you will well street is another way and the together they fly to get it mostly first class war and i thought that with one of the really interesting thing that you pointed out was the amount of share if anything any account any of their own by mutual funds or institutional investors so you think if you have experience in that afghan and u.s. markets are you think that it's directly influence is the way that wall street and

it business is covered. well look it's an industry filled with conflicts of interest i don't know if you saw the oscars but one of the p. persons interviewed on the red carpet was none other than the chairman of the disney company the disney company of course own c.b.c. that was presenting you know the oscars so you know they're all sort of scratching each other's back and so is promoting using media to promote and not being critical not asking the really hard questions until the system collapses and then they point the fingers at others they say well look everyone was doing it everyone was involved in these mortgages therefore no one was doing it therefore no one is responsible and that's that's their line and that's why we've had so few prosecutions of c.e.o.'s that were you know need deep in all of this corruption and all of this fraud. what we need today is not a nother bailout we need a jail though you know of the people who are responsible back in the s. and l.

days of the s. and l. scandal seventeen hundred bankers or banks third went to jail and most non of going to jail now now i know and that's a bit of a change and we talk about daily on the show why had it is and why the political will seem to have disappeared but back here example with something like the oscars i mean i can understand it your view that doesn't seem as as detrimental to me as as real issues that in that impact the economy or impact you know a lot more things then whatever the author is entertainment so actually let me ask you about this because we had a guest on yesterday who is the bankruptcy law he's an attorney and he's representing eight thousand m.f. global customers who lost their money or his money has it turned up yet and he's been very critical of j.p. morgan throughout the process and he's done mainstream media interview rounds being critical of j.p. morgan throughout the process and he told us that he was told by at least one mainstream media channel that they had received a call from j.p.

morgan who said we're going to pull our ads you can't have this guy on does that jive with with real stories that you've heard in real examples because i thought it found that shocking. i think it does but you know most people in the media have what i would call a built in radar they know how to push an issue they know where the line is and how not to step over it so a lot of the censorship that takes place is really self censorship it's in forced maybe by their bosses knew really by someone from the outside calling and it's not really done so blatantly but i wouldn't be surprised if it was that was just a report yesterday that there will be no criminal investigation and m.f. global they can't quote find the evidence you know how much a billion dollars has disappeared they can't find a what actually happened to it so it's unlikely that john course zein or the other executives in the company will be prosecuted yeah no i know we've talked about that

as well so you think that it's not as direct as the example that our guest gave but it's maybe a little bit more latent although those examples certainly it seems to occur let's switch gears now because i want to just stick on the theme of these economic policy makers because we talked about alan greenspan but let's talk about it a little bit more broadly because people like larry summers were right there with alan greenspan saying reparative shouldn't be regulated and can't be geitner i can remember you know two years ago danny when i went to the hill and seemed like once a week there was a hearing where lawmakers were saying why shouldn't you be fired on you know being at the head of the new york in having the new york that tell a i.g. to give counterparty one hundred cents on the dollar and now a few years later it doesn't seem like any of that matters what do you attribute that to. well guys who work for greenspan and you know if there's a quote back in two thousand and six telling you know geithner telling greenspan how much he loves and respects him you know so you know these crimes are part of

a whole gang if you will unfortunately it's a gang that couldn't shoot straight larry summers is now being considered it's been reported as the next president of the world bank and other words he seems to be on the east. it seems to be on a track to failing you know failing upwards quickly you know another words you use screw something up and you get rewarded for it and this is what happens a lot yeah i can only get a story really quickly though just i guess that very fact and i want to know why you think the public park at their crimes. because you know me the media practice is amnesia it doesn't offer a context and background it doesn't remind people it doesn't connect the dots as a result people say get what happened yesterday yeah i think that's a really great point to end on danny schechter thanks so much for being on the show we're going to call your insight on that and the media's role as you are the news dissects there after all that was danny schechter author and blogger and you say that there dot net and still ahead we've brought back the word of the day and it's

here for another round of read hypothecation we want to drill at home to make sure you really get how important this topic is and get it down but first closing market numbers. free. education free. for three. three. three. three. three brochures video for your media project c.e.o. gondar teton com.

all right it's time now for word of the day where we break down a pancho term or concept for our very smart euro but just maybe not the financial expert and given this headline i want to show it to you m.f. global collapse problems clash over collateral we wanted to revisit the issue of collateral and the read hypothecation of it which is key to this story of how and why i am a global collapsed i also talked about it yesterday but i really want to hammer it home to go. as it is complicated but we've got to know it's important and it's really hypothecation so what is it let's take a look at the definition it's the practice by banks and brokers of using their own purposes excuse me for their own purposes assets that have been posted as collateral by their clients now invested goes on to explain a little bit more for us that in a typical example of pop occasion securities that have been posted with a prime brokerage as collateral by

a hedge fund are used by the brokerage to back it's own transactions and trades now while have provocation it notes was a common practice until two thousand and seven became much more wary about it in the wake of the lehman brothers collapse and subsequent credit crunch and two thousand and eight and two thousand and nine but some people like our guest yesterday who was exploring and defending clients in this and the global case for bankruptcy said that it's still a common practice today i should tell you has a hedge fund and i'll tell you how it works now the investor pedia explanation went on to explain that in the u.s. regulations like t. say that collateral buy broker dealers is limited to one hundred forty percent of the loan amount to a client that's how much they can populate so here is how it would break down for a client if a client has five hundred bucks and securities two hundred dollars is their debt deficit three hundred dollars in debt equity then that means that that broker can use two hundred eighty bucks of that collateral one hundred forty percent of the two hundred dollars that is owed here's the clincher though in the u.k.

what are the limits there are no limits on real hypothecation none ok they could read hypothecate all of this money that a client has there so all of the collateral rather so what i want to explain what this looks like in a really simple way that everyone can understand even though in a typical example every hypothecation these are securities that have been posted with the prime brokerage as collateral by a hedge fund i'm going to use a much simpler example a mortgage and a house because it's a lot more relatable for people to understand how this. works so let's say we have a borrower they buy a house they take out money from a bank or something to get it so they take out a mortgage and they post that home that they buy as collateral now they stay in that house but if they default on their mortgage the bank can possess that house because that's the collateral so the bank what are they doing here they hypothecate back collateral if we could move it ahead and show what that looks like so it's going to take that even though there are stays at it so now guess what this bank

can do they can really high propagate that same collateral to someone else to back their own trades or their own positions if we can move ahead so that same collateral but now it's a shadow because there's only one of those houses right so this is a shadow they catered to somebody else well remember i said there are no limits to real hypothecation in the u.k. now this firm can post that collateral to somebody else to borrow more for whatever and it gets free hypothecated again and that collateral gets we have propagated again and it is a vicious vicious cycle ok this allows banks or brokerages to take on. on limited leverage well creating liquidity to give you an example by two thousand and seven banks receiving four trillion dollars worth of funding by rehired but they cation had one trillion dollars of collateral in reality backing up ok a lot of money created if it sounds like fractional reserve lending to you which is how banks expand the money supply it should however this allows prime brokers to become

defacto banks but completely unregulated now because we hypothecation is reportedly so super profitable for prime brokers many agreements provide for us clients assets to be transferred to the u.k. subsidiary to get around us regulations now this was in m.f. global's customer agreement for customers trading in cash bodies futures and a bunch of other options and futures it said that they pledged to. hereby loan or pledge to grow. in writing the global to write excuse me in accordance with the click of a law to borrow pledge pledge transfer hypothecate re take a loan or invest any of the collateral so there you can see how this was going on and global in allowing them to lever up in the u.k. through their subsidiary which they did so given all of what we just talked about and the additional leverage and temporary liquidity that can be created through this shadow banking process now you understand why for example at thomson reuters

and alice and up with this considering that real hypothecation may have increased the financial footprint of euro zone bonds by at least four fold that a euro zone sovereign default could be apocalyptic and now you know what real hypothecation is. are right before we go let's bring. in the newsroom and shannon dunn know in the control room two. stories that we that caught our eye so politicians we know they don't talk shop all the time hot mike scott this conversation maybe you remember

between john boehner and joe biden before last year's state of the union address. so. right. now the only reason we have one center of. the world with your point. there's no talking around off so now we have reported on all of these meetings all of these eurozone debt meetings there is another meeting every day it feels like well now we can welcome some insight into what they're actually doing a german finance minister. was caught playing said doku during a parliamentary debate on greece so i'm going to open the floor comments how how prevalent do you think this is is this what everybody is doing is this why the greek talks are still long when they go on just the fed him he's actually been one of the few leaders in this in the euro zone crisis who seems to be who who seems to be acting in the national interest he says be taking a german line which is i think is fair and he's he's going to really hard work has

been doing a good job and you know what if these guys are smart of bush of those who is even a fraction on was far enough i would be shocked so you know i don't blame him because there's a bunch of you know what my case of the war on terror but i only said are you going to smart look at c.n.n. center blackberry see this is this is her multitasking how do you like it don't you understand i don't think she took it well that's that's good that's not for. she's a smart as well as you think i cannot believe that you're taking his side ok this i just have him eyes is bureaucratic inefficiency or he he's like the he's like the wrong swanson from parks or gratian he's in the system and he hates it the guy who are going to hate him and he's got all the power so he can just sit back and place it ok because at the end of the day jeremy is going to call the shots anyway let's move on ok fortune magazine has come out with its list of the world's most admired companies and can you guess who is on it ok well they are really close friends j.p. morgan chase tops the mega banks category but it's twenty two on the list thirty

nine is goldman sachs and wells fargo is number forty. the group conducted the survey asking about four thousand executives directors and security analysts the ten companies they admired most so this really shows a disconnect because there was another reputational study that showed that some of the biggest guys on wall street have a reputation that amounts to the same level and wrong before it collapsed so this is really the divide and rapists and child pornographers people like i have actually driven them and called fortune magazine and cried on the phone. a cry he said please get me on this list because if you go can't handle he said i'm going to pull my advertising if we don't make. a let's move on because we want to get to this story before we go so wall street average cash bonuses the suspected to fall to only one hundred twenty one thousand dollars. and now that the smaller bonus checks across the financial services industry is making it difficult to maintain

the lifestyle that wall street workers expect people like andrew shift and peter schiff who were interviewed before about how much they pay in income tax are upset about it take a listen. i know i you know i make a decent salary and i get taxed close to fifty percent of what i make what percent of your income taxes ten percent i would you like to pay fifty percent like me i would really so andrew shift and a lot of others really quickly but we don't have a lot of time but they were saying that the cuts to their pay the cuts to their bonuses on wall street have really impeded their lives i don't think that's from that article that's only used for the group leadership because they do pay high taxes i expect they're not like these wall to wall street executives who get the carried interest over all their bonuses and they don't have access to this kind of window that are too big to fail so i don't think that's a very good thing andrew peterson and i'm going to take a slightly conspiratorial stance and say that this article was to show that one percenters actually pay a lot of taxes and have a problem with jim they're going to hell and he's lying when you hear the president

calling for higher taxes on people that make that much money that's all we have time for thank you so much for tuning and you can feel free to follow me on twitter at lauren lester give us feedback at youtube dot com slash capital account and from everyone here thanks so much for watching and have a great. and . it. will.

be.