gondar g. john tom. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for march twenty ninth two thousand and twelve and of global's collapse has taken center stage on the hill as justice and the safety of customer money in the u.s. banking system hang in the balance so what executives have to say about how things unfolded with an unprecedented one point six billion dollars in customer money missing. i really i don't recall. wolf thank goodness we have our sources we speak with the fund manager whose money

was vaporized by m.f. global and has been working with customers to get it back also with lawmakers on these hearings and he has the real story for us and is it reminiscent of enron and what can we learn from the clean up of these disasters that we continue to see more and seemingly worse versions of continuing to happen also here in the u.s. after the free market seemed to say it didn't want ammonia and left over meat was pink slime in its neat guess who was fighting back the g o v i'm talking about the u.s. department of agriculture and the governors of five states that want to bring pink slime back to birds everywhere to let you know we think let's get to today's capital account.

yesterday the m.f. global collapse took center stage on capitol hill as the threat of crony capitalism and the sanctity of customer money in u.s. markets really remains in the balance and as the unprecedented on precedented ok disappearance loss. whatever you choose to call it of customer money one point six billion dollars of the money kept in segregated accounts supposed to be protected remains unexplained unaccounted for and is m.f. global executives yesterday the legal counsel c. oppose assistant treasurer came to answer eagerly anticipated questions eagerly anticipated issues what did they reveal to you intend invoke your fifth amendment right as to any question it's

a subcommittee q on the subject to the ira i was not aware of that transfer before it was made. but i was away for the majority of that week and i apologize in advance if i'm unable to have a great deal of detail also my responsibility was to oversee the global finance function i was not responsible for i know what you were responsible for i read the testimony apparently you weren't responsible for anything and that really sums up the tone of those executives up there and what they actually said now speaking of the lawmakers you heard from one and whether their motivation was political theater or they genuinely care i have to give them credit for a much better performance and this guy took the words right out of my mouth pretty much the entire time. how am i supposed to ask you questions if none of you apparently knew what was going on apparently no one did anything wrong but there's a billion dollars missing that's fair enough i appreciate your consistency in

having nothing to add to this discussion this hearing after reading the stuff morning listening to you reminded me an awful lot of hearing we had in this committee i don't know how many years go on in one interesting comparison at the end you catch that he compared it and run it have been some time but let's work all the days of enron. i must respectfully decline to answer on fifth amendment grounds all the questions of this committee and served committee for you invoke your fifth amendment rights in response to all questions here today yes i will i respectfully decline to answer the question based on the protection afforded me under the constitution of the united states. no matter how much things change how much stays the same so what does that say about the progress in stopping these kinds of frauds in the financial system as they progressed to new seemingly worse levels and with more and more politically connected people and more consolidated

power of too big to fail banks and the alumni they produce behind them to help us answer that stanley harz here he's president of heart capital management he has been involved in this in the sense that he's been in congress talking to these lawmakers he's been an m.f. global customer that's affected a fund manager and also the founder of the commodity customer coalition that's helping customers in this case so we're really happy to have you here thanks for being on the show thank you for inviting me i just correct one of the songs one of the part of the team many of whom have been on your program really are going to actually thank you in this network one of the few places on the air that has given adequate coverage to this issue most of the others are just ignoring it and i've been speaking on behalf of all of us we're very appreciative of the work you're going well you know thank you for that because as we were talking about before we started this interview you know this has so much bigger ramifications than just this one case which has affected so many people and you can't discount that but this is it would set a precedent about customer money that's supposed to be protected in the banking

system for everybody i mean this is just a bigger deal than i think as you said a lot of the mainstream media has has credited for and i think it's a super important story to cover for that reason let's get into it because i know you have been talking to members of congress on behalf of the customers that you are working to help and send in questions to ask gary gensler the head of the c.s.c. see that you get your wish list that sort of thing my question to you what is your sense of how much members of congress and lawmakers get this really understand what's going on and care you know well it is a complicated area there aren't that many people who mostly come from. our cultural background or have worked in this specific corner of the financial industry the know much about the futures market and kind of the other side so to speak because that a pretty good job through their lawyers and leaking information etc that this is all just a confusion possibly an accident no criminality and so i think many congressmen have kind of avoided it for that reason i i do want to thank chairman of our and

the members of this specific committee the house financial services committee the oversight subcommittee in particular has been the only place in congress and i would say in my opinion the only place in the whole u.s. government that seems to care about this situation about justice for customers and trying to get us restitution of our money the other branches of government including the judiciary as well as the executive branch of the regulators like this you have to see have really been largely missing in action and again we appreciate what they're doing and we're trying to help them any way we can whether it's providing background information and educating them as to the nature of a futures trading and why this should never have occurred and was clearly illegal i mean the commodity exchange act is a seventy year old law that basically protects customer funds that need to be segregated. even you showed the clip of congressman comp want to our respect and have some good questions yesterday but at the end of the hearing he was still saying if criminality has taken place well there's

a concept in the law of the translation from the lion is it is what it is on its face in other words the very fact that the money is missing shows that a crime took place so we should really be moving beyond that to go out who committed it and how can we rectify this situation and recapture the money for clients right well why do you think everybody is so afraid to use words like fraud or that if you were the general counsel yesterday and that local who was his bumbling over whether to call this missing money that should never have been missing that then she wouldn't why is everybody so afraid of that well i think because deep down inside particularly mr. who is not some innocent country lawyer or someone who is just providing general corporate invites she's in my opinion probably the mastermind behind a lot of what took place the structure of the repos etc she's on the international advisory council of the c f t c she is one of the most famous derivatives and futures attorneys in the world and her experience and connections with mr corps and

goes all the way back to the time they worked together at goldman sachs whenever there was an attempt was made to restrict for example the use of customer funds repos in the kind of investments they could make but she and mr corps and i were on a plane or on the phone speaking with gary gensler with our children in order to keep the rules as they were to enable them to leverage up the bats and continue basically using our money place to be at risk to support their pet how important you think that goldman connection is oh i think i think in terms of a connection with the existing goldman sachs company there were a number of transactions that i remember reading a report that a lot of the assets that were sold in the final days of the company were purchased by goldman so there's an involvement there i think what's more interesting and this is not proof of any kind of criminality or whatever but it is kind of an interesting coincidence that almost all the key players involved you can find a connection back to working together at goldman sachs and that's what i mean i'd

have heard in fact vampires wakin accent for call resign william dudley at the fed who gave them primary dealer status j.c. flowers' who hasn't been mentioned very much but he placed from what i understand further of course on in the role of leading m.f. global because he had an investment in m.f. global and it wasn't doing well and he thought this was a way to maybe try to energize his investment it's curious that only this has been brought out anywhere that actually mr corps and remains a managing partner of j.c. flowers' company remains on the one that boards of his they and yet no one's talked about the conflict of interest possible dealings between those two companies etc so you find goldman everywhere and yet of course gary gensler. gary gensler. i mean how how is someone a former crony you can to be who contributed to mr reelection campaign in new jersey and he's supposed to be in charge of regulating it you know a lot of the spin masters from the other side were leaking stories and the rest of the mainstream press are going to get by you guys who are on top of it that the trail has gone cold yeah what i would say to that is if you haven't even taken the

bloodhounds out of the kennel how can you say the trails won't call there's been nobody looking after what really happened behind the story again with one exception of this committee which i'm very grateful for but they are not a court of law they can indict anyone they can't force the vehicle back or money to come back to us so at some point in time hopefully what we hope is that we can kind of shame the investigators in a sense because of these hearings into doing what they should have been doing already five months ago which is actively pursuing this case well let's talk about it i think hang out at the hearing yesterday in regard to that because we didn't hear a few of the executives at least say that they've been questioned by investigators or were questioned by investigators do you not take that to mean that there is an active d.o.j. or happy i investigation i was in the hearing room and listening very carefully and people are well ordered up if they're not warriors themselves on this fervor right now they're very careful in what they say and how they say it and if you kind of roll back the video or the transcript from that. and mr steenkamp said that his

lawyers had been propped up with he had never personally never been questioned right was ferber's that it was going to be question were april sixth by the o.j. that's right this is an event that happened on october thirty one a billion dollars goes missing and you don't you don't question the top executives in the company you know if i steal one of these chairs that we're sitting on here today i'll be in d.c. lockup in about five minutes being interrogated a billion dollars disappears and the head of the company who are clearly involved in the decisions that caused this to happen aren't interrogated to me that smacks of if not cover up a lack of desire to really get to a rapid conclude. and there's. one can attribute political motives to that because of course on obama connection corazon biden because of the cronyism that we talked about before without i don't have no proof of that you know of the grave and obama team doesn't come to me to consult on the campaign trail but i know you have been there for setting up the areas they would come to but i think certainly it's smells

of a lack of desire to aggressively pursue this case and that's one of the things that's been most frustrating it's not that complicated i think congressman posey had it right yesterday when he made the casino analogy if you and i are in a casino and all my chips are gone i can't get more credit at the window of the casino i can just reach over and take your chips and use them for my bed i'd be in custody in two minutes yeah if i surmise if you can occur john chorus line well it isn't it just to make to remind our audience of all of those connections you have corazon who has been a bundler for obama he way he goes and testifies before members of congress those were his former colleagues of them because he was a member of congress you have again the goldman sachs connection you have there's sound bites of vice president biden saying when they have a problem when they're figuring out how to solve it economically they call up john whereas i you know so it's really throughout this whole thing obviously we don't know exactly what i care but it's important but i didn't being the genius that he is if you look at those sound bites both obama and biden attributed the stimulus

plan through to the genius idea of john course right but of course biden always has to go over the top if you play back those videos which are available on he calls were one of those people he's met. and still ahead where did you end up global customers think their missing money is and do they stand a chance against that screw big to fail interest in getting it back we'll have more with stanley harvest burster closing market numbers. you just put a picture of me when i was like nine years old i like to tell the truth. my confession i am a total get over friends that i love driving hip hop music i'm pretty.

sure he was kind of a bit yesterday. i'm very proud of the world without you it's a place. you know sometimes you see a story and it seems so. you think you understand it and then you glimpse something else sure see some other part of it and realize that everything you thought you knew you don't know i'm charge is a big issue. what drives the world the fear mongering used by politicians who makes decisions comfortable break through it through a maid who can you trust no one who is you know you with the global machinery see

where we had a state controlled capitalism is called sessions when nobody dares to ask. we do our tea question more. welcome back now as i said earlier our guest was also an m.f. global customers so he's been personally affected i asked what it's been like trying to get his money back he explained how different it spanned from past bankruptcies in this industry the firm that preceded m.f. global was refco they went bankrupt i had an account there at the time and basically the account and all the money was seamlessly moved to another broker within a matter of twenty four hours and that's the way the system is supposed to work and

so really our commodity coalition came together about a week after the bankruptcy when we were all kind of in shock and it was and growing despair of the day because not only was nothing being done no one was even saying anything there were no pronouncements prophecy of the sea the sea i mean nothing was being done the money was gone we were left with our response oceans right open by the way so we were blessed with the worst of both worlds we had one hundred percent of our risk and zero percent of our equity about point and the whole manner in which the bankruptcy was structured is in my opinion critical to our ability to to get money returned to us and hasn't really been explored a lot in these hearings but i hopefully it will be and hopefully it will be we've explored it a lot on this show so i don't want to especially much time on that i do want to talk about how corazon got into this position of risk in the first place and we have this rhetoric that comes out from executives that these were these chaotic final days but were they really i want to play what janet have a colleague who was on this show earlier this week said about her due diligence

what it tells her about this cataclysmic trade that correspond with and gotten. given what he was long and given what he was short as stated in the march report at least when you looked at what was happening during two thousand and eleven i believe that there were several days in two thousand and eleven when m.f. global was in negative equity position and there should be investigated. so if what she's saying is true that would imply that they had been short many days or more than one day in two thousand and eleven and would have possibly needed to defend a customer money other occasions and maybe did and maybe just this time they were caught is there any merit to that and you know i think that's exactly correct and again i have heard reports like i don't have a smoking gun of you haven't presented to you here that they were really playing games for months in terms of intraday borrowings intricately between the broker

dealer and the commodity side also different parts of the world you know when when a company gets really short of cash and if they're trying to hide what's going on they'll play games like going during going into a company repos taking advantage of different time zones becoming between japanese . affiliates etc so i believe there was probably some of that going on but again i keep although i can't prove it there's a pattern here going back to the fact that this came out at the feb second hearing that they were had already worked on to break the glass or merchant claim they knew there were they were really skating on very very thin ice and for mr ferber yesterday to say though she didn't know there was a big problem and existential threats of the company until that weekend saturday sunday why did she hire bankruptcy attorneys on the day before on friday so having arps a cataract out there it's in that it's in the documents from the bankruptcy court and obviously she must have spoken to them even a day or two days before that they knew this was coming or that were potentially coming and speaking of hiding risk i want to talk a little bit about the reports and it's already degrade was what eventually caused

the demise of m.f. global i don't want to get too technical but our viewers aren't dumb they're quite smart and i want you to kind of speak to how this exactly works and in what way and the global and other firms that have done this in the past have used an instrument like this to high risk and therefore undertake more risk exactly you know i'm not an expert in this area because that's not my nature even though i've worked as a. and an executive of some some large companies in the in the agribusiness area this is not something that i would have ever complicated because contemplated because of the risk involved and because it really does involve kind of hiding what you're doing in terms of the accounting treatment of it but it's off balance sheet it's off balance sheet and that's a question for congressman have been asking at face value whether with the continued to be off balance sheet but in essence and this goes back you can actually go back to the december fifteenth hearing and congressman's posies question some of which i helped him with. what you generally want to do in these

situations is get the money to london the internal repos or some other mechanism by because you want london to london financial markets are wide open to recover and there's no limits on leverage so once you get the money there you can leverage it practically to infinity and john who resigned being again i've never met the man but from what i've read vanity fair and elsewhere having an extremely large ego and being almost addictive in terms of his trading style wanted to get as big as he could get with almost really no trading capital you know enough global was it was a small stodgy brokerage firm to put a very good job brokerage wise but they didn't have the capital to support those kind of trades so he wound up taking a little bit of capital that they have a lot of capital that was on their books that was ours that was costing the funds moving it to london leveraging up through the repos keeping it off the balance sheet and hiding it from regulators and from their accounts until about august until finra kind of caught them already in this very exposed position and you know

that's in essence what happened do you think that if it's found that j.p. morgan does have this customer money there is any way that you guys can legally get it back and do you think j.p. morgan being in a position to do a lot of due diligence on it on a couple it would have had suspicions about their ability to meet that's in our chain are a lot of due diligence is really an understatement one of the most interesting points that came out yesterday is the. they were already on a no no no debit they were on a close watch because j.p. morgan very well if they had run out of money and why in the ass for the comfort level yesterday j.p. morgan said it's an extremely rare occurrence to ask for that letter they knew that that money was not money that they should be touching to pay back the j.p. morgan credit on your question from day one of the all of us have very strong suspicions and nothing's happened since then but our money is a cheapie more than the only way we're going to get it back however is to break through the safe harbor provisions of the bankruptcy code because they've already grabbed the collateral and you can do that if you show that some sort of

criminality to reporters and there's criminality of all different flavors and varieties flowing through all through this situation and remember j.p. morgan had its hands all over m.f. global as the largest creditor also the underwriter of m.f. global's revolving credit facility there. it goes on and just a reminder he mentioned re high population and how major of a part that place you can find our breakdown of that very important term on our you tube channel we get a word of the day on it. all right before we go let's lying down with some loose change we've got in

a tree and shannon to talk about this first mcdonald's pulled away and then petitions to and what's been dubbed slime found in ground beef in school lunches in grocery stores went viral on the internet and then this. the maker of the meat additive known as peak slime is suspending production at all but one of its plants the ammonia treated filler came under fire and social media and so people got laid off pink slime closing down people pulling it oh but wait not everyone hates pink slime after all the u.s. department of agriculture the governors of five states are coming out supporting the company's beef products inc that makes this pink slime are going pink slime has been unfairly labeled and is actually a safe low cost way to make ground beef leaner and cheaper so my take on this is that the free market basically decided we don't want pink slime in our meat once they knew what was in it and then the government said oh no wait we don't care what

you want this is good you need this disgusting animal byproduct ammonia treated by pot products in your burgers well that's that's the government's job the government says uncle uncle sugar says this is this is what's good for you want to help you but with the really doing is doing the bidding of large corporations ok so this is once again uncle sugar come to the rescue with legislate with basically saying let's show your face full of pink slime and overalls and other stuff that would have what's his name from the great outdoors dogs but all in your mouth. here's a commercial and we're doing a favor so just to remind you of what's in pink slime because i actually didn't know animal by products including low grade beef trimmings from connective tissue spinal rectal intestinal material all treated with ammonia gas to kill food borne illness that causes bacteria now this is the government who has thought people's ability to drink raw milk or distribute it but they want you to eat ammonia laden

rectal tissue this is good for you you learn good for you yes good stuff shannon the only thing i can say is somebody needs to. where's the beef. where is the beef i don't know who the figure is in the records issue exactly ok let's move on the fourth annual growth summit is going on in new delhi and these are some of the largest and fastest growing emerging countries brazil russia india china south africa now they did some business they reportedly did agree to the to work on a common development bank between the five countries that something we've talked about it's along the lines of the world bank some analysts are saying it could be an alternative to the world bank and i.m.f. for these countries they also signed two packs which would increase trade or encourage trade between the nations because they're offering loans to each other in their own respective currencies so are countries trying to send the message they've

had it with the dollar circumvents it and are they trying to answer this. the question is how do you bury it in a way that is polite you want to do what slowly you don't want to do it suddenly but very politely they'll tell us your time is over so is that what they're trying to say to the dollar they say no dollars a pariah currency as michael has been told me in that interview which was a great interview on this very issue but i mean a year ago this is not a new issue while the developing world is trying to find a way to gently euthanize the dollar and that's the thing so yeah but i think people still look i want people to know is this we don't have it up here but the brics logo looks a lot like a marijuana plant and i think that this is a part of a marketing campaign for the first time troops to make their alternative currency look cool ok so now if you look at that i'm going to look for a golden compass we've seen a lot of these deals between countries to train their own currencies and i do think that they're meaningful also they take some time so you have some time to prepare so about three years for russia and china to train local currencies so there's

little food for thought but that's all we have time for thanks so much for tuning in don't forget to follow me on twitter at lauren lyster and give us give us he's me feedback on the show in you tube dot com slash capital account from everyone here thank you so much for watching and have a great night. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else here's some other part of it and realize that everything you thought you knew you don't. charge is a big. three . million take three. four three. three.

three stooges. priests'. the old stream launches clothing video for your media projects a free media dog to our teeth on tom. wealthy british scientists and. let. the market finance scandal. find out what's really happening to the global economy with months cause or for a no holds barred look at the global financial headlines tune into a report. if. any is he he.