stance when it comes to us and i will. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else hears you some other part of it and realize that everything you thought you knew you don't know i'm trying hard to look at the big picture. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines variable twentieth two thousand and twelve u.s. banks will now have more than two years to comply with the volcker rule the federal reserve and other regulators announce this pushes the date back significantly from

what was supposed to be the deadline of july this year and it means banks will have to warriors to push for changes to regulations that are supposed to stop the kind of excessive risk taking with federally insured money that helped lead to the financial crisis in the first place and speaking of lobbying for regulations so they work for you remember john corazon m.f. global reportedly did just that helped to allow him to make big huge bets on europe that brought the firm down and took more than a billion bucks of customer money with it well next week the case heads to the hill again as new emails have been produced has more information come out that helps build a criminal fraud case and what does it show us about the bigger picture and going after possible crimes committed during the financial crisis that we've seen so little underspent for and as the international monetary fund has its three meetings are going on right here in washington forget the play by play analysis of who is

pledging what amount of money to i.m.f. firepower what is the real role of the i.m.f. we'll break it all down. in a word of the day web exclusive you can catch our you tube channel this week and let's get to today's capital account. it's friday so let's take stock of this whole m.f. global issue because it's been almost six months and since m.f. global surprise its customers with this rather apropo holloway in surprise bankruptcy filing. and the global filing for chapter eleven bankruptcy protection we are continuing to track the bankruptcy of lobola it's

a common run by john for signs we are continuing to go through all of this. this bankruptcy filing just this morning by enough global. everyone was paying attention when it was breaking news but since then we've heard reports from sources close to the investigation in the mainstream press saying that that case has gone cold but the case really gone cold or are those who are in charge of the investigation the regulators and the trustees simply spray and teflon on every potentially sticky piece of evidence that could lead to criminal prosecutions and ultimately the recovery of stolen customer money we wish that m.f. global were just a one off affair a bad apple if you will unfortunately it seems more likely to us that this is another milestone in the history of what we see as criminality that is swept through the financial services industry like some sort of medieval black play the black death for capital formation it seems the only time people are held

accountable anymore is when they commit crimes that affect the super rich bird you made off is a prime example how long did it take for the media and the courts to hang the man accused of running the largest ponzi scheme in history not very long or a made up this securely behind bars but john teflon dawn or design is busy who knows what order in carmel property you know that the local starbucks as he goes to shop or office space in new york is reports have come out bothered only by the loaded of discontent emanating from the blogosphere and shows like this how to account what a nuisance we must be to the new god of the wall street but ok that's not entirely fair we haven't had some hearings on capitol hill and there will be another one next week planned on tuesday held by the senate banking committee remember these have really been the fertile ground for some eye opening statements made by m.f. global execs take a look. i was not aware of the transfer before it was made. you know that

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 but similar responsibility was to oversee the global finance function i was not responsible for what as you could see it was quite a lumina doing so to tell us what we should be or next week as someone who has been following this all very closely since the start is mark malema host of the uncorrelated investing show and author of high performance managed futures he is a veteran of the futures industry was shocked when this all went down and since then i think he's only become more shocked i would imagine it everything that you've uncovered first mr malema welcome back to capitol hill and it's nice to see you. likewise learn now let's go to this hearing because there is one coming up next week and last time we had the legal counsel to see oppose the treasurer your deflecting blame or in the case of the treasury pleading the fifth now this hearing we're going to hear from some new folks the trustees in the case also regulators

and from what has been reported this is supposed to focus on what can be done to prevent this kind of thing from happening again my question to you mr mullin what really should be the focus of this hearing next week. well i hope that this isn't a message that's been sent that this issue is going to be swept under the rug and that this is going to be the end of the global investigation because quite frankly i believe the world is watching informed people know what is occurred here and i think there's going to be a hit the market integrity and the perception of u.s. markets security if enough global is entirely swept under the rug that's my concern so in these hearings there are some great people that should be answering some questions you know in my opinion louis freeh among them you know mr freeh it's been documented held the information enough global and there were reports that louis freeh was supposed to be providing information to d.o.j.

but evidently that didn't happen because mr cores on six months after what is arguably a criminal offense has yet to be questioned ok so i find that troubling well let's get into a couple of the points that you made because we have had politicians rail against m.f. global hearings according to you there has been over a hundred thousand letters sent to congress about this and of course there is reported by a point six billion dollars and i think everyone from farmers to ranchers to hedge fund managers investors as far as an investigation what is going to be questioned do we know if he has or has not or what's happening with that well in congressional testimony on march twenty eighth we learned that he has yet to be questioned and then that that also confirms an earlier report by the new york times that identified that he hadn't been question and that's very unusual usually if you look at the other cases they question the leading people in the company right away the silent and to not question the principal officers of

a company where fraud was alleged from the start is just beyond belief to me what do you think is going on. well i tend to think these are political decisions and right now we're in an environment where if this can be swept under the rug it's going to be swept under the rug and you know if that happens you know i really think we're going to take a hit in the united states in the in the financial services industry i was speaking with a hedge fund manager from korea the other day and he was telling me all about how they're protecting investors over there now korea had their bout with scandal and they learned from it so if you look at how korea for instance is setting up their alternative investment space it's very interesting i think the u.s. we want to be is the investor protection haven not necessarily the place where people are afraid to put their assets i think that's

a key point that you know if we go forward and just treat global under the rug there's a good chance that you know we're going to be as an industry fighting harder and harder to attract capital to the united states i don't have an interesting point you make and i think of something about talk it has rattled rattled bait and the us i know you have people from switzerland that if that i'm just to be clear and follow up this person you're talking to you in korea were they aware and concerned about amicable. oh yeah my assessment of you know my individual experience is there's not a professional investor who is not aware of. you know i and i talked to a number of you at this conference in new york that i was there were a number of people from different regions of the country different regions of the world and you know i deal with a fair amount of people from outside the united states and i can tell you that there's concern among people who are informed and you know some people say oh this will go away people will forget well intelligent people you know professional investors family offices these are people that are going to remember and i just i

fear that if enough global swept under the rug we're going to be damaging a whole segment of the market and its core is what it will take for this to not be swept under the rug and if there should be any kind of criminal charges or prosecutions against john. i want to know because since the financial crisis we really have not seen any of the major players be charged with crimes being prosecuted we've seen several cases but not major criminal was and there's you know all sorts of speculation that can be had about why that is lots of questions that it raises but one for people that tend to be i don't know slightly more conservative side than i am oh it's very difficult to prove fraud in criminal cases and they you know i'm not a lawyer so i don't really know but is there more evidence that has come out there would prove or that would substantiate a criminal fraud case or john or design. ok well let's talk about this and again like you i'm not a lawyer but if we just look at what has occurred and there's criminality in the

transfer of money it violated the commodity exchange act in two locations and potentially three locations so that's a fact so when we talk about the m.f. global money transfers we have to understand that they were illegal money transfers and you know that's just based on what's known in this case so there's criminality there then i think what needs to be investigated is the level of planning that went into this entire. event and i'm not going to say that john corazon wanted of global to go into bankruptcy or planned for it to go into bankruptcy i'm going to say that question needs to take place as exactly what they knew exactly the instructions that they gave the back office and exactly the extent to which planning took place for them to wire transfer money to counter parties but then send checks to customers which john wrote pointed out in his great p.d.f. also that's one example of clear criminality and a little bit more into that because one of the things that you need in order to

prove criminal fraud is proving intent and one of the way that this whole m.f. global bankruptcy has been characterized by sources close to it and puppet invited media that i've seen is that there were these chaotic final days were just customer money get this here and so who knows what happened it's very hard to figure out who knows where this you know billion dollars disappeared to they're saying that there may be some evidence of planning you want to just expand on that again but we know about how this possibly was more of a calculated event. ok let's just look at what is publicly known for instance the back office was essentially cleared out of the top three people the week that they were known to be going into a liquidity crisis this report in the wall street journal now futures industry practice is you know to have the top three people in your back office in charge of protecting customer assets to have them gone at any point in time would be unusual

but when you know that you're headed for a liquidity crisis when you know that things are going to be a little crazy you do not let those people go now on congressional testimony christine's or wincey one of those top three people to see if all of north american finance called back to the office and shout hey is everything ok there's no no it's fine ok so let's understand that mr corson this testified that things were so chaotic and you know mr winston is testifying that she called back to the office things were fine why didn't mr cord sign call the top people in his organization back to the company it's all hands on deck at that point i would think but you know that's so that's one of the surplus point let me let me let me hold you right there mark because this is that's an important conversation i love to get their break which is the most unfortunate things right this second but we are going to come back in a couple minutes we're going to punish your thought and i'm going to talk to you about regulatory capture because it plays a role in this m.f. global case it's important to look at as we see that the volcker rule has been

delayed and it's time that banks need to implement it for two more years so right there we will have more with mark melinda author and host of the uncorrelated investing show. and still had a loose change dedicated to give me a loose change dedicated viewer feedback i'll share my responses to your comments from this week but first your closing market numbers. there hasn't been anything yet on t.v. . it is to get the maximum political impact. before source material is what helps feed journalism honest we.

we want to present. something of. the sound.

before the break i had to stop mark and our guest mid-sentence as he was telling us all of the things that fly against the face of the conventional wisdom perpetrated in the mainstream media about the global bankruptcy i believe the eighth largest in this country's history taking an unprecedented more than one billion dollars in customer cash that's supposed to be secor disaggregated cash that has not been returned nobody's in handcuffs we don't know the state of an investigation but here building a fan on how those last final days were not chaotic is mark melinde host of the

uncorrelated investing show and author of high performance managed futures and he's been covering this since the very beginning on a very deep level really. pounding the pavement with this one so mark before the break i literally had to cut you off when you were talking about some of the questions that have been raised about the planning that was going on at m.f. global's bankruptcy do you just want to finish your point about what the significance is of the questions that you have. well once you start to get into the details of how an f c m operates and then compare it to the story that's been told it really doesn't match and so you know when you start to look at planning that's when you get into intense and when you take a look at that check case for instance where checks were delivered to customers that bounced but wires went to counter parties that takes planning it's been reported that this was sloppy for keepin sloppy is when you don't do things consistently sending all checks to customers and then sending all wires to counter

parties that's consistent and you know and i think once you start to get into this case you're going to start to learn that instructions were were sent from certain levels i think that's what an investigation would logically identify and then once you start to get into who actually gave the instructions to undertake some of these criminal acts that's where you sort of lead to the back office and and you know why i'd like to see them have a voice do you think that we would hear from the backup if we heard them talking to brian thinking of beth. ok well in terms of you know. i can speculate and i want to make it clear that i don't know edith and i have not directly spoken to anyone who is a subject of the investigation but if i had to speculate based on informed sources you know some of what i might speculate is that when syringe. called back to the office she came in on a sunday she was initially surprise as part of congressional testimony but the

grand might have come up to it with a small batch of papers and said here's the problems here is we are overdrawn and here's exactly what happened and here's why it happened and here's some issues with these money transfers and here is the story of what happened they were shocked and then they look around and they see no one investigating corps time you know so all the sudden they are hard investigated so on the record that they were they they were asked questions twice it was you know it was a hard investigation they were siloed after the bankruptcy they were put in communication silos they weren't allowed to talk to one another compare that with the c. level executives who weren't questions and who ran the company afterwards i mean they were translate the ability to transfer money after the company declared bankruptcy for up to six weeks and you know there were some issues about certain holding companies filing bankruptcy later than other holding companies i mean it's it's it's just unusual it sounds very unusual mark i want to ask because when we

talk about how we got there in the first place how this all was allowed to happen how or if i was able to have these large events and then use customer money we get into a regulatory capture and this is i think important to talk about because we've just learned that the federal reserve and other regulators are going to get banks to more years to comply with the volcker rule which to me based on all of the things that i've heard from sources about how much banks are lobbying this regulation it just said to me they've had two years to either lobby for loopholes or to figure out ways to get around this role so. when we talk about regulatory capture can you talk about john because he lobbied against regulations that would have put tighter restrictions on customer money this was of course months before m.f. global went bankrupt doing the very things that this look at regulation was supposed to curtail so what do we know about regulatory capture in this case because there are some new e-mails from the c.s. you see i believe. ok well here are a couple of points about regulatory capture the the regulatory sources i talked to

say that we're on a descending trend in regulatory capture as a matter of fact if these guys are manage futures trend followers they would and so on this thing it's continuing to go down and this is not a one off and i think we started in two thousand and eight and i think we've gotten to the point now where a case can be made that you know regulators are not just turning a blind eye but in certain cases you know they might be aiding and abetting to a certain degree and i think that as you see documents in my opinion deserves investigation and then coupled that with the decision on one point two five that was a celebrated lobbying effort i guess you could call it celebrated and if you look at the chill why twentieth date that's a important date because that's the date that they were supposed to be a decision making but they held off that decision so mr quora zein and is so over debt trade would remain intact now it can be logically argued that if the c. f.t.c.

did nat's. this soft shoe that rule one point two five at that point mr later bond offering on august second it's of that same year that the three hundred million dollars question will bond offering would have been very different and there was there was talk you know and part of what could where the senate investigation could go if they wanted to really go somewhere is that search to talk about all the meetings mr course and had with finra who actually stood from what i'm told stood up to a course on the f.c.c. pretty much back to down and there was debate there was dissent from what i understand within the c. f.c.c. as to whether to give mr corps car plants was definitely a fight and it's just amazing mr john cores and probably has more influence in washington d.c. than any trader i have ever known and never had no. of course and personally and mr malone we have to leave it there the rest is of course history but important

lessons as we look at regulation they continues to be. need or a lot beads so that it doesn't even get to the point that it had in the first place as i believe the volcker rule illustrates thanks so much that was mark maleng author and host of the uncorrelated and best in show. it's friday so time for viewer feedback in this week is a loose change dedicated your feedback as there were a lot of comments that caught my eye so earlier this week we talked about the expansion in drone education as it becomes a college major routes rules with quite successful looking prospects and eric

friday of the daily reckoning i'm very touched to say he liked it and in his latest post on barrel drones and other and based of species quoted from the show here take a look at his piece as i said that's the title peril drones and other invasive species and he he like that there's a bull market in targeted killings and he quoted that and then goes on to write about the bull market and governmental intrusiveness which he says is very robust and trending sharply higher in his view it is a great read i recommend it and thanks to eric right for including us in his analysis in your analysis if you're watching now we also bantered about the heyday of loans which wells fargo is getting into the business and which is increasing in political involvement be increased campaign contributions if you need a refresher this is what they are. i need extra cash right now one day my car broke down and i wasn't going to get it's a friday whatever the reason when you needed emergency cash with pay when i made

a phone call and that was payday one is here around the clock. so we asked if we asked your opinion on if payday lenders should be regulated at the end of the show and we did get some different responses the white chocolate space said payday lenders should not be regulated as the birth of crony capitalism comes from the idea that regulation is good either the regulators don't do their jobs or they go to bed with the very institutions they are supposed to be regulating the free market is the ultimate regulator first of all great point about regulators not doing their job or being in bed with the institutions they're supposed to regulate because we see cases of that time and time again one that we were just talking about now we agree that the market is the ultimate regulator in the long run but that long run can last a very long time and without regulations that may be longer than any of us are willing to wait. in addition there without regulations there's nothing stopping the private sector from externalizing cost onto the rest of society if it is profitable

for them to do so from externalizing risks to externalizing pollution the private sector is not without its inefficiencies and its all regulations are needed but it is important to build the most robust economic system possible and only use regulations in order to address the imbalances they come from imperfection creating new regulations in order to solve the problems caused by the regulation is not very smart on that i think we can agree and wind very read his opinion he argues if it's not if it's not of payday lenders should be regulated but how they should be regulated in other words what should the rules be for payday lenders should they be allowed to break your legs if you don't repay the loan i sure hope not good point and right before air time i thought it was interesting i got a tweet from a viewer john d. one of our international ones who said payday loans have mushroomed in the u.k. he does think they need the regulation now this week we also discussed the n.f.l.'s anti-gambling stance and how it jives with their accepting ads from casinos and i asked shannon as a shareholder about it and one of our viewers said lisa shannon is

a shareholder do you mean she's a green bay packer shareholder if so that is all. yes janet is also she is a green bay packer shareholder that's what she was referring to full disclosure here on the show now several of our viewers were at that were very emphatic about this graphic that they posted your comment boards they were very eager press to show it i looked at it it was so insane we wanted to show you the derivatives exposure for banks illustrated stacks of hundred dollar bills great viewers take a look at some of them so this one i think is goldman sachs those are stocks of their derivatives exposure huge buildings they would make up let's move on i believe this is bank of america i can see the little flag but if i remember correctly again huge exposure and finally j.p. morgan chase which is huge exposure to derivatives in stocks of one hundred dollars bills it's really a lacerated when you see it that way and keep it classy before we go mine said l.o.l. it's friday and lauren is meant to be answering people's questions on you tube well lauren can we have a naked friday or gave your choice just once

a week i promise it won't be tracked from your message just merely add to it i commend you nice try you got me to read it not a chance though for those of you are big fans of word of the day and ask for it to come back which many of you have look for a web exclusive word of the day on the i.m.f. will post it our you tube channel this weekend as the spring meetings of the i.m.f. and world bank are underway right here in washington and monday i make a note we will not have a show i know it's sad that the network is doing technical maintenance we're back on tuesday with old money founder james turk you won't want to miss it and until then that's our show thanks for tuning in do not forget to follow me on twitter at lauren's lyster go to youtube dot com slash capital account for feedback and to watch that special word of the day and until today from everyone here a couple accounts tonight.

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