good afternoon and welcome to capital account i'm lauren lister here in washington d.c. these are headlines for may tenth two thousand and twelve a group of u.s. house republicans are calling for the department of justice to appoint an independent counsel to investigate possible criminal wrongdoing surrounding the collapse of m.f. global we will speak to the man who's been touted the face of m.f. global's customers he's been in d.c. this week a lot being lawmakers to support this latest effort james good to les joins us in studio and from lehman brothers to bernie made off to m.f. global is bankruptcy law stacked against customers trying to get their money back and does the law enable financial institutions to commit fraud enable fraud and

come out unscathed we'll look at the bigger picture and ben bernanke is out today saying the banking sector has gained a much more solid footing in the past few years but is this based on a flawed examination of the foundation and will discuss let's get to today's capital account. so if you watch this show then you know the story behind m.f. global and if you want to take stock of where we are now well customers this includes of course farmers mom and pop investors they're still missing their money regulators and prosecutors are reportedly investigating this one point six billion

dollars shortfall in customer money money that went missing in the firm's bankruptcy customer money that should have never been touched that we haven't seen a lot of progress least not that we've heard about as for junk or zine the former m.f. global c.e.o. goldman sachs c.e.o. obama bundler new jersey governor u.s. senator he reportedly hasn't even been questioned by the prosecutors we're told that's a mouthful so what is happening now well a republican member of the house financial services committee michael graham you see him there and a group of republican lawmakers have signed onto a letter asking the justice department to appoint an independent counsel to take over an investigation of criminal wrongdoing surrounding the collapse of m.f. global the letter cites the law that take a look provides for the attorney general to appoint an independent counsel in cases where an investigation or prosecution of a person by the d.o.j. may result in a personal financial or political conflict of interest

a letter states clearly the case of m.f. global and mr poor design falls under this section if you want an example of an independent counsel in the past being appointed it can be found you may recall in the case of ken starr during the clinton administration he investigated whitewater the death of deputy white house counsel vince foster and of course the monica lewinsky scandal now here this week lobbying lawmakers in support of this letter is james could two lists president and co-founder of the commodity customer coalition working pro bono mind you on behalf of m.f. global customers trying to get their money back he's also c.e.o. the head. fun typhon capital management i should mention he's a lawyer too so he wears many hats he's been on the show before and we're great happy to have you here to give us an update thanks a lot of thanks for man year so i want to get to all your efforts on the hill over the last couple days but first let's talk about why you're pushing for an independent counsel because i from what i understand these are attorneys who investigate and prosecute criminal activity in government corazon obviously is no

longer in government is this because you want to independent counsel to investigate him due to his connections or does this also have to do with possibly regulators an investigation of their acts who are in government but we want to impartial investigation and the conflicts aren't limited simply to obama's pursuit of phones from course on which all the it is a potential conflict but gary gensler the chairman of the c.s.t. see also a close friend of course i mean he recused himself and essentially de facto recused the entire agency from from investigating corazon about four days after the bankruptcy so i mean this is a case where really there's a there's a big an intersection between government and wall street and i think when you talk about the revolving door. this this is it i mean this guy went from goldman to the governor to senator back to wall street where it blew up m.f. global and now there's one point six billion in customer madi missing and. we've

done our own criminal investigation and we think with information that's in the public domain right now it's clear clear crimes were committed here and all the farmers ranchers retirees traders brokers who have money in their home their heart and property that has not been returned home seven months later really haven't seen evidence. well gentlemen an investigation they need an impartial investigation and they have that's what we're trying to do here what crimes because you say you have evidence of crime so what crimes and by whom first want to i mean overarching ok so so you see. published a brief written by our co-founder john rowe that outlines seven badges of fraud and among them are facts that on october twenty seventh four days before the bankruptcy the c.m. he told him of global but no transfers were allowed out of segregated accounts without the c. at least for mission also on the twenty seventh and global reported that they had

excess funds of one hundred eleven million dollars in the customer account so that's the house money that's like a buffer of money. twenty eight they published a falsified segregated report that said that they had two hundred million in excess of that to see i mean as i write i want to report so falls out of project network that's right and chairman duffy. chairman of the c.m.s. said back in december on capitol hill that that report was falsified while under oath to congress right after of course i'm testified and i said next to john wrote that and i said it on the i'm coughing course i'm for perjury right here right now . i mean when you're regulator under oath directly contradicts your testimony right come on i mean now it's it's over five months since their testimony you think these crimes fall on john chorus signs shoulders not edith o'brien not the council of m.f. global or any of the other executives this is john course i'm responsible you know i can't unequivocal say corazon is guilty of

a crime i can't say that the executive offices were and i think you know we really need investigators to ferret out is is that the c.e.o. is a chorus line is that both of them is it someone else and that's the sweet. but it came from the top and i've personally met with enough m.f. global employees interviewed them got in their facts it was well you know f.b.i. and the o.j. should be doing right well i mean no because i know you have been you know in the trenches and i know you there are limitations to what you've had access to but you have also gotten some access and i know you've been on all over again. and that sort of things that we do you know the status of the d.o.j. investigation more than we do from what we're seeing come out why no one prosecutor told me that the d.o.j. receipts are brief months ago they're interested in speaking to me as soon as possible and it's been months and i think out of my call you know so i mean just anecdotally i don't see any sense of motivation here at i.b.m.

slow it's very slow and you know if o'brien i could attest with pretty good confidence has enough information to blow this wide open and. we're sort of unity so you think she should get immunity you know hundred percent think she should get immunity interesting and we haven't seen that yet we have no we haven't seen it you know let's talk about this letter so i know when we last spoke you wanted to get some democrats signed onto it any luck any democrat signed on and why aren't they try and i mean i had several good meetings today on the hill. staffers today not rather than members but i mean they listen to me they understand the issue and you could tell the police the guys about what's today were good guys they care about this issue they you know they want to see justice done. but you go out of politics at work here i mean this is an election year when the president's biggest ball matters here i think people are so traumatized by ken starr and how he went all over the place with is that with his investigation and you know our intent isn't so

i could investigate obama have him you know get impeached or to serve as i like what we want just a truly independent impartial investigation so you're saying that essentially they don't want to go after the obama administration in election year that's their own party i think there would be there's some perception on the hill that it would be kind of breaking step with obama and you know what we were we've reached out to the administration and we spoke with someone pretty high up today who said that they're going to reach out to the administration on our behalf and see if you know if we can work with them and explain how we think an independent counsels actually good for democrats again coming into this election cycle i think they don't they want to be seen like they're doing something about john chorus line. right now no i mean where i don't want to i don't that serve their interests to not look like they're trying to brush this under the rug which i'm not saying they are but it looks a little fishy i mean that's right i mean obama said after two thousand and eight he's going to be tough on financial crimes and tough on wall street and all that

and we haven't seen it no one got indicted no one got charged no one got prosecuted for anything that happened in two thousand and eight and now you've got the president's biggest bumbler who was at home unprecedented failure one point six billion missing that but want to hold cross-section of america and if he doesn't do something to get serious about this investigation it's going to be a lightning rod against him in this election if enough people know about i don't know i was watching this congressman who is kind of the guy who's pushing this letter along with you guys and mainstream media was pretty in the dark about what the heck this m.f. global thing was i was quite surprised at their lack of knowledge at all our awareness of it of these anchors that were interviewing him along those lines he is a republican he's on the house financial services committee it's understandable why republicans would want to sign on to this because for political reasons it looks like they're being tough and going after obama's guy whatever so where is the

support from say the chairman of the house financial services committee who is a republican spencer baucus or the chairman of the subcommittee on oversight and investigations neugebauer where is their support or and i mean i think you know i'm new to politics right i mean most of these guys i've met with i walk into their office have no idea if they're republican or democrat honestly you know so i'm still kind of feeling my way around the hill here but from what i understand grooms of freshman congressman these guys have been around a while and i think that maybe there's a little reluctant to kind of back someone new i mean i think a little differently than politicians and i think that the groom is doing the right thing here comes from the f.b.i. were he to some pretty heroic stuff. and on. you know to me it's simple it's right or wrong yeah well this is politics so in with graham do you think that the fact that he is a freshman has allowed him to do this because he's not so entrenched with say big wall street money spencer baucus sixty three percent of his contributions in two

thousand and ten when he became the chairman of the house financial services committee reportedly were from finance. well you know what i'm in the finance industry right i mean i support this i think that really if you if you're in this industry and you think rationally it's in your best interest to restore integrity to its market course hold that thought we're going to come back we're going to go to quick break and then i want to talk bigger picture about the bankruptcy laws we'll have more of james president and co-founder of the commodity customer coalition to lead to fact or fiction does money really motivate people it's the behind bonuses and rewards given to top bankers and exact but we'll give you our three cents on the growing field it looks like of science aiming to debunk this tall tale first your closing market number that.

you. just put a picture of me when i was like nine years old and you told the truth. i'm a confession i am a total ghetto princess i love driving hip hop music and. i do it's kind of the gesture that. i'm very proud of the world with its place. you know sometimes you see a story and it seems so. you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything is ok. i'm charging welcome to the big picture.

what drives the world the fear mongering used by politicians who makes decisions to break through. who can you trust no one who is you who with a global missionary zeal where we had a state controlled capitalism is called satchels when nobody dares to ask why we do our t. question more. all right welcome back we're talking to james cook tulis president and co-founder of the commodity customer coalition he's been all over the hill this week talking

to get people to sign on to this letter you're calling for an independent counsel and a republican in the house along with how many republicans did you get on that on that letter from i think by the time i go over here we're pushing sixty to sixty what along with. what are most of them what's their reasoning why are they signed on i have no idea no idea i believe. they don't tell you. oh yes or no you say great fabulous i've got your signature that's amazing ok let's talk about the bigger issues here because i want to connect this because there are issues here that are that are bigger than just m.f. global issues we've seen in other bankruptcies in the made off scandal and lehman brothers so i just want to ask if there's anything about the bankruptcy law that you feel is stacked against customers like the ones you're fighting for and maybe in favor of big creditors like in this case t p morgan and same thing with j.p. morgan in a case like made off. yeah so in two thousand and five there was a big revision of the bankruptcy code that added were known as safe harbor

provisions which sound like warm and cozy but are horribly anti-consumer and long story short the bank lobby somehow got these changes and that. one of financial firm goes down the priorities don't go to the customers like an m.f. global where you know their accounts were looted it doesn't go to secured creditors or or people who are owed commission checks number one priority somehow public policy that. over the counter derivatives should have absolute priority over everything else on bankruptcy and not only that over the counter derivatives everything or for anybody that doesn't know most of our audience does are basically negotiated a nontransparent way they don't go through a clearing house they don't there from one party to another saying hey we're going to make this deal and nobody really knows about it they escape regulation yet they have priority under the law under bankruptcy code right so this kind of simplify it basically what it says is. you could like cover your eyes and take stolen property

customer property as long as you don't know what goes on a property ok so a big issue in this case is according to reports people organs probably received five to six hundred million at least of the missing customer money and much of that was to me margin calls on course and is incredibly risky trades. and i don't want to give it back i mean they admitted in front of congress that they received that i believe was the last hearing or maybe the one before that but they have the money and not only you know they have the money they knew it was going to money or they should have known it was constant money because they were one of the main custodians of the customer. they sent not one not two but three letters the amount of global asking them to sign saying this is a customer money because if they had that they'd say ok then we're going to go because i don't think trying to see why they can't get it back let me ask you this because when they get those letters are they do they ever get sent through. they got none back they took the money anyway and they still have the money yeah well ok

i want to ask about that because james given the trustee for the customers recently before a senate committee i believe he said that that one point six billion dollars in missing customer money has been accounted for so where is it where is it been found if you know and i know we're covering whole different issues so our customer is going to get this that right so this is kind of a nuance answer but of the one point six billion the money it's a kind of force not missing anymore right but it's money that's not under the trustees control it's not under the control of its rightful owners the customers ok so of the one point six billion seven hundred billion is in the u.k. the u.k. has even worse customer protection laws than we do right here and apparently m.f. global did not segregate the funds properly so they told customers that good these thirty point seven accounts are segregated they're just going over the u.k. so you could trade for a futures but apparently the one they set up these accounts they didn't non-segregated basis now a month ago the u.k.

supreme court ruled it lehman case that if that money could be traced back appropriately it can be treated like a segregated account and that's now what the trust that our us trustee get and is trying to do he's suing. over in the u.k. and trying to get that money and treat it like it was so we could have a return to customers no idea how long it could take years it could take years for customers to ever see this money so if you had to pinpoint because we talked about similar trends in now m.f. global lehman brothers bernie made off what would be the one thing that would really make a difference for customers having the priority that it seems like they should. really of course when all this is the number one thing that's missing in this case ok if we if we go back to we're talking about a few minutes ago fraud was committed here ok if i think you'll be in believe you found fraud which means in. tend to do the wrong thing that's right i mean there you know and in most white collar cases you know fraud isn't course i'm saying

steal the money right it's circumstantial and there were enough badges of fraud in this case where i think any reasonable person would say that the guy that job i described as the smartest guy he ever intended to to do something wrong or hopefully hopefully being a reasonable person translates into law because i understand the burden of proof for fraud is difficult including it is difficult but you know what if we could get an independent counsel if we could get an impartial investigation here. that helps i mean you're guaranteed to not get a conviction if you're not even to question the guy it's a great point because he hasn't been question that we know of right correct ok before we go i want to show you i want to bring up an article with how writers they profiled you and how they're touting you take a look at this if wall street power broker and politician john chorus line is the face of m.f. global commodities trader james lewis has become the face of its customers the other interesting thing about this article you've been very outspoken and crane

critical and critical about j.p. morgan. what did they say in this article a spokesperson let's bring it up if we could advance that said j.p. morgan spokeswoman mary said i guess did say they could tillis is general criticism of the bank was riddled with misinformation and totally without merit so when you say that. it's sounds like i should talk to my attorneys and get that slander cause of. a lawsuit i'm actually personally prepared to go straight to the very get go you call this slander definitely i've been to i think when you go in front of congress and you admit you receive customer money you know you didn't get a letter signed saying i was a customer model that what i've been saying all along is true so i don't know j.p. morgan where where's my misinformation please please explain there you have it please explain because we're going to leave it there for today thanks so much that was james good to list president co-founder of the commodity customer couple that.

let's wrap up with loose change dimitri and shannon and let's talk about ben bernanke your favorite person to talk about was there as he gave a speech at the chicago fed conference today saying that the banking sector is on more solid footing saying that banks have made considerable progress repairing their balance sheets building capital he cited evidence from the stress test in minutes administered back in march as one of the examples showing this here's what he said the latest c.c.a. are the stress tests conducted earlier this year demonstrated that most of the one hundred firms would likely have sufficient capital to withstand a period of intense economic and financial stress and still be able to lend to

households and businesses but here's the problem let's talk about the baseline assumptions because there are problems with those stress tests according to guess that we interviewed so are his arguments based on a total belief faulty examination of the very foundation that he's talking about here is a look back at chris whalen after the stress test came out talking about just one of the major issues with them which was that they didn't properly deal with real estate and foreclosure rest take a listen but we still have a very serious problem in the us when the fed seems to want to ignore it so they don't talk about litigation in the stress test and only one fifth of the losses that they generate in their scenario come from real estate which is crazy more than two thirds of the exposure in the banking system in this country comes from residential and commercial real estate. does this just show my question to you how deep our problems are when we look at these issues because he's using you know the

stress test as an example to prove that our banking system is better but the whole issue of the stress test is that they're flawed there's just too many layers to go through so mainstream media headlines are banks they're on better footing but based on what we're going to repeat this over and over again as there's no there's no other point we have to do it if the banks were healthy you would have zero percent interest rates you wouldn't of quantitative easing ok it's like being the cap of the titanic and saying the ships fire and you have a zillion water pumps pumping water out of your busted up hole twenty four seven ok yeah your sim your ship your ship is sinking the only reason that it's afloat is because you got emergency lines on the water oh the reverse is true in the banking system you have emergency liquidity facilities pumping money in you have interest rates at zero ok that comes on life support so then very good point to all the stress tests he likes you can say look at my beautiful ship look at my titanic it's great and it is sinking yeah and we know it because your interest rates are at zero and you've been opening up your credit facilities it's

a great point if banks are better then just show me the money you know raise interest rates stop saying you're going to print more money and we'll see what happens moving on we spoke yesterday about the growing protests among shareholders regarding executive pay and bonuses we've seen that a number of banks have that only made a difference though now a growing body of scientific evidence is suggesting that increasing financial rewards and may not be his performance at all here is a portion of an interview with daniel pink who wrote the book on it called drive the surprising truth about what motivates us. evidence i mean it's not even a close call in behavioral science that these if then rewards if you do this then you get that they're terrible for creative task they simply don't work my favorite part about that is did you notice what i was talking about creative tasks i like this ok compensation it is this don't work when you're executing creative tasks as

we know the banking system has become well look you know what that aside because i could argue that in a different way with these guys fail to recognize is that when you're giving the bankers more money you're just incentivize them to steal more but it's a reverse cycle it works differently in banking than anywhere else the way the banking has evolved ok over the years it's like you're giving them a bigger ransom all right of course we're going to kidnap more children that's what they're going to do you're giving them more money all right the last thing the jamie dimon is already more of your screen that's cash so they make their money yeah so that's how they're going to get a bigger raised by stealing more and you don't add anything. and it's time to promotions. ok. there for all good fun is this will work harder. to save if you stand ins point let's move on i don't think we have time to play you a really nifty commercial of avon ladies but we should tell you that the door to

door cosmetics company avon has more decisions to make than which shade of lipstick to carry because this liberty fragrance maker cody is trying to attract a bronze attention for a second time hoping to purchase avon but this time they have some flashy company warren buffett because quote he released in a letter this morning that buffett's berkshire hathaway is one source of actually finding j.p. morgan is another two so that's warren buffett right there what's warren buffet's in the mix does that mean that basically a bunch going to taken over warren buffett who were above us because he's basically become like the he's become like the sales pitch for anything and there's this worse if you slap warren buffett over so that's philanthropy they're older so that's good for you so he'll use coming out of the lipstick bubble i love it he's like a torpedo yeah he's going to be capitalism on who the good guys of. lipstick let's leave it there that's all we're looking at one of our guy we'll save that job for next time because we're out of time thanks for tuning in don't forget to follow me on twitter out lauren lyster give us feedback on the show at youtube dot com slash

capital account you know i read it tomorrow i'll respond to it and from everyone here thanks for watching and have a great night. we'll see british style. sometimes like this. market why not. why don't what's really happening to the global economy with mike stronger no holds barred looked. the global financial headlines tune in to cause a report on our.