technology innovation all the developments around russia. the future. this is our top stories. the joint u.n. arab league envoy for syria which could. name calling at the u.n. security council decision to resign meantime president obama apparently authorized support for the syrian rebels and the. president's revelation comes as russia and u.s. . try to bridge the gap over the differing approaches in solving the syria crisis talks. between the country's president the process. the countries.

the u.s. . washington. capital account. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and here are your headlines for wednesday august first two thousand and twelve u.s. interest rate the decision came out today from the federal reserve extremely low rates until late two thousand and four and fourteen nothing new here let's move on to the e.c.b. then we'll talk to peter chair founder of t.f. market advisors recognized source on all things to europe and while we're on it the manufacturing scenario in europe appears grim the euro zone factory activity fell at its steepest rate in more than three years in july according to market economics purchasing managers index and german manufacturers suffered the largest fall in new export orders of any eurozone country so uh oh trouble in europe's economic

powerhouse we'll talk about how this fits into the crisis calculus and as olympians from the u.s. go for the gold when they score one will have to cough up just short of nine grand reportedly to settle with the i r and chances are their competitors are in the same boat says americans for tax reform we'll talk about it let's get to today's capital account. all right so this is a bit of a central banking extravaganza week and today we got the first bit of that news from the federal reserve with their interest rate decision which came out this afternoon and really was nothing new it was pretty much the same statement from the

fed that we got after their june meeting a little more. dire language about about the economy in terms of growth however no change to the interest rate decision no major announcements in terms of policy just that same affirmation that the fed stands ready to act so should we look to the e.c.b. because there are some expectations there and you recall last thursday mario draghi said the e.c.b. stands ready to support the euro and it's going to work so what is really at stake with the meeting this week and the press conference when mario draghi will face answer face with reporters and have to answer questions on thursday we are going to bring in peter chair founder of t.f. market advisors to talk about this and all things a europe really get into it because he is a recognized source on all things europe so first of all peter to your welcome to the show it is a real pleasure to welcome you to capital account great thanks for having me on absolutely so now let's just get this out of the way because the fed's interest

rate decision came out and there's nothing really new same statement pretty much as last time except for some language noting slower growth so was there anything to see here or is it or in central banking land is it really all about the e.c.b. now this week. i think it's really all about the e.c.b. we've seen enough data in the us that you can see why they put it on hold and they certainly don't want to do anything ahead of the e.c.b. if the e.c.b. disappoints i think that we will see a real deterioration in markets so the fed wants to keep that in reserve also as we come closer the election in the fiscal cliff i think they were pretty much predestined to hold things off wait see maybe we'll actually get a surprisingly good non-farm payroll the number today was decent that generally not a great sign for if it. payroll but maybe this time i'll actually work out so the markets i think were pretty ready for this you know we were maybe up three or four points on the s. and p. before the fed came out and we finished down three or four points so in the grand scheme of things this was as expected and now we move on to tomorrow morning which

i think is really the big key ok so let's talk about that what really as it is at stake with this e.c.b. decision or with what mario draghi comes out and says because there is a that was a real big wall over everyone when he said the e.c.b. is going to support the euro and it's going to work so now what's what's everybody expecting tomorrow. yeah i think last week early last week we were kind of on the precipice where spanish yields were through seven and a half percent almost i think on the ten year we're seeing the two year really go wider so there was just no demand for spanish that concern was going on italian debt the stock markets there were in freefall and so i think he really came out to put an end to that he came up with this phrase that you know they would do everything within their power to support the euro then we had a lot of merkel come out and support them we've had monti come out so european after european leader and primarily central bankers as well have come out in support of needing to do something so now i think tomorrow is crunch time they have

to deliver you know the market has all sorts of expectations personally i'm looking for the f.s.f. which is kind of the existing bailout fund to be given some ability to actually buy bonds on the primary market possibly the secondary market looking for the e.c.b. to look at reinvigorating that secondary market market purchase program either directly or with the f.s.f. and then finally i think we're expecting some new. giant new funding program and you know i think people are hoping for something as large as a trillion euros and something as you know as long as five years while so it was so you think that expectations are very very high for the e.c.b. to really do something but we saw it with the expectation that the z.b. would reinstate that s. and p. program buying bonds directly right after all those hopes came out with that mario draghi statement the boot has been kind of pour cold water on that and said hey we're opposed to this and the buddhist bank is very powerful so i'm curious has the german calculus changed now that we've got these p.m.i. numbers out and germany is not doing well looking at them i mean this is not

a good report when to look at when you're looking at german manufacturing. yeah i think that's one of the things we started seeing this friend you know even a couple weeks ago were getting slightly weaker data out of germany and then this p.m.i. was the i'm pretty horrific actually you know forty three it's indicating a severe decline and i think what's going on throughout all of europe is basically around the time of the greek elections they started talking about taxes and then spain talked about access and people talked about which country would leave and right now business is grinding to a halt if you don't want to do business or create new deals in spain if you're worried about the devaluation you're worried about whether spain will tumble into a crisis same for italy germany actually has the other problem where ok they'll do fine but then you might actually be locking yourself into long term contracts which high cost producer in germany goes back to the deutschmark that scary for them in separate ways so i think all of a sudden this whole talk of euro break up everyone's realized how dangerous it is

it's forced businesses to basically stop thinking about doing new business most of my client conversations are actually people worried about how do they hedge their exposure to euro break up so they really need to push this through and i think the weakness in germany finally gives at least merkel the power and authority to support more aggressive measures so do you think that that's a real game changer because germany is always the one saying no we are holding to watch guarantee we are not going to do what everybody else is trying to push him to do and do you think this is a game changer for germany in the calculus of crisis politics. i really do i think that they now realize that it's not working and that it's actually risk dragging them down and that continuing to play this game of being overly tough is just stopping all business it's not just a political game anymore it's not just about you know helping sovereign debt it's about every corporation in europe and i think the u.s. wants germany to do something francis which sides really wants them to do something so there's a lot of pressure bearing down on them it's not working for the rest of europe and

finally it's not working for themselves so i think this is their time to cave a little bit and i think you know it depends it's very hard to read all these comments. in german and pundits bank he says things and they can be taken is very very aggressively negative or kind of in line he has said to me one of the quotes that he was attributed to today was that they will not be able to do things that are outside the e.c.v. mandate but if you go to that back to last week even druggy was specifically saying we will do things within our mandate so there's a lot of you know headlines that we have to deal with i suspect that we will see germany back down and we lent and you know they will try and save face a little bit but they will allow the e.c.b. and the f.s.f. to be more aggressive you know that's a really good point you made in there about the headlines too because every day there are different headlines about the euro zone crisis with a policy maker saying this hopeful thing or this horrible thing that sounds scary and there's a lot of stock that seems to be put in these statements and it seems at least there

are or media reporters attach to market movements these statements and a reaction to them but how much stock and you really put in and i mean these are politicians we know how much stock to put in to what obama or mitt romney says in an election year. yeah i think that's one of the big problems you know even the finance ministers they're all actually politicians so they say what they think for their party for their people and they're going into negotiations so i think they want to extract as much value from the negotiation as possible so they're not about to go into a final round of negotiations and say oh yeah we give up everything you know they're going to be aggressive and then you know they will give up at the final round of negotiations we come up with a deal so you know there's that there's some of the politicians who get quoted sometimes aren't that important sometimes the people that they're quoting to aren't as familiar with you know the details of the economic side of it you know the political reporters so things get lost in translation so yeah it's very hard you can have to take not just any one headline but the preponderance of headlines and

for me again marco in particular the last thing she has said have been positive about doing more and she has not come out and aggressively said no so i think you know we can look at what other germans are saying so long as she's being fairly quiet that gives me some degree of confidence that they're working behind the scenes to come up with a plan so now people have to be a headline analyst it will not oh in our industry of headline analysts to try and figure out how angela merkel is feeling today and what that means for the global economy but going into the poster child of the problem in europe or at least who it seems to be judging by a lot of the front page stories lately is pain and one interesting thing is that now regions are possibly reportedly needing bailouts from the central government and the prime minister is trying to enact austerity at the regional level in these regions too but there's a deeper dynamic going on here that you've really looked at what is the deeper dynamic between the regions in the central government of spain plays into this

economic calculus. and this is one of the reasons we got short spain earlier this year which since changed but people are looking at spanish debt to g.d.p. and saying was fairly close maybe seventy percent but what they were missing is that spain actually aggressively pushed a lot of costs at the regional level so the regions for example are responsible for healthcare in spain so that's a huge cost it was pretty clear that they were struggling last year you know spain had to guarantee some derivative contracts that they had on with deutsche bank there were lots of little things that were going on that made it clear this was happening and so i think now you know spain actually set up a bailout fund specifically for the regions so now we're seeing that debt pushed back up to the national level it was unsustainable at the regions and now spain has a debt to g.d.p. or probably will by the time this is all done of over a hundred which puts it in the category of where it's trading but yeah i think that's one of the things each of these countries accounted for things its own way had debt placed in its own way had various burdens or had burdens bear borne by different entities and that's all kind of coming back to be standardized right now

i think that's a really interesting point because people look at spain and say ok it has all of these economic problems but you know a housing bubble that burst that's one of thing but it's debt to g.d.p. ratio is below the eurozone average and you making such an interesting point which is that hey it was that low because of the fact that it pushed all of these costs onto the regions that now they can't afford and they need bailouts from spain so i guess and my question is do you think that that's really where this gets really ugly because if spain's regions are going bankrupt or at least need bailouts and they have all of these costs that they have to pay out that they can i mean is this really where the rubber meets the road. yeah i think we're hitting that point where people are going to have to say listen this is really scary and the next step is a greece like scenario of continued downward spiral so i think they have to kind of stop that now or else we see this real potential where people are in deep trouble so i think what i'm looking for is that the e.c.b.

to do enough to stabilize the funding costs for these countries for a period of time and then spain has to start entering into real policies that actually work they've got this very very high unemployment rate and i think it's over twenty four percent which seems very scary at the same time from a lot of what i hear and understand there's a big underground economy that needs to be brought to the forefront the average unemployment time is twenty two months which coincidently unemployment benefits and at twenty four months so there are certain people who are skeptical that there isn't some element of hey i'm just going to collect seventy percent of pay on unemployment before i look for a job so i think what spain really needs to do is stabilize get the situation under control at a national level make sure the benefits so the people exist that nothing dramatic as to occur and then start implementing policies that really make economic sense and can get people back to work get taxes to be paid rather than hidden under the table so those are all the next steps but they can't do that with daily focus on

where their year olds are yeah great point which it sounds like if the e.c.b. doesn't buy more time where they're going to be in that situation again and it's this constant kind of crisis mode that we've been in and i appreciate you giving that inside i want you to stay right there we're going to go to a break but next couple minutes we're going to have much more with you on libel or c.d.'s and the u.s. so we'll have more of peter chair founder of t.f. market advisor is and still ahead on american athletes where the i.r.s. is coming after your winnings in london and we'll give you our two cents in change but first your closing market numbers.

mission free. education free. for charge free arrangement free. free. free. old free brochures videos for your media projects free radio don carty dot com. welcome back let's bring it back home here to the u.s. because there was a hearing today on the hill not too far from where i sit in the wake of m.f. global and p.f.g. firms that went under where customer segregated funds were essentially stolen by

the brokerage any each case these are futures commission merchants which is a massive violation of regulation and has rocked confidence in these markets here's gary gensler chairman of the commodities futures trading commission talking about it. it's with these critical markets futures markets and ultimately in the swaps market as well that customers need to be able to hedge to risk lock in the price of corn or wheat or an interest rate. so these are incredibly important and when it comes to swaps part of dodd frank was supposed to be moving over the counter swaps to regulated exchanges so that they are at these dark opaque deals and it's taking what seems like forever regulators just recently decided on what the definition of a swap is now our guest has been involved in all s. aspects of credit trading so i want to ask him how significant would it be to restoring faith in the financial system and reining in massive risk taking if this

transition occurred or had occurred much earlier let's bring back peter chair founder of t.f. market advisors and i'm really glad to have you want today because this conversation is going on up on the hill about swaps in the wake of p.s.g. and m.s.g. you've been involved in all aspects of credit trading so how significant is it that these swaps aren't get on exchanges as dodd frank wanted them to be presumably. i think it's been a pretty big failure i think the most recent example of this was the world trade as well so in the j.p. morgan trade it was very large had it been on an exchange i don't think they could have ever got so big people would have noticed the price discrepancy certainly someone at the exchange were mailed us say hey you know this one counterparty j.p. morgan has a massive position and gone and done something about it so instead though you know it's kind of been this random haphazard over the counter market and credit derivatives in particular but all of the derivatives have had a special place in regulators heart since two thousand and eight many forget when

j.p. morgan bought bear stearns the night they bought them the j.p. had to guarantee all of bear stearns swap lines regardless of whether the deal went ahead or not so the regulators j.p. morgan people knew how important these credit derivative and lines were and yet here we are four and a half years later and it's still not on an exchange every six months to europe pops up you know last year the big concern was what's happening to morgan stanley's credit derivatives there swaps you know spreads were exploding you've had all this situation in europe where every time they're trying to fix a country greece was a prime example they get very nervous about the outstanding amount of credit derivatives on greece what impact will it have where will it be buried and so these are real problems they tend to intensify in times of market crisis and actually make it worse and because a lot of people aren't that familiar with the credit derivatives. it creates even more fear i think if you know as a person is familiar with that i can look through some of the headlines or some of the hype and kind of you know dig a little bit deeper and be more comfortable but you can't deny that the words

credit derivatives in times of crisis make things worse and so by not having these on exchanges they've allowed the system to continually going to be under more pressure than it should be yeah i think it's a really really important point and since you said that you are able to kind of see through these headlines and dissect what really is going on here with these markets i want to talk about library because swaps factor into library manipulation because from what i understand when it comes to swaps one part of those deals in most cases libel it was used so now that we're seeing all of these civil suits and the potential for many many more i mean is this a pandora's box do i have this right that potentially alive or manipulation could be involved in one part of many of these trillions of dollars worth of swaps. yeah i think that's definitely a real concern i think for myself i look at there's two specific parts here one whether they were successful or not a bunch of banks allegedly and it looks like several of admitted to it attempted to

manipulate libel or for their benefit there's talk that some customers were asking them to been it delayed live and they may have acted on behalf of that so i think you're going to see a lot of regulatory action it's going to result in fines and i think it was interesting that barclays actually had an emission of guilt in most of the regulatory settlements at least in the us always wind up with you know that standard phrase of this is neither a denial. and yet they still make some sort of payment so barclays actually admitted guilt so i think we're going to see you know anywhere from ten to thirty institutions fined or penalized for actions and live or then you've got the civil case and i think that becomes more interesting and i think this is going to affect anyone who lied i've seen some reports that kind of look at this based on they'll say oh j.p. morgan has a lot of exposure because they have a big market share and i think that's wrong the exposure is going to come down to whoever actually lie the most and ironically barclays gets talked about but as you read through and i've looked at barclays submissions really what they were saying is everyone else is lying and is too low so somehow they've been singled out first

but i think as we go through this we'll find out barclays was actually probably relatively clean and there's a few other banks that stick out to me where you can look at their c.d.'s spreads at the time or where their bonds were trading or even how poorly their stocks were doing and yet the recording very low library so i think those are the ones that are going to be most exposed and you know this is going to drag on for months if not years possibly ok we just have a minute but peter here you know i have to ask which of those banks that you found to be most exposed. you know certainly i've sent out one thing and i look at it and maybe there's good reasons for it but within the u.s. there are j.p. morgan and citibank city tended to live or very close to the live or submissions of j.p. morgan and when i've rolled through these c.d.'s levels city was much worse on c.d.'s for part of that time bonds tended to trade wider for city and ultimately even their stock did far far worse and in the end they had much more government

support the j.p. morgan ever did so i would look at that as certainly i would want to focus on some attention there and see if they have rational explanations why they price their credit so good when the secondary market wasn't indicating they were as good as j.p. really interesting point and i appreciate you being here to give all of your insight to these issues truly an interesting first experience an appearance on capital again i appreciate you for being here peter chere founder of t.f. market advisors thank you. all right let's wrap up with loose change that was a tough act to follow it was that i was really it was a very good interview. very interesting guy very i was very very well done very

good interview all right so let's try to be i guess funny. do you want to squash a risk and increase returns on your stocks well just turn to the superior sex when it comes to company boards. a new study shows that for investors a little diversity goes a long way and helps explain maybe by mark zuckerberg finally put sheryl sandberg on facebook board public companies with at least one female director do better than those with all male boards. that's right according to a report by the credit suisse research institute and reported by bloomberg shares of companies with women board members outperform comparable businesses an all male boards by twenty six percent do you read anything really into this maybe the boards are just more equitable in general because they are bringing a woman they want to make sure a woman's on. also not that a woman should be on what also i think is great but also you know women are they tend to study and in general i would say this is true but in this study they took

less i think i forget how they talked of the really the worst most risk taking form better they're harder workers and they're better assessing risk is what you're saying while there i didn't say that they're better assessing risk i think they don't take these crazy you're not going to see we're going reckless we're not reckless risk takers ok that's right if you don't know if we can catch it we can take a look at this here but we have to the board members guys and here we have c.e.o. of g.e. and jamie dimon there c.e.o. of j.p. morgan so they're kind of taken i think the good thing is you got to get these mothers on the board of the mothering instincts and this is really about women no way to really play out so i don't know it's about being a good mother to the company to have the mother and concerns of the mother now i think that women in general work harder are more sensible they take less for themselves they're easier they're more. that's ridiculous not only generalization but i'm going to you know there is purely anecdotal but i do think women are more like in the trenches toughing it out sink or swim speaking of swim let's move on the two thousand and twelve summer olympics are underway

a lot of swimmers from the u.s. have done pretty well all athletes are eyeing a medal here's us jen ishaan johnson's take on her quest to get the gold back in two thousand and. and so very very very kind to have gotten into my mind that gold just wasn't in my reach anymore yeah well u.s. athletes in particular may want to read the fine print coming from the i.r.s. on those winnings since the u.s. tax is world wide prize income earned overseas by its taxpayers according to the americans for tax reform american gold medal winners will pay the i.r.s. about nine grand in taxes what a crock and according to americans for tax reform other competitors are going to have to deal with this because they don't have the same kind of tax codes in most other countries so talk about a competitive disadvantage then it's best to close the goebbels or the gold or the mormons you guys are still doing with your the story line talked about it on the show yesterday all right well yes in fact you guys are clearly going to the swimmers are breaking their teeth trying to buy the gold is not real gold or it's

like some kind of like an arm or something yeah i don't know russ that or rather the one of the worst in the running and i'm going to put the iris ridiculous yeah i am so rocket man these guys are expression artist you know i do this is a case where i think that it is immoral to tax prize winning from the olympics i mean come on well what makes that we're almost there is the further wise and moral of tiger going to talk about income tax or whatever that's what about artists why should they be taxed for their it's a critic of music and they sell their views are going to get all this money from washington be taxed insane amounts of money about i mean how exactly this ridiculous i mean i i we're going to rather that if you're if you're running a business where you're using infrastructure i mean is there certain things as absurd that you that the government takes to get by that i'm going to i'm with you on this one i want that all bass players to this should be. forthright we'll leave you with that because that's all we have time to whom thanks so much for watching and be sure to come back tomorrow and in the meantime you know you can follow me on twitter at lauren lyster give us feedback on this show or any you missed at youtube dot com slash capital account subscribe to if you have it plus you can catch us an

h d the only place you can catch us in h.d. that's on hulu at hulu dot com slash capital dash account come back tomorrow we're going to have a fun guest convicted fraudster who now is going to tell us all about it but for now have a great night.