here in moscow thanks for being with r t let me take you through our top stories if you will syrian rebels say they're behind the blast that brought central damascus today explosion struck at a military compound and just meters from the hotel where the u.n. observer mission staying. it's already granted asylum to julian for the decision that will end the whistle blows two months quest for refuge now expected later this week. and no end in sight explosions rocked afghanistan right after the deadliest day this year so almost fifty people killed while another scandal flares up the u.s. presence in the country. in half an hour between now and then let's go to our

studios in washington d.c. laura list is waiting there for tonight's capital account. good afternoon and welcome to capital account i'm laurin leicester here in washington d.c. these are your headlines on this tuesday august fourteenth two thousand and twelve let's go back in time remember the threats reported about what would happen if wall street wasn't bailed out. the market would drop two or three thousand points the first day another couple thousand the second day and a few members were even told that there would be martial law in america if we voted no. that was years ago but it's hard to forget is the legacy is still with us too big to fail banks extended to take down the economy while taxpayers are expected to shoulder the losses they rack up a higher than expected tab as with the auto bailouts holdouts car companies really

well getting a slap on the hand for messing up i could go on but we'll talk about all of this with former tarp cop neil barofsky who is out with a new book bailout and while we're on it bloomberg reports russell wason board senior the c.e.o. of the bankrupt firm peregrine financial group was indicted on thirty one counts of making false statements to regulators will ask neil barofsky if sans suicide no confession there are legitimate criminal cases that could be built around executives at major firms too big to fail firms surrounding the financial crisis and its aftermath and i should mention for our futures and commodity trading viewers barofsky prosecuted the c.e.o. and president of russia that's a real hooker there and finally since we're talking being locked up we'll tell you about the apple of the u.s. prison systems turns out they found a captive audience let's get to today's capital account.

all right it's been a few years but i'll tell you on any given day we can see the legacy of the financial crisis and its response from the government in the news it is the legacy taxpayers are still footing the bill for won't street seems to be paying less for its crimes and that is to put it lightly today for example the s.e.c. charged wells fargo's brokerage firm as well as a former v.p. for selling investments tied to mortgage backed securities without fully understanding their complexity or disclosing the risk to investors that's according to a statement from regulators and was fargo agreed to settle the charges now we're glad there was something done ok better than nothing but a fine of six point five million dollars no admission of guilt or denial for that matter and six months of spend of the v.p.

from securities from that industry sounds like i can slap and a broken record too meanwhile yesterday we found out from the u.s. treasury department the auto industry bailout will cost taxpayers three point four billion dollars more than previously thought treasury now believes this bailout will cost uncle sam just over twenty five billion bucks that's according to reuters and this is not including the costs associated with the they old and false promises tied down hundreds of billions of dollars of taxpayer bailouts doled out through tarp to financial institutions under false pretenses of what that cash could do and what it was supposed to do that's according to the man who was policing it touted of course the programs i'm talking about to the taxpayer with platitudes like this what's really innovative about this is partnering with private investors partnering with the f.d.i.c in the federal reserve to get all the resources we can to get

those things off banks' balance sheets. i was referring to a particular program that i'm very excited to ask our guest about the man i was talking about critical of tarp the way it was dealt with at least is neil barofsky the former special inspector general for tarp and he's author of a fantastic new book he doesn't mince his words i have to say it's bailout an inside account of how washington abandoned main street while rescuing wall street and neil barofsky first as i said right before we started boy am i excited to have you to talk about this book i was telling you it is very refreshing to see fraud uttered more in one page of this book than i've heard on the hill or by wall street exacts for a very long time it seems to be the afterword in washington at least and probably in new york. well yes it's probably right it is one of the frustrations of the recent financial crisis has been the lack of accountability for a lot of the acts and not just the criminal acts but also of civil liability and

the lack of accountability on behalf of the regulators who. fall short of their jobs and i would agree with all of that so i really want to dive right into a part of your book that we found really fascinating and that's why i chose the sound bite i played in my intro because it was a tarp program called p.p.i. p public private investment program sounds an ascent but as you say it was designed by wall street for wall street and what i found so i guess creative about this was that for a financial crisis built on leverage that the so-called solution which was tarp that wall street and our policymakers found a way to use leverage with the programs that were supposed to solve the problem of too much leverage so i guess it's no shocker you say it was designed by wall street because you explain that assessment and why that happened and what impact it had. well this was a program that was announced by secretary tim geithner secretary treasury in february of zero nine and you know the time i was of course responsible fighting

oversight of the bailout and we sort of knew something was coming we heard a little some of the details but as we kept pressing within treasury to get some actual mechanics and details they kept putting us off putting us off putting us off and so those details emerged and it turned out it was originally intended to be a trillion dollar program that had that was so riddled with the opportunities in advantages for the giant investment funds the wall street funds that were going to run the program that it was that it was primarily based are lending tremendous amounts of taxpayer money leverage to multiple different government bailout programs that could have left it to be less than one or two percent of actual investor money the rest of it all provided by the taxpayer with very limited upside but all of the downside and there were so many conflicts of interest and opportunities for fraud built into this program that ultimately we had to object to that in its entirety the one good news i could i do get to report the book as far as we're able to really blunt the impact of this although treasury would not listen

to our complaints congress did and eventually even the federal reserve who is part and parcel of this program refused to go along with some of the more insane things the treasury was pushing and were able to stop that money from going out and i want to get into a lot of the themes that you just mentioned there that go through your book about the fat in the treasury and some of their tactics and underhanded tactics but first one of the things that really struck me with with your description of this program and what treasury with pushing for various agencies was that this program was for select firms for chosen firms that would that would work with a partnership with the government and there was potential for the chosen fund managers for example to use this program to move markets they could then booth profits for these managers existing books and i'm pretty sure i mean i'm guessing that if you're a retail investor you could a line out to get in on the action with a program like this i'm curious what you think this embodies as far as crony capitalism here in the u.s. in your view. i mean this was really an example of it at its worst you know at the

time we were still dealing with the program we couldn't really understand why treasury was sticking to to a program that gave such opportunities because it literally gave this very small handful of handpicked investment managers a trillion dollars worth of buying power to move markets in in bonds that had been frozen the market been frozen so the prices were very susceptible to big swings and the whole point of this program was to drive up prices to a certain extent so that these managers could have insane profits in other parts of their business potentially at the expense of the taxpayer if they were to artificially boost up these prices either directly or colluded with one another and it got so bad that i was complaining and working with the federal reserve that a lawyer of the federal reserve bank of new york i would would commiserate every time i had one of these incredibly frustrating conversations with treasury and he said to me it's as if their mouths are moving a treasury but it's actually larry fink one of the c.e.o.'s of one of the big over

the big investment houses it's like his words are coming out of their mouth i mean this is someone at the new york fed who's who is offended by by just how how onesided this was and eventually doing an investigation to find out how this program was designed and how these fund managers were there and it turns out that the very managers that were going to get this huge advantage had essentially designed the program for treasury and were vetoing my suggestions to try to protect the taxpayer from fraud i wanted i wanted to get it as later but what do you think is responsible for that you said essentially you felt like these guys at treasury were a mouthpiece for wall street and even some of the fed was complaining about that that's it that's a theme in your book that treasury was always trying to undermine you in trying to protect the interests of wall street in your view for example with executive compensation for wall street executives and assorted other things with the fam for example coming around more and kind of being more amenable to what you were suggesting why do you think that was why do you feel like treasury was so imbedded

in the what to put it that way with wall street but you but that even wasn't to that extent. yeah no should say to that extent i mean the fed is if you are really captured it should institution as well to the interests of wall street it was the treasury of god such off the bed on this particular program that it defended even the fed and they helped put a stop to it look there's a number of reasons but what i saw over and over again and i have to say coming from new york is a federal prosecutor i was shocked to see the level of control troll that the wall street institutions had over treasury and the officials in the in the bush administration then again in the obama administration and i think part of it is a result of the revolving door so many people are revealing with came from the same banks that of course helped drive us into the financial crisis you know banks like goldman sachs merrill lynch bear stearns and they brought that wall street ideology with them and even those who didn't be didn't come from those banks had so surrounded themselves with these individuals that they started to adopt this this

way of thinking and i heard it over and over again whenever i would push for important protection i would hear that we didn't need to worry about it that i was sort of out of my mind because we could just trust the banks not to risk their reputations by gauging in interest that conduct i mean it was as if they had ignored all the lead up to the financial crisis but that mindset is very much there and it's still alive and well today and it's one of the problems of our regulatory structure is that as a result you have these interest that are looking out not for the people they're supposed to be serving the taxpayer but against serving the interests of these large banks and speaking of not changing their thinking and ignore financial crisis that just happened you paint a really interesting scene that stuck out to me too where you're talking to william dudley at the new york fed and you're asking him how he's going to protect against fraud in the talf program another tarp program and he says well we're going to trust the ratings agencies to rate the aaa rated bonds and we're going to trust that and we're going to trust our economic models and we're going to trust investors to do diligence so in essence all of the things that led to the financial

crisis and i don't know if he wasn't saying that or he didn't want to see that i don't know now in new york that came around with a lot of your recommendations on that for example in terms of enforcing compliance but i'm curious do you think that that's still the attitude with regulators at the top that they can't see what's going wrong and korat act or they don't want to. i mean absolutely they saw all the problems that led to the financial crisis and they started designing programs that not only replicated all of the broken factors but added as an accelerant you know huge amounts of government guarantees and when i pressed dudley his response was that he didn't think the rating agencies would embarrass themselves again with those were the words the exact words that he used and this continues to be a major problem this sort of presumption of goodness of soft touch regulation that they can trust the banks not to operate by their obvious incentives to seek profit at all costs but out of some sort of public's minded interest and this was

characteristic of so many of the tarp programs and it's a real problem because these and these institutions have such an advantage because of their incredible size and have the ability to really flout the rules that are supposed to rein them in yeah and there's so much more i want to talk to you but we're going to go to break quickly we'll come back in one minute we'll have more with neil barofsky author of bailout and former special inspector general kind of a tongue twister for tarp still i had the treasury. he says it was quite a barrier to him doing his job wasn't a fan of timothy geithner blood timothy geithner's response to some of barofsky claims the first your closing market numbers.

wealthy british signs on it's time to rise. markets why not. find out what's really happening to the global economy in terms of the war on our. welcome back we're talking to the man whose job is to be that car watchdog protect against fraud hold banks accountable here is one criminal case where he was successful in getting it pursued. the charges have been filed against illegally

farkas he is the former chairman of t.v. w a private mortgage lender regulators a charging him with fraud and about a one point nine billion dollars scheme that eventually led to the downfall of colonial bank corp but he describes in his book how even though he had builder agents had built an airtight case d.o.j. was pushing back they didn't want to pursue it and they continued to as the d.o.j. print prosecutors continued to push back hard their timidity was frustrating i think that they just didn't have the confidence that comes from prosecuting a series of complex high profile cases and mr brodsky who had been a prosecutor in the southern district of new york very well no different obviously said his prosecutor friends from that district called the office were shocked that the d.o.j. was not wanting to pursue this and so i have some questions about what this means for our expectations of the d.o.j. let's bring back in neil barofsky and mr brodsky is this wimpy d.o.j. that you paint in your book the d.o.j.

that we've been relying on to investigate prosecute and charge higher profile wall street executives at too big to fail firms for crimes in connection with the financial crisis. just in that case what a number of cases i saw a real lack of sophistication in a lot of the prosecutor's offices around the country when it came to complex accounting fraud cases and you know those cases are different from other types of white collar cases they require a level of expertise and experience and the part of what i saw as a prosecutor was there is a huge shift in white collar law enforcement resources particularly the f.b.i. after nine eleven away from some complex accounting fraud to counter terrorism investigations and i think that has created something of an experience gap which i saw unfortunately time and time again that to get doesn't pass by we've seen fewer cases will just touch on something that there aren't something in your book where you said that you got so sick of hearing in washington the argument about reputation over at the banks will do the right thing because of their reputation arrest similarly what i've been sick of hearing and we have is this excuse for not

prosecuting high level officials on wall street when there is ample evidence that there could be cases i'm not a lawyer of course but but from a lot of people i've talked to and one thing that we always hear is these cases are too tough and you're talking about the sophisticated experience it requires but you did this you did this with rough go you put away the president and the c.e.o. that's a firm that i'm sure a lot of our viewers probably did business with and newry well i knew him back then i should say because it's fun to whom neil barofsky you were a prosecutor who could you build a criminal case for in terms of crimes at major firms too big to fail firms we've heard a litany of examples where there could be the goldman sachs abacus deal timberwolf lehman where they were only using what was a repo one hundred five to book billions of dollars in phony sales according to an independent examiner that on actionable plans against them we have a life or scandal we have john prison which of course i'm a global but i mean he was an sachs c.e.o. and has kind of been a poll out i guess you could say in the years that have been at

a crisis who could you build a case against. you know i think that vest a geisha is the most recent and unfortunately i think given how much time elapsed since the since the actions of the financial crisis perhaps best opportunity to start putting people in handcuffs i mean this is been so this is the facts that we already know are some of the most you know blatant attempts to manipulate one of the world's most important interest rates in the world and it seems pretty clear and it seems like it does because it's way up the ladder so i certainly hope to see some movement in those cases but it's also hard to get too excited too optimistic given the form as we've seen today do you think as a prosecutor that there could be criminal charges related to life or manipulation that you could build for c.e.o.'s of firms that were found to have traders manipulating it. you know that's a real question of how they approach these cases you know the conduct so far we haven't seen that type of direct evidence that would give you the confidence to bring charges could prove beyond a reasonable doubt but there certainly are suggestions that might be there and of

course what they need to do though is you need to start charging people you need to start putting people in cops and pressuring them to stop their bosses that's how you get the big fish you have to start somewhere that hopefully will see that soon start with the mid-level executives and work your way up the ladder and find out if this is something that is being known about and approved to the highest of levels and that really goes to so many of these cases whether it's robo signing we saw in the aftermath of the crisis as well you've got to start somewhere and we haven't seen that action yet even though years of years have gone by why do you think we don't see wiretapping and kind of methods that i always hear guys using from from your old stomping grounds at the office. i think we're trying to be difficult right now because you have to be on going cases and with these are historical transactions and it does appear although i think the library is actually you actually raise a really good point because apparently the new york fed was on full notice by april two thousand and eight that this was going on barclays at the century confessed

they were doing so and did nothing with that information didn't alert department of justice and we know that can that bad behavior continued on for another year yes that actually would have been a really great opportunity but of course the new york fed just sat on the information it didn't share it which is part of the problems with the problems i talk about in the book is just how capture these regulatory situations have become to the interest of lawsuit where they're too busy enabling fraud that rather than referring and getting it prosecuted and what do you think is the antidote to that because regulatory capture comes up a lot of your book.