good afternoon welcome to prime and tryst i'm harry i'm boring and here is the topic that we're following today. game on the big bang surfing club syfy that's regulator speak for too big to fail is going on the office executives from five of the biggest banks met in private to discuss their p.r. problem they also hired several former bush and obama administration officials to lobby congress their pitch well every additional dollar in capital they're required to hold translates into eight to ten dollars less to lend but according to the fed the biggest twenty five banks are already sitting on over six hundred billion dollars in extra cash which is not being lent from two thousand and seven to two thousand and eight but fannie and freddie tighten loans standards and eventually

stop purchasing subprime loans altogether we all know what happened next well it's like they're getting choosy again a new rule by the federal housing finance agency which oversees the housing giants would take effect next january and it would again thailand's lending standards no word yet from the what obama's new nominee to head the agency but we'll get to him later now the dow hit fifteen thousand this week it is up substantially again today but have we seen the ultimate contrarian indicator the new york fed no less released a study that concludes stocks are about as cheap as they are they've ever been as well when irving fischer said in one nine hundred twenty nine that stocks had reached a permanently high price to. save him and as we discussed is the same ability of current market and here's what's in your prime interest.

how would you like to get paid for being a facebook user well i found i found someone who thinks you should earlier i spoke with jaron lanier the father of virtual reality and author of who owns the future and his book he makes the case for the months of ation of personal information his work as a computer scientist won him a position on times one hundred most influential people he's also worked on projects at atari and microsoft and he founded research which was the first company to sell virtual reality products let's listen in to this fascinating conversation. in optimist because they see a way advancing technology can create

a stronger middle class than ever before in the past the middle class has always needed special little mechanisms to help it out because it wouldn't be stable otherwise their vote was big or ten you're or licenses that sort of thing i think if we acknowledge where value comes from individual networks it would turn out that a lot of people are valuable and we'd actually do have a middle class more naturally than we have in the past so i'm actually an optimist . we keep on doing things the way we are we're all the wealth of the power concentrates around whoever happens to have the biggest computer at a given time then of course it gets bleak and that's kind of what's been happening but i think we can change it ok and i wanted to get your thoughts on this in the one nine hundred fifty s. in the one nine hundred fifty s. one nine hundred sixty s. people thought that robots were going to make all jobs obsolete and i have here this headline from the spokane day we chronicle in ninety five says that gadgets were going to wipe out complex industrial jobs but the productivity gains from lower cost items such as cars allow people to do more with less money and in

less time and this is one of the reasons why the us shifted from the manufacture. economy to a service based economy now regardless you know we don't see massive unemployment. might we see structural sets in employment towards new industries here and you know you can find one derful headlines about fears that robots will take over jobs from the nineteenth century this is been going on for a while if you look at early karl marx from eight hundred forty this is what he was writing about this is where that all started and science fiction started that way too so this has a huge history and the reason why robots have not thrown people out of work is really simple it's because we've made a decision to still peep a people even though their jobs got easier to do you know i mean it's really kind of a values decision somebody could have said hey you know it's so much easier to drive a car than it was to deal with horses why are we even paying cab drivers people love driving but we made a decision that you know it's ok it's ok we'll pay people even if they're not as

miserable as they used to be to do their work and that's really what created the middle class in the twentieth century the only thing that's changed recently is not people are still needed for the new machines and i'll give you some examples in a second of that the only thing that's changed is by deciding that information should be free we've decided that the more the economy becomes an information economy the less people you talk about this a lot you think we should be compensated for getting facebook or social media platforms our personal information sure why exactly do you think facebook should be paying me to give them my info i'm sure it's fascinating in your case for one thing but another reason to let me give you an example right now you can upload a page of english and come back as a page of russian and that's magic but how does it really work the way it works is that the translating algorithms that google or microsoft have observed real translators doing real translations and then the pattern matcher example to those examples from real people and they mash up

a new result that's good enough to use but the thing is we never that happens that means that the real people. who provided the example data aren't getting paid and so what's happening now is that this incredible wealth and power concentration in both the financial markets and the media the gradual sinking of the middle class is being driven by these algorithms so that's why i mean that's a good point but also what about facebook and. the arab spring i mean this part for a while for people who were under your regime to be able to communicate with each other and to coordinate and to overthrow dictatorships i mean how can we argue that this wasn't a good thing well you know i wasn't there and i i'm i'm writing about the developed world which i feel i'm expert on the developing world it's not something where i feel i have expertise but i will say this i have friends from burma who point out that they had no internet and they still managed to achieve an improvement in their society similar you know maybe even they did little bit better we'll see how the

story pans out and there's been river lucian's forever without the internet i mean it kind of bugs me when my buddies in silicon valley call it the arab spring facebook revolution or twitter revolution because it's like it's disrespectful like basically if our tools help that's great but fundamentally they couldn't have been that important you know fifteen i think the internet is an important invention no you can you know we're going to my whole life i love the internet i love love love love love love love i just i just can't look it's so simple. as we create new efficiencies or create new technologies we have to do it in a way that we're not also sneaking in a phony bit of ideology where we undervalue the contributions from everybody we can't all the people who provide the data that makes it work you're going to live in this informal way where you're only getting reputation and promoting which are what about how you know about higher as we saw the reports last month with it being tax day viruses starting to see you social media platforms to look for tax cheats and we've already seen facebook being used to get evidence in criminal cases i mean

what about the the privacy issues here where facebook is now paying as. for every nation then they would have more of a right to use it to you know not really you know that facebook something you it's person to person payment if facebook's paying you then it just concentrates more power people have to be first class citizens and here's how and here's the answer to your question right now let's let's before the internet whenever there was a police force that people had to pay the police to turn by their cars and their guns right you don't give the police a blank check and say everything is free there's a constraint based on budget that's how democracy works if that happens for information when the government tracks you they have to send you a penny for seeing you on a camera there's a budgetary constraint to keep it from getting out of control it might not be enough but at least there will be part of a solution because otherwise we'll never keep ahead of the programmers there's no way like legislators will be able to do that and moving on to the actual topic we have some really interesting thoughts on high frequency trading i really want to

get your thoughts on how you really this is with such a life that's now where you sure look i have a bunch of buddies who are quansah and i've seen the rise of trading from its birth and look the deal is the usual justification for it because if you look at it you say wow it happened so fast there's not even time for information from the real world to get into it so how computers just react how can it be about anything other than sort of exploiting math and they say well the answer is that it detects little fluctuations and if we counsel those out we're making the market more efficient so we're actually earning our keep but if there was a monopoly and there was only one high frequency trader that might be true but since there's multiple ones they get into residences with each other and they're actually detect each other's artificially created little signals so that they're just milking the market to no purpose so it's one of those things that would be real if it was a monopoly but when there's multiple ones it's no longer real arms race to the bottom. in that in high variance in trading. it's going to be remembered as

a pretty stupid they give it the thing is the math is so intriguing like the thing is i could almost see doing just. it's fun like it's a great toy like if you're mathematically inclined or you like computer science what a great thing but. it's going like a video game it's addictive for the people who work on it even aside as they make money on it you know it's like with a great video game and you make money so i totally get why people like it but at some point of course are going to have to realize it's stupid well that brings up another point with you being in your work in mathematica computational science but you're also a very accomplished musician do you think how has being involved in mathematics and computer science develop your artistic ability. do you think. your brain in a way so you can see the musical patterns you know i mean one thing is in my work in computer science it's really been interested in user interface when ever i look at trying to do better user interfaces i always look to musical instruments and

they're the best ones ever made so it kind of gives me a sense of humility about how little we've done so far and how far we have to go do you have perfect pitch no i mean actually you know it's true it's funny if we don't think about it i do but if i think about it i don't so it's one of those things that's kind of on the edge for me i don't necessarily want to i don't want to be skilled as a musician i want to be sort of intuitive and it's a different kind of goal do you hear or see you know. if you go. see color is there anything. you know a little bit i'm really interested in it virtual reality is all about exploiting synesthesia news and studying so doubt on your point of virtual reality now we know how the virtues fear. you're kind of it's like the star star star trak holiday you know we've all seen star wars are involved seen avatar so how close are we to actually having a virtual reality and how will that change our socio economic structure. well

you know. all the digital gadgets change the socio economic structure not based on the. the technology is never the problem it's always the power structure so every single technology that we've talked about i actually like you know i i think some sort of a high frequency trading thing to make markets more efficient might make sense it's just that it's the structure all the power and most goes to ever has the biggest computer that's the problem but that's a different question than the tech i don't see how any way what if you spend your whole life saving all your money so one day you can finally afford the biggest computer and you're going to power you know they're expensive they're like cities at this point i mean there's it's no small thing it's a but it's a very hard game to get who has the biggest computer the very biggest ones in the world i'm not sure i mean in the sciences we know it's in american law but in terms of all of the politics and money stuff well there's the contenders are the national intelligence agencies the big financial schemes the big california consumer facing companies social network and search the big insurance companies who will win the

big elections run that way now too so those are those are the contenders. that was jason lanier the author of who owns the future and who is mel watt up next i'm going to profile president obama's nominee for the federal housing finance agency and then our team producer bob inglis and i will discuss the fed the botched and dependent foreclosure review process you won't want to miss that's. really.

the. little the worse for the only one i. really. want. to give you the freedom to. look for every dollar the feel good luck you will find it here if you're looking for relevant stories unique perspective from tom my skin's dark.

last week president obama nominated north carolina congressman mel watt as director of the federal housing finance agency this is the agency that oversees fannie mae and freddie mac. now his nomination garnered both bipartisan support and criticism tennessee senator bob corker it said in a statement i cannot be more disappointed in this nomination this gives new meaning to the adage that the foxes guarding the hen house on the other hand white house support from several republicans including senator richard burr and representative spencer baucus this is the second time obama has announced a nominee from north carolina to head the f.h. f.a. and two thousand and ten that the president nominated joseph smith the north

carolina commissioner of banks for the position but his confirmation for. bailed out the republicans questions miss independence from the white house since the agency's creation in two thousand and eight it has yet to have a senate confirmed director and the pope was nomination and contacts if confirmed he will take the helm from edward demarco the interim director since two thousand and nine. thousand courage to many groups to demand his removal because he has resisted efforts to help lower mortgage principal payments for bar workers and response demarco has cited his responsibility to return as much money as possible to the taxpayers for the bailout of fannie and freddie he eventually became so controversial that top white house officials made a promise during last year's presidential campaign to oust de marco and to make good on that promise obama has now announced a lot as his nominee so who is mel watt why was first elected to the house of

representatives into one thousand nine hundred ninety two he has spent the past twenty years on the financial services committee mel watt was one of the central figures that constructed the dodd frank financial reform law what is his cozy relationship with tara let's bangs his top campaign contributors that raise concerns of his objectivity mel watt received a million dollars from political action committees in the finance and insurance industry during his time in congress he received donations from bank of america corp the federal pac which by the way is headquartered in this district washington mutual pac countrywide financial goldens goldman sachs as well as market jacobson the co-founder problem and tory by his own words was in a minute he didn't understand a focal point of the agency he's expected to head fannie and freddie issued two point six trillion dollars of mortgage backed securities as a two thousand and eleven which are derivatives and here is what he had to say

about derivatives in two thousand and eleven. a lot of these arguments that i. hearing today the same arguments that i heard about derivatives well i didn't know what damn thing about derivatives i'm not sure i'm still not sure at do. not a trivial concerned we hope he has a quick learner and edition he had this to say about bain capital. can somebody explain to me worse in two year one can. i just. assume every bank. is. just don't have enough knowledge in this area. but will he understand enough to oversee the banks that are entered grow to the securitization process as as nomination moves forward the question is whether he will be able to leave his financial conflicts of interest behind and provide effective stewardship of fannie and freddie and this is the profile of now what

president obama's nominee for the federal housing finance agency. and it's time for our daily duel yes it is once again thanks for joining way you for having me shall we begin yes here we go now one of the largest nationwide homebuilders which is told rather is just raised one hundred million dollars by issuing ten year notes and we've also seen a few recent i have heroes of housing based companies including century communities in colorado which also raised two hundred forty one million dollars now that housing sector really seems to be taking on as it's taking off but let's see what

these guys have been doing before because one of the interesting things about the toll brothers is they were selling their own stock in two thousand and seven and two thousand and eight and this was one of the bellwether is that the housing bubble which bernanke he said could never be popped at least nationwide would actually end up popping so you know what these guys are doing they're putting their money where their where their mouth is they're taking on new debt they're expanding projects in several markets and i think there is evidence that there is considerable fraud in the whole. market right here but you would think that they would have learned their lesson the first time around well everybody wants to build up the pyramid and jump off at the last minute so i think they can they can figure it out just like they did last time what about i mean maybe just a few bondholders will end up being unlucky but maybe the majority of the firms well well. i mean they can refinance a lot of this or they can finance a lot of this very historical rate so maybe they're just taking advantage of that opportunity but i mean and that gets to the point of q.e. which is you know to encourage people to get into higher yielding securities anyway

and that gets back to bernanke his theory of how do you someone gets pushing on a string which is very good i mean the whole point of q.e. is really to encourage saver is out of their safe investments into accounts like stocks are real assets and. it we're starting to see this now but is this real growth or is it just a manipulated bubble well it gets back to what we were talking about yesterday with the dow hitting above fifteen thousand it was up a little bit to close just a little bit under yesterday it doesn't really matter because the whole point of this exercise that ben bernanke is is that is to make people is to build this wealth effect and i think that's what we're feeling right now at least some people who are in the financial sector but not you and me but there's a lot of numbers out there that are saying you know we have you know a great economy and job numbers where you know along with the dow being i mean it isn't like that high ok well if we can get into the merits of price inflation and i don't think we've seen the brunt of it yet because

a lot of this money has to work through the system first before you feel it and long term interest rates are going to rise we know that there's also but we know that well because bernanke is telling us that they have to i mean we can't have zirp forever so of course interest rates are going to rise it's just a matter of when and then we have one point six trillion dollars of excess reserve sitting at the fred what's going to happen with that the fed has to keep that money out of the system somehow and one of the things that we're going to be talking about a lot of. on the show is exactly how the fed is going to be doing that but isn't the point of this to get the other banks to start lending more in the capital where they have been lending a lot more and if you look at c. and i loans over the last few years they've been up the maybe eleven twelve percent annualized and that's a pretty big number historically speaking so we have seen loans picking up what are they high quality loans and what's going to happen when interest rates rise and i think we're going to see defaults and once this money starts going out is that going to exacerbate inflation and what if we do start seeing inflation doesn't the fed have the tools to scale it back so it's really you know

a concern of well this is saying that he has that he can reverse policy in fifteen minutes he does have the tools to rein in all this extra money but the question is is he going to use about the right time the federal reserve is still be there you know that's that's one of the other points he's probably going to be out next january and we're going to have somebody new coming in and maybe and he said he's not even to go to jackson hole this year so maybe that's a sign he's just going to you know leave the sinking ship before it's so. well you know i'm talking about the fed there's another issue going on there was the independent foreclosure rate and where they're at it is they're out again they are out of the tags yes i think this was after just a few weeks ago they had written checks that bounced and now they're very they're writing checks that are for the wrong amount and these checks are so small to begin with i mean let's back up here and take a look at the situation i think that that for those who you know are familiar with this process and opened up our closure of you you know reviewed all of everyone

that was foreclosed on possibly a lot were at a few banks there was a you know we're basically nine point three billion dollars in the federal reserve and the o.c.c. oversaw this process and a couple of very nice contracts were awarded to insiders like from a tory financial group and it's two billion dollars who are involved and spending contractors and consoled and exactly what happened to that report before it was even released it was quashed. because it was releasing too much information about the big banks that there was a bank of america whistleblower who came to them and the report just got washed the last minute so the bottom line is that people were only getting five thousand dollars one hundred twenty five thousand dollars for military wrongfully they lost their home obviously not going to cover the cost of and now the checks are. being written for the wrong amount probably not a higher amount either but another point that we do have to look on is the federal agencies the fed and even took their eye off the ball they gave the money to the independent consultants and even

a contractor said oversee this process and there's a g.a.o. report that came out about this as well and in the report you know it said that they had zero guidance from the government of what they were supposed to do when they hired so many different contractors that they were just know what streamlining a process is so it really is a very complicated process as you now are saying all this money being lost and no one's really being rightfully you know they're not and probably tory financial group for people who don't know is a private firm and it's staffed with people who were formerly really really big in the government gene ludwig is one of the major founders and he used to be contrary to the currency alan blinder of used to work for the fed mark jacobson who came out earlier in the show as a contributor to me what i mean isn't the whole point of having you know the private sector step in to take over what the government doesn't have the capacity to do so who better to do or than someone who's been in the government well i guess you can make a lot of fees that way another ok round another end of tory financial they also

advised m.f. global and i'd be remiss if i didn't point out that they advise them of global on their risk controls and they said they put their stamp of approval on them a year later john corazon blows up the entire for good job from a tory. because we didn't get to. the final question here do you have perfect pitch. i have not been. maybe i. jason linear. kind of words i hope you're all right thank you i mean that's the dog i do. we took a trip through time today on prime interest the big banks try to remind us of the

harmonious days when they were safe and too big to care and we looked at a few new rules that fannie and freddie that might just pretend the next housing collapse the new york fed traveled back eighty years to channel irving fisher let's just make sure stocks remain cheap ok templi then we talk with jaron lanier who lie in dust of the future of social media monetization and we profiled mel watt who we predict will one day learn the definition of a derivative finally history repeating itself with the independent foreclosure review as a second round of bad checks and an already bad settlement made their way to insult foreclosure victims thanks for watching and make sure you come back tomorrow make sure you've always on facebook at facebook dot com slash time interest from all of us here at prime and just have a great. location

so if you like stream quality joy you'll save work. if you're. away from your television just doesn't work so how would your mobile device if you could watch ati anytime anywhere. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else and you hear or see some other part of it and realized everything you thought you knew you don't know i'm tom harpur welcome to the big picture.

it is in chile a clash with police as they march to change the nation's education system sights and sounds from that protest coming your way i will also look at the cost of education here in the u.s. is walls around the globe. and it's thursday which means it's time for the weekly report from wiretapping data to the elusive quantum internet coming up an expanded look on how the government and private companies companies are getting caught up in the web. and since the days of nine eleven the way that the u.s. has revolutionized its ways it's a ways of fighting war are unprecedented instead of over operations with tens of thousands of boots on the ground targeted killings and kill squads are the name of the game.