from st louis president jim boehlert said the comments would not affect the fed's decisions on interest rates but others still fear that the fed choices will now be second guessed to an even higher degree. we have seen record bank profits some of which we reported here on the program earlier in the week at the same time we see continuing calls for relaxing regulation in the financial sector and even things like stress tests conducted by the federal reserve which are meant to guard against another government big bank bailout here discusses the former banker herself she's also the author of collusion how central bankers rid the world nomi prins know me thank you for being with us again we sure appreciate it the big banks have never made more money than right now does that surprise you. well now they've had ten years of being subsidized by the federal reserve by the policies that have allowed them to mass a lot of extra capital the quantitative easing policies that even though they have tapered off still have amassed

a multi-trillion dollar book of assets from the banks to the fed over the last ten years and as a result they've been able to buy their own stock with the blessing of the fed pay dividends to shareholders to also buy their own stock and to invest in complex securities and activities that enable them to extract high fees from their businesses which in turn produce bigger profits for the. u.s. sort of nutty i want to get into some of the details a little bit asked for your help in trying to explain some of it earlier in the week a federal reserve chair jay powell took some heat on the senate side at least from some democrats elizabeth warren idea some others and sherrod brown the ranking democrat on the committee for rolling back the so-called stress test and on these supplemental leverage ratio and i know those seem like they may be complicated for folks but they have a lot to do with what you were just talking about and the white the fact that the chairman said chair paul said that these stress tests were tougher than ever that

really doesn't seem to be the case explain what these stress tests are and what the federal reserve has done to relax them. well first of all these stress tests which were part of the requirement by the frank act of twenty ten to require banks to basically pass. a certain level of the amount of capital or reserves that they need to have in their possession or with the fed in order so that if there isn't another emergency we don't have to have a bailout and we don't have to have another ten years of additional fed subsidies to support the liquidity and this sort of operations of the banking system the thing about the stress test of course though is even though chairman powell is talking about how they are stronger than ever the reality is that banks are involved in helping to create these stress tests and a lot of the things that the stress tests miss are the very things that caused the last financial crisis there the co-dependence sees amongst the banks the leverage

or the borrowing the banks provide to each other or at the back of certain securities or transactions in which they are involved and these stress tests don't necessarily really stress. those codependency those links between banks so that means if one particular transaction fails dramatically in one institution if another institution has exposure to it because they're dealing with that first institution say bank of america with j.p. morgan chase then they are also on the hook and those are the types of things that actually these stress tests don't really accommodate in there the biggest pitfalls and dangers that really to a financial crisis potentially so that's really been off the table anyway throughout the most of these stress tests but the fact that they've passed them and they have enough leverage they've reduced their leverage enough supposedly to pass them is because of the very way that they're constructed and the fact that they've been subsidized by the fed for so long because so there's two things there is the contagion impact that you say is properly calibrated between the banks but then

there's also the leverage ratio and it's that leverage ratio that has been reduced and and that has to do with the amount of cap. but all that the banks would have on hand should something take place and and how they would go about what we call a what they call a what i used to call a living will that is what happens in the event that the bank has to go under and how do you deal with it without that contagion now that leverage ratio if you can explain a little bit more but it's the relaxation of that leverage ratio that i understand led the fed to approve the disbursement of funds from the banks and dividends and stock buybacks do i have that right. that's right so so first of all it's the fed that has the right the job of approving or deciding not to approve when banks come to the fed and say look we want to use the capital that we have or extra capital that we have instead of doing so bank lending activities to buy back our own shares

to provide higher dividends incentives to our shareholders and so forth and the fed can either say yes or no and this is historic this is even before the stress tests were created with the advent of the stress test the fed now has a sort of extra measure where they can say i will you pass these stress tests as we've created them and we've reduced the amount of capital you have to hold anyway as part of this new round of stress tests so given those two things yes you have enough capital to buy your own stock and to pay dividends or higher dividends on your own share so it's kind of a circular relationship that these private banks have with the fed who test them but also suggests that they don't necessarily need as much leverage or they passed their leverage test as the tests have been constructed and therefore they can use that extra capital to buy their own shares it's one of the reasons we've seen in the last week all of the shares of the banks or most of the banks right first because they've had high profits but second because they are going to or have began

to begun to start to buy more and more of their own shares they've already bought millions billions of sort of last week last year and so forth but now they're going to continue into the rest of this year and that's basically providing them additional lift to their prices you are right we talked about these bank profits earlier in the week and a couple of them because they were sort of symmetrical i recall b. of a was a thirty three percent growth in q two and you're one of your former employers goldman sachs was forty four percent that's forty four percent just in the second quarter i mean gosh you know we take any of that any part of that for any one of our investments but one of the reasons that people say that they're doing so well the banks is that we had this large tax cut. two hundred trillion bucks worth an active late last december in the economy seems to be you know bolstered by that purring along at least for the most part but what the fed forecast for the long term growth is now just one point eight percent g.d.p.

yet it was the same one point eight percent last year at this time so my question to you would be what do we have to show for the tax cuts nomi. well what you've basically discussed with those numbers is something i've been talking about for a long time which is that quantitative easing or providing extra capital to corporations of particular banking sector doesn't necessarily make its way into the real economy or certainly not in a sustainable long term growth type of type of manner and so what those figures say it's interesting because at first the fed was talking in j. paul was talking as he first came into the position of the chair earlier this year about how growth was high there was predictions of there for a potentially an increased rate of acceleration in hiking rates and so forth and talk of inflation rising and so forth and now that there's been a few rate increases this year it's all of a sudden been been dialed back and the expectations of growth are now all of a sudden a little bit less than they were to begin with so basically what the fed is saying

by that is that their policies haven't really helped by extension they are saying that the tax cuts even though they have talked about them as potentially helping and in addition relative to stimulate the economy as has the administration as has various members of the government media so forth haven't really made their way into sustainable growth at all into the economy they've made their way into shares they've made their way into the stock market into financial assets because there has been extra capital taken off the table by these companies particular ones that have really great accountants and you know stuff that people can figure out how not to just take the corporate tax cuts for their face value but also sort of expand upon them and terms of the capital they can save and reuse for for their own shares and so forth and that's exactly what we've seen in the market it's not what we've seen in the real economy because the what happens in the market simply doesn't go into the real economy what happens in the growth strategy of a company and increasing wages for a company in expansions of a company would go into the real economy but simply using that capital to to lift

share prices or to to back to use as collateral for issuing extra debt and so forth . doesn't go into the real economy and neither has the ten years of the subsidies the feds provided to the banking system i keep repeating that but it's very important to know therefore to have trillion dollars of subsidies for the banking system and that also hasn't created a sustained real growth at the sort of foundational level of the economy and certainly not wages and so forth what we do know about the tax cuts nomi is that you know our grandkids and it's two trillion dollars that's we're not going to dig out of that hole any time soon and while i'm a supporter of you know people investing in capital markets and certainly getting dividends when they can about a third of the stock investment the u.s. is actually from folks outside of the u.s. so it's not it's not just not making it into the u.s. real economy it's not making the you a current u.s. economy at all so my question is when you talk about real economy how about wages

we don't see much improvement on wages despite the good economy and workers shares of income are getting smaller over the years what about that all of that that's a direct extension really of of this phenomenon that capital is going into the financial markets whether it's coming from domestically or whether it's coming from internationally. and that capital is being is to elevate a certain perception of the books of corporations but it's not being used to give to the employees and therefore the wages are not increasing excellent nomi prins author of collusion how central banks rigged the world thanks for joining us appreciate it no me. thank you. break but stay with us because when we get back to holland cook and steve walz help us sort out what all the media merger madness means and we answer the question is local media on its deathbed plus danielle de martino who the c.e.o. of will intelligence help us look at the fed and jobs in light of

a meeting at the white house with business leaders and as we go to break here are the daily judges of the closing bell already arrows on the stocks as you go into the weekend will be right back. join me every thursday on the elec simon chill and i'll be speaking to guests of the world of politics school this list i'm showbusiness i'll see you then. still do. look at it it.

doesn't. do it a little bit. even though it is really nice for you. a little it's only about the looking on the other. hand full to one of the well columns on the wall. come. up early. tomorrow there may not be any kind of maybe bacterial life and may not be anything but i think it's probably the sometimes in life there and certainly from now we can we can send

a robot to interact with some other species out there. the world of media is changing as we've reported on the giant media merger madness that seems to be going on almost a daily basis and one question is if too. much is being paid for some of these companies and will that make them on viable and what about local content is it gone forever for more we turn to the host of the big picture here in r t america veteran media consultant holland cook and our friend conservative t.v. and radio commentator steve malzberg thank you both for joining guys holland i heart media is one media venture that hasn't worked out like plan perhaps there was

too much money paid invested there give us the background on how this giant conglomerate even took place the original sin was committed late at night in one nine hundred ninety six attack down to an otherwise unrelated telecom act was radio deregulation and the simple story is that one company had a ration of stations they were allowed to own a dozen and no more than four in one city now one company could own as many stations as they want they can now have as many as eight in one city so it became a seller's market and local radio the beloved mom and pop independent operators that made radio so delightfully local probably had no intention of selling they're all down in west palm now because along came clear channel now called i heart and some of the other big groups who are wildly overpaid in this feeding frenzy and ever since they've been burning their furniture to keep the

lights on because the mortgage is just untenable and that's why it's hard to find local news or local deejays on a lot of am f.m. stations and steve we always talk about you conservative t.v. and radio commentator you've hosted programs on some of these stations and and even where you are we look at the background there in our studio in new york i mean a lot of local content been lost there right oh yeah absolutely i mean w a b c at one point rush limbaugh sean hannity mark levin john bachelor all now some of the biggest syndicated shows that go all over the country and occupy radio slots all over the country at the expense of local programming they were all local shows that w.a.b. say at one point and that's just one example plus i had an overnight show you don't get live over night.