and so a bank run can lead to widespread bank runs or a banking panic more broadly.ometimes banks, again, pre-fdic, banks would respond to a panic or a run by refusing to pay out deposits and just say no more. we're closing the window. so that restriction on the access of depositors to their money was another bad outcome and caused problems for people who had to make a payroll or buy groceries. many banks would fail. beyond that, banking panics also fred into other markets. we're often associated with stock market crashes and all those things together, as you might expect, were bad for the economy. and so a banking panic could lead to a crash in the economy as well. so here's a formal definition just for your conference. you see people around -- standing around the corner waiting to take out their money. but a financial panic can occur any time you have an institution that has longer term illiquid assets. think of a bank that has long-term loans that are illiquid in the sense it takes time and effort to sell those loans. and which are financed on the other side of th

that's not the world of banking. what we're doing here is reacting to somebody's concern that they don't like blue signs or they don't like stagecoach signs or whatever is going into their commercial strips, and that's really not what formula retail legislation was designed to protect from. so i urge you to urge the board of supervisors to table the legislation. thank you. vice president o'brien: thank you. any further public comments on this item? come forward, please. >> hello, my name is gio danler-katz, i am a community outreach liaison on behalf of chase morgan, chase bank as a consultant and help with their government relations. since they were mentioned, i wanted to share some thoughts. we don't have a formal position on the legislation, but are aware of the fact that the impetus as was explained is in part due to a group of individuals who were not happy with the project that went forward last year, and appealed it multiple times on the grounds that the project should have fallen under the formula retail rule

one, we can address those banks and non-banks. you markets where, before, only banks were catbird by the standards and examined to imply with those. non-banks were competing in the market and taking some market share and growing it. they did not have any oversight whatsoever. many of the bad practices originated and/or accelerated in that short. . you cannot have a market where you regulate part of it and leave it untouched. that does not work. i came to greece. one of the things i would say is, we're looking at institutions from the standpoint of what is the impact of comply with these laws on the institution itself, what kind of risk as a create -- that is the banking agency costs wokas. that is what the law tells them to do. our focus is looking at the consumer. how did they will about marketing products? how does that affect individuals? are they being treated fairly and in accordance with the law? but may give you an example -- let me give you an example. with the contract with the vendor to offer a certain product and the li

large banks, smaller banks, and non-banks. >> you mentioned your supervision program. you have already been looking at the records of some of the larger banks. what did you learn so far? what did you find that might be different than the other bank speculateors have been finding? have you already dispatched regulators for those firms? >> we have. we have examiners on the ground at banks and non-banks as we speak, even though our non-bank program was hampered by not having a director and therefore got underway. both are underway at this point. i think what is interesting about our role in examining and sprfering these -- supervising these different financial institutions is two things. one is that we can address both banks and non-banks. if you have markets where before only banks were perhaps covered by the principles and standards and examined to comply with those. non-banks were in there competing in the market. they were taking market share, growing market share in the market, for example, before the financial crisis, not held to any oversight whatsoever. many bad p

banks. now, that should help ultimately. >> you look at the consumer surveys, more government policy is bad than good. so there's not any confidence that we can really solve the problems. get off the path we're on and get on a good path that will support growth. >> our baseline view unfortunately is the data starts the series, the economy starts to slow, and it does prompt us to go ahead with qe-3 later in the year. [ mujahid ] there was a little bit of trepidation, not quite knowing what the next phase was going to be, you know, because you been, you know, this is what you had been doing. you know, working, working, working, working, working, working. and now you're talking about, well you know, i won't be, and i get the chance to spend more time with my wife and my kids. it's my world. that's my world. ♪ >>> welcome back. i'm seema mody. the nasdaq fueled by the strength in technology, closing for the first time above 3,000 since december of 2000. the question is, can we hold this level. a

the fed says the nation's third largest bank isn't worthy of an invitation to the big bank party, yet citi says its capital levels are strong and it would've passed the fed's dreamed-up doomsday scenario if it hadn't asked permission to up its dividend. still, it's hard to say what's worse for citi: no tasty dividend or no invite to the fed's exclusive party? but some analysts say investors should not worry; the bank led by c.e.o. vikram pandit is in good hands. >> i think pandit put forth a sound strategy, a more focused strategy than citigroup had in the past, and i think he's on the right track. i don't think this 0.10% below the regulator's guidelines is really cause for concern. >> reporter: investors have good reason to be concerned. citi was one of the most damaged firms during the financial crisis, desperately in need of government bailouts. and even though the bank has clawed its way back, a fed- approved dividend would be the stamp of approval shareholders have been waiting for. 2012 has been a decent year for citi shareholders as it's been for most bank stock investors. sti

other thing of course is that the regional banks like the african development bank the american bank the asian development bank european bank for reconstruction of element also tremendous institutions as are many of the national and others but these are complementary not competitive with the world bank in so far as the world bank is the only global institution i can focus on the big global issues facing the world these regional institutions are not able to grapple with the scale and number of countries the number of regions where the different expertise sets that are required for the global issues so i think while they are competition for these institutions in very specific areas like infrastructure finance within the bric countries they are not able to deal with the failed states they are also not able to deal with the big common problems we face the issues of the global commons like climate change the management of systemic risks the reason it's true sions need to be complementary and the key question of course for the global institutions is can they live up to the global expectati

the issue is really developing a an integrated system of bank supervision, combined with bank resolution that allows us in effect a framework of early intervention with these institutions to avoid failure as well as the capacity to manage an orderly failure if necessary and i want to go through that with you for a minute if i may. it's important to recognize up front that resolution is always the option of last resort. the purpose of the supervisory process is to make sure that institutions manage their risks so that the risk of failure is minimized. the goal is to have a supervisory process that can recognize problems early and encourage management to address problems in a proactive way. when an institution supervisory rating or capital adequacy is downgraded, the institution is subject to a variety of supervisory responses intended to encourage management to take prompt action. these supervisory actions may include specific criticisms of risk management practices, formal or informal enforcement actions, and orders to raise capital or seek merger partners that can bring in new capital a

instability of the banking system. if people feel that the banks are more stable, both the banks will be able to be more comfortable lending more, and more people will want to borrow to invest and hire. >> susie: randy, let's turn to the fed policy meeting today, and the interest rates. do you think the fed did the right thing? you were fed governor for many years. is that how you would vote? >> yes. i don't think there was any reason to change the policy right now. they still have a lot of accommodation, a lot of support for the economy, because the economy although we've got some good signs, things turning around, we've had a few false stalls before in early 2010, early 2011, where the employment situation seem tobd improving and then we got very disappointing numbers for subsequent months. so i think it's right for the fed to be taking a wait and see attitude right now. >> susie: so what happens next? a lot of people are saying the april and june meetings of the fed could be critical. what's your prediction? >> i th

in a classic bank panic, if bank depositors lose faith in the quality of the assets held by the bank they run, pull out their money, the bank can't pay off everybody because they can't change their loans into cash fast enough. and so the run on the bank is self-fulfill, the bank will either fail or dump all of its long term assets quickly in the market and take big losses. that's what a panic basically is in the context of a banking system. the priccrisis of 2008-2009 was financial panic. but in a broader financial market setting. in particular as house prices fell in 2006 and 2007 for the reasons i described when house prices falling people who borrowed on a subprime mortgage were not able to make payments, more and more of them would be delinquent or default and impose losses on the financial firms, the investment vehicles they created and also on credit insurers like aig. unfortunately, the securities were so complex and the monitoring of the financial firms of their own risks was not sufficiently strong that there was -- it wasn't just the losses. a very striking fact is that if

the world bank the e.c.b. . trolling for assets in greece they've already seized one hundred eleven tons of gold that was held in the greece the greek gold reserve the central bank that's now gone it's the property of the troika so they know that people are looking for gold around the world and so they're very very nervous as they rightly should be as we reported at the time and we got a confirmation within the bank itself confirmed face to face that in fact the gold was not there also you're seeing an awareness of the citizens in this post world war two era where we've had this explosion of debt they're wondering what's backing it all now that it's all falling apart so alarmed by the build report the christian democratic union member of parliament philip misspelled there is demanding the list of gold from the president of the german federal bank younes weidman he told build quote i was shocked first they said there is no list and then there were a list but they were secret then he told me that inquiries in dang

if a big bank went down, charge it back to the big banks. by the way, that's exactly how fdic is run. we pay. >> that was jpmorgan's cpo jamie die mop. jpo among the banks that passed the stress test. in fact rj it was the one that announced it. jpmorgan came out with a dividend increase from 30 cents to 25 cents a repurchase program that got things off to the races. jp missouri began was up by 7%. if you take a look, the dow is up slightly. up about 15 points right now. also in political news, rick santorum winning the mississippi primary with a third of the vote. alabama with 35%. speaking to supporters last night, santorum hinted that newt gingrich should drop out of the race. >> the time is now for conservatives to pull together. the time is now to make sure, to make sure that we have the best chance to win this election. >> john harwood is our chief washington correspondent, and, john, well, this puts things up in question once again. what do we think after yesterday's primaries? >> becky, this was the result that rick santorum was hopi

a why should i lend money to bank b. overnight whether i have collateral or not if the rate is zero yeah there's just there's no point so i think what we have to do is get the fed to let rates go up a little even though they're probably going to have to continue to support the market in terms of intervention but that way at least we can start to rebuild private credit activity because we don't have any right now right now everybody is facing the fed yeah and you know you said earlier to you that you think that stress tests are basically to validate that policy that last thirty years badly house now . well it's not really thirty. yes but the last couple years they allowed the banks to pay dividends very quickly after the crisis and you can understand why investors depend on the dividend income you know almost as much as savers to your typical class of bank shareholders are pretty conservative saver type investors only the large banks really attract speculative activity the other thing of course is if they allow the banks

let's take a look at your favorite picks among the big banks. besides bank of america, j.p. morgan, citi and wells fargo. you also recommend comerica. u.s. bank corp, and just to mention some of them. most people think the banks are in deep trouble. why do you like them? >> first off, at this stage -- in other words, in the last 10 quarters bankering is up year over year. loan volume is increasing. because the yield curve sell a little bit steeper, we're getting better margins. we're seeing income rise from trading and investors banking and deposit fees going up, and bigger income from asset management, and the costs are under control. at the same time, the balance sheet of the industry is stronger than it has been at any time in the past three decades. the companies actually have more capital and percentage of assets going back to 1938. so it's psychology that's killing these companies. >> susie: very upbeat view otd financials. thank you so much, we prrnt you coming on the program. and before you go. any disclosures to make about the stocks you mentioned? >> unfortunately,

sparing no expense around the exiled from the global banking system leaving oil prices soaring in western nations rushing to open emergency domestic reserves. in the controversial tradition of remembering s.s. veterans as heroes that been nationalist gather for the annual condemned by half of the population and see it as an inspiration for young neo nazis. i'm next in tonight's capital account show from washington d.c. laura mr takes a look at how whistleblowing become a rising trend amid phony stress tests on wall street. good afternoon now welcome to capital account i'm lauren lyster here in washington d.c. and these are your headlines for march fifteenth two thousand and twelve bad news for underwater homeowners foreclosure filings in february point to a rising tide and home seizures ahead according to those who track it that is why that's when a five billion dollars mortgage settlement between states and the banks may be to blame we'll tell you why and we'll look at what this means and things may be stressed in the wake of the goldman sachs' greg smith bed there's certainly evidence t

banks. >> wall street banks. wall street banks. the banks of the day, citibank, bankers trust, the others that existed at that time. and so the idea got started that washington would be there with a prop, with a bailout, with a helping hand. and then the balls start rolling down the hill. >> the federal reserve bank of new york has taken highly unusual action to head off what could have been a severe blow to world economies. >> when the hedge fund long-term capital management blew up in 1998, it was big news. >> reporter: dan, the long-term capital fund lost billions in the recent market turmoil and last night, stood on the brink of collapse. >> long-term capital was an economic train wreck waiting to happen. it was leveraged 100 to 1. it was in every kind of speculative investment known to man. in russian equities, in thailand bonds, and everything in between. and it was enabled by wall street. >> reporter: an emergency meeting was organized by the federal reserve last night, here at its new york office. at the table, more than a

dominated by the four banks. you can't have them controlling 54 percent of the banking assets and not call that a mopopy. let me finish. competition makes a free market. >> don't anybody make wayne mad. it is not good. >> wayne, you are out in chicago and yelling at me like he does johnathon. thanks to all of you for the great discussion. coming up. wait for this. this land is your land. the government thinks it is theirs. and now a new fight for private property is here. is congress doing something right? and don't think you will have a stranger in your home today. you just did. this is delicious okay... is this where we're at now? we just eat whatever tastes good? like these sweet honey clusters... actually there's a half a day's worth of fiber in every ... why stop at cereal? bring on the pork chops and the hot fudge. fantastic. are you done sweetie? yea [ male announcer ] fiber one. >> protects private property from a complete government take over. the house voting to overturn the supreme court ruling allowin

the troubled bank list is banks that are in trouble and that -- historically only about 20% of banks that go on this list actually fail. that's the reason they're put on the list. most are nursed back to health, but the reason for keeping that confidential is to prevent bank runs. so i think contrast that to a stress test that applies to everybody, and really is, you know, i guess theoretically it could show if the bank was insol vent, with the largest institutions. the first year did show some severe capital shortfalls, but the first year the government said we will come in with capital to backstop the weak banks. and fortunately they've gotten stronger now. so i don't think any of them are on the precipice the way some of them were in 2009. but it's always a delicate balance between the transparency sand protecting stability and trying to guard against bank runs. >> we got to know each other through the worst of times really when things started to go poorly for a number of banks. the fdic developed what seemed in the midst of this crisis a relatively efficient system where many of

bank failures. as you might guess, with all that was going wrong in the economy, a lot of depositors ran on their banks. the picture on the right, the graph on the right, shows the number of bank failures in each year. you can see an enormous spike in the early '30s in number of failures. what caused this colossal calamity, which again i would reiterate was not just a u.s. problem but a global problem. one country in fact that had a worse depression than the united states was germany. and that led probably more or less directly to the election of hitler in 1933. so why was there -- what happened? what caused the great depression? this is a tremendously important subject and has received a lot of attention as you might imagine from economic historians. as often is the case for very large events there were many different causes. i mention a few here. the repercussions of world war i. problems with the international gold standard which was being reconstructed but with a lot of problems after world war

we have seen other banks do well. it is because they stayedut of some of the riskierer financial products. was that a part of your success as well? >> we attribute it to knowowing our clients and providing the services that they need that not doing the riskier things or things that we did not quite understand. >> i cited this earlier. the ceo of leesburg pharmacy -- yodid offer to take her out t to lunch when she asked for a loan. do you do that for every client? >> we do that for everybody. >> you are going to have a big lunch bill after this show is over. e do that for all of our clients.s. that is what is s nice about working wit a community bank. you can go to lunch with t present or the ceo. weo offer th opportunity. we encourage our officers to go the customemer's business as opposed to them, and seeing uss. >> how d do you handle t the ft that -- i am constantly doing stories about the great things that community banks c can offer. you only have four b branchehes in this area. i think you grew something like 73

the banks that failed were larger. . . bank. before the new central bank was established there were another financial panic in 1914. this really was a very serious problem for the u.s. economy. so financial stability concerns were a major reason why congress decided to create central-bank in the beginning of the 20th century. the other major mission of central banks is economic stability, monetary and economic stability. the monetary history of the united states is pretty complicated. i won't try to go through it all but in the period after the civil war, until world war i, into the 30s, on the gold standard, as you know the gold standard is a partial alternative to a central bank. with the gold standard? what a gold standard is is a monetary system in which the value of the currency is fixed in terms of gold. for example by law in the early 20th century the price of gold was set at $20.67 an ounce. there was a fixed relationship between the dollar and a certain weight of gold. that in turn helped set the money supply, helped se

the latest data is indicated released earlier this week at our quarterly banking profile indicated banks have continued to be gradual but steady progress in recovering from the financial market turmoil and severe recession from 2007 through 2009. during the past two years, the banking industry has undergone a difficult process of balance sheet strengthening. capital has been increased, asset quality has improved and banks of both to liquidity. i think it is fair to say that the industry today is in a much better position to support the economy through expanded lending. however, troubled assets and problem banks are still high and while the economy showing signs of improvement, downside risks clearly remain a concern. the fdic data does show a continuation during the fourth quarter of last year of the trend in overall improvement in the condition of insured institutions. industry earnings have grown over the past eight consecutive quarters. the percent of noncurrent loans on the books that fdic insurance institutions has declined for seven consecutive quarters, reflecting improved credit

led to our banking system. capital in our largest banks has increased in the last two years by 75%, something in the order of $300 billion. so, we have, i think, taken a lot of positive steps to strengthening our system. there are many aspects of -- including early liquidation. we also have to learn lessons from how we got into the mess in the first place. there were certainly gaps and weaknesses in our regulatory system, mistakes by regulators, including the federal reserve. obviously, lots of problems in business practices, which we're still seeing. and i think we will not really have learned the lesson unless we can correct those issues as well. >> mr. geithner? >> the best way to look at what we did is to judge us on the results. if you look at the path of the american economy since the beginning of 2009, compare that record against the record of europe or other countries in past -- >> thank you, mr. geithner. my time is almost over. i would like to put in the record that europe has the ability to avoid the

the crisis if you take a look at a bank of america the insides of bank of america what is it done in the last three years it's increased its derivatives its most risky types of deals i thirty five percent thirty five percent since two thousand and eight since it was bailed out by the government since it has increased its fees on this all customers since it's been involved in numerous lawsuits and settlements regarding the fraudulent types of mortgages that it has either purchased from countrywide or that it has had on its own books that it has extended to its own customers before having to take over countrywide so we're subsidizing these merged banks that are more dangerous to us now than they were and there's no talk at the fed the treasury department in washington to break these things up i think that video is fantastic because it just shows so clearly what the problems are long we should break up these banks but it's not going to happen. well. let's talk about something that is happening there and this one really i just as if we needed more lists to tell us about how rich certain

it's across all the banks. the large banks, the regionals, the broker/dealers. we're going to be facing fairly shortly first-quarter performance. and i do think we can be in the early stages of an asset allocation shift, bonds into stocks. i'm liking this action, bill. >> how much higher do you think we could go? we are coming off the lows in october. we already had a pretty good move since october 3rd. >> yes, we have, but we can still get up to 1440. we can still struggle around 1400. but i think by the end of the quarter we'll see closer to 1440. >> heading to the close here. >> not a lot of follow-through. the action wasn't all in the stock market. it was in the bond market. money is coming out of the bond market. what we've been trying to figure out all afternoon, is where it is going. >> exactly. >> it isn't going into stocks. a few big cap stocks. not going into commodities. traders feel we're at an inflection point. not sure if

may be to blame we'll tell you why and we'll look at what this means and banks may be stressed in the wake of the goldman sachs' greg smith bed there's certainly evidence they're doing damage control some of them should more of us be stressed though about the results and more importantly the methods behind the actual bank stress tests we'll go in-depth with senior managing director of tangent capital partners christopher whalen and while we're on the greg smith fallout you chose to go on wall street there's no question about that. maybe but with wall street shedding jobs and squeezing out less in compensation is there less to lose could a whistleblowing actually become the next growth industry on wall street with the prospect of multimillion dollar payout from regulators that you never doubt will talk about it let's get to today's capital account. so a day later we are still seeing the fallout from the greg smith off that everyone is talking about goldman sachs of course was what that was about they saw more than two billion dollars in the market value wiped out yesterday goldman also

bank and european banks have to roll forward. in europe, that's about 12 months off in the timetable so it's a little bit unclear, but i think overall it was a very welcome development. >> does it make any difference what banks passed and which banks failed? you believe that the most important thing is we have a kind of hierarchy of relative strength. >> well, thing the overall message is that the sector is regaining some momentum, and it's one of the interesting things about the rallies that we've seen over the past couple of days is that they say some of the beta bombs s -- bonds that we've seen in the bank we've seep them perform quite well. it may be a little more so in europe than in the u.s. but that's a sign that investors are starting to come back in. >> so this is a huge positive then. does it mean that this market rally that we've been seeing so far, this is going to have legs? >> well, think it's another positive to add to the list of positives that we've seen. probably the first one we saw. again, this one a little bi

we had this benign period in banking for so many years people forgot that banks fail. so we did start that early, and i think that did help us, and we ramped up those efforts. we had ads out and psas and ramped those up after indy mac. but since that was happening, it really helped. the other thing, there was a lot of controversy whether nontraditional investors like hedge funds should be able to get a charter and bid on a failing bank process. we put our toe into that. in 2008, we really needed bank buyers. we needed new capital coming into the system. it wasn't like we were going to be choosey about who could come in. if you have capital, you've got good management, you should get a charter. nonethele nonetheless, it's not a regulatory culture, so we started letting them bid. and i really saw some things that were quite troubling. particularly part of their proposal being they would flip the property very quickly. flip the bank very quickly. i wanted bidders but not people coming to the banking system that were not looking at this as a long-term investment. so a few

letting the banks all collapse, which would have spread across the world, because banks lend to banks. so the interconnections were such that they just couldn't allow a meltdown of that scale. and we see in the lehman bankruptcy that we're -- i don't know how many years since but it must be three or fr. and they're still unraveling the bits and pieces. and had it been the whole system, it simply would have been a calamity that from a soctal point of view would have been worse. so i think they had no choice. they did have to bail them out. and they did do it. and it did succeed. >> but they left in place the very people who had driven the ship into the iceberg. >> i'm quite surprised at that. it clearly has not been a clean sweep. in other words, those of us who made mistakes, and so forth and so on, are still floating around the system. and -- >> floating it? you're running it. >> well, i am no but -- >> you're not running it, they're running it. >> but there are many who are. i wasn't involved, obviously. i had retired in the year 2000. we're now talking 2008. so i was a knowledgeabl

bank c.e.o. or someone like hank paulson who was instrumental in bailing out america's banks during the financial crisis take the stand to answer for their actions we'll tell you what we think let's get today's capital account. now as i said china has just come out and lowered its growth target for g.d.p. from eight percent to seven point five percent and its premier reportedly said in his speech that the nation needs to shift to a more sustainable economy so one that's more consumption driven shifting away from alliance on exports and capital spending so let's talk about what is a sustainable economy the u.s. model as a consumer economy has proven not to be so sustainable as we've seen that huge bubble that burst in two thousand and eight and a consumer economy that has sputtered along since we've seen it take a disproportionate told the u.s. has for example five percent of the world's population consumes twenty two percent of the oil according to figures from the energy information administrati