morgan's our bear stearns residential mortgage backed securities which were likely it looks like. project lee belt and think about it this way that there are people now currently going to the f.c.c. saying hey g.p. morgan doesn't have enough reserves and the f.c.c. is actually are to send a letter to them questioning j.p. morgan does not have enough reserves set aside if they are forced to buy back these lumps and if they had more reserves set aside you would see affect their earnings max their earnings would look as good and that's the other accounting game that i think is going completely unchecked right now yeah well this is a systemic throughout the entire banking system as a none of these banks have the reserve this is why the crisis is there to begin with for example the basil basil three requirements set up to tell banks what they should have in terms of minimal reserve requirements are routinely bypass the reason you have collateralized debt obligations for example part of the flora and fauna of these recent pack of securities is to get a rating from the rating agencies ba

afghanistan jimmy cayne the former head of bear stearns lost his fortune and much of same way bernie ebbers did he believed in the ponzi he was pushing he held on get on your own supply that's the cardinal rule of the a debt pusher the debt pusher jamie dimon he doesn't make the mistake but you don't know you know it's still early in the game for jamie diamond he may go the way of jimmy cayne flat fricken broke so this racketeering lawsuit of course is something that you've been pushing over the last few years you're saying that it's an organized crime syndicate and the suit alleges that third in early two thousand and eight that two banks j.p. morgan and h.s.b.c. began manipulating the silver futures market by accumulating an unusually large short position and then secretly coordinating enormous sales of silver futures contracts on the commodity exchange which is known as max and is part of the new york mercantile exchange rudy giuliani went after drexel burnham concerned with rico ok it's the only way you can actually effectively break up the rackets on wall street and this is true

were the acquisition happened over the weekend where they got a sweetheart deal the fed forced bear stearns all their good asset onto the books of j.p. morgan all the bad assets were taken and giving to the taxpayer when i was going to wall street you know we knew all about bear stearns let me tell you something about the story we talked to at the at the very beginning of this show a guy named jimmy cayne was known for his. election for something that sounded similar to his name now he blew his entire fortune it's not because he was using all his mental faculties at the time or was see him in a little bit too much to the ravages of the byproduct of america's military excursions in cook afghanistan jimmy cayne the former head of bear stearns lost his fortune and much of the same way bernie ebbers did he believed in the ponzi he was pushing he held on to your own supply that's the cardinal rule of the a debt pusher the debt pusher jamie diamond he doesn't make the mistake but you don't know you know it's still early in the game for jamie diamond he may go the way of jimmy came flat fricken br

people wanted those vetoes, but he also, i think, it's fair to say in his last year, you look at bear-stearnsthen you look at the end of the year and you're bailing out general motors, this is an extreme economy and set the table for barack obama's stimulus and other spending. >> paul: yeah, but when a fed chairman and a treasury secretary come to the president and say, look, the economy is going over a cliff you've got to do something, most presidents, i would argue every president is going to do what bush did, at least in the case of lehman brothers and so on and tarp. he's going to go with that instinct because that's-- you're an information taker in that kind of an instance. >> i would like a more skeptical president. you look at the paulson book and bush book, he doesn't seem to push back much on-- >> i agree with that, that's notable. >> let me try to explain it was it wasn't a more skeptical presidency. this was if nothing else, the 9/11 presidency. 9/11 was an experience that all of us had, but he experienced it in a unique way as president. he went and saw the pentagon, he went to gr

this remember is post the bear stearns hedge funds, not bear stearns going under.this is a sign that one of the things about the bear stearns hedge fund that was interesting was the subprime market initially took a hit but the way these bonds were trading in the marketplace, they were trading at let's say this market value. but because defaults, defaults were increasing so much their economic value was actually plummeting but because everyone said, oh, my gosh, bear stearns hedge fund imploded, they created like an artificial type market for these, for these bonds. so when we flash forward to september and october of 2007, i was on the phone pretty much every day with treasury, fed, just trying to explain, i think really things are different here. you need to take a closer hard look, really senior people, okay? almost at the top of the food chain. i just don't think they necessarily got what i was saying. and, i get back to my initial comments being made i agree, in a perfect world that's great but where are you going to get the qualified people that are going to b

lehman brothers a poor rating and said of moody's giving it a plus rating they would have given bear stearns a poor ringing instead of moody's giving it a high rating they would have given all these credit default swaps and mortgage backed securities bad ratings instead of moody's giving it high ratings moody's s. and p. in bed with the devil on wall street goldman sachs j.p. morgan the fund managers the five fingers of death with their hands around the group global economy killing a lot of the chill going it. do you dong lesson big day gung president of the united states get rid of obama well speaking of obama here is the headline china may be bigger economy than us within two years this is on a purchase power parity so it's not in dollar terms but in terms of what they can buy with that income. so but notice the photo in this headline obama is barreling to hu jintao this is the relationship that it's very important to understand dead air versus creditor saver versus speculator that's move. you know they are also the u.s. of course operates on a trickle down sort of thing well i have some p

crisis they thought it was a liquidity crisis instead of a confidence crisis then they bailed out bear stearns and then they have been a huge part of the unemployment problem because they have this weak dollar policy and we've got low interest rates right now they're too low for too long it's a lot of mistakes that the federal reserve has made and i did that and like i did a lot there ron paul when he says i am going to have a lot of talk of a let's just you know hypothetically here let's invision a world in which ron paul really did rule monetary policy in a world where the federal reserve was abolished where we returned to the gold standard what would america be like i mean i or least you know even if we didn't return to the gold standard completely at least allow people to deal and coins in gold and fill a very well that a lot of focus a return to a gold standard doesn't mean we get rid of dollar bills we've had that ok but ok in your hypothetical world which is politically impossible to get to you. if we go back to a gold standard i said jerry and i mean i know there are a lot of rounds on

>> there's a lot of people watching and i remember bear stearns fails in 2008 and we acted but the interconnectedness of the situation and the money flowing into the country as a result of trade deficits and foreign investors looking for greater returns and housing -- the assumption that the housing prices were going to go up all led to this, you know, house of cards and when it started to collapse it really started to collapse and obviously if there's a way to stop it i would have liked to have done so but it was -- i hope it's a once in a lifetime situation but they said the great depression was a once in a lifetime situation. you have to be careful not to overregulate because investment's not going to flow and if investment doesn't flow people won't find work. >> except i would think, wow, if somebody set standards for loans, these banks would not have been stuck with so much bad paper. >> that's right. there was sloppy lending practices. >> isn't that regulation? >> well, but the regulations are on the book and -- on the books about, you know, sloppy lending practices. and yeah. the danger is tha

in 2009, the federal government tried but failed to convict two bear stearns hedge fund managers of security an exceedingly tall order. part of it has to do with the mindset in which the governing and financial classes have come to view the crisis. the entire financial meltdown was a counted of of collective error in judgment. nothing untorrid about it, no bad faith. just fundamental mistakes. we thought the housing bubble would last forever, we thought the financial instruments were distributing and reducing risk, not exacerbating and multiplying it. it turns out we were wrong. mistakes happen. let's move on. there's another way of interpreting what happened which is to view the entire chain of housing bubble securitization as a giant ponzi scheme. fundamentally predatory in nature. and predicated on deception. you have to use the "f" word, fraud. i was struck when i read michael lewis' masterful account of the crisis. about exactly this good faith/bad faith distinction. there were more morons than crooks. but the crooks were higher up. the crooks were higher up. it goes a long way towards

the fed has to do a lot of unusual things, that made a lot of people up set such as bailing out bear stearns and bailing out aig and extending loans to banks and so forth. and so this actually resulted in a lot of criticism and pressure on the independence of the fed. will you recall there was a movement in congress about a year ago to audit the fed. and so bernanke and his staff basically took the view, they couldn't just sit there and take it. they had to take their message to the people, as it were. >> now this was in an international forum so start on the international side. because a lot of today's message was aimed at who and saying what? >> sure, so essentially the background here is that in the last few months the fed has expanded what they call their quantitative easing program. normally when they want to stimulate the economy they lower short-term interest rates but they are already at zero. so now they are trying to lower long-term interest rates by buying bonds. one of the secondary consequences of that is that the dollar falls. but when our dollar falls somebody else's currency

. >> bear stearns, goldman sachs, lehman brothers, they knew what was happening. >> what do you think about selling securities with that your own people think are crap? does that bother you as a hypothetical? >> no, this is real. >> what do you think of wall street incomes these days? >> excessive. >> by 1986 he was making millions of dollars and thought it was because he was smart. >> he famously said we have to dance until the music stops. actually, the music has stopped already when he said that. >> at some point i used the word armageddon. these people are risk takers, they're impulsive. there's a lot of cocain use, prostitution. >> so these guys knew that they were doing something dangerous? >> i think they did. >> i don't hear confessions. >> what can we believe in? there's nothing we can trust anymore. >> we had a whole group of people looking at this for whatever reason. >> you can't be serious. if you would have looked, you would have found things. >> it's a wall street government. >> why do you think there there isn't a more systematic investigation being undertaken? >> beca

and jp morgan had been saved in the final hour, by bear stearns and he says over the past few weeks,s book, we had seen the failure of america's two largest mortgage entities, the bankruptcy of a major investment bank, the sale of another and nationalization of the world's allergiesest insurance company and now the most drastic intervention in the free market since the presidency of franklin roosevelt and russia invaded and occupied georgia, hurricane ike hit texas and america fighting a two-front war, an ugly way to end a presidency and he talks about the fact that he believed that god would not ask more of him than he was able to carry out. it was a very, very dramatic moment. >> it was, and, one of the things that struck me when i had a chance to read the manuscript of the book was exactly how much happened during the one man's tenure as president. how much happened to him and how many important decisions he had to make and very little of the presidency, though, had more compacted and repeated crises than the last few months when we were facing the economic crisis . the book does

host: david malpass has been a chief economist at bear stearns and is also between 1984 and january 1983 held economic appointments during the reagan and bush administrations for developing nations and deputy assistant secretary of state. he has been a republican staff director of congress's int economic committee and senior analyst for taxes and trade at the senate budget committee. he is our guest for the next 15 minutes. flint, mich., on our line for democrats. caller: and i would like to ask a question in regard to the quantitative easing. with the fed coming out at a time when obama [no audio] host: go ahead. caller: am i on? i want to ask a question about how the timing of the fed's quantitative easing decision right at the time when obama was going over to china about their currency. with that, it made him look pretty bad. can you hear me? guest: yes, i can. caller: id undermined his credibility at a time when he was trying to make a strong effort [no audio] host: we will leave it there. guest: hi will raise another aspect of this. chairman bernanke first raised the issue of quant

and we go back to bush when he was bailing out -- when he was bailing out bear stearns, i guess it was, and i guess all this and boehner was pleading with republicans back then to support those bailouts. host: fred barnes. guest: democrats, including then senator obama, voted for tarp and the big bailout as well. and a lot of candidates this year ran who had not been in congress back then ran against bailouts. i suspect a good number of them would have supported in the crisis back in the fall of 2008. but, look, economists are divided. you have some more liberal economists who want to spend more. they think that's the answer. spending more money by the federal government and that will get us out of the first recession and then a weak economy. now, it hasn't worked. that's for sure. i mean, the economy is just crawling along the bottom. what ronald reagan did, if you recall, was to cut taxes. cut taxes across the board, income taxes. it had a huge impact. this is what john f. kennedy did. his tax cuts that were passed under lyndon johnson. that's what calvin coolidge did. it's what coun

. >> what was unique about the fall of merrill lynch as comp e compared to lehman brothers or bear stearnshat merrill lynch was and still is a financial advisory business that was rock solid. it had advisers in the country helping mom and pop make investments for their future. that's a solid business. merrill became an investment bank, more of a high stakes gambling, actually gambling is the wrong term. they took far more risks with people's money in this decade more than any other point. stan o'neal was attracted by the much bigger payoffs on wall street. as a result, he didn't pay as much attention to the financial advisory business, which is a much more dangerous area. there's been a lot of focus on regulators and where with the boards of these companies? did they do anything to say oversight over the executive? >> no. >> the ceo tends to put people in place who don't necessarily challenge them. >> fascinating. greg ferrell, thanks very much. >>> coming up, world leaders want afghanistan to control its own security by 2014, but what will it take to get there? this is just awkward. >> no

and we go back to bush when he was bailing out -- when he was bailing out bear stearns, i guess it was, and i guess all this and boehner was pleading with republicans back then to support those bailouts. host: fred barnes. guest: democrats, including then senator obama, voted for tarp and the big bailout as well. and a lot of candidates this year ran who had not been in congress back then ran against bailouts. i suspect a good number of them would have supported in the crisis back in the fall of 2008. but, look, economists are divided. you have some more liberal economists who want to spend more. they think that's the answer. spending more money by the federal government and that will get us out of the first recession and then a weak economy. now, it hasn't worked. that's for sure. i mean, the economy is just crawling along the bottom. what ronald reagan did, if you recall, was to cut taxes. cut taxes across the board, income taxes. it had a huge impact. this is what john f. kennedy did. his tax cuts that were passed under lyndon johnson. that's what calvin coolidge did. it's what coun

there's members of of the bear stearns and one of the thing about the hedge fund is the subprime market took a hit, but the way these bonds were trading in the market place they were trading let's say at this market value, but because the faults were increasing so much, their economic value was actually plummeting, but because everyone said, oh issue, gosh, there's a market nor these bonds. when we fast forward to 2007, i was on the phone pretty much every day with treasury, fed, just trying to explain like i think things are different here. you need to take a closer hard look, really senior people, okay, almost at the top of the food chain, and they didn't get what i was saying. i get back to the initial comments as i agree in a perfect world, it's great, but where will you get the qualified people at the top making qualified assessments saying this is a real risk, and this is a bubble. when oil hit $150 last summer and came down, it got cut in price in half to $75. nothing happened. we survived the california real estate crisis of 1994. we survived, you know, 1998lcm. we survived 2001