surrender continues with bear bankers deal so these are the two hedge fund managers from bear stearns where this is the beginning of the global financial collapse this was the first signal that all was not right and this is ralph she offered and matthew ten mean and take a look back at two thousand and eight when they were arrested frogmarched out from bear stearns and here's some of the footage from that time a white collar crime case in new york that may have national implications prosecutors say these two former bear stearns executives told investors their billion dollar hedge funds were doing well encouraging others to put their. in the portfolios saying they would be profitable long term investment but meanwhile the government alleges route and matthew to mean both knew the funds were failing ok but as the subprime mortgage market collapsed pulling their own personal money out while telling others to stay vested so apparently now at the last minute the f.c.c. has settled a civil suit against ralph cioffi and matthew tanny of the now defunct bear stearns as you see they knowingly

at 7:00 eastern former ceo of bear stearns, alan schwartz. then rep jeb hensarling and then martin heldstein. stay with us. "squawk box" will be right back. [ female announcer ] goodnight gluttony, a farewell long awaited. goodnight, stuffy. goodnight, outdated. goodnight old luxury and all of your wares. goodnight bygones everywhere. [ engine turns over ] good morning, illumination. good morning, innovation. good morning unequaled inspiration. [ male announcer ] the audi a8, chosen by car & driver as the best luxury sedan in a recent comparison test. >>> welcome back, everybody. as you can see, the dow futures are indicated higher, up by almost 15 points. after the dow finally pushed above 13,000 yesterday, closing at 13,005. it's a target the bulls had been running at for the last week or so. in the headlines, microsoft will unveil a test version of windows 8 today. it's the first microsoft operating system compatible with low-power microprocessors designed by amd holdings. >>> still to come, guest host allen schwartz, the former bear stear

morgan and the into gesturing they're getting from bear stearns you know jamie dimon told us two years ago the bear stearns would not be material to their results but it's going to be very material because investors of lost more than half their money on the securities that they created so there's still stuff to fall out in this whole mess we kind of know what the numbers are now max i don't think there's anything particularly new in terms of their exposures but the thing is risks that we haven't talked about like eric schneiderman deciding that these people owe him you know billions and billions of dollars for the taxes that's a new factor that nobody is thinking about now i we got a one minute left i just want to comment on something that's a bit on the technical side but i think it's very interesting while ben bernanke is talking about the need for lower rates as a stimulus you have been quoted yeah i've heard you talk about this then there's a need for interbank lending just be stimulated by raising rates completely against what you hear the mainstream got we'll have about a minute

individuals not message for their stations you see the institutions in the long run folks like bear stearns and and lehman brothers i mean they crash and burn but the people who work there aren't incentivized. to worry about about long term safety they're incentivized to worry about short term profits and especially their short term bonuses and short term sours that's how they're rewarded it's for him that meant that next quarterly number for increasing their profits in this quarter for increasing revenue is why mention that there were a thousand people who went to jail by the reagan administration in the s. and l. crisis why do you think it is that i mean this is an order of magnitude larger than the s. and l. crisis why was it that no one went to jail this time. it's a good question it's really sort of inexplicable to me i think part of it is that. it takes political will to prosecute people and president obama is very much a meat in the middle kind of guy. and you really you know and in some political issues that may be effective but it's you know you really can't if someone commits a cr

if sooeone gave us the books of lehmannbrothers or bear stearns, then, i think, knowing what we knowwe could very well have realized something was wrong". "aig, i mean, they had a lot of credit default swaps. they were leveraging a lot too."(nats)to get that first job-- more than perhaps ever before-- they need this class. "it will definiiely make me more &pmarketable.""it's definitely growth area, so i think it's something good to know.""even through the crisis when head couut has been decrrasing, risk management head count is increasing. their nnmbers are larger than they have ever been before. the numbers shock me and i've been in thiss business for a couple of decades."they aren't all out to stave off the next financial crisis.(reporter): "don't these kids just wanna make money?""isn't that hy everyone's in new york? no. i think most of these kids are 22, 23. they're thinking about getting a job, paying back students loans."with starring salaries of around 150 grand for somm-- that shouldn't be a problem. (nats: "if those assists decrease by just 25 percent, and remain on our boo

. >> tom: two former bear stearns hedge fund managers who were among the first to fall when the housing collapse began have settled civil fraud charges against them. the deal between the s.e.c. and ralph cioffi and matth tannin came the same day a trial was to begin. combined, the men will pay $1 million in fines. cioffi will be barred from the securities industry for three years, tannin for two. neither admit guilt. both were acquitted in 2009 of criminal charges that they misled investors. >> susie: the recent uptick in >> susie: the recent uptick in job creation is welcome news, but tonight's commentator says problems in the labor market still run deep. he's glen hubbard, dean of columbia university's graduate school of business. >> the employment situation for january set forth many high fives in washington, but there's a problem with america's job machine. instead of momentum, at the pace of job growth over the past two years, it will take us two more years just to get back to the number of jobs we had in december 2007. but, of course, we have more people now who could be looking f

first by bailing out bear stearns in the first place. biggest mistake. what they should have done is let the market work. once they started picking winners and losers, does this sound familiar? once they started picking winners and losers, then the market decided, well, we can just wait since the government's going to be involved. we'll just wait for them to do it. that led to a path of wall street bailouts and auto bailouts. where if we had just stayed out of it completely and let the market work, i believe the market would have worked. would the auto industry look different than it does today? yes, it would be. would it still be alive and well? i think it would be alive and -- and equally as well if not better. why? because markets would have -- the markets would have had to e react and do what was necessary to structure it to be competitive. look, the facilities that are creating huge profits right now are there and would be there. problem wasn't the facilities or the workers. it was the obligations that these legacy companies had that they couldn't -

freezes funds as loan losses royal markets these were their investment funds and here's another one bear stearns hedge funds wiped out so bear had to pump more than a billion dollars into those hedge funds and they ended up going bankrupt now the problem of course is there are exceptions to the hedge fund part of the vocal role we're going to get into all of this here to really break this down alexis goldstein she's a former wall street technology v.p. and member of the occupy the f.c.c. and caitlin klein she's a former derivatives trader also a member of occupy the f.c.c. ladies thank you so much for being here i'm so excited to talk to you about this you guys have done such good work on this issue and i really look forward to breaking it down thanks for having us absolutely so let's get into this because before we get into dissecting the letter that you guys came up with you are a group of financial professionals former financial professionals lawyers who came together and came up with a three hundred twenty five page letter their response directly to the as the see along with efforts by the n

be to prefund european banks ahead of the greek default with enough cash to withstand europe's bear stearns right and it keeps them in the defensive mode in terms of deflation because greece is imploding this is going to be perceived as deflationary and therefore they need. to keep interest rates near that zero percent meanwhile the fact that they are essentially siphoning off the income from grayson is other countries through the backdoor through the off balance sheet to pay continually to pay the huge banker bonuses that's not really talked about because they go with that headline crisis greek collapse is deflationary oh by the way we ended up with all the assets that interest rates have to remain at zero percent if in fact the market was allowed to function without this interference you'd find interest rates starting to rise and you'd see some losers in the banking sector and you'd start to see capitalism return to the fore but right now you don't have capitalism what's called some some call corporatism but i think we're going to talk about that the second half or you could call it quits

this huge collapse in two thousand and eight so that was a bit of a bank holiday for lehmann and bear stearns and and there was a credit seizure in these global markets it wasn't an official bank holiday but the global credit froze right now well but that's that's different right that's basically you have a credit crunch is it going to happen again i actually don't think so because i think that these particular dogs have learned their lesson ben bernanke druggy respectively the head of the federal reserve and the e.c.b. the european central bank what they're going to do is they're going to put out as much liquidity as possible to prevent any kind of two thousand and eight liquidity crunch because that was the last quite a crisis that they know for instance at this point in time they are not afraid of inflation because they think oh inflation is so seventies we're over that so we have to worry about inflation we have to worry about liquidity crisis and so the next time we have a liquidity crisis we're going to have so much cash sloshing in the system that there is not going to be a two thousan

somewhat reminiscent of the debates we had and never really understood to our detriment around bear stearns and around lehman brothers in which someone else is getting bailed out by giving money to greece which they then turn around and have to pay out to someone else but those like you think your question don't you think with all this attention paid to greece . you know and i do understand what you're saying that it is creditors getting bailed out but don't you think that. the eurozone and some of the leaders in europe are going to make sure that the people of greece come out of this at least for the most part stronger than they are right now. i would love to think that i absolutely don't i mean i think that the twenty percent unemployment the forty percent youth unemployment the regular rioting the hemorrhaging of the future of the dreams of a lot of people the near bankruptcy or total bankruptcy of a significant portion of the country's industries the changing of the constitution to make debt repayment a higher priority than all basic social services i do think greece will get through it

leverage they were able to trade with and actually funnily enough that law became known as the bear stearns exemption. which we all know we all know how that worked out they basically lobbied for enough rope to hang themselves i think it's very hard to picture how the curtailing of hedge fund like a pivot is within a money center bank would lead to a collapse of financial markets i don't understand how we bridge those two things so really this is about protecting the possibility that these banks are going to be good to trade in and allow for that exciting extra revenue to come in and you know i'm not surprised as a lot of comment on it it's a huge rule change one of the biggest we've seen in decades wow and here's another argument one of the groups that did comment is the occupy the f.c.c. financial activist group here is a. woman talking about a counter to the argument that this is going to hurt the economy i played it for you earlier in an e-mail i want to play it for our viewers and then i want to get your take on it. the banking industry isn't all agog believe you have these like five b