morgan via bear stearns. didn't represent the mortgage backed securities ok you don't have to prove fraud if you can say their reps and warranties were a lot i were not right we're going to give you back all the mortgage bonds that you bought you get your money back that's a huge one and we don't even know if that's going to affect institutional investor yet there's so much on the plate for j.p. morgan there's something else max that i've learned about there was a hedge fund that they ran it was it was a mega billion dollar hedge fund called highland capital and highlands being sued by u.b.s. because they did some really allegedly illegal stuff and valuing their assets during the financial crisis so they could get more money from u.b.s. and not blow up ok well there was a whistleblower that came forward they spent thirty six thousand pages to the f.c.c. detailing how j.p. morgan is back off this helped them cover up this fraud the f.c.c. . sitting on this information right now and as of this month u.b.s. was

in order to buy bear stearns for pennies on the dollar and. what back it out was very stern's own collateral so estimates had that much collateral they should have been able to get the loans out and it wouldn't matter to you sell out to j.p. morgan so j.p. morgan got a clear which and went wonders why i mean j.p. morgan obviously has been going on and it is the specter that it has to do it these interest rates were absent or propping up the u.s. keeping the u.s. interest rate very low they finally ellen brown eyes countries around the world lose or sovereignty over bad debts of private banks what do you think about france's announcement that they are to establish a public bank by the end of this year what is a public bank how does it help and this is really what you've been talking about for a number of years talk a little bit about france's decision to introduce a public bank you know this is a public development bank there are two types that public banks at the low end yes well banks like in germany that have. find it all these export busine

so they signed this contract with bear stearns, now j.p.morgan, and they got a benefit from it in terms of lower borrowing costs. >> narrator: but it didn't work out that way. soon after the deal was signed, the interest rate the deal was pegged to began to rise. cassino found itself paying hundreds of thousands of dollars more in interest than it bargained for. (speaking italian): >> narrator: carmelo palombo is a former city councilman. >> smith: how well do these people understand the deals that they're buying? >> they had very little understanding of them at all. they should never have been allowed to have been even talking to these investment banks. it was... it was a crazy idea for them even to get into these kind of conversations. >> smith: and when you talk to bankers, what justification do they offer for selling to rubes out there these complex financial instruments that they know they don't understand? >> they'd be saying, "well, they might win." you know? i can tell you... i can tell you a client who's done that bet and did very

the upshot of bear stearns dying was that j.p. morgan more or less feasted on the on the carcass and through the lehmann debacle we also saw. how there was some fast and fancy footwork being done to the tune of one hundred b. eight billion dollars which j.p. morgan had transferred one hundred thirty eight billion dollars into lehman's coffers so that lehmann could see oer do traits this hundred this hundred thirty eight billion the j.p. morgan advanced to two layman after lehman had collapsed in my view there's a direct line from that to j.p. morgan suddenly. having an injection of eight billion dollars worth of less than one year. swap derivatives added to their book in the first quarter of two thousand and nine i mean that this this is so this is so blatantly obvious to me what is occurred there i mean j.p. morgan was in the hole wanted to be in the market j.p. morgan didn't want the notoriety of being in the market so j.p. morgan pre-prepared the collateral that that lehmann was going to need to to to produce the trades that j.

collateralized debt obligations to bear stearns hundreds of millions of dollars where as we pointed that out of the many years ago and they told us no these are good assets even though they were clearly worthless the pension fund is now under funded by something like fifty percent so these pensioners are going to starve to death and this is part of the victim pool that results from scandals like libel or because when you artificially suppress the interest rates down to zero the passion account of cowbirds can't meet its funding requirement and over a five or ten years it blows up there's nothing left and then the people die then the barclays will say well we didn't put the gun to their head you know well you know you did barclays bob diamond you did put the gun to those people's heads the their large debts are on your head yeah you did kill them you are a mass murderer. here's another headline relating to cal pers california pension plan cowper's made a poultry one percent of past year so it's fifty percent underfunded they're actually assumptions are for seven point five percent annual

hubbard was paid for example one hundred thousand dollars to testify for the criminal defense of to bear stearns hedge fund managers prosecuted in connection with the bubble who were acquitted then there's larry summers who was treasury secretary under clinton in that administration he was involved in the deregulation of derivatives obama he was an advisor to as well he returned to harvard he's been in and out of academia and has raked in millions during this period of service and out of service from out of service actually i should really say from speaking engagements for financial services companies and frederick michigan professor at columbia business school he's a former fed official and one thing that ferguson points out actually an inside job is he wrote a paper on stability in iceland that was paid for by the icelandic chamber of commerce but there was no mention of it at the time now we'll get more into those but first a little more on live war with charles ferguson director and producer of inside job and author of predator nation. i thought it was interesting with bob diamond the c.e.o.

morgan chase thought bear stearns in a firestorm that the new york fed was in. did you know of this conversation? >> congressman, i did not believe i was aware of that specific -- i was made aware of that specific conversation, but i need to be aware of that. >> why not? because the concern about the structure of the rate and the concerns across the market we thought were sufficient basis on which to do the things i said i did -- >> mr. secretary, this conversation is not just about the vulnerability on libor to manipulation, but in fact, that it was, in fact, being manipulated that there were false reports being found by someone who was involved in it and was there any -- i asked chairman bernanke last week, was there any element of criminal fraud that isn't admitted to in this transcript. >> there's a set of lawyers that will answer that question and you can be confident they're going do that, on this basic point, we had a sufficient basis on based on what the market was saying was happening and the way this thing is designed on which to take the actions we to

if you go back to the fall of 2008, you had first bear stearns went bankrupt, first investment bank and layman brothers. morgan stanley was next in line. it was about to go under. they were looking for deep-seated, deep-pocketed buyer and ben bernanke stepped in and basically baled them out. he used emergency powers to make them a bank holding company that gave the protection of the bank and fdic. >> do you see his contribution as a result of that. do you think simpson-bowles is somehow left valid because of his position there. >> i have a tact on policy grounds. he is intents on cutting social security. here we have people that make 1200 a month. >> that's the average social security payment. a little bit less than that in fact. and we are saying the most important thing is we have to cut these people's benefits. they are just actually to get by, not because of their own failings but really because of the failings of people like erskin bowles. when he is presented as being a paragon for virtue. he messed up about as bad as you possibly can. >> keep on writing. very interesting column t

this was a month after bear stearns and jp morgan chase. did you know of this conversation? >> congressman, i did not believe i was aware of that specific conversation but i did not need to be made aware of that. the concerns about the structure of the rate and the brought concerns across the market about what could be potentially happening, we saw a sufficient basis to do the things which was -- >> this conversation is not just about the vulnerability of libor to manipulation but in fact, an admission that it was being manipulated. that there were false reports being filed by someone involved in it. i asked chairman bernanke last week, is there any element of criminal fraud that is not committed to in this transcript? >> there is a set of lawyers double answer that question and you can be confident they will do that but on the basic point, we had a sufficient basis based on what the market was saying was happening. and the way this thing is designed, on which to take the actions we took. >> i understand that. what were you told this conversation or others like it that not j

bear stearns, i wrote a book about it. an investment bank that didn't have the commercial banking capacity. it was the mortgage business that led us all to a disastrous situation. not the large banks but at the same time don't we want to take a look that problem now that it's more behind us? that's sort of the big debate. >> is the big takeaway that, look, this is not necessarily about succession. jiemy dimon plans on being at the helm for quite a while. >> absolutely. he said i hope to serve for years and years to come. jamie's saying that's not going work. people like him are probably not going to be of the right generation because this is a job you want to be able to hold for ten or 15 years. what a novelty in corporate america these days, you know? >> mm-hmm. josh, do you have a question for kate? >> the new thing we keep hearing is large holders of these banks, the numb rumblings are about forget about regulators breaking them up or congress, what about the prospect of the banks deciding, hey, you know what? we've tri

. >> the federal reserve is bailing out bear stearns... >> narrator: it's a familiar cycle.customers are outraged. lawmakers promise change. then it happens again. >> mf global, down almost 39%. >> an increasing number of investors are betting the stock has farther to fall. >> of all of the collapses that occurred during this financial crisis, the collapse of mf global, in my mind, is the most egregious. this did not have to happen. >> it is a wall street morality tale in some ways. how can something like this be allowed to happen? how can one individual completely shape the destiny of this firm and ultimately its demise? >> narrator: this is the story of jon corzine, the collapse of his company, and why no one stopped him until it was too late. >> he is fiercely ambitious and an aggressive risk-taker. and that's the part that never comes across when you talk to him in person. you get this sort of avuncular feeling that totally masks what is a highly aggressive and ambitious guy who takes these huge risks with other people's money. >> narrator: corzine had an impressive résu

you have to imagine this is about a month after bear stearns almost went under. the credit markets are going crazy. bank stocks are being driven down. and one of the things that was being used to try to decide which banks, you know, people, investor was sell is what their libor rate posting was. the fed had a very nervous or a conversation with a very nervous person at barclays who had admitted that they were fixing the rate. they said that they weren't posting an honest libor. and that the reason they were doing that was because they didn't want to drive down the price of their stock. and so this happened in april of 2008. a couple of weeks later in may tim sent the bank of england an e-mail along with some suggestions on how to prevent manipulation of libor. so that's-- that's some of the new information that came out today. >> we know this investigation is ongoing and i know quitener and ben bernanke are both coming before congress at some point. one of the things they're clearly going to have to look at is what happened then. there didn't seem to be any follo

but what that is meant for aig, bear stearns, lehman, what cobia, all of the big banks? i want to use all my time at crazy speeds were in right down, which is libor and also the crisis and what it meant in financial loss to the american family last summer what could have been in the future? but specifically on libor, was this a british problem for united states problem? >> it was a race that in mind then that in implications far beyond lending, not just united states, the financial markets around the world. >> it was a set pain association are professionals in the united states or elsewhere? who sat at? >> it was set by the bakers association, which is a group of banks. >> were you aware of any other members of the president's working group following this issue? >> as i said, we briefed that broader set of relevant agencies said they were aware in the public domain. as you know come to cftc started at that time a very far-reaching , and to their credit come investigation ultimately balked at authorities. >> did the new york fed or the federal reserve have enforcement aut

. >> if you take on balance sheet, off balance sheet, bear stearns was levered 40 times. you know?animal is out of the barn. >> that is going to the end of the day. that is the hammer of taking significant risks. >> let's move on with aol. releasing second quarter results. the company reporting a strong surge in operating income for the first time in over four years. a good sign of things to come. well, let's ask the man in charge. tim, always nice to have you. you see an increase of 2%. while it was a good quarter, when are you going to start to catch up? >> first, thanks for having us on. >> i think we basically been restructu restructuring around verticalizing the products and teams. and number two is being really focused. things like video and premium formats and local are growing quickly and we think those will be the growth engines for the future in advertising. >> what is your outlook for advertising going forward both in the u.s. and in europe? >> at a macro level, consumer usage is well ahead for digital. i would expect a tail wind behind digital advertising overall. i thi

true in the london and cayman island affiliate's of aig, lehman brothers, a city, bear stearns, and aade earlier long term capital management, affiliate's in london and came crashing back here. the recent events of jpmorgan chase, again, what they call at the london well? executed in the london branch. a stark reminder. the live wire index at the center of the capital markets is but another example of globally interconnected financial system. hundreds of trillions of dollars of derivatives transactions here and abroad are based. people taking a small business loans, credit cards, mortgages, often in the fine print there is a reference to this terrible rate. as well as big companies doing complex transactions. what to their reliance on? the honesty of this benchmark. banks must not attempt to influence or others. they can't do it if they're concerned about the reputation. you can't do it if you're concerned about profitability. it's just wrong and against the law. so, if these key benchmarks are based on the observable transactions among borrowers, lenders, derivatives, and users benef

didn't the genius at bear stearns tell us great credits in the housing market, so-so credits in the housinge of paper, sell them to those institutions, part of that subprime tranche that wouldn't make it, but the overall yield on the overall piece of paper would do it. guess what, we tried that experiment in 2008 and it didn't work of the reason we won't have euro bonds, no matter what these summits have, whatever the meetings are, 20 throughout the summer, the buys of those bonds aren't interested in buying them. do not forget the one thing i'll take away from the trip to europe, the buyers aren't interested. create the euro bond, institutions aren't going to buy them. it's as simple as that. >> yet, gary, when we get together all those currencies into the euro, there have been plenty of buyers of euro, notably asian central banks. >> currency is one thing as you know. there was a belief the currency would work. it was going to work as trade. it was going to work as a stand alone unit, currency unit. you and i know buyers of credits if they are not interested in euro bond, create whatever

the failure of wamu countryside, aig, bear stearns, lehman, those are not about glass-steagall.ss-steagall would not have prevented them. we think it's important to have a regime that makes it safer not only for banks but non-banks. we ought to go forward with that regime. >> what's interesting when you mentioned those examples the big banks were around to buy them up and save the fdic quite considerable costs. >> that's right. >> it would not be painless to break up the big banks here. >> well, you know, look, it is much more painful for the big banks, now that they have that size and scale, they have to hold a whole lot more capital, subject to a set of constraints, a set of credential rules that changes their economics and makes it safer for all of us. >> i think what's interesting is what you're saying is you put in a set of rules that have made it harder to be a big bank. i think what andrew is saying is, what do you guys want to happen and are the rules enough for the optimal outcome here for the banking industry, for the economy. >> well i think what we want to happen and

lending gauge known as libor to play down the perception of financial stress after the collapse of bear stearns. after barclays spoke to the new york fed initiated a series of meetings in april and may with other agencies including the treasu treasury, tim geithner who was under fire for oversight in the rate setting mechanism and he set a memo to the bank of england which recommended reforms on how the rate was set up at the world's largest financial institutions. goes on from this and it is on the financial times website. ohio, nick, independent line. caller: good morning. yeah, i was outraged when i heard about the olympic uniforms made in china and every day we cry that we don't have jobs in this current and then people still pay taxes and we buy things in china. it is so outrageous. i don't know what congress is talking about based on this. i believe it should be some subpoena find who is responsible for the olympic organization because i believe it is actually trick and america is suffering from being out of jobs and some are dying from the lack of money because they don't have a job. and

but lehman brothers wasn't a bank, bear stearns wasn't a bank, aig wasn't a bank. to make a change just yet. we talk about flans philanthropy. you guys gave some money to the washington monument to save the washington monument. people talk about the selling of america, that we're selling lots of pieces of infrastructure, big monuments and relying on private money to do it. >> in terms of infrastructure, it's a good area to invest. but i don't think we're selling these things necessarily to foreigners. i think a lot of these things are being bought by u.s. public pension funds and they are very good investments. >> are you worried that we're giving away the store? these roads, this land -- >> the roads aren't that great right now. we could use some of the work to repair the infrastructure. we need foreign capital, perhaps, to do that. the roads are still going to be here. >> we asked you about romney. you were in the carter administration. are you a obama man? >> i'm apolitical. i try to stay out of politics

now before 9/11 of the financial market, before the meltdown, before the lamen brothers and bear stearnsrated, we would have thought, well, there's some very smart people on wall street and we'd have been right. but smart people can be wrong. we put very good people on the federal reserve board. we choose very good chairmen. chairman bernanke was a choice of republicans and democrats alike. but ultimately looking over the shoulder by congress, by my committee, by the financial services committee just to ask the question, are those numbers undeniable truths brought down on tabulates or are they in fact open to second guessing after the fact? questioning of whether or not a model works, or whether there is just a small but meaningful opportunity for tenses of trillions of dollars to fall on the backs of the american people if they got it wrong. that's the question the american people asked. and after 2008 it's a question congress must act -- ask. when chairman franks voted for -- frank voted for ron paul's bill, perhaps he didn't want it but he voted for it as did countless democrats. ulti

expectations had been, a lot of noise and dba adjustments and loan loss reserve and settlement on bear stearnsnd a lot of different things moving around. for the most part it exceeded most analyst estimates of what j.p. morgan would earn and does seem reflective of a continuing repair if you will, delinquency still moving down, credit cards, still not much, mortgages and the like and loan originations. >> the highlight is $9 billion as a figure for the trading loss, that's off the table. the "new york times" reported that. you at the time said that was oon erroneous figure and it was out there and it was a concern and at this point we can take that off and it does look increasingly like next quarter we're going to be talking about this less and less and less from an investors standpoint. that's a good thing for a company that lost about $40 billion in market cap since the april disclosure of this trading loss. >> they moved the credit portfolio within cio has been moved to the investment bank. they significantly reduced the total synthetic credit risk in the cio and to your point jamie dimon s

bear stearns collapsed in march 2008. you see the may, june, july september period. it was quiet.ened and you had the reaction to the market.