at tangent capital chris whalen welcome to the kaiser report thank you max all right chris whalen what has the fed done to our economy well what have they done they're basically trying to keep everything the way it was in beautiful states this this means no debt reduction no taking apart the big banks and no going after the people who ran the big banks and did all of the various acts of fraud that we've seen over less say ten years the fed is really the bad guys here unfortunately because they are trying their hardest to stoke up inflation but we have a deflationary scenario at the moment so they're kind of fighting the last war and you know as much as we tell them look you really need to let interest rates go up a little bit so the banking system doesn't collapse next year but they don't seem to want to hear this so i would characterize it is the fed fighting the last war i think that's the best way to describe it but they're also not really interested in restructuring and renewal which is the only way we're going to get any job growth in this country. you're globally really so chris

situation when it comes to generating economic growth chris whalen has written about a choice between debt and inflation or war and says finding a way to avoid these two extremes is now the chief concern he is here we will talk to him about why yesterday we told you about deposit light from greek banks today we talk spain where the country is denying reports of a bank run at its second largest lender bankia this as greece wears in a caretaker government to run things until elections next month the next step ideally towards certainty this begs the question though are we seeing a run on europe go on as we speak and when things are bad in the economy it's usually good for people in the business advice but are things so bad in europe that even strippers are threatening to walk well that's what appears to be happening in paris we'll talk about it let's get to today's capital account. all right before we get to some of those headlines let's bring you up to speed with the latest in whale gate because jamie dimon has been invited to testify before the senate banking committee reported late al

i don't know we're going to ask about that with chris whalen senior managing director at tangent capital partners here author of inflated how money and debt built the american dream chris wailing you say the volcker rule could actually cause a systemic risk because these banks are so big so responsible for liquidity. i hear ya i'm sitting here i'm going out come on all i want is these banks to stop trading with depositors money to stop making these bets to stop putting taxpayers on the line so really explain to me why this could be a risk well half of j.p. morgan's profits come from credit or betrothed just like the whale it's a very you're saying here right and remember half of j.p. morgan's business is not funded off deposits it's funded off the bond market ok so the whole complaint about them using deposits to trade derivatives i think is a little bit suspect also keep in mind they lose more money every quarter charging off bad loans than they lost on this trade and the unit is overall profitable so i look at j.p. morgan and while i would like to see changes in the risk taking and eve

chicago on may sixteenth at the unit box theater in chicago the documentary features interviews of chris whalen a smith dylan ratigan noam chomsky and others now let's turn to a clip of the film the fear mongering began when when paulson showed up before congress i mean he had a gun to america's head and he said if you don't give us the seven hundred billion we're going to wreck the financial markets that's of the banks have an america that's been a. two hundred twenty town the financial institutions have been handed a two point eight trillion dollars of money from the american taxpayer this is jobs this is growth we're taking six to seven hundred billion dollars a year out of the hands of consumers to subsidize the bad that's what the because low interest rate. it is enough to make you want to lose your mind when you understand the mathematics it's like me fixing your pinky when you've got cancer all right well looking fantastic there let's talk to some folks involved in the film john titus you quit your job as i only paid a lawyer and made this. film bailout tell us about it what so important

belief faulty examination of the very foundation that he's talking about here is a look back at chris whalen after the stress test came out talking about just one of the major issues with them which was that they didn't properly deal with real estate and foreclosure rest take a listen we still have a very serious problem in the us in the fed seems to want to ignore it so they don't talk about litigation in the stress test and only one fifth of the losses that they generate in their scenario come from real estate which is crazy more than two thirds of the exposure in the banking system in this country comes from residential and commercial real estate. does this just show my question to you how deep our problems are when we look at these issues because he's using you know the stress test as an example to prove that our banking system is better but the whole issue of the stress test is that they're flawed there's just too many layers to go through so mainstream media headlines are banks they're on better footing but based on what we're going to repeat this over and over again as there's no ther

word on wall street which shall not be uttered but we can enter it here it's fraud and chris whalen our guest today he's an author an investment banker has been writing about it and the way the law might be stacked against customers trying to recover their money in bankruptcy even when they've been defrauded it's really interesting our viewers your viewers are not going to want to miss it that that and more coming up in writing and if you do not want to miss it that is coming up next on the capital account with our listener but that's going to do it for the news from around the stories we covered you can check out our you tube channel it's youtube dot com slash r t america you can check out our website as it's r t dot com slash usa you can also follow me on twitter liz wall well they're right back here and a half hour. wealthy british style. is not on the title of. markets why not come to. find out what's really happening to the global economy with max cons or for a no holds barred look at the global financial headlines tune into kinds a report. you know sometimes you see a story and it

you'll want to catch this week not only will we have jim rickards in studio we will also have chris whalen in studio he has a different take on j.p. morgan and the unintended consequences of regulations like the volcker rule it will be great to get his take also on some of the bankruptcy issues surrounding the frauds we've seen with m.f. global and others but for now from everyone here thanks for watching and have a great night. there hasn't been a thing get on t.v. . it is to get the maximum political impact. before source material is what helps keep journalism honest we. we want to present. something else. wealthy british style. that's not on my list. market why not i'm going to. find out what's really happening to the global economy with max cons or for a no holds barred look at the global financial headlines tune into cars a report on our. mission free accreditation free zones for charges free. range month free risk free. to tide free. download free broadcast quality video for your media projects and free media and on to our teton tom.

they're gambling it's a disgrace so then this brings me to something that actually your colleague chris whalen said to be on the show tomorrow he was writing this if we could bring it up to talk about this malignant speculation which you say is going on more broadly he says the fact is that the vast expansion of the u.s. money supply over the past three decades makes such financial out alchemy necessary even for too big to fail banks to generate even nominal profits do you agree with that and i think it's responsible for some of the errors these banks that made i view that completely and this is also another malignant byproduct of the fed's zero interest rate policy because when you do a trade like this you have to analyze all the cash flows and all the moving parts so not just valuation but the present value the cash flows and the volatility and the cost of funds when the cost of funds is zero that means the cost of being in the trade the cost of putting up collateral is very low. so that means you do more of it and so this is again another byproduct of the fed's misguided policies they're en

chris whalen will break it down. >> and we're going to ask the company behind siri, the voice of apple'snomic data. we'll get the latest read on inflation with producer price numbers, the ppi, at 8:30 a.m. eastern. the third hour of "squawk box" starts right now. >> play "shake, rattle and roll." ♪ ♪ ♪ get out of that bed, wash your face and hands ♪ >> welcome back to "squawk box." our guest host this morning is jim tisch, the president and ceo of the loews corporation. we've been watching the u.s. equities and they're down by 38 points. the nasdaq has turned positive, up by just about 1 point. >> and hour top story, jpmorgan, disclosing a trading loss of at least $2 billion from that failed hedging strategy. ceo jamie dimon apologizing on a conference call with analysts last night. take a listen. >> in hindsight, bad strategy, bad execution, obviously the environment. these are market to market positions. i don't want to make excuses and talk about markets because that's usually just an excuse. >> he conceded the losses were linked to a wall street journal last month about a trader nick