stock companies yeah you know as big come what you fear you know some philosopher once said it lehman brothers was notorious for pushing penny stocks or pushing stocks like penny stocks or pump and dump scams this was a lehman hall mark of lehman brothers and and wall street leading up to the crash of two thousand and eight and dick fuld was he took that penny stock mentality and applied it to mortgage backed securities and that's how you got this mortgage backed security bubble inflated to multi-trillion dollar levels and then collapsing it was enough that they did the same thing in the savings and loan bubble and bust or the nasdaq bubble and bust they had do this with mortgage backed securities so dick fuld was the ring with the ringleader in that huge mortgage backed security pump and dump penny stock like collapse and it's poetic that he's now losing it sure in the penny stock market now and also for the likes of jamie dimon the late blankfein to look into their future he's this guy is like the ghost of christmas future because he's listed as a key advisor in eco's proxy and owed two hund

back in two thousand and eight now lehman brothers dick fuld is in the news in a sort of pole dancing kind of way folds tiny stock is penny from heaven and this is according to the f.c.c. filings have matrix advisors which he and his wife run he is a part owner of guy eco and go eat go like many a small company was born from the ashes of another penny stocks busted business model in this case boys' toys a san francisco strip club that went public before red dispute led to its collapse so he's running this guy eco penny stock company and it's a full report and company. dick fuld. very he had sent to the waste land known as the penny stocks and penny stocks it's a good thing. really. metaphor or gives you an idea of where the global economy is going because everything is turned in into a penny stock basically in terms. of stocks are notoriously manipulated and here you have a situation where former. wallowing around in the penny stock wasteland and this is the heart of what a lot of the bank to the banking system collapse was the new mindset of a pump and dump or scam or penny stock hol

back in two thousand and eight now lehman brothers dick fuld is in the news in a sort of pole dancing kind of way folds tiny stock is penny from heaven and this is according to the f.c.c. filings of matrix advisors which he and his wife run he is a part owner of guy eco and go eat go like many a small company was born from the ashes of another penny stocks busted business model in this case boys' toys a san francisco strip club that went public before red dispute led to its collapse so he's running this guy eco penny stock company and it's a former pole dancing company. dick fuld very into the wasteland known as the penny stocks. and penny stocks it's a good thing. really. metaphor or gives you an idea of where the global economy is going because everything is turned in into a penny stock basically in terms of the penny stocks are notoriously manipulated and here you have a situation where former. wallowing around in the penny stock wasteland and this is the heart of what a lot of the bank to the banking system collapse was the new mindset of a pump and dump or scam or penny stock hol

morgan so they got rid of bear stearns they got rid of lehman brothers and then they absorbed walkover year they were the big big to fail banks got even bigger and that's one of the that's one of the points that that whole financial engineering collapse occurred in two thousand and eight so now what you're describing here is morgan stanley goldman and jamie diamond of j.p. morgan have a position they collude means they are engaging open price fixing there's no competition there's no way is someone to come in there and so you know what we're going to offer a cheaper service to do this to competitively because they'll be forced out of the market because deregulation regulators are in the pockets of the bankers well you know that there's a case going on against for the story from former goldman sachs about these subprime mortgages that were dumped into collateralized debt obligations and sold to passive pension funds around the world and we know that goldman sachs. preferred clients were able to profit knowing that these things would blow up knowing that greece would blow up the same thin

what was when they went bust so lehman brothers was at a leverage ratio of about thirty one the fed is probably at least sixty maybe ninety to one with what they have on the balance sheet so it's just going to church so the issue. in the markets had the little taper tantrum i guess two weeks ago when you saw you'll dries i don't know one hundred basis points fairly quickly they all panicked because they said oh my god we just lost two hundred billion they said oh we know what it feels like to be a hedge fund now because we can't control this and i think that what they think is that they can control interest rates which is a big mistake so now what they've got to do is try to figure something out if you notice there's a massive scramble and p.r. campaign going on to replace the fed chairman who said that didn't even say he's leaving it so is that a hint to the market that he's been expelled by the administration to get to that was second talk about the possibility of larry summers coming in to settle but i want to stick on this idea for a second of minimum capital requirements and wh

hypothecated twenty two billion dollars worth of assets from their hedge fund clients and when lehman brothers international europe filed for insolvency there were little protections for their european customers now with respect to the m.f. global case that we've been discussing here where you hypothecation could pose an explanation and where the missing customer funds it and that global was involved in a complex repo to maturity trades as confidence in m.f. global declined as likely that the counter party started demanding higher collateral and what m.f. global did that was illegal as they dipped into customers. fines that were supposed to be and segregate accounts so when m.f. global went under multiple counter parties all went after the same leverage securities obviously not everyone concedes the same security at night magic these hypothecated trades disappeared like a game of musical chairs and the saddos of the financial industry this is the breakdown every hypothesis and. joining me now for the dual is the host of breaking the martin thank you for joining me here on the one sided right n

back in two thousand and eight now lehman brothers dick fuld.

was get in and stabilize and nationalize thosent entities, ty were nine times bigger than lehman brothers, and it kept housing prices from dropping further in a worth crisis. it never dawn oed on me, now th government insurances more than 90% of the mortgages. you know, how did we get here? we got here because of flawed government policies, over stimulating housing, fanny and freddie are ground zero. and as you have said, the key is getting the private sector into this. because if the government is setting the prices on your mortgage through a subsidy, what you are going to do is you are going to ultimately get things that -- it's not market realty, it's not economic realty and you will get another bubble again in housing. >> so we are setting ourselves up right now then, unless a change is made. >> we should have a plan in place to transition to a time when the private sector can play a bigger role in terms of financing mortgages. >> let me ask you about china a you have been spending a lot of time in china, what do you make of that going on right now, we know things have slowed down. ho

and so that's to a large extent what happened to bear sterns, lehman brothers, and the holding company of aig. >> in other words, three of the nation's largest financial institutions had made more bad bets than they could afford to pay off. bear stearns was sold to j.p. morgan for pennies on the dollar. lehman brothers was allowed to go belly up, and aig, considered too big to let fail, is on life support, thanks to a $123 billion investment by u.s. taxpayers. >> it's legalized gambling. >> it's legalized gambling. it was illegal gambling. and we made it legal gambling. >> with no regulatory controls. >> with absolutely no regulatory controls. zero, as far as i can tell. >> i mean, it sounds a little like a bookie operation. >> yes, and it used to be illegal. it was very illegal 100 years ago. >> in the early part of the 20th century, the streets of new york and other large cities were lined with gaming establishments called bucket shops, where people could place wagers on whether the price of stocks would go up or down without actually buying them. this unfettered speculation contribu

that, of course, is the day that lehman brothers was about to go into bankruptcy. it was also the day the bank of america bought at merrill lynch. debate the wall street changed forever. events that followed in this ugly weeks of the fall 2000 have been chronicled in a lot of books, and it sure most of us remember history, it's edgy, t.a.r.p., all these ugly bailouts and all these really economic calamities that was happening at that time. i'm going to focus on a couple aspects that are important in understanding what this is bonds was on a global level. so if in the 1930s the central bankers didn't understand each other, didn't communicate, didn't act with common resolve, that change by 2008, and by the time 2008 rolls around there is a sense of common purpose among these guys. they need many times a year, six times a year they could've also switzerland. there two days of meetings and long discussions of economic forces. they also they do that is the world's most exclusive dinner party on the 18th floor and basel switching. it's the most intimate opportunity for t

financial markets was in large part due to derivatives trading and later took out bear stearns and lehman brothers in 2008. bottom line is, derivatives do have a place in financial markets, but not with banks, because the banks are gambling with insured savings deposits. in other words, you, the taxpayer, are backing up all these financial derivatives so the banks can basically crap shoot." how does that happen exacly? what do banks buy and trade? "the ones they like especially are interest rate contracts, and they also trade a lot in global currencies. they trade a lot in gold, precious metals... these are the markets they like to speculate in. but the key thing is here they're not playing with the house money, they're playing with insured customer deposits, which are insured by the federal government. you have to separate those two areas." thanks for your insights, juli. "you bet." the u.s. airways and american airlines merger is almost ready to fly. shareholders approved the $11 billion merger, which is one of the final steps in closing the deal to create the world's biggest airline. the new co

bursting of the financial markets as we as we knew them at that time and we lost a couple of banks lehman brothers bear stearns it was the worst financial crisis in decades credit and it's all tied to principle a the unwinding for the meltdown in the securitized real estate market so now what you're describing to me now is pretty much what everyone feared would happen because the response of two thousand and eight from bernanke in his predecessor was to simply reinflate the real estate bubble to unsustainable levels so is it fair to say that route of point now where the bubble has been reinflated and now this new real estate bubble is bursting wealth even the fed is worried about that and the fed has actually pinpointed reads as one of the major reasons for jailing the purchases because the. we're getting out of hand these streets are very large they have grown at enormous rates and even though they're not as large as citibank or bank of america they can still do severe damage to the financial system if they if they blow up and so yes there really is a bubble that has recently been cost is somethi

and lehman brothers but you know and then you look at the other ones are going to so she was long term capital with the asian debt crisis but the secular trend remained intact on a downward basis so you know that clinton was right but clit was looking at this from a micro level as opposed to a macro level you have to pull it back and look at the thirty year trend and say well could shift the other way then there will be short term periods where increasing leveraged. work but in general you can't have any ought at all because if you do you're going to continually get hurt as asset prices decline so what you see is the gap between price and value in assets narrow and assets become valued on their utility as opposed to being valued on their speculative premium and that is a collapse the debate is going to get all areas of the economy you know housing people think of it as well you know this is how we get wealthy used average americans we buy a house it goes up in value no no no housing is depreciating capital asset you buy a house because you need a place to sleep now let's talk about the

the problem of all of these things is that these allegations just like bear stearns just like lehman brothers they're making bad bets and stealing customer accounts apparently to do them i don't know if the allegations are true they appear to be but it takes a lot of time to unwind the transaction find out who the guilty party is the real concern that i have is not punishing courts and he should be punished and obviously everyone who did it should go to jail my concern is this is going to happen again and again and again it's going to happen every five years just as it happened every five years in the. unless we get that vocal rule out of the dodd frank bill that i've been advocating before on your show that's great let's talk about the volcker rule what about it ok i happen to agree that if you're going to have a federally subsidized banking industry the way we have with the banks ok there's should be limitations on that i don't think we should have been the first place but tell me what's your view on the volcker rule we need the poker world basically local rules and it's not because you wan

the problem of all of these things is that these allegations just like bear stearns just like lehman brothers they're making bad bets and stealing customer accounts apparently to do them i don't know if the allegations are true they appear to be but it takes a lot of time to unwind the transaction find out who the guilty party is the real concern that i have is not punishing cords and he should be punished and obviously everyone who did it should go to jail my concern is this is going to happen again and again and again it's going to happen every five years just as it happened every five years in the past unless we get that volcker rule under the dodd frank bill that i've been advocating before on your show that's great let's talk about the volcker rule what about it ok i happen to agree that if you're going to have a federally subsidized banking industry the way we have with the banks ok there's should be limitations on that i don't think we should have been the first place but tell me what's your view on the volcker rule we need the poker role basically of local rules and it's not good if y

. >> guys, if you think about it, bear stearns, lehman brothers, citigroup, merrill lynch, not a singlewas charged at any of those firms for financially-related crimes. what it comes down to, the fabulous fab tourre? why do we call him fabulous? it was in an e-mail. >> whole build something about to collapse anytime now. only potential survivor, the fabulous fab. >> what is he talking about? a synthetic cdo. a product made up of mortgage back the securities or sin threat dick mortgage-backed securities. we don't have to get into all that. he sold that to investors. aba capital, a bond insurance company that bought this pile of junk that he calls a pile of junk. the sec is essentially charging him with putting together and selling something that know was fraudulent. that he knew was going to blow up that is what it comes to today. i would point out, there is a jury selection this is a civil trial. what is interesting about a civil trial, the sec has a lower burden of proof. it is a preponderance of evidence. not the sort of high, intent, what is the word for out? dennis: beyond all reaso

the companies that failed was fannie mae, freddy mac, lehman brothers, beir stern, countrywide. >> thepanies we bailed out were citi bank, bank of america, wells fargo. they got the big tarp money. >> chris, i will bring you in in a moment. w45 is your reaction -- what is your reaction to the senator had to say? >> look at jp morgan chase. they were forced to take the money because the government said so. elizabeth warren and john mccain are wrong on this. >> chris, is it time to bring it back? >> it is definitely time to make sure we don't have another financial crisis. the reality of the situation was, yes, you had bad mortgages and bad loans, but you also have a banking system that is incredibly interdependent. when you have a liquidity crisis, it is not just affecting one institution. it affects all. then you add in this complex, derivative type of transaction that is very difficult to manage. you don't necessarily know what the risk is. when you have a situation as we do now where the banks are even bigger than they were, the question is what can you do to mitigate the risk? if yo

they couldn't nail the guys the reagan lehman brothers or bear stearns.hey didn't get madoff. >> he turned himself and. dennis: exactly. >> of a sudden there's a public outcry. it is a very sexy case sitting there. they did have compelling evidence. on one hand it is political in the sense that they're playing this up and on the other hand they have real cases. if you believe insider trading is a crime you have to believe this is a good case. we should point out is is not done anything wrong. dennis: we appreciate. get blood on the buck. coming up at 8:00 p.m. eastern right here on fox business, charles will demystify the stock market. he will help you should your fears because a lot of fears about stopping people from getting into this market and making some money to prepare for a more prosperous future. the can't miss special major market. that guy is good. time now for of looked at stories you're clicking on tonight on foxbusiness.com. disappointing results from home builders could not keep the market from ending in the green today. the nasdaq and the

that was instrumental in the fall of lehman brothers.have also seen the same thing with the european countries since the problems began or we have seen it in stocks in our market because of deficit funding or debt ceiling issues or the sequester. when things are good we forget about the pernicious impact of aggressive short selling without limits but when they're bad we feel them plenty and they're not fair. i hate it. short sellers aren't the only risk. we now have etfs of mass destruction. double, triple leverage. exchange traded funds that give you two or three times the short selling bang for your buck. these are etfs that exist for day traders. that's not the point of the stock market, is it? they don't work for long-term or medium term investors. they rebalance every day. take the skf. that's the ultrashort financial proshares. you think it would have made people money during the financial crisis. many of them got wiped out. wouldn't this be the instrument of choice? wrong. it actually lost you money. one of the worst years in bank

and a former vice president at lehman brothers. good to see you again.the impact of detroit bankruptcy of the bond market? >> it is historical. behind the scenes you have tension -- pension and health care people with liabilities and bondholders in detroit. a big fight, and unfortunately the more the politicians get involved here, they steer bottlers around the country. in other words, bottlers around the country in other cities are worried about bondholders getting crammed down at the benefit. david: we certainly saw that happen with general motors when in fact the pensioners -- because they had so much political power. politicians were able to get the deals. they ended up pretty much unscathed. but this is a guy, beholden to no one. he is an independent. he is the manager for this whole debt procedure. will he have the final say in terms of who takes a hair cut? >> it is reporttd that he reached up to the white house late last week. definitely a political element here. david: i would not say definitely. you reach out to the white house because there ha

i remember the period in which i joined sac, it was the week before the lehman brothers collapsed, and i left about a week before so the market bottomed in 2009. the world was in crisis. i was engaged in other types of conversations that had to do with macroeconomics and things like that. and i have to say, i knew a handful of the portfolio managers reasonably well there, and we should remember, of the thousand people that work at sac, irrespective of how this all turns out, there are some very high quality -- many high-quality, honest professionals who work at the firm who do their business appropriately despite the fact many were convicted, former portfolio managers and some are still under investigation. it is a fairly large firm. there are 125 or thereabouts portfolio managers, each of who has an analyst. did i see anything that i thought was, you know, amiss? no. and if i did, i certainly wouldn't have -- >> how would you characterize the culture there? >> eat what you cook or eat your own cooking, kill or be killed type culture. if you're in a competitive environment, and i think

right at the time of lehman brothers clearly had effects. i think the goal of q.e. is to reduce long-term rates. you can see right upon the announcement period a drop in long-term rates, a drop in mortgage spreads. clear beneficial effects. the second round q.e.-2 was a bond purchase program in 2010. a little bit harder to tease out the effects there. but it's important to realize these policies work better when markets are under stress. markets were under less stress at that point. the last round sort of in between the two you see in effect on mortgage rates kind of harder to detect a major effect though. >> charlie: is the fact that he has publicly said, look, want to use the fed to try to bring down unemployment. does that separate him from other fed chairmans? >> i know. i think fed chairmen have balanced unemployment and inflation. go back to volcker, inflation was really high. he felt he had to take steps to reduce inflation at the cost of higher unemployment. in fact i think alan has made this point many years ago. to start the protest of fed chiefs, they're

lehman brothers could have had 20% capital ratios, and they still would have gone under, but if theydn't have had the balance sheet expand to the same degree, because they were buying low-capital assets. and so, leverage ratio is just another governor, and i don't think it's a bad thing. as i said, we've lived with it in canada for, you know, years. >> right. >> and it's certainly served the banks well. >> as canadian banks navigated through the worst of the financial crisis, better than american ones, a lot of people have been saying, yeah, yeah, wait for their shoe to drop. look at the home prices. look what's happening there. and we get evidence today that the housing market is still going relatively strong. is it your view here this isn't the case of a shoe to drop? it's actually that this is sustainable? >> i think it's sustainable. firstly, i think there's a real misconception about the housing market in canada. you know, there's been some increased pricing, particularly in the condo markets, in cities like vancouver and toronto. still very low compared to a set like new york,

if you're going to bring everybody down to the size of lehman brothers, you'd still have a problem. >always good to see you, mr. frank. thank you. we'll see if -- >> you're welcome. >> hopefully, we'll have you back before the thing is implemented. jack lew said it will be by the end of the year. >> i have a feeling we'll have plenty of time. >>> turning our attention back to netflix. shares are down 6% after hours. they've been moving around on the earnings announcement. the low is a little bit more than 6%. but still a hit, and that's got people taking a look at the subscriber numbers. >> the beat on the top line, 49 cents versus 40 cents. revenue was right on the money, 1.07 billion. but it's the guidance that julia boorstin that has some people troubled, they widened the expectations for the third quarter. we'll have more at 6:00 eastern time on cnbc.com, with the conference call that will be co-hosted by our own julia childs -- or julia boorstin. bon appetit. >> she won't have the french cooking tips. >>> it's all relative according to a new survey of the rich. it takes at least

because the companies that were the problem were freddie mac, fannie mae, aig, bear stearns, lehman brothersnd she said it was the big thanks that got the bailout. stuart: i am a conservative kind of guy but in this instance i agree with senator boren even though she is away on the left of the political spectrum. i believe she has teamed up with republican john mccain in the senate to propose this legislation. that is an unlikely duo. >> senator mccain has been supportive of doing this for some time and senator warren said that they are getting calls from democrat and republican offices of other senators who are interested in looking at this bill and possibly supporting it. stuart: anything but dodd-frank. i know you are laughing but do you not agree? appreciate it. let's go to the big board, pretty flat, up 9 points but we are at 15,468 not that far from 16,000. former mcdonald's ceo is here with us. i want to talk first of all about the markets. look at mcdonald's and junk food. and the markets. 16,000, here it comes. >> everyone looking for place to get their money, so many other business

the independent brokers lehman brothers when entities did you look to to stabilize the situation in the early '90s? it was universal banking company. so let's assume history has a meaning it is just not a joke you forget. if you don't forget history why do you want to create small banks and independent banking firms when we know this is where the crisis developed? lori: you make a valid point. thank you for joining us today and for your time. adam: back to london monitoring the latest from heathrow airport of fire was extinguished aboard this 77 that was parked at the gate we will bring you the fallout down 6%. lori: new concerns that home buyers and sellers are worried. >> eliot spitzer second shot the latest surprised. lori: after the asiana crash a man running a web site to rate by its performance. >> would you rate your airline pilot if you could? tweet to us ♪ [ villain ] well mr. baldwin... it appears our journey has come to a delightful end. then i better use the capital one purchase eraser to redeem my venture miles for this trip. purchase eraser? it's the easy way to erase any