and sold to another entity and it was a kind of a way for him to boost his own revenues that of m.f. global well the come. he was really sinking and eventually the mark to market losses caught up with him as did a number of other you know a lot of other things but so in the neurosurgeon environment that we have firms can use the shadow banking market with accounting gimmicks to kind of produce revenue for them right right and sometimes profits leak out from the shadow banking system to the real economy right out of that work ok well let's consider how let's say you have a hedge fund how do investors get their money back you can have maybe dividends but that's not common but you have shareholder redemptions and so all the money that the hedge fund has booked and they have a lot of stuff that's probably maybe accounted for in dubious ways not all hedge funds but some investors can withdraw their money and use that money in the real economy and you have employee bonuses and pay at the firms that are taking place in the shadow banking market so their pay is real and it's getting into the econom

often gets overlooked as something you and i have talked about we delved into it heavily with the m.f. global case where we saw a real hypothecation playing a major role there you hit the streets bob english has worked before we delved into this in studio you want to see if people even knew what this was so let's take a listen to what you found. we're talking about the shadow banking system in particular have you ever heard of the shadow banking. it's kind of like an ultra side like a bad man side of the banking system the shadow banking market have you ever heard of it yes what you barely i don't know much. i've heard it on the news and i read in the newspaper once but i'm not too sure it doesn't sound as scary as it is yes it's ok have you ever heard of the shadow banking system ok good for you i haven't heard of it either so i'm kind of in trouble no it's kind of like a compliment to the traditional banking system where you go to j.p. morgan or bank of america you have like a mortgage or a credit card or anything like that you have a credit card ok do you know where the debt on your credit

corazon met with officials from the department of justice last week this is close to a year after m.f. global failed we're not letting this news get drowned out by the fed we'll talk about it let's get to today's capital account. ben bernanke you gotta hand it to me announced essentially a q e until further notice policy today now with two trillion dollars of balance sheet expansion in recent years but still more than eight percent unemployment in this country and with the free market or at least the price mechanism a casualty of fed policy you may ask more combination for what well ben bernanke you made it pretty clear today when he said it was to affect asset prices so house prices is one vehicle stock prices many people own stocks directly or indirectly the issue here is whether or not improving asset prices generally will make people willing to spend. perhaps we will have to see if that makes people feel richer dr bernanke you but we do sure know that the market has been addicted to easy money here's a chart if you need a reminder shows when the fed announced a stock program and the stair

morgan london whale m.f. global all of these happened london they couldn't happen elsewhere that's exactly right we've been saying this for months for years now finally people are beginning to realize i think the m.f. global was really that what tipped it off finally they said you know why are all the major bank frauds always in the city of london you know in the city of london of course is the only place in the world in the banking world we can really hypothecate to infinity even in the west which is corrupt you could only read hypothecate one hundred forty percent say underlying marginal full security like the u.s. government treasury bond but in london you can do it infinity you can sell the same bond in london infinite number of times gee i wonder if that could lead to fraud and you know by the way regarding the london disease. and acting as a sort of haven for all sorts of ill gotten gains from around the world i do notice in the f.t. recently luxury homes boom in london. that of course is the way to launder yo

small flora and fauna of this wicked government they are going into directly you know it's like m.f. global they went right into the account to steal money for jamie diamond j.p. morgan and they stole it from customer segregated money as a new unprecedented ripoff here nick clegg is saying go into granny's account go into grandpa's account just take that money put it down on this overpriced housing market while and then let the free market do this job let housing reflect the true supply and demand her the prices would come down to the point where people could participate in that market but instead they're going to continue to hype it by stealing money from granny and grandpa and this is a policy of braised of glee in geriatric genocide don't want to get rid of that generation completely what do you what's what's not clear going to do it is going to go down the street is going to trafalgar square or we're just put a gun to grandma said to give me your pension money on the block your front end up thanks nick clegg your real caring conservative your real nice guy. well speaking of grannies and

sachs well governor new jersey he was caught stealing one point five or one point two billion from m.f. global and eat with jamie diamond as an accomplice his defense was the money simply vaporized and now he's back in business again is going to be. starting a hedge fund so they caught him red handed they said in his defense was the money simply vaporized no penalty whatsoever no public outrage whatsoever even though segregated customer accounts were stolen of by john correspondent jamie diamond absolutely no prosecution whatsoever but i want to ask about two thousand and eight for a second because back in two thousand and eight the total global financial system came to the precipice of annihilation but was pulled back when hank paulson went before congress and extorted close to a trillion dollars worth of dollars and what we found out two thousand and eight is that the world needs dollars because the seven hundred trillion dollars worth of derivatives that are floating around the global banking system are priced in dollars and that any unwinding that happens is requirement you require dollars

has seen john cause be brought up on charges if the bringing down m.f. global hey couldn't be because he was a big bundler for obama now it's just a little different again it's all the same yeah i agree obama's been wimpy on wall street but i guess what i'm asking is would it be worth with mitt romney i don't think so i think you'll be just as bad and you know that if it's because you have congress and they're all in it together it's not going to change much what could become much worse how much worse could romney make it than obama in terms of helping out his wall street bodies is he going to give them more money yet just like obama would if we have another financial crisis you'll see the fed dump more dough into it so i don't think it will be much of a difference and you mentioned congress i have to ask you because. tween the last time i spoke with you and now we've seen jamie dimon on the hill twice and if you want to get have any kind of evidence that would make you feel like no one has a political will to go after wall street just watch politicians pretty

money bernie made off went through a lot of lehman brothers the local and then the well of clue m.f. global ok and they have this concept every our party cation where they can use as collateral securities and then use the same securities as collateral again infinite number of times it's all the same thing an infinite number of times of london if you took fraud out of the g.d.p. of the u.k. . what would you have left over anything it's all to do with what you measure is actually productive activity because i've had this conversation with friends but you know we need to succeed because we will of course come from but how can that because that's the opposite of fraud is you know fraudulent bets or even worse because it looks like there's a claim on something but there isn't so. you know all sorts of numbers for a second because the government is saying the city is worth five or six percent of g.d.p. or something like that but they don't relate the ancillary markets deconstruction better part of the fraudulent boom in mortgage lending that's often on land and all of the services industry that a

that filters all the way down but you know the other agencies don't get the press i mean we've had m.f. global we've had here we've had night these are all going to be little little new what i call little explosions before the major quake you know everybody looks at this that whole you know look how much money was four hundred million dollars was you know twenty minutes with night that's going to seem like nothing in the future if these regulators and the more kids don't get in line and sort of protecting the customer and you think that as a result of as far as the earthquake what would be the earthquake or or the what what cracks or what fault lines cause that earthquake is it high frequency trading is it derivative is that leverage is that a combination of everything so yes ok. it's all of the above you know when people say that's all that's wrong is higher frequency trading well that's too narrow if people say all that's wrong with derivatives that's too narrow this is going to be a sum of everything and if you really put everything together it's very scary to see just how big it's become i

m.f. global's money the queen loses her hand washer peter peter how listen the washer of the sovereign hands guys the age of eighty two so the post must now be filled it's going to be by the descendants of this guy so if you're looking to apply for this job we were hoping for a gig i thought think of the foot washer of promotion they promote the foot washing of the hand washer and then somebody from the what was or becomes a foot washer in the foot washer becomes the hand washer in the man washer becomes the face washer is not the way it works over there looked house well he always had a silver you were bull in solver holding a linen towel on permanent standby but i thought this was a good sort of entrepreneurial market to enter because you know all these oligarchs who live here in london in the city of london where wealth around the world is plundered of course. that's how the queen herself has which money she used to be the head of an empire right winger's a silver bowl we should use up paper money gold queens no doubt though she knows the value of gold and silver it's all over the jewels