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great yes for you guys seems james galbraith he holds little boys that
sanjay right in government business relations of the elderly
l_b_j_'s full public affairs at the university of texas at austin in his new
book is the predator say how conservatives and then of the free
market and while the rules should too
%uh james was only enter actor
%uh now up
both the peaceful watchmen monthly called no return to normal %uh
first let me ask you about that or
%uh banks
reality insolvent handbag
about but judgment for the professional regulators but i think that the very
least in deeply koppel
%uh and that means that we ought to be product
after taking a much more aggressive role to protect the public interest and we
have that
and hats
would we be
ingress and like that
well
on when the bank is on the porch of failure when it has failed in that sense
what the the normal procedures for the federal deposit insurance corporation is
benefiting the regulators
the replace the existing management mixed archives
a process of getting clean bought it
of the banks books so that we know
%uh what assets or or are likely to recover value and what cardinal
%uh and at the present time you you guarantee deposit so that there isn't a
panic and you keep the bank open
who normal business
but you will for taking any
extra risk that you tried to build more computers for office
eventually be charged to the taxpayers with a positive charged
that step of course is being debated at the moment partly in the %uh
%uh within that
the treasury's plan to the for the pick that
skhhds
the treasury is not going that direction
well i had the perpetrator or
they're very intellectual
%uh amplified
%uh beyond that i think the treasury
feels o
or borrow
there is a feeling and these socks
confuses the %uh
the big banks quickly
with the %uh effectively functioning of the financial system as a whole
and i think fail to recognize that you could always replace a bank
the banks at that could fail but most important thing is to get a doubtful
place quickly as possible
and left the ad lib other financial institutions
e take on the functions of the roles but that pact was particularly
performing
but we're going to be in any event heather in the wake of this enormous
so hyper-inflation of a bubble
%uh in the %uh
in the last %uh over the last decade housing sector
%uh to have a smaller
financial sector going forward so the question is not whether when it takes to
watch is in the banking sector but with whether the court before
on his tution but actually caused the problem
or whether they're going to fall on other institutions smaller ones for the
most part
toward wonderful specificities saddam was uses the embody and
thinks look %uh president obama's really smart
he's got a grant from this in a lot of people elected
criticize us for some of these we say on the shore that i write
they say look or how you know by the president obama and he was a considered
all of this and there must be a reason why he's decided against it that if
all the banks the wonder at the same time that would cause some sort of
systemic problem that i cannot grasp
%uh how true is that
rob a bank
don't meet to disappear abruptly you could avoid this
systemic problem
bob reich
first of all using the powers but the f_d_i_c_ ask
to insure the pilot said to prevent arrived
especially by keeping the
the other the basic institutions institutional infrastructure
op ed wanted
%uh under federal supervision of that is what is typically done with the bank
people and on systemic bank fails who's no particular reason to think that the
system would be endangered by %uh %uh aggressive effort to find out
pratap what
the extent of the losses
actually all
of that you are going to be part of it what what it what would happen of course
is that a lot of people who have
capital with with capital with risk it
and supervised
pulp really pay attention to what was being done with a capital which loser
appropriate the capitalist system
%uh having outlook
incumbent management would have to be would be replaced for that
topic trash because a lot of capable bankers out there but what you need to
have one day
when you intervene with a with it could happen %uh
financial institutions
if they have a team in place
which is not wedded to the particular corporate strategies of the previous
team and that therefore to give you
%uh ed an accurate in queen audit
%uh evaluation of what the bank %uh condition actually is
and we establish confidence going forward
mills he's essays justices
%uh and first dealt with
i won't get to the
%uh this idea
that we've discussed on the chauffeur wild with the naked c_b_s_'s and whether
they are religious gambling
and not attached underlying assets units so
whether we even have to pay those obligations so first black have a right
are is is simply gambling without underlying assets will be called naked
credit default swaps
or credit default proper %uh recruitment greater radio
it's an insurance policy which is not backed up by any preserves respond
regulated in the market
and so i guess it's worth it if it's campbell you don't have to be involved
you have to be
popped up only half as it's being insured activity in the anyway
%uh related to wet your basic because gambling on some of that but i think
somewhere in the world in some particular tones
we're not misunderstand it is related but it is it's these guys that are and i
think that batch of more reasons to love the setup
all take decided they're going to go on there he'll take the side but they're
not and will just put %uh you know
ten billion dollar bet on another question forward
all right now and that's on regular
and alan greenspan today comes out in writes an editorial saying that we have
enough regulation that's not the prop
how could he say that in in good cops
are
i couldn't say that we could cut jobs %uh
risks
miami editorial press covered
is it possible that allen
doesn't know a damn thing
or issue
you know we robbed them but so what in you know if we don't have any more
regulation more armageddon and that's good for me
alan greenspan was of course or life %uh
and objective is to put %uh
w parade one of the most of the peace
extreme
%uh variants of the free market for perfect
%uh and %uh you know i think it's very hard for him to give that output
up but the reality of course that he presided over aircraft
deregulation unabashed desegregation of the financial system
and we now called
understand the rest of us who understand what the consequences of that are
so what it what alan greenspan thinks about it i don't have to print claims to
think about it i think is no longer in connect any great interest
right accepted into
we'll divvy up responsibilities i think that's a corpse
we are from our point of view react but i don't like what he's said i wouldn't
put put a lot of time trying to work
parts of the static and citizens at so
this credit default swaps undertaken in their damn beliefs that are at let's get
to the more interesting idea of their close for stresses suggested that
recently which is
and leave it at that
these are based on nothing and it's just gambling debts
why are we
using taxpayer money to pay them off
lautenberg request
catch a very good question and i did
the %uh out
%uh issue of howard forcible these contracts would be
%uh i think this is an issue which many will be worse
%uh ford
rb
despot any of the time familiar with his birthday
they should be their these are instruments which
basically didn't exist before the turn of the
of this decade they work %um
legitimized by %uh aloft
slipped into
an appropriations bill at the eleventh hour in december of two thousand justice
conversely leaving just after
aborted bush was two-sided blocked at work
it was written by him like phil gramm or anyway sponsored by him
%uh nobody knew that it was very uncertain eleven thousand page
appropriations bill
%uh and %uh of the day that basically opened the financial systems kind of
rampant %uh
spreading m
into renting
of systemic risk and that's basically what they with the yes market does
%um no that aka scientific theory %uh put out about it that that hypocritical
%uh
people to protect themselves from list
risky but in fact what it did was to todd the risk of every part of the
system together
and to transfer risk from one party to another
in a way that nobody could
quick tracer understand
%uh that method
profitable system of course is implicated in the project worst
you know n_y_
mala noche do another level and we're trying to professor james galbraith
these that would best in chair at the university of texas he's author of the
better satan
or i think one of the top economists in the country and
if in
if this c_b_s_ parties with sixty four trillion dollars
%uh and now the whole world economy the whole world g_d_p_ might not be worth
that much facility united states g_d_p_ is not worth that much lower fourteen
trillion dollars so or obvious
if they had a systemic problem c_b_s_ intended
is that possibly causing the whole
infamy it could be that the toxic assets the ones that %uh the bad mortgages the
sub-prime center
are actually not that big a deal with the real problem is in
the c_b_s_'s
we've got rid of the city s issue it wouldn't have a problem i'm not
singer
you wouldn't have a problem but you have a manageable problem %uh simply right
third purple heart expert problem
so where it would be %uh
with the sub-prime
securities %uh
at the paper the %uh
what effect curricula pyramid system
you've got
haiti
big problem anoop basically know where the risk is
%uh the %uh
that c_d_f_ markets enable that risk to be transferred
%uh basically anywhere on the planet
and you don't know when television tution goes down in the cupboard
contracture called
who helps is exposed
and that was of course what happened with a on a tree
%uh like that government was caught basically %uh
black-footed of when i kept with women brother secretarial triggered pm pacific
iraqi at issue
school
you know i'm trying to get a handle on whether if if the if you had an honest
broker coming and at the treasury which i'm not sure we have one %uh
insist look at this semester
heloc wait a minute now
this off here and these are real mortgages that went under and they
israel assets there in fact succumbing we got to take care that than any of
these other toxic assets that are
you know insurance based on that but that insurance would make sense it's era
and they have a whole nother category these
gambling deaths the snakey c_b_s_'s loop etcetera
any payments because
yeah there's a where there's a artificial as it is a winner but why are
we taking taxpayer money patel goldman sachs of some hedge fund
well we are much bigger problems than we had to deal with problems that actually
effect the country's let me
might get to those and if there's enough money et-cetera and it makes sense then
maybe we pay those off with whatever profits they have from other parts of
the company eighty et cetera
but this is the word that the white house is cannot
aunt airport corporate economic airport either correct
that the people who have money coming to them it would be lucky to get away with
the with sent on the dollar because after all
%uh there's no way that these obligations can be paid in a general o
of recognition of the losses
%uh that the %uh
top of that are going to be there in the underlying assets
talk abt
%uh after the fact that %uh
protectorate
the most important thing to do right now it could takes up to what those things
actually or
%uh and everything i feel we can't hear about it evidence
%uh this shortly for complete complete
but all the indications orkut
the ho
sub-prime
the security if it were based upon sub-prime mortgages
arm massively problematic they are
based upon mortgages that were issued
off-budget when they were based on fraudulent oppose prayerful at work
inadequately documented of that were in everyway out and in fact extremely
difficult to enforce actually etc ballot contracts in the court of law
in addition to that it's very difficult to know who actually holds the mortgage
%uh
the into the world i'm getting advice from getting is that t
under one security system reason why the market pacing political life here
which is that %uh krummel eagle cam point figured terrifically problematic
and the treasured plant basically treats them as though they were valid assets
that were corrupt
simply under above
under a cloud of stationed in the marketplace
a cloud of fear that would represent what's confidence returns these effort
we can expect we came to you
but i think there is a very good reason to believe that they are in fact
permanently impaired
and the neck of the treasury's planets simply to transfer them from the books
of the banks
and or responsible
for the tobacco up to the books of the f_b_i_ field ultimately to the tax where
hard-headed
that would basically be cramping
those parts of the financial institution of the financial sector which
almost a problem
%uh of repair
on %uh
%uh pop %uh welcome trillions of dollars worth of disasters
let's look at this in this intelligence of all the families
and %uh president bala comes on today in s says hey u_a_w_ gonna watch it you
know you got we gotta cut here
salaries
and you might not even have your passion of those are contracts to
and in fact this people relied on their pensions for their
lives
saw the one hand
burke and and and have no prompter about their contracts but on the other hand we
have these guys who went on a gambling's free and that now tell us on a night
understand our contractor rock-solid and it appears that we have already final
thirteen billion dollars over the goldman sachs through okay i g
on some of these vets that perhaps shouldn't
either not been paid or as you pointed out
depends on the dollar
so when you look at that
you wonder about who's in the government and already wonder people are angry
people are angry and they have every right to be angry
so what
mama not looking out for assessment
re-elect him for that i mean but that's a real fundamental question i'm not
asking you to look into his psyche painter but what i'm asking is that
packet
on the question
he's got to teach
yahoo ok all that is true
what is that plot content understand
for the record
to be quite honest with you because i'd like to think that or the
%uh king immediately surrounding or baba
locked
broadbrick warm enough
%uh helmet it put the date that the discussion that we're having
is being held inside the white house
similar terms
%uh were circling her hearing about it on the outside
%uh abha expect
there or
barriers
basically to put that
too many of the people
making these policies are tacos
to the %uh center for financial assistance and too much at all
of the big institutions
%uh and their who basically unwilling to recognize repeat that there is that
formidable choice that has to be made
%uh between some very powerful
%uh company cracow people so if you do with those companies
and the lord republican proposal or tricks to pick up
tool that choice is many
policy decisions are not going to be kam to strip
to %uh
rapid recovery economy too
dealing with the enormous problems
%uh that people are facing is resolvable
%uh we're going to discuss the dumbest is also the tennessee anthony last
question for you
%uh and that is the idea of what's coming up ahead
indication
okay you know the money's already going out the door and every day goes out more
but you have any indication that we're gonna get a ride going forward have they
had a discussion and that you've heard of that come out of the obama
administration about what regulations to pass the say hey you know what this
leveraging at thirty to one thirty five who want you know we're gonna cut that
out for
you know the board of directors you know of seems to be a circle where they go
around and they're not looking out for the shareholders we got the rating
agencies problems where they're putting triple-a stance on things that are
garbage where we have all whole host of things that he did the dress
she seems to me right away but i'm not really seeing a any indication yet but i
are very well might be missing that's why i'm asking you well you know how
does it have been occasion that capital close on the part of optimistic or or
both
out are brought that secretary geithner and sticking to the congress yesterday
about gave a very clear and very exact statement public breadth of the problem
he spoke about the extent to which
%uh consumers %uh took out mortgages that they can understand all that were
essentially fraudulently originated
antique spoke about the extent to which there was a cold %uh fought through help
the system
%uh so we shall see of that i think there is a clear case for a very very
broad overhaul of the financial system in the infantry of the treasury is
talking about bringing institutions which had escaped
regulations under a regulatory well
to really key issue here it is
critical
are we going to recognize the extent hopefully
extent to which broadcasts used to be activities institutions
stopped that war
now being
protected in effect by the treasury splat
at are we going to all
the people who
%um were responsible for that to account
and deal with that in a wave which will
was stored
confidence in the system dot blot pretending that everything that the
tornado like by facing up to the problems
owner and and dealing with them and making it clear that the
but the sheriff has arrived in the pre potent at that declined to producers
that were
encroached and %uh
tolerated in the bush administration are going to be
%uh
going to be prosecuted and
prescribed and this one
one thing that happens you will really can't trick worked with a quick weather
yet
still suddenly has someone requested used to think that one person
that you say hey present nobody would be really will serve to listen to his
economic thought to be to diversify your
%uh did advice me you're getting
character would someone you might have heard of or
and his name is without william kate black and he was the
top-up %uh a regulator an economist of a criminologist
personal understood what happened in the savings and loans in the nineteen
eighties first
%uh and probably better than anybody else someone who actually applied to the
oklahoma campaigns wells who was known to them the author of a very very good
book on banking
four entitled
the best way to rob a bank is two point one
%uh yet but once you get a grip on them harley is getting somewhere
well i think that that title says it all and %uh of course accused others for is
the predator state will put that up on the young first library at the
intersection
president of earth it's been a real pleasure we really appreciate your time