Dylan Ratigan Show   |  April 07, 2010

Regulating Wall Street and the economy

Msnbc’s Dylan Ratigan is joined by Rep. Alan Grayson, D-Fla., and Bill Fleckenstein, president of Fleckenstein Capital, to talk about the financial reform bill and to debate whether more power should be given to the Federal Reserve after it may have heavily contributed to the financial crisis.

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This content comes from Closed Captioning that was broadcast along with this program.

>> now.

>>> well, in america today we are getting closer to fully exposing the greatest con and cover-up in this history, it involves our banks , the federal reserve , our congress , and, of course, you and me. first, though, think of the fed as the godfather in this con.

>> i'm going to make him an offer you can't refuse.

>> the role of "the godfather" played by former chief alan greenspan who appeared before the financial crisis this morning saying he never knew what he helped perpetrate.

>> the notion that we in any way favored any of them or basically were influenced with respect to policy by what they said other than the facts they gave us, which we always evaluated, i saw no evidence of that in my tenure.

>> and may not have the favored among the banks because greenspan was working for all of the banks against you. the bankers , of course, the unrepentant conmen being supported by the federal reserve .

>> remember that sting experience, how good you felt?

>> so good, getting that money for free. getting away with it. here's how the con went down. the bankers were operating under an implicit guarantee from the godfather, the federal reserve , in the form of guaranteed interest rates , guaranteed cheap money exclusively for the con men. then, chairman greenspan , the godfather, would agree to hold those rates -- let's say 2% -- for as far as the eye could see. the banks , or bankers , the con men, would borrow that money from the federal reserve , let's say 2%, and turn around and lend it back tour, and let's say 6%. that encouraged the patsies, you and me, to be drawn into the con because 6% looks like a pretty low rate. low rates for houses, low rates for cars. heck, you could join a health club , make that into payments, turn that into bonds, and of course promises of a higher-than-average return for those managing teachers and policemens and judge's pension funds that are buying into the con as well. and here exactly is where the con comes in. as you and i both know, the banks had no money. they were getting it from the federal reserve , which is us. it's funny money . they had no capital to back up their lending. but that did not matter because they also had no risk in the lending. get the lending paid off, they win. and they won big when they did that because they did it with leverage. top manhattan executives alone paid themselves $121 billion in bonuses over the first part of the decade. now, mind you, when the bank loans failed, they knew they were too big to fail. so the rest of us, you and me, would have to bail them out. ignorant electorate, if you will, the patsies who had no idea, and really still don't, understand how badly they are being conned by our government and our banks . once the banks , however, realized there was no losing, the question was, how do we make the con bigger? how do we get more money through this crazy machine so we can get richer? the question -- or the answer, i should say, is simple, make more loans, more credit card loans. think of all the credit card applications sent to you over the last ten years. more car loans . it wasn't the cars, it bafs because they were running a financing scheme. home loans, you know the narrative. the person most hurt by this con, the home buyers, teacher, pensioners suckered in by the bait of low credit and high returns in exchange of buying worthless toxic assets manufactured by the bankers , and that's why your pension fund was wiped out and the interest on your savings till this day remains around zero in you're a retiree you know what i'm talking about. it's also why you're now drown failing a mortgage on a house that's worth far less than you owe because the bankers were happy to lend you money they did not have to drive up the price of that house because they knew the more loans the better, but no downside for them, so what's next? higher taxes for us, higher interest rates for us to pay for the bailouts while our government that was theoretically elected by us refuses to cover the stolen money by the con men or fix the system that allows them to continue to perpetrate the con against you and me. the current financial reform legislation proposed by our government would give the godfather, the federal reserve in this case, even more power to regulate the game, the conmen represent by the wall street bankers of course giving our congress the cust action, $344 million so far lobbying against the bill. second only to health care earnings we saw how well it worked out for special interests on health care . home run . guaranteed customer with no reform . i'm sure the bankers will do pretty well as well, all of this acourse assuring our lawmakers -- many do not understand how the con works in the first place that the financial crisis has been fixed of course with an infinite supply of your money. after all, just check out stocks over the past year. we are back over 10,000 on the dow, thanks to that blank check from the federal reserve . so now as we finally heads towards congress debating financial reform in our country, the question must be ask asked it make sense for our got give more power to a federal reserve and banker con men who unrepentantly caused this crisis and make money on your expense, on the pension side and on the credit side. that's the current plan. give them more power. joining us now congressman alan grayson , democrat from florida who sponsored the audit in the fed bill with ron paul . congressman, pleasure to see you again and on the phone president of fleckenstein capital and more importantly author of -- does an exceptional job of explaining exactly how the godfather greenspan allowed the banks to perplate to con. and bill profited rather handsomely against the conspacek because knowing it was a bubble.

>> i would likely more frustrated than i am that our congress ' unwillingness to acknowledge or understand the con or address it. why does it continue to be so difficult and continues to be difficult for ghb our congress to really deal with.

>> i've had the benefit of worked with an economist for for four years before i was electsed to congress and that does give me some insight into how this works. i think a lot people on capitol hill didn't how this works just as you just described. clearly they should be listening to your show.

>> if you don't understand that the bank's incentive is to lend as much money as possible without repercussions. the only way they make money is lots of gambling effectively and everybody else 's incentive is not to try to get screwed and the congress is feeding the money to those who have a directly adverse incentive. they make money by screwing over pensioners and borrowers and our congress is making that more possible, not less possible. how do we find ourselves in this situation?

>> well i think that the fundamental problem is campaign finance reform . i'm not trying to change the subject there.

>> no, no, i agree with you.

>> we wouldn't have this problem but lobbyists hand out $5,000 checks.

>> bill, explain in this simplest sense why it is that alan greenspan is soap directly responsible for creating this con?

>> caller: well, first of all, dylan, yours was one of the most succinct problems that i have heard. because greenspan is ultimately responsible because, a, he was the one who put rates at a level that was too low and then refused in the face of all evidence to do anything to try to retard the potential for an asset possible. he was in denial about the equity bubble and turned around and created the stocks -- sorry, the credit /hughes bubble and till this day refuses to accept any responsibility for it. when prices are held at an artificially too low of level by putting too much money in the system that money seeps it's way into other places, and if you -- it will end up creating a bubble and the more leverage in the bubble, the more dangerous it becomes. greenspan not only made the interest rates too low, he advocated the possibles and curled for the housing bubem importance. he made a speech where he tried to explain why housing could not possibly be a bubble. so it was not just his conduct of monetary policy it was the things, the speeches, he made and he was held in such higher regard, other people adopted his behavior and philosophies.

>> you mentioned campaign finance reform in the need to get the lobbyists out because the bank lobbyists $344 million, a cut of the action on the con goes to congress . are you as cynical as that would suggest? that, basically congress knows that they should create transparency and capital requirements which would end the ability to be a con like this but refuses to do so because they're afraid of losing those checks?

>> i think it's worse that than actually. we lived through an economic disaster and now we're slowly recovering from it. we lost 20% of our national wealth in 18 months, the last 18 months of the bush administration . and housing topped out 3 1/2 years ago. not just in florida , but around the country. and nobody has been held responsible, not alan greenspan , not anybody else. in japan they have a way different solution to these kinds of problems. it's called harry carey .

>> i think what confuses people that the point, congressman, and having been talking about this incessantly for a few years now most people, if you look at the polling, understand, at least enough of this, to know that congress works for the banks , not for the american people , and yet congress still seems a phenomenally willing to drag its feet in addressing this. harry carey may be interesting or nice, we're probably not going to see it. we live in a democracy where we're told we elect people who look out for our interests and yet the same people are creating laws that allow this group to con the american people out of the largest transfer of wealth in the history of the world with no consequences. are you suggesting special interests have so much control that our government literally is willing to facilitate that level of wealth transfer with no consequences?

>> i think that's a fair statement and i would add to what was said before is we've got the creation of the idea of too big to fail under alan greenspan . we've got him gunning the economy through the y2k money supply increase that led to economic disaster within four months. he made mistake after mistake after mistake and what we never hear from any of these people is, i'm sorry. we don't even hear that and i think it's because the system is enslaved -- yes, that's right. and the senate bill unfortunately does that. the senate bill takes whatever possibility there is, of somebody who is actually looking for the consumer, and puts that, into all places, the federal reserve as the one responsible to do that. the official reserve which is actually run by big banks , it's governed by big banks . they choose the people who occupy the seats of power in each regional bank.

>> go ahead, bill. quick.

>> caller: if the american banking system forecast directors and higher-ups there were held personally liable for the problems as in brazil for instance and used to be in this country 70 years ago and then you might get a level of oversight in the banks and have them pursue policies that we would find less differous.

>> any chance of that, congressman?

>> yes. in fact, we're working on a bill to do exactly that and we've examined what happens in other countries. when they make the kinds of mistakes we've seen in the last few years in america and it's not a pretty picture for the people in charge. either on wall street or in the capitol.

>> listen, congressman, we appreciate your efforts on our behalf to correct for the con and get the money back and fix this system. and, bill, thank you, for your journalism and your efforts to make sure people actually understand how this happened, truly. bill fleckenstein, thank you.