Harry Markopolos on King World News | Part 1/3 — Transcript

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1. 0:00this is Eric King from kingworldnews.com
2. 0:02and joining us in this segment is Harry
3. 0:06maropis the gentleman who broke the $50
4. 0:08billion Bernie made off Ponzi scheme
5. 0:11wide open the interview is incredible
6. 0:14and I hope you enjoy joining us now at
7. 0:16the New York heart asset show is Harry
8. 0:18maropis um Harry this is an unbelievable
9. 0:21story I I know you feel like you failed
10. 0:24I sat I listened to you talk but uh and
11. 0:26that's fine I understand where you were
12. 0:27coming from but I think everybody around
13. 0:29considered you of a hero because you had
14. 0:31the guts to go in and I think in
15. 0:32retrospect listening to you it was
16. 0:34almost like you go wow looking back I
17. 0:36endangered my family I don't know about
18. 0:38this journey I was on but you you kind
19. 0:40of helped break this Bernie ma off thing
20. 0:42wide open and it's just unbelievable
21. 0:43there's a movie coming out there's a
22. 0:44book coming out what was the adventure
23. 0:47like I mean it start at the beginning
24. 0:48where you first were going wait
25. 0:49something's not right here these numbers
26. 0:51are not adding up and you said you did
27. 0:53it very quickly it took 5 minutes 5
28. 0:56minutes and that's not the record by the
29. 0:58way I have a buddy of very decent human
30. 1:00being and much more brilliant than I am
31. 1:02he was head of equity derivatives
32. 1:04research at City group one of the nicest
33. 1:06men you'll ever meet and he has an IQ
34. 1:07north of 200 his name is Leon gross and
35. 1:10he left the bank in November they had
36. 1:12some staff cutbacks trying to stay
37. 1:14solvent unfortunately let him go it took
38. 1:17him 30 seconds to figure it out and uh
39. 1:20he was willing to cooperate with the SEC
40. 1:22and all they had to do was call him I
41. 1:23gave them his contact information they
42. 1:26never picked up the phone he's in New
43. 1:27York all they had all all they had had
44. 1:30to do was go through call him up he
45. 1:31would have had to go through channels
46. 1:33and got permission from his firm but he
47. 1:34would have cooperated there's no firm on
48. 1:36Wall Street that would not have help put
49. 1:38Bernie mat off down if you look at who
50. 1:40the victims were not they were not the
51. 1:42major Wall Street investment Banks they
52. 1:44knew but they suspected they didn't
53. 1:45really know they just knew it wasn't
54. 1:47transparent it was too good to be true
55. 1:49they were highly suspicious they never
56. 1:50took the time to investigate but there
57. 1:52were certain people in the derivativ
58. 1:54field that had more than a suspicion and
59. 1:56they were really good at math like I was
60. 1:58and probably better at math and I list
61. 2:00of those is references for the
62. 2:01government to call they never called a
63. 2:02single person they never conducted a
64. 2:04proper investigation and that they have
65. 2:07to be held responsible for and
66. 2:10unfortunately a lot of those people have
67. 2:11already left the agency and many will
68. 2:13leave by the time the SEC insector
69. 2:15General's report comes out and I think
70. 2:17anybody who's left over who there's any
71. 2:19sense of responsibility for this tragedy
72. 2:21I think Mary Shapiro is going to deal
73. 2:22with them harshly you I think it's fair
74. 2:25to say we're somewhat of a Critic of
75. 2:26Mary Shapiro when you look in the past
76. 2:28but now you're saying she's coming in
77. 2:29she's cleaning up the SEC the changes
78. 2:31appear to be going well you like what
79. 2:33you see you're cautiously
80. 2:35optimistic is the hesitation that Bas
81. 2:37because I think some of us when we
82. 2:38looked at the SEC kind of looked at it
83. 2:40and went this just looks like an old
84. 2:41boys club designed to protect hired by
85. 2:43Wall Street to protect Wall Street it's
86. 2:44not functioning the way it's supposed to
87. 2:46function it's hiding this stuff it's not
88. 2:48uncovering it it's almost a joke is that
89. 2:51fair to say that the old SEC was like
90. 2:53that I would say that the SEC was a very
91. 2:56bad joke on the American public it was
92. 2:5735 people 3500 people not doing their
93. 3:00jobs wasting 900 million in taxpayer
94. 3:03funds every year looking the other way
95. 3:05protecting Financial Predators from
96. 3:07investors and they were supposed to be
97. 3:09doing the opposite they were supposed to
98. 3:10be protecting investors from Financial
99. 3:12Predators but they became captive to the
100. 3:14industry because the industry lobed
101. 3:15Congress and defang the SEC over a
102. 3:18period of multiple decades the SEC
103. 3:21didn't become bad overnight it didn't
104. 3:23happen in under the Bush Administration
105. 3:24only it happened under multiple
106. 3:26administrations under multiple
107. 3:28presidencies and it happened they
108. 3:29haven't done a big case there since the
109. 3:31mid 80s since Ivan bosi and Dennis lving
110. 3:33right right right and Michael milin they
111. 3:35haven't done the big cases for decades
112. 3:37now it was a slow process of defanging
113. 3:41the SEC and now we have a nonfunctional
114. 3:43agency that would need to improve
115. 3:45several fold just to become
116. 3:46dysfunctional so dysfunctional has to be
117. 3:48their newterm objective and then they
118. 3:50have to become functional so it's crawl
119. 3:52let me stop you for a minute defanged
120. 3:54when you use that word I found it
121. 3:55interesting was that done on purpose did
122. 3:57Wall Street were they involved to slowly
123. 3:59defang organization as you say and there
124. 4:02were places they would never let them go
125. 4:03every time that the SEC tried to
126. 4:05regulate over the counter products they
127. 4:06were told no and the lead aor in a
128. 4:08batter was alen Greenspan right and so
129. 4:11you had people at the highest levels of
130. 4:12government under multiple
131. 4:13administrations the guy kept getting
132. 4:15reappointed Allan greenan will go down
133. 4:17in history as the worst fed chairman
134. 4:19ever my nickname for him is Mr Bubbles
135. 4:21he never met a crisis he didn't want to
136. 4:23inflate his way out of caus the next
137. 4:24Crisis he never instilled moral hazard
138. 4:27in investors he ateed an eded moral
139. 4:28hazard pped Dumpty is now so big that he
140. 4:31may not be able to be put together again
141. 4:33and the government thinks they can
142. 4:34rescue everybody and they certainly have
143. 4:35tried to date so far right but I think
144. 4:37we're running on a life well I read for
145. 4:39six years from a speech that Greenspan
146. 4:40gave in Belgium and I think I wore out
147. 4:42the listeners but it was where he was
148. 4:44talking about the fact that the banks
149. 4:45make these off table bets in the form of
150. 4:47derivatives and and listeners have heard
151. 4:49this certainly enough times but at that
152. 4:50time it was roughly 110 trillion with a
153. 4:52t and uh and the fact that systemically
154. 4:55the taxpayers stand ready to bail them
155. 4:57out and and if the banks win they keep
156. 4:59the winning but if they lose then these
157. 5:01taxpayers are are ready to bail them out
158. 5:03but I took that as a warning from him CU
159. 5:05five times he said we stand ready to
160. 5:07create money without limit and it wasn't
161. 5:10covered by anybody nobody covered that
162. 5:11speed basically I kind of rode that
163. 5:14until this thing blew up how bad was
164. 5:16alen GRE because you say he was the
165. 5:17worst but what was he doing what was
166. 5:19this a setup I mean this was obvious the
167. 5:21Federal Reserve needs to have every
168. 5:23regulatory power stripped from it
169. 5:25because who appoints the Federal Reserve
170. 5:27presidents the banks of the banks for
171. 5:30the banks by the Banks it's nothing but
172. 5:32a self-regulatory organization it
173. 5:34answers to no government it needs to
174. 5:36have the regulatory put back into the
175. 5:37government you can have them set
176. 5:39monetary policy independent keep the FED
177. 5:41Governor setting monetary policy but
178. 5:43remove them from the regulatory
179. 5:45framework because they were incapable of
180. 5:46regulating they were regulating the
181. 5:48industry they came from and they proved
182. 5:49incompetent with that it was an Insider
183. 5:51club and it worked to the advantage of
184. 5:53the bankers bailing out the bankers but
185. 5:55it worked to the disadvantage of the
186. 5:57taxpayers we're on the hook now for 12
187. 5:59trillion dollar corre in government
188. 6:01guarantees and back stops and credit
189. 6:03line facilities right my children and
190. 6:06your children are going to pay for my
191. 6:07Generations mistakes because we allowed
192. 6:09this to continue on it's time for a
193. 6:11total rewrite of the regulatory
194. 6:12framework in this nation and the Federal
195. 6:14Reserve cannot be allowed to regulate
196. 6:16the banks as bad as the SEC was and they
197. 6:18were terrible unfortunately for this
198. 6:20country they are the best regulator that
199. 6:22we have and they're the best in the
200. 6:23world at Securities regulation that
201. 6:25tells you how bad the standard is and
202. 6:27they were hundreds of times better than
203. 6:29the Federal
204. 6:30the Federal Reserve is the most corrupt
205. 6:32most blind regulator that we have in in
206. 6:34the in the arena and they need to be
207. 6:36they need to be stri of their power they
208. 6:38are Beyond incompetent they were they're
209. 6:39to the point of total corruption well
210. 6:41Jimmy Rogers says that they're unethical
211. 6:43that this is immoral that we should
212. 6:44abolish the Federal Reserve and go a
213. 6:47different direction I mean I like the
214. 6:48independent monetary policy setting I
215. 6:50think they can retain that that's fine I
216. 6:53just don't want them regulating I want
217. 6:55that but should the US Treasury print
218. 6:57the money like like in the Constitution
219. 6:58it talks about that that why did the
220. 7:00Federal Reserve come into existence who
221. 7:02are these people who owns this as you
222. 7:04said it's not really a government agency
223. 7:05is it it's private and so it's qua
224. 7:07independent I think you need to keep the
225. 7:09independence I don't I don't mind having
226. 7:12them set monetary policy I don't think I
227. 7:13want the government doing that okay
228. 7:15because they they've proven that they
229. 7:17cannot spend what we earn that they only
230. 7:19know how to deficit spend so I wouldn't
231. 7:21trust them I don't think they the answer
232. 7:23I'd rather keep the Federal Reserve in
233. 7:24charge of the monetary policy but not
234. 7:26have them do anything regulatory cuz
235. 7:27they've proven beyond the Beyond corrupt
236. 7:30at that they they're not punishing any
237. 7:32anybody are they no they're not shaming
238. 7:35anybody they're not clawing back the
239. 7:37bonuses are they how come we have a
240. 7:38clawback for the Madoff investors but we
241. 7:40don't have a clawback for the corrupt
242. 7:41CEOs of the money center Banks and the
243. 7:43Wall Street investment Banks well I have
244. 7:44a question that fair for you what about
245. 7:46Franklin Reigns and he runs Fanny May
246. 7:48into the ground and what does anybody
247. 7:50talk about this guy what there's no
248. 7:52shame there's no shame how much money
249. 7:54did he make hundreds of millions 200
250. 7:55million and how much are we out how many
251. 7:58we don't even know how many hundreds of
252. 7:59were out because of but then they come
253. 8:01on the air and they say well nobody saw
254. 8:02this coming baloney Bunches of us saw it
255. 8:05coming we said the system is insane this
256. 8:07is madness The Leverage is tremendous
257. 8:09and you know derivatives so maybe
258. 8:11there's a responsible way but I never
259. 8:13lik derivatives is are derivatives
260. 8:15responsible or should we get rid of
261. 8:16derivatives or talk to me about
262. 8:17derivatives for a minute I'd say the
263. 8:19list of derivatives keep because they're
264. 8:21transparent and you can regulate them
265. 8:23and you know who the the counterparty
266. 8:24risk is contained the overthe counter
267. 8:26derivatives get rid of okay don't allow
268. 8:28over counter derivatives to trade in the
269. 8:29US and if they do trade say that they're
270. 8:31totally unprotected if they fail the
271. 8:33users of them fail it doesn't matter no
272. 8:35bailouts for over the- counter products
273. 8:36anywhere anytime no matter what when I
274. 8:39was interviewing Dr Anna Schwarz she
275. 8:41talked about the bailouts and said that
276. 8:43this is not the way to go we shouldn't
277. 8:45be bailing out any of these failed
278. 8:47institutions and that we're we're
279. 8:48leaving this to the taxpayers which was
280. 8:50really the message that you just gave
281. 8:52should we not have have bailed out any
282. 8:54of these institutions as a country
283. 8:56meaning sure we've just let it fail and
284. 8:58and because Jeremy Grant wrote about
285. 9:00that just now in his quarterly piece you
286. 9:01read that okay well he said look Jeremy
287. 9:03pretty well well okay so did you read
288. 9:04the latest quarterly piece you talked
289. 9:05about okay was it cleansing he said look
290. 9:07we'll clean it out we'll get all this
291. 9:09stuff people will buy it for pennies on
292. 9:11the dollar and then we can start the
293. 9:12recovery we can start the rebound it
294. 9:14would have been really bad it would have
295. 9:15been a collapse even worse but we would
296. 9:17have cleansed it out now it's a long
297. 9:18Japan likee journey of you know two
298. 9:20decades of Hell or who knows what's in
299. 9:22front of us I support Jeremy grantham's
300. 9:25position uhuh we told the Japanese not
301. 9:28to do what they did and now we're
302. 9:29repeating what mistakes they made
303. 9:31prolonging at the agony for the and the
304. 9:33American public is going to suffer yes
305. 9:35the only way to to start the road to
306. 9:37recovery is to hit rock bottom and and
307. 9:40cleanse the system and the only way to
308. 9:42do that is to nationalize the banks zero
309. 9:44out the shareholders and make the bond
310. 9:45holders feel the pain too make them take
311. 9:48haircuts and reins moral hazard into
312. 9:51this nation and take us away from
313. 9:53socialism and back toward capitalism and
314. 9:56free and open transparent markets and
315. 9:59it's the only way to do it cuz the
316. 10:00government's lying to us now they're not
317. 10:02they're not supporting Market to Market
318. 10:04and so they're basically giving the
319. 10:05light the green light to the banks to
320. 10:06lie about their balance sheets once
321. 10:08again correct and keep in mind that
322. 10:10there's two balance sheets that every
323. 10:11bank has these days the big ones they
324. 10:14have one offshore and they have one
325. 10:15onshore and the leverage ratios that you
326. 10:17see published like 20 to 30 to 35 to 1
327. 10:21it's not true because they're not
328. 10:22bringing the off balance sheet
329. 10:23contingent liabilities onto those on
330. 10:26shore on balance sheet but aren't they
331. 10:27also accrediting Goodwill now and so
332. 10:29it's it's phony the books are phony
333. 10:31still the books are cooked okay and
334. 10:33supposedly sban Ox eliminated the cooked