"Take the Regulatory powers away from the FED" Harry M. Markopolos on KWN — Transcript

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1. 0:00this is from the book also Harry quote
2. 0:02but sadly all of this nation's Financial
3. 0:04Regulators the Federal Reserve the
4. 0:06Federal Deposit Insurance Corporation
5. 0:08the office of the comproller of the
6. 0:10currency and the office of thrift
7. 0:11supervision are at best incompetent and
8. 0:14it wears captive to the companies they
9. 0:16are supposed to regulate in quote I want
10. 0:18to ask you about the Federal Reserve
11. 0:20specifically Harry what are your
12. 0:22thoughts regarding the FED you've got to
13. 0:24take the regulatory Powers away from
14. 0:26them they had that power for decades
15. 0:28they never regulated the banks they ate
16. 0:30and and abetted they were the shield
17. 0:31that allowed the collapse of 2008 to
18. 0:34occur if they didn't want to exercise
19. 0:36the power then why should we trust them
20. 0:37with it going forward they failed
21. 0:39miserably at their jobs they need to be
22. 0:41held accountable they shouldn't be
23. 0:43allowed to regulate the banks all their
24. 0:45Regulators on the payroll there should
25. 0:47be fired immediately you said to me last
26. 0:49year in May that the FED is to the point
27. 0:51of total corruption do you still believe
28. 0:53that yes they're there to protect the
29. 0:55banking industry if you notice they
30. 0:57won't tell us anything there's no
31. 0:59transparency there who's borrowing from
32. 1:01the discount window so if you're an
33. 1:02American citizen and you're putting
34. 1:04money into a bank that's on the verge of
35. 1:07failure you wouldn't know that and your
36. 1:10deposits are only protected up to
37. 1:11$250,000 limit so if you have any money
38. 1:14more than that let's say you're a small
39. 1:15business and you have 400,000 deposited
40. 1:18in a bank that's about to fail you
41. 1:19wouldn't know it and you would put extra
42. 1:21deposits in there and would not be
43. 1:22protected they're there to protect the
44. 1:24banks not the taxpayers they need to be
45. 1:26stripped of their regulatory Powers
46. 1:28they're not doing their jobs what about
47. 1:30Allen Greenspan because you said to me
48. 1:31last year he was the lead AER and a
49. 1:33better is that how you feel looking back
50. 1:36my nickname for him is not the mro it's
51. 1:38Mr Bubbles you never met a bubble you
52. 1:40wanted to prick you'd only pick up the
53. 1:42pieces afterward make an easy money
54. 1:44policy hurt American Savers hurt
55. 1:46American retirees that were living off
56. 1:48fixed income Investments he didn't care
57. 1:50about them he wanted to Banks to have
58. 1:52healthier balance sheets he wanted to
59. 1:54rescue the financial system time and
60. 1:55time again and that's what led us to
61. 1:58this crisis last year basically was an
62. 2:00eer and a better let's get back to
63. 2:02Bernie moff for a minute talk about how
64. 2:04you knew that maid off's numbers were
65. 2:06fraudulent well it was pretty clear just
66. 2:08looking at his performance chart it went
67. 2:10up at a 45 degree angle and those kind
68. 2:13of charts don't exist in finance they
69. 2:15only exist in Geometry he only had 4% of
70. 2:18his months that were losing months and
71. 2:19that would be akin to a major league
72. 2:21baseball player batting 960 given what
73. 2:24we know about the ethical climate Major
74. 2:25League Baseball you'd expect cheating
75. 2:27immediately and no one questioned that
76. 2:3096% of the month were up that would be
77. 2:32equivalent to an NFL team going 96 wins
78. 2:34and four losses over 100 game span can't
79. 2:37happen can't happen in sports can't
80. 2:39happen in finance this also from the
81. 2:42book as I continued examining the
82. 2:44numbers the problems with it began
83. 2:45popping out as clearly as a red wagon in
84. 2:48a field of snow there was a stunning
85. 2:49lack of financial sophistication anyone
86. 2:51who understood the math of the market
87. 2:53would have seen problems immediately a
88. 2:55few minutes later I laid the papers down
89. 2:57on my desk this is a fraud Frank I told
90. 3:00him you're an options guy you know
91. 3:02there's no way in hell this guy is going
92. 3:03to get these returns from this strategy
93. 3:06he's either got to be front running or
94. 3:07it's a Ponzi scheme but whatever it is
95. 3:10it's total BS and that's when we began
96. 3:12chasing Bernie maid off what year was
97. 3:15that when you came to that conclusion
98. 3:16Harry it was early 2000s and it was
99. 3:19pretty clear at that point there were
100. 3:21two fraud theories in operation here and
101. 3:23we didn't have enough information to
102. 3:25decide which one was actually true or
103. 3:27not so we held them to be equally true
104. 3:29Theory number one was the returns were
105. 3:31real but they were gathered through
106. 3:34illegal means mainly known as front
107. 3:35running frad Theory number two was that
108. 3:38was a Ponzi scheme either way Bernie mid
109. 3:40off was going to go to jail for a long
110. 3:41long time before we go on Harry I want
111. 3:43to ask you about the banks and the banks
112. 3:47balance sheets because this bothers me I
113. 3:49know it bothers you is the government
114. 3:51today aiding and abetting fraud on the
115. 3:54bank's balance sheets because they're
116. 3:55phony aren't they Harry oh the balance
117. 3:57sheets are cooked they're allowing the
118. 3:59banks to keep the offshore Vehicles off
119. 4:01their balance sheets I suspect that many
120. 4:03of the major Money Center banks have
121. 4:05larger balance sheets that are hidden
122. 4:07and offshore than they have onshore and
123. 4:09are reporting to shareholders and I also
124. 4:12believe that the FED is granting
125. 4:14regulatory forbearance which means
126. 4:15they're looking the other way as the
127. 4:17banks refuse to mark their assets and
128. 4:20liabilities to the market they're
129. 4:21basically marking to model or keeping
130. 4:23them at historical prices which are
131. 4:25nothing but a fantasy they're allowing
132. 4:27the banks to extend and pretend on their
133. 4:29balance sheet they're looking the other
134. 4:31way keeping interest rates to Savers
135. 4:34very low in minuscule and that's just
136. 4:36nothing but a direct subsidy to the
137. 4:38banking system so that they continue
138. 4:40paying their bonuses and it's so unfair
139. 4:41to the taxpayers and to the Savers and
140. 4:43the retirees who are living on fixed
141. 4:44income but the F doesn't care about us
142. 4:46the taxpayers they only care about
143. 4:48serving their masters with the banks