Max Keiser and Alex Jones expose alleged Goldman Sachs naked short-selling and corporate consolidation, predicting a dollar collapse and global shift to gold reserves. Congressional hearings reveal Representative Duncan Hunter's accusations that TARP funds were diverted to foreign assets rather than toxic derivatives, while Elijah Cummings condemns AIG's $503 million bonuses against struggling homeowners. The segment argues these policies prioritize financial stabilization over public welfare, suggesting the administration executes a "coup d'état" that sacrifices citizens for banker bonuses. [Automatically generated summary]
We've got a long way to go And a short time to get there For the next 50 minutes or so, we're going to open the phones up and let you talk to Max Keiser.
He does international television for, well, you name it.
He's invented major systems used on stock markets worldwide.
He's producing an international TV show for the BBC with Alec Baldwin.
Just check out his website, maxkeiser.com, because the guy is doing too much to ever tell you about it all.
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All right, going to Max Keiser.
Max, a lot is happening.
The economy is worsening very quickly.
I had Gerald Cilente on last hour, and he's talking about war in the streets within two to three years, and we'll have bank runs in February.
Well, Alex, I think if you look around the world, you're already seeing evidence of that, and I'll give you two examples.
It was reported today in the independent newspaper in the United Kingdom that gangs from the city are invading the country, and they're stealing livestock from people's farms.
They're stealing salmon and farmed fish from farm fisheries.
And you've already got this happening in the UK right now.
People are... Gangs from the city are invading the country and stealing food.
If you look at the global picture, you see that around the world, you know, the corporations have taken over all the fishing rights around the world.
So in Somalia, you've got Somali pirates who are starving to death.
They are hijacking one ship every day, on average, just for food.
But these are people who are starving to death, because all of their food supplies have been taken from them by the huge corporations.
So this is what's happening on the fringe of the, you know, if you're in the United States, and your view is that, you know, these other areas are on the periphery of the biggest economy in the world, the so-called the U.S., you can see the trends developing on the fringe, on the periphery, And I think they're heading toward the U.S., but you see it already right now happening around the world.
Max, again, for folks that don't know who you are, tell us a little bit about yourself and then currently what you're most focused on and what you think is most important in the world right now, and then trends that you see going into the mid-term and long-term, how bad do you think it's really going to get?
Well, just to follow up on a couple of things from when we spoke last time, you know, we were talking about the gold market, we were talking about Comex, and the fact that Comex is short gold that they can't deliver, and that some people are out there trying to organize a raid on the Comex.
I was talking to some folks today in Canada, apparently Eric Sprott of Sprott Asset Management is going to try to take physical delivery of a huge precious metal position on the Comex this December to try to force the price from the physical.
Uh, in the paper market to match up.
So that could be, that's still in play.
Remember last time I was mentioning that there could be a major event on the COMEX in December?
Okay, well shorting is actually something that's come up in a couple of the big stories today, and it relates directly to Goldman Sachs as well.
So I'll segue into the Goldman Sachs thing.
But a little bit about shorting, it's one of those concepts that People have trouble wrapping their mind around it.
It's a little counterintuitive.
But, you know, if I can break it down as simply, is, you know, people are familiar with the idea of borrowing money to buy a stock, and if the stock goes up, they sell it for a profit, and they pay back their loan.
When you're selling short stock, you're borrowing stock, and you're selling that stock, and you're hoping that the price goes down, and after the price goes down, you buy back your stock at the lower price, And you return it to where you borrowed it from.
But because the stock is now at a lower price, the amount of money it took to buy it back is less.
You get to keep the difference.
That's how you make money on a short sale.
And it works on stocks, and it works on commodities, and it works on the Comex.
And the Comexes were all the biggest precious metal futures operation in the world, and as has been pointed out by numerous guests on your show, The big bankers in the world who love the idea of fractional reserve banking, and love the idea of infinite credit, they hate gold, they hate precious metals, because it's a limited supply, and they don't like to live in a world of limits.
They like to live in a world of infinite credit.
So it's in their interest to try to keep those precious metals down.
And they do this primarily by selling gold and silver short.
They're selling gold and silver contracts that they do not own, and they borrow for the most part, and they do this with broad money, and they can borrow money Quite cheaply.
The scandal, the scandal here, is something called naked short-selling.
And naked short-selling applies both to the comics, in my opinion, and to what Golden Facts has been doing, which is the opinion now of Bloomberg and the Wall Street Journal and, you know, observers around the world.
Is that why they're keeping... I mean, it was Goldman Sachs guys in the 90s that changed all the rules, and in the 2000s with Bush, and now you notice it's an inner group of Goldman Sachs running the bailout, running Treasury, running the Fed, and that they're bringing more Goldman Sachs people now into it as well.
Is that to keep it, you know, keep the conspiracy in a closed circle?
They have dictatorial powers, and they are literally having sconfed themselves But just because they say they're God, and just because they say they can barbecue children on their front porch, doesn't mean they can.
They have law saying black people weren't human in this country, and we know those were bull, and they were overthrown.
So what do we do about these arrogant criminals?
You know, Wall Street frat guys.
I'm not bashing Yalies and people, but that's... I mean, it's that arrogant... I mean, watching Kashkari with the smart mouth comments, you know, the glare last week.
And, you know, I used some language that I'm not sure Americans have heard in this context, but You know, the point is that these guys have, as you point out, I mean, they are literally, they've pulled down their pants and are literally giving a golden shower into the face of 300 million Americans.
And unless you are into golden showers, unless you are into FNM, unless you enjoy that kind of thing, I would suggest that you begin to, you know, take some steps.
I mean, this is so I mean, I've been a observer for markets for 25 years, and I have seen examples of egregious electronic feeding, as we used to do.
I mean, I was working on Wall Street in the 1980s.
I know many, many of the tricks that one can use in the bank to transfer wealth.
Electronic pickpocketing, we used to call it.
It's just electronically transferring wealth from the customers to the bankers.
That's all pretty much the job entails.
The techniques are pretty standard.
And the beautiful thing about it, Alex, if you ever worked on Wall Street, is that typically when, you know, the management comes around and says, unless you're being sued, you're not really doing your job.
We've got plenty of lawyers.
Just keep racking up the commissions.
We've got lawyers.
Just keep racking up the commissions.
And the beautiful thing about it is that if, in fact, it ever gets to the point where there's a serious problem, two things.
When you sign a new customer account, it forces you to go to arbitration.
Under Bush, and this is all over the news, over 90% of the corporate white-collar crime investigators were pulled off and they weren't put on anti-terror.
If you read deeply, they were put on mom-and-pops.
So what happens is big, too-large-to-fail groups can steal, kill, Halliburton can run white slavery camps, it can be in mainstream news, nothing happens to them, but then a pet store owner A guy that owns a used car lot, a dentist, somebody who has a hamburger place.
The IRS will rake them over the coals for no reason.
I mean, the whole culture is going into total corruption, governments expanding, governments feeding, you know, no different from administration to administration.
There's also another thing going on, which is I call the sixes versus the nines.
This is the people with six zeros in their net worth, the millionaires, versus people with nine zeros in their net worth, the billionaires.
Because after 9-11, when they dropped interest rates down to 1%, they screwed up the economy so badly that now, seven, eight years later, the system is so badly screwed up that you've got wars broken out between the billionaires and the millionaires.
So even a millionaire is like $5, $10, $15 million.
People who thought they were wealthy a couple of years ago are getting squeezed due to the global credit collapse.
So you're seeing like, for example, Goldman Sachs is at war with its own customers.
And this was today in today's Bloomberg.
Here's an example of this.
Goldman was targeted by investor complaints of naked short selling.
Investors in a $591 billion high-yield, high-risk loan market are accusing Goldman of naked short-selling to profit from record price declines.
At least two fund managers complained that they were victimized by Goldman, for whom they were doing business with.
So you've got wars broken out between the millionaires and the billionaires.
And they're pushing each other using these credit derivative products and other financial forms.
investigators believe that there are Israelis again very much engaged in spying in and on the U.S.
unidentified
I'm aware that some Israeli citizens have been detained.
Bin Laden's connections to the CIA, the hijackers' ties to the FBI, the Saudi Arabian connection, the Israeli Intelligence Network, Warnings and War Games, the shadow government, and much, much more.
Fabled Enemies.
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Let's go ahead and play that CNBC clip with one of the bigwigs on TV saying, yeah, it's the Illuminati.
Here it is.
unidentified
At least you're getting back to the point where you can start to look at fundamentals and that's good news.
What happened?
I think you're in a liquidation phase.
I think Kirsten had it exactly right.
I think there's a bunch of wrong-footed moves by Hank Paulson and the Illuminati of the country, if you will, and I think we're paying for it right now.
We've always, for the last hundred years at least, had a very corrupt Wall Street elite that is engaged in some crime and some skimming and some manipulation, but, you know, is more boss hog-like.
This is so virulent, this is so out in the open, they're blowing their whole game.
Is it because the elite knows the dollar's dead and they're bringing us into a new world monetary system that they're just going for broke?
I mean, why?
I've never seen, and I've studied a lot of history, so have you, So, such open arrogance.
I mean, that level of chutzpah or arrogance, bravado, kind of shakes me up.
Because, I mean, if they'll steal five trillion bucks in a month right in front of you and laugh at you, what are they planning next, Max Keiser?
And the question is, there'll be a global devaluation of all the major currencies, and then a revaluation upward for the price of gold.
This is exactly what happened in the 1930s.
And to discourage profiteering on the gold side, You might see my friend Eric Jansen over at itulip.com thinks that they'll impose like a 90% capital gains tax on gold ownership at that point.
So gold, as you know, I'm a big believer in gold and I think you have to own gold as a core investment.
You know, you really have to get a defensive position because I think what these guys are telegraphing is, you know, it's so easy for them to steal so much money these days, I think, that they're telling you that they're coming and they want you to, you know, get in shape and work out and prepare yourself because they want a good fight.
I mean, obviously, the fact that the American so-called democracy is toothless in the face of what is obvious tyranny is quite shocking at this point in the country's history.
I mean, if he didn't do what they told him, he'd, you know, he'd get a Dealey Plaza visit from the Secret Service instead of guarding him, so we all know that.
My whole point is, all these Obamanoids are in for a rude awakening, because there's no course changes here.
It's full-scale raping.
We'll be right back with Max Keiser in 60 seconds.
We've been live at PrisonPlanet.tv for 30 minutes and I want all the PrisonPlanet.tv listeners out there to be able to tune in and even hear the behind the scenes.
John, give me a new call list so I don't get any of these mixed up.
Again, for people out there listening, we're not on the AM and FM dial or shortwave or satellite right now.
This is prisonplanet.tv viewers and infowars.com, exclusive audio stream listeners.
And coming up in about 20 minutes after Max Kaiser leaves us, we boil down from four hours of testimony by the arrogant Kashkari.
And by arrogant, oh, thank you.
I respect you.
Sir, I'm working so hard.
But he was just looking at them and the body language was smiling and smirking and just, I don't care.
You're a slave.
I own you.
We boiled it down to the most powerful 30 minutes of four hours.
And believe me, it was difficult to cut it down to this because there's so much good stuff there.
We've cut out a few of his answers because he kept repeating the same thing over and over again.
That's coming up in 20 minutes after Max Keiser leaves us right now.
We're going to be taking your phone calls and a host of issues with our guest, Max Keiser.
So stay with us, ladies and gentlemen.
Here we go.
Our guest is Max Kaiser.
For the next 20 minutes, Really appreciate him joining us.
I want to go ahead and go to your phone calls here in this segment and the next.
Mike, David, Kevin, Daniel and many others holding around the country and the world.
Don't forget to join us 1-800-259-9231.
I do want to squeeze a lot of calls in this.
Just have your question or comment ready so we can get to the next person.
Any other points you haven't gotten to?
I mean, you were talking about the ships aren't moving, 98% reduction, because no one has money or has the credit to even ship the products.
Same thing with Ford and GM saying that they can't even get the insurance ratings to have their parts suppliers overseas, these aren't American companies, to ship over here.
I mean, it looks like the economy is dead, but the brain's still going to get oxygen for a few minutes, maybe six months more, but it looks like the economy has just come to a standstill.
Also, on the gold front, you saw over the weekend that the finance minister in Iran has now officially come out and said that they're moving Most of their 120 billion dollar reserves into gold bullion.
We only have about a minute left before we come back to the full audience, but behind the scenes, tell folks about the specific stock market system that you're the inventor of, because I find that to be intriguing.
The virtual specialist technology is a technology that allows for a virtual currency to trade on an exchange, and you can trade virtual securities.
And the valuation is tied to something intangible, like awareness.
So in the Hollywood Stock Exchange, depending on what people's awareness is of a movie that's going to come out in six months or a year, their trading, buying and selling those securities creates a need to match those orders.
And to match those orders in a way where all prices over all securities, the price is consistent, there's price parity.
So in the system, the virtual specialist technology is a virtual economy that Prices, thousands of securities simultaneously, within an environment where there is no hard assets, like the New York Stock Exchange, there's still earnings that are tied to profits and cash, etc.
This is based entirely on people's awareness, but you still have price parity, so it's a completely fair system within the economy.
So that system was sold to Cantor Fitzgerald, who moved the technology to the top floor of the World Trade Towers, Stay there!
This is a very complicated problem and we cannot fix it without some international rules.
Notably absent from the summit's final statement, any detailed plan to help troubled homeowners or struggling workers in the developing world.
That wasn't expected.
But with economists projecting a global recession that could last upwards of two years, one might be justified in asking whether these leaders really feel the urgency of the situation.
Rosalind Horton, Al Jazeera, Washington.
Well, let's get a European perspective on all of that.
Max Keiser is a financial commentator based in Paris and joins us live.
Max, positive words there from the world leaders.
Will the financial markets be cheering on Monday morning?
No.
Bush misspoke.
He said that the world's economies were hit hard.
That's not true.
The world's counterfeiting schemes were hit hard.
The bond counterfeiting schemes from Wall Street and the City of London were hit hard.
The counterfeiting schemes have been exposed.
And the problem is that these G20 nations are not willing to get rid of the scoundrels and the criminals who are running the banks and putting in fraudulent, faulty economy.
Somebody should issue a frock-rock against Hank Paulson.
Someone should issue a frock-rock against Hank Paulson because he's an infidel.
That's why the global economy is in such a sad shape.
The man is a financial terrorist.
The hyperbole aside... That's the reality of the situation.
That's not the hyperbole.
That's not the hyperbole.
That's the reality of the situation.
That's the reality of the situation.
So the solution is what?
The solution is what?
You have to go into a court of law and take Hank Paulson and Goldman Sachs up for financial terrorism, put them in jail.
This is counterfeiting.
They're issuing bonds that are absolutely non-collateralized.
There's $500 trillion in licenses with no collateral.
That may be one response to Hank Paulson, but as far as the international global economy is concerned, we have matters like, should the IMF be reformed?
Should countries like China and India have a bigger say in regulation and moderation of the global markets?
Did any of these get addressed, and are these the way forward?
China, India, Europe, all the banks own Structured financial products sold to them from Wall Street.
These are all counterfeit bonds that are exploding.
They're worth zero.
For example, they have no way of selling these bonds because they have zero value.
As a result, they dump oil.
And oil, because they're dumping oil to pay for these fraudulent bonds, the price of oil has dropped and these developing nations are suffering.
because of this counterfeiting scheme that has zero value.
Bush is completely incorrect when he says the global economy is suffering.
It's the global counterfeiting scheme that's suffering.
These guys are criminals.
There should be a fought while against these guys.
He's an infidel.
Hank Carlson, his head should be bouncing down the Capitol steps.
I'm sorry, but that's the reality of the situation.
This show is going to rip the ball, you know, the cover off the ball.
This is going to be the most watched television show in the world.
We're going to have 100 million viewers.
It goes out to 180 million households.
A half-hour show every Friday night.
We're going to be talking about all the global banking conspiracies and everything else that people are dying to know about, but they're not being told.
Because the mainstream press, even Al Jazeera, is too timid.
You just have the producers or the people doing the legwork tell me where to be, what satellite feed, and hell, if you can't even get a satellite feed in Austin, which I'm sure you'll be able to, it was hard on election day for some other stations I was on, I'll go wherever I need to be to be on that.
Hell, hell, I'll just skip playing the Clemson plan tomorrow.
We've got plenty of time.
Go ahead.
unidentified
Yeah, just sit back and hear the questions.
Alright, well, okay, with the fires occurring in California, and all these people losing their homes and whatnot, will their insurance companies be able to cover them?
Yeah, or, you know, the thing is that if, in fact, by some stroke of luck, you do get some insurance money on this disaster, your rates are going to be skyrocketed the next quarter, so you won't be able to afford insurance anymore going forward.
Just like in Katrina disaster, everyone can't afford flood insurance in New Orleans anymore.
The rates were jacked up.
So the rates for insurance are going to go a lot higher with every single one of these disasters.
So the insurance industry, which is the backbone of capitalism, is going out of business.
Everyone gets together in a church basement, and they go the 12 steps of Goldman Sachs Anonymous, then we are powerless over Goldman Sachs.
Now, it sounds a bit glib, but on the other hand, it's a way for people to reach out to their neighbor, because one thing that's going to get people through this crisis is it's going to be neighbor to neighbor.
So, get to know your neighbors.
Get to know the people around you, because that's going to be key to your survival, I think.
And, I mean, it could bring people together, unfortunately, in a crisis, but generally that's what happens.
Because China owns so much of our treasury bills, the trade deficit is so high, what role do you think that China's going to play in this post-economic meltdown?
I mean, Alex, you know as well as I do that this country is New World Order's dream.
They'd love to run every country like this.
I mean, after all of a sudden, Donald Trump, are we going to be slaves to the Chinese Empire?
You know, we're going to talk behind scenes just for the internet audience and then let Max Keiser go because I've got to air at least most of this 30 minutes and tomorrow I'll air more and comment on it.
But I promised I had people come in and edit this four hours down to 30 minutes so that is coming up.
So we appreciate Max Keiser joining us, MaxKeiser.com.
That's it for the full interview.
We'll talk for four minutes behind the scenes and come out with the audio clip.
Here we go.
Okay, Max, again, let's take a few more calls here.
This is with regards to the conversation they had with Valente a little earlier ago and how the government is consolidating and the command and control type thing.
And I'd just like to reference that in terms of a new article by Naomi Klein in Rolling Stone, in the New Chalk, and she refers to the Bank of New York Mellon as being the kind of general contractor for the bailout.
So, you know, just two images here.
One is that the government is consolidating the corporations, and the other is that the corporations are consolidating or privatizing the government.
For example, when Bear Stearns blew up, the fact is that Bear Stearns wasn't the problem case.
J.P.
Morgan was the problem.
J.P.
Morgan had unbelievable amounts of Derivative contracts with no counterparty able to satisfy.
And so what they did was they blew up Bear Stearns to get rid of the counterparty that can make claims against J.P.
Morgan.
J.P.
Morgan assassinated Bear Stearns for their own good.
That company was assassinated.
That's what a lot of experts... You see a lot of this consolidation of balance sheets in the banking industry.
So Bank A goes to Bank B and says, oh, we've got these risks, you've got those risks, these assets.
You know, when I was working on Wall Street, we used to do a thing called swapping dead books.
So, if I'm a broker and I work in one brokerage firm, and I've blown up a lot of customers, I can go across the street to the broker of the other brokerage firm who's blown up a lot of customers, and we swap each other's blown-up customers.
Then I call up his blown-up customers and I say, hey, you know, I got a great stock tip for you.
I already know his name, his brokerage account, his social security number, and I know what stocks he's owned, and I know how much he's lost.
And I can just put into my pitch, well, I think you could make X amount of money, and I hope you didn't buy this other stock last year.
That was last year's loser.
And meanwhile, this broker who I swapped dead books is doing the same thing at his firm.
So now you're seeing banks do that with each other.
They're swapping each other's dead clients and dead bonds for fees, and it's just another chapter in this huge Ponzi scheme.
Alright, there goes Max Kaiser from Paris, where my wife wants to move, where we never will move.
Alright, here we go.
Okay, we're going to go ahead and go for this segment for the rest of the show, with 30 minutes.
We may not even get to all of this.
Yeah, I really should just play this tomorrow and then stop and comment on it, because there's so many facets to it.
But this is Kashkari being grilled.
This is only 30 minutes of four hours of the hearings last Friday.
Tomorrow I'm going to play some more of this in the end of it, and then comment more on it.
But here it is, ladies and gentlemen, so stay with us.
unidentified
Now, I heard your testimony, and I have to say that I'm a little bit surprised because
It appears that testimony was prepared before Mr. Paulson's statement about the purposes of the Troubled Asset Relief Program and the Secretary's decision not to purchase mortgage assets through his decision.
Policy Reversal and Its Impact00:04:56
unidentified
Hasn't Treasury rendered obsolete entire sections of the Emergency Economic Stabilization Act Because there was no question about congressional intention that Treasury use an asset purchase program to mitigate foreclosures.
Do you have a response to that?
We worked very hard with both houses of Congress to design the legislation to provide a lot of flexibility.
And we and the other regulators are using every tool at our disposal to get at this problem.
Stabilizing the financial system as well as helping homeowners.
And Secretary Paulson and Chairman Bernanke and Treasury, we have been looking at how do we deploy these resources to first stabilize the system so that we can get credit flowing to the entire economy, to our communities.
And so Secretary Paulson made the determination that the best way to get at this problem, given how rapidly markets were deteriorating, was to lead with capital.
But that doesn't mean that we don't care about other aspects that are very, very important.
We're trying to use the right tool to solve the right problem.
Well, it would appear, Mr. Kashkari, that Secretary Paulson has gutted Section 109 of the Act, which requires Treasury to undertake specified steps to mitigate foreclosures with respect to the mortgages it acquires, including working with other federal regulators to directly identify troubled assets to acquire to further loan modification efforts.
How do you reconcile this policy reversal with Congress's expectations laid out in the statute?
Congressman, there are other sections of the Act, as an example, that direct other government agencies, whether it's FHFA in its conservatorship of the GSEs, FHA, the Federal Reserve, to the extent that they own or control mortgages to take action.
So let me give you an example, Congressman, because this point is very important.
If we had spent all 700 billion dollars buying loans, that would be around three million loans or so, depending on the value of the loans, but around three million, three and a half million.
Instead, if you look at the actions that we took on Tuesday, by using the GSEs to now set a new industry standard for loan servicing, when the GSE set a standard, other servicers around the country use that standard, whether it's for GSE loans or for other loans, those actions and that protocol It has the ability to influence servicing for almost every loan in America.
There are 55 million residential mortgages in America.
It could touch 3 million or 55.
Sir, it has the ability, but the problem is that Treasury, by taking this action that de-emphasizes loan modification, has essentially sent a signal to all the banks that this isn't particularly what you're concerned about.
I mean, even though you may maintain, oh, this is in there.
I've got the act.
Here's the purposes.
I want to spell them out.
The purposes of the act are, and number two, to ensure that such authority and facilities are used in a manner that protects home values.
And then it goes on to section B, preserves home ownership.
Now the Treasury just basically cut that out of the bill.
And what we have here is a situation where banks are hoarding the money, That they're getting from the TARP.
They're using the money to purchase other bags.
We still have a credit freeze.
I'm looking at your testimony.
You're saying credit markets were largely frozen, denying financial institutions, businesses, consumers access to vital funding and credit.
Financial institutions were under extreme pressure.
Investor confidence in our system was dangerously low.
Hello?
Are we in a different universe here?
The same situation prevails today!
And yet, your testimony Acts as though, well, you know, we're just merrily skipping along our way here.
We've got millions of people threatened with losing their homes.
And the underlying problem is that banks are now increasing their interest rates in order to get more customers.
Think about this now.
It's counterintuitive to your troubled asset relief program.
You're now saying we're going to put the money into the banks.
Into these financial institutions.
Shore up finance capital.
Well, finance capital now is seeing that the only way they can survive is to start to raise their interest rates and give away some of the money that the government's giving to them.
At the same time, you're picking winners and losers.
How do you reconcile these policy reversals?
And why won't Treasury act swiftly and forcefully to maximize the system?
Thankful for the Warning00:03:08
unidentified
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Picking Winners and Losers00:15:50
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And the sun is gonna burn into a cinder Amen.
At the same time, you're picking winners and losers.
How do you reconcile these policy reversals?
And why won't Treasury act swiftly and forcefully to maximize assistance to homeowners under TARP and play a significant role in modification of home loans at risk of imminent default?
Why not?
Congressman, I personally have spent most of the past year and a half focused on ways to try to reach and help homeowners.
That's been my That's the primary focus within Treasury.
Hasn't the Secretary listened to you?
Do you feel frustrated that your position isn't being vindicated?
Congressman, the Secretary is passionate about this as well.
Passionate about what?
Helping homeowners, Congressman.
He is?
Where?
What country?
Congressman, we are using all the tools available to the federal government to get at the credit crisis and try to help homeowners.
Let me give you an example, please.
We have different tools.
Mr. Kashkari, I really respect you being here, but I'm looking at a bill, section 109, that spells all this out.
The Secretary just essentially took some scissors and cut it out and threw it away.
Now, you know, maybe this is just some kind of a game to some people in the administration.
They're on their way out of office and they just feel they can do whatever they want, pick winners and losers in the market.
We've got millions of people losing their homes.
Mr. Issa came to my district And saw some of our old neighborhoods, how they're just falling apart.
And we've got people that are holding on, hoping against hope that somebody's going to help them.
We've got millions of people in foreclosure and, if I read it right Mr. Issa, in California there are millions more at risk of foreclosure with these jumble mortgages and the Alt-A mortgages in 2009 and 2010.
And all of a sudden the Treasury sent a signal to the banks, forget about it!
We're going to give you the money that you want and you do what you want with it.
Unless you directed Specifically, it's not going to happen.
So tell me again, why isn't it happening?
Not how passionate the Treasury Secretary is.
Congressman, I believe it is happening.
If you'll permit me, I'll walk you through.
Please go ahead.
The four banking regulators, the Treasury is not a regulatory agency.
The banking regulators supervise the banks that are getting this capital.
The four banking regulators put out a joint statement that's going to govern how they supervise these banks.
One of the things that they're going to be looking very closely at and watching Not just executive compensation, not just dividend policies, making sure lending is getting out there in our communities, and foreclosure mitigation efforts.
The banking regulators are the supervisors of these institutions, and they've now put out a joint statement saying exactly what they're going to be looking at in their supervisory capacity.
There is no one better positioned in the country than the banking regulators to do that.
Treasury's not in a position to do that, but the bank and regulators absolutely are.
We've done numerous, had numerous initiatives to try to get at the root of this problem.
But the most important benefit, Congressman, for homeowners is that we didn't allow the financial system to collapse.
Imagine how many foreclosures we would have If the banking system had collapsed and mortgage finance was not available to our homeowners.
That's the biggest benefit that we've been able to achieve.
Chairman, we are not out of the woods yet, and I didn't mean to suggest that in my testimony, but I can walk through numerous statistics looking at the beginning of a healing credit market, which is the first step to getting through this problem.
Well, maybe, you know, see again, this might be a philosophical divide here.
Because on one hand, the Bush administration and Treasury seems to indicate that Uh, the trickle-down effect, give the money to banks and they're going to loosen up money and credit and they're going to start to flow and people are going to be protected.
On the other hand, there's another model which says, create a system where you, where you get pools of mortgage-backed securities the government takes control over and you direct loan modification, you know, lowering interest, lowering principal, extending the terms of payments to keep people in their home.
One model may keep several big banks afloat, But risk millions of people losing their home anyway, and the other model keeps people in their homes.
See, you're talking about an IFCOM model that's based on the charitable sentiments, seemingly, of major Wall Street banks.
But the truth of the matter is, if you don't get the money into the grassroots and help on loan modification, the banks aren't going to get their money to begin at the end anyhow, because, you know, one model percolates up.
Money goes to the banks, help move money on Wall Street.
The other one, you have this idea of some kind of trickle down.
A trickle never gets down.
Everybody understands that.
And yet Treasury seems to cling to this notion that if only, you know, the regulators now do their job.
Are you kidding me?
I mean, regulators...
Look, Treasury's been given almost omnipotent power here.
And you have, unfortunately, you know, not exercised in the interest of homeowners.
Do you believe that Congress would have passed the EESA if it understood that none of the TARP funds would have been earmarked for asset purchase and subsequent mortgage loan modifications?
I mean, this looks like classic bait-and-switch, Mr. Issa.
Thank you, Mr. Chairman.
Mr. Kashkari, I appreciate that you were in on those negotiations with leadership.
The majority of Republicans voted against it once and twice.
Mr. Kucinich wasn't in the meeting where Secretary Paulson came in with the Vice President and Fed Chairman Bernanke.
And made all these assurances that there was absolutely a critical, immediate need to get rid of the corrosive derivative products.
You know, all the different names for this, you know, ubiquitous, you know, uh, sub S retraded credit default swap, blah, blah, blah, blah.
Okay.
But they, they talked about them as though they knew what the hell they were.
You got the money and you immediately said, what items?
What auction?
Would you please respond to under oath?
When did you go from what you told members of Congress in open and closed sessions was the absolute reason to have this money immediately to buy a specific group of assets, about $350 billion in the U.S., about $350 billion held by other countries and other funds outside the U.S.?
Those assets were what you said was locking up and destroying the market.
When did you first hear that that money was not going to be spent that way?
Congressman, the day on October 3rd, the day that the Congress passed and the President signed the legislation, we immediately created several policy teams developing asset purchase programs, all the details, both mortgage-backed security... Now, that wasn't the question.
No, I'm... I want to know the time and date because I want to know whether Congress was lied to or whether there was a team all along that had an alternate, one or more people, that had an alternate idea of how this money would be spent.
Congressman, forgive me, on October 3rd, we created a team.
No, no, that's not answering the question.
And here's the reason I'm asking a very directed question.
You can create the team, you can put together all that.
You know, look, people, you know, Circuit City, and I sold them for 20 plus years, so I'm very sensitive to the trouble they're in.
Circuit City announced that they were closing 155 stores and began that process.
They never announced they were filing Chapter 11.
But all of us looked and said, look, they're not going to renegotiate walking away from 155 leases without a bankruptcy.
So in our minds, we knew, you know, it's a question of time.
Well, they don't tell you one thing, they do tell you another.
You never, in any good faith, explained why You formed these organizations and now you say it's hopeless and impossible to buy these products that were the entire reason.
You can't have the success for doing something different than you said without explaining why you didn't buy one of those assets.
And when did somebody figure out, by date, When did you first learn that we were not going to buy these assets because we couldn't value them properly?
First of all, Congressman, it's not a question of our ability to value them.
The decision was made by Secretary Paulson very recently, as early as earlier this week, late last week.
Secondly, it has been said that your purchases of $250 billion plus of preferred stock Is at a price that would not be market competitive, meaning you paid too much.
Tell me why I'm to believe for a minute that those preferred stocks that you bought, you could resell today for anything close.
Remember, the market has improved.
You've said that.
Tell me what the profit would be on those preferred stocks if you began putting even $1 of them into the market today.
Congressman, I don't know what the price would be.
Okay, well, you're from Goldman Sachs.
I used to work there.
Okay, well, I'm from Directed Electronics.
You're from your last job.
If you tell me that you've improved the market, then by definition, those assets, if bought at par, have appreciated.
Isn't that true?
Well, there are many, again with deep respect, Congressman, there are many different markets.
There's the equity market, there's the credit markets.
I think there are strong signs.
I can walk you through data showing the credit markets improving.
The equity markets, we purchase equity.
You purchased a debt instrument.
Well, it's tier one capital, Congressman.
You know, we can go ring around the rosy here, but you're here today because Congress is feeling that you You've played a bait-and-switch game, and you're not convincing anyone that you haven't.
But let's just try to go to the fundamentals.
You bought preferred stock.
Yes, sir.
Preferred stock is a dead instrument.
You're capitalizing the company, but you're capitalizing with a dead instrument.
Those instruments trade.
I have BB&T.
I have a number of dead instruments of that sort.
They have, in fact, appreciated from the time you bought till today.
In various portfolios.
So I'm looking at those and I'm following a lot more of those kinds of instruments.
They have appreciated.
So my question to you today, under oath, as someone who should know about this is, are your purchases above par today in your opinion?
Candidly, Congressman, I don't know.
We have independent valuation firms that are going to provide regular reporting on the current valuations.
Regular reporting starting when?
You're here today.
Do you have any regular reporting from the day you bought them until today?
We've published the reports to the Treasury website within 48 hours of completing the transactions on the terms, and then we're, right now we're in the process, just yesterday, the equity asset manager solicitations concluded, and we've received I think hundreds of proposals.
We'll be engaging the equity asset managers Who will be providing us the valuation services and the reporting to the Congress on a go-forward basis?
Well, wouldn't it be reasonable for us to believe here today that if, in fact, you have improved the market, that those assets that you purchase, we'll call them equities since they're a hybrid, have appreciated?
I think they'd be reasonable relative to the day that we bought them.
So if we find out on the next report, which I hope is forthcoming and we will be looking for it, that they are below par, then in fact you paid too much, right?
Well, again, it depends, Congressman, what our objective was.
Our objective was to create a program that would encourage Thousands of banks across our country to voluntarily apply and to use the capital.
And so we intentionally made it attractive for them to want to apply.
So you believe here today that you had authority to subsidize banks, including providing them this capital at a below par, a below fair market of a market that should have existed but didn't exist.
Well, Congressman, as you know, the market when we did this There was no market.
Most banks couldn't raise private capital.
But we're in a better market today.
One of the reasons for the question is you've thrown $350 billion, including AIG and so on, out there.
You're coming back for another $350 billion.
If in fact what we discover, and I believe here today, Is that your $350 billion, and let's just look at $250 billion, we'll leave AIG, which is a whole other can of worms, aside.
If that money, in fact, is a subsidy arriving at a price below the fair market price, thus causing banks to choose you, including banks in my district, choose you instead of other capital, all you've really done is give them a discount capital.
Now, the reason I ask that is, how large is the capital base necessary for the banking industry in America?
Do you have any idea?
Isn't it about 55 trillion, plus or minus?
In terms of assets or capital?
The size of the market, if you will.
That sounds about right.
So you'd have to put several trillion dollars in to be the owner, if you will, of that base, even with the multiple.
So the reason I'm asking all this, and I know I've got to yield back, I've extended my time and just follow up one last time, if all you're doing is moving
Your money in at a discount to banks and entities like American Express and GMAC and everybody else who's rushing to become a bank holding company today as a result of this deal, then at the end of the day we will have bought stock at too high a price or debt at too low an interest rate, however you want to look at these preferred instruments, and we will have moved people to other capital
where they can get the returns they want because you're competing at a price that the market wouldn't accept the loans.
You're giving them a deal that distorts the market.
Isn't that true based on your background at Goldman?
Well, Congressman, when you have a market that is dysfunctional, any deal that we would put in because we'd be the only provider of capital would by definition be better than the non-available capital in the middle of a crisis.
So yes, we did offer attractive terms to stabilize the market.
Mr. Chairman, I might note that Warren Buffett weighed into this with billions of dollars.
Wells did a deal.
There have been dollars done.
But those dollars, I believe, are not coming in until the United States quits subsidizing in competition to private sector dollars that would ask for a better return, and undoubtedly would say that dividends and excess compensation would have to be curtailed until they were getting their returns.
Cummings Questions Kush00:12:10
unidentified
I thank the gentleman, and there was a reason why I I voted with the gentleman twice on this same question, the bailout.
We now recognize for a period of ten minutes, Mr. Cummings of Maryland.
Mr. Kush, Kerry, I must say that as I have sat here listening to your answers, I have been disappointed.
I think that You have kind of skipped around the issues here and I say that because when I saw pictures of you, I thought, you know, I said this looks like a guy that'll be a straight shooter.
So I'm going to ask you some questions, sir.
And I don't say that trying to embarrass you.
I say it because life is short and I don't have time to hearing around the rosy answers.
Let me go back to something that the Chairman said.
He talked about how, whether you understood that when foreclosures take place, he said, he asked you, did you realize that it also affects the housing in the communities?
In other words, you sell a foreclosed house, it's lower price, price value goes down.
Let me ask you this follow-up question to that.
You also understand That when price value goes down, local government is affected because it's based upon the tax dollars are based on that.
And it just goes on and on and on.
So it's a very serious problem that we are dealing with here.
Do you, and I guess what I'm, I always, every time I sit in these hearings, I always try to put myself in the position of my constituents who are watching this.
Because when I come home, hopefully I'll get home about 3 o'clock today, I live in the inner city of Baltimore, and believe me, when I go to the supermarket tonight, when I go take my daughter to the movies this evening, I promise you people are going to ask me about you.
And what they're going to say is, Cummings, we watched the hearing, we heard that guy, Cash Carey, but I'm losing my house today.
And they're going to ask the question.
They're going to say, well, we heard about the Citigroup thing where I've got to be three months behind before I can get help.
And we heard that guy, Kashkari.
We know he's in charge of the $700 billion.
What can he tell me today?
I do not want a handout.
I just want a hand.
I want to pay my mortgage.
I just need a little help because this Bush administration And his policies has put me in a position where I don't have a job.
Or I'm now working a part-time job.
Help me, did I miss something, Cummings?
What can Mr. Kashkari, did he say something to help me know how I can help my family?
That's what they're asking.
They are in pain.
Now I'm giving you your, you're on TV.
You're the man.
I don't know how much we're paying you, but you're our employee.
And I'm asking you to look in the camera, somebody back here, and tell those people what you are doing.
They hear about the bailouts of Wall Street.
They hear that their tax dollars are being paid to AIG and these people going on these junkets and all that.
They hear all of that.
But they feel like it's ring around the rosy.
They hear a lot of nice talk, But they're still being put out of their houses.
They hear Paulson get up and talk about all this wonderful stuff, but they still are worried about whether they're going to come home and all of their furniture is going to be on the street.
Those are the people that I represent.
So I'm begging you to please tell me exactly what is being done.
And then I want you to do something else.
With Fannie Mae, Announcing Monday that it had lost twenty nine billion dollars and you talked about all the wonderful things that Fannie Mae is going to do.
I'm wondering how that affects, I know we got a hundred billion that can go into their coffers, but how does that affect them helping that guy that I just talked about?
And I'm saying, I mean I hear you guys talk about the urgency of the market and all of that, but Something tells me that you need, and I think this is where the Chairman is coming from, you know, we can fix Wall Street, but it seems like there's a bucket down there at the bottom.
These people that are being thrown out of their houses, it's like a bucket with a hole in it.
So whatever you do for Wall Street, if you're not saving these mortgages and helping people stay afloat, and by the way, saving some pain, I mean, it makes no sense.
And so, help me with that.
Because my people don't believe that you all care about them.
But let me tell you, when we gave them money, when we gave the banks money, they still weren't loaning any money.
unidentified
Let's talk about that, because we are passionate about getting the banks to loan money in our communities to help our small businesses and to help our homeowners.
First of all, we allocated $250 billion for banks of all sizes across the country, and just about half the money is out the door today.
I think we're going to approve another 20 banks today, large and small, across the country.
Potentially thousands of banks are applying, and it's going to take a few months to process the thousands of transactions to get the money out the door.
So we're working as fast as we can.
We're working around the clock to process all these to get the money in our community banks.
It's not a stimulus.
It's not an economic growth plan.
It is an economic stabilization plan to stabilize the financial system.
And so I just want to respectfully set expectations that we are trying to use these resources to stabilize the system for every American.
But we also have real economic challenges that we all need to work through.
Mr. Kashkari, in the neighborhood I grew up in, in the inner city of Baltimore, one of the things that you tried to do was make sure that you were not considered a chump.
And what chump meant was that you didn't want people to see you as just somebody they could get over on. .
And I'm just wondering how you feel about an AIG giving 503 million dollars worth of bonuses out of one hand And accepting $154 billion from hard-working taxpayers.
You know, because I'm trying to get, I'm trying to make sure you get it.
You know?
I mean, and you know what, what really bothers me?
Is because all these other people who are lined up.
They say, well, is Kashkari a chump?
We can just go in there, and I'm not saying they are, I don't know.
We can go in there, we'll get some money, and you know what AIG did?
They even will tell you they're coming back for some more.
And they have the nerve, the nerve, to grant some 503 million dollars worth of bonuses.
I'm just wondering, do you all say to yourself, boy this doesn't look too good.
And I'm wondering about them, if it was strictly from a PR standpoint, and I know nothing about PR, but one thing I do know, I wouldn't want to be asking my friend for some money to help me stay afloat, and if I didn't get the money I'd be out of business, and then for my friend I say, okay, I'm really struggling.
Then my friend, who can barely afford to go to McDonald's, then walks around and sees me in a restaurant costing $150 a meal.
There's absolutely something wrong with that picture.
And so I wonder, do you all, I mean, does that go through your head?
Or is it just me?
Am I missing something?
unidentified
No, Congressman, I saw the same images that you saw of the parties, and I share your frustration with that.
Let's talk about that, because I heard about that this morning, I think as you did, in the paper, and I asked my colleagues to check on it.
I said, what is this?
Because I was outraged when I saw the headlines.
What was explained to me is that this was money, apparently, and I'm not defending it, but this is money that had already been paid to employees that were set aside in a separate fund that they would get if they left AIG.
And we need AIG to keep running as a company so that it can sell off its assets and pay back the taxpayers.
And so from what's been explained to me is that this money that had already been paid but set aside to the employees was now released so that the employees did not have an incentive to quit.
Because we need them to keep working so that they can sell off the assets and pay back the taxpayers.
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