Episode-1109- John Titus on the Movie “Bailout”
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John Titus is a lawyer, licensed before the U.S. Supreme Court, who’s practiced patent litigation for over 15 years. In 2011-12, he took a break from his practice to make a feature-length film, Bailout, about the real cause of the financial crisis: criminal fraud.
The film features interviews with truth tellers Dylan Ratigan, Karl Denninger, Chris Whalen, Yves Smith, Sheriff Tom Dart, and others. He is now working on a TV-safe version of the film to be released later this year.
John joins us today to discuss what actually caused the financial crisis because it isn’t what the TV told you. Why he went to the expense and trouble of making a film. What distinguishes Bailout from other financial crisis films and the direct cause and effect relationship between Wallstreet elites and the crisis.
I think you will be intrigued when I ask him how many bankers should be in jail a you hear the math behind his response. We also will discuss how this crisis will end and the sad answer can be summed up as bad or worse.
Before becoming a lawyer, John worked as a circuit designer for motors used on the Space Shuttle and space station. He was a free market Republican until the party betrayed itself as a total sham in 2008 by getting TARP passed.
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So credit unions are a “safer” place to keep your money? They are not covered by the same regulations? How long before they end up as bad as the banks or can they? Or the powers that be go after them. I know something is happening with them now. Some kind of change. But not sure what it is.
Seems every time I hear about banks their list of troubles is a mile long but when Credit Unions are mentioned it’s just a blurp. I have asked at our credit union if the banks closed like they did over seas would they also close. No one there was able to give an answer. Still all the hub bub and stress of watching things just makes me want to say bag it burry money in the back yard.
Credit unions have a very narrow range of activities they can engage in. Pretty much those that we think of as ‘regular banking’.
They’re not allowed to gamble in the derivatives or forex markets and they’re not ‘investing’ (gambling with) money for 3rd parties. They can still get in trouble by making bad loans.
There isn’t a ‘good’ reason to keep money in a bank right now, its just a convenience.
On my prepping task list right now is: How do I continue to pay my ‘electronic’ bills when the banks are closed? (I already have the day-to-day expenses covered). Always good to have at least a plan B. 🙂
The regulator for credit unions works hand in hand with the other federal banking regulators.
Now that the OTS is extinct, the NCUA is the least stringent regulator of financial institutions (assuming that you ignore the too big to fail banks).
I heard tate say he was from IL. While looking at his pic(before I listened) I swear I know him
One other item that the news doesn’t mention is that the mortgage crisis was predicted almost 10 years before it happened. There was a story in the NY Times when the Clinton Administration (and greedy investors) urged Fannie and Freddie to change the credit requirements to allow more people with questionable credit ratings to get a mortgage.
“But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s. ”
Dave Ramsey is who talked about this on his radio show.
This about the main conclusion that Titus proposes is the real culprit. “The Bankers created investments that were fraudulent”. None have been prosecuted” Every one that bought the bogus securities, including Freddie and Fannie, were victims of a system created by deregulation, because the derivative market was an unregulated market. Here is the invisible hand of Adam Smith that I have been talking about.
The policies that came from the Fed and the SEC were policies of hands off government, and the lack of oversight comes from the idea that markets can regulate themselves, and that we ought to just let the chips fall where they may. That philosophy was just one of the straws that broke the camel’s back
This was one of the best shows not about survival that Jack has ever had.
I don’t think you’re entirely correct. It was only “hands off” long enough to let the market begin to correct itself, which would have been unpleasant to say the least. Then gov put its hands all over it. They told us how bad free market was. They made things worse, we just haven’t seen it all yet. This was not an issue of the failure of free market. It was gov failure to allow the free market, and of the judicial system.
The failure wasn’t one of regulation.. it was one of prosecution. The actions taken by the banks are ILLEGAL under current law.
But with a few payoffs here and a few handouts there.. the law no longer applies to them.
So, ‘oversight’ is not the issue, that’s just polito-speak, the SEC was too busy watching internet porn to ‘oversee’ (and by the way, none of those people were fired).. and ‘regulation’ is not the issue, more unenforced laws mean nothing.
Justice is the issue. A ‘market member’ who can rob the other ‘market members’ with impunity, isn’t a ‘market member’ they’re a criminal and thief. Who, in the current system, can then buy off the ‘market police’ with a paltry percentage of his plunder.
So, don’t blame the ‘market place’ for ATTRACTING thieves.. that’s just standard ‘blame the victim’ syndrome. Punish the thieves, and their toadies & accomplices, the politicians who refuse to prosecute them.
“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” – Napoleon Bonaparte
As for the lap dogs of the bankers (including those who are still banking with them):
“If you love wealth more than liberty, the tranquility of servitude better than the animating contest of freedom, depart from us in peace. We ask not your council or your arms. Crouch down and lick the hand that feeds you. May your chains rest lightly upon you and may posterity forget that you were our countrymen.”
– Samuel Adams
As usual, you want to shift the blame to the po folk who got loans because redlining was finally outlawed. And of course, you are wrong. The loans that defaulted in the greatest numbers were not single home mortgages, the majority of defaults occurred in households that had the highest ratings and owned multiple homes. These were the people who were able to get no money down loans without credit checks. Freddie and Fannie had strict lending requirements that did not allow for the crazy variable interest rate loans with no money down–those were loans created by the private banking industry, investment banking, and insurance companies and mortgage brokers like countrywide.
Black Mortgage holders did no default in the highest numbers, contrary to popular belief. It was white mortage holders that had the highest number of defaults, followed by hispanics.
How can you not know any of this? Do you just watch Fox News and listen to Glen Beck and Rush Limbaugh? Freddie and Fannie were making record profits after the savings and loan debacle, but they were buying the same toxic derivatives that everyone else were subjected to by the fraud on wall street. It became a game of musical chairs, and whoever cashed out first would save their asses, but the whole house of cards was going to come tumbling down, and they knew it.
This is why the bank bailout had to occur–it would have collapsed the entire economy.
The ideas you conservatives have about not bailing out the banks and businesses and let let everything fail are the same policies Herbert Hoover and Andrew Mellon used in the depression.
Here is what Andrew Mellon said in 1930— Treasury Secretary Andrew Mellon announces that the Fed will stand by as the market works itself out: ‘Liquidate labor, liquidate real estate… values will be adjusted, and enterprising people will pick up the wreck from less-competent people’.
Does that sound familiar to you? It should..you are saying the same idiotic thing they said in 1930. Andrew Mellon, the Secretary of the Treasury, called all the shots, not the Chairman of the Federal Reserve. Then congress passed Smoot-Hawley on Jun 17th.
Supreme Court rules that the monopoly U.S. Steel does not violate anti-trust laws as long as competition exists, no matter how negligible.
The GNP falls 9.4 percent from the year before. The unemployment rate climbs from 3.2 to 8.7 percent.
1931, No major legislation is passed addressing the Depression….No bailouts, banks collapsed everywhere, nothing was done by congress.
The GNP falls another 8.5 percent; unemployment rises to 15.9 percent
By 1932, his and the next year are the worst years of the Great Depression. For 1932, GNP falls a record 13.4 percent; unemployment rises to 23.6 percent.
Industrial stocks have lost 80 percent of their value since 1930, and 10,000 banks have failed since 1929, or 40 percent of the total number of banks in 1929.
Wake up..these are the policies I hear Jack and most conservatives say we need to go thru again. ARE YOU CRAZY?! We don’t need all of this masochistic collapse you conservatives want.
I will say it again–Anarchy is not government, it is just a transition phase to a new set of rules.
Now you are getting your ass VERY close to a site wide ban! You are making this racial and NO ONE ELSE DID. I don’t tolerate racism, period and you know what else I don’t tolerate calling someone who never did a thing racist a racist! It is as insulting as any racial slur. One more time dickhead and away you will go permanently.
Again though what type of idiot calls a libertarian a conservative?
Again you smell like a troll and now are playing the race card, in fact that is enough you are toast. No more annoying shit from you and no more TSP for you at all.
Actually I decided not site wide ban your IP for now as it might catch up others in Utah (oh did I say that) who are not guilty of your BS. You are no longer able to comment though. Don’t bother it just won’t work. Trolls waste too much time.
I don’t think anyone is speaking in favor of depression. Though it is a great time to scoop up assets at severely depressed prices.. 😉
The statements are simply that the current system is corrupt and unsustainable, and is therefore likely to collapse.
I’m unaware of any historical instance of a government, after ruining a country.. finally pulling its head out of its ass and managing to ‘fix’ things. If you’re aware of one, I’d love to hear it.
What has happened historically is one of two things.. 1) everyone just ‘muddles through’ and you get a generation of depression -or- 2) collapse.. everything is smashed, and eventually gets reorganized from the wreckage.
With a little more brevity:
A thief came into the marketplace and stole money.
Therefore, marketplaces are bad.
It’s unfortunate I can not give you comment a +1.
After hearing how much bailout money went overseasx I began thinking about what that money coming back would do to inflation. Normally I’m not concerned because we do very little productive work in this country. However…our future gas production could open the proverbial flood gates. Just one way I could see it happening.
After hearing how much bailout money went overseasI began thinking about what that money flowing back would do to inflation. Normally I’m not concerned because we do very little productive work in this country. However…our future gas production could open the proverbial flood gates. Just one way I could see it happening.
It was a Liberal experiment that resulted in “EPIC FAIL” (I am referring to the lowering of credit requirements for a home loan brought about by the CLINTON Administration). Not everyone is meant to own a home.
Again you don’t hear ANYONE talking about how it was directly tied to CLINTON’S admin.
I would be interested in watching the movie if I could download it. I’m traveling South America right now and I don’t know when I’ll settle down long enough to get mail.
I think there was mention of a dollar bubble, coming; maybe I heard wrong and am writing this for nothing. So far, since the 2008 collapse, this has not happened in my opinion; Jack may still be correct in the future, but I am not sure how. Evidence that this, a dollar bubble, had not happened yet is the dollar index, the price of the dollar against a basket of currencies (http://www.marketwatch.com/investing/index/dxy); it has been essentially held still between 78-84 which is actually a relatively low level for the dollar which was about 90 in 2009(you can see this by clicking on “5y” below the chart you will find at the link above). The recent down trend in precious metals, and I think other commodities seem to be consistent with a relative large (possibly global) move to cash, which often happens in a downturn. The dollar itself has a long term downward trend since it’s high in 1984(http://en.wikipedia.org/wiki/File:U.S._Dollar_Index.png), though it you look at the first chart, since it can be zoomed in on the last 5 years, the last 2 years does seem to be a small upward trend.
So now I will explain my skepticism for a coming dollar bubble. The demand for dollars around the world seems to be falling in general. The Chinese do not want our dollars/debt; Germans, the major European economic power, want there gold back; the Australian-China alliance to bypasses the dollar’s reserve currency status, and the BRICS threatening to do the same. As for the dollar supply, well everyone knows it’s rising, and that’s not good for the dollar’s price, except to the Keynesians. However, this world is not completely rational with the government’s lies, regulations and moral hazard; the Fed’s, lies and manipulation of interest rates; and public schools lies that dumb down and confuse the populace; the Democrat & Republican lies that they will make our lives better, so I won’t says it’s impossible since so many people believe so many of these lies. I would like to hear a description in terms of supply and demand of a scenario that gives us a rapid rise in the price of dollars. Since the supply is not likely to shrink, ever, somehow demand would have to be created. There would have to be a mass inflation of stupidity that rivaled the money creation, I think, for this to happen.
Finally, I tried to explain the issue of monetary velocity in the past, so I will just leave some links of some articles, and be brief:
Is Velocity Magic? by Frank Shostek (http://mises.org/daily/918)- He mentions some of Ludwig Von Mises and Murray Rothbard’s discussion of this fallacy.
The Velocity of Money by Henry Hazlitt, an excerpt from a 1968 book, (http://mises.org/daily/2916)- See point #4 at the end under the heading of “to sum up:”, which I have tried to explain in the past.
Not only is the monetary velocity false theoretically, but empirically, at least if you believe M3 as the best measure of the money supply. Be patient with me through these 2 charts: (http://www.shadowstats.com/charts/monetary-base-money-supply) shows that M3 is essentially net stagnant from early 2009 to today, April 2013, and the monetary velocity (http://research.stlouisfed.org/publications/mt/page12.pdf) has declined significantly as a percentage from 2009 to now. That is a long enough period that even with a 6-12 month lag that we should have had some generalized price deflation by now.
Good stuff! I think this is a good example of ‘believing what you’re told’ versus asking (and trying to answer) the fundamental questions.
Such as, if ‘money’ is just a ‘barter token’, how many units do you need to facilitate trade?
In our worship of money, it seems that many (particularly high finance types) have completely lost sight of the fact that the whole point of ‘money’ is to allow the exchange of goods and services.
And that without the creation, and demand, for goods and services (need/desire for exchange) that the money in and of itself is worthless.
In other words, money isn’t magical.. its creation does not CREATE goods and services OR demand for them.
So, as an alternative theory.. recession/depressions aren’t caused by a lack of money or money velocity.. they’re created by a lack of ‘trades’. And the reason for the lack of trades is that a large number of people have nothing to trade.
Not in the sense of money, because that’s just the exchange mechanism, in the sense of actual goods & services. If we use the example of the baker trading with the potato farmer.. the baker makes NO BREAD. Therefore he has nothing to exchange for the potatoes he wants, therefore there is no trade to facilitate.
So, your recession/depression is caused by an increasing percentage of your population creating no VALUE (increase) with which to trade.
Back to velocity.. so falling velocity = less dollar trades.. I think the obsession with velocity is that each of those exchanges is a TAXABLE event, so from a government perspective, the higher the velocity, the better.
As for the lack of deflation.. deflation would imply a condition of an EXCESS of goods and services.. as our theoretical Baker has quit baking, due to a back injury, and gone on disability..
The demand for bread remains the same, as the baker can ‘trade’ with his disability check ‘money’ for it. But their is no excess supply (because he quit making it) so there is no deflation.
Listen Insidious, you don’t have to twist yourself into a pretzel to explain. Supply side is BS.
It is simple supply and demand
The economy isnt driven by supply, it is driven by demand.
Spending creates demand.
Lack of spending creates gluts and then goods pile up on shelves, nothing gets sold, and the economy contracts.
You need to have spending for growth to occur.
When spending ceases, the economy contracts, and the economy DEFLATES.
You should be having an epiphany now, or you are just too dense to get it.
In that case, I can’t help you.
Gee economics are that simple? (roll eyes) Supply and demand explain all and ALL demand is driven only by spending? Well wow golly gee wiz and holy shit wow man thanks for that now we know how it all works. With that knowledge all we need is a magical wizard like person to push money into the economy when spending slows and take some out when it is moving to fast and all economic woes are a thing of the past.
Keep talking you just make yourself look more foolish everything you do it. See any more wind mills lately there bub? LMAO
If you’re talking about what one would learn in ECON 101, and then regurgitate without applying any critical thought. You’re right.
I’m actually trying to think about how things work, not trying to quote Bernanke and his ilk.
If you’re going to try and argue your ECON 101, at least get your Cause->Effect chains right.
For instance –
‘Lack of spending creates gluts..’
No. The creation of more goods than there is demand for creates gluts. Making too much stuff (more than there is demand for) creates the ‘glut’ (over supply). A glut is, by definition, an over supply.
‘The Economy’ like ‘The Government’ is a stupid abstraction that is used when people don’t really understand WTF they’re talking about.
I’m talking about markets as in the micro person to person. You know, where this stuff actually starts.. with INDIVIDUALS making INDIVIDUAL choices for INDIVIDUAL needs..
You’re talking about.. ‘I’m professor So-and-So and I wrote a theory after 20 years without a real job and I think the world works like this.’
Demand is created by people wanting things, and having something to trade for those things. No desire, no demand. Nothing to trade, no demand.
‘Spending’ assumes you have something of value to trade. Pieces of paper have no intrinsic value. So creating more of them, and spending them, doesn’t create ‘value’.
Value is created by someone, somewhere, providing something VALUED by human beings (desired). That might be a created good, an extracted good, or a service. In all cases, the VALUE is created when someone does something that others find tangibly useful.
My original post point, was that it MIGHT BE (just a crazy thought) that a lack of value creation by individuals, due to inability or disinclination, might be the actual source of recessions (which I am defining as : a falling amount of value creation).
Many people have nothing of VALUE to trade. In other words, nothing that meets someone else’s desires.
If I have no goods to sell, and the only service I’m offering is that I’m a mediocre cubicle drone with an Economics degree.. I’m not creating enough VALUE for an employer for him to TRADE with me (my time for his ‘money’).
Second issue with the supply-demand narrative..
It blindly assumes that its MORE beneficial for an individual to supply a need (meet demand) than to do something else. In a ‘free market’ this might be true.. but in our current system, it isn’t.
Its much more ‘profitable’ to trade ZERO hours of your life for a welfare check, than it is to trade 40 hours a week of your life for a minimum wage.
It’s much more profitable to bribe a few congress critters for special tax exemptions, than it is to develop better/cheaper products.
It’s much more profitable (and less risky) to have your private corporation (the FED) print you up a few trillion, than it is to earn them making loans.
In other words.. our current system incentivizes NOT entering a ‘free’ marketplace and competing to meet ‘demand’.
I should also add that the NUMBER of trades has nothing to do with the VALUE of the exchange.
Two banks moving money back and forth between them equals lots of velocity, and no value exchange (think ‘high frequency trading’.. it creates no value).
A company making a one time purchase of a machine that uses 1/2 of the electricity of the current machine.. huge value creation, with ripple effects (cheaper goods, less resource use, etc.)
Peter Schiff was wrong, and jack is too. The dollar collapse did not occur and won’t occur as long as Bernake and Lew are running the economy isntead of Rand and Ron Paul and Paul Ryan. Andrew Mellon’s ghost is ratting his chains like Jacob Marley< but as long as we keep the ghostbusters in the Fed and the Treasury in their jobs, then we will get thru this without another global depression.
You are right about the dollar index. The loss of the value of the dollar all occured before Obama. You can go look at the value of the dollar, but when you do, look at the when the United States went from a Creditor Nation (Trade Surpluses) to a Debtor Nation (Trade Deficits) Once you look at that, then just look at the collapse of labor unions and the middle class. Then look at the percentage of GDP Corporations paid then and pay now. Then get a big cup of Joe when you put all of this together and wake the hell up from the conservative coma you conservatives are in. You need a wake up call.
Now we see how daft you really are dude. You are true believer in the religion of the Fed. The dollar will never collapse? So 20 trillion of debt by 2016 is that plan and that is just swell and fine right? The interest on the debt by 2020 according to the Fed itself will be about 850 billion but that is find too we will just print more.
Seriously why the hell are you even on this site or listening to my podcast if you believe that? I am starting to smell a troll! We know what happens to trolls don’t we?
I can’t tell if you’re serious.. or just going full on troll at this point.
Should there be ‘sarcasm’ quotes around these comments?
Quit looking at Mises. He is talking about an agrarian economy in the 19th century. It doesn’t have the same rules and those ideas dont work when we have the specialization in the work force that is alot more efficient because you are only doing 1 task, but creates a dependence on everyone else in society because of it.
The Mises economy isn’t the modern world, in other words.
To Insidious and Jack:
I had not thought about the governments interest in the transactions, in the context of this discussion, but Jack has said many times in the past, and I agree, that the government and businesses like that they can profit from any taxable(or fee enriching) event, so they would have interest in these stats.
Peter Schiff predictions haven’t been 100% perfect, with the big prediction that he did not make was a move into the dollar in 2008. But other than that he has had a very strong track record in macroeconomic events. He knew about the housing bubble before most did, and went on the record via radio and TV years before it happened, because of his understanding of Austrian economics. Listen to his mortgage bankers speech in Nov. 2006(http://www.youtube.com/watch?v=6G3Qefbt0n4) when he uncanny predictions for that time. I started reading about the housing bubble at from the Austrians in 2004. The media talking head were saying “no one could have predicted this” after the fact, and Bernanke’s track record, well just watch:(http://www.youtube.com/watch?v=44C8dTcPSjI).
Mises predicted the great depression (http://online.wsj.com/article/SB10001424052748704471504574443600711779692.html), the fall of communism(http://en.wikipedia.org/wiki/Predictions_of_Soviet_collapse#Ludwig_von_Mises). The Austrian school of economic though predicted the breakdown of the Brenton Woods agreement which lead Ron Paul to really take notice. Ron Paul has made a set of political and economic predictions that have been very accurate (http://www.youtube.com/watch?v=ifJG_oFFDK0). Here is a fairly good list of monetary event predicted by the Austrians (http://wiki.mises.org/wiki/Austrian_predictions) with references for further reading. This was all made possible because Mises did not concentrate on the current technology of the day, but “Human Action”, that is decision making, the things we can and can not know about it.
Austrians are not supply side economist, because they do not believe in intervention into the economy. The debate between supply and demand side economics is about how to intervene, not whether or not to intervene at all.
Insidious is right. Remember you stated “spending creates demand”. People spend their production, directly through barter or indirectly with money. How can you demand (pay for) anything for which you can not trade money, a good or service?
I also think the run up in oil prices caused peoples budgets to be busted, then they had problems paying the mortgage. So in a nutshell, I think high oil prices exposed the cracks in the fraud earlier than it would have otherwise
@Jack, lately I cringe when I hear you talk about economics without mentioning Bitcoin. What’s up man? How can you talk about gold and silver without at least mentioning the future potential of digital/peer-to-peer wealth storage and transfer?
It’s the first time in human history two regionally separated people can transfer value, almost instantly, without involving a middleman. It’s one of the most, if not the most, important tools to economic liberty and all I’ve heard you mention about it is that you weren’t sure what you thought about it (circa 2011?). Give me a call, Skype me or just send me an e-mail so we can sort this out.
My view of bitcoin is you just described its only real value, transfer of wealth. I would never let the sun go down on my money as bitcoins.
Thanks for sharing your thoughts Jack, I’m always impressed how you respond in these comments. Your opinion is definitely vindicated by recent events. I think that will change though, as bitcoins beat or match gold in every respect except their level of adoption. Gold is just too limited to be our future and doesn’t give the owners enough control.
People will continue to flow into bitcoin, early adopters will continue to make huge amounts of money and eventually you’ll be mentioning it in your economic shows (: how do you say it? a fight for freedom anywhere is a fight for freedom everywhere.