Treasury Covering Up Massive Fraud?

" Wow so is our Treasury Secretary engaging in a massive bank cover up. Let us hear from former treasury official John Taylor. He is author of the book getting off track how government action and intervention composite prolonged and work then. The financial crisis doctor Taylor thank you very much for joining us for happy hour first of all. Good to be here. Unlike your take your reaction to this economists saying in fact that you -- each claiming in back. That the Treasury Secretary is covering up this massive fraud you know this economy that contending that the credit agencies and the banks colluded. To sell off these liar loans at all based on created to make a quick buck and this is what led. Into this economic -- do you buy that."

" Was a couple of things there I think in terms of hiding things no reason to. Just come to that conclusion I think another explanation for this behavior about not. Taking back TARP funds as there's still good don't have their act together on the whole. Processors still uncertainty about that and that was way back in February 10 and it's continue into the plan is. Not fully fleshed out there's been some positive reactions -- negative reaction that I think that's what it is. In terms of those that cause and I've always stressed that those very low interest rates got the housing boom going. And ultimately the bustle is the fuel they got his fire going of course should add to that the -- Fannie and Freddie. Purchases but you know you always have -- out there is nothing wrong with -- percent but when it's when you have these government actions that instigate. These speculative reactions the -- in the bus that's the problem."

" Well doctor Taylor you know that your book I it's actually something not even argued on -- before that this it's the actual government bailouts and these new. So basically fascist corporate just policies that we are implementing. Creating even anarchy and our systems that are pro -- the confusion and the downturn in what might even now turn into a depression how -- we -- that. And actually get back stabbing some semblance of private property law."

" Well we gotta get away from this bailout mentality and a heavy hand of government in the interventions. That's that's the most important thing right now so from bank wants to pay its TARP money back. Go with that they have their reasons they don't want to get strangled by. Government bureaucracy so we can understand that. Getting on that track as soon as possible seems to me is what's going to create some clarity and reduce the uncertainty that still there. There in the markets."

" Doctor -- Cheryl Casone you'll let me ask look let's go back -- next month we'll go back to October when you have the financial system about the collapse. Something had to be done it was not good secretary got the stuff that it was former Treasury Secretary Henry Paulson. Many believe that system what it collapsed. Completely if the government did not step then it's easy to point fingers now but we had to do something back then wasn't the right at the wrong decision by Paulson."

" No I think basically what happened then there was intervention with. Bear Stearns. Back just over a year ago that was done for various reasons but then there was no. Policy or strategy or any kind of element of a certain. Way to approach his problems which was laid out and so by the time. You have this summer go by and Fannie and Freddie and then you have. Lehman Brothers people didn't believe the idea that Lehman Brothers would not intervened and that was a shock to the market if they had laid out of some kind of a plan. Some kind of an idea of the reactions and I think my point is demonstrated by the terribly adverse reaction. The following week ten days after Lehman when the market's tanked largely around the time that the TARP was presented. To the congress and the there was a fear. Negative very negative reaction -- that."

" Well let's not -- Kelly can't really blame -- Paulson that the Fed up with congress that he had a three page plan initially that bad then. It was congress that politicized no well they get there haven't been politicized and you will want to -- even -- my first question though we want to get back to the premise what we this this segment is about we want to know whether you think the Treasury Secretary is covering up that the bank now there are insolvent yes sir now."

" No I don't I don't have any evidence for that I. The stress test we've -- you can question whether those -- stress test should have been emphasize so much you know banks do stress tests all the time. That probably created some uncertainty at the time and I thought I certainly don't have evidence about cover conduct."

" There I mean I think the point that economists are trying to make its point I make here on the show all the time is that. Ken Lewis good companions they look investors regulators and lenders and people like me in the -- Constantly and say that they are perfectly solvent including now. Treasury Geithner and treasury Paulson before them they all look at us in the eye and say everything is fine everything solvent. And then they can't turn around and say they still need another two trillion dollars in welfare money they can't have the chicken and -- they can't have it dictate to make any of them vote. Sometimes I'm making sense here."

" Well let the what you got what they have to do is lay out a plan and this is some. Some firms are going to go into bankruptcy who have -- AIG had gone into bankruptcy that and certainly in retrospect. Would have been a better process. And so laying out the what the plan is rather than. Being -- gone back and forth giving to our money and forcing TARP money in and not taking it back those are the those are things that have to be clarified I don't think there's any question. That clearly laid out plan which tries to avoid bail -- gets off that -- mentality. Would be healthy thing for our economy and --"

" We want to talk about North Korea before -- he has a lot of experience in there -- doctor Taylor the president wants zero nuclear weapons eventually. And ask the former undersecretary for international affairs at treasury. What can you talk to us about what the president options up from your perspective in dealing. With that the North Korean nuclear treaty want to get your expertise on that as well."

" Well most important thing I think is to get the Security Council together on some sanctions and if you can't then get some like minded. People together the financial sanctions which were used. Against North Korea war but while there were in place they were pulled off I think that's the most important thing now is to be very. Specific this is unacceptable. Take some actions. -- just before -- saying the words at this point aren't there sanctions that are possible."

" If we're talking sanction North Korea whether it's North -- or somethin' else is the whole the whole political. -- military regime trying to figure out ways to ran out to rally us up. We basically going to end up in some sort of a war in order for the next type of stimulus is -- a conspiracy out there to take us to war."

" I don't think there's anything in terms of the stimulus for that you know this does G twenty meeting. Rejected plans for even bigger stimulus that we're coming from the Obama administration I think that was actually. Pretty good outcome that the Europeans said no enough is enough we can't have deficits. Exploding so it seems there on the stimulus that's. -- time together but you do need to worry about strong sanctions and getting them in place reacting to this event in North Korea it's very important."

" The doctor doctor Taylor thank you very much thanks for joining us tonight -- appreciates our."