Making over a quarter billion dollars. The former chairman of the sec, harvey pitt and doug burns. Welcome to you both. I want to go over a couple of facts in the case as we know it right now, which is not everything, not by a longshot, but heres what we know. A Hedge Fund Manager receives insider information, secret trials. An alzheimers drug. He finds out the results before anybody else and trades on it. He sells his stakes in a couple of Drug Companies and assures them. You have said both wall street has developed a reputation of not caring, which individuals make of this story . Theefact is terrible Economic Conditions, that is what we have caused some people to try to cut corners or look for advantages. This will not sit well with individual investors, nor should it. This is blatant conduct at least if alleged, and if it is proven, this individual will do a substantial amount of jail time. Gerri of course you would not excuse anybody for doing Something Like this because of Economic Conditions are bad, having said that though, turnin3 to you because you have prosecuted these kind of cases before. Heres what the special agent in charge had to say. And on Holy Alliance between insider willing to divulge valuable nonpublic information and a money manager to whom that information is as good as gold. These are tough cases to prosecute, right . He is right, when youre in very tough economic times, sometimes you see an increase in this kind of behavior because were in for old times. Gerri you can go to a judge. Talking about the larger policy situation that sets this up. I often say very hard times will soon increase in whitecollar crime. In proving the case. Gerri how hard are these cases to prove . We saw where tap, thats cases on appeal and the issue on appeal will involve the wiretap issue in specific it is not listed as a crime, getting complicated. In this case anyone has with seeing somebody at the center of a criminal scheme get away with it, at least in that respect. The government has to make this case. This is a big one, they need to stress the point, and i think this is what they felt they had to do in order to ensure themselves a successful prosecution. Gerri and they have a great track record. 410 individuals and entities have been charged, has 75 million in illicit gains total so far. Something that just wrote this afternoon, the sec spokesman now, the company that owned the fund this particular trader work for. Heres what they had to say this afternoon. Referencing their ceo, they are confident they have acted appropriately and will continue to cooperate with the government inquiry. Our own Charlie Gasparino has been doing great reporting on this, he interprets the statement to me that they are knowledge and theyre being investigated. When you read that statement the same way, doug . I read through the complaint, actually. I had an erroneous report that he was specifically named in that document. He is not. Gerri whenever asserted that. Not you. Gerri what about this statement that they are confident that acted appropriately and will continue to cooperate with the government inquiry. So Charlie Gasparino saying theyre saying theyre being investigated. Speak of the statement is really just a generic publicrelations statement. Are they being investigated . I would have a tough time producing it from that. Charlie may have looked at something im not looking at. Gerri do you believe it is possible there is a case being built against him specifically . Not just this one trader, who seems to be at the nexus of all this, but his boss, ultimately. I think the government is giving off signals, but they are looking at everything surrounding that trader. I think that means before theyre finished, theyre going to satisfy themselves whether or not they have a case they can bring. I think it is very logical to assume anyone that has even a small attachment to these activities will have been put under the microscope. If they have been implicated, they will certainly be concerned. The doctor is the one who turn around and specifically said im going to be speaking at a medical convention of the phase two clinical trials. You have it right from the inside. I am sure there is some culpability, you never know. Turn around and try to make a person from today a cooperator. We will see. Gerri one of my big concerns is having an even Playing Field, not having individual investors feel like they have the last person to any news. How does this go to that issue of your mind . How are we doing making an even Playing Field for individual investors and professionals . I think the government in terms of the regulatory efforts and as well as enforcement efforts are trying to create a level Playing Field. The truth of the matter is people who have a lot of money to spread around get access to data and information. It is not enough to constitute inside information, and it is perfectly legitimate. In cases like this at least according to the allegations, if far crosses the line, and people who have money to throw around often get better treatment than the average investor. Gerri last word. Last word is Insider Trading is betting on a horse race when you know who won in advance. Says there will be a huge negative reports of this political pill incidentally. It is not efficacious, if they do short the stock, it is at a huge cost, it is not fair. Gerri the trader himself got a 9 million bonus. Do you think the benefit just went to the company . This guy went and made out like a bandit. Thank you for coming on the show, great analysis. Now what do you think, our question tonight, do you have trust in wall street . Log onto gerriwillis. Com, i will share the results of th at the f tonights show. Lots more still to come including a harsh message from fed chairman ben bernanke who is sick of congress kicking the can down the road. And it was a bad business move and hewlettpackard paying the price to the tune of nearly 9 billion. I will break down what went wrong. Stay with us. Gerri we talk a lot about freedom on this network. The freedom to start your own business, to invest, but with freedom comes responsibility. Theres a lot of people just blow it. Im highly critical of the way government operates and we spent a lot of time criticizing the feds and state and local governments. Some folks in the ceo suite on making some of the same mistakes. You have every reason to complain. Case in point today, former ceo of hewlettpackard. No one of my colleagues at fox business nominated him as the worst ceo of alltime. In his rush to write the ailing company, they restructure the legendary pc business and bought a British SoftwareCompany Called autonomy. Oracle decided to take a pass. Hp should have done the same because today it had to take 9 billion accounting charge after finding out they have serious accounting i improprie improprieties. The write off wiped out the companys profits. At least the traders at jpmorgan lost 5 billion new or taking a gamble. Which raises the question, isnt that what Due Diligence is for and why did two georgian due die failed . The former hp ceo is long gone, about a year, but his legacy continues. Followers of his career are not too surprised about this. This is the same fellow booted as ceo the worlds biggest business Software Company after just a year on the job. Now while they were at hp, the company reached 30 billion in market cap. That is not a chart to be proud of. Again investors have seen it before. He used it as his own personal piggy bank or firing steve jobs at apple back in 1985. Unbelievable. The beauty of the private sector as opposed to the government is when you really screw up, there are penalties. Hp stock down 12 today bumping along at the bottom of the 52 week trading range. The fbi is now looking at the case. Consequences, the same Human Behavior but the market has a lot more discipline that is sorely needed in the public sector. And thanks to ray hennessy for inspiring all of this. Ben bernanke has strong words for lawmakers and the president fixing the fiscal cliff now or else. Details next. I always wait until the last minute. Can i still ship a gift in time r christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. We dont let frequent heartburn come between us and what we love. So if youre one of them people who gets heartburn and then treats day afr day. Block the acid with prilosec otc and dont get heartburn in the first place [ male announcer ] e pill eachmorning. 24 hours. Zerheartbur gerri fed chief ben bernanke gettingiving a big speech in new york city, but it is what he said after the speech getting all the attention. Next. Gerri Federal Reserve chairman ben bernanke speaking today at the new York Economic Club in new york city, and his message to lawwakers in washington, fix the fiscal cliff and dont kick the can down the road. The commons the fed chief has everybody talking. John, always great to see you. I want you to respond to something the fed chairman had to say this afternoon. Listen to this. In a worstcase scenario where the economy goes off the broad fiscal cliff, the largest fiscal cliff, dont think the fed has the tools to offset that. Gerri dont look at me, cant do anything if you cant avoid the fiscal cliff. What did you make of that . Speak of the war is quite complicit dumb explicit. If the u. S. Goes over the fiscal cliff, the jump in taxes would likely quickly push the u. S. Economy into a recession and there is nothing the fed can do to prevent that from happening. Gerri it seems to have unloaded everything they have, the economy has to come back on its own now. They can do with the bank of japan is now supposedly considering, resort to negative Interest Rate policy. Consumers would be charged to keep money in savings accounts. That is one way getting people to spend, i dont think that is likely to happen anytime soon. Gerri i think that is just crazy talk to lots of viewers. But it is reality. Instead of getting paid for putting your money someplace, which is the way it normally happens, instead you have to pay for the privilege. Now why are people willing to make that tradeoff . Simply because they dont have enough room in their mattress to store their money or they dont have enough confidence to put their money in other Financial Assets such as stocks. Gerri we are not here yet. Could be a reality in japan the japanese want to weaken the yen. That is one way of doing it. Gerri he is optimistic about it generally, but your ideas his arctic onto fark face higher inflation. I dont think so. My sense is the u. S. Economy remains subject to strong disinflationary forces that still come from the always cheaper and ever increasingly skilled workforces of dynamic emerging Market Countries such as china and india. In the three months ended october, the average wage grew by only 1. 7 yearoveryear. That s a record low growth rate for the average wage and as long as wages slow, slow as wage growth is brought in by china and by india, it is very unlikely that the u. S. Will suffer from persistently rapid price equations. Gerri were more likely to suffer a recession, and you told our producer on this segment business retrenchment will apply to payrolls. Looking at more cutbacks possibly. How deep will it go, do you see recession on the horizon or are we in it now . Not quite yet. Financial markets are not signaling the recession. Nevertheless, we are probably looking at another year of approximately 2 growth, so in all likelihood, this is going to remain the most linked economic recovery since the 1930s. On the inflation front it may be some businesses will try and pass on the higher cost of health care to final crisis, but because of meager wage growth, chances are the price hikes will result in a loss of sales volume or a reduction in real spending. Gerri what happens if we go over the fiscal cliff . What happens to the economy . We have gotten some good news out of housing. We go over the fiscal cliff, that will kill home sales. We will have a return of home price deflation. Not only home price deflation, but consumers will also suffer from sharply lower share prices, stock prices, 401 k plans. Coming up in a serious downside to unemployment, could be bad for your health. And waiting until after thanksgiving to talk again. Sitting on their teachers at home. The latest next when im joined by former cbo director douglas deacon. [ male announcer ] you are a business pro. Governor of getting it done. You know how to dance. With a deadline. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. This is awesome. [ male announcer ] yes, it is, business pro. Yes, it is. Go national. Go like a pro. Gerri with all the talk of the looming fiscal cliff, you would think congress would be hard at work in d. C. Negotiating a deal. You would be wrong. Theyre on thanksgiving recess. If not for the country is facing a financial disaster or anything. Oh wait, we really are. Joining me now, doug holtzeakin. Former cbo director under president george w. Bush. Always a pleasure to have you on the show. Today the Federal Reserve chairman ben bernanke warned congress, said look, i cant help you out if you go over the fiscal cliff, there is nothing the Federal Reserve can really do at this point. Do you think congress realizes, understands the stakes here . I hope they do, this is a clear and present danger to the u. S. Economy and it is not just what happens if we go over the fiscal cliff, it is actually affecting the economy right now. A big drag of business confidence, businesses are already not doing very well, negative investment, really cannot afford to make the situation any worse and we have heard some members of Congress Talk about going over the fiscal cliff to teach the other party a lesson. That is not helpful. This is something that should be settled quickly. We know that were probably going to have higher taxes out of the health care reform. Now the payroll tax or they will probably go away. But a premium on in more taxes on the nearterm dealing with spending and getting next year without imposing a recession at american public. Gerri you take a lot of time to analyze what happens to this economy if we go over the cliff. Is it a big recession, its a deep recession, what happens . It is a deep recession, you hear talk that it is a slow weakening. We can fix it in january and come back. We know the magnitude is large, 395 tax increase, 140 billion spending cuts. More importantly, Financial Markets would be shocked at the failure to reach a deal and the fact the political system is so bad in the united states. That kind of confidence is not recovered. We saw it in 2008 i 2008 when te financial and market goes south. We cannot risk that at this point. Gerri you saw that this week, happens over and over again. I would say though it has not moved enough. Because heres what is at stake. Tax hikes are not income tax hikes, they are taxes on investment. The taxes are dramatic and will dramatically change how people think about investing but it does not seem to me like anybody is really thinking about it yet. I have been surprised at how slow this has dawned on the market. Now they seem more focused, but i think missing the fact is they have targeted investment, 3. 8 investment income, there are potential for higher income taxes and those tax hikes are layered on top of the peer Financial Market effects. We did not have the 2008, this is a very dangerous combination. Theyre really out of luck. Gerri talk about recession. You also have to talk about what happens to the average american psyche if the theyre faced with increasing income taxes dramatically so. These are taxes across the board, and investing in texas, where is incentive to work, where is the incentive to invest, get up off the couch . Speak of these are dramatically antigrowth policies at a time when growth has to be at a premium, we are going exactly wrong direction. The really frightening thing about this is we know we have a big debt problem. We have known we have to deal with it, it is very unlikely we will come to terms with a debt and deficit problem in a recession. We have big nearterm problems and dont solve the longterm problems. Gerri 50,000 for every american taxpayer. It is pretty frightening. What would you like to hear from the president . He has made it clear it is my way or the highway. What he has to express his urgency to get this done and lay out a plan. He is the president of the united states. If were going to talk about big bargains in solving the debt problem, all we have heard is the tax hikes. What are they spending cuts would actually propose . That is something American People have to hear. Gerri i want to hear about entitlement spending. Please come back. Have a great thanksgiving. The fiscal cliff mess is going take a bite out of your bottom line when a slew of higher taxes. Those lucky enough to get a yearend bonus, now maybe the time to ask your employer to cut fat check. Rich edson joins us from washington. The law says taxes are going up. Trying to avert the full tax hike so we really dont know who will pay more or if anyone will pay more. One tax expert says a conservative tax play this year means planning for those higher rates. Youre going to have to maybe assume or gas tax rates will go up rather dramatically for higher income individuals. You might want to consider taking income where you have that option through compensation planning, businesses or where you are on a cash basis to exploit income. Advisors say take any bonuses before the first of the year is nearly five percentage point increase in the top income bracket and. 9 Health Care Surtax in january. The top rate for dividend jumps to nearly 40 , the Health Care Law adds 3. 8 on top of that. Take