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00:00THEY GOT KICKED, SO HOW BAD ARE THE BANKS IN TERMS OF THEIR OWN BALANCE SHEETS? DAVID STOCKMAN: IT IS HARD TO KNOW BECAUSE THEY DON'T DISCLOSE. I KNOW DEUTSCHE BANK HAS A 2 TRILLION BALANCE SHEET AND THEY HAVE TANGIBLE EQUITY OF 66 BILLION, SO THAT IS 3%. THEY ARE LEVERAGED 30 TO ONE IN TERMS OF TANGIBLE EQUITY. LET'S WORLD AROUND IN THE 2 TRILLION, NOBODY KNOWS, BUT I DID INC. THE BANKS HAVE UNLOADED THE WORST OF THEIR STUFF AND IT IS IN MUTUAL FUNDS, ETF'S, NON-BANK AND FINANCIAL INSTITUTIONS LIKE ALL THESE COMPANIES THAT HAVE COME UP OVERNIGHT TO MAKE AUTO LOANS BY SELLING JUNK BONDS. STEPHANIE: SO THESE BAD ASSETS THAT THE BANKS HAD ON THEIR BOOKS, THEY ARE ELSEWHERE AND THEY ARE NOW IN THE HANDS OF MUTUAL FUNDS, MOM-AND-POP. DAVID STOCKMAN: THOSE ARE WORSE, THE DANGER OF THE RUN IS MORE DANGEROUS THAN BANKS. BACK THEN, MAIN STREET BANKS DID NOT HAVE TO MARKET MOST OF THEIR ASSETS AND THERE WAS NEVER A RUN ON MAINSTREAM BANKS BUT JUST AT THE WALL STREET HEDGE FUNDS POSING AS BANKS THAT SHOULD HAVE BEEN LIQUIDATED AND REORGANIZED. THIS TIME, YOU WILL HAVE A RUN ON FIVE OR SIX TRILLION OF FUNDS. THIS TIME, A RUN ON ATS, THERE WERE LESS THAN ONE TRILLION OF ETF'S INTO 2008 AND THERE ARE 3 TRILLION NOW. THEY ARE AN ACCELERATOR MECHANISM. WHEN EVERYBODY SELLS THE ATF'S, -- BTS, THEY HAVE TO LIQUEFY THEMSELVES BY SELLING THE UNDERLYING. THEY ARE NOT NEARLY AS LIQUID AS THE OFFERED AT ANY TIME YOU WANT TO SELL YOUR ETF, THERE IS A BID AND ANYTIME YOU WANT TO SELL YOUR MUTUAL FUND SHARE, THERE IS A BID. I WILL TELL YOU WHAT -- THAT IS WHERE THE COLLISION IS GOING TO COME IN THE MARKETS. STEPHANIE: DAVID WESTIN, I NEED A STIFF DRINK OR A BREAK. DAVID: ME, TOO. DAVID STOCKMAN IS STICKING WITH US. I WANT TO THANK MARK AREN IN LONDON -- MARK BARTON FOR BRINGING US UP TO DATE. COMING UP, A LOOK AT THE

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Mutual Funds, ETFs at Risk of a Run: David Stockman

Former OMB Director David Stockman discusses bank balance sheets and warns of a run on mutual funds and ETFs. He speaks on "Bloomberg ‹GO›." (Source: Bloomberg)

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