good morning.g. one year later, this time last september lehman brothers was collapsing. bank of america was buying merrill lynch, and the u.s. government was stepping in to save aig. the president heads to wall street, a major speech on the u.s. economy today. the markets at this hour, red arrows across most of europe and asia and u.s. equity features pointing to a lower start here at home. "squawk box" begins right now.

good monday morning, welcome to "squawk box" here on cnbc, i'm carl quintanilla, becky is on assignment today. our guest host this morning, peter cohen, the former lehman ceo, founder of ramius llc. great to have you on the program. >> great to be here. >> an appropriate morning for peter to join us. it's one year since lehman brothers collapsed, it changed the financial world forever. september 14th, 2008, lehman employees were seen walking out of the firm's new york headquarters carrying boxes unsure about what the future held on that same sunday b of a and meryl werill were working o deal of their own. >> i remember that. i want to talk to peter about a lot of things. spending the day with peter cohen, and i want to -- it's so hard to remember all of the permutations of what lehman brothers was and when you ran it. i just wanted to get some

historical perspective on it. it was the oldest investment bank in the world. that was when i worked there and i worked there and i still don't know all of the different permutations. we sent out that book to when we'd make a cold call called the -- >> 1850. >> 1850. and then it was finally, when was it first acquired? >> it was acquired in '84, 1984. >> by shearson? >> and we changed it to shearson lehman brothers. and you were running shearson at the time? so you bought in lehman brothers at that time?? >> right. >> and then ran it until -- until when?? >> 1990. >> 1990.. >> and what happened in 1990? it came public again or shearson -- >> in 1990, american express decided to dismantle what we had put together over the '80s. >> put together over the '80s, started again with commercial credit. >> sandy left to go to american

express in '81, and we kept acquiring and kept growing, and lehman came in '84 which ran the investment banking and capital markets for us. but interestingly, when we bought lehman brothers the balance sheet was about $17 billion in 1984. when i left in 1990, the balance sheet was about $90 billion. and the balance sheet a year ago was probably $650 billion.. not including the off balance sheets, the derivatives, which were in the trillions of dollars. >> it was in the '90s -- okay, so it came back out, right, and then fold came in, he'd been a 30-year veteran of the firm. >> dick was there the whole time i was there.e. >> and he took it into new areas and the stock went from single digits to 200 or something? >> yeah, the stock did phenomenonly well. >> it was the success story. it's what gave him a bounce in his step and swagger everywhere

because he was the man. outperformed every other investment bank. >> also, he put in a compensation system before anyone that required everyone's compensation to be partially paid in stock. i think it was up to half was in stock that vested over a prolonged period of time. so the employees were the big shareholders of the company. so it was in their interest to really drive the business. >> and in the articles over the weekend, it was pointed out how many of those guys saw -- they felt really wealthy, their families felt wealthy.. and one guy was down in florida, owns a mobile station with a car wash and all the money that he made over the years, some of the middle level employees that were multimillionaires, $5 million or $6 million that i guess went basically to zero, right? and it was hard to sell. >> they went to less than zero because a lot of people leveraged themselves against this stock. that's just the lehman brothers, but at bear stearns, goldman sachs, merrill lynch, and every one of these financial institutions.

you know, i just happen to know that some of the new york city private schools have trouble getting tuition out of some of the families who own park avenue apartments, houses on long island, or in west chester, but don't have the money to pay tuition. >> in the '90s, it wasn't mortgages, it was -- >> it was, well, lehman had a fixed income franchise that was second to none always. and he just drove that fixed income franchise -- >> but he did become a market leader in mortgages and when did that start? >> oh, i think it was probably 2002 or 2003. >> trend setter almost. everyone else saw what they were making and wanted to get into that business too? >> right. >> and that was the -- that was what eventually the sword cuts both ways. >> yeah, but if you look back at what really did him in wasn't the mortgages as much as it was

the illiquid assets on the balance sheet. most lly derived from real esta. it was a private equity investment that they did. but it was all of the real estate lending that was being done commercial real estate lending, not residential. you know, and it was -- there was sort of a joke that if you needed money, you went to see lehman brothers because there was a guy there that would kind of lend against anything. >> so as you watch the summer progress last year, right, post bear, at what stage did you know this was more than just a passing problem for them? >> well, i thought -- i thought the problem wasn't just their problem. i thought there was a problem going back to the end of '07 across the entire industry. and with some of my partners, we'd gone and talked to people about the new york fed about it and said there is an extreme

leverage problem that's going to come home to roost. >> did you talk to geithner? >> i talked to geithner's staff. did talk to a number of people in congress, talked to somebody who is very influential in the administration today in the white house back in '07 about pending housing crisis. >> is that larry summer? >> it's better i don't say. it wasn't larry summer. >> oh, it wasn't? all right. >> nobody wanted to listen. all i heard was how good everything was and there was no problem in the housing market. the system was sound and what was very clear was that no one got it. but it wasn't lehman per se, it was all of the securities industry, which is extremely overleveraged, you know. and people had no concept of what the shadow banking system had become, how big it was. >> yeah, well, we're in a position to be able to look back now and we're going to talk

about the nosera piece, and whether the t.a.r.p. money could have been raised without lehman going under and talk about paulson, and unfortunately he ran goldman, save bear, save aig, and it almost looks -- it was unfortunate that it was such a competitor of goldman and that was the one. i'm sure he still points at hank paulson and harbors a grudge that he didn't come. >> or others who said you can't become a bank holding company. >> right. that was geithner. but he apparently was calling him three or four five times a day. some calls were returned, some weren't. but it's unfortunate how it worked. but nocera and others would say it drives the point home. and moral hazard would have been

100% if one didn't fail. >> it's a good piece, but kind of silly the idea that you have a fire going on, but it's not quite big enough to call in the fire department yet, let's get some gasoline on it and really get this thing raging. >> you yourself said it probably needed to go, but we should've handled it in a more orderly way. >> could've easily be handled in a very orderly way. >> saved us a lot of money. >> would've saved the whole country and the financial markets around the world a huge amount of money, plus the confidence in the u.s. financial system would have been probably better preserved than what's happened. >> he said that too when he was on. >> yes, it wasn't necessary. >> who took over for him, said fuld was the ultimate professional trying to help to work this out. >> that's dick's m.o., always has been that way. but lehman had $150 billion of capital between equity and long-term debt. so if the hole in the balance sheet was $20 billion, $30

billion, $50 billion, you know, so what? you would have wiped out the equity holders, the debt holders, you still would've had residual capital, but could've had an orderly unwind of the assets. and taking the hits. you could have had a liquidation of lehman brothers, which in effect is what aig's going through. it's an early liquidation of aig. >> right. >> we'll be here till 9:00, right? >> we can talk a lot about it. >> we've got this horse that's dead and we're going to -- at least we're looking at it a year, you know, and we did not go through, you know, the gut wrenching depression that people -- >> we came close. we came close. but let's not spend all of our time looking back. >> we won't. we won't. >> but we want to, you know, it's a year, we do that. >> tv's good at that. speaking of looking ahead, the president's going to wall street today to mark the

one-year since the collapse. john harwood is our chief washington correspondent and is in washington to tell us what we think we might hear from the president. good morning, john. >> hey, carl.. i think the president is going to try to revive that case for reregulation of wall street. he's got so much going on on his agenda that that issue has kind of faded. it's not going to be taken or moved to completion by congress this year. he's trying to get a health care bill, of course, passed, trying to work on energy and climate change legislation. and so financial regulations kind of fallen off the map. and he's trying to sort of grab the political establishment by the shoulders and wall street to some degree and say, hey, wait a minute, we've got to fix this or we're going to be back in the same situation in the next few years. >> you see it more of what we should be doing in the months and years ahead rather than a victory lap on what the jobs he's been able to save so far? or how effective -- >> absolutely. i would not expect to see much of a victory lap. that's one of the biggest dangers that this white house sees in terms of his management

of the economy. the more time they spend celebrating the disaster that was averted or the progress they think they've made, they underscore the pain that's continuing to be felt by the 9.7% of americans that don't have a job and people who continue to suffer under a relatively slow economy even if it's one that's turning around.. >> are there specifics about financial regulation, systemic regulator executive pay, consumer protections that he will set as the key? will he prioritize those things? >> i'm not sure how much he's going to prioritize all of the things in his package, he's going to try to get momentum for that package. you do have resistance, as you know, carl, to the senate to his proposal to vest the systemic risk to the fed. chris dodd is not sure that the fed should have that much authority. there's a little bit of disagreement between the house and senate over that. you've also had questions about how much consolidation in banking regulation ought to take

place. and, of course, wall street and the business community is very concerned about this new consumer finance or consumer protection agency the administration wants to create, which they think could duplicate some of the regulation and make things more difficult. >> john, cnbc's a business channel as you know, you do the washington stuff. you're well versed in things of business. when we've had people on over the years and we say what's the one thing that scares you the most? and i'm talking about on both sides of the aisle. the one thing that could really set us back and they talk about protectionism. what do you make of that 9:00 p.m. move sort of thrown a bone, i guess, to the unions that feel like they paid to get in the dance. they want to dance now. is this a small enough thing with the tires to where it's not going to come back and hurt us? >> i think we don't know that yet. it's sort of a dangerous game, joe. and the administration has sent some mixed signals on how he was going to treat the trade issue

from the beginning of the obama administration. remember, he promised during the 2008 campaign to renegotiate nafta. well, that didn't happen. and when he was trying to manage the stimulus package and economic recovery, he did a lot of coordination with other countries. and they used a lot of rhetoric to say we were not going to get into trade protectionism, that would be dangerous for the recovery. >> he hasn't pushed card check and some of the other things that the unions felt they would be getting. is this sort of a make good on that? and is it enough? >> well, that's the question, it could be a make good. but if it's a make good, can you control it? once you set that spark, how much can you keep that under control. i think we've got the g-20 coming up in a week when the chinese and the other industrial countries of the world are going to be meeting in pittsburgh. and i think this is a real challenge for the president. if it's a political gesture and the chinese have responded in kind with the political gesture, how do you make sure that you've got a fire wall around that and

it doesn't spark some sort of very, very damaging trade war on the other hand. we could be in an unpredictable situation. i think the whole world is going to be. watching and the markets are going to be watching how this plays out over the next week. >> crummy tires, they're cheap. >> but you'd like the choice. >> i don't know. i just -- you know -- >> what do you have on your jaguar? >> jaguar, i would not buy a british car. i'll tell you that much. >> if i'm a union and i thought& i was going to get a car check and i get this instead, that would not be a fair trade. >> that's probably true. i wonder if this is a big enough deal -- supposedly china's not going to be that mad about this. >> hey, guys. >> yeah. >> we shouldn't fail to note that i'm going to be able to discuss some of this with president obama later today.. i'm going to be talking to him at the white house. >> this will be on your plate for sure. with everything else you've got to talk about, tires seems

small, but -- >> we've got a few things to talk about, yes. >> all right. do you think there's going to be a fly there this time?? >> i think he might have killed the last big fly in the white house, but there could be some smaller ones, smaller relatives floating around. >> john, we'll be looking for that. thanks a lot, john harwood will be sitting down with the president later today. you can watch their conversation and more on a cnbc special presentation, 8:00 to 10:00 p.m, tonight on cnbc. in corporate headlines this morning, a report out of london that deutsche telecom is considering a bid for sprint t nextel. higher in early european trading, that's a huge percentage move because it's a $3 stock. deutsche telecom has called in bankers and could submit a bid for sprint within the next few weeks. meanwhile j & j seeking to cut $100 million from its deal with

elan, it will remain unchanged but j & j wants to reduce the $1 billion in cash they agreed to pay because a judge ruled part of the deal breaches a partnership that elan has. cadbury responding to kraft's letter. cadbury's chairman said the proposal asked the candy maker's holders to swap their shares in his words for a company with considerably less focussed business mix and historically lower growth. we'll see how that story continues to unfold. checking on the markets this morning, rough morning in asia overnight. in fact, the worst performance for asia in about a month. nikkei down about 2%, and the weakness will continue here on this monday morning back state side. again, a lot going on with the president speaking on wall street later on today. 68.57 after one of the longest winning streaks since november in the past week or so.

ten-year note, we'll keep a close eye after the supply coming on last week. the yield around 3.351. people talk about the short covering, but up across the board, close to 91 yen, and with the stronger dollar, you might expect action in precious metals. let's go overseas, let's go to london with with the latest out of europe, good morning, louisa. >> i heard about your comments you don't want to buy a european car because you're afraid you'll love it so much. >> i don't want to drop the transmission to change a wiper blade, thank you. >> i'll leave the jaguar discussion for another -- >> range rover. you might want two cars. >> sure, right. i do want to pick up on the discussion of the discussion of the one-year mark of lehman's demise. the stimulus spending board to

give you an indication of how much the percentage of gdp each area spent, the u.s., uk and germany respectively. 5.5% of gdp has been spent on stimulus, 1% of gdp in the uk, and germany 3.25% of gdp. the issue is, of course, we don't know quite how the economy would look without. if you focus in on this measure alone. we don't have a control group had we not been putting the stimulus money in. and one of the sides you could take if you want to argue for government is just the amount of risk control that the government has helped play in the unwinding of the collapse of the banking system that without the government involvement you wouldn't have had a lot of the stability you're looking at today. anyway, i will leave my 5 cents for the time being. let's head to singapore and take a look at the markets here. mora? >> yeah, hey, following up on you louisa, talking about stimulus spending, china, for

example, its stimulus package at the end last year, about 15% of china's 2008 gdp. if you want to talk about percentage, china has outspent everybody else in terms of its gdp. the markets here in asia ended mostly lower here with the exception of shanghai. we saw japan's kninikki losing e than 2%. as the dollar hits a seven-month low against the yen, we saw exporters leading the selling and the concern is that we're going to see a big hit on the bottom line of all of these exporters as the yen continues to strengthen. japan airline shares kicking off today, the company is in talk with american airlines and delta about the u.s. carriers investing in jal. over to the shanghai composite today where we saw that market bucking a regional trend.. a close at a one-month closing high. money that has, in fact, been earmarked for the ipo application, share application, but they couldn't get in on it flowed back into the markets in

shanghai today. we saw that market reaching the 3,000 mark seen as a key resistance level for shanghai. and a trades bet of the u.s. local tire makers, but at the same time producers are rallied as a result of that trade stock too. the gains in shanghai did not do much for hong kong, in australia, shares down 1.5% from the 11-month highs recently. banking stocks and resources led the way down. that was the asian trading day. back to you. >> okay maura, thank you. you've had four or five range rovers and never had any problem, right? >> never any problem.m. >> i'm going back to the old days. years ago that, you know, you couldn't even, the wiper blade -- >> horrible electrical -- >> electrical problems. >> and the jaguar too. >> i'm kidding, it's monday, generate mail from our viewers in the uk. >> i just bought a new one two weeks ago. >> and you've never had problems? >> never had problems.

>> camera, neat stuff. coming up, your business travelers forecast. plus if you went to bed early last night, we'll recap the tennis and football highlights you missed. what happened to nadal? >> we're going to find out. first, a look at last week's winners and losers.

welcome back. time now for our business travelers forecast. scott will wams is here. good morning, scott. >> good morning, carl. as we talk about your business travel on this monday morning, fairly quiet conditions for most of us, but we will continue to watch for some airport delays as we move in mainly around the lone star state. dallas, you continue to see the rainfall, also some gusty winds from time to time as we watch that slow-moving of low pressure continue to pin wheel the moisture inland. so some delays likely around dfw, as you move along the gulf coast, that i-10 corridor, in and out of scattered showers and thunderstorms, also, if you are traveling along the i-20 corridor.

atlanta and points westward back into texas, some scattered showers and storms, quiet conditions as you move around the big apple. 80 degrees for the high temperature, but if you will be traveling around using some of the bus services and subways, you might expect some delays due to a vip visit later on today. back to you, carl. >> the president is coming, and he sometimes disrupts. if you went to sleep early last night, you missed sports. becoming the first unseeded woman to win the u.s. open. she's a mom of a toddler. >> that's why she didn't play for a while.e. that's a great story. >> men's finals tonight, federer will face del potro. >> after nadal, who's the other guy? gonzalez? beat him badly in the straight sets. his whole family was there. they're talking about how he can play much better.

nadal looked like he was rolling. this may show you as federer as elegant as he is, just the best ever. >> just like he doesn't even break a sweat. >> right. if he beats this guy -- this should be good. to beat nadal that bad. >> it would make the six straight win of the u.s. open for federer. first sunday night football game of the nfl season, the green bay packers beat the chicago bears 21-15, the packers were trailing late in the game. aaron rogers hit greg jennings on a 50-yard touchdown pass and then when the bears first play on the next possession, packers corner back al harris made an interception, brought it back 29 yards to seal the victory. >> you have a future. you have a future. >> in sports? are you happy football season's here? >> didn't the bangles beat the patriots in pre-season and they played detroit yesterday -- >> probably a game somewhere in

the history -- >> but until they -- no, they did this year.. >> yeah.. >> and then the first game they played in detroit, i think they lost. it's hard to be a bangles fan, carl. >> and a reds fan.. >> and reds have been playing a little better, but it's hard, yeah. >> it's hard work. they need a new stra teejry.. when we come back, this morning's top stories, plus the futures pit in chicago. this week marks the one year since the collapse of lehman, bank of america-merrill lynch deal, the government's rescue of aig. two men on the front lines at the time.. plus financial industry insider peter cohen. the year that was and what's still to come. you're watching "squawk box" on cnbc. y without aflac! is that different from health insurance? well yeah... ...aflac pays you cash to help with the bills that health insurance doesn't cover. really? well, if you're hurt and can't work, who's going to help pay for gas? ..the mortgage, all kinds of expenses? aflacccccc!

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♪ >> that may be a throwback to the weather we had friday and saturday. is that not -- >> it's gorgeous today. >> fun sleeping weather, isn't it? good morning, welcome back to "squawk box." our guest host, meanwhile, peter cohen, the former shearson lehman ceo and founder of the investment firms ramius. and it is an appropriate morning to have mr. cohen in studio. marks one year since lehman brothers collapsed setting off a chain of events, that will change the financial world forever. september 14th, 2008, lehman brothers employees were seen walking out of the firm's new york headquarters carrying boxes unsure about what the future held. on that same sunday bank of

america and merrill lynch were working out an historic deal that we're still talking about that is still in court for certain things and may be in court for years. based on what's happening. i don't know if we'll ever know. was that a good deal, do you think, when it comes down to it for ken lewis or not? >> terrible deal. >> terrible deal. >> never be -- >> destroyed shareholder value. >> of enormous proportions. >> and lehman brothers, that failure was a shot heard around the global world. steve sedgwick reporting from canary wharf this morning. good morning, steve. >> reporter: good morning. isn't it interesting we're talking about the financial markets having changed forever, but if you look at the city of london and the complex of major banks behind me, it seems things are vaguely familiar. bank bonuses are back up, m&a is back, of course, we've seen kraft getting involved, disney getting involved in big deals in recent weeks. bankers tell me that the ipo market is queueing up.

and yet have things changed forever? over my right-hand shoulder, this the lehman's office. that office has gone literally 100 yards down the road. barclay's almost had a ken lewis moment when they were involved in negotiations to take on lehman brothers during that weekend one year ago. as it turns out, it was allowed to fail and barclay's was able to pick off some of the key assets, including the broker dealer operations in the u.s. some saying 80% of the lehman's business was really sound, good business, and barclay's was able to cherry pick. it was a similar story, as well, they took on the european and asian operations. they have benefitted, although big cultural differences. but pwc, the price border house are still working on $10 billion worth of claims from subsidiaries around europe for the parent holding company. that one's lingering on. back to you. >> he's crazy. not you, steve. we're talking about -- there's a

piece -- he is crazy although he's a nobel loriate. it's not like that with physics or something. >> that's not my point -- my point is -- joining us with a look ahead and a look back, is former assistant secretary at the treasury department, currently a managing director. also joined by our old friend tony frato, former white house deputy, press secretary, and even more prestigious now, a cnbc contributor. >> indeed. >> so that -- you got the experience at the white house to finally make that next career leap. >> and the treasury didn't get me there, but the white house did. >> tony, we've been talking about this piece, and we've gotten some of your thoughts on this, and i guess in a nutshell

you agree that it would have been hard to get the tarp to give to the banks which did a lot of good, we think now in hindsight, it would have been hard to do that if lehman hadn't failed? >> yeah, i don't think there's any question about that, if you go back to the political environment, we're in the midst of a presidential election and you had all of this fallout taking place in the market. the members of congress were not at all ready to consider any kind of bailout plan, whether it was for lehman brothers or anyone else in the middle of that environment. so you almost needed a real tangible crisis to get them to act.t. and even then as joe points out in his column, you know, we failed once. we had -- the vote lost in the house of representatives had to go back up and get that thing passed. so you have to imagine that in the absence of a real tangible crisis where the money markets were frozen up that it probably would have been impossible to do. >> yeah, i remember that. we had each vote that was

going -- was it on "power lunch"? every vote we were watching. that was when we thought it was going to buy all of the illiquid assets. i remember -- david, your thoughts? >> well, i think that tony's exactly right. if the one thing is certain, if you thought we could've asked for a t.a.r.p. earlier, just a couple months ago we asked for money to back the gses and that was brutal. so the thought that we would go for unlimited money to back stock wall street firms is not going to happen. not going to happen. >> tony, what about the notion that we had this show that not everything would be bailed out? paulson is being called mr. bailout or bailout hank.. that doesn't seem fair to lehman and its employees that you had to make an example out of their firm but not other firms.

>> i don't know that lehman was -- lehman wasn't chosen to be any kind of example. i think it was very, very difficult to get the messaging right to markets at that time as to what the government's intentions were. i'm sure it's possible that if we had signalled our intentions that there were not going to be big bailouts early, earlier than thursday, a week heading into that weekend, then maybe marcus would have been better prepared. what was amazing to me that markets were completely unprepared. there'd been a real acceptance in the market that government was going to come in and some ltcm kind of way, maybe a bear stearns kind of way or with just a straight bailout.t. i remember talking to someone at one of the big banks on that saturday morning, and she told me that their back offices were full with every bank trying to figure out what their counterparty risk was to lehman brothers, and that was astonishing to me considering that lehman had been lifting for

six months. they thought the federal, you know, government fairy was going to come in. >> i don't think anyone really thinks that lehman was a sacrificial lamb. i think no one was particularly thrilled with the situation we were stuck with. and if paulson and bernanke thought they could have saved it, they probably would've. >> was it just unfortunate that paulson and fuld used to be rivals and paulson was in the position to make these kind of decisions? >> i think it's fortunate he was there and understand -- >> but unfortunate to look back historically saying goldman got favored treatment and looks like lehman was -- >> well, remember, bear was a competitor to goldman, as well, and bear got saved. i think to think paulson did this because he didn't like lehman brothers or fuld is wrong. i didn't see one piece of evidence that would suggest that. the guy worked his behind off trying to find a way to help the system.

>> people say that the notion that there's nothing that bernanke and paulson could do for lehman that that's not true. >> i know that people believe that, but there's two ways that the government can support an institution before t.a.r.p. the first, the first is that you can create loans and the second is that we had a limited amount of funds in the exchange stabilization fund. it wasn't enough to fill the hole, and made a decision not to provide credit. >> and tony, later, geithner let banks become commercial banks or a commercial charter. is that because circumstances changed? why do you say no to lehman?? >> i think that's right. and circumstances certainly have changed at that point. you know -- >> 48 hours later? >> well, yeah. it was clear that at that point you had a real systemic problem. you had money markets freezing, you had over night rates spiking through the roof. there was -- and you also had very imperfect information. you knew there was enormous

global fallout from the lehman brothers bankruptcy, but you didn't know what that was going to be. i don't know, maybe david had some insight as to what was going to happen in money markets, but i'd never heard anybody mention concern over money markets going into that weekend and even during that weekend. so you had a real unintended consequence and you had policy makers trying to make, you know, very decisive decisions with imperfect information. that's a difficult thing to do. >> what do you make of the argument, david that we haven't learned anything. a report that said it's almost like we never had the biggest credit bubble in history. executive pay, some of these stocks, which is sort of what we wanted have come back. have we learned anything? >> i hope so. it's unclear whether or not we've learned anything. companies are still taking a significant amount of risk. i know the regulators are going to be a lot more rigorous with people. and it's also hard to unring the bell. the markets expect us to move in and save these types of institutions.

unless there's a real paradigm shift, people are going to still be expecting it. >> the other point, tony, administrations often stumble their way through crises and it's better to be lucky than smart or good. would you acknowledge that that describes the former administration? >> now, look, i think we did a lot of smart things in the rescue that in retro spect have proven to be correct. and even have the courage to change the program, to charge the program, you spoke earlier. >> that was a gut wrenching decision. >> it was a real gut wrenching decision. hank knew what that was going to do to his reputation. but it was absolutely the right thing to do. and, you know, you all got to watch, you know, policy making being made there in the heat of a crisis. >> we're still -- we'd still be waiting a year later, you've got to throw that money in there. >> that's right. that's the point i've been

making. that buying assets looked elegant at the time. we still haven't done it, right. >> i think, you know, we're rewriting history a bit about what happened with lehman brothers and the government's ability to do something. because monday night after the bankruptcy, the fed lent lehman brothers $15 billion and that collateral was there that morning. lehman could have been an orderly wind down. there was no reason to create this calamity, which ended up costing the system substantially more. . and the reason t.a.r.p. is so confused because there was no t.a.r.p. until sometime in that week when they realized that we we had this worldwide financial crisis. commercial paper markets seized up, everything, credit default markets and they invented t.a.r.p. and it was one piece of paper with no outline. so it was sort of legislation and design on the run.

so we weren't -- no one was prepared for this. and should have been because bear stearns was the shot across the bow. >> i think what's safe to say is that all of these points are valid, but lehman brothers didn't cause a financial crisis. saving bear didn't save lehman, saving aig didn't save wachovia, and passing t.a.r.p. didn't save citi from needing two bailouts. i think you're right, we'll be debating this for a long period of time. but i think the financial crisis was created because we had a hugely overleveraged system. it was delevering in a very distortive way, and i think we're going to be talking about this for a long period of time. >> i don't think anybody would disagree with that, the financial crisis was well underway before all of this happened. >> well, tony and david, thanks. you read the journal and just because there are people trying to take credit for a lot of stuff that happened is a lot better than us talking about people that are to blame for the

second great depression. talking about bernanke's reappointment. we're still here, right, peter? >> for the time being. >> for the time being. thank you. >> we're not out of the woods, though. >> got any comments or questions on that this morning, drop us a note, our address is squawk@cnbc.com. a lot more from peter cohen when "squawk box" continues in a moment.

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we've got to get some -- and not all news is good, obviously. and let's get a check on it, though. monica novotny with a round-up of the headlines.s. good morning. >> good to see you this monday morning, joe. this weekend, about 50 taliban militants were killed in a battle in afghanistan. the fighting came after an ambush that killed three u.s. troops and seven afghan n soldiers. reports vary, but sometime within the next 24 hours, looks like the iraqi journalist who threw his shoes at president george w. bush is expected to get a hero's welcome as he's released from jail. he served nine months for the 2008 incident which made him somewhat of a celebrity in the arab world. lighter stuff for you. in california, this one's just for carl, in fact, thousands of spectators lined the beach for the fourth annual surf dog surf-a-thon judged for the length of their ride and size of

the waves. it's kind of cute. so the event raises money for local animal center. brought in about $47,000 last year. >> carl, i didn't know -- >> i'm going straight home. i'm getting him one of those vets, and we're going to -- >> i knew you'd like this one. >> and we're going to kick some you know what on the beach with lucky. >> you could bring lucky out to those big waves -- >> he'll be fine, look at him. >> i always see the picture of lucky, but i want to see the picture of carl in manhattan walking lucky. that's the shot i want to see. >> i don't know if you saw gail collins. she was talking about this joe wilson guy down in south carolina. what's his real name? >> addison graves wilson. >> and then she went on to say he's not the only faux joe, faux conservative joe, like a fake joe --

>> gail collins wrote that? >> yeah. >> and i'm wondering, who's the other joe? what are other joes that are fake joes that are conservative? >> i couldn't think of any, except -- >> did i mention the story we almost told you about. i saved you from the man who eats spiders. >> look at her dancing. >> from the man in india who is a fighter. my wonderful producer thought that would be okay for morning. >> thank you, monica. we've got to go. >> take care. >> we'll jump-start the trading week. ♪ i don't know much ♪ but i know i love you ♪ and that may be ♪ all i need ♪ to know (announcer) customers love ge aircraft engines almost as much as we love making them. innovation today for america's tomorrow.

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welcome back. a check on the market. michael standing by. good morning to you. >> thank you. >> we're spend ag lot of time this week talking about the anniversary of the lehman collapse. there is other stuff going on. we'll get to interesting economic indicators. a few coe t.i., ibm, fedex talking about guidance for the coming quarters will be a little better than we think. thoughts on all those things? >> first of all, i just want to use a simple round number as a surprise in the market i feel last week, 1,000 s&p holding in support very well when we could have started seeing things break down which will happen probably this week, 1,000 on the upside with goldman.

probably looking for selloff value, we saw so much profit on the metal side for over a month. the question was after we saw that nice run in aluminum and of course the huge percentage returns in silver, was there going to be some type of end game where you might see something come back in something as crazy as the bond market.. until some placing for inflation and longer securities, probably just the market based on merits and fundamentals. earnings will probably look good again because payrolls trimmed for the right reasons. i'm really keeping an eye on this, how does the bond market return. most people have been short the dollar and that's working out. others the dollar struggling through upper levels. export numbers helped out because of the type of situations with the dollar. until the bond market returns, ping movement in volatility, not so much in demand like you're seeing. a whole different caveat, huge

percentage returns overnight in asia.. still into something in europe. i think for myself at least, one of the probably best performing markets on the globe started to show an inkling of a pullback. i don't know if that's enough to take us for the week here. >> michael, appreciate that keep it short. thanks for your time. we'll talk to you soon. >> joe the plumber. >> joe the plumber. >> maybe that's what you're talking about. >> that's right. >> maybe not talking about. coming up top stories and much more from our guest host. plus president obama plans to deliver what the house is billing as a major speech on the financial crisis today. k today.

one year later, the month that shook the world. breaking news all over wall street this morning. a new day and a new reality is dawning on wall street. no one could have predicted what would happen after the fall of legendary wall street firm lehman brothers. >> will the overhaul keep the banking system from repeating history.y. a member of the economy advisory report gives a preview of the expected speech. "squawk box" begins right now. pç good morning, welcome back to "squawk box" on cnbc. i'm joe kernen along with carl somewhere. he's in the building supposedly. becky quick is not here, though, she's on assignment. in studio, he stayed with me on set, guest host peter coen,

guest host of ramius. are you there, carl? >> i am. there's actually a chair in here with your name on it. >> i won't be back in time. i'll be hobbling along on these arthritic knees. >> a report out of london, a bid for sprint nextel, shares higher earlier in trading. london telegraph said deutsche brought in bankers to put a bid in for sprint in the next few weeks. cutting $100 million from the billion dollar deal wii lan. developing drugs will remain unchange. they want to reduce the cash they agreed to pay because a judge ruled earlier that part of the deal breaches a partnership between elan. cadbury a crass offer letter. says the proposal asked the

candimaker's holders to swap their share for a company with less focus business mix and historically lower growth. check out futures.s. a lower morning after asia, specifically nikkei, down, 80 points below fair value. >> carl, thanks. this week as you know, marks the one-year anniversary since the collapse of lehman brothers. that set off a sequence of events that changed the financial world for. lehman brothers employs -- that's old tape of them walking out of the firm's headquarters all carrying boxes. unsure what future held. on the same sunday, bank of america, merrill lynch were working out that controversial and historic deal. so how was the crisis being handled on the other side of the pond. let's start with senior economics reporter steve liesman who is back -- you're in d.c., i guess. >> yeah, for the town hall with

tim geithner. talked to him. interesting guy. >> he is. he answered all the questions. >> he answered them. i wish there was more time for follow-up. we did get the follow-up on some things. we then we wanted to cover a whole lot of stuff. you know, i want to say there's a whole other side to this story but it's not really another side. what happened in europe is the same thing and part and parcel of what happened in the united states. while the fed and treasury scrambled with lehman, they knew whatever happened would have huge affects over there. part of the whole story. i sat down recently an exclusive interview with european bank's jean-claude for his recollections. >> at what point did you feel pretty certain there was not going to be only a private or public solution but no sloog at all? >> it was the end of the weekend. we knew that it was

unfortunately the bankruptcy that would be the solution. of course then immediately it triggered for us, as well as for all i would say sister central banks the sentiment that we had to prepare for something which was really big. really big. >> in hindsight, given the cost that has been exacted from the planet because of lehman's failure and the cascading event that happened after it, was it a mistake to let it fail? >> lehman was a trigger but you could have another trigger. lehman could have been saved, but aig wouldn't have been saved and you would have the exact same thing. even if lehman and aig was saved, a new entity would have problems. it seems to me we have to fully recognize we were living in a universe in finance that was highly unstable. >> so the idea being that if it wasn't lehman, it was going to

be another company. and if the united states government had put its resources to work saving lehman, could it have saved aig? if not aig, what would have been the cascading of events that would have led to a huge investment bank to fall down. the issue was not just lehman. what happened post lehman. i don't know if you guys remember it this way, was that the key event was a piece of paper, the u.s. treasury piece of paper, was no longer good collateral. not because of what was on the piece of paper but because of who was trying to collateral eyes it. i'm not sure. i heard you say long money, i'm not sure how you get in front of that. that was an entirely new thing that a single event could cause

a dramatic world seizure. >> off camera i said to you, did you mention to him that maybe his misguided focus on price stability, keeping rates way too high in europe, did that add anything? >> we didn't talk about monetary policy. >> criticize -- >> i'm not sure it was, joe. >> i'm not sure. >> i think the point made earlier here, what was everybody doing from bear stearns to lehman.. what was wall street drog, what were the regulators doing? why wasn't there a t.a.r.p.? how ready were the europeans, did they understand the connectiveness. i understand the slipup, if you go through events as a regulator to understand there would be a money market -- there's one market with an overconcentration in lehman brothers that breaks the buck causes all money markets to hold back, not invest money, hold commercial paper,

then you can see that southwest events. the other events in the repo market, should have been studying and seeing. they put out the blueprint in the summer, june or july they put that out. i don't think there was any sense at all there would be a need for administrative measures to get ahold of events and they just did not. >> we started with you with the london angle. our guest host peter coen, founder of ramius, $700 billion under management and a billion dollars in lehman accounts in london. you're one of the creditors, ramius. >> tens of billions of dollars, if not more, maybe hundreds of billions. >> how does it stand? what kind of update can you give us? >> the administrators who are running the liquidation there are an extraordinary punch of people working really hard how to unwind this thing.

we got ourselves on the creditor's committee right away. it's different, a consultant role, different than here.. we worked to develop a scheme as they call it. scheme meaning plan for an orderly kind of after the fact windown of the assets there. the british courts rejected the plan. not because they argued with the plan itself, just said as it was constructed didn't have authority under english law to approve it. and they basically told the administrators go back to the drawing boards and see if you can't modify this and bring it back to me in a way i can approve it. having allowed lehman to fail as it did, the u.s. regulators, i don't think they had a clue what was going to happen in london. london would just get grabbed and cut off. there was $600 billion in london, and that the world was just going to find $600 billion

walled off. so i don't think they had any idea how the plumbing worked, which was something we tried -- >> $600 billion of debts, what was the asset side? >> assets, liabilities, and transactions, unsettled transactions. i don't really know what the total asset and liability base shrunk down was, but there were unsellinged transactions. and that could have been -- that could have eased the problems in the capital markets in the world if they had somehow kept the corpus alive and started to liquidate and squeeze down. in effect that's what happened to merrill lynch's balance

sheet. >> with the buyer. that was paulson's instruction, find a buyer. >> but there was no buyer for bear stearns until after the government committed the money. it happened sunday night jpmorgan came in and paid a dollar, eventually $2, then 10. there was no buyer. >> we still haven't seen -- i saw one report that was a little sketchy. what was the deal that was rejected? as far as i can tell, there was really not a deal on the table to save lehman. i don't know what that number was the government was going to have to put in to save it. i've heard north of $100 billion, $70 billion. any idea what the number was? >> i'm not sure.. i think i asked for a 20 to $30 billion bridge to get to the point where barclay's could go and do what they did do. bark clay's was around, moore, bank of america but they

preempted lehman on that. the koreans were long gone by then. the fact that the fed came in and lent $50 billion that afternoon -- >> wasn't it secured by jpmorgan? >> no. that was bear stearns. the lehman had collateral that was -- secured the feds for $50 million. if jp was involved, i'm not sure but they lent them collateral. we'll talk about the future and what he believes our responsibility is now given what we've been through to get this right and get into the real thing which just about on the edge we're talking about here, a resolution. why after bear stearns failed or nearly did we not come up with a resolution to handle something like lehman which was no longer unforeseeable. it was unexcusable then and

unexcusable now to not come up with such a resolution regime. >> comments on that, e-mail us at squawk@cnbc.com. when we talk next, investing opportunities you need to watch with black rock's bob dole. center bridge partners co-founder will tell us if new regulations, as steve said, can keep history from repeating itself as "squawk" continues in a moment. time now for today's trivia question. in 1901, what u.s. president died of in fact from gunshot wounds? the answer when cnbc's "squawk" continues. aflac! is that different from health insurance? well yeah... ...aflac pays you cash to help with the bills that health insurance doesn't cover. really? well, if you're hurt and can't work, who's going to help pay for gas? ..the mortgage, all kinds of expenses? aflacccccc! it's the protection you need to stay ahead of the game...

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now the answer to today's aflac trivia question. on this day in 1901, what u.s. president died of infection from gunshot wounds? the answer, president william mckinley, who was shot by an anarchist during the pan american exposition in buffalo, new york. beijing is calling for trade talks with washington in the wto over the tariff, sanctions on auto products and poultry reportedly in response.

washington's decision to impose tariff on chinese tires last week late last weekend, 9:00 p.m. friday night. >> that's when the strategic time to release certain kinds of news. >> ministry says they are thinking about moves after u.s. products sold in china at below market prices. later the president will be in manhattan delivering what the white house calls a major speech on the financial crisis. co-founder and managing partner of the private equity firm centerbridge partners, a member of the economic recovery advisory board. he joins us on set along with peter cohen, welcome. >> thank you. >> before china, which is clouding the message, what do you expect him to say? >> i think the president will talk about how the federal government will wind down its activities in the capital markets. there's been a lot of movement away from government

involvement, $70 billion paid back by institutions, $250 billion has not been needed it looks like under the t.a.r.p. program. i think he'll talk about that and his plan for that. i think he'll also talk about a need for financial regulatory reform, something he's described before and is going to push hard on. particularly on a coordinated basis globally. >> with the health care battle still raging, is getting that message out convincingly, is that an uphill battle? >> i think certain things take center stage in washington time but you can't forget that a year ago when lehman happened, over that next several months, as peter knows and all of us know, we're on the bring of total financial meltdown. so there's a need to really focus on this and see if we can get past some fairly basic structural changes that were not in place and need to be in place in order to in sure that we don't have that happen again. >> how seriously do you expect him to be taken given the china developments, the cries this

morning of protectionism.m. it's one of the reason futures are down. people are afraid. >> i think this president has been pretty clear he's not a protectionist. i think that type of issue will not be something that sticks. >> what was behind this decision, then, that most of the rhetoric or analysis that you hear is that the uaw feels like it's owed and he needs the uaw on board for health care. this is a bone for the entire tariff.. private equity as an adviser to the president, can you support this move? can you look the other way? >> how do you rationalize it in your own mind? >> the details of that situation are not something the president's economic board are getting involved in. it's not something i'm really on point to talk about. it's not something i've spent a lot of time on. >> in general, protectionism is

not good? >> protectionism is not good. president has proven he's not a protectionist. i don't think if is something -- >> how has he proven that? >> time and again he's had an opportunity to provide greater level of government involvement, greater level of involvement whether it's banks or other things and he's decided not to do that. but instead to try to put us in a position where capital markets are able to act and function in a way that can provide -- >> imagine what the size of that demonstration in washington could be if this is actually the president that's holding back on government involvement.t. it might have been 10 million people if this is holding back. >> they are saying that he's going to position himself as a reluctant shareholder. does that make sense to you? the government. >> i think this president will move out of, because he's not interested in running banks or auto companies. in time you'll see him move out

of both of those markets.s. that's what he's been doing and will continue to do. >> how can he do that without removing the fragile pillars that support the economy. >> you're seeing money paid back and $250 billion not utilized. money from money market not maintained. over time as the economy continues to improve, he'll take one step at a time and wind down the role the government played in stabilizing the financial system. >> would you say we're prepared for another lehman-like moment right now? >> i think we're better prepared for it than we were when it was happening. there's been a lot of practice globally on what role the government can play. i think in order to avoid that involvement over time, we need to put in changes in the regulatory format the government has -- the president has proposed. those changes would include providing some party who is capable of looking systemically across the system, a coordinated effort among regulators, an

opportunity for regulate toers have the resolution authority. >> some have argued it was hard enough get the t.a.r.p. through when the fire was already in the living room. it's going to be near impossible to get that through congress, especially when you've got so many other pots boiling. >> the t.a.r.p.s you mean regulatory? >> yeah. >> i think as with any situation, you need to operate on more than one level. you can't just be focused on health care or energy or regular, you need to do more than one thing. if the government is going to be capable of making changes pretty fundamental to what's going on in the economy, you're going to have to be capable of that. just like the street has responsibility to clean up actions, they have a responsibility to get things done. >> what kind of response would you expect them to get just from the street in general. >> you know, there's always a healthy tension between -- >> is that what it's called? >> between new york and

washington. i think you'll continue to see that. in general a number of institutions, leaders of institutions want to make change so they don't see this.. i think it will be a reasonably positive response. >> thank you for your time. john harwood will sit down with the president later today. you can catch their conversation and more on the cnbc special presentation called "one year later, the week that shook the world." 8:00 to 10:00 p.m. right here on cnbc. >> the markets are still recovering from the month that shook the world. a year later the s&p 500 is down 16%. is that not the weirdest thing. >> 9605? >> yes. >> that's like. >> september 11th, 2001. >> september 109, the day before september 11th, thing closed on friday within a tenth of a point. that's, i don't know, that scares me. like revelations. where should your money be for the next year, black rock gives

us a strategy session in this post lehman world. take a look at where oil is trading. your you're watching "squawk box" on cnbc, first in business worldwide. ll

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futures are off of their session lows. a busy week ahead. the president speaking on wall street today. jitters about the prospect of a trade war between china and u.s. blamed for some of the weakness this morning. got any comments or questions? we'd love to hear from you, squawk@cnbc.com is our e-mail address. when we come back we'll talk markets and where we stand a year after the collapse of lehman brothers, b of a and merrill. later on, the man who predicted a lot of this, a fallout, u-shaped recovery was possible warning chances of a double dip there. nouriel roubini. your you're watching "squawk box" on cnbc, first in business worldwide.

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welcome back to "squawk," a check on the markets. futures a little bit lower after some weakness in asia. the worst session in asia in about a month. we're down about 80 points below fair value or more than that. making headlines, average price of regular gas falling a nickel in the last few weeks. lummberg survey says a gallon averages $2.59. that's what you're getting en route? >> i can get premium for $2.70. i'm a sucker. is it better? i don't know. i play for it. >> ruled out in financier danny pang, accused of bilking millions out of investors died. it could be months before details are revealed. >> he was 42. british finance minister writing to six british banks.

he wants them to increase lending by the end of the year. enough with your criticisms of trichet and his monetary policies? >> you remember that? >> of course. >> the world was -- >> yeah. >> we don't want to hear about price stability. they folded like a cheap -- when they did move. >> when the going got tough. >> exactly. >> s&p still down over 16% electric a year ago but it's been up seven of the past nine weeks packing on nearly 3% last week. bob dole, black rock's chairman, global ceo of equity. peter cohen of ramius, former crow of lehman. good morning. >> good morning, carl. >> did you think we'd be here today? >> i don't think so. certainly didn't expect what would happen in the last 365 days in terms of market action, we'd see 666 in the s&p 500. who would have thought it.

>> we had david rosenberg from barons talking about the risk out there. he said he'd be interested if we were around s&p 840. does that seem ridiculous or within the realm of common sense, logic? >> given what we've been through in the last 12 months, nothing is irrational.. i don't think we'll see 840. i sure hope we don't. there's enough cyclical forces turning in the right direction, leading economic indicators, evidence the tim lsu is working, improving earnings estimates, lots of cash on the sidelines getting zero percent return. these are the things i think will prevent 840 from being seen on the s&p 500. >> you tend to shy away when we get too political. are we going to have a trade war with china? >> i don't think so. are there going to be skirmishes?? certainly. we need china, china needs us. we'll figure how to co-exist. we'll have skirmishes along the

way. that relationship will be an important one. >> evidence is piling up that the administration, if not the president, is more harmful than helpful to markets? >> i think there are moments when that happens, slip of the lip, we remember what the treasury secretary said a couple months ago. i think we need to be careful with our words. certainly the president does on most occasions. we need behind the scenes interaction and dialogue and i'm sure that's happening at many levels. >> that's the conversation we're having here. right, joseph? whether or not -- >> you say we'll have these skirmishes. what caused this one, bob? what do you attribute the tariff on tires to, other than throwing a bone to the uaw, what would you attribute it to? >> you hit the nail on the head. comments are appropriately viewed as political in nature and that's exactly what this is.

it's a small little piece. why that one, why not something else -- >> you can play a little politics, and everybody does it, i'm not saying it doesn't happen on both sides of the aisle. but if you just do it here and there, hope fully you don't tip over the cart? >> exactly. you have to hope we need the chinese to buy our paper, we need them to buy our goods and the world can be a happy place. >> see. so it's for show. you okay with that? >> yeah. i mean, i understand you've got rahm in there who is so smart and ruthless. you've got the uaw expects some stuff. maybe we can get a little credit for doing this and they will jump on the health care bandwagon. that's the way it works. i'm okay with that. >> you look like you have a comment but you may not? >> no.. i think that's exactly what's going on. >> the speech today, bob, do you expect anything of substance by the president sff i think it will be a reiteration of old

plans, a few new words but i don't think there will be anything new that comes out. >> is it at least constructive arguably it's a step toward creating a structure that will help us deal with problems we know have not gone away? >> yeah, that's exactly right. this is not front and center at the hospital molt mom. health care is for the president. he'll come back to this depending how health care goes. he'll see how much political capital he's got to get things done. we all know we need more disclosure in parts of the financial industry. how much regulation we need is a subject for debate. >> what's most likely, bob, between now and the end of the year, first quarter of next year, 11,000 from '96 or 8,000? i read something every cabbie and correction is saying, where is the correction? they might ask in farsi, but

they are all asking, where is the correction? is it coming? >> i'll take 11 over 8 because you're giving me a wide range that does not mean we won't have a correction. sometime between here and the enof the year, i don't know what level and when we will have a dip. cyclical markets never go in one direction. you're right. so many people waiting for it. >> every time not justified you get another fedex, something it seems, another little -- not a green shoot but another little piece of the puzzle that says maybe it's not going to be quite as bad as we thought? >> this is the sweet spot as you know, joe. there's lots of scepticism, lots of belief, that's when they do the best as long as you have policymakers in there trying to create stimulus. that's what they are doing, the sweet spot for financial assets. that's where we are. >> small investors edging back into stocks, 401(k). is that a good sign or bad one?

>> a good one. they are just inching and starting. most money taken out of cash going into fixed income.. we know equities have not gotten very much of it. i think the move out of 0% return cash will continue. the debate is where does it go? eventually equities will be played and this is maybe the beginning of it. >> we keep waiting for the preannouncement to shape up. ibm, t.i., fedex and p & g, they had an opportunity to come out and say will things be better or worse, they impbled to the better side. will that continue? can the dynamic of the q2 be repeated this time? >> i think it can, joe -- carl. what was important to watch is how much of the good news is a result of cost-cutting and how much is a result of guess what, my revenues are okay. we need to see some of the

latter for this to continue. we'll get a mixed bag, more revenue-enhanced earnings than we got in the last quarter, i believe. >> maybe we'll take that, see what we can make with that. >> have a good one. >> peter, of course, is here for the rest of the show. when we come back, too big to fail, not in lehman's case, aig, citi, merrill, they got life preservers for the financial meltdown. we'll talk to andrew sorkin of the "new york times." always good to see him. ♪ on this endless ocean

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lehman brothers, the collapse set off market panic. it was one year ago. our special coverage rules. the book "too big to fail" the author with us. guest host looking forward to the book. >> a definitive piece on what happened. >> love this guy. >> you have been locked --

>> we haven't seen you. >> this is true. >> because you've been working on that? >> i have been. >> can you give us anything we don't know that nobody knows that's in the book that you can tell us? >> not yet. >> this will be the first book where you'll be inside the room with hank paulson, go on vacation with some of these people, get inside their bedrooms even. >> beyond that, you actually -- it may actually change your view slightly of the crisis. there's a handful of nice grenades. >> change our views how? >> i think we all woke up in september and thought that the world imploded. i think when you peel it back, you will see stuff, when it comes to government intervention, conversations that happened, that will disturb you. >> some things you'll actually be very happy about. oh, my god, people are ahead of the game. other times you'll think the

opposite. >> you saw your -- >> i did. >> what do you make of that? do you buy the notion regulators didn't have authority? >> i do buy they didn't have authority. where i think the distinction is that that sunday they had an opportunity to do something with barclay's they did and they didn't take it. when they did bear stearns, jpmorganan was the vessel. they needed the vessel. once they lost the vessel -- they could have. that's where the real problem is. it's not the bankruptcy itself, which was the fundamental problem as peter knows very well. it wasn't confidence sucked out because we saw them fail, it was the money getting locked up in london. it was the pressure on the money market. it was all of these other

impacts. by the way, many didn't happen in the u.s. in an odd way the federal reserve lent to the broker dealer. that was probably the right thing to do and actually worked out well. it was what happened in the uk which really killed everybody.. it wasn't that it was just killing folks in the uk, it was killing everybody because the money gets locked up, everybody starting to sell everything else. that's lowering prices.s. it continued through the week and obviously through the year. >> how about the conclusion that put the fear of god into everybody. >> i think it does. the question is did it have to put the fear of god -- have to do that for ge and the rest of the system? i don't know. i like to think probably not. >> unless you think you can manufacture moral hazard, there had to come a time when someone wasn't saved, right? >> first of all lehman could have been saved, maybe not the way you wanted, maybe in a more

meaningful way. >> it's the only one we lost.i7 think of who we saved. fannie, freddie, aig, wachovia, wamu bought, everybody we found some arrangement. i mean, there are some people that wish everything would have failed. >> that's not true. you look at wamu or wachovia, that is moral hazard. they have moral hazard. everything worked out. there was a way to do this and to make it work. they didn't have the tools they needed to at the time. they probably could have been a little bit more creative than they were. >> they were somewhat creative already. in the lehman context they weren't that creative.. they sort of walked in doing the straight out of the box, didn't work, and that was the end of g that. >> so have we spent too much time trying to help the system survive rather than change it? >> that's what i think is the saddest part about this, the president speaking obviously at noon today. the one thing you want is what they call resolution authority.

a year later we're in no better position than we were before. that is to me the true crime of this. >> is it bogged down in too many other add-ons, just resolution authority? >> i think it's partially that partially, health care and other issues that are important issues that need to be attended to. resolution authority is the hard one to trablg because the tricky one, how do you do it? do you wipe out bonds, it's a government intervention issue. do you want them to say we're not so sure you can continue operating. you have to take them out in advance, not after the fact. you have to allow the government to make that step. that's a difficult situation. i also think there was a clear debate between whether you have a systemic regulator in charge of all these other issues definitely bogging it down a bit. >> says banking systems are in worth shape than lehman. he wanted to nationalize banks.

>> nobel prize winner. i don't have a pulitzer prize either? >> you're setting that up. >> can only hope. >> i just wonder at this point, we're okay? >> no. i worried we're in a w. where are you? square root? a bounce and sideways or down? i think we're in for a difficult long haul ahead because we're being overwhelmed by debt in this country and in the world. but clearly in the united states. and you know, everyone is misfocused on what the real risks of the economy are. without the consumer, there's no growth. and there's no conceivable way the consumer gets himself back in shape to dig our way out of this. so the deficit is going to keep growing, going to compound.

the deficit plus interest will continue to grow. the dollar will be under pressure even though it's in no one's interest for the dollar to be under pressure and rates have to go higher eventually, because the only way out of this is inflation, evaluate that. we're in a very difficult, very difficult, vicious cycle. i don't see a clear path out of this. >> i agree. >> who comes out as the hero in your book? >> besides yourself? >> i don't come out as a hero at all. the saddest part of the story, there are no heroes. >> the journal says people are lining up to take credit for -- >> i'm not sure the regulators should be lining up to take credit for anything. i think when you look at ceos that have gone through this, to me the saddest part in an odd way is that i'm not sure any lessons have truly been learned. when lou at there's as much ego

on wall street as there has ever been. to the extent you made it out the other side and were a survivor, you are now emboldened. it goes back to moral hazard issue. by the way, you survived on the back of you and you and the taxpayers. >> i was going to say, the question i think that someone raised this morning, the actions of the counter-parties last year were baked in certain fears. >> right. >> that now seem legitimate, right? no reason she should act any differently from an institution than they would a year ago. no reason to feel more comfortable about capitalizing a bank? >> absolutely. the problem is we do. mp everyone is acting fine.i i'm not sure there's a hero issue. what i was going to say, when you think about -- i do think you actually have to give credit to regulators even though they made huge errors in the fall in terms of trying to solve the problem, i actually give them

more credit than most people do. >> i agree. i think once they understand that they didn't understand what was going to happen after lehman, they really went into overdrive. they really were in trouble. >> i think you can fault hank paulson on lehman for a very long time. i think you ask about history, i think in an odd way history may actually look well upon it. >> i think you're right. i wasn't setting it up. maybe even the lehman move -- >> that i'm not so sure about. >> when will it hit? >> october 20th. i think i'm scheduled to see you then. >> whenever we talk to you, every time we talk to you we'll put up -- >> like another friend of mine at the network. >> what does the cover look like? >> it's red and it has the word "too big to fail" and they look like they are about to fail or fall off. >> on papers it has my comments

on the back, do you want me to do this for yours? >> no. but if you can imagine this, i actually thanked both of you in the acknowledgements. i actually did. >> a picture of you on the front with your teeth gleaming or something? >> no. >> good to see you. thank you. >> a lot more to come on "squawk box." all the comments are they taken in there's no way -- >> you know who is on the back, actually, tom walsh. >> the guy that wears the white -- >> that guy. author of bonfire of the vanities. >> it's a long book but it reads fast. >> i don't care about long. i'm looking forward to it. >> good. thank you. >> we do have gm's vice chairman, talk about the new ad campaign. maybe paulson, i'll be on the back of his book. may see some of the ads on nfl, what's behind the 60-day money

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boxers or briefs? take a look at stocks to watch. i know, it's okay. i was asking andrew. considering a bid for sprint

nextel, stock will be up on a huge percentage basis $3.77 stock. called in to submit a bid for sprint. upgraded neutral to underreported suisse. underperformed at a $48 price target on ups. going neutral and raising price target to 61. upgrade freddie neutral to america, campbell soup downgraded to noot ral by bank of america even though increased from 34 to 32. e-trade upgraded citi group. price increase of $2.30. underarmor upgraded from neutral to sell, target increase 25 from 19.

they have been wrong on this. $26 stock. boston scientific downgraded from neutral to buy, target price. upgraded motorola, 11.5 to 7.5. >> when we come back this morning, marking one-year anniversary of the collapse of lehman. what changed and what has wall street and the financial community learned from the failure. nyu chairman and monitor nouriel roubini, if he's sticking to his call for a double recession. stay tuned. >> your. you're watching "squawk box" on cnbc, first in business worldwide. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk,

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the fallout from lehman brothers one year later. >> all i heard from everybody how good everything was. there was no problem in the housing market, the system was sound. what was very clear was that no one got it. >> we get the fed perspective with normer central bank. what are the chances for a

double dip recession? nouriel roubini saw it coming. find out what professor doom sees on the horizon. gm rolls out a new incentive. >> if you're not 100% happy, return it. we'll take it back. >> the satisfaction guarantee program. as "squawk box" begins right now. welcome back to cnbc first in business worldwide. i'm joe kernen along with cart quint. becky is on assignment. we'll see a lot of that. >> we are. she's out west. she's on the program later in the week. >> leave it at that. people are going to want to see where she is. help our viewership. >> we miss her.

>> where in the world, former ceo of lehman. we look back at the demise a year ago. you're here, you're going to do the top story. >> i got tired of going there and getting all that grief. >> it's not as dramatic from here. see what you can do. >> a report out of london deutsche telecom, nextel, london telegraph says deutsche called in bankers and could submit a bid in the next few weeks. looking to cut the deal from elan. developing drugs will remain unchanged. they want to reduce the $1 billion in cash they agreed to pay. a judge ruled part of the deal reaches a partnership between elan. cadbury responding to kraft offer letter.. the candimaker's hold tore swap

shares for a company with considerably less focused business mix and historically lower growth. futures on top of all of that news relatively weak off the session lows. a difficult morning in asia. a lot of concern, though, about whether or not this tire deal is the beginning of a new -- >> united steelworkers were the guys petitioning for relief. uaw probably wishes they had.gú usw. that compounds the problem, fuel prices, may have ramped up production too quickly, steel prices. >> speaking of which, that's a good lead into the next guest, a year after lehman failingly collapsed and took the mashts with it. we're looking back to's how great the affect on the crisis. nouriel roubini, chairman,

international business school of business. good to have you back. >> pleasure being on your program again. >> your thoughts a year later. with that you can take it in any direction as to whether or not they should have been saved, whether or not not saving them allowed us to later on save other bigger players. a lot written over the weekend about the lessons and mistakes made. >> first observation, the interpretation only save lehman things would be fine and cause of the financial was letting lehman go. i think people forget by the time lehman was gone, the housing recession had started two years ago, the recession started in november where a severe financial crisis, 300 non-bank mortgage lenders are gone out of business. bear stearns had collapsed. fannie and freddie lapsed. merrill lynch had the same problem as lehman. bank of america and citi group

had hundreds of billions, companies were in trouble, interbank market seize add year before. so already in the middle of a very severe crisis. lehman, everything okay is just non-sense, not understanding the difference between cause and affect. lehman was an effeaffect of the crisis not the cause. >> did allowing it to fail, though, give regulators the administration the political will, the panic to put in the tools -- to put into effect tools that would later be useful? >> yes. certainly why do i feel unconventional monitoring credit policies of the financial system were implemented, some of them before lehman, some of them after lehman. the support and back stopping of the financial is a commitment of $12 million resources, three already spent, capitalization,

gaerns, insurance, you name it. many things occurred well before lehman. many occurred after lehman. >> do you feel better or worse than you did prelehman? i know at the time you said a depression was not an all together possibility, right? >> yes. >> you think that has been taken off the table but we've replaced it with an unimaginable amount of debt? >> yes. that's one of my concerns about the economy ahead. that's why i see the risk first of all of a u-shaped recovery, a low trend, then the risk of a y. we have all the lempbl of the private sector, highly lempled housing sector, corporate sector, highly leveraged financial system, as a way of socializing some of the private losses we socialized them, now there's a massive releveraging of the public sector. that's why i see a situation which the economy cannot borrow as much, cannot spend as much.

there's not going to be consumption, not as much spending because of the burden to have to reduce more. because of that, the recovery is going to be -- >> but you make deleveraging sound like a bad thing. we need to deleverage, don't we? we just need it to be spread out over time so we can handle it all? >> absolutely. the consumer has to be leveraged, save more and spend less. consumption growth, 70% of gdp below the growth of the economy, then growth of the economy is not going to be otherwise. that's part of the problem we're facing. we need to deleverage. we have to save more. because of that it's going to be weak for a while. >> you're a tough critic. if i were ben bernanke, i'd be worried if write something about being reappointed. he's been repoiappointed. i assume you think he was

instrumental in the crisis. how pout geithner and not nationalizing the banks. i know he probably takes the opposite tack, should have been done more. do you think that was done properly? >> i criticize 90% before the crisis, not understanding, i give credit forth fact his actions did not lead to another great depression. that's why i support it. the bank 360 mortgage banks gone out of business, more than 100 banks out of business. those in trouble have already gone under. at the end of the day with we might have 4,000 financial institutions, even big ones, fannie, freddie, aig, lehman have gone bad. this is a severe financial crisis.. my view is still many losses have not been acknowledged.

for example, $2 trillion of commercial real estate is in trouble. at the rate of 30%. now later said forbear answer, let's continue face value going to wait. eventually there's going to be trouble for regional banks, for smaller banks. if you think about it, subprooimt prime, now commercial real estate, credit cards, student loans, leverage loans, commercial loans, corporate bonds, muni bonds, all these losses slowly going up. we'll not have another blowout like lehman. we decided nobody systemically important again like lehman but the financial system is severely damaged. not just the bank most of the shadow banking system has disappeared. there's no securitization, no growth. things are much better than a year ago, of course, and i credit the policimaker with strong action but still a huge

amount of damage in the financial system in thet market and in the real economy. >> all right. so but i agree with dr. roubini, the commercial real estate problem is enormous, may be bigger than the subprime problem was. we're not out of the woods on residential, because of the interest only mortgages we have to reset. what do you think the affect of that is going to be? >> absolutely, right now rising from top prime to near prime. interest rates on the mortgages now by the way a moratorium on foreclosure. because of that excessive homes on the market has been limited. eventually that's going to be lifted and people look and see a massive increase in supply of existing homes are going to come in the market on the next six to 12 months. while the quantities in the housing market fell 80% from the

peak demand in supply, the gut between supply and demand is so huge, you could stop producing new homes for a year to get rid of inventories. one-third of existing home sales are distressed sales, short sales or sales of for closed homes will increase. the price of adjustment will continue for another year on a cumulative basis, 40% reduction in home prices sometime next year from the peak. that means half of the people with mortgages under water with negative in their homes. that's what we're facing right now. >> talk about prices going down 15%. >> 12%, see it down 40% sometime next year. >> you talk about death by a thousand cuts, we're not going to have another blowup like lehman. why don't you believe we're doing to walk in here some morning and face some explosive event? an overnight collapse of the dollar. are you saying that's not going to happen? that's off the table? >> extreme events occur, what

i'm saying is last november said clearly we're not going to let anybody to collapse in a disorderly way and not allow the backstop the financial system in 20 different ways. therefore the blowup of a major institution right now even if it were to be unsolvent is unlikely.. now, on the dollar, of course, there's a risk we're going to use inflation as a way of wiping out the real value of public debt and as a way of dealing with a problem in the private sector, if these were the odds down the line, eventually they could have collapse of the dollar. that's why i'm worried about double dip. not being addressed, lead to the temptation of using monetization. in that case the dollar could collapse. again, to me, the scenario is a risk to be aware of. >> nouriel, thank you.

>> you got it. you read that. >> nouriel, good to see you. >> glad to be with you. thank you. >> even though you did it on the "today" show. >> no. >> yeah, you did. >> when we come back fed and financial crisis, treasury and central bank put to the test. did they mat right decision to let lehman go? we'll talk to former governor larry myron his perspective of the month that shook the world. >> first, satisfaction guaranteed. gm's vice-chairman on a new ad for automaker, hope fully, for all of us, on the road to recovery. that's "squawk box," first in business worldwide. >> your. you're watching "squawk box" on cnbc, first in business worldwide.

one of the big stories this morning, china is accusing washington of violating wto rules by raising tariffs on chinese tires. china is demanding wto talks on the matter. threats about putting

restrictions on u.s. poultry and other things. >> nobody thinks this is like a small shot across the bow, not big. >> cosmetic. >> i don't understand, maybe death of a thousand cuts, too. no one thinks anything because of a simbiotic relationship. >> because of dollar, trade, they are sending messages about don't trifle with them. >> is it a slippery slope? >> yes, i think it's a very slippery slope. >> let's go from cash for clunkers to refunds for regretters, says here. >> write that? >> general motors laumpl ag satisfaction guarantee program hal allow buyers to return their car within 60 days for a purchase price refund.d. joining us now, the legend, bob

lutz, vice-chairman of general motors. mr. lutz, good morning? >> good morning. >> how does this -- does this cost anything? how would this cost general motors at this point? >> well, if you have passive returns, which we don't think will happen, if we weren't confidence in the excellence of our product program we wouldn't lawmaker this thing f we have a return rate of, say, 2 or 3%, that wouldn't be very costly because we would remarket the vehicle as a used car. >> and do okay with it. whose idea was it? did someone take it to whittaker? was it your idea? >> i can't take credit for it. it was somebody in the marketing group. the chairman strongly suggested we find a way to get the word out and change public perceptions of gm, which are completely outdated. >> right.

so the thing i'm worried about that someone could say is you don't know whether you've got a lemon until a year or something. what do you really know in 60 days. >> i think in 60 days you know if the vehicle has any early problems, ergonomic, don't like interior, squeaks and rattles, consumes too much fuel. in the longer term we do have the unique 100,000 mile power train warranty. so i think we've really done our very best to remove any anxiety people might have about buying a general motors car. >> that covers long-term, short time in the first week you have that covered with 60 days, 100,000 five-year deal for longer term. >> exactly. >> bob, have you seen anyone -- i mean, ford says they have people coming in to say i like you because you didn't get bailout money.

do you see any of that, that people are holding that against general motors? >> yeah. i think there's a broad segment of the american public who dislikes government interference and is somewhat hostile because of gm because of chapter 11 and the money we got from the federal government. that's one of the reasons why you will not hear us, other than in a program like this one when i'm talking to business savvy people, normally we will no longer be talking about general motors. all the ads will focus on chevrolet, buick, gmc and cadillac. >> you're a car guy, too, bob. i've always loved camaros, there's never been one i don't like or firebird and the new one looks great, too. what can you tell me about something not called a camaro or anything to get that impulse buyer to say i really want that car from gm. >> we have a lot of stuff like that. the new cadillac cts, which is now about a year and a half old is doing exceptionally well.

the new buick lacrosse, which is just starting to hit buick dealerships is opening to rave reviews. the new cadillac srx is going out of dealerships as fast as it's going in. the exceptional, exceptional smash hit we've got on our hands is the new chevrolet equinox. that's one of the reasons we were able to do this. we could not have done this five years ago because i think people would have gone in and said, you know, what you're right. after five weeks i don't like the car. we can be absolutely sure people will love the vehicle. >> i think gas was down $0.05 or so. we had fritz on, ceo, the government said if they were to come and tell you you need to do something you thought maybe it's green, maybe it increases mileage, maybe it helps you hit -- takes you down the road to -- maybe importing small cars.

you're not allowed to import them from china, you have to make them here, was he willing to resign if the government told him to do that. he kind of dodged the question. do you see that coming, it becomes necessary to take a stand between what government told you to do. >> i think we would all take that stance if we saw the certain element if we were asked to do something not in the best interest of the company or country or taxpayer or in exhibit us in the desire to pay the money back. that is just not what's happening. the government task force was very helpful. they were entirely focused on one thing and one thing only. that is make general motors a viable enterprise. as long as we meet fuel economy legislation like everybody else, we are actually encouraged to produce a full line of vehicles which includes vehicles like cadillacs cts, several corvettes, camaros, all the

things not necessarily green but, one, highly profitable. and two, put a lot of fun in the business. >> if the government came to you tomorrow and said we're thinking of doing cash for clunkers 2. we're thinking of reviving the program, good for the industry. would you welcome that or something not repeatable or dangerous to repeat over and over. >> well, i think it was good the first time around. i don't think it's a program you can run and run and run and run. but the first time around the interesting thing was these were not normal new car buyers. these were people who had very old cars that were worn out that used a lot of fuel. they normally would have traded them far new used car. but because of the $4,000 of government money, they suddenly found out that this old used car they had, that they thought was worth $250 was suddenly worth $4,000 and it was possible to trade a lot of them into new cars.

but as most dealers will tell you, these were not your normal used car buyers. so it genuinely did provide a stimulus and get a bunch of old and heavily polluting vehicles off the road. >> you were almost gone anyway. i think they asked you, can we use the canary in the coal mine, if they do something you don't like, you're out thereof. we can count on you. if they try something you'll resign and let us know why. >> i'll tell you what, this spring when i announced that i would probably be retiring at the end of this year, that's exactly what i thought was going to happen. that was when there was talk of, you know, now that we're going to be controlling general motors, we can make them do the kind of vehicles they always should have built and so forth. i thought uh-oh, this isn't going to work. maybe it is time to retire at age 77. now that i see the new reality and the way they actually intend to let the company be run by

this great new board of directors we've got, run like any private company, i'm very encouraged. so i signed on kind of for indefinite. >> good. you'll be out of there, be the first sign. >> early retirement. >> all right. thank you. >> thank you. >> when we come back, handling the crisis from across the pond. steve liesman back with more of his interview with jean-claude trichet. mr. santelli will give us his sense on the month that shook the world a year ago when "squawk box" comes right back.

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good monday morning. welcome back to "squawk" on cnbc, first in business worldwide. we're about an hour away from the opening bell on wall street. an untold part of the lehman story, senior economics reporter steve liesman sat down with jean-claude trichet on how the crisis was viewed on the other side of the pond, what did europeans know about lehman, how

did they know, what did they know. interesting interview. didn't get into a lot. >> he sat down, gave us 25 minutes. we'll roll with that piece. we have a big chunk in our especially which you're part of, too purchase i think we all are at least in spirit. >> even worse for you. exclusive interview with jean-claude trichet, i asked him, walk me through the weekend with lehman brothers and whether he assumed the company would be saved by u.s. regulators. were you getting updates personally from fed chairman ben bernanke? >> absolutely. >> beginning when, wednesday, thursday? >> during the weekend. >> so you went into the weekend, is it correct to say, believing lehman would be saved? >> no, i knew it was extremely complex. before the weekend, thought there was a solution. it was very like bear stearns.

had we had the chance to have the information that some private institution would be interested, then it would have been different. realized it was not the case during the weekend. >> were you advised to hear the comments from treasury secretary henry paulson saying there would not be government money in a solution here on that friday before? >> i have to say that this seemed to me to correspond to public opinion in the u.s. after bear stearns, which was done in my opinion, there had been a number of criticisms coming from various sensitivities as far as i could see. >> trichet said it would be absolutely stupid not to enact regulatory reforms in the wake

of the lehman crisis. they were getting their info from the fed. the fed, maybe history will show, was more in favor, certainly treasury secretary geithner, more in favor of a bailout. so maybe trichet is getting information that way. he thinks, okay, they are going to end up with a solution. maybe what's happening with paulson is more posturing for the street where ultimately he tries to get the street to do a private sector solution. >> it certainly seems that way. i don't know if it was a bailout as much as a bridge to a windown that was very feasible. you know, i think a lot of people who understand the plumbing of wall street knew that that could work, if they would permit it to happen. >> you talked earlier about all of your funds, some funds tied up in the bank of london, still going on. >> actually -- >> a large number for everybody all in. >> yes. >> that would seem to me, given that there is no resolution

right now of that problem that today a counter-party would be correct to withdraw his funds from someone who is thought to be in danger, lest they end up in bankruptcy. that's what we talked about in the last hour, which is why don't you go with a security because of the named attached toyota. ultimately your funds could end up in bankruptcy. that same situation a year later remains unresolved. if there's a run on another bank later, questions about ute bank, counter-parties would do the same thing and not fund good securities. >> that, in fact, is what's s going on. people are with drawing from the -- everybody is moving to the international banks in new york as much as they can, under fed regulatory regime, away from small broker dealers. nobody has got an asset in europe. you know, nothing in the uk or out of the uk, out of the pool,

back to the u.s. because i don't think anyone had an idea how the uk would just be grabbed by the fsa and cut off. the implication of that. that came as a complete surprise. >> sounds to me like you are sort of supporting what the u.s. regulators did was to refinance america's big bank system. >> absolutely. had you not done that, i think we would have had -- we would definitely had v had a finance of the whole financial system. >> nobody would trade with anybody else, no financial system. what about with drawing the guarantee it's putting on bank debt. >> i'm not sure that it's appropriate to do that yet, because we still have a lot of problems coming up. we've got the whole kmerpgs loan problem, which dwarfs the subprime problem, $2 trillion in loans that have to be

refinanced. $6 trillion of commercial real estate assets that probably declined 30%. >> i've heard administration n people tell me wall street is fighting regulatory reform tooth and nail. is the industry doing the right thing here? >> i don't think that's true.. i don't know this they are fighting it tooth and nail. i don't know who is saying that. i think we have all the regulations. what we need is application of the regulations and better trained people to apply those regulations and maybe around the edges, yes, we can use more regulation. but you know, look at the madoff situation with the s.e.c. as an example. they had the tools to catch that. >> let's bring rick into the conversation. >> the poster child for no more regulation. >> is that what you're calling -- >> no, madoff for no more -- >> rick, i assumed he was talking about you. >> rick, don't take the bait. there's plenty to argue about. don't take that false bait from joe. >> i don't argue. i just try to put some light on

the other side of opinions and maybe show that there are two sides to every story. i think this one-year anniversary is great but i think it's great for another reason. i think someday we'll learn that we didn't need to do very much, that time heals all wounds and you don't have to go broke in the process. >> we just had a guy here -- >> i don't care who you had. >> who dramatically disagrees with you, rick. >> the whole government disagrees, the treasury disagrees. we can't audit them. i still don't know the size and dollar amount of toxic derivatives, it's irresponsible, it's horrible. where have we come? we fixed all the banks and people still can't get loans. okay. i'm done. now give me all the propaganda. >> not propaganda. it's okay no banks would trade with each other. we had somebody say here -- >> i don't think they were worth saving, joe and steve. what do we say? what do we know today, steve?

how much the citi has $300 billion in guarantees. how many toxic derivatives do they have, buddy? >> i don't know the answer to that. we know hundreds of billions guaranteed by the government. the thinking was if citi group went down the entire financial would. >> like if lehman went down the sun wouldn't come up. guess what, it's come up 366 days in a row. >> 66, interesting number. i just want to be clear. what you're saying it would have been okay to have everything freeze up, no banks fund or collateralize -- >> most of what they did was the same thing. papering up a situation in the darkest of times where they are going to claim that the credit crisis is fixed and over as the current administration does many times. >> i don't think they are doing that, rick. if you heard what geithner said,

a long way from mission accomplished, rick. >> what did you hear? >> did you have a bad weekend, rick? >> i did. >> why? >> you know why i had a bad weekend. >> chicago lost. >> one year ago today i could see the philosophical issues of those who lead us isn't in lock step with those who put them there and probably that will change. >> rick, were you in washington at some of the demonstrations s this weekend? >> what demonstrations? i watched network news. i didn't see any. what demonstrations are you talking about? >> the one in minneapolis, they had 1400 people. >> that one. i heard there were 300 protesters outside. i didn't see them on the news. did you? >> so i guess you weren't there. >> okay, steve. >> rick, good seeing you as always. a pleasure to chat with. >> yes. >> i like it. >> joe, is there any other -- >> let's say i wipe out everything i said before. i know we've got to go. anybody else that said we've got to let it drop and fall.

did i miss anybody? >> journalists didn't say that this morning.ó the journal said this morning they should clarify. they don't say they shouldn't have done it, the journal editorial page. >> like he said, that's not necessarily what he was saying. he was saying there were many things that could be done. it is possible, what if you just did the fdic guarantee of deposits. if you did that and commercial paper. >> you still don't have banks lending to each other. the whole financial banking system is one where you don't have to have the same amount of money on hand that you have to lend. you borrowed reserves. >> the idea of letting the system find its own level is a risk that the world couldn't afford to take. so i mean, it's silly to even talk about. >> john harwood is going to sit down with the president later on today. you can catch their presentation. special presentation, one year later the week this shook the world, age of 10:00 p.m.

eastern. >> coming up, bring rick back? no, probably not. the month that shook the world, former fed governor larry myron how the central bank handled the fall of lehman and the rest of those too big to fail companies. "squawk box" will be right back. ♪ on this endless ocean

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we are examining the financial crisis a year after lehman brothers the nation's fourth largest investment bank collapsed. former fed governor larry meyers is vice-chairman of macroeconomic advisors and we just had a spirited debate, governor. that was about let's say nothing had been done. would the worse case scenario in your view have occurred? >> of course we'll never know for sure. the likelihood was too great just to sit back and do nothing. we were in the risk of a total financial breakdown with catastrophic consequences for the economy. it seems to me at that point there was absolutely no choice to intervene aggressively as the fed and ultimately the treasury did. >> what if we did, fdic covers everything and commercial paper guarantees, that's all we did and let the weak players fell. the counter-party risk would have taken -- it would have come out somewhere else, i guess.

>> you're saying the weak players fail. well, after lehman, if there hadn't been intervention elsewhere, there have been a cascade of the weakest financial institution, the vultures were swarming. if the fed didn't draw the line at lehman brothers, that was the last chance. the point here going institution to institution, trying to let the markets decide to lived and who died was never going to be a solution. a systemic approach, which we ultimately took, capital liesing the banking system and assuring no financial institution would fail. >> wouldn't you like to run a big bank now? if nothing was going to change, wouldn't you like to run a big bank, hieads i win, tails you

lose. >> there are always consequences. it encourages risk taking which can increase the likelihood of a future crisis. what you do is deal with the real risks, potential real hazard immediately and later settles, earlier -- >> we're doing health care, we're not doing that. >> that's up to the congress to decide whether it wants to move back or move ahead with regulatory reform. >> our guest host thinks there's plenty of regulations, just not enough regulators, it's not enforced enough. did they add on too many things where it's not politically  feasible? what's the most important thing we need to do, figure out how the resolution how to wind things down? >> i don't think so. i think we still don't know how to resolve institutions that are

too big and too interconnected to fail. now, it's true reform tries to move in that direction, but the most important parts of what's coming is much tougher capital standards, tough liquidity standards, less leverage and reducing the risk that there will be another repeat. i certainly think that a systematic, systemic regulator is a good idea. we should note institutions that fail were outside of the regulatory reach of the federal reserve. once you criticizes the federal reserve all you want for its failures but the institutions that collapsed were outside their reach. >> where -- i guess i'm wondering whether or not you think any sitting congressman, given all the phone calls and e-mails and letters they are getting these days about health care, whether or not you think any of them at this point will be willing to go out on a limb

for anything regarding financial regulation that the president proposes? >> well, now you get into the realm of politics. want me to go there? i'm happy to go there. whatever the democrats propose, republicans will oppose. that's what we know.. the only way we can get any legislation through is to have the democrats agree and push it through. i think we know that. >> that seems to be the running dynamic in congress, get it done. get it done while you can. >> yeah. we were talking earlier about what, you kn what, you know, probably be there to dodge a bullet. could there be something we don't know about down the road at this point? if not i'll have to say we're better off now than we were, a lot of people say we're more vulnerable. >> well, i think as a general rule you can never imagine the

force of the next financial crisis. so what you do is try to reduce the likelihood that it comes at the same place. so you know, i think you've got to keep in mind here this was a once in 75 year crisis. there's going to be i said, more capital, less leverage, et cetera, so we come out of this, it's certainly clear that it's much less likely, we can talk about all the regulations, et cetera, that's going to be put on the higher capital standards. but the greater risk averse, the less reliance on internal risk models, i think that it's unlikely. now, we haven't gotten ourselves -- it's not time to sound the all clear here. there's another round of significant losses coming to banks. it's been pointed out today, commercial real estate is the next shoe to drop. it's going to increase the risk of bank failures of small and 

medium-sized regional banks.s. that's where we are. >> all right. appreciate it, all your insight and analysis. former fed governor larry meyer. deal making with our guest host peter cohen. we'll find out where he's been shopping lately. - ( classical music playing throughout ) - wireless can bring even more freedom to the freest country on earth. so why should you be penalized for talking to someone, just because they're on another network. shouldn't you be able to call any mobile... on any network, at any time? it's a free country. knock yourself out. announcer: introducing the revolutionary any mobile, anytime. now on the sprint network you're free to call 250 million mobile phones nationwide without worrying about the meter running. only from sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com.

multi-billion dollar energy deal today, ge energy and hin die signing an ord we're the kuwait for energy and electricity. thank you. >> thank you, ge. >> thank you, kuwait. >> thank you, kuwait. let's continue our conversation with peter cohen who can bring us up to speed with this deal with cowen which is just a few weeks away from being done? >> perhaps six weeks away. we signed an agreement last june to merge ourselves as a private company into a public company, cowen and company. we developed a view and have the view that there's going to be enormous amount of capital

market transactions, financing of small/medium size companies. that's a space that's been abandoned by the large firms. they're not really equipped to handle it. and there's a void that we see an opportunity to fill. and cowen is a very unique franchise. they have extraordinary research capability and some of the most important areas like health care and technology.. they're also very good in aerospace, retailing. they have very good sales in trade business and very good banking franchise. we come out of it with combined capital.l. it makes us both stronger and importantly for our firm, our capital becomes permanent. >> right. being public doesn't hurt anymore. >> yeah. i think -- right. there was a period of being private seems to be the way to go, but i think being public today is going to be a great advantage, you know, for those companies that want to take advantage of all of the

restructuring that's going to go on which will go on for years. >> joe? >> all right. next, we will have a final round with our guest host peter cohen. one more break in. first, check out gold prices this morning. i think they're back right around 1,000, aren't they? just below. 40 cents below. "squawk box" will be right back. natural gas is a cleaner burning fuel, yet a lot of natural gas has impurities like co2 in it. controlled freeze zone is a new technology... being developed by exxonmobil... to remove the co2 from the natural gas... so we can safely store it... where it won't get into the atmosphere. exxonmobil is spending more than 100 million dollars... to build a plant that will demonstrate this process. i'm very optimistic about it... because this technology could be used... to reduce greenhouse gas emissions significantly. ♪

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