disaster could be on their way out. i'll have that story and not business not have a more world news for you at the top of the hour in the meantime of course there's always a website about steve w. dot com i was self a good day. i . am not proud of and they will not succeed in dividing us so that i'll not succeed in taking the people off the streets because we're tired of this dictatorship. taking the stand global news that matters d. w. made for mines. a museum a school me to just let see the unsub new sounds so cold shake hands not good is kind of side by.

any play put big dreams on the big screen. the movie magazine on the dummy. this weekend marks the tenth anniversary of the collapse of lehman brothers it's the largest bankruptcy filing in u.s. history that sent shock waves around the world. come to do business on september fifteenth two thousand and eight as the fourth biggest investment bank in the world filed for bankruptcy the event sent everyone from spanish property owners to american investors running for cover of the most needed impact was felt

by lehman brothers employees twenty five thousand of them found themselves out of work overnight the bank was a giant but not too big to fail lehman had become so deeply involved in mortgage origination that it had effectively become a real estate hedge fund disguised as an investment bank washington wasn't willing to save the bank lehman brothers remains the largest bankruptcy filing in u.s. history. so here's a look now back at the events that led to the worst global financial crisis since world war two. mortgages seemingly for anybody who wanted one. many u.s. banks seemed willing to lend to anyone regardless of whether they had the means to repay those loans things came to a head in the spring of two thousand and seven when record numbers of people defaulted on those loans. at the beginning of april new century a real estate investment trust filed for bankruptcy it had been

a major issue or of subprime mortgages. next to face the music was german corporate bank i k b on july twenty seventh after running into funding problems it received a bailout from the german state development bank k f w. then on august ninth the mortgage crisis hit financial markets as more people defaulted on their loans banks and investors began losing money banks lost trust in each other worried that they wouldn't get their money back this fear was reflected in a rise in interbank lending rates. on the twenty first of january two thousand and eight germany's stock exchange lost seven percent in value the biggest drop since nine eleven in the days afterwards the u.s. fed lowered interest rates again. two months later on march sixteenth bear stearns was bought by rival j.p. morgan with cash barred from the fed it had been the fifth largest investment bank

in the united states. on september sixth the federal takeover of us government sponsored mortgage lenders fannie mae and freddie mac. . a little over a week later another blow when u.s. investment bank lehman brothers filed for bankruptcy. the u.s. government chose not to step in. stocks around the world crashed as banks lost even more confidence in each other. the following month german chancellor under macko and then finance minister patched work had this message for savers. those are telling savers that their deposits are safe because and an attempt to avoid a run on the banks. what began as a u.s. subprime mortgage crisis soon had an effect on the global economy trade slowed down dramatically the result in the year two thousand and nine the u.s.

economy contracted by almost three percent and the german economy shrunk by five percent. that brings back memories certainly from my colleague who was a correspondent at the time tell me what was it like on that there a day well it was certainly shocking that particular morning and even in that context oft times at the time that it was very tense because of course there was problems before lehman's bankruptcy but still nobody saw that coming especially with the government not stepping in and people suddenly packing their belongings and schlepping those boxes out of the tower. that was a shock especially when you work on wall street it almost feels like you're part of a family part of a big community bankers financial analysts journalists you know each other so you have kind of a personal relationship and all these people you see them losing their jobs it was terrible news at first but then of course the picture changed a little bit as more developments came out and your heard about the lehman brothers and other mortgage lenders practices lending practices and you know they were not

so innocent they were not just victims of something bigger but they were really in gauging in highly questionable business practices and of course they had to pay the price at some point ok so you being right in the thick of it all how did those developments back then impact your view of the financial life well generally i would think i have a darker view of banking in general because losses in the sense of thora t. its banks used to stand for something and maybe coming from europe too you know that banks can be rather strict and they're well regulated and you don't get away with anything and here the banks got away with too much and they were pushing people into taking risks they couldn't shoulder so of course their behavior was highly immoral and that changed my view of course of the entire sector all right and probably not just yours they're from d.w. business thank you so much. well in the aftermath of the lehman brothers

collapse and the subsequent global financial crisis is the then new u.s. administration implemented measures known as the dot frank wall street reform and consumer protection act it was signed into law by former u.s. president barack obama in july two thousand and ten since may two thousand and eighteen many features of those regulations are scrapped. how much adversity can a bank withstand that's the question stress tests were designed to answer they were a key feature of the dodd frank act which was signed into law in two thousand and ten each year the federal reserve assesses how a banks can cope with unfavorable economic scenarios like a stock market crash or a long term recession. a financial institution that feels is required to increase its capital reserves. us president donald trump has long been a critic of dodd frank he maintains that the regulation goes too far these reforms are back in may he scrap some of the rules for small and medium lenders. the

legislation i'm signing today rolls back to crippling dodd frank regulations that are crushing community banks and credit unions nationwide they were in such trouble one size fits all those rules just don't work. before trump's rollback all banks that had fifty billion dollars of capital had to take part in stress tests. under the new measure only banks that have two hundred fifty billion dollars or more are subject to the tests but many on wall street want the deregulation to go further they want more flexibility and in other words the freedom to take more risks critics say easing restrictions on banks could prompt the next financial crisis. and for more i'm joined by john jordan u.s. economist and advisor to multiple presidential candidates including the current us administration good to have you with us someplace tell me how healthy is the u.s.

banking system ten years on from the crisis. well the u.s. banking system is much healthier as is the u.s. economy the next threat is going to come from a very different quarter and it's going to it's a very different nature than what struck the world in two thousand and eight it has to do with publicly held debt both in the united states and europe and that is the next mid-term threat to the world economy and the results could be every bit as catastrophic and perhaps even more so than what happened in two thousand and eight well it's it's good that you mention that because the global data has the deed ballooned over the past decade largely of course thanks to low interest rates old measures that central banks around the world took following the last crisis u.s. debt stood at more than twenty one trillion dollars this summer which is a record when is the next bubble going to the. well it's hard to

tell but let's that's hard to know exactly but let's look at some of the forces involved since two thousand and eight in absolute terms as well as a percentage of g.d.p. u.s. public health public debt has doubled it is now north of one hundred percent of our global gross domestic product here in europe the picture is a little more complicated the average is about eighty three percent debt to g.d.p. but you have some e.u. members including big ones like spain and france that are one hundred or more and so obviously you have the basket cases like italy and greece so what sets this off eventually the bond markets are going to get wise to this and it's possible that a contagion begins in the united states or it begins in europe and spreads worldwide and policy of the central bank certainly in the united states has mishandled this badly in the last ten years as did the previous administration with its anti growth high tax redistribution us policies aid and abet it by janet yellen

in the federal reserve who kept interest rates artificially low and was very slow to unwind a lot of the extraordinary liquidity measures otherwise known as q e one two and three inside the united states so now central banks are woefully unequipped to deal with that next crisis and because interest rates are still very very low bed that this nobody but surely rising let me just bring it to another possible threats to the global system financial regulation known as the dutch frank act which was put in place following the two thousand and eight crisis is now rolled back under the current administration doesn't that open the door to new let's call it reckless behavior. you know it was rolled back largely for smaller banks inside the united states who really the cost of compliance for dodd frank was prohibitive for smaller of smaller to mid-size banks and basically all that was functionally was

a protection scheme for big banks who could afford the compliance the compliance costs involved but again the you know it's amazing how we worry about shutting the barn door when the cows already out the real threat in the near long term is is is publicly held debt and i stick by that and it's scary and it's of and it really scares me ok well that's worrying then don't join us economist and. advisor to the current u.s. administration thank you so much for your time my pleasure. and that's all the time we have on this a business brief for you thanks for watching. the mob.

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