. >> lehman brothers post event on steroids. >> meaning what? >> meaning what the buck will be broken in money market funds. americans will rush to get cash and put it under their mattresses. major corporations will be unable to borrow. the stock market will crash. and quite likely, the basic mechanis of payments that keep the economy going will break down. >> rose: we conclude with george stephanopolous of good morning erica on the political implications of the debt limitation talks. >> in the end, i think, even if the public, if we go in default, even if the pubc blames repuicans more the president bears more responsibility and has to deal with the consequences. >> rose: the economic consequences of the debt limit talks with george stephanopolous when we continue. funding is provided by the following: we can all root for.a hero who beats the odds and comes out on top. but this isn't just a hollywood storyline. it's happening every day, all across america. every time a storefront opens. or the midnight oil is burned. or when someone chases a dr

i would add in the absence of an actual bond default you're not looking at lehman. the real chaos is in the economy. in people who aren't getting their payments and really significant negative shock to the economy rather than in the markets. >> the other thing, if i could add there, jay, is what we don't know is the unknown unknown. so there are so many dominoes in the world economy that are connected to u.s. treasuries and that are built around a aaa rating for u.s. treasuries and we can't predict the link in the global chain to could break, should the u.s. default. >> should someone who's at home and watching this play itself out, the news is full of reports of what's going on behind closed doors, whether it's the government preparing. whether it's the ratings folks preparing. whether it's wall street preparing. what about a typical american? any level of preparation that they should be undertaking or is this completely out of their hands? jay, you start, and then cristea, follow up. >> nothing comes to mind. i wouldn't change my investment to things like that. th

it is not as unusual as what happened with lehman brothers. but the europeans could do anything. >> in a better scenario, you will get the risk over with. >> susie: another thing worrying investors is the whole job situation. we have the june employment report coming out friday. the consensus is 115,000 jobs were created last month. does that sound about right for you? how does the job market look to you these days? >> well, it soublds about right. susie, if you're looking for a job t feels like recession, because unemployment is really high. we have just not come out of it. we'd like to be seeing 200,000. 300,000 jobs created every month for a couple of years to really start pulling us out of this. i do think the second half of the year ought to be bettered the affects go by. >> household debt. and government debt. there's an overhang on the economy. it's going to be a long, halting recovery. >> susie: thank you for coming on the program. we really appreciate it. >> my pleasure. >> susie: we've been speaking with kenneth rogoff, proves of eco

people talk about lehman brothers and this being like lehman brothers. actually this is 100 times more complex and potentially lethal. lehman brothers was a relatively small investment bank that had a big balance sheet. here talking about the full faith and credit of the united states of america, the holder of the reserve currency of the world. who knows what this could mean. >> and we want to give issue results of some new polls out. it seems that house republicans who are refusing to consider revenue increases as part of a debt ceiling deal are out of step with most americans. that's the finding of two new polls and that could spell rubl for the party in elections next year. one poll finds that 67% of respondents favor higher taxes on the rich and also on companies, and a gallup poll shows that only 20% favor a deal that includes only spending cuts. so pretty interesting there. >>> still to come on "world business today" -- >> i think they've injected themselves into a situation that's beyond their comprehension. >> the credit ratings agency are findin

>> the new york fed and the sec were living at lehman brothers in the last few months. do we understand the risks that arise in this kind of leverage? do we know who will be impacted? we don't know. there is no determination on this. these risks are huge on the impact of the rest of the economy and they come from excess of leverage particularly in our biggest financial institutions. >> there are capital structures that are in place right now. we have not gotten into the transition period we should be considering but what kind of time. do you think we should be looking at as far as the transition pace of tax reform? >> that would be determined in part by the kind of change you make and whether it is incremental or whether it is more comprehensive. even incremental change needs some transition period. >> this mainly has to do with debt and the incentives for increased debt and the tax code today. >> it depends on how radical you want to be. if the changes are incremental, they could be phased in more quickly but radical changes would take a longer time. >> benigno back to

a lehman type situation. jay talked about this in a great piece he published today where he talked about the other big thing that has it happen in august is that the u.s. has to roll over a lot of its debt. the question is, would the borrowing cost go up? would creditors be willing to lend money to the u.s. government knowing that it's not paying all of its obligations? the answer is, probably yes. but probably at a higher cost. and again, the consequences for the entire financial system, not just in the u.s. but in the whole global economy are really unpredictable. i do think that looking back to what happened on lehman and the financial crisis and global recession that that caused, it is not extreme. >> jay powell, interest rates, presumably they would go up in the doomsday scenario? >> yes, i think kristy said it demand goes down, rates go up and that could play out at a consumer rates, mortgage rates, that sort of thing. by add, in the instance of default, i don't think you are looking at lehman. the chao

lehman brothers with a $600 billion company. the u.s. treasury market is $14 trillion.g a game of russian roulette with the u.s. treasury, the risk is much worse than what we faced with lehman brothers. it is serious. a default is unthinkable. the downgrade would be damaging to the economy. as you know, piers, the american people are suffering with 9.2% unemployment. if it goes up from here, it will be harder on the families and communities. >> and also, i noticed today that the chinese are getting increasingly angry with the behavior in washington. they own a lot of american debt. they are making a point this is having a huge impact on the global economy. the longer this impasse goes on, the more damage to the world's finances. >> that is exactly right. that is because for decaddecadee dollar has been the global economy. the risk free bonds are the standard. so now we are playing a game of russian roulette jeopardizing the gold standard. it will not effect america, but effect every country around the world. once confidence in the united states is lost, it may take a lo

in 2008 it was three cents on lehman. in the primary reserve fund, excuse me.and even though eventually shareholders received 99 cents. our approach is different. our approach is to say that there is a cushion, there's an amount of money that's appropriate to set aside, and it is enough to, for shareholders to understand what's happening, it's enough to over a period of a ten-day crisis, we've got a chart in our attachment that explains what happens over a ten-day crisis assuming underlying securities, and 60% of the fund leaves, you still have a dollar left for your shareholders. so with a relatively small buffer, what you really do is buy time, you buy a chance for the markets to resettle, for investors to really understand what's happening. and, ultimately, if a board, a mutual fund board and the adviser conclude that they've got a product that's no longer viable, it should be okay again for a money market fund to shutter its doors and say we're going to return our money to you, and the rest of the system can continue to operate. >> if i could just add one p

you know, people talk about lehman brothers and this being like lehman brothers, actually, this is aed times more complex and lethal. lehman brothers was a relatively small investment bank that had a big balance sheet. here you talk about the full faith and credit of the united states of america, the holder of the reserve currency of the world. >> fa rereed zakaria, thanks. >> pleasure. >>> still ahead, how you'd be affected by the u.s. government if the u.s. government actually defaulted on its debts. next moammar gadhafi has something new to say. e dry, damr a whole new life! with aveeno nourish plus moisturize. active naturals wheat formulas target and help repair damage in just 3 washes. for softer, stronger... ... hair with life. [ female announcer ] nourish plus. only from aveeno. morning starts with arthritis pain... that's two pills before the first bell. [ bell rings ] it's time for recess... and more pills. afternoon art starts and so does her knee pain, that's two more pills. almost done, but hang on... her doctor recommended aleve because it can relieve pain all day with

viable parts of lehman afloat and available for sale.his sort of sounds to me like they would have done what treasury refused to do, namely, bail out lehman. now, since i have just argued the bailouts may be better than meltdowns, i guess for me, this version of the fdic resolution processes are kind of disguised bailout is preferable which is one that causes the whole system to go down. but i think there's some questions about whether, you know -- we, the public and the congress, really are understanding it, if that's what it is, and it also it seems to me to put the fdic in this role. they are the caretaker of insured deposits, not the curator of financial markets, and i do not see how fdic would have the resources or authority to respond effectively to a future situation where multiple, very large and maybe small institutions were failing and global markets were in turmoil. now, maybe this is just a failure of my understanding. but as a representative citizen, i would like to feel more confident about this new resolution process. my s

brothers, let lehman brothers fail, take it in stride.ext it was pandemonium. >> we still got greece that we're worried about. lot of uncertainties in the global international markets. all of that is not good. >> hey, early in the morning, going out to get a bacon sandwi sandwich, what's going on with bacon. >> reports that bacon prices are going to go up. a couple of reasons, ali, it's the blt season, you got huge increases in grain prices this year which means, farmers who work on kind of a longer lead time, they were watching those prices go up. hog herds are up about 1% this summer over last year. not a lot. and you also got some heat -- these pictures are making my mouth water. sweltering heat can affect the size of the hog herd. there you go. >> christine, i have known you for a long time. you love bacon and most people don't know about your roots as a commodity reporter. >> i covered pork belly futures. and as a consumer, i will say one of my new year's resolution was to eat bacon only once a day. >> christine, i'll see you in 25 m

>> i made a point above the lehman brothers leverage. living with lehman's last six months, i think they knew what the leverage was, and i am sure they could have told you what the accepted leverage was, if that was the framework. taking on the question, which is do we understand the risks that arise from this kind of leverage, do we know who will be impacted, all of the small businesses and small community banks will be devastated the next time there was a problem, or italy were to run into problems today, no, we do not know. the panel, created from this purpose, it does not have this in any precise way. these risks are huge and impact their rest of the economy. they come directly and immediately from excess leverage. >> maybe starting with you, ms. olson, based on the current tax code as it exists, we have really not gotten into the transition period for making these kinds of changes, but what do you think we should realistically be looking at in terms of tax reform? >> that would be determinedly part of the change that you make and wh

thank god the course ended in may of 2008 before lehman brothers went bankrupt.ughter] not a single principle of finance that i taught was not violated by the people who were running these major constitutions. it was incredible. just one comment here and then a question. the course announcement was posted on the website of gw in december of 2007. this was an undergarage watt course -- undergraduate court. i was amazed. i got letters from three staffers at the federal reserve who were going to take this course. i couldn't believe it because there's no way they could get an mba degree, so clearly they knew something was brewing there, but looking at your book, i looked at references to goldman sachs. they lost every shady deal exposed -- for example, ripping off gadhafi i read in the "wall street journal," you know -- [laughter] someone made a joke that if we could get the major investment banks in china and russia and japan, we could cut our defense budget by $500 billion a year -- [laughter] there's not a single economy in the world they couldn't bring to its kne

remember what happened with the lehman brothers. the bush administration said, let them go.t won't matter that hch. it mattered profoundly. we let the united states full faith in credit go. i this that i could have huge impacts resulting in the loss of hundreds of billions of dollars in financial value and millions of jobs. let's not forget when we talk about standing up for the middle class and working people, we want to protect their jobs. >> all right, bob shrum, thanks for joining me this evening. thanks so much. >> thanks, al. great to he sue. >> we look to be joined by the director of the president's national economic council at the white house. thank you so much for your time. >>> bill clinton makes an explosive claim about republicans trying to disenfranchise democratic votes and he is a hundred percent right. >>> and a question of justice. casey anthony released from jail next week. is that right? stay with us. a network [ male announcer] this...is the network -- a network of possibilities. in here, the planned combination of at&t and t-mobile would deliver our next

treasuries, the risk is much worse than what we faced with lehman brothers. it very serious thing.le, even a downgraded u.s. that would also be very damaging to our economy and to confidence. as you know, the american people are still suffering with 9.2% unemployment. if it goes up from here, it will be that much harder on our families and communities. >> also, i noticed today the chinese are getting increasingly, i think, angry with the behavior in washington. they are making the point that this is having a huge impact on a global economy. not only just about the american economy. the longer this impasse goes on the more damage to the world's finances. >> the day is exactly right. that is because for decades, the dollar has been the reserve currency for the whole economy and the u.s. treasury bonds have the and the risk free gold standard that every other investment around the world as measured against. now we are playing a game of russian roulette, jeopardize in that gold standard. you are exactly right. it is not just going to affect america, it can affect every country around t

to the day -- the sunday when it was announced by a lot of smart people here in new york city that lehman brothers was going to be allowed to collapse because the market would be able to absorb that. guess what happened? global capital markets and credit markets froze instantly. nobody really knows how serious or how not serious it's going to be. it's quite a risk. >> it certainly could be a progression of from bad to worse. if august 3rd comes and they haven't raised the debt ceiling, it's plausible to say not too much will change. geithner will have to make tough decisions, decisions about who not to pay. i disagree with the notion that we're going to save money if they just prioritize spending. the services have been provided -- >> this is the tv you already bought, this is the house you bought -- it's two separate discussions, right, ken? i think there's a very valid -- i think most americans would agree, very valid discussion to be had about holding on to spending, controlling spending and ideological differences. we're talking about bills we have incurred. >> that's exactly right, a

lehman brothers is the only example of a major financial institution in a developed country that was allowed to fail. the evidence clearly puts this to rest the notion that we did not deal nottoo big to fail. there are a couple of areas where i see the attack coming. my republican colleagues, on like climate change and health care, don't want to take this one had on. it is still too popular. coming to the defense of unrestricted derivative trading is not a popular cause. they are coming at it sideways. they want to use the deficit as an excuse for under-funding the sec and cftc. they have a small percentage of what we're wasting trying to build infrastructure in afghanistan. the notion that the $90 million more that we need for the cftc because of the deficit is nonsense. they want to turn the sec into a profit center. you have a catch-22. first denied the sec and the cftc adequate funding. they in turn will not be able to deal with the rulemaking requirements that they have. because they have not been able to move as quickly on the rolls, the rules have to be abolished. that is some

this is a lot bigger than lehman brothers collapsing. david, you have been in the white house. you understand how people think. why are some people so concerned, particularly those who are concerned with scoring political points, why is it going to have a broader and more devastating effect to not raise this credit limit? >> i think ultimately the republicans -- at least i hope -- will agree to go and lift the debt ceiling. certainly speaker boehner has agreed to that. mitch mcconnell has over on the senate side. but there is a strong sentiment among republicans that the cuts that are on the table now are -- we had great, big budget cuts. when you broke it down, it didn't turn out to be much. there's a strong feeling that what they're being asked to do is to agree to cuts that are actually quite modest. and then increase taxes. and in effect to pay for the welfare state, a bloated welfare state. they would like to shrink the size of the welfare state. this is ultimately a conversation, a debate, a food fight over how big the american government should be. that's why they're not

prevent another global financial crisis like the one in 2008, which was triggered by the collapse of lehman brothers. three groups say they aim to gradually raise their capital ratios by increasing profits. >>> that is all for me here in business. back it katherine. >> thanks very much. >>> engineers continue to struggle with the decontamination system at the crippled new hampshire plant. tokyo electric power company admits the system is still working below target. tepco says last week it was well below the target. this is the third straight week it has failed to meet the target. the decontamination system's capacity to remove radio active materials is 30% lower than particularly planned. the cause of the latest problem is still unknown. >>> since the crisis began in march, water used to cool reactors has become radio active and is accumulating in basements of the buildings tech co-put in a system to to decontaminate water and cool the reactors. >>> failing to confirm the whereabouts of 198 workers who are believed to have worked at plant since the nuclear disaster started. criticizing the

what if lehman brothers had been lehman brothers and sisters?[laughter] yeah, suddenly we can see thing differently, and we can see there may be alternative solutions. wear the shirt. this became a metaphor for me when i was here with planned parenthood in arizona, and we had a very small clinic in casa grande. i was visiting with the staff there one day, and one of the young women said to me -- she had on her planned parenthood shirt that the staff all wore in the health centers -- and she said, you know, every day before i go home i have to make a conscious decision, am i going to wear this shirt when i go home? because if i have to stop to get milk at the grocery store, do i want to have to engage in a conversation with the woman at the checkout count about what i do and why i do it? and i thought for a minute, and i said, you know,s that is exactly the time it's most important to wear the shirt. and wearing the shirt of our convictions is one of the most singularly important and effective leadership skills. when we think back to who are the

mortgage-backed securities during the financial crisis, lehman brothers, these were all highly rated instruments by the ratings agencies. until the moment when investors realized they were wrong. >> they were highly rated until they weren't. >> exactly. so what we have to worry about, i think as mary said, what investors think and are they satisfied that the u.s. is going to pay its debts and it's still the greatest credit in the world and a judgment much bigger and important than the ratings agency said. >> this is a structural problem, it's not something you paper over. >> that's how we like greece. >> we're not like greece yet and as kim said this is going to take time. the question the markets will be looking at. is there any capacity for the political system to face the structural problem? and i think that will depend a lot how this is handled politically by the republicans. >> steve, treasury secretary geithner should be right in the middle of this. is he? >> well, you know, i think he's acted incredibly irresponsibly, stuart, after all what has he been doing the last couple of

can turn extremely quickly and we could be seeing the type of credit crisis we saw in 2008 after lehman brothers collapsed. so it could be extraordinarily serious. but right now we're still holding our breath. >> do the details of the deal matter at this stage or is it just a question of getting something on the table? >> well, yes, the details do matter in short. we have seen president obama wants a large $2.4 trillion deal. he wants to be able to have enough money in the coffers to see how his term and beyond the 2012 election cycle. but also we have seen the racing agencies weighed in on this. standard & poors for example is leaving enough room to downgrade american debt and credit rating here no matter what happens because fundamentally they say that they are word yoied -- worried about how politicians are dealing with this whole issue of dealing with raising the debt ceiling and also trying to bring a government spending and taxation into balance. >> caroline heckar in new york. >>> you're watching bbc world news america. still to come on tonight's program -- helping the people of

no to get since lehman every year according to recent poll in russia forever single man over thirty there are dozens of single women still on the lookout for that prince who is search for true love becoming statistically challenging no wonder always a wondering a brute and then from russia with love is to go in strong. regional tea most going. brian may is best now as a guitarist and songwriter for a legendary rock band queen but he is also an astrophysicist and the chancellor of a british university a little later this hour we asked dr may what makes science and music sing and harmony. it's a hard question. yeah obviously there are mathematical things in music but ironically i think the most important things in music having instinctive things so i don't quite have it works out except maybe he was your parents but yes i love pure science and i love music and they're not the same sure. certainly throughout history there has to have been connections and people who were immersed in both of them you know from beginning to divinity to. patrick more you know. it seems to be that way maybe it's

making such an error and actually it's very interesting because this is a very nice contrast to the lehman situation i think there was an appetite rather than to say you know it's good to have a big investment bank fail and. something happened but i don't think this is the case right now and probably this is the good news and it's. going to you are now and where do you think the u.s. is going in its economy and we look at volatility in the world because you know we're looking at the chinese are watching very carefully they don't want to see any kind of major breakdown in the in the u.s. budgetary system nor does anyone else in the world where you think the u.s. economy is going. well we don't expect you notice any. surprises on the positive side you know some unexpected jump in the. employment or the growth but. we think it's going to be pretty nice you know economy is going to expand moderately and jobs will grow and you know the budget deficit will be reduced just a question of how much. as we all heard if it was not would be not enough you know to keep the economy going it would be what

greece in the berlin parliament and why these huge loans to basic simply because they very much fear lehman moment in the french banks which we need to the explosion of the spanish debt situation and then do a complete collapse of the euro and then that he considers you know the dutch market will introduce a huge recession in germany now are great politicians run london recently trying to sell great assets far knock down prices how does selling off income producing assets restore the long term economic viability of grace it doesn't at all i mean don't you just give you a very brief example take the state lottery the national lottery of greece it produces four hundred million euros of dividends a year for the good state and they're now going to try to sell for nine hundred million now this is on the cream in a neg. since but so why are they doing it well firstly because they're being told to do it and then the question of course the guns why are they being told to told to do it because mrs merkel wants to throw some bones to have members of parliament saying look the good eggs are really sho

fairly pretty and very compassionate yet i'm still single and my odds of trying to nor to get since lehman every year according to recent poll here in russia forever single man over thirty there are dozens of single women still on the lookout for their prince with their wounds search for true love becoming statistically challenging no wonder these are wondering abroad and then from russia with love is to go in strong. regional shanty moscow. love it there or leave it maybe that's what life is all about rock legend brian may best known as a guitarist and songwriter for queen found himself waiting so aside prior to the death of freddie mercury and just a few minutes we asked ron what brought him back from the brink. what drops you killing yourself. i think what stopped me was the fact that i had children and people who depended on me and people who love me i would like to tell you that there was a glimmer of hope there but there wasn't at that time you know i remember driving and seeing the bridge and thinking i could do this you have to somehow get outside . and trust that you can come back

fairly pretty and very compassionate yet i'm still single and my old of trying the north to get since lehman every year according to recent poll in russia forever single man over thirty there are dozens of single women sit on the lookout for their prince their wounds search for true love becoming statistically challenging no wonder always a wondering a brute and the from russia with love mantra is to go in strong. regional tea moscow. what makes science and music sing in harmony brian may may have the answer best now as a guitarist and songwriter for a legendary rock band queen he's also an astrophysicist and the chancellor of a british university in just over an hour we asked dr may what lengths is to major passions. it's a hard question. yeah obviously there are mathematical things in music but ironically i think the most important things in the use of having instinctive things so i don't quite have it works out except maybe gives you a balance but yes i love pure science and i love music and they're not the same sure but. certainly throughout history there have been connections and people

no to get since lehman every year according to recent poll here in russia forever a single man with thirty thousand of single women see on the lookout for that premiss who is a true love becoming statistically challenging no wonder always no one during a brood and from russia. is to go in strong. reason. most. about why twenty years ago one of the world's a legendary rock bands all but ground to hold the death of queen's flamboyant front man freddie mercury was undoubtedly a pivotal moment but guitarist and songwriter brian may tells us later in the show that the show did go on and freddie's influence has never faded. it's like a family member you lose them but you don't quite lose them because you take them with me. and we were so long together. you get that closeness from somebody particularly in a creative environment i don't think fame there's anything to do with it or even success but in the creative environment you learn to to know what somebody else might be thinking you might not always be right but you have a feeling so i still feel that way and roger does as well in a particularl

thank god the course ended in may of 2008, before lehman brothers went bankrupt. [laughter] not a single principle of finance that i taught wasn't violated by the people who were running these major institutions. it was incredible. let me just make one comment here and then a question. the course announcement was posted on the web site of gw in december of '07. this was an undergraduate course. i was amazed. i got letters from three staffers at the federal reserve who wanted to take this undergraduate course. i couldn't believe it because there's no way they could get an mba degree. so, clearly, they knew something was brewing there. but looking at your book, i looked at references to goldman sachs, and here's my question. behind almost every shady deal that has been exposed, for example, they ripped off gadhafi i was read anything the wheat journal -- reading in "the wall street journal." [laughter] you know, a colleague of mine made a joke that if we could get the major investment banking in china -- banks in china and russia and japan, we could cut our defense

finally we brought down bear stearns and the lehman brothers. it's only then like the citigroups and washington mutuals and bank of americas, you know, saw their very lives threatened and so you call this introduction by saying that the penalty we're going to talk about is ask the question with all our attention focused nowadays in the regulatory arena on the banking system whatever happened to the shadow banking system? you know, where all the problems began? and you can sort of think of this in two ways, at least i think of it in two ways. there's two opposing forces at work. the -- the immediate force is the flight of safety force which basically is that in the aftermath of the crisis, the weakest have all collapsed. the ones who are most associated with the excesses that brought on the crisis. they're gone. they're gone or they have been bought out or changing their charter. and if that's the case then we don't really to have worry about a shadow banking system because it basically imlated itself. there's another way as time goes on memories