s&p gave lehman brothers an a-rating, right up to the month that lehman brothers went bankrupt. s&p was as wrong about lehman brothers as it is wrong about the united states of america. congressional investigators looking into the causes of the financial collapse found this instant message exchange between s&p employees. "that deal is ridiculous. i know, the model doesn't capture half the risk. we shouldn't be rating it. we rate every deal. it could be structured by cows and we would rate it." one s&p senior manager put this in an e-mail to another senior manager. "lord help our -- scam. this has to be the stupidest place i have worked at." s&p is the stupidest place everyone at s&p has ever worked at, and these two, john chambers and david bearce have now taken their places as the worst political pundits in our midst. >>> joining me now, professor at berkly, robert reich, also the author of "after shock," which is in paperback, thanks so much for joining me tonight, robert. >> good evening, lawrence. >> the standard & poor's rating, as i read it, is nothing but a political adju

this isn't lehman brothers. then we had jpmorgan chase's ceo jamie dime on coming out everyone needs to relax. you saw the market move up and down a little bit. this market, look at that chart, that's one day's chart. look at the volatility there. people sell off. then bargain hunters come in and buy and then those who are worried about the market sell out. there's very little confidence in this market right now. as for whether or not banks are likely to fail, it's hard to say. premature right now. what we don't have that we had in 2008 was a credit crisis where banks in trouble couldn't even borrow money from other banks. we don't have that right now. we have a lot of money. nobody wants to borrow it and use it. different situation, piers. >> leigh gallagher, let's talk politics here. interestingly in britain where riots have been unfolding in the last four nights, all major politicians came back from their vacations, they were demanded back by the public and the media. i'm surprised given the scale of the vola

we tried very hard and we couldn't find a prop -- powers that worked to save lehman brothers. we tried. merrill lynch avoid failure because they were acquired by bank of america, its bank of america acquired lehman brothers it would of been worse because merrill lynch would gone down and would of been worse. aig was taken over under very tough terms, the ceo was replaced and essentially nationalized. we then had to have tried to -- have a treasury guarantee three. dollars trillion of money markets to avoid an implosion. when we were working to get tarp -- wamu essentially failed and was acquired by j.p. morgan. what cobia was acquired while it was failing -- wachovia was acquired. and six european nations had to nationalize certain banks. so, we made a judgment that we had to do something so dramatic and move quickly. and we were tired with dealing sequentially with one failing this edition after another and dealing with it -- dealing with it at hoc basis. so we said, how do we do something that doesn't look like nationalization, doesn't have government control -- let's design

. >> tom: lehman brothers took a big step towards officially wrapping up its bankruptcy today. a federal judge gave lehman's creditors the green light to vote on the failed bank's $65 billion payback proposal. lehman filed for bankruptcy nearly three years ago. it was the biggest bankruptcy in u.s. history. since then, the estate has sold off portions of the firm's business and assets, trying to recover money for institutions around the world. >> susie: as we mentioned earlier, today's consumer confidence numbers show americans are as pessimistic now about the u.s. economy as they were in the middle of the great recession. but instead of feeling down, tonight's commentator thinks we should feel thankful. here's alfred edmond j.r., senior vice president and editor at large at "black enterprise." >> we're still struggling to recover from the worst recession of most of our lifetimes. the stock market is volatile, you've cut your operating budget to the bone, and it's been years since you've been able to give raises to even your most deserving employees, much less rehire those you'

the dow jones industrial average to fall more than 600 points since 2008 in the aftermath of the lehman shock. prices show no sign of bottoming out. they also say investors are eyeing changes in policy from the federal reserve's committee meeting on tuesday. the sharp drop in stock prices drove investors to gold and bonds. gold hit a record high of over $1700 an ounce. bonds from the u.s., italy, and spain also rose. the dollar fell to the middle 77 yen level on the new york foreign exchange as investors bought back the japanese currency to seek refuge in the perceived safety of the yen. >>> now, share prices in major european markets also dropped sharply on monday to their lowest level of the year. stocks were bought back earlier in the day as the european central bank promised to purchase italian and spanish bonds in an attempt to calm investor concern. sale orders increased following a sharp drop in prices on the new york stock market. european markets closed lower on friday. down 5% in frank further and 4.6% in paris. >>> tuesday marks the 66th anniversary of the atomic bombing of n

the dow jones industrial average to fall more than 600 points since 2008 in the aftermath of the lehman shock. prices show no sign of bottoming out. they also say investors are eyeing changes in policy from the federal reserve's committee meeting on tuesday. the sharp drop in stock prices drove investors to gold and bonds. gold hit a record high of over $1700 an ounce. bonds from the u.s., italy, and spain also rose. the dollar fell to the middle 77 yen level on the new york foreign exchange as investors bought back the japanese currency to seek refuge in the perceived safety of the yen. >>> now, share prices in major european markets also dropped sharply on monday to their lowest level of the year. stocks were bought back earlier in the day as the european central bank promised to purchase italian and spanish bonds in an attempt to calm investor concern. sale orders increased following a sharp drop in prices on the new york stock market. european markets closed lower on friday. down 5% in frank further and 4.6% in paris. >>> tuesday marks the 66th anniversary of the atomic bombing of n

brothers lehman brothers went bankrupt and the system worked it worked poorly which meant that we have to go back and we have to design better rules better bankruptcy rules the lehman brothers went through a bankruptcy process it was sold off it would have been difficult to do with a lot of banks but people would not have been starving in the streets it would have been really painful at the end of two thousand and eight it would've been. really painful in two thousand and nine but now towards the end or the middle towards the end of two thousand and eleven we would have been coming out of this and we would have been dragged through a really crappy economy for years and we're going to we're going to be on the next several years in a lot of painful situations you hear that freddie macas asking for another bailout . they are going to be bailed out no matter what their problems are the treasury department said unlimited bailouts to freddie mae and to fannie mae it's now over one hundred sixty billion dollars that's the largest bailout of any of the individual bailouts that the u.s. governm

. >> they haven't finished the lehman brothers investigation, that's all i can tell you and we're talking three years. i will say this, obviously the leak or whatever it was was curious, it's not going to-- they were shooting back at s & p, the government is-- >> for now they've left fitch and moody's off. >> i don't believe that. i believe they're involved. >> neil: s & p is the one that was reported. >> noi what was reported. i believe they're in it together and i will say this though, if were you going to tell me does anybody deserve to be investigated out of the 2008 financial crisis, it's s & p, moody's and fitch. >> neil: and that would put congress. >> listen, i've been very, i've always said it was a government inspired crisis, but these guys put triple-a ratings on some of the worst. >> neil: no doubt, no doubt. >> they might have caused the financial crisis. >> neil: and s & p, and believe me i'm not saying it saint. i find the curious gangup, and senate banking panel looking into it and, i don't see that with fitch and moody's, maybe it will come, but i don't see it. >> it is p

he was talking to me about a possible lehman scenario, lehman brothers went under, stock market, boomping. and then congress decided, you know? maybe that bail-out wasn't such a bad idea after all. in terms of progrenosticating t future here, is that likely to happen? >> not likely. lehman brothers was an all-or-nothing situation. either they saved it or it failed completely. the u.s. government is not going to fail completely. the worst-case scenario, i think, is that the u.s. government muddles through in a way that's disruptive, for instance, if they don't pass this deal and the treasury has to start dropping a plate or two, as richard alluded to, i loved his metaphor, then it's going to get ugly. but that ugliness, i think, will be the thing that will finally bring another five or ten votes across the line in the house and say, look, we can't just let the whole economy fall apart here. and then we'll be able to put the pieces back together, if you will. it's not going to be neat. but i don't think we're on the verge of a catastrophe here. >> rick newman, thank you so much. and glo

do you think that we could see something like when lehman went under in two thousand and eight are the current conditions as serious. well in general i think we are approaching that kind of situation with the exception that of course lehman was a kind of big bang where we are more in a situation where we are on a gradual path down in terms of growth prospects in the united states in the eurozone and also with respect. for handling this crisis the eurozone. i wanted to talk about just that europe of course is plagued by its own do you think the euro zone can preserve its integrity in this kind of environment. well the chances that the eurozone can preserve its integrity are still there but then it's getting very urgent to come to the fundamental issues which are still not yet treated. even if we take into account what has been agreed upon on the july twenty first summit the two fundamental issues the lack of political union and the lack of labor market flexibility in the eurozone are still not being fully looked in the eye and as long as the european authorities are not. taking up these

daisy chain aspect of these banks i'm thinking back to two thousand and eight it was revealed that lehman brothers. their own little pet bank that they would hide their dad speed for each reporting quarter was needed this is part of what you could look up and find out the repo one l five scandal they have this bank they were hiding debts and they were shuttling back and forth to avoid the regulatory scrutiny and to avoid the disclosure of all there that it seems to me that that particular scam peekaboo accounting or debt shuttling is done on a huge global scale it didn't play into what you're saying how much of that is incidental how much of that is more is so has more of a nefarious twist to it i think it's much more widespread then is commonly believed anybody thinks the repo one fire began and ended with lehman we got that one bad apple out of the bureau really needs to have their head examined this is clearly common practice there's all kinds of accounting tricks and shenanigans that can be done let's face it wall street can afford the best of the greatest and they are just how we're

lehman lehman brothers were. even very high res it is or whether it's cleaning its act up now or whether it's showing it's power who knows what's going on but the reality is as your correspondent said it comes at a very shaky time we saw a big drop in the stock market of four percent of its value on thursday we saw a very shaky market on friday no doubt this will not help things on monday and tuesday of next week so people should watch closely how that plays out and suddenly it comes to an issue of a credibility back in the crisis of two thousand and eight fannie mae and freddie mac. were still given aaa ratings that all though are the next day also they went belly up now the administration is saying that there is a miss calculation of two trillion dollars in the s. and p. report when you make of this reaction well i think they're they're trying their best to minimize the credibility of the of the report but the reality is our economy is in terrible shape and the government's actions are actually counterproductiv

widespread then is commonly believed anybody who thinks the repo one of five began and ended with lehman and we've got that one bad apple out of the barrel really needs to have their head examined this is clearly common practice there's all kinds of accounting tricks and shenanigans that can be done let's face it wall street can afford the best in the brightest and they are just outgunning it out manning. government regulators in every turn and that's not even including the revolving door where sometimes those very same perpetrators of these scams go through a revolving door into the regulatory apparatus would it be wrong to say that when people talk about the shadow banking system as gordon brown former prime minister bretton called it what percentage of the shadow banking system what accounts for this type of fraudulent debt shuttling to avoid regulatory scrutiny would you guess on a percentage basis it's hard to say but here is one number i go by you know we look at the number of mortgages that are either delinquent or in default and it's over one in ten at this point in time so we lo

people in lehman brothers didn't respect reality. people who ran aid didn't respect reality. i don't know what fantasy world they were living in but you look back at some of the stuff they did, it just makes no sense. it was not about reality. so reality is their prime virtue. the second virtue that as an employer right down to the to line is reason. okay, starting to see the ayn rand connection? what did she call this philosophy? object in the them. she says she's a philosopher of reason. this is what it's all about. reality is what's out there. recent is what's in your pic gets our tool for apprehending and dealing with and profiting from what is out there. you've got to use reason to run your business. aid didn't use reason. lehman didn't use reason. what did they use? fancy computer models. that worked really well. made if it's shown in a few more greek letters it would've worked out. will have to try that again sometime. i hope not. the third virtue of bb&t is independent thinking. how about that, a bank that wants its employees to think independently. let me say what th

on effect the domino effect to american banks will be catastrophic you'll be just as bad as it is lehman and so you know the american banking system is going to suffer huge. ok and if the american banking system suffers huge well then you can have the problem of the treasury department in the in the shape of timothy geithner and the federal reserve in the shape of ben bernanke who are going to go out and try to apply the same medicine in two thousand levon that they applied in two thousand and eight and of course that medicine didn't work because it's going to be bigger this is what happens when you kick the can down the road instead of you know standing still and taking the hit in two thousand and eight they decided to kick the can down the road by way of bailouts by way of monetary easing that is the zero interest rate policy as well as q e one and also by the suspension of the counting rules specifically fast the one fifty seven which is a key issue that not enough people are talking about that's the rule whereby banks can basically mark to whatever they think a particular acid is wor

style collapse. >> this is not lehman brothers.uropeans have a clear picture of the debt problem and know where the debt is. >> but economist said europeans need to do more to stabilize the financial markets. until that happens, the wild ride may just be starting and not ending, bret in >> hold on tight, adam, thank you. >> u.s. attorney dennis burke is opposing the motion of the family of murdered patrol trooper to be victims. they want to be heard in the case. that would mean they would have the right to confer and speak at sentencing. those guns were moved in the ill-fated operation fast and furious. john koran demanded answers from attorney general eric holder about if the feds staminged a similar gun problem in his step . next bad news from afghanistan. naturals from purina cat chow. delicious, real ingredients with no artificial flavors or preservatives. naturals from purina cat chow. share a better life. woman: day care can be so to save some money, i found one that uses robots instead of real people. 'cuz robots work for fr

bearish investors believe the european financial crisis could be the next lehman brothers and that the u.s. could be slipping into -- oh, i have to mention the "r" word -- slipping into another recession to sal street is torn. cnn's analyst david gergen told anderson cooper something else. >> someone who steps forward, usually the president steps forward, and you have a sense of somebody's got their hands on the wheel, knows where we're going, can help guide this ship. there's a sense right now in our politics that no one's in charge, not the president, not ben bernanke, there's no walter cronkite. there's no one here to give us that sense of reassurance. >> the dow flies around like a bad trap in an airplane. standard & poor's downgrades the u.s. 14 million americans are out of work. sounds like a great time for a vacation. congress is still in recess and the president heads to martha's vinyard next week for a ten-day vacation. four lawmakers say they should come back to d.c. and fix the economy and the president is catching flack for taking time off but if congress is gone, the presi

the concern now, a lot of people are asking this and we have spoken about this before, is this the lehman moment for the eurozone? is this the moment no one wants to talk about? >> is it. >> germany is doing well. then you have the likes of spain, portugal and italy. how long can you keep bandaging up everything and keeping it together? that's a big question. is it too big to fail? maybe. but how long can you keep it going. >> keeping 17 nations with completely different economies going has always been the test that the euro faced. and the eurozone as a bloc. >> jean-claude went against the bundes bank to go against the portuguese. that is significant, isn't it? >> it is. it just seems like the problem right now in europe is a unity aspect. how do you come together on a united front and pull this together? that's a problem. we heard angela merkel will speak to nicolas sarkozy again today, and this brings in the concept how do you keep the eurozone together? 17 countries with such diverse financial aspects. >> it who have been the $64,000 question a few years ago, i'm sure it's 64 trillion

is that -- does that signify what we faced in 2008 with lehman brothers or is it different? >> yeah, not only that, lehman brothers happened to be triple a credit rated right before it failed. you're 100% right. bank of america being sued for $10 billion by aig, the financials really are -- >> aig which got us into the big pickle anyway. they want $10 billion. >> they want $10 billion but again, we're in bed with aig, so to speak. bottom line is the financials usually do tell the tale. you got to watch the banks, watch the bank stocks to see where the economy is going. they've been having a rough go of it at least in the equities market. we know all these companies are making a lot of money. the problem is they're making money and putting it in their pockets and they're not hiring. need to really get the economy moving again. they need to start hiring. they need to start spending the money that they've been accumulating. >> and as things tighten up, they spend less money. apparently, according to the report we're quoting today, the good news is they have more liquid assets,

it overrated lehman brothers which had an a rating just before going out of business in 2006.t came iceland the same rating that u.s. now has and iceland almost went bankrupt. what credit worthiness do we have from an agency like this? i mean, are they worthy, as george will says of us giving them credit? i've never quoted george will in my life as i promise. >> it was very generous of you to call the ratings of lehman brothers flubs. in one interpretation, can you blame the rating agencies. not just s&p been rudy's and fitch as well, forebeari forebearing a lot of the blame for the crisis. the rating agencies right now, s&p in particular, are feeling that they missed it in 2008. they were too generous. they were too easily swayed by these companies, which said, no, no, no, don't downgrade us. i think that enclined them psychologically to say, you know what, this time we will take a hard line. >> jared, she's saying that maybe they were influenced because they made mistakes and they are now taking a harder line. others are saying that they were being political then and they ar

good question in regards to why you have an insider trading been investigated in the general sense lehman brothers for example was known by some other card counterparty to be functionally bankrupt for some time prior to when they went under and yet nobody at the federal reserve or the new york fed or anyone else bothered to say anything to anybody. time now for a look at some other news from around the world see when security forces bring need down an anti regime protest it's following friday's prayers when mass riots erupted in several towns at least ten protesters were shot dead in separate clashes across the country after police opened fire on the crowds that's have to american secretary of state hillary clinton called for wider international sanctions on syria the ongoing unrest which began in march is said to have claimed seventeen hundred lives. at least one person has been killed and around forty injured after a passenger train derailed the central poland it was on the way from also to the southern city have cut of eight sec carrying almost three hundred people when the engine and

lehman brothers collapsed and it said that talking about jeremiah wright in that climate wouldn't help them. i think there's always a concern that republicans would use race-freighted issues to try to peel away white working class votes. they couldn't do it in 2008 and right now, given the state of the economy and the way the whole thing has been flipped on its head, i think it will be irresistible. >> for exactly the reason you said, economy is in the tank they don't need to. what's the point of doing that? they can run against him on the economy. chris: i wonder whether the big institutions, the major networks, for example, will try to fight this if the this -- if they smell it? >> i think that's true. we're talking about it today. if you go back four years and said, you know what we just elected our first black president. four years from now, the opposition is still going to run on the idea that he's the other that he's unfamiliar. we'd all say, my god by that time he would have been president for four years, he would have been so familiar, it's unusual that this still resonates and

in 2008 what happened sunday evening in september lehman brothers goes down and suddenly we are in a financial crisis. that was the bursting of the housing bubble . prices had gone up to unsupportable levels. we editorialized about it for two years. what we are seeing now, is the bursting of the federal spending bubble. we needed s&p flip the switch and everyone realizes that what we are doing 25 years is no longer supportable. the question is, is the political market place going to put in the right policies to react to them as they did not do to the housing bubble. >> housing prices fell 25 to 30 percent. >> with the government doing all it can to thwart the housing. >> and i agree with that. how much further can they fall there? >> there is a similarity. markets are nervous about what is going on in europe and in particular, what the nervousness are about. u.s. money markets are holding a lot of exposure to the european banks that have exposure to european sovereign vet. >> money market investment funds. >> and we are learning here, every time the fed interest rates too low for too

it's down gradually over five years so it's not like people react suddenly to some event or like lehmanthers was an event in september in 2008 and there was a sharp crisis then but people didn't suddenly change their expectations. it's been sagging for five years. >> consuelo: and what's interesting is you and a couple other economists had an article caldwellth effects revisited and housing value impacts house hollywood consumption which is 70% of our economy than do changes in stock market values. so our attitudes towards home and the value of our homes, right, has a huge impact on the economy. >> right. i think homes are more immediate and visceralhan our stocks. often stocks are held in an retirement portfolio and for young people it's so far they don't feel like they own it. in the 1990's you could barrow against your equity and there were competing offers every day and now that's happening less and people are feeling damage that i thought i was a millionaire or my home would soon be worth a million dollars but now it's going down and so it changes their willingness to spend. i thin

rating even as the housing market collapsed and they gave an "a" rating to lehman brothers before the investment bank went under. >>> this morning, san francisco interim mayor adjusting to a new political reality after officially entering the race to run for a full term after promising for months that he would not. >> mayor ed lee. [ boos and cheers ] >> how heard that boos filled the candidate forum as he walked out on stage last night. he was there to face off against other contenders who appeared in similar forums and the other contenders didn't wait long to target the new addition. >> as you know, tonight the ethics commission is considering ethical violations against the "run, ed, run" campaign that drafted you in this race. there are allegations that the committee did not follow campaign finance laws. when he did speak -- >> when lee did speak he chose to talk about his proposals. often the audience called out the word "liar" or shouted over his answers. lee was selected to replace gavin newsom. >>> driver charged in critical accident that critically injured a woman and 9-year-o

that's the longest losing streak actually that we've seen on the dow since october 2008, after the lehman crisis so neglective open here, now basically a deal may have gone through congress to avert a default, but markets still pretty jittery rarding fundamentals both for japan's economy as well as the u.s. economy, you mentioned there consumer sentiment and also a lot of eyes are going to be on the u.s. jobs number, which is coming up on friday, and that follows faltering data we already have seen on housing and manufacturing side in the u.s. also moodies investor services came out and made a statement saying that it still has a negative outlook for the credit rating of u.s. however, it said that because of the debt deal that just got pushed through congress, it says that that virtually eliminated any risk of a downgrade and it's keeping its aaa rating now for the u.s. events in the last 24 hours in the currency markets have been pretty volatile, with the euro also being pushed lower because of renewed concerns about euro zone sovereign debt. that's coming back into the picture yet again

lot like the financial meltdown of 2008, which saw the collapse of big american institutions like lehman brothers and bear stearns. but relax-- bank analyst erik oja says the sector is in much better shape today. >> we do not expect large institutions to fail this time around. we do not see any breakdown in liquidity. if you look at libor, which is one indication of liquidity, libor is far below where it was three years ago. >> reporter: in addition to increased liquidity, oja says banks have bigger reserves and far less leverage. but it's clear there are still major headwinds for american banks, including the possibility of another recession. >> bank profits depend mostly on how well the economy is going to do. loan growth, credit quality, fee income growth, and then capital levels-- everything depends on how the u.s. economy does. >> reporter: there are also concerns about fallout from the european banking crisis. true, most u.s. banks have little direct exposure to greece, portugal and spain, but as morningstar's jim sinegal explains, there could be serious indirect effects. >> if the

crisis in europe, and you could see a european bank or banks go under, similar to what happened in lehman brothers here in the united states. now, it may sound a lot like 2008. there are some key differences, however. first, americans have really cut back on their debts, and, second, american corporations are sitting on a mountain load of cash. >> pelley: why the big swings? the dow 600 points on monday, up 400 yesterday, and now down more than 500 today. >> reporter: well, traders here on the floor tell me that overall, there's uncertainty. but that uncertainty gets exacerbated by high-frequency, computerized trading. the majority of trading that takes place is no longer between two traders by hand. instead, what's happening is computer programs are executing trades like rapid fire, and that exacerbates both upside and downside moves, which is why yesterday we saw things so dramatically higher and today so dramatically lower. >> pelley: thank you, rebecca. one of the most powerful and influential funds in the market is the pimco bond fund. it's the largest bond fund in the world with ass