number two, the markets know lehman brothers is in trouble and number three, lehman brothers is in such bad shape they don't have enough collateral and security to offer the fed enough to keep them going so they say let's do bear stearns again only this time let's see if we can give bolster for its own self-interest to subsidize the deal. that's when they call everybody together at the fed and they managed to get wall street to put money on the table and find a buyer. for cleaves, the british bank. for them the british government doesn't let it happen and get to this point where they don't have any alternative they think -- >> host: very late in the game. >> guest: right. history would be totally different if the british government had gone through and pour cleaves had been able to buy lehman brothers but it might have been a catastrophe three days later with joseph aig. this was the only problem. we now know the economy was slowing precipitously at the time that lehman was going down but i think that they made in this calculation, and bernanke and paulson dropped to the notion that the

would be totally different if the british government elected and barclays had been able to bye lehman brothers. it has been a catastrophe three days later. i'm not saying this wasn't the only problem. we now know the economy was slowing precipitously at the time lehman was going down. but i think that they made a miscalculation and bernanke and paulson have dropped the notion that they somehow wanted to try. they don't mention that anymore. they rely exclusively on the legal argument that they didn't have the power to do it. but i find most people don't believe that. they think the fed managed to stretch every other day except that once. but it's worth remembering the editorial pages on monday after the weekend praised them for letting lehman brothers group. it was only in the aftermath and the hours and days afterwards that it turned out that they had expected some ripples but they didn't expect a tsunami. the markets did not anticipate -- >> host: briefly what happened? >> guest: lehman brothers goes into bankruptcy sunday night. it is a lot of news. and then a couple of things happen. the f

fed today do not have any more authority to deal with the collapsing financial institution like lehman brothers or aig than they did 15 months ago. they have a choice. bankruptcy, like lehman, or bail out like aig. and the one thing that they have been asking for, and it seems to me to be obviously needed is the way to close these institutions so that if we do have another crisis the can do it in a more orderly manner that doesn't put taxpayers so much on the hook. all the other things are it's hard to figure out. and there's one set of people this says we shouldn't rush to judgment, we will over regulator have unintended consequences if we move too fast. the others if people say the congress on the acts in a crisis. we know there are things wrong with our financial regulatory regime and we do not act now i got the crisis is already fading from the memory, they will never act. and so far nothing much has happened. the bill passed the house but it's not going to the senate. >> host: it has and that there is a bill in the senate and hope something will happen but it's not clear. one of the things

about the extraordinary weeks after lehman brothers, which was the most tense week that there was.y we capitalized with warren buffett and the day after that we did a capital raise. we have access to the capital markets and we were not relying on that government help. the tarp legislation came three weeks later. that being said, i do not know it and cannot sit here and tell you what would have happened. i know for sure that no one else knows either. i feel good about it but we were going to bed every night with more risk than any responsible manager would want to have, either on a business or for the system as a whole. risk, not certainty. even after the tarp was implemented, did that exacerbate the risk? no. but the question does not have to turn on which you have gone under but for? the world was unsafe, the government and regulator and taxpayers took extraordinary measures to reduce intolerable levels of risk to a much more tolerable level of risk. and the reason the press this is not to make you say uncle. what was done differently and more regulated commercial banks, was extra

about the extraordinary weeks after lehman brothers, which was the most tense week that there was. that is when we became a bank holding company. the next day we capitalized with warren buffett and the day after that we did a capital raise. we have access to the capital markets and we were not relying on that government help. the tarp legislation came three weeks later. that being said, i do not know it and cannot sit here and tell you what would have happened. i know for sure that no one else knows either. i feel good about it but we were going to bed every night with more risk than any responsible manager would want to have, either on a business or for the system as a whole. risk, not certainty. even after the tarp was implemented, did that exacerbate the risk? no. but the question does not have to turn on which you have gone under but for? the world was unsafe, the government and regulator and taxpayers took extraordinary measures to reduce intolerable levels of risk to a much more tolerable level of risk. and the reason the press this is not to make you say uncle. what was done

the weekend when they let lehman brothers fail and bailed out aig. then you go back to the runner-up of the crisis and proceed more or less chronologically through the whole step-by-step thing, until last summer. now your basic judgment, as i get it, is that many people, including ben bernanke and his predecessor, alan greenspan, should have seen the potential for the meltdown. that happened in the financial system, and acted to head it off. but they didn't. and oncesis happened, bernanke was the right man in the right place. he's something of a hero of this, of this volume. so let's start by talking a little bit about ben bernanke, and why you think this was true. what did he learn from being a scholar of the great depression, for example? >> guest: well, ben bernanke, when he was a student of economics at harvard and mit, became very interested in the work that the great economist nona friedman and anna schwartz did, that basically pin the blame for the great depression on the federal reserve. that the federal reserve was too tight with credit, at

and when they did not have the means to save lehman brothers.reasonably say that the fed had other powers that it did not use aggressively in the run-up to the crisis. it allowed citigroup to develop a lot of risky leveraged, and they had the power to police the way mortgages were issued to customers, and they did not do that effectively. lots of people ended up with loans that they could not pay back. if we're going to give someone regulatory powers, should it be the fed? we have dueling proposals in congress where the bill produced by barney frank in the house more or less at here's to with the administration would like. in the bill put forth by christopher dodd in the senate banking committee, it would take the existing powers away from the banks and fdic, and give it to a new organization. host: bernie from ohio. caller: good morning. the first question is regarding the banks. i recently wrote on a website that they have no conscience, obviously. number two, 40,000 jobs are lost on wall street, and they say they have to pay them so that they

just because we tried going the other way in the 1930s and we also tried it with lehman brothers. things did look very good and they certainly didn't turn out well in the '30s. so the option of just -- some people in chicago, we should let the whole system collapse and everything would've been fine in a few weeks. maybe they are right but i'm glad we didn't run that social experiment. and the '30s didn't work out very well. but question is, how do you bail out wall street? there treasury and fed both, you know, they deserve a lot of the criticism they've got. that had a lot more leverage than they realize. the banks were frustrated. golden was about to go out of business. they were all about to go out of business if they couldn't raise money. attacks therefore providing them a lifeline and we should have charged more than we did. so i think that's a legitimate argument. the banks are now repaying their loans and they're claiming we gave taxpayers a good deal. they may 10, 20 percent on their investment over a year. that's completely fallacious argument. at the time they got these,

right one just because we tried going the of the way in the 1930's and we also tried it with lehman brothers and things didn't look very good and certainly didn't turn out very well in the '30's. some people in chicago synced we should let the whole system collapse and everything with confine in a few weeks. maybe they were right but i'm glad we did not run that social experiment. to some extent in the 30's when the government allowed the banks to collapse it did not work out very well but the question then is how do you bailout walls treen there i think treasury and the fed both, they deserve criticism because they had a lot more leverage than they realize. the banks and they were about to go out of business if they couldn't raise money. we the taxpayer were providing them a lifeline in we should have charged them a lot more for it than we did so i think that is a legitimate argument. the bankston are now reaping their loans in clamming, we gave the tax there goodale. they made ten, 20% on their investment over the year. that is a completely fallacious argument. by the time they got the t.a

for years for being too conservative about its banking system, but if i am not mistaken with lehman brothers bust, the us and britain in shatters, indias solid banking system is part of a six and a half growth story this year. so did you make the right mistake? >>nath: well, i have always said, i have always preached on following the best practices of the western world, and i said we will follow the next practices, i think our next practices are holding us in good stead. >>friedman: alright, thanks for joining us. >>nath: thank you >> >> abirached: the midlife crisis has become something of a cliche, when men of a certain age try to recapture their youth by buying flashy sports cars, motorbikes and vintage guitars. but for some, the midlife crisis can mean serious business. >>rolling thunder, an iconic piece of rock n roll art painted for the grateful dead by alton kelly, now on sale for $100,000. as retirement looms for the baby boomer generation it is not just the classic sports car which is driving these investors to buy a symbol of their lost, and sometimes misspent, youth. bonhams recen

when lehman brothers collapsed in its september, 2008, it sparked a crisis of confidence like many ofced a classic run of the bank. as the entire investment banking business model came under siege. morgan stanley experienced huge swings in spreads on the threat of false swaps tied to our debt and sharp drops to our share price. this led banks to request that firms post additional collateral. in an effort to stem the panic, morgan stanley moved up its announcement of its strong third quarter earnings to september 16. but our stock remained of her heavy pressure. it lost nearly 1/4 of its value the following day, falling from 28.7 to 21.75. despite the strong results, it continued to trade lower and finally traded as low as $6.71. this crisis of confidence in the market fed a chain reaction to the broader economy, as lower prices for financial assets undermined confidence and lead to lower prices. this year was marked by rampant rumors and speculation. my management team worked around the clock to address these rumors and it -- provide investors and employees entered information. we als

i am more interested in about risk-management practices at lehman brothers and bear stearns and fannieae and freddie mac, those as opposed to others that failed and went under. but i think the american people, we do not care about the risk- management practices at home depot or caterpillar, or even the biggest firms, like wal-mart and chevron, because if those firms bail and go under, and they go away, their competitors swoop in, but i think a lot of the problem and a lot of the political blowback -- we could not allow the largest financial firms to fail because of the broaderçó consequences for the economy, so what i want to do is first focus on the perception of the too big to fail question, and a question for each of you, on both investors and managers and your board members, and that is in the fall of 2008, do you believe that investors that were investing in your firm where pricing in the possibility that the government might come in and provide assistance? that the government might decide that your firm was too big and too interconnected to fail? and then, the related question, t

we estimate that the top five executive teams of bear stearns and lehman brothers derived cash flowsof about $1.4 billion and $1 billion respectively during 2000 to 2008. and these cash flows substantially exceeded the executive's initial -- initial holdings in the beginning of the time frame. as a result, unlike what happened with long-term shareholders, the executives net payoffs for 2000 to 2008 was positive. the second point i would like to make is that we cannot rely solely on existing government arrangements to produce the necessary reforms. to be sure, some firms have announced a fault in the compensation structures. an example, an indication that bonuses would be subject [unintelligible] but firms have not provided information that would enable outsiders to determine whether the cognex would be meaningful or merely cosmetic. this is an area where the devil is in the details. because the changes that firms adopt appear to be at least partly motivated by a desire to appear responsive to outside criticism, there is a basis for concern that arrangements whose details are not disc

we estimate that the top five executive teams of bear stearns and lehman brothers derived cash flows of about $1.4 billion and $1 billion respectively during 2000 to 2008. and these cash flows substantially exceeded the executive's initial -- initial holdings in the beginning of the time frame. as a result, unlike what happened with long-term shareholders, the executives net payoffs for 2000 to 2008 was positive. the second point i would like to make is that we cannot rely solely on existing government arrangements to produce the necessary reforms. to be sure, some firms have announced a fault in the compensation structures. an example, an indication that bonuses would be subject [unintelligible] but firms have not provided information that would enable outsiders to determine whether the cognex would be meaningful or merely cosmetic. this is an area where the devil is in the details. because the changes that firms adopt appear to be at least partly motivated by a desire to appear responsive to outside criticism, there is a basis for ) following aspects of a -- an existing state that

lehman brothers, aig. we thought everything was going to go off of the cliff. that didn't happen. we had -- yes, stimulus and maybe a budget you think may have been too lauded by the committees and congress. but the entire saving of the financial system was huge. i do think that when you are in a recession it is a great time to tackle the unmet social net issue of our time. which is health care. the fact that most most americans are insecure and fear if they lose their job they are not going to have health insurance, this is big and has to be tackled and the fact that he has gotten it past the 80 yards -- you know, down the field, 80 yards so far, is pretty amazing. >> but it is -- isn't it fair to say that it is -- more than americans might have bargained for when -- when they elected him? it is -- i mean, it is something no democratic president has been able to get past in the -- you know -- >> sure. it was -- i was on the show. not too long ago with peggy in an an. we were worried he was trying do too many different things. >> trying to do too many -- no, it was all genius. >>

her stern, lehman brothers, cfc program and others. we are happy to share that information.it is important to me as well because of the new leader of the sec and having brought in new leadership across the agency i want everybody informed by the things that didn't work out well so they can make appropriate changes going forward in building much stronger regulatory program across the board and across foliage of the spirit >> two new mac. ms. bair? >> with an ongoing self-examination with a number of changes than i would have happy to give you some of the documents that describe that. i would also say when when banks fail there is an investigational by the bank failed interview of the supervisory process. i think one piece of that that is missing is because the large institutions were buildout that did not fail. the statutory provisions requiring what we call the material luster views of his investigations have not applied. i think it's very helpful to reap provide -- we need to look better at what the supervisory issues were leading up to those larger institutions becoming un

and what happened with the lehman brothers crisis is that suddenly that dynamics stock. everywhere in the world people stopped investing -- dynamic stopped. everywhere in the world people stopped investing. it affected especially japan because they're so specialized in their products. for the world declined -- economy to grow again, you need to go back to very fast growth in emerging economies. the danger is that too much, perhaps, in the short run is still driven -- driven by stimulus. and there is more needed to go back to the very fast growth that we saw before the crisis. but it is a real phenomena and is home grown. >> very quickly, the image that i have been pushing, and living with for the last couple of years is that this is a world turned upside down in so many ways, not the least of which is we actually have the official sector in the emerging world supporting banks in the mature world. that is a tremendous inversion of the official capital active in the 1990's. but i think, the point i would really highlight youhere is thai came into this business in the early

fascinating thing about enron was that the banks that enron did business with, bear stearns, lehman brothers, citigroup, did not think this business model was very strange at all. and when people say, could we have avert this crisis by doing something different with bear stearns in 2007, by bailing out lehman, the last time to do anything about this was enron. after that, these regulations had so be loaded, the markets, financial markets were not subject to any reasonable discipline because they knew that market disappointment economic catastrophe. and that is how we get from there to 2007, 2008 when the markets finally did correct the excesses just as they had in the late '20s, but they could not do so without creating another great depression. and that is how we got the nationalization of all risk in the financial industry. the opposite of prudent regulation and market discipline and finance is not freer markets as we've seen. it is nationalization of one of the most important elements of the economy, who decides which businesses get investment capital and on what terms. it's fashionable t

when lehman brothers collapsed in early september of 2008, it sparked a severe crisis of confidence. we experienced a classic run on the bank. as the entire investment banking business model came under siege, morgan stanley and other financial institutions experienced huge swings and spreads tied to our debt and sharp drops in our shares price. causing further depletion of cash resources. in an effort to stem the panic, morgan stanley moved up the announcements of its strong third quarter earnings to september 16, but our stock remained under heavy pressure. it lost nearly a quarter of its value the following day, falling from 28.7 to 21.75. despite the strong results, it continued to trade low and finally traded as low as $6.71. this crisis of of confidence in the market, had a chain reaction to the broader economy, as lower prices for financial assets undermine confidence, and led to lower prices throughout the rest of the economy. this period was marked by rampant rumors and speculation, by management team, like those of my peers here, worked around the clock to address these rumo

lehman brothers simply went bankrupt, and that did lead to a lot of the meltdown.ewhere in there is a balance, but the company's that failed, they should have been allowed to fail. countrywide, wachovia, washington mutual, lehman brothers, they all failed, and then went away. there is able for the government to make sure the failure of one company does not trigger the systemic failure of thousands of others. that is really what this is about. when a company fails, make sure it does not bring down the whole system. host: next phone call from new jersey. pat on the republican line. nashville, tennessee. go ahead. caller: i would like to make a statement about fannie mae and freddie mac. if i am not mistaken, these two mortgage institutions were created in the 1970's for the purpose of enabling low income, primarily african-americans to purchase homes. from then until 2000 the program worked fine. they got people into low income homes. they gave them part of the american dream, and it worked fine. it is mine understanding that it was not until the lending institutions

and what happened with the lehman brothers crisis is that suddenly that dynamics stock. everywhere in the world people stopped investing -- dynamic stopped. everywhere in the world people stopped investing. it affected especially japan because they're so specialized in their products. for the world declined -- economy to grow again, you need to go back to very fast growth in emerging economies. the danger is that too much, perhaps, in the short run is still driven -- driven by stimulus. and there is more needed to go back to the very fast growth that we saw before the crisis. but it is a real phenomena and is home grown. >> very quickly, the image that i have been pushing, and living with for the last couple of years is that this is a world turned upside down in so many ways, not the least of which is we actually have the official sector in the emerging world supporting banks in the mature world. that is a tremendous inversion of the official capital active in the 1990's. but i think, the point i would really highlight youhere is thai came into this business in the early

if you're looking at bear stearns or lehman brothers, is not a simple thing to do.and the extent to which on shortselling has added real information to the marketplace about what the appropriate price ought to be for the stock of a particular company, that's a good thing. to the extent it's based on rumormongering or desire to drive down the price of a stock artificially, that's a terrible thing. so our investigations are trying to find the path to the amounts of data. you know, we tried billions and billions of shares a day in this country. and understand whether we have cases that could be brought for manipulative shortselling. >> mr. chairman, this is an interesting question to us and obviously a verbal answer in the time we have will not be sufficient. so if you'll allow us to friends and questions to you for response we would appreciate that very much. >> i would be happy to do that. >> and that myers will make a universal statement that we can ask all the questions we would like to ask, and when we get follow-ups to the ones we have. we're learning as a goal a

we do not want any more lehman brothers. we want a well-established, well stated identified worked out a system that can be used to wind down his company's, allow them to fail, let creditors take losses, let counter parties like the edgy counterparties take losses. but without completely destabilizing the whole economy. as can happen. >> as a part of all this i'm concerned that we will not reestablish the kinds of proper approaches and the principle of moral hazard. until we and t.a.r.p., and provide an exit strategy from the recent government guarante guarantees, and decide how they're going to proceed with fannie mae and freddie mac. would you agree with that? >> i do agree with that. fannie mae and freddie mac are particular problems, had to be addressed. but under the current situation, the t.a.r.p. was used about companies and make all creditors whole, except for the shareholders, under a well-designed resolution regime, you know, many creditors could, would, should lose money which would create market discipline going

that have changed our nation, september 14, 2007, which had to do it bear stearns and laymen -- lehman brothers, brought to our attention a long-term deficit trend that we have had as well as a short-term tremendous blow to our economy. should that date symbolize a -- along the lines of the berlin wall and 9/11 that has affected our nation. it looks like a trend that is going to happen for a while. >> well, i think it is important for us. this goes back to the first question. how do we know we are in one of these trends formative moment? it is important if you are an analyst to consistently said yourself and arts and say, and i say this and i think i am in one of these moments, i will start fundamental assumptions. i would answer that in the negative. i do not see the financial crisis as such a moment. the reason is, and maybe i'm old-fashioned -- don't you think that the most powerful actors in the world, some of them shouldn't these be changing their strategies? if the entities with the most capability and are not altering their strategic remarks and to do not see a sign of it, right now we d

my career at lehman brothers and 29 years. rose to vice chairman of the firm in the 1980s, and i was cochairman of the investment banking division and chairman of the merchant banking division. i have held financial positions in the public sector, as deputy mayor of the city of new york during the financial crisis of the 1970s. and as counsel to the secretary of the treasury in the carter administration. i haven't acted on corporate boards, not-for-profit foundation board, where i've been involved in an investment decisions. so the past one years i've been chairman of the peter j. solomon company, a private independent investment bank and member of general. our firm is a throwback of the air of the early 1960s when investment banks function as agents and fiduciaries advising their corporate clients on strategic and financial matters such as mergers and raising of debt and equity capital. i like today's diversified banks, we do not act as principles of a nor do we take proprietary positions. we do not trade and we do not lend.

september 15 came along and lehman brothers collapses and people see that things really are bad. obama shoots ahead becomes -- it becomes a heavily democratic year. in 2004, there was a big question that voters were asking which is which president will make us more secure. terry did not realize that. he got torpedoed by use of his military record. in 2000, we had a close election and we were still not sure what? or try to answer. republicans were trying to say -- -- still not sure what we were trying to answer. go all the way back to ronald reagan. ronald reagan two alexian's -- elections, -- ronald reagan won two elections asking the same question. as you are thinking about your senate races for congressional races -- for congressional races, i think the congressional question was kind of easy. for republicans, it was all trying to change the question so that the question became something other than the national question. going into 2002 and, -- 2010, there seems to be a buyer is developing -- a bias developing. part of what you're going to have to decide is if you still want to

. >> the fact that the top executives of bear stearns and lehman brothers were able to get large bonusesased on earnings, which they were able to keep even though all of those earnings were evaporated. >> thank you, mr. chairman. >> the gentleman from missouri. >> i have a number of questions, i will try to ask them quickly. before i ask the questions, i was a part of this committee in 2005. my recollection is that mike was the chair of this committee and our current chairman was the ranking member. one of the first things that we dealt with when i came on this committee was some proposed reform -- maybe both the former chairman and the current chairman, dealing with fannie and freddie was proposed. i was talking to reporters two days ago that says that one of the problems in washington is that the truth does not matter, it is whether or not you can say a lie over and over again so that everyone buys it. my concern is that history has been distorted because the former chairman proposed trying to deal with the issue of fannie and freddie's compensation, and as i recall, they did not get a

if you think about what gives you a global recession -- it so happens that oil and lehman brothers came together so is difficult to distinguish, but if we see a live above it dollars per barrel, that would be something to add significant medium-term downside risk. second, the fiscal issue. we can talk about it all day. . . we should be prepared to imagine the unimaginable. this is not turmoil in the spanish debt market, but the u.s. treasury market. the issues seem to become so high that this raises concern. one important thing to keep your mind on is the rating agency. they seem to be attempting to avoid problems but they will have to understand that many of these dynamics are going into the smaller countries, and they are not sustainable with the current debt rating. the third downside risk is in the euros zone. the concerns i have are not just about the budget deficits, this is about the tough problems that we have in that region, during a time when we are trying to implement or maintain a fixed system in a difficult time. when this is tough and the unemployment rates increase, he th

i think it covered a bear stearns, lehman brothers, merrill lynch, goldman sachs, and morgan stanley. one of which failed, some of which had to be acquired, and the others became bank holding companies. that was during the financial crisis. did the program fail in providing sufficient credentials supervision? >> we have to conclude that the program was not successful. as i understand the program was developed in regard to changes in european law that require the five largest u.s. investment banks be subject to the consolidated supervision by some entity. because there were investment banks, not commercial ones, they elected to be supervised by the sec. the sec created the program. prior to that, the good news -- investment bank holding companies were not subject to any supervision at all. that was due to be good, to bring them under the umbrella of regulation. i have lots of concerns about the program and many of the specifics. generally, i think there were several problems. one is that requires the sec to become a provincial regulator, which is not traditionally what it had done. it

it was in response to the fall of lehman brothers and the credit markets using ups and the stock marketrashing -- its credit market seizing up and the stock market crashing in 2008. extraordinary steps were taken by a republican president and republican-appointed chairman of the federal reserve and it continued in a democratic administration with an extraordinary economic catastrophe. i think there's a lot to fault president bush on, but his acting -- his backing -- it was probably one of his finest hours. he continues to tell me whether the governor is going to stay in that race. he is under significant pressure regarding running for elective your. -- regarding all running for election again. we were trying to wait for the governor to make the decision. he is under considerable pressure. they are trying to woo weight. it will be a difficult race for him. host: under the radar screen-is that the case. guest: we do our ratings of the time. i do not believe in least in the senate races, we have done that in our senate races. i do not really have one. with so much pulling taking place, par

services reform, it will be only a matter of time before we see another aig, bear stearns, another lehman brothers and the next big bank will be too big to fail and the taxpayers will wind up footing the bill again and again and again. i ask my republican colleagues on this committee to join with me in fixing the system. blame is about yesterday. fixing this system is about today and the future. in the aig case we can talk all we want to about complicated business deals, but this all boils down to a simple concept. when average people are losing their homes and jobs the same big banks that caused the problems got every dollar back courtesy of the american taxpayer. and the federal reserve tried to keep important information a secret. secrecy leads to distrust and the american people now distrust what happened in these bailouts. congress has the right to know how and why that happened and the american people have the right to know how and why that happened. i hope that today we can get answers to these and other important questions. i now yield to our ranking member the gentleman from california co

because that's the group you can get continuous cds the debt and you can see after the failure of lehman brotherscts spread shot up and when the stress tests were released there was a discreet drop in the cbs spreads. this stress tested banks. when i do econometrics i call this an intricate series that you can think of the counterfactual it is a very sharp discrete event that happened on may 7th of 2009 when the stress tests were released. this chart shows just for citigroup. and i wanted to show citigroup because as you know citigroup has repaid tarp funds and this shows the fall even after the period it paid back its t.a.r.p. funds. now there's a lot more to the financial stability stabilization plan. the administration of the t.a.r.p. program is obviously a big part of it. i don't know how widely known is that for the banking successor to beat considers a whole the t.a.r.p. investments payback for the taxpayer were projecting that will make a profit from the taxpayer from the investments in the banking sector. other stress as don kkohn mentioned our market and, many are to the pre-christmas le

because that's the group you can get continuous cds the debt and you can see after the failure of lehman brothers cts spread shot up and when the stress tests were released there was a discreet drop in the cbs spreads. this stress tested banks. when i do econometrics i call this an intricate series that you can think of the counterfactual it is a very sharp discrete event that happened on may 7th of 2009 when the stress tests were released. this chart shows just for citigroup. and i wanted to show citigroup because as you know citigroup has repaid tarp funds and this shows the fall even after the period it paid back its t.a.r.p. funds. now there's a lot more to the financial stability stabilization plan. the administration of the t.a.r.p. program is obviously a big part of it. i don't know how widely known is that for the banking successor to beat considers a whole the t.a.r.p. investments payback for the taxpayer were projecting that will make a profit from the taxpayer from the investments in the banking sector. other stress as don kkohn mentioned our market and, many are to the pre-christmas l

when lehman brothers collapsed in its september, 2008, it sparked a crisis of confidence like many ofed a classic run of the bank. as the entire investment banking business model came under siege. morgan stanley experienced huge swings in spreads on the threat of false swaps tied to our debt and sharp drops to our share price. this led banks to request that firms post additional collateral. in an effort to stem the panic, morgan stanley moved up its announcement of its strong third quarter earnings to september 16. but our stock remained of her heavy pressure. it lost nearly 1/4 of its value the following day, falling from 28.7 to 21.75. despite the strong results, it continued to trade lower and finally traded as low as $6.71. this crisis of confidence in the market fed a chain reaction to the broader economy, as lower prices for financial assets undermined confidence and lead to lower prices. this year was marked by rampant rumors and speculation. my management team worked around the clock to address these rumors and it -- provide investors and employees entered information. we also

institutions, and the net result is that virtually all of them were saved from collapse, all but lehman brothers which had failed before this request. and so the economy moved forward and then the bankers repaid the effort of the american taxpayers by announcing, many of them, that they now felt that times were so good for them, they could start declaring bonuses for their officers and their employees, bonuses. in the real world of 40-hour work weeks and day-to-day grind, most people see a bonus as a reward for good performance or successful performance. many of these financial institutions were literally the victims of their own greed and their own malice and their own poor planning, and then after taxpayers rescued them with tarp money, they wanted to turn around and reward themselves for good conduct. it grated on the american people, and this senator as well, and the tarp program, which was initiated to keep these banks from failing, is one which few of us would step up and say well, let's try that again, that was a great idea. i, frankly, think it was a probably necessary thing to do at the

inherited starting before, but certainly made visible in september of the year before with the lehman brothers crisis, which was the visible symbol of the most recent and serious economic downturn, which has prevailed during the course of last year with negative growth in our countries are the first time in 60 years. and combined with that, the involvement of american forces in afghanistan, the combination of their activities overseas and in terms of events and expenditures and accumulating budget deficits, a 10% plus unemployment and probably a combined on a planet of 16%, 17% at a minimum. and when you're president of the united states and you're looking at the range of problems, i think you'd have to say that those problems certainly on the face of it are more significant than 11 million people combined with the israelis and the palestinians in a city of 350 million arabs. notwithstanding the importance to all of us about that particular issue and notwithstanding the fact that when you talk to israeli and palestinian friends, they perceive this as being the center of the universe. it is not

it was in response to the fall of lehman brothers and the credit markets using ups and the stock marketcrashing -- its credit market seizing up and the stock market crashing in 2008. extraordinary steps were taken by a republican president and republican-appointed chairman of the federal reserve and it continued in a democratic administration with an extraordinary economic catastrophe. i think there's a lot to fault president bush on, but his acting -- his backing -- it was probably one of his finest hours. they can have their own opinion. but i don't think -- i think calling this stuff communism and marxism is a little strong. host: you were talking about new york state. it's the trieffecta because you have two senate races and then the governor's race. does that have any impact on governor patterson as he seeks a full term? guest: i think the key is governor patterson, i have to give my associate name gonzalez credit on the governor's races because he follows them more closely than i do. he continues to tell me that he wonders whether the governor's going to stay in that race. his pol

services reform, it will be only a matter of time before we see another aig, bear stearns, another lehman brothers and the next big bank will be too big to fail, and the taxpayers will wind up footing the bill again and again and again. i ask my republican colleagues on this committee to join with me in fixing the system. blame is about yesterday. fixing this system is about today and the future. in the aig case, we can talk all we want to about complicated business deals, but this all boils down to a simple concept. when average people are losing their homes and jobs, the same big banks that caused the problems got every dollar back courtesy of the american taxpayer. and the federal reserve tried to keep important information a secret. secrecy leads to distrust, and the american people now distrust what happened in these bailouts. congress has the right to know how and why that happened, and the american people have the right to know how and why that happened. i hope that today we can get answers to these and other important questions. i now yield to our ranking member, the gentleman from califor

financial crisis, so at this conference we did, alistair darling said during the interview that after lehman brothers and the crisis in september, he was talking to a very senior, well-respected london banker, and he said, have things changed at your institution? oh, yes, things have changed a lot. one thing we have made a firm policy that we are not going to buy any security we do not understand. wait a minute. what did you do before? these are very complicated. it is a much more complicated world, and even people that are in the middle of it do not understand. >> i have a really tough question about journalism. what is the use? you talk about the futility of journalism, but we cannot really explain what is going on. is that what you're saying? >> in my side of the business back in the late 1960's, i have a model in my mind that if we bring the right facts to bear that the system is ultimately rational. it may not be rational day-to- day and week to week, but if you bring the right facts to a situation, a policy will go in the right direction. if you persuade people this is an educational process, i

it was only a little over a year ago with the collapse of lehman brothers that we faced the financial crisis the likes of which few have seen in our lifetime. we were truly standing on the edge and staring into the abyss. for all intents and purposes, the financial system was on the cusp of a total breakdown, a great depression loomed. a year later while we can't diminish the large and real problems that remain in front of us, we did succeed in preventing the catastrophe that seemed possible, if not probable, in the fall of 2008. no one was more -- to rescue the economy from what looked like imminent freefall than chairman bernanke. i was there at many of meetings and i saw his steady hand and guidance. and that's why i'm going to vote to reconfirm him as chairman of the federal reserve board. the fed certainly made mistakes in the runup to the financial crisis. failing to use its regulatory authority to rein in a skyrocketing credit boom. failing to adequately fulfill its responsibility to protect consumers from predatory lending practices in mortgages an elsewhere, and allowing too

services reform, it will be only a matter of time before we see another aig, bear stearns, another lehman brothersrepublican colleagues on this committee to join with me in fixing the system. blame is about yesterday. fixing this system is about today and the future. in the aig case, we can talk all we want to about complicated business deals, but this all boils down to a simple concept. when average people are losing their homes and jobs, the same big banks that caused the problems got every dollar back courtesy of the american taxpayer. and the federal reserve tried to keep important information a secret. secrecy leads to distrust, and the american people now distrust what happened in these bailouts. congress has the right to know how and why that happened, and the american people have the right to know how and why that happened. i hope that today we can get answers to these and other important questions. i now yield to our ranking member, the gentleman from california, congressman darrell issa for his opening statement. >> thank you, mr. chairman, and you have our promise that this has been and

and what happened was a crisis that started was lehman brothers was that suddenly that investment demandat with a dynamic in the emerging economies stopped everywhere in the world people stopped investing, including in the developing countries. and that resulted in the very sharp downturn in the income countries, especially japan that is somewhat specialized in investment products. now, that has to be turned around. and for the world economy to grow again you need to go back to that very fast growth in the emerging economies. there's a potential buyer. the big danger is that too much perhaps in short run is still driven a stimulus and there's more needed to go back to that very fast growth that we saw before the crisis. it's a real phenomena and and it is homegrown. >> would you address the same question? >> the image that i've been sort of pushing and living with the last couple of years is this is a world turned upside down in so many ways, not the least of which we have the official site or in the emerging world supporting banks in the mature world, which you know it's a tremendous in

. >> succumb if a lehman brothers picks up this book making your case what are they going to learn? >> they are going to learn how to persuade, how to speak credibly, how to write credibly, in fact there have been business people already writing reviews about how it could make them better -- help them make better business presentations and how anyone in any kind of argument can at least be sure he or she has a cogent logical argument. that is what the b allook is about. >> bryan garner with justice scalia, "making your case the art of persuading judges."