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

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. government is

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

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

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 three of

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

it's down gradually over five years so it's not like people react suddenly to some event or like lehman brothers 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 think this is

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

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

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 european

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 assets of mo

. >> 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

in the fall of 2008, lehman brothers-- and all the highly leveraged lenders-- didn't. second, the macroeconomic situation. in the fall of 2008, the u.s. economy had already been in recessiofor eight months. while it continues to disappoint, the economy today is in its third year of expansion. third, in the past two years, american companies and consumers have vastly improved their balance sheets. the savings rate has gone from nothing in 2007 to about 5 percent. companies are sitting on more than $1 trillion in cash. taken together, these differences make the u.s. system far better able to absorb shocks than it was three years ago. i'm daniel gross. >> susie: we have more on safe haven investing in tonight's "word on the street." you can find it on our website. the street's debra borchardt joins us on nbr on pbs.org. that's "nightly business report" for wednesday, august 10. we want to remind you this is the time of year your public television station seeks your support. support that makes programs like "nightly business report" possible. thanks for joining us. i'm sus

totally outrageous to ask to see the loan files that people that merrill lynch's of the world the lehman brothers putting these c.e.o.'s together don't even have the loan files never looked at the loan quality finally going to compare the looting going on in the u.k. with the looting by the bankers yes when your most elite most powerful members of society. upped strategy of what the famous french economist very conservative called plundering then as he said they will develop a morality that doesn't simply permit plundering but valorize is it and when that happens the moral structures of the society will inevitably deteriorate in the upper classes that it leads to polite living. in the underclasses it leads to st louis south ok well let's follow up on this on a word so we've got looting going on in both saks strata of society now the public has demanded something like sixteen thousand police to go into strains to stop this street looting where were they and demanding similar actions to stop the bank looting that hasn't happened and the a bomb administration has followed the bush policy is doing ev

to investors when important there and the two thousand and eight collapse of investment john lehman brothers the largest bankruptcy in u.s. history is on many a financial mine right now fears of a repeat ascending markets into choppy waters to jason johnson professor of political science thinks only wrist averaging investor confidence will save the u.s. from recession the companies that have lost stock value over the last two days or two weeks these companies aren't magically not working anymore it's just that people's confidence is at an all time lows so if confidence stays low we will see another recession of confidence improves the economy will grow the only problem with that is when someone actually wants to call it or most of the u.s. debt right now is owned by china china is not about to reclaim the state of virginia they're not about to reclaim new york city by calling in their debt they primarily want to see america so if legislation can be passed united states if the president can sort some control and there's still some confidence in our future economy and the debts are less of a p

. >> 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'

of course when the world was in a different place, lehman brothers declaring bankruptcy. are you seeing the same kind of volume of redemptions from equities you did then, and the same kind of fear? or is this different? >> i think this is clearly very different than 2008. 2008 felt like a very, very unique time. there was uncertainty as to who was going to be in business from one day to the next there was uncertainty on the part of investors as to what the next days would bring. i think what we have seen this week has just been a period of intense volatility as opposed to fundamental questions about the future of our financial systems. now that's not to say that they haven't been active. we had a day earlier this week where we processed over a million trades, a rather remarkable number. for the most part investors are looking at this volatility with understanding and with the realization that this is not 2008 all over again. >> how do you protect your portfolio in moments like this in terms of volatility? what should investors know? >> well, it's difficult to make the dec

good question in regards to why have an insider trading been investigated in the general sense lehman brothers for example was known by some other card counter party 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. in the late forty's and early fifty's when the moon was in full swing in the us humans minds mushroom and parts of arizona but when demond dried up the facilities were burned and leaving an environmental hazard in their wake was all of these reports reports radiation poisoning threatens the area's few remaining indigenous people in. this northeast part of arizona accomplices part of america's navajo nation native american governor terry torrey rich in your rainy arm but ruined by the us is demand for it it's a different world we don't have money we don't have the funds the people from the dominant society have we also have conditions we're trying to live through like living in the abandoned your ania marion's here and drinking with contaminated waters

lehman brothers was an all-or-nothing situation. either they saved it or it failed completely..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 gloria borger, thank you so much as well. >>> continuing this conversation, you know his name. donald trump. he is an outspoken critic of president obama. that's putting it mildly. coming up next, i'll ask mr. trump why he calls this debt agreement a joke. don't miss this. >>> so the d

question in regards to why you have an insider trading been investigated in the general sense lehman brothers for example was known by some of their card counter parties 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. the uranium boom of the line nine hundred forty s. made mines spread like mushrooms and paul. eventually the need for nuclear fuel declines that after decades the facilities were abandoned and left to contaminate the environment now disease from radiation threatens to be even digits people extinct in the area but it's not reports no one seems to care. this northeast part of arizona compass is part of america's navajo nation native american governor territory rich in your rainy i'm ruined by the us is demand for it it's a different world we don't have money we don't have the funds that people from the dominant society have we also have conditions we're trying to live through like living in the abandon your a new mary is here and drinking the contam

perspective for us how deep is the financial crisis at the moment are we talking collapse of lehman brothers bad or worse. no i think there's obviously a lot of uncertainty about the eurozone and what will happen. and of course the eurozone summit wasn't very conclusive or helpful in that respect so that's a great deal of uncertainty which is worrying the markets about the situation of banks in europe i don't think that that i think that will be resolved but it may take some time to resolve it that's the problem meanwhile markets are very nervous and what will be the boiling point. do you think you know what they saw we lined he to see a double dip recession in europe and beyond. i don't think it's likely to will be a double dip no i think the slowdown you go to remember the world growth is still quite rapid and has slowed down from five percent to probably a bit over four percent that's not a double dip recession but i think what it is happening what is happening is that the western economies the richer economies are having a harder time of it because you know all the growth if you like in