One Year Later: Remembering the Meltdown

>> The 158 year old investment bank Lehman Brothers was on the brink of failure. After bailing out Fannie Mae and Freddie Mac the week before and Bear Stearns the previous March, the Federal Government decided not to rescue Lehman. That decision set off a chain of events which nearly brought the world financial system to a halt. A few days later, insurance giant AIG nearly collapsed and had to be rescued, credit locked up around the world and financial markets tanked deepening a recession that had begun ten months earlier. Treasury secretary, Henry Paulson, went to Congress to ask for a $700 billion dollar bailout for the nation's banks. The crisis spurt calls for financial of forums, few of which have been instituted, joining us for some perspective on the financial crisis and its aftermath is banking analyst Dick Bove. Good evening Mr. Bove.

>> Dick Bove: Good evening.

>> Lets go back just a bit. How do we get to the point where we face this horrendous financial crisis?

>> Dick Bove: Well I think mostly simply speaking we had loans growing at rates three times faster than income for a five year period. If you keep growing loans at a faster and faster pace than you're growing income, obviously you're going to reach a point where income is not enough to pay the debt service on the loans and you're going to start to have a collapse and we had a collapse.

>> Taking a look at what the governments did, the bailouts etc., do you think the government did the right thing, at the right time?

>> Dick Bove: No I think the government was stretching. It was trying to figure out what was going on in the financial system. It didn't have a real good feel as to how bad or deep the crisis was and because of that it let Lehman go. I think if the government understood what the result of letting Lehman go would be they would not have let that happen.

>> As we discussed, there are calls out there for financial reforms. These calls have been out there for some time. Few of these have actually been instituted. Do you think regulation's a good thing at this point?

>> Dick Bove: I think it's a terrible thing. I think that we are in a situation where either the regulators do nothing or they overreact, and after having done nothing, they're now overreacting. And as a result of overreacting I think they're going to basically harm the U.S. economy and the financial system.

>> Banking analyst, Dick Bove. Thank you so much for your insight.

==== Transcribed by Automatic Sync Technologies ====