CNBC anchor Bartiromo says government 'needed' to let Lehman Brothers fail

Maria Bartiromo

CHICAGO -- As Wall Street began crumbling two years ago, Maria Bartiromo knew she had to write a book about it.

The financial world's titans were huddled to make a decision that ended up igniting the 2008 meltdown: letting Lehman Brothers fail rather than rescuing the multibillion-dollar investment bank.

The high-profile CNBC anchor had a proverbial front-row seat to history. She spent that weekend in off-the-record chats with key figures, then talked to the top players on camera in the following days and weeks.

"When I was first covering the crisis, I was thinking 'This is such an unbelievable moment in time,' " she recalls. "I was interviewing people literally morning, noon and night, and I felt like I was hearing truly the insiders' account."

Bartiromo is out this month with "The Weekend That Changed Wall Street," a tick-tock account of the frantic weekend combined with an extra year's perspective that first-year anniversary accounts couldn't offer.

Among the behind-the-scenes nuggets: a source's tip about which Lehman executive went to The Wall Street Journal with a desperate leak, and a veiled comment by

then-Treasury Secretary Henry Paulson that turned out to refer to government efforts to hide Citigroup's insolvency.

Bartiromo also believes the government "needed" Lehman to fail for political purposes, as proof the financial system was in the process of collapsing.

She elaborated in a recent telephone interview with The Associated Press from Italy, where she was covering the Ambrosetti Forum, an annual gathering of political and business leaders. Here are excerpts:

Q: How do you think the events and decisions of that weekend might have played out had the major players known the market would collapse?

A: Would they have saved Lehman? I don't know. To be honest, and I get this feeling when I speak to insiders in Treasury, I think they needed to prove to Congress, "This is real."

They needed a failure on their hands to get that TARP money, frankly. Otherwise, Congress was saying, "What do you mean? We're not going to allocate hundreds of billions of dollars to the financial services sector."

I think they actually needed to prove that there were going to be collapses. I think that was part of it.

Q: What did we learn from the meltdown?

A: First of all, we've learned all about debt. Debt has hit a tipping point with not only corporations but individuals. More than ever before, individuals are talking about deficits, are talking about $13 trillion debt in the U.S. And the personal savings rate is up to 6 percent.

I think we've also all learned the lesson of overpaying managers for failure, of pay for performance. That's being looked at and scrutinized. Boards of directors are on a much hotter seat than they've ever been.

Q: Have you seen any changes in attitude on Wall Street or elsewhere as a result of the crisis?

A: I think that there is definitely a humility, a little more conservatism. But you can't forget that Wall Street companies are in the business of making money and doing deals. And that's what they're going to do.

There's been a change, and this is not a good change, in terms of class warfare.

This whole idea of "Business is bad and the average guy got screwed and the fat cats are still making all this money," I would like to be able to come up with solutions rather than pointing fingers and creating this class warfare.

Another negative change: The U.S. did lose some credibility. Because unfortunately, it was a major blow to the world.

Q: You wrote that a year ago the financial system was like a patient who had been upgraded from life support to critical, still very, very sick. What's the patient's condition now?

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A: The economy is still very fragile. There's so many open-ended questions that CEOs are not going to add heads to the payroll in a very substantial way. And as a result of that, unemployment will be an issue into 2011, just based on conversations I'm having with managers of businesses who are on the ground.

So I think that the patient today is better but I think we are still looking at a fragile situation.

I do not think we're going to see a double-dip recession, frankly. But I also don't believe that we're going to see any vibrancy any time soon.

Q: You also say you don't think we will be able to avoid another big setback like September 2008. Why not?

A: First of all, we're an optimistic society. We forget, and then we believe quite easily. Look back to the bubbles that we've lived through: the dot-coms, oil, housing prices.

Hopefully, we'll be smarter. There are important lessons for investors to take away from this collapse: That fundamentals matter, and if it looks too good to be true it probably is. But there will be another blowup because this is free markets and free markets are messy. Things don't always happen in a systematic way.

Q: You've been doing your job for a long time, 20 years. Is it still fun for you?

A: I'm having the time of my life. People always used to say to me, "Don't you want to go on the 'Today' show?" and "Don't you want to go into general news?" No! I love business news and markets.

This year was so extraordinary for me. I'm being inducted into the Cable Hall of Fame. I just celebrated 15 years of being the first person to broadcast from the floor of the New York Stock Exchange, and they let me ring the opening bell.

I mean, come on, it's unbelievable! I'm so grateful.