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coming up on "streets signs," mark, i'm excited about this wunl. we decided to take a real look at the u.s. economy. so european, the port long boeah in california, port of houston, we talk about energy, and the port of boston to find out where there is any tea parties going on. that's today at 2:00 on "street

signs." >> i think it's like dining out with sailors. >> i do like those ships.. >> thanks for watching "squawk on the street."." see you tomorrow. >> time for "the call."." good morning, and welcome to "the call," everyone, i'm trish regan live at the financial markets here. we are off 30 points on the dow, despite better than expected numbers out of goldman sachs. coming up in today's call of action, we're going to talk retail.. better than expected number on the retail sales. however, what is this saying about the critical back to school shopping season? we're going to talk about that. plus, what you invest in right now. larry. >> thanks, trish. i'm larry kudlow. well, it didn't take long for sarah palin to write an op-ed, criticizing president obama's cap and trade energy policy. think of that. we're going to debate whether she is right in our call of the wild. >> and i'm melissa francis. first on cnbc interview with marquet sims, her take on the retail sector going forward and to the all important back to school shopping season. this is "the call" on cnbc.

all right. sort of a buy on the rumor, sell on the news trading day so far this morning after yesterday's big gains of. stocks modestly lower despite better than expected earnings from goldman sachs and johnson & johnson. on the economic front, the retail sales number was sloppy.. that's how i would characterize it. producer prices came in on the high side. businesses are still cutting inventories.3 and small business firms are less optimistic. the net-net of whole net dow is off slightly 20 points, as you can see, the s&p is down just about 2 points and the nasdaq is off about 5 points. i want to see where oil is, because we have the opec representative here, melissa francis, straight from the horse's mouth. >> i cannot let you get away with that. i just -- >> just a moment -- >> can't let that happen. opec representative?

i mean --. she's got a special little opec line here to discuss the whole thing. so trish -- >> he's never going to stop. >> i am somewhat underwound. >> he just keeps doing it. he loves it! he loves it when oil is down, because then he gets to tease melissa about it, and also he loves it, because i guess it's good for all of us, right, larry, good for the economy and that will help things. but a good characterization of the retail sales number. sloppy is sort of what it is, and that's in part because if you take out gasoline, if it you take out autos, really it's a lackluster number. but we're going to talk about that coming up and just exactly how you want to position your portfolio ahead of the critical back to school shopping season.. in the meantime, i want to get over to a guy that we have not seen in quite a while. at least it feels like ages. mr. pisani, welcome back.. >> great to see you. >> great to see you. >> we came right in the middle of earning season and there is a lot of interesting things going on here today. >> certainly is. but, you know, one of the things we were talking about earlier, you and i, is that the volume is

not what you kind of want to see. i mean, but it's difficult, right? >> yes. >> there is a lot. >> there is somewhat seasonal l summer volume. here's the problem. it has been light, really, for several months. we had a big spike up in march and april, and it started notably declining in may. that's not typically seasonal, so i would have to say, in the last few months, we have seen even lighter volumes than typical. >> goldman sachs, better than expected numbers. but you know, as we have all been saying, it's that old adage, buy on the rumor, sell on the news. >> and meredith whitney had a great call yesterday. she said, i'm not upgrading because i think the global economy is doing better, which would be the traditional way you upgrade goldman sachs. she said, we're upgrading because they're masters of training and with the environment of oceans of treasury becoming available, they are masters of trading, as well as the derivative products. and indeed we saw that in the numbers. record revenues for fixed income trading and over the top line of $13 billion. >> always goldman. and i used to at goldman -- work at goldman.

and praising goldman.n. that said, a lot of other firms out there too that should get their just due. morgan stanley. >> morgan stanley will probably also do great numbers. but if you are expecting blowout numbers from everybody else, i think it's somewhat unlikely. bear in mind that the estimates from these companies, the analyst estimates you can drive trucks through was about $2.50 to $4.50 for goldman sachs. that was the analyst range. so nobody has a clue exactly what some of these companies are going to do. >> let's dive into this retail sales report, because you are making the point, and we have said this. it's not all good news here. >> yeah. here's the important thing. 0.3% autos, that's not bad, up several months in a row, but it's really spotty here, and that's because if you look compared to last year, we had those rebate checks last year that people were spending, and the comps are tough now. so electronics and food and beverage, sporting goods from up. but a lot is down, furniture, building materials, department stories, and restaurants. and yes, they're going to get better. comparisons are going to get better as the year goes on for these companies, but i think it's going to be a pretty lean

back to school season. at least that's what a lot of people are talking about. today most of these department stores, most of the big names are on either side of positive or negative. >> we're going to talk more, with some other analysts joining us in a discussion next on just exactly how you want to position yourself ahead of this back to school shopping season. >> a very interesting comment csx had, this company ships rail cars all over the united states, they just came out a momenting and said their freight volume should be down. it was down 21% today for the second quarter. getting better. so maybe it will only be down 12%, but still tough. >> okay. very busy earning season. so good to have you back. thank you so much. let's head over to melissa now on earnings. >> these, trish. let's talk more about goldman sachs and johnson & johnson, joe was cracking me up. mary thompson is at our earnings desk. the goldman conference call just began, and she'll join us. and also in cincinnati, banking

analyst matt mccormack with us. i'm going to attempt a serious question. goldman sachs, blockbuster quarter. trading up 9% which makes me worried. did they trade at the end of march really well, like in april, like other people? what does that mean for now? >> volatility is slowing down a little bit. that was interesting. yesterday volatility dropped off sharply, and volatility with the traders.s. but lloyd blankfein did make some comments in the press release. he talked about how you're looking at still fragile markets, but still seeing improvement.t. >> you're supposed to be like vanna white. >> you are. >> i'm waiting for the charts to come up. >> for some reason, they're stressing that it was basic blocking and tackling and playing the newer operations at goldman. >> like at 90 -- >> that is what they do. but the risk supposedly was flat with a year ago. >> there it is. >> got to be impressed with the stock's performance. it's now 102 points above a tie. >> this is what we were talking about today, is just this level. it's been above the flat line all morning long, two very quick

drops below that. if you want to show the one-year chart, though, this is what we have been talking about earlier this morning. dick beauvais said, look, you saw a stock at $8. if you want to continue make climbs and gains, you want to see strong numbers. so just to be able to hold on to the $8 yesterday. >> a lot of people thought that was buy the rumor, sell the actual news. let's bring in matt mccormack. matt, were you dazzled by the results like others were, and do you think this is going to carry over to other banks, or is it just goldman? do you expect the same thing from jpmorgan on thursday? >> they certainly were impressive results. i think you could see good but not as great results from the other banks, especially those associated with proprietary or capital trading. that's the only wrinkle i see in this area, is that the revenues associated with trading and principle investments were essentially ten times those of other business units. so it certainly helps to have massive fiscal and monetary stimuli. and goldman is clearly the

flagship of the financial industry in terms of taking advantage of market volatility and trading opportunities. hopefully, we'll have that -- you know, they'll continue that run. you know, my concern here is that essentially this still in our opinion is a relief rally that the fundamentals still haven't really turned a corner yet. we're still skeptical on this broad market rally. and i think in this trade, goldman is clearly in the flagship area again. but i'm concerned about the legs, as well as the longest of more trading opportunities like this. >> and the underwriting was huge for them. does that continue, as well? >> you know, it was surprising when, you know, earlier this year, if you told me that you would see a great deal of revenue growth from secondary and ipos, i would have said you're kidding me. but clearly that is an area where goldman is essentially becoming a microsoft-like monopoly in that area where if people are going to do primary and secondary offerings, they're first is goldman. the others will certainly participate, but not as much. >> by picking up market share

with the demise of bear stearns and lehman brothers, and i guess especially in bond trading, lehman and bear were big bond houses and so is goldman, and also perhaps in the retail, the so-called upper income wealthy individuals. >> absolutely, i agree, larry. you know, goldman is essentially the last investment house standing, and so they have the ability not only to attract and retain great employees, but the next second derivatives, they have the ability to attract and retain great clients. and i think that's an area where most people if they're going to go out into the public marketplace, goldman is going to clearly be in the position.n. that doesn't mean the other larger banks or other investment houses will have opportunity. it's just that they have to be essentially the second call or third call, not the first. >> let me ask you guys about johnson & johnson, becky. i can you probably have a chart, as well. were these guys hurt to a turn to the generic products? using like regular baby powder

instead of name brand? the q-tips, you get the plain brand ones. >> on amazon people said they traded down. >> did that hurt them? >> it did, if you looked at the consumer overall, $4 billion in sales. listter even, the oral care products, a drop in u.s. sales. one interesting thing, though, and you can see this dow component up by almost 1% today in a down market. this is a very strong showing for this company. but again, start looking at what they did in the u.s. skin care sales, and melissa, i thought this was really interesting. they talked about how avino and newt jenna, all of the skin care sales up 8% in the united states and that may be one area where the down trade is helping them out. because if you think about it, people using avino, newt regina maybe using that instead of cliniq clinique. >> people wear contact lenses longer. the extended wear. >> you smell like baby powder.

>> i just actually did -- >> you're like this all day, every day. >> go like this, joe. you'll probably see some -- clouds -- >> larry, help me out. >> who doesn't like the smell of baby powder, seriously. >> are they going to keep this up, do you think, getting back to something serious?s? >> this is a trough quarter. >> it is. supposed to be the worst quarter. if we want to look at a longer term chart here, just like all these other companies, they bottomed outweigh back here. and it's pretty strong sales since then. and as the analyst mentioned today, this is a trough quarter. >> it was a billion sdlars dollars of generic competition taken off the top line. >> guys, thanks so much. >> thank you.. and a programming note. on thursday, i'm going to have a live, sit-down exclusive with cfo michael cavanaugh on the company's earnings right after their call on thursday. you don't want to miss that. trish? >> okay, sounds good. and i am lucky i got to see that little dance from concernin.

when we come back, retail sales, cpi, and the economy. we're going to break down the numbers and talk about exactly what they're signalling for economic recovery. larry. >> all right. plus, america's new consumer. the recession shopper. find out how we're saving money and staying stylish when we talk live with the ceo of sims and filene's. they lure you in with a $5.99 trade, then charge you 15 bucks. you get a low price, but only if you make a ton of trades. at td ameritrade, every online stock trade is just $9.99. period. no matter how often you trade. no matter how much money you have in the account. i hate those hidden fees buried in the fine print. surprise! it's a maintenance fee! i hate surprises. at td ameritrade, you never pay a maintenance fee. you get low, straightforward pricing, so you always know exactly what you're paying.

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okay. welcome back, everyone. i want to point out markets climbing back here a little.. i'm looking at the dow, down 10

right now. so we'll keep an eye on it for you. june retail sales, up 6/10 of a percent, but the back to school shopping season is on the horizon and the question is, will this slight rebound and i say slight, we're going to get into the numbers more in detail. will this slight retail boost be enough to help turn this sector slump? joining us now, we have jan nicean and the chief research officer and retail analyst, and also from los angeles, mr. steve liesman. dana, i'll kick it off with you. your overall reaction here to the number. >> overall reaction to the retail sales numbers, x auto is a little light, below expectations. it was food prices, certainly energy and gasoline that drove the increase overall.l. >> okay. so what does that mean? in other words, as larry described it, kind of a shop sloppy number.r. as bob was saying, kind of a spotty number. what's your take-away here? >> the take-away, that we're not

seeing any real pickup in consumer spending.g. the back to school season is going to be sluggish at best, and everything is still going to depend upon price. the consumers only react to discounts these days. >> jan, do you buy that? are consumers very much still in that bargain shopping, bargain hunting kind of mood right now, and is that going to continue through the fall? >> i think dana is exactly right. the consumer is only buying needs, the consumer is buying on events. we're going to see a back to school season that starts late for a couple of reasons. one being the consumer is going to buy late, the other being the holiday is moving back, so it's going to be a tough sell for the consumer and back to school.. >> steve liesman, three straight months of declines for core retail sales. three straight months. it can't be good. and i also noticed, general merchandise and department store sales down three straight months. what's your take? >> i am sorry to correct you, larry, but i believe it's four straight months. >> oh, is it? i just have three on this sheet, but you're probably right. what does it tell us about gdp

for the second quarter? >> well, the second quarter -- you know, larry, i'm not really concerned about the second quarter. i think it's a wash. i think the market has really discounted it. it's going to be down. you know, in that 3% range, maybe, you know, 2 to 3%. the focus is on the third quarter. and i just want to give one possibility of good news out of the retail number. and i'm interested in what dana has to say about this. given the need to spend, consumers have the wherewithal to drive that retail sales number up more than expected. i think the down side of that is they may not want to, that given their druthers, what they would do is fix their balance sheets, which is really what this process is all about. that when these gas prices come off as they surely will now, that they'll go back to saving more rather than spending. but they do have the wherewithal to push it up. they were able to spend on gasoline, because they needed to. i think the desire, though, would be to rebalance -- it's all part of a process, larry. at the end of the day, consumers have to get their balance sheets in order.r. they need to reduce their debt levels.. that's where they are going, and

that's why you're going to have flat and very modest gains in retail sales in the coming quarters. >> to steve's point, we're talking about pent-up demand, and when does that start to spill into retail sales.s. >> i agree with steve in that consumers are looking to help the balance sheet. the savings rate isn't at or near 7% for no reason. replacement or replenishment spending is actually beginning to happen. we're seeing a slight pick up in women's apparel in department stores, more so than in the specialty stores. we'll have to see for back to school. you need to spend for the kids. they're going to spend at the e lower income -- at the lower price points, like the old navies. >> steve, let me come back to you -- i'm seorry, jan, let me come back to you. i would like to put a positive spin on this, but i'm having a lot of trouble.. with jobs falling, wages flat and hours worked down, will consumers really have the resources going into the rest of the summer, much less the school snoen i season?

i mean, how much can we make of this picture? i want to be realistic here. >> even if they have disposable personal income, which is really what drives the consumer, it's going to be tough to get them to spend t. the savings rate is going to go up. we have seen that. that's going to stay with us. it's going to be tough, too, to bring them into the store, unless you've got a real deal for them. so that can hurt the aur on the price point. so we could see people pushing down on price point. we could see input prices be down 4 or 5% for fall. that allows retailers to drop the price. but the question is, can they still make money at the lower price point when they have to cover their expenses? >> even more importantly, can i still make money as an investor? hang on, steve. we want to get both these guys. dan and dana, dana start with you. what do you as an investor like right now? what would you recommend? >> we think the trend of weak consumer spending continues, and therefore, some of the discounters and off-site retailers continues to do well.

tjx, lost stores, some of the value names, family dollar, even walmart, we think will continue to do well. >> jan? >> i like opportunity. i think macy's has an opportunity with their new program and the big cost savings. i think american eagle has an opportunity because they're starting to benchmark after arrest owe positivel. they seem like strong players. and i like payless shoe stores which is collective brands. i think they can actually raise the aur, have a higher price point and be under the competition. i like all three.e. >> steve liesman, on the way out real quick, both the core and the overall ppi jumped unexpectedly. are you worried about that? the end of deflation, that's for sure. >> i'm not. i'm not. i was on vacation, larry, and the reinflation trade or inflation concerns went away. i just want to tell you one thing, larry. you've got to pick one thing to be depressed about. you can't be depressed about two things.. you can't be depressed about a high savings rate and on the other hand depressed about high debt levels.s. savings rate cures the debt

problem over time. pick a thing, there is plenty to be depressed about, larry, pick one and go with it. >> the within thing i'm not woerds about is not the saving rate. i like savings. the one thing i'm worried about is the jobs issue. we have just got to see some jobs creation and do something to help businesses create jobs, because that is -- business creates jobs, jobs creates income and that's what sells. >> i want to thank the entire panel. and larry, i want to thank you, because you've been so bullish and strong on the economy for quite some time, and you're starting to make a little bit of a shift, which i think is an interesting -- an interesting phenomenon. >> my point is, trish, just briefly, going back to the june jobs report, and i've written a column in and a couple of blogs on cnbc.com. i am worried about this picture. and how it's going to affect it. to me, jobs are the key to a real recovery. i want to be honest. the leading indicators look much better, but the jobs indicator doesn't look good to me. >> i wholeheartedly agree with you. i know we've got to wrap, but

what about inventories? at some point, businesses are going to have to start replenishing their inventory. >> all right. you're right about that. i'm hopeful. up next, more on consumer spending with the ceo of a major discount retailer, sims. we will have marcy sims joining us live right here. >> plus alaska governor sarah palin is sounding off on cap and trade. will the obama energy plan lead to an economic disaster? we'll debate it today coming up in today's call of the wild. we'll be right back. undefeated professional boxer floyd "money" mayweather

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okay. opec is trimming its estimate for world oil consumption this year, and now expects demands to decline by 1.65 million barrels, 35,000 more than its previous forecast and oil is lower than where it started the day, although it is higher on the actual day from yesterday's close. so you can see there, up 53 cents, 6222 the last trade, larry. >> june retails posting a small jump that beat expectations, but a sloppy number underneath the headlines. questions, as more americans are lightning their belts, more are finding ways to recession stop at discount retailers like sims and filene's basement. joining us is marcie sims, the ceo of sims group, sims corporation. miss sims, thank you for coming on. >> my pleasure, larry.

>> all right. you're discounting heavily. how is your traffic flow? is it working? >> well, we've always been off price. there is a difference between an discounter and an off pricer. a discounter pays wholesale and takes a shorter mark up. an off pricer buys below the manufacturer's wholesale and then takes a shorter markup. sims has been the off price apparel retailer for 50 years, and filene's basement has been an off price apparel retailer for 100 years. >> how does that affect your property margins? >> well, because of our business model, we are always lean, never mean, but we have always run a lean shop. our business model reflects that kind of margin. >> yeah, marcie, are you getting a better deal from the people -- >> i'm sorry, i just lost you. >> if you can hear me now, are you getting i aye better deal when they're more desperate when they're selling clothes, i think that's what larry is asking, and also how are things shaping up for the fall?

are you getting a better deal?? >> we are getting a better deal, because we are now going with double strength into the apparel market to our vendors, because we're buying for both sims and filene's. we're keeping the companies very separate. they have a very different consumer base. but there's an overlap of the vendors. so we share about 40, 50% of the vendors, depending on which apparel it is. whether it's men's, women's, children's or shoes. >> and a lot of people are focused on back to school for the retailer, because retail sales, obviously, have been pretty disappointing, and you know, maybe back to school will be the come back.. how do you see things shaping up right now? does it seem like it's going to be better or worse than expectations? >> i think it will be soft. i think that there is a lot of accommodation. consumers, americans, are very resilient. they're very creative. they understand that this is not the right season to have the can i see go out and buy $150 jeans. we are doing deny i am promotions in both sims and filene's. and we expect to do very well.

but those price points are going to be 50 to 70% below the regular retail. >> marcy, just to circle back to the first part. what kind of traffic are you seeing on your floor, and how is that translating into sales revenue volumes? >> well, there has been a decrease of traffic. i think that there is a decrease in traffic involved. we are free standing retail stores, so we are destination stores. and in most cases, we have seen since actually the rise in the oil prices last year, we have seen people condensing their visits. so that instead of just hopping into the car and going to buy one or two things, they are coordinating their trips, so they're making three stops on the same day. >> okay. >> and that changes traffic. >> marcy sims, thank you so much. we are going to send it to scott cohen who has breaking news right now in buttner, north carolina.. scott, what do you have? >> in north carolina, the federal prison complex here where bernie madoff is now an

inmate, he arrived a short time ago. we can show you tape of him arriving here. he was the second person off a bus after taking a long bus ride from atlanta. we are told by local prison officials, he is being housed in the medium security section of this sprawling prison complex. so he will be in with medium security inmates. that is not a particularly pleasant life. it also means visiting hours for his wife ruth or anyone else are limited as opposed to inmates in other parts of this facility. bernie madoff, 71 years old. we are told, again, went straight to the medium security section of the federal prison -- federal correctional complex here in butner, north carolina. we do not know how long he will be here in butner. of course, he was sentenced to 150 years in prison. whether this will be his permanent home or not is so far still to be determined. melissa? all right, scott, thanks so much. trish. thanks, guys. when we come back, details off the goldman sachs conference call. plus, will other big banks outperform this earning season?

we're going to discuss that one for you. >> call of the wild. is the obama cap and trade plan a bridge to economic disaster alaska governor sarah palin is sounding that along, and the details coming up on "the call." 

welcome back to "the call" i'm mary thompson. goldman sachs knocking the cover off the ball in the second quarter.

beating earnings estimates. t the's cfo is holding a conference now, saying the current environment is not conducive to straight forward solutions and that's an environment benefitting goldman, whose clients increasingly need the investment bank services. here is highlights from the call that just started 30 minutes ago. first of all, it's thick, which is its best performing -- best performing sectors, this is within investments or it's trading and principle investments unit. fixed income currency and commodities. the results were driven by strong performance in currencies, as well as credit.t. this is a change from the fishifirst quarter. also said the world is still not a great place, and we are far away from being out of the woods. commercial real estate was a drag in goldman's principle investments and some of its other trading operations in the quarter. and the $6.6 billion in compensation or 49% of revenue put aside in the second quarter, that again reflects the second

quarter results. remember that whatever is decided on compensation will reflect the year-end results so we still have half a year to go to determine whether or not those high compensation levels will continue for goldman employees throughout the year. he was also, when asked about the added capital that goldman has needed to add, whether or not it is a return or a drag on returns right now. he said yes. it certainly is. but the risk-reward of having added liquidity continues to outweigh the concerns about that drag on returns that the added liquidity basically is putting on goldman. also, in talking about how they mark their commercial loans, he said 6.4 billion of those loans were marked in the low 50s. again, speaking about commercial real estate loans, this continues to be an area of interest. keep in mind, of course, goldman sachs beat the street, posting stronger than expected earnings of 493 a share on record revenue of $13.7 billion in the quarter. the majority of that record revenue, over $10 billion generated by its trading operations, which the cfo, david

very near said on a earlier conference call with the press was done by basic blocking and tacklingel. a couple other things from the conference call. the second quarter head winds the company saw included low ceo confidence which hurt m&a activity and said also we have no direct exposure to the consumer, which would benefit the company, and there is less risk capital available, meaning fewer competitors in the marketplace right now. trish, back to you. >> okay, marry thompson, thank you so much. we want to get some more on q2 earnings on the heelgs of the goldman sachs call. will other financials outperform? here, david stevenson, from hart see capital management. and back with us, banking an last, matt mccormack. matt, i'll start with you. you look at goldman sachs, and my question is, is this sort of a stand-alone company? i he mean, over and over again, its reputation kind of precedes it, and people think goldman,

you know, this is just really the one -- the one standout in this space. but are there others that might be an opportunity for investors right now? >> absolutely agree with your sentiment that they are the -- the blue chip trading opportunity within the financial services community. i think there are other opportunities, whether they be jpmorgan, bank of america, even citi, that could prosper if faced a similar environment, where you see a bounce off the lows of relief rally, so to say. they should make money in this environment. however, there's one point i picked up in the conference call that mary talked about that i think is something people should focus on is the $700 million charge that goldman took for their commercial real estate.e. that is something that many fear is the next shoe to drop. that is something that even as the consumer is crimped, certainly people with cre exposure, should be a little more worried, as well. that could also be a drag on future returns. >> let's continue with that theme for a moment, matt, and

they did say they were marking their commercial loans in the low 50s. is that low enough for you, do you think? >> it's -- you know, it's something, when you see the massive trading revenues that they can generate, that certainly dwarfs that, at least in the short term this concern. but longer term, i think that's a symptom of further issues within the economy that frankly, as goldman says in their conference call, we are not out of the woods yet. you look at essentially a bankrupt consumer, which that doesn't impact goldman, but you also have higher unemployment, you feel that people in potentially the rise for interest rates could occur.. there are further issues out there that i think in the general financial sense i don't think this is the sector that's going to lead us out. it's great that you're seeing a short term trade, but i doubt this is a great investment opportunity. >> david, let's continue this. goldman toxic assets.. what can you tell us? goldman toxic assets. we have mentioned commercial real estate, we have mentioned commercial loans. what about the cdos, the mbss and the resttive? >> not much is known about them.

not a whole lot of exposure there, and that's part of the problem. that's what got us into the mess, obviously.y. and it's not much better -- we don't know that much more about it. and not just goldman, but with any of them. >> i mean, a zero interest rate, just to continue this -- a zero interest rate makes it a lot easier to finance these assets. the mark to market reform makes it a lot easier to finance these assets. but -- but, but, but, how can we be genuinely optimistic unless we have this information about all of the baskets of toxic assets, and why the heck isn't goldman talking about this? >> well, none of them are. but you're absolutely right. we can't. we need more information on these. we need to know what they are. what constitutes the pools, we're not getting it. but i will tell you this, larry, to be optimistic about it. and you have pointed this out several times. when your borrowing costs are so low, you can lend out almost anything and make decent money on it. assuming it's a good loan. >> i mean, that's the steep

upward yield curve to me ask the ultimate, ultimate bailout for toxic assets. but i am troubled, matt, by the absence of information, and i want to hit another layer. is goldman still using the fdic guarantees of their debts? >> i believe they are. >> and so are they taking risks off of those guarantees? >> if there is an opportunity for profit, i guarantee goldman is taking it, and i believe they are taking the fdic trade. >> what do you think about that? is that something that should be remedied? why should the taxpayer finance goldman's leverage? >> they already are, larry. they financed essentially these quarterly returns. goldman is going to look at this situation as a quasi hedge fund. heck, they are a hedge fund in many cases, to give outsized returns. few should be surprised when they get outsized returns.s. as you point out, the borrowing costs are so low. the question happens, what do they do when this relief rally or borrowing costs increase? that's when i'm going to say, how are they traversing this difficult market environment and i think there will be more struggle if not only in line for

them, but also the financial industry. and i think it's something that people should really focus on. >> okay. we have talked about taxpayers. let's talk about the compensation issue. dave, $6.6 billion set aside for compensation. how is that going to fly in d.c.? >> well, d.c. doesn't have much to say about it, outside of the issue that larry just brought up, with the -- >> with the fdic. >> but as far as compensation goes, one -- the main reason they wanted to pay the t.a.r.p. money back was so they could continue to attract good and quality employees by paying them a lot so you can't really begrudge them for the compensation issue. in fact, i think you're going to see many of the other winners in all of this doing the same thing. and i think that's a great idea. you're going to get the best people, and you're going to be in control of your own destiny. >> okay. so we might see a return then to the compensation levels, not necessarily of 2006, 2007, but certainly an effort to try and recruit the best and the brightest employees. >> you can't blame them for it. that's how these guys are so good at what they do.

they have the best mouse trap. >> all right.. we've got to leave it there.e. we're out of time. but thanks for joining us. we really appreciate it. we're going to continue with our earnings central in the next hour on "power lunch" for you in earnings exclusives, the folks at star mine will tell you who might surprise on the upside. and on the down side. you can't afford to miss this one. melissa. >> up next, outgoing governor sarah palin is sounding off against cap and trade, calling the obama plan an enormous threat to our economy. >> is she right, and should the administration start listening to her? that's straight ahead. today's "call of the wild," it's all about sarah palin.

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welcome back, everyone. i want to point out real quick, the market has moved into positive territory, up 13 points on the dow. look at the cit group rising on expectations that regulators are going to actually support the company, which is struggling with a liquidity crisis. take a peek. stock up about 10% there. 14 cents. $1.48 a share, melissa. >> thanks so much, trish. it didn't take long for outgoing alaska governor sarah palin to express her views. she is criticizing president obama's cap and trade energy policy, calling it a major threat to our economy. is she right? let's bring in former vermont

governor, howard dean and steven moore from the "wall street journal." howard, let me ask you. it's hard to see how making energy more expensive right now is the right thing to do. what do you think? >> we have been living for a long time without the full cost of energy being in in anything we've done, and i think it's the right thing to do. and if you look at who pays the burden, it's the folks who can afford to pay the burden. if you analyze it by quinn tile, people at the bottom are paying $40 a year, i think most people would pay happy to pay $40 a year to have less asthma attacks for their kids. >> steve, i have several problems with what howard just said. i think everybody is going to be paying more, right? >> a lot more. >> and we have been underpaying in the past. i don't know if anyone felt like they were underpaying last summer. >> shame on the democrats who voted for this bill in the house. i'm still astounded you add 218 votes to pass a job killer. no question. howard, i've known you for a long time, you've cared about working class people, unions, , the middle class. this just destroys a lot of

jobs. i call this cap and trade bill the india and china redevelopment act, because all of those jobs are going to move there. one last point i would make, howard, is that, you know, i know you're from vermont, i'm from the great state of illinois. those midwestern states get creamed under this bill, because the utility -- states like illinois and west virginia, michigan, ohio, depend heavily on coal for utilities, and the utility rates are going to go way up in those midwestern states. i call it the war against the midwest. >> actually, that's not true. in fact, coal got a pretty good deal out of this, and it's one of the reasons that some of the people more left end of the spectrum didn't like the bill. >> what are we doing it for? that's where all of the co2 comes from is coal.. >> this is a problem we haven't dealt with and need to deal with. and i voluntary to get -- we have known each other for a long time. we actually agreed some some things. >> yeah, right. >> but here's where i think the republicans have got a big problem. they never want to do anything about the big problems. it's always it's a job-killer, it's going to do this, it's

going to do that. they never have a positive e program to deal with the environment. we've got to deal with this problem. it's a serious problem, and there is no serious thinker anymore that thinks global warming is nonsense. so we've got to deal with it. >> let me make a point about this, though. if the democrats had been serious about saying, look, we've got to do something to solve this problem of global warming, but in a way that does not destroy jobs, there is a steve moore/larry kudlow promo -- solution to this. you tax carbon, but you use the money that you save from capping carbon to reduce taxes on capital. we haven't done this in this bill. it turns out to be a big trillion-dollar tax increase. why not use that revenue to reduce taxes on things that could create jobs in america? >> an even bettered why. i agree with you. it's easier than a cap and trade, but we ought to use the money to pay for health care. >> howard, i cannot find an opinion poll that supports your political view on this. and you're smiling, because you know i'm right. she -- this is so interesting to

me. sarah palin after the left wing media trashs her for leaving the governorship, she is on the war path on an issue which the american public are so much opposed to mr. obama. what are you democrats going to do about this issue? there is almost nothing out there more unpopular than cap and trade, according to every single poll i see. >> larry, if you want to run this company by polls, i'm happy to do it, because that means that we will get a public option for health care, which is supported by 72% -- 72% of americans believe that they ought to have the choice to stay within the public and private plan. so i would gladly pass an cap and trade -- >> howard, you are dodging the question. stay with sarah palin on cap and trade. she says it's anti growth, going to hurt the middle class. >> this is nonsense! absolute nonsense. >> what is your response to that? i haven't heard you really respond to her criticism. >> my response is that i believe for the $40 a year that the lowest-income people pay in extra taxes or extra energy costs, they will more than recoup that by having their kids

spend less time in the emergency room because of asthma attacks. this is a problem we have to deal with. and i think the president has done the right thing.. >> but you know, howard is nobody believes that $40 a year. you know there are studies that say that once this is fully implemented, you're not talking about $40 a year. you're talking about several,000 dollars a year. >> larry, we believe everything in the "new york times." >> if it's in the "new york tim times" it must be true. >> what about her counter argument? she says basically, drill, drill, drill for natural gas, and go for nuclear.r. those are two things that came up against howard. what's your response on those two points? >> let me be serious about this for a second.. i was never a huge fan of cap and trade. >> oh. >> that's true. i'm with steve. i think a carbon tax, and we can argue about what you do with the money -- >> all right, we're getting somewhere. >> but cap and trade is necessary, and i'll tell you why. if you want the rest of the world to join in on what's going to be hopefully the copenhagen treaty, equal to what kyoto has

been, obviously everybody agrees you've got to get china and brazil to be a piece of this. it costs less to take out of the air in europe and the united states than it does in developing countries. particularly poor countries. so what cap and trade really does is an international mechanism to make it easier to reduce the co2 load and make it possible to develop countries. and we're not talking about india and china which now produce almost as much carbon dioxide in general as we do. we're talking about countries like guyana where we've got to raise the standard of living. so cap and trade does make some sense. >> we've got to go, guys. >> howard, and china and india have made it very clear, they're not doing cap and trade. so if we do it -- >> okay, guys. got to leave it there. >> drill, drill, drill. >> thanks for joining us, trish. >> thanks, melissa. "power lunch" at the top of the hour, and sue herrera will tell us what is coming up. >> i love larry kudlow. trish, thank you. coming up at noon, the number

one-rated fixed income manager on making money, betting on bonds. he and his partner have not lost any money since 1984. we'll tell you what he has to say. vesting in china. should you do it, how should you do it? the chair wm of jpmorgan equities china joins us. and earnings after the bell. all of that at nooj. trish, back to you. >> sounds good, sue. thanks so much. coming up next, bernie madoff's new home. cnbc's senior correspondent scott cohn is outside the federal prison in butner, north carolina. hey, scott. >> trish, today is the first day of the rest of bernie madoff's life, and it's here in butner, north carolina. a medium security institution where he arrived a short time ago. we will show you that, and tell you about his new digs. when "the call" continues.

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so don't wait any longer, call the scooter store today. all right. check out intel ahead of its earnings after the bell today, the street expecting a gain of 8 cents on revenues of $7.3 billion. closing bell will have the numbers, as soon as they're released. take a look at that stock trading higher. trish. >> thanks, melissa. as we told you earlier in the show, bernie madoff has arrived in federal prison in butner, north carolina and that's where we find our cnbc senior correspondent scott cohn. hi, scott.. >> reporter: hi, trish, the public information officer here in butner confirms to cnbc that bernie madoff is now housed in the medium security section of this sprawling federal prison complex. let's show you the scene from

about 45 minutes ago. madoff arriving on a bus with a group of other prisoners from atlanta. completing the long journey from that jail cell in new york that he occupied since he pleaded guilty back in march. now he will be here to presumably serve his 150-year or -- the rest of his life in prison for the 71-year-old madoff. this facility is actually a complex of facilities, about 4, hundred inmates total, some in low security, some in a medical facility, some in immediate security, which is the tightest security here, and that is where bernie madoff will go, partly due to the 150-year sentence that was imposed on him on the 29th of june. his cell will consist of a couple of bunk beds, a toilet. he'll have a cell mate if he's in one of general population cells. will earn work, but certainly nothing like the money he earned or stole in the massive ponzi

scheme. trish? >> scott, can we expect any special protection for mr. madoff? >> well, we don't know for certain, but one prison consultant that we talked with said that he is going to be watched carefully here, both because of the danger from other inmates, and also whether he is any danger to himself. as he faces the years ahead.. >> okay. thanks so much, scott cohn, we appreciate it.t. larry. >> we'll be right back for the last call.. you're still watching cnbc, and we are still first in business worldwide. you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most powerful names in the industry. introducing morgan stanley smith barney. here to rethink wealth management. here to answer... your questions. morgan stanley smith barney. a new wealth management firm with over 130 years of experience.

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