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welcome back to "squawk on the street" dow jones crossing on the remark that former treasury secretary hank paulson will deliver tomorrow, saying

bernanke did not direct the warning to b of a management, that knicksing the b of a merrill deal would have been unthinkable. stay tuned. "the call" is next. welcome to "the call" everyone, i'm trish regan here at the floor of the new york stock exchange, watching the dow soar up almost 150 points on the heels of some very positive earnings news. what is this saying about the market right now, do you need to be in it? we're going to debate it, coming up. larry. >> thanks, trish. i'm larry kudlow. so with good earnings is the recession over? and if it is, what might the recovery look like? we'll discuss it all, and let you know how it might affect your vesting over the short run. >> and i'm melissa francis. the house financial services committee holding a hearing this morning on financial reform. we'll talk live with two of its members, republican michele bachmann and democrat greg meeks. this is "the call" on cnbc.

better than expected earnings from the likes of intel and goldman sachs putting investors in a buying mood, hoping the economy turnings around. look at how stocks are trading right now. the dow is roaring higher, up 150 points, almost 2%, 8508, the last trade, the s&p following suit. also trading to the plus side. we have it there, up almost exactly -- it's 1 3/4 percent, and the nasdaq trading higher as well, almost 2 1/2 points, on the back of intel. trish, good moves this morning.. >> yeah, everyone is in a great mood and why not with this rally. this is something you and i were talking about off camera yesterday. when you look at the first fishing, and you see the financials, and that set the tone for a rally going forward over the next several months, a lot of people now asking whether or not we could be seeing the same kind of thing. you have the great news out of goldman, what do you know, sparked a rally. here we are again today, intel on top of that, of course, also

coming in very strong. so lots of momentum. here on the floor, as always with bob pisani. good to see you.u. >> good to see you. >> the olive suit on again. >> it's a monochromatic look. >> i like it. cost-cutting, a lot of things companies have been very successfully doing and one of the reasons we're seeing strong earnings. >> yeah, and one of the good things that's happened through this if you to look for something is the ability for companies to successfully get leaner and meaner. and we see gannett up here today. gannett, of course, a newspaper company and the business has been horrifying. they just simply are awful at this point. the important thing is, they beat on the bottom line, because they had been so successful in cost-cutting. obviously, this is only going to go so far. in fact, the ad trends have been terrible for them. they made it very clear in their report this morning. revenues down 32% for them. >> that's with all of the car companies -- >> and they're on a conference call right now, saying read between the lines, doesn't look

like much of an improvement. but my point is, cost-cutting does help, and the bulls have argued if we get any top-line increases as the economy improves, much will go right to the bottom line because they have been so successful at cost-cutting. >> that's important, bob, because you can't save your way to prosperity, either. >> no. >> we have to at some point see the top-line growth.. because it could be really great stuff. intel, of course, doing phenomenally well. much better than expected.. i wonder if we have a chart of it. but you say there is a very interesting correlation going on here that's worth pointing out. >> the good news at intel, again, another company that's gotten leaner and meaner and any increase in revenues is going to accrue to their bottom line quicker, and good for them and they surprise the street with their comments. just a little dose of reality, trish, and i thank michael rourke for bringing my attention to this. twelve years ago, the s&p was 900 and today on this day, the s&p is $900, and intel $18.

>> wow. >> bear in mind a bit of historical perspective on where we are in the last 12 years. we haven't gone anywhere. obviously -- well, we've gone up and a big loop around. looks like a giant horseshoe, but this is good news for intel today, and all of the people yesterday who were nay saying that taiwan shipments were weaker. apparently things are better than anticipated. and there is a lot more optimistic tone down here. >> health care being a big issue. orrin hatch -- >> orrin hatch, of course, very influential republican senator on the finance committee talking about the health care bill saying the tax on the wealthy, is a quote, dead issue. there's a shot across the bow to house which is, of course, considering a tax to pay for the health care bill. >> okay, bob pisani, thank you so much. and on that note, i'm sure you'll like it, larry, we'll send it back to you. >> all i tell you is orrin hatch for president, the best thing i've heard all day. the new york fed's empire

state index for july showing improvement in business conditions. orders and is shipments were up. let's add to that positive earnings reports and got us to thinking, could the recession be over? there are other issues, but let's dive in. yes says dan north, us chief economist for humez. no says sue hoffman, chief economist at tnc financial. hello, gentlemen. dan, let me begin with you. you think the recession is over. we did get poor news today. industrial production, one of the most important indicators of the economy declined again. it's hard to raise the flag of surrender with production falling. what's your take? >> well, that's one of many indicators, i would say, doesn't really cover a very large sector of the economy. so you can't have everything going the way you would like it to go. but i think the evidence is fairly clear. for instance, if you look at nonforeign payrolls, it seems

clear we bottomed out at 740,000 in january. now, it took a hiccup the wrong way last month, and that brought a lot of the bears out. but if you look at the big picture, it was 740 and now we're at 470, and if you believe the nonfarm payrolls are a lagging indicator, you could make an argument that we've reached the bottom. . >> well, stu hoffman, i think that nonfarm payrolls are the most important co incident indicator in the economy, and the most important national bureau of economic research recession recovery indicator. we have a chart showing the decline there, too. what's your take, stu? >> larry, i wish i could believe that the recession was over. and that i could tell you it was christmas in july. but we're getting close, but as you just noted, payroll jobs fell. even if it's less rapidly. in june, industrial production declined. income is going to decline in june. i think we're rounding the bottom of the recession. i think this quarter may actually mark the bottom of the recession.

i'm watching unemployment claims. if they can stay below 600,000, maybe not in the next week or two. the leading indicator, which the stock market is a very important component, we've had two big rises in that. i think there is some signs -- i don't want to call them green chutes, but i think there is some precursors, or prelude to recovery, and it hasn't started in the month of june, but probably will this summer and show a little momentum in the fourth quarter and even more visible, not only in the u.s., but globally in the first half of next year. >> dan, one of the concerns that a lot of people are raising and i saw in the "new york times" today and david lienhart's article is the hidden unemployment. and we have a graphic of that. in some places like oregon, 23%. michigan, 21%. this is part-time workers and also those who have given up looking for work. how big a problem do you think this is? >> certainly, it's a problem that you can't ignore. i think you're going to look at unemployment one way or another, you have to compare the same measure. and it's better than it was.

and, of course, you're going to have geographic areas that are different. it's important to note also that even if you're losing jobs at a smaller rate, like 250 or 100 or 50, the unemployment rate is still going to be going up. so there are two different ways to look at the employment situation. and the unemployment rate will be a big problem, i think, politically and for -- in particular for the fed, because they're going to see inflationary pressure soon, and they're going to have to start tightening up. but unemployment is still going to be high. so it's going to be a difficult situation for them.. >> stu, another trend that i've noticed, is it possible it's getting better in the place where all of this started? i mean, this is what is sort of the mainstream media started talking about, about on wall street, in manhattan, you see things turn around and people getting bigger bonuses than last year. stocks are turning around. i'm afraid people are going to start fire bombing new york. is this a trend you think is going to continue?

not the fire bombing, but getting better in the place where we started this mess. >> i'm not sure we started -- well, maybe started it, but i think it really started in the housing market. so geographically, i'm not sure we started it in new york. i think we started it in the sand states of california and florida and some of the desert states on housing. so the fact that the financial market seems to be healing is the beginning of that process. talk about the unemployment rate. you don't watch the unemployment rate,'s the caboose of the economic recovery train. by the time you wait to see that, it's almost past you. some are watching the unemployment rate. but i think if you do see improvement -- >> what are you watching? >> back to housing. housing starts seem to be bottoming out. extraordinary low levels. prices haven't hit bottom and i don't know how you can say you have economic recovery when house prices are still going down and delinquencies are still going up. >> the thing is, dan, coming back to that, incomes have to

rise, incomes have to transfer payments. and this bothers me the most. wages are flat and hours worked are falling. this is the income proxy. this bothers me a lot. because it's falling like a stone. i'll weigh that in a more balanced way. i'm trying to be optimistic. >> horrible chart. >> i know, it's an ugly looking chart for consumer spending and says a lot. on the balance side, though, as melissa said, financial conditions have improved. the stock market has improved. that's a great leading indicator. what about earnings? we're getting some very positive surprises, and stocks are rallying. and that's possibly the best thing. earnings are sort of a quiet indicator of the economy, but very important, the mother's s milk of stocks and business. could it be that we're missing a big earnings jump here? >> well, certainly earnings are a very important indicator. i think it's kind of the people on the grounds and particularly it's what they're forecasting for revenue and for conditions going forward. that's the really important stuff.f. and i think that's where we're getting the boost in earnings.

>> just one last one, stu. on the earnings, i don't want to let go quite yet. if, in fact, businesses are slashing all costs, inventory costs, and labor costs, so that looks bad on the employment side, but could that give us better earnings than we think? >> it can, larry, especially when you couple that with productivity. as bad as the economy has been the last couple quarters, and as deep as the recession has been, work product activity has been going up. that's a little help to offset the lack of pricing power. the other thing i would throw in, we had this big jump in gasoline prices and other commodities back in may and june. >> right. >> i think it's wonderful to see oil prices coming back down. i think it was a lot more speculation, and surely betting on a much stronger global economy. $60 a barrel for oil is a recovery story. 70 or $80 could have been a global roadblock. >> phil, $20 a barrel.l. >> not a chance. >> what do you think opec is going for this morning?

>> all right, wave got to go. i'm ignoring that. the prices at the pump are down, as well.l. >> they are. >> they always peak in july. >> i'm just asking, what do they tell you this morning? >> you handled that so well. just ignore it. okay. coming up next, whether you think we're heading into the post recession rally or not, we're going to discuss call to action on where you need to put your money now. >> plus, are you worried that financial regulations could do more harm than good? a house financial services committee is weighing that issue, and two committee members will join us to talk about what changes congress is thinking to i am prose. we'll be right back.

call or click today. take a look at the crude oils trade this morning, now up $1.31, the inventory data out earlier today showed that inventory fell by 2.8 million barrels, more than expected in crude oil now. it's trading at 60.83. trish. >> depending where you see the economy heading, where do you want to put your money right now? joining us to discuss, we have mike williams founder of genesis asset management, and doug roberts, chief investment strategist for the bears. and i think it's only fair i kick this off with mike, our bull today, because we are up 160 points. we've got great earnings news out of goldman sachs. out of intel.l. and there seems to be some momentum building here, mike. what do you think? is this going to continue over the next three months, just like we saw happen in the first quarter? >> you know, trish, i think first of all, this is a trade

range. i mean, it's summertime. we shouldn't expect much more than that. but i think point you want to highlight is the point that larry made right at the end of the last clip, and that is that what's going to be missed if we focus on the negative news is that companies made rapid and radical adjustments to head count and inventory costs. that's going to cause what we saw in intel, and it's going to cause what we saw in altera, it's going to cause what we're going to see pretty much, much throughout this earnings season. and that is, companies are going to do a lot better than we think they are, and we're going to have to figure that out and understand it. the world didn't end, it just changed. >> okay. the world didn't end, it just changed. what does that mean for me as an investor if i've got money on the sidelines, and let's not forget, there's a ton of money still on the sidelines right now. just look at treasuries. so what happened to all that money? >> i think what happens is typically, if you look at history, that money doesnsn arrive until things, quote, unquote, look better. which means higher prices. so the griffin investor has to

use dips to continue to build their positions for growth, which is the surprise, instead of the end of the planet.. >> doug roberts, let me just raise a different point. and i thank mike williams for that on the enks side. that may be a big surprise. we'll see about the industrial companies. but doug, my single favorite and i want to get your reaction is banks and financials. as melissa said earlier, that's been the big improvement from m one year ago. and with a steep upward treasury curve and zero borrowing rate, even a banker can make good profits. what do you say to the bank story? i think they can run and run and run. >> larry, i think that's too short-term, actually. you're seeing them, and you're correct, in a positive-shaped yield curve environment, anybody can make money. the real question is, the rules. right now, what's going to happen in the future? they're constantly changing the rules with the banks. you're talking about increased fdic fees, so even though profits may be made, what are they going to be utilized for?

they may not end up being in the arms of the shareholders. they may be taken by the government. and we're starting to see inklings of that right now with discussions of fdic increases in terms of fees. assesseded on healthy banks, as well as sick banks, as well. >> doug, what's your time frame on that? because you said in the short term, yes, they're probably going to continue seeing up sides. so if i'm looking at a three-month horizon and looking at financials, what do i do? >> i think if you're looking at it, you could try to play it, but there are safer ways to do it. in other words, i would go more for things that are guaranteed that you know the government is going to continue to spend money on, no matter what. for instance, that's what i -- larry has talked about before the reinflation trade. i would go for more of the government trade.. >> yeah. >> the government is going to continue to spend money in these areas. >> you know, it's so interesting, mike williams -- let's go there. in a sense, the system is rigged for the big banks, rigged in favor of the big banks, not only the positive curve, but the loan guarantees are still behind them, the accounting rules have

been loosened, mark to market.. i mean, the leadership from banks right now could be the biggest story.. in some sense, it's an underrated story, you have jpmorgan and all these other financials coming out. what do you think? is this the time? short run, jump in, ride the banks up. what do you think? >> well, larry, i think you make a good point. i think we just have to realize that the way you want to act is not on up days, you want to act on down days, because people get afraid so quickly now. 100 points down means we're going down 1,000. so quickly, you've got to act and trade this trade range to your advantage. i agree with you that financials -- they've already marked the ones that are going to last by their t.a.r.p. input. >> yeah, too big to fail. it's a government subsidy, like freddie and fannie. and is you saw that story in the "new york times" today, making a lot of money on the mortgage re-fis. what are you going to do? you buy money at zero and you put it out at what, 5, 6, 7% with extra points? even a banker can make money.y. >> you and i can even do that, larry.y. >> i think so.

it's possible. >> all right. we're out of time. so on that note, i think we're all going to open a bank now. larry -- >> look at the action in the bank stocks. >> you're welcome to join, too. >> put the board up again, the bank board, the financials board. the action today is just phenomenal. >> it is. >> i think you've got to ride that for a while. >> don't forget tech.. >> tech, too, i don't know. i just think that's the best -- >> we're going to open a bank after the show. >> every night i talk about it. banks, banks, banks. >> up next, the earnings today that are boosting stocks and the others that are cause for concern. i'm going to head over to earnings central for an update and what you need to know. and just when you you thought bailout nation was over, one of the largest small business lenders comes along asking for government aid. should cit group get a bailout? we'll discuss it, it's at "call of the wild." right now, 1.5 million people are on a conference call. 750,000 wish they weren't. - ( phones chirping ) - construction workers are making 244,000 nextel direct connect calls.

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okay. welcome back, everyone.. take a look at that. up triple digits, almost 180 points, earnings fueling this rally that we're seeing. it comes on the heels of goldman sachs and of course intel after the bell last night. melissa. >> thanks, trish. amr releasing earnings this morning, but intel's surprising numbers after the bell last night helping fuel this morning's rally. here to discuss, "squawk box" host -- i can't say that.

>> i know. >> complicated. that's it, i'm changing the way -- i'm renaming your show. i can't take it. anyway, let's talk amr, what does it mean for the airline sector? >> not surprising the airline business, even with all of the capacity cutbacks and the fare adjustments, traffic is still problematic. >> although fuel costs are coming into line, and still keeping the surcharge. >> yep, a loss of 114, which was better than expected. we were looking for 1.28. they got $3 billion in cash, but talking about ongoing economic weakness and we had ron allen -- on today. and he said all these balance sheet issues may come to a head at some point if traffic doesn't i am he prove. >> probably right now you are not paying as much as it costs the airline to take you there. but they're bringing in -- >> really? >> probably paying less than it costs the airline to get you there right now, but they are calling the number of flights out there, and that will -- >> except for the tech airlines.

which is like $200 -- for a one-way ticket for a 10-poubt pound dog. >> what about a frog or a bird? >> that's revenue -- >> but transports have had a pretty good run. and i'm just wondering if oil -- if melissa francis and her friends at opec let oil go to 40, wouldn't you want to buy these transports, certainly on the dip? >> definitely cracking down on speculators, the industry association with cramer's help on that. just don't call in the carpel. right? >> don't call them a cartel.. >> do you look at the transports the same or are some of the guys that are rails or the trucks, do you look at them the same as the airlines or do you strip them out and look at that in a different light? >> i like to keep it as simple as possible, i'm a simple guy. but i do think the price of oil has a lot to do with that whole story. and i wonder whether there isn't some bargains there. >> yeah. interesting. let's move on to intel, as well, which, you know, the cfo is saying yesterday he thought he saw a bottom in the computer

market. >> right. >> that was amazing. >> it was. there was so much positive news talking about this, intel, it was hard to find anything bad when you looked across the numbers. margins better than expected, and talking about the bottoming in the industry. and if you look at some of what we're hearing from some market researchers out there, one called i-supply says even though overall growth shipments could be down, it's predicting notebook shipments will rise by 12% and thinks pc growth will return in 2010. and also looking for chip sales to improve next year to $208 billion. >> do you have a nice char you want to show us? >> i'm curious, larry, when you saw these numbers last night and you heard the company say there's no reason why long-term margins can't go back to their highs, did your head spin? what did you make of that?? >> my head did spin, and i tell you, i think the key to this story is not the usa, it's china, it's taiwan and asia. i think this is the big asian bet and i think asia is ahead of us in recovery, i think china is

ahead of us in recovery, i think taiwan is ahead of us in recovery, and i think that's where this is coming from. >> and to go off the eu and the results that would have been better!! if they had levied that -- >> they had a profit of 18 cents when you stripped out the fine. but when you added the fine back in, it turned into a loss of 7 cents a share. >> i want to get to jpmorgan, because goldman took off, and there is no reason to believe jpmorgan isn't going to do the same thing. their earnings out tomorrow. and you look at intel, and you wonder, is that going to kick off the rest of tech as well? it's starting to feel like a trend here. looking at a chart of jpmorgan. so what's the consensus? we think jpmorgan when it comes out tomorrow, thief got to beat, right? >> what some people are saying, but not the same thing as goldman. with goldman, it was straight-playing in the markets. jpmorgan has some consumers they're taking care of, too, if you have credit cards and things in there. but it's interesting to see these numbers. there is one analyst who downgraded their estimates early they are week, talking about

those one-time charges the fdic special assessment. this was barclays saying jpmorgan may end up taking a charge of 12 cents, but it will be interesting what they have to say about the broader consumer, because this will tell us more. >> what are you guys hearing about morgan stanley, if there is a semi rotten apple in the bunch, people are saying they're not going to do well? what do you hear about -- what's the gossip? is. >> well, i heard you in the last block saying you wanted to open a bank and it was about banks. >> i was going -- >> so with the coal mine, larry -- does jpmorgan -- does jpmorgan confirm tomorrow, that will be the question for the morning. >> i think it does. >> and that's going to be very important -- very important news event tomorrow with jpmorgan's earnings. in fact, we have a programming note. tomorrow right here on "the call" i'm anchoring, and we're going to have a live, exclusive interview with the company's cfo mike cavanaugh, and we'll get his take on the bank's earnings,

in the economy, you don't want to miss that tomorrow beginning at 11:00 a.m. peern right here on "the call." >> and that should give people a good look at what's happening in the economy overall. >> and so send me your questions.s. trish. >> that would be great.t. i'm looking forward to that tomorrow. just when you thought it was safe to call the end of government bailouts, what do you know, along comes cit group. on the brink of collapse here. should the small business lender get a bailout? we'll talk about that next in "call of the wild." >> and the house financial services committee is weighing new financial regulations right now on capitol hill. we have two house members who are going to step out and join us live to discuss it, only here on "the call." bailout nation lives, trish. that bears the problem. y 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.

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okay. welcome back to "the call." i'm trish regan along with melissa francis and larry kudlow. we want to get you caught up on the marks, because what a day it's turning out to be. up 182 points now on the dow. all this up side really being fueled by those positive earnings results. we had intel coming out after the closing bell yesterday, just came on the heels of goldman sachs the day before. want to show you the s&p, because that's also looking pretty darn good there, up more than 2%. 925 is the latest level, and you can see the nasdaq getting fueled by gains in tech. right now, up 2 3/4 of a

percent. 1849. well, u.s. officials are considering giving cit group a temporary loan as part of an aid package to help the lender avoid collapse. it's just one option being considered to give cit room to strengthen its balance sheet. but in "call of the wild" we're asking today should the government really be bailing cit out? we want to bring in justin morneau carney, managing editor of business editor insider.com. and a senior legal and policy advisor for the afl-cio. great to see you guys. john, good to have you back on the program. >> thanks for having me. >> i'm going to kick it off with you here. is this a case of really running the risk of the moral hazard argument? should the government be stepping in and bailing out yet another financial institution? >> no. it's time to lower the flag on bailout nation and raise the flag once again to a good old capitalist america. we've gone too far with the bailouts. this isn't even a company that anybody thinks is systematically important, and yet they're still possibly eligible for a bailout.

it's really time to say no more bailouts. >> no more bailouts.. but heather, you know, a lot of people are saying that this is too important an institution systematically to the entire economy. in other words, there is a real systemic risk. if you let cit go down, you're potentially letting a lot of small businesses go down. >> yeah. i think this is a really hard call. you know, the afl-cio has taken the position that if a financial institution is insolvent, then it should be put into severeship, and if at that point government money is necessary to facilitate the orderly dissolution of that institution, then and only then should government money be used. at the same time, however, we're already in the position where the government is choosing winners and losers. >> i agree that's a serious problem. choosing winners and losers, the government needs to get out of the business of choosing winners or losers and instead let the real winners, the competitors with cit group come in and take over the business. cit is a lender to a lot of

small businesses, and that's important for america. but there are other banks, other lenders, who will step in and do this. we understood this for years in america, that you let the thriving companies thrive, and you let the dying companies die. >> heather, let me ask you. i think you were making an interesting point. why don't we back stop them and then get them into receivership and then just sell them out? in other words, make it clear this is not bailout nation. backstop them in the short run and then put them now receivership, and then just sell them out. you can do it in 90 days. why not, heather? >> i think this is a hard call. i'm sure the government is privy to a lot of information about this institution's importance to the system that we haven't seen. and the other big issue is the message that this sends. we have basically gotten into a position where the u.s. treasury is a piggy bank for large institutions, for the aigs, the citigroups, the bank of americas of the world. now we get to an institution that serves the little guy needs some help. . >> but this is a problem, though, because every bailout

then causes the very next bailout, because somebody can say, well, you bailed out those guys. why don't you bail out these guys? if we bail out cit, who is next in line? every time we do it, we find out that it's not limited to the systematically important banks, not limited to the big guys. now it's everybody step in line and get your bailout.. >> isn't it failure a part of our system? if you're going to have an efficient-free market system, isn't failure part of the system? >> i completely agree that failure does have to be par of the system, and the only issue i'm raising is the message this sends to small businesses when we have been there over and over again with an open hand to the tune of hundreds of billions of dollars for the big guys, and when somebody is helping the little guys needs some help, money that seems negligible compared to what everybody else has gotten, then the message may need to be that we're there to help you too. >> but john, isn't this a situation in which a lot of these small businesses can still get loans from other financial

institutions? isn't this part of the argument against helping them here, because it's not like financing has completely dried up. they can go to other sources?? >> absolutely. if you have a -- if you have a profitable business, there are a lot of people who want to lend you money. one of the reasons cit got as big as it did is because that is a good business to be in. lending to america's small businesses is a very good business to be in. and so the idea that somehow they won't be able to raise money if you own a car wash and you need to fund your operations, you will be able to rrow money from cit's exceed tors, so rather than having the taxpayers step in to lock in cit's market share, which is basically what we're doing, we should let the company fail. larry's idea is not bad. if we need to stem some temporary thing, let the government put it into reserveship, let the customers temporarily find other people o to, you know, find other lenders -- >> send the signal, john.

that you can fail. in other words -- >>s exactly.y. >> make it clear that we're not going to own them the way we own fannie, freddie. just see the story, heather, aig, they can't sell their assets, have no plan to get out from under the taxpayer dole. we need to avoid that. big labor? why would you want to preserve all these big banks. i don't get that. >> hey, larry, let me ask you a question. >> we definitely believe very strongly that the aigs, the city groups, bank of americas, if they are insolvent, they need to be treated as any other insolvent bank would be treated. >> let me ask larry, if we did this, your plan here to backstop them temporarily, would that serve the taxpayer? because let's not forget, and i know you know this number off the top of your head, so what is it, how many billions of dollars of taxpayers already lent cit? >> we put in about $2.5 billion. >> so we have a stake. >> i don't want to give them another nickel. >> good money after bad. >> yeah, but the economy stinks,

at least that's my view. look, you can do this on the cheap. the federal reserve can open the discount window. but the key point is what john is saying. we have got to send a signal, john. in other words, this is a receivership action, this is not going to be aig, fannie, freddie take them over, general motors. that's what we have to do. makes it very clear that you can fail still in american capitalism. >> that's exactly right. creative destruction, allowing failure to actually really happen is an important part of our capitalist system, because that's what also opens the door for opportunities for competitors to succeed. >> all right, john carney, thank you. heather, thank you. appreciate it very much. up next, the house financial services committee is weighing the obama financial regulation plan, whatever that is. >> what passed, and what is politics as usual. find out next when a republican and democrat join us live from capitol hill. we'll be right back. at 155 miles per hour, andy roddick

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trade there. melissa. >> thanks, trish. the house financial services committee is weighing president obama's regulatory reform plan on capitol hill. representative gregory meeks is a democrat from new york, and he just stepped out to join us. thank you, so much for joining us. let me ask you, looking at the proposal today, what would you change about it, what don't you like? >> well, you know what? i think what's going on, and is before i say what i change, i'm trying to hear from all segments of the financial services community. and that's what this hearing is about, is hearing from many of the financial institutions to get their opinions. i want to listen to all of the parties that are involved on both sides of the aisle, and then try to make a -- >> okay. >> -- decision.n. >> mr. meeks, what about the empearl fed? a lot of people are worried we're going to give the fed much too much power, have a tough time monitoring monetary policy. are you worried?d? >> i think we're going to make sure what has been clear is the regulators have been too weak in the past.

and i think from the testimony i'm hearing, in the committees thus far, that all agree that we need a systemic risk regulator. the question is, who should be that appropriate person? all agree that we've got to do something to those individuals who are large companies that may be too big to fail or how we resolve them when they are failing. and what's the best way of doing that. and that's what we've got to determine. and i don't think this is any controversy there. and so i think we're embarking upon a legislation that is going to be historic. and that's since 1930. and i think it's something we need to focus on, take our time, listen to everybody, so we make little mistakes. we don't want to have unintended consequences here, and that's why i think the hearing is very good. >> who do you think the main regulator should be? do you think it should be the fed, and what would you change about the proposal? >> well, from what i'm hearing right now, and from what i'm -- i'm getting consensus the fed is probably the best person or the best entity to be the systemic risk regulator, but these are also questions when you talk

about hthat, because many of th companies involved are also global companies, and so therefore, what effect will it have if we talk about overseas?? for example, lehman brothers, who still is caught up in the bankruptcy and lehman in london. so what will we do about that? and so those are the kind of questions that i'm going to ask as soon as i can get back to the hearing. >> okay congresswoman michele bachmann here, a republican from minnesota, with us as well. i'll ask you the question. what would you change about the proposal you're looking at today? >> well, i'm very concerned that it may have anti consumer portions in it, and by that what i mean is, i think we'll see products will be limited to consumers. we're looking at a plain vanilla financial product, which means that a lot of consumers, especially lower-end consumers won't have access to credit.. that's not what we want right now. so many of my constituents in my district are complaining about not having access to credit. and i think this will actually serve the unintended consequence of drying up credit more than opening up that valve.

and that's something we want to do right now. >> miss bachmann, we already have a consumer protection agency in the federal trade commission. why do we need to relationshplit as a stand-alone agency?? >> i don't think we do. i think we have a lot of bureaucracy here in washington, d.c. this is adding yet more bureaucracy. i think the american people are really concerned right now, larry, about run-away spending and expanding government.t. government is growing, as you know, 25% right now. we should be going the opposite direction. we should be contracting, not adding more bureaucracy. and allowing for more private wealth creation. this is a war on private wealth creation. we need to have more private wealth creation, and allow people to keep more of the private wealth they actually created. >> mr. meeks, just one last one. william donaldson and arthur leavitt, donaldson a republican, and levity it a democrat. they're calling for a systemic regulator, a new one. do you believe in that?

>> i'll listen to what they have to say, i did see a letter to make that call, and i'm looking into that proposal, also. i think that the key here is to make sure that we get it right, so that we don't have this problem again. the problem that we have is many consumers, unfortunately, my district, number one in new york, and they want some protection from foreclosures, and we want to make sure we keep our end on this. i think it's important for new york to make sure that the financing institution is well, because it's important for new york, it's important for our government and our nation as a whole. and so we've got to make sure that we have new regulation that works and helps protect the financial institution, as well as the consumers. >> representative bachmann, what do you think about that?t? do you think it should be an independent body? >> well, one thing i want to make sure is we don't separate safety and soundness from consumer protection. if we separate those two, we won't have the balancing act occur.r. and we need to make sure that we have strong balance between safety and soundness on one

hand, and protections for our consumers. >> all right. thank you very much, house members bachmann and meeks, we appreciate it very much. "power lunch" at the top of the hour, and we are sue herrera. what have you got, sue? is. >> we have a lot, larry. coming up, president obama set to speak on health care from the rose garden 1:00 p.m. eastern time. we will bring it to you live. and then are investors still ga ga over google?e? it was down and now above. should you buy it? we'll talk about that. see you at noon, trish. >> see you then, sue. tim armstrong marking a key day at aol. julia boorstin is standing by in los angeles with the details. hi, julia. >> hi, trish. well, it's been 100 days since tim armstrong took on the task of fixing troubled aol. what does he have in the works? i'll have the details coming up only on "the call."

all right.. check out google, the company report earnings coming up after the bell tomorrow.. the street is looking for revenue of $5.5 billion. take a look at google right now, trading up 10 bucks. wow, more than 2.5% on the day. trish. >> yeah, that's a lot of up side. thanks, melissa.a. the first 100 days are a key time frame for any new leader, whether you're the president of the united states or if you're the one heading up a struggling business. aol's new chief executive tim

armstrong marks his 100th day tomorrow, and details to save time warner is slowly leaking. we're in los angeles with some details on this plan. hi, julia.a. >> reporter: hi, trish. time warner hired tim armstrong to turn its struggling aol around. now, 100 days later, after tim armstrong has traveled the world talking to aol's clients and employees, he has a plan, focusing in on four main areas. aol's owned and operated like tmz is separating from the ad system across the web. and also hoping to build vacation, taking advantage of the map quest site and the fact there is no leader. and last, expanding communication and messaging technology like instant messaging and icq. >> i think that tim realizes they need to not only improve traffic on their various sites, but also improve the monday at

theization about it, i think there is complaints about the availability of the aol sales force to really sell they're unique visitors. >> eagan says while the street value is $1.9 billion, he thinks it's closer to $3.5 billion.n. the possibility of a big payday when aol is spun off has helped armstrong lure a handful of top advertising executives to aol. but even with a new plan and new team in this economy, it will take a while forearm strong to implement a turn around. >> you look isolate, and they have to isolate the execution impact. unfortunately, in the middle of both problems and so i think it will take some time. >> for full disclosure, jpmorgan does have a banking relationship with time warner.. trish, time warner says it hopes to spinoff aol, and some people are telling me within a year. we'll see if the management can create the kind of turn around that would get a potential buyer interested in this as an acquisition target. >> one of the keys to good management is having happy employees, people that want to

work there. you know, google had always had the reputation, julia, for being sort of the "it" place to work. is aol gaining some steam in that department? >> well, aol had a pretty bad reputation for a long time, but i think hiring tim armstrong was really key. tim armstrong was really well respected and incredibly well liked at google. some people described him as sort of having a madmanesque appeal as an advertising executive. so he had had a real lure to bring other people with him. and also there is a sense that aol is kind of a start-up so there is potential to not really change the company, but also to make a huge amount of money. >> julia boorstin, thank you so0 much. larry, over to you for this one. >> yeah, thanks, trish. really appreciate it.0 big changes in the business of pornography in america from studio executives to entrepreneurial roles. more and more women are in charge, and they're the fastest growing segment of porn consumers. that's a change, proving to be good for business. take a look. >> there are no official

statistics on the number of women in pornography. but according to industry insiders, the ranks are growing. and that's good for business. >> what do you put in your movies to cater toward women? >> yeah, i try and -- what i tell my directors is, i want a stronger female lead. i don't want it all to be about the guy. >> is that a change? >> oh, yeah. >> that looks like a change.. >> oh, yeah, having a female lead guys remember -- it should be focused on the woman, not just the man. so that's definitely a change that we have seen in the last several years. >> for more of the inside story on this industry, be sure to catch the new cnbc original production, porn: business of pleasure, premiering want to on cnbc at 9:00 p.m. eastern and i thank the producers for allowing me to read this. >> that was fantastic, larry kudlow hocking porn.. i love it. >> melissa and i were e-mailing back and forth about how funny

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