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tv   Squawk Box  CNBC  July 16, 2009 6:00am-9:00am EDT

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good morning. dow component jpmorgan tops the agenda. cit is reportedly 24 hours away from bankruptcy. from investors to small and mid sized businesses across the country, the impact could be huge. and on the hot seat, former treasury secretary hank paulson is back on capitol hill today defending his actions in last year's bank of america merrill lynch deal as "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe
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kernen and carl quintanilla. on the agenda today, corporate results ready to hit the tape. we are getting into the heart of earnings season before the before the numbers today, we have nokia, charles schwab, nokia, marriott on the list today. analysts are sfekting the financial giant to earn 4 cents a share on revenue of $25.9 billion. shares were up nor than 6%. >> how about this week? >> after what we heard from goldman sachs. >> it went up with goldman sachs two days ago, but then it went up yesterday and was part of the
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number, the huge rally that we saw yesterday in the financials. there it is. so these will be, as they always are, so difficult for us at first to figure out what's going on. so many different things to look at, the revenue numbers, and you talk about a profit of 4 cents. you can't put the price on a 16 cent per year profit. >> but this will give us a better idea of the economy than the goldman sachs numbers did. a big bank that has a lot to do with the consumer. >> and you saw these blengt wentsy trends yesterday, which weren't too bad. how is that even possible? >> i was fascinated by a lot of the stuff in the journal today in that the fed is preparing for a much stronger economy, but no jobs.
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it's preparing for -- the economy is stronger than affected, those job markets being stronger than expected the. >> and you talk about stealth exit strategies happening, even now. >> we're back to thinking that 88% or 89% of the people can generate an economic recovery, even if 12% are unemployed. i know it's hard to understand, but look at intel. look at some of the things that are happening and look at the credit card debt. >> some of these things can be growth from overseas. if you continue to have such a lack of jobs or some of these people who are laid off in this country, i don't see how you can possibly contend with it. whether it be retailers, restaurants, hotels, airlines, all of those are dependent on -- >> you figure that people that might get laid off would worry about paying their mortgages. once you worry about losing you're home, you're not going to
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worry about any consumer goods. it doesn't seem to make sense. i want to get to cit. so many -- i've got 100 different things to talk about with cit. >> this is fascinating, not in a good way. >> not in a good way, but i could take either side of about 100 different arguments. >> i argued with myself last night. >> you weren't talking out loud? >> that's ridiculous. >> we were talking back and forth but i was arguing both sides. >> but if you're sitting alone getting mad -- >> but i was getting irritated? >> can i answer the question? no, i can't. yes, you can. >> you always talk over me. then you'll look like -- what's the guy's name? normal bates. that's because i'm a very gentle person. don't do that. >> after the bell, our attention will turn to two big tech names. big blue now ranks sixth in the
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s&p 500 by market cap. it is seen earning $2.02 a share. ibm has beat estimates in all but one of the last 12 quarters, meeting consensus that one other time. ibm down 15% during the past year. though the shares have rallied more than 27% since the beginning of 2009. then there's google, expected to post a 10% increase in profits. revenue to jump to over $4 billion. in the last three years, google has beat expectations nine quarters and they've missed three times. check out shares of google, which are up 42% since the beginning of january. and then, of course, maybe they'll give us more insight on how this whole war will enbetween them and ibm and mi o
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microso microsoft. yesterday, the biggest story and the biggest one to talk about today is this collapse of cit group, which was totally unexpected. i know some of the other networks said there would be a deal within 24 hours. >> we thought for sure. the government was deeply seeped in talks and we thought, okay, they've been in talks for over a week. >> i was using the view that the wall street journal expressed the obama administration will want to get unemployment under control and because it's a small business lender, i thought there's no way that you would let these guys go. i am also -- you know, i hate to say that, but i was almost like this is not too big to fail. it's just not. and if you're ever going to let things fail, this is one that you have to let go. >> after watching all the big banks and the wall street firms that got money out of the way,
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the idea that you're going to let a small bills -- >> i know, but that money will be repatrioted by the rest of the banking system. there are other funds around to do that. >> cit only needed a couple billion dollars. we're not going to get anything for -- we gave $160 billion and didn't save a single job at aig. i'm jeefr stating it. once again, the -- >> i'm not sure it's determined in terms of sheer lendin power that that is not going to be soaked up elsewhere. >> we have a small businessman coming on later this morning, he's the president and the founder of this company that makes garden furniture. and if they -- >> maybe they shouldn't be expanding right now. >> they're not expanding. f there is a real question what happens. and it's not just this guy.
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it's businesses across the country that look at these things. what happens is if they're relying on receivings, they may get kauts out. it's going to be a workout, but it's probably not a lehman and it's not probably not systemically important that in a free market this someone of the guys that made bad decision that's you have to let go. maybe we shouldn't open new franchises of restaurants. >> but what about credit lines? >> it's a recession. things happen. >> it is, but he david what seems like many people along the way. >> it sounds like it's such a mess. if these guys were in negotiations for a week, why did the government say from the
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get-go, no, you're not too big to fail. >> did you see who was involved and we don't know who -- >> the fdic, the treasury and the fed. >> and nobody knew who was in charge and the fdic probably went -- would it. cit is -- >> have they provided the stability to the market that somebody would step in for the rest of this or is this -- they couldn't get their debt backed by the fdic, which leaves them out in the lurk. but they're not probably the only ones in this trouble. >> and this is the fourth paragraph in the front page of the wall street journal, one steer voice by analysts and others is that ci elections would steer territoryies.
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it's a multiple in some of the similar businesses of cit, but ge has had the opportunity to use some of the fdic. and you wonder why cit different get the at any time to use the fds. because the cit was lothed to use r5.3 billion. >> they have no restructuring -- >> they 4.8% -- >> and no prospects for becomes profitable in the future. >> and their loss rate is something like 4.3% or 4.8% versus half that for the rest of the industry? >> well within noon rhode island is later on. >> he's like me. he's light a swiet pinsd nut.
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i think we have a live picture of cit mks in new york. in the next half hour, we're going to talk to a mid skiezed business in alabama. >> we're going to talk to the maul bit in new mexico until and there are that have a need. >> i think it's fascinating. past, i remember a few years ago, the crazies, the bloggers said other coverage of it was we were talking it down because ge wanted to buy it. cit over the years, it was, you know, the blogosphire olympic. >> well, i think the story, which sort of came out of no, it just bubbled to the front and is
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a sign of how hard $to invest in this market when you don't know when the big clash. a lot of customers went and drew down their lines immediately. >> there could be a realtime stress test to see how the economy is versus the way it was when lehman collapsed. and with haulson on the wheel, some people are looking back on walls i don't know and wage, look, this current administration works opinion some of the stuff is bearing fruit. >> i saw a quote from goldman saying far and away, the
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strongest economy was -- sfwh that's not good. i remember when that was going to be conas subcrimprime. remember? >> in the meantime, citi is near a deal with the dp dic over gornance asset quality, sxet management and disclosure. meantime, amex suspending pension contributions to its workforce in the uk as part of a previouslily announced global credit crunch. it says it won't affect employeeses to 15 degrees. an lexed forex just stopped.
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what was their point on dlengtsys or where are kwuf yaus flig rising 15 pors, like if the symptom market went up 15% a year, that will be good. unfortunately, this is foreclosure. so that's a pretty big number. foreclosures were 15% if the first half of the year. realty track, in that business, i'm surprised they don't find a way to get it rising 2%. i've never had a realtor that came on here that didn't say, you know, keith -- >> realtor or -- >> somebody for the association of realtors. i don't see it. this is a buying opportunity. we're not getting a lot of act.
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>> i don't think so. god is not making any more than emp. i don't remember that. experts, how about that, experts don't expect foreclosure to peak until the middle of next year. we're still searching for one, in any -- on any subject to bring on the show by percentage, nevada, arizona and california have the highest rate of foreclosures in the first half. >> you know, there was a moratorium on foreclosures for a long time. >> right. >> as soon as they released that, that flood gate opened and you did see a heavily. in recent hearings, paulson argues that he was right in suggesting that the bank of america ceo could lose his job
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if he chose something else. >> you didn't get to give it a  shot? >> no, i did not. >> him his name is eddie? >> when you said it earlier for practicing, you had better excuse us. >> although i know adults with that name. >> i don't know many. busy front on the economic watch this morning. 8:30 a.m., weekly jobless claims, quickly becoming one of the most watched data points among economists and traders. at 10 oshg, we'll get philly fed. and then a half hour after that,
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weekly gas inventories. >> the anticipation friday is building. >> we are below value, although asia had a nice day overnight. china gdp came in at 7.9 pergs foort second quarter. >> do we believe it? >> that's the evidence. that helps the asian market, but not so much here. oil is responding to 68.4%. the 10-year note, 3.585%. we're not going to get the dollar board for the third dates, i can. >> i don't think the dollar board likes us. >> treasuries plan to keep us -- the six week low or something.
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>> it is below 80, which got a lot of attention yet. finally, gold, when it cracked a two-week high, the inflalgz figures were ppi or cpi. 936.10%. >> i was supposed to read that story and now you just blew it. now that it's coming up, i know i have to do it again. and you never do that. >> china's second quarter gdp came in stronger than expected at 7.9%. we want to tell you one more time and up from the 6.1% in the first quarter. but can you believe it? oh, no, we said that, too. >> we're not very good at
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clouding the waters. >> no. >> and there's still no deal in california. budget talks are stalling over this funding for education killing hopes to a quick resolution between the shortfall we thought that they were going to get somewhere. they were starting to make some traction on cuts, on budget cuts. but $26 billion is a long way to travel. meantime, the s&p is cutting its rating on california's $8 billion in economic recovery bonds to a from a plus, the agency rating the cots into beds. the company's ceo will join us alive next. the most innovative companies in the world
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all right. we are watching the futures out there. we have earnings, full throttle today. we are in the heart of earnings season. coming up, we'll have more on today's top stories. we're on the lookout for quarterly numbers from dow component jpmorgan. we've got the ceo from knock kia joining us live to talk about his numbers. in the middle of the last
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night aes show, i got this letter. i think it's going to report a better than expected quarter next week like intel. i also believe appear sl a great play for next week, also the intel quarter and intel is a great play. i could not resist, even though the stock is all the way down. i had to put jeffrey pete on the wall of shame because he's done such a good job with cit.
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nokia is out with results
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this morning. earnings did beat estimates, but the shares are under pressure after the company cut its profit outlook for the second half and also its market share forecast for '09. the company's ceo joins us now from finland. olli, with technology, the shares had a good week over the past four or five trading sessions back up to the mid 16s. today's news has your stock giving back the gains of the past week. i guess the lead is that in this weak global economy, people are trading down and that's affecting nokia? >> yeah. people are definitely trading sometimes down. that is absolutely correct and that's having an impact on the marketplace. it's having an impact on us definitely, but in fact, less on us than on some of our
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competitors because we basically can offer this in every price category. so if a person is trading down, we can offer a solution to him or her. but that is having an impact. at the same time, i have to say if i look at the market, in total, we are seeing it bottom out. and that is something i could not say yet when i was speaking to you in april. so it's bottoming out and that's difficult. >> interesting how that works because i think your stock at that point was single digits and it's made this 50%, 60% move back to where it is now. but the trading down affects everything. so your average selling price goes down, as well as your forecast for a gain in market share for the rest of the year. now you think market share will
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just stay flat. >> yeah. in fact, we did gain market share in q2. we gained market share in total volume sequentially. we gained market share in value terms, as well. mean that our asp can down less than the asp in the marketplace and against value -- volume shares also in smart phones. we have 38% in the smart phone market in the first quarter. now we recorded 41. i think that's very encouraging. but there are different type of trends in the marketplace. >> we want to -- becky. >> we've got earnings from jpmorgan. sorry to interrupt, sir. they're coming out on with earnings of 28 cents a share is the headline number on this. the estimate for this is 4 cents share. i want to look through these again. hold on. just trying to get the numbers.. 28 cents a share, net income of
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$2.7 billion. and the top of the report, taking a look at some of the things -- the bid/ask is moving immediately. 36.70 on the bid. it was a 36.20 on the close after yesterday, up about $1.60. 36.70 to 37 opinion. >> and earnings, we saw this with the gold marn numbers, the amount that it -- the earnings per share were reduced by the payment they're saying was 27 cents. without t.a.r.p., would that have been 28 or 27? a loss of 27 for the tarp repayment. the fdic's special assessment, that created a loss of 10 cents. so we'll weigh you through and get numbers on that because -- >> but since the last time we saw this, the analysts usually know about the t.a.r.p. so the clean number is probably still the 28 cents which is --
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you know, i hesitate to say it, you know, it's eight times, they beat it by a factor of seven. people were saying that they had to beat this handily because of the runnup that we've seen. 28 is strong if that's the actual number. >> in a normal year, they wouldn't be throwing a big party about 28 cents in a quarter. >> but we were looking for $26 billion in revenue, and they beat that by a couple manage dollars. the result, they say, were continued to be hurt by high levels of credit costs. >> and they say even after paying back the t.a.r.p. money, the firm ended the quarter with very strong peer one capital ratios, 9.7%. peer one common ratio was many.7%. they say with the decision of the reserves, they have an extremely high long lost coverage ratio of 5.7%.
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dimon goes on to say throughout the crisis they've woshlgd on bringing stabilities to the counties in which they brought at all. they say they continued to lend, extending about 150 billion in new credit consumer and corporate customers. they improved 138 thousand trial mortgage modifications bringing total foreclosures prevented, tles, to 555,000. >> that's been a running theme with jamie dimon, trying to answer some of the critics out there who say the banking sector is not lending. $150 billion is a lot of lening. >> back in the old days, a company typically could earn as much as $1.34 in the first quarter of '07. which make sense, it's a nine, ten times financials.
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so 28 cent is way above, but below the earnings power. let's bring in jeff lart. he's on the phone. real quick reaction to that bottom line number of the 28 cents, jeff? >> first glance through it, admittedly we've got 50 pages or so of data come. it looks like a pretty strong number. the thing that stands out looks to be revenue strength. we are looking for something closer to 25, 26 billion and it came in closer to 28 billion. so it looks like a strong revenue quarter for jpmorgan. >> we knew. i mean, we knew that trading and investment bank would be strong this quarter. the question is the mad tup of
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that strength. what is similar to what goldman said and how did jpmorgan get here in a different way? goldman, you think of it as more of a -- you know, they take more risk, do you think, where did jpmorgan do better? >> well, i think the big differentiator between the two is goldman sachs is an investment bank. jpmorgan has a very good investment bank in it, but it's also got big consumer smushl lending operations. jpmorgan will have credit conditions that jpmorgan is not going to. certainly within jpmorgan's investment bank, they're benefiting from a lot of the same thing that goldman sachs did this quarter. >> that was the take. those who were trying to talk us down from all the euphoria over the goldman numbers were saying that the way gold plan was operating may not be good for banks later in the week.
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>> it almost has to be. commercial real estate hasn't got b better. it has certainly gotten better. but i think as we dig through the numbers, you'll see credit improvements are not ras hupg what's helping. if you're looking for a candid assessment of the macro picture, is that the best you can ask for? >> a lot of these financial stocks have run from the great depression three or four months ago to okay, we're in a normal recession. by they have a big leg up. i hate to make it sound like it's a macro call, but that's a big part of buying financials
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right here, is what's your macro outlook over the next year. >> jeff, if you look at all the commercial banks, which one is your favorite? >> i wind up pushing on the. jpmorgan, at least in my opinion, is one of, if not the best managed bank out there, but carried more of a premium than b of a. that's the way i look at it. >> should people be looking at in this morning as confirmation of what goldman said during the week or is it apples and oranges? how do you think it's going to get read? how should it be read? >> i mean, i'm going to have to dig through the numbers more. at this point, i'm assuming a lot of the revenue game from investment strengths. but that would imply we're going to see better revenue from citi and bank of america tomorrow and jpmorgan next week. >> net revenue of $1.74 billion.
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is that better than what you thought? >> yes. >> are you worried about the cip situation at all, for what it takes about the banking as soon as in this ku. you know, in this failure, you have to look back at lehman brothers. but i guess i would say two things. there's a lot of moving parts to it. don't assume they're down and out. my second suspicion is if they are, the environment will be able to handle it. the way things have gone here, you never quite know what the government or regulators are going to do until they actually do it. so until cit actually moves to bankruptcy, i think there's always a chance that something changes on the government or regulatory law. >> the statements from treasury
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and from cit sounded frustrated last night. it does not sound like a senator. >> yeah. and look, a lot of what's going on with stuff like this, it's tough to see anything definitively. it's probably not in the best interest of the system for cit were to mail. but if they were to go down, the system can handle it. >> and you've been in a meeting with christine bagarde, saying that the u.s. government did not underestimate the severity of the crisis, trying to unwind some of what was said a couple of weeks ago. >> jeff, quickly, after you get the headline numbers from jpmorgan, what's your general feeling about the financials overall? >> you know, i think -- it's a
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little cautious here. it's been a nice run for what i think is oversold. but i have frubl getting too excited moving forward. i don't think there's a lot of downside to come. as much as i had it to say i've got a lot of old right now, i've got a lot of old right now. >> the margins on lending right now, those are all positive, bu you're saying they may not be positive enough? >> well, i mean, a lot of what we've seen in mortgage so far has been a re-fi, which has slowed down a little bit. i don't know if we'll see that continue. allegedly, a lot of these mortgage backed issues may wind up providing some gains, but i think that's a long way off. we have to see how bad the credit headwinds are here and at
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one points in time, consumer and ceo confidence grows to say it's going to be okay, let's start thinking about growth as opposed to just the curtailing thing. >> jeff, thank you very much for joining us. it's good to talk to you. >> i want to get some broader comments on that news. dave bahoric is standing by at the cme. . your take? >> the market will respond this story on the back of those numbers. we've taushgd about leadership and we've seen it here. it's been a nice run to the upside. the overnight trade has yielded nothing but more bullish technical sentiment here. so we'll continue to watch the earnings and watch the jobless claims that the philly fed will not come out today, not expecting any surprises. but the market is getting set up for us, surprise. we'll see just that that as it
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comes in. >> do you think we bring this to the market, will any of that be offset by unl certainty by cei. we've been really focused on some comments that have come out of wall street earlier in the week. goldman sachs and now jpmorgan, we realize the bar is set a little low, but nonetheless, we're bounding over it. we keep putting one foot in front of the other. there was good buying yesterday in the last half of the day and that days something about st marketplace right now. >> right. people yesterday were saying you look at a one-month s&p. you can see head and shoulders, they were asking is this quasi moto? but they said if you can get
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over that right shoulder, which could be about 930, it was suggested earlier in the week that that might invalidate the heavy shoulders that you can have and could result in, inside r in his words, a super rally. have we done that? >> i don't believe that we have yesterday yet and i don't believe that we're in an environment for a super rally. it would be nice to continue to put one foot in front of the other here. as a matter of fact, i think we need a little bit of a pullback. it's been a little too much too fast. and if we can hold that level, it's still good news. >> we'll see if that happens today, james. thanks for joining us. again, jpmorgan, up 12 cents. >> how are the few futures at
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this point? did they still indicate a down -- >> well, they were down 38 points before that. >> right now, you can see that -- they've turned positive. >> yeah, they have turned positive on that. comments or questions about anything you see here on squawk, e-mail us at squawk@cnbc.com. coming up, a mid sized business leader who warnings that a cit brums could be a disaster.t our shipping costs. dallas. detroit. different rates. well with us, it's the same flat rate. same flat rate. boston. boise? same flat rate. alabama. alaska? with priority mail flat rate boxes from the postal service. if it fits, it ships anywhere in the country for a low flat rate. dude's good. dude's real good. dudes. priority mail flat rate boxes only from the postal service. a simpler way to ship.
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welcome back. the story we've been talking about all morning long is the potential collapse of cit group. a source close to the group says cit it is likely to file for bankruptcy. right now is summer classics, a $70 million company based in alabama that employs about 300 people. thank you for joining us this morning. we were hoping you could walk us
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through what a collapse of cit might mean to small businesses across america. >> thank you, becky. i appreciate it. it's great to talk to you and joe and carl. i watch you guys every morning. you're my financial coffee. >> thank you. we appreciate that. >> yes, thank you. >> and i've been listening to joe and carl this morning talking about cit. they mentioned that it would be okay if this sale, because everybody could move their lines very quickly to other banks. and i think that's -- that's a systematic risk that i don't believe you understand. it's very difficult to move a bank line as it is in this environment. but when you have 10,000 customer simultaneously, it would be -- i don't -- i think it would be darn near impossible to do. >> do you -- go ahead. >> go ahead, joe. >> you know the position that
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the government regulators are in right now, where there's so much -- there's a coffiny of voices saying you have to let the free market work. if it's not something that could -- by systematic they mean bring the entire system down. we're not minimizing the effect it's going to have on people that are dealing with cit. >> but there will be disruption. >> a huge disruption. but if terms of bringing, you know, something like what they thought would happen with an aig or something which did happen with lehman, the perception is cit's just not big enough. >> well, i think they're ranked like fifth. certainly, if you look at who they bailed out, they bailed out gmac. they're a factor, right? >> yes. >> why don't you tell us about that. >> gmac is a factor, wells fargo, dbmc and cit being the biggest factor. i don't think people understand how factoring works.
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that what you're doing is you're assigning your receivable to the bank. they're guaranteeing that it's going to get paid. i'd kind of use it to -- look at it like a big credit card, okay? so you go into the store and you're buying. and you place your credit card in there and it goes through and the store gets the credit immediately. right? so they get the money immediately. and then you don't pay for 30 days later. right? >> right. bew, summer classic -- >> this is the same thing. this is the same thing but for business. so you take your receivable and you give it to cit. they guarantee the credit because they know the people that you're selling to, right? >> correct. like if you're a company that's making something, like, let's say, patio furniture like you make, some patio furniture and garden furniture, you're selling it to the stores, you're using cit to make that purchase go through, as your credit card. >> yes. and i don't have a credit
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department because of that. most companies my size would have a large credit department that check credit of accounts. and then they would turn those accounts over to collections when it's -- when it's necessary to collect them if they're late or they charge a late fee. >> right. >> in this case, cit does all that for you. i don't think -- i don't think the general public understands that. i certainly don't think the government understands how that works. this is the -- i believe this is the biggest portion of what they do. i'm in the fortunate position much having other banks and i have another factor, but a lot of people don't have another bank or another factor. and my guess is, what i read in the wall street journal is, there's a million accounts like th this. >> what happens if cit were to go under for those that don't have a second line? >> i would -- i would be concerned that -- let me give you an idea of a person that only uses cit. they're invoicing every day. they turn the invoice over to
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cit and they get the money right then from cit. i don't work like that but a lot of people do. so they turn the invoice into cit and they get their money back that day. that's the money they use for their entire cash flow of their company. >> then are you suggesting if you can't give those invoices to a cit, you can't make -- are you looking -- are you talking about a wave of small businesses going out of business? >> bingo. carl, you nailed it. if you turn it over to cit and then they can't pay you because they don't have cash, which is kind of what i'm hearing, then they can't pay you and you're getting ready to make payroll with that money or you're getting ready to pay a payable that's very important, or you're getting ready to pay a supplier for product you've got to have, you can't get that protect and you can't make payroll because you're totally dependent on cit to do that for you. >> right. bew, we want to thank you very
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much for joining us and helping us shine a little light on what this could mean for small businesses everywhere. we hope you keep in touch with us. let us know how things are going. >> great. thanks, becky. >> thanks, bew. >> nice to have him on the show. buford, do you think? >> don't know. don't know. i think it's williams and then he went by bew. >> that was interesting. when we come back -- >> how do you get bew from william? >> i don't know. plus, former u.s. senator john sununu has tackled much economic problems from the energy to economy to patriot act. (the world's leading companies thrive on collaboration with the world's leading companies. together, we're helping to shape the exchanging world. nyse euronext. powering the exchanging world. hi, may i help you? yeah, i'm looking for car insurance
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that isn't going to break the bank. you're in the right place. only progressive gives you the option to name your price. here. a price gun? mm-hmm. so, i tell you what i want to pay. and we build a policy to fit your budget. that's cool. uh... [ gun beeps ] [ laughs ] i feel so empowered. power to the people! ha ha! yeah! the option to name your price -- new and only from progressive. call or click today.
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good morning and welcome to earning central. reaction to the latest numbers from jpmorgan. what the company is saying about the second half of the year and what those results mean for the markets and your money. who's looking out for small business? commercial lender cit likely to file for bankruptcy tomorrow after bailout talks with the governme talks end without success. china talking about 8% growth in the second quarter, making it the fastest growing economy in the world. these stories and all the earnings news you need as the second hour of "squawk box" begins right now. good thursday morning. welcome back to "squawk" on cnbc. i'm carl quintanilla along with joe kernen and becky quick. former senator from new hampshire, now member of the congressional oversight panel, the t.a.r.p. panel, john sununu.
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lot to talk to him about this morning. futures have come a long way from being negative after we got these jpmorgan numbers. you've got china gdp, cit may be filing for chapter 11 later this week but jpm had earnings 30 minutes ago. straight to becky who's at earning central with the numbers and other names that may be worth watching today. >> thank you very much. jpmorgan reporting second quarter earnings a short time ago. the company earning 26 cent a share the second quarter. it did include one-time items. the street was only looking for earnings of four cents a share so this company coming in with numbers well above expectations. second quarter revenue at jpmorgan came in at $28 billion versus the $26 billion estimate. some other key points here, the company adding $2 billion to credit reserves in the second quarter. that brings the total to $30 billion. the company also strengthens core consumer and that helped offset a jump in the credit losses. take a look here again.
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the bid ask on this stock looking right around where it closed yesterday. remember, this is a stock that had a big gain yesterday as people were expecting strong numbers out of jpmorgan. goldman sachs reported earlier in the week and had solid results in investment banking and trading operations. both those stocks over the course of this week up substantially. over the last six months, up as well. over the last six months, goldman up 112% and jpmorgan up by 60%. invest ares are waiting to see what ceo jamie dimon will say on the conference call, at 8:00 a.m. eastern time. wednesday he spoke to a group of business leaders in seattle, talking about bailout funds to jpm's ak we sags of washington mutu mutual. he said hank paulson asked him and other large banks to accept that money through the t.a.r.p. program. we knew this part. he said, i think they did the right thing and it stabilized the system and then t.a.r.p. morphed and i learned a great lesson in life.
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it will be interesting to hear what he has to say about the t.a.r.p. on this conference call today. other names investors want to watch after the bell today when we get big blue and google, both report pmg ibm ranks sixth in the s&p 500 by market cap. ibm is expected to earn $2.02 a share. analysts are looking for revenue to fall 12% year over year to $23.6 billion. ibm, beat estimate in all of one of the last 12 quarters, meeting consensus one other time. google is expected to post 10% increase in profits, earning $5.09 a share. revenues forecast to rise to $4. >> thanks, i love that quoted from jamie. >> you learned a listen in life. >> you can imagine -- >> a great lesson. >> you can imagine. he sat down as one of the strongest members and they said, you're taking this t.a.r.p. money. he said, okay, i'll do that. i'll do that. and now people refer to jpm as a
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bailed out bank. >> yeah. and that drives him crazy. >> how would you feel if you said, okay, we don't need it. we've done the right things -- >> because at the time they said they wanted the entire system to be strong. they wanted all the big banks to take this money because they didn't want anybody to look weaker than the rest of them. >> now the populous rhetoric and people that have an axe to grind against jpmorgan or wall street, oh, jpmorgan, a bailed out bank. i would be mad, too. >> congress started telling them who they could hire, what they could pay them, and that -- >> you will hear jpmorgan as a bank that accepted t.a.r.p. fund. you will hear that follow when someone says about jpmorgan, one of the banks that was bailed out by taxpayers. they weren't. >> they say it just like that, one of the banks -- >> yeah. >> you're blaming hank paulson, who will be -- >> no, i'm not. i'm blaming the populous backlash against the, i guess, the banks -- >> the strategic decision was,
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give it to everyone. you think that was wrong? >> as a good citizen these guys said, okay, we'll do it. >> jamie dimon said, he thought it was the right thing at the time. it wasn't until after it morphed -- >> you shouldn't have to deal with the reputation damage that makes it look like you had to take a bailout from uncle sam, like goldman. i saw that guy the other day on this msnbc -- >> the "rolling stone" author. >> he should be -- that's like an anarchist at a wto demonstration talking. that's what i thought. it was totally -- he said, every cent of goldman's profits this quarter were from the government. government patronage resulted in the entire $3 billion goldman got. we as taxpayers give them that money. none of it was trading. none of it was investment banking. make no mistake about it, ed,
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and ed went, wow, thanks for clarifying that for us, matt. it was ludacris and shameless. i'm not here to defend goldman. i don't want to do that. definitely don't. cit is likely to file for bankruptcy tomorrow. a source close to the company tells cnbc that the major lender to small and midsized u.s. lenders is surprised at the failure of bailout talk. steve liesman is back from vacation and joins us. >> finally. >> i swore yesterday i wouldn't bring up this guy that i watched. >> matt? >> yeah. the other tiabe -- >> he's a great reporter. >> i know. >> i have a history with matt that i don't want -- >> listen, i watched -- my mouth went -- >> i don't want to -- joe, don't make me go there. >> it would be like an anarchist, you know, commenting on financials, someone that is obviously such an axe to grind that it doesn't care at all about, you know, facts. >> he has said that the
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fact-checking process at i7 "rolling stone" is the most strenuous he's ever seen. >> it's about time. treasury official telling me last night bankruptcy for cit now the most likely outcome as talks broke down for government assistance. the official saying the government balked at the amount of aid needed to save the lender, relative to how critical they view the can company is to the economy. as they expect those consequence, they say cit was not doing a lot of new lending in small to medium size businesses. a survey showed obtaining credit is not not a huge problem for small to medium size business. at the same time treasury official is saying bankruptcy is not a foregone conclusion. the government could yet play some roll in saving the company. cit saying it's looking at
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alternatives. they say treasury could provide bridge financing if a major private sector player came in to save the economy. still, the government is bracing for what would be the largest loss to date in its investment in the banking sector. in december the bush administration pumped $2.3 billion into the company. officials saying while losses are expected, there remains a considerable amount of collateral in the company that could pay back the government some money. i was interested in that discussion you had in the last half hour. i'm wondering if that is essentially secured lending, if that's not going to be a hard -- relatively eisley to replace, okay? you have a receivable. the idea of financing receivabl receivables, essentially, is something well done or well worn in the financial sector. whether or not this is a time to be creating new relationship as as might have to happen. some disruption, some consequence, but the rose to the level of government assistance, basically saying no. >> i think there's one other point. you're absolutely right. you've got to ask the question, how important is this
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institution? does it rise to that level? you also have to ask what the precedent is, though. if you take a certain action or a certain step for this kind of an institution, then you're going to have to apply that precedent later. and i think -- i think treasury -- >> they changed the rules on all of this. >> well, i think -- >> gmac. run down the list of everything -- >> i think treasury is cognizant, though, and fdic is cognizant that they have to be mindful of the precedent. >> this is the line in the sand, you're saying. >> absolutely. absolutely. >> and look what happened. that was the first line -- >> do you really want to go back to lehman? >> that was the first line we tried to draw and look what happened. that was in some ways, because of -- >> but that was -- whether you agree with the action or not, whether you agree or not, that was made worse by the fact that they had chosen to support bear. they chose to support bear -- >> that's what i mean. >> set an expectation and a precedent. >> and they got@a lot of flack. >> so the lesson is, that has to
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be consistent. one factor they took into consideration, that if you act for -- >> as they did it with gmac, ge, where's the consistency for cit? >> the auto and auto financers are separate. when i was in -- when i was in the senate i made the argument we shouldn't be getting involved in auto manufacturing or industry for any of those firms. >> paulson was very -- >> again, they tried to be very -- >> hank paulson was very consistent. he was like, t.a.r.p. is like financing financials. obama administration expanded that to critical sectors or too big to fail sectors in the economy. what they're saying here -- it's unclear how this decision was made. there was an fdic input on this, the fed and the treasury. there was some reports that the fdic came in and said, wait a second, guy, this is not systematically important. treasury telling me, we all had that same conclusion.
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when it came to the amount of money that was needed from the government, they just said, you know what, that's too much money. now -- >> we continue to get stuff, like this e-mail that just came in. citi's collapse will destroy -- gl cit's collapse. >> i'm sorry. will destroy the new york garment industry. factoring is a need for the industry. >> we just talked to the man who makes patio furniture. you can say there are other places to get it and there's not a need for small business lenders but we get anecdotal evidence through our e-mail that a lot of people who think they won't be able to get this from other banks. >> people will feel this.y that's the most difficult part of going through this kind of financial turmoil. people feel the foreclosures. people feel unemployment going to 10.5%. all of these have enormous consequences in human terms, but, unfortunately, that doesn't necessarily justify --
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>> wouldn't you argue, though -- >> taxpayers coming in and supporting every company. >> remember, they've already put 2.3 billion in. it's not like they haven't done anything here. >> and i think they don't want to compound their losses. >> politically, symbolically, are they not vulnerable in rescuining big banks and a milln small and medium businesses are left without a factor? >> that's the risk you take in passing t.a.r.p. in the first  place, to stabilize the financial system immediately. you're at least exposing yourself to the criticism of the question of whether or not that first fundamental step is the right step to take, whether the treasury and the government could administer it effectively and fairly and draw lines, boundaries, around how that money's going to be used. >> i have to think also, senator, there's a calculation here that there will be alternative sources of funding available. now f you try to look at what has been at least some form of a consistency in the government
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program, it has been sort of step in and replace the shadow banking system, okay? but the idea of factoring does not necessarily fall under that framework there. factoring is -- it goes back forever, right? the idea of financing receivables in some form. that's as old as banking is. the idea that's part of a shadow banking system, of course, securitization on the backside, that's part of shadow banking. but i think what the fed would argue is they have a series of programs to help finance asset -- >> there's not enough cit debt out there to have any type of scary ripple. i mean, cdos in europe, supposedly, they all have cit debtedness. $600 billion -- >> that's another good point, joe. but there's -- >> we're ready for it. >> we're ready for it. >> it's unlike lehman because -- >> the justification, getting back to that jamie dimon discussion you had, we were about to fall off the cliff. the whole system was about to melt down.
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i think if you listen to bernangeithner, we're in a position now where we're not on the brink any longer and we can take these losses or observe these losses. senator sununu is right, it's going to be painful but the question is, whether this reignites that panic. there's being a calculation made, rightly or wrongly, that it will not. if you look at libor, trading at 51 cent, there's not a sense in the financial markets -- and the cit debt trading at 67 cents on the dollar is -- >> can i read you two more? people are flooding in about e-mails. small businesses are watching incredibly closer. one e-mailer writes in, it's a simple way to think about cit, it's a special finance company. it's not huge compared to jpmorgan or bank of america but the areas in which it operate does not have many competitors. we talked about factoring. you can count the number of factoring firms on your fingertips. this guy says, my suggestion is do your christmas shopping now. the store you want to buy from may not be around from in a few
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months. also the ceo of mainland bank in texas wrote in, robert harris. he says, talking about this, he's very glad we're focusing on the world of small business. we need to look past goldman and their bailout bonanza and look at small businesses are struggling mightily. just the fact that jpmorgan beats estimate doesn't seem we can ignore the bankruptcy. >> there are banks, whether that bank in texas or a small community banks all over the country, but, quite frankly, compete with cit. they do factoring. they do small business lending. they seb their communities. and i would think many of them would be concerned about the federal government providing support to a competitor. >> but it's like trying to pick up a girl at a funeral. it's a bad time to be creating new relationships. >> have you done that or something? >> is this like "wedding
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crashers"? >> better than picking up a girl at a family reunion, right? that's even worse. >> did you, joe? >> no, i haven't -- i'm from ohio, cincinnati. >> one of the many lousy metaphors. >> it is. let me just -- cit, if you read between the lines, i mean, they have kind of messed this up over the last few years. obviously. i mean, their loans are worse than -- should the government be in the business of coming in and subsidizing every bad business model -- >> absolutely not. >> someone needs to provide this service for customers, but should the government subsidize someone that's not doing it right? >> absolutely not. >> is the government pushing here? you mentioned this in your report, to have another company come in and save them? like you mentioned this company -- >> the example i got -- first of all, i want to echo what joe said, senior treasury officials telling me, where were they raising capitals over the time they were allowed to become a bank. they did not do what other banks
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did. >> many banks reduced their balance, reduced their leverage. >> they had it, though. >> they did? i don't think -- >> but they could have done a lot of other things. look at all the other capital that's come to market. >> the example i had from the official is if someone comes in with a $3 billion or $4 billion, just a small amount to get over the goalpost, look, if i was a private equity guy with $2 billion, $3 billion in the company, i would work to save the company. what i was told was some reports about how close they were or how definitive an agreement was were ahead of themselves in terms of what was in the paper. last several days. >> who would be the partner? who would be the company that would come in and have the reserves and be able to take -- >> you know, chris flower, who's been involved in so many -- >> private equity or a bank? >> was there a deal he eventually did?
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>> we're spending $750 billion trying to create jobs with the stimulus package. couldn't we have saved more jobs giving it to the cit? are we spending it the right way? >> when we put the money in it doesn't necessarily go out and just maintain the status quo, the banks are not necessarily a place -- >> but there will be jobs lost because cit fails, right? >> yes. >> you would assume. >> i mean, is there -- >> they didn't need $7 auto billion. >> 787. >> whatever it is. you don't like that, though. >> there were jobs, unfortunately, being lost all across the economy. so the standard used by treasury or the fdic can't be, can we save a job if we put out $100 million -- >> how many jobs do we save with $180 billion aig? >> what's the purpose of this money? what kind of a standard do we establish for allowing financial institutions to have access to these taxpayer funds and how do we ensure we're setting a precedence that doesn't create a greater problem down the road.
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>> you're from new hampshire. this live free or die attitude -- >> i can't believe you're not celebrating -- >> i understand that's what you need to do. >> the recertificates we would be saying the hole got two feet deeper. >> we said there's so many different facets. they're all legitimate arguments. >> somebody says community banks don't factor. >> they don't do factoring. >> another person is saying that there are many factors out there and it's possible there are other factoring companies -- >> it's huge. if -- if cit were to get bought by another company or picked up by another company, absorbed by another company, would that be a seamless transition? would we to longer have the question of the small businesses getting cut off or -- >> it's a bank, right? >> i think about my mortgage. >> and fdic does this in a seamless way. if you are actually a borrower of the bank and the fdic comes to take it over -- >> countrywide. >> they may eventually turn around and cut off your credit
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but i don't think the existing relationship goes away until the new owner -- >> so is that what the government is trying to do, force cit into a position where they have to accept an offer from somebody else because -- >> you're the one who said it was a bit of -- >> that's what it sounded like last night. >> you have a good nose for this kind of news and i'm not going -- >> nobody said anything definitive. >> the read i'm getting is they come in -- if it was a small amount, but they're not saying they'd come in with a big amount. >> i would very much agree. i think folks at treasury and the fdic, they've watched over the last six months the politics, the emotions, all of the questions raised about every action they take. i think in this situation they look at the decision, regarding the precedent, regarding the size and importance of the institution, and then they move forward from there. so i don't think they are trying to force a specific outcome. first, they're trying to make the right policy decision. and then if there are other
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participate ans that come forward to merge, to consolidate, to provide financing, and they're a t.a.r.p. bank or some other financial institution that might be eligible for funding under the t.a.r.p., then the treasury and fdic -- >> i think her question is, do you believe they're resolute in what they're telling us right now? if nobody else comes through, a white knight, it will -- >> no, if it's a small number to have a big impact on the economy, i think they'll do it. they did a cost analysis and they did not -- >> i don't think they're going to change their decision on cit. >> that's what i mean. >> no, i think they could come into funding. if it's a small amount. >> if it's a small amount. >> if a guy stepped forward, i don't know the right numbers and says, i'm putting $3 billion in. if the government gives necessity half a billion or a billion and the government saves the money, they might do it in that situation. >> a lot is happening behind
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closed doors. we'll be talking about this. steve will be back. steve will be back with more. senator sununu is with us for the rest of the show. let's get a look at where jpmorgan is trading right now. company out with earnings 40 minutes ago. you can see right now, that stock is slightly bo bo the 4:00 p.m. close yesterday. it had a big gain earlier in the week as they were expecting a big number. they certainly got it. dow futures did turn around at one point up. were talking about the flat line but right now you're talking about the dow futures being 34 points below fair value. we'll keep an eye on all of this. tomorrow on "squawk box," earning central kicks into high gear ahead of the weekend. the mother ship, general electric, bank of america and citigroup report quarterly results. we'll have the numbers and instant reaction. plus, business on the beach. becky quick is live in the
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hamptons with don peebles, ron hairing. in this market there is no vacation. tomorrow on "squawk box."
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hank paulson is on his way
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to capitol hill today. he'll be testifying on the government's role in last year's bank of america/merrill lynch deal. in written testimony for the house hearing, paulson argues he was justified in suggesting the bank of america ceo could lose its job if the bank backed out of plans to buy merrill. we'll be joined live at 8:00 a.m. eastern time, just over half hour away with ed towns. when we come back this morning, we'll get a look at top stories moving markets, including the latest on cit. two market experts will give us their views of earning season and whether cit will have widespread consequences. taking its rightful place
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in a long line of amazing performance machines. this is the new e-coupe. this is mercedes-benz.
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welcome back to "squawk box." we're going to take a look at the markets which have been fluctuating. you saw some downside because of
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the major gains we saw yesterday. dow up 3% yesterday. right now you see the futures are still under a little pressure. dow futures down by 21 point below fair value. commercial lender cit could be on the verge of filing for bankruptcy. that's after talks with the government on a possible bailout ended without success. our steve liesman telling us earlier this hour that the government is reluctant to provide the level of aid that would be needed and that a bankruptcy filing for now is the most likely outcome. one more time, take a look at shares of jpmorgan after quarterly earnings report. that bank coming out with earnings eshgz earnings of 28 cents a share. well above expectations. right now you can see that stock is right around where it closed yesterday, but remember, if you've been watching the stock over the last week, yesterday, major gains. it started on monday after we heard from goldman sachs. it's been a very strong week of gains for jpmorgan. what did you say, up 12% for the week? >> yeah. been a heck of a week. i think yesterday it was up significantly, almost $2, not
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quite. here to talk about all things financial in the economy, we have our continuing discussion with former new hampshire senator john sununu, member of the congressional oversight panel. good morning again, senator. where should we start? the jpmorgan discussion that we had before, should jamie dimon feel a little miffed that he's a bailed out bank? >> well, i don't think anyone working in the private sector  would be happy to hear the phrase bailout used for their company. you have -- whether-u 20 employees, 20,000 employees, they work hard, come to work every day, so that obviously doesn't get to the complexity of the situation. but there's no question jpmor n jpmorgan, all of these banks, over 500 banks, have received t.a.r.p. funds and the t.a.r.p. program was designed to provide basic level of financial stability in the marketplace last fall with we saw things falling apart.
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you can't erase that fact. it is a fact. they believe that the time they didn't need it, but they understood what they were being told by treasury and by the fed about the current situation. >> so -- >> so they accepted the funds and pursued a strategy of raising capital and replacing those funds as quickly as they possibly could and get out of the t.a.r.p. program, for all the reasons you talked about before on this program. >> so the truth is that some institutions are too big to fail. we have to -- but the catch-22 with that is that they're systematically important so we have to bail them out, no matter how dirty you feel doing it. and then you get cit, they're not big enough to where they're systematically important so we let them fail. does that mean from here on out we need to make sure no one gets too big to fail? that's what we have to do then. >> i don't think under normal circumstances any institution is necessarily too large to fail. >> i can name about ten. >> and i would probably disagree with you.
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>> citi group. >> i don't think so. now, last fall -- glo after lehman? >> last fall, after lehman, in the situation we were in, you had a lot of institutions that were too big to fail in that dramatically deteriorating economic environment. and that was effectively why we passed the legislation in the first place. because it wasn't just the largest institution to jpmorgan or citi or bank of america. it was even middle tier institutions that were viewed as being, perhaps, too big to fail at that moment because of the follow-on effects in a very, very fragile economic situation. but i think that -- >> it didn't come at any time. how do you know it's never going to repeat itself or that was just a one off? >> i can't predict what the economic future is going to be ten, five -- >> coming at some point and not let them get that big then? >> i don't think it was purely a matter of size last fall. i think it had to do with the
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particular economic circumstance. now, you need a strong regulatory system, strong capital standards, changes to lending practices, changing to mortgage origination standards. of the things that are being discussed and have already been implemented by the fed and by others. >> here's -- >> and in that situation, you should be able to create an economic environment where no institution is, quote, too big to fail. >> here's a problem. goldman makes a lot of money over the can quarter, $3 billion in profit. they're going to pay -- their bonuses are going to average 800 grand, on average, for their employees.u people are going to be able to say, from here and into perpetuity, they only survived because the government made it possible for them to survive. once you step in that, how do you ever extricate yourself? how does the bank ever -- >> well, you know -- >> absolve themselves of that stigma. >> a big part of the population, they'll never be able to erase that fact or that stigma.
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if you're goldman sachs, jpmorgan or any bank, large or small, that participated in the t.a.r.p. program. you go about your business. you do your job. you deliver good products and good services and you maintain -- >> and warfare rages on without you? is that -- >> it is not new. no question with some of the legislation being pushed now, tax increase as part of this health care plan, you're getting into that class warfare rhetoric, but those arguments aren't new. they weren't invented in 2009. they go back decades, centuries. you can't expect we're going to live if a world five years from now where there's no class warfare, nobody brings up the fact that chrysler was bailed out in the '70s or gm -- >> you're right, though. it goes back centuries because people are going to say this is marie antoinette, let them eat cakes. you're right, it goes back centuries. >> the political discussion is always going to be there in the second guessing of government's activity.
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but i think -- i think treasury and the fed are very conscious of that second guessing. maybe even more so than they were three or four months ago. and i think that is one of the factors that drove their decision in cit, is that they don't want to set a bad precedent. they want to try to be consistent. look at the companies paying back their t.a.r.p. funds, the banks paying back now. several dozen that have paid back. one of the bigger drivers isn't the rules, per se. many -- moss of these institutions could have lived under the executive compensation rules that affected a small number of executives. but it was the uncertainty. it was the fact that congress showed it was willing to change those rules after the fact. and if -- it doesn't matter what your line of work or business is. if you're at risk of having the rules of your operation change after the fact, after you sign a contract, after you make a deal, that's not good for you. it's not good for your shareholders, not good for your
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employees. >> do they believe the obama administration would not let this happen because of the job losses they need to really deal with. >> would not let what happen? >> cit go. our viewers wrote in, since it's small business, small businesses are mostly republican and they don't care. i'm going to go with that since i don't need facts in this day and age. >> they're on the spot every time with the latest -- >> exactly. i know. that's why i -- you know who my next article will be for. >> "rolling stone"? >> absolutely. i think that might have something to do with it so i'm going to write about it. >> no fact check? >> no facts. no facts to check. >> opinion check. when we come back this morning, we have a lot more on "squawk." the mood of the markets on this thursday. we'll get reaction to the jpmorgan numbers, which were better than expected. also, the news of this possible cit bankruptcy tomorrow. talk to the head of investment strategy for barclays and our pal, jason trener.
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stick around. this summer you can't escape the heat. "squawk box" is live in the hamptons and it's all business with special guests including billionaire investor ron baron, don peebles and back at earning central general electric, bank of america and citigroup all ready to report. that's tomorrow on "squawk box."
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the possible bankruptcy of cit and earnings galore moving markets this morning. joining us now is russ, head of investment strategy at barclays global investors and jason trennere, t-r-e-n-n-e-r-e -- >> the sununu plural is like that too, jason. i don't know if you knew that.
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your name's easy. it's just the name of your firm that's hard. >> i mean, it's been three years now. you won't let it go. >> i finally got it right. straight gas. that's wau get from him, straight gas. >> straight gas. from the mound. >> jason, i see you quoted all over the place. i'll start with you. this move was surprising this week, wasn't, it after it looked like we were in the throes of that correction, the 30%, 40% rebound after the lows. for a while we thought we were down and now here we go, are we off to the races? >> we've been telling our hedge fund client it's more dangerous to be short than long mainly because there's such amazing government influence in the markets, that it's very likely you're going to see a false sense of prosperity between now and the end of the year. the dow is up 370%, down 90%
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before that. really, you don't have many totals until the bill comes do. i think it might come due late next year, 2010. but it's asking a lot to stand in front of what is going to be really just kind of trucing your own luck and trying to get growth higher. >> russ, same question to you. where are we, do you think? >> you know, i agree with jason to come extent. if you look back at 68 to 82, long secular bear market but within that bear market you had three rallies, 40%, 50%, 60%. so absolutely the market can go higher. if you look at the earnings, for the s&p 500, you're already trading 15, 16 times earnings. this is just about the long-term average. do you really want to put a premium multiple on the market at the time you have all of these head winds, more consumer dele rajjing and a lot of supply
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on the treasury side? probably not. it may not stop the markets from trading higher in the short term. >> jason, do we have -- are there fundamentals backing up the move higher or just a bounce from the lows? in other words, were the green shoots weeds or now are we seeing them again? >> listen, joe. i think you're going to get 2% growth in the third quarter. >> really? >> yeah. i think it's inventory correction plus fiscal stimulus. you could get there. when i -- i agree with russ. if i look at the basic building blocks of multiple expansion, taxes, regulation, inflation and interest rates, all of those things will get worse. they can't get any better than they are right now. and so i think that you're looking at kind of a secular head wind but i would also agree with russ. i'll use -- i'll even use another example, which is japan in the '90s prp there were six rallies of 60% on average or more. in a period in which the nikkei went down by -- a fourth of
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where it was 20 years ago. so i think this argues for many much more tactical as an investor. i don't want to say earnings don't matter but this is the first time in my career earnings have never mattered less than they do right now because it's really all about trying to dope out where the momentum is in terms of the economy and, you know, what the winners and losers are going to be from that interventi intervention. >> so if the s&p is trading at the multiple you described, 14 or 15 based on earnings, and from here to the end of the year, the economic news is going to be mixed at best. got unemployment moving toward 10.5%, more stories about foreclosures, i'm skeptical about 2% or 3% growth in the third quarter. i think you might see positive growth in the second quarter because this is when most of the stimulus effects are going to be felt. if you have flat growth in the third and fourth quarter, how can you sustain growth in the s&p for the next six months?
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i see the economic head winds being much stronger than what you're describing. >> i think the economic head winds are strong. i think weight going to favor the economy in the short term is you've had an inventory correction, wholesale inventories are down 6% yooefr other year. if you look at the new order, they're telling you we're probably see an inventory build start to happen. that helps in the short term. long term, the big head winds facing this economy is the consumer deleveraging. we still have the consumer with total debt of about 125% of disposable income. even back, you know, in the sort of heady days of the '90s that number was only 90%. you have a consumer credit indebted, delevering for several years and that will be an enormous drag on growth through 20 2011, 2012. >> what were the four things again? i don't know how the heck you can be long-term bullish. let me talk to you about taxing. if this health care thing were
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to go through with the sure tax on -- it sounds like they talking about individuals but a lot of people point out it's sm businesses with payroll over $300,000 being affected, is that hard for job creation? >> absolutely. most of small business creation is done, believe it or not, through home equity lines of credit. if you're starting a dry cleaner or pizza line, you take out a second mortgage on your home. that's how it works. you have these big secular forces. joe, i'm kind of the opposite. i'm taktically bullish but longer term very cautious. you're right. i would say taxes, regulation, inflation, interest rates, those are the four things -- >> four for four. >> four for four. ten-year treasure treasuries, can't get better. >> going up 50 or higher, 60. >> 40 but yet everything back in
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with the surtax. >> it's very difficult to get optimistic. i think there's also an irony that cit is happening this week when we're debating health care. one of the things i would caution again is i think when push comes to shove, if the administration wants to get health care,ist it's going to have to save cit. you could say they don't care about small businesses at all. it doesn't matter. it's almost too much to ask if you let cit fail, which is really dependent upon -- really funding small businesses and also try to get this health care deal through. >> larry kudlow, yesterday i was talking to him and i said, what do you think of this? he said -- the president is more concerned with social restructuring than maybe economic restructuring. he's going to get this done, and is more concerned about what it does for spreading the wealth around to more people than what it does to the overall economy.
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that would be the only way to explain it, wouldn't it? >> you know, i'm struggling to think about how a lot of the plans coming out of the administration are pro-growth. obviously, we're coming through the worst recession since the second world war, consumer-driven. you know, it goes without saying the last thing you need is a tax hike. on top of that, you know, you mention interest rates. we have a budget right now, $1.85 trillion in 2009, the deficit, the highest percentage of gdp since the second world war. for 2010 you're looking at $1.4 trillion. on top of that those numbers are probably understated. if you look at the sumgs that go into this budget, you have an assumption for 2009, unemployment's going to be at 8%. we've already blown through that. for 2010 you'll see 3.2% gdp and a 4% ten-year yield. we know those numbers won't go together. in my opinion, the supply will be worse, even with slow growth we might see a pick up in rates and right now the economy is too
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fragile to handle a pick up of rates and higher taxes. >> you know, we were just talking about how those economic head winds are going to affect the markets. but we'll have a few members of congress on shortly and there's no question, those economic head winds are begin to have a political effect as well. i don't know about the president's perspective, and i think he does care about economic growth in jobs, but i know, house members, senators, they're going to go home over august and they're going to hear about the unemployment rate and foreclosures -- >> he wants to-t done before august. >> it's not going to happen before august. there's no way it will get done before august. so as those members go through the summer and into the fall and start looking to the 2010 elections, these economic facts and figures and job growth and employment are really going to be a factor in the legislation. 8% tax on small businesses, on their payroll and to the health care bill, the increase in the marginal tax rate to about 45% in the health care package that the house passed, those will be
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big factors in employment and job draegs. >> there's economic costs to covering 47 million people but you get 47 million people covered. some people might say it's more important to get these people covered than to worry about a point being shaved off gdp. >> would those people include you? >> that's not -- doesn't matter, does it? let me ask you, would it include you? thanks, russ. >> thank you. >> and jason, from strategas. >> unbelievable. >> becky -- >> guys, i want to tell you about headlines coming out from the jpmorgan ceo and cfo, jamie dimon and the cfo as well. they say they'll be facing some real compensation issues when we get to the end of the year. jamie dimon has talked about that in the past. he said there's pressure for competitors for talent. he says industrywide their compensation is just going back to where it was, i guess, before all of these problems popped up. they said they have to be competitive.
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and they do intend to compete for talent as it's coming out. also making comment about the broader economy. hes the cfo says loan demand usually lightens up at this point in an economic downturn and we are seeing just that. that loan demand has not been as strong. also, talking about how they have no material impact, i guess, from cit. that's what jpmorgan's saying. the ceo also saying loan loss reserves are getting pretty close to their peaks. these are comments from jamie dimon and the cfo of jpmorgan. we'll have more. we'll continue to monitor what's coming out on the wires from some of these things as well. when we return on "squawk box," the chairman of the oversight committee is geared up to grill henry paulson, heading to the hill today, about the role he played with the bank of america/merrill deal. he's our special deal, congressman towns.
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take a look at stocks to watch. jpmorgan and first knee-jerk reaction, first blush did this stock up. now 28 cents as well as expect takings of 4 cents but well below normalized earnings for the big bank. revenue was also above.
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just recently you heard becky talking about some of the things that could be somewhat to blame for the stock selling off a little and that is just talking about the reality of the situation with cards -- >> unlikely to make cards in 2010 or a mull imlevel. >> but delinquencies are leveling off. >> commercial real estate for the country will get worse. when you talk about the mortgages for the homes, home mortgages, its been leveling off. >> nokia will be a feature and lower. the company did cut forecast for second half profitability and now sees flat market share. it's because a lot of movement from consumers to the low end. iodeck reported 75 cent a share. marriott reported 23 cents. that was 2 cent ahead of expectations and in line with guidance.
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the fall of cit, talks of bailout the small business lender collapsed. is bankruptcy next? will markets absorb this latest financial meltdown? getting to the bottom of bank of america/merrill lynch's merger. >> i want the truth! you can't handle the truth! >> former secretary hank paulson expected to get grilled on how that deal went down. houseover sight achairman towns talks to us. >> you need me on that wall. earning central comes alive. >> it's alive! it's alive! it's alive! >> jpmorgan, the latest banking giant to report. that's just setting up tomorrow's triple play. "squawk box" begin right now.
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welcome back to "squawk box" here on cnbc, first in business worldwide. i'm jk yk alooe kernen jk along becky quick and carl quintanilla is not in his chair. >> he's at earning central. >> oh, he is. i'm not that stupid. i don't just read what's in front of me. carl is not in front of me. >> in an interview you won't want to miss. >> i won't read that either. on you guest host, former senator john sununu from new hampshire. now a member of the congressional oversight panel. the jobless claims report is less than 30 minutes away. right now the futures are back down. for a while, they were trading higher. carl, you're over there. i knew you were in the building but i just didn't know where. you have jpmorgan results. >> i do. i'm glad to know you miss me as well. joe, i'm at earning central. jpmorgan did have two cue numbers 90 minutes ago, earning
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28 cents a share, beating analyst expectations of 4 cents. revenue, $28 billion. that topped estimates of $26 billion. some of the other major key points, the banking giant talking about that they added $2 billion to credit reserves in the second quarter bringing the total to $30 billion in reserves. although jamie dimon says the level of reserves may be coming close to their peak. they a strength in consumer. investors waiting to hear what dimon will say on the conference call, which is getting under way. matt nesto is monitoring the call for any nuggets. stocks on the move, has been soaring since goldman reported earlier in the week with 70 -- or, actually, 32 earlier on, now 36.65. look at the bid ask. joe mentioned it has come off the highs. joe, net charge-offs in cards, 10% a year ago only 5%. home equity charge-offs, last
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yore's levels. prime mortgage charge-offs, last year's levels. unclear. the quarter may have been good for morgan guys. not sure it's as healthy a sign for the consumer overall. we'll have a lot more from earning central coming up in the next half hour of "squawk," including the trio. we're expected to talk about 24 hours from now, what is that, ge, citi -- >> bank of america. that's right, big numbers coming out tomorrow as well. carl's will be back in a moment. but the other big story we're talking about this morning is the collapse of cit. talks between the government and small business lender breaking down and bankruptcy could be the next step. david faber is here to tell us what he's hearing this morning. we're glad to have you here this morning because this is a very confusing story. >> yeah. well, at this point the confusion will probably get clarified quite a bit. we'll see whether, in fact, it's today. unfortunately, as you well know, becky, these things have a tendency to feed on themselves very quickly. >> can i ask you -- >> so cit's inability to reach a
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deal with the government yesterday -- >> is it the death nail? some people say maybe they can somehow sell something or raise money somewhere or do you -- >> according to "the journal ", they had a stress test that indicated they needed $4 billion. it's hard for people who know the company that i've spoken to or investor who have been studying the company for some time, imagine they could be in a position to raise that much money quickly. >> although they have profitable ventures. >> and they've been on the policy of trying to sell assets. it's a difficult period in which to do that. they've been unable to raise private capital. that was the source of the problem to begin with for cit. the concern has been this week as it's played out in the press so much, that some of the unfunded commitment they made, totally $5.3 million, would suddenly be funded. if you were a customer of theirs, you would take the money you had offered from them instead of risking having it go away if there were to be a bankruptcy filing. my understanding was that wasn't quite as heavy as they expected.
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you know, you do need assets or clal to give if you were to pull down on those revolvers. nonetheless, you have to believe that sped up over the last day or two. and then you simply find that cost of funding problem so many of these companies have, if they have to fund themselves at all in any way short term. they certainly can't do that. cds's blowout, the bonds, of course, will trade way off once again. so we'll monitor the situation this morning. conversations i was having last night led me to believe they did expect borrowing some sort of very much unexpected event they would have to prepare bankruptcy -- >> unexpected event meaning the government actually changes its mind or this or meaning some big company swoops in and agrees to take this company over. >> yeah. i would think it's probably that. i mean, at this point the government simply does not -- they're not going to do it. and it's interesting being we'll know more. how much was tension between fdic and sheila bair, how much
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was treasury in favor having will already extended $2.3 billion under t.a.r.p. >> how much is management team of cit in negotiations with government, how much were they playing hardball? >> we're hoping to get insight into all of that. >> they were part of the t.a.r.p. and other companies in the same business, ge capital got the fdic -- i guess they had to be granted that right. why was cit not granted that when everybody else was? >> that's the -- a question for sheila bair. >> you need to meet certain requirements. >> what? you have to be big. >> capital, levels of capital, levels of security in order to be eligible for the fdic guarantee. my guess is that's a big reason why things broke down is because sheila bair pushed back. >> $60 billion, at least, i've heard $75.
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when i looked at the balance it was $60 billion in assets in cit. fairly large, not gigantic. >> pretty significant liquidation value as well -- >> yeah quet is collateral underlying all those loans which we all know -- we went over jpmorgan's numbers. they're dealing here with small, middle market. but when you see -- i'm looking at the jpmorgan stuff, prime mortgage continuing to go up in terms of delinquencies, home equity, credit cards, you can imagine -- their receiverables is probably -- >> if they would have had the guarantee on their desk, would this be moot? >> conceivably they would have been in a much better position. that wouldn't have started this whole panic to begin with. when we started to learn they were unable -- they've been telling us for some time they were negotiating to get that permission, and as time went on people started to wonder, especially with this --
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>> this will be controversial because they weren't granted -- >> there's $2.3 billion of t.a.r.p. money that taxpayers aren't going to get back. >> so no matter what the government does in some of these situations will be controversial from one side or another. >> absolutely. lehman, we can -- for years we can be wondering about that. the same thing, they said, no, we're not going to do it. of course, we bailed out the rest of the financial system but here we are a smaller player, not systematic risk where it appears the government is going to say, no, you're on your own. >> we're going to talk with hank paulson, former ceo with goldman, involved with the decision with lehman. that will be forever talked about. one of the biggest -- but out one of the biggest competitors to goldman and he was treasury -- >> he's written a book. i'll be curious to read -- >> yeah. we're just talking about hank paulson, former treasury secretary has a date today with congress, in fact, this morning. this does not have to do with
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lehman. that could maybe be another date. this has to do with the controversial merrill lynch/bank of america deal. first on cnbc, ed towns. good morning being congressman. >> good morning. how are you? >> i'm very well, thank you. what do you expect to hear? what do you expect to ask secretary paulson today? >> he's coming in to talk about the merger that took place between bank of america and merrill linynch. we want to find out from him, first of all, who was responsible for putting all of this together? why did it require $20 billion? we need to get to the bottom of all of this because when we look at the fact that ken lewis said that there was a $12 billion deficit, but somehow they got from $12 billion to $20 billion, and whether or not this was a forced deal. at first i looked at it, i thought it was a shotgun wedding but now i'm beginning to think
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it was a wedding of convenience. we need to get all of these questions anned to know in terms of what really happened here. >> are there questions that were raised from chairman bernanke's testimony that now you need to take directly to secretary paulson? what would they be? >> first of all, bernanke said they didn't put any pressure on ken lewis. you know, however, ken lewis indicated they did. then, beinof course, in terms o paulson, we want to talk to him about whether this occurred. these are questions we need to get answers. it seems there was a whole lot of power in the hand of two individuals. of course, if we were going to reform our financial system, we need to look at these things as well. we need to get to the bottom and find out exactly what happened. let's face it, there's a lot of money involved here. we need to know really if ken lewis was incompetent, why wasn't he removed? why would we give him additional
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money if he was incompetent? these are questions that need to be answered. we're going to look at all this today because as we move forward to look at the system that needs to be reformed, financial system, we might even have to bring back ken lewis again. >> john sununu here. i think secretary paulson has been somewhat clear in previous statements that he felt the merger between bank of america and merrill was important, it would have been good for the financial systems, stabilizing for the financial system. so if that's the perspective of the treasury secretary at the time, that he thinks it's good for the financial system and the economy, isn't that something he should have pushed for if he really believed it was in our best interest? >> but at the same time, he questioned the competency of ken lewis. so the point is, if he felt that strongly about it, why didn't he remove ken lewis? so these are questions i think need to be answered. we're going to try to move forward to get some answers today. >> i don't -- we weren't in a position of removing -- the
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government wasn't removing -- i don't think, we hadn't removed rick wagner at that point. that would have been unprecedented, no, congressman? >> no. the point of the matter is if ken lewis disagreed and he felt so strongly that it should happen, then he had the ability to do that. i mean, the point that he felt that it was so important that this transaction take place and ken lewis was raising questions about it, i really don't know in terms of what really happened here. this is why we want to have this hearing because it seemed to me that there was a sort of stick-up. >> congressman, the journal, other published reports, say that unlike chairman bernanke, secretary paulson was loathed to use e-mail. you don't have the same type of things to talk about, if you will. is that true? is there less on paper that you have to bring up with secretary paulson that with chairman bernanke? >> that's true. it seemed to me that he was just
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on the phone or either in private meetings, you know, making statements. we do not have a lot of e-mails with him. the point of the matter is we think it's so important to get to the bottom of this. that's the reason why it might require bringing ken lewis back again, might require talking to the fdic. if we have to reform the system, we teed to have information as to what went wrong. >> congressman, thanks for your time this morning. god speed. should be interesting. >> good luck -- >> good luck just with the hearings and finding out what's going on. most of it was on the phone. as far as i know, he wasn't part of the -- the purv surveillance system we weren't around, covert operation. he wasn't part of the wire -- >> i find it interesting, though. he's been pretty clear -- >> i agree with you. >> i believe this was the right thing to do. i believe -- i was absolutely --
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but if you're ken lewis, at the same time, you're of the mind, if we're going forward with this, this is an enormous undertaking, i want to make sure i have some access to some financing taet been committed as part of the t.a.r.p. >> we will return to that. we have to go somewhere, carl. >> we're going to commercial break and come right back. with we come back, putting the fair back in fair trade. ryan kirk will be our special guest. at 8:30, we'll get weekly jobless claims and see how the labor market's shaping up. later on we'll talk health care.
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the u.s. trade deficit has eased in recent months and the obama administration hoping to close that gap further with an initiative to increase exports of u.s. products and crack down on nations that don't play with fair trade practices. joining us this morning, u.s. trade representative ryan kirk joins us, i believe, maybe from pennsylvania, where he's expected to deliver a major address today. mr. ambassador, good to have you on the program. >> carl, thank you so much for having me. good morning. >> you're going to be speaking at u.s. steel, i believe, and talking specifically about enforcement, settlement dispute,
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that kind of thing. what are we going to say? >> well, first of all, you talked about the trade deficit narrowing. that's good for our economy. when our exports go up, our imports come down. that usually translats into saving or creating jobs here. today we're going to talk about how we can aid this president and his still number one priority of getting this economy turned around and putting american back to work. and the trade field there's two ways we can do that. one, we go in and negotiate new markets for america's manufacturers and farmers and the workers that joined them in that effort. secondly, we can also help to create market access if we get our trading partners to live up to their commitments. today we're going to talk about some new tools we're going going to utilize to do that, both in enforcement of our rules and application of our rules. >> does the administration
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believe that the bush white house was too focused on expanding trade and not enforcing trade? >> i'll be honest, carl, to me -- i haven't spent a minute trying to assess blame or look at this from the standpoint of what the bush administration did or didn't do. i've often said, i am not the third trade representative in the bush administration. but what we do believe is that president obama and i share a couple of common beliefs. one, is that having a smart trade policy, a strong market creating policy that helps us create and sustain jobs is going to be critical to our economic recovery. secondly, we've also believe we have to honestly face the growing skepticism and cynicism in our country that a lot of people believe that while trade may work in some areas that we just have let some trading partners run roughshot over us and we've been a lot more
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excited about negotiating deals than we have been in enforcing pem. that's something we can fix. in order to sustain and help americans believe in trade and it's power to help us grow the economy, create good paying jobs, that we have to go to our trading partners and ask them to do something pretty simple. that's play by the rules we all agree to. >> mr. ambassador, that enforcement is obviously very important. it always has been. with trade agreements and our trading partners. but everyone understands that in the great depression, up with of the things that made the situation much, much worse was erecting trade barriers, smoot holly, those tariffs were devastating. not just in the u.s. but around the world. so knocking down barriers is very important. what is the administration doing to knock down barriers and to reach out and to establish new agreements that lower barriers to trade for american companies? >> well, that's what we're going to be talking about today, carl. i appreciate you making that
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reference to the smoot/holly act and the impact it had, the extraordinary, negative impact it had in lengthening the great depression. first we to want do two things. president obama and the leaders of the g-20 and recent g-8 summit agreed their commitment. we know that hurts all of our economies. today what we'll talk about are a couple of new tools we'll use to look at some of these barriers, particularly in agricultural and manufacturing sector. and it employs some of our most successful tools in identifying those working with our partners to try to remove those barriers so that they don't artificially tilt the playing field and a more damming sense that they don't hurt the export interest of america's manufacturers. the reason we're here today is we recently initiated an action that is particularly important to the steel and aluminum interests against china on
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export restrictions. what we want to do is make sure we remove those sort of market distorting measures to keep the playing field level. >> mr. ambassador, we would love to have you back to talk about labor and china and a lot more. we'll be watching today. thanks for your time. >> we'd welcome the opportunity to come back and talk with you. thank you. >> ambassador kirk. coming up at 8:30 a.m. eastern time, we have the weekly jobless claims coming out. ist it's a closely watched figure by the markets. republican senator judd gregg and senator ron wyden will give us their diagnosis. ♪ look at this man
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the futures are just about in line with fair value. they've been bouncing back and forth all morning long. we have something that could move them sharply one direction or the other coming up right after this. breaking economic news. this time it's the most up to date read on the labor market that's out there. this is the weekly jobless claims. we'll have that number for you. you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh aflaaac!!!! oh yeah! that's it!
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check out shares of jpmorgan. that stock at this point, a little below where it closed at this point last week. the conference call is going on. matt nesto's been listening in. some headlines, the company saying overall they don't know if it's going to get better or worse for the economy, but for
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commercial real estate, jamie dimon saying in this country it is going to get worse. let's do it. let's get these weekly jobless claims. rick's not there. kevin's waiting for the data. >> reporter: 5.22 on the week, joe. a little upward, maybe 4,000 from last week's numbers. so a good number well within the range of expectations, but watch out for them to catch up with some of the statistics next week and the number to go back up. >> steve liesman? >> yeah. you know, generally things have downshifted. remember we said plus 600,000 range and there was a disappointment that happened when it didn't come down. now we're down with 565, 522. i think the consensus was 513,000 going into this, at least from dow jones news wire. i'm interested in the continuing claims number. there it is. minus 642, i will check, guys, while we talk, but i think that
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may be one of the first declines in continuing claims we've had. it got shot up again last week. and so in terms of declines, of continuing claims, that would be a decent met rick out there. i don't know, kevin, i know green shoots is a much discredited term these days, but it looks like, if i can just tell the tale of the tape, we had a few green shoots and then everything went back flat. are we -- >> i think we need a new buzz word. that's whafs going to say, because people are definitely afraid to use that term again. but i do think you saw over the past three sessions, a very conventional move. breaking out on monday on better volume, an okay day on tuesday and a breakaway day wednesday. as we go into today, into tomorrow, we'll see if there's really something behind it or if they're going to pause the
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market and bring it back. right now the ten-year note took that news fairly well. from the higher yields that yesterday's stock rally brought about. >> let me interrupt you. the continuing claims, according to -- what am am i reading here? dow jones wire report. is the largest on report but the labor department is cautioning this is not part of an economic revival. i'm just reading the news claims. the drop does not mean job prospects are -- >> we just got an e-mail saying the seasonal claims may distort this data. claims may look lower than they are. >> i don't know the reason. i'll go back to one thing i've been worried about. they front-loaded a lot of auto layoffs. this would be the time of the year when they would are been doing auto layoffs. they did that a month early. maybe the seasonals are looking for auto layoffs which they
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already did. what are you looking for? >> the minute are indicating we are preparing for the economy to improve as employment continues to worsen. is that just the typical laggino indicator nature of unemployment or a new -- >> here's the top of "usa today," fed now looking at 10/1, even though -- they are laying the groundwork for people to start seeing bad numbers, worse numbers. >> that's 10.1% this year but a lagging indicator and i think it's more likely than not that it will go higher as we get into next year. >> some people say in a credit recession that this one wasn't brought about -- a debt recession, wasn't brought about by interest rate going up because the economy was too strong, that the unemployment can actually feed on the recession and continue -- continue it along. in other words, be a leading indicator because more people lose their houses, consumers lose -- >> i can't say if it's leading
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historically it's been lagging. it's going higher. you need to be creating, creating 100,000 jobs a month just to keep unemployment steady. we're not even close to that. unemployment is going higher. it's going to continue to have an effect on the performance of the consumer. and it's going to continue to have an effect on -- >> giant reset of expectations is what they're trying to do. >> right. i think that joe's point was really resonated down here on the floor with regards to the minutes. the idea of a jobless recovery was -- used to be considered a campaign rhetoric. this was coming from the highest levels of the fed, that they are actually preparing for just that. >> you know, rick, that's the stupidest thing i've ever heard. oh, wait, it's not rick. it's not rick. no, i think that's right. i think this is -- joe said the word typical. typical for the last two recessions, right? that's been the story, is that because of high productivity and a whole bunch of reasons the economy will recovery before unemployment. inside that, by the way s a huge
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political question, right? is will the fed have the back bo bone to raise the rate as unemployment continues this is that's the question. i was with a bunch of advisers this week and they're all quinned, a lot of conviction about a double dip because, as the economy recovers, the fed has to tighten and that would be the reason why we could go -- a typical reason for a recession as opposed to the current reason, the recession. >> we haven't gotten your take on why the balance sheet is strengthening and why there's a stealth recovery happening right now. >> the balance sheet is shrinking because these are designed to run off, to an extent, automatically. the debate as you saw yesterday in the minute, is whether or not they do something to kind of -- what's the right word -- counter that natural runoff and go out and buy additional treasuries, which there's not a support for,
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or come in and buy other mortgages. the consensus i hear is that they like what they've done with mortgages. they don't see too much efficacy in the idea of buying u.s. treasuries because the market's too big. i know kevin disagrees with that. i don't know how much time we have for that. >> none. >> kevin wants to double down there. >> avoiding that, i would agree with carl. the thing about what you're hearing lately is the idea -- people talk about m2, the broad monetary base. in the interest on reserve regime, you have to look at the makeup of the fed's balance sheet. not just whether it's growing or shrinking. the fed is very pleased with the shift in the bamakeup as the balance sheet has shifted a bit. that's go the geeks pay attention to. don't get caught watching m2 levels or broad levels -- >> don't even think about it, steve. good-bye. good-bye. we're out of time. go away. >> she threw a pen at me. >> kevin, thank you.
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steve, thank you. let's take a quick look at the futures. the futures did respond, thank you, positively to that number. we have seen them a little above fair value, up by six points after trading in the negative for much of the session. up next, we'll go from the health of the markets to a checkup of health reform. judd gregg from new hampshire and ron wyden will give us dueling prescriptions. your mission should you choose to accept it. corporate earnings. be the first to find the numbers and decipher what they really mean to the markets. agents kernen, quick and quintanilla, "squawk" will disavow any knowledge of your actions. undefeated professional boxer floyd "money" mayweather
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heltd care reform facing a series of capitol hill hurdles just over the next few weeks. joining us from capitol hill, republican senator judd gregg from new hampshire, who is a ranking member -- the ranking member of the senate budget committee. also democratic senator ron wyden from organize organize, a member of the senate finance committee. senators, thank you very much for joining us this morning. senator wyden, why don't we started things off with you. as your party is taking a look at the health care reform issues, what are the most important aspects you think need to be tackled?
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>> i think the big challenges are first making sure you stop these double-digit health premiums. second, you expand choice for all our people. finally, that you promote quality. i also think it's possible to do it in a bipartisan way. our other guest, senator gregg, is a co-sponsor of our bill, which for the first time would allow all americans to have quality health care coverage, like members of congress have for the amount of money we're spending today. >> obviously, i want to talk about health care and reform legislation. we come down to costs pretty quickly. you're going to play a big part on the finance committee in dealing with the costs and raising revenues. how do you fund your legislation. what do you think the source is of new revenue will be for the finance committee when they get down to meeting and marking up the bill? >> first, we miss you on the tax issue. a couple years, our bill to stop
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those discriminatory taxes on interstate commerce will be up. with respect to health care, what we do is say that it is time to convert this incredibly regresses ive set of health care tax rules, change them to one that provides a generous, above the line tax credit for all americans. that way they'll have an incentive to shop. and the fact is that most working class americans would get a tax cut and we would have money left over to provide some help for the ininsured. >> senator gregg, i know you have said in the past, you think health care, there is something that needs to be done. but you disagree with how the democrats are going about it right now. >> i don't disagree with what ron wants to do. senator wyden's right. he's got a good bill. what i disagree with is the idea that you would create a massive new basically federally-run program, putting the government between you and your doctor and creating an english or canadian
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type system where you basically end up with delays and rationing and that you don't address the cost issue in the odd years. the proposals marked up in the house and senate have added trillions, trillions of dollars to the debt of the united states and expanded the government dramatically. that's not what we need right now. right now our problem our debt. >> how big were the bills they put through committee in the senate? how was it financed? senator dodd talked specifically about financing. and the idea of financing by taxing health care benefits, is that dead in the senate or is it going to be seriously discussed? the finance committee? >> first, john, i think it's nice to know there's life after the senate, although i'm not sure what type of life the if you have to spend the morning with joe kernen. in any event, the bill that passed the senate health committee, the committee didn't pay for it at all and represents a billion dollars of spending that's not offset at all.
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it is a very serious problem because it still leaves 34 million people uncovered. the president set out three goals. cover everyone, make sure nobody loses their policy, their insurance if they like it. it doesn't meet any of though tests. it leaves 34 million people uncovered. end up spending a trillion dollars that's not paid for and a lot of people may lose their insurance and jobs, according to the small businesses. small businesses, a lot of them can't pay the penalties in this bill. >> if you're going to have to spend money to pay for this, although i think there's enough money in the system to pay for, it but if you're going to spend new money to pay for, it you should take it from the health care arena. we've got all these very gold-plated insurance plans. there's no reason a person working at a restaurant in new hampshire should be playing for an insurance plan that costst $17,000, $18,000, $19,000 through tax subsidies. those subsidies should be ended. >> when does the finance committee mark something up?
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>> we'll probably get to mark up pretty quickly. there's been no firm date set, but on this tax issue, john, here's the way it comes down. if you go out and do a poll, for example, and i asked people if they want their health care taxed, about 107% say, no way. usually accompanied by some choice curse words in front of no way. but if you tell them that we got this system that wildly favors the most affluent in our society and inefficiency, and what we'd like to do is change that in a way that would give working class people a tax cut and encourage people to shop, then they will start to say, all right, we'll look at it. so i don't put off the table by any means this question of reforming these tax rules. after the medicare program it's the biggest sum of money that goes out the door. >> let's be honest about this issue. the only reason this is not on the table, and it should be on the table because ron's described it absolutely
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correctly, which is that you have these plans which are extremely lucrative to certain people in this country who are the affluent in many instances. the average plan in america costs $12,000. the average employer-sponsored plan. we're talking plan that go up to $20,000, $25,000. there's no reason why somebody who's making a reasonable wage should have to subsidize people who are making a high wang and getting massive benefits through health care. the only reason this is happening is because the big labor unions here in washington have said, they do not want this on the table. >> if you're going to correct health care, you have to address this issue because this is -- this is an inefficiency event. people are buying -- are doing things with their policy and they have these gold-plated policies, they spend a lot of health care that shouldn't have to be spent. secondly, it's not fair to skew the system this way by having this type of high-end health care insurance subsidized by people that are just working for a living. >> when it comes to health care on both side of the aisle, i think the two of you probably
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understand these issues better than anyone, in your representative caucuses. i hope people on both side are listening to what you have to say. >> so do we. >> senator gregg, senator wyden, thank you for joining us. >> thank you. >> thank you. >> senator gregg loves to come down here. was he teasing? >> he was very serious. i think he was very serious about -- how sad it is to finish your political career by coming on tv with you. >> he loves coming -- i'm -- i'm a little -- and you seem to -- >> i seem to like you, i've been able to convey that? all right. it's been a good morning. >> you're going to win an oscar. >> thank you. >> 18 cents is in line with expect takings versus 22 last year. we should point out that the latest results include a $40 million pretax cost-cutting charge as well as a $16 million fdic assessment. we're talking about total earnings of $205 million.
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if you were to add in another 56 onto that, it looks like it would be, i don't think 18 is in line with expectations really tells the whole story. ig it's actually above expectations if you add in $56 million to the $205 million. the revenue number was in line with expectations, exactly in loin. 1.08. the company added 197,000 new brokerage accounts in the second quarter, 17 $billion in net new assets in the second quarter which confirms barron's cover article, it looked like a charles schwab advertisement. >> same graphics. >> same graphics. charles schwab is a fine, fine, company and a fine individual, and a great sponsor for us. he's ready to be sponsored on "squawk box." >> have you had him on?
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>> we've had him on a few times but not nearly enough. >> could you have too much? >> i don't think so. >> we'll check out earning central, and check out big report in the morning. and art cashin will tell us what drives the markets.ev ng... tdd#: 1-800-345-2550 including who i trust to look after my money." tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "the dust might be settling... tdd#: 1-800-345-2550 that's great, but i'm not." tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "i guess i'm just done with doing nothing, you know?" tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 "oh, i'm not thinking about moving my money. tdd#: 1-800-345-2550 i am moving it."
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welcome back to earnings central. shares of jpmorgan are lower at this hour. 28 cents a share. that beat analyst expectations by a wide margin. revenue came in a couple billion ahead of 28 billion. a lot of comments from jamie dimon over the course of the hours. unlikely to make money in credit cards in 2010. commercial real estate is going to get worse in the united states. they want to see improvement in conditions in charge-offs before all of that happens. coming up on the call, jpmorgan cfo michael cavanaugh will talk to us at 11:00 a.m. eastern time. and then it's a big day for earnings tomorrow starting off with nbc and cnbc parent ge. the company is expected to come in with revenue of $42.16 billion.
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revenue forecast above $33 billion. and then citi on the list, they're expected to post a loss of 37 cents a share, revenue expected to top some $22 billion. art cashen, of course, head of the trading operations over at ubf financial services. art, just your reaction to jpmorgan. good for the company, perhaps, not a good barometer for the consumer, right? >> that's probably right on. it's been a strok bank throughout. as you were talking, they had the talk money hoist upon them. they're having difficulty straightening it out. they're going to have to worry about compensation problems and a few other things. it's a strong company and the outlook for the consumer and credit is not quite as glowing. >> in your notes today, you talk a lot about the expectations, the bearish expectations that we came into the week with and how the market loves to confound and embarrass anyone who thinks they know what's going to happen. you also talk about the possibility of a hairpin turn.
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what does that mean? >> well, you know, the market, as i wrote, the first rule of trading is the market will do whatever it needs to do to embarrass the largest number of people. and we had a lot of people bearish. friday, the american association of independent investors said nearly 55% were bearish, everybody was talking about the head and shoulders. and the market in its own practical sense pulled the rug out from under them. we had said a couple weeks ago that we should know a lot about the market by the 17th. that is starting to come true here. but this market is now overbought. there is a chance for a reversal. we may have to extend that checkpoint into next week, but i'll let you know that tomorrow. >> well, if the bears are looking for ammunition, art, serve jobless claims is not going to be their friend, or is it? did you believe those numbers? >> no. i think they were skewed by the seasonal adjustment. remember, we talked last week that the bureau looks for
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shutdowns in the automobile industry that used to come in summer. so they make that adjustment saying, we know it's going to be down a lot, but let's adjust for that. well, it wasn't down a lot and therefore, that adjustment made them look better than they were. i think the same is true this week. >> i know art has read confessions of a stock operator written back in the '20s and he said it's a direct quote, the market, the diabolical objective of the market is to embarrass the most people on board. a colleague of ours back in the '20s, i believe. anyway, we will have a little more time with our guest host, former senator and now a member of the t.a.r.p. oversight committee, john sununu. "squawk box" will be right back. . by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you
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