who service their loans, in order to deal with these issues while there is still time to deal with them. and my question is, are you looking at this? are you intending to put forward guidance? when can we expect this guidance, and what other steps are you taking for this to prevent this ticking time bomb to our economy? >> we have not made a judgment on whether that -- a guidance in that particular area is necessary or appropriate or possible. but that's something we would be happy to talk to you and your staff about in more detail. stepping back, you are right to say this is still a significant challenge for the u.s. financial system. we do have in place today, though, relatively created carefully designed programs to mitigate its effects. and those principally are the program that allows us to give capital to community banks, a program we expanded and extended in two months -- roughly two months ago, two or three months ago. and that is a very important thing to do. the second is a program we designed with the fed to provide

financing to the -- the markets that are central and important to commercial real estate financing. now, those are important programs. we think they can be helpful in this, but i think you're right to say this is still going to be a challenge for our economy to work through. >> what is the problem with giving this same treatment to commercial-backed securities that you gave to residential mortgage-backed securities? if this will help them refinance -- we're not talking -- and we're not talking about forcing them to modify or extend loans, but simply allowing them to begin dialogue to see if they can work this out. >> i understand why you're drawing attention to this issue, and i comment you for doing it. but this is an enormously complicated set of issues and something we've got to work through very carefully. and we would be happy to talk to you and your staff about this in more detail. >> then secondly, when we talk about the consumer protection agency, which i totally and

completely support but i also support letting the agencies maintain these protections for consumers in these agencies. a great deal of how well an agency performs is who's in charge, who's appointed, and obvious times, there is a political agenda. we have seen very ineffective chairman or commissions or whatever, and others that really protected consumers. so i believe consumer protection is so important that we should have a check and balance. and to give the example of the federal reserve that was so helpful to this congress in the passage of the credit card holders' bill of rights, i truly believe momentum did not come to this effort until they came forward with a very well thought-out rule that helped move the process forward. so it seems to me that it would be counter active, and put in jeopardy consumer protections to take away the right for other agencies that have the depth --

in depth understanding that it would take years for a new agency to learn, to take that away from them, and to also counter a situation where you may have an agency head who is not performing the way they should or carries a political agenda. we've certainly seen that at the fda, time and time again. >> i understand that concern. and we thought about that a lot carefully. but let me make the other case. if you give this agency only rule-writing authority and no enforcement authority, it will be too weak and the rules won't be well designed as i said in my opening statement. because they're not responsible for enforcing, they won't have the incentive to design the rules carefully to meet the needs of both consumers and the basic reality is the way these businesses work. so that's one reason. the second reason is that right now, again, what you've been proposing is, you're leaving in place, with a bunch of different people now, enforcement authority that frankly was not well-used or deployed. it's in a bunch of different places now.

and i think it's very hard to look at that system and say that it did anything close to an adequate job of what it was designed to do. so i think it's a hard case to make that enforcement will be as effective as it needs to be in the future if you leave it where it has been. >> i would move the enforcement to the protection agency. but allow the others to continue with their rule making and their input into protecting consumers. >> so you would move enforcement and leave rule writing authority where it is. >> as a back-up. >> well, again, you know, as i said, we want to have a strong agency with the right balance between innovation and protection, and we would be happy to work with you and your colleagues in how best to achieve that. >> the gentlelady's time has expired. >> thank you, mr. chairman. mr. secretary, thank you for coming today. earlier in the week, chairman bernanke was here, and we entered into a dialogue, and he at the end stated, when it comes

to separating the financial products regulator from the primary regulator, he was opposed to that, pause because he thought it bifurcated the regulatory process. and so i guess the first question -- i'm not trying to pit you two against each other -- why is he wrong and why are you right? >> well, as the chairman said, i think it's perfectly reasonable and understandable that the institutions who had this authority and have teams of dedicated, motivated, experienced people with that responsibility today, they are not enthusiastic about giving up that authority. and i, with great respect for chairman and other supervisors who are reluctant to do this, they are doing what they should. it would just defend their traditional purgatives of their agencies. and i think, frankly, all arguments need to be fused through that basic prism. and i understand that obligation they feel. on the substance, though, these

are very different types of responsibilities. prudential supervisors is different from consumer protection. and i don't think -- again, we've had a running natural experiment as a country, living with them being done together in their existing basic framework, and that did not turn out so well for us. so i think the basic point is, is that i don't think there is a plausible defense of maintaining that current system in place today. but although i understand why people who still preside over those authorities are trying to make the case to preserve them. >> i think the question then, if you're going to have two different agencies, then what is the size of an agency that has to basically audit or oversee every financial institution in this country for their compliance, and what does that cost, and who is going to pay for that? >> important question. but let's just step back right now from where you began. as you began -- as you said at

the beginning, there are existing teams of examiners spread across bank supervisory agencies, and some in the ftc today, with responsibility for consumer protection. so we would like to take that expertise and put it in a single place, less diffused, take advantage of that accumulated experience, and have that enty be responsible for this important function. since i think overall supervision was inadequate, particularly over the nonbank sector. it's -- i'm not sure i could tell today what you're going to need pictures of the overall resource envelope, but we can take advantage of the fact that there are substantial existing resources. they're just spread out in a place where they have not been optimally deployed. >> does it concern you, though, that -- when i read your legislation, i see the charge of that, and you spend a lot of time talking about this particular area in your

recommendation. other areas are pretty short. but this area. and i think what begins to look like to me is that these products that could be approved, that are going to be, quote, the optimum product, begins to look like government, trying to limit the choices of the american people. in other words, this is kind of the optimum credit card, this is the optimum mortgage, this is the optimum car loan, and to me, i don't see that as a role of the federal government. and so, you know, i think there's a difference between consumer protection, and i think all of us are for that. and then there's the other piece of it, which is product -- the government determined what products the american people get to look at. i'm going to be on the no category of the government telling us what kind of financial products we should have. >> generally, i agree with you on that. and if we were proposing that, i would agree with your criticism and i would share it. but we're not proposing that. so let me just be clear about

this. we're suggesting that as part of a broad range of reforms to fix the vulnerabilities in this system, there should be a set of of standardized, simple to understand, clear disclosure set of products that are available to consumers. that they can choose to avail themselves up or choose not to. we're -- make it very clear and explicit that we want banks and other institutions to have the ability still to market other products to consumers. but even as your colleague said, there needs to be stronger protections in place against fraud and perdation in these kinds of products. so we have a relatively pro choice proposal here, and by suggesting that firms should be marketing standardized, more simple with clear disclosure products, we're not maturely limiting choice. >> well, i think -- i think we all agree with the disclosure piece that there's a lot of difference between -- >> talking about this turf war going on here. treasury secretary tim geithner wants to take away consumer

protection from the federal reserve. chairman ben bernanke in his testimony and earlier this week said he wants to keep it. so geithner was asked, well, what is bernanke's argument and geithner responded, well, it's what all agencies do. they're defending the traditional purgatives of their agency, essentially protecting turf. the background on this, by the way is that geithner used to be at the new york fed, used to work closely with bernanke at the fed, so here they are, a little bit of a war of words going on and maybe a little insulting there. >> and not just between geithner and bernanke, also includes sheila bair. this new agency, tim geithner says should write the rules and enforce. ben bernanke says, no, no, i should write the rules someone else can enforce them. sheila bair says someone else can write the rules, but i want to enforce them. >> and this shows how complicated doing financial reform is going to be in this country. not the different businesses and industries that are out there, but also inside government there is a fight that is complicating this. and not only democrats and

republicans on two different -- >> because whoever wins gets the you will mat power over what the new structure will look like. >> i think that's a big part of it. let's go back to the hearing. >> i don't have to tell you that the unemployment rates in minority communities, in poor communities, are double digit, have been for a long time. and when we see 14 and 15%, like in new york, you really talk in some sense of areas of 35, 40% around this country. and so i'm very interested in doing everything that i can do to help create jobs. to that end, you know, i have been a real advocate in pushing for minority participation with the treasury on a number of your programs that have been developed under the t.a.r.p. the ppip, minority and women-owned programs -- well, the ppip program, in particular, is your latest effort. let me thank you for paying

attention and including some minority firms in cooperation with some of the majority firms. i'm very pleased that we got at least one firm that will be a main participant in the effort, and i'm very pleased that we have identified and you have helped to select through your work minority firms that can participate with majority firms. but in examining what the minority firms are doing, i'm finding that they are getting more fee-based work rather than that flat -- flat fee work, rather than percentages. we to beef up the participation with our minority firms to make sure that they are earning, you know, credible amounts of money, because this money goes back into these minority communities. if you take a look at magic johnson, for example, and what he has been able to do, showing people that you can go into

minority communities, you can do business, you can make a profit, and you can create jobs. so we need a lot more of that. and i would like to commend to you our database, which we have been i think trying to share with you so that you will have -- >> want to break in here and get you some market coverage, because there was a lot of concern in the wake of microsoft we would be weak today, but we have come well off the bottoms. joining us, bill stone, chief investment strategist at pnc wealth management. bill, what do you make of the fact that the market is so easily recovering from this negative news out of microsoft? >> well, i think a lot of it has to do with what we've kind of talked about, which is that you still have a macro background that macro global economic background that is getting better as opposed to what we had been seeing earlier in the year. and, you know, it's kind of where the focus has been. so we have been able to ride out some of these not as great in numbers or some disappointments

here and there. >> and is david, how much of this it also has to do if you look at health care and some of the other proposals being floated around on capitol hill, there's a lot of discussion, and it looks like we may be looking into a little bit of gridlock as we go through the rest of the summer months and into the early fall. is that good for the market? >> oh, that's great for market. you know, any time we have congress in gridlock, that's always been good. and it will continue to be good and positive for the market. the health care bill is very scary the way it's proposed in the beginning, but if we can postpone that until the end of the year, maybe we'll get some compromise and come up with something that's really a win-win. >> but reading the notes, you think this rally is a bunch of hooey. that it falls off next quarter. >> you know, think about -- yeah, this rally, this is a relief rally in a secular bear market. we went from cash, went back into the markets on april 7th, and then just three days ago, we did increase our equity exposure by another 10%. so i do think this rally had

momentum, has more momentum in it, but the thing we can't forget is we are in the tenth year of a secular bear market. we just had a major financial meltdown crisis in our country. and that means that over the next 10 to 15 years, we're going to continue to be in a secular bear. so participate in this relief rally while you can. >> and bill, are we all walking into an ambush here? >> you know, i think it's impossible to tell at this point. i certainly can't forecast out ten years, though i'll go with warren buffett and say my suspicion is ten years from now things are better than they are today. i'll take that side of the trade, though. >> so what ends, david, this rally that we have going on right now? because there are some people on the floor we talked to that say they're seeing some genuine commitment to this market. so what ends it? >> well, you know, the thing is, we can sit and talk about the grocery list of problems, whether it be, for example, all of this debate going on on capitol hill about the new regulation that's going to come in and gridlock the financial markets. we can talk about california's

possible bankruptcy. >> let me interrupt you very quickly, because we have two members of congress who are waiting in the wings here. you increased your equity position. what would make you -- what signal are you going to look for that will make you take some of that off the table? >> yeah. as soon as investors become overly confident, overly bullish, those are some of the very early signals we look at to exit the market. >> all right, gentlemen, thank you so much. >> thanks. >> you're welcome. all right. let's hear now from representative jeff henceterling of texas and only henceterling is good right now. we appreciate you stepping out. >> thanks for having me. >> we have been talking about this turf war. we're watching it here. tim geithner says there should be a new agency that writes rules to protect consumers and enforces them. you already know what bernanke is going to tell you. he says don't take those

rule-writing providence away from me. and sheila bair says i want to enforce the rules. where do you come down on this? >> what we don't need is an assault on consumer rights, and unfortunately what the second confirmed in this hearing is that the agency that the administration -- is proposing, will be given the draconian powers to either ban or modify all home mortgages, ban or modify all credit cards, ban or modify remittances, home equity loans, and the list goes on of. and so you don't protect consumers by taking their choices away, and it would also contract credit in the midst of a huge credit contraction in a small business. specifically to your question, i don't think you can separate a product approval, which is really what this agency is all about, from safety and soundness. that's what happened with fannie and freddie. and i can give you 85 billion reasons today why that's a bad idea. and it was 85 billion reasons

represents the taxpayer dollars that have been paid out, not to mention the hundreds of billions more. >> so congressman sherman is with us, and i understand you can hear us now congressman. so who is best to run of the three that are going to be speaking on capitol hill, and michelle mentioned the turf war, certainly. after what you've heard this morning, what are your opinions? >> well, i do think a new consumer protection agency makes sense. but what's critical is we don't transfer to the executive branch, and i don't care what part of the executive branch, lawmaki lawmaking. it is congress that should be deciding what are the basic rules to protect consumers. and administrative agencies should have regulations that only fill in the gaps between this and that word in the legislation. if this is an idea we're going to punt to the executive branch the decisions of what is necessary to protect consumerses, what products should be allowed, what products should not be allowed, then this will be part of the overall erosion of congressional authority. >> congressman, i want to change gears and talk about the news

that broke yesterday on health care. it is not going to be passed, or they're not going to try to pass it before august. is this a defeat for the president and a victory for the republicans in your mind? >> well, i'll believe it when i see it. you know, the speaker or the president doesn't call me in for their counsel. but it's clear that the american people are very nervous about a health care system that will deny them choices, that will deny them the health care that they need when they need it at a price they can afford. and then they're going to end up paying over a trillion dollars. that's according to the congressional budget office appointed by democrats. so clearly, what you see is that the american people are very nervous about this system. and today -- today they want jobs in a trillion dollars of debt in taking away their health care choices is not a way to go about it. >> representative sherman, what do you think when it comes to this august deadline that seems now to have been pushed back? is this going to happen at all? >> well, i hope we pass the bill by the end of the year. keeping the present system would be the real disaster. it's not a choice between today's health care and what's

being proposed. because if you stick with the present system, it gets worse every year. think of what's happened over the last ten years to coverage, the number of people who don't have coverage, the premiums, the deductibles, the exclusions. >> but with all due respect, representative sherman, the cbo came out and said the plans on the table thus far do not control costs in any way, they raise the costs to the taxpayer. nor do they provide universal coverage. so it doesn't seem like any of the bills out there achieve your party's mission. >> well, many of the bills out there provide near universal coverage. >> what about a cost curve? >> we need to do more to conserve costs. at the same time, many of the proposals put forward have been scored as saving roughly half a trillion. but this is expensive. you're talking about 50 million americans who need to get health coverage, who need adequate health care and i don't think we'll be able to do that at no cost to any taxpayer. we're going to insulate middle

class taxpayers, there are other ways to generate -- >> it sounds like you're giving up on cost controls when you say that. because the whole mission was to control costs, and now it sounds like that isn't necessarily the mission. >> the mission is coverage and cost containment, and we need to achieve both goals. there needs to be more in this bill to control costs. i think there will be before it comes up for a vote. >> congressman, let's go back to the focus of today's hearing, regulatory reform. i heard your very strong opening remarks in which you brought up fannie mae and freddie mac. is that a gaping hole, you think, in the administration's plan is that it does not deal with fannie and freddie? >> well, absolutely. i mean, fannie and freddie were at the epicenter of the federal policy that either incented,ca joeled or mandated federal institutions to lend money to people to buy homes who ultimately couldn't afford to pay it back. you had this neither fish nor foul entity, these government-sponsored enterprises that created huge systemic risk

and now the taxpayer is picking up the tab. i think frankly, it's unconscionable that the administration would be silent on this. so on one hand, secretary geithner appears to have said that yes this is a huge underlying cause, but for whatever reason they want to kick the can down the road. and meanwhile, taxpayers continue to pay out bills and billions and billions of dollars to resuscitate these firms at the same time that their functionally government-owned and increasing market share. >> kicking the can down the road, unconscionable? how do you feel about that? >> if we were to apolish bollish fannie and freddie, home prices would take another huge dive. that would be terrible for the economy. i don't think the actions taken by fannie and freddie going forward have been a mistake. i don't think that they are funding loans that people cannot afford to repay. i think the real problem was the credit rating agencies that give aaa to alt a. and many had nothing to do with

freddie or fannie. >> and that was really the response of secretary geithner who said, hey, fannie mae and freddie mac are the ones doing the financing in the markets right now. you go after them, you get rid of mortgage financing in this country. >> well, one, you don't do it overnight, but there must be a transition. you need to signal to the markets that this system of privatizing your profits and socializing your losses are going to have to end. in the republican plan, we have a multi-year process that would transition fannie and freddie away from their taxpayer infusions and essentially get back to market discipline. no, we're not going to do it overnight. but any time you have government come in, it creates a monopoly. they have taken a duopoly and put it on steroids and making the situation worse. we need a plan to get them back to market competition, and yeah, i admit, it will take a number of years to get there. but let's start today. >> at this point you have no idea whether the private market would step in, because you have this big government agency. >> fannie and freddie did play in this -- >> absolutely.

or rating agencies. >> let me make one more point about the hearings today. and that is the geithner proposal is for unlimited, permanent bailout authority for systematically important institutions on wall street. >> and how would you define systematically important institutions? >> under the bill, any way the administration -- the executive branch decides to do it from year to year, from time to time. if you liked $700 billion for t.a.r.p. for a couple of years, how right leg are you going to like unlimited t.a.r.p. permanently? >> so congressman sherman, is that correct? you're opposed to that? what are you going to do to limit it? >> i'm going to propose an amendment that says that you cannot risk government money without congressional approval. and i mean future congressional approval. we'll see if we're able to get that through. there is one thing wall street wants. and that is permanent, unlimited bailout authority without having to ever come to congress again. they liked the $700 billion. they're looking to take more risks. they're looking to have the implied guarantee of the

taxpayer, and the one thing that's messy was that one time when the house of representatives voted against it, and then voted for it later. >> you agree with that? can we end on a note of agreement here? >> yeah, as a matter of fact, democrats and republicans can agree. brad and i agree, we do not want america to be a perpetual bailout nation, and i would certainly be willing to work with him on his legislation. >> but does that mean you're taking away from the fed the ultimate right they had to step into emergency situations? >> well, at least with respect to the republican bill, we will allow the fed to keep its 13-3 exigent powers, but not to bail out a particular financial institution, but to provide broader liquidity to the economy. and we will take 13-3, and we will put it in a sand box and limit its duration and its size so that the president doesn't have unlimited powers to impose taxpayer liability in perpetuity. >> let's see how far that agreement goes. congressman sherman, are you also in agreement that the fed's

13-3 emergency authority should be limited? >> i think you need to limit 13-3, but you also have to make sure that you're not adding more bailout authority to the statute utilize. >> i'm sorry, how would you limit the fed's 13-3 authority? >> i think you should limit it in terms of quantity, and you should impose by statute what bernanke has already said he imposes upon himself now, which is that he is not allowed to invest in anything that isn't in effect aaa, that it isn't as close to risk-free as you can get. that has been his position. i like the fact that he has taken a conservative or limited view of what 13-3 provides, but i think we ought to make sure the future fed chairman also take a limited view by making it more clear. >> gentlemen, thank you very much. appreciate it. let's go back to the hearings very quickly. congressman royce is now questioning the treasury secretary. >> and the reason it's important is because we are back to debating that again. if we go back to where a fail in

hud were in terms of their positions, we basically have a situation where the safety and soundness regulator is being trumped. is being prevented, just as with a case of fannie and freddie. hud had in its mission these foernl affordable housing goals. and as a result, hud came out with an idea of zero down payment loans. that would be on an agent ma. but hud came up with the idea of allowing them to arbitrage, go ahead and leverage. now, this was absolute anathema, but never theless, allowed to happen, and the amendment to try to do something about it, and allow the regulator to step in and regulate for systemic risk was blocked. when it came to the idea of meeting those affordable housing goals by doing $1 trillion in

subprime. that was encouraged. not by the safety and soundness regulators. for them, they saw in 2004, 2005, 2006, as they came up here and advised us against this, they saw where this was headed. and so did treasury. so now we're in the process of trying to look at the problems that are in the past, but not repeating those problems in the future. and that is why i think it is important, at the end of day, that the regulator for safety and soundness be able to trump these other missions. fannie and freddie became the most powerful influence or lobby up here. and as you know, i've supported a federal insurance charter for some time. and i would like to talk about another issue here. i was concerned about the aig problem and not being able to get our hands around the information. and i think you were, too.

we've talked about that. as you've laid out your regulatory reform proposal, there are several problems with the current balance conized state system. it hampers u.s. competitiveness and lacks a centralized regulator which is the key concern for me with the ability to look at the entire u.s. market. as we are working to streamline and consolidate regulatory authority in the insurance portion of our financial system, it appears we may be taking a step back in the banking sector, especially with respect to the consumer financial protection agency. within your cfpa proposal, you call for creating a floor for consumer protection, which would allow state consumer laws to go over the top of the national standard. bearing in mind what has happened in our insurance market where we have 50 different sets of rules, 50 different regulatory approaches, are you concerned the negative consequences that have arisen in

the insurance market could be replicated in the banking sector with this approach? and would it not make sense to set a ceiling, as well as a floor, so there is some consistency nationwide? >> i understand the concern you're raising, and it's difficult to get the balance perfect. we thought about it a lot. what we laid out was our best judgment. again, how to make sure you have stronger, more uniform protections at the national level. without depriving states of the ability to go beyond that. but i understand that concern. again, we,000 thought we got the balance right, but this is a very complicated issue. this committee spent a lot of time on these issues in the past in the preemption area, and we're happy to work with you and think through best how to get a better balance. >> i appreciate it. much and one last point before my time expires. would you concur on the thought about fannie and freddie, some of the points that i made in terms of the systemic risk they proposed to the system?

>> there is no doubt that we as a country let fannie and freddie get to a point where they posed enormous risk. there is no doubt about it. it would have been good if we figured out a way to avoid earlier, and that mistake should underpin much of what we do in thinking about how to create a more stable system. >> thank you. >> the gentleman's time is expired. >> and this just in. in may, delaware governor jack markel started a lottery to raise money for the state. it was not expected it would go without opposition. and we have that just now. four of the major sports leagues, the nba, major league baseball, the nfl and the nhl, along with the ncaa have filed a complaint in delaware, saying that the state should not be allowed to have single-game betting on pro and college games. delaware, of course, is one of four states that is exempt from the gambling laws regarding betting on sports, because they

did have that prior to 1992. but, again, they were expected to try to do this type of gambling by the nfl season that starts in september. but, of course, there's opposition to it. once again, the four major sports leagues, along with the ncaa have filed a complaint in delaware, saying that this violates federal law, and should not be done. guys, back to you. >> thank you, darren rivell, very much. we want to recap some of the news that was made during our interviews just a few moments ago with the congressmen. steve, one of the issues is the 13-3 proposal, or statute that's in there. >> i don't want people to think we're talking about -- >> gives the fed -- >> right. 13-3 is the authority the fed has used, the emergency authority they have used to provide all sorts of funding of liquidity to the markets, the primary dealer authority, some of the insurance, citi and bank of america. what we heard right there were democrat and republican

congressmen agreeing on limiting 13-3 in some way. so i don't know how serious this movement is. i think those are two very serious -- congressmen there who thought a lot about this issue. there has been bipartisan support to limit this open and essentially checkbook to provide liquidity and in some cases capital to the market. bear stearns under 13-3, and aig under 13-3 so all of the things it did -- >> well, a lot of people would argue that without that authority we would have had a global financial meltdown that was much worse. >> waiting for congress to allow for something to happen. >> some would argue that, which is why i believe the federal reserve will try to fight that and retain that authority. the question is not maybe will they limit it. it seems to be bipartisan. the question is how, and whether that creates more risk to the system. >> what's significant about this is the way the members of congress have moved up the learning curve. because when all of this was happening, we asked many of them, how do you feel about the fact that the federal reserve is essentially doing all of this stuff with taxpayer money.

and a lot of them looked at us like, o we actually hadn't thought much about that. >> remember, 13-3 comes from congress. this is a congressional act. >> a long time ago. >> right. so the question was, we gave them what? we gave them what power? so now one other piece of news out there is they're both agreeing on limiting the treasury's bailout authority here, and one thing they do not appear to like for the administration's proposal on regulatory reform is this idea of kind of this never-ending bailout authority that's there. and so the key is that that seems to be another thing that might be what you would watch -- >> might the fed not argue, though, that without the unlimited authority of 13-3, in these crises, every time there has been a time element, an urgency that one would think would argue in their favor to keeping 13-3 exactly the way it was. >> i actually think you make a good point, that congress gave this fed the authority, for it knew it could not act in a pinch. >> right. i mean bear stearns, it was 24 hours and gone.

>> over the course of a weekend and no particular fund in the treasury to step forward to do that. but fed has the authority to go in there and essentially bail out an ice cream vendor or a large investment bank if it feels there is some sort of emergency authority out there. really very, very broad, and whether or not it's used judiciously is in question. >> and you can understand why a member of congress would be very uncomfortable about. >> because it's the power of the purse that belongs to congress. let's go back to the hearing now. >> i complete my moment. i understand that we have two classes of consumers. we have those who actually consume or deal with the products that are being pervade, and then you have another class that the folk who work at minimum wage, which just went up today, to i think 7 $.25 an hour, but who suffer because others make unwise choices. they end up losing jobs. we have seen how connectioned

the economy is. how interconnected the world is. and by virtue of this, i care about those consumers who make $7.25 an hour, and i care not only about fannie mae and freddie mac that we have discussed today, but also aunt fannie and uncle freddie mac. people who have real lives that are being impacted by those who made bad choices. so i'm here to let you know that i want to work with you. but my fannie mae and freddie mac includes at least two classes of fannies and freddies. thank you, and i'll yield back, mr. chairman. >> mr. chairman, i did an unusual thing. i yield back time. >> i appreciate that. and i now recognize the gentleman from new jersey. >> thank you, mr. chairman, thank you, mr. secretary. before i begin, will you work with mr. watt on all of those issues?

i'm just being -- glib about it. >> you? >> it was an attempt the at humor. thank you. following those lines, randy asked a question with regard to who do we trust, who do we believe with regard to the feds last week and your position here. >> you can believe him and believe me. we have a difference. it doesn't mean that -- >> right, right. one of your comments, though, was sort of intriguing. you said you understood what they were saying, you understood what they were doing. and one of your comments was that what they are doing is right thing. they are defending the purgatives of their agency, basically. and you're nodding your head, and she can't write that down, but that's a yes, right? >> i would say that they're defending the people that have worked on these issues over time. >> right. yeah. >> and speaking in favor of preserving the traditional purgatives or agencies. that happens all of the time. >> and my concern there is of course it puts us in a hard situation when agencies come before us that that's the understanding of the agencies are going to come from aspects

from defending the purgatives of their agencies, whether it's the fed or one of the regulators or the treasury, they come to us doing it not for the good necessarily the overall economy or country, or what have you, but defending their peg purgatives, and you can understand why that raised a red flag when i heard that. >> no, you can understand that inherent in your job is to think about how to make those choices. >> and consider another source. >> no doubt about it of the absolutely. >> but going to mr. watts' question. one of his issues was someone coming in for a vanilla product, and then getting a more complicated product, and his concern is if that more co complicated product isn't right for me, do i have a right to sue the bank that they gave me this more complicated product. and he said you hoped you would work with him to make sure that you can't sue the banks just because you're into this new product. if did i understand his question right. >> ipds it i understood it

differently. in trying to protect against fraud, and make sure it's possible can see for example a 30-year fixed rate mortgage, alongside a suite of other mortgage products. we also want to make sure that they have the ability to choose a five-year adjustable rate mortgage, too. without presumption that they would be presented a challenge for offering products other than the vanilla product. that i agree with. >> okay. what about the flip side? what if an individual comes into the bank and the bank does have these more esoteric products and they don't offer it to the client or individual. and all they offer to the client -- or the customer is the vanilla product. does that client have a right to go back to the bank and say that this bank is profiling me and saying i'm not eligible for this type of more sophisticated product? >> that doesn't worry me that much. in our system, because we'll have a lot of banks competing for this business, that consumer will be able to go to another institution and say, i like the

range of choice that institution offers. >> well, that certainly should trouble you, because we've heard a lot of discussion on this panel with regard to something called predatory lending, and sometimes they say there should be other products and individuals should be entitled to, but they're just not offered those. and all they're offered are these much higher-rate products or ones that put them in a bad situation. >> very unlikely i think that would come with an institution that chose only on its own only 30-year fixed rate mortgages. it's possible, but i think unlikely. >> in my time remaining, on the wind down authority -- first of all, the chairman made a comment i agree with completely. he says if we identify who the tier one companies are, what did he say the other day? and we shouldn't have a preexisting list, because if you do, then he said you only exacerbate the problem of too big to fail. i agree with that. but under the proposal right now, it seems as though you're beginning to identify them with

parameters. so, a., wouldn't that cause a problem because you're telling us who they are, and b., the second question, i've heard different stories where the assessments will be. will the assessments only be on the tier one companies, and if the answer to that is yes, and you can give the answer off line, too, will that be potentially harmful to those companies if the remaining companies -- if the e. assessment is too large, because you only have a small group. i'll let you respond to question as you can. >> let me do the first part and the second and third part i'll do separately. on the first part, here is our basic challenge. we believe, and i think there is a very strong case for this, that the largest institutions that present the unique risks to the stability of our system, they need to have more conservative constraints on capital and leverage. they need to be holding more resources against the risk of loss, so that we are left vulnerable in the future to the mistakes they made. and the system as a whole is better able to withstand the effects of their failure. to do that, you have to be able to apply differentially higher

charges. but we understand the moral hazard risks that we live with today and that come with various yapts of this stuff -- >> i'm going to do two more. the gentleman from georgia. >> thank you, mr. chairman. mr. geithner, welcome again. of i want to ask you specifically in terms of would you not commit to at least having someone on your staff that is dedicated to increasing the participation of african-american-owned firms, management asset firms, other firms, so that they can get business in the financial sector as we -- as we move in this area? >> i think i can be -- i think i can do better than that in the sense that i would be happy to designate to you the principle

senate-confirmed official in the treasury with broad responsibility over the design and management of these programs. part of whose responsibility will be to continue to make sure we're looking for opportunities to increase participation of, again, small women-owned minority-owned businesses in these programs. again, we're -- we've been pretty careful, and pretty effective in expanding those opportunities. happy to work with you on ways we can do better. >> because there are many, many well-qualified minority-owned firms who, if we don't make a special effort, a special effort, to make sure they have the opportunity to compete, and if it doesn't come from the top, it just doesn't get done. so i would appreciate it, and i know this committee would appreciate your work on that area. now another area that i'm vitally concerned about. and that is many or shall we say some in the banking industry, it

seems to me are reverting back to some of the very practices that got us into this mess. i'm sure you're familiar with the reports that have come out of now the huge, multimillion-dollar, billion-dollar compensation packages, bonuses, that really got us into some of this. and they're going right back to it. what can you do about that? >> congressman, i want to make it clear. we do not believe we can go back to the set of practices and compensation that prevailed over the last decade and helped contribute to this crisis. and that's why we have proposed well-designed, but very important reforms in the compensation area. and that's why it's very important -- you're moving very quickly as a committee to consider those reforms just next week, i believe. but it's important that we do this in the context of broader regulatory reform. because it's not going to be enough just to bring about

better incentives through compensation. we're also going to have to put other constraints on risk-taking through capital requirements, for example, more conservative safeguards, require firms to hold greater cushions against loss. but need you to look at comprehensive reform, again, to reduce the risk that we start to recreate some of the same problems that got us here. >> we'll continue to get complaints from some in the banking industry with certain practices. we have the consumer protection agency, which we are pushing. which, unfortunately, some are fighting very hard. and yet they're not doing the basic thing that need to be done. they're not lending. what can you do to increase pressure on our banks to lend? >> let me just say two things in response to that. one is the most important -- there's basic two core substantive strategies you can do that would be helpful in that area. one is to make sure that banks who need capital have access to

capital. that is critical. without that, you'll have further reduction in had lending capacity. banks will have to pull back further. the second is to make sure that our broader credit markets that compete alongside banks are working better. we've done a lot of things in both those areas. but i think those are the most important effective things we can do. i do think it's important, given what a bunch of the cumulative effect of a bunch of judgments by banks across the country did to our economy, i think it's very important that they work very hard to earn back the confidence of the american people, that they're going to be a source of capital and credit for growing businesses and for families going forward. i think that's very important to them they work hard to earn back the basic trust and confidence. >> now, there is another growing practice that is happening in our financial sector, and some banks, not all, but we've gotten reports where banks will end there, and in our rush to -- to allow banks to do a multiplicity

of services and products. and in which they would encourage individuals to open up their savings account at this bank, open up their checking account at this blank. and if they need a loan or home equity loan or any loan, that they would take that at that bank. but what happens is, that oftentimes, and particularly now, when there's pressure on consumers out there, to -- and they're on the margins, where these banks would go in, and if they are a week or two late on their payment for a loan, they would go in and take that individual's savings, without their knowledge, and their -- or checking and apply it to that. >> gentleman's time has expired. gentleman from delaware. >> thank you, mr. chairman. mr. secretary -- >> it has been stated perhaps by you, but i know by others that various financial entities in this country seem to be relatively free or flexible in selecting their regulators, if you regulators, if you

will. a little bit beyond the purr view of this hearing. that just interested me. i mean, you're talking about everything from state regulators to the fed, occ, fdic and ots and whatever, and i would think that the regulator would be dictated by how they are structured, so what are they doing that allows them to be able to so-called select their regulator, and how great a problem is that in terms of some of the enforcement mechanisms we're concerned about? >> let me just give you the -- some of the most compelling examples of that. countrywide and wamu were banks, found the strictures of being banks inconvenient, shifted their charter to a thrift charter, and were able to take advantage of what in retrospect could only be judged as lower standards of enforcement, and they grew dramatically or at a

more rapid pace after they made that base inswitch. that's one example, but there were others in our system, too? should we be looking at legislation to -- to change that? >> we should. we've proposed that the centerpiece of our legislation that we eliminate the thrift charter and combine federal responsibility for these bank-like entities into one place to eliminate. >> and you think that will solve not all. >> not all. >> but a lot of the problems? >> in the banking area, that difference between the thrift and the bank charter as it was enforced. now, you know, there's hundreds of well-run thrifts across country, but there were, unfortunately, a few very big examples that caused a lot of damage where effectively people would go from one system that was stronger to a weaker system and grow market share, took themselves to the edge of the abyss because of that, and that's something we have to prevent. >> changing subjects. on the consumer financial protection agency, and this may be in some of your writings,

you're submitting a lot of writings. sometimes in your spare time i think you wrote the health care bill and the energy bill and a few other things and i haven't had a chance to read it all and maybe this is spelled out in there. >> i would have to rule out attacks on the witness' character. >> my question is -- >> that's right. >> how do you view how this would be structured? how big would it be? how expensive would it be? would there be all sets of reduction in employment in the other various agencies that are now regulating, if it were to occur? how do you foresee that? maybe that's not thought out carefully yet. >> again, there's a whole range of complicated design questions we have to work through but the simple thing you said it well. again, there is a substantial body of existing examiners who now do consumer protection spread across our multitude of bank regulators, and what -- ideally what we do is take advantage of that expertise in shaping the work force of this

new agency. that would be the ideal thing. it would be not -- it would not be sensible not to do that, and i think that as a result the amount of employment in what will be bank supervisors with a narrow set of responsibilities for safety and soundness would be reduced. >> is it your view that every new product that the bank would issue, a change in a credit card or whatever it may be, would have to go through an approval process with this consumer protection agency? >> absolutely not. >> what -- how would they determine whether they have to go through it or not? i mean, what's going to be in your view, what is going to be the methodology for what needs to be submitted and what doesn't? >> we don't envision that process. don't think that would be necessary or desirable. the core of our proposal is to say we've put out broad standards and principles that should govern products and practices in this area. there's a lot of good stuff that's happened, somewhat late, but good stuff that's happened over the last two years, both in the credit card and mortgage area. you heard some in the paper

today. we'll build on that basic model, but what we really want to do is just to make sure that consumers have the ability to take advantage of a more standardized plain vanilla easy-to-understand product even as they contemplate a range of other different sets of choices. that's the basic thrust of our proposal. >> as you know, some of the existing regulators are not totally happy with this change, shall we say. what is -- and in my judgment they are starting to do a lot better than they did before, and i'll be the first to agree with you that there were serious problems, but the credit card business and the fed is an example of starting to do a much better job. what is your response to them? i mean, there's a great deal of expertise in the fed, for example, with some of them, and they are worried about giving it up, right? >> there is a lot of respect and we need to take advantage of that. we had a long period of testing the efficacy that have system and it did not serve us well.

>> mr. secretary, as the song goes, see you in september. >> okay. they are wrapping up the first part of this hearing, the house financial services committee led by chairman barney frank. tim geithner on his way out and ben bernanke and sheila bair and bowman on the way back in. what you heard this morning was geithner trying to defend the administration's proposal for regulatory reform, including the creation of a new consumer financial protection agency, giving the federal reserve prudential oversight risk and then a question of what happened and why wasn't there more discussion of fannie mae and freddie mac. you will hear more turf battles in the next segment. >> oaks i'm sure. >> bernanke is going to defend the fed keeping consumer protection. you'll hear defense of the office of thrift supervision. dugan coming in, and he's part of the occ, supposed to merge with the ots. all of this sounds like a little bit of inside baseball but the oversight and the form of the financial system is going to depend on the outcome of these hearings. >> to really simplify it, the new consumer protection agency

under theory under geithner's proposal can write rules and enforce them, taking away that ability from ben bernanke to write rules. he wants to still be able to write the rules and sheila bair wants the abilities to enforce the results so not giving the consumer protection agency all of those powers. >> and the thinking is that the republicans were criticizing saying, you know, this would determine what kind of products can be offered and would still innovation and then the other side of that is, hey, the fed didn't do a very good job when it had it on their side. >> and a lot of criticism on that front. >> if you put together the safety and soundness part with the consumer protection, one gets watered down as opposed to the other. i wanted -- i guess we have to wrap right here. on the other side i want to talk about a background conference call i had last night about how it's going to be more expensive to run a big bank under these new rules. >> regardless of who -- on the back side, if you're a tier one company, it's going to cost you more. >> all right. we'll talk about that as we continue and, of course, the fed chief ben bernanke will be back on capitol hill in just a second. he will start talking and taking questions about financial

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and welcome back to "power lunch." you see the fed chief live on capitol hill in front of the house financial services committee making hi statements and getting ready to take the

q&a. >> that strategy must include sustained efforts by all our financial regulatory agencies to make more effective use of existing authorities. it also invites action by the congress to fill existing gaps in regulation, remove impediments to consolidated oversight of complex institutions and provide the instruments necessary to cope with serious financial problems that do arise. in keeping with the committee's interest today in a systemic risk agenda i would like to identify the key elements that i believe should be part of that agenda. first, all systemically important financial institutions should be subject to effective consolidated supervision and to tougher standards for capital liquidity and risk management consistent with the risks that the failures such a firm may pose to the broader financial system. second, supervision and regulation of systemically critical firms and in financial institutions more generally should incorporate a more macro economic perspective, one that takes into account the safety and soundness of the financial

system as a whole. such an approach which considers interlinkages and inddepend sis among firms and markets that could threaten the financial system in the crisis complements the traditional micro prudential orientation of supervision and regulation which has focused primarily on the safety and soundness of individual institutions. third, better and more formal mechanisms should be established to help identify, monitor and address potential or emerging systemic risks across the financial system as a whole including gaps in regulatory or supervisory coverage that could present systemic risks. the federal reserve board sees substantial merit in the establishment of a council to conduct macro prudential analysis and coordinate oversight of the financial system. the expertise and information of the members of such a council, each with different primary responsibilities, could be of great value in developing a systemwide perspective. fourth, to help address the too big to fail problem and mitigate moral hazard a new resolution process for systemically

important non-financial banks are needed. such a process would allow the government to wind down a troubled systemically firm in an orderly manner. importantly, this process should allow the government to impose haircuts on creditors and shareholders of the firm when consistent with the overa.r.-ching goal of protecting the financial system and the broader economy. and, fifth, ensuring that the financial infrastructure supporting key markets can withstand and not contribute to periods of financial stress, also is addressing the too big to fail problem and systemic risk. all systemically performing and payment and clearing arrangements are subject to consistent and robust oversight of production standards:comprehensive reform of financial regulation should address other important issues as well, including the needs for enhanced protections for consumers and investors in their financial dealings and for improved international coordination in the development of regulations and in the

supervision of internationally active firms. let me end by noting that there are many possible ways to organize or to reorganize the financial regulatory structure. none will be perfect, and each will have advantages and disadvantages. however, one criterion i would suggest as you consider various institutional alternatives is the basic principle of accountability. collective bodies of regulators can serve many useful purposes such as identifying emerging risks, coordinating responses to new problems, recommending actions to plug regulatory gaps and scrutinizing proposals for significant regulatory initiatives from all participating agencies. but when it comes to specific regulatory actions or supervisory judgments, collective decision-making can mean that nobody owns the decision and the lines of responsibility and accountability are blurred. achieving an effective mix of collective process and agency responsibility with an eye towards relevant institutional incentives is critical to a successful reform. thank you again for the

opportunity to testify on these important matters. the federal reserve looks forward to working with the congress and the administration to achieve meaningful regulatory reform that will strengthen our financial system and reduce both the probability and the severity of future crises. thank you, mr. chairman. >> miss bair. >> chairman frank, ranging member marcus and members of the committee. thanks for holding this hearing and for the opportunity to give our views on reforming financial regulation. the issues before the committee are as challenging as any that we've faced since the days of the great depression. we are emerging from a credit crisis that has greatly harmed the american economy. homes have been lost. jobs have been lost. retirement and investment accounts have plummeted in value. the proposals by the administration to fix the problems that caused this crisis are both thoughtful and comprehensive. regulatory gaps within the financial system were a major cause of the crisis. differences in regulating capital, leverage and complex financial instruments as well as in protecting consumers allowed

ramp ant regulatory arbitrage. reforms are urgently needed to close these gaps. at the same time, we must recognize that many of the problems involved financial firms that were already subject to extensive regulation. therefore, we need robust and credible mechanisms to ensure that all market players actively monitor and control risk-taking. we must find ways to impose greater market discipline on systemically important institutions in a properly functioning market economy. there will always be winners and losers, and when firms through their own mismanagement and excessive risk-taking are no longer viable, they should fail. efforts to prevent them from failing ultimately distort market mechanisms including the incentive to compete and to allocate resources to the most efficient players. unfortunately, the actions taken during the past year have reinforced the idea that some financial organizations are simply too big to fail. to end too big to fail we need a practical, effective and highly

credible mechanism for the orderly resolution of large and complex institutions that is similar to the process for fdic-insured banks. when the fdic closes a bank, shareholders and creditors take the first loss. we're talking about a process where the failed bank is closed, where the shareholders and creditors typically suffer severe losses, where management is replaced and where the assets of the failed institution are sold off. the process is harsh as it should be. it is not a bailout. it quickly rhealcates assets back into the private sector and into the hands of better management. it also sends a strong message to the market that investors and creditors face losses when an institution fails, as they should. we also believe potentially systemic institutions should be subject to assessments that provide disincentives for complexity and high-risk behavior and reduce taxpayer exposh u. i'm very pleased that president obama supports the idea of assessments earlier this week. funds raised through an assessment should be kept in

reserve to provide working capital for the resolution of large financial organizations to further insulate taxpayers from losses. in addition to a credible resolution process, we need a better structure for supervising systemically important institutions, and we need a frame wrork that proactively identifies risk to the financial system. the new structure featuring a strong oversight council should address such issues as excessive leverage, inadequate capital and overreliance on short-term funding. a regulatory council would give the necessary perspective and expertise to look at our financial system holistically. finally, the fdic strongly supports creating a new consumer financial protection agency to help eliminate regulatory gaps between banks and non-bank providers of financial products and services by setting strong consistent across-the-board standards. since most of the consumer products and practices that gave rise to the current crisis originated outside of traditional banking, focusing on non-bank examination and

enforcement is essential for dealing with the most abusive lending practices that consumers face. the administration's proposal would be even more effective if it included tougher oversight for all financial services providers and assured strict consumer compliance oversight for banks. as both the bank regulator and a posit insurer i'm very concerned about taking examination and enforcement responsibility away from bank regulators. it would disrupt consumer protection oversight of banks and it would fail to adequately address the current lack of non-bank supervision. consumer protection and risk supervision are actually two sides of the same coin. splitting the two would impair access to critical information and staff expertise and likely create unintended consequences. combining the unequivocal prospect of an orderly closing, a stronger supervisory structure and tougher consumer protections will go a very long way to fixing the problems of the last several years and to assuring that any future problems can be handled without costs to the taxpayer. thank you very much.

>> thank you very much, miss bair. >> those are some of the opening comments, and we're going to talk about that now with david greenlaw, the chief fixed income economist at morgan stanley. david, welcome and thank you for joining us. >> hello, sue. >> anything surprising in what you've heard so far from -- i know the q&a session hasn't started with the fed chief certainly, but it was interesting, was it not, with david geithner -- with treasury secretary geithner, david? >> you know, secretary geithner really seemed to be much more relaxed in his testimony this morning. i think he dealt well with the questions from committee members, and i think in general the -- the improvement in the market tone may be over the course of recent weeks has made him a little bit more optimistic about his function at treasury. >> do you agree with that improvement in the market? look at the selloff that we saw yesterday in the ten-year notes especially? >> well, in fact, what's been driving the treasury market for a while now is the improvement in the stock market, so when the

stock market goes up, that's not great for treasuries. the short end of the treasury curve did catch a bid earlier in the week on the bernanke testimony and the perception that the fed will be on hold for a significant period. >> mm-hmm. >> the improvement in the stock market has a lot to do with the perception that things are getting less bad, data that we've seen, whether it's the weekly unemployment figures or the existing home sales, do you agree with those who believe that the economy is turning around, and is that one of the reasons that we've seen the selloff in treasuries? >> i certainly think that the data points to things getting less bad, and i think we may well be at an important turning point for the economy. indeed, it's starting to look like there's some upside risk for third -- we get second-quarter gdp next week. that i think will show another decline of maybe a point and a quarter or so, but they are starting to look like there may be some upside risk to q-3 gdp on the basis of a pretty big pickup of motor vehicle production. >> david, i want to talk to you about what you think the bond yield curve is showing us.

when way to look at things is the spread between different maturities the two-year at around 1% and the ten-year at 3.67, so that's 2.60, 2.70 in the spread between the 2 and the 10. when i go back and i look, i see this is a normal sort of thing that happened six months or so after an expansion has begun. so i don't see what -- what is this -- this spread telling us? is it way ahead of itself in terms of the signal of expansion? >> not really. i think we could even get more steepening in the curve as we get closer to expansion. part of that will reflect the fact that we're getting closer to the end of the -- of the fed's treasury purchase program. also we still face a lot of treasury supply. there was an interesting announcement by treasury yesterday which indicated a big increase in the auctions, an unusually large increase in the auction sizes for next week so we've got more supply ahead of us. we'll have the fed pulling back

eventually on the purchase program. i think the curve can steepen more. >> okay. >> david, thank you very much. appreciate t.david greenlaw joining us today, and now we're going to go out to julia boorstin, and she is at a very interesting conference and has a very special guest with her as well. julia? >> reporter: thanks so much, sue. i'm joined now by barry diller, the ceo of iac. thanks for joining us. >> happy to. >> reporter: barry, it's been nearly a year since you spun off four different businesses including ticketmaster and lending tree. nearly a year later, what is the plan for iac? >> well, the plan is was in the original concept of when we spun these off. iac has research, it has match.com and ask.com so it has a whole series of businesses that are a billing and that's what we're doing and they are building. i mean, notwithstanding the economic mess of the day, the companies are all profitable. >> reporter: well, speaking of economic mess of the day, in

your last earnings call back in april you said you didn't think this economic period is over and there is much more of this to come. are you any more optimistic now? >> no. >> reporter: do you see a bottom ahead? >> i don't know. you know, i -- i think, first of all, i think there are some indications of some stabilization in certain areas, but if you're in the advertising business, as we are, the subscription businesses, the transaction businesses as we are, you do not see any euphoria anywhere. i mean, forget you'veia. you see stabilization, but nothing robust. >> reporter: now your businesses probably give you some sense of trend in terms of consumer spending obviously in addition to advertising. do you see any change in consumer behavior? >> no. i think the consumer is on the track of contracting which is i think a healthy process, but given where we've been with

excess over the last 20 years or so, and so i think that contracting that is taking place and i think it's going to continue to take place with the consumer, i think people feel good about that presuming they have jobs. forget people who are growingly unemployed, but the people who have jobs are starting to save, are starting to live i think more -- i think are probably more secure building lives. >> reporter: what does that mean for your business for the new media space? >> well, i think it's fine. look, new media as against old media. new media which is certainly -- has some of the downward pressure, of course, that all advertising-based businesses face, but new media has this gigantic wind at its back, and that's just going to continue. i mean, the internet is going to continue to evolve. it's going to continue to change things certainly for the next

ten years, change things pulling more and more activity through the internet. that's good for anybody who is engaged in that kind of block building. >> reporter: you have about $2 billion of cash on your balance sheet. in this economic environment do you see opportunities to buy? you bought an $80 million company. >> we bought a little business called people media last week, but, no, not particularly. i do not think we are -- i mean, if something came around the corner, of course, but i don't think it's going to happen. >> reporter: so going to do stock buybacks with that cash? >> well, we have done them and we announce our stock buybacks every quarter. you can tune in next week to see whether or not we want stock back. >> reporter: you've express ed interest in aol in the past and now tim armstrong is trying to do the turnaround, are you interested in aol as a potential acquisition? >> well, i don't probably think it's going to come up for acquisition, but there may be commercial arrangements, partnerships and things we can do with aol.w >> reporter: do you think it is a viable turnaround?

>> yeah, i do, i do. i have a lot of confidence in tim. >> reporter: a question of another media property. microsoft's bing, what do you think of bing, and you own ask.com. can microsoft market its way to success with bing? >> most of bing but a lot of bing looks like ask. a lot of the ideas that ask, a band of people that ask pioneer invented over the last, you know, innovated in the last couple of years are most of the things that people talk about the good parts of bing so i think that's nice. and i think it's -- i think actually it's a good step. i think bing is a good product. >> reporter: what does it mean for ask.com? >> i don't think it means particularly anything much to ask.com. ask has been able to hold its audience and gain come queries during this period. hasn't gained much market share. i don't expect that it will for

a little while, but i don't think it's adverse. i think actually the interesting thing son the day it started and all that attended stuff ask goes up. anything that happens in this area the boats rise. >> reporter: last final question and we've been talking a lot about social media, twitter, facebook, you own match.com. >> we do. >> reporter: do you think all the social networking sites are going to replace online dating? >> i think there's -- look, i have an ax to grind so who knows, but not a chance. >> reporter: great. >> not a chance. >> reporter: thank you so much for joining us and we'll tune into your earnings call next week. >> okay. >> reporter: sue, back over to you. >> thank you very much, julia. appreciate it. coming up next, the "fast money" halftime report right after this break. stick around. come on in. you're invited to the chevy open house. where getting a new vehicle is easy. because the price on the tag is the price you pay on remaining '08 and '09 models. you'll find low, straightforward pricing.

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welcome to the "fast money" halftime report. getting to the heart of the action as it's happening. the market selling off table unable to shake off microsoft's and amazon's disappointing earnings. is this rally really over and 23 so how to protect your profits. our crew today, pete najarian and jim uri of tjm institutional services and the governor steve grasso. guys, you know, there was no surprise given all the earnings lows we had on the desk last night that the markets are pulling back just a touch. been i want to ask you this. amex came across and capital one

came across and really seemed like the financials were in for some sort of a selloff. we saw axp tread into positive tearity and capital one is up sharply. what do you make of this move? >> sure seems like people were looking for an opportunity, looking for a selloff opportunity to jump into a stock like axp who made such a significant move up to $30 a share and gave them a chance today. the pullback, that's what we've seen across the board really and the stocks that people really want a piece of, that they missed on the way up, when they are showing any kind of signs in pullbacks we're seeing folks come in and start to buy and clearly american express is a great example of this. the delinquency rate far less bad than people first expected. the writeoffs weren't as bad. when you look at the actual numbers, the numbers were pretty impressive and the fact that they put away a little bit more money, i like the direction right now that mesh express is going. i think it makes it much more attractive. >> governator, last night it seemed like the futures were falling off a cliff and seems to

speak volumes today that the dow is virtually unchanged and so is the s&p 500. what's the feeling on the floor and what kind of participation are we having on a day like today? >> i can't agree with pete more. people waiting for the fall of the cliff selloff, 975, nothing here. people even betting on a positive close. i think people that were short of this mark were surprised it didn't crack on the opening bell. on the floor everyone was surprised. when we sat on that desk last night on "fast money" we all thought we were in for 955, 960 in the s&p and just didn't get it and when the shorts couldn't crack them, the bulls came in and started buying or at least supporting them. >> let's get to our chart of the day. bill, this is your chart. speak to it and talk about the sort of levels we should be anticipating on the s&p 500. >> melissa, i like this chart because it gives us a little bit of perspective. we get caught up in the day-to-day ups and downs but when you take a step back and look at what's going on here, the s&p is really bottoming in the same area it did in '02 and

'03 after the dot-com bubble burst, basically the area from 800 to 1000, so as i said back in may, i -- i still believe the s&p gets to 1,000. we'll probably take a big chunk of up profits there, maybe even get short a little bit, but recently we've put out a note to our clients we think over the next several months we can even get above that level and put another leg on to the up side to 1,100. >> let's move on to our next strike, drill down on the rally on the sector really moving today, the opposite of a rally i should say and that's the tech trade, nasdaq down by a full percentage point. soft in the semi-conductor sector and disappointing earnings, second-quarter profits dropping 90%, margins st disappointed. jim, you're seeing the impact ot some of the chip names that you're watching. >> a lot of interesting activity in this sector, and most of it t was microsoft-related, and as wt expect a lot of it was bearish this morning. now this sector has turned around a little bit, too.st earnings have come out a little bit and dragged things up.st the thing that stains me the most microa and cyclon, all sold

he have they morning on the heels of microsoft. micron understands because their business coincides with microsoft technology and i think they are throwing out the good with the bad there. >> and pit boss, yesterday when the microsoft earnings crossed you said i want to hear what the company says about its outlook, et cetera, to see if this is a buying opportunity. the stock is down 9%. what is your assessment of the situation? are you a buyer on this weakness? >> i am. i'm not really calling a bottom necessarily for microsoft, but i think that they missed that tc cycle and that's what they are using as the reason for the scapegoat of why they missed on the revenue numbers, but i'll tell you what. i still look at microsoft as $30 billion in cash. when are they going to put that to work for something, not necessarily growth, but is that something going to be more share buybacks or what facet will they see some growth in another area? i like microsoft for those reasons. i think you missed it on the way up. now we're getting a nice pullback, a big 10% move. i like the opportunities here for microsoft. >> got it. let's move on.

time for fast and furious where we answer all your burning questions. big earnings names out next week, disney, time warner, up, what are you doing ahead of the results? >> all the names have made a brisk name into this already. it's an opportunity to take some off the table because of the fact you like at disney, made a spectacular move. you've got to take some off going into the numbers. >> after at&t's better than expected results, do you buy sprint, motorola or verizon next week ahead of the results, jim? >> no. you know, if you look at this sector it hasn't made new highs from a couple months ago like the rest of the market has. to me it looks like a failure. any of the charts that looks constructive, rim looks the best and maybe at&t. >> steve, big casino names out with earnings next week what. are you doing with them? >> based on a technical basis i think you want to be buying the casino names but we're not out of the woods yet. there's still worst news to come in that space. >> that does it for us here on the halftime report, abbreviated version. do not miss the first on cnbc interview with the ceo of hyundai and we'll have the

juniper ceo and "power lunch" continues right after this break. stay tuned. >> this korean import is now booming in an industry left for chunk. hyundai's head man on winning in a downturn. plus, after microsoft's big mess, is a tech trade in tact? the ceo that controls the internet's backbone sets the record trade and retrade it on america's post-market show tonight. so many arthritis pain relievers --

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right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. 154 people are tracking shipments on a train. 33 are i.m.'ing on a ferry. and 1300 are secretly checking email on vacation. that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. sprint. the now network. deaf, hard-of-hearing and people with speech disabilities access www.sprintrelay.com. dow is off about 15 points. important to note that if microsoft were taken out of the dow, dow would actually be

positive. microsoft is off by a little more than two points. not as bad as some had thought considering the earnings that came out yesterday, but it is getting hit pretty hard, lower by $23.24 in the wake of their first ever sales decline. we'll see you on the other side. [ engine revving ]

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> all right. despite the drag from microsoft, the dow has moved positive by almost seven points. just a little bit -- just a few minutes ago. it's 9,076.16. the s&p just a fraction, you could basically call that unchanged on the s&p at 976.20, and it has been peeking its head into the green, and that comes despite the fact that we have an uptick in the oil market as well today. >> see if this rally can keep going. there is a huge controversy brewing on wall street about a new trend called high frequency trading. a controversy because critics say it's hosing the little guy and making them pay more for stocks than they should or would. joining us the guy who started the controversy. he's co-head of equity trading and he wrote three white papers everybody has been talking about and we'll talk about them and irene aldridge, managing partner at abel alpha trading, the author of "high-frequency

trading" and says this is a new innovation. you've got the white papers out that everybody is talking about. high-frequency trading, if i understand, it i'm one of the big guys. can i pay the exchanges to see # orders before everybody else. >> that's correct. >> that's the bottom line. why is that not front runing? >> well, it is, it absolutely, is and there's different types of high-frequency trading as i'm sure your next guest will say. there's program trading. there's rebate trading, front-running orders called predatory algorithms and the key here 170% of the volume going on on all of the exchanges is related to high-frequency trading. certain people with big computers, let's leave it at that, can pay for a co-location service like you just mentioned. they will pay the nasdaq and pay the new york stock exchange and it's a good chunk of their revenue. >> let's highlight that co-location, putting their servers right there on the ground and because of the laws of science they actually get information faster than everybody else. >> that's correct, and that's why the retail investor and the

institutional investor is currently at a disadvantage to this class of investor which represents 70% of the volume and this is a subset, the co-location guys. >> let's bring irene into this. >> why isn't this basically front-running and do you agree that it puts the little guy or the average investor at a disadvantage? >> first of all, it's a pleasure to be here, and i'm so happy to be able to square off with you because i read your paper and, you know, i could not disagree more. first of all, there's nothing new about high-frequency trading. you do high-frequency trading. you have staff that does trading right now but they are trading it manually based on their instinct and owl high-frequency trading does, just introducing computers into the marketplace, so think about it. it's like taking a slide rule, a slide rule that your grandfather may have had and replacing it with a computer, just to do faster, multiplication. >> what about paying for access though? what about those firms that pay for access to get order information before other people? >> yeah. well, first of all, this is not

what high-frequency trading is about. everybody knows that front-running is illegal and especially in equities and it's strictly monitored and we're not talking about front-running and high-frequency trading. i completely separate issues. nothing to do with each other. all which ear talking about in high-frequency trading is we're actually looking at fast turnover of capital. >> okay. >> holding for five minutes. >> sorry. >> first of all, i'm happy to see a human here on the other side. i was expecting to debate a super computer so it's great to see but i applaud the high-frequency traders to tell you the truth. >> thank you. >> because they are capitalists taking advantage of a system but the problem is the equity market structure is corrupt. it's wrong right now. it needs to be fixed, and the problem is starting at the exchange level. they pay for rebates for these guys. it's a payment for order flow scam. it's a co-location scam, and they get these second orders called flash orders, bolt orders, you know what they are and that is what keeps you in business.

if you didn't have them and you'd be gone and 70% of your volume would be out of the door and then what happens to the equity markets? >> high-frequency trading provides service. it's not taking advantage of the system. it's actually a service of price discovery. high-frequency traders are able to locate through complicated computer systems and, kids, listen to this, study math. it's very important in the new economy, but through complicated mathematical problems or algorithms they are able to arrive at the fair price faster. >> irene, i want to get one fact down here because it either exists or it doesn't. are some people able to see the data of other people's orders ahead of time and able to trade in front of it using super computers? >> it's illegal. >> yes or no. >> the answer is yes. >> hold on. >> it is illegal. >> the exchanges -- the exchanges are supplying you with the data, giving you the flash order and if your fixed connection goes into the lines first you're disadvantaging the resale. >> are you disputing that. >> i actually dispute that.

>> if you pay certain amount of money you get the information before other people? >> it's illegal and everybody knows it's illegal. >> okay. it's illegal or is it happening? both could be true at the same time. >> it is illegal, so if it's happening then these people are breaking the law. high-frequency trading is not about that. >> show you the co-location fees are tremendous, they are making a fortune off of it. >> wait, wait, wait. he's talking about a kollocation fee, does that exist or not, a co-location fee? >> a co-location is a very simpler is voice. you put your computer next to the exchange. you rent an office for crying out loud. >> the retail investor can't put a computer next to the exchange. i could be a retail investor and want to sell 1,000 shares on the offering. if a super computer comes in, they can get that in front of me and sell the stock in front of me and i was the guy responsible for the displayed quote. how is that fair to the retailer? >> does this just get a price discovery faster than we otherwise would have gotten? >> yes. >> takes you away from price discovery. in the end six months from now

you'll get the price discovery but surntry the super computers are on the buy side and look at stocks like capital one the rebate traders in the heyday, sit there and gap it to the morning. >> what is a rebate trade? >> exchanges pay high-frequency traders as well as brokers a fee to post liquidity on to an exchange up to 30 milz or a third of a penny almost depending on the size -- if you have 100 million shares a day, which is what these guys are doing, a third of a penny to buy the stock and turn around and sell it at the same price so they have collected two-thirds of a penny or half a penny for doing nothing. >> providing liquidity? >> they provide volume. >> what's the difference? >> liquidity can go away tomorrow. if they should the computer we're down 70%. volume is what they are doing, just like what the nasdaq market in 1987, they shut the computers off on a bad day. >> your definition of high-frequency trading is completely off. there are so many strategies and most of them do not involve rebate trading. >> that's correct. there's a lot of them.

>> it has nothing to do with rebate trading. read my book. read my book, "high-frequency trading. "". >> irene, why shouldn't be there a speed limit on this highway where everybody has to go at the same speed? i forget all the other complicated stuff and co-location and rebate trading, if someone can make a trade at .03 of a milisecond and i have to wait more time for a rewound that's unfair to me, isn't it? >> it's not. for example, now you have a stock like large stocks, ibm that trade both in london stock exchange and new york stock exchange, and to quote my counterpart trading here like a turtle, these days, the prices -- you agree the stocks -- >> i help my institutional clients provide liquidity. >> let me finish. >> let her finish. >> basically high frequency, one of the strategies is actually arbitraging the differences of the prices between exchanges.

>> i understand that. >> london stock exchange and new york stock exchange and this is a service and for the service high-frequency traders need to be compensated. >> if news breaks and microsoft is out with earnings and somebody can get in and make that trade faster than i can, they get a different price than i can. >> and the "new york times" ought to point out the perfect example with broadcom how it gapped 20u7 cents and the retail guys get nothing. the 70% of the volume is controlling topch. the s.e.c. and regulators need to look at equity markets and high-frequency traders, nothing illegal with what you're doing but you know it's not ethical. >> it is so ethical. how dare you accuse us of not being ethical? we're cutting your margins for brokerages because like you cannot compete because you don't have the proper skills thank you so much. >> make sure the fuses are okay. >> bill and irene. >> well, let's go back to the hearing because we also have some very interesting comments by the fed chief ben bernanke

who says that basically the emerging market economies have bounced back pretty well as you look at the q&a session. we'll continue to follow that but the comment on the emerging markets is very interesting, and the dow has manage the to add on to its advances now, up about 11 points on the trading session.

> with the dow in positive territory fed chief ben bernanke and others sitting in now listening to some comments being made by the congressional leaders there in front of the house financial services committee. let's listen into the q&a session with mr. bernanky. >> and those firms, if somebody, if a firm was determined to be systemically significant and they didn't like or want the

additional supervision they were going to get, they could always spin off divisions or do whatever they need to not become systemically significant, correct? >> absolutely. >> okay. second question for the whole panel is unless i heard incorrectly with the exception of perhaps mr. bowman, i think all of you believe that some of the powers or authority or whatever in the cfpa should be somewhere else than the cfpa as the treasury has proposed is. i think that question was very inartfully worded, but hopefully you understand that the powers and everything that treasury gave to cfpa with the possible exception of mr. bowman or maybe you agree, but that all of you believe that some of those powers and authority should be somewhere else, is that correct? everybody is nodding. >> the reporter cannot pick up nods. >> okay. then let's hear some yeses. >> yes. >> so all of you believe that.

okay then. one final question from me and then i can yield the balance of my time to mr. posey. the treasury proposal does not have federal preemption which in theory perhaps means 51 regulators instead of one. do all of you support or do any of you not support federal preemption? >> we -- chairman bair. >> okay. >> go ahead. >> i think, you know, there are a lot of shorter banks that operate in multiple jurisdictions and they comply with state consumer protection laws and it's not that much of a problem so we do disagree on this. we think that it's appropriate even for financially chartered institutions to comply with state consumer protection laws. we also think with a good strong standard setter it would prep some strong -- >> we're going to continue to monitor the situation on capitol hill as the fed chief ben bernanke continues to take questions as sheila bair and

others. right now let's go to the nyse with bobby heller and from cme the manager of trade the news and tim jennings, president of vantage trading. for the trader triple play. gentlemen, welcome. >> hi. >> interesting, isn't it, bobby and very good news for the bulls that the market is able to add on to a significant face and keep the winning streak going in the face of a decline in microsoft? >> seems to be pretty good news for the past week. no matter what came out there seems to have been a positive spin. i personally thought the microsoft thing would have a little more detriment for an up move. i think it would held things back a little bit but as you can see everything has turned around a little. i think what might have a little bit of rally this afternoon but i'm betting on some profit-taking late in the day. >> and what about next week, dave? at what point do we get profit-taking? can't keep going up every day though the bulls would like it? >> the bulls would like it but only to a certain point.

the bulls appreciate a pullback and a consolidating area where they can lean on. profit-taking, you know, michelle, it's so hard to call that. i mean we went, five, six, seven days in a row up side and started down 200 and we're back to steady on the day here trying to go green again. we've got energy companies, oil companies and -- >> i want to interrupt you because we're showing the ten-year note yield and what it's done over the last week and the big rise we saw on thursday, got a lot of supply, more supply coming next week than people originally anticipated. >> that middle there is bernanke's testimony. >> interesting. >> where he talked down the long end of the curve. >> how much of a threat next week are all of these auctions going to be when it comes to interest rates and then hence what happens to the markets? >> i think it will be a significant point up next week along with the oil companies reporting their earnings. i think the oil thing is the real key to this whole economic concern that we have, and i think if we can get the oil

policy correct i think we can get on with business around the world. that -- that to me is the keystone to the whole thing. the auctions are going to be paramount for our markets here in the united states. >> okay. >> but we need to get the world going it's got to be with the barrel of crude oil. >> let me just understand what conventional wisdom is here because so many people i talked to are certain that this rally is not for real, and it will go away and i just wonder if the stock market is climbing that particular wall of worry, that the selloff that everybody thinks is not conventional wisdom is in fact conventional wisdom here. >> directing this at me? >> that's for bobby. >> bobby hellor. >> people have been saying that for months. as soon as market started turning around from its bott tomgs in the first quarter everybody said it's a trap, it's a bear market, it's a trap, it's a trap. at some point you have to turn around and say, no, this is the late trend. late autumn selloffs and early this year were way overdone, no solid data to go on.

it was just gut feeling and people selling, selling, selling. >> okay. >> so now we're back at a reasonable spot where you can really look at things and analyze whether it should go from here either way but i don't think like some of these real solid bears saying 450 in the s&p, that's ridiculous. >> tim, you get the final word because dave mentioned the fact that oil is key and you think it's going to climb next week. why? >> well, i think the market is looking for any kind of sign out of the equities market that the demand picture is picking up and i think that the figures that came out wednesday were kind of a mixed bag. the crude, a draw but the products were a build saying there's not really the demand yet. we'll look for figures on wednesday and look for any kind of signs that the economy will pick up. >> i read the numbers not as a mixed bag but the first time that the doe got it right as calling it inventory. you've got 85% capacity utilization. it's july. those refineries should be running at 91% and 92%. >> okay. >> purposefully this is being held between 55 and 75. half the world is no good under

55 and the other half is no good above 75. here we are right in the middle and everything seems to be moving forward. that's where we need to be. >> all right. okay. on that night. thanks, guys. have a good weekend. >> thank you. >> we'll take a quick break and wrap things up and follow this market which is on the up side. the s&p is positive. dow is positive and nasdaq lagging behind a little bit by about 13 points. [ engine revving ]

[ engine powers down ] gentlemen, you booked your hotels on orbitz. well, the price went down, so you're all getting a check thanks. for the difference. except for you -- you didn't book with orbitz, so you're not getting a check. well, i think we've all learned a valuable lesson today. good day, gentlemen. thanks a lot. thank you. introducing hotel price assurance, where if another orbitz customer books the same hotel for less, we send you a check for the difference, automatically.

welcome back to "power lunch." your realtime flash. schlumberger, company profits falling to a less than expected 51 cents a share. weak north american gas drilling hurt its profits seen continuing through the end of the year. capital one, trading to the up side reporting its first-quarter profit or first profit in three quarters, excludeing t.a.r.p. repayment. the credit card giant earned $224 million while it set aside less money for bad loans. it is expecting higher losses on bad loans in the coming months.

there you see it's still up 9.5%. dover sunday pressure today. the manufacturing holding company second-quarter profits falling 28% to a better than expected 52 cents a share. its stock up 4%. among other things it makes garbage trucks and says orders are stabilizing. however, it doesn't see any kind of meaningful recovery in the second half. one-time charges for things like ashland hurt third-quarter revenues. its stock is up 7.5%. the company is expected to remain flat in the near future. a couple of stocks on the move today. sue, back to you. >> thank you very much, mary. all right. we've been chatting here while mary was talking listening to what she was saying and talking about what's coming up next week and rick santelli joins us. one of our guests earlier mentioned the fact that it's very interesting that there's all this supply calming the market, much more than everyone was looking at. how are you anticipating that that will play out? >> you know, i think next week is going to be interesting because it's what i call the non-threatening coupon part of the curve with regard to

maturities. in other words, 2s, 5s and 7s, maybe 7s, it's the longer maturities that might be the most dicy in the grand picture. mr. buffet, you know today earlier talked about how he'd rather be long stocks than fixed income. a lot of people would take that a step further. they would rather be long short maturity fixed income than long maturity so i think it's a double-edged sword. debt is going to be very integral in moving these huge numbers is key, but i think the august refunding a couple of weeks down the road, the longer maturities will be more questionable. >> rick, stick around. we'll have you on the other side. i'm going to talk about my bold, not really so bold theory about dow 10,000. let's go to break. let's go to break. >> bold but not so bold. are on. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. 154 people are tracking shipments on a train. 33 are i.m.'ing on a ferry. and 1300 are secretly checking email on vacation.

that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. sprint. the now network. deaf, hard-of-hearing and people with speech disabilities access www.sprintrelay.com. come on in. you're invited to the chevy open house. where getting a new vehicle is easy. because the price on the tag is the price you pay on remaining '08 and '09 models. you'll find low, straightforward pricing. it's simple. now get an '09 silverado xfe with an epa estimated 21 mpg highway for under 28 thousand after all offers. go to chevy.com/openhouse for more details.

fair, straight-forward pricing. that's what td ameritrade stands for. think about it. why pay investing fees you shouldn't have to? or account fees that aren't clear? like inactivity fees? or maintenance fees? it's not right. and you know it. and the thing is, the other investment firms know it. but they do it anyway. and that's just not fair or straight-forward.

td ameritrade. independence is the spirit that drives america's most successful investors. selloff, what selloff? at least not when it comes to the dow jones industrial average which is now managed to get into positive territory despite microsoft's above 9,000. a 38% gain in the last five months. nasdaq is getting hit by microsoft and s&p is flat though. >> that's why you think -- >> the 13th day in a row. my idea is this. >> you say 10,000. >> i think 10,000 is an easy

trade for the dow and here's why. i think we're still in this retreat from the abyss trade here and i think if we're at 12,000 o so before lehman that getting back to 10,000 here is not a hard thing. i think there's questions beyond that. getting back to that level we're not falling to pieces. it's not that hard. >> 15 seconds, ricky. what do you think? >> i think the biggest news in some ways was the reduction of the size of the tafts moving forward, didn't move the markets much. when mr. bernanke talked about it it moved the markets a lot t.sends a positive sign. >> that's it for us. have a great weekend. "street signs" is next. melissa francis begins in sufficient seconds. the university of michigan consumer sentiment index fell to 66 this month from 70.8 last month, mostly on concerns about the long-term economic outlook. the home vacancy rate fell to 2.5% in the second quarter from 2.7% in the first. that is the lowest in two and a half years, and black & decker shares are up about 10% after the company reported better than

expected quarterly. that's cnbc.com news now. and i'm rebecca jarvis. >> hello. i'm melissa francis and here's what the street is talking about at this hour. the summer rally returns. the market turns positive. take away microsoft and united technologies, the dow would post an even stronger gain at this hour. can the hot streak keep going? plus, the obama change train running out of steam it looks like. is d.c. gridlock picking up the pace on wall street and standing by their man. a sponsor sticks by their star accused in a crime. is that stupid or smart? that's our show, and it starts right now. all right. in case you didn't notice, stocks turning positive. let's get a quick check on the market right now. the dow above 9,000. the best performing group utilities. look at that turning positive there in the last 45 minutes or so. it's up about 11 points but remember where we started the

day. the worst performing group is tech which isn't surprising after a 12-day winning streak for the nasdaq. among the biggest gainers cit. keep in mind it's cit's last day to trade on the s&p 500. so what is money talking about at this hour. >> reporter: here now our take straight from the floor and our own boss pisani on the floor of the new york stock exchange. you can see rick sell they in the bond pit and mike huckman from the nasdaq. let's start it off with you, bob. what made the dow turn positive? >> resiliency, simply put. bulls have got to show at this point that the market is resilient and it can bounce back from disappointment and today the disappointment was on tech earnings and you'll hear that from mike and, number two, got to show a little bit of sector rotation, other sectors will pick up the slack if something like tech falls o.today the market is doing both. starts out weak on tech concerns and it's been building throughout the day. not only is tech coming off the bottom and it's underperforming, industrials, energy, materials are all coming off the bottom and now we're starting to see a few go green here, a very