you still think something will happen in the next two hours? after the fireworks you guys have experienced in this market the last two weeks, you will not see us go out in a whimper, i think. the dow is what, still down about 30 points? down 16 now. coming off the close here. >> what were people talking about in your neck of the woods when you were on vacation?

do they feel better about things, about the market, the economy at all? >> the outer banks. the crowds were a little less, certainly, the vendors saw less business right now, especially the restaurants. fewer people. but the crazy thing about the gasoline prices, when we got there, we paid $2.78. midweek $2.64. when we left $2.27. unbelievable. you got into that on "fast money" that night. >> i was so excited when they do about it. >> practice. >> we will be watching. >> excellent. and we will see you tomorrow. that's it for us on "power lunch." >> "street signs" is up next. aaron burnett is back. that gets under way in about 30 seconds. see you tomorrow. the s.e.c. says rules designed to prevent abusive naked short sales have been made permanent and it's working with other agencies to make short sale information more widely available. former group chairman bischoff has been named chairman at lloyd's banking group. and a lawyer for the ponzi

schemer is asking his client be transferred to a different facility while he remains trial saying conditions at his current facility are oppressive. that's cnbc news now. hello, i'm errern burnett. here's what wall street is talking about this monday. the day has finally come. you can turn in your old peugeot for a new car. cash for clunkers. joining us for the big rollout that started this morning. inside, the $100 million paycheck citi is said to be making out to its starved trader. and now is the time to go into the retail business. yes, you heard us right. that's what golf legend jack nicklaus said. he's our guest exclusively at the show and it begins now. we begin with a check of the major market averages. yes, we are still above 9,000. i was sorry to miss that land

mark last week but we are right now at 9,077, down about 16 points for the dow. stats are pulling back a bit despite better-than-expected news in terms of new housing sales that we found out this morning. keep in mind, the dow was up 12% over the past two weeks until today's slight pullback. the s&p currently is coming off its highest levels in about eight months. as you can see, s&p is down -- again, these are minimal changes but just to highlight we have seen at least a pause in the rallies. what is money talking about this hour? we will go straight to the trading floors, where those who usually abide on the trading floors, you, rick. bob asani and rick santelli and also scott wopner. i was interested to see we have a record in terms of issuance, barely topping the record we set at the end of june. >> yes, and it's not only in the treasury on the issuance side. we have record investing in

munis. but here's something interesting, why is everybody in the world and indeed domestically, so enamored with u.s. debt? it only -- it isn't just the yields because if we look at italy, for example. italy has a ten-year rate that's about 4. 33. spain about 4.05. u.s., tenure about 3.72. if you look at why investing occurs, it more because of credit quality. and the u.s. government is one of the better sovereigns. but there is also something interesting, erin. if you look at ten minus twos, italy, spain and the u.s., italy and the u.s. are identical. they have higher yields but the difference is about 2.60s and if you look at spain, 2.40s. so it seems there's a common denominator. it isn't the credit issue so much. but the yield curve steepness seems to be rather uniform. >> bob, i don't want to insult anyone in your extended family line of many generations back, but behind the united states versus italy treasuries, when

the yield difference is that small, it sort of makes you think twice about why people have been buying treasuries with such voracity lately. >> well, a little bit of concern over the fact that we might get a double dip in the economy is the main thing. rick didn't mention emerging markets but that stuff's been on fire. getting incredible yields there. here's what's good about what's going on today. great new-home sales number. look what happened? they sold right into it. we haven't seen that in a little while. here's the good side. yes, you have techs being a little weak here today. that was the big market leader. have you noticed they're buying a whole set of sub sectors here? they're buying tv stocks. they're buying newspaper stocks. refiners are up big here today. home builders have held their gains. retail banks, huh? in other words, there's rotation in the rstock market and that'sa sign of some kind of resiliency. that's good news. here's something i'm a little concerned about. take a look at the cbo volatility index. you know what this is, this

measures the price for near money in the s&p 500. it's up 7%. and this is a six-month start. it's been basically straight down since the march lows. this is consistent with the kind of action that would say traders are getting a little concerned with the rallies and are starting to buy some protection here. that's the one little thing here today i would say better keep an eye on that. if that keeps popping up, you will hear traders talking. >> bob, isn't it possible that the world is changing a bit and we're seeing car buying as a pro development? >> that can be at work here as well. but you know how it works, they are sending indicators to a certain extent. at the lows they have seen usually implies the opposite. >> i have two thoughts and today and the reason why the nasdaq is under pressure by a half percent or so. as bob mentioned, tech is the leadership group. we are at 12% and maybe we were going to give a little back. amazon.com weighed on overall tech. i will take you to the wall and show you exactly what i'm

talking about. amazon down 3% all by itself. you can see certainly pressure on stocks like yahoo! down 3% as well. google's down by 1%. it was downgraded over at bws financial and cut to a sell. this was off last week's disappointing earning's report. speaking of last week and disappointing earnings, look no further than microsoft. there appears to be a little bit of a haenger in large-cap techs. down 2% is microsoft today. that gives you the overall picture why we're under a little bit of pressure today, erin. >> thank you very much to all three of us for giving us the lay of the land. let us know what you would do, if you have .4% yield differential, is italy worth only .4% more in terms of yield versus the u.s. treasury? let us know what you think. today is the day you can drive your old gas guzzler to a dealership and get up to $4,500 that you put towards a new car that is quote/unquote fuel efficient. the program is nicknamed cash for clunkers. it's been trade in places a far

flung as egypt and germany. it's designed to help the environment and, of course, the nation's struggling auto industry. joining us to talk about the program kickoff is transportation secretary ray lahood. secretary, always a pressure, sir. >> my pleasure, thank you. >> i know this morning you were announcing the formal rollout of the quote/unquote cash for clunkers program. how many cars do you think will get turned in, in this country during the program, which is i believe, what, a billion dollars in value? >> it's a billion dollar program, and all of this man is used, 250,000 cars, new cars, will be sold in america. that would be a huge, huge boost to the car manufacturers all over the country. >> and the car has to be less than 25 years old and then you have to basically use the $4,500 immediately towards a fuel-efficient car. how do you define that? >> a car that gets like 5 miles

per gallon better than the car you're trading in. the car you're trading in has to get, say, under 18 miles per gallon and the car that you're buying has to get about 5 or 6 miles per gallon better than that. and you walk in the showroom. you show ownership of the car with the title, without any liens on it and that you have insurance on it and you own the car for a year, you walk out with a new car and a $4,500 knockoff on the price of the automobile, and some car manufacturers are even putting more rebate on top of that. so i just talked with a car dealer in my hometown this morning after the announcement. he had four deals pending, and his show room was filling up with people. i think this is going to work. america is ready to buy cars. >> but 250,000, that's as many as you can do. so it's first come, first serve, right? >> it is first come, first

serve. so we encourage people to get into your favorite car dealer and take a look at your favorite car and take advantage of the $4,500 or $3,500 to $4,500. and as i said, many car manufacturers are lopping more on top of that. this is the best time to be buying a car in america, the very best. >> and we are obviously running below that key 10 million cars sold per year that the car industry says we need in order for them to be viable. 250,000 won't in and of itself get us back above that level but you do think this will move the needle, it sounds like you're saying? >> i think people are going to start shopping for cars again, particularly with these kind of rebates. and i think people have been driving cars with high mileage and very low gas mileage and this is a way for them to take advantage of an extraordinary opportunity to get into a new car and to get into a fuel-efficient car also.

>> secretary lahood, one final question. this doesn't have to be a contradiction, but i want to give you a chance to say whether it is or isn't. the administration and the president passionately believe in train and high-speed trains, and they have been very vocal in that. but then here we are bailing out the auto companies and now trying to make americans buy more cars. when it sounds like the real goal of the administration has people buying less cars and take mass transit. is there a contradiction here? >> not at all. we want people to drive fuel-efficient cars. one of the aspects of this program is that people will drive cars that get much better gas mileage than the older one, and the whole idea of promoting high-speed rail is because america doesn't have high-speed rail. there's no place in america where you can get on a high-speed railline today. you can get on an amtrak train but it's not a contradiction at all. it's really trying to get a number of different forms of transportation that people will use, but the idea behind this program is to sell automobiles,

to give people a good rebate, and to get people to drive fuel-efficient automobiles, to clean up america. >> thank you very much, secretary lahood. always a pleasure. i'm sure i will be speaking to you soon. >> thank you. the other big story, and it may end up being the biggest story not just of the week for the foreseeable future in what's going on in washington this week between china and america. china is now our nation's most important ally and most important, frankly, rival. china has over $763 billion invested in american treasury bonds. they are the single biggest holder for the united states' economic future could be excited in beijing. today both secretary of state hillary clinton and treasury secretary geithner representing the u.s. at the u.s./china strategic dialogue, which is happening in washington. what is at stake? it's good to have both of you with us.

as we discovered when we visited china earlier this year to talk about what we called a till debt do us part, in terms of the relationship between the united states and china. in the meeting this week, what specifics, what measurable, actionable, could come out? or is thank you just going to be a whole lot of high rhetoric about how we're all really friends? >> i think you need to keep in mind there's a couple of things at play here. first off, this is the very first organizational meeting of the new structure. while secretaries clinton and geithner had traveled to china individually earlier in the year, this is really the first opportunity for they and their counterparts to talk about substantive issues. so it will be more about the framework of where they want the discussions to go. that said, some of the issues that frankly were analysts were talking about a little bit earlier are going to be on the table. things like chinese investment in the united states. what are the u.s.' plans post recession to deal with the deficit being created, and how do we work together to try to

ensure that global prosperity returns? >> there are two issues i wanted to ask each of you about in terms of the relationship here and the first exchange was this, china and whether it will bail out the entire world. the chinese economy and the chinese stimulus package, which we are well aware is being spent and going into company's pockets, is going to help bail out the world. it seems to rely on chinese consumers consuming. which is something historically they have not done. they have preferred to save. i want to ask you whether you think the stimulus package in china will be enough to change generations of long habits of saving? do you think that chinese consumers will actually start spending money because the government tells them to or will she still save? >> i think this round the chinese stimulus plan has mainly

been led by the government's investment products. so in the short term, the growth of recovery in china is really driven by the growth of recovery. now we are seeing early signs of private sector. in terms of consumer spending, we also see early signs of a pickup, particularly related to auto sales, related to that. but i think for most of the domestic consumption is a long-term process that is likely to take time. the government has been doing measures to promote that in china, which will reduce the savings but it will take time. >> so many people are hoping for the silver bullet, that china will start spending and save the global economy. but it will take time to change those habits. the other question i had was

this one, america has defined its future, or our president has, as alternative energy and technology. it appears -- and we had a couple ceos on recently in alternative energy who said china has won that battle. they have the technological leadership and they will own the alternative energy future. do you think that, that's true? >> i'm not willing to give up that yet. i think we certain sli have companies here in the united states that have some of the best technology that will help china meet its needs ultimately. and with technology alone, ge is the market leader in wind. there are questions about company that's produce that kind of technology here in the united states will get in china or whether china will favor domestic companiy companies. at the same time, i think it's important to keep in mind while china may be pushing far ahead in using reusable energy sources, it still remains, much like the united states, a fossil fuel driven economy. until the full transmission lines are put in to enable the wind farms and solar panel farms to be able to access the consumers to use the energy, we

will still continue to see very high rates of fossil fuel consumption in china. >> thank you both very much. we will keep a close eye on this. there are key events over the next couple of nights, we have the vice premier of china meeting with secretaries clinton and geithner. and let us know what you think, particularly on this alternative energy issue. do you think the united states can own alternative energy technology? or has china won that battle? "street signs"@cnbc.com. on the other side, a $100 million -- maybe it's a headache and maybe it isn't. is he working for $1 this year but he may pay a top trader $100 million. is that the right thing to do or not? and does the golden bear have the golden touch in fashion? taking on the big names, polo, greg norman and nike and he's coming up in an exclusive interview. at 155 miles per hour, andy roddick

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andrew hall is the man you see there. he is one of citi group's top traders. according to "the wall street journal" in 2008, he made the struggling firm nearly $70 million. he took home $100 million. 2009 is not over yet. but apparently andrew hall has made it clear, he and his team will leave citi group if the new role sets up by the federal

government curbs his pay. what do we do with this someone dan mitchell joins us. he's the senior fellow at the cato institute. and a senior fellow for american progress. good to have you both with us. this is an interesting one, dan mitchell. obviously, we do not know what his pay is this year. we have reports he's doing very well. he made $100 million last year. what if he does as well or better for the firm this year. should he be allowed to take that sort of money home, considering he has a contract where that's what he would get? >> well, i have to admit, i'm a little bit conflicted on this issue. i think if a company is sticking its snout on the public trough and using the coercive power of government to steal money from taxpayers, as far as i'm concerned, any restriction and inconvenience that they have to suffer is very appropriate, because i don't want bailouts and i want to make bail juts as unpleasant as possible so we don't have more companies running to the government for special favors. on the other hand, it is so dangerous to give politicians who are probably the least

competent people in our entire society, to give them power to start interfering with and dictating private sector pay. now, of course, these companies aren't genuine private sector companies because they're getting bailouts, but what concerns me is that it's going to spread like a cancer as politicians decide they like this power, especially because it makes people come to them begging for favors, giving them campaign contributions. very sordid. >> christian, what do you say? i think you probably agree on this one, both of you, in a lot of ways? >> to some degree i actually agree. i knew this time would come where we would actual find common ground. >> kumbaya. >> we have executive pay in this country and unlevel paying field in corporate shareholders, and in this case the federal government is the shareholder. but where congress and the treasury are pushing for is level playing field. greater transparency, greater focus on the long-term health of a company, less excessive risk

taking and ultimately a stronger economy. i think the main thing here is that the government doesn't want to run companies. >> what are we going to do in this case? >> we are shareholders and want a level playing field and make sure the companies we investment survive in the long one. >> what do you think they should do now? we have a report saying mr. hall, the trader, said he would leave if he didn't get his money. i don't know if he really said that. >> i agree with dan. i think in the end, i think it's in the company's best interest to say hold on a minute, mr. hall. this may not be paying you $100 million is probably not the best way to handle this situation. it's going to get everybody riled up and get everybody angry and ultimately make life a lot harder for citi group. >> what do you say, dan? >> i say citi group should do its best to get out of the business of mooching off the taxpayers or shut down. >> i will force you here to

answer the specifically about what you would tell victor pandit? >> if you have an employee making $700 million and you're not going to make that $700 million if you don't pay him $100 million, obviously, it's in the best interest of the shareholders, and including the unfortunate taxpayers, who are now your shareholders, pay them $100 million and tell the idiot bureaucrats and politicians in washington to stay out of private sector decision making. >> in this case, you'd pay him. >> it's not congress meddling. it's really ken feinberg saying, let's take a look at this. what is in the best interest of citi group? what is in the best long-term interest of the country and company in order to rein in excessive risk taking in order to make sure we have enough money for the future. >> you know that feinberg will have congress watching what he does on this one very closely? >> clearly. but in the end, it's an argument over what is in the best interest of the company and the

country. and the question is would mr. hall have performed as well if he only got $35 million or $10 million? i'm sure there's a lot of unemployed traders who would be happy to work for a fraction of what he's getting? >> would they make $700 million? this guy has a special talent. >> this is not like michael xrrd pl jordan playing basketball. this is a skill you can learn. >> i don't know everyone would agree with that. >> this guy obviously has a special talent. the best thing for the country is get the politicians, get the government out of the business of interfering with the private sector. that's what caused the financial crisis in the first place. >> nobody is saying -- >> final word. >> just because we like the government being the owner. the main goal here is create a level playing field for shareholders and managers so that we ultimately get rid of these excesses that we have seen. >> it's not the government's business. >> dan christian, thank you. i'm sure we will hear more about this issue and we will have you

both back. look, they started out agreeing and realized, guess what? they didn't. just ahead, jack nicklaus, top golfer of all time, is looking to win another crown. he will tell us more. he's our guest right after this. and then apple, friend or foe of the music industry? first the company virtually killed the idea of the ail wum, now they are working with apple to try to save the album. we will be back. you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most powerful names in the industry. introducing morgan stanley smith barney. here to rethink wealth management. here to answer... your questions. morgan stanley smith barney. a new wealth management firm with over 130 years of experience. i hope he has that insurance.

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we have good news today from "the new york times," shares of the company higher. analysts think it could be part of a delayed reaction to last week's earnings, which were not as horrible as could be expected. i guess it's all relative. and the golden bear is taking on a new challenge. jack nicklaus is teaming up with the founder of knotnautica bran make golf clothes and other things. here to join us, one of the lead financiers of the deal, u.s. trust ceo. it's wonderful to have all three of you with us. it's a great story and captures the imagination. mr. nicklaus, i'm curious, first, what exactly is it you're rolling here? it says a quote/unquote lifestyle brand. what will you be selling and where? >> first of all, you know, we have basically had the jack

nicklaus brand or nicklaus company's brand for quite a few years. but we needed to grow this grand. we wanted to find the right person and we made arrangement for consulting relationship with david shoe management grope to help us build the brand, first in apparel and through many of the other things we do where we have products. >> and will this be, competing with the names like polo, golf an deedous. it's apparel, but is it all golf apparel? >> no, it will be lifestyle. largely based parn goaround gol the people who wear everyday apparel, too. it will be a combination of such. >> what exactly will you be doing and what with we expect to see and where? >> i believe when i got involved with this venture with jack, and the reason is i believe golden

bear and jack nicklaus is one of the highly recognized names of the last 40 years. for me really to be involved and i'm passionate about the game and about the sport. i think there's a huge opportunity in this space. i think not only in north korea but worldwide, especially asia, with the economy ramping up in asia. tremendous opportunity in china. golf is really a growing industry and a growing business. so i think there's a huge opportunity globally in this brand. it's one of the best brands out there. we just need to make sure it's focus and the product is amazing. >> howard milstein, i guess that's where you come in. i know that you hear pitches like this. this is a great brand. this is something that's underutilized. it all may be true. but this is one of the toughest financial environments in history and you're dealing with a huge slowdown in discretionary spending and even in recent reports in things like golfing. why finance this now? >> erin, as you may know, we partnered with jack several

years ago in the nicklaus companies, and so we have been working with jack to both institutionalize the company and to focus on the brands. and this is a brig stig step fo with david now to be able to go ahead and take the golden bear and the nicklaus brands and put them into apparel stores all over the world with a level of fashion and a level of design that will create even greater distinction and customer desirability. >> and mr. nicklaus, i believe my numbers are right here, but please correct me if i'm wrong. i believe you've got about 341 golf courses, and there have been reports that there has been a real downturn in golf club and course memberships during the slowdown. are you going to keep expanding courses? and if so, where? >> well, we're doing golf courses all over the world, erin. right at the present time, we

have been 40 golf courses under construction, which is down. we normally have about 60. we have been 120 or 130 golf courses under contract as you're going through zoning or financing or whatever they might be. so our business is still there. yes, it is a slowdown. it is a big slowdown, and i think that golf course design at this present time is a luxury. certainly not something that somebody does every day. we still have a business. david was talking about china. in china, golf is just exploding. china is probably our key market today. >> all right. thank you very much. china keeps coming back again and again and again. jack, david and howard. up next -- jim cramer is here with his trades and he has one key one on the back of the housing sales numbers. and with all of the talk in washington, will any of the health care actions actually cut down what matters the most?

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. time to stop trading. hey, jim. >> welcome back. >> i'm glad to be back. i will see you in person tomorrow. >> of course. >> i know you have a whole lot of things you want to get through, and the big surprise of the day, obviously, was the 11% jump in new homes. but the housing stocks were up, what, 50%, home builders? >> yes. >> so what's the trade?

>> i was just kind of blown away by the plus 40% increase in the midwest. in other words, there was this one region that was totally on fire. the people had written off mostly because of the auto industry. and that is up bread box. the pulte deal wb mould be monumental. i would be in there buying syntex. these numbers show that region is back. >> now, let me ask you this, you're really just talking about centex but none of the others? >> the midwest increase was incredible. the whole group has been on a tear. but i think you have this cat laft of august 18th closing of the deal. s centex has been the midwest builder. i think it's a closing moment for the two. >> let's link to that and go straight to financials. capital one, what's going on there?

>> i'm seeing two things going on. capital one had a gigantic rebound. people are starting to think the worse is over. however, it's a huge buyer of september 29, i think capital one, which dipped all the way to 20 after the $27 pricing and change, pricing of their secondary. when president obama was bashing credit companies. it just made a big, beg leap back to $30. i bet that capital one pulls back before it has its next move. >> what about agilent? you think they're doing the deal right now, it's smart, good? >> one of the things we're seeing in this era is bristol-myers -- which i own from my charitable trust, makes in action. j & j's made a series of acquisitions. that stock's gone up. companies that need growth are usually using in this case the currency to start making buys. the other one i saw, first niagara, fnfg --

>> the philadelphia bank, right? >> these deals are good. these deals are very good and i think people should start recognizing when your stock goes up when you do a deal -- when people see this, it brings more and more mergers. >> okay. so let's get eaton. this one's interesting. this was earnings, right, last week? >> yes. honestly, if eaton reported today, i think it would barely go up. this is one that has gotten appointed. it wasn't that good a quarter. there were a lot of people betting against it. there were a lot of people who believed the dividend wasn't in good shape. sandy cutler's repeatedly said on my show that the dividend is fine. but i think that this stock has now gotten very overbought. let's wait for a pullback. eaton has been one of my favorites for a long time. not up here. i don't want to buy it in the 50s. >> jim, one other thing as we look here, it's a macro question. it is going to be a record week for issuance of treasuries, right? >> yes.

>> and yet we have seen such resilience there. i know i keep harping on this, but you're really not getting a whole lot more yield to buy government issuance from places like italy or spain, which makes the u.s. option look a lot stronger. does it make you believe there's something still there at the treasury/. >> look, i don't want to own treasuries. can you buy 2 3/4 piece of paper of wells fargo, wachovia today, you have to pay $105 for it. but i was checking to see what other markets you could do in corporates. but i will say this, erin, i do believe the dollar will be under pressure. first, because i believe the chinese will be selling the agency bonds, and i think that will lower the value of the dollar. and that's why i think the over cs is a sucker bet. i just don't think they make sense. but there sure is a lot of money sloshing around. i'm just shocked our bonds are where they are. >> there's a lot of money slosh, around. it's all been going into stocks. steve and i were talking this morning, is it a good thing or a bad thing? because there's so much money,

it's got to slosh somewhere. >> look, the liquidity is back to some degree. i'm surprised it's not in some other instruments. i do believe also there's still some fear about the fall. remember, that was cit from last week. and it's not complacency. we had two good weeks. i'm looking for a little bit of a pullback here, but not a big one. >> thank you very much, jim. see you tomorrow in person. >> terrific. >> i learned how to say the crazy one in several new languages. jim tonight on "mad money," 6:00 and 11:00 eastern here on cnbc. the record industry's been looking to apple for help. we've got that story coming up after the break. and hospital costs are the fastest growing piece of the health care pie. it's something we have been harping on. the question is, does the health care reform in washington do anything to stem that surge? ♪ ♪

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there are shares of starbucks, up .4%. but this headline just crossing right now in terms of health care.

starbucks, which has been known for very generous health care policy, is increasing the contribution that employees must make to their health care system. they describe them as they will be paying slightly more. we don't have specific numbers but that is nonetheless an interesting development, one that a lot of employers, obviously, have been doing. but we wanted to emphasize is given starbucks' traditional role being known for health care. hospital care cost when's you look at health care rose 7.3% in 2007, which is the most recent numbers we have from the kaiser family foundation. that increase was more than any other specific piece of the health care pie, and obviously, as we all know, at current inflation rates -- well, it's much more than twice the inflation rate. controlling hospital costs, therefore, is important if we want to get health care costs in control. will the obama plan achieve that? joining us are two people who know, dr. john mendelson from the university of texas.

the hospital was named the top cancer hospital in 2009 for the "u.s. news & world report" annual survey. also with us founder and ceo of universal health services, which is one of the largest hospital management companies in the nation. it's a pleasure to have both of you with us. mr. miller, since you're with me, let me start with you, why is it hospital costs are rising more quickly than any other specific piece of the pie? is it as simple as uninsured people go to the hospital as their first point of care, and that's expensive, or is it something else? >> well, we do have a bad debt problem. it's about 12% to 14% in most hospitals. but i think it's a question of technology and new facilities and increasing demand on hospitals. population is aging and there's increasing demand in hospital. >> so they're able to charge more, supply and demand. >> if you are able, you have to charge more. >> dr. mendelson, would you agree those are the reasons? >> i would agree to that statement. of course, we are a specialized cancer hospital, so that the care we provide is probably even more expensive.

but i think the key issue is how to achieve value that's good outcomes at reduced costs, and i think the approach has to be to bundled care and groups of p people working together for a long-range goal for an outcome rather than it being build and collecting money for every test you do and every procedure you do, which is, of course, the current method. it's disincentivising us to be more efficient and effective. >> dr. mendelson, and i don't want to oversimplify this, but from 50,000 feet, would you agree with a possible solution where doctors are paid salaries instead of paid by procedure and by tests? which i know is something a few hospitals in the country currently do, including mayo and cleveland clinic. >> well, we're not one that does that. our doctors are all salaried. and i don't think that is the solution, because in many cases doctors work out of more than one hospital.

but certainly, if doctors work together to treat a disease problem, let's say diabetes. diabetes involves prevention, it involves wellness. we have to reimburse for that, and not just for the operation when a person's leg is amputated because the disease has advanced, which brings in much more money to everybody. >> i know this keeps coming back to something that i know your peers, dennis have said, we have to focus on outcome it's people get well, payment should be linked to that. >> exactly. >> is this something we can do? it's easy to say we want to reward doctors for people living longer. but how in the world due make specific parameters to pay them that way? >> one of the things that has not been spoken about much is tort reform. it's come up but it doesn't seem to get much discussion. >> this is malpractice. >> malpractice, caps on malpractice and tort reform. and there's been a lot of discussion about defensive medicine and various estimates of $100 billion over 10 years or

25% of the tests are unnecessary. that would go a long way to decreasing the need for extra tests, defensive medicine, because doctors are concerned -- and facilities -- about being sued. i think if that were to be part of any program -- it's been mentioned, but in passing. >> i know that's not in the current legislation. do you also believe it's a glaring miss and it should be in, tort reform? >> i think tort reform is important. but, remember, there's two reasons why tests are ordered -- one is protection against a potential lawsuit. and the other is, that's where -- we're paid for that. we're paid for ordering more tests and doing more procedures. everyone in the united states learns how to respond to incentives. our system is wonderful. if we were competing with each other for outcomes rather than for income for tests, we would

achieve this. now you asked the right question, does the current plan before congress deal with this? and i think it's a huge issue, and it's something that the congress and the president need to look at with the american public. this is a three or four-year project to work out the metrics, to collect the data so we can evaluate outcomes, so we can talk about the outcomes in plan a versus plan b and site a versus site b and the public can make a choice and the payers can select who they work with. >> to that point, is there in some way -- and this is a question that goes directly to universal health care service and earnings, publicly traded hospital. there has to be on some level a motive for you to, well, make sure shareholders money, make a profit. which some would say flies in the face of what medicine should be about. can you address the direct question about whether having publicly traded hospitals actually hurt or help or health care system. >> we passed that a long time ago. our hospitals are the same treatment as other hospitals.

the fact that we pay taxes only adds the necessity to be more efficient. doctors don't know the makeup or reorganization of the hospitals. they bring their patients because they think they could get very good care there. for example, we operate george washington university hospital. we own the majority share. it's an excellent hospital, as are our other hospitals. the profit motive is important in that it enables us to get capital to build further facilities. if we didn't do a very good job, a high-quality job, we wouldn't have patients. >> thanks very much to both of you, alan miller and dr. john mendelson. appreciate you taking the time. as you all are aware, we do have a special program tonight, cnbc's primetime special "meeting of the minds: the future of health care." some of the biggest names in the industry and government are going to be there and that program is tonight. we have been asking you for your thoughts on what will be the biggest challenge to president obama's health care reform. your response has been overwhelming.

9,323 voted in our cnbc linked-in poll. here's how the results panned out -- of you said concerns abo the cost of the program would be obama's biggest challenge. 25% said concerns about reduced quality of care would be number one. 16% said politics. and 14% said lobbying by the insurance industry. interesting, not any of the other groups, just insurers. 10% said there's many challenges you about the effort will ultimately succeed. those are the optimists out there. thanks to all of you who participated in the poll. we'll take a brief break, and we'll be back to talk about apple's biggest new bet. xx

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all right. just a couple quick headlines we want to share from you from fed governor prosser in an interview

with the "wall street journal" saying a couple things that may interest our viewers. first he's worried about the fed taking on too many tasks. as to whether that is a direct blow at the fed's desired goal as stated by ben bernanke to be the systemic risk regulator and also the consumer protection regulator, not clear, but that's an interesting headline. we'll update you on more. he says he's not satisfied with obama's regulator plan as it stands. he says he expects positive economic growth in the back half of this year. that's in line with the fed overall forecast. doesn't seem inflation risk right now but does see it in 2010 and says we could be raising rates in the not too distant future, which perhaps is the most important headline of all. again, fed governor ploser said we could hike rates in the not too distant future. when is the last time you bought an actual cd or downloaded an entire album? if you cannot remember, you're certainly not alone because most of us simply download the exact song we want on itunes. the music industry doesn't like that. artists are losing money. and, well, apple's trying to find a way it can make them happy and make more money itself.

cnbc's julia boorstin has that story. hi, julia. >> reporter: hi, erin. well, that's absolutely right. the "financial times" is reporting apple and the four major music labels are working together on a plan to encourage consumers to buy full-length albums, the entire album, which is of course much more profitable than just an individual song. apple tells me it doesn't comment on rumors or speculation, but the f.t. reports that the new plan, which is code named cocktail, would include interactive liner notes, which would -- with album purchases. everything from photos, videos, lyrics, and even the ability to play the albums on consumers -- on different computers without using itunes. apple's reportedly working with emi, sony, warner music, and universal music group, who are desperate to boost revenues as sales of single digital tracks have failed to competence yacht for the decline in the cd business. "billboard" executive editor rob levine says one of the music industry's biggest challenges is raising the value of each transaction, that it's more desirable to throw in more content than to cut an album's price.

cocktail could complement the tablet consumer that apple's reportedly working on. like an oversized ipod touch it would allow users to wirelessly download music and videos from the itunes store. we should hear more about cocktail and the tablet computer by apple's annual music event, that is coming up in september. and erin, we have reached out to those four music labels. they have not gotten back to us yet. but we will keep you posted as we learn more. back to you. >> all right. thanks very much to you, julia. i love just being able to buy the one song instead of having to go to the cd track like i like number 7 or number 2. who wants the whole album in many cases in that's a separate issue. but coming up your final thoughts on citi's $100 million man. should he get his money this year or not? we'll be back.

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