point fingers at speculators for running up the price of oil. a bond bonanza with traders buzzing about today's $42 billion auction of two-year keynotes. the markets at this hour, mixed results out of asia overnight. red arrows across the board there. and u.s. equity futures pointing to a lower opening at home as "squawk box" begins right now. good tuesday morning. welcome to "squawk box" on cnbc. becky is off today. she will be back tomorrow. it's too bad because she's missing quite a show.

a virtual who's who of washington and wall street power players. our guest host next hour, america's mayor, former new york city mayor, republican presidential candidate, rudy giuliani. famed business leader steve forbes at 8:00. ed rendell at 8:30. and we'll check in with the man who wants to be new jersey's governor, former u.s. attorney chris christie trying to unseat jon corzine. then the seventh inning stretch, randy levine of the new york yankees there. the pitch on and off the diamond. what it tells us about the state of the u.s. economy. we don't have shows like this. this is a big one. >> the yankees are on a roll. >> since the all-star break. >> i don't know. jeter keeps leading the way.

and i saw he passed somebody -- i think ted williams the other day in total hits. 2,800. >> i think kanu just had 2006789 it's like the mets and yankees are like a supply and demand curve. >> they fired some guy at the mets because he was a hot head. >> likes to take off his shirt. >> i saw rose yesterday, lots of shots of rose. made me think, 4,000 hits? and derek is at 2,800 or whatever. 4,000 hits is 2,200 hit seasons. that's a record that seems like it may never be -- >> i know it. like cal ripken's record. >> i never know which way to feel about rose and the hall of fame. >> you're conflicted because you're from cincinnati. >> but with all the roid -- not hemeroids, steroids. with all the steroid use, i look back -- >> how bad was it in retrospect?

>> i don't know if he bet against the reds. i don't know. how do you take away -- >> it's a game where the stats pile up slowly. >> it does. 200 hits in a season is huge to do that 20 times -- what are we talking about? oh, earnings. no rest -- >> not as busy as yesterday. >> but no rest for you today for the earnings warriors today. >> where are you going? >> been doing so well. >> thanks. >> on the calendar before the bell, we have things like coach. and coach is always interesting because you wonder how luxury goodmakers are doing. mcgraw-hill, we'll have that one. office depot, viacom which had a heck of a rebound recently and u.s. steel. a quieter day on the economic front except those bonds, at 9:00 ooeastern, the case-shille index. at 10, consumer confidence.

the government auctioning off that 42 billion in two-year notes today. then we have a bunch of politicians on today which is cool. >> yeah. >> though, rendell is a democrat. he was form dnc guy. we have both sides. but you know we will hear about two hours of america's mayor. >> okay. >> he may say some things -- he may disagree with some policy initiatives of the obama administration -- >> but he might agree with some. >> you can listen. takes two sides. there's a big debate going on in congress. they can't even bring it out of committee at this point. there's debate. we are trying to figure out how to do this. you don't have to change your channel and write in about you s.o.b.s -- >> though we like hearing from passionate viewers. >> i know. but we will hear about having giuliani on. >> that's okay. >> it's like when we have howard dean on. >> in washington today, the commodity futures trading

commission holding the first of three hearings to consider whether to limit holdings of energy and agricultural contracts. and whether traders should be allowed to exceed position limbs. the agency is investigating whether the biggest players distort the markets role of price setting when they amass these huge positions. the hearing fits into the obama administration's attempts to calm the volatile commodity markets. bart chilton will have a preview at 7:10 eastern time. and the cftc plans to issue a report to show that speculators did play a significant role in driving the wild swings in oil prices. that's a reversal of an earlier position the agency took which chilton says was now based on flawed data. >> one was the bush administration saying no speculators. the obama administration says there are speculators in london, the financial services authority, the biggest one, they

say no evidence behind the oil price swings. it depends on who is looking, i guess. it's a bizarre -- commodities move around, right? we have seen commodities, deans in the teens and beans at 3 bucks. there's differences between things that you can grow again and again and the things in the ground, but i want to think that -- i can't believe it ever should have been 150. but people in here say it's at the margin. it's the incremental demand -- supply/demand at the margin fchblt something could happen in nigeria, that warrants the price, even though we never waited in line. >> you agree with the new date tax the new report? >> no, i -- i don't like to see it politicized. the bush administration found no speculators, the obama administration is finding speculator? >> so you're agreeing with the old report? >> i don't know. who knows. do you know?

>> i don't know. >> you know i think oil should have never been 150. >> yes. >> if you have 20 or 30 times the number of contracts trading and it's not guys involved in bringing oil to use for gasoline -- >> on the other hand there was a lot of money flowing around. >> etfs -- >> it had to go -- >> it had to go where things were going up. the stock market wasn't going up. do we know experts? >> this is you. >> bank of america planning to cut 10% of its branches. 6,100 branchs citing a shift in consumer preferences to mobile and online banking. ken lewis making the announcement to investors in charlotte that happened last week. the "wall street journal" reports that wells fargo has no intentions to reduce branch networks. jpmorgan plans to add 100 or so new branches per year.

>> time warner has brought back google's 5% stake in aol for $283 million. at the time it valued google at -- 206r7b8g9s. >> 2 >> 20. >> this was an investment that an individual would make and go why did i do that? >> yeah. bought a $10 stock, selling it at 3. >> google did buy the position in 2006. the details emerging in a regulatory filing by aol yesterday. the transaction sets up aol's expected spinoff from parent time warner.w we will get viacom earnings in an hour. you wonder if the guy at google who said, listen, i've been talking to time warner here. they are willing to sell us -- >> do they talk out of the side of the mouth? >> yeah. they're willing to sell us a stake in aol. he took it to eric smither, he

said i think we should do this. is he still there? is he in a cafeteria looking around going -- is he not admitting that was his idea? that was a horrible investment. a billion -- any way. high level meetings between the obama administration and chinese officials wrap up in washington today. the treasury secretary, tim geithner, cool picture of him on the front. >> it is. >> looks like he's ready to grab that. wait, don't go. wait a second. you can have your own independent currency. >> they were trying to arrange a photo shoot. lots of people moving around. cameras. he's trying to -- >> all right, you don't manipulate your currency. doesn't it look like it? the chinese guy is like forget it. i'm out of here. >> show it to eight. >> where is he? >> it looks like the chinese official is saying i don't want to hear it. i don't want to hear it at this point. i'm out of here. you have done it this time. i'm leaving.

ben bernanke along with geithner and larry somers are trying to reassure china that the united states will not let deficits or inflation jeopardize the value of all those investments that the chinese hold in dollar terms. but they, you know, they're in bed with us. they start selling those things, what they have left will start going down as well. >> there's an old chinese saying, when you were in a common boat you need to cross the river peacefully together. >> that's a very good -- that's like the fly and the -- what was that? mouths -- can't remember -- >> mr. miagi trying to catch the flies -- >> wow. was that kane? >> i don't know. >> that was fascinating and loud. >> a check on markets today. busy tuesday.

not so much on the earnings front, but between the two-year auction, case-shiller, consumer confidence. the president holding a virtual town hall on health care in bristol, virginia. asia was mixed. europe is trying to get 12 straight up days. oil off 6 cents. inventories coming out today and tomorrow. ten-year note hovering under 3.7. the dollar at the lowest of the year, the euro up. gold which has not been moving wildly in either direction lately, around 9.55. let's go overseas, christine tan is in singapore. first to london and jeff where they are trying to go for 12 straight. >> not looking like it will happen at the moment. we are in negative territory now

on these european markets. we slipped into negative territory in the last hour or so. let me show you the boards. a slew of corporate earnings and big organizations reporting. they have not convinced at this point. deutsche bank very important to the german story and europe's largest economy. and they increase their provisioning by a billion euros. that was double the quarter on quarter number. that clearly had caused some concerns. let me show you bp. the stock is down as we talk about it at the moment. bp coming out with a 53% drop in net profit. one of the only encouragements there, i guess, is that they said that they are going to lift their cost cutting targets. quite aggressive plans on that side. quite frankly, just not ringing the bell for us either this morning. arm holdings, another interesting story in the semiconductor space coming forward with an 18% drop in revenue. at least the outlook was better,

which i guess may persuade some technology bulls that there is a reason still to hang in there on the semiconductor. just bit easier on the european session. over to christine in singapore. >> jeff, thanks. asian markets took a breather today but optimism of corporate earnings helped to limit some profit taking. the nikkei finished flat. shares of hitachi fell. the kospi was up 0.1%. airlines and banks were firmer today. in hong kong, investors continue to pile into property stocks sending the hang seng higher about nearly 1.8%. in shanghai, the composite finished flat. china state construction will make its debut tomorrow.

elsewhere, low interest rates could prompt some to speculate the rba could be first to hike rates in this environment. joe, back to you. >> christine, thank you. to the u.s. markets, joining us is beth ann bovino, standard economist economist at standard & poor's. we saw the new home sales yesterday. we have seen the market up 40%, 45%, depending on what index you look at. i think it's on the cover of one of the pop news magazines -- >> "newsweek." >> "newsweek," the recession is over. in hindsight, looking back a year from now, when will we think the recession has ended? >> we have a ways to go. not far, though. we think sometime in the third quarter we will see a bottom out of the quarter -- of the recession. we think the recovery will start moving on into the fourth and on. we think the recovery will be weak. while we may finally see the bottom t doesn't look like it

will be a big boost after that. >> so we're not in recovery yet? >> no. no. we are expecting certainly the second quarter, gdp to contract. a little more conservative. and we think the third quarter will see a bit of a contraction as well it looks like the pace is slowing, though. that's a plus. >> what is the biggest thing now holding us back? is it commercial real estate? continuing foreclosures? not being able to get credit? weak consumer? >> all of the above. it seems now that housing is not getting much of a play anymore because it does look like we're starting to see some stabilization in those numbers. we will see some today as well. it looks like prices, while we expect prices to fall, we think that's also slowing down somewhat. i guess it confirms the theory that what goes down does eventually go up. that's a plus. we are concerned with nonresidential construction.

we think that will be the lag on the economy into 2010. >> jeff d this latest move above 9,000 in the last two and a half weeks d that ta weeks, did that take you by surprise? >> not really. i think we're in the 2003-type pattern where you bottomed in march, rallied into june and chopped around for a while and broke out above the june highs. >> what is you're ultimate medium-term target on the s&p? >> we had 1050 on the s&p for the past couple of months. >> then what happens? >> then it is a call on the economy, how vigorous the recovery is. i think it will be a fairly muted recovery. >> why? >> because the things that havetihave

historically pulled us out of recession are housing and autos, debt-driven sector. i don't think you will get another layer of debt put on by the american consumer. >> is it that there's no demand for that credit or is it that it's still too hard to come by? >> i think it's a bit of both. i would note the recession is an anomaly. corporations cut front, back and middle. therefore even a marginal pick up in demand will make the earnings numbers look good when they come up against the awful earnings comparisons of the third and fourth quarter last year. >> we have guys come on, they either want to invest in cyclicals because there will be a recovery or they want to stay in defensive issues because of a muted recovery which camp are you in? >> i continue to think you take it on a stock by stock basis. we have been recommending the wll convertible preferred. shares are up from 90 to almost 120 in the past three weeks.

there are special situations in just about any sector that you want to look at. >> would you avoid anything because of washington? >> i continue to avoid the financials. i have avoided them for five years. i missed them going down, missed them coming up. there is still some bad news on the horizon for some of the banks. and i continued to avoid the financials. >> beth ann, we have a lot of supply this week in the bond market and a gdp number on friday. will we get through this? >> i hope so. i think we are. we are expecting for gdp, it's starting to -- of course we're looking at 2% drop or contraction. the markets are a bit more optimistic. if we see something much more severe that will spook the markets and we might see another letdown. >> the supply that we have, so f far, i read an article over the weekend that japan's debt is twice gdp over there.

we are at 80%. we see a lot of worries. we have not seen it happen. we are still at 370. do you expect that despite the yields? >> we do think it will climb. we don't necessarily see a spike. it depends on the conversation earlier about what will happen with that foreign investor. are they going to run for the door? right now it doesn't seem like we are seeing that much activ y activity. but if something spooks them, they nay tamay take off. we think the ten-year will climb higher, the question is how severe. the question is where will they go? we don't seem to have that now. >> jeff, do you like health care better or tech better? that's what everybody comes on and says i like health care and tech. do you leak either? >> i do like tech. you have price monotizers and

then volume monotizers. technology tends to be volume monotizers, where a slight pick up in demand flows to the bottom line. >> all right. what about health care? >> like health care. on a stock by stock basis. >> do you? all right. we will talk about health care. i won't ask you political questions today. we will focus on that from 7:00 to 9:00. >> can you not focus on government and politics? we have to. thank you. we will later. >> it's a huge issue. >> do you like the mail that says stay away from politics, just focus on business? i feel like saying what company is not involved -- >> mcdonald's? >> i can figure out an angle, some type of -- i won't go there. we need to prevent -- some say fast food causes obesity.

i don't think you can come up with one. >> a company where there's no -- >> zero -- every company in the world if they're mandated to supply health care -- mandated for cap and trade, to adhere to that. if their tax rates go up, marginal rates go up. you cannot talk about -- >> we are in a land governed by a government. if you have ideas, send us a note. a company that has no interest in what government policy is all about. just make money on their own terms. >> can't think of one. >> when we come back, you thought the prius was revolutionary, wait until you see what toyota has up its sleeve.ñ and you'll hear a tale ♪ ♪ a tale of a fateful trip

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toyota plans to launch a hybrid compact in japan in late 2011. a newspaper says the price tag is expected to be less than $16,000. the new compact will use the platform and engine of the euris and feature a more cost competitive hybrid system than that of the prius. good news for you, joe. >> an engine? >> yeah. >> they call it a mechanism to make the car go.

not an engine per se. >> you are talking like a westerner or something. delphi announcing creditors led by jpmorgan have won the auction for the automakers assets. the two companies interest remains tied together because of gm's dependence on parts from delphi and delphi's need for financing. >> there's a trial under way in boost than could have far-reaching implications in the music industry. opening statements today expected in a music downloading lawsuit. the industry says a man downloaded songs and made music files available for distribution on the kaza file sharing network. the recording industry threatened about 35,000 people with charges of copyright infringement. last month a federal court ruled a woman must pay almost $2 million for willful infringement of copyrights.

you have probably done this. >> i have not. i'm wondering how in the world five years from now you can own anything and make money off of it. >> in terms of media content? >> yes. it seems like -- piracy is a -- it's a huge issue. i talked to someone yesterday who still said analog nickels are leaving and they're being replaced with digital pennies. we don't know how to do that. i don't know. that's a difficult one for me. you can see it in the stocks. >> when we come back, we'll get top stories and the picture from the future picks. so, what's the problem?

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♪ good morning. welcome back to "squawk box" on cnbc. becky is off today. she'll be back tomorrow but she is probably thinking she might drive in if she's watching because she is missing quite a show. a who's who of washington and wall street power players. at the top of the hour, former new york city mayor and republican presidential candidate, rudy giuliani. do you remember the last time he was on, carl -- i will ask him about this -- we said the president's approval rating, it was like 65%. how will that change? he said as his policies come out that will change. that was the first thing he said. he will probably say that's in the process of happening right now. we also got steve forbes who was

a part of the mayor's presidential campaign at one point. we also have pennsylvania governor and former dnc chairman ed rendell. we will also check in with the man who wants to be new jersey's governor, at this point after what happened in the last week, i think he widened to double digits over jon corzine at this point. he was one of the guys that, i guess, started some of the investigation into all the mayors, the rabbis. it was a bizarre story. >> new jersey. i defend new jersey. i do. >> you live there. >> i do. i like it. i like where i live. i think it's -- i don't like the taxes, but politics are interesting. not a whole lot different than maybe the sopranos, which i o miss. >> if you ever want to move back to manhattan, we'll welcome you. >> i never lived in new york.

>> if you wanted to move to manhattan for the first time -- >> no i don't think you guys are necessarily much better. at the seventh inning stretch, randy levine will join us, the yankees president hat inside pitch on business on and off the diamond and what it tells us about the state of the u.s. economy. >> another busy day in earnings central as well. on the calendar today, quarterly results from coach, mcgraw-hill, office depot, u.s. steel. on the economic front, key data releases to watch. at 9:00 p.m. eastern, the case-shiller report. at 10:00, consumer confidence. and then the government auctioning of those notes, 42 billion in two-year notes today. let's check on how the markets are shaping up today. quiet morning in asia. the nikkei was down. results were mixed along the pac

rim. europe has been off and on most of the morning. futures are down state side. oil is not moving this morning. down 8 cents today. ten-year note, the yield around 3.7.g dollar did not react dramatically to this chinese/u.s. strategic economic dialogue. >> it's ban slow burn as the euro continues to climb. >> is at the lowest level of the year, the dollar. the euro at an eight-week high. gold is up a buck or so. 1.50 to 955. that has not changed at all in the last half hour. standing by is kevin ferry, chief market strategist at cronis. good to see you again. >> good morning. >> so with europe struggling -- >> lots to talk about. >> yeah. i guess the rally overall, europe trying to put 12 straight together today. it may or may not happen. are we getting tired?

>> is a little tired that helped keep it fueling, too. volume is low. shorts have been rolling in to most of the new highs and giving up rapidly, both overseas and here. i think you see a bit of rejiggering today. once you get past this halfway mark in the earnings, that's usually when the market frees up a bit, more towards forward looking. so we'll be watching that. hong kong and china, they have been on the big one. aluminum, as you pointed out oil. the lower dollar. those have been the themes. now you're in the transition to see if there's rotation. of course how we get through this big amount of supply. >> how do you reconcile the conflicting guidance? not that it's been dramatic in either -- or definitive in either direction, when you have corning saying we think holiday sales will be good and caterpillar saying we are seeing

signs that stimulus is working, especially in china. then you have honeywell saying we think 2010 will be as tough as 2009. >> right. i think that's what we have been focusing on, not only from the corporations but from the governments, too, carl. there still remains a fair amount of uncertainty out there. so the market has taken, you know a rather positive run as of late into those types of situations. i think that speaks to what the chairman is doing on his interviews, also. he's being more public in trying to interject a fair amount of certainty about what he's doing into this still clouded outlook, both policy-wise in the states, and outlook-wise for the companies. so i think he's creating a nice counter balance. personally, from our standpoint, we would like to see it the other way. we would like to see the fed more opaque and the government's policy and the corporate outlook

much more clear. >> because why? you want to protect whatever independence the fed arguably has? >> that's good for the fed. it's good for policy. most importantly it's better from looking at the economic outlook. especially, let's go to the banks. thasby is talking about looking at fair value accounting, you have this concept that there could be re-regulation as bernanke has been talking about a total restructuring of how things are overseen. that's keeping the banks hoarding money. it's wide for them, when they're not sure about what that is going to look like, to hold on to their cash until they know what the future holds. those two things are holding back. so you have a great movement in the marketplace, but still i think a clouded outlook for the economy in general. >> have you been heartened at all by fhfa, the price index,

case-shiller today. >> it is undeniable that there is stabilization, but it shows 9 market coming from a terrible place -- >> nothing more than that. >> not the way we look at it you dig deep into the numbers, people are still applying for multiple mortgages to get one. that goes into the numbers. i think there's still no securitization. so i think it's a -- you are still talking about what's the new normal going to look like with regard to mortgage finance. so, you know, i think that it's good. you see the numbers. stability is the first sign. the interesting thing about what the chairman is saying on television is that he's still explaining what they did. the market is clearly pricing for what's going to happen next. there's still several tightening priced into the forward curve for euro/dollar futures even

though we made a new low for libor. this -- the end of this month, beginning of next month is the transition time. >> you guys miss santelli? he will be here for a few days. >> i saw that we're anxious to see. he will provide a spark on that show for sure. >> he usually does wherever he goes. >> that's right. >> talk to you later. >> comments, questions about anything you see here on quack, e-mail us at squawk@cnbc. 'tis the season for summer camps, the kids are not jumping into lakes, their poring over corporate reports. speaking of memorable moments, check out who has made his way to the squawk boardroom a face that can be recognized anywhere in the world. america's mayor rudy giuliani, our guest host at the top of the hour.

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welcome back to earnings central. before we get busy with this morning's report. let's look at the stocks on the move following the releases on the bell. you got your height to where you want it? >> taller. i feel like i'm in an interview with mr. potter. let's begin with masco. the building products maker. earnings at 10 cents a share. analysts forecast a loss of 3 cents. the company is also narrowing

its loss estimate for the full year. we have masco in from time to time. >> nhealth marnagement getting boost. company posting a profit of 13 cents a share, versus estimates of 106789. >> amgen up nicely this morning. the biotech company's q2 results topped estimates by 13 cents. revenue better than expected. helped by a rebound in saleses of its rheumatoid arthritis drug. it is upping full-year guidance and announced a deal with glaxo under which glaxo would commercialize an osteoporosis drug. >> that stock gets into the 40s, i see it there, i say will it happen again? there seems to be these reasons not to know whether it's medicare reimbursements,

whatever it is, but there it is, back up to 62. >> rent-a-center. i used that once. >> you did? >> you can rent to own. it was either rent-a-center or a competitor. >> what was -- >> i just got a couch, a table, and i think i bought my own tv. but i had a couch and table. you pay rent each month and you can end up owning this stuff or give it back. >> that's good in an environment where there's not a lot of new household creation. >> yes. you can see that it was well above expectations. i guess it makes sense in this economy. up 66 cents after hours. 61 cents, eight cents ahead of expectations. revenue was slightly short. full year's earning guidance at the top of the street's expectations. >> when this is all over, are you going to miss this? miss coming over here? >> i have a feeling that, unfortunately, there are companies that report every

month. and they don't report during earnings season. >> you think this might be -- >> we paid for it, didn't we? are we not going to use it? i don't like it it's a long way from the seat. have to put on these -- >> at least 100 feet. >> put on these things. >> goat the chair situated the way you look. >> exactly. >> plus a little dental pain today as well. >> this thing i had yesterday, i'm telling you, it was like a root canal. >> because it was a root canal. >> oh, it was a root canal. that's why it was like a root canal. >> you look good, though, for having gone through that. >> didn't hurt right away. now i feel like i'm growing something here. >> when we come back, newsmaking headlines outside the world of business. one of the nation's most recognizable politicians, rudy giuliani has hung up his hat as mayor of new york but still has plenty of insight on everything from the economy to the future of the republican party. the man himself, the mayor, our guest host at the top of the hour. ♪

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n i'm  ♪ ♪ i'm back time on a check of news outside of the world of business. a alex witt joins us again. >> i'm glad for the music. i was vacationing in cal so i'm back in the new york groove. law enforcement sources tell cnbc news that michael jackson's doctor prescribed a powerful prescription sedative the night the pop star died. toxicology results are expected this week. president obama will meet with the black professor and white police officer at the center of the recent controversial arrest that has fired up a national debate over race relations in an apparent attempt to cool things off. the three will meet for drinks this week, very likely on thursday evening. athletes from around the world put on extra weight to go for the gold. competitors faced off in the

second annual sumo suit athletics championship. yeah, that exists. it included the high jump, long jump and 40 0-yard dash. oh, yeah, that's -- what can you say to that? >> you can't. >> we have so got to try that. >> no! >> it's a great -- >> i'll watch you guys and report on it. >> taet a great segue because i'm going to talk about football in japan where people don't know that it actually goes on. >> american-style. >> yeah. >> but this happened saturday, an exhibition game. it's on cool. which camera? this camera. that's lou holtz right there. these are guys, fighting irish. lou holtz leading the fighting irish out onto the field for an exhibition game in japan. and it's not well known but for 75 years the japanese have been interested in football. >> really? >> yes. they have an x-league, semipro,

and guys that have real jobs. the quarterback has a 9:00 to 5:00 job. saturday's exhibition game at the tokyo dome was the stiffest test yet of japan's progress as a football nation. most athletes in japan either go to soccer or baseball or something like that. they don't reply a big -- >> big on baseball. >> yeah. lou holtz, who was coaching, known for his effusive praise of opposing teams lauded the spirit of the japanese side saying football had improved greatly and the national squaurd played at the level of a mid-major division college football program. but the coach of the japanese football team said getting a compliment in defeat is meaningless. he said it wasn't about moral victories. i thought maybe he would -- but a typical that that was -- didn't want to hear it. they want to get really, really

good eventually but at this point not quite as much interest as even golf. you've seen some of the unbelievable players coming out of -- >> korea certainly. >> korea as well. >> maybe that's where michael vick can end up. >> he's allowed to come back, right? >> yes. >> but my free plaxico campaign, it's not going well. >> legal problems. >> he threatened -- >> he's not messing around. >> he had been threatened for his bling. he needed to protect himself. i don't understand that one. >> you wanted to preplaxico. >> i did. >> because you like to carry weapons yourself, right? that wasn't it. what was it? >> read this. >> "usa today" has a great piece on -- have you been trapped on the airplane on the tarmac and been unable to get off the plane? >> not for eight hours. >> there's a flew called fliers.org they've been lobbying to free passengers who are held

for hours without recourse. the numbers aren't that high, 1 in 10,000 but there is legislation in the senate, if you're on for three hours to let you off. the industry says this could create even more unattended consequences, more cancellations. the airports with the highest record of this -- what would be your guess? you would guess o'hare or atlanta. it's houston. >> really? >> surely you can't be serious. >> jfk number two. philly number three. you've heard where toilets are backed up, kids crying, they don't serve food. >> no air conditioning. i thought newark would be on there. they're on the list of everything bad, the luggage -- >> you're dising jersey a lot. >> newark is number seven. >> that's pretty good for newark. >> someone's looking out for your rights. >> that's good. it's no fun, especially with kids. you'll see when you take the twins on their first -- on the

first -- too young at this point. can't take them yet, i don't think. >> really? >> you could but i don't think you could. >> i won't do that. when we come back, what a packed two hours. america's mayor, giuliani crossing the hudson to join us on set. we'll talk politics, the economy, taxes and of course baseball. welcome the mayor with us when "squawk box" continues. announcer: welcome to the now network. currently, thousands of people are enjoying the new palm pre from sprint. its revolutionary web os allows multiple applications to run at the same time. - ( thunder and rain ) - millions are using the simply everything plan. - each is saving $1200 over an at&t iphone plan. - ( cash register dings ) together that's billions of dollars. enough to open a dunkin' donuts in space. from america's most dependable 3g network.

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america's mayor joins america's premiere business show. former presidential candidate rudy giuliani joins the "squawk" crew with his thoughts on the economy, the president's plan for health care reform, the future of wall street and what it means for your portfolio. as the second hour of "squawk box" begins right now. ♪ start spreading the news ♪ i'm leaving today ♪ i want to be a part of it new york new york ♪ >> good tuesday morning and welcome to "squawk box" on cnbc. we should point out that that music is an honor of america's mayor, rudy giuliani joining us for the next couple of hours. thank you for joining us, mr. mayor. >> my favorite song. every yankee song. >> and favorite morning show. >> great morning show. >> favorite morning show? >> great morning show. >> ten seconds and you're

already trying to pin imhim as great. >> welcome back. i'm carl quintanilla with joe kernen. europe's try to make it 12 straight. we'll talk more about markets in a little bit. in the meantime, some stories, bank of america reportedly plans to cut 10% of its 6100 bravenlgs citing a shift. bm says 3q profit sluched due to falling oil profits. bp has already achieved the goal by cuts costs in 2009. in washington the cftc is holding the first of three hearings whether to limit holdings of agricultural contracts and whether some traders should be allowed to exceed position limits. the agency is investigating whether the biggest players distort prices. the commissioner will join us in a couple of minutes. we'll have some earnings

hitting. i see coach. we might as well mention coach, 43 cents right in line with expectation. sales fell 1% to $778 million.ñ the estimate was $783 million. so revenue just slightly below. there you can see the action in coach over the last year. $28.43 close. unclear where -- the results just hit moments ago. if we see viacom, we'll bring it to you as quickly as we can. meanwhile our cnbc exclusive, former new york city mayor rudy giuliani is our guest host for two hours. do you remember the last time you were on? was it three months, four months? >> with jack welsh. >> yeah, with jack. >> probably in march, april. >> jack was a little under the weather but he's doing good. i know he watches in the morning.

at the time, i tried to -- i asked you the question, the president's approval rightings were sky high. they're still pretty high pip asked you, how would that change. you said, when people look at his policies and when the policies start making the news. >> well, his policies -- >> did it happen? >> his policies have been unpopular by and large. even the first stimulus problem a lot of people were worried about it, concerned about it, disapproved of all the heavy spending and it didn't claim to be a stimulus. he claimed it would bring down unemployment. the reality is, i think the policies have now caught up with him. the stimulus program has failed. it hasn't worked, at least in the short term. he promised it would work in the short term as well as the long term. it part of the promise seems to have evaporated. i think the issues he's weighed into, cap and trade. people don't see the need for that tremendous amount of spending. it looks like just an excuse for a major carbon tax and an excuse

for a big tariff, which would be a disaster. the health debate, i think, has really taken a toll on him because he had it that press conference. he had no answers. he doesn't seem to know how many people he want to cover, doesn't seem to know how it's going to cost. it's telling us it's going to be revenue-neutral, which nobody believes. even his democrats in the house and senate believe it's revenue-neutral. you can't cover -- we don't know how many people because he hasn't decided yet, 30 million, 40 million, 50 million, 10 million, illegal immigrants are going to be covered. how do you do that and make it refuse nerevenue-neutral unless you cut services for everybody else. i think the biggest tactical error was saying it's revenue neutral. it's one thing to say i want to cover 30, 40 million people that aren't covered. it's going to cost us this money. do you want to pay this price? it's forething to say it's going to cost us nothing.

it makes no sense. all of a sudden it's free? >> peter orszag accused olmendorf of escalating the fight. is that dangerous? >> of course it is. cbo, first of all s a creature of congress, democratic congress. he should be nonpartisan. i think he sound like a very courageous man to me. the pressure on this man -- i think they brought him to the white house and tried to put the pressure on him. this man has to be the hero of the story. whether you agree with him or not, he's telling you what he believes. it has to make sense. how do you cover 30, 40, 50 million people when health care costs are soaring and you say, it's not going to cost anything? he says he's going to tax about a third of it. the other two-thirds by reducing waste. well, this administration has not been particularly good at reducing spending. no other administration has been

able to reduce the cost of medicaid. the most anybody has been able to do is reduce the percentage of growth. maybe growth was estimated at 10%. somebody got it down to 7%. so you're going to cover all those people. it's going to cost money. i think the american people want to know, all right, mr. president, how much is it going to cost? let's stop the political posturing. >> if it's poged as a deal that's going to cost more but give you more, would that have been more successful? >> for me -- not for me. for me the thing that makes it impossible and very, very dangerous proposal is the government insurance. the idea you're going to expand the number of people covered by government insurance by 40 or 50 million, including moving people over who have private insurance. we should be going the other direction. we should be moving people out of the government web and into the private sector. that's a healthy economy. so i would kind of part with him on that. the democrats he's losing, including the blue dog

democrats, they're probably not opposed to major government coverage as i am or government bureaucracy. i think their big problem is they don't believe he's making the case to the american people because it just doesn't make sense that it's going to be revenue-neutral. he's not going to cut costs by the amount that he says he's going to cut. you don't need elmendorf to tell you that. >> you're right. it's a philosophical difference. there are people that you seem to say that, you know, the government should not be involved in providing the coverage. there are people that say the private sector, they've made huge profits and you need to take the return on equity out of the equation for health care. that's -- >> everything that -- when you take the return on equity out of, it you take quality out of it. the minute the government starts regulating it, by numbers completely and external criteria, we're going to turn into a canadian, english, german

health care system. >> there are people who say those systems are pretty good. i get mail every day. one says the government is the only way to keep the private sector -- >> eye never met anybody -- i've had a long debate with a doctor who actually want to increase the medicaid coverage. he really believes government coverage should be increased. he says once again, don't fool people. in order to increase it, we have to reduce the quality. the quality just has to reduce. if you add 40 or 50 more people million people and trying to keep the expenses down-u to reduce the quality of the care we now presently experience. and you'll have longer waits. i ran a hospital system. i ran the second largest publicc hospital system in the country, the new york city health and hospital corporation. when i came into office, this government-run hospital had a six-month waiting period to get

a breast examination. then if you happen to have a problem that came up, it was another three months before you ever saw a doctor again. can you imagine, told that you possibly have cancer -- i had cancer. i can't imagine what it would have been like, you possibly have cancer but come back in three months. >> is -- >> that's what happens in all of those socialist medicine countries. doctors here are making money on people who come here from canada, come here from england because they don't want to wait three months. >> there's a lottery for certain things, too. >> there's a lottery. there's a whole private practice that develops. in some countries it used to be illegal. in canada it's illegal to get a private -- >> to opt out, right. >> but we're saying all these things from the viewpoint of people with insurance. >> is the status quo indispensable? >>-u to examine it more carefully than the president. the president didn't answer any questions. here he was asking the house --

i think that's why they put it off -- >> to pass the bill in a week. he didn't know how many people, what the criteria was going to be. is there going to be a penalty if you don't have insurance? what is the penalty? are you going to be attacked or fined the way you are in massachusetts? the reality is of the 40 or 50 million people that aren't covered, half of them about, can afford coverage. they can actually pay -- they pay for other thing. they buy cars, they buy televisions, they buy computers. they don't buy health insurance because they make the decision that it's too expensive. >> or they're young and -- >> or they're young and they want to not be insured. pe say, we're willing to take that risk. then the argument on the other side is, well, then they show up for emergency treatment. but the reality is that emergency treatment will never cost as much as fully insuring someone. that's why it's got to cost more. if you're going to take someone who occasionally uses the system for emergency treatment and now you insure that person, it's got to cost three, four times more than the emergency treatment is going to cost, which is occasional.

that's why, whatever side of the debate you're on, whether you think the government should have a bigger role or not, somebody's got to be honest about the price tag. >> but you would agree that we need to insure at least some of those people -- >> yes. >> you don't want to have a car crash with a person who's uninsured. >> i would like to see those people on private insurance. i would like to see the cost of private insurance driven down by the marketplace. i'd like to see -- >> that historically has not gone well. >> because we historically manipulate the marketplace with a $15,000 -- or with an exemption for employer health insurance. so if we had a $15,000 exemption so i could buy my own health insurance and we could set up a health savings account so i could save the money that i can get the price down by, in other words, i get it down to $12,000, put $3,000 in a health savings plan, we can create a private marketplace and have people investing in health instead of having government take it over.

>> all this said, you don't necessarily agree with the tactic of some republicans to use this policy measure as a political weapon against the president, right? disarm him on a broader scale. >> the idea that this is waterloo, the president has been five or six -- every president has five or six waterloos. this may be one. it may be damaging to him but he has another 3 1/2 years to go. he has plenty of time to make good decisions and bad decisions and that will eventually decide things 3 1/2 years from now. he can have a terrible failure on health care and rebound from it. >> does it feel like '92 and '93 again? here we are again and it's the same argument. >> people understand it better. >> they do. it's gotten further. they say it never got through -- >> but how far is it? it's nowhere yet. the senate at this point says they will not include a public plan. >> from my point of view, thank god. a healthy america economically and in terms of our physical

health in which more people have private insurance, not more people, controlled by the government. and i see it as part of a whole obama administration trend toward the government taking over. they've taken over the financial industry, they've taken over the banks. they own general motors. and now they're making moves to take over the health care industry, to take over energy. where is it going to stop? >> but that's a classic -- i mean, in all due respect that's a classic republican talking point for -- >> how about 300, 400 years it's a classic conservative talking point, including andrew jackson, who was the first democrat who worried about large government. >> sure. but this is -- >> this is the classic philosophical decision. >> but gm and the banks were a different decision. you can't say obama walked into office with all of this in mind. >> if obama had a sense of restrantd about the federal government he would not have taken over general motors. the reality is, if you look at the health bill and you count the number of bureaucratic that

will be necessary to do this, to control insurance for 40 or 50 million people and then control all the rest of the coverage, you'll have to build 12 new buildings in washington just for the health care czars. we have 33 czars now. 33. someone forgot what happened to the last real czar. remember, he got his head cut off? this is a very big mistake. there will be 12 new buildings to deal with health care. and you can't imagine what cap and trade will do in terms of the number of bureaucrats number necessary. this is the most complicated thing we'll do. thousands of new bureaucrats will have to be hired by the government in order to do that, housed in another 12 or 13 large government buildings. >> the defeat of the clinton plan in '92 and '93 ushered in a more moderate and bill clinton was able to get a lot more done. with it happen again? >> that's the key to his

political success or failure. if he's going to -- >> to president clinton -- >> president clinton. >> can he move back to -- is he cab capable of moving to the center? what's your heart of hearts say about that? >> i don't know him well enough. can he make a midcourse adju adjustme adjustment? >> you would agree he's a pragmatist, right? >> we'll see. these were his views, developed in chicago, doing the things he dshg the influence of, a community organizer, in state politics. it's always been kind of very left wing agenda. moderated for the campaign. now it's gone more left wing than any american president we've ever had. now we have to find out if these policies don't work, can he move to the middle the way bill clinton -- bill clinton ran as a real moderate. he ran as the new democrat, the moderate democrat, the sort of reaction to ronald reagan. >> you've heard the president again and again say, if you like

your plan, you can keep it. and this will not drive people out private insurance into the public plan. do you think he believes that or do you think that this is a backhanded way of headed to a single payor system? if he knows it and he's not speaking the truth, that's scary. >> i think he -- >> you think he believes it? >> i think he believes it, but absolutely wrong. private insurance companies, based on this kind of competition, a number of them will fold, which means if you just happen to have insurance from one of those companies, you're without it. it's not as if the government will take the private insurance away from you, but they'll create market forces that make it impossible for some of these companies to be profitable which means they'll go under, your program is gone, you have no place to go but the government. in fact, they even assume that. half of the people they think they'll be covering in this new government insurance program or cooperative are people who presently have private health insurance. they're going to either find government health insurance less

expensive, they'll go get it, or their insurance will disappear because their companies can't make a profit. this is an administration that's against profit. they want to regulate profit. when you regulate profit, you inherently change the nature of the capitalism system and inherent performance. promise of great profit means great profmise. when you take that motive out, i really fear for what we're going to have as a result. >> so do you think -- does the role of profit have -- is it any more of a shade of gray when you're talking about delivering health care to america? as opposed to selling them a kindle. >> it may be more important. i had a good friend who was a doctor back in the 1980s, he delivered both of my children. during one of the deliveries we got into a long discussion about what was happening in health care. he told me he was very concerned about the brain drain in american medicine.

he said when he was a young man all the most brilliant kids went to medical school because you could do good and get rich. he said a combination of those two things gets you the best. some are true all truistic and work for nothing. others like to be stable and they like their families are have to are as much as possible and hes we're losing those people to investment banking and law. come on. you make this a salaried job at $130,000, like some of these clinics are, sure, you'll get some very, very qualified people that are just pure altruist but we'll lose a lot of brain power we had in science. >> not just in different countries -- >> our founding fathers understood this, self-interest. it's the thing social democracy misses. >> you wonder if you were to privatize the police or fire

department, there should be no profit motive in whether you decide to go and fight a fire. some people might say that health care is the same way. that is -- you know, the pursuit of life includes the right to -- >> some people say that and then they have to go look at systems that have taken the profit motive out, that have been run by the government. those systems don't -- >> even the best ones, yeah. >> don't deliver medical care at the rate we deliver it. we are an imperfect medical system. we have a lot of mistakes in our system. we also have a lot of mistakes in our economic system, our legal system. it just happens to be better than everybody else. >> we'll have more from the mayor for the next couple of hours. viacom did come out. i think they beat by a penny. >> nongap of 49 and the estimate is 48. viacom is -- it's been doing a lot better than at the lows when we saw those. you're wondering what sumner was thinking at 16 --

>> you see what they're citing, lower sells of the game rock band. you remember what amazon said, high margin video games. >> there was an article about getting a -- the video games and box makers finally getting hit. futures are a little lower. europe has been struggling as well. nikkei off a little bit overnight. we'll open down by 27 point or so. a lot more "squawk" after this commercial break. coming up, regulations of the energy markets hits capitol hill. the commissioner of the cftc join the "squawk" crew before today's big hearing to talk about oil futures, trading futures contracts and tighter regulation on the industry. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called?

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the cftc will cite speculators as playing a role in last year's wild oil price swings. joining us this morning from washington is barth chilton, commissioner of the cftc. good to have you back on the show. >> good morning. >> story getting all sorts of play in the papers, specifically the reversal that it shows from the report last year which you believe was based on deeply flawed data. what happened? >> as i said, last year we didn't have complete data, first of all. secondly, i think we spun it to

say that speculators had no influence. and this year i'm convinced the report will, one, have better data sets, we'll have more confidence in the data. two, we're not going to minimize the role that speculators are playing. you know, i think they have had an impact over the last year as we've seen the commodity roller coaster go up and down. >> how much of that change of heart is because of the data and what specifically has improved on that front and how much of it is simply because it's easier to say that now in this political environment? >> well, it was very tough, you're right, last year. everybody was trying to pull information together from a myriad of sources but this year we've been able to confirm some of our numbers. we're looking at it in a different way. we're getting different sources and sort of slicing and dicing the data so there's a greater degree of confidence in what we're saying. i'm not going to prejudge what the report will say. that will come out in august. but part of the -- what we're

doing in these hearings today, tomorrow and next week is get the best and brightest minds around what we need to do to control excessive speculation if it exists in these markets. >> commissioner, what is the key fact, if you can, simplify for us, weights the key fact that's changed between last year when the commission seemed to clearly say, speculation had very little to do with this, and what appears to be what the commission is now going to do? what's the key factor that's changed that explains. >> sure, mr. mayor. last year i think -- you know, a lot of people in government, a lot of regulators, a lot of people like me, quite frankly, were saying things were okay. i wasn't saying things were okay but a lot of people had that attitude. as prices were going up, people really didn't know quite what to make of it so they grabbed all sorts of data and they sort of, as you know, sir, they sort of spun it and said, everything's okay, no fire here. well, we've got a new approach now. and we've got some different people at the commission.

and we're looking at this in a deeper way. >> i don't really understand the difference. in other words, last year the commission was prone to spinning for political reasons, but -- >> with incomplete data, sir. this year -- >> now it's not going to spin for political purposes? >> no. we're going to let the data speak for itself and the data we have we'll have more confidence in it. >> what fact has changed other than the spinning and -- >> well, that's -- >> >> what facts have changed from the investigation that says, speculators are more -- i mean, supply and demand, obviously, plays a big role in this. there's a tremendous demand for oil. there's a lack of supply. and those factors all figure into this. the war's going on. how do you evaluate the role of speculators against those big geoeconomic facts? >> well, what's happened in the last several years is there's been an entirely new group of speculators. these are people in these markets that don't have an interest in the underlying

physical commodity. these are people endowments and hedge funds, pension funds, that get in the markets for long periods of time. they don't care what the price is this week or next week. they're betting on it, larger in ten years. and that's a new phenomenon. in the aggregate we've had $200 billion that have come into the markets, much of it into the manager markets and crude oil. so i think it's having appear upward lifting of prices. that's what it did last year when speculators were getting into the markets. last year they've gotten out of the market in droves and we've seen what prices have done. they've tumbled and people are starting to put their toes back into the water. it could be happening again. >> we don't -- we wouldn't be having the argument, you could argue, if it were the other -- if they had shorted crude, right, and crude went to pennies a barrel. we certainly don't look at equities the same way we're looking at commodities now.

you can see what the endowments will say about this, right? >> nobody likes upsetting the apple cart. that's why it's important to get the views, have the hearings. a lot of times in government they'll put out a proposal and say, you're adhering to these constructs. we're not doing that. we'll take input, listen to traders, and consumers and put out a proposal, have a comment on it and hopefully do something to make sense for markets so they're efficient and effective. as i say, for consumers, too. >> you got the attention of a lot of traders in the pits this morning, commissioner. good to have you on the program. >> good to be with you guys. coming up on "squawk box," check out the "squawk" boardroom. a power breakfast, new jersey gub thatter toal candidate will join us to discuss his ideas for fixing the state's economic woes, the job that governor corzine has done and what he would do differently. later, as you can see, camera left there, billionaire steve forbes on the markets, the

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welcome back to "squawk box" and rning central. can't get a decent bid/ask on viacom. second quarter result were basically in line as far as the bottom line. there's a lot of metrics that people use for viacom, the ibitar cash flow. apples to apples, $3.2 billion versus $3.54 as an estimate. you can see the rebound. shares doubling from some of those lows late last year. coach reporting fourth quarter net of 43 cent, right in line with expectations. again, revenue slightly below. that looks low. you can see from the ask that's about 60 cents below yesterday's close. north american comps were worse than people thought, down 6.1%. the street was looking for down 4%. in japan, sales declined 10% on a constant currency basis.

office depot reporting second quarter losses of 22 cent. that's when you back out items. that is wider than the loss that wall street was expecting. looking for a loss of 12 cents. revenue, more or less in line with expectations. $2.82 billion. office depot, as you can see, called a little lower, down 15 cents on the ask. mcgraw-hill, 58 cents a share, if you factor out items, that was two cents ahead of expectations. revenue of $1.47 billion was slightly below the $1.55. also, the full-year guidance for '09 was lowered from 220 to 225. the company had a high end of 230. wall street is still at 227. company also notes they'll come in at the low end of that range and also lowering '09 revenue guidance to 5.5 to 6.5% decline.

they had been at 4% to 5%. reuters is still up at about $6 billion for revenue. not great numbers. today a little bit -- not quite as good, carl, as we've seen. >> yeah, yesterday was a little mixed as well, right? >> yes. this week not starting out quite as -- maybe that's why they waited a little longer. >> they argue the good numbers come early and the weak numbers -- >> maybe that's true. they had more time to work with the numbers. you figured they could do a little better. >> the cooking goes on a little longer of the books? >> exactly. >> any comments or questions, drop us a note here this morning. our address is squawk@cnbc.com. when we come back, a lot more from mayor rudy giuliani. tomorrow on "squawk box" -- hedge capital fund honcho we know why we're here.

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welcome back. ibm is buying sfts, $50 a share in cash. >> that's fairly significant,

right? 43% premium, $1.2 billion, sees closing in the second half. we've seen a couple of little medium size acquisitions. amazon and zappos. >> this is a $35 stock so -- yeah, that was -- for ibm you would have to call it small. they're suddenly making a -- i guess that probably includes debt if it's $1.2 billion because they're not doubling the price and it was at $35 so must be debt included swu. back to our cnbc exclusive, former new york city mayor rudy giuliani, our guest host for a couple of hours. are you seeing any signs in new york that the economy is stabilizing at all? >> yeah, i think so. i'm not sure we're through it though, yet. i mean, i think the financial community has come back somewhat. i mean, the market is a good indication of what's going to happen in new york city. you have a good market year, new

york city is in pretty good shape. all those bonuses that everybody attacks is the way mayor bloomberg will end up balancing his budget or not. the mayor has to predict the revenue receipts, has to set them. the heavy part of it was, what kind of bonuses was wall street paying out because all that money gets paid out. you talk about a stimulus -- >> don't profits get taxed, too? >> of course they get taxed. they get taxed incontradictly, also, because they get spent and taxed as sales tax and real estate tax and every other kind of tax you can possibly imagine. >> where's the line between taxing high income earners in the city and keeping them from moving away? does that really happen? >> oh, you're darn right it happens. before i came into office in 19 -- the early 190s we had lost 450,000 people. some of it was crime, but also some was taxation. and if you look at reports done for companies deciding where they're going to put jobs, where they're going to add resources,

taxation is is one of the three major factors. quality of life is important, education is important and taxation is right up there. i know a few leaving new york. they're trying to make their residences in connecticut, trying to make their residences in florida, thinking about going to texas. they're carefully trying to calculate, how many days would they spend in new york so they don't have to spend tax in new york. people are losing people in new york, i imagine the same is true in new jersey, because of the 9% increase in spending. >> you saw what happened in the financial sector. you saw the type of games, played. and you're familiar -- you remember mike milikin, parked a little stock. compared to -- >> i would say -- >> go ahead. >> up until madoff all of it reminded me of deja vu, in the words of yogi berra, madoff is didn't than -- i did cases when

i was u.s. attorney. but the scope of the audacity of that kind of fraud is way beyond anything i had ever seen before. >> i was taking it to -- maybe not to madoff but to the ability to lever up and use other people's money to have these afemoral profits, to take your percentage of these afemoral profits and the profits go away, you leave these companies like citigroup and merrill lynch and, you know, holding the bag. you go off with $150 million. is that any different? >> it is different but it -- it's actually, used as an attack on the serious capitalism. >> it is. >> in fact, the theory of capitalism would say, you should never assume that a market is constantly going to increase and you should never assume that it's constantly going to decrease. the history of capitalism is, cyclical markets. that's why we have capital requirements, hedging. all those were the principles

that were ignored. we went through an era of massive spending on people buying homes, on the part of ó government, on the part of business. you can look at all levels -- >> credit. >> right. the obama administration, unfortunately s continuing it with more spending than ever before. >> i just wonder whether you think it's okay for -- when you're risking other people's money and it's not your money and you're still taking home $40 million, $50 million a year. >> there's the argument of whether there's really an efficient market. if the market was acting on its own terms, when it was giving those mortgages to its people that couldn't afford those homes. >> i just wondered as a prosecutor you prosecuted -- >> two different questions. first of all, the market was not operating on its own when it's giving to mortgages that people can't afford. it was operating on the tremendous pressure from democrats, clinton and bush who tried to prevent it. we had people like barney frank and chris dodd putting tremendous pressure on. give people these homes. banks aren't going to loan money

to people who have no assets unless they are forced to do it by the government. i think the subprime mortgage problem is another step of the government and a political theory -- >> people say that doesn't hold water. it was the securitization of all these -- >> that happened longer. >> along with the aaa rating -- >> and president bush saying 70% of society -- >> that happened later. president bush is the one one who warned about fannie and freddie and ignored for three straight years. president clinton warned in 198 and 199 and democrats ignored it. a tremendous market was created and -- >> steve liesman will tell us that fannie and freddie were not the main providers of the funding for the housing. >> they weren't the main provider but the government was the main instigator of doing it. i agree with you, securitization and these complex deals made it -- spread the problem. >> not holding onto the risk -- >> the initial problem was a lack of common sense. you don't have someone get a

mortgage for $100,000, put no money down and then get the money to pay for the mortgage. the person is under water by $5,000 before they start. you don't put somebody in that position. banks didn't do that initially. the government did that. banks then -- >> they followed suit. >> they learned how to make money and they spread the problem dramatically. >> like parking a little stock back in the old days. compared to this, mayor, i mean -- >> compared to this it was -- i'm not going to say minor. itgi implications. >> more coming up. dirty jersey. republican gubernatorial candidate shares his thoughts on how he plans to clean up politics in the garden state. his thoughts on jon corzine and his handling of the financial crisis.

new jersey governor jon corzine is one of the nation's incumbents under attack for his handling of the state's economy. the democrat and former goldman sachs ceo trailing challenger in

the latest polls, republican, chris christie. we've got the budget problems. and then what are we calling this thing, jersey gate? i don't know what to call it. the mripoliticians in chicago a laughing at us. i mean, in new jersey we've somehow moved them aside and we look more ridiculous than they looked. >> we had a good laugh, didn't we? lasted a couple months. >> new jersey just made a good comeback thursday. the blagojevich stuff where we fell behind, we're now back. we're back. >> do you think some of that you can lay at the feet of governor corzine? is that a stretch? >> listen, i think that whenever you enable people who are in the party system in new jersey, maybe the big boss system in new jersey, when you enable those people, that's a problem. i think the governor over a period of time has not stood up for some reforms he campaigned on. he campaigned to limiting office

holding and then he grandfathered in the dual office holders. send the wrong message and wrong tone. when you enable people like that it becomes part of a problem. i don't think the governor himself is corrupt or anything to indicate that at all. i like jon corzine i just don't think he provides the type of leadership new jersey needs. >> okay. how would you handle the budget problems? criticize what he's done and what would you have done differently, do you think? >> he started off right away out of the gate spending 20% in his first two years. and there was a huge mistake right off the bat. he came in saying he was going to cut the budget, he was going to scrub the budget, find efficiencies. instead what he did was rolled right over to the traditional kind of pork barrel spending that's gone on with the legislate tour down in trenton. he was digging a deeper and deeper hole. when the recession came, you know, we had no room to move. we were in worse shape than anybody and we're in worse shape than anybody in the region.

highest unemployment than connecticut, new york, delaware. all that's an indication of his policies, higher taxes, more spending. we are to reverse those like when the mayor did when he came to new york in 1993. >> i support chris. i've been a big supporter of his since u.s. attorney and now as u.s. goef nor. i think u.s. attorneys make great governors, by the way. >> there's an article saying there's a connection between corruption and massive increase in corruption in new jersey. i think government jobs have grown five times the number of private sector jobs during the last six or seven years. maybe even more than that. >> it's more than that. in the last seven years under corzine for every one private sector job, 15 government jobs were created. it's huge. >> what would you do about it? basically, the point is, if you have that much government, i saw

this in new york with regulation upon regulation upon -- inspectors, all kind -- you have that much regulation, you then have corruption that comes into it because businesses start offering money, people believe it's part of it. in new jersey it looks like it's systemic. >> i've been saying this since i was u.s. attorney. one of the factors is is clearly the targets of opportunity we have. there are so many levels of government, so many people's in those levels of government and so many pops of money that are available for people to dip into that you have to reduce that. that's one of the ways to do it. it's not a silver bullet but one of the ways you can help reduce the opportunities for people to be bribed. >> how do you actually deal with the number of public employees? how do you actually reduce it? do you do it through layoffs? attrition? a combination of both? >> i think both. i think both. i think layoffs and attrition. we're in such -- next year the

budget jon corzine put forward this year, the nonpartisan office legislative services says this is one shot from gimmick and stimulus money. we're looking at an $8 billion deficit for fiscal year 2011. that's in a $30 billion budget, $8 billion deficit. you'll have to do layoffs, attrition, everything has to be on the table because we're in a huge hole. >> the trick, or at least perceived wisdom you do all of these thingsed in first year, all these tough things in the first year, did mcgreevey or corzine do that? i don't remember. did they do that in their first year, do the cutting and reorganization? >> exact opposite. exact opposite. i was just saying to joe, you know, in governor corzine's first two years, his spending -- state spending went up 20% in the first two years. he did the exact opposite. he did good time budget, a lot of spending, $350 million in earmarks in one budget at the same time he closed down a

government delayed sales tax, gave $350 million away in earmarks and we wound up indicting a couple people involved in that and sending them to jail when i was u.s. attorney because they were doing it to feather their own nests. >> i mean, taxes are not low in new jersey, business taxes are not low. i had anecdotal evidence of law firms buying companies that -- buying firms in pennsylvania because they're going to operate out of -- taxes are high. how do you close $8 billion, you're talking spending. what happens? school lunches, all these people that need the money are the ones that are going to get affected by this, like california. no sacred cow. >> there can't be any sacred cows but also there is enormous waste in the new jersey budget. we're not going to find $8 billion. we'll have to do layoffs and losses of jobs by attrition, downsize a number of people, consolidate agencies at the state level that are not doing their jobs the right way. we have to do all of that. in the end, as mayor proved in

new york, unless you cut the size of government significantly and then cut taxes, you're not going to have economic growth in new jersey. the top rate in new jersey now is 10.75%, gross income tax, 10.75% on individuals and small businesses. top rate in pennsylvania, 3%. we can't be competitive. >> nobody in the government's going to vote for you. i just want you to know that. appreciate you coming in. hope you come back again. >> i'd be happy to come. at the top of the hour, steve forbes, we'll get his thoughts on whether this market is headed higher or lower. the president's plan for health care reform and a lot more. we'll talk more about states in crisis, governor ed rendell of pennsylvania will talk about his state, the budget gap they've managed to close there. the dnc chair will sound off on health care reform as well.t benefits package aflac! it made a big splash with the employees yeaaaahhhh! find out more at aflac!... ...forbusiness.com (laughter)

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influential state governors and more storied franchises of its pastime. >> drilled to right field deep. there. goes. ball game over. see ya! >> "squawk box" begins right now. ♪ everyone's your friend in new york city ♪ ♪ and everything looks beautiful when you're young and pretty ♪ >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with carl quintanilla. becky will be back tomorrow. i know she's somewhere envious, jealous of missing out on this show. our guest host today, former new york mayor and republican presidential candidate rudy giuliani. futures at this hour, a little bit weaker. every day, like yesterday i was surprised that after, down a lot of the session and with the vichlt. xich vix, up, we're looking at dow pressure this morning. you would have to say some

results we have seen were not as good as the first two weeks. maybe lower than revenue, but viacom and coach were neither -- >> the guidance the first week or two were bright arer than the stuff -- >> you had to characterize it, yeah. a couple names in earnings central this morning, viacom did beat the street by a penny. revenue fell short, dropping amid, slower video game sales and fewer movie releases. mcgraw-hill posted 23% drop in profits, 28 cents a share. revenue was in line. but the company still lowering its full-year outlook hit by weaker demand for textbooks at schools, credit ratings on mortgages and complex debt. also the advertising for magazines, "business week" trying to get sold for a buck. coach offers a good read. the luxury goods company had earnings right in line. sales fell a bit short.

i didn't see the guidance out of coach, did you? >> no. different leather goods than what you would normally be. these are handbags, normal stuff. >> no handcuffs. >> no, nothing -- i can just see you readle et leather goods andw the glint in your eye. have you been in coach? they're handbags. they do sell some metro sexual man bags. >> interesting. >> do you have one? >> i do need something for the bottles for the babies. >> oh, you're showing you're -- you've proven yourself. you've got a couple kids. we've been spending the morning with rudy giuliani talking about health care to the economy, the future of the party and now we're joined by steve forbes, ceo of forbes and author. the last two weeks, steve, have been a little different than the first six months. have you felt that a little bit? whether it's the rise of the blue dog or -- there hasn't been a mid-term election but there's been some push back.

it almost looks like we're back to a divided government nen. there some checks and balances. >> it did. his moneymoon is is over. the amazing thing on health care, even though they brow beat the farmers, the insurance companies, the ama to go along with this thing or keep their mouth shut, this was a grassroots effort and that took them by surprise. what they did not anticipate is a lot of this stuff, a lot of issues in government are sort of wonky, nerdy, people know they're important but on health care it is personal. personal about you, your parents, your kids. and people start to get concerns about that, questions about that, boy, you've got a problem. and they thought they could just shove this thing through and -- >> who's getting the call? >> everyone in congress is getting the calls. >> everyone is hearing. >> they got the first taste of it on the so-called cap and trade or so-called cap and tax, it boiled back from there. on health care it's grown

exponentially. in the press conference he tried to slough it off. take my word for it, you'll keep your insurance, no, you won't. five years, even if you have a good plan, our plan will be gone. and then every day you get a bombshell. there was one the other day about medicare. they're going to allow bounty hunters to sue people in auto accidents in you're on medicare to recover money for these trial lawyers. this stuff just keeps cropping up. >> so you -- when you say grassroots, you're telling me that you know that these blue dogs and other congressmen are getting calls from constituents. that's what -- that's why the worm turned at this point? >> they're getting -- they're hearing from their constituents. they first got a little taste of it on cap and trade. >> the and the poll numbers. >> then the poll numbers. when you go into health care, you're going to raise health care, raise questions about whether they'll have benefits in the future? it will take more than a press conference to turn that around.

>> all right. that is all true, what you're saying but the decisions we're talking about are big, right, energy, policy, and at some point one would argue, someone in favor of change would say there's going to be tough decisions that are going to displace some american from the status quo. are we just postponing those decisions overall? >> the question is, where do we go? the current health care system has very real problems. problem is, we don't have real free enterprise in health care. it is a hybrid system. you don't get the kind of productivity innovation you get in other parts of the economy. so which direction do you go? do we go to socialist method we have in canada and england? cancer outcomes, we have much better outcomes in this country. or more free enterprise, allowing americans to buy insurance around the country, allowing the same tax breaks as businesses have, small businesses band together, tort

reform, $100 billion at least in there. you can see it in the newspaper where they're going to head. obesity is causing health things go up so they'll say, you can't eat this, you can't do that, we'll tax this, we'll tax that. >> you'll get -- you'll get democratic resistance in the opposite direction as well. do we wind up with a stalemate and we have forestalled yet again tough choices on how to fix the problem in this country? >> better to keep the bad status quo -- >> really? you think we should leave things the same? >> not leave things the same. i want to go in the free enterprise direction but i don't want to go in the direction they went in and that is socialized medicine. >> is there any chance they'll do any kind of free enterprise solution? i thought when president obama took tort reform off the table, doing something about the excessive costs, the doctors, sued, he made it an entirely political program. i mean, how can you ask republicans to be part of a bipartisan group when you take

tort reform, which is one of the major causes of expense in the health care system, off the table? shouldn't that be part of a whole reorganization -- >> well, that's one of things they have to learn. there's one thing you don't spin on a campaign trail. quite another when you're actually governing. when you say you want to have a bipartisan solution, then you make clear it's my partisan and you'll stand on the sidelines, no, that won't work. from the get go, the stimulus package, if he had gone to the republicans, he could have gotten 40 or 50 house members throwing a few crumbs after a demoralizing election and had something that had bipartisan support. nancy pelosi said no. conservatives don't like nancy pelo pelosi. why? unbeknownst to the president, she maxed out his credit card with stimulus bills. now on health care, where is this money going to come from? it's already been spent, thank you, madame speaker.

>> she undercut him, is what you're saying? >> inadvertently. >> not on purpose. do you -- are we out of the woods in the economy? i mean, can we now consider doing all these things right now? do you think that -- do you think that the president's priority is the economy at this point? or does he figure, you know, it's going to eventually come around, i'm going to -- i don't want to waste these crisis, i want to do these societal transformations -- >> part of the problem is in -- from his background, you could take the private sector for granted and do your other programs. but the national economy, you can't do that. if you don't deal with that, all this other stuff's going to go by the wayside. you have to deal with it. one of the things i think that's going to become apparent in the months ahead is this recovery will be a very jagged recovery. small businesses are still having a hard time getting credit. consumers are still having a hard time getting credit. the federal reserve didn't follow through on its promises to get that part of the securitization market working. so the credit markets are not fully working. they're recovering but not the

kind bowant recovery we should have had. >> still pushing for free choice, a lot of these things would you call it an assault on cap -- it doesn't seem like you're -- it seems like you're erroring are trying to make a society that you like and the losers are business and the economy. >> we haven't seen this kind of war in business since the 1930s. >> forbes is a capitalist tool. tool in a good way. >> i'll accept it. >> you feel there's a broad -- >> yeah, genuine free enterprise is the greatest creator, eradicator of poverty in the history of human beings. >> you call this an assault? >> they made it very clear. they want socialized medicine, they want massive tax increases on energy, they want to control more and more parts of our lives. and so the irony is, with this president n items of his

initiatives, the more he fails, the stronger he will be for re-election in 2012, because he actually realized his initiatives, it would be so bad on the economy, he would be out in -- >> he would win in spite of himself? >> look what happened to bill clinton. he tried to nationalize health care, got a setback and came back. we'll see -- >> what is your estimate, though, steve? do you think president obama is capable of a mid-course correction the way bill clinton was? do you think -- >> the big question. he's a i dechlt alog, much more than bill clinton but does he have the capacity or is he too brit toll make the supple changes when you have a cries? crisis, curveballs come your bay, how do you handle them? this is his first real setback. is he going to lick the wounds and say, okay, i'm going to make concessions here and there like bill clinton or is he going to be ridged and go down in flames?

>> you argue going from the senate in oval office in six years, you don't do that by burning bridges on the way, do you? >> on the one hand in campaign he made it clear to his base party he was as far left as you could go and using rhetoric to change the public. now, the question is, going from the rhetoric to the reality of governance. you can't spin your way through it. he should have learned that from his press conference. he set himself back. >> did you just say fixing the economic crisis was a matter of showing up? the past six months have just been -- >> no, no. winning the campaign, carl, and winning the campaign. after september 15th when we went in near cardiac arrest, all he had to do -- that just turned people against republicans generically because bush was in the white house, so all obama had to do was show up on election day, do well in the debate, which he did, and he would win. he was smart enough not to get in the way of that tidal wave.

>> since that inauguration, with joblessness adding up, but at a slower pace, some pulse in housing, do you think he's done a decent job in his first six months? >> no. on the credit side, the mark to market, he should have gotten rid of that from day one. they've done nothing on the short selling. on the credit system, ben bernanke -- lincoln used to called generals who weren't aggressive they had the slows. ben bernanke has the slows and it's been a disaster there. geithner in terms of financial reform has not done well. what they should have done is take paul volcker, put a group of gray beards and said, come up with something and that would have had an aura of real bipartisanship. he didn't do it. >> isn't the whole -- >> by the way, mr. mayor, if he was interested in real stimulus, instead of this grab bag bill he passed, he should have cut the payroll tax in half for 18 months. that would have given people money immediately, reduced the cost of keeping people on

payrolls instead he goes for this monstrosity -- >> barring something unforeseen something happen, isn't the obama president all con isn't again on the economy? >> yes. >> if it recovers, in spite of him, he'll get all the credit, and if it continues to lag,  he'll get all the blame, probably more than he deserves. i mean, is that the way it usually works with -- >> yes. everyone -- >> it's basically a one-issue president? >> yes. if the economy isn't working the other issues don't much matter. he also has another challenge in front of him and that, of course, is iran. the israeli is not going to stand on the sidelines forever on that one. >> the defense minister already -- >> the next 12 -- that's why he put obama as defense minister. if they move it will be thoroughly planned, it will be in the next 12 months and he has to be on top of that otherwise

it looks like he's not mastering the job. >> don't you think there's a heck of a debate that goes on between hillary clinton and barack obama? i remember during the presidential campaign, she was in favor of not negotiating with ahmadinejad. i think she called him irresponsible and immature for wanting him to do it. she was in favor of keeping the military option on the table as a way of forcing the negotiations to go further. >> well, in effect she said it again on sunday, in terms of the iran can't become a nuclear power. i hope the white house was listening. >> the vice president was listening. >> steve forbes, thanks. >> thanks. >> great to see you. >> there's never enough time. when we come back this morning, the future of financials, ge capital holding court with investors today. what's next for that unit and what is its future tell us about the overall state of the industry?

ge capital is holding an

investor meeting set to begin in a few minutes. mary thompson is here with the inside line. it's a web cast? >> it's a web cast, a scaled down version of the six-hour deep dive presentation ge made about its finance arm back in march. once the source of half of ge's profits, ge capital is the achiles heel, the loan loss provisioning and funding at the unit which is involved in everything from mortgages in the uk to mortgages here and aircraft management. gechlt e's aim is to shrink profits to 30%. but as it does this, investors and analysts have a lot of questions. some of which they want answered today. questions like ge capital's real estate portfolio, what are the occupy occupancy levels, what are the lease rates, is the market improving in countries where it operates. they want more on the credit cycle, what stage we're in, could it lead to higher losses in the lending portfolio. what about funding, ge met it's long term funding requirements

for 2009 and it roughly halfway there for 2010. but is it really government backed programs insuring debt, with does that mean for funding costs. he want to know about regulatory reforms. proposals sent to congress might force ge to break off. what is. can the company expecting? it comes on the heels of second quarter reports, falling 49%, dropping 80%. the stock is down 50% -- over 50% from last year. it's more than doubled from the march lows when concerns about ge capital hit a peak. this they lost their aaa rating and to reduce capital in funding profile, as to the second quarter also cut use of commercial paper in half from the peak, set aside $50 billion in cash, cut leverage and says credit costs at $5.1 billion year to date are running ahead

of the federal reserve bates case. those are some questions they want addressed today on the web cast that starts in a couple of minute. i'll have updates throughout the morning. >> there are a couple headlines right now. saying there's no need to raise funds, even in an adverse  scenario but saying most of ge capital performing as expected but below the fed base case, as you talk about. >> yes. >> and the question will be -- >> so they want to know, where is it happening, what parts of the business are more impacted by that, you know, is it the commercial loans, is it the consumer loans because some of them were in -- in the u.s. there was -- actually delinquency rates were lower and they want more information on that. it's supposed to take two hours. not quite as detailed as the six-hour march presentation, which was something i'm not sure they were planning on doing again but there's still a need for it because the markets are -- investors still have a lot of questions. >> you'll take notes? >> yes. i type, actually, as i listen to it. >> you can do that? you can get the web cast on your

computer and still type and take notes? >> where have you been for the last ten years? yes, you can do that. >> do that and then report later during the day on -- >> i'll be on ""squawk" on the street" in about 45 minutes. >> this is a good idea. stay on that. >> i will. i will. thanks for your support. >> you're welcome. >> mary draws the short straw, covering ge ge. >> you need to be very tough and not that you always don't want to be accurate, but they will -- they'll get on you if you say a word that -- >> maybe they won't be watching. >> oh, yeah, they watch. they watch. >> thanks, mary. >> sure. when we come back this morning, pennsylvania governor ed rendell, not just that, but new york yankees' president, randy levine, and new york's former mayor rudy giuliani. price of crude down 60 cents.

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dow futures are lower as some the results we've gotten on the earnings front are not as strong as the past couple of weeks. of course, the dow's had quite a run. best two-week gain in -- well, since the beginning of the bull market. bank of america plans to cut 10%

of its 6100 branches citing a shift in consumer preferences to mobile and online banking. ken lewis made that announcement to investors in charlotte last week. the journal says wells fargo has no intention to reduce its branch network. jpmorgan plans to add 100 or so new branches a year for the foreseeable future. when we come back on this tuesday, pennsylvania governor ed rendell, the 50 state on the front line of the nation's financial crisis. we'll talk about taxes, real estate, the ongoing health care debate. he'll open the door to the keystone state's economy. what do baseball and wall street trading have in common? a lot more than you think. why business on the diamond tells investors an awful lot about consumers and the state of our economy. we'll talk to the president of the yanks when we come back. thursday, a nation diagnosed with a severe economic illness. what's the right treatment?

an answer only "squawk" can provide. government leaders, health care industry insiders and doctors and patients on the front lines. a "squawk box" special thursday starting at 6:00 a.m.

welcome back to "squawk" here on cnbc, first in business worldwide. one hour away from the opening bell on wall street. our guest host this morning, what a treat, mayor giuliani is with us for a couple of hours. we've had had a couple hours. steve forsch was fired up. the yankees may be leading the a.l. east but if new york doesn't get out of slump some worry the bronx bombers may have trouble finding those to fill the new stadium. president of the yankees randy levine along with the player, whom you know very well, right? >> the mayor is my hero. he's the best. i'm glad to be on with him and ask all of you guys today. >> it's good to see you. >> let's first find out what has happened on the team, because since the all-star break, i mean, it is -- it's been astounding what's happened. what did you do?

>> i think a lot of credit goes to our whole organization, our general manager brian cashman, our manager joe girardi and the players seem to have come together, they're playing well, player hard. it's a long season. there's a long ways to go. right now they're playing very well and i credit the leadership of brian cashman, the jo joe girardi and the coaching staff and the players. they're playing together well now. >> is this the season you envisioned at the start, mayor? >> always. this is what the fans expect. they've lost only one game since the all-star break? >> that's right. we're 10-1 so we have to keep it going. >> 2 1/2 ahead of boston, right? >> so far, yes. >> you want to talk about ticket sales? i think you're going to start selling for next year, is that right? >> we're going to start selling soon for next year. we've been very successful. we've sold over 90% of all of the tickets available for this year in our new stadium, which as the mayor will tell you is an

absolutely beautiful stadium. it's lived up to all of our expectations. we're very sensitive to the economy. we're reviewing everything and looking to see where we can be better and where we can improve. in a couple weeks, hopefully we'll be prepared to come out with our new plans and programs for next year. >> when you say renewing everything, what kind of metrics do you look at to determine whether the new york population is ready and able to spend money and how much money on baseball tickets? >> well, obviously, we look at our attendance. you know, we look where the tickets have been sold, where the demand is, where there are waiting lists, where there are some soft areas. >> you look at home valuations? do you look at jobless rates? the fact that salaries are up at banks, that kind of thing? >> we look at everything. we look although the entire economy. we know our fan base pretty well. we do a lot of surveys, a lot of outreach and we try to put it all together and come to the best conclusion we have.

we talk to a lot of people. >> would you say the new york consumer -- where would you put them right now? where's their state of mind? >> well, i think new york consumers, like everywhere, are very cautious. they want to get the biggest bang for their dollar. but, you know, people love baseball. they love the yankees. they love baseball. it gives them hope. it gives them something to get up every morning and pull for. so that's -- you know, george steinbrenner's philosophy and the family's philosophy is put the money back into the team, give new yorkers and yankee fans all over the world a great product, give them something to feel good about and they'll come out and watch the ball club and watch the club. our ratings on the can yes network is the highest we've ever had. >> how is baseball affected by the recession? in new york there's a certain insulation but how about in the rest of the country? are other teams suffering? >> last i looked, mr. mayor, i

think our attendance is pretty good. i think we're about 5% off from last year butd but obviously our stadium and citi field has less capacity so baseball's holding its own. we're in an industry, consumers, fans spend their money. we have to be very careful. and it depends on which market you're in to determine. it's very different. so far baseball's had a very, very strong season. >> there are only 23,000 last night in tampa bay. i think that's right, if i recall the broadcast correctly. >> i think they had 33,000 last night. there are a lot of yankee fans down in tampa -- >> the average is 23,000. >> that's right, that's right. >> so the yankees turn out to be -- the yankees and red sox are the two big draws on the road, rye? >> we've led -- we've led the league in road attendance for many years. we're leading this year. the red sox are right there with us. >> who are we going to acquire? >> we're working -- >> a couple more days to the deadline. i know the yankees will pick up

somebody, even though we're ahead. >> we're working very hard. right now nothing to report. but brian cashman is working really, really hard -- >> washburn? >> i can't comment on specific players -- >> if you don't give the skoo scoop the mayor, no one's getting it. >> i'll get in trouble. we don't know who's available. our history is we're always very active. we do all of our due diligence and we'll do everything we can to try to improve the team if the right deal is out there. >> let me ask you this. when you -- as the head of a team that's doing well, and you look across the river and you see a team with injuries, with off the field distractions, just a rough season overall, do you look in the rearview mirror and say, you know, good luck or do you feel bad at all? what would you say about the mets in your own mind? >> well, you know, we really worry about ourselves. we don't really worry about

anybody's problems that really don't directly affect us. we're friends with the owners and the executives of the mets. new york city's a great city. it's enough for two baseball teams. we leave them to sort out whatever they have to do. you know, it's a good organization. but we really just worry about the yankees. >> randy, always -- we have a couple, obviously, big mets fans here, el erian comes to mind. there's a fair amount of pain, joe. >> since the all-star break, randy, i think the reds are like 2-9. i'm a reds fan. every day i look, five or six straight and it's just awful. but, you know, you guys try to forget '76 so quickly, don't you? sweep, you forget about the big sweep! you forgot about that, don't you? >> there's a lot of years we try to forget about. >> randy, come back soon. >> come up to the ballpark, please. we would love to see you. great ballpark. absolutely ballpark.

>> we should do the show from there. >> we're two games out, we're like nine games out. it's just been horrible. i was a little jealous. >> you asked him about the mets. i believe the feeling is for the grace of god, all of a sudden injuries are so much more a part of the game than i remember back in the '50s and '60s. you can lose three or four players and then these distraction problems, any team, yankees, mets, any team. >> starting pitching is -- i mean, the relief is fine it's our starters. you're spotting guys eight, nine runs. coming up, unlock, the real story of the u.s. economy. we're calling in a locksmith. the governor of the keystone state, a democrat and he has some big shoes to fill today. i hope he's warmed up. >> he's a good clean-up hitter. >> all right. today there's a way to save more for retirement,

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we know the nation's economy is hurting and states from coast to coast are feeling the pinch. pennsylvania's budget impasse approaching its fifth week so the pressure is certainly on for our next guest, the keystone governor, etd rendell joins us from -- i believe, new york. >> no, i'm in philadelphia. the president will be in philadelphia in an hour. >> so far we've had steve forbes, chris christie, mayor rudy giuliani is our guest host. >> so we're coming to you.

big shoes to fill here. >> you'll be a great clean-up hitter. you can handle all of that. >> thanks, rudy. out of a simple request, can we just talk about baseball? >> it could be a philly/yankees world series. >> i think there's a real chance of that. >> i guess, what do you want to tackle first? i mean, we've talked about so far the health care debate over the last couple of months -- >> i would love to talk about that because i think in the long run, i think we are going to get out of this economic dilemma we're in, but in the long run, health care is the single most important thing confining the country. >> where -- how do you think this is going to wind up? we don't know anything that the finance committee is cooking. and they say that's what's happening on the senate side is important. >> well, i think that's true. and i think there's a real bipartisan effort going on in the senate finance committee. i have a tremendous amount of respect for senator bachas and senator grassley.

they want to get it to work. and it has to work. i mean, consider, guys, just two statistics from pen. . in the last seven years health care inflation has gone up 75%, while overall inflation, 14%. in the last seven years, 560,000 pennsylvanians have lost employer-based health care. five more years of that and we'll have no employer-based health care. the system has to change. the president is right when he says the worst alternative is the status quo. >> but conrad is talking more about co-ops than a public plan and john kerry is talking about taxing some cadillac plans. would you go out and say a public plan, as the president envisions it, is probably off the table? >> no, i wouldn't say it's off the table because i think by and large the american people -- i know i've seen all different types of polls, but the american people support it. they're right about one thing, there has to be competition.

what happens in most states, i don't know what it's like in new york, i'm sure rudy can tell me, but in pennsylvania we have four, five different regions and one health care provider. and that provider sets the tune. they set the reimbursement levels for doctors and hospitals and they're both in trouble because those reimbursement levels are low. they, in fact, tell us what care we can get. they price it. it's almost a virtual monopoly. as a result, costs are extremely high because of the lack of competition. now, you know, it's interesting. the opponents of the public plan argue both sides of their mouth. on one side they say, the government can't run anything, it will be ineffective and inefficient. if that's so the hmos have nothing to worry about. but i think there has to be competition. i know the facts. medicare and medicaid aren't perfect but the administrative costs for those government-run programs are a fraction of what the administrative costs are to the hmos. >> aren't you afraid, governor,

a big public plan that has to be financed off cost measures, reduced costs, isn't it going to raise your burden of medicaid dramatically? >> there's a huge danger in that. the mayor is absolutely correct, guys. one of the plans that senator bachas he can committee was considering when medicaid went from 100% to poverty or 200%, to lay those costs off the state, to make the states have bond issues to cover them and we were going to get some form of reimbursement by reduced pharmaceutical costs but some states have already negotiated those reduced costs. that would have put a tremendous burden on the state. this is not easy. i understand the president's desire to get something done. i understand what he said about deadlines. but i think it's good that we're going to have this time period where good and decent people are going to have a chance to work on this and get it right. we can pass it by the end of the fall. that would be a great achievement for the country. but let's get it right. and i have confidence there are people out there who aren't

trying to make ideological points. i think you'll all agree with me, when when that senator from south carolina said, this is going to be the president's waterloo, that's a disgrace. that's a disgrace. this is the insing the single m important domestic issue and we shouldn't uses it for political points -- >> the other way -- >> governor -- >> it's right over the plate. >> you would never hear that from me or most democrats who care about getting people covered and getting good access for care. we can tall talk about, what's the rush? le well, if you're a cancer patient and you don't have health care and everywhere you go you're denied because you have a preexisting condition, you're in a rush. if you're someone who gets dropped by your health care plan because you get sick, for you it's a pretty desperate thing. if you're one of the, whatever it is, 30, 40 million americans who don't have health care and you worry about it every single night, there's a rush. >> but the tradeoff may be the

government will start dropping people in order to afford the 40 or 50 million more people that they're going to have to put on. in fact -- >> rudy, that's a possibility. that's a possibility. but you know there was a big expose about a year or two ago. how many people in the hmos, their sole job is to find ways to deny coverage. that's their sole job. >> it looks, in the house bill, like there is going to be a government czar, whose sole job will be to cut people off from medicaid and medicare, particularly elderly people. >> i don't think that will be the eventual outcome. >> i hope not. >> like i said, i believe there are people -- i have a great deal of confidence in senator grassley. and i hope they'll work with the president, the administration and get it right. we need to get this right. it's the single most important challenge this country faces. >> governor, when we hear the president say -- i've heard him use the same analogy that you talk out of both sides of your mouth, that the government can't do anything efficiently, how can they compete with the hmos.

you know they wouldn't pay taxes. they're able to set pries. it's not a fair apples to apples comparison between what a government plan can do and what a private plan can do. >> well, there's a point there, too. still, i think the basic thrust is there. let me say one other thing. there's a myth going around, and i've heard a number of people say it during this time. in fact, the two doctors who are senators, that we have the best health care system in the world. well, folks, we don't. we spend the most on health care of any country in the world but consider that 41 countries have longer life expectancies than we do. we're 29th in the rate of infant mortality. we're 17th in the rate of heart disease. we're 14th in the rate of cancer. 24th in percentage of people who die from respiratory diseases in all the countries in the world. we don't have the best health care system. we spend the most money. we have to fix it by people who

will put aside ideology, put aside political point and -- >> where do people go in pennsylvania outside the united states? i think people come to pennsylvania for your great hospitals. >> no question. >> they come to new york and minnesota and -- nobody goes to england, canada -- >> rude y there's no question that if you can afford it, america has the best hospitals and the best doctors. >> right. so we don't -- so we want to make sure we don't ruin that. >> absolutely. we're ruining it right now. how do you explain the statistics i just ran off? >> we have horrible habits. >> it's not just habits, though. it's not just habits -- >> life expectancy, we don't take three months off in the summer to go relax. you know, we have a little bit of stress because we have to earn a living over here. we're not living off the state. >> and we're more productive than anyone else. >> but part -- look at the mayor. the mayor has more stress in eight years than anybody in the history of this -- >> and so do you.

>> the mayor looks great. i'm not not a poster job -- >> now you have an easy job -- >> i'm not a poster child for fitness. the mayor is. some of it can be attributed to our habits. a lot is attributed to the fact that some people are uninsured or underinsured. that's not a acceptable proposition for the united states of america in 2009. let's get it done. let's get it done. and i, frankly, don't care what it is. you know, john kerry had a good yt in the 2004 campaign and i would love to see it. what's the biggest cost driver to a business? let's say sa i'm a business with 100 employees. my biggest cost driver are the four or five employees who are going to get really sick and run up several hundred thousands in bills. that causes my premiums to go way up. john kerry said, let's do stop loss. let's have the government be a reinsurer. so if it's over $50,000 in loss, the government picks up 75% of it, the company picks up 25%. be that reinsurer.

if you can take away those severe cases, it will be level down prices for health care for everyone in that firm and maybe that firm can continue to offer people health care. >> there are some things going on. >> absolutely, absolutely. we should find them out. look, i am a good supporter of the president. i think he's trying to tackle the country's problems. but here, legality all take a deep breath. let's get it right and let's get it done. >> governor, always a good time. we hope you'll come back with the mayor. >> i love the mayor. love the mayor. i would have endorsed him in the republican primaries but that would have killed him. >> nothing could have hurt even more. >> there you go. i've been there, rudy. i've been there. >> governor ed rendell. when we come back, art cashin so don't go away. when a major hospital wanted to add on

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time now for the "trader's edge" joining us is art cashin, director of floor operation at the ubs. the bulls won, 9100, all bets are off. i don't know what's happening. you have any idea? >> that's pretty accurate. what i would guess, joe, we are overbought, we're entitled to a little bit of a pullback.

i thought it would extend into maybe august 5th to august 8th somewhere in there, right around there. then see how they come out. pullback is going to be important. will it be shallow? will it lead a lot of people to say oh my god, is that all i'm getting? that could lead to a very explosive follow-up rally with people saying that. this market is not going to allow an entry point. i got to get in. if it is a bit more severe, it will raise some questions. do doug kassen made a good call on the march rally, taking money off the table, a lot of pros are looking for a pullback here. >> when are you taking some time off? and your budde dyes? is it starting already or coming in august? >> it's not that it's been busy, joe. >> no. >> the volume has been light. so we've had kind of the summer doldrums all the way through. i just think august will be different. a lot will depend on how we look

at what the market does by august 5th or 6th or 7th. >> but it gets even quieter in august. doesn't it? >> the dog days. things pull back. but you know, this has been a strange market t has divided many of the customers. >> that's when the evil manipulators get involved when no one is around. >> actually, i think they just step things up. >> they're always around. all right, arthur, thank you, appreciate it. see you later. >> when we come right back, on the "squawk" stump, some thoughts from rudy guiliani, don't go away. announcer: the perfect hotwire getaway--

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time for the two minute drill with our guest host new york city mayor rudy guiliani. it's been great having you. >> a lot of fun. >> we've got bonuses at goldman this year, are going to be pretty good. salaries at banks are going back up. some would argue is a good thing. is that going to come back to haunt us when the rest of america find out they paid taxes to save these banks and then they paid a lot of money to keep what they call key talent. >> you know,