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okay. welcome back to the floor of the new york stock exchange. time now for the closing countdown. consider where we were yesterday, marking the one-month anniversary of the start of the summer rally, asking if it was the start of the summer sell-off. today the market is up 117 points. a fed statement that was largely unchanged, certainly it's off the best levels of the day but the leaders today definitely the home builders, financial strokz strong and what can you say about technology? the nasdaq very strong as tech led the way. there's the bell. and "the closing bell" continues in just a second.

it's 4:00 p.m. on wall street. do you know where your money is? welcome to "the closing bell," everybody. i'm rebecca jarvis in for maria bartiromo. here's what we're following at the close. the summer rally roaring back after a two-day sell-off thanks to strength in financials and encouraging earnings from macy's. the stock really picking up steam after the federal reserve said the economy is leveling out and announced it will slow the pace of its program to buy treasuries. and toll brothers strong results giving the home builders a boost.qú coming up, toll brothers ceo himself will give us his outlook for the housing market. here's how we finished the day. up side day we ended up the highs of the session but still up 1.27% on the dow. nasdaq the big gainers there the technology names. 1 1/2%. 28 points up side.

and the s&p 500 the overall market up more than a full percent, 11 points higher. let's get more on today's action. bob pisani our eye on the floor at the new york stock exchange. hey, bob. >> hello, rebecca. as you mentioned, pretty much status quo on the fomc statement but a little bit of an upgrade on the economy talking about economic activity leveling out. that helped a little bit. let's take a look at some of the big movers. i'm with you, rebecca. i talked all day about toll brothers. the important thing is the company reported orders to buy homes increased 3.3% year over year. that's the first one in four years. one big reason was the cancellation rate only 8 1/2% that's magnitudes of orders better than the quarter before and the do quarters before. that's good news here. at the new high of the year for toll brothers. financials, volumes were light here, i don't want to make too much of it but after a couple days of pressure we saw nice moves up in the insurance company. citi, good move up, again, light volume. regionals lagged a little. keycorp was on the strong side. how about tech?

applied materials talking about improved demand. the third biggest pc maker in the world, based in taiwan, they talked about improved demand in the notebook market. all the big demand was in the tech market. it was interesting as they talked about an upgrade to the economy a little bit, the fomc we saw some cyclical groups moving, and i mean like the hotels. we don't normally get 4% moves in the hotels but a lot of big names were in that category. finally i want to note two interesting ipos today. you saw me talking to the ceo of embeon. medical billing company. they went fub today. priced at $15.60. a and as you can see they ended up for the day. starwood capital pricing at $20, the company looking to buy debt that was used to purchase commercial real estate. that stock ending at $20 which is what it priced at last night. >> that can be a win in this kind of market, bob.

thank you so much. we appreciate it. all right. the federal reserve keeping interest rates steady but the central bank says economic activity is leveling out. cnbc's hampton pearson is in washington with the details. hampton, always busy on fed day. >> yes indeed. and as you and bob were just talking about, the open market committee tweaked what it said about the economy since its last meeting at end of june. it reassured market and fed watchers about the future of monetary policy and it provided a date certain for ending at least one of its asset purchase programs. here are the highlights. as we mentioned, economic activity's leveling out. conditions are likely to warrant exceptionally low levels of the fed funds rate for an extended period. inflation will remain subdued for some time. the purchase of $300 billion in treasury securities, the fed anticipates the full amount will be purchased by the end of october. now, while financial markets have rebounded, leading economists and former fed officials say the key to a main street recovery is jobs and a rebound in consumer spending.

>> i think it is important because, again, unemployment is still a serious problem and it's growing. more and more people continue to lose jobs. even though it's slower. realize we've got to be creating about $130,000 -- 130,000 jobs a month just to keep the labor force growth. i think too many people reacted too positively to the drop in the unemployment rate when it really was just people getting discouraged and dropping out of the labor force. as long as people are continuing to lose jobs, there won't be an income foundation to support consumer spending. >> so the fed open market committee saying the economy is leveling out after 20 months of recession and it will extend the time but not the size of the program to buy long-term government securities. rebecca? >> thank you, hampton. for more on the fed decision and the markets let's get to our market panel. dan cook, senior market strategist at i.g. markets. david tice, bear market strategist at federated investors. and kevin flanigan, fixed income

strategist at morgan stanley smith barney. great to have all of you guys here today. and kevin, let's start off with you. anything you heard today that changed your view, that makes think differently about the future and your market stance? >> no. i think the two important takeaways was first they continued to leave the language in there that they're not going to raise the funds rate anytime soon. so when we get these less bad employment reports, let's not watch fed fund futures. let's listen to what the fed's trying to tell us. the second aspect is i think the fed is putting to rest finally any thought or consideration they're going to add to the treasury purchase program, follow in the bank of england's path or anything like that. those are my two takeaways. >> david, you think this is a false rally and this leveling out concept brought out by the fed-s that baked into this number? >> we think leveling out is the key word and the green shoots are not indicating a v recovery, it's really an l recovery. and things are getting less worse but that doesn't mean

they're getting much better. and this market's selling about 22 times strategists' eps for '010. this market's very expensive and we really have not seen a turn in terms of the economy improving much. >> under an l-shaped type recovery if a number of companies out there are forecasting heightened earnings you're saying that is already what's baked into the stock market prices? >> well, eps estimates were ahead of expectations for the second quarter. however, they were still down about 28% or so year over year. so we don't see a great deal of growth. and in terms of 22 times '010 earnings, markets don't bottom at those kind of levels. >> dan, is leveling out just simply stabilization in your view? and is that already what's baked into the pie here? >> it is stabilization, and i think essentially mr. bernanke was saying today, and this was a very carefully crafted statement, essentially saying yes, we're still up a creek but now we may have a paddle. we're not out of it yet.

i do think the market has run up well past where we're at. if we continue this way, what would we see the dow at, 16,000 by the end of the year? so this rate has to slow. i would expect a bit of a correction, pullback. when that's going to happen is anybody's guess. i was happy to see that the fed -- my guess was they were going to halt purchases to see how it would affect the market. they probably took the less shocking approach. they're going to slow down the purchases. >> they hedged the statement. >> exactly. >> dan, what do you do in light of that view? >> i'm still pretty conservative. i still like the bigger names out there. i don't like the financials at all. i think they've had too much of a massive run-up. i don't think the overall financials are -- the financial balance sheets are there to support it yet. we've got a lot of consumer credit constraints, small business credit con staints strants. employment is still the huge situation. until we start to see some improvement there, which looks to be a long way off, this rally should be stymied relatively soon. >> david, they talked about the fact that rates are going to have to remain low for some time

here. does that in any way shape your view about inflation? the fed clearly doesn't think it's an issue, but we have seen oil prices -- come up along with this stock market rally. >> i think the key thing to look for, rebecca, is the dollar, and if the fed's not going to be there buying treasuries and the future and rates stay low who's going to keep showing up at these treasury auctions? we have $2 trillion of additional debt due to this stimulus and unemployment, et cetera. that's a heck of a lot money. used to be a few hundred billion dollarses with a lot of money, now we're throwing the t word around. >> absolutely. quechb, what's your take in terms of what you doit rue ghoichb this market scenario and what the fed told us today this idea of leveling out maybe it's stabilization or maybe it means a little growth? >> i agree with what i just heard, that you're losing an incredible buyer in the treasury market that's just going to be going away now. 300 billion, even though it's not matching 2 trillion, it's still a supporting factor. that and inflation expectations that's my concern. not the whites of the eyes of

inflation but expectation. so i'd be in the front end of the market the two to five-year area. >> so you're looking at some of these momentum trades on inflation expectations. would you look at oil in would you look at china? would you look at the brick? >> yeah. i think for some of these companies that could benefit a stronger than expected recovery and perhaps some inflation plays those could be some areas to take a look at. >> david, what do you think right now? >> we think this is a false rally. we're right up against this 1,011 level, fibonacci level, it's very likely to hold there and possibly break. we would rather be short. we think resource stocks are the place to be to help offset the decline in the u.s. dollar. >> dan, when you see the rotation into cyclical type stocks like we saw today, do you ride that momentum out as an investor or do you just stay away from it, hold on to what you have in the longer-term view? >> for me i'm holding on to the longer-term view. that momentum can shift on a

dime. and i'm not saying that i would short anything, but i'm definitely carefully monitoring all of my long positions and getting ready to pull the plag when it does turn. >> thanks so much, guys. dan, david, kevin, have a great afternoon. it was great to see all of you. >> thank you. >> here are some other stories we're following on the "closing bell" ticker right now. foodmaker sarah lee narrowing its fourth quarter loss to $14 million after losing $272 million a year ago. excluding charges the company earned a better than expected 29 cents a share in the first quarter but the company forecasting 2010 revenue and profit will miss analyst expectations. you take a look at those sara lee shares on a very high up market day you do see them down 10%. furniture maker ethan allen swinging to a 17 million fourth quarter loss but excluding a big restructuring charge the company lost $7 million matching wall street's estimates. looking forward ethan allen expects to see benefits from its cost reduction in fiscal year

2010. and that stock got a bit of a bounce on the news 2.7% to the up side on the day. meantime, women as parol maker liz claiborne second quarter loss widening to $82 million missing wall street estimates because of the 29% drop in sales. also forecasting third quarter same-store sales will fall by as much as 25%. those shares on the day roughly down about half a percent. lots more on "the closing bell," folks. next, forget politics. we'll tell you what may be president obama's biggest anniversary when it comes to tackling health care reform. and then later, the inside school on the health of the housing market with an exclusive interview with the chairman and ceo of toll brothers, bob toll. plus, it's one area, one area of the mortgage market that banks have pulled out from in the h. in the past couple years. so why is citigroup using billions of taxpayer dollars to get back in right now? we're going to tell you what it is and why some say it is risky business while others say it is good for homeowners.

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welcome back. taking a look at today's business headlines, the commerce department reports the u.s. trade deficit widened in june to $27 billion because of higher

oil prices but that was actually less than expected because of a 2% increase in exports. the trade deficit is now on pace to end the year at the lowest level in a decade. the national association of realtors reports existing home sales rose 3.8% in the second quarter compared to the first quarter thanks to sales of distressed homes and first-time home buyers taking advantage of an $8,000 tax credit. but median home prices fell a record 15.6% on a year-over-year basis. meanwhile the mortgage bankers association reports mortgage applications tumbled 3 1/2% last week as interest rates jumped to the highest levels since june. coming up in an exclusive interview the ceo of toll brothers tells us if he thinks the housing market is finally hitting a bottom. and passion is epitomizing the health care town hall meetings taking place across the country. whether in favor or not, citizens have shown angers, others fear of what the health care system will likely should legislation get passed.

so it was overcoming the fear factor the biggest challenge for the president in howard dean is the former governor of vermont and dnc chair, a physician and author of "howard dean's prescription for real health care reform." also with us michael frank, vice president for government afarsz at the heritage foundation. it's great to have you both with us. mike, i just want to kick things off with you. where do you see the biggest skept siz snm who's it coming from and around what issue right now at these town halls? >> well, it's really plural. issues. this seems to be a nice tidy health care debate and instead what we have is a number of debates about spending and deficits and taxes and job security, even abortion, privacy rights, personal freedom, and there's a lot of different currents that are colliding together not only in these town hall meetings but around kitchen tables all across america. >> governor dean, what grade would you give to the administration for meeting those

questions head on? >> i give them a b so far. the president of course now he's getting out and he always gets an a, i think. look, the truth is these are legitimate issues but they're all spun up by the right. the folks that are going to these town hall meetings and are yelling and screaming at the congresspeople never liked obama in the first place. i bet you there aren't very many that voted for him. i think most people are being told a lot of things that aren't true about the bill and they're being encouraged very vigorously by these right-wing e-mails and so forth to go out and shout down their congress people. i don't think that contributes to a productive dialogue on health care. this health care bill i think is a very solid, decent bill. it gives the american people the choy about how to change health care and what you've really got is the insurance companies versus the american people here. >> governor dean brings up, mike, this idea that there is some misinformation out there. the way that the administration has handled that misinformation

has actually in some cases fanned some of the flames. do you think in terms of the grade you would give the administration that they're doing at least enough to combat some of these issues? >> i give a much higher grade because in large part what the president's been doing is issuing a great deal of assertions. he's asserting the health care plan will do a, and b and c, if you like what you have you can keep it and so on. and he has to start plan explaining, backing it up with explanations because the people who are angry, and a lot of them are independents. a lot of them are senior citizens. they're reading the bill, detailed analyses of certain sections of the bill and they don't like what they see, they're scared silly. and he's just out there mouthing the same bromide's over and over again. he's got to get a transition into something more substantive. he's not there yet. >> governor dean, it was an interesting reaction in yesterday's town hall that president obama is saying ups

and fed ex is doing just fine, it's the post office having problems. one of the problems the fear angle brings out is people are afraid of government intervention when they fear the private sector might just be able to do a better job. >> see, that's the problem that makes this so ridiculous. i would disagree with michael. i think very few of them have read the bill. people on medicare standing up and saying don't let the government interfere with my health care. well, medicare is everybody on 65 has health care through a government program, it's called medicare. we need a really debate, but we need a debate on the issues michael raised aeshler on. i think those are legitimate debates. privacy and how you're going to pay for it. unfortunately, we're not vague debate on those issues, we're having a debate between people who never liked obama in the first place-v kind of been cranked up by the anger machine the republicans have used for decades. and we need to have a real discussion about these issues. >> do you think the president did a good job, governor dean, of bringing people to look at those issues? yesterday when he contracted

private organizations that he said were doing a good job with public organizations. >> i didn't see the telecast, so i can't comment on his yesterday performance because i didn't see it. >> all right. it's been something some folks have been focusing on at this point. mike-n terms of where you see this debate going into the future, what's going to win out here? >> well, on the most office point real quickly we're all familiar with the term snail mail. and the idea that you're going to use this as a model for health care reform suggests that there might be the snail mail equivalent in health care, like lines and rationing and delays. i'd suggest they find a different analogy in terms of messaging. where is this debate going to go -- >> in terms of what people are also afraid of there's this question of freedom. people are afraid they will not be free to have choice in all this. >> right. >> just a fundamental core concern that everyone has. of the father who confronted john dingell about his son who

has cerebral palsy. they're very much afraid of what lurks in the details of thousands and nouds of pages ever legislative text. and it's clear most of the members at these meetings haven't read, it digested it wet. there's the sort of a lot of the fear ha can be abated. way little substance and a little explanation that allows the vote to come to their own decision like that. >> governor dean? >> i think john dingell needed a chance to answer the question. this is a bill about choice. you can have a choice if you're under 65 which you don't have now, which is to have what people over 65 do. if you don't want to take that choice you don't have to do it. but two cores of this bill. one is you get a choice. if you like what you have you can keep it but if you don't like what you have if your son has cerebral pawsy and you can't get insurance because of that, you now have another option. secondly, 70% of people want to have that choice and if they're denying it it's because the representatives vote for what the health insurance companies

want instead of the american people. >> there's also this fear of rationing that perhaps you'll have a choice but it won't be the same type of choice you that already have right now if you already have medical care and even if your company our opt choose to opt out of what would be a public choice, everything will be more narrow because of this public idea. >> there's no evidence forever that at all. there's no rationing in medicare. your choices get broader. right now you're stuck with private health insurance. they don't give you health insurance if you're stick. they put fine print in the contract to take it away if you get sick. if you lose your job you may lose it. if you get it back aufr leave your new job you may not be able to. and you can't leave your job because you may not get your health insurance back. public health insurance everybody's insured, it's the same price for everybody, whether you have work around. i think female can have that

choice. if not they can go back into the private sector. >> governor dean, how does this shake out? >> i think it's going to be a tough august for everybody. at the end of the day we pass it and with a public option. to put $60 billion a year into the private health insurance industry is insanity. >> mike? >> well, there is a lot of rationing in these public programs. there's a lot of concern about medicaid -- >> but you don't see this going through? >> do i see it going through? not in iz its present form. i think there will be another phase when we scale it back dramatically and try to convince them it's something more manageable in a legislative sense. >> good to have you both with us today. obviously a debate that will continue to roll on. >> thanks very much. >> thank you very much. reporting the first increase in signed contracts in four years. with housing finally starting to turn around, the chairman and ceo of toll brothers gives us his tale take on the health of housing in an exclusive interview.

the home builders rallying after toll brothers reported the first annual increase in signed contracts in four years and cnbc's diana olick just spoke exclusively to the chairman and ceo, bob toll, about the health of the housing market. diana? >> well, that's right, rebecca. toll reported a 3% jump in signed contracts over year over and a whopping 44% jump from the previous quarter. now, given that toll is the luxury home builder and most of the action in today's market is on the low end i asked ceo bob

toll what's behind this unexpected surge and if he expects it to continue. >> well, thanks so much for joining us, mr. toll. now, most of the activity that we've seen in the housing market has been on the low end of the rket and yet you saw a 3% year over year increase in signed contracts. that's the first time in four years. and yet you are a luxury home builder. to what do you attribute that? >> i guess the luxury end isn't as dead as it's been predicted to be, or observed to be. it could be that this market pretty much follows the fortunes of the general public that's invested. the stock market is going up. and we haven't gone into a depression. most people were scared to death six months ago to a year ago that that's where we were headed. people are starting to feel better about their jobs, better about the economy. confidence begets confidence. and this may indicate that things are going to be better

for the future, immediate and longer-term, than we believe. definitely the information that we printed today, while not being determinative, certainly is more indicative than it is anecdotal. this info came off of 230 approximate communities, 50 markets, 20 to 22 states. so it's a good thing to observe. >> even a more positive note in this report is a 9% cancellation rate. in the worst of times in the last couple of years we've seen up to 40% cancellation rates. are you seeing perhaps a different kind of buyer now, a more confident or more qualified buyer? >> it's definitely so that the can rate is way down. i think it was actually 8 1/2. our average can rate since '86 going public is 7. so we're almost back to a normalized cancellation rate.

and as you suggest i think the reason is you're seeing a different kind of buyer. i think the cans come out of people to some extent who were speculators in the market, jumping in, putting a deposit down, signing up. and as it came time for settlement deciding that the best thing to do was take the loss, drop the deposit, and leave us unfortunately with what then became a spec. that begot a lower price as we added in the deposit, the margin, put a lower price on, and moved us back out. and that kind of business is the business we don't want to do. and i think that's been supplanted pretty strongly by buyers who are for real. >> but you're able to get more home now for the price given that there are so many foreclosures. do you expect the surge in foreclosures to eat into any of your future sales? >> no, we don't. we don't foresee an increase in foreclosures. it appears to us as though it's

abating and not as much of a challenge as it was a year ago. >> just overall what's your outlook for the future of the housing market? we've seen predictions of it bottoming out in sales anywhere from 2010 to 2011. >> it seems to have bottomed about two or three months ago, and if we are lucky enough not to have a w recovery, i don't care if it's a u or a v, as long as it's not a w, it would seem to us that we may be on the way up now. our pricing has been going up in the last few weeks. the incentives are being taken down. so margins are increasing. that's, after all, the strongest sign of all of what the market's doing. >> mr. toll claims price is no longer the dominant factor. but the average price for toll's net purchase contract was down

7.6 pirs from a year ago and that doesn't include subsidized mortgages or upgrades. toll also added that he'd be shocked if congress let the $8,000 first-time home buyer tax credit expire as it is set to do november 30th. very interesting stuff. for more go to the blog, realtycheck.cnbc.com. rebecca? >> fascinating tough. thanks so much, diana. citigroup using bailout money to get back onto one area of the mortgage market. it is a sector that other big banks, they've walked away from it. so why are some analysts say it could be a good move for citi and homeowners? the story's coming up next. >> announcer: here's a look at some of today's winners and losers.

welcome back. taking a look at today's business headlines, the energy information administration reports oil inventories soared by 2.5 million barrels last week. that is much higher than what wall street was expecting. "wall street journal" reports toyota is planning to sell its next generation prius hybrid car

in china possibly as early as march. and the prius steep price tag has hurt sales in china recently but the country's government is expected to introduce a consumer incentive program to give a boost to hybrid and electronic car sales. and dvd rental company red box is suing 20th century fox over the timing of new release rentals. the studio's been trying to prevent redbox kiosks from receiving its movies for at least 30 days after a dvd is released in order to help falling dvd sales. redbox currently rents movies for just a dollar a night. and call it a big move by citigroup. the bank deciding to re-enter the so-called warehouse lending market. lending $2 billion to independent mortgage firms and hoping it profit from an area that was mostly exited since the market seized up in 2007. but do the risks outweigh the rewards? especially when the sbank using government funds. here to talk about it lenhart along with len bloom.

i want to kick things off with you. this is a business you used to be in. are there risks out there? we know there are. but are the rewards outweighing them? >> in general, this is probably a good business for citigroup. there are fewer competitors. four years ago there were 119 companies making mortgage loans, now there are only 30. they'll probably get decent rates and terms, and of course it provides more capital for home buyers. the caution that should also be looked at with mortgage lending, warehouse lending, is warehouse -- and i'm not saying in this particular case, this is the case. but warehouses in general. banks use warehouses as a way to get customers to issue security through the banks. they lend money to the customer and then the way the bank gets paid off they get the loan paid off is when the customer issues securities, which puts the bank in a horrible conflict of interest position because the bank is selling a security to pay itself back.

so there's lots of inherent conflicts and lots of thoughts about ways to deal with -- >> and not only conflicts when we're talking about a private business but conflicts when we're talking about a business that we essentially as taxpayers own a chunk of. jeff, what's your take on this? it sounds risky, but is there a big payoff potentially waiting? and as taxpayers could we receive part of that? >> i should think there is a really good time for someone like citigroup to kind of be getting back into warehouse lend. they're not the only one that exited in 2007, 2008. there's been a mass exit from that channel. that's led to a reduction in competition and very favorable pricing. so i think one of the advantages to having a very diversified mortgage origination platform is you can ramp up and ramp down different channels as the margins fluctuate. i think that's what you're seeing citigroup do here. there is, i think, a perception out here that warehouse lending is a synonym for toxic assets. some of the sfraud problems we had. i think, at least the way things are being underwritten now, it's

a much better process. and really, everything they're planning on originating through this warehouse line is going to be going to freddie and fannie as opposed to kind of going out to private security. so there's always risk in lending but i think this is a pretty good time for citigroup to be doing this, and it would also seem to be consistent with what the government's been asking banks that got capital to do and that's lend the capital out and keep the credit markets functioning. >> from a purely psychological standpoint, len, at a time when confidence in the structures that are out there, in our banks, in the markets is running lower as a result of what happened in the crisis, is this something, is this conflict of interest potentially something that could unravel in a very ugly way in terms of public sentiment? >> well, we have to be very aware of the potential conflicts of interest that were brought into play really when glass stiegel was repealed. whenever a bank is lending to a

client and the bank is in the investment banking industry they're in a real conflict of interest because they're issuing securities to essentially pay themselves back. it's the same kind of conflict when banks issue research on companies they underwrite for. there's a couple ways of dealing with that. one is that the banks should have the same disclosure and liability requirements for a new issue if they lend on it as if they were the issuer itself. or two banks shouldn't be allowed to lend to investment banking clients. so there is a conflict of interest there, and we just have to monitor it. i don't think we want to allow people to monitor their own aks. >> yeah, jeff, do you think there needs to be a body out there with them proceeding into this business that oversees some of this? is there a body out there that can really oversee it and lend itself to that confidence-inducing measure that is sort of this intangible idea that's out there for investors? >> that always concerns me a bit. in general i'd like to see less but better regulation of the financial industry. but i think a good point is when

it comes to financial services inherent to financial services are conflicts of interest. you're not going to completely avoid them. what's important is the way you manage them and the way you deal with them. and i do have confidence that at least the new management at citigroup and the new people they put in place are going to take that job fairly seriously and hopefully do a good job of managing the potential complicates. >> jeff, len-w we really appreciate it. we've got some breaking news. we're going to head over to charlie gasparino on why bank of america's stock is on the move. which investor might be moving it. charlie. >> and it's interesting, the investor, john paulson, remember the guy that sorted the financials a couple years ago, is taking a massive position in b of a. 168 -- let me see if i got this right. million shares. that's pretty big. we're talking about -- god, how much is that? at $16 a share. you're talking about a massive stake. >> a massive stake. and for us to know this information, are you getting this out of a filing, charlie?

>> right off the wires. here's the interesting thing. people that have invested in his fund received letters about a month ago. he essentially mapped this out. he was going to take a big stake in b of a. now that stake -- it takes a while before the disclosure comes out official. that stake is hitting the wires right now. his stake. he's going long on some other financial stocks. now, here's the interesting thing. we don't know what he's going short on. so this might not be a sector move this might be a bank specific move. but it's b of a 168 million shares. that's 16 bucks a share. excuse me. i don't add well. but a colleague said that's a stake worth $2.7 billion. you know that's a very big stake and a significant sort of bet on b of a. we don't know if he's short other financials, citi. we don't know if this is a specific sort of company move -- although he went long on a couple other ones. regions financial.

he bought $35 million at $4.8 a share. 35 million shares at 4.8 you're talking about a $168 million stake in that. he bought some others. we don't know the full extent of it, though. but b of a, he's gone long and long big time. >> you look at the stock it is moving higher in the after hours market. meantime, u.s. airways and delta swapping 167 pairs of spots at two of the nation's busiest airports. up next in an exclusive interview ceo doug parker is going to tell us why the move is good for the carrier's bottom line and if he thinks there will line and if he thinks there will in the industry. we'll have that. stay with us. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out,

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satisfaction guaranteed or your money back! new! nutrisystem d. lose weight. live better. call or click today. call it a switcheroo in the airline industry. i think that's the technical term. today u.s. airways group and delta airlines announcing a plan to swap 167 pairs of takeoff and landing slots at two of the nation's most congested airports. the proposal will allow both airlines to swap gates at new p york's laguardia and washington's reagan national airports. and u.s. airways says the move would help boost annual results by $75 million, helping to give the stock a lift today. you do see the stock up 4.4%. and joining us in an exclusive to talk about the plan and the

outlook for the airline industry is u.s. airways chairman and ceo doug parker. great to see you, doug. and a big move for the company today. what do you get out of this? >> well, thank you, first, for having me. what we get out of it is the ability to fly more flights out of reagan national, which is a big operation for us. it allows us to serve more customers and fly to 15 new cities out of reagan. we also get the ability to fly to sao paolo, brazil, as well as tokyo, japan, markets we have not been able to serve before. so it's a big boost for u.s. airways and our customers. >> and you're looking at annual results up by $75 million as a result of this. that's a near-term projection. in terms of the longer term and huh how you want to boost results going forward, is this going to be an organic growth story, or is it acquisition time? >> well, first and foremost what we worry about is making sure we have a stand-alone airline that can be profitable in the long term. and today as nounsment allows us to do that. it does improve our annual

profitability by $75 million immediately. so once we get this approved our annual profits will improve by about $75 million, which is a big deal in this economy, to be able to improve our numbers by that much. >> yeah, you bring up the economy. and recently on flights i've actually noticed the airlines, and this may purely be because of the routes that i've been flying on, but they've been more crowded, more people have been flying. do you see that coming back in business? >> we're starting to see it come back. but you're right. while the flights are full, you shouldn't necessarily assume that means the revenues are up because they haven't been. we've been able to fill the seats. but largely the way we've been doing that as an industry is by discounti inin ining seats to l traffic to fill the seats that used to be filled by business customers. that's not a good formula for us generally. but of late we've seen business travel beginning to come back, slowly, not near where it was a year ago, but it certainly feels as though we've bottomed out and are starting to climb back up. >> in terms of getting back to that profitability, how long out

is it going to be before we maybe start to see a little price increase on tickets? >> that depends on when demand comes back. and right now as soft as demand is, again, for business what that generally means is you'll see some pretty good deals out there. for leisure customers. because we have to fill the seats that aren't filled by business passengers. once the economy comes back and business passengers come, you'll see fewer and fewer of those deals. they still exist. they'll just be harder to find. >> the fed today talked about the leveling out of the economy. they also said inflation isn't a fear, at least on their book. for you and fuel are you concerned at all? and how are you hedged for the rest of the year in terms of oil prices? >> well, we are concerned. fuel is our largest expense. we haven't hedged. the fact of the matter is what i think most of us in the airline industry learned last year about this time as prices were going up that hedging actually increases the volatility of the firm because we have to post collateral as the prices rise and the reason it's rising for the most part is the economy is

coming back anyway, which gives's a nice hedge. we're not hedged. at this point -- and that's where i think we should be. that's the least risky position for the company. >> in terms of what you're seeing in the business pickup, where do you see the economy right now? are we still in the throes of a recession, or do you see a turnaround happening right now? >> we see it coming back. again, the only business -- we don't have a lot of visibility. people -- particularly business travelers tend to book their travel pretty close to the time of travel. so we don't have as much visibility as maybe seen in some other businesses. but with that caveat we're certainly starting to see some rebound, which is encouraging. >> doug parker, good to have you on. >> thanks for having me. >> have a good one. >> thanks. >> bernard madoff's former right-hand man giving insight into how the ponzi scheme was run. details when we come back. these days, wouldn't it be great if saving money happened as automatically as everything else? at bank of america, it practically does. use the bankamericard power rewards visa credit card

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we're getting insight into how ber marred madoff was able to execute his fake trades for some years. cnbc's mary thompson joins us now with details. mary, you were in the courtroom

hearing it as it unfolded as he told his tale. >> that's right. it was a fascinating hearing yesterday. in pleading guilty to ten criminal charges, madoff's former ceo countered his boss's claims he acted alone. he said he, madoff and unnamed others knowingly defrauded thousands of investors for over 20 years. yesterday the 52-year-old described using historical pricing to create the illusion of profitable trades on clients' statements. of course those trades were never made. he said clients' money went into a jachlt p morgan bank account hammond by madoff. government filings allege he prepared the account every day for madoff and from this account redemptions for the $65 billion ponzi scheme were made and bonuses paid. dipascali dipped into it and used some to buy a fancy fishing boat. >> i've seen cases where false

statements were generated. fraudulent order tickets were prepared for a few clients or maybe a few dozen clients. but nothing even close to the level of this. >> other tactics dipascali used in this office building where he worked included some employees having been schooled to execute fade trades on computers should regulators drop by. he also generated phony statements from the depository trust corporation, a central clearinghouse for trades with dipascali finding the best font, paper and layout to mimic the real statements. he also shut down any accounts held by clients who worked for big banks. the the reason -- not all clients, but if the bank's clients department actually checked on their employee's investments and asked madoff for more information, they shut the account down. that's because one of these banks could have easily determined that the alleged activity in the madoff account was indeed a hoax. >> that's fascinating.

the jpmorgan account that they funneled bernard madoff's money into, has there been an investigation of that account at this point? is there any information out there on that? >> other than we have heard -- this is previous. this isn't new information. we knew madoff had this jpmorgan account. you can be assured prosecutors are looking into how much money went in to and out of the account at the time. it was interesting to see it was the one account the redemptions were made out of, bonuses were paid out of as well. they used it as a little bit of a slush fund. let's head over to the nasdaq marketsite where melissa lee is standing by. >> we'll talk about the rally we saw post fed meeting. where are opportunities right now? you might want to think market cap. also you might be getting a little bit giddy after this rally. we will present the case for perhaps a recession on the horizon. yes, better to know now and get ready than know too much. much more ahead on "fast money" at the top of the hour.

we are back if just a minute.