good morning. ben bernanke is coming back. president obama is set to facilitate the dhooef a second

term today. the announcement comes earlier than expected and well before bernanke's term expires in january. at this hour, market reaction is muted. market reactions roughly flat, but a lot to talk about this morning as "squawk box" begins right now. and a very good morning to you. i'm mandy joining carl quintanilla once again today. becky and joe are still off deserving some well deserved timeoff. this morning, we have dick aerm, freedom works cochair and former house majority leader and leaving his focus at the new york stock exchange this morning is art cashin from ubs today. >> good morning, guys. there couldn't be a better day to have these gentlemen with us. of course, with the top stories

this morning about ben bernanke, at 9:00 a.m. eastern, the president will make a public statement reappointing ben bernanke to a second term. bernanke, we think, will, in fact, join him for the event. according to the text of his remarks, he'll say the man next to me, ben bernanke, has led the fed through one of the worst financial crisis that this world has ever faced. bernanke dealt with the crisis in his words with full action and outside the box thinking that has helped put the breaks on an economic free fall. the president will defend bernanke's actions as steps of necessity, not choice, taking together all of these steps that brought our economy back from the brink. they are working. we have steve leisman, i believe, calling in from his vacation, steve. how much of a surprise is it to you, especially from the fact that it comes earlier than we expected sdmrp good morning,

carl. i don't know how much of a surprise we're in. he said, you know what? it's august. there's no new information of real substance that's going to come between now and january when bernanke's term is up. remove the uncertainty and do it now, jacob franco called for as well as several other people who said, let's just remove the uncertainty. so i think one of the things oh bam in gets out of this, i understand there's a muted reaction in the markets now, but it does remove that uncertainty. and i think critically, it let's the fed, certainly the fed chairman, begin to plan beyond january. as you know with wab there's a lot of planning to be done. there has been some movement towards the exit strategy. they extended the talf program. they're letting the bond purchases to run off. a word you can write down, and

you might be hearing more of it with this word of apering. that's what they're going to be doing with programs. but it let's them think beyond january. i was a little surprised that the fed wasn't more advanced in thinking about its exit strategies and i was concerned that if the wasn't one of the reasons for it. >> how much of this do you think has been in the works? how much of this timing is related to the timing of jackson hole? >> well, probably they wanted to wait until after jackson hole. i will you that it was like you walked up to somebody like you were a leper if you had a question about whether or not bernanke was going to be reappointed. i walked up to a couple administration officials. i tried to apply the fed people. they kind of hold up their hands and slowly ease back from you if you started to report that. there was a little bit of a buzz going around that it may be this week or -- this was last week, that it might come this week. there were journalists talking

about that. and the idea being, hey, with the slow news week, there's not much going on, it's a good week to reappoint bernanke. >> we can bring in john harwood at the white house. john, any background how how this came about? summers, geithner, emanuel all recommended that this happen. >> yes, the white house told me the same thing. they say this has been in the works for six to eight weeks. the president met with bernanke at the white house last week and formally offered him the job. i think a couple of things are in play, carl. first of all, you've got a white house that is now under siege for its health care plan for the level of unemployment, for the questions about whether big government is coming back. and by appointing a republican to continue as the head of the federal reserve, somebody who does have the confidence in the markets, the administration sends somewhat of a sen temperature russ move, a

continuity move, and it enables the administration to make the case that this appointment shows that they are confident that both the fed strategy and the administration economic strategy are now working now that we see some signs preliminarily of a return to growth in the economy, even though unemployment remains high. so i think those things go into this appointment. you do have the timing of the jackson hole korns. also, don't forget the mid session economic review and the new cbo estimates for the deficit come out today and to the extent that over the long-term, even though in the immediate year we're going to see an improvement of a couple hundred billion dollars in the deficit for 2010, the long-term picture is somewhat worse and the bernanke news is going to blow that out of the with water and overshadow that news. >> john, thank you for that update. obviously, the markets hate uncertainty. let's take a look at how the markets will open up this morning. let's take a look at the

futures, which last time we checked on them look a little flat. but i think they are suggesting a slightly higher open today. yep, it looks like it could be a marginally higher start to the trading day today. ought for oil, it's a close correlation between oil prices and equity markets recently. nymex crude is slightly to the downside right now. although still holding on to the 74 mark. keep in mind we have a bit of a shacky day out there on the asian markets, which are already closed, naturally. we saw a big plunge in china stock markets down by 5% at one point. finishing off by 2.6%. let's bring up a board for the dollar and tell you what's going on there. naturally, a little bit of a risk aversion means a bit of a flight to safety for both the japanese yen and also the dollar. so euro/dollar has been downs e downsizing at 1.4295. the pound against the greenback is at 1.6388. boy, i do need glasses to read those boards.

as for gold, 948$948.5, so marginally higher. but certainly that risk aversion might be supporting gold prices there. >> let's bring back in harwood and leisman on the phone, and art cashin, of course, here on set. why has reaction been so muted, art? >> because i think the reappointment was partially baked in the cake. everybody felt for purposes of continuity, you had to keep them there. >> there was a lot of talk about janet yellen, a lot of talk about summers. >> yeah. i think there were considerations. but as -- i think it was john who pointed out, the white house also sees this as a positive move to say, we're convinced we're on the right track. so i think we're muted because a good deal of this was baked in the cake. i think it would have been a terrible shock if they appointed somebody else. >> considering all the other possible successes, do i think this was the best decision, the best nomination? >> i think it's probably as good

as any right now. the fact is, there is nobody else. but the fact is, ben bernanke is going to have to do a great deal to get the federal reserve back on track and disciplined to do its foundation duties and to shed itself of all of these -- what should i say, grandiose extracurricular activities that i think ultimately he rose the fed's ability to do its essential task which is maintenance the value of the currency. so he's got a big cleanup to do a a and, you know, from my point of view, since he was a big part of making the mess -- >> so you reckon he is to blame for not recognizing the big problem with the subprime crisis fast enough, early enough? >> no. first of all, the subprime mortgage crisis was government created. the federal reserve had a long-term history that really -- i mean, starts before that and

goes through this. you know, it's easy money. they had lost their sense of mission. i've watched congress since i came there and before in the mid '80s, wining for the fed to maintain loose money to grow the economy. that's not the fed's purpose. the fed has a very narrow purpose. armey's ax yumm is division of labor works when people mind their own business. the fed should have done that. now the fed has itself in a big pickle and it has to be cleaned up, disciplined and brought back to its tradition role. inflation, fighting inflation in the futures as a result of all of this easy money, all these big deficits, is going to be -- >> steve, how much baggage does he go into this second act with? >> well, i think dick armey is more decided about the causes of the subprime crisis than most economists are. >> but i brought this up to you last week as he was about to make his speech on friday, i

said, some people are wondering if his speech would include this -- you know, the title of the speech was reflects on a crisis and i asked you if it was going to go back to the period where he was on the fed with chairman greenspan and why they kept rates so low for so long. >> yeah. the idea of rates being low for a long time, we had some very long conversations about that at the jackson hole conference. there are people who believe it played a role in the rye sis, but the history that leader armey tells is one that ignores any private sector responsibility for the subprime crisis. >> let me be clear. i don't want to lay all the fed -- you can't build a house on sand unless someone provides the sand. the sand was provided by the fed. then you throw in government-sponsored enterprises teaching and compelling the banking industry to bad decisions. this is a government-made

crisis. we are going to probably eventually get the market to work itself out. >> the government didn't mandate that bankers make stupid loan toes people who did not qualify for those loans. that seems to me to be a bit of rewriting of the history of what happened. when most of the bad loans were made with 2006/2007, fed was actually at 5.25%. i think it's more complicated than saying the government was responsible for the subprime crisis. in fact, you could also go back and look at the gse balance sheets. you might point out that subprime loans are, by deaf anything, not gse guaranteed loans. i think one key, carl, to the reappointment is probably his agreement in the philosophy with tim geithner that you have to be really careful about getting out too early, but that two years down the road or a year and a half down the road when they get

out, they have to get out in a force theful way and start planning for what they call the peace pretty soon. >> john harwood, does keeping bernanke around add fuel to the ron paul fire that calls for more fed independence? >> well, i think it does. the question about fed independence are out there, but i think bernanke gives obama some cover. first of all, just to steve's discussion with leader army, just to be clear, leader armey is one of the most honest and principal conservatives in this country. >> that's why we have him on. >> what he thinks government is responsible for most of the problems in the country, okay? so in this particular case, obama is facing charges from people like leader army that says he's trying to take the country to the left, bring back big government. for him to say, i have kept george bush's fed chairman in place, that helps him deflect some of those charges and, in fact, the fed chairman appointed by that very, very conservative

republican president is the author of many of the moves that people like ron paul are concerned about. there is no better protection for a liberal democratic president than to have such a person. therefore, the cleanup and the unwinding is to say, look, we may not all like this, but we had to do illustrate to prevent a great depression-style collapse and i think that is the big benefit of president obama to a appointment. >> it's hard to counter factuals, but what do you think would have happened if he had not been renominated? >> well, just before we do that, let me put a different spin on that low rates for a along time routine. it started with greenspan and he was waiting for a dog to bark and the dog never barked. you remember greenspan talking again and again about the miracle of productivity. that was what was keeping inflation down. it wasn't. the reason we didn't have any wage inflation is because those wages were in china, okay, and

we never saw a wage innation here. therefore, they never heard the signal and they never moved things up. >> so the iceberg -- we only caught it at the last second? >> and the key has to be you don't keep looking from over there. sometimes the wave comes from here. now, the idea about what would have had, you would have had a huge collapse in the market. >> define huge. >> i think na you probably could have seen 500 points to 1,000 point move in the dow. >> and not up? >> not up. i think they were looking for the continuity. pass leader says, look, he was involved in it. he's begun so many of these programs. look at what we've been talking about for the last several weeks, the exit strategy. we're going to bring you a new guy in for an exit strategy on some other guy's plan?

>> we've still got a big maybe half of his job is left to do. >> if you're going to dee fudefe if bomb, we need someone who designed it. thank you so much. steve, i appreciate you calling in and john, we'll talk to you soon, as well. in the meantime, the overseas reaction has been interesting, to say the least. maura fogarty is in singapore this morning. pretty rough trading session there overnight after china add 7% over a few sessions, maura. >> yeah, you could say in essence asian markets gave back their gains today after hitting multi week highs earlier on monday. the news about mr. ben bernanke being reappointed for a second term did not impact markets here. the nikkei in japan was down 0.8%. we saw investors worrying about the rising japanese yen and that

accelerated japanese equity selling today. hong kong settled down 0.5 peshs lower. off the session lows, just like in japan. the market we were paying a lot of attention to today was china. you mentioned there, carl, prime minister wen jiabao's comments saying he's going to keep monetary policy loose in china as it faces new difficulties. what he said wasn't anything new, but got people concerned about the dmk challenges people in china are facing. that meant get out now, take your profits right now. at this one point, we saw the market down by 0.5%. that was how the asian trading day wrapped up today. really, no bounce from mr. bernanke, but still, overall, good news as his reappoint to

fed chief for another five years. >> thanks, maura. you're wearing the right color for a red trading day in asia today. as for what the united states will do today, beth ann bavino, we've got our guest hosts with us, art cashin and dick armey. thank you all of us for joining us today. beth ann, i have to ask about china, because obviously, the beginning of last week, the u.s. markets really took their cue from what was happening in the shanghai market. and i'm wondering how much they're going to take note of what's going on there today. >> well, i think they -- i'm certain that china will always be on the moves of what investors are thinking in the u.s. but i think the news about bernanke is probably going to trump some of that. i guess the point was that because bernanke was nominated much earlier than expected, it seems like that was what markets were expecting. coming earlier plight smooth moods out there, so that's a 

positive. >> what do you reckon, do you  reckon there will be any kind o bernanke reaction or do you figure this is largely factored into the market already? >> i think it's factored into the market already. one week ago, we surfaced thousand he our lpl investors. they overhemingly gave ben bernanke high marks. we know what will be happening today had no one else been nominated to take that role. when greenspan was nominated to take over from volcker back in june of 1987, we saw interest rates jump 40 basis points in one day and in october of 2005 when bernanke was appointed to take over from green span, we saw rates rise 20 basis points. so we know we would see a big leap in interest rates this morning, which we can ill afford given how much debt we have to sell and how fragile the mortgage market is right now. >> if we had seen someone else being appointed or nominated, at least, then we would probably

see a bigger move unanimous we'll see today with the reappoint open bernanke, right? >> oh, absolutely. i don't think it's going to be terribly beneficial. i can the opening part of this segment is true, that china will be important. they're coming up on the 6 0e anniversary of the chinese communist party taking over. tights an important time for them. they're starting to put people under house arrest. so some of the things are changing. >> i have to pick up on that comment about the meeting that's coming up. there is some school of thought there that possibly the chinese leaders would like a stable market ahead of that meeting. do you think that they might actually get into the market and intervene or at least even if not physically intervene, but maybe come out with some soothing words of comment, like

we're going to keep stimulating the economy, don't worry, we'll keep things going? >> yeah, i think they're going to try to calm things down. that's probably not going to work. they're working on a new banking bill. their system was more bizarre that is than ours was before it came apart. they have a growing unemployment problem. all of their economic figures are suspect. people are starting not to believe them. the baltic dry index is going down. it's not happening. >> that is big, right, the bdi going down over the last month or so? >> it is denying what the leadership is saying. >> beth ann, why don't you weigh in on this. does this bode badly for future stock market activity? >> sure, i would bet certainly it is a concern. i guess i'm not as -- i have a little bit more confidence in the chinese economy, though. i think while the numbers are certainly, the strength in the chinese system, particularly with the moment that the

government pack did put in place, i think that was a big boost to get china ought of what was a drag and basically a world recession. so i think some of the moves that the xhien he's government has made has been something worthwhile. >> bell ann, thanks so much for your comments. >> a lot to talk about this morning. if you have any questions or comments, drop us a note. squawk@cnbc.com. when we come back, more on the chairman's big day. a man who knows bernanke well, bob mctier will join us at 3:00 a.m. eastern time. dddddddddddddddddddddddvvv carol, when you replaced casual friday with nordic tuesday,

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welcome back and good morning to you. on your way to the airport this morning? it's time for your business traveller's forecast. scott is with us from the weather channel. good morning, scott. >> good morning, mandy. and good morning, everyone. as we focus in on your business

forecast for today, weather will not impact us too much throughout the day. we are keeping tabs on a few areas. central and southern florida, scattered showers and thunderstorms along the i-95 corridor. just outside of el paso, texas, along the i-10 corridor as you move through southern portions of new mexico there, into parts of nebraska, north of omaha, just to the south of the twin citys, a cold front, scattered showers and thunderstorms. taking a look right now at our current airport delays, we don't have any around the twin citys, also around newark's laguardia, boston's loeg yoon, moving back down into the deep south, quiet conditions in atlanta and san francisco, as well. so later on, expect follow in a few areas mainly as we move into places like the hartsfield-jackson international airport in atlanta and volume in the northeast. boston, 81 degrees, picture-perfect conditions. raleigh, north carolina, upper 80s.

scattered showers in florida. as we move into the great lakes and the central plains, some scattered showers and some thunderstorms. but moving out west, fairly quiet conditions, a cool start in the pacific northwest, and some scattered showers and thunderstorms around the four corners there. now back to you. >> good to know. thanks very much for the update, scott. coming up on the show, president obama is ready to reappoint fed chairman ben bernanke today. we'll talk to former dallas fed president book machine teer. he ran off with his secretary! she's 23 years old!

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we're certainly giving it out better shot here on "squawk box" this morning. i'm mandy drury joining carl while becky and joe are off enjoying themselves on vacation. so they say. >> so they say. >> they would if we were gone. >> exactly. fair is fair. our host this morning, dim armey, freedom works cochair. and leaving his post at the new york stock exchange, he's coming uptown -- well, actually, over the river, art cashin. of course, our top story this morning is all about ben big. president oh bam the ma is

nominating fed chairman ben bernanke to a second term. he was make the announcement from martha's vineyard. bernanke will be joining him for the event. accord to go text of the president's remarks, he will say the man next to me, ben bernanke, has led the fed through one of the worst financial crisis that this nation and this word have ever faced. he would defend the steps taken as steps of necessity, not choice. taken together, all of these steps have brought our economy back from the brink. they are stepping that are working. >> joining us on the squawk news line this morm to talk about that is former dallas fed president and a cnbc contributor, bob mctier. bob, good to see you again. if this did not happen, you would have been quite disappointed, right?

>> yes. >> what do you think brought this, that he is the best person available, that you don't change horses in the middle of a race, that you want someone who can unwind this come transportation we have called monetary policy and with that, you want someone who helped create it? >> well, dick said a moment ago, who else is there, and i would agree with that. >> that might hurt janet idealen's feelings or some other people. >> well, i was surprised when ben bernanke got the job in the first place and he dealt with a situation we've never had before and he did it without a guidebook and i think he with did marvelous job. >> what's the biggest compliment you can pay him right now? that his learning curve is steep? i think the man is serious.

my biggest problem with ben bernanke -- >> i asked for the biggest compliment. >> no, i know. we've taken the fed so far outside the box, in fact, i've come to the point lately in my life where i keep looking at people and say, it's time we start thinking inside the box. the fed has got a very narrowly defining, extremely, critically important disciplined role and it's gone so far beyond that now that it's hard for me to feel very complimentary about it. >> if i can just play devil anticipates advocate here. maybe if the fed's mandate is quite clear, according to the textbook, the problem is here that we had an un-pleas dented crisis in our generation. so essentially, the textbook had to be thrown out. >> and it wasn't all that unprecedented. he was, in fact, pretty much in one area of irresponsible public policy affecting the private sector. the market in the end will be the instrumentation by which this is cleaned up. and it will clean it up around an awful lot of the rubblish

infrastructure that was created by politicians, you know, busy at showing the world they were involved in securing the problem. but quite frankly, in the final analysis, when the cleanup is completed, it will have been the market that will have done it. and then it will be dismantling all of the stage work that the politicians put in place to do something which we in america called call cya. >> that will be real -- >> i mean, i just have to tell you, there's this great country western song, "that don't impress me much." politician running around looking busy generally cost taxpayers billions of dollars and bernanke swung right into the middle of this thing and he fit right in. do you think it was against his choice, though? >> that's a good question. and on dick's points, does he per son phi the expansionary nature of the fed, the one

that's under fire right now? >> i guess alan greenspan is going to keep that title. but you know, i was part of that, too, and i'm not as critical of that expansionary and easy money as most people seem to be these days. i remember that we had an early recovery from the 2001 recession that put the peak or the trough at november of 200 1. we only had two or three months of growing employment and then we started getting this jobless recovery and the economy weakened. we were about to go into a double dip. we had disinflation that the chairman was worried would morph into deflation. so there were reasons for that easy money. as a matter of fact, in september of 2002, the senate wanted to go ahead and ease another notch, the committee did that at the following meeting. people talk now about the

fallout from that, the negative consequences, but they forget that there were reasons for it and that it succeeded. when monetary policy or any other policy succeeds, it usually means nothing happens. so what we're left to talk about is always the unintended negative consequences and never the intended positive consequences. >> yeah, i think my memory is that the that potential double dip was in the aftermath of 9/11. and i think they kept rates low long, partially in response to 9/11. let's not forget how terrified the government was that the economy would be the victim after the twin towers went down. you recall the president being asked what should the people of the country do to help out in this circumstance? he said, go shopping. okay? and he meant it. it wasn't flip. it wasn't glib. washington was terrified that victory of the terrorists would be that the economy ground to a halt. if they had followed up and hit

five walmarts in five states with suicide bombers, no mother would have let a child out of the house. the economy would have ground to a halt. >> you get the feeling that there's a similar message going on right now, that you, as a consumer, two-thirds of this economy, please help us out. go shopping. but isn't that sending the wrong message? too much shopping and not enough savings was one of the problems that got us where we are in the economy. >> right after 9/11, i wrote an op-ed piece in the dallas morning news that said the same thing bush said. i said, people seem to feel like it's their patriotic duty not to shop and lay loy. but one person's spending is another person's income and you're not doing the country any favors by hunkering down. we need to behave normally and do what we normally would do. so i agreed wholeheartedly with the message. >> bob, do you think having the nomination in his pocket now, did that allow him to take a

harder line on exit strategies? in other words, if he didn't have it, would he be trying to keep the job by being our friend, keeping money easy, or do you think he's beyond those sorts of political consideration? >> i think he's beyond that, but i think this removes a major distracton. i think things will go up more smoothly now that we're not talking about the appointment every day. >> what do you think will be the defining characteristic of his second term? >> i think people will be surprised that we're not going to have this inflationary blow monthout that they expect to have. the fed's balance sheet expanded, but it hasn't expanded since last december. the monetary base spike, but most of that is being held as excess reserves on bank balance sheets. in fact, the money supply, which probably dick armey and i both think is more important than interest rates, it's only grown a little faster than normal and that was necessary because of

declining velocity. right now we have been a year over year decline in both consumer and producer price index and i still think that deflation right now is a greater threat than inflation. >> yeah. i agree whole hardly and i think a lot of that growth that we saw in the monetary base, that only becomes inflationary when you have velocity. you either have to spend it or lend it. right now, it's parked. it's parked in those banks that's not inflationary until it starts to move. >> right now, if you'll watch the consumption patterns, the american consumer has become more disciplined, more disciplined than use of credit, especially with credit cards and with housing credit. and you just look at the sort of two tiers in the housing markets now where the lower income affordable housing, that people can actually afford, not affordable as defined by members of congress, but real affordable housing. that's moving. but the luxury houses are

sitting. people are not overextending themselves. so the public seems, in my estimation, to have learned the discipline of the near catastrophe more thoroughly well than the government has. >> and to that point, the jump in existing home sales over 30% were of foreclosures, so they were buying the cheap house. >> the devil is always in the details, isn't it? >> bob, one final thought, or i guess we'll see what the president says at 9:00, right? >> well, it's awfully early in the central time zone, but i feel lucky to have heard ahmey's ax yumm. >> irving fisher would be so prod of you this morning and i am, too. >> irvin would have said there's money sitting and money on the wing and what we have right now is money sitting. >> i wonder what bernanke is thinking right now. >> well, the times last week

said he is finally get something sleep. i can't imagine what the last two years have been like for him. when we come back, we would love to hear from you. early morning market action in the futures pits we'll talk about and beyond bernanke, this morning's other top stories, including why allan stanford will be staying behind bars and why jessica biel is the world's most dangerous celebrity. you have to hear that one when squawk continues. (announcer) illness doesn't care where you live... ...or if you're already sick... ...or if you lose your job. your health insurance shouldn't either. so let's fix health care. if everyone's covered, we can make health care as affordable as possible. and the words "pre-existing condition" become a thing of the past... we're america's health insurance companies. supporting bipartisan reform that congress can build on.

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welcome back. our top story this morning, the president reappointing ben

bernanke the head of the federal reserve. joining us this morning, ben lichtenstein from the cme. maybe the story is not so much how the market reacted, but how it would have reacted if the news had been otherwise. >> i think if we had heard news that we were looking at somebody new, that would be a major concern for the market and probably bring us off these extreme levels we're trading at right now. other than that, i think the market is relatively flat on the news here. we had a big day here, though, with the gap higher and the sell-off rejection in those prices. everybody is waiting and seeing right now what that means, whether that's the beginning of the end of this mow that we just saw, the extreme rally that we just saw, or whether things are slowing down a little bit. but that rejection of those prices up above and the ability for the market to attract any initiative is what the market is focusing on. >> how much of it do you think is a volume thin week and how much do you think maybe is the

reaction in asia overnight? >> well, i think some of it you can attribute to the volume at this point. b but, you know, the volume has been relatively weak for the biggest part of june, july and august. i'm focused on the market. from a technical standpoint, i think the level above the s&ps is around 1058. in order for us to breach that, it would be a major hurdle avenue this point. and down below, we're talking about 1100. maybe below that, 1,120 is the initial support. i think we're focused on a couple of the light numbers coming out this week. we have consumer confidence contributing a little bit. as we slowly pull out of this earnings season, things seem relatively well here, but a lot of optimism is mixed with concern at this point. >> you mentioned the consumer numbers, ben. how high is the risk that we could get a down sooiz surprise on the consumer read?

and would you take money off the table just ahead of that? >> yeah. i think that was probably one of the biggest factors to yesterday's sell-off. i think that's a possibly at this point. you know, a lot of talk right now about the consumer also in regards to retail sector at this point. you know, cash for clunkers going off the table, as well, a lot of concern about how much that is going to actually affect the retail sector, whether we're going to see a slowdown there after people have, you know, kind of gone ahead of themselves here and purchased a vehicle or increased car payments ahead of what they normally would have planned to have done because of the inventive. so there's a lot out there at this point. i feel like the market is kind of at key levels, high levels at this point for the concern that's out there and uncertainty. i think we will see a bit of the sell-off, which don't get me wrong, at this point would be a sell-off of the market. we have yet to really see that pullback. >> ben, what do you think about the currency relationship, also?

yesterday, that pullback seemed to see gold, oil, several commodities and the market pullback at the same time. it looks like the currency influence is playing into the market, too, right? >> yeah. well, there's no question. i mean, we're looking at this yen rally up against the dollar here, which is -- has had its play on the market. but you know, this market has been full steam forward. it's been ignoring many of the underlying negative fundamentals and focus on some of the very positives. you have to look at the home sales number that we had out last week. which came out looking extremely rosy. but if you really kind of broke it down and looked at some of the details, it wasn't that great of a number. we need to talk about how most of the spending and most of the numbers came in from the lower range of the homes and, again, aus guys already mentioned from foreclosure sales. again, just see that upper percentage of home prices that have fallen, actually, is a concern at this point. and the market is really just ignored some of those negative fundamentals and only focus on

the positive. but how long can it sustain that is the question? >> ben, thanks. talk to you soon. >> my pleasure. others news this morning, a federal appeals court says allen stanford must stay in jail until his fraud trials. he has been behind bars since his arrest in june. at that time, a district judge ruled stanford was a flight risk. no trial date has been set, but stanford is due in court this thursday for a hearing. jessica biel is the world's most dangerous celebrity on the internet. searches for the 27-year-old actress are more likely to lead to online threats like spyware and viruses than any other famous person. mcafee says fans are likely to damage their computer. last year, brad pitt was the most dangerous celebrity online, following beyonce, jennifer anniston, tom brady and jessica simpson. >> now you know why you have all

of that spyware on your computer. >> let's get -- >> if they -- when they start tagging famous economists, then they'll get me. but they're not going to get me with movie stars. >> let's get a check on the news outside the world of business. contessa brewer is here with a rouvendup of the headlines. warning from the white house health experts, they're saying swine flu virus could kill as many as 90,000 people this fall and winter and they predict 40% of americans will feel swine flu symptoms in the months ahead. they're stepping up distribution to children and high risk individuals. the mistakenly telling at least 1200 veterans they were suffering from a fatal neurological disease. the department's rushing to tell everyone who received the letter of the mistake, many veterans say they've undergone expensive medical tests and endured painful psychological effects.

in london an atm operator has introduced cash machines this use cockney slang. if you want to withdraw cash you have to say sausage and mash, but if you're a tourist and you need to get money out, what do you do? >> do you do an impersonation of -- hello. it's horrible. >> you're not going to do it, and neither am i. >> i don't know how to speak cockney. >> anybody know? >> cockney rhyming slang was a way to keep secrets from the authorities. >> is that true? >> yes. >> what was that, during the war? >> no, no, no, way back. way back in the 1700s, i believe. the authorities would come in and lower class neighborhoods to make sure that they weren't onto what you were talking about, you talked in cockney rhyming slang. >> i wonder if it's losing

circulation because my father, who's english, speaks a lot of rhyming slang but i wouldn't have an idea. >> thank you, contessa. when we come back, more moussings from our guest host, art cashin and dick armey. we'll talk about bernanke's reappointment and stocks. taking its rightful place

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if you're just waking up, the president has renominated ben bernanke as fed chair. futures have been lightly unmoved off that news. world stocks have had favor straight sessions to the upside. when we come back we'll talk more about why ben bernanke is getting the nod from the president. back to work and back to school. september is sure to be busy at staples. we'll hear from the company's cfo on the latest company result and if he can even find a spiral notebook in the aisles this week. the governor of minnesota, tim pawlenty, his take on the economy, politics and of course the fed chairman when "squawk" continues. i'm racing cross country in this small sidecar,

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president sticks with ben. >> thank you. >> fed chairman bernanke will get a nomination for a second term. some say he brought the economy back from the brink of disaster. >> everybody stay calm. we're get to make it out of here. >> larry lindsey will tell us why bernanke is the right man for the job. >> aggressive policy actions taken around the world last fall may well have averted the collapse of the global financial system. in an event that would have had extreme adverse and protracted consequences to the world economy. and minnesota governor tim pawlenty on what four more years of bernanke will mean for economic crisis. and we'll throw health care crisis politics into the conversation. "squawk box" begins right now. ♪ staying alive ♪ staying alive

a couple fans of "saturday night fever" right here at the desk. good morning, we'll come to "squawk" here on cnbc, i'm carl quintanilla. amanda drury is here while becky and joe enjoy time off. two guests, dick armey and the former house majority leader and also today art cashin director of floor operations at ubs. what a treat for us. it's been a good hour. we've got two more to go. the big story is about the fed chairman. >> it's about the fed chairman, indeed. we're at the crossroads the washington and wall street today. at 9:00 a.m. president obama will make a public statement reappointing fed chairman bernanke to a second four-year term. he'll make the announcement from martha's vineyard and bernanke will be joining him. he will say, the man next to me, bernanke, has led the fed through one of the worst financial crisis that this nation and this world has ever faced. he will say that bernanke dealt

with the crisis with, in his word, bold action and outside the box thinking. president obama will defend bernanke's actions as steps of necessity, not choice, taken together all of these steps have brought our economy back from the brink. they are the steps that are working. our chief washington correspondent joins us from the white house. good morning, john. >> good morning. well, you know, the white house, i think, is feeling good that they have blunted some of their critics. the fact you'll have larry lindsey on for a few minute and other republicans are defending this choice as a wise move by the president is an illustration of why this appointment was made. they welcome the idea that they can bring some semblance of bipartisan comedy on this particular choice on the most critical issue for barack obama's term, and that's the economy. >> have you met anyone on the

ground who's been disappointed with this decision? >> not yet. it's early, of course. we know there are some people who want free market grounds o fed independence grounds, question, amanda, what ben bernanke has done and will question this decision. you know, we were talking in the last hour, and someone observed, i forget who in the conversation, that there weren't any alternatives. there were some good alternatives. larry summers last fall, when the white house indicated that larry summers was going to head the national economic council, you had a lot of people praising him as a centrist, someone calm to provide stability to the economic policy. he was a potential candidate for the job. but the president decided that he wanted to keep things going. the market's doing very well right now. the markets, i expect, are going to welcome this decision. so the white house at a time when there's a lot of turbulence over health care policy, over economic policy generally, unemployment rate remains high, is looking for some applause for

this choice. >> john, let me put a little different spin on it, possibly anyway. if the president had appointed anybody else, including larry summers, and the economy had fallen or stumbled, he would definitely own it outright. that would be a problem because he put a new guy in. >> reporter: i agree with that. >> by keeping continuity up, i think he can still say, we're working with an old issue, i'm still working on the old issue, we're getting it there, i don't own this recession or problem. >> reporter: i completely agree with you. and i think that logic was compelling, especially since the next job for the fed chairman in the next four years is going to be unwinding some steps that ben bernanke took. remember, ben bernanke had significant credentials for the job as somebody who was an expert on financial crises, on what happened during the great depression and that's the expertise that -- and the concern that he brought to this task. it's why he did so many things

that were outside the box, as president obama said. and some people, you know, it's a difficult challenge when you are facing a potential collapse of the financial system. if it doesn't happen, people sort of forget what might have happened. that's one of the challenges that barack obama faces. people say, oh, man, look at all the ways in which government's involved in our economy. they bailed out wall street. they bailed out the auto industry. but the administration would tell you, they had some very, very tough problems and that if they didn't take some of these actions we were going to be in a lot worse shape. you know, the dog that didn't bark is a hard thing to argue as a reason for your policy, but that's what they've got to do. >> john, we'll talk to you in the next hour, i'm sure. john harwood joining us from the white house where -- actually, the action's at martha's vineyard, not the white house. with more, larry lindsey, our friend, former national economic koun sill, president and ceo of the lindsey group, served as a governor to the fed. larry, good to talk to you this morning.

>> thanks for having me. >> we talk about this -- all polls of economists leading up to this moment show 60%, 70% likelihood this would happen. are you surprised at all? >> well, i think that john was right in mentioning the president had other alternatives, members of his own party, and they included larry and they included janet yellin, robert ferguson. i think the president obviously made the right choice. whenever you have someone doing a very good job, as ben is, the right thing is to reappoint him. why take the chance on somebody else. and i think the president should be commended for making the choice he did. >> is summers sulking somewhere this morning like a jilted sibling? what are the feelings inside the brain trust? >> well, i think that -- you know, obviously folks are disappointed but everyone else understands that ben has done a great job and the natural thing to do is reappoint him. when the president does the right thing, i think people should salute. >> when you say you think he

made the rice decision in reappointing, what score out of ten would you give bernanke for what he's done in trying to fix up the crisis? and how confident are you that he'll be able to exit out of it successfully? >> first of all, no one has faced a crisis like this, you know, in the modern fed era. so there's really no basis for comparison. i think that the chairman probably deserves a ten out of ten. he plowed his way through a very, very difficult crisis, used a lot of creativity and certainly deserves the highest score possible. maybe it might be that getting out of the current situation, unwinding, may be as big a challenge as solving the problem of the crisis of last fall. >> in which case we can't pat him on the back just yet. his legacy is going to be how successful that exit strategy

will be. >> it's interesting. ben is a very modest man. and i think that if he had not been reappointed he would have been disappointed for about 20 seconds and relieved from then on. and what he's now got is maybe 20 seconds of elation and four more years of very, very tough situation. i think he knows that. and, you know, he's committed his life to it. and, you know, we can only wish him, you know, every good wish there is. >> we've been looking at some pictures of the chairman testifying in front of the senate, which he must love. that must just be -- >> it's the high point of everyone's life, carl, believe me. listening to our distinguished representatives. i liked it when the three of you were up there, by the way. i thought maybe we should have you three replace the senate. >> that may have been a market top as far as government goes, having us there. we're here with leader armey and art cashin. i wonder if you would comment on how the senate may take this.

senator dodd says it's probably the right choice. and he's promising a thorough review of the nomination. is there going to be any problem later on? >> the economists always hopes for decisions that are obvious and easy to make. the president was blessed with that opportunity. he took it. senators will strut, that's what senators do. but in the end, when it's time to vote, they will vote to confirm this nomination. after they've shown everybody how thoughtful they are, they will do -- go right back to doing that, which is obvious and easy to do. >> right. >> they will be -- hi, larry. >> how are you doing, art? >> the posturing will be the main event. they have to be careful there, too. i mean, if they overdo that, you know, the market's can be sensitive to those kind of things. so they have to be careful. larry, do you think there's any outside chance that there was some negotiation that bernanke

was reappointed but has agreed not to fill out the full term? to clean up what's there. and once the clean-up is done, so exit and perhaps go back to academia? >> well, if that were true, it's not an enforceable contract, so to speak. so i think that that's always possible. this is washington we're talking about. but i would imagine that ben is in for the four years. and, frankly, it's going to take four years, i think, to unwind. i don't think this is going to be a quick job. i think he's the natural person to do it. >> you know, as a follow-on to that, this is a bit of a political posturing kind of question, but it's kind of telling when president obama says that a lot of the measures that bernanke took were not his choice, essentially, it was out of necessity. do you think to a certain, that despite the independence of the fed he was strong-armed with the decisions along the way and maybe even strong-armed to accepting another four-year term even though, perhaps, he might

like to have bowed out? >> well, you know, there's no question that the chairman and the treasury department both with the current treasury-secretary and the previous one, worked very closely together. he has testified that he was not thrilled with all the decisions made. and i think aig was one where he had particularly critical comments. but this is a situation where everyone in government had to work together. and i think ben cooperated with whoef was the treasury secretary. i don't think the word strong-armed is appropriate. i think this was really a team effort all along. and he did the right thing. >> larry, some of the critics this morning, just politically talking about the timing of the announcement. some have said this morning that it's, perhaps, intended to help deflect attention away from the mess that has been the health

carrollout. and the new deficit projection. do you think that has any part of the equation? >> well, again, you know, this does not detract -- the timing issue does not detract from the wisdom of the decision, but, you know, companies do it, administrations do it. the only other piece of news out of washington today was going to be the $2 trillion to the deficit. >> that would have gotten some play. >> that would have gotten some play. it's an old rule. again, it doesn't detract from the decision at all. but you want to have some good news as cover for the bad news. >> on your terms, on your home turf, even if it's martha's vineyard. larry, appreciate you calling in. really do. >> my pleasure. thanks a lot. >> bye-bye. >> now, if you have any questions or comment about anything you see here on "squawk," e-mail us. the address is squawk@cnbc.com. coming up next, we will check into camp c.

steve liesman will be joining us as well. >> steve goes fishing a lot. >> thank you. and then later on in the show, the new school year is just around the corner. back to school, folks, meaning a very busy time of year for staples. the cfo of the office product giant will be joining us up ahead. time now for today's aflac trivia question. on this day in 1835 the first in a series of six articles announcing the supposed discovery of life on the moon appeared in what newspaper? hey, it's great to see you're back after that accident. well...i couldn't have gotten by without aflac! is that different from health insurance? well yeah... ...aflac pays you cash to help with the bills that health insurance doesn't cover. really? well, if you're hurt and can't work, who's going to help pay for gas? ..the mortgage, all kinds of expenses? aflaccafcccc! it's the protection you need to stay ahead of the game... exactly!

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now the answer to today's aflac trivia question. on this day in 1835, the first in a series of six articles announcing the supposed discovery of life on the moon appeared in what newspaper? the answer, "the new york sun." the articles later came to be known as the great moon hoax. yondz the nbeyond the news reappoint of the fed chairman, there are other headlines. citi says it's boosted efforts to modify mortgages. the government has called on firms to speed up that pros. citi says it has helped 108,000

homeowners modify home loans in 2q. citi notes most changes have come by reducing interest rates or extending payment periods. been a lot of pressure on the banks in this country to do it faster. they are starting to tattle-tale on them. bank of america and fcc defending their executive bonuses. a judge held up approving the settlement. b of a says it didn't mislead investors suggesting they should have already known about the $3.6 million in bonuses given the media attention surrounding the bank's takeover of merrill. the company notes merrill disclosed the size of its bonus pool in an earnings report last year. the s.e.c. says the fine fully takes into account the seriousness of the bank's misconduct. also, president obama will reappoint fed chairman ben bernanke to another term.

joining us with their insights on what it means for the economy, cnbc contributor david kotak and on the phone steve liesman. what's your initial reaction to what this might mean for the markets f anything? >> i don't think it means anything for the markets, mandy. most people in the market assume the appointment would take up at leen's lodge, two-thirds of the people there thought he would be reappointed. the markets see a continuation of the same policy so there's more clarity, less uncertainty. i think there are two open issues here. bernanke is going to need to arrange a coordinated removal of the stimulus. it took the coordinated worldwide application of stimulus to stem the crisis. that's number one. and we are still short two

governors on the board of governo governors, which means there's a u.n. anymo uninimity rule. he has had to live with that rule because the senate would not confirm those last two seats. it's obscure but important. >> on the coordinated response or the coordinated exit strategy you mean coordinating with the powers that be over at the ecb and and the boj? if they don't coordinate what are the implications to the market and mores essentially the dollar? >> there it is. it's in the dollar. because the adjustment process takes place in the currencies at once when a central bank changes policy. whoa had that and we see signs of it all the time. one central bank makes actions of one currency adjustment. the risk after justment is more intense and volatile than ever before. the coordination with the ecb,

the bank of japan, swiss, the bank of england, there are 153 central banks in this world now, although it's the big ones that count. we're going to see more of that discussion at the g-20 meeting. that's the discussion for bernanke. worldwide coordination. otherwise we really have a high risk in a currency crisis. >> we were talking earlier about -- as we went through the crisis, reaching out to do things and finding unintended consequences, as -- after the lehman thing when money started to hemorrhage out of money market funds and the fed rushed to say, we'll guarantee everything in a money market fund and then money started rushing out of banks because you were only protected up to $150,000, into money market funds. do you see that same kind of extreme if there is no coordination here? >> i think it's possible, art. you know, we have a client in greece. greece raised their deposit limit during the crisis to a fixed amount.

germany took the deposit limit to an unlimited deposit guarant guarantee. the client in greek put it in a german bank. he had a euro deposit in either place. we saw a hong kong client withdraw from the u.s. and put money in a hong kong bank where you had an unlimited deposit protection. here we had a limited deposit protection. you're absolutely right. there are dislocation. people act irrationally to protect themselves and they don't wait, they don't gauge in political discussions so this coordinated withdrawal issue is a huge one. >> steve liesman, weigh in on this one. >> well, first, mandy, i want to say how disappointing it is i'm not in the office when the beautiful people are there. >> who exactly are you referring to? >> i'm talking about art cashin. >> leader armey appreciate that very much. >> yeah, that's what i'm talking about. >> i think the keys here are the

coordination that david's talking about. let's just talk about one thing. i disagree with david on the importance of markets. i think there's a little political message here and that is market still matter to the obama administration. some people who said the -- that what wall street want doesn't matter. maybe it matters a bit to obama and he's following that. wall street wanted this, not necessarily -- i don't know how much obama would have wanted it. he would have liked to have appointed somebody closer to him. remember, there are times coming here when the administration and the fed are going to have to split. right now there's a lot of criticism, i think dick armey talked about it earlier, how they're walking hand in hand. there will be a team when geithner and bernanke will not be friends, when the fiscal authority is going to want to continued stimulus from the fed and the monetary authority is going to want to be pulling back. they have been kissing cousins lately and there are some interesting times coming.

in addition, let's talk about banking regulatory reform on the table and a whole host of other political issues that the fed faces. what's critical about this is it removes the uncertainty about who will lead the fed in these critical political issues that are to come. >> steve -- >> dave, do you think -- >> let me ask you, david, so much of the learning conserve that people credit bernanke with came from tough lessons at lehman, at even bear, are the tough measures going to be simply a matter of retracing those bread crumbs or will they, too, come from tough lessons, from mistakes? >> well, tough lessons only come from mistakes. >> well, that's not encouraging. >> no, it isn't. but it's the way -- it's the way the system works. if you think about it for a minute, a countrywide was the first primary dealer. it was merged. it did not get a failure. it created an increase in

systematic risk. indy mac was costly but permitted. fast forward to bear stearns. lehman the price would have been $150 billion and we don't know what the real decision was. maybe bernanke said, how am i going to go to congress and explain i lost $150 billion to save the world from $10 trillion? who's going to believe me. we don't know if he had four votes and the fifth was a dissenter because he didn't have a full board of governors. there's a lot of forensics missing here. >> we have to do this again on the way out? >> the fed's going to walk a very tightrope in a hurricane here been trying to exit without causing inflation by the velocity of money and at the same time if they keep that firm hand on, not having a second leg down in the recession. so it's going to be very difficult pulling out. there's no easy answer. >> art, if i could just weigh in

on that. my read of the fed right now is they are very sharply divided between those that are ready to pull the trigger now on getting out and feel as if the fed is already too late and think that the fed is behind the curve in terms of withdrawing stimulus. and those who are very much, very patient in saying, you know what, let's wait to see -- until we see the whites of their eyes here. >> thank you so much for joining us. david kotok joining us, and steve, weet get ba'll get back later in the program. a check of futures and then the governor of minnesota, tim tau lenit pawlenty, often mentioned as a presidential candidate, we'll talk to him about the reappointment of chairman bernanke. look at crude, back above 74 but down 29 cents. we'll get inventory numbers out today and tomorrow.

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got any comment or questions, drop us an e-mail. our address at squawk@cnbc.com. we'll get some headlines when we come back and more from our guest host dick armey and art cashin. the cfo of staples shares his thoughts on the american consumer and his expectations for back to school. a lot more to come.

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welcome back to "squawk box." president obama will nominate ben bernanke for second term. the official announcement will come at 9:00 a.m. eastern time.

bernanke's current term is set to expire next january. gm cars will be taking on a new look. they will be phasing out the gm logo on it's cars starting in the 2010 model year. they want to but more emphasis on the individual brand rather than the parent company. and beleaguered car dealers are getting a little more time to deal with all the paperwork involved in the cash for clunkers program. the expired last night. for buyers and dealers have until moon time to file applications for government rebate. let's get a check on the markets this morning. you would think or maybe you could argue because of the reappointment of bernanke futures might rally on that news. instead they haven't done a whole lot of anything. asia was down overnight, europe has been having trouble getting out of the red. dow jones are up about 16 points above fair value. oil's down as the dollar strengthens today. we're back down 12 cents, but

still above 74.25. we'll get inventory numbers later on today. dollar, of course, when in a little risk, dollar tend to do a little better. we're still above 94 yen. beside bernanke what else will we focus on this morning? dick armey and art cashin in our guests. we've got an hour and a half left to talk. we were saying, art, what other surprises might come in the fall. once we see the effect of removing cash for clunkers, that might be one early signal. >> the concern is, and speaker armey and you and i were just talking about it, that we're seeing some growth in the economy, but it's all government-generated. cash for clunkers had people go out and buy cars and may, in fact, induce them to take on some extra debt. the old car was fully paid off, you're going to give me $500 and i'm going to take on some debt.

the home sales are perked up with the first-time buyer $8,000. when that lapses at the end of november, where is the stimulus? where is the consumer going to come from? we may be eating the seed corn. we may not have saved reseven for next year so you could have that "w" a lot of people are talking about. >> you start to hear hangover when people talk about the end of cash for clunkers. you don't feel so good a night after but it was good while it's happening, right? >> uh-huh. >> i would like to get back to where americans have a sober reconciliation of their income, their year earnings, projections against realistic purchases and disciplined use of credit and so forth. we have gotten to be a nation of self-indulgent, the consumer way out of control. now i think they're trying to learn these disciplines back. still, the government then

disincentivizes them from really practicing what they know they must and they're finding themselves maybe buying that car they don't really need to buy because they've got to take advantage of this opportunity while it lasts. >> right. aren't you -- i mean, i can't imagine you're not anxious for auto production to get a boost, right? i saw an analyst report yesterday referencing springsteen. you can't start a fire without a spark. maybe cash for clunkers or other stimulus is the spark. >> but you want a spark that becomes sustainable. that's a similar problem in china. they had a good old-fashioned stimulus package, they're building hundreds -- thousands of miles of roads and bridges and whatever. but their economy's about exports. so it doesn't kick in. it can't convert. some of this stuff is not sustainable. with the government money, when the government giveaway stops, will the consumer follow up? >> do you see other specific

examples? like the housing, things like that? >> absolutely, absolutely. we think that that may see some disappointment. people get kind of hypy and hopy, wow, things are turning, vb's looking for that turn. it's interesting that people keep talking about the recovery starting. but if you read, they go to the fed statement, fed didn't say the recovery. they say the downdraft is leveling off. everybody's talking about leveling off. so far we could wallow in that. you're going to get a little of this and then without sustainability you're going to have a problem. >> like we're eating a lot of corn. staples out with quarterly number. the office product giant earning 16 cents a share for the second quarter, matching wall street estimate. joining us now with more on the numbers is john mahoney, cfo of staples. i was just reading through the second quarter earnings you came out with this morning. what i really notice is the fact you're not giving any decide

answer, not giving any sales forecast, not giving any full year guidance which is interesting because recently in the second quarter earnings a lot of companies are saying they've got increasing visibility. why not you? >> well, i think we said  beginning of the third quarter  last year that our visibility wasn't what it had historically been. we feel like we're in the same  boat. our customers are coming back t us. they're coming back to us with more regularity but they're not buying the discretionary things they used to buy from us. i think that the demand, while it's good and improving, is not going to come back suddenly. so we don't feel like we are the visibility we have in other  times. >> what are you doing to  counteract that? >> well, we're really trying to adjust to a customer that is looking to us to solve problems for them. so we're adding services like our easy tech programs, our copy and print services. we're trying to make technology more exciting. we're trying to make sure that office supplies are more colorful and brighter and have

more fashion in them, particularly as we get into the back to school season. >> i know you're -- sounds like you're not giving guidance, like a lot of other retailers, not, as specific in your guidance. can you say whether or not you believe same store sales off five is the worst you'll see? >> well, it's improved. we're seeing pretty consistent improvement in traffic in stores. as well as the average order. while it's still down, seems to have leveled off for us. so really it's about customers buying the things they need. things like ink and paper are comping positively for us. so a lot of signs that our small business customers are beginning to feel more confident and are ready to begin to grow again are there. but we just don't know if the whole basket's going to look like in an environment where  people are buying only what the need and trying to be very responsible about the way they grow their small businesses. >> yeah, that -- the dropoff in discretionary purchases is very

interesting. that's going to make it pretty much an uphill fight for you if everybody's cutting back and only buying the basics to grow sales is going to be more difficult, will it not? >> i don't think so. i think that if we with-k do more to solve small business  customers' problems, make our  stores more productive, maybe the website more interesting an solve pore of their needs  through, able to help them talk to other small business customers, et cetera, we think we'll be able to begin to see sales grow again in the not too distant future. >> i believe back to school is your biggest selling season. of course, that is upon us. what are you seeing so far and how are you feeling about this back to school season? >> well, like our small business customers, students and their parents are coming back and looking for value. we were prepared for that. we've got a lot of great value deals there. and in the same way we're tryin to attract them to buy the things they need to be successful. particularly the serious  students, you know, the junior high school and high school and

even college students that want to be well-prepared to have all the supplies they need, whether it's a new laptop, whether it's -- >> i've never known any student like that. >> is the penny sale strategy working for you, john? >> it is attracting traffic. you know, we have a long season our season goes until really th end of september. we think it's off to a good start. >> last question. as you know, the second quarter result were so much about companies wringing costs out. with-k that be repeated at least for 3q or is all the water wrun out of that dishrag? >> in our business a lot of the costs are variable. we've been careful to invest in things like services through  easy tech and making sure the customer gets a great experience in our stores. we've tried to invest in labor and cut other things that don't affect the customer. and we still think that there's room to go to maintain the level of profitability we're seeing. >> thank you very much for joining us. john mahoney, staples' cfo.

when we come back, we're feeling minnesota. governor tim pawlenty on the bernanke renomination, the state of the economy, health care plan, presidential pomtics along with leader armey and art cashin. my mother made the best toffee in the world. it's delicious.

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well-being here's an interesting turn of events. according to the future it looks like we'll get a positive open in the u.s. which is interesting considering we had a negative day both in europe and also asia. we've had one element of uncertainty removed from the market and that is the fact that obama is going to renominate ben bernanke for a second term. all morning long we've been talking about the president's nomination. that's just one of the topics we want to talk about this morning with our next guest, tim pawlenty, the governor of minnesota. he joins us via satellite. governor, good to have you back. >> good morning. >> year here with leader armey and art cashin. we do have the president in martha's vineyard and he'll speak in about an hour and a half, a little less than that. is it possible as he takes his

vacation to do a reset on health care, come back and have a different debate that we've been having? >> i think the way for him to do that would be true to his words when he was campaigning and he said he was going to be a uniter, work on a bipartisan basis. he clearly now is looking to a health care plan that could pass with all democrat vote. it's a bad plan from a policy standpoint but that would also be undermining the central premise or promise of his campaign that he was going to be a uniter. instead, he's jamming a really bad plan down our throats. >> you've written, if you want to understand how health care works, you've got to look to the states. do you want to explain that? >> state are laboratories of democracy, that's the way the founding father set the country up. we're the ones who are supposed to try things before you bring them to scale, see if they work. across it country there are great innovations in health care reform keeping costs down, including in minnesota where we've moved ahead and away from this system where we're paying for volumes of procedures, starting to pay for better health. that's one of the central foundations of what could be a

bipartisan health care reform. we're not seeing that very aggressively in the obama approach. they've goofed up every intilgtment program they have in washington, d.c., social security, medicaid, medicare are on a path way towards bankruptcy. they can't run the one they have, why would we give them another one? >> leader armey? >> for example, when we did one of the great innovations of the contract years was welfare reform. we learned that from the state n that case, wisconsin. if you take a look at texas, texas leading the way in tort reform which reduces medical costs. there's a great deal of innovation. we have a couple of examples of states that have shown us how not to do it. >> tennessee. >> massachusetts and tennessee have shown you when the state, i speak generically, the state takes over the operation of a major segment of the economy, they usually screw it up. those two states have proven that that model doesn't work. so the kind of thoughtful,

targeted reform that focuses like a laser on the problem that you see in minnesota, you see in texas and other areas, these are the lemps we should learn at a federal level. >> is that another way of saying, governor, a public option has to come off the table? >> i think the public option should absolutely come off the table. if you don't like the price of potatoes are we going to have a federal government potato farm now? ? if you don't like the price of toilet paper are you going to have a federal government walmart and -- >> it's hard to compare with costs of produce. >> i don't know if i'd agree with that. the rationale for the public option from the obama administration is they want to, quote/unquote, keep the private sector honest. if the commodity is important enough, are we going to have a government intervention to keep the private sector honest? that's a very slippery slope. again, they goof up everything they manage. there's no federal entitlement program that isn't on a pathway to bankruptcy.

they can't even manage the ones they have. >> keeping the private insurer honest is one thing, but the cop op proposal issed to push private insurers out of business. >> go ahead. >> i have painfully read this bill. it will break your heart if you read it. it will scare you half to death. but while they say in the private -- the public option is just an option that's supposed to be competitively on the same scale as everybody else. there are so many coercions, red tape harassments, fines, penalties, audits on the private side you're literally going to force everybody into the public sector option. and i really think what you're seeing now -- >> less competition. >> the president needs to take a little time on his vacation and address the simple question, which i always thought was

important. start by getting -- beginning with the question, what's it about? is our initiative about the health, security and safety of the american people or about the concentration of power and control of the federal government? separate these two issues. make up your mind. and i'll guarantee you, if, in fact, you really think your first priority is the focus and concentration of power over a major sector of the economy, then go with the plan that's out there. if it's about the health, safety and security of the american people, you'll find plenty of opportunity to revise this plan. and i'm sorry, governor, you shouldn't take so much of your time. >> well said, dick armey. you're a legend and i certainly respect all of what you just said and i agree with it. >> how about comment on chairman bernanke, governor. >> i think he dealt with a very difficult and historically challenging situation. from my personal standpoint, i think he became more focused on intervening in the economy

beyond just money supply and managing the interest rates for the central bank and got into things like advocating for the bailout of the auto industry. so i know that the markets are responding well to his reappointment but my personal standpoint he became too much of an interventionist beyond the role of the federal reserve. >> if you have chosen someone else? >> i don't know who i would have chosen but i would have had reservations about reappointing him unless he was able to rein back in his role and involvement in some other issues. add row indicating for the auto bailout was a bad policy direction for the country. >> i mean, i'm sure you understand why there pib -- or you could argue there were reasons for that. are you disagreeing with the reappointment because you see yourself as a potential rival one day in terms of running for president? >> no. i express concern and reservations because he did things like, bail out general motor. now we have this ridiculous

economic framework where we're borrowing money from the chinese to pay ourselves money in the form of cash for clunkers to buy cars from ourselves from cars we own like general motor so some day we might pay ourselves back. that's the country we live in today. to the extent chairman bernanke was the architect of that kind of thinking concerns me. >> so it's a mistake, in your view? >> i certainly have reservations about it. and i'd think long and hard from reappointing him. >> any sense the sfat may feel the way you do? >> well, if i -- if i had to speculate i think the congress would concur with the reappointment. i'm just expressing my personal views. that's different. >> who would you have appointed, had you been president? >> i would have found someone, i don't have a particular name in mind, that understood, respect and appreciate the traditional role of the federal reserve, which is manage the money supply and apply the interest rate for central banking and not get into other policy issues. >> speaking of policy issues,

what is favre going to do for the vikes? >> well, he's going to take us to the super bowl, i hope. we have an individual who's a future hall of fame quarterback. even if he's 80% as good as he was during his peak, that's probably enough to take us a long ways. >> are you going to the game at lambeau? >> you know, i can't go to the game at lambeau. i can't even get ticket, probably. if i could, i couldn't afford them. we have to watch it on television. >> it's gok a fascinating season to watch. governor, we look forward to seeing you. you'll come guest co-host on september 3rd. >> looking forward to it. it was a pleasure, there with the legendary dick armey today. >> legendary. >> i can't believe that. >> he's awesome. >> and a very beautiful art cashin, steve liesman. coming up next, we have today's top stocks to watch and banking on bernanke. saving the financial system, pulling the economy from the brink of disaster. all of that. we'll find out how australians

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stocks to watch this morning. burger king holdings had fourth quarter numbers, 43 cents, street was looking for 33. so they beat by a dime. stocks going to trade a little higher today. revenues were a little light. they said eps result include a negative impact due to the fact

of currency translation. medtronic, revenues were a little heavy this time. 3.93 versus street 3.8, as you can see. chico's fas, are you ever shopped there? >> what do they sell? >> women's clothes -- >> oh, i'm there. >> they had earnings ten cents ex-items versus previous guidance of nine to ten cents. margins -- gross margin, 55% versus 52% year over year. so they improved. we'll do staples. we talked to john mahoney any, cfo, who had not such encouraging things to say. when we come back this morning, what does the banking industry think about the president's move to renominate bernanke to a second term as fed chief? and the regulation revolution. delaware senator ed coffman wants an fcc overhaul of the markets.

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reading about washington these days... i gotta ask, what's in it for me? i'm not looking for a bailout, just a good paying job. that's why i like this clean energy idea. now that works for our whole family. for the kids, a better environment. for my wife, who commutes, no more gettin' jerked around on gas prices... and for me, well, it wouldn't be so bad if this breadwinner brought home a little more bread. repower america. i hope our senators are listening. special interest groups are trying to block progress on health care reform, derailing the debate with myths and scare tactics. desperately trying to stop you from discovering that reform won't hurt medicare. it will actually strengthen it by eliminating billions of dollars in waste and lowering drug prices. tell congress not to let myths get in the way

of fixing what's broken with health care. learn the facts at healthactionnow.org. president obama says ben bernanke has the right stuff.

>> thank you. >> the fed chief will get another four years to defend the economy from recession and inflation. does the banking industry share the same opinion of the fed chief? >> i appreciate the opportunity. >> how will this nomination play out on capitol hill? lawmakers from both sides of the aisle weigh in on the president's latest move to keep the economy from tilting toward disaster. "squawk box" begins right now. ♪ heat it up take it so slow ♪ >> welcome back to "squawk." i'm carl quintanilla. amanda drury is here all week. while becky and joe enjoy some time off. we have a show so big that we needed two guest hosts. they are biggest hosts. dick armey, freedomworks

co-chair and art cashin, director of floor operations at ubs. we're on the crossroads of washington and wall street today. at 9:00 a.m. eastern the president will make a public statement reappointing the fed chairman to a second four-year term. he'll make the announcement from martha's vineyard where he's vacationing. we think bernanke will join him for the ooebt. going to be good, political theeter at the least, i think you could say. according to the text, he will say the man next to me, ben bernanke has led the fed through one of the worst financial crises this nation and world have ever faced. president will argue bernanke dealt with the crisis in his words with bold action and outside the box thinking that has helped put the brakes on our economic freefall. in a shot to the fed chairman's critics he will defend the steps taken by necessity, not choice. they brought us back from the brank. they are steps that are working. john harwood joins us from the white house with the latest. we talked this morning, john,

about what this mean and politically the timing given the fact that some of the news, whether it's health care or a new deficit projection from the white house has not been all that positive. >> reporter: well, it hasn't. the near term deficit project n projectio projections, the revisions for 2010, are more positive, a couple hundred billion dollars smaller deficit as a result of the administration estimating it's not going to need as much money to bail out the financial industry as was originally thought. but over the long term, over the ten-year picture, the deficit picture is getting worse. $9 trillion over ten years. the administration is going to see those numbers come out today in the mid-session review. also the cbo, which may have worse numbers than the administration. and they're hoping for a counterweight of good news that's much larger with the news of bernanke's reappointment which they're expecting the markets to take positively. >> yes. there's been some positive action. we're not rallying on that news, certainly. i'm not sure how much they could

have expected that to happen. any intrigue as to how other players are feeling about this behind the scenes? >> you know, chris dodd, who has been critical of the role of the fed and the role of the administration wants the fed to take in assessing in monitoring systematic risk, praised the nomination but he said he'll raise some difficult challenges. you can be sure the women on the right, dick armey's best friends, will be raising questions about the scope of the fed's involvement, when they're going to reduce that government involvement. i think there's no doubt whatsoever that ben bernanke is going to be reappointed with a very large vote, barring some cataclysmic development between now and january. >> "the washington post," administration official says as far as larry summers goes, he's changing in his job, quote, first because no one can do what larry can, the president's right-handed adviser on the economy, and because the president want and needs his

whole economic team together. do we think they are still one, big happy family? >> well, look. the white house told me exactly the same thing. one big happy family? look, there are a lot of big egos and big brains in those rooms. i think it's widely understood l.a. summers would are liked that job. larry summers has been around politics for a while. he understands political reality and understand why president obama needed to make this choice. he'll stick around. how long he'll stick around? who knows. but for the foreseeable future he'll be there. >> let's bring in steve liesman to the conversation. steve, you know, people have been waking up, eating their breakfast. everyone has an opinion on this, pros, cons, you name it, everyone has their two cents' worth. what are you hearing? >> i think it's interesting what obama said after he said the things that you quoted him on. later on in his remarks he said, there are still serious concerns about the fed's failure to protect consumers. he also says he expects many

serious questions will be raised about the role of the fed moving forward and what authorities it should and should not have. it's pretty clear that this just removes one of several political items on the fed's agenda here. and really it strengthens the fed for dealing with it. could you imagine a fed chairman trying to protect the fed's independence in hearings that will be happening this fall while he was still not reappointed? can you imagine a federal reserve chairman that was trying to talk to his open market committee about exit strategies when people would be looking to him wondering if he would be in office several months from now. i think it's critical that this is out of the way now. the other thing, you know, worth pointing out, remember, when greenspan refutedly became -- became -- or was for a while the greatest chairman, when he was reappointed and volcker resigned, the market sold off hard. i wonder if obama looked that

the history. he said, maybe in 1978 the economy took a selloff as it readjusted to a new chairman but it is a different economy, a different economy with much less sturdy legs and certainty here is the better -- >> the safer option. what do you recollekon? >> i think many hold chairman bernanke in high regard. the steps he took last fall, along with tim geithner and hank paulson were unprecedented, historic, not perfect but i would say not every regulator batted 1,000 last fall but i think we're better off as a nation. one thing dave i've been listening to the program this morning. one thing that's been overlooked it's not just the market reaction but how important i think this appointment will be for main street. what he did last fall to restore the flow of credit that was important for the average american and then also unwinding, you know, how carefully he will have to unwind these credit and liquidity

facilities to do it the right way so we don't hit inflation. >> rob, i'm just wondering about that. i don't have the political ear you have, but this strikes me as at least partially a risk to obama. i'm not sure -- i would say maybe it's worth saying that the fed is not really -- have that high of an opinion on main street right now. to the extent they're i rick here, it's a political belowback where people said, hey, they reappointed the guy that was in charge during crisis. >> somebody they could believe it, right if. >> right. the moves he took notwithstanding after the crisis but he was there for it and in terms of the thingd we talked about with dick armey what the fed may and may not be responsible. we all agree it's banking regulation and oversight was lacking during the run-up to the crisis. >> so you think main street would have welcomed the change, a change? >> john? >> i think it's entirely possible. >> john, how much of a sticky

point will his involvement in the greenspan era be during confirmation? >> i think people view the greenspan era is in the rearview mirror right now and see ben bernanke as part of a change that took place at the fed and the change that took place really beginning in september of 2008. to steve's point, sure, there's some risk to obama, especially on the left, but i think that risk is less are than the risk he would have faced to make a change right now. he's got much more downside risk, in my view, on the right of the political spectrum than he does on the left. and i think he's covering some of that base with with disappointment. >> i think one other thing -- >> steve? >> yes, sorry, go ahead. >> i'm just wondering, do you think bernanke will continue his educational forum? is he going to be on "60 minutes"? will we see him in any unusual presentations? is that going to stop now that he's reappointed or will that go on? >> that's a good question. i don't know about "60 minutes"

again, but as i argued, he came in with a philosophy of transparency. and while some argued, it was a decent debate "60 minutes" and jim lehr were about, trying to campaign to get reappointed, i argued it was about his philosophy. i stick to that. i say he's going to do that and trying to make the fed more transparent. >> i think so. i think he's been well served by his communication style. i think he's been very well served by that. i think given the historic nate nature of the turmoil we're in, he need to educate americans about financial literacy. i talked to a senior administration official last night late, late, and asked a little bit about that. additionally some of the judgment made to reappointment were two factors.

one was that the president has really grown to like him. their relationship has really been developing over the last several months. secondly -- >> that's important to have a good working relationship and communication. >> absolutely. >> and the second piece is the working relationship with tim geithner is very strong. i think having the treasury secretary and fed chair working hand in hand and having a good working relationship, at this time, in our economy, i think is very important. >> steve? >> i just want to build on what rob was saying. very stark met aforehere but in a sense obama is picking his executioner in this way. bernanke is the one who has to start pulling back the easy accommodation of the fed at a time when it could be politically sensitive and bernanke, and we talked about this, and the treasury are going to have to split. it's very, very important it be someone you're comfortable with and somebody who has the same reasonable philosophy as tim

geithner which is stay in place -- the history shows that the fed has -- and other central banks who are battled this type of cries, have been too early to pull back. that's a big part of why obama was comfortable with bernanke, is that he felt he would stay the course during the critical time here. >> steve -- >> that's a pretty dark metafhore and not executioner? >> well, i just mean there's a time when they should, for the same of the nation, for the sake of the fed's independence, be going their separate ways and be on opposite sides and restore that natural tension between the fiscal and monetary toert. wau want at a time like this is you want these guys to be together in saving the economy. there's some research that shows, in fact, during the deflationary time period the fed should kind of cede a little independence to the fiscal authority to show people that there's a potential inflationary

threat which helps the psychology of battling deflation. but there's a time when they're going to have to split. it's going to be an interesting time and it's gok critical. >> one last question here for rob. and then you can respond to steve as well. some traders have written in today saying te were disappointed in the speech at jackson hole because there wasn't enough talk at fiscal restraint, deficit restraint. now they're saying, oh, he already met with the president and he had an understanding. they don't like that. is that response not rational? >> that's a hard bone for me to chew on. another important piece is the international piece. chairman bernanke is held if very high regard by his counterparts. >> and the need for coordination. >> absolutely. i guarantee you that the international aspect of this was something that was considered at 1600. >> i just like asking art what would have happened if he hadn't been. your answer, 500,000 on the dow.

>> yes. >> i think that is a critical point because had he not appointed bernanke, you would have seen the market react. if bernanke within the course of the next two or three, four years at the outside does successfully, this evolves all of this government apparatus which many think is extracurricular and plays himself in a position where he can effectively be the voice of restraint against deficit spending that pushes interest rates through the roof. >> you have hope. >> but in doing so i promise you he will offend the liberals. he's kind of caught between a rock and a soft-headed place. >> we have to run. >> we've got to go, steve. can you make it quick? >> very quickly.

there was a lot of talk here about fiscal deficit at the kansas city fed conference. and the role that's going to play in monetary policy going forward. so while bernanke may not be ready central bankers around the united states and the world that are looking for restraint from washington right now. >> steve, thank you for that. we'll talk to you soon. rob nichols, the president ceo and dick armey and art cashin are sticking around. senator we'll talk to him f cnbc. and as we head to the break, let's check out the futures. "squawk box" coming right back. looks like a positive open out here for the dow jones. some people buy a car based on the deal they get.

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bank of america and the s.e.c. defending their proposed $33 million bonuses paid out by merrill. the b of a says it didn't mislead investors, saying they should are known about the bonuses give given media attention surrounding the bank takeover of merrill. they note merrill disclosed the size of its bonus pool in an

earnings report last year. the s.e.c. says the final takes into consideration the seriousness of the bank's misconduct and we'll see what the judge does with that information. our next guest , senator te kosman send a letter to mary schapiro yesterday outlining his concerns saying the current structure is unfair to many investors. senator is here with more. great to have you on the show. tell us specifically what you think is unfair about the current structure. >> sure. the single most important thing for this country is our credit markets, not just all of our financial markets. some things have come to light in recent months that bring into question how things are -- how things changed. i first got involved in the uptick rule. when i was at wharton, one basic rule was to help in down markets was you have to have an up in

ti -- uptick rule. i moved from that abusive short selling was important in bringing down a number of companies. so a lot of people have contacted me. flash trading, high frequency trading, location of computers, all these things, the fact the market has changed in the last few years and we need a comprehensive approach. the president of the s.e.c. is looking at a number of these issues but we have to look at the total picture that the markets have changed. everyone knows that. i want a comprehensive approach instead of a piecemeal approach. >> would you advocate some of these practices be abolished all together or more oversight, more regulation of them? >> for instance, flash orders, we have flash orders and we know nasdaq went to the s.e.c. and asked about flash orders and they were told to go ahead and do them. when it came out and said what they were doing, everybody said

this is a lousy idea and nasdaq backed off. so i think each one has to be looked at in terms of what the result is. my job as a senator is not to be, you know, prescribing what the s.e.c. should do in each one of these cases. some are really, very, very clear. my job is to see in my oversight capacity to see that they deal with them if a comprehensive manner. the fairness of our markets is key, especially as this economy turns aren't. people want to come into the market, they want to feel it's fair, they're credible and it's a level playing field. right now it's hard to believe that based on what's coming out with regard to a number of these issues. >> senator, we're here with leader armey and art cashin. thoughts on this, art? what's fair, what's unfair? >> well, it's become an object of a great deal of discussion. several things played into it. there have been a few reports out about flash trading. and i think after the gentleman

was cited for taking some of the goldman sachs trading code, the words that were used in the government charge against him is they wanted it restrained because it could unfairly manipulate things. i think that set off a whole wildfire of what's going on. i agree with the senator. i think we need to be transparent and trustworthy. that's the main thing about the markets. and a review if it's necessary should be in order. that should be the goal. not to restrain the markets but to make them transparent and effective and trustworthy. >> a trade that takes milliseconds is a trade, a fair trade, a legitimate trade. >> as long as it's available to everyone else. if it's a trade in the closet, if it's routed a special way, those are items of concern. and so you want to give everybody an equal opportunity. that's what capitalism is all about. >> couldn't these higher

frequency trades boost volatility or push down trade volumes? >> there are some who would think it would be the opposite. that, you know, program trading has now become thoroughly electronic. we're down to -- the average trade is in the hundreds, the low hundreds. it used to be up around 1,000 shares. so you get these instain jous whip saws. people wonder if that's the cause of it. the senator might be on the right track. a review of that will give us a. you already sent the letter to the fed chief. any indication they'll listen to you? >> no, this is a whole host of issues we've been dealing with here. absolutely, it has to be fair. in flash trading some were getting to see the bid/ask prices before others were. co--location of computers allow people closer to the market to find out what bid/ask prices are

and swoop in and get bid/ask earlier. we have to be transparent, have a market fair and credible. the idea that some people get to see the bids -- it's like poker, some people get to see the cards before others get to see the cards. that cannot last. i think we have to change that. the other thing is dark pools, the oel area, as he said, if we're having trades that no one knows about behind -- in a dark pool, that also erodes consumer confidence. everyone's confidence in the markets. this is a big dole. it's a big deal for little traders, big deal for big traders, big deal for people around the world. we have to have fair markets and the s.e.c. has to look it in a comprehensive way because of the incredible changes in the market the last few years. >> senator, topic of the day is reappointment of the chairman of the fed. how would you characterize how the senate vote will -- will it be contested at all? >> well, you never know with the senate. i've been around the senate for

36 years. only a years in senate. i've been on staff and studded at duke university. anybody that tries to forecast the senate is bound for a fall. >> like leader armey. >> this is- i mean, dick armey, i'm sure, can tell you depth, house members most complain about the inpredictability of the senate. no, i think he'll go through. i think you look back at what happened in september. he really made some, i think, incredibly smart moves in term of dealing with this and getting us through it. i met with him a number of times when i was on the transition team for the obama team and the senate, and he's been very good in predicking how things would go and work out. i think he's done a great job. as dick armey points out, he has probably as many problems with my colleagues on the democratic side as he has dick armey's problems on the republican side. but that pay be a sign that he is independent, doing a good job. i'm going to vote for him. i think he's a wonderful selection. >> thank you very much for joining us today. >> speaking of bernanke, when we come back we'll talk about the

fed, the economy and markets, the chairman's nomination for a second term as fed chief. less than an hour away. you are looking at a live picture of the podium where the president will make his announcement in about 36 minutes. we'll have a live report from martha's vineyard in a couple of minute when "squawk" continues. i'm racing cross country in this small sidecar, but i've still got room for the internet. with my new netbook from at&t. with its built-in 3g network, it's fast and small, so it goes places other laptops can't. i'm bill kurtis, and wherever i go, i've got plenty of room for the internet. and the nation's fastest 3g network. gun it, mick. (announcer) sign up today and get a netbook for $199.99 after mail-in rebate. with built-in access to the nation's fastest 3g network. only from at&t.

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order now and get an extra three weeks of fantastic meals. that's right, 105 meals absolutely free. call or click now. guys, you can do this. just pick up the phone and call. you will lose weight. coming up next, the traders sound off on another four years of bernanke at the helm of the

fed. we'll talk to rick santelli with his opinions on chairman bernanke and how he's handled the financial crisis. that discussion continues.

welcome back to "squawk boxx here on cnbc, first in business worldwide. we are one hour away from the opening bell.g let's check in on some of this morning's top stories right now. president obama is renominating fed chairman bernanke to a second four-year term. he'll make the announcement at the top of the next hour. we'll head to the scene in just a minute's time. on today's economic agenda the june case-shiller home price index out at 9:00, the richmond fed survey and consumer confidence following an hour later. now, the rate at which credit card holders fell behind on their payments was far worse in the second quarter than it was last year. but credit reporting agency transunion shows the rate approved sharply from the alarming level we saw in the first three months of 2009. mandy mentioned our top story, the president's decision

to reappoint bernanke as fed chairman. president will make that announcement in about 29 minutes' time, and that's where we find nbc's ron allen. what do we know about what's going to happen in half an hour? >> good morning, carl. the president's going to arrive here with ben bernanke. it's a bit of a surprise. we heard about this late last night. it's not surprising it's happening but it's surprising it's happening right now. the reasons are not real clear. one reason, perhaps, because there's going to be a deficit projection released later today that's going to be $2 trillion higher than originally thought. this is also good news story for the president while he's on vacation because there's not going to be, it would seem, a lot of opposition to mr. bernanke's reappointment. he's, praised generally throughout the financial communicate although there are some critics who have concerns about the role he has played as fed chairman, the amount of money he's injected into the financial system, future inflation and how you unwind this process. but, again, this may shift the

focus of discussion to the economy, to the financial crisis. and how we have kind of gotten past the worst of things. in his remarks the president is going to say that bernanke has essentially led the fed and helped the country and the nation through the worst financial crisis that this nation and the world has ever seen, to use his words. he's going to praise bernanke's background, temperament, courage and creativity. he's an expert on the great depression. the president will say he helped prevent a second great depression. we expect him to be in half hour's time or so. the president's spokes people said he won't be taking any questions. we don't know if mr. bernanke will make any remarks. we expect he would. . the president stays, we have a lot of questions about other things like health care, terrorism interrogation and health care. >> ronal len doing tough work on martha's vineyard. thanks for the update.

the futures are suggesting it's going to be a positive start to the trading day, which is kind of interesting considering the negative lead x from offshore in europe and asian markets, the big plunge on the shanghai market. according to futures it could be a gain of 0.4% at the start of the trade for dow. on set today we have rick santelli at the cme group of chicago, scott mason and our guest host, art cashin and dick armey. gentlemen, a pleasure to are you here on the show. rick, we've been talking about the reappointment of nomination of big ben. what's your thought on this. >> i think i'm going to stick with the wisdom of this great gentlemen on my left, art cashin. i think it was a defensive play. strategically i think it was the only play. the president already in many ways can't really use inherited much longer. and i think with respect to the fed, if you change the leader and the exit strategy goes badly f there's a second side, call it

a double dip, the second "v" of a "w "and he would be more scrutinized and i think the public would be more scrutinizing with that ending. i think most market participants whether you agree with him or disagree with him, meaning ben, i would say he also made the right choice. >> with regard to the market reaction i think it's fair to say that not all, but most expected him to be reappointed. if we take the flipside competent wasn't reappointed, do you think that would have been disapproval of what kind of job he's done? the market would have really tanked? >> it likely would have, very much like the market did not like mr. greenspan when he was originally appointed. because it would have also pointed to a complete changing of the strategy to deal with the problem. traders don't like uncertainty. that's why the market's probably up a little bit. it certainly is a defensive play. what's the political upside to throwing over mr. bernanke?

there's almost none. remember, it wasn't until two whole presidents after mr. greenspan had been appointed originally that he was anointed superman and albert einstein all in one person. nobody said, boy, ronald reagan was really smart for appointing mr. greenspan. they said, boy, mr. greenspan is really smart. inc. the reason we only see a little bump is because it was so expected. and if for no other reason, cynical reasons. >> hey, sometimes cynical's a way to go. you're a floor trader, right? >> yeah, there's not necessarily anything wrong with that. >> no. >> it helps us figure out what's likely to happen. >> always assume the worst and trade for the best. listen, i have a question for a real quick, scott, what do you think about weights going on the supply side? one month bills, two year notes, are we starting to take supply and purchase of supply just as a given? is that a dangerous road? remember, the premier of china

today warned against, just blankedly and boldly optimistic. i wonder if he was directing that across the ocean in our direction? >> don't you think he was talking his position or the country's position from -- >> short? >> 5'9", isn't he? sgo if they are going to buy, they would like to scare the market down and buy at a better price. i'm surprised at how well the splice has been accepted throughout the entire month. i think it's done -- it's denona pretty good job. you're right, we're probably coming to expect this amount of supply, but given the news we're going to get later in the week about the deficit, isn't that the way it's going to be? >> some say the announcement of the renom naction ination of be made to mask over some other numbers, like the deficit. does it mean a continuation of more government intervention in

the markets? as an investor or trader, how should you view that? >> you know, we loved cash for clunkers. i don't know how we as a country got so turned around on cash for clunkers, it's give away a car or now we're talking about giving away refrigerators, or more energy efficient appliances. we're starting down a dangerous path ear. when that get pulled back, then what happens to the consumer? the consumer is already curled up in a feelgt position. what are they going to do when they're no longer incented to go out and spend money? i think we have to worry about that when some of this start to go away. >> thanks a lot. you can catch scott every friday night on "options action" although 8:30 p.m. eastern time. when we come back, allen

stanford is staying put for now. lawmakers from both sides of the aisle ready to way in with their opinions on the charp as the president get set to reappoint bernanke to a second term. we're looking at a live shot of martha's vineyard. we are hearing the president is actually rolling to the school now from his vacation property. he may end up, a little early. this may happen in the next few minute. we'll get you that. quick check on futures. close to our session highs. about 20 -- 35 points above fair value. when this hotel added aflac to compliment their benefits package aflac! it made a big splash with the employees yeaaaahhhh! find out more at aflac!... ...forbusiness.com (laughter)

i don't know who else i would have chosen but i would have had reservations about reappointing him unless he was able to rein back in his role and his involvement in some of these other issues. i think advocating for things like the auto bailout was a really bad policy direction for the country. now we have this ridiculous economic framework where we're borrowing money from the chi nose to pay ourselves money in the form of cash for clunkers to buy cars from ourselves from companies we essentially own like general motors so somedy we might be able to pay ourselves back. that's the country we live in today. and to the extent chairman bernanke was the architect of that kind of thinking, that concerns me. >> that was republican governor of minnesota tim pawlenty questioning the president's decision to renominate ben bernanke as fed chair. i want to get some reaction from republican congressman john shadic from arizona and congressman snyder. there aren't too many people

disagreeing with the president's move. do you think this nomination will be contested to a large degree in. >> i don't think so. i think a smart move but a particular move by president obama, but i'll give him credit. i thought president bush's two best appointments were secretary ber fan i can and robert gates. i think president obama's two best appointments will be robert gates and chairman bernanke. i think it's a good choice. >> congressman, if you can't beat them, join them, that kind of thing? >> i guess it says all the criticism of the bush administration last time around wasn't all correct. i'm not a huge fan of mr. bernanke because of the reasons that were articulated earlier that he has two interventionists in the economy, getting us to borrow too much, spend too much and some policies have been too aggressive but this was a move by the president that was seen as safe and as

changing the topic, quite frankly, from what's dominated the news lately, which is health care, which is not going well for the president. >> we're here with leader armey and art cashin. the conversation keeps coming back to this dynamic that, who else? what better horse do we have to run right now? leader? >> no, don't think so. i think it's the right choice. at this time. and, again, the downside of him going with someplace else would have been extremely difficult. so i have no problem with the choice. the question now, though, is will chairman bernanke come to terms with unraveling this whole myriad scheme of government ent interventions and get us out of that game and get us back to the focused discipline of the money supply. >> i would agree with that. i think there rm some things congress needs to do. we've given the fed too much big of a role. we are it trying to manage the

money supply and also promote the economy. few countries elsewhere in the world try to give it a dual duty like that which i think creates a conflict and causes these kind of problems. >> may i add a comment in here? i agree with what mr. armey said. with regard to the fed's power, when you go back to several months where we were standing on the abyss of essential terrible not only for our economy but for the world economy, i was in a meeting with mr. bernanke and sitting there wondering, i wonder if he sleeps well at night because he and paulson at that time, secretary treasury, they were trying to sort this out. i hear people talking about pulling power away from them. inc. we teed to be cautious about taking away the ability of our government can has potential threats that are unforeseen. >> i want to, before we finish the conversation, i want to get your thoughts on health care proposals out there.

congressman, you've been holding a number of rowdy town hall meetings. what's the public's response to the proposals out there? >> the last town hall meeting i had sponsored by the clinton school of public service, we had 1200 people there, very well-prepared questions on both sides. there was not one harsh word spoken. i thought it was a very good discussion. i think the challenge of us who are proponents of the plan coming out of the house now, i and i know mr. shadegg has his oe pro proposaoe proposals. the point that we need to keep remembering is, it's changing underneath us. premiums keep going up for those that have health insurance, policies get rescinded, preexisting conditions, small businesses getting killed by increasing rates every year. this is about those people, those -- us people, middle class

people have insurance. we're not doing a good job of discussing why we need to do something. >> do you think to get a bill passed you'll have to ditch the public option? >> i wouldn't lose any sleep at all about that, frankly. i'm not sure -- i can see some merits of it. it's not clear to me why that has been latched onas that's the definition of reform. i think it's gotten so much political heat for not much benefit, i don't think. if it were jettisoned. i think that would lower the temperature some but i'm not sure when it's going to happen. >> quickly, congressman, i believe you've got a republican proposal that you think might work. tell us what it is very briefly. >> i think dick is exactly right. we need to take care of preexisting conditions and we need to take care of the people who aren't covered. but he's right that the people we're leaving out of this discussion and the people i think the house bill does not

help and actually harms are the people that have health insurance now and like it. we shouldn't be throwing out that part of the system to take care of the problems. >> we're not throwing them out, john. we're not throwing them out. >> under the system what we're doing is putting them under the government control because we're moving all control of health insurance to the federal government. >> no, we're not. >> yes, we are. >> no, we aren't. >> let me finish. i didn't interrupt you. where we agree is we agree on a market. we don't have a health insurance market in america today. last night on television you washinged three or four commercials for auto insurance, you watched no commercials for health insurance because right now you and i as individuals can't afford to buy health insurance. it's tax-free if our employer buys it but not if we buy it. that means we have no control over it. that means it's not a market. that means costs are going to keep going up and up and up. we can do some market reform. let me buy health insurance, you let you buy health insurance on the same tax-free basis as a company and you'll create a market. and also let us buy across state

lines so that we're not forced to buy from two or three companies in just one state. that's not a real market. that's not competition. that's what's causing costs to go up for the 86% of americans who have health insurance now. >> i disagree with several things john said but i'm going to leave it at this. he and i are in agreement, this problem is about people who have insurance right now and like it. because what's going on now is not sustainable. and i would love to have that continued debate for the next several weeks and months because small business and large business and individuals who have health insurance and like it think they're okay. when you sit down and talk with them, their premiums are going up, they'll having to do exact things as a small business. i talked with a small business -- >> their premiums won't go down if the government takes over the situation. >> john, i think you interrupted me this time. government is over -- >> we are awaitingto make some . a good exchange. we appreciate both of your time.

>> thank you. >> and we're about to interrupt the show in a second because we have a break. coming up after that, more with our guest host, dick armey and also art cashin as we await president obama's appearance from his vacation on martha vineyard to nominate fed chief ben bernanke to a second term.

all right on the left side of your screen, the podium at which the president of the united states will speak in a few minutes about his renomination of ben bernanke. on the right, a pictures of future, not quite the session highs but trading in the green for most of the morning, despite selling off in asia and europe overnight. hard to tell how much of the makts are reacting to the chairman's new, but we'll find out how the market day goes on later on. we're awaiting the president and fed chairman to make an announcement. we'll have that in just a moment, don't go away.

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>> that's what i told all of you to do. >> the president of the united states speaking at martha's vineyard. let's listen. >> the man next to me, ben bernanke, has led the fed through one of the worst crises that this nation and this world has ever faced. as an expert on the causes of the great depression, i'm sure ben never imagined that he would be part of a team responsible for preventing another, but because of his background, his temperame temperament, his courage and creativity, that is exactly what hay h hay has helped to' achieve. that is why i am reappointing him to another term as chairman of the federal reserve. ben approached the financial system on the verge of collapse with calm and wisdom, with bold action and out of the box thinking that has helped put the brakes on our economic prefall. almost none of the decisions that he or any of us made have been easy. the actions we've taken to the

stabilize our financial system, to repair our credit markets, restructure our auto industry and pass a recovery package have all been steps of necessity not choice. they faced plenty of critic, some of whom argued that we should stay the course or do nothing at all. but taken together, this bold, persistent experimentation has brought our economy back from the brink. there are steps that are working. our recovery plan has put tax cuts in people's pockets, extended health care and unemployment insurance to those who have borne the brunt of this recession and is continuing to save and create jobs that otherwise would have been lost. our auto industry showing signs of life. business investment is showing signs of stabilizing, our housing markets and credit markets have been saved from collapse. of course, as i've said before, we are a long way away from completely healthy financial systems and a full economic recovery. and i will not let up until

those americans who are looking for jobs can find them, until qualified businesses, large and small who need capital to grow can find loans at a rate they can afford and until all responsible mortgage holders can stay in their homes. that's why we need ben bernanke to continue the work he's doing. and that's why i've said we c cannot go back an economy based on overleveraged bank, inflated profits and maxed out credit cards. for even as we've taken steps to rescue our financial system and our economy, we must now work to build a new foundation for growth and prosperity. we have to build an economy that works for every american and leads the world in innovation, experts and -- exports. part of that foundation has been to be a regulatory system that ensures we never face a crisis like this again. we've already seen how lax