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going to end with the dow jones industrial average up about 80 points or so. that is five straight days of gains for the major averages. technology a standout today. some of the cyclical stocks as well. there's the bell. and then maria picks you up at 4:00. it is 4:00 on wall street. do you know where your money is? welcome back to the "closing bell." i'm maria bartiromo at the new york stock exchange. we've got a lot going on this afternoon. financials, energy today lead the rally. and the market ends at its best levels of the afternoon. the oil bulls didn't take full advantage. crude oil ending slightly higher. pushing near the $72 a barrel mark on crude. just moments ago, cnbc has

learned morgan stanley's ceo john mack will leave morgan stanley early next year. the dow jones industrial average as a high of the afternoon at the close, up 78 points. nearly 1%. back above 9600 at 9625. s&p 500 also strong. better than 1% on the upside. back above 1,000 at 1,044 with a gain of ten points. the nasdaq composite also strong. a number of big moves like e base of 3%. up 23 points on nasdaq, better than 1% at 2,084. scott wapner on the floor with all the action. >> five in a row is what we said here. the day got started with the better than expected jobless claims and some pretty positive outlooks from a number of important companies. that's where we'll begin today, really with proctor & gamble reaffirming q-1 and earnings guidance, also, and this was new, they said they expect to return to sales growth in the second quarter. general mills another consumer staple out today seeing

first-quarter earnings above initial targets there. texas instruments, a key technology company out of the semi conductor's space. a new 52-week high today. they raised the outlook. they're looking for stronger revenue in every segment. corning says it sees a smaller than expected decline in the third quarter. glass output for flat panel lcds is what this company is talking about today. they see q-4 demand to be stronger than expected. today it was the cyclical stocks as they started to build some momentum into the afternoon hours. that's when the market took another leg up. and you really saw that in a stock like caterpillar and interday there, as that stock started to move higher and some of the other cyclical stocks, then the market started to move higher as well, as did many of the commodities. really that similar story i, the dollar index hitting another 52-week low today. weak dollar, higher commodity,

higher stock market in general. and the airlines, the transports had a pretty good day today. up 89 points here. anywhere from 3%, 4% we saw most of the airline stocks. the transports are talking about that being jpmorgan in talking about the upgrade, assuming stable demand. and then also fuel prices there. and then technology. technology stocks, new highs from emc, broad com and micron. health care as well. there was a lot of speculation on what health care stocks would do today on the back of president obama's speech last night. hmos, many of the stocks were in positive territory. monsanto was a standout. it was to the downside. facing earnings at the low end of the previously announced range. maria? >> scott, thanks very much. the other business headlines we're following. the labor department reports

initial jobless claims sell fell by larger than 26,000 last week. the number of americans continuing to collect unemployment benefits fell to just under 6.1 million. that is the lowest level since early april. the commerce department reports the trade deficit rose more than 16% in july. that deficit now at $32 billion. the highest level in six months. a record 4.7% jump in imports resulting from strong demand for foreign cars and consumer products. the energy information administration said crude fell by 9 million barrels last week. closed justed under $72. a hearing to find out how the securities and exchange commission failed to detect bernard madoff's ponzi scheme. last week the s.e.c.'s inspector

general said they botched five probes of madoff's business since 1992. treasury secretary tim think geithner testified on tarp today. joining me now from washington, hampton? >> maria, well, first of all, the treasury secretary told the oversight panel he's made no decision yet on whether or not to ask for an extension of t.a.r.p. and geithner was repeatedly asked just what is it taxpayers have gotten in return for that $780 billion investment in shoring up the financial system. >> you have a financial system that is more stable. credit is more available. people can borrow at much lower cost. and the taxpayer of the united states can see in the investments we made in the banking system returns in terms of actual billions of dollars. >> however, the five-member oversight panel was skeptical, raising questions about using t.a.r.p. money to bail out gm and chrysler.

does treasury know the actual value of toxic assets. still on bank balance sheets. with millions of mortgage foreclosures, why have treasury loan modification programs only assisted about 360,000 homeowners. and from oversight panel chair elizabeth warren, why was the auto industry subjected to much tougher conditions in exchange for government help versus insurance industry giant aig. >> it's a tragic failure about the regime we came in with. we did not have the legal capacity to manage the orderly unwinding of a large complex financial institution. capacity we do have small banks but did not have for something like aig. that forced us to do things that we would not ever want to do. >> as far as winding down t.a.r.p., geithner says the real risk is ending the programs too early, declaring victory too soon, and the real best insurance policy against a future crisis of the type we've just gone through, true

regulatory reform. maria? >> thanks very much, hampton. tonight at 7:00 p.m. eastern on cnbc, treasury secretary timothy geithner will be in a one-on-one type of town hall event. ask the treasury secretary a question. go to our website cnbc.com. at townhall@cnbc.com. larry cantor is with me. head of barclays capital. sarah from capital management. good to have you both on the program. >> thank you. >> larry, five days in a row. to what do you a tribute this market rally? >> hey, i mean, the economic recovery is looking a lot more normal. it's looking like a normal recovery. the market is behaving appropriately, i think. >> do you agree with that, actually, in terms of putting new money to work right here?

because a lot of people, of course, are worried that perhaps this market has gotten a little ahead of itself based on the economic evidence out there. >> i'd say not yet. it hasn't gotten ahead of itself yet. remember, maria, i think a lot of people have really not participated in this rally. a lot of fund managers waiting for a correction to put money to work. and they're having to do that now. just look at where treasuries are at, how many people own treasuries, how much money is in money market funds. you cited the claims numbers earlier. those are critical if you're waiting for the consumer to get back in the ball game, it's going to happen as the later markets get better. and they're getting better. >> sarah, what about that. we've got money on the sidelines. where is that money coming from? i saw a report earlier that they point out they've had outflows out of mutual funds as well as exchange traded funds recently. who is at the ready with money to go into the sidelines -- into

the market, rather, and where is this money on the sidelines coming from, in your view? >> maria, my colleagues and i would say it's coming from everywhere. in particular, institutional investors who have significant liability problems ahead of them. they need to put that money to work. they can't afford to be in cash. >> and where are you putting your money right now? where do you see the biggest opportunities? >> well, our fund, because we're a national fund, has picked up 78% from the market low fs. over the last six months. so we've done very well in cyclical stocks. now our emphasis is putting some balance in the fund and making sure that we preserve those gains, and carry on with excellent returns going forward. so areas that are really attractive include pharmaceuticals, certain parts of media, some other defensive areas of the market where companies are extremely high wault, and yet the price doesn't yet reflect the potential. >> i see. and are you looking largely

domestic or are you also looking around the world for tuntsd here? where would you say the biggest opportunity is when you look at the global landscape? >> still the biggest opportunity remains abroad. we find more stocks in our global funds outside the u.s. than we do within the u.s. and that has something to do with the inefficient pricing overseas. >> larry, do you agree with that? tell me about the landscape from your standpoint, whether it be sectors or geographies. >> i guess we agree with most of it, but not the last part. in other words, i think up until now, the u.s. has lagged the global economy. and the recovery was led by china and then it spread through asia. we were advising investors focus on asia. now i think you're going to see evidence of slowdown. you're already seeing some in china. you just can't grow at the pace that, for example, korea has been growing at. the u.s. is set to outperform in the second half. we like the u.s. we like equities.

before we were weighted more toward credit. now equities look more attractive to credit. we like cyclicals. so anyway, that's where we're putting our money. >> those groups likely to benefit from an economic recovery that perhaps gains traction in the new year. thank you very much, sarah, larry. we appreciate your time tonight. the president laid out his plan for health care reform before congress and the nation last night. is he able to keep the momentum going. we'll talk with health and human services secretary, kathleen sebelius next. scott sperling, co-president of thl partners. coming up. i've been growing algae for 35 years.

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welcome back. a day after making his speech to congress on health care reform, president obama was at it again today. john harwood at the white house with the latest. john? >> hey, maria. the president's looking for fresh momentum for his health

care effort from that speech to congress last night. he sought that by reaching out to republicans, including john mccain, his opponent last year. and in his remarks today, he reiterated one of the themes from his speech last night, which was that his health care plan over ten years is going to pursue a policy of fiscal responsibility. take a listen. >> the cost of this plan will not add to our deficit. the middle class will be rewarded with greater security, not higher taxes. and if we're able to slow the growth of health care costs by just a fraction of 1% each year, we will actually reduce the deficit by $4 trillion over the long term. >> reporter: now, the president is making that assertion with new confidence, because in that speech to congress, he came down on the side in large part of the senate finance committee bill. that bill unlike the bills that have moved in the house, maria, has gotten a favorable preliminary evaluation from the budget office that it would not add to the deficit. the president is looking for the cbo to bless that plan and

ultimately convince the congress and convince independent and moderate voters out there that in fact he means what he says about not adding to the deficit. >> john, let's talk about the public option. some people on the other side of this debate came out last night after the president's speech and said, look, he had an opportunity to take the public option off the table. he didn't. >> reporter: well, look, the beauty of where i think this process is heading up from a democratic point of view is that the so-called triggered public option, meaning there is not an immediate public option in the plan, but one could take effect if by certain indicators the insurance marketplace fails, let's liberals say we voted for a public option because it's there as a back stop if the insurance companies don't do their jobs, but lets moderate democrats say we didn't vote for a public option because it is not going to take effect immediately. that's the way that the president and the democrats, i think, are going to try to thread the needle here. they're not there yet, but i think that's what they're going

to do. >> how much confidence do you have, john, that we will actually see this on the president's desk by the end of the year? president obama has been very add ament that he has not been the first to bring this up, but he will be the last to make a dent in this. do you think we'll see a bill on his desk by year end? >> reporter: i do. i think chances are pretty good. i have no doubt the house will pass a bill. the house leadership has a lot more power to jam things through and a substantial majority, 257 votes. that means they could lose almost 40 members of the democratic caucus and still pass the bill. the senate's always been more prop attic. the finance committee has been the last to move. it appears the finance committee is now ready to move in a next couple of weeks. then the key question's going to be, can democrats get the 60 votes they need to get past a filibuster. if they could hold all 59 democrats since the death of ted kennedy, and get one republican, they're aiming for olympia snow, the moderate from maine, they could take up this bill and pass it. and you could see the president

achieve his goal. >> john harwood at the white house. i'm joined by kathleen sebelius, health and human services secretary. miss secretary, thanks for being on the program with us. >> thank you, maria. >> you heard john harwood. is the public option, is that an adamant part of this plan? is there a chance that could be taken off the table, or no way? >> well, i think what you'll have in a new health exchange, which really will be available to those americans without coverage at all, or those americans who have coverage that really doesn't ensure what they need, a new marketplace that will include some competition to the private companies. so that you don't have a monopoly in an area of the state. and you don't have any resistance to cost control. we need competition and we need cost control. and whether it's a public option or another alternative, i think the end product will have a

component that keeps insurance companies honest, holds down costs and gives consumers some choice. >> let me ask you about more detail, miss secretary. because that's sort of been the one area that people feel that they are still lacking information about how it is going to impact those people, them directly. so one issue is, if you're putting more people under the umbrella, insuring 47 million americans out there that are currently uninsured, and you've got the same amount of doctors, if not fewer doctors, and the point to do it at a lower cost, how does that happen? how do you make this cost less when in fact you're insuring more people? >> well, first of all, maria, most of those 47 million americans without insurance coverage still get health care. and they get it in the most expensive, least effective way. they come through an emergency room door. they hit clinics off the run. but they're often in sicker

condition and in a more expensive state to take care of. their kids end up in the hospital because they don't have asthma breath a liesers. they don't have the preventive care, so they end up in a more chronic disease. so the same number of doctors actually can provide better care at an earlier point, can deal with people before they get sick. but also, congress and the president recognize that the health care work force is a huge issue. we need more nurse practitioners. we need more primary care docs, more health care professionals, more dentists. there is a big investment in health care work force as part of the recovery act. and there are new incentives in both health reform and what we're trying to do with medicare to put innocence i was on the table for more medical students to choose primary care, to become that first line of defense against illness, to begin to work on prevention and wellness. and i think that combination,

more docs, more emphasis on primary care, and using the health system more appropriately really will put less strain on a system right now that's kind of bursting at the seams, because too many folks are accessing it in the wrong way. >> are you concerned that this ultimately will many excessive government control? >> no. i think that what we have proposed, as the president laid out last night, is sort of the perfect american solution. it's actually stabilizing the private health insurance market. which has been so important in america since the '30s. 180 million americans have private health insurance, mostly through their employers. they like the coverage they have. this actually will make it easier to keep that coverage. it will get rid of the insurance rules that punish too many people because they get sick. it will allow people to actually stabilize their coverage, and put some incentives in place for

small business owners to come back in the market. and then there will be a new marketplace. again, mostly a private insurance marketplace. the only element that will be public is some competitive plan to make sure if you live in kansas, or in colorado, or in california, if one company dominates the market, you get some choice. you have companies that have to compete, and they have to keep costs down because they're competing with a public option. >> what about keeping the cost at $900 billion? a lot of people are concerned about the cost of this over a ten-year plan. can you cap it at $900 billion? or is there a chance it goes higher than $1 trillion? >> well, i think all the plans now are on the table, and i think that's the range of all of them. again, the president pointed out last night very clearly, the bulk of the money that the house is talking about, or the senate is talking about, is already in the health system. it's money we're spending day in

and day out to pay for things that don't really make americans healthier, that don't provide high-quality and lower costs. so we're going to take some of the expenditures that are overpaying for medicare advantage plans, that don't have competitive bidding for durable medical equipment, so we overpay for that. spend too much on drug costs, so we lower the costs for all seniors, and put that money back to stabilize medicare to provide health for seniors and lower drug costs to make sure they don't have to provide co-pays for preventive care any longer. and provide some help for the lowest income americans, so they come into the insurance market. we're talking about an investment over ten years, and the bulk of the money is already being spent day in and day out for actually not such good results. we spend more, live sicker and die younger than any country on earth. >> miss secretary, real quick. your new report on the

employer-sponsored insurance market. how does it impact the employer-sponsored plans? >> well, small business owners are being dumped out of the market, kicked out of the market. it used to be 50% provided coverage. they kept good employees that way. now it's less than 40%. it has tax innocencives for business owners, more choice. i think actually stabilizes the kind of insurance coverage. it also changes insurance rulings once and for all. no preexisting condition, no more if you lose your job, you lose your plan, no more letting insurance companies pick and choose who gets coverage. it's good for all employers and it will bring costs down. >> secretary sebelius, good to have you on the program. we so appreciate it tonight. thank you. >> thank you. >> kathleen sebelius. up next, we talk deal making with chl partners. please help me welcome a long-time friend of glencoe baseball.

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welcome back. more on one of our top stories tonight. john mack will stel down as ceo of morgan stanley. and keep the chairman title effective january 2010. joining me charlie gasparino to talk more about this. i just hung up with morgan stanley and they do con firl this is part of an orderly succession plan, that this was

an 18-month process, in fact, where john mack discussed his succession with the board 18 months ago and has said throughout that period, till today, that when it came to his 65th birthday, he wanted to step away from the ceo role. his 65th birthday is this november. do you have any other information on this? >> i actually broke this story a month ago, where i said point blank, john mack will be stepping down before the end of the year as ceo, remain as chairman. jim gorman who runs the brokerage division will eventually be the ceo. you remember when i broke that, it was right around the time of second quarter earnings, which were extremely disappointing. yes, they've thought about success for a long time. i really do think there's an issue here about the board being a little bit uneasy about the direction of the firm. the fact that they missed -- they lost money in the second quarter, citigroup, and i think that was a problem. so i think, listen, john's been

talking about leaving morgan for a while. talking about success. but i think the timing is interesting. >> mack definitely did take on fair amount of risk. and lead the firm to super profitability before all of this occurred. so you could, i guess, go back to that, that he did take on some risk. >> well, you know -- >> to handle this success in this way is certainly a coups given the fact we've seen so many other success failed plans at so many other firms. >> you're absolutely right about that. they're smart enough to have it sort of planned out. there are two people in the rush, right? gorman and wally chama. >> wally chama is staying. also a positive point to make. >> that's very positive. this is an orderly place. but there is a degree of tension, i believe, over john and the board over this issue of missing the second quarter earnings. i think it would have been done next year if it wasn't for that. >> it certainly was understood

and expected that he was going to step down when he hit 65, which is this november. we should point out that apparently he's going to stay on with the chairman role for between two and three years, which is also worth noting. he's still at morgan at chairman in 2010. and by the way, gorman has a terrific resume. i know you'll agree. having turned around merrill lynch, putting together the huge morgan stanley smith barney network. >> i remember what this means. because gorman, he was never a broker, but he ran brokerage divisions at merrill lynch, over here. this shows you how much they're going in that direction of advice, giving advice to the individuals. and yes, you're right, these guys are grown-ups. think about it, how many blood pets have we seen out there in terms of success, right? in. >> right. >> and these guys visit in a very grown-up way. however, we have to point out

that there is tension between the board and john mack, particularly over that second quarter loss. which is pretty amazing. and i think it reaches a point recently, when i reported it a month ago, that was right around the time of the second quarter earnings, where the board wanted to make the move this year to show that the firm is moving forward. >> charlie, thanks so much. on the telephone there. timothy geithner relaying an upbeat message to the t.a.r.p. panel this afternoon. mr. geithner said the government's scaling back many of their special loan and guarantee programs is a sign of strength. and it is emerging in the economy and the financial system, that strength. one year after the collapse of lehman, does it necessarily signal the worst is over. we get some answers on that with my next guest, scott sperling. wonderful to have you on the program. >> thank you, maria. >> how would you characterize the environment right now? >> i think there's a level of optimism that is warranted that we have hit bottom in the real

economy. i think the public markets, both on the equity side and the credit side have performed extraordinarily well, obviously much better than we might have hoped as we looked at the bottom in the march time frame. the reality, though, is that it's still a very fragile recovery. the equity markets have priced in a very strong recovery, if you look at the pe ratios and enterprise value, ebda ratios of most of the companies in the s&p 500. and what we need is to make sure that we have very few missteps in order to meet the expectations the market has set. >> so let's talk about deal making and opportunities from your standpoint. where are you finding value these days? >> well, we've been looking very aggressively at companies that provide services to other types of other companies, so that they

can help reduce their cost structure. this would be business process, outsourcing type companies. we think that sector has been very interesting. if you look across the board at the consumer side and retail side, there's been a very strong recovery in the multiple of those companies. i think most people in our industry had the expectation that we would see the opportunity to buy companies in the five to seven times cash flow range. the public markets really shot right by that, and so it's difficult to find companies that are good companies at those valuations. you're really looking at situations where you're being asked to pay anywhere from seven to nine times for companies in most sectors. and that requires a degree of certainty about the economic environment that's not quite there yet, but that we hope will start to coalesce a little better over the next three to six months. >> other managers of smaller and

mid-cap companies, scott, pardon me, will tell us from time to time that they still don't have access to credit that they need. and it's still very much a tight environment out there. not necessarily the larger companies, but certainly in the small and mid-cap range. how do you see that? >> i think that's probably right. i would say the credit markets have been nothing short of phenomenal over the course of the last 90 days, in terms of providing capital at reasonable -- still pretty rich pricing relative to where we were 18 months ago. but reasonable access to capital for larger companies. that's largely been done through the high yield market more than the bank market. but we're even starting to see the bank market come back into play. smaller companies have more pressure on them. there's more uncertainty about their ability to ride through another downturn, if it happens. and i think that's what you're seeing in terms of the market's willingness to provide more risk capital to them at this point.

so as we get more confidence in the sustainability of this recovery, which we hope to see again over the next six months, i think you're going to start to see the credit markets start to become more open to providing risk capital to smaller and mid-size companies. >> what can you tell us about what has gone on with regards to private equity, and the banking sector really in terms of those loosened rules from the fdic? some private equity executives feel they could have gone a little further. you know, the banking sector needs capital. private equity firms want to invest. yet there are limitations. >> yeah, you know, i understand the concerns of the fdic and they're reasonable concerns, to make sure that the capital being put to work in the banking sector is not the so-called hot money, that it's there to invest and be patient as these companies recover. and one of the reasons for that is the fdic is retaining significant risk. they don't just want the

troubled assets handed back to them, because the way the deal was structured, the new owner of these banks can put it back to the fdic. so they're looking for players who are willing to help build the business over a longer period of time than a 12 to 24-month time frame. i think the reality is private equity has long committed itself to investing in companies for long periods of time, and typically holding periods are four to seven or eight years. so it wasn't clear to many of us that it was necessary to impose a hurdle on the private equity industry to them putting capital to work in helping to alleviate some of the problems that we have in the banking situation. i do think restrictions on the ability to quickly trade those positions would be reasonable. i think we'll have to see how this higher capital reserve

requirement, which may be the most important element in what has been proposed, by the fdic, how that impacts the ability of private equity to help deal with the problems that we have in the banking community, or whether because private equity would be competitively disadvantaged by having to hold those higher capital ratios, it will create a significant hurdle for that money to come into the -- to help alleviate the troubles that we're seeing in the small to medium sized banks. >> it's not their dna, the private equity dna to have a huge reserve fund. >> well, i think the most important thing is that we want a competitive playing field, not just for the purchase of these assets, but as an owner of a company, you want your company not to be competitively disadvantaged. and if you own a bank that has a much higher capital reserve

requirement than the bank next door, just because of the nature of the ownership, obviously you could be competitively disadvantaged. and that has to play a role in how private equity would value those opportunities. >> scott, are you bidding for any of these banks? >> we've looked at a number of these situations. we were -- and quite frankly, we are a participant in the financial services sector in a very heavy way. but more in the transaction processing side of it than the heavy balance sheet side. some of the fears that we have is that you can't understand the balance sheet of these very large institutions. and even a small to medium size bank has a very large balance sheet. and that's one of the reasons why it's important that the fdic play the role it's playing, which is to share a significant amount of the risk with the new owners. so we're going to continue to look at it. you know, right now we're still

reasonably cautious. >> we'll leave it there. scott, great to have you on the program, as always. >> you're very welcome. thank you. take care. foreclosures numbers, what do they say about the market now. - ( classical music playing throughout ) - wireless can bring

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as they say, the devil is in the details. we have all the details. diana. >> reporter: as you say, the foreclosure numbers held steady in august, but a steady from a record high in july. take a look at the numbers, if you will. over 358,000 properties receiving some kind of foreclosure notice in august. july's numbers were up. if you break it down by type, the fall was largely due to a 13% drop in reos, the final stage of foreclosure when the bank takes back the property. bank notices or auction notices actually rose 3% month-to-month.

>> unfortunately the foreclosure problem is not going away anytime soon. there are more foreclosures coming in the pipeline than going out the other end. the catalyst is now different, it's job losses. >> reporter: in a brand-new report, housing analyst ivy zellman said the foreclosure timeline has doubled, and lender's self-serving motivation. foreclosures in process are up 88% from a year ago. we do not believe investor demand will be able to absorb the demand. now, banking analyst meredith whitney isn't too bullish either. she's talking about job losses having an effect on home prices. >> no bank underwrote a loan with 10% unemployment. there's no doubt home prices go down dramatically from here. or from here. just a question of when. >> reporter: whitney estimated in her report a month ago that

home prices could fall even 25% below where they are now. despite the four-month price runup we've seen over the past four months. she said those are simply seasonal. maria? >> diana, thanks so much. meanwhile, moody's also had negative words on the banking sector. we've got the moody's report on banks next. one of the major upheavals of the financial sector. the ceo of florida's bank united thinks we're not out of the woods yet. he's joining me next. i've been growing algae for 35 years.

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if you think the banking system has turned the corner, maybe think again. matt nesto joins us now with a report from moody's. >> they call it fundamental credit concerns. basically saying they still think there's a lot of trouble ahead. these are the highlights of the reports that i said moody's bogs banks. it didn't hurt the financial sector today, but it did see regional banks lagging. the .9% of the gain we saw today. $470 billion, just to give you context. we've done $70 billion painfully so far year to date. almost seven times as much still to come they say. they see multiple quarters of

losses, and stress on capital levels deterioration of the asset quality has not peaked, they say. and then they also point out, we talked a lot about commercial real estate and the coming problems there. commercial real estate as well as particularly residential construction loans. holy mother of grail. that one, 25% npl rate in residential construction loans. if that wasn't enough, again, we heard from meredith whitney just a minute ago, this is what she had to say about banks. >> the fundamentally things haven't gotten better. the crisis situation is over, but it's going to be a long haul. really difficult and painful haul for consumers, for state and local municipalities. >> so let's play whack-a-mole real quick. here's a few that didn't get it done today. maria, back to you. >> matt, thanks very much. treasury secretary timothy geithner said today it's less likely that the banking system

will impede a u.s. recovery. where do we stand in the sector right now. particularly one year after the crisis began. we bring in an executive who knows the industry better than most, john is with me from north forth bank corp. good to have you on the program, john. >> thanks for having me. >> $470 billion in additional writedowns for the banking sector. do you think that's what's coming? >> unfortunately we've been seeing this for quite some time. we're also facing as the fdic announce on the troust list. 28% of the banks that are insured by the fdic in the first quarter. in the second quarter, rather. had losses. and so we are certainly not out of the woods. we're in for difficult times. >> why are we seeing the banks going under? because of unemployment that it's sort of a lagging indicator where people take a couple of months before defaulting on, or not being able to pay the mortgage? >> there was a period of time, if you recall, when the

administration was trying to figure out how to properly monitor the modification programs, when we actually declared a moratorium on foreclosures. and that went on for several months. that moratorium ended several months ago, now we're seeing a buildup in the pipeline that is in some result of the moratoriu >> so how -- where does it go, then? in 2010 we have the headwinds of a default in the reality estate market. >> it's been a mounting problem that we've been talking about for the last year. it's also in discussing -- matt mentioned the real estate, most of the option arms are resetting in 2010 and 2011. so that's something that we have to face ahead of us as well. at's in the residential side. so we're in for a long haul. never a better time when more of a distinction, by the way, in between banks. we talk about banks as if the 20 banks that were analyzeded by the federal government represents the banking system. you have to remember there are

8,500 banks in this country and most of them don't have a lifeline to absorb the losses that are going to be coming their way and most the smaller banks, particularly regional banks, were the banks that were funding residential construction growth and commercial construction growth in the local communities throughout the country. and they're taking it on the chin right now. >> well, this is a really important point, particularly, given the fact that some of the larger banks have gotten government's assistance. and clearly if you're an investor out there, where are you going to invest? you're not going to invest in the bank that doesn't have access to the government money. you're going to invest in the larger bank and so again, you're getting hit by that notion. >> right, and if you're worried about too big to fail, last year at this time, you should be worried three times as much about too big to fail now. because we have -- because we've given a massive dose of medicine to the banking industry and most of it went to the large institutions, properly so. i suppose, that we have disadvantaged a very large sector of the banking community. and we will probably continue to do so as we -- as we wind our

way through these difficult sometimes will we see another capital raise, an extraordinary capital raise, obviously, we saw earlier in the year from the major banks. so he here we have the private equity firms wanting to invest in some of these banks and the fdic says look, yeah you can invest, but there are going to be limits because we don't necessarily want private equity money. >> i think that the fdic is being cautious in this. i think what they showed in their hearings and promulgated that they tried to be balanced their way. i think as the need for private capital increasing, and i believe it will over time and as regulators get more and more comfortable with private equity owners as they get experience with them over time, that they'll open their arms more to the private capital. >> it sounds like the market has gotten ahead of itself. >> it certainly does. >> yeah. how is your bank doing, bank united? what are you doing to offset all of these worries. >> very well. we bought the bank, as you know, from the fdic.

it was a failed institution and we bought under a loss share arrangeme arrangement. that's going better than we thought. as a result of that, we are one of the healthier banks in the united states right now, overcapitalized with a tremendous amount of liquidity. we're doing very well, competitively, but unfortunately in our marketplace that which is florida that has 350 banks, it's not the same story. we're seeing a lot of struggling and we will lose a lot of institutions. >> john, thanks so much for sharing your insights today. >> nice to see you. >> we appreciate it. john kanas, president. the consumer could be a market driven tomorrow. we'll explain. what else is on the docket when that opening bell rings tomorrow morning. you're watching cnbc, first in business world wide.

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breaking newsdesk. we've just got word from the department of justice that are there some indictments coming down concerning the standard financial group. this one involved the former global director of security at the fort lauderdale office. thomas raphanelo has been charged in the three-count indictment, conspiracy to obstruct and documents and to obstruct the proceedings of the s.e.c. so more indictments in the stanford financial case coming down. we'll be right back.

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