on the floor of the new york stock exchange. welcome back. you might say, gee, not much happened, but we were down earlier in the day. financial stocks were leading the way in the middle of the day. new highs, jpmorgan doing well, goldman sachs at a new high. general electric, our parent company, when it hit $15 late in the day, boom, stocks moved up. we're getting modest breakouts with key names. that's going to be the story here. once you see these technical breakouts, holding up and

smoothing the market forward in key stocks, that's going to keep the bulls talking about where the market goes next. mostly to the up side. that's where the bulls are right now. you know who's next. there's the closing bell. do you know where your money is? welcome to the "closing bell." here's what we're following at the close. a late run by stocks helping erase earlier losses. the major averages ending the day in the black. shares of general electric, the parent of cnbc, helped lead the reversals, spiking to $15 for the first time since january.. a federal judge rejecting bank of america's settlement with the s.e.c. over bonuses paid at merrill lynch. here's a look at wall street. after spending much the session in negative territory, the dow

finishes higher by 19 points. the s&p 500 higher by more than 6. the nasdaq composite higher by near 11. bob is our eye on the floor of the new york stock exchange. there was so much focus on president obama today because of his address across the street. but the fears about a trade war with china, we shook it off at the last minute. >> we did. i think that's the resiliency of the overall market. we did see stocks moving up, early on. but michelle's right, folks, that should have caused a little bit more of a concern. it did earlier in the day. stocks opened on the lows today. but we moved very quickly off of those lows. let's look at a few important names. general electric, our parent company, the stock of the day because of a very important technical level at $15. you cannot see a volume chart here, but just around 2:15, 2:30, ge hit $15.

the overall market rose as well. general electric hasn't been at $15 since january. this is a technical breakout. financial stocks had been lagging the overall market for the past week and a half, also did well. jpmorgan also sitting right near a new high for the year. some stocks moving up rather aggressively throughout the day. started in negative and ended nicely in the positive. there were interesting developments. the vix, which is a measure of the cost of buying options on the s&p 500. it was up early on. now it's below 24. the lowest levels since mid-july here. ibm was discussed rather much in the middle of the day because big names like ge, if they can break out, maybe ibm can. didn't quite make it there, but got awfully close. tire stocks up today. michelle and i were just talking about the fact that the president slapping a 35% tariff on imports of chinese tires. sparking talk of a trade war. didn't amount to much in the

overall market. >> there was some criticism whether or not he should be let them involve in the trade. >> i think most people argued that he should.d. there was a lot of talk about that, comments on "ferris buehler's day off," and the 1930s. let's talk more about the president. a merger of sorts between washington and wall street today. president obama spoke to leaders of the financial world at federal hall across the street from the new york stock exchange. nearly 1,000 people showed up on wall street outside in the hopes of getting a glimpse of the president. those in attendance inside were some of the biggest names in the financial industry. there you see paul volcker, the former fed chief, dick parsons, and the former head of the s.e.c. there you see pete peter son, head of blackstone. the president outlined what his administration did to prevent a

second break depression, and a vision for future regulatory reform. he at once chided wall street. but also tried to give skeptics that he believes in free markets. >> we will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis. where too many were motivated only by the appetite for quick kills and bloated bonuses. those on wall street cannot resume taking risks without regard for consequences. i have always been a strong believer in the power of the free market. i believe that jobs are best created not by government, but by businesses, and entrepreneurs, willing to take a risk on a good idea. i believe that the role the government is not to disparage wealth, but to expand its reach. >> the president reiterated his desire for the federal reserve to become the super regulator of risk in the markets. he also reinforced his idea of a consumer protection agency for financial products. higher capital requirements for

banks and a clearinghouse for derivatives which caused the trouble of the wake of lehman's failure. chief washington correspondent john harwood has a one-on-one interview with president obama on the state of the economy and wall street regulation. that is coming up 6:30 p.m. eastern time here on cnbc. and then after the president, you'll want to see jim cramer's take on the fall of lehman n brothers. then at 8:00 p.m., our two-hour special, one year later, the week that shook the world. mark haines and erin burnett will look at last september's historic meltdown, where we are today, where we are headed. that is tonight 8:00 p.m. eastern time right here on cnbc. let's break down the market's action with jack at harris private bank, along with mark at russell investments. guys, good to see you. jack, let me start with the news of the day, which is the growing worry about a trade war potentially with china. starts with tires, then they want to talk about chicken. it doesn't seem to end. how worried are you about this

incident in particular, and jusc rising tariffs in general when it comes to the overall market?c >> well, i think that would be certainly a terrible direction to take trade in the overall !c economy. it really hurts everybody.!c and it's probably one of the !c biggest impediment to profits moving forward.!c any talk about protectionism, either here or abroad, certainly is well worth sending shock signals around the equity markets. >> mark, the president defended his moves when it came to what he did with china. do you think he defended it strongly enough? does it worry you? what else about the speech, if anything, had impact? >> yeah, i think i would agree with jack as far as the long term ramifications. i think this is a kind of a shot across the bow by both the u.s. and china in this regard. so on an individual item, i don't know if i'm too worried about it. but if it is a trend that continues, i would agree this is probably not a direction that bodes well for the long-term

economy. as far as the overall speech in general, i think it met with the response that you would expect it to. what to me is most interesting about today, this market had every reason to sell off today, based on what we saw in asia last night and how the markets were opening there with the news. the speech that was no real positive news today. if the market needed an excuse, it had it today in a couple different areas. and it still closed at the highs of the day. that's sending a remarkable message that this market wants to move higher. >> that leads to my next question that i had ready for jack. incredible resilience. every day we see it, jack, especially in face of bad news today.!c you're bullish, right?!c >> absolutely. yeah, still bullish.!c i think you're right.!c we've got a combination of a loc of cash sitting on the !c sidelines, and a lot of skeptical investors out there.!c so any incremental news to the positive will tend to push the skeptical investors stay more optimistic. that money will find its way back to the equity market.!c i think it's a huge stockpile of

fuel sitting on the sidelines that could help push this market higher over the next four quarters. >> what is the message you're going to watch for to tell you it's run too far, too fast?? a lot of people make that argument that's already happened.!c jack?!c >> well, i look at valuation.!c valuation is still reasonable bc most measures, michelle. there are some, i'll call it vent risks that are out there. perhaps that could cause problems. one is certainly widely known, and that's commercial real estate. i think that is finally the devil we do know. so i'm not convinced that that's going to be a problem.!c the other, swine flu has a potential of being an issue. but overall, you know, like i said, i think on balance there's certainly more positives than negatives. >> mark, you're underweight consumer staples and health care. that would suggests me you're bullish as well. you're down on the defensive sectors and up on the perhaps

riskier sectors. >> that's absolutely correct. the technology and financials has been one that our managers have had on for this year. they've come in a little bit. but they're not running to those defensive sectors that you mentioned. the underweight to health care has come down a little bit. i think that's more of a political voice being spoken there. and not so much a defensive move. i think as we move through and whatever does get ultimately put in on the political arena related to health care, probably more subdued than it first was thought to be. technology, financials, materials, still more of a cyclical bent. so co-signing with where the markets are going up from here. and agree exactly with what jack has said. >> good discussion, guys. see you later. in the year since the collapse of lehman brothers, the financial word has gone under seismic shifts in the landscape. what happened, where we might go from here. and then a little later, citi's

ceo vikram pandit. morgan stanley chief john mack tells maria the financial crisis was a big miscalculation. >> i don't think we really believed at the time, or rn understood at the time how bad it really was. ♪ must have been one of the strangest days ♪ everyone may face the same uncertainty. ♪ some would say that you won't find ♪ protecting yourself, however, requires good decisions. find strength and stability with mass mutual, a company owned by its policyholders. ask your advisor or visit massmutual.com.

john mack earned a nickname mack the knife for his ability to cut costs. mack's cut throat style proved to be a success. leading the company he helped build for 30 years through the toughest times at morgan stanley. a $10 billion federal reserve injection, plus a $9 billion investment by mitts you by shi stabilized the firm. in january, mack was back on track to grow morgan stanley. acquiring a stake in the newly formed morgan stanley smith barney for $2.7 billion. that created the largest broker dealer on wall street. a bold strategic move, perhaps

the first of many to come. so much has changed at morgan stanley in the past year. it became a bank holding company. in january it formed a joint venture with citi, creating morgan stanley smith barney. for john mack, the biggest lesson learned is not to substitute taking risks at the expense of making money. here's more from my exclusive interview with john mack. let's talk about the environment today. one year after the collapse of lehman and merrill's sale and the government taking 80% of aig. how would you characterize the market one year later? >> there's a calmness back in the market. i think people are still shell-shocked. everyone, including morgan stanley, have gone out of their way to make sure that we're in a better position as we go forward in these markets. when i say better position, we've raised a lot of capital. we probably have the highest tier equity capital in the business, if not the highest, one of the highest.

we've reduced leverage dramatically. we have a new regulator in the federal reserve, which for us, and one of our competitors, goldman sachs, wur bank holding companies. that's a big change from where we were a year ago. so that's huge. and of course, we've looked at our risk management, and where did we make mistakes and where do we need to add more resources. and we've really bulked up on the mismanagement side. so one year later, i think everyone feels better.r. but everyone is still concerned. one of the issues, when the crisis happened, and everyone came together trying to find what's the right solution, and then the government stepped in and came up with t.a.r.p., and really, i think you have to give credit to bernanke and to paulson and geithner, what they did, how they did it. i know there's some criticism. but at the times things were moving so quickly and so fast, i thought the reaction that they had was really outstanding.

and i believe working with other regulators around the world, really stopped the global meltdown. because it was very close. >> when you look at the industry as a whole, i mean, you're talking about less risk, less leverage. perhaps a smaller industry.. what does this industry look like going forward? how changed has it become as a result of that weekend, that moment in time? >> well, it's changed -- i mean, number one, let's be clear. we're in a risk business. the banks, morgan stanley and others are going to be taking risks. but to have a leverage, at one point our leverage was 31 times leverage. today we're probably in the 15 times leverage, maybe 16 times leverage. it was clear the industry, having been rewarded for taking that kind of risk, and that much leverage, has really retrenched. so going forward, yes, we are going to take risk. i think it's going to be in more

liquid securities. but clearly am not have the kind of leverage that we saw a year and a half ago or two years ago. so clearly that's number one. number two, again, with our new regulators, i think a balance sheet is going to be looked at. what are the assets on your balance sheet. are they liquid securities, are they securities that when you do need to either take your balance sheet down, or adjust your balance sheet, do you have the flexibility to do that. so one year later, clearly that has got all of us to look at our balance sheet, our leverage, and going forward, i think those are permanent changes.s. >> looking back, what do you come away with as one of the most important, or the most important sort of seams for business going forward?d? >> i think for me, anytime you've had such a tremendous run in the markets, we begin to lose our discipline. and you get a sense that you can

take more and more risk, because, you know, those firms that were taking richks were making even more money. so you need to have the discipline, to look within and say, does this fit with our balance sheet, our capital, and our risk management. are we going out of our comfort zone in some of the products, we're either trading or investing in. so i think going forward, the leadership of not just the morgan stanley, whomever that may be, or at another firm, needs to have the discipline to say no, we will miss the business. yes, i know we may slip in the league tables. yes, i know we may not be as profitable as some of our competitors, but we have a strategy, and we're going to stick to that strategy. >> how did it happen? i mean, you know, you hear stories that, look, we weren't necessarily understanding the complex securities that were on the balance sheet, or being

traded. is that what happened? people didn't know how complicated some of these instruments were? or what? i mean, it seems like all the geniuses who have led -- you know, have been the titans of finance, internationally, sort of missed the ball on something. >> well, look, i believe, at least the street did understand the securities. i think what they didn't understand, the miscalculation, was how dramatic the mortgage market was going to go down. i mean, i don't think anyone believed -- you hear people talking about what is the percentage of default rate. is it one or two times historical averages. it was dramatically more than that. so it wasn't so much that they missed the structure of the securities, it was much more, no one anticipated how these securities would react when either defaults or takeovers of people's mortgages started. it was much greater than anyone anticipated.

clearly i think that was a big issue. >> what was the most important thing that the government did, the fed, or the government, whether it's treasury or -- were there one or two actions that came out of the federal reserve that were truly critical? >> well, i think what they did, again, it's paulson, bernanke and tim geithner, they really showed leadership. that was the best action. they took control. and they were -- i don't know if i got four or five calls a day from hank paulson, or ten calls, but he called me a number of times every day. tim geithner, i remember tim calling and say, okay, john, give me plan b. what do you do if this happens? i think that kind of involvement. and clearly, they were not just working with me, they were talking to other banks. i think that kind of leadership and involvement was the critical piece in keeping the meltdown from being much worse than it was.s. >> did you know how bad it was before sort of these calls, and before really getting into it

with these guys? >> well, look, when you stock, you come out with record earnings in the third quarter, and your stock drops 30%. you know, it was pretty bad. we came out with that. so you know it's bad. but what they -- to their credit, they really said, we're here and we're going to help you. and i think they did a great job.b. you always criticize, you can always look back, and say, you could have done it a little differently.y. but they were superb. >> how was the t.a.r.p. impacting your business? i know that you returned t.a.r.p. funds in june, $10 billion. tell me the impact of all of this for morgan stanley.y. >> it was an interesting meeting. i was at the imf in the fall, and sunday night i received a call from secretary paulson asking, can you come to our -- a meeting tomorrow at 3:00 or 3:30 at the treasury. the answer to that is yes. so we go there.e. and he lays out a plan that he

wanted, i think there were nine of us there, a plan that the federal government was going to put money into the system. he would like all of us to take that money, because he wants to have a very strong financial system, and he believed even though some of us said, you know, we really don't need it, he thought everyone should take it. and as we talked about it, it was clear it was the right thing to do. there was a little pushback from one of the banks on the west coast. but by and large, we all said, look, if this is what you want us to do, you see things we don't see, and they did, it was the right thing to do. and i think it did help the stability. >> do you think we'll see more consolidation in your industry? >> we've seen a lot of it already.y. i'm not sure where else we can consolidate. if you go aefr the last -- you pick the time, 40 years, 20 years, 10 years, consolidation continues. but at some point clearly you're getting down to just a few very

large players. so i think the pace of consolidation clearly will slow. i'm not sure what happens to the smaller broker dealers in the e united states. you may see consolidation there, as they join bigger firms. but i'm not seeing, or even hearing people talk about a lot of consolidation going forward. i don't think so. >> are there new things you'd like to see done that haven't been done yet? and also, what about a global overseer? i mean, clearly that moment in time, the last several years have shown us that it's a small world and we're all connected. what do you think needs to be done in terms of oversight in the regulatory environment? >> a couple of things i would like to see. i would like to see some kind of consolidation of our regulatory framework. i think we just have too many regulating bodies, and a lot of it can be put together and buttressed with more, either financial support or human support, to do a better job.

and i think there's a real strength in putting some of these agencies together. if you go back prior to the new york stock exchange going pub c public, the new york stock exchange had an enforcement unit. we had the nasd and the s.e.c. after the exchange goes public, now we have finra, which is the coming of the new york stock exchange and asb. should that all be part of the s.e.c. and put more resources into the s.e.c. so there's one example. there's been a lot of talk about the cftc, and should it be part of the s.e.c. i know there are a lot of issues. i don't quite understand all of it. but that should be considered.. the other thing i would like to see, it seems to me there needs to be some change in the rating agencies. for the street to go out and pay to get ratings on complicated securities and then turn around and sell them to investors, that's probably worked all right, but i would rather see a system where investors pay for the ratings.

maybe that should be discussed. >> the mentality of the investor, do you see it strong right now? >> i think there's a lot of cash on the sidelines. and investors think they've missed a big piece of this. they're trying to figure out when do they enter the market. and i do think investors are spending a lot of time trying to pick the point of entry. >> that was john mack, chairman and ceo of morgan stanley. later this hour, a banking behemoth falling to its knees. citi now picking up the pieces after a $45 billion lifeline from the government. my interview with vikram pandit, ceo of citi coming up. delta airlines shares coming up today. we'll tell you why when the "closing bell" returns.

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here are some of the other stories we're following on the "closing bell." delta airlines raising operating margin forecast from 3% to 4% because of fuel costs. the carrier also says the important revenue per available seat mile will decline more slowly in the fourth quarter. delta shares gained 59 cents, $8.65 a share.

motorola upgraded to buy from new tal, from ubs, to $11.50 from $7.50. it had the introduction of phones running the android operating system. $8.79. eli lily, announcing a major restructuring. the drugmaker will cut $5,500 or 14% of its work force and reorganize into five business units. cutting costs of $1 billion a year and speed um development. shares higher by nearly 1%. a gain of 31 cents. $33.13. the political climate these days is super charged. how does that impact investing. when we come back, how politics plays into how you should position your portfolio. ♪ on this endless ocean

♪ finally lovers know no shame ♪ ♪ watching in slow motion ♪ as you turn to me and say ♪ take my breath away (announcer) ge locomotives. customers love them almost as much as we love making them. ♪ my love (announcer) innovation today for america's tomorrow.

the largest gathering of independent investment advisers taking place right now in san diego. the schwab impact 2009 conference helps shine a light on the changing political and

economic picture affects us. >> howard ward runs the gamco growth fund. up in ryan, new york. howard, good to be with you. >> pleasure, tyler.r. >> you say that this economic recovery, that this bull market gets no respect. it's kind of a rodney dangerfield market, as luann saunders was saying earlier today. why do you think that is, and more pointedly, why should it get more respect from what we saw a year ago? >> everybody is shocked.d. it was like getting hit in the face with a baseball bat. portfolios went down tremendously. obviously we're now in the process of going to overhaul our regulatory systems for financials. people were shocked. to such an extent that in the media, actually telling them this is the worst thing since the depression, even though the consensus forecast is for

positive gdp growth since last december, nobody really wanted to embrace that. >> people have been really hurt. no wonder they are skeptical of it. you also say that one of the things that we have done is take some of the risks that were in the system and now transferred them to the dollar. >> correct. >> long-term, what does that mean for the united states, and for investors? >> it means the weaker dollar right now. the dollar's down 35% since 2001. it doesn't mean it can't go lower. we're borrowing a lot of money. we're printing a lot of money. we're about to raise taxes on all a host of things. this is a bad prescription for the dollar.. so i would expect the dollar to continue to work its way lower. however, we have very high interest rates, the highest since 1985, that's helping to break that fall. i don't think there's going to be a collapse. >> michelle, i know you wanted to ask a question of howard. >> absolutely. if that's your view of the dollar and interest rates, what are you doing with people's money? are you more exposed to companies that are exposed overseas because of a falling

dollar? >> yes, exactly, michelle. i would suggest that investors really make sure they have strong representation in foreign stocks, and domestically in energy stocks, and material stocks. various commodity stocks, including gold. because those are sort of proxies for a weaker dollar. they will benefit from a weaker dollar. and i would want to have a lot of exposure to oil and copper and gold. in addition to u.s. exporters, such as an apple computer, for example. >> apple computer, by the way, is one of your two largest holdings, along with google. i know the viewers would like to know those have such large positions in your portfolio. you should be happy with them, they are up, and your fund is up, what, 35% this year. >> 35%. thanks for mentioning that. here's two companies, apple and google, who managed to grow their earnings right through this horrific downturn in the last year. and in the case of apple, you've got a tremendous growth with the iphone. they've just done a deal with

china. mobil. growing global platform for the iphone. in the case of google, continuing to benefit from the migration of ad dollars from old media to new media. new media certainly has about 15% of those ad dollars. those numbers are going to grow. google has an 80% market share in global search. so it's almost collapse, the

government threw it a lifeline. mr. pandit shares his perspective on citi's past as a financial heavyweight, its present as a government influence, and its future as a smaller and more focused company. so one year later, one year ago, we saw lehman file for

bankruptcy. merrill sold to b of a. and of course, the government taking 80% of aig. it was an extraordinary moment in time. can you look back for us, and look forward to the environment we are in today? what's changed? >> we have gone through over the last year a number of issues with respect to capital liquidity. in banks, for that matter, funding availability was in short supply. so we had to have a number of different plans in place. the fed did this. the treasury did this, the government guaranteed plan to help financial institutions raise funding if they needed to. so over the last year, there were lots of liquidity and funding issues that had gotten to a point where they needed government and federal help. now, we've addressed a lot of those things. the good news about where we are today is these markets seem to be opening up. there seems to be a lot more liquidity, availability, and we

and a lot of other banks, financial institutions are funding themselves now without guarantees from the government. a number of them have also raised capital. we did our own exchange offer. the market has come a very long way over the year. as i look forward, i hope that we continue to build on this. we hope that we continue to build on the liquidity, availability of capital, availability of funding to the financial system. the one part that does concern me is the shadow banking system, while the banks are doing okay, and the financial system is doing okay and things seem to be improving, the securitization markets are still very tight. finance companies themselves have a little bit more of a difficult time in financing themselves. so we need to watch this. we need to watch the shadow banking system to see how that develops over time as well.l. >> what about here at citigroup? you clearly have been leading the bank during one of the most tumultuous times in the company's history. you have already undertaken

significant amount of asset sales. what do you see happening going forward with regard to that? >> let me step back a little bit and say, when i got into this job, there were three questions. the first one was a question about do we have the right strategy as a company. the second one was a question about our assets. and do we have the financial strength as a company to weather the storm, and really do well over time. the last question was on, do we have the culture that can execute on any plan. and i think we've turned a corner in all three. you asked about asset sales. asset sales was one part of the plan.. we cut our expenses down dramatically. we got our assets down by over $500 billion over the last 12 to 18 months. and by the way, we've done so by keeping our client business going steadily, and we can see the results. and we can see the results in how well the businesses are doing, even though we've taken all the actions to cut back on costs and assets. and so we have a very

well-defined, thoughtful plan that balances the need to sell assets versus making sure we get a good price for them. we're right in the middle of that.. it's going to take a little bit of time, but we have a very high confidence we're going to get it done. >> when would you expect to incur operating profitability? >> we, as you know, in the last three quarters make money.y. some of that was because of asset sales that are in place.. a lot of this to me is a question of where the economy is. and to us, the key two facts that are going to drive our profitability is credit card losses and losses on home mortgage portfolio. when we see those assets turn, i think you'll start seeing a change in the profitability of the picture of citi. now, again, i'm not going to forecast profitability, i'm not going to tell you exactly when and how much money we're going to make, but we do believe that we're seeing some good signs in

both the credit card portfolio and mortgage portfolio. >> do you worry about the fed's exit strategy, shutting off the spigot of the stimulus in the face of an economy that's just getting traction, we hope? >> as a general rule, the regulators and policymakers around the world have been very clear. one should not exit some of these policies and strategies before we're sure the economy's actually working well. and they said that. i think that's a good plan. as far as the fed is concerned, i think they've done a great job of really working through the liquidity issues in the market, working through what is necessary to provide the stimulus necessary to get the economy stabilized and going again. and i'm pretty confident, by the way, when they see that turning, they'll be the first ones to pull back. >> when would you expect to pay back the t.a.r.p. money? >> obviously that's something that we have to work out with the regulators and the treasury. we talked about the stock ownership that the treasury has in us.

well, they can sell at any time. that's $25 billion right there. and actually, in today's market value, it's probably closer to $40 billion. but again, that is t.a.r.p. they've gotten the shares. they can sell in the market. that doesn't affect our capital. that is something they can sell to raise a lot of money and earn a profit. and that's a repayment of t.a.r.p. so all these things we're working through them with. what's happening is every quarter that goes by, and that we do better than what their base scenario was in the stress loss assumptions that they used, we accumulate capital. so every quarter that goes by that we outperform the fed stress test, we keep accumulating capital. over time, it's certainly not going to be a capacity issue as much as an issue of what's the right timing. and for that, you know, i'd like to see some more stability.. >> vikram, can you take us back to that weekend, and sort of the weekends in september and october when you were going down to the new york fed, along with

your colleagues in the business? what was it like? can you give us a sense of what was going on during this time when people were so worried about the stability of the system, and in fast the collapse of the system? >> and that was a year ago, of course. >> yes. >> it seems a lot longer than that, as you know. >> i'm sure. >> and some of these things blend, so i can only share with you some general impressions. obviously we were all concerned about the fact that the financial system in the u.s. probably had more leverage than it should have. we were all concerned about the fact that the u.s. consumer was going to start consuming less and saving more, and that's all going to have impacts on the market, the economy, all of that. and we had seen what had happened with fannie and freddie, i think the week before lehman, right around that time. and so when we were down there, well, i didn't know exactly the reasons why we were going down there, but when we were down there, there was a clear sense of saying, we need to try to figure out the solution to

lehman. and all of us talked. one way or the other. that finding a solution to lehman was important for confidence in the financial markets.s. and that we ought to do everything we can to ensure confidence remains.s. because ultimately it's confidence that drives liquidity and capital for all the banks. >> why was lehman so critical to all of wall street? >> well, in hindsight, we know why. and there were a number of us there who knew that this wasn't only a question about one company, one firm. this wasn't only about intercompany contracts and whether we'll make money or somebody else makes money. but that if something did happen to lehman, it could undermine confidence in the entire financial system. which could drive away investors who were invested in the financial system, financial bonds and financial capital. and that could have feedback effect so much so that it could cause a lot of gridlock in the

capital markets.s. and the money markets, funding markets, all of that. unfortunately, that's what transpired. >> were things handled well? could things have been done differently? >> what i can say very clearly is that all the discussions are very frank, very open.. and i do believe that the options that were available were all looked at. none of us wanted this necessarily to be the answer. but that was really the only option that was left after looking at every other possibility. >> and one of the options that you faced was spinning out, or doing the deal with morgan for smith barney, in retrospect, how tough of a decision was that? tell me why that was one of the solutions for you? >> very early on when i came to this job, we had a clear plan. we talked about that, reducing assets over time. but we also talked about clarifying the strategy. that citigroup had and making sure we could execute all of those things. they were things that we were

doing all the way along the way. and frankly, the plan kind of remained the way it was. the only thing that changed post-lehman, as much as urgency as we had before, we had even more urgency to keep going on with what we were doing. smith barney was one of those assets that we were thinking about.doing. smith barney was one of those assets we were thinking about. twheth was core to citi or not. and when we thought about what citi was, at the core, at the heart was a bank, a unique global institution, great people, products and services that related to banking and invest banks iing, sales and trading and it became clear to us that while smith barney was a great business it wasn't necessarily core to our wealth management strategy. our core wealth management strategy is our citi private banking strategy. >> will you be looking to raise new capital in the near future? >> we have a lot of capital, as you know, and these ratios are very good.. we're very happy about them. by the way, you should me that

we raised over the last 18 months $85 billion in capital privately. equity sales, asset sales, company sales. and when you add to that what we got from the government in tarp, that's $130 billion total of capital that we raised in the last 18 months. our losses are far, far, far smaller than that. but that tells what you happens when you get into a market of this sort. you have to overshoot the market. and so we have a lot of capital. and we're happy about that. happy to have the kind of f capital ratios we do. and actually, we're looking forward to seeing what the regulators say about what the right long-term capital structure ought to be, and we'll let that guide us. y)o while it has been a tough 18 months at the helm, pandit is confident citi has turned the corner. he told me citi now has a clear strategy and a clear ability to execute plans, a testament to the success of its restructuring in the past year and a half. now back to you. >> thank you, maria.

inflation will be a key focus tomorrow. we're going to tell you why and what else the markets will be focusing on when wall street opens in the morning. that is next. you're watching cnbc, first in business worldwide.

i'm melissa lee at the

nasdaq marketsite. coming up on "fast money" we'll talk about the china trade wars with the former commerce e secretary carlos gutierrez. also, we'll talk about the top-performing sectors since the collapse of lehman brothers. that would be technology on a day that google hit a new 52-week high. and a view from the top on wall street. the ceo of stifel nicolaus on how the past year has gone for his firm and what he sees ahead for wall street regulatory reform. all that and much more coming up at the top of the hour on "fast money." but first, more "closing bell" right after this.

here's what to watch for tomorrow. >> i'm steve liesman at cnbc global headquarters. tomorrow we're watching for the producer price index from august. economists see a gain of 1% after a decline of 0.9% in july. take out food and energy. look at the core ppi. and economists see just a 0.1% gain. >> rick santelli on the floor of the cme group. tune in tomorrow 8:30 eastern. august retail sales very crucial number. headline. down 6/10 when you strip down transportation. this time we're looking for 2% on headline, up half a percent when you take out transportation. that would be good news because the consumer news of late has not been good. think consumer credit. tune in. before we go here's a look at the dayn