good morning. a rally-ready market. stocks jumping for a third straight day, but can the bulls really keep running? we're going to keep saying that so it keeps happening. >> going for gold. the dollar continues to drag. the global pictures at this hour, green arrows as the tails were wagd by the dog here yesterday. we're looking positive again with our futures as "squawk box" begins right now.

>> good thursday morning. welcome to squawk here on cnbc. i'm carl quintanilla along with joe kernen. becky is off today. a lot of the agenda today, fresh reads on the health of the u.s. employment picture and the housing market. at 8:30 this morning, we'll go weekly jobless claims. economists forecast that claims will jump by 13,000 after a pretty good drop last week. meantime, august housing starts seen jumping by 3.3%. later on this morning, look for philly fed. at 10:00 a.m. eastern, we had good numbers all this week, industrial production, empire state, they've all been looking pretty good. we have corporate stuff out today, too. >> philly, i think philly cheese, but it's felly fed. one of these days, we're going to lead with the market. but let's not. >> we're a couple hundred points away from 10,000. >> is that what you mean? >> yeah.

but i don't want to talk about it and i don't want to lead with it. it is the lead story in the journal but quietly they've been putting it to the top of the 12 point. we're lulled into whether you read it there because it's eight of out of nine days, i think. that was one of the latest. we're bringing back the green shoots because that was definitely a green shoot last week. it was announced last friday, a better than expected first quarter profit of 58 cents. the prior range was 30 to 45. so you can watch cardboard, you can watch boxes, shipping, it's a very good indicator of commerce. and we're going to look for, you know, comments from the company. >> they still talked about significant overcapacity. >> well, we know -- i mean, we're still talking double dip. i saw a guy yesterday that overlayed the '30s market versus

ours and the big crash is coming. we're still aware there's problems out there. so when they say something good, you know there's going to be a couple of -- anyway. cleaning up. didn't do it before you came in. dow component general electric is hosting a global research analyst meeting today. the company says it will high lie technology being developed. ge shares surged at 3% during the last session. there's the one-month, carl. ge is the parent of cnbc universal. they're not going to be at the ritz carlton in laguna beach, not going to be in florida, not going to be in jackson hole.

>> it will be in -- >> north of albany somewhere. >> exciting. >> it's nice up there, i think. >> the fall colors are going to turn. >> fall colors are going to turn but, you know, we're going to have fred malik on. it's not popular to go to the five star for hesitate. >> there have been some comments, though, out of some brokerages saying it could be a catalyst because people want to see organic growth in the stocks. and others say it's hard to imagine stocks coming through. >> you've been talking about higher quality names. ge is a funny one. a lot of the industries have been moving. but it's a hybrid. a lot of people see it as the financials.

there's a lot of this stuff happening. we'll see. this is a research analyst meeting. >> meantime, the bipartisan ten-member financial crisis inquiry commission is headed by former california treasurer and failed candidate for governor phil angelites. we'll see what they come up with. >> i saw him on our air the other day. very partisan. but who isn't? >> to measure the health of port yolos of mortgage backed bonds. regulator res considering substituting analysis from financial firms other than the s.e.c. recognized rating agencies. the changes would be noteworthy because insurance companies are some of the biggest bond buyers in the world and among the most

important users of bond ratings. ratings agencies are -- you know, the penguins, remember the penguins from the old days? >> i do. but that was about equity research, right? >> it was. but you know, where do you really find -- will it be better than the ratings agency? they have a long mentality, or at least used to. it's hard to find great objective research, except anywhere from here. >> i was going to say, unless you pay for it, right? >> but then how much you want it to be in some cases. if the market is that big, you want it to be available to everyone. >> you want it widespread. let's see what's going on here. >> paul volcker is calling on

suggesting banks should be restricted to trading on their clients' behalf and not with their own funds. the journal says the view could be at odds with the white house's proposals for new financial rules. that would affect the business model, to some degree. meantime, citi expects to eventually divest itself of its stake in morgan smith barney. the ceo says his bank estimates smith barney as amazing all of that separation. . >> that has a long history with citigroup. >> yes. >> isn't it an elementary -- that's amazing how important. >> that's back ten years with sandy wow and jack grubman. >> huffman changing him on the

sidewalk. >> with the deputy dog outfit. >> good times. >> the bank of -- who is the other dog? mcgruff. >> mcgruff, inspector gadget. >> i hope he's up. he's not, he's not on now. the bank of japan keeping its key interest rate unchanged. it's slightly more optimistic about financial conditions. the economist says this likely signals that the boj is now closer to phasing out some of its measures to support corporate funding. 0.1%. >> but it's better than nothing. and asia stocks certainly reacted to that. we got another day up in the far east. do you know the return year-to-date on the dow is almost 12%? >> is it really? >> yeah. we're in double digit -- who would have thought we would have

double digit gains? >> from the lows, what's the gain on the s&p? >> 53. got gotta be more than 53. >> probably 55% and every point has been argued against by people that think it's not justified, which is how it works. but the people that should know after all these years don't think -- i don't know. >> one thing that is down today, oil, 72.49, we had a bit of a rise yesterday. well, now it's up. yesterday we got inventory numbers down. the ten-year note around 3.46%. the yield has been up a little bit in the last couple of days. dollar down across the board, but still close to 91 yen. 1.47 euro. and in gold, which i went back and looked, the record is actually 1,033. so we're not quite there. >> this is an exchange high, we've been calling it. and then there is the inflation adjusted high. that's why 800 was insane in

1981. >> right. but we're up almost a buck today to 1021. let's get overseas today and hear more about what happened overseas today. maura fogarty is in singapore but first to louisa bojesen in london. >> hello, loaf veries. european bourses are higher by approximately 1.5% across the board. i want the to thank you your attention to ireland at the moment and to irish banks in particular. we have a huge rally going on from within the irish banks if i can figure out how to get the right chart up for you. 20% higher, 10% higher respectively for allied irish and bank of ireland now that the large bailout of the banks has been detailed. so the finance minister saying that the state is going to be paid close to $80 billion to take the toxic loans off the bank's balance sheets in ireland and it's the details pleasing

investors right now and that they are doing more about it and we know more about the actual movements on this one. other than that, i want to tell you about the french for a moment because they're saying laengz about new capital requirements is going to be unfairly punishing the european financial institutions because -- and i know you'll love this one. they say the crisis originated in the u.s., being led by the lax regulation, cheap credit, etcetera, this being one of the things that's being braud to the g-20 agenda next week. today there will be a meeting for investors in the uk to make sure they're all talking off the same sheets. asian market res definitely on a tear today. we had the hopes of a global recovery, strengthening, and that provided momentum for stocks to rally across the region here. also, the rise in commodity prices, especially in gold

prices were today's up factor in the markets. as joe mentioned, the bank of japan did upgrade to the economy in essence showing signs of recovery. we had one weak spot that was glaring. financials today actually fell in japan after the country's new bank minister said he was going to introduce a moratorium on loan repayments to help struggling individuals and smaller companies. shanghai making up for yesterday's losses, gaining more than 2% today. and that rally in commodity prices i mentioned, there really lifted the asx up by 1.4%. that was the asian trading day. back to you now.

>> mike, let me start with you. we rely on you for a lot of economic and credit stuff. i remember you saying that the environment was pretty good for stocks. you've been pretty consistent there. and you probably need someone like you who is maybe saying, you know, that's not what you're supposed to do. and so you might have a chance of being right and you have that. >> thank you. well, you know, joe, we look closely at the credit markets to try and anticipate cyclical turning points in the macro economy and when i look at the credit markets, it looks to me like the equity market is still lagging the credit markets. the credit markets have all cleared the pre-lehman levels, meaning they've corrected back or they've rallied back to where they were before lehman went down. in some cases, money market spreads are back below historical norms. that's not the case for the corporate market, but still,

even there we've seen an enormous rally, huge, 300 basis point plunge in corporate bond yield. but i don't think the run up is based on a lack of fundamentals. we'll see the actual coincident numbers coming later. this kind of move makes sense, especially based on this corrective action that we've seen in the credit markets. that has been uninterrupted. >> you would say, then, that not only have people underestimated the market, but maybe people think the market is unjustified and underestimating the underlying economy, as well? >> i think so, joe. the credit markets look forward. and we really can look back at virtually 100 years of business

cycle history and see that very deep recessions give away to stronger than average recoveries. there are absolutely no exceptions to that rule. >> that's not consensus at all, mike. it's the opposite. >> the consensus is just wrong, i think, here. even in the 29 to 39 period, which included two depressions, all kinds of credit and banking system problems, we had periods of very strong recovery, a four-year period in the mid '30s with 9.5% growth. >> that is what scares us because the ultimate lows were after that, right? >> well, no. the equity market made a ultimate low in 1932. there was certainly a lot of volatility and there were, you know, bear markets in there. we slipped into another recession in 1937, 38.

so i think we're on the cusp of a six to -- >> the bears, michael, would argue what's difference or maybe what's more rare is the fact that it's being led by the delivery and the withdrawal of government stimulus, right? the reason we had trouble in '3el is because it went away. when does this one go away and how? >> it's been an accumulation of monetary reserve tightening. i don't argue with that point at all. this is a liquidity driven reflationary situation that's global and it's synchronized. so when policies start to lean the other way, then we'll have to think about that. but if we look at the rate indicators that are forward looking and leading in nature, hopeful le we'll be able to anticipate the turn. >> lou, the journal, and john taylor and a couple of others, john, there's a bunch of republicans. anyway, they say the stimulus didn't work.

so that is not getting the economy going. lou, what's your take? you were right about the yen. >> the interesting thing with the forward looking indicators, i put out a chart earlier in the week concerning the 0-year yield and the s&p. you know, during the period when the 10-year yields were falling from over 15% down to about 5% from the early 80s down to the late 80s, that drop in yields was ben efficient for the stocks. but from that point on, the yields and the stocks have kind of gone in concert. nerds, when the yields fall on the ten year, so does the stock market and the ten-year yield, every time it peaks and rolls over within its larger trend has indicated a turn in the stock market. in january of 2000, the ten-year

yields peaked. the last couple of years, it's repeated itself. in june of '07, the ten-year yields peaked and roldz over and the stock market peaked in october. in june of '08, they rolled over again and the stock market had its trouble at the end of september a few months after that. and then in december of 2008, the ten-year yields bottomed around 205 and have almost doubled from that point and three months or 2 1/2 months later, in march of earlier this year, the stock market bottomed. now, we had almost a 200 point increase in june. since june, the yields have fallen by 70 basis points. i think you could have beefed a peak. and that would, if history follows, would indicate that the stocks may be stopping somewhere around now or in october.

so -- to the interesting, i think they both have been rallying recovery or there's so many issues that caused the deep recession that they're not going away any time soon? which is it in your view? >> i think what michael said is once you get things to a bad state, you have to start rebuilding them. but i don't think we've unwound all the problems that brought us to the deep recession that we've had. for instance, the cop assumer

how will household debt is that 100% gdp for the first time since the 1930s. the wages as of 2008 income was at the lowest level that it had been, real median income than it had been in many years since 1997. so during that period, we increased the economy only because of the extension of credit, an extension of credit that we really hadn't seen in 70 or 80 years. so that has not been unwindow. for ten of the last 12 months, the consumer credit, not including real estate, has declined and then in july it fell, even with the first issue of the clunkers, it fell by 21.6 billion, a record. so the deleveraging, in my opinion, is going to continue for quite a while. i just don't see how we can have really strong growth. we've got how many billion of

chinese with the dollar going down every day? >> you know, though, some of these ratios look and they're really at their worst level. in 1932, '33, that was the end of the first leg of the great depression with 9.5% per annual for gdp following four consecutive years immediately thereafter. so to some extent these ratios are propped up. i agrees, there's a lot of debt out there. households will rebuild their savings. >> but you're saying we're not going to rely on them as much as we have. >> there will still be a business cycle. you have a steep curve, a lot of liquidity. so as the economy starts to come back, we're seeing it in corporate earnings, you can see it in the recent figures in sales and production. once hours worked in hiring restart, probably late this year, early next year, households will have some income to both save and spend.

so we'll have a recovery. >> interestingly, i think we're starting from a weakened ogz, though. from december '99 through september of 2009, the total nonfarm payroll ves increased by 0.7%. the worst previous decade performance was during the 80s and 90s when it expanded by 16.7%. now, you get a different story with the household survey, the employment. it went up over 3%. it never increased by less than double digits. so we're kind of starreding from a weaker position with more debt. >> we've got to go. thanks. we went long, but thanks, guys. see ur later. >> when we come back, we'll get your business traveler's forecast. first, though, as we go to break, let's get a look at yesterday's winners and losers.

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welcome back. let's get a look at our business traveler's forecast. scott williams from the weather channel is here with us. morning, scott. >> good morning. we have a lot of rain falling in parts of the deep south. so the worl's busiest airport later on. expect airport delays. meanwhile, continuing to track that upper level low moving back into east texas, believe it or not. so we could see impacts in and around dfw. a few pockets of rain falling in the northeast, as well. current conditions in the big apple, a little on the cool side of things, we have clouds, as well, so light jackets and showers to start the morning. a few light sprinkles from time to time. around nashville, getting a bit of a break from the rainfall now, but more to the south. that will be moving into your area a little later on this morning. what about your thursday's overall forecast here? we will watch out for airport delays as we move into the atlanta metro area. also, keeping tabs on the activity in and around the airport, in dallas for airport delays, unlikely delays as we

move into boston. also chicago and l.a., some great travel weather. >> scott williams, thanks for that. when we come back this morning, wee el get some top stories. some reaction to oracle's numbers after the bell last night and is we'll talk about transports from the economic barometer.

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good morning. and welcome back to "squawk box" here on cnbc. i'm joe kernen along with carl quintanilla. becky quick is on assignment today. eventually she's going to be -- boy, are my arms tired. she's going to be winging her way home. >> we're going to see her 24 hours from now. she'll be sitting right here. >> right here. the futures, even after the move yesterday, i think are -- do we want them up or down? because when they're down, they eventually end up. today, they're indicated about 20 points. that's not enough to say where we'll be at 4:00. >> no, it's not. >> no way. what do you think the chances are of us putting together a little over 200 points today? >> yeah. the -- can we not even talk about it? >> let's not. >> but once you get within 200 points, you figure you can probably do that one. >> or like that final six inch

putt. >> no, those aren't automatic, i've learned, unless someone gives it to you. then it's an automatic. let's look at the oil board. nothing has been going on there, really. it's been right around 70 for a while, 72, 72.5. let's look at the ten-year. lou brien was just talking about the ten year. it's 3.5%. was he saying when yields peak -- i was confused with that. >> he was saying when the yield on the ten-year peaks, then stocks tend to peak a little later, a few months later. >> looks like -- i don't know. that yield is headed back up, eventually, isn't it is in the? we'll see. how about the dollar again today. are the arrows all down again? there's a couple of pieces in the journal today about how there are a lot of forces at work here. you've got to decide, do you like it or do you not like it? the multi nationals, if you look

at what's they've gained in this move in the market, they've led most of the other groups. that's probably not a surprise because you can export a lot more of your stuff. there's gold, which had a big move yesterday, up to 1,020. you have a drinking problem, i see. carl, you don't talk about it. robert hershey and arrow plane? >> yeah. carl just took his water and poured it on himself. >> i did. >> how long have you had a drinking problem? >> software giant oracle recording a profit of 30 cents a share. oracle saying it cut costs to offset slower sales. the company has been waiting for european regulators to approve that $7.4 billion acquisition of sun. joe fishbien follows oracle. he joins us from philly this morning. >> good morning, guys. >> the dynamic shows earnings

berts than we thought, but revenue was problematic, right? >> yes. the license revenue was a little light. i think it's explainable. we're telling our clients to go out and buy the shares this morning on any weakness. i think the shares, the license line was impacted. they're undergoing a new product release coming out this quarter, 11g, the debate product and the fusion middle wear products. and i think some customers opted not to buy in front of this new products cycle and i think base odd what they're classifying as conservative guidance, i think investors will look forward and start to buy the shares here. >> joe was just mentioning the dollar and sort of the positive effects for multi nationals. so what degree are they benefiting from being so global to having so much customers around the world? >> so in the latest quarter, in their 1q, it negatively impacted their revenue by roughly 5%, both on the top and bottom line. going forward in q2, would he

we're expecting a backdraft of likely around 2% based on the currency rates that they're forecasting right now. so they are going to benefit going forward and that's another potential visual upside to the numbers. >> over the years, they have taken knocks for their acquisition strategy or at least their integration of acquisitions. you say they're doing a pretty good job, right, and you think the sun thing will work? >> i do think the sun thing will work. i think evidence of that is what was lost in the shuffle last night was this product announcement exit data which works on the sun hardware platform. it's designed for very large data processing. this is going to be a killer product for them going forward. and i think this is just the tip of the iceberg in terms of the opportunity that the sun microsoft -- or sun/oracle merges has to show for us going forward. >> how much of a hurdle will the eu be?

>> i think the e you is hung up on a couple of things, number one being my fql database. this is a $5 billion revenue company. so i don't think at the end of the day it's going to be a big deal. i think that they want to try to get as much control over oracle as they can before -- or as much concessions as they can before they approve it. our take is that commodities, oracle and sun will be one company and i think we're going to see some positive things out of the company going forward. >> and at a time where we're watching margins maybe more closely. they're getting fatter, not thinner, right? >> absolutely. 46% operating margins in the quarter. and i think frankly, that's one of the things that the ec is actually looking at, the fact is how profitable these guys affect, they have pricing power, are able to raise prices in this environment, but the sticking point is this mysql, which at

the end of the day, i don't think will be a big deal. >> well, you want to be profitable, but at the end of the day, you don't want to be too profitable, right? >> oh, yeah. >> these guys are very profitable, $3.7 billion cash flow. >> thank you very much. >> we have been hearing from many of the nation's biggest business players this week at the fortune's most powerful women's summit. becky had a chance to speak to a woman at the conference that had some international clout, jane ulrich, jpmorgan's commodities with fortune ranking her among the top powerful women internationally. >> it's because of the work you're doing right now in finance markets and why don't you tell us what you're seeing right now when it come to the chinese stock markets. >> the chinese market is booming. the market has come roaring

back. if you look at the general economy, things are going very well. china is going to achieve its 8% growth target this year. that is in an environment where ex ports have been plunging. so the domestic demand is really doing very well, pulling up the overall economy. >> and becky is a very intuitive person because we finished about her being back tomorrow and sitting there and immediately my machine hit with a message from becky that you got. morning, guys, how are you? i'm up and driving to the airport. so it's early out there. but no satellite radio in the car, so i have no idea what you're saying, which is weird. so we got the update right after we talked about her being there. >> and then she says -- >> she said say pp for me, but anyway, that's producer price index. she thinks it's funny -- >> her favorite. >> yes. she's very childish.

it's youthful. all of us are. some of you hate the childishness. a lot of people get up on the wrong side of the bed, don't they? >> do they have a right side or is it against the wall? >> i think they get up on that side every day. if you have anything that you want to say about "squawk box," be gentle, e-mail us at squawk@cnbc.com. still ahead, skip the data, pass on the pundits. the true pale might be in the transports. all aboard wh boarboar boarboar comes right back. xwxwxwxwxwxwxw.

time now for a check on the news outside the world open business. monica novotny is here. good morning, monica. yeah, you know, on tv, you want to see them and hear them. i'm not good at reading lips, though. >> she said i'd like to revisit the whole morning joe thing joe is -- i am the real morning joe. >> oh, is that what she said? >> you didn't see that? >> no, i could not actually read her -- >> that's fantastic. thank you, thank you, monica. she converted finally. but she flip-flops back and forth. you couldn't read her lips? >> i'm just asking. >> maybe we'll try to get her back and if we do, we'll confirm with her that she indeed just said that. the dow transports, we talked about the s&p up at least 54, 55%. the transports are up 60% in the last six months.

also in one of becky's interviews with buffett, on a desert island, they asked him what information he would use and you said transportation volumes. this entire market move now, lee, is on your shoulders to keep it sustainable. are we seeing things in the transportation average that indicate that we're underestimating the bounceback in the economy? >> well, i guess not to throw some cold water on the issue, we view it as things are getting less work. would you rather get punched in the face four times or five times? car loans are down 17% year over year, and that's on the rail side. tonnage is down 10% to 15%. so things are not good, but it

does appear that we're bouncing along the bottom and the whole fundamentals within the freight industry are getting less worse. we couldn't classify it as getting better. again, just less worse. >> so are you talking domestic or international? >> domestic. >> you're talking just domestic. so maybe some of this could be because it's a global economy. but then again, the baltic isn't looking very good, either. maybe the stock markets over there are indicating some trouble, too. how do you account for the commodities? >> we're seeing some benefit from the cars, for the cash for clunkers program. that has helped in terms of freight flows, whether it's on rail or on the road. in our view, that's pushing demand forward in 2010. we'll probably be weaker than what we were anticipating because of all those buyers coming in early in july and august buying those cars. what do you attribute the fedex

comments last week to? how would you downplay those? >> a lot of that was on their international business. that was kind of their benefit. they preannounced last friday and a lot of that had to do with the international business and also management's ability to control costs. >> do you expect we're going to be punched in the future two or three times in the face or weelg be back to like seven or eight? >> we would like to think only two or three times. so, you know, it's still going to hurt a little bit, but just not as bad. >> so it's going to hurt good, if that's -- there was a song about that. >> hurt so good, linda roth. >> yeah. okay. break it down for me. i think it wab john mellencamp, yeah, both of them. break it down in terms of rail versus trucking versus all the different ways to move this stuff. has anyone got an advantage? >> well, i mean, rails traditionally are a little more defensive than the trucking market. however, what's been a real surprise for us and i think the

market, as well, is the lack of demand for coal during this cycle. coal carloads would be down 3%. we're seeing them down around 8%. a lot of that has to do with, you know, the unseasonably cool summer that we had. also the cheap price of natural gas and the large stockpiles and utilities is holding demand to a low. and also on the ag side, typically during most cycles, you see ag down not as much as we're seeing right now and that's been the biggest surprise. that's usually able to articulate the steel and metals. >> okay. we've got to go. i was going to ask him one more, but i'm going to listen this time. i don't know why. >> wow. you're not going to -- >> she sounded urgent, like break, i know. >> when we come back, the temperature rising in

washington, as you know, the debate over health care. up next, we'll talk to republican congressman bustanni who gave the response when obama spoke to congress. then, we're welcoming fred malik to squawk pep has organized buyouts, run companies, worked for four u.s. presidents. so much to ask fred at the top of the hour. he decades have pas, the promise of medicare has always been there. and aarp has fought to guarantee none of the benefits you earned were ever taken away. today we're continuing that fight by protecting your freedom to choose the doctors and treatments you need. and to have your tax dollars go towards your care-- not insurance company subsidies. you've done your work. and we'll keep doing ours. learn more at aarp.org. ♪ so blessed with inspiration ♪ ♪ i don't know much

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those here illegally will not benefit from this initiative. also make clear there will not be federal funding for adoption. we'll also adopt a cooperative approach as one option so that it would be member-run, member-controlled, not government-run, goaltender controlled. tim conrad talking about some concessions democrats made to make the baucus proposal more amenable to republicans. speaking of which joining us from the hill to talk about where we're heading. congressman, how are you? >> good morning. >> there are some things that potentially could have been in that proposal that now are not. not enough to get a large amount of support from your side? >> i think we have some concerns about this. first of all, the proposal was

just released. it's not in legislative form. we don't know what the actual cost of this will be, whether it will add to the deficit. that's unclear at this stage. so those are unanswered questions. with regard to the co-op, i read the section in the proposal and there's no detail. it just simply says $6 billion will be allocated with the startup. there's really no detail as to how this co-op would work. fears this is a place holder for another government option. >> when there are things like restrictions on illegal immigrants access to health care, restrictions on abortion, no specific public option, that is worth anything? senator snowe said it's a first step but still withholding support. what would be enough to bring some people over.

>> it might be a good step but the devil is in the details. we need to see a lot more detail. however, i did note there are excise taxes in this. these are new excise taxes which could be harmful to research and development. there are some provisions in the bill that restrict the use of flexible savings accounts, which i'm very concerned about. this amounts to a middle class tax hike. >> right. congressman rangel wanted to tax not just cadillac plans but rich americans all together. again, those things are out of the package as it stands at the moment. if you guys keep nitpicking, so to speak, some might suspect you don't want this to pa no matter what. >> i think if this is used as a vehicle to start real negotiations on legislative language that has bipartisan support in both chambers, i think that's a good thing. i believe we have to have broad and bipartisan consensus to really get meaningful health

care reform. let's face it, this is one-sixth of the u.s. economy. we're talking about affecting the lives of every man, woman and child in this country. it needs to be done right. i think there's a lot more work left to be done. i would suggest we're only at halftime right now. >> you're a heart surgeon, doctor? >> yes, i am. >> make that clear. it's funny, you come on and all we talk -- what we're hearing from you are things about the definite skit and fiscal things. i think we can tap a lot more of your expertise, perhaps, on trying to figure out just how to hold down the cost. the president has gone from great stakes to change it from health care reform to health insurance reform when a lot of people say that's putting the cart before the horse. you're going to add 47 million people to a system where costs are out of control already. there is any chance -- the left doesn't like this plan, the right doesn't like the plan,

we're getting nowhere. can't you go back to ground zero or the start and look at the way it's delivered and do something there? >> that's exactly what we need to do. if you want to look at good high-quality health care and control the cost at the same time, i don't think these things are mutually exclusive but you have to focus at the level of a doctor-patient relationship. i think it's critically important to look at what drives physician behavior and what drives patient behavior. clearly on patient behavior, it's all the prevention and wellness. physician behavior, there are a number of cost drivers and we have to look at the delivery system. we need to make substantive reforms in the way health care is delivered, create those kinds of efficiencies, create virtual networks if need be to get the cost down. >> as a heart surgeon it probably makes you chafe. you remember the case in california, doing bypass surgery

on people that don't need it. there are all kinds of things like that going on and it's going to hurt doctors. how do you do this? it's going to tough on constituency, hard on every plan we try to enact. >> you're right. my frustration on the house ways and means committee where i serve, we have not had any hearings on this. i think that's a travesty. we need really to investigate fully the options for health care delivery reform to make the system much more efficient, to help build out networks from primary care all the way through the specialty. it's critically important. >> congressman, thanks for your time. when we come back at 7:30, chuck grassley will sit down and talk about the proposed bill. >> we've got to go. we have a hard break coming up. top stories. maybe carl will go in the control room. a household name. if you want to know about corporate america you need to know about fredmalek.

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checking in on the lodging industry. >> this the hotel's presidential suite, gentlemen, normally reserved for royalty, leaders. >> two telling about trends they will see with the american consumer and if they see the recession ending. president and coo of marriott and fred malek here to give us their opinion on recovery. releasing a bipartisan proposal on health care reform. we have reaction from ranking member and republican chuck grassley. >> signs that bank failures will

continue. former fdic executive and ceo telling us how many are coming and whether or not the fdic is putting the right plan in place to stop the bleeding as the second hour of "squawk box" begins right now. good morning, welcome to "squawk" on cnbc. i'm carl quintanilla with joe kernen. becky is on assignment. good to have you, fred. welcome back. it's been a few months a lot has happened since your last appearance. joseph, we've had a lot occur. >> we need an update on the lodging industry at this point. is it getting better? >> we thought it would.

we thought august would be a pivotal month, the end of august because we're preparing against a very, very low august last year. we thought august would show an uptick. august is not. august revenues down 18%, 19% year-to-date. haven't seen much improvement. >> hold that thought. let's look at the markets quickly. we need to look at futures up. >> they are up. good day in asia overnight, oil has been relatively flat. for most of the session, as we saw inventories come down, down $0.15. ten-year hovering around 34. software giant or cal, $0.30 per share in line. offset slower sales. shares did fall in late trading. waiting for eu regulators to approve that acquisition of sun microsystems as well. dow component ge host ag global research analyst meeting today.

the company says the meeting will highlight technology being developed. ge shares have surged 14% in the past week alone erasing the year's losses. parent company of cnbc universal, a unit of nbcu. paul volcker calling for restriction on banks risk taking and trading activity. the chairman of the advisory board should be restricted to trading on their clients' behalf and not with their own funds. >> now back to fred. hotel owners one of the hardest hit during the recession. even though you had some hard to resist summer deals, you had hoped we had sunnier skies as we were just hearing. >> yeah. >> not necessarily -- is it across the board? is it worse than the high end? >> it's worse than the high end. across the board, worse than the high end. people afraid to have conferences at high-end hotels. august is a vacation month. high-end, luxury hotels, hardest hit. in fact, very difficult for almost any luxury hotel.

so rest assured, it's that bad. i see some glimmers of hope. >> glimmers of hope for anyone in the private equity business or whatever restructuring business. >> for private eck, it's a great time to be there. there's going to be such wonderful values because of the fact things have been beaten down. we always have learned you want to buy low and sell high, this the time to buy low. i think with a recovery looming at some point, we don't know exactly when, it's a good time to be in the private equity business. >> get some actual data points, president and ceo, wide range of expertise in the business. mr. sorenson, you just heard fred's comments. you concur with most of those? >> good morning. i'll take the optimistic side of what fred said this morning. august while being a traditional leisure travel month, a little less significant than september

and october. in august, leisure traveler recognizing the business and they came back more than we anticipat anticipated. >> september and october you're looking for business. >> september and october, a business time of year, depends on corporate profits, all the things fred was talking about in terms of willingness to have meetings. we know as the economy recovers, it will increase demand for hotel room. only a matter of time. whether in september or october, we're watching carefully. >> have you sat down with your strategist long-term and said let's pair back on luxury. luckily we're in this -- kind of a middle ground company. let's either add to that or at least get out of some of the luxury stuff. is it going to be long-term? >> i think the luxury segment may come back to the rates they used to get in 2007, slower. at the same time luxury hotels have a great advantage. we can see that in august.

they can offer everything to a customer, whether that be spas or golf courses or great restaurants or luxurious appointments in a room. while the pricing may be weak, we think the values there will be recognized pretty broadly. >> you're not going to get t.a.r.p. guys going there for business meetings. do you see eventually some businesses that didn't get government aid not going to a red roof inn for the meeting? >> we're eager to see the banks pay back those t.a.r.p. moneys. >> there's still a stigma for any business to go to a five star now? >> yes. i think in part because of that we've mod lated our marketing a little bit. it's a little bit less luxury with a capital l and a little bit more about the depth of experiences that can be gathered and the great service and great meetings that you can have at these hotels. >> what are you seeing for next year?

there's two different indexes out, one has a slight increase and one has a slight decrease. what do you think and how much do you put in this so-called pulse index. >> that should be very interesting. i suspect over the course of 2010 we'll see real indication the economic recovery is taking hold and with it we start to drive occupantsy. only after that do we drive pricing power. i think it will be a slog into 2010. whether it's negative or positive depends on the transition point. >> fred was alluding to it, none of these properties are worth what they used to be worth. they are going to have to be rolled over. do you have issues? >> well, you know, we've got 3200 hotels in our system today. there are bright spots. we were at a grand opening at a residents inn in arlington,

virginia. been open and was full last night. that hotel will do great. two renaissance in paris and new york. those are opening at least in paris in a very good market. i think we'll do fine. the industry as a whole, many many hotels carrying debt levels too high. their problem not just about debt levels too high, when the debt matures, not clear where they will get new depth. that market shrunk dramatically. those securities come, probably late 2010 into 2011 and 2012, we're going to need financial markets to be back, financial institutions to be back for those things to be refinanced at levels anything like they have got today. that's a long story still. >> you're not talking about marriott? >> where he don't own much at all. we manage our hotels and franchises. >> who among your peers? >> it's less about the branded

peers than it is about the real estate investors. and they are of all types so you've got public reits, lower debt levels and less pressure. private opportunity funds, individual funds, individual and family investors. awful it depends on when they bought and how much debt they put on it. it's overstating it to say every hotel is in trouble. it's certainly not rare. >> arnie, i think that's a good point. a lot of hotels that have been overleveraged do this problems. at the same time i think the banks are a little bit more lenient in terms of extending at this point. there's so many hotels out there not making their standards but they are paying their debt. it's like a homeowner paying the interest. they are not doing to get foreclosed upon as long as they are payi monthly payments. if hotels are doing that, that's the saving grace to prevent a free fall. >> you're absolutely right. part of this, you've got banks that are, you know, really

worried about their own balance sheets. they are not in a position to take the charges, to mark those loans down to market. as a consequence, that's a force that causes them to continue to work with borrowers. >> are you more worried about the financial markets and debt or moderate for a chance for consumers to give customers enough income to service marriott. >> important to us is the economy. owners and franchises who are big customers and partners of ours, debt issues and finance markets are very, very important, so we care about them. but the leading edge for us is about demand and getting folks back into the hotels, driven by jobs, corporate politics, the politics of travel. >> that's different. if it's corporate profits, we hear they can rise in a jobless recovery. where is the consumer going to be. you could actually benefit --

would you hire people if corporate profits increase and you got more business? could you hire people? >> we could hire with occupancy in the hotels. >> what were you down? >> 10%. varies by market. >> probably the rate, everybody dropping rate for fill occupancy. until the rate is up, you won't get a profitable enterprise? >> yeah. >> you need help politically? >> i was just referring to what fred said before. it became unpopular in political circles to have those meetings. >> not forthcoming. i understand what you're saying. you just need job owning, not a tax break. >> the job owning -- >> employs more people than auto

industry, probably not a good idea to trash it every day. >> i think the politicians realize that. >> thanks, arnie. >> you bet. >> great to see you. fred will be with us for the rest of the show. >> any comments or questions about, that politicians, accepted us a note. squawk@cnbc.com is our address. when we come back, a clue why this recession is likely over. steve liesman will tell us how long it takes for the technical end of the recession to turn into the real end. and take a look at what's sure to come. 7:30, talk to the man who brought indymac, former ceo discusses how big the threat of commercial real estate is to the system. 8:00 a.m. professionaler michael porter joins us for the remainder of the show. plus ceo of cleveland clinic and etna will talk health care reform. busy morning ahead as "squawk" continues in just a moment. >> time now for today's aflac

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now the answer to today's aflac trivia question. what two hall of fame capers grew up across the street from each other?

the answer, yogi berra and joe garagiola. >> i knew it wasn't finch. >> must have been the prince of the city. >> regulators include key secretary, treasury secretary tim geithner. house has hearing for the next few weeks including a september 23rd appearance by the treasury secretary. now there are 11 hearings slated for the first week of october. >> eleven hearings. >> beautiful. >> we'll cover every one of them. the chairman calling the end of the recession this week. when are ordinary americans actually going to start feeling the affects of that. steve liesman is here on set and joins us with when we can all

start enjoying the party. >> i didn't know about the 11 hearings. might as well get the needles now. look, carl, if the past two recessions are any indication they might not bother to call an end to the recession. that only means things stop getting bad. it takes months. it could take years for americans start feeling affects of actual recovery. let's take a look at one. unemployment. you can see it takes 15 months after the '91 recession ended and peaked 19 months after the 2001 recession ended. look at payrolls. it took 23 months to hit the old peak employment. to ploy as many americans az as we did before the recession.

39 months for 2001. potential growth, 3%. three quarters in '91, now go to 2001, can you see it took six quarters to hit potential growth after the 2001 recession. now let's look at the s&p and market. different story here. first, eight quarters to get back to the peak s&p earnings level in 1991. but look how long -- how quickly we regained peak index level. the markets were forecasting two quarters -- a year or two down the road there. 2001, nine quarters to get back to the s&p earnings level and then six years to regain the prior peak index level after the ze '01 recession. the fiscal monetary stimulus along with severe deficit suggests a faster bounceback. one of the few metrics, jobless numbers which we'll get at 8:30.

you think of the problems we have when it comes to finance of that's really the key as to why people discount the v-shaped recovery idea. if the banks aren't lending you can't have a v-shaped recovery without a moderately robust -- >> 39 months to hit the same jobless level after 2001. >> right. job level. payroll. >> which was seen as a jobless recovery. it was jobless recovery. that's what we think we're going to have this time or the consensus says we're going to have that this time. could it even be worse this time or is it likely that was the -- >> i still hold out hope. this is simply anecdotal here, there was panic firing going on. i think there's a possibility of coming back a little faster on the payroll side. no data behind what i'm saying, just a feeling everybody panicked last fall and they may unpanic again. >> what's your feeling for when

the recession -- the end? it probably already happenedish right? >> i think it's going to be august and it could be -- >> september data. >> we're going to have 36 more fridays of saying oh, my -- saying this is a bad report. >> you think i'm just doing this as an economics reporter, employment act. >> no. >> you do the number -- >> we're going to be depressed for 39 months. >> to turn job growth positive? >> to get them all back. >> months, not quarters. >> to get them all back. it's bad enough, carl. >> i know. >> steve, i don't feel it out there. >> you won't and you don't. i think we should have another name for this year. just because the recession technically ends when things start getting bad, we need another thing for when the economy has recovered. it's not like an expansion because we will be expanding from the bottom here.

but to get back -- it's the feel good point, a long way off. >> i want you to start channeling and going around -- my first experience, waiting in line to buy underwear. packed. >> what was the price? >> the price was expensive. $20 per box. >> differential between consumption and job losses. people are losing work but they are spending as if they haven't that mean. >> not down by as much as suggested. you do have transfer payments from the government. >> yes. >> by the way, if you look at that, if you look at incomes, incomes are flat through recessions in part because of what the government does. automatic stabilizers, stimulus packages. take you it out, again, 20 months, 30 months to get back to

recession level. >> we'll exceed 10% before it starts to turn unemployment. when do you think we'll see the first month when we add jobs? >> i'm not sure we're going to hit 10%. i think we may just avoid it. just underneath that threshold. that's my hope. i think it's possible if the firing has stopped. i think it's well into next year we start to see that. >> only takes more job losses to get there. >> those coming and those out of work. part-time workers, there's a lot of work to be done. >> s&p regained ground. >> s&p gets it back. >> before earnings or jobs or anything else. >> but we're still scratching our head how the market goes up on any given day. >> are you surprised at what the market has done this summer, with everything you know? >> i am surprised and i'm concerned about what the bond market is telling us. the bond market seems to suggest we may not be out of the woods

and we could see a kind of w. i don't know. gold says inflation is going all the way up. hyperinflation. >> coming up on "squawk box," amr is on this this morning. we'll tell you why after the break. plus health care with senator chuck grassley of iowa. here is a guy that, i mean, he's right in the -- not that the republicans are in the driver's seat, but he's in the driver's seat for republicans. he's one of a gang of six. he'll vote on health care. find out if there's just a crack they could do it. that max baucus plan. we'll ask. >> your. you're watching "squawk box" on cnbc, first in business worldwide. american airlines

announcing 2.9 in additional liquidity and aircraft financing. included in the $2.9 million cash from the frequent flyer miles with citigroup.

amr allocating plans for dallas-ft. worth, chicago, miami, new york. >> got comments we'd love to hear from you. our address as always is squawk@cnbc.com. when we come back, the man who brought indymac back to life. he'll talk about the fdic efforts to rescue banks. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action--

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welcome back to "squawk box." let's get a check on the markets right now. we are indicating a little bit of a higher open.

was it eight out of nine days? i think it might be. >> positive. hate to tell you, not getting it right now. paul volcker calling on restrictions for risk taking. "wall street journal" reports chairman -- smells like peppermint. chairman of the economic advisory board suggests banks should be restricted to trading just on their client's behalf. what a concept and not with their own fund. fountainers of skype has sued ebay and investor group agreeing to buy the phone service accusing them of copy right violation and potentially disrupting that $1.9 billion deal. and let's take a look where gold is this morning. metal hitting an 18-month high yesterday as the dollar slid near one-year lows against the euro. let's get a quick check now on

the market. >> can they put you in front of an actual chart? >> they are taking away the green screen right now? >> kevin ferry -- >> that's good stuff. >> kevin ferry of cross os -- >> that's real. >> is it real? >> chronos futures -- >> we've been all over the map already, kevin. have you ever seen any of the show? did anything we said float your boat or anything happening? get your mind out of the gutter. anything you see there really highlighting? >> you've got to throw it ault all into the mix. this is all important stuff, joe. it's not going to go away any time quickly. the two things to watch, currency, outside of a little movement with the pound is pretty stable and gold is down a touch. so you have to see if investors say on the theme of weaker

dollar and higher equities throughout the rest of the week or the little picture at the bottom of the screen. it says jobs and housing a little later. that's going to be the key. you've got too few of one and too many of the other. so those changes will be important. >> all right. we decided off camera with fred during a discussion that the bond market is so much bigger than the gold market that if you have to look at a clue of what's really reflecting reality, you go with the bond market. fred says that means that the economy is weak and there's still a double dip fear. you can't use gold as an economic indicator. is that true? >> i'll buy fred a drink after the show. absolutely. did anyone notice where the t-bill yields went yesterday? nine basis points, eight basis points. they are still down there. a lot going on with reduction in government guarantees and the spf. this is very tricky stuff.

the only point i'm trying to make, outside of the improving equity index picture is there's no road map for this. we have not done this before. >> all right. >> exiting is a difficult and tricky process. >> kevin, yesterday you were writing -- before yesterday you were writing about the chinese controversy, moving to the short end. you think maybe there's a possibility soon they just sit it out, one of these auctions perhaps. >> i don't want to overstate -- i don't want to overstate, but i think it's a nuance. what's amazing about the debt process is their aggressive bidders in the auction. so the auctions come up bulleted or through the prevailing rate. i think it would behoof them and you could see the overprescription in bills. take a pass and reduce the

process, auction pales a bit. they can tidy up afterwards with a better rate. it makes it better for them. yesterday the two-year note had 80 basis points. it's at one 1% already. this is what we pointed out tuesday, given how low these yields are is significant. so we're watching them and watching them closely. >> i just remembered i talked fred out of the gold. he said it's gold and a trillion dollar deficit. that's what's looming there. we said, well, why is the bond market 3.4%. that is bigger, must take precedent. is gold looking at what we're doing in terms of monetizing everything? >> absolutely, joe. becomes what others in foreign countries do as opposed to what americans do at the risk curve. i watch the ted spread, relationship of government paper towards other things.

that's what's indicative of people's fears. so right now it's down and they are betting in gold. americans don't tend to make that bet as readily as foreigners. >> thanks, kevin. all right. see you later. with the list of failing banks and fdic bank deposits falling, concerns of fdic itself needing a bailout has actually risen. joining us with his outlook on the banking system. john bovenzi, ceo of indymac, former deputy, now ceo and financial practices officer. great to have you. >> good to be here. >> couple of weeks ago we had bank underin sitting in that chair and he said he wouldn't be surprised to see 1,000 banks fail. you don't think the number will go that high. >> i don't think the number will go that high. no one knows what the number is. there's a large number of bank failures, could be in the

hundreds over the next few years as the banking system adjusts to a new economic environment. >> the rolling average will go up rather than down? >> i think the kind of trend you're saying now where there's several bank failures each friday over the weekend is going to continue for some period of time. >> how worried should we be about the fdic's ability to save those. >> i don't think you should be worried and the general public shouldn't be worried. the bottom line is anybody that has deposits that are insured will be protected. the fdic funds are backed by the industry. they pay premiums to replenish that fund. right now the fund has probably $10 billion plus $30 billion in reserves for a total of $40 billion for failures. the fdic will assess premiums on the industry. plus they have a back-up line of credit of $500 billion with u.s. treasury so they can borrow money if need be.

>> let's do to preventive health care for a minute. what can the fdic do to encourage banks not to feel at this point, banks kind of on the brink or head thanksgiving way, what can they do, what kind of standards should they relax in order to help these banks not fail? >> i think there's a process under way for capital standards, liquidity standards under way for future to help banks better survive going forward. there's going to be some number who are just too far gone this time around to save and they are going to have to be closed over the next year or so. >> what can they do now or the next months? anything they can do, standard to relax for banks to go one way or another to prevent failures. >> there's a reluctance to relax standards too much. if you relax capital standards or other things we saw in the s

& l crisis in the past, take more risk to get out of the trouble they are in but ultimately raise costs of the fdic fund. if a bank is going to be insolvent it's important to close it sooner than later, clean up the system, have fewer healthier banks and stronger economy going forward. >> you mention assessments for the fund which are going to go up and probably stay up. people at loan financial shares worry in the affect on earnings if they are going to have to chip in, even more than they already are. >> ultimately it will be the banking industry that will pay for the cost in the banking system. it's all together possible the fdic will borrow money from treasury in the short-term but the banking system will pay it back. those assessments in the industry will be calibrated so as to not put too much of a burden on the industry in the thunderstorm term to create more problems like you're saying by causing more to fail. but at the same time not to be so low that the fund doesn't

have -- >> it's important in an environment where we want to buy the bank's time, financial rehab, if the yield curve doesn't stay steep, assessments go up and stay up, if financial regulation comes and pinches margin, can we buy the banks enough time where they can get healthy enough? >> i think if we step back from, you know, where we were a year ago with the enormous problems we had with, you know, the crash in the housing market, secondary market, completely freezing up and banks being so -- all lenders being so unsure of who to lend to, there was no liquidity whatsoever in the system, the steps the government has taken by putting capital in the banks, providing liquidity for the reserve, fdic programs, have done a tremendous amount in terms of buying time for banks to be able to rebuild their balance sheets and become healthier. i think a lot of those steps have been put in place and have been very successful getting us through the worst of the

problem. >> how considerate are you about having world with bill in the past when we had a real estate crisis, we have a looming debt crisis. it seems we have a lot of overhang. how concerned are you? >> you know, debt is part of what got us all into this in the first place. everybody got overextended, whether you were a bank with low capital or bore we are who got overtended or whatever, there was so much borrowing, pushed up the housing prices unnaturally, then it crashed. we're going through the process of realigning debt in this country and we'll have a smaller financial system as a result of that. commercial real estate is part of this. it started with subprime mortgages, went to other mortgages. now commercial real estate is feeling the pinch and we're seeing some banks that specialized in that market having problems now. >> bill was a longtime guest on our network. what do you think he'd be saying right now if we had him still

around? >> well -- >> would he be happy where where we were at least for the moment. >> he's a former boss of mine. i worked for him back in the days of the s & l crisis. he's a great guy and i'm sure he'd have something right on target to say about the situation. i think he would basically say mostly fair this is going to have to work itself out. the market is going to have to find its bottom and then start recovering, just as it did in the last crisis. >> good to see you. welcome. thanks for the time. >> my pleasure. >> chairman of the senate finance committee releasing his proposal for health care reform. what does chuck grassley think, ranking member, republican from iowa, has to consider a bunch of different things before he knows how he's going to vote. take a look at orcl, revenue lighter than expected. stock did trade down after the bell. back in a minute.

welcome back. a pentagon supposeman says the obama administration is making the defense plan.

u.s. decided iran is less focused on developing long range systems. the move will likely be cheered by russian officials which did see that shield as a threat. a big sticking point under the bush administration. >> top story in the "wall street journal" today, confirmation and filling in all the blanks. this is -- >> no fedex. >> i'll do it. companies said on friday they earned $0.58. what do you think they earned? >> 58. >> they did. companies forecast what they would earn for the next quarter. do you remember what they said on friday, a firm $0.65 to $0.95. they are reaffirming the reaffirmation, $0.65 to $0.95. it made a move but it is down. get to fish to fry. we don't have fish to friday. we're going to talk to senator

max baucus's health care reform plan would require all americans to carry health care insurance while preventing from discriminating or deny coverage based on health status or pre-existing conditions. what does a ranking member think of the proposal now? senator chuck grassley, one of the gang of six of the just like some of the other gang members we've had, you don't look like a gang member, senator. anyway, that's not a great name. we're supposed to know what we're doing now. but after we had senator conrad on, he left the door open for so many amendments for what the final bill would look like, i don't know if we do know. do you? >> no. the sad commentary is that we were working to practically completion of a bill. another couple weeks would have given us an ton to have a bipartisan that would have gotten broad-based support.

but the white house and speaker pelosi are getting anxious to move something along. i would like to consider what is going to come before a committee next week is kind of an incomplete package in terms of it's a partisan package. a lot has been worked out with both political parties. what's hanging fire is very controversial. you bring up one of the most controversial aspects and that's a requirement, individual mandate, federal requirement that everybody has got to have insurance and a penalty if you don't have. now, i think that -- i laid on the table a reinsurance proposal, or you can call it a risk proposal, where it could have been more voluntary and probably still got a lot of people to buy health insurance that wouldn't otherwise buy health insurance. >> senator, i can feel what viewers are thinking right now.

you said if you had a little more time, you could have produced a bipartisan bill. i can tell you at least half of our viewers are saying there's no way -- you can't even get one republican. the left would say even this bill was so watered down already. you still can't get even one republican. what would another two weeks have done? >> well, all i can say is, you know, through the course of our working and developing what's been developed, it's without a doubt a lot of hard work put in it. it was three republicans and three democrats not one harsh word, not anything but colliegiality in the room. we were working through it, still at the table. do you think we would put in hundreds of hours if we didn't think we would have a chance for success. what has happened here is the politics has taken over. the white house is getting anxious. senator reed is getting anxious.

i suppose speaker pelosi wants coverage for her liberal bill. quite frankly the politics stepping in is going to make it very, very difficult. and particularly, what's the hurry, when most of this bill won't take affect until the year 2013 anyway. >> sir, fred malek here. thank you, you did a heroic job keeping this thing on a sensible track. my question is why don't we start over, find out what 80% of america want and agree on and do that maybe after we get the economy in order. what's the hurry? why in a rush to add another trillion dollars to another $11 trillion deficit we're building up. >> let me answer this way. if you take what's coming out of senator dodd's committee, congressional budget off says both those add tremendously to the deficit. none of them do anything about

inflation in health care. that's a mainly problem we have to deal with. then look at what product we've been looking for and you have a product i don't agree with entirely. but it is a product that the congressional budget office says is deficit neutral and does not increase inflation. those two major goals that the other two partisan bills really exacerbate the problem, then you ought to look at us as starting over. because we started over in a way with a clean sheet of paper three months ago. now, you just seemed to indicate to me we ought to start over again. if i started over again, the only things that i would do is put more market forces in in the sense of having a tax exemption for everybody to get insurance. and affordability of that insurance and not having it tied to the workplace. but beyond that, i don't know where you can go any better than

we have already. >> yeah. i was going to say, dealing with the political realities we have now, if we don't start over, senator, on the baucus plan, the union leader over at afscme, he called it entirely unsatisfactory. obviously the far left is unhappy with it. would you say because of that fact, this plan, even though you're not happy with it in its current form, is moving in your direction? >> it was moving in my direction. but the final product has a lot of controversial things in it that would still have to be worked out in a bipartisan way. but it's sure a heck of a lot better than -- >> well, just look at it. it doesn't add to the deficit. it does cut down on inflation and health care. look at what came out of dodd's committee, the house of representatives. it's inflationary and it's -- it adds to the deficit. but here is the basic thing that you ought to look at what

senator baucus has put forward as opposed to the other -- the pelosi bill or dodd bill. they have a public option which is a brand-new government-run health program, that's going to take everybody out of their health care program, 120 million people. put them into this government-run program. as barney frank said, you've got this government-run program. it's a trojan horse for single payer canada. that's what all these liberals in washington want, including probably some of the labor union people. they want the government to run everything. and the people of this country don't want that, and it denies a promise the president made to the people of this country that if you want the health insurance that you can, you ought to be able to keep it. but everything is working in the direction of having the government run everything around here. >> okay. >> and there's no choice.

and we have choice that we've been working for. >> senator, we're not done, obviously. we'll talk to you again soon. appreciate your insight so shortly after the baucus announcement. good to see you. >> thank you. >> senator chuck grassley of iowa. harvard business after the next break. don't go away. has always been there.dicae and aarp has fought to guarantee none of the benefits you earned were ever taken away. today we're continuing that fight by protecting your freedom to choose the doctors and treatments you need. and to have your tax dollars go towards your care-- not insurance company subsidies. you've done your work. and we'll keep doing ours. learn more at aarp.org.

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going to talk a little about or cal. we've had some analysis after the company reported a share. down on revenue. >> a lot more "squawk" continues. school is in session, "squawk" scholar and business professor michael porter, a legend, making his way to the set. he's our guest co-host. stick around. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity.

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america's health care crisis, from the hospital room to your self-insurer. "squawk" goes to the front lines of the health care debate. the lineup includes ceo williams, and comes grove, ceo of the cleveland clinic. and harvard business school's competitiveness guru michael porter with his advice on how to mend american health care. "squawk box" begins right now.

8:00 a.m. on the e. coli. "squawk," first in business worldwide. i'm carl quintanilla along with joe kernen. becky home from the east coast. is she there, or on her way back? >> she was at the airport. there's a three hour difference. >> she won't be here tomorrow. that's right. in the meantime our guest host fred malek, guest host. the next hour harvard business school professor michael porter, called the father of the modern strategy field. he is now focused on health care. wish you could have heard the conversation we had during the break. we'll try to bring it to you in the next few minutes. a lot to talk about. first, some of the top stories, the markets about to get fresh reads on the health of the u.s. job pictures and housing. in half an hour, we'll get

weekly jobless claims, looking above 13,000. housing jumping 3.3%, building permits looking to jump about 4.6. a little later we will try to string together yet another regional manufacturing survey doing pretty well. 10:00 a.m. eastern time. futures lost a little steam. >> below fair value. dow component ge, the parent of this network host ag global research analyst meeting today. the company says it will highlight new technology that's being developed. ge shares surged 7% during the last three sessions erasing the year's losses. if you go back further than the last three sessions, down about six weeks ago. now back to -- chose at 17 yesterday. you adjust the dividend when it goes x, reset at $16.90. as i said, the parent of nbc

universal and cnbc as a unit of nbcu. >> an important one. >> cable. we're suddenly not the guys over in new jersey with the ticker at the bottom. we're suddenly -- >> generating reports, a little revenue. >> with the network receding, we're moving into the fore and we're proud of it. >> couple of stories, paul volcker calling for restrictions on bank risk taking and activity. chairman of economic recovery advisory board says banks should be restricted to trading on their clients behalf not with their own funds. the journal this morning notes you could be at odds with the white house proposals for new financial rules. the president mentioned in his speech on wall street just this last week. city meantime expects to eventually divest itself in its stake in morgan stanley smith barney, ceo says his bank anticipates morgan stanley's power to amass full ownership of

that operation. turn now to our guest host for the hour, harvard business school professor michael porter. as we mentioned big competitiveness guru. been a couple of months since you've been with us. welcome back. >> good to be here. >> during the commercial break, we started to go to town on health care. these guys are as worked up about it as any. >> i sensed that. >> in the past when i've been on, i have not written you off as just another harvard academic, but you certainly are not approaching everything from the capitalist, free market viewpoint. but on health care i'm amazed you do not come up with necessarily the left wing take on this whole thing. >> my gosh, harvard business school, left wing, that's a great place to start. >> cambridge, harvard. >> fair enough. we're on a different side of the river. you've got to be careful about that. >> you're on the good side. >> we're on the good side.

i think on health care, we've got a fundamental challenge if we're going to make this a success, and we have to make it a success. every other advance company has better health care than we do. we've got a dig ugly debate on health care, how to get coverage. that's clearly a problem. we've got to get there eventually. that's really expensive. the cost starts now. what's not being really addressed or talked about is how we take delivery of care. we've got a delivery system that is producing very bad quality actually based on all our measurements and the costs are astronomical. so by trying to increase coverage without addressing delivery, we're walking off the cliff. >> that's what happens when you change from health care reform to health insurance reform and you focus on insurance. am i wrong to say for 60 years

liberals have wanted to cover everyone and that's necessary. you also need to make it for the people with pre-existing conditions can also get care. that's also important. so they will put everything else on the back burner to get that done because that's ted kennedy's dream, harkening back to fdr but in fact it's putting the cart before the horse. if costs are already out of control because of sacred cows and delivery, doctors, whoever is making money, we know how it's happening, if you don't address that first, adding 47 million people makes it worse. >> that's true. the question is how do we reform the delivery system. the senate finance bill, you know, starts actually -- the president's speech was completely silent on this. the president said we can take a lot of money out of the system. we can reduce waste. we can rust fraud. >> and there's a lot of it. but there's really no plan for doing that.

there's no coherent, rigorous approach to doing that senate finance bill starts to tinker a little bit. fundamentally the problem with the health care is very simple. number one, we're paying for services. we're not paying for results. nobody is accountable for outcomes. nobody is accountable for achieving good health outcomes for the patient. we're organized the way businesses were organized. health care is organized by specialty, service. the patient goes from an odyssey from one visit to another, one service to another. it's poorly coordinated. there's a lot of mistakes, duplication of care. we don't measure outcomes. nobody knows whether the physician or team is doing a good job. we don't measure outcomes at all of the system is hyper fragmented. we have too many hospitals providing the same services at very small scale without the volume, experience, facilities to be really excellent.

so we have a system where we have a classic value problem. we're not delivering good value, we're not delivering good quality and we're certainly not doing it efficiently. how do we attack this value problem. >> i can't imagine, joe criticizes the left agenda, rightfully so. when a republican comes out and says answer is tort reform and electronic records, that doesn't get us farther down the road either. >> no. again, that's on the margin. tort reform is part of the process by which we end up getting too much care, care that doesn't really work, care that often people don't really want. hit or information terms could provide infrastructure required to design the way care is delivered and measuring the outcome. those things alone are really the cart before the horse again. the real fundamental issue is measurement, payment, how care

is organized. none of these proposals really tackle that. they really are, as you say, focused on insurance. >> we're going to have the cleveland clinic on. personal responsibility is part of the project. start exercising. you need to have some stake in your own well-being. stop getting fat and getting diabetes, stop smoking. >> it's absolutely right that preventive care is a fundamental theme as well in this whole equation. you've got to get people behaving a healthy life. you've got a problem in the system, people don't get care, get instructions. do you need to do this. >> becoming a ward of the state that will pay everything for anything that you do wrong to yourself is not giving a person a personlized stake in their well-being. that's not the way to approach it. >> to be fair, the senate has

started to put a good spotlight on the stuff, taking responsibility. it's allowing people to be held accountable for unhealthy behaviors. i think that's a step in the right direction. again, we are tinkering on the margin, adding little incentives. we are not actually getting at the heart of why health care deliver y is not working. >> you haven't mentioned individual incentives but not responsibility. responsibility is extremely important. do you agree with that? >> i agree with that. what we need is we need to give people the incentives to take some of the steps that maybe uncomfortable like stopping smoking or worrying about their health. you know where there's good results in that area is in the corporate sector, ironically. the employers get criticized a lot in health care as being unnecessary. but employers now increasingly have health and wellness programs, on site health clinics, the works. they are encouraging their employees. that's where we're getting the best results, actually in the

workplace. but the employer can give incentives, they can make health premiums less if somebody takes the right steps. they can create a sort of a team culture of health and that's working. >> yeah. see. >> got that settled. >> thank you. >> a lot more with the professor and fred later on in the program. also this morning the real estate market and labor force, we're counting down to two critical numbers, housing starts and jobless claims in about 19 minutes time. next, america's personal behavior crisis, you heard us talking about it. dr. toby cos grove runs a clinic. >> the camera adds weight. >> there's joe right now. >> coming from over there. "squawk box" continues in a moment.

quite frankly the politics stepping in is going to make it very, very difficult. particularly what's the hurry when most of the bill won't take affect until 2013 anyway. >> senator chuck grassley on our program not too long ago. in fact, while many americans support the notion of health care reform, big flash point is how to pay for it. our next guest is a forts behind a different medical model, one praised by the president. from cleveland clinic, good to see you. >> good morning. >> michael porter is here. during the break, he says yours is the most innovative delivery system he knows about in the world. can you describe it to somebody

not familiar wit. >> we're totally integrated system. the doctors are employed so they get a salary. there's no incentive for them to do too much or too little. we are very much around monitoring quality. every portion of our hospital measures on an annual basis the quality of the results we have. we're very trans parents about reporting them. we think you have to measure quality and derive value for your health care dollar. we have done that by bringing together doctors, medical doctors, surgeons in groups. they, for example, in a neurological institute, neurologist, psychiatrists in one location. this brings specialties and areas of care together for the patient. we're patient centric. >> why is corporate america at

large either unwilling or unable to replicate that? >> i think you can do that. there are multiple clinics around the united states that have done that sort of thing. the basic principles we believe in is you need to integrate to have an efficient care. you've seen that now at the mayo clinic, hleahy, oxner. we've repeated it in florida, built on our same model in cleveland. so it is something that is replicable. incentives must be right as well. >> thoughts and trouble spots about how do you overreach telling employees how to live their lives, that sort of thing. >> the cleveland clinic is a great example of what can be

achieved if you get all the physicians involved in the care of a patient as an integrated team with no ensentive but to improve quality. they know quality is measured and want to improve it over time. the doctor has led improvement in trying to achieves wellness and prevent disease. i'd love to hear him talk about that the cleveland clinic has unique characteristics we haven't really injected into all of health care delivery. they have salaried doctors who don't work on a piece rate basis where they get paid more if they have more visits, get paid more if they do more surgery. at the clinic every doctor gets paid a good salary and bonus if they contribute to value. the cleveland clinic is absolutely unique in being willing to measure how well the patients do and actually put that out in terms of survival rates, complication rates, cure

rates and so forth. and until we know the quality that we're delivering, there's no way that the system is ever going to change. the cleveland clinic has said i'm not going to wait for the government to tell me that i have to do this. i'm just going to go ahead and do it myself and get better. i think we need support from public policy to create the environment where everybody has to do this. >> doctor, you don't hire people who smoke, correct? >> what we did is we said we need to change the health care system to really emphasize not sickness care but health care. we need to prevent people from getting sick. so the two major issues in the united states right now that account for over 10% of the health care cost in the united states are smoking an obesity, both things we can manage. so we went at those things in a very positive way. we had no smoking on our campus.

then we added the smoking cessation for our employees, then final we thought we ought to walk the talk and look and act like a health care organization, so we stopped hiring smokers. similarly we've had a tremendous amount of very positive things we've done for people who have weight problems. we've changed the foods in our cafeteria, and we've taken pop out of our vending machines. it's really hard to find a good snicker's bar at the clinic. we've gone to the other aspect of obesity by helping people with their exercise. we've given them free weight watchers, curves, access to gyms, ped omters. all told over the last 12 months we've lost a lot of pounds. >> you've seen washington,

things that have nothing to do with this and back into incentive centric programs or incentive centric debate. >> absolutely. let's take wellness, for example. wouldn't it be wonderful, for example, if organizations got tax breaks for having wellness programs for their employees? that's an easy step the government could do, very positive incentive for employers to do that. there's also you could change the legislation. so you could make people's insurance more related to their health, in a bigger percentage of the ways. there's all sorts of ways to incent employers for employees. and doctors, they can't have increasing number of procedures or tests or visits. they need to really be paid for delivering value. and in order to deliver value, have you to measure quality so

you can get to the quality equation. >> good salary plus bonus if you deliver value. i mean, that makes sense. remember stockbrokers used to get paid every time they did a trade. it just makes sense to do it that way. >> sounds like a business. >> and some doctors you can own the radiology lab you're sending people to for x-rays. right? can you still do that? >> yeah. there are doctors who do that. but there is starr clause so-so that is limited. >> we hope you come back. if you're in new york, we hope to get you at the desk. it's tough, the whole food ceo measures something like this, it's pummeled in the media. >> wait until the professor from harvard, the sacred cows to the left, you're in trouble. you'll get it from the left. have you ever had that before? >> we'll pick up on america's

health care crisis in the next half hour. one industry in the crosshairs, one rpms, ceo of aetna will tell us about being a target in washington. find out how he handles it.

when we come back, breaking economic news, housing starts. that should set the tone for the markets after this short break. don't go away. 

welcome back to "squawk." we're eight seconds away from august housing data and of course weekly continuing claims, both might give us some clarity. the survey says on jobless claims we move from a revised 557,000 to down 12 to 545,000. continuing claims moving slightly in the opposite direction for a revised $6.1 million to $6.23 million. housing starts, looking for just under 600,000. this is shocking we came in just under 600,000. 598,000. last month actually had a minor positive revision from 581, original to 589,000 on seasonally adjusted annualized basis. building permits may be the road

map towards the future. what we're looking for, 580, 575, that's pretty much what we received. 579,000 last month, starts 564,000. wow, lot of numbers, huh? what's the response in the marketplace on the marketplace, the dollar cain a tenth of a percent better in the dollar index. that's improving slightly. a little bit of a selloff inequities, still holding miniscule gains. in terms of treasuries, yields moving just a bit higher but the ten-year is still around 350. maybe end short today, two-year rates popping back up towards 1%. not a lot but we do have a fed meeting next week. back to you guys. >> let's get more reaction. what's the headline from all these numbers, steve? >> claim starts continue to moderate. that's part of what we're talking about all morning, the end of the recession but still a very long way from a kind of feel good economy.

as we said months and months. i want to find these housing numbers. i think one of the interesting things, if you look at a chart, i don't think it's updated in the back. you cannot find data like we've had in just a permit. all i'm showing you there is one time. if you go back to '91, post '82, that surge we had month by month, you only find it after a recession. why would that be the case? you would have interest rate sensitive sectors responding to the policy. that's actually in this day and age -- rick, tell me if i'm wrong here, at the very least if the fed is wide open you would want your interest rate sector to be responding to it. one of the things we've seen in

this recession because of the di dilapidation. >> i guess what you're sig saying, it has self-corrected, measures haven't been implemented by the banks ort measures weren't the right cure. in either kay you're correct. market forces to some extent are at work. >> just because we agree on that, let's bring up something we don't agree. yesterday, i think this is important, fdic did a pilot program. joe may be interested in that, because he loves saying it so much. it lived, pilot program on legacy loans. they went out, offered six points leverage run by a ft. worth company. bought it for $0.70 on the dollar, these were old franklin bank. fdic going to get $0.50 on the dollar. the point i'm making, the government made the financing available. i believe it's a resource

financing. the private sector stepped up and offered more for the toxic assets. so i think there's a case to be made here that in a limited way, the government is doing a good job here stepping in and providing financing and let the private sector come in with the equity. >> i think we almost agree but there is some discussion. let's go back to the last agreement. i think hands off, let the market forces work. i don't care if it's $0.70 on the dollar versus $0.50 so things are better off plus out of the taxpayers' pocket. the fact private markets and entrepreneurs are interested at all, if the government clears the zone i have the feeling all the want to be more benefits with regard to the strategy of coming in on these toxic assets, that demand would be there anyway. don't let them wait in line with their hat in hand, let them do what they do best. swoop in and get the capital markets moving. >> thanks, guys.

steve and rick. carl. >> want to break. >> let's go. >> jobless claims 545, the lowest level in two months. housing starts for august driven largely by apartment building. that's the highest for housing starts in nine months. two big numbers there. when we come back, his industry the target of reform. ronald williams the ceo of aetna will give us his side of america's health care crisis. more with fred malek and michael porter in a minute. >> your. you're watching "squawk box" on cnbc, first in business worldwide.. ♪ look at this man ♪ so blessed with inspiration ♪ ♪ i don't know much

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insurance executives don't do this because they are bad people. they do it because it's profitable. as one testified before corning, insurance companies are not only encouraged to find reasons to drop the seriously ill, they are rewarded for it. all of this is in service of meeting what this former executive called wall street's relentless profit expectations. >> president obama harshly criticizing the insurance industry in last week's joint congressional address. senator max baucus released yesterday calling for big changes including national plans and state-based changes. i want to visit with michael porter and clear up several

things quickly. professor, you made the point in health care united states ranked 36% or whatever. we get a lot of mail that says we're the best. you measure, other places cover everyone. that allows them to move way ahead of the u.s. in terms of overall composite delivery. we still have some of the best care. >> actual care delivery for deses like cancer, cardiovascular is excellent, certainly some of the best providers. our big deficit, because so many people aren't covered, they don't get primary care, prenatal care, don't find problems before they get serious. that's what i meant. >> you also said it's better everywhere else. as americans we think these are government-run programs. yet when i ask you shoot government take a much bigger role in running our health care, you said absolutely not. it should be a market-based solution. that seems to not make sense. you say everybody is better and

government run, why wouldn't that work here? >> many other country's aren't government run. they may have a payer. but the hospitals and delivery organizations are often private sector, in many cases non-profit. you have non-profit health care providers in sweden, for profit in sweden. the socialist haven. for profit in germany. the system itself is not government run in almost any country, except for really poor countries. if you're looking at france or germany or even canada, it's libertarian. >> you're not including a public option. >> i don't believe we actually need a public option. i think we need to get the insurance market in america competing on value not competing to exclude people because of pre-existing conditions or repricing if they get sick.

that's one of the good things about the current health care discussion is we're starting to move that forward. hope fully that will happen. as i've said over and over again, that's just the start. we've got to fundamentally change the care. if we don't do that, we're going bankrupt. >> kill all the lawyers, ron williams, chairman and ceo. you don't want us kill all the insurance executives. if you listen to the president, mr. williams, hasn't the industry -- hasn't you and the industry already agreed to cover eventually and reformed to cover pre-existing conditions? why does that keep coming up? >> that's a great question, one that 35,000 employees ask me all the time. they know aetna and the insurance industry as a whole has embraced that they shouldn't use health as basis for insurance as long as we find a way to bring everyone into the insurance pool. that way we can cover everyone and make sure insurance is quite

affordable. >> you need broad shoulders. you just heard professor porter say the onus is going to be on the market. in the past your industry has been in sentivized. how do you base it on outcome. >> great examples in the industry. i think there's a misunderstanding. let's take aetna as an example. we have 20 million members. two-thirds in the category called self-insurer where the employer actually pays the check for health care services. in that sector we actually compete on the value we provide in terms of, close the gap in care, wellness, smoking cessation. i think there's been a lot of

innovation we can export to the insured portion of the market. >> you and i agree fundamentally we have to reform the delivery of health care if we're ultimately going to be able to afford to have health care coverage for everybody. what. what steps are you taking at aetna, what steps can the insurance industry take to drive this agenda as opposed to the old agenda we're hope fully getting beyond. what are some critical leverage points you have to increase value? >> i think you framed it just right. i think when we look at the real issue that health insurance premiums over the last decades have gone up 7.7%. that's because health care, the cost of health care has gone up 7.7%. the way to fix the system, we're putting resources on how we actually create more value by aligning incentives, meaning

paying physicians to manage the population, make sure people are getting the right screening exams. if you have diabetes, getting all the checkups. if you have cardiovascular disease, you're compliant with your medication. if you perhaps are depressed, if you're being screened for depression, it really is about aligning incentives in the health care system. we're doing demonstrations and working with doctors all over the country to really try to figure out what works and how we can replicate it and scale it up. >> fred malek, i've been watching your comments with interest. i think you made a real contribution to the process. there are two elements that have not been in the debate that could really debate in cost savings. one is tort reform. the other seems to me lifting the prohibition on interstate insurance. i wonder if you could give us your thoughts on that. >> tort reform is extremely important. i think it's not only the cost of the litigation itself, it's really the cost of the defensive

medicine, that a physician, someone who is treating a patient has to think in their mind, i may end up on the witness stand and i may be asked, was there any possible test i could have conducted that would have, perhaps, uncovered this situation, no matter how remote the possibility. obviously in the physician's own interest they want to be thorough and comprehensive beyond what their judgment might suggest. about 10% of health care cost is purely defensive and doesn't have to do with improving the quality of care. in the context of the multi-state sale or prostate sale of insurance products, we think it's a great idea. we think it would create more competition in the marketplace. i think one of the things it would do is incent states for necessary mandates, there are mandates like vaccinations that we're fully supportive of as an industry. i think the cross state sales

would create more competition. i think that's what people want. >> we're talking about all these ideas. in the context of a political game that is playing out, we had some senators on after the baucus bill was introduced yesterday. they said it's probably about halftime in that game. i wonder if you think these things we are talking about, that you want to add to the debate, is there time to make them a significant part of that, if we are really halfway through? >> i don't know whether we're halfway or closer to the end, but i do think we're awfully close, closer than we've ever been in having a substantive discussion of the issues, not just access but fundamentally how do we slow down the rate of increase in health care cost. i think there is still time to have dialogue, all of these topics are well understood by the policymakers, and i think there is an opportunity to really make certain that many of these are brought into focus. >> you and others in the

industry, the administration try to get ducks in a row, ama, drug companies. i know they had a pretty good relationship with the insurance industry, a lot of concessions. do you feel the trade at this point and sort of used as the. >> villain. >> villain, scapegoat? >> i think the short answer is we do feel we've been a very positive force for reform as an industry. we recognize that one of the most critical issues in the individual insurance market where 18 million people get insurance has been the issue of pre-existing conditions and medical history. we've agreed it should go. we really don't understand why it's talked about as if it's an issue we don't agree with. i think quite honestly the employees in the industry really understand the positive role that we're playing and really do have trouble reconciling the comments they hear. >> but the simplistic view is that profit should not be a

motive in delivering care. it's not as though you don't deliver -- the fire department doesn't try to earn a profit. the police department doesn't try to earn a profit. if you're delivering care to someone, your motivation should not be profit. why shouldn't it be? >> we have to have the resources to make substantial investments. one of the areas we've enforced in as a company is health information technology. to really use the data and information to find gaps in care where members should, in fact, have a particular test from the data we don't see evidence that they have had that test. that can really be helpful in early identification. we've invested $1.8 billion in health information technology in the past few years. that $1.8 billion came from profits. the entire amount in the stimulus bill for health i.t. was $20 billion. we're one company and we've invested almost two.

>> the converse, the government has no interest in holding down costs on anything. at least the private company has to try to make a payroll. >> as you look back, ronald, over the past, say, couple of decades at the industry, are there business practices or habits that you wish could be undone so that you weren't being vilified the way joe says you are right now? >> yes. i think it's fair to say that the image that most people have in the industry is firmly rooted in the history of the 1990s. the industry of aetna as a company has done a lot to transform itself from an industry that really was about transactions, paying claims, providing sus service. we provide those services and do our best but transaction volumes are large. in our case we pay 4 million claims a year. if year 99% accurate we've made

a mistake 200,000 times. they don't understand improvements and enhancement we've made in creating value for the patient. really helping control the quality and helping people really understand how to get access to health care services . hope to see you again soon. i'd like to do the whole thing again. have everybody back again at some point. even though we've got to rush this whole thing. we'll be done with this in about a week. anyway. thank you. got to go. anyway, thank you, sir. appreciate your time today. we'll get some futures action in a little bit. after, we have housing claims. "squawk box" continues in just a moment.

futures have been losing a little ground this morning although the jobless claims number came in pretty good, 545. the lowest in two months, reflect that maybe the pace of firing this country is moderating. although hiring is not taking off by any means. got housing starts, too. highest level in nine months. when we come back, our lead

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our guest host are fred malik and professor michael porter. we spent talking about health care. despite all your attempts, joe, to inform the debate, people are still writing in that you are, what, some anti-profit, anti-capitalism. >> i'm in the nbc family now because i said why do you need to make a profit. in making the point that the simplitic notion, obviously i believe if you can't tell by now, i think the government with no incentive to watch any expenses anywhere is not the way to do things, at least the private sector -- you go somewhere else in the private sector. if they don't cover what you have and if they're charging too much if you can go across state

lines you can find an insurance company that will do what you need. with the government, you look at medicare, you have no idea what you're paying for there. >> we need a market for delivering health care and for providing insurance. we need to be able to choose based on value. and frankly, there is no evidence that a public system delivers better care. in fact, most other countries don't have a public system. they have private system, but they have -- often they have government playing a role in insurance. so i think that profit -- profit is also a slippery word here. you know, a lot of hospitals in america are actually non-profits but they all have to make a surplus, they have to cover their costs. they need reserves so they can invest. we've gotten hung up on the wrong issues. we shouldn't be worried about the profit of the insurance company. we ought to be worried about the quality of care, the efficiency of care, how care is actually delivered, whether the patient