they get into some pretty dicey areas, including banker pay. we'll talk about that later on this morning. beck, first you have top stories. >> that's right. carl, how close are the protests to where the global leaders are and our coverage? >> i would say maybe a mile and a half at the very closest. the cops were very good at building these concentric circles of security. even if some protesters got through, there was another line of police ready to meet them a few blocks away. i would doubt they got anywhere within a mile of the convention center itself. >> all right. carl, we'll get back with you in just a minute. in the washington post, fed governor kevin war sh says the central bank may have to raise interest rates before the need becomes clear. he has that op-ed today in the wall street journal. he says policy likely will need to begin normalization than is

bheefd to be necessary, possibly with greater force than is customary. he says inflation remains in check for now. he says the financial markets could provide a better guide than traditional forecasting daddy and impossible price pressures. but he points out that all of those very unknown things that we saw in the beginning get in are the samp thing that are going to be happening on the way out. you may expect to see big moves from the fed just like we saw when the turmoil began. >> he seems to be saying that what we're seeing in the equity markets might be more real than the consequence dent indicators and saying, look, there may be something happening here that, to me, it would be positive if the fed -- the sooner the fed is able to raise rates, japan was never able to raise rates. they got 0.1% inflation and people were celebrating any type of price firming and rates going

up. the other day when the fed didn't raise rates, the market was down. >> but before they to get in to raise rates, they have to pull out the other plans that they have out there. in fact, once the short-term loans to banks and the other is the lending that they would do to some of those investment firms where they take the riskier assets along with treasuries. >> do you like riding a bike with training wheels? >> yeah. and it's scary when you take the training wheels off. well, you might as well be on a tri cycle. you need to get those off. but at least you can go and have some fun. >> but the interesting thing, warsh says is that all of these people that are calling these two guys heroes right now, he's saying that's a little early because this is like where you're in the try aliathlon, yot out of the water, people are cheering for you, but you still have another leg left.

he was basically saying we're only about a third of the way through this. >> we're going to microanalyze this move from where we haven't raised rates to where we finally do. we're going to beat this. >> this time we're going to get it ride? >> well, we're going to watch every minute comment from the fed. >> and i think that's the point in this that we have to watch what's happening. >> exactly. >> we're going to talk more about the comments for today, too. >> did you see rimm? >> i did. >> let's talk about it. it reported a fourth quarter profit even though it beat the street by three cents a share. it makes blackberry. tumbling in after hours trading, the outlook may have disappointed the street, as well. a lot of analyst comments today, none of them really very good. i saw a lot of analysts going with cell.

down 12%. mike, in reading what everyone is saying, it's one of two things. expectations just got ahead of themselves or you're finally seeing competitors like the iphone start to have an effect. which is it? >> well, i think it's part of the former, but something that you're not mentioning, which is that rim's guidance was a function of moderating asps and that's why they came below guidance. so unit guidance was very strong. >> but what does that indicate, though? like i'm read some of the write-u write-ups. it's not clear yet that rimm is not being hurt by the competition. is that true, this is not apple's gain? >> yeah. no, i don't agree that it's being hurt by the competition. what rimm clearly said was that they've seen some late quarter delays that led to some soft afcs.

and the unit guidance was very strong. so there's no evidence that rimm is being hurt by competition at this point, as some people are saying. >> but why wouldn't it be when i heard that more corporations are start to go be like iphone enabled? isn't that going to be possible to have -- we wasn't do it here because -- i don't even know why. >> it's security reasons. they don't have a security system that can protect all the data that goes out over the iphone yet and they do have one on rimm. >> i don't think this is about the enterprise. most of that commentary is anecdotal. rimm is king of enterprise both here and in europe. microsoft, mobile and apple make small inroads, but they're by no means impactful. it's really about the consumer and that opportunity ahead and the steps that rimm is taking. one of those steps is to moderate its m&ps and that did affect the outlook on the quarter.

to some extent, that's why we're calling this a speed dump as opposed to something that would change the fundamentals of the company which are very strong ahead of a strong product cycle. >> you're saying moderate their asps. what did they do? they didn't charge as much for each rimm, for each unit? >> it was about mix. so they had a larger mix of lower asp devices, which did better. particularly in international market. the unit guidance was actually very good. so as a result, revenue came off less than expected. if the asps were higher, then revenue would've come in above the street and people wouldn't be worrying so much about it. >> but is the lower price point because of the competition or is it just because they're building into new international markets where they haven't been before? >> yeah, becky, it's because they're trying to get after the larger market. they're not milking the market right now by limiting their opportunity with just can keeping prices high. rimm still has very good

margins, though. that's the important point. they were able to get that lower price and still deliver strong margins. so we sort of have the best of both worlds which is that mass market does require the price point. rimm's position is to after that particularly internationally and you're seeing impacts to asp as a result. but we believe this is interim because the unit momentum that will eventually come through willlltinue to drive up side in the stock as is the earnings support. >> mike, thank you. >> thanks very much. >> all right. check back. anyway, carl, we're coming back down to you in your jacket and, man, maybe we should change. you know, i see you down there and i start to think maybe that's the way to go, you know? seriously. >> you mean with the jacket. >> yeah. >> we all know how good you look in a vakt. >> you don't, i don't need it as much as i used to, either. there was a time -- >> because you've dropped how many pounds?

>> a few. >> you were telling me the other day you need a new hole in his belt. >> and he wanted to show you his abs. >> that's right. instead of a keg, i actually have two bottles. harwood was there in a jacket, too, right? >> somewhere. he's not by me. i think he might be in the convention center. our chief washington correspondent john harwood has been watching all the action here this morning. >> joe's abs. >> lucky you. >> we can talk about the g-20 specifically in a second, with but these warsh comments, the op-ed and talking about how we need to be aggressive in withdrawing stimulus in all the policies as we were in implementing them. the timing of that today, coincidence or not? >> i think it's interesting. the obama add men administration might not disagree with the aggressiveness part. the question is the timing part and why would that be emphasized now by kevin warsh as opposed to somewhat later because this sa

period of time when the g-20 is going to emphasize not withdrawing. this isn't the moment to do that. so interesting timing there. >> yeah. he's going to speed at 8:30. it's unclear whether or not it's going to be a statement or q&a. it sounds more like a statement. but is this going to be the iran stuff that we see in the papers this morning? >> yes, i would expect that it's going to be the announcement about the discovery of this enrichment, uranium enrichment facility by iran that they had not disclosed before, hoping to give some momentum to the international effort to negotiate and some leverage in that effort to negotiate with iran. that starts on october the 1st. we've also got the news this morning that the g-20 is going to be enshrined permanently as the place before us where international economic issues are going to be discussed and settled, which was inevitable, given the emergence of china and india, even though it's kind of a bummer if you're canada or if

you're italy and you see this club all of a sudden expanded to include these behemoths that are much bigger than you are. >> yeah. the chatter this morning among some is given the fact that the g-8 is now a relic if anything and this move to give china bigger voting rights nimf, china and emerging economies are clearly walking out of the g-20 as a clear winner. would you agree with that? >> i would. i was talking yesterday to the deputy national security adviser who said, look, the time has come for a new global financial architecture. and this is part of that architecture. if you're china, i think you have to feel good about that. newer hoping that that good feeling may bring them to the table on more issues like climate change. we did see from hu jintao some understand cages that china is

not going as far as u.s. officials would want on carbon change, but it is prepared to dress the problem and i think that will be considered a step forward. >> yesterday we were talking about the paper companies wanting to jump on the protectionism bandwagon. the draft communique is a few pages on and trade is almost the very last lean. right before they say we're going the meet in 2010, they say we will fight protectism. this is the same time the eu slapping tariffs on steel pipes. would you argue that the trade has been one of the relative losers in pittsburgh? >> well, i would say a relative loser. look, i don't think that the leaders of these g-20 countries are walking away from free trade. other than, there is some choppy water right now. i think if you were president obama hosting this summit, it might be awkward to go on too long about your desire for free

trade when you've just slapped those tariffs on. again, i suspect when the book is written at the end of the day on the obama presidency, the final verdict will be free trade. you'll see ups and downs along the way. remember the steel decision early in the bush presidency. but you'll see more of that in the obama administration and i think that would be reflected in the chinese tire decision. >> it's interesting. we'll talk later on in the show, guys, not just about the trade show. joe, i know you've probably been watching the steel pipe show this morning. >> oh, he's doing crunches. >> do you know wa i'm doing? >> i've never seen joe do a crunch. >> no, i do this thing where -- no, you don't need to know. you know what i'm doing? i'm reading hubbard and -- we have govern dean on trying to unwhat these guys are saying because i want to ask governor dean, you know, how to get around a lot of this stuff.

basically, it's that if you take the current system, john harwood, and you add 47 million people, it's just hard to understand how it's not going to cost more because when you add people, they utilize mosh health care and the demand is going to go up and if the demand goes up, the system stays the same, prices naturally go up. did you see this yet in your own paper? >> yes. but a couple points. first of all, they're adding 30 million, not 47 million. but secondly, according to the congressional budget office, which if they get sited on the negative side for their analysis, they ought to be sighted on the positive side. they say it's deficit neutral. but beyond the scoring for the ten years, the hope from the add mip administration -- and it is a hope. nobody knows that a lot of this stuff is going to work. but the hope is that some of the reforms in the delivery of health care services will change the incentives to align them

better with market forces and bring some of those costs down. so would the proposed tax on high value insurance plans. it wouldn't work as well as if they taxed employee benefits directly but barack obama had a political problem because he campaigned against that idea and organized labor hates it. >> guys, you were talking about iran and the u.s. is going to be accusing it of being that nuclear facility. there is something hitting the wires now that iran informed the u.n. about that plant on september 21st. so we'll hear more about that today, as well. >> all the papers have netten yahoo! on the papers answering a lot of the -- anything goes at the u.n., doesn't it? you had chavez a couple years ago and act ma dean jad,

everything goes there. you can say stuff and it has no bearing on reality -- although i bet both sides would say that about another. >> on that notification on monday, we think iran provided a cursory notification after they learned that western powers were on to what was going on. >> right. we'll hear more about it through the morning. again, this is a -- >> yeah. president talks at 8:30, guys. >> at 8:30. okay, carl, did you see brian -- i'm not going there, but did you see bryan williams? >> i did not. what's come up after the break? >> i'm not going there. i was just wondering. >> did you see that? that was almost a diss, wasn't it? >> from you? >> no. from him. pittsburgh is known as a steel city, but 84 lumber is trying to change that, the nation's leading privately health buildings material company talks about the american consumer, the economy, and what it's seeing in the warehouse.

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welcome back, everybody. it's time for our business traveler's forecast. scott williams of the weather

channel is here. good morning, scott. good morning, becky, and good friday, everyone. the weekend is almost upon us. the mid-atlantic will encounter some problems, scattered showers and storms around baltimore, the nation's capital moving through norfolk this morning. give yourself extra time. also as we move into parts of iowa, just to the south and west of the twin citys, watch out for scattered showers and thunderstorms. so the big question is, what will the weekend forecast entail? as we go into saturday, some heavy rain in the midwest, back down to the deep south. quiet conditions for the major cities saturday, looking like a fall weekend on tap. sunday, showers along the eastern seaboard. but quiet conditions for the south, back into parts of the west. drying out, cooler temperatures, as well, behind that frontal boundary. have a great weekend. now back to pittsburgh. >> thanks very much, scott. few sectors are as closely tied to the real estate industry.

our next guest runs one of the largest privately held lumber companies in the country. joe, good to have you with us. good morning to you. >> great to be here, carl. >> for those who don't know the story of 84, just talk about how it came to be and what you started back in '56, i guess. >> yeah. that was a wonderful time to start because all the cities had their individual lumber yards. and when you went in there, they wanted to know what your religion was, what you're doing -- and they charge different prices. so we came in with a very, low, low price. they had shots, the dumont station, 30-second shots for $50. and the thing took off like a rocket, yeah, it really did. what would you say about the economy right now relative to the cycles you've seen over the past two decades? >> yeah, for us because we're

selling just contractors and i'm sure your audience knows all about them and all that other stuff. but it's been tough. it's been tough. in other words, my daughter, maggie, she runs it and with a very within very good team. and in this tough era, they've come to the floor. in other words, i've been in this thing and seen -- but this is a time you can't be sent mental. housing starts two years ago were about 1.8 million. this march, it went down to 300,000. so yeah, our company has done some dramatic things to -- i think it would be a lot better in the future, as you mentioned, we've got to do some commercial sales rather than just residential. >> changing the mix. >> yeah, yeah, and i would think the first year we'll have an international department. so yeah, we've had to do things

and it was great that, as i say, the people of 84 took it on. in other words, you couldn't be sent mental about this thing. that's the one thing about a private company, you can make decisions fairly rapidly and we had to. >> when you -- i mean, we see the housing numbers come in now. obviously, the data has gotten a little less ridiculous, a little less terrible. >> we're probably about 500 single dwelling starts a year. i would think going into next year, they would probably up to 600, maybe 700. for the last 20 years, it's been about a million housing starts and then two years ago, bang. but that's a -- you see, the point is, right now you have an inventory of houses, probably about a 15-month splice of finished hughess. you should have a five-month supply. then you'll get a million housing starts a year.

>> as the housing guy, do you want to see housing pick up or do you think lodge term is it healthy for houses to stay low, clear out the inventory and -- it's not a decision. we have to clear out the inventory. it has to disappear. >> because that starts to mean you is he the sell more lumber. yeah, but there isn't demand there. they have to be digested for it to really pick up. >> what's to to happen with lumber prices? >> they're very, very low. >> that's not something you call someone. yeah, read. >> maybe at other times. at any rate -- obs it is. >> okay. >> i slipped on that one. at any rate, it was probably -- well, now it's about $2 a shea sheet. it was around $25 a sheet and you couldn't get it. so yeah, i'm sure the prices are

probably around 35% to 40% from where they were two years ago. >> but that doesn't sound like you're looking for another big leg down on prices. >> no, no, i don't think so. no, no. that's true in the homes themselves. some of these places have really taken a bath as much as 40%. so i think there's a leveling there in price. >> we'll see what happens over the next year. i appreciate your insight today. >> yeah, good to see you, carl. >> joe hardy, with 84 lumber here in pittsburgh. when we come back, we'll get a viewpoint from hank pitsman. at the top of the hour, former verm governor and the former tt howard dean will join us. we will talk about g-20, economic prices and, of course, health square.

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good morning. welcome back to squawk here on cnbc. i'm carl quintanilla along with joe kernen and becky quick. the leaders of the worl's most powerful nation gathering here today in pittsburgh. last night, the president hosted a dinner with the heads of state. treasury secretary geithner hosted finance ministers in a separate gathering. today they're going to head behind me for some great meetings and we have a great lineup of guests behind me to help set that agenda.

we'll talk to governor ed rendell at 8:15 eastern time. also global risk expert jim rick eithers. and then the eco of bear, a company based here in pittsburgh will talk about what it's like to be a multi national, the g-20 has put a spotlight on pittsburgh. then, bob zoellick, some interesting things to say about the low grade fever we have right now when it comes to world trade around the globe. first, we'll get to some top headlines, right? >> that's right. howard dean is in the building with us now. the former presidential candidate will have all of those things coming up. research in motion first report a prot that rose over last year. it stopped expectations. but rimm's sales and outlook took a big hit yesterday. plunging in late trading, you're talking about down about 12% to 14% in the after hours trading.

a lot of concern about the average selling prices and what this may mean for competition. hewlett packard is projected previous knews to rise for 2010. hewlett packard expects the i.t. industry to return to growth next year and believes that the company will outpace the market. consumer goods giant uni leaver has greed to pay $1.8 billion for sara lee. >> let's check on the markets this hour. we have futures database well, they're earth yesterday, too, right about now. but we have a gain here of 18 points, so the jury is out on what today will bring. oil has been conspicuously weak in segs, but it's up fractionally today. 42 cents or so. the 10-year has been buffeted by all this news this week and all the conjecture. but even after all that, yields continue to fall, prices continue to rise now, 3.36%.

if there's inflation, it's not being man fasted in that, but maybe it is in gold. the dollar continues to weaken against the yen and the euro and i haven't seen gold today. but actually, it was down yesterday late in the session, i think, and now it's back down below 1,000, 50 cents today. back to my colleague, my colleague, carl, who is down still in pittsburgh. looking forward to seeing you on monday, carl. >> it's been too long. the g-20 leaders are aimed at boosting the world economy. meantime, we have fed governor kevin warsh saying the central bank may have to raise interest rates before the feed becomes obvious, in his words. steve haloveman is with us here. >> good to see you. >> good to be here.

>> what do you make of the timing? >> the timing is a little odd, but i think the message is we just heard the fomc statement. i think kevin is staying, some day we may have to raise rates faster than what we view, but i don't view this as a shot adross the bow. when he says it's obvious. obviously might be the unemployment rate coming down. since that is such a lagger, it may well be the fed has to rates the rate before the unemployment rate falls. in our view, we're still talking a year away before that happens. >> and part of his argument is the aggressive nature by which we put these things in can't be asymmetr asymmetric, right? >> i think they still absorb it. maybe people are thinking back to the greenspan, 25 basis point for seven straight meetings.

it's not going to be that slow. but we're starting at zero. it would take a year in a to get the rate back up to that percentage by then. we're not in the position to start raising them, but we may have to do it aggressively. >> so we may be looking at a meeting where they hike 0.75%. >> i don't know if they would start that way, but i think they're saying quarter points, when they move, aren't necessarily going to be the moodus operandai at least until the fed funds rates gets up to 2% or what you might consider to be normal given low inflation. >> i can't imagine you think he's trying to talk asset prices down. >> i don't think so. but certainly bond prices today, like you said, the yield keeps

going down. i think he's trying to talk about the fed's exit strategy down the road will have to be more aggressive than it was in the times in the past, more like they got it down, they'll have to get it back up faster. >> jobless claims, you know, were pretty -- i mean, they're looking better, not worse, on average. are we going to see positive job growth by the end of the year? >> i have it in january/february, not quite by the end of the year. you would reasonable see initial claims down around 450 to 475,000 for several weeks in a row. where at 530,000, i think the couple months ever couple months, getting smaller and smaller. but before we can put that plus sign before the payroll job number, it will be clear i think by the end of the year that the job totals hit bottom with very small declines in the fourth quarter. >> are your revisions going up like they are for a lot of economists around this week?

>> on gdp, they have gone up for this quarter. fourth quarter, i've sampled down a little bit. >> why? >> i think it was a little bit of building up for cash for clunkers and a little bit of a fast start out of the gate. but i mean, i'm not talking about double dip or anything like that, but if gdp growth in this quarter is 3% now or maybe 4%, my guess is the fourth quarter might be 2% or 3% and keep going maybe around 3% next year. it's never that smooth, but that's sort of the average ooh a couple of quarters in a row. by the way, welcome to pittsburgh. it's great to have you all here. >> and it's fun to be here. it's interesting. people have pointed out at the g-20 in april, people are still talking about not v or w or l or u, but d. that was the word. nobody is used that term this time. >> i think that's one of the differents in the back drop is in london, there was still -- we were on the brink, as the president said, and maybe of us felt the "d" word, the

depression. i think many of us feel it's not uniform, there are signs of recovery in the united states, certainly in parts of asia gentleman and in europe. i think the momentum is not to turn the economy around before it falls off the edge, but to try to avoid protectionism or issues, try to help the economy make this upturn and not let it stall out, not in the u.s., but around the globe. >> it's great seeing you, stu. >> thank you. glad to be here. >> joe, back to you. >> carl, thanks. if you have comments or questions about anything you see here on squawk, e-mail us squawk@cnbc.com. coming, the dollar is not officially on the agenda at today's g-20. but other items of the discussion, we'll talk to world leaders and global market risk when "squawk box" returns. you're watching cnbc first in business worldwide. tdd#: 1-800-345-2550

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g-20 mebts still in pittsburgh trying to tackle the lengthy list of challenges facing the world economy. here now is some outlook on the meeting and things that are taken even more prominent today. jim ricker from omnus, good morning, jim. you think that the warsh piece, it's not totally separate from the g-20. it may have been intentional that came out today, but it's more important than anything that these officials decide? >> it's probably just as if not more important than anything coming out of the g-20. i think his audience is as much the g-20 as it is the

marketplace as a whole. >> this is kevin warsh again. >> yeah. the front door governor who is saying the fed's job is only half over today. >> he's given the market a heads up on the following, the fed has traditional times when they raise interest rates and fuel and as and other things. what they're saying is, look, in addition to that, we may look at interest rate prices. the question is what asset prices? it might be the stock market, it might be an indication that they think this bull market is -- my view is it has to do with gold. he's preempting the collapse of the dollar. if gold goes to $1,500, it has to do with the fact that the dollar is imploding. so warsh is saying to g-20, we're not going to let that happen. he can't come out and say that because the fed talks about the collapse of the dollar. he's doing i by indirection. when he says asset prices, i

read that to mean basically gold which is approximately inversely related to the dollar. >> in a perfect world, a guy like you, if you're a policymaker, you can run out of town on a rail. if you try to raise interest rates when unemployment is heading higher and going above 10%, theoretically, if you tried to do illustrate right now, there would be so much populous anger or questioning of what you're doing. you said this off camera, they should have started raising rates six months ago? >> sure. the dollar is a linchpin in the national security. how are we going to conduct a war or are we robust to catastrophic events in a world of fdrs? the fed needs to dollar to go down by about half over the next sh years. we have $60 trillion of liability. that's tarp, baseline budget, inny may, freddie mac, medicare, student loans, fha. it comes to about 60 trillion. there's no combination of growth, no feasible combination of growth and taxes that can

fund that liability. >> do you need to pay it in half? >> we can pay half. we can pay 30 trillion, not 60. so 4% inflation for 17 years, cuts the value of the dollar in half. that's what the fed does best. if you had a nickel and three pennies in your hand, that's the value of the dollar relative to 1913 when the fed was created. the idea of price stability, they inflate the dollar to prop up the banks. so they need to do that, but that's an unstable process. they would love to do it gradually, that's the plan, but if the market sees this playing out, which they probably will, you could have a rapid collapse of the dollar. you see that in gold. >> what other tools does the fed have besides flat-out raising rates? are they ways they can do it behind the scenes? >> well, they can withdraw some of this liquidity. but what they really want to do is basically displace the dollar with sdrs. when you mention sdrs, people just jan and say, it's complicated. basically, the imf, this is the

unannounced part of the g-20. the imf is being anointed as a global central bank. they've issued debt for the first time in history. they're issuing sdrs. the last sdrs came out around 1980. when i say issuing, it's printing money. so i mean, this has to do with something that came out in 1960. they say they said in order to stimulate trade in the world economy, some has to run persistent large deficits. but if you run persistent large deficits, eventually you go broke. so he pointed out the dem ma in 1960, but didn't have an answer. 50 years later, the u.s. is getting closer to going broke. how do you get out of that? well, the u.s. can get its own house in order, but that would cause world trade to contract. what you need is to kick the problem upstairs. that way we can take the dorlt off in a corner and appreciate the dollar to sell our own debt

problem. that's the unannounced play. >> does that mean that we're no longer the country that's fueling -- >> exactly. and that's the new dilemma. we have a solution for triffin slem ma which is sd rsc. we don't have a solution for the national implications of that which is if we have a war, we have a catastrophe, we no longer have a privilege of printing money, we just have another currency like sterling or maybe worse. what warsh is saying, is we're not going to let that happen. he's saying, look, we sort of have to trash the dollar, but we're going to do it gradually. and if the market gets ahead of us and you see gold at ,500 or $2,000, we're going to raise rates a lot. my point about doing it six months ago, politically absolutely impossible. i agree with that. you would get run out of town on a rail. but they would have gone a long way to strengthening the dollar and helping our economy along. >> you just made a heck of a

case for buying gold at $1,000, didn't you? >> yeah. the probably with gold -- i like gold. you like it at 1,000? >> yeah. i think gold can double and that could kind of give you 70% a year for a couple of years with a lot of liquidity. the problem is, when you own gold, you're fighting every central bank in the world. the central banks hate gold because it limits their ability to print money. even the central banks are not bigger than the market. what warsh is trying to preempt an unstable decline of the korld dp what they want, of course, is a stable -- >> you are better than professor robert langdon at code breaking here. >> thank you. >> coming up, hear all about it, we'll be talking about the newspaper headlines grabbing our attention from pittsburgh to new york this morning. plus, we have more from carl at the g-20. stick around. >> we're at the corner of 32nd

street and penn avenue in downtown pittsburgh. take a look at this intersection. what you're seeing is essentially a staging area for police putting on their riot gear, putting on their helmets, some of them stretching, just arming themselves to what may come. we've seen joe turned dumpsters, choppers above us and a steady stream of neighbors coming in to witness whatever protests there may be. the organization of the protest has definitely gathered steam and we'll see where it goes from here.

wow, i want to talk about that. a nice new opening. we have a lot to get to. we talk about all the bad things happening in the world all the time. i want to point out a story that's very small in make of the inside back pages of the newspapers today. family reunions are important to probably some important ones are happening now. two koreas, north and south, some families are getting to meet up again after decades, some of them.

they get six to seven hours for the first time in two years. a lot of these relatives get to meet up. this is something the north koreans watch carefully. they don't let them out of their sight for a couple of hours. they have been told the rules what they can and can't talk about. >> how long ago have they seen -- >> it's been two years since they have allowed any of these. some of these haven't seen each other for decades. >> but they are related. >> they actually get to talk to them. that's a good thing. >> i don't like north korea. >> that's a good story. you're going to hear a lot about protesters in pittsburgh. you know what, don't think it's anything more than what it is. despite the pictures and some of the reports and the use of pepper spray here and there. there really weren't that many. if you don't believe me, here is the pittsburgh tribune. at some point in arsenal park where protesters were gathering,

there was more media than anything. we started taking pictures of each other. take one look, when the mass showed up. there's me. >> you're a protester. >> getting ready to shoot a standup. >> where's waldo. >> exactly. where is waldo. it's sort of the lead in other parts of the media. as the paper says today. pittsburgh aside from that, sort of has a sunday morning feel to it, because everybody who lives here and who can't get downtown, doesn't want to be anywhere near here. >> it says weekend "wall street journal" today, i think it's interesting when you have, for example, mark twain's executor had 700 manuscripts that hadn't been released. what do you do, release them posthumously? >> did they?

a few of them. >> another author wrote something on his deathbed told him to destroy it. >> because he wasn't happy with it. >> then he said he came to him in a dream and said i want to release it. >> a whole list, an author with 14 previously written short stories, even if they are not up to standards how can you not want to read it. michael crichton had one that wasn't finished. they paid someone to finish it. i think whatever you have from these guys that's left around, you ought to be able to look at it. >> i agree with that. >> more on the top stories plus more from carl in pittsburgh. last night president obama hosting a dinner for g-20 leaders. today their work begins. we'll take you inside.

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good morning. the g-20 set to anoint itself as care taker of the global economy. but not without controversy. >> if you remain in the immediate vicinity, you'll be in violation. >> this the tightest security pittsburgh has ever seen, the corner of 32nd street and penn avenue. just in the past few minutes, police have put on their riot gear and essentially organized to stand their ground against whatever may come their way. we've seen organizers work their way along these neighborhoods. when they disperse, forced to disperse in multiple directions, police have been fairly effective at blocking them from each direction. they have clearly done their homework.

they are preparing for a lot more. the day is far from over. >> in studio, former presidential candidate, howard dean. the second hour of "squawk box" begins right now. good friday morning. welcome back to "squawk box" on cnbc. i'm carl quintanilla welcoming you live from pittsburgh this morning where the g-20 summit is convening for a second day. joe kernen and becky quick back at headquarters holding down the fort. in fact let's get back to becky this morning for headlines. good morning, beck. >> good morning. top stories, chrysler's board will reportedly review new models as part of a turnaround plan. "the wall street journal" says directors will be shown updated versions of existing cars, early version of compact and mid-sized sedans by chrysler's partner.

a 90 million flexible assembly plant in china. this the third in the country. it will increase capacity by one-third to try and meet growing demand of the company plans to introduce four new vehicles over the chinese market over the next three years. the new plant will begin production on the ford focus in 2012. hewlett-packard expecting revenues to rise in 2010. that is slightly below analyst expectations. expects the ip industry to grow next year and outpace the market. >> special guest host in the studio this morning, got all these other titles, former democratic vice presidential candidate, governor from vermont. >> doctor. >> doctor. former dnc chairman. but just off camera he admitted the pinnacle, cnbc contributor. >> dispensing with all these, cnbc contributors.

welcome. you've got the jacket off. you look great. you've lost some weight. >> not recently but last summer. i tell you what happened i gained 35 pounds eating peanut m&ms every time i got on the plane, so -- >> personal responsibility. >> most of the people on the outside don't want any personal responsibility. >> here we go. >> been here a half hour this has been going on behind the scenes. >> new jersey taxes went up and he's been in a bad mood all morning. >> yeah, the government will take care of it. don't worry. >> let's start before we get to -- is bernie sanders from your state? that's neither here nor there. >> he's a conservative by vermont standards. >> let's talk g-20. i'm interested in some of your comments about what we need to

do to sort of synchronize or coordinate our financial requirement. >> i'm actually on the board of a group called national democratic institute funded by congress and a republican counterpart which builds democracy and meet with the european parliament a lot. just had this discussion. i think, i hope what's going to happen, there will be -- i don't think we're doing to form a director for the world for financial regulation but i think we've got to have synchronization between european and american regulations particularly about banks then we'll enforce our own, have our own agency to do it. i really hope -- i pick up the paper and read they are fighting over who gets a seat on the inf. that is not a productive use of people's time. they have got to come up with joint regulation. if we have different regulations, one side is a advantage, we don't want to destroy our financial institutions, they don't want to destroy their financial industry. whatever we, do they have to be relatively similar regulations.

>> you can't chase the capital from one place to the other. >> particularly between the western -- >> we used to do things differently, a lot of things internationally. we used to take some pride in that. i know you want to move -- your party wants to move -- let's say we don't go all the way. here is a couple of examples. used to be that euro banks, we were envious of the leverage. we were 30 to 1 and they were even more than that. we don't want -- we need to control the leverage. what about antitrust, something like that. they have a totally different viewpoint of antitrust where they try to protect jobs and competitors and consumers. are we going to do everything like them? >> no, i hope not. i often seize the european when i go over there and say americans we always think without -- act without thinking. trouble is europeans think without acting.

the good regulation is someplace in the middle of the atlantic. they get be a little more stodgy and we've got to be more careful of the risks. you're right about the the london banks, they had nor leverage than we did. look what happened to them. in london they are in worse shape than here. actually things are getting better. not so much watching wall street, talk to actual people on the street. guy drove me out here so i can be here on the show, business is picking up. business in car companies is picking up. that probably mean bigger than wall street and the index is getting better and so forth. it's starting to trickle down to ordinary working people like that. that's when things are getting stabilized and better. >> got to end it but do you ever drive yourself anywhere anymore. >> i only drive myself anymore. >> limousine. >> only when i come out here on my most important job as a cnbc contributor do i have a car, the

rest of the time i drive myself. >> you remember the accelerator is on the right. >> in my car the accelerator is on the left. >> we have seen that many, many times. >> carl, you're missing the governor is back here. >> he's especially grumpy this morning. good thing you're in pittsburgh. >> we've got the governor with you. you've got harwood with you. go ahead. >> normally i say don't touch my stuff but the governor can do whatever he wants. play with all the keyboards, whatever. our chief washington correspondent john harwood is at the david l. lawrence convention center this morning. john, the president speaks in a little less than an hour and a half. we think it's largely going to be about iran. is this turning into the lead today? >> well, i think so. when you've got the united states and its european allies accusing iran of having hidden this enrichment facility, being caught red-handed, confessing to

the iaea only after they have been discovered, that's going to be the story when you have a mix of security and economic issues on the table. i ondo think that's likely to take over the communication at the conference. >> the biggest leap forward the notion that after dealing with china and russia and not having them on board when it comes to relations with iran, have they now gotten religion when it comes to u.s. agenda? >> it's interesting to know whether president medvedev before he came out from his meeting with president obama and said sangs may be inevitable against iran, that is new sanctions, wonder whether or not president obama informed him of this discovery of the underground enrichment facility. we do know this is going to change the climate in the united states, hopes it helps bring russia and china along because

those have been reluctant partners. >> at the same time we have two other things going on. one is the signaling fedexes need to be as aggressive going out as coming in. this bubbling continued controversy over trade, new tariff over steel pipe at eu, china grumbling about that and people wondering just how much emphasis trade is going to get as the communique gets finalized. >> we'll see as the recession as well as the private leader meetings whether or not obama gets beat up a little bit by his colleague for taking steps that they might argue are contrary to the rhetoric. the anti-protectionist rhetoric we saw from the g-20 in london in april and we will likely see in this communique, although in fairly cursory form. china and india, emerging economies will be gratified by this shift toward the g-20

rather than the g-8 as the permanent forum for resolving international issues. i talked yesterday to deputy national security adviser mike pearlman about that and asked about the rational from moving away from g-8 to g-20. let's look at what he said. >> it is time to update our international architecture to reflect the realities of the economy. we'll do that, including imf and world bank governance. imf has been flexible in the past and could going forward. >> has it met for the last time? >> i don't think so. >> mike froman said i don't think they met for the last time. they haven't but it's going to be in a distinctly downsized environment. it appears that group is going to largely be focused on security issues where officials believe it still has a role. that's partly canada, italy, who

think they will be displaced in their influence by these new entrants that crashed through the door of the club. >> i think the governor may have a question. >> i want to ask about protectionism. i think when president obama raised tariffs on chinese tires, everybody went ho-hum, this is political. even the chinese, it's a small market. raising tariffs on steel pipe, that's worrisome. there's resistance to protectionism, mostly been avoided in a very bad economic period. this seems a little bit more serious. can you tell us a little bit more about that? >> look, one of the things that happens when you take a step like this, you know, you shove somebody in a heated moment in a game and somebody punches back and somebody punches back again and all of a sudden you've got a brawl on the field. i think the question is whether this is going to be contained or develop into something bigger. when i interviewed president obama last week, he said he was absolutely confident the tit for

tat was not going to get out of control. that's something everybody would be watching. maybe a useful function that this g-20 meeting can provide. once members look themselves in the eye and realize they have, in fact, rhetorically committed to anti-protectionist policies in the main, it will be harder for them to go back home and take steps that exacerbate the situation. >> one more quick question. protesters are going to hear a lot of publicity about them, are they seriously impacted or relatively small number of people? >> doesn't have a lot. >> it will be on cable. >> it will be on cable but a diversion. we should pay attention to the substance not the protests. >> i'm totally with you, governor. i think that's the right approach. by the way, you need to ask joe about the size of the limo that brought him to work today and every other day. >> he has his own. >> i have never been driven in here. >> john agrees with the governor

on something. oh, my god, stop the presses. >> 250,000 electric car. >> stop the presses. they are on the same page. >> oh, my god. we've got ourselves a news organization. >> joe, did you hear what i was on the same page with him about? >> i don't need to know. i know it's across the board. i don't need to know. i don't need to know anything. >> what did you say? >> it was about protesters. >> about the protesters. >> you know those rhetorical tricks he plays like inflating. this is like that scene in ghostbuste ghostbusters, dogs and cats living in the same area. >> i put up a news article with a caricature of you. you haven't seen it. you're on with eric cantor talking back, squawking about

d.c. >> any press is good press, right? >> that's right. >> all right, guys. we will get back to you in just a few moments. at home if you have any comments or questions about anything you've seen, go ahead and e-mail us at squawk@cnbc.com. up next -- >> al came seltzer. >> talking to makers of bayer and aleve, business in the steel city and efforts toward sustain ability. >> world bank president, robert sellic takes g-20. global financial system and more. stay here. "squawk box" will be right back. >> time now for today's aflac trivia question. on this day in 1957, what high school was integrated following the supreme court seminal brown versus board of education of top came ruling? the answer when cnbc "squawk box" continues. ter that acciden. well...i couldn't have gotten by without aflac! is that different from health insurance?

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the city of pittsburgh may be known for it's image but the home of 800 fortune 500 companies. the ceo of bear north america. been a crazy week for you guys? >> it has been, but a great opportunity for pittsburgh which we've called home for 50 years now. we've lived through this. we're part of the new technology. >> people point to former u.s. steel building as the symbol, this long-standing icon of manufacturing. right now a health care building. what about pittsburgh made that whole transformation possible? why can't other cities replicate that? >> i think first and foremost we have to go back, carl, to a dedicated and capable workforce. it doesn't matter whether you're

making steel or pharmaceuticals or writing computer programs, you need a dedicated workforce. we have that here. the other thing that's critical, universities. our university network is outstanding. it is the source of our talent that continues to drive this transformation and make it successful. >> is it tough being part of a big multinational at a summit where obviously some want to put a spotlight on that and not in a good way? >> well, we're proud of the fact that we have operations in every one of the 20 countries that are represented here. and i think that we're proud of our business model across the globe. so we understand this is part of what goes on around the summit like this, but it shouldn't detract. >> the policy initiatives we're going to see out of g-20, things

like having the economic council oversee the global economy essentially, bringing more countries, the g-20, the default group not g-8. are these positive steps? >> i think it is. the economy has become global. certainly our business has been global for a long, long time. bringing stability into the global economy has got to be a good thing. now, how we're going to work through all the differences of opinion, there's a whole lot to be made there but let's hope we can make the compromise. >> implementation is the tough part. >> right. >> this has taken some attention off of health care but the process continues in washington and we'll get back to that i'm sure next week. how are you feeling about how it appears to be coming together? >> well, bayer is in support of the comprehensive health care reform. we want that, however, to include a preservation of the

voluntary employer benefits offers. we want to ensure there are incentives for wellness and preventive medicine and for chronic disease management programs. but most importantly, we want to in sure that it includes cost savings and cost reduction. because we're not only a significant player in the health care industry but also a mainly employer here with 16,000 employees in the u.s. >> running short on time but it's going to be interesting to watch how that all gets resolved. it's been a long fight so far. good to see you. bayer north america. >> good to see you. >> back to you in the studio. >> when we return, more from our guest host howard dean, plus what does the world bank have to say about the g-20 summit. robert zoellick speaks about financial security and more. cnn, first in business worldwide.

check on futures, continue to trade above fair value as the dow jones futures fair value up 9, looking at 18 points or so. >> the president speaking at 8:30, 9:55, 10:00 new home sales. it was disappointing, single home sales yesterday. >> hurt yesterday. the small gains we had. if you have comments or questions about anything that you see here on "squawk," e-mail us, squawk@cnbc.com. don't call me a hillbilly. >> again. still to come, former moody's analyst turned whistleblower, his company continues to issue high rating for controversial debt securities. first as we head to break, a look at the most widely held stocks. don't go away. you're watching "squawk box" on cnbc, first in business

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good morning, welcome back to "squawk" on cnbc first in business worldwide. we're reporting live from the g-20 summit in pittsburgh. we've got some headlines. the international atomic energy agency said iran confirmed it's building a second nuclear fuel enrichment plan. the agency said iran would enrich uranium only for the level needed for electricity. the iaea asked for permission to make immediate inspection of the plant. fed governor in an op-ed said the fed is in a critical transition period and policy will likely need to begin before normalization is obvious, possibly with greater force than is customary. >> shares of rim, blackberry maker disappointed investors with latest sales numbers and outlook for the current quarter. chrysler said to look at proposed new models as the ceo

moves forward with the recovery plan. directors will be shown early versions of new models and updated versions of existing cars. back over to you. >> carl, thank you. the credit rating agencies have been widely criticized for overall positive rating. next week congress is taking them on interviewing one whistleblower who warned moody's about the inflated rating. he's here now. the former managing director of moody's analytics. thanks for coming in. great to see you. >> thanks for having me. >> you warned early on, back in january that there was still a lot of funny business going on at ratings agencies. why don't you explain what you got. >> the specific warnings i sent to the compliance group was that they had changed the methodology for rating deals blacked by leverage loans in december.

yet in january they rated a transaction without taking that information bo account. they knew they were going to change ratings and ratings were going to go down substantially. yet when they rate add new transaction in january -- >> based on those securities. essentially a c loan, they didn't take that into account. >> the issue we are still paying the freight? writes the reason for them doing that? is it a -- >> i don't know. i can't speculate. i don't know. >> i don't see why they would do that at this point? >> i don't know. >> you have no idea for motive, if you were to look for a diabolical motive could you find one? could you connect the dots? >> i probably could. i mean, i think there's not -- i wouldn't even think of it as diabolical, there's incentive at the rating agency to say no that's the problem. that's the problem that we still

have. >> how do you fix that? as much as i hate to admit it, joe is onto something here. how do you fix that? when i was governor we did a lot with rating agencies, trying to get to aaa, which we did. we would go down, they would beat us up. we'd have to go back and do things differently. now we find out people getting rated were paying the bills. it's in everybody's best interest for you to give usa better rate. >> the readings product was much better on the corporate side. the problem is still primarily there. there is a lot of ways -- three options. number one, taking the ratings agencies completely out of the solution. it's a good solution but impractical. you really don't have a good substitute to take them out. >> they serve a purpose when doing their job properly. >> exactly. that is a quasi regulatory purpose. the first step is to admit what

they are doing is a quasi regulatory job. i think we do have a model, not perfect but for an agency that performs quasi regulatory. they haven't been free from scandal but what they have not had is a free fall advantage. in order to do that, there's a limitation, fasb and gaap. accounting firms can compete on price and service but they can't compete on things like what's income, what's loss. if you can imagine scenario each accounting firm could determine in its own methodology what the loss, what's the gain, then going out to your current employer thinks that's a loss. we think it's a gain. you can see standards fall immediately down. what keeps that from happening is a single set of standards everyone has to use gaap. >> but don't you have the same kind of conflict that accounting firms have? we've seen this in accounting

firms. you're a big client, paying them a lot of money, whether through ito to rate it or to account for it. >> absolutely. >> and the guy or company paying the bill is going to get some consideration for that. how do you fix that without the government -- >> no. that was your idea. >> no, it wasn't my idea. >> are you kidding. >> you said have the government run it. >> the best way -- thank you. do what you do do everybody else. seriously we don't want the government running it. this is an inherent problem, inherent conflict. how do you fix that? >> i think you can never really fix that conflict. what you can do with an accounting model. first of all there's a lot less room for accounting firm to say we'll go your way because they can point to the gaap. look, we can't do this for you. we know you really want us to but we can't because that's what gaap says and we won't be

liable. from a regulatory point of view because there's a set of standards, liability is more clearly defined. if you don't have standards, you can have methodologies, either, a, a rating agency can talk its way out of a bad rating, just our methodology. b, no one can prove it because it's their methodology or b, losses when something goes wrong. i think what happens -- i agree with you. there's no perfect solution. you'll always have this conflict between somebody who pays for the rating or ratings, accounting, pricing services. but what you can do is set standards so you can have liability. that way rating agencies can defend themselves. you guys got it wrong. look, standards. we did our best job. >> other people said the people that need the information should pay the ratings agencies. but then you couldn't make it

public. it would be proprietary to people to see what they are doing, no transparencies, no one knows anything. you know what, i think maybe you were right. >> far be it from me to be on your right. but the problem is you getting into a whole other -- look at the games played in congress. let's not talk about health care. >> this is a lot less dangerous than giving everything to health care like you want to do. >> then i think about gap and i think about the other day dell reported. >> we only report -- it said i asked him about non-gaap. he said i never do non-gaap and i was shocked. most of the reporting we do is non-gaap anyway. the whole point we made about you have to do gaap, there's a way around that. we report all non-gaap. >> you know what, people have to

publicly file gaap, non-gaap. >> so you have two things to look at. you can find the truth somewhere in the middle. >> there's no magic in the rating, no crystal ball. >> the interesting thing about this is, this is incredibly arcane stuff, not for these viewers. most have no idea what you do. it is critically important the whole financial structure of how governments raise money and give people confidence in order to buy the bond comes from what you do. this is really a big deal even though it's really arcane. i wish we could figure out how to not have that conflict. >> eric, you're going to be testifying before congress next week? >> yes, ma'am. >> will you come back and tell us what you think after that testimony and the sense under the circumstances from other people, too. >> yes. >> we appreciate it. eric, thank you very much. we'll see you next week. >> coming up we'll have carl's conversation with world bank president robert zoellick. his take on the global economy and the high stakes of the g-20 summit. then later pennsylvania governor

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beautiful morning in pittsburgh. the weather cooler but a lot more clear. we're in the steel city for the g-20 summit. world bank president bob zoellick following all the latest developments. he's going to be arriving later on today. we talked to him earlier about what he thinks about the brewing trade war around the globe, the financial system and global economy. >> i think the london meeting was successful in breaking the fall. you've seen the improvement in financial markets. now you know there's early signs of growth. but people can't get complacent. there's a lot of uncertainties.

unbalances, each stage will come back faster. chinese credit growth will be hard and fast. that's going to get turned on a little bit in 2010. one of the issues is obviously the u.s. consumer can't crop all this up. where will you get other sources of demand. that can be from other countries if wets the right financing. >> when you say complacent, about what? financial regulation, helping the poor, keeping stimulus in place or all of those things? >> the whole set. in london, crisis concentrate is the mind. people have their backs against the wall. they were fearful to a return to the '30s, everything from protectionism to financial breakdown. they have to keep the pressure on. that does mean financial regulation agenda but also means in the area of trying to look to sustain this early growth, you're going to have to make sure you're going to get additional sources of did he man. we did $4 billion of lending to india this week.

at some point we're going to need additional capital. that helps the system. if you get countries that can expand their demand, get the financing, that comes back with purchases from the developed world. trade protectionism. you know, you had a low grade fever. the temperature has been rising. people have to be responsible on that. the whole climate change agenda. how are you going to connect with the climate change negotiations in doha, what are the opportunities to work with the developing world. there's no shortage of things. food security, the g-8 meeting had a very good initiative but right now words on pain. $20 billion in pledges. we've got to operationalize that to help poor countries. >> trade, you talk about low grade fever and temperature beginning to rise. we talked about tires a couple of weeks ago. this week we're talking about paper companies. is the president being seen as a protectionist going into this summit and is -- are all of these leaders coming into pittsburgh with a so-called flat tire on trade?

>> i frankly think there's uncertainty. his comments talk about direct mission on trade. people will look to actions. this first round with china, both sides signal there's room to negotiate and they will try to take it under control. you raise a good point. all will file suits. if the image is they are going to have a lot more they will have a problem on the global trade front but also some could affect financial markets. the best antidote for protectionism is off. a lot of people believe doha round and wto can get done. i happen to be one of them. it's going to take a political push including from the u.s. >> i want to get your thoughts broadly on the markets and risk around the world. all the pools are coming out, a great time to buy stocks, feds at zero, economic forecasts upgraded. no signs the rates will go up soon. steep yield curve and all that

bears are arguing no about whatever level it's at. it's about the amount of risk we're putting together again after the collapse last year. are we in danger of reinflating to a degree we put ourselves back at risk? >> well, that goes back to one of the core points i was trying to start with. everyone knows there's a lot of liquidity out there. some people say, well, liquidity may be boosting up some of the prices that raises anxieties about whether it's gone too far too fast. the real question will be in 2010 do you get a hand-off from government stimulus programs to private sector investment and growth. that's not only in the u.s. but that's around the world including the developing world. the question is with the chinese expansion which has been great, have they expanded credit so much they will have to dial it back in 2010 and what will that do. in east asia i personally think you'll get faster growth. i think that's going to pose a question for monetary authorities about whether they

are going to follow the fed as they usually do to help manage the currencies or whether they are going to use their monetary policy to deal with inflation. if they do, that increases interest rates, will that draw capital. so the point is, at the same time that london helped create a financial fix for the system, it won't work unless you get the private economy back in place. that's i think some of the questions that these leaders are going to have to try to make sure they get the incentives right. >> zoellick from the world bank talking to us from outside the u.n. but he's on his way to the g-20 summit and will get here later today. talking about big issues before the g-20. chris donahue, president and ceo of federated investors. he joins us at alcoa center to jump in on that topic. there's a lot going on. >> there is a lot going on. welcome to pittsburgh. >> these summits usualley are

mishmesh. banker's bay, should be linked to long-term value, not excessive risk taking but not direct monetary caps that sarkozy and some others wanted. has this turned into a witch hunt for bankers or not? >> i don't think so. i think that kind of bonus program is exactly you what find most of the financial institution, including ours, to adopt. i think the bigger issues are more important. in other words, having this group coordinate itself on stimulus. on liquidity, and on free trade. and i agree with secretary geithner they ought to come up with deadlines and timing on these things in order to prevent what happened before. >> are you encouraged -- discouraged by the seeming lack of coordination or lack of agreement between americans and europeans or do summits like this give you some heart that the story is going to be straight around the world? >> i think it's a lot like raising children of which we had eight. you have to reward what's

approximately correct sometimes. the coordination on some of these issues sets the stage for coordination and cooperation on others. so i would be more optimistic than the average bear. >> directionally. >> directionally they are heading in the right direction. >> you think markets are going to do well here? talking 1200 s&p. >> our house view is 1200 s&p year end. we have teams of investment managers and some who rigorou y ly dissent from that view. >> what's the bear debate. >> we'll head off the cliff again and therefore we have a short fund that does that. the other guys are saying, no, this is an honest recovery and we're looking for 1200. >> there's a lot to argue. can you believe in both. but you can try to make money in the near-term while this liquidity raises all these asset prices? >> the diversification we have is important to us. with equity, fund and money

markets it doesn't matter how the market goes we feel we have excellent products and diversification for our clients. >> has the little guy bought in yet to stocks. >> the little guy has bought in a little bit but not that much. our primary business is through intermediaries so we don't have the direct contact with the little guy. from what we've seen with some of our customers, there has been some movement but not an avalanche. >> are you still expecting some to go all in. >> i'm not expecting people to go all in for a long time now. i think they are going to see diversification and managed portfolios coming into the fore. you're not going to see people going all in, declare victory and moving on prfr you're catching us on a morning a lot are chart about this op-ed by kevin warsh saying the fed needs to be aggressive removing some of these policies and it's going to happen before you might ordinarily think they are needed meaning watching joblessness come down or watching excess capacities go down.

what are they trying to tell us? >> i think they are trying to tell you they are not going to repeat the last sin. more importantly i think if they do it in a measured and communicated way, it will work. they can take bigger steps. they can take them sooner if they are measured and well communicated. >> is the risk going out greater or less than the risks going in as we saw last year? >> i think they made a good decision in keeping the liquidity open, because that was a far greater risk. and i think now they have assessed the risk properly because the recovery has begun. i think they are giving right signals to the market. >> chris, we didn't talk much pittsburgh but some gorgeous weather here for that. thank you for that. >> thank you. we're ninth generation pittsburghers so i'm all in. >> that's a long time. chris donahue, federated, thanks very much, chris. >> thank you, carl. >> back to you. >> carl, thank you. we'll see you again in a moment. still to come, update on automakers satisfaction

guaranteed program at 8:00 a.m. eastern time. >> up next, before you make a trade, you need your daily dose of stocks to watch. we break down today's movers and shakers right after the break. um bill--

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k today.

>> after yoko, a couple of days ago. we had some of her music. as the beluga whales were singing we piped in i don't cyo. maybe some serious people in their cars caused a ruckus. i'm trying to make up for yoko. we're going to be the most soothing -- you like that. >> i like that. the walrus, too. >> you see the animals, soothing. >> you wait for the one day i'm not there. >> i didn't know you were tuned in, carl, right now. >> i'm watching. >> you do watch very closely. i'm ready to pull up yoko at any

second. we're ready to go grego, aren't we? >> shots to watch for months. >> we are. ♪ ♪ >> see you had to open your big mouth. cut! cut! here we are. i said i'd never do that again. research in motion, that is going to be done. we had a dispugs with an analyst whether it's a competitive with the iphone. the analyst we spoke to, the outlook was disappointing, even though it was above expectations, revenues somewhat disappointing. we did see downgrade including goldman sachs from a neutral to a conviction buy. upgraded airline stocks. the top pick is uaua, which normally will play louis louis.

uaua. they believe the best leverage for economic and corporate travel recovery. carl, i didn't think you'd be watching that. back to you. >> always watching you, joe. somebody has to keep their eye on you. when we come back, breaking economic news, durable goods on the way. the president soon will be arriving at the convention center behind us. the g-20 summit about to get started this morning. we will take you inside. how is the gm satisfaction guarantee rolling along? find out from vice-chairman bob lutz when "squawk" continues in a moment. fidelity, traders learn from the pros. say you want to backtest an entire portfolio of stocks. market experts show you how through fidelity's extensive trading knowledge center. and fidelity gives you free research from 15 independent firms, with accuracy scores... to help you decide which analysts to trust.

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satisfaction guaranteed. gm vice-chairman bob lutz will tell us if the latest sales cam paper is paying off. >> protests are moving, cops are also on the move. these police put on their riot gear 20 minutes or so. blocked an intersection at the

corner of penn avenue and were heckled by protesters. nothing too serious. they are on the move as these crowds go from block to block. they are intermixed with neighbors on the street, spectators, really. some making jokes, making light of it, some very serious. hard to tell from one snapshot how serious it can be or may not be. for the time being there are an awful lot of police on the streets of pittsburgh. >> we have breaking news on the way. >> durable goods at 8:30 a.m. eastern time. "squawk box" begins right now. welcome back to "squawk box" on cnbc first in business worldwide. i'm joe kernen along with becky quick and carl quintanilla. our guest host former vice

presidential candidate, dn chchlt chairman, cnbc contributor, author of the book," howard dean prescription for real health care reform. he'll be with us for the rest of the hour. we'll get to health care at some point. first let's get to carl at the g-20 summit in pittsburgh. back down again with you, carl. >> joe, despite the attention, headline might be iran, national atomic energy agency has confirmed it's building a second nuclear enrichment program. the president will talk about this later this morning $830 a.m. eastern time on the issue of iran. says they have been covering the covert project for years. iran is making the admission only after western intelligence agencies breached the security surrounding that project. so we'll hear a lot more about that in half an hour's time. host of the g-20 summit meantime are going to be meeting today. pennsylvania governor ed rendell is going to be among them. we'll talk to him at 8:15.

a lot going on, some economic, some foreign policy. we'll get to that in the next hour. >> carl, we'll see you in a moment. a check of the morning's top stories of the fed may have to raise interest rates sooner by a greater degree than many think. "wall street journal" op-ed piece, policy will need to begin normalization before it is obvious that it is necessary. probably with greater force than is customary. this is huge for the markets. traders are paying very close attention because this going to change the risk factors that are out there. in the markets not going to see tracesing come back like it normally would be when you expect feds will be raising rates. we'll talk more. pay $1.9 for sara lee personal care, categories like skin care and deodorants. ford is building a third plant in china for half a billion dollars. this plant built with ford's joint venture partners will have

an initial production capacity of 150,000 vehicles. ford is planning to debut four new vehicles in the chinese market by 2015. >> gm satisfaction guarantee program finishing up its second week. we had mr. lutz on before it started as i recall. how successful has it been so far. let's get to phil lebeau, the aforementioned bob lutz. >> lets bring him in from michigan, bob, vice president. it's been successful. how successful has it been in terms of that money back offer bringing in buyers? >> well, it won't drive immediate sales and we absolutely knew it wouldn't. what it was designed to do is drive consideration. september has been a pretty weak month because we had hangover for cash for clunkers. almost everybody's inventory is severely depleted.

we never did want to look at this program as immediately driving sales. however, when you look at consideration, whether it's edmonds.com or rasmussen, a lot of these polling outfits will tell you consideration for gm is up very sharply. it was up 14 points in the first week and information i got this morning shows that overall consideration, willingness to consider gm, which was our problem, is up 17%. >> bob, the question becomes are you reinforcing gm with people who are already predisposed to have a positive attitude or the core problem, bringing people back that might be more interested in a toyota or honda. >> no. that's what i call the increase in consideration. that's not the core group that buys gm anyway. this is a great undecided group

that could go any brand and is undecided whether they go to imports or domestics or maybe they own an import now but would consider a domestic brand. it is precisely in this undecided vote that we are up anywhere between 14 and 17% and we have also had over 1 million visits to the 60-day satisfaction guarantee website. so as far as we could tell, what the dealers are reporting, exactly the affects we wanted. >> who is buying post clunkers? who is in the market? it's so weak out there. >> well, i just think it's still, one, a generalized economic weakness and some uncertainty. secondly, i do think there was some pull ahead affect from clunkers. then, we can't forget the fact that maybe some other people as well. but we are seriously short of

inventory. all of our very, very hot new cars like the buick lacrosse, the cadillac cts wagons, chevy equinox, gms terrain, all of these vehicles are selling out as fast as we get to the dealerships. we don't have enough to cover demand. full sized sport utility and full sized pickup trucks, we have plenty of inventory. >> bob, real quick. last question. when you guys look ahead, it's too early to see if people will turn vehicles back in if they are not satisfied. whether or not percentage do you think will say, thanks for the opportunity to drive a gm vehicle but here is your vehicle back. >> i'm going out on a limb. i'm going to say way under 1%. >> this program runs 60 days? >> yeah. possibly renewable. we'll see what kind of experience we have.

>> bob lutz, vice-chairman of general motors giving us perspective on the money back offer. two weeks into it, joe and becky, there you have it. they are fairly optimistic it is succeeding doing what general motors was hoping for, changing the perception of gm vehicles with those that pass right by gm dealerships. back to you. >> thanks. appreciate it. see you soon. more thoughts from our guest host, former presidential candidate and governor from vermont. we mentioned before dnc chairman and cnbc contributor. governor dean, listening to what he talked about, seriously short of inventory, especially when it comes to their hot models, does this tell us anything about the american economy right now? >> not yet. although this industry is critical to the future of the american economy, what it tells us is gm had a terrible branding problem. the japanese cars in the

american market, ford had a reputation for quality better than gm. this is a smart thing for gm to do. they needed to break out of their place they got stuck in and challenge consumers. that's what they are doing. this is really the canary for american manufacturing. does it have a real future or not? the american company has got to be able to sell cars to americans. we cannot have toyota, which is a great car company, be the leading car company in the united states of america if we're going to continue to be competitive manufacturing power. >> wait a second, toyota is building plants right here, honda is being plants right here, you can consider those american cars, too, even though the companies aren't based here and profit go back overseas. >> absolutely right. they can have the kind of quality brand our companies need the quality brand in the marketplace. that's what gm is trying to do, come out and try us. talking about ford earlier.

ford putting their plant in china, it's a risk but it's really smart, because the chinese, because of the kind of government they have, have said by he had income tax, their mileage standard is something like 45 miles to the dillon, even after the obama administration put it out is 29. they will have to make cars, learn how to do it in china, then the technology they will be able to bring that back to the united states and probably be ahead of their american competitors to try to figure out how to meet high mileage standards here. >> we talk about ford putting plants in china and talked earlier about protectionism on the rise around the globe. what's your big concern when you look at things that happened later not only with the tire spat, paper mills and now steel industry. >> when everybody was ranting and raving about protectionism, i thought it was mostly fine to rant and rave about it because

protectionism is not a good thing. i didn't think it was going to happen. tires didn't bother me. a tiny market, a lot of politics involved. chinese got it was a tiny market. as i said earlier in the show, this news today that europeans are thinking of putting tariffs on steel pipes, that's worth looking at and finding something about. that's potentially a good deal. we've got to watch that. protectionism is going to undo standards of living around the world. >> are you worried about coming back? >> no, i don't think so. i'm a little more worried today. i want to know why the europeans did that. one thing to have a political reason to do it. another reason for find out it's a broad-based tariff. that means something. that would make me nervous. >> governor we kept running you're going to be pitching the public option at the bottom. you said you feel like a broken record at some point. maybe some people do want to hear you talk about that at some point. the whole time you talk about carmakers pitching the public option, we're just expecting

you -- >> as you expect, i think we should nationalize all the industries and have a public option -- >> we already did that with the automakers. >> actually, you know what, it seems like -- >> in the administration's defense, the way they resisted calls to nationalize banks, a lot of the things -- even the way the car bailout, a lot of things have worked well. >> this the interesting thing, you never want to trust ideology on the right or left. you've just got to do what's pragmatic, even though it may not be what you're taught to do. >> the president is letting geithner and bernanke stay as integral parts of the administration. both of those guys were bush guys. they are still here and they are still making policy and doing pretty well. that's a huge -- >> i don't think we're out of the woods yet. i think there's still a lot of shakiness in the car companies,

even post bankruptcy. >> whittaker, chafs a good move. >> i think this was his idea, too. >> gm would have never had a guy -- >> they have broken the stodgy culture of gm. >> and ford. >> great job. >> we don't need to worry about chrysler, they are making fiat. >> they have to come back, too. and they have jeeps, which is still very popular. >> anyway, governor. we will have more for you throughout the hour. we'll beround for the rest of the program. let's get back to carl in pittsburgh. >> i think we're having a problem with transmission. let's tell you what's coming up. when we return, 90% of the globe's economic power, 80% of trade, 67% of the population represented. thousands of police and security and one big-time governor. up next, pennsylvania governor ed rendell will be the special

guest as the center of the world in pittsburgh for at least a couple of days. "squawk box" will be right back.

live picture of the convention center at pittsburgh where we do expect the president to speak at about 8:30 eastern time. we think regarding iran and this nuclear facility that the iranians have now copped to. we think he'll speak for five minutes, flaengd by gordon brown of the uk, nicolas sarkozy of france. they are not expected to speak. that's coming up in about 13 minutes time. meantime pittsburgh is enjoying spotlight during the g-20 summit. joining us to talk about it, pennsylvania governor ed rendell. among those singing its praises he joins us to talk about pittsburgh politics and the economy. good to have you back. i know your pittsburgh pirates tie.

>> i'm loyal to pirates, they lost 23 out of their last 26 games but i'm still loyal. >> we're going to see video protesters. net gain for pittsburgh? >> absolutely. protesters up to now did damage to retail stores but relatively contained. for pittsburgh, a city that most people in the international community still think of as the steel city, a smog city, they don't understand the story of how the city has incredibly transformed itself with life sciences, it and green jobs. this convention center is the only lead certified in the country. pittsburgh has 40 buildings that are certified. it's on the cutting edge of the green economy. people don't understand that about pittsburgh. they don't even understand this great skyline. >> how do you make the calculation between we're going to get a lot of good press on the economic transformation of the city but we're going to have the protester video in how do you know -- >> there's always an element of risk. i look back at seattle.

seattle was the worst american experience with the g-8 at that time. seattle didn't have any permanent damage. i think the risk was worth taking. it's expensive. i'd like to say to protesters, tens of millions for the police. i'd like to say, tell us the cause, we'll give the money and stay away. the federal government and state government stepped in. we're financing about $24 million of the cost. >> is iran going to overshadow all of this in a few minutes? >> i think. you know, it was a pretty big announcement by ahmadinejad. see what the president says. the overlay has to be the financial recovery. we're showing signs, i know recent polls tart to give the president credit for stimulus. i believe the stimulus is working. no question it's working in pennsylvania. i still think the economy in minds of americans overshadows iran. >> some reports this week not

going to some of the highways you would have hoped, stimulus that is. why are you so bullish on its effectiveness. is it because it's hitting the state in ways it's not hitting other states? >> number one, for us we developed a good plan for roads, bridges and highways for a billion dollars. we've used $700 million of that, construction has already started. $915 million already obligated. not just bridges, steel factory. secondly the state is getting 67896 billion of stimulus money for medicaid and for education. without that money there would have been tens of thousands of additional layoffs. so when you talk about creating jobs, stimulus also helps us retain jobs. >> there's a piece yesterday, gop is raising more money than they have in a while. is that a precursor to taking a large number of seats back in

2010? >> it's too early to predict what's going to happen in 2010. it's a year away. let's say the stimulus continues to work and the economy for other reasons. then the president will get credit, which he deserves. he certainly would have gotten the blame if the economy stayed in the trough. i think if the economy is good urks going to be surprised by the 2010 elections. in my view, of course i'm a democrat, the republican party has offered nothing but criticism. they haven't offered one good concrete idea on health care, on the environment, on the economy. nothing but criticism. if people don't like criticism alone. you've got to pair that criticism with positive suggestions and we haven't heard any. >> rahm emanuel asked about the public option on health care. he says if you think that's going to happen you haven't been paying close enough attention to the debate. can we call it dead? can we call it gone? >> i think in its purest form, probably gone. will there be some iteration of it, i think possibly. >> is that okay with you?

>> i would rather see the public option because we need competition. in most parts of pennsylvania there's zero competition. we have one carrier, that dictates prices to consumers but also dictates reimbursements of doctors and hospitals, which is one of the reason they are suffering. we need competition in the system most of all. if there's not going to be a public option, they better find some way to inject real competition into the health care delivery system. >> with 60 votes or 51. >> 60 is preferable with the massachusetts action i think we'll have 60. i'm hoping senator stone and collins will come around and support something good for the company. i'd like to see 70, 75 votes. >> 70 or 75. >> i'd like to see it. >> originally when we spoke to senator grassley and baucus, i was convinced there would be republican votes. i think their position -- the president reached out to them on the speech, tort reform, tax

credits on savings plans, and there was no return. >> assuming it gets done, assuming health care is a when not if, is there stamina to do things like cap and trade or anything else? >> i think everyone is going to have to take a little time off for the christmas vacation. one thing to give president obama credit for, more than one thing, but he said he wanted to make change and he's pursuing a change agenda. and the areas he's going at, everyone agrees there has to be change. i don't think there's any right thinking person who thinks we can keep health care delivery system. let me give you one statistic. in pennsylvania, ten years ago if an employer wanted to do family health insurance for his employee, $5500. today it's $11,400 and in 2016 it will be $25,000. there will be no health care system as we know it unless we do something. >> congratulations on the senate. go pirates, go eagles. >> and steelers. we'll get killed if we don't mention steelers. >> governor, thanks.

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braef day two of g-20 begins in pittsburgh. it's going to kick off not regarding the economic collapse or banker's pay or capital requirements but rather iran. the president is going to speak in a few moments, we believe, about iran and will accuse, along with gordon brown and nicolas sarkozy iran of building an underground plant for nuclear fuel. they will say it is hidden. that covert operation not complete from international weapons inspectors for years. becky, we'll be watching that closely. a lot of luncheons and plenty area sessions and of course a speech later on this afternoon. that will kick things off in pittsburgh in not too short a time. >> the durable goods report for

august. it's about to come out as well. rick santelli standing by in chicago. steve liesman on set. we'll talk about that in a moment. rick, why don't we get numbers first. >> minus 2.4, very volatile series of data, durable goods, things that last three years or more is definitely many multiples below expectation, below a july number pegged at 8. if you strip out transportation, this is what most will look at, it's better but a goose ago. it's unchanged coming off a slightly revised up .9, basically 1%. we know the cash for clunkers program is going to continue to have an effect on the data. this is a number that is disappointing the market at least defined by a rally in treasuries pushing yields down and a break inequities that took small gains into small losses.

all you technicians out there, of course, we know that the wednesday session had a very significant technical reversal and pending today's friday close of course can find potentially more selling if you subscribe to the aggregate mentality of group behavior as depicted in a chart. back to you. >> all right. rick, thank you very much. why don't you stand by. we'll get more reaction on this as well. >> steve, do you see anything that rick didn't summarize in the details? >> i very rarely see anything rick didn't summarize. we thought aircraft were going to be down, apparently they were. that's part of what dragged down the index. one thing i like to look at, the barometer of business spending. that was down as well. non-defense capital goods, aircraft, call it business investment, downtown 0.4. a lot will be scratching their heads. super supply management came out

with their index showing new orders increased to 64.#, which was the highest level since i think it was december '04 or any time in 2004. this contradicts that. what i'd have to do now is dig in. there may have been an expectation of vehicle orders that didn't show up. we do this every month. i hope you guys remember there's a difference between what the auto manufacturers report and what shows up in the government data. it eventually catches up but may be a sequencing issue. >> talk about kevin warsh's op-ed in the journal. we've been talking about it hearing from different people. you said you think this is a little out there. >> what i don't understand. what happened tuesday or wednesday, the fed came out and said we will have rates low for an extended period, exceptionally low for an extended period and we are going to not end the creation of money as in mortgage backed security purchase program until the first quarter of 2010. what did kevin say?

we may end up turning sooner than you think and we may end up being harsher than you think. >> more violent. >> this is three days after he agreed and voted on a statement that essentially did the opposite. now, you could argue he's giving us guidance for, i don't know, six months, nine months down the road. i'm not sure what value of that guidance is right now unless it's to influence the curve all the way down the road. >> walk that tight wire, tightrope that the fed is trying to walk the whole time. >> any of the dollar bears what they use to keep hitting the dollar, just be careful. we can come back. >> let me ask one more question. >> let me ask rick -- >> talk is cheap and more talk makes talk cheaper. >> this is what these guys do for a living. look in europe. journalists are allowed to admit

when they have a chill rundown their leg, we saw chris matthews do it. >> i don't know who that is. >> when you remembered warsh, duties a chill? is this guy speaking to you? >> listen, you know what? i'd like to look at the realities of the world firsthand. i'm sorry but i think it's unfortunate in many ways but i think that there's just a general concern that what you say, what you print versus what you do, i love the action versus the words, i want to watch how all of this plays out. there is a bright side right now that has nothing to do with what's written in op-ed pieces. that is if you look at what's happening inequities and some of the technicals and we'll have to see if they pan out in a perverse way it is building a base in the dollar. the dollar could have bottomed out temporarily wednesday evening and i'll take whatever they give me for whatever reason. if the dollar can find a footing

i'm happen. >> rick, earlier, said we should have started raising rates six months ago. do you agree with that? >> joe, i continue to say raising rates, i understand there's impairments to that. but i think if you look at where they are and where they would need to be to really present an impairment, there's a huge amount of gray there. that gray could send a message. europe never went below 1%. the money fund managers are thanking them. there's a lot to be said for a token form of tightening, much more than a program that's in misuse being taken off. granted i'll even take that but yes, there's a lot of businesses, individuals and world investors that are sitting on the fence for the prudent behavior that helps markets fix themselves that aren't going to get off the fence until the government gets out of the pasture. >> rick, what i'm confused about is how the market takes the message today from what warsh is

saying. he's saying let's agree the feds agreed to create money until the first quarter of 2010. you don't create a dollar to burn the dollar the next day, take it out of circulation. when is he talking about this will happen? sometime now between now and the end of 2010? >> i obviously read the rorschach statement, heard experts talk about and i read today's piece. i agree with you. words here, words there, they don't seem to be congruent. i continue to think i look at all markets the way i look at housing. if an anvil off the empire state building. if anybody in the government thinks they can hold it in midair and borrow some time until midair becomes the new baseline, new ground level, it just isn't going to work. and all markets need to get back to basis post crisis. we shouldn't be doing this. we have addressed the crisis.

we have moved on. that's the problem with government involvement in anything, that the extraction becomes an ongoing visit from your uncle who never leaves. the crisis for the most part is over. >> i actually want to ask somebody who knows something about markets. >> who is that speaking? >> that's governor dean. >> howard dean. talk to me about the market a little bit. we've had a big run-up in the market. the economy hasn't quite started to turn to catch up to the market. is this a good sign that tells investors that the government, in fact, is serious about making sure that this is a steady, thoughtful climb and we're not going to permit a lot of speculation on something out of control in the first place. >> let me think about that. no, absolutely not. the markets inequities are now a commodity market. they are commodetized. the way it travels, behaves is like a commodity. most of the players aren't

putting pleasure in the economy. they are putting flesh in the idea of trading. i'll tell you what, i hope we don't get a major reversal in the market but if it acts like commodity markets what goes up comes down, more value tilt. this isn't the equity market of the past because of what's going on in leadership hallways all across the world, whether it's in washington or whether it's in europe or whether it's in asia. the government comes up with something tomorrow that none of us could predict. how could the market possibly divine that. the market isn't fundamentally driven. >> rick, you know, in a way kevin believes in what you're saying. >> that's the one thing -- >> in words if not in action. the idea this game is halfway over. you can't say there's any victory if all we did was stop the panic. the getting out part is as significant as the getting in. >> to me the headline said it's only half over but he sounded like it's only a third of the

way over. he's talking about triathlon where you get out of the water and you've still got two more legs to go. >> he sounds like he thinks the economy can stand significant increase in tightening. that's why i asked is this a sign we're getting better. >> the actual answer judged by his answers is no. he voted for a statement that kept a lot of these things in place up to the first quarter of 2010. we're getting there. but i think the other thing is, for lack of a better language, we can screw this up as badly as possible right now and completely obliterate any success. >> rick, what would happen in the markets if they did raise rates? >> well, i think the first thing that would happen, the dollar would really get a rally going, a. b, we'd go through turmoil. equities wouldn't like it. i think what the market would do eventually it would like that type of behavior because we

would see reality. maybe we would put a price and quantity on things we don't know still like toxic securities. that securitization process is ongoing. i just had a meeting this morning with a group that understands not only cvs products but the structure behind them. putting these products in transparency isn't going to work. >> that big inside outside today on wednesday technicians are pointing to. that was the day we didn't get something, a confirmation like reverse repo or tightening. that was the day we got the selloff. maybe the market really did want to hear that we're ready to exit more quickly. did you see gold today? maybe that's from warsh. where is gold? 980. >> the problem, joe, a couple of years ago we could have talked about that. >> hold that thought. we've got to get back to carl. >> hey, guys. we're still waiting for the

president to take the podium. as we can see we've been watching his arrival over the last couple of minutes. even though the g-20 begins day two to talk about the global economic collapse, the things you guys have been talking about, the topic this morning will be the subject of iran, accusing them of building this secret underground plant to manufacture nuclear fuel saying it is hidden this covert operation from international weapons inspectors for years. we don't know or don't think, at least according to reports, that this facility is open. according to the times this morning we think it has enough centrifuges to manufacture about a bomb's worth of material every year. we don't know whether any of those centrifuges have been turned on. i'm sure you would agree there are risks bringing up this topic. on the one hand he risks overshadowing all the work the g-20 has done. also not a slam-dunk to accuse another company, even iran, of doing something in advance. it's going to be difficult to

confirm that they do, in fact, know what they think they know. it's going to be interesting to see how the foreign policy stuff, joe and beck, plays into economic discussions we're having today. >> carl, we also remember the other day we want to know, great, now we've got russians on board, a little more about iran sanctions. we had to give up quite a bit. we wonder was it worth it? i don't know. maybe it was worth it if we get russians involved now we know there's this other facility? >> that's right. >> who knew what and when did we know? did we know back then? >> that's exactly what we'll be asking. one thing to point out, china and russia are not appearing with the president. it's gordon brown from uk, nicolas sarkozy from france. they are going to flank him. he's going to talk for five minutes. they are not going to say anything. it would be a much different story if china and russia would be on the stage. you're right. one of the lessons out of g-20, all these many years of

disagreeing over policy regarding iran, china and russia probably moving closer to a u.s. view. >> kind of sneaky the stuff they put out this morning. no, no, we told them earlier on the 21st about all of this. apparently that was only because they found out that the united states and others knew about this facility. anyway, we'll hear more about that in just a moment. >> i can't believe we've got this going on regarding iran. we've got warsh op-ed, which is huge, obviously and a brewing trade war. i think we're going to get our first look at the president now who arrived a few minutes ago who arrived, as you can see followed by gordon brown and nicolas sarkozy behind him. here is the president of the united states. >> good morning. we are here to announce that yesterday in vienna, the united states, the united kingdom, and france presented detailed evidence to the iaea demonstrating the islamic republican of iran has been

building a covert uranium enrichment facility for several years. earlier this week the iranian government present add letter that made reference to annen richment facility years after they had started its construction. this underscores iran's continuing unwillingness to meet obligations under u.n. security council resolutions and iaea requirements. we expect the iaea to immediately investigate this disturbing information and to report to the iaea board of governors. now, iran's decision to build yet another nuclear facility, without notifying the iaea represents a direct challenge to the center of the

non-proliferation regime. it's clear. all nations have a right to peaceful nuclear energy. those nations with nuclear weapons must move towards disarmament. those nations without nuclear arms must forsake them. that compact has held for decades keeping the world far safer and more secure. that compact depends on all nations living up to their responsibilities. this site deepens a growing concern that iran is refusing to live up to the international responsibilities including specifically revealing all nuclear-related activities. the international communities knows this not the first time iran has concealed information about its nuclear program. iran has a right to peaceful nuclear power that meets the energy needs of its people. but the size and configuration of this facility is inconsistent with a peaceful program. iran is breaking rules that all

nations must follow, endangering the global non-proliferation regime, denying its own people access to the stability they deserve and threatening the security and stability of the region of the world. it is time for iran to act immediately to restore the confidence of the international community by fulfilling its international obligations. we remain committed to serious, meaningful engagement with iran to address the nuclear issue through the p 5 plus 1 negotiations. through this dialogue we're committed to demonstrating international law is not an empty promise. obligations must be kept and treaties will be enforced. that's why there's a sense of urgency about the upcoming meeting on october 1st between iran, the permanent members of the u.n. security council, and germany. at that meeting, iran must be

prepared to cooperate fully and comprehensively with the iaea to take concrete steps to create confidence and transparency in its nuclear program and to demonstrate that it is committed to establishing its peaceful intentions through meaningful dialogue and concrete actions. to put it simply. iran must comply with u.n. security council resolutions and make clear it is willing to meet its responsibilities as a member of the community of nations. we have offered iran a clear path toward greater international integration if it lives up to its obligations, and that offer stands. but the iranian government must now demonstrate through deeds its peaceful intentions or be held accountable to international standards and international law. i should point out that although the united kingdom, france, and the united states made the presentation to vienna, that

germany, a member of the p5 plus 1 and chancellor merkel who couldn't be here this morning, wished to associate her with these remarks. i would now like to turn to president sarkozy of france for a brief statement. >> okay. the president speaking there. we're going to step out as nicolas sarkozy begins to speak. again, the president saying what we figured he would about iran. accusing them of building -- of having this nuclear facility. questions now involve does it push him into a more hawkish position on foreign policy, give the g-20 something to rally around, what does it mean for u.s.-israeli relations, does it give room for news on anything else or will this be the talker of the day? >> i think this will be the talker of the day with good cause and good reason. >> he's already gone, isn't he? >> ahmadinejad from new york?

he was at the general assembly. >> makes you wonder, too, why they didn't bring this up at the u.n. earlier in the week. why today? >> iran is a real problem. it's a major problem. the problem, at some point talk has to stop and something has to actually get done. they are talking about sanctions. iran has a ton of oil, they don't refine any. all the gasoline that runs in the iranian has to be imported. that would ab huge deal. this talk is not going to precipitate a change in behavior. >> you need the gentlemen standing by his side to go along with that. >> and the russians. we'll find out if the russians reciprocate or be the usual russians, take everything we give and give nothing back. this is crunch time. i didn't expect it to happen so fast. >> the population in iran isn't

100 behind this guy you know. >> yeah. i mean, it's a tough sanction. these guys are tough. to clamp down on that, is a little late. something is going to have to be done here. now we're going to find out if this is talk or we're serious about it. >> ahmadinejad has the poor erie johns behind him. >> he also have the poor regions behind him. >> building another plant, carl. like three days. >> iran, you said israel. >> no, he was talking about israel and the holocaust and everything else. >> dirty guy. >> john harwood has been listening to the statement by the president, too. john, of all the scoldings iran has gotten about its use of nuclear materials, where does this fit? is this the biggest step so far? >> well, look, i think we're going to find out for sure in october when those talks take place. and if they don't bear fruit, as

people are skeptical that's going to happen, then we're really going to find out are the russians ready to step up, are the chinese really ready to step up and impose those sanctions that governor dean was talking about. in the meantime, carl, the point you just mentioned a moment ago could be critical. i think israel is going to be very encouraged to remain firm in its position with respect to iran. and maybe with respect to the broader middle east because of this. benjamin netanyahu can say, you're right to be aggressive and forward leaning to protect our people. >> politically, this a boon for the president or does this dilute the artillery he has to use on all the agendas? >> well, i think it is always good for a democratic president to be seen as taking a stern stance to admonish a foreign enemy or adversary because

democrats are always laboring under the idea that they're not very tough on foreign policy as compared to republicans. so having the president who has been accuse of being a little soft and a little too inclined toward diplomacy rather than toughness, stand up and give a warning to iran that now it's time to act and demonstrate your good faith or you're going to face some consequences, that can't hurt him politically. but it is a distraction and it's a reminder, carl, as we get toward the end of the year, we've got this health care debate going on, but between iran and afghanistan, which is increasingly a problematic issue for the administration to deal with, he's going to have a lot of other things on his plate besides his domestic agenda. >> well, joe, governor, john, it's not what we expected to be talking about this morning, i'm sure. but here it is. we'll see what happens later on today at the g-20 wraps it up today, joe. >> split it up a little, carl. we've got war, obsessing about

war, so at least this broke that news cycle just for an instant. and when we come back, we might even talk the public option and health care with governor howard dean. >> this is going to be fun. >> i assigned the hover piece to you in the op-ed pages of the journal. and you have finished it because there will be a test. you are going to be tested on this in a moment. you have to counter all of that when i come back. >> he's a lovely guy and his wrong. >> all right. stay with us in pittsburgh. i think we're first in -- first in business worldwide? >> first in business worldwide. >> we're first. we'll be right back.

final round with howard dean. i'm trying to figure out the's siest way to say this. i guess if you're a republican you would say, governor, that the democrats would like to do the humane thing and include everyone, cover everyone, which we all want to get there where everyone has coverage for catastrophic coverage. they might want to say the democrats want to do that first and work og containing the costs, the inherent cost over-runs in the delivery system. we're rushing at so much that the cart is going to be before

the horse. >> i don't think we're rushing it. we've been doing this for 60 years. but we've been trying. >> in the obama administration, we need to do everything so quickly. almost to get a political win. >> i don't think it's so quickly. look, let's cut to the chase here. this is not about imposing a government-run system. we have a government-run system, medicare, and all the things you people say about this impending insolvency -- >> you just said you people to me. >> what? >> you just said you people to me. >> you said to it him earlier. >> i know. but go ahead. >> whatever you people mean. so here's the deal. what this plan essentially does is give the american people a choice where they want to reform health care or not, delivery. the public option is essentially and should be an extension of medicare for people under 55 and it's totally your choice. here's the advantage of the public option, right, medicare. you can't lose insurance. they charge the same for everybody. you can take it any place you want to go.

you can't be denied. right? okay. you can -- but it's not as flexible. >> and according to the article here, the expenditures of medicaid have constantly out-stripped the dedicated revenues. it also hospitals and doctors would say they're not paid for what they do, which causes the supply to shrink. and it doesn't contain -- >> ultimately -- >> are you hanging your hat on the administrative saving for medicare. you talk about it like it's a great thing if other side talks about medicare is horrific. to bring everybody under a medicare system -- >> nobody is talking about bringing everybody under a medicare system. nobody is talking about it. give them a choice if they would like to be in such a system. the truth is that the system is too expennive. their costs have gone up 2% above the rate of inflation for 30 years. the problem is in the private sector they've gone up at 2 1/2 times the rate of inflation for 30 years. it's less successful cost containment in the private sector than the public sector.

what we believe is we ought to give american ts the choice. we ought to give people under 65 the choice. >> you think the bill will have one of these? >> i do. last thing i want to say quickly. there is a lot -- i do love the show. number one business network in the world. >> you're right. see? >> i get it. >> i think it's first in business worldwide. if you mess up the way you say it, you can get in trouble. >> number one, first, whatever. here's the deal. viewers at this network should know this. the small business community is going to benefit enormously from this bill because they will no longer have to provide health insurance for their people. that would be a huge help for small business. >> governor, come back soon. >> i think we're all back onset on monday, right? >> we have. >> yes. no more carl -- >> join us monday. "squawk on the street" is coming up next. >> stay away from the pepper spray. p.

live from the financial capital of the world, this is it. "squawk on the street." doesn't get any better than this. good morning. i'm mark haines. >> i'm melissa in today forrer lynn bu erin burnett. maxine walters will conduct and qur q and a and you will see it live. >> this time near a heavily populated holy city. >> iran has confessed to the international atomic energy agency through a letter. this whole episode heightens fears iran is on the verge of having direct access to nuclear weapons. as for the reaction, the oil markets after two straight days of declines, oil not seeing too much of a reaction today. down by 20 cents a barrel. $65.6. goldman sachs raises global oil forecasts for the fourth quarter

of '09 as well as 2010. that could be lending support to this market. >> also, in pittsburgh, dozens of arrests last night. protestors attacked riot police at the g-20. and here's the big ask on sara lee. buying the company's personal care brands. focusing on deodorants and skin cleansing. we'll talk to brenda barnes, ceo, in a few minutes. let's check the futures. down 230. >> it's really the durables that did us in this morning. steeper than decline in the durable goods orders. aircraft orders in particular. >> i did cancel my order for some. >> i did as well. i thought now is not the time. >> the economy, yeah. >> all right.