good morning. bless you, becky. two trading days ago, the third quarter raising to a close. today's test, the economy earnings in washington's comings and goings. the markets at this hour, a mixed picture in asia. u.s. equity futures pointing to a slightly lower opening as "squawk box" begins right now.

good morning, everybody. welcome to "squawk box" right here on cnbc. i'm becky quick along with joe kernen. carl is on assignment today. but we have plenty of things happening on the agenda this morning. in fact, we have two economic releases of note. first upcoming at 9:00 a.m. eastern time, we've got the s&p case shiller home price index. economists are looking for that index to have dropped by 14.2% in july. that is the least it will have dropped in 17 months if that's the case. then, one hour later, we get consumer confidence. forecasters are looking for the september reading to rise from 57 to 54.1. what are you laughing at? dmuth. thank you for coming in. thank you. i hope you feel better. you're sniffling, the minute the boards comp up, you're -- you're doing all this stuff. >> you were here by yourself and i couldn't leave you by yourself, but i promise, i won't

breathe on you. >> it seems like it's a cold. it's a cold. it's not is swine flu. i don't have a fever. >> no fever. >> no. none of those body aches or anything or i wouldn't have put you at risk. you've been washing your hands. >> i have been. >> don't touch my water here. stay over there. >> i'll stay on my side. we don't call in sick. it's the first time in about four years i've called in sick. >> it's good to be here. a couple of people wrote in yesterday that carl and joe, it's just not -- you know, it's better -- >> the all boys, now we're missing carl. >> and then tomorrow, i think we're missing him again. thursday you're missing me and you and then -- >> friday. >> next week it will be better. >> next week, we promise we'll be here all week. >> there's earnings today. it's not earnings central, but -- >> earnings are coming up. they might not notice. >> they might.

>> they definitely don't watch this early. >> the consumer is the main theme today. we have wall greens after the bell, darden restaurants and -- what is that? >> nike. >> i knew that. there is no way not to know that that, that that is nike. >> that's one of the very few symbols that you just know it. mcdonald's, the golden arches. my brother, when he was about a year and a half would see that and would say, french fries. he didn't know what it was, but he knew it was french fries. >> nike, my mouth doesn't start watering when i see nike. but put that up, and i start salivating. >> the senate banking committeed this b, they hold a hearing on bank supervision. the senate finance committee gets back to work on the health care reform bill and the s.e.c. is holding the first of two days of meetings on profit sharing. mary shapiro wants to shine a

light on what she calls the opaque multi trillion securities market. it's central to the practice of short selling and that's we're going to be watching closely. and every weekend when we go home on fridays, i wait for something to come about with banks being closed every weekend. you know, the fdic only has so much. today, the fdic is expected to propose that banks prepare three years' worth of fees in an attempt to replenish the fund, the insurance fund. their requirement could hand the government agency between 36 and $54 billion, some industry insiders have called on the fdic to borrow the money it needs from the treasury rather than putting more stress on the banking industry, which is still troubled. the fdic's board is going to meet today at 10:00 eastern. >> last week in the times, they said sheila bair would cut off her right hand before she would ask for money from tim geithner on this. >> with her buddy.

>> with her buddy. but other people say you really don't want to borrow money from treasury because it would send a bad signal that this is a serious emergency. other banks say maybe it's not as bad as getting a one-time fee that goes towards future payments, as well. we are also on white collar crime watch today. the scattered showers will consider whether to hear the appeal of jeff skilling. his legal team is expected to show that the jury was prejudice and that is underlying facts of that case were flawed. meantime, there will be specific recommendations for reform at the agency. let's get a check on the markets this morning. markets up sharply yesterday. in fact, it was the best day for the markets since august 21st. this morning if you're watching those futures, they're a little below fair value, but not by a heck of a lot. you're talking about the dow futures down by 5 points below fair value. the s&p is down by under two

points below fair value. if you've been watching oil prices, yesterday oil price were up by about 1.2%. this morning, they are down by 21 cents to $66.63. also the ten-year note, treasuries were up, the yields were down. this morning, you're going to see the yield slightly higher at 3.3%. and the dollar is showing strength against both the yen and the euro. hung in there yesterday against a basket of currencies. right now, you're talking about the yen at 89.88. the euro is trading at 1.4585 just below the 1.50 range for the euro. let's get a look at gold prices this morning opinion you'll see gold prices at this hour down ever so slightly, $923.20 an ounce. >> two big stories out of the european banking sector this morning. bnp paribas launching a $3.6 billion rights issue so help

repay the emergency funds its received from the french government and ubs's ceo says that the company's u.s. unit, painewebber, is no a core part of bank's operations but won't be sold right now. he also said that the company wants to buy its way out of a bad bank dielt. he told the company that ubs would make a to buy back it's toxic ago ets to escape the very expensive charge of insurance against losses that it has on them, on the books. >> meantime, german business leader are asking their new government for tax cuts, more flexible labor laws and a better education system. the ceo of basf says the election is an opportunity for significant policy changes. let's head to the overseas market this morning. lisa oake is standing by in singapore. we'll get to her in just a moment. we'll start things off with steve sedgwick who has the latest out of europe. it's great to see you. >> great to see you, too, becky. these markets are taking a bit

of a breather today. marginally away from that on the likes of the cac 40 and the ftse 100. as joe was mentioning, all the focus is on the banks and the common theme is that they look at the likes of barbly's and goldman and those that have a stake in goldman wants a slight of that action. they want to be free of the limits the government is putting on them. as such, following that story, the biggest banks in france, italy, and switzerland, as well, are trying to lessen or get rid of the government involvement. joe mentioned that big rights issue, $67.3 billion to pay back a total of the $5 million that the french government has offered them. elsewhere, unicredit is turning down the help of austria and

east berlin, as well. going their own way, they get get a $5.6 billion capital rights increase. and it's the same story on that landmark, as well. you mentioned ubs, oswald grubel talking about that painewebber valuation at the start of this century. although it may be on the block and we know it was on the block a couple years before this crisis, he accident like it even though it's noncore. briefly, the lights of sir gay marceloni is the ceo. haven't they got enough on their plate over at royal dutch shell. let's get out to sing tore sxvz what's hating the news there. >> hello, steve. very different day over in asia.

a lot of that because of the gains based on m&a activity that we saw in the u.s. in the previous session, investors coming in today and saying, well, if companies are willing to invest billions of dollars in acquiring other companies, perhaps we should take some of the cash we have on the sidelines and get it in the market and get it torque. we didn't expect the markets to do well in august or september. they just kept going. today for the most part, investors are betting that perhaps october is going to be another positive month, as well. in japan, we had the nikkei putting in a lot of performance because of the weakness that japan just mentioned. we have the prime minister of that country saying he didn't endorse those value egz as, but if necessary, he will get in there and sfaurt the yen. investors have had a nice day today in support of the economy. china, this was the one sliver

of red we had in asia today. the market was lower because we're entering an eight-day holiday in china, which kicks off on thursday and no one wants to be overly exposed going into a break of that duration. hong kong today, though, doing quite well. we have banks and telcos and h shares, really the outperformer. so that is a snapshot in asia. back to you. >> wonderful been thank you. let's get to our tuesday task force. mark vitner is here. looking at some of your interview notes, are you comfortable talking tops down or -- >> yes. >> you are? >> absolutely. >> all right. then we're at 9800, big move yesterday. locks like something has started last wednesday in terms of the long awaited correction. do we need a construction? is a lot of this move unjustified or is the economic backdrop positive in justifying the equity move? >> well, i think a few things are going on. there is still a lot of

negativity in the market. if you talk to to the average investor who missed the bottom, there's still skepticism. when i look at it as a contrary investor, there are things that i think are still positive. the idea is that if you can invest now, because a lot of people are looking for yield. they're moving money out of money markets into bonds. bonds have moved away ahead of the equity markets. top down, the idea is you want to be in areas that can grow. i think there's still opportunity there. >> you don't like consumer discretionary. you're looking for names. >> we're looking at companies that can grow and lower our gdp. so companies that have a great market share that have defensive markets. you see that in the downturn prospect these are companies that are really good product line. >> like what? >> companies like stericycle, with ecolab. you're going to get double digit groes groekt and sales growth

top line. >> so overall, is this market away highway of itself and has a huge air pocket and it's ready to pull back? i wouldn't be surprised if the whole market pulls back. >> how much? >> 5% or 10%. >> when? if it's 5% or 10% from here the -- >> what you do is i'm not waiting for it to happen. early september, we had the 3% down. what we're doing is investing in companies that we want to own for three to five years and if the opportunity comes now, i can nibble at it and i'll add more if the market comes down, but i'm not saying i'll wait for a 10% correction because if i'm wrong and i'm a long-term investor, that's not the way to do it. >> with a lot of ser rat's picks, he had assuming a low gdp environment to pick stocks. are you in that group? >> we're pretty inch that group. we see gdp come back in the

third quarter. then we slow in the first half of next year. and we really have trouble getting traction. few look ae gdp, the final demand that underlies that number is very weak. final demand only grows about 0.35% and that is one of the problems that we're seeing in did she l -- i would say in the consumer growth figure. >> do you economists ever look around and if all of you are in the same room on the same side of things, do you ever get uncomfortable or is that just equity analysts? >> well, down here in charlotte, we don't have a lot of economists, so it's very hard to get us all into a room. >> yeah. it's a nice city. >> but i'll tell you, in terms of everybody getting on the same side of the trade, i don't know that we're there. i think there is a wide range on consensus. >> mark, who is forecasting a blockbuster recovery? >> well, i think the top 10% of

the blue chip is probably looking like 3.5% to 4%. but it's real hard to have a blockbuster recovery when you've got -- when you've got the huge head winds that we're going up against. >> in your view, are the huge head winds that we're going up against, are they still a surprise to anyone? you're not a stock guy, but do you think that the financial markets are away ahead of themselves and on a sugar high that is caused by all the government spending and stimuli? >> well, i do think they're ahead of themselves, but i don't think we're as much ahead of ourselves in regard to the optimism about the economy as we were behind the curve and the pessimism back in march. i think we were overly pessimistic then. today i think we're a little bit overly optimistic because we're being fooled by the bounceback in gdp, which is really a lot of inventory cycle and final demand is just not there. but in terms of whether we're surprised by the head winds, we

still may be surprised. there's been a lot of wealth that's been destroyed and even though the market has not come back, housing surprises are not coming back. we've had some seasonal quirks on a month to month basis. but the high end of the housing market hasn't begun to correct. then we've got commercial real estate which has been talked about and talked about and when is that shoe going to drop. it's dropping gradually day-to-day and we're seeing a lot more force transactions that really distress prices. >> yeah. and that's going to show up, i guess, eventually on the banks' balance sheet. but you're right, the rents are going down in a lot of commercial buildings, but they haven't had to roll over the mortgages yet and that's when the problems start. >> a few folks have been forced into bankruptcy there. so we have seen some forced transactions which have resulted in startlingly reduced prices. >> employers aren't going to be cautious, what do you expect for friday? >> friday we're expecting a drop

of around 200,000 jobs. we have seen some improvements in jobless claims. they've come down considerably. and the improvement there is two months to dismiss. i mean, it really does look legitimate. but on the hiring side, if you look at the jolts data, it shows that hiring plans are the lowest since they've begun to track that series. so we're likely to see negative numbers through tend of the year, probably through the early part of next year. >> negative numbers on friday, once a month. >> i'm sure there will be one month that will surprise us to the upside between now and the middle of the year been but we're going to see a lot more negatives and we've got tun employment rate rising up to around 10.5%. >> we're going to choke on that when that's in the headlines of all these papers. that's not good news for anybody. >> well, a lot of the country is already over 12%. it's surprising when you look at a map by county, how many counties are above 12.5%. most of the south, most of the west and a good part of the west coast. >> all this deal activity that

we've seen lately, the "new york times" says this is a sign that those in the corner offices are feeling a lot more optimistic about where we're headed. should we read it as such? >> i think it's a combination. the capital markets are opened up and that's given people the opportunity to say let's not focus inward on cutting costs. to do that, let's find ways that we can do that. so let's use our stock because now it's come back up and if the dead markets are opened, let's look for opportunities to do that, too. but let's look for a good sign. it's a vinyl that we can grow our businesses. i think as you see more activity, it's a self-fulfilling prophesy. there's more optimism coming. the markets are discounting a lot of the bad news joe was talking about. all the gdp growth and everything else. the market has discounted all this. it's what's the unknown. and if there's anything positive that's coming out, it's going to put a bottom to the market. i can that's the thing we're looking for, you get more positive news because the negative is built in.

we know commercial real estate is bad. we know housing prices are bad. it's what comes that we don't know, and it could be more to the positive. >> very good. sat, thank you. thanks for showing up this morning. mark, we'll get you in here one of these days. it's nice up here, but we have a lot of economists around the greater tri state area up here. but you know all those guys. you hang out with them, right? >> yeah. i'm looking for a visit. i need to come up there and shop for some new suspenders. >> i was going to ask about it. have we seen these before? >> these are relatively new. i had to go online to look for them. >> online. so it's not like shoes or something you need to try. >> i went to trefalger.com. i hate to give them such a good plug, but they are pretty good. >> i'm going to give them a

check because my belt, with it keeps fluctuating. >> i've never seen you wear suspenders. i don't even know how they work, really. in other headlines this morning, starbucks is rolling out instant coffee nationwide today. the company first test today product in chicago. this rollout comes complete with starbuck's first complete television ad. there is a $21 billion worldwide market for instant coffee. it's hard to imagine instant coffee. i don't know. do you drink instant coffee, joe? >> no. i don't like it. you can do a -- the best thing i think to ever come out of -- croix sants are nice, but the french press, those work -- >> i have one. >> you can get a country cup brew thing and that works, but starbucks, it's a high brow thing. they're trying everything, aren't they? >> yeah. >> egg mcmuffins, all that stuff.

penske auto group is expected to close its division to buy saturn this week. an potential announcement could come on thursday opinion this tentative deal was first announced in june and i know a lot about it because of the "new york times" sunday piece on penske. and it's interesting -- >> last week. >> it's a distribution deal. he's going to sell saturn for a year or two, but then he might sell anything in this huge network of dealers that he has. and this guy is -- he's notice someone in the past who has really not done things successfully. so all the saturn people, all the saturn dealer res like, you know, davis rodner and, you know, we'll see. but it's a tough one. i mean, the whole domestic auto industry is tough. >> it is. >> toupt to talk about my ford? i picked up friday ford flex yesterday. for first impressions, i love it.

>> really? >> yeah. >> is it here? >> no. it's the family car. >> i want to check this out. >> good. it has a thing you can -- i don't know. it's got a blue tooth. i don't know what the -- >> it's got technology in it you don't know how to use? >> it's got a refrigerator. i know how that works. >> i like that. >> you know, carrying a six-pack of beer around in the car, is that -- >> it's supposed to be for water and juice and sodas for the kids. >> that would be a better idea than having the beer right there. >> yeah. bad idea. >> it's in the back seat. coming up, we will get your business traveler's forecast. later today, we have two wall street heavyweights, one year later. wilbur ross and ace greenberg on the financial crisis, the global recovery and where they're putting their money right now. lots to look forward to. as we head to a break, let's take a quick look at yesterday's winners & losers. ♪

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click today.d make your business dream a reality. welcome back, everybody. right now it is time for our business traveler's forecast. scott williams of the weather channel is here. scott, what do you have for us today? scott?

hmm, i don't think scott knows we're here just yet. give us a second and we're going to get this worked out. meantime, why don't we talk about what people are saying about halloween. >> you know, when you're a weather guy and you're getting it from a lot of -- he's getting tossed to from a lot of people, i think he has that look on his face like, i am ready. i am ready at all times. >> which is great because if we come up early for us, i could have my hand up, be blowing my nose. >> it could be sunny where you are or it might be raining later today. >> thank you for your help. >> probably somewhere if you're on the east coast -- >> 50s or 60s. it's going to be cool this week. >> it was 51 this morning when i drove in. >> warmer down south. and in the northwest, you're going to have some really tall trees. the u.s. economy is -- i can do weather. the u.s. economy is still spooking shoppers, it says here.

a new survey by the national retail federation shows that consumers plan to spend after average of $56.31 on hallow week this year. and that is down from $66.54 in 2008. so i wouldn't be looking for any of those really nice bars that no one gives out any more that you used to go to when you were a kid to find the house that had the full sized bars instead of the little -- >> yeah. >> not happening this year. >> no. the worst ones are where you go and they have the candy corn that's not even in the bag. >> oh, stop! that's so gross. >> you can find people that do that. >> oh, no more, please, don't do that. i'm going to tell you about my story in chairs a little later. >> do we have chairs today? >> yeah, we have chairs. >> i'm going to have an all french chairs segment today. >> you're speaking french? >> no. but i have a couple of things. >> don't tell me.

keep it as a surprise. >> anyway, coming up, we'll have more of this morning's top stories. plus, pork, it is the other white meat, but possibly be healthy for health care reform? government waste and your tax dollars at risk, that's story when "squawk box" returns. so, at national, i go right past the counter... and you get to choose any car in the aisle. choose any car? you cannot be serious!

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♪ >> sure. good morning. welcome back to "squawk box" here on cnbc pep i'm joe kernen along with becky quick.

carl quintanilla is on assignment today. >> do you remember where you were one year ago today? on september 29th, 2008, the house, surprisingly voted down the bailout bill. remember the so-called paulson bill, that sent the down down 778 points. >> we had a plan that we worked very hard on that did the job, it gave us the tools we needed to protect the financial markets, to protect the american people. so where we go from here is something we're going to be working on with congressional leaders because we need to get something done and we're going to be working hard on it. >> was it the republicans that -- wasn't it? we blamed them at the time. there were a lot of people that didn't want to do it, but that got people's attention. >> 778 points in one day.

by the way, the dow fell by 778 points and it was still at 10,300, above where we are right now. >> something else happened. the fed one year ago today injected hundreds of billions of dollars after overseas markets plunged, private equity firms bought a neuberger berman, that units of lehman for $2.3 billion and citigroup offered to buy wachovia's banking unit for $2.5 billion. that started that amazing story with vickram pandit. then they didn't get it. fargo got it and citigroup was still in a position at that point to be acquiring instead of -- >> instead of asking for help. >> yeah. >> let's get a jump start on the trading day ahead of it. kevin ferry of cronus futures management is standing by at the cme. kevin, remembering back to where we were one year ago, it's hard to imagine that we can get back to the talk of, well, the markets go up or down from here. >> right. last year, it was interesting to

point that out. i think on the trading desk, the thing was you just couldn't believe they would be that stupid. so everyone was sitting there watching the counter like it was the scorer. >> and they were counting on the house floor. i remember that. >> right. the wrong team was winning. and so, you know, i think what you saw there was that something that could have been contained from the fed in the financial markets spread out into the general economy after that date. and so that is a seminal thing to talk about later. now we have something else going on. you have a very strong monday. the news comes in after a correction on thursday and friday. you get a monday that revolves around mergers and acquisitions, drug, tech and a very strong monday to go out of the end of the month and to begin the earnings season. so i think that will be the good tone that's carried through in the equities side. but there is a lot of things going on in the other side, especially with treasury and

regard to debt and the worsh article was overstepped i think last week to a lot of other things that the central banks were doing together. and i think it would be the last coordinated effort in the world. >> what do you mean about that? ? the warsh article overstepped, what do you mean? >> i think it sucked all the air out of the room when he was trying to show that there were, in fact, things that the fed was bringing to the table with regard to risk management. at the same time, other central banks were making moves to their facilities with regard to dollar funding. if you go back to the dates in which you're talking about last year, the real problem in the world was there was a belief that there was too many dollars out there. and as soon as everyone needed them, there was too few. and so now, they're on the opposite side of that spectrum and these central banks are going to work at reducing the

ability or unlimited supply of dollars in the world and maybe propping up those in the uk or even the eu with regard to their tenders of how much of their currency is available in the world. >> so treasury prices continue to rise, at least yesterday. again today, we're seeing that a little bit with what has been happening. where does this wiped up, kevin? >> that is the tricky part, because it's been amazingly stable. and i think the other thing about the market trading wall on the equity side was that the currency market was fairly stable. >> so you finally saw an update with the ekts market without the collapse of the dollar. >> right. so we think generally those are all good things. but will you be able to unwind such big trades without some type of volatility, i think last thursday and friday showed that that is probably not true. so with regard to these, i think when i was out there, you saw mr. el-erian bring out another

point, also, which is that we're exiting the time in which all the world's central banks are going to be on the same page. and so this type of movement away, as we have to do what we have to do and other countries are going to have to move, maybe new zealand or canada moves first. but those are the type of things that are going to dictate not just the last quarter of this year, but certainly the first quarter of next year. so watch the volatility in the treasury department. >> in fact, mohamed el-erian has a piece in the financial times where he says we are right now at the point of maximum confusion for the global economy, for pols policy markets at this time. he says the real danger is sticking with the short term. >> i think that's very well put. again, we see a lot of good things going on. but i think that you're in a window and that window is only open for so long when you have to get these policies done and adjust them. and i think that was the real point of the warsh article. don't use old metrics in a new

tworld and i think that's going to cause some miscommunication. there's going to be some mistakes and that means there's going to be some bumps along the way. >> kevin, thank you. it's great to see you. >> okay. thanks a lot. >> the debate over the cost of health care reform is intensifying and our next guest is so outspoken about some of these things, about the proposals on the table being financially misdirected. joining us now, tom schatz, president of citizens against government waste. ccagw. the nation's largest nonpartisan, non-profit organization dedicated to eliminating waste, fraud, abuse and mismanagement in government. so i want you to raise your right hand and you are nonpartisan, tom? you would take the oath that you are truly nonpartisan? >> yes, joe. you've seen our congressional pig book with republicans and democrats up there writing all the pork to those spending bills. i would say that we go after

everybody who wastes our tax dollars. >> you're a mean one, mr. grinch. and we've called you that during the past because during the bush years, you were on here railing constantly. but i'm reading this. people aren't going to like this when i read this, i'm just going to tell you. the president used that recent address in front of congress to burnish his commitment to a radical, overly bureaucratic and costly plan that would insert the federal government even further into the health care sector without driving costs down or delivering a better health outcome. >> let's look at where we are. we have new bureaucracies. we have a whole new effort to control health care costs. they've been railing against the insurance companies for months. they're the new boogeyman in this whole system. but if the government makes decisions about what should be reimbursed and what should be covered, what does that make the government? it makes the government the largest insurance companies in the worl. so if you don't like your insurance company knew, how are

you going to like government insurance incorporated, because that's where we're headed. and i think people need to understand there's a fundamental shift in where we are right now. medicare, which is, of course, a government plan, is broke. >> you and your organization are -- would be called by the president and his people some of the -- some of the people that are distorting what they're trying to do, that are actually -- i mean, i've even heard the "l" word, that are lying and using scare tactics to try and paint this plan as something that's it's not. you are in that group, tom. >> well, i don't think so. i think we've made it really clear that we're looking at how this system is going to be set up, what it's going to cost and what people will get in return. so you have a system now, medicare and medicaid, both in serious financial shape. by the way, the medicaid reimbursement system goes out at the end of next year. in other words, the

reimbursement rates that they have now are not going to continue after next year, which means the states will end up paying more for medicaid. that's why a lot of them are unhappy with this plan that they're talking about here in washington. it's very complicated. look at the chart of how they're putting this all together. then look at how we could cover people without inserting the government so deeply into the system. >> you're saying that the notion that it's going to be revenue neutral and that we can pay for this plan by squeezing waste from the current system is -- i mean, its sounds to me like you're saying that is totally untrue. >> well, look, they've done some things to try and eliminate waste already. recovery audit contractor necessary medicare. they've recovered some money, but then some of the states and some of the hospitals have said, why are you taking money back from us? but it's money they didn't deserve in the first place. you can get a lot of waste out of the system. we'll do everything we can to help the president do that

because we think it's critical, but it's still not quite enough to avoid increasing taxes and increasing the coverage and getting into this whole new system that we don't have now in washington. there are more jobs being created in d.c. than anywhere else right now and one of the reasons is that they're in sourcing everything, including helthd care. >> i mean, you know that the president wants what's best for this country in his view and he wants -- he must know a lot of this stu. he must understand what you're saying about this. what do you attribute this to? just wanting to cover everyone, the humane thing to do is first let's cover everyone, let's findly do this, we've been trying to do it for 80 years or whatever it is and worry about this stuff later? because he's not a -- he's a very, very smart guy. and i know that he reads this stuff and he understands it. why push so har for something that, in your view, is so clearly misguided? >> i think that they have an idea and if you listen to a lot of the people on capitol hill,

they say they eventually want the single payers, they know the public option, the co-ops are all lead iffing in that direction. the president is smart enough to say we're not quite sure how this is all going to work. we'll let congress work it out and we don't know what's going to come out of this house/senate mishmash that they have right now. they have four bills, they have to merge everything together and then go to the conference and we've seen this in bills in the past where the president wants something and congress pushes him further away from what he wants. we saw that with the stimulus. the president wanted more tax cuts and the congress said, went more spending. so that is the big concern, as well, is what we're going to end up with because congress will push further for something that looks more like a public option unless we go and say, hey, we don't want anything that looks like that. in the end, you might have something that looks more in the middle. insurance reform is great. insurance reform says, okay.

once government gets their foot in the door, you have a big problem. >> tom, thank you for your nonpartisan -- you know, i know we all strive to do that. it's hard sometimes. but you're going to be accused of being partisan and being part of the problem here just by talking about policy. >> well, again, we have a solution, but it's not quite as large as what they're talking about. tom schatz, citizens against government waste, mr. grinch. we used to call him that. he laughs. ♪ you're a mean one mr. grinch ♪ ♪ stop spending so much money of the taxpayers' money ♪ >> you do that very well. >> thank you. coming up, we're going to get to the news making headlines outside the world of business. first, tonight, a new series debuts on cnbc. it's called executive vision and it will bring together some of the grate leaders in the world. tonight's premier looks at the leadership challenges in health care. we ask pfizer ceo about how big

pharma can repair the industry's big negative image. >> you have said drug companies are too often portrayed as the bad guys. are you taking that on specifically yourself, trying to change the image of pfizer in that respect? >> absolutely. and that's not going to change overnight. i realize that. we're a company and industry that has to earn trust with people overall. we're asking people to put our product in their bodies. we're asking them to trust us with their lives and their health. clearly, our industry has had serious reputational issues over the years. some of it deserved, some of it not deserved. it's something we have to continue to work on. we over the years at phases have tried to make major strides in that regard and change our practices and we're going to continue to do that. eeeeee

good morning. welcome back to "squawk box." i'm monica novotny over at msnbc with some of the other headlines making nuls outside the world of business. u.s. officials are drafting plans for new sanctions that would take a big economic toll on iran unless the company comes clean about its controversial program. while the are under review, it would target iran's energy structure. following the arrest and indictment of 24-year-old imaginul bull la zazi, three accomplices have been identified in the plot to attack new york city. accomplices are not being revealed, but they are said to be from new york city. jackman stopped production of his latest broadway show, but stayed in character to tell a patron to turn off the ringing

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welcome back. we are in the chairs, which means we get to talk about the things that caught our eye in the paper this morning. you know i've been under the weather. >> you're on the other side. >> feeling much better. >> probably not contagious. >> no. but interesting story in the

"wall street journal" today. you know my obsession with germs. they point out about where the worst germs lurk. forget about what's on your toothbrush. you really don't want to know about those things. when you think germs, you think don't touch door handles, watch out in a public bathroom. >> yes. >> turns out those are some of the cleaner places. where you really have to look at is in front of you on the desk. the public toilet is one of the cleaner places because they actually get cleaned. if you look at your keyboard, areas around that. areas in the workplace or horrible for things like that. public toilet seats are better. kitchen sponge and cutting board hashers biggest dangers, along with elevator buttons, coffee, machines in the gym. >> a machine in the gym is worse than a public toilet. >> yup. >> that's assuming the public toilet -- they don't clean them

in the airport. >> they clean the ones here. >> most toilet seats get cleaned once a day. >> i'll put my money on the gym. >> if you had to lick one. the gym? >> yes. >> all right. that's the worst place. thorough and frequent hand cleaning is required, maybe needed ten times a day or more daily because we live in humongous amounts of live organisms and we're all continued covered in effectual organisms. >> cans, ocd 50 times a day. no one wants to end up with howard hughes, those long fingernails. i hesitate to wade into the roman polanski mess but it's in the usa today mess. pepperdine university, we should quote her, let bygones, be

bygo bygones. maybe they won't fight it. the rape and sodomization of a 13-year-old girl, someone who admitted it, is probably not something to let go. a man of such talent in the world. french culture minister told french news media. in the same way there's a generous america that we like, there is also a scary america that has just shown its face. >> i can't believe we don't have a extradition treaty with the french. >> not a full extradition treaty. i'm not going to comment on the mores of the press. domestic happiness, goes back 20 years 1982, looks at gdp growth. france has lagged the rest of the world at about 2.1% versus u.s. at 3.3. a 50% difference.

americans are a third wealthier in that period based on what's happened. the person who wrote the op-ed attributes it to 1982, in flekz point when france chose not to participate in the free -- the international wave of free market revolution of ronald reagan and margaret thatcher. the oldest and most pathetic trick, try to glue the goalpost, now adding leisure time in the way -- changing the way you measure growth. >> really? >> talked about it one other time, rich, creamy salsas, the freshness of a cross ont, blow smoke into the face, all these things add to the quality of life.

>> all right. when we return, we will have more of this morning's top stories. plus wall street and washington colliding. per spentive from both worlds this morning with dueling guest host. wilbur ross, congressman right after this. they've served for decades as a golden, tasty sidekick... to the all-american meal. french fries, and our national passion for them, are legendary. classic. iconic. but times change and people want better foods. so cargill helped a restaurant chain create... a zero trans fat cooking oil for their french fries... using select canola plants... and innovative processing techniques... while preserving their famous taste.

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r click today.your family, launch your dreams. back in control. the market is breaking a three-day losing streak today. the fed, the american consumer and how you can profit from a bounceback. a fund manager tells us what you need to add to your shopping cart. reassessing health care reform. the public option at the forefront of the public debate. weighing in from both sides of the aisle. >> is the second stimulus plan

still on the table. guest host and investor wilbur ross tells us where he's putting his money to work. why washington needs to put the pedal to the metal. the second hour of "squawk box" begins right now. good morning and welcome back back to "squawk box" here on cnbc. i'm joe kernen along with becky quick. carl is on assignment today. he really is in the studio, wilbur ross, chairman and ceo of wilbur ross & company. mike pence, chairman of the republican conference. as you can see the r down there from indiana. what part of indiana. >> i'm southern indiana but represent the entire eastern half of the state.

>> southeast. like you're really close to -- >> i represent some cincinnati suburbs, some of the fastest growing neighborhoods in indiana are suburbs of your old hometown. >> absolutely if you go west electric there. >> bright, indiana. >> there's some casinos there, too. >> just outside my district, actually. >> just outside. i guess we want to check on the markets. >> quick check. we'll be talking to our guest host in just a moment. among the top stories we are following this morning. airbus may cut its forecast for 8382 superjumbo deliveries in 2009 by one to a total of 113. airbus has been having trouble delivering those skrets on schedule because of wiring problems. also ohio attorney general may seek billions from bank of america over merrill lynch. he filed an amend lawsuit claiming bank of america, its directors and executives hid losses from merrill before the shareholder vote on that

acquisition. accused ponzi schemer in jail after a prison brawl last week. two black eyes in an altercation in prison. he was hospitalized over the weekend but now returned to the general prison population. >> i don't know. don't they separate guys like that out? i hate to show pity and compassion but he's awaiting trial. >> awaiting trial and right back into the public population. >> we don't know what it's over. >> he was a tarpgt, do you think. >> might be. or he might have tried to hustle someone. >> continuing on that scheme. let's take a look at the futures, the futures have sbn under very little pressure, dow futures down over 10 points. remember yesterday we're coming off a very strong day for the market. dow was up by 124 points, s&p up 18 points. best day for stocks since august

21st. also take a look at oil prices which were slightly lower yesterday, today, continuing that drop down by -- yesterday were up by 1.2%, today down $0.57, 66.27. also take a look at the ten-year note on this day wen we're going to be getting case-shiller home prices, consumer confidence 10:00 a.m. -year-old on ten-year sitting at 3.291%. dollar hung in, doing the same today when compared to the yen and euro, down against the pound. the yen is at 89.93. euro at 15553. oil prices down $3.50, $990.60. >> let's get to our guest host. one is a wall street legend, the other a leading congressman. we don't need to explain why you're both on. i think the intersection between

government and wall street has been clearly delineated. some people are comfortable with it, some people not so comfortable. did you vote for t.a.r.p.? >> no, i didn't. i was having some flashbacks. it was one year ago today. >> what would have happened if we didn't do t.a.r.p. >> i think we would have done something different. if the truth be told, it's important to remember history. we didn't do the t.a.r.p. we didn't do it as it was passed. the bill that failed one year ago today and then went to the senate and was passed was all about, you know, congress authorizing administration to go out and use public assets to purchase toxic assets. the remarkable thing was about two weeks after the president signed t.a.r.p. into law they abandoned that proposal and began to nationalize banks. what you've seen in the years since thennes millions of americans know we can't borrow

and spend and bail out our economy, bail out every failing business. we would have done something. there were proposals on the hill at the time to do something like an fdic-styled backstop to create some sort of new insurance program, government invest in a private program to get the toxic assets out of the system. we would have done something but we wouldn't have done t.a.r.p. and that would have been better today. >> would you have voted for t.a.r.p., as it was used, to bolster the capital of some of the banks that needed it at that time? it seemed to stabilize the system? >> well, i think any time you borrow a trillion dollars from future generations of americans and spread it around -- >> they were making money on it. >> yeah. we're running a $2 trillion deficit. but look, i don't think the american people supported the

nationalization of banks in this country. i don't think the american people supported -- >> quasi. didn't happen. you've got to get the obama administration credit for not national lizing the banking system. >> didn't nationalize all of it. nationalized large pieces of it. look, the american people want us find an exit strategy from bailout america. that's why when the t.a.r.p. comes up for reauthorization the end of this year i think you see strong opposition to continuing this program. >> we've got another guy here that one of the reasons that we changed the t.a.r.p. was maybe it was going to take a little time to do the original t.a.r.p. just getting started. if we waited for that, it's been a year now. you've got news, you're going to be part of buying these toxic assets like the original intentions of the t.a.r.p. >> yes, we are. we're having our first closing tomorrow and we start off with a bid over a billion dollars to get to work on buying up the

toxic assets. >> and so it closes them. >> what it means is we've been getting capital from the institutions, from state funds from our normal client base and that's being matched by actually t.a.r.p. money from u.s. treasury, 50-50. they have become your partner in buying these securitizations. then on top make a loan as well. so it's very clever in that it gives the government the upside half of it, and it also gives them some downside cover because we're matching it with private funds. >> i guess the question at this point is, we're a year out of this whole thing and the question becomes are the banks going to be willing to sell some of these assets or do they think they are going to recover so they might as well hold onto them? >> there are a few billion dollars of them every week. the question isn't so much will there be some selling, it's will there be enough to clean the system. i think the unfortunate thing

is, it's become very small. this is originally meant to be a trillion dollar program. in washington everything seems to start with a t these days. anyway, it was meant to be a trillion. now it won't be $100 billion worth that gets bought, so it will be very small relative to the economy. i think that will be good from the investor point of view because we don't have to find such a huge quantity at good retur returns. >> this is exactly what wall street was talking about as an alternative to wall street bailouts. wilbur remembers this. we were looking back at fdic-style workout back in, you know, a decade or two earlier that was done with a fraction of the cost. what it did, it used the federal government as a backstop. the real answer and cure for what ails the private marketplace and financial institutions is going to be found not in the treasury but in the private marketplace and

entrepreneurial capital. but it's -- we learned a lot of lessons in the last year. and one of them is you shouldn't rush in where angels dare to tread here. remember that the -- talking about the bush administration artisan here, t house sent a three-page memo to capitol hill asking for the better part of a trillion dollars on a thursday and said we need the cash on monday. and a number of us one year ago today went to the house floor, mostly republicans, some democrats, and stood astride history and yelled stop. i hope the enduring lesson out of the last year is when we come across the next crisis like this that we'll take a breath and cooler heads will prevail. >> i thought the question was, we heard from a lot of people very involved in the markets that said we were looking into the abyss, looking at a system where if i went to the atm, i wouldn't be able to take money out of my bank, because the bank wouldn't have money. >> remember, the president actually went on national television and said we must act

now. >> going down. >> i said the last time -- joe, i told some reporters, last time i heard we must act now i was on a used car lot. the american people know -- >> you don't believe we were on the -- >> i think it was important we took action. but i think it was important we be prudent and whatever we do build some fundamentals for our private free market. >> the market, we're in a different place now. it's a year later. the stock market has recovered handily, so has the credit market. we haven't done one thing about those toxic assets that were supposedly gumming up the system so much. so now looking back on it, was it -- are they still a huge problem or was it just a lack of confidence in the financial system that was threatening to bring everything down? obviously we've still got toxic assets, wilbur. >> all of the above. remember, the context was lehman

allowed to fail, merrill take over, b of a. it happened at the same time and really create add sense of panic around everything. >> it was confidence. >> confidence number one. no financial institution can survive without public confidence. none of them are liquid enough. >> isn't it also true, though, that the uncertainty of the federal government saving the one and not saving the other. the american people know the freedom to succeed includes the freedom to fail. once the government comes in and interrupts that for some but not others it creates instability. >> they were calling him bailout paulson and that got to him. it was almost like lehman had to make an advantage of it. unfortunately it was one of his biggest rivals. >> it was a huge mistake to let lehman fail. everything they were worried about with bear stearns and why they bailed out there was true and bigger. >> in hindsight people say it's good because it put the fear of god to everyone that reacted.

>> i don't think it put the fear of god into anyone except me. >> the fear in you. i think it's interesting the toxic as it is, have any of them, have we dealt with it at a all. >> confidence return, right. >> fdic has a good program for dealing with the whole loans themselves. treasury program is securitization, commercial mortgage-backed securities and residential. treasury auctioned off a couple weeks ago some very toxic loans from franklin bank, and they are in the midst of an auction now where we're bidding. >> drop in the bucket. >> a billion here and a billion there. where i come from, that's still a lot. >> i really think it's amazing and glad to hear wilbur side thad way. a year ago a group went to the house floor in the midst of a

public and political panic and said no to the wall street bailout. and it came crashing down and we saw the market tumble. and the truth is, we were just saying not nothing. we were saying not that. and after the administration signed the t.a.r.p. into law, they also said not that. here we are a year later with very few toxic assets having been taken out of the market. >> i agree with the congressman. something had to be done, whether it was exactly this or something else. i think it would have been better to deal directly with the toxic assets back then. they didn't get better. delinquencies are going up. foreclosures are going up. banks still aren't making loans. until you get the consumer credit freed up, i don't think the economy is going to go anywhere. >> was it urgent to act that quickly or do we have more time? >> i think it was urgent to do something quickly.

whether it should have been one more scrap of paper with fill in the blanks later on, maybe we can argue that. >> back in the market, covering fdic deposit would have -- >> those were curing affects not the cause. >> still the can you -- >> i understand. that's why we're finally getting now to deal with it. i hope the ppibb will work we will and they will expand it back. >> i quoted one of our founders who said famously, providence always moves slowly but the devil is always in a hurry. the enduring lesson of the last 12 months. >> are you leading to a health care debate. >> i actually am. >> don't call the president a devil, please. please. actually it will make the news that's for sure. >> anyway, we have a lot more

with our guest host today. we'll get to that in just a moment. if you've got comments or questions about anything you've seen on "squawk," go ahead and e-mail us at squawk@cnbc.com. up next stock shopping. we've got a fund manager with a hot hand. he has some names in the bargain bin that could make you money. later in the hour, congressman from new jersey will join the healthy debate with our guest host. stick around, we'll be right back. >> time now for today's aflac trivia question. in 2005, what "new york times" reporter was release freddie prison after agreeing to testify in the so-called plame affair? the answer when cnbc "squawk box" continues. aflac! is that different from health insurance? well yeah... ...aflac pays you cash to help with the bills that health insurance doesn't cover. really? well, if you're hurt and can't work,

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now the answer to today's aflac trivia question. on this day in 2005, what "new york times" reporter was released from prison after agreeing to testify in the so-called plame affair? the answer, judith miller. welcome back, everybody. in some other headlines, starbucks is rolling out instant coffee nationwide today. the company first tested] this product eight months ago in seattle and chicago. the rollout comes complete with

starbucks first ever television ad. there's a $21 billion world market for instant coffee and they are hoping to tap into that. u.s. consumers are still strapped. some consumer stocks on the radar of our next guest. ron sloan, senior investment manager, aim starting fund positive fund, positive returns. w.l. ross, investment affiliate of invesco. thank you for joining us. >> my pleasure to be here. >> good to see you today. i know over all you're pretty bearish when looking around the consumer sector. you do have a few stocks you think will stand out. >> being bear issue is a trade. i don't know the consumer has any friends. there are stocks that are consumer relate thad you can still make money in.

comcast. >> you talk about something that consumers probably going to put at the very end of the list before they give up cable. >> it is. it's not just about basic cable. it's about wireless, land lines, broadband connections. one of the bullish things about the story, not just old-fashioned basic cable. other names, a niche somewhere that the consumer isn't going to -- doesn't feel it's a discretionary item. we like h & r block. >> is that because of crazy tax changes coming our way. >> tax changes, i don't care whether they are little, simplified, complex, every time that the tax changes, the tax preparer business goes up. and so i think there's going to be more tax changes next year, so i think that will be very positive. they have gotten rid of some of the bad businesses they had gotten in trouble with over the last few years. one of their big competitors

went out of business. so i think there's a freer growth for h&r block going forward. >> can we go back to comcast. >> sure. >> you like it because they are less likely to give up triple play, phone, cable. by why comcast? >> time-warner. comcast has a bigger free cash flow number coming out. it's older. it turned that corner faster, quicker than everybody else. if you would ask me five or ten years ago if i would ever own a cable company, i'd say no way. these people capital spending a black hole, didn't know how to save money. that business turned completely around. >> you were up last year. i thought you said five years. >> no one was up. >> was anyone up last year? >> not anyone i --

>> if you were great kudos. i thought i heard that in the intro. >> it's nice to have the money manager perform and not be 12 years old. >> another site you like is hasbro. you say, look, people won't buy toys. is that the one that will hang in there during the holiday season. >> basic toys. the g.i. joe coming back. kind of the kicker on hasbro the g.i. joe movie that came out as an example. they get a residual from that. there's going to be more movies to follow this. the whole superheroes thing is a nice kicker for hasbro. in the meantime it's got the kind of basic skews that people when they do buy toys are going to buy. so the thing that kind of links these companies together,

financially conservative, lots of cash, not in big cash spending programs. so we like cash. we like cash. as shareholders, we like to get in the way of cash if it's being handled. >> all right. thank you very much for coming in today. >> pleasure. >> great to see you. >> so that was wrong. >> yes. >> i hear that. if it was up in each of the last five years, that's really something. up in the last five years. that was my only question but it wasn't. a look at what's ahead for today's market session. paying a price for a public health care plan, congressman rob andrews and guest host mike pence are going to completely agree on the public option. maybe not. more "squawk" after this. >> breakfast with a ceo, dardin restaurant chief will talk about the company's quarterly results, the state of the american consumer and how his company is handling the global recession.

plus credit ratings under fire, moody's, fitch, standard & poor's facing a new round of hearings on the hill. chairman oversight and government reform committee gives us a preview tomorrow at 7:00, 6:00 eastern on "squawk box." it's not the new bmw. it's not the new audi. what it is... is impossible to resist. the new twenty-ten lacrosse from buick. it's the new class of world class. as the decades have past, the promise of medicare has always been there. and aarp has fought to guarantee none of the benefits you earned were ever taken away. today we're continuing that fight by protecting your freedom to choose the doctors and treatments you need.

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all right. if you have any comments or questions about anything you've seen on "squawk," go ahead and e-mail us at squawk@cnbc.com. up next we're going to head to the cme group for a check on the markets this morning. don't forget at the top of the hour, we have is a greenberg, former bear stearns executive chairman. also a look at today's top performers. $$$$$$$$$$$

welcome back to "squawk box," everybody. let's take a quick look at the markets right now. remember yesterday we had major gains for these markets. talking about the best day for stocks since august 21st, with the dow up by 124 points. this morning you are looking at the futures below fair value.

right now dow futures down by 5.5 points below fair value. supreme court will consider an appeal of enron jeff skilling. his legal team is appealing on grounds the legal theory underlying the case was flawed and the jury was prejudice. penske auto group will close its deal to acquire saturn. the deal was first announced back in june. again, see what we're set to do with trading. joining us from mf global, cme group, todd, looking at futures under a little pressure after yesterday's gains. today we have big numbers, case shillinging at 9:00 a.m., consumer confidence at 10:00. >> they will watch. both will be market friendly. we expect home prices to decline

at a lower rate and krfd to increase. confidence mirrors the shape of the stock market over the last six to eight month. we've seen confidence above that 50 mark, which is obviously a sign of optimism. i think today will play with that. however i think the big number is friday with the jobs report. that will obviously be what dictates the trade over the next few weeks. >> earlier this morning we had one economist mark visitner looking for a number of about down $200,000. how is that going to play out in the market. >> if it comes in as expected you'll see the stock market uptick slightly. the real question is in the bond yields. you'll see the bond yields come in recently in the 30-year sector, a signal of inflationary pressures not evident in the market as well as companies reaching for a yield. they want returns and aren't getting it in the instruments parked in over auto year. a possibility in the pop in 30-year prices taking the yields down below 4% which we haven't

seen in a while. >> wilbur, big question, what happens in the broader economy? where do you see things now? >> the consumer is about 70% of the economy and is still disabled. the consumer can't borrow month of july largest reduction in consumer credit since they have been keeping the statistics. so that's not a sign that consumer is getting ready to do a lot of anything. i believe that obama will have to go for another tim lsu -- stimulus package in the spring, because things won't be better by then. >> the stimulus isn't working. ed administration said we had to borrow a trillion dollars from future generations and pay for this long laundry list of

priorities to prevent unemployment to go above 8%. it's 9. it may go up when the president is in copenhagen talking to the international olympic committee. we should push away from the idea we can borrow and spend away from the failing economy and work on growth. nothing you can do to stimulate consumer confidence, encourage capital investment than if we signaled we are going to preserve bush tax cuts in the future. not going to raise taxes on health care, not going to pass a national energy tax. >> the stimulus, a lot of that money hasn't been spent until the first part of next year. will that change the economic environment at all? >> there will be more spent. i really don't think it's going to solve the consumer problem. you've got real unemployment is

around 12.8% because people who have given up looking for work, they don't count any longer as being unemployed, but they are. similarly people who wanted fulltime work but were only able to find part-time, they don't count. but those people don't feel like they are fully employed. if you take those three categories together, it's probably $250 billion less spending than they would have if they were fully employed. when you allow for the two-for-one multiplier, that's a $500 billion hit. plus even the tax cuts for the lower paid people that went in are going to be way more than offset by state and local taxes and user charges of every kind. driver's license fees, dog tags, everything you can imagine, transit fees. so i just think we need something more dramatic. >> but we don't need more borrowing and spending and

bailouts and government takeovers. what we need is what john f. kennedy did, what ronald reagan did, what george w. bush did after the towers bill, across the board tax relief for working families, small businesses and family farms. we do that, then you'll see if the american people and the consumer and business owners surge into this economy and really create the kind of growth that's going to be necessary to put us ultimately back on track. >> todd, how closely do you and the other guys on the trading floor watch what's happening in washington? how big of an impact does that have on you on a day-to-day basis right now? >> the fiscal policy changes we've seen, the dramatic changes we've seen really do affect trade. it's more reflective in the stock market, i think, because the stock market is more of a hope indicator. looks to me with more fiscal policy changes in the way, a new stimulus package, possibly another sort of cash for clunkers program will help, a sort of a band-aid but will help

to get manufacturing moving is definitely in the cards. the stock market is almost priced it in fully whereas the bond market is a little more skittish about the possibilities of a stimulus package and whether it will work or not. i think the other thing people are talking about here, over the next six to 12 months, a huge reset of adjustable rate mortgages which people have been under the radar paying their mortgages but maybe won't qualify for new loans in the second and third quarter. that's going to continue to put a dark cloud over the housing market but we'll have to wait and see. >> todd, thank you very much for joining us. congressman pence, wilbur ross will be staying with us. >> coming up on "squawk," no finish line in sight for the debate over health care reform. the latest next on "squawk box."

the so-called public option at the center of health care reform, the debate. it has been there. that was what got people going at the town hall meetings as well. lawmakers preparing an attack on that issue again. joining me now congressman rob andrews, a sponsor of the house democrat reform bill, chair of

subcommittee on health. we're also going to hear from guest host congressman mike pence, who is also here. congressman andrews, it's very confusing for viewers as to what the final plan is going to look like. we're hearing word maybe the house offers an even more robust public plan even though it's not in the baucus plan. can you clarify anything for us? >> yes, joe. that's yet to be determined. i think the house will have a public option. the question is how the prices will be set. the discussion is whether it will be negotiated rates or whether it will be a rate fixed based on the medicare rate. not yet decided. >> is the possible to have that in the final bill without reconciliation in the senate? >> i don't think so, joe. i think that's a really good question. i don't think there would be 60 votes for that in the senate. that's why we have a conference as my friend mike pence can tell

you. a lot of things got hammered out there. the likelihood, we'll get to conference without that in the senate bill, it being the public option in the house bill, will come to some accommodation in the conference. >> in the conference. if it had to go reconciliation, are mainstream democrats willing to go along with that. do you think such a big important step should be taken in that fashion? are you ready to do that because you didn't cooperation in their view from the right. >> that's up to the senate. i would say the answer is yes. remember, joe, the reagan tax cuts, the reagan dole social security. bush gephardt foley deal, clinton economic plan, bush tax cuts in '01 and '03, normal path for economic legislation not an abnormal one. >> i see in some notes that we

have, this could help governor corzine maybe help win re-election. is there any way to get this done before re-election? >> i doubt it. the reason i said i think it would help him. health care has energized republican and democratic bases. they are both really engaged now. in new jersey an energized democratic base would help governor corzine. >> congressman pence doesn't think we should have a public plan, do you, congress? >> let me -- >> i know stop the presses, that's a shock for you. i don't know if you would have come on if you had to take that stand. >> rob is a lot more liberal than i'll ever live to be but he's a good friend of mine and not in the congressional sense. i have a lot of respect for him. he knows and was just candid about it. house republicans want health care reform that will lower the cost of health insurance and lower cost in the long-term, but we don't want to launch

government-run insurance paid for with $800 billion in higher taxes. what rob just signaled there, and correct me if i'm wrong, they are prepared to go forward without really bipartisan input. at this point what you see both in the house and the senate is really -- and being driven by the administration is largely a partisan bill. which you know, in fairness, rob points to a lot of different tax bills that have been done with that 51 reconciion in the past. this is a bill that will affect 17% of the economy and 100% of the american people. i don't think it's the kind of bill that you want to pass on a partisan basis. i think it's the kind of bill that ought to be subject to the filibuster rules of the senate, the kind of bill that ought to invite the largest bipartisan participation. frankly, you know, we haven't seen that and unfortunately i think it's heading us in a direction that's going to lead

to government takeover of health care. >> first of all, it's not a government takeover of health care. congressional budget office estimates 3% of americans would be in the public option. but more importantly, on this issue of the reconciliation, you know, the reagan tax cuts and clinton economic plan affected 100% of the economy. so it is very frequent that this is the method that's used, because it also results in deficit reduction. so i think this argument that reconciliation is rare is just not right. >> well, but you know, i think that, you know, on the subject of the cbo estimates, rob, isn't the cbo estimate based on projection for economic growth? also, i've got to tell you, i know the administration continues to say if you like the health insurance you have, you can keep it. most hoosiers and most americans know it's tough to keep the health insurance you like if your employer cancels it.

if rob and liberals on capitol hill have their way we create a public option or create this massive new beaurocracy of government-run insurance in this struggling economy, an economy that could well see unemployment go up this friday, there's doing to be millions of employers the minute uncle sam opens the door on a government-run insurance plan that will say to employees, we love you, love to have you here, we're not offering health insurance. tens of millions are going to be relegated to a government-run plan. >> i'm curious, how do you reconcile two programs, one of which has a public option and one does not. how do you split the baby? >> well, i don't know. that's what negotiations are about. i think that you look at the goal. and the goal is to introduce competition in the health insurance market where it does not presently exist. 96% of the markets across this country would not pass the justice department's test for

market concentration if the antitrust laws applied. the top two companies typically have 78% of the market share. so we're looking for a way to increase competition. i think the robust public opposing is the best way to do that. there are other ways. and in conference, i'm sure we'll be exploring those other ways. >> congressman, we always try to figure out why not open up the state to -- you know, so that someone -- how many insurance companies are there, health insurance companies, across the states. >> about 1500. here is the problem, joe. it sounds attractive. the problem is you have to build a provider network to build market share in a market. the problem is companies really can cross state lines today. they just have to get licenses, which is not that onerous. the reason they don't do it, the difficulty in building market share drains their resources and they tend not to do it for that reason. a public option would have the

built-in advantage of having the medicare provider network in place when it begins. >> i told you we'd find something rob and i could agree on. it is the cure for what ails, the rising cost of health insurance is killing businesses in indiana is killing competition. the reality -- the federal government competes with the private sector the way an alligator competes with a duck. it consumes it. most americans know the way you bring competition into this system is allow the american people to purchase health insurance across lines, association health plans. get that little salamander, gecko on the desk in health insurance. >> go ahead. >> i don't think fedex and ups feel like ducks being consumed by an alligator in the competition for packages being delivered around the country. i think there is public-private competition that works to benefit both sides of the equation. >> right.

but fedex and ups, rob, actually followed after government postal service and the government postal service survived. so i don't think you can use postal service as the model of efficiency for the best comparison for a public option. >> that's not what i did. you said public and private can't exist and i think it does in that example prfr i think if the government is first, can you find some private sector business on the margins. but i really do believe you introduce government into a private marketplace, i think millions of americans are going to lose health insurance. >> how about colleges and universities. have private been pushed out by public higher education? >> again, not pushed out of the marketplace but the reality is -- >> doing pretty well. >> if you have a government-run insurance option there's not a small business in indiana during these difficult economic times that isn't going to take a hard look at canceling health insurance and sending people to a government-run plan. when you throw in -- none of us

talks about the fact here, joe and rob, that there's a government individual mandate here. president obama opposed mandating americans to purchase health insurance when he was running for president, but house and senate bills both include a mandate that says to the american people you buy the insurance or we're going to raise your taxes and fine you. >> just like it says you buy car insurance to drive because you're putting other drivers at risk, i think that's a pretty fair provision. >> all right. we're not going to -- we didn't solve this. i was hoping. >> we'll solve it tomorrow morning, i'll come back. >> you're welcome any time. >> so will i. >> you're both welcome any time. that's an open sitting. wilbur is welcome, everybody. >> thanks, joe. >> thanks, congressmen, appreciate it. >> all right. coming up at the top of the hour, wall street legend. the man who took bear stearns public ace greenberg, the rise and fall of the firm. what he sees on the street, the state of investing in today's

world. you're watching "squawk box" on cnbc, first in business worldwide. 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. .

trying to reconcile the house and senate vision. i can show, but instead of the sound people find so disconcerting, we'll play something like this. if i can do it. if we can get along and bring the sides together. >> give a lot of hope for what's coming out of washington. >> i thought you were showing shots from the conference. >> walgreen's reporting $0.44, a nickel ahead of expectation. some costs and items. bottom line, much better than expected on revenue that was also ahead of expectations. then they expect organic store growth of 4.5 to 5% in fiscal 2010. broadcom upgraded from overweight to equal weight at barkley's.

>> congressman, thank you very much for joining us. >> it's been a delight. i appreciate the program. appreciate you having me on. appreciate the focus on where the american people really are at. all the battle over national energy tax, the debate over health care reform. when i'm back home in indiana, people are talking about jobs. they are talking about congress coming together in a way that really gets this economy growing again. and i appreciate the focus on that on this program. >> we appreciate it. up next on "squawk box," a legend on the street. ace greenberg joining us for a rare interview you will not see anywhere else. thoughts on current investment climate, global economy, the month that shook the world. september 2008. "squawk box" will be right back. you're watching "squawk box" on cnbc, first in business worldwide. the same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers,

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legends of wall street, legends of investing. billionaire wilbur ross. >> the question isn't so much will there be some sign but will

there be enough. >> ace greenberg, a year after the financial crisis -- >> we need to get something done and we're going to be working hard on it. >> compensation controversy, fixing the economy. it all starts now on "squawk box." >> welcome back to "squawk box" here on cnbc, first in business worldwide. good morning again, everybody. i'm becky quick along with joe kernen. carl is out on assignment today. our guest host is wilbur ross, the chairman and ceo of w.l. ross & company. also we have ace greenberg with us for an exclusive interview for the next half hour. ace, welcome to the set. it's great to see you here today. >> hi. >> we're doing to have a lot more with ace in just a moment. but first let's get to the headlines. signs of economic notwithstanding u.s. consumers still keeping a tight grip on wallet. national retail survey out

showing consumers plan to spend 15% less than last year. only 50% plan to celebrate compared to 65% last year. international air transport association said flights have flown at about 80% of capacity through august. that is 1.2% better than the year before. also starbucks is rolling out it's instant coffee nationwide starting today. that follows an eight-month test in seattle and chicago. it will be accompanied by the first ever television ad. if you're watching futures you'll see after major gains for the stock market, in fact the best day for stocks august 21st, you'll see dow futures down 14% below fair value. keep an eye on that. we do have numbers at 9:00 a.m. you'll be getting case-shiller home price, 10:00 a.m. confidence numbers will be out. >> kick off final hour of "squawk box" will two legends of

wall street, ace greenberg, former executive committee chairman and vice-chairman emeritus. ran the firm years and years and years. >> bear stearns public. >> yes. wilbur ross chairman and ceo of wilbur ross & company. good morning to both of you. >> good morning. >> hi, ace. >> you can chime in whenever you want. overall sometimes i ask you stuff like this and you go, what do i know. we have to because you know a lot. the economy, better than a year ago. no doubt about it. does it justify the move we've seen in the financial markets? >> i think so. you know, we're still a long way for 14,000, which is where we were a year ago october. i think so. a definite trend is up, i think. i think the government has done a very good job. some people say they have made mistakes. on the other hand if you don't do anything, you won't make a

mistake. people that do things make mistakes. i think they certainly have tried and they have been successful and i think we're going the right direction. >> i guess people can argue with how they did it. maybe not all the programs were necessary. but in total here we are. the abyss was avoided. when you look back on it, was it about something other than confidence? >> the toxic assets are still around. >> i don't know. certainly the worst period i've ever seen. nothing even close to it. you had the largest companies in the united states cutting their dividends by 95%. i don't think wilbur or i ever saw that before. we've both been around 112 years. >> i don't want to see it again. this is just different from anything i ever saw before. of course none of us is going to be happy with one out of ten americans out of a job. all of us hope that starts going in a different direction in a few months. i hope it will.

>> you've been quoted saying the wall street you knew and help build is a thing of the past. >> what i said was the investment banking model is gone. there's no question about that. that's been proven. it's a marvelous firm like goldman sachs was faced with a run, who won't have a run at some point. goldman sachs, as you knowh to take drastic action during that one week. they borrowed money at a very high rate of interest, warren buffett, they became a bank. now they are a bank. now there can't be a run on it. if there's a run, banking authorities think that the bank is sound, they will laugh and say, here is the money, end the run. >> tied somewhat to rumors, almost as if someone can make a targets of an institution and almost as if you can set someone up and maybe benefit monetarily by destroying -- >> i'd say it's possible. >> that's one of the reasons you

can't do it again. >> the model can't withstand a run, period. a bank can stand a run, an investment bank can, boutique is not doing to have a run because they don't have positions. a firm that does commission business is not going to have a run on it because they are protected, of course, by the government up to a certain opponent on their accounts. so the only firms that really were at the mercy of a run were firms that had inventory, that took on securities to help facilitate deals and so forth and so on, so i'd say that's gone. >> there was concern about the levels of capital and the losses in a lot of these strubt you're products, obviously. do you think that you can add to that people that had credit did he fault swaps that were circulating rumors and trying to make money? >> i don't know about that. i think the whole question of credit default swaps is

overrated. nothing wrong, it's just insurance. when you buy insurance, you have to buy it from somebody you think will pay if it goes your way. like on a football game, you bet with somebody who can pay if he loses. >> the nature of the crisis was that it would move from target to target. it almost looks like someone was targeting firms in a serial fashion. >> i don't believe that. >> that didn't happen. it was the 30 to 1 leverage, structured product. >> some people buying credit default swaps and people didn't have the finances to back them up. >> should they be traded on an exchange? >> i don't think so. most of them are too complex and too -- just tailored for the individual. i doubt they could stand it. that's my guest. >> only a third of them ever had collateral. >> that's dangerous, right?

>> absolutely. >> i do want to point out the people that had default swaps, for instance, lehman brothers, got paid off like that. several other instances, 100% got paid off. no fuss, no bother. people took lumps and paid off. those people that owed credit default swaps, obviously their counter-party was something of substance. i think the government, if you look into the amount of credit default swaps aig had written in europe and who they had written them with so forth, the government let aig go, we could have had a massive horrible mess on our hands. the banks in europe, so far dependent on those swaps to stay in business. the article in the new yorker covers that very well. i'm sure you read it. it was dangerous. we were very dangerous position. >> we're walking a fine line on executive compensation. try not to go too far.

we're aware rewarding certain risk taking probably added to what happened. would you at least -- joe, i have some real problems with this whole question of executive compensation. i don't think any american, or very few, object to an athlete getting a fabulous salary, whether he's a baseball player or golfer, how much money they make. >> actor. >> actors nobody seems to care, rock stars, nobody seems to care, talk show hosts. >> like networks should have a ticker at the bottom, talking about business news, they make too much money. >> too much. >> go ahead. >> nobody objects to all these people, these are superstars and i'm sure they deserve it or else they wouldn't get it. yet we have superstars in the financial industry and they also deserve money like this. they are just as much superstars as the people i mentioned or alluded to.

to think they should work for less just doesn't make any sense to me. >> the question whether you can measure performance of an actor or singer or something right on the spot. the guy who is getting cashed out on the market to market basis, i think there's a disconnect there. >> well, you know, but you have a willing worker and a willing employer and they are willing to employ that man. if they are willing to pay him that, i assume they must think it's worth it. i know this particular flap over this man at citicorp. i don't know him. he had a crack, certain percentage of the profits. he made $2 billion. his share was 5% or $100 million. >> i don't think the problem is with the employee, it's with the overall managing system, is that a sensible thing for the bank to be doing? >> well, they made $2 billion. if they had many departments like that, they would be better off than they are.

>> they would if they do it every year. >> i had a feeling he did do it every year. that's why he had that deal. >> he's eating what he kills. there's chief executives, i don't want to sippingel out anyone at merrill or citigroup, say you're dealing with someone's money, it looks goo with mortgage-backed securities you sell. you get a fee for that, a percentage of that. then all the profits disappear and you've got billions and billions of dollars of losses. they don't give any of that money back. it was other people's money they were wagering, not their own. then the profits were -- >> i think that you have to blame squarely on management on the deals they made with these people. but on the other hand, the baseball player that has a bad year doesn't give any money back either. >> you can understand where the baseball player wasn't bailed out by taxpayer dollars either. >> that's another issue. >> what if the risky behavior helps to bring down the system and caused one out of ten people

not having a job? >> that's bad. >> that's bad. so that's the fine line we're trying to walk. so fineberg is in this position as a pay czar. you've got congress involved, fed involved, treasury is going to get involved. i just wonder, what are the guidelines you would use. you wouldn't just say don't do anything, would you? >> no, first place, they are involved with the banks the government money, not involved with banks that paid off the money. so there are two banks, right? do people object to the banks that have paid off the money on what they pay their people? i think so. i think they are questioning that. >> they are questioning both. >> i think that's a mistake. if the banks paid off what they owe the government, and if they are current with every regulation, they have somebody they think is a superstar, want to pay them accordingly, i think they should be allowed to. i don't think that's anybody's business. the bank that owes the government money, all bets are off.

>> i agree. they are working for the government. they have to listen to the government. whether the government is right or wrong, the government owns. >> in the private sector wouldn't it be better offer to have longer time than a year to measure a trader's performance. >> it would. competitive pressures, though, may change that you have to be -- you're exposed to competition on wall street. everybody wants a hot article. if you could have a fallback, that's fine. the person you're employing agrees to it, he may have another point of view. such and such a deal across the street. >> that's true. but then you have idiots running the asylum. >> it's not against the law. >> against good practice. >> how -- >> can't legislate against making people sick. >> simon cowell. see him? >> i saw the article.

>> $100 million. but then again, something is going to be done. you just wonder exactly how to walk that fine line. >> it's very rare when a baseball player has a bad year that it doesn't bring down the whole league. that's the difference. >> they don't hit -- actually hits do disappear with the whole roid issue. >> we're going to continue this conversation in a mom. a quick break then we'll get back to our exclusive interview with wall street legend ace greenberg and our guest with us today wilbur ross. "squawk box" will be right back you're watching "squawk box" on cnbc, first in business worldwide.

that's the music for our white collar crime watch. the supreme court will consider whether to hear the appeal of enron ceo jeff skilling. his legal team is appealing on grounds that the legal theory underlying the case was flawed and the jury was prejudice.

meantime inspector general due to follow up on last month's madoff investigation with very specific recommendations for reform at the agency. welcome back, everybody. we continue our exclusive conversation with wall street legend ace greenberg, former bear stearns executive committee and vice president emeritus. also wilbur ross, chairman and ceo of wilbur ross & company and talking about everything, including what's happening with the banks. gentlemen, before we get to that, i'd just like to ask you what you think about what's been happening with all the m and a activity coming back. we've seen it over the last five weeks something on par of a huge pick up in m and a. we're well below last year. what do you two think -- >> bull markets bring more merger and activity. a company feels their stock is trading well, they are much more likely to make an acquisition whether for stock or cash for some combination.

if you look at market lows, there's almost no m and a activity at all. it tends to be the m and a people get more manic as the market gets stronger. >> front page of the "new york times" says there's a lot more confidence with ceo offices. is that the case or a case, my stock is overvalued, quick, buy something with it. >> they cited two mergers. i don't know how they can talk about confidence based on two mergers announced yesterday. also what wilbur said, of course, is true. an awful lot of stocks selling below levels of where they were and may look very attractive to somebody who may feel they are in a good position. >> you've got $60 billion in deals in the last five weeks, not just the two announced yesterday. dell earnings before. is this a sign that things are coming back to life and the credit markets are loosening up again? >> well, they definitely are. there's no question about that. i mean, a short time ago you

couldn't sell commercial paper. remember that? that was a year ago i'd say, just to show how far we've come. money funds having runs on them also when that one fund broke the dollar, broke the buck. so to compare today with a year ago is just -- it's no comparison. >> how long will this last? wilbur was telling us in the last hour he worries the economy is not going to be as resurgent@as it has been to this point. you're worried about a second stimulus. >> i think corporate america is doing better than economic america. mostly it's the flip side of the joblessness. companies have learned to operate with far fewer employees than they have before, and i think that will be a relatively permanent thing. so i think corporate earnings are going to continue to outperform the economy for some little while. eventually you need top line growth if you're going to have a real business and real stock

story. that's the part i think is suspect. i really do think there's a great probability that the obama administration will do another stimulus before the summer recess next year, because they will be worried about the congressional election. >> i know you just said you can't look back at where we were a year ago. we've come back so far over that period of time. there are so many concerns on the economy, including unemployment rate edging up towards 10%. >> right. that's our biggest problem. >> the jobs factor. >> very sad that one out of ten of our friends, relatives, whatever, are out of a job. just hope that turns around quickly. >> what's the answer? some people -- there's two sides. some people say tax cuts, get it from the private sector. other people say government programs add jobs. what's lasting? what's the right move, some combination of both? >> just i think the perception

of people about the economy can change very quickly and that feeds on itself. some people are, as you probably read in the last couple weeks, rehiring workers. that can really be a snowball affect. >> animal spirit. >> i think it's really going to be that we're going to continue the massive transfer of liabilities from private sector to public sector. that's really what's been going on. i think it's the only way to deleverage american consumer. think about it at the peak, real estate values for residences were some $23 trillion. down $7 trillion. along the same time period, consumer debt has gone down by less than $1 trillion. so the fact is the consumer is more overleveraged now than at the peak of the boom. combine that with the rising unemployment, and unemployment always recovers more slowly than the rest of the economy, that's

why i think it's the combination of those factors that will make for very soggy top line. >> i wanted to ask -- can i ask one more? jamie diamond, talking about too big to fail. we've all been talking about too big to fail. is that mongolia we need to address -- >> i agree 100% with everything jamie diamond says. i agree 100% with what he says. even if i didn't know what he said, i agree with what he said. >> the corollary of too big to fail should be too strong to fail. shouldn't be -- i think morgan is perhaps closer to that than any other big banks. >> what does that mean too strong to fail? >> should have capital. >> ratios. >> the fact little banks are forced to have more capital than big banks. they are not of any systemic danger whatsoever. >> how do we accomplish that if

you're in government? do we have someone that dictates what capital standards should be? who should it be, the fed, the treasury. >> we do have people that do that. they didn't do that well. also i'm not saying they could foresee. even new york real estate two years commercial real estate according to the newspaper went down 25 or 35% in value. >> more to come. >> maybe. but you know, so who could foresee that. i don't know. new york was almost considered immune to real estate problems, particularly residential real estate, high-end apartments. they said no way are they going to come down prfr what would you tell the government to do in terms of new financial regulations? >> i wouldn't tell them anything. i think they know more about it than i do. >> you better tell them something. they will way overshoot and the investment bank will be dead. >> it is. >> it's already dead. >> what if they came and said, mr. greenberg, you're a legend.

you know how wall street works. we don't want to overshoot. how can we try to prevent this from happening again. >> i'm an expert in several fields but not that field. so i wouldn't know what to tell them. it's a very tough question. you certainly -- they have the mechanism right now to regulate the bank and positions they take. they do not have the mechanism to regulate positions the investment bank took. they didn't. >> or aig. >> well, aig they probably did. >> they didn't know how to wind it down. >> maybe they didn't know exactly what aig was doing. credit swaps with a ridiculous premium. >> aig regulators, too, everybody said it was somebody elsed job. >> they were regulated. none of their insurance companies have been in trouble yet of the company, the parent company was in troubl, obviously. the government owns 79% now. but no, it's a tough question.

but i think the regulators right now have the power to regulate the banks. i'm sure they will use it. >> they are not even minding themselves. the fha is 50 to 1 leverage, twice what an investment bank had had. yet its portfolio is deteriorating. there are all kinds of delinquencies coming in as we sit here. l you look at that. you look at fannie mae and freddie mac, government regulation hasn't kept them from making mistakes the private companies made. >> now they are stepping it up because they are the last resort. >> well, they were under tremendous pressure also from certain congressmen to lend money to people, so everyone had their own house. they were caught between the two opposing forces, which is sad. >> that's the inherent conflict between trying the quasi private

sector, quasi public sector. >> ace, we want to thank you very much for joining us. it's been great having you here. hope to see you soon. >> i'm flattered. when a man you've known 100 years to do something and offers you a coal company or steel company, you accept. >> i'll take the coal company. >> you're rounding up, right? really not 100 years. maybe combined. >> we've known each other -- >> that's for sure. >> thank you. good luck. have a good day. >> thank you. all right. coming up. we will head to the trading desk in chicago to set up the trading day. also why debt is the new four letter word queepg markets on edge. "squawk box" will be right back.

raef welcome back to "squawk box" on cnbc. we are one hour away from the opening bell. here are top stories how things are shaping up. airbus may cut its forecast for superjumbo deliveries in 2009 by one to a total of 13. airbus has been having trouble delivering those jets on schedule because of wiring problems. also the fdic is expected to propose banks prepay three years worth of fees in an attempt to try and replenish fdic's insurance fund of the requirement could have government agencies 36 and 54 billion dollars.

some have called on the fdic to borrow the money it needs from the treasury rather than putting more stress on the still troubled banking industry. the federal board meets at 10:00 eastern time. on the gend ashes, two economic releases of note. 9:00 eastern case-shiller index. they are thinking it dropped in july, the least in 17 months if it dropped in the case. one hour later at 10:00 a.m., consumer confidence numbers. forecasters see the september reading rising to 57 from 54.1. up next we'll find out what the traders are watching ahead of the opening bell. "squawk box" will be right back. you're watching "squawk box" on cnbc, first in business worldwide. 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...

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's hey, welcome back to "squawk box," everyone. let's take a look at the markets. we've been watching the futures. after major gains yesterday, the futures are down by 6.5 below fair value this morning. yesterday talking about the dow

up 120 points, s&p by 18 points, the best day for stocks since august 21st. rick santelli standing by in chicago. steve liesman is right here in studio with us. guys, steve was just making an interesting point in the commercial break ahead of time. steve, you point out you've been gone several days. the markets look different than they did. >> we had plus $70 oil down four days in a row, now $66 of the dollar looks like its weakness has topped off. you're now 145. i think if you blink for a couple of days, i don't know what happened friday, go back and figure out what i was working on, i was off yesterday, things on the inflation scare front, my friend santelli will argue this is a calm before the storm. looks like we took a gentle step back from the edge when it came to all the concern about inflation. certainly what's going on with

the ten-year. >> rick, would you agree from where you stand. >> i just wouldn't use the word inflation. what's changed since last wednesday is that the dollar has really put in a near-term bottom. however, having said that, it's having troubles against the yen. but this is a very key area historically around 89 to $90 yet. i think it merits looking into, getting footing against that currency just started as it may be going into the half year in japan. >> scott, maybe one interesting thing from yesterday from equities perspective, the stock market was higher without the dollar being weaker. what happened here? is that an important break? >> we've been paying attention to the dollar. it's been bouncing around. obviously m and a activity yesterday, and the fact it was a vacation or holiday for a lot of people so we had lighter volume. so m & a was amplified or impact was really overwhelmified. that's really interesting. i don't think it's so much

inflation or expectations for inflation, i think there's a little fear that equity traders are afraid to admit it. we've seen treasuries. last week we saw a lot of index buying and index buying, people are afraid of what might happen in october. they are getting their ducks in a row. they want to be prepared in case something unfortunate happens. we had a little taste of that last week. >> scott, didn't the market climb just that wall of worry over a very long period of time here? every day you'd come in and people were saying this the day this market is going to get back a piece of that 50% gain. i know sometime it's going to come. but seemed like the more buying there was, the higher the market went? >> well, you know, we didn't have a whole lot of foot buying. relatively flat level for a while. but in the last earnings cycle, people can say, hey, ignore the top line, look at the bottom line. ignore the fact the only way to do that is by firing a bunch of

people. mr. ross was right when he said a few minutes ago, we had to see top line growth. if rim is going to be the poster child for the upcoming earnings season it's really going to be ugly because they missed on both the bottom line and top line. >> wilbur? >> i really do feel at some point soon you've got to get top line growth going if you're going to continue either the rally or even the economy. >> you know, there's a new trade in town, becky. instead of buying long stocks long equity markets and buying treasuries or long treasury markets and sustained is an interesting development. >> doesn't make sense. shouldn't you be long equities and selling treasuries. >> whatever works. that's what you're supposed to do. >> i want to make one more point about the week, becky, which is all the fed guys talking. bernanke testifying regulatory

form, kicking off fed at 9:50. in light of comments last week that look out for stronger, faster, sooner turnaround in fed policy, we're going to be watching there's eight guys talking this week or testifying. i'll be in washington for shadow washington committee, kind of like the guys in opposition, do not cohen, speaking of the vice-chairman. we're going to want to put these guys back into the line of where they are relative to hawkishness. >> all right. steve, thank you very much. rick, thank you for your time this morning. scott, thank you as well. by the way, a reminder catch scott on options action 8:30 eastern time. watch out for that. >> please. our next guest says debt is the only four-letter word that matters. former morgan stanley president and founder of center view is on the way to the set. find out why he's more worried now than ever about the markets. "squawk box" coming right back.

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executive comps getting plenty of attention in financial reform efforts. next guest says a debt is a next issue to rile up reformers. joining me stephen crawford, partner and co-founder of centerview partners. we had -- i don't know, maybe we should have saved it, steve, the discussion we had off camera. you fall into the camp that even though it's a year later and the market all of them, equities, jumps, spreads, everything moved hugely, maybe the improvement

we've seen hasn't warranted such a big move everywhere. there are still problems that haven't been addressed. >> some problems. yeah. and look, we've got huge external debt. we have large deficits, large and expanding deficits and declining demographics. we have the highest monetary expansion we've ever seen. and yet we still enjoy extraordinary low interest rates. find me the historical press, it's not a stable circumstance. when lie at the rebound in the markets, i don't know what you do with all of those factors. >> it's not like your firm manages money. >> no. >> you're not just like hanging -- >> i'm not -- >> you're not saying i'm not going to buy now. i missed it and i'm bitter. there's a lot of guys we have on all the time. you're almost objective in looking at this? >> objective except for the fact i have three kids and i don't

like what we're doing to their futures. i'm not objective about that. there's a lot of things that had to be done given the crisis we got ourselves into. the one thing we didn't have to do is expand the size of the state on a long-term basis. a lot of the things we're doing now are doing that. >> we haven't even expanded it yet. you're worried about what we've already done. >> and what we're going to do, health care. >> let's wait until we really -- that's the expansion. you're talking about in one fell swoop, 17%, those are the things you're worried about as well. what about, wet into how much crap was on the books, positive stuff. you said $2 trillion. >> at least. >> over $2 trillion. >> the mortgage market is $14.5 trillion. $2 trillion out of that wouldn't be 15%. >> everybody talks about the housing market as if it's back on fire. we're back to normal. what i see makes me wonder why

people are so enthusiastic. >> it is on fire in the sense that houses are -- >> you have the lowest cure rate of prime mortgages. the government now backs 60% of mortgages versus 40%. the 1990s. you have the $8,000 credit. who knows how long that's going to last. you look at the foreclosed properties. the build up in for closed properties that haven't yet been repossessed by the banks is going to be an enormous amount of inventory. and yet, you know, everybody is enthusiastic about where housing is going. >> well, to work this out, some people think we get a 50% decline in the dollar which allows us to repay a lot of this stuff. >> over the years. >> i don't know what's going to take us there. i think what's troubling to me is the only thing that really matters is debt.

when you look back at all crisis, they all start with a tremendous amount of leverage. it amazes me how quickly amnesia sets in about that problem now. when you think about how we're going to solve this, there's all kinds of things that are brought into the equation, too big to fail, which to me is a red herring. comp, incredibly politically important matters. but again, regulatory structure, not going to matter. the only thing that matters is we have to continue to focus on revealing and limiting the amount of leverage, because we are not going to change the cycle on human behavior for markets to overshoot. what we can change is how expensive it is when they do. that has to be the focus. look, there's only so many things we're going to be able to get done. particularly, this is a problem that crosses borders. and to try and expand what we're trying to do to comp, 10 or 15 other things isn't going to work.

we have to focus on what matters. what matters is how much leverage these financial institutions can take on and therefore how much the expenses when there are problems down the road. >> it isn't just the financial institutions, the consumer is seriously overleveraged. i really think that's the root of the problem. >> you're absolutely right. but a lot of the leverage that the consumers have is from the banks. the other thing that you were talking about earlier. you know, one of the things that's not going to improve the situation is just moving private debts to public debts. people, this confusion about the fact that if the government assumes my debt we're all better off is ridiculous unless you don't care about children paying debt down the road. >> the government is us, they get the money from -- rainfall it's a different us. >> yeah. from what we've seen, it's pretty scary different us when you look at what's happened in the housing market. >> do you fear a period like the

'30s? is that what you're getting at here? >> we've taken a dramatically different turn. i think the appropriate concern we were going to get into a debt inflationary cycle. what none of us know is since we've taken a different turn and increased monetary base substantially is how that impacts us going forward. i think the best case is we have five to ten years of really low growth. but part of the things that will put that in place, i don't really see, which is a focus on narrowing the future promises we've made to the public and trying to figure out how we get our balance sheet as a country better back into a position where we can deal with the debt. >> you better stop reading newspapers because it's going to get -- you know, the next couple of months there's going to be a lot more stuff you don't like. >> i recognize that. it's great spending time with you, but part of the reason to do these appearances is just,

you know, a different voice. >> now headed back to the bomb shelter. >> now headed back to the bomb shelter. >> all right, good. thank you. >> good to see you. pleasure. >> a year ago investors were preparing for congress to sign off on a bailout package. but little did anyone know how that day would turn out. art cashin will give us the trader's edge right after this. "squawk box" will be right back. $

i'm very disappointed in today's vote, but leaders on both sides of the aisle have worked very hard. i've spoken to them and i know they share my great disappointment. >> that was then treasury secretary hank paulson comment ing after congress voted down a measure to protect the financial system during the crisis last september. that action led to a nearly 800 point fall on the dow on september 29, 2008. joining us right now is art cashin, the director of floor operations at ubs financial services. art, we all remember this day well. you watched this on the floor. it seemed like trading stopped because people were watch iing that vote come in. >> absolutely. they all stood in front of the tv screens looking at cnbc, you were broadcasting the count live

and they watched it. then there was this great sense of disbelief when the thing got voted down. it was kind of like being on a ship that's in trouble and racing up to look in the wheelhouse an seeing the captain and the officers punching each other instead of working together. that's what led to the big selloff. >> that a big selloff took us down almost 800 points in one single day but it took us down to 10, 300 on the dow which is well above where we are today. people come back and see we came back a lot long way, but the question is what do we focus on now? >> i agree with what wilbur said earlier, most of wall street, the floor agree, it was a mistake letting lehman go under. that involved lots of reverberations all around and that didn't help we forget also there was a change in the administration and president obama as president-elect was

loathe to make any comments. a little bit of a vacuum there, that led to the oversells of the march lows. >> i know you always listen to mohamed el erian. he's got a piece in the "financial times" today. we're at a point he calls maximum confusion in the markets and public policy at this point. he says the biggest concern is sticking with the short-term view. what do you think about that? >> i that's right as i wrote in my comment, we have the financial equivalent of la cage a falls. we did a piece earlier about possibly no halloween or christmas, it's going to be tough to sustain any crisis at this point. >> it's always great to talk to

you. see you again soon. >> one more round with wilbur ross. i might ask him about la cage a fall. have you ever had that. >> no. >> wilbur lives for this. "squawk box" will be right back. if you're still one of the guys who's going over and over... going urgently... waking up to go... it's time to do what lots of guys everywhere have already done-- go see your doctor, because those could be urinary symptoms due to bph, an enlarged prostate. and for many men, prescription flomax reduces their urinary symptoms due to bph in one week. one week. only your doctor can tell if you have bph, not a more serious condition like prostate cancer. avoid driving or hazardous tasks for 12 hours after your first dose or increase in dose, as a sudden drop in blood pressure may occur, rarely resulting in fainting.

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some final comments from our guest host wilbur ross. i listened to steve crawford, it sounds like there's a lot of truth there about debt and how bad it is. it's the worst thing for an economy and there's a lot still out there. is there a way out of this? you just look for opportunities. you'll do well either way. but as a country, is there a way out of this? >> i think the way out of it, frankly, is ultimately going to be devaluation of the dollar. we're not competitive with other economies. we have import/export imbalance and we too much debt. and the only way to make that easier probably long-term is to have the lower dollar.