thinking about mutual funds-- think about this: the best place to buy one may not be a mutual fund company at all. instead of emphasizing their funds, td ameritrade has tools that can help you choose funds from the leading fund companies. there's even a "recommended" list by the independent experts at morningstar associates. so you can get a fund that matches your objectives instead of someone else's. announcer: before investing, consider the fund's investment objectives, risks, charges and expenses. contact td ameritrade for a prospectus containing this and other information. read it carefully before investing.

welcome back. we are down on the floor of the new york stock exchange closing the third quarter. the dow jones industrial average up a little over 15% right now. best quarter since 1998. there is the closing bell. you know who is next. maria bartiromo. and it is 4:00 on wall street. do you know where your money is? welcome back to the closing bell. i'm maria bartiromo on the floor of the new york stock exchange. a volatile trading day for the street today as we close out the best quarter in 11 years. stocks plunging at the open today, but rebounding midday and heading lower in the last hour of trading, off the worse levels of the session again.

investors discouraged by an unexpected decline in the pmi showing a contraction in manufacturing activity in the midwest of the country. oil made a major comeback today. crude oil spiked $3.90 a barrel. that's nearly 6% to close above $70 a barrel. after an unexpected decline in weekly gasoline inventories. dow jones industrial average on the down side by 34 points. 9707 is where the blue chip average finishes. trading about $1.5 billion shares. s&p 500 up 4 1/2 points, technology strong, 1,056. nasdaq weak, but money did move into tech and that is the leading sector of 2009. let's get all the action from bob on the floor of the nyse. >> traders worried tomorrow's ism numbers for september would be weaker than expected, as well. that is a big part of the gpg.

again, we didn't drop much, folks. why haven't we dropped much? why does the market keep going down? this is the last day here of the best quarter in 11 years. the dow is up about 15%, best quarter since the fourth quarter of 1998. that's big momentum. we are just a point or two off the highs of the year. the dollar weakness, you heard us talk about dollar weakness, stocks up. that's the best trade you could have made in the third quarter. it works every single time and worked again today. we heard donald kohn talking about lots of slack in the u.s. economy implying interest rates will stay low for a while. let me show you the dollar here. you saw the dollar and as we moved down, we hit the lows to the dollar 1:00 eastern time. that's when we hit the tie in the stock market. the dollar drops, material

stocks, commodities tend to do better. your freeport-mcmorans tend to rally a little bit. same situation with energy. we've got a nice boost when we got the weekly inventory levels for oil out. oil stocks moving up. stocks like eog had a nice day. they helped start the rally here. let's talk about the other groups here. consumer discretionary stocks had a tough day here. darden restaurants, you know them olive garden, red lobster had comments out. earnings okay, but the not a lot of topline growth nor guidance. we had weekly mortgage rates out. mortgage rates are going down, yet applications not increasing. we are at a seven-week low in applications to purchase homes. that is putting pressure on the home builders. finally, let's take a look how we ended the quarter up. settling out here. got to get the final numbers here. the dow is up about 15%. the s&p, rats, i think we are just shy of it.

we were up 15% the last quarter. we didn't get any multidecade beats here. look at the disparities here. financials, materials and industrials. there is the big outperformers for the third quarter. financials, materials and industrials. >> really an interesting quarter where money did move in a selective manner. >> you very rarely get those kind of disparities in the sectors. >> thanks, bob. see you later. take a look at the business headlines we are covering. chicago purchasing manager's index falling to 46.1 in the month of september. it's six points weaker than expected and indicates contraction in midwest manufacturing activity. that is down from august. p the economy still has major hurdles to overcome. commerce department reports second quarter gdp fell by less than expected 0.7%. consumers not cutting back on

spending as predicted. payroll firms, adp says the private sector cut 254,000 jobs this month. that was more than expected, but it also was the smallest employment decline in more than a year. the news coming two days before the labor department releases a monthly employment report which is expected to show unemployment increasing to 9.9%. take a closer look at what's moving the markets, how it affects your money and what new employment numbers may do for your investments. gentlemen, it is very nice to have you on the program. >> great to be here. >> thank you. >> are there any upsets on the horizon that either of you can see in the fourth quarter that could take us back and get this market reversing after the huge momentum we've seen from march? >> well, there are certainly a

lot of people that get afraid of october. we call it octophobia. we had vicious moves in the downside, maybe september on the overall was the worst month. i think there is a hesitancy going into october from a lot of people's stand points, traders, too. >> we had the 1987 crash, the 1929 crash in october, although you might say that it also represents a nice opportunity to put new money to work, huh? >> that's what i view it as. we think the market is going to rally in november and december. i think if you do get significant weakness in october, i think it's a terrific time to get a position for the end of the year. >> hugh, what do you think? what sectors do you want to be invested in as we approach the end of the year here? >> we agree that the market will work higher and do a zig-zag fashion. october specifically is third quarter earnings releases. i think that would be the

catalyst for perhaps a setback that would allow you to reset your long positions. specifically, i think companies have beaten estimates handily in the last two quarters. so now i think there is an expectation we will beat in the third quarter. i think any disappoint there could set the market back a little bit. what we are looking at -- go ahead. >> would unemployment at 10% set the market back or is that baked in the cake? >> i think that's baked in the cake. i think it's more around topline growth, and again, whether companies can continue to beat what admittedly are low expectations. >> how about the nasdaq? do you want to be investing in technology when you have nasdaq up 50%? >> well, we are, our aek convict part folio is 25% in technology. we've been there for quite a while and think that's where the leadership is probably going to be. maybe there and we like the small and micro biotech stocks.

we are aggressive with our equity portfolio. >> let's talk bin vesting in terms of sectors, hugh. where are you betting on in terms of the leadership of this market? every time we move into another phase for this market, leadership changes. do you think leadership changes in the fourth quarter going into 2010? >> i think it does. consumer discretionary, there are pieces that will do well. again, i think the more subdued sectors like internet retailers, low-end apparel. other things we like are oil well equipment and pnc insurers. all areas we see earnings visibility being much clearer in those sectors than in some of the go-go sectors. >> great conversation. we appreciate your time tonight. thank you very much. we'll see you soon. a number of drug companies out with news today. we've got the nasdaq with the

lows. >> from h1n1 to cancer and obesity to multiple sclerosis, incremental developments are driving the subsectors. novartis unveiled positive late-stage test results on its experimental drug for multiple sclerosis which it plans to final for fda approval by the end of this year. citi upgraded the stock to buy. the biopharma ticker was weak today. the shares were a real standout. the news hit to the downside. companies that already make drugs. speaking about small and microbiotechs, orex is in a race with other companies to bring diet pills to the market. arena and vivus.

and on the cancer front, shares of onxx were down. h1n1 flu vaccine is getting shipped a little sooner than had been expected. they are already moving their product. glaxosmithkline and baxter are waiting for fda clearance. some are worried about the safety of the quickly made pandemic vaccine. sanofi ceo says he will put his arm where his mouth is. >> it may feel sore where you got injected or you may feel a little nauseous afterwards. i'm going to get personally vaccinated as soon as the flu vaccine is available. i've been getting the seasonal flu for ten years. we stand behind the safety of the vaccine ichblt. >> and he says sanofi iv's plan

are going through 3,000 eggs a day. i'll be going on "fast money" to talk about whether biopharma can score in the fourth quarter. >> are you going to get a flu shot, mike? >> definitely. both of them. >> even the h1n1. aren't there concerns the vaccine that is out is not fully approved yet? >> they actually are approved. the fda approved four company vaccines. glaxo and baxter are still waiting for approval. the question is when will they be available. there are others at greater risk, we have to wait until the risk population gets vaccinated so we can get the h1n1 vaccine. >> thank you very much. swine flu could be a huge strike to bichlts up next, which four major threats, domestic and international could be bigger concern for economic recovery. later on, is washington on the right track when it comes to reforming financial system?

mfs investment chairman bob pozen will join me.

welcome back. federal reserve vice chairman donald kohn giving the exit strategy today. steve is in washington with details right now. >> thank you very much. don kohn was speaking to a group of private sector and academic economists who follow what the fed is doing and critique it when they feel it's necessary. don kohn addressing the group and providing a little bit of counter to what was said last week by federal reserve governor kevin morse who talked about the fed coming in and his exit strategy being sooner and stronger. don kohn saying he doesn't know how rapidly the fed will be withdrawing its monetary policy but made a case for the,

"exceptionally low interest rates from the fed for a period of time." here is what he said. >> activity still growing rapidly. that is not what was happening in the 1970s. wages are decelerating. that is not what was happening in the 1970s. that inflation expectations, long-term inflation expectations have been well anchored and that actual inflation, particularly core inflation, but even total inflation has been very low. to me, these are all indications that there is quite a bit of slack in the economy. >> so he sees all that slack which means the fed can keep its rates low for a period of time. i want to give folks some of the flavor of things said here. not a lot of criticism what the fed is doing right now, but suggestions how to get out and what the new fed should look like. one paper suggesting the fed should limit regulatory powers of the federal reserve for the fed to concentrate on monetary policy and its independence. also saying they should have more rule-based decisions.

finally lessons from the '30s. suggesting we learned the lesson from the '30s. mickey levy giving a paper and saying that the fed should announce right now plans not to purchase anymore pressuries and plans to sell mortgages, if needed. kohn coe did suggest the fed could do that. >> the markets are riding high since march. domestic growth showing signs of rebound. housing is showing signs of stabilization. the fourth quarter will be here in just a couple of hours. what can the threat be to throw a wrench in the economic recovery. we are on watch. is the consumer, a hurricane? good to have you on the program, gentlemen. >> hi, maria. how are you? >> i'm doing great, thanks very much. brian, you agree there are four

major threats to the economic recovery going forward. can you go through those threats for us? >> sure. i think they are the four pillars of prosperity or threats, if you turn them around. it's number one is bad monetary policy. right now, i do think the fed is too loose. that will be inflationary in the future. the other side would be if they jacked up rates to 10% next quarter. i highly doubt that is going to happen. both those things are a threat. number one is monetary policy. number two is taxes. if we have tax hikes right away. that could hurt the economy. number three is spending and regulation. both of those are up, but they are long term problems. the number four is protectionism. we just put tariffs are chinese tires. if that turned into a trade war that could threaten our economy. monetary policy, taxes, spending and regulation and protectionism. right now i think those are kind of going to keep a recession at bay, and we can look at the

fourth quarter as being pretty strong, a continuation of a v-shaped recovery. >> haven't we heard taxes are going higher in 2010? the bush tax cuts are not going to be extended. >> right. >> so we are seeing more expenses, corporations have cap-and-trade, other issues people are worried about as it relates to business. why wouldn't taxes be a problem? >> well, they will be. i think they will be in the future. the actual bush tax cuts are scheduled to expire at the end of 2010 and that means we have higher taxes in 2011. cap-and-trade and health care could be issues, but cap-and-trade won't cost us anything for nine or ten years. health care, probably really two or three years. there's clearly some regulation in spending that is a burden on the commit now. that's damping potential growth. i don't think it's the kind of

thing that will throw us into recession right away. all of these things are negative, i agree. it's really long-term problems, not short-term kinds of problems. >> i want to get this breaking news out. penske automotive terminated talks with gm to acquire the saturn brand. this is just breaking right now. we want to get this out for our viewers. david, let me get your thoughts. when you are looking at the economy, domestic versus international, let's put it in two buckets here, what are the issues you're focused on? >> i think the largest threat to the economy is very, very weak consumer confidence and the continued unwillingness of consumers to return to spending. i think the consumer confidence numbers that we saw coming out yesterday indicate the continuing nature of the threat as long as unemployment is increasing and is at historically very high levels. i fear we are in for a very weak

recovery, that weakness being driven by a lack of consumer spending in a robust way and a lack of a v-shaped recovery upward of consumer spending to parallel what we are seeing in the financial markets. >> in addition to the financial system, auto sector under pressure here. one of the reasons penske is walking away from the deal to acquire the saturn brand from gm is because they have concerns with supplies beyond the supply period. this is what the company is saying. penske automotive walking away from the deal with gm to acquire saturn. any thoughts on this breaking development here brian or david, in terms of the impact on gm or the broader auto sector? >> i think what david just said, there is a lot of concern about what the consumer might do. clearly, inventories are very low. i'm not sure exactly what the

supply issue they have right now is. obviously, they would be a competitor in the future and they are going to use the same suppliers, if that's an issue. if you have doubts about the future of the economy or think we are going to have a w or another dip down, all these deals are of concern. when i look at all of this though, the consumer has returned. we have seen retail sales up -- forget autos and forget cash for clunkers. nonauto retail sales are up 5% in the last six months. the consumers come back. inventories are super low. we haven't built enough houses. i think this recovery is just getting going. i think this v-shape is going to play out for a much longer period than pessimists believe. >> and david you have the unknowns out there, geopolitical issues, issue with iran, the nuclear program obviously of great concern that wasn't in, necessarily, your two buckets, david. >> the two main geo political

threats out there are the iran nuclear threat, and i think these negotiations begin tomorrow. i think we are going to see very tough talk by the iranians. there is going to be scary stuff going on over the next several months. you are going to see early next year, i think, increasing possibility, not a high probability, but increasing possibility of israeli strikes on iran. that could very well spook the markets. i share brian's view on protectionism being a threat. i do believe that both the obama administration and the chinese authorities are committed to not having this escalate. >> we never know. >> gentlemen, thank you. we have to get to phil lebeau. we have a situation unfold hearing with penske. the stock moving actively in the extended hours. the company terminates gm. >> the reason this stock is under pressure, the saturn deal

was considered a perfect deal for penske automotive. penske automotive has a great collection of dealerships. the reason you want saturn if you are penske is because of the dealership network. it's a great distribution network. the fact penske will not team up its network with the saturn network, that's why investors are saying this is not what we want to hear the at this time. i can tell you talking to people the at general motors, they were close to getting this sewn up within the next couple of days. the fact they called off talks, i'm not sure if that means it's done for good or if this is a case where they are saying we are done for now as far as penske is concerned. again, that's the reason the stock is under pressure. if you cannot marry penske with saturn description network, that is not a good situation for penske. that's why investors are pulling back. >> phil, you've got the company talking about concerns over supplies beyond the supply period. do you share that concern? >> what general motors wants to

ensure is that its competitors do not immediately fill that void in terms of supply to the penske group once it has saturn. penske is going to have to go to somebody to build saturn vehicles in the future at some point. it sounds to me like they are negotiating over how long will there be a period where general motors supply vehicles for penske and saturn, and then at what point, what are the parameters in terms of what other automakers could supply penske in the future? that is at the crux of what penske is complaining about, not complaining about, but citing as a reason for calling off talks. >> the stock seems to be trading wildly. now it seems to be rebounding a bit. we'll get back to you as news develops. thank you for that. phil lebeau on the penske walking away from gm and the saturn deal. more as this develops. lenders doing more to help troubled homeowners. loan delinquencies and foreclosures are still soaring.

we'll break down numbers. stay with us. welcome to the now network. population: 49 million. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. - 154 people are tracking shipments on a train. - ( train whistles ) 33 are im'ing on a ferry. and 1300 are secretly checking email... - on a vacation. - hmm? ( groans ) that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com.

welcome back. home foreclosures, dling sis continuing to rise despite attempts to help troubled homeowners.

more than half of all loans modified last year redefaulted and total loans past due reached a new high of 11.4%. in q-2, seriously delinquent loans rose to 5.3% of all loans or nearly 2 million. loans in foreclosure ballooned to 2.9% or 993,000. as they had 440,000 new home retention actions. the administration's mortgage bailout program started in the second quarter of this year. to redefaults. on loans that reduced payments 20% or more, a full 1/3 are redefaulting after a year. the redefault rate that don't change payments is twice that after a year. good news is that the reduced payments is up. >> the rise of delinquencies are highlights the fact nobody was

really policing lending under writing over the past few years, particularly in the subprime market and we are paying the price. to some extent i guess we are closing the barn door after the horse has left in terms of this. it's trying to make sure this doesn't happen again down the road. >> what he is talking about is starting tomorrow the fed will impose new rules under the truth and lending act. they target expensive or high interest rate loans which are fewer today, but could include jump woes or reduced documentation loans. rules require verification of income and the ability to repay the loan. a ban on repayment penalties and pyramiding late fees. delinquencies are rising faster than modifications. that will put downward pressure on home prices, which will put even more political pressure on the government's housing bailout. for more go to the blog realtycheck dot cnbc.com. >> thank you very much. we want to recap the breaking story of the hour. penske automotive is terminating

talks with general motors to acquire the saturn unit. penske stock was up 269% since the march 9th lows. i'm looking at a chart from s&p and rich peterson of the auto retailers and they've all gone well since march 9th, which was the lows. penske, the fourth best performer with a gain of 269% since the march lows. the company stock is moving actively in the extended hours tonight. the company says that the concerns, the reason it is walking away from this deal, they are concerned about supplies for the saturn beyond the supply period that is involved in this deal. we heard from phil lebeau earlier. this was a very important deal to go true. now penske automotive walkes away from the talks with gm. story is still developing and the company shares are trading wildly in the extended hours. first plummeting, then making some of that back.

up next, 7-eleven collects more than 1.6 million signatures in its petition against unfair credit card fees. the ceo will be with me and why he thinks the fees are unfair. back in a moment. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action-- tdd#: 1-800-345-2550 you know-- i have to see what's going on. tdd#: 1-800-345-2550 and when i pull the trigger... tdd#: 1-800-345-2550 ...i've got to get the best price out there. tdd#: 1-800-345-2550 (announcer) try the new schwab.com tdd#: 1-800-345-2550 for yourself. tdd#: 1-800-345-2550 call 1-888-4schwab tdd#: 1-800-345-2550 or visit schwab.com/trader today. tdd#: 1-800-345-2550 'course a trade doesn't always work out my way. tdd#: 1-800-345-2550 but when it does... tdd#: 1-800-345-2550 ...man... do i love that feeling. how can you get your retirement plans back on track? consider oppenheimerfunds, whether the markets are up

or down, we follow a consistent investment approach. ask your advisor about oppenheimerfunds. and see how our numbers can lp you reach your destination. call your advisor for a prospectus with complete fund information. read it carefully and carefully consider fund investment objectives, risks, charges and expenses before investing. mutual funds are subject to market risk and tility. shares m the right way alue.merfunds.

welcome back to "the closing bell." i'm phil lebeau with breaking news from general motors. the company announcing while it's finished talks to sell saturn to penske, it will begin the process of winding down the saturn brand and those saturn dealership in accordance with an agreement recently signed. we don't have the exact time frame how long it will take to wind down the saturn brand. the news is general motors will go forward closing down the saturn brand now that it failed to reach an agreement with penske automotive group to sell saturn to penske. again, the breaking news, general motors announcing it is going to wind down its saturn brand. >> thanks very much, phil

lebeau. 7-eleven delivered a petition to capitol hill today with nearly 1.7 million signatures on it, urging congress to pass legislation from stopping credit cards charging excessive transaction fees. we have 7-eleven ceo and president mr. depinto. >> nice to be here. thank you. >> what is unfair, sir? >> clearly, interchange fees have been growing for many years, but in the u.s., we are paying twice the average of these fees that are paid around the world. visa and mastercard together have over 80% market share and have been unwilling to sit down with retailers in a meaningful way and negotiate those interchange fees. consequently, we have to pass the cost on to customers and that's not what we want to be doing now. >> i've got to raise prices as a result of the fees you've got to swallow. >> absolutely.

those fees, as i mentioned, haven been going up. our credit card usage is about 20% in 2002. 2008 it's about 50%, but we are paying more in fees to visa and mastercard even with that increased volume. again with the monopolistic pricing power they have, they are setting these rates and are unwilling to sit down and negotiate in a meaningful way. >> are you looking forward then to the financial reform on the table in hopes this consumer protection agency will help alevate this? >> well, our goal here is really to be able to sit down with the credit card companies and come up with and determine what a proper interchange rate is for retailers. we have no issue with the free market. we have no issue with companies needing to make a fair profit. we simply want to be able to sit

down and negotiate those rates given the type of volumes we put through with credit cards. >> let me ask you this. national association of the convenience stores said in a 2008 study the average convenience store owner pays 63% more in transaction fees than they earned in profit. how much more do these fees eat into your profit? >> well, they are significant. i'll tell you, for 7-eleven, we earn $200 million last year. 7-eleven paid $160 million in credit card interchange fees to visa and mastercard. the industry as a whole, the industry as a whole earned $5.3 billion, but the industry, the 145,000 convenience stores in the united states, paid visa and mastercard last year $8.4 billion in interchange fees. that's not fair. that's not right. that is a monopolistic pricing power we are talking about. >> we have statements from mastercard and visa. mastercard says many consumers

may have been duped into signing the position. many consumered says they would oppose the legislation once they understood it would cost them more through higher fees to use their payment cards. why not let the free market determine the cost of the card instead of getting congress involved, sir? >> we do believe in the free market. i think it's unfortunate because we put out, we talk to our customers. we got 1.7 million signatures from them. the petition was very simple. we explained what the credit card interchange fees were to the customer. they understood it and signed it. i think that is a referendum that says visa mastercard as well as congress, look, we need to do something here. now is the time given the situation we have with the economy. >> great to have you on the program. thanks very much. >> thank you. >> we appreciate it and we'll look for more developments there. up next, more on penske's decision to terminate talks with gm.

welcome back. more on our breaking story of the hour. the penske you off group saying it is walking away from talks with gm to acquire the saturn brand. dave, thank you for being on the

program. how important is this that they are walking away? >> it is a big surprise because that deal was going to close this week, probably even today. the reason it's important, one, it is a crushing blow to all saturn stake holders, particularly all these dealers who are likely to lose their jobs now. there is a rouge ripple effect in the communities where the dealerships are. but also, this was going to open a retail channel for foreign automotives, or a chinese or indian oem to get into the u.s. market. >> it makes things more difficult for general motors giving they were counting on that asset sale. >> right. saturn is part of general motors corporation which is known as old gm. it won't affect the new gm that is out of chapter 11, but obviously, the motors liquidation company sitting in court would want to get cash for the assets here.

>> quick on the concerns, the company says it was concerned on the supply. >> what penske is saying right now, they had to get another automaker, not general motors to make new vehicles under the saturn brand once saturn, that we know it from old gm, would stop making vehicles. they had a deal worked out with another automaker they are not naming, but i suspect was renault. that board rejected the deal. why they did, it's hard to say. perhaps they thought it wasn't worth trying to get into the u.s., which is becoming a more and more fiercely competitive market every day. >> i see. okay. we just had carlos ghosn on who runs renault recently. thank you very much. >> up next, reforming financial regulation. chairman bob pozen joins me.

[ thunder rumbles ] what is the sign of a good decision? in the world of personal finance, it's massmutual. find strength and stability in a company that's owned by its policyholders. ask your advisor or visit massmutual.com. in poland, cargill borrowed the idea... for something quite different.

small polish farms had difficulty getting... affordable feed for their smaller herds of animals. so cargill created a way to bring the feed... directly to them... on musical delivery trucks, selling a few bags per visit. ( dog barks, horse neighs ) keeping the small farmers competitive, and their animals happier. this is how cargill works with customers.

odododododododododododododododo. welcome back. financial regulation on the way,

but it's still unclear what form it will take. in an article in "barron's" magazine, my next guest says better regulatory blueprint is out there and without new legislation there are several important steps to be taken to prevent a future financial crisis. bob pozen joins me chairman of mfs management. his book due out in november, "too big to save? how to fix the u.s. financial system." >> thanks for having me. >> what kind of regulatory framework would you like to see? >> i would like to see a framework where we close the glaring gaps. we have a few glaring gaps. we need some regulation of hedge funds and good back office clearing for financial derivatives. those are probably the most important things we need and need by legislation. >> let's go through them. people will say some of the proposals on the table create

more bureaucracy and more regulation, when in fact we had a structure in place, but people dropped the ball on that structure. what do you think? >> in terms of hedge funds and financial derivatives, congress made a decision several times not to regulate them. those were clearly gaps. those products and institutions grew very fast and we had no idea exactly what was happening. so that's really not an appropriate criticism. in terms of systematic risk regulation, there is a lot of pushback on the fed having a large role in being the regulator of all systemically risky institutions. i agree with that pushback. the fed should be the monitor, but it shouldn't try to be the regulator of all systemically ricky institutions. that would involve money market funds, hedge funds, insurance companies. nobody could regulate all of them. it takes too broad an expertise. >> as far as the ratings agencies, bob, this is one area

that seems to have been forgotten or put aside. what needs to be done? >> what i think needs to be done is that we need to have an objective agent, an objective consultant appointed by the s.e.c. whose job will be to pick a rating agency for the major bond offerings. this type of forum shopping this type of forum shopping that goes on where an issuer goes from one credit rating agency to another, that's the real problem. if the issuer doesn't get a good enough rating in one agency, it goes to another. and it can also pay higher fees to get a better credit rating agency. that's why the credit rating agencies have lower and lower credibility. if we had that choice of credit rating agency made by an independent objective consultant, we could feel a lot better about their credibility. i think that's the reform that we need to do.

>> what about some of the agencies merging? a lot of people feel the cftc and the ftc should merge. the idea that the federal reserve office of thrift supervision and the federal deposit insurance corporation and the control of currency also has been discussed as far as consolidation. what do you think? >> i think most of the banking mergers wouldn't be worth it. the banking agencies already put out one rulemaking for every significant rule. we will see the office of thrift supervision merged with the controller. so there will be one federal regulator of all national bank and thrift charters. and that makes sense. but as to the cftc and the s.e.c., i think everybody on policy grounds has always agreed that it makes sense to merge them. there is a lot of overlap between financial derivatives and stocks. but that's a political issue. the senate agriculture committee has the cftc. the senate banking committee has the s.e.c. and neither wants to give up

jurisdiction. my suggestion is let's form a special joint subcommittee of the two and merge the agencies. that would be a way to finesse the political problem and get to the right policy results. >> and the last time we spoke, you said that it's a mistake to give the federal reserve more power, right? >> i think it is a mistake to make the federal reserve the primary regulator of all systemically risky institutions. we can't identify all of them in advance, and the fed would be overwhelmed with trying to regulate so many different institutions. the fed should figure out and monitor what problems are, and then they should work with the existing functional regulators to cure that problem. that's a much more sensible approach. and it does not involve giving the fed so much power that congress wouldn't let it happen. >> well, what about this consumer financial protection agency? good idea? >> i think like a lot of things it's partially a good idea and partially a bad idea.

the way it's written would have jurisdiction over every retail financial product offered in the united states. that means bank deposits. that means fixed annuities. it means so many different products, all of which are already regulated by somebody else. so that's not such a sensible idea. on the other hand, there are financial products that aren't regulated very well now where there is a real gap. mortgage origination would be one of them. that's the sort of thing that the new agency could do. it could also do payday loans. again, another area where the lending is done mainly by the non-bank lenders and where there isn't regulation that's effective today. so the broad brush approach is too broad. i don't think it's going to go through congress that way. it's hard for me to believe that we're going to have two examiners, one from the new agency and one from the banking agencies, to look at all credit and loa products in banks.

that would be overkill. >> all right, bob. great conversation. we appreciate your insights all the time. thank you. >> thank you. >> we'll see you soon. bob pozen, chairman, amfs investment management. let's take you live to the nasdaq marketsite. melissa lee is there. >> we've got a very big show as we close out the best quarter in about 11 years. our traders will give you the best plays for the fourth quarter. also we will look at the quarter's fallen angels. maybe they will be the next quarter's big winners. and from the bond market we'll give you the one alarm that could sound when it comes to the u.s. economy. the one indicator that the world's largest bond firm is looking at. all that and much more top of the hour at "fast." >> we'll see you in about five minutes. now to steve liesman. more on the developments out of that plan out of treasury. >> do you have a pen, maria i? want to go through how all this works. the treasury as we reported announcing the first two of nine agents that will go out there and buy residential mortgage-backed securities and commercial mortgage-backed securities using treasury equity

and treasury debt along with their own equity in order to do this. here's how it works. you bring $500 million of your own equity to the table. treasury does $500 million of equity to match. then they'll take a billion dollars of loans op top of that to leverage it up, give you 2 billion out there, and go out there and purchase really the toxic assets, the stuff issued before 2009, the rmbf and the cmbs out there weighing down the banks. the treasury hopes they'll have $40 billion of this out there purchase using really 3-1 government money to private equity money. they should have all nine funded by the end of october. treasury officials telling me. but they're announcing right now the first two, what have they done? they've raised their 500 million. what did the treasury do? match the 500 million of equity and then gave them a billion dollars. so now there's essentially $4.50 billion out there that is funded that can be out and buy cmbs and rmbs. this is an issue that came up about six months ago, we heard about it, it went away, but now it's come back and it's really

being funded in full force. >> what's your analysis? good news or no? doesn't matter? >> i think if it doesn't crowd out what the private sector would do anyway-f it's doing for the private sector that which it wouldn't do for itself, then it's good news, maria. >> steve liesman with the latest there. find out what could move the markets tomorrow. we'll set you up for the opening bell. you're watching cnbc, yeah, first in business worldwide. we're back in a moment.