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plus get $100 cash, when you open an account. bill griffeth and the rest of the "power lunch" team stepping in as we continue our live coverage of the hearing as they hear testimony from ben bernanke on his perspectives on

the financial regulatory reform proposals now in congress. let's listen in. >> as long as the banks lend as they are, to some extent, weak ens the affect of our policies. >> last september, we had a very lengthy debate. but it seems we went through a tremendous amount of debate to make that decision, yet the federal reserve last week decided to buy mortgage-backed securities. your previous comments have talked about the fed's role in injecting liquidity, but you can't do that with assets you're buying. how can you justify those two? and how do you justify the

ability to do that when the -- we were requested to authorize the treasury to do that. >> under open market -- >> i'm phil lebeau. we have breaking news. september auto sales reported by ford, down just a smidge. 8.9%. all the automakers are expected to report weak september sales numbers as they come off cash for clunkers. again, ford down 8.9%. >> by the authorizations for open market operations and by the demand congress gave us to maximize employment. these are the only tools we have to achieve those objectives. i want to assure you that we have every means of exiting from the situation even if we do not sell these assets. >> you can do it in other ways.

>> yes. >> hvcc. we passed a new policy. congress did. the ability of appraisers to appraise local units. the federal reserve, you went to a very lengthy process on regulating on appraisals recently. do you support the current policy because it seems to be having a very negative impact on homes in the industry today. >> we have policies that try to create adequate independence of the appraiser. >> your policies were good, but the direction went is my problem. >> could i answer that in a letter? >> you sure may, sir. >> the gentleman from missouri, mr. clay, is recognized. >> thank you, mr. chairman, and thank you, mr. chairman for being back with us. i just want to cover one area.

consumer protection. >> step in for one second to make sure we emphasize that the ford sales figures phil was talking about are for september, not for august. the sales were down 8.9% for september. let's listen in. >> for other regulatory agencies and kind of dropped the bomb in the last decade on consumer protection. are you one that advocates expanding the authority of the federal reserve to actually to put some teeth into consumer protection or beef up consumer protection or do you think we need a separate, federal agency? >> congressman, i continue to think that the debate here has

to do with the congress's view about whether or not a new agency is needed in order to sufficiently prioritize consumer protection. in other words, i think many of those who support new agency feel that the federal reserve does not place sufficient priority or attention on the topic. while i agree that the federal reserve did not do enough in this area for many years, that in the past three years, we have been quite active in this area and made use of our particular strengths and economics and finances to compliment our consumer protection. i wouldn't, you know, pretend to tell congress what to do. it's their decision on whether they think the federal reserve's decision can be made sufficient.

if not, then presumably, you'd want to have a new agency. that's the issue. >> but going along those lines of thinking then, how does the federal reserve repair the damage that has been done to communities like the one i represent, who had a disproportionate number of subprime loans when really the consumer should have had a prime loan. but now, it's caused them to go into foreclosure. it's damaged those communities. now, you have these vacant properties sitting there ju destroying those communities. how can the federal reserve help repair that damage? >> well, several ways. first, again, i agree that we didn't do enough at an earlier stage, but over the last three years or so, we have put some

tough rule ins place in a variety of areas. we're also trying to address the situation through other mechanisms. we have a partnership with neighbor works america where we're trying to work to help stabilize communities where there have been a lot of foreclosurers. they hurt the borrowers and community. we are doing the best that we can in the current situation to try to address the problems. if congress decides they want to leave it with the fed, i think we would have to take steps to reassure congress that we would in fact, even beyond by ten yur and into the future, have sufficient commitment to this area. i've suggested ways of doing that including, i mentioned mandatory testimony by the chairman. various kinds of review processes. strengthening the consumer advisory council and other things that could be done just

to assure congress that the fed would not repeat the mistake and let this ball drop, as you put it. >> thank you for your response, chairman bernanke. mr. chairman, may i yield the rest of my time to my friend from georgia, mr. scott? >> mr. scott is next, but he can use the rest of your time, too. >> thank you. >> 30 seconds. that means i have 30 seconds when i come. i'll come back to that. >> you just used the 30 seconds. >> pardon the int rums. want to bring in phil lebeau again as we look at these numbers for september for ford. obviously, these are the post cash for clunkers numbers. we were wondering what sales would look like and this is the strongest of the big three automakers in this country. how do you think they did? >> as expected.

we knew it would be weak. we knew it would be slightly negative. the question is, what do we see from the other ins tes in terms sales pace. p in terms of the sales pace, if it comes in between 9 and 9.4 million, i think most people in the auto industry will say, we'll take that. it's not falling off a cliff. we can live with that. they are honestly believing that things will gradually improve as we move into october, november and december and we'll see that build-up to what they expect to be for the rest of this year, in that range of 10 and 10.5 million, setting up for what most people believe will be an 11 million handle next year. that's what we're focused on and waiting to see what they have to say at the conference call. ford's is in about an hour. >> are we down in september, ford sales down 8.9% versus

august or year ago september? >> year ago september. >> isn't that a lot milder decline? >> it is, dennis, but keep in mind for ford, it has been actually increasing sales. i think the raw numbers, 114,000 sold september of this year versus 122,000 september of last year. september was right around the time when ford was starting to get some traction last year. i remember october and november is when we really started to see them increase their sales, month over month, year over year. we're starting to get to the point where ford is going to come under more comparison. >> i want to pick up on dennis's confusion and amplify. the month to month, what happened there? and how much give-back can we look at these numbers and say, they were up 21% year on august,

9% september. we want to know what was the success of cash for clunkers in restarting the auto market. was it a one-month wonder or is there residual? >> i don't think there's residual. it churned the market and got people to the showrooms. what you're asking, how much of the sales pocket in july and august is cash for clunkers versus the underlying demand. the market is growing on its own a little bit. how much it is is debatable within the industry. >> we'll take a little right now. >> i will tell you this, that cash for clunkers, no doubt you had the two-month pop and automakers will say, generally speaking, of that increase, how much would we be up if we didn't have cash for clunkers. i suspect ford would say maybe 4

or 5%. most of the sales in august as well as july, was due to cash for clunkers, but the underlying demand, their competent -- >> special financing of cash for clunkers, correct? >> they're intent on rebuilding inventory. they don't have much metal to move. >> they've been aggressive with incentives in the past. >> phil, where are we at at this point in terms of actual, yearly sales? 5, 6 million? >> i think so. i haven't looked at the raw numbers, but i think we're somewhere around there. we are on track to come in at about 9.5 million. >> what we did, a 14 million annual rate in the month of august, up from 11 and you're

saying you think it bounces back down to nine? >> oh, god, yes. >> in november? >> well, i mean you look at it and see the underlying demand. the underlying demand before cash for clunkers was about 9.2 million. if they can get it up to 9.5, 9.6 million, i think most of the industry will -- >> be happy with it. >> yeah. >> we're going to take a quick break, follow the markets and testimony by the fed chief, ben bernanke, on capitol hill. we're back in just a moment. do you trust your coworkers, yes, you do, so just let go. [ groan ] okay, what did we learn there? is there such a thing as personal space, no, there isn't, because we are all molecules... in the same organism. american airlines. yeah, i need an earlier flight out of chicago. i feel like some of you don't respect me. because, ah... because of the hat. [ horns blowing, clanking ] just get me on the next flight out. hey, me too.

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more coverage of the hearing. they're hearing the testimony of ben bernanke, who has been advocating a pullback from the aggressive stance taken earlier this year on reform. we'll get to the particulars of that when this ends. let's listen in as things start to wrap up. >> we are using extraordinary additional tools i was talking about before to try to stimulate the economy and get people back to work. we think that's very important, consistent with maintaining price stability as well.

there are a lot of ways to address unemployment. one of the real concerns i have is that not only is unemployment high, a lot of people who have been out of work for six months or a year is very high. folks out of work that long tend to lose skills and attachment to the labor market. even when the economy comes back, they may not be able to find work or may not ever become a regular part of the labor market again. i think there's certainly some scope for ensuring people to keep their skills fresh, have additional education or training. i can see that as being important in a situation like now when unemployment is so high and unemployment spells are so

lengthy. >> would you agree that should not we approach this serious unemployment and joblessness problem in this country with the same energy policy directive, legislative directive, to address this issue as we've done in previous downturns of the economy? unemployment now is 10%. it's devastating in many other parts of the country, particularly in the midwest. it seems to me that we ought to get packages of tax incentives, tax cuts to businesses, that we know will stimulate the economy. direct training acts, job training acts in which we could money directly into the hands of the unemployed to immediately begin to retrain for these positions. i think the attitude we have, we throw this up to wall street,

the big banks, unfreeze the credit, i would just hope th that --ened i have such great respect that you could put greater emphasis to do more direction action to address the unemployment. >> gentleman's time is expired. i know he was entitled to 30 seconds more, but we just got an e-mail saying there are going to be three more votes shortly, so i want to try to get the other members who haven't been recognized in. mr. manzulo. >> thank you, mr. chairman. thank you for coming and spending a good portion of time with us and for your availability outside of the hearings. i have a couple of questions. first of all, with regard to the oversight council, i think it's page two of your testimony, made

up the agencies involved in financial supervision and regulation. the mandate is to monitor and identify emerging risks to financial stability across entire financial system. identify regulatory gaps, coordinate agencies responds to potential systemic risks. i guess another word is moral hazard. to me, that's the tooe with a bear. even without this group, this is something that has gone on any way. isn't that correct? >> well, for example, we've had a president's working group, a group of regulators. i would have to say that you know, the focus on the system as a whole is lacking and for

example, this council would have its own dedicated staff and more regular meetings and would be very focused, perhaps writing reports and so on, on the gaps in the system that lead to the systemic risks. >> the -- at this point, i know from prior testimony and visiting with other groups, you're already doing this as part of your job. >> we are moving very much in that direction. >> right. >> but the federal reserve's authorities don't extend to all the different markets and instruments. >> correct. how do you balance, if that's if word, would do with a new consumer financial protection agency. especially if it come to a dispute over instruments products. you may think the product may impose a risk, such as the

subprime market when people were allowed to get mortgages, teaser rates and things like that and allowed to get loans without written proof of their income. what happens if you have a conflict with the oversight council and a new consumer financial protection agency? >> first, there are several mechanisms. on the one hand, the agent would talk to colleagues and the other hand, some of the regulators would be part of the board. i think what the most powerful weapon would be the council believes that actions taken were not consistent with a safe system. i would think that one of their best methods would be to provide a report or recommendation that

would be public and that would be a very powerful tool because the agency ignored that. it would certainly be going against their piers and taking the risk on themselves. making a mistake in being too lax, for example. so i think there would be a certain amount of peer pressure that would affect the ability of the council to get cooperation. >> by the time you came in office three and a half years ago, the die had been cast. it was pretty late for you to do anything to turn around the train and you tried to. the -- looking back with seasoned eyes, what do you see now that you think should have been seen back then.

>> there's not a single smoking gun, but there are lots of different problems. again, there were gaps that arose because we didn't take enough of a systemic viewpoint. i've talked about consumer protection and the problems you talked about. i think that's important. but if you look across the whole range of institutions, it seems clear that the strength and consistency of the oversight was not adequate. that they were many individual financial instruments where again, the oversight was fragmented and not sufficiently consistent and powerful. it would take me some time frankly, i'm sure you appreciate how complex the whole crisis has been. it would take me some time to go through all the the elements, but what we learned was that the

system, which seemed to be working fine as long as is stresses were not too great, when things got much worse, the system was not able to stand up to it. we've learned a great deal from this crisis and i hope the congress will make use of these lessons. >> mr. greene. >> thank you, chairman bernanke, for appearing again. i trust that all is well with you and your family. mr. chairman, i sense a hint of exasperation with you in terms of your having to continuely express that you're opposed to too big to fail. trying to get that message out has been quite a challenge for me, too, in that i'm opposed to too big to fail. and the temptation is there to use a memory aiding devices.

however, the devices will only help the person have a better sense of memory. it won't force the person to use memory. i suspect a lot of people who continuely misunderstand my position are doing so with a certain amount of design as opposed to a lack of memory. but for the record, i, too, am opposed to too big to fail for the inth time. having said this, some of my colleagues are talk about jobs and the recovery as though jobs are a leading indicatoindicator. i think it's fairly well indicating there are a lagging indicator. have we ever had a recovery in a recession where in jobs were a leading indicator? >> i'm not aware. it takes time for firms to bring

people back to work after a recovery begins. >> exactly. the market, stock prices, generally speaking, are procyclical. i want to talk for just a quick moment about countercyclical. it will cool down an economy in an upswing and stimulate an economy in a downturn. if this is the case, when we require banks to increase their capital ratio in a recession, while it may be a good thing to do, it can also be procyclical in that it can offset some of the lending. would you just give a quick comment on this because if you recall, we started out with a t.a.r.p. fund that became a

capital purchase plan and that may have had some impact on the lending side of banking. if you would, please. >> you're absolutely right. banks doff various ways to raise cap tail tall. one of the real tensions we face now in this and other spears is that there certainly is the desire to raise bank capital levels so they will be safer in the future. but recognizing that in the short run, it may cause banks to reduce their assets and reduce lending. we need to find a way to phase that in gradually, so that it doesn't impede the recovery. we want people to save more, but not immediately because the economy's in a recession. it's the timing that's very important. >> in fact, this is one of the

reasons why 02 has been criticized. moving on. dark liquidity. interesting term. has to do with what i call quiet money placed in the maeconomy. >> you mean dark pools? >> yes, sir. >> well, the s.e.c.'s looking at that. i think there's interesting questions about whether the market is served by having more transparency about those pools. i don't have a firm position on that. i'm not aware those dark pools were an important factor in the crisis as a whole. i may be mistaken. but transparency in general is very important, but in this particular area, i know the s.e.c.'s looking at it, trying to make a determination. >> final comment. with reference to small banks, community banks, i want to thank you for your effort to help them

become the bear the burden, if you will, of a lot of what has happened when in fact, they were in the main, not the cause of this downturn that we're suffering from. had the opportunity to meet with many of the bankers and they say, don't have us punished for the sins of others. we've been here, we're doing a good job, we're maintaining a lot of loans, so please, don't let it happen to us. i thank you for your efforts in this effort. >> mr. lance. >> thank you, mr. chairman. good afternoon, mr. bernanke. we're all concerned about the levels of unemployment. my concern is that given the state of the workforce in this country, post industrial in many

ways, do you believe long-term that the unemployment rate will be lowered significantly? >> i would be fooling myself and you if i said i knew with any certainty, but most forecasters, including the fed, are currently looking at growth in 2010, but not so rapid as to substantially lower the unemployment rate. >> so at the moment, we're at 9.7% and if we may technically get out of the recession, the fourth quarter or perhaps the first quarter of next year, could we expect a significant lowering any time next year, mr. chairman, of the unemployment rates? >> well, if we just to explain t, we have to grow faster in order to make a dent. so it depends on how quickly the

economy grows. there are some who think it could grow at a fast clip, but if it only grows at 3%, say, which is not much faster than the underlying potential growth rate, then unfortunately, the unemployment rate would be above 9% by the end of the year. >> by 2010? >> that's right. if growth is about 3%. >> and this is, as i understand it, different from more typical recoveries in the fast, fewer manufacturing job going to other parts of the world. i think people will consider the country to be in recovery if the unemployment rate is at 9% or in the high 8% area in a year in

three months from now. based upon your expertise and given your extremely extensive knowledge on what's happened in the past, is there anything else we should be doing to make sure we bring the unemployment rate down more quickly than may now be anticipated as the case? >> i don't have any magic bullets to offer. if i did, i would have offered them by now. but i think, as i was saying -- and again, these are areas that congress needs to decide and not the federal reserve, but one way to mitigate the long-term damage is to try to make sure those out of work for an extended peter period don't lose and remain employable. >> i think we're all concerned about the unemployment rate that

congress as well as the federal reserve board and this is for which the american people determine if we're out of a recession. that may not be the technical definition and certainly, we want to work with you on this issue. i yield back. >> thank you for yielding back some of his time and recognize mr. cleaver as the final questioner. >> thank you, mr. chairman. i want to go to speeches and one my governor duke. there have been some references to it. the other is world bank president, bob zoellick. let me first deal with governor duke. when he testified before this committee, he surprised me a little when he suggested that consumer protection should become one of the fed's core missions. are there other central banks in

the industrialized world that hold responsibility of consumer protection as a core mission? do you know of any? >> well, consumer protection function varies a lot across countries, where it's located and how it's managed, but i can't give you a good example. >> i'm sorry? >> i don't have a good example to give you, no. >> does that mean that you agree with me that consumer protection should be performed by a single agency that has only consumer protection as its core responsibility? >> i think the main argument for a single agency is the focus core mission aspect, but again, i reiterate that given the historical accident that gave this authority to the federal

reserve, that in the resent years, we have been very aggressive in pursuing it. >> senator clinton wanted me to correct myself called governor duke a he. let's go back to the world bank president. in a speech earlier this week, he said that the fed should be given authority to -- that the fed should not be given the responsibility for regulating systemic risk and that the treasury department should have that responsibility. the reason behind his statement was that treasury is responsible to the president and to congress. and that -- this doesn't mean that i've joined in with

eliminate the fed movement, but that the fed does not answer to congress. and so that the american public should have some participation in this and that the treasury's the likely spot for this responsibility. do you agree with mr. zoellick? >> without comments in particular, i do agree there should be a systemic risk council. i think the federal reserve is the appropriate to do the supervision, but that would be underneath the ag of the systemic risk council.

we, i'm here today and we testify frequently and of course, we are subject to congressional oversight. >> well, yes. but not to the degree that treasury, you agree that treasury can be fired rather easily and i don't think you're going to see a lot of mass firing in the fed initiated by congress. and you're probably not mad about it, but you would agree with me, right? >> well, it was the president who fired the treasury secretary, not the congress. >> i understand. one person. >> but again, i don't know exactly what mr. zoellick had in mind, but i agree with treasury. i said this a few minutes ago. i thought the treasury ought to have a chair of the council and the council ought to have the

responsibility. but you still need agencies to perform certain tasks. you need the s.e.c. to monitor credit funds. the federal reserve, this is not a new power for the federal reserve. the federal reserve for the last decade has been the consolidated supervisor of all bank holding companies. we should retain that and we should cooperate with the other agencies to create a more systemic orientation in our oversight. >> thank you. you do come and -- i do want to express appreciation. >> time is expired and i want to express -- >> we didn't, they're closing out the financial services hearings and with chairman

bernanke testifying, let's bring steve liesman, who's been monitoring these hearings. >> there are some there, but it's what he said about the dollar. i think we have the sound. he was asked to respond to comments made by world bank president robert zoellick. status of the dollar. here's what he said. >> i agree with two things mr. zoellick said. he said there's no immediate risk to the dollar. it's relatively a long-term issue. i also agree that if we don't get our macro house in order, that will put the dollar in danger and the most critical element there is long-term fiscal stability. >> he said that unemployment rate could remain above 9% even with growth next year. he's supporting a systemic risk council. saying the fed ought to be the

one that regulates systemically important institutions. and i have no idea where they are at all on this issue of resolution authority. >> okay. steve, isn't there an unwritten rule, only treasury talks about the dollar? >> what i thought was more significant, the things he would say. how many questions he got about the dollar, the issue of the dollar status in the world is now one of increasing importance to congress. that's the kind of thing that could, on the outside, possibility lead to some kind of policy change or shift as it becomes important to congress or in the political sphere. >> thanks, steve. see you later. when we come back, we'll get to the red hot debate about climate change. the environmental protection agency proposing new rules for

factories and oil companies. we have lisa jackson in just moments. this year, gold has moved higher as the dollar has fallen.

call it tough love. the government's starting to push out its environmental the agenda. these emissions from factories and power plants -- joining us, we're pleased to welcome lisa jackson. >> thanks, so glad to be here. >> wall street analysts have weighed saying the cap on emissions is also a cap on

growth for the companies who would have to put these new standards. do you acknowledge that at all? >> no, bill. i don't. let me start by saying i'm here today in california, at the port of los angeles and long beach. we're about to announce $30 million for projects. it'scommerce and the environment in one swoop. that's the same answer i have for the nay sayers here when it comes to climate. this is about a recognition of an urgent environmental problem that has real economic opportunities as well. >> you don't acknowledge there's any trade-off to growth and profitability? >> listen, i do acknowledge there's a cost of moving to the clean energy future that the president has talked about. please. i wouldn't never say there is no cost, but there are ways to mitigate the cost. there's always a way to continue

moving and acknowledge that now is not a time to look for a time out of the business as usual. we have to move forward. >> the conservative kale institute is looking at a major intrusion into an area that congress needs to be passing new laws on. why didn't they declare it hazardous 20 years ago? >> the bush administration did nothing 20 years ago -- the news from the eps was much more about what we said we would not regulate. our announcement yesterday was about exempting small and mid-sized businesses from the clean air act. >> but they don't make a lot of pollution, do they. >> of course not. but those same pundits and nay sayers have been scaring them

into thinking that epa was going to regulate everything. we're exempting small and mid-sized businesses. >> the question, the executive branch appears to be making law, which is what congress is supposed to do. >> no, that's not true. the executive branch is following the law of the clean air act. my announcement yesterday, i said that it is a powerful tool and that we're actually tailoring the use of the clean air act existing law to ensure we exempt these businesses. >> there is a lot of talk that when legislation goes through and with some of the efforts that you're putting forward today, that energy prices on a wide variety will rise. which will hit small and medium

sized business. do you agree? >> president obama has said we need to transition to clean energy and both of us have said the best way to do that is with legislation. in a way that uses the marketplace to help mitigate energy concerns, particularly for those least able to afford an increase. in the meantime, i believe strongly that we have to follow the law, that there are things we can do now to move us ahead on that pathway that are doable and are common sense approach. >> but sue's question was is this going to raise energy prices. >> what will happen is that there is a cost to move to clean energy. >> so that is a yes? >> the announcement yesterday is about saying, listen, as large emitters, modify their plans. right now, they can't get a

permit to do anything. we see investments that literally cannot be made. yes, there will be costs to making those investments and we're well aware that at the same time we're working, congress is working at the same time. yes, there will be costs and there are ways to mitigate those costs. >> thanks so much for your time. >> thank you. well, the toy retailers already gearing up. it's a holiday shopping season that is going to be quite crucial this year. toys "r" us ceo will join us. >> first though, the halftime money report. my business. i just don't know how wireless can help my business. tara showed me how i could keep track of my employees in the field and get more jobs done faster. i was blown away. i'm blown away. only verizon wireless has small-business specialists in every store to help you do business better. we should get you a hat. now buy any blackberry, like the new tour, at our lowest prices ever, and get one free.

click today. welcome to the "fast money" halftime report. fourth quarter kicking off with losses. weak economic data and the fed chair hiding the bulls into hiding today. our fast money crew, the liquidator, joe, john navarian and j.j. what was the reaction to bernanke's comments? he spoke about financial firm regulation. the recession technically ending but there are not still enough jobs out there. what was the reaction compared to the weak economic data we had setting the table for us today? >> i think the economic data had a greater reaction. what mr. bernanke said, people are still trying to figure it

out, sort through the information. it came out at lunchtime. i think a lot of traders waited around to see what he would say. we really haven't had much of a move one way or the other. i think the one thing that's the most feared down here is the sort of super regulator, puts another regulation on our trading. >> where we did see his comments really impact the market was in the dollar index. here is what he had to say. >> i agree with two things mr. zoellick said. i believe he said there's no immediate risk to the dollar. it's a relatively long-term issue. i also agree with him though that if we don't get our macrohouse in order, that we'll put the dollar in danger and the most critical element is long term. >> let's ask joe what this all means. what is a trade off the back of this? >> i think the trade is the secular trend in the dollar will remain down. if there was a viable option for

the rest of the world right now other than the dollar, then that would right now be the reserve currency. there is not. >> okay. so how do you trade that, joe? >> i think you still play for further dollar weakness in the marketplace. i think that the dollar today, there is a little bit of a bid to it right now, but it is not as much as i would have thought it would be. >> brian kelly, i listened to that sound bite and that makes me think perhaps bernanke, the federal reserve, could take a roll in being supportive of the u.s. dollar. what's your take? >> i think that's probably a good observation. the dollar at this point -- i know joe is saying you can play for a weaker dollar. i think the dollar is responding to a bit of fear here. we have a weak economy, weak economic news coming out, and you see a bid in the dollar. now if you look at the fed getting in the picture, i think the dollar could take two paths. global strengthening or you have a risk you have competitive devaluation going throughout the world. that's something on the table with the fed starting to talk

about the dollar. >> with all that said, how would you place your bets based on bernanke's comments? >> are to the most part i think the more critical question is the support level for the s&p right here. we are dancing right at, melissa, about 1038. that's the level that when we spoke of it when we went through it, that there was almost nothing up until about 1090. we broke down through 1055 today, down to 1038. if we don't hold this going into tomorrow's numbers, that's very telling and very bearish. >> what is troubling is the sell-off we're seeing in the etf. last quarter financials were the top performing sector for the third quarter, the best quarter in about 11 years. j j.j., you're seeing aggressive put buying. >> we talked about this last week. october 15th, 14th, and 13th puts. they haven't stopped for two weeks. very aggressive buyers. they're starting to buy the november 15 and 14 puts.

when the market weakens, it will be the footballs thinancials th first chink in the armor. as john just talked about, that level is what every trader is looking at right now on the s&p. >> let's talk about private he can -- equity firm kkr. joe, is this interesting to you? they will be sitting on a whole bunch of cash, billions of dollars. they haven't done an lbo in about two years. >> absolutely. it is a little interesting right now. the entire space is interesting. clearly their entree now, if you're an investor and you're looking at a name like this, i think it is a name you could possibly own. >> we're going to leave it there for the halftime report. tonight on "fast money" after breaking the news of ken lewis' departure, charlie gasparino joins us to debate who is likely to replace ken lewis. up next, a look at the hottest

toys from the holiday season. one year later and the dust hasn't settled as another wall street head honcho rides off into the sunset. who is next on the wanted list? charlie gasparino mounts up and gives us more street straight shooting. and it's all eyes on tomorrow's big jobs report. a top economist tells us this report puts an end to seven months of stock gains. plus the lightning fast liquidator eases off the pedal for the fourth quarter for a slow energy trade for the long term on america's post-market show tonight.

second hour of "power lunch" gets under way for this first day, the trading day of the fourth quarter. i'm bill griffeth. the dow down more than 140 points.coa and travelers the on

blue chips not seeing minus signs. in testimony before a house panel, bernanke has been advocating a slightly less aggressive approach to regulatory reform than the obama administration has been pushing. ford reporting september sales declined almost 9%. what can we expect from general motors? that automaker due out with sales figures later this hour. buzz continues to build over the story our charlie gasparino broke yesterday, ken lewis stepping down as ceo. who might be in line to succeed him. bertha coombs has a special first on cnbc interview. bertha? >> we're at the time to play holiday kickoff event. we're 85 shopping days before christmas. folks are focusing on toys here. joining me is jerry scorch, the

ceo of toys "r" us. what are you looking at for this holiday season? >> well, i can tell you a few things. first i want to assure you, christmas will come. secondly, hot toys will sell. and we have some very hot toys right now that are flying off the shelves already. and, finally, what we have seen in year after year, christmas after christmas, including last year, which was pretty dreary, in good times and bad, the last thing pirnarents cut back on is holiday presents for kids. they will cut back on luxuries for them seselves, and by their nature toys are very affordable yoo. there are fewer players out there. kb toy store is gone, and yet it seems to be that much more competitive. walmart announcing a strategy,

100 toys at $10, and you are launching a pop-up store category this christmas. how do you think that is going to help you combat the behemoth that is walmart? >> we are the toy authority. it's our ground. parents want to shop at rtoys "" us. we're opening 350 new toys "r" us express centers. this will make it much more convenient for parents to shop. that's not the only way we have been aggressive. you mention kb toys. they did go out of business and we bought them. we also bought fao schwarz this year. we also bought e-toy this is year. e-toy was worth $10 billion and now they're part of toy s "r" u. we bought baby universe.com. we're positioned very well. we believe this is one of those times in history where it's important to be aggressive and to go after your core market,

and toys "r" us is the toy authority. >> i know they want to jump into the conversation here in the studio. guys? >> you know, bertha, we have phil lebeau. thank mr. storch for us. we have more breaking news though on car sales so we're going to go back to phil lebeau at this point. >> quickly, we have the latest numbers for the month of september from chrysler. down 44.4%. that's roughly in line with expectations out on the street. chrysler down 44.4%. the sales pace that is expected in the industry if most of these numbers continue coming in as expected, the sales pace is going to come in somewhere in that 9.3 million to 9.5 million. we have general motors coming up in a half hour. >> that makes ford look a whole heck of a lot better, phil. >> well, yeah, but remember we're looking against these comparisons against last year. we knew they were going to be down 44.4%. that estimate of 38%, i have heard a couple people say to me, listen, i think it's going to be weaker hahn th eer than that.

>> it was charlie gasparino who first broke the news of ken lewis' retirement from bank of america. joining us with his take on the b of a situation is bill smith. he thinks lewis finally had enough of the circus and will ultimately look very smart on the meryl dearill deal. you really think he chose to step down? all the facts, he said he wasn't going to retire until he's 65. he said this, and then suddenly everything is changed. >> i think ken lewis basically has a bull's-eye on his back and, you know, why deal with this if you don't have to any longer? i think what his goal was is to get to the other side of the credit crisis, which i think he's successfully done. i am not a fan of the supermarket model, as you know. i don't think that ken lewis' business plan is correct, but i like him as an executive, and i think at the end of the day two

years, three years from now, merrill lynch will be spun off as an ipo. >> one more question on his resignation, he doesn't and they are leaderless, right? no succession plan. there's something very strange here. why wouldn't they come together and say let's get the next person ready to go here? >> well, i think he's going to stay on through the end of the year, correct? >> okay, that's three months, yes. >> i think in the next three months they'll find their candidate. i think they will have to search outside and inside the firm. >> what is this going to do for b and a. andrew cuomo made it very clear this does not change his investigation by the new york attorney general's office. the s.e.c. is still looking at him. nothing will change in that regard, will it? >> that's absolutely correct. i think you had ken lewis as a lightning rod, and that's what everyone was focused on. so i think things can probably move along a lot smoother now. >> you think it sends a message that other ceos in the financial services industry should pay

attention to. what is that message? >> well, you know, there's a lot of ceos that are running banks that are doing just a tremendous job. look at jamie dimon or stump at wells fargo, blankfein obviously at goldman sachs. but then you have another group of ceos such as a vikram pandit at citigroup, he's been at citigroup for two years and it's been a complete failure. so -- and you have to wonder why he is still ceo at citigroup. you have to also wonder why dick parsons is the chairman there who just accepted a part-time job with a private equity firm. >> it sends a note to other c s ceos. do you think vikram pandit stays in his chair? >> i don't believe so. it should be -- it's very similar to what happened with lewis losing his chairmanship. this is something that shareholders should be voting on, and shareholders, if you

look at when vikram pandit took over citigroup at $40 a share, the shares are now under $5. shareholders should be voting on pandit's future, not the government. >> what do you do with the stock now? >> we don't have any exposure to bank of america so i really can't comment on that. >> internal candidate or external to replace lewis? >> i think you look at both. you find out who is the best executive to run the company as a whole and look two years down the road and say what is this company going to look like if he we side to break it up. >> all the major averages are down. between 1.5% and 2%. we'll round up our all-stars and bring you the real time pulse of the markets. >> cisco shelling out $3 billion to make a transatlantic acquisition. we'll look at that deal and how other cash-rich tech companies might put their cash to work.

>> and the ceo of red. >> how do you keep that charity hot? and also communist china, speaking of red, celebrating a 60th anniversary. is the economic experiment working? you bet it is. we'll have a round table discussion. !d!d!d!d!d!d!d!d!d!dd

welcome back to "power lunch." i'm david faber. breaking news now for you

involving our parent company, ge. ge and comcast are in talks about a deal with ge would spin off its nbc universal unit into a new company. the deal under consideration would allow comcast to take 51% economic control of nbc universal through its contributions of content asset such as the e channel, the golf channel, and the group of regional sports networks and the contribution of as much as $7 billion in cash to the new company. the prospected deal is complex and is far from a certainty. under the scenario being contemplated ge would spin nbc universal aloveng withng with a significant amount of debt into a new company. comcast would merge content assets it values at as much as $6 billion along with cash so it would take a 51% ownership stake. ge would control 49%.

and as part of the spinoff of nbc universal, it would be able to contribute as much as $12 billion in debt to the spunnoff entity. that according to people familiar with the negotiations. bankers on both sides of this deal tell me nothing is imminent and given the high degree of difficulty in making this work, they are far from certain a deal will get done. still, the willingness of ge to consider shedding nbc universal is of great significance. comcast officials are not commenting under the scenario being contemplated. comcast would not issue equity or endanger its investment grade credit rating according to people familiar with the negotiations. now, these talks had been prornt prompted by the prospect that avendi will tell ge it plans to exit its 20% stake in universal. under the plan, ge would buy the stake and put the borrowings that fund that purchase on nbc universal's balance sheet t would add further debt to nbc universal and spin it off.

assuming the company is valued at $35 billion, subtracting $12 billion in debt. come cast would have to spend $13 billion to garner that 51% stake. over time come ca comcast ceo brian roberts has long coveted control of content-related assets, of course. a number of years ago making an unsuccessful and unsolicited did to acquire disney. officials have declined all comment. back to you guys. >> you know, david, what about the price tag on the deal and comcast's ability in terms of cash, the issuance of debt? how is that all going to play out given the state of the markets? what are you hearing on that front? >> they would contribute content assets they claim or from what i am hearing again from people who are close to the situation

generate about $600 million annually. if you put a ten multiple on that, it's worth as much as $6 billion. we'll see. i want to try to get more transparency on that. >> okay. >> then they would contribute another $6 billion to $7 billion in actual cash. they have a great deal of cash. they have a lot of capacity for leverage at that company. that would not take them anywhere near a below investment grade. so that's not a problem for comcast which generates a lot of cash flow, a good amount of free cash flow, is and an underleveraged companies in many ways. that $13 billion, if you assume nbc universal is valued at $35 billion, then they throw on $12 billion in debt, you do $35 billion minus $12 billion and that gets you to $23 billion, so to get 51%, comcast has to contribute a bit more than let's call it $12.5 billion, somewhere in there, dollars worth of equity. >> and you have rough cash and conte

content. fantastic reporting. first, guys, i wonder whether ge might be using comcast possibly as a stalking horse it get avendy to make some sort of decision. a spinoff when media property values are really low. and the third thing is if ge does this spin and it no longer owns any piece of it, it looks like nothing more than a pure financial company if they're not careful at a time when a financial companies are a little scary. >> it would be a private company. avendi is likely to say it wants to exit it's 20% ownership stake. it seems ge will be in position to offer for it. it's not a public company. that being said, it is no doubt a very significant move for ge,

and as for the ramifications on things like the tax front, still trying to work through that. again, let's not forget this has a long way to go. there's a long distance between the cup and the lip as some bankers like to say. >> wouldn't it solidify and clarify what ge is worth, what its assets are worth, give them a little more transparency on that front or is that not an issue? >> you would put is value on nbc universal. >> you're now thinking as long as you guys are going to talk to comcast, you should talk to time warner, any number of different big media giants. >> and you know what? that is certainly a possibility. my understanding at this point based on some early reporting is from time warner's perspective it gets a little more difficult to pull off anything of this type. you've got two studios which could conceivably have an antitrust issue and -- >> tax problems. >> and you'd have to get rid of msnbc. there's a lot of hair on that.

that being said -- >> any idea who called whom? did brian pick up the phone and call jeff? >> brian roberts has long been interested in the possibility of gaining some sort of foothold when it comes to nbc universal, and they have seen the potential sale of avendi's stake as an opportunity to begin the conversation. that's led them a bit further along than many of us expected even as short a time ago as yesterday, bill, to this point. >> very interesting. thanks, david. let us know if you lerp anything else. >> let's talk about the overall market on the downside by 164 points. laets go down to bob pisani at the new york stock exchange. >> a simple mantra here, dollar strength, stock weakness. that mantra continues here. look at the dollar index. mr. bernanke out testifying this morning talking about the fact that the dollar could be at risk if we don't control the bunt dg gap a little more. the budget rallied as he made those comments. the stock market moved to the

downside. s&p has been weak all throughout the day. we are now about 35 points from the old high, the closing high. that was september 22nd. i think that was 107 1. we're down about 3% on the s&p 500 from its highs. certainly not much of a correction, at least so far. there are some big names that have really declined in the last couple of weeks. names like airline stocks that had a great quarter overall have been very weak. amr is down 17% from its high a couple weeks ago. cater pillar is down 9% in the last two weeks. some of the big financial names that also had a terrific quarter, clearly traders have been taking profits a little bit. tradertalk.cnbc.com. and, rick, i'm wondering if we get a really positive jobs report on friday, say maybe only 100,000 jobs report instead of 150,000, i wonder when we'll break that relationship between weak dollar and stocks up? one day the dollar is going to

go up and maybe the stock market will go up. >> yeah, but the question is what level will that rally start with respect to the dow? that's the question. and i'll tell you the charts are interesting, but before we get to them, today and bob has talked about it at great length as all of us have on cnbc, the conversation regarding the financial service committee and the head of the fed, mr. bernanke, was interesting, but even traders debate the outcome of that. my own personal view is he told them it's var job their job if t the dollar to go higher. he didn't raise his hand to take the job. there's going to be a lot of stories about that tonight. look at the charts. 30-year bond yield intraday year-to-date, lowest yield since april. the curve is steepening just a bit. the dollar index that bob referred to, hey, it went down on those comments around ten.

however, the strength that is in there now has been developing along with the weakness in equitying on those breakouts we talked about one week ago today. bill, back to you. >> rick, thank you very much. back to bob pisani one more time for this week's cnbc 101. >> thank you, william. that's our weekly guide to investing. a lot of interesting things going on with etfs this weekend. the commodity future trading commission is investigating position limits of lspeculators in all the commodity areas. look what deutsche bank has done. they're changing the composition of some very successful funds they have. the commodity index tracking fund and the agriculture commodity index here. what's going on is they're going to diversify their holdings in these indexes. why? to get around the potential position limits that the cftc might impose on them. this is an interesting solution. look quickly at the power shares commodity etf. this is the big one. it used to have only six holdings. now it's going to have 14 holdings of different

commodities. the new waeight in crude oil is 12%. used to be 35% weighting by crude. this is a big change in the composition. the agriculture etf used to have only four holdings of different kinds of commodities. now it will have 11. the largest weighting used to be 25%, now only 12.5%. big changes here, and, bill, the cftc really starting to have an impact on the way the etfs are structure. that's our cnbc 101 for the week. >> thank you very much. we'll take a break. cisco is sheming out about $3 billion to make a transatlantic acquisition. we'll look at that deal and how other cash-rich tech companies might be putting their money to work as well. the market is on the downside triple digit decline in the dow jones industrial average. the bears are in control as we go into october. we're down 169 points on the dow. we're back in a minute. we're cnbc, first in business worldwide.

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look up in the sky, it's constellation brands. >> pushed higher by 4.5%. the ceo of constellation will be on "street signs" kicking it back with erin burnett.

kiss sew systems kicking off the fourth quarter on the acquisition trail agreeing to buy tandberg for $3 billion in tash. >> what are they called? >> norwegian. >> jim goldman joins us with details. jim? >> hold on a second. did you say norwegian? >> yeah, he did. >> does that mean john chambers will now start to drive a fiord? let's talk about the deal, shall we? i was going to give a special shut out to brian roberts, but i'll save it for another time. cisco is buying tandberg. they will pay that $3 billion in cash for the company at 26$26.4 for each share. it fits into plans to expand video conferencing and video

communications business. the telepresence unit is soaring. cisco says the so-called collaboration market is now at $34 billion opportunity. >> enterprises are looking for enterprisewide solutions. we provide a telepresence for about two years now. we have seen explosive growth in this. it allows us to interoperate with more end points. that's what tandberg really brings to us is that great number of end points we're able to provide to enterprises. >> this is cisco's 134th acquisition since 1993, and even though cisco shares are trading right near their 52-week high, the company pays all cash for this transaction. video conferencing has been an absolute boon for the company with customers already snapping up more than 1,000 of the pricey systems that can run hundreds of thousands of dollars each. today's deal also opens another major competitive front with hp. that's a company with its own video conferencing technology

called halo. po polycon also offers systems. there's more on this topic on the blog. right now with all this cash on the balance sheet with so many of these tech companies, this is merely the latest and certainly not the last major m&a deal. >> tech companies in particular have a lot of cash on that balance sheet. some of them, one, two times sales. do you think that this is the big deal that cisco will do for the entire rest of the year or do you think we will see more acquisitio acquisitions? take a wild guess? >> i would be surprised if cisco didn't doer in de er ianother d. this should be fairly easy to integrate. i wouldn't suspect this is the end of it, but you've got other companies out there, google and intel, $19 billion in cash each. microsoft, $36 billion, apple, $35 billion. there's a lot of cash. i think m&a will hit frenzy times over the next two months. >> thanks a lot. >> okay, guys.

>> it could also add to earnings. >> it indeed, it could. the bulls are wishing they could add to the dow jones industrial average today. they'd like to accrete, it suspect working. we're down 168 points on the dow jones industrial average. we're seeing a move into parts of the treasury market, which is interesting, the dollar is rallying, but the dow triple digit loss on the trading session so far. we're back in a moment. not long ago, this man had limited mobility.

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got thup morniup this morni to turn the heater on. the nasdaq has been down more than 2% and the s&p a like amount as well. we're down to 9543 on the dow. let's bring in steve grasso and stuart frankel on the floor. >> do you know the only reason why i ever liked october? >> because i'm a yankee fan. that's the only reason why i ever liked october. the jobless claims came in at the high end of the spectrum. beam people were looking at the end of quarter. nothing really to get people excited about. they thought they were going to

mark them up, they did slightly, but not enough. >> wall street is so tradition-bound. so beholden to history it seems to me. we already know what shape the economy is in. we already know that earnings are coming and they're probably not going to be great. auto sales haven't been great. we knew that was going to happen. why the sell-off realistically here? >> human nature is if you know all this stuff is bad, do you still jump in? if you know a volcano is hot on the inside, do you jump off the edge of it? there's no mad rush to start investing again. >> so you've given up on 1100? >> no, i'm not excited about october, i think it will be very volatile. i think we will give a little back. hopefully we just move more lateral than south, but i think november and december you will see that mad rush for performance again and we wind up around 1150, maybe even 1200. >> all right. thanks, steve. see you later. >> thanks, guys. >> all right. let's go to charlie gasparino,

as you know, or on-air editor and also author of "the sellout" two first broke the news of ken lewis' retirement from bank of america. he has more on what the secession planning might be on that. charlie, congratulations. >> on the book or the scoop? >> on both. >> thank you. by the way, i don't necessarily believe it's a retirement. i know that's what they're saying. a lot of interesting -- >> that's their line and they're sticking to it. >> a lot of interesting stuff going on over there at bank of america. i think the most immediately interesting stuff is who is going to replace him, and the conventional wisdom especially last night right after we reported, i mean the conventional wisdom developed there are about six internal candidates. here they are. tom montag, barbara desoer, sallie krawcheck. brian moynahan, joe price, and greg curl. one of those people are going to be -- is going to be chosen to succeed lewis.

>> so it won't be nobody from the outside. >> here is what i know is happening right now. by the way, this is a joint decision by the board and by the government. they're both weighing in. what they're weighing in is none of those people have the chops to run the company at least in the immediate future. what sources are telling me, sources that basically know what the government side wants. treasury, they're still a t.a.r.p. bank. what he is going on at the board level is the likelihood at least as of now is you're going to get someone else to do that. now, is it anoutsider? probably not. probably someone from the board. charles gifford, a lot of people put their money on him. or billboardman, t boardman. a lot of people think cliff gifford is the guy they go to in the immediate future and then he

makes the decision from those six. >> we have sallie on "power lunch" on monday. >> she has zero chance of getting this. here's why. i like her. very good brokerage company analyst. did a decent job at citibank. she did not do a decent job at cfo. she does not have -- this is what they're telling me -- the chops to run what is essentially one of the biggest financial companies in the world. you know, if you did have the chops, she would have done a better job as cfo. i think that's the problem she has. you can make that case about a lot of the people there. the person on that list with the most -- with the broadest experience is moynihan because he's done a lot of different jobs. so that's where we are right now. complicating the whole matter is the fact that bank of america, amid this whole thing, will have

xe significance from bob mccann. courses are telling me mccann is done with bank of america. they're releasing him at the end of the month. i think october 22nd sources tell cnbc he can go out and pursue other interests. as of right now, obviously this could change, too, but i think they basically offered him a job, he's going to ubs. the question is what job does he take? does he take wealth management? or does he head the whole u.s. subsidiary and that is unclear right now. >> charlie, thanks. great work, appreciate it. can't wait for my signed edition of the new book. >> you got it. >> okay. promises, promises. product red, this is a nonprofit forum by u2 front man bono to raise money to fight aids in africa. apple put out a red broanded product, converse. we have the ceo of red to come on to talk about a new deal they have going with bugaboo.

cnbc exclusive. here is red ceo susan smith ellis. also joining us is cnbc's julia boorstin. good to see you, miss ellis. thanks for joining us. >> thank you. it's great to be back on "power lunch." >> how significant is this announcement when it comes to getting money into red, 1% of bugaboo and why the change in model versus what you've done with other companies? >> every one of our companies has a slightly different model from the other, so the exciting thing about bugaboo was they not only wanted to create red-branded products where money would go to the global fund, but they're so committed that -- >> these are bugaboo products we're showing people right now. >> they're beautiful. they're incredibly beautiful and very innovative. i think they feel you can buy these products. they'll give 1% of revenue to the global fund, and that will buy life-saving medicine for mothers and children in africa and buy medicine to prevent women who are pregnant from

giving hiv aids to their babies. >> consumer spending has pulled back so much over the past years. these strollers are quite expensive. hundreds of dollars, top of the line, how much is bugaboo doing this to help people feel better about spending a huge amount of money for a stroller. do you need to have this kind of angle if you're a high end luxury product like this? >> i don't think so. i think why they're doing it is that, one, they are a socially responsible company, so they think they need to do things to make the world a better place, and i their own research shows more and more consumers are asking for companies to do things that make a difference, to give back and to be participants in solving some of the problems in the world. so i think it just makes smart marketing sense for them. it isn't about justifying a high-end product. >> how much are these? >> those patrol estrollsers, th from $800 to $1,200. >> 800 for a stroller?

>> well, they're innovative -- >> this is a way to convince people it's a good thing to spend that much money on a stroller. >> they're not just a stroller. you can do lots of different things with them. they become car seats and baby carriers and there's amazing innovation and technology in those products. >> cool. thank you so much for joining us. we appreciate it. >> thank you. >> i don't need one of these thankfully. >> blef me the stroller is just the beginning. trust me on that. the people's republic of china celebrating its 60 anniversary as a communist nation. is the country's economic experiment working? we have a great panel to tell us what they think straight ahead. a down market this first trading day of october. the dow down 160 points. we're at 9552. back with more "power lunch" after this. for every dollar spent on wellness, companies can expect to save $3.

that's according to the wellness councils of america. >> let's take a listen to you. >> now ibm employees like doris gonzalez are also cashing in. the tech giant offers a $150 annual wellness rebate to both parents and children for healthy eating as well as physical activity. >> we both engaged in more activity. so in the long run it's going to help us both be just a healthier family. >> having a healthier family has a more productive employee. a more productive employee is a more satisfied employee. >> satisfying the bottom line, too. since introducing wellness incentives, ibm has saved more than 200 mm$200 million. for gonzalez, she says the program is really paying off. >> this is really motivating for me. it's absolutely wonderful that i'm getting paid to stay healthy. >> that's today's "healthy horizons" report. i'm jim goldman.

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ch. welcome back. stocks took another nose dive, not a nose dive, but a dip lower in the last half hour. traders are talking about the fact that goldman sachs have changed their estimate for nonfarm payroll estimates. they had a estimate of 200,000 job losses. now gone to 250,000 job losses. they talked about data points on the u.s. job market being disappointing recently. they are keeping their forecast of 9.8% unemployment intact. as you can see, stocks down but they're off their lows right now. sue, back to you. >> thank you, bob, very much. china celebrating 60 years under communist rule. the country is staging a massive national day parade in ba jing

with beiji beijing. joining us are donald strasheim and mike moran. nice to have you here, gentlemen. don, congratulations on the move. second of all, given the numbers puts out, it's hard to argue against the system not working. i mean, it seems to be working pretty well for them. >> well, sue, from 1949 when they started this experiment until 1978 it was a disaster. collective system, everybody knew it was going to be a disaster except the chinese. in '78 they finally came to their senses, started introducing the various market reforms, and it's been a wonderful success story since then. too much government control still for my taste, but it's been fantastic growth, millions of people have been taken from

poverty to a real healthy standard of living. >> they're hosting a celebration to celebrate 60 years of communism, but it's not 60 years of communism, right? i mean, they are on the path to capitalism. >> well, yes and no, michelle. it's still the communist party runs the country, and it is still very much top down driven, and by the way, this was a show, this was not a party. july 4th in america is a party. this was a show, a tv show really. very few people there. to show their might both domestically and internationa y internationally. >> let's spin this forward economically. chi china's growth rate has been phenomenal. what happens from here? can they keep it up and what about inflation? >> i think that's going to be a

real challenge. the last 20 years the economic growth in china is a remarkable story, remarkable success as well. the next couple years will be a real challenge. although, yes, we have seen a remarkable growth, the growth is very uneven, very investment driven. consumption and export section has been really hurt. the stimulus we've seen has really sort of augmented this kind of imbalance, and i think 2011, 2012, the beijing will have to work very hard to avoid the inflation pressures. the money supply growth has been astonishing. i think inflation is going to be an issue when we look into 2011, 2012. >> don, the chinese chose to pump more than $1 trillion into u.s. stocks, u.s. treasuries instead of spending that money on making life better for its own people. is this a threat to the u.s., how much they own us, or is it a good thing because now they can't afford to cripple us? >> well, i think the latter,

dennis, is more accurate than the former. we're both in this bed together. they've done a great deal in terms of the stimulus. again, too much beijing driven, but i want to go back and quarterly a bit with mike's concern about inflation. i think the real concern is their difficulty in trying to restructure their economy from the export-driven to the consumer-driven. that's going to take a generation. it's not going to take a few years, and it's going to be very, very tough. >> what do you think, mike? >> yeah, i mean, i think it is going to be tough. i think inflation -- i think we're already seeing the asset inflation in china coming through. already beijing is trying to address this by tightening various measure that is govern these kind of investments. that's what's really the concern. it's the asset price, the asset bubbles rather than the consumer prices. i don't think that's the main

issue. >> thank you, gentlemen. we got to go, don. thank you. we'll have you back in just a little bit. >> we're looking at what's going on in geneva. the white house says president obama is going to make a few remarks coming up at 3:00 eastern time on the outcome of those nuclear talks between various world powers, including the united states and iran, which have been, we are told, pretty productive. they've scheduled a second round of talks for later this month. so biwe'll hear from the presidt in almost an hour. >> phil lebeau and numbers coming up after this. 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.

i'm phil lebeau with breaking news from general motors. the company reported september sales down 47.1%. that's almost exactly what the street was expecting. a decline of 47%. basically when you look at car sales versus truck sales, down in the mid-40% range. to show what you a weird month september was, although gm's market share dropped compared with august, it is expected to come in at 21% for the month of september. bill, that would be the highest market share of any month in 2009. strange month september was. we're waiting for the final sales pace for the month. it's expected to come in at 9.3 million to 9.4 million.

>> it's hard to wrap your head around that. >> speaks to the market. >> can we bring back cash for clunkers? let it inflate it. >> bring back cash for clunkers. >> i think you're arguing it did what they wanted it to do. >> right. i wish they'd do -- >> is saturn really dead? >> oh, man. >> that's a shame. >> are you asking me? >> yes. >> i heard dennis talking. is saturn really dead? >> i asked you first. >> it's on life support. that's for sure. is there a possibility that roger penske, who is a man who would love to have the saturn distribution network, is it possible he comes back to the table with general motors? yeah, there is a possibility. i can tell you this much, bill, the saturn dealers are the savviest, perhaps the most connected dealers in the country. >> this feels like a negotiating tactic. if he's not getting a deal from whoever is going to build these

cars, he's going to walk away until he gets the deal. it still feels to me like he's just negotiating. >> not entirely, bill, negotiating. the people i talked with who were helping advise penske auto group in terms of putting this deal together, they honest will i thought they were going to have a deal worked out. they were talking with two foreign suppliers, south korean consortium and ren know out of fran france. there's no way you can have anybody come up with a complete product line in under 24 months. can't do it. so he's stuck in the middle saying what am i going to do for product? that's why he walked away. >> i agree with phil though. >> such a valuable brand. >> and a real community. people loved their saturns. >> phil, thanks very much. we'll come back. more of "power lunch." look at the markets as we continue lower. getting ready for "street signs"

at the top of the hour.

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breast cancer awareness month. iacask.com unit donating $1 million to the susan g. komen foundation and do other efforts on the website. >> that is an unbelievably beautiful building. >> built at a time when you had five times as many companies and you split it up five