on a health care bill last night. majority leader reid refusing to give details, but says the proposal will be sent to the budget office. not 65. >> wow. :óñ look jbjîm@,z=m >> senators rejected a bid to limit insurance coverage of ar portion. 1xzm]du4;1fd

milestone if they're going to get this through -- at least the senate. we know the house bill still has that public option and how it's going to be reconciled. but on the senate side, it's not nearly as dramatic as they thought, right? >> well, there's still some question. harwood is saying he's not sure where oh olympia snow falls on this entire deal. they will probably lose ben nelson. >> they can't lose anybody. >> they might very well because there was a vote yesterday on what he wanted in that went down 54 to 5 in a senate vote which harwood says makes it likely that they will lose ben nelson and they would need oh olympia snow. >> this is hard to understand. maybe it's more people in the house that say if it's not a public option, count me out. >> maybe the liberal senators will go along with this just to get it done, i guess. but then sooner or later, you merge those two bills.

and if there's no public option. it will not going without -- >> it's a public/private thing, enough to win over moderate republicans. >> even other public options that were in there, that was seen as the two mile for some of these guys. this is much milder than even the opt in, opt out provision. >> i'm not saying too mild for the left. is it mild enough for the right? >> that is the other question. >> i'm not even sure if you did one republican on this. and they're going to need at least one if they lose ben nelson. we'll see what happens. >> this is hard. >> well, you don't want it to be too easy. >> we have a big lineup, as carl mentioned. we have people talking about this all morning long.

the obama administration is planning to extend the lives of the $750 billion financial an announcement is expected as soon as today. an administration official tells cnbc that it will dedicate $140 billion of that amount to the total reduction. that is the amount expected to be repaid through the end of the year. >> for an economy like the united states, for us to achieve a more stable, more responsibility, sustainable fiscal position, we need to get that deficit down towards 3%, in the range of 3% over the medium term or the amount we borrowed is going to keep rising and that's unsustainable and that will lead to higher interest rates in the future. >> the administration's plans will leave $140 billion of the t.a.r.p. funds unused. presumably, that will go for jobs programs. >> it is likely a revolving line

of credit. that's what they call it. it's like a resolver. lights like a heloc. >> a 90-day revolver. >> yeah. >> but it is an example of -- you see, that's why some people in congress say i'm not going to vote for this because it will never come back. once it's in the public budget -- that's what we worried about the social security surplus that we had for a while. eventually, everything gets used as a way to not add to the -- >> because it's more politically expedient at the time. >> democrats want t.a.r.p. to become a revolving line of credit. what's the interest rate? i know. it's the wall street journal again. >> they were given some props in that. they have a couple good ideas. >> that is a switch. in the meantime, the bailout fund left many problems unsolved. the congressional oversight panel -- is she on today?

>> she is. >> -- argues that the plan helps to stabilize the financial system, but it's done little to boost lending or to stave off these millions of foreclosures. and she'll be on at 8:30 eastern this morning. >> all right. let's get a check on the markets on this wednesday. the dow obviously lost triple digits yesterday. some of these concerns about dubai and now greece beginning to weigh. >> how about gold? >> we were told that. a couple weeks ago. but you don't need to were about greece because they have such large -- 08%, right? >> yeah. i mean, i just -- he sounds so smart, so sure. now i tell people, well, you know, it's not that bad. >> and it's really tungsten painted yellow. >> all that said, europe down early on. but futures are going to

hopefully rebound here in the early on. oil is coming off its longest losing streak, five days since july. we're going to get a little bit back today. but oil has come way down from 80 plus. the 10-year note, we saw the three year do fairly well yesterday, the auction, that is. the 10-year yielding about exactly wait was at this time yesterday. i think the euro is having a little bit of problems getting out of the gate. but there was some pressure on it and whether the euro zone would have to come to the rescue. and gold, its worst three day session since march. $1143. let's get overseas this morning. first to zurich to check in with carolin schober. >> good morning to you. markets here in europe are trading slightly lower. the cac and the dax off by just 0.1% or so. in terms of the sector, we see

stock are leading the decliners. as you say, investors obviously still worried about the sovereign debt issues in dubai, but also in greece. and speaking of greece, the greek banking stocks continuing to slide this morning. obviously, that's after fitch cut the sovereign debt rating yesterday. and moving on, the uk's finance minister, he will unveil the country's much awaited pretty budget report later on today. his path, of course, is difficult. he will have to convince the government that the nation is cableble of bringing down the record deficit. now let's get an update on the asian trading session with christine in singapore. >> thanks for that, carolyn. we're talking about risk aversion worries about export demand and investor eggs looking for safety ahead of year-end.

the economy grew somafy[u-0'íúfn quarter. that was weaker than the initial reading. the strong yen and corporate profits, all this risk aversion again pushing the yen high he, which in turn hurt the exporters. in china, the market came under pressure for increasing share supplies and fund-raising concerns in the banking sector. banks sold off for the second day in a row. the shanghai composite up 1.7%. in hong kong, the hang seng down 1.4% after weak earnings from the u.s. shares of hsbc continue to slump on concerns about its exposure to dubai world. that is the action here in asia. not a pretty picture. carl, back to you. ,çbf'po)cgkzbylp# singapore, let's get a look at how the u.s. markets are shaping up so far. john sylvia joins us here on set, a special treat for all of us. joe has taken note. >> he's really here.

it's not your first time on set. >> no. >> but i'm trying to remember the last time. >> carl may have been out the last time you were here. >> carl was out. i was here. >> there have been days when you guys are both out, yeah. >> and show the camera what john brought us. >> well, we're not really allowed to accept things like this, are we? >> all right. it's a beautiful pen with a great color and it sells walls fargo on it. you said you wanted to watch ohm. >> next time. how do you feel going into the end of the year? a lot of people say volumes tried up, it is a little choppy. traders books are closing and that the end of the year is either going to be noneventful or not very good. >> i would think it has to be positive, actually, carl. we know we have an economic recovery. we know the fed is not going to raise interest rates. inflation still is pretty low. i think some of the discussion you had earlier today, especially with matt, that the lower dollar is probably going

to increase export orders. i think you have to be positive going into 2010. >> because -- because of the weak dollar, because of low rates? >> low rates, low inflation. the fed is not going to move rights. and i think you do have an economic recovery. the institute by management survey continues to improve, jobless rates continues to decline. i think by the second quarter, we're going to have positive job growth each month on a sustained basis. when do you think the first month will come of positives? >> well, the way the revisions go, we may actually see december as the first month of positive employment numbers reported in early january. and i think the revisions show you that each month they're revising the negative numbers smaller and smaller. so i think the momentum is on our side. >> and temporary workers, things like that. >> temporary jobs, average workweek for manufacturing. two leading economic indicators. >> ned, does that lead you to be constructive as we approach the new year?

>> definitely. i'm still constructive. i think a lot of things happening right now that people didn't anticipate six months ago, i get people saying why is the market up so side? and i keep trying to tell them, the market doesn't reflect today, it reflects what's going to develop over the next six months. and i do see a lot of positive things. the skepticism is still pretty high out there. there's some that still say a double dip next year. i don't believe it. there are some that say inflation is going to get too high in the next six months. i don't believe it. a lot of people want to get 6% to 9% returns, but they're settling for 1% or 2% in the government market. and by the time this market gets to about 13,000 or 14,000, they're going to scratch their heads and say, okay, i give up. and that is the time i'll become

apprehensive. but right now, there's still a lot of uninvested individuals out there and i still think this market is going substantially higher over the next couple of years. >> so ned, there is nothing that really worries you out there? we had meredith whitney on who said all the bad loans are still out there. we have a lot of toxic asset wes b the consumer has seen a lot of its credit pulled back in. she's worried about what's that's going to mean next year and beyond. but none of that gives you any pause? >> becky, one of the things i'm concerned about is joe's tie, to see if it actually matches up with his shirt. >> look at the purple. >> we had this discussion earlier. there is a purple stripe on his shirt. >> the purple stripe. >> joe, with you, i'm never sure what kind of hair do we're going to have. >> what happens to that buzz cut you used to have?

>> it's sergeant carter. everybody accused me of being gomer pyle's boss. >> oh, sergeant carter. >> but it answers the question, consumer spending is going to be quite slow. but the good thing is what the earnings are doing and how companies are coping with a low volume, no volume environment. and to me, that's the most encouraging of all. wage costs, salary costs and sentiment is still going down. and the biggest cost component in this country is wage and salary and benefits. so when you put it altogether, it's earnings, earnings, earnings and i think we're going to hit a new record high for earnings in the next 12 to 18 months and this market is going substantially higher before everybody starts to jump on the bandwagon. >> is it possible, john, to have a good strong recovery among s&p

companies, right, and have small businesses in real pain with no access to regional credit and real pain on the consumer level? can there be two different economies? >> there can be, and i think that's what we've seen in the last few months. when you're talking about small business, they tend to be recoveries. when you have a weaker dollar, you're going to have international companies making a lot of money because they're selling a lot abroad. whereas domestic companies picked up by the nifb survey, the small companies are domestic. so again, i would say some of the commentary yesterday that was made by meredith, i think these right. and it does give us pause, but it doesn't stop us. i think you do have a consumer reducing, gathering income, spending that income. but at a much slower pace than they had in the past. so it pauses, but it doesn't

stop the economic recovery. >> and on the state and local level, budget gaps in the 2010 underfunded state budgets, are those -- is that something we can look past, get past? >> oh, i think in terms of the overall u.s. economy, yes. but i think on a state and local level, that really is a challenge to many state governments where they've made a lot of promises, but they don't have the revenue to deliver. >> so either taxes go up or they let people go. >> thanks for the pens. >> you got it. absolutely. >> and thanks for the comment about the tie. we're going to work that one all morning long. >> we've already been over it, ned. we've already decided it works, i'm telling you. >> you understand indicated that it didn't work, with you there is another stripe. >> that's purple. >> it's dark when we get ready for work. >> now you're make executions for me. go ahead, instead.

>> you need a purple tie and a suit cuff to go with it. >> you're almost too put together. that makes me wonder. not that there's night wrong with that. >> you didn't see me ten minutes ago. coming up, time warner and aol are splitting up. first as we go to break, let's take a look at yesterday's winners & losers. sfx:racking of a taillight.

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making headlines this morning, time warner is officially spinning off its aol unit today. it's been nine years since the two emerged. p&g reportedly nearing an agreement to buy sayre where a lee's air care unit for about $700 million. the deal has been rumored for some time. and mozilla.com says u.s. home prices have stabilized this year. homes lost $489 million in value during the first 11 months of 2009. nearly one in three markets showed gains in home values this year. >> let's talk jobs right now. corn ferry's ceo gary burneson jones us right now. thanks for coming inned the. >> good morning. >> we've been trying to get a feel for if this jobs picture

has turned around and we were caught by a great deal of surprise. were you? >> it's been improvement over the last few months. the white knuckle free fall is over. there's no doubt about it. >> when did you first start seeing those signs? >> it was about four months ago, four or five months ago. if it start started in fm services and they typically overfire and overhire, you know, cycle after cycle. and that happens again. and, you know, it's really been broad based, except for one area that you probably guessed, and that's real estate. >> real estate, right. that is the one area that is still is lagger? >> yeah. and particularly at the high end, in the board rooms, a lot of talk about succession planning, you know, ceo turnover. and as you go down in a workforce, it obviously becomes tougher. the unemployment rates continue to suffer. and how far down the chain can you see things and where are things, let's say, at the mid levels? >> it's tough. i mean, you know, we're a publicly traded company.

there's 3,000 ceos of nyse publicly traded companies. everyone has a bias towards liquidity. >> right. and despite the economists that we just saw, in terms of running a business, you're going to have a bias for liquidity. and i guarantee you that over christmas, every ceo is going to be thinking about what i can do to drive the top line? >> so they're not necessarily thinking about hiring as you go in and bringing more bodies on, they're still trying to do -- >> no. i think the closer you are to the top line to producing revenue, probably the better chance you have of getting a job. >> and when you take a look at the number of searches you've been asking to lead up, maybe let's say in the last three months versus where we were a year ago at the same time, how do things measure up? and maybe we should look back two years. >> well, you could look back a year. there was this gigantic free fall. business has just stopped 14 months ago. and if you look at where we are now, we're kind of operating

between the last peak and the trough that we had in the springtime. that is essentially where the job rate is. >> how about regionally snl where would you say the best parts of the country are to find a job? >> ironically, north america, ow business grew 48% sequentially. >> off a base, right? >> sure, off a lower base, but still, very good growth. >> how about within the u.s.? >> pretty broad based. >> yeah? >> yeah. >> life signs in health care, for example, right now, is about at the same level before the recession started. >> have you dealt with doing a significant amount of any compensation issue where you've said, yeah, geez, i have a place for you. but you can only make 500 -- i mean, have you had to deal with feinberg related issues with any of your searches? >> oh, sure. >> you are dealing with that? >> oh, sure. >> and have you seen talented people say, i don't even want to think about -- i wouldn't even consider myself to go there?

>> absolutely. >> so there are people leaving firms with pay caps and there are talented people not going to firms with pay caps? >> absolutely. absolutely. >> how many times have you seen that? do you have that many -- you're doing all senior executives? >> yeah. i mean, 75% of our business is around the world, right? and you are. there's unintended expense consequences of this regulation. you have to be careful about that. >> well, you've got a horse in the gate, too. because you get paid based on the kind of deal you get your guys, right? so you don't want any compensation, either, i guess, right? as a -- i never think about it that way. come on. >> what are we talking about? six companies. are we talking about the 3,000 ceos? >> is it a bad idea, gary? >> i think it is a bad idea. i think it will go away in two years. >> is it the financial services industry where this has played out? you're talking about six companies that this plays out

with. what happens when they say -- when you find people who say there's no way i'd consider that job because of the pay constraints. where do they go? >> they're probably gainfully employed today. >> because we have people who write in who say, forget about it, there's no one else to go. there's no way to get around these pay caps. >> we're talking about a very small percentage of the population. >> are the new financial regulations, have they dropped a more widespread use of pay caps? have they dropped? >> yeah. i mean, for a while, it was going to be more than just t.a.r.p. funds. we were going to look across the board at ways of minimizing risky behavior. we were going to look at that. >> look at lehman brothers. the ceo made, you know, $500 billion over a 14-year period. look at merrill lynch who changed their comp system in 2006, went to equity, it changed behavior. clearly you're going to see pay for performance, more of the bonus is going to be tied to roi

or, you know, how the stock price does relative to peers and the like. that is clearly going to happen. but to put caps, to come in and regulate a free market system that has worked for decades -- >> the candidates you have who are popping, meaning getting the attention of the companies that you're working with, what are they doing right? what is the difference right now between getting noticed, becoming a serious candidate and being passed over pretty much? >> well, again, it depends on if you're talking at the very top of the house. if you're talking about a candidate to run general motors, you're talking about the broader populati population. the broader population, the more skills you have, the better your chances. >> gary, we want to thank you very much for joining us today. it's been great seeing you. >> thank you. >> gary burnison, the ceo of cornferry. whether we come back, john harwood will be joining us and the futures pits in chicago. in the next hour, though, his

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♪ the weather outside the frightful by the fire is so delightful ♪ ♪ since we've no place to go let it snow let it snow let it snow ♪ >> good morning. welcome back to "squawk box" here on krpz. i'm joe kernen along with becky quick and carl quintanilla. the futures at this hour are looking better than yesterday.

up about 22 points, 21 is points above fair value. becky, can you take us to the futures pits immediately, please? >> immediately. you're going to see up by about 21 points above. anyway, matt zeman is standing by. no, no, i'll tell you after. matt, good morning. we've been watching that's been taking place this morning. you've got the president making big news talking about the jobs initiative that he's going to be putting forth. you've got the health care debate that's going to be looming large. how many attention is wall street paying to washington these days? >> right now, i don't think a whole lot. certainly the jobs things is a huge issue. that number last week caught a lot of people off guard. i think health care here, anyway, is taking a back seat. i think right now the dominant theme for december has been the dollar and risk aversion based on what's going on in dubai. >> and the dollar situation has gotten more interesting by the day. are you in the camp that thinks

the dollar is going to make a strong drive or do you think this is a temporary gain? >> i think it's temporary. i think the credit fears we're experiencing again right now is giving a -- you know, the dollar a boost and we're seeing that reflected in commodity prices. you know, look at what gold has done over the last few sessions. given the deficiter we're running, the fact that i can't see it tightening any time soon, i think the dollar is going to roll back over. this is a buying opportunity right now. >> although there's some people that say these are momentum trades. once the momentum changes, it's hard to get it back. you don't agree with that? >> no. i would agree with that. looking at gold specifically, gold got extremely overbought. every time you turn on the television, people are talking about gold and i think a lot of people jumped on the bag wagon. when you get a correction, they're the first ones to jump off. you can see these large

sell-offs. >> are you concerned about any of these negative credit ratings that we've seen for country aes cross the globe? greece, but then also concerns about the united states and the united kingdom. >> certainly it is a concern and it's a global concern. greece, dubai, i think those prosecute probably fears that the market is digesting right now and those are going to pass. you start talking about the u.s. or great britain, that's a whole other story and we'll have problems if that deteriorates further. >> although you don't think this is something that is in imminent danger, just something that could happen down the road? >> exactly. when it comes to the u.s. and great britain, i don't see them losing their power down the road. >> matt, any particular data points you're going to be watching today? >> you know, pretty light on data today. pretty light on data and volume. i mean, i think right now it's really a dollar story. if the dollar were lower right now, the dollar stays lower, we're seeing a pop in xhod tirs pretty much across the board. i think people will be watching the greenback closely over the next few sessions after the

rally the last few sessions. >> matt, thanks a lot. we'll talk to you soon. meanwhile, senate democrats reaching a agreement on health care last night. joining us this morning is our chief washington correspondent, john harwood. good morning to you. >> good morning. >> this gang of ten, how significant is it, what teef done over the past 24 hours? it's a significant step forward. and, you know, you mentioned that harry reid was refusing to give details. i'm not sure whether he was refusing or is that nobody knows how this thing is going to work yet. this is totally an art of politics kind of product because i was talking to white house people last night saying, what do you think about this deal? 24edz, well, we like it, it's a step forward, but we're not really sure how it's going to work. but they've avoided the pothole. you could have had a situation where the liberals and the moderates and the conservative democrats to the extent there are any cannot come to an

agreement on some sort of alternative to the public option and you lapse into an extended sort of argument over that. they're getting past that now. this is an indication that the caucus is going to hold together. they might loos lose ben nelson of nebraska over the abortion issue. he lost his abortion amendment yesterday. there's a chance they could pick up one or two republicans, sus soon collin of lip ya snow. we'll see what the congressional budget office says about this deal been but there is another indication that, in fact, they are likely to get this done in the senate by christmastime and then that sets the table to finish the entire process by the time the president gets to the state of the union. >> what is the running bid on what cbo would say? >> well, cbo so far -- and the senate has worked very closely in the finance committee and later harry reid and leadership staff that's worked very closely with cbo every step of the way because they know those scores are so important.

they've got very good scores so far. so i think we have to assume that whatever product they have cobbled together, and what it looks like, carl, is this health bill is setting up exchanges, where people who can't buy insurance on the group market who are buying on the individual market or small business would go and have a menu of choices. this is adding to that menu of choices with something that's overseen by the federal government that's supposed to look like what federal employees and members of congress get. that's part of the political appeal. but i think it's likely that they're going to score this thing as over ten years reducing the federal deficit, which is what they said about harry reid's bill, and i would not expect that to be a problem, but we'll see what cpo says. >> we'll see what happens when it goes to reconcile with the house. >> the house has a reasonably robust public option, which is what liberals want. the liberals also know that this has not gotten done for 70 years

since harry truman and frankly roosevelt first put it on the table. john dingle's father, the dean of the house, his father introduced national health insurance back in the 1930s. so the point is, i believe they will compromise. i believe they will get this thing done and it will probably be something reasonably close to the senate 5e7s position. >> really? >> yeah. because the house position, you simply cannot get 60 votes in the united states senate for that. >> so all the drama about the public oopgz which we have worked to death for a month, you think might be a thing of the past? >> carl, i've always thought that the drama over the public option was way exaggerated for this reason. one of the central goals that president obama has for health reform, there are two, one is to dramatically expand coverage and get something close to universal coverage in this country. that is what the left has wanted for a long time. the second is cost control. that's why the cbo was so

important. and the administration, whether or not you think ultimately -- and nobody really knows for sure whether you can bend the cost curve down in a significant way. all of the markers they've gotten from cbo and others have indicated they're trying the stuff that might work. if you get those two elements, public option is a means to those ends but it's not tend itself. and so that can be set aside and the president has signaled that. when i interviewed him in june, he said, i will be open to good ideas that are options that or alternatives to the public option. that's exactly what's happening right now. >> john, what happens in terms of going into conference between the senate and the house? we've heard from state governors, like ed rendell, who say they're very worried about the amount of unfunded mandates that get dumped back on the states for this. i believe the house bill is better than the senate, although i could.be wrong on that. what do you think comes out in the end? >> part of the problems for states is that medicaid is a joint state federal program. by the way, medicare and medicaid are big parts of this

compromise. in medicare, if this compromise holds, you could buy into medicare when you're 55 years old, instead of 65 when you are now. that is a total public option. but because it's an existing program, it doesn't -- isn't seen as something that would spook out the country so much with the specter of big government balls it's already there. but on medicaid, that is a joint state/federal program. so if you expand the eligibility for medicaid significantly, as these bills would, then you're incurring costs for the states. and i think the attitude of the members of congress would be states, you're going to have to lump it. we'll see whether they have come up with other sweeteners there, but i think that is what is likely to happen and the governors may not like it, but they may have to live with it. >> they may have to live with it, but the states are already squeezed to thin. >> oh, yes. >> and you're paper brought up earlier, i don't know if it was this weekend or this week, the story about the idea there's a lot of cuts coming for popular

programs like health care services provided to people still in their homes. >> home health services, that's right. look, there are tough choices to make in health care and, you know, state budgets are squeezed everywhere. so is the federal budget. we've got this deficit over $ trillion. the one thing i think that washington would be able to say to those states is they're getting ready to pass a second stimulus package called a jobs bill which is going to have a significant slub slug of money for state governments to try to keep them from laying off teachers and firefighters and police officers at states and local governments. so that will be part of the response from washington. >> how about that responsibility? >> what's that? >> it's a one time payoff for a lifetime of responsibility for a new program. >> yep. >> john, for those americans who you say are spooked out by this whole thing and have been for most of the year within if this holds for the way you say it may, is their response to going to be we still had something shoved down our throats or we talk to the extremists in

congress off the ledge? >> are you talking about the general public? >> i'm talking about the people who are represented at the town hall who obviously -- who did not want to see -- >> those people are going to hate this bill in any case. and there's a real question, guys, over whether the general public is going to reward democrats in any way politically for having done this. let's say they get it. >> they'll get their reward. >> joe, you're exactly right. >> i'm telling you. >> there are a lot of democratic operatives who think they would get no political credit for -- >> we're below 40%, aren't we? we're below 40% approval for this plan, aren't we, on some polls? >> yes. but i want to discount public opinion polling on health care plans isn't worth a darn. and the reason is, nobody -- it depends on how you ask the question. nobody knows what's in these plans. you tell me, if people in the white house don't know what's in

the senate compromise, how is in the heck -- >> oh, just pass it. we'll figure it out later. >> no, but it's going to be a real test. if barack obama democrats can say you elected us to change washington. we just came up with near universal health care for the first time in decades, which is what we've been trying to do, give us some credit for that and you know employment is still 10%? most people in politics are betting on 10% unemployment ruling the reaction of the public, which means that 2010, whatever this coming does, is going to be a very difficult year for democratic members of congress. >> john, getting interesting. has been and continues to be. thank you for that, john harwood. still to come this morning, we're joined by trevor fetor, ceo of health care hospitals. and also with us this morning, etna's chairman and ceo ron williams and former florida governor jeb bush. >> forget about the old enemy

name. airtran doesn't think about jet very often. >> no. but he's done some good work. >> absolutely. and to talk to hospitals, don't you think we should? >> yes. >> including you. if you've got any comments or questions, drop us a note, squawk@cnbc.com. when we come back, u.s. senator ted coughman is holding a hearing today on financial fraut fraud and the economy. first he'll join us here on squawk.

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today the senate judiciary committee holds a hearing to examine the roll that financial fraud played in the economic crisis and the actions taken by the government due to testify representatives from the s.e.c., the fbi and the attorney general's office. dleer senator ted coughman is chairing the hearing. senator, this whole discussion is going to be fraught with semantics. i guess, you're talking about things like gallon, maybe, or madoff, but there are those that would say ratings agencies and credit defaults. >> no, you're right. this is not about just madoff. this is about ratings agencies. >> oh, it is? >> yeah. this is about everything who is involved in any kind of fraud, especially with regard to the

financial crisis. we're trying to get away from the normal thing where you picked up a single person who was involved or even just insider trading. you're trying to find the things that went on that caused a lot of crisis because it was a systemic thing that caused a lot of the crisis. we pass ed to go after this kin of complex fraud. >> you're going to see more of this. that is what this is all about. >> but unfortunately, a lot of stuff that caused what happens was legal. and if it wasn't legal, why would we need new regulations if anything that they were doing wag already illegal? >> that's a very good question. most people don't realize, there's two different kind oefs legislation hearings. that is what we did before we pat'sed the fera act. then you have oversight hearings

where you call in the people from the federal government and you say, we pasd this act, we gave you more fbi agents, we gave you more prosecutors, we gave you more money, what are you doing with it and how you are using it? this is not about new legislation. this is about oversight so make sure that the government is involved in exactly what the congress and the approximated said they wanted to be involved in, which is to back, find out who was involved in this. if there is no fraudly lent behavior, no problem. find the fraudulent behavior, find out who it is and put them in jail. >> and the scary thing might be that gallion and others come in and say, i hear you. he's saying that's how the whole hedge fund operates. >> not in exchange for cash. >> i know, but stls a lot -- some people think it's the tip of the iceberg. >> i think it is. but let me give you an example. let's talk about the

mortgage-backed securities. basically what we're doing now, we're going out, with did a great job of finding mortgage brokers and appraisers and finance officers in l.a. and las vegas who did it. but they've been packaged up. and there's real reason to believe that there are people on wall street that knew that these were bogus packages. so all of these mortgage backed securities, agencies rated aaa, all the time, everybody knew that they were not what they were supposed to be. that is fraud. we're talking about the systemic fraud that went on with regard to the whole mortgage backed securities industry, we're talking about the systemic fraud that went on with regards to short selling. we're talking about the things that went on that really were the cause that happened that caused a lot of the financial crisis. now, there were a lot of people that is things were bad, we had a housing bubble and things like that. but there was lots of reason to believe that there was systemic fraud going on in a number of areas. but one man's fraud is another's marketing. you look at how hard it was to

try and get a conviction of the bear stearns guy. >> by the way,

..

the target is 66 and kroger downgraded from neutral to buy at ubs. the target is reduced from 22 -- or from 30 to 22. a al also -- did you think of that?

kimberly-clark. >> it was on the cover of "the post." i don't know. >> becky's, like -- >> coming up, we'll get more of this morning's top stories. plus bob dahl, what black rock ceo of equities is buying right now. and the ceo of tenet health care makes a house call. he's our guest host this morning. we'll have more with trevor fetter when "squawk box" comes right back.

this kind of a market is very difficult. it scares people from investing. they don't know what's going to happen. >> energy is maybe the largest business in the world. and it's really having a focus on the fundamentals and seeing through the cycles that we see in energy preissing and the volatility because the world's going to need more energy. >> because if you have something that causes the market to take off or drop or something, if you've got the fundamentals analyzed, you're okay. >> i think it's about vision. i think it's about persistence, and i think it's about quality of execution.

health care reform gets a checkup. say ah. >> ah! >> democrats replace a government-run insurance option

with a scaled-back nonprofit plan. reaction from health care giant tenet and former florida governor jeb bush. >> so where is the momentum moose hiding? ♪ the dow shedding 1% amid worries that the recovery is losing steam. our market experts weigh in on whether it's a trend or a temporary blip. new life for the t.a.r.p.? the president set to extend the life of the $700 billion financial bailout fund. what it means and where the money might go. as the second hour of "squawk" begins right now. good morning. welcome to "squawk box." we have a packed show this morning. senate democrats reaching a health care bill, an agreement which will remove mostly, i

guess, from what we know the so-called public option. we'll get a reaction from our guest host, tenet health care ceo trevor fetter in just a second. but we also have some stuff to tell you about. we've got former florida governor jeb bush joining us in the studio for a special interview. his thoughts on health care, the economy, job creation. it's going to be an extended interview. i want to ask him about charlie crist, palin. >> gop. >> the gop. a lot of stuff. first, though, carl has more on the health care deal. take it away, carl. >> it is a big story. senate majority leader harry reid refused to give details on agreement, as joe said. but he said these proposals will be sent for cost estimates. senate negotiators say they agreed to replace this government-run insurance option with a scaled-back, nonprofit plan. that substitute would be operated by private insurers, but administered by the same agency that supervised health coverage for federal workers. the deal would also expand

medicare to americans starting not at age 65 but at age 55. and senators rejected a bid to limit insurance coverage of abortion. a lot of cross currents and it has nothing to do with what the house has done. that will get resolved maybe at some future date. >> this is a significant move. >> yeah. >> by the senate. >> isn't there something in here that says if that doesn't work, then a state can opt into a public plan or something? >> yeah, i think it's still pretty confusing exactly what you can do. it's an opt in versus an opt out? >> now, on the senate side, we think -- >> we think. we're a little confused by this. >> people that believe it's baby steps to big government are still going to say this is -- they're not going to like it still, you know? you wonder, it's just hard to win -- you can't win over the people that really want a robust public plan and you really aren't going to win over the plan that don't want public -- >> it's major strides in trying to cobble something together that would bring at least 50 people into the fold on this.

>> you wonder how much -- whether, you know, in the house they just said just do this. this is never going to be -- >> right. let the senate worry about the difficult problems. >> yeah. let's get this so we can pass it over to them and they'll do it and then they'll do something that we aren't going to do either. >> that's definitely what happens. push it through and see what happens. >> seeing the sausage being made it -- >> horrible. >> yuck. >> we are lucky enough to have a guest host with us today who knows a lot about this and who can give us his side of what's been happening with all of this. joining us now for the next two hours is trevor fetter, the president and ceo of tenet health care. and tenet is a hospital company. and trevor, you've talked to us before about how important this is for you because of how much you're paying in costs for uninsured. how much did you pay, let's say, over the last quarter to cover uninsured patients? >> if you analyzed our costs in the third quarter, it runs $520 million a year. of that, we're collecting about

$56 million. so, i mean, it's a huge burden on hospitals across the country to care for the uninsured. that's why we've been so engaged in this debate and so eager to see reform passed. we are add slow cats of reform. but, of course, the details are incredibly important. >> yeah. and despite the fact that you have this huge looming problem of how much you're paying for the uninsured, you have not been entirely on board with what you've seen so far. what is it that bothers you about what you've seen in these bills? >> well, we were concerned about the public option and about a robust public option that might attract a lot of people who presently have jobs through their employers. and we don't want to see the unraveling of the employer-based insurance system in this country. we are badly underpaid, as i just mentioned, by the uninsured. and then we are badly underpaid by medicaid. and in any of these bills, there's, you know, going to be a large expansion of medicaid. so that's something we've had concerns about.

i'm glad to see with this news last night that the senate seems to be moving away from the public option, at least the terminology of the public option. still a lot of details to come out. you know, it's going to be very interesting for us. >> you always mention medicaid. you can deal with medicare. you're okay with that? it's not perfect. you're obviously not covered 100% of what you spend with medicare either, right, and neither are doctors. >> all the analysis for the industry is that there's a negative margin on medicare. medicare essentially, the way to think about it, is that it covers the costs of treatment, sort of the fully-loaded costs, but not enough extra to pay for capital improvements in new technologies in hospitals. medicaid barely covers the cost of just the incremental costs of treating a patient. >> i'm not, you know, i'm not a mathematician, but i think if you go from 65 to 55, aren't we talking about a lot of people? >> in terms of who can get into medicare? >> if you did opt -- isn't that

going to be a much bigger percentage of what you're trying to do? are you okay with that part? >> i would not be okay with that part. let's get back to what they said last night. if you take it literally, and all we know is what's in the newspaper. very thin -- >> what we read in the newspaper. >> it was a very sort of thin amount of information that was put out there. but what they said literally is the people from 55 to 64 who would be able to buy into medicare are only those people who don't currently have insurance through their jobs. so number one, that would be a relatively small number of people. number two, those would be, if you take it literally, those would be people who are presently uninsured. so looking at that, you'd say, well, uninsured people now having medicare, that's better for hospitals than the alternative. but, of course, the risk is, you know, once you open that door, now you're opening it very wide. and medicare costs balloon and hospital providers could see

rates cut. >> would you think that employers at that point would say, you're on your own when you're 55? >> dump you off the payrolls? >> why wouldn't you say you're on your own. you could go into a great medicare program. >> it's a great question. >> it is? really? >> it's a great question for you to ask. >> thank you. i'm trying to think this through. >> wait a second. wouldn't that raise the point to age discrimination, we'll provide health care coverage until you're 55 and then you're on your own? >> but you've got to see the details of how they would accomplish this. the only thing they said was the only people 55 to 64, how would you make that happen exactly? how would you prevent employers who are covering those people now, and they are expensive to cover. how would you prevent those employers by dumping them into the public system? >> it starts to happen. >> i can't imagine -- however you work out, there's a lot of things i can see problems with. i can understand being concerned employers would dump all of

their employees into this public plan. the idea of pushing people out when they turn 55, i can't imagine that's not age discrimination. >> it's hard to imagine how that would actually happen in real life. but you really need to see how the details -- so they've sent some things apparently to the cbo. and i would imagine, before the cbo can score it, they would need to know some details like that. what exactly would cause employers to keep people in the private insurance market? >> you'd have to prove discrimination, you'd have to prove medicare's worse than private insurance. and why would it be? >> not necessarily. >> you see cases of 65. >> i would definitely say don't you think that your insurance you get right now is better than -- >> i would hope that they'd -- i don't think you could prove discrimination for that. >> i think there's another angle to this other than the discrimination angle. you know, would be one in which you could have employer mandates. so that might be part of the, you know, story here. we've heard about employer mandates in the house bill and the senate bill plus individual

mandates. so if you had a strong employer mandate that said employers have to provide insurance to people 55 and older, that could solve your problem. >> but you have some of these mandates that say you have to provide insurance for your employees or you have to pay, let's say, the 8% surtax which a lot of employers will say great. that's a fixed cost here. i'll pay the 8% which may not be more than i'm paying already. at least it's a fixed cost i can put in my calculations for my budget for the next five years. >> i found the 8% very interesting because we're a health care company, so we are committed strategically and morally to providing health benefits for our employees. but our health benefits costs as a percentage of payroll is exactly 8%. so it's a very interesting sort of break-even number. >> how about this, trevor? one of our viewers says, all right. you're getting killed with the $500 million for the uninsured, grossly underpaid by medicare. who's overpaying? everybody else? >> everybody else. >> that's why private insurance is up so much. >> right.

so basically everybody in this building is getting insurance, you know, as long as you're still owned by ge, have a solid parent company providing health insurance. and you're paying more, you know, than the costs of care for you because you're subsidizing the uninsured, the medicaid patients and to some extent medicare. to the extent it doesn't cover those complete costs. there are these massive subsidies occurring in the system. >> makes universal health care sound like a great thing, then. >> then i saw something else, too. rockefeller says we should cap medical loss ratios for private insurers. they're going to do this. now, can you -- you don't have a medical loss ratio. >> we don't because we don't -- we used to operate a medicare advantage plan, but we don't anymore. we sold it earlier this year. >> any hmo that is at 90 or above is in dire shape. and he wants to cap it -- and what i mean by that, it's the inverse of a profit margin. you know, when you look at -- decide touy united health

care, you want them keeping 17 cents or at least having 17 cents of every dollar, administrative, shareholders. they're thinking about capping that at 90. no matter what they're doing, they've got their hands all over the way we do it now. >> i saw that. >> rockefeller, what does he care? >> and we do have the ceo of etna coming on later. he'll have an interesting perspective on that. but the medical loss ash yoe ra in the 70s and low 80s sometimes. >> 90. >> to go to 90, it's hard to imagine how they could have enough left over for administrative costs and profit and to build capitalization. >> now it's almost a pejorative to call someone. >> when i read this 90% which i had not seen before, but when i saw the 90%, i thought, maybe that is a threat being put out there in order to really get the

insurance industry behind this -- >> 85. >> -- new twist. >> got their attention, i'm sure. >> well, trevor, you're going to be with us for the next two hours. obviously, we have a lot to talk about. again, trevor fetter will be joining us for the next few hours. if you have any comments or questions for trevor or any of our other guests today, go ahead and e-mail us at squawk@cnbc.com. still to come this morning, he governed the state with the most medicare recipients. jeb bush talks about health care, the economy and much more. as we head to a break, take a look at the performance of the s&p health care index. you can see where that's been headed. higher as the nation's debated all of this. you are watching "squawk box" on cnbc. time now for today's "aflac trivia question." in what year did the new york philharmonic perform its first concert? the answer when cnbc "squawk box" continues.

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now the answer to today's "aflac trivia question." in what year did the new york philharmonic perform its first concert? the answer? 1842. all right, welcome back to "squawk box," everybody. checking the futures right now, we've been keeping an eye on things through the course of the morning. and right now you're going to talk about those futures well above fair value. up by close to 30 points above

fair value. our -- or make that 40 points. almost 40 points above fair value. our other top story this morning, the obama administration plans to extend the life of the $700 billion financial bailout fund until next october. an announcement is expected as early as today. an administration official tells cnnbc is will dedicate $175 billion of t.a.r.p. money to deficit reduction. that amount represents the total amount of treasury expects to be repaid to banks by next year. the new trading day opens with the dow and s&p coming off 1% drops, the biggest since november 27th. bob dahl is blackrock's chairman and joins us from new york this morning. bob, good to see you again. looking at your recent note, the words that pop are, we are growing more concerned about the near-term outlook. can you explain some of that? because the backdrop is relatively positive, things you talk about. >> yeah, it is. and we still think the cyclical bull market has further to go. but in the near term, we're just concerned that the market's

gotten stuck, carl, the last couple months, it's gone nowhere. volumes declined. the leadership which has been the financials on this rally from march have underperformed. the average stocks underperforming. there's just some charting going on, and the news picture remains kind of mixed. so we think the market's taking a pause, arrest. a little higher quality, selling energy stock and buying a health care stock, maybe even a retailer. >> why are we not getting more bang for our buck when fedex says the quarter's going well or t.i. will come in at the high end of the range? >> i think the market has already already given the economy the benefit of the doubt of some improvement. we're going to actually need to see that. the jobs number was an interesting one. better news but still jobs lost. we need to turn some of these corners for the market to be able to move higher. i think we'll get there, but not just yet. >> you must enjoy your job, though, bob, because you know,

if you pause at the case there won't be a correction, there will be a sideways consolidation, this is exactly what it would feel like if it was just a sideways consolidation. you know the last time this happened, bob? july. do you remember july? we were stuck. >> absolutely. >> from march we moved up how much? 30 percentage -- a big move. and then we did this -- and all of a sudden for no reason, nothing good happened. and it took off again. and you could make a case for either thing happening here. we have people on like yesterday meredith whitney, rosenberg. i get so scared listening to those people, i could see this thing being 2,025 points too high, but then i could also make a case it's sideways consolidation. just have fun. >> there's never a dull moment, as you well know, because you sit in the same kind of chair. i think what i would add to the picture is different from july, we're beginning to transition. you know, july we were still in this p.e.-driven mode, the

liquidity pushing p.e. ratios up. we're transitioning to the economy's got to do better and earnings have to come through. and that's a different environment. stocks go up during those sorts of periods, but it's more ragged. it's less uniform. i think it's back to the stock figure. >> what is it telling you, bob, that we are -- at least for this very moment, we seem to be able to dodge bullets like dubai and maybe greece this week. why aren't they turning out to be bigger threats? >> well, i think back to joe's point, there's so many cross-currents. they are reminders that the deflation environment is not over. dubai, greece, people not getting raises, people losing their jobs, banks still being shut down, small community banks. these are all signs that growth -- nominal growth is slow and deflation's not over. >> t.a.r.p. at least appears to be -- it's going to be a moderate success. we're getting a little more

clarity, if you can call it that, on health care. this jobs bill is going to have an echo, right? are you seeing a little less political risk? >> i think the political risks are still out there, carl. health care, we've got some clarity compared to yesterday. but what's tomorrow going to bring? we still haven't come back to the house bill which is very different from what we read in the headlines. and we don't even know what's behind the headlines. i think there's still a lot of political uncertainties, taxes, the deficit, the whole bit. this will carry for some time to come, that uncertainty. >> you say we've yet to see the cyclical highs for the current market, but you're not saying when. >> that's correct. we identified a 1250 s&p 500. i still think we'll see that. but i think we just have to go through this period of cautiousness, and it's going to last more than a few days. it may last a few weeks, but i think we'll see higher highs sometime next year. >> sometime next year. you see rates obviously staying put, at least for the first half. >> for now, but the curve slowly

but surely moves up if the economy continues to improve, and we think it will. >> all right, bob, we'll see what the coming weeks bring. good to see you. >> have a good one. >> we're getting viewer mail. tony fratto, one of our contributors, says all an employer has to do is offer insurance that could be actually worse than medicare. >> sure, but you can't offer one policy for people under 55 and a different one for people over 55 to push them out of 55. >> yeah, but if you're in an average plan beforehand, and a lot of people are offering much more average plans -- >> sure. >> no botox, no e.d. drugs which is what you need at 55 anyway. >> no implants. >> no dental. >> major employers are cutting back. >> we have another viewer, michelle caruso-cabrera says when the government started offering prescription drug service to her grandfather -- or grandparents, they said we'll continue to provide drug benefits as part of your plan, but it's going to cost you more

than the government plan would cost. you choose. and what do you think they chose? they chose the one that's going to cost you more. so that's another way. >> there are a lot of questions about this. another guest wrote in, this is a doctor, douglas burns, medical doctor, says medicare was designed with life expectancy of individuals after age 65 was only a few years and there were many more workers with payroll deductions. the demographics have shifted which has made the program unsustainable. >> that's a david walker looming entitlement bubble. social security, same way, right? >> yep. >> trevor? >> i think that's right. i think the counterargument would be, well, if people are buying in, they're paying for that coverage. not sure that -- again, we have to see the details in order to make these conclusions. >> right. that's a fair point. >> you know, the long-term solvency of medicare is incredibly important to doctors and hospitals and taxpayers because otherwise guess who gets stuck with the bill? >> all right. we'll go to break. coming up, democrats reaching an

agreement could remove a major obstacle to the health care bill. we'll have former florida governor jeb bush and tenet health care board member, he also is that, and he will be here to weigh in.

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take a look right now, you're going to see texas instruments. this is one of the stories we're following this morning. the chipmaker says that its quarterly profits and revenue will come in at the high end of its target range. but that did disappoint some investors who were looking for even better results. also, procter and gamble's deal is likely to be signed within the next few days. and germany's volkswagen would buy a one-fifth stake in suzuki giving it access to the japanese firm's expertise in small cars and its dominance in india. shares of men's payroll retailer plunged more than 15% in the after-hours trade. the company issuing fourth quarter guidance below expectations and saying that it expects a drop in fourth quarter sales. >> keep sending us your thoughts on health care. we'll go over them throughout the show. our address is squawk@cnbc.com. when we come back, former florida governor jeb bush joins

guest host trevor fetter. we'll talk health care reform, job creation and the state of the economy. an interview you can catch only here on "squawk" next. as we head to the break, here's a look at the widely held stocks. "squawk box" on cnbc returns after this. we are first in business worldwide. (announcer) we call it the american renewal. because we believe in the strength of american businesses. ge capital understands what small businesses need to grow and create jobs. today, over 300,000 businesses rely on ge capital for the critical financing they need to help get our economy back on track. the american renewal is happening. right now.

welcome back. 30 minutes past the hour. a couple top headlines. mortgage applications jumped 8.5% last week, the highest in two months. the mortgage association says the rise came mostly from borrowers seeking to refinance and lock in low rates. a ceo says he's willing to sacrifice short-term market share to further the automaker's long-term restructuring goals. he made the remarks to members of congress. he's trying to streamline chrysler's product line and produce more fuel-efficient engines. and the european union has extended its review of kraft's bid to buy cadbury. this comes after recessions aimed at reducing anti-competitive concerns. cadbury has rejected the bid and will file a formal response next

week. he served two terms as governor of one of the largest states in the union. joining us is former florida governor jeb bush. our guest host is trevor fetter, president and ceo of tenet health care. governor, great to see you in studio. >> thank you, joe. >> it's a pleasure and we appreciate you coming in and you're a board member on tenet as well. >> i am. >> we thank trevor for getting you to come in here. we appreciate it. did he have to ask you for us to get you in here? can we ask you now and you'll come in? >> yeah. i'll submit. but i don't do a lot of tv interviews. it's much safer. >> that's probably true. i've learned that, safñ for me -- yeah, safe foro . were you able to watch in the green room? we tried to solve a lot of the problems already with what's happening, and we haven't solved any of them. we just have more. >> you guys have been watching this carefully because i watch you every morning. it is incredibly complicated, isn't it? >> it is. >> i mean, it's so complex and to get news that's half news, you don't have all the news, it

makes it even harder to have an opinion. the fact is that this was a golden opportunity to transform our health care system. and i think no one would suggest there's any transformation going on here. this is now kind of migrated to how do you provide insurance for more people which is a good thing. but this is a dysfunctional system irrespective of that. and i would have loved to have seen more focus on quality, more focus on prevention. all that's kind of been put aside. and now the debate is about what's the role of government in all this and how do we provide more insurance. and for tenet, that's important because there's a lot of uninsured people showing up in emergency rooms. >> trevor disagrees with you. off camera i said to trevor, we are being told that you're either for reform or for the status quo, and that leaves out the other option of for a different type of reform of actually maybe -- maybe not quite as all encompassing, but go into where the real problems are, the sacred cows, doctor

payment, the way that things -- go into the actual cost side of things and come up with something different. you said that's what jeb wants to do, but you want to do it this way just to get something done. this doesn't sound right. >> well, i think you always have to go back to what are the problems we're trying to solve? so for us, the most important problem is covering the uninsured. there are lots of other problems. you know, we have incentives that are not aligned between hospitals, physicians and patients. we have costs that are high. we have waste and inefficiency. and we know that -- we have the ability to solve these problems. so i think the question is, do you try to solve it all at once, or do you try to solve one thing at a time? >> do you cover everyone first and then work on the system that's totally broken or do it at the same time -- it seems like it's going to be worse if you cover everyone with a bad system. >> if i had to choose, i would choose working on the coverage first. >> you would? >> i would. i would. >> get it done. >> now, for us, that is the most severe problem. if you're somebody who doesn't care about the fact that they're

uninsured people in the country or you're strictly concerned about, you know, federal spending and the percentage of gdp on health care, you might have a different point of view. i think eventually we've got to get to all of these issues. but, you know, given a choice, i would choose to cover the uninsured. >> the humane thing to do and we haven't done it for 70 years. we're the richest country in the world, we should cover everybody. >> i'm going to put on my tenet board member hat. >> as a governor, you saw massive problems, too. >> no, and this won't change any of that. i mean, if medicaid's going to be expanded even though the federal government's going to provide the great majority of the match, it's going to create more budget shortfalls. it's a pay and chase system. both medicare and medicaid by and large is a pay and chase system. there's huge fraud, huge inefficiencies. it's not a model that we should apply to solve this problem. i mean, it just isn't -- it's dysfunctional, medicaid particularly is dysfunctional.

and as trevor said, the reimbursement raitts are abysmal for doctors and hospitalizeds. to expand medicaid as a solution really is not going to get us anywhere. a year from now, two years from now, everybody's going to be back to the drawing board again. >> but the whole debate's taking part in a political context, right? the democrats have the ball right now. so is it -- you're saying it's not worth it to try to operate with them in control? >> no, i think there ought to be engagement for sure. i'll tell you, though, that the democrats overreach on this. there's a 2010 election where you could have a dramatic reversal. and then you have the chance to reverse all of this again. so i think there needs to be some common ground. if they overreach both on the budget and on cap and trade and the cumulative effect of health care, all of this, there could be a massive rebellion in the country, people deeply disturbed about the scope of government and then we're back to the debate again with a dramatically altered approach. >> but the things we're talking about this morning are a far cry from the fears of single payer

that we dealt with a couple months ago, right? >> i think so. this is an interesting -- it's an interesting -- it's a simpler approach, less complicated to taking existing programs and expanding them for sure. >> so the tendency -- the biases here, the compromised bias is to the middle. you would argue that? >> i would argue that as well. >> i think one of the most -- >> do you think republicans should get on board with that? >> no, i wouldn't argue that. you can't be on board on something where there hasn't been the specifics outlined. but this was clearly an effort to try to get beyond what was becoming a pretty sterile debate about the public option. by the way, the public option -- the language that we use is pretty obvious. this is a government option. and medicare is a government option. and so is medicaid. so we're not changing too much. but i think it's an effort to try to find common ground at least inside the democratic caucus. look, i think there ought to be -- everything ought to be on

the table. there ought to be an open discussion. and the president had that opportunity. now it seems like the battle lines are drawn. i doubt that there's going to be a lot of republican support for this. >> are you hopeful that if there is something that gets passed, that it can be improved, worked upon, maybe look at some of the fraud that takes place in both medicare and medicaid and improve those systems down the road? >> yeah, we're going to have to do that. and i think tenet, for example, is a leader amongst hospitals on focusing on quality. yet quality's not reimbursed. you know. think of a system where you're really making a major effort investing millions of dollars to improve outcomes, improve quality, and all there is is a punitive result at the end if you're not successful, but there is no rewards for quality. that's one place where i think democrats and republicans should agree. we have huge illnesses that are created by our own behavior. yet there's no incentives or very minor incentives to deal with how do we create a more

healthier population? what incentives are in place through our federal programs and through private insurance to deal with prevention, for example? those things, you know -- i think, again, there shouldn't be a big argument between democrats and republicans. and i would have thought that that should have been the place where common ground could have been found and then have our food fight. >> who are some people, if there's this common ground for republicans and for democrats, who are people on both sides of the aisle who understand that that might be able to lead us in that direction? >> well, there are a lot of thoughtful people on both sides. this debate, though, got focused on this one big issue, which is insurance. i have a lot of respect for people that serve in washington. and the administration, too. there's got to be people that see this as important. in fact, it's in the bill, but it's a minor element of the 2,000 pages. it's not really what's driving this. >> all right. we've got much more to talk about in terms of health care. but i just -- the state of the

republican party, we're going to touch on, too. you've got some interesting things happening down with charlie crist. is he republican enough for us? is he republican enough for you? >> well, we'll find out. we'll find out. the primary's in august. he's running against a really talented guy. and charlie crist is one of the best politicians i've ever met. so it's going to be -- if you like politics, that's a good race to watch. >> and we'll talk about the future of the republican party and what you were alluding to, walking the plank. a lot of these people are walking out the end of the plank, aren't they? what do they tell them, if we pass something, the president will be so popular that people will forget that you did this? is that how they sell it? >> i think that's what they were saying three months ago. >> it's interesting. stay with us. >> we'll have much more. our guests are jeb bush and trevor fetter. don't forget, t.a.r.p. oversight committee chair elizabeth warren will join us in just a little bit. we'll get her thoughts on extending this program, whether or not it's working, and what should be done with that money once it's taken back.

"squawk box" will be right back.

back with former florida governor jeb bush and also our guest host this morning it trevor fetter, the president and ceo of tenet health care. we've been talking about the health care deal that's being worked by this gang of ten on the senate side and what that means for health care. but joe alluded to some broader topics, governor, and that is what the future of the gop looks like in the fall of 2010. you mentioned the potential for some dramatic reversals in the number of house and senate seats that are held. how dramatic could it be? >> it could be a takeover by the republican party. that's remote, but 1994, that happened in terms of big gains. i think what has to happen is that this growing rebellion against this massive growth of the federal government kicks in, as it has, and people begin to see it. and then secondly, there needs to be a compelling alternative to just being against that. and my guess is that if the focus is on economic policy,

that that will be a very unifying thing. i'm not an economist, but the obama economic policy on a good year, put aside this year where you're dealing with a low base, a good year is going to grow at 2% per year. most economists would agree with that. if the republicans can come up with a compelling alternative that says for the next ten years we'll grow at 4% per year, then there with going to be a lot of people interested in that. and there's no reason why we can't have that. we have to radically change policies, but there's no reason an't grow 4%. >> what you're saying is the party has not yet clarified that position, right? >> no. >> why is the message so cloudy or so nonexistent at this point? >> well, it's early. president obama is incredibly domineering in the news. he dominates the debate in many ways. and there is not one person that is there articulating that message.

that's the deficiency of being out of power. it's hard but i think that by nearing the election 2010, at least there will be, to win, we need to have a unifying message. and then, you know, the person will come later. who knows who that will be? remember, four years before that, before in the last election cycle, barack obama i think was a first-term state senator from illinois. >> governor, there have been some olive branches that the administration has made to the business world. in fact, today in "the wall street journal," the lead editorial throws out a couple of kudos points to the administration. one for the idea of the zero capital tax gains on new investments and small business. the other is for expensing for small business that was set to expire at the end of the year by extending those two ideas. what's your sense of the relationship the administration has with the business community right now? >> well, for the big businesses, they're looking at it as a market opportunity. washington's become the

financial capital of the united states. and a great business -- source of business. so for the ges of the world, you know, they openly say, we're going to expand our operations in washington to get more business. for small businesses, i don't think they have a good relationship at all. because there's so much turbulence, so many ideas, so many things happening at once that the small businessman or woman is frozen in place. they're not making any decisions till they know what the rules of the game are. i mean, those are interesting ideas. a one-year zero capital gains is great. but what about a permanent zero capital gains rate? or what about a lowering of the capital gains for everybody? what's small? we want small businesses to become medium-sized businesses. and trusting the market and trusting people to pursue their dreams in a competitive marketplace, i think, will yield a better result. and republicans need to offer that. i mean, again, you can't just be saying, president obama's approach is the wrong one. i think it's okay to do that,

but there needs to be an alternative. you know, let the games begin because i think people will begin to gain confidence and not migrate to the government-imposed solution every time if someone comes or all of us come and say, here's the approach that's different. >> how does the party react to things like t.a.r.p. making money, for instance? if jobs is not going to happen any time soon despite what's been put in place, how does the party say -- do they say good job -- >> i do. but then, again -- >> why would they not say good job? they were the guys who voted it down the first time around. >> the t.a.r.p. was proposed by president bush, and t.a.r.p. has made money except for the parts that have come afterwards. aig, we'll see about that. but gm was announced quietly that there was a huge loss on that. but i'm the guy that sold my chrysler and bought a ford, you know.

i'm not big on all this. >> how would you advise the party to be more fiscally conservative, move to more socially liberal politics? okay, you're saying you have maybe not go that way. do you think that the palin conservative is the way to go for the republican party and to have a checklist of what makes you a real republican? >> no. >> and to, you know, charlie crist isn't a real republican? we've got to back this other guy? >> i was with rob simmons yesterday in miami. he was raising money. rob simmons is a real republican. he doesn't -- i don't agree with him on social issues. he is a libertarian on social issues. but he's a real republican, and he is a fiscal conservative, and he believes in limited government. and he believes in a strong national defense. a guy like rob simmons needs to be party of our party if we're going to be a majority party. he's going to beat chris dodd in my opinion. >> if you were in charge of the party --

>> the kbaz emphasis is on fiscd economic policy. you don't abandon your views and say they're unimportant. you focus on the things that unite -- and things that are important for people. i mean, this is a deeply disturbing time if you just project out deficits as far as the eye can see, run rates of the federal government spending that is so beyond what is normal for americans. but this alters who we are, and i think americans -- you know, this is a center-right country. 40% of the people in this country define themselves as conservatives. >> when a democrat gets elected, they sort of thing that it means a lot of times that suddenly the entire country has shifted. and then within a year or two, it seems like that gets reevaluated. >> look, if you could rewind the clock a year and a month and knowing what we know now about the proposals of president obama in reaction to a really tough economic challenge, do you think -- honestly think that barack obama would have been elected president? >> who should the republicans run -- >> i don't know. >> who are the rising stars? >> answer my question first.

>> i can't. no, i'd be afraid to. people have my e-mail. i can't. >> but you know what i mean. >> no, i just ask questions. >> had the president proposed all the things -- >> we know where the ratings -- >> they're pretty good given how tough the times are. but had the president proposed all the things he proposed now, i don't think he would have been elected. so the conversation would have been different. >> i think he did propose but no one thought he was serious. they thought, he'll move to the center after he's elected. >> a trillion dollar health care plan, a second stimulus plan now, a cap and trade plan. >> will you answer my question? >> i'm trying to avoid it. >> will you run again? >> i don't know. i'm trying to achieve financial security for my family first. and i'm involved in education reform which is where my passions are. >> would you advise the republicans to run, pailen? >> i think we althouought to ha open primary for sure. >> do you think she'd win? >> she might.

she's incredibly charismatic. look, these are challenging times. i think candidates need to retool every step along the way. they need to have intellectual curiosity to deal with the fast-moving nature of life. understanding how china operates today for the next president of the united states is going to be a dominant aspect of the job. five years ago it wasn't. i mean, there are things happening now, technology's changing how we live. i think you want to have a candidate that is curious enough to go seek out the best people in the world to try to help them craft policies that are relevant to 2012. and if sarah palin does that, she's going to be a formidable candidate. >> do you still have the hunger for office? do you miss the buzz of being -- of running? >> no, i miss -- what i miss is service. i miss the chance of -- being governor was the coolest job in the world. florida is a fantastic place, dynamic, wacky occasionally. >> not in that order either,

right? >> yeah, exactly. it's a great place to serve. and i had a chance to act on my beliefs and had -- generally had a legislature that was supported. we did a lot of interesting things and it was a blast. >> still no income tax? >> never. >> no income tax. three times the amount of people of new jersey and the deficit is a fraction of new jersey's. >> and tort reform on hospitals. nice tort reform in florida. >> homestead. >> is that what it is? >> florida's got some problems, too. well, florida's got some problems that are out there when you start looking at insurance and its exposure to hurricane insurance which some people say is a big disaster waiting to happen if another hurricane hits. >> it is. and it's the price we pay to live in paradise. and if you try to socialize that risk, you create -- and it's similar to what's going on in washington -- if you create a contingent liability in the billions of dollars, it creates uncertainty. and i think it's retarding

investment. and since we're connected in many ways to the northeast, we look really pretty in that beauty pageant. i mean, if you look at the business climate up here, the next governors really need to focus on that for our country's sake but for their own citizens' sake because there's been an erosion of business climate in new york and new jersey and connecticut. and that helps places like florida. >> how long's it going to take for housing to truly repair in that state? >> it's -- i think we're about at the bottom. but there's a lot of unsold inventory. i mean, so it's going to take a while. and in the commercial market is weak as well. we're overly reliant on construction and tourism even though there's great efforts under way by the old guy and the new guy to diversify the economy. >> i just want to hear how you'd answer this. i know you probably see things like huffington post or any of these organizations. if you said we're looking at 2% with obama, we need to get back

to the 4% republicans -- >> it will be on the blog tomorrow. >> you know what they would say given -- they'd say, look what we had for eight years and what happened with the economy and the financial crisis. and they would say, you're saying to go back to that versus what we have right now. how would you -- >> we didn't have 4%. we haven't had 4% per year since the '70s or the '80s, you know, after the deep recession in 1980 to '82. this needs to be a new approach. and you're right, though. the political climate -- >> the republican fault we're in the first place? >> i'm so tired of that. >> it's not going to go away. >> i'm tired of it anyway, though. i got off the -- the huffington post is off my kindle now. >> you added it because you wanted to see what the other side was writing, right? >> right. it's so -- i don't have to read it because i know -- it's a p

pavlovian response. who could be against 4% compounded growth for the next decade of time? my goodness. that solves a lot of problems. as the denominator grows, then our entitlement problems become easier to deal with, our budget deficit issue s -- >> that's a big issue to think the republicans would be the ones to deliver the 4%. >> what you do, you open up -- you need to have immigration reform. hopefully democrats are for that. and hopefully republicans are. you have to have a growing population, and you have to have productivity growth that grows at 2% or 3% per year and you can achieve 4% growth per year. why would we put a ceiling on our aspirations? next time you have economists on later on today and this week, ask them if this economic policy will yield more than a 2% growth for the next ten years. >> most of them already say no. >> it's devastating. and yet we are -- our debate is so sterile, it's about what's going on today. we ought to be saying what do we want to look like ten years from now? >> you can measure the economic

growth in europe since the '80s. some embarked on free market initiatives and you can measure and see. >> so it's a tradeoff between the security people feel with this expansion of government and the limited aspirations for people. and i would argue there needs to be a conversation about this before it's too late. >> governor, very quickly, if the huffington post is off your kindle, what's on it? >> well, cato. >> green hornet? >> forbes. economist, cato are the three blogs, magazines i read. and i have a pretty eclectic -- "blind side's" the last book i read about a young man. now i've got to go see the movie. spectacular, inspirational book. i'm into inspiration these days. i want the cloud to lift. >> governor, thank you so much. it's been a great half hour having you on. >> you bet. thanks. >> governor jeb bush. when we come back, ron

williams, the chairman and ceo of aetna and chairman of the congressional oversight committee, elizabeth warren, a new report on the t.a.r.p. when "squawk box" continues after the break. fidelity, traders learn from the pros. say you want to backtest an entire portfolio of stocks. market experts show you how through fidelity's extensive trading knowledge center. and fidelity gives you free research from 15 independent firms, with accuracy scores... to help you decide which analysts to trust. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity.

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getting to the heart of the health care reform. senate democrats drop the public option. aetna chairman and ceo ron williams and our guest host trevor fetter will tell us what it means for the health care giants. extending the life of the t.a.r.p. the white house wants the $700 billion bailout fund to keep going into 2010. congressional oversight chair elizabeth warren will tell us if that's a good idea. the road to recovery. >> ah! >> fed strategy, job creation, the health of the consumer. >> ho ho ho to me. >> we tackle those topics with morgan stanley chief u.s. economist dick burner. "squawk box" begins right now.

welcome back to "squawk box" here on cnbc, i'm joe kerner with becky quick and carl quintanilla. our guest host is trevor fetter, president and ceo of tenet health care. much more from him over the next hour. first, though, it says here that you have -- i'm going to tell our viewers you have some of our top -- i don't know why you don't tell our viewers the top stories. do you not have some of the top stories? >> absolutely, joe. the obama administration plans to extend the life of the $700 billion financial bailout fund until next october. an announcement is expected as soon as today. an administration official tells cnbc is will dedicate t.a.r.p. money to deficit reduction. that amount represents the total the treasury expects to be

repaid by banks through 2010. the administration's plans will leave $140 billion of uncommitted t.a.r.p. funds unused and congress will be allowed to allocate that money as it sees fit presumably for jobs programs. meantime, a new report by a government watchdog group says the bailout fund left many problems unsolved. the congressional oversight panel led by elizabeth warren argues it helped stabilize the financial system but has done little to boost lending or stave off home foreclosures. the report declined to take a stand on whether t.a.r.p. should be extended through the end of the year. warren will join us in about 30 minutes. again, senate democrats reaching a deal on health care last night. majority leader harry reid refusing to give details, but he says the proposals will be sent to the congressional budget office for cost estimates and be marked up on that. senate negotiators say they agreed to replace a government-run insurance option with a scaled-back, nonprofit plan. the substitute would be operated by private insurers,

but administered by the same agency that supervises the health care coverage plan for federal workers. the deal would also expand medicare to americans starting at age 55. senators rejected a bid to limit insurance coverage for abortion. we've been hearing from tenet health care ceo trevor fetter on health care reform. right now it's time to add another voice into this mix, another expert on this subject is joining us. here now in a "squawk" exclusive is ron williams, aetna's chairman and ceo. it's a pleasure to have you. >> it's a pleasure to be here. >> we've been talking a lot about what happened last night in the senate. obviously we don't know all the details. what's your sense from what you've been hearing and the headlines you've been seeing? >> i think it's very positive that they're beginning to move away from the government-run health plan. and while we don't know all of the details as to how the plan would work, i think it's very encouraging that they are looking at other alternatives that really build on the successes that we've had in the private sector. >> part of our discussion that

we've had here this morning is if people are in favor of these new changes that are coming down the pike, if they'd like to keep the status quo or there are other things they'd like to see included in this, what are some of the things you think are absolutely necessary and some things you'd like to see added into the conversation? >> i think one of the things that's really important is that we build on the success and the strengths of the employer-based system. we have over 180 million people in that system. and while certainly there's room for improvement, overall it's worked well for those who participate in that system. i think one of the things that we have to make certain as we make changes is that we really do get the details right. as you know, insurance is regulated by the insurance commissioners of over 50 states. as we move into the next step, we need to tap into the expertise they have to make certain that as we bring more people into the system, we focus on costs and the value we get out of health care. >> our guest host is trevor fetter who is the head of tenet which operates 49 different hospitals.

and trevor, again, you've told us through the course of the morning for people just tuning in that you are underpaid badly not only by medicaid but by the uninsured people that are coming through. but who do you think gets overcharged as a result of that? >> well, i wouldn't say anyone gets overcharged, but those who are, you know, really paying their fair shares are companies like aetna and the employers who buy their health insurance policies through aetna. we happen to use aetna to provide our employee health benefits. so it's this massive cost shifting that's going on. we've talked a little bit about the shifting within the united states from the insured towards the uninsured towards medicaid. there's also a massive shift that occurs around the world from the united states to other countries in terms of the higher drug and device prices that we pay. but ron, i appreciate your being here. i have a question for you. really, i was surprised, one of the big pay-fors in the health reform bill is the cadillac tax. and when i first heard this term, i thought, well, it

couldn't possibly apply to our company. we don't have any special executive health benefits. we all have the same health benefits offerings from me all the way to, you know, the front-line people in our hospitals. yet when we did the analysis, we found that many of our plans that are taken up by the people earning the least actually trip this cadillac tax. i wonder if you have any insights into how employers might change their behavior because of this. >> well, i think your observation is very consistent with what we see which is often the more moderately compensated will be impacted because they really tend to select the richer plans that have more predictable out-of-pocket expenses and provide more comprehensive coverage. also depending upon the employer, it can impact those individuals who have larger families as well. so i think one of the things that we really need to focus on is figuring out how we improve access and finance the costs of

insuring everyone in as broad based a way as possible. i think one of the things we're struggling with is we're trying to pay to bring in the 46 million uninsured by taxing only those people who really have health insurance today. so we're trying to increase affordability and access by really making health care more expensive. >> who should be paying? i mean, obviously, the money has to come from somewhere. >> i think we do have to recognize that if we are going to increase access, my belief is we need a much more broad-based approach. if we think about how we deal with other issues like hunger and other things, we come up with ways to make certain that as a society, we have an obligation to make certain that people have access to nutritional food. and so we mutualize that across our society as a whole. >> but i guess the question becomes very specifically, if it's not going to be taxing the people who have health insurance right now, if it's not going to be taxing companies, where do you move beyond that? i mean, the money doesn't come from nowhere. >> no, i would agree.

and i'm no tax expert. so i really wouldn't presume to be. i think that the position that i would take is, i think we do need to recognize that we do need to raise the revenue. i just don't believe it should be localized on the health care system alone. i think everyone who's in a position to contribute should be expected to contribute something. >> ron, can you explain the fallout from moving the medicare age from 65 to 55? and as an employer, what's my motive in that case? how can i or would i even want to -- how could i move an employee off my rolls and on to medicare ten years earlier? >> well, i think the biggest impact is really on the health care delivery system and the stability of the health care delivery system. and it comes back to trevor's point in the fact that medicare and medicaid pay about 80% of the costs of health care. that's what medicare pays is 80%. medicaid pays even less. so adding another large cohort of people will basically increase the cost shift back to

the employer-sponsored system and ultimately to the consumer who's purchasing their health insurance in their workplace. >> so would you expect employers to offer less generous insurance in the hopes that employees opt out of the employer-based insurance? >> i think what happens mostly is if you're employed, there is a rule where the employer insurance is primary. so the employee would have to be separated from the company at that age. and i think we do have a real problem we need to address of people who are 55 or older who are out of the workplace and need individual insurance. that's why we've been an advocate of eliminating health status for health insurance but also making certain that we bring everyone into th system so we can mutualize and spread that cost. >> go ahead. >> ron, it's trevor again. one of the solutions that's been proposed out there is to allow insurers to offer policies across state lines. and i think most people in the country would think aetna

already does that. could you just expand a little on that? is that a meaningful solution to get more people covered? >> yes, i think it is a terrific solution and one that's not currently being explored. what happens is, today each product that we sell in our insured marketplace has to be filed with each state. and the variability in the regulations and in the required benefit mandates is substantial. and what a national product would do would be a way of creating a reasonable floor so that a person had a very solid product but would eliminate the administrative expense and variability. we believe that a national product in some states could reduce the premium by as much as 20%. >> i'm sorry, i was going to say, i've been told that mandates by states range from eight mandates in some states to 49. in new jersey is particularly notorious for having a high number of mandates. >> you know, we hear they're going to consider alternatives -- i don't know, this one didn't seem to really be considered at all. let me ask you this, though,

ron. jay rockefeller, 90% medical loss ratio. if the government gets involved in setting medical loss ratio, number one, is that just a bargaining tactic or a bluff? could something like that actually happen, and what would that do to the private health insurance industry? >> i think it would absolutely stop the innovation in the system. in the past four years, we have spent $1.2 billion on health information technology to improve the quality of health care. that $1.2 billion would be considered bad administrative expense and not be allowed under this type of approach. i think the best way to address this is let the market decide. we deal with the most sophisticated purchasers in the country, companies like trevor's, other organizations who are well equipped to figure out whether they're offering them a good value in the overall price that they pay. i think trying to look at components of it really isn't an

appropriate way. >> but this whole argument, i mean, if you really slow it down, ron, it would be why should health care delivery be in the business of making a profit in the first place? why not do it like a fire department or a police department and just -- and then the private industry side would say that the government is too inefficient to do it effectively. we just keep going back and forth and back and forth on this fundamental issue of how to do it. >> well, i would look at the success of the employer-sponsored system as the proof in the pudding. i think it's worked very well. i think the most sophisticated employers who employ hundreds of thousands of employees have gotten very good value by working with private insurers. if you look at the innovation, we have over 10 million members who have their own personal health record, prepopulated with all of the data. it's their data. they can take it with them. we've developed that in the past two years. in that time, no medicare members have a personal health record.

that's just one example of the level of innovation. >> ron, how's your relationship with the obama administration? there have been movements from the administration to reach out to the insurance agency, and then there have been other times when the insurance agency's been demonized. >> i think what i try to do is focus on the health policy issues. and the one thing i've learned is there's health policy and then there's the politics. quite honestly, i focus on the health policy issues. and i think on the health policy i have a good relationship with the administration. i have a good relationship with republicans and the democrats. >> oh, that's just -- come on, ron. after what you've been -- the insurance industry has been vilified beyond belief. you don't take any of that personally at all? >> well, let's just say we have a rule at aetna which is called positive intent. so we always assume positive intent. >> american petroleum institute, api, okay. all right. he's on message here. >> mr. williams, we appreciate your time today. thank you so much for joining us. >> thank you. it's a pleasure to be here. >> okay. >> why can't you live like that?

>> you know what? >> api. >> right. i thought i learned from greg kinnear, sarcasm is the domain of the loser. >> "little miss sunshine." >> i tell myself that, but it's hard to live it. what does that assume -- >> assume positive intent. >> positive intent. >> a better place. >> everyone around me. >> until somebody absolutely sticks a knife in your back, right? >> even though i see everyone around me with negative intent, i should assume positive intent? >> yes. >> that seems to be denying -- >> reality? next, the markets in the economy will take center stage. morgan stanley's ceo dick berner will tell us how far down the road the nation is to recover. 8:30 a.m., congressional oversight chairman elizabeth warren -- chairwoman. it's interchangeable. extending the t.a.r.p. is a good idea of a revolving credit line.

futures trying to get something back after the dow lost more than 100 points yesterday. the dollar once again resuming its decline so the old risk trade on a modest level. a couple headlines, publishers

are delaying e-books. simon & schuster will postpone editions of 35 leading titles by four months. the company's ceo says e-books should come out after hardbacks but before books go to paperback. warner brothers plans to expand tmz, the tabloid news website and tv show will become 100% owned and operated by the studio once it spins off from time warner. "the l.a. times" says warner brothers wants to grow the news operation through expanding ad sales. with the u.s. gaining sustainable ground on its road to recovery, the fed is under increasing pressure to come up with a strategy for a smooth and timely exit. joining me now is dick berner, chief u.s. economist at morgan stanley. great to see you this morning. >> thanks for having me, joe. >> let me ask you, when you heard the chairman last week, after we had a couple of good days in the dollar and we had that decent employment report and he said that doesn't matter. we're staying where we are for a long, long time. and we haven't done that well since then.

is it the right move to just stay like this for another year? >> no, we think that the fed will exit in 2010, joe. and i think the basic reason is that the economy is improving and that the fed has put in place extraordinary measures to really rejuvenate the economy and restart financial markets. and those measures, i think, will get traction increasingly as we go forward. so at some point in 2010, it's going to be appropriate for the fed to start to exit from those policies. >> we'll be at 70 yen by then, dick. do you sacrifice the dollar? can we -- if it's the end of 2010, would that be the right thing to do? >> no, we think, actually, we're going to start a little bit sooner than that. in two stages. the first stage will be after the asset purchase programs, the mortgage buying, the agency buying ends at the end of the first quarter, the fed's going to start draining slowly excess reserves from the banking

system. and the second stage will be that they actually start to lift policy rates beginning in the third quarter of next year. so it's going to be a gradual exit but nonetheless one that starts really in two stages in the second quarter and in the third quarter of next year. >> do you think this is good, this is a good time line? they came in effectively, they're exiting effectively? >> i think it will be, but it's obviously going to be conditional on what we see going on in the economy and the outlook for inflation. in our view, the economy will be on a path to sustainable growth. and we think that inflation will be bottoming. not that inflation is high, but the fed's campaign to prevent deflation, i think, will be pretty much on track. so that point they'll start to go in the other direction. >> dick, we had former governor jeb bush on earlier. he asked us to ask economists today, the way things are laid out right now with the administration's plans, do you anticipate seeing gdp better

than 2% over the next decade? >> oh, yeah. i think, first of all, the economy, i think, is capable, becky, of growing around 2.5%. that's down from where it was a few years ago, but that's certainly not bad, and it's better than many other countries. and second, i think that, you know, we're going to see next year above-trend growth, growth at around 3.25%. and probably 2.5% in the following year. we obviously have a long-term set of challenges to deal with. but if we can grapple with some of those challenges, i think there's reason for optimism beyond 2% over the next several years. >> dick, are we -- is everybody who is worried about the consumer and layoffs on the state and local level, are they underappreciating the extend to which foreign consumers will help the economy? are we in that mindset where it's the u.s. consumer or nothing? >> i think that's exactly right, carl. i think that people are

underappreciating the strength of growth in many countries abroad, particularly emerging market countries in asia followed by those to some extent in latin america. we have a focus on the industrial world and the industrial world isn't doing all that well. obviously, what we're seeing in japan and europe and in the uk is a little disappointing. but the emerging market economies and consumers in the emerging market economies are starting to come into their own. it's a gradual process. but i think it represents a big, big shift in the way we think about the global economy. >> i know this other guy at morgan stanley that talks about china a lot. i know you know who i'm talking about, steve rhodes. what if something doesn't go as well as can be expected over there? then would you change your forecast? a lot of people think that, you know, china's a great creditor nation, no doubt about it, but they're totally overbilled supposedly and there are looming problems. do you buy that? >> you know, we don't buy that.

i think there are some risks that we have seen in some parts of the chinese economy, some growth that outstrips in capacity that outstrips demand. every time we worry about that, however, it seems to catch up. and i think what people forget is that living standards in china are improving. that actually, we all know there are lots of questions around the chinese data. we've done research that suggests that the share of chinese gdp and consumer spending is actually quite a bit higher than conventional thinking would have it. so that shift away from an export driven to a more domestic-oriented economy, while slow, is still under way. >> great. thanks, dick. appreciate your time this morning. >> thank you. >> good to see you. the white house this morning wants the t.a.r.p. program extended with hopes of using those funds to pay down the deficit and stimulate jobs. we'll talk to the chairman of the congressional oversight panel, elizabeth warren, who will tell us if that is a good idea and tell us about this new

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coming up, everybody, the congressional oversight panel says that the t.a.r.p. program is leaving many problems unsolved. we will have the panel's chairwoman, elizabeth warren,

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welcome back to "squawk box" here on cnbc, first in business worldwide. we are just one hour away from the opening bell. our guest host today, trevor fetter. he's the president and ceo of tenet health care. we've had a lot to talk about with him today, considering everything the senate did j yesterday. trevor will be with us the rest of the program as well. meantime, some of the other stories this morning, mortgage applications have risen to their highest level in two months as homeowners seek to lock in low interest rates. the mortgage bankers association says applications jumped 8.5% last week led by a surge in refinancings. volkswagen is buying a stake in suzuki for $2.5 billion. vw wants their expertise as well as its prominent position in asian markets as it seeks to become the world's biggest automaker. and shares of texas instruments, if you haven't seen this already, they are called lower even though the chipmaker says quarterly earnings will come in at the high end of its earlier target range. that disappointed some investors

who were expecting the company to be even more optimistic. the obama administration plans to expend the life of the $700 billion financial bailout fund until next october. an announcement is expected as soon as today. an administration official tells cnbc it will dedicate $175 billion of t.a.r.p. money to deficit reduction. that amount represents the total treasury expects to be repaid by banks through 2010. it's been a busy week for the congressional oversight panel with the release of its latest report on the t.a.r.p. as well as a hearing thursday with the treasury secretary. here now with more this morning, elizabeth warren, chairman of the congressional oversight panel, professor at harvard as well. good to have you. >> good to be here. >> in looking at a summary of the report card, what's striking, it's hard to grade t.a.r.p. because it occurred within the context of a lot of other things happening as well. at congress and at the fed, right? >> that's right. that's right. >> so what is the grade? what is clear? >> well, so here's the part that's clear. part of what they did was very, very good.

remember, all the indicators showed that this economy was about to plunge over a cliff. and t.a.r.p., as part of this other set of programs, was a very strong government response that in effect held up a huge sign and said, we will not let this economy collapse. and that sort of steadied everybody and got everybody calmed down. and we went into a recession but not all the way over the edge. that's the good news. that's what we got out of t.a.r.p. but remember, the point of doing that was not just to shovel hundreds of billions of dollars into large financial institutions so that they could survive. the whole idea of doing this was that it was going to help the real economy. remember, it was going to restart lending. we were going to clean up the books of the banks. we were going to make money available to small businesses. we were going to get ahead of the mortgage foreclosure crisis. when we evaluate t.a.r.p. in terms of what it was supposed to do in the real economy, it doesn't get good marks.

>> right. is it clear to you whether or not the money that we're getting back in t.a.r.p. should go to deficits, should go to jobs? does the commission have a few on tha view on that? >> you know, i want to put this in a really blunt way. if the money isn't spent in t.a.r.p., then by definition, it's going to reduce our deficit. there's nothing -- i don't want to dress this up any fancier than that. we shouldn't spend money on t.a.r.p. unless we really are getting something valuable out of it on the other side. >> wait a second. i think that's avoiding the point of not -- any money that's not spent is being spent to pay down the deficit. the way it was written very specifically is that money could not be redeployed for other uses no matter how worthy. >> well, what the secretary of the treasury is saying, as i understand it, and we haven't yet read the specific language, but from these reports, the statement is that the secretary believes that he will be able to do what needs to be done,

remaining to be done under t.a.r.p., with less than the full amount that's allocated. which means the remainder will be available to pay down the deficit. it's just not any fancier than that. that's all that's going on here. >> but the administration is saying, part of that extra money could be used to help put more jobs into play. and i understand your contention that if more jobs are being created, then that in turn will lower the deficit but that's not the way it's written. >> no, what i'm talking about is just spending the t.a.r.p. money. look, if the administration wants to put more t.a.r.p. dollars through financial institutions, say into small business lending, and in turn that creates jobs, you can do that with t.a.r.p. money. but if less t.a.r.p. money is spent -- >> right. >> -- that doesn't mean it can be used automatically in a jobs program somewhere else. to spend money on a jobs program somewhere else, congress has to make that decision. >> yeah. so if your parents send you to the grocery store with 5 bucks to buy bread, you can't use the remainder to buy candy, right?

>> that's the deal. that's the deal. >> okay. how about this notion that t.a.r.p. has somehow become a slush fund or revolving credit line for the government? was the original language such that the government could use it as a revolver to deploy as it saw fit over time? >> well, i think the original language has real specificity about the way in which the money can be used. that is it has to do within the financial system, right, the money has to go in through the banking system and other parts of the financial system. although it was quite explicit about some broad goals, about mortgage foreclosures, about what was happening in the real economy and restarting credit. it is not simply a slush fund to be used on anything anyone wants to do no matter how worthy. and i want to be clear. so far they haven't done it. and the oversight panel would be up in arms if they tried. so so far they haven't gotten

close to that line. >> is it fair to blame t.a.r.p. -- i should say it differently -- is it fair to bring up things like banks not lending or foreclosures not moderating, is it fair to connect that to t.a.r.p.? i mean, t.a.r.p. was there to stabilize a bank. you can lead a horse to water, i guess is where i'm going, right? >> no. it is entirely fair to blame t.a.r.p. on this. congress made very explicit in the statute that this money was to go into the financial system for those purposes, for restarting lending, for getting ahead of the mortgage foreclosure crisis. remember, t.a.r.p. is basically, other than those kind of few parameters, it's like a blank check. so it was possible for the treasury department to design the specific program any way it wanted. the way treasury initially did this 14 months ago is they said to the big financial institutions, here, take the money. do with it what you want. you know, that was not the purpose. the purpose was to take that

money and restart lending, to take that money and deal with the foreclosure crisis. and treasury just did not administer the t.a.r.p. money in the way that congress in the statute said it should be done. >> i thought initially it was for toxic assets, and then it went to bolster the banks' capital so that the banking system didn't collapse. it's hard to connect the dots between a functioning financial system and main street, but we can't prove a negative again here, chairwoman warren. to say it didn't work, what if we had 25% unemployment right now? what if we had all the things that the worst-case scenario would have brought about? how can you say it didn't work if someone argued from that other point? i don't remember, you know, all of this about the -- i know barney frank wanted some money for mortgages but most of it was for toxic assets and to bolster -- you know, to keep the financial system afloat. >> so let's look at it two different ways because that's exactly what our report says.

it says part of the reason that t.a.r.p. was initiated was to keep this economy from plunging over the cliff. and we give them very high marks for having done that. but it is also in the statute, not just in the, you know, talk-talk on the floor of the senate or in the press releases, it's in the statute that the money is there for restarting lending, that the money is there for dealing with the mortgage foreclosure crisis. and there's no dollar amounts put on any part. what happened is treasury was very, very good at shoveling hundreds of billions of dollars very fast into the big financial institutions, and that probably did prevent us from falling into the abyss. but it has not been good in designing programs for main street, using some of that money through the financial system to make sure that it makes it on down to the real economy. >> banks like bank of america have made news, obviously, in

the last few days for paying it back. there's others who argue that the pay restrictions that were put on those banks who did receive t.a.r.p. have corrupted the intent of t.a.r.p. do you think those banks are giving it back too early just to get under the thumb of the government? >> you know, the whole notion here that the banks are giving back the money and so they're going to get out from underneath any kind of government restriction, let's remember that there's a third part to this, and that is they'll get out from underneath the restrictions on pay. but they're going to carry with them the implicit guarantee that t.a.r.p. gave them. you know, it's already been out there in the rating agencies where the rating agencies are saying, in effect, well, you know, when we rate some of these very large financial institutions, we recognize that the american taxpayer would be called on again if they get into trouble. >> right. >> and we boost their ratings accordingly. in other words, they're not getting out of t.a.r.p. they may be getting out of any

restrictions imposed by t.a.r.p. they may have paid back the money. but they are living one of the consequences of t.a.r.p., and that is that we have now truly created a too-big-to-fail system. >> like being married to the mob. you're in for life. >> is it possible that lending would even be worse? and we don't know whether the t.a.r.p. worked to get these guys to lend, chairwoman warren? it would seem that banks want to lend. that's how they make money. if there's no demand or if they're not credit worthy, seems like, you know -- >> unless they're making money on reserves, right? >> banks are making money other ways right now, the principal way that banks are making money right now is they're out there trading. they're using your and my tax dollars to go out and speculate in the market. you know, that's a heck of a business model. because it says, in effect, you know, invest your money with my financial institution, and what i'll do is i'll go bet it all on black 22 in vegas.

and if it comes in, we're rich. and we're going to keep it all. and we're going to spend it like crazy including on bonuses. and if it turns out to be bad, the american taxpayer will back the deal up. >> so if treasury had been -- if they were a fund manager, right, and you were morningstar, would you give them -- how many stars would you give them? >> you know, this is -- this is the really scary part. there are now financial rating agencies that are giving these biggest banks different ratings based on, with the implicit guarantee, citibank, for example, gets an "a." and without the implicit guarantee, they get a triple "b." that difference is what the taxpayers have just paid for. >> do you have office hours? because joe and i, we need to delve into this, right? >> we need to talk about this a lot. >> there's a lot of different ways to look at things. i don't think -- i don't necessarily think that jpmorgan and citigroup are rolling the dice every day trying to, you

know, trading to grease the high-ranking executives' compensation. that's a very cynical way of looking at it. and, you know, we do want these guys to do well, chairwoman warren. we want them to pay taxes on the profits that they make, right? >> i want them to do well doing what banks are supposed to be doing, lending. i don't want them -- i don't want them taking guaranteed deposits and taking taxpayer guarantees to become traders. >> you think they're earmarking stuff they would normally use to lend to gamble in the financial markets? >> whether they are earmarking or not isn't what really matters. what matters is they're out there in the financial markets. they are gambling, and they're doing it with an implicit taxpayer guarantee to back them up. >> i know a show on msnbc where you could definitely get someone who wants to talk about this. time's up. >> chairman warren, i appreciate your time. it's worth reading if you haven't read it, the executive summary at the very least.

good to talk to you again. >> it's good to talk to you. the opening bell is on the way. we'll head to the trading pits of chicago, find out what the traders are watching today. "squawk box" coming right back. (announcer) they've been tested, built and driven like no other.

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before investing. mutual funds are subject to market risk and volatility. shares may lose or gain value. oppenheimerfunds. the right way to invest. i get to charge a lot money for advice and then i can share that with my readers who often can't afford to hire a very high-priced financial planner. my name is sandra block. all right. welcome back. take a look, right now you see the dow futures are higher by about 20 points above fair value. let's take a closer look at the trading day ahead. rick santelli and ira harris in chicago. and rick, not any numbers this

morning, but, obviously, people are going to be keeping an eye on the dollar and the impacts that it's having across many other markets. what's been the story so far this morning? >> well, i think, the you know, the deleveraging is something that has tentacles in all markets, whether it's a goose egg yield on the one-month bill auction. i find it fascinating today with the dollar down, the dollar index, that the yen is still doing better against the dollar. it seems to be more of a dynamic when the dollar is doing better. that's the one currency that it doesn't do better against. you know, the yen and their stimulus as "the wall street journal" pointed out doesn't look like it's going to be any better. in the end, i think end-of-the-year issues can only be a slight positive mostly for shorter maturities. i think after this auction tomorrow and the 30-year, you're pretty much going to be gliding on the longer-term maturities for the rest of the year in terms of any market. moving issues with an asterisk, of course, about to buy in greece and any further news that could even make long-term

treasuries something that investors will pay more attention to. >> rick, what do you expect adding into that 30-year option? how is the market going to react to it? >> you know, i think all auctions are going to be going well until they don't. the assumption that they're going to last forever is a dangerous one. i think the 30-year won't be as good as yesterday's tens or threes. but instead of an "a" it gets a "b" minus. if you look at the last couple days, the 30-year is the most well behaved in terms of rallying the least against all the other maturities. >> ira, if you're just looking at short-term perspectives from the market, it seems as if market expectations have certainly risen for companies. i mean, texas instruments trading down after coming in and actually looking at guidance at the high end of what it had earlier told people. we saw the same thing yesterday with 3m where there seems to be a lot of disappointment if the numbers aren't knocking things out of the park right now. what's happening from stock

tickers perspectives on this? >> that's not my expertise, stock picking, but i do have to watch it to put together the whole global picture at any time. so what they did is that they lowered it so much, all these expectations going forth, but now that the equity market has gotten so far ahead of it, the expectations have to meet some much bigger numbers to satisfy investors. but we're also seeing as barron's aptly talked about the last couple weeks that people are gravitating towards big caps with high dividend yields and with credibility to those yields. so we're starting to see flow in that especially towards the end of the year as people are searching for yield. >> yra, rick, gentlemen, thanks so much. when we come back, stocks to watch and a final checkup of the health care reform plans making big news today. rrrrrrrrrrrrrrrrr

hard to figure texas instruments out this morning. let's look at some stocks to watch. the company provided a mid quarter update after the close. that's not that substantial,

actually. but it is down after the company said it sees fourth quarter net above the wall street estimates. 47 of 51 cents on a fourth quarter revenue. the street view of 2.9 to 2.5 is right in the middle of that range. maybe traders wanted them to actually raise the revenue. 3m upgraded to buy from hold at citi company. the company believes the internal execution has improved and that 3m can grow organically in line or faster than the group over the next 12 months. they go from a hold to a buy and raise estimates on 3m which is going to get back more today than it lost yesterday after what some people thought was kind of a weak forecast. >> all right. up next we'll get a future prognosis for the nation's health care system, final thoughts from our guest. let's take a look at gold prices this morning. right now up by just $2.70 after three days of losses.

$1,145.50 an ounce.

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our guest host, trevor fedder, the immigration issue.

governor bush -- we have to solve that, too. what happened to that? it's not a priority at all. >> look. i happen to agree with jeb that opening up immigration is a great way to get this company growing again -- the country growing again. let me tell you one of the things about health reform. i'm not making this up. hospitals have a legal obligation to treat everyone who comes in our door so we screen them and then we treat them if it's an emergency condition without regard to immigration status. it's not -- we don't even ask. i can't even answer the question how many illegal immigrants do we get and treat. in the proposed senate bill illegal immigrants would not even be allowed to purchase health insurance through the exchange with their own money. so consider that contrast. right? we're saying on the one hand we force hospitals to treat them and on the other hand they can't purchase health insurance. that really doesn't make any sense. we got to deal with this issue. >> is it just politically such a charged issue that they don't want to touch it?

>> i think that's exactly right. we've gotten, you know, indications from members of congress when i've been up on the hill, look, we know this is a serious problem. we'll deal with it later. even under the bush administration there was a program where hospitals could apply to get some reimbursement to treat illegal immigrants. it was very hard to qualify but our company for example was getting $8.5 million under that program per year, a fraction of what it costs us. we don't know what it cost us. >> watching the process on the hill as closely as you are, being as close as you are, i assume your bet is that the senate gets something done and that something gets to the president's desk. i guess largely -- looking more like what the senate has done than the house? >> yeah. i think it'll happen. i think the senate seems to be, you know, achieving some breakthroughs in terms of compromise to get to the 60 votes. i think they'll get something to the president's desk. i think it's so important to this administration. i admire the administration for taking it on. it's an incredibly tough problem

that nobody has wanted to deal with comprehensively. and there will be a lot of, you know, important elements in the details, but for hospitals the big deal as i mentioned at the outside is getting people covered. saving costs, there are a lot of great ideas, even experiments in the senate bill thai think are worthy. i'm not endorsing the bill. you can criticize it on a number of levels, a number of important issues that are not addressed. but in terms of our most important issue of covering people i think we're making a step in the right direction. >> yeah. people who criticized it for being 2,000 pages, one answer is that it's going to become -- it has to be complicated because you don't know which parts are going to work and which aren't. right? it sort of has to be sort of a catch-all. >> whenever you get involved in health care it's incredibly complicated. >> sure. this one definitely is. >> no doubt. >> >> trevor, if you had one issue, one point, one thing, you know, given whatever you could wish for in that bill, what

would it be? >> i think if there were only one i would say we need to increase the alignment of incentives between hospitals, physicians, and patients. what i mean by that is patients don't necessarily have incentives to be well and prevent themselves from having serious illnesses. physicians are paid for activity. hospitals are paid somewhat for activity and mostly by the government for, you know, treatment of a diagnosis. these incentive misalignments create all sorts of waste in the system. everybody knows it. it's a really tough problem to solve but i think it could be solved. and greater accountability for patients. patients ought to understand what they're getting. they do it in every other walk of life. they ask questions about products they buy but in health care they don't do that so much. as jeb bush mentioned, rewarding better quality is really important. so we know how to do that. there's a lot of transparency and measurement of quality. >> right. >> and we can, you know, i