>> good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernen and carl quintanilla. we've got plenty of headlines this morning. let's get right to them. bank of america, it will announce plans today to start forgiving mortgage principal for troubled homeowners. this will target people that owe more than 20% of their home's value. this plan will begin in may. bank of america is expected to offer an earned principal forgiveness ooh up to 30% in two stages. first, the bank will offer an interest free forebearance of principal. homeowners can turn it into forgiven principal annually for five years. bank of america will slash the principal balance on so-called payment option adjustable rate mortgages. those loans had negative am more tiezation features that allowed the principal balance to grow over team.

>> we got some pretty good home numbers from yesterday. >> they were down from january, but still well above the fall. >> we talked to kanjorski yesterday. housing is somehow creeping back into the conversation in a big way. >> right. well, because some decisions stro be made on what's happening with fannie and freddie. there could be seismic changes, any changes, but in any event, there will be implications. >> big story in the journal this morning, jpmorgan is reportedly close to a deal with the fdic. the great could result in tax refund of backside 1.4 billion for the bank. the deal stems from part of the economic stimulus bill. that law let companies apply losses from 2008 or 2009 against the taxes they paid in the previous five years. wamu is said to be eligible for $276 billion in refunds. so it's trying to claim more

than half of the total refund. the journal says more than 250 companies have said they expect to get about $12 million in federal tax refunds under the law. and it doesn't take a genius to know that the stimulus bill, helping big banks are going to be the new wig firestorm. >> it's not just big bank. but there will be pushback that comes from this. the bill excluded any banks from took t.a.r.p. money to get help. jpmorgan says, we should be exempt because we took over wamu. although the wamu bondholders are fighting saying we should get some of those pay backs, too. this is the lead story in the "wall street journal" today. you'll see a lot of pushback from taxpayers and saying, forget it. the congressional budget office looked at this and the 12

different or 6 different plans they looked at, they say this is the leave the effective for creating jobs. >> did you see kb homes decided to sell off some of the land and at this point they could use it to offset here. but i can't wait to see the way -- i love it when the left comes after poor geithner or this add men administration. the huffington post will be wild over there. >> this was put in and nobody was paying attention except for the companies that were going to get money back from this. >> and the journal, a lot of companies benefited, but they picked a big financial company, the big banks. >> $1.4 million is the largest payout you'll see in these. there's 250 companies. >> how does that help generate jobs? >> well, there was a retailer who is getting money from this who says this puts them back to

the position where they can open like 12 stores. the complaint is you're showing us bad balance sheets and things like the home for the home builder. >> you're taking public dollars to raise a request, right? >> i saw a view herb the other day judd gregg peoplely said why he didn't like the financial regulatory reform bill. because it could hurt financial industry. that's why he doesn't -- that's the smoking gun. it's like, oh, so we need one that will really hurt. but when it comes down to it, a financial, strong vibrant industry is good. you can no longer say we've built that.

>> no. i got turned down for a loan this week, which i can't believe. i have more money in the bank that -- i have more money in the bank than i was asking to borrow. >> he know your husband. i wouldn't lend to you. >> you're like, forget it. >> they said, we'll give you half. i said, what? >> i will buy you a cup of coffee, but i wouldn't loan you the money. >> i can understand that. >> the eu moouft mruft decide on a help to help -- i don't know. what country is that? i don't know. i can this is france. >> this country, let's me give smu hints. it's debt laden. we've been talking about it a lot. >> that is greece. >> how do you know that? >> i'm looking at the rundown. >> i know that, but how is this helping? >> the cobble stones, fresh bread. >> it could be italy. you don't know at this point. let me see where this actually

is. but we actually are talking about -- >> paying in euros. if we're going to run wallpaper, i want rooun ruins. and we're talking about greece. there's risk of a serious disruption for the euros. in a finish newspaper, we would show people doing the tango. >> no. vodka or reindeer. >> all right. he argues that the pieces are -- it's not finland! now we're on the page with greece. we're talking about greece, but there was in finland. he argues that the pieces are in place technically, but now a political decision is needed. european leaders are scheduled to meet tomorrow. now you know what we're talking

about. go ahead. >> let's take a look at today's u.s. economic calendar. at 7:00 eastern time, weekly mortgage applications. then coming up at 8:30 eastern, february durable goods. economists predict durables likely climbed about 0.7% last month. later in the morning, we're going to get new home sales. they take center stage. a rise of 1.9% is expected. that report from yesterday, as carl mentioned, showed a third monthly decline. i think the numbers were up 10.8% from a year ago. >> also at 10:30 this morning, pay attention to weekly inventory. yesterday, inventories surged in the latest week raising concerns about the demand recovery. today's numbers from the government are expected to show crude oil stocks rose, as well, while gasoline and distillate stocks decline. oil is off below 81 to 80.56,

1.35 in part because of those bearish numbers yesterday. >> and president obama's picks says the low interest rates are still needed to help boost the economic recovery. fed president janet yellen argues that unemployment will probably stay high for years. when the time has come, am i going to support raising interest rates? you bet. >> speak yesterday, yellen said it looks like the housing market rebound has stalled to some extent. when i started reading this, i thought president obama's vice, and i thought we were going to vice president joe biden. >> oh, what he said? >> well, i have no problem with it. if you think to -- >> it's a hundred years. this is what these guys want and

they've been trying for a hundred years and it was a big deal. it was. >> i thought your take was going to be ridiculing him. >> no, no, i ridicule him when he's speaking into the mike saying thoings purpose. >> if we were at an awards thing, not that we ever would be, but if we were at something that was positive for "squawk box" and for us, i would walk up to you two and say -- >> we do this on a daily basis. when you get a good ratings, we talk it up a little bit. >> people do speak this way. did you see rahm was on "60 minutes" and they asked whether the president will throw in a -- >> salty language. >> rahm says, i'll take that to my grave. >> did you see what the pt they said, though? rahm is missing part of his middle finger.

>> we've been to award shows. >> you know what joe is saying right there? >> yeah. this is a big -- what i was really saying is i'm never wearing a straight tie again at an awards ceremony. i never am. >> you have gotten some grease in the past. >> i have. >> immelt. reamed me. >> let's check on markets today. as joe mentioned at the top, up 102. here is some fun market facts. we're at the highest level since september 2009. we're up 10 of 11 on the dow. we did that last july. we have not had ten straight since 1996. so what is going on in the past couple of weeks here does not happen every day. we should mention that the nasdaq, of all the indices off the lows of march, nasdaq is up 90%. so we'll talk with david bianco about what happens next. but this stealth rally, it's both of those things. it's been stealthy and it sure is a rally.

we had $118 billion for the week, two-year note auction went pretty well. five-year is today. the dollar is doing better. tin decks is back above 81, which is the highest level since june of last year. and then with the stronger dollar, you might expect weakness in gold, but a lot of people are talking about the cpi. if you took out rent, took out housing, it's up 5%. and if housing recovers, are we all of a sudden going to see big time inflation? so they're saying watch gold even though it's off nine bucks today. in london, patricia szarvas has the latest in europe this morning. hi, patricia. >> hi there. it was interesting because we started off perky this morning in the european markets and then we had really good numbers coming through from the macro side. the sh row zone pmi data, there's a lot of insecurity with

regard to greece. we have the eu summit coming up tomorrow. and on friday, the uk's budget is due. so a lot of question marks. we had a uk rally, as well. this is what happened to the market after gaining about 0.3%, 0.4% across the board for these markets. london is now negative. so it's an interesting one. we were just bouncing back from interday session lows. in toerms of what is holding up, money in europe today, it is health care, financial services and media up just about 0.3%. in terms of individual stocks, i would definitely watch out for some of these. nokia is doing very well, indeed. so the theme of having the technology shares being on the upside has continued at least for nokia today. novartis, as ra zen ka, so health care is doing very well, indeed. i think that the obama bill that was passed this week is start to go change sentiment around these stocks.

credit suisse, basf and ericsson, as well. >> patricia, thank you very much. let's take a look at what's going to be coming up in the u.s. trading day. for that, we turn to bob brusca, also from lpl financials, bert white. bert, carl was laying out this stealth rally that has been gaining a lot of melt yumm quietly. the highest level we've seen the dow since september 2008. at this point, people have said it's a waiting game, it's something to continue to wait on. but at what point do we become convinced that this thing has legs? >> well, it has has a little bit of legs here. but we are at the right place at the wrong time. you've got wonderful economic news coming out, housing market is stabilizing.

probably going to get employment data here pretty soon on april 2nd. but what's the wrong time? we are up 23 of the last 30 days. the last time that happened was january 11th and we promptly had a 10% pullback. so we think we're overbought here and we look to trim into this rally a little bit. we've got strong resistance at 1226 on the s&p. and so we do have a little bit of room here. but i'd be trimming into this rally and getting dry powder and getting into the next run. >> trimming in what sectors? >> mostly the cyclicals. we think energy had a really good run here as well as the material had a great run. obviously, health care. 98% of health care stocks are trading over 5% above its 20-day moving average. you don't get that very often. it is massively overbought. even though this is a clarity rally, we think those sectors are a little overbought here and over the short-term. we'll look to take profits over the short-term. they're reengaged when the market pulls back to its 50-day

moving average to 1115 or so. >> you would be holding cash in the meantime, waiting for that? >> no. actually, i think we would rotate out some conservative equities as well as high yield. we like getting yield here. high yield looks pretty good. so we would move over to more of the aggressive bonds. it's going to be questionable because of how much is the consensus. you have a situation where we're watching inflation. carl was laying out the case that the cpi would be 5% higher if you stripped out housing. so we're waiting on housing numbers to show improvement there. you add it all up and what do you wake away from as an economist? >> if you had all that up, i think you walk away with some depression. but i don't think that's really the picture.

i think that -- i keep hearing this thing about the housing sector. i don't really think it's the right way to look at the cpi. i think inflation continues to be subdued. you know, people who take housing out, then they leave all the energy stuff in, that doesn't make much sense to me. inflation has been pretty well controlled. the housing sector is part of it. the housing market is in bad shape. even if housing recovers, you'll see all these increases in housing costs. the sector will continue to be under pressure for a while. it's going away while before you can mound any significant pressures in the sector. so if you don't have any pent up inflation, you don't have any measures telling you that, the economy i think is going to continue to grow. we're going to get the job growth. some of it is going to be census and some of it is the bounceback from the bad weather. but i think fundamentally, once you make the return, you build on those gains. i think we're going to get sustained and stronger growth once we turn that corner.

that's what we're waiting to see. we're waiting to see job growth, we're waiting to see if it pure cysts and how strong it is. i think we're going to be pleasantly surprised. >> bob, what number are you expecting on this jobs report that comes out next week? >> it's hard to tell, but i think you could see something that would be 350 to 200. >> and that would be some restrong momentum if that's the number we actually get. >> and recovery periods, you know, when the labor force was smaller, you are knocking down in recovery periods after the kind of recession we have had 300,000, 400,000 jobs per month. for several months in a row. this is what you get in a typical recovery. and after all the losses we have had, it's -- you know, it's eye popping to do the calculations to see what would be comparable with the size of our labor force. so i just want to see some better numbers and then we'll see exactly where they take us. but i think that the potential for getting very strong gains in the job market are much better

than people are giving it credit for. >> bob, yesterday we had jack rel much here and he said from his private equity perspective, the number of businesses that he looked at, that there seems to be a real consurgence over the last three or four weeks. is that something you're seeing in the numbers that you watch? >> you see some stirring in the weekly consumer comfort report. you know, the bad weather has kind of mucked things up and it kind of mucks up consumer confidence. we're going to get that at the end of the week. but i think confidence doesn't always turn early. even when things start to get better, with it's so pessimistic, it doesn't register right away. but i think there are some glimmerings. i think what you need to see are jobs getting better. people might even brush off the first one. people will go, oh, well, 300,000, 400,000 jobs, but there's several people unemploy unemployed. that's the talk you'll hear from people. after a while, you'll start to

get believers and people with small businesses are start to see more walk-in traffic. then you'll be in the virtual circumstancel recovery process. that's what we're looking for. coming up, congress prepares another vote on another jobs bill, but first as we head to break, a look at yesterday's "winners & losers."

welcome back, everybody. why don't you take a look right now at the futures. you can see the futures are under pressure. they dropped rapidly. dow futures down 35 points. fitch is just out with a downgrade of portugal, dropping their rating for that country to aa negative, having an outlook that is negative, as well. that's putting pressure on the euro, which was trading at a

10-month low. that in turn is dragging treasuries down, as well. this bill is combining $13 billion in equities for krushgz construction bonds. it would provide states with $2.5 billion for temporary welfare payments. right now, let's get to your national weather forecast. scott williams is standing by at the weather channel. scott, good morning to you. >> good morning to you, becky. good news for the northeast and new england. finally, we'll watch that area of low pressure lift out to sea. but in its wake, we'll see gusty winds. that could cause some delays as we move into places like newark, laguardia, boston's logan. but high pressure for the mid-atlantic and the southeast,

get ready for temperatures to climb there. we'll watch a storm system moving snow out of the rockies. watch out for severe weather as we move into places like oklahoma and dallas. take a look at the exiting storm system here. gusting winds. >> narrator: from 15 to 20 miles per hour as we move into the northeast and noew england. denver, still watch for that snowfall and rain. a lot of that is not yet making it into the ground. we'll see snow moving out of the rockies, but places like dallas, tulsa, oklahoma city, watching for thunderstorms and large hail is possible. current temperatures, checking in new york city at 44 degrees. 59 in dallas and salt lake city. good morning, it is 31. here is a look at the forecast. lingering rain and snow as we move into portions of vermont, new hampshire and maine. boston, morning showers ending.

philadelphia, 65 for you both. we'll watch houston for scattered showers and thunderstorms and denver, you'll still see some of that snow. what about los angeles? 73 for your high temperature and the queen city, charlotte, north carolina, will enjoy 74 degrees. that's a look at your weather. now back to you. >> nice to be in charlotte this morning. thanks a lot, scott. the international ctia show opens in las vegas this week. cnbc is the official broadcast partner, the latest and greatest in wireless on display. in a technologically advantaged country like south korea, mobile service provider res constantly having to outdo each other to provide services and businesses. that is snow small challenge. kio kim reports. >> reporter: in 15 short years, the mobile phone has gone from a communication device to everything from a shopping tool to a web browser to a tv screen. south koreans have become so dependent on their phones, they constantly have their head

downs. but it was the advent of smart phones late last year that cat putted mobile usage. very soon, you may need special glass toes watch tv with your hand set because 3d mobile has the next major application online. and shopping will never be the same. your phone can activate the scanner to create an avatar to show you how you look in new clothes. you can start your car and bring the latest digital teej into your living room. some are turning their attention abroad at the same time hoping that cutting edge will give them an advantage. so when all that is going on in the wide world, it seems almost an insult to call mobile phones just phones. >> we've got a whole battery of coverage today on cnbc. wireless in asia. it's huge. we're going to run that again. we're going to run that every

hour. >> really? >> yes. we're waiting. >> we liked watching it. seriously, a mobile phone anywhere in japan or asia, it's not like having a mobile phone here. >> no. so different. >> yep. >> let's move on. coming up, we have more on this morning's top stories, plus the head of lloyd's of london joins us, straight ahead. d# 1-800-345-2550 if it was up to me? tdd# 1-800-345-2550 investment firms wouldn't even dream of overcharging people. tdd# 1-800-345-2550 in fact, they'd spend all of their time dreaming up ways

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good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and carl quintanilla.

house panel holding a hearing today on the -- that's the chinese currency, the yuan. i don't even say that right normally. but it's the house ways and means committee will investigate how china's policy xwrakts the u.s. economic recovery. we talk about china constantly. china and the united states will hold high level talks in may, right? >> yes. schumer and graham, i think, putting pressure on the president to act before this thing potentially could come to a vote. >> they want to call them a currency manipulator and the chinese are getting riled up at the suggestion because there are trade implications that could come from it. >> after all the talk we had about rio tinto, i went and read all i could about that. and what a -- >> suspicious, hey? >> what a crazy system.

there's so many things that we don't understand about china. >> first it was espionage but then the charge turned to bribery. >> you know what is strictly forbidden? pleading innocent. >> pleading not guilty. >> yeah. and we'll cut you some slack, but the first step towards rehabilitation is admitting what the government says that you did. i mean, i'm not -- i'm glad the olympics aren't -- >> wouldn't it raise concerns if you were an employee of a u.s. company? >> yeah. and did you see abanese was there? i don't know when he was there with who or who he was there with and when. but he was with one of them and smiling. he has an employee over there on trial. >> trying not to make it worse. >> or trying not to screw up. they think they should get a lot of this stuff cheaper because

they're using so much of it. if they don't, it looks like they might take punitive actions against employee peps anyway, we're going to have sandra levene -- i'm going to start going on -- >> but china is the biggest foreign holder of our u.s. treasury. >> we own them, they don't own us. >> you about if you see them turn around and -- >> where are they going to go snm. >> they need us as much as we need them. if we don't buy everything they're producing, the migration of their huge middle class is not going to continue. >> when trade talks turn ugly, countries are leakly to bite off their nose to spite their face. >> we'll see how much longer that lasts. >> meantime, fitch is downgrading portugal's sovereign debt, now rates the country a

double a minus. fitch says portugal's prospects for a recovery are weaker than its peers in the euro zone. lloyd's of london says it had an extraordinary area in '09, although it adds that 2010 investment returns are unlikely to match last year's. joining us this morning is lord peter levene. good to have you back. good morning to you. >> good morning. i'd better be careful because i'm getting on a plane to beijing this afternoon. so watch what you say. >> pars your words carefully. i was going to ask you about the portugal news, but china is all over the place. you had some comments earlier that of all the countries you're worried about operating in, it's more like india. but how do you balance your concerns, whether it's india or china, doing business in these emerging markets? >> let's talk and concentrate for a moment on our business side of it. in china, we negotiated for

three years. they gave us a license. we're now established in shanghai. the business is moving forward and whatever we have asked of them they've delivered and we run by their rules, which we find to be not excessive. in india for the last seven years thooeven promising that they would allow us to operate which we've been unable to do since 1948 and they keep promising and delivering nothing, so we're not very happy. >> george david said similar things, that he thinks china is easier to operate in than india. but lord levene, is there a point when you look ats at escalating tensions, whether it's google or rio tinto, when you say, this is something you need to be more concerned about? >> when lloyd's business in

china gets to the same size at google in rio tinto, then would have to look at how we're doing it. i think at the moment, we're not of sufficient size to cause them that much of a problem. but i have to say, and as i had, laying policy aside at the moment, that in our dealings with them, they have behaved extremely well. and in india, i'm afraid we were promised everything and nothing ever happens. and that is unfortunate. and it also means that i'm afraid we can't believe a lot 06 what we're told there because they don't deliver. so, you know, if you ask me where we find it easy to operate, it's pretty clear, i think. >> interesting. get your thoughts on the prot broad macro economy. sings like that fitch portugal downgrade this morning aside, we keep hearing good things about discretionary spending, at least stateside here. markets have been on a fairly good rally. you've made optimistic comments about the economy overall.

do you still feel the same way? >> well, i think as far as the uk is concerned, as you'll understand, we're in the silly season. we're just a few weeks from the election now. i think it's clear to virtually everybody that public spending has to be brought under control, that the huge deficit, which we now have which is the biggest in our history can't remain at that level and whoever is going to form the next government has to do something about it. but, of course, with an election coming up shortly, nobody really wants to get up and say things which the electorate doesn't want to hear. i think we will recover from it in the uk. but i think it's going to be very tough and i think it's going to be difficult. but if i then look at it from the rather narrow point of view of what has always been our largest industry in this country, for many years now, which is the financial services industry, we have to

differentiate there between the nightmares that occur with the banks and the rest of the industry. for example, on the insurance side, which sa very big part of the industry, where we've had a very good performance and a lot more narrowly, even at lloyd's, with you will see that we've produced our best ever profits and we don't like being lumped in with all the bad guys. so i think the banks here are starting to get together, but it's going to take them time. i think it's a fragile plant and if you keep treading on it and kicking it and saying, well, we don't really like it, it's going to make it that much more difficult for them to recover. the overall economy, again, i think if you're in business, you've got to be optimistic. but the politics doesn't help and an upcoming election means that you have to look at things and take the words that are coming out with a considerable degree of caution. if you ask us again in six months time, then whichever

government is in power, i think we'll have a better idea of what's really happening. >> yes. you mentioned that silly season and we've had some experience living through that on this side of the pond, as well. lord levene, always like getting your point of view. have a terrific day. thank you for your time. >> thank you. >> if you have any comments or questions about anything you see here on squawk, e-mail us, squawk@cnbc.com. when we come back, we've got the news making headlines both inside and outside the world of business. stick around. "squawk box" will be right back. >> announcer: step right up, ladies and gentlemen. boys and girls, children of all ages, "squawk box" runs away with the circus and gets a unique view of the u.s. economy in the process. lions and tigeres and bear markets, oh, my! it's a three-ring story squawk style. thing as taking a chance?

as having to decide to go for it?

at the hartford, we help businesses of all kinds... feel confident doing what they do best. by protecting your business, your property, your people. you've counted on us for 200 years. let's embrace tomorrow. and with the hartford behind you, achieve what's ahead of you. ♪

time for a check on the news outside the world of business. monica novotny is here with a roundup of the headlines. >> good morning. good to see you all. president obama is trying to patch up relations between the u.s. and israel over veisrael's announcement to build homes in jerusalem. you see them there. it was for a private discussion with the president. no comment on how that meeting went. in mississippi, a federal judge ruled that a school district violated the rights of a lesbian teenager when it canceled her prom instead of letting her bring her girlfriend. the president did say he would be hold ago trial on the issue. the teenager wants the act declared unconstitutional and $1

in damages. and have you heard about this? the chicago area teenager, he's autistic, he may be the winner of the ncaa bracket. he correct ly named the outcome of the first two rounds. they say it would have been easier for him to win the lottery twice. >> that is amazing. >> that includes kansas, everything? >> everything. >> the first two rounds, the first two rounds. >> northern iowa. that is unbelievable. >> i want to know who to pick for the finals. >> purdue. but he's bias on the final. his mortgage acknowledges on that because his brother went to purdue. so, you know -- >> what about the final four? >> i don't have the list of his final four, actually. i just know that he had purdue to win it. >> i hear what whoo, because that's not smart, that's not

memorizing the phone book, that's like predicting the future. that is amazing. >> he says he has been watching all the games and that he's been watching all the teams and he listens to the stats and he says, i guess i'm good at picking up scores, remembering stats. >> the other thing, i don't know how many were filled out, but millions were filled out and there were 56 left. 56 that weren't bracket busted, because it's insane the way it works out. >> do you know where he didn't do a great job, though? apparently he entered this one over at cbs online. but it's not one of the money making ones. there are prizes if you get a perfect round. >> somebody should pay him, anyway. >> i feel a feeling we'll be seeing more of him. >> he'll have a job in vegas. >> remember, one for bad, two for -- anyway, thanks, monica. coming up, you say it and you know what we're talking about. the greatest show on earth.

remember this seinfeld? how was the circus, jerry? the greatest show on earth. we're talking about a live show, the circus stops by our set. we've got animals, tigers, elephants, we have that guy from johnny carson bringing something, a lizard might do something in carl's lap. >> ahh! >> we'll have a unique view on the u.s. economy. later, then the global business frontier. google, rio tinto workers on trial. the realities of hanging a corporate shingle in china. we will go into a time machine to interview jeff sonnefeld, the way he looked 30 years ago.

i drove my first car from my parent's home

in the north of england to my new job at the refinery in the south. i'll never forget. it used one tank of petrol and i had to refill it twice with oil. a new car today has 95% lower emissions than in 1970. exxonmobil is working to improve cars, liners of tires, plastics which are lighter and advanced hydrogen technologies that could increase fuel efficiency by up to 80%.

♪ an early appearance by the a.o., the animal cork centrorch because we're going to talk about something that includes animals but also incredible people. >> they'll be thrilled. >> they will be. a lot of their friends are in the circus. you say the why it's called -- say the greatest she on earth. its identities a great tag line. there's so much history and so

much allure in barnun & bailey headed to the world's most famous arena, writtenling brothers and barmun & bailey. the producer of ringling brothers and barnum & bailey. when did your family get involved? >> november of 1967. so it's over 40 years in our family. >> and you've had it ever year? there has never been a year that you didn't go -- what is it, on tour or something? >> it is the longest continually running entertainment in america. and it's 140 years old, so it's one year older than baseball. >> how many days a year do you operate? >> we have three touring companies all other america. and we operate about 44 to 46 weeks a year. >> so how many shows is that?

how many days will you perform? >> in a year, the three tours, probably about 1,300 performances. >> 1,300? >> 1,300. >> and you see what these people do, two guys, strong men with each other, the kind of holding on to like a guy's toe as he's horizontal and they do it >> three times on saturday. >> and the trapeze, the things that go on where you're hoping that, you know, that they hang on, and they've done it twice before that day. >> you've been doing this for a long time. when you try and get a sense of the nation's economy, just based on ticket sales, did you feel a real pinch as most of the economy did when we went down, and is it back? >> actually, we've been fortunate because our business has been up. and i think a lot of it has to do with people are not traveling the way they were. so we bring the entertainment basically to everyone's backyard in america. so we're there. we've always been affordable.

and people do look for promot n promotions. what i've noticed, the biggest difference is the buying patterns. people are buying lighter. you go in, your advance sales is never what they were, but the walkup is unbelievable. like we've been walking up 2,000, 3,000, 4,000 people a performance, last minute, they're holding on to the dollars a little longer. >> is it a high-margin business, and if you have to cut costs, how do you do that? is there a show or event you want to stage but you can't because it's cost prohibitive? >> you're not talking about my business. >> yes. >> this is a high overhead business. we have a mile-long train. the elephants eat over 100 pounds of hay, food, every day. >> hold on. so it's like -- it's not jets, 747s, it's like dumbos, from what i remember from dumbo. >> it is. >> but the big top doesn't go up. >> no. we're in the arenas. >> but you have to customize

every arena, cable, wire. >> every arena is different. but what happens when people build arenas in this country, they call us, and we put inserts in the floor so we can hang our show in every building before the ice floor goes in so we don't have to drill and all the wrong stuff. and we play 135 cities in america every year with ling ri ringling brothers, barnum & bailey. >> is it hard to audition? i'm curious, people say i'm going to run away and join the circus. >> you've got to be from an eastern bloc country. >> actually, we have a network of talent scouts, and my two older daughters actually produce ringling brothers barnum & bailey madison square garden, so they go all over the world looking for talent. it's a little different today because everybody's on youtube. something interest will be posted, but we never buy talent from a video.

that will get the interest. then we go out wherever it is in the world. >> i wish you could guest host. can you bring back the bearded ladies or something, any of the freak show? that's not there anymore. >> it's still pc. in this year's show, we have what would be a modern-day sideshow. so we do have a guy that jumps on glass that's lit on fire. we have the most unbelievable contortionist from all over the world. we have a woman that actually hangs by her hair. like you see that and you go, oh, my god. i couldn't do it. i don't have enough hair. you could do that. >> i think it would rip out. >> who gets all the $25 lights and all the concession revenue? >> concession revenue. >> well, that's part of our business. and that's really why we can keep the admission prices at a very affordable level because we do have the concessions and the merchandise. >> iverson.

what's his name? >> jonathan lee iverson. the greatest ringmaster you have ever heard. >> he's huge. >> he is. he's so tall. >> his legs, the great voice. >> and he started at the harlem voice choir. >> how much does he make a year? >> i don't talk about that. i wouldn't ask you how much you make. >> i know, but he deserves -- >> he is a real well paid ringmaster. >> thank you. i wish we had more time, but we appreciate it. >> thank you very much. >> you're welcome. coming up, more of this morning's top stories. plus, he ran goldman sachs, served as a u.s. senator and then took the helm of the state of new jersey. so what is next for jon corzine? two new jobs, chairman and ceo of mf global holding. he's going to join us on "squawk" right after this.

the markets' next move. >> flip. can you dig it? >> government data and ongoing talks to help greece will keep traders busy this morning. guest host david bianco will tell us why financials may be the group that will keep the market rally going. from the public eye to the private sector, an exclusive interview with former new jersey governor jon corzine who is back in financial circles with a brand-new job. the new frontier of business. how management should approach deals in china and why in some cases the risks may outweigh the rewards. "squawk box" begins right now.

now we all have lousy. good morning and welcome to "squawk box" here on cnbc. i'm joe kernen with becky quick and carl quintanilla. the dow and s&p 500 close at their highest level since september 2008. the nasdaq now at its highest level since august of '08 and up 90% from last year's march lows. guest host jim bianco and mahaney will join us. at 7:30, doing business with chinese and then an update from the president of ritz-carlton hotels. first, a look at this morning's top headlines brought to you by carl, it looks like. who better to bring us these.

>> i can think of some people. futures are lower this morning after fitch did downgrade portugal but some of these gains for the markets. the nasdaq up 90% from the march lows. b of a says it will start reducing principal for troubled homeowners. the program will focus on customers who owe more than 120% of their home's value who are battling negative am ortization loans. general mills says they must make a decision this week. it argues the pieces of a rescue plan are in place but now tough political decisions are leaded. eu leaders meet tomorrow. record low rates still needed to help boost the economic recovery. the president's choice for vice chair says the expected sluggish recovery means unemployment will probably stay high for several years. also said when the time comes, sure, she'll be ready to raise rates to stave off inflation as well even though she's known as a pretty ardent duff.

>> there are people who clamoring over these things. kevin ferry has been sending in notes about the spreads, how you have to watch this closely. portugal being downgraded earlier today. that has people riled up. so we'll watch it very closely. it's an issue that is certainly in the headlines and in the attention of the bond market. former new jersey governor jon corzine is returning to the private sector after nearly a decade in government. he has taken the helm of futures and options brokerage mf global. that news actually sent shares sharply higher in after-hours trading. right now he joins us for an exclusive interview this morning, jon corzine, the new chairman and ceo of mf global. thanks for coming in. >> great to be here. nice to see you guys. >> some pokers in the fire, but it's not just mf global. you're also the partner at j.c. flowers and company and you'll be a visiting professor at princeton. >> a little time on my hands. >> you've got a lot of different things going on. >> i'm really excited about the opportunity to lead mf global.

i think it has a great strategic position, underutilized, not recognized in the marketplace today. it's entrepreneurial which pays to what i wanted to do with the balance of work life. and it's got a great set of talent that i think are just underutilized, and we're going to work very hard to get the earnings back on track and then take advantage of what i think is a very fluid situation in the financial services industry as regulation changes. there's concentration of economic power and a very few number of firms right now which i think will create an opening for others. mf global's going to be one of those. >> yeah. you think of the old wall street and the new wall street, either they're gone or they're with somebody else. >> right. >> the power is still concentrated somewhere, obviously, but you think that it opens up avenues for new

entrants? >> it does. and mf global has advantages to start with in that it has, believe it or not, has a global footprint in 13 different countries, locations, 70 different exchanges, has a leading market position in commodity businesses. >> when you think of derivatives with them? >> yes. >> are you going to take investment banking? >> the first thing we're going to do is get the earnings platform and internally generated capital in a position that we can feel good about strategic growth as those opportunities are dictated by the customers that we deal with. >> how do you do that? >> well, first of all, there are some areas on cost issues that can continue to be dealt with. previous management actually did a pretty good job on that. i think there's more to do. i think this business, as it is organized today, is sort of an option on interest rates. if you saw the fed fund's rate a

year from now, 100 basis points, 1% higher, it has some natural reasons to do better in and of itself. they carry a lot of customer funds that get invested at higher rates, runs almost directly to the bottom line. and i think that we will be able to expand our customer base. hopefully i can be a decent salesman to some of those folks that are out there that are looking for competitive players in their derivative activities. and we're going to work very hard at it. i think that can happen. we're expanding our cash business. they are applying to be a primary dealer. we can't turn this into a camouflaged hedge fund. but i do believe we can take more principal risk in some of the businesses that are involved. that will take additional capital. we're going to work on it. >> we have a lot of viewers obviously in banking and

probably are hardened to see you make this move. what do you say to those who say industry's going to have their leverage capped more likely, facing more regulation, facing higher fees. why would you go into a business where the overall pie is probably going to get smaller rather than larger? >> i think that a lot of the activity is going to go into exchange or clearing arrangements, central clearing. that plays to mf global's strength. i saw a number in one of the papers this morning. there's $40 billion worth of revenue in over-the-counter derivatives. somebody made that estimate. we'd just like to get 1% or 2% of that as it moves into the exchanges. and even if it's a lower number, that flows pretty directly to the bottom line of a firm like mf global. i see a lot of opportunities. as in every business, everything you do in life, you have to

execute. i think we have talent on the table that will allow us to do that. we have to have additional talent. we'll find it. we're going to drive to make this a successful, high-return -- >> it can be done. do you look at barclays capital as something that you follow a similar path? >> well, they start in a much different position, joe. you know, we have $1 billion worth of capital, give or take. i don't know what the number is. >> but they didn't have much in the u.s. dimond kind of did that. >> no, no, i think the idea that someone can't break into an industry with innovation, with client-driven activities and the proper deployment of your capital into the right places, a little nimbleness on how you do it -- >> is it me or are you more excited all of a sudden? i would be. especially in the senate.

now you're actually -- you can do some good now. you can do some good now. >> i actually loved what i did, but, you know, the pages turn. the seasons are different. and we're going to go -- >> that's a song. >> we're going to go at it. >> you think the senate did some good this week? >> well, i know joe had a little sidebar. the senate was on the sidelines. it was the house. >> that's true. >> i, like most people, think there is a lot of butchering going on inside that senate bill that none of us like. so we need to get that reconciliation package passed so that you can pull out some of those special deals. you know, i'm going to admit it. i believe we need to get everybody into our system. and i think that's what is at stake here. i think it actually will bend the cost curve. maybe not as much as any of us would like to see, but it starts us on that pathway. this is an historic week. this is one of those times you wouldn't mind being a politician

down in washington. >> right. you all want -- we all want everyone covered, but you look at some scenarios, if some of the cbo numbers don't play out, and a lot of people think they're more fiction than real, and you look at the -- i mean, these are numbers of trillions we've never considered before. >> joe, and one place where i'm probably in agreement with you, it also depends on congress doing certain things over a period of time. they're really committing future congresses to make some tough decisions which we don't have a real history of following through on. on medicare. >> jon, if everyone that is suddenly covered goes and there's no rate limit on how much they use their coverage, there is not enough health care to go around to everyone in the country. >> well, they've got this little thing called comparative -- what do they call it? anyway, they're going to look at the various actions that are

taken in a doctor's treatment of a patient and say, is this procedure successful? somebody's going to have to make -- >> private and public. >> by the way, that's going on in the insurance companies now, so people use this term "rationing" -- >> or managing it. >> -- or managing it. some of that's already going on -- as a matter of fact, a lot's going on. it's done by money, who has it, who doesn't, and then who the insurance companies say is viable or isn't viable. you know, there are pros and cons. i can tear this thing apart. but i think getting started is a very good deal. making sure that the congress is disciplined about the future, steps that need to be done to take care of the financing. and i think you can bend the cost curve through these. >> do your relationships in washington, the time that you spent there, will it help you in your new role, trying to help mf global navigate this new financial regulatory reform that's coming?

>> actually, becky, i think it will be useful in making sure that we can be on the front end of the curve in reacting to changes. we're going to win or lose based on what we do in the marketplace. you know, how we service our clients, how we manage risk, how we take decisions with regard to how we use our capital is going to determine our success. and it's the same old deal. everybody else does. you've got to go to work every day. who has the best ideas? who executes? who gives a damn about their clients and goes out and makes it happen. and i believe that kind of culture brought to this organization this footprint, this regulatory environment is a great place for mf global to be. >> could you see -- >> and jon corzine. >> -- could you see yourself leaving mf global in a lobbying effort that you would have been spearheading when you were in politics? >> i would have been -- the part

that's most meaningful for mf global today is what is going to happen to the derivatives market? are more of them going to be exchanged -- are more derivatives going to be exchange traded? >> more publicly now? >> not likely. >> you might adopt a couple of republican tenants. >> by the way, i believe in markets as much as anyone, but we have to acknowledge that some of the weaknesses in the structure including the regulation let the system get to a point where leverage was out of control. had it broke, it hurt everybody, trillions. >> i know. but it's a big tent. the lights were left on for you if you ever want to come there. you're in private industry now. you've got two sides of your mouth. >> i like talking out of one. >> jerry brown ran and he's running again, so there's always that, too. >> oh, my gosh. we have one focus for the next five, six, seven, ten years. that's to make sure that mf

global is the most successful p up-and-coming financial services firm in the world. >> will you come back and tell us how it's going? >> absolutely. great to be here. >> thank you very much. really appreciate it. jon corzine, chairman and ceo of mf global holdings. new title. we're going to follow him. >> any comments, we would love to hear from you. our address is squawk@cnbc.com. tech and broader markets with two of the smartest on the street. five-star analyst mark mahaney and david bianco on this market move we've been watching over the past 10 out of 11 sessions now. "squawk" will be right back. time now for today's "aflac trivia question." what pulitzer prize-winning play by tennessee williams opened on broadway on this day in 1955?

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now the answer to today's "aflac trivia question." what pulitzer prize-winning play by tennessee williams opened on broadway on this day in 1955? the answer -- "cat on a hot tin roof." >> aflac. a chinese communist

newspaper accusing google of colluding with spies after the company rerouted web searches from beijing to hong kong. the stock is down 3% over the past week. here to discuss google and more, institutional investors number one analyst mark mahaney. also, our guest host, david bianco, head of u.s. equity strategy at bank of america, merrill lynch. mark's in studio. i thought you had been in studio before, but it wasn't you, i realized it was nick faldo. and you're actually different people. >> yes, we are. >> i thought you had been in before. we had a long talk with jack welch yesterday about this that gave us a whole new perspective. i was fully behind google saying, you know, you go, girl. i mean, you don't need to put up with this censoring, and you need to free the chinese people. welch says for shareholders, employees, business people, 20 years from now, this move could

have huge repercussions that maybe you should have let the u.s. government maybe take on the communists in china. what's your feeling? >> for shareholders, this was a negative decision. they just took out 5% of their long-term value. look, china's small for google today, it's 1%, but it's going to be 5% long term. >> welch. >> the google founders, this was a principal decision on their part so i respect that, but it does hurt shareholders and we think the stock has overcorrected. they did take out 5% of their long-term value. this is a very large market long term. >> someone yesterday tried to argue their motto, don't be evil, that their audience will reward them for this in ways we can't count on yet in other markets because this is what they stand for. this is what they're about. >> sure. i'm sure at some level that's the case, but you are taking the largest internet population, and you're cutting yourself off from that. now, there's always a chance they'll come back into that market. and i guess you'd have to bet

over the next five to ten years they'd be back in the market. it's the only market in the world where they've done this and also the only one where they've had material market shares. google does very well in almost every market in the world except for china and now they've taken themselves out. >> will the foothold that -- what else, bing, will it be insurmountable if google's not there? >> probably. it's going to be hard for anybody else to step in. it's hard for yahoo! to step in. they have a play on e-commerce, this ali baba asset they own. microsoft and bing will have a chance, but they'll face the same regulatory government pressures. and you have a very good, very well executing competitor, baydu. >> welch yesterday was more or less saying apartheid, you take the moral high ground there -- >> although he said it was grueling. >> iran, you don't deal with

iran if materials end up in ieds. he seemed to say this was more of a gray area where you can't really change the 5,000 years of the way china operates. one company can't really go up against them. and it should be the u.s. government should be the one deciding whether google stays or goes there. >> well, i think that's google's management's shareholders' decision. the other part, there were pretty significant hacking incidents. i think google's point of view, just so we get it out, we're having to censor, which we don't like to do, and we're getting hacked. why are we in here? there's a principle at stake. i respect it. but as a shareholder, it does hurt people. >> is it imminently clear to you this is a huge market in the future and this is a big screw-up, a bad management decision for someone running a company for shareholder value. >> it's a principal management decision. step back, is this the only market worldwide? no. in almost every market in the world google is the leading

search company. very few media companies have that kind of position. so put it in context. the other 95% of google's business, the reason that we like the stock, then we've got mobile coming. we've got video and display advertising coming. that's plenty of reasons to buy the stock especially when you get it at a discount. >> so no part of the decision makes you want to recompute -- >> we did. >> -- on the judgment of management, on the quality of management? >> no, i don't think so. i mean, this is not a surprise. google from the beginning said they were going to do some of these decisions. look, they took on the department of justice in the u.s. on a couple cases, too. this is not that far out of character for them. yeah, we'll recompute some things, our price target. you'd better take that long-term multiple or the growth rate, you'd better trim it down. we think you could still buy google at 20 times earnings. next year's earnings to $640, you want to buy this kind of correction on google's shares. we're byers here. >> with tinto and everything, we're doing so much business in china, a trading partner, we're

starting to look a lot more closely at a lot of -- to me, isn't it inscrutable? it's the idea that you don't want to plead not guilty over there. it's looked down upon, frowned upon, much better to plead guilty if you are arrested for something. i mean, i don't understand that. >> one side and say, i mean, we think we're the good new guys, right, we all agree we're the good guys here. but foreign companies we'll hold them to our laws just as they're hold says us to theirs. >> but some of the laws are very hard to understand. >> but you understand the culture clashes, like toyota. >> he was eating bugs during the olympics. i understand there is a difference, scorpions. >> a frog, a lizard, too. >> a scorpion, too. it was delicious. >> mark, thank you. and we'll be talking about this again, i think. and david, we're going to talk to you about, you know, everything else. >> whatever you want to.

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welcome back to "squawk" for a wednesday morning. still to come, the coo of ritz-carlton hotels, how his business is impacted by the slow economic recovery. at 8:45, do not mess with texas. the attorney general there is ready to challenge the new health care bill in court. he's going to be our guest a little bit later in the program. first, becky has a look at what's making headlines today. >> that's right, carl. in the markets we have seen a

little pressure on futures this morning. right now, futures are coming back a little bit. they're still down about 20 points below fair value. we saw that immediate selloff when fitch came out and downgraded portugal's debt. this was all amid concerns about the country's ability to service its current borrowings. it's now rated at aa minus, down from a prior aa rating. the outlook is still negative. portugal's prospects for recovery are weaker than its peers. the treasury program aimed at helping homeowners avoiding foreclosure will likely fail. that is a report from neil barofsky. he says that the program will not be a long-term success if many borrowers redefault and ultimately do not avoid foreclosure. and the mortgage bankers association says mortgage applications fell by 4.2% last week. home purchasing activity did rise but that was offset by a sizeable drop in refinancings. average 30-year rates rose to

just over 5%. veteran market insider david bee auianco joins us this morni b of a merrill lynch. he's been on the show prior. >> thanks for having me. >> you have been pretty constructive for a while now. >> even during the dark days. >> i thought you were going to say confused. >> we were confused. >> there's lots of confusion out there, sure. >> nasdaq's ten points away from doubling for march. >> right. and the s&p's up about 75%. >> so where is -- i mean, is that going to spark people who feel they missed out, or are the returns already getting a little bit too steep? >> well, i think a lot of people are disappointed they missed out. i think this has been a very strong rally that most people did not participate in. but i think there's more up side. i think the s&p is going to make it to about 1200 in the next handful of weeks. but then i do think things slow down. i don't think the s&p gets to my 1275, 2010 target until late in

the year. we need to get past some of the politics of midterm elections and more visibility on growth. >> what is feeding the market right now? is it anticipation about a hot jobs print? is it getting health care done? >> there's conversation out there now we're finally going to see some positive encouraging jobs reports, six-figure jobs gains. >> the numbers tossed around this morning, 250,000? >> 250,000 did? >> two-handled numbers are becoming very common on the estimates. we're thinking something similar. what's fueling the markets, earnings. this has been a powerful earnings recovery, mostly at the nonfinancials, global exposure, beneficial commodity exposure, exports. i think what's going to take the mark higher in the next couple weeks is that now the financials are going to participate in the earnings recovery. and financials could lead the way higher as they have for the past couple weeks. >> what is the major narrative going to be about earnings season? is there going to be more top-line growth? impressive cost cutting?

what's the story we're going to tell over and over starting in the beginning of april? >> i think finally we'll get cleaner numbers out of the financials. it will be a continuation of the earnings recovery. arguments out there which i think are specious that it's all been inventory rebuild, which it hasn't been, things like that as the earnings continue to trend higher, it becomes more difficult to deny there has been a powerful earnings recovery. that the market's more or less right to be where it is assuming interest rates stay benign. and i think that's the major issue for the rest of the year. if rates stay benign, the yield stays under 4% for the summer, i think we continue to grind higher. >> are you worried about commodity pressures on businesses, gas prices on consumers, or is it too early for that? >> those things do pressure consumers. it does pressure small businesses. but oil prices up as high as even 90 bucks a barrel, that's a positive for s&p earnings because of the energy sector, the industrial sector, materials sector. that's a big part of my message

to clients that the s&p is exposed to the strengths of the global economy like commodity demand and prices. and it's less exposed to things like consumer discretionary spending. provided oil doesn't super surge, which we don't expect, if it just grinds higher, that's a positive and keeps the world economies healthy. >> one reason you could argue oil spiked last year, there was no where else to go, right? >> right. >> here money does have options at least for the time being. >> right. and i think people have seen that, once we started getting above 100 that there is demand, it will be difficult for oil prices, so it's not a geopolitical issue for oil to get much above 100. >> things like greece, portugal, shanghai real estate, minor concerns? >> we monitor them, but i think minor -- asian real estate is something to pay attention to. but southern europe is of minor concern. >> on a day when fitch downgrades portugal. >> still minor concern. >> okay. a lot more from david in a few minutes. any comments or questions, a lot

more still to come. send us a note. cnbc.com. lessons learned from doing business in china. professor jeff sonnenfeld will join us. and then how is the company with the world's only tanning butler handling the economy? we'll check in with the coo of ritz-carlton hotels in just a bit so stick around.

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a hearing will be held in san diego tomorrow to consider consolidating more than 80 class action suits against toyota. cnbc's phil lebeau joins us from chicago with more. hey, phil. >> hey, joe. this is going to be a troubling area for toyota over the next several months. the class action suits could be where the company pays the biggest amount of money in terms of woes facing the company. when you look at all the legal cases and the ones mounting, about 80, across the country, is

totals 118 class action cases. and then you've got 36 individual cases, also grand jury investigation. the individual cases includes a family out of dallas, texas. the husband who was driving a toyota, it crashed the day after christmas. four died in this crash. the car sped up, went through a fence, flipped over and landed in a lake. monty hardy's family, the driver, his family claims the avalon he was driving was defective. >> i don't want any other family to lose their husband, their wife, their children or anyone in an accident like i lost my husband. i lost my best friend. i lost my husband who i've been married to for 35 years. and it's pretty rough. >> as tough as it will be for people to hear those stories when those cases come to court, this is the troubling area for

toyota. the class action suits, attorneys are claiming everything from the diminished value of the vehicles to, listen, we want the entire cost of the car returned to the owner because they don't want to drive what they consider to be an unsafe car. >> toyota is the company that caused the problem. toyota is the one that's causing them to be fearful of driving their cars. we think the law allows them to revoke their acceptance of the car, give it back to toyota with some discount for the time they get to use the car. >> we reached out to toyota and received no comment. carl, the class action suits, there's going to be a hearing tomorrow in san diego where they're going to see if they consolidate all these into one giant national case, if you will, where one judge will preside over it. and this is really the troublesome area for toyota because it's open-ended. if a judge ultimate says, you know what? toyota is going to have to be responsible for repaying millions of dollars to millions

of toyota owners, that's where it's really going to hit the pocketbook for the toyota corporate company. so that's the issue that's really going to get the most attention. >> yeah. they're going to be bracing for this in tokyo, we know that, phil. thank you for that. phil lebeau. as you probably know, china presents tempting profit opportunities, but as the google situation shows, there are many risks as well as potential rewards. jeff sonnenfeld, good morning to you, jeff. good to have you back. >> good morning, carl. good to see you. >> i wonder, the google story or the rio story, which one has farther-reaching effects? >> we have seen occasions before where employees have gotten themselves in legal difficulty, and the company will try quietly to unravel things and to see if they can get the facts and get some transparency. right now where people have already perhaps been pressured to confess, we don't know if they actually were guilty, but the charges flipped obviously --

>> espionage to bribery. >> bribery is a little stunning. it's hard to defend a moving target. >> and hard to hear a hearing where the hearing's closed. sorry. >> and that's a major issue, of course, a huge one. in terms of being a lightning rod for the business world, it might be, of course, the google story. it is surprising. we want to see what the ceo does. it's kind of surprising seeing that he's in china. he's going to business meetings on economic development. and you would expect that he would be taking a more public position. but, again, working behind the scenes, perhaps, as, say, "the wall street journal" tried sadly in failure but earnestly for the release of danny pearl that sometimes a company is trying desperately to resolve a situation where lives are at stake or personal jeopardies there and they're not so splashy. with google, a whole different story. the splash, many of the old china hands, many of your guests, high-profile guests,

yesterday from the business community who i admire so many times i think have this one wrong. >> you think they did the right thing? >> absolutely. and i think many business leaders quietly do. there's a great reluctance in the east and the west to be critical of china. and not -- if you're a friend of china, you're not a good friend unless you can give a little bit of constructive criticism. google, they live their principles, their brand is this do-no-harm brand. and they believe it. and to somehow be hypocritical on it the way bp was -- >> one man's hypocrite, though, is another man's trying to change a situation from the inside, right? constructive engagement, as you call it. >> constructive engagement is a term people used to use with south africa. we knew that the sullivan principles, in fact, made a difference in helping to make a public stand genszagainst apart in south africa. and even with the sullivan principles like procter & gamble

wouldn't go there. they bought major companies with presidents in south africa. they shut them down until conditions changed. living the brand really matters. there are companies like ibm and u.p.s. in the southern parts of the united states in the '50s and '60s for blacks and whites to work side by side where it wasn't the custom or even the laws of some of those states. >> let me ask you this. with the google piece, with the rio piece, we've got schumer and graham putting up on the table once again currency manipulation. are we at some kind of tipping point, the whole path of doing business with this country? >> we are and we're seeing we're not aon loan. if there's any way i would fault google on this, maybe they tried and failed, to get yahoo! microsoft and bing who are experiencing some of the same frustrations, even though they have very small market shares, is a show of force. the european chamber of commerce right now is coming out with a series of papers critical of state capitalism or a difficulty

of competing in china. and there are a number of fronts where it has to be addressed. and we're seeing some leadership is making a big difference here. >> you know what that means? they do that when we talk too long. good to talk to you. we'll be talking about it for a while. coming up, when it comes to five-star hotels, riltz-carlton has set the standard. we'll hear from the coo after a break. the aisle. choosing your own car? now, that's a good call. go national. go like a pro.

well, the ritz-carlton luxury hotel chain is planning several new locations this year including one in hong kong which will be the tallest hotel in the world. simon cooper is ritz-carlton's president and chief operating officer. and he joins us this morning. how are you, sir? >> excellent, joe, thank you. >> it's good to see you. what a two or three-year period to go through in luxury hoteling or whatever, luxury lodging, is that what we call it? and we've been talking china all morning. is it the chinese expression that in a crisis, you can either, i guess, bury-- >> i think there's a character. i think it means crisis and opportunity if i remember correctly. >> that's what it is, crisis and opportunity. would you say that you've been able to use this period as an

opportunity? >> i probably couldn't say that completely, but certainly the last six or seven years we focused very much, as you mentioned, on china. we will be opening a new ritz-carlton, the eighth hotel in that part of the world. and we've had very positive experience. obviously, if you look today at the chinese market both inbound and outbound, it's really, really important market for us. and we've had a very positive experience over the last ten years. so coming back to here, the impact certainly over the last 18 months has been much more -- i think felt much more strongly in the united states than it would have been in asia. >> i was alluding to that you have used it as a time to exert your dominance over your competitor, four seasons. and it's been done sort of almost on a price basis, right? you have offered more luxury for more value. at least that's what -- >> yeah, we probably have. we certainly, this time last year, we were being very aggressive in the marketplace to what i would say is affordable

luxury. we needed to fill our hotel rooms. we needed to offer value-added products and preissing that was going to attract new customers. and we, in fact, through '09, through the whole of last year, we filled more leisure rooms than we did in '08, so we actually did better. we had, obviously, a loss of group rooms. >> because of business. >> yes. so from september '08 until this time last year, six months really when groups were canceling, certainly banks, financial services which are major customers for a ritz-carlton for any of our luxury competitors. >> are they coming back now, though? >> the groups are coming back now. >> the groups are? >> they definitely are. that sort of stigma of luxuries is off. we were very active. we and our partners on the hill in terms of trying to sort of avoid that stigma that was coming both politically and a little from the media in terms of meeting and luxury hotels. we don't hear that anymore. certainly we're very aggressive from a pricing point of view and

flexible and making sure those groups are coming back but they are coming back. >> where was it in 2007? >> probably if we sort of drop 20%, we're probably halfway back. we're certainly not to '07 and '08 and certainly preissing is still a challenge because there's a lot of inventory out there. we and our competitors have a lot of space. certainly in the group area, that's probably where pricing is the biggest challenge. i have to say in the season now, florida, caribbean, leisure preissing is back to where it was in '08. >> all is not well. back to the four seasons, i saw an article recently about the maui one. the property there. things have been -- who do you use to say who has the best luxury hotel? what -- is there a service? j.d. power? what is it? >> well, there's j.d. power, there's all sorts of research out there. we look a lot at actually not even the physical product but the guest engagement. the key thing we look for and we

rate our managers and ourselves on is how engaged is our guest when they leave the hotel. because engagement is the measure. >> what do you mean, engagement? how do you -- >> actually, the key engagement question that i love is people have to respond to a question that says, i cannot imagine a world without ritz-carlton. now, that's a pretty tough test. and we'll have about 57% of our guests leaving our hotels who will answer positively to that question. this is owning the mind of the customer. you know, we want people's hearts and minds. and that, to us, is the true test. if somebody's loyal to you or they were satisfied with their stay is great. but that they're fully engaged as a devotee of ritz-carlton, that's what we're looking for. >> how do you lower prices in the down periods without losing the sheen of luxury when things come back? >> well, just because you are offering a lower price point, you cannot -- the guest expectation doesn't change. so your service quality has to be there. what we tend to do is what we would call value added.

you get four nights for three. that kind of thing. where the price point stays but you get extra value. you may get what we would call a resort credit. so here's $100 to spend. one of the most interesting points of last year was the people who took our most aggressive packages actually spent more on the hotel than other guests. it was kind of, you know, we're getting 50 bucks less than last year. i'll go have a round of golf. you go to the spa, that sort of thing. it was a very interesting, you know, dynamic. >> must have been a great debate at the time for you guys. wondering how far we can cut on a room rate. because the world's not going to end. we're wondering how long this is going to last, right? >> well, one of the things we did decide earlier, probably very early in january of '09, it was going to be a very tough year. this was not going to be, you know, a quick rebound. it was going to be long. it was going to be hard. it was going to continue frankly and still continuing. we're rebuilding now. but we decided that '09 was going to be very tough. so right from the beginning, we

began to be relatively aggressive of putting packages out there that would stimulate. >> downtown l.a. could use -- >> a luxury hotel. >> yeah. but that's taking a chance, it seems. of course, you do have a huge convention center and maybe convention travel comes back eventually. >> one of the great things about a ritz-carlton is that we can be part of a revival of a city. i would use berlin as an example, the ritz-carlton berlin, that's where the old wall was. the wall came down, and recreating what was really times square of berlin was a terrific thing for ritz-carlton to do. likewise here in l.a. being part of the revival of downtown, positioning a luxury hotel, a bit of a risk. it's not a very big hotel which reduces the risk. we're partnered with a j.w. marriott and ritz-carlton, so it's a great combination. as you said, a lot of action x activi and activities down there. >> i think the beach is only 20 minutes.

>> we've got one in marina del rey on the beach. >> thank you. >> must be to be here. when we come back, have your investments felt like a high-wire act? tired of juggling your way through the trading day? feel like you're being crowded like a crown out of one of these little cars? keep your eye on the center ring as joe takes stocks to watch to the circus. we'll see what the animal orchestra is up to this morning. >> we've seen them once.

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twice today. so this is a good day for you. >> yeah, it's a good day. more animals sort of distracting from the walruses. >> let's take a look at stocks to watch. general mills reporting third quarter 97 cents, 4 cents ahead of expectations. $3.63 billion in revenue, full-year earnings guided to $4.59. lennar reporting a loss of 4 cents, much narrower than expectations of a 30 cent loss. also revenue was above. and the company says it's on track with its goal to achieve profitability. you see general electric. >> yes.

>> bernstein raising its price target to 20 from 19. hey, they're crazy. they're nuts. on any given day, they could do anything. they're out of their minds. >> are you complaining? >> no. thank you. anyway, the rating is an outperform. they're wild men over there at bernstein. they go from 19 to 20? >> that should help our overweight industrials. coming up, dealing with a delicate situation. congressman sander levin gets into google's face-off with beijing. also, texas challenge. the attorney general of the lone star state will tell why he is taking the federal government to court over health care reform. stick around. here's a little trick i picked up

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google's actions in china raising concern on capitol hill. the co-chairman of the congressional executive commission on china and ways and means committee chairman sander levin talks to us about this delicate situation. >> you're playing in somebody else's play pen, and you want to make the rules your rules. that doesn't always go. getting a handle on financial regulatory reform. kelly king, the chairman and ceo of bb & t corporation will tell us what the dodd bill needs, what it doesn't need and what

would keep him up at night. don't mess with texas. ♪ the stars at night are big and bright ♪ ♪ deep in the heart of texas >> the lone star state wants no part of health care reform. texas attorney general greg abbott will tell us why he's fighting the overhaul. as "squawk box" begins right now. >> aren't we going to see the basement? >> there's no basement at the alamo. ♪ in the eyes of a ranger ♪ the unsuspected stranger ♪ had better know the truth of wrong from right ♪ ♪ because the eyes of the ranger are upon you ♪ welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and carl quintanilla. our guest host, david bianco of

b of a/merrill lynch. he'll be with us for how much time? 59 minutes. hopefully you'll comment on the economic data that we're going to have this morning right at 8:30 eastern. february durable goods. economists -- no one can say what i said there. because it could have been durable, right? >> it wasn't, though. >> you can say gerbil goods and it sounds like i'm slurring my words. economists predicted orders climbed about 0.7 of a percent. and at 10:00 a.m. eastern, new home sales take center stage. a rise of 1.9% is expected. yesterday's existing home sales report showed a third straight monthly decline. right now the futures are indicated like today might be. we've got 10 out of 11. we'll see. not bad. getting a little better. people in the markets listening to david bianco and his dulcet tones. >> yesterday was a one-day high,

so this is not much of a pullback. >> although when you started talking, it went down to about 20. >> that's a good point. plus you've got 9,000 -- no, how many? >> 16,000. >> 16,000 guys. >> they all call me. >> are you on "squawk box" in the morning? >> yes, regularly. >> does it look like this? >> you have a very nice setup here. >> i think yours came first but i'd like to sue you for the name. but i think theirs was -- we named this from that probably. well, david's going to be with us for the rest of the program. meantime, let's check some of today's top stories. president obama's pick to become vice chair of the federal reserve says low interest rates are still needed to help boost the economic recovery. san francisco fed president janet yellen is arguing that unemployment will probably stay high for years. >> when the time has come, am i

going to support raising interest rates? you bet. i don't want to see inflation kick up. we absolutely -- i've said this repeatedly -- have to take the punch bowl away. >> yellen also said that it looks like the housing market has stalled. in fact, total mortgage applications, they declined for the second straight week as rates rose. demand for home loan refinancing falling to its lowest level in a month. but in an early indicator of home sales, demand for purchase loans did increase slightly. and jpmorgan is reportedly close to a deal with the fdic. "the wall street journal" says the agreement could result in a tax refund of about $1.4 billion for the bank. this deal stems from part of the economic stimulus bill. this is the plank that was in that bill that to this point probably hasn't received a whole lot of attention. the law lets companies apply losses from 2008 or 2009 against taxes that they paid in the previous five years. growing tensions between the u.s. and china are the subject of a hearing today before the congressional executive commission on china. here now first on cnbc with a

preview, congressman sander levin, co-chairman of the commission. and chairman of the house ways and means committee. mr. chairman, good morning to you. >> good morning. glad to be with you. >> i don't think we've had you on since you took the chairmanship, so congratulations. >> thank you. >> appreciate you being on the program. obviously, china's got our attention with google, with rio, now with talk of the currency manipulation. how are you thinking about the country and business over the last week or so as these things have come to light? >> well, i think clearly there's a problem with our relationship with china. we have a major deficit. and they essentially have a policy. and that policy is to keep their currency low to control it, to make their goods cheaper, to make our goods more expensive, and to invest very heavily as an export platform. they need jobs. so they have a clear policy. we don't really have one. and we haven't had one for years

in terms of reacting to that policy. and we'll have a discussion, a debate, i think, today. it's in the ways and means committee as to whether there's a problem. i think clearly there is on what we should do about it. that's more complicated. but i think the complexity of action should not lead simply to inaction because we've talked with china. there's some talk of having unilateral action. but the situation remains basically the same. they have this policy pegging their dollar, i think manipulating it, and we just don't have a policy that's clear. >> yeah. we have spent -- we -- by that i mean the country has spent a lot of time talking about it. do i hear you saying that your patience has run out? is running out? >> yes. >> but mr. chairman, there are some serious implications if they are officially labeled currency manipulators. are we prepared to go to battle with china who is the largest holder of u.s. treasuries outside the united states?

>> well, that factor is always raised, that they hold a lot of our money, a lot of our paper. and are we afraid to tackle this issue, this imbalance? you know, it's not only a u.s. problem, it's a problem with other countries. the world bank has now said that china needs to douevaluate. it's devaluated. the imf has said that, india has said that. so it's really a global problem. there is this huge imbalance that china has used to help its economy that is hurting other economies. it's really kind of rigging a system. it's not a free trade system when one country rigs its currency. so we have to do something. i am impatient with inaction. and we're going to discuss today

various alternatives for a more forceful addressing of this issue. >> we've obviously tried different things. secretary paulson tried the strategic economic dialogue. there's always the possibility that white house or state can lean on them in their own way. why should congress be the one to carry this water? >> well, i think we're not exactly carrying it. what we're doing is trying to move this issue up the hill with some water on our back, i guess. but, look. our job is to fend the interest of this country, to take into account the needs of our constituents. clearly the chinese policy has impacted jobs in this country. there can be a debate about how much. but if one country has policies that make their goods cheaper and it leads to our goods being more expensive, it's going to have an effect on our production, our jobs, our

products, and it makes it harder to ship overseas. so something has to be done. as you said, there have been talks, bilateral talks, that haven't led to much. and then there's an idea we could take action unilaterally through our duty. there are other provisions, antidumping. that is questionable, whether or not it would work. then we say let there be multilateral efforts. there's a lot to be said for that. but the multilateral institutions like the imf and the wto are very weak and effective on this issue. so this is a problem waiting to be addressed. and so far it hasn't been. and the purpose of the hearing is to highlight the issue, get all sides to it, and then see what prescriptions for action there might be beyond talks. >> so you're talking about more than just label them -- labeling them currency manipulators, more than just taking that complaint to the wto. you would like to see something even more dramatic?

more dramatic action that takes place quickly? >> i mean, there hasn't been -- look, we have to decide a policy. and i don't know, april 15th is irs day. it's also the day the administration has to say, is china manipulator or not? in some previous years, some decades ago, china was so labeled. there's been hesitancy to do that now. and i think that there's hesitancy within the administration. but that hesitancy cannot lead to doing nothing effective. and china says anything that we do that would be effective is, in quotes, protectionism. but it's really china that has been protectionist in terms of its trade policy and its currency policies. >> chairman, do you think google's being used as a pawn in this whole broad debate? >> i'm not sure. i think china's actions vis-a-vis google, they

illustrate a major problem. and that is will china become increasingly a free economy? and google has shown china isn't. they restrict the activities of google so much that they're saying it isn't worth being there. they restrict their outreach. they censored, et cetera, et cetera. you can't operate -- google can't operate under those circumstances. so china really faces this issue as it becomes the second largest economy in the world. as it's growing, it impacts other countries. is it going to adopt policies that really are effective trade, imbalance trade policies? in a word what china for its own needs has undertake very imbalanced economic policies, and we've got to take steps to balance them so there's equity among our nations as we trade. >> before we go, is there any part of you that is nervous about setting off -- setting off

some kind of trade war? i mean, a real negative -- a battle with negative effects? >> you know, that issue, trade war, is always raised. and i object to this polarization in trade that it's either free trade or pol polarization or protectionism or the notion that if you take action, it will always lead to a trade war. the answer is we need to be careful, and we need to be active. we can't be scared off simply by the statement that china has said that if we take action, it will be a trade war. often when we took action like on china tires where they were flooding our market, they said it would lead to a trade war. that has not happened. >> mr. chairman, wow, it's fascinating to watch. appreciate your time today. we'll be watching the hearing. >> good. good. it should be interesting. we have four excellent witnesses. >> congressman sander levin, thanks a lot for your time today. >> thank you. coming up, a regional banking giant sounding off on

regulatory reform. kelly king who is the ceo of bb&t will tell us about his greatest fears of the bod difficult. president obama has signed health care reform into law, but texas and 13 other states are not taking the medicine just yet. texas attorney general greg abbott will tell us why the state is just saying no. it's one of 14 states that are already pushing back. because now you can trade u.s. and foreign stocks online, in 12 markets, 24 hours a day, all from the same account, and settle in u.s. dollars or the local currency. plus, we'll guide you with international research and realtime quotes, so you can diversify your portfolio, wherever -- whenever. and we'll be on call around the clock, while you trade around the globe. fidelity investments. turn here.

financial industry leaders talking regulatory reform at the u.s. chamber of commerce's annual capital market summit today. joining us right now first on cnbc on what he will say before the group later today is kelly king. he's the chairman and ceo of bb&t corporation. kelly, thanks for joining us this morning. >> thank you. good morning, becky. >> what do you plan to say about this? i know you're not a huge fan of the dodd bill as it stands right now. what are your biggest kplanlts?

>> well, the biggest complaint is that we haven't yet had all of the necessary discussion to reach a compromise from the legislation that will accomplish, you know, the reasonable purposes of all that are involved. and specifically my biggest concern is the consumer financial protection agency which in its current form is an extraordinarily dangerous piece of legislation. and i think most of us in our industry would be adamantly opposed to it. >> when people on main street hear that, they say, okay, the banks are pushing back. they don't think consumers should get a fair shake, what specifically are you concerned about with the consumer protection agency? >> well, you know, i guess basically i would just like for the consumer to understand that we are for -- really for -- really good consumer protection. we've always been. but what we are pushing back on is consumer protection in a form that is being proposed that would not be good for the consumer. >> how so?

>> you're talking about a 1300-page document here that has not been properly vetted. and i'm afraid that carried out to its natural extreme, it would be much, much, much worse for a consumer than what we have today. >> but why, kelly? there have been so much back-and-forth about the consumer protection agency, how strong it will be, how much teeth it will have, in effect, where it will be housed. what are the biggest concerns about where it stands with that bill? >> right. well, the biggest concern is that it is going to be while housed in the federal reserve, it will be completely independent of the federal reserve, have its own budget, unleashed and unbridled and able to do what it wants to do. and as long as it really is protecting the consumer, that's a good thing. but here's the problem. the problem is a group of people that are appointed and are unlicensed to be able to, you know, do whatever they, in their opinion, judged be right for the consumer is very dangerous.

take, for example, todi bet mos people out there have gotten a mortgage loan in the last few years. most people think that's terrible. all these documents, papers, fine print, you can't understand it. i agree with them. guess what? all of the forms, all of the legalese that they see, it's because of existing consumer protection bills already been put on the books. what we need is simple, straightforward documentation so the consumer can understand what's going on. that's what they want. that's what we want. but we already have this kind of regulation in place today. and it has happened under the guise of being a part of the regulators. if you put it outside of the prudential regulators where there's no balance between, you know, safety and soundness and the consumer, we're going to end up with a big mess. >> kelly, to your point, st. louis fed president james bulluck was here on set earlier this week. he's concerned with it being housed in the fed and having the

credibility of the fed without it actually being reported through to the fed. wouldn't it be confusing to try and add an additional mandate on the fed to have them not only looking at monetary policy buzz also consumer protection as an equal, a mandate that they'd be following up? you start thinking about things like a fannie mae and a freddie mac where they had dual and sometimes conflicting mandates, too. >> well, it may seem that way, but keep in mind, and i should mention that i serve on the board of the federal reserve in richmond, so somebody might say i'm not objective, but i think i'm certainly trying to be on behalf of our consumers, our clients. but consumer protection has already been for years and years a part of the prudential regulators, the fdic, federal reserve, sec. while it's not been perfect, they've made mistakes. i think we probably all have. it's worked pretty well. so they know how to balance safety and soundness. but here's the problem. when you separate safety and soundness in consumer protection, if you go off and push consumer protection to the natural extreme, you know, for

example, you'll end up with a vehicle that will be so safe and so secure that it would cost $500,000 and nobody would be able to afford to get a car and drive to work. we have to be able to find some balance in life so that the whole system can operate. >> kelly, it's always great talking to you. we hope to see you here in studio again soon so we have more time to chat. >> thanks. i'm looking forward to it. have a good day. >> kelly king, chairman and ceo of bb&t. next half hour, democratic senator jeff merkley will talk to us on the regulatory reform bill. next, we get set for -- hello -- key economic data ahead of the wednesday session on wall street including the latest report on durable goods. "squawk box" will be right back. tomorrow, "squawk box" hits the campaign trail. senator john mccain in the political fight of his life, the economy, health care, the issues that matter most to your money. one of the country's most powerful politicians live on

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bianco talked again. we're down 55, down 30, now down

28 on the futures. it's right around there, isn't it? down maybe a little bit. so not quite 25 points worth of downward pressure. the durable goods report will be here right at 8:30 a.m. eastern time. and i think kevin ferry, cnbc market analyst, are you a cnbc market analyst? i don't know. santelli is, you know, a lot of people that are crazy think -- you know, people can't take two days off without people thinking something's going on. he'll be back thursday? >> yeah. he left -- he left when all the fun started. so we need him to get back and explain all this craziness to us, joe. so a lot going on in the bond market. you see the numbers up. the big story is not just the equities. it's really the historic movements in spreads.

janet yellen makes comments like that last night, you have a fed that is actively helping suppress that in the marketplace. so watch out today. the rates are rising a bit this morning. and certainly the government is going to have to compete with the corporate market now to see where they can get this debt off. >> yeah. that's interesting. and you saw faber, 10% to 20% eventually. if we're going to go there, we need to get above 3.6, right? 4%'s on the way to 20%, right? used to be. >> that's right. you've got to walk before you can run. i mean, i think the amazing thing is that they're trying to really lock it down. and so if you're going to get in the business or the central bank is going to get in the business of suppressing this, it's odd because the market prices very little risk. in fact, less risk than it did in the peak in 2006. it has two things going for it, the yield curve's steep and there's a lot less leverage in

the sis feystesystem. so the fed's counting on that. >> stay there. we'll be back with you to get reporting in just a couple minutes and we'll have instant reaction. "squawk box" will be right back. i drove my first car from my parent's home

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the government's about to release the durable goods report for february. kevin ferry is standing by at the cme group in chicago. steve liesman at the jeffries trading floor in new york. our guest host, david bianco, is here. and kevin, take it away. >> up 0.5, ex-transportation up 0.9%. lower on expectations, becky. but a good ex-transportation number. and an upward revision on the whole number last month from 3% to 3.9%. taken as a package, a pretty good number. >> pretty good number, but there have been other things happening in the bond market that have really caught your attention over the last couple of days. >> you bet. and they're still going on. the rates rose a little bit before the numbers.

so not really a big reaction in the bond market since it printed, but rates are up and the five and ten-year note are on the low of the session. we have to watch that. it's just not the nogovernment issuing now, it's everybody who can try and jam through the window. it's the debt markets that will be the big story today. >> the debt markets are going to be the big story when you add the fitch downgrade of portugal, what does that mean? >> well, they're only downgraded them to where everything else is actually trading on a market-based standpoint. so i guess it's everybody down on the floor. i don't think it's a good thing. that's my short answer. but the market participants and the fed clearly think that there's risk in the system. the market is pricing no risk in the system, and that's where the ball is going to have to bounce. >> are we hearing the bond vigilantes coming back? >> some people say, it's going

to lead to an inflationary situation. on the fed, on the other side, there's people that clearly feel that the risk is tilted toward a debt deflation. so somewhere in the middle. if you can lock it down and hope that it stays here, that's going to be the best possible outcome. as a trader, all i can say is that's the least probable outcome. >> let's get more reaction. steve liesman is standing by at the jeffries trading floor. steve, you got any more thoughts on what we heard from these numbers on the durable goods? >> well, the first thing i heard, becky, over the jeffries squawk box here was about that sizeable revision to january. they went up from 2.6 -- 3.9. so that's going to be important when we start figuring out gdp for the first quarter. 0.5% is okay and transportation is better. we look every month at the nondefense capital goods, business orders. first of all, capital goods were up 5.2%. nondefense capital goods and ex-aircraft up 1.1%, reversing

the january decline. what we've been looking for for a long time as far as the economy goes is whether or not business is going to be spending. and it looks like at least in the month of february they are. and, of course, you can't talk about february without the potential effects of the snowstorm. you've got to look at shipments, see if there is an effect there and whether or not fed was capped in terms of the rebound, the amount of durable goods or because of the weather. >> david? >> it's nondefense capital goods that's the important component for s&p. actually with aircraft. and that looks pretty good. it's aville till series but it confirms growth and we think that's going to continue to play out. >> this is in line or even better? >> it sounds like it's roughly in line. it's volatile so we tend to monitor the trend. it seems like it's just confirmational, 3.g% gdp growth. >> yesterday they said you could be looking at 4%, 5% for a good

period of time to come. >> we think it's going to be just slightly above 3%. >> steve, can you weigh in on what we were discussing with kevin before, too, just the idea that some in the bond market are starting to get a little restless? is that a concern that it's going up at treasury? >> well, i mean, the big story i think they're talking about around here is the swap rate, ten-year swap rate being below the treasury rate. that's two factors. one is a lot of supply from the corporate side, causes guys to come in and swap fixed or floating. and that puts downward pressure on yields right there. of course, there's concern about issuance. that's why we're here today, becky. we're here because the government will be issuing another, you know, give it a yawn now, but if you think about it a year ago, two years ago, $42 billion of five-year notes. the market has taken these down well. it took down the two-year pretty well yesterday. at about a 3% bid to cover. and we're looking, how does the government go about placing all of this paper out there?

what's the appetite like? and what are guys like jeffries primary dealers doing. i just want to make one note. i don't know if you got a chance to talk about this earlier, roubini said something positive. >> what? >> yes, can you believe it? no single u.s. state has the financial vulnerability seen in greece. and he goes through a whole mathematic cal thing looking at individual u.s. dates versus greece. the title of that report is no greece, the country in the u.s. machine, at least for now. so how do you mark the day and time roubini seemed to say something positive about the united states. >> he backtracked. for a while, he said i don't want to be called dr. doom. dr. realist. that was like a year ago. but he's -- you know, as things have gone against him, he's gotten progressively less strident. >> is it a once-a-year thing, joe? a flower that blooms every 24

years? every couple months. >> the twice a thing in 24-hour, right? you know that -- >> the what? >> right twice. >> got it, got it, got it. anyway, steve you'll be there all day, right? >> yeah, we'll be here talking to guys. this is one of those growing wall street companies that's taken, i think, market share from the fall of the big boys. and they're pretty interesting shop right here. >> steve, we'll be watching through the day. kevin, thank you. and david's with us for the rest of the hour. the road to regulatory reform, senator jeff merkley of oregon. mf, up almost 20% on corzine. >> that's a good get. >> anyway, a guy who's still positive coming on on the partisan politics that could mean a bumpy ride. and then president obama signs the massive health care reform bill into law. but texas is just saying no, the

lone star state's attorney general tells us why this is the wrong prescription. all of you e-mailing can get all fired up. "squawk box" is coming right back. the stock of the day is on the way. is it in your portfolio? find out in just a few moments.

the financial regulatory reform bill headed for the senate floor following a party line vote in the senate banking committee. joining us now with the latest on the bill's prospects is democratic senator jeff merkley of oregon. senator, it's good to see you. >> it's great to be with you. >> are you guys feeling emboldened now after health care? is that going to get a lot more democratic, the bill? >> well, i tell you, there is a sense of momentum that comes from having been stalled so long on health care. but we've been working on this bill in committee for well over a year. and i think it's time to have the debate on the floor. and i'm glad to see it headed that direction. >> how do you see the process playing out, though, senator? do you think that you'll be able to pick off a couple of guys from the other side of the aisle to get this filibuster proof, or

how's it going to work? >> i hope so. because during the course of the last year, the debating committee really hasn't been partisan. folks are looking for the right lane markers, the right traffic signals for our financial system, a lot of shared concern about the role of the fed, consumer protection, a lot of concern about how much you have financial institutions inside of banks. there should be a way to get to a bipartisan bill on this. >> we talk so much -- we've talked to senator corker, senator dodd. we're talking to you. it's hard for us to really figure out what the real bones of contention are. what are the things that are -- will actually make or break whether we get some cooperation or whether you can get a couple of republicans? do you know? do you even know? >> you know what? what it looks like to me, just one person speaking, is that there's a lot of political jockeying going on related to the upcoming elections. you might remember the lunch memo that came out that instructed republicans how to kill financial reform while

pretending to be for it. and there's a sense of folks want to be on the side of the consumer, on the side of small businesses that depend on the liquidity and lending in our economy. but how do you make sure that that's where you are? and are you going to be there for real or just are you pretending to be there? and so we're seeing a lot of maneuvering. i just want people to put the elections aside and say let's do what's right to create a sound financial system so we can have solid growth. >> do what the democrats do. do what's right for the country, not what's right for the elections. it could be, though, that if you push too hard on being the friend of the people and the populist rhetoric, if you destroy the financial system, that's bad, too, though, because sooner or later you do need that for a decent economy, right? >> listen. that's exactly why we need to have clear rules of the road. i mean, we have all seen that financial investment houses blow up. we watch merrill lynch blow up. we watched bear stearns blow up. we certainly don't need to have those inside of banks where there are special access to

discount windows, special access to insured deposits. and we don't want to blow up the lending institutions at the same time that something goes awry in an investment house. >> a lot of the stuff i've read that you've weighed in on has to do with risky proprietary trading when i know you've been -- people have mentioned it many times in the past, that's not really what got them into that trouble last time. is that fighting the next battle? >> that's only one piece of it. no, it really is part of the last battle except we're in a riskier situation now because whereas a number of commercial banks did not have investments houses, bank of america now has merrill lynch, jpmorgan now has bear stearns, so we're in a riskier position now. for sure a lot of what happened in the market was the result of proprietary trading. >> go ahead, david. >> b of a merrill is proud to have repaid the taxpayer with a handsome return. i'm not sure it's proprietary trading that caused the problems. certainly we don't need that to be a future problem. >> senator, are you worried?

i mean, obviously, there were some hopes that this could have been marked up to some degree, built some consensus in committee. now it goes to the floor. on one hand, i see a new cast of characters will help get a fresh set of eyes. on the other hand, it's going to be tough to get some consensus with 100 senators who may or may not know anything about banking. which is it? >> well, in a perfect world, i would have loved to have seen politics aside a really good discussion and a market in the banking committee because we've been sitting there listening to testimony for a year. many of us have been putting a lot of special effort into reading and talking to experts on every side of this puzzle. and so it would be great to have that expertise come to bear. but i think the leaders on both sides felt that this discussion might inflame the tensions rather than have a more productive conversation on the floor. so that was their direction. they wanted to take us. and i think everyone is hoping that the floor does prove to be

a place where some real quality debate can occur. you know, i'm a little bit of a skeptic. but that's the hope. >> all right, senator. thank you. appreciate it. >> it's great to be with you. >> good to be with you as well. when we come back this morning, states asking for a second opinion. the president signing health care reform into law yesterday. now 14 states are suing the federal government, calling the overhaul unconstitutional. we'll talk to texas attorney general greg abbott about why the lone star state wants that second opinion when "squawk" comes right back.

is this comprehensive? is this really enough of a change? is it going to solve our problem? i think the costs are going to be out of sight, out of sight. i mean, i think we're talking a couple trillion dollars. i don't know the precise number. of overage, not savings. >> jack welch on this program yesterday commenting on the high price of health care reform. 14 state attorneys general have filed lawsuits claiming the

landmark reform law is unconstitutional. joining us this morning is texas attorney general greg abbott who joins us from austin. mr. abbott, good to have you with us. good morning. >> thank you, good morning. >> we've got attorneys generals doing this, legislators who say they're going to file or are filing bills to block it at the state level. on what level is it unconstitutional? >> there are several issues. first and foremost is the individual mandate. this is the mandate requiring every american to go out and buy health care insurance. this is the first time in american history that congress has forced americans to buy something merely as a fact of being a resident of the united states. here's the constitutional provisions that it violates. >> let me stop you on that front because the constitution gives congresses power to regulate commerce, but your point is they can't force you to buy something. is that it? >> they can regulate commerce or commercial activity. they cannot regulate inactivity. and what they're trying to do here is to regulate inactivity or the failure or refusal to buy

a good or service as a result. >> and those mandates go into effect in 2014. does that mean you can file suit now or do you have to wait until they go into effect? >> good question because that will be the first issue we face, and that is the issue of standing and rightness. in virginia passed, they believe they already have standing and rightness. there are going to be some standing and rightness claims we prove in court in our case where we believe we can go ahead and assert the violation of both, the commerce clause, but also the violation of the tenth amendment. >> there have been scholars already -- everybody's weighing in on this, right? and a lot of people point out that the freedom not to participate in a given market is not well established in constitutional law. back in civil rights, you have a restaurant, you don't want to serve minorities, too bad. 1964, you're going to serve minorities. how do you answer them? >> there's a clear distinction there. with regard to the civil rights laws what was happening, say with serving minorities in a restaurant, serving minorities in a hotel, those were instances where the hotel operator or

restaurant operator were willfully and purposefully engaging in commercial activity themselves. in this instance, congress is trying to regulate people who are refusing to engage in that commercial activity. that is the factual distinction between this situation and the civil rights laws. >> attorney general abbott, would it be different if there was actually a public plan that people were forced to participate in, just like they are social security? is there a mistake in keeping any private insurance at all? >> you know, there are ways in which congress could have mandated this program. one would be through something maybe like social security, but congress didn't go down that path. instead, they went down a path that forces americans into the commercial transaction process by forcing them to buy a good or service. and that's our whole point, and that is, there are constitutional ways that congress could have achieved the same goal. they didn't pursue those paths i think because they were more politically unpalatable than trying to force americans to buy a good or service.

>> mr. attorney general, can you hold for a moment? we have breaking news. steve liesman is hearing on financial regulatory reform right now. steve, what do you have? >> yeah, becky, really interesting ramping up of the rhetoric on the part of the administration when it comes to the republicans and financial regulatory reform. an administration official telling cnbc the republican amendments that have been introduced show the republican confusion on financial regulation. they say the republicans have no plan to end too big to fail and their amendments would make it impossible to regulate the next aig, bear stearns or lehman brothers. finally, the administration official saying republicans don't really know what they want after months of negotiations. we bring this to you not only for the criticism or whatever content is in it, but because a real change in strategy by the administration where they were negotiating in the background, now they're stepping up, ramping up the rhetoric on the republicans, and we'll see how this is going to play out in the attempt to get bipartisan support when it comes to the financial regulatory reform bill introduced by senator chris dodd. carl? >> steve, thank you for that. wow, the picture changing

quickly on financial regulatory reform. back to the attorney general. i forget what you were asking, becky, but my question, quickly, mr. abbott -- congress has framed this as a tax, right? which is a pretty clever way of operating on turf that is safely theirs. why is that not a problem for your cause? >> if it solely were a tax, there are certain ways they could have structured the tax that would have made it legal. the way they did this is what's called a capitation tax. that type of structure is a violation of the constitution itself. so, once again, there are pathways they could have chosen with regard to imposing taxes. they didn't go down the way that could have been achieved because it was politically unpalatable. they've chosen pathways that are unconstitutional, which is going to make it a challenge for them in court. >> do you worry that as a result of your bringing this action that they will go ahead and pursue some of those ideas that, i would guess, you're opposed to, like a public option? >> well, what we are concerned about first and foremost is ensuring that whatever pathway

congress chooses in enacting a law, it's one that is consistent with the constitution. what we're most concerned about here is that if congress is able to force americans to buy a good or service in violation of the commerce clause, in violation of the tenth amendment, there will be absolutely no limit to congressional power, and that will change the entire constitutional framework of this country. that must be stopped. >> there's been some republicans who have said they've heard from other conservatives that people are comparing this bill to the kans kansas/nebraska act of 18 -- i forget what. it was one of the precursors to the civil war. is this on that level? >> well, i am not going to go make any comment on whether or not it's on that level. what we're dealing with here is a situation where this is going to be the first time ever congress has forced americans to buy a good or service. this is an expansion of the commerce clause that has never been drawn before, and it draws into the target, the tenth amendment, that americans are clamoring to have enforced, and i think we're going to have a

chance to enforce it in this case. >> just so i don't hear anyone say, well, you've got to buy car insurance. you don't have to drive, right? >> no, this is very important to understand. completely different from car insurance, and that's what brings in the tenth amendment. the federal government doesn't have the authority to make you buy car insurance. those powers, because they weren't vested in the united states government, they rest with the states. the states have the authority to make you buy car insurance. that's perfectly consistent with the constitution, point one. point two, they can make you buy car insurance because you are voluntarily engaging in the activity of driving. here they're trying to make you buy insurance -- >> you're voluntarily not killing yourself, i guess. yeah, i see the distinction. thank you. right? you're voluntarily living. >> we all operate in the market, is the thing. >> he's right in that the states have a lot of these powers, that and helmet laws as well, as people have pointed out. >> i wonder how long this would take. any idea? i mean, this could go -- i mean, we could be talk being this in five years, still? it could be going up the court

system? >> we're going to move it along as quickly as possible. there are three parties that will be defendants in the case -- secretary of treasury, secretary of health and human services, secretary of labor. they need to be served. we expect they will come in and file a motion to dismiss. the court will rule upon that. hopefully, it will deny it. then we'll proceed to a quick trial. and the goal for everyone is to get up to the u.s. supreme court as quickly as possible, hopefully, within a two-year time period. >> before that place is stacked, which is probably headed that way. anyway, serve them good. knock on the door -- can you do it at like 3:00 a.m.? [ knocking ] >> hi, is mrs. sebelius home? attorney general, appreciate your time. we'll be watching this one as well. "stock of the day" is next after a short break. we'll be right back.

all right, some news, "stock of the day." conocophillips plans to raise -- or to half its steak in luke oil by 10% and launch a $500 stock buyback. the company taking a number of steps as rt