good morning, good morning. a deal for greece as the eu leaders work out a financial aid plan to address that country's debt problems. we're live in brussels -- we're not live in brussels. we have somebody live in brussels with the latest. we'll have street reaction and preparing for a november showdown, republicans looking for support from a disaffected public, while democrats are hoping a growing economy keeps them in charge as "squawk box" begins right now. >> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe

kernen and carl quintanilla. and it's friday and we're ready to go. and we've been watching what's been happening, not only in the treasury market, but also what's been happening in the euro zone. in fact, the euro zone leaders agreeing to help debt ridden greece to be used in a financial emergency. under the accord, athens would receive coordinated bilevel loans that use the euro as well as more from the international mon taen tear zone. this could cost an estimated $27 billion to $29 billion if it had to be utilized. we've been keeping track of what's happening with currencies. the euro is slightly higher on this. but every time the euro has gone down, it's helped stocks this week. every time the euro has done gown, the dollar has gone up. >> yes. >> but the stock has been following what the euro has done. >> it would be the first intervention by the imf in a euro zone country. still concerns because the plan doesn't have a lot of details,

worry about portugal and spain, is greece going to go back into recession after all these fixes? >> right. although there is some idea of a euro zone sovereignty. >> what changed, though, in the last week? remember france and germany saying this is not something we want to do? >> imf coming in and if they have the imf in there -- >> it sdint didn't help that the contagion looked like it was the downgrade in portugal. >> and some people wonder if it was spreading here, too. >> obviously something is going on. >> and there are times when the euro -- you know, they don't like a strong euro because they're already in a slow growth period. but i guess if you're worried about big debt issues, you don't want to dollar going like this every day. >> it depends on why the euro is going down. >> they like to export, but not if they're going to be in -- and it had to scare them what's going on over here.

because things are happening global noe now. >> yeah. >> we're right in the distance of 4%. >> yep. which people will say it will be interesting. >> and as i've said in the past, just keep in mind -- i hate to say it. people say that all the time. >> 4% of nothing. >> yeah. but there were times looking at it -- >> rapidly in the last two days. >> 8 and 7 were very friendly in the 80s. but then when we got down towards 5 or 6, we thought, it can't go lower than that. >> but with the housing inflation struggling, you're talking about the housing markets going to 13% and 14% interest rates. >> you're not saying you want ta again? >> no. i hope people don't think, oh, my god, 5% would stifle -- >> i wonder what happens with so many mortgages and adjustable

rate mortgages, if they were climbing higher, i guess there's a question of what that does to the housing market, too. >> yeah. and some of these foreclosure numbers that we got yesterday -- >> we might be able to watch this go right through. really? >> yeah. joe is having some health issues this morning. whoa! no, i'm not kidding. stop and go, not pass -- anyway -- >> we do talk too much. sorry, sorry. >> meantime, the ranking member of the senate banking committee raising objections to the financial regulatory reform bill. senator richard shelby sent a letter to treasury secretary timothy geithner. he says it exposes taxpayers to bailouts for large financial firms and give the fed too much power. however, shelby says there's still room for bipartisan compromise. we'll talk to senator shelby at

8:35 eastern time. things change day-to-day. >> his letter is pretty strife, but if he's willing to make compromise, we'll see what happens. this is the final hurdle, it cleared late last night. democrats approved a package of fixes that approved better benefits and low income housing for middle class familiars. the president is set to sign the fix-it bill early next week. aimed at curbing the rate of foreclosures, it's the second initiatives announced in as many months to require lenders to lower payments for jobless workers. it will lower some principal debt for borrowers who owe more than their house is worth. a lot of these banks are taking the bull by the horn, b of a saying that we're going to work on the principal part ourselves. >> i'm surprised you're not hearing more outrage.

this is kind of what started the whole tea party issue. rick on the floor saying, why should they be allowed to pay down their mortgages when they were using their homes like piggy banks. i'm surprised we haven't heard more about it at this point. >> yeah. and if that's the only things from holding the economy to a true v-shaped economy -- >> the good thing about this is it's targeted to people who are unemployed to make sure they can stay in hr thome while looking for a new job. oracle topping expectations and issuing its strongest sales forecast in more than a year. shares were down after hours, but the stock hit a nine-year high ahead of the report. joining us now is joe fishbien, managing director of lazard capital markets.

this is the second quarter in a row that you set acited from the previous quarters. this is a pretty good metric. >> absolutely. and i think it's going to continue. they put out a fairly conservative guidance and i think they're going to continue to execute. i think the big overhang on the stock has been the sun and the sun is turning out to be a good thing for them. >> how can we tell already? what did they tell us about the integration of sun and how can you -- why do you think now that it might be better than you thought six months ago? >> a couple things. number one is they're cutting the supply chain down from sun. sun was fairly mroeted on the supply chain. they've given guidance that suggests that they are starting to cross sell into sun's customers. there's not a huge amount of overlap there. and we're seeing here people very concerned about the overall impact to margins and to eps and eps guidance is up. so we've got indicators that funds are not going to be as

material or as impactful as people had expected. >> the revenues of 17% plus 12, if you take out currencies, is that an organic number or is that with sun? >> that is an organic number. it's actually closer to 10% organic growth, roughly 17% with the sun acquisition. but again, like you said, joe, this is the best organic quarter that they've had and they're just entering a new product cycle with databases and their middle wear products and we're going into an i.t. spending environment, so we think oracle is a must know name here for anybody investing in large cap tech. >> is license revenue, is that something that everyone watches that and that is up more than total rich knew? is that the high end? >> that was at the high end of their guidance range. and it is what everybody looks at because oracle gets roughly, you know, 53% of their revenue from maintenance.

and the license line wibt shows what the new business is, what new people are buying. so that number, i think, really surprised some people and shows that people are actually buying new products. again, we think we're in the early cycle of the increase in the database and middleware product up cycles. >> really? so if things happen on a macro level, then oracle will be there. it's funny that -- can you explain why there's almost a permanent wall of worry around oracle? there's always a skepticism. is it larry, is it the acquisition that they can never do it cleanly? what is it that makes people hesitant to go all out on oracle? >> i think there's some skepticism around the acquisition strategy and how it's playing out. but i think the proof is in the pudding that every time they do an acquisition, they're able to increase operating margins significantly. and so i think, joe, that we might finally be breaking out of that skepticism, particularly

when they go out and buy sun, a hardware company, saying how is this ever going to happen? how is this going to work? and i can this is not only transformational from an i.t. point. but you know, a software company comes out and buys a hardware company and makes it work. you'll see investment sentiment change to this opportunity and the stock is going to work from here. >> post bubble from almost 50208. here we are, we've made about half of it back, i guess, back to 26. there's oracle with sun and there's a companies that can do the same thing. what is it, three groups? >> three major groups. you'll have the haves and have-nots. with this information, they're going to be an enabler. but vendors that are providing cloud services are going to be buying from oracle.

because they've got the stack. >> did you guys get that? if you're an enabler for this computing -- >> judging from the stack of applications -- >> can i say that at a cocktail party? anybody trying to enable cloud competing has to be involved with -- i just wanted to see that. >> well, i've got a 160 page report on it if you want to -- >> is this how you figure out climate change? cloud computing? what exactly is -- how much precipitation? >> very simply, it's being able to leverage the internet to deliver software and services. >> i know, i know, i'm doing this -- this is for viewers, joe. this is for viewers. hey, i'm going to migrate from talking about scoring algorithms to -- >> you'll get that report and have time to read it. >> yeah. thank you. i can read it until the bathroom. it will give me something to do.

>> you'll be there for a while. >> yeah, i'm going to be. in fact, carl, take it away. >> the controversy over health care and the state of the environment, we're joined this morning by our own john harwood taking a look at politics. >> good morning, john. >> good morning, carl. i think it's important to make a distinction between what did and didn't happen in terms of the health care debate. if they had failed, it would have undercut the credibility of their government. but everybody dmt democratic party, as they look ahead to the november elections, understands that they're going to lose seats, it's going to be a difficult year for them. and these numbers that we're about to show you are some of the reasons why. the pure of labor statistics is going to highlight state by state unemployment figures. nevada, for example, 13% unemployment rate. this is a heavy foreclosure state. and harry reid, the senate

leader who pushed through this health care plan is in deep trouble in that race. could we know, but he has a deep fight ahead in that re-election. now over to the midwest, look at indiana. evan bahy is a retiring member. you're looking at 11% unemployment in the state of indiana. you've got a couple of house seats at risk. conservative varies. the tie came in for democrats and bmp become in 2008. but this is a much different year. george voinovich is retiring. that's a race in which republicans clearly have the upper hand with rob portman, the former bush budget director. democrats think they can make headway against him late in the year. we'll see. he's going to have a lot of money. five house seats in the

democratic party. the tide came in in '06 and '0837 they won some seats that are a hard ground to defend for democrats. they're going to have their work cut out for them to defend those seats. that is also a double didn't unemployment state. finally, it is important to make clear that it's not only unemployment, and it's not only the level, but everybody across the country realizes it's a weak economy. look at pennsylvania, arlen specter switched over from the republican party, the democratic party supported obama on health care, has a tough race. the republican is challenging him. he has a challenge from the left in joe sestak, one of the house members. sestak's seat is vacant and also john murtha, the veteran who passed away some weeks ago. those are the broad landscape for democrats the.

they know this is an uphill fight. they don't see much changing despite the victory on health care. that's one of the reasons why the administration is talking today about this foreclosure relief program, the aid for jobless people who have under water mortgages, guys. >> john, on top of all that, this great story in the times about robert bennet, the senator from utah, and they ask him, if this anti-incumbent tie is as strong as some people think it is, i will be swept out despite all my efforts if the anti-incumbent tide has a lot of strf of graphtation, i'll be just fine. that's a huge wild card. >> we have to figure out that question that robert bennet mentioned to you and whether or not we are at an election point in the economy. the obama officials are talking

about a turn around that will stick. we haven't seen it so much in the jobs rate. voters take a while to get oriented in the fact that things are improving rather than getting worse. that's important for bob bennet who is on the defensive as well as it's important for those democrats. more important to the democrats, they're in the majority. they've got terms of defense. right when things are improving, john, we need to add in these bond auctions this week and the global possibility of rates moving up fairly quickly, i guess. i mean, if you want to be, you know, dire and look at things half empty, you could almost see that, yeah, we're right now headed on a course for a nice recovery, but you could see something in the future, actually a new event with all this happening, higher rates, for example, globally that could sort of make it much less strong than it would have been. that it was differentin to be as of right now. >> and the question is, once rates start moving up, do people view that as another negative trend hitting them or do they

take the perspective that you mentioned a moment ago like, come on, man, rates have gone a lot higher than 5%. we can see something in the future that is more difficult, but right now, the rates are still pretty low. we have to see how voters judge all that. but it's -- this is still a bad election year, even if you're celebrating, even if you're high-fiving in the end zone over health care. if you're a democrat running for election this year, you know the tide is against you. >> john, you have to go with nevada, though. we get a lot of mail. and the people of nevada, they're very, very -- you know, this is important to them. but i want you to say nevada. i don't know more -- you know, and if you ever watch bonanza, they always say nevada. >> don't worry, he came after me with vigilante. >> joe, i think it is easier to handle algorithms and cloud computing than it is to say the name of that state.

>> oregon, too. >> if you need a high performance pascal written into your commador computer. >> i had to do it. >> 18 drops of due, each row has an even number of drops, eight boxes have an even number of drops. >> joe, how are your brackets looking? >> you know, john, i -- it was murphy's law last night. you know how much i wanted xavier to win. they got killed by k state the first time. i got up this morning and looked at it. i wasn't feeling well and there it was, double overtime, still loss. t.g.i.f., that's what i'm resting open the. >> you got duke going deep in this tournament? >> i actually didn't fill out the brackets. i'm kind of glad i didn't. i don't know if i would have picked northern iowa. what happens to cornell? >> they got whacked by kentucky. tough game. >> kentucky might be good, i think. >> yeah. >> butler. >> i saw some of the butler

game. they looked strong. i couldn't believe how mad bay dd hunt looked. he looked like he could kill someone. >> thank you, john. coming up, we will see how markets are reacting to the rescue plan for greece and we'll look ahead at what traders will be watching today. federal reserve speakers, plus everything that's happening in the treasuries market, that's ahead. "squawk box" will be right back. first, though, take a look at yesterday's winners & losers.

for a look at what may move markets in the trading day ahead, joining us right now ig markets analyst dan cook. from riversource investment, chief investment strategist david joy. david, what's happening in the treasury market right now, does this concern you? is this a temporary blip? >> we're hoping it's a temporary blip. i expect pushing the ten-year by 4.25% in the end. this action in the last few days is faster and steeper than i'm comfortable with. but at least so far, i think it's just a little bit of

indigestion with all the supplies coming into the market. i'm not so sure it's the start of a trend. but it does make me nervous and it does bear watching. >> dan, what do you think? i guess you're still talking about incredibly low rates historically. but the move over the last few days has been more dramatic than people had been expecting. is this something to get worried about? if not, what should we watch? >> hopefully it doesn't become a trend. hopefully it is a supply issue. right now, there's still a lot of fear regarding debt. we see it in europe and we see it here, as well. hopefully it doesn't become a trend. it becomes devastating to the economy if it does. >> is it easy to see japan tra drnlly doesn't come up and by as they're trying to get the first year in order? >> i don't think we want to discount it that quickly. there's no question that we financed a lot of our so-called recovery so far. and so at some point, we're going to have to pay for that. hopefully it's not a case where

investors are going to make us pay for that too rapidly. >> david, what do you think the fed and/or treasury could do to make others feel better? they did not come into the auctions this week for the five and seven-year. >> yeah. i'm afraid they're not going to get much comfort from the federal reserve. i would expect they'll be on the sidelines for the balance of the year. although they may prepare the ground for some tightening maybe early next year by, you know, shifting their language over the course of the year, raising the discount rate again, some of those kinds of things and at least sending a signal that they're prepared to move when the time is right. but i don't expect them to actually do anything to tighten monetary policy for the balance of the year. so i think the investors are going to have to comfort themselves with the idea that there's no inflation anywhere around and that their real rate of return is going to be secure. >> can we comfortable ourselves with the greece situation? it sounds like there is some sort of a deal that's been worked out between the eu and the imf. we'll get more commentary later today.

but david, is this something you worry about right now? >> no. i was of the mind-set that the european union would come to a resolution of this with germany's objection to a bailout. i think it was inevitable that the imf got involved somehow, despite the objections of mr. trichet. now that that is what we've got, i think that situation calms down a little bit. there's now a mechanism to help others as they get into the same problem. >> dan, we get gdp numbers later this morning at 8:30. what are you expecting in terms of growth and let's say the number couple of quarters, too? >> i think for the numbers today, they'll be unchange from what we expect, 5.8%, 5.9%. again, we have to look at how much of that has been bought by stimulus and how much of that is an economy getting heated back up a little bit. moving forward, i wouldn't look to put up numbers like we've seen and people expect to see today. probably something more along the lines of 257% to 3% for the overall year.

>> david, we came pretty close to dow 11,000 yesterday, at least earlier in the day we were seeing a pretty major rally. what do you think is more likely to happen? it's friday, it's the last trading day of the week. is this a number that you think investors can push over psychologically or is this something we're going to have to wait a few weeks on? >> you know, i don't see any reason that we can't work through it. i think that the underlying momentum in the economy is improving. i think investors understand that. and, you know, we can push through that. having said that, we've done nothing but go up since this recovery started in early february. so, you know, you can get a pullback. it might take us a little while. eventually, we'll get through it and we'll fire. >> gentlemen, dan, david, thank you for joining us. >> thank you. still to come this morning, european leaders agree on a pledge of financial support for greece. we'll head to the eu summit in brussels and find out how this put this altogether after a short break.

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good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and carl quintanilla. let's check on the markets this morning. they've had a great day going

yesterday until, i guess, the bonds and some other concerns. >> the bonds or was it the greece situation? >> both. i think that's all kind of -- >> one and the -- >> the same thing. but we were doing really well and then it ended up 5 or so. ge almost at 19 backed off and was down 15. >> did you see we came within 45 points of dow 1 ,000? >> of 11,000. we'll see whether that becomes something that surmounts, like a mental level for -- >> i don't know if it's a technical level or not. they've blown through others. >> 10 we can deal with. 11 to the perm abears, that's something. at 8,000 when they all got bearish, it's like, 10,000 is bad. but 11 means we went right through 10 and right to 11. you guys had no idea. you shouldn't even be managing -- we'll see how barons manages to counter this weekend. >> barons, the famous five. oil this morning, that's another thing that you wonder

about, if that were too far have a spike or a super spike, that could hurt the recovery. what do they call it? very beautiful. >> beautiful, yes. we are quite happy. >> i think he said it's like a new nabach, what, he has about 20 or 30 of those? like these rolexes. the 10-year bond has been backing up in yield. we'll take a quick look at that now. 3.85%. the 11,000 on the dow, maybe we'll get a 4% on that 10-year. the dollar, this has been the silver lining. a lot of times you see equities not do well with a strong dollar. but we're at 1.33 on the euro and almost back to 92 and change on the yen. and the pound has been a problem. where is gold? i saw that broke over $1,100. now it's coming back. this is you. >> european leaders in brussels putting aside differences tw agreeing on financial support in a deal for greece.

carolina climenti is reporting from greece this morning. good morning. >> reporter: very good morning to you, becky. now, here the decision is not the best decision, i would say, but it's the decision they could agree on. angela merkel when she came to brussels yesterday, she said there was not going to be an announcement on greece. at the end of the day, we saw a strong announcement on what will be the strategy if the euro zone needs to help greece. trichet said having the imf help a rur row country, he said it would be very, very bad for the euro. when he left the meeting, he had since it's a strategy, it's not a bailout yet, it's still okay. then it's not too bad in his conflicting contents with the deal that they found. a lot of u-turns we are seeing with the europeans in this meeting here. but what we are seeing in this deal is that if a bailout is

happening, one-third of the funding is going to come from the imf. two-thirds is going to be coming from all the euro zone countries, not only from one of them, but in the form of bylat rat ral loans. also, these are going to be, depending on a unanimous vote by the euro zone companies. so basically, the day that greece decides they need to ask for money, all the euro zone countries would have to vote and agree on that, as well. so it's not tend of the road yet and this is a very important point. angela merkel asked to put in this agreement, that means that germany still has a veto on this bailout if the day ever comes and they're hoping that this day is never going to come. carl, back to you. >> carolina, i wonder, there's a note out for jpmorgan saying the greek fiscal crisis may be over for now, but sovereign debt may

be an issue for years to come. is that basically the view in brussels where you are, do people think that the big fire has been put out and that is over? >>. >> reporter: certainly people do not think that it is over. they think it's sort of over now for greece. they are waiting to see what the credit markets are going to say, if they believe in this plan or not. but the fact is, people are trying to find out who is the next greece? people are looking at spain, portugal and italy. it's very important to say that this safety net that the euro zone is building for greece is going to be valid and in the same format to any other euro zone country. so this is the foremost of the bailout to any of these countries having that problem in the future. >> yeah. we'll see if that mechanism works and if they actually ever have to put it in full effect. carolina, thank you for that. good reporting this week, carolina cimenti in brussels. got any questions? squawk@cnbc.com. still ahead, we'll get some news outside the world of

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welcome back, everybody. right now, it's time for a check on the news outside the world of business. alex witt is here with a roundup of the headlines. hey, alex. >> here we go. while the fight over health care, the legislation, that is, may continue, the fight over the health care fight may continue legislation has got that right, at least for now, by a vote of 220 to 207 the house passed a final vote of fixes to the

health care plan last night. the money pursuing threats against the u.s. and south korea, north korea threatened today unprecedented nuclear strikes. those threats were reportedly triggered by a south korean newspaper report that the u.s. and south korea ya would be meeting to formulate a plan. these photos were shot by a amateur space enthroughoutist, sent up a cam to to the edge of space and got those pictures. i mean, yeah, i guess that's an rchb project. can you believe that, carl? >> what kind of balloon? like the kind you get at the circus? >> no. the kind that balloon boy went up in. >> yeah. like the balloon boy one, yeah, almost like a weather balloon

but yeah, with the camera, $100 digital camera. >> shah shows you how far technology has come. >> thanks, alex. >> sure. time to take a check on the markets today. ira harris of practice trading is at the cme group in chicago. good morning, ira. >> good morning, carl. >> how serious was trading yesterday where you are? >> it was serious. it was amazing to me that the equity markets, we have the large sell-off at the long end of the curve on wednesday and the equity markets fought it off, fought it off and fought it off. finally, it all came to a head yesterday late. >> what does it mean? at what point do these sort of mild concerns turn into something serious? are two weeks a trend if one week is not? >> two weeks can be a trend, but i don't think we've seen that

yesterday. i think the equity markets will be okay as long as the -- if the curve doesn't flatten here and what you're doing is getting a sell-off ahead of the mbs roll down from the fed on march 31st. of course, a huge amount of supply debt is yet to be told yet. i think if investors are starting to get leery about u.s. debt, it will not only show itself off in that end, it will show off, the dollar ought to sell off once the european situation starts to clear a little bit. that would be a telltale sign. >> yra, isn't it all relative? couldn't the debt situation elsewhere be so bad that our currencies versus those others, that it doesn't necessarily have us weaken, that everybody's rates goes up everywhere and the dollar stays where it is? >> well, you know, joe, that's exactly right. it's relative.

we've seen some other peripheral currencies. >> they got commodities, right? oil and natural resources? >> yeah. but if we're that worried, there's been so much movement in that. but i think what you're seeing is that the dollar is not the ultimate haven that it was a year ago when everybody got service. they are seeking other alternatives so that is a healthy thing, actually, for i think the entire economy rather than just the dollar being a recipient. >> that's another reason why gartman and others are buying gold. they think if you're a big central bank, you might move into the euro as a secondary reserve, but maybe not any more. and if you're not going to do that, maybe you'd do goldman sachs. >> is gartman buying goet gold after getting back to the top and -- he is long gold and he's been long on gold. >> when he comes on, we'll find utah if he's decided to go back in now.

>> yeah. gold is a nice hedge. >> but yra, we were in a better position to accept some dollar weakness in a much better position than people thought a year ago. i mean, people were bearish on the dollar a year ago, no one would have thought it would have rebounded to this extent. but we certainly are at a position to pull back from a much higher level than we would have been. >> absolutely. steve liesman was talking about that yesterday, has bernanke been lucky with the dollar rally? that's been easily some other situations that could have developed here. let's go back and take bernanke's words. when the euro was at 1.51 and people were concerned about the weakness in the dollar and ben bernanke's comment was forthright. he said, look, we're not worried about hearing 1.51 because when it was recently down to 1.35 -- of course i'm going back a

year -- he said that was because of the stress of the global financial system and the kornt being the haven. now we're looking at these currency levels, and it's not totally because it's a new haven. it's because a lot of people have piled into the euro. but of course, other currencies have been in the aussie, to canada. and the interesting one, to me, is going to be the british pound going forward here. because the pound has been the weak currency by their own design, by the way. the bank of england has used a currency to try to get some growth, export growth out of the uk with a weak currency. actually, they've done okay with it. now we'll see what happens. >> no doubt about that. >> they've weakened, carl. but they've picked up some exports. their current account export is not as bad as one would expect. now we'll see if there are equity flows that are going to take place around the globe. britain should be a recipient of

positive equity flows. with the cheap pound, it's like you see kraft buying cadbury. we should see other companies moving in and buying european asset us because it's so cheap. >> might be nice to get that election over, too. yra harris, have a great weekend. >> thank you. coming up, we'll head to the chairs and talk about the headlines grabbing our attention this morning. at the top of the history, tony crescenzi, dan greenhaus and patricia chadwick join us for a round table you won't want to miss. stay tuned.

fascinating. we're in the chairs. fascinating watching what's happening in washington. winning begets winning. it really does. you would have to say the president took his lumps in this health care. his approval rating. and it would be impossible not -- you wouldn't be human if you weren't able to take a little bit of satisfaction or a little bit of a victory lap. he's on the cover of the times

holding up rose book and mitt romney's book going, really, who are these clowns? he said, the birds are still cg and the world is still going around. i thought armageddon -- it's interesting. it also is deadly serious. and i mean i see their point. "the journal" has a story implying that caterpillar didn't need to do what they did. >> when gary locke answered the question, i asked him about a bunch of companies at once. it was not only caterpillar. verizon sent out a note to the employees saying your health care costs will go up. >> he clarified it here. it's not responsible to suggest that the health care law is bad

for business net net. not that caterpillar shouldn't have made that charge but when you look closely some of the charges the company is taking are higher than the benefits they would have received if the loophole hadn't been closed. caterpillar says it was not a political move and they have to do it for accounting reasons but my point is that everybody is -- robert gibbs is talking about this saying this was a loophole they used to have and now we're closing the loophole. >> let's talk about the loophole they used to have. a lot of policies push for one direction or another. this policy was put forward to companies would keep their retirees giving them better benefits than they would get off medicare. there's a reason we do it. same reason we give people discounts on taxes if they buy a house. it made sense at the time. you wanted to keep -- >> the language you use, gibbs is a master, the same loophole.

who will say you shouldn't close a loophole. >> we get e-mails talking about we're giving loopholes -- why is it better to be a home buyer than a renter? >> because the mortgage loophole. they know what they're doing. everybody is -- >> you can say we shouldn't be doing it. they should be on medicare. let's think about the reason it was there for. >> it has given the democrats the ability -- they will counter in financial reform and they'll counter every single charge. >> paul ryan has an op-ed talking about the repeal that mccain talked about yesterday. that's their platform for november. >> it's important that it's reform and reform and not just repeal. the idea that -- >> it's not going to go very far. >> there's a great new book

about obama. it's about 600 pages and in it he tal and obama looks at how to keep your cool when everyone else is losing their mind and that's what you started out with. things looked bad. somehow he managed to find his mental clarity. >> when things in the campaign went that way, he would be, like, i got game. i may be down a little bit now but i can play on this level. >> he went out and played basketball during the iowa caucus. everyone around him couldn't eat. >> people don't shortchange him on his ability to further his principles in kind of a not republican way but in a pretty hard nosed way.

you think hard nosed. >> he's not carter. >> exactly. "times" has a great piece today about marijuana. we run a documentary on this network a lot. >> you point at me and said i thought you were going say we love to smoke marijuana. i looked directly at you. >> you said we. i wondered where you were going to go with that. >> on wednesday the secretary of state out there certified a vote on the november ballot that would legalize tax and regulate marijuana. they can raise 1 hadn't $4 billion. >> this is the change now. states are so desperate for cash -- >> they said we need the money. we're letting prisoners out of prison early. >> teen usage of marijuana has dropped over the last decade. if you legalize that that number will go higher. >> teens that choose to smoke marijuana don't have trouble getting marijuana right now. i can't imagine it would be any

easier to get -- >> it would be. >> it will add to obesity. >> for the campaign they hope to raise -- >> or hershey's. >> supporters are hoping to raise $10 million for the campaign primarily on the internet and the idea here is you send in $4.20 at a time because it's popular short-hand for the drug. >> there are places when i was in colorado recently or california on venice beach saying the doctor is here and will write you a bripgs rigpres right now. pharmacies don't look like pharmaci pharmacies. >> do you know how many questions we raise? we never get answers. i get the answer for $4.20 with

medical composition or something. >> take a look at this picture in the new york post today. that picture was taken. the pilot said if you want to look at your left window right now you'll see a volcano exploding. the entire plane ran over to that side and this is about a month ago. this is in the british west indies and that plane full of passengers got this view out their windows. >> worse than it looks or looks worse than the actual explosion. >> what a force we live on. that's crazy. >> heating up. >> when we come back, a market trifecta you won't want to miss. later on, florida's attorney

general calling the health care overhaul unconstitutional and tell us why the bill tramples on state's rights when "squawk" continues.

a market trifecta. the dow making a run at 11,000. three market names that will tell you where you should place your bets right now and whether the so-called stealth rally has run its course. >> oranges are juiced. florida's attorney general on why the government's health care

plan is unconstitutional and what he plans to do about it. >> righting the economic roller coaster. six flags getting ready to help its doors for the new season. the ceo looks at what he's expecting and how the economic downturn is hitting theme parks. >> i had a bad experience on this ride once before. >> what happened? >> i threw up. >> "squawk box" begins right now. >> good morning. welcome to "squawk box" here on cnbc. i'm joe kernen along with becky quick and carl quintanilla. the futures again firm this morning after a late session muting of the nice gains that we had. i see that carl is going to talk about the late day sell-off.

we are up about 35 points today. >> that's right. after that late day sell-off dow short of 11,000. got close but the blue chip average has been making some slow and steady progress. joining us this morning for a "squawk" triple play. our guest host and dan greenhouse and patricia chadwick. we have never had this many people at the table at once. you need to be careful not to get in their shot. >> they told me to lean back. my stomach cannot lean back. i'm trying. >> good to see you guys. >> thank you for having us. >> we had this notion earlier in the week after talking to jack welch that we're in a v-shaped recovery but we don't know it yet. you say that's ridiculous. >> i believe there's a v shape occurring now but you have to think in terms of the cyclical

tail winds but secular headwinds. there are industries that are impaired. automobile industry, finance industry, housing industry, retail. these industries might have some cyclical rebound. car sales may go from recently 10 million to 12 or 13 but they were 16 or so. there may be a rebound in jobs with steel production, they won't return steel production for the levels it used to be at because car sales won't go back to the 16.5 million or so that we used to see. we have to think in terms of positioning for the long-term in term of being flexible and retaining optionality as obama wants to call it. >> as long as you will par cyclical and secular, you never have to say anything.

really strong cyclical. it's been great. we were talking secular. >> when you believe in cyclical rebound, you may position as we did in the last year in corporate bonds. they did exceedingly well and you can believe and position yourself there. >> your position with the possibility of being right about the new normal and you can play it with the bonds is what you're saying. >> you can do that. >> you tell me you're a stock house. >> we are developing a stock business. two unbelievable people -- >> keep developing. >> something has just fallen here. >> i heard that. >> you don't think that's fair? >> i totally disagree with both of them. which is normal for me. >> how is that possible? >> to his point, let's be clear we're in a v-shaped recovery but cited four sectors not participating.

that's not possible. find someone in the housing sector that thinks it's a v-shaped recovery and businesses hiring like it's a v-shaped recovery. to joe's point i disagree more so. this secular/cyclical argument is of fundamental importance to the investing landscape right now. you can't dismiss the arguments in terms of the fact that -- >> you use it in any market environment you can say -- >> no. >> why not? >> not like saying i'm wrong but will be right eventually. >> the market will keep going unless it comes down to this support level and goes through that and go lower. we hear it all the time. we've been doing this for 20 years. >> i have not been doing this for 20 years. in a nutshell you have to look at the type of recession we had and type of recovery we had and history suggests that in these

types of recessions how you get out of them is different than how you get out of them in other recessions and in the immediate term we'll see effects of the stimulus and effects of the monetary policy but over the next couple years, next couple of quarters and years, you're going to see the lasting effect of the financial crisis in the downturn. >> that implies that when we come out of the v it's back to things as normal and the economy just piles on and so you could have that long trend line that says we're back to normal. that's not necessarily the case at all. we're having a v right now because inventories were depleted to nothing. now we're manufacturing those. the big step is will they get bought? if they don't get bought this v will waffle into something else. >> jack welch's point is that consumers are spending. they had this pent up demand and they're spending and spending as money comes in. that goes back to the new normal or not? >> this is very important. people talk about this. i'm sorry to interrupt but i want to make this point. consumers are spending monday

certainly more than i and others would have expected. let's be clear quarterly consumption if we use that as our barometer for this discussion, is 2.5, 2.25%. if you go back to 1983, 6.5% per quarter personal consumption. >> that number will rise over the next couple quarters. >> quick point i would make is next couple months through the spring you have to look at the jobs number totally in context with respect for census hiring. >> other things are coming along the stimulus program is going to be winding down. that's money in the economy. the unemployment rate is coming down very, very slowly. over 9% by the end of the year i believe and productivity gains are phenomenal which means --

>> best in 50 years. >> you said 2.5% is anemic but -- >> i didn't say anemic. >> better than would you have expected. >> absolutely. >> so you have been thinking this is not going to happen this way so you still think that and explaining your previous positions of not being -- >> the consumer is stronger than i thought it was. >> your previous position may not have been in sync with what happened. >> i'm wrong. i'm fine with that. it doesn't change the fact that 2.5% -- >> will there come a time you say wow? >> five seconds ago. >> but you say it's just a matter of time and you're just early? >> i don't understand -- i was wrong. >> but you're going to eventually be right? >> i stand by what whe're arguing. >> you have missed out on this.

>> good. i'm happy. >> you didn't sound him like you were -- >> i have spoken up about a strong recovery here on your program and we have talked about rates rising for months. rates have risen and we expect that it to continue. >> are the auctions this week the first sign that secular headwinds are moving? >> it shows the marketplace believes the fed can't move on interest rates because secular headwinds are that strong. move in long-term rates show better than where short-term rates will be in the future. they a it's a long-term idea. secular idea. one has to position for globally because the sovereign credit risk is the risk factor and

market is looking at that as major risk factor when investing in global portfolios now. the curves will stay steep until the eve of interest rate hikes. you would expect a flattening trend when it begins to last for a while because yield curve trends are long lasting. we do not think the fed will move much. the secular headwinds will continue to be and secular idea and long-term rates as well. >> at 11,000 the cyclical case is strong on the dow. you are still worried about the secular case. is it at this point time to be worried about the secular case? are you saying that 11,000 is pricey for everybody? >> one has to think in terms of risk diversification and not just asset diversification. you can have equity risk in a bond because bond prices fall. you can have interest rate in stock. you have to look at the

commonalities. >> could the strong secular case take us to 14,000 before your secular case kicks in. >> in a nominal level of spending will be lower than it used to be. the rates of return on investments are lower than it used to be because you don't have financial and operating leverage you used to. you can have a gradual move up into the stock market. >> we could go to 14,000 but you better are worried the entire time is what you're saying? that doesn't help us. >> we're talking about choices. about places to be in the world in terms of investing. perhaps invest in local bonds in brazil. >> who is saying to stay away from them to be careful about how you diversify. >> you guys were for the last eight months. >> in the 1970s which was hardly the stellar investing time in which you wanted to be in the

market, you had four rallies of 50% in the market and over that 16-year time span nominal equities went nowhere. >> you had a different environment. you had high invasion which has a different impact on multiples and things like that. >> this isn't the '70s. in secular bear markets you can have vicious value rallies. >> watching for the best odds for wihere you make money and stay there instead. >> the market is struggling to get ahead. 11,000 is not all that exciting. i think what's given the consumer a sense of empowerment so far because we have high unemployment is the fact that the stock market has moved up. people look at this 401(k)s now and don't throw up. well, there's life. things are okay if the market is going up. maybe it's all right for me to spend. there are other forces secular with this health care reform looking at headline news for each of the companies saying

we'll write off these expenses. what does that do to corporate profitability and for employment? what does it do for a whole lot of other things? those are unknowns. >> do you think we'll see big flows back into equities and are the more savvy investors going to ride that wave? >> this is the big question of the next couple of months. we have seen consistently no matter what data point you look at, flows into bond funds have been outperforming equity funds but january for a variety of cyclical reasons -- >> the movement to equity funds look back a decade, two shots in decade financial bubble bursting and it altered the population. remember, households in 1999 held 50% of the equity market capitalization. it moved to 37% by 2004. by 2007 it was at 37%. seven years passed since the stock market had fallen and stock market had risen to new highs but households did not

return. if they didn't return after the last one, why return in meaningful ways after this last shot. >> to the consumer and the wealth effect, the top 20% of income earners in this country accounting for 40% of spending own 80% of equities. that 70% rally boosted the component. >> you guys are good together. it's nice having you at the table. >> all very similar -- >> thanks. tony will be us for the next couple hours. >> someone said the police code for marijuana incident. >> kevin says it's from a dead head song. 4:20 was the time. >> let me chime in. this is an area of expertise for me. >> i was thinking you were stoned out of your mind. >> it's more closely aligned with the police code. there's nothing necessarily in

the -- what happened with stoners in the '60s would use the police code as an excuse to smoke the weed on april 20th at 4:20. >> krispy kremes over there on the way out. comments and questions about anything you see on "squawk," e-mail us at squawk@cnbc.com. health care, stimulus, more spending. if you thought that's what's crippling the budget, think again. we did some digging to find the real source of pain. "squawk box" will be right back. >> announcer: time for today's aflac trivia question. before florida did it in 2006 and 2007, when was the last time a basketball team won back-to-back men's ncaa championships? the answer when cnbc's "squawk box" continues. this is not more benefits at greater cost to your company insurance. this is not how does it fit in my company's budget insurance.

this is help protect and care for your employees at no cost to your company insurance. with aflac, your employees pay only for the coverage they want or need. and, the cost to you - nothing at all. if all you know about us is... aflac! ...then you don't know quack. to find out why more businesses provide aflac, visit getquack.com so, at national, i go right past the counter... and you get to choose any car in the aisle. choose any car? you cannot be serious! okay. seriously, you choose. go national. go like a pro.

>> announcer: now the answer to today's aflac trivia question, before florida did in in 2006 and 2007, when was the last time a basketball team won back-to-back men's ncaa championships? the answer, duke, in 1991 and 1992. >> all right. so where did all the money go? the answers to what contributed

to most of the swelling of the u.s. budget deficit may not be as obvious as you think. steve liesman went on an expedition to try to find some answers and here he is with what we found. >> two bond auctions highlighted growing concern on wall street about the deficit. we worked with the congressional budget office to answer the question, is the hand wringing about the deficit because wall street and the american public just woke up to the problem or has there been a meaningful change in the outlook for the nation's finances? we found the ten-year outlook for the deficit took a rapid and historic turn for the worst in just two years. what was projected by the cbo to be a $247 billion surplus over the ten-year period before the recession began, from '09 through 2018 deteriorated to $4 trillion deficit and is now projected to be a $7.4 trillion deficit making for a whopping $7.7 trillion turnaround in just two years.

let's put it another way. every man, woman and child in this country has taken on an extra $25,000 in debt in addition to what he or she already owed but how did it happen? was it because of spend big bush or obama or was it the economy and the answer we found is there's blame enough to go around, blame enough in the trillions. according to our work with cbo, 43% of the increase in the deficit from the projection in '08 through 2010 is result of decline in revenues of which the vast majority is because of the cbo's outlook for the economy. a huge part of the revenue change is social security over a ten-year period looked at was supposed to show a surplus and now the surplus if there is one at all will be just over a trillion dollars. a change in accounting for the war, stimulus bill, more interest on the debt, extended unemployment benefits, all of it adds up on the spending side to account for the deterioration there. fed chairman ben bernanke highlighted the nation's deficit troubles in his testimony yesterday.

>> i have to make some tough decisions. you know, there's this tendency that nobody wants to cut and nobody wants to raise taxes. at some point we're going to have to take some unattractive and tough decisions. >> the take away, the change in the deficit outlook has been fast and dramatic. one upside is it shows the sensitivity of the budget to the economy and an economic turnaround will solve part of the fiscal problems but not all of it, not by a trillion dollar long shot. >> the cbo can say it's because revenues aren't where we thought but isn't it garbage in garbage out at some point where we get to the point where revenues and good times are going to continue to roll for forever, that's part of the problem and states are facing the same problem around the country. >> a huge part of the problem was they projected -- one projection for the economy over the ten-year period back in '08. that projection is back in 2010. they can only use their best guess and they do provide a lot of detail in their forecast for

what their economic projections are. i think they are more pessimistic than the street but not a lot. >> if you look at california, the huge problem with california is a boom and bust type of place. every time it booms, they start spending the money they bring in and not save for a rainy day. >> when things deteriorate, unemployment payments go up. social security revenue goes down and you are into this whole cyclical thing and everything just gets worse over time. i think what's important is to look at what real sources. some of this we have to deal with and some will deal with itself. this helps to focus on where the problems are that we can actually solve. >> we have to go. you said it to me a hundred times. >> i heard it the last time. sorry. >> it's hard to blame the cbo for not knowing there's going to be war. >> let me just take one second and thank the guys at the cbo for the great work they did working with us on this.

they took 50 calls from us to get to the bottom of this. >> again, it's something we'll continue to talk about. >> i'm getting a lot of mail on that last discussion. a lot of mail on that last discussion. all about 420. >> viewers wish we wouldn't talk about business at all but manure and marijuana. >> if we continue down this pass, steven emerson, happy birthday. he wants a shout-out there. >> standing out against health care reform. florida attorney general bill mccollum will tell us why the sunshine state doesn't want to go along with a health care overhaul. >> announcer: as we head to the break, here's a look at the widely held stocks. "squawk box" on cnbc returns after this. we are first in business worldwide.

any comments or questions this morning, please drop us a note. we're getting a lot of e-mail this morning. not so much about greece or the ten-year but about the police codes for marijuana. our address is squawk@cnbc.com. companies bringing manufacturing from china. why insourcing is now a hot corporate trend. good morning, hampton. >> reporter: good morning, carl. this is not the dark side of the moon. behind me parts for made in america wind turbans. part of the made in america story when "squawk box" continues.

>> manufacturing jobs. putting america back to work. we'll check in with hampton at a former steel plant that's now gone green and then off to six flags as the amusement park operator gets ready for a new season and another state standing up against health care reform. this time it's florida. we'll talk to the state's attorney general about saying no

to the mandate is what they have a problem with. here's a look at what is making headlines this morning. >> check on the markets today. we'll see what happens. dow lost a lot of ground halfway through the day yesterday but we'll get some back at the open with dow futures up 40 or so. keeping an eye on currency markets for reaction to the agreement the setup of financial aid mechanism for greece the euro weakened against the dollar after comments involving the imf in a greek rescue. they now say the plan formulated by eu lead certificates a workabwor workable one. congress put fixes on the health care bill yesterday but left another piece of business undone. they have not extended jobless benefits for hundreds of thousands of out of work americans. the current extension is due to expire soon. congress getting ready to adjourn for a two-week break for easter. a number of automobile

developments. volvo's deal could be signed this weekend. and nissan reportedly close to a deal with renault. all car companies just a big dance. one after the other. all day long we look at which states are seeing job creation. hampton pearson is in pennsylvania today where we know steel was once king. that was a long time ago though. >> reporter: a long time ago. we're north of philadelphia on a 22-acre side that used to be a u.s. steel mainstay built in the '50s and employed up to 10,000 people out here. a lot of the remnants of the demolition are clearly visible going on all around us as the transformation to green manufacturing success story begins to gather momentum. they are building on the

leftover infrastructure that includes power plants, a deep water port and rail access and frankly there are two very prized tenants. we're standing on the grounds of a spanish firm that's a wind turbine and energy giant. they made $34 million investment on this site to begin manufacturing parts for wind turbines here in the usa. now, the other startup is a solar material manufacturer producing key ingredients inside solar panels. what did it take to get these folks here? 12 million in loans, grants and tax breaks. neither of the new firm will pay property taxes until 2018. >> you can see how competitive it is in the environment that it is not just -- it's not just a

site but every state wants these type of businesses to come on site and it's a package deal. >> reporter: in january, the company hit the jackpot winning a $45 million federal renewable energy tax credit. all part of the stimulus funds and it's part of their giant overall game plan to become a major job creator in the next five years. >> in the solar industry the further downstream you go the farther the job you actually great so potentially taking all output and try to produce into the solar panel and that could mean 6,000 job in the surrounding area. >> reporter: right now those two firms combined with hundred of employees here on this site but they are really part of an overall aggressive game plan to create thousands of jobs in the

next few years and later on today we're going to talk more about the fierce competition for that green manufacturing job all over the country. 50 states competing if you will in a global universe. back to you guys. >> all right. hampton, thank you. we'll watch closely all day today. also watching closely six flags which son its own thrill ride trying to emerge from chapter 11 in the next few weeks. the nation's largest theme park operator emerged from bankruptcy last june. the park opens for the season tomorrow and thank you for joining us this morning. >> thanks for having me, becky. >> we've been watching very closely what's been happening in bankruptcy. i realize that you are very close to emerging from bankruptcy right now but you also switched sides this week going with a plan from avenue capital instead of stark investments plan. why did you switch sides? >> well, actually it's the other way around. we're going with a group of

about 11 funds that are led by stark partners among others and frankly we went with them because it's our obligation to maximize recovery in any sort of bankruptcy process and what happened here is the junior bond holders wrote a massive equity check to $275 million and bought out and paid off the senior bond holders and so avenue and fidelity will step to the side and junior bond holders led by stark and the rest will take the lead. >> they were worried about six flags taking on more debt. you're not worried about that? >> we're comfortable with the capital structure. chapter 22 isn't going to happen for six flags. we're not going to assume extra debt or extra burden that would put us back in this position. we wouldn't have signed off on it if we weren't comfortable with it. we're cautiously optimistic

about the season. we have a good long range plan and six flags finally will get this nees int noose completely back. >> one question obviously a lot of businesses ran into trouble over the last two years as the nation really hit hard times. six flags has been in a position where it's rarely been profitable over the last decade. what's wrong with the business model and what needs to change? >> too much cap x. when premiere parks bought six flags back in the late '90s they paid too much for it and expanded internationally at a high price and overcapitalized the business when they didn't need to. the debt has been building up and building up and to your point the company was never free cash flow positive in its 48-year history never been free cash flow positive in our third year of the new management team in 2008 we had our best year ever and we were free cash flow positive and right after that is when we took it into bankruptcy

to shed the debt once and for all. we fixed the operation and now we'll fix the capital structure so you can expect big things from six flags going forward. >> this is tony crescenzi. i love going to your parks. now, what can you say about the leverage the company took on the past decade or so. what does it say to corporate america generally? what lessons has your company learned and what can we teach others in terms of what to do going toward? this deleveraging process will be a long winded one and it's affecting you and you mentioned capital spending and it will have to be brought down. won't that mean you'll be spending less and won't it mean reduced rate of growth in the economy if you think more broadly? >> it forces everybody to be a little bit more responsible and to be at bit more prudent about the amount of leverage they put on their companies. the market is hot right now.

companies are levering up and obviously the banks are loaning money again but for us we won't be cutting back. we'll be running at a run rate of about 90 to $1 million in cap x and that's enough to service our customers and keep up with the market and bring in marketable capital. >> is it lower than it used to be? >> it will be -- last year we spent about $100 million in cap x and this year and going forward we'll be about the same rate so we won't be cutting back. the difference is we'll have a lot less cash interest because we'll have less debt. >> the growth rate is smaller than it used to be. >> we'll be able to grow. >> the growth rate and cap x will be lower than it used to be. the point is to look more broadly at the way companies have been spending money. they've been borrowing money to spend in ways that maybe your company has and so do you think the growth rate in cap x having slowed because of the deleveraging process within your

company and something i'm thinking about more broadly. >> we are going to have a load that i think we'll be comfortable and have liquidity and this company will throw off about 60 million in free cash almost out of the gate if we hit our numbers. we'll be able to service our debt and be able to grow at the rate we want to. we need marketable capital every year to tune of $50 million. and then we need another 30 million in asset maintenance to keep up with the parks. i feel good about capital structure going forward and the amount of investments we'll be able to make on a consistent basis in order to keep our product top shelf and we've spent a lot of years rebuilding the product. >> all right. we want to thank you very much for joining us today. we look forward to seeing how the season goes. >> thank you. come on out and enjoy. the sun is coming out this afternoon. >> we might just do that. we appreciate it. when we come back, dark

clouds over the sunshine state. the state's attorney general tells us why he's fighting against the newly passed health care reform bill. he'll join us next. stay right here.

>> before the ink was dry on the health care reform law, it got 14 states attorneys general filing lawsuit against the federal government claiming the landmark legislation is unconstitutional. one of those leading the charge is bill mccollum. great to see you, sir. how are you? >> fine. good to be here this morning. >> is it the mandate that you're going to use? we had texas attorney general on. is that the crux of this? >> there are two issues here. we're challenging the constitutionality of the individual mandate of requiring somebody to buy insurance and not have them necessarily have done anything in commerce. we don't think the commerce clause applies to this because nobody is buying everything. you're not engaging in it voluntarily. if you're sitting in your chair and somebody in the federal government says if you don't do this and don't buy a product or a service, we're going to tax you or fine you, that's not appropriate for the federal

government. that's not constitutional or part of the powers that they have. they don't have those powers. states might be able to do that but the federal government can't. the second challenge we have has to do with sovereignty of the state. the state has and all the other states have put out a lot of money for things that are related to medicaid but never anything like this. we're being asked to set up exchanges for insurance opportunities and do many, many other things including dramatically increasing medicaid roles and our portion of paying that mandated by the federal government and no money coming in. they have overdone the powers they have. this is a manipulation of the state. there are two challenges. one on both of those grounds. >> are all 14 attorneys general the same two issues? can you guys do this together? >> we're basically doing it together. the state of virginia is going to do its own lawsuit but our state has been joined by 12

others. we'll probably have more come in at some point along the way. i think most attorneys general look at this saying this is the biggest invasion ever by the federal government. >> any democratic states? >> louisiana is with us. and we may have a couple more. we've talked to several of them about it. i think they are gun shy at the moment because of the politics. this is not a political question. this is a serious constitutional question about whether the federal government has exceeded its powers and gone beyond what is there. >> you choose to drive a car. you choose to drive a car, you need insurance so you don't kill someone. i don't know. just breathing. if you're just breathing, i don't know that you need insurance for your ability to breathe. >> that's the whole point. you're not engaging in any activity at all. they're trying to find to you tax you. conceivably they could tax you as a head tax but no one has

ever done that. there's a provision that says you have to portion it among the state and no effort by this congress and this legislation to apportion any tax among the states so it strikes me and most constitutional scholars i spoke with that this is fundamentally wrong. we call it uncontusionstitution its face. >> attorney general, you could argue for the idea that congress should have done this as a public plan because if it was a public plan, then that wouldn't necessarily be a constitutional violation just like they can have you pay into social security and a public plan they could make you pay into that. >> social security and medicare are taxes based upon your employment. you're doing something in commerce. engaged in some activity. it's like the comment made a minute ago. you're sitting in a chair. you're not doing anything and you're required to do it. the point is that if you are required to do this or pay a fine or tax, you could be taxed or fined for not buying a car

and not having a club membership and for not doing any number of things. the court has said that the commerce clause is not something that you can just go and have everything covered by and i think this has gone way too far on the mandate. i think they have gone too far on ordering states to do things. this is a massive billions of dollar additional costs they put on our state without any choice about it. >> the chair argument makes sense until you think about things like the draft. if i don't like sitting in this chair, the government can tell me i'm going overseas to fight. larger than that, a lot of scholars arguing running for governor that this is about civil disobedience on the part of the attorneys general especially those who can benefit from some political posturing. is that true? >> first of all, the national security point is not an issue here because that's a separate part of powers of congress. there's no hook like that. no national security issue here.

as far as politics are concerned, i would be doing this one way or the other. it's the rule of law. it's upholding my duty in order to protect my citizens and uphold my constitutional oath as attorney general to make sure that we have the right shake in our state and it's a constant bottle that attorneys general across the country have to defend their states on federal encroachment on the states. that's something we do on a smaller table every day. this happens to be very dramatic but it's an extension of the job that i have and all of the other attorneys general do. if you look at it, only a couple of us are running for higher office. we do multistate frequently with a lot of states joining in and other attorneys general. this is our lead. there are a number of attorneys generals with me on this that are not running for higher office. this is not political. this is based on real concerns over the power of the federal government to encroach on the states and encroach on the individual rights of citizens to conduct themselves in ordinary

ways by as you put it earlier just sitting in a chair and not doing anything and getting taxed or fined which is wrong. >> this is tony crescenzi. are you saying this is in violation of the tenth amendment and if you are, haven't you seen history on it only four times has the supreme court said there's some violation in the last 60 years, what are the odds of you being successful here? >> the challenge to the individual mandate that require you to buy the health insurance or face a fine or tax is not a tenth amendment challenge. it's a challenge saying that the federal government in this case congress does not have this given to it the right to do this under any enumerated power under the commerce claws or under the constitution. we do have a tenth amendment argument with respect to the scope of the federal government's mandate on the states to do these things unfunded giving us no money to

do it. this scope is far beyond anything that i think has ever been done before. i think it's unprecedented to require states to add to it the roles of medicaid and on top of this the federal government pays for billions of more we would have to pay and on top of that to set up insurance exchangeses and do other things that the federal government reimburses for. >> bill, we appreciate your time. if you think about calling cuomo, i don't know. >> it's not political. it's not political. >> they are both running and they're both democrats. they could look at the law and see it shouldn't be law and they would never engage in this. come on. him running versus him not supporting it because they're running is the same thing. i wish you would get drafted. thank you, bill. >> you're welcome. >> it is march 26th. do you guys know what that is?

it's my dad's birthday today. happy birthday, dad. any way, coming up, we're just over 30 minutes away from government data that could move the markets today. the latest reading on fourth quarter gdp and instant reaction when "squawk box" comes right back. >> announcer: does your portfolio have what it takes to win the race? fear not. stocks to watch is up next and we'll help you make it to the opening bell when "squawk box" returns.

>> rocky mountain high. you went to colorado. we know what you spent the best six years of your life doing. >> it was only five. >> 5 1/2. >> studying and skiing. >> poor john denver. he was flying high there for a while. >> i met him once. we went to a book signing one day and he had written a book and she gave him the book saying please autograph it and make it out to my uncle so and so and took the book wrote john denver and gave it back.

>> i love his music. >> you guys are young. >> who can argue with anyone who sang with the muppets? >> i'm waiting for them to call us. penny above expectations on oracle. revenue above. licensed revenue was good. analyst making positive comments about this especially after the sun acquisition and how it is going. research in motion upgraded to overweight from neutral at jpmorgan. price is 84. pf change upgraded to neutral from sell. i'm nauseous. cheesecake factory upgraded to buy from sell. see you in a second. >> when we come back, putting market fears to rest. the bulls overcome their worries as dow got within 45 points. what will it take to get the

bears to change direction? we'll find out next. senator richard shelby tellses but tells us about his letter to secretary of the treasury. we'll talk to him after a short break.

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the great depression that wasn't. >> the only thing we have to fear is fear itself. >> the bulls get over their fears of financial collapse and economic struggles to make a push toward dow 11,000. find out what could push stocks even higher. >> getting america back to work. check out the latest trend of insourcing that's bringing jobs back to u.s. soil. >> you are coming off stupid. >> you're wearing tuxedos to a job that requires to you clean bathrooms. >> suggestions for the dodd reform bill. shelby sends a letter to treasury secretary geithner with his objections to the overall plan. he's talking to us.

"squawk box" begins right now. ♪ >> welcome back to "squawk" for friday morning here on cnbc, first in business worldwide. >> it's letter. send me a letter. >> someone did it on five minutes of "american idol." simon just hammered him. >> didn't they also do janice. >> they did. bobby mcgee. >> blake sings it better. >> that's what people says. >> i'm carl quintanilla along with joe kernen and becky quick. our guest host this morning, tony crescenzi, market strategist for pimco having fun this morning talking about markets. speaking of which, the markets will get another revision to fourth quarter gdp later on today. economist expecting a slight decline to 5.8 from 5.9 coming

out at 8:30 eastern time ahead of the numbers futures looking good. we got this deal between the euro zone and imf and who knows if it will stick and be necessary really and other concerns like portugal will outweigh that. decent growth in futures here. >> up by 45 points. the white house is set to announce a new plan to help strapped homeowners later this morning. that plan will require lenders to lower mortgage payments for some unemployed workers and give them incentives to cut mortgage principle for those who owe more than their homes are worth. congress approved a package of changes to the health care reform bill expected to be signed by president obama next week. those changes help make insurance more affordable as well as raise taxes on wealthy and close the doughnut hole for seniors buying prescription drugs and ecb president says he's happy that eu leaders were able to work out emergency financial aid for greece and it's unlikely to be used.

the beneficiary of the deal is greek bank stocks jumping this morning. moody's says the deal is hapelpl but little impact on greece's credit rating. >> dow close to 11,000 despite a late day sell-off on thursday. i needed you earlier. were you watching, jim? did you see earlier? >> i did see it, joe. the trifecta? >> yes. my point was if you go with the cyclical secular double speak, you can say, you know, we were right about secular but this cyclical has been really good. it could be good to 35,000 but i would be cautious on the way. you have heard this before, right? am i wrong? you, on the other hand, you are

on the way down but you have been bullish. >> i think the driving fuel for the rally in this last year is debunking fears created by the crisis. we came off the lows of march a year ago and went up 200 point from march to may from 700 to 900 because we debunked the idea we're headed for a depression. we struggled that we won't return to positive growth but we returned to ps tif growth and that thrust another 200-point rally and now we struggled with 1,100 and we're in the process of debunking the third majorcri. i think we're starting to figure out that we're headed for a susta sustainable recovery and that may be worth another 200 points. ultimately before we're done and this gets into secular case a little bit, i think ultimately

before this recovery is over we're going to probably debunk the major crisis fear created. that's the idea of the new normal recovery. i think ultimately we're going to find out this is going to be a very normal if not better than normal recovery and that's going to be worth another leg up in the equity war. >> this is why i want you on. the final myth that get debunked. the new normal secular -- >> let's look at one issue in particular regarding this idea of the new normal. credit availability. do you think it will get back to the way it was and if it doesn't, won't that mean somewhat reduced level of growth because we don't have leverage we had before. how can we with amounts of credibility that we used to have the banks want to posture themselves and with fewer banks around? >> i think one is i've been

impressed thus far with how fast if you watched how fast corporate bond issuance is coming back. we've had more in '09 and this year than part of the good years of the last recovery. you saw a revival last month for the first time in over a year in consumer credit. and this is all happening and we haven't even created a single job yet. so i think a couple things are going to happen that's going to bring back borrowing and lending. we'll start creating jobs, which is going to lead to consumer incomes and with revival in home prices that we got going on now, that's going to bring back consumer demands at the banks and then secondly we're going to not just liquidate inventory slower but build inventories which we haven't started yet and that will bring back industrial commercial loads. we have a well functioning bonds rate. we'll be surprised if you give

us sustainable recovery, we'll get back to credit creation. >> a similar question for you, scott. the last couple times you've been on the way i interpreted what you said is the market itself got expensive a while ago but you were still finding individual issues that you thought weren't expensive. that's what you were buying. when did you think the market was expensive? it was a while back. how many percentage points and do you still feel the same way now? >> the market is up 5% year-to-date on s&p with dividends reinvested. the market is fairly valued depending on if you use a top down forecast $67 and change or bottom up $78 you have a multiple between 15 and 17 times this year's earnings. the nice thing is good earnings momentum because it is up 30% year over year. the market as a whole probably is fairly priced at this point but there are individual companies out of 13,000 u.s. companies that are statistically

cheap. >> right. i thought you said we were fairly valued about 300 s&p points ago. am i wrong about that? >> no. i was on at the beginning of the year as i just pointed out the s&p with dividends up 5%. it's not possible it's 300 points ago. it's roughly in the same region. >> maybe you were on at the -- i don't know. it has been a tough market for a lot of people to accept moving higher and one way is to -- i mean there's always some individual stocks especially for someone who makes a living picking stocks, right, scott? >> the other thing as i pointed out the last time, there's still lots of liquidity on the sideline. the total value is 2.5 trillion and more than 3 trillion sitting in money market assets and in bank deposits. not all that money will find the way into the equity market. a lot is going into the monday market. it broke the $3 trillion year

over year. some of that money is seeping,0seep ining into the u.s. equity market. i'm bullish on the rest of the year. i don't think it's a run away freight train but some of the cyclicals have a way to go if you look at the basis of peak earning power and many of them are still 1.5, 2 times book value. they are reasonably priced. >> i almost could come up with names you brought up last time. do you like them? >> one was allegheny technologies that has done well. two sectors haven't got much is technology and companies continue to shoot out the lights but across a wide front whether it is arrow electronics, general cables, these things are all cheap and i still like some of the metal stocks. you can buy big and small types

of steel companies like allegheny, new corps, they still have a ways to go because fundamental earning power hasn't come back to the 2007-2008 levels. >> all right. jim, when we do get l-- let's sy you're right. sooner or later we're going to get to about as much as we can on the whole dispelling the myths of the previous downturn and eventually we're going to need to think something good will happen in the future for us. i do worry about that considering what our deficit will be and it's already tough to raise money in the bond market. when would you get bearish? >> well, i think the issues i guess primary that i worry about not this year. i think we're okay this year but the primary issue down the road, joe, for me is whether or not we're going to have a serious inflation problem or not. it's not going to be a 2010

issue but i think it could come in in 2011 and beyond depending on how we react to reversing the stimulus and what happens to the dollar and a number of issues and we certainly have primed the pump in this cycle because of the fear that was generated among our policy officials here. >> do you think the fed moves too late? >> yeah. i think that -- i would like to see the fed start the process of bringing up the short end. i am encouraged because there's tighting going on. money supply has slowed. money deficit is starting to contract. receipts coming up a a little bit. dollar moved up which is tightening mode. we're starting the process but we haven't officially begun the drainage of liquidity that could create problems for the secular bull for 2011 and 2012 but i don't think that's an issue for this year in which momentum looks good yet for higher moves

this year. >> for a scruffy looking guy, he's pretty good. you have a minnesota -- that's not -- >> it gets so cold here you have to have a little fur. >> how do you keep it the same length? whenever you're on -- is it stopped or something? >> this is as far out as i can grow it. there's nothing left. this is it. >> all right. scott, i'm not going to comment on your attire. you're fine. appreciate your time this morning. you all right? >> yeah. >> that was good. >> tony will be here for the rest of the show. >> i love when you call our guests scruffy. for a guy that looks like he just walked off the street -- >> he's a farmer scruffy. it makes him down to earth. i listen to what he says. i feel good. >> coming up, manufacturing jobs and getting america back to work. jane wells is in sun valley,

california, where the buzz is all about in-sourcing. jane wells will explain that to us, right, jane? >> reporter: that's right. in sun valley without the sun. that's okay. like the other flow of the tide, jobs going offshore coming back onshore and up next find out why some companies say made in america is making them money. stay tuned. tdd# 1-800-345-2550 to help with my investments. tdd# 1-800-345-2550 so where's that help when i need it? tdd# 1-800-345-2550 if i could change one thing... tdd# 1-800-345-2550 we'd all get a ton of great advice tdd# 1-800-345-2550 just for being a client. tdd# 1-800-345-2550 i mean, shouldn't i be able to talk about my money tdd# 1-800-345-2550 without it costing me a fortune? tdd# 1-800-345-2550 if i had my way, investment firms would be tdd# 1-800-345-2550 falling all over themselves to help me with my investments. tdd# 1-800-345-2550 (announcer) at schwab investors rule. tdd# 1-800-345-2550 are you ready to rule?

the bureau of labor statistics releases its monthly breakdown of state unemployment numbers coming up a at 10:00 a.m. one state hit hard by unemployment is california. jane wells tells us how insourcing is trying to be used to reverse that trend in the golden state. >> reporter: what made in america is making a comeback and this company behind me is one example. rico international makes reids for musical instruments. over the last 18 months it moved chinese production back to california. onshoring or reshoring after years of offshoring.

why the reversal? wages overseas have gone up and in the u.s. they have come down. transportation costs across the ocean it looks cheaper to make things at home and made in america cuts down the risk to quality problems. who is changing course? caterpillar is considering shifting some heavy equipment production from japan back to a u.s. plant. ge, our parent company, announced it is moving water heater production from china to kentucky and even companies like wham-o is bringing back toy production and for rico international's parent company, it is the best place to make guitar picks. >> they are looking at new machinery and process to bring in new employees in new york and manufacture this stuff here in the united states instead of in china. for years manufacturing in america is dead.

you just can't afford to make anything here. i think people are starting to realize it is not true. there are ways that you can make it in america and make money at the same time. >> reporter: now manufacturing groups are hosting a re-shoring fair in southern california in may. one of the pluses of controlling the entire production process and keeping it close to home is you can have much leaner inventories. he said since they started this onshoring initiative at their parent company, they have taken out 1.5 million in inventory. the wood is not american grown. it comes from france or argentina but they are trying to look for a place in the usa to grow that wood. it's a weed. >> we've been talking 420 all day today. >> it's like bamboo. >> you know how i knew where you were this morning, jane?

>> reporter: how? >> twitter. you have been tweeting this morning about where you are and i've been following. >> i said there's no place than a parking lot in sun valley before down. it doesn't get better than this. >> you get all of the good jobs. thank you very much. when we come back, we have the latest revision to the nation's gdp at 8:30 a.m. eastern time. next, president obama and democrats enjoying a big win but the fighting is not over where health care reform is concerned. we'll talk about what this means for the critical midterm elections. "squawk box" will be right back.

>> if you don't buy a product or service we'll tax you or fine you, that's not appropriate for the federal government. that's not constitutional. that's not part of the powers they have. state might be able to do that but the federal government can't. >> the passing of the health care reform bill intensified the bitter party lines in washington. joining us this morning, david gregory from washington. good morning. we're quickly becoming constitutional law scholars here. i wonder how seriously you are taking the possibilities that these ags can get some where.

>> it's not clear right now. most of the legal experts who have weighed in on this suggest that federal law will still trump here and there won't be a lot of headway made by these attorneys general across the country but it is indicative of a political movement that's going to continue and opposition movement to this kind of government intrusion into the health care economy and that's a debate that frankly just is beginning even though there's been a passage of a law here, i think no one doubts that health care reform that's been passed in this version is going to change over time as future congresses get ahold of it. and it certainly will be a big issue for the fall. >> the refining will happen over the course of many years but you get paul ryan in "times" today promoting this repeal and reform agenda. is that going to last all of the way to november? can republicans run on something that takes something away from the american people if it's combined with a promise to give something back? >> white house advisers certainly don't believe that's

the case. it's a fair question. ask republicans if they want to start over, why didn't they start at any point going back to the bush administration where they had a lot of power and didn't put this on the agenda. reality is that conservatives do not believe in in kind of government role in the health care economy. they don't. they provided prescription drug benefits under medicare under the bush administration in an effort to foster more competition and there are some fixes for that that are in this bill but there is a philosophical divide but the notion that they are unlikely to have anywhere near the votes necessary to repeal this and they could be part of a reform effort but the white house does not believe that it is possible for republicans to run on the promise to take something away from children who need health care, unadults who have been on their parents' plan or insurance reforms that make insurance companies keep people on the rolls even if they have pre-existing conditions. >> one thing to debate a

politician or attorney general but another thing when caterpillar says we'll take a tax loss because of these things. is a fight with corporate america in the offing? >> it might be. there's also financial reform that's coming down the pike which has gotten them into a fight with corporate america certainly on wall street and i do think the question of who pays for all of this is an important one because you have payroll taxes on the wealthy on payroll taxes so there are higher taxes associated with all of this. there really is wealth transfer to those that have and those who don't and that will mitigate the fact that people felt the stimulus helped those who were the richest in the country and wall street. but nevertheless these are going to be some of the areas that are going to be battlegrounds and the largest point that warren buffett made is why not come out and deal with cost first and deal with that in an effective way before you try to expand

access. >> great things are hard to do. you look at the great society and i guess people look fondly on that. you wonder is it possible some day to have the biggest thing ever done in 100 years totally not bipartisan and get your own guys in line you had to do these sleazy backroom deals, can it turn out to be a great, wonderful society done in this way? >> obviously the interpretation of what's taudry in washington and what you do -- >> business as usual. >> it's done on both sides of the aisle. the important question is whether process will trump policy here and whether the process is substance in this regard and certainly americans are not happy with the way washington has been working. will that be something that remains front and center even when consumer benefits are realized in this bill. again, i think health care reform is something that will be evaluated over time.

i was with my dentist. i don't know if it will have impact. that level of confusion and the question marks among professionals in health care, that's going to have an impact. >> david, wish we had more time. got some gdp data on the way. see you sunday. >> any cavities? >> thankfully no. >> tune into "meet the press" on sunday. check listings for times. we'll get gdp after the break. don't go away.

>> welcome back to "squawk." we have numbers coming out. gdp our last look took a bit of it away. you would think after three times we would narrow it down. 5.6 versus 5.9. personal consumption dipped. gdp is pretty much in line. higher at 1.8 on core personal consumption quarter over quarter. forgetting all of the extras, it's down .3 from 5.9. we want to pay attention to that. interest rates are still somewhat elevated but in the grand scheme of things on the top of a broad range as we get close to and back away from 3.90 dollar under pressure but not

much after having a good go around and of course we're all looking forward to the next jobs numbers to see where these jobs are coming from and to see the after effects of that laser beam like concentration by leaders to create jobs, jobs, jobs. back to you. >> stay there. we will get more reaction. steve liesman is with us and tony crescenzi of pimco. steve, i see you go through the numbers. what's jumping out at you? >> domestic final sales were down. hotter on inflation as rick said. following closely the consumer down a tick with durables up 04 versus 02 with change in services. i know tony wants inventories. give me a second. down more than expected. minus 197 versus minus 16.

>> as you said final sales have moved from 1.4 from 1.6. when we sum up business in the economy, it was weaker than previously thought. that's the problem in the economy. the amount of consumption and whether the private sector will take over. >> would you explain to rick getting it right after three times, they're going revise this thing over the next five years. >> for many years. >> just like jobs data. a huge revision of. >> that's where the term good enough for government comes from. >> do we want maybe a slightly less hot number for the quarter so that maybe some of that gets stretched along? it doesn't disappear, right? >> what we don't like in terms of the united states story now is that half of the gdp growth came from inventory investment. final sales isn't going to cut it. it used to be around 3% or so. we can't live on final sales or on inventory investment or fiscal stimulus.

you have to have the third stage that kick in giving reinforcing growth. we don't have private sector demand kicking in yet. >> i thought it was significant what bernanke said yesterday and i guess for rick as well about the sale of assets and he means mortgage purchase move it up. how much impact does that have for people's homes and ability to buy mortgage? >> we've seen a number of feds speak on that. but it looks like that's way down the road. not in the sequencing of events. not early in the sequencing of events. there will be reserves more likely than sell assets because that would be too disruptive in the marketplace that can't handle those assets just yet. >> you didn't think -- rick, any reaction to what bernanke said yesterday? >> there really wasn't. we're going to pay more attention to actions than words although it is difficult in this political arena to really truly

do that. >> rick, we've been watching the treasuries very closely. it's the lead story in "the wall street journal" today. the move, how much of a concern is that on the floor to see over the last couple days what's happened to treasury and prices and yields? >> you know, there's a term that traders use to put speeding. it means that sometimes you forge ahead aggressively. there has been a backup in rates and the auctions from a demand perspective didn't go as favorably as auctions in the u.s. usually go. i think we're a long way away from giving true credibility to the tone of that story. the sky is not falling. it's just an issue of how much more investors over the long haul of auctions and debt are going to demand to service this debt and anyone who thinks it won't go up is probably a little crazy but it isn't going up in a real fast manner. we still haven't been able to close above 3.90.

4% is elusive. we're getting closer. >> wouldn't be surprising to see the ten-year move up to that level. moving further beyond it is not in the cards. we can't have a significant rise in interest rates while the inflation rate is low and while the interest rate set by the federal reserve is at zero. the biggest is where inflation rate is and where the benchmark rate is. now a new part of the equation is sovereign credit risk. the markets knows that congress won't deal with entitlement issue until next year because it just won't fit in. when we talk to senator shelby in a little while we'll ask him about what they have planned for entitlement spending next year because it must be addressed to get the deficit down to keep bond vigilantes away. >> real quickly, with demand from foreign governments or lack

of demand from foreign governments, could this be a problem with the sovereign debt that we have or is this something that you think is cyclical thing where you have japanese less willing to jump in until after their fiscal year jumps in on march 31st. >> are you talking to me? >> rick. sor sorry. >> it's easy to make these issues cyclical. that's what everyone is hanging their hat on. i think a lot of the problems in the credit market are probably structural and i would think that it would come under a, b, c, d for debt. i don't know how you can call them cyclical unless having trillion dollar deficits every couple years is cyclical. >> bond traders have been willing to cut the government slack but they are not going to take kindly to being ignored.

the government needs to come up with a plan. the bond market has really enabled the government to place a lot of paper relatively cheaply but then they pass health care and a lot of guys say i don't believe you when it comes to the projections of the cbo and political actions you take to make this plan be positive for deficit over time and so health care in my opinion for many of the traders much infrastructure raised the bar and said you guys now need to come forward maybe more quickly than i needed you to come forward before with the plan for solving the structural problem of the deficit. >> steve, are you saying that the run-up in rates is somehow tied to health care? >> i definitely am. i got that impression talking to a lot of traders on that. there was skepticism. it's also tied to better economic outcomes. i think that they go hand and glove together that if you're going to be doing 3% gdp growth, to

it wouldn't be unusual. when you ask what the reason is, traders say we were willing to take this over a period of time but not forever. we need to hear a plan and hear it soon. >> is tony still there? >> yeah. >> question. what was gdp at its highest level before the crisis and after this 5.6 jump, what is it now? just the number? not the percentages? >> the actual level of gdp around 14.5 trillion or so, we haven't gotten back the gdp we lo lost. we're hundreds of billions away. >> we're up 5.6. >> you're mikking a big mass take. don't look at the percentage rates. think of levels of activity. car sales were 16.5. now they're 12. housing starts 2.2 million in 2005. now a half million. we may return to higher levels but we're not going to those. don't think of growth rates.

>> they need to spend more money to get us to those levels, right? >> we'll get to 2.2 million housing starts, i would like to know how. >> we have the senator coming up. rick thank you. >> objections to financial regulatory reform bill. senator shelby sent the treasury secretary a letter saying the dodd bill does not end too big to fail and leaves taxpayers at risk and fed with too much power. the senator will tell us what he'll do after a short break. as we go to break, check out apple this morning up more than two bucks. the stock hit an all-time high yesterday. be right back. tdd# 1-800-345-2550 that's why, at schwab, tdd# 1-800-345-2550 every online equity trade is now $8.95 tdd# 1-800-345-2550 no matter your account balance, how often you trade tdd# 1-800-345-2550 or how many shares... tdd# 1-800-345-2550 you pay what they pay what everyone pays: $8.95. tdd# 1-800-345-2550 and you still get all the help tdd# 1-800-345-2550 t you expect from schwab

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>> welcome back to "squawk box." we've been keeping an eye on futures. they've been well above fair value throughout the morning after the number we got that showed a slightly lower growth than had been previously expected from gdp. revised up 5.6% from up 5.9%. you are talking about stronger futures. those futures up by about 37 points above fair value. we'll see what happens on this

last trading day of the week. >> as the financial regulatory reform bill heads to the senate floor, the senate banking committee's ranking member not too happy if you look at this letter he wrote to the treasury secretary detailing the many ways he feels the bill falls short. senator shelby of alabama joins thus morning from the nation's capital. good morning to you. >> good morning. >> it's a fascinating well written letter. you spell out the big structural issues you have and the power of the fed and how easy it is to choose a bailout over bankruptcy in your words. how does this reflect 80% agreement which is what you suggested a couple weeks ago? >> i said that we probably agree conceptually on 80%. maybe higher than that of the proposed bill but we have to get down into the weeds. we have to get down into the words and phrases and that's where we are now and my letter to the secretary reflected some of our concerns regarding what's in the bill now.

i met with senator dodd yesterday. we're going meet again today. our staffs are working together. i believe we'll be able to resolve this. it's of the utmost important that we send a message clear that nothing is too big to fail. that there's nothing where if a company, a bank, if they belly up, they're going to be resolved. they're going to be gone. the creditors will be gone and the parties are going to be gone. we do not ever want to go back to where we were 18 months ago. the american people are against that. we don't want to visit the taxpayers again and if we're not careful in this language, it will be like the status quo and that was what prompted my letter and analysis of where we are today. >> any direct feedback from the secretary to your letter? >> no. i'll get some. i'm sure the secretary and i will sit down with senator dodd and our staff and try to resolve

this. the secretary tells me that he is very interested as chairman of the fed in putting the too big to fail doctrine to rest and bury that to where no one will believe the government, the taxpayer will bail them out in the future. >> is your confidence on the rise? the conventional wisdom is this will happen one way or another. is that how you feel? >> i believe we'll get a good bill. we're working toward that end dealing with derivatives and dealing with too big to fail and also the consumer agency and a number of other things. we got to work together if we're going to get a good bill. i'm willing to do that. senator dodd and i have worked in the past on many things. if we can do this, this will be monumental. >> senator shelby, this is tony crescenzi of pimco. what do you see the oversight

council being made up of? will they be lawmakers? people from banking? people from finance? what type of people will make up this important council? >> that's a good question. first of all, we haven't formalized anything into stone yet but what i would envision is a council that would not have connections to something that would be bailed out directly or indirectly. somebody with knowledge. i don't believe that we ought to get politicians involved in this because a lot of these are cold blooded serious business decisions. >> there are some out there that say one of the simple solutions that goes unaddressed is limiting inner bank lending between banks. if they're not interconnected the danger is significant.

is that a possibility? >> we have to be careful in trying to limit or do away with inter bank lending. the interconnectiveness is a real issue dealing with too big to fail. are some of these in it and too interconnected and so forth? i don't believe anything is bad because it's big but i think it is bad because the expectation of the people expect taxpayers will bail them out or back them up. that's bad policy. >> i wonder if i might ask you we're watching this ten-year yield and what happened in the bond markets yesterday. do you think rates are on the rise because the economy is getting better or bond investors are more worried about deficits or both? >> i think bond holders and people who invest long-term have to be worried about deficits. they have to be worried about

deficits and the debt of this nation and also if you look around the world, sovereign debt, looked a what happened in greece and perhaps some other economies. >> is the concern acute enough that it will force congress' hand and somehow get budgetary measures on the agenda before you recess later in the year? >> i wish it were true. i don't think so. i think this administration is going to borrow more money and spend more money and lack fiscal discipline more than any administration i've ever seen since i've been in washington. >> senator shelby, it's tony again. you've been impartial over the years. very bipartisan. you put policy over politics. you are also on the special committee of the ageing. can you be straight with us and we know that markets have kicked the can down the road on this entitlement issue. tell us what you think will happen in the entitlement area?

do they expect change? if not, how will congress deal with entitlement issue. it must be dealt with with the numbers we see. by 2015 the numbers on the budget will worsen. interest by 2020 will exceed discretionary spending on this path. it must be rectified so we don't go the way of greece. what do you see when we get the new congress in terms of efforts to go after this because it must be dealt with it seems. >> excellent question. i think this is the central question facing the country. the entitlements how do we deal with them? they are under funded. social security. medicare, medicaid. many other things. we have a financial time bomb that's ticking. people don't believe it will explode in their life but it will down the road. i don't the congress, this congress, both parties are ready to deal with it. i don't believe this president is going to do it. it's going to take a real breakdown, i'm afraid, for us to

face reality. >> can i ask you if you think we're going to get a bill that's voteable in the next few weeks? >> i believe that there's a good chance that we can get a regulatory reform bill -- >> before recess, before easter? >> no, no, before memorial day, if we can work out a few kinks that we have working today. >> oh, good. then we can all enjoy the summer. we'll see if that happens. >> we hope so. >> senator, thanks. >> thank you. >> senator richard shelby. all right, the march to dow 11,000, the bulls slowly climbing towards that psychological barrier, but we've seen this movie before. will it have a different ending this time around? we're going to find out, right after this on "squawk."

all right, we're counting down to the opening bell right now on wall street. joining us right now is art cashin, the director of floor operations at ubs financial services. art, it looks like, at least at this moment, things are looking to the up side for trading today. do you think that will continue through the end of the day? >> well, we can hope so. again, you're getting a tail wind from currencies, the idea that there is going to be some kind of resolution of the greek crisis. it's got the euro improved.

you can look at what i call the troika these days -- oil, gold and stocks. and if all three are moving in the same direction, you can bet that some of it has to do with currency. so, yeah, we're going to start out a little bit better. i think the reversal yesterday was a little spooky, so people are going to be wary as they watch where they're going. as long as we stay above s&p 1,150, the ball is in the bulls' hands, so they're in good shape here. >> have you been casting a wary eye towards what's happening in the bond markets? >> oh, absolutely. what we've seen over the last couple days is of concern. you don't know whether china's just sitting on their hands trying to teach the people in washington a lesson as to who has real power, or is it that we're going to have to -- people are saying i want higher yields if you want to borrow my money. there's a lot of cross currents here, becky, you know. if we're importing less, that means we're sending less money to china and other places, and

yet, we're going to have to recycle larger and larger treasury debt. it's going to be a tough outlook. let's see what happens when the quarter ends. >> yeah, i guess the quarter ending, people are wondering if it's just the japanese waiting until their fiscal year is over. >> yeah, i think there's a lot of people waiting. we found $136 billion come out of money market funds and virtually every penny wound up in the bond markets. so, there's a lot of confusion as to where things are going here, and that's why the volume remains low, even though we've kind of had a nice move to the up side. >> all right, art, thank you. have a wonderful weekend. >> i'll be marinating ice cubes and thinking of you, becky. >> all right, cheers. >> thank you. >> that's nice, becky. >> that is nice. next, we'll have the "stock of the day." "squawk box" will be right back. natural gas is a cleaner burning fuel,

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