magnitude. and now european authorities say, in terms of its impact on airlines, it's bigger than 9/11. global airlines. asia down -- >> ash priccrisis, is that -- >> well, british airways is calling it the ash crisis. it's cost them. >> it's a real pain in the ash for them? >> a real pain in the ash. >> i'm going to enjoy this story. oh, look at that. wow. >> the pictures are -- >> holy cow. >> stupendous. and it is a tiny, little ant of a volcano. >> yeah, but it's under the ice sheet. >> right. >> so the combination -- it's melting the ice and you get this mix of -- >> right. glass, actually. it's interesting how all these things happen in nature, that part of what's flying high up is a fiberglass type of material that's so damaging to the engines. >> then there is the global picture, still tied up by the volcano. hundreds of flights canceled again today. the european air traffic system

remains pretty much shut down. a few european airlines did run test flights wednesday. some airports in central europe have let a few flights take off today, but the system still really not functioning much at all. >> that's right. and you know, they did fly some f-16s through it. they landed safely but did have serious engine issues. breaking news on toyota. just agreeing to pay a record, mark, fine. this is $16.4 million. it's to u.s. safety regulators for the government's claim it delayed a massive accelerator pedal recall in january, and again, to give some perspective, that is a very small amount for a company like toyota. most fines are relative to the reputational issues, but when you think about wall street and the fines, for example, what this may cost goldman sachs, it's always the reputational issue that's much more costly than the actual fine. >> yeah. plus, now they've got that issue with their big suv, withdrawing it from sales because of safety concerns. hasn't been a good year for

toyota. >> no, it has not. well, the s.e.c. reportedly investigating other mortgage deals by wall street's biggest firms after accusing goldman sachs of fraud. now we are going to be joined by senator kay bailey hutchison, republican member of the senate banking committee. she was obviously with us last week, and well, a lot of things have happened since then. senator hutchison, good to have you with us. we appreciate it. >> thank you, erin. good to be with you and mark. >> what's your perspective here on the goldman sachs situation? i know you probably had a chance to look at the s.e.c. filing as well. do you think there's something there or do you think this is politics? what's your view? >> oh, i wouldn't want to venture an opinion on it because i think it's a little too early, but certainly, we've got to make sure that what we do is the right amount. i want to regulate to avoid fraud, certainly, but we've got to also have the capability for our companies to be able to compete in the global marketplace. >> so, is anything going to

change in terms of the financial regulation bill, either what is in it, anyone's stance on it or when it becomes law? >> well, right now, many of us are not willing to sign on to the bill because of the too big to fail language, which is not nearly tight enough for many of us. we do not want to have a big divide between the too big to fail banks and then all of the other community banks in the country. the big is very targeted toward the big banks, the new york banks, the $50 billion and above banks. but it really leaves the community banks in the dust, and i think we've got to balance that out, because they're the ones that have provided the liquidity and this hard time. and taking them out of the fed, for instance, i think is very unwise. >> how do you legislate away too big to fail? if a bank is too big to fail, it's too big to fail, period.

i mean, unless you prevent them from getting that big, what do you do? >> well, the bill as it's written gives a lot of leeway to continue bailing out the too big to fail banks, and it gives it to the fdic and the treasury and the fed, and that just tells wall street banks, look, you know, go ahead, be risky and make a few mistakes, because you're never going to have to pay the consequences. and that's what has to be tightened up if republicans are going to support this bill. >> well, here's what i'm trying to get at, senator. if we get into a situation where a bank, if it fails, would bring down the system, do you really want the government's hands tied so they can't do something about that? >> i think the banks need to know that they are going to have to provide for their own

liquidity and their own basic needs in their commercial activities. and if they don't think so, you will always have too big to fail. >> but i still don't understand how your approach would work. if a bank that's systemically critical is about to fail, you are saying they shouldn't be bailed out, is that correct? >> you have to stop the idea that they can take risks -- >> understood. >> -- and they'll be bailed out. you have to do it. and the way to do it is not to open the treasury and the taxpayer dollars to those institutions. >> then you have to break them up so they're not -- because once they're so important they would bring down the economy, somebody's going to have to do something. so, would you advocate breaking them up now so they never approach that size? >> no. i don't think that you should artificially keep them down because you do want them to be able to compete globally, but

you do have to put regulations in place. you have to have enough transparency, enough oversight, and certainly, capital requirements and reserve requirements. that's the way you assure that they are solid from a regulatory standpoint, but i don't think we should artificially cap them and break them up. i want them to be able to compete in the global marketplace. >> all right. let's talk about transparency. we're almost out of time. are you -- it's my understanding, and i could be wrong, that the republicans in general are opposed to the proposals to regulate derivatives, correct? >> well, no. >> okay. >> well, we want to have derivatives be able to be done. i mean, there are a lot of end users that are legitimate. >> right. >> actually, stabilization for the banks in derivatives. >> right. >> so, we don't want to outlaw them. but we do want to make sure that there's enough transparency,

that there are liquidity -- >> all right, so, you're okay with forcing them on to some sort of exchange? >> i think that's the best way to go. it's a little unclear here. it's kind of tough because you want it to be available. it has a very good purpose in many instances. >> okay. >> you just don't want them to obviously be a ponzi scheme, as we have seen. >> okay. so, i did misunderstand where you stood on that one and i apologize for that. senator, thank you very much. appreciate your time. >> all right. thank you both. >> senator kay bailey hutchison of texas. >> and please vote in our street poll. s.e.c. decision to charge goldman sachs, are you now more or less in favor of financial regulation? please let us know, more or less. let's get to phil lebeau with more on that breaking news out of toyota. phil? >> yeah, erin, as expected, toyota has agreed to pay the largest fine ever issued by nhtsa, the national highway traffic safety administration, just under $16.4 million.

just a few minutes ago, secretary of transportation ray lahood saying he is pleased toyota has accepted responsibility for violating legal obligations to report any defects promptly and goes on to say that the department of transportation is continuing to investigate whether toyota has lived up to all of its disclosure obligations. that last sentence there clearly a reference to the fact that there are ongoing investigations, not only at the department of transportation, but also elsewhere in the federal government looking into toyota and the recall issues that have been facing this company over the last six months. so, again, toyota paying $16.375 million. mark? >> thank you very much, phil lebeau. in the next hour, by the way, see if other businesses will stop doing business with goldman sachs because of the fraud charges. but right now, let's hit the markets. we start with cool breeze, bob pisani's here at the big board. bob. >> good morning, mark. citi reported a sizable beat on the top line and the bottom line, both of them. look what we've got. we've got citi, jpmorgan and bank of america all reporting

numbers that were pretty good. there's two problems. number one, much of the gains we've seen already priced in the way the stocks are trading. ci citi's up 37% year to date, bank of america up 22%. the problem is the financial reform thing you were talking about the senator, that throws a monkey wrench into potential earnings down the road because it could be much more aggressive than the street expected. much of the gains in the s&p 500 for earnings this year are financial gains. that could be a big problem. halliburton came out with numbers that were very good, 3 cents above expectations. more importantly, north america really has improved. recounts up. they may have opportunities to increase the pricing level. here's the concern -- natural gas prices are way down. if this continues, there will be pressure on halliburton to cut prices for all the rigs that they have out there. and speaking of lower prices, sharon over at the nymex, i see oil down $2 again today. >> it is, and bob, the traders here have a lot to watch -- the two gs and jet fuel, goldman

sachs and the volcanic ash from iceland and the impact on jet fuel prices. nymex gas prices are at a three-month low, below $81 a barrel, but we're also paying close attention to the june contract where all the liquidity is, as the may contract will expire tomorrow. we're watching what is happening to heating oil as well because heating oil is seen as a proxy for jet fuel, and in addition to what we're talking about, about goldman sachs and talking about greece and the bailout plans there and imf conditions, we're also looking at jet fuel, 1.4 million barrels of jet fuel used here in the u.s. not much impact on u.s. flights, but in europe, we're talking about 1.3 million barrels a day of jet fuel being used and about 2 million barrels per day as an impact here in the grounded flights we're seeing in europe. 30% of the flights still grounded in europe. that is going to have a significant impact on jet fuel. continue to watch brent crude prices for the impact as well. mark, erin, back to you. >> okey dokey. next up, much more on the financials after citigroup posts

big first-quarter numbers. plus, michelle caruso-cabrera on whether firms will start shying away from goldman sachs after the fraud charges. plus, a goldman sachs executive, now a business ethics professor, going to have to see where he stands on all this. but first, flying to europe today? check with your carrier. still seeing a lot of cancellations because of the volcano. back in two minutes.

welcome back. citigroup reporting earnings at 8:00 a.m. this morning. mary thompson will have details from the conference call coming up. but in the not-too-distant future, let me give you a few highlights, if i can, from those numbers, which looked to be not bad. we'll take a look at citi, how it's looking to open. you can see perhaps up just a bit. not a huge jump there. the stock had hit $5 a share before falling significantly on friday after, well, hitting $5 on thursday, but on friday with the goldman news and the rest of the market, it took a bit of a tumble. highlights to tell you about at this point. well, fixed income, no surprise

there. so many firms, investment banks have been doing extraordinarily well in the fixed income markets for any number of reasons. citi among them. fixed income revenues of $5.4 billion were up 77%. interesting to note, as well, that expenses were down rather sharply, 6% decline in expenses overall or about $800 million taken out of the expense base of the company over the last year to $11.5 billion for the quarter. and allowance for loan losses was up to $48.7 billion. that is about 6.8% of total loans, up from $36 billion or what was 6.09% in the prior quarter. that reflected the addition of $13.4 billion in reserves related to the adoption of sfas 166-167, the consumer allowance for loan losses $34.4 billion at year end or 7.8% of total loans. so, that's a quick look at citi. of course, you see what the

stock has done over the last ten years, over the last year, and over the last month, a very sharp rise. remember, the u.s. government, owner of 7.7 billion shares or previously the owner of 7.7 billion shares, has been selling shares, most likely every day, through its underwriter morgan stanley in that at-the-market sale process that is going on. we don't know at this point where the treasury stake is. we assume it is lower, and at some point, we may see a very large block of citi stock trade, if and when they can clean that up. of course, that's quite a cleanup, but that may be coming. we'll see. again, mary thompson monitoring the conference call from citi's ceo vikram pandit and we'll have more for you as we get it. mark, back to you. >> thank you, david faber. here to go inside the numbers on citi, get a check on the latest with goldman sachs, marcia orenbach is managing director the credit suisse north america and anton schutz, president of

mendon capital. we'll start with you. first, the citigroup numbers, pretty impressive? >> yes, they are, mark. particularly the $2 billion lower losses than they had relative to our expectations in the fourth quarter. >> all right. so, it's not just a case of easy come. >> no, no. you had better trading, as all the others did. but in addition, you also had significantly lower losses. we'll wait to hear on the conference call how much of that is sustainable. >> and how do you see it kn. >> strong numbers. international is strong, expenses down. shareholders have to be pleased. i guess we as taxpayers that own citi shares have to be pleased. and look forward to making some profit on this investment. >> anton, vikram pandit's comment in the press release -- i'll read from it -- "we are proud of our first quarter results but remain cautious about the environment given the uncertain economic recovery." that's a little bit different than what jamie dimon said last week. >> well, i think vikram has nothing to lose by being

conservative here. there's no reason for him to go out there after one real strong quarter, go out and say, hey, it's all over. and there's no doubt that regulatory legislative headwinds are so strong, you know, it's kind of hard for them to predict. and certainly, we need to make sure this economy gets off the ground. and citi's got lots of reserves and lots of capital now, but profitability's going to be contingent upon continued growth here. >> moshe, do you see any risk that citi gets involved in a situation like goldman sachs now is, where whether by or innocent, it will be a feeding frenzy and a lot of negative headlines for a long time? >> i think you are going to have negative headlines, and i think the harder you look, the easier it will be to find wrongdoing at any of these firms. but i think one of the likely analogs, perhaps, could be the research settlement in which there's a global agreement over the course of the next several weeks or months, particularly since this is a practice that doesn't go on anymore in the industry. >> one quick question to you, anton, as we wrap it up. capital ratios. we were talking to kay bailey

hutchison about the too big to fail. alternatively, one could focus on capital ratios. citi puts theirs at the top. tier one, what, three times more than they have to be right now? is that a sustainable level? >> no. i think it's probably too high, and i think everybody's waiting, including jpmorgan and even goldman, with very high and strong numbers. but until legislation is passed, until it's clear, until we're completely out of the woods, why not carry a fortress, but that's also part of the investment piece this year, is if you have too much, you can return it to shareholders again. once again, through dividends, once again through stock buybacks, and i think that's going to be a theme in the second half of the year that is going to be very powerful. >> all right, gentlemen, thank you very much. appreciate hearing your thoughts. >> thank you. >> thank you. up next, the headlines straight off the citigroup conference. we'll be right back.

welcome back to "squawk on the street." a couple of headlines from the conference call that citi cfo john gerris back just held with the media. of course, the headline being that he did acknowledge that the s.e.c. has launched an inquiry into the transactions similar to that it's charged goldman sachs with fraud in. gesback saying they have complied with the s.e.c. but declined further comment, also saying they are not involved in matters that the s.e.c. spoke about on friday. again, those fraud charges against goldman sachs. also, speaking about a couple of the business areas within citi,

gersback cautioned that it would be wrong to think that the trading business, of course, which was the standout in the first quarter, would continue to provide these stellar results, because of course, it's benefiting from a very favorable trading environment at this moment. he also says that credit is improving in developing countries, but credit losses remain very high in north america and their main concern continues to be the high unemployment rates here in the u.s. additionally, gersback says that citi is seeing much stronger evidence of loan demand abroad outside of the u.s., but right now the bank isn't seeing it here in the united states. once again, citi coming in with very strong results for the first quarter, 14 cents a share, again, helped by a strong performance in its trading operations. mark, back to you. >> thank you, mary. next up, the opening bell after friday's big drop. we will head lower at the open, it appears. >> yeah, we will -- a little off the lows of the session but still a lower open coming your way. we'll have it for you. a big day from the ash crisis to citi earnings to the fallout from goldman. we'll be back.

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okay, here are your headlines ahead of the bell. citigroup posting a $4.4 billion profit for the first quarter, well above estimates. also says it is not involved in any of the s.e.c. procedures announced friday against goldman sachs. oil falling sharply, down more than $2 a barrel, approaching $80 again. european air traffic still shut tight because of that massive volcano eruption in iceland. here come the opening bells. where are we? we are ten seconds away from the opening bells. >> ten seconds away. >> here at the big board, nyse euronext employees who volunteered their time for new york games. and at the nasdaq, the world

federation of exchanges and the international options market association. >> there are the bells. we're off to the races. don't yet have a tick for you on the opening market. as i look up here, interesting, the first tick there for the dow is up. >> not anymore. >> and now it's down. but that is the battle of what's going to happen today as we try to get -- >> up and down. >> up and down, up and down. bob pisani can explain more. we'll go through the markets and begin, of course, with you, bob. >> and the important thing is, they're delaying those negotiations over greece because the traffic is all grounded in europe, they can't get anywhere and negotiate with each other. china's down very big today. they're trying to curb property speculation there. so, that's sort of weighing on the asian markets overnight. here's citi, opened up 9 cents, $4.64. big beat on the top line, big beat on the bottom line. securities and banking had a big gain. that was mostly fixed income trading here. 16% decline in net credit losses. that's good. and their release for loan losses. they didn't have a build for

loan losses. they had a release. several banks have mentioned that as well. the problem is we've had big gains so far in the prices for these companies. we've got citi up 22%, 37%, excuse me. jpmorgan's up 22%. that going to be an issue. and this whole financial reform bill is now a big problem because they think it may be more aggressive than they thought before. before it was manageable. now it's not sure. remember, all the gains in the s&p are mostly big gains in the s&p 500 this year, are going to be due to improvement in earnings in the financial. that's a big issue. halliburton had excellent numbers overall. their north american operations are improving. rig count is up. pricing looks like they're going to be able to get more aggressive. the worry here is natural gas prices. if they stay down here, halliburton's going to be under a lot of pressure to cut back pricing for what they charge for their rigs. let's talk about phillips. i didn't even mention that this morning. this is the big electronics giant over in europe. their numbers were much better than expected, and sales improved rather noticeably, 11%, and they said they're increasingly confident they'll be able to make their ebitda targets for the year.

tradertalk.cnbc.com. scott, how are we looking at the nasdaq? >> bob, we've opened lower as well, modest decline, about 0.2%, a loss of seven points. apple's the story, reporting earnings tomorrow. certainly, expectations are high. expectations are always high when apple reports, even more so, perhaps, because the stock has been hovering right around an all-time high for the last several weeks. take a look at some of the other large cap and widely held technology stocks like google, ticking to the down side, microsoft showing a positive move right out of the gates this morning. intel's negative. palm is down about 6%. it was downgraded over at morgan keegan. the stock's had huge runs over the last few weeks, mostly on takeover speculation, but giving back about 6% this morning. cognizant, meantime, is down 1.5% on a downgrade from goldman sachs, mostly a valuation call. let's go to sharon at the nymex. >> we've been telling viewers for months that everything in the oil market is really one big trade. and when you talk about one of the biggest commodity traders, if not the biggest commodity trader, having civil charges filed against them, that's why you're seeing the impact on oil

prices. that is the main reason why oil prices are down more than $2, but there's another factor to consider, particularly when you're talking about brent crude prices, and that is the impact of jet fuel demand after this volcanic ash impact in iceland. that is impacting prices as well. we have 30% of flights right now operating in europe today, and european jet fuel demand is about 1.3 million barrels a day in april, according to energy analyst andy lip yao. when you talk about the lost jet fuel demand, it could be nearly 2 million barrels per day in europe. so, that is the impact we're seeing there. and when you're talking about how to trade this impact, a lot of traders are looking at heating oil here at the nymex as a proxy for distillate, for jet fuels, and that is why we're seeing heating oil as the main drag in the oil complex today. rick santelli, to you in chicago. >> well, thank you very much, sharon. you know, everybody thought maybe we'd get more information regarding goldman over the weekend. you know, how big of a smoking gun it is? well, the market's backing away from worst-case scenarios quickly. according to prices and what

traders are saying. we see that yields in the states haven't really moved much, but we continue to see things like greece 30-years, 10-years were up dramatically again, all interest rates and even portugal's rates, watching some other countries like portugal and spain, portugal's rates continue to move higher. their ten-year's at the highest rate going back to february. as we monitor potentially will they get to the highest rates of the year. supply, we had 50 billion three and six-month bills, 25 billion of each in the states, but we don't have coupon supply starting until next tuesday in the form of two-year notes. as far as the dollar, it's doing better. as a matter of fact, a lot of the news of the day has vaulted it back over 81 in the dollar index. so, for the moment, the dollar seems to be much more firm than it had been the last week and a half. mark, back to you. >> thank you, rick santelli. let's check the markets for you. the dow right now is down only one point. and the futures -- now we've flipped positive. obviously, we're going to go back and forth here. but the futures were indicating

a much worse open than we got. s&p is down only one point. nasdaq is down 2.25. and wait a minute, the dow is actually getting in gear now to the up side. let's get the info on the early tick. joining us now, linda thisel, equity strategist, frauded investors and fritz meyer at invesco aim. linda. >> good morning. >> i'll start with you. here we faced a down opening, according to the futures, and yet, we've opened higher. i get the market wants to go up? >> yes. we've been reading a lot about performance anxiety in the last several weeks, and i think that's going to continue to carry on as we make our way through the earnings season. there had been a lot of concern recently about china and greece, and now goldman sachs, et cetera. and i think that people need to focus on the fact that we're here in the usa and potentially seeing a v-shaped recovery, which, again, we had been

looking for a federated for some time, but more and more participants are starting to jump on that bandwagon. that's good news for earnings and the need to raise earnings estimates through the year and that's good for the markets. >> okay, so, you are positive on the market. fritz, what about you? >> right on, linda. i think you said it perfectly there. what's interesting to me is that the "wall street journal's" most recently released survey of economists showed an expectation of about 3.1% gdp growth for the next four quarters. remember, the ism said two weeks ago that we could see an excess of 5% economic growth over the next several quarters. there's still substantial potential for upside surprise on the economic data. and my view is the market will continue to scratch its way toward the old high of 1,500 on the s&p over the next seven quarters, simply based on that $100 in earnings target for 2011. >> linda, what about what's going on in europe? you know, airlines are saying this is a bigger hit than september 11th was, and certainly, you're seeing economic reverberations going

throughout those economies. it's unclear when we're going to have full air service. it could go on for a long time. at what point does this become something relevant to overall markets? >> you know, as someone stranded over in heathrow, that is a nightmare, and i feel for those people. and i think for investing, it has a lot to do with airlines and shipping, i guess is the way i would look at it. but really, greece is more important than that. and they'll work their way through this. this is a near-term concern. again, it clouds the issue that we really should be focusing on, and the mantra we're using here at federated is stronger for longer. and i know about 1565, but i'm like my other guest on the panel, we're bullish as well. we have to watch we don't let these clouds with ashes get in our way to see what's really the good news just ahead. and i feel for the people across the seas. >> all right. fritz, what part of the market do you like best here, if it's going to continue to go up? >> well, mark, i suspect the

economy-sensitive sectors in the s&p continue to out-perform. and i start with financials, because i think they have the furthest to recover. industrials, materials and, importantly, consumer discretionary. and i think probably energy comes along at some point, because i think the oil price is probably headed higher. >> all right. thank you very much, linda and fritz. have a great week. >> thank you. >> cnbc's senior economics reporter steve liesman joins us now with more breaking headlines on the goldman case of alleged fraud. steve, what do you have? >> erin, thanks very much. cnbc has learned that a former top lieutenant to john paulson told investigators that the multibillion dollar hedge fund struck only one deal of the type that is the focus of the s.e.c.'s case of alleged fraud against goldman sachs. paolo pellegrini, according to a source close to him, told attorneys that paulson struck only one so-called bespoke or subsidized collateralized obligation with goldman sachs that a neutral third party or collateral collection agent.

paulson did one of the deals in question with goldman, but this is the only one that had that neutral third party, which is central to the allegation of fraud in this case. in addition, pellegrini told investigators that paulson approached other banks about doing such a deal, but the since-failed aca was the only cdo manager who agreed to do this sort of security deal. cnbc has also learned new details on how paulson selected the subprime securities that were part of the larger cdo. according to pellegrini's interview with government officials, the criteria were deal sized first, average fico score and percentage of adjustable rate mortgages, all mortgages written in a certain time frame. as the complaint says, paulson initially proposed 123 deals and aca threw out 55. paulson then expanded the time frame for when the mortgages were written to find more deals and aca threw a bunch of those out. the process was repeated until the deal got enough size to satisfy rating agency requirements. a person close to pellegrini

argues this -- he believes, in fact, the deal was stacked against paulson based on aca's ability to throw out any deal they did not like. aca ended up taking $840 million of the $1 billion deal and failed soon afterwards. so, they were the long making the selections from paulson's suggested securities. pellegrini was one of a number of sources in the case for the s.e.c. which had thousands of pages of documents there. was no allegation that paulson or pellegrini did anything wrong, and mark, goldman sachs, as you know, is denying any wrongdoing in the case. mark? >> sure. okay. you know what, steve? i mean, the football draft is coming up this week, and that logic that you just explained, then you would not find it objectionable if, say, every time the giants were going to pick a player, the players that would be available in the pool would be chosen by somebody else.

>> well -- >> i mean, basically, that's what we're talking about. that's the rationale i'm hearing, is that since aca could veto -- >> right. >> -- then paulson didn't have an advantage. but if paulson decides which players are in the pool -- >> right. >> -- and which are not -- >> right. >> -- that's an advantage! >> i agree, mark, but if it's your team and you're the one that's going to field them and you're the coach and your contract is on the line for the selection of these players -- remember, the key here is that aca apparently took down $840 million, mark, of the billion-dollar deal. what more incentive could they have to make sure this was a positive long deal? i mean, maybe they took the whole billion, that would actually act in their financial interests? it's hard to tell, mark. >> all right. >> i agree with you, though. it's an interesting point. >> i wish we could continue talking about this, because it is fascinating. but we have to move on. phil lebeau has more news for us. >> toyota now talking about the fact that it's agreed to pay

$16.375 million for a nhtsa fine for failing to disclose sooner about sticky gas pedals, but in acknowledging that it is paying this fine, toyota says "we have acknowledged that we could have done a better job of sharing relevant information within our global operations and outside the company," but here's the important part. they say "but we did not try to hide a defect to avoid dealing with safety problems." toyota agreeing to pay just under $16.4 million for a defect violation in terms of notifying the federal government, but again, saying it was not trying to commit a crime or trying to hide a defect. guys, back to you. >> thank you, phil lebeau. is stronger financial regulation warranted directly because of the case against goldman sachs? both sides are going to weigh in on that, next. and later, building in the ipo market. a little bit of this pressure recently hasn't put that to rest yet. can it continue? pricewaterhousecooper's new ipo watch, coming up right here on

"squawk on the street." we'll be back in a moment, as we're flat. >> yeah.

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all right, breaking news. president obama announcing he will travel to new york thursday to talk about wall street reform. that coming just moments ago from the white house. the trip comes on the heels of the case against goldman sachs and as the president pushes for passage of the financial regulation reform bill. more details on this when they come in. thursday could be a tough day for driving in new york. >> that is one thing that is definitely going to be true. well, financial regulation, obviously, more or less likely

in general, but also getting added, a little bit of an added boost from the s.e.c. filing a fraud charge against goldman sachs. former vermont governor and chair of the democratic national committee howard dean is with us. tom kearn also joining us with pecker and abramson to talk about this issue. good to have both of you with us and we appreciate it howard dean, let me just ask you this, i guess this big-picture question -- do you think that the charges against goldman sachs helped the push for financial reform in any way or do you think that is sort of a marginal thing? >> well, i think they probably do help the push, just like the huge increases in health care premiums helped get the health care bill through. i like the lady from federated who said stronger for longer. i have no idea if what goldman sachs did is fraud or not. i mean, i don't know the case and i'm not a lawyer. but i do know that it's probably not ethical that when you start cooking the financial instruments and trading it back and forth, that removes public confidence from wall street. wall street is really necessary

for strong capitalist system, but trading things like derivatives in a non-transparent manner focuses capital on doing things that, frankly, don't create jobs and don't create wealth, except in the lower edge of manhattan, and we need a more manufacturing-based economy. so, i think a strong financial regulation is really important. >> tom, it's interesting when you look at what the president has said -- at least the white house has never seemed to go aggressively for this concept of a fund paid for by the big banks that would hypothetically be used if one of them were to fail and with taxpayer money. it's interesting democrats now are pushing that. white house never has seemed to. republicans obviously don't want it. do you think that we are focusing on the wrong thing, on how big an institution is, as opposed to focusing on how much capital it has on the end for a rainy day? we're highlighting today citigroup's baht 11%. that's four times higher than they need. isn't that proof that the right thing's already being done? >> well, it certainly shows that there's a responsible response for the risk that was taken on, and there has been a risk taken

on and the street and private entities are responding to this in an appropriate way. i think that the risk management is more important than the fund that is being set up by the banks, because ultimately, the banks are going to pass that on to the taxpayers, and that will remain the taxpayer fund. and i don't think it's very popular with either side of the aisle. it's good window dressing, but it really doesn't address the problem. >> what would address the problem? >> well, i think you're seeing it. i think that there is a perception that the risk management procedures put in by the banks, by the investment banks failed. i think there was no one saying, wait a minute, you know, we're betting on the housing market to continually go up, when in fact, we're professionals and we know that eventually all markets come down. and i think that you see from the reserves that

>> no bank, no end service is going to attach fees on it, and it not be passed over.

>> merrill lynch has it, bank of america doesn't -- >> it's passed on -- it's silly. >> one at a time, please. governor, you made your point. tom, would you repeat what you were saying? >> well, it's silly. fees are added -- banks or any other business has to set up a fund. that fund -- the cost of that fund is going to be passed on to the consumers in that fund. >> well, that's like saying the sun rises in the east. i mean, corporations don't pay taxes or fees or anything. they pass it on no matter who -- whether it's exxon or citigroup, they're going to pass it on to their customers. >> well, that's true, but to sit there and say to engage in the demagoguery that, oh, the banks are going to have to pay and the big players are going to have to pay, it's just not that way. >> well -- >> ultimately, people who use the services from pension funds and everywhere else, there's

going to be added costs to them. >> okay, we have to leave it there, but we thank you very much, gentlemen. appreciate it. tom curran. >> thank you. >> thanks. >> and of course, howard dean, cnbc contributor, former vermont governor, chair of the democratic national committee. he's a doctor, little league coach -- >> he is? >> on and on. i don't know. but his resume is so long, it's -- >> well, look, if he's not now, he probably was at some point. >> okay. where do we go from here? >> the s.e.c. after it announced charges against goldman sachs, our poll of the day, are you more or less in favor of financial regulation? you heard howard dean's point, which i thought was an interesting one. he said yes -- >> i thought they were both very interesting. >> they both were, but his point was well point it was, yes, this probably did help the push to financial reform the same way the rise in premiums got people on board and supportive of health care reform. may not have agreed with what the reform was, but they wanted the reform, so, vote at squawkonthestreet.cnbc.com.

coming up, whether they're found guilty or not, is it unwise to bet against goldman sachs? will the wall street titans see a sharp recovery? but first, a few of the stocks on the move right now. and on the way to our break, a look at the companies out with quarterly results this morning. here's a few of them. citigroup, by the way, before the open -- this was fascinating -- it was up 2%, down 3%. obviously, it's absolute value, you know. very low-priced stock. but still, a lot of fighting going on there, and right now it is up, although not as high as it traded last week when it crossed the key $5 mark. >> no, it got to $5 and then went back down big time. >> yeah.

welcome back to "squawk on the street." i'm bertha coombs. a couple stocks on the move. eli lilly this morning beating on its earning but cutting its 2010 outlook, blaming the health care reform bill. they say it's going to be good for seniors on medicare, but it's going to mean big costs in the short-run for lilly.

it will cost between $600 million and $700 million in revenues between higher retirees drug costs and higher government rebates. boston scientific got fda approval to go back into the defibrillator market last week, but jpmorgan says over the weekend, surveying doctors, they expect bsx to lose more than seven points of market share while some of the products remain sidelined. we're going to be right back. i switched to commodities. there's even more volatility in markets like gold and crude oil, and i can go long or short any time, with no special rules. commodities? yeah, and commodities always have value, unlike some stocks. well, how'd you get started? lind-waldock. call lind-waldock, the premier futures broker, at 800-445-2000 and see if commodities are right for you.

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welcome back to "squawk on the street." march leading indicators are more impressive than anticipated, up 1.4%, and this is on top of a upwardly revised 0.1%, which now stands at 0.4%. so, let's look at the trend of leading indicators. december was up 1.2%. jan was up 0.3%. feb was revised to up 0.4%, and now we're looking at 1.4%. so, the trend has been broken from a strong december that started to mitigate lower. this restores that. now, whether you believe leading indicators is exactly that, a good indication of what lies ahead is debatable, but this is a good number. we saw that interest rates moved up just a little bit from slightly elevated levels as we approach 3.80 on a ten-year, and

preopening equities improved just a couple of points from up 24 to up 26 in the dow. erin, back to you. >> thank you very much, rick santelli. so, the trend is your friend when it comes to those economic indicators. >> look, the numbers are improving. we saw that not just about the economic numbers, we've seen it in the earnings numbers. citigroup, now there's your trifecta. citi, bank of america, jpmorgan reporting good numbers. citigroup is moving up. for all the damage that happened on friday, look, goldman's down fractionally here today, but basically, we've recovered pretty much here. this is not a bad open here overall. the important thing is, the numbers on citi are continuing to point in the right direction. and look, erin, here, 60% decline in charge-off, nonperforming assets were down 10%. that's the key thing that you're looking for here. lower expenses. there was a 5% or 6% decline in expenses as well, but it wasn't just that. topline gro growth. >> and their capital ratios keep going up. >> that's right. >> they were at 8%, now at 11%. probably higher than they need to be. >> loan losses continuing to go down. there's your big trend and

citigroup nicely on the up side. it's up, oh, over 30% so far this year. the thing that worries me a little bit, and this is good for consumers that we're continuing so ee natural gas and oil down noticeably, but it's affecting the big energy names. halliburton had good comments in their earnings picture -- >> and they're hiring, right? >> they're hiring. but if the numbers continue, oil and natural gas continue to drop like this, there's going to be a lot of pricing pressures on these oil companies, these oil exploration companies as well as oil service companies like halliburton, and that's going to be a little bit of a problem for them. >> all right. >> all the big energy names are to the down side today. >> and we are at 81.66, down nearly $2 for crude. thanks, bob pisani. now let's get to scott wapner. hello. >> hey, erin. thank you very much. we just moved into the positive territory on nasdaq, 0.1%, gain of five points. all the anticipation, of course, is about tomorrow's big event, apple reporting its earnings. the stock is up ahead of that. expectations are always high around apple. perhaps more so this time than for some of the other reports

just considering the fact that the stock has been trading at an all-time high over the last several, several weeks. almost $250 a share. so, we'll be watching that report certainly closely from apple. goog google's higher, microsoft is higher. microsoft has added a little bit since last time i saw you, up a little over 1%. intel is a fractional mover to the up side. look at palm, though. a lot of takeover talk around this stock over the last two, three weeks or so. the stock had run up on that news. the stock is giving back about 7% right now. it was downgraded over at morgan keegan. a couple quick others. cognizance down better than 1% on a downgrade. f-5, watch it as well, downgraded. sharon epperson is at the nymex. >> as equities are holding their own, scott, oil prices are coming off their lows of the session wlgt l. we're up more than $1 from the low of the session. keep in mind, as well, though, there are a number of factors trading are putting to it that occurred last week that indicated prices may be falling. one is the options activity we saw last week with growing open

interest for june puts at $50 and $60. that is an indication that perhaps we're going to see prices falling, more likely than prices rising in the next month. add to that the cftc data that showed that money managers increased, rather decreased their net loan positions by about 6% in the week ending last tuesday. so, that was setting up for oil prices to be lower even before the goldman sachs news. we're also keeping our eye on jet fuel demand, and of course, heating oil and gas oil as a proxy for that. but barclays says only expect about a million-barrel-per-day disruption to the jet fuel demand due to the airline disruptions that we're seeing in europe. mark, back to you. >> all right. thank you very much. shares of goldman sachs continue to get hit following the s.e.c. fraud allegations on friday. will the so-called wall street darling be able to repair its image? and if so, how long will it take to recover from this mess? well, let's ask josh rosner, managing director of graham

fisher and company. jesse eisinger is senior reporter at pro public ka. and former "wall street journal" edition of the portfolio. josh, i'll start with you. how is this going to play out for goldman? >> well, i have a feeling that we're going to end up seeing the continued, the company continue to claim that they did nothing particularly illegal, that yes, there may have been lapses, and i would guess this is going to end without an admission or denial of wrongdoing, civil fines, probably tourre ends up leaving and we go on from there. the question is is this the front end actions or an isolated case? and that will go to the question of was this s.e.c. political posturing in advance of reg reform or is this the beginning of a broader inquiry into issuer practices? and if it's the latter, then goldman's really one player in a

relative world and i think everyone's going to be equally harmed. >> the fabulous fab, tourre or however you pronounce his name, is he going to be the fall guy? is he going to be set up and labeled as a rogue by goldman sachs? >> i can't imagine they won't ultimately have to play it that way. if you remember, in 2003, goldman was accused of front-running the closing of the long bond? >> yep. >> and what ended up happening there was you had about a $90 million settle mend and you had the employee at the center of it going to jail. i'm not sure this ends up terrifically different. obviously, front-running versus material statements, but the substance ends up looking the same. >> interesting what he will be responsible for. he was a pretty junior player in all of this it was very clear. jesse, what's your point of view on the point you just made about how far this goes? is this really going to hone in on goldman or become broader some. >> i think this is going to be much bigger than this. i think that the cdo business of 2006 and 2007 is not dead yet,

and people are going to be re-examining it. my colleague, jake bernstein, and i investigated hedge fund magnitar that did deals with nine investment banks, cdos like this, $40 billion worth of deals, and they were similar to the goldman advocase deal. so, i think the s.e.c. is only at the beginning here and they're going to look at other banks and look at higher-ups at goldman, and i don't think this ends. and this shows, you know, the crisis is still with us. >> jesse, was it standard practice in, maybe not in every case, but in enough cases, for you to say that magnitar, which was like paulson, making pets against, that they often, and with deals with other banks, had a say in selecting the collateral to be included in the synthetic cdos? >> our story showed that in seven different cdos, magnitar asked for riskier collateral to be put into the cdos, they pressured cdo managers and

demanded it from investment banks. and in fact, magnatar says their situations were known to the dealers and cdo managers. so, this was common for the sponsors of cdos. >> right. so, if it's fraudulent, i mean, if it's a criminal act, then this is a crime that was happening across wall street -- >> although i'm not sure that the crime was deciding to construct a synthetic for the purpose of getting short exposure. >> well, that's what they are for. why else would you construct one, right? >> that's exactly right. so i don't think that's the problem anyone has. i think the problem is, did the dealers have an obligation to tell the other side? >> right. >> and frankly, even there, i think that raises question, and i'm not a lawyer, about the s.e.c.'s case, though. because as a buyer, if you were given the collateral information and you saw the weighted averages of the quality of the collateral, is that really the material information that you needed as a qualified institutional buyer to do your own due diligence? or did they have an obligation to tell you that someone was shorting the other side? and that's a big question. >> well, i want to back up just

a minute. >> sure. >> you do not believe this was set up as a vehicle that would fail? >> no, no, no it was definitely set up as a vehicle to fail. >> all right. >> so, the question is, did the buyer on the other side know not that it was set up to fail, but the collateral fallen? in other words, did they have enough information to do their due diligence? they're qualified institutional buyers. what level of disclosure did they need to get, the collateral information or did they actually have to specifically be told that they were someone who was short the exposures? >> okay, but -- well, that's another question. even if they weren't, didn't need to be told that someone was shorting it, didn't they need to be told that someone else was involved in putting this whole thing together? >> you would think so. >> that's -- i mean -- >> you would think so, although even there, as a qualified institutional buyer expected to do due diligence with an obligation to your investors, if you had all the information on the underlying exposures --

>> right. >> -- is that the information that you needed? >> jesse, was it also known, and maybe not in this case, but in general, should one assume, if one was going long one of these things, that whoever was going short was involved in the selection process in one way, shape or form? >> that's an interesting question, and the answer is actually no. >> okay. >> that the ikbs of the world, the german bank that insured the advicas deal, they actually were not thinking about the world as a long and short world. there's a cliche on wall street about a derivative that it's a zero sum game with a guy that's short and a guy that's long. in fact, what they were doing was really insuring something. so, i think what they were thinking was the guys on the other side like mortgages, but they want a little bit of insurance. it's just like fire insurance for your home. so, they wouldn't naturally assume that there's somebody shorting the other side, betting against them. it just isn't the case. >> so, a lot of people, even though synthetic cdo, we realize now, was set up for that purpose, there weren't any more

mortgages being issued at this time, so you find more and more ways of building a pyramid above, although not everyone understood the treasustructure t it was for. >> and those are the private actions that follow on from here, i think that's the bigger risk to goldman and to the rest of the dealer community are the private actions. and in fact, aig we know insured not this, but other abacus deals. >> right. >> and we know that we paid out, aig paid out goldman 100 cents on the dollar. do we end up seeing suit to recoup some of that because of, perhaps -- >> well, then you've got to go to all the banks, everybody that -- >> well, that's the -- >> you'd have to do a massive review of aig. >> well, that's possible, but also, the plaintiffs' lawyers are coming and knocking on the door of all the investment banks and this is going to be -- >> mark saw that coming friday. >> come on! you've got somebody with pockets as deep as goldman's, and you're handed a reason to sue them? >> that's right. >> get me in the courthouse! >> i mean, there already are numerous lawsuits about cdos,

and there are just going to be more and more. >> all right. gentlemen, thank you very much. >> great conversation, thanks. >> thanks a lot. >> josh, jesse, appreciate it. and that is today's street poll. after this happened, at least the filing of the suit. no matter whether you like it or don't like it, you think goldman's guilty or innocent, does it make you more or less in favor of financial regulation, yes or no? squawkonthestreet.cnbc.com is where you can vote. all right, we've got much more ahead, including whether goldman routinely bets against its clients and if they'll walk as a result. >> they were long this, actually, this abacus, which is interesting, and they did lose money on it. interesting little wrinkle to the story. and the other big story, mother nature's fury and the price the world's airlines are paying, bigger than 9/11 in terms of the economic effect. and later, a former goldman insider and ethics expert on whether wall street is morally bankrupt. and even if goldman didn't break the law, did they violate the business principles everyone

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all right. goldman sachs stock has just turned higher. you know, up just a tad and kind of oscillating around break-even, but nonetheless, it appears the drubbing the stock took on friday will not continue today.

so, a lot of questions yet to be answered, obviously. are there more cases coming wall street's way? is this really the only cockroach? does goldman routinely bet against clients or help bigger clients bet against smaller clients or, you know? who knows? there are lots of questions. scott cohen and michelle caruso-cabrera covering those angles for us. scotty, we'll start with you. >> never more than -- or less than one cockroach. there's always more than one cockroach. that's what i'm trying to say. more cases like this. stay tuned, we're told today, which is pretty much what s.e.c. enforcement chief robert khuzami said after unveiling the charges on friday. >> we have a structured product and a new product enforcement unit in the s.e.c. that's looking at these as well as other products, transactions and practices across the markets arising out of the financial crisis, and we will look at deals with similar profiles or any deal where disclosures were

not properly made. >> and that part, disclosure, is key at the s.e.c., we are told. strip away out the futuror over the goldman deal, the point that goldman says they lost money in the deal, the point that investors were sophisticated and should have known, strip it away and that's a case about disclosure and that, we are told, is central to what the s.e.c. is looking for at all these deals at all these banks, which has many legal experts saying there are more cases where this one came from. >> i will bet you right now we will see at least 6 to 12 similar actions against other wall street brokerage firms, including possibly goldman sachs again related to the abuses in the structured finance area, which was a huge, huge cesspool of abuses for the last five or ten years. >> of course, goldman sachs has said in no uncertain terms that there was full and complete disclosure in this abacus deal and that is what the court case will ultimately hinge on. but the fact that the s.e.c. has set up that special unit just to look at those specialized

structured products, it is a fair bet that wall street should be on notice, goldman sachs should, too. so, what about the firm that america increasingly loves to hate? michelle has that part of the story. >> thank you very much, scott. if you are a goldman client and you've read the s.e.c. complaint that charges them with fraud, you may be asking yourself how do i know when they come to me with a deal that my interests are their priority or do i have to worry that they're using me to help a bigger customer make money? as christian whalen said "this litigation exposes the cynical, savan culture of wall street that allows a dealer to commit fraud on one customer to benefit another. this is alleged fraud." as this news has rolled out, market participants have started to look to or point to other instances where perhaps the details of deals indicate goldman was structuring things to fail or created incentives against the interests of the clients they were serving. in the case of cit, the finance

firm that went bankrupt in late 2009. in june of the previous year, goldman sachs launched a $3 billion rescue package for cit structured as a 20-year swap. here's what's crucial. according to an s.e.c. filing, cit declared bankruptcy. they would be subject to what's called a make whole amount that would be equal to all the future fees goldman thought they were going to get discounted present value, a total of $1 billion, according to later press reports. those familiar with the deal say it was structured such that goldman sachs was much better off if cit went bankrupt. goldman has always defended that deal, saying they gave the company workable financing when no one else would. the broader issue, of course, that goldman sachs faces, is that every time they have to defend themselves against a new allegation, whether it's this charge by the s.e.c., whether it's the situation with cit, aig, they are having to face down the notion that perhaps they have a corporate culture that puts clients second. guys, know they're keenly aware to this, because their letter to shareholders this year referred to clients 56 times and lloyd

blankfein has told his employees that they should be reaching out to clients today to talk to them about these issues. >> all right, michelle. thank you very much. and our case against goldman sachs coverage continues at 10:32, because we like to be specific when we can. >> yes. >> luckily, we're not penalized when we miss those numbers. protecting your investments from another goldman-type bombshell. at 10:50, a former goldman insider on whether wall street is in need of an extreme ethical makeover. and we're going to pull out the goldman sachs business principles. at the top of the hour, the fallout in financials. we'll be right back. also just ahead, the ipo pipeline stuffed. over 100 new issues expected to hit the market this year. we'll show you how to separate the weak from the strong. and are you more or less in favor of financial regulation post goldman sachs? the s.e.c. charges against goldman sachs, that is. please vote. squawkonthestreet.cnbc.com.

bob pisani on the floor of the new york stock exchange. welcome back to "squawk on the street." there's over 100 ipos in the pipeline this year. the big issue? we've got a robust first quarter of offerings. what does that mean down the road, good news, bad news here? is it going to spike in volatility that we're going to see on friday, did that dampen the recent enthusiasm? we have a transaction services partner at pricewaterhousecooper with us. so, we called the ipo resurgence before. it happened a few months ago. looked like we were going to get a pop up. then all of a sudden, boom, it sort of fell off a cliff again. what's pushing the resurgence here? >> well, i'm not sure we've seen it fall off a cliff, bob. in fact, we've seen 31

successful ipos to date. but more importantly, we've seen over 60 registration statements for new ipos in the pipeline to date, right? and that compares to the prior year similar period where only two deals got done. and if you put that together with the fourth quarter, we've got over 100 ipos in the pipe looking to come into the market period. >> although the same period for 2009 was a disastrous quarter for ipos. what sectors or particular ipo styles are coming out here that stick out to you? >> yeah, we're still seeing a lot of small and mid cap companies, right? and in particular, technologies. technology broadly, including biotech. >> how about energy stocks? i notice we've seen a lot of merger deals recently, and i know a lot of companies are still out there. >> yeah, overall a nice diversification. if we look at the deals that have gotten done to date, we see a nice diversification across many industry sectors, bob. >> are most of these companies u.s.-based or are we getting international companies? the list of chinese ipos is in the hundreds now.

some of them are definitely interested in coming here. >> to date, mostly domestic companies, u.s. companies, but there is a nice sprinkling of foreign private issuers. >> how would we play this? how would a normal investor get in on this? there are a couple ipo funds that are out there, but they're not widely invested. >> right. a great question and you mentioned volatility early on, right? you know, we have pricewaterhousecooper, as we see this really as a journey, right? and post-ipo success is really all about pre-ipo preparation and planning. >> and pricing, of course. >> right. >> how do you get the prices right here? we notice most of the ipos that do well leave a little money on the table, they pop up the first part of the day, first day of trading. do you think people understand that who are investing right now and need to bring these ipos out? >> obviously an important conce concept. that's not in our area of focus. however, what we can tell you is that those that prepare better, those that are more diligent about the process, they seem to be a lot more successful with pricing. you know, that advanced prep is

what we at pricewaterhousecooper focus on. >> scott gehsmann, pleasure to have you. >> thank you, bob. and next -- don't know what i swallowed -- protecting your investments from a goldman sachs-type bombshell. i wasn't eating haines' donuts, because haines ate them all already. and volcanic chaos taking a swipe at the airlines' bottom line. we have new numbers to share with you. and as we go to our commercials, some fresh one-year highs. hasbro continuing on that upward trend. hasbro and mattel have been on a roll lately. microsoft, southwest -- why southwest, you say? well, they only fly in the united states. we'll be back. alaska, the fishermen bring in the catch. and cargill brings in the sea salt to help them preserve it, shipped in an efficient supply chain to save the fishermen money and their catch. this is how cargill works with customers. and you have a heart attack. that's what happened to me. i'm on an aspirin regimen now. my doctor told me

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welcome back. you know, something we had not mentioned, 9:40 a.m. press release from goldman sachs in which they make it clear yet again that they are coming out fighting and going to fight quite publicly to try to maintain or restore or fight to keep their good reputation, if you will, given the charges from the s.e.c. on friday. why do i say? tha? well, goldman sachs' conference call to talk about its earnings tomorrow will now also include the company's general counsel or co-general counsel, greg palm. again, the company saying that mr. palm, co-general counsel, will address the recent s.e.c. complaint against goldman sachs.

he will be joined by david vinier, of course, goldman sachs' chief financial officer who typically runs the earnings conference call. this will be at 8:00. something else worth noting as well, members of the public are invited to listen to the conference call, given the number to do so. and they have scheduled it for 8:00 a.m. typically, of course, vinier has a conference call, not the entire public is always invited, although basically, you can. if you want to get on, you can get on. but goldman sachs coming out and saying they will now hold the call at 8:00 a.m. the call will be open to the public at large. in fact, they're almost inviting the public to join the call. and it will include the company's co-general counsel. interesting to note, goldman's shares did come back a bit, i think, once this release was put out there. the company fighting hard. and apparently caught unawares by the s.e.c.'s decision to file

the complaint when it did. you know, there had been wells notices, of course, given, and goldman had responded to those notices in full, and yet did not know that the s.e.c. was coming when it did. of course, the timing of the s.e.c.'s announcement on a friday kind of strange given they don't normally bring cases on a friday, same day that there was that relatively negative review of the s.e.c.'s work when it came to things such as scott cohn has detailed it did on friday, the allen stanford case. so, again, goldman, 8:00 a.m. tomorrow. of course, earnings are going to be announced at 7:00 a.m. david vinier, cfo, will be on the call, joined by the company's general counsel to discuss the s.e.c. charges. all right, overseas, goldman sachs in the global firing line as well. some european countries are considering investigations of their own against the most profitable firm in wall street

history. cnbc's steve sedgwick in london with that story. steve? >> reporter: yeah, thanks very much. look, goldman sachs isn't the most popular bank in the city of london, behind me. at the moment, you'll recall there's a lot of controversy about their role in the greek swap deal back in 2002 that allowed the greeks to hide the true deficit. banker bonus bashing is popular in the british establishment as well and we have a election and gordon brown is straight away against goldman sachs, talking about how morally bankrupt they are, how it needs a special investigation where he's already jumped board, but most of us believe you're innocent until proven guilty. as such, the fsa, the equivalent to the s.e.c. here in london and the equivalent over in germany, they are holding council at the moment, just waiting to see how this s.e.c. investigation does pan out, because of course, two of their alleged victims of this fraud are the royal bank of scotland, rbs, which is now majority owned by the uk

government since it collapsed amid the crisis in 2008, and ikb, again, which was bailed out in germany. they have respectively losses from this cdo of $841 million u.s. for rbs and $150 million u.s. for ikb. at the moment, the fsa are saying they're working with the s.e.c., they're looking at what the s.e.c. unravels, and indeed, so are rbs, which of course could have its own civil case against goldman sachs if these allegations are proved correct. we'll pass it back to erin now. >> thanks so much to you, steve. we appreciate it. we want to bring in two old wall street hands to talk about goldman sachs and what it means for the overall market. vince farrell and michael farr. obviously, this is the fabled farr-farrell combination. michael farr, goldman sachs news broke on friday and you sold the stock on it. are you rebuying did now today because you thought it was

oversold or is this a bigger picture call? >> erin, good morning. it wasn't unusual that we sold it because it violated one of our for-sell disciplines and the fourth one is disingenuous management, even the appearance of disingenuous management sends us and our money to the sidelines until the cloud clears. this cloud hasn't cleared and i think there still may be more down side for goldman sachs. if not, if it doesn't prove to be true, i'll come back with money later, but for the time being, i think prudence demands, as we are stewards of other people's money, that we get over to the sidelines quickly. >> vince? >> same thing. i work with a hedge fund. we sold it immediately upon the news hitting, and your first sale in circumstances like this is usually your best sale. i think this thing is going to spread. i can't imagine andrew cuomo not getting involved in it with an election coming up in november. maybe the u.s. trust department gets referred to it. i think other banks are going to be investigated. they put together a special unit at the s.e.c., so i see a bunch of young guys running around looking to make their mark. >> can i make a quick aside

before mark jumps in? and that is, andrew cuomo has been incredibly silent. we've been calling him and there's been no statement, nothing. i don't know what to read into that, but he has not been responsive yet. >> my guess -- >> i would guess an announcement's coming, then. >> maybe. i don't know. he has not been on our air, by the way, in a long time, mark to begin with. some thought maybe that because of his broader political agen aspirations, but a lot of people want to hear from him. >> i have no inside knowledge, but my guess would be he has asked to see the evidence. >> maybe so. maybe that's what it is. >> and his staff will go over the evidence, because it's not enough just to look at the complaint. he's got to look at the evidence. >> right. >> and remember -- >> e-mails -- >> and remember, too, just to take a quick leap of aside. to prevail in a civil action, the s.e.c. needs to prove goldman's guilt with a preponderance of the evidence. to prevail in a criminal action, the evidence must leave no reasonable doubt. it's a much harder case.

>> standard. >> a criminal case. so, there are different considerations. >> and the main issue, mark, is failure to disclose, right? failure to disclose. >> the issue is failure to disclose. what about, vince, i'll start with you -- what about this argument that they were being sold to sophisticated investors who had the opportunity to do the due diligence and, therefore, the disclosure's not that important? >> well, all true, but the law says you have to disclose all pertinent facts. now, people that bought this stuff should have known better. many of us didn't, but nevertheless, sophisticated investors are at their own risk and their own reward. so, that's why the charge, i think, is so technical. whether i'm sophisticated or not, if you did not include everything in the disclosure, you broke the law. >> well, and the other thing here is that this definition of sort of insider trading or non-public information is somewhat nebulous, but they always go to the point of did you have material, non-public

information that a prudent man equipped with that same information might have changed an investment decision? i think that is pertinent and applies here. >> ooh, i like that point. very good point. farr and farrell, thank you very much, gentlemen. >> thanks, guys. >> thank you, guys. all right, coming up, mother nature. got something? >> i'm just reading through the goldman sachs business principles. >> okay. coming up, bringing the airline industry to its knees. the volcano is. now we're getting numbers on how bad a hit the group is going to take. >> greed, for lack of a better word, is good. greed is right. greed works. >> is wall street morally bankrupt? a former goldman sachs insider isn't holding back. he's with us. he's why i've pulled up these principles, which by the way, mark when i was a lowly analyst there, in the front of every calendar they gave out to everybody, front page, goldman sachs business principles. it was not taken lightly.

they were in absolutely everything. so, we're going to talk about whether there was a violation of that, which is perhaps part of the reason the firm has traded at a premium to its rivals. and as we go to break, a check of ibm ahead of its earnings. they will be reporting after the close.

snrwlt, we've got. we've got senator dodd speaking on financial reform. >> the retirement accounts that people spent years building have wr wiped out in some cases as a matter of minutes in response to the economic collapse and fall of 2008, and we have seen the devastation all across our country. we came to the brink of a major meltdown of all financial institutions, approximating the great depression of the 1920s. we've avoided that, but obviously, a lot needs to be done to see to it that we never end up again in a situation where the gaps exist in our

financial structures, in the architecture of our financial institutions, that we never again find future generations without the tools to combat the next economic crisis, as surely there will be one. but to be able to respond to it in a way that doesn't allow it to grow to the level of resolve over the last couple of years. and lastly, of course, we want to make sure that simultaneo simultaneously, we're providing the kind of innovation and creativity that allows our financial services sector to provide the jobs, have credit flow, capital perform so that our economy can grow and produce the kind of opportunities that america has historically provided. those three goals are what we tried to achieve through this legislation. we didn't take the action lightly at all, obviously, to move forward. we're committed to making sure that bad decisions on wall street never again lead to the kind of disastrous economic results that occurred on main street, and we're committed to making sure that taxpayers never, ever again are put on the hook for massive bailouts such

as the bush administration paid out in the fall of 2008 in the early months, early weeks of 2009. wall street and our republican friends are entitled, of course, to their own opinions. that's something you have in great abundance over here, but no one's entitled to their own set of facts, and here are the facts when it comes to what our bill does. i'll touch on them briefly and turn to senator warner to speak specifically about the first one i'm going to mention. our bill ends too big to fail. bailouts end forever. management is fired, shareholders lose, creditors lose. there is a liquidation of assets that occur. there's just no room, whatsoever, for senator warner, senator corker and others worked literally for weeks in developing the legislation in title 1 and title 2 of our bill. secondly, our bill institutes strong, new protections for consumers. never before have consumers received the kind of attention within the financial services area that they deserve. our bill provides that

independent consumer protection division bureau to allow for independent rule-making in examination and enforcement of those rules. so, the consumers are not left behind in the process. and thirdly, our bill holds wall street accountable and mandates real transparency so that large banks can't gamble our money in the shadows of the financial system. that's what we do with our bill. those are the major, major points of our legislation. now, wall street and our republican friends apparently want to leave in place the status quo. the status quo leaves us vulnerable. should another economic crisis occur without any changes in the law whatsoever, that once again, too big to fail will be -- >> once again, you're listening to christopher dodd, senate banking committee, talking about the financial regulation reform bill, and the president will be visiting wall street later this week to make a final pitch for it. if you would like to watch the remainder of that press conference, go to cnbc.com. and a new development in the volcanic ash crisis. we're just learning that air space in scotland and northern ireland will open tomorrow. officials say restrictions over

the rest of england and wales may be lift aid tuesday. the airline industry, though, has taken a big hit. helane backer. a couple key questions here. first of all, what is the key cost? the financial commissioner for the eu today said this is bigger than 9/11 for the global aviation industry. british air losing $30 million a day. can you aggregate it? >> well, we're estimating that at this point in time, it's for the world's airlines something on the order of $200 million a day. we're in the fifth day. it's well over the billion dollars, quite frankly, because you've just been talking about, today we've just been talking about passenger airlines, but there's the whole freight segment to consider, world trade in a lot of markets has come close to a stop. and that's probably another $500 million in the aggregate. so, we're looking at well over $1.5 billion so far in the last five days. >> helane, what happens? i mean, i know a lot of people are thinking about this, they all want to fly again and maybe

it is safe, but then we see reports that some f-16s flew up to test it, landed safely, but they do have engine damage that will require quite a bit of work. all it takes is one horrible thing to happen here for this whole little experiment of opening up air space to be a tragic disaster. >> well, that's right. i mean, safety first. everybody understands that. but on the other hand, you know, there have been reports -- i saw over the weekend -- that said this could continue for up to a year, this eruption. so, you know, at some point, the industry and safety officials have to evaluate what's going on, you know, how do we open it up? how do we safely open up the air around northern europe? you know, do we fly into southern europe and then train or rent cars or however it works? but at some point, we do have to address the whole issue of safety. >> well, but the safety is not a question of the duration. if it goes on for a year or two, it goes on for a year or two and you have an unsafe condition for a year or two. >> well, i don't think it's so

much that as it is the engine damage, the maintenance. you just wind up having lots more maintenance events than you would otherwise, you know, have. but i mean, the reality is, the industry has to get back. europe has to figure out how do we get this industry back in the air? because at this point in time, you've got airlines talking about laying off a number of their employees, you know, they're talking about 2,500 people, laying them off as of today because they're not back in the air. you've got, you know, potential for bankruptcy. british air, you're talking $30 million a day. that's on top of the losses they reported in march because of the strike. >> i guess what i'm saying or asking is, if this eruption were to continue with this volume of ash for a prolonged period of time, months, you know, that's life. i mean, you know, you want to get the airlines back in the air. if the air isn't safe, the air isn't safe. there's nothing you can do about that. >> well, no, that's right, but i

mean, there are points in time where perhaps the ash is less aggressive or, you know, the clouds dissipate. i mean, i think there is an issue of wind as well, right? the wind has to come down. >> whichever way. all right, i'm afraid we have to leave it there. i ain't going up there until they tell me there is no ash left. >> well, here is -- i just was top lining, which is our instant message with jason gore, our producer. i was requesting a street poll tomorrow, because a lot of our viewers travel these routes. if the planes all go back in the air tomorrow, would you get on one? >> because, as you said, all it takes is one. anyway. greed or hard work and intelligence? >> what's really driving wall street? is an extreme ethical makeover what's needed? two experts, including a former goldman insider, coming up next.

we're back. goldman sachs' reputation dealt a bit of a blow when the sec charged them with fraud. the impact will be felt far beyond just one firm. many people on main street already skeptical if not cynical of wall street's business practices. now they have reason to be even more suspicious of how these big banks operate. what's the state of ethics on wall street? is that a contradiction in terms? will goldman be able to repair its -- you know, like jumbo shrimp. paul argenti. professor at dartmouth. edward freeman. i guess as professor and -- is there such a thing as wall

street ethics? we know they write it down. we also know they frequently don't practice it. >> no. absolutely. i think they have the strongest set of values of any firm on wall street. what most people want to see now is those values put into play. they say their people, their -- >> capital and reputation. r here. >> thank you. are the most important assets. if they're ever diminished the last one is the hardest to restore, reputation. i think what everyone wants to see now is whether goldman sachs can dig deep and rebuild its reputation. this is not about a legal battle which is the way they seem to be framing it or even about a public relations battle. it's about a battle for the values. they've become sort of the center of populous rage in america against wall street. >> mr. freeman? >> yes. >> what do you think? >> i think paul is right. goldman was known for a long time as having the strongest values on wall street.

and i think one of the things we have is a real crisis in trust in business. business has acted as if it's not a part of society. it's acted as if it's its own institution, disconnected from main street. and it's all in the joke, as you said. tell somebody you teach business ethics, and they start to laugh. and that's the problem. until we can fix that, until we can see business as imbedded in society, as not only searching for profits, but searching for integrity and ethics and responsibility at the same time, we're going to have another crisis like this one. >> paul, the first business principle at goldman -- by the way, you worked there. i worked there as a very, very junior person at the beginning of my career. we know that was plastered everywhere. i was telling mark, it is a big part of the training i haven't experienced at any other company i've worked at. the first one is this --

>> except, of course, here at cnbc. >> except, of course, general electric. >> >> where we have a high standard of ethics as well. >> our clients' interests always come first. if you're going to -- our clients' interests always come first. the heart of this situation seems to be that you can never keep that promise. because you always are going to be keeping one client's interests over another, right? >> i think that's the question here. whose clients' interests came first. my guess is that when this thing comes out in a court of law, probably goldman sachs will be exonerated in some way. it's not abilityout a legal bat anymore in my view. it's about perceptions people hold in the firm. they need to dig deep and show us what they got. >> i think that's an interesting point. the legal battle is over the disclosure. i'm sure goldman -- i'm almost certain goldman will argue, we gave as much disclosure as was necessary. but both of you are saying there's a bigger -- even if it's not the legal issue, there's a

bigger issue. we've got to go. i wish we could keep going on this. >> we're going to have to have you both back. be right back with the street call.

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all righty. here we go. >> okay. 68% of you are more in favor of financial regulation now than you were before the goldman sachs headlines on friday. that says a whole lot. >> hardly a surprise. boy, do we have to go. we're real late. see you tomorrow. good morning, everyone. welcome to "the call." i am trish regan. we are 90 minutes into a new trading session of a new week here. we've got stocks recovering a bit here, getting a boost from citi's news on earnings. but the goldman sachs issue still overhanging this market right now. we're going to discuss whether or not the deck is actually stacked against the small investor. if so, what do you do about it? good morning, larry. >> good morning, trish. are we witnessing a more aggressive sec? are more charges against wall street firms to come? what does that mean for the markets going forward? >> hey, larry. i'm melissa francis. as airlines lose about $200 million a day from the fallout

from the iceland volcano, we're going to take a look at airline stocks. have you noticed oil's down sharply today? this is "the call" on cnbc. financials taking front and center this morning. citigroup continuing its remarkable comeback, easily beating wall street's earning forecast. everyone is still talking about the sec fraud charges against goldman sachs. also adding to positive sentiment, the index of leading indicators rising for the 12th straight month. right now take a look at how the s&p 500 is trading. essentially flat on the session. exactly flat. take a look at the dow as well. up almost 10 points. 9 1/2, 10% above 11,000. the nasdaq. oil as well? why not. oil down sharply today. about 2.5%. still above 80 bucks. 81.18 the last trade there. a lot of that on