good morning. the case against goldman sachs, as financial executives preparing for a capitol hill grilling today. financial regulatory reform. senate democrats fail to win support in a key vote. and tech toughness, texas instruments seeing the street, offering a bullish outlook 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. goldman sachs executives are headed to dlil today where they'll be facing a senate

panel. congressional investigators led to the wall street developed strategy to try and profit from the housing meltdown, misleading investors in complex mortgage securities that became toxic. now, according to his prepared testimony, blank fine will argue that goldman did not bet against its clients and can't survive without their trust. senator carl levin and blasting goldman for misleading clieptsd and the government. >> its own documents show that it engaged in what one top executive described as, quote, the big short. the evidence shows that goldman repeatedly put its own interest in profits ahead of the interest of its clients. >> we will talk to former s.e.c. attorney jacob frankle. we'll dig deeper into the case of goldman and what you can expect to hear today.

>> at last check, going short wasn't a crime. >> but saying that, you're saying no trading because there's no different between gold long and long going short. now, if that's something that you want to do, if you want to keep them from trading, then that's what you're saying. because to just focus on the short side is -- >> it makes no sense. >> but none of this is new. but the way you say it now, i know there's people out there who says -- >> and there are people that don't understand how wall street works. >> exactly. and this is hindsight. it's the benefit of hindsight that we knew that everything collapsed. it was smart to get in there and hedge at the time. why is this doing this? where is mac? >> is your chair bothering you? >> yeah, it is. it is. i think i have a different chair. >> i have to tell you real quickly about the funds. $1.24, which is well above 1.06,

which is what the street was expecting. also raising its guidance fort full year. the previous gietance was 2.15 to 2.45. >> and revenue was above, 8.48 versus estimates of 8.05. >> and they talk about the deposit chairman and ceo ellen coleman says our intense focus on customer sustained rnd investments and productivity investments and improvements are delivering growth. productivity improvements gets you back to the idea that you're getting growth -- you're not necessarily getting the growth, you're getting more cost savings on some of these things. so maybe a little continued productivity gains and some improvement in the overall global picture . >> i heard pasani yesterday saying that rail shipments had shown a big increase in chemical

freight. >> really? >> and therefore looking at that in dupont. and i had, right. >> he had wicked smart. >> absolutely smart. >> meantime, the financial regulatory senate bill failing yesterday, 57 senators voted in favor of starting formal debate. that was below the 60 debates that they needed. one democrat, senator ben nelson, in a statement his vote raised concerns about that representing businessmen. senator chris dodd and richard shelby are expected to continue to talk today on the bill.

>> he always seems to be a man that voted his conscious. >> as he did earlier in the health care conference. >> yeah. the nebraska kickback. he's the trouble. i don't know. this whoelg thing right now, we'll see. i have the feeling, and i could be wrong, but the way that health care was handled, that emboldened democrats. we'll see whether republicans decide, look, we leld the line here and we're going to want some things different in this bill. >> it's tricky. >> i read on the huffington post, this increases the chances for a stricter financial regulatory bill. i don't know how -- >> i don't know how they -- >> and they have a picture of every republican that voted against it. they've got all of them, in case you see them at the mall, you can throw a tomato at them.

i understand we're all fresh off the financial crisis, but i have a feeling if you let go overboard on something, they're going to screw it up. and if i get the first blue commission meeting today -- >> but you're not saying this will get drald out that long, do you think? >> i don't know. i don't know. how do you know it's going to compromise at all? if both sides become entractble. i didn't think of that. for some reason i was thinking they would stro take it back to the table. >> i heard harwood and liesman saying that they've got them right where they want them and maybe they'll even take another day and let them stew. no fannie and freddie clus included in the whole reform

bill. it's almost like congress is like, fannie who? i'm not familiar with who fannie or freddie is. >> you know, a lot of these same politicians were blocking any type of control on fannie and freddie at the same time. we'll see what happens. you may be right, the pause that refreshes so we get an even tougher bill or you may -- you know, the republicans may realize there's only 59 of you and we got one of you. you didn't get one of us. >> and then one, including nelson. >> who didn't vote? who are the two that were out? >> who are the two that were out? >> yeah. it was only 57 to 41 vote. >> i don't know. >> i don't know who didn't vote. >> you better put that picture up there, too. an arm in today's "new york times" outlines concern among other sectors, more than 130

retail manufacturing and service companies have retained lobbyists on the issue. mars wants to be able to play derivatives. oh, okay, for sugar and chocolate. the company, mars. because that threw me for a complete loop, why they would be interested, right, in our affairs here? i know there's water. i didn't know they found a civilization up there, as well. i knew that there was -- tlooef they've got global warming problems up there, too. also, harley davidson is worried about dealer finance loans and ebay is concerned about its pay pal unit. what are you doing, are you reading? >> yeah. >> are you ready to go? >> no. i'm reading what you were talking about. >> we keep painting this as a

aren budget bank and a number of derivatives. texas instruments posting first than expected first quarter results after the closing bell. t.i. says chip demand is strong with growth seen in every region. the ceo rick stempleton on cnbc yesterday. >> we're seeing this recovery or strength in growth out of a lot major regions where asia is the strongest, u.s. is probably second followed by europe and then japan, yet all of them have rebounded strongly through 2009. so we think that's a great indicator of where things are. >> t.i. sharts hit a 21-month high during the regular session. the bid/ask this morning, 26.76 to 27.3 1. >> the dow was up yesterday, but not by a lot. >> 0.75%.

>> it's still not down. dow jones futures are a little weaker as we continue to weigh some things about the hearing. oil has been an interesting one to watch, hovering in the mid 80s this morning at 83.32. we got a two-year auction, $44 billion. we'll see how that goes as we work our wie through some of these auctions this week. the euro is down a little bit as though in europe are seeking answers regarding greece. and then gold has been performing a little better lately, up above that 1150 mark to 1152.30, down $1.70 today. >> let's get to our task force with the latest economic analysis. senior vp and senior portfolio manager joseph balistrino, also chief economist maury harris.

joseph, if we want to figure out what is happening out on wall street, despite financial regulatory reform, is that about earnings at this point? >> the earnings picture is pretty good. the economy looking pretty good. i'll go that far. however, the biggest problem is the consumer is not there yet, but the jobs market, as the fed keeps telling us, the housing market, so what we worry about a year and a half ago, we're still worrying about today. but the rest of it looks pretty good. >> you know, the unemployment picture is not expected to get too much better before the end of the year. so that's sort of a long-term problem that you're facing. >> it is, it is your classic lagging indicator. as soon as things start to pick up, in essence, people start to come back and look for work. therein lies the fact that unemployment stays high because the pull grows bigger and bigger. but nonetheless, everything else

comes along. rail carloadings are up 20% year over year. >> so that's a very good precursor? >> very good. >> maury, i don't know how much attention you pay to those rail loads or what you're seeing here, but you're saying the economy looks like it has strength at this point? >> yeah. what's happening is that you have a recovery that is spreading, that it started in manufacturing, but it's spreading to nonmanufacturing. the consumer is pitching in a lot more. consumer spending growth picked up in the first quarter. i think we've got a pretty promising future ahead. >> maury, we have a two-day fed meeting that kicks off today. do you expect to see any changes? >> i think the fed will upgrade their assessment of the economy, which is a prerequisite for finally increasing the target

fed funds rate range, which is just zero to 25 basis pints right now. i don't think they're going to give us a heads up quite yet on when they're going to tighten the funds rate. i happen to think that over the summer, we will get that message, that in september they will start to raise the funds rate and this gets back to a recovering economy. >> okay. and if we do hear that today, joseph, is it the idea that the federations its assessment of where the economy stands, how do you think the market reacts to that? >> i think the fed goes there. the market anticipates that. but the fed has been very clear. they've set out conditions for the extended language. and the condition is resource has to fill up and it has not. the capacity utilization side, what's keeping them at bay is inflation. the inflation expectations remain low and until you see some giveback on all of those, they don't need to tighten, anyway. >> the rhetoric that is coming out of washington has gotten increasingly, i guess, aggressive in its stance towards

wall street. today, we're going to be watching some of these hearings where senator levin has made some very strong comments about what goldman is doing. i guess in some ways, it raises questions about wall street's entire existence. i mean, is this something that wall street can continue to with stand this onslaught? >> i think it survived its existence here a year and a half ago. this is a black eye. it seems like an easy lay yaup for congress at large and that the populous is behind this one as opposed to health care. here you have a couple of major forces. the democrats, not to turn it political, but they have their way with this one. >> goldman sakes says, look, our confidence that our customers has is a key part. we can't survive without pipt. >> i would not dispute that and even more so today than a couple years ago because the competition has been wiped out. >> you mean that's bad news for goldman? >> i think it's temporarily a

headline grabber. and more than that, i'm sure he lost a lot of sleep in the last few weeks. >> maury, we're going to get the first quarter gdp number on friday and that's the number people have been looking forward to. what are you expecting? i think you're going to be just over 3%. what's important is don't get too hung up on the total gdp because what the fed is focused on is the gdp exploding government spending and excludeing inventory swings. this is called private/final demand. that had only picked up slowly. it was 1.2% in the third quarter, 2.4% in the fourth quarter. i think it's going to pick up to just over 3% in the fourth quarter. that's one of the variables that the fed has its eyes on. and it's telling you, the economy is picking up and you're moving to a sustainable recovery. >> maury, thank you very much for joining us and thanks for joining us on set today. it's good to see both of you.

>> glad to be here. dupont reported its results a few moments ago. were these numbers above your estimates, frank? >> yes, they were, joe. we saw a nice start to the earnings season with ppg reporting a nice up side. but their volumes were only up 12%. dupont came out and posted numbers up 19% year over year. so a nice, solid b. foreign exchange helped a bit, but even backing some of that out, it was a very nice surprise. >> what were revenues if you back up foreign exchange? >> well, the -- looking at it on an eps basis, make it a buck 14, it's still nicely above the buck six. butover all, on the sales side, up 23% year over year, as i had, with 19% volume, you can definitely see the signs of recovery in dupont's first quarter results.

like so many companies, caterpillar said a lot of it is due to asia. is that the case here or -- >> i would say, joe, it was a nice broad based recovery. but you've got to say that their asian business was phenomenal. asia was up 71% year over year. i think 60 plus percent of that was on the volume side. asia was 19% of sales in the first quarter. but the businesses and electronics being a key contributor -- in fact, electronics was the number one business showing improvement year over year. >> so the feedstock is still over. as well as international gas. overall, i think materials are

relatively down 2% year over year for them. maybe not a modest driver of results. i wouldn't attribute most of it to the raw materials situation. they have a big automotive business and that was totally in the doldrums a year ago. that's shown us a nice recovery. here is an interesting product that dupont makes. they make titanium oxide which is a preoccurs to economic activity. that business is up 33%. that business is starting to perform nicely for them again, suggesting that 24 economic recovery, at least as viewed through the prism of dupont, has some legs. >> right. so the best is yet to come domestically and in europe so the best is yet to come at this point? >> i would say we haven't seen sigh signs that europe is going to emerge. but one would think if other parts of the economy are doing well -- and i would think dupont

is seeing some of that. they raised their giet kwans by 30 pennies to mid point. >> so what is the stock worth. >> they think it's up over 10% versus the s&p 500 year-to-date. so you've had nice momentum here. you've probably had a bit more to come, so yeah, trading into the mid 40s is not unrealistic for dupont. how much more is left is probably for the momentum guys and the deep value guys looking at it now. >> thanks, frank. >> thank you. >> see you later. >> you're sniffing. becky is about to make some tea. when we come back, the e-mails, the executive stories, capitol hill grilling today. first, as we take a break, a

loot at yesterday's winners & losers. over 20 million customers have put their faith in sun life financial. we should be a household name. and we will be. so you're suggesting that we change our name from florida, the sunshine state, to...? florida -- the sun life state. the posters will be so cool. sooner or later, you'll know our name. sun life financial.

goldman sachs is the center of attention this morning when the senate committee begins its hearing. but will the star of the hearing testify or plead the fifth? jacob, good morning to you. >> good morning, carl. >> i'm wondering whether turet is going to be the headliner or blankfein. >> well, i think we're all headliners. what we have today is washington theater. but as far as turet testifying before congress, i seriously doubt it. but the s.e.c. pending with other civil litigation out there, it is not possible for anyone from goldman sachs to talk substantively about the actual allegations that have been made against goalman sacks. we may hear testimony about some of the more global issues, ethics, policy, but as far as

the allegationses of the case, i seriously doubt it. >> is a lot of the questioning from the committee going to center around whether or not they were short the mblth? and how do they address the fact that that is not against the law? >> well, i think exactly as you and joe were discussing it at the beginning of this hour, which is what we're really doing right now is looking everything from hindsight, also that's shorting the market is a legitimate force within a free market system. and what we're talking about is what was going on at the most significant markets. and i think the biggest problem is, that's easy for those in the industry to you understand and we were talking about is goldman going to have a bruise here, but is everything going to be fine going forward? at the end of the day, goldman's clients are going to remain

loyal towards goldman. at the end of the day, you'll have goldman people sitting there, taking questions from congress, refusing to answer a good number of questions, i would expect, and moving on. >> jacob, i'm just -- what we or the market could use at this point is an impassioned defense of some of the stuff by a true orator that can clearly explain, even to a levin and a skeptical public works. is lloyd blankfein that guy? >> joe, i think the issue is he's there for a public flogging. >> why? that doesn't help goldman or the defense. what a treat street firm or

savvy fund is supposed to do, and i could do there and says, thank you, sir, may identify another and we have go the cut our bonuses, i remember someone saying, we're trying to do better next time. that doesn't help. >> joe, you're absolute lit right. but the question is, what does the audience want to see and hear? and more importantly, and when we talk about the permanent subcommittee on investigation, it's one of the most sophisticated southbound mt.s to lap on capitol hill. you a v you but it's are the not all about what happens, it's more about what does merge see and what does capitol hill wish to present here. you're absolute lit right, for the right audience, whether it's mr. blankif he in or someone else, there are plenty of impassioned defenses that are available to be made to basically talk about how the

market forces worked, what happened and what needs to be done to change it. i just don't think today's theater is where they're goes to occur. jacob, as someone who has gone through evidence before to build cases pb did that bring us too tores, is there anything in those e-mails where he gets to his moral conflict? >> carl, again, you hit the issue, which is there are moral c conflicts. there is poorly chosen language in communications which often really does affect the entire public relations section. but the xlaint itself is weak. once you start arguing points, there is a defensible case. the problem is, that defense can

only court in a court of law. but today is not a whoa -- >> and now we're not talking about that case any nor. levin is pointing a finger saying, you shoot is market. >> yp. and to that point specifically, it goes to a fed ask you concept that need to understand if the mblth is going you, that's okay. in terms of shorting the market, a lot of people have a difficult time understanding -- well, then they should go back and read a book or a newspaper or go back to school, it's not uncommon for people to go to the lowest common denominator -- >> more important bly, senators should not be playing up to

that. fraud is one thing. shorting the market is another. by confusing the issues, it plays into the markets. >> exactly. and i think the issue of the fraud, which is what has brought goldman front and center, that allegation at this point, only an allegation, it's something that's going to play out in court. there's going to be an effort today without question to bring that into the court of continue, but still that will have to by brought up in new york. 24 questionable fraught shade had loused us to go back and we knew that they had set themselves up hedged and shorted the mortgage market when a lot of the other investment banks had not. >> of course.

>> okay. so we knew that. >> and that is -- that is exactly -- you started it up, opened up a huge can of worms. and who knows where this ends with finally what it does to wall street. >> and it may end in the goldman sachs situation with a settlement, but with its public relations having occurred up until now, but you know, again, your point correctly is that what we're going to see today is very different than ultimately what needs to play out, and i think wall street really boo benefit from goldman sachs drvending the leg case, but not today. all those republicans that were standing against the bill will find it to do when with they get

up there, they look at that. >> there's been a lot of talk about the chronology. it was in september of 2009, right before the end of the government's fiscal year that goalman sacks submitted not just one, but two well submissions to persuade the s.e.c. why it should not bring the case. all of a sudden in the middle of the psi hearings, and right -- you know, right on the eve of the actual consideration of the financial regulations legislation, that the s.e.c. authorizes the case and more importantly -- >> down party lines. >> and actually, i think we've talked about this the other day. i'm not as troubled by that vote because i do believe the commissioners do vote based upon their believe as to the bona fides of the case. to me, what's more striking is if you go from september 2009 to april, so you have 6 1/2 months

before the s.e.c. considers a case and all of a sudden within 36 hours, the case is filed? that particularly is suspect. that's unusual. that's where the peers come in in the case of timing. historically, it's a matter of unwritten policy does not follow that case on a friday. when does it do so in goldman's case on a friday. >> good e-mail coming in, don't forget how loudly the banks leaded for the regulators to short the stocks after the banks collapsed. good point. coming up, we'll have more of this morning's top stories. plus, are texas instruments latest numbers computing with investors? we'll turn to the street for analysis. plus, ford is set to post quarterly results this morning.

we will hop in the drivers' seat. boss: y'know, geico opened its doors back in 1936 and now we're insuring over 18 million drivers. gecko: quite impressive, yeah. boss: come a long way, that's for sure. and so have you since you started working here way back when.

gecko: ah, i still have nightmares. anncr: geico. 15 minutes could save you 15% or more on car insurance. just, out of the blue at 43. now i'm on an aspirin regimen because it helps me live the life i want to live. [ male announcer ] be sure to talk to your doctor before you begin an aspirin regimen. it's not a big deal to go to your doctor. it is a big deal to have a heart attack.

230rd is set to post q1 results this morning. phil lebeau is with us this morning from michigan. >> good morning, carl. when do you think is the last time that ford reported four consecutive quarters of a profit? >> can i phone a friend? becky? >> i'll say --

>> it's been a while. >> how about 2004? >> oh, very good. you are correct, sir. 2004. and that's the expectation today. here are the numbers in terms of what wall street is expecting. it's expecting 31 s a share with profits being greater than $1 billion. for revenue, the company is expected to bring in $30 billion. the reason? ford is on a roll right now. this company is expected a fourth straight quarterly profit due to extremely strong q1 sales. not only the fact that sales are strong, but it's the content in those vehicles. that's pushing profit margins up, as well. ford is profiting from the higher content in the vehicles and that's a part of the turn around that has not gotten enough attention and that's the reason that ford is able to benefit from the fact that it doesn't have as much incentives on the vehicles, they were lower than the competition last quarter. when you take a look at the

stock over the last year, heck of a run. now trading over $14 a share this. although, when you see the numbers today, do not be surprised if they are stronger than 31 cents a share. allen mulally, we'll be talking with him first on power lunch on cnbc. allen mulally, he has a track record over overdelivering, underpromising, and so wall street has been way off over the last four quarters. i would not surprised if wall street is off today. we'll have the exact numbers about 25 minutes from now. guys, back to you. >> phil, thank you for that. we'll be seeing you in about 20 minutes' time. phil lebeau, in deereborn. one analyst answer, is there more room to run? we'll have that answer when "squawk box" comes right back.

welcome back. texas instruments offer a better than expected profits. what did they do, buy cheap machines when people said they didn't need capacity, but that's paying off? >> that's early, actually. that's the move. in the downturn, they took advantage of a company going out of business, kimondo, and they bought those on the cheap. you're going to see that coming online late this year and late next year and allow them to gain share and have about a 30% cost advantage. that is significant, but not driving the results here. >> so this was all analog?

what does that mean, exactly? >> there's really two worlds, joe. there's analog and there's digital. so they're basically one of the leaders in the analog world. these are needed in all kinds of devices from computers to hand sets to consumer devices, industrial. some pretty broad application here and obviously, you saw broad based strength, which is pretty strong for all the economies we're seeing here and general improvement across those economies. >> okay. like where, in this country, in asia, in europe? it's relative to different areas. what was strong, what was weak? >> well, basically, they saw broad based strength. it's really hard to find out or look past all that and find out where the growth was. because it's across a lot of different end markets and a lot of different geographies. but the key here is that they're a good proxy for the recovery continuing and probably most importantly, the big fear going into this call was lead times

coming in and that causing cancellations from their customers and, in fact, their lead times did come in, which historically in the semi conductor world is a scary sign and that's the time to get out of the stocks. but their lead comes are coming in because backend capacity came online and they didn't see any cans layings, which is a real positive sign this morning. >> so basically, the t.i. results are there, just respond to go a better environment in this fields that are in the markets they sell into. and they executed fine, but this is purely an economic call? >> not really. i mean, this is, you know, a secular recovery here that is continuing, that is pretty broad based. >> anything that t.i. did or just they're selling into the markets that they've always sold into? >> well, i think they're executing pretty well. they are bringing on that backend capacity allowing them to serve their customers better. i think the 300 millimeter you

talked about is a big driver for late this year into next year and is a reason to own the stock going forward. >> because this was one of the stocks that got up into the mid 30s and it hasn't -- that was a couple of years ago and then it backed off and it hasn't done much. it's at a 21-month high at 26 or so. is it going back to the mid 30s? >> i think it can. it's rel ofly cheap here versus the analog peers. it's only trading about 11 times. there's been a lot of negative sentiment on this name as this lead time thing has caught people by surprise and made them nervous. but i think this morning, given their inventories and given the supply chain being lean, i think those investors that were bearish on the semi conductor cycle should be feeling more confident about the lack of cancellations and the strong order patterns. so this strength should probably condition here. >> all right. great. thanks, adam. >> thanks. >> see you later. coming up, the debt threats, with great power comes great

responsibility. an 18-person xhig has been charged with the task of solving the budget crisis. today, the members meet with the president. representative jeb hensarling will be here. then, bill ackman will be with us in studio, as well.

on the economic agenda today, an update on housing prices. the standard & poors case shiller index will be released at 9:00 eastern. watch for the conference boards gauge of consumer competency index is expecteded to rise from last month's level. we had a disappointing number. why is that? you seem -- but this is just me. but you seem unbelievably confident. >> really? >> always. >> i'm feeling pretty good. >> it's self-confidence. >> they don't ask me. >> it's his posture. >> well, then i'm totally unconfident, then, right? >> yeah. >> i don't know. it's all collapsing on me. i'm going to try. >> there you go. >> you have arms on your chair. >> i know. you should get some. >> really? >> yeah. they help with posture. meantime, northrop grumman is moving its headquarters, relocating to the virginia suburbs california.

company is said to want to be closer. bob mcdonnell will make an announcement on that today. general motors reportedly choosing its engine plant outside buffalo, new york, to build a new v-8 engine. that news conference is planned today. they will be announcing a $400 million investment for a next generation engine and the venture is expected to create or retain more than 700 jobs. the president's commission on national fiscal responsibility on reform will meet this morning. joining us is a member of the special commission, also a member of the budget and finance committees and, jeb, thank you forp joining us this morning. what are you expecting in this meeting? >> well, that's a good question. like i approach most things in washington, i go in with high hopes and low expectations. high hopes, we have a very serious spending crisis that ultimately our spending is unsustainable and we are going to have lower per capita gdp if

we don't do something about it. some of these commissions have actually been successful. the 9/11 commission. certainly the brac commission. more often than not they fade into obscurity of history. i don't know if this is a real effort on the part of the president or simply a exercise in political expediency to sweep an issue under the carpet. it's too early to tell but i'll go in with a very open mind. >> wow. >> the way you spelled out the options has us reading between the line. erskins bulls was asked if he thinks things like raising taxes on americans making less than 250k, if that's on or off the table. he seemed to think that wasn't entirely off the table. do you think it is? >> i don't know. i think to start out these negotiations, everything has to be on the table. i mean, listen, there's a lot of

things that my fellow panel members will bring to the table that i don't necessarily agree with, but i at least agree withwit withwith erskins. you will have tax increases baked into current law. we already know that tax is a percentage of gdp under current law are due to increase from the traditional 18.5% up to 25%, roughly, over the course of the next generation. it's spending. due to explode from average of 20% to 40%. and so, unless we bring spending to the table, frankly, it's an exercise in futility. >> is that also an exercise that taxes and higher taxes have to be brought to the table in. >> they already are brought to the table. dividend tax is about to increase about 150%. we know taxes on capital gains are about to increase over a third. then if you bring in this new, i

believe it's 3.8%, 3.9% investment tax that was in health care, it's even more. i mean, we are hurting job creation if we do that. again, the challenge is on the spending side, so that we don't leave the next generation less freedom, less opportunity, lower standard of living and that's the past we're on today. >> the v.a.t. won't complete our transformation, jeb. there are many other things planned -- i mean, we've got three years after this, too -- >> good point. >> i think you misspoke with you said it was complete the transformation. there's many, many more things planned. >> good point. >> congressman, the issues facing us on the debt crisis have been really brought home over the last couple of years, as we've seen this economic downturn. you're talking about social security at this point. going broke many years earlier than had been expected. but as we see the economy start to improve, maybe some of the pressure comes off the immediacy

on this. now, that's not to say these huge entitlements aren't still bearing down on us, but will it take some focus away from the very immediate danger as the economy starts to improve, tax receipts go up? >> well, one, i hope the economy does improve but until you see jobs, i'm not really sure the american people are going to be convinced that the economy has improved. listen, economic growth is going to be a key component to getting ourselves out of this spending crisis. but you would have to have double digit economic growth for the next two generations to grow your way out of this problem. i mean, the hole is that deep. unfortunately, to some extent, what government spending has turned out to be a little of a ponzi scheme for future generations. we have to stop it for you. yes, will economic growth be helpful? yes. that in and of itself does not solve the problem. until -- >> understood. >> you can't have these entitlement programs grow at 6%, 7%, 8% a year and have the

economy grow at 2%, 3% a year. >> understood. financial reform voted down by the senate yesterday. you think the new legislation feeds to be taking into consideration fannie and freddie. >> absolutely. at the crux of this economic crisis were federal problems that consented, cajoled, mandated to lend money to people to buy homes that ultimately couldn't afford them. at the epicenter is fannie and freddie. i can think of 127 billion reasons they need to be reformed. that's obviously the taxpayer cost and counting. until you deal with the root cause of it, i peemean, it's no complete economics. frankly, it's working around the edges. were there abuses on wall street? you bet there were. the answer is to let people go bankrupt and where circumstances warrant it, criminal indictments. talk to your community banks in

any rural area of texas, this huge new office that's going to ration consumer credit at a time when people desperately need credit and not deal with the underlying causes, again, it's ultimately a permanent bailout bill, enshrines the whole institution of too big to fail. we can do better. >> congressman hensarling, thanks for that update. we appreciate it. >> jim. >> jim? >> the president called him jim. >> he did? let's welcome back the "squawk" man of the morning, general growth, his best bets and latest targets for the next two hours. imagine being at thirty thousand feet with a plane full of kids.

and you have a heart attack. that's what happened to me. i'm on an aspirin regimen now. my doctor told me it's the easiest preventative thing you can do. [ male announcer ] be sure to talk to your doctor before you begin an aspirin regimen. see your doctor. simple.

ford just out. phil lebeau is in michigan with the numbers. >> reporter: no surprise. a much better number than wall street was expecting. a profit of 46 cent a share. the street was expecting 31 cent a share. roughly $2 billion in profit. the revenue will be light of the estimate on wall street coming in at just over $28 billion. wall street was expecting a little over $30 billion. by the way, that's a $3.7 billion improvement from the first quarter of 2009. ford changing its guidance for all of 2010. in the past it has been saying it expects to be profitable in 2010. company saying it expects to be solidly profitable. in north america a pretax profit of $1.2 billion. a couple other things, ford motor credit profit improving there. it was expected to deteriorate this year. that is no longer the case due to improving residual values on

used vehicles. ford ending the quarter with just over $25 billion in cash. again, the headline, joe, ford reporting $2 billion profit for the quarter. 46 cents a share. well above the wall street estimate of 31 cent a share. we'll be talking with ford ceo alan mulally in a little bit and a first on cnbc interview on "power lunch" at 12:10. >> good morning and welcome back to "squawk box." i'm joe kernen along with carl quintanilla. becky quick in studio for the remainder of the show. william ackman, also this morning, the financial regulatory bill hitting a snag. democrating coming up short on a vote that would have started debate on the bill. we'll have austan goolsbee coming up. before we get to that, is it earning central? >> it's earning central and also everything that's happening on

wall street. financial regulatory reform bill failing a senate test vote late yesterday. that was a vote that went right along party line. 57 senators voting in favor of starting formal debate. that was short of the 60 votes they needed. among 41 votes against starting debate there was one democrat, senator ben nelson. in a statement he said his vote reflected concerns about the bill that were raised by nebraska businessmen. the most famous is warren buffett. he's been seeking a provision that would ensure new capital requirements would not apply to existing derivative requirement. he's one looking for changes in that considered legislation. kansas city fed president tom hoenig says the u.s. should lead the way on reforming financial regulation. speaking at a conference on monday where he said regulation could make financial systems stronger and make banks more globally competitive. industry leaders have argued reform would raise the cost of doing business and give overseas banks an edge. >> he didn't exactly say how, though, right?

like everybody wants health care reform, but did they want what we got? that's probably a negative. financial firms aren't the only ones watching negotiates in the senate. an article in today's "new york times" outlines concerns. more than 130 retail and manufacturing sectors have retained lobbyists on the issue. this is the same story i read last hour so i'll read it. mars wants to be able to play derivatives, it says here. >> for sugar and chocolate. >> oh, for sugar and chocolate. >> the candy company. >> oh, the candy company. >> the way it's written, does venus have concern? >> for next time we do it, somebody write chocolate company -- >> jupiter? >> uranis. >> there's nine planets and you come up with uranis. >> harley davidson. >> you're moving me along. >> harley davidson is worried about dealer-financed loans --

neptune. ebay is concerned about its paypal unit. >> goldman sachs hearing set to begin on capitol hill. scott cohn is on capitol hill. >> reporter: it's a fair bet securities and exchange attorneys will be watching this testimony very carefully, taking note because, of course, they have their civil fraud suit against goldman sachs. federal prosecutors will have a record available to them, too. fonl nonetheless, everyone is appearing voluntarily. no one has taken the fifth. the headliner is lloyd blankfein. he'll testify at the end of the day, by himself, as he talks about what the company did in 2006-2007 as the mortgage market was coming undone. he will contrite, according to his prepared testimony. he'll say the s.e.c. case was

the worst day of his life. and we believe in a culture that prizes teamwork, rewards saying no as much as saying yes. but senate investigators say goldman sachs was saying a little bit of both and very quietly shorting the mortgage market in a big way, even as they were continuing to sell toxic mortgage securities as the mortgage market was coming undone but the company managed to make money because of what investigators and carl levin say was a massive short. >> for large fees goldman helped run the conveyor belt that dumped hundreds of billions of dollars of toxic mortgages into the financial system. >> the committee has millions of pages of document it got from goldman sachs, including internal e-mails that talk about how the firm was trying to unwind its own long positions in the mortgage market, beginning in 2006 as things started to go bad.

lloyd blankfein himself had a different take on thing than it seems he does in his prepared remarks. in an e-mail release that came out in november of 2007 where he sizes things up. of course we didn't dodge the mortgage mess, he says. we lost money, then made more than we lost because of the shorts. nonetheless, the company says it did not have any sort of coordinated effort, any sort of massive short position. what blankfein will testify and others have said, is the company was managing its risks in a risky environment. we'll get testify and see for the first time fabrice "fabulous f fa bth b" tourre. joining us is bill ackman, manager the per shing square capital management and the subject of a new book out "confidence game" about his six-year battle with mbia as he

warned investors of overleverage. this is a very timely story given everything considered today and financial regulatory reform. thanks for being here. >> sure. thanks for having me. >> we were talking as scott was reporting on goldman you have some thoughts on what's happening there, too. again, everything that happened in this book is very telling for about weights being considered right now in washington. >> what's interesting about the book, number one, in this book i'm a short seller, a company called mbia and it's a book about bond insurers, which play a role in goldman sachs. about people making a lot of money, losing a lot of money, a book about the s.e.c., our efforts to get s.e.c. involved in the mbia story. so i was investigated by eliot spitzer, by the s.e.c. for my critical analysis i wrote on mbia. it was an interesting period of my life. i think it's a good book. i helped the author by giving her a cd-rom with every e-mail i

ever received and the result is a story that's not based on hearsay or recollection, it's about e-mails going back and forth, foiling the s.e.c. and the attorney general. >> these are politically-charged times. you hear levin now saying that goldman -- this is all you have to say, goldman shorted the housing industry, so it's basically shorting america. you, meanwhile, shorted a company that was trying to insure muni bonds. you shorted a company that was trying to help municipalities get a good rating to raise money for needed service for -- >> schools, hospitals. >> you, my friend, shorted this company. you're shorting the -- you're just as evil -- >> actually, i don't like to make investments that are, if you will, not good for america. this is one where i felt comfortable with the investment. the subject, as a result of the book -- >> you know what my point is. >> i understand your point. i also -- i'm prepared to defend

goldman sachs today due to the c c contrarian thing. >> what you have is a company, at the time 140 to 1 leverage. started out in a safe business, guaranteeing municipal debt. one thing the author discovered was that the rating agencies actually had two rating scales. a rating scale for municipal credit and a rating scale for municipal credit. if you were california and you got an q at" rating you would be aaa on the corporate scale and single a on the municipal scale. the result is that they had to buy bond insurance in order to sell bonds. this became the subject of, still is the subject of, litigation. the connecticut attorney general actually brought suit against the rating agencies against this exact issue. it was a company that was not needed but ultimately collected ee foremouse amounts of fees by guaranteeing municipal debt they didn't need to guarantee. bill gross said the notion that

mbia should guarantee the debt of california, a company with a tiny capital base guaranteeing the debt of california, started out as municipal credit. when that business became more competitive, they moved out along the risk spectrum, started guaranteeing structured credit and cdos, synthetic cdos, dhfs ultimately responsible for the stock dropping from 70 to 3 and put them in the circumstance they are in now. if you think about what caused the credit crisis, what caused the credit crisis is that more and more risk was hidden away in the system by companies that didn't have the wherewithal to meet their obligations. i remember people asking the question, where is all the risk going? this was a question people were asking. you know, five years ago. and the answer, the risks going to companies like mbia and risk was going into cdos and into companies like aig financial products. and there was a lot of pass the hot potato.

and very little attention paid to it by regulators. what i tried to do in the mbia circumstance is one of the benefits of being under investigation was that i was able to present my case to the regulators. then i went to the rating agencies and i did my best to convince everyone that the company was a house of cards. >> that was one -- you even say in the book, this is a good thing because i'm going to get to meet eliot spitzer. i'm going to get to make my case and get an audience. >> to eliot spitzer's credit, initially investigating me but after concluding i did nothing wrong, went after mbia for the issues we identified. in some sense eliot spitzer in this book is a hero. >> where are the lessons for goldman in this? >> that's what i was going to say. do you need to make a case that this company deserved to be shorted to -- i mean, it's going to be hard for you to make a case that you should short the housing industry of the united states. if you do it in that way, you say i feel comfortable contributing to something that contributed to the crisis. do you need to make a case it's

socially responsible to short something? >> no, not at all. >> okay. because it's going to be harder to short the entire housing industry. >> here's what i would say. if you think about the housing industry, what caused the housing industry to become one of the great bubbles of all time? the answer is there was no way to short the housing industry until in the last several years when development of synthetic cdos and other structures that allowed people like paulson to make big bets against housing. had there been a mechanism to short housing -- >> there probably wouldn't have been a bubble. >> if there were no way to short stocks, i think the probability of stock market bubbles would be much greater. >> i haven't heard anyone make that point yet. >> i haven't either. >> you could not go along, right? i guess that's what shorts did. >> you could short home builders. that was the closest you could come. when you have a self-fueling circumstance, like the housing, like housing credit, if there's no one betting against, it can go on for a very long time, get to incredible highs. >> so if you're helping structure the cdos and giving

them long, you know, selling them to people that are long cdos, is there an ethical problem with shorting the housing market? >> i don't think there's anything inherently unethical about shorting anything. as long as you follow the securities laws, i think that -- >> but that's the question with goldman. it's the idea of the disclosures. that's a different question. >> i'm happy -- if you want, i'm happy to give you my thoughts on goldman. >> yeah. >> first, i think there's not that good of an understanding of what took place. basically -- i actually took the time to read the papers, which i encourage people to do. what appears -- you know, i guess the best -- let me make an analogy. paulson wanted to make a billion dollar short against housing. instead of shorting rmbs or cdos, you could have said i want to short portfolio of home builders. i want you to find someone who will write me a put against these five home builders. goldman says, let me see if i can help you out.

they go to one of their clients, who's willing to take the opposite view, they take a look at the five home builders and say, we'll put two in the basket, we don't like the other three. paulson says, we'll take two of three. there's a discussion about what goes in the basket. that's what happened in this particular transaction. then what happens next, they put together a prospectus and then they go out to the marketplace. in the prospectus it says goldman sachs is shorting the basket and looking for the other side. so they find a german bank, german bank effectively goes long. goldman sachs goes short. no disclosure in the prospectus that paulson had anything to do with picking securities. you think about paulson circa march 2007, but no one knew who he was in march 2007. people knew who goldman sachs was. i have to believe ikb, they knew

what they were doing, they took on the risk. they had a list of home builders, they had a list of every one of the cdos, could do whatever due diligence they wanted and made the bet they made. >> knowing goldman was short was probably, you know -- >> more significant. >> -- more significant than paulson. >> goldman laid it off on paulson, but they said in the prospectus they may not keep the rick, they may keep some, they may short some to others. and i think it would have been unethical had goldman sachs disclosed who the opposite side of the trade was. i think one of the key -- if the s.e.c. rules is that client confidentiality is paramount. >> why should i know the long fnt the short? >> well -- >> i know who the longs are. >> paulson didn't know who the long was. >> paulson knew aca was the long, though. >> they didn't know who ikb was on the other side of the trade. paulson, frankly, didn't care. the other thing is i would point out, imagine if paulson went short and jim cerberus went long

and cerberus lost $1 million, there wouldn't be an article in the fup about it, a criminal investigation about it. i think the bigger issue is should taxpayer faxed institutions, should regulated banks be allowed to take the risks they were taking. i think they shouldn't be be allowed to take those risks because i think it was a dumb risk but i don't think that's goldman's fault. in fact, that was driven by regulation. another fascinating thing here is what drove the ikbs of the world to take on these kind of ribs, it was the basel chords which said triple obligations you don't need to hold any capital against them. >> and the rating agencies. >> they played a major role. if the rating agencies didn't exist, this trade could have never taken place. >> you are in favor of limiting or outlawing proprietary trading when investment banks doing the trading? >> the answer is, i think differently about an investment bank than i do about -- if it's an institution the government has to bail out, i don't think it should be taking proprietary type risks. if we have a resolution regime

that allows the banks to be taken over without taxpayers, sure. >> if you're blankfein do you come out and defend the firm like you just did or fall on the sword and say, we're sorry? weight the right tone? >> goldman, i think they're being unfairly attacked and you can attack them for lots of things but this to me -- i don't think they have a good case. i'm not a lawyer. but having been the subject of an unfair attack, frankly, by -- at one point in time, the ag and the s.e.c., yeah, not that i feel -- i don't feel sorry for goldman sachs but i think they're getting unfair treatment. >> you know all the cliches about getting your reputation back. don't you think the s.e.c. -- i mean, on a friday down party lines against goldman sachs, this should have been something

to consider that this company is never going to get its reputation back at this point. and fin regular will be passed before we -- >> goldman sachs will get their reputation back. i'm a good example of that. i was in the press as evil hedge fund manager under investigation by the attorney general -- >> but still people think much you as evil hedge fund manager. >> they probably do but for different reasons. >> we have a lot more to talk about. we should mention we invited mbia to come on the program and they declined to do so. when we come back on "squawk," we take a look at the s.e.c. case with a insider, former s.e.c. general counsel, will take us inside the regulatory rift between wall street and washington. time now for today's aflac trivia question. which 19th century u.s. president had 15 of his 21 regular vetoes overridden?

the answer when cnbc "squawk box" continues. greater cost to your companyet insurance. aflac is not how do i fit it in my company's budget insurance. aflac 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... duck: aflac! ...then you don't know quack. to find out why more businesses provide aflac, visit getquack.com.

now the abc to today's aflac trivia question. which 19th century u.s. president had 15 of his 21 regular vetoes overridden? the answer, andrew johnson.

>> first they overrode all his vetoes and then they impeached him. let's get to ford reporting, a short time ago. back out to deerborn, michigan, where phil lebeau just got off a phone call with ceo alan ma l mulally, you big sandwich. what did he say? >> reporter: a couple of important things. ford improving it's guidance and alan mulally pointed out to me on the phone, listen, this shows we're delivering profitable growth. that's going to be the key going forward. it's not going to be a one-time surge and then a couple quarters where they're doing okay. he expects this type of profitable growth going forward. keep in mind, these are the strongest operating profits in six years. finally, mulally says cutting ford's debt, which now is $34 billion, that is a priority going forward. that has long been the big

question over the last year, two years, people saying, you've got all this debt out there that you've been winding down slowly. how much is that going to drag on the company? mulally says cutting that debt, that's a priority. we'll be talking with him first on cnbc coming up on "power lunch" a little after noon today. back to you. >> phil, thank you for that. phil lebeau in michigan. alan mulally on "power lunch ". joining us this morning if a special "squawk" exclusive is simon lawrence, also former general counsel at the s.e.c. he joins us along with our guest host bill ackman of pershing square. great have you. >> great to be here. >> does the s.e.c. have the goods on goldman orren? >> it's very hard to tell from what you can see so far. doesn't look like their strongest case, i'll tell you that. >> what's missing? >> at the beginning, they're

alleging fraud involving two very sophisticated purchasers who were involved in the transaction. and it's hard ho see where they were misled. maybe they were. the s.e.c. is focusing on the absence of information about john paulson's involvement in selecting the pool of mortgages. was that material to the transaction? it's hard to tell. john paulson of the time wasn't the john paulson we know now. >> that's the point. >> and it's very hard to tell whether that would have been material to a reasonable investor, which is the test the s.e.c. has to pass. >> if you were advising the firm, prepping for this hearing, what would be your goal, getting through today? >> well, there are two different things going on at once. >> understood. >> once the political animal and one's the lawsuit. i think they probably come out about the same place. i think they want to present their side of the lawsuit in a

way that makes goldman sachs look less evil, if you will. and present them in a favorable light. >> there's some commentary out today that they have two options on this. they can either play dumb but good to their clients or -- >> meaning we lost money, too. >> right. or smart and sleazy, like we're smart but we didn't tell about you it. >> i think they're going to try to, i think, walk the tight rope between those two. and they certainly don't want to appear dumb, but they don't want to appear opposite their clients, as is quite clear from lloyd blankfein's comment already. >> if goldman sachs wanted to be short the housing makt, they wouldn't have sold the trade to paulson, right in they would have just kept the short, entered into it with -- >> right. >> and they started out the other side and immediately entered into a credit default swap with paulson. the best evidence they didn't want to be short, is they could have made a billion dollars had they kept the position, instead

they made $15 million by intermediating -- >> that brings up another part of the case, too. certainly the purchasers of the cdo, the synthetic cdos, knew somebody was on the other side. it was either goldman or somebody else, if gold pan w. how material is it to them, that goldman is putting it together or paulson on the other side? >> so if it's not the s.e.c.'s strongest case, is it politically motivated or not? there's so many elements as to how it was ruled out, the 3-2 vote. >> we don't know it was a 3-2 vote yet but it's been reported that we a lot. i assume it was. it has a lot of those touches in the sense. i mean, i would be astonished if the white house had called the s.e.c. or if senator dodd or anybody in the congress had called the s.e.c. i would not be surprised if the s.e.c. itself, or the three commissioners, presumably the chairman and other two, thought

it was useful in the political mix at the time. they live in washington. they read the papers. they're aware of the situation. i would not be surprised if that was the factor in their thinking. >> that's tough to prove. >> of course it is. >> the unfortunate thing about the investigation is the investigation is made public. your reputation is destroyed. and it's months, sometimes years later before we know whether the investigation was rightfully brought or not. >> and you already get to make the political hay out of the innuendo that you just talked about. you get the benefit of that, you know, and it's long after that that there's any vindication. >> which is why i think it's very important that the media doesn't just pile on to one side of the -- >> oh, great, why? so we can get all this mail about how, you know -- >> stop defending goldman sachs in. >> yeah, stop defending goldman. how can a slut get a reputation back? >> someone wrote that? >> yeah.

>> would you advise the firm to disclose the wells notice earlier? >> that's very hard to tell. you are to be in the middle of the mix to figure out whether you should -- disclosing a wells notice is always tricky. how serious do you think it is? this one was a little strange again, according to what we've read in the press from people that i would trust. there was apparently some period of months, several months, between the wells notice and the case being brought. and then it was brought out of the blue. that's an unusual procedure. usually there's a discussion, harvey pitt, a former chairman, had a column the other day that he sent me that talks about whether -- whether you find fault on both sides. goldman should have had an understanding from the s.e.c. that the s.e.c. would talk to them before filing a case. and the s.e.c. should have approached goldman before filing a case. usually you'd rather announce a

settled case than announce something that's going to be litigated. it's unusual for somebody in goldman's position to be litigating -- >> and it came on a week where the s.e.c. had some unwelcome news to share about madoff and stanford. >> right. were they desiring to diffuse the inspector general's report and that sort of thing? could be an element. i think that's less of an element but all of these things are part of the mix. >> does the case, in your view, signal a more aggressive -- rightly or wrongly, a more aggressive s.e.c., a tougher cop on the beat? >> the s.e.c. has been saying for some time that they're going to be tougher. they brought in rob kazami as the new director of the division of enforcement out of the u.s. attorney's office, a former prosecutor, made a big point of the fact he was a former prosecutor, appointed other former prosecutors within the division.

and, you know, i was fortunate enough to be introducing rob kazami on a panel at the tulane institute in new orleans half an hour after his press conference. and he clearly is taking a more aggressive posture. and that was something that the s.e.c., i think, had to do and was good to do. >> he knows the synthetic cdo market inside-out since he was so instrumental at deutsche bank in designing those. >> he'll understand it. >> yeah. >> going back to my experience, my experience i couldn't get the s.e.c. to focus on the issuer. in fact, what happened is the s.e.c. focused on the attacker. very similar to david ayhorn's experience. and now i think the s.e.c. -- my sense is they're doing a much better job and more aggressively attacking -- -- >> not the messenger. >> not the messenger, but the problem company or manager. there's a risk they go too far the other direction. >> right. >> before you start, let me see if joe has 3m earnings ready to

go. >> i feel comfortable with $1.40 versus 1.21, well above expectations. they say they're raising 2010 sales and earnings. now sees the full year result at 540 to 5.60 which is well above the $5.16 the street is looking for. sales increased 25% to $6.3 billion, well above the $5.44 billion, which is what we're talking about. can't see where the stock is going to trade at this point, but is good. >> they have several things they cite. improved market penetration, new product flow, but they also talk about significant growth in important in-pashgts, things like electronics, automative oem. sounds like we are seeing strength from the industrialized side here. that's where a lot of this demand's coming from. >> the spread is narrowing.

these results would appear to be enough to maybe have this stock traded at a few high today. we'll see. the low, $55. closed at $87. >> are you talking about guidance earning? >> yeah, i did talk about that. $5.40 versus $5.16. >> appreciate your time. incredible time to be in business. >> it is. >> thanks for coming in. >> my pleasure. let's get a check on the markets after the earnings reports we've heard this morning. at this point you'll see the dow futures are still a little below fair value. faft, when you call up the chart you'll see it's down by 26 points below fair value for those dow futures. we are keeping an eye on the euro this morning. it's falling against the dollar as greek bond spreads are blowing out yet again. investors want more information about greek's aid talks. in the meantime, worries are out there building about credit risks in other countries as well. you can obviously point to the other countries in the eu that have some concerns and people are talking about even more broadly than that.

back to the drawing board for senate democrats. a vote to start debate on the financial regulation reform fell three votes short of approval. one senator ben nelson sided with republicans. it was 57-41. north rupp grumman is headed east, moving headquarters from virginia to los angeles. it's been scouting locations in virginia, washington, d.c. and maryland as it seeks to be closer to their customer, key customer being the government. >> this could be good for -- >> trump's been active in real estate outside the nation's capital. >> the fortune 500 should all relocate to d.c. mars should get a little closer if it can to d.c., too. sorry? comments or questions about anything you see here on squawk, e-mail us at squawk@cnbc.com. when we come back, we'll have more with our guest host today, bill ackman.

in the next hour of "squawk box," kynikos founder, james chanos. boss: y'know, geico opened its doors back in 1936

and now we're insuring over 18 million drivers. gecko: quite impressive, yeah. boss: come a long way, that's for sure. and so have you since you started working here way back when. gecko: ah, i still have nightmares. anncr: geico. 15 minutes could save you 15% or more on car insurance.

our guest host this morning, legendary hedge fund manager and activist investors bill ackman, good taste in ties as well, he is the subject -- close, isn't it? he's the subject of a new book about his six-year battle with mbia where he warned investors about the coming financial crisis. here's the author of "confidence game," christine richard. >> going back to 2002, when he first issued this research report, questioning mbia's aaa rating, even though this was shortly after enron, shortly after worldcom and many people would have said, i don't have any more faith in the credit rating agencies, there were

still very few people who were willing to be very public about -- if their criticism of a company, particularly a aaa-rated company. >> we should point out that we invited mbia to come on to "squawk," but the company did decline our invitation. let's talk about -- you gave the money away, too, anyway? >> i'm in the process of giving it away. >> the profits. >> made $150 million. i committed to give profits away. actually it wasn't until i committed to give the profits aware the stock started to decline. maybe there's correlation there. >> why in this case did you decide to do that? >> i decided to do that because while someone's long a stock and someone says you're biased, you buy the stock. somehow when you're short and express your views publicly you're viewed as a market manipulator. i wanted to make it clear that this was more important than making a profit investment. >> it's almost like conceding their point, though, by -- right? >> i didn't need the money. i thought that i could do good. i wanted something good -- you know, the problem is -- i had

made a very successful investment at general growth, company was on the brink of bankruptcy, stock was 15 cent, today $15, simon fighting for control of the company and no one who will criticize that because they're like, wow, you helped save a company. it's great for the country, et cetera. here you're attacking a company. in this case the company itself was fueling the credit crisis and taking risks it wouldn't withstand. i don't like to have investments inconsistent with the country. i felt this was -- >> wait a minute. there was a time you had a great idea for how to make balance sheets for fannie and freddie, and yet you were still short all of the fannie and freddie bonds. we said at the time you could see more -- >> imimpartial. >> -- impartial if you would not have all these positions that would benefit -- >> my thought on goldman sachs, i'm not long or short, just my opinion, and fannie and freddie

i was short the junior debt, not the senior debt. it still applies today where we could minimize the taxpayer funding. i think if anything, that's the biggest -- if you look at the success of the bailout, really fannie and freddie is the only one that so far looks like a disaster. >> you made a compelling case for -- you made a compelling case for the ability to short that maybe we could have prevented the bubble. you can probably make a compelling case for hedge funds, pry pry tear trading by investment banks, for a lot of things that wall street does right now that are under attack. you could probably make a compelling case. how much of fin reg is going to be deleterious to the long-term benefit and future of the country that's in there now? how much of it in. >> i've skimmed the bill, as best i can, and i think this resolution authority -- >> tell me what you like. >> -- is a very big positive. the biggest problem is we feeded the taxpayer to come in or save the institutions, that was the

conclusion that was made, otherwise the whole system would have broken down. they're setting up a mechanism where if a financial institution takes too much risk the government can step in where the equity holders, bond holders, unsecured credit holders in the hierarchy can absorb the risk and people that took the risk, people that own the risk, bear the risks. that's a great outcome and an important part of the bill and should be -- it should be approved and i think it will be approved. i heard sheila bair speak at new york public library monday of this week. first of all, she's extremely impressive person. i think she did, perhaps, the best job dealing with the credit crisis over the last year. but she talked about how they'll use this resolution authority to wind up a problematic bank. that way we don't have to worry so much about what's happening at, you know, goldman sachs or morgan stanley or pick your favorite institution. >> you're okay with the volcker rule for commercial banks?

>> sure. i don't -- >> maybe not for investment baction. >> i don't think that private equity and hedge funds should be funded by taxpayer financed institutions. i don't think there's a good business reason for doing it. i think they could spin off those divisions. citi sold their real estate private equity recently. those are not -- i think if banks actually were simpler and easier to understand, they would try to trade higher valuations. maybe wouldn't earn as much but those earnings would be awarded a much higher multiple. as a result, the shareholders would be better off, a lower risk, maybe lower return, but safer, more stable institution. >> how do you push back on republicans' claims the bill enshrines bailouts? that there is the authority, with or without -- depending on how it's financed, there will be a mechanism for banks to be saved and that in itself lets them create the risks. >> i don't think that's correct. my reading of the bill, the way this resolution authority works they are the ability to put financial institutions in suspense.

when lehman failed, you know, it made losses at lehman much worse. under the current resolution authority i think they can basically step in, keep the operating entity operating, keep the derivative contracts in place, they can wind down the holding company, they can sort out, they can sell off the operating entity at a higher value because it's still an operating entity to, you know, jpmorgan or pick your favorite surviving financial institution, and then they can make sure the people that took the risk absorb the pain. the problem i had with, you know, what took place over the last year su had bond holders that get paid well above a treasury yield to take meaningful risks. they didn't properly oversee the institutions and they got bailed out by the taxpayer. and the current authority is not going to allow bailout of financial institutions it's going to allow for proper allocation of losses to the people that took the ricks. that's very important. i think it's very smart. i wish it were -- we had this 18 months ago. there were element of the bill if i study itted more carefully

would be problematic but as a country we have some polarization is the ultimate bill that gets approved will be a better it one than the one that was just pushed through by necessarily one side of the aisle. >> hopefully, you know, the very -- i think mr. buffett's concern, i understand his point of view. he wrote a bunch of derivativetive contracts, notice expost fact, the law is changing it's going to be a much worse investment than he thought it was at the time. he wrote put options, in a sense, on the s&p 500 way out, collected premium up front. it's very similar to the reinsurance business he's in. now he's told he can't invest the money. he's got to give it to his counterparties. there's a little bit of an unfairness about the way government works. sometimes the rules of the game are changed, after the fact, and i think that is something you have to live with. >> bill's going to be with us

throughout the program. we do have more to talk about. >> yep. >> still to come, the counsel of economic adviser's chief economist austan goolsbee talk tos to stay with us.

♪ you weren't around. we haven't done it. so it's all -- >> you didn't do it yesterday? >> no. >> only because i wasn't here. >> you weren't here. we brought the animal orchestra and yoko back to welcome you. >> so it really is punitive. >> the punitive. one plus one is about eight when you use yoko with the walruses. >> now we have no time left for "stocks to watch". >> dupont, $1.24. that was above expectations on better than expected revenue. that will help the dow this morning. let's see 3m. let's get a decent bid/ask on this one.

it was much better tan expected. new high, that will help the dow. $1.40 well above expectations. one more from last night, texas instruments, 52 cents was above. guidance is pretty good as well. that stock is trading at, i think, 21-month high. we had plenty of time, even with charming our viewers with yoko. >> you're that good. when we return, financial regulation hits a bump on the hill. austan goolsbee. "squawk box" will be right back.

let's get white house reaction to last night's failed vote to begin financial regulation reform. joining us is austan goolsbee, staff districter and chief economic of president obama's economic recovery advisory board. it's great to see you it morning. >> great to see you, becky. >> what's the next step? what happens now? >> well, i'm not an expert on senate legislative procedure, but i guess they're going to just keep voting and try to get this thing to the floor. remember, this wasn't to pass the bill. this was just to open up a debate about the bill. and i guess the republicans are trying to prevent that from happening. fundamentally the president has said before, said many times, we need to do this, the financial crisis started more than two years ago. we're not going to do it in a back room and we're not going to add loopholes. we're going to have the most aggressive, toughest oversight

of consumers we've ever had. we're going to end this derivatives trading in the shadow and end the era of bailouts and too big to fail. so, you know, we'll see where we go from here. >> there are several republicans who have come within inches, they say, of finding some sort of common ground with senator dodd. is there a way to kind of pull that back and allow them to close the gap, or is this going to be -- we're going to vote and vote and vote until you give us exactly what we want? >> well, look, as i say, all they were voting on was to bring it up for debate. the thing i can't understand is if you want to change the bill, just stand up in public and say, here's what my amendments are and let people vote on that. what has happened, and we are clearly open to negotiation on any details, not on these fundamental principles the president outlined we need, that we need to bring der-itives out of the shadows, end risky

behaviors and enthe bailouts, i am confident in the end there's going to be a bipartisan bill. it's not going to be done in the back rooms. it's going to be done out in public. but i think there's two -- it's too important. everybody recognizes we need this, even a bunch of the financial institutions themselves who are opposing certain provisions are basically behind the scenes saying, yeah, they know we're going to pass something that's strong. and so we've got to get through this bumpy patch. >> austan, the other big story happening in washington today is the goldman sachs hearings before senator levin. obviously, the s.e.c. case focuses very much on fraud aspects, alleged fraud, whether that was there or not. but some of the topic and the tone we've already heard that's going to be coming before the senate committee this morning has to do with whether or not short selling should be allowed. what's your take on short selling? >> well, the stuff about short selling, i think, is only a pirn part in this -- in this

endeavor, you know, the -- >> it's been some of the loudest commentary coming from senator levin today, this idea of shorting things, should that be legal or not. >> well, that's being. i'm i'm an economist so i don't see banning short selling is as productive as trying to end conflicts of interest, which are some of the issues that are raised in these cases and in this hearing. one of the aspects of the so-called volcker rule is whenever you have commercial banks are endgaging in proprietary trading for their own account, you can frequently get yourself in a position where their trading is at odds with what's in the best interest of their client. whenever you're in that situation, i think it can be a little -- you know, you can get a little dicey. >> i ask this because our guest host today is bill ackman. we've been talking about some of the services short sellers can provide. they were the first to point out

enron. bill's here with a book about what happened with mbia. i guess my question is, do short sellers sometimes provide a service in the market? >> i think it would be hard to say that if you looked back through the recent financial history of the last 20 years that there was never a moment that the short sellers did provide information. i think they have provided information, as i say, to me blanket bans on all short selling seem like a bit of an overreaction, but as i say, that may be one of the loudest components today, but when i look at this case, i think the most central features are those about the conflicts of interest. as i said the other day, i don't think that the ceo or anybody else is going to win any popularity contests when ordinary americans' houses are falling through the floor, people getting foreclosed everywhere and then reading

about the profits somebody's making on it. but i think the conflicts of interest is really an issue the president wants to crack down on. >> austan, thank you very much. it's been great talking to you. i hope we can extend this conversation. come join us on set. >> will do. when we come back, we'll talk more about fin reg, goldman sachs, and jim chanos, founder of kynikos will be paying us a visit. ♪ throughout our lives, we encounter new opportunities. at the hartford, we help you pursue them with confidence.

by preparing you for tomorrow. while protecting what you have today. you've counted on us for 200 years. let's embrace tomorrow. and with the hartford behind you, achieve what's ahead of you.

head to head with the s.e.c. a reform rejection. >> on this vote, the ayes are 57, the nays are 41. >> financial regulatory overhaul bill doesn't get the votes to move forward. democratic senator mark warner will tell us about bridging the gap. a lot of earnings on the docket today. earning central loaded up once again. dupont, ford, 3m rolling out results. will the numbers give the bulls another boost? "squawk box" begins right now.

welcome back to "squawk box" here on cnbc, first in business worldwide. i'm becky quick along with joe kernen and carl quintanilla. our guest host is legendary hedge fund manager, bill ackman. he's the managing director of pershing square capital management, also the subject of the new book "confidence game." we've been talking about that throughout the morning. we have more to talk about in a few moments. in the meantime, let's check into earning central. shares of 3m are called sharply higher this morning. the company came out with first quarter earnings of $1.40 a share, 19 cents ahead of what the street was expecting. revenue also beat the street and the full-year guidance is topping estimates as well. as you can see, that stock is going to be up significantly, up by a couple of dollars. dupont's first quarter profit more than doubling and better than expected results,

increased sales is and selling prices coupled with declining raw material cost and that helped drive result. the chemical giant is raising its full year outlook and that stock is indicated higher. $41.6, skz 41.79. the revenue fell a little short for ford, but the automaker is raising its 2010 outlook. that stock at this point is trading just below where it closed. $14.46 after a big run. bid is $14.32. overall, u.s. equity futures a little below fair value, at this point down by 19 points. that's off some of the weaker levels we saw earlier. financial regulatory reform failing that senate vote yesterday. 57 senators voting in favor of starting formal debate. they needed 60. among 41 votes against starting debate, one democrat, senator ben nelson. in az statement he said his vote reflected concerns raised by some nebraska businessmen.

of course, the most famous of which is warren buffett, seeking a provision ensuring these new capital requirements would not apply to the existing derivatives contracts that are already out there. chris dodd and his republican counterpart in negotiations, richard shelby, are expected to consider talks. senator mark warner will join us to talk about the next steps of the bills. which senators abstained? >> kit bond and bennett. >> bennett of utah. >> meantime goldman sachs accused of putting its interests ahead of client, a charge lloyd blankfein denies. mary thompson joins us with more from washington. >> reporter: good morning. in prepared testimony released yesterday, blankfein says without his clients' trust his firm can't survive. but senator levin chaired the subcommittee for permanent investigationsed goldman breached that trust. >> the evidence shows that goldman repeatedly put its own

interests and profits ahead of the interest of its clients. >> reporter: in his claims with e-mails like this one from goldman mortgage executive daniel sparks who wrote in late 2007, he wrote, real bad feelings across european sales about some of the trades we did with clients. the damage this has done to our franchise is very significant. levin's committee examining the role of financial banks and the crisis. he says goldman and others built a conveyor belt that dumped billions of toxic housing stocks into the system. goldman bet against its own money making $2.37 billion in 2007. >> its own documents show that it engaged in what one top executive described as, quote, the big short. >> reporter: blankfein counters the firm never had a net short position against housing and lost money against those bets. he also said the firm managed

risks as its client and regulators would expect it to, that included reducing exposure to housing in 2007, but levin suggests goldman was double-dealing, not telling clients it was short while selling them toxic housing assets off its own books. he highlight this e-mail from blankfein who wrote, do/should we have cleaned up these books before and are we doing enough right now to sell off cats and dogs in other books throughout the division? levin didn't accuse goldman of anything illegal. rather, hi staff suggests the hearing should raise this question, should investors and clients know the position a placement agent like goldman is doing before doing business with them, given that firm might be betting against a client's position. joe, back to you. >> thanks, mary. short selling is a key focus of the hearing today on goldman sachs on capitol hill. joining us is jim chanos, president and founder of kynikos and associates. our guest host is bill ackman, managing partner of pershing square capital management. as long as you live as a short seller, there will be repeated

periods of defending short sales. we're in another very heated political environment right now about short selling. i was going to describe what levin was saying, but you just saw it. how do you -- what would you comment on what you just saw? >> i think the senator is commenting on the right aspect of it, the ethical issues are more important in this case than legal issues. i'm not sure that the case is the strongest one. i know bill went into that earlier. the issue is when an investment bank does deals and takes the opposite side, do they have a disclosure issue? i don't think they should be disclosing the other sides of the trade. and i think you also discussed earlier today, which raises issues about the whole paulson disclosure. in the goldman case. but, again, we're putting the emotional issue of the fact it was a short trade with the brilliance of -- >> shorting housing. >> shorting housing. >> you heard austan goolsbee say while people were having their

houses sold out from under them and being moved out into the streets, goldman is making billions of dollars shorting the housing. that's the emotional -- >> that's the emotional aspect. and that's what short sellers do, they basically keep prices down. there was an article today in "the wall street journal" about municipal debt market and there are now derivatives. that means people are putting

short bets on. what's going on. well, the flipside of that, of course, is that maybe you aren't paying a high enough interest rate to retirees buying your bond. the market is not sending the right signal. so these kinds of things get lost in the shuffle of an ee notional ags spekt of it being short. i think bill mentioned that in the spring of '07 no one had heard of paulson. >> you heard levin say they were dumping toxic securities. they had a conveyor belt of turning out toxic securities. they had more people that still payments to ikb and others. if the underlying bonds referenced in the deal blew up, the buyers would are to make payments. >> supposedly -- >> back to paulson. >> people were excited about taking paulson's money. he looked like a chump. >> we were short ikb in 2007 because we looked at -- we looked at what they were doing. it was madness. it was absolute madness. and they also were basically

taking a german bank balance sheet and leveraging it up and going long, all this toxic stuff to make spread. >> the problem isn't that paulson bet short and another institution bet long. the problem is that a bank, a bank that effectively the government needs to come in and bail out, was taking stupid -- making stupid bets. >> exactly. >> i think if you had to criticize goldman for anything, you could argue it's a suitability question. almost like if you think of ikb as a widow or orphan, maybe you should never sell stuff to them where their upside is to make 80 points and -- >> sell to a german bank instead of a u.s. bank. that's exactly what you're supposed to do. >> there's one unstated aspect vitally important to the whole thing. there was a participant at the table in these deals who didn't know he was there. in this case it was the german taxpayer. in many cases it's the u.s. taxpayer who is on the hook for banks making dumb deals. >> right. >> and it gets back to

regulatory reform. whether we have the volcker rule or resolution authority. but at the end of the day, you can't put the taxpayer who doesn't know that he or she is at the table on these speculative kinds of trades at risk. >> was this deregulation from 1999? >> it was regulation. the way it worked is, you know, basel courts required you to set aside capital based on the rating of the financial institution. which meaningfully increased demand for aaa assets. there were very few natural aaas. berkshire, pfizer, but that demand for aaa assets built the business for structured assets. the rating agencies by putting inappropriately high ratings on this stuff enabled investment banks to manufacture product that could be purchased by regulating institutions. the problem with credit link note with a aaa rating, it sdent didn't deserve the rating and

they got basis points for two years and then lost their investment. that's an inappropriate investment for a financial institution. jim had taken that bet, which he wouldn't because he's skeptical of those kind of bets, frankly if fidelity had bought that security, don't think there's an issue. the issue to jim's point, a party not at the table, the taxpayer h to step in. the financial reform bill in its current form, with respect to this resolution authority, happened in the u.s. and happened overseas, as long as the invests in the institution bear the loss as opposed to the government or taxpayer, i think that you won't have these kind of problems going guaforward. >> jim, you're on record saying there will be more cases and there is some widespread criminality on wall street. but you're not talking about the goldman case. you think that's a weak case. that shouldn't are been brought? >> again, more details will come out. i'm not a lawyer. but i think that while we're worried about goldman sachs and

whether or not they disclosed everything -- >> where's the real criminality? >> it's residing in the balance sheets of aig and lehman brothers where losses were tens of hundreds of billions of dollars. the losses were on the basis of mismarked position. this is really simple. lehman brothers, the hole was $150 billion. on a portfolio of $600 billion of assets, $300 of which were easy to value, treasuries and short-term instruments. $150 billion mismark on a $300 billion, give or take, toxic pool. >> is this the s.e.c.'s domain? >> has to be someone's domain. >> if you add madoff, stanford, and then you look at the enforcement they decided to bring, it almost makes s.e.c. look like a complete, inconsequential, irrelevant joke. >> we have a law on the book wes passed post-enron, called

sarbanes oxley, in which it is a -- >> who signs that? >> and importantly, does not give great protection to the i didn't know what was going on defense. so that's why we passed sarbanes oxley. >> dick fuld saying, i don't know -- >> that's not a defense. so, that's exactly why you see lots of cfos resign before companies hit the wall, because they don't want that legal liability. and i think that we passed this because -- exactly because these crimes are were so hard to prosecute. where's the justice department on this? where are state attorneys general? i mean, what -- it's just too difficult, is that their answer? i don't know. until we find out what exactly happened, we're not going to be able to reform the system until we really know exactly how these things were mismarked, why it was executives were paying themselves big bonuses on positions that ultimately ended up being worthless or worth

veriless and the shareholders got defrauded, if you will, the marketplace was defrauded. where were the auditors on these things? >> so just to make sure i'm not putting words in your mouth, you think the justice department, somebody, these attorneys general, somebody needs to be going after dick fuld for what happened with lehman. >> i think they need to go after every big company that collapsed where we find out that on a postmortem basis that assets were overvalued materially. >> if you go to christine's book, basically this book -- >> which is called? >> "confidence game." which is a book about how i tried to convince regulators, s.e.c., attorneys general, i must have met with moody's ten times, sent e-mails to the boards of directors, tried to meet with the audit committee of mbia about inadequate reserves, inadequate capitalization and what happened was, i got attacked personally. the whistle-blower, very often the short seller, ends up being attacked. now, i survived.

ultimately i was able to rebuilt my career, start a new firm, get short and ultimately be right. i think there's enough evidence in the book for a case to be brought here on financial statements that were signed where they knowingly were aware that they were wrong. >> i remember a panel we were on in stanford, connecticut, november of '07 as things were unwinding quickly in the market police. bill was talking about the work they had done, marking the positions where they had data. they could go in and see just how -- the variance between where mbia was looking at things and where the real world was. people were noticing this real time. and again, i'm mystified as to where our justice department, where our prosecutors are, where on a lot of this stuff, because it's not rocket science. >> i haven't anybody bring that up before. >> you can look at the data, look at where stuff was marked, look at e-mails. >> people are trying to convince us to do away with the mark to

market rules and everything will be fine. i guess we know -- we looked at the end result of what happened with these marks and -- >> but we actually in april of last year, we got the -- because the banks complained about mark to market about how unfair it was when things were going down, got rules actually liberalized a little bit. and so -- >> one of the things that will help with the financial reform bill, to the extent more derivatives are on exchange, more transparency about pricing, it will be harder for institutions to mismark them. it took place on a lot of cdos because there wasn't a trade you could look at. >> so-called level three. >> it was a model. here's my model, matches the rating agency's model so it must be right. the incentives of the people writing models is not to sign their own death warrant. >> which is why we have sarbanes oxley, though. in that people can say, well, i was using -- i was using my judgment, my best judgment, but if it turns out the entire pattern in aggregate is a large

fraud, you know, we have laws for this. and i don't know, again, why we're not going after this stuff. it really, i think, is what's making the public so cynical about the process. >> all right. kynikos is greek, right? what's the meaning? >> it means -- it's the word cynic, joe. >> cynic? >> yes. >> there are some things happening in grease that are making us cynical, too. >> greece is a great segue. here we have the germans and others complaining about not bailing out greece, but who is the unnamed person at this table? it's the european tax paper. many of these sovereign debt bonds sit on bank balance sheet. >> oh, boy. >> and so, you know, to theuiji extent they need to be restructured, guess who's going to be on the hook? the european eu taxpayer for, again, the stupid decision banks have made in buying the sovereign debt at too high a price. >> we need to go. when can you come back and talk about this and bill can sit

here? >> i think -- i think some time soon. some time soon. >> okay. jim chanos, thank you. meantime, democrats recooping this morning after the vote to begin debate on the financial regulation reform bill failed. democratic senator mark warner of virginia, who voted in favor of that starting debate joins us. senator, good morning to you. >> good morning. >> first question might be, which does leader reid make another run? >> today, tomorrow, i mean, i think one of the things that's remarkable is we all agreed, both sides of the aisle, we need financial reform, we need to make sure as the earlier segment, we never have the taxpayer again kind of holding the bag, on the hook. you have to have more transparency. you've got to try to set up some framework that hopefully the market will give predictability in items of rules of the road. why we're going through all this political theater to try to get to the part we can actually start offering amendments, i don't get. i'm a new guy. but i do think we'll get there, if not today, tomorrow, some

time this week. >> what do you think particulma needs to change? to get olympia snowe on board? >> my hope is we'll get a bill that doesn't limp through with 61, 62, but end up having 70, 75 votes. what i don't get is there's commonality of interest here. i think everybody wants to end too big to fail. everybody wants to make sure that around derivatives we try to sort out a regime that provides an appropriate end-user exemption but at the same time tries to encourage more of these contracts be cleared and put on an exchange. we to make sure the whole overall area gets a little more transparency and we don't have taxpayers holding the bag. details are important, as your earlier segment went through, the details in the weeds could amend to billions and billions of dollars. we ought to go ahead and start the debate. i've been working, for example, with bob corker from tennessee. we did the first sections on

systematic risk and too big to fail. we have amendments we would like to offer to tight continue up a little bit, but you have to get to the bill before you can have those amendments. >> we've had senator corker and you on together. it it seemed like you were moving a lot faster at the time than ornishtives on the hill. you talk about xanalty. republicans have unity here like they've never had before. they obviously are feeling strongly, and not the way you guys do. >> i think what you're seeing s is -- i think yesterday was more about politics than it was about substance. >> in what way? >> well, because, i think they wanted to show unity in terms of trying to hang together on the first test vote. remember, this was not a substance vote. this was just, can we start talking about the bill? again, i'm a new guy but i thought the whole purpose of debate on the floor was to are these ideas out, argued back and forth, then you offer amendments to correct them. why we can't at least get to debate the bill, i don't get. and i do think the republicans,

you know, there's negotiations going on between dodd and shelby right now. i think they're very close. >> so you think there may be more republicans open to this bill than the vote suggests? >> yes. at end of the day, i do not believe that the complete u.n. anymo republican says we want melt down, i don't believe that. >> i think some republican senators voted yes the first time, thought they would have another chance to vote. we know what happened there. i think that memory might be appreciate in people's mind as to how that whole thing went through. maybe they're saying, look, it's 59 and this is the way it's going to be. >> i don't agree. >> well -- >> hold it. let's bear out the facts here. i have amendments. i wouldn't be voting to move forward on this bill if i didn't think there was going to be a chance for me to try to correct and improve --. >> but there are still some bad feelings from what happened -- >> but in health care, there were legitimate differences about the role of government and

about whether we ought to go ahead and extend coverage to 30 million more people. in this bill, i'm not sure there's many differences that we ought to make sure taxpayers are no longer on the hook for any kind of failure on wall street. >>. make sure you'd rather have transparency. >> that's to make -- >> you've got to make sure you have some rules of the road so that derivatives can be used but there's not an end user exemption to even draw -- >> but it's not happening in a vacuum. there's linkage to what happened back then and that's like saying you're going to take politics out of politics. that's the way it works. you must be new down there. >> if there's not commonality around the fact we need financial reform 18 months after the meltdown, then i don't think we're going to get anything done. >> we could wait for that panel that we set up to make sure we get it exactly right. i mean -- >> let's put it like this. i don't think 18 months -- it's tough for me to go out to va virginia and say, hey, 18 months after we basically but 700

billion bucks, why we haven't changed the rules to preclude that from happening again in the future. corker and i worked our tails off to try to say, how do we make sure that we can kind of get it back? there are parts of this bill in our section that still need to be improved. wasn't exactly what we started out with. we'll get that bite of the apple if we can get the bill to the floor. >> senator, you mentioned derivatives. that's where a lot of the controversy has centered over the last few days. on one hand you have companies like harley davidson, mars, others that want to be able to continue to use derivatives and get an exemption. on the other hand, you have warren buffett of berkshire hathaway and other companies very concerned about this idea being retro active, going back to derivative contracts that have already been settled where they're forced to put up collateral. where do you come down? >> i have some concern about the retrotivity of it. i think there are uses of derivatives to be used to hedge against future business changes.

where i suggest is, let's write our best end-user extemgs. and then, in effect, accept the industry who says, this is only going to be a small percentage of the contracts being written and say, if the -- if that percentage exceeds some number, if we suddenly see that 90% of the contracts are being, you know, re-exposed as supposedly end-user exemption, then punitive action takes place. but let's try to write a good exemption for industrial end users and put a trip wire in place if industry abuses it. i think there's a way we can come to common ground. >> do you think carl levin's committee is doing this hearing today to hurt those republicans who stood against the bill yesterday? >> listen. i think that senator levin had this hearing planned for a long time. the committee's been working on this issue for, i believe, most of the last year. i'm not on the committee. i don't know the substance of what he's getting at. you know, i can see where people

are suggesting the timing but i do think this thing has been on the books for many, many weeks. you know, what i hope would be this, every financial institution i talk to, and i'm a pro-business guy, spent 20 years dealing with the markets before i got this job. >> i know. you were the first person in your family to make $100 billion. >> that's right. i want to try to get it right. i mean, this is not democratic/republican. we've got to get it right. everybody that comes in to see me says, hey, i agree, we need financial reregulation but let me tell you why the one section that affects my firm, you shouldn't do because of unintended consequences. you can get kind of default into the status quo because everybody's got a reason why, financial reform for everybody else but don't touch my section of the market. we need smart folks, candidly, from industry itself, to help us get it right eye right because if we get it wrong, lord knows we could screw it up pretty bad. >> senator warren, bill ackman. do you think there's annaning on the resolution reform issue about what the bill -- how the

bill really works? do you think the republicans understand that this is not about bailing financial institutions, actually, it's about winding them down? is that understood in washington? >> well, i think you raise a great point. corker and i, we are working through this, realize we wanted to make a resolution authority that was so painful that, you know, for management and shareholders, that they would be wiped out and that anybody would prefer trying to go through a more ordinarily bankruptcy process. the question that we rose was, how do you make sure that one taxpayer aren't exposed, and, two, you have some funds available to keep the lights on so you can ordinarily put these businesses out of business? and, you know, we got criticized somewhat for this, having this prefund, funded by the industry. i think some of the critiques that came up with were folks that maybe didn't understand the process you have to go through are having second thoughts saying, okay, if we don't prefund by industry, there are other ways we can do it. treasury can borrow the money

but that subjects you to the critique that taxpayers could be exposed. there are different ways to get there. into the day we have to put these firms out of business if they go into resolution. we have to protect taxpayers and have resources available so we don't do it in this kind of panic mode we saw in '08, but then there's an ordinarily way to basically put these folks into receivership, not conservatorship. >> appreciate the time. senator mark warner. >> thanks, guys. coming up, the headlines of the day, the case against goldman, and how do take on the s.e.c. and much more with our guest host hedge fund manager bill ackman.

hey, aren't you... supposed to be following that fidelity green line? well, yeah, but it keeps leading me back to my old office. i think it might be broken. or maybe it's trying to tell you something. yeah, but what could it be trying... oh, i left my 401(k) at my old job. and i left a jacket on the back of my door. but i think the line is talking about my 401(k). leave a 401(k) behind? roll it over with the company that's helping more people reach retirement than anyone else. when it comes to investing, never settle. fidelity investments. hi, ellen! hi, ellen! hi, ellen! hi, ellen! we're going on a field trip to china! wow. [ chuckles ] when i was a kid, we -- we would just go to the -- the farm. [ cow moos ] [ laughter ] no, seriously, where are you guys going? ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao!

ni hao! ni hao! ni hao! ni hao! [ female announcer ] the new classroom. see it. live it. share it. on the human network. cisco.

let's recap earnings. ford earning 15 cents better than expectations. it also says it is on track for solid profits for the year. our phil lebeau with be speaking live with alan mulally coming up during "power lunch" later today. dow component 3m posting 19 cents better than the street was expecting. raised the estimates for the full year. another dow component beating the street, dupont reporting first quarter earnings of $1.24 a share, compared to estimate of $1.06.

dupont like 3m raised its full-year outlook. that stock will be trading higher as well. the bid's at $41.75, ask at $42.05, closed yesterday at $40.95. coming up, the case against goldman sachs. david faber will check in from washington with hers his perspective and we'll figure out what it takes to go head to head with the s.e.c.

goldman sachs executives, including lloyd blankfein, head to capitol hill today. congressional leaders allege goldman developed a strategy to profit from the mortgage meltdown. blankfein says that the wall street giant didn't bet against it's clients. joining us now from washington is our david faber, who is covering today's headlin, it says. anyway, got to get used to that. how are you doing, david? >> reporter: i'm okay. good show. i've been watching it all morning. you guys do a great job. >> wow. >> that is -- coming from you, that is high praise, indeed. so, you know, we had chanos on. short selling is getting -- and ackman is is here. short selling is going to get a bad name again just from the discussion today, i think,

david. >> reporter: yeah, no doubt. listen, it's interesting when you look even at the witness list and what the hearing is called, wall street and the financial crisis, the role of investment banks, and yet of course every single witness is related to goldman sachs. nobody here from merrill lynch which lost $41 billion structuring and holding onto it cdos. to be from citigroup which lost even more, or morgan stanley, some of the investment banks that lost a great deal of money in these various products in the mortgage market. nonetheless, certainly as you say, there will be focus on the short side of the trade as there always is. that having been in this case, mr. paulson pacific to the abacas cdo. >> when goldman reported results that first quarter where we got an idea of how they fared after everyone else was devastated by holding onto the longs, we said, doesn't it make sense? goldman is smart. at that point we were still in an environment where you could give kudos to having anticipated the housing bubble bursting.

but in the benefit of hindsight now, everyone seems to think it was a slam dunk. that goldman nev maman knew it to collapse. they had a conveyor belt of securities to ram down clients' those as they shorted the housing market. that's what you're going to hear today. i wonder if blankfein is in a position to vehemently defend the firm or he's going to take -- as people apologize, we'll do better next time. >> reporter: that's a very interesting question. i was here at beginning of the year for the first hearings of the financial inquiry, the commission on the financial crisis. where blankfein was particularly aggressive and feisty took on the chairman of that committee, strongly in terms of challenging some of thinhis assumptions. i'm curious to see how mr. blankfein chooses to approach today's hearing, if he's the same blankfein, in

which he would argue some of the things that have perhaps caused tease problems or is he a different toned down version. >> interesting, david, we're getting some of the testimony now being released from tourre, some things he plans on saying, i worked on products that built the need for sophisticated invest hers. if aca was confused on paulson's role, it had the opportunity to clarify. it sounds like they're going to be more -- issuing a harder defense than simply rolling over. >> reporter: that may be the case. as we've discussed, you discussed earlier with the attorney from millennium, accessing the face of it doesn't seem to be the strongest case. perhaps he'll go hearter than we anticipated instead of taking the fifth as some people believed he might, given of course he's the key witness, if you will, or certainly the key defendant, i should say.

but that being said, you know, i always go back to that time in the market where i was reporting, just starting to learn about many of these financial products. in fact, even a year later really starting to understand what they were and how it all came about. hard to argue there were that many people who completely believed that the housing market was going to implode in late '06, early '07. you know, that being said, let's not forget there was also a great deal of demand that had been brought about by wall street for buying these products by the big banks. >> david -- >> reporter: so much excess cash around in the world and then many people who were at least smart -- >> the s.e.c. gave sort of the goodhousekeeping seal of approval to what people might call a witch hunt. levin is accusing goldman, he's saying is outright, you shorted the housing industry with when some of your client are long. that is the charges being levied. that's where we are.

>> reporter: it resonates with the broader assumptions the part of many people, it's a rigged game. whether or not this s.e.c. complaint ultimately goes anywhere, that certainly has -- >> the other thing is that customers and clients, do you want to deal here on out with merrill that lost $41 million, or are you going to deal with goldman that might have had a clue of what was ready to come? we'll see whether the reputation with, you know, john q. public, whether that damages the reputation with their clients and customers, because there's a difference. thanks, david. we'll get a firsthand account of what it gets to go head-to-head with the government. more from the land of hedge funds with our guest host bill ackman.

come on, guys, sack those unwanted pounds. i'm lawrence taylor. i lost 35 pounds on nutrisystem. give nutrisystem for men a try. losing weight has never been easier. that's me 22 pounds ago, and i'm never going back there again. don't miss our best tv offer: order now and you can get an extra four weeks of meals free.

that's right, 140 meals absolutely free! hey, get back in the game like i did. i did...go...all...the...way, whoop! i lost 50 pounds with nutrisystem for men. get off your butt and try it. nutrisystem worked for me, and it can work for you, too. don't miss our best tv offer: order now and you can get an extra four weeks of awesome meals! 28 breakfasts, lunches, dinners, desserts, and snacks. 140 meals absolutely free. call or click now. don't make me come looking for you.

welcome back. futures off the lows but still in negative territory. a lot of concerns about greece once again, five-year insurance on greece at the highest level. actually posted like venezuela and argentina levels today as people wonder how they're going to make good on some of the problems they have coming up. when we come back, we have the "stock of the day," but first parting words of wisdom from bill ackman. 

welcome back, everybody. what's it like going head-to-head with the s.e.c.? here to tell us about is is

aaron marcu, head of litigation practice at the law firm freshfield, and mr. ackman's outside attorney on mbia. also our guest host today is bill ackman of pershing square capital management. thank you for joining us this morning. >> glad to be here. >> this is something we've been talking about through the course of the morning, what happened with mbia when bill laid out his plan, told people what he thought he was going on at the company and then was attacked by the s.e.c. and attorneys general. what do you do in a situation like that? >> well, we should have had a perfect situation because bill set out, when he took on this -- what turned out to be a crusade, he laid out everything that he had figured out about mbia in a very public document, which he posted on the website, told the whole world he was taking a negative bet. he thought the company was overleveraged, undercapitalized, underreserved. then he said, agree with me or don't agree with me, but here's all my analysis. and he published a very lengthy

report, all based on public information. so he should have had a great start. and then when the s.e.c. or some attorney general wanted to look at it, they should have looked at a report that spoke for itself and they should have been able to analyze it and do their own analysis. >> but? >> but they were so eager to kind of -- first, there was a problem with dealing with the establishment. bill wasn't the establishment at the time. mbia was very much the establishment. and it had friends in high places and it was -- it had a lot of credibility because it was insuring the municipal debt all over the world. so, it was a -- it was like a bit of taking on a wind mill and kyoto over here hadn't developed enough of a public -- >> those are fighting skills? >> well, if you had been a little better with the jouster. but the reality was that the s.e.c., not as bad, didn't do as bad a job as the attorney general did.

the attorney general was so focused, so committed to taking on the hedge fund industry at the time that it was just dying for an opportunity to get in there. if you remember -- >> eliot spitzer was the attorney general at the time? >> he was at the time. >> he was hard on the prostitution rings, too, but i digress. >> he had made quite a reputation going after mutual funds, investment banks on wall street, he was looking for areas of gap in regulation. he was kind of an arbitrageur as prosecutor, looking for places where nobody else had gone or done a good enough job from his perspective. and he decided hedge funds is the next best place to go. unfortunately, they didn't really sit down and do the reading even, much less the analysis. they didn't read the report bill had written. they didn't listen to what the facts were. they were so -- they were so sure that a short seller must be just trying to fool the marketplace that they didn't do their homework. once they finally did it over the course of the year, they dropped the case. in the meantime, a lot of damage

was done. >> did you ever try to tell bill, look, you may be right and that's great, but the cost of being proven right is going to be too expensive? >> may have said that 100 or 200 times. one of bill's great qualities, apart from being quite brilliant, is that he's got an enormous amount of tenacity. more than almost anybody i've ever met, i think. which i thought was a quality that he had to have to a fault. but this book tells the story of an amazing reversal of fortune. you don't see this happen. you don't see the guy who's getting investigated, no matter how good the lawyering it is, to matter how good the facts r you don't see the guy come out on top and find out the people accusing him are investigated. >> i know you can't talk about goldman sachs but the reason we're so interested in this today is because of everything happening at this point in washington and on wall street. at this point, once again, this

again, there are regulators looking and -- at ways to tighten up restrictions, tighten up regulations. there is certainly a need for that in many arenas, but how do you do that without unwittingly crushing some very good market forces that should be there? >> you really don't want to destroy the creativity of wall street. >> there is some people who would question, you know, with some of the cdos and things out that are out there, but -- >> you don't strangle creativity and have plain vanilla everything, no innovation. we wouldn't have the kind of home ownership in this country were it not for the fact that somebody figured out how to securitize mortgage loans so that more mortgage money could be made available to borrowers. it got way out of control, there's no question. so risk needs to be watched. defects in the system need to be watched. somebody at the federal reserve and that's what this financial reform bill would provide if it gets enacted or some form of it gets enacted, has to be watching defects in the system. why is it okay to give loans to

people without verifying their income, without requiring a down payment. these are just not sensible business decisions. yet they went on and on and on until the point where they began to dominate those subprime loans began to dominate the market. >> this is the point that bethany makes in her "op-ed times," no one is calling the government out on what they're failing to do, protect us from our own greed, is how she phrases it. we can put amisbank les many ba in front of the stand as we want. >> the government, unfortunately, good or bad, is always right. they get the last word, a lot of credibility, they don't have the profit motive that is easy to attack. the reality is that profit motive fuels a lot of good ideas and we want people to have the profit motive so there is always going to be a seller for every buyer and vice versa. this is not really about how bad shorts are. it is not -- because short sellers play a really important role in the marketplace. >> what is interesting, you go back and look at the s.e.c., of

the era, beginning around this time, and up until the change of the administration at the s.e.c. until chairman shapiro, you have an s.e.c. that is much more protective of companies. so, and whistle-blowers, look at markopolos, madoff, stanford, you look at l.a. capital, you look at the mbia situation, in every one of these cases, the whistle-blower was ignored, not taken seriously. now you -- now the s.e.c. has woken up to that and i think they investigate literally every whistle-blower rumor that comes in the door. what you want to be careful of is they don't bring cases that could be very damaging without really being quite comfortable that the facts are on their side. >> finally, there is no one left, but they finally are investigating. everything's gone. lehman, mbia -- basically everything is already taken care of on its own, the market took care of it. now they're on the case? >> what is interesting is i think we have a pretty good regime from a regulatory point

of view. just a question of enforcement. -- responsible for overseeing leverages at institutions and unfortunately didn't listen to david einhorn. >> such a similar situation. it is amazing. there is books written about both. i feel like this is kind of like -- i'm expecting ravlph edwards and "this is your life." have you ever seen that? probably too young? they would come in and it would be -- all these people would be saying things about a person, and then you have seen it, ralph edwards, this is your life, and everybody from a person's past life and a half-hour show just devoted to -- >> was this on before or after "howdy doody"? >> "howdy doody" was before my time, but ralph edwards -- this is nice. >> aaron, thank you very much for your time today. appreciate it. >> glad to be here. >> a good lawyer. very good. don't no he what happknow what ,

but he was good then. >> big ackman and the stock of the day. "squawk box" will be right back.

stock of the day is 3m, nice move to a new high for 3m.

after better than expected results and also raising outlook. that's a dow component. you would think that with the dow components that we have seen today, that the averages would perhaps have a chance to trade higher on the open. but still a little bit low. >> up from where we started. >> from where we started. but the dow components we have seen today, pretty good. >> want to get some final thoughts from our special guest host, bill ackman of pershing square. we have been talking about general growth. and we all know there has been news surrounding the company, even eventually, how much do you still own, how much have you made, what is going to happen with simon? >> it has been a good investment. we invested $50 million or $60 million with the equity, which saves a billion two. the best investment i ever made and we still like it. we would like to continue to own general growth. it is going on right now is simon has a proposal to, guess what i would call make a stage acquisition of the company. they don't think they can get antitrust approval in time so they're trying to compete with a plan on the table whe