along with joe. becky is off. it's you and me by myself. >> sorkin is going to be with us at 6:30. >> yes. >> not here, but he's going be at place where we can talk to him. >> right, exactly. >> and then he's going to be out here. >> he's going to interview paulson, then he's going to rush back here like superman. >> no. he's got jeeves. the car is right out in front and it's idling. he runs out, jumps if the back seat and he'll be right here. it should be great interviewing hank paulson. i don't know that -- i wouldn't say he's taken a victory lap but i think he's let everything sink in since he orchestrated a lot of the things that at the time it was controversial, do we need do this. at the time some of the skeptics and purists, even some of the most far right say, you know, at that point there's a time you

step in with an emergency and we're really glad he was the guy that was here. >> looking at what europe has done, for example, for your the last two years, you can at least say they made a decision. maybe he didn't like the decision they made, but they made one as opposed to this kind of ongoing torturous thing. >> he wanted a be big bazooka in his pocket. >> which most guys do. >> he wanted shock and awe, which he dead. people said that much t.a.r.p., you'll want it back. we got most of it back, it stabilized the system and it was great big -- it was a big enough move to calm everything. there have been people who have said europe need as czar and they need hank paulson. he's suggested that hank go over

there. >> which, of course, freaks the europeans. >> even geithner is here. >> hey, son. >> timmy. >> paulson might have -- they wouldn't have listened to them. how many are there. how many -- >> there's a zillion. 17 in the eurozone, they've all got their finance ministers and the euro group and eurozone. so many leaders. so many leaders. so little leadership. >> you know, in hindsight it's gotten more -- his legacy has gotten better and better as time has gone on. but, again, he was ceo of goldman sachs. >> that's how they had all the power, they control them. >> with some of the backlash against walg street at this point, i would be like him. i wouldn't have want to be out in front. they're ignorant, most of them, that are so app tie-capitalism or so anti-goldman sachs. they've never had an economics

course. they look at him. he could become the poster child. i would lay low. >> you know, the most impressive thing about hank paulson, his many, many wellesley women in his life. >> you know what? i'm going to say that's great thing. >> that's great thing. >> that includes you. >> no, i'm not. >> and wendy. >> yeah. i believe -- i've heard him give a speech where he makes reference to wellesley women. >> not hillary. she's a wellesley women. >> no. >> who else? >> madleline albright. french gdp growing by 0.2%.

investors invested more. the second largest economy may avoid a recess this year and for the first time since the beginning of 2009 french grouktd outperformed neighbor germany. contracting slightly in the last three months of the year, down 0.2%. but the figures were better than forecast. figures out of italy shows the euro's third largest economy has slid into recession. the italian economy registered 0.4% last year compared with 0.1%. it shrank 0.3% in the first quart quarter. that's the first contraction since the first quarter of 2009. when their economies contract, they have less tax rev nunld less money to pay back their debt, which is their hardest issue. >> and harder for us to sell things. it's different over there. don't they add up the quarters for the year. >> yes. they don't do it the same way.

it's not apples to apples. >> if it was -- we would be shrinking at an annual rate. over there you add up each quarter to get to it, right? >> i think so. >> it's not great, 0.3%, but i'd almost call that -- >> for them, it's gang busters. >> exactly. given the structure of things. the remarks that china is lifting some stakes. the governor of the people's bank of china believes that europe can solve its issues and suggest that china will expand investments in the area. he also repeat as promise that china will become more involved in helping the crisis in the rescue fund. meantime in a report today, china central bank argues that the country still needs to effect a rebound. they're going to maintain tools while keeping a lid on inflation and hank has, i think, recently

met with chinese officials. premiere xi. i debate whether to call him 11. it's x-i. >> it's not a roman numeral. >> you mremember on "seinfeld" when a guy wanted to name his child seven. >> i have to call him xi, not 11. paulson, he's going to talk china too. >> i think that's his greatest interest. >> i think so too. i want to ask him some questions about china. i understand. i understand there are huge cultural differences and we can't say, well we like property rights and human rights and we take these things for granted. does there come a time where really 1.2 billion people and their government have to face

human rights and property rights and it might not happen quickly? >> it's the people themselves who have to seize their own deftyny and do it for them. >> for a while after maybe some efforts in iraq or afghanistan. there have people who have said even that world can't handle democracy. >> i can't believe that people can't handle democracy. all people can handle democracy. >> right. you can't say -- >> all people understand choice. babies understand choice. you feed them peas, they don't like it. they do like carrots. right? people understand choice. >> i have to disagree. i think carrots and peas, if you like one, you like the other. there's even a song, "we go together like peas and carrots." in the u.s. today a few economic reports. you know that song. >> no, i don't. ♪ peas and carrots somebody feed this baby please ♪

i'll teach you when you need to know it. we're still hoping. hope springs eternal. cavorting around the world, you'll meet mr. right. >> maybe there's multiple mr. rights. 9:15, industrial production for january. then at 10:00, get this. the national association of home builders is going to build its sentime sentiment. can you wait for that. at 2:00 'em the fomc goes over it minutes. the futures, up. >> despite the fact that they were talking about letting greece go into an abyss. >> it looked like it was going to trade lower and it ended up with a slight gain. we ooh not there yet. if we were to open strongly

today and then add to those gains we could possibly see a move up there. i guess a lot of this is going to depend on how europe closes. it's a key. i like that. do you watch that on "squawk" on the street? it's cooling. >> where are -- i can't show you the boards. higher across the board because of what's happening, i guess, in asia to some extenlts. "wall street journal" says the analyst is henry king. king's activities are said to have focused the flow of information to -- from taiwan to u.n. investors about the supply chain for pc parts makers from taiwan. the fcc dealing a blow to plans to establish a hee-speed wireless network. failing to propose it after a

government expert said it would interfere with the gps system. the hedge manager has made a huge bet on it. he's surge more than $3 billion from his harbinger capital hedge fund. this has got to hurt. wow. >> it's amazing. you whereabout your gps, you know. you've seen like -- if you follow it, you can turn into a river. >> i love the consent of light squared conceptually. this idea that in order to get your wireless it's got to be through a phone company but you can be a company that buys it second hand and -- >> it's a serious wrench in the works. >> it's a terrible wrench in the works. i guess the idea, but wow. >> the deal would be the biggest u.s. bank acquisition since dodd/frank was passed in 2010. all five fed governors voted in

favor. the capital one shares rising on all the news. the viking guys are celebrating. alec baldwin. and zynga reporting its earnings. the shares fell after hours but the stock is up more than 25% since facebook revealing at the beginning of the month that it comes from zynga. that's an alec baldwin reference. isn't that -- >> i think it's a word game. >> i should. talk about anything within the last five years. >> i thought it was cute. you used to think the disk drive was where you put your coffee cup. >> or the credit card. there's no place to swipe it. >> no. >> i have not bought anything on line yet. >> never in your whole life? >> i have not.

my family has. >> really? >> you can click -- >> i'm on amazon prime every other day for something. >> i don't shop anywhere except for the supermarket. >> your wife takes care of that. >> no. i go to the supermarket sometimes but i don't like shopping. >> time for the global markets report. ross westgate is standing by in london. hey, ross. >> hey, mcc, good to see you this morning. the u.s. stocks are ahead of the u.s. open. a little bit later, about 8 to 1. pass decline. pretty slim flat close yesterday. mervin king laying out the inflation forecast for the year. they say that forecasting inflation could be below forecasting. that 2% target. of course a similar amount of qe. so this is suggesting the door is open on more qe but it's a

highly uncertain outlook. he's also said you cannot prepare for the unforeseeable consequences of a greek default if there was to be a disorderly greek default. dax up 1%. they contract 1 pnlts 2% in the second quarter. we were forecasting minus 0.3%. the french economy expanded in the corner. the contraction was worse. we've seen the euro dollar pretty steady throughout the session. the yen weakening. that follows from the bank of japan. the euro/yen is stronger. dollar yen up in the two-momtd highs at 789 pchblts 52. sterling also reacting not only to the bank of england inflation

but it went up. but we had it. also relating to the fact that the outlook is very uncertain. we've just had the greek finance minister saying some euro members are playing with fire that they might be rejected aed from the euro or has suggest they'd may want greece ejected from the euro. we understand there's to be a call. they don't trust greek promises. they've now asked for details on how they're going to run them. there are thoughts that maybe --

these are thoughts from the german officials they now think europe is in beater place to allow a disorderly default. that's what the greek minister is saying that is correct th they're playing with fire. mervin king emphasizing this morning there are not consequences of a european default, you can't plan for it. that will roll. back to you guys. >> let's define that. a disorderly default. right now we know they're supposed to take a 50% default. march 20, $14 billion due and nobody gets it so it's a 100% loss at a minimum on that round of bonds and then we see what happens from there. >> yeah, yeah. although it's actually march 27th. then, of course, it is a contract. you can argue it over a contract. so, yeah, it's just, disorderly

effectively would be there is no bailout. >> right, right. that's the banking system. >> after two years, i don't know how long we've been talking but breathless breathlessly. then france up 2%. you would think it would tumble because of the breathless reporting that we've done. >> in italy it's still sunny. >> it snowed. >> i know. but great three hour. i mean life goes on. what is it? point 2 down. up point 2. does it really matter? >> italy is firmly in recession. you look around. what did france do to grow, i

wonder? i was trying to figure that out. >> there was investment and consumer spending. it held up. you can see it had gotten. >> yep. >> now, did you get a valentine at all yesterday? you never did get nothing, right? you're standing in front of red right there, but you didn't -- you got nothing from no one. >> no. i did. my wife very kindly wrote me a card which was very nice and i reciprocated. no, we did. >> oh, i didn't realize that. okay, good. >> we thought it was an american thing only. >> not thanksgiving. they're bitter about the whole -- how well we've done over here still. >> any time you want to -- by the way, any time you want to come back in, you've done very well. if you want to rejoin the

commonwealth, you're more than welcome. >> no, no. >> you can come back to sterling. you rejoin the commonwealth and make the queen effect ivgly, you know, as -- >> i like the queen. >> she's got her diamond jubilee. that's going to be a good thing. >> i like the queen. you used to have the most powerful military and navy. now your entire funding is on a wedding of the teenager. you've got the changing of the guard. that's nice. >> paddington. harry potter. >> harry potter. >> but you are kind of living in the past. you've got a couple of rowboats left in the world's most powerful -- that's okay. thanks, ross. >> see you, joe. >> coming up, coming up, flole the money. i do this sometimes. >> yeah. steam comes out of your ears. >> i'm kidding around. relax. new info.

set your clocks, we're a bit more than 30 minutes way from a live and exclusive interview with that gentleman right there, former treasury secretary hank paulson. linsanity. knicks' point guard jeremy lin -- like tebow -- hitting a game buzzer. it's a sixth win in a row for lin since he took over the point guard position. now as we head to break check out the global market headline.

welcome back. is s&p 500 higher by 8. the nasdaq higher by 15. making headlines, we're going go through a number of 13 fs. we learned the firm is taking new stakes in davita and liberty media. increased stakes in directv, coca-cola and general dynamics,

caremark. in creased its position it had in apple. soros fund management reducing its stake in xerox, citigroup, at&t charles schwab amazon. raising share stakes in google. the airline industry is bracing for tough times ahead but virgin atlantic is reefring for the skies it says here with a first-class makeover. joining us now, the company's ceo steve ridgway. i already think of it as first class. almost exclusively. what else can you possibly do? >> well, i enjoyed your banter in the last session. i enjoyed hearing that. it's very good to be here today. it's really targeted a new fleet

of aircraft arriving this year. there's a fleet of ten airbuses arriving. it's a complete makeover. i think we're flying the strongest product in the north atlantic but you can't standstill. in these tough times you have to be out there continually improving your game. they'll go on through to dreamliners which start arrived. delayed unfortunately. >> what's going to make them better? i mean the pillow is going to be made of cashmere? you've got flatbeds in your first class. >> it's the next generation of flatbeds, so they're more comfortable, bigger, more modern design. i think the upper class fleet flying today is the best but this takes on another stage and that allied with a new on board service. we've revamped the meal service. that is rolling out starting

next month. all these things come together as well as a big new clubhouse, a 10,000-square-foot clubhouse at jfk that's going to be air side for the first time and the aircraft will be bolted onto the clubhouse. >> that is fantastic. instead of having to leave the clubhouse and have to go somewhere else and go through the check in somewhere through security. you can go right from there into the plane? >> yes. you'll get dropped off by the limousine. a private security channel like you do at heerkt row straight into the new clubhouse and the aircraft most times will be on gate switch directly below the clubhouse. so it will be a fantastic service improvement, think. >> mr. ridgway, for a while when we had anyone in lodging or travel on two or three years ago, there was actually a question as to whether they were going to invest big in the high end, given, you know, not just the financial crisis, but almost the stigma that we're still dealing with -- watch this

election we're going to have in this country between now and november and the stigma of the 1%. i don't think anyone in the 99% can fly on virgin. >> well, thing you have to remember -- it's very kind of you to call it an upper class product but it's a business class product. we always strive to make it as first class as we can. yes, it's baze class product but actually lots and lots of people fly it. business men of all shapes and sizes and luxury riders. we pride ourselves in the products we've provided to you. >> what's an egalitarian ticket going to cost me round trip? >> competition is very fierce and the prices are great and passengers are great at finding the great fare. that's the nature of the competition, isn't it? >> yes. that is amazing. in terms of business travel are you back to prefinancial crisis

level? >> no. our passenger numbers -- we're not back to where we were. we did see growth and we saw a reasonably good start. that's probably more focused on our ledger business to be fair but we have maintain add good show. in fact, we've grown our share, so that's been pleasing. but you have to fight very hard for it. and there's no doubt. i think businesses are out there traveling. they need to go out there and do business to get our respective economies going. the uk needs to get growing. the growth is very, very flat at the moment. i think business travelers are traveling but there's a way to go back to the 2008 levels. >> how close -- considering how much -- what a big apartment of your costs are fuel, how close are you watching the situation between israel and iran and what it could mean in terms of either pricing or disruptions? are you concerned at all. is it on your radar screen or do you wait and see what happens? >> no. we watch that like a hawk. thing that's a big adjustment

for the industry at the moment. we happen to live in a world where fuel prices are not over $100, they ee over $110 a barrel and i think what people forget is last year was the first year they had to cope with an entire year where fuel was at or above $110 a barrel. 2008 was a big trauma but if you remember the big oil price fell away. we hedged very aggressively as much as we can. of course, all we're doing there is smoothing out the future. it does take out those shocks as you get, as you say, the tensions on something like iran. >> mm-hmm. we appreciate your time. i think you're sort of carrying the managemetle for the modern sector. it's not going to be the public sector, it's going to be the private sector. you can bring it back single-handedly. >> given your earlier conversation i think aviation has made the global economy possible. you need to remember who

invented the jet engines. >> touche. and actually were you -- the numbers from europe, they're not -- i mean those are -- we can work with down 0.3%, i think. that is not going to cause a real, i guess ripple in the entire global economy. i mean i think it was heartening to see that, no? >> yeah. i think -- i mean -- i mean it's still going to be very, very tough this year, but, you know, there are one or two signs that people realize this is the new norm. this is the basis on which you have to run your businesses. consumers are getting used to this. i think hopefully we ool see some gradual improvement. this is why we even got these big investments going on in great times. >> great. thanks for playing along. i appreciate it. hopefully we see you again soon. >> thank you very much. >> okay. coming up andrew's going to join us live from new york where he's preparing for a live interview with former treasury

secretary hank paulson. we're going to chat with comcast c ceo. but first as we head to break, winners and losers.

today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. [ male announcer ] let's level the playing field.

take the privileged investing tools of wall street and make them simple, intuitive, and available to all. distill all that data. make information instinctual, visual. introducing trade architect, td ameritrade's empowering web-based trading platform. take control of your portfolio today. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.

hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too. [ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business.

good morning. welcome back to "squawk box" on cnbc. i'm joe kernen along with michelle. becky quick is off today. andrew sorkin sit downs with hank paulson. he'll join us in just a minute with a preview. he'll do the interview at 7:00 this morning. the headline, none of these are lower headlines, i would say,

would you? >> only top headlines. dwoemgt do low headlines. >> for example, the airbus is ordering an investigating how the company allowed wing cracks. the plane maker's been dealing with embarrassing publicity about the problem. roche says that counterfeit versions of its multi billion dollar cancer drug found in the u.s. there were only two that rose to the level of top. >> right. >> headlines. that's all of them though. as we've been telling you, andrew's in new york this morning where he's going to sit down with former treasury secretary hank paulson. you weren't watching right at the top, andrew, we when we were talking about how excited we are about china, about talking about debt, and also about how you're going to try to get back here by 8:00 when the interview is over at 7:30.

i said you have -- that jeeves is idling right outside -- >> idling, right. >> you're going to dive into the back seat, peel out of there and be here by 8:00. >> helicopter, joe. helicopter i wouldn't expect anything less from you. jeeves has a pilot's license for helicopter? >> didn't you see "batman?" of course, he does. >> there's staff they have to maintain. there's a lot going on. >> when is he going to show? is he there yet? >> the secretary has not arrive. he should be here in a little bit. he'll be starts at 7:00. he's in town and had dinner with xijinping. it's interesting what he thinks

is going on in europe and how the chinese are thinking about what's going on in europe. and as you know, paulson still gets called by people like mario draghi. we'll get a call on whether this is comparable to what happened in 2008 and he still has the ear of ben bernanke and i want to get his view on what's happening in the u.s. economy and jobs and all of that. it's hopefully going to be an exciting half hour. >> and there's news out of china about that maybe they feel a little bit more comfortable with investments in europe. we've had some of the gdp data which i'm calling pretty good. i don't know. up 0.3%, town 0.3%. that's not that bad, andrew, for all the animals speared, getting drained out of that part of the world. and yet france was able to actually grow 0.2%. >> right. i don't know. maybe things are better than we

think. we'll hear what hank paulson has to say on that. i'm hoping that maybe he'll give us a little bit of color on discussions we have with mario draghi. perhaps it's not as deep as we think. >> you know, i've said this to joe in the last hour and being self ref rehn chal and self-centered, but i'm going to bring it up again. i find it most impressive, number of wellesley women he's had in his life when it comes to moms and relatives and things looic that. >> you're a wellesley grad? >> duh. i've mentioned it to you thousands of times. >> it's hard to work with both of you ivy leaguers. >> i'm a buffalo man unfortunately -- well not unfortunately. >> you're a buffalo man.

>> that kind of snuck in there. i wonder does he have a day of reckoning in the future where human rights, property rights, where that becomes paramount out of 1.2 billion people and i wonder how the government finally is able to deal with that in a, you know, stable way. but we'll see. thank you. that wel >> well, we look forward to that question. we'll see you. from the markets, joe joins us from the cme. good to see you. >> hi, michelle. how are you going? >> good. it's going to might harder for them to pay their debts. asia's rallying. europe is higher. we're doing just fine. why is the market higher do. we think the situation in europe has been cordoned off? what's the storisome. >> i think the story is for two years all we've had is bad news, bad news, bad news. to have china come out and give us a positive statement.

our stock market has been so healthy this year that people are starting to believe we could be a little bit higher. what's interesting is the first few weeks of the year we went high owner low volume. over the last week and a half the volume started to pick up as people are starting to put a little more money into the market. . i think the next thing would be if people start to roll out of bonds and into the stock market. that would be a very, very healthy sign. we started to see it, as i say, over the last week and a half or so on the spx, s&p 500, we're coming up on a level of 1377. we obviously have a bit higher to go. around 1360 it looks like this morning. we do have room on the upside that would equate to 170 dow points. before the next time we see major resistance. if we get through there, we'll get up to 1,400. i think we could see that happen if the volume can return and we don't have any -- the problem that we've seen with europe as

you know over the last few years has been we get neutral to somewhat positive news and then it always seems like three weeks later we get something negative that throws a horseshoe or something into the whole mix. >> that's the thing to be watching for. good to see you this morning. thank you. >> can i ask one quick question? >> sure. >> joe, i was listening on the way in. you've really never bought anything online your whole life? >> no. i've been associated with people who have. i've asked people to do the actual buying for things that i've received but i myself have never hit the return button and had something come to me. >> so you're an accessory to the crime, not involved with the crime siitself? >> that's correct. boy uld say this associate has ordered multiple, dozens and dozens -- ebay, thing we're involved in an auction every day -- every hour almost.

i'll be talking to her and she'll be looking over to see where the minute's ticking down on how long you get something. i mean i've seen it happen but i have not actually -- >> so ebay financed by kernen? >> a lot of it is. a lot of thing i don't want to get my hands dirty. andrew has his driver. >> you have your own jeeves, is that what you're saying? >> no. i do not. i handle my own speeding tickets. >> comments or questions about anything you see, e-mail us. coming up phil lebeau joins us with new proof. phil. >> prized companies are saying do we really need to send somebody over to europe for a particular business trip? how bad is it this year? new numbers when we return to "squawk box" in just a bit. [ mom ] i think it's fine. it's the new element from at&t so it's w-a-t-e-r proof. cool. what else does it d-o?

it's fast. it's 4g lte. 4-g-l-t-e? mhhmm. i think it's time to stop spelling? ok. a-y. [ male announcer ] introducing the waterproof pantech element. buy one for $249.99 and get a 4g burst smartphone free. only from at&t. [ male announcer ] aggressive new styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the new c-class with over 2,000 refinements. it's amazing...inside and out. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services.

yeah, you -- you know, everything can cost upwards of...[ whistles ] i did not want to think about that. relax, relax, relax. look at me, look at me. three words, dad -- e-trade financial consultants. so i can just go talk to 'em? just walk right in and talk to 'em. dude, those guys are pros. they'll hook you up with a solid plan. they'll -- wa-- wa-- wait a minute. bobby? bobby! what are you doing, man? i'm speed dating! [ male announcer ] get investing advice for your family at e-trade.

welcome bachlkt the futures have improved. it indicated that the market did eek out gain yesterday and we're continuing to study 13 ifs from some of the world's most powerful and successful headliners. among them, bill ackman taking a new stake. cnb kre's phil lebeau joins us with jaw-dropping numbers. joe. >> european business travel has really been one of the few engines that is driving profit growth for the airlines, but take look at the global business

travel association's forecast in terms of what they're seeing potentially in europe as the economy over there slows down. currently trips are flat to spend up about 5% year over year. here's the real concern that the spend could drop as much as 16% if there's a severe recession over europe and by that they're talking about $88 billion less being spent on european business travel. currently the u.s. spends about $263 billion in terms of executives going over to europe on business. and that's the forecast for this year. but increasingly, companies are thinking twice before committing dollars to european business travel. >> what we're seeing is that companies are concerned about putting money -- spending money on business travel to send their travelers to do busy in europe in a very uncertain environment. >> as i mentioned at the top it's daf problem for the airlines because europe,

michelle, as you take a look at the headlines, europe is really one of the few engines for driving profits for the airlines in terms of business travel because they've got the pricing power right now. but if that price demand slows down that's going to evaporate very quickly. these are worrisome headlines. >> virgin airlines is making a huge improvement in business. >> they'll get that, virgin atlantic and all the others will get it as long as that demand is there. but as soon as that slows down, that's the problem. >> all right. thank you, phil. >> thank you. >> you bet. an all-star guest line. in addition to phil lebeau, hank paulson, brian roberts, randy kroez ner and senator ron cork anyone. he was theoretically on the

short list for vp. finance media, the economy, politics all front and center on "squawk box." stay tuned. spark card from capital one. e employee of the mo. spark cash gives me the most rewards of any small business credit card. it's hard for my crew to keep up with 2% cash back on every purchase, every day. 2% cash back. that's setting the bar pretty high. thanks to spark, owning my own business has never been more rewarding. [ male announcer ] introducing spark the small business credit cards from capital one. get more by choosing unlimited double miles or 2% cash back on every purchase, every day. what's in your wallet? this guy's amazing. look, every day we're using more and more energy.

the world needs more energy. where's it going to come from? ♪ that's why right here, in australia, chevron is building one of the biggest natural gas projects in the world. enough power for a city the size of singapore for 50 years. what's it going to do to the planet? natural gas is the cleanest conventional fuel there is. we've got to be smart about this. it's a smart way to go. ♪ librariaemily skinner,

each day was fueled by thorough preparation for events to come. well somewhere along the way, emily went right on living. but you see, with the help of her raymond james financial advisor, she had planned for every eventuality. ...which meant she continued to have the means to live on... ...even at the ripe old age of 187.

life well planned. see what a raymond james advisor can do for you. nchts we're back. you want to talk, are you a basketball fan? zbl no. and that's what's significant. about my pick. zbl so, is it really significant? so you're pretty sharp. and i've

mentioned that before. but you have figured there's something going on with this guy, lyn. zbl jeremy lyn? i know who he is. zbl you're proud of yourself that maybe you've heard of this guy. zbl yeah. zbl actually the nba didn't start for while and a lot of people said this isn't like a football strike and that players should realize i like college. i like watching college

basketball. it would have to be a pretty special game for me to arrange my saturday or sunday around -- >> a professional nba game. >> yeah. but you get a guy like this and suddenly it's like hey, the knicks are going to play. >> and it's the cinderella aspect. the undrafted part. nobody wanted him and he's a star. >> i guess lebron at one point, you know there's some bad blood in cleechveland and it's not as positive a character. >> because you knew he was coming, right? we knew he was great from high school. was so highly anticipated and he's, didn't he baer that out for at least a while? >> he's great and he's great in miami and i like miami and i can understand how someone has to decide what to do with you know, pete rose left -- left the reds, finally so -- >> the taxes are lower in florida. >> they are. if you have an interest in just the whole notion about whether the government is a good place

to go for venture capital ideas or deciding which industries will be the winners of the future, a solyndra type article, it's washington's knack for picking losers. a page in the "wall street journal." even a quote from larry summers, who warned the administration against the federal loan guarantees to solyndra. he wrote in a 2009 email that the government in his words, the government is a crappy venture capitalist. and you can just, just time and time again when, when and it's not just that the government is incompetent. which in a lot of times, it is because there's really no incent i to do things effectively. but it's the decisions are made politically. they're not made on an economic basis. >> right. >> they're made politically. not all, because there's malice intended, it's just the nature of the beast itself. that it's made politically and that doesn't work in something where you know, there's high

risk, high reward for these new industries. and the government just is not getting it. >> and it's always done with this justification, well we need to invest in the future and we need to help people create jobs. >> tax people to invest their money into what the government thinks is going to work, which usually doesn't work. and it ends up wasting resources. >> ethanol. >> that would have been better spent -- the whole argue. that we have and we have an election based on one thing or another, coming up in november. coming up the news-maker of the morning, former treasury secretary, hank paulson, the u.s. forgettable crisis, europe, china and much more, the live conversation you can't afford to miss, next. ♪ that right now, you want to know where you are, and where you'd like to be. we know you'd like to see the same information your advisor does so you can get a deeper understanding of what's going on with your portfolio.

we know all this because we asked you, and what we heard helped us create pnc wealth insight, a smarter way to work with your pnc advisor, so you can make better decisions and live achievement. an investment opportunity you didn't see before. fidelity's next generation ipad app lets you see what's trending around the world, as well as what over a million fidelity customers are trading throughout the day. and advanced charting lets you customize your views and set up your own comparisons. our ipad app can help refine your strategy or even find a new one. i'm velia carboni, and i helped create fidelity's next generation ipad app. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades and explore your next investing idea. laces? really? slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug. i have club passes. [ male announcer ] now there's a mileage card that offers special perks on united, like a free checked bag, united club passes, and priority boarding.

thanks. ♪ okay. what's your secret? ♪ [ male announcer ] the new united mileageplus explorer card. get it and you're in.

in this hour of "squawk box," former treasury secretary and goldman sachs executive, hank paulson in an exclusive interview, from the economic bailout in 2008, to the current european debt crisis, thoughts from the man on the front line of saving our nation's banking system. hank paulson, live, as the second hour of "squawk box" begins right now. good morning, and woirm to "squawk box" on cnbc, i'm joe kernen, along with michelle caruso cabrera. european financial ministers will hold a summit to talk about a greek bailout deal. they dropped the plans when greece failed to deliver the necessary commitments, but

leaders say all pending issues will be resolved ahead of the conference call. and we have earnings out just out from nbc universal parent of comcast, the company earned 47 cents a share for the fourth quarter. and that was six cents above estimates. revenue also beat consensus. comcast is also increasing its annual dividend to 65 cents a share, from 45 cents. i think that's -- like 40% more than that. and it approved a new $6.5 billion share reprsh plan. i think $3 billion of which is going to be repurchased in 2012. quite a bit more than was repurchased in 2011. i think i've got that -- >> they mentioned "squawk box" several times in the earnings release? >> i searched squawk -- maybe they spelled it -- i'm sure i'll be able to find it. we don't need to find it there because we'll talk to come kraft

ceo, who i'm sure every other word will be squawk. the futures this morning indicated sharply higher. not quite as sharp as they were before, but up 64 points, we've had a slow steady move higher, 4%, 5% in january and we're up a couple of percent so far in february. i'm looking at the comcast bid and ask. even though this just came out. and it is indicated to be at a new high this morning. on the bid, 27.79 on the bid, the only high was 27.52, 52-week high, obviously. let's get to andrew who is in new york this morning. bringing us a very special interview. excellent, andrew, well done and it's good to see you. and the secretary. >> thanks, joe, appreciate it very much. i am here with the former secretary of treasury, hank paulson. he just had a very interesting

dinner in washington, d.c., with the vice president of china, xi engine jinping. he was just at the white house yesterday. i want to get your thoughts on europe and what's going on in the u.s. i do want to talk about china since it is in the news. you have started the paulson institute and you're writing a book about china. given all of the political rhetoric going on around china right now. you think about some of the things that romney has said, he has called china a quote-unquote cheater. he said if he was in office on day one i think he says that he would call them a currency manipulator. i'm curious, when you talk to the chinese and you talk to xi jinping in particular, how they see this developing. >> well, andrew, first of all, i think the chinese understand the same thing you and i do and all

americans understand. or many americans understand. is this is a political season. and harsh language on china plays well at a time like this what i emphasize to the chinese and to others, that what you see our leaders talking about, is enforcing the trade rules. and we've got a rules-based system. how can you question the need to enforce the trade laws. and fortunately, we've got dispute resolution procedures in the wto that really, that keep us out of a trade war. >> do you see china as cheaters? >> do i see them? let me tell you, china has got, i fought as hard as anyone to create a level playing field in china. and so there's a lot of work that needs to be done. but i tend to take a more

positive approach and take an affirmative agenda. and i look at china as largest export market, or fastest-growing export market. and so the things i'm emphasizing are things that going to grow the pie. for instance, a big effort i have right now with the paulson institute is to advocate for more chinese investment in the united states. because that will help the economy. it will create jobs. and so for instance, when i was in beijing in december, i was there, the mayor of los angeles, mayor villaraigosa, who chairs the mayors association, was there with me, we were doing programs on sustainable urbanization, we pushed hard for chinese investment. i'm going to be working with the mayor of l.a. and the u.s. mayors association and the chinese mayors association are

putting together an event in los angeles in may, emphasizing investment to create jobs in the u.s. >> how politically palatable is that, given what's going on. you read in the pains about some of the labor practices in china. i'm thinking about fox com and apple and the perception of what americans think what's happening in china and to think of them as investors here. >> well let me say that when you get to the sub national levels, when you get to mayors and governors, trust me, they understand capitalism. it doesn't matter what party they're from and they understand jobs and they understand growth and investment. and so that's what we need to get our economies going. and they understand that the investment in the u.s. economy is great vote of confidence in the u.s. economy. >> when talked to xi jinping, the news recently about nortel that was hacked.

google left china. how are they thinking about those issues? >> well first of all, let me say with regard to xi jinping, you have someone who is a strong, confident leader and that's good for china and it's good for the united states. because the chinese leadership is going to be tested, really tested over the next ten years. because the demands, they can be tested domestically and globally. and domestically, the demands of the chinese people growing all the time as is the leadership challenge of managing the kinds of change they need to manage. you know on a massive scale. and to emphasize, place a big emphasis on consumption rather than exports. they need to increase income

across the entire population and keep that growing, that's a huge challenge. >> you mentioned fox con and labor relations in china. china is a huge economy. and wages are going, they're pressing wages up quickly. wages went up 23% last year. and so they've got a lot of work to do. they know that their country is, is too big and too complex right now in terms of its economy to be as dependant as they are on exports. so they've got a lot of work to do to rebalance. >> you worry some of the social issues? when you go to china for instance, would you make a sensitive phone call? do you worry about being bugged, for example? >> in terms of cyber security and in terms of breaking into computers, that's a crime.

we need to do everything we can to enforce the law. and the point i make and i think the point that the chinese understand and all of us understand is every big economy and particularly china, have a lot to gain from having international economic system work smoothly, be stable. and so they've got the same interest in cyber security that we have. and i make that point. >> china's economy, how much do you worry about it. we had a guest on who is a bear about china, worries a lot about the real estate market there. worries a lot about a major hiccup coming. how do you see it? >> i'm not a bear on china. china has got some real challenges. we have china is a $6 trillion economy. the u.s. is roughly $14

trillion. europe is 16 trillion. with the issues we have in $30 trillion away from china, that has to have an impact on china. so china is going to have more pressure to maintain their growth rate. i think they're going to be able to maintain it at an acceptable. at an acceptable level for them for a while. but remember, that this, this job is tremendous, in order to keep, manage the change, maintain growth, rebalance the economy, and the point that i make to them all the time, is they are so large and complex, and increasingly integrated into the global system, that it's going to become more and more difficult to manage that economy with a combination of market means and administrative measures. and that they need to speed up the process of reform. and that's there actually more risk to them if they go too slow than in going too fast.

>> mr. secretary, joe has a question for you. >> great to see you, mr. secretary. and you know, for i don't know how many thousands of years, we've pointed out the differences between the culture of the west and the culture in china. more recently, neil ferguson has pointed out, the ascendency of the west 500 years ago, he's identified six of the killer annapolis, he says china has effectively downloaded five of them. he says there's still one that's hasn't been downloaded, that's the human issue, the property rights issue. is it sufficiently different enough culturally over there that they never have a day of reckoning. or the internet, the desire for all people to have just basic freedoms, does that eventually present a huge challenge for china? and how many years down the road do you see that, you know, coming to where they have to reckon with that?

>> joe, first of all, good to see you, if only through a camera. and the question i get asked is one i get asked a lot. the way i answer it is, i believe that you're going to see ultimately, more political freedom, more perm freedoms. because they will inevidently follow the economic freedom as china gets more and more economic freedom. so i see that as inevitable. when you talk about political reform and more political freedom, i don't think any of us, have got the exact timing or the, the precise path it will take. but the one thing that i believe, and i believe this very strongly, that more political freedom is going to be a very important tool to help maintain stability. it doesn't have to be destabilizing. and to step back a bit, i've

been going to china for a long time. and let me tell you, the, the living conditions and the personal freedoms and the lives of the chinese people have improved dramatically over a 20-year period, ten-year period. so i think there's, there's, there's room for a lot of encouragement there. >> when you go it a fox con facility, i've been reading all of these stories in the new york times about what seemed like rather horrible conditions. are they as horrible as they sound? and is the government trying to cover it up? >> i have never been to a fox con facility. so i've read the same stories you've raed. but to put it in perspective, andrew. this is a developing nation. you know, gdp per capita of $4,000, there's a lot that's being done in terms of wages

increasing. and u.s. companies operating in china have done a lot to raise the bar and improve conditions. now there's a ways to go, obviously. but the country has come a long ways and u.s. companies have added to that. >> mr. secretary, michelle has a quick question for you. >> thanks so much for joining us. the chinese investment corporation as a member of their advisory board who has been put forth to talk to media around the world. recently made comments about europe that if he thelt the system there had bred slothfulness, et cetera. how do the chinese behind closed doors look at the situation in europe and about how they're going to invest there, if they are at all? >> chinese have been investors all around the world and they very much to invest more. as you look at china today, that they've got some, a good number

of companies that are very, very successful, operating in china. but they have few, if any, of the best global companies. so i think the next, the next iteration for chinese companies are to learn how to become greats global companies and how to have, have outstanding technology and governance and how to give back to the communities in which they invest and so on. so they've got a long ways to go. i think they're looking to invest in europe. they're looking to invest in the united states. they're looking to invest all over the world. now i think what your question is getting at is how do they look at what's going on in europe. and they've got to look at it with a good deal of concern, as i said. they understand that they, they've got a $6 trillion economy and they lack at what's going on around them.

their job isn't becoming any easier to continue to grow and meet the demands of a chinese people, chinese people want the income to grow throughout the population and throughout all the regions. they realize they're going to have to rebalance their economy. >> we're going to sneak in a quick break, come back and talk more about china and u.s. economy and wall street. so we're going to continue with the former treasury secretary, back to you, michelle. >> great stuff, andrew. comments or questions about anything you see here on "squawk," this interview, email us at "squawk"@cnbc.com. still to come this morning, we're going to have the ceo of comcast, brian roberts. "squawk box" is coming right back. ♪

[ male announcer ] offering four distinct driving modes and lexus' dynamic handling, the next generation of lexus will not be contained. the all-new 2013 lexus gs. there's no going back. ♪ are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers.

class. priority mail. certified. international. and the mailman picks it up. i don't leave the shop anymore. [ male announcer ] get a 4-week trial plus $100 in extras including postage and a digital scale. go to stamps.com/tv and never go to the post office again.

welcome back. more from hank paulson in just a minute. we want to tell but a deal, there's one being done and one falling apart. kellogg is acquiring proctor and gamble's pringle business. p&g shares we'll take a quick look there as well. not a whole lot happening now. we had, i think we asked john mule ber this, i asked him sentimentally, is it sad to be selling pringles, when they were going to sell diamond foods.

p&g a while ago had agreed to sell the pringles business to diamond foods. what happened was, it was mutually agreed that the two companies, pc and diamond to terminate the propose the acquisition after i guess kind of a scandal with diamond. they found that diamond had wrongly accounted so some payments to walnut growers. so it's, they have a lot of nuts, and it seemed like a pretty good fit. that deal fell apart and now it's going to kellogg at this point. >> we should mention shares of diamond are halted. we don't see any movement in that stock. >> i can't remember how long ago. kellogg predicts that the pringles purchase will add roughly eight to ten cents a share, so it will be accretive. joining news a rare exclusive interview is hank paulson. former treasury secretary of the united states. quickly we want to ask you about what we've been watching and slow motion.

mr. secretary. in europe and i understand with china there's cultural difference, europe, there's cultural differences. but you had, i would say days to deal with a situation in the united states. i guess they have years in europe to deal with similar situation. should we have expected that? and will it ultimately be effective, their approach to dealing with what was kind of similar in certain regards? >> joe, you're right. they're similar only in certain regards. because this has been going on for a long time. and i think it's going to take years to play out. so this is going, this is something we're going to be watching for a good while. and you know, when you and have talked about the u.s. financial crisis, i mentioned that that was, the collision of, of political forces and market forces.

and that's really what you're seeing in europe. but the reason it's so difficult is that the issues around the structural issues around the eu are very difficult issues. they're difficult analytically, you can put a bunch of experts in the room and it isn't that obvious what the ultimate solution is. and they're very difficult politically. and then you've got the issues around the fiscal problems of several of the member states. so you know that's going to take a good while to grind on. and so while the political process grinds on here, i think the important thing is to say how do we construct a big-enough firewall so that we stabilize the banks and so that we make sure, so that they make sure you don't have a big systemic bank

failure or messy member failure. >> you have the year of mario drag dragge -- >> i've got a high regard for mario dragge, and mario montee. i'll tell you when, when i said we need to have, come up with a way of stabilizing the banks while this drives on, i would say that mario, mario dragge has taken a big step to address that with a massive liquidity facility. >> when you go back and think about lehman brothers. is that an apt comparison? is the failure of greece that

big? >> i think when you look at lehman brothers, remember, i believe lehman was a symptom as much as anything. because we had, we had aig, merrill, lehman brothers all going down the same week. we had this problem throughout europe. i don't think that is the right analogy. but i think the one thing that we should take away from lehman brothers is you don't want a big systemic institution to fail in a messy way and you clearly don't want that to happen with a member state. but so when you look at greece, i think it's important that if there is a, as a problem, that it's well anticipated and that, and it doesn't happen in a sloppy sudden way. >> are there any lessons from your experience on the social side? and when i say the social side, i think about the bailouts. and the reason i ask it is because right now you're seeing

social unrest in greece around austerity. here you're seeing a different version of social unrest at some level around occupy wall street. i'm curious when you go back and think about that, if you do talk to mario dragge, what would you tell him? >> i think everyone understand it is so well. i tell the story, and i get a laugh, although i didn't laugh at first, when i left, when i left my job, there was a poll. and the poll showed that 92% of the american people were against the t.a.r.p. and that the same poll, 60% were against torture. and so that's, that tells you something. and when you think deeper about it, i understood why the american people don't like bailouts. no one likes bailouts. but they're better than the alternative, which would have been a catastrophe. so if the american public feels

that way, just imagine what the greek citizens feel. just imagine what the germans feel. >> and so, you have to stay, you can only do what you can do. so this is, that's why i started off, and i said to joe -- the collision of politics and markets. that's what we saw in the u.s. but in the u.s., we were dealing with one nation, only one nation. and the u.s., no one doubted that if we got the authorities, that the sovereign was strong enough that we could, we could do what we needed to do. >> right. >> so the danger is, if this drags on too long, that people start to have those doubts. that's why i think it's so important that they erect that firewall and that they make sure that the banks are stable. so that's why i applaud what

mario draghi has done. >> speaking of firewalls mr. secretary, when andrew was in dafs davos, he asked jamie diamond, what would be the default of banks. do we have a good-enough firewall here? >> i think there's several ways to look at this to begin with, i would say that the u.s. banks are much better capitalized than they were a number of years ago. they're better regulated. and i, you know, i don't doubt what i read and what i hear from regulators that their direct exposure to european sovereign debt is really quite manageable. i wouldn't want to test our firewall if we had, if this thing got out of control and you had catastrophe over there. i'm not expecting that.

i'm not expecting that and i'm not forecasting that. >> the vocal rule is in the news, given the comment period. i thought the comment period is over, but we'll give you an opportunity to comment. >> thank you for that opportunity. >> does the vocal rule help end too big to fail? >> listen, andrew, i think you know that, that i advocated very strong tough regulation on the big banks. and, but i didn't advocate the volcker rule as the way to go. and the reason i didn't was at least from my experience, that when i looked at the failures and the problems we're dealing with, it didn't come from propriety trading. what i've said, andrew, is that i want the regulators to be able to, to have the authority to step in and stop any dangerous practice by the banks or risky practice that violated the system.

and in my experience, a propriety trading is clearly brings with it, risk. but there are many practices that do. and from my experience, banks get in trouble even more, from customer accommodating trades. bridge loans or stepping into to do a big oil-hedging transaction or whatever. so i think it can be, it can be counterproductive to single out one area. and focus on that. and then you think boy, if we just deal with propriety trading, we've solved the problem. also, my other concern here and this is going to be the way it's, the way the rules are written. because i think it's very important and i'm not saying the volcker rule is going to be a problem. it could be helpful. but it's going to be very important that the rules are written so that banks are able

to maintain inventories. because if they can't have inventories, they're, how do they provide the liquidity and how do they do their market-making and risk management function in a way that there's not a big cost. >> do you think wall street has changed? you spent your career on wall street with goldman sachs. can you ever imagine that would be in this place now in terms of the way the public thinks about wall street and some of the issues that are surrounding it? >> it's so, so sad. because i believe banking is and should be a noble profession. it's vital capital markets are just a very, very important to any economy. and so i, when i go and talk to business schools or talk to undergraduates, then people talk about their career, i encourage them to consider banking along with all sorts of other careers.

and wall street will get through this. wall street made a lot of mistakes. but you know what happens? and it happens with every financial crisis. it has from the beginning of time. financial crises stem from flawed government policies. always. okay? >> and -- >> i'm saying the plenty of blame to go around. but the root cause are, this was a huge credit crisis. why do americans borrow too much, save too little? why did we overstimulate housing? there are flawed government policies. there are everywhere. what's going on in europe. are you going to blame the banks? when you look at some of the structural issues and so on. so what happens, because the banks always make mistakes. so people pile on the banks. and they work to correct those mistakes.

and that wouldn't be all bad if people, unless it has people take their eye off the ball. because so far we've done a lot to strengthen the banking system. but the government policies that got us here, no one's dealt with those big issues and those are the issues that we really need to deal with. >> u.s. economy, you also spend time talking to ben ben bernanke, we had some good jobs numbers out last week. but mr. bernanke has signaled he he doesn't think the economy is going to grow nearly as much as those numbers would suggest. how do you square those circles? >> i can't comment on what ben believings or not, that's for him to talk about. when i look at the economy, and again, i'm not an economist, i just look at it and i am encouraged by the recent economic news. but i think it's going to be a long slog. and i think it's going to be years before we get our unemployment to an acceptable

rate. >> what do you think an acceptable rate is? >> i won't put a number on it, but it's a lot lower than it is now. here's the anomaly and here's the anomaly that many, that a numb of economists i've talked to are struggling with. the, if you look take a look at the recent job creation, which has been quite gratifying, and you look at that, you can't square it with the, with the grot rate. because almost any economist would say it's going to take a higher growth rate than we've had to create the jobs we've created. and i've had a couple of economists say to me, hank if you're going to back the 2010 when unemployment was the highest and then you said what growth rate would it take to create the jobs we've got today, they would say 5%. and of course, we haven't had that kind of growth and so to me, that's again rather troubling. so i'm not being an alarmist.

i just think that until we deal with the huge structural issues we've got and work across the aisle and compromise, we're not going to get the economy on the kind of sustainable growth track we need. >> mr. secretary, joe's got a quick question for you. >> hank, you've seen that corporations seem to be a little bit hesitant to make long-term investments, a little bit hesitant to hire. there's a lot of different reasons and i'm sure they all have some veracity. ha do you think is the most important. do you think they're looking at never having commercial paper fund all their operations again? so they're more cautious? do you think it's uncertainty about tax policy and government policy in the future? or is it, is it just what we should have expected given such a deep financial crisis a couple of years ago, it's still working our way out of that problem? >> joe, i think it's all of the above. but to step back, u.s. business,

they've been a huge bright spot. when you take a look at how abysmally, how poorly the government has performed, and you look at what this economy has been through, and then you look at the way u.s. business is performing, i would say u.s. ceos and management teams and corporations are doing an outstanding job. and i think it takes a while to come back with what we've gone through. i think there's a lot of uncertainty. just look at the issues we've talked about today. when you talk about what's going on in europe. you know, what are the issues in china. what are the concerns in the u.s. it's not the kind of environment with all of this uncertainty. and then when the political uncertainty and the regulatory uncertainty, it's not the kind of environment where ceos are feeling so confident they want to go out and are looking to make the incremental investment. >> i'm curious, i wasn't going to go here, but tax policy and the context of everything that's

going on, you're a friend of warren buffett's, there's the individual, but also the corporate tax issue. i'm curious, you saw what obama has recently proposed. ha do you think of that? >> yeah. i get there's nothing that frustrates me more than the tax debate. because i've studied the tax system. and there's no doubt we need more tax revenues. of course we need more tax revenues, they're 15% of gdp now, they've averaged more than 18% for 40 years. but the issue shouldn't be what do we do with this rate or that rate. the question should be, what form of taxes will give us the revenues we need and let us be competitive and create jobs and give us economic growth. that's what we need. and no one would argue that the current system does it. we need a new system. and you know, i've been for a system where we would eliminate the deductions and all the

distortions and the special spending programs that are part of the tax code. and lower the rates. and have something that will, will let us be competitive in today's world. >> final question. timothy geithner has signaled he's going to be stepping down, whether obama wins or not in the next election cycle. who would you like to see or what kind of person, given the economy and the state of the world that we live in, what kind of person would you like to see be the next treasury secretary? >> i would have to take this time to say, tim is a terrific treasury secretary and all of us should be very grateful that he's in that job today. now in terms of your question, i would say what we need with a treasury secretary, is first of all, someone that is close to the president. or can build a strong relationship with the president. because the treasury secretary can only do what the president is going to let him do. and secondly, we need someone with both the skill se and the

mindset to work across the aisle, to work with members of congress like their clients, and to be willing to take on huge issues. because we're, we're only going to solve the big deficit problem we have, and with entitlement reform, with tax reform. and so this is going to have to be someone that knows how to get something done. knows how to work with people and knows no matter how smart are, no matter how great your ideas are, they're worthless unless you can sell other people and get them to act. >> hank paulson, thank you so much for joining us this morning. we appreciate it very much on behalf of everyone at "squawk." michelle, back to you. >> great stuff, andrew. thank you so much, and thank you to you, mr. treasury secretary, as well. do you have any comments or questions about anything you saw in the interview? email us at squawk@cnbc.com. and follow us at twitte

twitter, @squawk is our handle. and the nasdaq is higher by 20 points this morning. a couple of sports headlines this morning. detroit red wings fans have not seen their team lose in more than three months, the hockey club has 21 consecutive wins on home ice. last night he they defeated the dallas stars 3-1. their next two games will be in detroit. and the linsanity continues. the point guard phenom scoring the last six points against the raptors, including a game-winner three-pointer with five seconds left. the final, another knicks win, 90-8 7, jeremy lin finishing with 27 points and 11 assists, more news and a check on the markets when "squawk box" continues. still to come, comcast triple play, earnings, innovation and the consumer. ceo brian roberts joins us first on cnbc to discuss quarterly results and more. "squawk box" is coming right back.

hey. did you guys hear... ...that mary got engaged? that's so 42 seconds ago. thanks for the flowers guys. [ both ] you're welcome. oooh are you guys signing up for the free massage? [ both ] so 32 seconds ago. hey guys you hear frank's cat is sick? yeah, we heard. wanna sign the card? did you know the guys from china are in the office... [ speaking chinese ] [ male announcer ] stay a step ahead with the 4g lte galaxy s ii skyrocket. only from at&t. ♪ laces? really? slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug. i have club passes. [ male announcer ] now there's a mileage card that offers special perks on united, like a free checked bag, united club passes, and priority boarding. thanks. ♪ okay. what's your secret? ♪ [ male announcer ] the new united mileageplus explorer card. get it and you're in.

welcome back to "squawk box" on cnbc, among the morning's headlines, ali baba and japan's soft bank will go directly to

ceo scott thompson in an effort to restart talks over yahoo's stalled assets. it's considered crucial to yahoo's future. sources tell the a.p. that negotiator asnd company leaders seem to have different ideas. japan airlines says it will add ten more boeing dreamliners to its existing order, bringing the total to 45, despite recent problems that have delayed deliveries of the first dreamliners. and diamond foods shares are reopened after procter & gamble canceled the deal to sell the pringles brand to diamond. the p&g has struck a new deal to sell pringles to kellogg for $2.7 billion. comcast is out with q4 and year-end results, joining us is brian roberts, chairman and ceo of comcast, the parent company of this network. i don't know if you've seen the quote this morning, mr. roberts, but 29.02 on the bid. closed at 27.25.

that's a 52-week high. obviously i look back long-term, 30 and change is the all-time high, isn't it? >> i think that's about right. >> so in terms of some metrics here, the earnings per share number was well above. it was six cents above expectations at 47 cents. and a 30.6% increase from the fourth quarter of 10. in terms of cash flow, numbers like $1.9 billion, that's up 67.4%. i'm trying to figure out where all of this upside surprises come from. and it just looks like the cable business continues to add customers. video customers, high-speed internet customers, 336,000 internet customers versus 49,000 for at&t and verizon combined. are you winning that war? >> well, we had a really strong quarter and it's nice, nice way

to start the day with some of the numbers you just told me. i think the headlines are, you've touched on a couple of them, we really had a great quarter on x finty products, which are high-speed internet. had a fabulous quarter, better than 2010 by over 10%. this is a product that's been out there for many years. to still be growing faster than the year before, the sixth straight year we've added over a million broadband customers. america is in love with broadband. it's not so much winning or losing, it's how important it's becoming and how much the incremental speeds that we keep adding to our broadband customers, many of it without any change in cost, for the consumer, is really working and it's a great strategy. the xfiniti brand is very focused on screen, on demand, tv

everywhere, if you will. it was an exciting quarter, a great year, first year with nbc universal and nice way to start off 2012. >> we also have you're talking about the company returning capital to shareholders, which hopefully will be well received, a 44% dividend increase. the prior yield was 1.65%. the stock has been moving higher. so that yield has obviously been coming down. going from 45 cents to 65 cents, which makes it a good yielder and also a repurchase of $6.5 billion worth of stock and $3 billion of that will be this year. 2012. which is 40%, 40% more than was repurchased in 2011. is this, what is this, what does that indicate? that there's no -- >> i think we feel really good about both businesses, the capital structure of the company, we've been saying for a numb of years, each year, at the

beginning of the year, we would lay out the capital allocation strategy, return of capital to shareholders, the free cash flow, the 1.9 billion you talked about, adds up to 7 billion for 2011, a big increase and a record for us. and we have a very disciplined approach to wanting to return capital to shareholders, our cfo has been talking about this for several years. and so today is a, a very sizeable increase. and we hope a consistent beginning and continuation of increases in dividends, year in, year out on the buy-back, we had exhausted all the shares that our report had allocated us, so a new 6.5 billion program with 3 billion this year. that's what the free cash flow is there for and what we've been building the company toward. we've kind of come through, a lot of the capital spending cycles. we've purchased nbc universal, with free cash flow from nbc

universal will pay out general electric for the 49% that we don't today own over the next six years. so this free cash flow from comcast cable, a lot of it can go back to our shareholders in the form of buy-backs and dividends. >> some of the other metrics kind of look like what we've seen, brian. adjusted cable, operating cash flow, it's the cable networks at nbc continue to do well, 16.2% up. as far as can't really see much yet in the broadcast division, can you? are there, what would you point to as positive signs for the turn-around there? >> let me start, you're right. cable networks, including cnbc and particularly "squawk box" as you like to say in previous interviews -- >> finally. >> so the cable networks are fabulous business and once again, had a terrific 2010 and we've got some terrific leadership. and channels and you know, won't go into each of them right this

minute. but by and large, cable programming channels, which is the bulk of nbc universal's cash flow, great year. turning around nbc, the network, we always said is going to take several years, but i think the team is off to a great start. and last week, as a perfect example. we had the super bowl, the highest-rated show ever watched by americans, the more americans watched it than ever before. a terrific production, real kudos to the sports group. but at the same time, if you saw the broadcast, tremendous synergy between and amongst all the nbc universal properties as well as comcast cable and our properties there. and out of it came "the voice" season two, which was a fantastic start to the year, one of the highest-rated shows in the history of a show following the super bowl. and then "smash." so it's the beginning of that turn-around that you're talking about. you can, it's, look, we have to

be patient, we're pretty excited and enthused with the prospect. >> is there synergy between still, the theme parks are going pretty well. does it make sense for comcast to still own that and film? does it all work together long-term will those be assets that the company has forever? >> i think so. i think if you were to paint the perfect company, i think nbc universal has many, many, if not all of the aspects of a well-diversified, synergistic media company. we are going to have "the lorax" will be out in a few weeks. "hop" and "despicable me" came out. they're going to be in the theme parks, well branded. you saw "safe house" opened last weekend. it was advertised during the super bowl. i mean these are stand-alone businesses, you have to have great managements, but i think amongst and between them, one stat that i'm intrigued by is the show "smash" we had lots of on-demand and previews of

"smash" on comcast, on xfinity, on demand and online and on interstitial commercials. 20% higher ratings on comcast than for the rest of the nation on "smash," the first two episodes. we have a lot of synergy, we call it project symphony. it's early. one other stat to jump back for one second that i think is really not like everybody else. was we, our video business had 17,000 customers lost in the fourth quarter. a year ago this number was 135,000. an 87% improvement for the year, 40% improvement. that's customer service, that's the xfinity innovation and that's a really great cable leadership and business services and other things all pulling in the same direction. but that's 17,000 subloss is the lowest in five years for the

company. so we're pretty pleased with that for a fourth quarter. >> hi, it's michelle, good to see you this morning. there's some members of congress who have started to make noise about the dell that vezen has struck with you, reference spectrum. are you worried about that not being done or getting done? >> i think it's always expected to have a thorough review when you're talking about something as important as spectrum air waves being sold by comcast and other cable companies to verizon wireless, but we do expect that deal to be completed. that's the part that we believe is reviewed. and ultimately, what's important and why we think the deal should be approved is it's pro consumer, it's in the sense that we're going to look for innovative ways to have all of your video content available on your wireless devices and on your tablets, to have it be, if you walk into one of the early markets right now, you sign up

for our triple play and verizon wireless, you can pick any smartphone you want, up to $300 for free. so that's pro consumer, by taking a co-marketing and using each other as another channel. and then over time, trying to innovate together. so that it's just easier for consumers to program their dvr, in one location, not have to do redo it somewhere else. and all the various things that might happen, next five, ten years that are so exciting. i think it's important that we have wireless products over the long term for our customers, ease of use in working with verizon, we hope will get approved. >> all right. mr. roberts, we appreciate your time. we may have missed a commercial there, i'm not really sure how to -- >> you're not going to punish us, are you? >> i'm just going to say good-bye. >> i'm torn between missing one and i need some guidance on how to handle that. anyway, i know you want us to run commercials. but thank you, thanks for coming

on "squawk box," brian, we appreciate it a lot. >> thank you so much. hank paulson joining us earlier this morning, giving us us his take on the markets. here with more on the markets is the vice chairman and ceo is the bank of mellon's oversees $2.6 trillion. >> let's take a commercial break. curtis, thank you. i'm kidding. >> do you believe this rally this we've had? >> it's been a very interesting raly. i do believe in the raly. one of the things that i'm been focusing on is we've had stocks, the xnp financials are always making new highs. versus all awe sets, they're all doing really well. stocks relative to other real assets. one that's the most super charged in terms of emotion is gold. whether you love it or hate it, it definitely is an indicator of

sentiment. and stocks relative to gold actually have not done well. they're actually on all-time lows so even though the x & p financials denominated in dollars -- >> is that buy signal, is it telling you the valuation is still low? >> today for example, classic day, stock market sup, gold is up -- so is it really stocks, gold and oil going up? or is it just the dollar continuing to sort of lose value relative to other things. and i think the reason that it's good to focus on that, is it's all of the chaos we've gone through the past several years. much of it we've dealt with by central banks increasing the size of balance sheets. qe, the operation twist. the eight largest central banks have tripled the size of their balance sheets. investors are asking a question, ha does it mean? what is mondayly really worth any more? i think gold has been one of the most emotional ways that people have responded to it by buying gold. but kind of everything has

rallied relative to currencies. the decline in confidence of currencies is one of the investment themes we've been following. >> it sounds like that's your key investment theme. as a result of that, you tell your clients to do what? >> to watch the purchasing power of their investment portfolio. so stocks are now again as i said, s&p x financials, the financials industry has changed dramatically over the past several years and still in the midst of great change. so let's put that aside and look at everything else. everything else is almost at all-time highs. but its purchasing power is not. so the amount of food and energy, the amount of good, the amount of real assets that your portfolio buys is actually not. >> i'm dumb, does that mean that i buy stocks or fixed income or what? >> i think it should make you feel better about the value of stocks, even though they're at all-time highs in nominal terms, in real terms, they're really not. by real, i don't mean the inflated cpi, which is 40% housing. i think cpi is a bad way to measure inflation, by the way.

it just sakes that stocks are not up as much relative to other assets as they are relative to the dollar. >> that's an interesting valuation. >> we'll take you into the next hour if you're willing to pay for what a commercial costs. if anyone can do it, this guy can do it. >> $1.2 trillion. >> thanks. coming up, if you missed it a recap of our exclusive interview with former treasury secretary, hank paulson, his thoughts on the u.s. financial sector, europe and much more and we'll talk politics and budgets with senator rob portman, republican from ohio. oh! [ baby crying ] ♪ what started as a whisper ♪ every day, millions of people choose to do the right thing. ♪ slowly turned to a scream ♪ there's an insurance company that does that, too. liberty mutual insurance. responsibility. what's your policy? ♪ amen, omen

[ male announcer ] ylord of the carry-on.. sovereign of the security line. you never take an upgrade for granted. and you rent from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above. and still pay the mid-size price. i deserve this. [ male announcer ] you do, business pro. you do. go national. go like a pro. you walk into a conventional mattress store, it's really not about you. they say, "well, if you want a firm bed you can lie on one of those, if you want a soft bed you can lie on one of those." we provide the exact individualization that your body needs. welcome to the ultimate sleep number event. not just ordinary beds on sale, but the bed that can change your life on sale. the sleep number bed. this is your body there. you can see a little more pressure in the shoulders and in the hips. now you can feel what happens as we raise your sleep number setting and allow the bed to contour

to your individual shape. wow! that feels really good. it's hugging my body. it's not about soft or firm. it's about support where you find it most comfortable. right now, queen mattresses start at just $599. and save an astonishing 50% on the final closeout of our innovative limited edition bed. you can adjust it however you want so you don't have to worry about buying the wrong mattress. hurry this week to the ultimate sleep number event. only at one of our 400 sleep number stores. are you still sleeping? just wanted to check and make sure that we were on schedule. the first technology of its kind... mom and dad, i have great news. is now providing answers families need. siemens. answers.

a budget battle shaping up in congress, we'll talk debt, taxes and politics with republican senator rob portman. and we'll ask former fed governor randy crosner about our interview with hank paulson. >> i want the regulators to be able to, to have the authority to step in and stop any dangerous practice. a third hour of "squawk box" begins right now.

welcome back to "squawk box" here on cnbc, i'm joe kernen, along with michelle caruso cabrera. andrew ross sorkin is en route on i had ways back from his interview with hank paulson. >> you're not allowed to land a chopper in bergen county. . equities are trading up. 60 and 80 points between most of the morning now indicated up 70. >> when we built this place they were going to put in a heli pad and they killed it. in our headlines, kellogg is acquiring procter & gamble's pringle's business for $2.7 billion. shares of kellogg are trading higher on that news. remember this is a little bit of a saga here, the bid and the ask, 57.55. p&g had previously agreed to sell the business to diamond

foods, diamond says no break-up oregon other fees will be paid in connection with the termination. nbc universal parent company, comcast reporting results this morning, the company earning 47 cents a share, for the fourth quarter, that was six cents above estimates. revenues beat consensus, comcast is increasing annual dividend to 65 cents a share from 45 cents a share and it's also approved a new $6.5 billion share repurchase plan. shares are getting more expensive this morning. we spoke to comcast ceo brian roberts in the last half hour. >> we had a great quarter on xfinity products, high-speed internet, had a fabulous quarter. better than 2010 by over 10%. this is a product that's been out there for many years, to still be growing faster than the year before, it's the sixth straight year we've added over a million broadband customers. think america is in love with broadband. important economic headlines out of europe today, the greek conservative party has sent a

letter to the euro group, expressing commitment to austerity measures. this was key in order to get the next roupd of bailout money. germany's gdp contracting .2% in the fourth quarter. a better reading than economists had expected. france's economy grew by a stronger-than-expected .2%. we saw a rally in asia overnight. ftse, cac and dax all higher. athens is lightly lower. our guest host for the next hour is ronald spogli the former u.s. ambassador to italy under president george w. bush. obviously freeman spogli, one of the first pea mere and private equity funds as well. >> we founded in 1983, we were not the first, but certainly one of the earlier firms in the business, the pioneers and we have a few arrows in our back to prove it. >> based in -- >> los angeles with an office in new york, yes. >> with an office in new york. but based in los angeles. and colorful, you know,

colorful, what would i call you principles, i guess. it's you and -- >> i'm less colorful than my partner, mr. freeman. >> mr. freeman, that's a wide swath to this day, doesn't he? >> he does. serious person who doesn't take himself too seriously. >> he broke the mold when they made that guy. we want to talk to you about, you know as well as anyone after having been ambassador to italy. you were like on the ground. in some of the things that you're saying now, is that, has the crisis moment passed at least for italy? >> it's a good question. i think it has, i think the crisis to some degree may have been a bit overblown. i was here in november and we were talking about the impending break-up of the euro. mario monty had just taken office. so there was a lot of concern as to what was going to happen, not just to italy, but to the euro in general. i think what has trance spi spi

there has been confidence reinstilled in the system. if for no reason that the ecb has ridden to the rescue and that has been obviously extremely positive. but italy has done some good things as well. mario monty came into office, he passed an austerity program. he's made some other moves with respect to some liberalizations which will not in the aggregate mean a great deal. but they're important signs that italy is beginning to take some of the right steps. so i think the crisis probably was overblown, the market, i talked about this back in november, having been behind the curve for a significant period of time, i think with respect to greece, with respect to certainly other developments, decided to get ahead of the curve with italy. i think in that regard it was probably premature. obviously leading to one of the greatest trades in the the world. >> if you were in italian debt you made a lot of money. but ultimately italy has to make

key changes so it will grow. what the ecb has done is only going to work for a serp amount of time and they've actually going to generate some tax revenue. has mario monty done enough or should he do more? >> he said he will take on a third rail of italian politics -- >> the unions? >> the whole question of labor reform. he's involved in very intense conversations with the unions and he has promised that by march he will have achieved a major development in terms of the liberalization of those markets. i am hopeful that is the case. i know mario, i think he's very capable. but i think he's going up against truly what is one of the most difficult areas of the italian political and economic world. >> dangerous. i mean he must have body guards, it's going to be -- potentially dangerous. >> in 2001, we may remember that an economist who was advising berlusconi on labor reform, was

gunned down by remnants of the red brigade. so this issue is heart-felt in italy. but if the country is going to make fundamental improvements in its capacity to deal with globalization and be more efficient, it must make major inroads in this particular area. not just in this area. but clearly, in the area of legal reform. the two reasons that i argued as ambassador, why we do not as a country, the united states, u.s. corporations make more investments in italy, due to the fact that the labor markets are rigid and the legal system does not allow the adjudication of commercial disputes on a timely basis. it takes months, if not years for the most simple thing to transpire. and american businesses simply are not going to stand for that kind of lack of transparency and lack of, of the ability to get things resolved in a timely basis. the magnitude of the problem is staggering. the united states total direct foreign investments by u.s.

corporations in italy is something on the order of magnitude of $35 billion in comparison to spain, which is $48 billion. france, which is $73 billion. germany, which is will over $100 billion. so we have invested the least in italy of any of the countries in the traditional western europe, with the exception of portugal. that's because italy has not been an attractive place. it must change if mario monti is going to be able to achieve the kind of growth numbers that italy must in order to get out of this quagmire. >> the big worry was that the contagion would not be contained in europe. we can say italy is going to be okay, i guess if we could get the firewall between greece and spain tucked awhy, we could even give portugal, we could say that come what may there. but now is spain the next one to really worry about? and then the crisis is over? >> well i think spain is one to

worry about. and i think greece is certainly something which is not going to go away easily. you know, people talk about this problem being long in the gestation. frankly, it's even longer than most people realize. because this isn't just a problem that came about in 2009. it actually came about in 2004. when greece went into the euro in 2001, they admitted in 2004 that they basically fudged the numbers and they had not met the criteria necessary to be admitted to the -- >> they did it repeatedly. >> so it's been eight years that this problem has been -- >> you could go back to the 19th century. for some of this stuff in terms of the social safety net and -- >> what reason do we have to believe that if they can finally get through the whole process, get through the whole process with the eu and be able to receive their bailout money, what's to say that they're not a year from now, 18 months from now, going to come back? i think they will, i think they won't meet their austerity

numbers. i think they're clearly not going to meet their growth numbers. the country is basically in economic free fall. having declined in the fourth quarter 7% year over year. there's not a lot of reason for anyone to believe that this problem is going to get resolved. >> the current prime minister firmly believes in the same things, the liberalization of the markets. you don't think the people have the will. he firmly believes it, that's what he's trying to achieve here. >> i think growth is one of the most elusive things for these countries to achieve. you can press the austerity button and you can try to gain compliance. >> competitiveness, they're working on competitiveness. >> and that's the issue. because there is no similar button in my opinion, for growth. you just don't press the growth button one day and growth happens. certainly liberalization has helped, but they help over time. part of it is the mentality of these countries. it's very interesting, there was a survey that came out over the weekend in italy, done by the most authoritative pollster in italy called manheimer, who is

equivalent effectively for gallup in italy. he was analyzing 18 to 34-year-olds' attitudes regarding jobs. he asked them the question, would you rather take a so-called secure job that wouldn't have a lot of up side in terms of your career, or would you rather take a job that had the potential to be much more remanu rative, give you much more possibilities for career advancement. one which was little risk, one which which was higher risk. 8 4% said they preferred the job that had the least amount of risk. the point here, it's very telling in terms of the mentality of entrepreneurship in the country. i'm on the board of trustees of stanford. i meet regularly with young students at stanford. and i am always blown away by the enthusiasm they have for their futures, by the excitement they have about the potential which they see for

entrepreneurial activity. and as the ambassador, i spend a lot of time in italian universities, and i did not see that same sense of enthusiasm. and that's what needs to change in order for this entrepreneurial flair to happen and for growth to be sustained over a period of time. >> and it's hard to worry about italy when we're worrying about sustaining it here in this country at this point. which i worry about. stanford, i think, i think of saun parker and zuckerberg living right next to each other. >> sergei, paul. >> you got to come out to stanford. that's what they told jesse ismer. you're going to stay with us, which is great. >> thank you. >> have you heard from him? he's not awake, is he? freeman? >> no, he's not. >> we can talk about him, then. michelle, what is it? >> i like people named freeman who live in california. >> he would like you. >> upper next, we talk policy with former fed policy, randy

kroszner. "squawk box" market indicator, stocks are higher across the board and treasuries are lower. [ male announcer ] if you believe the mayan calendar, on december 21st, polar shifts will reverse the earth's gravitational pull and hurtle us all into space, which would render retirement planning unnecessary. but say the sun rises on december 22nd and you still need to retire, td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers for accounts receivable today. i mean i know that this is important. well, both are important. let's be clear. they are but this is important too.

[ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. the the new spark cardnth from capital one. spark miles gives me the most rewards of any small business credit card. the spark card earns double miles... so we really had to up our game. with spark, the boss earns double miles on every purchase, every day. that's setting the bar pretty high. owning my own business has never been more rewarding. coming through! [ male announcer ] introducing spark the small business credit cards from capital one. get more by choosing unlimited double miles or 2% cash back on every purchase, every day. what's in your wallet?

when i look at the economy, and again i'm not an economist. i then look at it and i'm encouraged by the recent economic news. but i think it's going to be a long slog. and i think it's going to be years before we get our unemployment to an acceptable rate. >> that was former treasury secretary, hank paulson talking to us earlier this morning about the economy and unemployment. the fed set to release the minutes of its most recently policy-setting meeting later today. joining us from chicago is randall kroszner former reserve board governor and steve liesman joins us as well. fed governor kroszner, we're going to get the minutes later today. what do you expect to see in them? >> some historic decisions were made quite recently. the fed announced an inflation goal, fed never had that before. there's been a long discussion about doing that. so i think it will be interesting to see how they talk about that. and of course they had the history showing the full monty,

we might say of where we're going on interest rates. it will be very interesting to see the discussion and debate about that. >> we're going to get another piece of the historic decision, we're going to get some qualitative discussion of the balance sheet and the outlook for the balance sheet. remember, the fed has two tools that it's using, one is the zero interest rates, and the other is the size of the balance sheet, which it's using to kind of take the place of interest rates, by essentially printing money and/or buying bonds. knowing what the outlook is for the balance sheet is as possible as knowing what the outlook is for interest rates. we don't have any idea what it's going to look like. its going to be quite a surprise at 2:00. i think the other thing that will be interesting today is you know the economic data has improved. we asked the fed chairman about, the presides conference and thee like we're not so sure. what is the discussion inside the fomc about how they feel about the improvement of the economic data and how it relates to policy.

that's another thing we'll find out today. >> randall, what do you think the answer going to be to steve's question? >> i think steve is right. although they've certainly got headlines talking about interest rates and saying that they're not going to raise interest rates until late 2014. the tools that are at their disposal now before they start raising interest rates have to do with the balance sheet, all the discussions of will there be another round of quantitative easing or further twists. that's really what monetary policy is going to be about between now and 2014 or between now and when they raise rates. i don't see a foundation for doing any, any fundamental changes with the balance sheet right now. but i think there are a number of people around the fomc table who want to do something particularly related to mortgages. >> randy, i have to ask you, if you were on the board at the time that they made that decision to extend the promise, the commitment, the forecast, call it what a you want, to the end of 2014, would you have supported that? >> i wouldn't have gone quite that far.

because i think there are more strengths in the economy. i think much like the teaser from hank paulson, that it's going to be a long slog, but we're doing okay. and so i think it's more likely that sometime in '13, maybe late '13, start thinking about raising interest rates, than '14. >> what about the concept of committing for that duration? >> i think, i think the fed got a lot when it made the first announcement over the summertime. it's amazing it see how the markets moved to where they were saying they were going to, or moved out to where the first interest rate increase would be. but also volatility came down. and that's really the key. if they can a achieve greater certainty, that's a big plus. >> will it be problematic if they turn out to be wrong? >> a forecast is is a forecast. and that by it's very nature means something is going to change. especially when you're making a forecast over a multi-year horizon, i think the economy is strengthening, but i wouldn't pop the champagne corks just yet. my guess is they'll have to have

some revisions. >> randy, good morning, this is ron spogli. i was curious if we could move the conversation to the ecb. we talked about the fact that capital markets were in disarray before december 8 in europe and suddenly with the ltro program, life changes dramatically. two months later, one of the greatest trades have been created in italian bonds. is it that simple? >> oh, if it were only that simple. i think that is an important piece of it. the ecb has changed its focus to provide a lot more liquidity support. and very long-term liquidity support. much longer-term than anything we did while i was at the federal reserve. what's going to be very interesting to see is whether at the end of the month, when we we have the next trench, maybe we get trillions of dollars of assets brought to the ecb. basically have the ecb finance the entire balance sheet of the banking sector in europe. >> randy, i want to go back, our guest host talked about inflation. he doesn't like the current

inflation numbers and i don't disagree with him entirely on that. and i'm actually doing some reporting on air live, right here, right now. i'm working on a story that says this, neither the hawks nor the doves have had inflation right here. what's going on with the inflation dynamic? the hawks, if the hawks were right, we would have had double-digit inflation right now. if the doves were right, we'd be darn near zero. we're not, we're up near 2%, 3%, what's the real story object inflation dynamic and where do you see it going through this whole process? >> i think a little humility is something important to learn from the process. think you're right, people who had the more extreme views didn't turn out to be correct. we've been hearing about the potential for explosive inflation for four years now. we haven't gotten it there's no evidence in market expectations or in inflation movements that we're going to get it. so i don't see an extreme inflation outcome coming any time in the near-term. but we've had, we've had a

little bit more growth than i think the dovish side of the table has anticipated. and that's why i think inflation hasn't been quite as low. certainly the fed has made sure we've taken out the tail risk of deflation. so if you focus on the tail risk, focus on taking it out as the fed has, you're going to get positive inflation, but not extreme inflation. because the economy is just not taking off, banks are holding a trillion and a half dollars of excess reserves and i don't think they're about to lend that stuff out. >> so it says here in the prompter, i'm supposed to say thanks, randy. but i find it very hard to call a former fed governor randy. >> you can. >> i can? >> we knew him before he was a big governor. he was well known as being a good guy on monetary policy. we know these guys and we get them on the board so they're our friends, that's how it works. >> steve, i have no trouble. thank you. steve. >> stevie, if you want. >> coming up, i thought i -- did you -- trying to listen whether

i -- [ helicopter sounds ] >> do we get special dispensation from the bergen county governors? >> that's andrew! >> i'm back, i made it. >> that was pretty quick. >> it was his -- was it, was there cloud cover? >> there was a little bit of cloud cover, we were a little anxious, going over central park like that and crossing the river. >> did you land right on the roof? >> you know, there's a spot on the parking lot, actually. out here. >> so jeeves knows how to drive a car and fly a helicopter? >> i have a separate pilot for that. >> jeeves ii. >> you guys asked some great questions and i thought his answers were very interesting on the china stuff and on europe and the u.s. -- very interesting. >> he's writing a book. did he ask you for advice? >> he's always asking me for advice. no, he's not. >> good to see you, you missed brian roberts. >> i did miss brian roberts.

>> he didn't ask about you. >> coming up -- >> i heard he did very well. more on the day's top stories, more data from the empire state survey. still ahead on "squawk box," the budget, taxes and politics, we'll break down president obama's budget with republican senator rob portman. tdd# 1-800-345-2550 and what i need. tdd# 1-800-345-2550 and still gives me a great price. tdd# 1-800-345-2550 at charles schwab, you get everything you need tdd# 1-800-345-2550 to trade your way. tdd# 1-800-345-2550 all for $8.95 a trade. tdd# 1-800-345-2550 here, it's all about trading. tdd# 1-800-345-2550 start trading with the intuitive streetsmart edge platform tdd# 1-800-345-2550 and use its tools like strategy builder to screen for stocks, tdd# 1-800-345-2550 find opportunities faster and compare your strategies tdd# 1-800-345-2550 against other traders. tdd# 1-800-345-2550 at schwab, you also have the resources to research and trade tdd# 1-800-345-2550 across 30 countries with more than 40 stock exchanges tdd# 1-800-345-2550 around the globe. tdd# 1-800-345-2550 plus, talk strategy with dedicated trading specialists. tdd# 1-800-345-2550 attend workshops and webinars. tdd# 1-800-345-2550 and get up and running faster with a personalized introduction

tdd# 1-800-345-2550 to all that schwab offers. tdd# 1-800-345-2550 get it all for a great price of $8.95 a trade. tdd# 1-800-345-2550 this... this is how i like to trade ! tdd# 1-800-345-2550 open an account and trade up to 6 months commission-free. tdd# 1-800-345-2550 call 1-877-412-6113. tdd# 1-800-345-2550 talk to chuck today. 3qmy journey continues across the golden state, where everyone has been unbelievably nice. mornin'. i guess i'm helping them save hundreds on car insurance. it probably also doesn't hurt that i'm a world-famous advertising icon. cheers! i mean, who wouldn't want a piece of that? geico. ah... fifteen minutes could save you fifteen percent oh dear... or more on car insurance.

coming up, we talk more about our exclusive interview earlier this morning with former treasury secretary, hank paulson. but first we head to chicago for a look at what traders are watching. plus new empire state survey numbers. anything not moving forward... is moving backward. [ tires screech ] [ engine turns over, tires squeal ] introducing the 2013 gs, with the lexus enform app suite -- the most connected information and communication technology available in an automobile. [ engine revs ] the all-new 2013 lexus gs. there's no going back. see your lexus dealer. there's no going back. oh!

[ baby crying ] ♪ what started as a whisper ♪ every day, millions of people choose to do the right thing. ♪ slowly turned to a scream ♪ there's an insurance company that does that, too. liberty mutual insurance. responsibility. what's your policy? ♪ amen, omen today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers.

we're back, let's check the markets, rick santelli standing by at the cme in chicago. he's got the numbers for the empire state survey. >> it improved more than expected. we were looking for a number around 15, 19.53, what a great year. taking us back to what the eisenhower years? 13 billion 48 is the last look, unrevised was as i look up at the outlook at the markets, a couple of things pop out. our rates are a smidge higher than yesterday. but yesterday we were at one-week lows. so we're 194.10, that hasn't changed much based on the number. but if i look toward europe, they're close to two-week lows in the boon, under 190, hovering around 187, as good as the news may be, regarding the optimism

for i forget what bailout it is, you know, for the parents of europe to give their tantrum-y offspring a little extra dough for march 20th, that looks good. but it's a tip of the iceberg in the grand scheme of things, back to you. >> tharngs, rick. >> you have views on this? >> i don't, actually. >> you don't have views on this? we're on live tv, you're supposed to come up with views. >> that's partially of what this is all about. >> i was thinking about, you must have known w. pretty well? >> yes. >> you guys weren't roommates, but you were in all of the same classes? >> we in all of the same classes for a year and a half. >> let's say you want to be an ambassador. let's just say it's something you would like to be. >> it's on your to-do list. >> what country would be number one? >> italy. >> italy. >> seconded by france. >> of course it would be italy. >> slovenia or -- >> the food, the people. >> if i ever got one it would be

some crappy place. but i mean that is the, that's prime, isn't it? >> it certainly was for me. >>. >> what were we going to talk about? this new number. >> do you watch the show? who do you think is right more, liesman or santelli? >> santelli! >> oh, nice! >> i'm saying that because i think he has the passion of someone who has lots of conviction about what he's saying. >> and steve doesn't? >> much less so. >> whoa! >> wow! steve's going to have to come done here and defend himself. this is tough stuff. >> rick, i don't know, i'm your wing man, i've got your back. >> i was particularly impressed with his animated ways yesterday, i think you did an incredible job yesterday. >> thank you. >> that's great -- >> rick was animated yesterday? i'm shocked. >> it was almost a youtube moment.

rick, you almost went after me accidentally. >> he was ready to. >> it wasn't you talking. >> i wasn't ready to at all, andrew. i was just surprised that out of all the topics that you haven't interacted with me on, i was surprised that that particular question. so in hindsight, i didn't think it was you. i was just a bit shocked. and i thank our guest host today, i guess the two things that get my passion up the most are you know, suicide door lincoln continental and anything about the markets. >> all right, thanks, rick. coming up, a budget battle shaping up in congress. we'll talk debt, taxes and election-year politics next with republican senator rob portman from the great state of ohio. and great city of cincinnati. "squawk box" will be right back. is you're saying we need to cut spending -- >> you've gotten so much of what you wanted and not claimed any credit for it. >> name one thing we've gotten.

>> state and government hiring. >> state and government spending. optionsxpress, where you can trade your favorite products,

all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com.

we need a new system, and you know, i've been for a system where we would eliminate the deductions and all the

distortions and the special spending programs that are part of the tax code. and lower the rates. and have something that will, will let us be competitive in today's world. >> former treasury secretary, hank paulson, who spoke to us earlier about tax policy. joining us now. to talk about taxes, the budget, and politics, senator rob portman, a republican from ohio to sits on the budget committee. a former omb director under president george w. bush and even more importantly, a former two-hour guest host on "squawk box." that's moved to the top of your cv at this point, hasn't it, senator? >> it has. >> we've had a lot of comments about the budget. i guess it's a commentary on our times that i can't even get a democrat to say that it's not a political document. i haven't had one person that's been on, senator, say it's an actual budget.

>> andrew, unfortunately, i think you're right. >> senator, this is me. >> is that kernen? >> i thought andrew was giving me a softball there. >> oh! >> those are for me. didn't you hear me say democrat? >> senator, joe does the soft buzz -- >> oh! >> i was so surprised that you were dishing one up for me, andrew. >> okay, joe, let me answer your question, then. last year the president presented a budget that was also called political. it was taken to the floor of the senate and was voted down, 97-0. these are political times, we're in a campaign year. but these are also times with trillion-dollar deficits, spending more than we've ever spent. and it's time to put the politics aside and actually put out a blueprint that makes sense. this is not that blueprint. i just heard hank paulson talk about tax reform. there's nothing in here about

tax reform. it increases taxes significantly. even on dividend taxes. people thought the budget would probably go from 15% to maybe 20%, maybe 25. dividend tax goes actually up to 39.6% here. and congressional budget offices looked at what happens when taxes go up. guess what, unemployment will be higher next year. this is a political document. it doesn't touch social security, it does very little on medicare, almost all of it on the provider side to the point that entitlements as a percent of our budget, we talked about this when i was on the air, about 64% now. when you include interest on the debt and medicare, medicaid, social security, so-called mandatory spending. it's the biggest part of the budget, fastest-growing part of the budget. over the ten-year period, it goes from 64% to 78% of the budget. so i know ambassador spogli is here today, he can tell us what happens in southern europe when you come to an entitlement society, or you can't stop the spending, that's the track we're on.

>> i guess, what i was leading to by saying both sides admitted to political. because the democratic will say that proudly, that it was political. because there's no reason to try to deal with republicans on a budget right now, they're going to say no to everything. that the president proposes. so why give a serious budget proposal when it's not going to get anywhere, anyway. why give up ground in an election year? that makes some sense, doesn't it? >> it's an election year and it's tougher. but you look at last august, which isn't too long ago. president obama and speaker boehner were apparently very close to what was called the grand bargain. it was in essence a budget. about revenues and about spending. and the president has backtracked since then, significantly. including with the supercommittee. basically giving us the same proposal he game to congress this week. so i do think that there's some receptivity on the other side of the aisle. meaning the republican side of the aisle, to real solutions, to the problems we know we face and have to address.

and i actually think it would be good for the president politically. i think it would be good for the country as well, for us to address some of these issues. this is an opportunity to do it. at least to have the debate. we can't have the debate now, because we don't have a budget document that can make its way to the floor. the senate, as you know has not even produced a budget for over 1,000 days now. so we're in our third year of no budget here. so we aren't even going to have the debate on the floor at a time again where we have these deficits of over $1 trillion, 42 cents of every dollar is borrowed that's being spent. this is a scary time. i know the ambassador is here, he can talk about what's going on in europe. we are headed toward a very similar situation. and it's not like we don't have an example there now. and we look at what's happening in greece. athens is aflame. look what's happening in spain, and portugal and italy. we're headed that way unless we change direction. and unfortunately this budget doesn't even help us to take a step in that direction. >> andrew, give him a question

that he will know will coming from you. where you won't even have to identify himself. give it to him. >> what kind of a question would that be? >> he's a republican, you can say anything. >> from your heart. >> your "occupy" heart. >> it's so unfair to be pigeonholed this way. >> he just pigeonholed me, a softball republican ass-kisser. >> come on. >> going from chickens to pigeons? >> you asked the question that i would ask. you already asked it. >> why should he do anything when he's not going to get anything. >> i did ask it. >> it was a tough hardball question. >> joe kernen, fair and balanced. >> i got accused of that yesterday, senator. they told me to go to fair and balanced. >> senator, ron spogli, moving to energy, if i can. when you look at the decision on keystone and you couple that with the canadians having decided to sell their oil to the chinese as a policy-maker, hows did that make you feel?

>> well, it's frustrating and it's a political decision, not consistent with what the president said in the state of the union, which he wants us to become less dependant on sources of oil from the middle east and other volatile and dangerous parts of the world. it's a decision that also affects jobs. and not just jobs directly related to the pipeline, which they say is about 20,000 jobs. but it's actually over time, many more than that of course, because it's about our refineries. it's about places like ohio where i'm from. manufacturing things that go into the pipe-making and into the pumps and other things related to the pipe. this is a decision that makes no sense from an economic point of view or from an energy security point of view. >> we have a great opportunity, ron, as you know, for us to actually use our own domestic sources of natural gas and oil and so-called wet gas, things that we frankly didn't know we had access to until the last several years with this new technology and the new finds. so this is an enormous opportunity. in ohio, we have a report out

saying we can create up to 200,000 jobs in the next several years alone, just by accessing some of these shale finds. the president ought to take the opposite position, which is to aggressively pursue this, affordable, reliable cleaner energy, it's a huge advantage for us as a country at a time when frankly we've got a lot of competitive disadvantages. >> senator, we put our heads together i have a question, this would be the left of all left questions. and the question would be this -- you saw the jobs numbers last week. you've seen what's happened in the market. some people, even in this ild about, called it the obama rally. do you give the president credit for what's taken place over the past several months, given the jobs numbers? >> first of all -- >> and stock market. >> we talked when we were on before. the jobs numbers are better and we should celebrate that. the fact is, though, that we still have a lot of people who are not looking for work,

because they have left the job markets. so instead of being 8.3%, we should be at 8.5 or 8.6%, just on that alone. if we had the labor participation rate, prerecession now, we would be at about 10% unemployment. hardly something to celebrate. so, yes, we're making some progress, but we have a long way to go. and again, this recession was relatively deep, but the recovery is the weakest in modern history. so we're still down about 5.5 million jobs, as compared to the '81 recession, when we were up six million jobs by now. as opposed to the so-called jobless recession in 2002-2003, when we were up 15,000 jobs. it's time for us to reform our taxes, regulatory relief. energy as the ambassador talked about. we've got to really focus on restructuring our economy to make us more competitive. and unless we do that, i think we'll have what happened about a

year ago, remember a year ago we had a little blip where things seemed to be getting better. unfortunately, think we're looking at a situation based on what the congressional budget office told us, which is nonpartisan group, of higher unemployment next year. the president talks about that, he says there will be higher unemployment next year and actually higher unemployment in 2014 than we have now. >> did you endorse anyone, rob? >> i endorsed mitt romney after being on the show with you when you guys sort of forced me to look into my heart and think about who i really wanted. >> okay, good. >> i endorse him because i think he would be the best president. and i think on these very issues we're talking about, he gets it and i think he would focus on results and trying to achieve something that this country desperately needs. which is pro growth economic policies and dealing with our debt and deficit. i think he would be the right guy to do that. >> would you be on the ticket if they asked you? >> i'm happy where i am and actually he needs some help in the senate if he gets elected. >> that's like a pull cord that every vice presidential candidate says, i'm happy where i am.

>> i am happy where i am. and there's lots to do. >> uh-huh. >> okay. >> ohio is an important state as you know. >> it is an important state. >> senator portman, thank you, good to see you. >> thanks, joe. >> and you -- >> as an ohio native, i'm glad you acknowledge ohio is important. >> this is how we do it from both sides, right, andrew? >> both sides. >> both sides now, senator rob portman. >> from the middle and -- >> speaking of both sides, headlines breaking on greece that have the euro moving. joining us is simon hobbs on the floor of the nyse with more. >> we've cut the futures here and as you say, the euro started to move. it looks like we may have a problem with greece during the session. essentially the man who will be the next pp of greece has failed to give an unequivocal promise to the rest of the european union that he will follow through on the austerity after the greeks go through the april election. that is a red flag to the bull as far as the germans and the dutch are concerned. we have a finance ministers meeting starting at 11:00 our

time. it's looking highly unlikely that they're going to sign offer on the greek deal and they may start staggering the money, if they give the money at all in advance of the march deadline. so i'm afraid the headlines will the risk of a disorderly default are growing. >> they're talking about some of the money might be dispersed to avoid the disorderly default. in other words, 30 billion euros that would go to the banks? >> i think it's the march deadline that would be the most important. that would pay off the bonds that are coming due as you know so well, michelle. >> wow. hedge fund managers in the market would be thrilled if that was to happen. that would be unbelievable. thank you, simon. coming up, the latest buzz from wall street, we're going to talk stocks and see what's on the move with the "squawk on the street" team. when you miss "squawk box," you fall behind on global business news. when you fall behind on global

business news, you make bad investment decisions. when you make bad investment decisions, you lose all your money. when you lose all your money, you are tempted to hatch an illegal ponzi scheme. when you hatch an illegal ponzi scheme, you get roughed up in an interrogation room. don't get roughed up in an interrogation room. watch "squawk box." you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. sadly, no. oh. but i did pick up your dry cleaning

and had your shoes shined. well, i made you a reservation at the sushi place around the corner. well, in that case, i better get back to these invoices... which i'll do right after making your favorite pancakes. you know what? i'm going to tidy up your side of the office. i can't hear you because i'm also making you a smoothie. [ male announcer ] marriott hotels & resorts knows it's better for xerox to automate their global invoice process so they can focus on serving their customers. with xerox, you're ready for real business. in the works package, we change the oil we change the filter... tire rotation, suspension, we make suspension checks... what we have here is the multi-point inspection. every time a vehicle comes into a ford dealership you'll be presented with one of these. we check the belts, hoses... brakes. tires and the pressures... battery, all your fluids... exhaust system, transmission... we inspect your air filter... it gets done,it gets done quickly and it gets done correctly. the works. oil change, tire rotation and more: $29.95 or less after rebate - at your ford dealer. you're a doctor... you're a car doctor. maybe a car doctor...

welcome back to "squawk on the street." david and melissa and jim join us with what's coming up on "squawk on the street." >> you know obviously a lot of what will drive the market today is europe. >> china is very big. if we get them on board, we get some growth. that's what i think we're all after that phase now. if we get growth in europe, i think we're home free here. >> the economic data, i mean, france grew, about you we saw weakness in italy and the overall euro zone. >> how about portuguese 12-month paper. another hit.

the long-term refinancing was one of the biggest success stories of 2012. we've got to start acknowledging it, because it seems to work in every single country. i think when i saw -- >> we'll also go through a lot of the corporate earnings out this morning and after the bell. zynga a huge disappointment. >> holy cow. >> and an interview. >> mark may, says the sell quenchal decline. incredible. >> and we have -- you won't want to miss it. sounds great. coming up, final thoughts from our guest host, the ambassador. can i just call you the ambassador? i kind of like that.

"squawk box" is coming back with that right after the break. tomorrow our guest host will be w.l. ross chairman and ceo wilbur ross. we'll talk earnings with ceo-election barry soren son. and we'll talk budget with republican senator bob corker. don't miss "squawk box," starting at 6:00 a.m. eastern tomorrow. [ leanne ] appliance park has been here since the early 50s.

my dad and grandfather spent their whole careers here. [ charlie ] we're the heartbeat of this place, the people on the line. we take pride in what we do. when that refrigerator ships out the door, it's us that work out here. [ michael ] we're on the forefront of revitalizing manufacturing. we're proving that it can be done here, and it can be done well. [ ilona ] i come to ge after the plant i was working at closed after 33 years. ge's giving me the chance to start back over. [ cindy ] there's construction workers everywhere.

so what does that mean? it means work. it means work for more people. [ brian ] there's a bright future here, and there's a chance to get on the ground floor of something big, something that will bring us back. not only this company, but this country. ♪

wow, this is not self-serving, right? >> stock of the day, comcast. snubs universal's parent company, today given those numbers, it deservedly, no matter who owns is the network. revenue beat, 44% increase in the defend. it was already yielding about -- 40% increase in the buyback for this, 2012, and some of the other metrics. it is a varied and sundry company at this point, but the operating cash flow for parts of

nbcu, the numbers of new customers added by x finity. >> how much do you think squawk represented. >> i was just going to ask. a lot. >> i heard them only one mention one show either on nbc or cnbc, it was "squawk box." >> no, he mentioned "the voice". >> oh, yeah. >> and splash? >> "smash" c'mon. oh, my god, our guest host is the former u.s. ambassador to italy. we talked a lot about that role that you've had. we didn't talk that were about your private equity firm. do you think -- and you're a romney backer. one of the problems i've had is that, you know, i guess i would tread lightly, too if i was the romney campaign with the 99% and 1%. the whole narrative the president has set up for the up versus them narrative, but

wouldn't you have mounted a better defense. wasn't that a better opportunity? >> i think so. really as a tool that can be used as a variety of different ways as it is. it's neither good or bad intrinsically. it's how it's used that makes a difference. i believe it has been used overwhelmingly to purposes we would all agree have been positive more than anything else. >> the carrying the interest thing is an optical problem that makes any defense less effective. >> you can leave that aside. >> how? >>. >> i'm not going to stay it has to be unequivocally what it is today. obviously i'm not going to go on and earn the -- of all my colleagues by sayit