that we got 14,000 people to a safe place and that was actually more important. >> alan, want to thank you very much for coming in today. it's been a pleasure talking to you. >> thank you for having me. >> that does it for us. join us tomorrow. right now, time for "squawk on the street." good wednesday morning. welcome to "street signs" on this leap day, february 29th, 2012. i'm carl quintanilla with melissa lee, jim cramer and david faber live at the new york stock exchange. this morning, the dow will open above 13,000 for the first time since may of 2008. also we're a little more than 13 points away from nasdaq 3,000. you always have to have a target. >> always. goals in life. >> round numbers. >> there's a look at futures today. a lot to talk about relative to the easy money coming out of europe. modest up open here. and europe is mixed for the time being. although for the year to date,

still hanging on to good gains. ftse up 6%, dax up and cac as well. let's hit the roadmap. can the dow stay above 13,000? the last leap say, the dow lost 315 points. >> fed chief ben bernanke heads to the hill to give his testimony. how will he respond to questions on gas prices, manufacturing, employment and stocks? >> and the ecb's second low-cost loan program. 529.5 billion euros borrowed by 800 lenders. >> apple set to open north of $500 billion in market cap today. can the buzz around the launch of the ipad 3 next week keep the stock up or will the law of large numbers kick in? the dow is coming off its first close above 13,000 since may 19, 2008. the blue-chip index up 6.5% so

far this year, it's jumped 22% since october. meanwhile, the bulls can only hope today's leap day trading is nothing like the last one. stocks tumbled the last february 29th with the dow falling more than 315 points, about 2.7% drop back then. other major averages chalking up similar losses, including the s. cramer, why is now different? >> last time around, it was a commodity bull market, which is completely insane when you think about it because when commodities go up, it is often a big precursor that the fed has to put on brakes, that the economy is being driven by inflation. this time, the economy's being driven by growth, by nice revenue growth, good earnings, no particular stock standing out -- it's not caterpillar this time, it's not chevron, it's not exxon. it's just a consistent, broad mosaic of stocks going higher.

jpmorgan started to participate yesterday. i like the way it's percolating. >> interesting. historically, leap days have not been so good for the s&p. down 10 of the last 16, going back to 1945. and in terms of leap years, spx up 8 of the last 10. but the 2008 year is so bad, instead of underperforming most years, it would have outperformed if you strip out 2008. >> the ghost of 2008 is still very much with us. i was talking last night on "mad money" -- >> not just because alan schwartz was -- >> holy cow, the grim reaper. here's what i see happening. i think that people are chastised. if you go out and say something positive -- if you go -- do you know we once had dow 10,000 hats here? >> i remember that. >> i have 11k, 12k and 13k. i brought it back out.

>> how about 7,000? >> i think we're all kind of saying, let's not be too excited. maybe that is the secret why this market continues to work because we don't have broad retail representation. we saw some numbers yesterday. the money is still going into bonds. it seems like not a lot of people participating. we did some work yesterday on apple and how that's an underinvested stock. i think the idea that there is no joy -- other than joy global today, there is no joy to these numbers says to me, we can go higher. >> interesting. doing something would be different because so far this year, three triple-digit gains on the dow, no triple-digit declines and we're up 1% in three weeks. you talked about a vacuum of news yesterday. it has been in some ways a weird vacuum of activity -- >> 1985 to 1989, 1992 to 1996.

these -- intel doubles, microsoft doubles. microsoft goes up a little bit in windows 8 today. you have to get the microscope out. intel goes up a little. this is sustainable. >> you talked about crossing into the 30s a few weeks ago. >> this is sweet. this is not like the old days, that terrible rally in 1999 which really just set us up for one of the great falls. we're finally back to 3,000. how long did that take for nasdaq? >> when will we get back to 5,000 is still questionable? >> cicso has to go to 80, right? >> march of 2000 is when we hit it. >> yeah, third week of march. >> the transports are not confirming the rally. that's a problem. that is largely in part a crude problem because crude is hitting the transports disproportionately. and the volume have been light. >> i don't mind volume being light.

i've always cared about this volume light thing -- it's terrific data point. but in the end, you can sell at these prices. the transports, very troubling because i can't whistle past a front-page story in "the new york times" which says, after israel attacks iran f that happens, will the united states be safer? these are stories that say, i want to go hoard somewhere. demand in this country -- >> how much of the transport weakness do you think comes from the nat gas/goal dichotomy? >> when we look at the rails, coal is transported by rails. joy global talking again about switching by utilities, nat gas is not something that goes by rails. do we look through it and say the rails are done for a specific reason? i say, no. without confirmation, it's worrisome. let's just say it's worrisome.

>> less than an hour from now, the fed chairman, ben bernanke, is going to be on capitol hill kicking off his semiannual testimony on the economy. today, we goes before the house side financial services committee. tomorrow, the senate side, the banking committee. it comes as rising gas prices are taking center stage as an economic and political issue. i'm not sure he's going to be asked a lot about what europe did earlier this morning. >> yeah, europe continues to be a key in terms of the performs of our own economy and for its part, the fed and the obama administration kind of hope it just keeps limping along. we got the results from that long-term refinancing operation, otherwise known as ltro in which the ecb is giving banks 1% money for three years, taking almost any collateral. they took in a little over -- about 529 billion euros' worth. compared to 489 billion euros' worth last time we had it. this may be the last operation of this type. it has given enormous amounts of

liquidity to the bank system in europe, potentially staved off what was a crisis that was much closer than even some of us might have been aware even though we kind of knew it was there in november and december. >> you did. your guys were saying, look out, some bank may not open. was there some bank other that dexia that might not have opened? >> i think there was. judging from some of the assets that were sold and the prices accorded those assets, there were fire sales going on. i think we know in some ways that we were very close. i'm convinced of that. but it didn't happen. since then, italian yields are shown sharply. spanish yields are down sharply. some of the 489 billion that was given last time under this program was used to buy the very same sovereign debt bonds. it doesn't solve the solvency issue. it solves a liquidity issue near term. there's a question of the willingness of the banks to still lend. they're contracting their balance sheets, not good for

economies in europe that are already dealing with austerity budgets and no growth. >> this was the greenspan way to get out of the crisis. you make it so that you borrow money very low and you can invest in treasuries. it worked. there is going to be accumulated capital at these banks so that they feel better lending. that was the strategy to get out of our jam in 1991. it's going to work in europe. >> obviously the sovereign arbitrage problem is getting a bit of a solution. long term, if there is no growth, either through austerity or no austerity, will yields creep up again and will the banks lean on the ecb for another gift like this? >> they have to pay the money back. it's three-year money but they have to pay it back. >> we need china to cut rates dramatic and we need the united states to be the engine of the world's growth. we need to see companies want to do business in europe. there was a really terrific op ed piece by our old friend sally kraucheck talking about how banks' money funds has been funding european growth. will it come back?

>> that was another thing that reached crisis proportions. i don't know if they'll come back. >> you need it for lending. >> you dochlt but you're not getting the lending at this point. >> there's a question as to how much liquidity there is on the market now even with the second round of low-cost financing. there's apparently $150 billion in medium/short-term ecb loans do. if you take that what was loaned out to 800 institutions, it's much less -- divided by many more institutions than the last time, 800. >> as opposed to last time it was 523. >> and the thinking here is that international institutions were bigger participants in this. of course, they don't disclose because they don't want any sort of stigmas attached. and nomura pointed out that it could be people like auto manufacturers that have arms that could have participated in this. >> untold story here, germany is

just fabulously strong. a lot of people, i'm sure, are resentful in europe that germany's been able to export the heck out of their economy. everyone else takes their stuff and germany is saying, we don't like the way you do your budget deficits? come on. >> that's the key question. germany benefits enormously from the euro. it's an export-led economy, doing extraordinarily well. that's the calculus. >> and deutsche bank has emerged as one of the top four or five banks in the world. terrific balance sheet, a lot of safety, very savvy management. i think that we should watch them because someone's taking share in europe. >> still pretty highly levered. although i have to check that. as is the ecb, by the way. that balance sheet has expanded a lot. let's not forget that. a lot. >> we're not carrying around

wheelb wheelbarrows of euros. >> the euro holds up well. it's been a trade again this year that the macro funds cake in saying they're short. and it's not working out. >> a couple of weeks ago, morgan stanley said 1.15 for the euro. in the immediate term, a lot of people are getting caught on the wrong side of the trade. a lot of currency traders are saying, stay away from the euro entirely. >> jon corzine is the only one that got it right. corzine -- >> we have breaking news -- >> news corp. is announcing that james murdoch has stepped down as executive chairman of the british arm news international, the focus on global tv ventures. we've been talking about the son, not the sun. this is one headline that affects a man who sat next to rupert in that hearing that we remember from last year, the one

in which rupert got a cream pie on the face and had to walk his father through this very delicate scandal which they're steele still dealing with, jim. >> one of the things that happened, when you look back at that pie, that pie, the moment it hit his face, absolute bottom of the stock. it was pie bottom. >> when wendy came to his defense, that was my favorite. she was just ready. listen, james murdoch, he's not stepping down from the company. >> correct. >> that has been a key question. and it probably will continue to be. but he is stepping aside from the publishing operations. >> is it just -- >> he continues to -- he overseas bskyb. >> the dolans would like to have him, the cablevision could use james murdoch.

>> can you imagine another media company hiring a murdoch? >> anybody's better than a dolan. >> but the question, i think, will continue to be can he survive the scandal that is still escalating on some fronts? >> the stock keeps going higher, ticking up again -- news corp has no cash flow. >> media stocks have been doing well. the advertising market has come up. take a look at disney, comcast. we're in an upswing for media in general. >> don't you think the newspaper execs are overpaid? jamie dimon keys in on that -- one of his most bizarre moments is when he attacks newspaper executives for taking too big a bonus. i love this guy. >> maybe he's talking about the newspaper that is went to the fed for emergency lending. there's a headline this morning that jamie dimon is no longer a media darling after yesterday's presentation, right? >> he gave up his crown.

>> it was an interesting comparis comparison. perhaps a bit specious to make that comparison. >> a lot of yucks in that talk. he needs a rim shot when he -- he's become the funny banker. no one's buying that? >> i don't know. >> i think he's funny. >> i think we like it when jamie comes out swinging, which he did yesterday. >> maybe we can take a look at jamie's stock for a second, see whether that's been the driver of the group. no, no. jamie -- >> we're so short term here. >> the upswing can't be as -- >> he's comparing himself to "new york times," the gannet. >> apple hit a new milestone. sur ppassing a half trillion

dollars in market cap trading. it's the sixth company to do so. it will do so if shares remain at $536.27 or above. that's the magic number. >> now you have one of these situations, the classic apple situation, we have a product launch, people come in. they buy it ahead of the launch of the ipad 3. and they sell -- but people didn't expect much of the iphone s4. they didn't know the power of siri. she is someone you want next to you when you go to sleep. she wakes you up. by the way, when you tell her, i want to get up at 5:00, she says -- >> does lisa know about this obsession? >> there's room for more than one woman when it comes to waking up. >> i'm getting that impression. >> i wonder how many babies are going to be named siri this

year? >> not suri, the tom cruise child. >> that's so 7 years old. >> the power of siri is amazing. you really don't know how much she's driving things. but here's something, samsung was starting to get a little momentum in phones before siri came out. no, game, set, match. >> if apple were a country, 20th large economy in the world. and in terms of the s&p -- it's bigger than material, bigger than telecommunication services. pretty amazing. >> i remember when they talked to the godfather about being bigger than u.s. steel. i often find when merc in 1985 passed gm, people thought that was fanciful. but people thought it was outrageous that they were bigger than u.s. steel. now i look at this and say, ibm, big company, doing well, but apple hotter, apple better and apple cheaper.

>> when it comes to the recovery, how big of a threat is high gasoline prices? in a "squawk on the street" exclusive, we'll take the pulse of the economy with the chairman and ceo of truck rental company ryder system. here's one more look at futures. and we'll take ben bernanke live when he hits the hill coming up at 10:00 a.m. eastern. a lot more "squawk on the street" live from post 9 at the nyse. 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.

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♪ in case you're wondering, the tremendous applause for the bell ringer who will be ringing the bell in just a few minutes, nypd detective kevin brennan and his family along with the police commissioner ray kelly. he's just passing by. that's why you hear the applause behind me. today's "squawk on the tweet" focuses on ben bernanke. he's scheduled to testify before a house panel. we're asking you to answer this question. tweet us and we'll air your responses throughout the morning here. >> he's clearly focused on -- he thinks this is 1936 and he's trying to forestall 1937, when

we fell back into a depression or a great recession because we'd had a budget problem. i focus on that. >> a picture of the commissioner of the nypd, obviously ray kelly, and detective kevin brennan who will talk to us after he rings the opening bell. why take a leap on february 29th when you can go running for profits with cramer? his mad dash is coming up next. take a look once more at futures. can we hold above dow 13,000? as of now, it does look like it, up 14 points, looks like, at the open.

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all right. just about five minutes before the opening bell. time for cramer's mad dash, ahead of the market open. a lot of interesting stock stories today. let's start with costco and their 8% comps. >> costco seems to be the place people go when they want to shop maybe a little bit more -- it's a bmw place is the way i look at it, meaning there's bmws all over the parking lot. people want to be able to get a bargain. costco's the way to go. revenues up because they raised prices for your ticket, for your club card. >> membership, big engine of their revenue stream. >> and no one knows costco as well as you -- >> still learning. the documentary we're doing airs in april. fascinating -- actually very berkshire-like, i've found. the similarities are not too surprising. >> the former ceo just retired.

i've compared him to being a steve jobs of retail. i know that's hyperbole. but -- >> how about soda? >> you have to go through a technical analysis of the third quarter versus the fourth quarter. this must be razor/razor blade. this stock belongs lower. >> herb's going to have a field day with that today. >> look, taste matters. it tastes good but you don't want to own the stock. >> jim, thank you very much. the opening bell just moments away. get ready for another big day of trading. much more "street signs" straight ahead. he lives in the mariana trench. much more "squawk on the street" straight ahead. >> did you not grow up with leap day? he emerges every four years to trade children's tears for candy. >> we'll pass on the children's tears and stick with trading stocks. which of these 500 stocks have

you leaping? the opening bell is next. we'll be right back. a carfirmation.

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♪ the opening bell on wall street. here at the big board, kevin brennan and police commissioner ray kelly. detective brennan was shot in the line of duty last month. over at the nasdaq, pr week. will the dow hold on to 13,000 after it closed above for the first time -- oil trading slightly higher. yesterday we saw a big decline in oil. >> right. >> helping to fuel that rally. >> and remember, we've been talking about this time versus other times. we have -- let's compare it to 2000, the devastating year. we have dividends higher, cash flow higher, p/es lower, particularly for the nasdaq. the valuation is really there. >> as of yesterday, i think we had almost all 500 s&p

components having reported. the beat ratio about 60%, not that hot. i think the run rate on earnings was $95, which might be a blow to those who still want to see $100-plus for the year. >> you have to compare to it what you can get in fixed income. i was trying to find some six-month paper that doesn't make it so that you're basically losing money after inflation. i can't. so if you can get 3.5% -- if you can get some of these dow yields, verizon, you're doing pretty well. >> and your point last night was look to technology as opposed to some of these big consumer names. you talked about microsoft earlier. >> if we can focus on intel for one second. if you look at intel, this is one of the great unsung rises that i have seen. they do it with yield. they do it with buyback. they've got new products. they're in cell phones. this is one of the nicest, steadiest charts out there. and i think that general mills

is no longer as safe as intel. >> microsoft is a great one to look at also. take a look at the creep it's had in 2012 after being, quote, unquote, dead money for so long. this year breaking out to new 52-week highs. the beta version got launched today at 8:00 a.m. eastern time. that could provide some fire to the stock. >> i've seen the beta version. it turns your desktop into the functional equivalent of an ipad. >> blogs also getting active about potential heirs to the thrown over at microsoft. we're going to start hearing a lot more about that. >> skype -- steve ballmer, always under a lot of pressure. this chart tells me we ought to think about steve ballmer as someone who can make us money. skype is a big winner. xbox, the way that kids watch

netflix -- >> it wasn't that long ago that we were poo-pooing that -- >> this windows 8 is a little breathtaking. i really like it. >> safe to say you're not as enthusiastic about first solar's numbers. >> first solar is amazing. this is a first-class disaster. it's a $3 billion company that should be a $1 billion company. >> we had a fantastic analyst on last night on "fast," gordon johnson of axiom capital, recommending first solar as a short for more than a year. he's done channel checks that have been solid and have proven to be right. he says the earnings was much worse than expected. you can keep shorting the stock -- this could be a potential game-ender for first solar. keep in mind, first solar is one of these solar companies that has a d.o.e. loans, one of the biggest d.o.e. loans out there. it's not just shareholders that are going to be missing out. >> he's thinking collapse?

>> down 7.5%. we should note quickly, apple, new record high intraday, $544. $544.99. let's turn it over to david and bob now. >> bob was peeking his head over into a crowd there -- >> we're waiting for it to open here. the key thing today is, goldilocks. the ltro, is it 300 billion, is it good? if it's 800 billion, is it bad? 530 billion was exactly the right number, right in the middle of everybody's expectations. 800 banks participated, significantly more than before. spread out rather nicely. so the bottom line is, everybody seems kind of happy with it. i don't know if you saw the s&p report this morning. they issued this

innocuous-sounding report evaluating the ltro. it sounded like the mario draghi for president report. one sentence says, we believe that the ecb's intervention has materially reduced the risk of a liquidity-driven bank failure and averted the possibility of a severe credit crunch and additional recessionary pressure across the economic and monetary union. >> long-term refinancing operation, 1% money for three years. 800 banks availing themselves of this opportunity to the tune of 529 billion euros. this is it, though, right? they're probably not going to do it again, are they? >> that's a great point. the body language is no. we're getting a modest rally in europe. some of the bank stocks up 2%, 3%. here's what i think the problem is. you're right. once we know historically -- when central banks turn the spigot off, stock markets run into trouble. that's going to be a problem for the market if the ecb says, this is it. find a way for your banks or

money market funds to start funding your operations. by the way, we're going to have this problem, too. this is why i'm watching bernanke this morning. operation twist, the fed extending the maturity of their bonds is going to go out at the end of june 30th. those people there are going to get questioned very heavily. i think that's going to be a big issue. when that happened last year, too, when q.e. 2 ended, problems for the market. >> we'll be watching the rest of the day. bernanke coming up soon. over to carl now. we're joined this morning by the commissioner of the nypd, ray kelly, and detective kevin brennan. detective brennan shot in the line of duty on january 31st, just finished ringing the opening bell. gentlemen, good morning to you both. >> good morning. >> detective, i don't think anybody -- any of us can truly understand what you've been through over the past few months.

but surely it has changed the way you approach your work. how has it changed it? >> my work right now is just to get better. i'm going to be out for a few months. my work is to heal at this point. >> you have your wife here, janet, 2-month-old daughter, which is just off camera here. it must be an amazing feeling to have that second chance. >> yes, it is an amazing feeling. i'm very lucky that i pulled through that night. i'm lucky to be a husband and a father. >> commissioner, it's a reminder of the risks that officers not only in new york but around the country take and the protections that they afford all of us. >> absolutely. you never know. kevin is truly a hero. kevin tackled on individual with a gun and kevin got shot by that individual from only a range of four or five inches away. it's truly a miracle he's standing here today and underscores the dangers police officers face 24 hours a day. >> it's an honor to have you here. i know you're well aware of the

applause you got as you walked on the floor. but on behalf of all new yorkers, we're very honored to have you and appreciative of the work you do every day and to the nypd. gentlemen, thank you very much. >> thank you, carl. >> let's head over to david faber with more on news corp. today. james murdoch, as we told you earlier, resigning as executive chairman of the news international, part of news corporation. sarah allisellison joins us on phone. murdoch still at the company. he's back in new york and running all of the international properties in terms of video. but give me your take on his stepping down from news international? >> i think you're right. some of this is not totally shocking because i think he even said he was relinquish some of these responsibilities. but james murdoch a year ago was going to be the next ceo of this company. this is yet a further sign of

his diminishing influence and his diminishing role at the company. if his last name were not murdoch, he wouldn't be working there anymore. >> to that speculation, if this continues, this investigation in a negative way, do we think it is still possible that mr. murdoch, that is, the son, james murdoch, will be forced to ultimately step down from any role at news corporation? >> sure. i think these are all possibilities. this is something that james has been dealing with and has been sticking to his story, that he did not know about the improprieties that were going on. he's been walking a very fine line of the investigations here in london, where i am right now,

are continuing a pace and are very aggressive. and i think that he does stand in real jeopardy if they continue to dredge up the kind of information they have been dredging up. >> and what about his 81-year-old father who continues to be the ceo of this company? is it fair to say at this point james murdoch is not expected to succeed him and that at some point it will be chase carey, who is kushlt tcurrently the co? >> i think it is safe to say that james is not going to succeed him and that chase is the person in line to get that job. rupert's stance right now is even as his own company's internal investigation is throwing up really damaging information about what went on in europe, he's here launching a new version of the paper, sort of sticking to almost 19th

century newspaper roles -- the more you see that happening, rupert is just as alone because chase and the new ceo in europe are taking over more and more responsibility. >> and of course we should point out as we look at the stock of news corp that this scandal, while having a significant impact on the shares over the course of the summer, has really not impacted them since then. there have been a couple of good quarters of earnings from news corporation. as you point out, publishing is simply not that important. psychologically very important to senior mr. murdoch, but not to shareholders, is it? >> no. in fact it would be good news for shareholders. they would be just as happy if -- i think the uk newspapers are as good as gold because the investigations that are going on here -- it's an effort to clean them up but it's sort of poisoning them at the same time. that's good news for shareholders.

they want news corp to sell those properties. they're symbolically very important. now it's down to the position what's good for the murdoch family is bad for shareholders, bad for the rest of the shareholders. that's the tricky part of looking at the stock right now. >> it certainly is. that big buyback they put in place in answering their shareholders has helped certainly with the performance of the shares. sarah ellison, appreciate your joining us. over to melissa. let's shift to bonds and the dollar. check in with rick santelli at the cme group in chicago. good morning, rick. >> good morning, melissa lee. obviously we're all going to be debating the four letters you guys don't want to say anymore, ltro. but something interesting is going on in the fixed income markets. we had a three handle on gdp. that's a good thing. maybe rates climb add little bit. as you look at the 24-hour chart of our ten-year, unchanged. the bunds were dabbling in lower yields. but look at what happens when you get to the uk and the

ten-year, their gilt, their yields are up rather notably. i've been trying to figure out what's going on. they had good housing data this morning. they have a gilt auction tomorrow of 2.75 billion pounds worth. but it really is breaking out in a different direction. we're going to have chicago purchasing manager survey in several minutes. we'll be handicapping that one on the fly. back to you. >> thank you very much, rick santelli. meantime, we'll do this in "six in 60." but i know you want to mention joy global. you say it matters. >> yeah. this was one of those companies that has really been like caterpillar, like cummins, linked to worldwide growth. the company reported what looked to be a disappointing quarter. that's what everybody's been saying. mike sutherland talking about china, no slowdown despite the fact that people are switching from coal to nat gas in this country. the fact that this stock is going up is positive for the market. the industrials have room to go higher. >> the homebuilders are doing

nicely today, bouncing off of yesterday's disappointing case-shiller numbers. we saw a selloff, pressure in yesterday's session. but a lot of them up more than 2%. we spoke to doug yearly yesterday and he said there are positive signs when it comes to the spring selling season. most of his buyers are paying in all cash. the average selling price for a toll brothers home when you strip out the manhattan projects, high $500,000, the ar average selling price. >> mortgages at all-time lows and you have people paying -- >> i've been through this process. i have a real good balance sheet, okay. i literally have a lot of -- >> you doing okay? >> cash flow is okay. not trying to to be 1% here. but i have worked hard to get the 3.5% mortgage that people

are supposed to be gunning for. i have to put down between 30% and 40% cash. i'm haggling over the idea of putting up 40%. bothers me. important numbers, second big number of the day. chicago pmi, rick santelli in chicago, rick? >> well, of course -- here we go. 64.0. much, much better than expected. we were expecteding a 61. this makes four consecutive readings above 60. that's a phenomenon that doesn't happen very often. how far back do we have to go to usurp 64? this is a bit less. we know this may change as energy prices catch up to these survey periods. but all in all, this is a better-than-expected number. let's see how the market parses the current headline versus the future anticipation of energy effects. and, remember, we're still very

close to unchanged in a ten-year after a better-than-expected gdp as well this morning. back to you. >> thank you, rick santelli. the fed, as you know, fed chairman heading to the hill. we asked you to complete the following sentence in our tweet of the day. ben bernanke needs to say "blank" for me to feel better about the economy. tweet us. we have your responses straight ahead. leap day session on wall street.

you think dow 13,000 is a big deal because it takes us back a few years, nasdaq 3,000 is an even bigger deal. it's been more than 11 years since the nasdaq closed above 3,000. december 11th, 2000, was the last time at 3,015.

the intraday high was in 2000. takes us back to a time -- >> makes me feel old. thanks for reminding me of that constantly. >> now we're all even, guys. >> he said i weighed 100 pounds the other day on air. >> it's the suit you have on. >> it's consignment. >> it is a chapter that we -- >> incredible. that move up from 23,03,000 to 0 was unbelievable. probably never see anything like that again. >> by the way, 3,000 was going the wrong way last time. >> that's true. >> we'll talk more about it. a lot of it driven by one name, in this case, as opposed to being driven by 20 names.

>> that should get a speeding ticket fenlt -- >> it's 18% of the nasdaq 100. having a huge impact. >> if it gets to 14 times earnings, talking about a $700 billion company. >> wow. >> keep an eye on that. keep an eye on 13,000 as well. a lot more "squawk on the street" still ahead. ♪ coming up -- >> i'm about to do something pretty crazy. >> you should, it's leap day. >> what's crazier than six stocks in 60 seconds. cramer celebrates leap day the only way he knows how, when "squawk on the street" returns. optionsxpress, where you can trade your favorite products

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♪ simon hobbs not only does great television, he also lends out his suit coat when needed and he's here to tell us -- >> i would lend one to you, but i don't think it would fit. this data we've had today, the third-quarter gdp revision, the chicago pmi, is good, solid data. it's going to be critical how ben bernanke does on capitol hill. we're live from the financial

services committee. will he change the view on q.e. 3? it could move the markets. we'll talk to the republican national committee chairman for mitt romney. is it in the bag for him on super tuesday? and could democrats win control of the house in november? we'll stoke it up a bit. back to you. >> thank you, simon. time for "six in 60." we kick it off with autozone removed from citi's top picks live list. >> please. just because there's no real -- this remains an up stock. don't pull this thing. no takeover, i don't see any momentum. i agree with the call. >> chevron? >> deutsche bank is moving toward the supreme oils, the bigger ones. i agree. >> enbridge downgraded by goldman on price. >> he likes the partnership. very forward-thinking company. >> jcpenney, decliner today? >> cleveland research says the numbers weren't that great. they're pouring a fortune in to

get people into the stores. maybe it's not working. >> and gentex corp -- >> forget about it. too hard, transports. >> we are taking a look at the markets. we're up by about 41 points. crude trading higher. your one tell on the -- >> banks, banks, banks. revenue growth has been the thing that's been the achilles hill of banks. revenue growth is coming back. jpmorgan confirmed similar. jamie dimon, we kidded about the newspapers. the company is doing great. i don't want to lead people astray. my charitable trust owns it. >> who do you have on tonight? >> why is enridge important? that's how you're going to be able to reverse the wti.

it's bottlenecking cushing. >> see you tonight at 6:00 and 11:00. don't go anywhere, fed chairman ben bernanke set to testify on capitol hill just moments away. we'll have that live for you. much more "squawk on the street" straight ahead. [ tom ] we invented the turbine business right here in schenectady. without the stuff that we make here, you wouldn't be able to walk in your house and flip on your lights. [ brad ] at ge we build turbines that power the world. they go into power plants which take some form of energy, harness it, and turn it into more efficient electricity. [ ron ] when i was a kid i wanted to work with my hands, that was my thing. i really enjoy building turbines. it's nice to know that what you're building is gonna do something for the world. when people think of ge, they typically don't think about beer. a lot of people may not realize that the power needed to keep their budweiser cold and even to make their beer

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you're looking at a live shot of capitol hill, where ben bernanke will be spending his leap day testifying before the house financial services committee. >> potentially very important testimony on interest rates, growth and q.e. 2. let's bring in hampton pearson who, i believe, has news of what the chairman will say. >> reporter: good morning. the fed chairman getting ready to talk about the economic recovery continuing. there have been positive developments in the labor market, including a decline in unemployment more rapid than expected. however, the job market, the fed chairman says, remains far from normal. there is no expectation of a substantial decline in unemployment this year. a consequence, the fundamentals it supports spending continue to be weak. turning to housing, housing affordability has increased dramatically.

but potential home buyers face problems as far as their credit history, lacking a down payment or concerns about job prospects. the fomc, the fed chairman says, will be closely watching the labor market as a key to the pace of the recovery. looking ahead at europe, there are critical fiscal and financial challenges that remain, global markets are poised for significant downside risk to the economic outlook. concerning inflation, the subdued level of inflation should continue to persist. and a combination of the fed view of a persistent downside economic risk and subdued inflation outlook creates the conditions that still warrant that exceptionally low level of the fed funds rate through late 2014. so from the fed chairman in his prepared testimony, no hints of any change in the 2014 monetary policy strategy or hints of a

possible q.e. 3. back to you. >> hampton, thank you very much. you can see the nasdaq just slightly below now. but for a brief moment, above 3,000. again, sort of a historical reminder of what the tech bubble was like the last time the nasdaq on an intraday basis above 3,000, december 13th, 2000, driven largely by a slew of components, netflix and so forth, apple, that have brought us to this point. >> we should note that it did turn about 3,000 -- microsoft actually hitting a new intraday 52-week high, right now, 3,194 is the level. . get to our roadmap. the fed chairman spending leap day on the hill as part of his semiannual report to congress on monetary policy. how will he respond, though, to

surging gas prices, employment concerns and the overall markets? >> and it's been a long time coming as the dow closed yesterday above 13,000 for the first time since may 2008. does this milestone mean it is time for a celebration or is trouble brewing behind the mask of the bull? >> all eyes on michigan last night as mitt romney pulled through in a clutch, holding off conservative challenger rick santorum ahead of next week's super tuesday. we'll talk to reince priebus and get his take on last night's big win. the nasdaq, 3,000, still watching that. >> we are. semiconductors also a main contributor yesterday. you can debate where the prices will be sustained there. we seem to be pulling back now. >> looking back at these statistics, it's taking me back to that 1999 period. the incredible moves that we saw then to bring us above 3,000 in november, i believe it was, of '

'99, only to hit over 5,000 march 10, 2000, and be back at 3,000 by december of that year. the double having burst later in 2000 and here we are finally close to breaching that 3,000 mark. we haven't seen that in 11 years. >> in a very different environment. we were propelled through a lack of earnings at that stage, weren't we? it was a very different environment to where we now trade where you have the likes of apple -- >> the nasdaq is, yes, far more modest than it was then when you had the yahoo!s of the world trading -- multiples that we have yet to see even close to or perhaps never will see again. >> the valuation of apple is in line with the general s&p 500. it's not arguably stretched, even now. >> also this morning, the commerce department reporting that u.s. gdp grew at 3% annual rate in the fourth quarter of 2011. major improvement from the 1.8%

growth rate in the prior quarter and the fastest since the second quarter of 2010. on top of that, the chicago pmi, 64 versus 61. kind of making up for yesterday's durables numbers, yesterday's -- considered numbers were okay. >> case-shiller. between the durables and the case-shiller numbers, it really put into question whether or not people are ordering goods, they have confidence -- >> do you think it puts ben bernanke in a difficult position? can he promise to have interest rates low to the end of 2014 if the data is as strong as this or does he have to attempt to explain that or potentially change his view on capitol hill, david? >> i can't imagine he's going to change his view from the last time we heard from him. and we will parse every answer to every question that he has to see if there is a change -- we've been through this debate about, was it a good move of the fed to try to in the name of transparency to give us a target

so far out or sit in some ways self-defeating. wall street's cash bonus quote fell to $19.7 billion last year, the lowest lel since 2008, according to the new york state comptroller. feeling the pain. the pain extends. when wall street makes less money, the tax revenues are also lower. >> state of new york and city of new york suffer as a result. we talk many times about comp coming down on wall street. it will continue to come down, judging from the conversations i've had with a if you remember of the cfos and the ceos at the major banks. you have to remember as well, the component of that overall comp is also changing dramatically, so that you've got a lot more bankers getting a lot less cash, whether it's $150,000 total at morgan stanley or $175,000 at bank of america, much smaller cash portion of the overall. and the overall is still coming down. >> is he accounting for that in these figures because the average bonus in new york is $121,000.

i wonder -- projected. that's the forecast. i wonder if that includes that or whether that's just the cash element now? >> i don't know. i don't know. that seems low for the average. but it's possible. i don't think that would be right -- it depends on where you are. you have to remember, you're talking about a broader swap. when we're talking, we're usually talking about more senior people. >> what about the hedge funds in connecticut? >> it has nothing to do with that. >> but they could presumably be making far more than that. >> they are making far more than that. they haven't seen their comp hit in any way, shape or form. >> unless their asset pool is lower, in which the 2% is off -- >> a number of hedge funds didn't have great years, therefore, they're not seeing that big 20% of -- 20% of zero is still zero. don't worry. >> i do worry. >> and steve schwarzman, salary,

300k -- >> what was the total comp? >> 213.5. >> most of that -- cash contributions, carried interest. whether it's a dividend and therefore taxed at the capital gains rate, not the ordinary income rate, which is a key question and one that we'll deal with in the presidential campaign if, in fact, mitt romney is the nominee. we all saw his tax rate. he's taking home a lot more of that $213 million in total than you or i are. >> oh, yeah. lots of crab claws can be bought with that amount. >> you don't make $200 million? >> i didn't mean to let that leak out. yeah, i signed it back in 2000. let's move on. nasdaq breaking 3,000 just moments ago. the dow opening above 13,000 for the first time since may 2008. wee we're holding that level.

david kelly and nicholas kolis join us now. david, going to start with you. where do you think we are in this rally? a lot of people might want to point to a weakness saying that the transports are not rallying along with the broader markets. >> yeah, what i think is going on is we've got an uplift in confidence in the entire economy, we have more hiring, better housing numbers, better auto numbers, better manufacturing numbers across the board. so things are getting better. i wouldn't want to play this too cleverly here. if the tide is rising, you don't want to be too clever about trying to pick the exact wave here. overall, i think the environment is improving. what's really interesting, listening to hampton pearson talk about what ben bernanke is going to say, is the federal reserve is deliberately trying to downplay the improvement to the economy to try and keep long rates low. but i think the economy is improving which should push stock prices higher. >> nick, you said the fact that people thought there was going to be a pullback was such a consensus view that you had to be skeptical of it.

>> exactly. >> at this point, doesn't it feel like the consensus view is that the rally will continue and therefore we should be skeptical of that now? >> there had to be a pullback. that made a lot of sense to a lot of people. but at the same time, i think david's right. the momentum of the economy is improving. we got this rally without the benefit of incrementally more positive news on fundamentals. analysts actually pulled their expectations in over the course of the past three months. now we have room for potentially some expansion in earnings expectations. that might take us to the next level. >> nicholas, let me emphasize what's happening in europe. the scale is absolutely phenomenal. by tomorrow morning, over $700 billion will have been deposited in cash in 800 banks courtesy of the ecb's action. that is almost 6% of the entire annual output of the eurozone economy. that's the scale of the liquidity that's going into those bank accounts. i'm looking at a dow that is barely up. it's up 22 points today.

that would indicate to me that something's wrong. >> well, certainly i think you can call the last rally from the october lows the ltro 1 rally. and you have more of an ltro 2 rally embedded in stock prices currently. no doubt europe is in real financial trouble and there's a recession brewing there, which is probably a little deeper than people realize. >> but that scale of the cash should move these indices higher, should it not? that sheer scale, 6% of the annual output of the eurozone. >> i think perhaps a little patience is in order. we saw the ltro 1 dump didn't all happen at once into the u.s. equity market. but it did seep into government bonds in europe which then pulled back in those yields in peripheral countries. i think it takes some time. we're probably more than halfway through this version of the rally because of that liquidity dump that you mentioned but perhaps a little more to go. >> and it's not like these european banks are taking this money and buying google stock with it. we need to see -- despite this

rally, we've continued to see people take money out of equity funds all the way through january, beginning to put money in in february. but there's a trickle of retail money going back into the equity marks in the united states. that's why i think the market is only moving up slowly. but after the volatility of the last few years, a slow move up is just fine with most investors. >> yeah, they don't mind being a little bit late if it's necessary. let me get your take on what bernanke is saying about joblessness in this country. this morning out of the humphrey hawkins notes, the fall in the rate, more rapid than expected. but further substantial drops in the jobless rate this year, not expected. is this a function of -- let me get nick first, david -- a function of participation rates? what's going on? >> participation rates have definitely been the bogey in these calculations. the rate has come down quicker than expected but so have the number of people looking for full-time work. participation rates are something i focus on because i worry we're down 70% and trending lower and have been for

the better part of a decade. this is a secular phenomena. so i agree with the perspective that rates continue to trend down but more slowly. if they go more quickly, i worry more about participation rates. >> retiring early, that kind of thing. >> just saying i'm out. >> nick and david, thanks so much for your time. ben bernanke, the fed chairman is expected to speak now at any moment at the house financial services committee. we'll take his testimony live, not just a statement but obviously the questions as well. and republican national committee chairman will join us to talk about last night's michigan primary results. that's all coming. but first, let's go to bertha coombs at the nasdaq for more on nasdaq 3,000. bertha? >> that's right, simon. it's the first time in 11 years the nasdaq crossing 3,000. the last time it brastz crossed on an intraday basis was december 13th, 2000. we just hit right at 3,000 within the last few minutes. what's interesting is if you look this year in terms of the

biggest gainers on a percentage basis, sears holdings more than doubled year to date. netflix up 61%. whirlpool, up nearly 60%. when you look at it on a point basis in terms of the big caps, they've moved up about 360 points, 110 points, not surprisingly, coming from apple. we'll have much more and fed chairman ben bernanke when "squawk on the street" comes right back.

♪ mitt romney sweeping yesterday's two primaries in arizona and in the key state of michigan. today the gop candidates move on to focus on super tuesday in ohio, the next big race. reince priebus is the chairman of the republican national committee. he joins us this morning after last night's busy night. mr. chairman, good to see you again. >> good morning, carl. >> as we're talking, ron paul's giving a speech which i think is a reminder that even after last night, there are obviously still candidates who are determined to remain in this race. did you see anything coalescing, getting us closer to the general last night? >> well, obviously i think governor romney had a good night last night. i don't think you can deny that. super tuesday, over 400 delegates, carl, are going to be awarded next tuesday.

so far we've only awarded 172 delegates. so this thing's going to hit a steam train starting next week. so i think last night was just a -- it was a big night. but there's going to be a lot of big nights coming up. >> but you do not think that romney delivered what some are calling a knockout punch? >> i'm not in a position to make those declarations, carl. i think at the end of the day, i like where we're at in the process. i like that people are talking about our primary. i think we're in a much better position today than we were four years ago when we basically put everyone to sleep during our primary. i think it's a much better contest. i think the drama b in the tough primary is is good thing for us. >> michigan was such a good test for governor romney. yet he won by a smaller margin than he did back in 2008. do you think his comments about the bailout, not needing a bailout, has worn on his popularity there and will it weigh on him as he enters more battles? >> well, no, i think it's a

different contest, different time, different candidates. i think all that changes. i think in the end, we're going to be very strong. i don't see that as any indication -- in fact, we had more people voting yesterday than we had four years ago. so i think it's good for our party. i don't have a problem with that. >> do you think that the party has an accurate impression of how romney will execute on behalf of the gop in the campaign itself given that he's quite reluctant to go on to show where is he'll be examined like nbc's "meet the press"? >> i don't know what all the strategies are. i think mitt does plenty of tv. so do all the other candidates. what the strategy is, who knows? he's only lost one contest where delegates were awarded. so obviously -- i'm not sure that makes a big difference in winning delegates within a republican primary. >> i don't know how many headlines i've read this morning, mr. chairman, that have some variation of the words "winning ugly" when referring to

romney in michigan last night. obviously it's a state where we grew up in. dad was governor, as you've already pointed out. and yet the margin was not -- certainly not as wide as it was in arizona. do you think the talk of an outside candidate, some kind of white knight that can electrify the party the way romney has not is still a possibility? >> i thought it was an impossibility last week. and i think it's an impossibility this week. >> why? >> why, because we have the candidates right now. these are the people that want to run for president. these are the ones that made the calculation as to whether or not they wanted to put their lives aside and their families are behind them. they made the decisions a long time ago that they are going to be the people who stood in the breach to make sure we defeat barack obama and save this country. these are our candidates. gallup and "usa today" put out a poll saying we beat them in

battleground states but we're beating them across america. i think we're in great shape. >> how about money? obviously a lot's been written about romney's warchest, sizable but having to dip into it to push back gingrich in florida, push back santorum in michigan. are you worried that resources might be getting a little thin come november? >> no, i don't. i think there's going to be plenty of money to go around. i think you know the republican national committee, we have more cash in the bank than the democratic national committee does. but you're right, the president is constantly fund-raising. he's got it down to an art form. and we have to be prepared for that. i think that's going to be a challenge, i guess is what i'm saying. but i'm not concerned that at the end of the day that americans across the country are not going to come together and make sure that our candidate has a fully funded operation to compete against this president. >> let me take us slightly outside the primary. olympia snow, retirement announcement yesterday, gives

democrats a better than 50/50 chance of holding the senate in november. she was pretty clear about her reasons for deciding not to run again but how much of a blow is that to the party f any? . >> i don't consider it to be that big of a blow. obviously i'd rather have a majority with olympia snow than being in the minority without her. but i think we have so many opportunities in the united states senate, not just in battleground states like ohio and virginia and nebraska -- excuse me, florida and wisconsin. but you look at nebraska, montana, north dakota, new mexico. we have so many opportunities in the senate. i think this is going to be an election about whether or not barack obama fulfilled his promises to the american people and whether the direction that the democrats have taken america is the direction that we want to go in. i feel really good about our chances. it's only february, guys. we have so much time in front of us. so i think we have a lot to be optimistic about. >> mr. chairman, thanks for your time.

always good to see you. >> thank you. >> reince priebus of the rnc. take you now to capitol hill and the fed chairman. >> the recovery of the u.s. economy continues but the pace of expansion has been uneven and modest. real gdp increased at a 2.25% annual rate in the second half. the limited information available for 2012 is consistent with growth proceeding in coming quarters at a pace or somewhat above the pace that was registered during the second half of last year. we have seen some positive developments in the labor market. private payroll employment has increased by 165,000 jobs per month on average since the middle of last year and nearly 260,000 new private sector jobs were added in january. the job gains in recent months have been relatively widespread across industries. in the public sector, by

contrast, lay-offs by state and local governments have continued. the unemployment rate hovered around 9% for much of last year but has moved down since september reaching 8.3% in january. new claims for unemployment insurance benefits have also moderated. the decline in unemployment rate over the past year has been somewhat more rapid than might have been expected, given that the economy appears to have been growing during that time frame at or below it's longer-term trend. continued improvement in the job market is likely to require stronger growth and final demand in production. and notwithstanding the better recent data, the job market does remain far from normal. the unemployment rate remains elevated, long-term unemployment is still near record levels and the number of persons working part time for economic reasons is very high. household spending advanced moderately in the second half of last year, boosted by a fourth-quarter surge in motor vehicle purchases that was facilitated by an easing of

constraints on supply related to the earthquake in japan. however, the fundamentals that support spending continue to be weak. real household income and wealth were flat in 2011 and access to credit remains restricted for many potential borrowers. consumer sentiment has rebounded since last summer but remains relatively low. in the housing sector, affordability has increased dramatically as a result of the decline in house prices and historically low interest rates on conventional mortgages. unfortunately, many potential buyers lack the down payment and credit history required to qualify for loans. others are reluctant to buy a house now because of concerns about their income, employment prospects and the future path of house prices. on the supply side of the market, about 30% of recent home sales have consisted of foreclosed or distressed properties and home vacancy rates remain high putting downward pressure on house prices. more positive signs include a pick-up in construction in the

multifamily sector and recent increases in homebuilder sentiment. manufacturing production has increased 15% since the trough of the recession and has posted solid gains since the middle of last year, supported by the recovery in motor vehicle supply chains and ongoing increases in business investment and exports. real business spending for investment software rose at an annual rate of 20% over the second half of 2011. but real export growth while remaining solid slowed somewhat over the same period as far as economic activity decelerated, particularly in europe. the members of the board and the presidents of the federal reserve banks recently projected that economic activity in 2012 will expand at or somewhat above the pace registered in the second half of last year. specifically, their projections for growth and real gdp this year provided in conjunction with the january meeting of the fomc, have a central tendency of

2.2% to 2.7%. these forecasts were considerably lower than the projections they made last june. a number of factors have played a role in this reassessment. it was indicated that the recovery had been somewhat slower than previously estimated. in addition, fiscal and financial strains in europe have weighed on financial conditions and global economic growth and problems in u.s. housing and mortgage markets have continued to hold down not only construction and related industries but also household wealth and confidence. looking beyond 2012 fomc participants expect economic activity to pick up gradually as the headwinds fade, supported by a continuation of the highly accommodative stance for monetary policy. with output growth in 2012 projected to remain closer to longer-run trend, participants did not anticipate further substantial declines in the unemployment rate over the course of the year. looking beyond this year, fomc

participants expect the unemployment rate to continue to edge down only slowly towards levels consistent with the committee's statutory mandate. in light of the somewhat different signals received recently from the labor market than from indicators of final demand in production, however, it will be especially important to evaluate incoming information to assess the underlying pace of the economic recovery. at our january meeting, participants agreed that strains in global financial markets posed significant downside risks to the economic outlook. investors' concerns about fiscal deficits and the level of government debt in a number of european countries have led to substantial increases in sovereign borrowing costs, stresses in the european banking system and associated reductions in the availability of credit and economic activity in the euro area. to help prevent strains in europe from spilling over to the u.s. economy, the federal reserve in november agreed to extend and to modify the terms of its swap lines with other

major central banks and it continues to monitor the european exposures of u.s. financial institutions. a number of constructive policy actions have been taken of late in europe, including the european central bank's program to extend three-year collateralized loans to european financial institutions. most recently, european policymakers on a new package of policy measures for greece which combines additional sector loans with a sizable amount of greek debt held by the private sector. critical, fiscal challenges remain for the eurozone, the resolution of which will require concerted action on the part of european authorities. further steps will also be required to boost growth and competitiveness in a number of countries. we are in frequent contact with our counterparts in europe and will continue to follow the situation closely. as i discussed in my july testimony, inflation picked up during the early part of 2011. a surge in the price of oil and other commodities, along with

supply disruptions associated with the disaster in japan that put upward pressure on motor vehicle prices, pushed overall inflation to an annual rate of more than 3% over the first half of last year. as we had expected, however, these factors proved transitory and inflation moderated to an annual rate of 1.5% during the second half of the year. close to its average pace in the preceding two years. in the projections made in january, the committee anticipate that had over coming quarters, inflation will run at or below the 2% level we judge most consistent with our statutory mandate. specifically, the intral tendency of participants' forecast for inflation in 2012 range from 1.4% to 1.8%, about unchanged from the projections made last june. looking farther head, participants expected the inflation to continue beyond this year. gasoline prices have moved up, primarily reflecting higher global oil prices, a development likely to push up inflation

temporarily while reducing consumers' purchasing power. we will continue to monitor energy markets carefully. longer-term inflation expectations is measured by surveys and financial market indicators, appear consistent with the view that inflation will remain subdued. against this backdrop of restraining growth and moderating inflation, the committee took several steps to provide additional monetary accommodation during the second half of 2011 and in early 2012. these steps included changes to the forward rate guidance included in the committee's post-meeting statements and adjustments to the federal reserve's holdings of treasury and agency securities. the target range for the federal funds rate remains at 0 .4%. in august, the committee clarified the forward guidance language noting that economic

conditions including low rates of resource utilization and the subdued outlook for inflation over the medium run were likely to warrant exceptional low levels at least to the middle of 2013. by providing a longer time horizon than had previously been expected by the public, the statement tended to put downward pressure on longer-term interest rates. at the january 2012 fomc meeting, the committee amended the guidance further, extending the horizon to at least through late 2014. in addition to the adjustments made to the forward guidance, the committee modified its policies regarding the federal reserve's holding of securities. in september, the committee put in place a maturity extension program that combines purchases of longer-term treasury securities. the objective is to lengthen the average maturity of our holdings without generating a significant

change in the size of our balance sheet. to help support conditions in the mortgage markets, the committee also decided at a september meeting to reinvest principal receive from agency debt rather than continuing to reinvest those proceeds in longer-term treasury securities as had been the practice since august 2010. the committee reviews the size and composition of a securities holdings regularly and is prepared adjust those holdings as appropriate to promote a stronger economic recovery in the context of price stability. before concluding, i would like to say a few words about the statement of longer-run goals and policy strategy that the fomc issued at the conclusion of its january meeting. the statement reaffirms our commitment to our statutory objectives given to us by the congress of price stability and maximum employment.

its purpose is to provide additional transparency and increase the effectiveness of monetary policy. the statement does not imply a change in how the committee conducts policy. transparency is enhanced by providing greater specificity about our objectives. because the inflation rate over the longer run is determined primarily by monetary policy, it is feasible and appropriate for the committee to set a numerical goal for that key variable. the fomc judge that is an inflation rate of 2% is measured for personal consumption expenditures is most consistent over the longer run with its statutory mandate. maximum employment stands on an equal footing as an objective of monetary policy, the maximum level of employment in an economy is largely determined by nonmonetary factors. it is therefore not feasible for any central bank to specify a fixed goal for the longer-run level of employment.

however, the committee can estimate the level of maximum employment and use it to inform its policy decisions. in our most recent projections in january, there was a intrcen tendency to 5.6%. the level of maximum employment in an economy is subject to change. it can be affected by shifts in the structure of the economy and by a range of economic policies. if at some stage the committee estimated the maximum level of employment had increased, for example, we would adjust monetary policy accordingly. the dual objectives of price stability and maximum employment are generally complementary. the committee judges that sustaining a highly accommodative stance for monetary policy is consistent with promoting both objectives. however, in cases where these objectives are not complementary, the committee

follows a balanced approach in promoting them, taking into account the magnitudes of the deviations of inflation and employment from levels judged to be consistent with the dual mandate as well as potentially different time horizons over which employment and inflation are projected to return to such levels. thank you, and i'd be pleased to take your questions. >> thank you, chairman, bernanke. chairman bernanke, the biggest driver of the ever-increasing deficits this nation faces is the runaway growth in all of our major entitlement programs -- medicare, medicaid and social security. you have repeatedly stressed that the united states needs to return the federal government to a sound fiscal footing over the long term, yet the administration's 2013 fiscal budget does nothing to reform these programs or rein in their costs. now, we did across military

spending with cuts in the budget and with sequestration. what will be some of the consequences and if we do make major long-term structural changes to our entitlement programs, do you see immediate or short-term benefits? >> yes, mr. chairman, thank you. i have often, as you noted, talked about the importance of establishing long-run fiscal sustainability in the united states. if you take a look at the congressional budget office's report that recently came out, what you see is that under current law, which is the basis of the projections they have to make, that over the next 10 to 15 years, you begin to see an increasing acceleration in the size of the debts and deficits. reaches a point where it's obviously not going to be sustainable. once the markets lose confidence

in the ability of the government to maintain fiscal sustainability, then there are numerous risks, the most extreme case would be a financial crisis or a sharp increase in interest rates analogous to what we've seen in some european countries, even absent that extreme result, large deficits and debt over a longer period of time raise interest rates above levels where they normally would be and crowd out private investment and are bad for growth and productivity. they also may involve borrowing from foreign lenders, which is also a drain on current u.s. income. so it is important to address this issue. there are many dimensions of the issue. i guess one point i would make is that there may be some problems with the focus on the ten-year window that is part of the effective analysis of the congress, since many of the

problems are really just becoming most severe after ten years. so i would ask congress to consider not just the ten-year window but the longer-horizon implications of their policy decisions. would it have benefits for today? i think that a credible plan put in place that would strengthen the view that the united states would be fiscally sustainable in the longer term, i think it would have current benefits in terms of lower tax rates, greater confidence and perhaps lower interest rates. >> thank you, chairman bernanke. chairman bernanke, you're a member of the financial stability oversight council, which is charged with responding to threats to financial stability and mitigating the problem of too big to fail. "the economist" published a piece on dodd/frank titled "too big not to fail," which notes

there's never more apparent risk that the harm done by the massive cost and complexity of its regulations and the effects of its internal inconsistencies will outweigh what good may come of it. will the financial stability oversight council consider the threat to financial stability that the cost and complexity of dodd/frank poses to the financial system and offer advice on how to minimize that cost and complexity? and how do you view the fed's role in that process? >> yes, mr. chairman. i've been actually quite pleased with the functioning of the fsoc. we've met regularly. the meetings involve every principal. we have good discussions. between the formal meetings, we have extensive discussion among the senior staff of the various agencies. there's been a lot of interaction. there are a lot of benefits to coordination. we have talked to each other about making sure our policies

are as consistent as possible, that they provide a leveling playing field. and obviously where we can avoid redundancy, we want to do that. at the federal reserve's level, we support the basic goals of dodd/frank, which are to create a more macroprudential approach to make sure that our large institutions have more capital, more liquidity and are better supervised. all those are the key goals. we understand the specifics of the regulations make a big difference. it's very important to make sure that we get the best result for the least burden. and we have a process of both comments, consultations and, of course, cost benefit analyses to make sure we are minimizing the regulatory costs, particularly i would add for the smallest

banks, which are least able to deal with those costs. >> thank you very much. ranking member frank? >> mr. chairman, thank you for that implicit refutation of the notion that the financial reform bill is causing people these problems. one of the major contributors to that bill was another appointee of president bush who was head of the fdic. i noted the portrait of hank paulson that's gone up in which a write-up that obviously -- with his approval, at least, noted his having initiated many of the reforms that wound up in the financial reform bill. so, m mr. paulson was also ther. i do want to go back to the deficit because the chairman said he agrees it should be -- he talks only about the entitlements. when you talk about the level of reduction we need f you're going to get that all out of social

security and medicare and not go else where, you're going to be doing damage. and i believe to start with, overseas military expenditures that are quite excessive. from the economic standpoint, given the importance of a longer term policy to reduce the deficit, purely economic standpoint, there are policy preferences i know you don't want to get into. but from the purely macroeconomic standpoint, would it be greatly different if those came from reducing the costs of living increases, social security or restricting medicare or from some change in the tax code at the upper levels of income? would there be any macroeconomic difference? >> well, from a macroeconomic perspective, the main thing is to achieve sustainability, which means the deficits come under control and the debt to -- >> it didn't make a difference where you -- >> it's important to make good decisions about how you spend your money. >> i appreciate that. i want to go back to this question of the dual mandate. and the notion that somehow you

can't do much about employment. you've done this in practice. about a year ago, two very distinguished economists did a paper about how the great recession was brought to an end. one writer was a vice chair with you at the fed. but mr. zandy has been bipartisan. they talk about aggressive fiscal and monetary policies that not only averted a great depression but are resulting now in the beginnings of a recovery. when we divide these into two componen components, we estimate the latter was substantially more powerful than the former. this assessment of how we did better says that monetary policy were even more important than the stimulus although they thought the stimulus was important. this effort to denigrate the role you can play in that seems to be greatly mistaken.

i've handed out a copy to the press. look at page 17 of your report. there is a chart on the bottom, net change in private payroll employment, 2005 to 2012. what it shows is -- it measures monthly job loss. the lowest point, the worst monthly job loss comes in early 2009, in other words, just after the change in administrations. and you then beginning in -- this looks like february or march of 2009, you get one of the steepest rises i've ever seen. you get a very substantial -- an almost vertical increase in employment. it takes the place here of a drop of the numbers losing. and then it hits in early 2010, it goes into positive -- it levels off, i think that's europe that was part of the problem. then it starts to rise again. not only does this show a very significant -- it shows the worst employment position was

right around the time of the changes in administrations, very substantial increases beginning with early 2009 and a point now where the monthly increases in 2012 are equal to what they were in 2005. we've come back now, the total losses were so great during that period below the line that we haven't yet undercut it. i'd also note that you correctly point out while we have done very substantial improvement in the private sector and not yet what we want, there has been diminishment by reductions in state and local government. if state and local government hiring had been even, no gains but hadn't lost over 500,000, unemployment would now be under 7%. let me ask you, as i see it, one of the major problems we've got -- i'll just say this. one of the major problems that might keep us from a continued upward trend, which is a good trend, although slower than we

would like, would be troubles in europe. i should just note, i think the role that you and your agency have played in helping to get europe to avoid greater troubles has been very helpful. and i think it is striking that you are getting criticism, particularly on the republican side, but some from people on the left, for a series of very constructive actions. so i just want to express my support for what you have been doing with the swap agreement and in other ways because the greatest threat to the american economy at this point is in europe. i should note, by the way, thanks in part to what we have been doing, the american economy is the best-performing economy in the developed world right now of any size. you have been helping that. and the attacks on what the fed has been doing to try and keep you from continuing to encourage the right kinds of things in europe are about as disastrous a prescription for american policy. and i hope you will continue to ignore them. >> dr. paul? >> thank you, mr. chairman. mr. bernanke, if you don't mind,

would you tell me whether or not you do your own shopping at the grocery store? >> yes, i do. >> so you're aware of the prices. this argument that the prices are going up 2%, nobody believes it. the old cpi says prices are going up. people on fixed income are really hurting. the middle class is really hurting because their inflation rate is very much higher than the government tries to tell them. that's why they lose trust in government. but, you know, this whole idea about prices and debasement of currency, if you loan me $100 and two years from now i gave you 90 back, you'd be pretty upset. but we hand that money back that's worth 10% or 15% or 20% less and the fact that nobody's able to do anything about it is upsetting. but if i don't give you your full $100 back, i'm steal 10g from you. so somebody's stealing wealth and it's very upsetting. in january at one of your press

conferences, you said that you sort of poked a little bit of fun at people to downplay the 2% inflation rate. but if you say it's 2% and i say it's 9%, let's compromise and say it's 5%. you said that it doesn't hurt you unless you're one of those people who stick their money in the mattress. but where are you going to put it? are you going to put knit a cd and not make any money at all? this doesn't make any sense. it doesn't encourage savings. it just discourages people. but i do want to make a point about prices because prices go up. that, to me, is not the inflation. it is one of the bad consequences of the inflation which comes from the increase in the money supply. it's one of the bad effects. but you took over the fed in 2006. i have a silver ounce here. and this ounce of silver back in 2006 would buy over four gallons

of gasoline. today it will buy almost 11 gallons of gasoline. that's preservation of and that's what -- that's what the market has always said should be money, money comes into effect in a natural way, not in an edict, not by governments declaring it it is money. but why -- why is it that we can't consider, you know, the two of us, an option. you love paper money, i think money should be honest, constitutional, still on the books, gold and silver legal tender, why don't we use it? why don't we allow currencies to run parallel? they do around the world. one of my options, as much as i would like to do something with the fed, i say the fed's going to self-destruction eventually when the money's gone. but why -- why wouldn't we legalize competing currencies?

why couldn't people save -- put this in a mattress and get four, five times much of the value in a few years so the record of what you've done in the last six years is destroy the value of real money, of paper money, at the same time real money is preser preserved? but a competing currency, we already have a silver eagle. it's legal tender for a dollar. some people say, well, it's legal tender, it's a dollar, it's on the books? they use it and get into big trouble. the government closes them down and you can get arrested for that. what would be wrong with talking about parallel currency and competing currencies? this is something talked about, something that would be a compromise and that we could work along those views. >> first of all, good to see you again, congressman paul. just one word on the inflation. of course, those numbers constructed by the bureau of labor statistics, not the fed, independently constructed and done in a serious and and

thoughtful way, on alternative currencies, nobody prevents you from holding silver or goal if you want to. it's perfectly legal to do that. you're also -- it's perfectly fine to hold other currencies. euros, yen, whatever else. in that respect, you can do that. and i'd be happy to talk to you about other options. >> but that's not money. i mean when you pay taxes to buy a coin or have capital gains tax, when it's not -- if you have to settle a lawsuit it's always settled in depreciating federal reserve notes never in the real contract. that's nothing near money when it's illegal to use it. but to do it, you'd have to repeal the legal tender laws, you'd have to legalize this, get over the sales taxes, get rid of the capital gains taxes. people even in mexico they're talking about this, trying to have competing currencies. they've been wiped out too many times. with inflation that would wipe

out the middle class, they're encouraging people to save in a silver currency. i hope we move along in na direction there shouldn't be overwhelming changes all of a sudden there could be a transition. people could vote on it. maybe they'll give up on the federal reserve note and get real money. >> i'd be happy to talk to you about. >> can i make an announcement? for the democratic members we're going to follow the policy on our side. we won't be able to get to everybody here. the committee's too big. when mr. bernanke comes back for the second appearance, we will begin with where we left off. members that don't get to ask a question today, we will start from there and they will get to ask the question the second time. >> we have the same procedure. dr. paul and chairman bernanke are getting along marvelously, miss waters we hope you'll continue this cordiality. >> thank you very much. i'm interested in housing.

everyone agrees that this economy is not going to rebound until the housing market is vigorously operating. so i want to find out a little bit what is happening with the servicers, and maybe some -- something about principle reduction. february 9th the federal reserve assessed monetary penalties totalled $776 million on the five largest market services pursuant to the consent orders you issued in april of 2010. these five services also happen to be part of the settlement between the state attorneys generals and the federal government announced on the same day. as i understand it the penalties paid by the services are under the consent orders issued by the fed can be satisfied by lone modifications that they make unstatement a.g. settlement. in other words, unless the services failed to comply with the settlement, with a.g.s,

there will be no monetary penalties for servicing violations identified by the concert orders. we don't know all of the details yet, because the state a.g. settlement terms have not been released, i understand that services can satisfy at least some of the requirements of the 26 billion a.g. settlement by writing down loans including investor loan, owned loans that they service. my question, will services be able to use the write-down of loans held by investors to satisfy the penalties levied by the fed in response to the unsafe and unsound practices? that's the first part of my question. >> no, the -- we are part of the overall agreement and i participating we helped make it happen. we have released our -- by the way we just release our engagement letters and action plans for those companies that we oversee. the banks will have to verify that they have reduced their own

holdings, their own assets by the amount that they are taking credit for in the overall holding. if they don't meet those full amounts then they will have to pay the rest in cash. >> on the issue of whether to pursue principle reduction on residence mortgages your report, your federal reserve white paper report, acknowledges some of the problems with negative equity, but the report never endorses principal reduction as the stabilization strategy. so with that said, i wanted to ask you what you thought of a speech by new york fed president after your paper came out. in his remark ps dudley suggest it can minimize loss of value on the delinquent loans they guarantee and a shared appreciation approach could have policymakers giving certain homeowners a windfall and suggests limiting principal reduction to people who are current on their payments.

what do you think of the ideas proposed by mr. dudley in his speech? does this approach vo a. void some of the problems with principal reduction you identified in our report? couldn't this approach discourage homeowners from defaulting when they could otherwise pay their mortgage? >> well, first, the fed has no official position on principal reduction. we were careful not to make recommendations prieecisely because we thought it was the congressional prerogative to make those recommendations. i think it's a complex subject. it's not that we disagree in the goals. we want to reduce foreclosures and delinquencies, help people who want to move to be able to do that. but they're often a number of alternatives. for example, the idea to be able to move, then a short sale or a deed in lieu might be the most effective way to do it. if the goal is reduce payments refinancing at a lower interest rate or modification might be the most effective way do in

terms of dollars spent. interesting questions from the perspective of public policy the best way to proceed, whether the most cost effective approach or not. >> we're really interested, many of us, in principal reduction. in your report to congress you note facilitating principal reduction modifications were under water borrowers would be too costly but identifying targeted segments who would go to foreclosure without principal reductions is too difficult. and i won't go on to talk about what mr. dudley said. so if you're not supporting principal reduction and you're not talking about how homeowners can get out from under this foreclosure problem, what are you suggesting we do to improve this housing market? >> well, we have discussed a variety of things in our white paper. though again the proviso the goal to provide background analysis that would help congress make good decisions.

for example a big overhang of homes in the market, one of the ideas that we've discussed is the moving reo, real estate owned to rental, that is something that the fhsa has begun a pilot program on, that's interesting. we talked about -- tried to identify barriers to doing that on large scale. that's one potential direction. it's a lot of issues right now with the tightness of mortgage standards where people are not able to get mortgage credit even when they meet gse standards. so we have talked about clarifying the representations and and warranties that are part of the mortgage contract. fhsa and the gses have looked at that and that could be a constructive step. servicing is an important issue. you know, you just -- you referred to in the the beginning the servicing agreement. we have since early last year put consent orders on all of the major servicers requiring them

to improve their practices to have principal points of contract for individual borrowers, to provide more counsel, better controls and so on. there's a variety of things to be done. not all congressional. some of them are our own responsibility as regulators. but some of them would require some congressional input. >> thank you. thank you chairman bernanke. the vice chairman of the full committee is now recognized for five minutes. >> thank you, mr. chairman. chairman bernanke, in your testimony, you described the recovery as modest relative to historic terms. we note for the record that under this administration, when you add in those who are underemployed, those who have left the labor force due to giving up the true unemployment rate is 15.4%. half of all americans are now classified by the census bureau as either low income or poverty. and one in seven now have to rely on food stamps.

so from the perspective of my constituents the use of the term modest is indeed modest. i would like to, first, return to the subject of our structural debt. one of the major players in our economy has said, quote, the major driver of our long-term liabilities, everybody here knows it, is medicare and medicaid and our health care spending nothing comes close. that of course was our president, barack obama. so i suggest to the ranking member, when convenient, he first debate the president on the subject before he debates us. and i would ask this simply, mr. chairman, even if we cut the pentagon by 25%, make it 50%, have we solved the long-term structural debt crisis in our nation? yes, that's to you. >> you refer specifically to health care an area where costs

have been going up faster than gdp. the output of the health care industry is not that market edly better than other countries. not only for fiscal issues but private sector productivity it's an important issue to address. as a matter of arithmetic, it's true over time an increasing share of the totally outlays will be going to medicare, medicaid and it's important to address that. >> page 7 of your testimony, in dealing with your dual mandate, you say the maximum level of employment in an economy is largely determined by nonmonetary factors. my remaining time, i want to pursue this theme, i certainly agree with the assessment, but i question after three years in the most highly accommodative monetary policy i believe in the history of our nation, the recent announcement that we will continue this policy for two more years, i mean i note according to your oin

statistics, public companies are now sitting on $2.1 trillion in excess liquidity. banks have a trillion and a half of excess liquidity. which seeps to suggest that perhaps monetary policy is not the challenge that we have today. recently the dallas fed president richard fisher made me aware of a harvard study, the greatest impediment to job creation, taxation, uncertainty, a gallup poll of small businesses show that roughly half believe that health care and government regulations is what is causing them not to hire for workers. you have job creator after job creator, like bernie marcus at home depot saying, i can tell you today that the impediments that the government imposes are impossible to deal with. home depot would have never succeeded if we tried to start

today. i would add the voices of every small business person i talked to in the 5th congressional district of texas that i represent, so again it begs two questions. number one the limits of the efficacy of monetary policy and, frankly, the risk as well. it was brought up early we have retirees being squeezed, pension funds savors. community banks are feeling squeezed. many lending out on the risk curve. and i'm very grateful that you've shown your concern and anxiety over the structural debt. but to some extent, you're one of the major players by creating these artificial rates, that i would argue, mask the true cost of our fiscal folly and to some extent by keeping rates artificially this low, aren't you simply postponing and

exacerbating the problem, the unintended consequences of another asset bubble? so do you share these concerns? and how do you balance them? >> you raise a lot of good points. first, i do think the monetary policy has been constructive in bringing employment back towards the maximum employment level. congressman frank, ranking member frank, pointed ow the sharp move innocentmement march. since qe 10, there have been 2.5 million jobs created. i don't claim credit for all of the jobs. of course many other factors are at work but it's been constructive. but you're also absolutely right that in terms of what long-term employment productivity gains can be sustained by the economy monetary policy's not the answer to that. the answer is good -- well certainly the private sector but in a partnership with good other

economic policies, ranging from trade to regulation to education to infrastructure to tax code and 0 on. all of those things are in the province of the congress. i certainly agree with you that monetary policy's not a panacea, that it it could help offset cyclical fluctuations in financial crises like we've had. the long-term health of the economy depends on the decisions of congress and the administration. >> thank you very much. mr. maloney? >> thank you. welcome. thank you very much for your public service. in your testimony today, you had some encouraging points, specifically that in january the private sector gained over 260,000 private sector jobs. and we've seen over the past 23 months a steady gain in private sector employment, over 3.7

million new jobs gained. i believe your chart that the ranking member pointed out is very graphic. we were losing 700,000 jobs a month when president obama took office and we have been moving forward with economic recovery. and i thank you for your leadership. really, your brave and innovative leadership during this time. but we are still facing many, many challenges, including the challenge of the long-term unemployed that seem so persistent, deep and strong, over 40% of those unemployed have been so over six months. i'd like to know where you feel this is structural or something to address with an improved conditions in our overall economy. i am deeply concerned about the fact that we are facing the largest income disparity in the

history of our country, and that the gap seems to be getting larger and larger and the challenges for the middle and moderate and low income people become stronger for them to make progress. the administration has announced their number one priority is creating jobs, growing our economy. what are the things that we could accomplish in order to stabilize our economy and create the conditions that would improve the opportunity for more job growth? i obviously believe in the dual mandate. and specifically, do you think that at this point in the cycle that we need the kind of budgetary tightness or shrinking of the government that my friends on the other side of the aisle are advocating for? doesn't it make more sense in

terms of our fragile economy to have more fiscal stimulus, to pass the transportation bill, to help create jobs and improvements in our economy? and again, thank you for your service. >> thank you. it's a very worrisome problem, very high level of long-term unemployment. as you say 40% plus of the unemployed have been unemployed for six months or more, the highest by far in the postwar period. i think that happened because the decline in the economy was so sharp and so severe in 2008 and 2009 that firms in a panic-stricken mode cut many workers and many of those people have not found work and now maybe three years. this has a lot of potentially serious long-ton consequences. we know for individual workers if you lose a job and you're out of a job for a long time and find a new job, it will be a lower paying job, for example,

or much less secure job. the concern in particular is that people who are out of work for six months or more will be starting to lose skills, losing attachment to the labor force, won't know what's happening in their field or industry. and that's really one reason for urgency to try to get job created and bring the economy back to a more normal labor market. so that's certainly something we're paying a lot of attention to. this obviously is no easy solution he. you asked about fiscal policy, and i've tried to i guess have -- make three points about fiscal policy, one, as we've talked about, that achieving long-run sustain ability and providing comfort to the public and the markets that deficits will become under control over a period of time, that's important for confidence and for creating, you know, more support for the recovery. at the same time you have to protect the recovery in the near term. under current law, january 1, 2013, a massive fiscal cliff of

large spending cuts and tax increases. i hope that congress will look at that the and figure out ways to achieve the same long-run fiscal improvement without having it all happen one day. so attention should be paid to the -- >> mr. chairman, if i could -- my time is running out. >> sure. >> in some ways monetary policy has replaced fiscal stimulus. wouldn't the recovery happen faster if we had a better balance between the two? could you comment on the need for more fiscal stimulus? do you believe we need more? >> i think if you do that, it needs to be part of a two-handed plan, so to speak. i mean the actions that you take in the short run whether they be infrastructure or education or tax reform or whatever they may be, i hope they are considered and wisely chosen. but it's also important that we keep in mind the long-term

necessity of making fiscal policy sustainable. so you need to think about those two things together, i think. >> thank you very much. >> thank you. the chair at this time recognizes the chair -- >> that's the chairman of the federal reserve speaking, semiannual humphrey hawkins testimony. saying the u.s. expansion is uneven and modest, gdp is likely to grow at the pace we saw in the second half of last year and saying that a further substantial drop in the jobless rate is not expected going into the second half of the the year. the dow was down on that testimony, was up 50 points by the time he started. bottomed out, down some 64 points. right now down 26 points. one more note, former fed governor will be on "kudlow" 7:00 p.m. eastern time. a quick break. back with more ben bernanke on the hill in two minutes. first as we said, programming note, the former federal reserve

governor kevin warsh on "kudlow" governor kevin warsh on "kudlow" tonight. "for starters, it didn't cost me anything."

if you're just joining us, ben bernanke on the hill giving semiannual testimony to the house financial services committee. as you can see, thinking pencively there. let's bring in diane swank and talk about what he said. always good to see you. thanks for being with us. i hope you can hear me.

he's -- he talked about different things, gas prices obviously hurting consumers in the near term. but not exactly effusive on things like gdp growth this year, and certainly the jobless rate coming down the way in which we've seen it over the past few months. >> you are going in and out for some reason, i don't know why. exactly right. i think it's more important with the chairman didn't say in his testimony than what he did say. what he didn't say he didn't criticize fiscal policy in the testimony, left it to the q&a. the fed is walking a fine line, defending policy of continued easy monetary policy which is controversial in the fed itself, which is a place they debate it. we see the sausage being made, whether we like it or not. a fed trying to defend its independence. i've never seen a more hostile environment. this is less in this testimony but more hostile environment on capitol hill regarding the independence of the federal reserve. and we know that in other countries compromising independence of the central bank

is a place we don't want to go. >> yeah. we've heard a lecture from ron paul in which the would-be president, presidential candidate, bringing an ounce of silver to his lectern. maxine waters only a few friends on the panel so far, barney frank and the like. why the market reaction? is it because the threat of that independence means they are less likely to be able to move in some sort of easing way later in the year? >> i'm not sure how much the market realizes that or not. i hope they do. i think that is one -- the most critical issues going forward. i also think the reality of gatt prices being a real threat to the recovery is important and that the fed isn't sort of kumbaya, isn't this great, we see problems, it's a reality check to better news that the market's been wanting to rally off of in recent weeks. that's true as well. also i never thought i'd quote rodney danger field but look at chairman bernanke and saying

he's getting no respect. he's doing better than usual on the hill but let's face it, during the political year and what he's had to go through, given what he did to save the foundations of capitalism when it could have been lost is really hard. i don't know how he does it. he does it with levity. saying good to see you, too, ron paul. he's really walking a very fine line here. his cool has got to be, you know, it's just amazing. i just wouldn't have it. >> interesting to see how many times he'd say something like, i'd be glad to discuss it with you at a later date. he talks about the jobs rate, diane. further substantial drop in the rate, not expected. continued improvement need in final demand and production to continue to boost the job market. he's clearly saying the low hanging fruit here has been picked, yeah? >> yes. exactly. the critical issue for the fed is talking about the long-term unemployed, the number of people still taking jobs at a lower

pay. the cumulative effects, he refer odd to that in the q&a, this amount of people out for a longer time, if they get back into the workforce they get completely marginalized, lose touch with their industry, they lose skills. we know from other research i've been looking at the fed is concerned, even college grads as they accept a job outside their field they compromise their own earnings for years to come. talking about the highly skilled workers in the economy in an economy not functional with the slack in the labor market. it has impacts that even go into some of the higher income households that we often neglect. >> far from normal, in his words, how he describes the job market in the country at this stage. thanks for the recap. good to see you. >> good to see you. >> diane swonk. the chairman of the federal reserve. ben bernanke's testimony continues. >> holding more press

conferences and releasing interest rate forecasts for the first time in its history. while these policy tools are good for the financial markets and wall street firms, they are off limited use use to the general public. would you consider relisting guidance for households and small businesses at the open market committee meetings and what changes to monetary policy means to them? >> well, that's an interesting idea. we have, of course, many speeches and i'm here giving a report to congress about monetary policy. i'm -- i'd like to think about what that would look like. but obviously, we are trying to communicate to the broad public. i've been on some tv programs and the like and in fact, later this spring, i'll be giving lectures at george washington university, which will be available to anybody online, about the fed and the financial crisis.

so we are working to improve our communications and your suggestions are more than welcome. >> thank you. >> thank you, mr. chairman. >> thank you. >> thank you, mr. chairman. first, just a quick note. we heard much talk about the wall street reform bill and we will continue to and it was said that the bill is bipartisan and that the nature of that should not be overlooked. i'd just like to point out for the record the bill is to bipartisan it's called dodd/frank. mr. bernanke, thank you for being here today. in your testimony and your written remarks there are things coming from michigan, a very hard-hit state struggling to come back in this stagnant economy. there's some things that bear repeating. on page, i believe, 2. the economy appears to have been growing during that time frame at or below its long-term trend. continued improvement in the job market is likely to require

stronger growth and final demand and production. notwithstanding the data the job market remains far from normal. the unemployment rate remains elevated, long-term unemployment is still near record levels and the number of persons working part time for economic reasons is very high. fundamentals that support pe spending continue to be weak. household income were flat in 2011. access to credit remained restricted to potential borrowers, consumer sentiment which dropped last summer has rebounded but remains relatively low. two questions and i'll be quiet and listen. the first is, in terms of the credit still not getting to potential borrowers, what specifically do you think the reason for that is? and what do you think would be specifically done about it, if not by you, i can understand why you can't discourse on that.

and finally, my concern is that just a question about how this operates. it says on page 6 the target range for the federal funds rate remains at zero to a quarter percent. now, when that type of rate remains in effect, does that have an effect on the personal savings interest rates that individuals who bank get? and if that is the case, somehow that, let's say, stops them from getting a higher rate of return, would that not constitute them essentially subsidizing the operations to try to get money to, say, banks or other people still not giving the credit which leads off to horrible things which i started off my remarks and with? >> on the latter point, you know we are certainly paying attention to the effects of low interest rates not only in savers but other financial institutions and the like. the banks complain about the low interest rates. they say that reduces their net

interest margin, it's not a profitable thibng from their perspecti perspective. for most savers, i think on average, something less than 10% of all savings by retirees is in the form of fixed interest instruments like cds. remember, people also own equities, they own money market funds, they own mutual funds. they have 401(k)s and a variety of things. and those assets are assets whose returns depend on how strong the economy is. and so in trying to strengthen the economy, we are actually helping savers, be it by making returns higher. as we can see what happens in the stock market. >> that's a very important point. i personally don't subscribe to the fact because it's 10% it's okay to have their rate of

return artificially lowered and i think that what you're saying then is, is that, yes, they are subsi dieding this but in the long run it's better for them because you believe this will lead to economic growth although, again, and we'll get to the second part of my question that very much remains in doubt, doesn't it? >> well, the economy's been recovering, and i believe monetary policy is set to help the economy recover. you can't get good returns in the economy unless -- unless you have growth. the other thing that we're doing, as you know, we have set an inflation target and we are committed to keeping inflation low and stable and that also of course is good for savers because it's the inflation adjusted return that matters in the end. >> if i can, we can skip the first part of the question, because they're interrelated. so in short, it's almost as if you've decided that you're going to invest what their potential interest rates return would have been into your recovery for the economy. and again, it may be recovering but by your own admission it's

either at or below long of it term trends we have money -- trouble getting money into the people who can grow the economy and get jobs back and the long-term prognosis is not good for unemployment rating dropping anytime soon. doesn't sound like a good investment if i'm saving and your spending money on the recovery. >> we're not spending anybody's money. it's arguable that the interest rates are too high, they're be constrained by the fact interest rates can't gee below zero. we have an economy where demands fall short of the capac of the economy to produce. we have an economy where the amount of investment and durable goods spending is far less than the capacity of the economy to produce. that's suggests interest rates should be lower rather than higher. we can't make interest rates lower, only go down to zero. again i would argue that healthy economy with good returns is the best way to get savers, you know, get returns to savers on providing credit, i would make

one observation, the news this morning bank lending increased last quarter at the fastest rate since the recession. >> thank you. thank you. >> we also -- the housing market declined and i think 19 of 22 major markets. we are seeing some signs of deflation. mr. wyatt? >> thank you, mr. chairman. i just wanted to let my friend know that the protocol has been to name bills after the people who head the committees of jurisdiction, which is why the bill was called dodd/frank. we had the majority in the house and the senate when it was split, it was sarbanes-oxley, which he doesn't like anymore, i guess. oxley was a republican because we were in the majority, the republicans win the majority in

the house. so -- >> of course we -- >> we are following the same protocol. >> mr. chairman -- >> the gentlemen will yield. >> we didn't vote for it either. >> mr. chairman -- >> the name of the bill is voted for as part of the bill. so you know, you lost that vote so nobody is reversed it yet. anyway -- >> if the gentleman would yield. >> let me get on to what we're here for. chairman bernanke, one of the problems with setting these horizons out so far is that when you set an accommodated policy horizon out through late 2014, the private sector starts to expect that, and if

circumstances change crawling back off that limb could be very difficult from a private -- private sector perspective. what if -- what if really thing dozen change substantially in different direction? i assume the fed has given itself enough leeway here to say we can go back. >> things are interesting when they start disagreeing not only by the legislation but why legislation is named the way it is. in that case dodd/frank and sarbanes-oxley. 30 seconds until europe closes across the pond. simon hobbs here to talk about what happened and explain why we're obsessed with the letters ltro. >> if we're allowed to mention them on the network. what i think is really interesting, as we come into the european close, the power of the fed and the power of ben bernanke. you know, the world is watching

what you see on capitol hill. let me show you where we are on the bond market. we have to mention of course this huge dump of liquidity that will come through tomorrow. in excess of $710 billion deposited into the bank accounts of 800 banks around europe, equal to 5%, 6% of the annual output of the eurozone economy. that's why you can see they're making way for that on the bond markets. yields falling today. we'll see what happens tomorrow when the cash is increasingly around for them to use. take a look where we are on the equity markets coming into the closing. this is what i mean about the power of bernanke. this is how we've traded today, as you can see. this is when the announcement came out what the ecb was doing. this is the effect, though, on european equity markets ben bernanke not mentioning further easing qe-3, an extension to the twists going out. that's taking us into negative territory on the marketed, as you can see. have a look at french banks. you think they would be

propelled higher by what is coming out of the ecb. the announcement from the ecb, this is bernanke not mentioning that there will be further qe. so bnp paraba, not mentioning further qe-3. diane swonk characterizing the ecb fighting for its independence. the euro, no real boost to risk appetite within the eurozone. the euro is in negative territory. again you can see the way -- as we got the announcement from the ecb, arguably the euro was much more influenced by them being no mention from ben bernanke of the qe and now there's chatter about double expiration in the eurozone tomorrow. in an environment -- sorry, let me rephrase that. a double expiration within the foreign exchange markets in an environment where the dollar is

mostly positive because of what we didn't get from bernanke. give me a break. that didn't make sense. i got tied up. >> one thing we know for sure 523 banks took advantage of the cheap money in december. 800 banks this time. so the stigma of coming and getting these 1% money is lessening, right? >> yes. interesting looking at comments from major banks going in how they might well tap it. the reason you've got more banks in this time around they've reduced the bar on collateral. a lot of those smaller regional banks who probably arguably are in more difficulty longer term have been able to get their noses into the trough, as it were. >> my favorite tweet, someone wrote, biggest surprise of the day, europe has 800 banks. which you know better than most. >> you know, it is actually the most powerful economic grouping in the world, though let's not dwell on that. >> thank you, simon. rick santelli who has thoughts on this and more. good morning to you, rick. >> good morning. before i bring in yra harris,

listen, there's a lot of rumors around the floor from actually major news agencies, talking about fat finger errors because we had a sell-off in treasuries. look at these chart of various markets, 5s, 10s, 30s, they moved in a way for a reason. okay? fat finger error. ira harris, any more ltros scheduled? >> no. simon's comments was exactly right. the bank of england's backing off. >> right. >> ecb we know what they did. >> did you hear twist and shout from the fed chairman? >> the fed was kind of quiet. that wasn't the line of questioning, really, so market was a little bit disappoint. it hard to be when you look at gold market it was built -- >> don't use the word disappointment. this is me you're talking to. >> okay. >> what i'm getting to is, it's seen for the here and now that maybe qe isn't front and center.

wouldn't that totally explain maybe auger for bigger moves in the markets? >> certainly. listen, a one handle move as we say in the 30-year, off of this is nothing. fat fing, it's nothing. it's -- it's been caught in this range, ten year's moved a half point down. yeah they were up a bit. insignificant moves than was a reaction to hey, maybe there's not much come in as i thought which if we're right we can look at long end to hold in here. we know what the fed's going to do. should mosh pressure on the short end i believe. >> i agree. maybe curve implications. curveball back to you, carl. >> rick and yra. bob pisani who i know is going to talk about gold. is this true, worst day in almost three months? >> it it is. we had a very strange thing happen, events in the markets at 10:00 as mr. bernanke's testimony came out. traders are scratching their heads trying to figure out and reconstruct things. ten year treasury, this is where

the initial reaction happened. and it was a training one. take a look here. see if you can take a tight shot. look at this. you to not see this often. all of a sudden 10:00 a.m. eastern time we spiked on an intraday basis 2%. we went from 6 basis points up 1.94% all the way to the upside. that kind of got people wondering what was mr. bernanke saying? just as his testimony came out, we were reading it, figuring out why did everybody react negatively? there have been vague rumors of a fat finger trade in ten year treasury trading. that may or may not have been a factor. that got people talking within a minute after his testimony was released. most people feel, right now, that the fact that he was commenting on an improving labor market. he did say we have seen positive developments in the labor market. that and his -- the fact that he did not at all mention in his testimony qe-3 or operation twist ending on june 30th. that's a clear indication.

simon referenced this, withdrawal of the liquidity for the market is is not good for the stocks, that's the most important thing. take that assumption, guys you have to work under the idea sell treasuries and, boom, look at that on the dollar here. you've got -- you buy a dollar, you get a rally in the dollar and commodities follow from there. put up gold. logical development, sell gold. there you go. look at that. straight down. all of this happened within minutes. my i.m. lights up, my machine lights up, what the heck? we're all reading microscopically the testimony to figure out part what he's saying. but he didn't say that much different. >> what is interesting to -- i mean talk about the fat finger theory. when you have a move confirmed on both side of the atlantic from the french banks to the euro to gold, that's not fat finger. that is a market that is increasingly discounting the prospect of further quantititive

easing. the withdrawal of liquidity but less further liquidity down the line. >> i agree. ecb has given body language, they, too, do not want another three-year facility -- we're not calling it a ltro -- three-year other. they all like to be on the same page which the ecb was not for a long time. it wasn't easing when the fed was. >> put up the stock market here. you can see the risks part of the sectors put up the sectors here. you see materials, industrials, energies, financials. there's your heavier risk side. they're the ones that dropped the most today. all of this is consistent with the idea of qe-3 off the table for now, labor market improving. >> that's right. and as you pointed out, gold, silver 7% decline today. >> huge. >> all of these commodities. there's a look at 34.63. dramatic moves stemming from the chairman. be back with more of bernanke's testimony on capitol hill.

plus, the ceo of ryder systems with us live. before the break, a look at winners and losers from europe's trading day just now ending.

next on "the halftime report," an analyst that says microsoft is better than apple. sodastream takes a plunge. is the sell-off overdone? predicting the s&p, could it hit 1300 before 1400? hear from last year's most accurate market forecaster on "the halftime report." back to carl and "squawk on the street." >> the federal reserve in the humphrey hawkins testimony by the chairman moving stocks lower, gold lower, commodities lower and the dollar higher as they make slight explicit announcements about further monetary easing. back to ben bernanke who is still testifying on the hill. >> we think the banks generally

have done a pretty good job of hedging the exposures they have to sovereign debt and some extent european banks. they will be reporting this information, the s.e.c. provided guidance on how to report, both exposures and hedges to the market, to the public. so a lot of progress is being made there. having said that, i think if there was a major financial accident in europe that the main effects on our banks would not be to district exposures just general contagion, flight from risk taking, loss of faith in the financial system, economic stress and so on. so i think there is a significant risk, though we've done what we can to make sure banks are managing their direct exposures to banks and sovereigns in europe.

[ inaudible ]. >> we're very integrated. about 2% of our gdp is in the form of exports to europe. so europe has a significant slowdown. we will feel that. our companies are highly integrated. think of companies like, you know, ford, gm, which produce, you know in europe and as well as the united states. however, we do think that if europe has a mild downturn, which is what they are currently forecasting, and if the financial situation remains under control, that the effect on the u.s. might not be terribly serious, at least it would probably not threaten the recovery. but nevertheless, it would have an effect, certainly. >> let me just -- one of the things that we discussed over in europe also was the fact that they said that greece equalled about 2% of the economy. they were going to try to keep

them in to keeping -- so they wouldn't have to lose the euro. but they said if they did, if greece defaulted, it there would not be contagion, they'd move on, like what was happening in ita italy. from your viewpoint if greece was to default do you see the possibility of contagion to italy, portugal and spain, or are they a small part of this that it doesn't matter? >> the time of the gentleman expired. mr. chairman, you can give a brief answer. >> i would just say that leaving the euro would be very difficult, and uncontrolled disorderly default would create a lot of problems. >> the gentleman from new york, mr. graham, is recognized for five minutes. >> thank you, chairman. thank you chairman bernanke for being with us today. if i could switch gears and ask obviously the volcker rule -- >> we're going to come back to the fed chairman in a few minutes. in the meantime, breaking news. general motors announcing more details on its partnership with

peugeot. phil lebeau live in chicago. >> it's official, gm and the french automaker peugeot officially formed a global alliance. here's the way that this is going to be structured. two pieces of news here. first of all, they're targeting $2 billion in annual savings through synergies within the next five years, they're going to do this by sharing vehicle platforms, components. essentially a large block to buy raw materials, all of the things that go into the cost side of the business. and here's how it's going to be structured. >> gm 7% stake in peugeot, peugeot issuing shares worth 1 billion euros. as we look for reaction on wall street to this alliance, gm says, the synergies or savings are not realized in the first two years of this deal. it's going to be further down the line, especially if they perform together on joint platforms starting in 2016.

again, gm and peugeot officially announcing a joint partnership, global alliance. we want to point out on "power lunch" at 1:30 this afternoon a first on cnbc interview with steve girsky, vice chairman of general motors dispatched over to dm europe by dan actor son. he said, fix it, steve girsky. his first major move. first on cnbc on "power lunch." more details about how they structure this deal and also, carl, by then, we'll see what reaction this alliance gets on wall street. a lot of people are saying it's a start but they need to do a lot more. >> with all of the questions how they're going to come back into the black in europe, phil, that will be interesting stuff. thanks a lot. phil lebeau in chicago. with rising gas prices, is the trucking industry one of the first to get hit? ryder system is flat this year. how will they ride the wave of higher energy prices snout joining us today, greg swinton, chairman and ceo of ryder system, joins us from miami.

>> good morning. >> you've been listening to the fed chairman. not sure where you want to take it first. his discussion of gas prices how they impact the consumer, at least in the near term is worrisome. anything that you have heard that you have not agreed with? >> no, i think there are two things i agree with. when we did earnings release in forecast for 2012 we said, compared to other recoveries we're in a modest recovery. if you throw in where rising gas prices are, that of course is going to be a drag on available consumer spending and, therefore, goods to move. that is a bit concerning, but not exactly too surprising. >> yeah. is -- do you think rising energy prices is the function of an improving economy or is there something more pernicious at work? some sort of work that a central bank might have caused by printing so much money? >> i don't know there's anything more pernicious. i think it is an issue of supply and demand. and i think, in spite of how

people might feel about that, there's always going to be a supply and demand issue regarding oil prices. so if other parts of the world need more and there is a bit of a recovery, if we're not doing more to drill and refine and look for new sources, i think ultimately it's going to play out that way. >> how is ryder dealing with the increase we've seen so far this year? getting a break on crude today, down a dollar at 1.05 and change. we know where it's been since december. >> well, in ryder's case, the advantage that we have is that our customers who lease vehicles, when they maintain them with us is also rent. they buy that fuel from us, and we can pass along some savings to them because we guy buy in volume. if a customer comes across fueling islands they gain advantage of our buying power. it's not a direct impact to us but certainly is for all customers who have to do

fuelling. >> are you modelling in aggressive increases in energy, in crude, later in the year, second half. >> i can't say that we've done any aggressive modelling in there. ooh think the expectation is that diesel fuel prices, as well as normal gasoline prices, will continue to rise. i think that is the expectation we have. >> the chairman also talked about overall gdp growth. i'm sure you're a very key proxy for that. >> correct. >> saying gdp likely to grow at the pace we saw in the second half of 2011. talk to me about volumes and and whether or not that model fits with what you're seeing later on this year as well. >> it fits exactly with what we forecast when we put our 2012 planned out publicly, so it includes improvement in lease contractual transactional business and volume in our supply side business, bumpy but modest improvement. but also still growth in commercial rental, which is supplemental capacity.

that's important. but then more importantly, what we're seeing is a continued increase in customers who are signing longer-term contracts, especially for trucks, trackers and trailers. we're think that's still a good sign for the long term, and some evidence that customers have more confidence now than they did several years ago. >> so maybe the degree to which we're trying to work down this economy, like driving down a highway, headlights only go out so far. the longer term contracts people are willing to bet there's not a cliff farther out down the road? >> exactly what their mind-set means. we also have to recognize that, in this environment over the last few years, a lot of equipment, lot of equipment has gotten mump och older and hasn' been renewed. part of the issue is get equipment renewed, leases and that's a sign people feel fairly good. we had modest expecttations

going into the year, that we'd have modest, bumpy recovery and that's the way his comments say we're going to continue to play out. >> greg, interesting stuff. thank you for your time today. >> you're very welcome. good to be with you. >> chairman and ceo of ryder system. we'll take a short break. back with more of the fed chairman's testimony in a few minutes. before the break, a look at gold. you don't see days like this often. it was down $80 one point. now down $66. dollar's stronger today. not a big surprise. americans believe they should be in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future.

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the charmchairmantalking about risk. here's more of the chairman on the hill. >> that people who don't have the means can obtain the means to go to school, that's important, and student loans play an important role in that respect. but one might consider whether there are ways of tying repayment to financial conditions, for example, as a share of income earned or with discounts for certain types of service. various ways to look at how to replay student loans that might better adjust the cost of the loans, capacity of the student. but student loans are a good thing in principle but obviously the program has to be well-managed and is becoming increasingly a federal responsibility to do that. >> the time of the gentleman

hasek pyred. >> thank you. >> the gentleman from texas mr. canseco is recognized for five minutes. >> chairman bernanke, thank you for being here with us today. our nation's fiscal health is in very bad shape and only getting worse as medicare and social security begin to absoall of th baby boomers entering the system. former white house budget director as li director alice rivlin and pete dough minute chi said while the budget stable identifies debt, speaking about the president's budget, the problem arrives thereafter as entitlement costs spiral out of control and revenues inadequate to deal with a wave of retiring baby boomers. you said before that congress needs to act now, to put our fiscal house in order. would you agree that, in order to do that, congress must agres the unsustainibility of social

security? >> i noted earlier that the current budgeting procedures focus on the next ten years. but many of them, the most serious problems occur after ten years and they include entitlements, as one major category of spending. so i do urge congress and thinking about this not to be artificially constrained by the ten-year budgeting window but think longer term because the longer in advance you can make changes the more time for people to adjust and easier politica y politically. >> i don't mean to be putting words in your mouth, but your answer is yes, we need to address that? >> particularly the health care side, costs are very high. >> in your opinion, was the budget passed by the house of representatives last year a serious effort to address our nation's long-term fiscal health? >> forgive me if i don't get into a political debate like that. those are congress' decisions. my -- my role here, i think, is to try to encourage you to

address the long-run susta sustainability issue. >> i high llight the word serio effort. >> i -- i -- >> has to be addressed. has to be addressed. would you say any legislative effort to deal with long-term fiscal health that doesn't address medicare and social security is not a serious proposal? >> well, it is a fact that health care costs, medicare and medicaid in particular are increasingly large part of the federal budget and that unless you're willing to have the government be a much bigger share of the economy than it is now, ultimately those programs would basically squeeze out the other components of federal spending. >> we will ultimately see a situation where our entitlement programs are 90% or 80% of the budget and the rest we'll have to fight over.

to your knowledge, has the administration put forward a plan to address the impending bankruptcy of medicare and social security? >> well, again, i think the focus has been in the next ten years. the -- the administration has addressed the long-run issues to some extent through some of the aspects of the affordable care act that have, you know, oversight board and other things that would try to reduce cost. it's still a major challenge for congress address health care costs. >> in your opinion, would you say that the administration's budget would not seriously address our long-term deficits because it does not address our entitlements? >> i would reiterate the budget they put out was for the next ten years. by definition, you know, if you're only looking at next ten years you're not addressing the long huff run implications. >> thank you very much. let me go to regulations.

i don't know if you've read this cover of last week's "economist" entitled "overregulated america". it presents a pretty dark portrait of our financial system in the wake of dodd/frank and stein, as the article puts it. the last sentence sums it up in ambition is often welcome, but in this case, it is leaving the roots of the financial crisis underaddressed and more orless everything else in finance overwhelmed. mr. chairman, dodd/frank required that regulators write over 400 rules for the financial system. yet over 300 of these remain unwritten. would you agree that this lack of clarity is a hindrance on the financial sector? >> i think so. we're working as quickly as we can. we want to create as much clarity as we can. on the