i think that would be a much healthier thing than it just being a golfing buddy of the ceo. >> wilbur ross, thank you for being here. make sure you join us tomorrow. "squawk on the street" starts right now. good morning. welcome to "squawk on the street." let's take a look at how u.s. futures are set to open ahead of existing home sales data due out in just an hour from now. we are looking at green arrows with the s&p looking at about half a point, the dow at about 16. as for the picture over in europe, take a look there. pretty much red arrows across the board. let's get to our road map for this wednesday morning. benb bernanke hitting the hill. he's expected to say risks remain for u.s. institutions.

goldman gets bullish. the firm saying it is time to say goodbye to bonds and equities are a good buy. two big stock stories of the day. baker hughes warns and oracle beats guidance's mediocre hardware continues to disappoint. who could get an ipad boost? telecom. we have to start off with fed chairman ben bernanke later this hour. he and treasury secretary tim geithner of scheduled to testify on the european debt crisis before the house oversight committee. according to prepared remarks, bernanke says he is comforted by an easing of europe's financial troubles. he also suggests financial institutions have some potential exposure to losses. he does say that major u.s. banks are not vulnerable. still, european banks may suffer losses. what we've seen time and time again throughout the past year

and a half or so is that the u.s. banks still take the keys from european banks when it comes to trading. >> i think of late we've seen a little bit of delinkage. i like to focus on morgan stanley. that's the one the shorts have often targeted, believing they have a weaker balance sheet. i think it's totally untrue. but when you look at the way morgan stanley trades, it often trades with a credit agri coal. i like to think that the stress tests really do go back to 1933, 1934 levels. our banks are so strong it is time for them to take share, take names, take over europe. >> it will be interesting to see if the comments about whether or not further cbs will be triggered. so in terms of 3.2 billion in payouts, it would seem spread across the european banking system that's not a lot of money. >> and a lot of that money has been collateralized every month. you've got to sort of pay in every month your fee to own

these cdss so that's not a true $3.3 billion. my big concern is last year we saw commerce bank and a few others get whacked. most of those have come back. when you look at a one-year chart of uni credit in italy, that's ugly. it is the biggest banking group in italy. no offense to greece or portu l portugal, but italy is a real economy. >> i'm not going to disagree. they're still worried about carbon taxes. they're so unreal over there. they're green ideology seems to defeat the notion of job growth. all that said, i think one of the undercurrents people do not understand in this country, we do not have a club of bankers that are alive with the government. our government is very antagonistic to our banks. over there the fix turned out to be in. these people go to school with each other, their kids go to school with each other. i am saying that europe's culture said we're not going to

let these banks fail because we are all part of the same strata. people don't look like that in this country. we don't play that game. >> i will say this when you look at some of the new greek debt that has been sort of reiterated. it is actually trading at a level which implies to some that yet another bailout could be coming in greece. now you've got concern about portuguese banks. do you feel, because i don't, but do you feel that the european banking crisis is officially over? >> as soon as you all it officially over, then you've got egg on your face. but here's what i want to point out. we are a growth country again. i talked last night on -- i almost said "mad men" because they're here today and also because i look like don draper. >> exactly the same, jim. >> we're like siamese twins. what i would point out is, don't you give me that grin, that we are america on, china off. if we can catch fire here,

catching fire, there's again i've got a lionsgate reference, if we can catch fire, we can overwhelm european weakness. i want to own jpmorgan if the european banking is flat. >> and the growth is not going to be just organic. it might be inorganic as well. i know you know m & a attorneys. they're all working on deals with u.s. companies going after european targets. some in the banking sector. who knows if they'll be completed and i don't know a lot of the names because they're not going to tell me the exact names because then they go to jail. but at the same point it is a deal flow that is for five years has come to america, european companies buying us. everybody is working on deals going the other way now. >> the dollar is stronger and there's a lot of private equity firms flush with cash. private equity firms are now seeing value in europe. they're very, very busy in europe. a good friend of mine who works at one of the biggest cbcs said,

yes, that is the hotbed of activity. we could see in the pipeline a lot of deals. there are bets being made on european deals. >> a lot of suits in the first class section of olympic airways -- oh, wait, olympic went bankrupt a long time ago. >> i wore a new suit so i could fit in. >> it's a fine-looking suit. we'll see what don draper is wearing. >> look, whiskey sours for everyone, right? >> take the gun, keep the canoli. goldman sacks out with a report recommending a move away from bonds into equities. peter op epenheimer writes it's very lengthy note. it seems as you mentioned it's a think piece.

>> yes. >> but i came away with it sort of -- i didn't find it that fascinating. no offense to goldman sachs. >> it's a thumb sucker. you want to go thomas hardy. this piece is called the long goodbye. this is a raymond chandler, maybe his worst. >> long good buy. >> i'm calling it the big sleep. >> why? >> because it's boring. >> i will call you lord jim as a thomas hardy reference. >> let me say victory was better than lord jim and i say pass the bottle. >> people listen to goldman sachs. >> yes, they do. >> and they're making a lot of historic comparisons saying this period resembles 1929. that period saw a big bull run in bonds and you had to shift into equities like we're seeing at this point. >> in candor, it's a big sleep with equities being over, they're about to awake from their slumber. people at home say they talk about duration and the notion of

post-equity risk premium. you know what they don't say is buy. it's almost as if you're not allowed to say and what we ought to be doing is buying dividend stocks. they talk about the dividend yield. right? >> they're going -- >> listen, you've got to admit, number one, that's going to have an influence on stock trading today. >> it will. >> you're talking about it, everybody is talking about it. number two, to melissa's point, where was this point a new months ago with dividends were the exact same? >> it was just a twinkle in the eye at that point. >> maybe he started working on it back then because it is a lengthy, long, extensive data-driven report. >> i suggest this go right into the -- this is a school case study. i'm going to give this a b plus. >> a b plus. >> i have to grade on a curve. >> let's be fair. you don't like peter oppenheimer at goldman sachs. >> he's a nice man.

>> this particular note, what would you listen to? what outfit? which firm would you listen to? >> scott wapner was talking about the notion of who was bearish and who was bullish. i'd like to go back to november and actually take a hard look of what seemed interesting. now, i earlier was on the previous show talking about jim -- about o'neil from goldman. he did come on the show and said when italian bonds were 7%, he said you know what, they're probably a buy. i want to see more guys like that. >> go out on a limb, make the calls nobody else is making because that's why they're getting paid the big bucks. >> i tell you who's been more right than anybody and he's a friend of mine is scott mineart of guggenheim. he called us -- he's coined the phrase the cleanest shirt in a dirty bag of laundry. he was out ahead of curve. now, he is very bullish on gold. he seize gold going to 3,000.

but he was right on the economic turn and the return on equity so far. >> adam parker over at morgan stanley last year made probably one of the most accurate calls on the s&p 500. so there's our kudos for us bashing goldman just a little bit this morning. meantime, we are watching a couple of big stocks, oracle posting better than expected quarterly earnings. software giant posting 62 cents a share, 6 cents above estimates. also current quarter guidance largely above consensus. revenue growth numbers were below estimates. oracle said it was helped by a jump in new software license sales. if you had to really pick on oracle for something, that would be hardware. hardware was yet again a disappointment. it is again forecasting flat growth in hardware for the next quarter year on year. you've got to wonder if sun is working. if they're actually getting traction on the high-end servers. if their phase-out of the

commodity servers is fast enough and if they can make this work at this point. >> larry ellis has been saying de-emphasize this. sun microthe revenues have fallen off. it was a good quarter. but what i'm surprised about is the trash talking on a conference call. >> you were surprised? i was totally not surprised. this is larry ellison we're talking about. >> there was just an assault on salesforce.com where he basically said, listen, it's not secure. sap, he's talking about sap being like out of date. these guys are -- this is a bare knuckles -- >> but benny came from oracle so there's a little bad blood in the sense a top executive leaves to start a competitor. and benny, your boy, has not shied away from going after ellison as well. >> he across the street gave his own little talk because he got

shot at so the bad blood is deep. >> on the numbers side, the old firm in d.c. coming out and basically saying listen, thankfully for this quarter, november's quarter looked like a hiccup. it wasn't necessarily the end of the world and there's still products in hardware. but fbr raised their target at oracle from 36 to 34 saying it looks like the last quarter was just a bump and not the end of the road. >> i'm with them. i agree with that. >> oracle is higher by 2% in the premarket session. so you read through to what, crm, to sap to bm wear, to red hat? let's go the full gamut here. >> i think they're trying to make the case once again that they are the cloud company. they have made cloud acquisitions but they're also a company that has big legacy. you mentioned sun micro, they are indeed not a cloud company. i will point out that i like big data off this. that means i like the m wear, i

like emc. >> did you just coin a new sector, big data? >> i beneficiawish it was hbo. >> could that be rack space and amazon. >> yeah. rack space by jeffrey -- it's initiation. rack space has been criticized by our friend, herb greenberg who was so happy i mentioned his name yesterday so i'll do it again. >> most of the businesses manage data in terms of cloud. >> but the cloud is here. i believe in bennyoff. but they didn't get to a couple of billion in revenues very, very quickly. i want to circle back and say don't sell sales force off of ellison's comments. >> rack space initiated with a buy at jeffries. everybody is a cloud company. if you do any business on the internet effectively, g mail is a cloud industry. >> it's like plastics -- >> nimbus. next up, things have been

fitting nicely for sintas. what's ahead with the ceo? we'll find out what is working for his company. taking a look at the futures. implied open is up. more "squawk on the street" including the cast of "mad men" after they bring the opening bell. jim cramer gussying himself up. we know how much you count on your car, and how much the people in your life count on you. that's why we offer accident forgiveness, where your price won't increase due to your first accident. we also offer a hassle-free lifetime repair guarantee, where the repairs made on your car are guaranteed for life, or they're on us. these are just two of the valuable features you can expect from liberty mutual. plus, when you insure both your home and car with us,

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welcome back. here are some of the other stories we are squawking b morgan's application was down last week. this because refi activity fell. hartford financial has decided to exit the annuity business and consider selling a large portion of its insurance operation. they are yielding to demands from john paulson. shares of general mills down. quarterly profits are in line with wall street expectations, standing by its lowered full year forecast. they face higher costs for raw materials, ie input costs are up. >> worst in 30 years. i think this yoplait accusation will come under acquisition because of the sales that are not so shot.

>> let's get ken powell on the phone. >> i'd love to. ken is a classmate of mine and a terrific guy. okay, now to a surging stock to watch that i have been pushing endlessly on "mad money. " the shares of cintas. the company reporting a nearly 30% increase in its third quarter profit which surpassed estimates. stock hitting a 52-week high yesterday. i might also point out this is a company that literally starts with negatives. i think that that is cincinnati's way of doing things. first on "squawk on the street" is the company's ceo, scott farmer. scott, welcome to to the "squawk on the street" show. distinguish good to see you. >> thanks very much for inviting me. >> a phenomenal quarter. i'm curious whether you're now in a mode where you're seeing tremendous both service economy growth and also manufacturing

growth. remember i understand that you say we're not up there in terms of employment yet, but are both sectors starting to do well? >> well, i would say yes. what we're seeing is pretty widespread. but i would call it moderate at this point. it's not something that, you know, at this point i would say is robust growth, but the mood out there has changed. we're taking advantage of it. >> now, in the conference call i was kind of surprised. people at home may read this conference call. you focused on -- you're worried about recycled paper prices. but you bury the lead, i think. you've got a remarkable resurgence in the actual core, starting a new company getting uniforms business. >> that's absolutely true. you know, the paper price thing is a comparison that has had a significant, from our perspective, quarter-to-quarter change. so we just wanted to make sure that we explained that. but absolutely the core business is doing well.

and we have a lot of momentum right now. we expect to be able to continue to do that. >> skcott, i've got to ask you about the strength in the energy services sector. obviously gas -- there's a lot of drilling going on out there. what sort of pipeline do you see in terms of orders? what kind of guidance can you give us as to whether or not the strength will continue and how far out it will continue? >> well, let's start with, you know, the oil and gas business itself. that has been very solid. there's a lot of oil and gas exploration right now with the marcellus shale region, the canadian sands and then the traditional oil belt, so they're all doing very well in that area. relative to looking out into the future, a lot of it depends on what happens with the employment base. the economy shed about eight and a half million jobs. they have aed somewhere between a million and a half to two million of those jobs back so there are millions fewer people

working today than there were in 2007. as those people come back online and those jobs come back, that only bodes well for our company. the timing of when that happens i can't predict. but in every other recession and every other decline we've seen in the labor market as a result of a recession, those jobs have eventually come back, so that bodes well for our business. >> scott, i assume you see good things ahead because you're advertising all over the place. you must see an improved labor market, otherwise you wouldn't spend the money to go after workers that you clearly believe are going to be there? >> there is an improved labor market. you can watch it on a month-to-month basis. we have not seen the 450,000 jobs added per month yet, but what we're seeing is a positive trend. the advertising, though, also is an opportunity for us to explain to our customers the other products and services that we have to offer these days, that

traditionally are fairly new to a lot of our customers. >> scott farmer, you've done a remarkable job. thank you so much for coming on "squawk on the street." great to see you, sir. >> thanks for having us. jim, you looked great in that coverall last week. >> i have many facetted looks. >> with a little flap on the -- >> let's leave that to the imagination, shall we. coming up next a big stock on cramer's radar. find out which one is in his mad dash. take a look once more at futures. it looks like a positive open. stay tuned. ♪ when your chain of supply goes from here to shanghai, that's logistics. ♪ ♪ chips from here, boards from there track it all through the air, that's logistics. ♪

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up next, about five minutes until the opening bell rings on wall street so it's time for the mad dash. we have to start off with baker hughs. specifically the shift away from nat gas drilling is really hurting baker hughs. >> they did this gigantic buildup on the natural gas side. we've got a week's chart here but what's going on is that -- wow, that's the wrong chart. what's going on is when you make your bed with natural gas, you can't very quickly switch to oil, which is why i think that's the wrong play to sell. 8% of their business is american natural gas. halliburton, however, definitely not going higher today. >> the problem here is that the shift is happening. we've seen it in the case of

chesapeake energy, for instance, shifting away from natural gas. they can't convert the rigs so rig utilization is down, labor costs are going up. it is having an impact. baker hughs really the one to watch, down 4% so far. >> western gas on last night. there are some guys you should not sell off this but people will shoot first and ask questions later. start asking questions now and get some buys. >> got to hand it over to brian who is in the mix of the crowds. no surprise, the cast of "mad men" is here so there's a flurry. >> john hamm, christina hendrix. why are you all watching? >> because of you. >> because of me? liar, but i love you. coming up after the break, we've got the ceo of lionsgate. we're going to talk "mad men," maybe mad money. "squawk on the street" coming up after the break.

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there you have it, the opening bells ring on wall street. here at the big board, big applause for the cast of "mad men" celebrating season five. we'll speak to the cast and the ce of of lionsgate which produces the series. at the nasdaq, a nonprofit providing education to chipper a -- children all over the world. >> i think we seem to have passed to china. yesterday vhp was the focus. pointing out, look, this is much ado about nothing. the china growth story is very strong and we're right back in it. but this is about lionsgate today and another new high. >> another new high. this is a string of highs for shares of lgf. on "fast money" last night we

spoke to the vice chairman about specific all "the hunger games" which is a highly anticipated movie set to open in theaters across the country this weekend. i had the pleasure of seeing the movie yesterday. it was a fascinating movie. it's what they call a four quadrant movie. men and women over and under the age of 25. that's why perhaps it is so widely anticipated. >> i mean, look, i have a 17-year-old and a 20-year-old. we instantly read these books together. i've got my fave, which will be the last part. i've got to tell you, this has got to do $120 million for this stock to continue to go. >> that's at the higher end -- >> it's got to do 120. i guess it's going to begin to get dicey. that said if any movie can be able to have broad appeal, it will be this one. >> it's interesting to note, there are a lot of other countries that stand to benefit in the success of "hunger games." in that basket, scholastic imax. imax is set to get 10% of the

box office. so let's say it does 100, it gets $10 million. and then you have some of the toy companies that might have licensing agreements for some of the "hunger games" related toys, so mattel and hasbro are in that basket as well. >> also of course we've got "mad membersh men." this is incredible. mad men is a hugely lucrative franchise and "the hunger games" which the book spiked, so many things have been working since the decision to make that into a -- four movie, not three. >> oracle is higher by about 3.33%. crm is trading higher by a percent but sap is down and ibm is up fractionally. >> that split i think is important and obviously the oil service just getting hammered here. halliburton getting hit every

bit as badly as baker hughs. these companies decided that they wanted to own the natural gas franchise. well, they own it. >> yeah. it's also worth watching today's session, shares of bank of america. bank of america is a standout. so far it is higher by about 1.33% or so. what's key here is the price level. before we had 10.08 and then that rumor that got batted down. so we're approaching the level it had been before the rumor. 10.08 was the prerumor level so it would be important to move past that. >> remember, there have been a tremendous series of downgrades of the regional banks ever since the stress tests results were announced. i think this group could have a major multi-month run. people want to downgrade it, they're too short-sighted. this is where the value is in the stock market. >> we're seeing a lot of strength in the home builders. the etf that tracks the home

builders near ia 52-week high here. i want to head over to bob sullivan. >> there is a lot of activity down here. can you figure out why? >> it's a lot of very well-dressed men standing around. >> and you're one of them, my friend. >> for the moment we've got some classically dressed '60s style which i very much like and one of the hallmarks of "mad men." >> and the martini lunch. >> let's not come back after 2:00. >> let's talk about iron ore. >> isn't it great that people have calmed down a little bit about this firestorm. overblown. did you see today australia turns around and raises its estimates for iron ore exports, most of which goes to china, by 3% this year. they don't seem to be that worried about it. they acknowledge the numbers are dropping, but we've had numbers that were 20% and above for 20

years. it's been in everybody's models for a couple of years and the hysteria yesterday was frankly a little overblown. you never tell the stock market what to do. that's a rule. but there are times when things get a little overblown and you tell everyone to calm down. the bottom line is a lot of money, including the australian iron ore industry is betting there will be a soft landing in china, not a hard landing. >> and ubs agrees. they came out with a note saying we love iron ore. >> they have numbers in the single digits and they have had it for a while. their numbers did not change as a result of yesterday. let's move on, it's crunch time for mario monte. he is the point man for this. if he does not succeed all those problems will come back and europe will be on our radar every single day again. so monte is introducing changes in the italian parliament to change the labor laws. article 18 specifically says you

can't fire anyone for economic reasons. they're going to try to change that. the main italian labor union is out against this change. a couple smaller ones appear to be in favor of it. >> when that happens, i'll believe he can change the labor laws. are people optimistic this can happen? >> yes, they are. this is brian's way of saying hell will freeze over before you get that. i think you should be a little more optimistic. >> listen, i hope so. i want to be. >> italian parties that are very closely tied to the labor unions are the ones that are talking about it. >> melissa, back to you. >> hey there, brian. yeah, what a crowd is forming around the cast of "mad men" set to premiere its fifth season this weekend. we're joined by the cast of "mad men." i'm sure you know many of these people. the ceo of lionsgate, vice chairman of -- i'm sorry, i

didn't catch it. >> i'm matthew weinart. >> candidly, i'm a little speechless. i have not been that way in 31 years. you guys have done a remarkable job. i want to know, everyone has been very tight-lipped about what is going on, you know, with the show. how important is it just to keep the lid on what is going to happen here? >> i think, you know, we're in the entertainment business and it's a very unique product. people don't know what's going to happen so it's very important. we want people to sit down, hear the theme music, watch the show. they have to watch it on tv and share that experience that night. >> i totally agree. john, i don't want to lose sight of "hunger games." 120 million? >> you know, jim, the record for lionsgate was $41 million and i'm pretty confident we're going to break it and that's all i'm going to tell you. >> will suzanne collins be working on the others? she is my favorite writer.

>> of course she will. critical to it. >> that's important. >> in terms of "mad men" there's so much anticipation because of the lag from the last season. was that on purpose? was there this sort of designed lag between the seasons in order to drive demand? >> no. there was not. we do believe in scarcity. we only have 13 episodes this season. but there was a programming decision by the network that we would not be on the air in 2012 and i thought it was crazy. i fought it, but it turns out it might be okay. >> i'm concerned, i've got to know this right now. will this be the only time i see you guys together this spring? >> probably not. we hang out a lot. >> i don't really care that much about offscreen. >> our boss is right here. >> he is right there. >> i guess the embargo continues. you can get earnings per share ahead. you can get insider trading more than you can find out what these guys are talking about. >> are you guys surprised on how

long this series has gone on and what the response in the audience has been to "mad men." >> yes, in short quite. we all started this trip six years ago on a little show on a network that never made original programming and here we are six years later and they have got a stable of shows on amc and we're just thrilled to be back. we're thrilled that it's made this impact. >> i can't resist this, because this is the greatest business show of all time. it is a business show. so i want to know how the heck did you lose the lucky strike account? >> i don't think it was anything that i did. i think roger did his best and it was just time for a change. >> how important is being absolutely true to the way the business really was? and how much of it is true today? >> i think there's an exhaustive amount of research done on the show but it is entertainment. we're not making a documentary, we're making a story of these

people who happen to be living in a very iconic time period. >> and obviously "mad men" is not the only series in lionsgate series. it's part of the strategy to diversify your portfolio. but last year fiscal '11 revenues, 22% from tv production. john, what do you see that expanding and in what time frame? >> yeah, i'd say more. we see it growing, we see more diversification. obviously we're super grateful to matt and what he's done. i think back to when we first rang the bell in '04 and we didn't have "mad men" or "hunger games" and the company is growing beautifully and it's because of creative talent like matt and this cast that are able to do it, so a lot more television. >> the stock of lionsgate has been on fire. yesterday in the after hours session it was up 3% so it continues to build and build and build. part of this obviously is "hunger games."

a loft your other might havies have been franchises as well. so there's one after the other after the other. that is also part of your design strategy? >>y started thinking about how do we have more franchises that are repeatable. each time we've got coming out in a few months "what to expect when you're expecting." i think that's absolutely part of our strategy and i think it's working. >> matthew, i've got to ask you, as someone who is a huge consumer of tv programming, i feel -- >> talking about you? >> yes. i want to ask you about what's changed in this world. i find, no offense to "hunger games" that the best writing, the best acting, the best drama is all on tv. that wasn't the case when we were growing up. >> i don't know if that's necessarily true, but i do feel that there is an opportunity to take a risk in television because the audience is smaller. and i think what you're looking at here and what's happened to lionsgate and amc are people

willing to take a risk. adult programming with a niche audience is a business. these movies, the 30 or $40 million adult drama or comedy that doesn't exist anymore. there are tent pole movies and all of the talent has gone to television where there's creative freedom and people willing to take a risk. you're seeing the rewards of people who are just like not afraid of failing on some level. it's a 30-year business. we've talked about that. >> movies are out four weeks and you're out of the theaters pretty much. we've got a tv series going into its fifth year week after week after week. people have a chance to get to know it and grow with it. >> and we work on a reasonable budget. a season of the show costs less than a big feature film and it's 13 hours and goes all over the world. >> this terms of acquisitions, john, i'm curious if you're shopping around. michael made it clear last night that the debt level of lionsgate will be paid off fairly soon. about half of it will be paid off over time and other half

will be thanks to revenues from "hunger games." are you looking to acquire another property? >> i think we're trying to do the integration of summit and do it well and tell everybody what the combined company really looks like and what our strategy is going forward, but we're not shy. as you know, my partner, michael, isn't shy about looking at acquisitions when it's the right timing when it's the right opportunity. so i think in the future obviously we're going to do that. >> are you worried about managing expectations? here i come at $120 million. this is one of the most talked about movies, but there was another movie two weeks ago, john carter. just a disaster. how do you temper enthusiasm so those of us who like the stock, and i've been recommending lionsgate, don't get ahead of sglou ourselves. >> you say 120, i say 40. somewhere in there is the expectation. but our strategy was to grow slowly, take the moderate amount

of risk, build value for the shareholders. that continues to be our strategy. we're not going to boast about "hunger games" but i think it's going to do very well. >> i have to ask christina this. one of the things that i love about the show is that it is taking -- it's the kennedy assassinatio assassinations, marilyn monroe. you are the way that we talk about vietnam in the show. is that going to be a theme for this year? >> no comments. >> i'm scared to say anything. we have to address it. i mean we left the last season, you know, in that place and we have to address it. that's where we are. so i'm going to leave it at that. >> hey, that's enough. i'm thrilled that you're going there. >> you have to watch the show. that's really -- the story will continue and

we're very excited to be back. we can't wait for people to see it. we finished the entire season. we've never done that before. we're all sort of sitting here. we're dying to talk about it, believe it or not. >> what's different is also the netflix streaming aspect of it. i watched all of the last season on netflix over the course of a weekend. i just binge watched. >> binge viewing very important. >> is the next season going to be available simultaneously on netflix? >> no, not simultaneously. but the great thing about netflix, the great thing about online viewing is that now the serialized dramas particularly create a chance for people to catch up and really look at them. some people are watching them 12 at a time or something like that. this created value for that audience to catch up like that so we're really excited about the deal with netflix. >> there are a lot of tv networks that were probably

questioning the decision to actually put "mad men" on netflix streaming, the whole series available. was there any intrepidation on your part? >> i was not involved in that decision but i trust these people to get the highest dollar value for what it's worth. we basically said let's step into the future. it's so hard for people to believe what's happened in the last six years. you could not get an uninterrupted streamed commercial that was 15 seconds long when we went on the air and this show has really evolved as the technology has evolved. itunes, video on demand, the dvr, all these things have happened coincidentally with the existence of the show. so if we're the first thing to go into the future with that, i'm very proud of it. >> but it was the carousel, the breakthrough carousel episode. i'll never forget it. >> north of 100 on "hunger

games?" ? >> oh, i hope so. i really do. >> guys, you've been great. thanks for your time. >> thank you so much. >> the producer of "mad men" and the vice chairman of lionsgate. brian, over to you. >> i have to admit i am extremely jealous. it's fine to admit that. let's shift now to bonds and the dollar. rick santelli is at the cme group at chicago. we've got to go from the cast of "mad men" to talking about obscure russian economists because our folks, our colleagues in europe talking to a guest today about the man whose model says the 30-year bull market in bonds is over and interest rates will begin a decade-long cycle higher. do you agree or disagree, sir? >> yeah, i don't think you need a textbook the size of a phone book to end up at that conclusion. but to me the real issue isn't whether ten years down the road

we look back on this quasiperiod from last july until a month ago and say those were historic low yields never to be seen again. the real issue is how much higher they can go, and that is the dynamic i'm paying closest attention to on a day where i see the gilts have slipped under 240. osborn from the u.k. talking about how austerity, but the key, the key is how the british pound moved a bit lower against the dollar on another line, and that line was, hey, we need to double exports. i tell you what, trade issues are really going to be front and center. think china, think the u.k. over the next several months. watch that fx market, sully, back to you. >> you know what, i'm watch you and the fx market more than movies and shows about advertising executives. this is just me being bitter, i

wasn't over there. fed chairman bernanke and treasury secretary tim geithner are getting ready to testify on the european debt crisis. this all before the house oversight committee. we'll go live to capitol hill once they begin their remarks, followed by the q & a session with lawmakers. as we head to break, this morning's early moves. hard ford financial, micron tech, put ta group, masco and saic. "squawk on the street" will return right after this. 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.

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an interesting twist between starbucks and green mountain coffee roasters. the two have announced an expansion of their relationship with starbucks coffee being available for green mountains latest single serving brewer. green mountain took a beating after starbucks announced its own single serving. you pointed out the pop earlier. you said what's going on. that's what's going on. >> and clearly green mountain

was surprised initially by starbucks' entry so maybe this is the beginning of a better relationship or a repair of the relationship. >> you're saying something good is brewing. >> yeah, i'll go for that. >> it's percolating. >> we need to filter our puns a little better. >> come on, let's focus. >> i'm talking like a drip, i get it. much more "squawk on the street" straight ahead. with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus - i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones. tdd# 1-800-345-2550 and i can trade wherever i want, tdd# 1-800-345-2550 whenever i want. tdd# 1-800-345-2550 the kicker? tdd# 1-800-345-2550 i pay $8.95 a trade. tdd# 1-800-345-2550 that's a deal in any language. tdd# 1-800-345-2550 open an account tdd# 1-800-345-2550 and trade up to 6 months tdd# 1-800-345-2550 commission-free. tdd# 1-800-345-2550 call 1-800-790-7706.

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let's don't waste time. let's start with goldman sachs making positive comments here. >> i'm talking about a mobile strategy. this company has real earnings, real growth. >> people are getting too negative about these brokerages and asset managers. >> dr. copper may be sick but there's a wall street firm that likes freeport. >> i think this stock can go higher. >> deutsche bank did something with ebay sorta kinda. >> there was a short-term buy

list. >> is this a sell? >> no, no. >> but they took it off the short-term buy list. >> i would tell you once again that this is a paypal plight. work the company. >> look, peot to own a drug stock that has a good yield so they seize on that one. they have a good buyback. >> how j bill circuit does. >> a lot of people felt this quarter was weak. it's all about the expectations. the expectations were darn good. >> and you've got the ceo on "mad money" tonight. what's the main topic? >> research in motion. they have got a telco business that's not so hat. john hamm right there. existing home sales examining 10:00 eastern time, that is in moments. "squawk on the street" returning with more home sales data. and jim, he's handsome. stick around.

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welcome back to "squawk on the street." fed chairman ben bernanke is testifying on capitol hill. let's listen in. >> european policy makers. our focus is to protect u.s. financial institutions, business and consumers from any adverse developments occurring in europe. to help calm dollar funding

markets and to support the flow of credit to u.s. households and businesses, the federal reserve worked to enhance the u.s. dollar swap facilities as has been testified. use of our re-established lines was limited until late last year. in late november we agreed with the ecb and the central banks of japan, switzerland and u.k. to extend the swap lines through 2013 and reduce their pricing. the lower cost to the ecb and other foreign central banks has in turn allowed them to reduce the costs of short-term dollar loans that they provide to financial institutions in their jurisdictions. as was noted, the swap line increased considerably and peaked at $109 billion in mid-february. this has had a very beneficial effect on easing dollar funding pressures in european and other foreign banks which has in turn lowered tension in u.s. money markets, alleviated pressures on foreign banks to reduce their lending in the united states and boosted confidence at a time of

considerable strain in international financial markets. as market conditions have improved notably, usage of the swap lines has fallen back. it's currently about $65 billion. i would add that the swaps are very safe from the perspective of the federal reserve and the u.s. taxpayer. they present no exchange rate or interest rate risk. each drawing has a short maturity and must be approved individually by the federal reserve. they are collateralized by the foreign currencies and our counter parties are the foreign central banks, not the commercial banks receiving the loans. the fed has worked with the fsoc and other agencies to monitor financial institutions. notably they have very limited net credit expos urs to the most vulnerable european countries. there are some exposures arising from the sale of credit default swaps on sovereign debt, but our assessment is that those are broadly hedged with cs in the

other direction and that the counter parties to those cds are broadly dispersed and are strong banks in europe. although u.s. banks have limited exposure to european countries, their exposures to european banks and larger core countries is much more material. moreover european holdings represent 35% of the assets of prime u.s. money market funds in february, and those funds remain structurally vulnerable despite some constructive steps taken since the recent financial crisis. so the risk of contagion does remain a concern. in particular where the situation in europe to take a severe turn for the worse, the u.s. financial sector likely would have to contend not only with problems stemming from its direct european exposures but with an array of broader market movements, including declines in global equity prices, increased credit costs and reduced availability of funding. most recently the fed released on march 13th the results of our comprehensive capital analysis

and review, which is essentially a stress test of the largest banks or bank holding companies. we imposed a hypothetical stress scenario on these banks that involved a deep recession in the united states with unemployment reaching 13%, a decline in activity abroad combined with sharp decreases in domestic and global asset prices. this exercise was designed to capture both direct and indirect exposures and vulnerabilities of u.s. financial institutions to economic and financial stresses that might arise from a severe crisis in europe. the results show that a significant majority of the largest u.s. banks would continue to meet supervisory expectations for capital adequacy despite large projected losses in an extremely adverse hypothetical scenario n conclusion, the recent reduction to financial stress in europe is welcome, given our important trade link ajs. the situation remains difficult and it's critical that european leaders follow through on their policy commitments to ensure a

lasting stabilization. i believe that our european counterparts understand the challenges and risks they face and are committed to take the necessary steps to address those issues. the fed will continue to monitor the situation, work with our 14 counterparts to strengthen our financial system and use the tools at our disposal to help stabilize u.s. markets should the situation require such action. thank you. >> thank you. i'll now recognize myself for five minutes. chairman bernanke, in that stress test, you i presume assumed that the fed systems including the credit default swaps that are backed nation to nation would work, is that correct? you weren't assuming a collapse of all of the, let's say, $1.4 trillion of exposure? >> we didn't assume they would work. we checked to make sure we were comfortable with the counter parties. >> but that means you graded yourself as that part working, correct? >> i'm not quite sure what you're asking. we looked at the cds positions

of the banks and we verified first that they are largely hedged against sovereign default in europe first and then secondly we looked at the counter parties of those credit default swaps and assured they represent the strongest financial institutions in europe. >> like aig did? >> aig is what we don't see. aig was not appropriately regulated. it was not appropriately hedged. id didn't have sufficient capital behind those cds. we know there's nothing -- >> so you're comfortable today that there are no aigs hiding in the woods? no fps sitting in some small company in london that essentially has bet the bank without us knowing it? >> well, our stress tests have covered all the largest bank holding companies in the u.s. we've looked also at other large banks with a somewhat less stressful and somewhat different approach, but within that whole range of u.s. financial

institutions we don't see any similar problem. >> thank you. that's one of the most important parts of today is to ask the questions that weren't asked in earlier times before what couldn't happen occurred. europe has -- the eurozone has an economy we'll call nominally our size. it has a debt, if i'm roughly right, of 14 trillion of sovereign debt. some countries have positives but we'll look at their sovereign debt across the board. so it's fair for the american people, not the talented economists but the american people to say same size entity, similar debt to ours, not exact but similar. if that's the case, why is it that they're not being treated, and this is a question for the american taxpayer if you will, being much more like we treat our states. california doesn't look to greece or germany for a bailout,

they look to the united states federal government. in other words, we're internal. what is the justification for the american people to understand of a zone, similar size to ours, similar wealth to ours, similar debt to ours, looking around at the rest of the world and saying what part will the united states put in to a european union member, such as greece's problem? >> well, your question highlights the difference between europe and the united states, which is we have a fiscal union as well as a monetary union. as you point out correctly, the reason that we don't see the same kind of stresses at the state level is because implicitly there is support from the federal government for the rest of the country -- >> right, but for the taxpayer, and i want to get to secretary geithner too. for the taxpayer, they are very similar to us in the positive side. human beings move freely within the eurozone. most of the eurozone is a single currency and in fact they

basically act from a winning standpoint as a protective trade partners. they treat each other in a way they do not treat us, period. we simply do not enjoy the advantages of selling into the eurozone that the eurozone enjoys throughout the european union. so the question is, for the american people, and by the way, this is not a question of why are we doing it in our own self interest. i understand we're doing knit our own self interest too. but the question is, why is it that the eurozone isn't being asked by our government to step up much more and take more responsibility? why is it it comes to the american people at all? not why is it in our best interests. but why does it kmt to the american people when in fact they have the same wherewithal and when they're trading with each other they trade like states, but when they have a problem with a rogue nation or two or three or four, they turn to the imf and other external forces for which we participate? >> well, it's a good question.

our position and perhaps the secretary can speak to this from the administration's point of view. the position of the united states has generally been that europe needs to really step up and do a lot more and we have been encouraging them to strengthen their firewalls, strengthen their fiscal compact and essentially to move in the same direction as the united states is currently structured. >> and mr. secretary, as i go to you, i want to say this because as you said in your statement, we have never lost a penny to the imf. we have been fully repaid. some might say that the interest has not always been what we would hope it to be, but in fact it has been a good bet overall for the world economy. but the american people are wondering what i asked. i hope you can give it to us in a way. and the follow-up question i'll give you in advance, doesn't it strengthen your hand when we make it clear that the american people are essentially saying no and you're going to have to convince us if you need large amounts of money, you're going to have to convince us to go against what is the populist

feeling within mr. comings communities and mine as well. >> we have a similar view to what you have expressed. europe has the means to solve this on their own and you're right to point out that because their monetary union, they don't have the mechanisms we have in the united states, not just to discipline the borrowing ibehavior of our states but we have a set of fiscal transfers which are powerful in the united states to soften the downturns that individual states might face. the imf is an institution where members have a right to request assistance. if they're prepared to meet the conditions the imf establishes, then they have the right to request that assistance. and our judgment has been that it's been in the interest of the united states and fully consistent with its institution and certainly better for us as a country for the imf to play a modest supplemental role alongside the much more dominant financial role of the european

authorities going forward. and where they have asked us for the imf to take more of the burden, we've said no, we don't think that's appropriate. so we're taking very much the course you would take and most americans would say which is they're a rich country. in fact nations around the world are taking a similar view. which is let's make sure that people understand for their strategy to work, the world needs to see europe, that very rich continent of europe, demonstrate that they are prepared to do what it takes to make this work. and we can help with advice and some support on the margin. we're not going to do that in a way that puts the american u.s. taxpayer at risk and not in a way that shifts the burden of solving their crisis to the american taxpayer. >> thank you. mr. cummings. >> thank you very much, mr. chairman. secretary geithner, you know, europe has a housing krietd,

does it not? >> parts of europe do. >> so to restore our economy, you would agree that housing has to be addressed, do you believe that? the foreclosure situation that we're going through right now? >> i do think that obviously our economy, as you said, is still suffering from a lot of collateral damage fallout. you see that in housing, not just high unemployment. and our judgment is that we should do everything we can to help repair that damage. that would make the economy stronger over time and that's what we're trying to do. >> now, house republicans released a budget proposal this week that would make the cost of cuts of $5 trillion in medicare, shift the cost of health care to seniors, slash education research and infrastructure funding and chairman bernanke, you and i have talked about this a number of times. you know, you gave a speech back in 2008 in which you said

principal reductions that restore some equity for the homeowner may beely more effective means of avoiding delinquency and foreclosure. is that right? >> sometimes it can be effective, yes. >> and secretary geithner, you also agree that principal reductions can be a critical tool if it's well designed, is that right? >> yes in, some cases. that's why you see private investors and private banks on their own in many cases offering principal reduction to their borrowers. >> now, how did europe deal with this, the foreclosure situation? >> well, there's actually a limited number of countries in europe with quite that same mix. and they are taking somewhat different approaches. where they're different, it's different because of the nature of the problems. i think it's fair to say they

have not been as aggressive as we were in trying to move early to try to repair the damage in the housing market. >> mortgage banks across the country already doing principal reductions because they count their bottom line. they want to keep people in their homes paying lower mortgages instead of foreclosing and getting nothing at all. this helps the homeowners and shareholders. the only official who does not share this view appears to be ed dimarco, the acting director of fhfa. chairman bernanke, his opposition is strange because his own data which he provided to us earlier this year shows that principal reductions would save the united states taxpayers billions of dollars compared to foreclosures. his data also shows that principal reductions would help the homeowners. so based on his own data and based on the law congress passed

to create fhfa, mr. dimarco should be doing principal reductions now, but he has refused. now, secretary geithner, i know that you are in negotiations with mr. dimarco and the treasury has now offered triple incentives for principal reductions. can you tell us why treasury is doing that and why are these incentives important? >> well, i should point out that under the law, the treasury and the administration did not have any authority to compel the fhfa to undertake specific activities. under the conservatorship mandate, they have to make sure they meet a very tough test, appropriately so, to make sure the things they are doing are in the interest of row deureducing losses to the taxpayer. there are situations where we think there's a strong economic case for principal reduction as part of a strategy to limit the future losses to the gses so

we've been having some discussions with him about how to narrow the differences between us. but he'll have to make these choices. and i think maybe on this question, it would be better for me to come back and talk to you in more detail about it separately. maybe in a couple weeks we could give you a better sense where he's going to come out. >> very well. in his letter to us, he said, so that you'll have this when you talk to him, he said administrative costs could be too high to adjust his i.t. systems and he went on to say he has made that argument to you, i assume, has he not? >> he has. but again i think he's in the process of looking again at those questions, as are we. >> and so your response was look further? >> yes. again, we both have the same basic interest, which is we want to make sure that those institutions are doing things to not just help repair the damage in the housing market, but they're doing so consistent with

their obligation established by congress to make sure they're doing things that would limit the risk of future losses to the taxpayer. >> finally, secretary geithner, let me ask about the stakes here. mr. dimarco controls all of the lob loans guaranteed by fannie mae and freddie mac. how many loans could be affected by his decision, hundreds of thousands or millions potentially? >> no, not millions. i know it's not part of the popular wisdom, but the gses are more conservative, more careful in their underwriting standards than the loans they took so the broader quality of their loans is actually better than the broader market in this context. again, our job is to try to make sure we're doing everything we can to reach as many as people as we can whether we think there's a good, strong case for the country on the merits, not just for the taxpayer. >> thank the gentlemen. mr. secretary, we'll also send you a copy of the field hearing information from brooklyn which actually has fed and other representatives' testimony to that point so that you're

briefed before you come back to the ranking member. with that we go to the chairman of the full committee emeritus, mr. burton, for five minutes. >> is that what you call me? >> emeritus is a forever term, as is chairman around here. >> i got it, i got it. >> according to crs, the exposure that the united states has in portugal as of september of last year was $54 billion. ireland was $111. italy $310 billion, germany, $635 billion and france $685 billion for a total of $2.08 trillion. i'm concerned about what happens if the euro starts to devalue and how it's going to affect the united states' ability to

collect on these indebtedness that we're having with here. i'll combine some of these questions so you'll have more time to answer. we're printing money, have been printing money with qe-1 and qe-2 and i presume this may be continuing. is there a mid or long-term cost to loaning money that we printed to europe? and how much will that be? the federal reserve has created this foreign currency swap mechanism and it has outstanding loans as high as $1.2 trillion. i understand you say now it's only $65 billion, but nevertheless that's a considerable amount of money. and i still like to ask what happens if you do have some defaulting over there and they can't repay those loans. i know the european central bank

is printing money right now. that will cause some kind of inflationary pressures as well. what will that do in the indebtedness that we have. the foreign currency swaps takes our money and exchanges it for you are euros. i presume we're getting the money from the money we're printing. i'd like to have the answer to that. and it appears as though we are providing dollars that are loaned to or swapped with europe and it's used to buy bank bonds that are then lent to commercial banks. i believe that's correct. if that's the process, it sounds like we're cooking the books to make this all look legitimate. finally, i've been to a number of these countries and the unrest is very apparent. some of our european neighbors have not passed austerity measures and even when they have passed some of these reforms, you still have an awful lot of

dissention in the countries and they have had changes in those governments. i think there's still a big question whether or not greece can survive, maybe italy, spaceship, portugal and so forth. so to what extent are we exposed if this so-called european recovery does not take place? can you give us the figures or at least roughly the figures both directly and indirectly as far as the exposure is concerned? and do your numbers include foreign currency swaps or other assistance from the federal reserve or the treasury? i know that's a lot but if you could kind of run through that, i'd appreciate. >> it may i respond? >> sure. >> on the swaps, the maximum was $109 billion, it's down to 65 because it's been very constructive and has helped improve the market, it's been beneficial to the united states as well as to europe. if the euro devalues or dpreesh depreciates, it has no effect on

the value of our liability because we get paid back in dollars. so the european central bank takes any foreign exchange risk. we get paid back in full because the they take all the credit risk. we're not taking any credit risk or foreign exchange risk. the chances of losing any money in this are very, very low. and the benefits are quite significant. on exposure, you mentioned some numbers, i wasn't clear whose exposure you were talking about. let me just say briefly that obviously our banking system is exposed to europe. they are a major trading partner. we have many investments there. but it was exactly what we tried to do in our stress test scenario that we just released the results last week. we considered a very severe scenario that included a sharp, new recession in the united states, a sharp decline in activity in europe, a major financial stress, including 50% drop in stock prices. so all of this is sort of an attempt, at least in part, to

measure the impact on our banking system of a new crisis in europe. of course there would be significant losses, but what we found was that all of the banks essentially were able to meet a reasonable level of credit -- i'm sorry, reasonable level of capital even following the losses associated with session event. the losses would be larger, of course. >> thank the gentleman. the gentleman from illinois, mr. quigley. >> thank you, mr. chairman. gentlemen, i guess the academic question is that balance that i talked about in my opening statement about austerity measures and how they impact recovery, your view in general on that issue and how the european plan seems to strike that balance or how effectively it might do that? either or both of you, please.

>> well, i think the answer to your question depends on which country you're talking about. i mean there are countries like greece, ireland and portugal, which are currently under european union eurozone and imf support which have essentially no alternative but to do whatever they can to reduce their fiscal deficits. they have been trying to do that, although the slowing and growth has made it more difficult. more broadly, there are some countries that have some fiscal space, as it's called, and there they might consider a balanced approach to deal with the fact that europe is slowing, their economy is slowing, at the same time addressing longer term fiscal issues in a comprehensive long-term plan. which, for example, they're trying to do through their fiscal compact. that's an approach the united states might take which is a

comprehensive plan which has both a short term and long-term component to it. >> i think the chairman said is exactly right. you have to distinguish the countries that lost the ability to borrow on their own without support from those that still have that capacity. in general, the countries that are not in an acute stage of crisis, you want there to be a medium-term plan to gradually phase in the reductions and deficits that have to come and you want that to be balanced by and complemented by reforms that are going to try to improve the economy. very important to get that balance right. as i said, it's going to take a bunch of financial support to make sure those reforms have time to work and you want to make sure they're phased in gradually over time and you want to avoid the risk that, again, every time growth disappoints and, therefore, the short-term effects in the deficit or increase the deficit, you want

to match it by immediate cuts in spending or tax increases because you add to the challenge on growth and it's harder to dig out of the problem. so that's the balance you want to have. >> how did they do? >> how are they doing? >> if you want to talk about the countries that are more acute like greece and italy and others, how did they do striking this balance? how optimistic are you that -- the concern is if we are so dependent on their recovery, perhaps we can learn some lessons there, did they go too far with these countries that are really hurting and stymie the opportunity for recovery? >> i don't believe you can say that in greece and ireland and portugal because once you get to that point there's no alternative available except to do this mix of tough reforms across the board. in the other countries in europe, they're in a different position. they have a bit more time and space to bring a bit more care and balance to the path. of course greece and ireland and

portugal are very small economies, even aggregate in that context. what hurts the united states is the risk of a longer period of weak economic growth in the major economies of europe and that's why it's so important that as they have come the financial tensions across europe, they are able to shift some of the attention and focus in europe to broader strategy that say would make europe stronger across the continent. >> and your overall assessment, their chances for recovery, why are they less optimistic -- or you're less optimistic or more optimistic about what europe faces versus the u.s.? >> i think the fundamental reality of europe is this is going to take a very long time for them -- >> and we've been listening to treasury secretary tim geithner and fed chairman ben bernanke testifying before the house. a number of headlines have crossed but essentially chairman bernanke saying that the european debt crisis remains, that the u.s.' position is europe should do more to further

stem the crisis. he's also talking about some of the measures put in place and how effective they have been. the currency swap lines, particularly effectively. >> what i thought was very interesting was the explicit nature with which tim geithner said he had refused europe's attempts at greater burden sharing and to be very clear they would not put the u.s. taxpayer at greater risk and they would not have the u.s. taxpayer share any more of europe's burden. very explicit. he's always said europe had enough money to do it on its own but that really is spelling it out. >> yeah. meantime we'll take a quick break. much more testimony on the other side on capitol hill right after this. ♪

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welcome back to "squawk on the street." wee watching the testimony of fed chairman ben bernanke and tim geithner on the issue of europe and the bailout. fed chairman ben bernanke just said that the federal reserve is not considering the purchase of sovereign debt out there right now. didn't rule it out but said it's not under consideration. generally the two are defending their positions. bernanke, the swap lines that were made available to europe and tim geithner, the idea that essentially the imf is a back stop but not the primary way that europe should defend itself. it should be european money. let's go back to the hearings. >> europe, of course, has very substantial financial capacity to put behind their strategy to

resolve this crisis and, therefore, we do not see the case for coming to congress and asking for more authority in this context. >> okay. now, is the treasury considering being involved in the imf's new arrangement to borrow facility? >> we are in that already. congress has authorized us to participate in that. so, yes, when the imf draws on the new arrangements to borrow, which is like a supplemental pool of resources, then yes, like when the imf draws on its quota resources, we do participate in those drawings. as i said, we have 60 years of experience with how the imf quits itself in that context and the record supports our judgment that there's very substantial, strong financial safeguard that say protect the interest of u.s. taxpayers in that context. >> under dodd-frank, and i know you've been supportive of this, but a number of provisions in there. one in particular dealing with

the imf. when your designee engages in a decision to loan money to a country that has greater than 100% debt to gdp ratio, they have to present congress with the understanding of why they made this decision and what the credit risk is. is that being done? >> absolutely. of course there's a rich history, a long history of congressional mandates on the votes we can cast in the institution. that's one of the more recent ones and we'll meet the test of that provision. >> and it's a 30-day provision, so we would expect that within the next three or four weeks in front of congress, the decision-making there? >> the way that provision is structured, as you said, in some circumstances where the existing level of debt in the country is high, there's a higher burden on all of us to make sure that the

reforms that come with this assistance give us a reasonable prospect that it's going to be improving the path of sustainability. >> just to clarify for the record, if i heard correctly, the imf doesn't maintain a whole pile of money. they maintain the ability to draw by the members based on an allocation. so for the american people to understand, you're not coming to us for new money, but there will be distributions at times within the current limit that just occur as a result, a trigger, so that they don't sit there with all our money. but the fact is they will be taking our money, is that correct? >> you're exactly right. the way the law of the land is structured, we can't lend money to the imf without the authorization of the congress of the united states. congress authorizes the scale of the financial commitment we can make. what happens is as members ask the imf for resources and meet the conditions and can draw on those resources, then we provide a part of those resources. but again, the exposure we take

is backed by not just a substantial amount of imf gold but other financial safeguards so our interests are protected. the gentleman from virginia, mr. connelly. >> thank you, mr. chairman. welcome to both of our guests. mr. geithner, you noted that ireland and spain both ran large fiscal surpluses yet they were victim of the financial contagion. you also noted spain reduced its deficit through austerity measures since the onset of the crisis. do you believe that there's some lesson in that? i would have guessed that in order to have this kind of crisis, both ireland and spain would actually be deeply in the hole of debt. how did that work? >> you're right, i think the popular perception is the crisis in europe is overwhelmingly the result of decades of fiscal --

that's not quite right. it was certainly true in greece where following the advent of european and monetary union, greece did substantially expand how much it borrowed and the government grew the size of the economy to unsustainable levels. >> i'm going to come back to greece, but in those other countries what you saw was a very large rise in private borrowing in the banking system and by the private sector, huge rise in private debt as a share of the economy. and a damaging loss in the relative competitiveness of their businesses relative to germany in that context. and when the crisis hit and confidence eroded, their fiscal positions did deteriorate dramatically, as always happens in that context, but the fundamental cause of the crisis was not a long period of extreme fiscal prophecy. >> mr. bernanke, one of the medicines recommended here, obviously, is draconian fiscal

austerity measures. we have a new budget out yesterday that certainly subscribes to that philosophy. many european countries actually adopted that policy in terms of austerity measures. did those economies grow faster or slower than the united states since 2009? >> well, the economies of europe with the exception of germany to some extent have grown significantly slower than the united states over this period of time partly for the reasons you said. their crisis was more acute than ours. they're in an earlier stage of adjusting to it. they reacted more tentatively and with less overall force than we did in the united states. for those reasons and the scale of the challenges they faced beforehand, growth has been weaker in that context. i think the basic lesson in this context is, yes, you want to be very careful to try to balance the imperatives of restoring fiscal sustainability with the recognition that ultimately both

long-term fiscal sustainability, not just the immediate health of your economy, depends on your ability to get the economy growing again. >> one of the comparisons that often is cited by some even here in this body is that the united states if it's not careful given its debt pause tour and its lack of fiscal discipline is going to look alarmingly like greece. i personally find the comparison inindividua invidious. it is shocking what went on in greece. they didn't have macroeconomic data that was reliable. they engaged in outright deception when officials came to examine the books. they didn't know how much debt they had. they didn't have central control over their own economy at all, unlike the united states. but i'd like each of you, if you'd care, to comment on that

comparison. is the united states headed toward going down the road of greece? >> congressman, it's certainly true that situations are not directly comparable. first greece's debt trajectory looks a lot worse than ours or that of other industrial countries. secondly, the economy is a small, less diversified, less strong economy in general, less competitive. in going -- their short-term issues cannot be immediately rated by a monetary policy since they're part of the eurozone so there are very important differences. that being said, i think we all understand there are long-term fiscal sustainability issues in the united states and what we need to do is find a strategy that will credibly and convincingly put us on a path toward long-term sustainability

without doing undue damage to the recovery. >> secretary geithner? thank you. >> yes, no basis for comparisons with greece. important for people to recognize that our long-term fiscal position is actually we're in a much stronger position, and it's partly because our economy will grow faster than europe's over time. it's probably because we're a younger country. it's probably because the commitments we've made to health care and retirement security, even if unsustainable are much less generous than is true in europe as a whole. those factors and the one the chairman mentioned mean that we're in a fundamentally different position, a more comfortable position. but of course in the united states as well, we have made unsustainable commitments. our deficits are unsustainable over the long run. we have a little more time and more room for maneuver in how we address those. and we need to address them, we can't put them off indefinitely. we do so in a way that achieves

the necessary balance between helping the economy repair the damage from a terrible crisis, making sure we can invest in things we need to grow, but still restoring us some gravity to our long-term fiscal position. >> mr. gowdy from south carolina is recognized for five minutes. >> mr. chairman, is there an interconnectivity between cost of energy and economic recovery? >> yes, there is. particularly when there is a supply side element, which there appears to be, given some reductions in available supply and tensions in iran and so on. higher energy prices create at least short-term inflation pressures and moreover they are -- they act as a tax on household purchasing power and reduced consumption spending and that also is a drag on the economy. so, yes, higher oil prices, higher energy prices are a concern. >> i think the price per gallon

in europe is about double, if not more, than what it is in the united states. >> yes, because of much higher taxes. >> so can you imagine any scenario under which someone would advocate for boosting our price per gallon to european levels? >> well, there are a lot of policy issues related to that. >> i mean an economic reason, not environmental, economic. >> well, the question is whether or not there are other goals that are served, environmental goals, congestion goals and the like. >> i'm just asking from an economic standpoint. >> from a purely gdp growth perspective, i think higher energy prices would probably slow growth, at least in the short run. >> well, what word would you use to describe it if our price per gallon doubled? >> that would have -- >> catastrophic?

>> i wouldn't say catastrophic, but obviously a very negative effect on consumers, consumer confidence, consumer real incomes at the same time that it would push up inflation. >> thank you. mr. secretary, what is our debt as a percentage of gdp currently? >> i can give you the precise numbers in writing, but as we measure it -- >> i'm not kwogoing to hold you around a precise number, just something around a lawyer can understand. >> as we measure it, which is debt held by the public and we try to measure it net of financial assets which is the appropriate way to do it financially, our debt to gdp ratio is somewhere between 60 and 70% of gdp today. >> since i have been here, there has been one request for an increase in the debt ceiling. i understand there's another one coming. i don't know whether it will come before the first tuesday in november or after the first tuesday in november. i want you to assume -- and again i'm not going to hold you to the number, you don't need to

go research it. you're smart enough, i've seen you testify before enough to know that you probably will be able to answer this question off the top of your head. if this were the last debt ceiling increase you could ask for, the final one, and you had to make it large enough for all current and future obligations, what would the request need to be? >> i don't know how to answer this question. let me answer it slightly differently. it makes no sense for the country, since congress controls how much we can borrow every year, we have no independent authority to spend beyond what congress authorizes, for congress to put itself and its members through the position every six months or every year to hold a separate vote, politically difficult vote on whether they should continue to authorize us to do things they have already authorized us to do. but i don't know how to answer that question because you're talking about the future. the best way to -- >> well, the last debt ceiling increase was for how long and for how much? >> well, under the deal we reached last august, we set up a

mechanism, i believe, where congress imposed on itself three votes over a 15-month period. >> what will be the amount of the increase in november or december? >> well, it depends -- congress makes this choice and congress -- >> i just want to break in and score some comments. ben bernanke hasn't really commented on h gas prices. he said they will probably slow growth in the short run and probably boost inflationary pressures in the short run. not changing any of his longer term or medium-term forecasts upon which he bases policy and he's made such comments in the past with previous gas price hikes, but right now what he's talking about is the current gas price hike and saying it will probably slow growth, raising the question as to whether or not the federal reserve may be thinking growth is slower than otherwise thought because of the recent spike in gas prices. let's go back to the hearing. >> you can choose that amount of

time. the larger the number you create -- but again, the debt limit doesn't decide how much we can borrow. you decide how much we can borrow because every year you authorize it. >> how much debt would we need to meet current and future obligations, assuming the status quo indefinitely? >> that i'd be happy to get you in writing but i can't do it in my head. >> how about a round number? >> no idea. but if your question is, if congress authorized no additional increase in spending on revenues -- >> right. >> forever, how much would we have to borrow? >> $20 trillion? >> i just can't do it in my head. >> $50 trillion? >> i don't know. >> i've seen you work before. you're smart, you're quick. >> can we agree it would be a lot? >> it would make you uncomfortable. >> thanks. thank you, mr. chairman. >> it would make you uncomfortable. interesting transition. miss holmes-norton is recognized for five minutes. >> thank you, mr. chairman.

and thank you, secretary geithner, and chairman bernanke, for being here. every country and every culture of course is very different and it's very risky to go looking at cultures, whether it's greece or some cultural country that you perhaps admire. i do want to ask you about germany. we are -- there are some in the congress who believe that the way out of our present recession and dilemma is to impose draconian cuts repeatedly, even foresake the budget deal which was very difficult to reach, was reached at a huge sacrifice, the loss of our aaa rating. i look to europe. this was a worldwide recession. and look at the difference among the various countries.

the british seem to have adopted something of that approach, the approach to emphasize retrenchment over growth. i'm intrigued by germany. everybody's favorite example of the strongest economy in europe, perhaps the strongest in the world today. and do not understand and believe we need to come to grips with the theory that they have embraced during this recession. they are one of the few countries in europe not to cut the budget deficit. i take it it wasn't terribly out of control, but i don't know, i'm going to ask you. in fact they have added to their deficit certainly in 2009 and 2010, one of the few countries in europe to do so. i'm truly intrigued by a country

that did not abandon its working class, did not abandon its social abandon its working class, did not abandon its social net, has a national policy that is maintained of keeping unemployment low. i know they have some things that are culturally oriented like we're sharing in the rest. they also, of course, subsidize employers to keep people on the job. dwoe that in a scattered fashion. but i believe we have to come to grips with why this country continues to be a country that we identify with so closely. so i have to ask you, how has germany maintained its strength, continued to grow without cutting its budget deficit?

>> let me take a first stab at that. germany has achieved quite a bit. when they had unification a couple decades ago, there were problems with the competitiveness and efficiencies of the industries and they made a very sustained and successful effort to increase the productivity of the industry which is all to their credit. inaddition, though, as part of the euro zone, they have benefited quite a bit from that arrangement. first, because they have sort of an export market that they have easy access to and because of the economic strength of the different parts of the euro zone is probably weaker than a deutsch mark would be. which means they have something of a currency advantage in their ability to export.

>> just like we have a currency? >> i do not know about that. >> not today. all right. >> this is less permanent, i think. >> okay. >> as you point out, they also had work-sharing policies which, in this particular case, it's a question whether it's a good strategy in general because there's not movement among workers and so on. >> of course, no one claims that they were inefficient. >> in this particular case they avoided the sharp layoffs and unemployment rate remained lower. in fact, it's lower today than it was before the crisis. that, in turn, meant that their fiscal stresses have not been as great as the united states and other countries. certainly they deserve not every country in the world can be a

major exporter. somebody has to buy. so that model is not necessarily exportable in itself to every country in europe. >> gentle lady's time has expired. gentleman from ohio, mr. turner, is recognized for five minutes. >> secretary geithner? >> the title of this conference is lessons learned and focusing on lessons learned, i have an issue with europe that stems from my concern of the bailout process that has gone through in the united states. and largely as we look to what occurred in the u.s. with bailouts, i think many people, like me, have a significant concern of conflicts of interest, issues of lack of transparency, a lack of openness. mr. secretary, as we look to the

auto bailouts, you served in three different roles. you served as the secretary treasurer, looking at issues of the taxpayer dollars and exercising the ownership interests of the united states to the extent that the united states became an owner frequently in the auto bailouts. you served as co-chair of the benefit and guarantee corporation. you were not merely involved but you were simultaneously leading all of the agencies on each side of the deal on one side or the other. and throughout the ordeal, you've refused to answer questions, provided unredacted documents and people have tried to hold accountable to find out what has occurred, where the tax dollars have gone. one of those issues, obviously, affects retirees, where 20,000 people across this country lost a significant portion of their profits, the three roles of the

treasury, co-chair task force and benefit corporation picked winners and losers and our tax dollars were picked as losers. if you look at that hardship imposed on the retirees in the bailout -- >> we're in a back and forth between congressman and fed secretary bernanke and tim knee geithner. geithner saying, essential lease, they are not doing anything that would burden the u.s. tax dollars that would solve the european debt crisis. right now it's not in the cards that they would buy european sovereign debt. >> jeb bush has now endorsed mitt romney. there are major conservatives holding back and there were questions as to why they were holding back. mr. bush is calling now on the gop to unite and unite behind romney. let's take a break and we'll be back with more ben bernanke and timothy geithner after the break. omnipotent of opportunity.

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welcome back. during the break they were involved in discussion about a controversy regarding the

pensions, something that came up in june asking for more disclosure and about the bailout and the gasoline prices. >> questioning there is a consensus in the country not invested the term bailout and auto industry and it doesn't make its own cars. i would prefer to see more things made in america with

american jobs and i call that american greed. if it is true that you are the architect of this program, i'm not so sure that you are, many people, i'm sure, worked on it. if it's true that the architect of it would be carrying him on our shoulders and saving american jobs and building up the economy of our country and it's a valid one and we've learned as a country and how we're going to be better prepared in the future. very specifically, how would you

compare to the american government in the face of the crisis that we faced in 2008 chairman bernanke and secretary geithner on what was the difference in the response, what are the lessons that we've learned to make a stronger and i'd just like this particular downturn in our economy and great depression and after the great depression and be able to combat it. and hopefully the lessons are

learned. >> thank you. it was a global crisis. we worked with the europeans in order to do that. and i think relative to the history of financial crisis, given the size of the united states has been somewhat more aggressive in the financial system and our banking system and our capital and largest banks 5% something in the order of 300 and the oversight, how we got into the mess in the first

place, there were gaps and weaknesses in the regulatory system, mistakes by regulators and lots of problems in business practices that we are still seeing and we really will not have learned a lesson unless we can correct those issues as well. >> mr. geithner? >> i think the best way to look at what we did is to judge us on the results. if you look at the path of the american economy since the beginning of 2009, you compare that record against the record in europe in the united states and other countries in the financial crisis is. >> thank you, mr. geithner. my time is almost over. i would just like to put in the record, i've been researching you and getting all your quotes that are very positive about this crisis, that europe has the ability to avoid the debt crisis, geithner. and a direct quote was -- and he said that the european union has the ability to avoid a worsening crisis and your honored eu

members to speak with one voice about plans to solve their debt problems. i have no time left but yes or no, chairman bernanke, do you agree with that statement, that europe has the ability to solve this debt problem? >> they certainly have the economic and financial resources as was pointed out. economies about the same size as that of the united states. they face very political problems getting agreement among 17 countries forward. it's not going to be easy. but, yes, i think they have the capacity. >> recognized for five minutes. >> thank you, mr. chairman. let me express my appreciation to both of you as public servants for making this commitment that you have, a tremendously challenging time, not only for our nation but for the world. i'm grateful for your efforts. there are many complexing situations. one of the things that struck me

in listening to your testimony was that in your review of the totality of the circumstances in europe, one of the places where you seem to identify a little bit of hesitancy was with respect to the issue of the currency swaps that -- which we take american dollars, make them available to the european banks, as i understand it, and they are going to be paid back again in american dollars by the central bank. now, what's the real purpose behind that? is that any distinction from the imf funding and other things? it's a liquidity issue, primarily? >> it's a liquidity issue. it's not a long-term loan. the longest of these loans ever made was three months. we have our counterparty, it's not the country, it's not the bank. it's the central european bank, which we had every confidence we will repay. as i said, we have the

collateral of the currency. so we have a lot of confidence in the financial integrity of those swaps. there are many financial benefits to the states. european banks do a lot of dollars. two reasons. one is that they lend in the united states. it directly affects their ability to make loans to american businesses and households. secondly, they do a lot of lending to support trade globally, a lot of which takes place in dollars. and that exactly strengthen the role of the dollar, the principle trade currency and it's the leading reserve currency. so our interests are very much involved and at no financial cost we have achieved and the demand for those swaps is actually going down. we think that's been a successful step. the president of the ecb has made a point of saying how important the contribution to

the swaps was to the stabilization. >> you mentioned a three-month period. is this more or less a rolling line of credit that over the course of a three-month period you get repayments and then make new available credit as well or access to the -- >> yes. yes. but we approve not just the program but every single draw. so we can -- there's never a point where we can't end the program. >> what's the exposure currently? what's the totality of the exposure? >> 69 billion, of which 54 billion is to the ecb and the rest to the bank of japan. >> what's our total exposure in terms of other things by the united states to the european sovereign debt and other forms? >> as our stress test analyzed the exposure of our banking

system to the debt of the weaker countries is on net about zero. because even though they hold such debt and they've written some insurance on that debt, they have hedges in the other that protects them from loss and we're comfortable in the security of those hedges. >> where does the strength of the hedges come from -- >> it's written by a variety of stronger european institutions and we're quite comfortable where every european institution -- >> explain mehe qualification. if i'm not incorrect of your testimony, you expressed some reservation, there was one area of exposure, was currency swaps. i thought i heard that in your -- >> no. we're quite comfortable with the securities and currency swaps. >> let me just ask one closing question from either of you. we're also living in a very dangerous world. i know you run these with respect to models.

the instability that is currently existing in a relationship with iran and what may happen. to what extent may these models impacted by what may be a very problematic with regard to global unrest. can this whole system be subject to complete reordering if we have to consistent instability? >> are you referring to the middle east? >> yes. >> so we haven't done directly stress test based on a shock to oil prices. but we have done a stress test basd on a much more severe drop in stock prices. so i think a geopolitical event that caused oil prices to double is, i think, mr. gowdy perhaps is suggesting, will have effects of that sort and we believe our

banking system has sufficient capital to deal with that. of course, it would be very costly to the american economy and to thing banks and to the financial system more generally. >> thank you, mr. chairman. my time has expired. >> the gentleman yields back. the gentleman from pennsylvania, mr. kelly. >> thank you, chairman. i'd like to yield my time back to the chair. >> thank you. i'll use it briefly. this has been very instructive. before we go to a second round, originally we said we'd get you out of here before 1:00. if we get you out of here before 12:00, are you willing to stick around? good. before we go to that, a couple of quick questions. the european -- i just want to clarify, i guess. the european central bank can prevent an unlimited amount of euros. is that correct? an unlimited amount of dollars? >> yes.

but it has an inflation objective. >> and we know they have only cheated on that a few hundred times. is that right, mr. chairman? >> they've had a good record of keeping inflation around 200%. >> but they have cheated on monetary things. the fact is greece is where it is because nobody was watching what greece was doing while greece was pumping up its debt s that true? >> i would argue that was both greece and some of the other authorities rather than the ecb that was responsible for that. >> but isn't the european bank our fair ash arbitrar? who is responsible for violation by the euro zone? the debt affects the value because it's on a common currency they are agreeing to live within certain guidelines which clearly nobody was

watching when many countries ignored the guidelines, at least as of to debt. >> right. the principle was supposed to limit debt and deficit. and it was violated and for political reasons there wasn't sufficient enforcement of that. they've tried to strengthen that now with the fiscal compact that they've agreed to more recently. >> going back to my original question, then, within the obligation that we have for currency swaps, are they obligated notwithstanding political pressure to make us whole? in other words, if hypothetically the euro were to drop in half, they would have to give us back twice as many euros to get dollars. is that within your jurisdiction or would they have to go back into the interesting votes of members? >> no, that's entirely within the jurisdiction of the ecb and i have no doubt that they would honor the obligations. >> soes that's the underpinnin that these swaps are extremely safe? >> yes, sir. >> and i appreciate that.

because i think the american people have to understand that the swaps that we're talking with today are not the swaps we were talking about in the aig era. one more question that i know the answer to but i want to make sure the american people hear, secretary geithner, i think the ranking member addressed it towards you, he talked about the huge amount of debt built up in this country in mortgages. and you may have noticed that the word principle reduction comes out of the ranking member in every question. he's very good. he's very disciplined. is it true in europe that the loans are recourse and in the u.s. ours are nonrecourse. in europe they cannot walk away from their loan until they all

their resources. is that your understanding? >> i can't speak to the broader pattern across europe that doesn't mean that there is not a long chosen recourse and europe apparently is you sign like for the deficit? >> well, you did see very, very substantial increases in borrowing by households and generally in those countries. even with that slightly different system you saw in some countries very, very large crisis in debt by individuals. >> now, i went to the debt clock. that may not be the best one but mr. chairman, it's the one we all tend to use because it's on the internet and i looked and in round numbers at the time of the crisis we were at like 14 trillion. about a trillion more -- >> can you stick with this,

guys? >> that shows me that overall debt of mortgages has fallen, if you will, of a relatively small amount, certainly less than 10%. what does that really say to you from a sfintd of debt to equit ebt is down by that relatively small amount but housing values are down less and how does that make you feel relative to the security of home mortgages? and i realize that is outside the scope of the original hearing. you don't have to respond if you're not prepared. >> they spent 12 trillion less and obviously leverage in the housing sector is up. but things are moving in a deleveraging direction as home purchases have gone down and home ownership has gone down and

there have been writedowns as people pay down their debts. >> okay. i'll now take advantage of this opportunity. wait a second. to call on one last round member. >> chairman, i'd like to yield my time to mr. mchenry. >> the gentleman is recognized. >> i like my colleague for yielding. chairman bernanke, is there a current fiscal trajectory sustainable? >> in the united states? >> in the united states. >> no, it's not. >> what is a sustainable debt load for a country such as ours? >>. >> well, there's no exact number. i think that the current levels would be sustainable if they were kept more or less constant relative to the gdp. that's an important criteria. if we could, over a period of years, get the debt to gdp ratio, to some level like 75% and then over time, that would

be a much better situation. but as it stands, the cbo projections show that the debt to gdp ratio begins to explode in the next couple decades. >> so explain what happens. you mentioned this before and just to clarify, what happens at the end of this year in terms of our fiscal situation? >> well -- >> welcome back. we're in the middle of this hearing and we want to recap. the swap lines, dollar loans giving no interest rate or currency risk, the market would have taken a turn down right here when the fed chairman was saying that high gasoline prices endanger growth and may cause can higher inflation in a sense

that the fed is downshifting their outlook on growth. let's go back to simon now. >> steve, we also learned that the fed's oaks pose sur is $64 billion to the ecb. an interesting question, they believe that the private exposure to europe for the smaller countries is zero because it's banked by others. to the bigger countries and bigger banks, were they to fail? >> fed chairman ben bernanke in his testimony, simon, did provide some clues. he talked about the cbs exposure which he said was small of the u.s. banks. it was also dispersed. he did say that there is exposure to the core countries of europe in their loan books, in their assets, and finally the big concern that the chairman said were the money market funds. 35% of assets are still in europe, simon. that was an area of concern.

overall he said financial contagion is still at rest. >> steve, thank you for that. do you want to run through the markets? >> we've seen a slight downturn. let's keep this in perspective. we're seeing fractional movements. same there for the s&p 500. nasdaq is basically hugging the flat line. we should note, even amid this, the fresh record high in 250u today's session, 50 cents off of that. also, big movements in the software sector. oracle coming out with the bell, guidance issued for the current quarter pointing to the revenue growth guidance. that being short of what the street was expecting. we did see oracle pair its gains. it impacts the overall software sector. we're seeing pretty big gains. salesforce.com. vm wear higher by 3%. oil services, that is feeling a

sharp pullback. warning on the current quarter saying that the shift towards away from natural gas drilling, that is hurting its result ares. it's reducing the utilization of its fleet there. baker is down 4% and that's having an impact overall. >> baker is down 35% over the last year as people kind of expected that that might be the result. i tell you what, let's take a break. we'll continue to monitor what is happening with ben bernanke and tim geithner and bring you updates as they happen. we'll continue with more discussion on housing data and the regional banks after this short break. cannot be contained. [ clang ] the all-new 2013 lexus gs. there's no going back. see your lexus dealer.

credit suisse regional bank downgrade. good to see you, craig. >> good to see you. >> i want to tie in this interview to what we've been hearing for the past hour. bernanke specifically talking about the exposure of money market funds to the european debt crisis and funds are still invested in european sovereign debt. i wonder, from your standpoint, what has been the impact and should investors in the stocks that manage these accounts be concerned? >> yeah. so the money market industry had

a very big problem. if you go back to 2008. at that point the treasury had to step in and provide a guarantee on those assets because several funds were what we call breaking the buck. at this point in time, though, the dodd-frank prevents the s.e.c. from doing this. that's where we stand now. some of these regulations may be very negative for aum growth but as a whole they may protect the industry better and make it stronger. >> so can you just walk me through, from a layman's perspective, in terms of being invested in the european sovereign debt and how the new regulations might impact that as well? what is the connection? >> sure. so the regulators are really looking at three specific issues. the first one is having the asset manager provide a capital buffer, either using their own balance sheet or revenues generated from the fund. the second step they are actually looking at is limiting

redemption. if you buy money market fund, maybe you can't redeem all of it tomorrow which would reduce the liquidity of the fund. and the third one really is is the floating. if you're in a money market fund, it's stable at $1. they may change it so it can float. the second time i talked about will be very negative for aum growth. it could fall about a trillion from those regulations. >> craig, let me take you into what you published. you're downgrading the regional banks because you think the gains have already been made on the basis of credit quality improving and here it's really down to the u.s. economy. that extraordinary bounceback has occurred. is that right? >> that's absolutely right. when i was on your show in september, i was looking at two

thing. the stocks are up 40 to 50% from the ones i cover. >> sure. >> at this point in time, though, earnings expectations are in line, in my view, and valuations are fair value. for us to get more for our performance, we need gdp growth in the u.s. of 4% plus this year. we need the fed raising rates in 2013. we think both of thoese events are unlikely. >> the first is the relatively sharp rise that we've had in market interest rates over the last nine, ten sessions, whatever it is. the second thing is whether or not the fed is going to welcome the buying of mortgage-backed securities. which is the most important of your analysis of regional banks. >> the macro is very important now. but when i think of the fed's dual mandate of keeping inflation low and improving unemployment at this point in time, in my view i see it more likely that we get continuation of qe 3 or operation twist extension and try to keep long

curve lower. if that goes up, that causes a bunch of things that are not necessarily for the economy. i want to keep long interest rates lower for longer so we get a stronger recovery. especially before november of this year. >> all right. craig, we're going to keep it there. coming up on the program, romney's big win in illinois. is this the end of the road potentially now for rick santorum? the latest on the race for the white house right after the break. stay with us. [ male announcer ] what if you had thermal night-vision goggles, like in a special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.

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a check. of the market two hours into trading, the dow is almost at the 1400 mark and nasdaq at the ground mark. jeb bush announcing that he's endorsing mitt romney for the presidential candidate, republican, i should say. romney has, by far, the most endorsements. existing home sales decreased .9%. numbers dipped slightly but still recorded the strongest february in five years. and we continue to watch shares of starbucks and green mountain after the two companies

announced an extended partnership. starbucks coffee and teas will be available which is now up 8.25. all morning we've been listening to tim geithner and ben bernanke talk about the united states and what was happening there. while that was happening on capitol hill, there was quite a course reminder of how precarious the situation was in europe. let's bring in bob pisani who has been watching the mark debts all morning. >> we did have a drop there. there is a tendency to say there was something that mr. bernanke said. i'm not entirely sure that was the case. he did make comments about gas prices impacting the economy. put up the s&p intraday. there are other factors associated with this. this is a very small am pli tud. it's not big moves here. you want to look at how it goes up and down but it's not particularly large. there are concerns about europe

recently. so let's put up something on how the european market is doing. the euro has been moving down all through the mid-morning and that's been affecting europe in a very noticeable way. the dollar has moved up. european banks are on the weak side. there's not a lot of news out here. if you're being looking for it. not a lot by and large. credit agricole and they have been moving up. they went away for a while. nobody talked about it. slowly but surely they have been creeping to the upside. this is the highest level. the highest level since going back to february. it's starting to get back on people's radar and, again, there's no particular news out today that's making people talk about it. it's slowly been creeping up for several days now. in the meantime, if you look at our markets, sectors, the risk on trade. the big leadership has been in

financials. energy has been down now and under pressure for several days. finally, i want to note the s&p 500. we're nearing the end of the quarter and the important thing is pension funds and s&p up so much, if you're 60/40, stock to bonds and suddenly 65 to 35%, you're going to have to sell some equities and buy treasuries. those are some of the big institutional funds and that may be happening here a little bit as well. you can't quantify that. my point is, it's been real estate a remarkable run and i'm not sure all of this is remarkable right now. >> one of the ecb governing councils was that spain is still suffering and whether madrid

will follow through with italian-style reforms. so it's not debt as an issue. >> the last two days i said route for mario because he's the leading edge in europe. he's pushing through a bill. he's trying to enter a bill into parliament that would change at least labor laws to make fire people. big fight going on in italy. route for mario. >> bob, thank you. now let's head to rick santelli who is in chicago. rick? >> we're just kind of asimmulating and accommodating all of these moves. since ben bernanke and geithner have been talking, bob thinks it's a coincidence. we've seen the equity markets move a bit lower. do you think ben bernanke had anything to do with it and, if yes, what do you think is going on? >> when bernanke talks, especially nowadays with the

markets being so thin as they are not so much in treasuries but definitely in equities, that where the next trade is going to get financed is directly impacted by what he says. is that going to come through? operation twist ending, basically a trade that they can get in front of it a little bit? it makes some interesting dichotomy. >> and you mentioned quarter end. we talked about that. it's also year end in japan although the companies say, forget about it. it's not going to be a big deal this year. let's switch gears. everybody has been talking about the allocation trade. the fed meeting on the 13th moves from just over 2% to in the ten-year case, 40 basis points. on the 13, the dow jones is actually higher than it is now. where is the asset allocation? what am i missing? >> again, trying to push in front the end to operation twist. we're coming to quarter end.

let's take that money and go home. >> if i'm a trader and i see, since this allocation happened, equities at the same level and treasuries moved higher signing treasuries off, does that mean there's one or the other that has to be moving in the weeks ahead? does that mean treasuries are going to go back to 2%? what do you think? >> i'm on the 2% or lower with the treasuries, because of the 2% in europe which never went away. we all know that. italy with new debt out there. >> spain? >> spain, portugal. >> greece really hasn't changed. are they going to be able to imply -- >> let's look at another country. chancellor, osborne, in the uk. not would it be at this point, he wants to stick with austerity, a buzz word for getting our fiscal house in order but what he said after that makes me nervous. he said we're going to fix it by doubling our exports. we seem to hear this from our president, we see it in china. so basically is this another

better thy neighbor happening? they are going to double the exports to fix what is wrong? >> who is the buyer of last resort? you can only export it in one direction, in so many different directions. if you're going to circle around, you're not selling anything. >> i would think maybe shorting the pound against the dollar might be a great trade when chancellor osborne is talking about doubling exports. what do you think of that trade? >> that's a 4.7 market. that shift is a little bigger than an aircraft carrier. we're going to be -- >> a lot of ways to go on this. i say watch the british pound versus the dollar. back to you, melissa lee. >> thank you very much, rick santelli. of course, 2012 has been the year in which we had a huge rotation and as a result utilities are the only sectors now read so far this year. worst performing sector down 3%. what is this heatwave actually

meaning that utilities will rebound? greg is an analyst at isi group and he kindly joins us now. what is the analysis at the moment where we stand in our sector? >> utilities were a massive outperformer last year driven by sector rotation into what is considered a defensive asset class and this year almost two-thirds is evaporated as people have rotated into the market. also, higher interest rates have a damp pending effect for utilities and a large portion of market cap that has direct exposure and as you know, natural gas prices have a precipitous decline. and this hot weather we've had is actually -- we've had a pretty mild weather. that's had a dampening effect on electricity demand. those three things basically

have been factors in driving the underperformance. you know, you'd have to see this hot weather really drive through into the summer. and then you'd see, in certain states, like texas where, in particular, you have a very tight power market. certain companies could stand to benefit a company like nrg. >> just those two? are those others on the potential buy list there? >> well, if you had a hot summer in the mid-atlantic region, you could see prices rise there to reflect that. another company with a buy rating could be first energy. generally speaking, though, utility investors don't capitalize big swings in weather-driven demand into the stock prices. they look more at a longer term structural earnings power. >> greg, i'm curious. the other side to the nat gas story, nat gas being so cheap,

it's derailing some of the revival that we've seen in nuclear energy. are there any companies caught off guard in that they are on their way to building out new nuke plants but that's not the way to go right now. the new way to go is nat gas because it's so cheap? >> that's a fantastic observation. there is only one nuclear plant being constructed in the u.s. by a southern cop in georgia. other than that, there is no economic rationale to start construction on anything new. outside of texas, frankly, we have excess capacity because we haven't fully gotten back to the projected levels of demand. but i do think that when we get into 2015 and 2016, especially since a lot of coal plants are going to be forced to retire because of new federal rules from the epa, you'll see a lot of new gas plants get built in this country. one of the interesting phenomenons is it does dampen customer rates.

the last several years customer bills in the u.s. for electricity have actually been flat to down. even though we've had a lot of capital invested in the sector, simply because natural gas prices have declined. we think big ben fisheries of low natural gas, include pinnacle west in phoenix, arizona, have a robust capital spending plan and customers see very modest impact on rates because they burn a lot of gas. >> greg, thank you for your time. have a great afternoon. >> thank you. straight ahead, the kudlow caucus is in session. larry kudlow himself makes a return to post. we'll talk to larry kudlow right after this break. [ artis brown ] america is facing some tough challenges right now. two of the most important are energy security and economic growth. north america actually has one of the largest oil reserves in the world. a large part of that is oil sands. this resource has the ability to create hundreds of thousands of jobs. at our kearl project in canada, we'll be able to produce these oil sands

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♪ all new technology ups brings to me, that's logistics. ♪ hi, welcome back. goldman says good-bye bonds, hello stocks. find out how our traders are playing it. plus, meg whitman's latest shake-up at hp. smart move or a sign of desperation? and we're showing you how to gain the oil trade. that's at the top of the hour. now back to melissa on "squawk on the street." >> thank you, scott. wti is up by 1.1% right now compared to the increase in just about a quarter of percent in

brent crude. sharon epperson in west texas, we do have some calls out. we'll look into that. we did have a drawdown earlier this morning. the move occurred well after that. we'll fill you in as we get more details. >> let's talk about where we are with the gop presidential nomination. mitt romney having a great result beating rick santorum by 46% to 35%. and within the last hour, getting the endorsement from the former republican governor of florida, be jeb bush himself. now that romney is back in front, what does that mean for rick santorum? let's bring in john harwood who is live in chicago with the details after another busy night, john? >> simon, it's pretty significant that jeb bush came out and endorsed mitt romney after holding that endorsement for some period of time.

that means that the pressure beginning to mount on rick santorum. he needed to break through against mitt romney. couldn't do it. lost by double digits. it now appears that he cannot have the capacity to topple mitt romney in a place in the midwest. he lost in michigan, ohio, now in illinois. very different delegate map facing him. which is why mitt romney at his acceptance speech last night -- or his victory speech, began turning immediately to the race against president obama. >> tonight was a primary but november is a general election and we're going to face a defining decision as a people. our choice will not be about party or even personality. this election will be about principle. our economic freedom will be on the ballot. >> now, even as thessure mounts on rivals like rick santorum and newt gingrich, we heard from newt gingrich this morning saying jeb bush was another establishment endorsement for mitt romney

along with george h.w. bush and bob dole, who the latter two gentlemen were not revered in the tea party at the moment. so he may keep going. rick santorum may keep going or a while but once the air comes out of the balloon it becomes more difficult to attract support, more difficult to have any significant primary victories that pose any chance of them winning the nomination. >> john, this is not a done deal, though, shortly? >> simon, i think it is a done deal it's like a game where one lead establishes so substantial and have proven a best shot of the team. where is rick santorum going to beat romney where in essence they turn over the table of calculations on this campaign? that's what he had the opportunity to do in illinois. couldn't do it after failing in michigan and ohio. rick santorum could win that. there are not enough deep states

to prevent romney from winning the election and then the primary turns to wisconsin, another midwestern state, maryland, and then to the northeast even if santorum wins pennsylvania, which is his home state, difficult to see him prevailing in new york, connecticut, new jersey. >> john, interesting. john harwood there in washington. >> i want to bring in larry kudlow to dissect everything from the keystone pipeline. it's a done deal. mitt romney is a done deal. >> it is a done deal. i was giving a drum roll on it. romney's speech last night and his speech a couple days earlier at the university of chicago really is emphasizing free enterprise, business, business creativity, business innovation, and economic freedom and for a free market guy like me, it disturbs my soul. i want him to stay on message.

>> john harwood's message was spot on. i agree. and the jeb bush thing, it's almost like jeb bush crowning romney in a symbolic way because jeb has huge stature in the republican party. >> it is interesting that some of the seemingly conservatives held back for so long. >> yes, they did. including jeff. including mitch daniels. wouldn't surprise me if a bunch of those guys i didn't hear anything this morning, but steve liesman's interview yesterday and bernanke's speech to the kids at george washington the

depression, he keeps bringing up the depression. the first dip in the early '30s. as far as bernanke is concerned, interest rates stay at zero. no ands or buts about it. >> effectively he warned against the risk of raising rates too early. >> i think he has the 1930s and the double dip -- >> you better believe the fed has 1937 ingrained on their brain. you can look at japan in the late '90s and the mistakes that they made of tightening too quickly. absolutely that's what is on their mind. >> for my two cents worth, be bernanke is much more smarter than i am. remember, the governor raised taxes hugely and that had to do with the second downturn. >> before the qe, it's not whether you raise -- >> there's a comparison to the great depression.

the european central bank is more to fit that mold and i want to call attention to something that we're seeing today which is even though we've seen this tremendous easing, the liquidity doing what they have, you're being looking at the ten-year, part of the market the reason is t has turned around is the focus on spain that despite everything that's happened, there still has not been a resolution -- >> you cannot characterize the ecb as anything other than massively accommodate tat the moment. >> they are in qe 2. they should have started earlier. >> timing is everything. >> you're right. and it would have been easier had they done it a year ago but trichet. >> it's different when you're talking about the u.s. and euro zone. the euro zone is an entity whose very existence is being called into question here. if anything that trichet did here, it's that there are

fundamental problems with this that need to be resolved. >> this is kudlow's take. as long as the dollar stays up and steady, bernanke can get away with the zero interest rate policy. if the dollar starts really falling and all these commodities come up even more and oil goes to 150 and the inflation rate goes back to 6 or 8% like it did a year ago, he's in trouble. as long as the dollar stays steady, he can get away with the zero interest rates even though the economy should merit some normalcy in rates. he's not going to do it. >> i am loving your show at the moment. 7:00 every evening. >> must see tv and it's an honor to having you on this program. >> one other thing, we're talking about the dollar and the commodities in oil. i don't know why it hasn't gotten more attention. obama tomorrow -- >> yes. >> in curbing, oklahoma, is going to do what he should have done three years ago.

he's finally going to give a permit to at least the lower half of the keystone pipeline which will give the excess oil from kcushing. if they had done this three years ago, it's like a governor giving a fishing license. don't know why he didn't do this. but apparently it's coming tomorrow and that might help. life will look a little better. >> look, if there's any reason why life is better, ironically emerging markets are worse. it's worries about china, et cetera, et cetera. >> you know what, the world economy, because of world business, is better than you think. >> on that note, we will leave it there. >> how about that? >> good to have you on the program. >> we'll see you the 7:00 for the kudlow report. starbucks gathering in seattle today. we'll talk to one of the shareholders live after the break. stay with us. [ tom ] we invented the turbine business right here in schenectady.

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welcome back. shares of pharmaceuticals with headlines in the prior segment but lots of farm suit suit cals close to making a bid for $7 billion. what is unusual is the inquirer showing a pop on this. starbucks will start their annual meeting with shareholders and not all of them are feeling that perky about the coffee

maker. pushing the visits to be more socially responsible, what is the cutting edge of where you are? >> well, we are asking the company through harrington investments who has filed a shareholder proposal to really bake environmental sustainability into the core of the company's operations. i really want to celebrate but the company has made wonderful strides and its aspirations are extraordinary and what will happen -- the question is, what will happen really when the founders are no longer here to really push that agenda with such vigor. >> so what difference do you hope to make there? >> well, the difference would be having a mechanism by which sustainability is really infused throughout the entire process and thinking of starbucks. it is a very large way now but only i think because of the extraordinary leadership of howard schultz.

the company is doing good and could do better as it sets itself up for long-term success. >> why do you -- isn't this kind of the softer end of the market? >> actually, we speak to all manner of companies from chevron to starbucks and all in between. >> and i want to switch a little bit -- i understand what you're driving at for starbucks on the socially responsible front. but in terms of the fundamental picture for starbucks, their latest announcement to start selling single-serve coffee brewers, is there any concern that they may be moving to an area of business that might not be as high margin as other parts of the business? they are selling coffee brewers, a commodity, essentially. >> that's not been a particular concern of mine but i'm not the analyst not tracking that part of this conversation. >> okay. so nice to meet you. thank you very much for your

time. >> taking a look at the markets once again, we have a little bit more detail on that spread, that spike in wti. putting that spread up again, wti moving up much more slightly than brent. we're hearing from traders. larry had mentioned the fed making an announcement to fast track part of the keystone pipeline. wti ahead of that announcement. that could be part of the reason. >> i would think they would attempt to move it down. if larry's presumption is right -- >> because oil has some place to go. >> i see. okay. >> i would think that would be the -- >> what do you have on "fast money" tonight? >> jeff kronthal will join us. and that is a fast money