good morning. welcome to "squawk box" here on cnbc. i'm andrew ross sorkin along with joe kernen, mandy drury is here and becky is back on monday. jpmorgan is expected to report quarterly results at about 7:00 eastern time. analysts are looking for q2 earnings of 70 cents a share. that's going to be on revenue of $21.8 billion. ceo jamie dimon going to be holding that conference call with analysts at 7:30 eastern. "the wall street journal" reporting that three employees from jpm's chief investment office have now left the bank officially including the famous london whale, bruno iksil. the company is expected to claw back compensation from all three in addition to ina drew who ran that chief investment office. she, of course, resigned back in may. banking analyst dick bove will join us on this in just a moment. china's economic growth

slowing to a three-year low in the latest quarter, expanding by 7.6%. government stimulus apparently couldn't offset weaker exports and consumer spending. and in europe, moody's downgrading italy's government bond rating by two notches to baa-2. we'll have an analyst from london with more details including elements of another key debt auction. first, mandy is going to bring us up to speed on some of the new twists in that libor scandal. >> good morning, everybody. treasury secretary tim geithner pressed the bank of england in june 2008 to make changes in the way that libor was set. at the time geithner was the head of the new york fed. he sent a private e-mail to irvin king recommending six ways to enhance the credibility of the key interest rate benchmark. among the ideas, reporting borrowing costs for the calculation of libor to attest to the accuracy of their rates.

in other news, 12 global banks that have been publicly linked to the libor scandal face as much as $22 billion in costs. the paper cites morgan stanley estimates. the costs would come from combined regulatory penalties and damages to investors and rparties. as for corporate headlines, let's get back over to joe. good morning. >> okay, mandy, thanks. usairways is now a creditor. it says it supports the company's request for more time to draft a reorg plan. elsewhere, johnson & johnson and shareholders reach a tentative deal. shareholders are suing management for not fixing problems faster. they say management gave top executives on the board plausible deniability in their words as problems worsened. and the maker of angry birds has a new hit. rovio's puzzle game amazing alex is the number one paid app. analysts have valued rovio at $6

billion to $9 billion. speaking of video games, npd reports that industry sales dropped 29% in june from a year ago. accessory sales did rise slightly. i would have -- i would have gone instead of with the ackman p&g story. >> it's whether they would able to effect change where a company owns -- >> he owns $2 billion. you know, it's kind of -- >> it's sexy, it's big. and this will be his biggest effort ever. >> well, you have to -- you've got to hand it to him that he's feeling his oats to think that you can effect change. >> we did this at target. you know, he's tried before. there are certain times he's tried. >> he probably wouldn't want you bringing up target. he probably would not want you bringing up target. >> that's in the category of big and challenging. >> right. i mean, target's big. it's $39 billion.

it's not $175 billion. >> but that's why i'm saying -- >> $175 billion. i take this a little personally. >> why? >> i'm from cincinnati. >> ah. >> it is cincinnati. it's kind of like the reds. it's got the dolly parton -- you don't know the dolly parton building. >> i don't. i'm going to guess -- >> it's two weird -- the architect wasn't thinking when he built this thing. >> i think he probably was thinking. he's a guy. that's how he was thinking. the dolly parton building. >> like salt out in new jersey. what else do you want to add about p&g? >> i want to talk about libor. i have the e-mail. >> let me see that. >> i printed out the e-mail. >> what does the e-mail tell us? >> from tim get neithner. we're into the summer 2008, starting to get into the middle of the lehman debacle. number one, strengthen governance and establish a credible reporting procedure. so he knows. >> right.

>> number six, eliminate incentives to misreport. it's right here. >> why has it taken so long to come out? >> you know what this is like? excuse me for the analogy. this is like the sandusky scandal. i kid you not. it's a little different, but hold on. just hear me out. >> a little different? >> i'm getting uncomfortable. >> yeah. >> hold on. this is one of these situations where people sit on information for years because they don't know what to do. and i'm sure there's going to be e-mails inside the bo, where they're e-mailing each other every day day, what should we do? the whole system's going to come apart. i know it's a completely different thing. you get into these situations where you have people, and they think that their whole world is going to fall apart if they don't -- if it gets out and they don't really do anything about it. and now you have tim geithner -- >> don't put anything in e-mail. don't ever put anything in writing. >> that's another moral of the story. >> you mow what the "e" stands for, evidence. >> evidence, absolutely.

>> what i don't know, when you read an e-mail like this, does this exonerate tim geithner and say look, he's on the case, he's saying i'm here, i'm making recommendations, or do you say to yourself, ah, he knows about it. he tried to deal with it, but the boe didn't deal with it. therefore did he have some other responsibility to come forward in a more meaningful way? >> it seems like is there accountability on his part that needs to be taken? >> that is the question of the morning. we're going to be getting transcripts, by the way, later today from telephone calls between members of the new york fed and the boe on this very issue. so apparently tim geithner is not going to be among those transcripts. i don't know if his name is going to specifically be mentioned in terms of what he knew in those transcripts. some of the reporting including some from deal book and i believe also "the wall street journal" suggesting that his name is not included in that. it's going to be a very big issue today and obviously this story is not going away. >> yeah, we're going to talk a

lot about it all day with our guests. meantime, let's get a check on markets. let's look at the futures first up. it looks as if we could have a stronger open. this will be good, folks, because recently we've had a lot of down days. as for oil prices, let's look at the oil board. flip over the board and take a look. energy prices for wti currently sitting at 86.79. brent at 102.21. the ten-year note, meantime, is currently sitting at 1.479%. of course, we're sitting around record lows. the dollar board, flip over the board to dollar/yen, 79.21, euro/u.s., 1.21. of course, the surprise downgrade of italy certainly not helping the euro either. kelly evans standing by with the global market report this very morning. miss evans, miss evans, we were just reading this e-mail, going through it. do we exonerate mr. geithner?

do we say that mervin king was diddling? what do we say? >> andrew, i've said all along that regulators are shooting themselves in the foot with all this libor stuff in the first place. basically what they've done is slapped record fines and drawn the global public's attention to an issue that in some way they had dropped the ball on themselves from the get-go. and it's not clear what replaces this important benchmark going forward or whether any new transaction-based benchmarks would introduce volatility in the financial system and then sort of have adverse consequences. that way at a time when they're super worried about short-term funding conditions. that's my libor rant of the morning. i suspect the more people learn about this, the more they'll realize there's a degree that they known about these problems should have reacted. we'll give you a sense of what's going on this friday the 13th. there is a better tone to markets. the unlucky date notwithstanding. outpacers -- there are more

advancers than decliners this morning by about 4-1 ratio. we're up 0.6%. there's varied performance. the ibex 35 has been up and down. it's currently higher by 0.05%. this is probably the one to watch in terms of a gauge this morning. ftse mib down. we'll come back to that. xetra dax up more than 0.75%, the if the is 100 up by 0.6%. the reason why people are focused is not so much on the moody's downgrade last night which in some ways reaffirmed what investors had already priced into the region, but also on this auction it had this morning that it went off relatively well. three-year paper went off an average yield of 4.65% which is still unsustainably high perhaps but better than the 5.3% from a year ago. 5.991 is the level that the ten-year is at now. we were over 6% before the

auction. now we're drifting back up towards that level. a sense of what we're doing across the curve in italy. the five-year. the three-year, this, of course, the one in focus for that auction. and the two-year still above 4%. a quick look at what's happening across the german curve. we're seeing pressure not just on some of the longer-term maturities but the shorter-term ones where we're looking for safety for paper. and it may have something to do with the european central bank cutting its deposit rate last week that went into effect this week. negative 0.04%. that's the yield on the two-year. austr austria's turned negative as well. as we start to think about what's happening across the global financial system, cnbc's martin sung did sit down with christine lagarde, asking her about the potential for greece to maybe need more help and a second restructuring of its debt. here's what she had to say. >> it is way premature to discuss extension, to discuss additional financing and, you know, first of all, it's a new

mindset. >> way premature, we shall see. and with that i'll send it back over to you guys. >> kelly evans, thank you for that report. we're probably going to come back. we're going to talk more about this libor scandal later. back to our top story. it is jpmorgan. we will get earnings in a little less than an hour. dick bove is from equity research. dick, thank you for joining us this morning to help us sort through what we should be looking for and what we should be expecting. give us just your top line, bottom line on what we need to know when 7:00 rolls around. >> well, i think the most critical factor that people want to know is, has this thing been curtailed? in other words, is it going -- whether it's $5 billion or $9 billion, is that the maximum amount that we're going to be hit with? because if it's curtailed, then it becomes ancient history. if it isn't curtailed, in other words, if there's an expectation that we'll see a couple of

billion a quarter for the next couple of quarters, then we've got a real problem. >> so what's acceptable to you? i mean, right now the $5 billion numbers out there, the way i've been reporting it, we're looking at $4 billion boxed up today with $1 billion outstanding, could go up, could go down. does that work for you? is that too much? too little? what does it say about the firm? >> i don't care what the number is, all right? in other words, let's think about jpmorgan for a second, all right? it has $19 billion in earnings last year, which means it earned more money than any other bank in the world, and there's only five companies in the united states that earn more money than it in 2011. let's assume it loses $9 billion with this scandal. that $9 billion deducted which is a pretax hit deducted from earnings would mean the company will earn as much as general electric earned this year. the company's dividend is up 20% this year. it will be up 8% to 10% in each of the next four or five years. stock is yielding 3.5%. you know, it's something at a

30% discount to book value about a 2% or 3% discount to tangible book value. i mean, i don't know why you should get so excited about this $9 billion. what i really want to know, when i look at earnings of jpmorgan, is what is its six operating divisions doing? are those divisions continuing to increase market share? are they continuing to generate the type of revenues that earnings which will lead to a $20 billion to $22 billion next year in terms of the company's earnings. and if i think that's the case, what do i care about this $9 billion? what i care about is, am i going to get $20 billion in earnings next year? am i going to get my 10% increase in the dividend? if so, i really want to be buying this stock. >> and one other quick question just about the quality of earnings. that's going to be the big question today related both to the earnings we see plus how they box up this bad trade in terms of which piece of it. what should we be looking for when we're looking through the release, when we're trying to

hear from them today in terms of the trade itself and the volatility related to it and what they're going to say is still left over? >> yeah, well, see, you've got the right point. what is the quality of earnings? in other words, you have to take a look at what the six operating divisions are doing in order to determine if this company is showing any advancement in its earnings from, if you will, core sources. what you should expect to see is some improvement in mortgage activity because of this harp 2 program, a big increase inity lending to businesses because, you know, overall it's up somewhere between 14% and 15% industrywide. you should expect to see some improvement in the asset management divisions results because that is, you know, lagged a quarter. you expect to see a horrible result from their investment banking operations and their trading operations. but if the core business is showing an increase in revenues from most of its six divisions, that's what's important. this trading loss is not that

important. >> dick, this is mandy joining in. you said that your inclination would be to buy this stock particularly, but this is just a one-time development. what would make you concerned? what would make you not buy this stock in terms of the potential things that could come out today? >> well, if they tell us that, number one, you know, that they have basically not been able to curtail this loss, that basically they're going to have to wait till 2014 or 2017 when the two tranches of this ig-9 run out, that would be really negative, very upsetting. if they tell us that they are a participant in the libor scandal, in other words, that they've been sending incorrect information to british bankers association concerning their cost of funds, that would be very upsetting. if they tell us that, you know, the economy has slowed down to the point where loan losses will now start to creep up again because, you know, economic activity is going to be very weak for the next, you know, 6 to 12 months, those are three

reasons to get away from this company and to sell that stock. but if they don't tell us that, you know, this is dirt cheap stock. >> dick bove, thank you for joining us this morning. >> thank you. coming up every morning there's a new headline out of europe. our next guest is an economist from the osprian school. we'll find out how pedro swartz would fix the euro crisis. he got very famous over the weekend with a debate in spain with the esteemed paul krugman. first, though, soccer star the esteemed david beckham finally breaks his silence about being left off the roster of britain's olympic soccer team. he worked to lure the game to london, yet left off. >> with the talk of me possibly performing, it would have been a very proud moment for me. everyone knows how proud i am of representing my country and to do it in my hometown on such a

big stage would have been incredible. so, of course, yeah, i'm disappointed. but, you know, life goes on. ♪ ♪ i want to go ♪ i want to win [ breathes deeply ] ♪ this is where the dream begins ♪ ♪ i want to grow ♪ i want to try ♪ i can almost touch the sky [ male announcer ] even the planet has an olympic dream. dow is proud to support that dream by helping provide greener, more sustainable solutions from the olympic village to the stadium. solutionism. the new optimism.™ ♪ this dream

you are capitalist. is there some type of modification to capitalist? what would i call it? >> no, i'm a free market welfare state guy. i believe in a free market. >> that was nobel laureate "new york times" columnist paul

krugman earlier this week on "squawk box." pedro schwartz injos us from madrid, a spanish economist, a former member of the spanish parliament, currently serves as professor of economics at san pablo university in madrid. i don't know whether you knew that you would go viral on this. and i don't know what the spanish word for viral is, professor, but the debate where you're, i think, giving a pretty thoughtful critique of professor krugman's book has been seen millions of times, i think, by now. did you have any idea that a boring economic debate would become so popular? >> no. usually i teach 25 to 30 people. not tens of millions. but there you are. >> you gave a lesson to one person in particular, one notable person. i'm going to try and sum up for our viewers exactly what you

were saying. keynesians got us into this mess, and thousand we have now sacrifice our principles so that they can get us out of this mess. i've watched the tape, and you were basically saying a huge increase in aggregate demand, because of the low interest rates engendered by the euro, caused this to happen. and now any attempt to fix it shouldn't involve the root cause of the disease. >> well, exactly. you have a disease that now we know was caused by very low interest rates. there's an inverse relation between interest rates and asset values. and that's what happened. and now they want us to do it again. i think that growth -- and i told that to dr. krugman -- growth doesn't come from the demand side. it comes from the supply side. and he wouldn't take that. he thought that he knew the answers. what i told him and didn't like,

that i thought he was a great international trade economist. and i used his textbook to teach international trade. but sometimes he spoke about what he didn't know. and this was one of those times. >> that's not uncommon for some nobel laureates. in fact, i think we have -- you're pretty eloquent in that, and i'm sure you've heard it before, but we're going to run that sound bite right now, professor. we have it ready. >> often nobel prize winners are tempted to pontificate on matters that are outside the specialty in which they have excelled. and they have this mantel of authority whereby whatever they say, whether it's sensible or perhaps a bit utre, is accepted with resignation from some and enthusiasm by others. >> now, that -- i don't know whether that's insulting or not. i think i was even more insulting. i actually referred to it at the

beginning of the interview, i preferred to professor krugman as -- i didn't know what word to use -- i used union cocorn. i found out that's unicornio in spanish. i learned that a mythical creature that i wasn't even sure around was still advocating keynesian fixes for a keynesian problem. and i didn't know it was such a pejorative, but he took great offense to what you just said. and i don't really really know whether he was able to carry on in giving you a logical rebuttal of your points after that. he was so -- oh! go ahead. >> he, in fact, didn't give me a rebuttal. he said i had attacked him personally. i had not because that's not the way we do at university. he was very offended but never said -- never answered my main two points. one is that japan, for 21 years now, has been using that kind of

aggregate demand expansion policies. and they haven't worked. 21 years, no less. now they have more than 220% of debt compared with gdp. and then the other example was spain. my goodness. the previous prime minister spent in 2008 spent no less than 36 billion euros to try and keep the economy growing. and look where we are now. i think that those two cases are ones that he should look at. he knows about japan. but never answered. he is very wrong in the kind of policies, the kind of stimulus he's asking us to do. i think that money should be taken away from the public sector, and it would flow into the private sector and then would grow again. >> you know, professor, there's a piece in "the journal" today entitled "spaniards reel from planned budget cuts." and one quote this, this time the austerity are actually

touching the vital organs of the economy. and it's tough. and you know how tough it is. and there is the notion that if you go too far here, that any prospects for growth whatsoever, that you're cutting off. so you combine the effects of austerity and the pain people are feeling with the nobel prize, and it's very easy to embrace that type of ideology at a time like this. i mean, you can see how it happens, right? >> well, indeed. but it's not the vital organs that are being cut as "the wall street journal" apparently says. it's the organs that are sucking life away from the economy. what is being done is to reduce public state expenditure, to reduce, to have the autonomies that is provinces, balance their budgets, and their indeed increasing taxes which i don't think they should. i think taxes -- tax hikes are

not good for growth. you need to do something else. but the organs now being cut are not vital. they've been killing us. and that's what i held before krugman, and he didn't agree with me. >> sometimes, you know, i'm amazed that the austrian school, that economists like you actually came from europe. you must not be very popular. can you travel, or does it have to be incognito at this point? >> absolutely. well, i'm austrian in a way, but i'm also a disciple of excellent economists such as milton friedman with whom i did a lot of work. i think this classification, it's orthodox economics compared with keynesian economics. and keynes had a problem which is that in his model, workers were not rational. they only obeyed -- they only looked at nominal wages. that is, the amount of money

they got. they never looked at real wages in that model. >> all right, professor. >> and indeed they do look at real wages. >> we'll have to have you back. i wish you could come over to the states. thank you very much for your time this morning. thank you. laces? really? slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug. i have club passes. [ male announcer ] get the mileage card with special perks on united, like a free checked bag, united club passes, and priority boarding. thanks. ♪ okay. what's your secret? [ male announcer ] the united mileageplus explorer card. get it and you're in.

this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs.

a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. ♪ eyes wide open ♪ with our eyes wide open i am a sloucher. >> the worst sloucher. >> good morning. we need braces. >> braces on our backs. >> i need a couple of different braces. good morning. welcome back to "squawk box"

here on cnbc. i am joe kernen along with andrew ross sorkin and mandy drury. becky will be back on monday. today's top stories, jpmorgan expected to report quarterly reports at about 7:00 a.m. eastern. analysts looking for earnings of 70 cents a share. ceo jamie dimon will hold a conference call with analysts at 7:30 eastern. "the wall street journal" reports three employees of the chief investment bank have left including the big fat guy, the london whale, bruno iksil. he's not, though, is he? >> he's not. he's a thin little man. >> exactly. the company is expected to claw back compensation from all three. >> he's going to get picked up by some hedge fund in ten seconds. who wouldn't juan the london whale to work for you? >> exactly. >> great pr. >> how about ina drew? >> might be a little -- might take a little longer. but she's a very talented woman. i imagine all those people will

ultimately land on their feet. joining us on the "squawk" news line with a jpm preview is anthony paulini, director at raymond james. good to have you on the show. anthony, what are you expecting? >> we're actually expecting a positive catalyst from this announcement. i think the earnings are going to be much less important this quarter. where we're slightly above the street. the street has been coming down as far as their eps number. the key is going to be this cio incident and whether or not jpmorgan can make the street feel comfortable, that they're on top of the situation and begin to restore their credibility. >> you know, we were speaking with dick bove just a moment ago. he was saying that his inclination would be to buy this stock and that it's probably just a one-time development. obviously, we just got to wait and see. would you agree with that? i think you've got an outperform here. >> yeah, without a doubt, if you're going to trade the stock,

certainly i'd want to be on the long side before the announcement. and you know, if you're a longer-term investor, this is a great company, trading at an attractive valuation that is gaining market share globally. >> and you expect them to rheauresume their buyback later this year? >> it's going to be tricky. i think it's much more of a political/regulatory issue, not a capital issue. if i looked at their capital base and their earnings power, certainly jpmorgan should be buying back stock now. we've modelled the buyback beginning in the fourth quarter of this year. >> anthony, real quick, on the trade itself, in terms of looking at the quality of what's going to be left over, so they're going to probably announce a box around. they're going to announce a certain loss and they're going to say well, we still own some of this stuff. i don't know if they'll say this is the best stuff, the worst stuff, what have you. how would you evaluate that component, that piece of it? >> difficult to say. what we're looking for now is 70% to 80% of the trade being

unwound. the remaining, you know, let's call it 20%, 30% of the trade does not have material loss potential. and in fact, could result in a gain. part of the problem jpmorgan had is that other traders became aware of their position and were actually, you know, pushing the trade against jpmorgan. >> once you get down to 20%, 30%, arguably it would stabilize because the supply in the market's a lot less, no? >> exactly. >> just real quick, anthony, before we let you go, do you think that they were a participant in the libor scandal? >> that's difficult to say. you know, i think the big issue is going to be whether or not there was collusion, whether or not banks understated libor is one thing and whether or not they colluded is another. i think collusion would be very difficult to prove. you know, i wouldn't be surprised if there were a few hundred million dollars in fines for the large u.s. banks similar to what we saw for barclays.

but it's the overhang of the situation. we'll have to see how big it gets from a political/regulatory standpoint. >> a lot to find out. thank you very much for your thoughts. anthony polini. now to the broader markets. j.j. kinehan joins us from the cme. hey, j.j. what are you feeling in terms of this pullback? how much more and what are the metrics telling you, the vix and other things that you follow in >> well, it's kind of interesting. you guys just were talking about jpmorgan, one of the activities we've seen a lot over the last few days in jpmorgan options is a lot of buyers of these 35 calls. so support your last guest, i think a lot of people are playing this from the long side or at least speculating that things won't be as bad because there's been nothing but bad news on jpmorgan lately. so maybe that can serve as a catalyst overall. you know, we were down yesterday, but i think as you look toward the end of the day and what's happening here, we

see this pattern a lot. we were down a few days in a row, and perhaps we bounce back on the friday headed into the weekend. you know, a lot of the people down here think we're going to go test up to this 1347, 1348 level on the s&p 500 futures, to put that in terms of the cash, it's about 1351 on the s&p 500 cash. if we were to do so, that would be a very impressive rally. almost 200 dow points that would involve. and there really seems to be a belief down here that the market has set itself a little bit of a base perhaps for the next couple of days. as i said, many looking to jp. we also have ppi this morning that we're going to get good news there. the jobless claims yesterday, although it's only one number, was a positive number. it just seems as for the first time in a couple of weeks, people are actually looking for some positives out of the numbers because there has been, it seems, nothing but negatives recently. >> i was trying to figure out how long we've been in this range. i guess 12 years -- i mean --

>> it seems forever, joe, doesn't it? >> more near term. i'm looking at -- it's really not that long. it's really just about not even a year. it just seems we go between 12,000 and 13,000. but then you can find a 12,000 or 13,000 on the dow, as i said, that long ago. you're really not telling us long term. you think we get a bounceback? >> longer term, i think a lot of it -- so many people -- >> depends on what's going to happen in november. >> that's exactly right. i think you hit it on the head. until october, we could be a bit range bound. so many times three to four weeks beforehand, you start to get a feel of who might win it. and right now i don't think anybody has a handle on what's going to happen with conventions, who's going to have a handle coming out of those. so it wouldn't surprise me if we stay in a bit wider range. the earnings we've seen so far

have been a bit confusing because some are beaten but then their statements going forward kind of play things down. that's why i actually think that the statements that come out over the next week or so from these companies. in the finance sector today. next week we get some in terms of manufacturing. what is their outlook going forward? because everybody, i think, has set themselves up a little bit that there's not going to be a ton of positive statements coming out of these companies. >> all right. j.j., thanks for your time. see you. >> real positive, huh? >> yeah. i'm with you. i don't know when we -- we get out of it when we get out of it, i guess. >> the market is lacking mojo, right? just lacking mojo. >> it's friday, though. it's the summer. okay. comments, questions about anything you see here, shoot us an e-mail, squawk@cnbc.com. coming up -- >> does joe answer is the question? >> these days he is answering. >> you do? >> someone last night, when i was at 99 tweets, they said one more and you'll get to 100.

and they said, can you resist? and i sent back, i'm not sure. and that did it. >> if someone sends you a hate tweet, do you reply? >> i don't know what that is. >> a hate tweet? >> then if i reply, then what? >> it just gives you satisfaction. >> no, but does it get disseminated everywhere? >> it could be retweeted. >> it could be. >> it could be retweeted in sun valley which is where we're going next where the nation's most famous media moguls are tweeting. investors are there. kayla tau is getting up early. she caught up with eric schmidt. we'll get you that and a lot more. and if you ever worried about star power in the valley -- >> i told you about that one tweet i got. >> from who? mark zuckerberg? >> i looked at it and i go, wow, this guy is really nasty. he was a senior in high school, an anarchist, and he was writing from california. >> and you're sure that wasn't zuck? >> i'm pretty sure.

i mean, anyone can write in. >> that is true. >> you might not take it too seriously. a junior in high school. >> just to explain what you just saw, mark zuckerberg was stuck in traffic in sun valley. he was waiting for two people including the ceo of uber. >> have we seen him go to the bathroom or anything? >> not yet. they finally get in the car. zuckerberg pulls out. this is our pool. ♪ our fireworks. ♪ and our slip and slide. you have your idea of summer fun, and we have ours. now during the summer event get an exceptionally engineered mercedes-benz for an exceptional price. but hurry, this offer ends july 31st.

tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 and i'm on top of it all 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 1-866-393-6174.

some news before earnings on jpmorgan. i'm going to see if i have an indication. they have decided they need to restate some of their first quarter results after a determination. that one comment is pretty interesting. they are no longer sure that

their marks on certain synthetic derivatives really truly reflected fair value and whether there is a good faith effort for fair value. it says it's not going to affect revenue or earnings but will reduce income by $459 million in the first quarter. >> it gets more interesting, actually, i think. this is what they're saying. in this instance, while the positions were within thresholds established by an independent valuation control group within cio, the firm has recently discovered information that raises questions about the integrity of the trader mark and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter. you talked about good faith. >> that's what they're saying. >> this is the money sentence right here. as a result, we're no longer confident that trader marks reflected good faith. but the idea -- hold on. if you remember, jamie dimon had been asked repeatedly, did he believe that the traders in

london were acting in good faith, this specific sentence here says the firm recently discovered information that raises questions about the integrity of the trader marks and suggests that certain individuals may have been seeking to avoid showing the full amount of those losses in the portfolio during that first quarter. this is going to raise a number of very big questions about what they knew and when they knew it. >> right. bottom line, $459 million. we're not up at the eight-figure level. and watch the stock, people aren't -- you no know, people d have the ability to trade the stock right at this point. >> this is always going to be much more about the -- this piece of the puzzle this morning is much more about the controls of the firm and the story around these losses. and the larger story about volcker and regulation and all of that than it is about the stock. >> and the stock not moving. remember, it was a $47 stock not that long ago and probably $43

or $44 when all of this started. >> it started the year at $35, yeah. >> i just want to go back and say it again because it's unbelievable -- >> they're saying they didn't put fair marks on some of these synthetic -- >> but it's worse than that. >> synthetic derivatives. >> that certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio. >> if you didn't use -- that was said, and they didn't use good-faith efforts. >> here they're suggesting here we have individuals and we've caught them red-handed potentially doing something wrong. which is pretty incredible. >> it is. okay. let's get out. >> we actually have a picture of mark zuckerberg in a car. >> i think we've got to get to sun valley. >> blinking and breathing and almost looks human. >> almost. >> he's worth $1 billion and he's in his 20s. let's go. >> let's go straight out to sun valley where takayla taushi is

catching up with caleb schmidt. >> the conference winding down with a panel led by italian prime minister mario monti as the key debt auction goes on. that's not the only thing. you have a fragile deal environment, you have weak performance on behalf of venture capital ipos, then there's facebook and the fiscal cliff very familiar to you. we were able to get choice remarks from eric schmidt yesterday, and here's how he feels about it. >> i think all of this is bad behavior on the part of our government to business. business needs certainty, and the uncertainty that this is creating is bad for america. it's bad for american business. it's bad for investment. the sooner we can get our tax policies sorted out, where we're going to put our money, where we're going to save money, where we're going to control expenses, the better. it's important that we invest in america. and when you have these situations where you have an absolute cliff, people get scared and they hold back. that's a bad deal.

>> well, of course, with middling performance, a lot of talk has turned to dividend yields. dividends that google since its inception has resisted. but now with the stock split in more conventional financial structure for the company, that might soon change. schmidt says you won't see a dividend now but maybe in the future. >> there's not been a discussion about cash dividends. that would be something we might look at inuture but certainly not now. we have talked about it periodically. we've always said that we would prefer to keep the cash for a rainy day. and you never know when we might change our mind. >> reporter: of course, noticeably absent from this summit this week was ceo larry page. but schmidt says he's back in the office and will be back to business as usual as soon as possible. guys, back over to you. >> okay, kayla tausch, thank you very much. jpmorgan is -- we've got all this news, and we're going to talk about it right when we come back.

between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

between listening to the numbers... ...and listening to your instinct. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

we're back with breaking news on jpmorgan. the big news right this moment is a new statement out from the company suggesting there may have been malfeasance at jpmorgan. this is going to raise questions about whether there's going to be a criminal investigation and whether what was known -- was

known more broadly. >> apparently there is a number on jpmorgan's website for the second quarter, which is $1.21, which is would be well above expectations of 70 cents. and maybe one thing about moving some back to the first quarter to make the second quarter -- they obviously wouldn't do that -- but the first quarter is going to go to $1.19 from $1.31, a $459 million in additional losses$459 million in additional losses they're conceding weren't taken into account and it was not a good faith effort to mark the derivatives where they should have been marked. they wanted to make the losses look smaller and they're not allowed to do that. >> you are not allowed to do that. joining us on set is sharon o'hallaroan, from columbia universi university. thank you for being here. >> thank you. >> it's about this trade, i don't know if we can put it up on the screen for the screen.

the firm recently discovered information that raises questions about the integrity of the trader marks and suggests that certain individuals may have been seeking to avoid suggests certain individuals may have been seeking to avoid showing the full amount of the losses portfolio during the first quarter. >> do you know when they reached this determination? >> june 12th. >> july 12th. >> they just learned this yesterday. >> is that possible or plausible to you? >> they could be coming to a determination from the investigation over this period. i'm sure once this got reported they have doing detailed unraveling of the different trades and understanding and asking questions. this is the conclusion from the investigation. >> so there's disclosure questions though then this raises. in some ways is this better or worse for the company? now they're throwing certain people under the bus saying they might have been behaving

illegally and this information was being kept from them, before that, potentially the company could, had actually oddly a tougher time. >> well, if, in fact, there was malfeasance, if in fact people acted in a way inappropriate to fiduciary responsibilities they're not throwing them under the bus, they're defining where the fault lies, and to make a disclosure at this point is absolutely necessary and appropriate for them to do so, so they need to be very clear and precise in the sequencing and events and who knew what, where and when to disclose that information. >> jamie dimon repeatedly said on broadcast networks he did not believe there was malfeasance that he believed people acted in good faith. the idea he was saying that a month ago and today we're hearing this and they're suggesting that the first, i don't know if they're suggesting the first they learned of it, the first they determined that it was this way was literally yesterday. and by the way, this date, this friday date, he had been talking about the past, he kept saying this is the day we're going to tell you what happened.

>> i believe he truly believed he was saying the correct statements. i don't believe he thought anyone within his company, given the oversight and regulatory structure would actually misreport statements like this and he was reporting what he truly felt was true. >> stock is trading $1.21 at the this point. >> it's appropriate to disclose the information and say where revenue will go. the company needs to do that to build confidence with investors and show good oversight. >> we'll have to look through a lot of the numbers. we're showing you what the q2 revenues are. i'm not suggesting they're not real numbers, i'm suggesting in a banking world you can move a lot of money around. >> does it sound like a situation where the sec will have to get involved? >> absolutely, this is criminal, whether people didn't know what points to disclose, that will be determined. >> much more when we come right back. [ male announcer ] don't have the hops for hoops with your buddies?

lost your appetite for romance? and your mood is on its way down. you might not just be getting older. you might have a treatable condition called low testosterone or low t. millions of men, forty-five or older, may have low t. so talk to your doctor about low t. hey, michael! [ male announcer ] and step out of the shadows. hi! how are you? [ male announcer ] learn more at isitlowt.com. [ laughs ] hey!

this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com.

good morning. welcome to "squawk box" on cnbc. i'm joe kernen along with andrew ross sorkin and mandy drury. where to start, jpmorgan, we'll start with i guess a quote. now jpmorgan is called lower after briefly being all over the map from yesterday's close. the first news that came out was that they're restating some first quarter numbers to reflect what they are calling a not good faith effort to mark some synthetic derivatives properly, to make it look like losses were smaller than before than that he had thought. >> they were misrepresenting the numbers, specific traders cooking the books, individuals book cooking the books. >> $1.31 to now $1.19.

now we have $1.21 in the current quarter on better than xchted revenues posted, $1.21, well above the 70 cents and now we've actually got some numbers that have recently come out about the wales losses and now the stock is actually down but right now they mark it at $4.4 billion, up from the initial $2 billion to $3 billion. >> a whole lot better than the possible $9 billion. >> these include $4.4 billion of losses on cio synthetic portfolio, $1 billion of security gains in the cio group and $554 million gain on a baernstebaerear stearns first loss related note. we need toe try to understand is this $4.4 billion, is that it, are we done or is there still left over? >> are you worried $4 billion plus $1 billion left to deal with?

is this different than -- >> before we got there. that's what i need to look into. jamie dimon quoted saying cio the group under question will no longer trade a synthetic credit portfolio and focusing its core mandate of conservatively investing excess deposits to earn a fair return. the cio group the big question mark not just over the firm but the larger questions about regulation on wall street, the volcker rule, et cetera. >> joining us is sally crasek and john allison, former chairman and ceo of bb&t. david faber is at the nyse on the phone, jacob frankel, former s secretary. jacob, does this go beyond civil? >> andrew pointed out the striking language and it raises questions. when you have an 8k that uses

language discovering information and raises questions about the integrity of trader marks, and then goes on to say we are no longer confident trader marks reflected good faith estimates, it's language like that, that really highlights why an ak is filed, meaning there's a material change and when you have a material change based on the disclosures morgan has been making it certainly raises the stakes. >> you're a lawyer, i can't get you to say criminal? what do you think, john in you ran a bank. sally, does this go beyond civil at this point? >> i think it will be a criminal investigation. what comes out of it is hard because this is a complex problem. >> i think makes sense, actually. >> hold on, hold on. >> it's like claude reigns, there's gambling going on. >> all of this breathless

coverage of jamie was friends with ina and didn't watch it carefully, didn't watch it closely doesn't feel like him. they have very sophisticated risk management systems, very sophisticated executive management reports. i assure you they're poring through this all the time. >> i will push back on you saying jamie dimon repeatedly came on many broadcasts and said he believed everybody was acting in good faith for the past two months. had he believed people were not he could have said i don't know, we're still investigating, we're looking at it, we're not sure. he withent in front of congress and said, people asked him straight up, do you believe that you were being provided with the correct information, and he said, i believe everybody was acting in good faith. we can go back and grab a clip. >> believe until you don't believe it. >> and you learn more every day. these things, as we've discussed in the past, are enormously complex, more information comes.

if you have perfect information at one time, you had perfect information. >> what are the implications for him and his leadership going forward? >> this is better for him going forward. >> yes, it is if he didn't know about it. >> if people were misrepresenting information to him, it is much better than i wasn't watching the till at the candy draufr. >> jumping to conclusions i want to be careful. as i was thinking about the earnings today, there are a couple of things, which is you know, what is the size of this, how did it happen but importantly what does it mean for the normal earnings of this company, and i don't think we're getting enough discussion of that, which is if you can lose $4.5 billion, how much were you earning the quarter before the quarter before, the quarter before, and if this risk profile is to be reduced and go away what does it mean for the normal earnings of this company and quite frankly what as we think about banks overall what are the

normal earnings for banks. i was watching dic beaviere went through tremendous numbers and one that didn't come up is return on equity and return on equity for all of the banks is down. does that mean the r.o.e. is not 10% to 12%, it's 8%? 7%? >> are you out there, faber? >> i'm here, babe, i'm here. >> we know how some of this stuff works. you've been in the business is such a long time. should we have thought, i don't know whether i'm not that shocked. i guess it was not good faith but there's a lot of wiggle room in the way they mark these things anyway. isn't there. >> there would seem to be particularly. >> it's got to be bad if it goes beyond wiggle room to where it was intentional. >> you're looking at the same language i am in terms of lost confidence and the trader marks, reflecting good faith estimates, yeah, you would expect there would be wiggle room in

synthetic portfolio unless there was a lot of liquidity, evidently there wasn't that much. >> you could assign a standard, could you probably say all right anywhere within 10% or 15% is acceptable so you got to really be trying to do something to talk to this i think. >> i assume we'll get more. listen, they'll have a two-hour analyst's meeting really, and the analysts are actually showing up at headquarters and they're going to spend a lot of time on the cio so we may get, i expect we will get a lot more detail on exactly what they're talking about, i would hope at least, sort of back up what they're talking about there when he says these marks were incorrect. >> david, on the loss and what's left on cio, we've been trying to go through it, $4.4 billion looks like the loss number, at the very bottom of the statement, i mean literally in a footnote with a star next to it, we should say, remember, we were questioning how much was left.

here it is. for now, cio will retain a portfolio of approximately $11 billion, notional amount of mark to mark positions of the investment securities portfolio anding for the portfolio. it is simple, transparent and easy to explain and will likely be reduced over time. that seems to be what's left of those positions, that was the big question mark, of course, what could happen to that $11 billion either way we do not know. >> right, we don't. of course they have said they made, sig kabtly reduced the total synthetic credit risk in cio, substantially all remaining synthetic credit positions have been transferred to the investment bank. i think it's $323 billion in the cio, they had been about $360 billion last quarter and it was supposed to be a hedge producing fairly small returns. we all know that went quite badly in terms of the hedging it self. as for the overall numbers, they look pretty good. i've been going through the

release at this point, taken does look like the investment bank year over year it's not going to look great. the environment has not been a great one but nonetheless the numbers themselves look good. the comp. ratio is about 33%. you do have that dva, when their credit spreads widen and it is a benefit to them, when they narrow, they have to actually take a charge or at least say there's a loss associated with dva, so when you "x" that out you get a pretty good looking quarter in the investment bank. i'm trying to go through the various other parts of the business as well. you've made the big point. >> so this is 459 million which is bad, but you would think that counter parties that knew that jpmorgan was in the market, they threw everything they've got at jpmorgan and all they had to recognize was 4.4 which makes me think the rest of the 11 may or may not be at risk. i think the lion's share is not

at risk and have they weathered the worst, that 4.4? >> that would be my assumption, based on reporting, comments that we've all gotten, both on the record and off, you know, at least on background. >> we're not going to say 15 billion someday, 4 plus 11. >> you can't, it's impossible. >> the buck stops here. >> cannot imagine, cannot imagine that that would be the case, and again i think i said it's a dva gain this quarter of about 900 million. >> maybe the worst is over in terms of this trade. >> if the worst is over, i mean, john going into this, you say it's a big company, this isn't going to break them but from a shareholder's perspective, watching this, listening to this, what should she think? >> what are the quality controls in the organization, so could this ever happen again but sally hit the biggest point, how much has this kind of risk taking actually contributed to past earnings, because if it has been a fairly significant part of

past earnings and suddenly they have to quit doing it, the real core earnings are going to be a lot less going forward and it's hard to look at this quarter because it's going to be full of noise and really make much assumption of that, so i think the market's going to be skeptical until they see cleaner earnings on this. >> jacob, do you have people in your shop that would be equipped to figure this out, to decide what to do with it? >> in all seriousness i think you're figuring it out really well and going back to where you started this whole issue, joe. >> you're taking notes to give to your staff. we're $800 an hour, probably $1,500 on hour now. >> we don't have anybody in our shop at $800 an hour. we're discount to market in that respect but going back to the issue of criminal which is where you started i think it highlights the fact that we're going to see an investigation, but the kind of discussion that you're having right now shows how broad a range of issues come into play, which is why as

significant as material as this disclosure may be, it would not rise to a level of a potential criminal act. nevertheless, you're going to have the criminal authorities involved in the investigation. >> i know how you operate. if you dream about a client, you bill them for an hour. andrew told me that's the way it is. >> probably seven minutes. >> just one quick note, we talked about this $11 billion number, that is just the "remaining hedge" a big portion of the whale trades have been traded to the investment banking department. >> that's not the right number? >> we might be talking about more. this was an asterisk on what is "the remaining hedge." some of the whale trades have been transferred to investment banking. we'll try to get a better sense in a moment so the number may be greater. >> and now you know -- >> caution, everybody on what number we're looking at. >> now you know why the banks

traded at a discount to tangible book because it is complicated and hard to figure out in the moment, and very difficult to project. >> and normally jpmorgan would set the tone for the entire financial earnings season. it's not going to be the case this season. >> let's hope so. >> let's make one other thing and note this. if you take the 459 and you add it together with the 4.4, because they're saying this is a loss from q1 and q2, the total whale loss is the 5.1 loss. >> are you sure the 4.4 does not include the 4.59? >> it does not. i'm e-mailing a number of sources in total you'd put it at $5.1 billion this morning, that is the number and what's remaining on that is still a big question mark and we will be trying to get you some details.

>> 16 is bad. 5.1 we can handle. thanks, david fib ta aber, you' around? >> i'm sticking around. it could still be abr barometer for the market. i want to go through the earnings some more so we'll focus on that as well. >> your alarm clock still works? >> evidently. i managed to get in. >> i'm surprised and you actually have makeup. >> i know. >> amazing. >> my colleagues were already here. i had no idea they got here that early. isn't that amazing? what are they thinking? >> watch and learn, early bird. >> 19 years, joe, really? show up early? >> are you going to be here, john? >> yes. >> he's with us for a couple of hours. >> sally, thank you. you were a guest host another time. andrew? >> we have to slip in a break, great segue. we have more from john allison and sally. >> oh, you are sticking around. >> you can't leave.

>> i'm not going anywhere, fine. >> plus we look at the broader markets ahead, get back to some of the jpm news and bring you up to speed after the break. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug. i have club passes. [ male announcer ] get the mileage card with special perks on united, like a free checked bag, united club passes, and priority boarding. thanks. ♪ okay. what's your secret? [ male announcer ] the united mileageplus explorer card. get it and you're in. ♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon

if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of perfection.

welcome back. if you're just tuning in, check out the shares of jpmorgan, now indicated lower. we did look at an intraday chart, they're all over the map, up 60 cents, now indicated to be lower. that believe it or not is not a low for the year. they've been as low as 27.85 and the news, i don't know where to start. they earned $1.21 versus estimates of 70 cents. revenue was above expectations and then if you really wanted to look into all their divisions and see how, you know, credit was, you'd have to do that to make a determination, but all that is probably on the back burner, given that the company has said that it needs to add to the loss figure that it gave us for the first quarter because of the losses. the reason it has to add to that loss figure is because some traders were not using good faith in marking synthetic derivatives positions and

trying -- >> manipulate it, cooking the books. >> made it look like the losses were less than they were so they added $459 million in losses which reduced the first quarter number from $1.31 to $1.19. >> this is bad. >> the other news we know it's $4.4 billion, the loss we used to call $2 billion, the one you were reporting could go to -- >> we said before between $4 billion and $6 billion. >> $4.4 billion, plus the 4.59. >> it's falling within expectations. >> yes, but most analysts will say expectations -- >> but a lot higher. >> 4.59 plus 4.4 is -- >> but what you had was a pre-tax issue. here's what it is, 6.60 pre-tax, 4.4 plus 6.60 pre-tax it's 4.59,

after tax so 45.1 is the total loss number thus far. we want to get to sally on this because we're talking about water, you can move these things around. they moved it to the investment bank and they also say there's an additional $11 billion in notional hedges out there. is there a way for us to now fully grasp what that ultimate risk number out there is left? >> i'll have to tell you, my read of this they would have moved it into the investment bank and the trading business because they are talented professionals. they clearly had issues in cio, the folks who managed it clearly are gone so they have to put it somewhere to take care of so you put it in with these guys, whether you'll hear about it again or see it again in that huge balance sheet they have there, remains to be seen. >> i want to ask you with regards to be couping the books, earlier on this week there was a startling survey that came out that essentially said a startling number of people on wall street would cheat if they

knew they could get away with it. >> i remember seeing that. >> it's because of their compensation structure, they felt that they had to, because the bonus structure and because of the way managers are putting pressure on them. do you feel that perhaps after all of this, when all is said and done there's going to be some kind of regulatory pressure to try and change that conversation structure so that this kind of either risky bet is not taken or cooking the books, perhaps is less incentivized? >> well, i'll be interested to hear from all of you all on this as well but clearly and i've thought about this a lot and clearly the compensation discussion we've had as a nation has been on taking compensation down. i've done some work and some thinking on the structure which is we pay people in equity, which is a risk absorbing risk tolerant instrument, and we should be thinking about that structure, and i've proposed paying folks more in fixed income which is more risk averting structure.

>> you wrote a piece i think the title was "can women save the banks?" >> i think it was the economy. >> can they save the economy. >> i think it was the banks. >> "can women save the banks." >> my question is can women save the banks. >> they're less driven by testosterone. >> there's a broad topic of are the banks tooking too much risk and it's clear before the downturn they were and so what are the ways that we have the research that shows that we can reduce risk and one way is compensation. another way, every bit of research out there and i know this topic drives people nuts, but every bit of research out there shows the diversity of thought and opinion leads to lower risk. >> i got to break in here, we have a little bit more breaking news we've been trying to ascertain what the total loss can be, jpmorgan posting jamie dimon's presentation which he'll present in eight minutes from now, the worst case future loss is estimated to be between $800

billion and -- $800 million and $1.6 billion. also worth indicating, of course, that those numbers could move the opposite way, meaning positively, but in terms of the way they box this up, and this is what they've been trying to do the whole time s try to suggest this is what we lost today and the most that we could lose in the future, all in we are looking at something like potential loss in total of $6.7 billion. i wanted to put that out and make sure everybody understood we'll be talking a lot more about that with david faber. >> we are getting ready for the jpmorgan conference call so stay with us here on "squawk box." numbers... ...and listening to your instinct duff & phelps finds the sweet spot

that powers sound decisions. duff & phelps financial advisory and investment banking services.

between black and white answers... ...and 1,000 shades of grey duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. i'm david faber at the new york stock exchange we're aity with aing the beginning of a 7:30 analyst meeting between jpmorgan and wall street, a two-hour meeting followed then by a press call later this morning. of course many of the questions will be related to the $4.4 billion quarterly loss that the company suffered in its cio but there will be lots of questions

about the quarter overall. we should get a good sense at least in terms of the reflection of the consumer in this economy, mortgage delinquencies, credit card delinquencies, many different things to focus on when it comes to jpmorgan. we'll have it all for you right after this. to the gas stationly going about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago. i go to the gas station such a small amount that i forget how to put gas in my car. ♪ [ man ] ever year, sophia and i

use the points we earn with our citi thankyou card for a relaxing vacation. ♪ sometimes, we go for a ride in the park. maybe do a little sightseeing. or, get some fresh air. but this summer, we used our thank youpoints to just hang out with a few friends in london. [ male announcer ] the citi thankyou visa card. redeem the points you've earned to travel with no restrictions. rewarding you, every step of the way.

welcome back to "squawk box," everybody, happy friday 13th. jpmorgan chase's conference call is just getting under way, following the news that the company will restate first quarter profits, and pegging the so-called london whale trading loss at $4.4 billion. we're going to have lots and lots more news and analysis on that as the call goes on but in the meantime let's look at other news for you. we are about an hour away from the latest data on producer prices. economists think the index fell 0.3% last month with the so-called core rate rising by 0.2%. later on we'll get a fresh read on consumer sentiment from the university of michigan out at 9:55 eastern with economists expecting a very slight increase from last month. lots of things to watch out for. joe? yesterday on "squawk box" we asked warren buffett, erskine

bowles and alan simpson how to get the deficit under control and avoid the fiscal cliff and here is what they had to say. >> for 50 years after world war ii, more or less revenue was in the 18.5% or so range and spending was in the 20.5% range and it really worked quite well so this is not something the country is, we're not talking about something we never attained or anything of the sort. it's just that we've drifted into this situation we're not getting enough revenue and overpromised on expenditure. we have a rich country but a rich country can overpromise. >> let's quit fooling each other. this is madness and this baby is on automatic pilot and will suck up all the congressionary budget of the united states. what do you love, you ask people. i love education, i love this, well, pal, that stuff will be wiped out unless you put the screws to this system. >> we don't spare anything. i mean, the problem is so big right now that you have to make

significant cuts in defense, you have to make significant cuts in the entitlement programs. you have to make significant cuts in the spending in the tax code if you're going to produce enough deficit reduction to stabilize the debt. >> joining us now, fiscal commission members illinois congresswoman and chief deppity whip, jan chiatkow ask i and former senator judd gregg. >> good morning. >> also a cnbc contributor. congresswoman, is there any chance that we get to talk to each other before november? >> oh, i doubt very much that anything is going to be really negotiated before november, but i actually read the transcript of the lively conversation that you had yesterday both senator gregg and i were on the simpson-bowles commission and it's become the shorthand for a

bipartisan, more balanced approach, but i think, i call it simpson-bowles less than meets the eye. i voted against it because i think it's really a wrong-headed way to go and puts the burden on middle class people. >> hmm, so you won't even go for the way it's structured right now. that's going to be, we've heard that side, senator gregg. i heard it most vociferously from another deja vu from this week, paul krugman and even alan simpson responded to that, that i guess krugman said that simpson never saw a spending cut that he didn't love. is it really, is it too draconian to the people that are in most need, simpson-bowles, judd? >> no, absolutely not. of course what's really draconian is if we continue on our present course the bankruptcy of the nation and passing on to the children of our country where the standard of living is radically reduced

as a result of our refusing to step up and face the fiscal problems. warren buffett said you got to fix the size of the government of something you can afford. historically that size has been around 20% of gdp. unfortunately today we're at 24% of gdp and headed towards 28% of gdp, and what simpson-bowles did was set a number, set 21.3% of gdp as the size of the government and how do we get there? take about three-quarters of the reductions out of spending, you have to take about a quarter of it in new revenues which totals $4 trillion, $3 trillion of spending reductions, $1 trillion of revenues over ten years and that stabilizes your debt. until you do that you're not going to get a lot of economic activity because people are worried about the direction of the country, the value of the dollar and our ability to pay our debt and they should be because we can't pay our debt. >> john, is d.c. broken? >> yes, d.c. is definitely broken. >> congresswoman? >> i mean the very idea that what we ought to do is resolve

our deficit problems by going after the elderly, you know, and i heard the kind of, alan simpson never wants to miss an opportunity to call the elderly greedy geezers, who make about an average of $22,000 a year and going after social security, decreasing benefits, raising the age of retirement, changing the cost of living adjustment, asking seniors to pay more for medicare, which is part of the simpson-bowles plan -- >> if we don't do any of that, what should we do then, just raise taxes on rich people, will that cover it, congresswoman? >> you know, we can do a lot. i -- >> is that what we should do, bottom line, with he need to raise taxes? if we're going to keep doing it we need to pay for it. let it stand as it is and make sure we tax some part of the population, somewhere, corporations, somebody and just keep paying for all of it?

>> actually simpson-bowles has this absolutely ridiculous tax proposal that says get rid of every single tax expenditure and that means even the mortgage interest reduction, and the, for employee benefits on health care, and then we should broaden the base and lower the tax rate to 29%. >> where should we get the money? >> okay, i actually think that we need more tax brackets, not fewer. >> how high should they go? >> i think that for my proposal, starting at $1 million, 40% tax rate, and up to for billion-dollar earners a year up to 49%, which is still lower than under the reagan administration, and yes, we should ask the wealthy to pay more. >> how much would that raise? >> it would raise about just short of $1 trillion.

>> and then we got another how many trillion to go, to make a difference? >> and if you look at the at obama care, which is now the law of the land, you're going to save about $1 trillion. >> oh we're going to save a billion there, about a trillion there, that's right, i forgot about that. i forgot about that. >> yes. >> so that's $2 trillion. >> and we take away the tax rate for the, the tax breaks for the top 2%. yes, you can do that. simpson-bowles -- >> take away the tax breaks, what would that put their actual rate at then, above, that would go above 40. >> you know what? we can go back to the clinton tax rates, and at that time, let's remember, it's only just over a decade that we actually had a surplus in our budget. we're acting as if this is some sort of a place that we've never been before and that we can't get back to surplus. it's not that long ago, and to say that we aren't going to take it out of working families, out

of retirees, the american people are not going to go there, and these kinds of proposals are just simply not going to fly. >> this was the commission i'm seeing now. >> right. >> judd, you got nowhere. you guys sore far apart, but you just heard that, what's going to, between now and november i don't think after november, there are a lot of too emthat feel the way the congresswoman does, judd. >> well, there may be, but i don't think they're the majority. i believe in the senate at least because i've been meeting with senate members along with erskine bowles, you have a working majority involving both sides of the aisle who recognize you can't get there with the policies which are just outlined. the only way that you can get this under control is to address both sides of the ledger and the vast majority of the problem is unfortunately on the spending side of the ledger so you have to address the spending side of the ledger. you've seen the sizes of government grow beyond its historical size and seeing it

growing exponentially and we can't afford it. you have to reduce spending. >> one thing i just thought of, though, judd, if we do save $1 trillion covering 30 million new people if we were to cover china, maybe we could get another 5 trillion or 10 trillion, save 5 trillion or 10 trillion. >> all you smarty pants are saying that this is impossible, but the -- >> smarty pants? now, i resemble that remark, congresswoman, i'm going to sue you for definition of character after that. i appreciate it. we're out of time. >> oh okay. >> it was an idea, save a trillion here, save 10 trillion. thank you, we appreciate it. coming up jpmorgan reporting earlier this hour, david faber is monitoring the conference call and coming up, steve crawford and john kanas will weigh in. i'll call you next when you get

a little smart, smarty pants. keep watching "squawk box."

this is new york state. we built the first railway,

the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. good morning, everybody. jpmorgan was reporting earlier this morning and david faber has been monitoring the conference call and joins us with details.

what nor have we learned? >> a lot of discussion from jamie dimon who opened the call, call it about ten minutes ago or the meeting because there are analysts in attendance at jpmorgan's headquarters talking as you might expect solely about the cio for the most part, brief reference to the quarter, you know, had hundreds of people working round the clock for months on this, and adding to this basic idea that it more or less is behind them, of course, to what you guys were talking about earlier, and noted in the footnotes, there is that $11 billion, but they don't, he's not giving any sense that they expect to take a great loss from here on this portfolio, $1.6 billion in the first quarter, $4.4 billion in the second quarter is what we're talking about from the cio. we'll give you more as we get it especially as we move into discussion of the quarter itself. let's not lose sight of that. jpmorgan can still be a bellwether for the stock market. >> thank you very much. >> david, are you still there for a sec. ? >> yes. >> we're talking of a total

loss, i don't want to make the number go higher -- >> he referenced a $1.6 billion figure for the first quarter and moved on quickly and there haven't been any questions. i heard that, i assume others did, too. >> you have the $6 billion number. the $5.1 billion we were talking about earlier which was all, by the way, pre-tax, is really just the numbers since may, since may 10th when they first came out. i think that's just in terms of getting it into context, maybe that's where we're at. >> they're also taking gains from the portfolio, there are embedded gains in the overall cio portfolio which stands at $320 billion. dimon explaining why they even have it, the differential between deposits they take in over $1 trillion in deposits, about $720 billion in loans, you use the differential, well, not the way they work, certainly, andrew, but in a way that is supposed to actually hedge the overall loan portfolio in a sense. and that would expect, one would expect would be the case from

here on in. >> david, who is in a position to ask questions on this call? >> only analysts will be asking questions for the next two hours. the media will get an opportunity, joe, at 9:45 or so to have a conference call. >> i imagine the questions could get pretty good. >> yeah, i would expect so. you know we're going to hear from dimon for a while and also going to hear from doug bronstein, the company's ceo and mike cavanagh. there's a lot from the cio, the chief investment officer. q&a will begin at 8:30. >> it's interesting the language, dimon is saying we believe the events are isolated to the cio. i mean as we've seen before, believe is not very definitive, is it? they may not be isolated just at the cio but at this stage, given all the information on hand he believes this is the case. things could change, right? >> they could change although they have taken those positions down. they are marking them to market now we would manage, amanda, at what you would expect to be a

good mark. >> good thing. >> and so we'll see. things can move. these are financial markets we're talking about. but that is the case. >> are people mostly at a buy on this stock right now, the analyst community, do you know, david at 34? i would think probably. >> there were a lot, yeah. i don't know, joe. >> they're going to be mad, i think, and they're going to be, there will be some pointed questioning i think. >> there will be, although again when you look through the cio and if you assume we're done at let's call it $6 billion pre-tax quarter q1, 4.4 this quarter, the numbers are not that bad this quarter. >> let me know if he calls any other analysts a smarty pants. i want to hear whether he uses it. >> let's not forget it was his comment on the last conference call for the first quarter in which he called this very london whales story a tempest in a t teapot. >> i remember. >> which led them perhaps to have to go much further than

they otherwise would have in discussing it. >> thus underestimation. i know they're under scrutiny with regards to the libor scandal. do with he know about their possible participation in that? >> no questions or discussion on that. i would assume there would be a question or two along the way, mandy, and we'll let people know if we hear it. they added $2.5 billion to their reserves last quarter, only related to mortgages. we'll see when banks start to add litigation reserves for libor, but nothing on that so far as far as jpmorgan. >> thanks, david. our guest host is john allison, he ran a bank, a big one, bb&t, former chairman and ceo, and this, all the, it's like an onion we keep getting different layers. initially given the size of jpmorgan's, of the assets that this was not going to be a big deal, then you start wondering about internal controls and that

starts to raise some cautionary flags. is it at this point it should be receiving all this attention even though as a percentage of the bank's assets we're not talking about a lot of money for jpmorgan? >> i think it should in terms of analysts and shareholders because the big issue is the quality of internal controls and how much of past earnings were related to this kind of activity. i totally disagree with the kind of social policy issue. this is a big company. this is not going to break jpmorgan. there are no great policy issues that come out of this. >> other than we keep getting financial services industry keeps getting hit with more and more and more news that undermines confidence in the entire industry, and the populist anger rises after the financial crisis and this just adds to it, that these guys are gambling with the depositor money and eventually maybe with taxpayer money and they need to be reined in. it adds to the environment that

could be a negative for credit expansion unfortunately in the future. >> it adds to the environment. of course what happens there's a ripple effect so bb&t will be investigated for a business we aren't even in. the regulators' biggest fear is being embarrassed so as soon as something goes wrong they tighten down the standards. the lending standards in the u.s. today are the tightest in my 40-year career and it's because of regulatory overreaction and people drop the context. this is one mistake by a large company that can actually afford the mistake but that ripples through the whole economic system and the question was raised earlier about people taking too much risk. i think a lot of times you drop the context. any individual mistake doesn't mean the economy's taking too much risk. i argue one of the problems we have today is people are not taking risk. right now they're not doing normal risk. >> do you think it is the bonus structure, to what sally was talking about, that encourages that risk-taking? >> yes but that's a trivial thing. i think people have personal

goals and trying to maximize the long-term performance of their organizations. you know what they're doing on compensation, interesting the overreaction, that they're actually looking at incentive compensation all the way down to our tellers. >> the tellers? >> the tellers. you get this massive overreaction and that makes the regulation less effective because it gets, distunks. >> why do regulators tend to overreact? >> it's their nature. >> they have to be seen to be doing something? >> there's actually a bunch of economic theory called public choice and regulators always act for the regulatory good, not the public good. it's naively they act in the public good and for the regulatory good you don't want to be embarrassed, you don't want bad things to happen so in tight times, they always overreact. in good times, since bad things aren't happening, they quit regulating. >> on the back of this, what do you think the regulator's reaction or overreaction is going to be? what is going to come out of this? >> they're already tightening

lending standards in commercial lending which has nothing to do with this, but they just react in a very broad base trying to reduce risk in general, where the problem is, regulators don't know what risk the economic system and the banking system ought to be taking. you got to be sure to hold the context and not hold one example. >> does this galvanize the volcker rule? >> it does and it's not necessarily good. it's hard for regulators to determine what's the right regular leof risk. what we need to do is get rid of too big to fail and if jpmorgan makes a mistake they ought to be allowed to fail. the contingency risk was grossly exaggerated. large financial institution could fail and it's not going to take out the financial system of the u.s. >> you made some comments, i wanted to talk to but jpmorgan obviously but you sat in disbelief watching the the

simpson-bowles, two commission members. you didn't get optimistic. >> it was very discouraging today because obviously you had this political divide and frankly -- >> that was clearly defined right there. judd gregg is not a, you know, he's not a fire-spewing --'s not one of the bad ones, is he, andrew? >> no. >> he's not like the most wanted list on "the huffington post?" ? >> he's considered a man down the middle. >> and you saw how far he was from the congresswoman. >> the congresswoman, too, is simply detached from reality. that's what's scary. >> that's what both sides say about that each other. >> some of this stuff is flat math and they just want to deny the facts. >> we'll get more from you, john. >> we'll continue the conversation, coming up more from the jpmorgan conference call and then at the top of the hour, bankunited chairman and ceo john kanas raising' red flag about the solvency of thousands of banks if interest rates stay

low over the next three years. concerns are coming up at 8:00.

we're back this morning. we've been monitoring the call with jamie dimon. during the break i spoke to somebody close to the investigation at jpmorgan and just to clarify, where things are, the bank is not clear to the bank what took place was criminal. they do believe those marks were "aggressi "aggressive" and the question of course is going to be were those

marks within a band that is appropriate, we talked about 15% on either end, is that a criminal issue. >> in the liquid market. and they were the market at that point. >> and the second question were these trades hidden or how they were arriving at these numbers was that being hidden from upper management? there are still questions, the bank not clearly coming out and saying this is criminal but suggesting that the marks clearly were aggressive. >> let's say you got a synthetic derivative and it's hard to get within 20% in a liquid market of where it is. say it was off by 80%, if it was, if you were off by 80% deliberately, then would it be criminal? sarbanes-oxley or anything which said you're responsible for the veracity of these numbers, and it's criminal if you don't put the right numbers, you would think, if it was off by that much you would think it would be. i don't know, when does it become -- you're going to go

with your source. >> i'll go with the source and when we come back, more about jpmorgan and clawbacks. we have the numbers now. steve crawford and bankunited ceo john kanas will join us at the top of the hour. ♪ [ male announcer ] this is our beach. ♪ this is our pool. ♪ our fireworks. ♪ and our slip and slide. you have your idea of summer fun, and we have ours. now during the summer event get an exceptionally engineered mercedes-benz for an exceptional price. but hurry, this offer ends july 31st.

i'm making my money do more. ♪ i'm consolidating my assets. i'm not paying hidden fees or high commissions. i'm making the most of my money. and seven-dollar trades are just the start. i'm with scottrade. i'm with scottrade. i'm with scottrade. and i'm loving every minute of it. [ rodger riney ] at scottrade, we give you commission-free etfs, no-fee iras and more. come see why more investors are saying... with scottrade.

the first of the financials to report, we'll break down the results from jpmorgan and wells fargo. >> the economic recovery and the banking industry, steve crawford of center view partners and bankunited chairman and ceo john kanas will be joining us. >> we're going to sin city. >> vegas! >> the ceo of the las vegas sands will join to us talk jobs, regulation and the health of the hotel and gaming business. friday the 13th. the third hour of "squawk box" begins right now. ♪ >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm andrew ross sorkin along with joe kernen and mandy drury.

becky will be back monday. let's do wells fargo quick. >> 82 and the estimate was 81 cents of revenue, $21.3 billion and $21.366 was the estimate. this is going to be boring compared to jpmorgan i think. i don't see anything about malfeasance or -- >> cooking the books. >> there's nothing here. tier one common ratio of 10.08%. there's a lot of metrics if you own the bank or follow the bank as an analyst that you'd want to hear about. 32.48 to 32.65 indicated a little bit lower. >> you have breaking news on clawbacking at jpmorgan, they're owe fshlly explaining what they're doing, the maximum permitted clawbacks have been invoked. the board reviewed the decisions and it represents approximately two years of total annual compensation for each individual who was involved, this includes

restricted stock clawbacks and canceled stock option grants, remember, ina drew for example made $14 million last year. >> does it mention who else, the names? >> "to date all cio managers based in london with responsibility for synthetic credit portfolio have been separated from the firm." you have to assume some people are involved. they're saying those people received no severance and no 2012 incentive comp.. the decision to claw back compensation was from each individual and the clawbacks represented approximately two years of total annual compensation for each individual. they are not explicitly discussing the numbers. couple of other thoughts real quick for all other individuals, 2012 performance year compensation clawbacks if appropriate will be determined in the ordinary course considering among other things, here's the determining factor, company unit individual performance based on absolute and relative basis, chief

financial objectives and involvement in other responsibilities for the cio matter and they plan to make these public. >> how many does this affect, does it say? >> it is not indicating how many people are involved in the clawbacks but this would be the first time i think in history from what i gather we've actually seen a clawback. >> set to precedent i guess. in the meantime we'll give you background information in case you missed it earlier with regards to all the news surrounding the jpmorgan chase numbers. the bank pegging the so-called london whale trading loss at $4.4 billion, jamie dimon says wrors case scenario the number could grow by another $1.7 billion. the can. is reducing income for the first quarter by $459 million, amid questions about values assigned to certain trades. for the second quarter jpm earned $1.21 per share. that compares to estimates of 70 cents, much more, of course, on jpmorgan still ahead.

we're all over it. >> there are some items in there in the $1.21 as we thought there's losses and gains. i don't even know if that's a 50-cent beat but revenue was over expectations. >> we are joined by john kanas, chairman and ceo of bankunited and steve crawford at center view partners and former morgan stanley president, our guest host all morning has been john allison. >> where to go? >> where to start on this one. >> first thoughts on some of these jpmorgan both numbers, how they're explaining it and this idea that potentially, i don't want to suggest it was criminal but this idea there might have been some malfeasance involved, john? >> i think a lot more information needs to come out as joe said. restatement is not very good news. i think that that's probably going to get a lot more attention in the next couple of

days than some of these personal details. >> a restatement on an honest mistake and restatement on something that was not in good faith, but then off camera then you said, since they were the market, they were the market, they were so big that they were the market, so it's like the libor rate, you don't know where to set it. there is no rate. >> to me the most troubling aspect of this if you're jamie or if you're the board is you find out about this problem internally from an outside source. you ask your people to go back and do the work. they go do their homework and come back and tell you everything's fine and you tell the market this say temp nest a teapot. there are plenty of people in history who have done their homework, looked at thes historical correlations, made a trade. they get those numbers wrong. that's happened a bunch of times but to actually have your organization go back and do the analysis and then the answer comes back, hey, everything's okay, that's i think what should upset investors. >> but the point that i was just

trying to get to with you is that so there's not a number where you mischaracterize these marks, there's not a number that would say this violates sarbanes-oxley? >> oh, sure. >> even if you're in the market so how far off, but john you pointed out if it's 459 million on the huge portfolio sounds like it's only a couple of percentage points off and it would be aggressive. the aggressive marks, what will constitute marks that they knew were false and that were criminal? >> well, there's a materiality standard, right. >> what is it? >> generally it's 10%. >> 10%. >> is the materiality standard. >> we were talking about whether -- i said if it was 80. if they said, if it was 80% off, where they were marking it, that would violate sarbanes-oxley. >> it's not just the mark on the individual security. it's how the teerlt contributes to the overall results. >> it's impossible to pros prove

this then, no wonder no one ever gets prosecuted. >> prosecution is one thing, the reputational damage is something else. >> the lawyers on both sides here are sharpening their knives all morning because this is going to be a side show for a long time. >> is it better or worse if the trade, for jamie dimon and the management of jpmorgan if the traders in london misrepresented, factually misrepresented these trades to them, meaning do you say to yourself, ahh, i was lied to, so maybe you let them off the hook and you say ahh, i was lied to and james murdoch said i was lied to and created even more problems. >> they're both bad answers. would you prefer incompetence to illegal behavior? i don't know. >> you talk about reputational damage, whose reputation is on the line, the bank as a whole, is it jpmorgan's jamie dimon? who is essentially accountable here? >> well, i mean obviously jamie

is accountable as the ceo but you also have to be realistic. >> even if he didn't know and he was lied to. >> they were 300,000 employees, a couple trillion-dollar balance sheet. it's hard to have your finger on everything that can go wrong in that institution. the complexity is a real challenge and something a lot of people are pushing back on in the financial system in general. >> so too big, it's too big to manage. >> it is? >> i think that's certainly -- >> jamie hates that, right? he hates that. >> he doesn't like that. >> very interesting question on that because a lot of these banks are less in book value. one of the questions is, why don't the banks break themselves up instead of the regulators. i don't think the regulators know the right answer. >> phil purcell wrote an op ed in "the journal yesterday" on this. >> it's an interesting question. it's an ego trap. >> would that be a solution right now? >> i think the management ought

to be thinking that. >> i think the counterpoint, look at one of the most consolidated financial services countries in the world is canada, right? they have four banks and they probably perform the best in the most recent crisis. when you look at it, we've had all kinds of sources. >> they do the money around the banks just to keep propping them up and that's how it works. >> john you hate regulation, john. >> me, too. >> you said it was no fun to be a banker anymore. why don't these guys or not you, but if they did it themselves, if they divested themselves, maybe they'd find that more palatable. >> these large, complex universal bank institutions are shrinking. there's no question that there's pressure on their balance sheets, they're either having to raise capital or shrink balance sheets and they're in the process of doing both things today, but the problem is that we keep talking about jpmorgan as a bank and jpmorgan in my

view isn't a bank. it's an investment bank, not a commercial bank and our obsession with keynesian econom economics has driven rates to zero. bankunited used to make loans in their communeities and taking back deposits are finding pressure and it's difficult to do that. it shouldn't be a surprise the complex institutions are out there taking undue risk and doing things that are complicated because the other components of their balance sheets are under pressure and margins are shrinking every day. >> you've said if rates stay this low for what about the next three years or so, some banks won't even be able to exist. >> and the chairman of the fed has said that count on this at least through '14 and into '15, so those banks who make money the traditional way are going to be under tremendous pressure. it may be good for bb&t, bank

united, we view ourselves as buyers and been predicting for some time we'd be able to buy banks at cheaper levels, good for us. not a great answer universally. >> you mean to acquire now? >> well i mean i'm not speaking for bb&t but for those of us who have, part of our business strategy is to expand inorganically by acquisition that is a great opportunity to us but it's not a great answer for the industry. >> you just blame the keynesians for all of this? is that what i heard? >> no question. >> just as a philosophical question, when someone says yep i'm a keynesian on steroids, don't you look at them as there might be something missing at this point? is there any historic -- how much of history do you have to ignore? is a unicorn a bad thing to call

a keynesian. i go like this to someone, are you really three-dimensional? >> unicorns do not. >> that was too polite, joe. >> it was too polite. >> i'm curious, steve, this news out of jpmorgan, does it change the regulatory debate at all or is this, we're sort of -- >> i think it gives them a bigger stick to push through the agenda that they have. >> and the volcker rule therefore will emerge -- >> i don't know what the volcker rule is. what is proprietary trading? >> he's right. >> good luck. everything's proprietary. >> we now find out we don't know what sarbanes-oxley is, do we? >> we're struggling with that. the other big question is will jpmorgan be able to make the money it used to be able to make going forward. that's a phrase that joe hates. >> as opposed to the must be they make going back but we need to look backwards because we don't know what they made in the first quarter. usually it would be redundant to say going forward but obviously

they didn't go forward or backward. >> the key to success in our business is to retire and look ten years younger like john does. >> no, no, no. you don't know about this guy? he's got the secret. it wouldn't even be a year if they clawbacked a week on you, you'd be broke, right? >> smarty pants. >> i know exactly what we're talking about. >> depends on the clawback. >> wow. okay, we're going to -- thank you, steve, for being here and john for being here as well. >> coming up, you'll be back, right? >> always for you, joe. >> thank you. >> i've been called a smarty pants twice. and david fab er er is monitori the conference. >> i think andrew was included in the smarty pants, plural. he's more fancy pants. >> he's more fancy pants than a smarty pants.

>> i thought you'd call me a dummy pants. >> with what you do when you eat, man, is he mr. new york, mr. upper west and east side. david faber is monitoring the jpmorgan conference and in the next half hour the new normal in las vegas, the coo of las vegas sands will talk jobs, regulation and big changes to the business model in las vegas in the last five years. [ male announcer ] eligible for medicare? that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses.

the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement plans, they help save you up to thousands in out-of-pocket costs. call today to request a free decision guide. with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients... plus, there are no networks, and you'll never need a referral to see a specialist. join the millions who have already enrolled in the only medicare supplement insurance plans endorsed by aarp... and provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide.

[ male announcer ] olympic tennis players bob and mike bryan are always on the move. so they can't get to the bank to deposit a check. instead, they use citibank mobile check deposit. it's easy. they just snap a pic... ♪ hit send... and their checks are deposited right to their account. well almost all of their checks.

stand back. seriously? [ male announcer ] citibank mobile check deposit. easier banking. every step of the way. we are not proud this moment but we are proud of our company. we're not making light of this error but we do think it's an isolated event. one of the reasons we hold capital is for known and unknown events. obviously this one we shot ourselves in the foot but there are things we are surprised about. we learned a lot. i can tell you this has shaken our company to the core and what happened here is that most of the management team went back and said let's redouble our efforts to make sure we're running a great company, granular, thoughtful in every way possible. we could never say that we won't make mistakes. we operate in a risk business. it's nice to not make mistakes, hopefully they're small and few and far between. we have great franchises, never stopped growing in the crisis, serving our clients in tough times and we think we have great

growth opportunities going forward. >> unless you're listening on the radio, you could see who that was, it was jpmorgan ceo jamie dimon on the conference call that started 45 minutes ago, still going on. david faber joins us from the nyse. that could have been, you could have played something from a month ago where he was talking about this, and i would nt' have known the difference i don't think. >> he said more or less the same things a month ago and said them a number of times including of course testifying in front of congress as well, joe, absolutely. on the call itself, we've sort of moved ahead, doug bronstein has gone over -- i'm awash in paper, they had three different presentations here and executive presentation, they got a cio task force update and then we've got the actual earnings from jpmorgan as well. >> david, why isn't it more focused, why aren't his comments more focused on the incremental information that we've gotten,

that this was not done in good faith now? isn't that you? ? maybe it's not something he wants to focus on. >> i think it's the news story of this morning. it's certainly what we did not know. what else very want' known is the loss was, $4.4 billion pre-tax, $1.6 billion for last quarter and they adjusted last quarter's earnings down by $459 million but you're right, joe. >> "shooting ourselves in the foot" oh, geez, we take risk, we make mistakes. well i don't know, that seems to be the, what has extended the story for us in the news business is the, that line about not done in good faith but we just heard, you saw crawford and he says they were the market, so who knows where, if you are the market, what's the difference between aggressive on where you mark something and just totally,

you know, out of the realm of possibility? >> i agree. and at the end of the day, it's still a lack of oversight on those positions. >> yeah. >> and where they're being marked and therefore in a bank that prided itself on risk management and a ceo in particular who always prided himself on that not understanding those marks were way off, taking the benefit of the doubt from the people you trusted, and clearly should not have trusted. >> you wouldn't say jamie's had a tin ear up to this point. he was trying to be up front with congress and everybody else but if he keeps saying the same stuff, you might start saying he is a little out of touch maybe and has a tin ear, if he doesn't, the lack of overnight on what could be intentional misbehavior, seems like it puts it in a new area. no? >> i mean that's the question, was it intentional, was it not? i made a couple of phone calls, someone who is actually involved

in the internal investigation suggesting we're not sure if this is criminal but suggesting clearly and kept using the phrase aggressive, these trades in the market were aggressive and of course the big question is were they aggressively intentional and again to that issue of materiality, steve crawford saying that 10% represents materiality. >> they made a clear decision to put this in a press release and put the language in there about good faith and not having a belief essential will i to paraphrase those positions were marked where they should have been marked. that was the decision. where it goes from here is unclear. we'll get the questions beginning in let's call it ten minutes or so from the analysts. i'm sure there will be many questions on the cio but also a lot of questions about the quarter which did not look bad b a $2 billion reserve release that helped, a dva adjustment, these things are complicated, that actually helped but at the end of the day the businesses seem to be operating fairly well. 14% overall return on tangible common or common equity, which

in a lackluster capital markets environment is not that bad. so "x" the cio which is hard to do, jpmorgan didn't look bad this quarter as far as we can tell. the questions haven't started. >> david now it's up again. >> no word on whether they'll restart a share buy-back. it has a $15 billion authorization. they stopped buying back stock entire entirely. i haven't heard or seen anything yet in the literally hundreds of pages of paper i got in front of me. >> i thought i saw it down as much as $1, i thought i saw 32 and change. now it is back up and it's been, you know, high 34, all the way down to what i saw was a 32. >> david quick, has there been any mention of the clawbacks on the phone call? >> no, none. >> okay. >> nothing that i've heard and again, i'm getting on and off, but nothing that i've heard. >> you got get to page 22 of

that cio task force before they get there. >> keep on reading. >> there's a lot to do. >> where did you see there would be a clawback on the teller? >> the conversation systems at the fed now is imposing on banks goes down to inis ncentives on e clawback line. >> there are some tellers left? >> yeah, there is some left. >> the guy who fills the atm machine. coming up we're going to get the government's latest read on inflation, we're going to get the ppi, the producer price index numbers for june, 8:30 a.m. eastern, about seven minutes' time from now and also heading to vegas, the president and ceo of las vegas sands will weigh in on jobs, the environment for business and unintended consequences of dodd-frank regulation, all that is coming your way. picked up back in the '80s. tdd#: 1-800-345-2550 like a lot of things, the market has changed,

tdd#: 1-800-345-2550 and your plans probably have too. tdd#: 1-800-345-2550 so those old investments might not sound so hot today. tdd#: 1-800-345-2550 at charles schwab, we'll give you personalized recommendations tdd#: 1-800-345-2550 on how to reinvest that old 401(k) tdd#: 1-800-345-2550 and help you handle all of the rollover details. tdd#: 1-800-345-2550 so talk to chuck tdd#: 1-800-345-2550 and bring your old 401(k) into the 21st century. tdd#: 1-800-345-2550

♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of perfection.

welcome back to "squawk box" everybody. happy friday. do check out the shares of lexmark, it is slashing second quarter guidance blaming unfavorable exchange rates and weaker than expected demand in europe, the company now expects to report earnings of 87 cents to 89 cents per share for the quarter that ended june 30th, comparing to prior estimates of

95 cents to $1.05 and analyst estimates of 98 cents. also coming up on the show, breaking economic data, we'll get the ppi for june and also as we head to the break look at the dow futures ahead of that data, all morning it looks as if we've been indicated slightly to the upside and that is what we're seeing right now an inplimd open up about 33 points. i don't spend money on gasoline. i don't have to use gas. i am probably going to the gas station about once a month. drive around town all the time doing errands and never ever have to fill up gas in the city. i very rarely put gas in my chevy volt. last time i was at a gas station was about...i would say... two months ago. the last time i went to the gas station must have been about three months ago.

i go to the gas station such a small amount that i forget how to put gas in my car. ♪

welcome back to "squawk box." producer price index for june up 0.1. this is a huge miss in terms of the analyst expectations, looking for 0.5 to 0.6%. that's including the all-important food and energy. if you strip that away it's up 0.2, that's called core and that's as expected. if we take a longer view, year over year, headline up 0.7. this is a big number expecting up 0.2 year over year, matching 0.7 on our last year. we've seen significant strengthening of the dollar and that had the effect of dampening

commodity prices. look at year over year on core, 2.6 that actually is the only number outside of core up 0.2 that matched expectations. what are we left with in the market, these are close to historic low yields. for the moment it is on the upside, and we still have university of michigan confidence index to be coming out and many continue to debate long-term affects how the price of gold fits into those inflation forecasts and the near term commodity prices. for the most part outside of ag has come back to where it was months ago. >> let's bring in oppenheimer funds economist brian leavitt. rick will stick with us. brian your thoughts? >> the number was slightly higher than the market expected and that's a good sign particularly for those worried that denation flare pressures

were taking over into this economy. i would caution against just looking at one number. we've seen the consumer price index be quite weak and saw the prices paid component of the ism weak. it's clearly an economy that's slowed down, clearly an economy that's lost momentum and there are concerns about deflationary expectations, taking hold, but this is one good sign that you know, regardless of what the bond market is saying and the gold market has been saying the prices in this economy are not slowing as drasticcally as some might expected. this buys the fed some time although when you think about what's going to happen with monetary policy this economy is growing at a slow rate. bernanke and his cohorts are looking at the ism prices paid, good indicator for ppi. when we face a fiscal cliff, bernanke can talk about all he wants we need additional fiscal

stimulus. that's not going to happen. you have to start thinking about policy accommodations sooner rather than later. >> would it actually work? law the diminishing returns, right, brian? >> absolutely right. >> mandy, nobody cares if it works. it's a head game. it's a head game. it's totally a head game with the equity markets. >> rick is absolutely right. essentially what you want to do with quantitative easing drive treasury rates below the rate of inflation. what that's supposed to do for racing taking improve the equity prices and they're supposed to help balance shields and pensions. there are diminishing returns to what you can expect the results of another bond buying program to have. >> okay, we're going to leave it there, guys. appreciate it very much, rick santelli, brian levitt. >> thank you. coming up, doing business a

lot of places. i can't wait to talk to this gentleman, chief operating officer of las vegas sands, joining to us talk about the hotels and the gaming industry. you see what they're building in spain? >> spain of all places. >> it's huge. >> we're going to talk about that. and the environment business also in america, we will talk to him when we return. >> the general economy in the united states has been more or less flat. it's not heading downward but it's not growing at the rate that it was. >> we face the most predictable economic crisis in history. >> these deficits are like a cancer, and over time, they will destroy the country from within. >> i was just listening to the panel on cnbc and bowles said he thinks we're going over the cliff. there's just so much money running for safety because there's so much indecision about where the future's going.

thank you so much, i appreciate it, i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money ? if your bank takes more money than a stranger, you need an ally. ally bank. no nonsense. just people sense. you have to dig a little. fidelity's etf market tracker shows you the big picture

on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com.

welcome back to "squawk box." the lackluster trend in jobs creation is a major source of concern on wall street and the las vegas strip. here with his thoughts on how to get america back to mark, michael levin, president and coo of the las vegas sands and members of the job creator's alliance and john alison is also a member. >> good morning, joe, how are you? >> i'm well. we talk about banks being impossible to understand and too big. i wouldn't know -- i guess we'll start in lay vs vegas and macau

and then your moves into the continent in spain is something we could spend a half hour on but let's talk about how business is given the economic backdrop in las vegas. are you allowed to talk about that? >> we can talk about las vegas if you want. the major thing about las vegas it is indicative of what the job creator's alliance is all about, how we educate employees on what's going on with our government, and policies and about our government and how it inhibits job creation, but vegas is basically, our visitation is up, has been up for the last year or so, may we had lousy numbers in i have gas that were published in terms of gaming revenue but our visitation was up. we're getting less spend per person and that's what statistically is happening. people don't have as much money in their pocket and don't spend as much as they used to and that has a downward spiral to profits.

the real sit if we can't create more jobs we can't get more spending and people are too tight so that affects us everywhere. we're a consumer-driven society and las vegas is basically a consumer-drifb plac consumer-driven place. >> back with the comment don't go to las vegas and blow, spend your money. there's a lot of cocktail waitresses and dealers and busboys and you know, some velocity in the economy i think you learn that in the first week of an economics course. that was pretty illustrative i think of what you've had to deal with, but also at that point, did anyone really listen and not go to vegas? no one had any money at this point, do you still feel the effects of that honestly. >> i don't really think so. i think the reality was that we were having meetings and big

associations, they worry about our government they worry about the intrusive nature of our government and they're scared because the government can get tough and they can cause lots of problems so they frightened their way out of las vegas and went to milwaukee and so in the early going that hurt las vegas for sure. i don't think it hurt the individual people coming to vegas but it did hurt on the group business. that's basically over now. our group business here in vegas is much, much improved, bookings for '13 are much better than they are in '12. that's not the problem anymore. the problem is what people are spending in their pocket and we need more individual business coming to vegas where people will spend what they used to in '07 and '08. >> talking of consumers not having enough money to gamble, i want to talk about your plans for euro vegas casino resort in spain of all places, why spain, why now, a country dealing with very high unemployment, obviously dealing as well with a debt crisis, why?

>> we're looking all over the world actually, and most of the activity we're doing in development we're doing in asia, vietnam, korea, japan, taiwan, et cetera. we're even looking in toronto right now as a possibility but we also look in which you'd call counter cyclical. no one can make a prediction as to what europe is going to look like five years from now and if we do anything in spain we're making a long-term bet on the european population and the european economy, so it's just another place for to us look. the real problem is we're not looking enough in the united states, and we can't, because the difficulty of doing business here is getting more and more difficult every day. >> can i follow up on asia and the business there? obviously china is slowing down, 7.6% is the latest read on gdp. >> yep. >> i think singapore's economy just contracted as well.

>> yes. >> how is business in asia? >> business is still very good in asia. i think we'd all be happy if we did a 7.6% gdp growth, that would be satisfactory for all of us. i think we have to start looking at china as an opportunity and not a problem. i woke up this morning and heard the statement about our uniforms for the olympic team being made in china and it's now brouhaha in washington. i think we ought to look at the great china consumer that's growing. it's going to be the largest consumer market in the world and we need to manufacture and spend our money and time and research building business to sell to chinese. we do that. we do that in china in the gaming business, aenwe do that with chinese tourists coming to las vegas. in fact they're the highest level gamblers and buyers of consumer goods that we have. >> are you active politically? >> yes, sir. >> michael, are you? >> yes, i am, not as active as my boss, no. i think he's more actively politically than i am. >> he's more active politically

than anyone i think, when he throw $20 million, when you have that kind of money to back a horse with, that's pretty amazing. >> i think that you know, i know we could spend hours talking about sheldon. he's a spectacular guy and i love him dearly and we're very dear friends. sell done is a great american, a great patriot and he believes sincerely in the free enterprise system and believes in creating jobs and we employ over 40,000 people in areas where people weren't being employed before that, includes singapore. as a matter of fact, he would do anything to ensure the fact that the america he glue up in is the america that he doesn't live in, when his children are living and his grandchildren are living, that he wants america to be the same, the same, have the same opportunities, the same chance for the middle class to grow and to get wealth and to be happy like him, and i don't want to

speak for him, but i'm around him enough to know that's what he cares about, and so he's going to support those candidates whose policies he believes will change the course of our country. >> there were a couple of caveats for this development in spain. if you had to assign a probability of it being completed right now, michael, what do you think it would be, honestly? >> i can't really say, joe. i think that -- >> is it 50/50, better than that? >> i'd say it's 50/50. basically i was there two weeks ago both barcelona and madrid have made tremendous efforts, the governments have made tremendous efforts to get out to get our products there. we're still doing very deep research and investigations about -- >> 250,000 jobs possibly for that country, i guess, that would be all the related jobs, but i mean -- >> yes, that's true. >> it would be amazing, i would

think the government would try to bend over backwards but i wonder if in dealing with that government maybe it makes you appreciate the u.s. government, no? >> actually it's been easier dealing with them than dealing with some of the areas here in our country. i mean, we try to take a look at florida. we tried to take a look at massachusetts. we tried to take a look at new york. we make all those efforts. i have to tell you honestly that dealing with governments is about 75% of my job, and there is no easy government anywhere, but the spanish governments in both barcelona and madrid have been very, very extremely cooperative. >> and okay dealing with government, how long have you been in this position dealing with governments, how many years? >> well i studied political science in the 1950s. and i never thought it would actually be something i'd actually have to use. >> are you saying in the last three and a half years has this been the tough toaest to deal w

or similar administrations in the past? >> it is getting tougher. there is no question the government is more intrusive in our lives than it ever has been and i think as i say i woke up this morning and the major comments are about the uniforms that the olympic team has and they're saying all the legislatures agree that that was a big mistake, and that's really important. i mean our country needs help. we need legislation. we need things to go better, and we're talking about uniforms, and it just doesn't -- it's indicative of what's going on today, so i think our job alliance creators solutions thing is really about educating our employees in all of our companies, large and small businesses that we have to vote to change the kinds of policies that are making it difficult to do business. >> michael we appreciate it. i do appreciate you being on this morning, michael. thank you.

>> thank you, you're very welcome. >> if you can throw something and say counselor, you're leading the witness. i object. >> i can? >> you are allowed to do that. >> can i get a yellow flag and red flag and throw them every which way, is that okay? >> i would never do that. >> you would never do that? >> i would never lead a witness, never. >> coming up, quarterly reports from jpmorgan and wells fargo, we're going to head down to the new york stock exchange for the latest buzz from wall street. don't go away. >> ready or not the stock of the day is coming up. you're watching "squawk box" on cnbc.

welcome back to squawk pox box. let's get straight to the exchange and we have been all over j.p. morgan and you guys i am sure are going to be all over j.p. morgan and probably the street signs as well >> we'll be covering it all day. the call continues. the q&a has begun and jamie dimon is answering questions and things we discussed over the last couple hours, it does appear over the last few days is when they made that decision the marks with the cio were not sufficient, even though on the call cavanaugh said that they were with bid spreads after listening to hundreds of hours of tapes in different languages they apparently decided they were not in a sense in good faith so to speak as we learned earlier in answer to some of the questions at least that andrew

and joe were bringing up earlier in your show. callbacks, seeing significant ones for people involved including ina drew and in terms of whether jamie dimon will be, that's a decision made by the board. >> i hesitate to mention but business was really good. >> oh, yeah. >> throw that out there. i know it is meaningless. june was strong. i refuse to talk about that and this was good. >> we'll be watching that stock price of course when it opens, mandy, because as jim says there was organic loan growth, middle market growth, mortgage origination growth and all seen as potential positives and the investment bank wasn't too bad. >> kind of surprising. >> jim, so the good news is that the business may be solid and maybe the stock will move up on that. i am curious as we have had lots of conversations back and forth about management and risk and how you think about jamie dimon and the management team at j.p. morgan and there are times you

have liked them and times you hated them. does this change your view one way or the other? >> i am holding up a bottle of white out. i feel better. this is what was used. if jamie dimon took his eye off the ball, it is one thing. when you use white out, jamie dimon can't fight it. fraud is difficult to protect. i feel better. >> they have not said it was fraud. >> no. i am saying that it cou fraud. i am saying it could be fraud. >> although given the comments they made, it does appear they made a decision. if the marks were within the bid ask spreads and they listed these hours of calls and decided they were assembling, i don't know that it gets to the level of fraud. >> i am saying you can allege fraud which is better than jamie dimon spending a lot of time not looking at the run. if the run is hampered or whited out, that's not dimon that can find that. it is a forensic account. >> you were hard on jamie, i thought. >> yes, i was. >> so now you actually think this to some extent makes you

recalibrate how hard you want to be on him because it may not be his fault? >> if it was hidden deliberately, that's different than hiding in plain sight and he wasn't rigorous enough. that's what i want to find out. >> then again, you hire people that oversee people that figure out who you want doing things. you can always take it back another step. >> you can say it is possible i don't understand that run and it is going against us versus that run is a lie and what i better was the possibility, not saying that there was fraud, the possibility that there was, the equivalent of white out on the run. >> a little more wiggle room. >> when we toss down to jim and david, i was going to order a fruit basket or something. i can't do that. >> bankrupt. it went bankrupt. >> jim and david. >> harry and david. >> all right. i got it. harry and david. >> the best pears in the world.

>> you can't do that, fruit of the month or something? >> i can take care of you. you know i live to serve you. >> there you go, on the record. >> a little bit too much info there. >> david lives to serve the smarty pants. >> for how long, david? >> longer than the average couple that's for sure. >> because we were not the average couple. we were above average. >> we'll see you in a few minutes. thanks, jim, david, see you then. >> coming up, final thoughts on the guest host former bbt chairman jenn allison and talk about j.p. morgan and a lot more after the break.

stock of the day has to be j.p. morgan. now called up and kramer alluded to that, that behind all of the intrigue and drama and hyperbole and cable news discussion, business was good. >> it was good. >> can we use our last minute to say what happened? i guess the biggest thing is they had to restate their first quarter numbers to include a bigger loss for the whale trades because the synthetic derivatives were marked not in good faith. >> we got an e-mail. i don't know if you saw it. this came from cass, and i will ask john about it. most interesting thing he came up with, the cio contributed 3% to overall bank profits from 2007 to 2011, but in other words a lot of risk has been taken for no gain throughout that whole period. >> in theory, the cio was supposed to be managing price. >> right. >> that was the theory.