♪ >> welcome to "squawk box" here on cnbc. i'm becky quick with andrew ross sorkin and steve liesman. our headliners include a right-hand man to tim geithner, deputy treasury secretary neal wolin will join us. a man synonymous with financial reform, chris dodd. let's get you up to speed. citi group saying the chances of greece leaving the euro in the next 12 to 18 months have risen to about 90%. the bank had previously put that likelihood at somewhere between 50 and 75%. a citi report suggests italy and spain will be taking a formal bailout from the eu and imf on top of the banking aid for which madrid has asked. we'll have more from kelly evans in a few minutes. midwest drought is not getting

any better. conditions in the midwest are the worse they have been in half a century. agriculture department extension food costs will rise. and a number of companies are reporting today. before the bell we'll hear from exxon, 3m, your nighted technologies, boston scientific, colgate palmolive, kimberly-clark, mcgraw-hill a few of the names. >> sounds like a busy morning. in other news to watch a couple key economic release, weekly jobless claims tn at 10:00 the national association of realtors reports on pending home sales. treasury secretary tim geithner returns to capitol hill. it's official united technology selling three industrial products businesses to private equity firms. the price tag, $3.46 billion. they will use the proceeds to

repay southeast short term debt needed to propose it's $16.5 billion acquisition of goodrich. a number of reports this morning suggests manchester united may delay its ipo due to a weak market. let's talk about some corporate buzz this morning. standard & poor is tloelowering credit rating for duke energy. they are bringing back the old ceo warning it heightens regulatory risk for the company. j.c. penney set to cut prices next month and sell more noncore assets by the end of the year. the "wall street journal report"ing this morning that the retailer plans to discontinue month long specials instead going to be cutting prices on up 20% of merchandise by up to a third and that stems be a reversal from the earlier plan, becky and a lot of eyes, obviously, all over j.c. penney.

it's ceo came from apple. >> target before that. two huge successes. this is a tricky story. retail whenever you try to change your entire strategy you risk 0 fedding your existing customers and who knows how long it takes to bring in new customers. depends on the merchandise you have in the store and that's the big question. >> this was the big bill ackman play. >> that's right. let's take a look at the markets today. right now you'll see that there are some pressure on futures especially when you take a look at the nasdaq. it's down by ten points. dow futures down by 23 points and s&p futures down by 3.5. april lot of things that happened last night, zynga really raising a lot of questions about what will happen with facebook when it reports later today. that's got people a little bit edge. there's all this talk about whether greece will or won't stay in the euro. most of the time when we talk to people about whether they will stay in the euro, will the euro

don't exist in five years or not? you don't often talk about these death by a thousand cuts. whether greece stays in it or not that's a question of the day. let's take a look at oil prices. oil prices are down by 1%, 88.09. the ten year, obviously, huge part of the story. ten year at 1.394%. well below that 1.4%. i'm not sure this is a new record low but near it. steve, you have to be watching this? >> i don't remember seeing a three before after the one dot. >> it fell very briefly earlier this week. but it closed above it. >> ble 1.4? >> no. closed above 1.4. this is a trade in the middle of the day. >> it's the over, you know, over and over again fascinating argument about is this in anticipation of fed action. >> right. >> is it perhaps related to what's going on around the

world. some combination. i think there's got to be some built in anticipation that the fed is going to move here but, again, you have people say, you know, why is the fed going to move. it's not going to do any good. you look at the ten year and you say how much of that is built in. >> the way it was kind of laid out and what's been telegraphed and people are calling this a telegraph, the way it was laid out is maybe this time but maybe the next meeting after that. so -- >> didn't think that was news. >> in the "journal" or "times"? something was in the water that day. >> if i can go back to the tale of the tape. when bernanke spoke, every journalist, not ever journalist, many journalists including one. people from "new york times" said no news here. i said no you're all wrong. that bernanke is downgrading the forecast which is increasing the probability of qe3. i said this the week before. so you guys are not paying

attention to what bernanke is saying, a chairman who does not front run his committee, ala in difference to greenspan. he downgrades and raises the probability of qe3. everybody said i was wrong. rick said i was responsible for turning around the market. i don't believe that be true. i thought my analysis was right. a week later they come along and say the fed is moving closer to qe3. they are a week late. >> without telling your sources, i don't want to giveaway the magic how does a story like that gets out. you know how the system works. what is going on? >> well, i think one of two things could have happened. a journalist could have had a nice background chat with some key sources, or what could have happened -- this is actually my suspicion is a bright and excellent journalist write as story that correctly previewed what was going on with no

particular new information in it and his editors decided to put it at 10-4 as an alert. there was no alert aspect that. >> that was interesting because of the market's reaction ten minutes before the market close. >> the market rallied by 50 points. >> that's the next thing i was going say. it's true. the fed officials are closer. what would have been news would have been, if either of the papers, this would have been news to me, something i don't have works have said it's likely at this meeting. but the way i read both stories was it was very even handed. could happen in this meeting or could happen next meeting in terms of additional quantitative easing. maybe i misread it. i read it three times. still got it wrong. i didn't see them telegraphing this meeting or the next one. had they done that boom i was scooped and i would be happy to take it on the chin. you know that feeling. when you lose it.

i don't think i lost it. >> you're talking to the queen of retail. she used to cover this stuff. >> she sat two cubicles way from me. >> wherever she goes i'm there next. time for the global markets report. kelly evans, standing by in london with a lot to tell us. kelly, what's going on? >> yes, steve. i guess i followed both of you guys too. but good morning. behind me you can see that we've got a bit of a split session overnight. stocks are kind of fighting to see whether we'll be up or down the session as we hand over to you guys. we're seeing stoxx 600 up 0.01. alcatel lucent down 8.5%.

it's is going to cut its workforce by 6%. royal dutch shell is down 3.7%. siemens more than 4%. basf down 1.5% all of this following weaker earnings or guidance. we had the basf ceo on our program earlier this morning said order quality from china was very weak and this runs counter to a lot of chinese ceos we spoke to over here for the olympic games who struck a bit more positive note. not too surprising given the reaction we've seen in the blew chips, the boards are weaker. ibex 35 is down almost.4%. xetra dax down .8%. let's look at the bond wall. we had some interesting comments

with regard to greece and spain. citigroup economists are putting 90% chance on a grekexit. up from 50 to 75% earlier. the spanish yield actually fallen this morning 7.35% here. we're seeing a little bit better action across the board. ten year in italy is at 6.5%. france and germany, take a quick look, despite reports for example that the greek banking system has seen deposits fall to the lowest self since 2005, markets are taking a breather. also taking the breath terrify olympic torch. i want to show you these images. earlier this morning it passed by our european headquarters here at cnbc in london and it was kind of neat. you're seeing there the hand off happening in front of st. paul's cathedral. so on that note i'm going to toss it back to you guys and

join some of the fun myself. >> we're jealous. >> do you have tickets to the opening? >> no. i don't have tickets to the opening ceremony although it might rain but i'm okay with that. i'll see beach volleyball saturday morning. i hope it's southeast men's too and not just the women's. >> years ago i covered women's beach volleyball at sidney. i'm sure there's a joke to be made about that. let's get to the news. it's only the 6:00 a.m. hour on the east coast but a number of stocks on the move. let's go through a recap. facebook game provider zynga, they are now slashing their 2012 outlook this after quarterly results badly missed wall street targets and facebook shares falling sharply in reaction and ahead of its own report tonight. we'll find out what those numbers reveal. they rely on farmville creator

for its revenue. a big deal. different story of shares of western digital hard drive, the hard drive disk maker posting much better than expected results after the close. shares of rival seagate rising sharply on that news and akama stock jumped. shares of cheesecake factory rising. i've never been to a cheesecake factory. the restaurant chain posting higher same store sales by attracting more customer, earnings beat the streets and margins rose. company announced it has instituted a dividend so that's going to be a big deal. shutter fly results beat the street analysts say the numbers offer hope into online photo service. they can grow even as more people post that your favorite pictures on social networking services. that was the worry that facebook would somehow overtake them.

visa earnings and revenue beating the street. miss quick? >> let's get back to more on facebook right now. big question is can the world's largest social networking company convince investors to like the stock? gene, do you think what we heard from zynga last night is any reflection what we should expect to hear from facebooking tonight? >> you know, would you think so but at the end of the day as facebook gave its guidance in the the middle of june site won't have a big impact. that's going the end takeaway. the reality is that people are nervous about this but facebook gave their guidance with plenty of room to go. >> the other thing zynga was blaming its problems on a couple of things. one is the development new games. the other is they said there were changes in how they were prentd on facebook making it a little tougher for people to fine them, maybe, which made me

think, maybe these two aren't linked as people were thinking. >> exactly. i think if you actually go through and break down the numbers and look at the percentage of facebook that comes from zynga it's 8%. if you take zynga mess and apply that to the facebook numbers it will imply about a 1% head wind. so getting back to the fact that facebook gave guidance very late before they, in the june quarter, in a combination that they haven't been emphasizing the zynga games as much, facebook will do just fine tonight. i realize that's going against the grain of what most investors are expecting but i think the results are just fine. >> what is just fine in your opinion? how should we be reading this. it has to be over this 1.15 billion in revenue. a lot of angst around this not because of the zynga numbers but

this shift to mobile is putting a big cloud over the facebook story. obviously the engagement they made a lot of money desk top and as people use their smartphone they don't advertise as much on smartphone. that's obviously put this cloud over investors. it's funny because going into the zynga report last night a lot of investors were thinking there was down side risk to the facebook numbers. throw on top of that what happened with zynga and i want create this very surprising set up where i think if facebook just does the numbers the stock is going to pop on this. >> yesterday kayla tausche brought up a good point. in terms of compensation they handout in stock to employees they could take a charge for this in this quarter. would that come as a shock to the street? >> they have been highlighting that that was coming. i don't think that's going to be a dig -- >> she did say this was in the

prospectus. seeing the headlines, seeing a big number, does that run through the mind of investors? >> it's not a big surprise. what people will be concerned about is a little bit about the june quarter. facebook probably won't give guidance. the real stinger is in how they guided for the september quarter. what you could see tonight is facebook posting some upside and some analysts could lower their numbers for september because of what they saw in zynga. >> very quickly, your price target, do you have one at it. the stock now is at 29.34. >> $42. seems hard to be optimistic. you can't bet against facebook longer term. 1.2 billion users. get into new ad units like mobile and e commerce. they will have this new want button in the september quarter. so my message is this.

it's choppy now but look to the future. >> 29.34 is where it closed yesterday. gene your point is made. this is a set up if they hit those numbers maybe some upset rise surprise. >> i want it, i want it. coming up the picture from the futures pits. we'll talk facebook earnings, citigroup's call on the grekexit. and then later, neal wolin will join us on set and we're going to talk about mr. sandy, libor and breaking up the big banks. nothing is off the table. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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welcome back, everybody. u.s. equity futures at this hour are a little bit lighter. you're taking a look at some red arrows. i take it back. things have turned around in the last five minutes or so. there were some comments from draghi. i noticed comments from draghi that came through as i was in this last one. the ecb wants to break the link between banks and national governments, and the eu wide deposit insurance fund to follow. wow. so draghi is making some comments right now that sound like this could be -- okay. draghi saying sharing national

sovereignty on the eu to come. the comments i'm seeing, these are headlines that are moving, he's speaking somewhere and said sharing national sovereignty on the eu level to come. that has been a huge question of whether these other nations would give up sovereignty. i don't know what he knows at this point, how solid it is. it's moving stocks. dow futures were down 20 points a couple of minutes ago. at this point it looks like they are up 45 or 50 points. >> ecb wants to move within its mandate. that's an interesting comment. he wants to do something. >> right. >> but it will be within the context of price stability. >> although we talked with jim o'neill who said draghi made comments over the weekend that were very important. he said nothing is taboo when it comes to ecb actions. jim and other people have been expecting that the ecb might make some moves that other

people had not been anticipating. you would thing if draghi would do that he would say it's within his mandate. >> can tell you, a lot of the official people i talked to on the u.s. side are looking to the ecb to do something and feel as if things could and will be, would be better if the ecb were to act. there's a bit of international pressure i think on the ecb to act. >> look at this comment. he says the ecb is ready to make whatever it takes to preserve the euro. this is very strong talk coming from draghi. a lot of investors wondered why he had not moved sooner because they do think it's within the ecb's power with or without j m germany to go ahead and make this happen. people said draghi might be able to find a way without putting merkel in that position of going back and negotiate with her constituencies. >> while germany has objected to

almost everything the ecb has done, they've eventually come along. so they sit there and scream and shout and try to get the best deal possible for germany but eventually do reverse. the german objections -- >> it's best way for merkel to see this. >> may not be the best outcomes. >> this is definitely something that's moving right now. we'll continue to watch through these headlines. in spain the markets are up 1%. let's look at our futures board. again just in the last five, ten minutes we were looking at those dow futures being down by 20 to 25 points. you just saw a 75 to 80 point swing based entirely i would assume on what draghi is saying. no other headlines that come out that move. you're talk about i guess at this point an 85 point swing. >> how did you know that? was that just -- >> i saw draghi headline cross when i was talking. >> that just came across? ? what came out?

>> the clicker. >> he's working on the news desk. >> sent a whole list. >> these are the things that we're going to be following very closely and steve maybe you want to talk about this right now. >> if joe were here he would make fun of what sorkin just said. >> let's talk -- >> the markets are about to get hit. let's go to ira harris. ira, did you northern this turn around here? >> i'm just hearing from you. the turn around will be much more -- we have to pay attention that 2.10 spanish curve. i was looking at it yesterday. the day before we got down, to it's really flat and back out in march we were up to 300 basis points. steep on that curve because people were buying the short end of the spanish debt, short end meaning within three years. now if you look at that chart, i

know it's not in front of you but go back and look at it later. we've come back down to almost the pre-levels back in -- i'll give the exact date november 25th of '11 when that curve was about 80 basis points. >> i got 1.1 now on that curve. >> we bounced up about 30 basis points which you see the reality which it's created over the last two days. i guarantee you if these draghi comments stick that curve will go about 1.2, 1.3 today and help motivate more risk taking. to me right now that's very critical. >> ira, characterize yesterday's gain. one day of double digit gains. how exciting is that to you? >> more importantly the market, softened the apple earns. that was critical. what we saw go with it, the gold went with it. we're getting a sense, you know,

exactly what you were talking about, europe will yield. it's the audacity of hope europe may it please get an idea. we have to back track. the last ridiculous comment yesterday which said hey i'm going on vacation anyway. the markets -- he said this. the markets have it wrong on spanish debt. and every time a european -- >> guys there are more headlines coming. let me tell you what else they are saying. draghi the eurozone has the power to beat market expectations. draghi, the eurozone wide supervisor will be established fast and well designed. this is not talk. he's got a plan that he's announcing right now and the markets are listening in. >> ira, thanks very much for joining us. we hatch to go to break. we'll come back and monitor this news that we have coming from mario draghi. >> in the meantime --

>> neal wolin is hear today. this is big news. >> coming up it was a call heard around the word, you know what it is and you heard it here first. >> wow. >> think what we should probably do is go and split up investment banking from banking. >> the man who created the financial supermarket wants banks to be broken up. today we'll get the industry's reaction to the suggestion from cam fine. a big debate when we get back after the break. if you are one of the millions of men

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reaction to headlines coming out from mario draghi. we've been talking about them. some of the things he's saying certainly caught our attention especially after the markets moved on this. he's saying the euro area is much stronger than people acknowledge. he says the ecb is ready to make whatever it takes to preserve the euro. he's speaking at an investment conference in london right now and steve you say some of these things are things we've known about. >> we've known about the idea about them being a central bank, concept of having a central banging regulator and being consolidated under the european central bank. what i think is new here and not hard to figure it out. the only thing the market cares about will the ecb do more or not and when he says the stuff, when he says that they will do all that they can do to preserve the eurozone from collapse that says to the market ecb will do more. the thing that stands out the me and i'm not seeing anything more interesting than this is when he says -- let me see if i can find

it -- ecb wants to move within its mandate. that's the way of saying we're not going break through but might come right up against the edge of it. we'll act for growth reasons or act to turn the market around. >> can i be a debbie downer? is this a head fake? is this another we think he's going say something? >> what's your criteria for a head fake? is it something that doesn't ultimately solve the problem? >> that's clear. >> remember how the market rallied on the rtos, when the ecb acted the market rallied. >> he's not doing that yet. >> he's giving you a good snafl something coming. >> think so too. when you add up what we heard from jim o'neill draghi said over the weekend nothing is taboo. another piece of the puzzle. the markets are reacting to this because just before we heard

these headlines the market was down by 25 points. the dow futures were down by 25. now they are up more than 60. also in europe things have picked up as well. take a look at european markets. at this point in franks market is up over 1%. ftse up over 26 points. steve pointed out the euro actually picked up a little bit. >> yeah. you can't see it on that chart because it's such a small move but you can see a tiny blip there. >> zoom in. he's in jump. >> he's in paris or italy and has to pay extra. >> just 1.2195. >> closer to 1.21. closer to 1.22. >> also if you take a look at oil prices we've been watching earlier down by 1%. rebounding some because of that euro there are correlation. at this point they are flat. down about seven cents at 88.90.

the ten year actually the yield picking up on this. >> i got to call the broker again. >> at this point the yield is 1.423%. gold prices was 1.394%. right now gold prices down slightly. flat lined at 1600. >> i can make one more comment. the question is relative to what? what you see here is a market with a lot of money on the sidelines. i was at an event this weekend and talked to hedge fund guys sitting on tons of cash. all they want is some sense of a green light that to put some money into the market they are not going to take their money and so it doesn't take very much policy action to solve some of these things to get the market to pop especially after three down days like we had before yesterday. >> okay. let's get to a different

segment. it is, i should say on the front pages of every newspaper out there, it is the comments that everybody is talking about and you heard it here first on "squawk." take a listen. i think what we probably should do is go and split up investment banking from banking. have banks be deposit takers, have banks make commercial loans and real estate loans. and have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail. >> okay. here now with some reaction is cam fine the ceo of independent community bankers of america and good morning to you, cam. >> good morning. >> i think during the commercial break yesterday with sandy, becky and i said this is going change the debate. at least it felt that way at the moment. i had no idea at the time what was going to happen the rest of

the day but tell us from your perspective how you think it will change the debate. >> well, it adds a significant voice to the icba choir of break up the banks. you know, you already have some significant thought leaders, financial thought leaders all saying the same thing. so when you get a figure, a legendary banker, someone who is respected as one of the great banking forces in our society saying that we should break up the big banks, we should separate investment from commercial banking, that really is significant. there is a reason why he's on the front page of every major financial paper in the world. >> so, walk us practically through what happens next? the debate may be shifting but is there any realistic

possibility that the banks end up getting broken up in a meaningful way? >> i think there is. i think there is growing traction and it's a grassroots kind of thing. it's coming not only from thought leaders but from the people and as long as we have this sort of steady tattoo of blunder, of libor scandals showing that these banks are not only too big to manage, they are too big to regulate. the regulators cannot get their arms around these entities. >> cam, who is going to do it? will it be the regulators who will ultimately decide they should be broken up or ceos and board of directors of these banks to make a business case. one thing that was interesting about sandy's proposition he thought ultimately they would be more profitable as separate entities. >> he's right. i totally agree with sandy. in fact his icba membership card is in the mail going to him as

we speak. but, what his point was, is that the banks the banking system will not return to the stature it was until we get government intrusion out and the only way to do that is to separate the highest risk portion of the financial services sector from the commercial sector. >> does that mean we'll see a bold executive or bold bank decide to be the first mover? how does this happen? >> i think it will evolve. you could see it happen that way. congress and the regulators could pressure that type of reaction. in other words as the volcker rules, as more and more rules pile on it could for the ceos to take this action whether they wanted to or not. >> cam, steve liesman here, isn't dodd-frank for all the complaints about it designed to do just that, it makes it more

expensive to be a big bank, it piles on more regulations, so i know you're a huge free market supporter but my question to you is sort of along the same lines, how would you make this happen and is dodd-frank sufficient enough a headache and a charge to capital that capital will flee the big banks and really go to the smaller banks? >> are you asking me, steve? >> yeah. >> yes. i think that was the end objective of dodd-frank, certainly it was the end objective of sheila baer. it was to disincent the banks from getting bigger. you'll see capital floss regionals and smaller banks as some of these regulations would kick in. >> do we need to do more here, cam, in your opinion? if you support this process or

is that enough? >> well, i think that we need to take a very hard look at separating investment banking from commercial banking. i think we should heed the words of tom who was the fed president who has a plan for separating investment banking from commercial banking. it's a very solid plan and it need to be given a hard look. . >> cam, let me take the other side of this argument. yesterday after sandy was on the number of emails that came in i can't believe sandy has said, he doesn't understand what's going on any more. this was the kind of thing they heard. they said look we're trying to be competitive on a global stage. playing against much bigger if you thi we're supposed to be the engine or back room engine of our economy we're only going to be shooting ourselves in the foot. you say what to that?

>> i say sandy was right. doesn't matter whether he's been out of the industry for ten years. he's a force in the industry. he's a visionary. and he had it exactly right. our banking system cannot come back to its full stature until we can get our arms around these companies, until we can separate the high risk taking from the commercial banking, because as long as the government perceives that the taxpayer is at risk we're going have over burdened government intrusion. i mean we're, my banks are being crushed by regulatory policies. then basil three doesn't help. >> there were some opposite emails that came in and said i wish he said we made a mistake. much more course today on sandy's call including an

exclusive interview with former senator chris dodd. wrote the bill. you know it well. 8:00 a.m. eastern time. >> through neal wolin will separate out these comments from draghi. big move out of these comment from draghi. any comments or questions you see here on squauk, e-mail us at squawkbox@cnbc.com. we'll talk earnings, state of the economy and be global earnings. >> tomorrow on "squawk box," 0-guest host peter sheffer will tell us where block rock is invests more than $3.5 million. we'll get analysts reaction as facebook's first quarter report as a public company. and "first look" at economic growth in the second quarter. you can't miss "squawk box" tomorrow morning starting at 6:00 a.m. eastern.

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welcome back. fears about spain in the headlines every morning so we sent our caroline to valencia a roi region that reignited concerns. what did you find there? >> this is one of the worst hit regions in all of spain and now it's paying a very, very high price for years and years of overspending. like many other regions in spain valencia has been completely shut out of the capital market since the beginning the year and, steve, as you say, boy did valencia spook the markets last friday when it was the first spanish region to tap the spanish government for aid because essentially that's the only way it will be able to cover its financing needs for the second half the year.

let me just run you through the most important steps. it's financing needs for the second half of the near stand at 9.2 billion euros. valencia is the most indebted region in spain after catalonia and worst offenders in terms of the deficit to gdp slippage last year the deficit came in three times higher than planned. guys, back to you. >> thanks very much. still to come on "squawk," the ceo of starwood hotels, treasury secretary tim quite heads back to capitol hill but his deputy, will spend the bhourngs. neal wolin is our guest host. later, former senator chris dodd joins us live at 8:30 eastern. [ female announcer ] e-trade was founded on the simple belief that bringing you better technology helps make you a better investor. with our revolutionary e-trade 360 dashboard you see exactly where your money is and what it's doing live. our e-trade pro platform offers powerful functionality

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welcome back, everybody. starwood hotels everybody 78 cents a share. joining us is president and ceo fritz von passion. these are strong numbers. where are you seeing the most strength in terms of consumer versus business and in terms of which region of the globe? >> yes, so our business continues to do better than you would think if you look at the headlines certainly. that's an underlying trend we've

seen for a while. what's driving that is first of all business demand is strong across the board so companies are getting out and traveling in search of growth, professional services companies are serving their clients, tech companies are looking at new markets. and then geographically we're seeing strength pretty much everywhere around the world with some softness in western europe, and a few countries like argentina, but if you look at africa and the middle east, much stronger growth than last year. pa latin america continues to grow and then the u.s. because supply is so constrained there are so few new hotels that have come on the market, occupancies and rates in the u.s. continue to do well also. >> you don't have to offer discounts to get people back in. is this because you're more high end than a lot of other chains out there in. >> that has an effect. there is a rise in wealth in markets around the world. today there are more

millionaires in asia than north america but this is a more travel intensive global economy than we've seen before because of how connected people are today and because of how businesses now spread to so many different markets around the world. >> what do you think when you hear the fed thinks things are slowing down that central banks are going to be acting, that there are a lot of concerns about europe in particular, what do you think? how do you match up what you're hearing in those headlines and what you're actually seeing on the ground? >> well, there's no question that the global economy is not having anywhere near the strong recovery we hoped it would and there are certain markets where things are downright slow, but what's behind this for us is this strong underlying trend as wealth increases and rises so far around the world. i mean, if you have the equivalent of three to four chicagos being built in china because of the urbanization there, that long-term trend dominates what's going on in terms of the headlines quarter to quarter, or for that matter even gdp growth quarter to

quarter. >> fritz, what is the outlook for business spending? what are you hearing in terms of the guys on the road, who live their life there? >> i've been saying this for a while and continues to be true. i have yet to talk to a customer among our corporate clients who says they're going to travel less in the second half of 2012 than they did in the second half of 2011. >> that's important. >> very important. >> we keep hearing of cutbacks and he is saying he's not hearing it. >> that's correct. >> fritz, asia, you spent last summer a year ago you were living in china for the summer. >> that's right. >> you made a number of investments there. there's an argument to be made things are slowing. how are you feeling it? >> well, we're seeing a deceleration in revpar in china, we think that has more to do with the eminent change in government and supply and demand were a little out of balance. we've signed more deals to open

hotels this year than we have last year at this time and last year was certainly a strong year and of the 100 projects we have under way, there's not a single one that's on hold right now so i this i that reflects confidence in china generally and we'd like to think also confidence in our brand. >> fritz, thank you for joining us this morning. we appreciate it. >> pleasure. when we come back, dow chemical ceo andrew liveris will talk outlook and the global economy, first he's here and on the set, welcome our special guest host, deputy treasury secretary neil wolan, talking libor, regulation, making sense of mario draghi's comments this morning, we have two hours to do that, stay tuned for that and a lot more after the break. there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone.

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the breakup bombshell haerld around the world and you hear it here first. >> breaking up the investment banks and the banks, are you suggesting breaking these companies up? >> that's exactly what i'm suggesting. >> deputy secretary treasury neal wolan is here to weigh in. the economy front and center, inside from tim geithner's former bank adviser. and earnings reports from dow chemical, we'll crunch the numbers with andrew liveris. the second hour of "squawk box" begins right now. ♪ good morning, welcome to "squawk box" on cnbc, i'm andrew ross

sorkin along with steve liesman and becky. joe kernen is off this week. the dow looks like to open up 90 points higher over the ecb's mario draghi making serious comments about the fate of the eurozone, that it is not in danger of breaking up and the ecb will do what it takes to preserve the euro. we'll ask guest host neal wolan in a moment. the eurozone's biggest bank santander saying its first half profit was cut in half after it took write-downs on deteriora deteriorating spanish assets. also today, telecom maker alcatel lucent will axe 5,000 jobs as the company looks to cut

costs by $1.5 billion by the end of next year, it comes after the company warned last week it would miss its 2012 profit margin target and announced a second quarter adjusted operating loss. and zynga slashing its 2012 outlook and quarterly results, a badly missed wall street target sent its stock plunging 35% and cast i casting a cloud over facebook, investors expecting a larger hit to facebook which relies on farmville for more than 50% of its revenue. we're going to get the facebook number after the market later today. becky? we have some news from london this morning. cnbc's carl quintanilla caught up with mcdonald's new ceo don thompson and joins us with details. carl, great to see you. what happened with don?

>> reporter: good to see you guys, beck, you're absolutely right, we're less than 48 hours away from opening ceremonies of the 30th olympiad. one of the reasons we come to these games is because it is a major gathering for corporate america and mcdonald's was first out of the gate today, had a big press conference with ceo don thompson a few weeks into the job, took over for jim skinner at the end of june, opened the biggest mcdonald's in the world, guys, seats 1,500 people, a staff of about 500, they've got four different restaurants at olympic park, one of them is an olympic village where some of the athletes can eat. there's been controversy over mcdonald's sponsorships saying the company sends the wrong message on nutrition but the recent quarter a tough miss, the first time in years they've missed on earnings, tough guidance for the second half and i asked don with all these ceos,

marissa mayer at yahoo! ron johnson at jcpenney coming into a new job with a tough company i asked him if he's been dealt a tough hand. >> we happen to be in a tougher global economic environment, but historically we've done well in those environments and so we'll continue to leverage the experience we've had with a senior leadership team around the world and we'll move forward. am i inheriting a tougher business, if you would? no, it's mcdonald's and it's the consumer business. it's the restaurant business and so we'll continue to execute the strategies we have and listen to customers and that will help to us migrate threw these times. >> reporter: london is bracing for the full impact on their infrastructure, one of the oldest transportation systems in the world, first laid out by the romans, parts of the train network go back to the mid 1800s. it's estimated because of the games there will be an

additional 1 million road and rail trips taken every day in addition to the 3.5 million that are ordinarily taken here in london and david cameron, the prime minister is out today pleading for corporate america to invest in the united kingdom. london spent $14 billion on the games since they landed them in 2005. you saw the economic data, gdp in the second quarter shrank worse than expected. this morning "the times of london" guys has, leads with cameron asking the world to invest in the country and has ten reasons to be cheerful. i love this, number one, summer is here, that's a good thing. number seven, gdp numbers may actually bounce in the third quarter because of olympic spending, and number six, guys, and you'll be talking about this all day long, one reason to be cheerful is britain is not in the euro. and that sort of sums up the mood as we come to a city, guys, where it's going to be a great games over the next 17 days but it also is one of the banking

capitals of the world, and it's gotten a lot of attention in recent months and not for all the right reasons. >> carl, i see the stadium behind you. are there any fireworks playing this time around for the opening ceremonies? >> reporter: yeah, you're referring to beijing, where fireworks happen and there was a delay for u.s. and we'll see if there's that drama again today. i think you're seeing olympic stadium over -- no, nice sound effects. this is a sculpture on this end i think sponsored perhaps by coke, i'm not entiring sure and the stadiums over here, we're not too far from olympic village where the athletes stay and a bridge that leads across, we'll get you a picture of that later. we've been watching athletes cross this bridge by our set and go jogging in the morning behind us. security wise getting into olympic park took i'm guessing an extra half hour because they were not only checking all of our camera gear but putting the mirrors under all of the buses, after one of the private

contractors was unable to come through with all the workforce needed so it's highly organized but logistically these things are always a challenge. >> how does it match up with what you saw in beijing a couple years ago? >> i would say the general sense is it is very much what the city originally promised, one thing one of the ioc members said. unlike past games what you said you were going to deliver you delivered, however they've been able to do it and everyone's been exceedingly polite especially the military personnel who were all over the park just extremely wonderful attitudes, and you got to imagine the pressure they're under, having the whole world watching. that's got to be tough to do. >> carl, we love getting to talk to you, even if it's from all the way across the pond and we look forward to much more over the coming days as we get closer to the olympics. thank you very much. >> see you later. dow chemical out with earnings this morning, they came in at 55 cents a share, that was

nine cents below what the street had been expecting. joining us is andrew liveris, president, chairman and ceo of the dow chemical company and andrew, thanks for being here this morning. >> nice to be with you, becky. >> it looks like earnings came in a little light in terms of the earnings per share and revenue light as well, $14.5 billion versus the $15.7 billion the street had been expecting. what happened in terms of the business lines? >> well, very clearly, the quarter was very weak, becky. actually i think we had a good result in a very weak environment coming out of march, q1, we saw strength around the world especially in the developing world they were overcoming the euro crisis but that was really a head fake. april was as weak an april as we've seen and some of the conditions in q2 were reminiscent of '09. i would tell you that controlling what we can control mantra which i'm sure you're hearing from most now is really what most of us are doing,

basically hunkering down and getting our shop to really produce results like these, which i think are decent results. the revenue and eps misses is mostly currently related out of europe. we have a third of our footprint in europe and most of the eps miss was all currency and the high turnaround season which happens in the spring here in most of our northern hemisphere factory. it's weak and june was stronger but we've got cautious buyers, inventories are very low. i will tell you the falling hydrocarbon prices were an indicator of the weakness of an economy, and frankly, going into july, the demand really hasn't picked up, i will tell you outlook wise this is very hard to call, i'd say it's opaque, and frankly doing what you can to control inside your fence so you can produce your results is really what's going on. i'd call the euro in a recession clearly and i'd say china got

hit by that during the quarter. >> we heard from dupont earlier in the season and they missed largely because of the currency fluctuations in the euro, they managed to beat expectations on the bottom line. is that because they have more of a mix in agricultural? is that because they have a different setup internally? how would you characterize that? >> well, look, the few bright spots out there, agriculture is one and our agriculture results were up double digitses as well, a small part of our entire enterprise basically. the other part is the energy world, u.s. energy seems to be a bright spot that we actually have a large footprint in america so that helps us a little bit. you can't export if no one's buying and i'd say euro affecting emerging world in particular china is one of the new factors out there. when you have so much of the world at or near recession or dropping quickly on growth, your

portfolio does matter and i think agriculture and energy are bright spots. look, i would say most of the industrial engine out there is weak to anemic right now. >> okay, and andrew, you have a company that gives us great gauge of what to expect with the economy. this morning we have a ton of news coming out and that forces us to not spend as much time as i'd like to with you. if you would, we'd love to have new studio because everything that happened with dow gives us a great outlook in the global economy. thank you for joining us this morning and please come back and visit again soon. >> thank you, becky. treasury secretary tim geithner is sending a double-edged warning to crisis, the european crisis threatening the nation's economic recovery. >> these potential threats underscore the need for continuing progress in repairing the remaining damage from the financial crisis and enacting reforms to make the system stronger for the long run. >> "squawk box" also made

fireworks yesterday with former citigroup chairman sandy wyle, take a listen. >> there is such a feeling among people, among regulators, among the political system all over the world against the banking system, and i don't think that's going to change so soon, so i think what we should probably do is go and split up investment banking from banking. >> those comments have sparked what you see on many of the front pages of the paper this morning, here is "the financial times" "the new york times" right here, picture of "squawk," in fact. here to discuss all of this are guest host treasury secretary neal wolan, thank you for being here. >> good to be here. >> i hope you had an opportunity to see what sandy said. some people would argue that the treasury department and tim

geithner in particular have not pushed to break up the banks, in fact, have pushed back on that notion, earlier on, behind the scenes people said he was against the volcker rule initially. when you hear sandy weill say i was the architect of something and it no longer works, you think what? >> andrew, we spent a lot of time in the obama administration and the congress talking about what the right set of size and scope restrictions ought to be with respect to banks in the wake of the financial crisis and president obama fought hard to make sure that in that wake, we put forward a set of size restrictions on banks and restrictions on the scope of their activities, and that that reform include banks and non-banks and if you look what happened in the end, dodd-frank includes very, very tough increases in capital requirements, liquidity requirements, leverage constraints, a whole set of things that are really about making sure that we take care of and we pay attention to the size and the scope.

>> is sandy weill wrong then? >> well i think what we should be doing is putting in place the kinds of size and scope restrictions that dodd-frank contains. >> ultimately then you disagree with sandy weill, you think the banks from a competitive standpoint, from a regulatory standpoint, should the banks be broken up? >> look the economics of banking have changed in a very substantial way. you've seen not only analysts and equity investors but a whole range of commentators saying it is much harder to do business, much costlier to do business if you're a big, complex bank than it was before dodd-frank. we ought to continue that process and as we go if there are more size and scope restrictions that ought to be considered we ought to look at those. for the moment we've put in place a tough set of those kinds of things. >> i don't mean to be difficult. i'm trying to figure out what is the position of treasury. >> i want to make one other point that is think is important. the failure of wamu countryside, aig, bear stearns, lehman, those

are not about glass-steagall. glass-steagall would not have prevented them. we think it's important to have a regime that makes it safer not only for banks but non-banks. we ought to go forward with that regime. >> what's interesting when you mentioned those examples the big banks were around to buy them up and save the fdic quite considerable costs. >> that's right. >> it would not be painless to break up the big banks here. >> well, you know, look, it is much more painful for the big banks, now that they have that size and scale, they have to hold a whole lot more capital, subject to a set of constraints, a set of credential rules that changes their economics and makes it safer for all of us. >> i think what's interesting is what you're saying is you put in a set of rules that have made it harder to be a big bank. i think what andrew is saying is, what do you guys want to happen and are the rules enough for the optimal outcome here for the banking industry, for the economy. >> well i think what we want to happen and what we put in place

is a set of governors on size for banks. it should be harder to be bigger and costlier to be bigger. if you're bigger and more complex you ought to hold more capital. >> are you ultimately trying to encourage the banks to break up, is that the ultimate point of the legislation on the books? >> the ultimate point is saying there's certain activities the banks shouldn't be able to do, to be more buffers and capital and more costlier to be big and the ultimate goal even if you're a knob-bank and previously were not subject to all this, you ought to be subject to strong prudential rules so that the financial system is safe. >> let me ask you a different question. there are some people who have said that the treasury department is too close to the banking system, too close tost with, that they have not pushed hard enough, there's a new book out this week, you know it, called "bailout" from neil barovsky. mr. grecco in the control room, do you have that for me?

>> there it is, how good is g grecco? >> terrific. "there has to be wide-scale acknowledgment that regulatory capture exists, dominates our system and needs to be eradicated." what do you have to say to this? he was inside the bowels of your organization, and i wanted to get your comments. >> i think it's totally without foundation, andrew and i sit in the treasury every day. secretary geithner has been a public servant his entire career. secretary geithner has been at the forefront of this, the toughest set of rules that relate to the banks in the financial sector that have ever been put in place. we have worked very hard to make sure things like tougher capital standards, consumer financial protection bureau, you know, all kinds of things, are in place, and i think there's absolutely no basis to say that the treasury has been soft on banks, that there's been regulatory capture and you know, i don't

know -- >> did you read the book? >> i've read reports of it. i've not read the book. >> what do you think of it? >> i think a lot of it is not consistent with the treasury that i know and without foundation. >> okay, we're going to take a break. we have a lot more coming from you and a lot of other people around the table to talk about this and i think becky has something. >> i want to point out the doubts again, this is a complete turnaround. the dow futures are up by over 150 points. >> wow. so 190 turnaround, 1830. >> when we came in the dow futures were down 25 points. at this point a massive swing and all happened because of comments out of the ecb's draghi making comments and our michelle caruso-cabrera has been on the phones working things trying to figure out what the key is here, but michelle says the key line could be a signal that he'll be restarting the bond buying program. the comment was "to the extent the size of the sovereign primea hamper the function of the monetary transmissions channel

they come within our mandate." steve, we've been talking about operating within the mandate is an important line. >> very important. >> it's newsworthy and certainly caught the market's attention. >> i think a key here is language similar to what he used to justify the ltro's last half and any sell makes a great point we've been falling for a long time. they talk in code, they use the same language. so taking a draghi on the monetary policy cigarette in europe this morning. >> we're going to have more on this, it's not just the equities futures that are moving on this, it's the european equities open and trading, it's the spanish yields on all of these things and who better than neal wolan to give us comments as well. other comments, questions about anything, anything you see here on "squawk," e-mail us at cnbc.com and follow us on twitter.

>> also on twitter. >> it did, sorry, you can also follow us, thank you for the correction, andrew, @squawkcnbc. the chances of more easing from the fed and what it ultimately means for your portfolio, coming up. "squawk box" wants to hang out with you. we're hosting a google plus hangout with author ben nezrek and andrew ross sorkin. here's how you can take part. go to cnbc's google plus page and add us to your circles. each day we'll be soliciting your selections, ask ben about his books or andrew about the show. if we pick your question you'll get an invite to hang out on august 15th with ben and andrew starting right after "squawk box." you can also submit your questions via twitter t to @squawkcnbc #squawkhangout. it's your chance to talk to one of the most interesting authors

of our time. come, hang out with us, stay connected to "squawk box" with us on google and twitter. with the e-trade 360 investing dashboard. e-trade 360 is the world's first investing homepage that shows you where all your investments are and what they're doing with free streaming quotes, news, analysis and even your trade ticket. everything exactly the way you want it, all on one page. transform your investing with the e-trade 360 investing dashboard. 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

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our guest host this morning, deputy treasury secretary neal wolan. we're thrilled to have you here, thrilled to have you any day but today is key because draghi made comments in the last hour that have really shaken the markets up, talking about how the ecb will do anything it needs to do to make sure the euro stays around. he has said that they're going to be working within their mandate and we were talking about how he could be using code phrases. what jumps out to you as the most important line of what you've seen and heard so far? >> becky, i think what's important is mario draghi added his voice again to what the european leadership has been saying for a long time, they're going to keep the eurozone intact and defend it and i think it's important for the markets to hear that and to have confidence. beyond the words, of course, there needs to be actions, and both the fiscal and the monetary authorities in here, we're talking about the ecb have a set of tools available to them and which ones they'll pick in the

coming days and weeks we'll have to wait and see but as they continue to go about the longer term business of making themselves more competitive certainly in the southern tier and to change some of the governance structures around fiscal and banking in the eurozone, they do need this space to be able to do that and so that requires the authorities there to make sure that banks are appropriately capitalized and the banking system is safe and some of these countries can continue to fund on a sustainable basis and i think important for the markets to hear that, and for them to understand and to see then after these kinds of statements the actual actions that will give them increased confidence. >> that's probably been the market's message, too. you see market knee-jerk reactions to things like this but they're always waiting for the show afterwards. >> it's critical. the commitment there, the words only, you know, mean so much. what they really want to see is what happens and i think what you're hearing now from mario draghi is his added commitment

that he's going to be working with the fiscal authorities and the leadership of the relevant european governments to defend the zone. >> that is definitely the kind of commentary we're getting this morning, becky. it's commentary that matches the move in the market, which is what i think is interesting. chris rupkey, bullish from bank of tokyo says european officials have long been told by others -- i think the united states is one of those -- that they have the power to end this crisis whenever they want and with draghi's bold statements today is looks like they have finally done it. then of course doug cass writing in "draghi finally gets it." we're getting that commentary from people which is along the lines of this 170, 180-point turnaround we had in the markets. >> neal i know there's only so much you can say as the deputy treasury secretary it's probably fair to characterize the united states government has been frustrated with how the ecb has come along and the european governments have come along.

it's taken them a lot longer than us to deal with the problems. they have 17 nations they're trying to pull together on this end but if you had to put a number or a grade just in terms of your faith that this is going to get resolved in the long-term, where would you. you the it at this point? this is your opinion, not the government's. >> sure, what i believe is that they will keep this zone intact. they certainly have said they're committed to doing that. that's what draghi i think has said again this morning. they have the capacity to do it, and so if they have the will and the capacity i think it will happen. they need to take the steps that will continue along the path and in many cases these countries are doing the right thing along this process and so steps have begun, they need to continue, and we've been giving our suggestions all along the way, as you know, and are very much engaged but this is in the end something that the europeans are going to have to come around, they're going to have to fund it. it will work within their own political systems and work for

their economics, but i think they'll do it in the end. >> okay, we're going to have much more with neal and more questions on this, too. >> also somebody used to work with neal, lee saks comichs com. former treasury official and adviser. he is talking about breaking up the big banks. time for today's aflac trivia question -- man, i'm glad aflac pays cash. aflac! ha! isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac! and everyday expenses? huh?! blurlbrlblrlbr!!!

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now the answer to today's aflac trivia question, what u.s. airport is currently the world's busiest by traffic movement? the answer, atlanta's hartsfield-jackson international airport. >> aflac! ♪ let's check on the markets this morning. there have been some major moves, just in the last, oh, hour and 20 minutes. right now you'll see the dow futures are up by about 135 points. it's off the highest levels of the morning but it's also a huge reversal of where we were at 6:00 a.m.

at that point the dow futures were down by about 20 or 25 points. draghi came out and started making some comments and we've had a lot of talk around the table about what these comments mean. essentially he is standing in saying the ecb will act to preserve the euro. he says they'll act within their machine date but there are all kinds of code words. michelle caruso-cabrera has been filling us on which keys to watch and steve has been telling us how this worked in the past and some of the commentary from market players. this is significant news, something people are paying attention to and affecting each one of the markets. >> is this a cue, becky, what bothers the market? >> exactly. >> it's europe. there's a minor if there were a college in europe bterms of the cliff but it's a major in europe. >> oil prices down by 1%, up to 89.71, the ten-year note we looked at this, this morning a

little bit in shock, when we came in the yield was sitting at 1.394 or 1.395. that's flipped, the yield's back up at 1.426%. we've seen major moves with the euro which has gotten stronger as a result of draghi's comments. the euro is trading at 1. 265. it's back above -- it was closer to 1.21 this morning. >> 1.21, yes. >> look at gold prices, they've barely budged through a lot of this, up about $6.80, $1,614.90 an ounce. we have a busy show this morning. we have neal wolan, the deputy treasury secretary, our guest host, he's been talking to us about how to interpret some of these moves and what the market wants to see next, we'll hear more from him in a bit. plus shoppers spending more at whole foods despite a slow economy. the company posting great earnings after the bell, shares surging 11% in afterhours

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welcome back, everybody. when earnings from 3m out this morning, the company coming in

with earnings of $1.66 a share, a peby better than the street was expecting. revenue is light, came in with sales of $7.5 billion versus the $7.8 billion the street had been looking for but again this is a currency story, what we've heard time and time again from international companies that are coming through, they say the sales were down about 4.3% on currency. they were down a real number of 1.9% year over year but again that currency impact reduced sales by 4.3% year over year. they would have seen an increase in sales if it weren't for the effects of currency. >> this is one of the reasons why the market does not like a weaker euro, it hurts u.s. sales overseas and something we've seen in a lot of different reports that have come out. >> if you think we don't like it, look at what china has been doing ratcheting up the yuan, it's creating all tensions with the united states. >> we might have to ask neal about that. >> neal heads up, prepare your

answer now. take a look at 3m, the bid/ask is spread,' not clear where that's going to open, beating on the bottom line, the top line a little bit light. tepid growth has investors questioning what they should do, carelli dividend growth is up 12% based on low adjusted returns. barbara marcin is the portfolio manager, great to see you. >> nice to be here. >> i want to talk about the dividend stuff but before the news of the morning, the markets have all turned around on these comments out of draghi. it sounds like he is stepping up and saying they're going to be backstopping this. the market obviously has some questions about whether he means it or not but how do you read it in. >> yes, well certainly there are only two ways out of this, either germany basically pulls the weaker countries onto its balance sheet or shares its

balance sheet in effect or we let go of the weaker countries and you have some sort of a euro breakup or exit. so the remarks today are the strongest that we've seen, saying germany intends to have a communal balance sheet and share that, but again, it's just words, and certainly you know, the transactions and interest rates that we've seen lately for sovereign bonds don't seem to indicate that the market believes this. i don't know have we seen any reaction in the spanish or italian bond yields? >> we actually have. the yields have reacted this morning, down by 40 basis points for the two-year. >> the two-year rallied, it was down the yield fell by 40 and i think the ten-year fell by ten. >> i'm a little surprised we see reaction to remarks at this point. >> you want to see the action in other words? >> yes it's been going on for a very long time and the markets continue to say pricing and

interest rates and i think they're being pushed further and further into this stronger and stronger but it doesn't seem like it's any closer than it was a month ago. >> you run a dividend growth fund, you're going to be focused on this. >> sorry, beck, i want to interrupt. the spanish ten-year looks like it lost 30 basis points, 736 to what is now 704. >> that's a pretty significant move. >> if they put their money where their mouth is and back stop these things? >> everyone's so uncertain and we've seen so many companies and consumers really have their hands in their pockets and this is one of the big reasons, that the range of outcomes on this crisis has everyone saying well i'm going to slow down or cut down on my spending. we saw that from such a broad range of earnings releases

lately, at&t citing weakness, mcdonald's, ford motor, eaton, texas instruments and everyone is saying their customers are uncomfortable with europe, and the potential outcomes there. so if there were some sort of resolution it would be very helpful to the world economy to spending. >> are the dividend plays crowded right now? do they feel like they're expensive? >> they don't. i have seen that we've seen some outperformance of specific high yielding sectors like utilities and telecom, but when we look at companies, we look at company by company and they don't seem to, the companies that we look at that have reasonable multiples and high dividend neelds don't seem to have been bid up. >> it feels like there should be a bubble in the companies you're talking about. >> it's like utilities. are utilities a good buy right now, 3.8 or 4% dividend on a lot of these things?

is that something? >> you have utilities have been bid up somewhat because people are looking for yield, so if you think that interest rates are going to head back up within the next year or two, you're going to see a correction in that group from people who are buying that, just for the yield. >> right. >> you know, if you don't think so, it's not a bad spot there, but certainly the higher yielding sectors have had people come in just for that reason, but there are a lot of companies, you know, across a broad range of industries that have good dividend yields and are going to increase those dividends over time. >> okay, barbara, i want to thank you very much for coming in. it's great having you. >> nice being here. when we return former assistant secretary of the treasury for financial markets lee sachs will be our special guest. he worked in washington and on wall street as well. coming up, wall street regulation and the state of financial institutions. coauthor of the wall street reform and consumer protection act, christopher dodd joins us

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welcome back. mario draghi sending signals the ecb could act. we've had the big turnaround in stocks and then the spanish ten-year, take a look at that, that was trading 7.60 it looks like on wednesday and just this morning it's fallen by 30 basis points, even a bigger reaction in the two-year, oil negative turned positive, the euro down 1.21, ended up to close to 1.23. it's moved every market. lot of mixed commentary. some guys saying this is bigger than, better than sliced bread comment we've all been waiting for, and richard bursy saying "what else would he say other than we'll do everything." there's different signs here. >> michelle caruso-cabrera has been calling on the phones and saying the key is whether they start buying those bonds again but let's get lee in. >> is this language sounds like

language he used when he did a previous operation. lee sachs is founder and ceo of alliance partner, was head of the obama administration's financial crisis response team, lee, thanks for joining us. >> thanks, steve, thanks for having me. >> let's talk about what we're hearing out of europe this morning. does it sound like something that is a precursor to a movement by the ecb? >> well it certainly sounds that way. i think what's important about what mr. draghi said, it obviously shows his commitment to doing whatever it takes, but one of the lessons from our response to our financial crisis here is that these things are crucial, they're important. they're necessary, but the market will be relentless until all the details of all of a comprehensive solution are out there. if you remember in february of 2009, for instance, we announced -- >> big swing and a miss.

>> i wouldn't describe it that way. >> that's the way i'd describe it. that's my job. >> that's your job. >> yes. >> we announced the broad outlines of a plan after being in office for about 10 or 14 days and we're all familiar with the market reaction and -- >> yes. >> -- each subsequent week we rolled out the details of each of the necessary elements of a comprehensive plan. >> right. >> and until the last detail of the last element was out there, the markets didn't really gain their traction, but once those details were out there, it did gain traction. the markets stabilized. >> so if we were going to say what inning are we in, in the ecb rolling out the details or europe in general fixing the problem, is this the second sni inning? is this the third inning? is it stopping for a rain delay? >> it feels early. >> so there's a long way to go. >> mario draghi has been heroic at several stages throughout this crisis, he has stepped up

and done what's necessary. it's necessary, but not sufficient. >> i want to move on, lee, because we have a lot of things i want to cover with you this morning. >> sure. >> sandy weill yesterday talking about the breakup of the big banks. you are involved in a business right now that challenges the big banks, and i think we need to say that. >> sure. >> trying to give the smaller banks collateral to compete with the big banks. what do you think about sandy weill's comments? what's the chance your buddy, neal wolan here will enact policies that could break up the big banks more so than dodd-frank already does? >> so i thought sandy weill's comments were obviously very interesting yesterday, and it's something that i think has to be explored, but it has to be done carefully. you know, these are highly complex institutions, and taking them apart, if you will, is equally complex, you know, in terms of what my friend, neal wolan and his colleagues would do, i think they've done an

awful lot so far, and i think you need to give that a chance to work, but in terms of what further steps might be necessary, i think you know, what sandy weill suggested yesterday is certainly something that's worth exploring, but carefully. >> what would the secretary think about this idea, neal? >> i think you'd have to ask him. >> where are you really? i just want to pin you down. do you think he's right or he's wrong? it's one thing to say it should be explored. it's another thing to say he's correct or he's not. >> it's complicated. it's not -- >> isn't that the name of a movie? >> seriously, when people say you have to take apart the big banks, you have to explore what does that mean, how you would do it is vitally important, when you do something like that is vitally important. i think there could be some real positives in terms of improving

long-term stability in the markets, and so i do think it's worth exploring, but the details in all this are important. people say, you know, there are a lot of ideas that are floated that sound great at a 60,000 foot level. >> if glass-steagall was in place how much of the financial crisis would have been prevented? >> i think very little. i think very little. >> i don't disagree with you, by the way. >> we had an s&l crisis in the '90s that was highly disruptive to economic activity, it hurt people on main street throughout the country and that was before the laws that were passed in the late '90s. so in terms of whether or not doing what sandy suggested would address that problem, it's not good. >> we have to ask you this

question, neal barovsky out with a book about the bailout, the cigtarp guy, critical of when you were running the bailout program, didn't listen to him, if you had followed i think the key charge here, if you had followed his advice, outcomes would have been better and i'd like your response. >> i think the outcomes of what we did have to be judged based on the objectives going in. the objectives were clear and unambiguous, and the best way to help, the best way to help main street was to stop the economy from shrinking at a 9% annualized rate, stop the country from losing 800,000 jobs a month, bring down borrowing costs for households and businesses and do it at the least cost to the taxpayer. i think by every one of those objective measures, the results of what this administration did and frankly, our predecessors

did were highly successful, and the best thing we could have done to help main street. >> so neil barovsky is wrong is what you're saying? >> yes. >> what is he missing? >> he missed the success of the programs. the overall purpose of everything we did and frankly what our predecessors did was to help main street, and if you study financial crises throughout history, the resolution of this crisis was much more successful when it comes to arresting the decline in employment, stopping gdp from shrinking at a 9% annualized rate and doing it at essentially no cost to the taxpayer. i think he missed the big picture. >> lee, thanks for coming in this morning. it was great. >> my pleasure thank you. >> thank you very much. three hours is not enough time. we need more to tell you about everything that's going on today. >> it's amazing. when we come back neal wolan

will talk about the threat of the fiscal cliff and we'll get reaction from chris dodd to sandy weill's call to break up the banks. plus talk about wall street regulation reform. the markets still going haywire. we'll have more on all of this when "squawk" comes right back. my volt is the best vehicle i've ever driven.

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we've got a big hour of "squawk" ahead. the co-coo of whole foods will be here and austan goolsbee on europe and the economy and big interview with christopher dodd,

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we're still committed to seeing this through 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. showdown on financial regulation. ♪ an exclusive interview with former senator chris dodd, two years after dodd-frank became law and his reaction to sandy weill's change of heart. >> i'm suggesting they be broken up so that the taxpayer will never be at risk. and austan goolsbee steps

into the ring with guest host treasury secretary neal wolan. >> ding, ding. >> and walter robb will talk to us about whole foods. and weekless jobless claims and durable goods at 8:30 a.m. eastern. the third hour of "squawk box" begins right now. ♪ pressure, crushing down on me, pressing down on you ♪ ♪ under pressure welcome become to "squawk box" here on cnbc, first in business worldwide. i'm andrew ross sorkin along with becky quick, steve liesman is in for joe kernen. our guest host u.s. treasury secretary neal wolan. we have a lot to talk to him about this morning and still have a lot more to talk about as the program progresses. steve? >> a lot to talk about in terms of markets this morning. u.s. equity futures at this

hour, becky, help me out, let's figure out, we were up 150, just off the highs but we were down 20 when we came in, draghi's comments came in, and the market reversed itself. >> let's talk about exxon mobil quickly. this is another big one, just coming out, what was it, $3.41, the estimate was for $1.95? we're going to have to watch this one very closely. exxon mobil at this point, let's look at the stock, it's moving up pretty quickly, 86.25 is where it's indicated after an 85.24 close. this looks like a much bigger number than expected but the revenue number was i believe $15.9 billion. we don't measure that because there aren't enough analyst estimates to still you whether that's in line or above but the company saying $3.41 versus the $1.95, there's a conference call taking place, we get this quickly off of the conference call and that stock is indicated higher this morning. so again, watch shares of exxon mobil, a much bigger number than the street had been expecting and steve that's only going to

help what we are seeing. >> a couple of headlines, 3.41, income at $15.9 billion, that's all i have right now. >> exxon mobil goes out slowly. the press release doesn't come out as quickly as the conference call so we have people in the control room listening on the line, that's how we get those numbers quickly to you. we'll have more that we can see beyond that, obviously oil prices over the quarter having a big impact, and maybe that's part of the key but a big surprise to the street on this and that's only what you were helping before, steve, big moves in the dow futures today. >> right. >> it really got kicked off, big news in every market. >> and spain turned around as well, european central president mario draghi pledged to do whatever is necessary i think it says in the prompter. >> someone corrected me earlier, he said "whatever is necessary" the full quote is "within our mandate." he said that's a -- >> he's going to say that, always going to say that, which means we'll go up against the limit which our mandate is price

stability so he'll do whatever it is to protect the eurozone from collapse. >> to the extent that these premiums have to do not with factors inherent to my counterparty, they come into our mandate. >> his comments came at a pre-olympic investment conference in london earlier this morning. draghi said the euro is irreversible and much stronger than people acknowledge. european equities, talked about spain being higher by 3%, quite a bit more now, 4.5%. the ftse is up, france is up, germany sup, everything is up except for greece which has no reason to be up. >> still not up and the question michelle caruso-cabrera points out is whether they will restart the bond buying programs in spain and italy. that's the big key. >> that's a good question. we have more on draghi's comments, here's cnbc's ross westgate joins us on the "squawk" u.s. in line. first most important question is

the market, are we making too much of this story and these comments this morning? >> okay, let's just, that clip you played was absolutely the most interesting part because we can take the comments about markets underestimating the strength of the eurozone and recent measures as nothing more than cheerleading bluster but what he's saying is the high government bond yields are disrupting ecb monetary policy transmission. those are interesting because they possibly hint at an attempt to really circumvent the restrictions on the outright government bond purchases and i think that's how some may be interpreting it in the market. it remains to be seen whether the likes of others would agree with the assessment but there seems to be a hint because the monetary transmission mechanism is being disrupted by higher bond yields that falls into their remix so therefore is there a reason for them to launch outright qe? >> okay, ross, so that becomes the question, and you sort of

partially answered but i got to come back at you. what kind of response here do you think draghi is setting us up for here, is it an ltro or do you believe it's outright qe and what probabilities would you start to attach to that kind of action? >> i think probabilities at the moment are pretty hard to assess. i think what he's trying to do is just maybe start the process. i spoke to a couple of people about this here in london and it's about whether they start the process towards outright government bond purchase, i.e., a full sort of qe program, rather than another ltro because as we all know ltro causes the problems to be worse on the basis that all the spanish banks are heavily underwater and italian banks on their purchases, which they made with the cheap ecb money. >> so then the key analysis here, ross, is you're saying that draghi is now laying the groundwork for possibly acting more like bernanke and doing outright quantitative easing. what would it take to have that

happen now, ross? >> well, it comes down to whether he can face down and take the majority of the ecb with him. of course, there's a big game here. there's a strategy to play whether the latin bloc is prepared to have a face-off with the northern bloc. now, they could get a majority on this, because i think the french would more likely back this position, and that would put the ball frmly in the northern bloc's role and would they take the ball and run away with it or just cave in? there have been those who have said this is somewhere that we could go, maybe this is the first sign. i wouldn't put it any stronger than that, it's a tentative first step. >> ross thank you for your analysis this morning so much. >> no problem. >> becky exxon? >> no, utx now out. this is a little bit of a mess. they come out with an operating number of $1.62 a share but that has a lot of moving pieces in it. there are, let's see, ten cents a share for net favorable

one-time items partially offset by six cents of restructuring costs. the company is telling us the number you should be looking at is $1.44, they say that is what should be compared to the $1.41 the street was expecting, that would be a beat. the market at this point is looking at the numbers trying to figure out what it means and the bid/ask is below where the stock closed yesterday. they talk about a lot of different things and say the revenue number, the company, utx telling us the revenue number of $13.8 billion is not comparable to the $14.4 billion the street was looking for so it may take some time for investors to sort through these numbers as well. i can tell you that foreign currency translation which has been a huge issue for every international company this earnings season had an adverse impact of five cents a share on the company. they did talk about a lot of the different sales lines, as you walk through some of these things you can say the second quarter sales were hurt three points by 4x. if you were look at the sikorsky

sales, otis sales, elevator operations, $3.3 billion, so again it's going to take investors some time to sort through this. the company is telling us we should be using $1.44 versus the $1.41 from the street's expectations based on what the analysts knew were in this and revenue lines again will be looking through. >> can we go back to exxon mobil? >> absolutely. >> there was a headline saying the earnings included a net gain of $7.5 billion in investments and tax related items. i don't know, and i don't know if you do whether that was part of why they came up so far. >> could be. >> you can see the market doesn't love this number, even though it's like -- >> right, and that could be very much the case. the reaction that you saw with the beat was based on the earnings per share and the revenue line that the company announces on its conference call. it does not put out a press release with as much speed as it announces these earnings on the conference call so always you see a knee-jerk reaction based

on numbers that no one is incredibly sure what's in those numbers until you see the press release. >> two two more points, a $5 billion second quarter buy-bark a back and $5 billion third quarter buy-back. >> i see a lot of headlines. >> that's what i'm reading off exactly. >> this is going to take us time to sort things out. >> what looks like a $1.50 beat, the bid/ask was below, it was called lower. >> again we'll keep you up to speed as we get more details, too, you can see the market's reaction. former citigroup chairman and ceo sandy weill rocked the financial world yesterday with his opening comments on "squawk box" on breaking up the big banks. >> i think what we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, and have

banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail. >> joining us now is's on it gallonsby, former chairman of the council of economic advisers, economics professor at chicago's booth school of business, our guest host is deputy treasury secretary neal wolan. austan i know you have thoughts about what sandy weill said yesterday. good theory but maybe tough to pull it off in practice? >> look, there's obviously the irony that the exact merging of those two entities he described took place in his merger. >> he was the architect. >> but look, i think we were in an environment were there were investment banks and commercial banks and it was the investment banks falling apart that threatened to bring down the world. i think him using the phrase "too big to fail" is not about big. that's not what happened. i mean, you got, with neal there you got a world expert of how we

try to get, reduce the amount of connectedness so these guys can't blow up their neighbors and threaten to take down the world, but i just -- maybe the private sector of the banks themselves should be trying to shrink themselves because the great synergies that were promised from these mega mergers don't seem to have played out very well. >> austan that was part of sandy weill's point yesterday is that times have changed and if you're looking at the market's valuations for these things it's not there anymore. he says this is an evolution. is that an idea that you would agree with? >> i kind of do agree with that. i mean, it's not my opinion. i think if you just look at the market, a lot of -- it's not unlike the, some of the big media mergers that we saw, and in some other industries, where they say, they go through a period of massive consolidation and become giant conglomerates on the premise there are huge

synergies across different lines of business and when those don't develop a lot of times you see these big companies break up into smaller pieces. i thought it was weird for sandy to say congress should go do it or the administration should be the ones to go break up the companies because why are they together if there's no synergy from that? >> austan, we haven't spoken about this comment by sandy in terms of actual companies and one thing i want to engage my colleague here, andrew ross sork sorkin, on is gaoldman sachs. goldman sachs is a company that in the throes of the crisis bankified, and it has all of this capital on it and can't do the fund trading it did before to make lots of money, it has all this caps on its books and i heard it wanted to debankify even though the bank itself is small. >> right. >> what would happen? would it be the greatest thing to happen to goldman sachs if they were forced to break up? >> if everybody else broke up it would be good for goldman sachs as well, because then they could get i assume out of the holding

company. i think with this situation as it is, i think it's very challenging for goldman for morgan stanley to unravel this because they have become so dependent and i know neal you have a view on this, the market has so much, the market, because it's a bank holding company has a semblance of confidence i'm not sure it would have unless the whole system were completely changed. >> steve, andrew, one of the things that's important about dodd-frank, even if it weren't a bank, nevermind the hypotheticals, it would still be subject to designation as a significant financial institution, still subject to the full range of capital and other prudential requirements that the fed could then put on as its consolidated regulator and that's the important point that dodd-frank deals with big banks and non-bank financial institutions, you have to hit both. >> austan, we talked to neal and lee, neil barafsky has a book on t.a.r.p. and he talks about

regulatory capture, the revolving door between washington and wall street and i was hoping you would comment on that issue and whether you think that the current administration or frankly regulators broadly are too close to wall street. >> well, they certainly were in the 2000s. you saw where regulators both at these investment banks, at commercial banks, and at fannie and freddie appeared to not be minding the store, and we missed some things. i think one of the insights of dodd-frank was to try to create an environment where you weren't 100% reliant on what the administration's goals were, so if the administration decided as it seemed to in the 2000s they were just going to stop enforcing the rules or that they were going to take a less aggressive stance on enforcing the rules of the road that there would be some bright lines right in the through that would make it a little harder to do that,

so i think that the point of the closeness of regulators to who they're regulating, some of it is inevitable, because you've got to know some details in order to be a regulator in these circumstances that's effective, but i think it's our job as the american people and as policymakers to set up the law so we're not 100% reliant on that. >> austan, if i could pivot for a second to fiscal and tax issues, the senate yesterday passed an extension of middle class tax cuts. i wonder if you could offer your perspective on why that's important or if it's important from an economic perspective, from a growth perspective and also from the broader context of fiscal responsibility. >> well, you know, a lot of important points in that. i saw the senate pass the everything but the top 2% tax cut extension. i think if all of the tax cuts expire at the end of the year, we're in for a real whopper of a

negative hit, the congressional budget office said that would lead us into a pretty nasty recession, so i don't think we can afford to raise everybody's taxes at that time, and i think the evidence is pretty overwhelming that tax cuts at the high end do very little in terms of getting the economy growing, so i thought that was the right thing to do. i wish they would just pass that. there's at least agreement on both parties on these 98%, and then let's argue about the other 2%. in the broader context of fiscal responsibility, i don't think there's any alternative but the two sides sit down and do a grand bargain. >> leave it there, austan. >> if it were me they'd premise it on bowles-simpson. >> thanks for coming in, austan. my guess is we'll see you not too long from now on jobs day. >> yeah, see you guys later. come up, whole foods beating analyst expectations in its third quarter report.

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whole foods is reporting a healthy third quarter, shares rising in afterhours trading after the company posted a two-cent earnings beat of 63 cents per share and 8.2% in same-store sales. joining us for an exclusive interview is whole foods kro-ceo walter robb. thank you for joining thus morning. in an environment where nobody else seems to be doing well, expln if you could how these results even got here. >> first of all, good morning, thanks for having us. we're excited, i think it's our particular recipe of continuing differentiation, strong focus on value and being america's healthiest grocery store so great results this quarter. >> when you think about the economy, when you think about the consumer, frankly, when you

think about whole foods people occasionally call it whole paycheck. what's going on in terms of the product mix and how people are buying things? >> we don't call it that anymore. we're not seeing any evidence in that in our data and sales results and i think it's the continuing desire for healthier eating and healthier food and fresh, high quality food. >> walter, i shop at whole foods all the time but i was blown away, i see how busy your stores are and the traffic, i was blown away by the results. last year you talked about how you may have hit a price ceiling on some of the premiums you could charge. what are you finding in terms of the lower prices, are these new customers coming into the store? >> that was the great thing about this quarter, this is nine consecutive quarters of 8% plus comps but the transaction count, the new traffic was up 7% and again that just is a really exciting number for a retailer to see that many new people coming into the store on a regular basis so we have a lot

less inflation this year and that's helping things but we're achieving these comps even though prices are coming down. >> prices have been coming down but if you look at the droughts there and the expectation for food prices over the next year or so, several analyst reports recently, talk about that emergence? >> we saw much worse a couple years ago. i think we're in position to handle it. they say corn is up 50%, prices go up 1%, i think we're well prepared to manage that. >> walter, we have to run but in terms of the mix of what people are buying, prepared foods versus stuff off the shelf, how is it changing? >> you know, the traditional strength of being strong on the perishables, the meat, the produce, the fresh foods, that continues but what was neat about this quarter was seeing that spread to center store and we actually saw strength across all categories of the store this quarter. >> okay, walter robb we'll leave

it there. congratulations on the earnings this quarter. >> appreciate you having us on, thank you. still ahead here is what sandy weill said about dod dodd-frank yesterday. what do you think about dodd-frank? >> it's too many pages. what i'm saying you can do in two or three pages, people would understand it. >> now one of the authors of the law gets to respond. former senator chris dodd joins us for an exclusive interview at 8:30 a.m. eastern time. we'll get his thoughts about everything that's happening in reform. first the latest read on unemployment, we're a few minutes away from weekly jobs numbers. d 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.

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welcome back to "squawk box." we have comments from the ecb president mario draghi, who is moving markets, that has moved markets all around the world and every single market from currencies to commodities to stocks and bonds and if that weren't enough we're seconds away from jobless claims and durable goods numbers, looking for 380 on the jobless claims, 380,000 off of 386,000 last week

and becky, i forgot it, 0.6 versus 0.3 on the durable goods number we'll be looking at the investment numbers by business and who else by rick santelli to give us the data. rickster? >> on jobless claims a drop from a revised 388 down to 353, so that's a 35,000 drop as we yo-yo between 350 and 380 several times. we could debate why in a minute. durable goods for june up much more than expected, five times more than i was looking for, up 1.6 and last month it was revised a half a percent from 1.1 to 1.6, so very good. however, it's all in transportation, it seems, because when you extricate transportation, we do a nosedive to minus 1.1 and if you look at just the orders, okay, capital goods orders, non-defense, ex-aircraft which is say proxy

for business spending, that is down 1.4%. if you look at shipments versus orders, it's up 1.2. that also merits some thinking about, and if you look at continuing claims, they jump from slightly under 3.32 to around 3.287, so almost 3.3 million. so that's the surprise of the day, a drop in claims we'll debate, i'm sure many will be very happy about that. i do think our cash would be the most important number of the day and durables, once you get beyond the headline and the fact that marchie draghi promised to save the euro is good enough for everybody. back to you. >> rick, thanks. i have to comment here, i told people to throw out the bad number last week, because of distortions and i think i'm compelled to say throw out the good number this week. there are issues with the closing of auto plants that make numbers in july very squirly.

it's somewhere in the middle. i know that's wishy-washy and maybe not the best cable programming but 375 might be the best area to say is where the actual claims data are. you have to wait until the seasonals wash out. august is a better time for figuring out where the claims are and the job numbers we'll get next week will do a better job. it's good to see the turnaround on the revisions to are may. shipments are more important, what flow into the gdp numbers on business investment, that up 1.2, could ultimately affect, give you a couple ticks additional on a gdp number that doesn't have a lot of ticks to give. >> that's huge. >> we're looking at 1.3. i'll be back later after the economists plug that into their model, maybe that's 1.5 depending on what's out there. we had talked about the strength of autos not having picked up in the retail sales number. here it does appear it's been picked up in the durable goods

number, transportation equipment up 8%. motor vehicles though are down, non-defense aircraft parts 14.3%. ex-trans down 1.1 and it is a bit troubling to see the business investment numbers being negative, however they were reasonably positive for the prior month in new orders at 2.7. andrew? last week marked the two-year anniversary of dodd-frank to provide much needed reform to wall street so how important is dodd-frank and why does the country need it at all? here to talk about this in an exclusive interview only on cnbc, former united states senator and one-half of dodd-frank, chris dodd himself, currently chairman and ceo of the motion picture association of america and thank you for joining us today, senator. >> thank you, andrew, nice to be with you. >> i want to start with sandy weill's comments yesterday, the architect of the big bank theory, if you will, the supermarket reversing himself. when you think about the legislation that's now on the books with your name on it,

given his comments, do you think that the legislation goes far enough? >> well, certainly i do, and i know sandy, and obviously -- when i first heard about it, i thought of paul bunyan becoming an ecologist in a way. this is the legislation, neil neal pointed out earlier the legislation allows for the draconian step to be taken if necessary not just with banks but institutions that pose substantial risk to the country, they have the power and authority under this legislation to actually do that, but as others have pointed out, i listened to austan goolsbee and talk about the importance of its product lines, it's not just the size of an institution, but how much risk they're assuming by their activities. so the idea of having necessarily breaking up these institutions is going to solve the problem i think it's frankly too simplistic an approach. should be done in some cases under certain circumstances but that's not the solution to the problem. >> so broadly speaking, sandy

weill is wrong? >> i think so because i don't think that's the only answer and the assumption you'll solve the problem by doing that i don't think that's necessarily the case and this legislation provides the authority to do just what he's talking about, if, in fact, there's systemic risk posed by a financial institution, you can break them up. the power exists in this legislation to do exactly that. >> senator, one of the other things that sandy weill said, and you see it in the editor yap or op. ed in the "wall street journal." two years later dodd-frank itself some argue is stifling the economy and let me read to you from a representative hensarling's op. ed, "two years later we remain mired in the worst economy in the post war era, too big to fail is actually enshrined into law and dodd-frank's voluminous rules are proving to be some of the most confusing, complex and harmful our capital markets have ever seen." what do you say to that? >> there are two crises.

the problem occurred and i believe it began obviously with the housing market although there were other problems that could have emerged but that was where this all began. i don't know of anyone who has thought about this for more than five minutes, thinks we'll be better off going to the 1980s where you had little regulation, little authority, few cops on the street at all and an economy going bust because too much of this was allowing it to happen in the first place. the idea somehow this is contributing to the problem. i'm told about 90% of the regulations are either proposed and under consideration are actually in effect and institutions in anticipation of what needs to be done are moving in the right direction, greater accountability and transparency, setting up consumer protection, these are good things for the country. >> senator, isn't the volume of regulation that's been created, things that ended up in your bill being a couple pages, end up being several hundred pages when it comes to writing the rules, and aren't the costs prohibitive? aren't the costs going to hurt

lending? >> not necessarily. this is a complex area, one of the reasons why for decades people have been talking about reforming the financial architecture of the country but you could never have the moment people wanted to sit back and do the work. it takes crises to motivate the kind of legislation we adopted. you can certainly make a case down the road, i'm not the one to sit here and tell you that everything we wrote is perfect. that's the reason you have congressional oversight. is it doing what you intended it to do? are there areas we could do a better job and areas we could cover? i never suggested this was a perfect piece of legislation but i also believe in the absence of doing what we did here, listen to the people themselves who are talking about it, when you have the head of goldman sachs saying the bulk of dodd-frank makes a lot of sense, jamie dimon saying 70% or 80% of it he supports. those are remarks from people who looked at the legislation, don't necessarily love every dotted "i" and crossed "t" but

we did the right thing setting up a rules system that hopefully will be harmonized globally so we don't have the sovereign arbitrage that went on with regulatory arbitrage and people like neal wolan are heroes because of what they suggested and did during that time. >> steve i would jump in and say there's absolutely no evidence that anything to do with dodd-frank is hurting our financial system and markets. if anything they're getting stronger and stronger. senator dodd, i think people don't understand as much as they might just how much you worked with republicans when you were crafting this legislation and how much their input is reflected in the legislation. it's curious to me, so much of america supports dodd-frank and why is it that they're opposing this? they were involved in the process, it's a popular thing, consumer protection seems to be, you know, something that every american should want to have. what's going on here? >> well, again, i thank you for making that point. you were helpful on this as well. tremendous effort reaching out

to get people involved. i set up on the committee itself, teams of people to work on the derivatives section, on corporate governance, on too big to fail, people like bob corker, mark warner, jack reed and judd gregg involved in the process. we ended up with three republicans supporting the bill in the end. i wish we had had more. the bill might have been somewhat different if that was the case but it was not for lack of trying. on the floor of the senate we had 60 amendments that were debated, many were taken. there were only 50 vote requirements. the process was an open one, you didn't have super majority votes on most of the amendments with the exception of one i think during that debate so it was an open process, it was transparent, and i sought the suggestions and ideas and many of the provisions like too big to fail were adopted, dick shelby and i did that i think over 90 votes in support of that provision of the bill so this is say myth somehow it was jammed down the throats of people. we went on for two years with hearings, with invitations to

industry to be a part of all of this so it was a very inclusive process. >> senator, we're going to continue this conversation with you, just after a quick commercial break. we have a lot more on the senator after this. as we mentioned, still ahead, more also from our guest host, deputy u.s. treasury secretary neal wolan, of course we want to get back to this conversation between the two of them. tomorrow we're going to be talking financial reform with the former chairman and ceo of wells fargo, get his take on sandy weill's calls to break up the banks. kovacevich never minces words so we look forward to what he has to say. with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying...

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we are back with more on dodd-frank. former united states senator chris dodd is still with us and senator, again, thank you for being with us today. >> thank you, becky. >> one of the things you said in the last block when we were just talking about things is that you know, 90% of this bill is very strong. you've got industry leaders who are behind massive chunks of it, behind the bulk of it. but obviously the more legislators and the more regulators who get involved the more complex it becomes. if you had your druthers, if you could go back and take a look at it, are there things you would change? i ask because earlier we spoke with michael oxley about sarbanes-oxley, he said if he could he'd set up two different sets of regulation, one for big and one for small. is there any you could tweak if

you could? >> fannie and freddie and the gses and we debated and discussed it at length. judd gregg said not for lack of trying but there wasn't a solution people were willing to gather round and how you deal with the government-sponsored enterprises. i have my own views on it but it's an area that still needs to be done. bankruptcy laws need to be dealt with in a way our bankruptcy laws deal with one-offs, not highly interconnected industries so we've done a good job in creating a structure so you don't have the bailouts we're fearful of having or had in the past and that requires some additional work as well and i think you need to determine how some of these things are working down the road. that's the reason that you want to get moving on this, not do it so fast you rush to get the job done. you want to make sure the regulations make some sense and then give this a chance to see how it's doing its job and if it doesn't do it well in certain areas, then change it. this is not the ten commandments here. >> what about the durbin amendment? >> yes. >> i'v bankers they

don't think the savings from the retailers are going back to consumers. >> this was a hard question and having written credit card legislation, dealing with the fees was difficult. this is not a black and whitish uin my view, but we had a vote on it. this is the one issue, by the way, on the floor of the senate that had a 60-vote margin and yet it carried, the durbin amendment carried and as you recall last year there was a vote to repeal that and that loss on the floor of the senate in a bipartisan fashion so again, this requires probably some additional work, but again the congress has spoken pretty clearly on this, both democrats and republicans, when that issue has been raised. >> senator, i think it's important to point out that at the time that the volcker rule was attached it wasn't entirely obvious it should be but subsequent developments have suggested it was a good move, but did you not blow i guess is the best way to put it an opportunity to consolidate regulators here, that you ended up with the same number, if not more regulators than you had

when you went into writing the legislation? >> joe, i appreciate your raising that. >> it's okay. honored to be mistaken for joe. >> i apologize. i offered a bill back in the fall of '09, which i had a single prudential regulator in the bill and i got roundly criticized for that suggestion. i think people today are looking back so i moved off that idea. obviously i was trying to put a bill together that you could pass and so we ended up moving away from the single prudential regulator idea. i still think it was a good one but obviously writing a bill, i don't get to write it myself. i have to deal with 99 other people in the senate and a committee as well to try to fashion something that can gather the necessary votes to allow it to become law not only in the senate, the house and win the president's signature so i would have preferred the single prudential regulator, but that wasn't going to happen. >> senator, governor romney has said that if he wins the presidency, he would like to repeal your law, as have a number of other republicans.

what's the chance you think that happens? >> well, i don't know if any of you saw the recent polling data on this. there hasn't been much done on it but it was stunning the numbers by a 53-point margin people across the country support this legislation, including something like 70% of republicans on the consumer protection bureau, which was highly criticized at the time, so i think it is a risk, you want to go back to the days of '07 and '08 where literally the financial system was collapsing, there was a lack of confidence at all in the country, lack of transparency, accountability in these institutions and we've seen recently the plethora of stories that break almost daily with problems that are emerging still in the financial services area. so i don't know of anyone who really believes that's a sound way to go. should there be changsz es to t bill? absolutely. of course there should be. any bill of this size and magnitude requires further examination to determine whether or not it's working as well. i support that. the idea of repealing all this? what are you replacing it?

i haven't heard the governor suggesting something else in place other than limited regulation. most people realize it was that attitude that created the environment which a lot of these problems emerged. >> senator there are those who say a lot could have been accomplished and it may be enough and i want to turn ta neal wolan on this to just have done it with higher capital ratios. charge them more for being big, having more capital. it's a simpler solution than reducing leverage. i want to get to neal wolan. >> there's no question they are critical components of the financial reform but you need consumer protection, which was sorely missing before, you need to regulate the derivatives market, make them more transparent, make them safer and something to deal with what happens when big financial institutions fail, so that the taxpayers aren't on the hook for cleaning all that up. i think capital has always been, from our perspective, one of the core elements of this, and it's one of the core elements in the

legislation that was passed and then signed by the president, but you need these other things to make sure that the system is safe and stable and protects all of us. >> let me mention two other things as well that you didn't talk about and i appreciate what neal just pointed out. one is having the financial services oversight board. the recent events that occurred, lack of communication between regulators. put aside whether or not we should have a single prudential regulator. you need to have an ability to sit and look over the horizon at what's occurring. we have communication between the various regulators so you spot problems that are emerging either by product line or by institution. that didn't exist in the past and some of the problems we're talking about in these very days i think might have been addressed, had there been more of that. getting realtime data, which wasn't capable before we built up that institution inside the treasury so that you get information on literally a current basis to determine where problems are emerging. those are not insignificant contributions to this legislation. >> senator i want to go in a different direction for a moment and go back to sandy weill. sandy weill in many ways in the

model he developed had been blamed by some people for the financial crisis and we an about-face here on this very program. there are a number of other people in the world who other people in the world who blame washington for the financial crisis and the housing. i'm curious if you would speak to the issue of whether you have any second thoughts about your experiences in washington during this period in the legislations that some people have suggested contributed to this. >> well, go back. 1994 the legislation was passed to insist, it wasn't a request, but insist that the federal reserve bank establish regulations to deal with deceptive and fraudulent practices in the residential mortgage market in the country. there was never a single regulation even promulgated despite the regulation being adopted and signed into law. i'll go back and believe very strongly that had we had more activism, level of regulation in the housing market, we could have avoided a lot of this in my

view because that was the end genesis of it. i had 90 some odd hearings in the year '07 just on this problem alone. i recall the first hearing that i held as new chairman of the committee, there was a witness who talked about having maybe 2 million foreclosures in the country. he was ridiculed the next day because his numbers were wrong. in fact, the criticism is correct. the numbers were wrong not because they were too high but ridiculously too low in terms of what would happen. we missed the opportunity in my view in '07. i can't tell you how many times i tried to get hank paulson and others to step up and get involved in this issue of putting a tourniquet, if you will, on the metastasizing problem in the housing market and they never did. so we ended up in martha weekend with bare stearns. it was treated like a one off event. six months later we had aig, lehman brothers and then all of it collapsed. in my view, had we 12e7d steppe earlier the rating agencies and

others, we would have had a problem but it would have been far less than what we're going through today. >> senator, we want to thank you very much for your time today. >> thank you all as well. >> former united states senator chris dodd. >> coming up, some parting shots from our guest hope, deputy treasury secretary. >> and i got to the bottom of exxon. >> we'll talk to exxon and stocks of the day after the break.

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welcome back to ""squawk box" ". the futures, we were down 20 when we came in. up 163 mostly on the back of comments by ecb president. take a look at the spanish two year. >> holy cow. >> an amazing turn around. this security -- this bill traded as high as 5 -- sorry, 654 this morning. >> wow. >> it is now down to 572. 84 basis point move. in my book, becky, huge move and you think those comments didn't matter. they mattered a lot. coming up, we have parting shots from the u.s. treasury secretary. we'll take some parting shots at him too. >> tomorrow on "squawk box" our guest host peter fisher will tell us where black rock is investing more than $3.5

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. let's get some final thoughts from our guest host this morning, deputy treasury secretary. how should we be seeing this from the u.s. perspective? >> well, i think again what's important here is that europe continued to take actions to make sure that they protect the zone. there are lots of tools in both the government's tool kit and in the ecb's tool kit. progress that they've added their voice to make sure we keep the zone intact. now the europeans need to do what they're saying they will do. >> do you think draghi is a man of his word? >> i do. >> the u.s. government is important? >> the words are important but they need to be accompanied by follow-on actions. >> neil, i want to thank you very much for joining us today. it's been a pleasure having you here. >> great to be here. >> we hope to see you again. we should mention quickly, steve, exxon?