saks, the stock of the day. new york post reporting the luxury department store chain has hired goldman -- that's complicated, chs, hired goldman to explore strategic alternatives including a sale. sales are 19%. thank you, andrew. thank you, becky. >> thank you, joe. thank you, becky. >> make sure you join us tomorrow. right now it's time for "squawk on the street "". >> good morning. welcome to a busy morning on "squawk on the street," i'm carl quintanilla with jim kramer and david faber. we have a hearing at the house oversight and bernanke in front of the joint economic committee this morning and all of that is coming up in the next hour or so. futures are mildly positive here, up 24 points on the dow after another unbelievable day in japan. as for europe, continue to watch

the headlines there and the markets which are mostly in the red. bernanke testifying on the state of our economy starting in just under an hour. will he be as optimistic as the members of the bank of japan which is keeping policy unchanged and push the nikkei to a five and a half year high. >> reporting a chelly spring is causing seasonal sales to cool. >> toll brothers beats estimates on an increase in orders and lowe's falls short on profits and revenue. >> shortening the amount of time it will keep factories lower citing a pickup in demand. >> the fed chairman will testify on the economic outlook before the joint economic committee. wall street watching to see what bernanke will say about winding down the central bank's bond purchasing program. we'll bring you live coverage of the fed chairman's remarks and his q & a with the committee. the fed is set to release its beige book at 2:00 p.m. eastern time. the bank of japan maintaining

its quantitative easing policy and optimism about that sending the nikkei to a fresh five and a half year high. a good chance, guys that he will be asked, not just about bond purchases, but his view of stock market valuations right now, jim. he might be asked if we're in a bubble. >> if he cares about price to earnings multiple. he certainly knows these things. he's a brilliant man. sitting here working on microsoft and the xbox still amazed that it's at 12 times earnings and intel at 11 times earnin earnings. so on a multiple basis, you certainly have not a lot to worry about with the exception of the clorox-colgate component which is selling at 2.2 peg rate. if he goes there he can say it's too inflated and that's because the economy is not that strong. i come back to the two economies. the toll brothers economy which by the way is on fire as they said it would be in the previous quarter, but people ignored them

and then the target economy and you can blame the weather all you want, but people will still shop. >> weaker than expected, target among them. on the fed, dudley is out saying a tapering decision is probably a three to four-month process. he thinks an announcement will be more like december meeting. so you don't think it's something the market will wrestle with it? >> it's wrestling with it in a positive way, but the big move in this particular leg of the economy is in the regional banks and it's been denigrated and you get more downgrades. the regional debts are on getting higher and the reason is if they tapered. if they tapered the banks would make more money and they're paying you nothing for deposit. people will be watching the regionals. the tapering's coming and the tapering is good, and that's contrary to the orthodox e and i can't watch these stocks go up 20%, 30% moves on the strength

of taper. ? do you think he'll be asked at all about japan and do you think we'll get anywhere with the yen and the devaluation taking place as the next step of qe in a way replacing it. if there are sophisticated enough people to ask that question, i don't know if they have that level of sophistication, not to be arrogant. >> to them the jgb is -- >> i believe that was -- everyone in the committee knows the sum of the questions can blow your mind. >> the jgb is kind of like obp. you know what the obp is? on-base percentage. >> this obp. i can tell you it's for my team. >> that's self-inflicted because i didn't bring it out. >> i went there before you did, okay? but with i knew what was going through your mind. >> i think they should ask because the fund flows out of

japan are dictating. toyota has suddenly an edge out of nowhere. we always associate the japanese with dumping. you mentioned tapering being a positive dynamic for regionals and piper is out with a big note saying the equity rally, and the bears capitulate. they say a tapering of qe they believe will spur housing activity and they'll see rates going up and they'll make their move as clearly demonstrated. provided the banks are willing to lend with less than fbi owe scores of 750 which is one of the largest brokers and it was the big issue and there wasn't anything that i heard on the home depot calls which indicated that credit isn't anything, but tight. they're talking about rejecting people with credit cards. the rich people did very well and the rich people are spending leak crazy and they were supposed to be hurt 8 to 10

percentage point on taxes and the people were hurt by this payroll tax increase. you have to go through quite an examination, which is not necessariry a bad thing, although credit is getting easier to find, certainly and we are starting to see slippage in terms of risk tolerance, perhaps on the commercial level and commercial real estate, for example. >> they're starting to be more of it and they're starting to require a lot less equity and we talked about high yield on covenant light. so it is interesting because it's bifurcated. you as an individual want to borrow money from your bank, forget it. not forget it, but you'll have to go through a lot. >> on my high income, yes, but when you want to go and do something on real estate, the documentation is very stroshg. there are 11 million people right now trying to get citizenship in this country who are denied no matter what. denied no matter what because of the immigrants. >> we'll see if this deal is going to get us here. >> we cover a lot of things.

we should be covering immigration because that's 11 million people who will join this country in an official way that are part of -- look, if japan had immigration, you're absolutely right. >> let's move on to target. those shares are lower in the pre-market. the discount retailer, close to quarterly profits, missing wall street estimates. >> targeting lowering its guidance for the full year. it said colder than normal weather didn't help the spring season which got off in its words, to a slow start. they say as a result of those softer than expected sales, particularly, jim, an apparel and other sensitive categories. the weather at tjx was fabulous because tjx had the opposite. >> sometimes the sales can be very small. >> we know, for instance, i shop on route 22 in new jersey.

it was clearly on the side that it was tjx. in the sunny side of the street. >> it must be a shade thing. tjx, listen, they benefit when target doesn't. if people have excess inventory, but i come back and say macy's seemed to be doing very well. tjx is doing very well. target is missing and walmart is missing and maybe that is again the cohort that did get stung and weather is not -- weather does matter because there were a lot of people like manny that is a good merchant who told you, look, we had an extraordinarily bad start to the spring weather because no one wanted to buy spring clothes. it was too cold. so let's buy it, let's not be totally negative about this. they seemed to cite weather regardless of what it is. >> i'm trying to be forgiving. even when there's good weather there's reason why good weather kept people from buying. >> they guided to flat and came

in minus .6 and that's the worst u.s. comp since q-3 '09 and the stock's done well. >> tjx not blaming weather, kohl's, not blaming weather. >> what did best buy blame? >> i can't watch cnbc anymore. we own that too, right? >> yes, we do, indeed. it is a conundrum, but i do point out that apparel is a great -- when it comes to weather and some companies have been able to figure it out. carl meyer which was the best single retail cal saying we know how to manage through the weather, maybe others don't. >> home improvement retailer lowe's reported 2 cents shy. revenues coming up low with lowe's citing more temperatures and more rain impacting the spring selling season.

46% as the home builder reports well above wall street views thanks to higher orders, average selling prices and orders up 36%, the highest in seven years. >> if you compare -- if you do a textural analysis, this one versus the february quarter and there are a lot of things that the ceo said were going to happen. there are large pieces of property and apartments that haven't been able to close. toll went from 37 to 30, it turned off everything thattierly said was true and the gross margins are improved and the price of housing was improved and there was some pushback into the next quarter. people have to learn to trust them. they've been saying things were better and people felt things were worse and this is a great affirmation of what they were saying two quarters ago. you tweeted the markets were critical and long, and toll is a great company and i know bob

told charity stuff. what it said once again, the rich have the money to buy homes and i can get the credit should they een need it. >> the second and third fourth and fifth. >> i saw your special. and the minor -- >> we'll talk about lowe's as well in a little bit. >> i want to move on now to the latest on the tornado aftermath in oklahoma. cnbc's jane wells is on the ground there in oklahoma and joins us now. jane? >> reporter: let me give you the latest numbers. up to 20,000 people need four, 24 dead, including four people hit by cars and other large objects in the tornado and then, of course, untold billions so

far in damage. you really get a sense when you come that these are people, this is somebody's house. there's the shower back here. all kinds of debris around and there's this broken lp, the best of earth, wind and fire. somebody's stuffed dog. eefrpt ally they'll get in here,en cloo up and rebuild and as they do that, companies like lowe's and home depot they're ramping up. home depot has become sort of a base of operations for first responders, medical help and salvation army. they've been giving away thousands of dollars of products to responders and gloves and today they'll finally be open for business. >> are you doing any business or is it all strictly, you know, helping giving stuff away? >> well, today is really going to be the first day that we expect the community to start coming in. there's been strong restrictions of where the homeowners and where the community could go.

they're going to open it up today where we have generators ready for the community. we have tarps ready for the community and anything that they need to clean up, board up houses, fix houses, whatever they need we're ready to sell it to them and continue donation processes to the government agencies who still need help. >> also home depot's providing space for pets which have been separated from their owners in the tornado. while we were there they had a cat that had come in about an hour earlier found on a porch of a destroyed home and so the process is going through of trying to get them together. a lot of the home depot people have come from other areas and they've responded to tornadoes including two years ago today in joplin and that horrible tornado there and one of them told me that the response here was organized. the locals have learned from the past and what made a big difference is they locked down the affected areas almost

immediately and that cut down on the confusion and chaos. >> so much good information there, jane. you have to imagine all of the work not only homeowners and utilities have to do to repair infrastructure there. we'll come back with more later today. thanks so much. jane wells in oklahoma. >> they in out with very good analysis of the market share of what insurers are going to pay with the property casualty haven't had much of this quarter, but state farm, farmer's insurance, and liberty mutual. state farm and farmer's insurance, you're not going trade those and there have been people -- >> it's why you have insurance. >> the past five years have been the biggest in terms of insurance claims payouts as far as the long-term model. you see the weather changing and they don't say why. it's a big political debate and the rates have been going up sharply, too. >> that's one of the reasons why

traveler's has had too much insurance in particular areas because they're very conscious of the change in weather patterns. at the bottom of the hour the government reform committee led by republican darrell issa in california will hold a hearing of the targeting of those conservative groups. the star witness is lois lerner. she is expected to invoke the fifth amendment asserting her constitutional right to not answer questions as protection against self-incrimination. >> other witnesses include neil wollen, former irs commissioner douglas sherman and russell george, the treasury inspector general for tax administration and we'll monitor developments surrounding that hearing later on today. >> when it comes to stimulus, will bernanke say what wall street is hoping to hear? we will have live coverage of the chairman's testimony on the economy followed by q and a. as we kick off wednesday morning, a lot more "squawk on the street" from post 9 in just

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weeks. chrysler where only four of its north american plants will take that two-week break. sounds pretty good to me. >> you want to know what they should ask bernanke? >> what? >> how could the housing market be so great and the auto market be so great and the market not be that great. ford is a great company. my charitable trust owns it. they're starting to ramp aluminum production in davenp t davenport, iowa, as they close in europe. this is a very strong product lineup of ford, and if you have to pick an equity to reflect your hopes of a continued transformation and resurgence of u.s. autos. is it gm? is it ford? which is it? gm is above the ipo price for the first time. >> a lot of it seems to be -- >> a lot of new models coming out this fall. >> gm has got a lot of europe and gm has a lot of europe. gm was behind ford in europe. it looks like gm's catching up.

at the same time, ford is very strong latten, gm is very strong china, but if china doesn't, it's ford. >> that's a good read. >> they're earning a lot of capacity, new plants. >> ford, the f-150, i know when i look at him pickup trucks, what am i? out of my mind? >> maybe for salmon pants and green ties. >> when you're sitting in front of the cab and you're driving the ford about 50, get the chhe out of my way, faber. i'll crush you like a bug on a windshield. >> i'm not going give hem a chance to retort. >> you might as well stop -- >> there is nothing that you can say that we both haven't heard. >> okay. i'm not from cincinnati. there. the reds look good this year. >> yeah. >> that's another mets reference. >> you are evil. >> thank you. >> they've been playing that and

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work on the leverage and continue to work on the cost of goods through our shrink control and days on hand with inventory, a lot of basic retail fundamentals and that together with the accelerating sales helped to produce a nice result. >> that was last night on "mad money." it is time for "the mad dash," interesting interview last night with whole foods. >> they're doing well and they're always lowering the cost differential. the millennials favor the good housekeeping seal of approval of whole foods. it's going to be one of the largest ones and they're have a 700,000 square foot greenhouse. they're building where they've done before. 21 in massachusetts versus 12 in new york and they can well exceed their thousand target and that's me saying it and dave, i want to be sure that people understand why lowe's is trading up. on the conference call they can talk about the progression getting better and continuing in may and that's why it is going up and also indoor doing very

well, much better than i thought. you're doing comps in plus 3. it is outdoor furniture. it's a very tough sell during the bad weather. >> it's not as though it is going to be down. it is up and that's always been the case. the conference call tells the truth so we can slag lowe's all we want, but it understands the decency. home depot was good and this turns out to be better than anticipated on paper. housing is strong and toll brothe brothers. >> indoor is good because the price of your house is going up. you will spend three times what you would spend otherwise if your house is not under water. i'm sure lowe's is benefitting from that, too. you're talking about houses and $600,000 selling like hot cakes and they can't get enough land. no one is listening to me, but i actually am right. >> we have a lot more stocks to watch, by the way that opening bell is about four minute away and wall street bracing for fed

chairman bernanke's testimony, anda we said we have to deep an eye on pfizer. we have a lot of stocks to watch, and when that opening bell rings. we're back after this. ♪

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you are watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in about a minute's time. bernanke speaks in about half an hour and an irs hearing beginning right about now and the house oversight committee chaired by darryl issa of california will in which lois lerner, the head of the tax-exempt division of the irs is expected to take the fifth regarding the controversy about whether or not they targeted conservative groups. inspector general report said she learned about this in 2011, but this is a sign that just the legal consequences of all of this going on. >> it was fox news. i read these things and it was -- it was anybody who has anything to do who is being conservative. >> and with that we'll await the

opening bell and a lot going on and retail earnings and whatever bernanke sxsz whatever the minutes say will be market drivers later in the session. >> minutes reflect the period of a wacher employment number so we have to be careful, but i do -- i come back to -- there are two economies. an economy, and it's the walmart -- walmart is weaker, so if you're bernanke, do you take your cue from saks which we have not covered yet, or walmart? >> walmart is more reflective perhaps of the employment situation than would be the saks of the world, so to speak and that's where he is focused. yeah because 100 million say the saks flagship store on fifth avenue. i care about that more than the high-end jurlry. the $800 toe cleavage thing doesn't do it for me. >> evertech, a processing business in latin america and the caribbean cell britting an ipo. a money transfer company

celebrating its recent switch to the nas as the fight for business between the two exchaefre exchanges continues. margins down 60is base points and traffic down, comps down. the negative tone in retail today --? they know how to buyback stock, that's for certain. wow, they're good buybackers and they should be in the brokerage business and become like ameritrade. they can buy. >> american eagle wasn't all that hot either. >> that's such a tough business. have you ever been -- i have teenagers and say how can you walk into american egoel and that stuff's hideous. american eagle, did you see what they have? talk about fickle. when you go into abercrombie, and you have to have a six pack to be in there and i don't mean a pack of beer, david. >> a name that we mentioned last week when we talked about the fact that elliott had a sizeable

position and the hedge fund run by paul that was very active. they did not go ahead with the slate tp it doesn't appear, but they did pressure the company which would seem to start changing its capital structure to a certain extense and it was quite inefficient given how much cash they have on hand and so they're returning 3 billion to shareholders. >> i was shocked at this. >> why? >> because this is a company that had 5 billion in cash, but it's a growth industry. you don't expect the growth industries to return this much capital. they should have a lot of opportunity, but this is a company that's doing quite well, but has been undermanaged according to the challenge and for them to be able to deliver a pop on a return in capital, it is pretty impressive. >> and we'll see if shareholders are ameliorated, so to speak. >> the activism is astonishing given how well the market is

doing. can't you do something else and be more active in sports? >> in this case and many others you will see the activity come from the company itself as a result of perhaps pushing, but nonetheless, not a big fight. >> even sony is willing to take the meeting. everyone is willing to take the meeting these days. >> we should mention sony shares. they were all over the place yesterday. >> this is not teldor. >> xbox came out and said it was missing some features that may have led some to think sony had a better shot in consumer electronics. >> it seems exciting with skype in it. you had 48 million gaming sub describers. i'm giving balm err the benefit of the doubt. >> i like to have my arms in kimbo, that's true. but as for sony which we were looking at and not much to add there. the company did put out and sort of came out with a somewhat constructioned release about the

entertainment business. last week the big news was that dan lobe has a sizeable position and he went over there and talked to them, but that all being the case, he's not going to do anything near-term. there's nothing he can do with the upcoming annual meeting and he is saying constructive things with the business. and my thing is they're not going to do anything. >> there are just companies that if their stocks have not kept up with the cohort, someone is saying what the heck are you doing? pfizer and merck beth with news of their own. >> pfizer, what is the exact story? which we saw here not that long ago, of course. we're talking about animals and animal health. we're taking a look at merck which is interesting. pfizer is up. they're going to basically 400 million or 401 million shares would be distributed to pfizer share holders through an exchange offer. you can exchange some, none or

all of your shares of pfizer for shares of zoetis. pfizer own 80% of zoetis. but most likely they will no longer control the company at the very least given the expectations that a lot of shareholders will want to buy. zoetis is down. >> animal health is a very hot area. we were discussing off camera the amount of money people will spend on animals is extraordinary. zoetis is attractive. >> ooh been interesting to look at pfizer and responding to shareholders and having benefited at least in the market as a result. merck, it's an interesting name and one that is worth watching. i will tell you, at least it comes up occasionally in conversations with activis, and

it's huge and has not embraced when things come apart. the performance is not bad, but i put it out there because i have heard it in a number of conversations. >> they did not have to do an accelerated buyback. this is like tuna with good taste, versus good taste in tuna. you want good drugs. it's not about financial engineering and i'm watching alex gorski trying to get new drugs throughout and merck, very problematic. i'm looking for drug approvals, not for approval of shareholders. >> before we get to bob. lowe's is higher and this is despite their weakness and all of their weaknesses, they get dragged up. >> i feel like i slide, the inside stuff is on fire. remember, paint was on fire for home depot and kitchen and bath and nassco. this is one of those moments, fofrtune brands, and this is on

of those moments when people are spending on housing. appliance sales are very song and outdoor, outdoor is very fickle. i know that from the old days when smith -- when scott's miracle used to have an outdoor business. it is very seasonal. >> let's get to bob pisani and see what's moving on the floor. >> we're on the upside and the important thing is everybody wants to know what mr. bernanke is going to say. i think we know what he is going to say. he's been preempted by bill dudley. he said it will take three or four months before the fed knows if the economy is strong enough to withstand the fed tapering its purchases of bonds. i can't imagine mr. bernanke will come out and say something that's radically different than that. so everybody down here has been throwing around a different idea. instead of saying gee, we're doing all we can. we've done all we can and you can, and now you have to do more

aggressive on fiscal issues and obviously, he's addressed this before and perhaps getting more aggressive saying we're reaching the end of what we can do and that's a great tactic for him to take overall. toll had another great number, but here's what's important, the volume is improving and the pricing is good and you have a real tension there, and you keep raising price es enough and the you can lose sales. how did they get it right? all i can tell you is just from looking at the report and i haven't listened to any conference calls on toll, but they're doing both of them for them right now. the other bright spot for the u.s. economy is the auto business. did you see what they came out and said? normally they take a two-week break in the summer. detroit not doing any breaks. ford shutting for one week, chrysler, only one week. gm is not take anything break at all. homebuilders and autos, those are the two bright spots of the u.s. economy. i agree on these numbers on

lowe's. they are very, very strange overall. here's the important thing. i heard a little bit on the conference call for people listening in. indoor comps were up 3%. outd' outdoor comps down 7%. it wasn't just the furniture. remember lowe's is much bigger in the gardening business than home depot is. so outdoor furniture, paint and garden were the weak spots and whether they have made an impact. guys, back to you. >> thank you very much, bob pisani and what i know, jim on "mad money," both clear wire and sprint and they seem to be your favorites. >> clearwire, interesting to watch and i've had the opportunity to speak to both sides and you have the hedge fund group, of course, that continues to perhaps say, hey, we want more than 340 which they've just gone up to and then you have the sprint/clearwire and soft bank side, if you will,

and softbank a part of this each though they've acquired control of sprint, but a few things to keep in mind. no shareholder has a cost basis higher than 325. so at 340 everybody will need money. clear wire will need financing in the fall and softbank says if we don't get there, if we don't get this vote, we'll operate it with 68%. they'll buy the comcast shares and almost 68% and everything will be a third-party transaction and they said we'll figure out a way and make it happen. there is a lot of vitriol. on the strip side, they say these guys are not rational and their numbers and from jekzs are wrong and they were assuming a long tax rate and they were assuming a lot of spectrum value yous that are incorrect and there is real frustration. on the other side, there's a simple case to be made at least on the part of these hedge funds

that said sprint's been bullying this company for years. they need the company badly and softbank needs it and so does dish if they need to acquire sprint and stop bullying us, after years and years, they want what's owed us and near real that you're putting out there. in fact, they are way low and so you'll have this continued debate and we'll see that may 30th meeting that it's now been pushed to could get adjourned again if they can't get the vote here. speakinging of votes, jim, i do want to point out that's the sprint vote and that is when at least at this point, sprint shareholders will be weighing whether or not to take the softbank bid for 70% of the company. now, charlie ergin, it's always unclear what it is that he's up to with the light squared potential bid that he made earlier this week, continuing to make his -- keep his options open as best he can for so many different things. >> one thing that is interesting to point out is that he made his bid on the 15th, the record date

for this june 12th vote is the 18th of april. so there were only a handful of days for shareholders of sprint to say investors to say i'm going to buy shares of sprint. he may have the potential to delay the meeting. it does seem to be at the very least that's one of his -- another option he can create for himself and move the record date up so you can get more people who want to see a higher price. we still go into that meeting wondering if softbank will need to increase. >> just on the report that you give us, it seems that we're not seeing best and final here. >> when it comes to best and final, who can believe it with everything we're seeing lately, and maesh they put in clearwater. >> guys making money off of this stuff, and they always had that spectrum. >> whether it's charlie ergin on the dish side. that spectrum in clear wire is

key. >> the government has spectrum. >> they paid down some bills. >> maybe the broadcasters will get back their spectrum as they threatened to do with areo and then we would have more spectrum to sell. >> let's check out the action and the energy in the metals and sharon epier son is at the nymex. >> traders were very focused on bill dudley's comments about tapering of qe and how that could be another three or four months down the road and they're waiting to see what fed chairman ben bernanke has to say on the hill today, as well. we're continuing to watch whether or not gold prices can get to that 1400 level. technically that will be a key level to reach, but we have seen a lot of bargain hunters coming in in the last day or so and as open interest, perhaps that creates a more bullish sentiment in the marketplace. in terms of oil prices, oil's down right now. we did get a report from the american petroleum, and that was

unexpected. most analysts were expecting a decline and we're awaiting the word from the energy department at 10:30 a.m. eastern time about the weekly supply data. that will certainly have a factor in the oil price direction and we'll be also waiting to see what happens with the cushing oklahoma oil supplies. fortunately those facilities did not seem to be harmed by the tornado in moore, oklahoma. back to you. thank you so much, sharon. kelly evans is here at post 9 taking a look at what she's watching today. >> good morning. >> good morning. it's one of these central bank kind of days and we know it's a big day for the fed and we have bernanke coming up and the minutes later today and we also have the bank of japan, two-day meeting, the policy meeting doesn't do a lot new and the nikkei is still up 1.6% overnight so if we look at just the nominal level we're at 15627 on the nikkei and 15,387 on the dow. it's the race, perhaps, what? to 20? >> or to 45,000 to regain that high? what was the nikkei high?

>> they hit 45,000 the dow was, what? end term. >> is it close year to date? >> it's not even close in nominal terms. that's what's interesting is the nikkei has been so much more exaggerated. >> the nikkei was at 45,000 and about 3,000 and they crossed. >> that's true. >> crossed in the downside and crossed on the way back up. the stimulus the bank of japan has been providing is one reason why a lot of people are positioning for the summer slowdown. if anything, we've gotten the melt up and many the fact that we have quantitative easing coming from japan that's put a global bid in the market. anyway, that's going on, as well. i wanted to just mention this, given the strength that we've seen in toll numbers this morning, talking about higher projects and in a seven-year high and the architectural building index in april slipped from 48.6 to 41.9. >> is the housing market just a different kind of story than one of consistent strength anywhere and always across the board?

is this a market where you want to buy a toll and not necessarily at this point anyway, some of the more middle-market names? >> i would think so. obviously, the strict financing and there's also the increased index which remains very high of the same term, 58.5 so there's definitely pent-up demand and i would come back and say yes, it's residential housing and unless we get commercial real estate, you're not going to get the big spur in job hiring. >> if you you can tell a consistent story, that new project in manhattan going up at 432 park where the maids' quarters are going for 3 million and so much of this is reminiscent of what we've seen in the past which is the bifurcation and trifurcation from the public. >> we're about to see the first million dollar hampton summer rental. i think it's about 900 on the most expensive rental.

>> is that memorial day and labor day. >> that's david faber. >> i remember when some clown in 1986 spent $50,000 to get a place for a month, and we thought that guy was extravagant. >> that's the 432 park is not toll brothers. >> no, no, no. totally different project. >> toll has different stuff in brooklyn. >> toll was going to build next to the kiwanis canal and toll has a lot of land and very smart company. >> and this will be interesting to hear, does bernanke today say anything about housing prices and stock prices, et cetera and whether that's going to indicate more strength in the broader economy, for everyone else for the lower income classes? >> still have a lot of people under water with their mortgage. >> we'll see you in a few minutes. kelly evans. >> as kelly said we are watching bernanke and this house oversight committee where lois lerner will start her testimony in a few moments and of course, fed chairman bernanke does head

for the hill and what will will he tell the joint economic committee about the economy and stocks. a lot more "squawk on the street" is back in just a couple of minutes. it's as simple as this.

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of the d.c. hearings -- all happening beginning in a few moments and we'll try to hop back and forth between the two. obviously, emphasis on bernanke. in the meantime, those "six in 60," we'll start with gtls. raymond james starts with a buy. bbt downgrades it. this makes lnt equipment and that's been very high. >> barclays likes terex. >> they want european exposure because europe has bottom period. >> sodastream, it's gotten a

little bit too high and i get that. >> citi's up, bmy. >> bristol is now being viewed as project. biogen, celgene up again, regeneron up again and gilead up again and these things are on fire. >> csm will beat. >> i think it's going to be an extraordinary call and ubs raises a target on sks. i don't know. i was listening to the sacs call and it dnaed sound like they were doing anything at all. >> david, you have a thought on what's up over there? >> i will say i think bloomberg also has it and it does give it credence. sometimes you get banke erers w want to stir things up, but it would not be a shock to see it wanting to do something in retail. private equity has been focused on exits. ipos, how many have we seen here a few feet away from us on the big board balcony. that being said, they have a lot of money to put to work.

>> has it been a jam? steve has been on my show many times. other than a retiring of the $230 million outstanding 2% senior note there wasn't anything to indicate that it was business as usual. how could they possibly have this conference call at 1:30 and completely repudiate. >> it may very well be nothing, but the market is reacting. you could make an argument for why that is the case. i have no reporting to share with you. >> what was the company that bid for saks? remember when iceland was punching above its weight? >> a little bit. >> the 400 basis points. >> for a while now. what's on mad tonight? >> we have stumbled of late. spills are very much in vogue. and i had fun on recently and six flags said our theme parks are hot, if want more. everybody who has been to a theme park knows it's very

exciting. >> i can't wait. are you guys roller coaster guys? >> threw up on the roller coaster last time. >> when i was younger, bii think something happens to me. inner ear. it doesn't work that well for me any longer, and i try and my son loves them so i have done a number of them. i don't like the ones that are visual -- you know, the harry potter stuff in universal. ? you don't like the ones that upside down. you're not really now offing and it's simulating motion. >> that will make me sek. ? why don't you go to magic mountain with me. >> any time. >> have a full meal. that's fun. >> and the projectile magic mountain. >> do you have a guess as to whether bernanke is going to say we haven't decided on tapering? we could go either direction? i mean, what the tone is going to be? >> he's learned from greenspan. i think he can do on the one hand or on the other better than anybody. he doesn't tolerate fools. he has to learn to be a little more giving when the -- that's

more the house. >> although there will be some of that in the joint economic committee today. >> bernanke is a serious guy. maybe we ought to treat him more seriously. >> buller's been out, dudley is out, williams is out saying he'd be open to tapering this summer. jim moore up 4% for the month. >> it's like lowe's. you don't want to taper it at 8:30 and you want to taper it at 9:30. it is -- everything is in flux. target says don't taper. saks says taper. i would rather be with the target people and not taper. >> meanwhile, we have a rally again here with the rally up one-third of 1% this morning looking at ge shares, and general motors is up not that utsch in, but we're seeing a broad participation and we mentioned lowe's and home depot. >> all of the rallies have started with this four horsemen

of biogen, regeneron and gilead and enron. >> it will be an antienergy drug and it could go much higher. what's amazing is gilead has a bigger market cap than amgen. >> you know why. >> biogen sat 56 billion and celgene at 53. we talked about consolidation, and if you're looking for growth, maybe you'd go to buy tech and that's -- they are too big for them to be purchased at this point so maybe it leads them and who knows if they tried to consolidate. >> they spent 11 billion, but this is all about an extra that came out this morning with hepatitis three. >> celgene is a remarkable cancer franchise. these are markets that are solving ill businesses and they're not spinning off health

care and they're not buying back, too. they're solving diseases. curing people is better than raising dividend. >> gill idea's market cap is mind blowing. hep teetis is a disease and it's a horrendous disease and you can test for it. you're talking about their 100 mel combrn people, and maybe it is incredible to look, and i don't think we have it. >> it's the broad frontier that they're going to solve. they're going to solve this illness. >> that's what you want to find. >> you of the a cure for something that kills people. it's a fabulous -- >> it sort of leads us to the broader point. we've had target increases for the market from goldman earlier in the week. today piper says -- it says they believe the great equity rally is going to bring in money from the sidelines. we'll get to that question in a bit, but this irs hearing is

about to fire up and let's get to john harwood in washington. good morning to you. >> reporter: good morning, carl. i can't expect to learn very much from this hearing. we have doug shulman, the bush-appointed irs commissioner that left office in december. he testified he didn't know all this much. we heard from russell george, the inspector general and we heard from him last week, as well. what we do expect that's new today is that lois lerner who is the official who was high up in the chain of command over the cincinnati office to take the fifth amendment against invoking her right against self-incrimination which is a bad development for the white house because it lends the impression or hint of potential criminality to something that th that had not been present before. so people are going look at this and say, oh, wait, why was she pleading the fifth. neil woland the deputy treasury secretary will also testify and

we've seen his prepared testimony and he's going to repeat that he learned of the i.g.'s report after the misconduct had stopped. he stayed out of the way and that now he and the rest of the administration including treasury secretary lew are committed to any systemic reforms of irs that will prevent this from happening in the future. so there's going to be a lot of attention to this hearing today. i'm not sure we'll get a lot of new information. >> especially coming off of thatterec holder help issa exchange from the other day. i can't imagine it will be nearly as fiery as that, john. >> reporter: the import of this hearing is going come from the moment when questions are put to lois lerner. she invotes her right against self-incrimination and that video, that sound bite on television is going to be what this hearing is about. >> interesting. there's been some written about the last time there was structural reform to the irs and the agency, and audits went down leak 50% as they suddenly had to

get a lot more conservative in the way they looked at returns. >> i was a lawyer at one point and i have to tell you, that fifth amendment. i don't usually see a lot of people and i don't want to draw broad conclusions and there is a correlation between people who have something to hide and the fifth, but this may be different. >> we'll see you tonight at 6:00 and 11:00 eastern time. let's get to steve liesman with information on bernanke. >> fed chairman ben bernanke in testimony before the joint economic committee will say the best path for growth is to provide policy combination as needed and what reads as dovish remarks and he's voting for premature tightening of monetary policy, and that risks slowing or ending the economic recovery. it would also risk inflation falling further. he says the committee is aware that a long period of low interest rates has cost in risk and will conduct its policy with due regard for the efficacy and cost, but he says that renewed economic weakness is a risk on

its own. a risk to financial stability. bernanke saying, quote, in considering whether a recalibration of the pace of its purchase is warranted. note whether they have considered it to do that, but if it does, it will continue to assess the degree of process made and objectives and we'll talk about those in just a success. the committee's prior guidance underscores its intention to regain hely kwul phied, conditions in the job market has shown some improvement and despite the gains that the stock market and bernanke remains weak. >> it's still well above the longer run and lower level. ? you can read right now. fiscal policy says that the federal level has become significantly more restruckive and fiscal policy will observe a substantial drag on the economy and he says quoting the

congressional budget office and repeating what he said in the past the fed cannot fully offset the fiscal drag of the current magnitu magnitude. a lot of stuff on inflation as well as risks in europe, carl, but those are the main headlines right here. bernanke, i don't think when i read this eight-page testimony is signaling an imminent tapering to policy. >> interesting. >> obviously, there will be some direct questioning about policy and valuations when it comes to all sorts of instruments including equities, steve. do you think he'll go anywhere near that? >> what's with been the emerging line here is they are concerned about things like reaching for yield and overleveraged, but the line right now from the federal reserve seems to be that the best way to resolve this is through supervision and not through changing policy which the fed continues to say is a blunt tool and affects the entire economy, but the first line of defense against imbalances caused by policy, the

fed has suggested several times now remains supervision and not policy overall although they hold out they could do that if it gets bad enough. >> they been so much evidence out there that he might say and the map, and what dudley said about three to four months. does any of that, you you think, inform better than other pieces of information? >> this is immodest, carl, and my reporting -- >> i like that, too. >> i don't want to put that out there, but i would say that my reporting was that there wasn't any plan in place that was not previously known in that the fed has come forward and said we will adjust higher or lower which actually was policy ahead of time. it just hadn't been in the statement and that this was not really a quantum change. dudley, of course, telling bloomberg that there is no plan in place right now and that the plan is what the plan is which is what you will do according to the information and in the story

that i published on dotcom, carl, i want to focus attention on the argument at hand which is has there been, quote, unquote, substantial improvement towards the goal and what is that? is it compared to september or compared to where we need to be. when i hear bernanke, i am hearing at where we need to be and that is the long-run rate of 5.2 to 6% this is the fed's outlook of unemployment rate where it should be and we're still upon and a half. the charm an to me suggests there's a long way to go. i know our next guest doesn't agree with the process of getting there, but i will say he must agree that bernanke is signaling to me that we'll keep going on this road. >> that's a great tease, steve. thank you for that. >> i like our next guest. >> i know you know who it is because you can see the name. >> kelly evans and simon hobs have joined us with david faber. the market continues to rally 81 points on the dow and the s&p is down to almost 16.78 and the

nas, a fresh 12 1/2-year high for the 18th straight session. >> on that note, you heard steve mention him there. steven kelly and the chief u.s. economist with misuho securities. do you want to pick up what steve was saying there and talk about the path when we start to talk about the taper? >>y i agree with steve that this is super dovish language. i think it's interesting that the emphasis on the possibility of renewed economic weakness, not much conversation about how this wealth effect should be stimulating economic growth and talking about future fiscal drag when all of the fiscal cuts are essentially in place right now. i think it is overly pessimistic on the economy, but the fed's got the tiger by the tail here because this quantitative easing is too extreme and building up its balance sheet too much and they keep feeding the tiger to keep it quiet, but at some stage they'll have to let go and the

problem is the tiger is getting begger a er anbigger and bigger. >> before we get to that point, to hear dudley yesterday say he thinks the fed didn't provide enough stimulus and they put too much emphasis on the exit and he sees it as 50/50, but the question then becomes if they do more with low inflation levels, you know, they're already buying the entire -- their demand for new bonds exceeds the treasurys and mortgage-backed securities. where do they go from here? >> i think the situation -- >> david, go ahead, sorry. >> you're talking to two david. >> david, sorry. and then steven, we'll get to you. >> go ahead. >> all right. i think the federal reserve, the problem is that monetary policy does not stem late the economy and the short run, and that's why i agree with bill dudley that they didn't achieve very much and that's because it doesn't work. what works is improving

confidence and cutting taxes at these low rates and the reason they keep on doubling up the dose is because it's not particularly effective medicine and the best thing to do right now is to talk about an exit strategy to get people and you see ideas go up and that way people can go away from the extremes that we're seeing in markets right now. >> steven, we're awaiting to hear from bernanke. in fact, let's go to that hearing where they're introducing the panel. >> pursuant to the rules of the committee all witnesses will be sworn. would you please rise, raise your right hand to take the oath. do you solemnly swear that the testimony you will give will be the truth, the whole truth, and nothing, but the truth? let the record indicate all witnesses answered in the affirmative. please take your seats. for all of the witnesses, your entire opening statements will be placed in the record.

we understand sometimes you're be on obligated to stay with yo opening statement, if so, keep it under five minutes. if you would like to take the time to add to or summarize, that could be very helpful for the members. mr. george, you're up first. welcome. >> thank you, mr. chairman. chairman issa, ranking member cummings, members of the committee, thank you for the opportunity to discuss our recent report -- >> we'll come back to that when lois lerner does again begin to speak. she's the head of the tax-exempt division and sort of the locust of this entire hearing. even though we all pretty much know she's not going say anything invoking her right against self-incrimination and one of two very big hearings on the hill today and as soonsa the fed chairman begins to speak we'll bring you that live as well. you get two high-profile desks working at the same time in that

town. they generally try to arc range their schedules around each other. >> it's getting harder isn't it because there's so much that's happening there on capitol hill and we should mention as well as we pivot back to the bernanke hearing that home prices here, here is the existing home sales report and it's shy in terms of the sales figure of the 5 million figure. kelly was just speaking about the macro and market disconnect. i want to speak to steven, and apologies for earlier. can you speak about what the fed's doing is it having the desired impact when it comes to the economy or is it setting us up for more trouble down the road? >> i think we have to recognize against the backdrop of what the fed's trying to do is that the underlying conditions that the economy is facing and basically we're facing an economy that has disinflationary pressures, and it's an economy struggling under the leveraging process that is extending the amount of time

it's below its potential and it will take quite some time to take both of those packers and the fed has to stay the course and this time they're not likely to take the punch bowl away and they'll probably have to follow marks higher because then they know they've accomplished the task at hand. >> this is unusual to have so many economists as divide as they are about the direction about the economy. it's put a piece out in direct contrast suggesting we'll get to above trend growth in 2014, 3% to 3.5%. you think exactly the opposite and that would be quite an important division, you think, particularly if it manifests itself with the fomc. >> i agree with you, and a lot of this goes back to the wealth effect and the rally in the equity market will lead to all sorts of gains and consumption expend etchures. >> we've seen two equity market sell-offs that have conditioned people to say equity wealth is

transitory. so to the extent that housing prices go back up and equity prices go back up, the behavior that we'll see on the consumer on the backdrop of that is different especially in an environment where wage and salary growth is not particularly strong and in certain instances it's declining. >> a number of fed speakers have come out and preempted what bernanke will say and the dovish comments. steven, when people talk about the costs of what they're doing ahead of the fomc, what do thai mean? what are they weighing here against further action? >> they're weighing the labor balance of the market. and i don't think it's a deafen tiff target. i think it's a reflection of where the overall labor market should be and what they perceive the overall labor market should be when you get to that level of unemployment. you have to have a certain amount of job creation and a certain amount of job openings

and a certain amount of labor force participation all consistent with an unemployment rate in the 6.5% area and we are nowhere near any of those factors even though the unemployment rate has come down closer to their target and we are a long way away from where they need to be in terms of where the labor market should be, and in addition to that, inflation is moving further and further away from their target and that is also an uncomfortable condition for them because disinflation is not what they need at this point in time. >> and the strong dollar will add to that impulse. it does seem that bernanke is trying to bat against the perception that any exit or tapering will begin as soon as join and they see this happening in the first part of june with the announcement in december. does what we've heard, do these comments change that view at all? >> no. i think that's exactly right. the problem is the federal reserve cannot really -- they have to say we're not thinking about it at all and the day that

they are thinking about it so they want to delay any effect and any hint here that they may be beginning tapering. i think they'll begin tapering before the end of the year maybe in september or october and then maybe become a little bit more extreme in tapering early next year. >> hang on, david. hang on. can they really do that? because they have very few opportunities in the diary for the full bernanke news conference and he has to have a full news conference to explain tapering, doesn't he? >> possibly, but i think -- i mean, they've been quite inventive in terms of the communication strategy. it might be nice with a full news conference, i agree with that, but there are other ways to get the point across. they shouldn't delay six weeks because they don't have exactly the right pr setup, but overall the problem is -- i don't think the labor market is quite as looks as people think because this decline in participation rates does look to us to be mostly demographics and if

that's the case, the unemployment rate will keep coming down over the next year and so it could be -- we may only be 12 to 18 months away from 6.5% unemployment and if that's the case issue the federal reserve can't keep this going that mitch longer, i believe. i think they may start it before the end of the year and going from adding $1 trillion in bonds every year to adding nothing, and that is a seismic change in the market and investors need to position themselves for rising rates within the next year or two. david, steven, thank you very much, guys. the fed charma know has started speaking and we'll take you now to the joint economic committee in washington. >> the gdp is estimated to have risen at an annual rate of 2.5% in the first quarter after increasing 1 3/4% during 2012. it was supported by continuing expansion in demand by u.s. households and businesses which more than offset the drag from

declines in government spending. conditions -- >> and with that we take you across town to lois lerner and the house oversight committee. >> the director of exempt organizations at the internal revenue service. i have been a government employee for over 34 years. i initially practiced law at the department of justice and later at the federal election commission. in 2001 i became -- i moved to the irs to work in the exempt organizations office and in 2006 i was promoted to be the director of that office. exempt organizations oversees about 1.6 million tax-exempt organizations and processes over 60,000 applications for tax-exemption every year. as director, i'm responsible for about 9 l00 employees nationwid and administer a budget of almost $100 million. my professional career has been

devoted to fulfilling responsibilities of the agencies for which i have worked and i am very proud of the work that i've done in government. on may 14th the treasury inspector general released a report finding that the exempt organizations field office in cincinnati, ohio, used inappropriate criteria to identify for further review applications from organizations that planned to engage in political activity which may mean that they did not qualify for tax exemption. on that same day the department of justice launched an investigation into the matters described in the inspector general's report. in addition, members of this committee have accused me of providing false information when i responded to questions about the irs processing of applications for tax exemption. i have not done anything wrong. i have not broken any laws. i have not violated any irs

rules or regulations, and i have not provided false information to this or any other congressional committee. and while i would very much like to answer the committee's questions today, i've been advised by my counsel to assert my constitutional right not to testify or answer questions related to the subject matter of this hearing. after very careful consideration, i've decided to follow my counsel's advice and not testify or answer any of the questions today. because i'm asserting my right not to testify i know that some people will assume that i've done something wrong. i have not. one of the basic functions of the fifth amendment is to protect innocent individuals and that is the protection i'm invoking today. thank you. >> thank you for your testimony. miss lerner, earlier the ranking member made me aware of a response we have that is

purported to come from you in regards to questions that the ig asked during his investigation. can we have you authenticate simply the questions and answers previously given to the inspector general? >> i don't know what that is. i'd have to look at it. >> would you please make it available to the witness? >> now that's an exciting time right there, that hearing, darryl issa with the very long pause as you can sort of see where the lois lerner testimony is going to go. there is a split screen of washington, d.c., right now. the market by all appearances doesn't seem too mind either one. it's up 118 points. s&p is up almost 15.

all-time highs on the dow, on the russell on the s&p and we'll go back to bernanke. here is the fed chairman. >> -- by roughly 700,000 jobs and total government employment has fallen by more than 800,000 jobs over the same period. for comparison, over the four years following the trough of the 2001 recession, total government employment rose by more than 500,000 jobs. most recently the strengthening economy has improved the budgetary outlooks of most state and local governments leading them to reduce the pace of fiscal tightening. at the same time, though, fiscal policy at the federal level has become significantly more restrictive. in particular the expiration of payroll tax cut, the enactment of tax roll increases, and the budget caps and discretionary spending, the onset offy is quest raising and the declines of defense spendsing for overseas military operations will be a substantial drag on the economy this year.

the cbo estimates that the deficit reduction policies and current law will slow the pace of real gdp growth by 1.5 percentage points during 2013 relative to what it would have been otherwise. in present circumstances with short-term interest rates already close to zero, monetary policy does not have the capacity to fully offset an economic headwind of that magnitude. although near-term fiscal restraint has increased, much less has been done to address the federal government's longer term fichlgal imbalances. indeed, the cbo projects that under current policies the federal deficit and debt as a percentage of gdp will begin rising again in the latter part of this decade and move sharply upward thereafter, in large part reflecting the aging of our society and projected increases in health care costs along with mounting debt service payments. to promote economic growth and stability in the longer term it will be essential for fiscal policymakers to put the federal budget on a sustainable, long

run path. importantly -- >> ooh! while you're listening to the chairman there you should know that lois lerner has been dismissed from the hearing at house oversight. darryl issa did ask her to reconsider her move to take the fifth, but i'm guessing that she will maintain her position and she has basically said you can go. >> interesting choice there. of course, you would have simply had a series of questions to which there would have been no answer. and so she will -- i guess get the rest of the day to go back to work. >> chairman. >> mr. cummings? >> i have -- first of all, with all respect for my good friend, i said i would like to see it run like a federal court. unfortunately, this is not a federal court, and she does have a right, and we have to adhere

to that. >> thank you. we'll pause for a moment. >> all right. there is lois lerner and clearly that hearing is going nowhere quickly. so with that we will take you to testimony that we already know about because the testimony's been released, but the fed chairman continues to read about eight pages long and we'll go back to the fed chairman. >> expectations continue to be well anchored, this guidance underscores the committee's intention to maintain highly accommodative monetary policy as long as needed to support continued progress toward maximum employment and price stability. the second policy tool now in use is large-scale purchases of long-term treasury securities and agency mortgage-backed securities or mbs. these purchases put downward pressure on longer term interest rates including mortgage rates. for some months the fomc has been buying longer term treasury securities at a pace of $45

billion per month and agency mbs at a pace of $40 billion per month. the committee has said it would continue purchases until the outlook of the labor mark has improved substantially in the context of price stability. the committee has said, that in composition of the asset purchases it will take account of the purchases as well as the extent of progress toward economic objectives. at its most reese not meeting the committee made clear that it's prepared to increase or reduce the pace of its asset purchases to ensure that the stance of monetary policy remain appropriate as the outlook for the labor market or inflation changes. accordingly and considering whether a recalibration of the pace of purchases is warranted, the committee will continue to assess the degree of progress made toward its objectives in light of incoming information. the committee also reiterated consistent with its forward guidance regarding the federal

funds rate that it expects a hely accommodative stance to remain appropriate for considerable time until after the asset purchase program ends and the economic recovery strengthens. in the current economic environment monetary policies providing significant benefits. low real interest rates have helped support spending on durable goods such as automobiles and also contributed significantly to the recovery of housing sales, construction and prices. higher prices of houses and other assets in turn have increased household wealth and consumer confidence, spurring consumer spending and contributing to gains in production and employment. importantly, accommodative monetary policy has also helped to offset insipient deflationary pressures and kept inflation from falling even further below the committee's 2% longer run objective. that said the committee is aware that a long period of low interest rates has costs and ris risks. for example, even low interest rates have helped create jobs and supported the prices of

homes and other assets. savers who relied on savings beings and government bonds are receiving very low returns. another cost, one that we take very seriously, is the possibility that very low interest rates is maintained for too long, could undermine financial stability. for example, investors or portfolio managers dissatisfied with low returns may reach for yield by taking on more credit risk, duration risk or leverage. the federal reserve is working to address financial stability concerns through increased monitoring, a more systemic approach to supervising financial firms and the ongoing implementation of reforms to make the financial system more resilient. recognizing the drawbacks of persistently low rates, the fomc actively seeks economic conditions consistent with sustainably higher interest rates. unfortunately, withdrawing policy accommodation at this juncture would be highly unlikely to produce such conditions. a premature tight edening of

monetary policy would carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further. such outcomes tend to be associated with extended periods of lower, not higher, interest rates as well as poor returns on other assets. moreover, renewed economic weakness would pose its own risks to financial stability. because only a healthy economy can deliver sustainably high rates of return to savers and investors, the best ways to achieve higher returns in the medium term and beyond is for the federal reserve, consistent with its congressional mandate, provide policy accommodation as needed to foster maximum employment and price stability. of course, we will do so with due regard for the efficacy and cost of the policy aks and in a way that is responsive to the evolution of the economic outlook. thank you, mr. chairman. >> thank you, mr. chairman. the fed would have to start unwinding qe-3. so what is the fed's exit

strategies, the steps you'll undertake and when do you anticipate to begin executing this? >> mr. chairman, so first the -- the first thing, of course, would be to wind down the quantitative easing program, the asset purchases. as i've said, the program relates, the flow of asset purchases to the economic outlook and as the economic outlook and it improves in a real and sustainable way, the committee will gradually reduce the flow of purchases. i want to be very clear at that time step to reduce the flow of purchases would not be an automatic nemechannistic flow o program, it would depend on the incoming data and our assessment to how the labor market and inflation are e vfling. so at some point, of course, we will end the asset purchase

program, subsequent to that we will follow the guidance that we provided about interest rates. our principal tool for raising interest rates would be the interest rate on excess reserves that we'll pay which will induce higher money market rates and we will compliment that with other tools including tools that we have for draining reserves. we may or may not sell assets. at this point it does not appear that it is necessary for us to sell any assets or anymore mortgage-backed securities in order to exit in a way that doesn't endanger price stability. so there are a number of steps. we are currently discussing further our exit strategy and we hope to provide more information going forward, but we certainly are confident that we can exit over time in a way that will be consistent with our policy objectives. >> do you anticipate allowing securities roll off the balance sheet before you begin selling

securities themeses? >> as i said, we could normalize policy by simply letting securities roll off, and i think there are some advantages to doing that. for one, it wouldn't disrupt markets so much. it would avoid as much irregularity to the fiscal payments, but we will see ultimately in the very long run, i think there is a desire to get back to it, predominantly treasury security portfolio, but again in the exit process, allowing assets to roll off would be sufficient to bring us to a more normal balance sheet within a reasonable period. >> when do you expect this to begin? what are the benchmarks you're looking at to begin this process? >> we are looking at -- we are trying to make an assessment of whether or not we have seen real and sustainable progress in the labor market outlook and this is

a judgement that the committee will have to make. if we see continued improvement and we have confidence that that is going to be sustained then we could in the next few meetings, we could take a step down in our pace of purchases. again, if we do that it would not mean that we are automaticallia y aiming toward complete winddown. we would be seeing how the economy evolves and we could either raise or lower our pace of purchases going forward. again, that is dependent on the data. if the outlook for the labor market improves and we are convinced that that is sustainable, we will respond to that. if the recovery were to falter and if inflation were to fall further and we felt that the current level of monetary accommodation was still appropriate then we would delay that process. >> at the pace we're going, do you think it's likely these actions will begin before labor day? >> i don't know. it will depend on the data.

the key to this program in our previous -- in our previous quantitative easing programs we give a total amount expected purchases and when that total amount was done we stopped and in some cases that stopping was rematch you are because the economy was not on a fully self-sustaining trajectory. so the difference in this program is that we are buying a flow rate. we are buying a certain amount of assets each month and the amount that we purchase will depend on how the data come in and how the outlook for the labor market goes over time. >> how much notice will you give the market before you start executing the strategy? >> we've explained the strategy and again, the market can see the data as well as we can, but what we are looking for is increased confidence that the labor market is improving and that that improvement is sustainable and as we see that we will, in steps, respond to that by reducing the amount of

accommodation in a way that's appropriate and maintains appropriate level of accommodation given the economic outlook. >> it's frustrating, here we are four years after the recession ended and the economy is in such a weak state, fragile state at this point. the patient ought to be out of the hospital, out of rehab and playing baseball with its kids. it feels like the economy is in the outpatient room and the fed continues to feed it medicine on a daily basis, asking are you getting better, but my worry is that the fed doesn't have the press corruption for what ails our economy. a year ago the fed made clear that it wouldn't set an employment target rate because it's generally affected by non-monetary factors, but your unwinding of qe is based in areas where you have the least control of.

what do we make of that? >> mr. chairman, the slowness of the recovery can be explained by a number of important headwinds including the after-effects of the financial crisis, developments in europe, the problems with the housing market and very importantly the fact that fiscal policy for the last few years has been a significant headwind to recovery rather than the supporting tailwind. so i would submit that without monetary policies' aggressive actions that this economy would be much weaker than it has been and if you compare our recovery to that of europe and other advanced industrial economies it looks relatively good. with respect to employment, what the monetary policy is a general rule cannot influence the long run level of employment or unemployment and that's certainly correct. when we are trying to address here is the short-run cyclical gap. we are seeing currently the economy operating at a level below what it is capable of operating at and many people out of work who normally would have

work and monetary policy can put people back to work in the longer run. increasing the potential growth of the economy, that's not really the fed's job and that's the private sector's job in terms of things like the tax code, investment in infrastructure, training and all those things that help create more growth potential. >> thank you. i'll conclude -- i think monetary policy has limits and qe and quantitative easing has run its course and it tells me if the lower long-term rates were lower and i would be hiring more. that's just not happening. it really is fiscal issues from higher tax increases, regulation, extraordinarily burdensome to them and the new health care laws are creating a great deal of uncertainty and impact on job hiring and those, i think, are the main roadblocks. i think the earlier the fed can begin communicating and announcing it, the more onus is

put on congress and the white house to actually address some of these critical, fiscal issues. with that i recognize vice chairman klobuchar. >> thank you. i was going to take the analogy -- >> so you can see that the market's actually fallen. the dow up 151 points to dow up 110, 111, ben bernanke was asked when he would consider tapering and he would announce that in the next few weeks and he was asked if he believed that could happen by labor day and he refused to rule that out as a proposition. as paul donovan suggested at ubs earlier today, he's playing the hokey pokey, 85 billion in and 85 billion out. carl? >> we'll take a quick break. back in a minute. you've known? we gave people a sticker and had them show us.

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>> responding to questions in congress, ben bernanke saying the fed could begin tapering in the next couple of meetings if the data were to point in that direction and you're seeing the market reaction and now the dow giving up half its gains on the day. we're up 150 points before those comments and now we're up only 75. to be sure he did leave open the possibility that the fed could do more saying that's, in account fa, the key difference between this program ask prior quantitative easings is that those had a size target and this one did not and any time, you flagged this. any time a fed chairman starts to say this could happen in the next couple of meetings. >> we came into this with the federal reserve president from new york suggesting it would take three to four mocks for them to make that decision, and he's failed to rule that out as a possibility that it would take less time than that. this is the issue. >> let's get reaction from steve liesman. what is your reaction to this? >> i continue to see bernanke's

remarks as dovish during the q and a like in the original testimony that he provided. first of all, he would not be pinned down with the timetable asked repeatedly what would happen. i'm not going tell you when. one is improvement in the labor market and we are convinced that it is sustainable. he repeated that at least two times and maybe three times and i continue to see these remarks as dovish and full steam ahead and one of the subtexts we're thinking about is bernanke believes that an important part of the policy right now is forward guidance. i think he's only going to take that forward guidance away with real conviction that it is going away. i don't think he's there yet. >> steven, the equity markets sold off dramatically, at least and the s&p was up almost 9% and we are now back to about a third of a percent. we've heard him get this question many, many times. has he changed his answer at all today or are you saying more or less it's the same answer we've

gotten in the past. >> i think it's the same answer, and by the way, if that's what the market's hearing they maybe missed the other side because he did also say, by the way, that if inflation falls further we could go the other way and one of the first times that we've mentioned inflation as the potential recently mentioned inflation as a potential trigger for additional policy. >> the dow's lost almost 100 points since the end of the testimony and q and a began and you think there's a match between the questions and what he wrote on paper? >> yes. the market's going to react the way the market's going to react. i'm going to call them as i see them, carl, and i believe when the fed chairman sat down to deliver his remarks there was a clear intention there to push back against the market's concern that there would be imminent tapering, and i do not believe in q and a either provided that or meant to provide any sense at all that that tapering could be imminent. i will tell you, though, and the

thing to do is to step back, guys and look at what he said about the labor market. there was a considered discussion about the labor market and said there had been some improvement and overall the labor market is weak. i did not believe that kind of conclusion is something that the fed chairman would change in the next meeting or two. >> all right. >> let's get to know how you're reading it, steve. let's get you back to d.c. >> i'll in back to that in a second, and ooh also true that low interest rates will make it easier to buy homes and they're increasing the price of homes and increasing the construction jobs or other jobs related to housing and have supported automobile purchases and manufacturing and are generally adding both to employment and to the wealth of americans and in that respect this is very much a main street policy and that is certainly our intention. with respect to savers. savers have many hats and they are workers and they may own a

small business, healthy economy helps them in those capacities, and as i said in my testimony ma we'd like to do is get higher returns in a sustainable way. a weak economy will not return. the only way to get interest rates up is to get the economy growing again so that returns would be adequate and not just for picked income instruments, but for other kinds of assets, as well. >> thank you, chairman t's time has expired. >> thank you, mr. chairman and mr. chairman, you opened in your opening remarks about financial stability concerns driven by the quest of higher yields and some of the risk that can cause given the yields and fixed income instruments. has your concern about financial -- these financial stability concerns increased

recently. >> i would say it has increased a bit. we have greatly increased our monitoring and our attention to these issues and we pay very close attention to essentially all asset classes and all major types of financial institutions even those we don't regulate. we are trying to ascertain both whether there is a sign of -- of frothiness or bubbles and moreover, what exposure there is, and in the sense of high leverage or other kinds of vulnerabilities that would mean if a frothy asset price were to reverse what implications would that have for the broader economy. so we're paying close attention to that, and doing our best both through monitoring and also through our supervision regulation and coordination with other agencies and so on to address these problems and some of these issues were discussed

in the fsox annual report which secretary lew has been testifying about. so this is an issue, and it's something that we take into account. as we mentioned in the statement, we look at the costs and efficacy of our program and i think the most significant cost is probably financial stability concerns. on the other hand, it's a very difficult tradeoff because, as i mentioned the weak economy means low interest rates which creates some of the same problems and moreover, the weak economy means worsening credit quality, for example, and that, too, has financial security implications and there are tradeoffs and difficult judgments to make and i want to assure you we are quite aware of this issue and watching it very carefully and it does factor into our thinking about the appropriate amount of accommodation and the appropriate exit strategy. >> speaking of exit strategy, yesterday federal reserve bank president william dudley said that the federal reserve should consider holding on to

mortgage-backed securities until maturity rather than selling them at whatever point an exit strategy might be necessary. maybe i read wrong, but i thought i heard in your responses to chairman brady's questions that perhaps you agree with that viewpoint and if so, because when the fed entered the qe a couple of years ago that was not the plan for the exit strategy. the plan for the exit strategy was to begin selling these securities at some point. where are you on this? >> you are correct that you have not updated the exit strategy, we put out two years ago which included sales of mbs and we have want done that yet and so the committee hasn't officially communicated our plans there, but i will say that we have done a lot of work on this, and i personally believe that we could exit without selling any mbs because most of them will run off in a reasonable period, but

that decision has not yet been taken and we will certainly let people know it when it is taken. >> if you do that, aren't you subject to argument that that's outright monetization in that that debt will never be sold to the public effectively that you've increased the monetary base their each day. >> we perm nonely finance the government using money. what with we plan to do is you will matly to get our balance sheet back down to a more normal level and in particular to get excess reserves which are currently nearly 2 trillion back to a more normal 25 billion or so at some point and it seems that's the likely outcome there and my point is that we can do that by allowing assets and particularly mbs simply to run off and mature rather than selling them. either way it gets them off our balance sheet. >> in my final 45 successes here, bank of japan and

yesterday they reiterated their qe, if you will and there is significant buying. the yen's been depreciating about 5% against the dollar. how do you see this in terms of the potential currency war and the race to the bottom and our qe, their qe and our own world central banks leading to trying to -- in a war here of depreciating currencies. >> the g-7 was given a statement with which we agree that monetary policies which were directed primarily at the domestic economy and are not specifically designed to affect relative exchange rates are acceptable because whatever effect they have on an exchange rate, they also affect domestic demand in japan because it creates more trade and more activity arne the world. so while we are supporters of japan's policies and i would make two observations and one is that under their current plan,

the bank of japan's balance sheet will be three times larger than the fed's just to give you a portion and secondly, though, that the actions they've taken seem to be having fairly dramatic effects both on financial markets and also on so far as we can tell on some as c aspects of the real economy and these policies do have effects on the economy. >> thank you. >> thank you, representative delaney's recognized for five minutes. >> thank you, chairman brady. >> and we'll depart very briefly from ben bernanke's testimony. the huge debate has broken out as to whether there has been a partial u-turn by the chairman of the federal reserve. he seems to have left it data-dependent and that has failed to rule out the possibility that tapering could happen more quickly than expected. let's take a brake. more testimony in a moment. it's as simple as this.

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quick mark check for you now. the dow up by about 66 points. we're well off the highs of 150 as markets continue to digest some of the hawkish comments. let's get back to the fed chief's comments.

6.5% is the target they're looking for on unemployment. >> that's how we protect ourselves. >> and then, just your opinion. as we think about the unwinding question and look at the external factors that we're observing rates low, as we all know. corporate balance sheets in very good safe. consumer balance sheet in much better shape than they have been for a long time. if we were to actually do something significant in terms of the fiscal condition of the country, in your opinion, how much would that impruf the em ploit if your ability to unwind? >> well, you drivewayed in the last comment the point i want to make.

i believe this is a two-part policy. which is on the one hand slowing the tightening in the near term, but at the same time doing things to create confidence about sustainability in the long run. i think it would be confidence inspiring in the markets. it would strengthen the economy certainly. and it would take the burden off monetary policy. we are pushing pretty hard at this point. and there are a lot of head winds. and it would make it certainly easy for us to unwind. >> thank you, mr. chairman. >> the corporal is recognized for five minutes. >> chairman berbernanke, all jo are not equal. about 95% of the jobs created have been service oriented jobs.

we have a skills gap. we have a growth gap. we have an attractable employment gap, shrinking middle class and on top of all of that the lack of real growth and real nick. and in a speech i gave the other day. and i don't attribute this to you and you are attributing this to someone else. but the i.t. revolution is important and will likely not generate transformative economic effects that flow from the earlier technological revolutions. as a result, these observers argue economic growth and change in coming decades will likely not be noticeably slower than the pace to which americans have become accustomed. apparently the doctor agrees with you and agrees with the statement of the american sbrer prize institute. though the structural factors such as mismatch between skill sets arguably stem that the

employment have and the skills that employers need also place a significant role that leads us back to education. my question is three parts. how much of today's unemployment is structural? if a significant amount is structural, then how does a highly accommodated monetary policy that the fed is pursuing boost employment? structurally over the long term. and if a significant portion of today's unemployment is structural, do we expose ourselves to significant risk of price inflation in the near term by continuing a highly accommodative policy until the employment rate drops below 6.5%? >> so, on the first question, how much is structural, again, nobody knows precisely. it has to be estimated. the fmoc makes its own estimates.

the nurnls we have come up are 5.2 and 6%. this can be addressed by monetary policy. the rest probably cannot be address by monetary policy except left untreated will become structural unemployment. in terms of the longer run growth, the comments you read were mess mystic comments about the i.t. revolution. let me be clear i laid out a view, as you mention, of pessimism. i think there are a lot of differences between the world today and the world in the 19th century when other inventions were being made. the most important differences have to do with the amount of research and development. the markets that make it very profitable to be first to market

with new innovation, and since resterj development and technological process are the as a country we need to try to do what we can to address the shortage of mismatches and assure talented people from all over the world can come to the united states and participate in technical innovation. i think this is an important area. i am the first to admit it's outside of the realm of what the fed can do. it's something only congress can addre address. >> thank you very much. >> the debate continues about bernanke's testimony and whether his q&a differs from his testimony. the next meeting is june. if there's no action there, it's august. that's roughly three or four

months. we're off about 100 points from the high. >> those are typically provoking volatility. even though equities, the 10-year yen is all over the place. >> the yen is at the lowest since '08. simon, thoughts? >> i think the it's the objective that he's a central banker. it may have been an attempt to explain they would be data dependent in their decision. almost by slip of the tongue left open the possibility to something before labor day. that is what the transcript says. >> again, he says it's not a mek nisic function. it's going to depend on the the data. let's go back to bernanke on the

hill. >> once again being in the position of having to be bailed out. issue number two deals with the structure of the fed. laws that long made. as you know, we have 12 regional fed reserve banks which have nine members each. my colleagues may not know this. as a result of congressional law. of the nine members, three come from the financial institutions themselves. three others are appointed by the financial institutions, and three come from appointments by the fed. we've had absurd situations where jamie dimon sat on the new york fed and whose job is to help the wall street. i will reintroduce legislation to end what i consider an

absurdity of having six out of nine members of regional feds colts from the financial institutions. the last question that i would like to ask is the fact that from the end of 2007 to april of 2013 financial institutions have increased the amount of excess reserves held at the fed from one 1.5 billion to 1.7 trillion. one reason is since 2008, the fed has provided interest to financial institutions to keep this money at the fed. so what we see is huge financial institutions pocketing huge amounts of money at the fed. getting a small amount of interest. i think it would be much more productive for our economy if that money was out going to small businesses and into the productive economy rather than sitting at the fed.

and the legislation that i'm working on would prohibit the banks and require them to impose a 2% fee on the excess reserves of the largest banks in america. in other words, get the money out. so those are three issues that i'm working on. >> the amount of excess reserves in the banking system is completely out of control of the banks. the total is just given. it would be the quarter percent interest that we're paying them for technical reasons is not preventing money from going out to small business or other business. prime rate is 3.5.

if the banks can find attractive loans, they will certainly make the loans. in addition, getting rid of the reserves capacity would force us, when we come time to tighten, it would force us to sell assets quickly in a very destructive way instead of using the tool to tighten interest rates and avoid inflation. it would be very counterproductive. >> breaking up the large points. that's a very complex question. many involve relatively small changes. investment banks and commercial banks got into trouble. i would sport -- so i think that we are doing a lot of things that i don't have time to go through through dodd-frank through orderly lick we digs authority.

and other authorities to move in the right direction towards addressing too big to fail. and i would be supportive of additional steps. the best direction is requiring the largest firms to hold more capital. that would force them to be safer, to have more even, more level playing field. and if the economic returns didn't justify the capital cost to break themselves up. i just want to assure you as strongly as i can that the primary role of the board members is first to give us market insight, business insight. let us know what is going on in the economy. but there is a complete

impermeable wall. so there's really no conflict. that being said, i can see why you might want different people represented on the board. >> thank you, all our time has expired. >> thank you, chairman bernanke i wonder if you can comment on the the primary factors in other words. given the effectiveness of -- >> the q&a continues with the dow up 66 points or so. we'll take a quick break and be back with a lot more in just a few moments. just minutes. protect your family... and launch your dreams. at legalzoom.com we put the law on your side.

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if you're just joining us, a very busy day on capitol hill today. a couple of different hearings. the joint economic committee getting testimony from ben bernanke. and the irs officials testifying in front of the house oversight committee where it's been a little more fiery than the fair chairman. good porng. >> well, members are getting frustrated because we've had a series of meetings that haven't produced new facts or pictures since the ig's report came out. but the oversight committee called a panel of witnesses, including the i.g. and the line irs official in charge of the unit that dealt with those tax exempt organizations that's

acknowledged misconduct. she decided to invoke her fifth amendment right against self incrimination. and that wasn't pleasing to some members of the committee. here's the exchange how that went down. >> i will not answer any questions ob the subject of the meeting. >> we will take your refusal as a refusal to testify. the witness and counsel are dismissed. >> mr. issa, mr. cummings said we should do this like a courtroom. she just waved her fifth amendment right to privilege. you don't get to tell your side of the story and then not be questioned she waived her right. she ought to stand her and answer our questions.

>> now chairman issa did not accept congressman gabbi's legal interpretation there. he did dismiss the witness. and you have testimony from the deputy treasury secretary who repeated what the administration was saying. they were not aware improper conduct was going on. they wait for the report to come out, and then the president acted. and members are going to question him further and one of the things members are boaring in on is the fact that the irs failed to correct the record after saying no improper targeting had gone on. both democrats and republicans are going after that. >> john, do what degree to you

see the optics of the scandal bleeding from the irs to treasury directly? >> not that much, to be honest. it was not a good moment for the white house to have lois learner plead the fifth. the i.g. said the activity in question was not motivated by partisanship, much less criminal activity. and for somebody to take the fifth, it naturally, as lois learner said in her testimony, makes people wonder did she do something wrong. and that's something the administration is going to have to deal with to be confident in what treasury is doing. they are going to deal with the public's view of how they're hand handling it. we're continuing to search for direction. let's get to the testimony of ben bernanke. >> where the labor market is and

given that we still have capacity in this economy. you said too much constraint too quickly continues to be the head wind that we may not want to get into. we haven't addressed the longer term problems. and then you mentioned that you thought the 10-year window may be too short to do that. some of us are looking now at something more than 30 years. relative to where our growth will be relative to our debt. and particularly in the enormous spike in the mandate in the mandatory spending and the impact on that and interest rates in the economy and so forth. you suggested before you use a lot of tools. plus the tools that the fed has to get us through this period of time.

but ultimately that responsible belongs here. my take is that begins in earnest, in a relatively short period of time. maybe two or three or four years. could you expand more on that on what you think our responsibility is? because i'm starting to hear things like the fed is buying us time. so therefore we don't need to take action right now. is the fed being an enabler for addiction that congress can't overcome? >> well, the fed st doing what congress told them to do. we're doing our best to try to pro mote maximum employment and price stability. congress needs to take a longer view. it's true that interest rates are low today. and therefore the interest burden today is quite low. when the cbo badge et

plans out for a decade or two decades, it assumes they will arrive. so looking at the budget plans, they assume higher sbris rates, and you're going to have to deal with higher interest rates at some point as the economy strengthens. so i support your suggestion of having a longer horizon. i would note that my predecessor shared that the reforms introduced then are still now being phased in. so 30 years later. so for some of these changes the leave time make it easier to achieve. >> and lastly, you're concerned about the low amount of interest return and the risk taking or

the reaching for yield. is this creating another potential bubble? there's a big surge in the market here that seems to be not enforced by underlying fundamentals, but i like your take on that. >> well, we are watching these carefully and to this point our sense is that major asset prices and tomorrow cat bond prices are not inconsistent with the fundamentals. for example, it was mentioned earlier that price earnings ratios and the like are fairly normal in the stock market. in addition in thinking of risk to financial stability. you have to think of leverage and other indicators that suggest mispricing is going on, but it has the possibility of greatly damaging the broader financial system.

and we're not seeing that at this point. so it's always dangerous to predict. but our sense is that those issues are still relatively modest. but they require close attention. >> we are glad you're doing that. we don't want a repeat of what happened before. >> absolutely not. representative sanchez is recognized for five minutes. >> thank you for being before us. we had many years as the president's economic adviser and now as chairman. so i know you're sitting as the chairman but i have questions overall about our economy and i would like your idea on something in particular. i remember when chairman green was before us and i spoke to him about what i saw as a frenzy in the housing market and right

around the time he called it a frothing in a particular set of markets and since having left said i completely missed what was going on. so i want to go back to housing. it's an incredible piece of the american budget. the american family's budget. their sense of wealth creation. in many ways it's the first step. it's what we use for small business or to put kids through college. so this is what i see going on now. around the nation in a lot of markets, in particular in california, housing prices are going up. so everybody is cheering and everything. but i see foreign money coming in. moneys being bought as investments. banks putting homes into hedge

funds. these funds holding onto these, and renting them out, anticipating at some point five or ten years down the road to get preeshs out of the assets. rent is going through the roof. and your average working family, at least where i live, is not able to buy a home because of these, if you will haves who have the money and the cash to come in and buy the home. and not flip it but hold it at a higher rate of rent to the families who are becoming permanent renters.

so the housing market is getting better but the not for the middle class and almost chaining them, i would say into the inability to find their way to homeowner ship. do you see that going on? and secondly? what can the congress do to ensure not the other way, where we went wrong. but what we yould normally call the middle class and people who should be attempting to buy a home not get caught in this cycle of i didn't get in and i didn't get a home. >> just a few comments. with prices falling 30% and with low interest rates, affordability is the highest that it's been in decades. there are people who are able to

buy now. although mortgage lending is tight for the people in the lower part of the district. i agree with that. many people who lost homes are not becoming homeowners have gone to renting. and rents have gone up, as you said, so it's probably a good market response that the houses are now available for rent. that will probably take the pressure off of rents and reduce the rents that people have to pay who are forced to rent. >> excuse me a minute, mr. chairman. those people who had mortgage rates were paying mortgages. and we know that a good amount of these people lost their jobs. but what i see are lower

mortgage payments that they were making versus higher rental payments that are now being cost again because a family is not getting credit or a family can't get credit or those who qualify with credit, you know, cash offers from in particular foreign markets are, you know, wiping them off from being able to own them. so what i see for a family unit is a higher cost of housing, effectively, than what they had pre-this whole problem. >> well, again, if you can get a mortgage. the payments are low and affordability is high. i agree mortgage lending is still too tight. there's a number of reasons for that. excessive conservativism on the apartments of the banks. there's still work to be done to clarify the rules, for example.

the fear of put-backs that the banks still have. i think over time mortgage lending will become a bit more accessible to a broader range of people. right now it's still relatively tight. so i agree with that. >> thank you. chairman, our time has expired. senator lee? >> thank you very much, mr. chairman. thank you, chairman bernanke. mr. bernanke -- >> all right. trying to find some legs here. probably pivoting off of the comment that stocks, corporate assets, corporate debt, not inconsistent with the fundamentals. >> and record highs with regards to indexes and record lows with regards to yields. the specific committee task to this. but what it means in practice

will be interesting this time around. especially as we continue to test. >> says it's dangerous to predict. our sense is those issues are still relatively modest. we will take a quick break and come back after a short commercial interruption. don't go away.

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a lot of parsing of words today. steve liesman has been telling us what his read has been all morning long. and you make the point what you hear from him dmend on the previous expectations, right? >> yeah. i think it's fair. it glea grows with your earlier comment. i come from a standpoint of we did the fed survey in april. if you thought that was the case, and these are definitely hawkish comments that he makes when he says the next few meetings. but over the past several weeks

it strikes me that the market has begun to pull that forward. if that was your take, then i think the comments are. and if there are two solid jobs reports, june and july, and by solid i mean in the 200,000 range. then i think you can head towards an august tapering. and that would be earlier than the market thought in april. but maybe a little later than we thought the past several weeks. >> bill gross is on a "power lunch" later today. all of these have two sides. today chairman bernanke spoke out to both of them. your thoughts? >> if it seems like the chairman is dance it's because he's doing figure 8s. i issued the forward guidance. the fed is heeding that as a

tool. it wants to help the economy by trying to do something in the future. he wants to be careful to not take away an effective tool for the economy. he doesn't want the market to go too far and be too surprised if the fed changes course. it's a balancing act. yeah, he's doing dancing. or you can call it talking out of both sides of your mouth. >> bottom line, it depends. we have to watch the date over the the next few months. let's get out to bernanke testifying on capitol hill. >> we have a now where, for example, home building is lower than where it can be sustained for long term. >> i just think it's an important point to figure that the monetary policy is not really a net growth strategy. it probably has a bigger impact

on the timing of economic activity than the total amount. >> we're trying to mitigate the effects of the recession. we can't affect long-term growth. that's right. >> right. another point. a quick follow-up. senator coats and senator lee alluded to asset bubbles that have occurred in the past. it's clear to everyone that we had a residential housing bubble in the last decade. and i just worry that this extremely acome dative and unprecedented policy can manifest itself in unpredictable ways. when we see a surge in housing prices, extraordinary low yields on junk bonds. huge equities in rallies. high agricultural and land. it's hard to know what an asset ought to be worth. but it worries me that this is going to manifest itself in unpredictable ways. the last point i would just want

to raise is you've discussed the general strategy for exiting when that day comes. but always with an implication that there will be this orderly transition. i know you're aware of this, but i think it's important to underscore that it's hard to predict how the markets will respond when the biggest holder of fixed income securities in the history of the world decides it has to sell them. you may decide you have to sell them. you may decide to let them run off, but that may not be enough. i think there's very significant risks that we're taking by accumulating a portfolio of this scale. do you want to comment briefly? gl i don't disagree this is not easy and requires good communication. we improved our communication. >> by the way, i would like to commend you for that. you have provided more transparency, guidance than the

fed has ever provided in recent history. i do think that's constructive. >> thank you. i guess i would say there's no risk-free strategy here. inflation is 1%. unemployment is still high. so we could tighten monetary moll policy and address some of the issues that you have in mind. it would also include a big market correction if we move very quickly and unexpectedly. >> which may suggest the reason the the market is where it is because of monetary policy. >> and also they think they're creating more profits than growth. >> a quick follow-up to kmebts you made in the past. i have legislation to allow that much, not all, but much of that activity be pushed out, which i think is a better way for financial institutions to manage risk and a better way for users to be able to use the products. do you still share the view that

it's a good idea to repeal the swatch push out? >> yes, we still have concerns about it. >> last thing i want to mention is there are august 9th, 2011, comments from a meeting in which there is a reference, and i will quote a portion of it. refers to plans developed regarding the processing of federal payments. potential implications for bank supervision or regulatory policies and possible actions that the reserve could take if the markets pose a threat to the federal reserve's economic objectives. so clearly they were plans regarding how to deal with processing of the payments, for instance and other things.

can you give us a sense of what the plans consistent of? >> well, my memory won't complete. but we looked at our systems and ability to make payments to principal and interest holders. for the most part, we were able to do that with a few possible exceptions. people holding savings bonds and a few things not as easily connected to the system. we also had some discussion we also had discussion of the policy we would have with banks. for example, discount window lending. and all kinds of things that were contingency planning in case this were to happen. we did not directly engage the private sector for any contingency planning. we were mostly looking at internal systems and the ability

to address whatever directions. we are the agent, of course, of the treasury. and it's our job to do whatever we can do. erp working through the capacity, both as an agent and managing the payment system and also as a bank supervisor to deal with a possible default if the dealt ceiling was not raised. >> mr. chairman, thank you. thank you for making this opportunity available for us. chairman bernanke, we're grateful for your presence and your testimony. i have to say as well the work you've done to seal with a set of economic circumstances that we rarely faced in american history. so yo brought in not just a lot of focus, but also a lot of

passion. i really want to focus on more issue. the issue is tax reform. if there is one area of consensus in washington and across the country, there's a lot of consensus. here it happens to be bipartisan, that we have to simp simplify the tax code. and make it working for businesses. there's all kinds of ways to do that. the hard part is getting consensus ford to move forward. the good news here, i don't want to overstate it, but it's important to assert it, is we've had two chairman. chairman baucus and the finance committee. they are working together individually and their staff to try to tackle this. and processes for mechanics

under way in both places. for example, every thursday in the finance committee, we sit down around the table and for at least an hour or more, go through elements of the tax code. that's all the good news. the question i have for you, maybe one or two, the basic question is can you give an opinion or assess the impact, i'm assuming it would be positive, but i would like to hear about this, on passage of a substantial bipartisan reform of the tax code? >> well, first, i would just make the observation that such a major action taken on a bipartisan basis would itself be confidence inspiring. most everybody on both sides of the aisle agree the tax code is complex and distorts economic decisions in a lot of ways.

and so i think if it were done in a way that simplified it, made it more economically efficient and rational, i think it would be positive. and i hope that you and your colleagues can make progress on that. >> is there any one part of the tax code that is of particular significance in terms of the adverse impact it has on either business activity or economic growth? i realize there may be more than one. if there is one that you think is particularly difficult to manage. well, the very difficult problem is the following. most economists would argue an efficient tax code is one that has a relatively broad base and low marginal rates. but low marginal rates is easy. but broad based means restricting or limiting popular

deductions and credits. so that's the goal. but political challenge is to figure out how to do that. and as you know, in the income tax, for example, the personal income tax, the biggest deductions are housing, charitable. state and local government and the health care exemption where are very popular and have their own purposes. finding a way to deal with that is the most challenging part but has the biggest payoff if you can broaden the base and lower the tax rate. we have the sense that there is a big measure or a substantial area of uncertainty. one is the tax code. one is the economy. one of the areas of uncertainty

is what the congress will or will not do or hasn't done. and it's my belief we can get a bipartisan tax reform agreement to remove at least one element of uncertainty, and i know my time is almost expired. the representative is recognized for five minutes. >> all right. we're going to take a quick break. we'll be back with more on the hill in just a couple of minutes. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades

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usaa. we know what it means to serve. the chairman is beginning to broader topics. let's get back to the fed chairman on the hill. >> you've seen our side. i think aggressively talk about the long-term implications of our aging population own the impact of medicare. i think you would agree that's the driver of our debt. yes? >> on the spending side, it's very important, yes. >> and what program does the spending come from? medicare and medicaid. right. so you know on our side of the aisle we're trying to reform it and make it sustainable. one frustration is we're not able to get buy-in with others to join us in the effort. and it's one thing to say, listen, i don't like the

republicans' plan. but the other side has to put out a plan to make it sustainable, too. wouldn't you agree? makes medicare sustainable in the long term. >> we certainly want to do that, yes. >> both sides should not make them appropriate. from a policy perspective, yes. we want medicare to be sustainable. we want the budget to be sustainable. >> and we want two sides to make medicare sustainable. >> there needs to be some bipartisan way of negotiating whatever you're going to do. >> one of my concerns with your testimony when you talk about the headwinds is you didn't talk about regulations. when i talk to small business owners, people back in wisconsin. they're concerned about the things that you mentioned. government is getting in their way when they're looking at expanding and growing a business.

they will site rules and regulations and government interference as a problem. i see that as a head wind as well. that wasn't referenced. i wonder if you see that as a concern. >> it's a concern. smart regulation is very important. i wonder if the regulations are ones that were just imposed or whether they are things that have been in place for a long time. in talking about headwinds, i was looking at factors specific to this recovery as opposed to longer-term growth issues. >> and i know your term is up in january. i have offered a second term by the president, would you accept? >> i'm not prepared to answer that question now. >> okay. some of us are concerned about the policies that have been implements and the long-term impacts that won't take effect in the next six months, but will impact us three, four, five and six years down the road. thank you for your testimony. >> thank you, representative

duffy for waiting until the very last moment to slip that question in. chairman bernanke, thank you for being here. i think the fed played a critical role in calming the crisis. i don't know that i agree that everything good in the economy including corporate earnings has occurred because of a joint monetary policy. the private sex tor is more resilient. i believe that at this point in the recovery. it's really the fiscal roadblocks aside from europe and some other issues that are really key to getting the economy going. we're going to continue to explore monetary policy, exit strategies and other issues in future hearings. thank you for being here today. >> thank you, sir. >> chairman kevin brady of the joint economic committee. wow, the room has already cleared out to a large degree. and saiing the best for last, kell, asking if he would take a second term. >> an interesting question says

would you be prepared to accept another term? and bernanke saying i'm not prepared to answer that. the artful dodge. >> we were wonder if that would come up. steve liesman, let's put it in perspective with the dow closer to the high at about 112. >> yeah, i miss ron paul. >> do you miss ron paul? >> we all miss ron paul. >> i think a little bit of the edge is off the fed criticism right now. in the gays of ron paul several years ago there was a lot more consternation on fed policy. there is pushback from the republican side. i don't think it's particularly strong or deeply believed at this moint. that was about the fed enabling deficits. about the effects sort of answered and moving on. i think the fed chairman did a little dancing today. he wanted people to think

tapering was not imminent. it would happen if the data is strong and wants to avoid bubble popping problems and bubble problems in the sense that it doesn't want the market to be at such a level and be taken by surprise, but it also doesn't want the market to rise all the way without any particular breaks on it. so a little bit of dancing there. and i think ultimately if the market is a little less concerned about tapering it's probably the right move but it should be on its toes and it could happen. >> yeah. sure sounds like, steve, when it comes to a former forms, he said in some cases stopping was premature. he is trying to protect the market against that as well, right? >> yeah. he's trying to use forward gings. it's a big tool that the fete is admittedly experimenting with. there has been a bunch of economic research on it.

not trying too much in the real world by telling markets once the economy strengthens, we are still going to be accommodative. let's not forget what the fed chairman considers to be accommodation. if the amount of qe were to be reduced from 85 to 45, for example, the balance sheet is still growing. let's say it goes to zero. the balance sheet is still large. he is still considering providing accommodation to the market. what the fed is concerned about, and i'm being told this behind the scenes, is this issue of the terminal rate problem. the concern that the fed has that the market crisis is zero and reducing the balance sheet. that's the concern at the fed. it may think the market, the economy at 45% stimulus but the market price is in zero or negative. that's a perennial problem for fed and central bank officials

around the world. >> thank you very much for that. 129 points on the dow as things stand as you can see there. we are going to take a quick break. more "squawk on the street" in two. hey, what's going on here? do you want the long or the short answer? long i guess. chevy is having a great-deal- on-the-2013-silverado- but-you-better-hurry- because-we-don't-want-to-see- a-grown-man-cry-spectacular! what's the short answer? nice. [ male announcer ] the chevy memorial day sale. during the chevy memorial day sale, current chevy owners trade up

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let's talk about what is moving to the big board here, now that bernanke is done with the testimony. >> mr. bernanke said what mr.

dudley said. any change in bond purchases will depend on the coming days. a lot of what i call the sparsing of the commentary and the whole thing is whether they would take it before labor day and what was going on. it is about -- i'm sorry, but this is not some kind of imminent end to bond papering that was occurring. i think the markets are very sensitive right now. dudley said this yesterday. there is a real risk of the market overreacting and i think this is a good example of overreacting. now if you want to see how hard it is to figure this out, take a look at the bond, by the way. bond market moving to the down side. look at headlines that came out exactly as this is occurring. so this headline, bernanke doesn't rule out fed taper in the next few months. and then reuters puts out,

bernanke offers no hint of pull back in fed stimulus. ap, stocks surge as bernanke retains dovish tone. so it depends on how you want to spin the whole thing. this is very interesting and somewhat more defensive tones in the market, so you see healthcare and consumer staples on the upside. financials are strong. that's because, guys, if you get a strengthening in the yield code or steepening in the yield code for bond tapering, that's going to help. >> thanks. >> and with the yield, just picking up on that point, the stocks again are rallying back towards their highs. what about the rest -- let's get out to sharon epperson. sharon? >> we have seen gold prices in just the last two hours during ben ber nank oo's testimony. we saw $50 range in gold. hanging on every headline trying

to interpret the how long the bond buying will last and whether we will see tapering sooner rather than later. we saw gold at a high of 1313 an ounce and after gaining more than $75 or so and now is down on the session, around 1,376 an ounce. also, in the oil markets, as ben bernanke reflects, there is a weekly oil inventory report from the department of energy. we did see a decline in oil inventory, but we also saw a big gain in gasoline supplies and that is what the market has been focused on. the fact we are looking at gas inventories 10% above this time a year ago. the summer driving season's demands will cover and there will be lower energy prices as well. >> yes, sharon, and keeping an eye on the energy levels and

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dow is back to the triple digit line. watching with today, rolling in and out with every phrase with bernanke uttered, what do we walk away with? >> what you walk away with, when you finally go in and read in between the lines, feds don't do anything different right now. the economy, this is one of the strengths of the economy. during a stronger economy, they feel they are responsible for it. originally, i didn't believe that. but i'm believing it more and more. they will tow the line probably for another throw or four months, minimum. >> so he did say it was independent. so does that mean the data won't improve? >> i think it is incremental improvements. they haven't seen anything significant. the most important thing for them, obviously, is

unemployment. to bring down unemployment rates significantly, below 7%, it's been a take continued by the fed and continued effort and i would think it is more about putting the onus on corporate america. because when you've got a lot of money -- forget about the repurchasing, start rebuilding your business for the future. >> of an interesting point as well, given the focus on stability of asset prices in the hearing, did that become the reason the feds would access, as opposed to other ways to look at it. >> i may be cynical, but i think the metrics change periodically. they don't follow the same game plan -- if they followed the same game plan, everybody would know what to expect, and i don't think they do. >> so you think it changes with the metric change? >> yeah. and that week won't work for the next week. i know that's cynical and maybe it's not the facts, but it is just the way i feel about it. >> peter is basically saying

sideline money will really start to participate here. are they on or not? >> i think they are probably right. but when the sideline money starts getting into it, i want to get out of it. and the mark set getting close to its near term. i think that will get it into it and then from there, i think we go on the sideline. >> an thank you very much. let's get back to headquarters. scott wapner and fast money halftime. >> welcome to the halftime show. i'm here with our own steve liesman who has listened to every word from the fed claireman today. traders watched the market take some wild swings as well. steve, so the markets seem to be at odds for a while. the dow is at is