good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick and ben kernen and ross sorkin. the so-called hawk larry summers bowing out of the race for the new fed chief position. the former clinton treasury secretary called president obama yesterday to notify him. in a letter to the president falling the call he said he have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the federal reserve, the administration or ultimately the market recovery. for anyone who thought yellen and summers were the same, the market doesn't think so. europe is following suit. if you take a look at what's been happening there, you'll see right now markets at least in germany up better than 1.1%.

in asia overnight, equities markets were a little bit mixed. the hang seng was up by 1.5%. oil prices are down another 1.34. that's probably because of what you're seeing happening in the dollar. look at the ten year note before we get to the dollar. the ten year note is yielding 2 point poip 482%. the yield getting pressed down. take a look at the dollar. the dollar is down against both the euro, the yen and the pound. right now the euro is at 1.3353. >> oil would be going up. oil is going down on syria. >> on syria is coming even further up to the forefront. if you take a look at gold prices this morning, up slightly. up by 7.40 to 1,316 an ounce. andrew. >> thank you. what a weekend. i remember five years ago we had one weekend and now we have

another one. it's not the same. with larry summers out of the race, will president obama pick janet yellen? is donald kohn a candidate? tim geithner says he doesn't want the job. we have three guests joining us. we have ben white back. i'll start with you, john. what do you think really happened over the weekend? what was the last sort of domino to get this to take place? >> syria, i think. i think what happened was larry summers was the president's choice. the president still believes he was the best person for the job. larry has accumulated controversy over the years. the white house didn't believe those were serious

controversies. as you had senators recommending him. there was a big campaign against larry. when they started getting close up on the fiscal fights and the syria controversy began consuming the administration, everybody lost energy for a big confirmation fight and that would have started in the banking committee where you have a three seat democratic advantage. if you got to the floor, everyone was pretty sure that larry summers would be confirmed. i think if push came to shove they would have gotten him out of the banking committee. it was too much trouble for them. >> tony, how did they miss play this so badly. can we show this to the camera here? this is the cover of the national review. there are people out there who would say from day one this was not going to work. >> i think it was one of those people. nothing against larry summers. i'm a troesh ri guy. both great candidates. the white house really wants larry summers.

i would say, that's great. i understand that. who's their second choice? the opposition to him is deep and personal and at some levels very -- >> is it really going to be yellen? is the president going to feel like he kneels threatened. >> i think the safest choice is yellen. i think it's still a possibility until somebody rules it out is that you keep the best guy for the job in the job. >> he said he doesn't want to stack it. >> i would bet a lot of money on it. he's very youth full. we've replaced them with more of the recent pictures. >> john, the president didn't need support to bomb syria anymore. i don't see why syria had anything to do with it. when you said i've been seeing

this all along, watching your assets, you are now a proxy for the far left now. >> you know, joe, part of the reason larry didn't get confirmed is because he didn't get confirmed is because he wasn't nice to people and i hope you're taking notes. >> i thought my support -- >> do you think john kernen can win senate confirmation? >> what about this? i also took this from this. is there any question now what wing of the democratic party really is calling the shots right now? shouldn't we caught -- every editorial i see about these nasty republicans in the house not wanting to compromise on anything, is there any question now, if larry summers is too conservative or too much of a -- too close to the banks, too much for deregulation, too much this, too much that, that shows you where the core, the center of this party is to this point. >> if i could just jump in on that. i think what we didn't talk about on friday, john tester

said he needed to -- >> he's not exactly the left wing. >> i've had him on and he is. in a lot of situations he is. >> he's not sharon brown. >> she never weighed in. >> she was going to be a no. >> you don't know that. >> oh, yeah. she was going to be a no. >> the point is that it's not all liberal democrats that are against him. >> some liberal democrats. >> if there was any question about how the market would react, what song should we play? let the go times roll, the cars. roll roll out the barrel. >> not that different. >> maybe liberal democrats are pro stock market. >> not that different. >> john, we know that they're pro employment and less so on inflation at this point. and, you know, i said earlier, let's see where -- we all know what we are. we're getting 200 points. i'm feeling okay about this today. hopefully there will never be any math or science that needs to be done on the fed from here on out. >> gosh.

thanks, larry. >> i have to go to bed on one question. this is the don cohn question. if you believe that tim geithner is the guy that's actually whispering in the ear of the president on who gets the nomination, my sense is he actually likes don cohn a lot more than he likes janet yellen. do you agree with that? >> that may be. i don't think tim geithner is very enthusiastic about janet yellen. i talked to folks in the white house, they said yellen is by far the most likely pick. don't expect a lot of surprises. don't expect it this week. i thought obama would be talking about economics all week. doesn't look like that will be the case. if they moved quickly that they wanted summers -- >> you had four people on the banking committee. >> he did the same thing on susan rice. he says i want this person for this job.

let people organize opposition and then they kill it. they could have gotten summers through. >> the first problem is this was politicized. it was allowed to hang out there far too long. then is the answer okay if you have 200 economists, and then if you have 200 senators campaigning for janet yellen, but do you really turn around and say, you are acting like bad children and i'll reward you and let you go what you want. >> it became clear they couldn't get democrats on board for syria. they won't get them on board for summers. they don't want to cut deals for represent karns on banking and on the floor. >> that's good. >> they're not in the mood to cut deals. >> tony, how does it happen? that's what i want to know. does the white house, somebody back channel to larry summers? >> that's what i think. >> i'm going to send you a draft of the letter that you are going

to send the president. >> i've seen that sort of thing happen. not a draft of the letter. larry is a professional. he's been around the block a few times. i'm sure he got a call from someone very high in the white house, probably mcdonough or mcdonough asking tim geithner, his friend and former colleague to let larry know that it's probably up. larry could have come to the same conclusion himself after seeing tester go south and to make that decision. >> couple points on that. first of all, everybody was counting the same votes and seeing the same political developments. secondly, one of larry's former colleagues reminded me that he has a very keen sense on whether to pull the plug on something like this and reminded me that he left promptly before the potential for getting blamed for the 2010 elections. >> how disappointed is he and given all the political capital larry summers used and the president used, what happened? roger altman came on and so many

people came out in support of larry summers. i assume he was working the phones to make that happen. >> i think larry summers wanted the job and his allies within the administration wanted the job. on the question of whether he was pushed, somebody i talked to yesterday said i was shocked that this happened and unhappy that it happened. >> somebody at the white house? >> yes. and that suggested to me that maybe it wasn't a direct push from dennis mcdonough. >> i'm not convinced that there was a whisper campaign to do it. i think he saw the writing eon the wall. there were a lot of people that were very surprised. >> you guys, just on friday we had former treasury secretary hank paulsen on the show. he said one of the reasons he liked larry even though he was not saying one way or the other, one of the reasons he liked him was because he had a very close relationship with the president and he said from his own experience that close relationship with the president was absolutely key.

is there someone else you look at who has a close relationship if it's not geithner and if it's not bernanke and if it's not going to be summers? >> i think the short answer to that question is, no, there's not. >> it's ben. >> it's probably ben. he's the only one. geithner is the one who has that relationship. he's made it clear he's not interested. >> ben white. >> if a part of the campaign against larry and it was a part was to say how could you pass up a highly qualified woman who's serving in the number two job who has all the credentials, the market likes, how could you turn away from that person for somebody like larry given the controversies associated with him, it will be awfully difficult for them to then say, well, yeah, we didn't take larry but we're not taking janet either. i can't see them passing -- given the nature of the opposition that they have just responded to, can't see them going past janet yellen. >> look, the parties move far

left from the clinton years. that's my take. sorkin, i'm listening to you. if you start talking about anything other than men's underwear, i don't think you're an authority on anything. >> i know. >> when they asked you to write that piece for the "new york times," did you think will this undermine my credibility in the financial matters? what are you wearing today, boxers, briefs, little tube -- >> i'm wearing my tommy johns underneath, but i will say i didn't think they would get on -- they put it on the cover. >> it was on the cover. men's underwear, by andrew l. sorkin. >> i talk about these undershirts. you know how this happened. there we are. >> all right. well, you've been talking about the fed, monetary policy for the rest of the day and everybody is going to think about i wonder if he's chafing, bunching up. i don't know, andrew. who's managing this career of yours? i guess let's say you're a renaissance man.

can you talk about it all. >> i'm going to have to start consulting with you all. >> you're the only person thinking intensely about this. >> i guess you don't read your old paper. you didn't see "the new york times"? >> i saw it. there's a real zeal to your interest in this issue. >> all right. whatever. >> he's wearing that undershirt too. thanks, guys. coming up, continuing coverage of monday morning market rally. yellen's pretty good. yellen's pretty good. we know who the short term heroin addicts in the market wanted. dow up 192 points. former treasury official roger altman. he's a strong supporter of larry summers as fed chairman from the old republican clinton administration. and an extended conversation with former congressman barney frank and former senator chris dodd five years after the financial crisis. capital to make it happen? without the thinking that makes it real?

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if you're just weighing up, the numbers are up almost 200 points. futures up 194 points on the dow. 20 points up on the s&p 500. that will get us a retracement of half of the recent pull back that we saw based on syria and the tapering. the ten year this morning, that should be interesting. 2.8, that's not too bad. and the dollar which was up on

friday on the nikkei report that it was going to be larry summers name this week is giving back some of those gains on the fact that janet yellen is more dovish than larry summers. they say there's no difference. they're saying that there are times in the past if you read what she said, she was not always rubber stamping the additional accommodations. >> if you look at what they've said about qe 3, larry summers has indicated that he thought it was not as effective anymore and not really worth -- you weren't getting the bang for your buck anymore. summers has been the opposite. yellen has been the opposite and she has been out there saying that maybe we need this for an extended period. >> where's leaseman. >> he's on at 7:00. >> he has quotes where she was hesitant to come on with more accommodations in the past. obviously the markets think there is a difference. >> yeah, right. i think it all comes down to qe

3, whether you're willing to taper or whether you focus only on what's happening in the employment picture. there have been a lot of thoughts that she's of the opinion that qe 3 can help push the employment. >> the most celebrated fed chief of all times probably fulker. price stability shouldn't have anything to do with employment. read what krugman says. read that part of the sort of analysis on the left of things think we need more accommodation, more stimulus, more, more, more, more, more. you can see why it happened this way. i think ben's probably right. we'll have senator warren on today. i think we knew she was going to be in. >> i think so. when you start doing the math on that, four of 12 democrats on the senate banking committee. at that point you absolutely have to have some republicans that get on board to do this. maybe it got a little too messy when you start looking at the

numbers. these guys know exactly how to break it down. >> even the wall streeters, you think of them as somewhat conservative. show them 200 points, they'll sell out. >> you were ready. >> yellen's great. have her on, perfect. >> we'll talk to steve weissman began coming up at 7:00 because he has really done the numbers and done the survey with economists to break down who comes out on top in which categories. we'll have him coming up at 7:00 eastern time. it's time for the "executive edge." first up today, former barclays boss bob dimon is asking for a shakeup of the rules. he's joining those in criticizing the lack of progress in ending too big to fail and an apparent change of heart for the risk that barclays was taking in the lead up to crisis. he admits the leverage was too high. he argues reg dwu la tori advances have helped cut the

risk but he says we need to work on this. >> dimon is right on this issue. forget about the crisis. before that he wanted global regulation. the problem for bark glas or any european bank, any asian bank and any u.s. bank, we have this global arbitrage going on. then you have to get concerned about deutsche bank. unless you have a global regulator, which you'll never have -- >> who's going to cede control to some global -- >> the folks in new york city can't get along with the folks in albany. the fact that we'll have this on a global basis is crazy. >> we're saying the title of your book and we've got a thing at the bottom that has the. >> too big to fail.

>> why are you dinging? >> this was your idea again. so how long are you in the penalty box before you can come out and start saying things? bob diamond, when did he quit? was it a year ago? >> it was a year ago, yeah. >> about a year ago. yeah, he quit about a year ago. quit, resigned, pushed out about a year ak over libor. >> okay. >> still has credibility. on this particular show i think he has a lot of credibility. >> all right. let's talk about a new nbc news wall street journal poll that finds americans are still unconvinced about obama care three and a half years after it passed congress. only 31% of americans say that the new health care law is a good idea. 30% say they understand the law and how it will affect them while 69% say they do not. here's an interesting point, too. 52% believe that the cost of their health care will go up as a result of the law. some difficult dynamics and i think approval rates dropped another 5%. that may be in relation to what we heard last week about the

union. the aflcio saying they have some issues with it, too. >> both sides, what's interesting is you might say, wow, it's never budged from this. so you would think inherently there's something wrong with it. the liberals would say that the right has been talking down obama care, spending money to undermine the law. the left has got hollywood types selling obama care and it still comes down at about 30%. there's something deeply unpopular about the whole notion. >> it's confusing. i have to admit. >> i still don't understand it. i feel like i've read it all. this is going to be the perennial problem. >> you mean you don't understand why people don't like it, andrew? that's what you -- >> no. i'm not sure most of the people here in d.c., i think if you actually asked them, even people who have written parts of it will tell you they don't understood it. >> if they understood it they

would like it. i know what you're saying. john harwood's been saying that. the american people, they're so -- >> no. >> they don't know what's good for them. luckily we have an administration that does know like your guy, bloomberg does know what's good for them. we better take our medicine and say, thank you, sir, may i have nother? >> only -- i hope that the viewer appreciates the sarcasm. >> let me tell you about the next story. >> you're finally getting it. two years is how long it's been. businesses getting a break from the i.r.s. about deductions. i don't know a whole lot about deductible asset repairs. fedex had a big win in terms of repairing some of the jet engines, this is something that they could legally deduct. >> i'm not -- >> are you the expert on that? >> no, i'm not.

>> you're preparing for that? >> me and the irs or the irs and i, we're peacefully co-existing at that. let's leave it at that. i'm surprised fedex, fred smith has said things in the past. i'm surprised they got a break. that was an oversight at the irs. is the irs back to objective, do you think, andrew? where are you on that? do you think we can breathe easily now? >> i don't know. >> now that there's no politics involved anymore? >> i think it's hard -- well, i don't want to get audited. >> careful. careful. >> i'm going to hold my tongue. >> careful. wait until de blasio gets there. >> when we come back this morning, we'll get back to the markets because again the futures are indicated sharply higher this morning. up about 190 points for the dow. up 20 points for the s&p futures. this comes after news that larry summers has dropped out of the race for fed chairman.

markets are looking a the this as yellen much more dovish financial chief. we'll talk about what is next for the market when we come back. peace of mind is important when you're running a successful business.

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can be a challenge. that's why we partnered with hp to build the new nascar fan and media engagement center. hp's technology helps us turn millions of tweets, posts and stories into real-time business insights that help nascar win with our fans. good morning. welcome back to "squawk box" on cnbc. john concern than with becky quick and andrew ross sorkin.

larry summers withdrawing his name from consideration as fed chairman. the global markets are taking notice. dow futures up nearly 200 points. 191 points now above fair value. the rest of the averages looking to open significantly higher as well. the dollar is down against the yen at this point. and the euro. joining us right now is naraman barivish. also phil orlando from federated investors. phil, the market's reaction to this is that they see yellen as a much more likely person to be dovish as fed chairman. is that how you see it? >> absolutely. the market had i think two areas of concern. one was that from a process standpoint dr. yellen was not even vetted, that larry summers seemed to be the foregone conclusion from the president's standpoint. second point is that yellen, who

is one of the architects with bernanke and the rest of the fed, is expected to be a more dovish person to maintain continuity. there was risks that dr. summers would take the policy too quickly and that would potentially hurt the markets or the economy. >> i get the knee-jerk reaction. the idea that the fed could be more accommodative under yellen versus summers. there are a lot of people who said it's time to pull qe. >> it absolutely is time to pull qe. the question was because summers didn't have any ownership of this policy, he might come in and eliminate the policy right then. >> come in, people thought he would walk in and say, forget it. 85 billion gone immediately? >> that was absolutely the concern. as ridiculous as that sounds, that was the concern. yellen would maintain a data dependent nature to the decision and would move it into the middle of next year based upon the continuation of relatively

strong data. >> naramin, yo you are' an economist. would he have steve weiseman coming on to talk about this. do you see a big difference between summers and yellen. >> i think the operative word here is continuity. with yellen we'll get continuity. with summers there was a question of what he was going to do and when he was going to do that. markets are breathing a sigh of relief saying, okay, we're going to get this sort of continuity, a phasing out of qe. we can debate about the timing. i think it's that sense of we know what to expect and of course markets as you know don't like uncertainty. this is a little more -- assuming yellen gets it, we're all assuming she gets it -- >> sure. >> -- but that this is more familiar and that's more comfortable. >> do you worry about inflation down the road? >> at this point, no. i mean, the fed obviously, you know, has a lot of control in the long term in terms of what happens on inflation, but

there's still a lot of disinflationary forces in the economy. a lot of excess capacity keeping prices down. even though oil prices are high, not terribly worried about them in the next two or three years. in the next four or five years, yes, that's a different story. >> phil, in the last month the market started dropping on concerns about what's going to happen with the fed, what's going to happen with qe with this next meeting this week, what's going to happen with syria. all of those risks and all of those concerns got pushed away with the major move we've seen and in today's bill too. what's the right level? is the level we're at now the right one and don't worry about all of those concerns? were those concerns right? >> we're about halfway through a difficult season. the president had a finite amount of political capital. the syria issue, summers issue seemingly resolved. what we have on the immediate horizon is the debt ceiling

issue late september, early october. we haven't completely cleared the decks but we have cleared two of the significant things concerning the marketplace. >> again, did you miss your opportunity? was that your pull back? >> not necessarily. we thought from the late july period with the s&p at around 1700, we thought we could see a move back potentially as low as 1600. we came halfway through that. we got to 1640, 1650. we have two issues out there. the market could come back again into that low 1600 level. at this point we're being a little bit cautious but once we get through those fiscal issues, then we think we've got some better prospects for a rally at the end of the year. >> we haven't even talked about the fmoc meeting this week. do you think they'll begin to taper? >> we're in the camp that think they have to wait. most of that has to do with the employment picture which is very cloudy at this point. yeah, the economy is looking a little percy. the economy isn't looking great.

the last reading we got was a little troublesome because they revised down the prior two months and the unemployment rate went down because of a bad reason but to say labor force participation dropped to a 35 year low. >> that's only been three years that's the case. that's the only reason it's going down for three years. we have people who said the market is absolutely set up for at least 10 billion, there's no way they don't do at least 10. you think they do nothing? you really do? >> i really do given some of the uncertainty we've been talking about here, i think they wait. i think the data aren't saying do it now. there's no clear indication of you have to do it now. >> we can do it now mp with yellen going in, nobody will question it. we can go to 1 a easy. >> there you go. there you go. >> bill, what happens to the market reaction if they actually don't taper when the market was expecting it to happen? is that a good thing be or bad thing? >> i think that's a little bit of disappointment. we're in the 10 billion camp. we think the driving issue is

that bernanke is leaving at the end of january. he wants to get the ball rolling. >> he has the press conference. >> he has the press conference. he loves the press conference. thoef' been feeding this to the market for the better part of the last three or four months. we're mentally conditioned for a $10 billion taper. we want to see it and get the ball rolling. $10 billion is not going to destroy the market. >> philipp, thank you very much. we'll talk to you again soon. yesterday's shocking news, larry summers removing his name for the running from fed chairman five years ago yesterday when lehman brothers collapsed. we'll talk all things financial when we come back. in the next hour, the men behind dodd frank regulation. former congressman chris dodd will join us. take a look at futures. they are now trading sharply higher. 200 points better than fair value. we're back in just a moment.

we are marking an anniversary today. five years ago today lehman brothers collapsed. one of the most well-known faces of the financial crisis, he's still somebody people don't know where he is or what he's up to. >> dick fuld was a star on wall street. the longest running ceo of any firm. in 2007 he mounted a vicious campaign against short sellers that he said were trying to put lehman out of business. >> what i really want to do is i want to reach in, rip out their heart and eat it before they die. >> five years after lehman's collapse, fuld is chastened. he has a small consulting firm in manhattan, no high profile

clients or none that are saying. one warns his tarnished reputation. he ran up legal bills into the millions of dollars, much of it paid for by the lehman estate. the d.o.j. and s.e.c. dropped their investigations after they concluded they didn't have enough evidence against him. fuld has kept a low profile. occasionally he's been seen dining at the four seasons with former colleagues and peers and he's been spotted on the weekends flying coach to one of his homes in florida. while he rode his lehman's stock from $1 billion to $56,000, he's not exactly poor. he has a greenwich mansion worth over $8 million and he sold his park avenue apartment and art for $46 million. he sued his former son-in-law over $13 million for a loan for an apartment. fuld and his lawyers didn't return calls.

he has told others he is still consumed thinking about lehman brothers. >> what could i have done differently? in certain conversations, what could i have said? what should i have done? and i have searched myself every single night. this is a pain that will stay with me for the rest of my life. >> and i think it is a pain that is going to stay with him for the rest of his life. all of his friends do say that he thinks about it literally every single day. in the meantime, as the financial crisis took root, t.a.r.p. discussions took focus. our next guest was a frequent guest on "squawk box." one comment in particular went viral. >> just tell the american people, the cavalry's arrived, we're home. >> joining us now with more, paul kemp is the former congressman and chairman of the capital market subcommittee. can you believe it's been five years? do you remember that? >> it was a compressed period of time because of the activities

that were going on, but it was -- i spent 26 years in congress and the reward of those 26 years were basically in that five-year period. >> did the cavalry arrive? given the fact that five years later we're talking about too big to fail, possible risks in the system, did it work? >> oh, in my mind there's no question that it worked. i mean, if you compare the american economy to almost every economy in the world, we're much better off. we wouldn't have been that way except that we didn't constrict what people could do, what decisions could be made and we went wholeheartedly at the problem. >> did t.a.r.p. work? we had dick kavosovich on last week. what happened after t.a.r.p. came? if you watched the markets they went the opposite. >> adding 15,000, that's confidence in the system. that's what dow is today. it went down as low as 7,000.

in five years you can go from 7,000 to 15,000, you have to conclude there's been infusion. is everything clear and all the problems over? hell no. >> if you could do it again, what would you do differently? >> well, i've given this some thought since i agreed to be on with you, andy. our problem is really reflective of what's sick about the whole system right now. it isn't t.a.r.p. or it isn't the crisis. we've gone through those before. our problem is there is a large element of the american people that have lost faith in the government, economic system that we've had and the political structure is disastrous. it's no longer are we going to work together, are we going to solve a problem, it's how can we torpedo the other guy regardless of his ideas. >> my greatest worries, given the situation in washington, these bailouts if we believe

they worked, we could not have gotten them through. >> oh, i agree. very tough today. it's deadly up there. the majority within the majority party is very -- they're not going anywhere. there's nowhere they can make them go to change. you can't have -- in our system when you step back, i think i'm giving this out of 26 years in the congress, we don't pass laws by 51 or 52% of the elected body. the laws pass and are successful in the united states when you get a consensus of about 75 to 80% of the people's elected representatives. we can't get that today. >> given your career in congress, 26 years, when you think about what happened to larry summers. the politization of that issue, do you think it was right? do you think it was wrong? would you have been happier if larry got the job? where would you have come out? >> he's a friend of mine and i like him and he's very bright,

but he also is somewhat of a lightning rod. he certainly attracts liking from people and the system. i'm not at all sure that we don't need a lot of people. the one thing i had a great deal of respect for bernanke, he was a laid back fella. he had strong opinions, strong positions but he got laid back. i think the federal reserve chairman should be that way. he shouldn't try to be commander? chief. >> do you take yellen or don cohn? >> it really doesn't -- we have an abundance of capable people in the country. there's no problem. any one of the mentioned people would have been great for the spot. to see more commonship with the president and the congress, i think getting someone who's less contentious in that role is much better. i would go to either of the two. >> congressman, five years later, thank you. thank you for your service to the country. >> thank you. >> appreciate it. still to come on "squawk

box" this morning, we've got global stocks rallying on word that larry summers has pulled out of the race. it is right, i don't know if it should be. u.s. futures 200 points above fair value. we'll speak to roger altman, an outspoken supporter of larry summers. stay tuned. we'll be back with "squawk box" after this.

welcome back, everybody. if you are just waking up this morning, take a look at what's been happening to the u.s. equity market right now. the dow futures up by 188 points above fair value. the s&p futures are up by 20 points. this is larry summers has pulled his name from the fed race. . if you take a look at the ten-year, the yield's gotten pushed back down this morning. yielding 2.817%. the dollar has dropped. last week, there was a report in a japanese newspaper that summers would be named this week. that pushed the dollar up this morning, you can see it's giving back some of that. the euro's at 1.3343. extraordinary venture, a nonprofit organization aimed at employing young adults with autism. they're holding a meeting for employment opportunities for individuals with autism. greg and laurie ireland are

founders of extraordinary ventures. i guess, first thing i'd ask you, i saw some disturbing data on adults with autism. and even being less employed at this point than adults with other disabilities. and it's -- i don't understand why that would be the case since so many kids with -- people with autism. they're high-functioning very intelligent. and what holds them back at this point? >> so because autism affects social interaction and communication both verbal and nonverbal, sometimes the social landscape or the environment in which the job is, they need some practice and they need to be able to develop some skills so they can work in those environments. i think that's part of the challenge. >> because intelligence wise, they're mainstream, many, or even above mainstream. seems like there would be jobs that didn't entail -- i don't want to just say that other disabled adults are doing busy work. >> right.

>> but you would think that autistic people might even have the ability to do something more than what you would normally think of as a -- >> i think they actually do have that ability. but it takes training in terms of understanding what their skills are, playing to those strengths and then also mitigating some of the challenges that they may have. and so extraordinary ventures and what the ireland family foundation has done along with autism speaks is really to go throughout the country and understand different small businesses that really capitalize on the strengths of those with autism. >> how will it -- what do you need to do? >> to get it going? >> what do you need to do to get businesses to understand that you need internships, do you need someone to get a chance? >> i think there's all of that, but our project extraordinary ventures has focused on starting our own businesses and the dream is that they would become self-sufficient and sustainable over time. and we employ not just high-functioning people. we employ the entire spectrum of

people with developmental disabilities. so we started some businesses, we've had some failures, we've had -- but we've had great success. for instance, we started a laundry business. we live in a college town chapel hill. so one employee goes and picks up and drops off laundry. the employees do the laundry, they fold it and others are in the marketing role. just depending on what their abilities are. so we're trying to capitalize on their abilities. we don't charge less, we're not a charity. we charge the same amount for doing laundry that other people do. but it's a job that, for instance, our population is very well suited to. we just saw our own son as he was getting older -- as he was getting older, there was

nothing -- >> very, very little opportunity for people with developmental disabilities. and a group of parents and myself in our area, we thought -- the government's not going to be rushing in here in this bad economy to throw money at it. and the big corporations are doing what they do. but we really have to depend on ourselves. and that's kind of the way we always looked at it. we started these businesses. >> how many people do you employ in the business? >> we have 40. 40 people. and we started six years ago. and it took about three years to ramp up to 3 or 4 employees. you know, it's like any other start-up. that was our experience. and suddenly we caught traction a few years ago when we hired -- actually, we took a page out of the teach for america model and we decided that we were going to hire people right out of college to actually manage the organization. so we have people like tom call paige morrow at extraordinary ventures who are in their young 20s and that's -- that's also an

interesting dynamic because that's -- the so-called los angeles generati-- lost generat. unemployed people, they have an opportunity to learn while managing a business like ours and it's a win/win and they turned it around in almost two years and suddenly we have 40 employees. >> and laundry is one of the businesses. what are a couple of the others? >> we have a gifts business. for example, we make premium candles. really nice candles, scented candles. and the way it works is we had an employee who loved to cook. so we -- again, these young entrepreneurs said, well, gosh, let's tap into that. and they set up the activity as a recipe. so the person comes in to work in the morning and sees it. they need to make honeysuckle, for example. and here's the step by step instruction and they go about the task. this is what people who have autism are best at.

if you organize things, if you -- if you adjust, they don't adjust as well to our mainstream life. so if you adjust the business to take advantage of the people, this is what really works. >> great. appreciate it. >> thank you. >> appreciate you coming in. >> thank you. >> and lisa, this is one way, i guess there's another way with businesses that are already around. >> we've seen some terrific businesses throughout the country, small businesses are an important piece. then large businesses and corporations also need to be employing people with autism. tremendous strengths they have and we're trying to really be able to highlight those strengths so more people with autism can be employed. >> thank you. >> thanks. >> when we come back, we'll talk more about this morning's top story. larry summers has pulled out of the race for the fed chairman job. u.s. equity futures are indicated sharply higher right now.

dow futures up by about 185 points above fair value. among our guests, summers supporter roger altman will be joining us in a little bit. plus pimco boss mohammed el-erian. s like we're still in college. but with a mortgage. and the furniture's a lot nicer. and suddenly, the most important person in my life is someone i haven't even met yet. who matters most to you says the most about you. at massmutual we're owned by our policyowners, and they matter most to us. as you plan your next step, we'll help you get there.

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larry summers out of the running for federal reserve chairman. who will shake fed policy and what it means for your money. market analysis is just ahead. creators of the wall street reform and protection act are going to join me for a special interview. their thoughts on where we stand five years after the financial crisis and the risk that still exists. will the fed taper this week? we get you ready for what could be the most important fed meeting the markets have seen in quite some time. the second hour of "squawk box" begins right now.

good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernan and andrew ross sorkin who is in washington, d.c. this morning. andrew will be joined by chris dodd and barney frank, the cocreators of the wall street reform and protection act, the most significant reform after the 2008 financial crisis. we'll hear from them in a few minutes. our top story this morning, larry summers bowing out of consideration for fed chief. the former clinton treasury secretary called president obama yesterday to notify him. and in a later to the president following that call he wrote, i have reluctantly concluded that any confirmation process for me would be acrimonious and would not serve the interest of the federal reserve, the administration or ultimately the interests of the nation's ongoing economic recovery. this morning, the futures are reacting to the idea that you

could be seeing yellen seen as a dovish replacement as fed chief. you can see the dow futures up by 180 points. s&p futures up by 18 points. >> steve liesman joins me with interesting numbers, the latest cnbc september fed survey. you have quoted -- you have all of these quotes where she was not always just a rubber stamping more accommodation. where she was worried about it or hesitant about it. you've constantly sort of pushed back that she was more dovish. why are we up 200 points? i'm not saying i liked it. i've been a big yellen backer. i liked the 200 points. i didn't know we were going to get 200 points. >> changed his mind. >> yeah. >> let me see -- >> what's great about joe, he changed his mind -- >> i think we're all prone to do that. >> i'm saying all of us, it's not requesting what we are, just

what our price is. >> yeah. i get that. i know that joke. >> yeah, exactly. i tweeted out over the weekend that the market is having wrongly assumed that summers was more hawkish than yellen. now rallying off the false assumptions. >> when you have an opinion, you stick to it no matter what. >> no matter what. so let me just -- i've got -- i want to get to this report. real quickly. if i was going to give you two people. one who has been a central banker for most of the past two decade in the fed, the other whose most recent job was in the white house, which one would you say would be the more hawkish one? >> probably the one that was in the fed, i guess. >> in the fed? >> yeah. >> right. so that was the concern among a lot of central bankers who i talked to was that larry as brilliant as economist everyone thought he was was more beholden to the political side which theoretically in monetary policy is the concern. >> i always figure someone who was actually at the fed and had been part of these decisions would be guilt ridden at this

point for what -- >> and would want to go to the other way. >> from the future, the prospects of the dollar and i would feel guilty and have to get to tapering as quickly as i could. >> i don't know if you care, but before our friend has a heart attack, i better get to this report. >> is he talking in your ear? >> no. because of the news about summers over the weekend, we're releasing a day early part of the fed survey. and it shows in no uncertain terms, the market by a 2-1 market expected president obama to appoint summers as the next fed chair. but as a whopping 5-1 margin wanted vice chair janet yellen. 47 wall street economists, strategists and money managers responding on thursday and friday. we asked who would obama choose? 58% to 30%, summers over yellen. who should obama choose? yellen, 56%, summers, 12%. john taylor got more votes than larry summers at 16%. in general, participants thought summers would be more hawkish than yellen, but their

assumptions went further than monetary policy. bernanke and former vice chairman don cohen in ten categories. the overall score, summers finished last behind bernanke, yellen and cohen. political and communication skills, monetary policy expertise, that was a slam dunk, yellen over summers. respect from other international financial officials, ability to manage a financial crisis and banking regulatory expertise. summers was graded higher in only inflation and expertise. it wasn't a knock against summers, the market graded yellen higher than summers. >> financial markets and inflation. those might be the two i'd put at the top of the list. >> to go with the flow and being all about price stability instead of this dual mandate which we see they can try and try and try.

going nowhere, fast. >> your point is you would want a fed chair. >> my idol for fed chairman is volcker not -- you know -- and i think we're building up this huge situation we're going to need volcker 2.0, within five years. whatever. >> within five years, that means five years of policy. >> five years of it. no, we're eventually, i wish -- we can make it worse with the reckoning we'll have to deal with. make it worse by staying accommodative. >> yellen is a firm believer in this output gap concept. the idea that inflation is not a threat as long as we have massive unemployment and unused capacity in the economy. that's the way she looks at the world. and over the last five or six years, it's proven to be the better way to look at the world to predict inflation outcomes than it has the idea that we flood the -- but joe, the other theory hasn't worked very well. the idea that because the fed -- >> worked in the '80s didn't it?

>> it was in the '70s. >> that's when we enacted it and the '80s we got the benefit of it. we've got to bring in roger altman. joining us roger altman founder and chairman of ever corp. partners. deputy treasury secretary. roger, i immediately tried to say this is a prime example that people like you and people in the clinton administration are now on the far right of this party you have now. that the center of this party is skewed so far left that where larry summers looks like a deregulatory -- deregulation minded banking, you know, crony capitalist that is totally unacceptable to the people that are running your party now. >> well, joe, i think it's -- unfortunately, it's testimony to the continued fallout from 2008. and the continued deep antipathy

on the part of the public towards wall street and the broader financial community. and that played out here in a perception, i don't think it was right, that larry was too close to wall street and that during the clinton years he had participated in certain decisions which resulted in financial deregulation, which are looked back on and seen as having contributed to the events of 2008. i think you also saw here the degree to which the president has just for the moment, at least, exhausted his political capital over syria. and we saw that had there been a vote over the syrian air strike resolution, it would have failed. >> but there wasn't, though, and he doesn't need the republicans for syria anymore. it's off the table. >> no, but there's continued -- there's some fallout from the process that occurred over syria. and i just think at this point, no one in the white house has

told me this, but i think at this point the white house was not going to take on another struggle. thirdly, as we all saw over the past few weeks, even a couple of months, this turned into a public campaign. i've never seen anything like that involving the federal reserve and i am still a bit mystified as to how it got to that. but i don't think that turned out to be helpful to anyone including larry. and the factor which is off in my view that larry was not the world's most cooperative guy and would have been difficult to work with. janet yellen is exceptionally qualified as are some of the others that are possibles. but if the president moves to nominate her, we're all going to be fine because she's going to be a steady hand and a firm hand. >> it was self-inflicted and i'm talking about the politization.

i think they thought if they put the trial balloon out enough and show -- and you saw the president -- the white house did it like three or four times where they brought them out and the huffington post, you know, ran two weeks of all negative summers coverage and put it out again and the democrats complaining to the president. and he said, look, i like larry summers. he kept trying to sort of soften up the opposition with the trial balloons and then it finally became clear it wasn't going to work. >> well, sometimes trial ballooning things like this is -- >> not the right -- >> not an effective approach and it was not in this case. not sure we'll ever know exactly how that all happened, but the way it played out wasn't helpful to anyone. and the other point i'd make this reflects the degree to which the federal reserve itself has become politicized. i think that's really a shame. even if bernanke, ben bernanke

would have been nominated by a third term. i think that would have been a bruising confirmation with republicans, a number of republicans opposed to it and probably a pretty close vote. i think last time there were more than 30 votes in the senate against him. so it shows the degree to which the federal reserve following 2008 has been politicized. and that is not helpful. >> is there anything to the point that we hear about the tea party and how the rift is so wide now in washington for getting anything done. you don't think this points at all to the notion that the democratic party has moved far too left maybe following the way obamacare was handled on such a partisan level? i mean, both sides have moved into their respective corners and, you know, but we don't hear that nearly enough. it's not the democratic party that elected, that ran bill clinton that you were part of. >> well, joe, the political scientists will tell you that

that's true in the sense that the center, each party on the democratic side, the republican side, has been hollowed out by gerrymandering and other longer term processes like that. i think there's some truth in that. this, i think, more than anything else reflects that the public remains very angry over the events of 2008. very angry at wall street. all those wounds are very fresh. >> too many people sought out the movie to the social network. i love the way -- i love larry in that. you know, those two twins deserved it. >> well, the way he slapped down the winklevosses. >> yeah, i loved them from that. i don't know, we wanted to cover larry summers in the -- as fed chairman. so it's hurting us, hurting me, joe kernan, personally, that we

can't -- don't you think it would have been fun to cover? you've got to admit. >> well, i think janet yellen will be a strong -- >> no -- i don't. she's consensus builder. i want a tyrant. all right, thank you. good to see you today. let's get to washington, d.c. andrew is there this morning. with two special guests. andrew? >> we do have two special guests, joe, who have been commenting throughout these interviews. we're going to get to them right now. i'm joined by two key figures whose names are synonymous with post crisis reform. former congressman barney frank is also with us this morning. we, of course, are going to be talking about financial regulatory reform. but given the news over the week, we've got to get your thoughts on larry summers taking his name out of the race. i'm going to go to you, mr. dodd, only because you approve bernanke -- you could have been doing this this time around. >> could have been.

>> summers -- >> not this congress. >> would summers have made it through? >> i think ultimately might have. i think presidents normally get their choices in these matters. it's not a lifetime appointment. it would have been difficult to speculate about that. i think he probably, in the end, it would have been ugly, it would have taken a long time. but my guess is you'd have to say the president gets the choice in this matter. >> barney, you were saying before you thought this was the right decision -- >> no. >> no? not the right decision. >> oh, i think larry made the right decision given the senate opposition. given, first of all, and chris is the expert on what happens in the committee. it's hard to get to 60 in normal circumstances. i'm afraid one day the senate's going to catch fire and they're going tos asphyxiate because thy can't get votes to adjourn. maybe i have mixed feelings about the outcome. but the point is this, of all the places where you don't want

a prolonged confirmation, it's the federal reserve. and the market's overly sensitive to when the fed chairman -- >> what do you think of joe's question about the polarization about the parties, about the polarization of the democratic party in that this is how we -- this is where we are. this is elizabeth warren. >> no, it reflects joe's polarization more than the democrats. it's not an equal polarization. yes, there has been some movement. the republicans have moved much further to the right. they have moved much further to the right than the democrats to the left. joe does not like to see this fighting, but he also doesn't like janet yellen because she's a conciliator and not a tyrant. i think joe is a hard man to please for some of us. but, no, i think the democrats are, in fact, much closer. look, in 2008, long after bill clinton, what we're going to talk about. george bush sends bernanke and

paulson up to congress and says we're having a terrible crisis. i need you to do something that's pretty unpopular. and giving us a lot of power and we democrats, chris and i at the urging of harry reid and nancy pelosi work very closely in a bipartisan way. and never gotten that kind of treatment from the republicans. >> okay. >> my -- quickly, andrew, i think both parties, i think if i could change one law. if i could change one thing, it's redistricting and roger sort of alluded to it in his comments. the redistricting how the congressional map is drawn is to me as harmful as anything to our country and the polarization of politics. >> it doesn't explain the equal problem in the senate. i would do that but throw in -- >> because they come over. >> we're going to take a quick break. ponder this, if yellen was in charge of 2008, do you think she would have been able to persuade you to pursue the bailouts? we'll talk about that in a moment. more with senator dodd and congressman frank in a moment.

strong market reaction this morning as larry summers withdraws his name for consideration, has the next fed chairman. "squawk box" returns right after this. you really love, what would you do?" ♪ [ woman ] i'd be a writer. [ man ] i'd be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] i'd be an architect. what if i told you someone could pay you and what if that person were you? ♪ when you think about it, isn't that what retirement should be, paying ourselves to do what we love? ♪

welcome back to "squawk box" this morning. president obama's going to be giving a speech today on the state of the economy in the rose garden. using the fifth anniversary of the collapse of lehman brothers to highlight signs of recovery and warn against potential market rattling fights over the federal budget and the nation's debt ceiling. and there's larry summers in all of this. we're discussing financial reform and more with our special guests here with me in washington this morning. the co-authors of dodd/frank. the president of the motion picture association of america and former united states senator chris dodd. also former u.s. congressman barney frank. hey, guys, thank you for being here. it's five years later. it's remarkable. five years later today. we had hank paulson on a friday. we were talking about this during the commercial break. a lot of people look at what he did during the crisis and say he's an american hero. do you agree with that? >> well, look, if you're beginning your mark of september of 2008 when the thing had cratered and we're looking over

the brink. when ben bernanke says to barney and i in the night of september, it's going to melt down here and abroad. then, yes, did a good job of working through that, getting the t.a.r.p. done, setting things up. but, you know, this problem didn't -- we're talking about five years ago. this problem began, you could identify the problems emerging in 2005, 2006. jim bundting and jack reed had hearings in 1996. almost all of 2008, even with bear stearns on st. patrick's day, we did virtually nothing. you couldn't get the attention of the bush administration on these matters. so, i love hank, he did a good job in a critical moment. but this problem could have been a lot less than it became had we acted earlier to step in. and i'll go to my grave believing that. >> you're friends with hank. >> i had a better experience with him. he testified before the committee when i chaired on a number of cases.

famously, by the way, my job to some extent in 2007 was to defend paulson and bernanke against the conservative republicans who didn't want them to do anything about bear stearns, glad they let lehman fail, though, i think they tried to stop it. one of the things that strikes me and i mentioned the business community. the republican party has become over the past few years a center of attack on the fed. not just on kwquantitative easi, but trying to help with the crisis. i think it's very much -- not to encourage people who do that, but we -- the biggest -- and chris is right about the duration. people forget this. in 1994, the congress passed the homeowners equity protection act which said to the federal reserve, stop the kind of mortgages they should be giving because people should be paying them. he mistakenly said, no, the market can handle that, refused to use -- >> in fairness, you did support

housing -- and pushing housing -- >> no, i did not. >> you did not. you think that's not fair? why not? >> first of all, the republicans control the congress from 1995 until 2006. so people think i stopped tom delay from doing something. if i stopped tom delay from doing something, we wouldn't have gone to iraq and he wouldn't be on "dancing with the stars." secondly, though, my position was we should be doing low income people rental housing. but in terms of home ownership, i've been skeptical. and we did try in 2004 democrats in the house tried to pass a bill, took the lead on this to stop the bad mortgages and delay said you can't do that. >> when hank paulson says that ultimately every financial crisis is a function of bad government policy, a lot of blame has been cast at the bankers, the blame has been cast at credit rating agencies, regulators, what have you. where do you in congress and the

senate take responsibility? do you? >> yes, well, first of all, i disagree with that it's bad government policy. there was bad government policy in the late '90s and 2000. but it was a failure to stop the business community from doing things they shouldn't have done. it wasn't so much regulation as deregulation. >> that's an important point. they didn't a single regulation. >> congress may have let this go on too long. but i was on a panel the other day with bill thomas, two of the republicans who were on the financial crisis commission. they agreed with me that the community reinvestment act which some conservatives blame had zero to do with this. didn't force anything. fannie and freddie did facilitate what the private sector initiated. >> we're going to come back with more from both of these gentlemen. going to talk about whether too

big to fail exists. back to you. thank you very much. in the meantime, we'd like to show you where the markets are this morning because owl of this news about larry summers pulling his name for consideration for fed chair have the futures at this point indicated open higher by about 18 poi0 points. we'll have much more on the larry summers decision to take his name out of the hat when we come back. also, we're getting ready for a huge fed policy meeting this week. we get the perspective from traders in a few minutes. stick around, "squawk box" will be right back. peace of mind is important when you're running a successful business.

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little more clarity on who may be the next fed leader. larry summers taking his name out of the race. equities are responding by pushing sharply higher this morning. we're going to talk fed, markets and much more when "squawk box" comes right back. baron of the build-out. you need a permit... to be this awesome. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. (aaron) purrrfect. (vo) meee-ow, business pro. meee-ow. go national. go like a pro.

welcome back to "squawk box," everyone. in our headlines this morning, packaging corporation of america is acquiring fellow product maker boise for $12.55 a share in cash. that's about $1.3 billion. also, an ipo filing for chrysler could come this week. told the financial times that all the necessary documents are ready to go. if that filing occurs, the ipo could occur before the end of the year. and the saudi prince says he will not sell any of his stake in twitter when it goes public. invested $300 million in twitter back in late 2011. he calls twitter a strategic investment saying its growth potential is tremendous. we'll be getting a fresh batch of data this morning. economists are looking for a rise of 0.4% after an unchanged reading back in july. joe?

markets expected to surge this morning on partly, i guess, on the news that larry summers is out as o possible successor to ben bernanke. joining us to talk currencies, bks asset management and kevin gittis. and i'll start with you, matt, because oil is down. you would think if summers' exit was bad for the dollar, why is oil down? >> yeah, exactly. we've seen three weeks ago we were at $105 and popped up on the potential for military intervention. and we've seen that risk premium unwind. whatever is happening with larry summers is nothing to do with the crude mark. >> does have something sood with currencies, doesn't it, boris? or not so much in your view? >> my first thought is i think they should form a club as investors best friends. without their withdrawal, it

created a huge run. for currencies, it had a very positive effect on currencies, on the pound, the aussie dollar and the risk currencies. they popped up on the assumption he was viewed as much more hawkish, yellen is viewed as dovish. going forward right now for currencies, the biggest focus is fomc to see if their going to commit to a taper. i think it's very interesting that as the case -- for taper becomes much less because the u.s. economic data has been going the wrong way. i would find it very surprising if they commit to a hard core move on taper at this point. >> got a start, though. >> they do have to start. i think if they start at 10 billion, the market would absorb that with less of an angst than if they went for full-court press with $20 billion. >> $10 billion. god forbid they go for $10 billion, what are we going to do? j.j. was played by jack, obviously. i saw jack the mayweather fight.

did you see him? he's so cool. meanwhile, mayweather tbe, best ever, i think after watching that. anyway -- what about bonds? why would yields go down today? i didn't quite understand that because we don't really have much of a hawk headed for fed chairman now. >> well, we did take about six out of the ten-year on the news. and what the market is saying is that -- >> no taper. >> well, given the choice, i think there still will be a small taper. but i think given the choice between the two candidates that janet yellen is a known, maybe more dovish. i think she'll surprise you she may be more hawkish than people think. but what that means is we're in no hurry to stop this from happening and the economy and inflation numbers are supporting the continuation of the fed. >> kevin, if -- and becky knows how to pronounce vigilantes, but if the bond vigilantes were

still around, they should be running up yields right now on the long end of things because we've got someone in there that's going to potentially in their view lose control of monetary policy by being too dovish. i guess that's not what we're seeing, is it? >> well, no, because the counter to that and we'll see some more numbers to that this week, the counter to that is the lack of inflation. really and recently, we have it -- there's so much slack in the market right now, there's not causing real price pressures where you would think that raising rates there's a reason to take rates even higher and that is the fear of inflation. as long as that's out of the picture, the bond market will be more patient and we can see how this plays out. also the economic numbers have not been great and the jobs numbers, as well. market's okay right now. >> yeah. i'm also worried -- we're going to talk to our guests, we're going to leave it here, but i feel bad for president obama. i mean, you know, it's almost -- he lost power, looks like here. and putin made him look bad and

maybe the -- >> joe, he had two great decisions not made by him, actually. >> i know. well, maybe they were -- oh, so you're happy -- what, you've got your long stocks? we get a day of -- >> no, i think yellen has been one of the best forecasters in the fed and the continuity is positive. so, yes, i think those things are good. >> all right, guys, we're going to get back to our esteemed guests in washington. >> okay, joe. when we return to washington, we're going to have much more from our guests of the hour, co-creators of the financial regulatory reform act, former senator chris dodd and former congressman barney frank five years later. also, the fed in focus this morning, market rally on the news that larry summers has withdrawn his name from consideration as the next fed chairman. plus, a big fed meeting ahead as the markets get ready for tapering. could it happen this week? all those questions and more, we've got answers when "squawk" returns. (announcer) at scottrade, our clients trade and invest

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crisis. and thank you very much again for joining us this morning. >> thank you. >> dodd/frank did a lot of really important things, but one of the most important, i think, is it requires the federal reserve to oversee financial companies not necessarily banks. but financial companies and any other nonbank financial company that could be seen as systemically important. i know already that there are insurers out there that have been lobbying to say that they should not be regulated by the federal reserve. and i guess when you look back at lehman and aig, some of the key components that took this country down, this financial hardship, do you think some of those insurance companies will not be regulated by the fed and how much of a problem do you think that is? >> well, i hope not. as a major provision of the bill, the legislation only requires there be four meetings a year of the financial services oversight board. they've already met some 30 times, by the way. i admire the fact that they're understanding the value of having the capacity to bring regulators together to discuss

with each other not only product lines but also institutions that pose systemic risk. exclude these major financial institutions from that consideration. i think it'll be a major, major flaw. obviously aig, what better case do you have? remember, these are all investment banks that caused the major problems. not commercial banks. they were not the cause of the major crisis that we went through. so this is a major provision of the bill, i hope it doesn't get lost or eroded. >> let me pick up from chris and venture into an unnecessary -- that's why having reenacting glass seagal would not have prevented that. neither would be affected. neither would countrywide. >> by the way, elizabeth warren, she says that, says it would not have changed the outcome. >> other reasons. i'm a great admirer of elizabeth, but chris is absolutely right. first of all, aig was an insurance company. but one of the things we did in the bill was we don't regulate institutions, we regulate

activities. because if you regulate, you know, by institution, they do something else. and, yes, let's put it this way. if you are a casualty insurance company, a life insurance company and all you do is write insurance and pay off when people die and invest then you probably won't have any real supervision. the thing people have to remember is that insurance is unusual in america. it's the only major industry which is not generally regulated at the federal level. it's been for many years for political and other reasons -- >> that was a problem because you could go shopping around for a regulator. >> if you did not have -- >> which is exactly what aig did. >> right. and they had the office of supervision, which we abolished. i had an alternative of abolishing it. i wanted to call it the office of if anythifig leaf dispensati. if you do not have the fsoc with major insurance companies, there's no national regulation of them at all. >> question for you, though,

elizabeth warren who you agreed with recently, you disagreed on a bigger topic. >> she's wrong about that, and i respect elizabeth immensely. if you try to do what we did in the fall of 2008, it's against the law. forget whether or not you could get it done politically. i don't think you could come close to getting it done. but our legislation prohibits what the federal government did in the fall. and i'll tell you over and over again. these funeral plans, the requirement that you lose your job that the institution pays for all of this, is the law of the land. >> i've heard these people say -- i've asked them, what's not going to happen? here's what the law says as chris pointed out. in the first place, yes, there were some institutions that were so big that if they fail and can't pay their debts, it'll cause problems. >> and you don't think the government would be forced, then, to step in -- you think politically it wouldn't happen. >> you're not too big to fail. you're too big to fail without impact. before the government can step

in, you're abolished. as chris said, the directors -- the board of directors, shareholders are wiped out. then after that has been abolished. as i said, we had death penalties in our legislation four years ago. but in our bill, not the health bill. the death penalty is for big banks and what happens then is the secretary of the treasury is empowered to pay some of the debts and paulson said, look, of you got to give me the power to pick and choose. i shouldn't have to pay all of the debts for aig and none of the debts as for lehman. here's the key thing, the secretary of the treasury is mandated by our statute to then go to financial institutions with $50 billion or more in assets and recover every penny. so, yes, we step in, but first by abolishing the institution and then by making the other financial institution -- >> well, by the way, that works, but only if all the other banks are still around. if you have a true crisis. >> first of all, we've never had that. >> isn't that what 2008 was? >> oh, please, 2008, lehman

failed, aig was in trouble, but hank paulson had to force wells fargo and jpmorgan and goldman to take the money. >> says that t.a.r.p. was a failure. >> let's stick with your point, andrew, please don't change the subject. the fact in 2008 most of them were solvent and said we don't need help don't want it, it'll stigmatize it. but the point is -- supposedly with the total collapse of everything, i can't tell you what's going to happen. but i do say this, we have never had that scenario. we've never had a situation where everybody collapsed. in 2008, a couple collapsed and the others -- >> you just wrote a column that it wasn't popcorn, it was dominos. you said it was a popcorn -- that they were bubbling up separately. >> i flip and flop, that's what happens. >> you do. hey, congressman, frank. i know you have an ear piece in and you heard what some of my comments about larry summers. and i'm just -- you know, i heard you said the republicans have moved further right. but here you have a democratic

president. shouldn't he be allowed to have the fed chairman that he wants should -- i feel bad. and i think it actually lessened -- lessens his power to some extent. >> i know you feel bad -- you say you feel bad. >> it's not the republicans that aren't going to confirm him. they don't confirm anyone else. but this is your own party that wouldn't have confirmed -- >> i want to respond. first of all, you say you feel bad. i hope your wires are insulated because the crocodile tears might cause that to be a short circuit. the point is this, there are two separate questions. was he the best choice? and should people vote to confirm him? if i would have been a senator, i would have voted to confirm him. i do believe that presidents deserve that power. i do think also that roger altman had the better part of the conversation with you. i do think that was more specific to public anger over 2008.

a leftwood move -- >> i've got to ask you one more thing, because i love when you're on and thank you for coming on today along with senator dodd. but when you say it was impossible for the democrats to do anything to sort of reform the system from '95 to '06, should i also take it that now the republicans on the clinton economy from '95 to '06 because it was a republican congress? >> no, they don't own the clinton economy. >> just the crisis? >> no, i'm going to quote what i quoted before when you said to me, hey, congressman, this is cable not c span, you know, except a little distortion. >> yeah, we're never one to take advantage of the air waves on cable. >> i was specifically talking about mortgages and fannie and freddie. >> the bad things of the republicans' fault and the good things -- >> that's a caricature you won't find me saying that. from '95 to 2006 it was the republicans who would not act on

fannie and freddie, and 2007 when chris and i took over, we then working with paulson put the legislation in that put a stop to it. that's a very specific point. not a general one. >> all right. all right. you always win. >> i have a slightly different question. which is ultimately when you think about where we are five years later, should have anyone gone to jail? what would happen? when you look at what the government has done from a regulatory standpoint actually enforcing laws both in terms of writing the new stuff and enacting the new stuff or enforcing the old stuff. we lawsuits, you've come out with comments you think that's crazy. >> we made jpmorgan chase take over bear stearns, and i think to force them to take it over and then sue them because of things that were done before the takeover. not only unfair but reduces your ability to get another company to do a similar thing in the future. >> you say we're never going to need to do another thing in the future. >> no, i said we're not going to have the same kind of crisis. you may still have to resolve a

particular institution. that doesn't mean we're going to let it ultimately fail. >> chris, real quick, do you agree with that? >> i do. again, i think the fdic has done one of the great contributions, done every friday afternoon and banks open up on monday mornings and done with continuity and no shocks. so in my view -- bear stearns to me, though, people sort of forgot. i think we came precariously close to declaring a bank holiday for the first time since the great depression. and it was a fire sale and to me, in many ways maybe bear should've failed in march. if they failed in march, we might have been able -- >> briefly -- >> the fdic has been good and we use the fdic's expertise in shaping our liquidation authority. sheila bair was a big piece of it. >> we're going to slip in a quick break and continue the conversation. i'm going to send it back to becky. back to becky.

>> thank you, andrew. when we come back, we're going to wrap things up from washington with chris dodd and barney frank. and more on larry summers with drawing his name from fed consideration. we'll take a closer look at who is still in the running and what they bring to the table. robe grover norquist will be joining us.

we're back in washington, d.c. live with the two men

responsible for the financial reform act. and my question is when you think about where we are in that act as little of it would have been implemented. >> we didn't anticipate the republicans taking over the house and choking off the funds. the commodity futures trading commission got the largest increment of new authority other than the consumer bureau because derivatives have been left alone. and they were given derivatives and i think he's done a good job. the republicans in the house have refused adequately to fund the cftc. they get all these comments, the conservative court in d.c. makes them do a thorough analysis and they don't have enough money to do it. the biggest single reason is the inadequate funding for the cftc. >> and you're not blaming the banks for pushing back? >> you do to a large extent, but i'm more optimistic than others are. jack lew has indicated by the

end of next year the big one left is the volcker rule. but barney's right, i regret we didn't have the funding, there are members not about to give up their authority over that. but that's -- and the other thing i wish we could've done, i proposed it in the fall of '09 and that is to consolidate under a single predential regulator. >> people talk about you've got to take the little bank. the smaller banks politically would've killed any effort to put them into the same regulator within national banks. that was a political fact of life. >> there have been arguments made that your bill at some level has slowed the economy, slowed the banks down, do you believe that? >> well, look at the numbers. they're having record years, they've gone -- it's incredible the success -- >> stock market on march 9th -- >> 2,000 points --

>> was 6,500. >> four months after t.a.r.p. it was that far down. when you look back at when you approve that $700 billion plan, do you think that was a success? >> oh, yeah. gosh, yeah. i'll go to my grave believing that. >> -- for that bill in the senate, 75-24. judd gregg, my partner in all of that, that's the reason we had the strong vote on that and re-wrote the bill. paulson sent us a 200-page bill at 1:30 in the morning, give me $700 billion. the country rightfully was outraged. >> you don't get credit in politics for disaster averted. none of us could've benefitted from that politically. >> gentlemen, we really appreciate it. we'll have much more about larry summers' decision to take his name out of the hat as the next fed chairman. i am today by luck.

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welcome back. it's all about you. welcome back, steve liesman. welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernan along with becky quick and andrew ross sorkin. i wanted him to write a letter, you know, to harvard for my kids to get in. it's about me too. this affects me. you're happy -- our top story this morning, u.s. equity futures sharply higher. yesterday, a former white house -- that's what we're talking about. former white house economic treasury secretary, he withdrew his name to be considered for the next fed chairman. we want to know -- i think someone told him take a walk, larry. janet yellen is now the presumptive front runner, considered more likely to continue the monetary policies than larry summers. i think, i'm serious, i think that the president loses something within his own party here. it wasn't the republicans that weren't going to let him in, it

was his own people that he was unable to corral. and i don't think that's ever good if you can't appoint the people you want. >> it was out there for a long time too. >> they knew it was going to be a problem from the start. they knew it was going to be a problem and then they never went away. they started this campaign and it just got -- >> friday was the final straw. >> they kept thinking they killed it and the president would say, no, i want summers and did another campaign. >> it seems crazy that four democratic senators on the banking committee -- >> crazy to me that the president can't -- >> say, yes, you're doing this. >> a trial balloon out to your own people. call your people in. the question i have is who is advising the president? and if they're giving him the right advice, is the president listening? >> the president now looks far to the center compared to the center of his party at this point. to make the president look like

not a progressive, you've got to be pretty progressive to make the president suddenly look like he's tacked to the center because he hasn't. anyway, not that i can tell. so you see where the actual center of the party is at this point. it's out there with elizabeth warren and jon tester and tester isn't supposedly -- >> except that, joe, in the space time continuum. >> you think it's gone so far -- >> democrats have gone so far to the left it's met up with wall street. that, i mean, it is a curious set of bedfellows. >> the market is up. >> the market loves not summers as the democratic left did. >> for the near, short-term, knee-jerk reaction -- >> i'm just having fun with joe's -- >> my fun is that now it proves that interest rates definitely aren't going to go up because the president is now the economy's just going to be in the toilet for the next three years because the liberals are now in charge so we're going to keep tapering forever -- accommodating forever. >> i would make this point that

yellen may have a set of beliefs and you can believe whatever you want about her. i think there's times she's been more hawkish than she's given credit for. but things change -- >> they were more similar than people thought. it wouldn't have been that big of a difference. >> but things when you become chairman. and one thing i'm sure about yellen, she will run a consensus committee very much the way bernanke did. >> i think summers would've done the same thing. i think you have people that would rise to the occasion. >> the hard core vigilantes that think we're going to lose control now. >> where are they? >> yeah. inflation's coming back. i would think the 30-year yield. >> i'm trying to think of what country they would think would be safe. they wouldn't go to antarctica. >> right. the coldest ever. >> maybe they're building a bunker below the bunker they built. but i want to give you more information from our cnbc fed

survey about what the market thinks about who the next chairman should be and what they think about cohen versus yellen. but first, i want to remind you what we reported in the last hour. america by a 2-1 margin expected obama to appoint summers but 5 to 1 margin wanted janet yellen. economist, strategist and money manager surveyed on thursday and friday. 58% said summers would be appointed by obama, 30% said yellen. who should they choose? 56% yellen, summers, just 12% below, by the way, john taylor. but looking at the next two apparent leading candidates, yellen and cohen. they were asked to grade summers, yellen, bernanke and former vice chairman on ten categories. yellen wins by a bit, monetary policy expertise, yellen, unemployment concern, yellen, two categories, yellen, but kohn wins on financial market respect

and financial market expertise, inflation concern and banking regulatory expertise. bottom line is that from the market's point of view, kohn versus yellen is a tougher call than summers versus yellen. here's the serious problem obama has now in my opinion, how does he stand next to the diminutive yellen and say she's the best person for the job after months after letting the market believe he thought summers was the best person. >> and reports saying she wasn't being vetted. looked like she wasn't getting a lot of love from the obama administration. any way he picks kohn. >> i think it's possible. that's an insider politics game and sure it's going to be yellen. >> the gender police, if he picked kohn -- >> what about laura tyson? >> i love yellen. i love yellen. please. >> it's not my favorite thing to do. did we get an actual reaction out of joe?

>> he is the economics columnist at the "washington post" and greg epp who is economics adviser at the "post." what do you think, is yellen going to be at the person at this point? >> well, it certainly seems she ought to be the front runner. and when you consider how highly qualified the two candidates are, i mean, in my view, you would have done well with either. but now that larry has pulled his name out, i can't think of a good reason why the president wouldn't go with yellen. other than the fact that through this whole process with the last few months, the people who are backing summers seem to have doubts about her for reasons i don't fully understand. so there are those other names out there. maybe the president tries to twist geithner's arm into changing his mind. but the path of least resistance in terms of nomination would be to appoint janet yellen. >> you see it as anti-yellen not pro summers.

i thought it was totally they liked larry, they felt comfortable with him. i didn't think it was anything against yellen. >> i don't think so, except in the process of trying to explain why they thought larry summers was the best person for the job, people would ask, well, give us good reasons why janet yellen isn't as good as him on this. i think a lot of people are making big issue of the gender thing. i'm not sure that did her a lot of favors in the end. this is a person superbly qualified irrespective of gender issues. >> i doubt if anyone questioned her science and math ability. that probably was not in the equation. was it, greg? >> she was -- she taught at berkeley. >> look at you -- >> nobody teaches at berkeley who isn't really good at math. >> neil, how about you? who is your choice? yellen you think the front runner? >> yeah, absolutely the case that yellen's the front runner. i don't think you can rule kohn out at this point. this has happened rapidly. this process was mismanaged from

the beginning. the white house allowed these expectations. then they kind of get out word that larry summers is a front runner. i think we should wait a few days to let things settle down. but for now, yellen does seem to be the front runner, but let's acknowledge what we don't know at this point. >> tony fratto threw out an interesting idea. he said what it's bernanke, convince him to stick around. >> there is a very compelling political case for bernanke. it doesn't cost obama anything. he continues not to fully own monetary policy if he reappoints bernanke. i just think from a combination of the way this has been handled that bernanke's off the table and i think from a personal standpoint -- to say he could -- the one idea, i don't know if tony mentioned this, but it would be an interim bernanke. i think that stops from happening. >> you wouldn't have to taper right away either. >> yeah, but i think bernanke believes it's time to taper. >> well, it's a six-year

appointment. but you can step away if you feel like it yourself, can't you? >> yeah. i'm not sure how it works, but i think the president could nominate and with an understanding it was a temporary thing and bernanke can step away -- >> he can say never mind, i'm here for another six years. >> someone told him, you've been here long enough. >> it has been said. >> any one of these names, yellen and neil and greg, i'll throw this out to you, are there hurt feelings? . how closely would that be working with the president? >> the fed chair meets with the president a few times a year. much closer with the treasury secretary, white house economic advisers. you know, that said, look, these are all grown-ups. no matter what happens, i think if janet yellen is the fed chair, i'm sure she'll have bruised feelings over the last few months. she's a prow, s, she would come and lead politically. susan rice back for secretary of state, he keeps having these favorites and then some

discontent builds on capitol hill and he doesn't make the nomination. didn't happen. >> this was his own party. the other one was the republican. it's totally -- >> i agree with you. this seems to me to have more resemblance to the debacle over syria where he didn't read congress very well either, including members of his own party. >> that's two in a row. >> that's a really good point you make which is that summers had the quality of not being enamored to the democratic left, but the right didn't like him either. you didn't gain any points. i think harwood was saying in the 6:00 hour, they were going to have to give up votes to get republicans. they didn't feel like doing that with the budget ceiling on the way and these other votes. >> budget ceiling. >> hey, greg. quick question for you, which is you've seen the markets, they're spiking on this assumption that yellen gets the job. if she doesn't get the job, it goes to kohn, what happens to the markets?

>> i don't know. when i see what the market did this morning, i got to believe this is less about an assumption that they think larry summers would have been hawkish and more about the uncertainty they don't know what the policy would be. and if janet yellen is not the nominee, that same uncertainty would prevail. people would say, well, we're going to get a monetary policy that we don't understand yet. >> why don't we think -- he was bernanke's guy during the financial crisis. >> sure, we haven't heard from him in years. one of the -- let me say one thing, quick. one of the bizarre things about this process is that larry was essentially criticized very deeply on a number of fronts while very few people actually heard from what larry summers' own views on what monetary policy and regulation were. and i think people who have studied, feel he would've

dovish. one of the mysteries of this process is how people can form such firm views on so little information. and if the president nominates another person about which there are big unknowns, there's going to be that same risk. >> all right, gentlemen. oh, you've got to thank. >> thank you. we'll see you later. >> i'll see you at 8:30. >> andrew -- >> yeah? >> i'm going to phrase this nicely. why did you laugh when i said let's get back to our esteemed guests when you had congressman frank and -- you kind of laughed. is it because you know me too well? i didn't -- it wasn't in my voice. >> i didn't know if it was a little bit -- might be. >> i said let's get back to our esteemed guests. >> i know what's going on. >> you do, don't you? >> i think i know what's going on in your head. esteemed is an interesting word for you to use. >> don't undermine me. that's bad, andrew. meanwhile, did you -- were you

working dodd for some movie premieres? >> oh, we were talking movies. >> take -- and we're -- >> we're going to go to premieres, take pictures, hang out with the stars. >> i knew you were working him. >> too big to fail 2 is going to be a great premiere. >> the sequel, right. >> coming up, without congressional action, the government expected to run out of money to pay its bills next month. we're going to talk to grover norquist, founder for americans tax reform. and we're going to talk to pimco about the yellen effect on the markets and the treasuries. i thinks he was the yellen guy probably all along. right now as we head to break, check out the "squawk box" market indicator. here at fidelity, we give you the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades.

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welcome back to "squawk box" this morning. live in washington, d.c. today, five years after the financial crisis. but there's another fight over the debt limit and it is looming with the federal government expected to run out of money on october 1st without congressional action. grover norquist, founder of americans with tax reform joins us now with more.

good morning to you. >> good morning. >> is there a path? any path here in washington to actually get through this? >> oh, absolutely. i think this is a lot easier than the last time we did it in 2011 and 2011 ended well. we got a compromise. you want $2.5 trillion in higher debt ceiling, mr. president. you have to have $2.5 trillion in spending restraint over the decade. that's the deal, we're holding to it, we have sequester. it's working we go back in again, the president will want $1 trillion, or he may want to take it past the next presidential election. $2 trillion or $3 trillion, okay. >> what are you asking? >> i think you're likely to have some sort of changes in long-term entitlement spending. stuff that won't affect obama or his team now. >> and the democrats go along with that? >> well, the alternative is to have spending restraint shorter term and they're more offended by that. meaning spending they control

now. that's one option, the other would be to delay obama care, not end it but delay it a year. president's delayed pieces of obama care for insurance companies, for large businesses, for labor unions. why not for the individual mandate? >> if democrats say no, you say what? meaning democrats have called you an obstructionist. >> to higher taxes. >> i'm not the first person to say that. >> yeah. >> if the democrats say no to the things you're proposing, where do republicans land? >> well, because the white house wants something too. the white house is up set with the spending restrictions of the sequester. the mandate for individuals. >> right. >> saves taxpayers $35 billion in a year. >> okay. >> you could trade that for some spending on domestic discretionary stuff. so the president has desires, as well.

remember, it's the president who always says i will close down the government if you don't do x. and the question is, what x is. clearly the republicans have offered to do it just a few months out. there's one other thing i think the republicans will ask for and get. that is that from now on the internal workings of treasury where they come up with the magical number that the government's going to run out of money. back in 2011, it was january and then it was april and then it was june. they kept moving. >> you want to see -- >> they're either lying or there's a lack of confidence. let's see the bank accounts, assets, how much gm stock do you have, how much could you sell? >> joe's got a question. you believe october 1st is a phony date? >> yeah, it has been in the past. i'd be pleasantly surprised if it wasn't. but let's open the books so people can see how you're making

that decision. >> all right. >> who would you -- who would the republicans actually be negotiating with? you remember during the deal, talks with boehner. some people said boehner couldn't deliver his people if he needed to on those talks. other people noted that the president seemed to have deal almost done. and he couldn't deliver it either. given what's happened with summers where that was the president's guy and we again see that hep doesn't control the far left of his party. who would you -- can the president make a deal now on entitlements? >> he can -- look, boehner needs to talk to his caucus obviously. he can't just do something individually. he talks to the caucus. we got a very good deal in 2011 that saved real dollars for taxpayers. it really made changes and has made the country put in a better financial footing. the president signed it and the democratic senate went along with it. so we know that we can get an agreement. the left objected to it. and the reason i called it

obstructionist is i worked with congress and say let's not raise taxes as part of the agreement. and the republicans said we're not raising taxes, we'll cut spending, do many things, raising taxes is not part of it. sometimes when people say we fail to get an agreement in 2011, they don't finish the sentence. they fail to get an agreement that raised taxes instead of cutting spending. >> is the far left emboldened now? >> that's possible in the senate and you certainly see harry reid staking out a position on tax reform, which some people thought might get wrapped into debt reform. it's not ready from the democratic senate because harry reid says he wants higher taxes. it's not where the house is, it's not even where the president says he is. so you're right that harry reid is hanging out a more left position -- >> these were all senators that did this with summers too.

he doesn't have the senate anymore and he's got the republican party in the house. >> will you weigh in on that debate? >> sure. >> yellen/kohn, did you want larry summers, by the way? >> it's interesting because larry summers i knew -- none of the above. if you had to pick one, i thought summers would have been okay of the three. the challenge is that you have here is the president has no working relationship with any republicans, not just the house republicans but senate republicans which is normally you could reach in. >> john mccain has worked with him. john mccain has worked with him on syria. >> john mccain offers to come into any conversation where you're doing stuff -- i'm not sure that this job is the one that mccain would focus on, tends to focus on syria. but he doesn't and the people -- not just the president doesn't have these relationships, the white house doesn't have these relationships with the democrats but don't have one with republican senators.

it's a problem five years in. they don't have working relationships with senators. >> before we let you go, you're involved in some kind of marijuana debate on taxes. you want taxes for -- for -- >> don't want taxes on anybody. slightly complicated, very serious, there's a giggle factor when we discuss marijuana. there are 22 states that have legal marijuana dispensaries for medical reasons, okay. but at the national level, federal tax level, in 1982, they said present law is if something's illegal and you have to pay taxes on the ill-gotten gains from being a bank robber or something, you can deduct your normal and ordinary business expenses. if you're a marijuana smuggler, you can deduct your costs. well, we now have legal marijuana dispensing at the state level but they can't deduct the cost of employees, the cost of renting a building. their tax rate's 87% as opposed to 35%. so what i commented on the other day is, look, there's a bill being put forward by a democrat

from oregon. let's treat them the way we treat everybody else, 35% tax rate, not 85%. >> thank you for that, grover. we'll make our way over to colorado at some point. coming up, mohammed el-erian expects big moves as the market prices in the expectation of janet yellen as the next fed chairman. evelopment. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪

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still to come this morning,

we'll have more on larry summers' withdraw from consideration as fed chair. up next, we'll talk about the yellen effect on the yield curve. plus, rick santelli will bring us numbers from the empire state survey and this morning's reactions in the markets. the dow futures up about 186 points above fair value. "squawk box" will be right back. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade.

welcome back to "squawk box." we're seconds away from the empire state survey numbers. rick santelli standing by at the cme in chicago. steve liesman with us onset. hey, rick. >> hi. 6.29 is september's read. for the manufacturing index. the last time we were at a level of 6.29. we don't have to go back far because may's number was minus 1.43. obviously it's a bit of a disappointment. i'm not sure this number would change the complexion of strength in equities, slight reversal. fairly decent size reversal with the fixed income markets. we all know the reasons. it seems like it's autumn for summer. back to you.

>> i couldn't help but think whether you could have made it to washington to be on the set with andrew with barney frank and chris dodd, rick. i don't know. i'm not sure -- >> all the champions of free markets, absolutely. >> my favorite line was that from '95 to '06 they really couldn't do anything about the housing crisis or fannie and freddie because the republicans were in charge. so barney's hands were tied during that period, rick. >> oh, yeah. >> i don't think the housing crisis would've ever happened with sort of the intimation there. >> well, you know, so much of it gets revised and synthesized and cloroxed they end up with these comments in the paper. his stance on regulation rubbed some of the progressives wrong. you know what -- we lump everything together whether it was andrew's interview on taxes. listen, there's good regulation and there's bad regulation.

to look at things and say he's pro or against, it's just silliness and we continue to do it every cycle. you know what my complaint was about larry summers? it wasn't the issues he was somewhat involved in. i agree with conventional wisdom there. that wasn't -- the issue was letting these derivatives go without coming on exchanges. very specific issues. and writing bad regulations or getting rid of regulations is too generic like taxes. >> i hate to say this, don't take this as an insult, but where you are right now is really to consensus i hear from republicans like peter fisher who we had on a few days ago. >> the gentleman who got rid of the 30-yearlong -- >> yeah, but he also did that too. but the issue is not that we deregulated, but we got rid of one regulation and didn't put another one in its place. no regulation was not the answer. and if you think about the greatest mea culpa, saying i

thought the derivatives would receive regulate and i was wrong. and that's where we are at right now. and they're trying to put the derivatives on to exchanges as they say. and the concept of the dodd/frank bill is to replace it with something. that's the defense of that bill right now. >> yeah, no, i don't disagree. i just think replacing it is not the way to go. and i think derivatives largely would self-regulate. there's just a couple of linchpins in there that we didn't have correctly. you know, you have to have some type of audit trail for the products. i think that was the significant issue and i think the other issue is that the implied versus explicit branding of gses where everybody from larry summers to mr. clinton, alan greenspan, they were highly aware of that. anybody alive in the '80s that monitored the mortgage market was highly aware of the special hands that were being dealt to

the gses and to plead ignorance or think regulation got off skew is just not correct. they were proactively driving this train down the wrong track even though the wrong track didn't have any speed limits on it either. >> barney frank had answers on all that. said the private sector absolutely drove the -- what happened with fannie and freddie. they were just accommodating what the private sector wanted. >> no, no, the private sector was accommodating the mandates of the gses as formed out by mandates for home ownership. >> that's not what they said. >> yeah, of course not. they built the factory to build a sausage and the private sector -- >> you're talking to me friday on this event put on by the group acknowledged that political pressure and political policies played a role in fostering the housing bubble. i don't think he puts it all on the gses, rick. >> they were accommodating. just said it, steve, on the air. said the private sector drove what fannie and freddie, what

happened there. >> you'd be surprised. >> he could spend the rest of his life trying to explain it. everybody with a pulse that was in the markets in the '80s and '90s understand mr. frank's role in all of this. >> it's weird, because there's all these things on youtube, obviously. but he -- he just told us again that he was never a big promoter of housing. he was -- >> oh, roll the dice with the gses! >> he was never a big promoter of housing, a big promoter of rents, he says. >> and barnum and bailey hated clowns, i understand. >> i think everybody in washington was about home ownership. that the real estate lobby cut across parties, cut across -- >> how could you say -- >> and now everybody's like, well, maybe renting is not the worst thing in the world. there's a whole change in how people think about rental properties and whether or not maybe that's a good goal that the government should be involved in helping low-income folks have more rental housing and building that. but back then and cut across parties, it was -- >> well, steve, that's the

point, though, and joe, i think you're going to disagree with me, it did cut across parties. that was the big issue. it may have started under clinton. >> i'm not saying that bush wasn't fully involved in that. >> they all were. >> i know. why would i disagree with that? it was societal. everybody that benefitted from having their house, the piggy bank benefitted also. i don't like when it comes down to being wall street. that's the revision history of the "new york times." >> joe, it's the same right now. think our new labor secretary, it's still going on, it's just gone algoryhthmic. >> i want to pick up on what joe said because one of the dangers -- not dangers, one of the interesting things, i think that comes from this discussion of the crisis is whether or not markets are prone to these

excesses on their own. >> right. >> or must they have some political impetus? >> and i think that people think that, you know, the markets would not have gone so crazy if not for the political motivation. and if we have learned any lessons about unintended consequences of things like pushing housing and then the market -- yeah, barney frank's right, the private sector did all the work, that doesn't mean they weren't pushed down the road. >> i've even said that's why we build crystals. we can't build them here. if one piece of dust gets into -- we've got to build them in outer space. the free market, it's never totally free. and in theory, if it was, if it was out in space where there were no government intervention, everything should work. that's what free market people believe. others think that the free market is inherently flawed in some way. >> well, that's the lesson some have taken. >> there's referees on the field. but you don't want the guy -- >> should be. >> have you ever seen where the guy runs into a referee and gets

tackled by him? that's not good for anybody, for the sport. especially when he can't get up. all right. thanks, rick. i was thinking about you, though. i was thinking about you with -- i don't think they would have come on, though, if santelli was there to be honest with you. >> well -- >> i don't think -- >> do you think barney shies from anybody? >> i don't think -- >> barney would have been there, he would've. he comes to play. he was amazing -- you know -- >> i tried to moderate a panel, andrew, with barney on it last friday and i'm telling you barney ended up moderating. >> i think we asked him, who would be interviewing him, andrew ross sorkin. oh, sure, we'll drive ourselves. it's andrew, we'll be there. >> he interviews himself. >> exactly. >> he's a little bit liberal for us -- no, i'm kidding. coming up, mohammed el-erian. he's a yellen person.

>> i don't know where they stand on this stuff. they don't like qe, maybe they like summers. i think he's not a big qe fan. the pimco boss is going to share his thoughts on larry summers withdrawing his name from consideration of the fed chair. janet yellen, is she the front runner? >> yeah, that's what harwood tells us. here at fidelity, weu the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account. the world is changing faster than ever, creating new opportunities for those who stand ready to seize them. in a time when the biggest risk is playing it safe,

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welcome back to "squawk

box," everyone. the futures are indicated higher. dow futures up by about 176 points, above fair value. s&p up by about 18. in our headlines this morning, paper product stocks are jumping in this morning's premarket trading after packaging corporation of america announced a deal to acquire rival boise incorporated for $1.3 billion or $12.55 a share. that's a 26% premium to friday's close. larry summers pulling his name for consideration as the next fed chair. joining us for more on the impact on the markets and yield curve, mohammed el-erian, also a squawk market master. and you wrote last night that we should expect some pretty significant market moves on monday. you were right. what happened? >> very easy, becky. on friday night when the market closed, larry summers was the front runner, his views on monetary policy weren't well known. and as survey showed, the market believed he was quite hawkish. yesterday, orders turned around,

yellen regained status as front runner. which the market takes well, the yield curve gets anchored, the front end does well. repression of volatility, the equity market, the credit market like that and what you get is a broad-based rally. that's what we're getting this morning. >> i know that makes sense to me in the short-term. i understand why the market is -- in favor of this idea, at least for the short-term. over the longer term, if we're talking a year down the road, where do you think the fed would be with yellen at the helm in terms of what they've done with qe, where they are in terms of moving on rates? and how will the market react to that? >> we discussed a lot about that in investment committee. whoever comes in won't have as much room for maneuver as people expect. i think what you're going to see going forward for the fed is a few things. first, they will taper. they'll taper small to begin with but they will taper. >> this week? >> we think this week is more probable than not probable they will taper.

and call it $10 billion to $15 billion reduction. secondly, they're likely to favor the mortgage market, which means they'll taper more with treasuries in proportional terms. thirdly, they're going to leave themselves quite a bit of wiggle room because the future's so uncertain. and finally, they're going to evolve the forward guidance. they're going to try to strengthen the forward guidance in order to minimize the impact of markets on the taper. >> a year from now, will we be through the tapering? and turning the sites on whether the next six months they'd like to start raising interest rates again? >> most likely we'll be either through or mostly through the taper. i don't think you can see an increase in interest rates because the economy remains weak. i think the reason why you're going to see the taper is not because of the declared victory on the economy. they haven't. it's because they're worried about what mr. bernanke has called the cost and risks. the collateral damage, if you

like, of using blunt instruments to impact markets. >> i guess we get back to the question of will the bond market react kindly to this? will it go along in a relatively smooth fashion as it has to this point? or will you get the point where vigilantes come in -- and i said vigilant vigilantes. will you get to the point where they say, hold on, we're going to move the markets ourselves. >> so we've already had a major repricing of the bond market. i mean, look at the ten-year gone from 160 which was an artificial level to 281 this morning. >> that was traders following what they thought the fed was telling them. that was being signaled to traders. that wasn't traders reaching their own conclusion and pushing the fed. >> correct. and it was investors betting on a fed put that would be there forever. there were also things, people in the carry trade, the reaction to the pressure of volatility. all of these technicals and all these flows that were accentuating the message from the policy makers. so now we've adjusted quite a bit. and the question becomes do you

believe this economy is near escape velocity? do you believe the technicals, which are pretty nasty have run their course? and if you do, then there's likely to be less interest rate volatility at the front end of the curve. the back end of the curve is a different issue, becky. >> my biggest question, mohammed, when does the market get a mind of its own again, when does the fed dictating every single turn that the bond market makes? >> it's going to take time. remember how deeply the fed has gone in this experimental territory. that's why people like us have been uncomfortable because they are distorting markets, they are distorting resource allocation and they are contributing to excessive risk taking. >> but if it's simply a matter of time, i would suggest that the fed wins. if it's not a matter of time, if the fed loses control at some point because there are investors who start making up their own minds of this. i guess that's my question. do you think it plays out

smoothly over an extended period of time, or do you think that one of these situations arises where the beast bites back? >> so the beast has been biting back, right? so the fed succeeded in buying time for the system and recovery of the housing market is a perfect example of something that wouldn't have happened without the fed. it also has bought time for the economy to heal. that's the good news. the bad news is that policies becoming increasingly ineffective. you cannot repress interest rates forever without causing damage and i think the fed realizes that. >> the wedge is being withdrawn very slowly, mohammed. and that's the thing, the wedge that keeps the market up even though the economy -- the market doesn't deserve to be where it is because the economy's down here. but if you're withdrawing it at 10%, 12% at a time, you only need 12% economimprovement to k

things where they are. it's not cold turkey. you've got another year to recover where it can warrant where the stock prices are on their own. there may never be a day of reckoning for the wedge being pulled out. >> you're right and i suspect that's what the fed was hoping. we are going to reinforce to our guidance. the only thing i would tell you is markets focus on terminal values. it's a journey story. >> some would say did a terminal pricing right away anyway. >> correct. >> who knows where it should be based on how crappy the economy is. 3%'s not bad. >> we're all looking forward to the day where we're going to assess market valuation based on fundamentals and based on technicals rather than based

on -- >> overall it was pimco for or guest qe? you were against it? >> we thought the immediate intervention was needed to normalize markets. we thought the fed was being too ambitious in trying to deliver outcomes on its own. >> against it. >> mohammed thank you. great talking to you. >> thank you, becky. >> coming up, we're setting up for a big week on wall street with a key fed meeting starting tomorrow. up next, we'll check in with jim cramer for a list of stocks to watch ahead of the trading week. tomorrow, scott mcnealy, the former chairman of sun microsystems. wednesday, we talk to goldman sachs chairman and ceo lloyd blankfein. then on thursday, dunne, and wachovia ceo bob steele. and wait until you see who we have lined up for friday.

watch "squawk box" all this week starting at 6:00 a.m. eastern.

welcome back to "squawk box."

let's get to the new york is stock exchange. jim cramer joins us. 15576, the douchlt we are within spitting distance of another new high. syria is out of the way. i just read something that says assad has a history of diplomatic initiatives that buy time. i don't think anything is happening there. taper is coming but maybe it is only $10 billion. that was or big worry. is there any reason now and even bonds, back to 28 or whatever it is. it looks like all systems go, no? >> i think a lot of people are totally incorrectly positioned here, joe. we are shorting the housing stocks very aggressively. people shorting the banks believing that when summers comes in, the taper you just turned on, a reputation of bernanke. i don't think yellen gets it. long shot, stanley fisher, who was the mentor of larry summers. if the president likes summers,

he should go for fisher. >> i just saw that in a mark grand piece that the dark horse could be stanley fisher. we don't know everything. we don't know whether there was something he didn't like about yellen or whether he promised the job to summers. what could he possibly not like about janette yellen? >> it does beat me. she is so popular. that would be crazy. people would be like, you've got to be kidding me. what was he thinking with elizabeth warren on that committee? a harvard woman professor versus summers? i like warren a lot, because she is a rabble rouser and she tries to get things going. she is a junior senator. she has a lot of conviction about who is good and who is bad. >> if everybody is over on one

side, it starts tipping a little, i think that part of the democratic party is now holding more -- i said, maybe i don't feel bad for the president but not being able to pick your own guy who was a former treasury secretary in the democratic that we remember. >> the level of power, you are dead right, the taper is a canard. we don't really need that. we could have good earnings. when i saw those interest rates go down today, i said, geez, you can go back into a whole cult war. maybe housing comes back. >> when we come back, we are going to talk stocks, commodities and a lot more. den anytime gartman will join us. "squawk box" will be right back. ♪

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welcome back. joining us on the phone with his thoughts on larry summers dropping out of the fed chair race. dennis gartman, buy gold, buy stocks, short the dollar. what else, dennis? >> i'm not sure one wants to get

to buying gold. you had a huge rally overnight. it has already given most of the gains up. stocks on the other hand are doing better. likely to continue to do better. it's amazing that falling on your sword as mr. summers has done is this supportive. indeed, it is. stocks are going to run strong. the dollar, i'm quite convinced, is in very difficult circumstances. money is moving away from u.s. dollars. it is finding its way into nonu.s. dollars dollars. it is finding its way into the aussie and the kiwi. it is finding its way into canada. that is likely to continue z if we hear yellen is not a certainty, my sources say she is not. does this all turn itself around again in the markets. >> i'm really not sure. i have a sneaky suspicion. first of all, let's say miss yellen clearly is the front-runner. she may be nothing more than a stalking horse. we heard mr. cramer talk earlier

about the fact that mr. fisher's name is in the hunt. that's pronbably a logical name except for the age involved here. he is only seven older than i am. there are other names that will be in the hunt. it will be hard to stop what seems to be a ground spell swell of support for janet yellen right now, it is time for ""squawk on the street."" good morning. we are on pace for our best market open since early july. as larry summers withdraws his name from consideration for the fed. welcome to "squawk on the street." i'm carl quintanilla, david faber. with that summer's news and a tentative agreement on syria, he looks to gap up more than 1% for the third time this year. the ten-year yield down to 2