>> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with john kernen. andrew is getting ready to talk to warren buffet and hank paulson. today's top stories. president obama says that he is exasperated over the gridlock in washington. in an exclusive interview with cnbc's chief washington correspondent john harwood the president said that wall street should not dismiss the battle on capitol hill. >> i think this time is different i think they should be concerned. when you have a situation in which a faction is willing potentially to default on u.s. government obligations, then we are in trouble, and if they're

willing to do it now, they'll be willing to do it later. >> we'll have much more on john's interview in a moment. later that evening president obama actually met with congressional leaders at the white house. but they are still no closer to a solution. >> the president reiterated one more time tonight that he will not negotiate. we've got divided government. democrats control the white house and the senate. republicans control the house. we sent four different proposals over to our democrat colleagues in the senate. they rejected all of them. we've asked them in a conference to sit down and try to resolve our differences, they don't want to -- they will not negotiate. >> i thought that they were concerned about the long-term fiscal affairs of this country, and we said, we are too, let's talk about it. my friend, john boehner, i repeat, cannot take yes or an answer. >> president obama is expected

to speak on the shutdown today at 10:30 a.m. eastern time and cnbc will be taking those comments live. harry reid on both "the wall street journal" and "the new york times" talks about he's sort of the front man now and -- >> the front man. >> kind of the front man dictating some policy. he thinks back the last time we went through this over the holidays he was mad when i guess the president set something up and negotiated -- >> he was negotiating directly. >> he was mad that that happened. >> although the president is the head of the democratic party and john boehner is the head of the republican party. >> he's their point man, harry reid, according -- he's the guy that relishes this and has gotten even more aggressive and like yesterday at the 4:30 meeting said you're going in to negotiate or talk to him. he says this isn't my meeting. i was invited to attend. the market yesterday i think the s&p, i think the futures are the

fair value is up, because i think, number one, they were waiting for john harwood's interview to see what he said. see fair value, up, what, 31 so i think -- >> down -- 73 below because the president made it pretty clear that this time is different. it sounded almost like he was trying to rattle -- >> at the close -- in at the close, roo it. >> it was up and i think they knew -- >> they knew there was the meeting coming. >> and john would talk and the president was talking to a business network about the economy, but for those that were critical yesterday that may be some politicians want the market to force the hand of people by like it did during, you know, during the financial crisis, the president said, yeah, you know the market should be going down. >> you shouldn't be worried. >> maybe there's some truth to that. united technology, the dow component may need to trim its workforce if the government shutdown drags on. people now think october 17th. >> i don't think -- anybody who thought this would be over

quickly i think will be deeply disappointed. >> they want to merge -- i saw mccome on "kudlow" last night and now changing saying we tried it with -- we think obama care is not a -- just trying to get rid of the law, we think it's part of the budget problem and on october 17th when we have to do the debt ceiling and combine the two negotiations and we're going to try to get some tax reform and entitlement issues on the table to negotiate about but we'll put it all together. >> boehner brought that up yesterday and according to politico this morning he was basically laughed at by the democrats in the room like, no, we're not negotiating on any of this. not opening any talks until you fully fund the government and raise the debt ceiling so the idea -- the silver lining, we spoked with erskine bowles yesterday and a grand bargain that comes up -- >> the president with harwood said i'm willing to talk about these things but not until you do the other stuff and -- in then they've given up their

leverage. >> right, in the past, many, many times debt ceiling increases have been accompanied by different budget agreements or negotiations, so we'll see whether they -- >> i think the whole idea of obama care and the affordable health care ago, they won't make any leverage with that. >> but changing a little bit. saying, way, we tried that, we don't like it. figure out a day -- they kept saying give people the same opportunity that their boss got when the corporate mandate was put off for a year. we thought it would be a good idea to delay -- let the normal, you know, rank and file delay it for a year but if that's not something you want to do let's talk about some of the other issues. >> although the president did bring up the idea that if they want to finish what they started in terms of revenue increases he'd be happy to open those talks. he didn't mention entitlements. >> other people say if you can get the -- lock in the sequester you've got and the budget they're willing to sign that keeps the sequester, you should

take that deal and run. i don't know. you saw that united technologies might furlough some workers. >> it would be 2,000 people i think beginning on monday. it could rise to 5,000 workers if it continues for a month. in the meantime, why don't we look at the markets. as joe mentioned futures are under pressure this morning after any hope of some sort of quick settlement or some sort of talks that would start in earnest kind of fell by the wayside. dow futures down by 7 2 points. s&p futures off by 9 1/2 points. oil prices this morning at least right now are down by another 33 cents but 103.77 is where wti stands, ten-year note is yielding 2.647%. it's the shorter term treasury notes where you've seen yields push up, particularly those that are going to expire between now or right around october 17th. taking a look at the dollar this morning, dollar is under some pressure when it's up against the euro, 1.3606 but stronger

against the yen, 97.71 and gold prices this important at least right now are indicated down by $11. 1, $315 an ounce. >> gleeful antagonism is what "the journal" calls -- >> "the -- >> they cut a deal with biden when vice president biden came in at the 11th hour with mcconnell and that made him mad and then the -- >> people were wondering if lew would play a larger role. he was supposed to be the guy who had relations on congress and would be able to work behind the scenes. hasn't happened yet and wonder if that's because the president has directed him not to. >> but it's because -- "the times" showdown -- scrappy reid. scrappy reid but some of the tack continues are kind of

interesting. leaking e-mails between the staff -- >> chief of staffs which is kind of unusual -- if you ever have hope on working behind the scenes together the idea that you are releasing e-mails between the chief of staff, that's kind of unprecedented. john harwood. we've already given you credit. we have more highlights. the futures, when they closed yesterday they trade up and thought you could broker some type of arrangement -- you know, representing a business network or we thought maybe when he met with, you know, we heard about that meeting but it's our opens have been dashed is -- it's october 17th now is what we're hurtling towards, right? >> yes, but i don't think -- i'm not as bearish as you and becky are on the basis of where this is going. i think if they're steering this conversation back to a budget negotiation, that is a positive development.

>> yeah, but it's not being received on the democratic side at this point, is it? >> oh, yeah, it's being received on the democratic side, absolutely. >> politico said the democrats in the room laughed at boehner when he brought that up. >> no, look, the -- if we get to a budget talk, then that's where the two sides can work together. now, the president did draw a hard line saying you got to re-open the government and raise the debt limit and have the budget negotiation. but that's something that -- where i think republicans will get to that point. remember -- >> get to that point where they say, okay, we'll give you everything you want and then negotiate. >> it's not everything you want. democrats aren't asking for anything right now. all they're asking for is to open up the government. >> the republicans see that as their key leverage point. >> yes, i know, but, look, here's the thing to understand. what republicans have been doing up till now is disconnected from the budget, it is also

disconnected from any kind of reasonable demand. it is not reasonable to say -- i mean, the tactic that they've been using so far is not very far from saying, mr. president, we will open the government and raise the debt limit if you resign immediately. >> john -- >> and then they -- then a week later -- >> previous debt ceilings there have been negotiations. your characterization is right from the democratic side of things. sometimes it makes me wonder how you can do that. these guys are just sociopaths or something. there is another side to this where -- >> at this moment they are. >> that's what i mean. you know, that's not how i see it and, you know -- >> but the thing is, joe -- >> i get up and do the same things you do. >> you're wrong. you're wrong. >> and previous debt ceiling -- in previous debt ceiling increases haven't those in the past been used to extract some type of budget agreements?

>> reporter: yes. >> that's all they're saying now. >> reporter: no, no. >> take away obama care because they've started shifting away from obama care? us try to maybe bring up entitlements or something. >> reporter: obama will have that conversation but -- >> not till after. >> reporter: joe, no, no hold on. here's the thing. look, you got to -- think about what is reasonable here. we've had months in which republicans have not been willing to go to conference on the budget. they demanded the senate pass the budget. they did. then they said let's go to conference with the house. the house didn't want to do that. remember, the house kind of -- >> why didn't the house want to do it? >> reporter: if you have a protracted negotiation in the conference and goes on for awhile, there is the possibility that the leadership loses control of the floor. if the conference goes on for a certain period of time without

resolution, then anything can be offered on the floor. it's not in control of the leadership and there's -- the republican leadership didn't want to be in a situation where budget proposals could be put on the floor where they could not control the outcome. that's why they didn't want a conference. so republicans lost interest in a budget conference. they went way off over to the side on obama care, okay, and now they're coming back to the budget. that is a good thing. but the government is already shut down and so it is, yes, have any negotiated over debt limits in the past? absolutely. but they've negotiated on things rationally related to the debt limit. that's first and secondly, they haven't in the process of those negotiations said with a real intent as if they mean it that they were going to bust the debt ceiling. there's an intensity about this demand is that different.

>> in 2006 when barack obama was a senator he voted against raising the debt ceiling. >> reporter: absolutely, yes, that is true, and that was a political vote and he's been called out for it and it was -- basically in our recent history, debt limit has been a vote where anybody in -- who is not in the president's party completely hypocritically for political reasons comes out and says, i think this is so irresponsible, our fiscal policy is messed up. i'm going to vote against it. but the difference is, there was never any real doubt over whether it was going to get raised. >> i think it's stupid this vote exists to begin with. i think it should be tied to the budget process and it's ridiculous it exists outside of it and not the first time they've held up this process. >> reporter: right, but the difference is the real -- >> we got to leave. >> reporter: it's the difference between slow walking and dragging your feet and actually saying, no, no, no, i'm going to

pull this trigger many i'm not going to raise it. >> john, you know, started watching, you know -- i stayed up and watched jon stewart because we've been on a few time. >> reporter: were we on again? >> no, we weren't but we -- our head shouldn't get too big because the people over at fox news, all of them get to be on every night. they're on -- they are on a lot but did have one segment. it was funny, had a guy and they were listening to people on both sides of the affordable care act debate and the guy was talking to the side that they were pointing out as being wrong, the republicans ex obviously, and the interviewer said, you know, normally i sit here and try and nod but with what you're saying, i just -- let me try again -- i just can't nod while you're saying that. when the president -- i'll tell you where i'm going with this. when the president last night said to you, john, i have bent over backwards to work with republicans, you were able to

nod. how? i mean, did you have the same feeling as the jon stewart interview that, i mean, he's really expecting me to swallow a load of -- did you have the same feeling at that point? do you feel like the president has bent over backwards to work with republicans in the last four or five years? >> reporter: i think he's tried -- i don't know about bent over backwards. >> what's leaned? could you see with his posture he was like one degree off 90 degrees? >> reporter: let me put it this way, he came into office with big democratic majorities. he expected that he was going to have republicans be willing to work with him and he made some gestures on stimulus, on health care, on financial regulation toward trying to make that happen. once they came to the conclusion they weren't going to get chuck grassley, olympia snowe, some of those republican, you know,

moderates or governing republicans to work with him, they jammed things through on democratic only votes so it felt to republicans as if he wasn't trying, but i think -- i think in certain ways he was trying, one in the negotiating process and secondly in the structure of his program. remember, the basic health care program follows the outlines of romney care and of the republican alternative to hillary care in the early 1990s but politics moves and the republican party has moved to the right and some of this is try tribal between the two parties anything a republican president proposes or a democratic president proposes the members of congress or the other party will move away from it. but i think he was -- had his breath taken away a little bit by you put out mitt romney's health care plan and describe it as the worst thing ever but ultimately he came to peace with that and decided to fight them

and that's why republicans think like, what are you talking about bent over backwards? you're trying to knock our blocks off. >> yeah. so it seems a lot -- i don't know. i think if you -- maybe it is different but a lot of times you figure if you knew the game and through there's all this going on that you'd say something in public then behind closed doors you'd take -- roll your sleeves up and do something. >> reporter: taken republican senators out to dinner and trying to get something going. >> i thought -- at the correspondents dinner, he said people have suggested i have a drink with mitch mcconnell. said, really? really? why don't you have a drink with mitch mcconnell. i don't think that kind of stuff -- >> reporter: i've been trying to do that, by the what. >> with mitch mcconnell. >> reporter: yes, i have. one final point, joe, on entitlements, republicans have not been pushing entitlement reforms. >> that's true, the conversation is completely fallen off -- >> what about tax reform?

>> reporter: yes. >> it hasn't been a serious attempt on either side. >> reporter: yes, but basically republicans -- as the deficit has come down and as republicans have decided that these discretionary cuts are too high for them too, that's why they couldn't pass their appropriation bills this summer and pulled them down because republicans didn't want to vote for spending that low, the entitlement issue faded away. you know, yes, they passed the ryan budget but they haven't talking about that. the president actually in his budget has put more entitlement reform on the table than republicans have. that's why i think it is constructive. if they get back to that, everybody knows we do need entitlement reform and entitlement savings and if they can engage that conversation, the president, i think, will have a bargain with them and he left the door open, i thought, not in a blatantly obvious way but he was pretty soft in the demand for additional revenue.

this is one place -- you foe, he took tax rates off the table. that is something that republicans can embrace and when i asked him would you accept any deal without additional revenue, period, loopholes, he said i think we need to close some loopholes but he wasn't firm about it. >> and didn't say which loopholes either. >> that's a potential agreement. >> excellent job yesterday. had all of us riveted. we' we'll talk with you in the next hour a little more about it. right now to andrew. he is in chicago this morning. and he has some big guests coming up. andrew, why don't you tell us about it. >> hey, becky, if you have to think about a crisis and someone who knows how to deal with one potentially who could bring both sides together i think of hank paulson, the former treasury secretary will join us at 7:30. five years after the approval of t.a.r.p. and happened five years ago today. he got down on one knee at one

point to get miss pelosi to help him out so he'll be on to talk mr. the debt ceiling, the government shutdown and the financial crisis and what it means five years later and:00, warren buffet and somebody behind t.a.r.p. as well who has probably views on what's going on in washington today and maybe he can help influence some of this discussion, as well. he's going to join us starting at 8:00 avm so a big show here from chicago at the university of chicago. this is not a fake backdrop. this is the real thing so we'll have all this and bring you that throughout the program. >> andrew, is that the chicago river behind you? that is beautiful. >> this is the chicago river right behind us. it's -- the sun is going to come up. it's a little misty right now but it looks pretty nice around here. we will bring you hank and warren on a crazy day. just listening to that harwood interview. >> are you at milton friedman's

university or austan goolsbee's university of chicago? do you know which wing you're in? >> reporter: i think the conversation -- i'm in the middle. i'm in the middle. but that conversation is going to as late because you'll have hank and warren who actually probably come from a little bit of both schools so it's going to be an interesting discussion. >> so as usual, you're going to occupy the center. >> reporter: that's what i like to say but, you know -- >> oh, thank you. >> reporter: everybody thinks -- >> joe, it's your line. i don't want to take it. everybody thinks they're in the center, right? >> liesman gave me the line. where you stand depends on where you sit. consider you stand on issues is where you sit on the right or the left. >> reporter: i still go back to -- look, hank paulson was an investment banker but he's someone who knows clearly how to negotiate and know what is a

crisis actually looks like. i want to get his perspective to try to understand if he thinks we're headed to a crisis like the president suggested. maybe it's not as bad as others have suggested and how you get both sides of the aisle to come together. >> who will be the one to do it after he got down on his knee with nancy pelosi who is going to be the person that does it this time around? >> i think we might -- after the interview we might have to send hank and warren as emissaries to washington. >> i've got a problem with this placement that we have. yeah, let's -- i think -- >> reporter: back to the middle. >> no, i want to put you where you should be and -- there you go. >> becky goes back to the middle. >> now you're on the left side of the screen and i think this is -- >> wait a minute. i should be in the middle. >> austan goolsbee is right over there. >> i should be in the middle. you should be where andrew is moderately and andrew off the

side of the screen and a two-shot. all right. >> where you stand depends -- this is good. this is -- you know what, now i'm the best-looking person on the screen. >> you always are. >> i was third best. no, no, okay. we'll be back with andrew. did bill actman's pershing square gain any ground last month following the debacle. the numbers next. first our first named winter storm of the season and the weather channel -- you know what, reynolds, i know we're supposed to have like eight hurricanes every week with climate change but you can use all the names we saved for the hurricanes for the winter storms because we got them all left. we haven't needed any. i interdo know if you noticed. >> you never know. may be a good idea to recycle the names. atlas, the big winter storm but a sharp eye on the tropics, that

would be karen if it's a named storm and later rain returns to the northeast. severe storms possible for the corn belt but warm and a chance of scattered showers along parts of the gulf coast. speaking of showers, you might deal with some in miami, also in cincinnati and chicago. those are the cities where you have the best chance of seeing delays today. hey, we'll go to commercial but more coming up in a few moments right here on "squawk box."

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? ♪ this is one of the most important appointments i make so, no, the shutdown is not slowing down the vetting. important to show us we're investing in things that will help the economy grow. this constant governing from crisis to crisis, we have

welcome back. right now for the executive edge and we start with some returns from bill's pershing square. ackman said they gain only half a percent from year to date. the nasdaq up 5% for that same period. ackman exited the fund's position in jp penny losing half the investment. they're down 10.77 billion from over 12 billion back in 2012. as for his stake in herbalife he has restructured his bet to protect the fund for further paper losses and deuced the short equity position by more than 40% and replaced it with long-term derivatives and put options, he acknowledges

herbalife is a pyramid scheme and announced a 1 billion short bet against the company by saying it is this big pyramid scheme. carl icahn gave scott wapner a statement saying "i am certainly happy i made the profit. i this his purchase is a judicious one because i believe the company is meaningfully undervalued." we wanted to see how much damage was out there. >> two points i want to make. one is oddly enough if you look in august, he was up in terms of how much money has come into the fund. only by 1% and they're down materially so i don't want to suggest that somehow people are flocking to the fund but in terms of withdrawals not as bad as you would have thought. the best line in the whole letter, i have learned the key to long-term success in investing is balance confidence with mew hillty to recognize when the facts are no longer

consistent with one's original investment thesis trying to justify getting out of jcpenney. don't let psychological affect psychological investment -- >> is that humility? >> i don't know. the question to me is he suggesting here that, you know, that the circus that jcpenney game -- became, in terms of his own -- >> especially with jcpenney. front and center. >> it's too much. i mean he's -- whether he should just focus on the numbers so anyway i thought that was my little favorite squible in the letter. >> interesting to watch and i'm sure we'll continue to hear more. carl icahn is certainly open about talking about his investment in all of these things too. also let's talk about new evidence that more americans are embracing alternative currency.

authorities arrested a san francisco man accusing him of running aonline marketplace for illegal drugs and accepting bitcoins for pays. they shut down the silk road site and users lost any bitcoins they deposit sited. some are saying this is prove that bitcoin will be used for illegal operation much the bitcoin people in support of it say, look, this is proof that the government can shut things down and it's not untraceable. >> what was he selling? >> drugsment -- >> i don't know what kind. >> silk road is a website where there's -- it's where like walter white would intepdz his time, if you will. crystal meth, heroin, coke, all of that just as a side commentary oddly enough jamie dimon's daughter wrote a fantastic piece about silk road. necessary's become a journalist. >> i thought you were going to say she was on silk road.

>> she got -- she wrote the story about a month ago before the fbi came down on silk road but there's a real -- there's sort of two views on what happens to bitcopy as a result. some people say fantastic this is happening. because it means that you won't have that he nefarious players but others -- you saw what happened to the bitcoin value. without the drug money it's going nowhere. >> i thought it was -- more likely one of those -- all these online advertisements you get for -- i don't know, painkillers or even viagra, things like that. this was -- >> i don't. >> you don't? >> no. >> maybe they're using big data to figure out what people are looking for or something. how do those work where you can buy prescription drugs? >> that's like fake stuff, though. >> those are much more common. >> this one is like you could buy meth on this thing? you could buy --

>> this was illicit drugs. >> i only have read -- i only have read la laura's piece on t. not from other experience. >> all right. what's -- oh, we're not going to do the mark cuban. this was interesting. this is so old. mark cuban thing. >> momma.com. isn't it? >> yeah, i think we can talk about it a little later. >> we can momma.com back in 2004. >> wow, this is old, nine years ago, it's already been nine years. i remember when it happened. >> when we come back, investors and the economy left in the wind as lawmakers fail to reach a compromise so when will this really start to get serious for the markets? we'll talk about that right after this. and one hour from now, former treasury secretary hank paulson weighing in on the mess in washington. warren buffet will make a guest appearance at:00 a.m. a big lineup from chicago. "squawk box" is coming right back.

good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin in chicago -- back in chicago. this is like the third time i think in a month that andrew has been there. >> third time in three weeks. >> hoping some of the midwest rubs off on him. you know what i mean, cincinnati, will it play in peoria, fly over states. there's a reason people settled

out there. >> chicago is a beautiful place. beautiful city. >> in the headlines this morning, the government shutdown is into its third day with no end in sight. a meeting between congressional leaders and president obama at the white house yesterday failed to produce any progress. though some of the government economic numbers are on hold, today we will get claims we'll get the jobless claims at:30, got the adp yesterday which was not great economists looking for 314,000 new claims that would be up have the 304,000. there's more possible fallout from the shutdown of the government. national retail federation is forecasting a 3.9% increase but those could slip if the shutdown continues which would cause perhaps consumers to lose confidence in the u.s. economy. 3.9% would be pretty good, though and growing concerns over the budget battle in washington. weighed on stocks yesterday. they closed well off their lows

and then futures did okay after hours but then we had john's interview along with, you know, no progress on that, what, mcconnell called a cordial but unproductive meeting when he was on with larry kudlow last night, mitch mcconnell. ed keon from qualitative management and from bny mellon, good to see you both again. ed, talking to hank paulson on the investment backdrop. i tried to get him to say exactly -- pose people say in the past, government shutdowns, buying opportunities, eventually goes higher. does there come a point for you where the economic damage would make you change your outlook on stocks? >> well, if we were to have a default, that -- >> we keep conflating that. even the people that use the

debt ceiling are saying we're not going to default. you know there's ways to not default even if you did not raise the debt ceiling. >> the shutdown is a small drag on gdp. not a huge drag. but a small drag but if it does go on longer i think you have a question of confidence so i think if we could move, i think john's comments this morning i thought were pretty good. if we could move away from the obama care defunding argument and move more toward the budget economic issues then i think that's a sign of progress and if we can get this resolved in the next few weeks -- >> you think we're heading up to october 17. >> that's looks like the way we're going. >> what do you think? >> yeah, i think we'll probably do it right up until october 17th. the good news is that's before the real main part of the holiday spending season. before thanksgiving and before christmas shopping season. and so i think that some of the

weakness you may get in the economic numbers you'll recover back within the same quarter. >> do you think there's any one on either side that would allow an actual default? >> there may be some at the extreme, but among -- >> a default or just not raising the debt ceiling? >> not raising the debt ceiling in terms of default i think there's nobody -- >> does it stop people from using it politically so tay this is what would happen. >> if they don't raise the debt ceiling what are the options? >> there are all kinds -- >> for a number of days of shifting money around. i think november 1st is the real final day. i don't think they can pay the social security on november 1st unless they get the debt ceiling raised. they may be able to pay the october 25th social security. but i think the odds of a default are extremely low. keep in mind if the federal government were to go into default, the history books would

not talk about senator cruz. this would be president obama's event in the history books. it's not going to happen. we're not that dumb. we do have a little -- some banana republic aspects in the united states but we're not that far over the edge that we're going to default on treasury debt. that's not going to happen. >> so at this point, ed, what is the corporate environment right now in general? it's good, it's okay. depend dep dependent on the christmas season. >> expectations are down to about 3.5% growth. i think it will be more like 6. i think if you look at the earnings -- >> earnings per share. >> for the s&p 500. for the last several quarters since the end of 011 every quarter of the earnings per share of the s&p have been a little higher.

sequentially we're making progress. i think the key thing this quarter and over the next couple is sales growth will start to pick up. i think it will. from 1% to 2% to 3% to 4% this quarter and next year because not just in the united states but the global economy is starting to recover. if we can get over this nonsense in washington, i think you're starting to see some traction. the private economy grew by 3.3% in the second quarter. that was despite that huge tax increase that we started the year with and the reduction in government spending so i think we are actually starting to make progress if we can get past this whole debate we'll see stronger economic performance and stronger corporate performance. >> we were moving from a 2% world to a 3% world. 3% for the next five years i think. >> for the next three years. we're past the midpoint of a seven-year economic expansion. we had four years at 2% growth. up until now we'll three years 3% growth in the united states and get up to 4% but right at

the inflection point to a faster pace of growth and that's the most important issue. we for the next couple of days we will have tv anchors held hostage day after day, but the key question you have to ask is, will the u.s. and world economy be stronger in the next three years and i think it will. >> you haven't changed. still 3% at this point. >> 3% and an acceleration in u.s. economic growth because of a fading of the drags, federal, fiscal drag, tate and local and europe out of recession. >> dick, ed, thank you both. the government shutdown is only a few days old but one area of the economy that may feel the first pinch is real estate. we'll talk with the former head of the housing authority at what's at stake for the industry.

investigators say a fire -- and that was a tesla vehicle in seattle and it did begin in the electric car's battery pack. tesla says a large metallic object made a direct hit on one of the battery pack module s an the fire was lipped to a small section near the front of the car. >> what happened? it fell inside the -- >> i do not -- i don't know. no injuries, however the stock was injured. fell more than 6% yesterday as news of the fire spread. tesla shares have more than quintupled so far this year. >> a lot of questions still about what exactly happened. >> we remember the battery fires

from boeing. >> right. tesla was supposed to have a better battery and elon musk had a better -- >> many people were on saying heat. that's the issue -- heat or cold. like a thermos. >> in the meantime, what will the government shutdown mean for the housing and mortgage markets. david stevens the former head of the housing administration and also the ceo of the mortgage bankers association and he joins us now with more on this. david, thank you for joining us because we've had a lot of questions about what this shutdown means for people who are trying to process loans right now. i guess the biggest problem is the irs not being able to verify loan applicants in terms of what they've been telling people they paid on their taxes in the past. how big of a problem is that? >> well, you know, the way i describe this is that in the short run and i describe short run as the next few days it it won't have a huge impact because most of the transactions in the

pipelines of lenders across the country have this 4506 form from the irs completed. in context, we forecast 5.3 million new and existing home sales this year. that's 100,000 or so a week. 75% of those get home loans and virtually every one of them needs this 4506 form completed. this is not like 1996. we're in a world today where you have to quality control your files. you have to be error-free in how you originate the loans, an important step for lenders to protect themself against preresearch risk, making a mistake, violating a law when they originate a mortgage so as this extends, this is going to cause significant potential challenges to, you know, a tepid housing recovery that's looking for long sustainable pace here. >> so if this goes right up to october 17th, or even just past that, you're talking about two

to three weeks of a shutdown and what does that mean? how quickly can lenders catch back up once the irs is open? >> i've been speaking to lenders and what their policies will be and quite frankly it's varied. lenders respect quite certain because of the a borrower's incs 4506 has become an extraordinary dependency to make home sales happen. we're talking about 100,000 of these a week, it adds up over time. add to this, you know, 800,000 federal workers. they won't be getting paychecks. if they don't get paid, some of them literally live paycheck to paycheck, they may be applicants on home loans, they may not make auto payments. we have moving trucks. if you're a tenant and you're planning to buy your first home and you're one of these borrowers expected to close in the near term, you've already notified your landlord. you may have to move out, your landlord may have rerented the home. it's remarkable that when we look at something that's 20% of

the gross domestic product of this country, which is a housing industry, you know, the impacts will really mount up in a very short time frame. and lenders will take risks for a few days. but at some point, they'll have to say we have to put everything on hold. and all that will mean is once the doors open again and the irs can now provide those 4506s, they'll be catch-up but certainly causes this delay. and you know, when you're talking several hundred thousand transactions that all have broad, extended tentacles in the economy with all the other service providers involved in this process, it's going to have an impact. >> all right. david, thank you very much. obviously, not a pretty picture. but we appreciate your time this morning. and if this continues, we'll get back to you again. thank you. >> great, thanks. >> in the meantime, let's get back to andrew in chicago this morning. andrew? >> thank you, becky. i am in chicago. and coming up in the next hour, we'll have an hour long conversation with the former

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as we head into day three of the government shutdown, the futures are indicated weaker this morning. the dow futures down by about 60 points, s&p futures off by 8 1/2 points. when we come back, we are crisscrossing the nation this morning. we will head back to washington for more of john harwood's exclusive interview with president obama. and then it is off to chicago where former treasury secretary hank paulson and legendary investor warren buffett will be checking in. "squawk box" will be right back. it's as simple as this.

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special guest former treasury secretary hank paulson joins andrew live from chicago. on tap, the debt ceiling, politics and the state of the economy. john harwood's exclusive interview with president obama. >> am i exasperated? absolutely i'm exasperated, this is entirely unnecessary. >> all leads up to our special interview with billionaire warren buffett. "squawk box" is open for business and the second hour 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 chicago this morning. andrew has who big guests who will be joining him in a little bit. hank paulson and warren buffett. we'll talk to him about that in a moment. in the meantime, look at the futures which are under pressure this morning. dow futures down about 61 points

below fair value as we head into the third day of the government shutdown. in the headlines this morning, talking about whether wall street should be worried about the ongoing government shutdown. president obama thinks so. he spoke exclusively to our john harwood. >> i think this time's different. i think they should be concerned. when you have a situation in which a faction is willing potentially to default on u.s. government obligations, then we are in trouble. and if they're willing to do it now, they'll be doing it later. >> we'll have more from john harwood and his interview with the president. that's coming up in a little bit. the government shutdown could result in furloughs as many as 5,000 workers at united technologies. the first 2,000 furloughs may come as soon as monday at the company's aircraft unit, which makes the blackhawk helicopter. the rest of the furloughs would come shortly after at other units with the defense department contracts. and the national retail

federation is predicting a 3.9% increase in the holidays this year. but warning all bets are off if the government shutdown continues and consumers lose faith in the u.s. economy. it is day three of the government shutdown with no end in sight. >> what we're debating right now is keeping the government open for two months. we would then be going through this exact same thing in the middle of christmas shopping season which i don't think many businesses would be interested in. we saw what happened in 2011. and then we'd have to go through it again six months from now and six months after that. and one thing i know the american people are tired of and i have to assume the vast majority of businesses are tired of is this constant governing from crisis to crisis. so in that sense, do we need to break that fever? absolutely. we have to stop doing that. >> jared bernstein, former chief

economist to vice president biden. currently a senior fellow at the center on budget and policy priorities and tony fratto, currently a managing director. both are cnbc contributors. and i'm going to tread a little lightly. i used to think, you know, i could count on tony as a pirates fan and as a steeler fan. have uh you switched totally to the patriots? i don't know you anymore. >> you know a lot about me. >> go tom brady, where are we? >> you know a lot. yeah, i was in that crowd the other night. i was thinking about you, and i would love to watch it with you. i know you love that spirit. >> can i tell -- >> i thought about you. and you know what, seriously, i'm glad the pirates are gone. we lost four straight. you won a seven-game series in the last week. why should the reds -- and they thought, you know what, those

last two games don't matter. when you don't -- when you forget how to win, then you need to win the one game and it was horrible. >> you can never, never, never stop trying to win. you have to try to win. >> which is a good lead-in to why you should be backing your party on the latest move here. >> i want to back my party. i want them to not -- i want them to be smart in this. and i think they had a lay-up here where they had the white house right where they wanted them accepting a continuing resolution with really low spending and the sequester cuts. the white house should have been coming to the republicans saying, please help me out of this sequester problem. instead, we have us putting ourselves on a hook and begging the president to come to the table when he doesn't have to. >> i would come to you, jared, but i think you're going to say what he said anyway. you're going to say what he said. i think he makes a better case than you do for -- do you want to say something? >> no, i'm just enjoying the conversation. i feel like you two should go somewhere to get to know each other a little better. >> you know what, i was going to

say this -- tony's going to get mad. is there a pickup basketball game with doud and frum and stockman. do you play a pick-up game together? >> that's low. >> that's bad. >> no, look -- >> i wanted to see a smart strategy. i want us to win. >> i know. here's the thing and this is the last thing i'm going to ask and quit ribbing you, tony. but there's that saying that desperate, you know, actions are required. desperate measures and desperate times are needed. you say this has never been done with the debt ceiling. it's always been, i guess, things have been attached to the budget. but not the debt ceiling. we've never seen something like the affordable care act. we've never seen that thrust upon the american people in history. and maybe that's why republicans think that any hardball tactics are okay at this point. is there any truth to that?

>> look. the way the affordable care act was done, it was -- >> that poisoned the well. that explains this whole situation. the whole scenario. what's happened in the last four years in this poisonous political environment results from the way that was done. >> there's no question that poisoned the well. but we also -- we also know that the chances of actually rolling it back of defunding it are something close to zero, right. i'm not -- i don't see how they're anything but, you know, zero. so to lead into this fight this way, to follow ted cruz down this path that could only lead to failure and to putting the republicans on a hook, a political hook that they can't get themselves off of, i just don't see the point of that when they had a winning hand. >> so i would argue the following. we have at times -- you have a point, joe, it hasn't happened a lot. but at times in our history, we

have implemented large social insurance programs. social security, medicare, medicaid for the poor. and those programs were all controversial when they were introduced. and by the way -- >> there was some bipartisan support for -- >> ronald reagan called medicare a huge socialist plot. so don't be too excited about the bipartisanship. but i agree with where tony was coming from. if you don't like the affordable care act -- and the president himself has said that, then you have every right to sit down with them and renegotiate a better plan. come to them with things you'd like to fix. to come to them with repeal is absolutely not going to happen. it's completely unacceptable. and it's why we're stuck in the jam we're in. so there's a difference between mend it and end it. >> all right. at this point, jared, to fix this, let's just forget all our differences. to fix this, do -- the president says i'm willing to talk about all these other things like tax

reform or territorial, you know, fixing that system -- >> yep. >> cola, entitlements, but not until after the 17th. we've got to get through it. that means -- and people have -- i think the president's on the record saying what are you going to give the republicans? and he's on the record saying i'm going to give them nothing! >> that's very different. that's actually not the case. and certainly not talking about waiting until after -- he's saying he will start negotiating. >> after this is done. >> in 20 minutes from now, if john boehner would simply allow these votes to come to the floor. on a clean budget patch and clean debt ceiling increase. at that point, harry reid said we'll start naming right away. >> and john boehner will lose his speakership if he does that. >> i think that's -- i think that's an absolutely fair conclusion and that's the risk he takes. >> even in that negotiation, what is the win/win? what are the things republicans

might be able to accept? the white house might be willing to accept. and that diagram doesn't overlap. there aren't things that they both can agree on right now. and this is the way we're going to be left with budgeting on things like, you know, the expiration of continuing resolutions. that's it. >> so i agree with tony. i think there's a way in which republicans have not done their homework on this. all they know is they don't like obama care. they actually know little about obama care. what they need to do is get under the hood and actually figure out how they can help this program work better. by the way, as we move forward, there do seem to be aspects of the program that are working pretty well. i'm not talking about the exchanges, talking about the parts that are supposed to improve the delivery system and cut the growth of health care costs. that's actually shown some success so far. >> well, we'll see. i guess, you figure at this point you can't give me the step by step of -- we're not going to default, obviously. you can't give me the step by step way that everybody saves

face here? >> yeah, no, look -- i think we're going to take this for a week or two and get close to that october 17th date if not even right up to it. but i actually don't see an escape hatch out of this for congress except to try to roll these two things together. and maybe get some agreement on process going forward. but i don't really see where the white house has to give in here. and they certainly can't -- you know, look, the white house can't give on -- whether we like the affordable care act or not, it's obama care, right, it has his name on it. for democrats, it's the biggest policy accomplishment in four decades. he's not going to give that up for a 90-day continuing resolution. that's not going to happen. he can't do it. >> now we're just talking about anything. we're talking about, you know, the medical device tax or making congress, you know, making congress get obama care themselves. that might be fun. >> the best thing they can do is a process going forward after

they pass those bills. >> after that's done. so it's going to have to happen. that's going to be -- there's going to be a lot of -- >> i think that is the sequencing. >> really? >> yeah. i think what happens is before we default because i'm with you guys. default's unimaginable. so before we default, i think john boehner says to his extremist wing, you've done your thing, you've had your time and, you know, now we really have to come in and start -- and, you know, the grown-ups have to come back on the same. >> let me say, i do not rule out. i do not rule out a technical default on some obligations. not on treasury securities. i don't rule that out. i think we can go past that date and where the government is for a day or two not meeting certain obligations. which would really be bad. but it might be the only thing that builds some sanity around the debt ceiling act. and if we're really, really lucky that we can get rid of the debt ceiling -- >> in 2014, jared, more

republicans in the house or less and same with the senate. >> the longer this goes on, the fewer the republicans. baa uz this really is -- if you look at the poll numbers. >> i figured you'd say that. >> i think republicans will pick up seats in the senate. they're very comfortable in the house right now. >> i know all polls are, you know, take them all with a grain of salt. but the one with how many people wanted a clean cr instead of or debt increase instead of tied to some measure. there was like 62% of the country did not want a clean cr. they want us to try to do something, right? >> that's true. they want that -- they want to see agreement in washington. i don't like to see polling on the debt ceiling because people don't understand the debt ceiling. but they want to have some agreement here. if we went through this, we're going to be talking about something else in two months. it's not like there's a shortage of things for us to disagree on.

>> and we're going to have harry reid and the president and all the same players and ted cruz and john boehner. i don't know what to say. >> if you want to think about the future composition of the congress, you do have to look around the next corner. if we're having the same argument, you me and tony sitting around having the same argument two months from now, it's not going to bode well for anyone. >> me between you and tony, arguably? yeah. i know what you mean. >> me and tony against you. >> yeah, exactly. >> as long as we have -- as long as house and senate are divided, this is exactly the argument we're going to have. >> i haven't seen you say anything about the steelers in a while. >> it's kind of ugly. i was trying to -- i'm trying to -- i'm glad that baseball season is overlapping with hockey season and that way i can just forget about the nfl. >> okay. all right. we'll see you later. >> thanks. >> is it @jaredbernstein. >> jaredbernsteinblog.com.

econ jared is the twitter. >> then i put a number sign, great minds think alike. >> oh, hashtag. >> yeah. all right. see you guys later. let's get to -- speaking of great minds, let's get to andrew in chicago with paulson, buffett, and he's no slouch. >> we've got some great minds. pretty good minds. we should tell you in about 15 minutes, hank paulson's going to join us on a day when we're trying to figure out how to fix this government shutdown and potential debt ceiling. a man that knows about crisis and bringing two people or two sides, rather, together, we're going to talk about that. we're also going to talk about jamie dimon and jpmorgan. he was in the middle of the crisis when that company bought bear stearns and washington mutual now at the center of that $11 billion settlement proposal. and also going to talk about t.a.r.p. five years ago today, t.a.r.p.

was approved. and we spoke to former wells fargo ceo dick kovasivich who had this to say. >> the proposition hank put before us was if we took this money, the confidence in the industry would go up. and i was arguing that day until i was told to be quiet as the opposite would happen. >> we're, of course, going to ask hank paulson about his remarks and what he thinks of that. and we'll have warren buffett. another great mind is going to talk to us about what's going on. plus the financial crisis five years later. and then we should say up next john harwood will have lot more on his exclusive interview with president obama. "squawk box" coming back right after this.

all right. let's look at futures right now and what to expect as we continue. and what is this? day something of the shutdown. >> day three. >> down 63 points. we close well off our lows yesterday. but we're going to test those lows again today. they were still about 15,000 on the dow. and in news, investigators say a

fire that destroyed a tesla vehicle in seattle began in the electric car's battery pack. tesla says a large metallic object made a direct hit on the modules. >> a quarter bouncing around in there? i don't get it. >> the fire was limited to a small section near the front of the car and there were no injuries. but it's a beautiful car and it's not anymore. shares of tesla fell more than 6% after an internet video that you were just looking at showed the flames spewing from the vehicle, which tesla has touted as the safest car in america and i think they got some backing from like consumer reports and others that it's a great car. >> somebody pointed out that combustion engines catch on fire sometimes too. >> as we know. also, president obama sitting down with chief washington correspondent john harwood in an exclusive interview yesterday and saying that this time the debt ceiling debate is different.

john harwood joins us right now with more. and john, in that interview, the president said very explicitly that he thinks wall street and investors should be more worried and not as complacent as they've been. we've talked about a couple of strategists this morning and also with jared bernstein and tony fratto. none of them think we are facing a serious potential to default on the debt. said maybe some technical defaults, but no one thinks we're going to stop paying our bills. and i'm just wondering, the president was trying to convince people that this is for real and we should be more worried about that. is that message falling on deaf ears? >> so far. that's what he's trying to push back against, which is the idea, i believe it too, it'll get worked out in the end. but what the president believes is that by persuading people in the business community and on wall street that there's a real threat to everybody's bottom line to the united states economy, that they will get more engaged and more active in

pushing on congress to do this, especially the members of the republican leadership who depend on a lot of their campaign donations. and for that reason, even though many republicans, becky, are insulated in, you know, 2-1 republican districts where there's no serious threat from disagreeing with president obama, the president thinks that wall street executives still can have some influence on the republican party overall. here's what the president had to say. >> wall street can have an influence. ceos can have an influence. i think it is important for them to recognize that this is going to have a profound impact on our economy and their bottom lines, their employees and their shareholders unless we start seeing a different attitude. on the part of that faction in congress.

>> so you know we'll see whether wall street gets and the business community gets more active and engaged. many members of that community felt burned by what happened in the fiscal cliff negotiations at the end of 2012 because they got out there, they started pushing a grand bargain, they wanted the two sides to come together. and ultimately, you know, we got -- we got a kind of limited bargain and not the thing at all that settled it and provided that certainty about long-term fiscal trajectory. and so a lot of people kind of stepped away and the president's trying to bring him back. >> several people pointed to what you said at the top of the 6:00 hour, john, when you talked about how potentially the conversation changing, getting back to the idea of a grand bargain, away from obama care. the president said he will not negotiate. but if the republicans stop pushing obama care as part of this, does that become a negotiable point? >> yeah, i think it's important to separate what he will

negotiate and what he won't. what he won't is the destruction of obama care. he won't negotiate over the debt limit. and basically he's decided these two things having merged in time in october, he's not going to negotiate under the point of a gun with a government shutdown. but if the government has reopened and the debt limit is raised, i do believe he will negotiate over the budget. the real question, honestly, becky, is whether the republicans want to have a budget negotiation. deficits come down, they drop the budget, they drop the idea of budget negotiations earlier in the year. they have not been pressing the entitlement reforms that they're for in theory. and, you know, obama care's become their default. if that goes away, then you could have a conversation if republicans want it. >> all right. john, thank you, and we will talk to you again in the next hour. >> you bet. >> okay. thanks. when we come back, hank paulson knows what it's like to deal with congress in difficult

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how did the word buck come to mean a dollar? the answer, a buck referred to a deer skin or buckskin which was commonly used as money. if you have comments or questions about anything you see here on "squawk box," e-mail us @squawk cnbc.com. the futures at this hour indicated down 67, check out the ten-year note. that yields probably aren't -- well, they aren't moving much. but we are back to about 2.65. we'll be right back. when we return, we head back to chicago.

andrew is joined by former treasury secretary hank paulson for a special interview from fiscal cliff to five years after the financial crisis, his thoughts on where the economy is headed and what washington needs to do to right the ship. it all leads up to our special interview with warren buffett at the top of the hour. "squawk box" on cnbc. profit from it. in a world that's changing faster than ever,

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welcome back to "squawk box," everyone. in our headlines this morning, two economic reports are out this morning. the government shutdown notwithstanding. the labor department will issue the weekly jobless claims numbers. that's coming up at 8:30 a.m. eastern time. and the institute for supply management which is a private institution not affected by the government shutdown. it's going to be out with its september nonmanufacturing index. out at 10:00 eastern time. also, mark cuban is expected to testify today in the government's civil insider trading case against him.

the government claims the dallas mavericks owner sold shares after learning confidentially that the company would issue new stock. also, we'll be watching shares of angie's list in today's trading. that's being done in a bid to try to attract new members. the paper says the cuts are taking place in new york, washington, chicago, san francisco, indianapolis and a handful of other markets. we've been waiting for this. let's head back to chicago now. we're going to find andrew this morning. we will be speaking with warren buffett in just about 30 minutes. first, though, a special guest will join andrew this morning. andrew? >> thank you, joe. we are here at the university of chicago with the former treasury secretary hank paulson. this is your home court, your office is just upstairs. but we couldn't be happier to talk to you today given that we

have this government shutdown, given we have the debt ceiling upon us. and i consider you mr. crisis but also mr. negotiator. someone who has been able to bridge the divide when things were tough. yesterday, president obama said this time is different. is it really different? >> well, it's very different than what i confronted. because this is self-inflicted. you know, we -- i -- i look back because this is five years from the day where congress passed the t.a.r.p. and there we saw democrats, republicans come together. i had an opportunity to work with a lot of the same leaders up there. worked together to get something very difficult and very unpopular done. now, today it's -- i'm not saying it's not very serious. it is self-inflicted. the most basic function of congress is to pass a budget. and if you can't pass a budget to pass a continuing resolution. and so with our economy, you

know -- so fragile right now d and, you know, we've got this -- it's very important to get something done. >> do we need it to get worse? do we need the markets to react even more than they have? you know, some of the speculation around the president's interview yesterday on cnbc was to make it clear to the business community that this was different, this was a problem in part because i think there's a sense that maybe everyone's a little too sanguine. >> well, it was one of the lessons that i came away with. it takes a crisis to get something difficult, very, very difficult and unpopular done. now, i don't accept the fact that to get done the things that we've got to get done here it should take a crisis. and i sure hope it doesn't. because what we're seeing right now is we're seeing certain segments tap into a very

disaffected angry segment of the population. who are angry and disaffected for some very, very legitimate reasons. but what they're doing is shamelessly telling these people exactly what they want to hear, which is tilting at windmills and focusing on the wrong solutions. and -- >> and you're talking about the republicans and ted cruz in this case? >> well, i'm not saying -- what i'm saying, republican party -- >> you're part of the party? >> what i say to people, listen, there is one element that does not reflect the views of the republican party. what they are doing is they have hijacked the debate. and they are, you know, they are dealing with trying to reflect the views of some very disaffected people. but frankly, the irony here, the huge irony is those people are disaffected because number one they're angry with their government. but number two. they're angry that the economy

isn't doing better and concerned about the economy. and the only way to fix the economy is to get democrats and republicans working together to dealing with some of these significant problems. >> in the 6:00 hour, becky had mentioned jack lew the current treasury secretary, a commentary piece today's politico, as well, about his role, what is the role of the treasury secretary in this situation? should he be doing a better job? >> first of all, i have a high regard for jack lew. second of all, the only power a treasury secretary has is what the president gives him. i had a boss during a crisis who always said to me, let's not worry about the politics, let's not look at the polls. what we've got to do is compromise, do what's necessary to protect our economy, save our economy. so this is -- jack lew has got a difficult job but, again, the issue -- i step back some time

and say what's -- what's going on here. is it a lack of leadership? and since i know the leaders on both sides up at the hill and i know they're good, reasonable people and i start saying what's going on with the system. and why are people as disaffected and polarized as they are? and i just see structural changes. >> structural meaning what? >> well, for instance, how do people get their information. how do they get their news? i remember a day when we were basically all working off the same facts, got it from the same sources. now, of course, competition in one sense is good. but we've got the internet with the different bloggers, cable tv, all these different channels. and so people self-select. people on the right talk to each other, they deal with their sets of facts. people on the left, go to the same news sources, deal with

their sets of facts. then we have this redistricting, you know, which as far as i'm concerned is, you know, legal corruption. corrupting the political system, driving people on the right to the far right, people on the left to the far left, making it more difficult to compromise. if our founding fathers had really seen the way the 24-hour news cycle and cable tv and et cetera, et cetera and seeing the redistricting, i think they, you know, they would have been shaking their heads. >> given the set of facts and the structures we're living with today. we can all argue they should be changed at some level, i think cable news is doing an okay job. >> i do too. i do too. at least the channels i listen to. >> if you were sent back to washington, what would you do? >> well, i would -- what i learned was the key to getting things done is during difficult times is building trust. you have to find some ways to

work together, and you've got to be willing to compromise and you've got to be talking continuously. >> but right now, there is no trust. >> right now -- >> the question is, how do we get that trust not just in a period of months but literally a period of days? >> quickly. it's going to take really strong leadership. it's going to take strong leadership from the president, the president's got to engage. really have to engage. taking strong leadership from both parties in congress. >> engaging, though, for the president, does that mean he has to give something? because thus far he has not appeared willing to give either. >> well, i think as a general proposition, it takes a compromise. and we've got two separate issues at interplay here. the first is the budget. okay. and there people are concerned about the deficit when you're dealing with a budget. i don't like to see those issues

solved in this kind of way with this kind of brinksmanship, but there's plenty of room to deal with the budget and the responsible way so you don't injure or fledgling growth and so on. and then you've got -- but this is starting to play into the debt ceiling and -- >> any chance this becomes such a mess that in an odd way we get back to having a grand bargain on larger issues? >> listen, i'm not going to project where it's going to go because, you know, as a former treasury secretary, when i look at the debt ceiling, okay, i hate the whole concept of a debt ceiling. to me it is a flaw in our system. because congress has already approved the spending. and then say you have to come back and agree to allow us to meet the full faith and -- to meet our obligations, that's ridiculous. but with the debt ceiling what i've always believed and what i've always said and i continue

to believe is there's going to be all kinds of brinksmanship, you know, people will play games. but at the end of the day, the debt ceiling has got to be increased. it will be increased. and so i see that as -- >> if there are rational players at hand. >> we have a lot more to talk about including t.a.r.p. as you said, this is the anniversary of the approval of that program. also want to talk to you about jpmorgan and other issues and then we'll get to warren buffett. in the meantime, back to becky in the studio. >> okay. thank you, we will continue this conversation right after the break. at the top of the hour, it's billionaire warren buffett weighing in, as well. five years after the financial crisis, we'll find out what has changed and what still needs to be done as we face yet another looming debt deadline. "squawk box" with hank paulson will be back after a quick break. i know what you're thinking... transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right.

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ackman covered about 30% of the acquisition of the company. part of the latest investor letter which said it was up .2% in september net of fees and up about .5% year-to-date. net of fees too. >> covering your shorts is so much more painful. it's both painful. but having been in that position. when you sell something down a lot, it hurts, but when it's going up, it's getting bigger and bigger. and the amount you have to pay. and something about getting -- it's called shorts and you're getting squeezed in your shorts and you feel like your shorts are getting squeezed. it's not picking your bottom, it's your shorts getting squeezed. let's get back to our special guest hank paulson, former treasury secretary. he's also former chairman and ceo of goldman sachs. hank, thanks for coming on the show again. it's great for us.

and, well, good for you. it's mutual thing. let's say that you had -- you find a magic lamp and you rub it and you only get one wish. let's say that what would you tell your republicans to ask for the ultimate thing that we should -- that they should try to do here if there were going to be a negotiation. would it be a lower corporate tax rate? would it be a simpler tax? would it be a territorial fix on the way our tax system is around the world? or would it be something with entitlements or cost of living, something that might help there? what would be the most important thing to help this economy? >> joe, first of all, good to be here. and that's a great question. because all of the things you listed there are fundamental reforms that take bipartisan cooperation. and none of those can really be done as part of something like

this. those take time, they take compromise. but those are what are not being done. and so i tend to be -- i think the two huge challenges we have are growth and we need pro growth policies and then responsible policies for dealing with the deficit. the two go together. and so the thing i would really like to see is real tax reform. tax reform both -- both the individual and corporate tax reform. but we need entitlements reform also. health reform, health care, social security, immigration reform. because what this economy needs to restore competitiveness and get growth to a more acceptable level so we can deal with some of these problems more easily like the deficit are going to be

some of these reforms. i think we need to get this problem behind us, build some trust and start to work on things that will make a difference. baurz t because the kinds of things we're talking about now are things that need to get done. we need a budget, we need the debt ceiling to be raised. let's get those done and worry about the -- and get done some fundamental things. >> mr. secretary -- >> i want to talk to you -- go ahead, becky. >> one quick question for you, mr. secretary. yesterday, the president was on our air speaking with john harwood. he said informevestors should n so complacent this time around with the standoff in washington. this time is different. would you agree with that? maybe he's looking for something more like what happened after t.a.r.p. when it got voted down the first time. >> well, this is not that

situation, but the last thing this economy needs is uncertainty. and like it or not, the government's the biggest hire. even those layoffs and the effects hurt and on top of it all, this just is putting a big target on our forehead because it's saying we're the gang that can't shoot straight. we can't work together in government. so it just leads to a lack of confidence. so what i think we need is to restore confidence. and the only way to restore confidence is to have people working together like adults and that is everyone. that's members of both parties and both houses and the president. >> hank, i wanted to change topics. it seems that the government shutdown and debt ceiling is the only topic. but one is the t.a.r.p. anniversary, approved today five years ago. one of the things that happened during the financial crisis that's become news now is

jpmorgan. jpmorgan and jamie dimon purchased bear stearns and washington mutual with the government's help. some say with a little bit of pressure from you. and now they're in the midst of this $11 billion settlement over mortgage related problems. much of which came from those companies they acquired. should they be responsible for those bad mortgages? >> andrew, i'm going to comment on this. probably shouldn't, but i will. first of all, i'm not going to comment on the merits of any legal case, legal settlement. i've got to trust our legal system. i'm not privy to any of those details, but i'm going to talk about jamie dimon and jpmorgan during the financial crisis. because when jamie stepped up and agreed to buy bear stearns and tim geithner and i were pleading with him to do that,

bear stearns would've gone down if jpmorgan hadn't acquired it. and my belief is then if that would've happened, it would have been a real disaster because it would have started a chain of events. it would have triggered the lehman failure. we would've had all these banks going down before fannie or freddie were stabilized. i can't imagine how bad it was. so it's hard for me to be totally objective when i look at what jamie dimon and jpmorgan did because it's one thing to make an acquisition like that, it's another thing to make a decision over a weekend. thursday night, we were told they're going to fail friday morning if we didn't act. and they acted by the end of the weekend. and wamu, again, the biggest s & l in the united states of america. you know, a private equity firm had come in early on. that didn't work. we needed someone with a balance

sheet. i'm not saying these things weren't in jpmorgan's interest. i assume they were. but to make them under those circumstances, it took someone with a great deal of courage and confidence and the support of his board to do that. >> barney frank has made similar comments. and yet there was a piece the other day, we talked about it off the air. regarding this idea that actually the government helped but this is what they wanted. this was beneficial to jpmorgan and they were never indemnify -- the government couldn't offer them an indemnification. >> and jamie knew that at the time. all i've got to say is this, who knows what all of their motives were, how much they wanted to do it, how much they didn't want to do it. no one wants to make an acquisition under those circumstances that quickly. all i can talk to is what would've happened if they hadn't done it. >> right. >> and it's hard to prove a

counterfactual. >> let me ask you one other piece of this. if there was a need for a bailout today, do you think any bank on the other side of the phone call would've taken it? >> well, i'd say, one of the lessons i've learned and things i'm sorriest about i was never able to convince the american people we did these things for them not for wall street and never understood how bad it would have been. the disaster we avoided. so these things are terribly unpopular. when we did them, we knew they were unpopular, but today it's going to be more difficult for anybody sitting in my seat and anybody sitting where jamie dimon was sitting to take the steps he took. >> we're going to slip in another break and come back with warren buffett in a little bit. back to becky. >> andrew, thank you, as he just mentioned, hank paulson will be sticking around for the next

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when we come back, the president reiterating his stance in an exclusive interview with john harwood. we'll have more on what he said and what it means for negotiations in washington as we approach the deadline. plus, warren buffett joins hank paulson live from chicago.

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welcome back to a special edition of "squawk box." andrew is live in chicago with

former treasury secretary hank paulson. we're talking finance reform, the future of banking and the health of the economy five years after the financial crisis began. our special guest this hour. the oracle of omaha, warren buffett. the third hour of "squawk box" starts right now. >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernan along with becky quick. in our headlines, the government shutdown is in the third day. a meeting with congressional leaders produced no progress. the president told john harwood yesterday that if wall street investors are worried about the ongoing battle, they should be. we'll have more from john coming

up with the exclusive interview with the president at the bottom of the hour. in other news, more trouble for intel's efforts to get chips into new smartphones. well of the few well known phone customers is dropping intel from the new vibez smartphone. it's going to be using a chip from qualcomm on that phone. the only other prominent maker to use intel's chips is motorola. we are less than half an hour away from the latest jobless claims numbers. they'll be out at 8:30 a.m. eastern time. those numbers are expected to be up slightly from last week's reading. let's get a check on the markets. again, the u.s. equity futures have been under pressure this morning. the dow futures down by about 50 points below fair value, s&p off by about seven points. overseas in asia. you can see that the nikkei was down slightly. the hang seng up by 1%. and in europe, in the early trading there this morning at this hour, you see green arrows for the ftse. let's get back to andrew in chicago who has another special

guest sitting down. >> hey, thank you, becky, we have two very special guests on a very historic day. this is the anniversary of the day five years ago that t.a.r.p. was approved. and we're joined now be warren buffett, oracle of omaha. i asked him before, are you ever sick of that? he said a little bit and hank said, how could you be sick of it? and hank paulson's sticking around, of course, former treasury secretary and former ceo goldman sachs, now head of the paulson institute. i want to go to warren on this. just five minutes ago in the last hour with hank, you expressed some, i don't want to put words in your mouth, not regret, but a suggestion he felt bad he was never really able to persuade the american public of the success of t.a.r.p. do you think historians, you know, 5, 10, 20, 30, 50 years from now will be an appreciation for t.a.r.p. in a different way there is today? >> yeah.

at the time in september and early october of 2008, hank was in a very tough position because if he told how bad things were, it would have made it worse. and people didn't really appreciate the need for the government to move in big time, immediate, decisive. and so the communications -- i'm not sure could have been done. and first impressions last so long. the american public thought of it simply as a bailout for banks. and that was not the case. but once that got implanted, it will take a long time to change. on the other hand, historians will get it right. >> i don't know if viewers or the public know it as well as they should, hank, you had a huge role, actually in the creation of ultimately what turned out to be t.a.r.p. tell the story. >> well, you know, t.a.r.p. was approved on october 3rd, the authorities. but we then because the

situation had worsened needed to figure out how to put capital into the banks. and i didn't want to wait and deal with them as they failed. and i was working figuring out how to come up with ideas here. and one of the people i'd reached out to was warren. and i write the story in my book. and it's just been re-released. >> in the prologue. >> i write the story that on the saturday of columbus day weekend -- i think it was like the 11th of october. i got home exhausted, we'd been working all day. and wendy said warren buffett called. and i always return warren buffett's call but i put my head down on the pillow for a second, i fell asleep. the phone rang, i answered it and he said, hank, this is warren. and i was dreaming and all i could think of is my mother has a handyman named warren.

why is he calling? and i found out obviously it was warren buffett. and warren made the suggestion of an idea of why not come in with a very attractive rate on the dividend on a preferred and then have it ratchet up over time. so there's an incentive to pay it back. and that was the seeds of the idea we ultimately went with where we put capital into hundreds of banks and recapitalized the system. >> warren, i want to ask you a question that relates to t.a.r.p. in this way. >> both of you think it was a success. and frankly, i have to admit i agree. i got into a discussion. we all in "squawk" got into a discussion with the ceo of wells fargo. you're a major shareholder. >> yeah, he's a friend of mine. >> i want to play the tape. >> i know what he said, but go ahead. >> i think it was one of the worst economic decisions in the

history of the united states. the proposition that hank put before us was that if we took this money, the confidence in the industry would go up. and i was arguing that day until i was told to be quiet is the opposite would happen. >> so -- >> yeah. >> what do you say to that? this is a man you invested in. >> the whole banking system rests on confidence and most of the time it's there. like oxygen when it's there. and when it disappears, it's the only thing you notice. and in the sense there are two kinds of truths. truth one is something that's true whether people believe it or not. the world is round even if everybody else thinks it's flat. truth two is where belief creates its own reality. and if people think the banking system is unsound, it is unsound. i mean because no banks can pay out all their liabilities at one time. so it's essential that people believe in the -- in the soundness of the banking system for it to be sound.

>> what do both of you say about this after t.a.r.p. was implemented or the initial money started to go out. the stock market continued to go down. this goes to his argument where he suggests it didn't instill confidence, it undermined. >> i think, first of all, i would say that i have heard -- i talked with many ceos, many people in the industry. this is the only person i've heard express that view. and i think when capital was put in what you will see if you look at it, confidence was increased. credit spreads came in, the markets did better. it made a huge difference. it was a turning point. and i think that what you will see we had to do some other things later. but why do you think the stress test worked in the united states and they didn't work ultimately in europe? our banks were well capitalized and perceived to be capitalized. >> right. i heard that you just watched

his new movie "hank" on netflix. >> yeah, he's got a second career coming. >> i actually thought it was the most unique thing i heard you say about the idea of too big to fail and banks being too large. was that to get through the night the institutions were merged and created a lot more concentration than we ever had when you started in the business? when you think about these institutions now and people talk about them being too big to fail. given this was done to protect us in an immediate basis from a policy perspective, does it make sense for these institutions to be this big? >> well, if you look at canada, look at france, germany, the big banks are a much bigger percentage of the gdp than they are here. so it -- it's true that wells and wachovia got put together, wamu and jpmorgan. but the concentration -- i do not think -- i don't think it's

inappropriate at all. >> i'm going to put it a different way, though. people talk about too big to fail. what do you think about too big to manage? we were talking about jamie dimon in the last hour. jpmorgan's a really big institution and lots of things can happen. you, by the way, manage a very large company. >> a big company and a small company. no question about that. and when you get into a financial company, it's tougher to manage a bigger financial company than a smaller one. and that means, you know, you're going to get surprises, more surprises because more things are happening. big ones can handle the surprises too just like jpmorgan can handle -- that is not a big problem. it would be to a much smaller institution. but things will go wrong at big institutions. and they'll go wrong at small institutions. what you have to worry about is when something overwhelming goes wrong like what happened to freddie and fannie. and those were too big to be

managed the way they were managed. >> the way they were structured. there was a flaw in the structure. >> so just going back -- go ahead. >> i just build on that because i want to say there's -- i'm not making light of too big to fail and i'm not going to repeat all the things i've said. but the point i make in the prologue is we've got bigger issues to deal with. >> right. >> when we clean up the mess, all the focus on that. i'm much more focused on let's get the work done and in the shadow banking markets. let's finish what we're doing with the money markets, the repo market and most importantly, let's fix fannie and freddie. >> right. >> they were a vortex, ground zero of the crisis. and, you know, stabilizing them, i think, even more essential than the bank capital program in t.a.r.p. was stabilizing them. that would have been all she wrote if we'd done that. that was key to get through the night. we needed to fix it --

>> okay. but if you had to prioritize, we had a government shutdown on our hands, the debt ceiling, entitlements, dealing with taxes, all sorts of issues. where does fannie and freddie fit in all of that? >> well, they're different issues. we've got -- to me the government shutdown and the debt ceiling, that's this -- that's got to be done. that's not long-term, it's not strategic, it just is necessary incredibly important housekeeping. and if you can't get that done, shows the government can't work. we have got to get that done and, of course, some of these other things. >> the full faith and credit of the united states, it didn't sate the full faith and credit of the united states unless one political party is unhappy about some extraneous issue. >> and how much are you worried about that? we asked hank in the last hour, is this time different? >> we will go right up to the point of, you know, extreme idiocy but we won't cross it.

>> that's what i say. and i say that all the time to people. i say these guys may threaten to take their mother hostage, but they'll never hurt their mother. >> yeah. >> if it goes one second beyond the debt limit, you know, that will not do us in. if it goes a year beyond, that would be unbelievable. >> hank suggested there are real structural issues, though, that led to this. it's not just the polarization of the country because we're all so different now, but there's redistricting issues, there's the media, there's all sorts of other elements that have made us more -- do you buy that? >> well, to some extent. but certain people -- many people in congress, they understood this before but now they really understand it. they feel they can't get their way on some other issue, they will use the threat of in effect defaulting on the government's credit. >> right.

>> to get their way. that won't work long-term. and they're going to find out it won't work long-term. and the public will turn on them and they'll all of a sudden have a counterrevelation. >> talk about trust between government and business. we talked about the jpmorgan situation. today if there was a bailout or a need for a bailout. i don't know if there'd be the political will to have one. do you think if you were on the other end of that phone call and this goes to sort of the jamie dimon issue whether actually a financial institution or business would accept a deal recognizing all of the things that have happened in the last five years publicly and in court? >> they would if the conditions were extreme enough. and for one thing, there'd be a lot of pressure put on them to start with. but if -- the united states works in the end and -- and you need somebody at a time of extreme crisis. and we won't have another one like we had for a long time. we'll have one eventually, come from a different source, probably. but you need somebody who has

the -- has the will and the ability to say we'll do whatever it takes. and that's what essentially hank and ben bernanke and tim geithner did and they had the ability to do it. and if that time came, the job would get done as long as you had strong, decisive clear thinking people in positions of power that had the and the will to do whatever -- >> do you have a view, by the way on the jamie dimon jpmorgan settlement? does that seem fair to you given the numbers? >> i don't know. >> you're a personal shareholder. >> yeah. they've got -- you know, the regulators have a huge, huge club. i mean, no financial institution, you know, can take any kind of criminal indictment or thing of the sort. you're dealing from a point of weakness if the regulator says i want "x," you probably write a

check for "x." >> coming back to t.a.r.p. for a moment, if you could have called him again. five years later, everything's hindsight with 20/20 vision, is there anything you would have said to him differently? >> i don't think so. >> i've asked him this question. >> you've got this fog of war thing going on where information is falling and some of it falls. you're getting bombarded by it and all kinds of problems popping up and you think you've got lehman solved and aig pops up. every decision you can say i might have done it a little differently. the important thing was that they had the ability and the will to act -- to stem, you know, the government saying, you know, it's not going to go beyond this point. and the money market funds, that was crucial. you talk about too big to fail, money market funds had $3.5 trillion. that's far greater than -- that's three times plus the

deposits of jpmorgan now or wells fargo or any of them or b of a. and they were totally correlated with a risk and you had 30 million americans who went to sleep a few weeks earlier and they act decisively to and they push their authorities probably too some in terms of guarantee. >> congress when they passed the t.a.r.p. put a provision in saying never do that again. >> but they will do that again if they need to. they're doing it again with freddie and fannie. too big to fail now and now conditions have changed so they're getting on their feet anyway. but they're too big to fail. the government went in there and had ha $2.25 billion line of credit with the federal government. they were not -- those obligations were not guaranteed but they had to act and would have to act now with fannie and freddie. >> real quick, hank used to call you during this -- during the crisis five years ago. >> not very often. >> not very often. >> are you getting any calls from washington now?

>> not very often. >> not very often. >> during the past couple of weeks? >> no, none. >> nobody's called you. i was going to tell you, we have one more minute. walter white, you were a big breaking bad fan, joe has not seen the end yet. >> joe has not seen the end? >> how are you rating it? >> a plus. a plus. vince gilligan is a genius. best written and best acted thing i've ever seen. >> when did you -- i know you're on twitter, but did you do this yourself? >> the answer is no. >> did you photo shop that picture yourself? >> well, you can judge for yourself when you look at the picture. that's my hat, though. >> okay. warren, thank you for being here. we're going to see you in a couple of weeks. and you're a movie star, you're a movie star on netflix. hank's going to stick around, but in the meantime, i'm going to send it back to becky. >> thank you very much. when we come back, it may be

the last piece of economic data we get from the markets if this government shutdown keeps going. weekly jobless claims coming up at 8:30 a.m. eastern time. as we head to a break, check out the "squawk box" market indicator. futures at this point indicated down. mike rowe here at a ford dealer with a little q and a for fiona. tell me fiona, who's having a big tire event? your ford dealer. who has 11 major brands to choose from? your ford dealer. who's offering a rebate? your ford dealer. who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires? your ford dealer. i'm beginning to sense a pattern. get up to $140 in mail-in rebates when you buy four select tires with the ford service credit card. where'd you get that sweater vest? your ford dealer.

welcome back. futures down about 53 points, which is not as bad as some of the levels we've seen today. but continue the downward trend we've had last week. we have one up day, down again yesterday, off the lows. let's get back to this discussion we're having with former treasury secretary hank paulson. i'm going to take one more shot at something, hank. and tell me what you really feel the prospects are for this. i agree with you that these things we need to do that are included in the grand bargain like tax reform and some type of entitlement reform are the key to getting growth in this country. my problem is that the president doesn't seem to grudgingly talk about these things when forced

to do so. but it doesn't seem to be in his view the answer to what gets the economy going. even when we talk about entitlement reform or tax reform, we always hear about, okay, but i want to raise more revenue for investment, for investment in infrastructure, investment here, investment there. do you think -- there has to be a strong will on both sides to get these done. do you think within the next three years that the remaining three years of the obama presidency that there will be an emphasis on these things that could actually help? and it's not all the president's fault because i don't know if the republicans would agree to a deal with him because it would mean saying yes on something. and i don't know if we -- i'm not optimistic any of these things we need get done between now and 2016. >> well, i've -- i'm always an optimistic. but as you're talking about major policy initiatives that

take compromise, congress can never leave those. look at history. it always takes a president to lead it. congress needs to be willing to work with the president, but the president needs to lead. so -- and there needs to be a willingness to compromise on both sides. and so the -- the one thing i don't have tolerance for is people that say it's my way or the highway. i know i'm right, i'm not going to compromise. and so, the things you want to talk about, whether it's entitlements reform, health care, immigration, taxes. the white house is going to have to lead, the president's going to have to lead and there needs to be -- it needs to be compromised. and when you -- when you talk about growth versus the deficit, the way i describe it, we -- we need a deal with the deficit. we've got serious fiscal

problems. but we need to be careful early on. we've got a fledgling recovery. so we don't want to cut too much or raise taxes too much to damage that. we need to nurture that. >> yeah. i wanted to bring up two other things. one is china because that's a big issue for you. last time we had you on the program, it appeared to be a race between larry summers and janet yellen for the role of fed chair. and you expressed, though you did not endorse, larry, i know you didn't want to make an endorsement, but when you look at the situation now, it appears janet yellen will get the job. i don't know if that's the case. are you satisfied? is that a satisfying outcome? >> well, i expressed an admiration of larry summers. i still have an admiration for larry summers. and have a great deal of respect for janet yellen. this is a very important job. and what i want to do is this is the president's decision. if he wanted my advice, he would

ask me. this is a big decision for him. as i said, president george bush, i think one of the greatest decisions he made was selecting ben bernanke. this is an important decision, i don't like to see it politicized. fortunately it's out of the news right now. unfortunately it's been driven out of the news by something this terrible. again, i'd like to see the decision made as soon as possible because i think this is just a really important institution. >> right. and ben bernanke was criticized for not tapering. maybe he knew this was coming? >> listen, getting into the tapering. we had to go through -- and have gone through a very significant deleveraging. it's no small feat we're growing at 2% a year when you look at the amount of leverage that the individuals had and financial institutions have. these low interest rates and, you know, these big purchases by

the fed can't last forever. they're extraordinary. we've got to get to the point where assets trade based upon real values. now, you know, there's big distortions in what we're doing. you know, there's no perfect solution. you've got to expect a little bit of volatility and a little bit of pain as you work through this but we'll work through it. >> hank paulson. i wanted to get to china, we're going to do it again at some point. you do run the institute that focuses a lot on china. you have a book rereleased "on the brink" and "hank" as a movie on netflix. thanks for being here five years later. it's been an interesting five years. i'm going to send it back to joe in the studio. >> he's got a book like you, he's got a movie like you. do you know all that's left? is there a sorkin institute? >> there's not a sorkin institute. we're working on that. >> you're basically following -- it's amazing.

but a lot of similarities. that was great and thank treasury secretary for all the time he gave us, andrew, and hopefully you'll have a safe trip back. coming up, minutes away from weekly jobless claims, the last government employment data we'll get maybe until the shutdown ends. trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates. woman: everyone in the nicu -- all the nurses wanted to watch him when he was there 118 days.

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we are just a few seconds away from the weekly jobless claims number. rick santelli standing by. stewart hoffman is with us. and steve liesman is right here in studio with us, as well. been watching the futures ahead of this number. they've been down, but probably has nothing to do with expectations for this number. this is the last government number we're going to get. rick, take it away. >> initial jobless claims were up a whopping 1,000 from a slightly upwardly revised 307,000. if we look at continuing claims, 2.925 versus 2.82. so you can say they ranked up a bit. i'm glad we have this number because without it i don't know if we could have survived this thursday morning. of course, there's no number tomorrow, but truly yesterday's number has a good enough correlation. 263 is the ten-year note yield which has been selling for the last. this could be the eighth day we're going to settle between 261 and 265.

and with that kind of excitement, i don't know how i'm going to be able to make it through this volatile treasury session. but we do see volatility obviously all kidding aside. in the equity markets, maybe not enough volatility for some taste. we still have ism, nonmanufacturing in about an hour and a half. back to you. >> all right. rick, stand there, we're going to bring in steve liesman who has been looking at some of these numbers too. stewart hoffman, as well. steve, not a whole lot to chew on. >> i want to do a shout out to my producer who points out the following. this is the one government piece of data we're going to be getting. however, it is about to become a seriously corrupted piece of government data -- >> because. >> as the furloughed federal officials -- federal employees begin to file for jobless claims. it was the one thing we could possibly use from the government we can't -- we're not really -- >> this number isn't affected -- >> not this one, but in the coming weeks.

>> i want to show you a chart. this government shutdown will rate as a serious national disaster. this is what it looks like if you guys have the list, february '77, 143, hurricane katrina, hurricane sandy, and the 1996 government shutdown. this shutdown assuming it goes on for a week or so because you have to have this one-week period of no wages will rank up there. where it comes in now if they get the back pay wages. it's a complicated thing. >> then they have to pay back -- >> they have to pay back the government. >> the claims will remain and they'll roll off as -- >> they'll roll off but they'll be permanently that they were -- >> they were filed. that's right. same thing with the natural disaster if you think about it. i want to get to stu hoffman with an interesting survey. releasing it exclusively here on "squawk box" and cnbc. tell us about your small business survey, which is

something we like to follow closely here on "squawk box." >> this is a survey pnc does twice a year. we talk about -- you know, we ask really small businesses -- as you just said, claims are low, there's less layoffs, but our survey shows they're reluctant to hire. we only have about 1 out of 6 small businesses that say they're going to hire. that's double what they're going to layoff. that's a small net margin. one thing of interest, we ask them specifically about obama care. what are their plans for hiring in the coming year? only 15% said they were holding back because of obama care. while hiring is still slow, it's a bigger issue than just waiting for obama care. >> i see that headline in your report, i'm not sure what to think about it. on the one hand, yeah, it's only 15%. on the other hand, 15% on a weak

economy, that's significant, isn't it? >> yeah, it's a significant number. but as they say, it's not like it's 40% or 50%. it's not zero. there's clearly some holding back. but i think what it's saying is between obama care and lack of customers, that's what small businesses are doing. they're looking for customers to walk across their door, you know, electronically or physically. they're not seeing that. so that is why they're still saying we're cautious. and this is a little better than it was a year ago, but it's no better than it was in the spring. and no better than it's been the last couple of years. >> now, i just want to add one thing, which is that by order of magnitude, small businesses are reporting that the effect of the sequester is more harmful in terms of 51% saying they had or will have some impact from the government decline in spending. >> yes. bigger number over half saying that will affect them. 60%, we also ask them about rising rates which, of course,

were rising more. we did the survey in august and early september before the fed passed on tapering. and 60% of them said the rise in rates were to continue. >> that's not the same question, though. having an effect and whether you hire or not. that's why it's not -- >> different question. >> yeah. >> i'm saying -- >> you can't use 19% and 51%. it's not -- one said will it affect you in some way? it wasn't will the sequester affect your plans to hire? probably be lower than 19%. >> no, it didn't say higher. >> that's right. >> it was the -- it was will it affect, will it have a positive -- >> affect on you. >> on your business. >> yeah. and add that -- add 15% there. add 15% for the new epa stuff. not 15, but add some percent there, for keystone, for this, that and everything else, and you get up to a number that explains 8%. >> i'm not sure if your math adds up. >> i didn't follow it either.

>> all right. you've got 15% with obama care saying it might affect hiring. you've got the epa stuff. no, i don't know what you get to. i'm saying you add up all these things and you can see why the job market stinks right now. >> right. right. hey, rick, i don't want to let you go without asking you -- >> not hiring but not firing. >> we're going to talk to john harwood in a minute, rick. but i'm sure you watched yesterday the interview with the president. at one point the president suggested that the markets shouldn't be so lax about negotiations this time around. that this time is so different. and i just wonder what people on the floor in chicago think about that. >> well, they understand this time is different. this time the president wants to raise the debt ceiling. i think people on this floor, the most common comment i heard later on in the session is that by watching it it was plainly simple what the president's

objectives and goals for the markets are. and i'll leave it at that. >> i'm going to push -- and the goal being that they want to see some reaction that would then push congressional leaders back to the table? >> yeah. what is the exact opposite of negotiating? that's what they saw. >> yeah. >> do you guys think he should have been more clear about the fed issue, to say bernanke is doing a fine job. and to add criteria including somebody that doesn't make bubbles? >> we're going to find out from john in a moment. but steve, rick, thank you, both. stu, you too. >> thank you. john harwood returns with more of his exclusive interview with president obama and we'll find out what's on jim cramer's stock agenda this morning. "squawk box" is coming right back. they always have. they always will. that's why you take charge of your future. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others.

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let's get to john harwood with more of his exclusive interview with president obama. john? >> well, you know, we were talking about his meeting with congressional leaders. had boehner, mcconnell, pelosi and reid all down to the white house. and we said the demands that he was making or the message he was making was pretty simple and clear. here's what the president said. >> the message i have for the

leaders is very simple. as soon as we get a clean piece of legislation that reopens the government and there is a majority for that right now in the house of representatives -- >> until after that? >> until we get that done, until we make sure that congress allows treasury to pay for things that congress itself already authorized, we are not going to engage in a series of negotiations. >> it's a pretty simple message but also a hard one for john boehner to deliver on. the president thinks it's important to make that effort, though, because as he said when it comes to crisis governance, brinksmanship, deadlines, we've got to break that fever now. >> we saw hank paulson, i ask him about -- let's move forward a little. i say we get through this after the 17th or something. then we've got three years left, got immigration, we've got some stuff we want to do.

but on the one hand the president -- it doesn't seem to be a priority to do these things that i -- that i or hank paulson think would help with growth which would be tax reform and the territorial tax system and maybe some entitlement stuff. that's not always the front and center i don't think. and then i think the republicans act like those things are front and center. but agreeing with the president on something would mean just that, agreeing with the president on something. which i'm not sure that they're willing to do that. when i add all these things up, i don't think we get anything done. i don't know whether things likely with the way redistricting is, there's nothing going to change in 2014. so are we going to do any of these things that really might in some people's view help growth? is there any chance we do that in the remainder of the presidency? >> we might not. one of the things i think is interesting about second terms and when presidents, they lose power, they become -- they have

more difficulty with congress, maybe the congress has flipped to the other party like it has in the house for the president. you get to a point where the part of your presidency that involves making deals, getting stuff through congress is over. so it could be that the rest of the president's term is about -- >> maintaining what he's got. yeah, maintaining what he's got. that's true. and the republicans seem to -- that's what they're doing now. the president's trying to hang on to that signature accomplishment and the republicans are attacking it. so that may be as simple as that. >> it could be three principle goals of the obama administration unless something turns around. one, implementing through executive action is carbon, climate change policies. two, implementing the health care law, and three conducting the -- >> what was the last one? >> conducting the foreign policy? that's something he can do pretty much -- >> maybe that's a neutral on jobs. first two were -- that's why --

the people he want to help presumably are the most hurt at 8% unemployment. >> tough situation. >> yeah, it is. all right, john harwood, thank you. great job, and, you know, you make us proud at cnbc. >> thanks, man. >> all right. up next, we're going to talk more about what we learned from warren buffett and hank paulson this morning. [ bagpipes and drums playing over ]

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we will go right up until the point of, you know, extreme idiocy but we won't cross it. if it goes one second beyond the debt limit, you know, that -- that will not do us in. if it goes a year beyond, that would be unbelievable. >> to me, the government shutdown and the debt ceiling, that's got to be done. that's not long-term, it's not strategic. it just is necessary incredibly important housekeeping. and if you can't get that done, just shows the government can't work. >> that was warren buffett and hank paulson live here in chicago on a misty day in chicago i should say. you know, guys, one of the things i was struck by was hank paulson's remarks about the

structural issues around why we're so divided in this country. and we always talk about how we can get to a solution. but maybe you can't get to a solution or maybe we're so polarized or that much harder because of the structural issues not because of the issues themselves. and i wanted to posit that with you joe and becky. >> we just sort of said that, i think. honestly, i'm not specifically blaming either side. i don't think the president's priority are the structural issues. we know what his priorities were. and if he did decide it was a priority and the republicans would be like, wait a second, you'll deal with us on entitlements and tax reform? we're not going to agree to anything with you. >> even if he didn't want to do it, the republicans would say no because they're not going to work with this guy. >> well, no, but the idea is if the districts were different -- >> then in 2014, you know, then you'd need an election like we heard before. you'd need an election to

change. but we're wondering -- >> that may be. >> between now and the next presidential election, do we address any of these long-term things? and i don't -- >> but i did find it interesting that both think that ultimately everybody's a rational player. and hopefully that's the case, i worry they're not. i also was fascinated by hank paulson's comment by jamie dimon. both of them. >> everything hank said. he said i'm an optimist, but. he's nice, he doesn't want to say bad things. i'm an optimist, but -- >> anyway, we're going to leave it there. i'll send it back to you guys. next time -- it's really great out here, i have to tell you. i think you guys would enjoy the windy city. >> i don't think chicago counts for you leaving -- you need to go south in illinois or indiana or something. that's not -- you're in the -- it's like new york. it's like the second city. you're still in a concrete jungle. >> right. >> this is your idea of a -- chicago. it's not. >> chicago's a nice state.

>> i know, but a flyover country, midwest, you need to get out where there's corn and stuff. >> he'll be there for two weeks. >> i'm going to get a corn husk. >> it'd be like a tour for you down in where those farms are. there's silos, barns. animals. >> i told you that tour for you. there's silos, farms, animals. i told you when i was a kid i milked cows during the summer, come on. >> that's for extra credit, that scarsdale prep. all right. next we head to the floor of the new york stock exchange to find out what's on jim cramer's radar. i almost said cradar. anyway, "squawk box" will be right back.

welcome back to "squawk box," everyone. the futures this morning are indicated down by about 42 points. that's off the lows of the morning but still down by about 42 points. let's get down to the new york stock exchange where jim cramer joins us now. watched larry last night till the 17th. the 17th, jim. i don't know what that means. what's the stock market do as we go day in and day out until the 17th. >> i think your show just

changed my view on this. i think you're right, there's no agreement coming. warren buffett is the first guy who said this is not a drop dead day. i'll take buffett over every politician. that was a remarkable interview by andrew and it's changed my view because i just think that you now have this wiggle room that i didn't know we had. >> so, jim, we got the hangover from the financial crisis hurting jobs, but then we do have -- i don't know if you saw liesman, you know, we had stuart hoffman on. he said maybe 15% of business owners might think twice about hiring somebody and that's not a big number for obama care. but you add that 15% in and add in executive orders for the epa and throw that in there and then throw in the prospect for none of these structural things, should we be hopeful that we ever get back to a really good employment number? i don't know. i mean, i had the ceo of paychex

on last night and he said we were coming in with a head of steam to this. we could even handle affordable care. what he says is, look, a long-term shut down and all bets are off. i think that's pretty much where we are. he did say this was the best we've been in a long time. coming into this, all government, all government stopping this, not any business people but government. >> jim, what's long term? anything past two weeks? anything past or up to the 17th? what is long term? >> it sounds like by the end of the month they can pretty much stretch things out. bill gross had a great interview. bill gross said there's really nothing big, no big bond that we have to worry about in terms of a coupon between now and the end of october. >> we had a guest this morning who pointed out it would be like the november 2nd payment for social security. that would be the big issue. >> i agree with joe, there's no agreement, we'll go over that. i think if people start freaking

out -- i'm trying to figure out why the market is allegedly so complacent. i think it's because of what warren buffett said. listen, we're going to work something out, it won't be catastrophic. i thought that was very, very meaningful. great interviews. you guys just redefined the debate this morning honestly. >> thanks, jim. it will continue, as it always does, at 9:00. we know that. thanks. >> when we come back, we're going to talk about the stock of the day. "squawk box" right after this. >> the government shutdown is putting the september employment report on hold. so tomorrow on "squawk box," it's jobless friday. we'll talk jobs, the looming debt ceiling deadline and the path to getting the government back on track. watch "squawk box" starting tomorrow at 6:00 a.m. eastern.

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tesla down 6% after a fire was caused by a metallic object.

i don't know if it was an alien thing. we have to be careful, these little metal things hitting -- if it hit you in the head, it would be bad. good job today, andrew. >> well, your battery powered -- >> my pacemaker? is that what you were going to say, something like that? >> no, i wasn't. a huge thanks to the university of chicago booth school who stayed up all night to make this thing happen. >> make sure you join us tomorrow. right now it's time for "squawk on the street." ♪ ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. we are in day three of the government shutdown. with little progress igh