that does it for us today. join us tomorrow. right now it's time for "squawk on the street." ♪ two, one♪ ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer david faber at the new york stock exchange. the latest s&p/case-shiller home price index is out. the up in's going to be on the screen in a moment. a big day setting up ahead of janet yellen's testimony and big earnings from home depot, comcast, macy's. futures are timid. oil's got a bounce still below $50, though. the ten-year remains right in the tight range around 2.7. road map begins with fed chair

yellen on the u.s. economy, set to testify today. we'll bring you both prepared remarks and q&a live. home detail shares are higher premarket following solid quarterly earnings but macy's volatile this morning on what are mixed results. jpmorgan shares higher. the bank outlining new measures to streamline businesses and cut some costs. the nasdaqness aiming for a tenth straight day of gains after closing at a fresh 15-year high. on capitol hill in an hour fed chair yellen begins two days of testimony on the economy. the watch is on for hints as to when the fed might raise interest rates. she'll face the republican-led senate banking committee, whose chairman is a fed critic. live coverage of yellen's testimony and the q&a session with lawmakers. a lot of tea leaf reading this morning about whether or not the fed is simply trying to tap dance here play for some time let wages come back let greece play out and so forth. >> i think that's right.

it's funny, the most visible thing that they could look at are retail sales which have been weak onning aga ing aagragregateaggregate. the home numbers yesterday, so week. toll brothers so strong today. you choose if you were as granular -- and they never are -- miss yellen i know you hated the biotech stocks -- >> it wasn't her. it was the staff. somebody on the staff didn't like the biotech stocks. >> when you look at individual companies, we've got to tighten them. toll brothers is too strong. the aggregate, we have to keep it unchanged here housing not that good. greece, you read through the fine print, they're not ready but maybe they are ready. brazil not good. russia, not good. other than germany, make a case that europe's not that good. and all of the time you come back to is residential strong in the country? maybe not. is nonresidential strong? maybe not. there's cases to be made against this economy that she can make if she wants to keep it easy.

she can make it. >> toll was a good quarter, 44 cents, beating 30 cents. most metric pretty good. >> doing analysis of the previous quarter, the heat came from they didn't feel that new york was -- the analyst community didn't like the new york stuff. if you look at what's happening in brook len and hoboken, the explosion in pricing there's allowed the growth margins to increase dramatically. >> case-shiller positive 4.6 from a mid-20 city ahead of expectations as inventory's come in. >> people are saying homes are no longer a buy but the other day, wells fargo, positive note how you're starting to get credit easing. this is such a mixed picture that you can understand why if you can tell you can tap dance, i like that term tap dance, that's what i think she can do. >> she can tell both sides of the story or go with either one. you can go with a strong economy story, yeah we have to raise,

right? and/or the no inflation, no wage inflation story, we don't really, we still have time. and the rest of the world is not as good as it might, although it's not that bad. >> the two-year's telling you things are better. >> yeah. >> but i -- it's funny, i was doing analysis, where the ten-year was 2000 with the incredible p/e ratios 6.6%. >> yes. >> that was good competition and still did well. there's a setup where i see that if you let the big macro janet yellen testimony against the senators, you end up missing the big picture, which is that when i read home depot, i think i remember when home depot was crossing the country with new stores and you never saw numbers like this. and, by the way, i think the next quarter's going to be better because cold weather is wrecking people's homes. >> good point. let's get to depot. beat the street with comps up

7.9. 8.9 in the u.s. approving $18 billion share buyback, hiking the dividend 26%. macy's as well holiday earnings did exceed forecast revenues shy. company expects growth for 2%. macy's did print 2.5 for the quarter. the best beat for depot in 15 years and they're closing in on coke as the biggest market cap out of atlanta. >> great one. i know frank blake left the company in tremendous shape. a great ceo. following along the conference call brilliant, they break it down aisle by aisle. you hear what's better -- what did better what did even what did poorly a sign that maybe you've got to go by tanly works, whirlpool, maybe sherwin-williams, stay close to the conference call. let's not for get that nordstrom traded from 79 to 74 based on the head lean and finished at 81. those trading on macy's once

again, you're trading on nothing. you are filled with sound and fury, signifying nothing until you hear the conference call. >> how could you not -- how could you find a better time to be a retailer in recent days? think about even the weather comparisons, we know it's the -- the weather's terrible in the northeast. a year ago the polar vortex didn't help anything. the comparisons not that hard. >> no. cracker barrel admitted that this morning. >> and inventories well controlled. you've got an economy with a 2% ten-year at this point, borrowing rates are quite good. inflation negligible. i'm reading a list here any number of things from one noted analyst that says hey, this should keep going. >> what's absolutely incredible you don't see the word "promotional" in press releases lately. remember promotional means gross margins coming down giving stuff away. there's nothing promotional about this -- about right now in

retail. it's an extraordinary time. it's full price time. >> true. >> and by the way, whatever's left of the winter inventory, they're not having to mark it down. >> especially domestic and not dealing with effects. >> home depot looking at 6 cents on a -- >> canada. >> any currency. it doesn't matter. any currency's awful. the peso's gone from 12 to 14 like it went to 14.5 one point it's come back down. you don't want to do business with mexico. the peso's out of whack but i think trading off of oil. >> they've shrunk the float by 2 22%. does that matter at all? >> i think it does if only because they're a consistent returner of capital with higher earnings. i mean higher revenues though not putting in new stores. ibm, bought back half of the

company since 19195. the stock's up since 1995 but not what people want now. when you have 8.9% comp for home depot, i mean throws -- art blank wasn't doing those. mash marcus wasn't doing those. i'd love to hear ken landgone. wow, this management team is unbelievable. >> after done counting their cash right? >> the turns must be incredible. just -- they just make money on -- they replace the stuff, intramonth so many times on the float. you don't have to pay your people. you don't have to pay suppliers until the end of the month. your fakemaking a fortune turning, turning. >> commodity prices are low, too. a lot of the stuff they're selling. >> everyone has more gasoline in the meantime. look at this more important than home depot is greece not really but -- >> this was a telegraph in headlines this morning but the eurozone is giving they're blessing to the reforms that

greece is proposing as part of the deal to extend the bailout by four months. earlier this morning satisfilyyily comp hence ibl. >> when you look at home depot, what you're seeing is this incredible money going back to the bottom line of the consumer because of gasoline. cracker barrel which i regard as being instate highway restaurant, says it's directly important. it is all about gasoline and better weather. >> a thousand bucks a year a lot of money. >> huge amount. visa said it wasn't all going -- people weren't spending it. i'm not -- who am i to argue with charlie scharf but we'll talk about it. >> i bet they'll be getting questions as in terms of credit sperd spending. >> i think 50% april a fellow on "squawk" saying short the

retailers. >> you don't have a problem. >> what will you going to short? >> i've never seen growth like this. this is extraordinary growth. it's not promotional. the consumer's obviously back. i were janet yellen and being grilled, listen is the consumer spending like mad? the consumer got a 1,000 tax cut from gasoline. i've not seen numbers like this prerecession. >> retail, on apparel, things are mixed and we are talking about -- we see bankruptcies. we see a great deal of spendings a result of what our friend david berman talked about, the apple/amazon part of. consumer is strong but retail can be mixed particularly that area. >> you can put the screws to the apparel makers. go over the vf conference call it was a thing of beauty. just a coalition -- they call them coalitions eric wiseman delivered a quarter magnificent, better than any of the oscar winners. >> you saw the number of tweets.

>> yeah. "birdman." award ceremony for conference calls. tesla would get the worst. >> can you believe merrill lynch numbers cut numbers. interesting you can do that not have a disclosure issue. you cut up ins and cut numbers again. best guidance most improved call. >> most improved call. most drama on the call. >> you're giving me whole shows. >> expletives on a call. >> true. we had that too. i absolutely am going to do that. i'm going to do the nominations, please, and i'm going to have eight, and they're all going to be conference call. >> jimmys? what's the name -- >> i like that. >> you have an oscar theme going on. >> the jimmys. >> i also a haillo. >> little jim statues. >> conference calls that clearly -- that are mass conference calls, okay and going to get awards and niche conference calls that the academy would give huh-uh.

i'm not doing that. i'm going mass. i'm going american sniper of conference calls. >> you want to tell tickets. >> that's what i'm interested. >> you get david and i will emcee and do an opening number. >> tuxedo. >> like brad cooper? >> he looked good. >> did he not look good. it's okay to say a guy looks good. >> better ratings than that guy in his underwear. >> true. >> neil patrick harris -- i like him, too. >> he's good. >> when we come back the latest on apple's march toward 1 trillion market cap. ubs' interesting call on them. fed chair yellen's testimony on the economy. we'll bring you live coverage from capitol hill in about 45 minutes. and taking one more look at futures, as the nasdaq goes for nine straight longest streak since 2010. back in a minute. no. you? no. aflac! what are you guys looking for? claims!

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♪ if you are what you say you are a superstar♪ jpmorgan chase holding its investor day today and is aiming to save about 1.4 billion in annual expenses by cutting costs and streamlining assets the bank says it's looking to eliminate $100 billion of nonoperating deposits and do that in part by charging negative rates. some deposits too onerous to

hold. >> i'm going to get charged, not happy. >> you're not going to get charged. consumers are not. don't frighten people. >> maybe you're considered an institution. >> i could be institution. there is a theme to this whole day and it's al green. it's let's stay together. this is a let's stay together. does jamie have that on the music hold? >> he should. >> right? this is if staying told how bountiful it is. it's so funny because this comes at a day when you pick up the paper, hey, gold rigging, we haven't gotten to oil rigging yet but alleging gold rigging but it doesn't seem to matter because this is the perfect day to put that story out and no one cares. >> what i think is interesting they did choose to take up a good amount of time so far, at least, doesing this idea why a breakup would be a bad idea. >> right. >> they are responding to something we first saw in a goldman report but a question we've asked, is this institution too big to manage?

would it be better off? and they gowin, marianne lake cfo saying our business model has 18 billion in synergies. apparently they've done work to come up with the number they say they have. and the value of the company's in its business model, a breakup would see slight capital benefit but duplicated businesses. it would diminish over time. they preserve optionality, you about to your point -- >> people like this. >> staying together. that does not mean when you talk to manage ant at jpmorgan there are not particular areas where they do business as a result of changes in the rules over capital and federal regulations, that they are going to have to move out of those businesses. >> absolutely. >> they don't know all of them and they can't -- they don't with certainty know what the returns are or will be. frankly those rules have been promulgated. just now starting -- >> it's hard to figure out unless you're john stumpf at

wells fargo. >> he's a banker. these other guys i don't know. he's a banker. >> lake making comments now, raising dividend is a priority. >> fantastic. >> the memo na the journal has, targeting 57% payout ratio by the end of the year adding they've done the work on a breakup. >> when you hear that thing about the dividend what you think they're out from under. the government is not -- maybe the government's not running the dividend program anymore. the regulations, good for bank of america. to get the government less involved with dividend decisions and buyback decisions is hugely valuable for a cup that sells at low multiple. >> the government's involved in a lost different things this is a small part of the overall piece but something i'm focused on the fed won't allow banks to len at six times leverage. a highly leveraged transaction financing are moving away from the bank if above six times

leverage ratio. period. end of sentence. that's. doesn't matter what the business or characteristics are, one can be different from the other, you cannot do it. bdc's doing it private equity shops, hedge funds doing it. it's moving to other areas. so it won't be profitable for some of the big banks. >> these were very big lines for the -- in the old days right. >> where you used to tell me jim, the return on equity's not going to come back because these were fabulous performers. >> so was trading which, clearly, we know is also changing in terms of at leaf the way it appears profitability wise. >> elizabeth warren throwing a couple of bombs against the banks today. >> good chance. >> yellen? >> why not. i guess? >> she's a firebomber. >> doesn't appear she's going to run for president. >> feeling amorous thoughts for you? >> cool minted blue eyes. she's a senator now, you can't

say that stuff. >> you're getting married anyway. >> we'll see now. we'll see if that still happens. >> she's a senator. she's married. stop it! >> she's married? >> yeah. >> i didn't know that. >> cramer's "mad dash" as we count down to the opening bell. take another look at the premark as the nasdaq goes for ten straight today not nine. jim references al green. let's go out on "let's stay together." back in a minute. >> cramer's "mad dash" as we

♪

all right. we've got about seven minutes to the opening bell. "mad dash" with american airlines. >> cowan this morning, buy to hold. now this group has been choppy of late. you can see that people have kind of abandoned it. one is that gas, oil, jet fuel has not come down oil to 40. jet fuel to lower. so that's been one of the reasons why it's stalled. they say listen there's pricing headwinds. something, i'll say his name you know i like it ben baldo. za talked about it. i caution selling this stock because it is so unbelievably cheap but resting. it's resting. >> as you talked about, almost oligopoly, price wars? come on. what is that about? >> they -- >> pretend to have a price war. >> it's a pretend price war. >> try to book a flight somewhere warm now, forget it.

>> incredible. spirit my favorite in the group. symbol save. remember, if you mention their name you've got to pay them a dollar. that's the way. every single aspect. ben, i owe you like $9 now. we've got -- we've got some really positive news. a love the mix to negative. first solar, finally doing what i've been hoping they do hoping a yield co nrg, david crane did this combination with sun power. a great reeldyielding company. first solar involve with apple in terms of doing sealerolar. no one's liked it because they had the wrong technology. they've managed to bring down the costs of their technology. this has been my favorite april lot of guys don't like. i think you'll get a lot of upgrades because of the spin-off. >> explain what's going on here. why first sole somewhere sunpower? >> together they can do a joint venture which allows them to take completed plants and have

them be like bonds. utility bondsen and this is a very, very good company. a lot of analysts turned on incorrectly and all going to scramble. they're all going to scramble. >> because does it increase ability to access more capital more cheaply. >> you on your game. >> sometimes i pick things up. >> allows them to access more capital. >> 28 years of doing this. opening bell a few minutes away. stay with us on "squawk on the street."

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you're watching cnbc "squawk on the street," live from the financial capital of the world. the opening bell set to ring in just over 90 seconds or so. busy morning. yellen's on the hill. we'll get her remarks at the top of the hour. q&a will begin 20 minutes after that. greece is officially on the back burner for a few months. of course earnings are big from home depot and macy's. jpmorgan looks set to crack 60. it's only done it a handful of times this year. >> this is an important moment because the yield curve is not favorable for these guys. you have to make it up in a lot of different ways. john stumpf making it up with

fee-based business. when the companies report and the margin's not good they sell off again. it's important jpmorgan power through 6 on0. when earnings come out people will say this is not their moment. jamie dimon says you want 4 billion number you want the ten-year higher . >> i spoke to him yesterday. he does -- >> like -- >> we chatted. he does believe that like a lot of people rates are going move up during the course of the year. are they going to move up sharply? i didn't get a rate call per se -- >> but you got a phone call, more than the rest of us. >> things are going to improve. >> well one thing -- >> and things are good. the u.s. economy, not that bad around the world. >> if you're one of the 770 million people in europe why would you want to earn their bonds when you go to our bonds? that's the problem. >> home depot's going to open up almost 5% on the call. just asked whether or not they would respond to walmart's minimum wage hike.

response, we pride ourselves on paying above the market wage we'll adjust as necessary. >> come on! home depot has always rewarded. there was a moment where the prepare ceo where there were cuts made. blake changed that. and the new -- the home depot that has happy employees, which you know when you go to home depot, by the way, and i buy all of my plants at home depot, frank blake knows that and i've got to start talking about -- this is remarkable quarter. i'm telling you, people short, you've got to understand someone followed retail since 1982, i've never seen numbers leak this. >> cramer they should have a quote pipe burst repair kit by the front door. walk in walk out. >> amazing. they've got to come to bar san miguel. i'm trying to do stuff with the vestibule. incredible how much you have to sink in. >> that door. >> vestibule. a place -- it looks awful.

>> ringing the bell associated bank core based in the midwest. over at the nasdaq multi color corporation doing the honors. so -- >> oil coming back up. that's interesting. i had two different oil executives on last night. neither one is willing to call a bottom. you get that whisper of an opec meeting but start hearing first quarter, so much oil being produce produced. refineries doing well. stay close to oil, hugging the dids 50 level. whether it can do it when we get in -- >> yeah. did want to do comcast. our parent company, reporting earnings. >> you got call there, too, didn't you? i get nothing. >> i was on the call that's all, like everybody else. >> all right. >> asked for your phone number when they get on the conference call. >> they do? that's personal. >> like a social security number. but you can't include them in your rewards show for conference

calls. >> i have horses. >> the stock price is showing that. the key questions, the buyback, which is $10 billion this year or $10 billion overall, 4. 5 billion expected this year. expectation, perhaps you'd get an additional buyback if and when the time warner cable transaction is concluded. the company saying they're targeting 1 1/2 to 2 times leverage. but we're looking forward to getting to time warner cable closed other transactions we think buyback a full year from the call could come in close to 10 billion. in addition, if they don't get time warner cable closed leverage would pop up. they were positive on the prospects for time warner cable. when it cops to fcc review of the deal remember it's the 26th that we'll get all of los angeles around title ii reclassification of broadband essentially. so it's after that that the

expectation is that you'll start to really get the regulators, jim, paying aengs to the transaction. that at leaf the belief of our management at comcast. it's pretty much as we said the shot clock of the fcc due to expire at the end of march. lots of information gathering taking place. it's an approvable transaction. this week they had to deal with open internet or that's what i'm talking about here and it will hopefully turn their attention right after that to the transaction. and the question becomes, will there be concessions what will they be if too onerous, we get into questions about whether the transaction will happen. but who knows? >> wow, this play of sign-ups, engagement. >> pretty decent. cap x higher 14. 5% of revenues. and that's -- and then the only thing i would say, i hear about business services not just from comcast but other provides are who have a lot of broadband out there and that's a competition

to the likes of a verizon or at&t. certainly to existing dsl services that perhaps businesses both small and even medium sized. it's a growth driver it would appear, at comcast. the cfo mentioned it on the call. 40% of growth in that is from midsized businesses now, which is important. >> wind stream does a lot of that and numbers were very bad. >> right. >> it's interesting to see comcast continuing to take some. >> increasing buyback to 10 billion, more than 4 billion earmarked for this year. div from 90 cents to a dollar. >> and think about this carl you know everyone says the market's too expensive. that's been the mantra. buybacks are incredible. the dividend raise great. the competition, 6.6 in 2000. now competition of ten-year, nothing. dividends how can you not want to own them. >> film revenue down 11 last we're weed a"despicable me 2"."

on track to have a record year in u.s. box office biggest since '08, in a few years because of people want to get out of the house, because it's winter, people want to get out. >> amc, all of the stocks. >> remarkable. you spent a lot of money at concessions unless those of us who sneak in -- >> you can't do that. >> you don't sneak? >> i limit all intake. >> deluxe popcorn guy. >> junior mints. >> so good, wow. my father loved nonper rels. >> apple is lower today. ubs believes the capital return everybody's pinned their hopes on is going to disappoint. >> well you know tim cook might have something to say about that but he's only the ceo of apple. apple was up huge yesterday.

continues to be good things out of europe. i like this $2 billion spend, it gets regulators and keeps then at bay. and it's great. a lot of jobs. apple's creating jobs all over the place. don't forget jobs created by the operating system if we were to do an app right now that measured some sort of cholesterol rating as part of the watch, home run. we ought to work on that in our spare time. >> cholesterol rate? >> the cholesterol level -- >> how are you get -- how do you get that from a watch? >> i'm thinking -- >> you have to test your blood. >> also looking into retailers. dillard dillard's up. >> preaching dillard's gospel for a long time. >> it's dillard's. >> excited about dillard's. >> i like dillard's very much and i like colts. both of these are coming back. people wrote these off, big mistake. classic classic, good retailers.

>> list of the top ten s&p gainers, at least almost half are housing related. home depot, lennar, you've got who else lowes, horton's not far behind masco, pulte. >> toll brothers we felt the gross margins were under pressure last time. the gross margins are great one of things home depot will talk about, how much money putting into our home. me put more money into the home hasn't been up to gdp growth level. the main thing about your home put money in if you think it's going to increase in value, circle to case-shiller it's important that home -- that people feel a home is a decent investment. but home depot benefitting from weather which is saying everything's cracking. everything's cracking. i bet -- interesting to see the insurers. i'd like to hear from fischman on travelers, a lot of damage being dobne by weather, subtle. garden variety pipe bursts. >> also yellen a hard time

about biotech call last time. i went back and looked where some of the big caps were six months ago. celgene in six months up 35%. gilead up 25. biogen up 18. is she going to double down? >> she was focused on the small stocks. >> i know. >> it wasn't her. some person on the staff. i don't know. >> which is the one she didn't like? isis. >> bizarre -- it wasn't in the statement. it was addendum. >> i feel awful, i think she's so good. >> you do? >> yeah. i just this she's early on the call. about like 17 years early. want to come back to a couple of movers from yesterday. valeant, up 15%. down a bit today. >> go buy it. stop it. that guy, i mean i got a lot of heat saying good things -- >> your interview so great. i was e-mailing david, i'm not getting that call, or on the call, but i was e-mailing, i'm

listing to the interview. i keep thinking there's holes in the story it's a rollup it's a rollup, and i listened to the interview. gosh, darn this guy is real. >> i know. we have been through areas where there are other ceos that were embraced what for rollups, swv said he just knows how to do it differently. in fact that was not the case. you wonder i mean how is it that you can take old products from a line i asked this question, and have them put up the kind of numbers they are? >> there are people who say when you -- look an unbelievable sales team unbelievable sales team, and full disclose, debt weller's on the sales team -- when i look at -- i look at what they've done with the tired contact lenses what i see is just amazing share take. it's like they're better

salespeople. we've seen that from a couple of companies. buy old drugs and sell them well. it's -- i don't know how to explain it. >> that can explain it it. i believe. >> they are taking share. >> reinvigorating franchises. they were doing their numbers but some showing double digit increases where there hadn't been previously. >> top 20 drugs. >> he does. >> line by line and they're positive. what can i say? look for holes and i still can't find them. i'm looking for holes, believe me. >> discovery, carl you mentioned yesterday, was up sharply, though it did come down during the day on the story that was completely refuted by fox. but interesting, at least, perhaps putting a light on their international franchise, we've talked often about. if there were to be consolidation and it was in the part of a bigger company that wanted more exposure overseas whether news corp., which -- excuse me, fox, already there in a big way or our own parent

discovery one way of doing. not that we think something's going on right now. >> viacom in the crosshairs not positive. a lot of flux in these guys. cbs big after the quarter. bewkes a great american. >> great american. >> got some intraday highs for the dow. the s&p and the russell. let's get to bob pisani. good morning. >> the market is stronger than the dow, just up 13 points. builders, as you know doing well. semiconductor doing well. consumer discretionary doing well. financials doing well. energy stocks doing well. things are doing well over in europe. you heard earlier, it looks like the major powers are giving their assent at least early signs are, to the greek package of economic reforms they put in last night. the greek stock market's up 9%. the highest level for greece since december. the rest of europe is on the mixed side. generally up. we're at historic highs. essentially in france as well as germany. speaking of europe qe ending

here but europe is doing very well with qe. thank you very much. notice europe is dramatically outperforming the united states this year. s&p's only up 2.6%. but historic highs in france and germany. both up 13%. the nikkei also the japanese central bank there, also engaging in qe up 6.7%. and the ftse over in the uk we noted yesterday, also at new highs, up 5.5%. my point in bringing this up europe and japan, notably, outperforming the united states this year. turn to the u.s. stock market. the high end of the home building business doing well. you mentioned toll. but these, i'm son of the home bill, i pay attention to numbers, average selling price for tolls $782,000. good heavens, the highest in the business. but their guidance was 710 to 760,000. they blew out away. that's how you beat earnings average selling price way above what was estimated. gross margins another way tou beat on earnings in the top

margin, 24%. any time 20% and above in the business, you're doing well. 24% is outstanding number. orders up 16% as well. these are just great numbers across the board there. toll brothers, as you can see, sitting not far from a new 52-week high. outperforming the rest of the builders. home building may be iffy but the remodeling business going strong, an historic high for home depot. and the numbers there, just great. comp store sales 7.9%. international, u.s. comp store sales 8.9%. we mentioned the quarterly dividend increasing 26%. that's a history ex-high. macy's, i think the problem with macy's, was while the numbers were in line guidance was disappointing. comp sales growth of 2% for 2015, that was the guidance. that sort of slowing down a little bit. that's getting closer to competitors and i think that's what the overall disappointment is. finally, how lousy is the stock

market business right now? we have the ceo of stifel on this morning and he looked very very happy, as well he should be. a new high for stifel nicolaus as we mentioned, they bought sterne agee for $150 million. they bought a business that's got a great global wealth business, bought a fixed income business. 0 generates north of $300 million revenue for $150 million, do the math on that. it's 0.5 times revenues or something. a sign that you can buy fabulous businesses in the industry right now for very very cheap. mr. kruszewski had a very good reason to have a big smile on his face this morning. miss yellen coming up shortly. most expect her to say very little data dependent is the word. remember, press conference of a year ago march talked about six months maybe raising rates, she'll never do that again. most people expect her to stick very very closely to her

script. guys, back to you. >> thanks bob pisani on the floor. jim says keep your eye on oil as it wrestles with 50. jackie? >> good morning. that's right, the energy complex up across the board today, despite the fact we have a stronger dollar and most traders here are bullish about the dollar. so what's actually happening here? seeing wti trading around 50. brent crude trading around 60. this is probably technical buy, not enough here to make it on headlines or anything. of course, we did have headline out yesterday about nigeria wanting emergency opec meeting. there is nothing on the calendar for march. the next opec meeting in june. there was an emergency meeting, saudi arabia isn't going to change its strategy so it's probably not going to change what we see in the crude pits here. expecting another build in inventories from the department of energy tomorrow. so curious that we're seeing oil prices up now. in term of the products it's not surprising that heating oil

are up we are keeping our eye on refinery issues. that is definitely one thing to watch. and i do want to mention that we are seeing gold prices dipping un-1200. it doesn't appear geopolitically and in terms of the eurozone things are stable. stronger dollar pushing gold back down. back to you. >> jackie thanks so much. fed chair yellen's testimony on the economy, she's going to be grilled by the republican-led senate banking committee. we'll bring you live coverage when that begins at the top of the hour. record high for the dow, the s&p and the russell. back in a moment. anyone have occasional constipation diarrhea, gas, bloating? yes! one phillips' colon health probiotic cap each day helps defend against these occasional digestive issues...

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number of firms initiating coverage of shake shack. goldman has a neutral on the chain, seeing 13% downside to its price target of 36. jpmorgan barclays jeffries with a hold. stifel does have a buy on shake shack which is off of the 52 that it hit on day one. >> it is the stifel story that's driving it. i think it's an very interesting report. concept called fine casual quick serve. a lifestyle brand which, to me says you want to own the stock, not for the short term play the

long game be with danny meyer. all i can tell you, people who love the burger love the service, they will love the stifel report. and i understand if you want to own it. i think it. i think it's expensive but i certainly has never kept people away from certain stocks. >> shows incredibly loyalty. >> it's the tesla of burgers. >> comcompetitors. >> tesla of burgers. i like jack in the box because that fantastic with the qdoba story. veggie burrito i talked about. >> goldman has charts on social engagements for sales on shake shack. maybe it's a law of large numbers thing. but instagram, you name it, vine followers. >> equity, fabulously. domino's pizza has been the technology company that loves social media. stocks down today. stocks had a big run. i love that number. domino's and dine equity are the

two leaders of social. that's an interesting statistic. we'll get stock trading with jim a momentnd counting down to the fed chair's capitol hill testimony. we'll bring you live coverage including q and a. in the meantime the dow is up 31. s&p 2110. the road. it can bring out the worst in people. but the m-class scans for danger... ...corrects for lane drifting... ...and if necessary, it will even brake all by itself. it is a luxury suv engineered to get you there and back safely. for tomorrow is another fight. the 2015 m-class. see your authorized dealer for exceptional offers through mercedes-benz financial services.

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plus enjoy special savings when you purchase any new verizon wireless smartphone or tablet from comcast. visit comcast.com/wireless to learn more. california. three cars of a southern california metrolink commuter train derailed. tumbled on the sides after colliding with the truck on the tracks in ventura county. so far it looks like a number of injuries. we've been looking at firefighters treating people at the scene. but the collisions between rail and cars in the past couple of weeks have been big. >> amazing the train carrying oil recently with csx, that was not speeding. >> it wasn't speeding. >> i thought it was very telling. in the meantime let's get cramer. >> alks is down badly today

because one of their pain drug formulations in phase i is not going to advance. i say focus on their depression drug. schizophrenia drug and ms drug and use weakness to buy richard pop's company because it's been a total home run and it will stay that way. buy it tomorrow not today. people have been itching to downgrade it. tomorrow is your day. >> "mad money" tonight? >> domino's pizza. they have done remarkable things. one of the best performing restaurants other than that is the fiesta group. that is taco cabana. this company has two divisions, not unlike jack in the box. both doing well. taft is a famous restaurateur within the industry. both patty doyle and tim taft are fabulous operators. i cannot wait to speak with them. >> i'll see you tonight. >> a lot of good. still more to come. "mad money" 6:00 p.m. eastern time. fed chair yellen getting ready to testify on capitol hill.

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good morning. welcome back to "squawk on the

street." david faber at the new york stock exchange. we begin with some breaking news. the senate banking committee getting ready to hear testimony from fed chair janet yell nn a little bit. the committee will consider a bill first. once that's done the hearing will get started. in the meantime markets are having a pretty good morning. dow is up 343 points. it's been a busy morning so far. earnings from home depot, jpmorgan is cracking 60 on their investor day. oil continues to wrestle with $50. simon, it does look like greece officially is something we will worry about not any time soon but more likely in june. >> yep. here is the chairman coming through. a lot of people will assume that there's likely to be a negative bias to what she says. some people suggesting she wouldn't want to pre-empt the committee by dropping the word patience in terms of interest rate rises. others would say that perhaps now is the time she needs to

layout whether or not the fed is going to raise rates slowly and gradually or be data dependent and therefore leave that door open. >> we'll see if june is a month we worry both about greece. >> let's get right to what the fed chair is going to tell the banking committee and monetary policy quoting from a prepared testimony. the committee considers it unlikely economic conditions will warrant an increase in the target rain for the fed funds rate, quote, for at least the next couple of fomc meetings. the fomc she says can be patient in beginning to raise fed funds rates because quote, there is room for sustainable improvements and inflation continues to run well below the committee's 2% objective. when the right hike policy progression begins before that happens, her statement says the committee will change its forward guidance.

the if economic conditions improve, the fomc will considerate hikes on a meeting by meeting basis. however, the statement goes on to say any change in forward guidance does not necessarily mean the committee will increase the target range in a couple of meetings. turning now to the economy, a pragmatic but overall upbeat assessment of the economy since last summer. the chair notes the many aspects of the economy have improved especially the job market averaging 280,000 jobs per month during the second half of 2014. but again, back to the theme that there's room for improvement, specifically with the labor force participation rate and sluggish wage growth. yellen says gdp growth is expected to be strong enough to lead to a potential decline even further in the unemployment rate. she says that strong job market and a drop in oil prices is boosting consumer confidence. housing construction, however, is the most significant drag, she points out, as far as the

overall domestic economy is concerned. on the question of the drop in oil prices yes, it will be a negative for energy producers, but in the opinion of the committee it will likely be a significant overall plus for the economy. greatest concerns foreign economic developments yellen statement says could pose a risk to u.s. economic growth the european recovery remains slow and inflation has gone even lower. china, her statement points out, could slow more than anticipated. but on the other hand the chair points out the european recovery could rebound more strongly from some of the policies stimulus measures now in place and the decline in oil prices could boost global growth. the highlights from the fed chair statement. back to you. >> hampton pearson in washington. thanks for that. markets have settled back a little bit on those headlines. dow up 17 and the s&p down about two points. we do have more breaking news. time for consumer confidence. for that we get to jim in

chicago. hey, jim. >> carl, the consumer confidence numbers came out at 96.4. that is disappointing. we were expecting 99.5. last month's was revised up to 103.8 from an already ready blockbuster 102.9. on balance this is disappointing. the last couple of weeks the numbers have been soft. two bright spots is labor and oil that's about half price it was before. that's the recipe for good consumer confidence numbers and we didn't really get it today. it's hard to figure out what the market reaction has been with all the yellen comments coming out at the same time. back to you, carl. >> jim thank you very much. obviously a lot to digest in a very short period of time. let's bring in senior economics reporter steve liesman to get context here. steve, what's on your mind here? >> digesting a lot here carl. what i hear her saying is pretty much what the committee's guidance is. i think it was simon who mentioned in the lead up to yellen's remarks coming out that you wouldn't expect her to stray too far from where the committee is. i think that's where we are

right now. giving a pretty positive or upbeat view on the economy, but saying that we're still on hold for a couple meetings here until the guidance changes and putting the market on notice that guidance is -- could be changing relatively soon, by looking at these headlines. she's balancing foreign developments as well as lower oil prices. but has not given up the ghost that inflation will be returning to the fed's target of 2% in the next -- over the medium term here. so, carl, i'm not hearing her say too much of a change in policy. we go into this testimony here with the question is it june is it september? i think that's still a question but it seems like yellen is holding on to that flexibility to do june if she feels like the economy has it proved to that point, carl. >> dollar getting a slight pop here. steve, apparently shelby's welcoming yellen saying that they're going to discuss a little bit of the possibility of auditing the fed. i'm sure in the next couple of hours. >> this is a big deal.

politics behind this are as interesting as the monetary aspects of it. shelby opposed yellen's nomination for chair and for vice chair in 2010. yellen got a hard time in the last july testimony from democrats -- democratic senator elizabeth warren over the issue of bank regulation. she has powerful opponents on both sides. no friends on either the left or the right here. and we'll be listening, carl i think not only what the issues are in the back and forth there, but how much of an issue is the fed in this year leading up to next year's presidential election. does the fed -- is it seen as a place where politicians can gain some points when it comes to their constituency. >> okay steve, we've got an hour and a half of this to go through. let's bring in diane swan economist with zero financial. what are you watching for now? >> it was interesting, flexibility was the key word that steve pointed out.

the audit issue, we might see interesting playback on this. i do think it's a political issue but it's going to be more of a partisan issue than politics alone. warren and many of the senate banking committee democrats have come out and actually said they would not support an audit of the fed. that's a bit of a turn around and a bit of a vote of confidence for janet yellen at a time when the partisan politics have been very bad and it had been bipartisan attacks from the fed. i think she might get a little bit of a break there but clearly in the house tomorrow is when she's going to get grilled on issues about what they should do about sort of congress imposing their rights and control over the fed and yellen has to say, hey, you see us, you do oversight on us. we are trying to be as transparent as possible but they are worried about these sort of threats to fed independence. >> as far as the market is concerned, diane, i guess the main focus is going to be when we're going to get interest rate rises and what the pattern then once they started to hike will be. what is our base case as we go into this? >> i think actually i've been

september, i still believe september. i think june is a stretch. i do think they want the flexibility to sort of ease markets into it. one of the things they're real lit concerned about is preventing another paper tantrum. all the comments bullishness on the economy but not quite there yet, allowing for catch-up. they are gliding path slow gradual. they're going to do this incrementally but they do want to get liftoff this year. of course there are those who do not want to do that. charlie evans came out and said he will wait until 2016. i think what we will see is some sort of symbolic liftoff this year but nothing that is at staggering heights. fed is going to be very cautious on raising rates, especially given what she already noted about housing market. >> and where do you we feel the pressure points are in the market at the moment diane? i think it's a 50 basis point move we've had now on the ten-year high. in a relatively short period of time. is that where you're most likely to see a reaction or in the stock market which at the moment is up 24 on the dow? >> well, you know i think the

idea of a 50 basis point hike has been over mied. if we get -- i have 50 basis points by the end of the year. we could get there incrementally. it's not out of the range of the fed's possibility to raise rates slower and less than 25 basis point movements when they firm the rates and then stand there. i think the markets, you know they have to deal with the noise that the fed is having to deal with which really mucks up the timing. that is the noise of we saw consumer confidence today but we have also seen economic data. all of that is due to weather and work stoppages out from the dock strike -- dock work stoppages and steelworkers strike moving into refineries. all that noise out there is -- could delay further delay that june sort of liftoff and i think people are focusing too much on specific date. at the end of the day we're splitting hairs between june, september. it's going to be symbolic it's going to be gradual. that's the message she wants to put out there. when they do move they're going to do it when we can handle it. >> the deutsche bank points out the surprise are currently lowing at lowest level since the

middle of 2012. arguably that isn't getting much of a focus at the moment. what would you say to that? >> are you talking to me, simon? >> i am steve. are you still with us? >> i'm sorry. i was reading the text there. the economic surprises definitely had some weakening. some sense timing perhaps it could be a weather related issue, some of that in there. also, remember you had very very strong numbers in the third quarter as well as second quarter. i think 375, diane, correct me if i'm wrong, 3.75% gdp in the back half of 2014. >> right. >> it's not surprising we have some sort of a comedown in the numbers. i don't think and i don't hear people essentially giving up the ghost on economic growth. it looks like we're settled back into a trend kind of 2, 2 1/2% number growth simon. i don't think we can look forward to that 2 1/2% 3% number this year. >> steve, diane, stay with us for a moment if you would.

thanks guys. let's bring in art cashin to talk about what yellen is saying at least in the testimony anyway, the statement. good morning, art. good to see you. she covers everything. she covers foreign government. she covers oil. she covers wages. even some comments on valuations in the stock market. what's your headline? >> well, i think she's left herself enormous amount of flexibility here. i think the markets initially worried a little bit about some of the early parts of the statement. now instead we saw the dollar go up a little bit. we saw bond yields go up a little bit. now they're returning back to where they were before the statement came out. so i think people are learning that the fed is hanging on to that flexibility and i would still maintain it's in my mind 50/50 whether we see a rate hike this year or not. >> this meeting to meeting business, how much fear is that going to infuse in the medium term? >> well, i think, again, that's the idea of flexibility. you know we're not going to come in with one big shot and

change things. so new people will monitor. you know i think this is back to phrases like data driven and data dependent. we'll see how things go is what that means. so i don't think that will drive terror into the market. it will increase the volatility because now every meeting after the word patience comes out they will be thinking about it. i think that there's every likelihood they would remove patience at the march meeting to give themselves a lot more flexibility but it would still be at the very least two meetings after that. march is an ideal one because it's got a press conference after it. so whatever they do, she can get up and explain it after that. >> is that the case in june? i'm trying to remember. >> june i think so also. >> diane, is this just taking a step back? this isn't your first rodeo. is this how you're supposed to set monetary policy? if you're talking about landscape of interest rate rises and 18 months at the very least, should we really at this stage

be meeting to meeting? are things really so unsure diane? >> actually i think that is what they're trying to do is get away from the guidance to financial markets is a pledge. and the fed sees it as optionality. they want flexibility, as art pointed out, flexibility is the key operative word here. the only way to get flexibility is to say, remember when they raised rates before and it was baked in every quarter point every meeting, bad idea. they want to have not a pledge. they want to have flexibility. but they also want to keep on the table that they're allowing for catch-up. that they're willing to -- they learned from the taper tantrum. they want to really prepare markets for this. they don't want to say we're just going to raise rates and get markets ahead of them especially given the weakness in house pentagon this is the on going achille's heel. the persistent weakness in it. we've seen a lot of broad based gains. you don't want to see long yields back up and cut off

housing. we've not recovered from the taper tantrum. last year was a down year for housing. >> simon i just want to emphasize what diane just said. what yellen just -- she's announcing -- >> let's get to her. >> -- a new policy here. not quarter point hikes every meeting. >> senator shelby and fed chairman yellen. >> member bss of the committee i'm pleased to present the federal reserve semi annual monetary policy report to the congress. in my remarks todayly discuss the current economic situation and outlook before turning to monetary policy. since my appearance before the committee last july the employment situation in the united states has been improving along many dimensions. the unemployment rate now stands at 5.7% down from just over 6% last summer and from 10% at its

peak in late 2009. the average pace of monthly job gains picked up from about 240,000 per month during the first half of last year to 280,000 per month during the second half. unemployment rose 260,000 in january. in addition, long-term unemployment has declined substantially. fewer workers are reporting that they can find only part-time work when they would prefer full-time employment. and the pace of quits, often regarded as a barometer of worker confidence and labor market opportunities has recovered nearly to its pre-recession level. however, the labor force participation rate is lower than most estimates of its trend and wage growth remains sluggish suggesting that some cyclical weakness persists. in short, considerable progress

has been achieved in the recovery of the labor market the room for further improvement remains. at the same time that the labor market situation has improved domestic spending and production have been increasing at a solid rate. real gross domestic product is now estimated to have increased at a 3 3/4% annual rate during the second half of last year. while gdp growth is not anticipated to be sustained at that pace it is expected to be strong enough to result in a further gradual decline in the unemployment rate. consumer spending has been lifted by the improvement in the labor market as well as by the increase in household purchasing power resulting from the sharp drop in oil prices. however, housing construction continues to lag. activity remains well below

levels we judge could be supported in the longer run by population growth and the likely rate of household formation. despite the overall improvement in the u.s. economy and the u.s. economic outlook, longer term interest rates in the united states and other advanced economies have moved down significantly since the middle of last year. the declines have reflected at least in part disappointing foreign growth and changes in monetary policy abroad. another notable development has been the plunge in oil prices. the bulk of this decline appears to reflect increased global supply rather than weaker global demand. while the drop in oil prices will have negative affects on energy we producers and will probably result in job losses in this sector causing hardship for effected workers and their families, it will likely be a

significant overall plus on net for our economy. primarily that boost will arise from u.s. households having the wherewithal to increase their spending on other goods and services as they spend less on gasoline. foreign economic developments however, could pose risks to the u.s. economic outlook. although the pace of growth abroad appears to have stepped up slightly in this second half of last year foreign economies are confronting a number of challenges that could restrain economic activity. in china, economic growth could slow more than anticipated as policymakers address financial vulnerabilities and manage the desired transition to less reliance on exports and investment as sources of growth. in the euro area recovery

remains slow and inflation has fallen to very low levels. although highly accommodative monetary policy should help boost economic growth and inflation there, downside risks to economic activity in the region remain. the uncertainty surrounding the foreign outlook, however, does not exclusively reflect downside risks. we could see economic activity respond to the policy stimulus now being provided by foreign central banks more strongly than we currently anticipate. and the recent decline in world oil prices could boost overall global economic growth more than we expect. u.s. inflation continues to run below the committee's 2% objective. in large part the recent softness in the all items measure of inflation for personal consumption expenditures reflects the drop many oil prices.

indeed, the pce price index edged down during the fourth quarter of last year and looks to be on track to register a more significant decline this quarter because of falling consumer energy prices. but core pce inflation has also slowed since last summer. in part reflecting declines in the prices of many imported items and perhaps also some pass through of lower energy costs into core consumer prices. despite the very low recent readings on actual inflation, inflation expectations as measured in a range of surveys of households and professional forecasters have thus far remained stable. however, inflation compensation as calculated from the yields of real and nominal treasury securities, has declined.

as best we can tell the fallen inflation compensation mainly reflects factors other than a reduction in longer term inflation expectations. the committee expects inflation to decline further in the near term before rising gradually to a 2% over the medium term as the labor market improves further and the transitory effects of the lower energy prices and other factors dissipate. but we will continue to monitor inflation developments closely. i'll now turn to monetary policy. the federal open market committee is committed to policies that promote maximum employment and price stability, consistent with our mandate from the congress. as my description of economic developments indicated, our economy is economys a made important

progress toward objective maximum employment reflecting in part support from the highly accommodative stance of monetary policy in recent years. in light of the cumulative progress toward maximum employment, and the substantial improvement for the outlook of labor market positions, the stated objective of the committee committee's recent asset purchase program, the fomc concluded that program at the end of october. even so the committee judges that a high degree of policy accommodation remains appropriate to foster further improvement in labor market conditions and to promote a return of inflation toward 2% over the medium term. accordingly, the fomc has continued to maintain the target range for the federal funds rate at 0% to .25% and to keep the federal reserves holdings of

longer term securities at their current elevated level to help maintain accommodative financial conditions. the fomc is also providing forward guidance that offers information about our policy outlook and expectations for the future path of the federal funds rate. in that regard the committee judged in december and january that it can be patient in beginning to raise the federal funds rate. this judgment reflects the fact that inflation continues to run well below the committee's 2% objective and room for sustainable improvements in labor market conditions still remains. the fomc's assessment that it can be patient and giping to normalize policy means that the committee considers it unlikely that economic conditions will warrant an increase in the

target range for the federal funds rate for at least the next couple of fomc meetings. if economic conditions continue to improve as the committee anticipates, the committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting by meeting basis. before then, the committee will change its forward guidance. however, it's important to emphasize that a modification of the forward guidance should not be read as indicating that the committee will necessarily increase the target range in a couple of meetings. instead, the modification should be understood as reflecting the committee's judgment the conditions have improved to the point where it will soon be the case that a change in the target range could be warranted at any

meeting. provided that labor market conditions continue to improve and further improvement is expected, the committee anticipates that it will be appropriate to raise the target range for the federal funds rate when, on the basis of incoming data the committee is reasonably confident that inflation will move back over the medium term toward our 2% objective. it continues to be the fomc's assessment that even after employment and inflation in near levels consistent with our dual mandate, economic conditions may for some time warrant keeping the federal funds rate below levels the committee views as normal in the longer run. it's possible, for example, that it may be necessary for the federal funds rate to run temporarily below its normal

longer run level because the residual affects of the financial crisis may continue to weigh on economic activity. as such factors continue to dissipate we would expect the federal funds rate to move toward its longer run normal level. in response to unforeseen developments the committee will adjust the target range for the federal funds rate to best promote the achievement of maximum employment and 2% inflation. let me now turn to the mechanics of how we intend to normalize the stance and conduct of monetary policy when a decision is eventually made to raise the target range for the federal funds rate. last september the fomc issued its statement on policy normalization principles and plans. the statement provides information about the committee's likely approach to

raising short-term interest rates and reducing the federal reserve security holdings. as is always the case in setting policy, the committee will determine the timing and pace of policy normalization so as to promote its statutory mandate to foster maximum employment and price stability. the fomc intends to adjust the stance of monetary policy during normalization primarily by changing its target range for the federal funds rate and not by actively managing the federal reserve's balance sheet. the committee is confident that it has the tools it needs to raise short-term interest rates when it becomes appropriate to do so and to maintain reasonable control of the level of short-term interest rates as policy continues to firm thereafter even though the level of reserves held by depository

institutions are likely to residual only slowly. if federal funds rate will be to increase the rate of interest paid on excess reserves. the committee also will use an overnight reverse repurchase agreement facility and other supplementary tools as needed to help control the federal funds rate. as economic and financial conditions evolve the committee will phase out these supplementary tools when they are no longer needed. the committee intends to reduce its security holdings in a gradual and predictable manner primarily by ceasing to reinvest repayments of principle from securities held by the federal reserve. it's the committee's intention to hold in the longer run no more securities than necessary for the efficient and effective

implementation of monetary policy and that these securities be primarily treasury securities. in sum, since the july 2014 monetary policy report there has been important progress toward the fomc's objective of maximum employment. however, despite this improvement, too many americans remain unemployed or underemployed, wage growth is still sluggish, and inflation remains well below a longer run objective. as always, the federal reserve remains committed to employing its tools to best promote the attainment of its objectives of maximum employment and price stability. thank you. i would be pleased to take your questions. >> madam chair, i first want to get into measures of inflation. you touched on that a little. the federal reserve, i

understand, currently uses an inflation measure of core personal consumption expenditures, or cpe, which excludes volatile food and energy prices. several alternative measures of inflation exist, including one called the trim mean pce which strips out a larger basket of volatile items from the calculation. i know you know all of this. do you think that the federal open market committee should incorporate alternative measures of inflation such as trim mean pce and could you explain to us the risk of not properly gauging inflation expectations? >> so let me first say that the federal open market committee's 2% objective refers to the increase, the annual increase in the total pce price index that

includes food and energy. food and energy are very important components of every household spending basket and i don't think it would make a lot of sense or be acceptable to americans to focus on a measure that strips out these important components of the consumer basket. so we focus on total consumer prices including food and energy. but at the same time we recognize that food and energy are particularly volatile prices and in order to get a better forecast sometimes of the underlying trend in inflation we do look at so-called core inflation that strips out these measures. and in trying to understand trends in inflation and the factors impacting inflation, we

look at a broad variety of measures of inflation. although our formal index is the so-called pce price index. we look at the cpi, which is well-known to most americans, and also to these trim mean and other measures that you cited. >> you've opined on the use of monetary policy rules, such as the taylor rule which would provide the fed with a systemic way to conduct policy in response to changes in economic conditions. i believe they would also give the public a greater understanding of and perhaps confidence in the fed's strategy. you stated and i'll quote, rules of the general sort proposed by taylor capture well our statutory mandate to promote maximum employment and price stability.

you have expressed concerns however, over the effectiveness of such rules in times of economic stress. would you support the use of a monetary policy rule of the fed's choosing if the fed had discretion to modify it in times of economic disruption? >> i'm not a proponent of chaining the federal open market committee in its decision making to any rule whatsoever. but monetary policy needs to take account of a wide range of factors. some of which are unusual and require special attention and that's true even outside times of financial crisis. in the original paper on this topic, john taylor himself, pointed to conditions such as

the 1987 stock market crash that would have required a different response. i would say that it is useful for us to consult the recommendations of rules of the taylor type and others and we do so routinely and they are an important input into what ultimately is a decision that requires sound judgment. >> thank you. in a recent speech richard fisher the president of the dallas federal reserve bank has suggested a reorganization of the federal open market committee. specifically advocates for a rotating vice chairmanship of the federal open market committee as well as a stronger role for regional banks on the committee. do you support any of mr. fisher's proposals and why or why not? >> senator shelby i think the current structure of the federal

open market committee and the voting structure was decided on by congress a long time ago after weighing a whole variety of considerations about the need for control in washington and importance of regional representation. it's of course something that congress could, if it wished revisit but i would say that it's worked very well. we have a broad range of opinion that's represented at the table and active debates. the decision to appoint the president of the new york fed is vice chair, reflected the reality that the new york fed conducts open market operations on behalf of the system and has special and deep expertise pertaining to financial markets

and i think that's worked well and continues to be true that there is special expertise in new york. >> a recent article written by two economists for the think tank e-21 proposes reducing the number of federal reserve districts from 12 to 5 and making the presence of all regional banks voting members of the federal open market committee. the article states that this would preserve regional diversity while giving more authority over monetary policy to reserve banks that currently rotate as voting members. it also says that it could allow for greater safety and soundness and remove the uncertainty created by 19 independent fomc members. do you oppose consolidation of federal reserve districts? >> senator, again, this is a matter for congress to decide.

the structure of the federal reserve reflects choices that were hammered out 100 years ago and i think the. current structure works well, so i wouldn't recommend changes but, again, you know the federal reserve -- >> of the congress is it not? >> -- play. important roles in their communities, but again, this is up to congress to consider. >> my last question to you in this round. asset threshold for banks. a recent report by the office of financial research shows a large disparity in systemic risks between the largest banks and those that are smaller and closer to $50 billion in assets. all banks above $50 billion are subject to enhanced credential regulation regardless of where they fall on this systemic important scale. do you think the findings of the

office of football inancial research, should be incorporated, considered, for a determination whether a bank is systematically significant? >> well, senator, we absolutely recognize in the federal reserve that the largest banks and those closer to 50 billion are quite different in terms of their systemic footprint. and we have many different measures that help us decide on the systemic importance of an institution and there obviously are large differences there. in dodd frank congress gave us the flexibility to tailor our supervisor supervision and regulation to make it appropriate to the systemic importance and complexity in size of a bank and to the maximum extent possible

within that legislation we have tried to use the powers that we have to appropriately tailor our supervisor supervisor supervision and regulation. for example, we recently proposed extra capital charges on the largest and most systemic institutions and higher leverage requirements and those requirements would not apply to the smaller institutions. but there are many other examples, as well. >> do you know of any community or regional bank that has caused systemic risk to our economy? >> there may have been episodes in which there were bank failures that had of smaller banks that did threaten systemic consequences, but certainly it's the largest -- >> i believe you chose your

words carefully. you said may have been. do you know of any yourself and could you furnish any for the record where smaller banks, any of them are regional banks have caused systemic risks to our economy or to our banking system? would you furnish that for the record if you do? >> i will certainly look into it and furnish -- i am trying to agree with you that -- >> that they don't charge -- >> by and large, that has not been the case. >> thank you. >> yes, i agree with that. >> thank you, madam chair. senator brown? >> thank you, mr. chair. i have one comment about your answer to your last question about capital requirements that you might apply. reports have recently played clear it's made for stronger banks and more stable financial systems. thank you. senator vetter, i know this committee has had special interests, as senator shelby thank you for that. madam chair, you mentioned in that opening statement, last

october you gave a speech on income and wealth equality. all of us agree the best way to address that is a more robust job creating economy. what steps are you taking to incorporate your concerns about that and to monetary policy decisions? >> well, senator brown, as you know we are very committed to both parts of the dual mandate price stability and maximum employment. we have been running a very accommodative monetary policy in order to promote stronger conditions in the labor market. we have been monitoring wide variety of indicators of labor market performance, not focusing on any single summary measure and in particular for example, the large magnitude of part-time and voluntary employment workers

who want full-time jobs rg decline in labor force participation, part of which we understand to be or believe to be cyclical. these are things that we're monitoring inging very closely. we're also looking at wage growth the fact that wage growth has really not picked up very much during this recovery i take to be another signal that although the labor markets are improving we have further to go and we want to promote full recovery. >> thank you. for much of our nation's economic history productiveity has tracked wages. since p 1970s, as you know this has changed an productivity has continued to -- particularly in the last 15 years or so continued to grow while wages have not. how do you explain this change and what are the dangers of wages being uncoupled from productivity? >> well, we have seen a

significant increase in the share of the pie of gdp that accrues to capital as opposed to labor. and that occurs when the growth in inflation adjusted or real wages fails to mirror the growth in productivity. so that's been occurring now for some time and we have seen that occur during the recovery. we'll wages tend to rise more rapidly in this strong labor market so i interpret part of that phenomenon as a signal a sign that the labor market is not yet fully recovered but i should also say that there are longer term structural factors that may also be afting the shares of the pie that accrue to labor and capital. i think one of these factors recent research fact that many

labor intensive activities in the global production chain are being increasingly outsourced. that phenomenon i think, has tended to push down the share of income going to labor as opposed to capital over the last decade or so. there is research on this topic, so i think it's a combination of structural factors but also remaining cyclical. >> that includes the organization of labor, of workers being organized? >> that certainly could include that as a factor. >> i appreciate the steps that you and your predecessor have made to bring greater transparency to the fed. as you know there's a proposal in the house and senate to go one step further and require the go to monitor the policy deliberations. what are your thoughts on that? >> i want to be completely clear that i strongly oppose audit the

fed. i believe the transparency and providing congress and the public with adequate information to be able to understand our operations, our financial condition, the conduct of our -- meeting the responsibilities that congress has assigned to us is essential. but audit the fed is a bill that would politicize monetary policy, would bring short-term political pressures to bear on the fed. in terms of openness about our financial accounts we are extensively addicted. i brought with me this volume which contains an independent outside auditor's, deloitte and touche touche's, audit of our financial

statements. so in the normal sense in which people understand what auditing is about, the federal reserve is extensively audited. what i think is really critically important is that the fed be able to deliberate on the best way to meet the responsibilities that congress has assigned to us to achieve maximum employment and price stability and that we be able to do so free of short-term political pressures. i would remind you that in the early '70s when inflation built and became an endemic problem in the u.s. economy, history suggests that there was political pressure on the fed which interfered with its decision making. it was in the late 1970s that congress put in place the current feature of law that

exempts monetary policy deliberations and decisions, the one area that's exempted from gao audits and i really wonder whether or not the volcker fed would have had the courage to take the hard decisions that were necessary to bring down inflation and get that finally under control, something i think has been very important to the performance of the u.s. economy. i wonder if that would have happened with gao reviews in realtime of monetary policy decision making. so central bank independence in conducting monetary policy is considered a best practice for central banks around the world. we are one of many many central banks that are independent and academic studies, i think,

established beyond a shadow of a doubt that independent central banks perform better the economies are more stable and have better performance in terms of inflation and macro economic stability. >> last brief question, madam chair. you mentioned your community advisory counsel. what are you doing the encourage regional bank presidents to follow suit? >> well, reenlg nap banks,gional banks are actively involved with their communities. they have community development programs and are really trying to address the special needs of their communities. but in washington we also encourage and have oversight of those activities and strongly encourage similar practices. >> thank you. thank you, mr. chairman. >> thank you, mr. chairman. chair yellen i would like to use my time going over the igrippa process that we're in right now with you. the first economic growth and regulatory paperwork act, or

egrpa review submitted to congress in 2007 states quote, besides reviewing all of our existing regulations to an effort to eliminate unnecessary burdens the federal banking agencies work together to work from new regulation and current policy starmts as they were being adopted. i think you know where i'm headed here. the report submitted to congress specifically discuss consumer financial protection issues, antimoney laundering issues and included recently adopted rules. however, included in the federal register put forward for this current ten-year egrpa pro guess we are now in where we are supposed to be having our financial regulators, by law, look for outdated unnecessary, unduly burdensome regulatory in the system there was i think a remarkable couple footnotes included which basically said the agencies engage this time

around are going to back off. they're basically going -- not going to review new regulations that have gone into effect not going to review regulations that are currently being considered and will go into effect during the egrpa process and clarified that the cfpb is not even going to be a part of the process. the entire consumer financial protection bureau weren't be a part of the process. my question to you is going to be would you not agree that we should have a thorough egrpa process that reviews all rules and that the consumer financial protection bureau or the consumer regulatory system should be a part of the egrpa process? before i put that question to you i would like to say we had a hearing last week which was dealing with community banks and credit unions and the regulatory burdens that they face. i asked the witnesses, and every one of them said that in the set of rules and regulations that

they feel are creating pressures are rules and regulations coming from the consumer financial arena, coming from the antimoney laundering arena, and coming from the dodd-frank legislation that is recently enacted. which would be exempted from the current agency's review. a couple of examples they gave were the qualified mortgage rule that needs to be reviewed the volcker rule that needs to be reviewed and yet, all of this is apparently outside the scope of the entire grip of process that the agencies are now undertaking. could you respond, please? >> so in the rules that have gone into effect or are in the process under consideration and will go into effect related to dodd/frank we had federal register notices took public comment, and important part of designing those rules, was

considering the costs, the burdens and what was the most effective and appropriate way of designing regulations to meet dodd/frank objectives. so in the sense, what a grip asks of the agencies is something that we have gone through very recently in the process of designing regulations in some cases that have not yet even gone into effect. >> would your answer be the same for the consumer financial protection bureau because it's new that we don't need to review its rules -- >> i can't speak to -- we don't have that rule-making authority and i'm, sir, i can't speak to what role the cfpb is going to play. >> i understand the argument. that's the argument we got from the regulators before us two weeks ago in our hearings. it seems that's not what egrpa says. it doesn't say let's review the

rules and regulations that are old. it's says let's review them all. that's what law was passed to do. if you look at the dodd/frank legislation you were saying has recently been through the process or rules and regulations through the process, the dodd/frank legislation was 848 pages long but the page count of the regulations required by dodd/frank has mushroomed to more than 15,000 pages and they're not finished and over 15 million words of regulatory text. and to say that the fact that they are now, and the fact that the implementation process has been completed on them i don't think is a satisfactory response to the requirement of egrpa that the agencies need to look at their regulations and identify those that are unnecessary or unduly burdensome. >> well we are holding public hearings and we'll be taking extensive public comments. you mentioned community banks.

we are very focused on trying to find ways to reduce the burdens on community banks and during this process we'll be very sensitive to looking for ways in which we can reduce the burden of regulation and we'll be reporting back to you. >> thank you. my time is up. i would enkourmg you and the other federal regulators to focus on the full intent of egrpa and expand your review. >> thank you. >> you you're watching live testimony of janet yellen on capitol hill. we'll be back shortly.

. you're watching day one of live testimony of the fed's chair janet yellen on capitol hill. let's bring in steve liesman discussing the theory of bank raeg glation. seems from a market perspective the big news here is that they're defusing the long-term style of guidance and moving very much to a meeting by meeting, rate rises could come at any meeting, change at any meeting although not for the next couple months. >> yeah. not just yet would be the way to say it.

when they start doing it it will be meeting by meeting. that's yellen talking against the way that rates rose earlier this century by quarter points 2003 2004 2005 when they did it in a predictable way. yellen saying it could happen meeting by meeting, paving the way for possibly removing in march but not saying that will happen. she just said during the break, simon, there's an internal review going on at the federal government following allegations essentially of problems with supervision and regulation at the new york federal reserve bank and wla they're looking at is whether or not dissident views can reach higher levels inside the fed. they're trying to deal with some of the ideas of what's called regulatory capture at the federal reserve, simon. >> talking about that everyone on twitter is talking about what the font is on her name plate. let's get back to the fed chair. >> clearing houses that would take bilateral transactionses

derivatives, swaps, and put them on a multilateral basis but that introduces a degree of risk in terms of clearing houses themselves. and i just want to, obviously, put on your screen which i think already is the sensitivity that we have to continued oversight of these clearing houses both our own and others across the globe because of the potential systemic problems. can i just put that on the table? >> absolutely. >> and i want you to note that i'm -- we're very attune to the need to be careful in our supervision, that we've taken the step forward, i think, as you mentioned, in moving a great deal of clearing to clearing houses. eight financial market utility sies

including the most important central counter parties have been designated by fsoc as systemically important financial market utilities and they are being supervised by the federal reserve. those based in the united states. the fed, the cftc and the sec. there are a set of principles that haven been put in place and agreed globally for what best practices are in terms of lick liquiditity standards and other risk management standards for the financial market utilities and it is extremely high priority for us to make sure that we vigorously enforce those standards and we're in the process of doing so because although these entities reduce risks that were previously present, they create their own risks if they're not

appropriately managed. so completely agreed this is important. we're giving it a great deal of attention. >> thank you very much. >> senator corker. >> thank you, mr. chairman chair yellen thank you for being here today. there's a push right now to add a provision addressing currency manipulation in the asian pacific trade deal. do you think trade negotiations are an appropriate place for these currency issues and what if such an effort leads to the inclusion of international arbitration panel under tpp's enforcement procedures where companies or other nations could challenge future monetary policy decisions by the fed? >> so let me first say that i think currency manipulation that is undertaken in order to alter the competitive landscape and give one country an advantage in