bottom. western digital also, western digital shares are also responding to that. what do you use the disc drive for now? i don't understand. no wonder their businesses are bad. >> no, hard drives. >> okay, yeah, forgot. floppy discs. >> "squawk on the street" begins right now. >> already had one accident. good thursday morning. welcome to "squawk on the street." i'm karl quintanilla with jim cramer and david faber at the new york stock exchange. news to start the hour, treasury secretary jack lew speaking to cnbc about the tax inversion crackdown and responding to companies' claims the new rules came as a shock. >> i think that it should have been no surprise to anyone that we were working on this because we've been working on it for a long time.

>> we're going to have much more of sara eisen's exclusive interview in just a few moments. in the meantime, a lot to look at as stocks hit new highs for the year, about 2% from all-time highs. bank earnings in focus. europe's mildly positive. core cpi up 2.2% year on year and jobless claims hit a new low going back to 1973. first up, wells fargo beating expectations with a first-quarter profit of 99 cents per share, revenues above consens consensus. they say while credit results remain solid, the oil and gas portfolio remains under significant stress due to low prices and excess leverage in the industry. and then b of a exceeded estimates with first-quarter results, put profits down 18% on a double-digit decline in trading revenue. not a repeat of the performance we got out of jpl. >> going over these quarters all morning, and i have kind of a very simple takeaway, which is that, wow, if these companies were to have a bunch of rate hikes, you know, they'd make a

fortune. and if they don't, they kind of do a little bit worse. and the stocks took a swoon when we found out there were only going to be two rate hikes, and these two numbers do not make me feel like, you know what -- my charitable trust banks are not the ones to own if there's a rate hike because they can loan progressively and they make a fortune. but jpmorgan set a high bar yesterday, because their whole release, their whole conference calls, their whole attitude was basically, look, we don't really care as much as we did when we thought we were set up for rates to go higher. and so, that's why i think jpmorgan was a big one, because they kind of distinguish themselves from just a rate hike bank, and that was impressive. >> yeah. they also distinguished themselves because the expectations had gotten down to a point where they were able to beat them, even though it was not an impressive quarter from a year over year perspective. everything was -- >> right. >> -- most everything was in decline, not everything, jim,

but it did set a tone. i just wonder whether now that we've heard from b of a and wells fargo this morning, that will continue, or did that rally already burn itself out yesterday? >> no, look, there is a deep cyclical component to bank of america. it's now -- tangible books now 16. i know without the regulators saying green light to buy as much stock back as you want, that's very hard gap to close. but i look at caterpillar, which is up $8 this week, even though peabody filed bankruptcy. and i say, people felt caterpillar was devalued. there could be someone who says bank of america's devalued, but in the end, you've got to have the people who want three rate hikes win in order to make that stock fly. i mean, bank of america is so set up for higher rates, it's amazing. therefore, it's not set up for a raise. >> meanwhile, the cfo, denof roe saying more tepid comments than

dimon, slowly improving. as for trading, said march obviously felt better than january and february and that april feels a little bit more like march than the first two months. >> i thought that was great! and you know, they do have a huge amount of revenues. again, i'm making the case for not selling it. i can't make the case for pounding the table and buy. i felt like i could with jpmorgan because they had such great momentum, and they did make the march comment. but you go over -- i mean, we can talk endlessly about oil and gas, and oil and gas is not good, but a lot of that is starting to get baked in. but david, we were talking beforehand -- >> yeah. >> you don't really know how bad the exposure to oil is because you don't know the quality -- there's a lot of lines that still can be drawn down. >> right. >> bank of america has a lot of lines to be drawn down. you don't really know the quality of these guys. you know if oil goes back to $26, you have to sell almost every bank. but if oil goes to $50, then the pressure's off. >> yeah, and do we get any real sense on the conference call or anything else? i mean, some of them have not yet taken place, but -- >> i think that, you know, the

sense is that, geez, we hope -- well, hope should be part of the equation -- but look, we're okay. if oil goes down big, we're not, and if oil stabilizes, we're okay. again, this okay concept is part of the earnings conundrum i have right now. csx was okay, and people bid that stock up 4%. okay in some industries when you're down from $37 to $24, like csx, are pretty good. bank of america -- i mean, it's almost like they should put out a release that says we are ready for rate hikes. >> but the overall barometers for the u.s. economy are not bad -- >> no, no -- >> 7% total average loan growth. >> yes! the revenues are there. >> that's not bad. i mean, we know deposits -- think about the number, $1.2 trillion worth of deposits. >> can you imagine when rates go up, how much money -- >> at wells fargo. >> look, i think net interest margin was a little bit shy. you know, you're picking, nitpicking. look, the theme of today is, is that we have better jobs and we

have low inflation, and that's an environment where you do not want to sell bank of america and wells fargo. you don't! better job growth and lower inflation? that's when you buy these, but you need a catalyst, and i haven't heard the catalyst. and i know stocks were up big yesterday. so, let's accept the fact they were up big yesterday and to have a second-day rally, you would have had to have seen tremendous earnings growth, and you can't. you can't get it! >> if the question is on the overall markets whether this is a blow-off top or a sign of something new to come -- >> i find it hard to be a blow-off top when you have low inflation and better job growth. that's kind of like, my whole life i've wanted that. since 1979, when i bought my first stock, what you wanted was low -- what's the matter? >> jim came out of the womb, said give me low inflation and good job growth! >> take the top off! >> no, but -- >> listen, pop! >> when my first-born was born, i bought alcoa and that was a big mistake. never mind. >> let's not read into that --

>> because that's the past. that's years past. but i do think when i look at an environment where the fed can't raise and job growth's okay, look, we had real earnings of plus 0.2% in march. it's pretty good. and in that environment, i can find stocks to like. i guess that's what i'm saying. look, as long as i don't buy value traps like a seagate, right? those are problematic. i don't buy coal. i don't want to buy coal. i don't want to buy oil companies that need $80. equal is the best place in this country to drill. sorry to reassociate with that. >> that's okay. >> and there are three counties where you can make money, the best prospect. when i look at the oil and gas loans and see that they're criticized, i'm more worried than they are. i'm more worried. >> and perhaps you should be. quick aside for me, and this is sort of apropos of nothing. i mean, guys, please, what are these press releases that we're now dealing with?

this is decipherable. please stop, bank of america. jpmorgan started this trend. here they are. >> i thought they -- >> where do they -- your eye doesn't know where to go, you have no idea. and look at ge, by the way. i just picked that one , too. i mean, come on, guys. give me an old-fashioned press release like wells fargo, all right? i can read it! i can actually read it. stop with this newfangled press release that basically is designed to make you not want to read it. i don't like it. >> look at unilever, since they have a model on every other pitch. >> okay. >> by the way, you can't rely on these press releases for anything other than basics. read the cues -- >> you want this, right? >> yes. yes. >> that's nice. >> swimsuit edition. >> sure. >> i mean, this is a guy whose stock is going up. >> jpmorgan will put her on the front of their press releases next. anything to divert your eye from the actual news. nonsense. >> it's got my eye. >> coming up, sara eisen's

exclusive with treasury sec jack lew on the sweeping tax inversion tracrackdowns and earnings, delta and a lot more. don't go away. ng good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird. steve, other than making i'm here atme move stuff,rade trader offices. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings.

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our sara eisen's in washington this morning for the imf world bank meeting. she spoke exclusively with treasury secretary jack lew. sara, good morning to you. >> reporter: good morning, karl, david and jim. jack lew is playing host this week to finance ministers and central bankers from around the world. he wants to project u.s. leadership, engagement in the global economy, contrary to what we're hearing a little bit on the campaign trail, but of course, we had to start the conversation with his recent clamp-down rules on inversion. so, i asked point blank, was it your goal to kill this more than $150 billion merger between pfizer and allergan? here's what he said. >> let me be clear, the goal of what we've been doing here has been to deal with inversions as a matter of policy. i said several years ago, the right way, the best way to do it is for legislation to be passed that would do serious comprehensive business tax reform and shut down inversions once and for all. i also said we'll use whatever

administrative authority we have, and it's a complicated matter because you don't have infinite flexibility. we have worked and worked on it. this is the third action we've taken, and each time we've slowed down the pipeline, and each time i've said congress needs to act because we want to make sure that inversions are stopped. i think that it should have been no surprise to anyone that we were working on this, because we've been working on it for a long time. >> i think how aggressive it was came as a surprise? i mean, do you understand the frustration of the companies who say we went about it legally, we played by the rules, and the rules got changed after the fact. brent saunders, the ceo of allergan, told us it was un-american. >> you know, what i think most americans understand is here we are in tax season. most americans either have or will be filing their tax returns over the next few days, and they know that if you're on a salary, you pay your taxes every year, and that's that. the idea that a company could take advantage of all the benefits of being in the united states, the wonderful rule of

law that makes us the best environment, the innovation that's supported by publicly supported research and development, the infrastructure that's supported by tax, paid for, roads, bridges and tunnels, and the education that's paid for out of our tax code as well. >> reporter: but i don't think it was a question of that. >> but that is the question. the question is, if you get all the benefits of being in america, doing business in america, do we have to change your address to avoid u.s. taxes is wrong. we said we wanted to stop that, and we are continuing to look at what tools do we have. so, i actually don't think that anyone should be surprised. most americans are offended by the idea that this can be done. >> reporter: but the issue was sort of the way of going about it retroactively. even your predecessor -- >> it was not retroactive, let's be clear. that's very important. what we've said all along and the way these kinds of things are done is it affects things that have not yet closed, have not yet taken place. you know, i don't know what else is in the pipeline, and frankly, our goal is to stop the

pipeline. >> reporter: but the serial inverters like allergan who had made acquisitions, those acquisitions in the previous three years did not count. >> so, this question of serial inverters is a really interesting one. it took a while for the pattern to become clear that companies plan over a multiyear time horizon, to be able to build up a big enough foreign presence so that the inversion can take place where it meets the technical rules not to be subject to u.s. tax. what i'm really focused on is shutting that pipeline down so this is not available as a matter of policy going forward. and as with all policies, it's effective when. >> reporter: even hank paulson said he's troubled by the effort, saying "we're a nation of laws and rules and you can't change the rules after the fact and keep changing them and changing them." >> i think we have a well-established practice of issuing guidance based on legal interpretation, based on legal authority, and that's what we've done here. everyone who engages in business

knows that it's subject to changes in law or rulings. and i think the important thing here is that everyone has been on notice for a very long time. it hasn't been a secret that this is an area of deep concern, bipartisan. my only frustration is that legislation hasn't been enacted to deal with it in the best way. but we remain focused on what administrative tools do we have to stop the pipeline as much as we can until congress acts, but congress needs to act. >> reporter: is there more to come from your office until -- >> we're continuing to look at what options there are. i mean, we've obviously now taken a third action, and we have some of the best tax lawyers and tax analysts. and i have to say, the people who work on this are the most non-partisan people you could imagine. they're tax professionals who are broadly respected for their ability and their integrity. >> reporter: so, potentially more rules on -- >> yeah, i'm not going to announce anything else. i'm just saying, what we've said all along, we'll continue to look at what tools we have. >> reporter: then what would you say to a business, executives

who already face so much uncertainty right now about the global economy, they're trying to plan, and now the government can come in and change the rules in a way after the fact? how do you plan in that kind of environment? >> you know, look, i think to the extent that you're talking about mergers and acquisitions or foreign direct investment in the united states, we are profoundly in favor of economically productive investments. what we're not in favor of is using tax loopholes to move income around to avoid taxation. if you're working on a deal that has really economic benefit, this is not going to be something that interferes with your plans. if you're trying to structure a deal to avoid taxation, the goal was to make that harder. >> reporter: jack lew defending the recent actions and rules on inversions, saying it shouldn't have come as a surprise, addressing some of the company criticism and criticism from the broader business world there. he also did not rule out that more rules are coming on

inversions, said this was the third one and they have a whole team of non-partisan tax lawyers working on this kind of legislation. the full interview with treasury secretary jack lew is on cnbc.com right now. and in the next hour, guys, i'm going to bring you some more of that interview. we did talk about the current legislation that's going through congress on puerto rico and how the treasury is going to deal with some of their debt problems. we also, of course, talked about this issue of too big to fail. calls are heating up for more action on banks. and karl, because i love you, of course i asked about alexander hamilton remaining on the new $10 bill, with everybody loving the play, and he gave me a hint as to what's to come. i'll have all that in the next hour, but for now, i'll send it back to you. >> that's called a tease right there, sara. really nice work getting a lot of news out of the treasury secretary on a day where larry fink on our air stopped short of criticizing treasury but said he would have preferred a dialogue between the companies. >> yeah, you know, i think, jim and karl, clearly, pfizer and allergan, the senior executive,

the leadership there questioned how atune they were to this potential change. and regardless of what the treasury secretary says, when it comes to the three-year lookback provision of those changes in the regulations that took place, it was designed to stop the pfizer/allergan deal. and in fact, it was designed primarily with that in mind, at least based on the reporting i've done thus far, and bue beautifully done, because the people who figured it out knew it would effectively stop the ability of that deal to go forward, at least as it was currently constructed, and therefore, they abandoned it. the earnings provisions of the changes in the regulations may have more of an impact overall and will affect foreign companies that have u.s. subsidiaries that have been trying to reduce their u.s. tax bill. you know, there's so many different parts to this, not to mention, of course, the fact that they've locked into a permanent bidding advantage, those companies that have already been inverted and that are in consolidating industries. >> yes, right. but sara, i mean, when i look at

the idea that you're not surprised -- not surprised -- allergan has lost $120 in market -- >> since the top. >> right. >> since its top. >> and those are people who were surprised, and they tend to be very smart people. i'm close enough and done enough homework to know that they weren't surprised, they were out and out shocked. >> they were. no, they were. >> okay? they were shocked. >> and they were questioning why they didn't have a better sense for it, fair to say, in retrospect, or at least, there's nothing they could have done, because the provisions in terms of the three-year lookback simply weren't possible for allergan to get around to be the size that pfizer were to be able to make it aine version any longer. >> you and i were following this closely, going back and forth, and we both realized at the same time -- we just said, oh, my god, this is to stop the deal. i was shocked. you were a little blurry-headed about it. but when i figured out -- i said, this is truly unbelievable, given what i had

heard from the two companies. and look, it's he said-she said. secretary lew said they should have seen it coming. maybe the tax advisers, maybe -- i don't know. my sources did not see it coming. >> no. i think that's a fair point. >> when we come back, we'll count down to the opening bell, we'll get cramer's "mad dash." the dow begins the morning less than 100 points from 18k. the last time we were there, july 20th. back in a minute. y, jesse. who are you? i'm vern, the orange money retirement rabbit from voya. orange money represents the money you put away for retirement. over time, your money could multiply. hello, all of you. get organized at voya.com. we believe in the power of active management. anagement, we actively manage with expertise and conviction. so you can invest with more certainty. mfs. that's the power of active management.

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listening to you, the ceo of delta, was listening to you when you ranted about the little bit moji, jpmorgan -- >> the bank of america press release, jpmorgan. they're indecipherable, and i'm tired of it. >> okay. delta is the opposite. it's a straight out terrific beat. earnings tripled. here's what i really like about it -- capacity is not going to increase nearly as much as i thought. you know, they're talking about a 2% to 3% increase in capacity. there were a lot of concerns when these stocks took their big swoon that it might be up to -- also here -- maybe 4%, 5% capacity, so it's a very good number. obviously, fuel is amazing. at $2.93 last year, $1.34 before. this is very cheap stock, like bank of america, cheap stock. but remember what you said at the beginning, this is first one. stock's come down a lot. it's kind of an intriguing value play. it's a value play. >> what's the multiple we're talking about? seven times. they earn their cost to capital now. they actually buy back stock. they return capital. >> they're actually going to buy

back stock. at this pace, they don't want to nail themselves, but 8% of the company's being bought back this year. they continue to buy. i mean, this is an airline, returning -- >> why is that attractive? it hasn't been a bad performer. >> nobody believes -- first of all, if we had a longer-term chart, you would see that it's up big. >> okay. >> but secondly, no one believes. i'm telling you, that capacity number indicates you should believe, and the commentary about getting the revenues back, plus the dollar. the dollar really hurt them. and the dollar continues to get weaker, you're going to see a very big earnings game here. i like this stock very much, and i like the fact that there's no gizmos, no gimmicks. >> no. >> it's just straight out the way it used to be. this is throwback thursday. >> it's a throwback press release. you can actually read it. >> yes. >> all the lig boxes and the emojis and -- >> no bitmoji -- >> here's the commentary down here. don't look over there, look over

here. designed to have you not actually look at it. >> you know the oil and gas situation at banks, a problem? >> yeah. >> not a problem for delta. the lower the oil, the better. simp simple, dal. >> speaking of financials, we have to get to blackrock earnings and more. we have the opening bell coming up after this.

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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in less than a minute. the dow 92 points from 18,000, 2% from all-time highs, erasing the losses not only for the year, but for all of last year, 2015, although tonight china gdp -- >> right, look for something north of six, i think we'll be fine. there were a lot of top callers in this market, if you recall. a lot of people put out bulletins saying this is a dangerous time. it's proving far less dangerous, and i think there are a lot of people with a considerable short base, and they probably support not great numbers and they don't

go down because there's a great shortfall. >> japan at a two-week high, china a three-month high. we'll see what happens. >> i just think things -- i told you, things are okay. things are okay. they're not okay if they're in energy 21, by the way, which you'll see has filed for bankruptcy. you're not okay if you're in peabody, but listen, joy global was up yesterday. they need their equipment to get oil out of the ground. so it's a counterintuitive rally in the cyclicals. >> there's the opening bell. s&p at the bottom of the screen. at the big board, the governor of tokyo, japan, doing the honors. over at the nasdaq, the good plus foundation, providing low-income parents with essential child products and services. and yes, that is jerry seinfeld. what is it with the opening bell, jim? every day they ring this bell. [ laughter ] >> call me cramer, okay? don't call me george. >> no, no. >> some research to get to.

chipotle continues to get bounced back and forth. today it's jpmorgan upping to an overweight, $510 target. they say comps not only are bottoming this quarter, but expectations on margins are effectively set. >> i thought that was a great piece of research. what they're basically saying is, listen, we're going to go back to -- 2017's going to be like 2014. if that's the case, you want to buy it. it was very well reasoned. they have a fabulous balance sheet, they have a lot of firepower, and they tend to use it. they bought a lot of stock for $500, bought a lot of stock for $400. and i believe if you look at jack in the box after the terrible e. coli, you look at the kfc in china, you look at taco bell a decade ago here, you see everybody comes back within 8 to 12 months. jack took longer because it was a terrible situation, but they came back. >> that's your top s&p gainer, chipotle, along with wynn on reports that steve wynn bought 73,000 more shares. >> he doesn't stop. remember, he bought about $100 million worth of stock --

>> it's a good time to follow him in when he bought that initial. >> yeah there were some guys who downgraded it the other day and he's basically saying come get me. steve wynn is a hero of mine, so, he's basically not going to sit there and say you downgrade my stock, i'll show you. the chinese communist party, we all know behind the scenes is letting up on some of the crackdowns. >> maybe a little bit. >> they are. >> but you look at number bree's numbers, high-end, relies on china. they were not great. >> i think johnnie walker blue, those are things you give when you want to get by, part of the gift-giving process in china. >> yeah. >> you're still not there yet, huh? >> i think many people will tell you when you speak to people who study these things, xi has more power than any premier since mao. >> that's true. totally true. more than deng xiaoping?

>> yeah. i'm no expert, but i try to talk to some of them. >> holy cow! wow. >> and he, you know, lawlessness was rampant in china prior to his taking over. >> it was. but the state-owned companies, they have not been able to get them to rein in. >> no. >> that's what i'm saying, they still can't rein in the state-owned companies, now that they're now -- mao, huh? wow. deng xiaoping was a very powerful guy. >> he was. >> more powerful than mao's wife? >> more concerns about the enterprise this morning, jim. on seagate, western dig not far behind. seagate's guiding q-3 revenue, 2.6 versus 2.7 estimate. >> the tobacco stocks. there was a positive story of seagate, looks like a value trap, they have got to cut costs. the pc segment is very, very bad. by the way, 3d systems gets a guy from hewlett-packard, and

you see dvd soaring. but the disc drives, everyone's trying to catch a bottom in them and it's really eluded people, because they are value traps. disc drives are a thing of the past. everyone keeps saying that intel's going to report a bad number and intel stock hangs in there, but it does have a good yield. seagate has a good yield. i think people are worried about the dividend. >> in the minute we have before the world bank president, i want to mention blackrock earnings. the stock is down a bit. diluted earnings per share decreased 19%, 13% as adjusted. always important now as we're in earnings season to look at all of these adjustments. in the case of blackrock, they adjust their operating income for restructuring charges comprised of sell ransom, previously granted deferred compensation rewards and exclude product launch costs, such as closed-end funds, which is a key part of their business, launching these products, and related commissions. they believe the exclusion of those costs is useful because the costs can fluctuate

considerably. i don't know whether that should be the case, but blackrock didn't -- you know, it's flat. >> well, this is the issue. i mean, things are okay. and so, you're looking for something that is -- that people don't think was going to be okay ahead of time -- delta -- and it turns out that delta is good. excuse me for, you know, i just want to get a current quote. but you know, delta was not horrible. and people thought that for some reason there were going to be big capacity increases and they wouldn't do that well, and they did well. but the bank stocks, you know, yesterday jamie dimon stole a lot of the thunder. >> yep. >> it was very hard, very hard to be after them. you don't want to do it. and bank of america should report the day before. >> let's get back to sara eisen, who's live in washington at the imf world bank spring meeting. sara? >> reporter: hi, karl. i am here with one of the hosts of today's meetings, president jim yao kim of the world bank. thanks for coming on. >> thanks for having me on. >> everyone was surprised when

president obama nominated you, a doctor who spent much of his life in public health care policy. well, now that's coming in handy. >> yeah. you know, we're in the middle of trying to build finally a pandemic response system. you know, the insurance companies will say -- >> you're talking about zika. >> yeah, insurance companies will say pandemics are a huge downside risk to the economy and we've been trying to do it. now zika has illustrated again why this is such a concern. zika's important because it's one of the things we fear the most, an old bug, an old virus that behaves in new ways. that's one of the big concerns. the other is something like the spanish flu pandemic that killed 25-plus million people. we could very much have something like that today and still as a world we're not prepared for it. and talk about downside risk -- >> reporter: but we're not talking about any deaths from zika. >> no, but this is very important. i think what tom frieden with cdc did was important -- >> reporter: last night. a turning point? >> it was a turning point, really good. it was not easy to make that association. they had to really think and be

creative to make the association. but now the association's very clear with children. and at w.h.o., they've also made the association very clear with adults. so, this is a major issue. it's not like the flu pandemics that kill tens of millions of people, but it is again an illustration that there are many downside risks to the global economy that we have not really buffered. the pandemics is one, climate change is another, the refugee crisis, forced displacement is a third. and all of these things now, we are really stepping up to try to see if we can put in place mechanisms that will buffer potentially the effects of these kinds of crises. >> reporter: you mentioned we were unprepared on zika. there's currently a debate over whether congress should release $1.9 billion that president obama has asked for for research in fighting it. is that necessary? >> well, you know, our view is that if you look at the potential impacts of pandemics, of things like zika, you know, the earlier you spend, the better. the later you spend, the more expensive it's going to be. and so, we think that

preparedness for zika in every country in the world is really important. and of course, you know, again, every minute that you wait, the cost goes up. >> and your estimation of what we're looking at in terms of the united states as we get into the warmer weather, what are we talking about, something of crisis proportions? >> well, we've heard 30 states, right? so, if it's 30 states and we know that, for example, in pregnant women, we don't know the numbers yet. we don't know what percentage of pregnant women, for example, infected with zika will have these effects. but the thing is, the only things that we're recognizing now are things like microceph y microcephaly, which are very dramatic effects. the other question is, could there be more subtle effects that don't look like microcephaly but show up over time as other problems with children's brains? >> reporter: question on brazil, where they're feeling this crisis acutely, not to mention what is going on with the political upheaval and the economic pain ahead of the olympics this summer. such an important market for corporate america. how deep is this recession? how many years is it going to

last? >> you know, a lot of fundamentals have been put in place. i mean, our current managing director, chief financial offic officer, minister of finance in brazil just before coming, he did a lot of very good work. that government did a lot of good work in getting some of the macro fundamentals in place. right now, though, it's a political crisis, and we don't see -- we see negative growth again for brazil this year. we think that if the political crisis passes, that brazilian recovery could be pretty robust, but the political crisis has to past first. >> reporter: china, you have a great handle on the emerging markets. the guys were talking about the relative calm we've seen in china with gdp numbers coming out tonight. the question is, is this temporary? they certainly seem to have a handle on their currency and on their economy. or is the worst behind us? >> we've been working with china really for about ten years in doing just what they're doing now. they're transitioning to a

different growth model. so, we see some signs that are really positive. service industry is now more than 50% of the economy. we see clear growth in consumption. there are still some issues that they have to deal with. they're still overcapacity, but they're aware of that. there is still a high level of indebtedness in the private sector, but again, they're very aware of that. what we're seeing in china is a deliberate move toward more sustainable, higher quality, but a lower growth rate, but we still have to remember that china has been responsible for 30% to 40% of global growth over the last few years. this is very important, and i think the chinese now understand fully the weight that they have in the global economy. and i just met yesterday with the central bank governor. he is communicating so much more clearly than he did even nine months ago, and he knows that it's important -- >> reporter: what's he doing with the currency? is it done devaluing? >> so, what we're doing is something that's really, again, unprecedented. this is a huge economy. they're joining the sdr, and

they're now not just pegging it to the dollar, but they're pegging it to a number of different currencies. they're beginning to communicate about what those currencies are. and they now know very clearly that communicating what they're doing is a critical part of the work, and he is very committed to it. >> well, certainly, investors have been a lot calmer about the china situation. always good to see you. thank you for your thoughts. president jim yong kim, the president of the world bank, talking china, talking emerging markets, and of course, very focused here on zika. just a flavor of some of the conversations in the imf building here at the world bank imf spring meetings, karl. >> sara in washington, d.c. sara eisen, thanks. stocks not going anywhere. bob pisani's on the floor with that. hey, bob. >> not right now, karl, but we've had a nice move up yesterday, remember, and also, remember big moves in asia. take a look at what happened overnight in asia, nikkei out-performing. a littlen weakness always helps. the hang seng is strong. we'll get china gdp tonight, but that's the highest level for the shanghai since early january.

nikkei also on the up side on yen weakness. fractional gains in europe, but what's interesting is here in the united states, what's going on, if you look at the energy sector, modestly to the up side here in the u.s., despite the fact that the russian oil minister said there may only be a loose agreement to freeze production in doha. so, if you look at energy, well, energy just went negative. that's interesting. it was positive just a moment ago. industrials, consumer discretionary and financials fractionally on the up side. take a look at the big earnings picture here. we did have earnings from bank of america, wells fargo, and they were pretty good numbers. but remember something, you see wells fargo down a little bit. that's had a big run-up this week, up 4% going into the open today. so, a lot of these stocks have moved up in anticipation of earnings. regions and citigroup will be reporting later this week. as far as specifics on the bank of america earnings, a little discussion already, but i think it's very important, long growth 11%. that's a pretty good number. deposits up almost 6 partly clou cloudy -- 6%, pretty good numbers. energy reserves, everybody's worried about losses in the

energy group. $500 million, added to reserves, so now they have about $1 billion in reserves. that's about 4.6% of their energy exposure, pretty high reserves here. similar with wells fargo. total loans up 10%. those are good numbers. again, they have very high energy exposure, so everybody's looking at these reserves for energy, potential losses in energy, $200 million. so, total reserves are now pretty high here for them as well. remember something about all of this -- as oil goes up, the chances that there will be large and dramatic defaults later this year declined, so it's actually good news that oil's going up because there's a chance these reserves may never actually have to be realized against actual losses. finally, just a note, we had a warning from burberry, getting pressure, you see them all to the down side. karl, back to you. >> bob, thank you very much. quickly here, airlines leading the charge. >> yes! >> i'm looking at the average price delta paid for a gallon of

fuel in q-1, $1.33. a year ago, $2.93? >> remember, they also were in refinery. it's such a fine company, so undervalued. totally rodney dangerfield. remember rodney? >> i do. >> remember the great sam kinderson? >> i do. >> that scene about vietnam, back to school. >> they're getting some respect today. >> in the end, dangerfield wasn't great. >> he got respect, finally. he got it. >> let's get to the bond pits as well. rick santelli at the cme in chicago. hey, rick. >> hi, karl. you know, we've had a bit of a nice ride, a little wild ride when it comes to treasuries, but not necessarily where they closed and not necessarily expanding the range. looking at interim 10s, we're up just a little bit, moderating a little. but a one-week chart -- and they reflects intraday levels versus

the normal charts -- the drift is towards the up side. we couldn't challenge the sub-170 area. if you look at the hyg, the barometer we've been looking at for risk-on, hey, today was the day it finally popped up. these are the highest levels since the early part of december last year. one week of the bunds. this chart also is more of an intraday versus my normal close only charts. why? because it's so unreal to see that it basically came close to the seven base points but closed higher. that's intraday. 17 to 18 on a one-week chart, now that's some serious movement when you consider how coiled some of these markets are. and the last chart, one week of the dollar index also showing a lot more of the points from an intraday perspective. you know, the dollar was strong yesterday, rates were down. you see that this chart really is right. there is a drift here. the big news is the fed is going to normalize, the dollar's weaker, maybe multinationals will kick better butt in the future, but it's a chart you want to watch, especially in

deference to the 94 area. by the way, coming up shortly, we're going to have an exclusive interview with sheila bair in person, in chicago. karl, back to you. >> a perfect day for that, rick. thank you very much. rick santelli in chicago. when we come back, sara talks with imf managing director christine lagarde live from the imf world bank spring meeting in washington. the global economic outlook, the fed, the banks, all on the agenda. dow's down four points. t-mobile does data differently. so it can do more for your business. when work takes you across the globe, your unlimited data travels with you to 140 plus countries and destinations at no extra charge. and that's not all. because with t-mobile there's no overages. ever.

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but unlike other plans, these are the only ones of their kind endorsed by aarp. rates are competitive. so call today. and learn more about choosing the doctor's you'd like to see. go long. take a look at oil. obviously, doha on sunday's going to be a big deal. the iea this morning, jim, saying that even if we get a freeze, probably not going to change the balance of supply and demand until the second half. >> but that's a major change. they had really not been saying that, and that's run of the reasons oil's tightened, because here you have natural supply and demand. a lot of people love iea. they are very good.

so, this is a major change. they're not some yahoo, stick your finger in there. they do fantastic empirical work on the ground. and that said, everyone wants to short oil ahead of the meeting thinking it's got to be ranked first, but this was a very calm, cool, reasoned, we're in balance, and that means that the tightness is for real. >> tightness? >> tightness. >> tightness. >> we've had a big rally already, percentagewise, we're up -- >> but if you're producing oil at a terrible price, you're not producing energy 21, the bankruptcy this morning. you know, they paid what, $2.3 billion for a company that allowed them to be the number one producer, but they paid a price that made it so you can't make money on the cash flow -- i'm sorry, the debt payments can't be serviced by the cash flow. >> right. >> so, i thought it was a significant thing, and i think that the wise guys who all want to short ahead of this meeting might turn out to be wrong because of demand. the demand has stepped up and we're finally seeing a million barrels drop off year over year in the u.s.

so it's significant. >> the tick-up in energy reserves at the likes of b of a is not -- >> that's when i -- you go back and forth to try to understand the numbers. i don't want to ever say i'm sanguine about any debt that could go bad, because that reveals after what happened in 2005 to '07 period where it looked like everything would be fine. remember the vintages? vintages of oil that if you got a loan -- let's put it this way, energy 21. they bought in 2014, march of 2014 -- if you bought oil properties between 2013 and 2014, you're under reserve and you drew down a credit line. that bank has worked. and we should be looking at who borrowed a lot of money in that time frame, between the last quarter of 2013 and the third quarter of 2014, because that's that vintage that's going to undo you, and they should be fully reserved. should go to the regulars, say listen, we want to be fully reserved because those loans are worth nothing.

nothing! fortunately, there is some debt that's ahead. there's some public debt that's ahead of that -- >> senior to the -- >> no, junior to the bankers. >> yes. >> and that's what's going to save some of these guys. believe me, a bank loan on something that was bought first quarter of 2014, yeah, sure, it's like a bad credit card loan. it's a fico score of like 400. >> we'll get "stop trading" with jim in a moment. this morning i read over 4000 articles on leukemia. in less than a second. (speaking japanese) i can understand euphemisms, idiosyncrasy and complex metaphors. i know every detail of every public quarterly report in the last 20 years. and i'm just getting warmed up. hello. my name is watson. together we can outthink the limits of what's possible. welcome to the cognitive era.

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time for cramer and "stop trading." >> it's incredible. there was a downgrade of starbucks by deutsche bank this week. i want to read what howard schultz is saying. the senior at deutsche bank who's covered for years resigned and a junior analyst was promoted and in less than a week's time downgraded the stock. during the less than a week's time on the job, no visit with the company or downgrade in management, yet a downgrade was issued. i'm sure the investment community would have benefited from a more diligent and thoughtful approach to the work." i thought that was interesting. he's never commented. >> i wish i would have known it was a new analyst, which i didn't. >> and for the 24 years starbucks has been a public company, we have never publicly commented on an analyst report. i just think that was worth the

note. >> why do you think he chose to come out and do that? i mean, that is odd for him to choose to -- gets free research? who cares? >> i'm not my analyst brother's keeper. oh, who cares? >> yeah. >> i think that there's -- look, the guy commands great respect and deserves it, howard schultz. and i would have -- i just didn't know. i didn't know that it was a junior analyst. now, we could say nothing matters. april 21st numbers reported, and that's what's going to -- and howard schultz would tell you the same thing, april 21st is the day you decide whether to buy starbucks. but when i read through the downgrade, i thought it was one of those, we're going to downgrade it at $60 and at $54 be cute and get back in, like the apple talk at $93. i think being blind-sided by the deutsche bank process, that's okay, but i want to point out that if you sell it, just be aware, you're selling it on a junior guy, not the senior guy, and that maybe you ought to do your own work and look at the quarter and make a judgment whether you think you should sell or not. my judgment is that i hope it comes down more because my

charitable trust has a small position, anxious to buy more. there. >> that's great color. >> i wish i had known that at the time. >> mea culpa. >> what's on "mad" tonight? >> gme, game stock. my friend, ken langone last night, he told me listen, watch paul raines. he's good. i've had paul raines on a couple times. i think he's been trying to reinvent the company, but the last couple quarters have been disappointing but has a big yield. and the rubicon project, which is not a project but a company, doing internet advertising and they've made a big comeback. >> is that like the allen parsons project? >> no, it's like -- they shouldn't call it a project. i'm going to get them to change their name tonight, call it the rubicon company. and it's time that we crossed the rubicon, frankly. the dye's been cast, partner. >> shangri-la reference yesterday, rubicon today, jim. we'll see you tonight. "mad money" 6:00 p.m. eastern. when we come back, sara's interview with imf managing director christine lagarde. dow continues to trade in a narrow range. don't go away.

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good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with simon hobbs, david faber at post nine of the new york stock exchange. sara eisen is live at the imf world bank meeting in washington. we're going to get more from her after an already busy morning. her interview with jack lew and christine lagarde still to come. markets a little trepidation here ahead of china gdp, which comes out tonight. oil also down just a touch. >> here we go then, the road map this morning. in a few moments' time, sara's exclusive interview with treasury secretary jack lew. hear now what he said about banks, trade policy and who could be on the next $10 bill. plus, a live interview with imf managing director christine lagarde and former fdic chair sheila bair will weigh in on regulation, and of course, too big to fail. but let's send it right back to sara in d.c. for more of that exclusive interview with the treasury secretary. sara.

>> reporter: good morning, simon. treasury secretary jack lew came out and defended his recent actions to block inversions, saying companies like pfizer and allergan should not have been surprised to see the treasury take its third action to stop these deals. he also said that it was not retroactive legislation and the tax lawyers have been working very hard. he did not rule out further action to come. the treasury secretary was also very eager to talk about the imf world bank meetings. finance ministers and global central bankers come to washington to speak to him. he is projecting a message of u.s. leadership in the global economy. he wrote a big piece in "foreign affairs" magazine about how the u.s. needs to engage more, so i asked him if this piece was an effort to refute the trump world view? here's what he said. >> i'm making an economic and foreign policy argument that has been profoundly important in having the united states play

the leadership role that's helped make us economically secure and promote our national security interests. i mean, you look at something like sanctions. our power to influence the world with sanctions is not unrelated to our economic centrality. and we have to be aware of that, because we want to have all those kinds of levers. it's not just about asking people to do the right things. >> reporter: well, i was going to mention trade, which is another big part of our engagement with the world economy. even democrats like bernie sanders and hillary clinton have trashed the tpp and other trade policies. do you worry that there could be some real damage by the next administration to our trade policies, or is it just campaign bluster? >> you know, i think that the trans-pacific partnership is an agreement that is very much in the interest of the u.s. economy and american workers. you know, right now, we have a world where markets are more open here than they are in other places. we benefit when we open other markets.

we have high standards in terms of labor protections, environmental protections. other countries have lower standards. raising their standards makes our products and services more competitive -- >> reporter: but that's not the prevailing view right now on campaigns or really in america. >> look, we have to make the case why this is good. we accept that. i accept that. but i'm arguing the merits of something that i think are profoundly important to promoting a strong u.s. economy and strong opportunities for u.s. workers. you know, you look at where the growth in population in the world is, you look at the growing markets in the world, i don't think we should say that we want other people to make the rules of the road of who can do business there and what the terms of doing business there are. we want to promote u.s. values. we want them to have high labor standards and high environmental standards. we also want those markets to be open for the best products in the world, which are u.s. products, and the best service in the world, which are u.s. services. >> reporter: on american values, bernie sanders recently said that general electric is destroying the moral fabric of america. is that problematic to have such

an antibusiness, negative campaign rhetoric? >> look, i try to stay away from making comments about individual businesses, and we don't target our policies for one or another in business to be affected by it. you have to be -- >> reporter: but the sentiment. >> you have to be able to advocate policies that make sense in terms of overall where will we be as an economy and as a country. i think that we've made a case for the kinds of policies that we think are the right ones, and i'm going to leave it to the political process to work through these other issues. >> reporter: speaking of policies, do you think neel kashkari, thas it right when he says the only way the taxpayer can foot the bill in a banking crisis is by breaking up the big banks? >> i think that we've made enormous progress in the last several years building up the capital in our financial institutions, making what they do more transparent so they can be accountable and we can see where the risks are. and making clear that if they

fail, they have to be able to work it out on their own. there's not going to be the backstop of a government bailout. >> reporter: would you ever go work for a bank again, now that you've been on the other side? >> you know, i have a full-time job. i don't think about what i would do next. >> reporter: there's currently legislation being debated by congress on puerto rico to help solve its debt problems. you know, investors we talked to say that the legislation somewhat undermines the muni markets and sets this precedent that contracts aren't enforceable. are investor rights taking a back seat in this deal? >> no. i actually think that the argument that's been made on that regard is not a correct one in terms of the structure of the municipal markets. municipal markets right now have a very clear understanding of what the risks associated with different debt issuances are. as you've seen trouble in puerto rico, it hasn't spilled over into other areas. there's a broad understanding that when you have an insolvency, there needs to be a restructuring. what makes puerto rico kind of unique is that it's not covered

by any kind of an organized process to go through restructuring. and the legislative effort is to create a process where all stakeholder interests will be fairly treated and where there will be a viable economic plan. but everybody has to be involved and you can't have holdouts. you have to have a process. >> reporter: i know you've been asked this a lot. can you ensure that alexander hamilton stays on the new $10? i know you're working on some sort of compromise. >> so, sara, people are trying to get me to say what we're going to do before it's all ready to be announced. it's a really exciting process. you know, when we started this conversation not quite a year ago, it wasn't clear to me that millions of americans were going to weigh in with their ideas. we're not just talking about one bill, we're talking about the 5, the 10 and the 20. we're not just talking about one picture on one bill, we're talking about using the front and the back of the bill to tell an exciting set of stories. what i'm committed to is keeping our currency the safest in the world, so the first principle is going to be we don't do anything to undermine the security of our currency. secondly is we can't wait.

we're going to have a representation of the contribution women have made to our democracy on the next bill that's issued, and that's going to be the $10 bill -- >> reporter: so, women on the front, hamilton on the back? >> i'm not going to say who's where, but we're going to have an exciting set of announcements. >> reporter: so, i tried for you, carl, there, but clearly, he is aware of the current public appeal of alexander hamilton right now and staying on the $10 bill. but seriously, we did talk about a range of topics there. and the key, i think, that going forward is going to be on this question of u.s. leadership at a time where the u.s. economy is doing okay, better than the rest of the world, but still continues to struggle. and that's a topic that i'm going to talk about with imf managing director christine lagarde this hour. she just downgraded global growth again. she also just downgraded u.s. growth forecast for 2016, so we're going to talk about why, what sort of policies need to be put in place, whether we're addicted to monetary policy, as larry fink of blackrock told "squawk box" today, and whether the move to break up inversions,

as i talked about with treasury sec jack lew, is more harmful than helpful when it comes to business confidence. for now, though, back to you. >> can't wait for that, sara. thank you so much. sara eisen in washington, d.c. meantime, two big banks reporting before the bell today, b of a and wells topping estimates. stocks are trading in opposite directions right now. bac is positive, wells in the red. wilfred frost back at hq with more on those names. hey, wilfred. >> hey, carl, thanks very much. as you say, both beat. i would say the boa eps was really in line, although the conference call has helped investor confidence and moved that share price up. wells was just ahead, as you said. both of them really, though, only ahead relative to forecasts at the start of the week. they probably underwelcomed a little bit relative to jpmorgan yesterday. a key takeaway for both is the economy seems okay, despite the volatility throughout the quarter and the interest rate hike in december. loan growth was strong, both saying that the consumer is looking fine. wells even saw loan growth in every single segment, deposit

growth for both also solid. on the bank of america side, as i said, we're in line on the eps line than a beat. on the plus side, though, expense control was good, always a key factor for bank of america. but investment banking was weak across the board, and the ficc performance, fixed interest, commodities and currencies in sales and trading was a particular disappointment. for wells, expenses, in fact, was a weakness, which will be a question for the conference call, which has just started, as they didn't control expenses in a weak top-line environment. their earnings beat was driven more on the fee side than the interest income side. there were some headlines on the wells side of a big increase in provisions for energy. yes, relative to the same quarter last year but relative to worse fears that deterioration was modest and not an immediate cause for concern. overall, share prices are mixed, as you said, right now with bank of america doing well, wells slightly disappointing and in the red. neither quite the euphoria of

jpmorgan, but nevertheless, a couple good days for banking shares across the board. carl? >> wilfred, thank you very much for that. of course, tune in to "closing bell" later today. they'll be joined first on cnbc by the cfo of wells fargo. coming up on the program, former fdic chair sheila bair will join us for an exclusive interview to talk about the big banks, and of course, regulation, a hot topic this week. and of course, also still ahead, imf managing director christine lagarde. lots to talk to her about. "squawk on the street" will be right back. at mfs investment management, we believe in the power of active management. by debating our research to find the best investments. by looking at global and local insights to benefit from different points of view. and by consistently breaking apart risk to focus on long-term value. we actively manage with expertise and conviction. so you can invest with more certainty.

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data bright spots this morning, a 43-year low on the number of workers applying for new unemployment benefits and the slower-than-expected rise in core inflation falling back to an eight-month low. market flat overall, as you can see. ben mandel is jpmorgan's global strategist and michael geffen is barclays's chief economist. michael, did some of the gloom that we're getting in the economy over the wake of the gdp changes, is that beginning to ease slightly with the data today, or is it just incidental, do you think? >> no, i think the data that you saw today does support the view that the domestic economy in the u.s. is doing okay. so, as you said in your last segment, that the consumer looks okay. obviously, labor markets are quite strong, the initial claims data point to that. and what the inflation data

today says is the weakness in the retail sales data earlier this week was really a price story and not a volume story. so, we're tracking close to 2% on consumption, which isn't great. but given where autos have been, it suggests that overall, consumption is fine. so, i think it supports the view of a modest, if unspectacular, u.s. economy. >> so, what happens in the second half of the year? >> so, i think what we would be looking for is two things -- one, that manufacturing stabilized, and second, energy stabilizes. i'm using that word stabilize. we're not looking for these to turn around, accelerate, and provide a meaningful boost to activity, but we just need these sectors, which have been drags on economic activity, to stabilize. if the dollar stopped rising, if energy prices have stopped falling, we think that's a reasonable outlook, and it makes the second half look a little better than the first. >> you know, ben, in quiet markets, the sort of moves that we've had on jpmorgan and bank of america this week really stand out.

i mean, financials were obviously the worst performing area of the market, still down about 4% for the year, but it's an 8% gain that you've had on both of those as they've come to market with their earnings. is that changing your perception, if at all? >> well, i think it's linked to certain bright spots in the u.s. economy, particularly the consumer, where fundamentals remain fairly positive, even if the narrative has taken some time to translate into aggregate growth. so, i think what you're seeing is the link to those positive pockets in the u.s. economy. and so, just to add to michael's point, you know, the disappointment we've seen in the first quarter this year is a different brand of disappointment than we saw right at the beginning of the year, whereas there we were seeing evidence of a sharp deceleration in q-4, big tightening in global financial conditions. now it's translated into more sort of business as usual type of disappointment and consistent with our view that we're still in the middle of a very long, very flat business cycle.

>> interesting. jeffrey sorts from raymond james has a note that's doing the rounds this morning, and he's been, as he puts it, screaming that the expectations for this earnings season are too low. and obviously, we're just at the beginning of that. and ben, what he points out is a lot of people are expecting a rebound in earnings in the second half of the year, to michael's point, and the next year. and if you look at that, we're currently only trading on 15 times next year's expected earnings. therefore, that might change your view of the valuation of the market. what do you think? >> yeah, i mean, i think that's a fair point. we certainly see an acceleration of earnings going into the latter half of the year. there are a lot of risks surrounding that outlook. so, one is obviously that the u.s. economy continues to accelerate. two is that we're in an environment where we've seen a dialing down of global risks, right? so, thinking about valuations and multiples. we've seen a recovery and a

decline and the possibility of another big financial conditions tightening. >> right. >> and that's mainly linked to what's going on in the u.s. dollar. i think the risk as we go into the middle of the year is that the fed starts walking back towardsresumption of rate hikes, the dollar starts to move, and if it moves too much, then it dials those risks back up, so i point to that as probably the biggest risk. >> just in terms of cost benefit, i mean, what would be -- what is your benchmark for how rapidly the stock market can gain here? what are we benching everything against, if you like, all those risks? >> yeah, i think we're looking at a situation where the, you know, top-line growth for firms probably remains a little bit disappointing, in line with weak -- well, not weak -- i'd say, you know, positive but benign, nominal gdp growth in the economy. and i think margins probably end upholding up better than people expect. >> okay. >> so, i think that helps. >> one last quick word from you, michael, about the meeting we

have in doha on oil over the weekend. there was a lot of news flow earlier in the week as to whether or not that could bolster prices longer term. i think you were saying we will bottom on energy during the course of the second half of the year. is there any chance that doha sends a substantially higher on sunday, do you think? >> i don't think the risk is to substantially higher, but i do think it would help support the idea that we've hit the floor. so, we'll bounce around within a range. that would mean extraction-related activity and mining activity should stabilize over the course of at least the second half of this year. so, i wouldn't look for that sharp upside surprise, but i think it reinforces the bottoming and the stabilization. >> it's great to have you both. thank you, michael gapen joining us, barclays' chief economist, and ben mandel from jpmorgan. thank you both. >> thanks. when we come back, a live, exclusive interview with former fdic chair sheila bair. we're back after a break.

let's get to the cme group this morning. rick santelli has a special edition of "the santelli exchange." hey, rick. >> thanks, carl. and yes, i'd like to welcome

sheila bair. needs no introduction. bull by the horns, maybe one of the most frank, honest books i've ever read about what was going on behind closed doors during the credit crisis. so, let's kind of pick up on that. >> okay. >> okay? the news of the day, living wills, the fed and the fdic not enamored with what some of the major, as i call, too big to fail banks have turned in as their plans. >> yeah. >> what are your thoughts? >> well, i wish they had been doing this sooner not later. i think this part of dodd/frank was one of the most important pieces, the most frontal attack on too big to fail. so, the good news is they're finally moving forward, but there's not much transparency, soe don't really know what's in those living wills or what their rationalizations are, and i think that really we need a lot more public xlour. it's important for them to see the living wills and for the market to judge their credibility. >> i know in general, sheila, you don't mind dodd/frank. you think there are issues, but we can work within that. >> right, right. >> don't you think there's too much micro managing going on

with the big banks? if a bank's going to fail, do you really think that regulators or the fed or the fdic are going to know how it's going to metastasize in the system? >> yeah, well, there are a lot of unknowns. it's good to have planning, though. just knowing what your legal entities are, where there are cross subsidies, common services are shared, those are the kinds of nuts and bolts things you need to know and understand in order to have a orderly winddown. so, it's boring, but i think it's important. it may sound like micromanagement. some of the other rules, though, i agree. i think we should have focused on capital. they were far too leveraged. and liquidity issues were really driven by the market's perception of insolvency because they were too overleveraged, so there should have been more emphasis on that. and the work they're doing, making sure that the management themselves understand the organization well enough to know how they can be unwound if they get into trouble. >> who's going to watch the watchdog, though? if everybody was an expert on leverage, i would think it's the current federal reserve. last i calculated it was about 110-1. >> yeah, well, that's a good point. so, well, they kind of -- you

can print your only money, maybe leverage isn't as important -- >> that's right, it's all about the printing press. >> they should be, but it's not. you know, we need more transparency, i think. and again, i think it's in the regulators to have more transparency. they're putting it all on themselves. they're the only ones that see the stress test, really detailed information about the stress tests, the only ones that see the detailed information about the living will. we're all riding on their judgment. if their judgment's wrong, i think exposing more to the market so they can have additional eyes and minds analyzing that would be helpful to them. >> our sara eisen's doing spectacular work at the imf world bank conference today. >> right. >> jack lew continues, of course, to defend not only what he's trying to do with regard to inversions and maybe specifically guided at certain mergers -- >> right. >> but it's about the process. >> yeah, yeah. >> let's talk about the process. sheila bair, do you agree with the shortcut tight process, whether it's the president's executive orders or the treasury secretary with regard to the rule of law in taxes and laws that are already statutes already on the books? >> yeah, so, i'm very troubled

about the shift of power to the executive branch. but in fairness, congress has created this problem by being so dysfunctional so often. we need fundamental corporate tax review. jack lew's problem is, whether he sees it this way -- i do -- that the top rate's too high. we have a noncompetitive rate. corporations will constantly try to find their way around it. there will constantly be other areas where it's going to be more efficient and lower cost to do business, so he's got a hydro-headed monster. he's trying to kill it off with executive power and he can't. we need tax reform and congress has to do that. it's in their court. >> currently, washington college, your new role, president. one of the issues that's near and dear to you is trying to solve the student loan problem. >> right. >> bernie sanders -- make college free. many of the other candidates say it's all about wages. we have to figure out a way, wages, it's the economy. >> right. >> what's sheila bair's avenue to potentially fix this, and does it agree with the bernie sanders approach? >> yeah, well, no, i don't think

free college -- it's kind of doubling down on some of the problems we have already. and we have free elementary and secondary schools. and you know, we spend a lot of money there. and i'd like to get that fixed as opposed to -- i fear some of this is just trying to make colleges the high schools now because the high schools are not performs as well as they should. i think it should be affordable, but there should be skin in the game on everybody's part. i really like a plan that jeb bush had put out, where everybody just gets a $50,000 line of credit. you can use it for colleges, vocational ed, ongoing job training. you pay it back as a percentage of your income, very small percentage over a long period of time, so it's going to be affordable. and you make schools have some skin in the game. so, if they're in default, the schools have to pay up part of the price for taxpayers. they would align economic incentives, simplify the program and make the loans affordable. >> well, doesn't it figure that the one candidate's plan that you liked -- >> he's gone. >> -- was one of the first to exit. >> maybe the plan can survive. >> maybe he will contest the convention, resurrect.

thank you, sheila bair. a pleasure having you in chicago. hobbs, simon hobbs, back to you. >> that was nice. thank you very much, rick. straight ahead, we're live from the imf world bank meetings in d.c. sara eisen will sit down next with the imf managing director, christine lagarde. that's next on cnbc.

welcome back to "squawk on the street." i'm jackie deangelis reporting from the nymex. the department of energy out with its weekly natural gas storage report. just checking on prices here, because we did turn positive. $2 right now is where we're trading. we had a drawdown of 3 billion cubic feet, not exactly a bullish number here, a small drawdown, but compared to what we saw last year of 49 billion cubic feet increase in stocks, it is a little bit of a disparity. remember, these prices have been trading largely on the weather, and we saw that little blip over $2 because it was a short-term cold-weather trade, but temperatures now starting to average out in terms of what you would expect for springtime. so, traders are telling me to expect these prices to stay relatively low. we're probably going to dip back under the $2 range, and to expect that to continue until we start to see these summer temperatures heat up. that's when people start turning on the air conditioning. guys, back to you at post nine. >> thank you, jackie. here's your "cnbc news update" this hour. a powerful earthquake with the preliminary magnitude of 6.4

has struck southern japan, knocking over houses. it was entered in the kumemato region. japan's meteorological agency says there's no danger of a tsunami. no immediate reports of casualties, either. a belgian judge has ordered mohamed abrini and five others arrested in connection with the attacks in paris and brussels to be held for another month. french tv reported that abrini, who admitted he was the man in the hat in the surveillance photos, told investigators he "wouldn't hurt a fly." for the first time, the u.s. has ruled that american ships have started conducting drills with the philippines in the south china sea. defense secretary ashton carter making the announcement in a news conference with his philippine counterpart. and a farewell to end all farewells. kobe bryant scoring 60 points in his last nba game, leading the los angeles lakers to a win over the utah jazz. kobe scored over 33,000 regular-season points in his 20-year career, leading the

lakers to five nba titles. truly a legend. and that's our "cnbc news update" for this hour. back to you, carl. >> sharon, thank you so much. >> sure. >> sharon epperson. the cdc finally confirming what's been suspected for a while, that the zika virus causes the birth defect microcepha microcephaly. meg terrell is in new york with latest on that. >> hey, carl. public health officials say the more they learn about zika, the more concerned they become. an important mark of progress in a study published in the "new england journal of medicine," cdc authors confirmed the link between zika and microcephaly. tom friedman saying "it is now clear that the virus causes microcephaly. we have now confirmed what mounting evidence has suggested. we are working to do everything possible to protect the american public." and of course, one of those tools is controlling the mosquito that carries zika. in an exclusive interview with bill gates, cnbc europe's hadley gamble yesterday talked about what the gates foundation may be able to contribute to this. take a listen.

>> we actually have the mosquito which is the carrier here along with dengue and yellow fever as well, that we could have cases. and so, ideas about how can we use new tools to go after the mosquitos, that's one way to conquer these diseases, to go after the vector and reduce or eliminate the mosquito populations. our foundation has some tools there which we will probably want to try, because there won't be a vaccine, even in the best case, for several years here. and so, there's a lot being looked at, but no, there's not a total solution to zika in the world. the u.s. is playing a disproportionate role in moving to find solutions, though. >> as the u.s. is playing that

role, this comes amid a fight between the white house and congress over the $1.8 billion the white house has asked to allocate for zika. that fight continues. back to you, carl. >> and i guess it's worth pointing out, meg, that as far as this country's concerned, it's important to noit note that this is sexually transmitted. that's also confirmed, is it not, in this instance, which makes it a big threat for the next generation. >> simon, that's absolutely true. it's not just mosquitos, but surprisingly, also sexually transmitted. >> meg tirrell with the latest on the zika virus and the contribution from bill gates. next, imf managing director christine lagarde live with sara eisen in washington.

what stocks might be the biggest beneficiaries of a weaker u.s. dollar? our traders are naming names at tradingnation.cnbc.com. right now, more "squawk on the street." credit karma, give yourself some credit. know that my score sucks.

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welcome back to "squawk on the street." stocks are mostly lower as the tech sector struggles for gains here, standing out as one of the worst-performing sectors in the day's trade, down about a third of a percent. the biggest laggard, seagate shares down double digits after cutting third-quarter guidance. other tech stocks weighing on the tech sector are shares of western digital in sympathy there, also netapp and micron as well. the tech sector is still up 2% for the year and of course, is the biggest sector in the s&p, so one that many traders pay attention to. now off to sara eisen in our nation's capital. back over to you. >> reporter: dom chu, thank you very much. after the international monetary fund downgraded its global forecast, we're here at the imf world headquarters for the spring meetings and i'm here with managing director christine lagarde. good to see you again. >> good to see you, too.

good morning. >> reporter: good morning. you set the tone with the downgrade to global growth. so many downgrades to your forecasts over the last few years. is it just that the imf is too optimistic or this recovery is just so disappointing? >> well, first of all, there is recovery and there is growth. that's the good news of the message. but it is too slow, too fragile, and while recovery's under way, it is progressing too slowly. when you look at poverty levels, when you look at the number of people unemployed, when you look at inflation, when you look at debt, all of that is not moving in the right direction as we would like it to move. so, what we are saying here today is because of this downside risks on the horizon, and because of that weaker baseline, we would like to encourage policymakers to take decisions and to implement them on both structural reforms, fiscal policy and monetary policy. that's what we call the three-pronged approach. >> reporter: we'll talk about all of them, but quickly, on the downgrade, you also cut the u.s.

economic outlook but don't see a recession coming in the u.s. >> no. >> reporter: correct? >> no, we don't see a recession coming up. >> reporter: no massive recession as donald trump sees. >> we don't see a recession for the u.s. economy. we see a growth of about 2.4%, 2.5%, 2016-2017. and clearly, there have been job creations in much larger volumes than, number one, was expected, number two, we are seeing in other places of the world. the quality of those jobs need to be looked at, in our view. >> reporter: stocks. we were just looking at the boards. they're at 2016 highs. it's been quite a reversal from the beginning of the year, worst start to a year ever for stocks. what do you think fundamentally has changed between january and now that has brightened the outlook? >> well, one of the very significant changes is good clarification and much better communication by the chinese authorities in relation to their own market and in relation to the exchange rate regime. so, i think that level of

uncertainty has been removed, and it has been a significant change. >> reporter: you have been very positive on china. you recently upgraded your forecast for growth to 6.5%. what are the doom-sayers, what are the big hedge funds that are betting against the chinese currency and the hong kong dollar and betting on a financial crisis hitting the chinese economy, what do they get wrong? >> well, i'm not going to comment on their strategy and their policies, but what we are seeing -- because we look at the fundamentals and we try to assess what the impact of the chinese measures will be in the short term and in the medium term, and we have slightly upgraded our forecast for china to 6.5% because we took into account the measures that they have announced just recently under their plan. having said that, we're also looking at the medium and long term, and we have a slight concern, and we certainly will convey the message to the chinese authorities that we hope

that they follow through and implement on some of the major reforms, such as the restructuring of the state-owned enterprises, such as, you know, the right reforms in order to open up the service market in particular, such as the deepening of the capital markets, all such conditions that really need to lay the ground for a solid and sustainable growth and transition in china. >> reporter: another thing that's happened in the last few months is the dollar has stopped strengthening, and that's relieved a lot of the tension out there in emerging markets and in commodities. we know that there was an agreement at the g-20 meeting in china to be more open and communicative about exchange rate policies. was there any agreement that the dollar should weaken? >> if there was such a thing, i wasn't privy to that, and i doubt very much that there would be such an agreement. by the way, we slightly downgraded the u.s. forecast precisely because of the impact of the strong u.s. dollar on

exports. and to the extent that the u.s. dollar would sort of stabilize and not continue to appreciate, then certainly, the forecast might be a little bit better. >> just on u.s. policies, we just had a great conversation with treasury secretary jack lew on u.s. economic leadership. we also talked about his recent aggressive rules to crack down on tax inversions with corporate america. do you think that those new rules will do more harm than good because they hurt business confidence? but on the other hand, they bring tax money back to the u.s. >> the u.s. tax regimes are probably the most sophisticated and the most complicated regimes in the world. and i really welcome the determination of the u.s. treasury to bring about more transparency, a better understanding of the rules, and the principle of fair share of

tax being levied and collected -- >> reporter: but you're not critical about the way they went about it? >> i believe that good cooperation is always needed, consultation of the business community, which i'm sure he's keen to also entertain, but then there comes a point where the treasury authorities and the tax authorities have to take measures, and they have to do so as is required in order to implement changes. there will be a lot of work to be done in the tax domain. clearly, what we have seen recently as a result of the panama papers is going to be a significant wake-up call to all authorities to have a more coordinated and more comprehensive approach, because -- >> reporter: is there a role for the imf in that? >> oh, absolutely. a lot of our technical assistance is actually dedicated to fiscal, which includes taxation, and we have a big section of technical assistance which is really dedicated to

an anti-money laundering regimes and implementation and counterterrorism financing, which we try to help countries with. and we need to continue. what i really hope as well is when we issue a report which is not flattering for the country, there is actually follow-up and policymakers take action as a result. >> reporter: talking about policy prescriptions, monetary policy. larry fink was on, blackrock, "squawk box" early this morning talking about some of the ramifications of negative interest rates and low interest rates, saying that they could sew the seeds for the next crisis, and they also buy time for governments to delay fiscal policy. are we addicted to monetary policy? >> what is critically important is that monetary policy be not alone. and at the moment, it is very much alone. it needs to be supported,

accompanied with fiscal policy and with structural measures, structural reforms. so, on that particular point, i agree with larry, it cannot go alone. it has to be accompanied. but at the same time, i believe that monetary policy, if accompanied by the other two fiscal and structural reforms has to continue to be competitive. there are many corners of the world where inflation is low where there is output gap and where the monetary policy has to sustain the recovery and has to fuel enterprises with credit. so, it's perfectly legitimate, but it has -- >> reporter: negative rates? >> negative rates included, of course. we believe that it's a net positive, no question about it, but it has side effects, and those side effects will have an impact on banks, which is why larry fink is expressing concern. but we have to remember always

that is a saver could be be concerned is also an employee who is very keen to keep his job and for the economy to continue to thrive and is also a consumer. so, you cannot isolate the facet of an economic actor. it is multifaceted, and we have to look at the global economy. we believe at the moment that negative interest rates are a net positive in certain parts of the world and have to be supported by fiscal policy and structural reforms. >> reporter: should the fed consider them, if we hit another downturn in the u.s. economy? >> currently, the u.s. economy is not at all in that situation. and if anything, being data-dependent, being gradual and being well communicated, we are more likely to have an interest rate rise rather than a move into negative territory. >> this year you've advocated that johnny allen should be cautious and gradual in her approach. she has been much more cautious and gradual. you must be pleased to hear that

they're paying more attention to global events -- >> jess. >> reporter: but how gradual is too gradual? >> clearly, janet yellen is focusing on her mission and her mandate, and i'm not surprised that she is, but i was very pleased that she actually included in the domestic economy analysis the impact of the global economy. if there is anything that has massively changed in the last couple of years, it is the spillover effects of policies going in all directions. it used to be, you know, how will emerging markets face an interest rate rise from the fed? now we have seen that significant move of the chinese markets have a global impact. >> reporter: when it comes to a fed rate hike, do you think that they can hike rates this year? >> data dependent on both inflation and unemployment account and gradual approach, it

could probably mean a move in 2016. let's hope so, because it would mean that the u.s. economy is faring better. >> reporter: and what would that mean for emerging markets? there's no question about it and whether it's an issue of added volatility, a move on exchange rate, it will have an impact because all economies and all financial markets are strongly interconnected. they are prepared and some of them are taking it to be equipp equipped. >> i know that you do not like to comment on politics or the election. >> correct. >> but we are seeing frustration in america on economy and inequality and low wages and americans are thirsty for change. how would you characterize

president obama's economy over the last 8 years. >> well it has certainly created jobs in the last few years and it has faced the biggest financial crisis since the second world war. and it is recovering in pretty good order compared with many other countries of the world. but having said that we also recommend the structural reforms that would actually help the american people. 50 million of whom are in poverty and this needs to be addressed. this needs to be addressed by various means. whether it's the income tax credit and the minimum salary raise or family friendly measures but clearly 50 million people in the united states living in poverty is not something that you want to have for the future. >> thank you. always a pleasure to speak with you.

the managing director of the imf here at imf headquaters. we'll send it back to you in new york. >> still to come, alan greenspan, sarah. he's ahead on the next hour. >> if you ever missed a flight because you were stuck in a security line you're not alone and the situation is expected to get worse. what's being done to change that? that's next. at mfs investment management, we believe in the power of active management.

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investors asked to pull a billion dollar from paul tudor jones's investment firm. he invests in macro economic events and one of the giants in the industry. which focus on macro events. the company has $13 billion in assets under management. this comes in the wake of the company's chief operating officer saying he is planning to leave but a sign that the difficult economic environment,

difficult market environment is certainly having impact on some of the hedge fund giants including paul tudor jones. >> thank you very much. at one point or another everyone has been stuck in a long security line at an airport. one company is trying to change that. phil is live at denver airport with more. those look like long lines there at denver, phil. >> this is only half of it, simon. this is the tsa security wait line. about 15 minutes you guys have been online. not uncommon in the morning rush hour here in denver. clear has its own line here and there's a couple of people that will be coming through. beyond that is the tsa precheck line. it's saying if you come in and put your fingers down we know who you are and you go right to the front here and then you go through. they believe it's a much faster way to go through the airport. now look what it's doing, it is expanding beyond airports and moving into sports venues. in fact there's five major

league baseball parks where clear has a designated entry point. coors field is one of those. you don't have to be waiting with others at the park. fans that we talk to love the expedited entry. >> first time i used it at a game i like it. it's real simple and makes it streamline and not waiting as long in the normal lines. >> i think it's going to be great. i just signed up so this is my first time through but it's going to be quick. >> one there's no lines. two i don't have to pull out my i.d.s and stuff like that. they don't go through all of my stuff. it works out well. >> clear is not a new company. it was in bankruptcy about five years ago when a new owner that had fast experience on wall street and the hedge funds took over they reformatted the business and they have expanded to 13 airports. more than a half million members. enrollment up 200% this year as

they look to expand. we had a chance to go to the clear lab in manhattan where the security is saying bio me tricks are the key to not only quicker entry into airports and sports venues but also if you want to pay. that's where they are targeting growth but the airport someone of the points where a lot of people say i don't like waiting in line. can i get in there quicker. >> more lanes, less congestion. phil, thank you very much. coming up on the program, or on squawk alley, more accurately, an exclusive interview with the former fed chairman alan greenspan. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris. all on account...of penelope. but with the help of at&t, and a network that scales up and down on-demand, this hospital can be ready. giving them the agility to be flexible & reliable. because no one knows & like at&t.

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