alpha, tuesday, september 13th, 2016. "squawk box" begins right now. ♪ signed sealed delivered ♪ 0 yeah good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin and we do have a big day ahead of us as we bring you a front row seat to the sixth annual delivering conference. produced by cnbc and institutional investor. >> signed, sealed and delivered. not seeking. very few deliver. >> this event brings together the most important players in asset management and tackling the critical issues facing investors in today's economy. among the headliners today we have treasury secretary jack lew, his predecessor tim quite quite, ray dalio, steve schwartzman and carl icahn. stay tuned to cnbc all day for the highlights.

in the meantime let's get you caught up where we stand. yesterday the markets had a rebound. the dow was up by over to 230. volatility is back at least for a few days. dow is down by almost triple digits decline of 96 points below fair value. nasdaq down by 24 and s&p down by over 30. overnight in asia the nikkei stabilizeed a bit after the big losses it posted the day before catching up with what we had seen on friday. right now you see nikkei closed up by 56 points. shanghai composite was flat. in the early trade in the european be markets you'll also see that the dax is higher up by by .4%. we're also watching oil prices today. the international energy agency cutting its forecast for global oil demand, the iea is citie ii

wobbling asian demand and its taking prices down. wti down by 2.5%. decline of over $1 to 45.17. >> some other headlines. goldman sachs now cutting the odds of fed rate hike next week to 25% from 40 porjsly. the firm's call came after fed governor brainard caused against the central bank moving too quickly. >> to the extent that the effect on inflation of further gradual tightening in labor market conditions is likely to be moderate and gradual, the case to tighten policy preemptively is less compelling. >> and fed black out policy will now prevent any policymakers speak being publicly until next week. we'll talk about that with many of guests. backlash over wells fargo and the subject of my column. bank agreed to pay $185 million

to settle those fraud claims. employees opened more than 2 million largely unauthorized customer accounts. fired 5300 employees over five years for that practice. plans to retire over the sum certificate being paid $125 million on the way out saying completely unrelated. hard to believe. wells fargo has told employees to stop cross selling products to customer citing high call volumes. there's a database of customer complaints that chose over 30,000 complaints which related to the same practices suggesting the tactics aren't just limited to wells fargo, senate banking committee will hold a hearing next week on the fraudulent account. here's what the bureau said yesterday on closing bell about all of this. >> the cfbb is charged with making markets work consumers. that's what we're doing here. this is the largest penalty we

ever levied against a bank. this was outrageous conduct. abuse of trust. it should not have happened i guarantee you we'll be seeing that it does not happen again. >> if you don't have reason enough to watch cnbc all day stick around later wells fargo john stumpf joining jim cramer tonight at 6:00 p.m. eastern time on "mad money". >> how do you come up with a pay package like that? is it deferred compensation? that's a slightly different thing. not a bonus like congratulations for opening up 2 million fraudulent accounts. >> she was deferring but because of the incentive put in place because of the employees working for her putting together what seemed like phoney accounts. >> being paid on -- >> being paid on potentially on wrong numbers and there seems to be at least at this moment no conversation about a callback for that money. and no other conversation about other heads rolling. >> took you all day yesterday to

do this and have this info to get in your column? you don't come in to see us. >> henry and max sorkin first day at school. so we decided i was taking the day off and we all went to school together. we took pictures and had a great morning together. >> excellent. >> that's pretty nice. >> pretty cool. i have to say. i don't know if we'll do it every year. >> this is like 2% admission. this is worse than harvard this place where they are going. >> new york city -- >> hard to get in. i watched you work on it for -- to the exclusion of everything else. that's nice. >> fantastic. >> kindergarten. first day kindergarten yesterday. very great. by the way, didn't even give me

a hug on the way into the classroom. once we got here thanks dad. >> european commission's recent move to slap apple with $14 billion tax bill has sparked jack lew to respond. the u.s. treasury secretary writing an op-ed in today's "wall street journal" he said retroactive penalties threaten the overall business climate in europe. he warned it jeopardizes america's corporate tax base because u.s. company could claim credits for any tax related payments to eu countries. good day to have jack lew. at 8:30 we'll hear much more from the secretary of the treasury. he's kick off delivering alpha conference right here in new york. for more on what to expect from the day's delivering alpha conference we're joined by kate kelly. there are other people we don't

have. i can't think of any we don't have. pretty good. pretty good lineup. >> i agree. i was going to talk about the treasury secretary too. our macro lineup in terms of people who can give us big picture intelligence. it's an embarrassments of riches. first thing in the morning jack lew and even with the economy dragging along it will be interesting to hear his take. unemployment is low but we're hearing plenty ever debate whether the environment is right yet for another rate hike. of course with the brainard comments yesterday looks like about 22% likelihood in the interest rate futures market for september 21st hike september could be another story. it will be interesting to hear secretary lew on that subject. we have former treasury secretary tim quite quite in the private equity business. another big picture guest who is

talking with mr. quigeithner. he's known for consistently strong returns. so much so his investors poured another $22.5 into his funds despite poor returns in the pure alpha strategy this year. i want to hear where he's at in capital in terms of where he wants to put some of his new dry powder in the markets and also of course what his take is on hedge fund returns. there are other main fund is up dramatically, 13%. in terms of assets, dawn fitzpatrick should be interesting whether they are pouring money into equities thinking there are more legs or like u.s. credit right here as so many europeans seem to lately. good time to short stocks but the take on china long and short focus and commodities same thing

there will be notable as well as his predictable on the down turns he's predicting will get sharper. my own panelist will give me their take on where the returns could be in credit at the moment. and the distressed debt fund is up. one of the single best performers in any strategy. >> 34%. >> i want to hear how he's delivering alpha. >> he was early in energy. he took a big hit last year but this year he's more than made up for it and he'll talk to us about how he picked those credits and where the picture goes from here. >> do you have any idea where the food fight could be? could we conjure. >> how about dalio and geithner. >> last year there was, wasn't

it carl icahn -- what about larry. >> yes. >> was that last year? >> carl could start a fight with scott or himself, even. the guy is like ready. >> we planned this. we got some way -- >> is this not world wrestling federation. >> not exactly that. but, you know -- >> happens naturally. not planned. >> we'll talk off camera. i got some ideas. >> even ryan lochte had protesters on "dancing with the stars". >> i don't know what happened. i saw him on "ellen" yesterday. i decided i'll get grief for this. >> you were on "ellen." >> i was watching. i was at the gym and all those tv sets. oh, my god there's ryan lochte.

i realize i forgive him. i forgive him. i forgive. i think maybe he's bigger than, in terms of everybody knowing who he is now i got -- i'll get flack for it. he lied to his mom. you know. then his mom came on. so they drank too much and he peeed on the wall. they pulled something down. with everything else that people, you know, have done, that we forgive. rio gets mad. makes us look bad. probably was happening to somebody else. >> i just love joe watched the story. you thought i loved the story too much. >> you did love the story. >> i enjoyed the story. >> you think -- >> i always thought this might catapult him. not with corporate sponsors initially. >> i think it all comes back to knowing how cold that pool is.

5 in the morning get up to train for years. >> doesn't excuse their bad behavior. >> sponsorships and -- >> andrew if we win a gold medal -- >> manages its own. >> if we won a cold medal we would go out i garage you if either one of us won a gold medal go out and celebrate. we can't find a bathroom, right? i think in new york now, isn't it basically one big open place? you don't get a ticket any more. there was some guy in times square on wi-fi did you see what he was doing. looking at porn with everyone there. >> here we are. >> right over there. he's probably walking by. >> maybe we can book the naked cowboy.

>> we got a guy that comes every day that flips his hair. >> he's a regular. kate thank you. check in with you later. >> let's get a check on markets this mornings as we showed you the futures are under a little bit of pressure once again this morning. we're back from -- we're back in september back watching what the fed is doing and brought some volatility as there's some uncertainty. if you look this morning the futures for the s&p down by 12 points. the dow futures down by 95. nasdaq down by 23. this comes after yesterday it was a bit of a rebound day. dow was up 239 points after losing almost 400 on friday. take a look at oil prices. as we mentioned the iea lowering its demand forecast especially from some of the asian countries that they are seeing. as a result of eti down 2.5% to 45.16. ten year note yesterday the yield hit almost 1.7%. its highest level since june 24th. takes you back to brexit days.

this morning it's yielding 1.649%. check out the dollar, at least at this point the dollar superacross the board. coming despite lowered expectations after brainard spoke yesterday. we'll see what happens. rye now the euro is 1.1226. the $is at 101.88. gold prices right now look like they are up by $7.10. 1,332 an ounce. >> a lot today, renesas is buying intersil. and anada rx o is buying asses.s and weight watchers ceo is

leaving the company at the end of the month. the board members and major investors or major investor oprah winfrey will help select a new leader. that was a short-lived spot. >> the oprah effect when we saw the balance first come in when she took a 10% stake in the company. stock is down over 40% for the year. >> when we return stocks rebounded yesterday from friday's selloff but futures falling again this morning ahead of next week's big fed meeting. we'll talk strategy next. coming up at 8:30 a.m. don't miss this. treasury secretary jack lew will be here to kick off the alpha conference. we'll be live. "squawk box" returns in just a moment.

welcome back to box. little auto news. general motors announcing its new chevy volt can go 238 miles on a single charge. this tops the range of its more expensive better known competitor tesla model s. it will go on sale later this week of a sticker price of $38,500. the executive will join us later

at 7:15 eastern time. >> markets moved shortly higher a as brainard said rate hike is less compelling. volatility is back. joining us right now, the senior vice president of wealth management unit of ebs and chief economist at wilmington trust and gentlemen welcome. >> thank you. let's start with her comments yesterday. this was the last comments before the black out period so everybody trying to figure out what will happen next week. maybe a rate hike. >> certainly after her comments you would think it's less likely. she came out dovish and focused on the very detailed down side risk arguments, really just no cuss on the possibility of an upside risk. you have to characterize her

comments to the very much down side. >> we saw today in the "wall street journal" laying out the case that the fed won't raise rates in september as well. this morning futures are still giving back almost triple digits. what's going on? >> time may be running out for qe infinity and the market is still scared. there's this ready audience for a tale of qe bond implosion. people get nervous when central banks together flounder. if you look at the summer markets which was an earnings driven market that hurt like a kitten. if we don't have low interest rate, stocks may have a decent chance here. these little pullbacks may be an opportunity to embrace the

volatility. >> this whole thing is getting so surreal and i hope we're going to talk about it today. we're 15% now. who did it benefit to jaw bone that it would happen in september. no one really believed it. no one, really believed it. then all of a sudden -- >> somebody must have believed it. >> this was this under current. >> steve liesman talked about it. goldman. one of the investment banks saying it would be a big surprise. >> even fed futures. >> they never went up that much. i feel more like we're getting played again. we got too complacent. won't be september because it's an election year and got to make us think we might be wrong. it was never on the table for september. >> i think when market levels are where they were stock market and high dollar in perfectly fine shape, oil being fine, rates being at the low end the market was ready. the data wasn't ready.

expectation set wasn't ready. >> what was the highest fed futures ever got. never got over 50. >> nerve got over 50. >> that's one of the big hurdles of the fed. economy is displaying enough characteristics they could hike. they are talking the market into it. to get into this cycle where each time the reserve bank presidents get hawkish and talk about the possibility. jackson hole, fisher talked about the possibility more and that impacted markets. as you get closer to the meeting some governors are on the more dovish side. >> there's a way to raise it. fix rates. >> because of the action itself. the absolute level of where interest rates end up after that will not change anything in the world. >> do you think the markets would settle. >> there's such a reluctance. i would agree. short amount of time. they've shown such a reluctance to surprise markets and so much

focus in the past year what will happen to the dollar. will it resume. will it affect oil prices and that constant focus on what could be the negative impacts makes them end up saying maybe next time. >> we had neel kashkari on yesterday. he said he does not have a bloomberg on his desk. he doesn't pay that close attention to the markets or even close attention to weekly and daily numbers. he gets out there and talks to people in his district. >> it's all about inflation well below the inflation card. he won't admit the possibility that maybe it's doing not helping get inflation but maybe doing -- he won't admit to the possibility of bubbles or people doing things they shouldn't do or putting off other decisions because they are at zero. on face value he said it's silly higher rates could ever hurt anything. in other words, that low rates are not conducive to economic

activity. i think pensioners and savers and everything else, you could definitely connect the dots to where it could hurt the whole bubble swath of people in the economy, no? >> there may come a day when the fed doesn't seek the markets permission to go. december is the countdown because we're over 50% now. everybody is expecting it. the data is at least even close to cooperative i think they will go in december and that will be the tell of the tape then. snowboard high probability of that with the percentage so high. >> if nothing changes between now and then. >> if something bad happens overseas but there's a probability they point towards that this week. but i agree there's this skepticism, dovishness about a quarter point interest rate. if you look at brainard's comments one of the phrases she used i don't think we should foreclosure on the possibility there can't be more improvement in the labor market as if --

>> the number -- >> unemployment rate. >> she's talking about not giving up on the labor market but not a 25 point increase not even 100 basis points. so there's this mentality that once we start hiking we've removed all ackomo days which is not true. once they start hiking they are very far away from the neutral rate. i think it will take some members to deal with that idea. >> it makes me think with the rules based system that it takes out all these subjective opinions. almost sounds status. 100 smartest people in this case, they each have this opinion. come up with all this stuff and subjectively decide, like masters of the universe. if it was rules based there wouldn't be human error that we seem to be -- >> that locks you into situations where you can't anticipate something. >> based on the markets.

should be market based. >> there's moments when you want flexibility and secrcreati. >> you want the robots to take over the world. >> i do. >> there are a lot of problems with the rules that people set up. a lot of benefits to it as you say because it gives the gietd post. i don't think there's any perfect rule. no rule that tells you where the rate should be. i agree the problem with individuals doing it you can always talk yourself out of it. that's what they've done. >> or move the goal post. >> let watson decide. he seems evil. they got him with that nice voice. >> because of how? 2001? >> once they are in charge. >> lock you out. >> we're dirty. we don't need any of that.

two people like to clean them once in a while. >> you have completely changed your perspective from wanting machines to take over to not 70 seconds. >> guys thank you very much. apple rolling out its new operating system today. we'll bring the details. don't do it today? don't download it. >> might wait until monday. >> plus the company's new coding for kids app and as we head for break a look at yesterday's s&p 500, winners and losers.

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welcome back to "squawk box" right here on cnbc, first in business worldwide. we're coming to you live from delivering alpha conference produced by cnbc and institutional investor the event bringing together the most important players in asset management and tackling some of the big critical issues. among the headliners, treasury secretary jack lew. tim geithner. ray dalio. steve schwartzman and carl icahn. you want to stay tuned all day for the highlights. take a look at u.s. equity futures at this hour because we're looking like we're in the red after what was a big day in the green yesterday. dow was off 85 points. s&p 500 looking to open down

11.5 points and nasdaq off 21 point. >> time for the executive edge. court ruling yesterday that yelp is not liable for businesses bad star ratings. this comes after a liable lawsuit was filed by yelp by the owner of a washington state locksmith company and the federal court of appeals dismissing that lawsuit saying the rating system is based on users input and not content created by the company. >> the problem is when people or competitor try to knock you down or there's a fraudulent post it's hard to get rid of some of those things. hard to determine legitimate customers from somebody who is trying to take you down. i can understand -- >> interesting. other companies like youtube at one point were going to be held liable if people put up copyrighted material. in this case it's not a copyright issue. >> this goes back to the '80ss. >> whether the platform should

be held responsible. >> are they a moderator or a bulletin board. president obama says that he is hopeful congress will be able to pass a short term funding bill to keep the u.s. government running during the 2017 fiscal year. the president met with congressional leaders yesterday. senator majority leader mitch mcconnell said lawmakers are making progress on temporary spending and fighting the zika virus. and february president obama asked congress for nearly $2 billion in emergency funds. this is hitting a charisma point if you listen to the cdc. on friday tom friedman the head of the cdc talked about how they are essentially out of money, essentially out of money for fighting zika and warning the country is about to see a bunch of kids born with microeicrmiccy

in the next few months. >> ios 10, you can get voice mail transcripts in addition all those apple planning to release a free coding application app. we should try it the app because we will learn how to code. the app is called swift playground developed with middle school students in mind what comes to coding that's where i am. it introduces the basics of computer programming. apple saying there are over 100 schools and districts teaching the app this fall in the u.s., europe and africa. company offering its own get started with coding work shops to show the basics of swift playground app. >> i even got confused what the ios 10. why would you want to hide your stock apps? >> no. currently there are certain apps that come with the ios -- some

people don't want the stocks. >> all those corporate profit mongers. >> you want the cnbc app so you can see the stocks properly. you may not need both. so the point is people who use -- >> i've seen that. different calendar functions. >> can't get rid of them no matter what. then the other stuff -- you can get -- i can't imagine trying to do photos from faces. you would probably -- >> you can say i want to look at all the pictures of your wife. >> i tag pictures when i was trying to put together pictures for my grandma's 90th birthday i got thousands of pictures. you tag. we were trying to put together a slide show. you can quickly find all the pictures she's in. >> facial recognition. >> i've been using it lately. sloits. the new version may be faster. doesn't necessarily pick up but

pretty good giving you the seven most likely people. >> whether i want to do it or not. i have to do it. the app will have a one showing i have something to do. it drives me nuts. >> your ocd. >> i don't know how sophisticated it is. but google will have a thing you can write ice skating and have a picture of ice skating. >> there are reasons. because you have tens of thousands of photos there are reasons to want it. >> google, i imagine apple. >> humans. getting further and further along. ncaa has pulled seven championship sporting events from north carolina because of that law, that state law that it says can lead to discrimination against the lgbt community. the events include opening weekend games in the men's basketball tournament. earlier this year the nba decided to move the 2017

all-star game. >> when we come back the best investment ideas in small and mid-cap stocks. and the top of the hour real estate titan tom barrack will be our guest host. right now as we head to a break a quick check of what's been happening in the european markets. things have actually been positive across the board. gains have picked up. dax in germany up by .7%. half an hour ago it was up by .4. "squawk box" will be right back. >> coming up treasury secretary jack lew is here and ready to kick off the delivering alpha conference. his take on tax reform, politics and apple's fight with temp u. that's coming up at 8:30 eastern. "squawk box" will be right back live from delivering alpha.

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welcome back. u.s. equity futures at this hour, woke up this morning on the way in, it was like what? they are up 250 yesterday.

what's the problem. >> what changed between now and then? >> what's the problem? we're not triple digits now but every day since the end of, like after labor day been all triple digits. anywhere we're down 80 and improving a little. down 80 on the dow. down about 11 on the s&p 500. and the nasdaq, if it were to open right now down about 21. just over 21 points. >> we'll take a look at what's working segment we're definitelying in to the higher market cap spectrum and we're joined by the chief u.s. equity strategist at credit suisse where we focus on small, mid and large cap stocks. be a contrary yion for us. tell us what you like and what you don't like. >> some of the changes we made yesterday we downgraded capital goods. one of the most over valued areas in the market.

we don't hate all cyclicals. we have been telling people to buy retail or ex-reits. we think the market has hit this critical inflection point for this expensive high dividend yield trade. >> why do you like retail? >> it's super cheap. we've also very recently started to see a recovery in earnings trend. that's something we've been waiting for a very long time. first half of the year numbers were coming down opinion sentiment was very lousy. something has changed over the last month. you basically hit critical lows and starting to bounce a little bit. >> the argument for financials make you want for us. that's a conditiotrarion play.

>> there aren't a lot of places to go. one area has been this bank trade. it's super cheap. people can't figure out the interest rate question. they have been struggling with it all year. >> do you like these stocks even if the fed decides not to raise interest rates the rest of this year? >> i do. what we saw similar to retail over the last month you started to see this bottoming and recovering earnings. she thinks all the bad news is baked in to the stocks. estimates are very conservative even without rate increases. >> what do you think about tech? >> tech is very interesting. i wouldn't be a buyer of semis. we pulled it off this spring. we're sitting at neutral. large caps are cheap. i think the real problem in semis is small caps where there's a lot of m and a speculation has looked expensive. one of the most over valued areas. the other big problem we have in

semis it's quietly coming on the radar as one of the most crowded trades. >> what about utilities? you hate utilities? >> i hate utilities. we hit two standard deviations over the summer. we retreated to one standard deviation. still unbelievable over valued. we saw very strong close in utility funds at the beginning of the year. >> you started to see outfloss in august. again this all happened before we had this chatter that the fed might raise. >> hate is such a -- >> not friendly. i would turn your power off. >> i don't like it. >> you have a generator. you better. >> she has a strong view. >> we've been telling people to get out of this space. >> fine. who is your supplier? when we say tech you talk about

semis. what is tech now? i think of tech now like facebook or amazon. what is tech. >> that's the internet space. >> not tech. what's tech. intel? microsoft? >> the area we do like with tech is equipment and hardware group more of your communication equipment type names. unlike semis you have a very clear cut valuation story both large cap and small cap. >> like what names? >> so like where do you stand on internet stocks if you want to put that in privately? >> i don't dislike it as much as semis is one kind of on our radar. i do think small cap software and service stocks is where these internet names lie. that's been true for a long time. i do think you have more reasonable valuations. >> thank you for coming in and your strong conviction. we like conviction.

delivering alpha. >> you said cisco. will you get in trouble? >> i would get in trouble. >> you go back there -- >> now he's going to try to badger you. >> yes. i can't do it. i can't do it. i can't do it. we have to get pre-clearance. >> okay. what firm? >> credit suisse. >> man. coming up, we're less than two hours away from the opening keynote of the delivering alpha conference. treasury secretary jack lew is here or will be here. steve liesman is moderating that interview. i don't know why we need moderators for anything any more. >> after what donald trump said yesterday. >> what to expect. that's next. hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices.

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welcome back to "squawk box." olympic swimmer ryan lochte says he is hoping to move forward after his first appearance on "dancing with the stars" monday night. interrupted by protesters. two people were arrested after rushing the stage moments after lochte finished his routine with professional dancer cheryl burke. it wasn't shown on live tv, but video was released by abc showing security removing the men from the stage. one of them was able to yell liar before host tom bergeron tossed to commercial. police called the incident a pre-planned action.

an interview with "e" news lochte said the interruption was hurtful. >> it's hard. i'm getting over it though. it feels like someone reached inside, took out my heart, and stepped on it. i turned to cheryl and she said you just danced in front of millions i was like, my god, you're right. i did. so i'm going to keep moving forward and keep dancing. >> lochte and three teammates were involved, of course, in that early morning drunken encounter at a rio gas station at the olympics claiming they were robbed. it was they were not robbed and vandalized the gas station. he was suspended for ten months and will be barred from the 2017 fina world championships. >> got to keep dancing. >> i was thinking i may protest at some point. but i'm going to pick something really big.

you know, i'm going to go with a more generic type protest. we've got plenty -- a lot of people protesting these days. but you're mad at -- really? you're still mad at him because he told his mother something and you rushed the stage because he lie snd. >> it is a good way to get attention. lots of viewers. >> we've got more to worry about, don't we? >> yeah. let me tell you where our attention has turned today. jack lew. he's going to be kicking off delivering alpha, our conference here, at 8:30 a.m. eastern time. steve leisman is going to be moderating that keynote. he joins us now. >> we have a whole international thing to deal with. north korea, russia, china, all that. and the eu and wells fargo. all that stuff. jack lew writing an op-ed this morning and i want to give people one of the paragraphs from it that was interesting. quote, the european commission's novel approach to its investigations seeks to impose

unfair retroactive penalties is contrary to well established legal principles, calls into question the rules of individual countries and threatens to undermine the overall business climate in europe. >> and this is for what the eu is saying about ireland and apple. >> and recouping the taxes. some sense this is a tax grab by the eu. this is beyond just apple. that what they want is to claim this. i thought it would be interesting to show you where we stand in america on the tax debate. here are the different proposals that are out there as far as i can tell. the current tax rate just the federal level, 35%. the obama administration has a plan to bring it to 28%. that appears to be going nowhere fast. this is a debate for the next administration. gop plan would be 25%. the donald trump plan as we heard reiterated yesterday would be 15%. this would be to the lower end of the oecd. obviously ireland has the 12.5%

rate. slovenia is around there as well. and the clinton plan, i can't find it. please call me. i've looked all around to see many secretary clinton stands on corporate taxes. she gave that speech awhile ago that was supposed to be her big -- what's that? >> didn't sound like she wanted to cut them. that wasn't clear. >> there was some suggestion that she wants to keep them the same and close loopholes. you know what that would mean? that would be a tax increase. so that's where we stand this question mark to 35%. >> is that gop plan paul ryan and the house? >> yes. and by the way, notice how close they were. >> 25%, 28% that seems like a measurable gap. >> what does the -- how much does the eu get out of the $14 billion that ireland gets? what's in it for them? what's the deal? it's not like they care that ireland is doing much better. >> i think what they're trying to do -- >> there's this race to the

bottom issue. right? and we have this in america. i don't know if you'd call it a race to the bottom. you would call it a race to the top and i understand your point of view. when lowering a smaller rate than another state. >> or just carry away corporate investors from going there. >> the bigger story is whether or not thereafter this big chunk of $2 trillion of deferred taxes that u.s. companies are sitting on, they haven't paid to the u.s. and they haven't paid to europe. so they're sitting there, this is a big, you know, target to aim at. >> but if they collect that money, if the eu -- if ireland collects those taxes, that is then something that apple can offset against the taxes here was jack lew's point. right? >> his point is that's our

money. >> great. steve, this is going to be really interesting. >> it's going to be very interesting. he's been a big supporter. he's been to each one of these things. each one has been more interesting. >> again, that's coming up in about an hour and a half time. steve, thank you. treasury secretary jack lew kicking off the delivering alpha conference right here on "squawk box." it is coming to you live at 8:30 eastern time. when we return, coming up our guest host this morning tom barrack. we're going to talk to him. he's going to join us next after the break. ♪ it's been over 100 years since the first stock index was created, as a benchmark for average. ♪ yet a lot of people still build portfolios with strategies that just track the benchmarks. ♪ but investing isn't about achieving average. it's about achieving goals.

♪ and invesco believes doing that today requires the art and expertise of high-conviction investing. ♪ translation? why invest in average?

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live from the cnbc institutional investor delivering alpha conference.

in the hour, a host of guests leading up to the keynote speech from treasury secretary jack lew. today's guest host is has invested more than $50 billion over his career. and is a member of donald trump's economic advisory council. tom barrack joins us. plus fake accounts or cross selling? outrage growing against wells fargo. we're going to speak to the former fdic head about the state of financials, the fed, and much more. and move over usain. there's a new bolt in town. >> man, he's fast. >> chevy looking to charge up its competition with tesla. we hear from the head of gm's global development on the all new electric car. as the second hour of "squawk box" gets charged up right now. ♪ welcome back to "squawk box," everybody. this is cnbc, first in business worldwide.

i'm becky quick along with joe kernen and andrew ross sorkin. we are live at the pr hotel in new york this morning where the cnbc delivering alpha conference is taking place today. we've got a great lineup and coverage all day long here on cnbc. here's behind the scenes. but we're kicking things off today with jack lew. his keynote starts at 8:30 a.m. and he's going to be kicking things off. we'll bring you his comments as we get to this at 8:30 a.m. you'll be able to see it live right here on cnbc. right now the futures we've been watching pretty closely. showing some improvement. earlier we did see another triple digit decline for the dow. right now looks like the dow futures are down but only by 72 points. s&p looks like it would open down ten points from here. the nasdaq down by 21. small business sentiment fell slightly in august. monthly index dropped to 94.4%

from 94.6% in july. the climate registered the biggest negative impact on sentiment in the history of the survey. crude oil prices under a bit of pressure this morning. that comes after the international energy agency cut demand for crude. and what the ia is now calling wobbling demand in china and india. and a new tool is out that's going to help instagram users filter out words they consider offensive. users can now make a list of such terms and any comments that contain those terms will be hidden from view. >> when you can block everybody on twitter who disagrees with you, when you can block words that offend you, part is the sunshine. you got to know what's out there. not put on the blinders. >> no, no, no. nobody needs to not block twitter. thap is a cesspool. >> you agree with me on this argument except for twitter. >> yeah. yeah. no, i -- i'm going to do this one. then i want to talk to you for a

second about this. this ios 10 thing. i don't want to do it if it's not bug free. >> i sometimes -- >> that's what i mean. let me mention this. then i need your advice. anadarko is buying assets for $2 billion. the newly purchased blocks will increase the output in the region. a stock offering of more than $35 million. you do weight watchers. okay. >> weight watchers ceo is leaving the company at the end of the month. the company says that board member and major investor oprah winfrey who owns about 10% of the company will be helping to select a new leader. you can see the stock down 2.6%. there's a new office of the ceo in the meantime that i think includes three people who will be running things. >> i mean, this story -- everyone in the world this will

effect today basically. apple is launching its ios 10 software today. your phone will get this thing that you're supposed to do something. you're not going to get rid of that until you need to do it. you're going to wonder is it the same one or something else i need to do. so it's going to weigh on you. >> you are projecting, mr. ocd. >> just a few days before the iphone 7 hits the store and andrew, in the past i've done it right away and i've gotten burned. it's frozen. >> i advise a couple -- apple does a great job testing it however once you get it tested once it launches officially on millions if not a billion devices, sometimes the first couple of days, there's -- maybe a bug we don't know about. so i wait a couple days just to see if there's anything that needs patched. >> should i do it friday, thursday? >> no. longer. >> couple days. within 48 hours if there's anything that needs patched, we will know about it and they will

patch it. >> take the pill, let the ocd go down. >> by the way, it's worth upgrading. it's going to be a great thing. >> i can't get rid of the settings thing with the one can i? >> they roll out the one forcing people to do it or telling people over the next couple of days. they don't do it all exactly at the same time. if they were to, too many people would be downloading at one time. >> people at home will go, wow -- but that's why i asked you. >> this is why they pay the big bucks. >> the update was first unveiled at the worldwide developers conference apple had in june. it's said -- see. it's the biggest one yet. it's packed with new features that's going to allow users to hide stock apps. if you're not allowed to trade and someone at your company might see it. you hide your apps. no. >> they don't mean stock applications. they mean stock meaning stock

footage. >> oh. i thought it was for guys with cayman islands. >> i thought it was the stock -- >> there's lots of apps that -- >> yeah, but it's not just stocks. stock apps. these are like stock photos. >> now we've confused ourselves fully. >> yeah. it's stock apps you're forced to have. not stock market apps. >> we have a great guest host here. >> waiting. anyway, sort photos by faces but then mine and nick noltes when he got that dwi, it'd put those together. >> quickly before we get to mr. barrack, we should tell you about the bank backlash over wells fargo. the bank has agreed to pay $185 million to pay fraud claims even as the executive in charge got $125 million payday. kerry holstead was in charge.

the bank fired 5300 employees over five years for that practice. being paid $124.5 million on the way out. some of that as we just talked about earlier is deferred comp. wells fargo has now told some employees to stop cross selling products to consumers. market watch looked at complaints from the consumer financial protection bureau would suggest these tactics aren't just limited to wells fargo. the senate hearing will hold a hearing on the accounts. here's what richard cordray had to say about all this on "closing bell." >> making markets work for consumers. that's what we're doing here. this is the largest penalty we've ever levied against a bank. this was outrageous conduct. it was a violation of trust and an abuse of trust. we will be guaranteeing it doesn't happen again at any

bank. >> and you're not going to want to miss this. wells fargo ceo john stumpf will be joining jim cramer tonight on "mad money." and the aforementioned guest is a member of presidential candidate donald trump's economic advisory council. joining us now is tom barrack. colony capital has sponsored $24 billion over a variety of fends and investment funds that collectively invested over $60 billion of total capital. in your career, you've probably overseen the investment of how much money? it's staggering, isn't it? >> yeah. it's staggering. my job description was either a waiter or a concierge of investments. but we invested about a hundred billion. but i'm no longer 30 years old

so that's over a longer period of time. >> what do you want to talk about first? we don't necessarily just want to talk about politics. i guess maybe since we're at delivering alpha, i think maybe better to just get your world view on where we are for different areas. whether the fed is to raise, whether real estate is overvalued at this point, whether the economy is ever going to get -- well, now we're back to politics there. but where are we globally? >> i think every day is in a search for transparency. so where we are for sure is america is still the best economy in the world. we mine opportunities everywhere. and there's no transparent environment regardless of what the issues are as good as the usa. so everyone in the world is rushing as safety to the dollar to the usa. and you can't avoid politics.

because as good as we are, we've got big issues. and the issue isn't really monetary policy. it's income inequality. and a generational gap of this mismatched funding of the younger generation paying for the sins of the older generation. right? pension funds, social security, health care. how an investment environment can you bridge that gap? pretty complicated. i think where we are is in a search for clarity which is never simple. and where the fed is is all priced into the market. but i think what you're seeing around the world, central banks starting to say maybe monetary policy isn't the answer. how many more arrow dos we have in our quiver for monetary policy? and we may need to step on the fiscal policy bandwagon. and i think that's what we're on the edge of seeing. >> there's this debate about whether monetary policy is actually harming the equation at

this point. where do you way in on that? >> i don't know if i'm smart enough to know whether it's -- people need to talk about jobs and moving forward and not saving. so increased savings in a descending discount rate vurmt is not a great thing. and you're going to give it back. the wind fafalls over the last year. regardless of who the presidential candidate apparently becomes president. >> can i press pause? there's a headline from wells fargo just coming out i wanted to bring to viewers. wells fargo announcing it plans to eliminate product sales goals for retail bankers this morning. they are just announcing this. this is john stumpf saying we want to make certain our customers have full confidence

that our retail bankers are always focused on the customers. this comes out after the news on friday they settled a case with the government over what appeared to be a scam or phony transactions that took place with 5,300 employees fired over five years. this is the latest piece of news. interesting decision to decide. clearly the incentive structure was not working. >> right. >> but also now, you know, it's a little touchy feely. it's like, you know, if you got an employee that's not performing, it's going to be, you know, i don't want to push you about goals and stuff. and you know, you haven't really written any business in like six months. we wouldn't you to, you know, try to ramp it up. >> but these are retail bankers who are supposed to be working with the customers making them -- you gave them dual mandate. we're talking about the fed. >> this is business. >> but you gave them a dual mandate. are you serving the customer or

drumming up business? >> you also got to close deals. >> not if you're a retail banker, you don't. >> okay. then you can sit there like a lump of deadwood and -- >> no. they need incentive structure to make sure it's a customer service. >> turn it into a nonprofit. some people would like to turn banking into a nonprofit. someone right here. >> incentivized over 5,000 employees to -- >> i saw it. so they got like 5,000 unscrupulous crooks. but they took the incentive to, you know -- it's nice to have an incentive to do well and open accounts. you don't have to be a criminal to do that. >> but over 5,000 of them were creating fraudulent accounts. >> it's about hustling. >> it's not one bad apple. >> we should just note john stumpf i imagine will be talking more about this tonight on "mad money." >> you're going to be a safe zone where the boss is never going to say anything that might upset you. >> this is not your average

settlement. >> joe, you should call into "mad money" tonight and talk to stumpf. >> i think it's nice. don't upset any of your employees. so tom, how do i start this? you've known trump a long time. i'm trying to figure out. i saw you speak at the convention and you have a different sort of impression knowing the man than most people in the media would like you to believe. yesterday i saw a beautiful "huffington post." hillary may be, you know, she may be a little sick but she's not ad man. so she's not a psychopathic maniac. in that light she's preferable to trump. is that just par for the course in this politically charged environment? when you hear those things, you just let it roll off your back or laugh about it? i wound whaer he does. >> he's a warrior so he just keeps moving.

i look at it a little bit differently which is he's much better than his billing. i mean, what we're in the middle of, the kind of vocal personal debate that we have to me is understim underestimating what the man can do. hillary is terribly competent. and her being sick is not an opportunity to pound her, in my view. it happens to everybody. the pace both these candidates take is incredible. the choice is between disruption which is trump and status quo which is hillary. >> okay. so there's two things. number one, knowing him for so long you don't have that -- i don't know, the narrative that certain parts of the media have painted. so you don't buy into that. what about economically. you buy a private equity fund.

what about his global -- his anti-globalization rhetoric. what about immigration? you're of lebanese descent, i know. all of us came -- i think by definition we're all descendent from immigrants. unless you're -- i'm not going to say it. but all are descended from immigrants. we understand that. what about that stuff and the rhetoric? >> i mean, the bottom line is i think he's correct in most of those things. if you look at his stance on islam, i happen to be an arab american christian but i grew up with sunnis and shiites. so radical islam is a fundamental problem in the middle east. and then you have 1.7 billion muslims. the problem is the fundamental radicalism ties into u.s. foreign policy. right? when you look at what we've done in the middle east, our catch and release policy. how it really started in 1919

and we just drew lines around tribes. so what he's saying is that first if you're in an airplane and the oxygen leaves, they don't tell you take the oxygen mask and put it on your neighbor and see how he's doing and then put it on yourself. you put it on yourself first and stabilize things. which is part of the problem. >> but the rhetoric has been very inflammatory around that. it has led people to think you are targeting a all muslims from anywhere at any point. that's what's been divisive. you may be talking about policies that are one thing. but the way it's described is something that matters too. >> the way it's described is disruption. right? so we can all sit here and say who is better capable -- you've had the clintons that have had basically 16 years of runway in establishing a policy and practice. so to me the choice is if you like that, she's absolutely the best requested. and that may be an option.

trump is the disrupter. right? marriott never saw airbnb coming and it never liked it as it was coming. it didn't like the rhetoric. it didn't like the dialogue. but it's a gigantic threat. so i think donald being donald -- by the way, he's better than all the rhetoric. but he practiced this for 13 years on "the apprentice." right? he found a niche in america that said this political disrespect just like brexit is a moment of appreciation. what i don't like about any of it, if you really went to the issues which i think you'll see in the debate, if you went to immigration, if you went to trade policy, if you went to finance. he's so much better than the billing. and to get the two of them just to say, great, what are we really going to do? you have a $20 trillion deficit. what do we do besides pound on each other? >> on the disposition issue, the

rhetoric doesn't bother you at all? i mean, that's the piece of it -- and people thought there was going to be this pivot that was supposed to happen where he was going to not punch down, if you will, at people. and not say things that some people thought were hurtful or not. and then he decided at some point -- he'd say i'm not changing my ways. so which is the donald that you like? >> well, i like all of it. but he's been right. right? we all sat there -- my natural inclination is to say, look, you don't need the rhetoric. i think he's better than that. i think on the issues watching as a businessman, as a consensus builder, outside of the establishment. the problem is the establishment is the problem. it's not a politician. it's we have to bust the system somehow. so i don't personally like the rhetoric. however, if he would listen to me, he'd still be on "the apprentice." he wouldn't be the republican candidate for president.

that's the bottom line. you can't get upset about him. you need to look and say what is it that america appreciates about this. hillary's unfortunate comment about deplorables. it's not that incendiary. she didn't mean it that way. everybody's just concentrating on the rhetoric rather than getting off the rhetoric and what are we going to do. >> you had a fund raiser for him at your mansion in santa monica. how do you put a mansion on a quarter acre? >> in santa monica if you have 800 square feet or more that's a mansion. >> all right. there is no back yard. there's like a track area. anyway, thank you. >> tom will be with us with more. when we come back, though, can chevy's new all electric bolt put a dent in tesla's sales? we'll get more from the head of product development. coming up in a few minutes. "squawk box" will be right back.

treasury secretary jack lew is here and ready to kick off the delivering alpha conference. his take on tax reform, politics, and apple's fight with the eu. that's coming up at 8:30 a.m. eastern. "squawk box" will be right back.

live from delivering alpha.

now that fedex has helped us simplify our e-commerce, we could focus on bigger issues, like our passive aggressive environment. we're not passive aggressive. hey, hey, hey, there are no bad suggestions here... no matter how lame they are. well said, ann. i've always admired how you just say what's in your head, without thinking. very brave. good point ted. you're living proof that looks aren't everything. thank you. welcome. so, fedex helped simplify our e-commerce business and this is not a passive aggressive environment. i just wanted to say, you guys are doing a great job. what's that supposed to mean? fedex.

helping small business simplify e-commerce. what's that? the number of units we'll make next month to maximize earnings. that's a projection. no, it's a fact. based on hundreds of proprietary and open data sets folded into a real-time, actionable analytics model. nine. eight. three. five. two. you're not gonna round that up? you don't round up facts. powerful analytics driving decisions for the world's most valuable brands. hewlett packard enterprise. welcome back to "squawk box." i'm phil lebeau in washington, d.c. a big day for general motors. it has announced the expected range for its all new electric

chevy bolt. let's bring in mark reuss head of product development in detroit. 238 miles is what you are promising when this is fully charged. correct? >> that's correct, phil. good morning. >> good morning. so why is this a game changer in your opinion? >> well, i think, you know, if you look at the car here, we've been at here -- well, we have sold more electrified vehicles than anybody else. we've been learning here for the last couple years with the spark and the volt. and now we've offered something that is a sthird of the price of the other cars in market here with a range that can make this car your primary car. so if you look at the reason why people didn't buy pure electric vehicles, it was really around either cost or price range or in some cases utilities.

so we think with the bolt, you know, we have all of those covered and more. so the value and the pure electrification is getting solved from a cost price here. >> even as the price is coming down and you're offering this starting before the government subsidies tax rebates you're offering this at about $37,000. a lot of people are saying with cheap gas, it's still going to be tough to get people to say yes i want a fully electric car. what do you say to that? >> well, you know, the gas prices, you know, i don't have a crystal ball on gas prices. i'm not sure anybody does. but what it really offers if you've driven the car here and i have quite a bit, as our engineers have made a fun car number one. this is a great car to drive with no gears no converters here. it's quite fun to drive. but it can travel roughly the

distance from washington, d.c. to new york. and not -- you know, on a single charge. so this is the kind of utility people expect. frankly i feel good and i think everybody else feels good when we have a car that has zero emissions. that's what this car is. responsibility around our energy and our precious fuels and the whole emissions piece of our earth is a compelling reason to love the car. but you don't give up anything with this car. you really don't. and cars of the past, you either hit up a lot of money or you had sacrifice on the total range or both. so this is really an electric vehicle for everybody. i think it's really the first one to market that we've seen ever. so we're very proud of it. obviously our engineers are a great team. but i think people will really feel good about driving the car for many reasons as well. >> mark, we have to cut it short. i know you and i could talk longer about the bolt and what's

happening in the auto industry. a busy day with delivering alpha. speaking of which, let's go back to new york where becky quick is there before a very big day at the delivering alpha conference. becky? >> phil, thank you very much. we are getting ready for delivering alpha. you've got just an hour from now our keynote speech with treasury secretary jack lew. in the meantime, let's get you caught up on the stories front and center this morning. tiffany has a new chief financial officer. his name is mark irseg. he spent 18 years at various positions at consumer products giant prospector and gamble. california based chip maker intersill being bought by r erk nesas electronics for about $2 billion. that is just about 44% above intersil's -- and wells fargo

saying that it will eliminate product sales goals for retail bankers. it's also going to be strengthening oversight, controls, and training. all of this follows a $185 million settlement related to sales practices. the bigger issue is what's been happening since then. laid off or fired over 5,000 employees in recent years because of 2 million fraudulent consumer accounts that were opened. ceo john stumpf is going to be joining jim cramer on "mad money" tonight at 6:00 p.m. eastern time in an interview you can't miss. let's get back to our guest host tom barrack. tom, we've talked a lot about where you see the markets right now, about what's happening with the issues in the campaign. you're obviously a donald trump supporter. spoke at the rnc eloquently about that. but let's talk about the economy and what you see happening right now and how that might actually pluns where you're deciding

places to put money right now. >> so across every asset class, stocks, bonds, real estate investment, very difficult to find alpha. right? it's difficult to find arbitrage. information is plentiful to everybody. the real estate industry feels bubbly. because as cap rates contract, cash rats don't increase. sop values increase. but in place is the engine earning the same or less. right? technology as it has dawned its beautiful head in labor has done the same thing in real estate. so the idea of appreciation is something people hate to talk about. none of that is there.

instead of total return. it's probably a time to forget yield and go to total return. right? everybody's fighting for 3%, 4%, 5% yield. so i think what you're going to see is a lot of smart people saying when the elephants -- and i'm going to invest in asset classes that would give me a better market return. >> which are what? what are those asset classes? >> well, i think you have to find the value in the middle of things. when you go to technology which is the only bright spot in the market place, there's no yields. it's difficult for people like us to understand what's there. also on real estate, you know, physical, financial, and functional are real issues. if you take this beautiful

hotel. i mean, this is an amazing place. but if you really looked at cash flow, it's just an illusion. because whatever money you make out of it, you have to put back in it to make it functional. it's never functional because today what young people want, what the market wants, starts from something totally new. so i think you're going to see development which is the dirty "d" word. and the real estate business be a great place for opportunity. everything's fully leased. >> can i go back one minute? you mentioned tech. do you invest in a lot of tech yourself? >> no. i'm not very good at investing in tech. but i watch tech closely and our firm watches tech closely. because tit's directly related o what happens in tech. so our real estate investments and our private equity investments are -- you know, we

were fortunate enough to buy r miramax. we got lucky because netflix just came into prominence at the time. what it did to content was amazing. if you're in that business and you're not concentrating on tech, you're going to be left behind as a slow moving dinosaur. all of us have got to be involved in tech. >> again, tom barrack is our guest host and we'll have much more from him in a little bit. when we return, sizing up the problem state and local pension managers have. ash williams is our guest. as we head to break, saw triple digit losses again on the dow. almost. down 99 indicated on the dow jones this morning. across new york state, from long island to buffalo,

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welcome back to "squawk box" this morning. we're at the delivering alpha conference. state and local pensions have seen their liabilities grow at much faster pace than their assets. some funds could be over $3

trillion underfunded. joining us now to discuss all this is ash williams. he's the executive director and chief investment officer of the florida state board administration. esba has over $150 billion in funds. >> thanks for having me. >> we're grappling on what the growth rate in the country should be, what the fed should do. when you think about your pension fund, what is the realistic rate at which you now expect to create returns? >> the way to look at that is over a longer term. and if you model it out, probably the peak of a normal distribution is somewhere in the mid-sixes, something like that. so there's obviously a gap between that and the return assumption. that's currently at 7.65. we wrestle with the same problem in the pension world that all other institutions wrestle with

where we have long standing spending assumptions and return assumptions that at least in the short-term and potentially in the intermediate return don't adequately reflect the persistent slow global growth and low investment return and low interest rate environment. >> so what do you do about it? >> well, there are a couple of things we can do. none of us have control of the market side. we can put in a place an asset mix that puts together a mix of risk assets and non-risk assets. so we maximize the probability, we can meet our long-term commitment instead of taking on so much volatility that we run the risk of a significant shortfall which causes a spike for taxpayers. the other thing we can do that we absolutely do know and has been a penny saved is the same as a penny earned, we can hold our cost down. so florida happens to be on the pension fund front the lowest --

pension in america for the third year running. we run at just about the cost of half of our peer group. >> that's a function of what? you've managed to negotiate better deals with hedge funds and private equity firms or real estate firms? or something else? >> that's a small part of it. the biggest part of it is we measured in house on our own desks cheaply. >> like is 500 index? >> it's a global index. broader than an s&p. >> do you think everybody should be doing that? could you scale that? >> we absolutely scale it. we scale it at our shop. there are other things we do in house. direct real estate investing. some we do directly. that holds down costs. eliminates risk. it disconnects us from timing imposed. >> can i ask you about talent though? one of the issues has been it's easier to hire the most talented

investors at a private equity firm or maybe tom's firm than it is at a public pension fund where it might be more difficult for you to pay people at the same scale where some of these guys are making the fees they can charge. >> well, no american pension fund is ever going to compete with colony capital on wall street. but what we have done with the leadership of our governor and our trustees is put in place a comp scheme that aligns interest very well between our beneficiarie beneficiaries, our stake holders, and our employees so we award people on performance. >> based on annualized performance, five-year targets? >> we use a trailing period. all kinds of qualifications. we worked on this for several years for investment advisory accounts. >> you happen to have one of the best investment profiles of anybody in the pension fund industry. have you moved up on the alternative asset class as this

market has continued to deteriorate on a discount rate basis? >> yes and no. when i came back to florida in the fourth quarter of 2008, there was very little in the way of alternatives except for a mature private equity program. we continued that program, it's highly successful, it's our highest returning asset class over a multi-year period. what we did add was a number of assets that are in the alternative category that are lowly correlated or negatively correlated. we have a small hedge fund book which we started in about 2010. but we're not there with that book trying to out-perform equities. it's a risk reduction mechanism. for example, our cta and currency strategies the day of the brexit market collapse, we saw significant gains both in our currency book and in our cta book. so they're nice countercyclical that on a basis reduce rusk,

enhance information ratio, and improve over the long-term. >> and define benefit versus define contribution. you manage many municipality and local government pension plans too. what's the future of define benefit? >> that's a great, great question. the discussion to date has largely been defined benefit versus defined contribution. the arguments are defined benefit is too expensive and puts all the risk on the taxpayer. the argument on defined contribution is it's fair but doesn't provide enough income compounding for retirement savings. i would argue the best way to do it and we run both. and 80% of our beneficiaries are local government. only 20% are state employees. so i would say the right way to do it is some combination of the two that makes sense. the reason is there's an advantage for the tax pay tore have db to have over long

periods of time come bounds capital more efficiently than dc. and it's cheaper. as a result. >> thank you for joining us this morning. see you out there later. >> thank you so much. let's quickly take a look at some of the markets right now. we've been watching the futures this morning. after a down day of about 400 points on friday followed by an up day of 200 points yesterday, you could see the futures are indicated down triple digits once again. dow futures down by 103 points. energy prices also under pressure after the iea said that its demand outlook has declined specifically because of what's happening in some asian countries. you can see wti down 2% to $45.30. currency right now up. when we come back, sheila bair. why she says it is past the time to raise rates. "squawk box" is live from the delivering alpha conference this morning. we'll be right back.

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coming up, treasury secretary jack lew is here and ready to kick off delivery alpha conference. his take on reform, apple's fight with the eu. that's coming up at 8:30 a.m. eastern. "squawk box" will be right back live from delivering alpha. like centurylink's broadband network that gives 35,000 fans a cutting edge game experience. or the network that keeps a leading hotel chain's guests connected at work, and at play. or the it platform that powers millions of ecards every day for one of the largest greeting card companies. businesses count on communication, and communication counts on centurylink. hey, 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.

welcome back to "squawk box," everyone. we are live at the delivering alpha conference this morning. we've been watching the markets seeing what's been happening. this comes after some whip saw days on friday and on monday. in the meantime we're watching stocks this morning. shares of blue buffalo slipping after the pet food maker announced a secondary offering of 14.3 million shares of common stock. also check out shares of sanmina. that's been bouncing back. no expiration date and the company goes through the $63 million in its current plan. united natural foods reporting mixed results. the earnings were better than expectations. revenue did slip. now to this morning's music streaming service pandora has signed direct licensing

agreements with several major labels including sony music, universal music group. "the new york times" reporting yesterday that pandora is working on an on-demand music platform that would compete with spotify and apple music. iphone 7 is going to hit stores on friday but t-moblie says preorders have been the biggest ever for the carrier. you're not getting one. >> i am. >> you are getting one. you're getting an upgrade from cnbc? >> i'm going to pay my way. i'm going to spring for it. the big one. >> i've never seen this before. >> i may even do the watch. and i'm doing the ear buds, the wireless ear buds. >> stupid watch. that thing is so ugly. let's get back to our guest host tom barrack. i want to talk to you about this

too. a very interesting note i saw yesterday. one of our guests, david wu from bank of america yesterday put out a note that said if trump is elected and does what he says he's going to do, the u.s. economy is going to take off. but so are interest rates. and the reason is it's going to cut taxes. this huge fiscal stimulus there. he's going to boost defense spending up the yin-yang so it's much higher. so you're going to see some kind of canesian reaction. but all of a sudden interest rates are going back to, you know, 3%, 5%, 6% something like that. is that what we want? and if we don't do anything about entitlements, how do we pay everything back when interest rates sore? >> nobody wants to touch the

entitlement question. but at the end of the day, 93% of all the deficit is entitlements. so something has to be done. but in the interim, it makes sense. right? you reduce corporate taxes. you get rid of regulation. you invest in infrastructure. you have fiscal stimulus and you get increase from 20 trillion to $30 trillion in debt. still our jet death to gdp would be the smallest in the world. one of the best chairman in the banking industry. and has been one of the most conservative banks. but the regulatory environment on banking? >> we've only got about a minute left. i saw pence on with brett baird last night. he's pretty smooth, i admit. and he was a huge entitlement

reform guy. and brett played all this stuff. you've said this, you've said this, you've said this. now you're saying this. what's the deal? mike pence said, look, all in due time. we're going to do that. but the first thing we got to do once you get growth going, suddenly everything is easier if you got gdp growth above where it should be. then you tackle -- >> absolutely. and the same on trade. right? we have 187 trade committees. you have 535 congressmen and senators who are trade negotiators. and china is just clobbering us every day. but also one of the largest owners of our debt. so that balance as to how you play it takes somebody like a donald who says i'm going to play it outside of the norm. i'm going to get congress to give me fast track authority. i'm going to have special envoys in each of these regions. and i'm going to negotiate better deals. >> just sounds so calm and logical about it. i've seen andrew nodding and i think we have hope here.

i mean, i think you're starting to think about this. which i never would have believed it. >> it all sounds reasonable when it comes out of tom's mouth. >> thanks, tom. >> thank you. we got a lot more coming back from this delivering alpha conference here in new york city. including the secretary of the treasury. we're back in just a moment. dayw technologies make healthcare more personal with patient-centric, digital innovations; from self-monitoring devices thatan interpret personal data and enable targeted care, to cloud platforms that invite providers to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies are rning to cognizant. oudoma exper, technologists, digital and data specialists, clinicians and scientists are transforming the way clinical rearch sites collaborate wi pharmaceutical companies, and enhancing patient engagement

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this is a special presentation of "squawk box" live from the sixth annual delivering alpha conference. >> the most important players in asset management tackle the critical issues facing investors in today's economy. the fed, the global economy, the u.s. presidential election, and much more. first up, u.s. treasury secretary jack lew. he's going to take the stage in minutes and we're going to bring you a front row seat. a special hour of "squawk box" begins right now. ♪ welcome to "squawk box" on cnbc, first in business worldwide. it's hard to where -- >> hst loud. >> it's hard to think.

yeah. i'm joe kernen along with becky quick and andrew ross sorkin. we're at the site of the annual delivering alpha conference which is produced by cnbc and institutional investor and synchronizer watches. we're now just 30 minutes away from the festivities. but it is festive. it's also just chock-full of info. and you can see the type of people that are going to be weighing in on everything from the economy to the fed to politics. nobody's really missing down there. and we've been talking off camera how we're going to get fights started and food fights and who's going to argue with whom. >> i don't know who i'm going to get involved yet. but i can tell you one person will probably be carl. i think i can get him -- >> you're going to play jim belushi and start the food fight. >> yeah. i just have to figure out who his opponent is going to be.

treasury secretary jack lew is going to kick things off at 8:30 eastern. all this with a backdrop of a more volatile stock market in the past three sessions. up 250 the next day. then mostly triple digits this morning. there we are down 100 on the dow. down 14 along the s&p. and down on the nasdaq over 20. my favorite story today, this is my favorite. >> this is your fave. >> getting rid of any sales goals at wells fargo. it's like to all the salespeople, just go at your own pace. you know, if you feel like opening an account today, do it. if not it's okay. >> there's a reason for it. >> just don't get -- we don't want your blood pressure going up. this is a safe zone. >> explain why. >> we're going to get you caught up on what joe is talking about. it is the big headline of the morning. wells fargo announcing it's going to eliminate product sales

goals for its retail bankers. now, it's going to strengthen oversight and controls. that $185 million settlement related to sales practices in which over 5,300 employees were fired. millions of accounts created that customers didn't even know existed. ceo john stumpf will be joining jim cramer on "mad money" tonight. lots of questions that need answered from him. meantime, international energy agency cutting its demand for global demand. and take a look at oil prices this morning. because all of this weighing on the issue. wti crude. $45.25 at the moment. separately goldman sachs cutting the odds of a fed rate hike to 25% from 40%. i would put it close to 0%. but the call come after brenner a voting member of the fomc cautioned against the central

bank moving too quickly. not going to be prevented policy makers from speaking publicly until after next wednesday's fomc decision. so it's going to be get harder to read the tea leaves between now and then. >> my other point is, you know, being the best bank you can be, getting the best service you can give trying to take business away from competitors -- >> should be doing all those things and there should be goals. >> and to blame the goals instead of the managers and the unscrupulous behavior, it reminds me of a college campus now. we won't invite anyone here that says anything that might upset -- >> that is the second part of it. the manager just left with $124 million over the summer. that becomes the question. if you are incentivized as a manager and a lot was deferred compensation. >> if he had done it right, then, it would have been exactly what you're supposed to do. rewarded for hustle. >> but she was rewarded for fraudulent accounts being set up. that's the problem.

>> the keyword is fraudulent. that wasn't in the sales goals. do fraudulent things. >> but what you're talking about didn't take place. there was not good oversight -- >> my point is it's not the sales -- >> it's not the goals themselves. i appreciate it. >> my man, andrew. anyway. let's get to sheila bair who is president bair now. no more chair bair. chairwoman bair speaking at an event in washington. jamie dimon made his case for a fed hike. >> my own personal view and she does not call me for advice, but 25 basis points is a drop in the bucket. we say to you 25 basis points go really slow don't worry about it. let's just raise rates. joining us now to talk about what's ahead for the fed and other things, sheila bair. she's president of washington college. president bair. i don't know. >> i'm so relieved y ed to have

gender neutral title now. >> you're not the only one. although there are people that say the idea of raising rates right now is absolute lunacy. i know you hear it. and actually we see it played out with different members of the fed every day. why do you think -- or why are you in that camp we should raise? >> well, i've been criticizing this for years. i think it's gone on far too long. they need to get out. we need to get a normalized rate. it's distorting markets. and it's penalizing savers and retirees that are growing in the ranks day by day. gosh for bid i agree with jamie dimon but i do think we need to raise rates. get on with it. there's never going to be a good time. it just needs to get done. 25 basis points is not huge. >> i think that's the argument is everybody knows that the

financial world at 1% versus 1.25%, that obviously it doesn't make a difference. but it's when it happens, the fed is almost, you know, almost babying all the market players that someone might not be prepared. or there might be a dislocation in a currency. you do think the world is on your shoulders. that's part of the problem. they've gotten to this problem now. >> you cannot create demand. you can only create zplie and distortions and risk taking when flooding with cash and there's no real demand on the other side. so we need fiscal stimulus. needed it for years to the extent monetary policy is someone abled congress for not having to step up and provide meaningful fiscal stimulus. i think it's been harmful. get out. do it slowly, do it gradually.

it should be on congress and our next president to have sensible fiscal stimulus. >> yeah. i mean, i even think -- i don't know whether rules based or what we need, but the whole idea of every different fed fomc member having a different subjective idea of what's right, it just reminds me that's stated when you have the hundred smartest people with the market decide i ing if you were chairman, we accuse use the title chair bair again. i want to ask you about -- let's go to the student loans. i see what you're saying. very similar to subprime because the money's being pushed out almost instead of being naturally taken by people who needed it. it also seems like when they were pushing those mortgages. >> right. well, there's no underwriting. there was very little

underwriting with subprime mort ga gages and none with student loans. leaving lending to students who don't have a realistic chance of repairing. so it needs to be fixed. i suggested going to an income shared -- move to an equity model, not a debt model. if we want to make financing at some sensible level with taxpayer support, it is a good investment in our future labor market. but if you're not going to underwrite, don't use nap based on a small percentage of whatever your income is. that would make a lot more sense than the debt model we have now. which is not working. it's hurting students and taxpayers. >> can you weigh in on this wells fargo what seems like a scandal? you've wrank ld with them before. >> that's right.

there are a lot of lessons to be learned here. i think senior management needs to be with the incentives they're putting in place and monitor those. it sounds like here was a numbers game. doing more cross selling without looking behind that whether the customer wanted it. it was enhancing the customer's experience. i think there's a lesson for regulators. examiners need to read the newspaper when they're scoping exams. i think they did a nice job once they engaged but they were a little late out of the docks. but it was a good example between the consumer regulator. when they did finally move. and i think wells fargo today's announcements are helpful. they need to say more about the senior levels. are they going to claw back. this would be the situation. are you ever going to use it if you're not going to use it in this kind of situation? it seems to be contained. the real victim here is wells

fargo then bank and its once-good reputation and shareholders ultimately. i think there's going to be a long tail for this even though share prices reflecting a huge dip, i think over time this is going to take a toll. also have to work hard to rebuild the trust of customers. >> well, that was the question i was going to ask. john stumpf has a great reputation. this is a bank that always had a good reputation for risk management. does this change your view on that? >> well, yes, it does. i mean, i think -- you know, one of the things i've noticed at the level, including risk level now have risk management committees. does the risk management committee talk to the compensation committee. i think there's not enough at the highest levels. this is true for most banks. how much they're driving risk taking. money driving behavior, let's face it. and if you're not linking those two, i think you have a problem. there's obviously a culture issue to high pressure sales tactics. and again, the perception is a lot of low level people lost

their jobs without any accountability among supervisors and the up of the scale. that sends a bad signal to employees about what kind of behavior is rewarded and what is penalized. and who is held to account and who isn't. i think there's a lot of work to do to rebuild trust. and it needs to go at the very highest level including full engagement by the wells fargo board. >> before you go, tom barrack's here. we've been talking about donald trump. donald trump is trying to repeal all or at least parts of dodd/frank. does that seem realistic to you? are there pieces of dodd/frank you'd like to change? >> well, there are. but i mean, just repealing it without knowing what he would want -- does he just want to get rid of it? not have strengthen financial regulation after the crisis. you know, look. there are portions i'd like to change but i think we need a financial reform law. and i thought had a credible

plan. i wouldn't do everything he's doing. if you're going to get rid of most of dodd/frank, a much higher capital requirements. but i'm not sure we're hearing that. i would get rid of it. it's a sound bite. it's not really a policy. and we need some thoughtfulness. dodd/frank is not. perfect. there would be things to change but it would be nice to get clarity from the trump campaign about what he would do instead of dodd/frank. >> yeah. maybe you could help him figure out how to do that. he says he's going to replace perhaps janet yellen too. i think you need to -- tom, she is pretty impressive isn't she? >> she's amazing. i'm a great fan. >> well, i'm happy where i am. but thank you. >> fed chair bair. all right. but like so many things, you may not throw out the entire thing, but that doesn't mean you let really -- whether it's obamacare, dodd/frank, nafta or

any of these things. just because they're in force, if there are issues that are wrong doesn't mean you shouldn't change them. they're not ironclad either. i think that's the disrupter part that you're talking about. >> i agree. he would be more credible if he had credible -- it can be a disruptive change, but acknowledge it's a problem then we need a solution for it. >> all right. president bair, thank you. >> thank you. >> we appreciate it. >> happy to be here. >> for now we'll stick with president bair. we'll see. life is long. thank you. >> thank you. and our guest host this morning is tom barrack as we mentioned earlier from colony capital. before you go, given that we've been talking about interest rates and whether they've been up in september or december or what have you, what happens to the price of real estate in a meaningful way? how many point raises do you need do you think for it to actually change the fundamentals of the real estate market right now? >> i don't think it -- i think within the scope of what we're

talking about, it doesn't change it at all. it actually makes it more dear. so real estate again is just a capital preservation postage stamp. historical interest rates are doable. the spread between the rusk free rate and a rate you can pay on on any real estate is just the matter of what is the revenue. so revenues really haven't grown proportionately to the increase in value. a rise in interest rates is already from the flood of capital all over the world. takes five years to develop. it takes two years to buy the land. it takes two years to get in there. seven years down the line if you're playing the interest rate game, you're gone. so it's a longer duration asset. it has much less volatility and liquidity. >> when you go into development

projects, when you say it's a seven-year gain and you're not thinking about the interest rate, you're saying you're not thinking of the interest rate at all? >> you're matching assets to liability. you're locking in that spread for a term. but you really -- nobody has a crystal ball to be able to say what interest rates are going to be on the other end. it's a cap rated residual. so you're going to have positive and residual over time. real estate, traditionally in the u.s. has been for trading. not for holding. it's a trading asset. people confuse it. so pension funds have done a great job, but it's a tiny speck of their balance sheet. so pension funds have it for variance. not because it's such a great total return or yielding asset. but it's much less volatile. it's much more stable. it has covariance factors and have outperformed the s&p every year for 15 years. it's a simpler model with less

growth, very predictable and transparent. i don't think the interest rate environment is going to affect it. i think actually a rise in rates -- but we go through this every year. we've gone through this dialogue for seven years without one increase in rates. to me it's not a factor. you look at businesses are struggling everywhere. the top line has not increased. >> tom barrack, thank you for joining us. >> thank you. >> and the property we haven't talked about. neverland ranch. >> i think of weird things with that. i think of the scary basement. isn't there some weird secret passage way down? >> i don't know. >> like the room or something? yeah. there was. you go ahead and buy that. coming up, u.s. treasury secretary jack lew will take the

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welcome back to "squawk box," everyone. we are preparing for the delivering alpha conference in just about ten minutes' time we'll be hearing from treasury secretary jack lew. in the meantime, though, we've been watching the markets because there has been a lot of volatility in the last few trading sessions. check it out right now. on friday you remember that the dow was down by over 400 points. yesterday it was up by over 230 points. this morning we've been looking for most of the morning at a triple digit decline for the dow. right now dow futures are 93 points below fair value. s&p futures off by 13 and the nasdaq down by 21. also declines in oil prices this morning after the iea lowered its demand picture. it talked about wobbling demand in asia. that was enough to lower 2.3%. decline of $1.09 to $45.20.

general motors announcing that its new chevy bolt will be able to go 238 miles on that single charge. and this tops the range of the more expensive tesla model s. the bolt's going to go on sale later this year. sticker price about $37,500 and mark reuss joined "squawk box" if the last hour. >> if you look at the reason why people didn't buy electrified or pure electric vehicles, it was either around cost or price, range, or in some cases utilities. so we think with the bolt we have all of those covered and more. and so the value and the, you know, pure electrification is getting solved from a cost standpoint here as well. >> 238 would work. shares of gm at this hour, you can see that basically they're flat.

down about three sents indicated. when we return, an update is coming. apple rolling out a new update. "squawk box" returns live from the delivering alpha conference in just a moment. coming up, treasury secretary jack lew is here and ready to kick off the delivering alpha conference. his take on tax reform, politics, and apple's fight with the eu. that's coming up at 8:30 a.m. eastern. "squawk box" will be right back. live from delivering alpha. everyone said it's hard tbe a musician, but i can'image doing anything else. thneighborhood is really changing. i'm alwaysopping on the trai rug all over poran i have to go erever the wk k . trains with innovative siemens techlogy lp keep cities moving, so neighborhoo and businesses c prosp.

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welcome back to "squawk box." making headlines, apple launching its ios 10 software update. just a few days before the iphone 7 hits the stores. have you preordered your iphone 7 or you haven't? >> i have not. i might need to. because they're going like hot cakes. >> one of our plans at our house, we're due. so we're going to go. i'm going to see what it's like. this ios 10 update was first unveiled back in june. it's said to be the biggest ios overhaul yet. it is packed with new features none of which really appeal to me. ios 10 will allow users to hide

stock apps. we still don't know. >> the apps that come with it. >> not just the stock app that does come with it. >> not just the stock market. >> all right. you can sort photos by faces in case you don't know who it is. i don't know. and then by faces and places. and -- and you can get voice mail transcripts. >> you never have to listen to my voice again, joe. all those voice mails that you get. >> i haven't listened to voice mail in forever, have you? >> yeah, why not? on your phone when you get -- >> it takes too long. if you can get it sent to you as an e-mail. >> whenever i get one, i listen immediately. then it's over and i delete it. what if you need to call back?

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♪ welcome back to "squawk box." we're live at the delivering alpha conference getting ready for the secretary of the

treasury to join us. but just for a moment we're going to take a look at some stocks to watch. quest diagnostics shares are on the rise following the announcement of a joint venture with united health group. providing more transparency into health care costs. also viacom upgraded to buy from hold at green capital. green says most negatives are already priced into the stock. there are a number of potentially positive catalysts. among them new management team and possible recombination with cvs. also netflix was downgraded to underperform at bmo. they said that netflix may have short-term difficulty due to rising content cost and increasing competition. wells fargo is going to eliminate product sales goals for retail bankers. that will also strengthen its oversight controls and training. all that follows a $185 million settlement related to fraudulent sales practices. separately market watch looked

at the data base of customer complaints from the consumer financial protection bureau which shows over 30,000 complaints which are related to the same practices suggesting that the tactics aren't just limited to wells fargo and probably weren't a total surprise. so the senate banking committee is going to hold a hearing next week on fraudulent accounts. wells fargo ceo john stumpf will join jim cramer in an exclusive interview tonight at 6:00 p.m. eastern on "mad money." here's one other thing, andrew. everyo and becky. the brokerage had this problem with a free structure. where it wasn't a rapid account where you get charged for assets under management. but commissions based on trading. it occurred to everyone this probably isn't a good idea. because people might do things based on their own situation rather than the client. so then i remember it was about five years ago there was some new rule that said that people

that manage money have to take the clients' interest -- remember? and i said what a concept. you have to take the clients' interest -- >> first. >> and that has to be first. and then later it can be about -- and i made a joke like, really? you figured this out? it seemed obvious. and now that's what i mean. we're back to this again. it should have -- you can have a sales goal. but base the whole thing should have been based on keeping your client first. that should be a given. so i can't believe that it's 2016 and we're still hearing -- >> stuff like this. >> there's a spirit of the law and letter of the law. people know better. people know better. and the managers that were overseeing these guys knew better too. history never repeats it. >> i'm looking forward to what john stumpf has to say about this. >> i'm looking forward after sheila bair with this student loan thing, for too big to fail two. some of them shouldn't be going to college. others are taking french

renaissance poetry and they're never going to get a job. >> no underwriting standards either. >> it's getting huge. >> we talked about this before. would you change the rate for a student loan based on what you major in? >> yes. >> that's not a bad idea. >> that implies there's lower risk for some degrees versus others in terms of getting repaid on that. >> it's an interesting question. >> particularly when we're at a point in this country where we need more engineers and computer scientists. those hard degrees that really require a lot. yeah, i could see offering a lower rate for those. that's what we need in this country. >> higher rates for -- >> a lower rate, yeah. if you could lower rates for people in these degrees where we need trained people coming out. >> what's the rocks? >> geology. >> rocks and jocks. >> yeah. >> so where's jack?

is he in the building? >> jack lew the treasury secretary? >> sounds like there's buzz behind us. he may be. as we are getting ready to hear from the treasury secretary jack lew that's coming up momentarily. before let's talk about his op-ed this morning. responding to the recent commission to slap apple with a more than $14 billion tax bill. in this op-ed today, argues that threaten the overall business climate in europe. that it jeopardizes tax base because u.s. companies could claim foreign tax credits against their tax bills for any tax related payments to eu countries. basically it means if the eu forces ireland toic that this $4.5 billion in retroactive taxes, apple could then turn around and say that's $14.5 billion we're not paying you because we should get credit for taxes paid to other jurisdictions. >> it is interesting if ireland

joined apple in pushing back. >> yeah. >> what that has done, that lower tax rate at 12% has brought in all kinds of corporate investments to ireland. >> but citizens in ireland want the money. >> the short-term versus the long-term. what happens. >> irexit. the holman jenkins piece that talked about recent years of eu actions against u.s. companies. if you can't beat them, then take government action to prevent -- you know. we're not going to innovate over here. and you know, there's some truth to that. someone wrote in one company that innovated. but there's no amazons there. there's no facebooks there. well, facebook is there but it's a -- you know, one of our. apple. give me one. s.a.p., you got one? >> deep minds. you haven't heard of them but

they were bought by google. they do machine learn pg. >> well, now google is -- they're us now. and that holman jenkins idea was give them twitter. >> right. give them twitter. worth $14 billion at the moment. other washington news this morning. reed hoffman the latest billionaire to put his money into politics. he's adding on to the mounting pressure for donald trump to release his tax returns. in an op-ed, the linkedin cofounder pledging $5 million to veterans if the presidential nominee releases his returns before the last debate in october. hoffman is backing the campaign on crowd funding site -- >> marine corpse? the "p" is silent. >> every $1 to the campaign. quote, no reason to keep his return secret sent that he sees them as a bargaining chip.

i'm not sure they're a bargaining chip. >> i've explained what it is before. it's very clear what it is. if he paid a 12% -- whatever real estate person pays, the democrats and the left will talk about that 12% for the next -- >> yes. >> biel through the election before they're done talking about it. if it's evasion and something illegal that's been done, that's one thing. if you're just giving a talking point to -- and also you're going to out him -- what if he didn't give as much to philanthropy. what if he's got a joe biden rate of philanthropy. >> i think all medical records should be made transparent and all tax returns should be made transparent. when we come back, delivering alpha opens for business. jack lew kicking off today's big conference. in the meantime, take a look. features have taken a step lower. dow futures now indicated down

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coming up, u.s. treasury secretary jack lew is set to take the stage in just a few minutes. give you a quick look at the oil complex today. it was lower yesterday and it's lower again today. down at $45 on wti. we will be right back. mmunicatn. th's y a cutting edge university cous on centurylink

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folks welcome back. this is delivering alpha. as you see treasury secretary jack lew speaking. let's listen in. >> -- that took action against wells fargo is an important new addition to our protections for individuals and for the

financial system. it didn't exist before financial reform. i think they uncovered practices that they've taken action against. i don't comment on specific regulatory matters. but what i can tell you is what i've seen from a what they've done, it's bad behavior. they were correct to take action against. how that flows through in terms of next consequences is going to depend on the facts of the case. what i can tell you is there's a lot of talk in washington these days about rolling back dodd/frank, about rolling back the law, changing the law that created the agency that uncovered and took action against this. this ought to be a moment when people stop and remember how dangerous the system is when you don't have the proper protections in place. this is something that our watch dogs found. if they weren't there, it would still be going on. this is a wakeup call. it should remind all of us and firms that culture and compensation make a difference. how you reward people, how you

motivate people. and what values you hold people to matter. there's a public responsibility and i think the cfpb took action reflecting the public responsibility. and there's a private responsibility. we each have to do our part. >> if culture and compensation make a difference, then why wouldn't you support a claw back on this? >> ooum not going to comment on the facts of the specific case. it's being reviewed by an independent regulator. it wouldn't be appropriate for me to speculate on something that i don't know all the facts of. i think i'm addressing the issue in a pretty conclusive way. that it's unacceptable behavior. and it's the kind of behavior that we need to be able to catch and stop. >> we've had billions of dollars of fines levied on financial institutions. and this still -- this behavior is still being uncovered. is justice going far enough here? do we need to be in a situation where, for example, companies are not allowed to plead that

they didn't commit the alleged act and that there are individual indictments brought? we haven't seen that in any of these. >> we have, i think, taken action on a pretty dramatic basis to put fines, penalties in place for firms that have acted badly. the question of whether or not to pursue criminal prosecution is a decision the prosecutors ultimately make. we have made clear we don't believe that anyone is too big to jail. it is up to prosecutors to decide how you pursue the criminal charges. it's not up to regulators or policy makers. what i can say is that the pattern of behavior that we've seen here is something that needs to stop. it is not acceptable to do things that are designed to increase either an individual or a firm bottom line by deseceivi

consumers and passing along charges that are either invebl or they don't know about. and this is not the same as a financial crisis issue. this is really a consumer protection issue. i don't think this is a moment where we have to ask the kinds of questions we did in 2008 about what it means about the underpinnings of the financial system. but when i hear people say we want to roll back the statute that created the consumer protection bureau, this is another proof point it was the right thing to create. it's the right thing to have an independent director. and it's the right thing to make sure there's a entity watching over our system so people get clear information about their financial products and when firms or individuals behave badly, that somebody finds out about it. and takes action. >> moving to another company story switch in the headlines and you're dealing specifically with this issue of apple and the

attempt by the european union to get $14.5 billion of back taxes. beyond the company-specific story, is this an attempt by the eu to essentially grab unpaid american taxes? >> you know, steve, i have an op-ed this morning in "the wall street journal" where i've gone into some length to describe our views on this. let me briefly reprise what i've seen on this. we have for some time told the european commission that we believe that this is an inappropriate approach. why is it inappropriate? we agree with them that it's wrong for companies to avoid paying their fair share of taxes to get to zero or very low tax rates by taking advantage of tax havens. but the action the european commission took is out of the framework of normal tax policy. it is a retroactive tax that reaches into another country's, another jurisdiction's tax base in order to make sure that a firm pays its taxes. we agree with them that firms

should pay their taxes. but when it's u.s. income, we think that that tax should be paid in the united states. we've done a lot of work over the last two years to work at the international basis basis te we share information better an we have ability to close some of the loopholes that have contributed to the erosion of tax bases around the world. we need to take action in the united states to decisively change what's now pushing firms to take their income overseas. we have a broken corporate tax code. we have the highest statutory tax rate in the developed world. it's riddled with reductions and loopholes that give advantages that we don't really need or would design for today's economy. and the result is, we see u.s. companies trying to park income in lower tax jurisdictions. those lower tax jurisdictions are for doing some things that aren't right also. the race to the bottom with low tax rates to be a magnet for

those companies, that has to change, too. but what action do we need to take in the united states? we need to fix our tax system. we need to close the loopholes. we need to lower the statutory tax rate. one of the things we've proposed which i believe is an idea that will still have resonance in the year to come, is that the revenue that we get by putting a one-time tax on income that's parked overseas will produce one-time revenue that ought to be used to fund an investment and infrastructure in this country so we can do two things at the same time. we can fix a broken tax code. we can make it so companies don't feel they have to leave the united states to put their income overseas and we can fix our broken infrastructure. what i don't think is right for for tax authorities and other jurisdictions to reach into our tax base an remove the ability tore us to execute what i just described. >> if they're reaching in on apple, are there other company cases you think will come. >> there are pending matters.

>> will there be more of a grab at this moment? >> i can't speak for the european commission. we have spoken on the policy. we don't address individual cases. i'm not addressing the individual case that they -- >> does that mean you won't join as a party to the case in europe to join? >> the european procedure is a little bit different than ours. they're very aware our views. we have committed our views in a pretty formal way. the parties here are the government involved and the company involved. they've both indicated their attention to appeal. we've made our views made to the authorities in europe. we've done it in a way that our views will be before the commission on future matters as well. >> let's talk about the right corporate tax rate. 35% is the current top rate. just the federal part. there's another 6 points or so according to the oecd that would be added on on a subfederal level. you propose 28.

the house republicans wanted 25 and donald trump wants 15. 15 would be towards the lower end of the oecd. 12.5 is ireland. germany is around 15. why wouldn't we want a rate that low that would be -- and make america very competitive? >> the principle that's driven our work on tax reform, it has to be revenue neutral. we are, i don't think it would not be right for us to have individuals pay more taxes for us to lower the corporate tax rate. what we've proposed doing is eliminating loopholes and deductions and using the revenues that we get by doing that to reduce the tax rate on the business side as much as we can. we got to 28% essentially because that was the amount of loopholes that we could close. >> that makes perfect sense on one side but the other side of the ledger, at 28 you're still not competitive and there's a 13-point incentive for companies to go overseas.

>> in the 25% to 28% range we're getting close to the average. a few minutes ago i talked about the race to the bottom. some of the pressures on countries that cut their tax rates to low rates in order to a magnet, as we have discussed in the g20 and other oecd and other international bodies truly believe we need to close down the pathways to tax avoidance. we're going to need to inform some norms and having countries go to very low tax rates is part of the problem are. we have our problem. we have a high rate and a broken system. some of them need to take a look at theirs as well. >> is this a failure of the administration that you could not get corporate tax reform through? >> i actually think if you look at the history of tax reform, it often takes many years for it to kind of take hold and it's not unusual for it to begin in one administration and finnish another. i feel we've made a great deal of progress, working through bipartisan conversations to build a growing consensus around the kind of approach that i've

described. i think that there's an environment now where the political environment is not one where it has been ripe to take up something like this. but the ideas that we've been promoting will be the foundation for action in the future. so i actually feel we've moved significantly towards business tax reform. you know, it takes a desire on the part of congress to do something hard. hard things don't happen unless there's a real, real desire to do it. and you need a partner, we have had individual partners but as a whole we have not had that commitment. >> if you look at this issue from outside the beltway, one guy's at 28. the other guy's at 25, let's get in the room, spend seven minutes and we'll make a deal. seems like you were impossibly close almost the entire time and you couldn't make it happen. >> you and i have discussed this a number of times. >> i still don't have a good -- not from you but in general. >> i do believe the people we've

engaged with who have been leaders on the republican side, now speaker paul ryan, some senators who have been engaged in it, we have had a lot of conversations that lead me to believe there is the basis for an agreement. i just think the time for that agreement is probably not the next four months. in terms of the need to do it, you look at the infrastructure component of this, i think there's an urgency right now to dealing with infrastructure. you look at the action taken by the european commission. that is an urgency we need to act if we can the to protect our tax base. you have an alignment of forces right now that i think create a real opportunity. i certainfully think that's an opportunity, the american people would be well served if congress takes advantage of. >> let's talk about the transpacific partnership. again, there's another program or effort by the administration, worked hard on it, seemed to get agreement and now can't get it through congress.

do you regret that? is that a failure of the administration. >> i wouldn't draw conclusions about what we can and can't get through. >> i'm watching my clock here. >> there's still time for the tpp, transpacific partnership to be approved. let's start with the substance. tpp is a good economic deal for the united states. it's good for american work enait's good for u.s. security interests in the world. it means they'll have a more level playing field, american products and services which are the best in the world will be able to compete on a stronger ground and it retains the u.s. leadership in the world on important strategic issues. so i think it's vitally important that we get it approved. i believe there's still support for tpp. there's clearly opponents of tpp. i can't question that. we passed through the congress about a year ago, the underlying legislation, trade promotion authority which provides the procedural basis to approve tpp.

tpa was a harder vote than tpp. it was an abstraction, not a specific agreement. i can point in tpp to how it strengthens laboren standards, how it strengthens environmental standards, raises business practices closer to our own. i can appoint around the world to countries that are already taking policy actions, whether it's mexico or vietnam to meet some of those standards. i think we have the substance profoundly on our side. what i think the challenge we have, and this is a big challenge, we can make the case that it will improve growth in the united states and more gdp should be good for everyone. where we're running into a problem right now is the sense that is not just in the united states but it's in other parts of the world that more growth does not necessarily mean better wages or tune for working people. i think the issue this is the real issue we'll have to deal with is to show how the ben fete gets to big other individuals. that's bigger than tpp.

we saw that in thengdom in the referendum. >> that's a failure at every level level. the support of the american people has eroded almost across the board. >> the point i made, steve, is that it's broader than trade. it gets to the question of the social compact. i think it gets to the question of how free market capitalism and liberal democracy thrive. we have to ask serious questions about what is it that's holding wages back? what is it that is preventing individuals from feeling that they have a share in growth? i know what we can do at a public policy level. at a public policy level we can talk about skills. if you want to have working people feel they have a stake in the future, they have to have the skills to get jobs in the future and be able to get to and

from work and see a growing competent that will grow the jobs they can take advantage of. that's bigger than trade. we have a confluence of things that have been going on between technology and trade and the changing structure of our economy that are making it a challenging moment but tpp on its face should be a clear plus. we're going to continue to make that case and i think we're going to have to demonstrate the commitment to working families. >> in that equation you have to address the omni bus criticism of the obama administration, which was attempt down on private enterprise and too much government intrusion into the private sector that kept some of the gains getting to individuals. >> if you look at where the economy was when we took office just under eight years ago, it was in the middle of the greatest recession since the great depression. we were seeing unemployment at 10%. there was no bottom. we put in place an economic program that's lifted the united states out of that recession. we've seen sustained