>> yes. >> anything he can do with this? >> let me say what he would say to me at this moment if david were sitting in the room. by the way, senator barrasso and my husband are dear friends from undergraduate and medical school. he called my husband every year on his birthday. you know what he would say to me? he would say, dr.ty, i'll call the new england journal of medicine is and let them know what your insight is. >> anyway, great having you. say hi to him for me. i don't want anyone to know if i'm going to see him. make sure you join us tomorrow. "squawk on the street" is coming up next. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. the major indices not too far from fair value this morning as we await janet yellen on the hill at no fewer than four of her colleagues set to speak today as well. europe's positive as deutsche's ceo tries to reassure investors

in a german newspaper interview. durables just ahead of estimates and still looking for definitive headlines out of opec. inventories at 10:30. yellen back on the hill answering lawmakers questions about the banks, what she's expected to say about the troubled sector. and speaking of banks, wells fargo ceo john stumpf is forfeiting $41 million ahead of his next appearance on capitol hill tomorrow. and what should you expect as an investor? >> shares of nike falling in the premarket on yesterday's earnings numbers. what's dragging that dow component down? but first, a lot of news involving the banks today. wells fargo's john stumpf to forfeit $41 million in equity awards while the company's board investigates the bank's sales practices. deutsche's john crion saying the bank did not need increase or capital interest. about an hour from now fed chair yellen will testify on bank supervision and regulation before a house panel on capitol

hill. of course when she starts making headlines, we'll try to take some of that live. i guess let's take wells first here, jim. board's looking into retail practices, labor department's now in, tollstead is going to give some money back. >> yeah. i've been waiting for somebody on the board who has some level of gravitas. by the way, it's very interesting there was an overlap. when he was on the board of target, john stumpf was on the target for three years, nice overlap there. they're both minnesotan, familiar with each other. but when you look at that makeup of that board, you realize it's difficult for some politicians in there. it's a very community bang. looks like as wells fargo has advertised itself. but sanger can stand up. sanger doesn't play for dinner. and i think what he's saying is, look, we've got to get ahead of this thing because of the house.

to get ahead of the thing would have meant to go bigger. go bigger. >> what do you mean bigger? what do you mean? >> i mean 2016 this wasn't even the year we're talking about. talking about a very long -- >> right. i mean, they clearly didn't get ahead of it. >> not at all. >> now, the independent directors are leading the show here, to your point sanger is leading the independent directors hired going to look back at past practices. expected by the way according to people familiar with its potential workings, let's call it at least two months they would love to wrap this up if possible by the end of this year. so prior to the beginning of next year. looking also at the systemic breakdown in the culture and a lot of wide ranging issues. so sherman and sterling will be doing that. they'll be reporting in to these independent directors as you said led by mr. sanger. and the board now has taken control. >> yes. >> but one does have to question what took them so long. and i am told they didn't know

about this really. i mean, they watched that testimony last week the way a lot of us did, and some of it may have been new to them even then. obviously they don't read the "los angeles times" over the last few years. >> 2013, goodness. >> reporting on it that started all of this off. so it didn't bubble up to the board level at all. >> no. >> and now you've got this full change. by the way we're going to call it -- it's not a club act, this is unvested interest he's forfeited also not getting his salary during the period this investigation takes place. >> that's what i meant. if you want a clawback, you clawback what you have, not what -- >> that's what you meant by bigger. >> yes. that's exactly what i meant. david, the key thing you don't ever hear here, subpoenas. who will issue a subpoena to carrie tollstead to find out why she really retired in july. find out what she knew, when she knew it and why is she so silent. because that's not what the congress is going to allow. they've seized on this in a way they didn't even seize on the

mortgage issues. to some degree because they kind of feel like that this one was represented a level of arrogance. i think frankly when you hear what you just said about the board, the board was unengaged. >> well, you know, when you're a board member -- and you are a board member in a public company. >> sure am. >> sometimes you are -- unless you are really aggressive, you are beholden to the information you are given to a certain extent. >> that's why i've liked the separation. >> you look at the package beforehand, look through everything and if it's not presented to you, it's going to make it less likely you're going to know about it. >> that's very true. again, this board is not -- this board has been through a different kind of test. they were tested about whether the oil valuations are right, because wells bought high. but remember, this was not a company that had a whale in london. by the way, missing figure in this is dick , and also the

previous cfo. like to hear from -- >> there's also another gentleman i'd like to hear from. his name is mr. buffett. >> i urged -- twice i asked john stumpf. >> he is yet to be heard from. carl, they are continuing to be of course the questions certainly is whether mr. stumpf can survive this or whether in fact he should choose to set a retirement date sooner than the two years he has left. >> he bright bring us more headlines when he goes before house financial services tomorrow. john chen, who has news of his own today, on the board. frederico pena. >> it's an odd board. the last time sanger was in the news was an absolutely brutal piece in "new york times" about how he put an end to the notion of studying obesity as a linkage to cereal. when you google him, you're not going to get a bunch of great stories though he was a good executive at general mills.

i only bring this up because this company dr we were waiting for someone to step up. sanger stepped up. >> sanger has stepped up. >> but sanger has close ties too. they're going to look very closely. congress is in the mood. they're in the mood. and elizabeth warren likes this storm. >> she does. if you're mr. stumpf, it's hard for me to imagine given your distraction to a certain extent. it will be interesting to see how he survives. >> he did say on "mad money" he felt he was in a position to really address the situation. >> he did. has that changed since that appearance though, jim? >> i'm not going to disagree with that. i had said to him, once you get up to capitol hill, they're not there to hear about the great service that wells gives. i'm not being facetious. that had been wells rap. once you open an account you find the pan plea of things they

do. this notion of cross selling somehow has become obviously strucken for boden but -- >> it will be interesting to see what the investigation reveals, particularly not just customer complaints as being a key issue that clearly went on. but also employee complaints. that's where i would be focused. how many employee complaints bubbled up and were ignored or pushed back down? >> right. labor department is looking on behalf of the employees who didn't meet the quotas and were fired. so they're in a way getting squeezed on two fronts. >> well, they have a board. they have a corporate responsibility committee. but again, it's what david said. i have been in important situations where relevant data would have been welcome. put that. boy, am i trying to be a diplomat on this very difficult issue. and difficult because it is more politicized, as it should be. because the company viewed the, i think, viewed the small size of the fine versus the fines that the big banks paid as

indicative of how small the violation really was. and you -- there's a lot of people who think this was a multi-year fraud. and that is something congress is not going to let go. >> yeah. on the deutsche front, john cryan and this german newspaper talking about no bailout needed, no capital raise. meanwhile, government officials making anonymous comments of their own. where's your head on d.b.? >> okay, now, if i didn't know better, i would say this is going to come out so harsh. and i don't even give a -- this man is almost chemetic. he hopes the department of justice will treat deutsche bank with the same fairness american banks center already agreed on compromise. $13 billion? $17 billion? is he kidding? once again deutsche bank shows you how clueless they are.

go speak to jamie dimon. don't speak on the record. do you remember what those discussions were like? how did you get $13 billion? say another thing it's $15 billion. where's the due process? can you show me the breakdown for $17 billion by the justice department? we don't need a breakdown. we don't need no stinking breakdown. so this gentleman may be as clueless as the last person, so my advice is speak with nothing. where do they fit in distinguished bankers? just in terms of characters. >> understood. >> the department of justice -- who does he think he's talking to? >> there's a lot of potential scenarios being bandied about, all of them are rumors and

speculation right now. >> they should stop talking. we want to get to wilfred frost who i think has breaking news on wells. wilfred, good morning to you. >> carl, thanks very much. yes, indeed, we have received from a credible source the prepared testimony of john stumpf due to be given to the house finance committee tomorrow. let me just sum up some key takeaways from reading through it. firstly, he starts, again, with sincere tones of apology saying i'm deeply sorry that we have failed to fulfill our responsibility to customers, our team and the american public. almost exactly the same words as last week. so that's not a new development, but again, a tone he wants to re-echo this time in front of the house. he also said a new line in here, we've never directed nor wanted our employees whom we refer to as team members to provide products and services to customers they did not want or need. this probably a response to two developing lawsuits and a labor department investigation as to whether employees were wronged in terms of the pressure put on them. another new development compared

to the last week or so. very clear and detailed specific dates when certain parts of the bank were made aware about what was going on and what they did in response to it. that was a criticism of his appearance last week that there wasn't enough specificity around when individuals became aware. conclusion remarks, similar to last week. he says today i'm making personal commitment to rebuild our customers and investors trust. very clearly saying he is there to say despite of course the fact that we've had those big clawbacks overnight -- sorry, in spite of that. those clawbacks he's hoping of course will be enough to placate the pressure on him and that he can still remain in charge despite various calls for him to step down both internally and externally, guys. >> all right. wilfred, we'll be sure to watch. the tone of questioning might be different as well as it's the house this time and not the senate. we'll watch the definition of clawback this morning as well. >> yeah, not to put -- it's not

quite a clawback because that would be vested equity. but this is -- i also am reading an e-mail he sent out to all the employees, jim. mr. stumpf talking about as ceo i should have acted sooner and more aggressively to correct weaknesses in our operations. for that i'm accountable and i'm deeply sorry. >> well, yeah, that's about the -- you go there and you don't say -- you don't defend. you apologize. >> this was to employees. >> but you apologize to american people too. >> yes. >> even though one of the things when i deal with these bank executives and many of them started their career when i started say this guy should apologize to the american people, what did we do to the american people? what does that have to do with? truth? truth is an abstraction here. honestly, why do i have to apologize? because it's america. justice department. they're going to treat me fairly like they did j.p. morgan. can anyone -- >> your bottom line is he's being naive? >> naive as the previous ceo.

what you need to recognize is if you would just have a private conversation with jamie dimon, he would say, you know, there really wasn't a lot of due process involved with the department of justice. there's not a lot of due process involved in these situations. because this is not -- it's not a station house. you know, there's no -- you don't -- there's no miranda warning. elizabeth warren does not issue a miranda warning before she starts questioning you. it's a lot more free flowing than that. >> yeah. when we come back, nike down despite that earnings beat. we're going to talk about that in a downgrade today. later on this morning sarah eisen's exclusive with christine lagarde of the imf on everything from brexit to the global economy. look at the premarket, three triple digit moves in a row. repeat today would be the first four-day streak since brexit. back after a break.

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nike's down in the premarket. quarterly results beat expectations, but growth and global future orders short of consensus, up 7 as nike faces heightened competition from under armour and adidas, trying to get out of golf equipment, the second worse dow stock of the year surpassed only by disney. >> there was an unrealistic nature on the conference call.

i happened to be in mark parker and he's done for the company, you didn't get there falling off the turnip truck. but i thought -- as a matter of fact, they actually threw little cold water i thought about the notion of how important futures are. forget it, we're trading to look at futures same way we're trained to look at same store sales. very little discussion about adidas, no discussion about competition. i refer to j.p. morgan's piece by matthew boss which was brilliant saying play with foot locker. but this is one where they really have to start explaining themselves better because, yes, it's true china was great. yes, it's absolutely true europe was great. this notion the total adjustable market is 7 million athletes and performance and innovation will somehow always triumph did not work this quarter. >> target 52, they call it an innovation reset. that products are getting less technical and more lifestyle oriented. >> yeah, well, i mean, this is

athleisure debate. remember stan smith is hardly technology. they did address the notion of flex, which is a great company that's doing a lot of technology. they talk about hp inc. and 3d technology. again, what's happened is technology this quarter, unlike what they talk about in shoe dog which really was about talk about technology, technology did not play nearly a role. there's a lot of questions about what people are wearing right now. this is the debate about lulu. when you ask lulu why are people wearing, i still say mindfulness. you laugh at mindfulness, but there's an article in "new york times" about the importance of mindfulness and what it means. there's a generation we're starting to think of are they into nike other than basketball shoes? and basketball shoes may not be as important. now, we know that michael jordan, it's an amazing franchise, all i wanted was an explanation of why we thought they were doing so well beyond just golf going down, beyond just one-time items, beyond just maybe some inventory issues. but they didn't give it to you.

in either one of two things, the next quarter is going to be fabulous and you're not seeing it for the futures orders or mark parker has to go back to the drawing board and say maybe we need to do more. parker is so good. you can't bet against parker, but wall street is. >> you seem uncertain. in either direction. >> i didn't like the call. i just didn't like the call. i mean, they were like -- when howard schultz delivered -- he didn't do plus five domestically. he was apologetic and abject not to worry. these guys acted like they did a great number domestically and k.d. and lebron -- >> so was that downgrade yesterday? we talked about on "mad dash"? >> yeah. >> and growth of adidas and everything? >> nike loss lee holman, he went to lulu. he's making it into more of a men not just women's brand and talk about tim cook and the notion of the apple plus watch. but i'm saying i found -- we

upon part of the analyst about the notion that this technology is going to get them where they have to go. that there has to be more. and maybe some questions here about the validity away from basketball shoe. whether it still has it. by the way, everyone wanted to say it's under armour. it would be adidas, not under armour. because adidas one of the great -- you got there if you were nike by total abdication by adidas. and adidas is back. >> yep. >> and they're back with very retro almost like converse should be the function. >> yeah, chuck taylors. >> yes. chuck taylors. look, they're not arrogant, but i did feel they were out of touch. and they run a great conference call, they always have terrific plays on conference call. a netflix like production and felt to me this time like a broadcast show as opposed to a

serial cable show, which you know is damning. >> yes, it is. >> cramer's mad dash, countdown to the opening bell, one more look at the premarket. "squawk on the street" from the nyse continues in a moment. the pursuit of healthier. it begins from the second we're born. because, healthier doesn't happen all by itself. it needs to be earned every day. using wellness to keep away illness. and believing a single life can be made better by millions of others. as a health services and innovation company optum powers modern healthcare by connecting every part of it. so while the world keeps searching for healthier we're here to make healthier happen. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. i'm in vests and as a vested investor in vests i invest with e*trade,

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♪ all right. what do we got? about five minutes before we get started. you didn't have a lot of time for your mad dash. >> i know. yesterday we talked about hammerstein and fa, a long, long way to go. wedbush an outright sell on

alphabet. i've been all over the place with lots of people who didn't like alphabet. remember, this company sells at a market multiple. so i'll take it. >> how can you do that after a downgrade? it's un-american to downgrade alphab alphabet. >> i think there should be a house american activities committee that looks into this downgrade. we need a committee to look into this sell. >> we do. >> meanwhile, obviously people are saying what should be the other a, adobe besides amazon, another price target raise amazon today. i think they do them on saturday now. don't you think the analysts should just do saturday and sunday upgrades of amazon? why do we have to wait until monday? >> that's true. >> and now amazon going into fed ex, u.p.s., and fed ex would tell you welcome aboard, we don't have enough trucks to meet your demand. those stories are a bit of a canard. alphabet a lot of different metrics about how it's no longer -- people look through amazon now to find things more than alphabet. i don't want to say it was late.

i'm thinking you could say that's why it sells at such a low multiple. but wedbush took -- that was a gambit, put wedbush on the map. >> got it. all right. we're going to talk about a lot of other things including fang or now it's fa. >> fa. >> yeah. opening bell four minutes away. stay with us. as a supervisor at pg&e, it's my job to protect public safety, keeping the power lines clear, while also protecting the environment. the natural world is a beautiful thing, the work that we do helps us protect it. public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. we want to keep the power on for our customers. we want to keep our community safe. this is our community, this is where we live. we need to make sure that we have a beautiful place for our children to live.

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you're watching cnbc live from nyse. we're watching big day for fed speak. then you mentioned the downgrade of google along with downgrades of at&t and macy's and twitter. >> radical day. macy's, switching to dillard from macy's? no thank you. i mean, just in terms of like style. but macy's is down and i don't see a catalyst to buy macy's. the att i thought was, you know, bond market with a little buzz, i'm not really into that downgrade.

by the way tempur-pedic downgraded itself there and really just a brutal moment. the burning fed scenario of tempur-pedic. >> yes, ohio mattress. >> there's the opening bell. and the s&p at the bottom of your screen at the big board it's noble midstream partners celebrating its recent listing. at the nasdaq fxcm provider of online foreign exchange trading. >> worth noting a very good deal in a segment that's actually been quite good. noble midstream is actually one of the bigger wins. and i think that people should be looking at those companies that midstream partnerships are back and they're very valuable because there's a lot of oil and natural gas being shipped around the country. turns out this group has bounced back. now, it's not anywhere back to where it was even a year ago. >> no. >> judge has the guy we want investigate for the house on the american downgrade committee, wedbush guy on, he's on the

scott wapner show, maybe they'll subpoena -- was it the subpoena that made it or is he coming onto talk about it? >> i think he's just coming on -- >> you are coming on the show. >> phas that stock down about half of 1%. symbol for alpha by the way is still goog. >> just a punch in the face. come here and explain why that man doesn't know what he's doing. come on the judge's show, or come on "mad money." >> right. >> we refute -- >> carl mentioned this at&t that downgrade from ubs having a bit more impact on those shares. att down about 1.25% this morning. i thought the most interesting thing from the note was this idea that there's more competition coming. >> yeah. >> doesn't say exactly from where. but ramping competitive intensity is the words he uses. >> i thought you were going to go twitter because of the nfl

versus directv because there's a note from citi today about will disney acquire twitter, we hope not, reward seem low. talking about how they lose money on the nfl deal. that's not what att did. they make money. >> no. they're also coming up with an over-the-top platform involving directv which will be interesting to see what that is. but there's some costs associated with that. but when it comes to competition in wireless, keep an eye on our parent company. i mean, brian roberts at the goldman conference last week was talking openly about it, this idea of using the wi-fi hot spots that are all over this country and creating some sort of service with offering something to the customer you have to keep an eye on it, it could be real competition. what are you giving me that for? what's this? >> well, i let you talk about comcast. i just let you do that. >> you want minimum safe distance. >> is that what i need to do to keep you quiet here just talk

comcast? >> yeah. >> comcast, comcast, comcast, woo hoo, comcast. >> i'm doing everything you used to do to me. >> back in ge -- >> wireless competition is an important thing to keep an eye on, mr. cramer. yes. we got some other earnings to get through. paychecks is a three cent beat with 60 cents. get through that sometimes a proxy for the labor market. >> i got marty on tonight. this is a stock that tends to bounce back quickly. obviously there are a lot of people wrote 150 shares is down big, a float that they take on the check, full disclosure i use paychex as they handle my books and i think that they are the ultimate small to mid size business so we get a referendum on small to mid size business. sonic down 5% more includes weakness about fast in quick serve lower ticket and lower

traffic. >> that was just a parade of pletho -- cliff is very good. sonic is not necessarily known as good for you. but they have been very consistent. and this has been a very rocky period for them. >> amazon cracked through 800 last week. today it's 819. this time nomura initiates with a buy, target 950. they argue global retail is a $24 trillion target. if amazon gets 1%, they say that's incremental $15 billion in revenue, 65 cents. >> let's go back to delivering alpha two weeks ago when bill miller said this company could double in three years. the stock could double in three years because precisely if we had just said that the market for retail is so large, i would not get in front of this juggernaut. notice amazon not a bidder for twitter. >> no, they're not. amazon is not. facebook is not. >> comcast?

>> i don't believe so, but at this point hard to say. you know, it's funny with twitter of course shares are down this morning -- wow, look at that move in amazon. >> yeah. >> that's some long term capital appreciation. >> that's everest right there. look at that base camp -- you need oxygen to buy that now. do you think you have to carry some canisters? >> maybe. maybe. >> percentage gain on 20 years. >> geez. >> people thought it was like the piedmont or appalachians. this turns out to be the himalayas. >> yeah, that's -- there it is, man. that's the reason why you invest for the long term. >> oh, you like long term? i like to flip in and out of amazon or these stocks just flip, flip, flip, just make sure you catch none of the move into thin air, david. do you remember how that ends? >> i do. >> into thin air. >> yes. >> that is thnot this book. >> the interesting top five companies in our country is

tech. not industrial, not an oil company anymore. it's amazon, facebook, google, microsoft and apple. >> speaking of which brings us to the macy's downgrade today over at credit suisse. they go to neutral $40 target. going into what they call the execution phase having put their cards on the table and how they're going to respond to this industry challenge. >> that was real negative. going into the execution phase, typically if they execute well you want to buy it, not downgrade it. that was a tough downgrade. >> dillard's outperform. >> i used to shop at dillard's. that's about all i'm going to say. >> used to. >> wow. >> what happened there? >> well, i moved to tallahassee, it was my main source. i lived in the south. dillard's is better than it used to be. i never regarded it as any more fashion forward than kohl's. and i have to buy my socks at kohl's. i've often revealed that. you probably don't see them. i bought a lot of my casual work sonoma clothesline at kohl's

is -- you probably use the target -- you probably don't go to any of these stores. >> i don't know where my clothes are purchased. >> do you have a kohl's card? >> never been in kohl's. >> the houseware division in kohl's kills it. i got a great barbecue book there once. >> really? >> yeah. ted nugent. >> finally, cody replacing diamond offshores. >> yeah, proctor exchange there. it's a lowe's koerpgs, but the offshore market is so horrendous. it's just horrendous. can't talk enough bad about the offshore market, those are the projects that are being canceled. not the -- >> right. although yesterday and you've made this point the journal did a story about how costs have come down, fracking is able to come back so quickly. and really the production numbers here in the u.s. have not gone down that much. >> not much at all. >> and the break even is far

lower than it had been. >> that's why iran doesn't want to give up any because the shares going to be taking. the u.s. is itching to take back whatever it lost in share. there's a lot of exports coming in. i do think when freeport sold that was a bargain because anadarco is adjacent. all things said, i'd rather be in the beer business. mention that because of molson going higher again. restaurants -- they're so hideous, i need virtual reality glasses to make restaurants into like twilio. we did get approval on s.a.b. >> yes. >> big one in the books. >> that is an enormous deal of course. this year's seen a few of them. the question will become immediately what's next, not just for abi but also for the three guys involved with that and always hear about more

consolidation coming. >> john cryan, that fella from deutsche bank, maybe he thinks he's in the beer part of justice, where anything goes. >> the beer part? >> remember the justice gave constellation brands -- they gave modelo and corona. >> they did. >> maybe that's what he thinks, that maybe he's in that more forgiving part of the department of justice. not the part where you go and ask the other banks how fair they were and say got a real good here and there -- tony west or eric holder now of course mr. holder's moved on. >> yes, he has. as has mr. west. >> yes. mr. west is at pepsico which is a lot less controversial and reports tomorrow and looking forward to speaking to hugh. >> ask him a twitter question. >> my guess is he won't have much to say on that. >> you don't think he'll just give us everything? ask him about disney been, salesforce -- >> i don't think so.

>> we have greg hayes. >> we did. >> kill the united technologies bid. well, bid for -- >> sorry. >> why can't he switch the narrative and spend most the time talking about twitter? right? >> very happy. as i'm sure mr. chen will be happy to talk about wells fargo. >> definitely. not software sales. let's get to bob pisani on the floor. dow's up 40. good morning, bob. >> good morning, carl. and a fairly nice start to the morning. 3-to-1 advancing to declining stocks, dow up about 40 points. europe having a good morning as well. japan unfortunately did not. overnight they had a fairly tough time. most of the big names, some of the car manufacturers, toyota, honda, they were all down, you know, about 2.5% as you can see there. honda motor down 1.8%. mitsubishi a bit on the upside. so a mixed market overall but swla to the downside. if you take a look at europe, they were up. financials were leading rather

nicely there. all on the upside. deutsche bank also on the upside. john cryan over there telling a german newspaper that the bank did not need any government assistance or capital increase. a lot of debate about that, but deutsche bank sort of leading the way as well on the upside here. here in the u.s. oil doing nicely this morning despite very uncertain opec commentary. energy's leading the way. and as you can see here materials, industrials a little more of the risk on in the more defensive names, your health care and telecom lagging this morning here. you were talking about coty and diamond offshore, this is a little bit more than just a maker of beauty and fragrance products replacing a driller that's out there. i think the important thing is coty's market cap is going up. diamond offshore's market cap has been going down. in fact, it's been going down rather precipitously. in july diamond offshore had a market cap of about $3.4 billion. today $2.1 billion. the stock's gone from $26 to $16 as jim mentioned the

difficulties with drilling particularly offshore, as you see the name of the company. and as oil has come down a bit from $50 to lower $40 range, that had a lot of damage overall. you can see one of the reasons the stock is coming out of the s&p and going into the mid cap s&p 400 mid cap here. let's move on to the vix. we're approaching the end of the quarter and everybody says september is a volatile month. and it is. but it turns out not to be. and the most volatile event was an unknown unknown. we had mr. rosengren speak on september 9th, which caused the vix to go from 12 to 20. mr. rosengren of course a dove saying maybe we ought to raise rates. everybody said oh, my heavens, maybe something really is going to happen. and that turned out to be the most volatile event. a lot of people were thinking that the election debates would be a volatile event. turned out not to be. or the fed itself the meeting being a volatile event. both of those events were not

nearly as volatile as the comments by rosengren. that moved the overall markets. if you look at the month of september and what stocks had a tough time, which sectors had a particularly tough time, home builders, oil and gas exploration companies, material names, all had a very tough time. much of this because the dollar moved. so we put up the chart here you can see the under performers were companys that have problems as the dollar moved to the upside. so home builders, oil and gas, exploration companies and material names all to the downside. there you see retail also had a tough time for the month. and all of the problems with these sectors can be priced to what happened on rosengren's comments on june 9th. that's when they started moving to the downside. let's talk about ipos. we had a great week last week. we're going to have a big one pricing tomorrow night. this is nutanix, an actual unicorn out there. this morning they announced higher price 14 million shares now at $13 to $15. they do computer storage

technology, that makes it easier to run corporate servers. this is very important because the prior price talk was $11 to $13. now it's $13 to $15. why is that important? because at the old price talk the mid range of about $12 that was the below the prior round of series e funding, fifth round of funding they had a couple years ago was a little over $13. so if they were to price at $12 everyone would have said they're pricing below where their last private funding was a couple years ago. this would have been a big problem for other unicorns out there sitting there watching these companies and wondering are they going to get anywhere close to the private valuations that are out there. so the bottom line is this is very good news for the overall unicorn business pricing above earlier price talk and closer to where their old valuations were. pretty good week for ipos in the last week. look at all the stuff that came, novan, the trade desk, e.l.f. beauty, apptio, valvoline, september is going to be the biggest month of the year for

ipos. be all over that nutanix pricing tomorrow. david, back to you. thank you very much, bob pisani. i want to do revisit a deal that was announced back at the end of july, oracle's purchase of net suite or announced. the reason i mention is tend r is coming close to conclusion set for october 6th, that the point at which oracle needs to see a minimum condition met from net suisse shareholders. what is it? remember larry olson owns tremendous amount of shares of n n ne netsuite. as i said, october 6th is the date. why do i bring it up? because there does seem to be a decent amount of opposition to the deal. and the possibility at least that that minimum condition will not be met in that tender and therefore it will be put upon oracle to either choose between now and then to raise its bid or

to simply say, okay, we're not going to buy netsuite. >> wow. >> let's look at some of the recent comps here. you'll see why there are some shareholders who are saying you guys are getting this too sweet a deal. and for example, salesforce demand ware done at 8.7 times. its next 12 months revenues and it's 26% top line grower. all right. there's a multiple 8.7 times, 26% top line. concur down to 10.6 times but here you have oracle paying 7.1 times unpriced value over next 12 months revenue for 28% growth company. so a higher growth company, a lower multiple. and that is why you've got opposition. i'll get to we talked about previously from t. rowe and remember it's the unaffiliated shares. i'll get to percentages. but the s.e.c. and proxy asked

for more information. what did they want? they wanted more information from oracle's advisor about its own assumptions on fair value for netsuite. we got that very recently. take a look at it. the upside case according to oracle's own banker was 162 to 211. that's way out there. but base case 141 to 178. conservative is 117 to 148 and yet oracle paying 109. this is their own banker. by the way netsuite banker catalyst as you might expect given they said yes to the deal came in with far lower, far lower assumptions of fair value. but that was interesting to note at this point. what? sorry -- >> this is remarkable what you're reporting. >> it's interesting to note -- >> at 80 i thought it was fair, but this is amazing. they're talking about this deal breaking down? this is a larry olson deal. tell me this deal could break?

>> we'll see. remember t. rowe only a couple weeks ago came out said the uniqueness between the fit we think there's a lot of synergy that could be taken. they went onto say a lot of other things ending with the basic simple fact that at 109 per share their preference for netsuite not to remain -- or to remain independent. >> now, what was t. rowe's role in the -- >> thank you for bringing that up. t. rowe was very important in terms of when dell faced a lot of opposition. and percentages to get them for you at this point that i have are showing simply that t. rowe and brown, another shareholder believed to be against 42.3%, you need 50.1%. it's going to be a tough fight for oracle, proxy solicitors to get that done. >> holy cow. that is so important. >> that's why netsuite shares

have been trading a bit above. >> i was looking at that jump to 110. what i find amazing, david, is a lot of people felt oracle had to do this for small and medium size business, but obviously this is ellison has a big stake in it why did they need to do it they could cooperate. but this was important for them to be able to say, listen, majority of our business is a growth business coming from the cloud. netsuite is integral to the cloud strategy. but, david, this deal -- >> yeah. >> i had no idea that this was even in jeopardy. >> so we'll see. thanks. >> last week was twitter. >> yep. let's get to rick santelli. >> but people have to say other news outlets report they won't know what to do. >> take it away, rick. >> all right, david, thank you. a one-week chart of 10s tells you pretty much everything you need to know. we have a downward drift wasn't dramatically effected by today's durable goods preliminary august though many are a bit nervous about the ongoing slump in

business, capital spending, what ultimately turns into investment and seed down the road. if you look at a mid july start to 10-year, you see that we have reverted back to very well worn range. you want to watch if we get past the bottom of that, even though there's a 1.40 most looking at 1.50 as somewhat the floor. let's look at one-week of bunds. yesterday they traded very close, three basis points away from their all-time low closing yield of minus 19. open the chart up to july 1st and you can clearly see the drift there. you can pick out on the left side of that chart that july 8th, i believe it was, bottom at minus 19. but let's look at the other end of the curve. let's look at a 2-year in europe. you see on this chart year-to-date, they did go off minus 70. who buys a minus 70 security? i'll tell you who, people looking at bazooka, no, not mario draghi's, the kind we chew

that blows bubbles because the only person who would buy minus 70 is somebody who thinks they want to buy it at minus 80. if you look at that year-to-date it really is somewhat dramatic and shows you why the likes of deutsche bank are in trouble. look at the spread 1.69 on our 10s minus bunds, this is at the upper end of the range. you want to watch if this thing pops. november last year last time it traded 100. many talk about a strong dollar, obviously not paying attention, not strong this year. david, carl, back to you. >> all right, thanks so much, rick. rick santelli. when we come back, sarah's exclusive with christine lagarde. the dow's up 41.

the top performing dow stock of the year is the top performing dow stock of the day, caterpillar up 1.5% followed by apple. index is up 37 points. we'll get stop trading with jim in a minute. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities.

we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. so what else is new? humm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird.

time for cramer and stop trading. >> mentioned those two stocks, caterpillar up, because asian numbers are better. but apple, bank of america does a survey saying the 7 is likely to exceed the iphone 6. wow. tony sagane the people ordered

jet black say it's going to be december not even november. no one wants to talk about the fact the samsung thing is one of the great botched recalls in history. in china they didn't give you the same story as they did here. samsung is getting carved up alive and the average selling prices are going higher for apple. this stock goes higher. i always say don't trade it, own it, but that was out of favor 93 when tim cook came on "mad money." >> if you were writing the novel you would say apple somehow had been involved. they raced to get it done. batteries too close to one another. they first said, listen, don't worry about it. then the airplane said you can't ride with it. now they told china something different. this is one of the most botched -- it's not even a recall. it's a fiasco. and the winner is apple. even as most analysts won't say it, i just said it. but i also said that comedian

who runs deutsche bank who didn't know he was a comedian until today, sorry, i didn't mean to be as rough as i was, i meant to be much rougher. just happens to be a family show. >> what's on mad tonight? >> we have paychex down really badly. let's see if marty mucci gifves up the ghost. i doubt it. and bob ward, some companies have better science. lots of good stuff in airlines, lots of good stuff in the rail, in the transports in general. >> and are -- >> a lot of good. >> can we put a period on this opec meet sing? >> yeah, algeria saying the saudis were going to do a deal but iran hadn't talked about it, so therefore it was nothing. in the meantime u.s. oil companies are going up into the end of the quarter. any company that's an oil company in this country that wants to buy an oil company that can issue equity at a great price, this is a very exciting time for our market. i did not expect this week to be as exciting or positive as it is whether it be for fa, fang, airlines, plain old fasted tech,

things are working with the un-american exception of wedbush facing not a single prosecutor on "halftime report." we'll see if anybody tries to dress up the tape closing out the quarter. let's get to steve liesman with some headlines. thanks very much. fed chair janet yellen testifying on capitol hill saying no comment on the current economic situation. says large and regional banks are well capitalized. the eight biggest banks in the country doubled since 2008. said the biggest banks increased holdings by $1 trillion over the past five years. she said the other side is banks are less reliant on short-term funding. banks, she said, showed improved profitability since the crisis although they are challenged by weak interest and noninterest income. commercial and industrial lending she says shows robust growth and community banks are significantly healthier.

she repeats news story that came out a couple days ago saying the fed is considering changes to the stress test rules that would require more capital from the biggest banks, carl. >> steve, thank you. steve liesman of course as we watch janet yellen there getting ready. let's go over to wilfred frost now. of course the banks are in focus. wells fargo ceo john stumpf forfeiting $41 million in stock awards and heading to capitol hill as well. wilfred, tell us more. >> yes, david, thanks very much. as well as stumpf's $41 million forfeit, we learned overnight the former head of the community bank will forfeit about $19 million. the timing of these forfeits late in many people's eyes. the size though large, especially the ceo john stumpf. on top of his annual $2.8 million salary, he's received a total of $161 million in performance related pay since 2011 when the wrongdoing began. though he only became aware in

2013. since then he's received $77 million. whichever way you look at it, $41 million is a big chunk. but more importantly it's the sum of his uninvested -- excuse me, unvested pay highlighting the level of dissatisfaction with stumpf internally as well as externally. we've also received his prepared remarks for the house hearing tomorrow from a source. the key takeaways of those remarks he reiterates that he is deeply sorry in similar ways as he did to the senate last week. he adds far more detail in terms of the dates for when things were discovered and what action was taken. he reiterates that employees were not pressured to do this likely due to the labor department investigation. he brings forward end of sales targets to the first of october and recommits to hinting to fix this himself, not to stand down. no specific mention of the forfeits in the testimony, but stumpf will hope it will be enough to keep him at the helm. one analyst i spoke to as

necessary but not sufficient. investors therefore still looking for answers on capitol hill tomorrow. some of the key questions remaining, is the board also taking action against itself? what percentage of customers have been retained or not? and is the underlying culture at the bank broken? guys. >> all right. wilfred, thank you very much for that. we'll see what happens tomorrow in front of the house financial services committee. in the meantime, we're watching the markets. dow's up 41 points, stocks edging slightly higher as we await janet yellen's testimony and possible clues on the timing of the next rate hikement for more on the markets joining us at post nine is berns mckinnie and ben mandell, good morning to you both. >> good morning. >> so we're closing out the quarter. nasdaq's going to have its best quarter in years. got a hall pass of sorts from the fed for now. >> yeah. >> how does that alter your thinking about equities? >> i mean, i think the economic backdrop continues to be supportive. think about the global economy

as being a thermometer where you've chopped off everything above 70. we've seen from hard experience it's been tough for those upside risks to manifest themselves over the last few years. but we've also seen recently is that the downside risks have also been coming down. part of that is -- are things like china, brexit receding into the background. part of that you have to give credit to central banks. the developed market central banks have tacked almost ubiquitously a little bit more easing. you've seen that in september where all g4 central banks if they weren't easing they were signaling they were going to ease. you mentioned the hall pass from the fed and the bank of japan has been doing what it can to provide sustainable easing. >> so you're not of the belief that this last go-round with kuroda was an indication they are reaching limits, logistically, of their policy? >> i think it was a burst of innovation, maybe a burst of desperation. so i think it makes sense inso far as they're aiming to cap the 10-year yield at zero, looking

to overshoot their inflation target. i think these are very ambitious goals. it makes sense inso far as they are able to control the yield curve, provide stimulus to banks, et cetera, closes them to a lot of implementation risk. there's a reason why central banks don't typically target the long end of the yield curve, they don't control it. so they're targeting above 2% inflation rate, you know, that's much more aggressive than the target they weren't hitting in the first place. >> we've had a couple events in the last couple months that the market had this welling up of suspense, the fed meeting and debates where you had a little bracing for more volatility, a we didn't really get it. does that mean we're kind of locked in? we have oil in the middle of its range, dollar in the middle of its range, 10-year treasury yield back in that 1.5, 1.6 area. what's going to break us out of this, do you think? >> i would say probably the u.s. consumer has been the one sort

of calm in the storm throughout all of this. yeah, i think probably the most important data point we've seen in a long time was in the last couple weeks we've learned the median household income rose year over year by the largest it has in years, if not decades. i sort of think of the u.s. consumer as being in baseball they call a certain type of pitcher a stopper. that's a pitcher that can come in and reliablely stop a losing streak. that's what we've seen from the american consumer, whether it's brexit, the consumer steps in, slowing growth in china, the consumer steps in. the u.s. consumer does make up two-thirds of the economy and look very strong. >> yet consumer discretionary stocks not the way to play that. they don't necessarily seem to be free spending in ways public companies are capturing a lot from that. >> i think that's probably one of the paradoxes in the market today whereas the consumer staples have rallied very strongly. those stocks have actually those along with utilities along with the bond proxies have gotten to

expensive levels whereas the discretionary names benefit from rising employment, lower gasoline prices and yet they've lagged the market. they really should have fairly strong earnings gains going forward i think that's an interesting place to be for our markets. >> then you have this yesterday which sort of clashes with buying intentions, weakness in tempur-pedic looking at whether people are filling their homes with beds. but how can you be so confident and yet not want to spend? is that everybody freezing up ahead of the election, or something else, do you think? >> yeah, i think this is the key question. it has been the key question over the past few years is that interest rates are super low, credit conditions have been getting, you know, gradually easier. so why aren't people spending? i think one of the good things and was mentioning consumer has been pretty resilient reflecting good fundamentals behind it. the other area where you worry about is investment, which has lagged. and i think if history is a

guide, firms typically take their cue from consumers. i think if you continue to see strength in the consumer sector, firms take that cue of expected higher future demand and they start spending as well. so i think it's something we watch very closely, but that we're somewhat sanguine on. >> does q-4 feel like a catchup quarter? >> for gdp -- >> or money managers. >> in general. i think you have firms trying to hit those targets. one of the things that really should make for some stronger revenue growth is that inventory buildups have actually been very low over the last couple quarters. that's really the market's way of borrowing from the present and adding to the future. and so between that as well as you do have pension funds trying to hit certain targets, i would expect us to probably see solid returns for the remainder of the year. >> neither one of you have really mentioned the election. obviously it's near-term, but could have very long term implications, particularly at least when i talk to a lot of

guys who run hedge funds if trump wins. one way or the other, what are your expectations there? and what do you think a trump victory would mean? >> so, well, let me start by saying we don't typically generally make big bets in advance of a big political outcome. but i think even if we were, we don't see a lot of scope if you're a 12-month plus investor for you to be shifting asset allocation around dramatically ahead of the election. you think about what are the main possible adverse outcomes, one is you get a brexit style uncertainty shock. we've run that experiment and that shock dissipated quickly. but then you look more closely at the fundamentals, probably the biggest binary difference in the candidates' platform is on trade and immigration. maybe that has the cleanest manifestation but that's already been starting to price, peso down 7% since august. so i don't see a lot of obvious trump trades out there for a 12-month investor. >> burns.

>> and i would say one of the interesting things about the debate is it provided a playbook to see what would happen on probably a much larger scale if you do see the election you saw with reports of secretary clinton performing a little better than mr. trump, in the debate you saw equities rally. that's the market's way of saying she's probably the more investor friendly candidate, more predictable. the markets love predictability. whereas mr. trump and his policies, i think that hits the nail on the head when we talk about anything pushing back against trade would probably slow global growth going forward. really what we've been telling our clients is to really make sure you understand what parts of your portfolio would win and what would lose under either outcome. >> and finally, do you agree with ben's idea that the market reaction to brexit and the uk is a good analog for our potential market reaction to the election? >> i would say that you are really seeing a lot of the same forces, the nationalization type forces across both ends of the pond. you see the pushback against

trade. you have building barriers whether it's in europe or the u.s., and a lot of the forces that are at play are the exact same ones between brexit as well as if you were to have a trump election. >> burns and ben, thanks so much, guys. good to see you both. >> thank you. >> thank you. when we come back, fed chair janet yellen on capitol hill. there's a live picture right there. we're going to bring that to you. later on squawk alley we'll talk to the imf's christine lagarde. that's about a quarter to noon eastern time. stay with us. they may want the latest products and services, but they demand the best shopping experiences. they're your customers. and by blending physical with digital, cognizant is helping 8 of the 10 largest u.s. retailers meet their demands with more responsive retail models... ones that transcend channels and locations, anticipate expectations... creating new ways to engage at every imaginable touch-point. it's a new day in retail, and together, we're building the store of the future. digital works for retail. let's talk about how digital works for your business.

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there she is, fed chair janet yellen testifying on capitol hill. we're going to monitor that and bring you of course any important parts of her testimony this morning. in the meantime, missed steps for nike. the company beat estimates on the top and bottom lines, shares though you see under pressure this morning. this after the company said its future demand for sneakers and apparel slowed more than anticipated in the most recent quarter. let's bring in morgan stanley's lead apparel and footwear analyst jay sol. good morning. >> hi, good morning. >> nice to have you here. was it as bad as the market is taking it? >> well, it was disappointing in the sense market's been concerned about adidas and under armour taking share from nike. that hasn't happened in a long time. results last night indicated

that's taking place and that's why the market is concerned and reacting the way it is this morning. >> so what are your expectations for the company and withstanding the competition it's starting to see on that front? >> it's a good situation. there's a bull case and bear case, they have to stop the momentum from adidas. adidas has a lot of hot products, one is the kanye west shoe. they released the second edition last weekend. and one retailer in europe said they had 5.5 million requests for the shoe. so in terms of retail sales that's more than $1 billion just from one shoe. nike doesn't have anything like that right now. they need to come up with something to slow that momentum from adidas. >> that sounds like it's kind of more of a hit-driven business, not something as reliable in terms of market share. what does it mean for nike, the stock, its ability to hold this premium valuation its had? >> that's a great question too because there's a perception that nike's in a lull from an innovation standpoint. we have a different view. they launch products like the lunar epic this summer, on the

conference call it was interesting ceo mark parker listed 21 different new products they've launched just this summer. so nike has a pipeline. i think what they need to do is continue to drive it. if they can do that they'll be able to get back to the growth they expect in the back half of the fiscal year. >> is there a generational shift in the way people just see the brand overall? and i wonder if athleisure has just colored their view of what the swoosh means in terms of lifestyle. >> you know, carl, i don't think the brand has changed. i think one interesting thing about nike is they had 189 athletes at the olympics win a medal. and i think that that's a sign they continue to be the -- have great authenticity and credibility in sports. that's what consumers recognize. sports is popular for any generation and i think that's what keeps the brand can i want and strong. >> you mean in north america or around the world? >> around the world and in north america. >> really? >> yeah. >> so if they do have sort of generational liability, is that a european story? is it an asian story? >> well, you know, my view is they don't really have a

generational liability. they just have better competition. before it was a major share gain story, now adidas strategy has changed. under armour continues to grow. those factors just made the marketplace a little more challenging so they can't grow at the same rates they've grown before. they're still delivering very strong growth. >> all right. but does that mean there should be multiple contraction then given that possibility? >> well, that's the risk. i mean, the risk is that if the adidas and under armour continue to take share and the market perceives nike as a low double digit earnings growth story then we can see multiple contraction. the multiple still in the 20 times range, the average p/e over time is still at 17. so there's a risk if people start to think this isn't quite the growth story they thought, you can see the multiple come in a little bit. >> you're talking about market share and also the performance side of things so that's kind of at the edge of the newest best products. what about the general category of just people dressing every single day in athleisure? is that something that's getting to a saturation point?

is that something that changes what the brands mean? >> great question. athleisure has been a strong trend. nike had double digit growth in north america for the last five years. the trend remains strong but growth rates may have peaked. one thing nike mentioned on their call is athleisure and athletic wear is a category, continues to outperform general apparel and that's worldwide. i think that's still the case. is it good enough to drive strong growth? yes. >> should we be paying as close attention? are futures the end all, be all metric? or do we need to look at other metrics as well? >> a lot of discussion about futures. the important thing to look at i think is the sales guidance. the sales guidance is the most direct explicit indicator of what nike sales are going to be. the futures are only a piece of total sales. we look at the futures because that comes out first and in the press release and don't give guidance until the conference call, but that's the thing to look at in my view. >> do you worry about inflation?

i know there's a term for it, but basically endorsement acquisition, right? >> uh-huh. >> we've seen what under armour's paid for curry and so on, not that his material in the end maybe but still a lot of money. >> it is a lot of money. in the s.e.c. filings you can see their future obligations for endorsement contracts has risen at a very high rate. i think in the end, you know, nike and adidas and under armour realizes not every great athlete can be a salesperson. it's not a race to get everybody. so they pick and choose who they want the stars, who they want to really make their bets on. that's a limiting factor in how high the endorsement contracts can go. >> we've mentioned under armour and adidas quite a bit. are they a better opportunity here for investors than nike? >> louis singlehersearst covers our sense is nike, under armour and adidas great competition from here. i think if we see another

quarter, get a sense of whether the share gain story for adidas and under armour is slow will dictate which stock will be the best outperformer as we go into 2017. >> jay, thanks for stopping by. appreciate it. >> david, thank you. >> jay sole from morgan stanley. >> fascinating story. of course nike having some impact here on the dow this morning. hanging onto a 21-point gain. we're going to be getting a lot of information in the next 10 or 15 minutes as the q & a with janet yellen kicks off. oil inventory going to hit us 10:30 a.m. eastern time. still waiting for clarity out of algiers as to how much the doors open for a move in november. we keep seeing the back and forth between the saudis and iran. >> there are so many levels in which to decipher this. not what might happen in terms of supply discipline, now or in november, but also what was priced in. it's been an amazingingly range bound market for oil. $45 give or take for six months is basically where we've been. it's hard to say that the market was banking on something big coming out of algiers, but we'll

have to see. >> and then we'll listen for yellen to talk about the strength of the nation's banks. she does say in her remarks that the nation's banking system has strengthened considerably since the crisis in part because of tough tougher regs passed in 2010 and one thing the senate committee made with stumpf like it or not the wells case strengthens the case for even further regulation. >> yeah. it will be interesting to see if she does get any questions that did not fall under their regulato regulatory. but still question certainly on the minds of perhaps some of the people on that committee. and wells itself coming in a bit, as we see it right now up very little, two cents. let's take chairman hensarling and the q & a. >> on page 13 of your testimony, your recommendation that congress consider carving out community banks from the volcker

rule and in senate section 956 i was also encouraged by your announcement today what we heard from governor a couple days ago concerning ccar's qualitative review exemption, i think that is wise and a very small step in the right direction. chair yellen, before we get to the application of heightened prudential standards, i want to take a step back to how we do the sifi selection process in the first place. as a member of fsoc, as you probably know, dodd/frank demands 11 different factors be considered such items leverage off balance sheet exposures. do you weigh each of these 11 factors equally? are you talking about the nonfinancial firms? >> yes. >> that the fsoc has designated?

>> yes. >> in the case of those firms as required the fsoc prepares an analysis -- >> i know, but my question is of the 11 statutory factors you must consider, do you consider each one equally? or, for example, is leverage more important to systemic risk than factor four important sources of credit and liquidity. >> so when it comes down to looking at an actual firm, the question that fsoc has to consider taking those factors into account is special to that firm. >> so it's individual to the firm? >> it's individual. the question is what would be the systemic impact on the u.s. financial system of the distress of that particular firm. >> well, with 11 different factors that are considered,

combined that leads to 2,048 different ways in which these 11 criteria can be combined. the statue says you shall consider these but can i assume you and other members cannot process 2,048 combinations of this analysis with the criteria? >> so what the analysis presented to fsoc does is look at the specifics of the balance sheet and exposures of an individual firm under consideration and analyzes how those factors would come into play and impact financial stability. >> i guess my point, chair yellen, is it's hard not to conclude that ultimately this becomes a very discretionary process among members of fsoc. let's now move to the living wills and ccar process. so 11 banking organizations

submitted rather volumous wills in 2014 and the g.a.o. found that the fed and the fdic had not reviewed those submissions. i understand many of these submissions are thousands of pages long with respect to living wills. i've had at least one testimony that the ccar reports are tens of thousands of pages long. i've heard one of 42,000 pages long. so i guess my first question is, does anybody at the fed actually read these reports? and can i safely assume you don't? >> you can safely assume that many people at the fed read these reports -- >> does somebody really read a 42,000 page report cover to cover? and know what to do with it? >> our staff, the fdic staff do. and i think it's fair to say that all of the governors

reviewed -- >> i find that very difficult to believe. but the g.a.o. has said that these living wills can cost up to $105 million. the sba estimates the average small business is capitalized with $30,000. so de facto you're taking away the opportunity to capitalize 3,500 small businesses with a living will that may or may not be read, that may or may not be useful. do you consider the cost of this process? >> well, we do -- >> -- as you impose it upon the financial institutions? >> we consider eliminating too big to fail to be a key objective of dodd/frank so that the american taxpayers will not be forced to bear the burden of the failure of a large firm. and i would tell you that the full board of governors met on

the order of 12 times. we had around 12 board meetings to consider in great detail all the key aspects of the living wills of each of these firms. >> i see my time has expired. the chair now recognizes ranking member for five minutes. >> thank you very much, mr. chairman. as you know, the reforms we have passed to make the financial system are constantly under attack. and many accuse of one size fits all regulations. as you know the dodd/frank act has provided discretion to adjust rules based on valuations of bank risks. i cannot count the number of republican deregulatory bills that have passed the house floor, which were not serious enough to even be considered in the republican controlled senate.

however, i know that i as well as other democrats on this committee have worked very constructively with you to identify areas of improvement and use your discretion to tailor regulations when necessary. governor tru low's announcement regarding reforms to the stress testing process are recent example of that cooperation. and i think you just said in your testimony that you were taking a look at banks with less than $250 billion in assets and you were considering some changes provided they were not involved in a lot of trading and international trading in particular. would you tell us what that is all about again? >> yes. there are two portions to the stress testing program for the institutions over $50 billion.

one is a quantitative stress test to see what the impact in the severely adverse scenario would be on the firm's capital position. and we expect to continue subjecting all of the firms over $50 billion to that quantitative part of the stress test. but there is also a qualitative part relating to a firm's capital planning process. and that is something that currently all of the firms above $50 billion are subject to. and we are proposing eliminating that and reducing some of the reporting requirements associated with stress testing for the banks under $250 billion, as you said that don't have a lot of international activity or nonbanking business.

and we think that our normal supervisory process where we would look at the capital planning processes of these firms is adequate and that many of these firms are meeting our expectations. and this is significant burden that we think we can relieve these firms of. >> i'd like to thank you for paying attention to the concerns that have been addressed by members of this committee. and i'd like to thank you for recognizing that not only do we have concerns, but these are concerns that can be addressed if we would but work with you rather than coming up with all of this legislation that really interferes with your ability to exercise the authority that you have. i'm very appreciative for that. let me go on to the next question. chair yellen, i've been closely following the process on the living wills at the largest banks over the last five years.

and i must say that i've not been encouraged by that progress. in april of this year, you and the fdic finally took the important step of officially declaring five living wills as noncredible, j.p. morgan chase, bank of america, bank of new york mellon state bank and wells fargo. these banks are required to submit their wills to you in the next week. these banks have had five years to identify and address problems within their organizations. if any of their living wills are still insufficient in october, will you use your additional authority under the dodd/frank act to quickly and severely reduce the risk these banks present to our economy? >> we certainly do stand ready to use the authority that we have to impose higher capital and other standards on these firms if they have not corrected the deficiencies that we've identified. we've been very specific with

the five firms in indicating what the deficiencies are. we've released to the public the letters that detail those deficiencies. we will carefully and quickly review the submissions that are due by october 1st to see if those deficiencies have been remedied. but i would say more broadly for all of the firms the fdic and the board identified a range of shortcomings, things that we did not think rose to the level of deficiencies but nevertheless are things we want to see corrected. and we will be reviewing the next round of submissions due in 2017 to see if they've been corrected or not. and it's conceivable that if there's been no progress, those things could later rise to the level of deficiencies. >> thank you very much.

i yield back. >> time of the gentle lady has expired. the chair now recognizes the gentleman from texas, chairman of the financial institution subcommittee. >> thank you, mr. chairman. chair yellen, this month the fed along with the fdioc put out a report on banking investment activities required under section 20 of dodd/frank. raises several concerns with physical commodity activity of financial holding companies under both a complementary authority and section 40 authority. fed would impose significant capital requirements on covered physical commodity activities that would effectively prohibit many of these activities. in both the documents the fed relies on the term environmental catastrophic risk or cat stofic risk, how does the fed define that risk and how does the fed measure it? >> the fed has been motivated in this rule making by looking at

the enormous environmental consequences of things like oil spills, the bp disaster and other things, and the kinds of consequences that those can cause financially for firms, and also reputationally. and we are concerned and have done a rule making on fiscal commodity activities as you indicated that -- >> that is chair yellen talking to the house financial services committee discussing not so much interest rates but more banking regulations suggesting the fed may consider making these annual stress tests easier for institutions that have less than $250 billion in assets. of course she's bound to get some questions from house members who think that's still too stringent. >> chairman hensarling of course has been long trying to get this

whole idea of sifi designations removed and roll back dodd/frank in general. definitely a lot of scrutiny on just exactly how these kind of safety and sound judgment are made. meanwhile getting news the imf is going to downgrade their u.s. growth forecast. we got a draw instead of a build on oil. let's get to sue herera with the news update, too. hi, sue. >> hi, carl. busy morning here as well. good morning everybody. here's your news update this hour. funeral preparations are underway in israel for shimon perez, former president and prime minister who shared the nobel prize for peace in 1994 died yesterday of a stroke. peres's body will lie in state to allow the public to pay their respects. his funeral will take place friday at mt. herzl. president obama and former president bill clinton are both expected to attend. dutch investigators say they have solid evidence malaysian flight mh-17 was shot down by a

russian mobile surface-to-air weapon. they say the missile launcher was brought into ukraine from russia and then later returned. but prosecutors are not accusing russia of involvement. the plane crashed in july of 2014 killing all 298 people onboard. the world health organization says measles is e r rad kated from the americas. the first region to rid itself of the highly contagious disease. measles remains top killer of children worldwide. the w.h.o. reports 115,000 deaths from the disease in 2014. that's the equivalent of about 13 deaths per hour. and it was a dramatic night at yankee stadium, but not on the field. it happened in the fifth inning. right on the giants scoreboard. a fan attempting to propose his girlfriend somehow dropped the ring. while the whole stadium watched, the fans around jumped in, scouring the area to help. there is a happy ending, as you can see, he dropped to one knee, proposed and she said yes.

that's the news update this hour. carl, back to you. >> it's going to make a good story in a few years. >> it certainly will. >> thanks so much, sue herera. >> thanks, carl. when we come back, imf managing director christine lagarde speaking at the kellogg school of management at north western university in chicago. our sarah eisen is there and will speak with her exclusively in about an hour, 11:45 a.m. eastern time. dow basically flat line up three. guys, what's happening here? hey nicole, this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade.

will the presidential election determine gold's next path? we're talking trump, clinton and gold at tradingnation.cnbc.com. more "squawk on the street" coming up. the pursuit of healthier.

it begins from the second we're born. because, healthier doesn't happen all by itself. it needs to be earned every day. using wellness to keep away illness. and believing a single life can be made better by millions of others. as a health services and innovation company optum powers modern healthcare by connecting every part of it. so while the world keeps searching for healthier we're here to make healthier happen. monitoring yellen on the hill as the conversation turns to rates. let's take a listen. >> -- and the labor force. now, i've been pleasantly surprised to see that the unemployment rate actually as i mentioned hasn't fallen over

that time. because people have been drawn back into the labor force, and that really means and with inflation running below 2%, we're really not seeing meaningful upward pressure on inflation, and we haven't seen the unemployment rate fall. but monetary policy is accommodative. eventually continued job creation at that pace would cause the economy to overheat and would push the unemployment rate down to lower levels than now. so monetary policy is accommodativ accommodative. we want to make sure that the expansion is won, and the good performance of the job market is sustainable over the medium term. if we allow the economy to overheat, we could be faced with having to raise interest rates more rapidly than we would want,

which could conceivably jeopardize that good state of affairs that we've come close to achieving. so we expect to see the unemployment rate fall farther. we expect to see solid job growth continue. but we do need if things continue on their current course to gradually remove the accommodation that is there. now, it's probably not that much. our estimate of how much accommodation there is has come down over time as economists have reconsidered what is a neutral stance of policy. but nevertheless there is accommodation. and while there's no fixed timetable for removing it, many of my colleagues indicated in their recent projections the majority that they would see it as appropriate to make a move to take a step in that direction.

this year, if things continue on the current path and no significant new risks arise. >> thank you. now, i'd like to ask you about the stress tests also. some people have argued recently that the fed should put the economic scenarios it develops for the stress test out for normal notice and comment for the public and for interested parties in order to let industry and others weigh in on -- okay. let's take a break here from yellen's testimony. and send it over to rick santelli who has the santelli exchange for us this morning. take it away, rick. >> good. thank you. and andy brenner, welcome. thanks for taking the time. >> rick, always a pleasure. glad to see you, buddy. >> all right. now, as janet yellen talks and of course always on the optimistic side of the job scene, but jobs without productivity and growth really is kind of a dead end in certain ways. your thoughts on anything she's saying before i get into the meat of this?

>> rick, all i got to say is if the economy's doing just okay, which i think it is, there's no reason for us to be at the rates we are. i mean, the fed lowered rates in 2008 to zero and it made sense at the time. but you've seen s&p triple, unemployment rates cut in half, we shouldn't be here. we should be at higher rates right now. it would be better for the economy. >> all right. now, let's talk about it. today, a german 2-year note auction garnered 90 basis points, not too far from where the old guy was trading and is trading. an andy, would you buy at an auction if you had the chance a minus 70 basis point 2-year note in europe? >> rick, you know the answer to that. not a chance. not even close. i mean, here you have minus 70 basis points in a currency that's probably going to depreciate rather than appreciate of a country of which the number one bank is going to have to be bailed out. the number two bank is probably going to have to be bailed out.

and its big auto company, volkswag volkswagen, will probably have to be bailed out. i'm not a real big fan of buying german paper at negative rates. >> you know, i'm getting off the track a bit, but i can't help it. volkswagen is fined $14 billion, apple's fined $14 billion. deutsche bank's fined $14 billion. what is so magical about $14 billion? just coincidence? >> you know, it's hard to say, rick. you know, a lot of people are starting to talk about a conspiracy theory that the u.s., the department of justice trying to get even with eu taxing authority because of apple. i'm not sure that i want to weigh in on one side or the other. but there is nothing particularly important about $14 billion. but it's just each shooting an arrow across the bow of each other's ship. >> all right. you mentioned that the number two and the number one might merge in germany. so i'm sure you're referring to commerce bank. "the wall street journal" and others have pointed out that commerce bank is still

partially, i think, little less than 20% is the government, brussels is in there. is this just a back door injection as "the wall street journal" intimates to try to get money into deutsche bank? >> deutsche bank has $1.6 trillion in assets and $16.5 million in market cap, compare that to bank of americas at $140 billion or j.p. morgan or even wells at $240 billion or $250 billion. these things are a fraction of where they should be capitalized. they need help and they need it now. >> andy, we have to run. i like that answer. but we have some breaking news. so let's go to carl. >> all right, rick, let's go to janet yellen, i think, answering some questions about politics. >> -- contributed the maximum amount to the hillary clinton campaign. and she did so while she was a sitting member of the fed board. and there was numerous reports that have come out, media reports stating that the governor is angling for a top job with the clinton

administration if hillary wins. so some basic questions knowing that's all out there on the table. because of the appearance of conflict and impropriety here, has governor brainard ever offered to recuse herself from voting at the fomc? has she? >> governor brainard, like all of us, is subject to the restrictions of the hatch act. >> right. so has she offered to recuse herself because of her political involvement? >> no. >> the answer's no? have you asked -- i'm sorry. >> the hat check does not contribute political contributions -- >> i get that. we see the appearance of the conflict. it's a basic question. has governor brainard ever offered to recuse herself, and the answer is no. have you ever asked brainard governor to recuse herself because of her close involvement with the campaign and making contributions? >> she's -- >> have you ever asked?

>> she's acting in a way that is permitted by the rules. >> so your answer is -- >> -- we are subject to. each one of us has to decide -- >> i understand that -- >> -- for ourselves. >> the answer is she's never offered to recuse herself, the answer is you've never asked her to recuse herself. to your knowledge has governor brainard been in contact with the clinton campaign regarding potential job in potential future administration. are you aware of that at all? >> i have absolutely no awareness of that. >> there have been published media reports talking about that. so you're not familiar with those media reports? >> what's important to me is whether or not in our decision making, our collective decision making, i see politics being brought to bear in reasoning about our decisions. and i have never seen that on the part of any of my colleagues. >> if you learned that she has had communications with clinton as far as trying to get a job, would that change your opinion as to whether she should be asked to recuse herself?

>> i don't think that there is a conflict of interest there. >> so federal governor can be in direct negotiations with a political campaign looking for a future job, and that is not a conflict as far as you're concerned? >> you know, we do have -- >> no, is that a conflict or not? if they are having direct negotiations with either political party to ask for a job next year while they're a sitting governor, do you see that as a conflict? >> will the gentleman yield? >> there's no time -- >> i'd like to have an answer. is that a conflict -- >> will the gentleman yield? >> will you be asking the governors whether they're engaged in such activity? >> will the gentleman yield? >> the time of the -- >> the gentleman apparently is not yielding. the time has expired. can the witness give a brief answer? >> i would have to consult my

counsel. i'm not aware -- >> the time of the gentleman has expired. the chair now recognizes the gentle lady from new york, miss currently facing an historic crisis. 46% of the population lives below the poverty line -- >> all right. we'll keep monitoring the yellin hearings. meanwhile, an informal meeting of opec members taking place on the sidelines of the international energy forum. our hatley gamble is in algiers and joins us with more. hatley? >> reporter: hey, guys. i'm here on the coast of north africa, and as you can see, i'm pretty much being blown away and blown by the wind. it seems to be the message coming from these opec oil producers. essentially what we know so far is there really hasn't been much progress on making a deal. there was a lot of talk yesterday about whether or not they could get the iranians to come to the table here and put a cap on production. but essentially what we heard over the last 24 hours, the

iranians have pushed back. they want to be able to ramp up production to 4.1 or 4.2 million barrels her day, back to those pre-sanction levels. and so it seems at least for now, the saudis are really left hanging. and i think this is a major reflection as to what's happening back at home, back at home in riyadh. essentially what we know, of course, is that the saudis are really, really trying to diversify away from oil resources, but at this point, they haven't gotten far enough there. and it's really reflecting not just now in the government salaries, government bonuses being cut, but it's also being reflected in the private sector. so a lot of discomfort at home for the saudis. and you can certainly see that they are making serious efforts to find some sort of common ground with the iranians, but unfortunately, it seems as if none of that has actually come to fruition. and we'll have to wait until the actual official opec meeting in november, for any kind of deal to get done. guys? >> hadley, thank you very much, appreciate that. let's talk more about what all of this means for the oil market. joining us now is john kilduff, founding partner at again

capital and bartley cohen. thanks for being with us. >> good morning. >> michael, let's start with you. no real decisions, seemingly, coming out of this particular meeting. maybe they've deferred a potential for some kind of supply agreement for november, but how much does any of this matter to a crude market right now that's really been in stuck for a range for six months. was the market anticipating anything in this regard? >> i think at this point, the expectations for a deal were already quite low. but at the same time, the stars were quite -- were more aligned now than they were back in april, when this group of producers last met in doha. just because iran is that much further along in its refrigeref reach a pre-sanctions level. at this point, it's not about what they were going to agree or not agree to in this meeting. this meeting always intended to be consultative in nature. at this point, it's not really

about what they say, it's more about what they do. the producers at this point still have some further room to run, especially ran in terms of reaching its pre-sanctions level. and the issue is that, you know, as we come into the end of the year, we expect that the overall oil market balance is going to tightening. and we think that's what you need to pay attention to, rather than what they say, just because they've got such a poor track record with any of these decisions. >> and john what do you think? are we moving towards some sort of balance in the next several months? >> i think hadley was getting buffeted by the hot air coming out of the meeting. i think this is all a complete farce. i think the agreement is going to be, in effect, to pump your fool head off and put as much oil as you can in the market. there's a scramble on here. what's interesting from this meeting is that it's clear that saudi arabia is really feeling the heat, and that this whole program of theirs to sort of wave everybody-out has backfired on them in a big way. and now iran seemingly has the upper hand in these

negotiations. but whatever agreement comes out of this, if anything, it's going to be sticker shock to the market, because the volumes being produced are record levels, and not going down. as a matter of fact, russia apparently has upped their production by 400,000 barrels from august to just september, with more to come. they're over 11 million barrels a day. so i see this market just getting continued to be swamped and overwhelmed by more and more production, not less. you have libya coming on, venezuela is even coming back now. and nigeria returning too. everywhere i look, i see more oil coming at this market, not less. >> i wonder if you would agree with john's -- >> i would have to respectfully disagree on some of those points. i think that while we saw at least for one month, some output comeback from nigeria, overall, the situation there continues to get worse and worse, and there was a new pipeline, 2,000-barrel-a-day pipeline that

was bombed just last month. the situation in libya is not getting any better, it's getting worse. we saw a 2,000-barrel-a-day bump, but we don't expect that to provide anything more than fits and starts over the course of the next year. so i think the broader issue here is broadly speaking, non-opec supply is continuing to come off. demand continues to not be the same kind of banner, headline-grabbing, more than 2.1 million barrel-per-day growth, but it's still robust, still a million barrels a day, and we expect that to lead to a deficit of supply and demand next year. >> john, when you look at what the price has done here, being in this relatively narrow band, i think you could play it both ways, right? you could say, that reflects an oversupply of market, because we can't get above 50 dollars a market. or does it means we have hopes in terms of something coming around, because we have not crashed down through the bottom of it. how do we decipher what the price is telling us, john?

>> i think you're right. it's a strong debate, just as michael and i are having here. there's a lot of folks giving credence to this meeting. there's a lot of folks giving credence that opec and russia will come together. it's just that for me, their words are not matching their deeds in any way, shape, or form. as well, too, a lot of the crude toil demand that's been talked about over the past year or so has really gone into these -- to china, and this teapot refining industry that has sprung up and is in the process of just turning that abundance to have crude oil into an abundance of refined products, such as diesel fuel and gasoline, particularly out in the asia markets, where there was hope to keep those numbers down. so for me, the entire balance sheet continues to grow, not shrink. and i think we're at a breaking point. you can even look at the chart. there's a competing up and trend formation and a competing down trend formation that's arguing for a breakout. i'm putting my money on the breakout to the downside. >> well, as we have in this debate, crude oil about flattened out to unchanged for the day. maybe that's appropriate. appreciate it, john kilduff and

michael cohen for joining us. >> thank you. >> all right, well there's a look at christine lagarde, she run s the imf. she's speaking at the northwestern school of medicine. sarah isaacson is there and she'll speak with miss lagarde at 11:45 eastern time. let's accepted it now to jon fortt with a look at what is coming up on "squawk alley." john? >> we'll have that and we'll have blackberry ceo john chen on the day that blackberry has announced that they are out of the hardware business. what is next for that company? also, we're going to cover walmart's expected investment in flip cards and windows on a mac, introducing a new era with windows 10 as notebook orders are looking stronger, how does the end of the year look. all of that and more coming up on "squawk alley."

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good wednesday morning. it's 8:00 a.m. at space-x headquarters in california, it's a 11:00 ap on wall street and "squawk alley" is live.