time and he changed the face of news and -- >> cable news for certain. >> cable news and tv. we already said we send our condolences out to his wife beth and his son zach. a shocking show today. thanks for being here, kelly. make sure you join us tomorrow. "squawk on the street" is next. good morning. welcome to "squawk on the street." i'm david faber along with jim cramer. live from the new york stock exchange. carl quintanilla is on assignment today. let's give you a look at futures this morning. you heard joe mention it, we are looking down as you see on the s&p. the dow and the nasdaq. european markets in the red at this hour. at least they were the last time i checked -- yes, the same. a little over 1% in france and the ftse, germany, bad, if you

want to call it that. ten year note, man getting closer and closer as well. to the shorter term, in terms of the spread there. as you see, we're at 2.2. crude is down after what had been a little bit of a rally of late. you can see also as well brent cruise down. let's get to the big road map. it does start with the trump slump. as you just saw futures are pointing to another lower open and investors are wondering about new political turmoil. what it will mean for the gop's pro growth agenda. plus, the president takes to twitter calling the fbi and congressional russia probes quote, the greatest witch hunt of a politician in american history. cisco, it warns, shares fall. company announces a weak outlook and about 1,100 job cuts. ceo chuck robbins will be with us in ten minutes from now. we'll talk to him about that. and including perhaps what was

less spending than they had anticipated from the fed. >> a lot of problems there. >> yeah. >> we have a lot to get to. futures of course lower in a day after the biggest sell-off of the year. that was sparked by concerns that president trump's agenda can face set backs in the wake of political turmoil in washington. the s&p 500 and the dow had the worst days since september, each was down 1.8%. the nasdaq which has been the strongest of all the indexes during the course of this year was down 2.6%. the worst day since last june when the uk decided to exit the euro. what do you do today? >> well, i think you -- you can buy small, some of the stocks that you know just reported good quarters. i think it's defense and defensive -- the defense stocks are going to go up. because we all agree that our allies have to pay more. and that's been the strongest group since the president was

elected, but it was also strong going in. then the defensives they were strong yesterday. clorox and kimberly is strong. people don't -- you taught me this, david, the eye should be on the bond market not the stock market. the bond market is saying, listen, you may not think there's a slowdown with unemployment back to the prettiest levels since 19 80. but we think there is. and i don't think there is, but i always say -- i defer to the bond market. >> yeah. the fixed income guys typically are ahead. >> smart. >> they are ahead. when we look back on the crisis itself, the big one, back in '06, '07, it was the bond market that was the tell. it was fixed income that was the tell really. >> that's -- >> prior to equities. >> against all of my stock work it doesn't matter, because the bond market is telling you what to do and to think. yesterday we had the huge bond rally and recognized, wow, you know what's back are these bond

market equivalent stocks with the reits that are connected to retail. that's a tell. it's an important tell. what it says is you know want to go back out and buy -- and you're fighting a tough bond market. very tough. >> what about this agenda that we talked about over the last three months, namely the idea that we have tax reform. that being the key, certainly deregulation. given the turmoil to put it lightly in washington you know, mnuchin showing up today to testify in front of senate banking. we'll obviously be taking that for you. i'm sure he'll be taking questions. it's got to put brakes on their ability to get much done. but -- >> yeah. look -- >> we have a special prosecutor now for russia. fbi agent -- you know, former head of the fbi. >> that's why -- you know it's funny. we'll be talking to chuck robbins. my charitable trust has a position in cisco. we have been selling it, but the position -- why?

they have the most overseas per market cap. so i figure repatriation comes back. a huge amount. given where the market cap is going to be. this is a layup. there's no real layups, but there's repatriation, you'll get government spend and we didn't get government spend, but cisco was the ultimate in the trump stock in terms of repatriation. worldwide acceleration today. it didn't work. so now i'm trying to think apropos of the interview we'll do, wow. i mean, how much reconfiguration do you have to do if there's no lower income tax which was a lot of the retailers that pay income tax, the home builders, we don't get the corporate tax reform and repatriation, a lot of stocks are not great. >> we'll get to obviously cisco, walmart earnings, and alibaba. brazil is having a brutal day.

it's worth mentioning because it has been a stronger market. the emerging markets have been quite strong. the riyal today is very weak. the brazilian market had been down as much as 17%. why? well, you know, another potential political crisis, tape recordings of potential payments of hush money by the current president. >> yeah. >> they're denying it but worth mentioning as you see what's happening there. any impact on us at all? >> i think there's always an impact when you have so much money going into emerging markets and brazil is such a big part of it that you have to say to yourself, you know what, this is going to impact what had been one of the hottest areas, david, and one of the hottest areas cools off, people are searching and searching and searching for some place to go. >> right. >> and what i think you're going to have to say is, wow, where is this money going to head next? we have some retailers weak and strong and we have the rally yesterday, which was a clorox

rally. i do believe that europe is good. i'm sticking by europe. and not just because the retail sales for the uk were off the charts and the pound is coming back. but europe is becoming a safe haven. which is rather extraordinary. >> certainly if you were -- >> safe haven, 770 million people. >> again with that continued investigation of course of the corruption and all manner in brazil, particularly as it related -- >> that's shocking because riyal -- >> such a nice move. >> let's get back to our country and what's going on here. the justice department's appointed the former fbi director is it mueller or -- >> mueller. >> special counsel to oversee the investigation into possible ties between president trump's campaign and russia. eamon javers has more. >> good morning, david. the president is awake, he seems angry and he is tweeting this morning. gone is the relatively measured statement from last night in response to that news that you just read of the special counsel being appointed. here are the tweets from the president this morning saying with all the illegal acts that

took place in the clinton campaign and obama administration, there was never a special counsel appointed much being made on tweet this morning of the fact that the president misspelled the word counsel there. the other tweet, this is the single greatest witch hunt of a politician in american history. that from the president of the united states this morning. here's what the white house put out under his name last night. the more measured response to the appointment of a special counsel coming about 80 minutes or so after the news broke publicly that the president saying as i have stated many times, a thorough investigation will confirm what we already know. there was no collusion between my campaign and any foreign entity. i look forward to this matter concluding quickly. this is a game changer here for the white house. the existence of a special counsel, his embrace by -- the embrace by democrats and republicans up on the hill after the news broke at about 6:00 p.m. last night.

that will affect the daily lives of those here at the white house. many of them have to get lawyers or spending time to testify and all of that adds to an atmosphere where it will be more and more difficult to move forward on the agenda. nonetheless, i talked to a senior administration official here earlier this week who said ultimately that they are focused on the tax cut agenda. they're focused on the pro business agenda and they're going to get things done. david, back over to you with that. >> yeah. >> thanks. >> two different views here by the president. i think the latter one is more -- correct. look, if you didn't do anything, this is a great opportunity. i mean, this is a man who beth the democrats and republicans respect. let it happen. if they didn't do anything, you get cleared. game on. >> right. people have been saying -- which is why they're bothered by firing the fbi director originally if you didn't do anything. and saying anything to him potentially if you didn't do anything. why not just have let things run

the course? >> yeah. if you didn't do anything, both the democrats and republicans think he's good. i mean, the second trump is more considered than the first trump. hey, you're siding with trump, well, i'm siding with the second trump. first trump, no, second trump, yes. >> let's get to some breaking news. the former chairman of fox news, roger ailes, has died. let's get to julia boorstin for more on that story. >> that's right. roger ailes passed away days after his 77th birthday. he was founder and ceo of fox news back in 1996. he became the chairman of the fox tv stations group as well in 2005. he resigned from both of those positions in july of last year following a sexual harassment scandal and a series of lawsuits. in addition to building fox into the jientsdz that trans -- giant that transformed the landscape, he was president of cnbc for three years before going to fox. he also consulted with nixon and reagan and bush. and he helped trump with his

debate prep. his wife issued a statement, quote, his work in entertainment and politics and in news affected the lives of many millions and so even as we mourn his death, we celebrate his life. david, back over to you. >> all right. thank you for that report. when we return, the outlook for cisco. we're going to have a live interview with ceo chuck robbins. you'll want to hear what he has to say, given a warning there. that stock looking down rather significantly in the premarket. let's look at how we fare in the markets when we open. we'll have another down open at the very least. we have a lot more "squawk on the street" live from post 9 when we come back. the power of the nasdaq market. the power of 100 of the world's top companies. the power of an etf. the power of qqq. the thinking we put in, clients get out.

power your client's portfolio at powershares.com/qqq. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc. containing this information. read it carefully. at crowne plaza we know business travel isn't just business. there's this. 'a bit of this. why not? your hotel should make it easy to do all the things you do. which is what we do. crowne plaza. we're all business, mostly. i count on my dell small for tech advice. with one phone call, i get products that suit my needs and i get back to business. ♪ ♪

for years, centurylink has been promising fast internet to small businesses. but for many businesses, it's out of reach. why promise something you can't deliver? comcast business is different. ♪ ♪ we deliver super-fast internet

with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. we do business where you do business. ♪ ♪ stock cisco, let's see, down a lot. cisco beat expectations on earnings and revenues in the third quarter, but they cut guidance pretty severely, announced some layoffs too. i have to tell you, it was the type of thing that caused the stock to go down pretty much in the afterhours. we are joined fortunately on cnbc interview by ceo chuck robbins. this is an awkward discussion to have, while the quarter was good it was the forecast and several times in the conference call where you said, as i have consistently stated, the transition will take time. so chuck, i'm going to ask point blank. why should we own the stock of

cisco? >> well, jim, first of all, david, jim, thanks for having me on here today. first and foremost, we talked about the fact that the sp business in emerging countries had been challenged. that continued and actually got a little worse. we saw a significant slowdown in the u.s. public sector, particularly the federal business which is a pretty significant business for us due to the uncertainty in budgets and then this transition to software and subscription continues. we put $5 million on the software so the fundamental strategy of moving to software and subscription, you know, we have doubled the amount of that revenue sitting on our balance sheets since i took the job. we continue to leverage our internal and our inorganic ability to innovate and as well as new product announcements and

you'll see more over the coming quarters. as customers build out these next generation networks, things like integrated security on the system will be critical. >> those are terrific pieces. i'm dealing with the 39% of the company that is say switching, that's hardware. i'm wondering, chuck, whether this business, the hardware business is going away faster than you can keep up with the good stuff. somewhat like ibm. i point out kelly kramer who is a terrific cfo said that switching could be fluid, which meant to me, chuck, there's issues next quarter that have to do with hardware going down which won't be made up with the software business and the cyber security. >> if you look at the overarching business, 80% of our engineers and 80% of our r&d expenses are actually in

software. the differentiation is around our software capability and we believe that cust maniers are going to leverage next generation technology much like what we saw with the security issue over the weekend. customers are going to need deep automation and going to need security embedded in the network. because as we build the networks, the network is going to be the first place that security has to occur. i think over time what you're going to see is differentiation in our hardware not only through the performance but through the next generation capabilities that the customers have to have for the future. >> i apologize, i got to keep coming at you, but the guidance was tough for me, chuck. and you on the conference call said, well, a chinese company i don't respect as much as cisco candidly, you called them a strong competitor. i'm wondering whether some of the legacy is being hurt by both

good competition that you regard as very strong and a problem with demand. because everything you said about cyber security -- everything you said -- i love the deferred revenue. it's terrific. but very strong competitor and maybe a lack of demand, can either one of them be smashed? can you go against wow way and get the federal government to give the orders because they accounted for 1% of the guide down? >> first of all, the competition that we faced have been severe. not like wow way has appeared last week. we know how to compete with them. we have competed with them in emerging companies for a long time. we continue to evolve. our strategy i think that we're in a position -- they do a good job, don't get me wrong. but i do believe we're in a good position to compete with them and the federal government is in my view is simply -- it's a by-product of uncertainty around budgets. it's a by-product of uncertainty around what is i.t. modernization in the federal government look like and how long will it take and what

should we as agencies be doing around that? when that becomes clear we're a clear part of that strategy and so i'm not concerned about that long term at all. >> chuck, it's david. on the conference call when discussing guidance, you mentioned in particular of course the public sector business in the u.s. specific to the federal government. you said it's a pretty significant stall right now with the lack of budget visibility. can you give us a little more sense as to what that means? i mean, what are you seeing on a day to day basis, why is it install? why is there lack of invisibility when it comes to the budget? >> well, david, if you go back to our last earnings call we talked about the fact that our second quarter ended after the inauguration. and this administration has been very clear about the fact that they want more efficiency in the government. they want to actually lower some costs in some areas and increase them in others. i think many of the agencies and many of the organizations just don't have clarity yet.

you have got the continuing resolution, got all of these uncertainties so i think that all of that will become clear as we move forward. but to me the fundamental -- the fundamental things that we're pushing in our business are still valid. i view this as simply, you know, it's one quarter. and we're very focused on ensuring that we continue this transition, build out the capabilities in our core networking products that our customers are going to need in future and i think we'll be fine. >> i understand that. you know, i asked that question about the federal government because of course it can have an impact much more broadly than just cisco. so just to come back to it again, so basically you're just not -- they don't seem to know yet what their budget is going to be at various agencies or how much they're spending in i.t. they're not giving you clarity at this point because they don't have firm direction. is that a fair way to state it? >> david, i think that's fair. what i said earlier if you -- you can read and you can look at

the strategies that are being articulated and it is around -- becoming more efficient. i.t. modernization. a lot is being developed as we speak. once we get through that the spending in that space will continue to move forward. >> all right, chuck, how does cisco get off of the service provider treadmill whether it be mexico which the numbers are horrendous, takedown 49% and u.s. these are big lumpy orders and we can't see all the good that you're doing with these fabulous acquisitions. do you need more acquisitions to be able to make it so service providers make it so you can -- control your own destiny. because i felt like on the call that because of the service provider business, it's difficult for cisco to control its own destiny even though it has $68 billion in cash and great leadership. >> jim, the service providers around the world are not only good customers but a very

strategic route to market for us. when you look at some of the countries and some of the data sovereignty issues we believe that it's going to be really important for us to be able to deliver our sass and our cloud offers through the service providers. we believe they'll remain strategic partners for us and we'll continue to drive new i believe know -- innovation. new platforms. one of the biggest benefits we provide is helping then create solutions that they take to the int int enterpri enterprise customers so it's a big set of customers. when two or three or four big ones its has an impact. but when they're all moving favorably then it's also a great tail wind to the business. so we'll remain focused on this side of the business. make sure that we run that business as efficiently and look at it as a p&l and make sure we're making the right decisions. but we believe it's important to us long term. >> i'm going to leave it on a

hopeful note. everything you said makes me feel more hopeful than i did after the conference call. service provider, federal government, mexico, maybe some emerging markets, these could come back or do you think over the next three months this is not going to happen and that the guidance you and kelly kramer gave is just saying, listen, it's not going to happen, so just -- lose the hope that those orders are going to be here for the next quarter. >> you know, jim the way we build -- you know kelly well, so we build it based on what we know at the time. and we want to be very -- we want to be good stewards of the information that we share. so based on what we saw in the order flow we can't assume that's going to change. we need to see it change. so when we look at all the facts and we look at the transition that we're making and we look what we saw continue in sp and emerge as examples that's what led us to the guidance. but it fundamentally doesn't change how we feel about the long term strategy and how we're executing. >> that's terrific, chuck.

thank you for coming on. tough guidance, great quarter. but the guidance is what's playing the role and i think that you acquitted yourselves good on what can happen. i really want -- just thank you and i appreciate that you came on this morning. good to see you, sir. >> thank you, guys. >> all right. chuck robbins from cisco. always good to from hear them. always appreciate when the ceos want to come on, rain or shine. >> right. because the stock is down seven. he could have said, this is a tough day for me, i'm jammed. i'm jammed. a lot of guys say they're jammed. >> up next, we have jim's "mad dash." the trouble in brazil, well, we pointed this out, but you -- but take a look at the vespa down 10% right now. as for futures here, well, nothing on that -- nothing near that kind of loss, but we are going to be down. more "squawk on the street" straight ahead. we should do that meeting tomorrow.

well wait. what did you think about her? it's definitely a new idea, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks make better lending decisions with new sources of data- so, multiply that by her followers, speaking engagements, work experience... credit history. that more accurately assess a business' chances of success. this is a good investment. she's a good investment. get ready, because we're helping leading companies lead with digital. ...you realize the smartest investing idea, isn't just what you invest in, but who you invest with. ♪ a 10-speed direct-shift 5.0transmission.ine. a meticulously crafted interior.

all of these are feats of engineering. combining them with near-perfect weight distribution... ...is a feat of amazing. experience the first-ever 471-horsepower lexus lc 500 or the multistage hybrid lc 500h. experience amazing. stay with me, mr. parker. when a critical patient is far from the hospital, the hospital must come to the patient. stay with me, mr. parker. the at&t network is helping first responders connect with medical teams in near real time... stay with me, mr. parker. ...saving time when it matters most. stay with me, mrs. parker.

that's the power of and. all right. we have about three minutes until we get to the opening bell, coming off the worst day we have seen in a long time. if you're long in this market, of course. where do you want to go to the "mad dash"? >> a company you know quite well, walmart. it's setting up as a two horse race, between amazon and walmart. and the way they're doing it is by accentuating food. particularly fresh food. that is the mantra and that is because it's harder for amazon to do fresh food than it is for walmart. it is working. they beat the quarter and the

comp numbers. i know they seem weak, but considering what -- >> the earnings per share was up 2% following eight quarters of contraction. >> yes. so this is a really good demonstration in mcmillon's tenure. these had more consistency in terms of the labor force. i like their strategy. the stock deserves to be up and it's not even jet.com yet. this is a way to compete and i have to tell you, if i'm the other guys, if i am target, if i am some of these other bricks and mortar i'm concerned that walmart has the balance sheet and the food. >> and a long term investor in the walton family that roughly controls 50% of the company that says take your time. >> that's a little like amazon. >> mr. mcmillon has been in the job for a while. he's still early. >> right. >> but in terms of the wages, in terms of the look of stores, in

terms of prices and online he has made significant changes -- >> that seems to be working. we never want to get ahead of ourselves. because what happens is amazon is so clever. maybe amazon -- there's a lot of speculation to -- they'll buy whole foods but i don't think they'll do that. they need a brick and mortar component perhaps to compete with walmart on food and remember, walmart has such good leverage. now, they're not saying that it's because they're beating down the suppliers. but david, their balance sheet allows them to be able to have a food offering that's fresh, that makes -- that's very different from the brown steak effect. you know the brown steak effect? >> no, tell me about it. >> that's the steak i order from amazon that's placed in front of my house on an 88 degree day. i prefer to pick it up at wall martz on -- walmart on the way home. >> you don't order steak from amazon? >> no. walmart is thinking that. what is our edge, brick and mortar, and it's the steak.

it's the steak that doesn't cook while it's in your driveway. >> all right. here at the new york stock exchange, of course, the opening bell set to ring right now. take a look back on the exchange. going to be a mixed open. the big board, bright scholar holdings. an operator of k-12 bilingual schools in china. it is going public today at the nasdaq. also celebrating its initial public offering, argenx, treating cancer and autoimmune diseases. >> alibaba missed the quarter. they didn't do the number that people felt was a given. the stock had increased tremendously going into the quarter. but the number was missed. a lot of the chinese stocks have gotten kind frothy. this is bringing them down to earth. >> yeah. baba shares are down over 4.5%. keep an eye on shares of yahoo

as we always do. by the way remember when they announced just a few weeks ago -- few days ago that the dutch auction at yahoo based on the ratio was 0.42 of alibaba, they wanted to see hoy the earnings release -- how the earnings release would impact their own share price. that was a good idea on their own part and as for the alibaba numbers, pardon me i'm looking through the papers, there was a margin that didn't come in where people anticipated. frankly, you know -- >> it did the revs. that's why people may say you know what, the revs -- if you use an amazon model on revenue do 4.6 billion and people are looking for 5.2. if you use the amazon model then the stock shouldn't be getting hit. they're blowing out the revs, taking advantage of the fact that they have that leverage. so the stock ran up a lot. but the fact is that if you want to use a model on online in order to do world domination and

i might actually use that term because they use that, then you shouldn't care as much about the day to day quarter. but they had repeatedly blown out the earnings so kind of a change. so just be aware of that. >> listen, revenue from core commerce still up 47% year over year. >> right. that's why i say, to dump this stock furiously is a mistake. >> they're moving aggressively in cloud computing and seeing over 100% in revenue. mobile maus still up 14 million. the number of active buyers is going up. that was up 11 million from the 12 month period. all of it of course is slowing in terms of the overall addressable market. and growth of that market. >> yeah. so i mean -- >> again, core margins, they did

announce a $6 million share repurchase which is a drop in the buck it. >> i don't want to spend too much time in china and that's in control today and we have the underwriting, but i think people are being a little harsh. >> what did you take away from mr. robbins and his interview with him that you didn't hear on the conference call as we see the stock open today, you know, down -- >> a great question. first of all, they have a june analyst meeting so i think that they have a chance to be able to say, let's explain all the good stuff. the good stuff is quite good. i wish it were 50%, not 30. it feels like ibm in terms of this race. because you want to have cloud. you want to be -- with amazon. you know, you want to be with the companies that are terrific that are growing the cloud. but i will say this. david, have any of the big orders come through? have any of the big service orders come through and there's a little bit of better margin because of the layoffs?

and if you ever thought the repatriation will come through, then you'll feel foolish selling this, david, because the yield -- remember he raised the dividend. the yield is so good. this is a company that has had erratic quarter after erratic quarter, but the trajectory is right. the trajectory of what they're moving into. the deferred revenue software business is good. the acquisitions have been superb. and the balance sheet, 68 billion is fantastic. at the same time, the guidance took my breath away. >> it really did. >> took my breath away. so conservative. i'm hoping. >> very interesting, just you know when i asked a couple of questions about the federal government. not specific to cisco as much as also -- >> what does it mean? >> to understand so many vendors to the feds and what does it mean? it seems as though according to mr. robbins the decisionmakers at various agencies are not making decisions yet.

>> yes. >> about how much they're going to spend in a given year. >> that's got to change. i was hoping when i asked the last question, it's just a matter of time, because they can't live without us. look, they won't give it to -- this administration is not going to give the orders to whyway, and the conference company, it's still down 2 to 4 and it's not a growth company. i believe in everything that chuck is trying to do. it's got to happen faster. no revelation there. >> the broader market is now is up. as you can see at the bottom of your screen. >> right. >> the ten year yield sort of moving up a bit. we'll see how we move from here. but futures had pointed to the lower open. that's already over and done with. >> you know, david, look, the -- let's talk about the special prosecutor. you know, look, anything that's

clarity so you're not every day faced with like rumors is something that is -- that the democrats and republicans both want. they want to kind of clear this up. i come back -- i know that the fundamentals always make it sound like, well, in 1929, they said the fundamentals were good. but we did just come through an earnings season that was pretty darn good. >> it was. >> i can't just say, well, wait a second, i have no memory beyond cisco. not on a day when walmart is up two. not on day i when i saw home depot do a decent job and unemployment levels are back to the levels of 1988. unemployment is the most important thing in the economy. it is very strong. >> it makes you wonder how exactly the treasury secretary who's going to be testifying on capitol hill is going to get to 3% growth. interested to hear that, because he continues to maintain that is a possibility. >> can we adopt the buffett approach for a second. buffett would say, are you going

to gauge how much my farm is worth today versus yesterday? i think that when i look at what's happening, i just find it very hard to give up on the u.s. economy even with the president that is in the news in a somewhat negative fashion to be ginger about it. because the hiring is extraordinary. i mean, it is, david. it's extraordinary. >> couple of things to get to. let's hit pandora briefly. you know, i did the story back on december 1st, saying it was open to the sale. and ever since they won't -- they don't know what it is. people i know who care. why do people care so much about a $2 million company? >> people listen to it -- i think the kkr money to me -- >> well, we'll see. they're getting it -- that would be june 8th. but you know yesterday "the new york post" reporting they're in talks with sirius. listen, they have been in talks with sirius on and off since i first reported on december 1st

that they were open to it. the question is will they ever get there on a deal? when you track sirius and the various things said over time it is kind of funny. february 28th at the right price it's interesting. not clear this is the right price. i wouldn't hold my breath. >> right. >> fast forward up to where we are today. but i'll tell you is this. people close to sirius say that the two companies while talki talking -- this is the last thing he had said back on may 9th. i think he said that to me. but the two companies while talking remain -- they're not reaching an agreement on value. and from the perspective of sirius at this point they look at the last quarter of pandora which was not a particularly good one. they do seem to have some qualms with the subscription business, believing that the subscription business has taken priority over the old free business at pandora. we'll see. but june 8th is when they take

the money down from kkr, a deadline that forces them to come to the deal of some kind at some price or finally say over and done with from their perspective. listen, sirius for its part, it's a favorite of -- >> it's one of my favorites. >> you're in the car. the new cars it's not hard anymore to have your phone play your music. in fact it's really easy. >> the apple factor. by the way i keep talking about in terms of apple if they ban laptops, the 7 plus. that is what you're going to watch on. you're going to watch. you know, apple better have enough 7 pluses and 8 pluses. that's going to be the issue. the bond market interest rates have actually -- you know, they're not as dire. we're at 2.2. 2.2 versus 2.1 in the world it's hard for people to believe, but if the trajectory, people feel the june rate hike is back. i'm giving -- >> where are you headed on this?

from cars to apple to phone to this? help me. >> it was a total a.d.d. moment frankly. >> but you're talking about the banks and the financials? ? >> yeah. i'm trying to keep track of why the market may be turning around. i was being a little less granular. i'm looking at the retailers starting to embrace walmart. sorry i did that. >> you never need -- love -- >> it was circuitous. >> it was not in your thinking and i have been known to engage in that. >> before we head to bob, afina health, elliott. a new 13 d 9.2 stake in athena. they're not commenting any more than the language thai gave us in the actual "d" itself. they think the stock's undervalued. represents an attractive investment opportunity. the issuer operates in the highly strategic area at the intersection of technology with the disruptive value proposition and they believe there are numerous operational, strategic

opportunities to maximize shareholder value and will be seeking to engage in the dialogue. >> jonathan push. >> dialogue with him, fascinating. >> he does not own a lot of stock. janus and fidelity in terms of the filing. >>s you can see what it -- you can see what it's done to athenaheal athenahealth. >> people are going okay. david, can i mention there's a stock that's come off from being up 12 to up 5. that was the best of the surprises in retail. okay. just pointing that out. >> thank you. thank you. let's get to bob pisani for more on what's moving this morning. >> hello. better start than yesterday certainly. still 2-1 in decline to advance in stocks. let's look at the sectors. still a slightly defensive tone to the market. utilities on the upside, telecom on the upside. banks are doing a little bit better. energy, mixed market. it's been moving around. but the question is whether we see any further damage to the

markets. we had some yesterday. we had distribution day yesterday. distribution day is when you see institutions come out sell on heavy volume. volume that's heavier than the day before. the nyse 4-1 declining to advancing stocks. should be nasdaq 6-1 to declining to advancing stocks. the thing about distribution days you have to put strings close to say, aha, the institutions are really selling. we haven't seen that yet. we haven't seen a number of distribution days in a long, long time here. that's why you have lowry's that watch this stuff very carefully say there's very few signs suggesting weakness in the intermediate or primary -- weakening in the intermediate or primary. you need to see things for them to start to get worried about that overall here. let's see if strategists believe that something is changing. i haven't seen any strategist take down their numbers

overnight. the s&p price target is 2400 and raised the guidance to 130. $2 more because earnings growth has been better and the guidance has been better. that's the trend so far. but i think a little warning to everyone they did say at the same time we see limited room for equity multiple expansion about sent further progress on the -- absent further progress on the pro growth agenda in washington. they're saying status quo until we get confirmation of what's going on. these are stock markets, i hear that ten year yield going down. the yield curve flattening overall. below 95 basis points between the two and the ten year. this is rick's providence. when stock traders say, bob, this is a problem because it's killing the banks that's when i start paying attention to it. they're right, the banks are already in correction territory. the yield curve has been flattening for a long time now. you have companies like cyan's fifth third, jpmorgan they're already in correction territory.

zion is already down. that's how it's starting to affect the stock market. on walmart, just kudos to them once more. same-store sales up 1.4% that's outstanding. you're talking about a company with $500 billion in revenues. traffic up 1.5%. e-commerce up 53%. they had 54,000 items for sale this year versus 10,000 to prior year. there's walmart up 12% for the year. two year high for that company. right now the dow's down 30 points. david, back to you. >> thank you, mr. pisani. let's head to the bond pits and check in on fixed income, and anything else, maybe he wants to talk about the brazilian riyal, rick santelli, take it away. >> let's keep this one on the important levels.

listen, i hate to get involved in politics but if politics moves the markets as think as it did yesterday, then all's fair in love and trade. look at a two day of tens. you see that low there at 2.18, let's stretch it back to early april. you see that low on the closing basis at 2.17. now let's stretch it back all the way to the end of last year. that 2.17 is the low yield close of the year. now, if we go through there means something. especially on the closing basis. maybe jump the gun. the fact that you kind of hit it intraday, but that's the area you want to pay attention to. bob was talking about the yield curve, kudos. you see the yield curve like everything else was distorted in november. let's look at the two year chart of the tens minus twos. bob is right. it's hovering in the mid 90s but it was flattening. last year, what that dynamic was was a proactive jump in long

rates. maybe it was a growth notion. maybe it was the idea that policy was changing. not so much whether the changes would be implemented. just that a retrograde of that policy probably wasn't in the cards but now there's questions. it's been coming down. but it also could be just the general notion that turning this ship into the positive or more positive gdp isn't going to happen overnight no matter what passes. let's go to another technical area and have some zoom zoom. let's look at the two day of the dollar index. you see that low? right around 9730 and let's stretch it back to november of last year. you see that low on the left of your screen, 97.05. yeah, they're not quite close. but sometimes you need a really big pencil or even a crayon because we're getting in the zone. these are important zones. listen, i like to be a little risky. i don't know. i think you maybe circle yesterday's move on most markets. look at your newspaper today. maybe ultimately in a year we'll

look back and call this the beginning of the mueller move. david, back to you. >> all right. >> jim has a question for you -- hold on, rick, rick. >> is rick there? okay. hey, rick, what do you think about the idea that unemployment is back -- it's the greatest level for most people since 1988. isn't that still the best sign of health for the country? >> you know what? i would think that there is something to be said about that. but there's also a problem with the math. the optics look terrific. the fact of the matter is, we have a lot of people that can't work that aren't working and we have a population that's growing. we have debt most likely that will get more expensive to service. the best way to answer that, jim, if you make 50 grand a year and your debts require you make 100 grand a year and your boss gives you a raise to 75 you're certainly better off, but still not in the shape you need to be in. i think that's the way i look at the unemployment rate. >> oh, very good point.

thank you, rick. >> rick santelli. >> well, still to come, facebook marks five years as being a public company. we'll go back to the market debut. that was quite an action packed day. "squawk on the street" will be right back. [vo] when it comes to investing, looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this kind of insight that has lead us to become one of the largest investment and wealth management firms in the country. discover how we can help find your unlock. ♪ ♪ welcome to holiday inn!

♪ ♪ thank you! ♪ ♪ wait, i have something for you! ♪ ♪ making every stay a special stay. holiday inn, smiles ahead. whether for big meetings or little getaways, member always save more at holidayinn.com

whether you're after supreme performance... ♪ advanced intelligence... or breathtaking style... there's a c-class just for you. decisions, decisions, decisions. lease the c300 sedan for $399 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.

welcome back. we'll talk a little csx. jim, interestingly, shareholders will make a decision as to whether to keep the ceo hunter henderson. remember they're going to vote because the board punted on this. going to vote on the pay package. given the move up in the stock price, it's hard that the shareholders won't say thank you very much, we want you in almost unanimous levels but a story in the journal raises concerns about his health. >> when i read the story -- oxygen. >> listen, he's had -- he's been -- he's confined to the home previously. >> right. >> not getting out that much. but it doesn't stop him from

running the railroad. >> look it, the guy says he's okay. this is an interesting issue because this is one of the issues about succession. i mean, if a guy is not healthy, you get a certification he's healthy by a couple of doctors just like you'd do at the nfl. you make a decision. i think that's what has to happen here. >> the whole thing is rather remarkable. the way he was basically brought to the board by paul halal, a large shareholder activist. his age at 72 taking over for a guy who was younger than him, but who had been there, michael ward for a long time. but i have never been in the house to see it, but i hear he's just got all of the rail crossings actually on closed circuit or whatever it is. he can control them. from his house! >> i didn't know david, that he was a miracle worker. >> from his house. >> i did not know -- >> that's all he does. >> look, i know squires from norfolk. i like the union pacific guys and i thought michael ward may

have been doing a good job. i don't care if this guy -- i don't care if this guy is never seen again. he's the guy. >> harrison. that's coming up very soon. interesting vote. up next, "stop trading" with jim. "squawk on the street" will be right back. e gotta go. -where? -san francisco. -when? -friday. we gotta go. [ tires screech ] any airline. any hotel. any time. go where you want, when you want with no blackout dates. [ muffled music coming from club. "blue monday" by new order. cheers. ] [ music and cheers get louder ] the travel rewards credit card from bank of america. it's travel, better connected. the travel rewards credit card from bank of america. the power of innovative thinking. the power of 100 of the world's top companies. the power of an etf. the power of qqq. the thinking we put in, clients get out.

power your client's portfolio at powershares.com/qqq. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc. containing this information. read it carefully. with e*trade you see things your way. ♪ ♪ you have access to the right information at the right moment. ♪ ♪ and when you filter out the noise, it's easy to turn your vision into action. ♪ ♪ it's your trade. e*trade. start trading today at etrade.com

time for "stop trading" with jim. where are you headed? >> well, ascena is down almost 40% why is that? because the ceo came out, he said there's an unprecedented secular change, disruptive to the business models and wedge operating conditions -- and we believe operating conditions will remain challenging for the next 12 to 24 months. this is intel, this is justice, this is dress barn, lane bryant. 4,900 stores. david, this is trouble with a capital "t." >> yes. rhymes with "p." stands with pull, but not really. i have to tell you this is the kind of thing that's happening. what will they do? will they close stores, right now no. but some people call me maurice. that's wrong. i don't want to be known as maurice after this.

i think this is a -- one of those situations, david, a classic mall situation. and you should be thinking -- you should be thinking ready? about the real estate investment trust and whether -- the rents, the rents. >> a lot of people are. that's why simon property group and a number of others -- they're at 52 week rows. >> and federal reality. >> ascena has a small business. >> didn't start as a smart -- david, those dollar stocks, no one wants to be a dollar stock. >> we're running out of time. >> come on. we'll go to taylor -- think my mother is going to call me? >> what do you have on "mad money" tonight? >> thank you, i have u.s. concrete. do you remember the wall? they have bids to put in the wall. >> the wall. >> the wall. but they also did lagardian. they have tax, new york. >> you have my best friend, benny. >> he doesn't like you. just kidding. >> tell him i'm thinking about

him. >> he's a giant. >> he introduced me to david blaine. he made me disappear! i disappeared. it was worse than when musk called me a hologram. a simulation. >> we have to go. disappear now. coming up, we have mnuchin on the hill. remember here at ally, nothing stops us from doing right by our customers. who's withe? we're like a spts team here at ally. if aports team h over 7... i'm in. 7,000 players.

our plays e a lile unorthodox. t to beat the big boys, you need smarter ways to save people money. we know what youant from a financial company and we'll stop at... nothing to make sure you get it. one, two... and we meanothing. ♪ ♪

steve, other than making me move stuff, i'm he at the td ameritrade trader offices. what are you worki on? let me show you. okay. our thinkorswim trading platform aggregates all the optns data you need in one place and lets you visualize that information for any options series. okaycool. hang on a second. you caeven see the anticipated range of a stock expecting earnings. impressive... what's up, tim. see options data like ner before. with thinkorsw only at td ameriade.

a big morning on capitol hill. we've got two hearings getting under way this hour. steven mnuchin testifying for first time as treasury secretary before the senate banking committee. and the house ways and means committee holding its first hearing on tax reform. we'll monitor those for you. take you there live, bring you the headlines. good morning and welcome back to "squawk on the street." i'm sara eisen along with david faber and mike santoli. live here at the post 9, new york stock exchange, carl has the day off. that little bounce we got around the open has sort of faded. the dow is now down about 18 points. nothing like the selling we saw yesterday. the s&p and the nasdaq still positive. the nasdaq having a gain of about a third of a percent.

wti crude not helping out today. it is down 0.6%, david. >> thanks. let's get to washington, new developments out of that town. the justice department appointing former fbi director robert mueller as special counsel overseeing the investigation into possible ties between president trump's campaign and russia. let's get to our eamon javers outside the white house who will bring us up to date on an ever moving story. >> yeah, that's right. the president this morning offering us an unvarnished take on his impression of this special counsel news last night we got a fairly measured statement from the president issued from the white house press office and today directly on twitter. he said this, with all of the illegal acts that took place in the clinton campaign and obama administration there was never a special counsel an pointed. the president also tweeted this morning, this is the single greatest witch-hunt of a politician in american history. we also had a statement last night from robert mueller who's going to be taking over as the special counsel here, the former

fbi director saying i accept this responsibility and will discharge it to the best of my ability. so we are seeing varying reactions in responses from the president of the united states from his official reaction to the things he's posting on twitter this morning. this afternoon, at 3:45, we'll see the president in a press conference setting in the east room alongside the president of columbia who will be here visiting. the president will get questions at that event and we'll see what his answers are, what his mood is by the time of this afternoon. that event begins at 3:45 today. >> thank you, we'll join you later. let's get to the panel this morning. stephen, how important is washington to this market? >> oh, i believe it's very important. but i think what the market is misjudging right now is they're tying the turmoil in the white house too closely to the actual

legislative agenda. when i believe that they're related but in many ways the turmoil in the white house could actually in fact provide some space for congressional republicans to proceed with first health care reform and then tax reform without as much interference from the white house. >> all right. why do you think that? >> well, simply because when we analyze the -- at beacon policy advisers any issue out of washington, we think of where the power dynamics lie and in terms of health care reform and tax reform, they're congressional republican driven issues. if you're talking about infrastructure which we never thought was really in play anyway, sure, that's better than it was before. because that was something that was a priority for the white house. but in terms of when you're

looking at whether or not health care reform will get done, the focus should be on senate majority leader mitch mcconnell. not on president trump. i'll tell you it's ill advised in washington to bet against mcconnell. >> bob, obviously the political intensification of the political situation was the trigger for the market sell-off yesterday. whether it was the market making a recalculation of potential legislative hopes or not. but i'm wondering just in general with market position right here, you kind of used up what first quarter earnings can give us. what do you think will be the next catalyst out there that's going to determine whether we're in the trading range that can break one way or the other? >> well, look i think the notch or two increase in uncertainty from washington probably takes the ability of the market to make upside away from us for now. but as it was pointed out with the economic growth more importantly earnings growth so strong, it's hard to see a lot of downside. so i think we're just going to have increased volatility

bouncing around, kind of going nowhere. we need to see some clarity about number one, is the economy and earnings going to continue to be okay? clearly, economic growth has been good, but of late it's been a little bit more of a question mark. which way we're going to come out there. and then of course can we get tax reform and i guess pro growth would be the secondary for sure. not the primary. it's the economy and earnings that are first place. >> bob, a lot of analysts and strategists have come on cnbc and said, great, we have had a period of unusual calm. all the way up to record highs. it's been a steady march higher and this is healthy to see a correction. take this opportunity to buy. are you telling your clients that? >> you know, eventually i'm not sure i want to be hercules after one day of declines, sara. remember, the u.s. stock market is only 2% off the all time high. you talked to some people and you think we're in the middle of a financial panic.

s we're still at 5 -- we're still at 5% year to date, up 30% from the lows of first quarter of last year. there's good nice in the market and to get aggressive here i need to see more decline. >> well said, good perspective. stephen, the appointment of the special prosecutor, robert mueller, who is getting props from both sides of the aisle. does that do anything to reset investors' attention on the policy agenda, especially with two hearings going on about the economy this hour. >> absolutely, sara. so i think what the appointment of the special counsel does is it puts some boundaries and stability around at least the set of allegations against the white house and swirling around the president regarding anything involving russia. of course as we have seen with this white house, it's -- it can always create new issues and completely new areas.

but if you're focused on the legislative side and particularly investors are focused on tax reform, the only -- the real issue right now is a procedural one. there's this process in washington known as reconciliation. since republicans are trying to advance both health care reform and tax reform, via reconciliation, the problem is you can't procedurally move forward with tax reform until health care reform is either passed or abandoned. so between now and the august recess, given this procedural limitation what we're going to see the house republicans led by paul ryan and kevin brady do is try to build substantive consensus on tax reform and the way they're going to do that is through the formal process of this series of hearings as well as the informal process of listening sessions and coronation with the white house

and their counterparts in the senate. >> so the white house may be more mute on the subject than the that -- than they otherwise would have been if not for the turmoil surrounding them so we get the blueprint for the tax reform and we get the border adjustment tax, what? >> they'll be holding a hearing on border adjustment tax next week and if they want to get the reform done they have to jettison the border tax. while focused on tax reform the prospects are inextricably linked to the prospects of health care reform. so the focus should be on can they get health care reform done before august recess? what that would do is free up a giant pivot to tax reform in the fall. right now, you have two scenarios. health care reform does or doesn't get done before august. if it gets done before august,

you'll have two competing narratives where the republicans are saying, look, we just got that done. now we're moving tax reform while the democrats will argue -- >> stephen, i have to cut you off. thanks to stephen and bob. we want to listen to the treasury secretary, steven mnuchin. >> -- for the first time as treasury secretary. during my confirmation hearing i promise to work with congress to create and maintain prosperity for all americans. i want to reaffirm that commitment to you today. let me begin by discussing the treasury's recent report on foreign exchange policies of our major trading partners. ensuring that american business, consumers and workers face a level playing field is one of the essential components of this administration's agenda. when foreign governments engage in currency manipulation, it makes the playing field uneven which is why we regularly monitor these practices. after careful study, the

treasury department has found that no major trading partner met the criteria for currency manipulation during the current reporting period. we will continue to follow this important issue and have accomplished a monitoring list of economies that warrant close attention. this list compromises china, germany, japan, korea, switzerland and taiwan. additionally we are committed to rethinking our foreign agreements and trading practices to ensure they are both free and fair to american business and workers. in my discussions with the imf and finance ministers of the g-20, i have emphasized this goal and i will continue to do so. turning to our domestic agenda it has been more than 30 years since we have had comprehensive tax reform in this country. combined with often imprudent regulations crafted in the midst of the crisis the entire american prosperity has slowed.

i believe that a goal of 3% gdp or higher economic growth is achievable if we make historic reforms to both taxes and regulation. there are about 100 people working at the treasury on the issue of tax reform. it is our goal to bring relief to middle income americans and make american business competitive again. we will do this all while simplifying the tax system. on regulatory reform, treasury is preparing its initial report and response to the president's executive order on core principles for regulating the united states financial system. these principles provide a road map for the administration's approach to financial services regulation. we have taken a systemic approach in our work by meeting with the variety of stakeholder groups to hear what works, what does not work, and what can be approved. our initial report contains recommendations to provide relief for community banks and make regulations more efficient,

effective and appropriately tailored. housing finance reform is another priority of mine. this has been an unresolved issue for far too long and once we are committed to fixing. we'll ensure that there is both ample credit for housing and that we do not put taxpayers at risk. this committee has done extensive work on this along with your work on community financial institution regulatory relief. my hope is that we can partner on both of these issues. i look forward to working with the congress to develop a solution. finally, another area that is crucially important to treasury is our commitment to combating terrorism activities in financing. s we have announced a number of sanctions against individuals and entities associated with destabilizing regimes like syria, iran and north korea. this work is essential to the administration's efforts to continue to keep americans safe. the first few months of this

administration have been significant. we had been working hard at treasury to develop and implement policy that will allow the economy to grow. this will make the dream of prosperity once again a reality for all americans. thank you. >> thank you very much, secretary mnuchin. i want to thank you you personally for your responsiveness to this committee. we appreciate your willingness to work with us on these issues. and certainly your expertise and assistance can help us get to the right results. i want to take my first question -- ask my first question about housing finance reform and the status quo. as i indicated in the opening remarks last week, director watt of the fhfa indicated that this was critical for congress to deal with. my question to you is, do you agree that the status quo was unsustainable and that congress must move on this issue? >> thank you, chairman crapo, i

do agree completely be that. we are committed to working with you on a solution on housing reform. i think we need to fix fannie and freddie. we are committed to make sure that there is proper liquidity in the housing markets. it's a very, very important part of the american economy and we need to make sure that there is ample credit for the middle class to buy homes. while at the same time making sure that the taxpayers are not at risk. as you know the treasury has a very big line outstanding to those two entities. >> thank you. and as you know, during the 113th congress this committee developed a comprehensive housing reform bill. we had to make a lot of compromises to achieve that bipartisan legislation. as the committee again focuses on housing finance reform what do you think are the key compromises that need to be achieved? >> well, i think we're open to

working with you as i have suggested. we need to find a solution that creates necessary liquidity while making sure we don't put taxpayers at risk, and while we have been busy working on tax reform and focusing on regulatory issues, during the second half of this year, i will focus on housing reform and look forward to speaking with many of you on ideas. >> one of the big issues that does face us on housing finance reform is whether there should be an explicit government guarantee provided through the housing system. do you believe that such a guarantee is necessary and if so, do you think -- how do we deal with implementing adequate taxpayer protections in exchange for any government guarantee? >> well, i think it's a bit early for me to make a conclusion on whether a guarantee is necessary.

that is something that we would like to study very carefully. and if there is a guarantee, we would want to make sure that there is ample credit and real risk in front of that guarantee so that taxpayers are not at risk. >> all right, thank you. i want to move quickly to the executive order that the president has issued. i notice i only have a couple of minutes left. i did not at the beginning of this remind all of our colleagues that we need to pay very close attention to the five minutes for questioning. because i'm confident that every senator on this committee wants to have his or her opportunity to speak with you. so i'll just in my last two minutes quickly bring up the order that president trump signed in february outlining the administration's core principles for regulating the u.s. financial system. now, the executive order requires you to report within 120 days of which existing laws and regulations promote the core

principles and to identify laws and regulations that inhibit the federal regulation of the u.s. financial system in a manner consistent with them. by the way i strongly agree with those core principles and i'm looking very much forward to working with you on this effort. can you tell the committee some of the specific issues you have looked at and perhaps some of the findings that we may expect to see in your report. >> yes, thank you. we have had a very large group at treasury working on this. one of the things that i emphasized to the team ahead of time was that we wanted to make sure that we reached out to many different groups and got feedback, that this was not something that the treasury was just designing on its own. i know certain people refer to this as a review of dodd/frando. it's one of the things that we're looking at but it's much broader than that. we have met with over 16 different groups. many of them having 50 or 100 people. we have had community banks. we have had small and medium

sized banks. we have reached out to each one of the regulators and had working groups with each one of the independent regulators to make sure we have input from them. and we will be issuing a series of reports the first one coming out shortly which will be on banking. i will say one of the big focuses we'll make sure that as we have different regulators, we have proper coordination between them and this is something that i have also been working on at fsoc where i take my responsibility as chair very seriously. >> thank you very much. senator brown. >> thank you, mr. chairman. welcome again, mr. secretary. at your nomination hearing on january 19th, as a member of the finance committee i was there. you stated one west -- the bank you were affiliated with did not engage in robo signing or other types of misconduct related to mortgage practices. since there's been a lot of news including reports in ohio from

one of our state's most conservative newspaper, some 1600 signings reports that one west did in fact engage in robo signing. your former company financial freedom settled for $89 million, $89 million related to violations of federal law. do you stand by that january 19th testimony? >> yes. let me first comment and let me first say that as you know, i'm no longer on the board of cit. so i only have access to public information and what i have read. but i would like to comment on the financial freedom settlement which was in the recent press. let me first -- >> please make it as short as possible. i have other questions. >> that these were identified by my management team and in self-reported to hud and fha when we became aware of them. these were issues that existed prior to us taking over the bank. we were concerned. we sent a team to go see the fha commissioner. and we dealt with that.

we also took reserves and as soon as we learned there were issues we put in policies to correct those issues immediately. >> i'm sorry to interrupt, but my question, mr. secretary, was did you -- you said that one west did not -- forgetting the settlement. you said that one west did not engage in robo signings. do you stand by that statement from january 19, you said under oath to the finance committee? >> i do and i would also just comment. i believe in a series of questions that were issued to me on -- after that hearing we responded on the definition of what we expected robo signing. again, i'm no longer at the bank so -- >> i know that. thank you. chairman crapo mentioned the executive order and then you gave us some detail about it, i'm appreciative of that. as you and your team at treasury work through this, are you reviewing the reforms that would

address practices that took place in places like indy mac and one west and you mentioned all the banks that you brought in the room, but there are customers, there are community people that you didn't mention. but the practices that took place at one west and indy mac, protecting home buyers from predatory lending, evaluating borrowers for their ability to repay the loan. are you reviewing those reforms? >> there will be a series of reports and we will be making recommendations on things that immarket -- that impact home mortgages. >> i'm just concerned as i sit through this, these hearings year after year. so many of my colleagues have suffered this collective amnesia about what happened ten years ago. i don't want you as treasury secretary to suffer from the same affliction. another question here, meeting with stakeholders on the executive order and housing finance reform, how many industry groups have you -- not

your staff, but how many industry groups have you met with versus how many consumer groups? >> first of all, let me just comment on your other thing. i won't forget those issues. i lived with those issues very seriously from the problems at indy mac. i spent many years trying to fix those and work on home loan modificati modifications. in regards to industry groups i have met with several groups of industry leaders and community areas. we have worked with them and we have had several meetings of large groups that have come in. >> could you spell out for this committee -- i assume you can't recite numbers now, but would you get back to this committee within the week that the chairman usually calls on to delineate which -- whom you have met with, which banks? you give us a litany -- i mean, diversity of meetings of not small banks, large banks, there are customers, community groups all that. if you will spell out

specifically whom you met with and give that to the committee. whom you have met with ago the executive order if you'd be willing to do that. >> we'd be more than happy to do that on a confidential basis. >> of course i accept that. i would honor that. last question. mr. secretary, you committed to senator hatch and i wrote to you on march 2nd, i haven't received an answer. that i asked for about potential conflicts of interest and ownership in the administration. just today there's a front page story in the -- shall we say mainstream media. it's "the wall street journal." about the president's business partners and his financial entanglements with a russian bank on the sanctions list so i would like to pose the question again that i asked in finance -- in follow-up, that i wrote to you on march 2nd.

will you get a complete list of trump business associates and financial ties to ensure that any foreign entanglements are benign with respect to the laws you enforce, terrorism, irgc associations and the like? would you commit to us to get a complete list of trump business associates and financial ties because of the threat they could have to ensure that they are in fact benign? >> well, let me first say i did review before i came today to make sure that my staff had fully responded to all of the inquiries from you and the committee and i believe we have. and if there is -- if there are outstanding questions that you have had from letters that you have sent us, please make sure you follow-up with me after this and we will make sure that we are responsive. in regards to your specific question again if you just send me a note on what you're looking for we'll review internally if it's appropriate to come from us

or somewhere else. >> i appreciate that. thank you for your cooperation, but the letter was march 2nd, it was not answered. i'm asking it again. i will follow-up with the letter again but we want a complete list. people in this country troubled by the president's business connections. they're troubled when the president's family goes to another country to do business and american taxpayers provide security for their families and that money goes to the trump business empire including the president. people want to know about those financial entanglements. that's not an academic or a political science exercise. not even a political exercise, it's about the national security of this country and it's about people wanting -- needing to know that information. so i reiterate how important it is. we just last week listened to the nominee for cfius and terrorism and financial crimes, all those very important issues, and we want to make sure those -- his ties don't affect

their ability, the secretary -- undersecretary for treasury, for terrorism, the ability of the cfius nominee to do their jobs. >> well, i can assure you, i take the cfius responsibility very seriously. i reviewed the cases weekly. my team reports to me on it. i can assure you that if there were any cases that involved the president or any members of his family that they would be treated very seriously and we would review them like anything else. >> but the public needs to know that as you review them. thank you. >> senator corker? >> thank you, mr. chairman. thank you for being here. i appreciated our conversation yesterday evening and i know that you heard secretary -- chairman crapo's commitment to housing reform in his opening comments. i know that you have some tax reform issues and others to deal with. but it's my sense that you're strongly committed to finally dealing with housing finance

reform and in an appropriate way, is that correct? >> that is correct, i hope that's something we can do on a bipartisan basis. >> if i -- i think the only way to do it appropriately where you deal with some of the charter issues that are necessary to really go beyond the model that we had back in 2008, the only real way to do that is through congressional action. is that correct? >> my strong preference is to do it through congressional action and working with you and your colleagues. i will say that obviously the treasury has exposure and taxpayers are at risk, but my strong preference is to do it as exactly as you have described. >> i talked to you a little bit about the -- i guess a couple nientions ago -- nights ago mr. white called me to talk about a conversation we had had here publicly about the capital cushion and some other issues and, you know, i sincerely believe he feels strongly about the position he's laid out. i discussed that with you a

little bit last night. i know your position there, but seems like we have got another 75 days or so to figure out the appropriate result to that. is that correct? >> that is. i appreciated you calling me and talking about that issue. i have had the opportunity to meet with mel watts several times. last time we talked about the dividend extensively, i did tell him that it was our expectation at treasury that they would pay us the dividend and we hope they continue to do so per the agreement. >> we -- i think most of the models that have been put forth to try to resolve the issues that have continued to exist with fannie and freddie most of them call for an explicit guarantee because of the fact that there was an implied guarantee which caused a situation in which there were

private gains and public losses. if there's any guarantee that's put in place after hopely a large amount of capital being put up in front that's something that should be priced, should it not? >> absolutely. if we do end up with a situation where the government is issuing a guarantee, no different than fdic insurance or fha insurance. the government and the taxpayers should be compensated for that risk. >> well, i'd like to say, again, it's been a lot of work, senator warner and myself, many of the people here at the committee have spent a great deal of time on this issue. as i mentioned to you last night, i doubt we'll have a secretary of treasury like you that knows as much about this topic as you and i look at this as a tremendous opportunity to resolve this because of your knowledge. i think when we attempted this back in 2013 we did so in a fashion that was so complicated. very difficult even though we

passed something out of the committee. to bring that into that the mainstream on the floor and certainly in front of the american people. my sense is there's been a lot of work to streamline since and i will say i feel for the first time a real opportunity to align not just the interest of u.s. taxpayers and the fact that we want a housing finance system that's robust and in fairness one that more fully aligns the public sector interests and the private sector interests. i know i talked to you a little bit about some potential proposals last night on the phone. but i just want to thank you for your interest in this and look forward to hopefully completing the work that is the last piece of work. the one piece of work that really should have been front and center on financial reform when we did it in 2010. i want to thank you for your concern, your interest and hopefully involvement in bringing this to the close. >> thank you. i'm committed to working with

you on it. >> senator reed? >> thank you, mr. chairman and mr. secretary for joining us today. you noted in your testimony the importance of the work done at the treasury department to identify and disrupt terrorist activities by targeting their financial networks and it depends a great deal on cooperation with our allies around the world specifically where intelligence sharing is concerned and half the recent revelation that president trump shared highly classified information with the russian ambassador, reportedly given to him by an ally, do you have concerns about the chilling effect this likely to have on our relationships with these critical intelligence sharing partners? >> well, i can't comment on what information was shared or not since the only thing i know is what i read in the press. but i will say, i'm probably spending 50% of my time on tfi issues. it is i think perhaps the most important issue right now as

part of my job. i assure you that i take it very seriously. i have had two foreign trips meeting with both the g-7 and g-20 and in each one of those meetings with my counterparts i have discussed this. i'm happy to report that we have a very close working relationship with our partners and our allies on this issue and something i think can be incredibly effective in stopping terrorism throughout the world. >> thank you. the white house has also asked you to review the liquidation authority under dodd/frank and to liquidate failing financial companies that pose a significant risk to the stability of the united states and to mitigate such risk and

minimize the hazards. i would like to highlight some of the provisions and ask if you support them. in the case of a failure of a mega bank do you support the mandatory removal of the executives and board members responsible for the failure? >> again, we are going through an extensive review of ola as instructed by the president. we are just starting that process. i have had discussions with many finance ministers and governors throughout europe and this is something very important to them as well. it would be premature for me to make any specific comments on any aspects of it. we're doing a review. i'm open minded to looking at all of these and i look forward to issuing a report. we'd be more than happy to come back and update you once we have done more work on it. >> let me recognize in your answer put on the record two

other issues which i would like you to pay particular attention. and i'll put it in the form of a question understanding that your response would probably be similar to your initial response. do you support the fdic's authority to claw back compensation from the directors or executives directly responsible for the failure? >> as a general matter, i think that that is a good policy that had been instituted. so again, it is something we will review. but yes, i generally support that. >> would you support the statutory mandate that taxpayers shall bear no losses in the exercising any authority under ola? >> i would say that's an objective but again, i would reserve comments -- specific comments until we complete the review. we don't want to put the taxpayers at risk in any way and that's one of the reasons that we're looking at all of the core principles. >> mr. secretary, the tax plan

is rather churlish in details but it suggests that some of the highest income americans would receive significant tax cuts and the majority of the tax relief to the remaining americans would be rather minuscule or certainly small. and there's a possibility that in the proposal there could be some -- indeed some increases on individual families or individual taxpayers. are you committed now to ensuring that there's no increase on the families or individual taxpayers less than $250,000 a year? i'm picking that as kind of a reference point. but are you committed to something like that? >> let me just say that obviously tax reform is something that we are working on with the house and the senate. but i can assure you that the president's objective and my objective is that we create a

middle income tax cut and that we do not raise taxes on the middle income. if anything the opposite, we are trying to create a middle income tax cut. >> would that tax cut be equivalent to the tax cut enjoyed by the very richest of americans? people who make about -- 1% or highest 1%? >> again, obviously, we are working on the details. one of the things we have done is we have proposed getting rid of almost every single deduction which is something that is used by the rich in return for a slight reduction in taxes. and our objective is that 95% of americans won't need to use itemized deductions and will be able to fill out simplified tax returns and we look forward to working with you as we progress on the details. >> thank you, mr. secretary. >> senator toomey. >> thank you, mr. chairman and thanks for joining us, mr.

secretary. good to see you again. i want to take a moment to compliment you on the extraordinary accessibility. you have been before groups of us, members of the finance committee, i have lost track of the number of times you have been on the him to get input on the various issues, you have been available by phone and that's a welcome change from the previous regime. i'm grateful for your accessibility and responsiveness. i want to commend you for reiterating the goal that we should be striving to create an environment in which we can sustain growth that's above 3%. i think that's entirely achievable and it's a very important goal so thanks for mentioning that. as a quick follow-up to the comments from the senator from rhode island, i would just like to underscore that as you do this review of the ola and the olf, i hope we'll keep in mind that this very convoluted construct which at the end of the day contemplates a taxpayer

funded bailout through the olf of a failed bank it is a -- it's a creature of the fact that we don't have an adequate resolution mechanism in bankruptcy. and some of us have been working for some time on legislation that would give us the confidence that we could resolve even a large complex firm in bankruptcy so we wouldn't need to put taxpayer funds at risk indirectly through the olf, nor all of these very proscriptive punishment mechanisms of which the senator from rhode island mentioned a few. in this general topic, i wanted to address one of the egregious problems with the fsoc which you chair now and it has to do with the designation of the too big to fail firms, the sifi designation. i'm hoping to get -- i'm hoping to get your reassurance it will

be run differently. some of the things i've objected to the opaque process that they have no criteria by which they're designated. the second is a complete lack of a defined so-called stringent regulation which is the dodd/frank punishment for being designated. no clear off ramp, once designated you could change your business practices so that could be relieved of the designation. even firms like asset managers had to worry about being designated and asset managers do not intermediate credit risk, they don't have the risk profile that banks have. so my question for you is can you assure us that under your leadership the fsoc is not going to launch a whole new way of designations and is not going to be run in this very opaque fashion and could you share with us how you do intend to lead the

fsoc since it does exist in statute? >> sure. well, again, i take my responsibility of chair of fsoc very seriously. not only on the designation issue, but it's also a very important forum where we can talk about issues across the regulators, cyber security is something i'm focused on. and we are working at fsoc and other areas with the regulators. specifically on your question, the president has signed an executive order where we are reviewing the fsoc designation process. again, it's early in that work. but i will tell you, i do support the concept of transparency and i do believe that if a company is being designated they should understand what would be required to be dedesignated if they want to derisk their business. so yes generally in regulation i believe that there should be transparency. >> thanks. then just quickly on the cfpb,

i'm deeply concerned in the way that this entity was structured has left it completely unaccountable and behaves as an unaccountable regulator in many ways. the house financial services committee had to take extraordinary steps to even discover the nature of their processes in their regulation of indirect auto lending, despite the fact that the statute forbids them to regulate auto lending and they failed to produce the time line we have requested to explain their involvement in the discovery of the wells fargo abuses where it appears that the cfpb stepped in at the end and director cordray has yet to respond to qfrs i submitted over a year ago. i think this lack of accountability and responsiveness is the logical consequence of an entity that even a court has determined is unconstitutional in its construct. i hope you agree to work with us to change the governance of this

entity, make it subject to appropriatations and appropriate congressional oversight. >> yes, we would work with you on that. >> thank you. >> senator menendez? >> thank you, mr. secretary, welcome. the president spent a great deal of time on the campaign trail highlighting those neighborhoods and communities throughout -- >> we will continue to monitor the treasury secretary steven mnuchin's first congressional testimony. he's taking questions right now promembers of the senate -- from members of the senate banking committee. you just heard the republican favorite punching bag of the consumer protection bureau. we have some breaking news we want to get now on nafta. also from washington. let's get straight to kayla tausche. >> we have obtained the letter that was sent to robert lighthizer on behalf of the president notifying leaders of congress, both the party leaders in the chamber and the chairs of the relevant committees that

they seek to renegotiate nafta. thus opening the 90 day window to discuss the negotiating position of the united states and and figure out exactly from which point they're negotiating when that 9 0 day period concludes. i want to read you a section of the letter. this is the letter in part. it says our aim is that nafta be modernized to address intellectual property rights, regulatory practices, state owned enterprises, services, customs procedures, sanitary and fido sanitary measures and small and medium enterprises. there was a draft circled a few weeks ago and that letter was about eight pages long and this is a page and a half long. from the copy that i have received of this letter. but two key similarities. one, the idea that nafta is outdated. that it needs to modernize along with the economy.

to that end, this new letter specifically mentions digital trade. the second idea that is still consistent in this letter is that the u.s. will be an aggressive enforcer of trade policy that comes out. there are some key differences, that is the specificity. the first letter went into how to level the playing field on trade and this leaves the door open. this leaves a lot of clean slates for congress and for the administration to decide exactly how they want to proceed. this is a letter that the u.s. trade representative wanted to get in the hands of congress before leaving for vietnam to meet with asian trade ministers so certainly this is something that will be talked about today. we have obtained a copy of that letter to bring to you. sara? >> kayla tausche, thank you for bringing that to us immediately. we'll see how the negotiations play out. that's something that investors

are paying attention to. i want to draw your attention to the market. because we are firmly in positive territory. the dow is up 50 points, being helped by walmart which is an earnings winner today. looks like mike and david, the s&p and the nasdaq climbed back from yesterday's deep declines. sort of a mini-come back yesterday. >> of course the high-tech names are the biggest beneficiary of the rally. namely apple. >> and walmart, only partially off setting the drag of cisco on the dow. a tentative bounce, still almost kind of 50-50 in terms of up stocks and down, looked like it would be a flush down before the open. sort of firmed up there as washington has been quieter. >> well, treasury secretary steven mnuchin says 3% economic growth is still achievable. he is talking about specifics on tax reform and regulation. let's get back do his hearing before the senate banking hearing on capitol hill right now. >> incomes are stagnant, these

communities desperately need investments that will allow them to start small businesses, create jobs and purchase homes. this is why i thought i'd find common ground with the administration but zeroing out for example cdfis in your desire to do national defense doesn't make any sense on behalf of the very people who supposedly want to defend, we want to create economic opportunities. so even the banking industry, the aba and the icba said it best in their letter to congress requesting full funding. they said cdfi work in the exact communities that were the focus of this conversation. they are looking at the local credit needs and as with go to the 2018 fiscal cycle i hope you can be an advocate within the administration for something that would meet the president's goal and your own stated goal and, you know, i hope to be able to work with you to make that happen. lastly, i wrote a letter in

march to you concerning about the real possibility that the administration would be forced to deal with an offer from russia's state owned oil company to acquire critical energy infrastructure in the united states. last year, venezuela's large state owned oil company pledged nearly 50% of citgo shares to ross never and i received your response on friday evening. frankly it doesn't say anything. it recites relevant stands and cfius procedures. would it concern you if state owned venezuela defaults on the debt and russia exercised a near majority ownership stake if they haven't purchased additional shares in the open market? they may have, the possibility being the majority owner with 48 u.s. petroleum product terminals, three refineries in three different states, nine pipelines throughout the country. wouldn't that be something to

concern you? >> well, let me just be very clear in stating this. this is an issue that i am aware of, not just from your letter, but from other people who have raised the concern. i can assure you that this like any other national security issue will be reviewed at cfius and where appropriate and other confidential settings. at the appropriate time i'd be more -- as issues progress on a classified basis we'd be more than happy to have a confidential discussion. >> i look forward to that. thank you. >> thank you. >> senator scott? >> thank you, mr. chairman. i think it's good to see mr. tillis here with us today. everyone is giving him a thumbs up so good to see you healthy here. >> that's why i don't run at 8:00 a.m. in the morning, however. >> we'll talk to you later. mr. secretary, good to see you

here as well. like you i had a fast professional life, i spent about 20 years in the insurance industry and on that may not be as cool as making the lego batman movie, but it's germane to my question. i was pleased to see the the president call for you to resue the fsoc's don bank sfi bank authority. i think examining the transparentsy the due process and likelihood of distress associated with these designation is good public policy. at the end of the day, insurance companies are not banks, and they should not be treated as such. under existing laul, fsoc includes an independent member with insurance expertise. those fsoc members can have their vacancies on the council filled by whoever takes their place. the law specifically allows that. unfortunately, such a provision does not exist for the independent member with insurance expertise. when the current insurance

expert's six-year term ends, there will be no one there to take his place and no voting member with any insurance expertise. do you believe that congress should address this discrepancy between the vacancies of the fsoc members? if so, how would you suggest that we do so? >> i would -- first of all let me just say i have had the opportunity to meet with him several times. i do think it's very important that we have someone on fsoc that represents and has experience in the industry, knowledge. i would be happy to work with you on that issue. we are aware of his term is coming up. and if you or anybody else have suggestions for us for someone to replace him, we would be happy to lip to that but i share your concern. and we want to make sure that we keep that spot on fsoc. >> i assume that when you make your presentation to the president on your review that you would perhaps bring thattish you up to the president as well?

>> yes. >> i want to thank you the chairman and the ranking member who have both committed to solving this issue as well. so i think if we work as a committee we can solve this, i think, discrepancy that is unusual and certainly not practical. thank you. >> thank you. senator tester. >> thank you mr. chair and ranking member brown, and thank you for being here secretary mnuchin, appreciate your presence at this hearing. senator moran and i have a community bank reg relief bill called did clear act. have you had a chance to take a look at that at all? >> i have only looked at it brief lieu but i would be happy to get together with you and go through night the reason i bring it up. it is a bipartisan bill, there are a number of democrats that are willing to work with you and republicans that are willing to work with you to get common sense reg relief for community bank. if you could take a peek at that

with us i would like that allot. >> i can assure you and one of the things that will be in the report to the president is relief for community banks. >> thank you. there is a bill out there called the marketplace fairness act. it deals with requiring small businesses to collect sales tax on behalf of other states and local governments when selling goods over the internet. are you familiar with that bill? >> i am familiar with the bill. >> do you or the president have a position on that bill? >> i haven't discussed it with the president. so i don't know his view. i think this is something that we seriously need to look at. and i share certain concerns of yours on it. >> okay. how about a national sales tax in general? is that something that the administration supports? >> we have had no discussions on a national sales tachlks it's not something we are inclined to do. >> ream you and director cohn

announced a one page tax plan in a briefing, a document that is not specific, but that's okay. non-partisan experts have said that this plan could cost $5.5 trillion. i don't think any of us here think that that's a good idea saddling the kids with additional debt. i think even senator mcconnell has recently said the blan cannot add to the debt -- plan cannot add to the deb. could you commit that this plan, the tax relief plan would not add to the debt? >> first of all, let me assure you we would never propose a plan that we thought would cost $5 trillion. there were only specific parts of the plan released. so i don't know how it could be responsibly scored. what i have said repeatedly is that any plan we put forward we believe should be paid for with economic growth. now, i am concerned as to whether some of the models will

attribute enough growth in dynamic scoring but when we present the details we will present how we think it should be paid for. >> i would -- just a couple things. first of all, the budget that the president put out, and quite frankly senator menendez talked to part of it but it does not bode well for america. so if we are talking about make growth in rural america to pay for a tax plan based on the bubt that the president laid out we have got some huge problems. i'm just telling you it ain't going to happen with that budget. i'll be honest with you. the other thing i would say, i'm suspicious of dynamic scoring because it has been done before. it isn't the first time we've been here. and oftentimes, through dynamic scoring, the end product looks really good but then when reality hits it is not that way at all. if you are concerned about the debt -- and i do believe you are, by the way, i would just ask, this needs to be done very

prudently. >> i can assure you that i am very concerned about the debt. and i'll give you my ten-second commercial on the debt limit, which we do need to raise and look forward to working with all of you on that. >> we look forward to working with you on that as well. gsc reform has been brought up several times. do you support a 30-year fixed rate note? >> i do, indeed. >> okay. you talked several times about protecting taxpayers. i think that's solid. would you -- would your support for that go away if in fact there was some taxpayer risk with with the gsc rebuild? >> well, again, i think that the 30-year mortgage has been a fundamental part of our -- >> yes, no doubt. >> mortgage finance for as long as most people can possibly remember. >> it's a big deal stereo again f we end up with a scenario

where we need some type of explicit guarantee, i would expect it would be paid for, and i would expect that it would hopefully never be hit. no different than there is an fdic insurance fund. >> okay. okay. the fsoc, under one of a number of changes related to transparency and designation process we talked about of them, notifying kpts when they move between stages, stage one evolution, providing more information for companies as they go through their annual review. would you support codifying those changes in the law? >> again, we are looking at recommendations. but i think that's one of the things we will look at and potentially recommend. >> okay. thank you very much. thank you mr. chairman. >> thank you. senator shelby. >> secretary, thank you for your willingness to serve. you bring unique experience from the private sector to the office of treasury. you know well that we need

meaningful bank reform. you have been in the banking business. a lot of us have pushed for overall comprehensive bank reform but it seems to me a lot of the smaller banks and regional banks that, to my knowledge have been here 31 years on this committee and chairman three times that they don't pose a systemic risk to this country. you know, the small banks and regional banks. so do you support in concept, and would you work with us to try to bring some meaningful fundamental bank reform to our system? >> absolutely. and i think that regional banks and community banks are critically important to lending. these are the banks that know the communities, know what's needed, and they know how to

make loans. and we should make sure that they can do it without undue regulatory burden, without putting taxpayers at risk. >> and sir, aren't they mainly the banker for the small and medium sized business in this country which are the job creation machines? >> they are, indeed. >> on the tax reform which we are all interested in and we've talked about -- we talk about the corporate rate, 35%, it's too high. of course nobody pays 35% as we know. but i have brought this up with the administration several times a lot of us have. most of the small and medium sized businesses that we just were talking about in this country are taxed under the subchapter s of the irs code. that's a pass route; is that correct? >> that is. >> so if we are talking about tax relief for the biggest of

the biggest, what are some of your proposals? what are you working on? you have got a lot of smart people working on this for the small businesses and so forth? because i for one would not want to support a big reduction just for the biggest of the biggest and do nothing for our basic base and job creation, small and medium sized businesses. are you working in that area? >> yes, thank you senator, we share your concerns. and i have referred to this in the plan as a business rate as opposed to a corporate rate. we need to figure out and we have a large team working on how we would deal with pass throughs. i also just want to emphasize that we are committed to make sure that rich people do not use pass throughs as a loophole to pay lower rates. so we do want small and medium sized businesses to have the benefit of lower rates. but we will make sure that, you know, not every singl