>> becky, you -- he was like, it has gone up since then, he was not long -- he was very cautious prior to that, i'm -- can i get in on this bet against you? >> on warren's side? >> yeah, i want on his side. >> thanks, becky thanks, warren join us tomorrow melissa, thank you hope you feel better "squawk on the street" is next ♪ oh yeah all right ♪ ♪ take it easy baby make it last all night ♪ ♪ she was an american girl ♪ good tuesday morning, welcome to "squawk on the street". busy morning, two big hearings getting under way in an hour the former ceo of equifax and the ceo of wells fargo testify on the hill. the president heads to puerto rico the las vegas shooting

investigation continues. the premarket building on the record highs europe is mixed. ten year 235 auto sales on the way today. road map begins with deeply sorry. that's the message the former equifax ceo is set to deliver to congress rick smith set to be grilled by a house committee over the company's massive data breach. >> plus on the hill, wells fargo ceo tim sloan will answer questions about the massive fake account scandal. searching for clues. investigators combing through evidence to see what led to sunday night's massive shooting in las vegas first up, the former equifax ceo rick smith getting ready to face a tough grilling by lawmakers, testifying before the house energy and commerce committee. in prepared testimony, he said he's deeply sore re thry this od and the company failed to prevent sensitive information from falling into the hands of wrongdo wrongdoers the breach may affect more

consumers than originally thought, bringing the total of potentially affected to more than 145 million people. >> i think people have to recognize that there is this abstract nature of what this could possibly mean. and the answer is do they have enough money, the bad guys have enough money and power to be able to take the information they have, which is basically you, and open credit lines in your name. and they can do it electronically, and they can open a home equity line of credit and you won't know it and that's what the real damage is i think that i wish equifax would come out and just say it, equifax has been skating the whole time on this, they only do things it seems when they're called out on it, this is a company that is trusted. i got to tell you, i speak to money managers about it, time to buy, time to buy, nothing is going to happen. it is, like, moodys, moodys was

in trouble, great buying opportunities, nothing it going to happen. because this is america. and america -- >> do you disagree with that notion >> stock did bottom a couple of weeks ago. >> it bottomed they got rid of smith, i took them down, i took him off the wall of shame, i said if he comes off the wall of shame, you have to buy the stock, there you go i want to separate stocks, look, obviously stocks were up yesterday, terrible day in real life, stocks separate from what is happening, but, yes, equifax may be a buy, no bank is saying, you know what, we're not going to use equifax i have not heard a single client, a single client say we're not using equifax? >> no. hearings typically are largely show, opportunity for congress to express its outrage, but don't necessarily -- almost ever

result in legislation that passes that would change the regulatory structure or the structure of the industry. so i would assume you don't expect that to be the case now either. >> no, i don't expect to get the congressional medal of cybersecurity. >> it is going to be -- it is going to go to be tough questioning today, no doubt. maybe will hurt the stock, who knows. will it really result in anything that actually changes their business model i guess that's the larger question. >> i don't think so. the business model is a good one. they're integral to the system i'm saying that people have to protect themselves because equifax is not going to protect you. >> and they do that by doing what right now? >> stop, call your bank, and you say, listen please, unless you have my pin number, unless someone has my pin number, they do not have your -- one thing equifax is your pin number thank heavens. i think they would give away your pin number in a nanosecond. they were hit by a cyberattack >> they were they sent e-mails out to people to remind them to do the patch on -- e-mails.

>> cybersecurity guys i talked to, it is like they are, like, are you kidding me they didn't respond? well, what's going to happen to them nothing. it is america. nothing happens. you get embarrassed. your spouse goes to supermarket, whoever does the shopping, and they get, you know, like you're squeezing the tomatoes and the guy says, that's the equifax guy, what do you do? just shame >> cynical view of america right there, jim >> america's a great country better than all the other countries. >> not the only hearing on the hill today the wells fargo ceo tim sloan also heads to washington to face the senate banking committee he'll be pressed on the bank's handling of that massive fake account scandal according to prepared remarks he'll say the company recognized too late the full scope and seriousness of the problems in the community bank and wells fargo is a better bank today than it was a year ago becky with buffett a few moments ago, buffett's point that these problems don't get solved in a

day. >> well, buffett said there is congress and there is buffett. and one organization is really for show and the other is a serious organization, buffett. buffett said it is fine, therefore it is fine what >> just move on now? >> yes >> yeah. you have not been fine with it you have been outspoken. outspoken in your criticism of this bank. >> i have subpoena power do i look like someone with subpoena power >> you kicked it out of the charitable trust. >> there is other banks that are a lot -- citi. cross selling, if you go over the report, okay, and i know that i don't want -- the report is about how to get a higher priced earnings, sherman sterling, incredibly in depth report saying what they did is they told wall street, look, we get more out of an account, we do great cross selling, so we deserve a premium multiple and turned out that a lot of the

cross selling turned out to be the kind of cross selling that was not that good and now the multiple has shrunk, but warren buffett stands behind it and he's a large shareholder remember, when warren buffett decided not to stand behind ibm, that stock went down >> yes, it did >> warren buffett is real and warren buffett says it is fine >> and would not say when asked by becky which of his children, so to speak, he favors, bank of america, where he's also the largest -- >> solomon had gain. >> certainly did go on to praise brian moynihan from bank of america for his ability to have cut costs. didn't realize their employee roles and expenses are down quite as dramatically as he quoted as only mr. buffett can come up with those numbers right away. >> they did a great job on the app, electronic banking, great job. look, i'm not trying to be cynical. i'm saying, look, i spoke my peace on wells fargo and i had -- i had senator warren -- what am i going to do?

i don't -- this is not what woodward and bernstein no mark felt i haven't seen has anyone seen that >> you're not going to parking garages? >> no, i haven't seen -- >> follow the money, follow the money, i talked about the sherman -- look, the company got investigated internally. the investigation was incredibly damming. i wrecked the weekend reading it i clearly was the only one that did. my wife was right. what are you doing reading that stupid report for? i'm trying to do my job? will you just move on? in retrospect. >> i don't know. you having read it, you have a certain amount of knowledge that others don't and therefore you're outraged as a result of it i did not read the entire report, maybe i should maybe i should >> the report is very damming. the report is unbelievable, about culture, and about how -- warren buffett said, can't be uprooted tim sloan will do a great job today. he will do a fabulous job. and then there will be some more articles, maybe somebody --

insurance, maybe -- and then move on because it is america. i thought the report was outrageous it was a report that the -- that i read, sanctioned by the company, and it was outrageous, but did anyone else say it was outrageous what happens when they issue a report and i'm only guy that says i'm outrageous? it makes me look like a -- >> buffett had a response to that take a listen to this. >> as much as possible you want the people that were responsible to pay and you -- ideally you would have the people that were innocent not pay it doesn't work that way in the american judicial system. >> so basically your thesis is we go through the motions today on both sides, wells and equifax, and come out the other side and we move on. >> i thought that buffett made a great point there. the shareholders get banged, the

individuals don't. nobody gets prosecuted >> right, we went through the financial crisis and the main point has been that no senior -- virtually no senior managers or certainly ceos at any of the financial institutions were prosecuted. >> jesse eisenberg wrote a good book about that. if the shareholders get hurt, what is the point? i do not think that wells fargo should have gotten away as easily as they did if it was just going to be a huge fine for the shareholders, that would be accomplished enough but the report demands to be read because the report is about how to get a higher priced earnings multiple by doing bad things and the report was incredibly sophisticated. it was right in my wheel house i've been recommending that stock, because of cross selling, they get so much out of an account, those who believed in this, you were wrong, because

they did things that were wrong to get you to buy the stock and pay a higher multiple than you did for bank of america and jpmorgan i'm surprised jpmorgan didn't send this report out to everybody. we got to run. >> we do want to keep our eyes on the investigation in las vegas, the death toll as you know by now has risen, the deadliest mass shooting in u.s. history. the gunman killed 59 people, injured more than 500 others during that country music festival jane wells is in las vegas with the latest this morning. good morning, jane >> reporter: hi, carl. this is where the concert took place right behind me. there is the mandalay bay behind it, my room in the mandalay bay last night was on the side, on the 60th floor, it gives you a clear view and for stephen paddock, he was lower and closer on the 32nd floor for a clear shot we saw there were reports of fbi investigators in that room last night and the president spoke about this on his way to puerto rico this morning. listen >> we have a tragedy, we're

going to do -- and what happened in las vegas is in many ways a miracle, the police department has done such an incredible job and we'll be talking about gun laws as time goes by >> reporter: we also started to learn more about what happened when police approached stephen paddock's room it took over an hour from the first 911 call to close in on him, to figure out where he was, and he fired on the first officers who arrived >> there were several suitcases, i can't give you the exact number, in excess of ten there was a team of six officers that approached security, they went up the elevators, after discussing the situation with the security and obtaining intelligence and they checked each floor by floor until they located where they believed to be the room subsequently they approached the room, received gunfire, they backed off and s.w.a.t. responded. >> those ten suitcases he's talking about were suitcases paddock had in his room

presumably how he got 23 weapons inside authorities still haven't cleared the crime scene, so people can retrieve their belongings people like danielle row salles who was working the festival and after hitting the ground with his wife, he started recording everything on facebook live. >> we're getting shot at oh, my goodness. >> guys behind, we were scared, i go, i'm thinking i'm going to lose my grandkids. my daughter. >> now, you are looking at the two blown out -- or broken windows that paddock broke, they think with some sort of hammer-like element before he began the shooting, certainly that's one thing they're going to look at and how that happened, nobody was able to notice, should there be a

sensor by the way, i should also tell you while this is going on, we have five conventions starting today, including theglobal gaming expo and a couple of properties over, the american red cross fall finance meeting is happening, guys so business goes on in vegas, though it is subdued >> i was going to y ing ting to that tells us anything about traffic disruptions, whether it is business conference, tourism, going forward, for the strip >> reporter: there is no disruption other than i can show you right down here, there is still this one area of the strip between tropicana and russell is closed we are on -- we are on the tropicana side of that right now. we're on the north end and until they clear this crime scene, which i think is going to take hours, when i was looking down at it from my room at 1:00 a.m. this morning, nothing had been touched everybody's stuff was still in this concert venue behind me but in terms of flights coming

in, there were -- maybe minimal disruption, but nothing, everything is back to normal, people were arriving yesterday, people on the casino floor at mandalay bay where we stayed last night but, again, it is -- you know, everybody is sort of walking around, i went to the restaurant, you know, they had most of the restaurants open, but not all of them, and everybody was sort of subdued. they couldn't open up the pool at mandalay bay yesterday. i was told because the lifeguards didn't come into work because they couldn't get here it was just -- it is just -- it is hard to explain, this is a town where people have fun, and it is hard to have fun right now. >> jane, you're doing fabulous stuff out there. can you try to explain to people who have never been to vegas, i know you said how long it took for first responders, but these are immense buildings, you can't really tell. these are just, like, gigantic, and just even to get a sense of the scale versus what we're used to, if you haven't been to vegas, i've staid on that floor,

it is an absolutely impossible to try to figure out where anything is coming from because it is ghiganticgigantic. >> reporter: well, on the one happened, the windows were broken out, it was 10:00 at night. so it was dark, so it may not have been immediately apparent where the windows were broken out, though people were seeing white flashes so they knew it was up there are reports that when they came in they first went to the 29th floor, i read a report where someone on the 31st floor said i think the sound is coming from above me. they couldn't shoot from the ground up, jim, because there are people in that hotel god forbid you have the wrong shot so they had to close in on the right room, and they knew they had the right room when he shot out the door, by the time s.w.a.t. got in there, though, he committed suicide >> right, but, just that this is unfortunately he was in an unbelievably good position versus any movie you've ever seen, versus any hollywood set,

this was just, you know, this was the place, unfortunately, to do it. >> reporter: and he planned. he planned look, he had the end suite the suite at the very end of that hall and as you mentioned, jim, these -- most of these casinos are mazes, but security knows where to go, but he picked the perfect room, he had 23 weapons, this was not spur of the moment why this concert, who knows? why? nobody knows >> that is the question we're all asking, jane our thanks to you. we'll check back with you later on this morning. jane wells, of course, covering the shooting in las vegas. when we come back, tesla missing the mark, why the automaker says it struggled with producing the model 3. we're getting numbers out from ford as auto sales are coming our way. another look at the premarket, the s&p is not only up five straight, it is up 13 of 16. we're back in a minute

welcome back to "squawk on the street," i'm phil lebeau september auto sales, a couple of the big three have reported, ford doing better than expected, an increase in september sales of 8.7%.

the expectation from edmunds was for an increase of 4.7%. more importantly, look at the inventory at ford, something they have been working on, just 72 days supply, compared with 85 days supply at the end of august chrysler also reporting sales down 9.7%. a little bit better than the expectation from edmunds, which was for a decline of 10.9% guys, we're going to get general motors in ten minutes. speaking of general motors, you saw the note from bank of america, the gm train seems to be leaving the station, guys a lot of people putting out notes believing this is the time for the stock to move higher and there is some momentum behind it >> indeed, phil. thank you. see you in a minute. b of a goes to buy, target 57 after that deutsche call yesterday. the words of b of a, management gets it. >> not taking it sitting down. the future, my new autonomous gm, some incredible statements same time, by the way, let's remember we did have half a million cars wiped out

a lot of that number that phil just gave, can now see why the rails have been so strong. it is -- they take cars -- why so much of the economy has strengthened post hurricane. auto and housing related so those are good numbers and i think that once again, it will be difficult to understand the employment number friday, but this confirms the need for the fed to raise >> we have seen a capital economics said the jobs number could be half of their prior estimate, maybe as low as 100 because of the hurricane but your point to cars and freight. >> nobody gets it. you get that check from those insurance companies on a car, instantly. it is really rather amazing. like, boom and then you got to have a car even during the great recession, people walked away from the home, but not the car, you got to get to work. >> cramer's mad dash, we'll count down to the opening bell, look at the premarket, "squawk on the street" continues in a moment

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less than two minutes before we get an opening bell for this tuesday. let's do a mad dash here at the desk. >> housing is so strong, david sheryl williams came out with numbers saying dramatically better than expected why is that? a lot of home builders were doing incredibly well. gm, by the way, up 11%, nice number i got to tell you, lenard does a buck six, most importantly here,

why? strong demand for homes, low unemployment, low rates. there you go that's the recipe, it is finally paying off earlier talked about gm, what happened that suddenly people are buying gm off the good news? what happened to people buying lennar for got news. they're able to navigate through the environment, and let's buy them sherwin williams going up because people are saying this is going to be longer lasting it is like everyone adopted the warren buffett view of there is progress, things are better than you think. and lennar is great, stewart miller did a great job, sherwin williams is good, they bought valspar, not unlike what tyson foods did. really good acquisitions >> phil lebeau, 30 seconds to the bell let us know what gm said >> gm, pumuch better than expected chevy is the big story there retail sales up much better than

expected ford, better than expected, up 8.7% toyota, better than expected, up 14.5% versus an estimate of 9.1, and chrysler, not as bad as many were expecting there, the number to focus on, guys, 18.1 potential starter for the month. >> phil, thank you for that. phil lebeau. there is the opening bell. and the s&p 500 at the bottom of the screen big board, group one automotive operator of auto dealerships celebrating the 20th listing anniversary at the nasdaq. natural pet food company blue buffalo pet food products, pet adoption campaign. two different stories going on one is the short-term rebound in sales. the bullish calls on gm this week at least have been about dominant position and autonomous, like going out five years. >> yeah, look, they made a commitment to electric vehicles. which is a very big deal, because you're thinking about

china, china is going to ban gasoline engines, perhaps. talking about california, maybe banning gasoline engines, gm seems to be ahead. there is -- i got to be candid, it is almost like some switch got flipped. gm has been saying a lot of the things that now this was a little more of an emphasis that they're going to go electric, but there is a belief that can't we beat tesla too? why is everybody -- why is tesla the only one that can beat tesla? we can beat tesla. you see the number of cars they put out, the model 3 >> the stock is only down 1%. >> it is tesla >> it is tesla >> will you get with the program? >> okay. >> david, you don't microanalyze. >> i won't how many cars? 300 cars >> 260 cars. >> 260. >> looking for 1500. >> easy come, easy go. >> yeah. >> i mean, come on. >> they'll get there they'll get there. >> bottlenecks, david. remember elon musk said -- >> sorry

stepped on your line. >> you stepped on my line. that's okay. tesla is loved gm is now loved. housing is loved >> that's the funny part gm is now loved. >> there is a thesis propounded by the hedge fund, the brilliant hedge fund billionaire, brilliant, autos have peaked and housing peaked you heard phil lebeau. you think autos peaked, i got a whole mountain you can climb k2 if you think housing has peaked, go read the lennar release you think employment peaked, look at the paychecks release. look, maybe things are good. i mean, maybe things are good. >> some of those peak auto advocates might argue we weren't counting on a hurricane. >> i think -- i have felt whether it be home depot, sherwin williams, whether it be -- that this -- that the rebuild is just gigantic and the insurance companies, i

mean, people don't understand, they have money, they're going to, like, rebuild. costco reports this week, i want to see what they do. but home depot is rolling over badly before the hurricane the hurricane changed the country's narrative. >> you felt hd was out of earnings >> i was furious about that. i thought home depot had an up believable number. the bears came in, flew in, saturation bombing, maybe anyone that felt that home depot was good feel like an idiot. who is laughing now? david? >> back to cars for a moment, we are at this moment, what has it been, 40 years of talking about electric cars? >> sure. >> and suddenly it is really here got vw committing to only have electric -- volvo. >> volvo. >> it is happening. >> you got the chinese -- you have the chinese committing to trying to have electric be largely what is going to be the fleet of automobiles on their

roads in let's call it the next ten to 15 years. india making similar moves because of pollution. >> these are countries where too many people are dying of respiratory illness. and they're making, you know, they're -- the government -- the government in china does not want to be overthrown because of a million people might die of respiratory illness. >> no, without a doubt >> 30% of the pollution. >> remember, who killed the electric car, that's from 30, 40 years ago, people were talking about that now, here we are -- >> you've been a proponent of invidia, and mobile ideal, but gm is not in the trust, even though you said on twitter. >> that's a mistake. that's a mistake. >> too late? >> i hate to chase >> i feel like intel too, like, geez, brian -- >> sometimes you miss the move. >> sometimes you just -- >> listen, ted williams batted .400. that means, you know, 60% of the time he was not so hot.

>> that wasn't lifetime. lifetime was a little more than that, yeah. >> you watching the game tonight? >> probably not. >> no. >> no? >> i'll watch the game yankee game. >> probably not. our season ended really well you won 11-0 as we both managed, well, not even quite 70 wins. >> didn't have a season. >> anybody ever talk about baseball i don't think anybody even really cares >> everybody talks about how nobody is watching football, everyone is watching football. >> meanwhile -- >> i know. >> can i just say that one of the bell -- i want to talk about a company that rang the bell blue buffalo pet food, it is blowing everybody away it is what, you know, american flag on it, you know it is not from -- that matters because people -- that's a symbol it is not junk inside. it has been a very big win and pet -- humanization of pet story remains one of the great investment thesis of all time.

>> we pay cash to vets that's a great business. >> that is great you can get pet insurance, you can. >> pet insurance is very expensive. blue buffalo is very good. >> speaking of consumer products, we got a downgrade out of deutsch from sell they think this retail rally is somewhat questionable. >> yeah. >> and then at the same time, stifle initiates a bunch of restaurants on a buy wendy's, yum. >> there is a mixed picture like the dollar tree and dollar general. my family dollar has not been done over yet by dollar tree not a nice dollar tree not a nice family dollar when they -- when the dollar tree comes in, they fix things up dollar tree is a fabulous place. fabulous >> fabulous. >> fabulous. david, i was where -- i went to the beach this weekend i had fake ray bans on, people thought i was wearing ray bans >> you bought them at -- >> five pair, dollar tree, all

look like ray bans you can't tell the difference. >> no, you can't the uv protection may not be the same may want to keep an eye on that. >> in terms of whether they work what are you, some sort of superficial guy? i'm talking about the reason why people wear sunglasses, looking cool >> dollar tree rocks candy aisle, some of their cleaning products. >> candy aisle and cleaning products >> cleaning products >> don't use them together >> let's talk about p & g. one more week. one more week. >> all right. >> vote is a week from today shareholders will mack a decision whether they want to put nelson peltz on the board of procter & gamble we'll know a week from now. >> are you taking the gloves off? >> i am not. laughly did, he's the former ceo, the company handed the reins over to david tiller a couple of years ago, he writes a letter that in no uncertain terms makes it clear where he's coming from and attacks people to a certain extent who worked for him including his old cfo. let's share some of the quotes

from the letter itself of course, goes after mr. peltz on a variety of areas. listen, also encouraging people to review both sides, detailed responses from p&g, in terms of their thought s about the company. but he says, mr. peltz and mr. daly, this is a reference, by the way to clay daly, the former cfo, are clearly out for number one. they don't represent me, a long-term shareholder. nor do i believe they represent the majority of individual and institutional shareowners. >> daly has more shares than -- is he out for number one >> he seems to be. he says, well, he goes on as well, to talk about daly but we got to get through digital first. let's do that first. board member at snap, he is a board member at snap, i can safely say peltz and daly would be the last two people in the world that anyone would call to get any insight on digital and

e-commerce >> he's got -- because of snap, he's got an insight? >> yes and finally one would hope he says that mr. daly would have learned his lesson about responsible goal setting, this in response to a question as to whether or not the goals are too low. >> so in other words, the cfo did not really work for the ceo. >> mr. daly did not work for mr. laughly. >> he points out during his first term as cfo, the company would grow sales 7%, 8%, eps, 13 to 15, both missed by a mile, the stock price fell by nearly half we got rid of a 60 billion in market cap, ceo had a change, of course, became -- many shareholders wondered why there wasn't a change in cfo wow. strong words from the former and long time ceo at the company, who oversaw in this first term certainly a period of significant growth at p&g. >> david, are the index funds going to vote for the way that the proxy solicitation firm, the

proxy advisers -- >> not necessarily. >> why is that >> now into the mechanics of vote itself. you have the proxy adviser firms, making their determination that mr. peltz should be added to the board, worth reading the reports if you want to, the keys are black rock, which owns about 5% of the stock, vanguard, 7% of the stock, and state street at about 3% these are the three main index funds. i would remind you in the case of dupont, the proxy adviserry firms went for try-ann and didn't get any of the index funds. and they lost. so larry fink at black rock, will he be involved? >> i don't know. >> do any of these firms have conflicts? >> the index funds now have also adopted more of their own work to a certain extent, they spent a little bit of money, at least, they'll say more, but want to keep their fees low on examining these kinds of corporate governance issues. >> do they care whether the stock goes up or down? >> i don't know. i don't know if larry fink will be involved, i doubt he would

be they do have 401(k) business they solicit from the p&gs of the world. >> wait a sec. >> you wonder if that plays into it >> if they have 401(k) business from p&g, then wouldn't they vote their interest in number one according to mr. laughly who is number one. >> they don't want to antagonize them and jeopardize the relationship i don't know that happens. >> but you mentioned it. >> by the way, since we're going through vote totals, they need vanguard or state street it would seem, at least vanguard or state street and black rock and they hope to get one third of retail, retail is 40%, a lot of them don't vote. we'll see how the vote goes. ali dubage, the analyst at bernstein, did say they're going to have a q&a later today, why should we listen to laughly when he got p&g into this mess into the first place.

>> i do want to point out to people that the cfo reports to the ceo, so if you felt the cfo was doing a bad job, you should have removed -- >> shareholders, i guess laughly felt like he was a good -- >> why shouldn't he be interested if he's out for number one, because he has a lot of stock, is that wrong? and do the proxy solicitation firms, i'd like that interesting idea, do they have -- do they have relationships that would be jeopardized? >> everybody has got relationships. >> looking out for number one. >> everybody is looking out for someone. proxy advisory firm, hedge fund pays them fees >> can i point out that mr. laughly is not necessarily the guy that i would want to be taking my queue from stock has done nothing well respected well respected. >> yes.

>> he is well respected. >> he is. >> mr. daly was well respected until he took -- then suddenly he's not well respected. he was well respected. >> we got to get to bob pisani a lot of well respect. a lot of well respect through the. >> like, you know, respect, like, yeah >> record highs all around the board. let's get to bob pisani. >> another day, another new record high. it is all about the inflation trade and this is going all offer the world. nikkei, another strong day, up 1% nikkei is at the highest levels since august 2015. weakening yen helping there, stronger dollar. hang seng, hong kong up 2%, near a new high they surged after the close on monday good pmi data. chinese bank stocks, biggest guys out there, they jump on the reflation trade and reduce and reserve some of the banks are required to keep, so look at that, 5, 7, 5% there, the big guys out there, including icbc

up 8%. reflation still the story here in the u.s look at the sectors here, materials on the upside. industrials now flat banks were up right at the open. negative energy had a fabulous month, but struggled the last two days as oil moved down a little bit. utilities a very poor performer because yields have been moving up that's part of the whole reflation trade. let me get in autos quick. hope you were listening to phil lebeau talking about gm talking about better than expected gm, gm has gone parabollic, $35 a month ago, gm, $35 a month ago. that's a new high for gm they went public in 2010 43 is a new high upgraded at bank of america, merrill lynch, ford also better numbers and highest levels since march for ford but it is this reflation trade that the market has been talking about. for weeks now. it is still going. reflation is about firming inflation, somewhat firming inflation, central banks being more hawkish, tax cuts, but the effect on the market is

broadening breadth and rallying very select sectors, small caps, banks, energies, look at the russell 2000, fabulous month in september, potential tax cuts, there you see it moving up here. the bank stocks have all rallied as well as the ten-year yields started moving up. people would like to see the yield curve steepen a little bit more we have seen rallies in those stocks as well these are weeklies that you're looking at what will kill this reflation trade, which is the primary topic for the stock market in last month or so you get the fed unexpectedly more aggressive than they thought. you get dollar head winds, you have tax cuts stalling out, that's a big issue august and september, weak months, didn't work. the important thing is very rare for august and september to be both up, only happened 21 times in 90 years and october was up 81% of the time. that's a very good omen for trading in october right now, the dow up 27 points.

carl, back to you. >> interesting seasonality thank you very much. to the bond pits, checking in with rick santelli. >> rates aren't really going up fast but they're certainly holding what they have gained over the last several plus weeks. look at the one week of two year note yields. now what you want to notice is the high water mark there, about the center, center right of your chart. that's around 149, 150, on a closing basis, the high yield, let's open this chart up to october of '08, high yield technically was the 29th of last month. okay that was 149 you saw in the intraday, we're toying with that level, we traded through it a bit. so looks like we're going to once again maybe extend the comp and it has been a while since two year has been here you look at july 1st of 2016, for ten year, something should really jump out at you and probably talk about this on the exchange today this thing is not necessarily with turbo thrusters in terms of the rates moving up, but that

chart pretty bullish for rates, bullish is the term used for higher rates now, tens minus bunds, i like this chart, ten minus bunds, around 187-ish this thing is starting to separate really is starting -- it was -- the european yields at one point, value trade, pulling us down now we're starting to pull them up a bit tens minus twos, bob was talking about a steeper curve, thank you, that's exactly what you have, bob. tens minus twos was 76 a month ago, now 87, put the dollar index on it, there is a two for trade that correlate pretty nicely carl, jim, david, back to you. >> rick, we'll talk to you in a bit. when we return, the former equifax ceo richard smith and wells fargo ceo tim sloan after facing the wrath of investors, consumers and regulators, now on capitol hill testifying at separate hearings. we'll have live coverage of that, record highs for the dow,

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we're awaiting rick smith and wells fargo ceo tim sloan who will appear at different committees on capitol hill this morning. we had a long discussion today about what may come of that as a result of this, jim. your expectations are low. >> yeah. i just think that wells fargo yields 2.8 i think it is a good quarter and that tim sloan is going to be, you know, the last -- ask a couple of questions and in the end, nothing really happens. and that's -- look, that's -- that's just the way it is. that's just the way it is in our -- i'm trying not to get people to sell the stock not to buy it. there say lot of better bank stocks, a lot of better fin tech, equifax, own mastercard, visa but those are stocks >> we'll take both of those hearings to the degree we can. 'lgesttring with jim and the dow is up 28 [vo] quickbooks introduces jeanette

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let's go to jim and trading. >> a report by citi, it came out and said paychecks remains overvalued sell and it was one of those thins, i said, i want you to buy it off

citi's sell. sometimes you have analysts who have sell recommendations, they don't work out pay chex is on tonight, they reported a magnificent quarter, got it up, and, you know, i'm looking at this solid piece of research and thinking, you know, we may build a fire later, my wife and i, first cold night, this could be absolutely terrific i ean, you may actually, i don't know if you use the things that -- i think this is a terrific piece this piece hasn't been ripped up yet. i think it is a really solid way to be able to start a good fire, which is this pay chex sell recommendation so i don't know. i mean, let me see it is a one matcher, don't you think? there. >> take that with you. >> i have never seen you literally rip up our analyst -- >> the first cold day of the year i want to tell my wife, let's get a fire going, here is a good pay chex sell recommendation from last week got to be good for something

don't you think? look at this >> a lot of firepower. >> the summer, i throw them on kingsfords but it is time for a nice fire >> pay chex, one of the biggest gainers this morning, almost up 4%. >> thank you for nothing thank you for tinder does that mean i swipe what do i do what did tinder do wrong >> swipe tinder, take uber >> make sure you swipe left. >> i think -- this is tinder, right? why would i swipe it i'm just going to burn it. i know i'm missing something. >> mad money, 6:00 p.m. eastern time when we come back, former equifax ceo rick smith and wells fargo ceo tim sloan on the hill in a minute. i was playing golf days ago... love golf. i used to love golf. wait, what, what happened? i was having a good round, and then my friend, sheila, right as i was stepping into the tee box mentioned a tip a pro gave her.

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good tuesday morning welcome back to "squawk on the street." i'm carl quintanilla two big hearings about to start on the hill this morning rick smith getting ready to testify before house energy and commerce ceo of wells fargo tim sloan before the senate banking

committee. we're going to monitor both of those hearings, bring you all the highlights, go live to equifax as soon as it begins in the meantime, markets once again setting record highs all across the board even oil playing a bit this time, back above 50. we're going to watch that all day long >> in the meantime, the death toll continuing to rise in las vegas following the deadliest mass shooting in the u.s. history. jane wells is in vegas with the latest jane >> reporter: hi, sarah now that the sun is up, you can fully seat coe the corner suite mandalay bay, broke out two windows, reportedly had two tripods for some of the 23 weapons he had we have new video of the search of that room by fbi agents as they're trying to figure out how many weapons, how he got them in there, questions about whether paddock maybe came down here to the ground level at the concert site to figure out which suite to ask for, for the best line of sight, did no one notice him breaking the windows or the ten pieces of luggage he brought the weapons inside, did he bring

them in a few at a time, and more importantly, why? why this concert, why this venue , why anyone mandalay bay is owned by mgm resorts and jim murin praised employees and first responders and seemed personally responsible, he felt, for something happening on his property so what now? >> we're going to do a lot of work thinking about this in the future about working with the federal government, president of the united states is coming here in a couple of days, not only the white house, agencies, to think about the path forward in the future that's not for today today is about the victims, the families, and making sure that loved ones who come to vegas, mgm resorts, make sure they get -- make sure they have what they need.

>> reporter: people, of course, are still streaming in to las vegas, but we asked arrivals at mccarron airport if they had any second thoughts. >> yeah. we did but we decided to come anyway. >> little bit, but, you know, wanted to come here and thought it would be fun. i'm not going to worry about that. >> no. not at all well, number one, he killed himself. >> i just feel vegas is time to have fun, and not to concern about anything else. >> people are going to go where they got to go got to do what you got to do. >> there isn't anywhere safe i live in northern virginia, 15 minutes out of d.c i'm just saying. there is not really anywhere that you can say is 100% safe. >> reporter: now, for people who are trying to leave vegas, whose i.d.s may be somewhere back behind that fence, where the concert was, because everything is still back there, what the mccarron airport is saying is you can still get a boarding pass, you may have to fill out new paper work and go to tsa and may be subject to additional

screening, but even without an i.d., they will let you get a boarding pass to leave town. guys >> any other more increased security measures across the vegas strip in some of the hotels, jane >> reporter: i have to say that we stayed in mandalay bay last night, and when i first checked into my room, there wasn't security around the elevator area, which i thought was interesting, as the night went on, there was security, two people there, and when i came down at 1:00 a.m. this morning, there were three people there, and more security everywhere much more visible as the hours passed >> jane, we'll check in with you within the hour, i'm sure. jane wells in las vegas, thank you very much. let's get back to the hearings on the hill today, our aditi roy is monitoring the former ceo of equifax, getting ready to testify before house energy and commerce. willford frost keeping an eye on

at the senate banking. >> this hearing is about to get under way in the room next to me as we hear for the first time from former equifax ceo richard smith as he begins the first three of days of congressional testimony from lawmakers, from both the house and the senate. he arrived here just moments ago, you can see him sitting in the hot seat right now, getting ready to answer those questions from 23 lawmakers today on this subcommittee, the house subcommittee on digital, commerce and consumer protection, who will be asking him the questions on a variety of topics today. he did arrive here moments ago getting ready to address a variety of topics, ranging from how this breach happened in the first place, why it took the company 40 days to notify the public about it, and also those stock sales by three company executives shortly after the breach was discovered. we also have taken a sneak peek at the prepared remarks that richard smith is expected to make and right off the bat, we can tell you he will start with

an apology also shed new light and new details on how this breach happened in the first place, and he will acknowledge that while the government did send out a warning two months before the hack happened about potential vulnerabilities that the company took no action other than sending an internal e-mail, so i'm sure lawmakers will be digging in on that he also disclosed more details about the timeline in terms of who knew what and when and in terms of that, it took him nearly a month to notify the full board about the breach. smith is also likely to get some questions about the website that was created for consumers who could be potentially affected by the breach, the security of that site, and also why so many customers had a tough time getting through on the toll free number that was created to help them it will be a busy day here on the hill carl >> aditi, we'll come back to you. let's get across the way to wilfred at wells fargo good morning to you. >> the hearings just kicking off

behind me. i was able to speak to tim sloan's team as he arrived they said he was calm and prepared even hired a special law firm over the last two weeks to help him prepare for this hearing and try to avoid the reaction of this predecessor john stumpf here a year ago. in the opening remarks, he'll address that saying, congress was right to criticize us a year ago after mr. stumpf's appearance, but, quote, wells fargo is a better bank today than it was a year ago he will tout changes in risk management, changes to employee incentivization schemes and the way they have paid money back to customers as examples of improvement, but will likely still face very tough questions, including on why the blame and financial callbacks have been focused on just a handful of executives, excluding sloan himself on the lack of extensive board changes and also questions on the way in which they had to expand the scope of the issues, recently increasing the potential number of fake

accounts from 2.1 million to 3.5 million recently now, wells fargo shares have underperformed the broader bank index by about 30% since this scandal became public. almost all of that from earnings multiple expression as opposed to lost earnings the question is whether this hearing today will reignite that pressure on the multiple or whether it is already priced in. guys >> well, a quick question, is there anything at stake here on the regulatory front for wells fargo. so- so far we have seen outrage and it has been probably quite embarrassing for executives what about actual laws or cracking down i remember at one point there was a proposal to make some board changes, anything like that >> well, i think the biggest hurdle on that front that they did get through earlier in the year was the tests where they didn't just pass the quantity tiff part of it, they also

passed the qualityive part in recent weeks giving the extension of the issues we heard about recently, we did hear janet yellen weigh in recently and mention that aspect of possible further board changes that's within the fed's power to do, we may see that in the future, but, of course, that's not specifically under the remitt of the senate banking committee. the other aspect in terms of fines, the cfpb, the consumer financial propetection bureau already settled. tim sloan will be under pressure today. >> we can't wait to hear what comes out of the hearing, thank you for that sticking with wells, for the moment, our becky wick is in omaha this morning and joins u z after having spoken to warren buffett on banks, the taxes, the ultra wealthy, a great hour with warren today. >> thank you, carl thank you very much. you're right we're going to talk about all of those issues

let's start with taxes that's something that it seems like everybody in the market is trying to handicap now, whether or not a tax plan will be passed by congress and warren buffett is no exception to that rule he thinks that it is actually more likely that they will get something passed, rather than they won't he said you have republicans controlling both the houses of congress and the presidency, and if they can't get a tax bill or tax cut where you're putting money back in people's pockets what can you get passed? free money, right? everybody likes to hear something about that now, it doesn't mean he likes all the specifics of what has been rolled out to this point, he started with the estate tax, and pointed out if you think cutting the estate tax is something that will help anything but the very wealthiest of americans, you're wrong to illustrate that, he said 2.6 million people died in the united states last year, and the estate tax would only affect 5,000 of those people. that's what he think s about th estate tax, he would be affected by that, a change in that law, he's not in favor of it because he thinks it passes on dynastic wealth when it comes to the corporate tax reform, on that, he's got a

little bit more of mixed feelings on it >> if you make it very easy to take back money from jurisdictions in which you pay very low rates, that's going to encourage even more investment over there you still have a higher rate than the united states on a personal basis and berkshire hathaway shareholders, i hope they do change it now i would like it in the sense that it would be good for a million shareholders of berkshire in terms of their debt returns. but i do think that some of the argument arguments, i think people may find their nose growing a little bit after they make them >> now, when you start thinking about what all of this means, just the uncertainty of whether or not this tax plan gets passed, it is something that buffett said is impacting his very own behavior at berkshire hathaway now that's something that almost never happens, he never pays attention to what is happening in washington. never pays all that much attention to what is happening in the short-term in the

markets. says this time is different. you have such a significant potential change that is happening and we're at the end of the year, he says he'll probably know in the next month to two months for sure if these changes will be made for next calendar year or for this calendar year and as a result, he's not doing things to the tune of billions of dollars that he might be doing otherwise. he said it would be crazy if you sell securities, sell stocks, this year, knowing that you were going to pay a 35% capital gains tax if you can wait a few more months and sell it and get a 20% capital gains tax. he is not somebody who usually plays around and waits for things to happen in washington, but he said this time is different, it is impacting him and berkshire hathaway to the tune of billions of dollars. he thinks that probably lots of people are doing this and probably impacts hundreds of billions of dollars in potential changes to the market. that could have major implications to the stock market too, whether or not this bill gets passed and whether or not people put the changes into place, come january, if there is a new tax bill or if there isn't if they make some of the changes anyway the other issue, obviously that we're watching so closely is

wells fargo and tim sloan, you were pointing out, heading to capitol hill, there right now, taking questions, berkshire hathaway the largest shareholder in wells fargo, and we asked buffett if tim sloan still -- if he still have faith in tim sloan. >> yeah, tim sloan has my faith. the truth was 99% of the people were perfectly decent people, just like the people working at goldman or some other place and somebody had gone off -- totally gone off -- gone haywire and other people didn't report it. when you find a problem, you have to jump on it, that is -- that's just basic. >> i also asked him if he had spoken recently with tim sloan, he said he has, he was out in las vegas with him last year, at a meeting for a group of some of the sales people for wells fargo and got the chance to talk with him then i asked him if he talked to tim sloan about his potential testimony, and he said, yes, only in the idea of him kind of relating his own experiences, testifying before congress,

congress and senate, with solomon brothers his testimony that he had there. so he says he's watching it closely, but does think wells fargo has done what they should have done to this point and that, yes, the ceo still -- he still has confidence in tim sloan. back to you. >> becky, that's a lot of information that we digested this morning with -- from your interview. thanks to you. becky quick. let's bring in yale school of management jeffrey sonnenfeld, talk more about the equifax and wells fargo portion of this. good morning one thing warren said was, about wells, once you find out about a problem, you got to get it right, get it fast, get it out, and get it over with has wells done know of those things >> wells has done all of those things admittedly very slow to the start and this time with you, very critical of wells fargo, this time last year, the board changed dra mmatically, the leadership changed dramatically, but, no, they were slow. it was like looking at tony hayward of bp, and the way he was disdainful of congress, the way the former ceo john stumpf

wouldn't admit to deep seeded problems in the culture, didn't say that there was a long-standing process of deceit, he was in denial over it all and the board was learning things for the first time in the senate testimony, and then a week later, he testified before the house, he wasn't much better, other than he had surrendered some of his bonus. the company completely took charge of this, there has been a big change in the board, a third -- at least three directors have stepped down, they changed the chairman, who by the way was a very good guy, but still they were caught by surprise, by all this, so they made changes there of the top management at wells fargo, they have seven of the top 11 have changed out, all the operating chiefs are new, many of them from the -- weren't in the operating committee before, head of the bank and the actual community bank itself changed and very good ceo as you referred to, tim sloan they have done it all right. by the way, at this point, even the -- this point last year, by october, by a month into it, the

new ceo tim sloan at wells fargo was holding town meetings, very transparent. now, we have a new ceo, we're not hearing from him in congress today. or next week who do we hear from we're hearing from the old guy all he with do as we saw in the sanitized statement that he has there, oh, yes, we had this horrible hurricane, which was horrible, and they didn't have enough customers -- service people reps to answer the complaints how does that explain in march they didn't put the patch in place, may, or took them a month to even tell the board what was going on and then the board dragged their feet before telling the rest of us and blamed the victims on top of that the irony is, this is 145 billion -- million people who are affected with all of their data with equifax, people say, well, that's half of the population, nonsense, that's the entire u.s. population -- adult

population there only are 130 -- roughly 140 million adults in the u.s. population we're all affected by this, and it is deep data. it is a little -- it is a middle sized company, it is a $3 billion company versus wells fargo, it is a, you know, $90 billion company and this was a regrettable, horrific act, but the damages were pretty minimal there and it was thankfully they corrected the problem. >> you laid it out pretty nicely obviously a big difference between these two financial firms. do you not buy the idea that putting out the ex-ceo, put it behind them, and really deeply apologize to consumers, to these members of congress, so that the new ceo can focus on the better practices that the company is putting in place isn't there a strategy there >> if that's what their strategy is, sell this stock as fast as you can. because if you talk to jamie dimon about the -- or ask mary

barra about the 100 fiery deaths they had at gm, if they're trying to bury this that's really frightening we don't know what investigations are taking place at this point at wells fargo we already knew what the investigations were, they had a transparent process and we can see what was happening, what changes were being made and personnel, what culture changes they're making and incentive changes they're making we don't know what changes are here the bad guys, i think they're bad guys to go ahead with their program sales after this was known inside the company, that the general council is a very troubled person, it seems to me, gave permission to three people, the cfo and two division presidents, to sell stock before this was announced inside equifax, they're all still there. this is a problem. how about the clawbacks? we have the ceo with -- he made $70 million this last year alone. well, boy, at wells fargo, they

claw back $150 million united health, they -- they find something, even more, like a billion dollars of clawbacks and some other scandals. we haven't heard about where the clawbacks are going to happen here by this point, we already knew about that at wells fargo. i'm troubled what is the investigation, what is the repairs, we don't know any of this. all we know is he's very sorry because a great pr firm has written an apology note for him, which is better, which is better than carnival cruise lines and better than bp, but that's not fixing the problem. >> deeply sorry, i think, according to prepared remarks. thank you, jeff. >> both of these guys trust is their most valuable asset. >> hang on for a second. we want to take you inside the wells fargo hearing where tim sloan is speaking. >> in addition, as part of the $142 million settlement that i mentioned, the lion share of

those funds are going to go to customer chose credit score has been impacted. we're going to be working with the experts that the attorneys for the class have provided, we're going to provide them with whatever information they want, we're reaching out to those 43 million customers again as well as tens of millions of former customers to make sure that they know about the class action settlement, so that they can be made hole as part of that settlement for any credit impacts. >> thank you and some of the acts required by regulators as part of the 2016 settlements, include the establishment of a compliance committee. carrying out an enterprise wide risk review of sales practice risk and maintaining enterprise wide sales practice risk management and oversight what has been the involvement of regulators since the initial incident including in response to the new disclosures about the increased amount of unauthorized accounts as well as the cpih issues >> sure, we have an active

dialogue with our regulators, the federal reserve, the occ, and the cfpb when talking about bank related issues. so there is a tremendous amount of dialogue, for example, as it relates to the collateral protection or cpi issue, when that got escalated in the third quarter, we reported it to our regulators on a real time basis and we have been working with them not hoonly to keep them apprised of those issues, but with the occ, working with them to make sure the remediation plan we had for the -- any customer that was impacted by cpi is acceptable. as it relates to the fundamental changes that i've made since i became ceo in compliance, we have done the following things, first and foremost, we have centralized all of our enterprise risk andcontrol activities that was one of the failings that the report from the

independent board of directors found, and we agree with that. so those have been centralized we're hiring a new compliance officer, we have completed and devised a new compliance plan. we have created a conduct office in the centralized risk group that independently brings up complaints, ethics line issues, any sort of team member turnover so we can connect the dots better than we did a year ago. >> senator brown >> thanks, mr. chairman. i don't think we have a good answer yet, mr. sloan, as to how and why this activity went on for so long in your bank the company first blamed rogue employees. we're trying to meet unrealistic sales goals, then blamed the senior executive vice president for community banking who earned $9 million in 2015, and finally

john stumpf, the chairman and ceo who earned $19 million that year you've been at wells fargo for a long time, 30 years you've been, coo, cfo, chiefe administrative officer, was there no point, mr. sloan, prior to 2015 with the lawsuits and the terminations and whistle-blowers, was there no point you saw a problem in the bank that required action? >> senator, that's not -- that's incorrect. in fact, i've been very public and i've made this statement on a number of occasions and also it was finding of the board's report that in 2013 when the sales practices issues were elevated to the operating committee, i sat on that operating committee, you're absolutely correct in my role at that time as cfo, that it was elevated to that group, we took action, but in hindsight, senator, we took action that was insufficient as i said in my

opening statement. and i'm angry about how we handled the problems historically, i'm disappointed in how we have done -- how we handled those, but the fundamental change that i've made since we have been ceo are addressing the failings that the board report pointed out, our regulatored pointed out, and the mistakes i saw in my prior roles. >> all right, that's an answer, but as the cfo, long time employee of that company, is having a strong, i understand, close relationship with mr. stumpf, it still perplexes me why your anger now or speaking out about it four years ago couldn't have had more impact. let me turn to another issue you testified how wells has changed. for years your bank used four star -- to hide cases where customers allege fake accounts were opened in their names, i mentioned my opening statement, the 2013 lawsuit, the 2015 lawsuit that wells was able to

squelch because of the four star arbitration clause not only did you use forced arbitration to keep the fraud hidden, but your banks also has taken the position that the fine print, on a real account, shoul apply to a fraudulent one. you settled with some customers on that issue, your bank was still making that argument as recently as last month against customers in utah. to top it off, in august, you asked a court to toss out a class action on a completely different scandal that also goes back several years, again, based on the forced arbitration clauses, the arbitration clause you force your customers to sign many of your competitors are starting to eliminate or have eliminated the practice of stop the practice of forced arbitration. would you commit to the committee today that wells fargo will quit using forced arbitration? >> no, i won't, senator. when i hear the word arbitration, what i hear is the word failing and when we have to resort to -- and have to have a conversation

about -- >> we're going to take you now from senate banking committee, simultaneous hearings going on, we're going to go to the house energy and commerce committee to hear from richard smith, the ceo of equifax, until last week. how he's going to explain the hack that affected 145.5 million americans. let's listen >> being the ceo and the chairman of equifax, earlier this week i submitted a written testimony which at this time i don't plan on going through any detail on that, but rather i'm here today to explain to you, the american -- you and the american people how criminal hackers were able to steal personal information on over 145 million americans from our servers and asimportantly as t discuss with you today what the company's response was to that criminal hack. criminal hack happened on my watch. as ceo, i am ultimately responsible. i take full responsibility

i'm here today to say to each and every person affected by this breach, i'm truly and deeply sorry for what happened i've talked to manyconsumers, i've read your letters, and equifax is committed to make it whole for you. americans have a right to know how this happened. i'm prepared to testify about what i learned and what i did about this incident. in my role as ceo, and as chairman of the board. and also what i know about the incident as a result of being briefed by the company's investigation, which is ongoing. we know now that this criminal attack was made possible because of combination of human error, technological error. human error involved the failure to apply software patch to our dispute portal in march of 2017.

technological error involved the scanner which failed to detect that vulnerability on that particular portal. both errors have since been addressed. on july 29th, july 30th, suspicious activity was detected and the team followed our security incident protocol, team immediately shut down the portal, began our internal security investigation on august 2nd, we hired top cybersecurity forensic and legal experts. at that time, notified the fbi at that time, to be clear, we did not know the nature or the scope of the incident. it was not until late august that we concluded that we had experienced a major breach over the weeks leading up to september 7th, our team continued working around the

clock to prepare we took four steps to protect consumers. step number one, determining when and how to notify the public, relying on the advice of our experts, that we needed to have a plan in place as soon as we announced step two, helping consumers by developing a website, staffing up massive call centers, and offering services free to every american three, preparing for increased cyberattacks, which were advised by the cybersecurity experts we should expect. finally, continuing to coordinate with the fbi and the criminal investigation of the hackers. and also to notify other federal and state agencies in the rollout of our remediation program, the stamiss

were made, which, again, i deeply apologize i regret the frustration that many americans felt when our websites and call centers were overwhelmed in the early days. it is no excuse. certainly did not help hurricane irma took down two of our larger call centers in the first few days after the breach. since then, however, the company has dramatically increased its capacity and i can report to you today that we have handled over 420 million consumer visits to our website. just over three weeks. and wait times at the call centers have been substantially reduced. at my direction, the company offered a broad package of services to all americans. in addition, we developed a new service available on january 31st, 2018, that will give all

consumers the power to control access to their credit data, by allowing them to lock and unlock their credit files when they want they can do that for free for life putting the power to control access to credit data in the hands of the american consumer is a step forward. i look forward to discussing this new tool with you during my testimony. as we all painfully learned, data securities and national security problem, putting the consumer control of the credit data say first step towards a long-term solution to the industry, the problem of identity theft no single company can solve a larger problem on its own, i believe we need a public, private partnership to evaluate how to best protect americans personal data going forward, look forward to being part of that dialogue.

general walden, ranking member pallone, honorable members of the subcommittee, thank you for inviting me here today to speak to you i'll close by saying again how sorry i am for this breach on a personal note, i want to thank the member hard working and dedicated employees who worked with me so tirelessly over the past 12 years at equifax. equifax is a very good company with thousands of great people waking up every day, trying to do what is right i know they'll continue to work tirelessly as we have over the past two months to right the wrong. looking forward to answering your questions thank you. >> thank you very much this concludes our witness testimony. we'll move into the question and answer portion of our hearing. i'll begin with the question recognized myself for five minutes and i with remind members because we do have quite a few members that want to ask

questions today, i'll try to keep the five minute rule on questions in place, so you'll hear the tapping but i will begin with the questioning. mr. smith, the timeline of the events is raising red flags. i would like to ask you about. according to your statement, the first time you heard about the breach of security was on july 31st of 2017, is that correct? >> yes, congressman, that is correct. >> and you first asked for a briefing about the breach on august 15th, is that correct >> yes, that is correct. >> and the first time the board of directors was notified was august -- >> on the 22nd of august, i notified our lead director, presiding director at that time, the full board was briefed on the 24th, on the 25th, and subsequently after that. >> all right and you notified the public about the breach on september 7th, correct >> that is correct >> okay.

you state in your testimony that you began developing the remediation for consumers on august 24th or the 25th. why was there a ten-day delay between you finding out that personal information had likely been stolen, but beginning to develop the re mediation plan and do you think ten day window was responsible for having learned about that personal information being stolen to start talking about how to talk to the consumers >> congressman, i understand the question, if i may go back to the time frame of the 31st so the 29th and 30th, someone in security had detected what they deemed as suspicious activity. that is something that happens routinely around our business. on the 30th bring down this particular portal, and they start their own internal investigation. as i mentioned in my opening comments, in my written testimony, on the 2nd of august, they had engaged leading

forensic experts, cyberexperts and lead iing a leading law firm and they're cybersecurity team you talk to the forensics experts, they will tell you the complications of trying to understand where these criminals were, the footprints they left, the inquiries they made, a cumbersome, cumbersome process that's why it took weeks before we had any indication of the breadth and depth of the issue which brought us to the august 24th date you mentioned. >> let me back up to july 31st, you learned again, you talk about -- you're talking with the experts at that time, you learned about the breach and you testified that you did not know that the personal information had been stolen at that point. but did you ask anyone if personal information had been stolen when you found out about that breach? >> on the 31st, all i was told

at that time was security had noticed a suspicious movement of data out of an environment we call a dispute portal. it wasn't until later they understood that was an actual dispute document no indication on the 31st of july there was any pii information that was vulnerable. >> so i guess again, again, not knowing if that information, that personal information had been stolen at that time, you know, your company is built on data, and at any point did you think it was important or somebody in the company start looking at personal data had been stolen at that point? >> congressman, i can tell you, we're working with the best forensic auditors in the business, they do this for a living we had a great cyberteam from spalding with us, it took them time at that time they did not know if data had been compromised, or what the data was.

>> if we could go back, when you did find out about the breach and that conversation, with your chief information officer, mr. webb, how exactly did he tell you there had been a breach, a phone call, e-mail, in person? how did he notify you of the breach >> it was a face to face brief meeting on the 31st. at that time, he had just learned as well. so the day was very fresh to him, incident was described as a incident, not as a breach. >> is that the normal way for that information if there had been a breach at the company to notify someone is -- the cio to come and give a face to face or what is -- is that the standard operating procedure then >> congressman, at that time, we had no indication it was a breach it was a suspicious activity >> did you tell anyone else in senior management or any other members of the board of directors about the breach at that time? or is it just not until you told

the -- on august 22nd, one call, and the 24th, before the rest of the board of directors, did anyone else know about the breach >> again, it is important to say on july 31st, it was not -- we did not know it was a breach at that time. suspicious activity only first notification to the board was the lead director on the 22nd of august, which followed the chronology of events, a meeting i had with our cybersecurity experts and our outside council, occurred on the 17th of august that's had the picture was starting to develop. >> thank you my time has expired. i'll recognize the gentle lady from illinois, the ranking member for five minutes. >> thank you, mr. chairman i'm going to get right to it i wanted to ask some questions about john kelly, the chief legal officer who i understand is responsible for security at

equifax or was at least at the time of the breach and its discovery. is that right? >> that's correct. >> and mr. kelly in turn reports directly to you, the ceo, correct? okay so we were told mr. kelly was informed by the chief security officer the week of july 30th, we have been talking about that, cybersecurity incident, you mensed that, had occ e e ed mend occurred, is that correct? >> it is my understanding the 31st of july, suspicious activity and particular environment called a web for theal thportal that was a dispu environment. >> we were told mr. kelly, our staff, was informed at the same time that the incident may have compromised personally identifiable information is that correct? >> the only knowledge i have is he was notified on the 31st if there was suspicious activity and a consumer dispute portal.

>> we were told that mr. kelly then wrote a short memo to you, regarding the incident is that correct? >> correct, congresswoman, in his e-mail, it said suspicious activity >> okay. around that time, three equifax executives sold over $1 million of equifax stock that's on august 1st and august 2nd. it is reported that mr. kelly was ultimately responsible for approving those sales. is it true that mr. kelly or one of his direct reports would have been required to sign off on the stock sales? >> yes mr. kelly, our general counsel, own the clearance process -- >> i have a lot of questions, so the answer is yes? he was supposed to sign off? >> yes >> did anyone of these three

executives have knowledge that cybersecurity incident had occurred >> the best of my knowledge, congresswoman, no. >> when were they informed that the incident had occurred? >> i don't know exactly the date that they were informed, they were not -- best of my knowledge, they had no knowledge at the time, they cleared their trades, general counsel. >> do you know for sure they didn't know? >> best of my knowledge, they did not know >> and mr. kelly, who we were told knew of the breach, and that it contained personal information and yet still approved the stock sale,is he still chief legal officer for equifax? >> congresswoman, i would come back to it again, he did not know it was a breach when he approved -- >> but it could have been a breach. >> all he knew at the time, my understanding, the suspicious activity when he approved the sales. >> what does suspicious -- it could be a breach, right >> it was deemed suspicious

activity, we had no indication that pii was in fact compromised at that time we had no idea if data was ex-filtrated at that time. >> so now i understand that you agreed to forgo your 2017 bonus, which has been about $3 million for the past two years, correct? >> that is correct >> but it has been reported you will still retain $18 million in pension benefits from equifax, is that accurate >> that is correct >> retiring, which is the category right now, though the can company maintains the right to change that designation, also means you'll be free to sell your equifax stock which is worth about $24 million, is that correct? >> congresswoman, that calculation is -- it is hard to say, it is a complicated calculation, it depends on the total shareholder return of the company at the time, the stock -- multiple variables, i've seen different estimates.

hard to say what that number is and won't know until the end of the year. >> that's in addition to equifax stock you sold earlier in this year for $19 million, is that correct? >> that sounds correct >> and according to one report, you could be eligible for $22 million in performance-based compensation depending how equifax stock performs in the next three years, is that right? >> let me be very clear if i may, congresswoman, when i announced my retirement, and thought it was best for the company to move forward with a new leader, i agreed to step down at that time, with no further compensation, i agreed i should not get a bonus, i agreed there would be no seven anrancei asked for nothing beyond what i already earned. >> i was informed by staff that the chief security officer told the chief legal officer verbally that there was pii, that according to a call with staff

yesterday. that actually there was mention of the breach of personally identifiable information. the cso told -- told us in a call yesterday is what i just heard from staff >> congresswoman, i have no documentation, no insight, no knowledge that anyone in the company had informed me or the in that case the chief security officer or the chief general counsel there was a breach on july 31st, is that what you said >> yes no, we didn't say a date, i'm told that our staff didn't say a date okay let me just say i'm glad the fbi is looking into it many state attorneys general, the city of chicago has sued so we'll probably get more information that way as well, thank you. >> thank you very much the gentle lady's time has expired. the chair now recognizes the chairman of the full committee, the gentleman from oregon for five minutes >> thank you, mr. chairman

mr. smith, thanks again for being here today as you know, this is a sample of a copy of a equifax credit report in my hand. it lists all the personal information. it is the life blood of equifax, right? these data points are really, really important to what you do. as a company >> congressman, that's correct >> $3 billion company, data on 820 million customers worldwide, yet it appears this breach happened because company didn't know it was running certain software on its system, right? the apache software that had the patch requirement. >> congressman, as i alluded to, there was a human error and technology error that did not allow us to identify. >> that's what we're trying to get to here. if i understand it right, your own information technology

system did not tell the equifax security division that the apache strut software which contained the vulnerability that led to the breach was running on the equifax system how did that happen? >> congressman, the day after the notification came out, the security team notified a wide range of people in the technology team who are responsible for them finding the patch, finding the vulnerability, applying the patch, and then days later as is typical protocol, to deploy a technology scanner to then look for the eventual nrvulnerabilitt found the vulnerability it knew was not patched, both human deployment of the patch and the scanning deployment did not work the protocol was followed. >> okay. so then people ask us how does that happen?

if as a sophisticated a company as you headed is -- >> we are going to hop over to the wells fargo hearing where senator warren is beginning her q&a. >> change for 29 plus years at wells fargo. so i want to take a laook at you time at wells fargo. 2011 to 2014, the height of when wells fargo was cheating customers by opening fake accounts, you served as the chief financial officer. and as cfo, you spoke to potential wells fargo investors a lot. on those calls, you aggressively promoted wells fargo's ability to open up new accounts, didn't you? >> no, i didn't. >> no, you didn't? >> no. >> well, here are the transcripts from all of the investor earnings calls that you participated in from 2011 to 2014 i've read through them and on these calls no one, not

even john stumpf, who was the ceo at the time, bragged more about wells fargo's ability and commitment to open new accounts for existing customers in the april 2011 call for example, i think i marked that one, you said i can't wait to get a credit card in every one of our creditworthy customers' wallets. nothing about whether your customers wanted or needed a wells fargo credit card, all that mattered was opening new accounts so while you were bragging to investors, about opening new accounts on these calls, from 2011 to 2014, you also personally owned roughly 2 million shares of wells fargo stock, is that right >> senator, i don't recall how much stock i owned in wells fargo. i'm a proud shareholder.

>> in the s.e.c. filing. >> sure, it is public. it is all out there. >> 2 million shares, so it looks like you had a really good thing going, talk up wells fargo's ability to open new accounts, get investors excited and, hey, if the stock goes up, by a dollar, you make a cool 2 million bucks. then in december 2013, almost three years into your time as cfo, the l.a. times published a long article on the relentless pressure wells fargo put on employees to open new accounts the article was based on a review of internal wells fargo documents, court filings, interviews, with more than 30 current and former wells fargo employees. the article specifically said that employees had opened fake accounts in response to this pressure now, you were interviewed for that piece, mr. sloan, and you

said, quote, i'm not aware of any overbearing sales culture. that is really interesting phrasing i'm not aware of any problem so when the l.a. times came to you, and showed you concrete evidence of a terrible problem with fake accounts, at your bank, did you launch an investigation into the issue before brushing it off >> senator, first, as it relates to my comments in 2011, i'm proud of that credit card products that we have. >> it is not the question i'm asking i just asked, you brushed it off, you said i'm not aware of any problem, did you open an investigation when someone laid out evidence of fake accounts? >> in that interview, to the best might have recollection with the l.a. times, they didn't provide me with any information. it was soon after that that as i mentioned -- >> so i take that as a no. so when you ask this question, you did not open -- you did not

open an inquiry into it, is that right? >> again, "the l.a. times" didn't provide me with any documentation. it was a phone call. >> did you read the article? >> i read the article, yes. >> and then you opened an investigation investigation immediately? >> at the same time that the article was coming out, that was the time when the community bank elevated this issue to the senior leadership team that's the time we began to take action >> let's talk about that time. you didn't look into the fake accounts, but you went right back to pumping up the stock price by bragging about wells fargo's record number of new accounts on your very next investor call. now let's forward to 2016, two months before the fake account scandal became public. you were then the chief operating officer of wells fargo, an interviewer asked you whether you thought the bank had

pushed sales goals and cross selling too far, and your answer was, "no, the fundamental strategy that we have is not going to change. that is july of 2016 just before this breaks open according to wells fargo's own investigation by july of 2016, you knew that thousands of employees had been fired for opening fake accounts and other sales violations, you knew aggressive cross selling goals were to blame, and still you publicly said the bank didn't have a problem right? >> senator, that's incorrect >> you didn't say this, that you're quoted? >> can you read the entire quote and can we go through the entire presentation >> your answer -- when asked about whether or not you pushed employees too far, your answer was no the fundamental strategy we have is not going to change

>> i was referring to the vision of our company >> including the fake scandals you were being asked about >> every time i give a presentation i start with our vision, which is to ground people in the culture of our company, which is our job is to satisfy our customers' financial needs and help them achieve financially. that's the context that i made that statement since i'd become ceo, i made fundamental changes to address the issues that we're talking about today. >> mr. sloan, you were asked about pressure on employees, which caused the fake account scandal. we all know that now it's public. you knew there was a problem, and when you were asked about it, you lied this is about personal responsibility wells fargo cheated millions of people for years the federal reserve should remove all of the current board members who served during the fake account scam. you enabled this fake account

scam, got rich off of it, then tried to cover it up either way, you should be fired. wells fargo needs to start over, and that won't happen until the bank rids itself of people like you, who led it into this crisis thank you, mr. chairman. >> mr. chairman, could i respond to that? >> yes, you may. >> i want an equal amount of time >> senator, couple things. first, and i'll get to your criticism of me in a moment, but first let's talk about the board. i think the board has taken very important steps in terms of a thorough, independent investigation that's been made public that's number one. number two, the board has taken very strong action in terms of executive accountability that is, unfortunately, some of the highest in corporate american history. again, unfortunate, so i don't

believe that your criticism of the board are accurate as it relates to me, again, i think the reason that i'm the right person to run this company today, notwithstanding your criticism, is because i have been making change at this company for 30 years, i have made mistakes, i certainly haven't been perfect, but i think having that knowledge of the company, having the ability to make the change, the actions that i've taken since i've become ceo 11 months ago have made fundamental change at this company, so i'm not afraid to make hard decision when it's needed, and i have the support of 270,000 people. that's why i think i'm the right person >> can i just make a short comment on this? i know we're over, but you really i want to say, are you kidding? look, you've been there for 30 years, and every one of my colleagues on both the republican side and the democratic side who have spoken so far have talked about a

broken culture at wells fargo, have talked about the fact that the problem starts with leadership the people who were there and leading wells fargo during the time of a years-long scam, and multiple scams, as our chairman pointed out, those people should not be left in charge of this business, and when you promoted exactly what was wrong with this bank over and over and over, you went to the stock market and you bragged about it you made money personally off it when you were asked about, you did not tell the truth, and you tried to cover it up wells fargo is not going to change with you in charge. >> senator rounds is next, and i do ask the senators to pay attention to the time limits >> thank you, mr. chairman i know that we're not supposed to be in the middle -- we each normally get five minutes, so

i'm just going to go back, because i know on some cases you don't get the opportunity to respond, but i think there was one area i want to hear your full response to it, and that is you said that basically as senator warren indicated, you wanted to see everybody with a credit card, or at least -- would you please go into what you meant by that statement? >> well, sure. we're in the banking business, and one of the products we provide to our customers is a credit card. and any one of our customers that comes in to see us, that is interested in a credit card, we'd like to provide it to them. i'm proud of the hard working effort of all of our team members that work in our credit card group we've seen growth in that group, because customers like using the product. i'm not embarrassed about that whatever add -- isn't consisten with the fact that our job is to

satisfy our customers' financial needs. if that need means they want a credit card and if we have the right product, i'd love for them to have it that's what we do. >> would you agree that there was a broken culture at wells fargo during this time >> senator, i would agree in our community bank we had fundamental problems that created serious cultural issues. in terms of the rest of the country, there were other issues, but i wouldn't say a broken culture having said that, as ceo and acknowledging i've been there for 30 years, there are some that don't think i should be in this role. we've heard that today, so what do we do as it relates to culture? we went out and asked third parties to help us do new culture surveys to make sure that we weren't missing anything, because even though i've been there for 30 years and i've done things sometimes good and sometimes i've made mistakes, i don't want to be in a position where it's just what i think we should be doing

i want to make sure that we're listening to outside experts, all of our stakeholders, and we're listening to our team members. so we're making fundamental changes in the company to address any sort of culture of weaknesses that we have. >> one area that i think we've got concern with in particular is the -- wells fargo is -- i want to make sure that members of the military -- >> that's tim sloan at wells fargo responding to q & a from senator warren focusing on the degree he touted the number of new accounts in the credit card group, the degree which he failed to make changes before or after "the l.a. times" article warren said it best you're incompetent, worst you're co complicit. sloan responded we're in the credit card business, one of the products we supply are credit cards, i'm not ashamed about that >> the board defended his

record she went after his track record at the company, being there 30 years, even though he was not ceo at the time, john stumpf was ceo. we knew this was going to be fiery and a topic she's all over and we know she tends to do her homework and get angry at these hearings she delivered. >> yeah, she did of course, mr. sloan did have numerous senior management roles at wells fargo during what is his 30-odd years at the bank before he became the company's ceo. yeah, she brought what we anticipated in terms of at least criticism, whether or not that translates into anything, of course, is unclear, although probably unlikely, given he continues at least at this point to have full support of the board. >> beyond her own advancement, her political career, this is one of her top issues going after wall street, irresponsible behavior and problems, and this is her signature >> sloan, of course, argues that

she's taking some of his comments out of context. >> yeah. dropped the mike there but clearly, you know, i think the question is going to be as pointed out earlier, is this going to hurt the stock, because wells fargo has underperformed at a time when banks have come back into a leadership position in the market, at least looking at its relative evaluation >> it has. some questions, of course, whether you can get new customers. it's not so much -- >> trust factor. >> the trust factor, people, obviously, parts of the bank that have nothing to do with this scandal still will tell you, certainly, makes it more difficult to bring in new customers when you're operating under the level of publicity >> jim has been tweeting and is watching this from wherever he is, said warren made a great point about how often tim sloan hiked cross selling. i was on those calls, the whole point, jim argues, why