good wednesday morning this is "squawk on the street. i'm carl quintanilla with david faber and jim has the morning off. you'll see him tonight powell set to make some comments this morning we'll go there live. the futures coming off off the late-day selloff let's get to steve liesman with some of powell's remarks >> good morning. jay powell will say that the path ahead is "highly uncertain" and he sees significant downside risk to the outlook. he is concerned about a prolonged recession and a possible weak recovery if the government doesn't get the stimulus and the relief correct. he says additional relief may be needed beyond that what is already done concerns that liquidity problems could turn in solvency problems. policies should address a range of possible outcomes additional fiscal support, he said, can avoid long-term

damage the coronavirus crisis, he says, raises those long-term concerns that he was talking about. the u.s. response to that point he says has been swift and forceful the fed has acted with unprecedented speed and force. he cites a survey that shows in the month of march, 40% of households making less than $40,000 has lost a job carl >> let's get to the webcast. here is the fed chair. >> it's very hard to imagine we could have anyone better than jay powell thank you for coming back to the peterson institute, chairman powell >> thanks very much, adam. it's great to be back. i have some brief remarks and then i'll look forward to our discussion the coronavirus has left a devastating human and economic

toll in its wake as it has spread around the globe. this is a worldwide public health crisis and health care workers have been the first responders showing courage, determination and earning our lasting gratitude. so have the legions of other essential workers who put themselves at risk every day on our behalf as a nation we have temporarily withdrawn from many kinds of economic and social activity to help slow the spread of the virus. some sectors of the economy have been effectively closed since mid-march. people have put their lives and livelihoods on hold making enormous sacrifices to protect not just their own helicopter and that of their loved ones but their neighbors in the broader community. while we're all effected, the burden has fallen most heavily on those least able to bear it the scope and speed of this downturn are without modern precedent. significantly worse than any recession since world war ii we are seeing a severe decline

in economic activity and employment, and already the job gains of the last decade have been erased. since the pandemic arrived just two months ago, more than 20 million people have lost their jobs the fed survey being released tomorrow reflects findings similar to many others among people who were working in february, almost 40% of those in households making less than $40,000 had lost a job in march. this reversal of economic fortune caused a level of pain that is hard to capture in words as lives are upended amid great uncertainty about the future this downturn is different from those that came before it. earlier in the post-world war ii period, recessions were sometimes linked to a cycle of high inflation followed by fed tightening the lower inflation levels of recent decades have brought a series of long expansions, often accompanied by the build up of

imbalances over time asset prices that reached unsupportive levels or spornt se spornt se important sectors of the economy that booned. the downturn is attributable to the virus and steps taken to its fallout this time high inflation was not a problem. there was no economy threatening bubble to pop, and no unsustainable boom to bust the virus is the cause, not the usual suspects, something worth keeping in mind as we respond. the today i will briefly discuss the measures taken so far to offset the economic effects of the virus and the path ahead governments around the world have responded quickly with measures to support workers who have lost income and businesses that have either closed or seen a sharp drop in activity the response here in the united states has been particularly swift and forceful

to date congress has provided roughly 2$2.9 trillion in suppot for households, businesses, health care providers and state and local governments. about 14% of gdp while the coronavirus economic shock appears to be the largest on record, the fiscal response has been the fastest and largest response for any post-war downturn at the fed, we've also acted with unprecedented speed and force. after rapidly cutting the federal funds rate close to zero, we took a wide array of additional measures to facilitate credit in the economy which can be grouped into four areas. first outright purchases of treasuries and agency mortgage-backed securities to restore functionality in these critical markets second, liquidity and funding measures including discount window measures, expanded swap lines with foreign central banks and treasury backing to support

smooth functioning in money markets. third, with additional backing from the treasury, facilities to more directly support the flow of credit to households, businesses and state and local government is, and fourth, temporary regulatory adjustments to allow banks to expand their balance sheets to support their household and business customers. the fed takes action such as these only in extraordinary circumstances, like those we face today for example, our authority to extend credit directly to private nonfinancial businesses and state and local governments exists only in unusual circumstances and with the consent of the secretary of the treasury when this crisis is behind us, we will put these emergency tools away while the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is highly

uncertain and subject to significant downside risks economic forecasts are uncertain in the best of times, today the virus raises a new set of questions, how quickly and sustainably will it be brought under control? can new outbreaks be avoided as social distancing measures lapse? how long will it take for confidence to return and normal spending to resume what is the scope and timing for new therapies or a vaccine the answer to these questions will go a long way towards setting the timing and pace of the economic recovery. since the answers are currently unknown, policies will need to address a range of possible outcomes the overall policy response to date has provided a measure of relief and stability and will provide some support to the recovery when it comes but the coronavirus raises longer-term concerns as well the record shows that deeper and longer recessions can leave

behind lasting damage to the productive capacity of the economy. avoidable household and business insolvencies can weigh on growth for years to come. long stretches of unemployment can damage or end workers careers as their skills lose value and professional networks dry up and leave families in greater debt the loss of thousands of small and medium-sized businesses across the country would december try the life's work and family legacy of many businesses and community leaders. and limit the strength of the recovery when it comes these businesses are a principle source of job creation, something we will need as people seek to return to work a prolonged recession and weak recovery could discourage business investment and expansion further limiting the resurgence of jobs as well as the growth of the capital stock and the pace of technological advancement. the result could be an extended period of low productivity growth and stagnant incomes.

we ought to do what we can to avoid these outcomes, and that may require additional policy measures at the fed, we will continue to use our tools to their fullest until the crisis has passed and the economic recovery is well under way. recall, though, that the fed has lending powers, not spending powers a loan from a fed facility can provide a bridge across temporary interruptions of liquidity, and those loans will help many borrowers get through the crisis the recovery may take some time to gather momentum the passage of time can turn liquidity problems into solvency problems additional fiscal support could be costly but worth it if it avoids long-term damage and leaves us with a stronger recovery this tradeoff is one of fofor o elected representatives. thank you again and i look forward to our discussion. >> thank you, mr. chairman

i'd like to start where you started. the you have for a long time and particularly since becoming chair spoke about the distributional aspects of running the economy hot, the importance of full employment. until the pandemic hit we were getting very close to something that looked genuinely like full employment with growth and convergence of incomes for excluded groups. as you pointed out, it's those least able financially to bear this burden who are being hit now. so going forward, do you see us as possibly getting back to the full employment we've had? you mentioned scarring of workers. how much does quick action now benefit us in terms of longer-term unemployment rate. and in the past, sometimes when people talked about the

long-term damage to recessipeopd workers, people say we can't get the unemployment down because there's been scarring, what the fed i think demonstrated in recent years is you should experiment to see how low you can go with unemployment when we get through this crisis, how do you see the fed's role in terms of its mandate on unemployment >> first, let me say, it was a great period to watch unemployment decline and continue declining, continue declining and not see wage or price inflation move up. i think we learned something fundamental about our ability to associate unemployment -- levels of unemployment with inflation or other imbalances. i think that's a lesson we'll be carrying forward

it's also been, frankly -- over the course of the last year or so with our fed events we made a series of 14 different events and engaged with different communities all across america including low and moderate income communities we heard this was the best labor market in 50 years or in peoples lifetimes, and it was -- the strong advice was to keep this going. we are feeling opportunity we have not felt -- they didn't feel the first seven or eight years of the expansion but they felt that in years 9, 10, and 11 it was a great feeling two months ago we were looking at more of that and further healing and addressing of these issues so it's particularly painful to see all of that put aside, at least temporarily, and the numbers show clearly it's more recent hires and lower paid people who are bearing the brunt

of this, though people are suffering all across the income spectrum so in terms of getting back, i would say that we -- i would say that probably over the course of the next month or so, unemployment will peak, and then as we return to more normal levels of economic activity, it's a reasonable expectation that unemployment will start to decline again. it may decline sharply, but it's also likely to remain well above the levels that we saw earlier this year and all through 2019 and 2018, which were 50-year lows in unemployment it will take time to get back to where we were. i have every within to think we can get back there the economy should substantially recover once the virus is under control.

ending with your final question, it's a major takeaway for the way i look and the way we're looking at the economy now at the fed to place probably less weight on realtime estimates of a natural rate of unemployment because we see that we were able to move down to 3.5% and be there without really any sign of a reaction from inflation or other imbalances in the economy. so it's a place we can get back to, we will get back to. it will take some time the main thing to do is get on that road to recovery and stay on it for a long period of time. that's what i expect will happen >> terrific. i want to praise you for long before this crisis talking about not having too much faith in the stars and being more pragmatic on the data. turning to the second main point from your remarks, in your view you emphasized the idea that

more stimulus, not just stimulus but more support for the supply side of the economy is needed and that it will probably have to be fiscal policy, not monetary policy that does that in short that if we cut office cal stimulus too small too soon it's not just a demand issue, it's a supply side issue that said there are concerns people raise about the fiscal policy in the future even though all reasonable fiscal hawks know we should be spending now. the question is what does fiscal responsibility look like a year or two down the road or three, especially if we will still have 10%, 8% unemployment, long-term unemployment how should we -- this is for elected officials to think about, what kinds of principles would you want them to think about in terms of the recovery of the economy and what role can the fed play when i was at the bank of england, i got into a tiff with

mervin king. he thought it was the role of the bank to lecture parliament about fiscal responsibility, i didn't what role do you think the fed has to play in disciplining fiscal policy going forward? >> we don't play a formal role in fiscal policy meaning that we would not take a position -- i wouldn't take a position supporting a particular bill i might ask questions -- answer questions that i get privately from members about things. it's not our role to supervise congress we're a creature of congressional action and they have oversight over us like other fed chairs through time, i have said things about getting back on a sustainable fiscal path over time. i think that's important and appropriate just because it's important for the long-run good of the economy, which is part of our bailiwick. as i mentioned, it's worth

remembering congress has really moved quickly and with real force here and appropriately so. this is the biggest shock our economy has felt in modern times, this is the biggest fiscal response. it's far larger than any fiscal response and it came quickly that's a good thing. the issue is there's a lot of uncertainty ahead. it may take a few more months than we would like for the economy to recover my colleagues and i have been speaking to a wide range of leaders of not for profit, for profit, businesses across the economy. what comes through is there is a growing sense that the recovery may come more slowly than we would like, but it will come that may mean it's necessary for us to do more, and the tradeoff is this. as i mentioned in my remarks, we

know long periods of unemployment leave a shadow over the labor force and over our economy and over peoples lives we also know waves of bankruptcies can weigh on economic activity for years. if you think about small and medium-sized businesses that are the heart of our economy and the heart of job creation, those are typically, you know, the product of generations worth of work to create if they avoided becoming insolvent because economic recovery didn't happen fast enough, we would lose more than just that business i think we lose something fundamental and it won't be able to be replaced quickly in terms of fiscal discipline, i absolutely believe that we must and indeed we will eventually have to return to a sustainable

fiscal path that just means you have to get the economy growing faster than the debt have that happen over a long period of time and gradually reduce the ratio of the debt to the size of the economy. that's how you do it successfully and many countries have done it successfully over a period of time like that i think the time to do that is during good times. when the economy is strong, unemployment is low, that's the time to be addressing those concerns now when we face the biggest shock in the economy in modern times, now is not the time to prioritize considerations like that i think we can come back to them fairly quickly, which is to say a few years down the road when the economy is well and truly recovered or at least mostly recoverin

recovering >> thank you for that. turning to operational monetary policy issues. all kinds of market people and reporters would love to ask you about negative rates before getting what i'm sure will be your answer on that, i would like to ask a little more deeply about the thinking of rates in the u.s. context. one way of looking at it is, of course, qe and rate cuts are essentially substitutes. so that if you can do more qe or these various credit facilities, interventions, the four buckets you listed, you could scale that up and not bother with negative rates which may have negative political effects and economic effects. the flip side is that on the other side there are people who argue negative rates have a particular use in terms of currency valuation but also, as my colleagues have argued, it might enable more qe because it gives you more space

broadly speaking, how do you feel about the arguments for and against negative rates in the u.s. at this point >> let me start by saying the committee's view on negative rates has not changed. this is not something we're looking at we chose not to implement negative rates during the global financial crisis and instead relied on forward guidance and asset purchases when we were near the zero bound. we said that we intend to continue relying on those tools which are tried and they are now a part of our toolkit. we revisited this at last october's meeting, revisited this question and the minutes said that all fomc participants currently did not judge that

negative rates were an attractive monetary policy tool in the united states i would say a couple reasons behind that. one is we do feel our tools work the tools we use, forward guidance and asset purchases work we are doing these 13-3 facilities we think they work we think we have a good toolkit, they work. and we have evidence they work i think that's what we'll be using. also the evidence on the effectiveness of negative rates is mixed there is research that says they have been effective, there's plenty of doubters the issue really is the concern over interrupting the mediation process. and reducing bank profitability there and reducing the availability of credit in the economy. it's not -- it's an unsettled

area, i would call it. i know that there are fabs fan the policy, but for now it's not something we're considering. we think we have a good toolkit and that's the one we'll be using. >> delighted to hear you say that another question about your toolkit. inherently what the federal reserve does is provide people with liquidity, loans, temporary bridges. in the past financial crisis of 2008/2009, one issue was money was put out through qe, cuts in rates, other measures, but it didn't get invested in the real economy. there was great uncertainty, expectations were poor, so on. what makes you think some of the facilities being made available now will be taken up in a way they -- and used in the real

economy in a way they weren't, say, in 2008 to 2010 will the main street lending work if you're running a small restaurant, a small nail salon god willing, i know you want to help these people, we would all like to help these people, but those sectors may shrink in the real world so why do we think they'll take these loans? >> well, as i mentioned in my remarks, we can address liquidity problems that's the problem that many companies find themselves facing companies that are really very directly affected by the coronavirus are in a special place. the airlines, hotels, some restaurants, things like that. and really we will need to see the economy recover fairly

quickly for them to benefit from this we're in a position where we will lend to companies based on their earnings from 2019 as we said, and if they qualify, we will lend to them up to that limit. so we're willing to take that risk so i actually -- as i mentioned in my remarks, we'll be in position to help many, many, many companies irhope that i hope that's the case with these facilities we helped already where markets have loosened up and functioned much better than they were a couple months ago at the peak of the -- the early part of the crisis where markets were not functioning well we see that. that's enabled many companies to finance themselves now that's a good thing. it may mean that we are not needed on main street -- those are companies that generally don't have market access and they will

need these loans we will want to provide them let me say about main street, for those who don't follow this as closely, this is for companies that have fewer than -- less than $5 billion in revenue. fewer than 15,000 employees. it's probably going to be for companies that don't have access to the capital markets, the syndicated loan market these are the great small and medium-sized companies it's an incredibly diverse group of companies, diverse industries and credit needs we're trying to create products that address as broad a swath of those needs as we can. it's also operationally complex. people have credit agreements, they have existing credit, we have to work through that. we're in the process of doing that i think main street can go live in a few weeks i'm hopeful we can meet the demand that's out there.

this is completely unique in our history. so we're learning as we go you know, as we go, we'll continue to be willing to adapt. we can make loans to solvent borrowers, solvent borrowers who don't have access to other sources of private capital that's what the law requires of us under 13-3 to make a loan the massapassage of time is all takes to make a liquidity problem into a solvency problem. we will be a big help for companies for a while, but only a longer period of time it may be that more fiscal help is needed again, i don't prescribe how, but i just say that it could be costly but the benefits of it would be potentially substantial. >> thank you another thing -- another area where you and your colleagues on the fomc were ahead of the

curve, before the pandemic, you were putting new emphases on the events abroad on the u.s. economy. not just the narrow trade role maury epsfeld did a great paper on that last year. i was wondering if you could take us through how you see what's happening in the rest of the world effecting the u.s. recovery now and how you see the flight into the dollar, which obviously was enabled by the swap lines that the fed and its partners provided, how that benefits the u.s. economy as well as the world. we are, of course, the peterson institute for international economics, so we think it does matter, but what matters is what you think matters. >> fair enough the global economy and even more so the global financial markets are tightly integrated at this

point. over the years that's become more and more the case it's in our interest for the global economy to be strong. we need people to buy more exports and in general we benefit from a stronger global economy. in terms of the swap lines, we are the world's reserve currency all around the world people fund economic activities from time to time in dollars. they buy u.s. dollar denominated credit assets, u.s. mortgage loans, things like that, they are bought by foreign banks who want to fund those activities in dollars, to these dollar funding markets around the world -- they're fairly important to the u.s. financial markets and the u.s. economy they are effectively providing core credit to u.s. households and businesses through the dollar funding markets

you're right as the reality of the pandemic dawned a couple months ago, there was understandably a flight to safety that meant short maturity, it meant fixed income, it meant u.s. dollar, sovereign credit at the short end. that left remarkable unprecedented levels of i illiquidity in some markets. we saw dollar funded markets threatened and playing a role in what was happening in u.s. treasury market, which was becoming highly illiquid and more dysfunctional so what the swap lines do, we swap dollars for local currency with another central bank, and that central banks faces off against its banks and provides dollar funding to them it had a constructive effect on

calming down those markets and reducing the safety premium for owning u.s. dollars. it's played a role in supporting return to more normal conditions and global financial markets more broadly, i think what we've been able to do is to help markets return to more normal functioning, which has the effect of buying time, buying time for health care professionals, buying time for governments to respond in a time when the financial markets are working, the financial system is working, and we don't have to face dysfunctional markets and the loss of credit availability. those measures, both the swap lines and the facilities that we've done have really, i think, been somewhat effective at achieving that >> thank you so much we're out of time, and you obviously have a world to continue to save

i want to express my admiration for what you, the fomc members, and the whole team at the federal reserve are doing. you're providing competence, calm, concern for the right issues, and nonpartisan fact-based work at a time when we need it thank you. >> thank you very much, adam [ no audio ] >> all right you saw carl's audio is having some issues there. we heard from chair powell, giving some prepared remarks that our own steve liesman previewed for us, and then going into his views of the world. i'll go to steve now to sort of get his view on what he thought were the main points beyond those prepared remarks i took note of the fact that he

did say the main street lending program will go live in a few weeks. we've been waiting for a number of these programs to start kicking in in terms of the treasury's funding of them what stood out to you? >> david, with a sharp newsman's eye did you listen to the chairman you're right that's one of the news items i bulleted we have known this was coming. him saying main street is coming in a few weeks, it may be longer than i thought it would be another piece of little news in there, which i think we also suspected but powell suggesting that those who can apply for the main street lending facility, a 6$600 billion facility, probabl can't access capital markets so those who are not issuing debt right now or public companies, it sounds like those will be excluded from the program. i want to come to the outlook in

a second he didn't slam entirely the door on negative rates but he closed it almost all the way. he said i'm not ruling on any tools, but this tool we don't like at all. we're united in not liking it. talked about the unemployment rate he said it will decline sharply but remain well above levels we saw this year and 2018 and 2019. the outlook was pessimistic in the written speech, he was concerned about possible recession, a longer term -- more upbeat about a possibility of a rebound in the qna section this chairman remains downbead, concerned about downside risks and is going as far as he's willing to go in urging congress to be prepared with additional programs in case this does not go well. >> right didn't really take on the full question in terms of fiscal responsibility there or the

fiscal side of it let's get to mike santoli as well, get his reaction to chair powell's remarks and the reaction in the stock market we did appear to be coming into the session with an uptick in the s&p futures, but that's been reversed once trading has begun. >> yeah. beginning yesterday, it seems as if just a slight change in emphases or orientation among traders after a very good run in the markets to really not incorporate any new information. it's more a matter of tone it's more maybe reopening will not be smooth. all this other stuff to steve's point, the chairman is focused on risk management. certainly urgingering er ring side of doing less, not more perhaps the fiscal measures combined with what the fed is doing might be enough. or at least what each next phase didn't require the market to

have an additional new tantrum to get it. i think powell is sort of saying we're trying to build a bridge there's a risk, we have to try to do more because there's going to be some wear and tear on the economy, on workers, on businesses the longer this goes. it's not just about flipping a switch, which i think everybody knows, but it's how the market tries to metabolietabolize thos factor factors. >> carl? >> yeah, mike. it's hard to know how to -- what bridge to build if you don't know where it needs to go. here's what the fed said a moment ago about the extraordinary circumstances we're in

>> the fed takes action such as these only in extraordinary circumstances, like those we face today for example, our authority to extend credit directly to private nonfinancial businesses and state and local governments exists only in unusual circumstances and with the consent of the secretary of the treasury when this crisis is behind us, we will put these emergency tools away >> dow down 283 now as futures did dip during powell's webcast. let's get to rick santelli and get your thoughts on this this morning. >> i find it all very fascinating. starting with the last sound bite, he talked about how right now we have to prioritize differently than when we get on the other side of the coronavirus. the problem is that makes good sound bytes, dealing with conservative issues regarding finance, how the fed's balance sheet and these tools were put back in the toolbox for storage, just never occurred in full force after the last crisis. we barely contained squee ed qug

quantitative easing. this hole will be much deeper for obvious reasons. the notion that when it's all said and done that the fed will put these tools away, it seems to me the more often they use them the more often they get used, which leads me to the most important point of the day, negative rates the chairman unlike me is measured and nonemotional, doesn't get super passionate which is probably the way you want your fed chief. i thought he could have been much more intense on how he dealt with negative interest rates. to be sure, if you looked at twos, they moved from 14 1/2 to 16 1/2 tens moved from 65 to 66 1/2 you can tell the movement was parallel across the whole yield curve because tens and twos is a 50 now, it was a 50 before jerome powell spoke and the index limited some of its losses in the end talking about, yeah,

i don't think we'll use it, it's not a favorite tool is different than saying why would we use it? look how wonderful it's done for japan. they're 250% of debt to gdp. their banks are broke. i think it would have been much better if he wouldn't have very flippantly said no, no, it's not in our toolbox and address why it should neveren ee ebe in th toolbox, but that's just me. carl, back to you. >> indeed, he did not say that the unanimous nature of the rejection of the policy in those october minutes was interesting. steve, i'm curious one stat that stood out was this number of those who worked in february, 40% of households who make less than $40,000 a year lost a job in march. he did say in terms of unemployment that he thought though unemployment would remain well above recent years levels for years, he did think we could get back there

>> just real quick, carl, i want to go back to what rick was talking about and you. the chairman specifically did say that one of the reasons he doesn't want to use negative rates is because it was not shown to be effective in places where it has been named. i think it's all fair game for criticizing the chairman but not for something that he actually said >> very effective is much different than saying the reasons why. it's not very effective. >> he laid out -- he laid out the reasons, mike. >> we'll read the commentary later. he did not slam the door shut and the lock did not click it's your interpretation versus mine right. right. i don't care if i offend the fed as much as you do, i guess there you go >> i don't care either i just care to report what he said let me go on

that gets to the whole underlying issue, carl, about the outlook here, the extent to which you do permanent damage. you heard adam posen mention this concept called historesis think about a couch when you sit in it, you get up it's supposed to bounce back up. what if you get in it and you get up and it doesn't bounce back up. it's the idea of long-term damage, it's a concept that essentially you have a liquidity problem now that over time could turn into a solvency problem i think you're right he's doing risk management here and saying when i look at the worst possible outcomes, the worst possible outcome is that this thing goes on longer. you talked about this metaphor of building bridges. it's a smart one

what i think powell is saying is get the barges ready, build the pylons and get ready to put those things in the water to expand or lengthen this bridge because you may need it sooner than you think >> steve, also interesting to hear his somewhat -- i wouldn't say emotional, but his comments on small and medium sized businesses, what that means to the fabric of society, far beyond the economic toll that those businesses will take i want to bring in jim cramer who unexpectedly can't seem to stay away from the office. >> i was at the beach. few minutes at the beach i'm back go ahead, david. >> you know, i actually can see you now. i saw you had on the sunglasses. we have now -- >> dollar general. >> i can actually see you. >> i look at this thing differently from what these guys are saying now we have two guys -- we have fauci and powell saying that the

president's wrong. fauci yesterday totally contradicts the president. makes us feel like if we reopen up, look out, storm coming powell just makes me feel like, hey, this thing is shot. w we're not getting anything you better go with pelosi right now, which is the opposite of what the president wants and get the $3 trillion program going because we'll need it. you have the president on one hand saying, listen, this will be the strongest economy in history, it will come back, everything is great. then you have two really powerful people, powell and fauci saying, eh, ain't coming together so i don't know. it looks like pelosi's plan is the one that powell wants, especially after what she said about small and medium-sized businesses i totally agree with you emotional appeal for dry cleaners and hair salons >> that was notable. and important, i think

it does go to the broader impact of losing these businesses hopefully not. jim, somebody else who sometimes we take note of is stan druckenmiller, former hedge fund manager saying last night in remarks he did with the economic club of new york, no chance of a "v" recovery, it's a fantasy talking about an overvalued stock market at this point and just generally being quite negative on the prospects for the u.s. economy overall he says i pray i'm wrong, but it's just a fantasy. you're thoughts? >> yeah. we've heard stan periodically being incredibly negative. you remember when he was calling for -- he thought rates would go up dramatically delivering alpha. it was a seminole moment we picked it up and ran with it and took it for days for days i think stan is a good guy, smart guy. but there's two markets here there's the stock market, and then there's the real market we know that there are --

there's $11 trillion worth of stocks that do well with covid he also said the fed will pump as much money in so be careful shorting it. i look at the market today, it opens down the same thing, there's the shopify, that starts going up. everything is falling here next thing you know, you have a lot of different -- tesla turns around how can tesla not turn around? isn't that what we have? so all the stocks that come to play every day, amazon right back so i don't know what stan has to say about the fact that there's so much money being made in a lot of stocks. >> yeah, jim nasdaq up 17% over 12 months, despite mike santoli what powell said about the biggest disruption to our economy in modern times then there's the added question about what it's going to take for the s&p to bust out of this range between the 50 and the

200-day. >> yeah. that's the other part of it. even if you didn't know what was going on in the world, and i know you can't shut that out, but if you just looked at we just rallied 35%, up to an area that, you know, has proven hard in the prior year and all along the way, and it's been a narrow rally in the last little phase, maybe it's time for consolidation, the put call ratio got low, so maybe the hot money was too eager, put that together and say you are probably at some point going to have to back off a little bit. i don't necessarily see the rhythm of the market being out of joint with what's happening in the world the other part, you know, looking at stan bruk druckenmil comments, the whole idea of not being a vr"v," it's a straw man. you can't find anyone who this it will be a true "v" right now. there's nobody saying that the market is not in position to price for that

>> michael, one guy is saying it >> yeah. >> the president of the united states >> there you go. >> the strawman for everybody else but him the president believes in "v" for victory. >> so what do you believe, jim is this a transition to -- >> i'm with santoli. >> you're going can druckenmiller -- we have not mentioned buffett, icahn or others >> these are rich people who don't need to do a thing they can ride it out we listen to buffett i think warren buffett is the greatest investor ever but what did becky have? a series of questions about why he's underperformed, why he bought the airlines, terrible performing group i prefer the cruise lines to the airlines but there are lots of stocks -- i just want to use a classic example of what these guys never do they never ever talk about stocks they talk about the market that's where they go wrong so this morning there's a piece

by morgan stanley, which says one of the greatest performing stocks of this era, adobe, may have real problems that's right adobe's clients may be strapped. the stock should be down 25 bucks, right it was a terrible piece. i read it and i said boy, here we go. this is going to be one of the situations where we're finally going to get a stock that's got negative heat from a major supporter, morgan stanley, yeah, absolutely gets hammered and now it's barely down i don't know that's the way of the world. they don't look at individual stocks they're too small. stan druckenmiller is a big thinker. these are two smaloo small when you break it down from the top, yes, he's right when you look at what vuers avi are looking at, amazon is unbelievable it's time to buy walmart have you seen target these guys are huge thinkers, they're thinking about --

thinking about the currencies around the world bonds. i love that. i love big thinkers, our viewers are not doing that our viewers are not going pound versus dollar. our viewers are looking at amazon and saying why did that guy keep me out of amazon? he didn't. but amazon, pretty good stock. >> jim, it's the staying rich crowd versus the getting rich crowd. >> yeah. they don't want us to get rich, do they? how about the -- remember dale dalio -- the guy who hit big in chipotle, the guy who had the fight with icahn >> yeah. >> gotham. gotham city. he came on and said, look, it's a thermonuclear winter, even though it's the spring you break down -- was he short

i've had it with the guys who are billionaires >> is it that include tepper does that include tepper and the game changer he talked about at the super bowl with you? >> tepper was a scientist. tepper said to me did you with u >> he said have you read the lancing article? i think this could be horrible i had just read it i said oh, my god, the lancer article, it's contagion written by a fantastic doctor. it's pandemic. it's it. it's -- yes. it's the lincoln tunnel scene in the book "the stand" stephen king has so far been even better than dr. fauci in terms of what this is. temper was based on science. tenn tepper liked it until -- tepper

never said it was the end of the world, he said why aren't more people talking about this pandemic so yeah, i mean, and i think tepper switches. he's not about trying to keep anybody out of it. from the day i met him and he screamed at me and told me i was an idiot, which i liked, because i was on a bond deal he didn't want me to sell. i looked and said he's not id logical and is willing to switch directions but most of the billionaires when they come on and tell you things, it's for them. it's right they're not here to make you money. they're here to make -- they're not here to do anything other than expound on their view but they're not going to look at fanny. they're never going to look at facebook it's too small they're never going to talk about netflix. it's too small and yet, our viewers are not trying to figure out about the ten versus the two they're just not they're not. >> well, speaking of netflix, it is up about 1.7% and tesla happily is also up a

bit. let's get back to the fed -- >> there you go. those stocks refuse to listen to br druckenmiller. they're saying screw you, druckenmiller. they don't even know who he is they like the new slate. what are you watching, david the new kimmy? >> yeah. i heard that haven't seen that. >> the -- >> working through library stuff now. and i'm waiting for the hbo max to start hitting >> how about peacock >> that's going to be the new ceo of at&t was talking this morning as well about hbo max. going to be launching every day. >> i said it was in three. i recommended it -- even he didn't like it >> you did you did. >> he came on the show he was crying, and i said listen, dan, you'll come out of this you're a good guy.

this stock is a buy. it's at 64 >> it is steve liesman, i was focussed on the main street lending program. i'm curious for your thoughts. he didn't mention buying bond etfs we didn't get much on the programs i'm trying to keep track of in terms of importance and how the fed is intervening in various markets >> well, they're not doing a whole lot of intervening the big issue is how many of these programs have not yet launched i have a full screen if you want to get it from the 7:30 hour called fed's unfinished business the main street lending facility not open the next couple weeks corporate bonds is a $750 billion program. that's only partially open the secondary market where they're buying etfs, a small piece of that open municipal bonds 500 billion, not open yet we got details yesterday about

additional lending terms there and then the $100 billion, buying asset back, not open yet. there were interesting characteristics of this. some of these markets have improved upon announcement that the fed would be involved. the fed may feel it has some time it wants to get these things right. it watched the criticism over ppp. and said you know what we don't need to go there in terms of the political backlash. i think finally it's fine tuning where does the fed come in this is the big question does it come in below market, at market does it try to roll back the clock to 2019? these are the questions the fed is trying to figure out. it's never done these things before it's never faced the public in such a way never faced the states or the corporations i know it's trying to get it done, but they move deliberately >> steve, thanks markets down 220

the markets wrestle with the promise of reopening versus the worries of a surge in new cases. we'll take a break and be back in a minute. ♪ right now, there are over a million walmart associates doing their best to keep our nation going. because despite everything that's changed, one thing hasn't and that's our devotion to you and our communities. our priority will always be to keep you and our associates safe, while making sure you can still get the essentials you need. ♪

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today. for example, our authority to extend credit directly to private nonfinancial businesses, and state and local governments exists only in unusual and kpis gent circumstances and with the consent of the secretary of the treasury when this crisis is behind us, we will put these emergency tools away >> the fed chair powell earlier this morning jim, we talked about that. you'll cover more on mad money tonight. >> i want to talk about the carnival cruise deal, it was going to be higher until powell said he was interested in buying bonds. carmel was the epicenter of the entire incident. the customers seem to like it. the bookings are fantastic for carnival i know i'll have cisco on tonight when the fed pumps in, you buy, not sell i always appreciate listening to rich people. i really want to know more about

their yachts i think that's exciting. i like to dream of it one day, but i don't care about what they have to say about the market, because you only need to get rich once. >> all right we care what mike santelli has to say about the market. we'll give him the last word in terms of where we are. >> it looked like a final hour shakeout yesterday once again, the nasdaq is kind of holding things together i think that sideways and slop around for a while isn't the worst thing. 5% on the downside in the s&p before you say the last leg of the rally is undermined. that's where we are. >> all right jim, we'll see you tonight, mad money, of course, 6:00 p.m. eastern time on a big day for the markets. in the meantime, everybody, good wednesday morning. welcome back to "squawk on the

street," i'm carl quintanilla with david faber and sara eisen. let's look at the markets in the wake of powell's web cast as the dow is down 205. session low is down 292. are we going to hear sound bits from powell and his remarks a few moments ago? let's take a listen to what the fed chair said >> recovering may take time to gather momentum. and the pass of time can turn liquidity problems into solvency problems additional fiscal support could be costly but worth it if it avoids long-term damage and leaves us with a stronger recovery this tradeoff is for elected representatives who wield powers of taxing and spending >> joining us for the reaction, mark zandy and barry banister. good to talk to you both again thanks for coming on the show. >> good morning. >> sure thing. >> barry, your general play book right now involves waiting for

the fed to get forced back into acting and thengetting more aggressive at least on equities. how did the web cast today move you in terms of the execution of that play book >> no change, carl we felt that deflation snahock usually necessary. since that april 30th downgrade to a neutral view, we see the market trading in a 5% range of around 2900 in the second quarter. >> does that mean you don't think the fed will need to act or there will be obstacles in the way of them putting further policies into place? >> right now reflation and early reflation always feels like growth until it becomes a problem years down the line. reflation is missing we've had a reduction of volatility we've had spreads come in. we've had backstop

we've had fiscal, but we haven't had reflation. and reflation is a critical element to get the market to move higher from this level. so if i see a deflationary shock, i would expect fiscal monetary action in tandem, but i haven't seen that shock yet, so i'm just standing aside, watching for reflation signals and we're neutral after having had a big rally in the prior quarter. >> that's sort of -- that's indicative of the market's general stance we've seen policy kick in. we're waiting for results on these reopenings and waiting for case load data to change, if it's going to change how do you put all of that into some framework, given how negative the fed chair appeared to be this morning >> well, you can't i mean, there's -- i'm sorry >> no, go ahead. >> was that for me, carl >> yeah. >> no, i don't think you can, carl i think there's too much

uncertainty here there's many different paths you can go down. i think the message from fed chair powell was given that uncertainty, it makes sense to ere on the side of being aggressive as a policy maker both at the fed, and of course the reserve is playing all its cards, doing everything it can but they also -- he also sent a strong signal to lawmakers that their job is not over in all likelihood they're going to have to come up with another fiscal rescue package. maybe this thing turns out better than anticipated and maybe we'll get a vaccine earli earlier, but i wouldn't plan on that if you go down the darker path, our fiscal problems are worse and there's not a policy response better to be aggressive right now. >> yeah. i think that was, mark, the most important thing he said. which was a direct call for congress to do more than the 3 trillion they've already done. how do you think that's going to

go down? usually fed is careful not to wade into fiscal policy. he said that he said it's the opposite relationship, that congress oversees the federal reserve but how do you think that call is going to be heard and do you think it's going to matter and actually push congress in that direction >> well, i mean, this is highlights of how significant a threat he thinks this is for him to go down this path and tell -- explicitly to lawmakers now have to do more is really unprecedented. and i think signals just how nervous he is about this and also, how nervous he is about the ability of the fed to do much more going forward now, how it goes down, i'm sure you're going to get some criticism and a lot of folks think it's a good idea, but i think from an economic perspective, put the politics of it aside, i think it would be very prudent for lawmakers to put another rescue package together, because here's a very

important point. they've put forward a lot of money, a lot of support. almost $3 trillion but almost one-half of that is already in the economy, and at the current trajectory, by july j august, all that money will be in the economy, and then if you get on the other side of the business reopenings, we don't have a vaccine and the economy goes sideways, the stimulus is gone and then we have a problem. the economy will struggle. i think law clemakers have to prepare now for what the world looks like on the other side of the reopenings >> he painted a stark picture of who is feeling the most economic pain in this country, pointing to a federal reserve survey, showing that 40% of households with less than 40$,000 in income included someone who has lost a job. so what does that mean are there investment implications of that that stark contrast between high income and low income households

and how they're feeling this impact >> i think there's fear all around if you look at it, we've had fairly prolonged and increasingly unnecessary full shutdowns, consumers and businesses have been paralyzed with fear, if you look at the media coverage of the virus itself, if you look at the litigation risk for business, so we have a general state of economic paralysis right now it's going to turn into rigor mortis if we're not care frl the s&p has always bottomed before gdp inflected upwards that's pretty consistent and so we need to see recovery from about the first of august on ward. if that date slips, the market is going to slip that's why we're using the second quarter period to monitor fairly intensively every single data point we can find on the success toward a more reflation

nar reopening, regrowth outlook. i haven't seen much of that. >> clearly his dislike of them to put it broadly. but what are you seeing in terms of the marketplace and what are your views as to the possibility j still, even with his desire, obviously, to avoid that fate. >> well, you're right. i don't think he really wants to go there you know, he looks at what's going on in europe and japan, and it's hard to conclude that negative interest rates have been much help, maybe on the margin the other thing is in europe and japan, those are financial systems dominated by mostly big banks nchls here in the u.s. we have financial system has a lot of nonbanks, the shadow system. it's not clear how that part of

the system works in a negative rate environment i don't think he wants to go in that direction now, having said that, if we get into a darker scenario, if we get on the other side of the business reopenings and don't get anymore fiscal support, and unemployment remains in the double digits, he may not have any choice at that point he's going to have to go down that path. he doesn't want to, but he may be forced to do it >> how important is fiscal relief for the states? it's obviously part of pelosi's bill how important do you think it is in terms of providing relief for the states >> critical. did you look at friday's jobs numbers? one million. i think it was 9 0 -- 980,000 state and local job losses i expected it to be down the road a little bit, this those jobs are relatively sticky

that was not the case. and for context, before this mess there was 20 million state and local government employees we just lost 5% of the jobs and they are police, fire, emergency responders, teachers, social service workers. those are the people you need in a time of crisis this means we're going to see millions of more lost jobs as their cost structures are rising over the next few months unless lawmakers work rapidly it's the most straightforward thing to do. it's standard fair it worked beautifully in the financial crisis it was key there's a lot of evidence that suggests it's the right policy to do. and frankly, it's good politics. it doesn't make any sense to force the state and local governments to lay off workers in a time when we're losing tens of millions of workers that's job number one. and if they can't do anything else other than pass state and local government, that should be it that's what they should be focussed on immediately.

>> we talked about how looking for clues about reflation you haven't yet seen so much discussion especially today about mobility data, the times this morning says 25 million people left their house last week versus the prior six weeks. goldman today says we appear to be through the trough if you look at four square and google, people moving around what do you need to see to see that signs of reflation are on the way? >> the new york fed has a realtime activity indicator. we also watch some of the other signals of daily activity traffic patterns, apple's mobility index and so forth. but on the subject of more fiscal which has the market's attention, topping up state and local underfunded pensions is not going to do very much for the current situation. it's unnecessary

when you think, it's going to trigger buying in the bondand stock markets. what's needed is a forceps and a scalpel approach to helping states that lost revenue make it through this time. so hopefully the fiscal bill will settle down into some negotiations the fed will help facilitate that i think that might be the basis for the next leg up. >> all right that's one reason we're going to watch that plan closely, barry, mark, thank you. we appreciate it we'll see you soon >> thank you and carl, speaking of that fiscal support, we have new details on the 3 trillion relief package. eamon has an update for us >> yes that's right 3 trillion is an enormous price tag. it's a long bill 1,815 pages worth of legislative text people are going through it this morning to see what's in there here are some of the highlights

starting with the $1 trillion figure in the old days that was big for a bill on it own now it's just a line item on a larger bill. that's state aid for the states hit so hard. also is a second round of direct payments to individuals following on the first round we saw earlier in the crisis. $200 billion in hazard pay for essential workers. $75 billion in testing and contact tracing. $175 billion in housing assistance nancy pelosi and house democrats say this is what's needed to get the economy going again. republicans on capitol hill, though, a little bit more skeptical, wary of the size of this thing and the enormous cost rob portman, a republican from ohio senator on cnbc earlier today expressing some of that. here's what he said. >> it's not only 3 trillion. it's more than we've already spent in four packages at a time when our debt and deficits are at record levels but it's also not helping in

terms of the economy >> so speaker pelosi says she'll have a vote in the house on friday it's not expected the senate will pass anything like this whenever they get around to taking their own vote. there is a sense of urgency in both parties and you expect they are going to do another round of stimulus at some point when that could happen, is anybody's guess. it looks like we're going well into the summer here this is a negotiation, and this is nancy pelosi's opening gamut. back over to you >> how should we look at it? is it dead on arrival, or you think they'll use it as a template for what ultimately comes next >> there are elements of it. this is a first offer in a negotiation. right? it's not dead on arrival in the sense that none of this will pass some of the elements will go through in the final bill. you can expect republicans will want to add liability protections for businesses that reopen they're concerned about the fear of lawsuits keeping businesses

closed they want to add their own elements they might strip out the state and local tax deduction which is in the bill. remember, president trump had taken away the state and local tax deduction in tax cuts. now it's in the bill republicans are skeptical of it. that might be something that falls by the wayside in the negotiations informal we'll have to wait and see. >> eamon, thank you. we'll take a quick commercial break. markets recovering some of the early losses technology, consumer discretionary and consumer staples are leading the s&p 500. it's only down a third of 1 %. banks and energy continue to get slammed. we'll be right back.

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across cnbc we are taking a close lyric at how states fare when they lift coronavirus restrictions with government officials struggling to find a balance between human safety and restarting state economies since minnesota began reopening on april 27th, it's seen a 247% increase in cases and a 117% increase in hospitalizations an average of 61 hospitalizations per day testing has also increased in minnesota by 105%. it explains a lot with 10% of results coming back positive minnesota has allowed retailers and nonessential businesses to allow curb side pickup and

recreational activities like golfing to resume while keeping the stay at home order in place. david? >> thank you, sara on the subject of minnesota and small businesses, let's get to stephanie, the co-owner of blu plate restaurant company in the state of minnesota stephanie, good to have you with us i'd love to start off on something we've heard from a number of small business owners which is the ppp program and the timing of it particularly when it comes to restaurants like yours a number of people have been telling us that the payroll protection plan as good as it was for them to get the money, doesn't work because you can't open yet has that been the case for you >> definitely. the ppp program is well intended and i believe it was really designed to help people like me. we were motivated to apply for it we were fortunate enough to receive it, but it doesn't work when we can't open our

businesses i'm about four weeks into my loan dispersement. that means i have four weeks left to go i'm still in a state where my business has to remain closed. if at best case i get to open june 1st, that will leave me two weeks to use my funds. and it's just not enough time. >> what would you want them to change and how would it have to be changed to be more useful to you? >> i think i need at least two months from the time i'm allowed to be legally open the runway has to be increased and if we could remove any of the restrictions, if i could use more of the money for operating capital or working capital, that would be a benefit, or in order to pay more of my rent in the future >> we began the segment by

noting the increase in cases in minnesota. what are you seeing on the ground there, and what are your expectations in terms of your ability to open and how you'll go about doing it when the time comes? >> we are patiently awaiting an address from governor wells tonight. he is going to speak at 2 p.m., i believe, more on the health and the numbers. and then tonight at 6 p.m. we hope he's going to as he says turn the dial. he has a diagram of these little analog style dials he's been using to show progress and we're hoping he'll turn the dial that means more of us will be able to open we're hoping for june 1st. we've been working actively, some of my colleagues in the industry have started a group called the twin cities restaurant coalition

very smart chefs, we're advising employee screening before coming to work, self-diagnosis. temperature taking, hand washing, managers will endeavor to have conversations to confirm all of this during shift enhanced personal hygiene and hand washing and an adequate supply of ppp for our customers and guests masks and gloves and social distancing. whether that be by limiting capacity or by physical boundaries and barriers. and for minnesota the other thing we really are pushing for is an expanded footprint outside. we love for our cities and our communities and states to relax the boundaries to our sidewalks, even our parking lots and alleys in ajdjacent areas. >> you were describing the ways you have to adjust to reopen,

but between the spending on safety precautions and the spacing out of the restaurant's limited capacity, how do you turn a profit in this new world? >> we aren't i have 500 plus employees. and i really worry about them. i worry about our business surviving. i started this business back in 1993 with one restaurant i sold my car. i was 21 years old and i boot strapped this thing it's a classic american dream story. and nearly 30 years later i worry if we can save it. >> yeah. we actually heard from the fed chairman as well talking about the importance of the businesses just like yours in terms of losing something fundamental that won't be able to be replaced that quickly. and we certainly hope the best for you. and look forward to you keeping us updated as well

stephanie, thank you >> thanks so much. david, president's tweeting. awfully close to the conversation we were having with crimer a few moments ocean when the so-called rich guys speak negatively about the market, you must always remember some are betting big against it and make a lot of money if it goes down, and then they get you both ways, barely legal. right in the sweet spot of what we were saying with jim. unless they're writing on eds that say buy american ims, sometimes people don't want to hear from them >> we know the president watches. i think that's a fair assumption here based on everything we're aware of in that tweet and to our conversation, i think you need to listen to stan druckenmiller when he speaks he's had a view and been warning, of course, about

entitlements for many years. that said, you have to take it into account with everything else that you're hearing you heard from jim, of course, as well. in terms of his view and what's working and what's not in the market right now druckenmiller did speak positively about amazon. it's fair to say, to be fair to him as well in terms of some of the things and of course, mike santelli said this. not many people talking about a v. that really does not appear to be the expectation of many when it comes to either the economy or the stock market, and i think we can include fed chair powell in that crowd as well. >> well, i think also -- >> a few weeks ago it was said where they were negative on cnbc and then there were questions about positions where he did make a lot of money, and so i think the president has a point there. but i would also just note that druckenmiller is just the latest in a chorus of huge name investors people follow and listen to to be somewhat cautious and bearish

warren buffett in cash and not finding opportunities. carl icahn, paul singer in a recent investment letter these names are very rich people who have made a lot of money in the markets sort of wondering about the big rebound that this market is seeing given the huge economic risks that we are facing and the prospect of a longer recovery which is something that resonates with people, but guys, so far market has gone against them because we've seen a 30% rebound from the march lows. the question is it a bear market bounce and we're headed lower or not. that's going to continue to be the debate with the big hedge funds piling up on one side of that at least saying they are >> absolutely. positioning remains a big part of the story we're getting new information from the fbi regarding allegations of the chinese trying to target bio pharma research in this country. let's get to eamon javers.

>> yeah. that's right this is a public service announcement being announced by the fbi and the department of homeland securities. cyber security and infrastructure security agency this is all about warning americans that the chinese are attempting to hack into virus research now, the question is what can those companies do about it? the fbi says the one thing you should do if you're a company and you see unusual activity on your servers, contact the fbi. don't think it's something benign in your servers i talked to a national security official this morning about this public service announcement who told me they are concerned not just about the chinese stealing this data, but this official also raising an additional scary prospect which is the idea that the chinese might be going into the systems with a motivation to alter the data that's in there or to destroy the systems themselves that is to destroy progress on a

vaccine. this official not offering any evidence that that's happening yet, but concerned about the activity they're seeing on the chinese side and now we see the fbi and the department of homeland security issuing this public service announcement to pharmaceutical companies and research institutes working on virus systems. watch your systems and report any changes. >> you've covered this area closely for years in terms of cyber espionage, the chinese in particular and we know tensions between the u.s. and china are rising. where could this go? there's some who say this could be viewed as an act of war in some ways if you want it to? >> absolutely. especially with the scale of economic and human damage that we're seeing related to this virus. i think any effort to destroy research would be seen as a very

provocative act. no indication they've seen it but it's something to watch for as we see a geo political race as countries are striving to be the first to develop this vaccine a the treatments and to put their stamp on this in terms of world leadership. this becomes a political race, geo politically as much as it does a medical race. there are all sorts of cross currents here. the fbi simply warning folks today to watch out ultimately, though, we'll see where this goes. whether the united states is truly in the lead on this vaccine development or not the chinese are racing to get a vaccine of their own and so it may put u.s. intelligence in the unusual situation of being asked a question of whether they themselves should be trying to steal the vaccine data from the chinese if they're trying to steal it from the u.s. typically they'll say the united states does not steal economic information to give it to

american companies they say that's an ironclad rule, but this situation is so different. it raises a lot of questions about how countries around the world are going to handle it >> yeah. of course, we can imagine the scenario under which it would be nice if the governments all cooperated in reaching a goal that all of us would benefit from eamon, thank you let's get to sue herera for an update. >> good morning, everyone. secretary of state mike pompeo is in israel for a one-day visit. he is the first foreign official to travel there since israel largely shut the borders to slow the pandemic key topics for the trip include the coronavirus and israel's stated intention to annex parts of the west bank the major trade group for the airlines say passenger traffic is unlikely to return to prepandemic levels until 2023 at the earliest the group also predicts a shift to shorter flights once travel

does start to rebound. and former trump campaign manager paul manafort was released from prison due to concerns about the coronavirus, even though there are reportedly no cases at his prison his lawyers says manafort was at high risk of infection because of his age and preexisting conditions manafort will serve the rest of his sentence in home confinement. as always, you can get more on the coronavirus coverage by heading to cnbc.com. sara, over to you. sue, thank you time to hit our etf spotlight. taking a look at the ticker kbe falling in reaction to this morning's comments from fed chair jay powell wells fargo, b of a in the red financial groups slammed the second worst performing group of the day they're down 6% this week and now down -- about 32% off the 52 -week high so some saying that paints an ominous picture about where the

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the committee's view on negative rates really has not changed. this is not something that we're looking at we chose not to implement negative rates during the global financial crisis and the recovery and instead we relied on forward guidance and asset purchases when we were at the near zero bound. and we said we intend to continue relying on those tools

which are tried and now a part of our tool kit. >> that was fed chair jay powell earlier talking about the prospect for negative rates continuing to push fwens that idea professor of economics at princeton and public affairs, allen blinder joins us allen, he's had to say that a number of times and yet, there continue to be questions about whether the federal reserve would go into negative rates you see the action in the banks down another 6% this week. now down 32% for the year. i mean, is -- do you think the market is trying to push the fed or communicate something differently than what we're hearing from powell? >> you know, markets are phenomenonny things. i think some people in markets and especially people that talk rather than the people that trade, which are not the same people, are into the idea of negative rates looking for -- they're always looking for something new. the fed has done 72 things and

what you would could it do i think powell came about as close as he could come to saying absolutely never, never, never you always want to leave the door open a crack. by the way, i don't personally think negative rates is such a bad idea, but i'm not a voting member of the committee. and it's clear the committee is against negative rates. >> why are they not such a bad idea if you look at europe or japan, their banking systems have been crushed and their economies haven't been that stimulated >> that's right. the argument against negative rates is they're not a panacea, as if somebody suggested if you go from what positive 12 basis points to negative 25, that was going to be like a revolutionary change that all of a sudden everything would be great. nobody ever claimed anything like that. it's a small interest rates

analogous to what happens when you go from 50 to 25 to 12 in you go further, you're in negative territory it's not that big a deal, and right now it's just not important at all it's not the -- people are not sensitive to interest rates right now. they're sensitive to fear and the disappearance of markets and a few more basis points on interest rates is not going to make a difference. >> so i thought powell did a nice job explaining how they can provide liquidity, and they've been doing so abundantly in many ways they haven't done before, but they cannot deal with come venn si, and for that he looks to congress and made a strong plea for congress to do more, because what we're look agentdee at is a pretty dire scenario what do you think about the fed chair going to a place we don't usually going to a place we don't see usually. >> powell has repeated several

times as have many other people that the fed is in the business of lending under severe strictures, not spending when it comes to spending, that's up to congress. now, where those two come together is as you know, the treasury has basically goaded instructed, authorized, whatever you want to say, the fed to do a massive amount of lending in areas which have some risk where the fed would never normally go, and has appropriated the first 10% of loss. so if the fed should lose $100, sorry, if the fed should lose money, the first 10% of the losses would be absorbed by the treasury which is one step away from the congress you know, by the elected government what's never mentioned, and hopefully will never happen, is what happens if the losses go beyond 10% then they are on the fed's

balance sheet. i don't think that will happen jay powell doesn't think that will happen, but who knows how bad this thing could get >> there's been some reflection, obviously, it's not just been a few minutes since powell's web cast, but the idea in order to justify the fed's actions so far, maintain political will for congress to do more which he clearly wants in the words of one economist this morning, he needs to accent focus on the po. >> unlike me and you, you can s say things like that if you're the fed chair, and you come up all doom and gloom, that's not good. i think he went as far in the

gloomy direction as is prudent for him to go. this is what struck me looking much more long-term than the fed usually does the fed doesn't usually concern itself with very long-term things for a simple reason monetary policy has effects within two or three years and today's monetary policy has essentially nothing to do with what the economy will look like five, ten years down the road. but powell really opened up, looking at the long-term and while it doesn't the gloomiest assessment you can imagine, it wasn't happy talk. >> what are you hearing in your circles as far as how long it could take to get out of this double digit unemployment, double digit loss of economic activity given what we're facing on the virus and all of the challenges with reopening? >> i think it's anybody's guess.

i think where there's consensus is we haven't seen the worst of the unemployment rate yet. but the bls itself basically said if we were measuring this better, that 14.7 might have been more like 20 or something like that. the economy is not going to come out of this like a rocket ship i don't think any -- well, you know, there's always somebody. i don't think many economists think we'll be done with double digit unemployment rates, and remember, that's something we practically have never seen before since the 1930s that will be done with double digit unemployment rates by the end of this year. so never mind the -- what does the president say, a third quarter is a transition to greatness or something like that i don't know what we're going to end -- i wouldn't be surprised if we ended the third quarter with an unemployment rate, remember, that's a lagging indicator, not much better than

the 14.7 than we have now, but moving in the right direction. we will have hit, i don't know, 20, 22, 24 from which 14 will look a lot better, but on an absolute scale, it's horrible. >> there is this idea, though, that even if it's not a v-shaped recovery, the rate of change in economic growth and unemployment should go up from here if we are able to sort of contain this and reopen slowly. do you buy that, or do you see a reality where it's more fits and starts >> you can have both at the same time forecasters are clustered for the second quarter in the range of minus 35, minus 40% annual rates. divide that roughly by four, not literally by four to think about the actual decline in gdp.

but let's suppose it's a minus 36% annual rate in the second quarter. even if the third quarter is still down, it's going to be a lot better than that, and i think the betting odds are it will be up, that we're going to hit the bottom in the second quarter and we'll be going up in the third quarter and the fourth quarter, but we'll not have come anywhere close to getting back to what we had lost in a little bit in the first quarter and mostly in the second quarter, and that's why i said the unemployment rate is probably going to be still very, very high although, directionally as you say, moving in the right way >> allen, thank you for your commentary >> thank you >> former vice chairman of the fed. appreciate it. as we head to break, look at shares of wells fargo. the financials continue to get hurt badly in part, perhaps, because of the comments from fed chair powell's analysis you

heard from professor blinder you know the yield on wells fargo? 8.8 %. we have a lot more "squawk on the street" right after this this is decision tech. find a stock based on your interests

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take a look at crude there we were looking for a build in oil inventories. got a slight draw as gasoline demandebnd rous. it's helped stocks as well we're back in just a moment.

welcome back to "squawk on the street." stocks are mostly lower today with the energy sector leading the way lower as investors grow worried about a second wave of virus outbreaks which could be devastating for oil demand even an extension of opec plus supply cuts would not be enough to stabilize the market. among the lagging are apatchy

and occidental is offering voluntary buyouts. shares down more than 60% so far this year. now back to sara erik, thank you. coming up later on closing bell, bill miller and david reubenstein. coming up at 3:00 p.m. eastern got a big show you won't want to miss "squawk on the street" continues in just two minutes with the dow down this is decision tech.

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more shoppers are ordering their groceries online these days due to the coronavirus outbreak trying to limit their time in supermarkets and maintain social distance joining me is the ceo of misfits market, a direct to consumer produce delivery markets saying 40% of the customers have never used a direct to consumer market before. thanks for joining us. i know your service as the company that delivers ugly fruits and vegetables. explain how it works. >> thanks for having me. in a nutshell we are a grocery delivery service the catch if you will is we work on proocccuring the misfits of food supply chain, funny shaped produce, things too big to fit

on the shelf stuff traditional food retailers are not serving hat. so we get it and ship it to consumers at 30 to 40% discounts compared to regular retail prices >> so what has this crisis and pandemic and change of life done to your businessin terms of th numbers? >> yeah, so, you know, i hate overusing the word unprecedented but that's the only adjective that comes to mind over the past month and a half or so we've seen new customer demand 4x on a daily and weekly basis what it was prior to that. if we were acquiring 500 new customers in january, february now we're acquiring 2,000 a day. we're see ago doubling down behavior, they're ordering boxes more frequently, ordering more in the boxes, upgrading to larger boxes so we are roughly 18 months

ahead of where we were projected to be currently. >> so are you able to meet that demand do you have the access to funding that you need to be able to ramp it up? >> yeah. it's a -- it's been, you know, our operations and fulfillment teams have been working literally 24/7 around the clock over the last few weeks to scale our fulfillment operation side so we've tripled the number of warehou warehouse associates in the past three weeks and worked on it in a safe way, we're an essential business, operate in the state of new jersey, making sure to take the right covid-19 precautions has been an interesting challenge but we're at a point we scaled our fulfillment channels today is the first day we've opened our wait list and accepting new customers. we're at a point we can keep up

with demand. we were fortunate enough to close on financing before all this craziness happened so we're also in a pretty good capital position >> it's great news for you, despite all the pain from a business standpoint. and that's great to see. i wonder, are you leery of the giants, the walmarts and amazons that have so much ammunition right now? what would it take for you to give in to a consolidation offer from one of the giants >> good question i essentially view kind of the past month and a half as providing sort of a step function change in the grocery delivery industry more broadly i think with a lot of folks, you know, stuck at home and i know sara mentioned that statistic before, roughly 40% of new customers signing up, this is the first online grocery experience they've had the first time they've tried any of these services.

i think broadly people are more open to a lot of these other options so whereas previously people only thought about a couple of the large delivery players, walmart, amazon, it's allowed the opportunity for some of the little guys like us to become a little bit more main stream and actually have somewhat of a competitive advantage in that regard on consolidation, like i told everyone so far on our team we're taking each day and week as it comes. so we'll see what happens. we feel like we're in a good position right now we have a lot of customer demand and the ops to fulfill it so we'll see what happens next. >> while you were speaking we were showing a graphic for the fact that you raised wages $3 an hour for your employees and hired another 100 of them. what are you seeing in the labor market in terms of your ability to get the workers you need and what is the hourly rate now that you're paying? >> definitely. so we were -- we ended up sort of adding that $3 to everyone's

base rate probably a month and a half ago, the 100 number is steal, stale, we added about 350, 400 new employees over the past few weeks. it's trying times in the labor market from a worker perspective. i think you guys are probably seeing the unemployment numbers in the high teens, almost 20% now. so we put up job postings for open warehouse positions, those postings get thousands of applications within a couple days there's a lot of demand there p p our challenge and opportunity has been to make sure we can interview those people properly, make sure the right safety precautions are taken in our fulfillment center we have about 750 people working across three shifts so making sure we have enough ppe for them making sure we can do social distancing properly, all of that stuff. >> so just thinking as a consumer here, is there enough

food, produce rejects out there for you to scale this in a really meaningful way? and how do you make sure you're not delivering people moldy blueberries or other produce that would be rejected because it just is no good >> both excellent questions. so you know when we started our thesis was always, there's way more inefficiency in and food waste out there in the food supply chain than people realized i think that's been the case to date the covid-19 pandemic crisis over the past month and a half has simply multiplied that problem i would say. now that schools are closed, the vast majority of restaurants are closed, we're seeing the supply that previously would have been routed to the food service industry or education industry that food supply has nowhere to go i'm sure people have seen the articles about food being thrown out because there's no end

demand for it. i think platforms like us are able to step in and reroute that supply in a way that previously hadn't been possible so we're seeing even more supply out there now, getting more opportunities on the supply side than we had a month and a half ago, two months ago, i think that will continue to be the case quality, it's a huge opportunity for us and kind of something we're working on we have a very large quality control team that essentially inspects everything that comes in one thing we tell our supply partners is, after the misfit food not the bad food. so everything is still human consumable, everything is quality checked before it comes to the warehouse and before it leaves as well >> thank you for joining us. >> thank you very much for having me. >> carl? >> sara, we'll see you this afternoon on closing bell. david we'll see you later as

well welcome to "squawk alley," i'm carl quintanilla, with jon fortt and morgan brennan busy wednesday morning as powell does the web cast, pretty downbeat message, talks about potential scarring to the economy over the long-term oil inventories helped get the back up. tesla saying the plant will be allowed to go beyond basic operations under strict guidelines joining us this morning is adam jonas, morgan stanley's head of research adam, glad to have you back. >> morning, carl hope you're doing well. >> doing ago a lot of discussions about musk's tweets, the show down with alameda county. sounds like you think the whole back and forth