indexes could be stuck for a while if that happened >> gentlemen, we thank both of you. it's a longer conversation, but i know we will have you all back show you where things stand right now in terms of the futures. you know, had these big dow components, a huge show tomorrow, you don't want to miss the interview with doug mcmillan we will be back here tomorrow, becky, joe, join us tomorrow "squawk on the street" begins right now. good tuesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber futures are steady coming off the best day since april 6th s&p at the highest since march 6th as the tension does turn to walmart earnings and the hill. the fed chair and the treasury secretary in front of senate banking virtually, that starts in about an hour june oil expires today up for the fourth day in a row the discussion revolves around those levels you were talking

about with joe, andrew and becky and the degree to which walmart can post a 74% increase in e-commerce >> it looks like the big guys won. you basically had them cordoned off as essential services. so many other companies, little companies, medium, small, just couldn't compete this is what happens when you have a survival of the fittest economy. this is darrwin playing out. these numbers are astounding if the stock had not run up every day, i wouldn't know what to do. add back 60 cents for home depot and -- before you start selling it that's the costs they said -- home depot had to keep traffic back they had to hold back traffic because they were trying to do it safely. walmart had these big stores, they were set, ready, and their dotcom, ever since they bought jet.com has been amazing

they also can do a lot of food these are great american companies that are on fire the move in walmart is stunning ever since he decided -- doug mcmillan, who is on "squawk" tomorrow, decided to creator the earnings in order to build a big dotcom >> your point on traffic is good home depot traffic down 4, but ticket up 11 what was the difference in walmart and home depot to making up for those additional covid costs? >> i think -- that's a great question because i want to wait until the call to give that answer it's a quandary i don't know why i know that when you do what costco did, i figure home depot are the same, you made a conscious decision to take care of the employees before you took care of the customers, maybe home depot did that. we'll have to find out i do think that lowe's is back

we don't know what that means. i think marvin ellison is doing a remarkable job it's no longer a one-horse race. those stores are all different construction has shut down in a lot of places. i want to put a new roof on, as david would say, on one of my houses, and i can't. i can't get the work done. so there are places where home depot is not a factor. right, david >> that's true, though where i am it was open the entire time through this period of time. >> contractors may not have been able to work >> that's true you could go in, you could have things delivered but you weren't going to be putting people to work >> do make that point on costco, it's worth mentioning how well they treated their employees

it's interesting our conversation for many years now has been focused at walmart certainly as well on rising wages, on how they treat their employees, on the growing pressure on them to do better in that way costco has always done better. but to carl's question in terms of what home depot was doing there, the added costs, it will be interesting to see where that came from and why that wasn't replicated at walmart or how exactly that comparison looks. >> one thing that jim sinegal taught us, the person who created costco as we know it, the biggest and worst thing we do is having to train people it adds about 30% to the sg & a. they are dead weight and they hurt customers customers go to them, they don't know something, so they go to another store. he said the reason why he would always beat walmart is these

people stay. walmart people turn over mcmillan knew that and he changed it i remember going to a walmart in louisiana, it was the same manager i had seen a couple years before i said oh, my god, the same manager. he said no, the rages were raised it's all good now. walmart was known as a place where, yeah, really not a place to shop. home depot and costco were always people who greeted you. you always knew the costco guy walmart joined that. that's mcmillan. he changed the culture quickly david, you told us it could happen because the family was behind him >> you have the short upport of family, family around 50% or so of ownership at various points that allows management to feel as though they don't have to worry about activists or other shareholder bases getting upset when you have the support of

your main shareholder and they control so much of the company the family was behind him. long-time employees, i remember meeting mr. mcmillan a couple of times when he ran international. they made a significant change there. one way in terms of employees, but perhaps more importantly for the business what they've been able to do on the internet beginning with the jet.com acquisition, which they now are going to get rid of that name, so to speak. and up 74% is a number i don't think they could have imagined having seen. >> i remember talking to doug, had lunch with him i pulled up his app. the top was kraft mac n cheese, potato chips, bad cereal i said what is this? what are you doing he said we have work to do holy cow, i met mark lurie later

on, he said what is your problem? let me show you what we'll do. one day we'll put food in peoples homes. i said are you kidding me? they succeeded they have done everything. by bringing in someone outside the culture who wanted to beat amazon -- when you met him, he had a beat amazon war room i love that. they were not going to let amazon wipe them out, they were going to beat them look what happened they are able to generate unbelievable numbers there's room for amazon, home depot, costco, there's room for target, room for lowe's. that's what we discovered this week >> without a doubt when it comes to price discovery, too, it's worth doing. don't just go amazon we found that in this household. you cannot assume it will be anywhere near the lowest price walmart and many others can often do that.

i bought my power tower from walmart.com. needed to do my pull-ups couldn't find a place do it. >> maybe you can have them come in and cut your hair >> nobody's cutting this hair. >> are you sampson where is delilah >> nobody in this household is cutting the hair me and the dog are going full shag, man. you should see the dog, he looks worse than i do. >> kick him. kidding. i don't know, carl an exciting morning. >> it's true what stood out to me, when you're walmart and you hire a quarter of a million people in the quarter, i did some math, that's 2,600 people a day new hires in a pandemic which works out to just shy of two hires per minute that's 24 hours a day. that's remarkable execution. >> that is incredible. it's like a war. it's like a small scale draft.

you put these people in, you have to get them to be walmart people immediately, they greet you, know what they're doing that's extraordinary they made every store a wash house. they have all these stores, why not make them a distribution center i just -- sometimes americans are so smart >> jim, when you couple this early picture on retail this morning, you have the airlines higher this morning as well with southwest and some others talking about load factors looking to get hire in may, june reopenings in states like california does this price action that we saw yesterday seem valid a day later? >> i think it does it feels like a bear market spike when you see it that much up, but a lot of companies are just saying, look, march -- the third week of march was awful.

most of april was terrible we had a lot of companies report in april they didn't know things could get better now there's a new spirit, there's also moderna i think moderna dominated -- i had the ceo of denny's last night. you can -- comparable sales down 80% in a restaurant? that's not sustainable that's what secretary mnuchin is worried about. but if you can get moderna and moderna turns out to be ahead of the game, they've done it with amazon web services, and they digitalized messenger, we can bridge it. we'll have illness, but our hospitals are in better shape for the illness. they're ready. we'll get through to when moderna will produce something that can work. the doctors who have been skeptical that i talk to about every single one of these things started by saying promising. encouraging. you can craft a scenario that

says trillions are coming into the market yes, we'll lose a lot of stores and restaurants, but maybe we can make a comeback. it's a little saccharin. i don't find that it's done -- it's nostalgic for the hold days comeback i see rigorous people saying it can be done. >> i'm hearing those voices as well it's being reflected in the price action we're seeing. jim, i don't know if you -- i'm sure given how rigorous you are, you read that letter from khosrowshahi yesterday to uber employees about the 3,000 additional job cuts. in my mind, that's an example of what we're talking about the stock went up. did you read that letter uber eats is great, but no wwhe near profitable. >> how about free? they love free >> this company is basically saying we're -- we're going to do everything we can to make

ourselves insulated from having to raise new capital it's not like these are good times, we don't expect good times any time soon, stock went up >> i think what we're taking off is the not going under david, royal caribbean got the money. i told you about booking that norwegian cruise line for your family giving it away come on. alaska >> not doing that one. if it can be me, the crew, you want to come, carl, that's about it >> and 4,000 others? all right. that's how you make friends. it's easy. >> we have a lot to get to in a short amount of time we'll preview powell and mnuchin on the hill in about 45 minutes. some downgrades of disney and comcast. kudlow is on the tape on a payroll tax cut. faber on "jeopardy" last night all of that and more when ts see ctiestrt"onnu onhituesday.

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make that a bit more robusrobus netflix is a key name in jim's portfolio of covid stocks, 2$200 billion market cap, not as large as disney which had that huge day yesterday. there is a downgrade at disney and comcast today. continued concerns overall for the old media stocks even including the likes of disney when it comes to advertising and production schedules, when it comes to what you'll see in the movie theaters, theme parks, which disney relies on >> david, what happens if a big part of the country just said i know we're supposed to be social distancing, to hell with it. there is a to hell with it component in the country >> yeah.

>> they think it's something that some new york governor created. >> i don't think it's a what if. doesn't it feel like it's happening? people are ready in virtually every state? >> what is this mask stuff and the social distancing? give me a break. the numbers still indicate people are getting covid, but there's a rebellion against the norms. the companies are horrified because they don't want the liability. >> they don't want the liability. there's still going to it be a significant protocol regardless of what people may do and they're willingness to congregate without masks the companies themselves will still take it upon themselves to put in place protocols, to try to maintain some level of safety, right? >> yeah. >> that goes for disney at the theme parks and it goes for jpmorgan when they open up the office building in manhattan and have people arriving at 7:10, 7:15, 7:20

why? because of elevator traffic. >> you have to do this when i was talking to the ceo of denny's, i said one of the gate things is you had guys they needed to corral, sop up, he said no, six per table really and you have to be distant from each other i'll go somewhere else go somewhere where there are no restrictions i don't know it's almost become voluntary there was some guy who opened a gym and was cited in south jersey i have a feeling there's not enough inspectors to keep these independent guys from not stopping the customers in the same way where it's a difficult thing to enforce the mask law >> does it mean we get a second wave and that we'll have to respond again? >> two weeks >> because we get a surge? >> we'll know in two weeks we don't know.

two weeks. we bent the curve, people are not -- i talked to -- i talked to a guy who was the chairman of mass general, scott sperling, you know him, they have so much room in their icu. they're so ready of course that means all the elective surgery which, by the way, elective includes brain cancer there's so much room the hospitals can handle it. i don't know i feel like three weeks ago we were worried about dying from it now we have people holding hands all over the place >> that's a good point massachusetts will start opening churches, hair salons, groomers. we forget, it was a month ago, but we were talking more about temporary cemeteries across the river from manhattan and central park >> it was apocalypse now >> yeah. you forget how much massive liquidity solvency crises that

seemed to be at least a little bit more on the back burner, especially when you look at what the june expiration of oil is, how different that is from a month ago. >> no, they took the depression off the table. that's what it feels like. remarkable >> yeah. we will see what powell and mnuchin have to say about that progress and any additional need that may be needed for states and local. one more quick break as we get closer to the opening bell on this tuesday don't go away. when the world gets complicated, a lot goes through your mind. with fidelity wealth management, your dedicated adviser can give you straightforward advice and tailored recommendations. that's the clarity you get with fidelity wealth management.

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welcome back to "squawk on the street." yesterday's big market rally fueled in part by news of a potential vaccine or progress towards it by moderna, a company jim followed closely today they say, well, you know,

maybe not a bad time to raise a little cash. >> i think that people who are new to the market, like 20 years, are not used to seeing the following. you have a red hot stock that needs capital in order to build what it wants to build, so sell 17.6 million shares at -- this is going to be done at 76, which, by the way, is tight. that's down 5% a lot of people are speculating saying if they didn't do this, it would have gone to 112. why did they do this they hurt me no, this is capitalism it works this is great. moderna could have sold a part of it to a major pharma or said we will stay independent, we like what we do, we'll raise money. some say that the ceo was promotional yesterday. i know they are a bit of a promotional company. if they didn't release some of that stuff it might have leaked out, somebody would say hey.

i don't begrudge these guys. you're supposed to raise -- it's called the capital markets you raise capital. it's not just in bonds they raise it in stock >> right right. but the optics of it, you could say are they being particularly promotional? it comes a day after they release an eight-patient study that was positive, don't get me wrong, but on the optics, it looks a little -- >> i told you yesterday when you said -- i said they're a promotional company. i meant the guy i love the guy. he approached me saying what do you think about moderna? i said, it's fabulous. i love the furniture he said it's a biotech i said holy cow, you use amazon web services to digitalize this? you're a home run. come on. i loved them since if you're one of the eight, maybe you buy stock, that's bad?

that's like insider information? i don't know i thought it was right i know the optics are not the people who bought the stock yesterday much higher would feel i say don't worry about it the offerings will be placed well it will go up. i think. >> yeah. carl, this has been a marketplace willing to accept shares this is 1.25 billion that blackrock sale by pnc went well i will talk later about t-mobile and softbank's plans to sell shares in that, but there seems to it be appetite. >> novavox, another one people are skeptical about. >> it's interesting. the fact that companies have been able to raise so much money is almost a sub text of this loop capital downgrade at disney where they say you have 14 billion in cash but you suspended the dividend, you raised 17 billion in new great

that looks great from a liquidity standpoint but it makes you raise your eyebrows in thinking what the pessimistic scenario might be. >> and the leverage ratios at disney are the likes of what i don't think many people anticipated that you would see it's been necessary, you have to secure your future any way you can. that huge offering of debt, the did it reasonable if not cheap, with coupons i'm not sure we thought we would see disney approach these kinds of ratios. there's questions as well about management you have iger as chairman. chapek as ceo taking over the most biff cudifficult time thaty probably has seen. and now kevin mayer leaving to run tiktok >> my travel trust owned disney since the start of my travel trust. when it was at 80, it was

painful. i don't blame the downgrade. it's like listen, remember, you need to have congregation. there's no congregation in the theme park not allowed. >> there's the opening bell. we will watch it closely powell's remarks, his opening remarks to senate banking are now published. interesting. we tend to watch these b of a manager surveys, the new one today, 10% of managers see a v-shaped recovery. asked about new bull market, 25%. bear market rally, 68% >> wow >> so the notion this is still a hated rally is intact. >> i don't buy that. we're waiting for the outbreaks. we have about an eight-day period where those people who think it's a bear market rally -- you never want to bet against the american people or bet against people living.

but if there's no spike in georgia, in tennessee, in texas, then it's not going to be a bear market rally it won't be. yes, you might have the fall, but if our hospitals are set for it, i think we'll be okay. there's eight days they have to have this thing become a "w. that's a dicey thing to bet on a "w" when you have moderna out there. did anyone talk to any scientist yesterday who said moderna is full of it i didn't i got nothing but, geez, that's encouragin encouraging. >> i think goldman's report said that they hit the mark >> yes >> that's 1 of 8 in clinical development. there's 1 of 10 in preclinical that's 118 potential shots at the goal

it led some to believe the likelihood of none of them having temporary immunity seems low. >> when you digitalize is and you spot trillions -- there's a thing, the illness you have to go three times left, two times right, then dial a 3, 2. almost like a james bond configuration of the numbers they run is there amazon web services, and they take out a couple trillion that don't work. then bring it down to a few that do work. then they can start doing the tests. all the people who said you can't do vaccines were not including the fact that you could do amazon web services to reject the ones that don't work. this is the first digitized vaccine ever they're using science and technology that didn't exist a year ago not one year ago >> right

jim, back to the market. the s&p is down 8.8% for the year we still have 30 million people or something unemployed. even if we have a significant recovery, which we all hope for and which appears to be starting in certain states, how many of those people will have their jobs back? they've been made hole to a certain extent, but that extra 600 bucks for unemployment will run out. how many of those people get their jobs back? how many of those corporations have cut capex go to 2021 for me. look at the numbers. back into a multiple that makes sense now. and growth rate from 21 to 22. i'm trying to understand why this valuation is one you're comfortable with >> i think indices are not america.

the s&p represents -- has a lot of zombie companies in it, but the stocks are not american. they're a unique combination of companies that seem almost built for this moment. they surprise people, but they shouldn't. apple has good numbers amazon has great numbers these are giant companies. facebook has a new small business initiative. what could be debetter for stock market alphabet, you can cheat on your homework all day because you're doing it at home these companies, it's almost like someone said let's create some companies for a pandemic. those companies are incredible now you join a walmart or a home depot. there will be a huge number of people unemployed. i'm not betting on a "v. i'm betting on a "u. we have to open places and believe that we can hold on. the restaurants, no restaurant

can open and have comp store sales down 80% it's not sustainable those arenydenny's can planet fitness open up and do what's right when you have hong kong putting plexiglass between each treadmill we're not doing that i think the unemployed will be gigantic, but if you took depression off the table, whatever level the market was, it was going to go higher. >> do you worry about the social implications of unemployment, at least double digits and the stock market at all-time highs >> i think the stock market if it was an individual, it would be somebody with a pitchfork to take it back the stock market is so disrespectful of the unemployed,

it's scary but it's not a person. it's a conglomeration of wealthy companies that can come through this at the expense of the little guys. that's why secretary mnuchin was so determined to help the small and medium sized businesses. there's only so much you can do. only so many people you can put on the sidewalk and serve them anything that can congregate is still no go. that's going to be a huge number of people in the cities. but not that much in these areas that are sparse. you know what that means for the election >> what does it mean for the election >> there's a lot of areas that are -- that feel these rules are just based on governors from big democratic states. >> we're aware of the partisan rancor that has broken down.

>> don't you think it's a shame? >> yes i do i don't think it bodes well for the future >> two countries two countries, david >> yeah. >> let's talk about stocks again. >> all right >> we were mentioning large offerings. i did a story yesterday that is worth coming back to today t mobi it mobi t-mobile shares down about 3.5%. yesterday there were stories of softbank selling about a 25% stake of t-mobile into dueutsch telek telekom. i mentioned there were parts not yet told late yesterday we told you what it was which was just not softbank selling some t-mobile shares to

deutsche tel, but selling a large number of theme into the marketplace. it won't happen right away there were lockups that they had as result of being the controlling shareholder of sprint, sprint being merged into t-mobile right now deutsche telekom is working through that they have a committee working through giving the waivers that will be necessary to allow softbank to do this huge secondary offerings. yesterday again, the journal then, after my reporting, saying it could be as much as $20 billion worth of stock they're not set in stone on that number that would be the high it may be less than $20 billion. and deutsche telekom will buy some of the stake to take their own stake in t-mobile above 50%.

you will have an enormous underwriter into the marketplace for a secondary offering that would put pressure on the shares but holding up well. they had a good quarter. people liked it. it's one of the few success stories so far for softbank. >> david, john ledger disappeared. i talked to him, it was his daughter's birthday. can we just say that this guy, even as eccentric as he was, he built a powerhouse company no lawyers around that guy he said what he had to say when you have t-mobile employees, every one of them met him. they loved him this guy built a great company people thought he was a clown. we need more clowns. send in the clowns >> yeah. no doubt we continued to watch him succeed and compete against at&t and verizon in a successful

way. now with the sprint deal huge integration deal ahead of them they had a lot of time to plan it but still going op mike sievert, the ceo of this company. 1$125 billion market value, they'll have to get the market prep for a large offering. doesn't mean today or tomorrow, not sure when these approvals will come through. >> whatever happened to dumb and dumber it was so much fun when he was calling people names like that at&t ceo got named called i don't think he's been called since i was on the swings. you know >> first time he did that on our set. the first time ledger called him dumb and dumber. we were like did he just say that i thi >> i think stevenson will be okay we have to mention the jesus christ thing

the softbank founder said he was misunderstood like jesus christ. the failure lies not outside but with me. you would backtrack, too >> ill-advised speak ill-advised. completely >> well -- well, they are monetizing assets to -- >> yeah. the ten-year is back to 74 basis points let's get to santelli. >> yes carl, you zoomed in on it. let's look at the yield curve starting with the shorter mat e maturi maturity a two-week of two years that shows us we popped up and traded 1 yesterd 18 yesterday, the day before, two-years are pretty much going to stay glued to the wall. maybe get up a little bit. it's not out of the realm of possibility to see squeezes and

ceos popping seeing a two-year note sell off. paired so closely with the fed's overnight rate, 0 to 25, it's anchored down. if you go to the further end of the curve that carl was referring to, a three-day, yes, 74 basis points keeps showing up here it's an important resistance area we're now hovering at basically a five-week high yield close if you look at a mid-april chart of ten-year, if it clears this zone, most likely we'll be toying with the hugely psychological level of 1%. and when you really think about what is going on with jay powell and mnuchin at the top of the hour, going to be speaking in front of the senate, question and answer, there's going to be some important issues and i'm sure debt and how much pain tolerance there is with these programs with regard to the treasury underwriting the fed, that will play with the yield curve. we want to pay attention to the long maturities. you have 30-year bonds hovering in the mid 1.40s looking at tens minus twos,

minus 55 basis points, that's the steepest it's been in two months it has implications of how the banking sector can squeeze more profits out and what's going on in the housing market. back to you. >> rick, thank you very much let's get to bob pisani with -- remembering that the nyse will have a full floor opening a week from today, bob. >> yeah. partial, actually. we'll be covering that as well the important thing about today, it's a consolidation day 2-1 declining to advancing stocks we want to see a broadening out of the rally we saw that yesterday. flat today look at the sectors. tech is doing better consumer discretionary is doing better mega caps, the five big name there's are holding things up. that's outperforming a bit consumer staples is okay health care, banks again underperforming, going back to that old role there.

it would be nice to see a sustained rally in banks we're not getting that want to remind everybody, companies are still pulling guidance we're at the tail end of earnings season, home depot did it, advanced auto parts did it almost 40% of the s&p pulled full-year guidance we don't have full-year guidance for most of the companies in the s&p. earnings today, walmart trading up they had a beat. walmart is near a new high home depot a bit of a miss here. i want to concentrate on comments made by -- the bottom line way down a little bit by pandemic related expenses. this is a bit of a theme we're starting to see, particularly in the retailers. look at walmart and home depot, they said higher wages and benefits and increased cleaning costs was an issue for both companies. target mentioned higher costs squeezing profitability. we'll hear more from them shortly. this is a theme emerging overall. we had some green chutes southwest had some very

optimistic comments from the cfo. the company that recently experienced a modest improvement of passenger demand, bookings and trip cancellations new passenger bookings outpaced trip cancellations that sounds like good news the airlines are trading up today for the most part. this is the first actual two-day rally -- now they're flat. they were up at the open but nothing moving dramatically off of the lows there, aside from yesterday as for the markets, modest break through yesterday to, what, 2 2,998 we're looking for. we'll hear from powell today i'm sure he will emphasize solvency versus liquidity. they can provide the liquidity, if there's not enough revenue for solvency, they can't help. that's the big worry we have for the markets. you the can't just have five mega caps generating the revenue. we saw this in the global fund managers survey.

the big worry from the fund managers, coronavirus, but permanently high unemployment. this has never appeared on that survey that's an indication that they're worried about the ability to keep generating revenue out there for some of these corporations carl, back to you. >> all right, bob. see you in a bit bob pisani when we come back, if you were not watching last night, here's who you missed on gy"jeopardy. >> corporate scandals for 800. >> back to david >> dennis muilenburg lost s hi job over the tragic scandals of this airplane model. >> what is the 737 max >> yes (vo) our communities need help like never before and wells fargo employees are assisting millions of customers across america through fee waivers and payment deferrals,

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corporate scandals 2000. >> not long before he went to jail for securities fraud of $1 billion, i interviewed bernie evers, ceo of this global telecom company that bought mci. >> jesse >> worldcom. >> our thanks to david faber, he does those clues, very, very well >> david announcing clues on "jeopardy" last night. david, when did you tape that? >> well, we taped that at the nyse after our show one day a couple of months back. they do their shows ahead of time so it aired last night but what i was most proud of, guys, i actually came up with the category, and i knew all the answers, but they wrote the questions, but i suggested it.

so, the contestants did very well they got them all. >> that's so impressive. my family still watches it it's an amazing show and i think it's an amazing show because they do stuff like what you did. that's just kind of exciting it's really cool >> thanks, yeah. always fun, so many different people you hear from, it's aiz amazing how many people watch "jeopardy!" and good to see alex trebek still doing it, amazing and thank him for that shout out as well. >> looks like his recovery continues pretty well here jim, about ten minutes until we get powell and mnuchin and the quarterly c.a.r.e.s. act report to congress in front of senate banking which will be interesting because it's all virtual. >> incredible. >> dow is down 206

yesterday was the third 90% up day since the march 23rd low, not surprising to see the market give a little bit back as mkm says bulls ought to be happy with the hold here s&p is down 12 points. we're back in just a moment. where will you go first? will it be familiar streets?

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let's get to jim and stop

trading. >> three months ago a start called nvax at $7 and now at $54. the company did see another vaccine competitors to moderna and the rest and the $250 million they filed for in stock, only down $2.60. be careful the stock that's up 1,278% this year is a stock that may not be able to hold they were on air with me, for the first time they wanted to put them on, but our restrictions of the size of a company, we couldn't have them on now everybody's crazy about it i want people to be careful because people hate this, who have been goiunning the stock novavax is confident but so is everybody else and they're raising money and i just said be a little cautious. >> yep, that's a good way to put it, jim. >> up 1,200. we have a company called ping, another one of the companies that makes it so you

can work at home securely and we have a company called five9, a contact center which is the rage how do you get, someone calls, how do you get customer service, what do you do and this guy has built an unbelievable company five9 and we'll speak to him i have all these companies that are what do you do when you work at home. these are work-at-home guys. i don't think it goes away even if moderna is successful it's a boom for a lot of companies. >> jim, we have to quickly touch on chips nvidia reports later in the week >> sheesh. >> a lot of talk about activity resuming, the chinese building some inventory as the rhetoric heats up and chips benefit from a reopening anddynamic >> i'll take the opposite thing on this. i think china, the negativity on china may have peaked for this year, for this moment. i don't think you're going to hear any more saber rattling i think the president was

concerned -- >> even with the nasdaq telling luck and the delist, tightening their standards? >> i'm not talking about that but i think the saber rattling may not be so loud right now president navarro focused on building factories that make our own pills with our own ingredients. i think this cats will play -- cats away, mice will play, nvidia's had a big run-up but the technology is incredible watch for ana log devices tomorrow, that has an auto component not so good. i think that the chip stocks have some justification to run here if nvidia is as good as everybody thinks, and it may be. remember, they have inference chips, nobody's ever seen it before there's nothing like it. they're using a new architecture, much faster than intel. it's remarkable company. it's science fiction

jansen wong developed a science fiction company. it's not skynet either it's meant for good. david is always worried about skynet >> yeah. we hope not. >> is it true, david >> guys, hey, jim, have you steen stanley black & decker it's interesting i mean, revenue decline up 20% to 30% organically in the second quarter but that's better than what they've been planning for, they tell us this morning. which was 35% to 40% organic revenue decline. >> i expect it to be down 50%. i just make up some number no, what happened is look, these companies were priced for a depression, not a recession. and they're not getting a depression i know there are a lot of people who seemed to even root for a depression i wonder what their political thinking is. >> yeah, let's hope there aren't too many like that >> i want to root for people

living.living, n living, not dying on a ventilator that's where i am. >> we're right there with you. see you tonight, jim, "mad money," 6:00 p.m. eastern time welcome back to "squawk on the street" with david faber, and sara eisen, i'm carl quintanilla. after the banner day yesterday the s&p is holding not too far from 2950 and powell and mnuchin at senate banking. let's get to steve liesman this morning. >> the dynamic duo financing the american shutdown, set to testify today in what will now become quarterly testimony on the c.a.r.e.s. act, it is mandated in the cares act. powell will say the fed's committed to using the full range of tools and the data show there's a sharp drop in output and a rise in unemployment but it's a comment he made last

wednesday at the peterson institute that may cause some controversy at the hearing, and it's about the concern that liquidity problems become solvency problems and congress may have to do more. >> recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems additional fiscal support could be costly but worth it if it helps avoid long-term damage and leaves us with a stronger recovery this tradeoff is one for our elected representatives who wield powers of taxation and spending >> so senator pat toomey thought that comment was so important that he went out of his way this morning on "squawk box" to comment on it. >> one of the things i'd like to clarify is the mischaracterization of the chairman's comments about the congress strapping another money

bomb on the economy. he was not calling for that. there was a much more nuanced comment, in which he observed that there are costs to doing that, so it might be helpful to clarify that >> let's talk quickly about the programs the fed and the treasury put together. treasury committed $195 billion of $454 billion from congress in eight programs at the fed. those will be leveraged up into trillions of dollars of lending inprograms including main street, municipal and corporate bonds and also buying ppp loans. $259 billion not committed and david, that may be another subject of discussion this morning. what happens to that other $260 billion, round it up >> we'd ask secretary mnuchin about that i think it was last week, steve, him talking about giving them the flexibility they need to respond based on what they're seeing steve, thank you speaking of secretary of the

treasury mnuchin he is also testifying this morning. let's get a preview on what he's talking about this morning good morning, ilan >> good morning, david it's been a busy day for the treasury secretary before this hearing he was meeting with vice president mike pence as well as republican leadership on capitol hill over the next relief package. also news that president trump will be meeting with republicans on capitol hill later on this afternoon. so far, republicans have not coalesced around a strategy for this next package. just this morning, white house economic adviser larry kudlow was talking about a payroll tax cut. mcconnell wants business lab liability protections. so we will be watching closely to see if mnuchin signals any sort of consensus is emerging from his remarks this morning. in addition we expect mnuchin to face some tough questions around the lending programs that steve had mentioned. the ranking democrat on the committee sherrod brown wants to

make sure there are guardrails around the main street lending facilities to make sure the money is going to the small and medium sized businesses it was designed for a bipartisan congressional oversight committee reported $37.5 billion has been disbursed. as you mentioned mnuchin will say 200 billion is committed and wants to reserve the rest to create or expand the programs as necessary and also bullish in his comments in his written testimony. he said that "we are optimistic about the progress being made on vaccines, anti-viral therapies and testing, and that he expects economic conditions to improve in the third and fourth quarter. finally just a few more numbers from his testimony for you guys, mnuchin said $530 billion has gone out through ppp, $240 billion in household stimulus checks and that means a typical family of four is receiving

$3,400, sara, we will see if the administration gets behind another round of stimulus. back over to you >> thank you let's talk about the market implications of this with our panel as weigh wait the treasury secretary and the fed chair. fidelity joins us and eric friedman of u.s. bank wealth management is here as well gentlemen, good morning to both of you urian, what is the market's expectations right now as far as potentially more fiscal relief >> the market is pricing in a "v." there's really no way to get around that. just a very handy way of looking at what the market is pricing in using this year's earnings, the pe went from 20 times at the high to 14 times at the low, to 26 times now on 2022 earnings gone from 16 to 12 to 16 so the market is pricing in that the government is providing a full bridge to the other side of

the abyss between monetary and fiscal, and obviously the monetary side is coming in loud and clear, and chairman powell has made that very clear as well in recent days, and now it's really a question of whether another fiscal is needed and my guess is in order for that "v" to be correct, it probably will be needed and it's a question of what it looks like between the democrats and the republicans. >> so you're saying the market is pricing in the fact that the stimulus that we've gotten so far will be enough to bridge the gap, and yet restaurant executives in the white house yesterday were saying that they need to extend those ppp loans an extra several weeks to get through the reopening. so does the market have this wrong, jur rien >> that is the big question. the market seems to be betting on the liquidity problem, not becoming a solvency problem, and that's been the big debate, and so i think the market is justified to be at kind of that

mid 2000s level, we're higher than that at this point but the markets are pricing in that by 2022, earnings are back to where they were in 2019, and you know, obviously we don't know the answer, but that seems to be what the market is pricing >> eric, what will you be looking for from the treasury secretary and the fed chief as far as potential relief and what could move the markets >> sara, i think the biggest thing we're focused on is the signal from the fed. they've been consistent and clear with their message that they stand at the ready to do more as more is needed given the back-and-forth within the legislative branch it will likely be that change agent as we wait and see what passes through the house and obviously the senate so bottom line for us is that we think that this is a very gradual transmission mechanism we as one of the country's largest lenders are really involved with the main street lending facility, as well as the

paycheck protection program and these things take time, both to process as well as to ultimately get to the many people who need them so we do think there is likely more to follow the fed certainly again has been very market reactive we also think ultimately there will be more fiscal stimulus to come through the system because the bridge has to extend further than we are right now. >> jurrien, you had good data over the weekend, dry powder so to speak nearing '08 levels. can you talk about the sensitivity of that money to headlines like the kind we got yesterday out of moderna, and what happens to that sensitivity if in fact we see the back end of rates start to climb higher >> yes, so my sense is just my gut feel is that i don't know nip who is bu anyone who is bullish. the pain trait clearly has been

higher, and when you look at some of the investor sentiment surveys, the aeii has more bears now than at the bottom there's $4.8 trillion sitting in money market funds, that's about 16%, 17% of market cap, that's not as big as '08 but it's certainly a large number of collecting nothing in interest and probably suffering from some fomo at this point and i think the rationale that most people have is that they're fearing that the other shoe will still drop, that states will reopen too quickly and then you have a second wave, and then like the news yesterday, owhen that come out, it starts to make people feel a little bit more comfortable that that second shoe does not have to drop there is a lot of money on the sidelines, no matter how you look at it, but again, when you look at the fundamentals, the market's pricing in 2022 back to normal, and the risk of course

is that it takes longer, and that doesn't mean the market has to go down it just means that the pe is going to rise even further for the time being, while we wait for the earnings to come in. so there are a lot of different moving parts still >> well, it's rising as we speak. s&p just gone positive here up four points. jur ri jurrien, eric, thank you both. we are seeing improvement of the overall market s&p and nasdaq positive. we have groups turning green like communication services and health care, industrials, joining consumer discretionary and technology, all trading positively dow is down only 37. on the other side of the break we'll hear from the treasury secretary evsten mnuchin and fed chief jay powell

just a few moments away from fed chair powell, and the secretary of the treasury steve mnuchin. let's get to it. >> -- our programs support the flow of much needed credit to american workers, families, business, states and municipalities i am testifying today on camera at the request of the committee. i look forward to testifying in person going forward in a safe way with proper social distancing according to medical guidelines i want to begin by acknowledging the unprecedented challenges the american people are experiencing due to the covid-19 pandemic this disease is impacting families and communities across

the nation through no fault of their own the american people are also enduring economic challenges i'm inspired by our nation's medical professionals and first responders on the front lines taking care of our fellow citizens thanks to their efforts and unwavering commitment to their communities, i am confident that our nation will emerge from this pandemic stronger than ever before president trump and the administration are provided to committing necessary relief to help people get through this time the treasury department is working hard to implement the c.a.r.e.s. act we appreciate congress working with us to enact the statute which is the single largest economic relief effort in the history of our country we also appreciate the feedback we have received from members of congress on both sides of the aisle as we implement a number of the critical programs

established by the c.a.r.e.s. act. we worked closely with the small business administration on the paycheck protection program to ensure processing of over 4 million loans for over $500 billion to keep tens of millions of hard-working americans on the payroll. nearly 400 community development institutions and minority depository institutions in many small banks and non-banks are participating in this program. we've issued more than 140 million economic impact payments for over 240 billion to provide direct relief to millions of americans. the typical family of four received approximately $3,400. we distributed about $150 billion to states, local and tribal governments through the coronavirus relief fund for essential services we have also approved nearly 25 billion in payroll support to the airline industry to protect this critical sector of our

economy. turning to the central focus of the hearing today, the c.a.r.e.s. act also provided authority for $454 billion in support for the federal reserve lending facilities to provide liquidity to the system. since march 17th a proved the commercial paper funding facility, the primary dealer credit facility, the money market fund liquidity facility, the term asset-backed securities loan facility, the primary market corporate credit facility, the secondary market corporate credit facility, the main street business lending program, the municipal liquidity facility, and the ppp lending facility we have committed pistol $200 billion in credit support under the c.a.r.e.s. act we have the remaining noun create or expand these programs as needed and we continue to monitor a variety of economic sectors closely and are prepared to support these programs with

the federal reserve as we need to move forward. we are sympathetic to the hard-working americans in business enduring tremendous challenges due to covid-19 we have had to take unprecedented steps to shut down significant parts of our economy in the interest of public health as a result in the second quarter of this year, we are continuing to see large unemployment and other negative indicators it is important to realize that the large number represents real people this is why it is so important to begin bringing people back to work in a safe way as we listen to medical experts, we are optimistic about the progress being made on vaccines, anti-viral therapies and testing. working closely with the governors, we are beginning to open the economy in a way that minimizes risk to workers and customers. we expect economic conditions to improve in the third and fourth quarter, and into next year. i want to conclude by thanking the hard-working people at the treasury, the federal reserve

and throughout the administration under the leadership of president trump, i am proud to have worked with all of you on a bipartisan basis to get relief into the hands of hard-working americans and businesses at quickly as possible. while these are unprecedented and difficult times these programs are making a major positive impact on people's lives. together we will destroy covid-19 virus and our country will emerge from this pandemic stronger than ever thank you for the opportunity to discuss these efforts today and i look forward to your questions. >> thank you, secretary mnuchin. chairman powell. >> ranking member brown and other members of the committee, thank you for the opportunity to testify today at the first quarterly hearing on the c.a.r.e.s. act this is a worldwide public health crisis and health care workers have been the first responders, showing courage and determination and earning our lasting gratitude.

so had 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, 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 health and that of our loved ones but also their neighbors and the broader community. while we are all affected, the burden has fallen most heavily on those least able to bear it the sack fileses we're all making represent an investment in our individual and collective health as policymakers should continue to do what we can to help cushion the blow. the scope and speed of this downturn are without modern precedent, significantly worse than any recession since world war ii, seeing a severe decline in economic activity and unemployment and already the job gains from the last decade have

been reversed, well more than 20 million people lost their jobs and recent fed research shows what others have also found that people earning less are the ones being hard e hit this caused a level of pain hard to capture in words as lives are up-ended with the uncertainty of the future federal reserve is committed to using our full range of tools to support the economy in this chal edging time. our actions so far fall into four categories. first outright purchases of treasuries and agency-mortgage-backed securities to restore functionality in the critical markets. second, liquidity and funding measures, discount window measures, extended swap lines with foreign central banks and several treasury-backed facilities supports smooth money bharkt function. third with additional treasury backing, facilities to more directly support the flow of credit to households, businesses and state and local governments.

fourth, temporary regulatory adjustments to encourage and allow banks to expand their balance sheets to support household and business customers. so far, we have created 11 facilities under section 13.3 of the federal reserve act, liquidity, funding and the flow of credit. all of these facilities have been undertaken with the approval of the treasury secretary and many supported by funding from the c.a.r.e.s. act. i've discussed these facilities in greater length in my written statement, which i provided to the committee. at the fed, we're committed to transparency particularly in deploying our emergency powers thank you and i'll be happy to answer your questions. >> thank you, chairman powell. i'll begin with you, mr. chairman as you know, with regard to the municipal facility, the thresholds for cities and counties are established but

they are established at such a level that many of the small cities and counties across the united states cannot apply for individual loans you have indicated it would be contemplative the states would be able to apply for loans for the smaller cities and counties and there's a lot of concern out there about this i'd like to ask you to clarify that it is intended that these dollars do reach these small cities and counties, and tell us the process by which that can be accomplished >> thank you, mr. chairman we as you've seen, been gradually expanding the scope of potential borrowers in this world, and there are 50,000 entities capable of borrowing so we need to draw some lines to be able to handle this, but in the first instance, we've said that we will always be willing to lend to a state and allow it to -- with the purpose of

downstreaming to counties, cities, other sub divisions of governmental authority within that state so that's one thing. we also lowered the size of the city and i would tell you, we're continuing to look at ways to accommodate further borrowing, including perhaps in the case of states with relatively low populations, where the only borrower with access may be the state government itself. we are looking at ways to make sure that in those states that we addressed the needs of potentially another borrower or two, and that's something we'll be working on going forward. zwr thank you very much. secretary mnuchin, the c.a.r.e.s. act appropriates $500 billion to be utilized through the exchange stabilization fund to help facilitate the

implementation of these section 13.3 facilities by the federal reserve. most of that has not yet played out, correctly -- am i correct >> so there's of the $500 billion, approximately $50 billion was in direct lending programs from the treasury and $450 billion was available for the 13.3 facilities. i've allocated about half of that, and let me be clear, i am prepared to allocate the rest of that the only reason i have not allocated it fully is we are just starting to get these facilities up and running we want to have a better idea which one of the facilities needs more capital as well as the potential for adding additional facilities so i expect to allocate all the capital as needed as was given to us. >> once the money is alocated as you just indicated to a particular facility, and the fed implements that facility, then

that money can be leveraged into greater amounts of liquidity for whatever market or situation that is addressed, correct >> yes, that is correct, depending upon the credit risk, it depends on the leverage we've allocated with the existing capital up to about $2.3 trillion in existing facilities and mr. chairman, let me just make a comment because i know there's been a lot of questions as to whether the treasury is willing to take risk with that. i would say the answer is absolutely yes the way these facilities work is in the facilities that don't have any credit risk, such as the ppp, i approve those without capital allocated by definition, any facility that the fed believes puts them at risk, i do put up capital so by definition that capital is at risk and we are fully prepared to take losses in certain scenarios on that capital

thank you. i have just about 20 50 seconds left and want to stay with the time there have been allegations that big companies are benefited by these facilities could you quick lay dress that, secretary mnuchin? >> well, let me just comment the announcement of the corporate bond facility without putting up $1 of taxpayer money, unlocked the entire primary and secondary market for corporate bonds. companies such as boeing that i had expected would need to borrow from us on a direct basis were able to borrow $25 billion in the primary markets so i would say in the best case scenario, the markets open up and we don't need to use these facilities in the case of main street facility and municipal facility, we expect both to be up and running by the end of the month, we expect to have a big impact on both those markets. >> thank you very much senator brown? >> the workers who have kept our

country running, the essential workers that we all pay lip service at least to are often the lowest paid workers in our economy, they're usually women, they're disproportionately black and brown workers, too often they don't have a union, they're low wage workers who do the laundry at hospitals who prepare our food, put their lives on the line to keep their country running, still worried about paying the bills, staying afloat and staying healthy. mr. secretary, do you think that's fair? >> mr. senator, i apologize, due to the technical issues, i didn't hear the beginning of your question >> the people who are, that we call the essential workers and we call out and thank those essential workers are often the lowest paid workers. they do the laundry, they're the custodians, the security people. they prepare our food, they put their lives on the line for very low wages, and they're still worried about paying the bills is that fair >> well, mr. senator, i just

want to thank all the essential workers, whether it be the health care people, the -- >> thanking is great, but these are people, is it fair that our economy pays the essential workers so little in such work conditions >> mr. senator, some of those people are paid less than others again, i -- >> my question, is that fair >> again, mr. senator, i don't know what specific workers you're referring to. >> i can lay them all out. i'll try the chairman of the federal reserve. mr. chairman, is it fair that those workers who are exposing themselves to this virus, that are making low wages, we call them essential by all of our definitions, is that fair? >> you know, those are workers who are in basically the service sector that's what's unusual about this is it's all about the service sector, particularly those parts of the service sector that are, where there are lots and lots of

in-person contact and those tend to be lower paid workers and definitely the most affected and i would just say that, you know, all of our efforts are to do what we can to help those people and create conditions so that they'll have the best possible chance to get back to work >> well, some of the best things you both could do is to support pandemic pay for these workers and support another recovery act that included more dollars for these low-paid workers who we continue to celebrate as essential. mr. secretary, we passed the c.a.r.e.s. act to help millions of workers who make our country work you've set up c.a.r.e.s. act programs to lend trillions of dollars to companies am i right you're not requiring companies to use the money they borrow to keep their workers on the payroll? >> mr. senator, i am following what was the exact letter and spirit of the law that we negotiated with you and others on a bipartisan basis. in some of these facilities, there are specific requirements and i assure you that the chair and i are absolutely enforcing

those requirements as required in the literal and spirit of the negotiations >> well, that was a nice sounding words, but the administration is willing to send people to work without regard for their safety, but the administration's unwilling to make the trillions of dollars of taxpayer money will help these workers directly secretary mnuchin, public health experts have told us it's not safe to reopen the economy until we have worker protections in place that will control the spread of covid, things like testing, contact tracing, protective equipment, efforts the president has clearly failed to lead to help our country. secretary mnuchin, you said there's considerable risk of not reopening, that keeping some businesses closed could cause permanent economic damage. how many workers will die if we send people back to work without the protections they need, mr. secretary? >> mr. senator we don't intend

anybody back to work with protebs. i was prepared to come there today, i thought it was safe to testify. as a matter of fact i was at the senate this morning wearing a mask and i assure you, both myself and everybody on the task force, the vice president and others are following the best medical advice and i couldn't be more proud of the medical advice that we're getting, and the way the economy is opening up in a safe way >> so how many workers should give their lives to increase our gdp by half a percent, that you're pushing people back into the workplace. there's been no national program to provide worker safety the president says reopen slaughterhouses, nothing about slowing the line down, nothing about getting protective equipment. how many workers should give their lives to increase the gdp or the dow jones by a thousand points >> no worker should give their lives to do that, mr. senator and i think your characterization is unfair we have provided enormous amounts of equipment we worked with the governors we've done a terrific job of --

>> mr. secretary, i'm not going to let you make a political speech who a great job we hear that from the president at his news conferences when in fact this country, the president has still not led an effort to scale up testing he's played state against state. he's played hospital against hospital to get protective equipment. everybody in the country, your comments not withstanding, knows that chair powell, you said last week the additional fiscal support could be costly, but long-term economic damage in the stronger economy so congress needs to think about more than just the national debt right now. it's less costly to actively help people than to help pay for our failure to act in the future >> if you'd answer quickly, mr. chairman >> i said it could be. this is really a question for congress to weigh. i wanted to call out a risk there, which was the risk of longer term damage to the economy, and that's what i was doing, and i said we may need to

do more and congress may as well >> thank you, and mr. chairman, one brief comment. the administration thinks we should put more workers at risk to juice the stock market and haven't come up with a basic plan how to protect workers when they go back to work, when president trump and leader mcconnell want to give away trillions in tax breaks to billionaires, the price tag didn't matter a couple years ago when that happened, but we need to spend money now to keep workers safe in spite of the comments of some in the administration and some in senate leadership. thank you, mr. chairman. >> thank you i would disagree with that characterization as well but let's move on to senator timmy senator toomey >> thank you, mr. chairman thanks for joining us this way i want to follow up on this discussion about additional spending and remind everybody, while we authorize something on the scale of $3 trillion to

round things off of direct spending and lending, and then authorize the fed to compliment that with another roughly $3 trillion, that could be $6 trillion that's like 30% of our entire annual economic output, and in fact, actually more than half of it has not been spent or lent. so i think you can make a pretty strong case that before we rush out and do another spending bill, we actually let some of this stuff go to work and understand the consequences of what we've already done. i appreciate the chairman observing that his comment, while i think it was often mischaracterized, is calling on congress to pass a new bill. in fact it was much more nuanced an that and acknowledged among other things the potential cost of new spending. the comment that you made at the peterson institute, mr.

chairman, do you still stand by that comment >> i do. i do would you like me to expand on that, senator? >> i think we covered it so i appreciate that. let me move on to follow up on something the secretary said about reopening. i think it's worth remembering why we shut down our economy in the first place. it was a very specific reason, and that was to prevent the virus from spreading so rapidly that so many people would get sick so quickly, that we would overwhelm our hospitals. well it's been clear for weeks now that we're not going to overwhelm our hospitals, certainly not in pennsylvania and i know not in most of the country, and so i think it's essential that we begin the process of carefully, thoughtfully and safely reopening the economy. secretary mnuchin, the longer that we continue a shutdown, when weeks turn into months, doesn't that necessarily increase the risk that some businesses will fail, some jobs won't be there to go back to, if

a lockdown and a shutdown continues indefinitely >> that's absolutely the case, mr. senator. there is the risk of permanent damage, and as i've said before, we're conscious of the health issues and we want to do this in a balanced and safe way. >> thank you so for i guess either of you, this one i want to talk about the main street programs first, give us your best estimate of when we can expect borrowers to be able to access funds from these programs. >> i'll go ahead so on main street and frankly on all of the other facilities, we expect all of them to be stood up and ready to go by the end of this month i don't say it won't be a day or two into june but that's our xmg expectation and the funds should be directly flowing after that >> very briefly, would it be possible to characterize the remaining hurdles you've got to get over in order to start actually being operational

>> sure, so all of them are complex and challenging. main street is in a class by itself really. it is not the bond market. these are small and medium sized companies. they live in a world of bank lending. that's a world of negotiated documents and we're trying to enter that world and make loans to qualify buyers. so we've set up, you know, big operations athe the federal reserve bank of boston and hire service providers and doing all of that to be ready to face off against it it's a very diverse, small medium and large companies, very different industries with very different credit needs, some of them, asset-based, some of them cash flow based so it's a really complex undertaking and people are working literally around the clock and have been for weeks to get it ready by the end of this month. >> thank you for that. i also observed that one of the terms, one of the conditions of these facilities is that the

banks who are acting as lenders and by the way i'm hoping on banks can participate well, business and others would be effective conduits for these funds but the lender is going to be required to keep some of the risk on their own books, and i'm wondering what kind of reaction you've gotten from lenders and potential borrowers, what kind of participation are you anticipating do you think there will be strong demand for these facilities, given the way they've been structured? >> you know, there are three facilities we've had a lot, a lot of outreach to borrowers, lenders, everybody, going back over the last couple of months, and three facilities will probably attract different levels of demand we are getting a good deal of interest and inquiry on them, and i think we'll find out fairly quickly you should know that we will continue to be prepared to adapt as we have shown, if an uptick is not what we hope, we'll be prepared to find ways to address

the needs of these, this area, of the economy >> all right, thank you very much thanks, mr. chairman >> thank you senator reed >> chairman powell, thank you for your great leadership. i think you recognize that late and local governments are absolutely critical to our response to covid but also to our economy. it's been estimated for example that there are 20 million jobs in state and local government that they contribute state and local governments 8.5% of national gdp and we know they're facing dire economic circumstances, projected 10% budget losses this year, 25% next year. how likely will it be for us to have robust recovery, if our states do not receive additional and flexible fiscal relief, not a loan for the fed, which increased leverage, but fiscal grants to the states, how robust can our recovery be if this key sector is out of play? >> senator, i don't want to get

into into individual fiscal proposals. those are really for you i tried to stay at a fairly high level on this. i will just echo that i think something like 13% of the workforce is in state and local government a lot of the critical services that people rely on day to day are, you know, provided at the state and local level, with balanced budget amendments, that means that balanced budget revisions in state constitutions, that means when revenue goes down sharply, it can mean job cuts and service cuts those are all important things to consider in going forward >> thank you secretary mnuchin, i just want to make a comment, because i made this comment to you repeatedly, that is, i do believe that we are in a coronavirus relief fund we passed, you do have the flexibility to provide support for the states when it comes to lost revenue this lost revenue was not anticipated in their budgets, far from that, and second, it is

directly related to the covid virus. if you go to most states it is directly related i would urge you to relook as you've done at ppp and you've tailored that several times, look back again and reconsider the ability to use flexibility in this coronavirus relief und so that's just a comment, mr. secretary. let me return back to chairman powell chairman powell, we know that our unemployment is going to be something that will be with us for a while. it's about 15% now i've seen us as high as 20% or 25% next year, and yet our unemployment insurance programs are key to date, they will end at a certain time. do you think it's important for us to have the confidence and give confidence to people that they can still receive funds like this, even if the date is surpassed, the economy is still in disarray, states still looking at 10% unemployment

rates? don't they need that certainty so we have to build in some type of tech, not a date but a test for unemployment compensation? >> senator, again, that's a question about a specific fiscal policy, that really falls to you. we try not to get into too many specifics. i will say, though, that the risk that i called out last week that i've been concerned about and others have is that long periods of unemployment can really affect people's ability to go back to work, because they lose their networks, they lose their skills they lose contact with the job market so i think anything that keeps people intact is probably, hopefully in their job but in the meantime, keep them out of solvency and things like that, should the expansion take, start later or take longer to get going. those are appropriate things for you to look at >> thank you just a final point, chairman powell

i think we're missing the boat, once again, this is sort of like deja vu. i was here in '08, '09, and '10 and we leaped in to help the mortgage market with both feet but we didn't help people avoid foreclosure. it seems to me that that's what we'll do again, unless we have a fiscal program that provides resources to keep people in their homes, when they can't pay their rent, when they miss their mortgage payments, that will put pressure on the mortgage community, and you and the fed and the treasury will rush to help wall street will get to help main street will be left behind. there will be as there was in '08, '09 and '10, thousands and thousands of people without homes, and any economic recovery is going to be slowed by people in those conditions. so i would just ask whether you consider this fiscal response to the core problem people can't pay their rent, they can't pay the mortgage, is

probably the best response rather than filling it in later. >> i think you're right. foreclosure, waves of foreclosures can undermine household finances obviously and as a result of bad household finances are troubled. so but of course in this case, there has been some significant forbearance on that, and i think that's again something to continue to consider >> thank you very much, mr. chairman i thank chairman powell and cha cha -- >> chairman scott? >> thank you for being with us this morning really important time in our country. there's no doubt that the global pandemic has shocked the world and frankly, shuttered a lot of businesses and because of the paycheck protection program i think the two tranches of the paycheck protection program has saved from my understanding

somewhere near 50 million jobs, the first tranche 30%, the second tranche about 20 million jobs and we still have about $100 billion left that we can deploy into our communities. with that said, thinking about the backdrop of $100 billion left in the ppp, mr. sick tear, i feel passionate about helping the underserved communities, orrey county in south carolina or west virginia an some rural parts of west virginia, very often small minority owned businesses are the lifeblood in these small rural communities, and frankly, we have the minority business development agency that has done a really good job of helping to deploy some of the resources from the ppp into those underserved communities. my question is, how can we use the mbda or some other mechanism to get more of those resources in our rural communities or frankly, in our inner city

communities where perhaps that paycheck protection program has been more intimidating for smaller businesses, like barber shops and beauty salons, some of the rural gas stations that may not have the banking relationship that was necessary at the beginning of the program, or their 1099 which means that basically they had to wait a week before they were able to get in to cycle. how can we help those organizations and agencies like the mbda actually provide the marketing so that more people understand the benefits and they understand the program of the ppp? mr. secretary? >> well, senator scott, first of all, thank you, because we appreciate the work you've done with us on this issue already, and we will continue to work with you, and others one of the things we are very pleased about the additional money is that the average loan size has come down considerably. i think we all had certain concerns about in the first tranche how larger companies

will prioritized i believe that's now been corrected. i also couldn't be more pleased how we've been able to get sole proprietors and others into the program. as i have said is fortunately right now, we still have a significant amount of money left, but we are very much willing to consider the bipartisan request of reserving money for cdfis at the end to make sure the underserved communities are properly served in this program. thank you. >> thank you, mr. secretary, once again, let me just say to you, since i can see you on the screen, you have done a fabulous job under intense pressure, and without any question america recognizes the valuable service that you've provided to our country, and i am personally thankful for your accessibility. under pressure, you have still been very receptive and responsive, and that is to say a lot under the current conditions so thank you very much on that,

and i heard chair powell, you talk about forbearance very quickly there. this is an issue that continues to grow in importance and really in urgency, whether it's a small business, whether it's the residential market or the commercial market. the one concern i have that continues to grow would be commercial mortgage-backed securities there are a number of shopping centers in south carolina and frankly throughout the country, where having spoken to some of the folks who own those shopping centers, like 20% to 22% of the folks are able to pay their rent, which means that we're looking at a domino effect in the mortgage market, whether it's commercial and frankly, residential the same concern i'm not sure what the answers are. certainly it's either forbearance or frankly bankruptcy for many firms. what should we expect, what should we anticipate from the fed and from the treasury as it relates to creating more liquidity in that market, and is

there, i don't know that there's a silver bullet. i don't see a panacea, but what would you both suggest that i should tell my constituents on this really important issue? thank you. >> so it is an important market. as you know, we've supported the cnbs market with our open market purchases. that did help the market keep functioning. in addition legacy cnbs are eligible for our term asset loan facility, which is an asset-backed security. it's an important market, we continue to monitor it you know, the 13.3 facility is a lending facility, and that's the tool we have not every problem can be successfully addressed with such a facility, but where it can be, we're willing to take a hard look >> okay, thank you mr. secretary, anything to add to that, sir >> quickly, please >> again, i would just add that working with the fhfa and ginnie

mae on the agency side, and then working with the fed on the securitization side, unfortunately securitizations have certain limitations, but we continue to do this. thank you. >> thank you, mr. chairman i may be over my time, i can't see time i can't see the clock so i assume i have five more minutes left. >> i've been trying to tap i'll do something louder senator menendez. >> state and local governments are facing unprecedented budget challenges we're looking at an enormous wave of budget shortfalls about to crest which will leave to a devil's cocktails of devastating layoffs, dangerous cuts to public safety and essential services and massive local tax increases. any one of those ingredients threatens to make this check crisis even worse and the combination of all three is almost unthinkable the bureau of labor statistics

just reported that state and local governments laid off nearly 1 million workers in the month of april that's almost 1 million firefighters, police officers, teachers, emergency health personnel that should be on the front lines of the public health crisis but are sidelined instead. chair powell, let me start by asking do you agree that our economy will get worse if state and local governments are forced to layoff even more firefighters, police officers, teachers and emergency health personnel? >> well, let me say what we are doing, senator we are -- we have a liquidity facility that is there to address the short-term liquidity needs that these entities have because of their loss of revenue due to the effects of the pandemic that's really the tool that we have to -- >> i appreciate that

that's not my question my question is, if states, counties, municipalities continue on the path to lay off, we have a million laid off even more, just from a economic situation, doesn't that make the economic recovery even worse >> essentially yes, senator, and we have the evidence of the global financial crisis and the years afterward where state and local government layoffs and lack of hiring did weigh on economic growth. >> one of the tools we have to alleviate this problem is using the money congress provided in the c.a.r.e.s. act to bring down borrowing costs for our state and local governments to set the stage for a tron recovery. i was glad to see the federal reserve support local governments through the municipal lending facility but i don't think it's enough. in a letter that i senators

tillis, brown and murkowski sent to you last week, we called on the fed to establish another facility one that would purchase medium and long-term municipal bonds directly from issuers as well as on the secondary market and ensure our state and local governments can finance key public services and invest in infrastructure in other areas to jump start our economy and get americans back to work will you commit to work on that proposal that senators sent to you? >> we'll take a look at that, senator. i will say that generally with 13.3 we're trying to address liquidity needs. not with standing that we are taking a look. >> i appreciate that >> in a speech last week you said additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery, the

tradeoff is for our elected representatives and i agree the hit is tremendous and not just specific to my state of new jersey, projections released by moody's reveals every state in the nation is already or will soon face budget shortfalls. they found that ohio and arizona are each facing a fiscal shock totalling about 20% of their entire state budget. some are worse like west virginia facing a 40% fiscal shock. the fed can't be expected to solve all of our problems. yesterday i introduced smart act, a bipartisan three republicans, three democrats, to provide $500 billion in direct support for our state and local governments, it's the first bipartisan bill of its kind in the senate and i think when we have colleagues from mississippi, louisiana, and

maine on the republican side it's not a partisan issue. would that be the type of solution that can get us back in terms of the states into fiscal recovery >> senator, you know what we've done with the municipal liquidity facility but those are for elected representatives. >> let me close on this. a lot of minority owned businesses are not getting access to the paycheck protection program as we in congress have intended i hope you will be receptive to alas vegas community development and financial institutions and minority development institutions to get greater access to these programs and to the lending facilities set up on the c.a.r.e.s. act so these funds can reach businesses and low-income and underserved areas of our country and it's still not happening and i urge the secretary has been receptive about this, i would urge you mr.

chairman to be receptive as well. >> thank you we'll next move to senator sass who will be with us by telephone and senator sass, i will tap at about 30 seconds left of your five minutes you can proceed. >> thank you, chairman and gentlemen, thank you for both being here and sorry i'm in the hallway outside of a judiciary committee hearing so i don't have the zoom camera here. i'm grateful for your time and responsiveness on this i want to start by asking by some of the recent cyber attacks. we've seen an increase in schemes directed at financial institutions that have been active in trying to help with corona response and i'm just curious if you have any update for us on the cyber security attacks we see in the space? >> well, i would just comment on that we have a department within treasury that is actively working on all these issues and

coordinates and makes sure our infrastructure -- i will give a pitch for our secret service bill, moving the secret service back to the treasury i think they can help with on these cyber-related issues we have all the resources working on this jointly and taking it very seriously >> [ inaudible ] the institutions that don't have the scale to have huge cyber defenses on their own and when we see foreign actors doing stuff like this it's critical we view this as a whole of society problem not just these institutions alone thank you for your pledge to keep looking at that >> chairman powell, the fed has done a series of announcements over the past two months over the 13.3 lending facilities and in the announcement of april 9th the fed announced the term asset backed security loans would be

expanded to include mortgage security backed and loan obligations. "the wall street journal" described that as, quote, the fed will in effect be buying the worst shopping malls in the country and some of the most indebted companies, closed quotes could you give us your perspective on the characterization of this expansion and are they right about the risk levels with some of the commercial properties as america goes through this experience of corona time, lots of people are not just doing telecommuting and distancing for the present, but we see in silicon valley lots of companies planning to migrate their long-term strategy and i would assume that's a wellwetter bellr the taxpayer should not be on the hook for flooding into that space. can you tells us how you would respond to the argument? >> first, in talf we're supporting asset backed

securities, car loans, credit card loans, in addition to that you mentioned. we're only buying the aaa rated piece with a good sized haircut. the credit risk is actually very, very low on this to us and same thing of the clos >> that's helpful the aaa point. secretary mnuchin, i want to go back to china i.p. issues you and i have discussed the chinese government has been stealing intellectual property tore decades while we've indicted companies and individuals for cyber espionage and some of the theft of the intellectual property we rarely see sanctions for these crimes we have indicted huawei and its subsidiaries and cfo for a long list of crimes for secrets, sanctions evasion, money

laundering, but we haven't placed any sanctions on huawei itself how do you and the treasury department assess the cost and benefit of utilizing sanctions against some of the communist cheese party champions like huawei that are not really private sect companies, they built the business side to sort of ostensibly private sector side of their organization by stealing i.p., but the back end of huawei is hooked in not just to the communist party but to military intelligence, why do we continue to treat these quote/unquote companies as if they're really private sector? where do you come down on the cost benefit analysis on utilizing sanctions? >> i think as a matter of policy, you know, and i've said this before, i don't comment on future sanctions, actions, nor do i comment on specific sanctions on specific companies, although i will tell you that the issues related to huawei, we