we got that out of the way june it is june >> it is summer. >> okay. it is summer now too >> the 21st. >> yesterday was spring. >> yes yeah okay, that does it for us today. make sure you join us tomorrow right now, it's time for "squawk on the street. ♪ good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber, all back at post nine of the new york stock exchange. stocks trading a little heavy ahead of powell, day one on the hill, although his prepared remarks are out. meanwhile, inflation runs hot. our road map begins with the macro picture. powell is set to testify, and fedex sales fall short plus we're watching that ev race we're going to hear what jim farley told our jim about why he didn't hesitate to team up with tesla for that charging

partnership. and keep an eye on housing mortgage rates they're flat, but those home builder stocks are still on a tear let's begin with powell. headed to the hill this morning, the fed chair kicking off two days of testimony on the economy. today, it's house financial services, tomorrow, senate banking. in his remarks, he does say nearly all fomc participants believe it is appropriate to raise rates "somewhat further," adding stls still a long way to go to get inflation down to the fed's 2% target. he said the banking system is resilient. >> i think he was trying to make no news. we knew that austan goolsbee was softer, that bullard wants to be more data dependent. i think what he's trying to do -- and david, you know when you make the testimony, you're trying to be neutral it's in the questions where he is called in to say, are you trying to throw us in recession?

there's also, like, talk about, always, the plutocrats >> yeah, and the questioning does go off into areas that are not of great interest, perhaps, to some of our viewers or at least when it comes to the market impact of his comments, not that it's not interesting to hear him opine on whatever it might be >> but they want a slip-up >> housing or affordable housing or who knows but we'll see. >> yeah, i mean, i think that, you know, carl, when i think about what the problem is, of course, we don't have enough homes, but if he starts talking about, look, we're worried about student loans, i think that someone could say, they should be -- they shouldn't charge them interest or they should be suspended. so, then, you get in this kind of moment where he's caught in some sort of cross fire and then he says something wrong and the market goes down >> you mentioned student loans by the way, it is official department of education says those will restart in october.

>> $14 billion >> interesting, jim. i guess the question will be about fed politics as we discussed yesterday, whether or not there was some kind of horse trading with the hawks to get a pause but reassurances that the dots would go higher, and whether that's a good look or not. >> look, i think there's another way to look at that meeting, which is, there couldn't be a consensus, so let's not do anything i really feel this i didn't feel this way when it happened, but i look at the disparity of where people are, and i think that it's probably worth saying, you know what? we got to sort this out. let's take some time to sort it out, as opposed to, hey, look out, we're going to have a recession. >> we mentioned the uk and by the way, i mean, it's possible that they bring this up the united states is basically alone in getting their policy rate above core cpi. uk core 7.1% they're nowhere near it. i mean, you got stagflation fears rising up again in at least the uk >> i think so. i do not like the initial take

that i keep hearing, which is, well, he was late, he was late no, come on. he's got it more right than anyone in the world. david, you know our stock market is the best, right >> what does that mean, it's the best >> it's the best >> no, i -- like, what's that? is that just a -- >> doing well. >> okay. >> i'm given to hyperbole. you know that. >> i'm aware >> why doesn't he get credit for anything he's done as opposed to what he did in, say, 2021? >> you feel like he doesn't get any credit >> no. i heard this morning, doing the ur usual whining. >> he was late >> oh my he was late. >> you were with him you were like, inflation, you know, you were using the transitory word. i remember you and i having those arguments. >> i got one for you nvidia >> you can't hit him on that

>> no, no. >> it's that -- it was up for, like, someone said it's doing well do you know that snowflake -- i had frank slootman on when i was in santa brarbara, and i tried o get him to say something positive, and he wouldn't. he said, jim t near term is bad. but, did you see he's sitting down with jensen huang at a fireside >> today, needham goes to $216 on snow. >> what are they going to chat about, jim >> does it really matter why do you ask for so much granularity? what's amazing is that bill mcdermott had that fireside chat with jensen, and that was the beginning of the service now run. what happens if trfrank stands his negative call? does it still matter that jensen's there >> i don't know. >> that's interesting. so, the new way to get your stock up is simply to go have a little pow wow with jensen huang? >> if you would listen to his initial talk, he said that

oracle was an early adopter. no one seemed to listen until the quarter. >> right >> and then, boom, we found out, yep. by the way, when i was with jensen, the first person he talked about having meetings is -- >> zuckerberg. >> geez, he's so good. he's over there in europe right now. can you imagine what that's like with the regulators? >> that's got to be hard, as we've said many times. they're ahead of the u.s. in terms of the evolution of their rule-making, perhaps >> in the q&a, what do you think that's like? >> i don't know. we'll see. >> tiktok. >> what about tiktok >> tiktok's bad. >> tiktok is bad >> i would stick with that, given the fact that -- what did our -- >> there was an interesting "journal" story about tiktok did you see that, jim? about all these brands that have to pivot almost immediately and/or can create new products

based, in part, off what they're seeing on tiktok it's like a billion-person focus group. >> meanwhile, the move to ban tiktok, at least in congress, is basically back on the back burner >> montana was all alone there >> i know. what happened to that? that was hot for a while it have durbin told -- either "the times" on the "journal" yesterday, it's all a.i. now >> i find that montana was extremely absurd and irresponsible. oh no, that's xi talking about biden. biden did something that was really amazing he said that he was a dictator, but he left out, "for life." was that like a concession >> well, whose life? >> well -- >> it's interesting. the line was -- you're referencing the balloon. that's what the president was talking about, and that it got off course and xi didn't know what had happened, and his line was, "that's embarrassing for dictators, when they don't know what happened. >> i think the embarrassing thing -- that's what got under his skin it did have, he said, two bus

loads full of spy equipment. how about the spies in cuba? how's that >> these are all issues. and by the way, this is still number one when you talk to ceos it's sort of a.i. now, generative a.i., what it will either help or how it will help our business or how it may displace us, and china they continue to be sort of one and two. >> i agree with that >> in the minds of leaders of organizations or the board, certainly, especially for multinational companies. but even for ones that aren't. >> totally >> speaking of multinationals, jim, of course, fresh back from ford in the motor city this is what jim farley told him on "mad. >> the only way we are going to transform this country into a sustainable ev industry is going to be working together, dividing people is not going to work. >> what an amazing day of coverage you had, jim.

i'm serious. >> including my rag doll >> i haven't seen that, sorry. i'll watch look, here we go >> here it comes >> watch how i handle this >> where are you, in the back? >> nobody can handle this better than i can this is me i'm a front-seat driver. when you see this, you'll know how cool i am. >> oh my oh my. >> serpentine. >> it was alan arkin this is where i'm really cool. >> your face >> there's a moment where he says, you got to warm the wheels, and i say, oh, yeah, warm the wheels. >> you didn't -- you were okay how was your digestive system after that >> i notice there's no video of you getting out of the car >> no, no, and there's no video of the muffin that i had earlier. >> wait, did the muffin go this way? >> it's one of those things you do, like, when you have had too much -- like, pretend that it

doesn't come up. but i will tell you this, the whole time, i thought i was going to die i actually, at one point, said -- at one point, i said, do you know how to do this? i mean, he's a ceo how do i know? >> he knows how to drive, clearly. >> i want to talk about musk for a second because david, he watched your doc. >> it wasn't a doc wait, i did a doc on exxonmobil, but i did an interview with elon musk >> he watched your interview >> a lot of people did, thankfully >> that's just a gratuitous mention. >> you're right. >> he was concerned about how m messianic -- like, musk is really about, to some degree, domination, but what i thought was great was he said musk is about machines he's about love of cars. the love of cars versus the love of the process, and so therefore, he's more in tune with what the customer wants than musk. i thought that was interesting

>> it is >> you worked to get him to address musk and actually, you got to it. take a listen. >> america loves an underdog, and we are the market leader for ev trucks and vans, and we know those customers better than anyone and if he wants to design a cybertruck for silicon valley people, fine >> okay. he described it as a lamborghini. he goes, that cybertruck is going to be a lamborghini. you know, that's a $450,000 lamborghini. but he just is not -- >> he sees it as a niche product, he really does. >> just not important at all but he has total respect and awe. i got the sense they get along but where the difference is, is he likes the dealer network. >> right, right. >> he feels he's more in touch, and that matters, because he's dealing with small and medium-size business you have the f-150 lightning

that defines that. >> musk told me that, listen, the cybertruck is going to be here soon, so we'll get some sense in terms of its ability to penetrate the market here i am standing in front of it i got to look inside >> why are you -- this is my segment. give me one in front of the mustang. >> that was there. and then musk talked about it. he obviously is a big believer in it. but you're right, it's a different-looking thing. they had to come up with an entirely new manufacturing process to create that car >> were you able to get inside >> i looked inside i was not able to sit inside >> i baited him, jim, repeatedly i said it was ugly i needed the sound byte. i tried to get a sound byte against "princess bride" even. >> in the plant, you can't see that part where they're making the truck. it's much more difficult you can look at them making every other car. >> i was allowed all access. >> oh, really? you had a backstage pass >> i couldn't take pictures. there were things i couldn't take pictures. by the way, the broncos are

coming off the line, and they're all sold you can see "sold, sold. >> you tweeted a picture you said, you like this broncos? too bad, it's sold >> they're all sold. every one. >> what does it all mean >> what, existential >> i want to get existential first of all, do we have enough lithium, cobalt, nickel to make this stuff happen? >> if we go to the chinese, but we won't soon. right now, the dependence is there, but we're going to make it -- ford is going to make it north america. >> meanwhile, musk met with modi yesterday. he says that india's pressing him to make a significant investment in that country he says he's a fan >> well -- >> by the way, even as larry fink tells nikkei today that international investors are trying to get out of china, maybe buy some japan, as capital flight in china -- is a story. >> well, yeah, but fedex didn't say that fedex says, we're still -- we can go into fedex, but that

china is still very important as a part of commerce and they're actually -- the fact that it's depressed the negative for fedex. it's really part of the world that we have to have going i think the india musk thing, i was shocked that tesla isn't up more today, because kind of a new catalyst every day >> it's interesting. musk, of course, only a month ago met with macron. he meets with modi he meets with all these heads of state who are encouraging him to come do business in their countries. >> he's a nation state in himself. >> he is it just goes to the significance that he has on the world stage, not to mention, of course, starlink, still, which plays such a vital role in ukraine's efforts to defend itself and actually on the counteroffensive we don't talk about the war very much anymore it's a horrible war. >> you know, we are -- did you see the error in the defense budget that's going to allow us to send more weapons it's like, why do we need an error to send more weapons let's have more errors this is good versus bad.

>> yeah. >> putin's a dictator. that's not irresponsible >> yeah, i mean, the cover of foreign affairs yesterday is all about how this is going to end and whether or not -- 15 months of fighting, neither side has demonstrated an ability to put this to an end, even with help >> we just don't know. i'll tell you what was interesting, excellent interview with kissinger on bloomberg. he turns 100 obviously, clear-headed. >> it's amazing. >> he says, if we don't negotiate with china, we have a war, and we have to do what we're doing. really, rather amazing i thought that his view -- i mean, this is a man who was in charge of foreign policy with nixon. nixon. i think most of our viewers don't even know -- >> china was a very important part of kissinger's life, including his associates, which focused on china and helping advise corporations in that country >> but there's no -- if china aligns itself with russia, well, whatever

very impressive. >> there's a lot to get to today ahead of powell in about 45 minutes. we'll get to fedex, under some pressure this morning in reaction to the guidance there and the discussion about some freight margins being down for the year we'll get to calls as well on disney, spotify, adobe, uber, tesla, and more. ain streets acrs the us, you'll find pnc bank. helping businesses both large and small, communities and the people who live and work there grow and thrive. we're proud to call these places home too. they're where we put down roots, and where together, we work to help move everyone's financial goals forward. pnc bank.

we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far.

(chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch. some gainers on the ndx this morning. once again, largely about autos.

you see rivian in there again today after agreeing to join the tesla charging standard. watching retail as well with monster and dollar tree, although all eyes will turn to the fed at the top of the hour when powell appears before the house. we'll get cramer's "mada" d unowtohe opening bell [due at target in 5!] copy that. make a hard left down the alley. network's got you covered. [please confirm requesting back-up.] -changing route. -go. roadblock ahead. ...back up, back up... reverse! reverse! next level moments, we're 30 seconds out. need the next level network. [north corridor, hurry!] -coming through! -or 3, let's go. the network more businesses choose. transplant received. at&t business.

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the only problem? more appointments meant he needed more space. that's when dr. petsworth turned to his american express business card, which offers flexible spending limits that adapt with his business. he used his card to furnish a new exam room, and everyone was happy. built for dr. petsworth business. built for your business. amex business. all right, let's get to a "mad dash. we've got about a little over eight and a half minutes or so before we start trading at the new york stock exchange. amazon, one of the magnificent seven and we're going to introduce our new index a little later. >> that will be fun. now, david, before my father

passed, you know what he thought was the best thing that ever happened on tv the greatest doc ever. he liked the amazon doc because people talked about how it was like slavery to work for them. my dad said, the 13th amendment doesn't apply to amazon. he was still sharp 92 we were riveted. one of the reason why i'm riveted is because they are america's greatest retailer. they are going to improve profitability, which is difficult because they have been -- they lose a lot of money on actual delivery speaking of fedex, the good business is delivering hub and spoke. the bad business is fulfillment. but david, some of the parts, $150 break-up >> i mean, other people have talked about, you know, who's the -- what's the research >> this is jeffries. >> jeffries, i mean, aws alone, although it's slowing growth -- >> that's the problem. >> the question becomes, what's the multiple on that i don't know what you pay for the retail business.

frankly, i don't -- you know it's not a high-multiple business it doesn't make any money. >> no, and they make money on prime, but i think if you don't have amazon web services and advertising doing well, and my travel trust owns this, but you got to see amazon web services, like, amazon web services is going like this. it's going down, down, down. >> growth rate >> you need to see a.i. bring it back up. but we're probably right there is that fabulous and i don't want to be right there. >> understood. by the way, $150 on a sum of the parts does not make me think that's worth pursuing. that's not enough of a premium if he says 300 bucks on some of the parts -- >> price target, $150. i mean, $150 do you push it really hard >> no. and by the way, i know some people in bentonville, arkansas, who would argue with your characterization of the greatest retailer in the united states. >> i think that's important, and i think that there's a lot of feeling, david, that this company has to do something major. they don't want to they think that it's all systems go, and they fired 27,000 --

they fired expensive people at headquarters but they are adamant that there's -- they really don't need to do anything other than what they're doing prime day is coming up you may want to wait to buy new shoes and stuff. >> okay. i do need new shoes, and i will wait thank you for that advice. >> no problem. >> the things you learn here we got an opening bell just a few minutes away of course, remember, you can catch us any time and anywhere by listening and following the "squawk on the street: opening bell" podcast.

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the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. >> as david mentioned a moment ago, with big tech in rally mode, cnbc is now out with our new magnificent seven index, which consists of tesla, nvidia, microsoft, apple, alphabet, amazon, and meta, all components are equal weighted, jim. and actually got the attention of goldman today as kostin recommends hedging some of this rally. >> yeah, and david does raise some good points, because some of these stocks just seem to go up it's like they're levitating, and david, yesterday, when the

market was really hideous, tesla and nvidia were still up >> right >> the buyers just didn't let it come in as if, like, i've got to get it now before it's up ten, and that worked that way i mean, that's what -- now, yesterday was on yul brenner and steve mcqueen, by the way, the only two who lived a lot of people feel robert vaughn lived he didn't live >> okay. i have not watched the movie in quite some time, if ever >> if ever there's a very definitive. the idea is that these people came and rode into town and saved really good people, and then they were almost all killed against the banditos, and, well, there you go only yesterday -- >> who would the banditos be in this market, jim >> the shorts. >> the shorts. >> short sellers >> oh. >> of which, by the way, when you read this, kostin piece, which is a great piece, they did talk about how it's just very

crowded. that's the term. >> downside protections, kind of cheap right now. positioning, maybe not the tailwind that it was a month ago. they still -- they're not calling for -- they're one of the lowest on the street in terms of recession highs >> what was strange is they had just -- this is not kostin they had just gone up, but they still stuck by 4,700 out, which was very different from wilson but now, i called it the magnificent seven. there are people who claimed in research they had it earlier i don't think -- when you have seven, it's not like you kind of dirty dozen. >> no, it's seven. i'm giving you full credit >> coburn, by the way, was the coolest. >> i think of yul whenever i think of the seven >> yul is amazing. >> do you have a favorite of this magnificent seven, jim? i guess you do i know what it is. >> steve mcqueen is nvidia >> so, nvidia. >> absolutely. >> why would i even ask that

question i have seen "the great escape" quite a few times. >> it hits the floor sorry. i didn't see that. >> let's get the opening bell here at the big board, it is electric and gas company pseg, celebrating its 120th anniversary. at the nasdaq, structure therapeutics, a biopharma focused on metabolic and pulmonary conditions >> what's interesting is that it was a very speculative stock it got a bid from lilly, and lilly's stuff climbed on it. watch this there are lots of drug companies that have just been moribund pick off these little companies and people pull in on the lightning round and say, wow, that's a really good company i didn't know about it the home builders are down today. what is that >> is that allowed >> i don't know. we do have kb homes coming up, who's going to report. we don't want that to upset the

apple cart would it it could i mean, it's florida and california, mostly people say the florida market is cool, david. that six-month in a day. clock may be ticking on that >> in terms of people moving there and living there to avoid taxes other places >> yes, yes. >> what do you mean, clock may be ticking on that why? >> the word is that they had some figures saying that is played out, that everybody who's going to do this -- >> everybody's going to move for tax purposes has already done so >> this is petering out. we might hear it from kb homes, although the people at kb home are not the people who have enough money to do six in a day. >> there has been work done after yesterday's data on completions getting -- picking up basically, the read is that parts and labor may be a little bit easier to come by. >> i hope so, because we went from 1.3 to 1.6. we need 2 million. we need go back to where we were in the '60s and if we don't, then powell is in a jam here, because it's just this chain

rent's too high. i think people don't realize that he's upset that homes have gone up 40% since 2019 that is outrageous this is not cream cheese and soup it's where people live, david. >> i understand that you mentioned many, many times, the run on the home builders you've also talked about how it figu figures into inflation and the fed's thinking about things. but what's going to bring this move to an end >> what carl just said there was a long time -- >> the inventory, we know, is just remains low every time we talk to any of the ceos from these companies. >> so, doug yearley, whom i regard as a brilliant guy, they're not building a home unless they have a buyer i mean, which is incredible. you know the home builders, what they used to do is put up like 10,000 homes and say, oh, i hope the fed doesn't raise rates. they don't do that anymore and you know what? the late bob toll, who was such a great guy, i was interviewing him once, and he said, jim, you

ought to buy one of thieese uni. it's like doubled within -- it was in brooklyn. doubled. >> that's a very nice development, the one down by the water there. very nice place. >> you could have gotten those for a song >> really? i wish i had >> it was incredible, the value there. and that's the problem like, it's -- everything's a value. by the way, my daughter bought a bronco, and it's one year old, and they said she could probably make more money if she sold it, like, make a profit off a used car. >> so, no more the days where you drive it off the lot and it depreciates by a quarter >> i was thinking the same thing. when you drive a bronco off the lot, the price goes up this is the problem with much of america. >> i was thinking of you in the front seat with farley again >> you mean when my neck snapped? >> i want to focus on that face you were making. >> can we freeze it? the look of horror >> the second --

>> how about this -- smoked tires have to warm up? i knew what i was talking about. well we thought we had it we could have it you never know >> it's never going away i'm going to -- whenever i want a laugh, i'm going to just roll it >> i didn't know that he was going to do that to me what was with the -- he had to go on the wet track? they watered it down i didn't deserve that. >> here's jim getting in >> that's the mustang. >> safety first. >> that's an i.c.e. engine it's not an "e." we're going fast there that's there >> that's not -- not yet >> still cool. >> you're a little uncertain right there. >> it was that second look >> forgot about the camera >> there it is >> oh, boy >> i didn't know there was a camera on me, and -- >> this is not funny anymore >> i'm sorry >> now, i'm asking, please cut it out really bad ride. it's a -- one of those -- it's

like a really bad roller coaster where you think -- or pharaoh's fur. >> when you do a test flight in the f-16, they try to make the media sick >> until he saw actual food spew from my mouth, like, reagan, right, remember, in the exorcist until my face turned green and i was rolling around he was really trying to do it. he was trying to jar me, and i love the fact that he got the tires hot. what the hell is that? hot tires? and then he said that a tesla couldn't do a hot tire that was meant for you >> oh. okay >> he thought faber and musk versus cramer and farley >> he equates david with elon. >> me and elon, we're like this now. oh, look, he's texting me again. i can't get him to stop. stop texting you i'm kidding. >> jim, fedex, we haven't really gotten to it the story about whether or not

costs -- cost efficiency is enough at this point >> i think it is i'm surprised -- the stock was down 10, and then down 15, and now it's barely down, and that's because they've never had a situation where volumes were down and margins increased which means, david, if you think there's any chance that the economy picks up, number one name >> and they are in the process of integrating ground and express, both here in and in canada as well, but in particular here. it's a years-long effort >> well, there's only -- they used to have seven people on the conference call. boom go right through the call. and raj subramainian, he was saying, u.p.s. strike in no. we're not going after anyone but if you want to be with us, u.p.s., strike, then you're going to have to commit to a long-term contract >> although the numbers again -- >> it's barely down. >> the numbers did not hit estimates at least >> oh, david you can continue with your small

thinking >> well, i'm just saying -- >> i meant that -- i'm just kidding. if you go read between the lines, what's incredible is they had planes, and you used to talk about this all the time. they had md-11s, and i asked the younger people in my office, does anyone know what an md is >> mcdonald douglas. >> remember that >> of course i remember that >> would that deal go through now? >> no. >> did you see laura martin on disney time for apple to buy it >> before we finish up with fedex, yes, we used to talk about it being a fat airline >> right well, it's no longer, he's retiring by the way, the number of people being laid off and the cost savings, billions. billions so, i think the idea that the stock was down 10, which is stupid, because what people didn't understand is it's a margin story it has always been a margin story. and the margins went up on

volumes down, which is extraordinary. so, then, you project the u.p.s. strike in there. you will get them because you can't, obviously, do business with u.p.s. if they're on strike >> but they're not >> no. >> not yet >> no. by the way, the automakers, look out. the guy who runs uaw, he is talking about, it's time -- it's time to get the fat cats and bill ford had some comments, chairman of ford, saying, no they don't like that kind of talk farley, obviously, said, look, our culture is not like that but look out he's spending a lot of time with john deere we know deere took a strike. >> okay. you've moved from u.p.s. to the automakers in terms of the threat of a strike is what you're saying? >> i just was trying to root these along. >> i get it. i just want to make sure i'm keeping up >> fedex is -- i'm talking about, when you take a strike, the other guys win now, in uaw, they'll strike everybody, but this u.p.s. strike could be, you know, if it happens -- >> if it happens

>> it could be unique, because what raj raj subramainian is saying is, we're not targeting these people, but he says there's lots of calls. he's not going to let you do a short-term contract with fedex and go back to u.p.s >> but they haven't taken any business so far, it doesn't seem no sense there's been a change in market share as a result of customers worrying about a strike at u.p.s. >> correct but it was a call unlike any other fedex call, just a couple people on it it used to be -- it was like the magnificent seven was on the call now, it's just raj, who's tough as nails and really good at what he does. >> interesting your point about upside economic activity, i see kkr's mcvay says investors are not well positioned for an unexpected bounce in economic activity right now. >> well, if you want to be -- if you want to be there, fedex is the way to go. i mean, i cannot believe -- i remember there were times --

david, you know this -- when the revenues would be down, and they would lose a ton of money. >> yes >> and now, hey. >> you're right. that's what the activists were after there. >> right >> cut costs, cut costs, cut costs, and obviously, fred smith is the smith era over? is it really over? era? i can't even call it that. this man created, founded -- >> he got them up to where they took a lot of share. when he started, u.p.s. had like 80% share. >> still the chairman. >> and i think that fred totally -- i don't know this i revere fred. but fred gave them the hand of which he said, listen, you know what the problems are, and go do it i mean, this is different. there are ceos who kind of hang out and chairmen who hang out and second guess this is not one of them. fred smith is not going to talk -- he'd sooner talk about the falcons. >> right >> you know why? >> because he owns part of them?

>> no, his son is the coach. >> oh, his son is the coach. i know who the falcons owners are, and it wasn't fred smith. fred smith's son is the coach? >> when i talked to him, i was trying to get him to question -- he said, no, i'm focused on the season eagles versus falcons is going on there he should have focused on fedex, because, oh my god, the falcons are bad. >> jim, there's a ton in media today. warner reportedly talking about licensing some shows to netflix. ryan murphy reportedly leaving netflix for disney and then needham saying that sentiment on disney is really souring, because people aren't sure of the strategy, who's going to be around in five years. they prefer deleveraging stories, takeout stories >> this was a -- the laura martin piece was -- >> this is the laura martin piece, yeah. >> needham, maybe a long-term --

that's how i'm looking at it too. i think the next quarter -- i think -- >> they prefer paramount to disney did you just say that? >> it was not a positive piece my favorite line is, just in case you were trying to figure out, trying to get out of disney, apple could buy disney >> that's not new. anti-trust regulators will bless that one in a heartbeat, sure. >> do i like warner more than disney i thin i think disney has more optionality, but i think warner has a ceo, so they have the edge of disney. >> i can give you a litany of challenges for all these companies. the main one being that the linear television ecosystem is declining at a more rapid rate than it had been, which, frankly, there was an expectation, perhaps, that things would slow. instead, they sped up. >> no, the barclay's piece -- >> the ad market is not particularly great warner bros. discovery,

paramount? that's where all their cash flow comes from at this point i think warner bros. discovery is going to generate a good amount of cash flow in order to continue to be that deleveraging story that they sell hard to wall street. and it may happen. it may happen. >> david, paramount has -- >> disney is going to be faced with adding debt, potentially, when they have to buy out a stake in hulu they don't own from our parent company, comcast, because it's clearer, based on recent comments and what i have heard as well that disney is going to buy what they don't already own of hulu. >> look, i reiterate that the next -- this is going to be -- this is not the year for disney. i know that. it's just not coming together. but maybe you cut enough costs, and new ceo's got a better hand. >> you cut enough costs, put a structure in place that works, introduce the new structure, maybe in the fall, and you hope

for the best as the next year goes along >> in a nutshell >> then the board comes up with a new ceo. >> there are parts of disney that are amazing no one disputes the theme parks are crushing it. >> yeah. >> but they could buy bitcoin with their cash. >> i mean, paramount >> champions league. >> okay. >> jim, some consumer stuff. l la-z-boy and winnebago, boert lo both lower you mentioned nikki. cowen and b of a saying streets may be prepped for a guide below. >> when they report, don't take the bait wait for the bomb that's dropped in in the guidance. direct-to-consumer was doing well now they're going back to wholesale. i just -- >> china >> china, just okay. there are obviously a lot of

issues with nike, but like many companies, it's a great company. like disney. nike and disney are somewhat similar. look, buy them, don't expect them to turn, you don't know what day they'll turn, but when they turn, they are great american companies i think that starbucks -- the irresponsible government called in starbucks >> your going through all the china companies? nike, starbucks. >> you want to go there? winners win. you see the stock? >> i haven't seen it lately. >> this is macao gaming. >> the macao reopening -- well -- >> nothing else is working >> no, it doesn't seem to be all the talk about china is what new stimulus they can figure out to sort of -- >> they cut rates that don't matter anymore this is a bad day. nvidia's down seven. >> nvidia -- >> what's that about >> i don't know, jim sometimes stocks -- even nvidia

goes down. >> have you ever seen the show, "camelot?" doesn't ever snow there. but snowflake is up just slightly off the jensen fireside chat that's coming >> well, adobe, which took a spill, bmo goes to outperform on an a.i. theme. >> i thought was a a good piece because adobe went to $518 and then back to $485 so you've got the benefit of a good quarter. but a lot of the stocks look like the chart of this one, which is you just can't imagine coming in now. i mean, you're not early to adobe. do you agree have you -- what have you been using for chatgpt? when you input it? >> i just go to ai.chat. i'm just using the last one. i haven't even signed up for 4 and paid my 20 bucks a month >> i want ten questions for farley, and i can tell you -- and i said, interesting guy.

chat is a yes-man. everything was positive. it was like, ask him how great he is. >> it does come back great question it's very enthusiastic >> i felt bad, two of my questions were chat questions. >> by the way, somebody else who's been doing that is massasan i know you covered his comments at the annual meeting yesterday, but he made more as well talking about how he's -- he was very despondent, and then he started talking to chatgpt about his business ideas for a.i., and once again, sort of taking softbank down that road. and you know, he had his cry, and now he's in love again with chatgpt. thank you, "wall street journal," for that great headline it encouraged him as well. he said, "chatgpt and i came up with a bunch of ideas. >> they talk every day >> that's great. well, chat's very supportive when you're in trouble like i said, it's a yes man. am i great you're the kin >> i got to sit down with masa

again. >> sit down with chatgpt it's just as good. >> i got to pay the 20 bucks and get 4 so you can actually be more current it has access to more, and you can upload a lot more. >> i looked when marc benioff, the ceo of salesforce, said, listen, it just does nothing but plagiarize it does. it plagiarizes constantly. >> yes, it is taking all the content that has ever been created to a certain extent that's available on the web and then formulating its answers, so to speak >> i got into chat, how do i get my wife to like me more? >> does it understand that >> it says, you're the greatest, you don't have to worry. >> well, they do say it hallucinates >> is it on mushrooms? people are talking about the mushrooms. maybe it's on mushrooms. no what's the matter? >> i don't know. >> you don't think so? >> by compass? on the mushrooms >> a little soggy here at the open dow is down 120. most sectors are red, except for energy, barely check bonds as well.

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let aeps get to jim and stop trading. >> one thing about this market people forget. you're saying good things about ultra and they're up 7 so be aware it's not that bad a market when you have an analyst say ulta is not doing too bad and they're up the stock was down 100 points, boom >> you think that translates to

managers behind picking up a dip? >> someone says i found something that is not at its high, so let's buy it, so it's a foe mow situation. >> right >> there's a bullishness, bullish tone underneath look at fedex, down ten and then up. there wasn't a person who hadn't written an article saying it was a bad quarter. no, it was not it was all about the margins >> there are people telling me the guide seems conservative and they came under the street not because of operating but because of some nonoperating items. >> true. >> and they're know or ttore rousely -- >> you take out cost, things are going to fly what a great company. >> how about tonight >> another company that never

goes down skrks zscaler. it's cyber security which is hot. and jay is fantastic and i think that the stock is as fantastic as jay is. it's been such a winner. and the fact it's down a little bit from its high, just makes it more scrum chow. love it. >> good to have you back >> my neck is a little sore from that -- gave me like seven whiplashes. >> i want to freeze frame that one picture of you. >> the horror? >> like this. >> the horror. the horror >> we'll see you tonight "mad money" 6:00 p.m. eastern time. when we come bk, t f ciracheedha on the hill in a moment.

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and buying 20 new laptops. so she used her american express business card, which gives her more membership rewards points on her business purchases. somebody ordered some laptops? cynthia suarez. cfo. mvp. built for cynthia's business. built for your business. amex business. you are looking at a live shot at capitol hill ahead of fed chair jay powell's semiannual monetary report to congress we'll take you there live as soon as q&a begins investors focussed on that as the main event welcome to another hour of

"squawk on the street" sara eisen with david faber and carl quintanilla. looking at stocks in the early action, dow down about 130 points or so s&p 500 down half a percent, masking strengths in energy, consumer staples nasdaq down almost a full percent and the message from powell is going to be key today. we have a taste in the prepared remarks which have been released and the two headlines to me from that are hawk wisish, he said getting inflation back to 2% has a long way to go tran translation, we're not done raising rates, doubling down on the message. so the expectation here is that he just continues on that message. i think it's going to be tricky

for him to explain why he paused but that's what he did in the last press conference and what he's expected to do again. >> not the only speaker, of course, today. we'll hear from cook, and jefferson today. b of a saying pay attention to waller who said core inflation is not moving and that's going to require probably more tightening to get that down. >> waller has been leading in the we need to do more on inflation camp and he's a governor so gets a vote every time, which is why it was surprising to get a unanimous vote on rate hikes because folks like waller didn't seem like they wanted to pause so i think the explanation, if he gives any, gets any questions from members of congress, you never know what they're going to ask. they're always political if he gets questions about what was behind it it's interesting to know if last week's decision

was a grand compromise, they stopped raising rates but to appease the hawks, promised to go in july we heard something like that. we heard something like that may have happened just to please the factions in the fed. >> no no to get too ahead of whatever it is he's going to say, but do we expect he's going to say anything different than a week ago >> no. we don't because it was only a week but, of course, anything he can do to elaborate. here's the thing, the market is fighting the fed you know the addage, don't fight the fed. the market is pricing in one more hike in july, and that is it the market went up after powell said we're going to hike rates bitcoin is breaking out. that's the market fighting the fed trying to give a message we're not done hiking interest rates so i think any nuance. i think it could be interesting what he says about the regional bank crisis and the ripple effects. >> i was going to ask you about

that, something to add color to on the regulatory front as well. what he thinks the im%pact is going to be in terms of lending. >> if you have a market trading at 20 times is it pricing a slow down because of credit contraction? i don't know anything about what he says because they're clearly worried about that that's when he changed his posture around being uber hawkish on inflation worried about the lagged impact so i think any comments on that will be important and any comments on inflation. you know the knock against powell is he's looking at inflation indicators in real time and not so much what they anticipate expectations of inflation. which have come down forward expectations. >> do we get any expectations on anything we talked about, the issuance of treasuries and whether that has a contraction nar impact somehow >> we should if money and credit contract

that's tightening in the system and another potential reason they would be on pause we haven't seen that but it's another headwind obviously for the economy. and i want to introduce one more data point fresh this morning. i'm sure you saw it, the uk inflation. hotter than expected, core inflation actually accelerated. >> 7%. >> the bank of england has a policy meeting tomorrow and now odds are getting raised they may go 50, a double. not past 50% at this point but there's pressure and we know there's a global impact here and we shared the inflation problem. especially with economies like england and the ecb. >> this is a day i don't have to wish them to question the fed chair because next week i have an opportunity i'm going to sit down for a panel -- it's

basically a dream team. >> i'm giving you a wow on that one, sara. >> trying to one up with you on elon. >> keep trying but that's very impressive >> i think there's a lot of question and those -- >> will you be able to deliver is the key question? will you be able to get them all to admit to their failings >> that's all i'm going to try to do. i'm trying to figure out what path they're taking. because they're taking different paths. bank of japan hasn't tightened yet, they're not fighting inflation. they're welcoming it fed chair powell is pausing and the b.o.e. are going forward they all have inflationary issues so it'll be timely to talk about the cross currents now. >> lagarde has said we do not need to trade in lock steps.

>> today raising the s&p 500 forecast but adding the global economy will face a sin crow moan you recovery. henry mcvay joins us, exclusively on set to discuss. perfect day to have you henry. i should note, when was it you came on pounding the table on japan? a few months ago. >> we just got back from japan and we were saying we thought they were exciting for inflation and ready for a breakout. >> was that 30% away >> we can continue to be the last couple of years busy in japan. a lot of companies are selling their subsidiaries, so it's active for private equities, we've done deals with panasonic, pioneer, hitachi and many have up to 500 subsidiaries so looking to create value. it's a change going on there i was back in hong kong since the trip

china is having deflation or disinflation at the same time japan is breaking out. we all came up you have one global recovery, last week, china eased the ecb raised rates and the fed skipped. >> that's why i'm excited for the policy panel next wednesday. you say the fed is looking up, which is obviously the market is telling us that, do you think people were too negative >> i think this recovery has been doubted the whole time, you have labor issues, you have monetary policy issues geopolitics. you know, this year we're using almost two percent growth for gdp. in next year there will be more of a slow down but unemployment is going to stay lower this cycle. the second thing is, there's still a housing shortage, 2008

too much supply of housing and the ira and your ceos, they're talking about spending on a.i., cyber so there's a cap x cycle we haven't had in past slow downs keeping the momentum. >> does that explain the headline poorly positioned for economic growth? >> people coming into this month were negative. s&p shorts were at a 30 year high coming into june. so we're up 5% this month and 14% for the year i think we muddle through. i would say on a tactical basis, i continue to pound the table. what we're seeing. if everyone is worried about tightening monetary policy that has to be a good time to be a lender you can't have it both ways. conditions tightening from the banks and the fed, being a lender is a great place to be. i think equity performance, japan breaks out

small cap is telling you the breath is expanding so getting a catch up there but right now we're most busy on private credit, seat based fitness. most investors are underweight infrastructure if you believe in a.i. data is back david petraeus door play on that, transportation is growing globally there are things to do. >> private credit has grown we follow it occasionally here. >> yep. >> give me your perspective on how much more it can and what that growth means broadly speaking somebody who is the balance sheet cio of kkr whatever that means. >> back in 2015 we cut our dividend and started compounding our capital and putting more in our funds and that's grown to 25 billion. so there's skin in the game there. i would say what's happened over the years, as the banks, my background, took goldman public, the leverage models have come

down so you need an alternative source right now with deposits leading the system, the banks can't make the loan you have a fair amount of issues around some of the big banks with real estate credit or lbo credit so the private credit markets have come in you've seen growth in the insurance business where they want more of the premium and then ultimately it's gone all the way into individual investors but they're not doing it in a levered models. >> you buy these things to hold them for life. >> yeah. >> the yield can be sometimes double digits. >> right now unlevered private credit is double digit >> yeah. >> the whole point of our note is keep it simple. there's a time we want to get out on the risk spectrum but you can make double digit returns in private credit and other areas without making a huge amount of risk but it's providing a good i think balance to the market between banks when they pull back you may have to pay more but you can get something done

if companies want to invest in businesses, make acquisitions, grow internationally you need a source of capital right now. >> as investors look for cracks right now, journal page 1 today, municipal bonds downtown, ft on junk bonds slowing down. >> we're predicting loss rates of 20% in office with values down 20 to 40% so that's going to put a pause on real estate in general. looking outside of that, i say self-storage, logistics, multifamily are still doing well definitely office, when i started in the business in the early 90s that went on for four or five years, probably going to have a similar issue with office you were mentioning, sarah and you were talking about the fed the biggest risk, this has been a new regime you have higher resting heart rate for inflation definitely coming down but we end 24 with the fed missing the

mandate 16 of 20 quarters. that's a big number. ask them about that next week. the goods inflation is going back to deflation. it's all about the services. so what i worry most about is that you -- the fed has to do more 6% for me is the threshold we have the fed going 5 and three eighths or five and a half but not to six but ultimately there is a level when you two back to '94 that's what happened when people pulled money out when you raise rates quickly. when i think about what could go bump in the night, office real estate, the fed has to do more and ongoing geopolitical but people are negative, they've been negative, pulled back earlier in the year and pulled back after svb and we've had a good rally but japan, private infrastructure there are things to do. >> you say equities do well in

an environment the fed has to do more which is a message we're expecting to hear today and while other central banks are clearly not done either. >> the market is a discounting mechanism. last year 84% of the top 24 banks were raising rates by the end of the year, it's 8% you think about headwind or tailwind if it's really 8%, markets are going to do okay >> 8% -- >> yeah but shouldn't you do that on a dollar weighted -- >> it's the most important -- >> but there's global money tightening at the fastest. we just went through 2021 we had what was pretty speculative conditions we had everyone raising rates at a record clip. that is going to slow down to a handful of them into next year what did powell tell you we're in the strike zone we need to see the difference between is svb going to take liquidity out of the system, what's happening with wages i think the body of the work with the fed has been okay

my personal take i think it's going to be hard to get to 2% and where we end up is above 2% and it gets back to the average inflation targeting they laid out during covid they missed their target for, i think, five years in a row, about 80% of the time. so it doesn't totally surprise me we're above it. the question is, do you want to sit on the sidelines during all of this. and i would say the time to be super negative was '21 when the s&p goes down 25% or more you have a rate of hitting on the basis. most of our capital is five to seven year capitals so trying to get right, themes around automation, services recovery, on a five year basis, this is a good market. we have 47 years of data that shows us and our co-president has talked about this yesterday which is our best vintages on private equities and other asset classes have been during the uncertain period

so it doesn't ever feel good but there are things to do. >> henry, good perspective thanks for joining us. >> getting breaking news on amazon this morning. let's get to dominic chu >> what we're watching right now is amazon stock taking a fall to the lows of the session right now. down about a percent or so this is coming on the heels of the federal trade commission taking action and filing suit against amazon for what they say is enrolling consumers in amazon's prime service without consent and then sabotaging their attempts to try to cancel. they say the company's knowing failure to address nonconsensual subscriptions and the cancellation trickery is behind this move. they also say and point out that amazon has knowingly dubbed millions of consumers into unknowingly enrolled in their prime service specifically they used manipulative, coercive or

deceptive practices to get people to subscribe to that. lina khan, ftc chair said in the suit, quote, amazon tripped and trapped people into recurring subscriptions without their consent, costing them money. these tactics harm consumers and law-abiding businesses alike interesting they go to point out that in the complaint the ftc alleges that amazon attempted to delay and hinder the commission's actual investigation into multiple instances. the ftc charges that amazon put in place a cancellation process designed to deter consumers from successfully unscribing from prime. the vote was 3-0 we know, of course, the ftc's commissioners are democrat cli tilted but it was a unanimous

vote you are seeing amazon shares move towards recession lows right now as a result of that. we will continue to give you more as we know here, sara, david, carl. but we know we have reached out to amazon for some kind of reaction or statement with regard to this we'll bring you that statement when we know more about it that's the reason why, gang, the stock is moving to session lows right now. back to you. >> probably doesn't help that today j.p. morgan says amazon has 40% plus of u.s. econ share. they see amazon surpassing walmart as the biggest retailer in 2024 next year. >> yeah. yeah which is not surprising. lina wrote her piece on amazon when she was at law school one of the reasons she was elevated

to run the ftc in the biden administration and three commissioners are all democrats. elizabeth warren has a good amount of influence as well. not surprising in some ways they follow this path at this point we'll see what the company has to say and how they defend themselves in court against these accusations. obviously the focus that we typically have is more on the anti-trust said but important to remember they are also a consumer watchdog at the same time. >> this is sort of european commission style this is what mthey do. and what it amounts to in europe is a fine. is that the same thing -- >> yes >> amazon is only down 1% here >> meantime watching fed ex shares all over the map today. the company posting the third drop in quarterly revenue, sales down ten profit outlooks disappoint

joining us is bruce khan with a buy and downgraded price target. good to see you. is the price action telling you anything this morning after last night? >> thanks for having me on, carl good question. i think as you pointed out we've seen, you know, the price kind of all over the map today. i think really what this is suggesting is that the market outlook is uncertain the company highlighted on the earnings calls that the delta in the guidance range the depended on a range of outcomes in this what the macro could potentially provide in terms of a backdrop for revenue growth with 1% or so in revenue growth bringing the low end of the guidance range and 3% bringing the upper end of the guidance range what we're seeing is volumes on the express and ground side are still squarely negative territory. we have seen that kind of

inflection point where the volume declines are getting smaller and smaller. >> you think cost, discipline is still the chief dynamic, that's why you argue risk is to the upside >> it is that's what's underpinning our call and valuation rating. what we're looking at at this point is close to a valuation multiple and with $4 billion in run rate savings as a result of the drive program initiative and potentially another couple billion from, you know, this network 2.0 integration which is further afield, you have to believe that we're close to trump earnings at this point unless we were to see a major dev lewis in the backdrop, which isn't out of the question but certainly not the base case at this point. >> they have a history of being conservative on their guidguidae

we have powell here so we'll keep it short. thanks for the time here. >> as carl said we're a few moments away from q&a with fed chair powell let's bring in steve liesman what is at stake here? >> i think setting up for what happens in july, the market, at least the fed funds futures market took it in a neutral way. the market is not pricing in the second hike right now, david he gave a little bit for everyone in the sense he says inflation is too high but also noted pause or maintain didn't use skip or pause. he also was remote from the first thing he said, he said the committee all voted that further rain hikes, but the idea of whether or not there's one or two more is dependent on the

data so i think a little bit more drilling down hopefully by the congressmen and women about what it would take to get the second hike in place would be interesting today. >> i thought it was interesting what happened in the uk bond market after the inflation numbers came in hot this morning, steve we got a terminal rate in the market priced to 6%. i know in the uk they're below 5 still. i wonder how correlated we are with the global inflation numbers and how much investors should read into that? >> i think they need to read into it only so far sara, i did see people changing the outlook for b.o.e. raising half a point and bringing it up faster. but remember going through the brexit issue and that seems to engender what's going on cyclically around the world.

so i think brexit that is raising costs internally and creating a step inflation is something that is a big factor in england that we don't have a problem with today >> that is one part of the diswugs, whether or not the uk is really an island of inflation and whether it's policy mistakes that have something to do with that. >> for sure. steve is right they're going through brexit and nobody else is dealing with that we look at europe we have lower ppi numbers out of germany which people are encouraged by we'll continue to watch everything those that are saying powell should have paused a long time ago, looking at diffusion indicators there's a lot of data to parse around inflation, showing it's moderating but still too high. let's go to powell now on the hill who's going to take questions. >> we did decide to make the current rate at this meeting at

the same time participants submitted personal forecasts suggesting that almost all of them thought there would be additional hikes i want to say those two things are entirely consistent the points being the level we raise rate is a question of the speed with which we move earlier speed was important it's not important now. the sense of the summary of economic projections and the decisions really is just that. given how far we've come it may make sense to move rates higher but do so at a more moderate pace that's it. we were at 75 basis points for several meetings and 50 basis points and then 50 basis points, 25 basis points at three consecutive meetings and now we're monitoring that pace much as you might do if you were driving 75 miles an hour on the highway and 50 on a local highway and as you get closer to that destination, you slow down

further. so more data is necessary for the fed to make these decisions. that's one interpretation. but thank you for a broader view there. i also want a broader view of this question on the vice chair for supervision is performing a review of the fred's regulatory framework for bank capital and liquidity. in an interview yesterday he discussed some version of a new type of stress test even, striking complete confusion in his description of it. and at the same time we have testimony from you and the vice chair of supervision saying we have a sound system that's well capitalized. you will sit in judgment of this proposal that the vice chair for supervision will bring to the full board on the review of

capital. there are a lot of discussions about the amount of capital he's talking about. the concern that this is pro-cyclical at a time with our economy with higher rates is -- you're measuring what's happening in the broader economy and at the same time we're going to have a major piece of capital required by institutions which will further restrict lending. so how can you tell us to think about that, given your seat on the open market committee and as a fed governor, how would you interpret that >> so i would say you're right, there are a significant number of proposals that are in the works. they haven't been finalized let alone brought to the board yet so i can't get into specific details today. >> but we'd like your thinking, chairman powell. >> what i can share is principals and how to think about this regulatory proposals go to the board, every person on the

board, six governors now, has an obligation to evaluate and vote on those i'm one of those people. a couple things i would point out. first, i think regulation should be transparent and consistent and not too volatile and particularly as it relates to capital requirements. i do note the central importance of capital we want banks to be resilient to shocks we want them to lend in good and bad times. we want, in particular, the eight largest banks to have very high levels of capital and liquidity. we spent years raising those levels over a long period of time, and i think there's broad agreement, as you point out, that capital is strong and, you know, the question there would be what sorts of increasing will be justified that's what we look at the other thing is to point out the trade off between higher capital, the benefit is to have stronger banks that can lend and

maybe survive more crisis environments, but there are costs as well. i think it's going to be, as always, a question of weighing and balancing those costs. that's what i think about. the last thing i say about that, we benefit from having banks of all different shapes and sizes in our system and we want to be careful not to regulate the smaller banks to the point their business models are challenged for all but the largest banks. >> this committee would expect to see an analysis of whatever the capital charge is going to be we would expect that from the fed, as we do from other regulators with that we'll now recognize the ranking member of the full committee, ms. waters for five minutes. >> thank you very much chair powell at this committee's last hearing on digital assets my republican colleagues proposed a stable coin bill that would create 58 different licenses with federal regulatory

approval the over only two of the licenses the remaining 56 licenses can be issued by each state, territory, and d.c. with little or no federal oversight, regulation, and enforcement. this proposal states state p pre-emtion to a new level. d.c. based coins would be sold to individuals nationwide and new york or north carolina regulators could do nothing to protect their own residents while even the fed would be severely hamstrung in providing any oversight. i argued that we should allow states to be part of the process but we must have a strong, enforc enforc enforc enforcible federal floor with the role to provide oversight of payment, in order to ensure that

consumers are protected. such a framework is similar to our dual banking system. it would ensure that non-banks and banks are treated the same we should bear in mind stable payment coins are a new form of currency intended to allow individuals to pay the things with them. as such do you agree it is important for the fed as our central bank to have a chance to approve or decline any state license non-bank entity before it starts issuing payment stable coins nationwide >> first of all let me say we appreciate that we've been able to offer our views on these things to your staff we appreciate the consideration given to our views we see payment stable coins as a form of money and in all advanced economies the ultimate source of credibility in money is the central bank and we

believe it would be appropriate to have a robust federal role in what happens in stable coins going forward leaving us with weak role and a lot of private money creation at the state level would be a mistake nonetheless i appreciate we've been able to be heard and share our views with the committee. >> thank you so much very much i'm appreciative for that clear answer the next question i have for you is a bit unusual one of the reasons we push diversity is because those things that have not been discussed, issues of people of color, et cetera, have not been dealt with um going to throw you something that you would not expect. earlier this week our nation celebrated juneteenth, which congress recognized as a national holiday for the first time since 2021. the holiday celebrates the day enslaved african americans in texas heard that they were free

two and a half years after they were emancipation proclamation was issued to this day black americans grapple with enduring racial economic inequality that has roots in slavery as evidenced by the black/white gap in net worth and home ownership rates my bill would require the federal reserve to carry out its duties in a manner that supports the elimination of racial and ethnic disparities in employment, income and wealth and access to affordable credit. now the fed has a number of duties to pursue maximum employment in the monetary policy to supervisor banks for compliance to ensure the community reinvestment act puts an end to diskcriminatory red line acts. do you agree with me and rafael

bostick that the fed has a role toplay in addressing racial inequality as it carries out its work until congress passes the bill what steps can you take to address racial and economic inequality >> we do consider inequality in the economy as part of our thinking about decisions, but ultimately and those are certainly highly valuable social goals to pursue. i would say our ability to take part in addressing those issues is fairly limited. we have one federal interest rate we set. we do try to keep in mind, as you know, not just the aggregate national level of unemployment or employment, but also for different ethnic groups. we take that into account. but i would think -- i think that's part of making sure we feel we have all americans in the room with us when we're making decisions on monetary policy i think other agencies are

better suited to address these deep issues. >> thank you we must have this conversation on racial equality. i yield back. >> we go to the vice chair mr. hill of arkansas for five minutes. >> thank the chairman of the committee. and chairman powell great to have you back before the committee. this morning you reiterated and vice chair barr reiterated a number of times that the banking industry here in the united states is well capitalized and capital levels have remained robust despite covid-19 with a 20% plus unemployment rate increase and a 9% output gap they've remained stable through government shutdowns they've remained stable through severe stress testing. and maybe more importantly just in the last few months since the first week ofmarch you've seen strong capital come into play as we've grappled with the reality of a 40 year increase in short

term interest rates and that impact on banks. but as the chairman said, michael bar continues to say he wants to increase capital requirements on certain financial institutions and in march you testified that -- you said i will do everything i can possibly do to bring people together, meaning on the board of governors in consensus and have a capital framework that could be broadly supported to what extent have you and other governors been involved in the wholistic review by vice chair barr has he briefed the other members this far >> yes and we've all been briefed by staff, really, on the proposals. but as i mentioned, they're still somewhat in motion but yes, we've been briefed. >> so they're still under consideration and no final decision taken by the board? >> once the proposals really do settle down and are written up, they come to the board for a

full discussion and vote. >> has the fed board reconstituted now the committee -- >> yes. >> the membership of it? >> yes. >> who is on that committee now? >> frg that committee is chaired by vice chair barr and also includes governor jefferson and governor bowen >> when you look at capital in the u.s. and i look at the globally significant banks here versus other places in the world, would you say the u.s. banks are better capitalized than their global peers in europe or in asia? >> so we're certainly at or near the top of the table i think there are a couple of other jurisdictions that have broadly similar levels of capital strength but yes, we are at the top of the table. >> i looked at it this morning, the u.s. has11.3 capital compared to european at 9.9%

would you say we're better capitalized than the european banks? >> i hate to call out the other jurisdictions but i would say our banks are strongly capitalized and competing quite successfully globally outside the united states. >> i agree and we've strengthened capital and the supervision notwithstanding problems we saw in the spring. but that capital standard does make american banks i think stand out. and wouldn't the so-called basil three wholistic reforms wouldn't it be better if the european banks did a review and got up to american standards >> they're bound the same -- no one is bound by these but they have agreed to follow the same standards and i think they're going through the same process we're going through. >> same topic. are the f dic supervisory process and the occ supervisors, are they involved or engaged

with vice chair barr in looking at this wholistic review of capital adequacy in other words, are they providing their input to the vice chair for supervision in their own views on this topic? >> on the regulatory proposals relative to them yes i believe so >> you made a comment a minute ago to the questions about you'd like to see rules and supervisory rules consistent over time. and i think that's frustrating here we see change in administration sometimes we see change in rules, which is i think frustrating to the private sector and market participants i note that the biden administration says that the financial stability oversight board should now base their decisions on size as opposed to activities and for several years we had an activities designation and a cost/benefit initial do you think the activities designation gives supervisors more discretion to select who

should be deemed under their supervision? >> i actually think that one -- >> in other words, is size alone -- should we look only at size or should we look at cost benefit analysis and activities? i think if you answer in writing i would appreciate it. i yield back, mr. chairman. >> we'll now go to ms. velasquez of new york for five minutes. >> chair powell at your press conference last week you stated and i quote, the committee is completely unified in the need to get inflation down to 2% and will do whatever it takes to get it down to 2% over time. some analysts have interpreted this statement as the fomc's willingness to trigger a recession in order to get inflation to 2%. how would you respond, if this is a fair and accurate interpretation

>> so our statutory goals are price stability and maximum employment we're dedicating to using our tools to achieving those in the case of employment we have historically low unemployment rates and high employment rates a strong labor market. we're very far from our inflation target of 2% and we're focused on getting back to 2%. >> how does the fomc take into consideration the impact of rising interest rates on lmi communities and small businesses when determining monetary policies >> so we only have one interest rate to raise or lower, mainly one interest rate to raise or lower and it applies to everyone but i would say inflation hits lmi communities and people generally at the lower end of the income spectrum much harder than people at the middle or high end because high inflation can get

you in trouble right away if you're living on a fixed income just to cover the basic necessities so it's the benefit of the people we must get inflation under control. the benefit of all americans but particularly those people and we keep that in mind as we're strongly committed to getting inflation back down to 2% over time. >> and they are the same people that are having a hard time accessing loans the same with small businesses chair powell, vice chair barr's report on the fed's review of silicone valley bank states while there was regulatory tailoring conducted in response to s-2155, there was also -- and this is the part that really concerned me -- a cultural shift at the fed on the direction of the previous vice chair for supervision, according to the

report, this shift included pressure to reduce burdens on firms, meet a higher burden of proof for a supervisory conclusion and a need to accumulate more evidence than in the past as chair, during that period, were you aware of this culture of shift and the impact it was creating if. >> i think we learned from the silicone valley failure and the others, that there is going to be a need for stronger supervision and also regulation for banks of that size and i'm committed to learning the right lessons from this exercise and to forthrightly implementing changes >> but were you aware of the cultural shift >> so i -- i can't really characterize it that way certainly i was aware that we were trying to avoid excessive regulatory burden --

>> do you disagree with chair barr's report in that respect? >> i'm sure that the people who wrote the report were accurately reporting what they heard from -- >> how often were you meeting with vice chair quarles? >> i -- reasonably frequently. we sat quite near each other >> and never discussed a cultural shift >> i didn't say that but i don't remember it -- the way you're describing it is not what i recall. i recall vice chair quarles talking about things like focussing on the really important issues and not getting diverted into -- >> the way described by vice chair barr is not what you recall >> well, i had no -- >> what steps -- >> i had no part in preparing the report i'm confident that the staff who worked on the report, reported accurately what they heard i'm sure that's right. >> so what steps did you take

proactively to meet with regulatory and supervisory staff? >> i think we're taking significant steps now. we're -- as you know, under vice chair barr's leadership we're looking carefully at these events and asking what do we need to do with supervision? there is a point to be made that there are situations we need to be more forceful and proactive not all situations but some. in regulation we're learning we need to update our thinking around liquidity which was based on a certain speed of bank runs which looks to be outdated now >> my time has expired. >> we'll now recognize the gentleman from new york for five minutes. >> thank you, mr. chairman thank you for being here i want to start with a few yes or no questions. was the silicone valley bank failure a result of the

liquidity issue? >> among other things. >> yes. >> yes. >> signature bank failure the result of a liquidity issue? >> yes it's not -- there's also a lot of bad management decisions being made here. >> liquidity first republic, was that a result of a liquidity issue also >> among other things, yeah. i wouldn't say just liquidity. >> were any of them failure of having too low a capital levels? had. >> let's go to silicone valley bank you know, the issue that triggered the run initially was the presence of significant losses in their securities portfolio -- >> yes. >> -- and that is a capital issue. >> so because they had too low a capital -- the requirements? >> they weren't required to take that into account in their

capital. if you remember what people were focussing on was these portfolio losses and then what people weren't focussing on is they had excess of 90% deposits and that caused the run. >> would increasing requirements for any of these banks would that have stopped the banks from failing? had. >> that's a hypothetical unknowable question? i think it might have helped >> how much then increasing it by how much would have helped? >>. >> it's very hard to say very hard to say so a failure of supervision to follow-up and really the liquidity regulation was just not -- it was not appropriate. we needed to have stronger regulation around liquidity and uninsured deposits >> last year you said the banking system was strong and does a better job of understanding the risks. just today you said the banking

sector seems to be strong. you still stand by those things? you just said it today. >> yes >> last month, vice chair barr appeared before the committee and agreed with you. secretary yellen has said similar things but today you -- you know, even though you all said that banks seem to have strong capital you seem to leave us today saying the bank is considering what increase would be appropriate of capitol requirements so has the board decided that an increase will happen just deciding what is the size of the increase for capital requirements >> no. what i thought i said was that any increase above these levels would need to be shown to be justified. >> i understand and you have a vote as to whether or not this proposal -- you'll vote on whether or not you personally think that an increase is necessary at this time --

>> do i think? >> an increase in capital requirements is necessary at this time? >> i'm going to react to whatever the proposal turns out to be in the end and give it my best assessment. that's what i'll say. >> okay. you just also said that credit is tightening. won't increasing capital requirements further tighten credit >> over time the thing about capital requirements is, if you put a proposal out this summer, let's say, it'll be a quite a while before the proposal is agreed among the agencies and voted on, and then it will be -- it'll take some years to come into full effect. so i would think -- whereas interest rates, for example, have immediate effects on financial conditions and quick effects on economic activities capital requirements are a more medium term, longer term thing. >> i would like to move to impacts on what raising lending

requirements would have. a 1% point increase in capital requirements could potentially reduce annual gdp by up to 16 basis points showing higher requirements come at a cost and could have impact on the economy. i discusse barr last month and expressed hi concerns about what the impact of increased capital in the real economy, but he didn't answer the question directly. we just need to -- we're hearing from all sorts of industry that these increased capital requirements at any level would have a further tightening on lending. and if that happens -- and i'm hearing from everybody if that happens, it's going to be a real disaster so i think anything that the committee proposes, if you could come back and brief us on before it's finalized, we would appreciate that very much, sir >> gentlemen's time has expired, the gentlemen from missouri, mr. cleaver is now recognized. >> thank you, mr. chairman

welcome, mr. chairman, thank you very much. this is probably economics 101, but a lot of people in my district are misunderstanding 101 along with me. in may of this year, unemployment remained at 4% for the 16th consecutive month and at 3.7%. this means that unemployment remained at or below 4% for the longest stretch in 50 years. in the u.s., the job openings rate has fallen by more than 1.5 percentage points from its peak,

while the unemployment rate has crept slightly lower in other words, job openings declined, but so does joblessness. and i'm wondering if there was any expectation that this would occur? >> there is an expectation that the level of the ratio of job openings to unemployed people has been at in historic territory, all-time highs for a while now, in the last year or so and there is an expectation that it will come down. a while ago, there were two jobs for every unemployed person, now we're down to 1.7 or 1.6 and that still speaks to a historically tight labor market, where the demand for labor is still very substantially exceeds the supply of available workers. so we do expect -- and by the way, that's a way the labor

market can become less tight without having unemployment go up >> i'm sure you're hearing this all over, as i am. and that is that business p people, i have a good friend who has a number of barbecue restaurants in kansas citi, and he is constantly telling me how difficult it is to find workers, to the point where he did something that he had never done, put a sign out in front of his restaurant, job openings and are there particular industries or sectors of the economy where we would expect this sentiment to be particularly true? >> no, and that is right that is -- there's still a significant labor shortage you know, the surveys at the

aggregate level show that it's not as bad as it was two years ago. so gradually, businesses are reporting that they're having a better able to find workers. workers are reporting that they're not quitting their jobs as much as they were that's a really good sign of how tight a labor market is, how much people feel free to quit their jobs, voluntarily. so those things are all suggesting a gradual cooling, and gradually getting supply and demand back into alignment but we're not there yet. we still have a significant excess of demand over supply >> are we also finding that, you know, in -- well, i know in missouri, that in spite of the fact that there is some, you know, jelly-like movement with the economy, people are still willing to go -- in our community, still willing to go out and buy homes. i mean, we're not -- we're not

having difficulty in terms of people going out and getting loans, even with the interest rates rising if that -- if all of this continues -- if the consumers are constantly paying whatever the interest rates might be, are we going to get stuck, just continually going up >> well, no, i don't think so. so in housing in particular, there is a housing sector nationally has flattened out and maybe ticked up a little bit, but at a much lower level from where it was, with rates as high as they are. so supply and demand, they are getting back into alignment. and i do think that, you know, housing inflation is set to come down as we move forward. there's a particular way that the inflation is calculated there, so that you're really only looking at the -- you're waiting for leases to come do and roll over at much lower

levels of increase we think housing inflation will be coming down significantly over the course of the rest of this year and next year. >> gentlemen's time has expired, the gentlewoman from california, miss kim is recognized >> thank you for recognizing me, chairman and chairman powell, thank you for joining us i appreciate your comment to price stability and commend your efforts to reduce inflation and make life more affordable for all americans. thank you for that the 10,000 small businesses survey of 2,000 small businesses found that 77% were concerned about their ability to access capital. so with that in mind, do you think it's appropriate for the federal reserve to increase capital requirements at this time and i know this was discussed earlier, but what specific analysis has the fed conducted, so we can determine the impact of this warrantless regulatory action on small businesses and other marginal borrowers

>> with capital standards, it's always a trade-off the more capital means more stable, more sound, more resilient banking system but it also at the margin can mean a little bit less credit availability, and also the price of credit can be affected. and there's no perfect way to assess that balance. obviously, the answer is not zero capital it's not 100% capital. it's somewhere in the middle >> thank you you know, there are estimated about 1.5 trillion of commercial real estate loans that are maturing in the next three years. anddeclining demand and the prevalence of work from home policies are putting a strain on commercial real estate market. the bulk of commercial real estate loans are held by smaller and regional banks is the fed thinking about policies that could provide time for commercial real estate loans to be refinanced and could an increase in capital requirements reduce liquidity in the

commercial real estate loan market >> we're very focused on the commercial real estate situation, you're right, of course, that a good portion of the commercial real estate loans are held in smaller banks. and supervisors are very much engaged with those banks, and it's particularly banks that have a high concentration. that's what we look for among the smaller banks. and there are some of those. but there's a playbook for working your way, you know, for, you know, working your way out of these loans and it's particularly in the office sector, where work from home is still a pretty material factor in some areas, as you know >> thank you you know, so, the next question has to do with the board process and procedures what are those procedures that governed consideration and potential adaptation of matters like the proposals that vice chair barr is, you know, about to present to the board? >> so on regulation, as opposed to supervision, on regulation,

the board of governors votes on regulatory proposals and it's a majority vote we now have six voters so when there is a proposal, it will be briefed carefully, and we will have a meeting or it can be done actually virtually and probably will be that way. as most of our meetings are. and then we have a vote. on supervision, it's different most supervisory matters are really under the authority of the vice chair for supervision under the law. so most of them don't have to go to the board for a vote. >> so what percentage of the governors must vote in favor >> majority. >> the majority of them? okay the california governor identified that he had been in touch with the highest levels of the leadership at the white house and the treasury the governor also on sunday march 12th when the bailout was

announced issued his own statement praising that action there have also been reports that the governor and his wife, with respect to their business and perhaps other interests, may have had deposit interests in svb. so when the reserve -- the federal reserve board, the fdic board, and secretary yellen in con certation with the president recommended invoking the systemic risk exception for svb, and then decided to provide blanket insurance, even on uninsured balances, that the fed or any others to your knowledge perform any conflict of interest due diligence? >> no. you know, we were in an emergency situation. on monday morning, there was going to be and there was a run on banks that looked -- >> so looking back, do you think there was -- >> we carried out our duties and i'm actually pretty sure we did the right thing? >> and you don't think there was any conflict of interest, even lo