, it impairs the fed possibility -- it impairs the fed's ability.how are they going to sell them? how will we get the money back? then we will all suffer from the inflation packs. >> the gentleman's time has expired. the gentleman from california. thank you. >> there's always a fight on democracy on the one hand and bureaucracy on the other. secrecy does not lead to purity. secrecy + power vehicles corruption. that is especially true over time. bj secrecy plus power equals corruption trend that is especially true of -- secrecy plus power equals corruption. that is especially true overtime. the chairman and many others in this committee have talked about needing to focus on 13-3. in number of my colleagues who are here now were not here when i questioned mr. alvarez. his answers were very scary as to 13-3. the federal reserve board has testified before that they will make only virtually no-risk loans under 13-3. but their general counsel testified that just about any loan and any amount would be allowed under 13-3 as long as the board felt secure. th

, it impairs the fed possibility -- it impairs the fed's ability. how are they going to sell them? how will we get the money back? then we will all suffer from the inflation packs. >> the gentleman's time has expired. the gentleman from california. thank you. >> there's always a fight on democracy on the one hand and bureaucracy on the other. secrecy does not lead to purity. secrecy + power vehicles corruption. that is especially true over time. bj secrecy plus power equals corruption trend that is especially true of -- secrecy plus power equals corruption. that is especially true overtime. the chairman and many others in this committee have talked about needing to focus on 13-3. in number of my colleagues who are here now were not here when i questioned mr. alvarez. his answers were very scary as to 13-3. the federal reserve board has testified before that they will make only virtually no-risk loans under 13-3. but their general counsel testified that just about any loan and any amount would be allowed under 13-3 as long as the board felt secure. t

the fed also said economic activity is likely to remain weak for some time.. because of ongoing job losses.. and tight credit.. businesses are also still cutting back on investment and staffing.. although at a slower pace. so it seems ... the fed's official statement is a little more positive from its last meeting in august.. but it's not nearly as optimistic as chairman ben bernanke's words just last week. in a speech at the brookings institute last week, the fed chairman said the recession was very likely over.. and even said that forecasters agree... we are in a recovery. but he added.. that the economy is still likely to feel very weak... and that's exactly the sentiment we found on the streets of chicago... when we asked people whether or not they think the recession is over. no doesn't seem like it's over.. economy still staggaring.. jobs not filled... lot of pent up demand not beign satisfied.. no it's not over not by a long shot i work in air craft industry and things are pretty tough right now.. what would give you indication it is over.. if we starte

the fed comes in. they buy the agency paper. the money they dump that on the fed. goes into a much more quality product into the treasury market. so add that into all the other reasons they're buying, it's kind of ironic. they should probably slow down the purchase program. they make the transition. there's so many buyers. >> they're basically saying the recession is over. that was in the statement. why do they have to finish up buying up all these mortgages. another $500 billion. isn't their job done? and might the market be rebelled against all this loose money, cheap money, pornographic dollar from the fed standpoint? >> how much time do you have left? it's 7:38 into the show. i don't agree with almost anything that's been said, except for maybe the part that began good evening. and after that, you kind of lost me. i don't believe the dollar is pornographic to the fed. i just don't think it's the central part of the party. >> it's ir relevant to the fed. >> i barely had 15 seconds relative to the eight minutes of disagreement that i have, rick. it's not irreleva

>> i think that the fed acknowledges the improvement in the economy. i don't think they can ignore that. that would mean their head's in the sand. but at the same time, they provide assurances that these are the early days of recovery and they'll watch and wait and see some more evidence. we know historically the fed rarely does much significant until they see improvement in jobs. we know we've got a ways to go before we get there, erin. >> that's one thing. the white house has acknowledged that, too. jim bianco, are you looking for any update on a lot of these programs that they have out there right now to try to influence interest rates for things like mortgages? >> i would like to see the update on some of the programs. i think there is a reasonable chance we'll get in on the mortgage program, though i agree with steve that it is most likely going to be at the next meet meeting we'll get the update on the mortgage program but as far as the other programs go, the fed has a history of holding on to those other programs and releasing a press release in

chairman frank has encouraged the fed with respect to lending practices. the fed has responded. the fed has been active in those areas as well, coming up with new guidelines on credit cards and that sort of thing. it looks like the fed is a little bit open to hearing what congress has to say and responding. it is really in the monetary policy. that this legislation is most concerneing or troublesome to te fed. one aspect is the disclosure requirements. what happens if information is released too soon? you have your own guidelines. the audit does not really say that if you have a meeting on monday and do the audit on tuesday that they are going to release all of the information. it sounds like the audit is one of those things that will take forever to do and then you'll finally released. it is not like you have the immediate release of information from the audit. is that correct? >> the g-80 is very responsive to requests from congress. -standing is that the gm tries its best to be responsive. the time frames would depend upon the audit and the request. >> you release your minute

and many doubt giving the fed more power now would prevent a future crisis. but treasury secretary timothy geithner says someone needs to be in charge. >> if you give that responsibility to a bunch of people, then you can't hold them accountable for performance. >> reporter: there is also disagreement about creating a consumer financial protection agency. republican jeb hensarling says that approach is heavy handed and could extend to retailers who provide credit, like walmart, target, and macy's. >> we see something that is very broad, very draconian. >> reporter: but geithner says the goal is to keep potential problems from slipping through regulatory cracks. >> if you are in the business of providing financial credit, and that is your business and your competing with banks and thrifts that are doing that, there should be a common basic set of standards and protections. >> reporter: but frank says not all firms selling financial products will be subject to the oversight of a new watchdog agency, including car dealers and 401(k) providers. and if you're look

here in asia, a lot of reaction to the fed statement. a lot of people are taking the statement to believe that the fed is contributing to the poor economy. the kospi, down 1%. it's prompting a lot of foreign sellers to get out of this market, foreign investors to get out of this market. the shanghai market managed to recoup some of its losses closing up 0.4%. the hang seng is down 2.5% and the s&p is down 0.7%. the nikkei managing to close up after a three-day holiday break coming back and doing positively well. in terms of crude oil, a lot of pressure there after the that high buildup we saw in crude stocks yesterday in inventory level, down 71, trading pretty much flat at the moment, $71.55 a barrel. brent is down 38 cents, $67.61 a barrel. julia, good to see you, as well. >> good to see you, too, christine. let's take a look at how the markets are looking ahead on the open. futures are pointing to a lower open. nasdaq s&p 500 pointing to a lower open. let's take a quick look at the treasuries, the 10-year bund yield is down 0.51 to 3.

a fed war going on. warsch said be tough, tough, tough, and don cohn says no, no, no we won't. >> so what's the contribution ben bernanke has made it for the federal reserve? he's trying to make it more democratic. fmoc is more open. he's not leaning on his colleagues to speak all from the same page. conspiracies never worked anyway. and people overemphasized the man behind the curtain. sometimes accusing it to be me. it just -- it's not that common. and i think chairman bernanke has pushed that a little further. it's a more democratic institution. you're hearing a range of views. >> mickey levy, we're going to get a bunch of numbers tomorrow, and that's going to launch the fourth quarter for stocks, toÑi see if this incredible 2009 rally continues. we're going to get the ism manufacturing. i think people are getting wobbly. we're going to get personal income and consumer spending. we're going to get auto sales. people are very concerned about that. mickey, what are you thinking here? is the data going t

we get the fed rate decision tonight. no change expected, but a lot of focus on their quantitative easing strategy and whether or not they'll give an indication of unwinding there. but all the markets are broadly higher across europe. at the molt, we're being led higher by still some of the basic resource stocks that are continue to go be bought up. but it seems this week, at least, that a lot of focus is on the forex markets, on the currencies. it seems one of the talking points is the which we will pursue in the next couple of hours. >> here in asia, with investors are staying on the sidelines. japan is closed for public holidays. the second reason is the fed meeting. everybody is keeping to the sidelines. the kospi down 0.43%. shanghai composite down 1.9%. comments from president hu jintao did not help. the aussie is getting a spike up 1.5% because of crude prices. >>> the weak u.s. dollar is giving a boost to oil prices, nymex light sweet crude at $71.55 a barrel. brent is trading down 19 cents, $70.36 a barrel. we ar

at t close of its 2-day meeting, the fed said conomic activityas picked up". but it went on to y that activitys likely to remain ak for sometime. on inflation polymakers don't seem worried. on rates, look for tse to stay w for an extended period. the fed also streted the timetable for s debt buying progms, including mortgage backedecurities. it wilnow remain in that markethrough march of next year. joing us now to help read today's fed tea-leaves is michelle girard, senoir onomist at rbs and mike holland of holla and company. welcome to t program. >> gooto be here, thanks. >> what is your assessment of e f's state tay? it seems to be the mos optimistic that they've been about the economy some time. do you agree with it? >> yes d yes. i think in both instaes it's been seral meetings several months since we've heard this kind of optimistic, i don't want to overste it,here's still good reference in tre to the hrible js picture and so on, b things are gettin grudgingly better, and i think that's a fair assessment as i talk to bunesses and railers, things have a th

the fed has no intention of doing this for a while because the fed still believes it can create money. it's wildly incorrect, but that's what it believes. >> thanks for pinch-hitting tonight twice. coming up, folks. gary schilling versus v-shaped recovery. keep it right here with "the kudlow report." this is going to be big bang recovery number two. i'm still pushing that argument. maybe the fed is listening. who knows. it's not the new lexus. it's not the new bmw. it's not the new audi. what it is... is impossible to resist. the new twenty-ten lacrosse from buick. it's the new class of world class. >>'. >> last night we talk about the rise in the leading economic indicators. tonight, part two of a possible barn burner. another leading index, the strongest in 40 years. let's do a quick kudlow 101. fist of all, this is from last evening. the index leading indicators from the conference board. just to make it real simple. you can see tremendous gains in the last five months. this is something worth noting. we haven't had this in quite some time. several years. i want to bolster this wit

he blasts the fed for bumabling the asset price bubbles and believes the treasury, not the f fed, should be the uber systemic regulator with meanwhile, stocks had a huge upday. the best in five weeks from the animal spirits of merger monday, expectations of higher profits and a toxic rally report from subprime mortgage bonds that helped drive banks and insurance stocks sky high today. i'll tell you all about it in our supply side minute. >>> plus, german chancellor marco wins big with the tax-cutting close. is this the handwriting on the wall for the u.s. return to the supply side? fasten your seatbelts, everybody. "the kudlow report" begins right now. >>> good evening. i'm larry kudlow. welcome back where we believe that free market capitalism is the best path to prosperity. >>> earlier today i spoke exclusively with world bank president, robert zoellick, and he said don't take dollar supremacy for granted and said the treasury not the fed should be the risk regulator. i began by asking about the global rally in stocks. and if that's the sign that the world recovery is upon us. take a l

some of the fed funds.'s other commentators who think the whispering of taking out a mop out of the federal reserve closet is going to mean something. i think it will. but mohow many months or years will it take? >> the idea that the fed would go out and essentially sell treasuries or sell securities off of its books to mop up dollars as part of the exit strategy, i think it's actually a little louder than a whisper, rick. it seems to have been out there in the press and there's some talk about whether or not we get some formal announcement about a pilot program or whether they push it off until november. you're right in the sense that it's coming. i guess the question becomes, does it make you any more about the inflation outlook that they're starting to talk about this kind of exit strategy stuff? >> i would think the answer is yes. i've also learned the last year that talk is cheap and action is all that really matters at this point in time. >> right south florida so, let's see. >> larry, conversely, as

the fed has to step in. and i disagree slightly when you said that this may not be the fed's responsibility. the fed does have responsibility to restore confidence. and i think if you want to restore confidence, there has to be some level of reasonableness in compensation. >> all right. gentlemen, great conversation as always. appreciate it. see you soon. >>> up next, my sitdown with president bill clinton. we'll get his take on the state of the global economy, health care reform and his recent trip to north korea. >>> this is "tech check." movies are all the rage, but digital 3-d projectors can cost 100 grand or more. and the first name in film technology in hollywood. >> you have two images for every four perforations of the film strip. one of those images is the left eye, the other image is the right eye. >> introducing new 3-d film in a new lens at a tenth of the cost of the digital cousin. the big film-making break-through. get ready for the intel forum in san francisco. the technological road map. ridi

the fed at some point, if these banks get around to lending this money out, are going to -- the fed is going to have to soak this up or otherwise neutralize that money out there in the economy. >> how's it going to do that? >> it has a variety of ways. reverse repo is one way. goes out and sells treasuries, soaks up dollar. the big question is the issue, interest on reserves. where it's going to pay bankers interest to keep that money on account at the fed. that's a big part of what bill dudley in the interview earlier this week said is a big part of the strategy for the fed to neutralize them and stop them from becoming inflationary dollars. >> thank you, steve liesman. >>> it may be the bigger retailer in the nation but it isn't keeping up with the nation's stocks. s&p a up 18% but walmart shares are down 9% so far this year. tonight at 9:00 on cnbc, david faber is going behind the scenes at the retailing giant again. it's "the new age of walmart." >> you're right. while other businesses are downsizing, though, walmart continues to expand. despite that 9% drop in its stock price. it

the fed board will vote on it and it will be open to public comment. the earliest expectations when these would be implemented, at the end of this year. larry, back to you. >> now citigroup's vikram pandit says $100 million is too much for a bank employee to earn in a year. well, here to debate all that is peter morisi and a former chief economist and cnbc contributor jerry boyer. hang on. sit tight for one second. before we get your take, i want to once again turn to "the kudlow caucus" on this subject. we put this question to our regulars. is $100 million too much pay for a banker? here's what they said. out of our 12 members, six said yes and six said no. an even tie. here is the yes camp and here is who said no. there's the yes boys. and here come the no boys. boys and girls, i remember your pardon. to cast your own vote, please head over to kudlow.cnbc.com. how about this picture of your humble anchor, okay? i'm going to break the 6-6 tie because i get ten votes. my law is simple. just say no to class warfare, income redistribution takeovers by go

fed should look like. one paper suggesting the fed should limit regulatory powers of the federal reserve for the fed to concentrate on monetary policy and its independence. also saying they should have more rule-based decisions. finally lessons from the '30s. suggesting we learned the lesson from the '30s. mickey levy giving a paper and saying that the fed should announce right now plans not to purchase anymore pressuries and plans to sell mortgages, if needed. kohn coe did suggest the fed could do that. >> the markets are riding high since march. domestic growth showing signs of rebound. housing is showing signs of stabilization. the fourth quarter will be here in just a couple of hours. what can the threat be to throw a wrench in the economic recovery. we are on watch. is the consumer, a hurricane? good to have you on the program, gentlemen. >> hi, maria. how are you? >> i'm doing great, thanks very much. brian, you agree there are four major threats to the economic recovery going forward. can you go thr

>> the fed continues on its mantra of holding rates low. we think that means to the second half of next year. that means their front ends could offer some value. it is longer at the curve will we see is risks, particularly coming from risks of inflation down the road. not over the next year or two, where the risks are towards continued disinflation, but fiscal policy continues. monetary policy, it will be difficult to implement the fed's strategy and those cause inflation rhysiisks over the me term. >> it seems there's got to be more to come to finance this debt. at some point, aren't people going to pay attention? >> we think so. supply has increased dramatically over the past year. more importantly, we think next year's supply in the coupon area will be even greater than this year. so supply will continue to move up and we think demand for the safe haven bid in treasuries will fade if we get this sustained balance in gdp. >> you could have a barn-burner of the recovery in the next four quarters. you are also getting the signals from a che

it's the fed that matters. let's see how well they manage their exit strategy. >> thanks ever so much. >>> coming up we'll talk about politics. fidelity, traders learn from the pros. say you want to backtest an entire portfolio of stocks. market experts show you how through fidelity's extensive trading knowledge center. and fidelity gives you free research from 15 independent firms, with accuracy scores... to help you decide which analysts to trust. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity. >>> your friend and distinguished adviser were peter schiff has thrown his hat into the connecticut senate race as a republican. are you running add republican or libertarian? >> republican, larry. >> let me gloss over for a minute the gop primary. running against senator christopher dodd. what's your key issue? >> if i get the nomination and get the run against dodd, and i know you considered the senate seat yourself, so i gues

what is the state of the consumer without injections by the fed? we will get results from nike and the restaurant play darden. this is "closing bell" on cnbc. >>> and it is 4:00 on wall street. do you know where your money is? welcome back to the "closing bell." i'm maria bartiromo. here is what we are following, stocks tumbling at a mixed batch of economic data as we come to the end of the third quarter. september's consumers confidence index posts a decline. the senate finance committee voting against an amendment that would make a public plan part of health care reform. the dow jones industrial average near the lows of the day, down 46 points, .5%, 9742, s&p 500 up two and a half points at 1,060, nasdaq down 6.70%. big tech names under proir, 2124 for nasdaq. hey, bob. >> we moved briefly in the middle of the day. the senate finance committee rejecting the plan for the public option. >> this is an important development. >> the baucus plan is essentially the main plan. here is the important thing. let's look where we stand on this. we are getting

some economists at the fed think the economy's set to grow in the third and fourth quarters and the fedconomy while remaining conscious on the outlook. ben bernanke said last week the recession is over from a technical point of view but warned about gradual recovery where unemployment remains high. the statement could also have new commentary on the outlook for the fed's $1.5 trillion plan to purchase mortgages. in august the fedex tended the plan to buy treasuries but kept the amount of same. they could do the same here, extending the end date to end by the end of the year. some economists think the fed will take an "f" on that and instead make any changes in november. look for the discussion of exit strategies in general. more likely showing up in the meeting of the minutes that comes out two weeks from now. they've discussed ways to soak up the excess cash from the economy that the fed has put out there and is also working behind the scenes on plans to raise interest rates on excess reserves. that could be coming out over time.

early upbeat comments from the fed. >> the fed minutes out a little while ago saying the u.s. on the mend. policymakers felt comfortable enough, slowing the pace of one of the economic revival programs, not changing any others. this is according to the minutes. talking about the fact that ben bernanke and colleagues are striking a much more hopeful note about the economy. no surprise, a lot of people feel like the recession is over at this point. it's interesting to see in the minutes, now topic one at the federal reserve is, what is that exit strategy. >> some of the

then the fed took out 1.7 billion of that. all of a sudden, it's way less than what hit the markets in '06. >> when you look at the u.s. peso falling every single day, isn't there a loss of confidence? >> currencies are all relative sh so we're doing less of an under contest now, but there's a lot of -- and i think the european, the ecb has no growth mandate, so there's going to be a discipline coming out of europe and asia, which is really going to force bernanke's hand. we're talking about prices of money. this week, we saw a sale of toxic assets coming up on bank balance sheets. that's not a trivial situation. >> we're going talk about that later in the show. thanks to all three of you. >>> coming up, ten house members are supporting new legislation to unwind t.a.r.p. we'll talk with spencer baucus, who introduced the new plan. >>> but first, the dog days of the u.s. dollar. is the prolonged weakness good for u.s. business? i don't want to demean the mexican peso, but you are watching cnbc and it is first in business worldw

that leaves a vacuum for the fed to define its own role. that i think is unacceptable. >> let me throw it question at each of you. we had this picture from a speech or a panel that jamie dimon was on. he's sitting next to sheila bair saying too big to fail is a horrible thing. it almost was hilg laarious to h him say that and watch her reaction considering he is almost the definition of too big for fail. is there any institution in any of these structures that has the power or authority to tell jamie dimon, you're going to have to raise your capital requirements or jpmorgan chase is now too big? >> well, see, you put your finger on the key issue here which is whenever you give government regulatory power, what happens? the powerful interest groups, whether it be jpmorgan chase or some other institution, the powerful interest groups get the lobbyists, the insider access, and they begin to work the system in their favor. that's why regulation is very bad for the smaller banks and for our dynamic economy. we wind up creating it cartel of the b

banking crisis and the fed. york financial analyst mike mayo, renowned bank analyst is in hong kong. he'll with calyon securities, which is running the conference. also with us this morning is eric fishwick, chief economist with clsa. welcome, gentlemen. you probably have a delay. you're all the way over there. we appreciate you being with us. mike, the first question to you. this is a very eclectic group. i see you have sarah palin talking and shreyl crow singing. it might be like anti-matter if those two get together and the entire universe as we know it could end. can you make sure it doesn't happen? >> i think we can do a better job with that than resolving all the problems in the world today. but this event hat 1,300 fund managers from 30 countries. it's the largest event of its kind and there's a lot going on. and the main purpose is that -- go ahead. >> one of the things that you're emphasizing is that that area of the world went through a large amount of deleveraging in the financial system over the past

evtually, the fed will start to become more concern about inflation. but ght now the fed is really focused on fostering gwth. >> rorter: if you're an investor, low interest rat are good because they redu the cost of trading. if you're in the mket for a home, w interest rates mean lower mortga costs, and other stuff you buy on cret. but for most of us, healy economic growth mes companies adding to payrolls a that has yet to occur. still, eveon that front, economist jonathan bile of credit suisse, saythere are signthe low inflation-- low interest re environment is having a positive fect. >> we've sn a stabilization in labor inco in the last two employme reports. prior to tha you had ten straight declines this labor income measure which comnes private jobs a hours and wages. so tre's more than just the jobs and wag to talk about. anthe hours are a powerful foe and what we're seeing right now ishat we're seeing companies increase tir hours bunot yet increase the... the head count. >> reporter:t its last meeting, the fed's open mark committee sa it expects

this is going to increasingly politicize the fed.f it exercises this power it will ultimately be doing -- making decisions which will spend taxpayer money to save firms, bail them out in some way. and when that happens, the fed is going to be overseen more by the politicians and that is going to jeopardize its independence as it sets monetary policy. so i would great -- >> i would greatly prefer to see the fed not get this responsibility. i think the place it should go actually is to the treasury department. now right now it doesn't have the capacity to do it. but it could build that capacity. and the treasury department is subject to congressional oversight. it is subject to the votes of taxpayers. and that really is where this kind of responsibility, i think, should be bested. >> lynn stout, where do you think that should be invested, in washington or even in the mix between washington and self-regulation by the industry. >> well w i think the, it's a little overoptimistic to expect that regulators can foresee and respond to proble

giving the fed a veto. if we think your pay is too risky, we can make you change it. it's not really setting rules in any way by which you could actually do that. so is this just a whole lot of rhetoric out of the administration? so they can get political cover for what's going to be some very big pay numbers coming out in the next 30 days? >> i think what the administration needs to do is help set the rules of the game but not cap pay. the big problem is that boards of directors compensation committees have really dropped the ball and they need to step to the plate right now. they need to make sure that pay is long term, performance based, and that it's reasonable. certainly pay up until this point hasn't been organized that way. just look at the big pay package there. in order to enforce those new principles for boards, shareholders need to come to the table, and that's where the fed -- a federal regulation comes in. we need to be able to replace directors on compensation committees that aren't doing thei

what does the fed have to do to prop up the greenback? let's ask robert, chief monetary economist for cumberland advisers and our very own in-house genious, steve liesman. >> you're buttering him up. >> i am. i'll go to you right off. the fed doesn't care one whip about the dollar, do they? >> i don't think that's right, larry. i think they do care about the dollar. i don't think they care to make it the end of their policy or the goal of their policy. i think what they have said is that they will strengthen the economy and let the dollar follow. i don't think they knew if they would let it follow. i would point out that it seems to me that the strok market would want a weaker dollar, but they keep rallying. >> that's true. bob, i would ask you, the biggest question at this meeting is whether the fed is going to stop buying mortgage-backed securities. do you think they're going to continue doing that and should they? >> that's a good question. the first question is whether they're going to change the pace of acquisitions to get to the 1.2

the feds fund rate is about zero.ou don't need to be a real deep economist to recognize that arrow is pointing forward. >> that doesn't really answer the question. we're talking about the stock market as forecasting the economy. it's a difficult one to hang your hat on. >> well, isn't that exactly what the stock market, though, is supposed to do? let me throw this over to bruce again. i mean, well, you know, we're trying to anticipate here what's going to happen six to nine months out. so, i mean, people are -- they have real money on the line here, bruce. they're trying to make a decision based on -- they think things are going to get better. >> when we look at the financial conditions, real economy, you're looking to put patterns together. the stock market is a bottom up vote from what people are seeing in real economies. tells you something about sentiment. it's not the whole story. it is telling us something positive. it's consistent with what we're seeing in economic news and across a wide range of things that ar

sct gurvey looks awhy keeping inflatn tame is good for the economy d the fed. >> reporter: the fed sets monetary policy to meet thre als: maximize employment, stabilize prices, and modera long term intere rates. it is often impossible to all three at theame time, which is why wall street is relved to find that prices are stable d inflation not on the near rm horizon. economist dean maki barclays pital says that good news means it's "stdy as she goes" for the fed. >> right now the fed'sop priority is, is trying tlower the te of unemployment. trng to prevent deflationary pressures from developg. we thi they will be successful on both onts. entually, the fed will start to become more conceed about inflation. buright now the fed is really focused on fosteringrowth. >>eporter: if you're an investor, low interest res are good because they rece the cost of trading. if you're in thearket for a homelow interest rates mean lower mortge costs, and other stuff you buy on cdit. but for most of us, hethy economic growth ans companies adding to payrollsnd that has yet to occur. still, en on that front

i worry, if the fed targets the great depreg and if the fed targets the unemployment rate, they will never absorb the excess money and we will never get the job done. that's what concerns me. >> they don't have an exit strategy and i don't know how they do when you've got this level of unemployment, bob, how can they withdraw reserves 16 fold. i mean, it's just such a huge -- they would have to sell about $1 trillion worth of bonds to bring it back into tight reserves when you have 10% unemployment. how are they going to do that? >> last word. >> i'm not sure, but let's just remember those reserves are there voluntarily by the banks. and there must be a reason they're there. they're there because banking is not out of the woods. >> it could be they created so many of them. i will say this. the fed funds future market, as of the close of business today is predicting a 0.75% fed funds rate by the middle of 2010. that is three-quarters of 1%. currently the rate is between 0 and 0.25. they're talking about a mild increase. a, is that right and b will they do it? i don't know. thank you f

but former fed staffer vince reinhart says the crucial decision was actually made when the fed bailed out bear stearns, a move that sent a strong signal to the market. >> knowing the government's playbook, speculators only had to pick out the next weakest antelope in the herd. they sold the equities short and bought the debt, precipitating the next installment of the crisis. >> reporter: while economists generally credit the federal reserve with rescuing the united states and much of the world from a second great depression, many lawmakers on capitol hill are not so generous. the record of the last few years has convinced them giving the federal reserve more power to police the financial system, as the obama administration is recommending, is not a good idea. darren gersh, "nightly business report", washington. >> susie: it's been exactly a year since the lehman brothers filed for bankruptcy setting off financial panic around the globe. but how much has changed? is wall street still broken? as we continue our special series "lessons from lehman" erika miller looks at what still needs

the ecb has been more restrained than the fed. i don't think they've been holding the pursestrings too tight. but isn't there a little bit of kind of rancor and anxiety and frustration over on the continent over what's going on here? it seems like there should be. >> yeah, actually there is a view if you listen to what the german leader angela merkel was saying, that you guys are way out of line. they had the hyperinflation in germany and he with all know where that ended up. she's openly criticized what the fed is doing here quite clearly and told the european central bank to get back in its box and stop talking about buying assets. the issue here is for many people in europe, that for a long time monetary policy in the states has been driven really for wall street and we've seen the way you guys are enjoying the rally and enjoying the game of chicken in a terrible economic situation. and also -- let me finish. also monetary policy that has run out for the sake of the u.s. government. if you've got such expansion as you have at t

first of all, going to talk about fed governor kevin walsh and him saying the fed might have to hike interest rates before the need to do so is obvious. discuss whether or not he is right on this one. also, a live report from g-20, talk about trade protectionism and discuss whether or not it can really be prevented. plus, we will be speaking live gm's vice chairman bob lutz, talk about gm's postbankruptcy strategy. all the news from the new york stock exchange, only coming up on ""the call"" at the top of the hour. first, "squawk on the street" is back right after this break. >>> want to take a check of the dollar versus the yen, this is a 7 1/2-month low. the dollar being part of the kerry trade. research in motion, on back of disappointing earnings is down by -- just last check, 4%, 16% now. new subscribers, 3.8 million. >> hammered. >> also look at the guys that make the components that go into the black bury, jay bill circuits, they are also feeling the pinch today. plus, down by 1%, jabill down 6%. so, across-the-board, they are feeling the pain. >> but we talked to an analyst n

the consumer gets hurt by today's fed comments and that maybe changes if you think the fed has to rush to change this policy. >> let's move to the next right here. crude clobbered today, oil sliding below 69 bucks a barrel on those inventory data. the inventory build. oil services stocks hit the hardest. joe, what's your thesis here in terms it of crude oil? >> i think you look at the entire commodity space today. there was significant weakness. also dollar related with the strength. and i think energy, i think oil itself is what stands out to everyone right now. oil is an investable theme. everybody wants to know energy. when you look at the energy space you have to own the question do you want to own oil or natural gas? what is there more potential for in terms of up side? and i truly believe we have seen some stability in natural gas prices and natural gas might be the actual trade moving forward. just a quick trade on oil, if we did not have the significant lower tape at the end of the day, i probably would have come on here today and said this is a true testament to how strong the

the consumer gets hurt by today's fed comments. then that maybe changes if you think the fed has to rush to change this policy. >> let's move to the next strike here. a crude clobber. oil sliding below $69 on inventory data. the inventory build. oil services stocks hit the hardest. joe, what's your thesis here in terms of crude oil? >> i think if you look at the entire commodities base there was significant weakness, also dollar related with the strength. energy, i think oil itself stands out to everyone right now. oiling investable, everyone wants to own energy. you look attner gy, do you want to own oil or do you want to own natural gas? what is there more potential for in terms of upside? i believe we have seen some stability in natural gas prices and natural gas might be the actual trade moving forward. if we didn't have this significant take i would have probably said this is a testament to how strong the equities market is that it can disconnect with the relationship between oil. oil does not have to continue to keep moving h

and then the headline was fed to act sooner. there is the fed saying gradual right there.e headline on market watch, fed to act sooner, faster, and rougher was the other line. that is how the market is taking the comment which contradicts the key statements. >> steve, isn't that statement almost better? the more the fed focuses on trying to withdraw, the better it can be in the long term? >> they are trying in a difficult way to split the two decisions between what goes on in terms of their balance sheet and what goes on in terms of interest rates. clearly the statement makes it quite clear. interest rates aren't going to change for a long period of time. the easing aspect has to be dealt with as well and they have to deal with that separately. they are trying to divide the two concepts. >> this is not even remotely clear, especially if you take the fact that the statement talks about a gradual transition. >> i think you are getting to the point where this is the problem we have been having with communicating things all the way through in here. we are just continuing that

easy fed money. barn-burner of recovery that could surprise people when you look at the leading indicators. including profits. what do you make of it? is that still after this little correction, is that still a good scenario? >> well i mean long-term, yes. but i'm looking short-term. you know, i'm narrowing my focus down to three months. if you want to talk long-term, yeah, i do think there's a lot of good, positive signs out there. i think any time the heavy industries are starting to pick up and you see that in the different stocks in those industries, that's a good sign for the future, for the next six months to a year. but short-term right now, i'm just looking very -- actually i'm kind of like in the middle of the road. i can give you, i can make a bullish case or i can make a bearish case. i'm possibly more on the bearish side. >> how do you trade it? >> right now, i stay where i am. i don't do anything, i go back in my booth and look at sports websites. where am i going to go? >> it's a nice w

so what does the fed choose to do. does the fed tolerate inflation next year? clearly the answer is no, that would be more damaging to the dollar. so we think what's going to have to happen is the fed working in concert with treasury is going to have to push them for a very strong dollar policy. clearly the u.s. government needs to borrow significant amounts of money moving forward, and the primary purchases of our debt are foreigners. we need to tell them, we all know that u.s. interest rates are going to move higher, therefore, bond prices are going to be moving lower. how do you continue to attract foreign capital to those bonds by assuring them that the value of the dollar will not fall. >> so where do you see the dollar headed over the near term then? >> we think the euro has peaked recently at levels near 150. we think the dollar yen at 88 is at the bottom. japanese officials in the new administration here clearly felt that they've gotten a little bit out of hand, and ahead of themselves by saying they promote a strong yen. with an economy that is so reli

the fed statement was bullish. the fed statement.hat is a fertile environment for stocks, for the economy itself. when you're looking at low interest rates going forward for an extended period of time. you're talking about zero inflation. that's a great environment for stocks. but what does the market do? it just confuses and frustrates you. does the

that is according to newly released fed documents. airline on time is best in six years that is cnbc.com news now. i'm scott cohen. >>> there is a live look at the stock exchange. the market shyer on wall street today for a third straight day. welcome to the "closing bell." i'm maria bartiromo. big show for you today. we have a guest host for the entire hour t. chairman and ceo of legg mason mr. fedding will be joining me. we will talk to him about recent market activity. money is moving into oil and other commodities and news on takeovers has this market higher. take a look where we stant the dow jones industrial average, up by 40 points. that is the best level of the afternoon. as you can see .5%. nasdaq up. technology, a handful of the drug companies as well. we have some laggards like aig in the financial services sector. s&p 500 is higher by seven points, the nasdaq on pace since 2003. gold, oil, commodities on the upside. matt nesto is sheer. >> three days up. i have been noticing this is a streakish market because in mid august

all of those are clearly relevant. >> my thanks to charles plosser of the fed. coming up next on the "wall street journal report" counting the ways you can save money when it comes to finances and your family. every dollar adds up, maybe to even as much as $500 a month. as we take a break, take a look at how the stock market finished the week. you like your health coverage, but worry what happens... if you get sick, or change jobs. eight ways reform matters to you. a cap on deductibles and out-of-pocket costs. no annual or lifetime limits on coverage. preventive care. covered. pre-existing conditions. covered. no higher rates due to gender. extended coverage for young adults. no more coverage denied if you get sick. and guaranteed renewal, even if you do. learn more today. ♪ yes, you're lovely... ♪ what do you think? hey, why don't we use our points from chase sapphire and take a break? we can't. sure, we can. the points don't expire... ♪ there is nothing for me... ♪ there's no travel restrictions... we could leave tomorrow. we can't use them for a vacation. you

how does the fed looking over the shoulder of a loan officer mitigate risk?t just makes this person do fewer loans. >> ok, i will. if there were a loan officer who had it in his or her power to make loans that got into the $20 billion range that could bring down the system, then the fed would say i'm stepping in to make sure that this person isn't making a ridiculous amount of money and taking undue risks with the system at the same time. if that loan officer is lending money to a company down the street, the fed could care less. >> i think that there is a sense out there that this goes beyond, you know, just the banks. this is sort of punitive, that this is sort of -- people are making too much money, particularly bankers in general. this is a disguise to go in and crush or cram down on these sort of salaries. >> well, the wealth gap is not narrowing the way people thought it would, so if the government has the power or can find the power or maybe even ben's concern is create it to go in an reg hate somebody's pay, good or bad, i guarantee that the financial

the fed can't move. the worry the rest of the world is going to think we're going to act like japan. are we going to beat japan or give a reason for everybody to go back to work and take advantage of the dysfunctional of the aspect of the economy. >> you've been looking at the international landscape as far as investing ideas. brian, you've been right on this as well, in terms of where this market heads right now. let me get both of your ideas in terms of investing this this environment. brian, you wanted to put money to work. the market has risen. would you still put money to work after the move we've seen? >> i would. this is the most reluctant bull market in the 20 years i've been in the business. people just do not want to believe it. but we still see fundamental leadership in technologies, industrials, in health care. we think health care is for nationalization. great buy for valuation in cash. think about the u.s. economy and where the strong exports are coming from. it's tech and industrials. we s

in interest rates, if they go much below fed funds, often, the fed has to respond.ight now, oil and gold just to name two, inflation-related assets are making moves. getting comfortable around $70 in oil. how long before the fed has to respond to that? >> to be honest, the oil prices have been hovering around $70 a barrel now for more than a month, maybe two months. we saw the push in june and july for those commodity prices to go up and now, they've been stable. but really, it's core that matters most to the fed and while they're always talking about inflation, they wouldn't be fed members if they weren't talking about it. they may talk about it when it doesn't exist and that's the possibility i can forecast for the end of second half. i think that's where the real concerns right now are rather than worrying about higher headline numbers. >> but michelle, this comes on a day when we have another $40 plus billion of securities being auctioned off. does the fed risk its credib credibility if it waits too long to approach the subject of inflation? >> i think that's ul

that's what the fed does best.f you had a nickel and three pennies in your hand, that's the value of the dollar relative to 1913 when the fed was created. the idea of price stability, they inflate the dollar to prop up the banks. so they need to do that, but that's an unstable process. they would love to do it gradually, that's the plan, but if the market sees this playing out, which they probably will, you could have a rapid collapse of the dollar. you see that in gold. >> what other tools does the fed have besides flat-out raising rates? are they ways they can do it behind the scenes? >> well, they can withdraw some of this liquidity. but what they really want to do is basically displace the dollar with sdrs. when you mention sdrs, people just jan and say, it's complicated. basically, the imf, this is the unannounced part of the g-20. the imf is being anointed as a global central bank. they've issued debt for the first time in history. they're issuing sdrs. the last sdrs came out around 1980. when i say issuing,