Real estate owned, empty foreclosed homes into the market, to rent them for a period, if thats appropriate. We were also part of the very large mortgage at the time settlement, which you are aware of, which part of the outcome of that is that banks have been working hard to increase their modifications, to reduce foreclosures, to assist home owners who were unfairly treated in the past and so on. So, from supervisory, regulatory perspective, we are trying to help. But in that respect, we are like other regulatory agencies who are addressing this issue. Finally, and i dont want to underestimate this part, an lit clirks the Federal Reserve, as you know is many, many good economist and we have devoted quite a few of them to studying housing issue, all the way back to the beginning of the crisis and before and influential talking to the other agencies, talking to the treasury, talking to the congress in providing ideas and approaches. So, we have had a lot of influence, i think, from an analytical, intellectual point of view, continue to try to do that but these are i think the bottom line here is that these are very challenging problems and the barriers to more mortgage lending, more rapid growth in the housing sector, are many and diverse. And theres not a single magic bullet, as you know you appreciate. We are trying to work on every margin that we can. In discussions of unconventional monetary policies, of which you were discussing several, the question of lowering the Interest Rate on excess reserves often comes up and im often asked, why doesnt the Federal Reserve do it . I usually thump for some sort of an answer, which i dont think is a very good answer. But i think you could probably do better. What would be your answer . Well, i hope i can do better. I dont know. So, heres the question. The questions the following. So, the Federal Reserve is the repository, so to speak, of a very large amount of reserves that the banks hold, you know, with the Federal Reserve. And we currently pay interest on those reserves, interest in excess of those reserves, of 25 basis points, onefourth of 1 , very, very low Interest Rate that we pay. Now, i can say parenthetically that this ability we have to pay interest on reserves is going to be very important in the future because when the time comes to raise Interest Rates, one of the tools that we have to do that will be this interest on excess reserve, which we can raise at the appropriate time, and this is in the power of the board of governors to raise and by raising it, we will make we will cause shortterm rates across the spectrum to rise because banks obviously are not going to lend into money markets at a price lower that they can get from the fed. So, this is a very important instrument from us and we will be using that at some point, at the appropriate time to begin to tight Monetary Policy. Now, youre talking about the other direction, why dont we just cut it to zero, pay no interest on excess reserves and there thereby, get a little more accommodation . It is something we have considered repeatedly, i dont rule it out as an action in the future. The cost benefit analysis we have done in looking at it, starting where we are at 25 basis points is the following. If we cut if we were to cut that it Interest Rate from 25 basis points to zero, our estimate is that it would affect very shortterm Interest Rates, like overnight rates by something on the order of eight or nine basis points, extremely small amount. And that, in turn, would have even a smaller effect on the Interest Rate wes care about like the rates on auto loans or houses, et cetera. So the stimulative effect of that action, while going in the right direction, we assess as being very, very small. On the other side you can the concern we have, or at least some have had, is that if there is no return on overnight money that a variety of different institutions, money market funds, rico markets and so on, may become more ill liquid, because there would be [ inaudible ] the perhaps is the federal funds grade itself may become less informative because it is being determined in a less liquid market. So, those are the kinds of concerns weve had. Now you weve seen some interesting experiments and relatively recently, seen in europe, for example, that analogous Interest Rate you deposit Interest Rate has been cut to zero and its hard to judge wheat the affect of that really is because the interbank markets in europe are not working that much any watch a question of what effect that has had. Those are the tradeoffs we are looking at. I think its wrong to look at this as a major tool that is a unused. I think if it were used, it would have some affects probably be at least marginally disruptive in terms of market functioning. On the other side, it would add just a few more basis points of accommodation. It is a relatively small cost benefit calculation. Thats what we have come out to this point. Well, ben, you mentioned the fiscal cliff, and i think everybody here and a lot of people who arent here, are very worried about what happens if we go over the fiscal cliff. With estimates that the combination of higher tax and spending cuts could take some 4 out of otherwise relatively weak gdp. But even if we dont and some deal is struck you t, the combi of eliminating the payroll tax deduction, which seems to be something that the administration supports, that together with some basebroadening, would probably be at least 2 of the gdp. And if there is going to be a deal it would involve spending cuts as well. So even if we avoid going over the cliff, it looks like there would be substantial fiscal contractionary impact next year. So in that environment what can the fed do to try to offset that to make sure that it doesnt take touts edge of or over the edge of a recession . So we will see what kind of deal comes out and i think there are a range of possibilities but you are correct, even if the most extreme scenarios are avoided that some plausible scenarios still involve relatively contractionary fiscal policy overall. I made that point in my remarks write said under most plausible scenarios, no matter what happens next year, that the tightening of federal fiscal policy will outweigh the stronger, more expansionary state and local fiscal policy we are getting. So, all of that is right. Its up to congress and the president , of course, to figure out how they want to make the tradeoffs between getting budgetary improvement in the long run and providing Additional Support for the economy in the short run. Then we are going to see how that goes. I think, again, my advice on this is sort of do no harm. And in that respect, what i am particularly concerned about is that we avoid the full force of the cliff, which would be quite substantial, as you point out. Um, so if there is some federal tightening, tightening at the federal level, offset some extent by state and local government, then that would be an ongoing headwind along the lines of what i described in my remarks, but again, i think in that situation, the economy will still be growing, albeit, you know, not necessarily at a rapid pace, but the Federal Reserve can do and will do is continue its stated policy, which is to do additional asset purchases by mbs and take whatever actions are appropriate to try to ensure that the outlook for labor markets improves in a sustained way. And a substantial way. So, we will continue to do our best to add Monetary Policy support to the recovery. A point that ive made though, and i just do want to reiterate this, is that the ability of the fed to offset headwinds is not infinite. We have certain tools. We have obviously used our easiest tools. And we can we can certainly have a meaningful contribution to supporting recovery, but in particular, in the worst case scenario, where the economy goes off the broad fiscal cliff, the largest fiscal cliff, which according to cbo and to our own analysis, would throw the economy into recession, i dont think the fed has the tools to offset that. And thats why it is important for congress to address these fiscal issues soon and in a bipartisan way, in a way that achieves the necessary longterm sustainability concerns, which i know you have talked about frequently, but also takes into account exactly this issue of how much restraint we will be experiencing in the next six months to a year from fiscal changes. [ inaudible ] you talked about the uncertainty of businesses because of all of the things that you also mentioned and thats impacting decisions on investment, et cetera. How much growth is being lost because of that do you anticipate . Well, its neither here nor there, but when i was a graduate student at 30 years ago, i wrote my dissertation on the question of how uncertainty affects investment spending. And i concluded that its not a good thing. [ laughter ] and they gave me a ph. D. For that. [ laughter ] so it seems pretty clear. One of the benefits of the way the Federal Reserve operates, you know, we have 12 reserve banks around the country. Bill dudley is here of the president of the Federal Reserve bank of new orleans. At the fomc, we have folks, therefore, from all around the country with different experiences, different backgrounds who, in turn, are talking to their boards, to local citizens, Business People, bankers, trying to get a sense of the economy. And so we hear an awful lot around the fomc table of an anecdotal nature and it is certainly true that businesses are very concerned about uncertainty and that that seems to be a drag on their investment, spending and hiring decision. In fact, i think its kind of striking that right now, consumers seem to be actually doing a little better. Consumer sentiment has rizzs un. Consumer spending has been a bit stronger, but businesses, probably in part because they are more exposed to the Global Economy and in part, because they may be more aware of these fiscal issues, more directly connected to these fiscal issues, Business Confidence has been pretty low and investment has responded to that been quite weak. So i think uncertainty has been an important factor. Im sure it is restraining, particularly longer Term Investments it is leading businesses to wait for resolution of uncertainty before they make commitments to new hiring and new projects, new markets. And is in that respect, it is clearly a negative. You asked for how much. You know, i think its probably significant, but its very, very hard to assess any kind of rigorous way exactly how big the affects r but again, i think they are meaningful, because we see, businesses have been quite cautious and conservative, particularly lately. Either the question i think though thats very important is uncertainty about what . Theres a lot of uncertainty his the world now. Theres uncertainties in europe. Theres uncertainty in the fiscal policy. Theres uncertain twist the stability and strength of the recovery. And its little bit hard to separate all those different factors when ask you Business People what are they most worried about. So, what wed like to do is attack that issue on all front. I think fiscal policy has a role to play. We hope our european colleagues will take necessary actions to create more stability on the continent. And as for the reserve, we are going to do what we can to support ongoing recovery in growth and jobs and create the demand for output and the demand for firms product that will remove that uncertainty about the future sustain built and the recovery. So if we work on all of these margins, i hope that we will help restart kind of confidence that we need to see strong recovery. I really have a sense that is a lot of unused capability, not just in terms of unemployed workers, but in terms of potential products, new investments, new technology, things that are just being on the shelf, not being utilized to the full extent because people are waiting to see how things will evolve. And i do think theres an important potential for the economy to strengthen significantly if there is a greater level of security and comfort about where we are going as a unt country. So i hope very much thats whats going to happen. Thank you. Country. So i hope very much thats whats going to happen. Thank you. So, chairman bernanke, on behalf a of all of us, thank you very much for that very insightful set of remarks. Ben bernanke before the Economic Club. Steve liesman will join must a moment. Lets bring in Tyler Mathisen and bob pisani. The fed chairman went into fed policy, the looming fiscal cliff and the recovery, said the economic recovery was continuing and largely positive about the direction of housing. I want to focus with you though on the fiscal cliff, because he centered on that and he did say that it poses substantial risks to the economy. In fact, its already hurting. This was a fed chairman saying dont look to me to fix the fiscal cliff, rise above and solve it. Could have been wearing one of our buttons in part of our speech today. He really basically said get your act together t is up to congress and the white house and the administration to hit the right balance between budgetary restraint in the long run and a do no harm policy to the economy in the short run. And he was absolutely Crystal Clear in his answers to one of the last questions there, scott, that if congress and the white house cant come together and we do a full Thelma Louise off the cliff you can the fed doesnt have in its quiver enough arrows to undo the harm and that would drive it almost certain fly another recession. I thought that was the most interesting portion of the last part of the q a, wit fed chairman said we will do our best to add help to the recovery. We have certain tools buts not infinite. We have used our easiest ones but he did say i dont think the fed can offset a recession if we can go off the fiscal cliff. He absolutely did. He said the easy tools have already been played. Our best cards have been played. So the amount of ammunition thats left there in the magazine is not quite as great as it once was. Scott, we are being told to go now to kate kelly, who has the latest details on an arrest aeit federal prosecutors say might be the biggest Insider Trading scheme ever. Kate . They are describing it as the most lucrative Insider Trading scheme ever with illgot gains nearly a quarter billion dollars, actually little more than that the q a session with the u. S. Attorney for the Southern District has just begun. Their prepared comments just finished. We heard from both berrera and s. E. C. Enforcement chief rob kuzami as well as april brooks of the fbi. Trying to use this case, tyler, very much as a warning shot, essentially saying if you are considering doing Insider Trading or cheating in any way, think better of t one of berr a berreras best, most memorable comments is if you are going to pursue ill got gains the only place you may be able to spend your profits is at the prison come mistary. They talk about the unlevel Playing Field created allegedly when the hedge fund in question at the behest of this defendant, a Matthew Mar Tomy marks who was arrested this morning, essentially traded out of pharmaceutical companies they had amassed positions in because they got early information about a drug trial that had not gone well, resulting ultimately in these quarter billion in profits. One thing absent from this commentary was any detail hot quote unquote Hedge Fund Owner was mention noticed federal complaint that is widely believed to be stevie keen,ed and runs sac capital where mar toma worked until 2010. He was not mentioned by name, but appears, he, tyler, figures prominently in a decision too sell out of the positions. Do we know anything about what mr. Cohens reaction may have been when he learned of this action on the part of the federal prosecutor in new york . Well, i would assume, although i dont know that cohen or at least his attorneys knew that this was in the works for a little while, so they had a chance to prepare. I dont know that im speculating. I have heard that the timing of todays announcement was made known or at least had the sense an announcement was made known to steve cone yesterdhen yester quite upset by that news. One thing that is concerned, of course, this is the latest event in which a former employee of sac and by extension, sac is implicated in this Insider Trading behavior. Cr intrinsic, the analyst and the Portfolio Managers provide knowledge to everybody, including you, at time, cohen himself about possible traced and possible ideas. It is very much a part of the fabric of that firm. Mar tomy mass let go at the end of 2010, ostensibly for poor performance. Toma was let go atf 2010, ostensibly for poor performance. We will have moron on the big stories of the day, ben bernanke speaking of new york, this prosecution of what is potentially the biggs Insider Trading case ever and the block busters announcement from hewlettpackard alleging accounting improprieties in the acquisition of the software company, autonomy. Back with more. Having you ship my gifts couldnt be easier. Well, having a ton of locations doesnt hurt. And my daughter loves the santa. Oh, ah sir. That is a customer. Lets not tell mom. [ male announcer ] break from the holiday stress. Fedex office. Monarch of marketing analysis. With the ability to improve roi through seo all by cob. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. Im going big. [ male announcer ] good choice business pro. Good choice. Go national. Go like a pro. Syou know, ive helped alot ofof bpeople save a lot of money. But today. sfx loud noise of metal object hitting the ground things have been a little strange. sfx sound of piano smashing roadrunner meep meep. Meep meep . sfx loud thud sound awhat strange place. Geico®. Fifteen minutes could save you fifteen percent or more on car insurance. Welcome back to cnbc. Federal reserve chief ben bernanke finishing up at the Economic Club of new york. Steve liesman was there. It infrastructure me, he chided congress in trying to get something done. You cant put everything at the door of the Federal Reserve. That is right, michelle. But it was a gloomy bernanke speech. He said he urged congress and the administration to solve the fiscal cliff problem. If you dont do it there is going to be a recession. No matter what happens under every plausible scenario, some drag on growth from federal spending next year, thats one. The other one he said that was kind of interesting, he said potential gdp, the ability of the economy, the speed rate that it could go, is actually lower than maybe we thought, below 2 1 2 . Lets listen to what he said to congress and the administration about solving the fiscal cliff problem. The real spraying that of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery. Indeed by the reckoning of the congressional budget off, the cbo, and that of many outside observers, a fiscal shock of that size would send the economy toppling back into recession. Of course, he emphasized what he had before, no matter what the fed does it cannot undo the effects of the fiscal cliff. Hence the urgency to resolve the problem. By the way, michelle, he did add not just resolve the fiscal cliff problem but not have another debt ceiling debacle like we had a year ago, michelle. Telling them to rise above. Now, when you talk about the gdp of the nation, 2 1 2 or below, you think he means for an extended period of time that we are stuck with that kind of growth or thats because of the situation that we have we happen to find ourselves in now . Im confused about that when im done here, i will get on the phone with my economic friends and find out what bernanke meant. It is a longrun issue. Bernanke talked about it in short run firms, he talked about healing the potential destroyed by the financial crisis. He was mixing ideas and frankly, im not really sure, but there are potentially significant implications if indeed exgdp phone sex lower. Absolutely. Because americans are not used to being a 2 1 2 economy. Thank you, steve, we appreciate it. Michelle, we are talking lower than 2 1 2 . Below that number. Maybe 2 . Maybe 2 . We as a nation dont i dont think ever find that acceptable. Thanks, steve. Right. Kenny polcari, end pend dent trader sitting on the set with me. Likely recession, no matter what shallow big . Is it going to be shallow other sfwhig that is going to depend on what happens in washington. Interesting that steve said that he thought that bernanke gave a doomy assessment. I actually think bernanke was very realistic, saying listen, this is the way it is going to be. You cant make it be optimistic when itville not optimistic as far as d. C. Not really carrying on and doing the job. Your point, when we were chatting earlier, lets say they get the fiscal cliff resolved, in the meantime, companies have already been act. They have done discounting in the worse case. What is bernanke going to be able to do, go over and enter a recession, which he said, most people going there is he going to be able to prevent the depth of it . Is the fed going to be able to throw so much more money at it to prevent it from being a really bad recession or a shallow recession . I think thats what we have to wait and see. Already used so many tools. Thank you, kenny. Kenny polcari back on the set with us. David faber breaking a huge story on squawk box. Hewlettpackard admitting that a British Company called auto any brought last year blind its finances that resulted in a massive writedown and the shares, you see them now, down 11 1 2 at 11777. David faber now with more from new york city. David . Thats tyler. Hewlettpackard reporting earnings this morning, that was not the focus for investors, the company alleging it was defrauded by autonomy to the tune of 5. 3 billion when it bought that company in october of 2011 for 11. 1 billion. That 5. 3 part of an overall part of an 8. 8 billion writedown related to that autonomy acquisition. Certainly not a good one. Now you it was last may that an insider, a senior insider from autonomy, spoke up, essential lay whistleblower inside hp and said, hey, you know what, now that management has gone,ing me whitman just fired the management of autonomy, now they are gone, i want to alert you to some accounting improprieties, revenue recognition issues and an investigation ensued. What did they find . According to hp, they did things like selling hardware at a loss to supplement revenues but treated the costs of selling that as a marketing. So margins werent affected. They actually gave money to value edit resellers to buy their Software Products making look like they had much stronger sales to omms than the case. Customers paying high licensing fees in return for low fees over time for hosting service. By the way, there were any number of short showers had taken a look at autonomy and raised questions of its own when it came to revenue recognition, why investors received the autonomy deal, one reason why so poorly when hp did it. I asked Coe Meg Whitman on the board at the time, not ceo, whether the board heard i have no those concerns. After we announced the acquisition, there were a number of blogs that came to the fore about potential issues at auto mitch the former Management Team ran that to ground and came up with a conclusion that there was nothing there. Now, often in a cuttingedge company like autonomy, there will be rumors like this, but they went through working with deloitte and kpmg who hp hired to talk to deloitte about these issues as well as talking to mike lynch and they ran it to ground and said theres no there there. Obviously, we know different now. Of course, deloitte was the accounting name signed off on autonomys numbers. Mike lynch, dr. Michael lynch was one of the founder of the company and running it until he was sum marly dismissed by whitman, because add harder time making the numbers, which he did when they werent actually autonomy but owned by hp. As for his part, mr. Lynch said the former Management Team of autonomy was shocked to see the statement today, flatly rejects these allegation, they are false it took ten years build autonomys industryleading technology. Stood see,has been mismanaged, he claimed, since the acquisition was done by hp. For all of that meg whitman says they still like the end product. We still like the business. We like the technology. We think its going to be an important part of hps hp softwares growth strategy, but it is not as valuable as we had believed it to be because revenues are lower, growth rate, we believe, will be slower and the margin is not what was reported, which was in a 40 to 45 range. We now think more of a 28 to 30 range. Which means they would have paid an awful lot less for it if they had over done the deal. Many hp investors which they never heard the name autonomy you let alone hewlettpackard, having issues of its own. You asked meg whitman whether she regrets having voted for the deal . I regret i voted for the deal. Very candid about it. Very straightforward, as she has been, about that, you are right. I thought that was an interesting explanation, wasnt as though they were out there. They tried to do their Due Diligence, clearly they failed. Not up to the board to do forensic accounting, tyler, but you would hope that somebody would asked the proper questions and perhaps raised a red flag. Somebody is going to ask tough questions of deloitte im sure as well. David faber, thank you very much former intel ceo Craig Barrett will weigh in on hewlett packers problems and several other big topics in tech and beyond, including the fiscal cliff, coming up in about ten minutes, michelle. Tyler, david hinted at this oothmy Software Problem a surprise to many but not to a frequent cnbc guest and short investors, jim chain knows. This was what he said at cnbcs delivering alpha conference in july. The reason we got interested in hewlettpackard was not only the macrostuff, one of our biggest positions was autonomy. In lon done the short side a year ago. Hewlettpackard bought this for 11 billions, a rollup of Software Service accounts, the accounting was absolutely dreadful, a disaster. They did almost no Due Diligence on the deal. It closed quickly. Oracle was shown the deal and passed. Within seven moment, the ceo and a number of stock people left. Jim chain knows was certainly right on the money there john what else do you think he is bright and see other choos dropped . Talked about what he calls value traps, these are overly dependent on one product, hindsight drives the expectation of future performance. They have people you have heard of, rock Star Management and appear cheap if you use managements metric and of course, they have accounting issues. What jim did, in a couple of different presentations, he has given us a list of some of the companies that he thinks fall into the value trap category. These include consol energy, which he thinks has been hurt by the shale gas explosion that has, not literal explosion, but the amount hurt the producer, coin star, obsolete because people arent buying dvds. Petrobras, a china play and then also, on his list, australias fortescu metals group. A keep named yesterday, another big iron ore producer, shorted that, and san tender, short on the troubles of the National Balance sheet of spain. Knew about the problems with the fee and autonomy a long time ago and thank jim chanos for that. Absolutely august big conference, very successful, thank you so much, john. All right, tyler, over to you. Thanks. When we come back, the former ceo and Board Chairman at intel, craig batter exwill weigh in on lots of topics from hewlettpackard to the fiscal cliff to the crisis in american education. Thats coming up. Try running four. Ning a restaurant is hard, fortunately weve got ink. It gives us 5x the rewards on our internet, phone charges and cable, plus at Office Supply stores. Rewards we put right back into our business. This is the only thing weve ever wanted to do and ink helps us do it. Make your mark with ink from chase. Customer erin swenson bought so, im happy. Today. Sales go up. Im happy. It went out today. Im happy. What if shes not home . together she wont be happy. Use ups she can get a text alert, reroute. Even reschedule her package. Its ups my choice. Are you happy . Im happy. Im happy. Im happy. Im happy. Im happy. Happy. Happy. Happy. Happy. together happy. I love logistics. Since Ameriprise Financial was founded back in 1894, theyve been committed to putting clients first. Helping generations through tough times. Good times. Never taking a bailout. There when you need them. Helping millions of americans over the centuries. The strength of a Global Financial leader. The heart of a onetoone relationship. Together for your future. Welcome back to power lunch. Rick santelli here. Looking at intraday chart of tenyear note yields, we are up four basis points, whats interesting, look at the twoweek chart. We have been in a really tight range. We could be breaking out. The reason . Well, a clue, 12 00 eastern put up the next chart this is a combination chart of the s p 500 and tenyear rates, they both peaked at the same time, goes on to say we continue down on these trading floors, say trader to monitor the equities what is giving us most of the trade in treasuries. Hyg, highyield etf, whether a two day or two week, you can clearly see its making its move, as investors feel a little better about equities and making a play for gives them the biggest yield. That may be hyg, high yield. Next after the break, former intel ceo fred barrett. You better stay tuned. Talk about the trading action here, bob pisani joins ounce the Stock Exchange floor. Any reaction to bernanke . A quiet session with bernanke, made a few jokes, seemed relaxed. He came out and said the ability of the fed to offset headwinds was not infinite, a little after 1 00 eastern time. Look at the dow jones, that is when we started moving south, mr. Bernanke went on to reiterate congress had to do something about the fiscal cliff and went on to little sidebars. He said the fed does not have the tools to offset the fiscal cliff. The dow dropped 70, 80 points that particular news. There was the dow. A little after 1 00. We have recovered a little bit of that. Look at some of the sectors, either side of positive or negative, prior to him coming on, basically flat to slightly positive on all the major sectors of the day. Mr. Bernanke occasionally can move markets. The clock is ticking, a few weeks left before we go over the fiscal cliff, if Congress Fails to reach a debt deal this will result in a 4 billion hit to the education department, among other cutbacks. Joining us in a power lunch exclusive is former intel chairman and ceo Craig Barrett. He is a staunch advocate for improving education in the United States. Mr. Baret, welcome back. Good to have you with us. Good to be with you. Let me start, however, with yesterdays story about mr. Adough leanny, your successor at intel stage side were you surprised he chose to retire earlier than some thought and does intel, to your observation, and you have been chairman there as recently as a couple years ago, does it still have a Strong Enough bench to replace him seamlessly, internally . First, i wasnt terribly surprised that paul decided to step down a bit early. He had been talking to his friends about that. I suspect the board knew that as well. I still think intel has great bench strength. I was a little surprised that the board did not name an internal successor to paul right away. I think they have got more than enough talent inside to continue the strategy and continue to have intel perform as a great company. Intel very dominant in pc chep chips but a weak spot, according to analysts of the company, hasnt made head way in mobility and tablet pcs and supplying the chips to them. Request the company make up that lost ground . Does it need to . Or must it go out and done external ac saying to catch up . I think its got great capability inside. If youve looked recently, low power microprocessor, same architectures of pc have been coming out. They have been getting design wins and smartphones. They have a good strategy but take time to make roads. The capability is right. Mr. Barrett, michelle here. You happen to be joining us another iconic name in technology is in a world of hurt because of the situation with the purchase of autonomy. I know i dont expect to you know a lot about what happened within that board room, but having run a Technology Company that has done acquisitions, when you look at the situation with hp, hear people like jim chanos say we saw accounting problems there how do you think about it, do you think there but for the grace of god go i or gosh what were they thinking . How did they miss this . The port thing when do you those sort of acquisitions, you must approach it from a dispassionate standpoint. The worst thing in the world could you have is a ceo who really wants to make an acquisition and will ignore the details. Im not sure that happened. But the claims hp is making today is the Due Diligence was glossed over, the ceo at the time wanted to make the acquisition as a major portion of the strategic change for hp. They may have just been a little too shallow in their analysis. What do you think about hp long term . Any exist seines threat . Can they overcome this . What should they do now if hurp running the company what would you do now . I think they have got a great ceo in meg whitman. I applauded her decision to keep the pc business as part of hps mainstream business. I think they have still got a very, very bright future. Heck, they are the Biggest Tech Company around, from a revenue standpoint. They have got great effort around the world, great product line. They just need to continue to push. Mr. Barrett, we are going to take a quick break, stay with us, because of mr. Bernankes remarks and when we come back, we will talk to you about the fiscal cliff and your passion, education. Thats in two minutes time. We will be right back. De. Its changing the conversation. Its changing the conversation. You know it can be hard to lbreathe, and how that feels. E, copd includes chronic bronchitis and emphysema. Spiriva helps control my copd symptoms by keeping my airways open for 24 hours. Plus, it reduces copd flareups. Spiriva is the only oncedaily inhaled copd maintenance treatment that does both. Spiriva handihaler tiotropium bromide inhalation powder does not replace fastacting inhalers for sudden symptoms. Tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. These may worsen with spiriva. Discuss all medicines you take, even eye drops. Stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. Other side effects include dry mouth and constipation. Nothing can reverse copd. Spiriva helps me breathe better. blowing sound ask your doctor about spiriva. Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. Equities blowing off a little bit of the enthusiastic steam. Back with Craig Barrett, former co of intel. Lets talk, mr. Barrett, welcome back, a little bit about the fiscal cliff and how damage you see going off the fiscal cliff would be, number one, to the economy generally you and number two to a particular passion of yours, and that is education. Regarding the fiscal cliff, i liken it had to the last election, half the populace voted all we have to do is raise taxes on the rich. The other half of the populace voted no, we need to change entitlements. Politicians representing those two sides are kind of intransigent, dont want to listen to the other side. The thought that youre gonna solve the debt problem in the United States by raising taxes on the rich, we know its only a 6 or 7 of the trillion dollar deficit that we are running. Im actually getting to be a fan now of lets do something and the congress doesnt seem to want to do anything. They are kind of like people who are overweight and they want to lose weight by maybe only having two helpings of pumpkin pie for dessert and not three. You know earthquake lets bring on simpson boles, lets bring on sequestration. Lets get started on the process, not clear to me leaders in washington, either party, really serious about fixing the fundamental problem the United States faces. We are almost california. Our did the 100 of gdp, running 1 trillion deficits. Gets get a balanced budget into the system. Right. We have got our own greece here, its callinged california. Look whats happening there. Right. Lets talk a little bit about more specifically about education. I know you are passionate about Stem Education specifically. If you had to sort of highlight one thing that you think would do the most to improve education performance in this country, would it be charter schools, the use of vouchers and competition, Something Different than either of those . Yeah, it would be all three of those. Charter schools and vouchers are a great form of competition to shaken the existing you mon nolism you really need to shaken the monopoly, its run 50 or 60 years now with no improvement whatsoever while the rest of the world has shown dramatic improvement in education. Off Great Program going on called the common core, 46 states have signed for increase the curriculum capability and rigor in mathematics, science and english. If it can carry off that program, a statedriven program, we have a chance of upgrading education but its going to take a lot of political backbone to make sure that program goes through. Craig batter, always great to see you. Thank you very much for your ideas today. Pleasure. And oil dipping on word of a possible ceasefire that could go into effect soon, maybe even as soon as this evening, between israel and hamas and the islamic jihad. More power in two minutes. [ male announcer ] tis the season to discover the kid in all of us. The memories that last, start with the gifts that last. Enjoy Free Shipping and great values on your Holiday Shopping from l. L. Bean. [ engine revs ] [ male announcer ] the mercedesbenz winter event is back, with the perfect vehicle thats just right for you, no matter which list youre on. [ santa ] ho, ho, ho, ho [ male announcer ] lease a 2013 c250 for 349 a month at your local mercedesbenz dealer. At your local when we got married. I had three kids. And she became the full time mother of three. It was soccer, and ballet, and cheerleading, and baseball. Those years were crazy. So, as we go into this next phase, you know, a big part of it for us is that there isnt anything on the schedule. If we want to improve our schools. What should we invest in . Maybe New Buildings . What about updated equipment . They can help, but recent research shows. Nothing transforms schools like investing in advanced teacher education. Lets build a strong foundation. Lets invest in our teachers so they can inspire our students. Lets solve this. Boproductivity up, costs down, thtime to market reduced. Those are good things. Upstairs, they will see fantasy. Not fantasy. Logistics. Ups came in, analyzed our supply chain, inventory systems. Ups . Ups. Not fantasy . Who would have thought . I did. We did, bob. We did. Got it. One of the stocks today, whirl pooh good Housing Starts this morning. Whirlpool a 2 1 2year high held up, a bit of a swoon there during bernankes speech. Mandy . We have in about three minutes time from now, more big stories crowded into our show than i can mention. What are the full implications of Ben Bernankes comments, its fed may not be fully able to offset a fiscal cliff whammy and how much dissent at the fed . Kate kelly on the Insider Trading case and Big Questions needing big answers in relation to hp, lots of things coming up, guys. Back to you. Thats dow industrials, down 54 points, s p 500 off 5. The nasdaq down about 12. 75. We are going to talk a little bit about that. I think basically, as you were saying with steve a few minutes ago and others, mr. Bernankes comments were rather down bebea he talk about the reduced economic potential in the United States. He talked a lot about the fiscal cliff, but the reduced economic folks, something below 2 1 2 , 2. 2, is it 2 . That has longterm implications for not on the economy and jobs but for the value of equities. Steves point, he was going to do more reporting to find out what length of time ben ber mack ki bernanke was talking about. If we are in an economy that grows that low a rate, that is something we are not used to in the United States of america, tyler. We expect to be an economy that grows a faster pace than that, up until now, one of the most liberal economies in the world and we dont mean in terms of liberal versus conservative in politics, mean the most dynamic economy, where we can adapt to changes very, very quickly. Thats why we can grow so fast. At least in the past. That would be one dramatic change if that turns out to be true, and frightening. One of the other things that you were talking about and Kenny Polcari was and john, your thoughts on, this the idea that whether we go full thelma and louise off the fiscal cliff or not, there is likely to be fiscal restraint in the year 2013. Higher taxes some form or another and reduced federal spending and that is going to pull put a drag on the economy, a headwind, whether that will be sufficient to push the economy into a recession or not it he was a little bit vague on it. He said we could maybe deal with that, but, we the fed, dont have the tools to deal with the full dots. What we have been talking about before, even if they do a deal it is going to be a minicliff. Maybe the fed can help us if we goo off the minicliff, but the big cliff is too much for Monetary Policy. The fiscal contraction too much and the economy in serious trouble. He said, michelle, corning the administration, go get her done, rise above the partisan rancor. He could have been wearing our button. It has led to deeper recession in peripheral europe. Things thave