Transcripts For CNBC Squawk Box 20100511

the start wasn't too bad, but weakened as we went along. china at a fresh low for the year, that's down almost 2% there. oil, you could expect some weakness there. we're seeing that back to 75.79 just a little while before we roll over to the next contract, too. the 10-year note, the yield has crept back down to 3.474%. and then gold, which was losing ground yesterday because the euro was stronger, the reverse dynamic is in place today up 8.70 to just ove$8.70 to just o. >> so many traders went into that weekend short. i guess the ones who went for the short trades got out of them. we'll see where things shake out through the course of the day. and a government watchdog is urging better krlts on treasury warrant deals. the t.a.r.p.'s inspector general says the department has been able to negotiate warrants for bailed out banks that price largely at or above estimated values. but in the new audit report being released today, neil barofsky says they need more control over this process. and that potentially jeopardizes the return realized by taxpayers. a new report out today suggests new york city residents may have turned a corner. the big apple's recovery might be rocky and long. the think tank cites a high number of job seekers, the concentration of job losses, soaring bankruptcy rates, small and medium businesses and the risk that the city will slash public workers. the mayor has already talked about the state budget costing the city $1 billion. the new state budget that comes through? >> yeah. and it's funny, you go down lexington after and they're trying to attract more business. it may not too late for some. >> well, the question about public workers is a big one. the governor, david patterson, saying that he got this thing passed through legislature that would mean furloughs for state employees until they get this new budget passed. there's a lot of unrest here, as well. it's not quite on the scale of greece. in the meantime, fed vice chairman donald cohen reports that economies around the world must further rebalance their economies inside and outside of the zone. speaking of switzerland, kohn argues that the economy will need to be less by consumption and housing. he says exports and capital need to play a larger role. toyota beating forecasts, returning to profitability in the fourth quarter. toomaker sites cost cutting and says its aggressive sales incentives swiftly drew u.s. customers back into their showrooms. but the company sees a storm lingering. it's blaming a stronger yen and some of the debt problems in europe. our auto reporter, phil lebeau will join us at 4:30 eastern with a sful full story on that. we talked yesterday about ray la hood. >> he had a smackdown, didn't he? >> he says their attitude is improving. >> it's such a backhanded compliment, isn't it? china's annual inflation rising to an 18-month high in april. property prices jumping at a record clip, as well. bank lending is topping expectations. the numbers are raising red flags that china might raise interest rates. the main stock index in shanghai is falling on that news. broader markets in asia are getting hit by this news, as well. we want to get to our task force this morning as we look at the u.s. trading day ahead. obviously, a lot of cross currents and they could be confusing. i think 8 out of 10 sessions have had triple digit moves. >> wow, really? >> i think in a similar time period a year ago or earlier this year, we had three. >> okay. back to some real action. >> there's a lot of volatility. joining us this morning, chief economist buhey and d.a. davidson, market strategist fred dixon. dan starts every one of his notes from a piece of a lyric from a song. yesterday, i think it was boc, right, blue oyster cult. what does that mean? >> the markets yesterday, everyone was saying it's okay. today everyone is coming out saying, oh, i saw this in the wall. but the truth is, in the longer term, solvency issues for greece and these other countries still remain. in the medium term, my original inclination was to believe a packet of this size was to take the liquidity off the markets. although net-net, it's still a positive two days. >> what was your take? >> basically, i think that the actions that were taken took the risk of a big bank crisis in europe off the table. and, therefore, we had a risk that things could have gotten out of control. it was the ecb on thursday morning that said, we didn't even discuss buying bonds, at which point the markets went into a panic. all of a sudden, you know, a couple of days later, they say actually, we've decided to buy bonds. >> yeah. and nobody pushed -- >> forget that. we didn't mean to leave the impression that we weren't going to do anything, even though that was their intention on thursday. but since you guys panicked so much, we decided to step in. and that's the big difference. so the bank crisis in europe, which could have been very severe -- >> and germinating on thursday, wednesday, thursday? >> thursday there were -- there was real concerns because of we did have contagion in the pricing of sovereign risk bonds, which are owned by the banks of europe. and if you did kind of a mark to market, you know, we have this culture coming up of instantaneous mark to market. if at 2:00 in the afternoon, the price of the bond is down, we better knock out all the net worth of the financial system. and so there was a real fear building that this would get to be a self-feeding contagion, which is why the ecb said, remember what we said on thursday? forget that. >> and it's amazing, too timing of that flash crash, i guess, as we're now calling it. it could not have been worse. >> did it happen because of it? was it because there were all these concerns out there? >> because you could not rule out during thursday that the european sovereign risk meltdown and bank stress might have gone much more critical. if you look at libor, it was showing stress in the banking system. and so people said, gee, i remember some prior occasions like this. and so it was very, very close to a very, very serious event. but that risk has now dropped. it's like you were almost killed by a semi thursday, but that doesn't mean you're at high risk of getting hit by a semi on tuesday or any other day. >> and libor barely moderated yesterday. >> yeah. i think the risk panic is over in europe. that is not to say they've solved all their problems. >> there's a different, fred, between what dick just said and investors focusing once again on corporate balance sheets and profitability here in the u.s. but you think investors are going to come back to that? >> absolutely. and we're going to go through a period where i think we're focusing towards stability, the guests was as they've just commented, we agree with our sentiment. we had our heart attack. the patient is coming out of recovery and it's going to take time to get the nurse settled down. overnight, i've been reading about the s.e.c.'s comments, working with the market regulators just to get the mechanism in place so that you have coordinated circuit breakers. that's going to do a lot to settle both institutional concerns down and it should quiet down concerns by individual investors. and i think restoring comments in the market mechanisms should leave investors looking at what we continue to see a have ae, very strong emotional picture. we are well on our way to a much better than expected economic recovery. we seem to have lost in all but noise the good jobs report friday which is just another piece of evidence that we're on our way. >> but if you survive a heart attack in the hospital and you're discharged, right, you've got to stop smoking. you can't go out and run a marathon. isn't ta -- >> you've got to eat better. >> isn't that a met for for investors becoming much more -- i mean, on a relative scale, risk averts from here on out? >> absolutely, carl. investors at this point are becoming more focused on balance sheets. they have really begun to understand the interplay between global investing, the world stents extends beyond the u.s. and balance sheet debt on corporate balance sheets and sovereign debts are critical elements. so what we've seen is a temporary fix. the big questions that remain are how are countries going to be able to resolve their debt issues? they've got a patch. i think about it in terms of they have -- we've got through bypass surgery. we just need to make sure that the heart muscles strengthens and that is balance sheet ability of governments to repay that debt and to basically launch economic footing going forward. so big question marks. i think the steps taken were necessary and it should restore investor confidence. i think if you think about the european situation, it was an inconvenient time for germany and france to have a banking crisis as a result of greece going into default. so a better time is when you've got a build up of profitability in the banks over a period of years. so basically they were just trying to stop the potential for a banking meltdown. >> but you slipped in something before, blaming this on mark to market, which i disagree with. >> well, i just -- i do think that -- >> mark to market, these guys knew this was coming. the idea of mark to market, you've to market it at some point. if you say when the bad times come, we're not going to mark to market database. >> but if you mark to market p&g at 37 on an out trade and that causes further contagion, do you have a problem with kind of the issue of what is the real market? what is the real market for greece? one day it's 76 and one day there is 90. there is a real problem with self-feeding dynamics being triggered, marking to instantaneous prices, assets being held for long-term. would you do a margin call for proctor & gamble for the one minute that it traded at 37 before they canceled the trade? i think you have to look at this as a potential for a self-feeding problem. and so yes, you should mark to market on a true, accurate price. but you have to be very careful about marking to markets that are falsified. >> as you said -- as they were on the way up, too. >> was ex ten temperature worth -- >> but we're not talking about debt. we're talking about long-term debt. >> first of all, yes, we are, but nobody is talking about marking to market proctor & gamble on an interday basis. >> no, excuse me, we do it with margin within the stock market. if you're run ago computerized operation, you're getting your market calls on an instantaneous basis. these are issues that need to be addressed. if you have permanent impairment of value, i don't think there's any question that you should mark to market. but you have to be aware of the potential for self-feeding contagion, just as we saw in europe. >> but that dynamic doesn't go away because a bailout package has now been proposed. are you avoiding all things europe because of this? >> i wouldn't say i'm avoiding all things europe. but certainly, the risk there, as -- the one thing we were saying earlier is while the package takes the nearly term liquidity issues off the table, as i was coming in, i was reading a couple of stories on the interwebs. what a lot of people seem to be saying this package doesn't think it was taking off the table that grooet isn't going to have a recession. that will obviously have an effect on the investing landscape. >> but that is not what the market was panicked about. the market was panicked for a while about the european banking system. i believe this has successfully killed thatbacking risk panic. it doesn't solve the problem of greece's recession, but i think it does stabilize the problem that you had almost a post lehman like panic occurring in europe and the ecb and the european government stepped in. that's why the ecb said, forget what the i said thursday. i'm going to buy government bonds rights now. i tell was a practical solution to an emerging bank panic in europe. see ee if it's real. >> thanks so much for coming in today. coming up, executives from bp, haliburton and transocean are on the way to capitol hill today. first, loets, let's take a look at yesterday's many winners & losers, as well. welcome back. that relief rally that we saw yesterday to the tune of 402 points, fading a bit today. giving back about 97 or so. we'll see what happens later on this morning. speaking of which, executives from b the, haliburton will testify before the senate today. written testimony suggests that the executives will blame one another's companies for the rig explosion and the failure to control the oil slick. bp argues the explosion and the spill is the fault of the blowout prevents valves. haliburton says there was a failure to place a cement plug within the well. it's been said that the senators are going to get a lesson in both oil drilling technology and finger point postponing. >> that's some complicated stuff, yeah. let's get your national weather forecast this morning. scott william, our friend over at the weather channel. good morning to you, cot. >> good morning, carl. wrernl we are finding activity weather here across barts of the country. as we move our way to the great lakes, you'll see nothing severe like we saw yesterday event in oklahoma. around chicago this morning, waking up to supreme court and storms, rolling through the indianapolis area. but the cloud cover is on the increase. we'll continue to quickly move towards the east here, so wecht delays as we move into detroit. cleveland, eventually d.c. and new york later on this afternoon and evening. and then during the overnight hours, we'll keep the showery conditions in parts of the northeast and new england, as well. let's expand the view and take a look at the national perspective for our forecast and our potential airport delays as we move throughout your forecast for today. mostly sunny for parts of the southeast been and as we move into detroit, heavy delays. cleveland heavy, as well. salt lake city, looking for moderate delays. it's a chilly start right now. boston, 39 degrees as we move into tampa. good morning. 71 degrees. here is a look at our current temperatures in san antonio. and the forecast for today, we'll see snow into the intermountain west. philadelphia, a high today of 60 degrees. boston will keep things dry. a high for you of 59. detroit, looking at the thunderstorm activity and as we move into charlotte, maybe an isolated thunderstorm. 73 degrees. and what about new orleans? 88 looking fine and laengz today, a high temperature of 71 degrees. that's a look at the business traveler's forecast. now back to you. >> but there are some doubts that remain about the sustainability of the euro. we'll talk more about that. when we are seeing a bit of a pullback today with some of the stabilization and the euro gained yesterday. what's happening here? is this a shake-up because people are reassessing the entire situation or were there some unusual moves yesterday because people weren't expecting that package? >> well, i do think it's sort f of -- you know, the dust settling. look at the irm data. there's record high shorts. we had some positions. we knew some sort of big package was in the works. we had a relief rally yesterday. that was to be expected. but the fact that the euro did not get above 1.30 or 1.31, it does underscore the fact that your previous guest is a little too operates mystic saying it's all clear on the banking sector. i think there's still much stresses there to be concerned about, as well. we had talked to several people and many of them came up with the idea that we would see parity between the dollar and the euro. one guest was telling us he thinks auto year from now we'll be at parity. do you think parity is in the cards? if so, when? >> the timing is a real trick. i have to say that parity has been hit before. if you remember, the birth rate for the you euro is around 1.18 or 1.19. we're back up to 1.60. it's symmetrical. the 1.20 area is central. right now, we're shooting for that as a near term target over the next three months. parity is a possibility. right now, they haven't done a lot to get markets -- to build up the credibility with the markets. i think that's something that's been taking a while to build back up. so yeah, i think the cell euro trade is still in play. it just depends on how well it can manage the panic. >> yeah. and i wonder, is the biggest threat to the euro the inflationary after effects of the package, right? recession in europe or some other sort of economic jolt that europe is clearly in no position to defend itself against them. >> i say it's a package of deflation coupled with default risk, restructuring risks. >> so if one of the players end up restructuring? >> yeah. look, greece has to basically see its wages and prices collapse in order to gain competitiveness. it doesn't have the exchange rate buffer. ten years ago, they wanted to get back that competitiveness. they don't have that option any more. they have to see the wages and prices collapse. that's when the social unrest picks up, you know, the commitment of the government to pay its debt. that's what it is, it becomes a political quench. is it befrt just to cut loose, restructure and come back? brazil defaulted in the past. so has russia. everyone loves them now. so it's not that greece is going to be forever tainted. >> no, but what about the ramifications on the euro that people are worried about? >> well, again, i think the fact that there's a similar risk in spain and portugal, you cannot continue. but to me, restructure does not mean the euro ends. i think a country within the euro zone, it's never been done, but a country within the euro zone can default on structure. i don't think it's the end of the euro. i think politically they want to keep it together. but they're not going around and expanding the euro zone any more. >> winn, thank you very much. >> thank you. still to come this morning, this morning's top stories, plus the picture from the futures pits. then phil lebeau comes up with the story around toyota's turn around. hi, ellen! hi, ellen! hi, ellen! hi, ellen! we're going on a field trip to china! wow. [ chuckles ] when i was a kid, we -- we would just go to the -- the farm. [ cow moos ] [ laughter ] no, seriously, where are you guys going? ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! [ female announcer ] the new classroom. see it. live it. share it. on the human network. cisco. good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with carl quintanilla. joe is out today. we've been talking about toyota beating forecasts and returning to profitability in the fourth quarter. our phil lebeau is here and he has more on that story. good morning, phil. >> this might surprise a few people. but toyota has prvp pretty much forecast this for some time, that it expected the fourth quarter and year-end results. toyota's fiscal year ends in march, that they were going to do fairly well, all things considered. net income, there you see it of $2.2 billion. but here is the part that people will be focused on. the projecton for the next year's earnings, that's going to end in march 2011. $3 approximately billion operating profit. as for the recalls, not only here in north america and europe around the world, what kind of an impact did it have on sales? a decline of 7.7%. that's the total number of sales that they've seen in the last year. how much of that was due to the recalls? approximately 50,000 versus what they originally estimated which will be a decline of 100,000. some people are going to look at that and they're going to say, are you sure you only lost 50,000 in sales? but they're saying that's the estimated impact. the cost, there you see it, about $1.8 billion to $1.9 billion. that's the cost of the recall, not only here in north america, which gets a lot of attention, but also around the world. akio toyoda saying we are in the middle of the storm, but i am feeling that we can see clear skies in the distance. we're going to hear more from akio toyoda as well as other toyota executives coming up early this morning opinion there you see shares of toyota holding in that $76 range. they've primarily been trading, becky, between $75 and $80. the worst that this stock ever saw was, really, at the heat of the problems when things were at their worst, probably dropped down into that $68 range. for the most part, it's been holding steady. the toyota conference calling coming up at about 9:00 a.m. eastern this morning. we'll have more on that call. >> phil, we'll be watching closely. thank you for that. you're right. it is surprising information for people that have been watching this play out. phil, thank you for watching. meantime, today, a house panel formed by congressman kanjorski will be held. congressman kanjorski is going to join us on set at the top of the next hour before he goes down ford hearing which i think begins at 3:00. and we'll ask him a lot about what happens on thursday, financial regulatory reform, a lot going on. it's great to have him. >> it's a good time to have him here and feeling him out on some of the issues. overseas today, the uk's big political parties are scrambling for a power sharing deal. prime minister gordon brown will stand by by september at the latest. this is the uk's first inconclusive election since 1974. one french official says that the uncertainty will damage the british economy. it is yet another cloud hanging over that economy right now. >> theater. in the meantime, greece is reportedly likely to submit a request today for the first installment of an aid package from the eu and the imf. they have to go through all these formalities. the greek finance minister has said his government will be asking for a period of 24 billion euros or roughly $25 billion. george papaconstantinou. >> papandreou, i've got. papaconstantinou -- well, yeah. >> the money will be used in part to refinance a 10-year bond that actually matures next wednesday. that was the big fear. i mean, the worst case was that if they didn't get anything, they would start defaulting on the 18th of may. >> right. and that would, in turn, because so much of that debt is owned by the banks in france and germany and around the eu. >> exactly. meantime, as becky told you, the euro's one-day rally did stall. the currency retreating in overnight trading to where it stood late last week before the aid package was unveiled. traders citing uncertainty for the euro zone and questions about implementing all those funds. we're closer to that than we were the 1.30 level. >> there is so much bouncing back and forth, those some some of the various levels that we saw at the panic of last week. >> yep. we want to get some more guidance from the futures pits at the cme and kevin ferry. kevin, on the equity front, maybe yesterday it got a little too rich. is that what the take away is? >> yeah, equity hard to say, carl. but i would say what i'm trying to say is that having the market go in a positive direction is not a proper evaluation for whether what they're doing policywise is correct or incorrect. what happened on the short end is not only a move back steeper in the futures markets, so healthy, but they didn't necessarily get the level of rates right then because libor rates did not really come down mucher canning the enthusiasm that everyone was -- else was a evaluating the policy by. and, therefore, you have things shifting back not just in a higher way, but in a negative way, which is flatter here this morning. so some of that is the uk. they need to get their governments in order. >> you mean when gordon brown's resignation? >> correct. and what replaces him is what's important. they're still negotiating that. i think they'll get it done. and the other part today you have to throw into the mix is as you were talking about, there is becky with the currency. remember, when we elected to made a widespread blanket here in the states, the dollar was at an extremely high level as people had flown into it during the global crisis. that's not the case for the euro. it, in fact, has fallen 25 cents from its peak and so the idea that it should appreciate as they move into this type of blanket guarantee is improper. in fact, it's going be harder for currencies to continue on the path that they are, which is, oh, if the dollar goes down, that's good for equity. i think that those days are over. >> right. so europe's -- the euro is down. futures are down here. european markets are down. libor, as you said, didn't cool, right? right. >> and correct me if i am wrong, but some of the cds spreads on the peripherals have tightened a little bit. so the markets aren't all trading in tandem, are they? >> correct. that's right. they're going to try and blanket it, right? so they have to come in. but at the same time, these are the nuances that you can talk about the curvature moving in the proper or in a negative direction, but that does not mean that the level of rates is necessarily proper. in other words, we were beginning, here in the states, to try and rebenchmark what the concept of interbank would be in a more stable environment. and now you're throwing a new crisis into the mix that is going to make that much more difficult. so i would say two things to watch going forward. okay? one, if the fed does not act, in other words, issue more of these special funding type issues, then their balance sheets will increase by whatever the fx swap lines are drawn up by. also, they would have to accept blindly whatever collateral the ecb elects to give them. and that could be a sticky wicket if you're taking things rated bbb now by certain countries. >> you mean like greek debt? things that the ecb is accepting at collateral. >> correct. part of the swap line would be what the fed would accept the same collateral. and so those type of things are not flushed out in the first day of what is a positive response. so you have to think about this, i think, much more delicately. i would not rate this as t.a.r.p. two. it's not the same as -- >> it's not a t.a.r.p.? >> right. it's not. and i think that what the other things that you have to remember is that here in the states, there was a heavy toll that the treasury department enacted on equity holders of things like aig, bear stearns and the gses. if this is t.a.r.p. or what is the equity side of the balance sheet of peripheral europe? is it going to be taken down in this process by did other owners. and i think those are the things that you have to watch. so i don't think it's over by any means. that was a big rock thrown in the market. remember, the market fell here during the trading session and it responded overnight. so there is a big part of those volumes and trying to correct. >> but kevin, european government leaders wanted to break the markets to say, no, you're not going to control things, we're going to control things. did they win at least that part of the tug of war? >> i would say no, becky. and here is why. if you remember in our crisis, most of the time when policy was -- there was some type of movement in the market and they acted against it, all it did was provide a bid for small money to then offload some of the risks to that bid. that is what happened yesterday and what happened in the global markets again last night. in other words, the only limit move that we had in 2008 and 2009 was up in the s&p. it lost half its value. >> that's a good point. >> so right back at you, angela merkel. >> right. an interesting story today about how geithner leaned on his counterparter at the imf and obama leaneded on merkel. a lot of what they've done is because the u.s. has said, yo, get with the program. >> right. i think it's important that we're working together, but i don't think that you necessarily get the same result. america has a unique situation. not only with the reserve currency, but with the extreme flexibility and innovation that we provide. the treasury and the fed work together to do this. that is not the same over there. you have one central bank and 14 or more finance ministers. and so they said it's a more delicate situation. but we still resemble it to the gse situation here and i don't think it's a coincidence that all of a sudden senator dodd, when we were out there, becky, he didn't quite have the time to work with it. it's not a coincidence that they putting the gses bark into the mix here in the states. watch for some type of massive idea to come to come forward that they try and isolate the mortgage market back into the gses while this is going on. and this is going to complicate things not only from raising rates, which they cannot consider right now, but how they manage their balance sheet. if these swap lines grow, then their balance sheet starts to grow in the fashion that it started to move in before those took place. >> kevin, one more -- >> one more point. sorry. yesterday, you heard a lot of talking heads say that, oh, they were going to monetize debt just the way we did. that is factually incorrect, although tastefully talked about. we have not monetized debt yet in the united states of america. >> okay. kevin, that's good and your point about the gses we'll bring up with kanjorski in about 20 minutes. >> kevin, i'm confused. what does that mean exactly? we were out late last night. >> in other words, they're not actual monetizing. they just purchased in the open market. that's different. well, say if you were to have an auction and there was not enough bidders for it and then the federal reserve was to buy the rest, then they have essentially monetized the difference of that debt. that is not the case. they are just active in the markets. they purchase and sell ponds on a daily basis, even when times are good, right? so it may be just the nuance. like i said, it may be the difference tw playboy and hustler when you're talking about pornography, but it's important that people understand that because you could create the concept that something that has occurred. and the chairman has been -- you know, has stated this directly. it's just that it's an academic difference and so people -- but they should get credit where it's due. the federal reserve is not yet monetizing debt. >> all right. good point. kevin, thanks a lot. we'll talk to you soon. >> sure. if you have any comments or questions about anything you see here on squawk, e-mail us. squawk@cnbc.com. when we return, u.s. gasoline prices rising despite a drop in crude costs. we'll have the details when squawk comes right back. welcome back, everybody. a very different picture for the u.s. equity futures this morning. right now, those dow futures are down by just over 110 points below fair value. this is a massive swing after yesterday's big upswing. remember, yesterday those futures were indicated as high at 400 points above fair value. you're seeing giveback today and that is something that start the out in the european markets. the ftse at this hour down by about 1.8%. the cac 40 is off by 2% and the dax is off by 1.25%. big givebacks after the major gains that we saw yesterday. the dow yesterday finishing up by over 400 points. in our headlines this morning, the u.s. energy department reporting gasoline prices are rising, topping $2.90 on average. that jump comes even as oil costs fell sharply last week. l.a. has the highest gasoline prices, denver has the cheapest. but you can bet some of those prices will go down as we continue to watch crude sell-off. monica novotny is here with a roundup of the nonbusiness headlines. tornados tearing through parts of oklahoma yesterday, killing at least five people, injuring 50 more. the twister shut down major interstates and emergency crews are still out looking for survivors there. and the scramble continues to stop the oil spill in the gulf of mexico. chemicals are being shot into the water. sand bags are being dropped from helicopters. they're trying to protect louisiana's wetlands. finally, if you need proof that betty white is still going strong, you can look to "life" and "style." she hit the after party, hung out until 3 on the o'clock in the morning, and a couple hours later, she caught a flight out to new york. did you catch it, carl? >> i did. i watched the entire thing. i don't think there's been a better episode. not just the ratings, but the quality. every sketch was funny. how long has it been since you've been able to say that? >> so many people were saying, if they could just keep that cast going forward, that snl would hit a new high. >> and anna gastire back and rachel drast. >> all those women back, it was great. i didn't see it. >> fantastic stuff. thanks, monica. >> see ur later. coming up this morning, becky and i are going to flee the desks and head to the chairs. (announcer) we're in the energy business. but we're also in the showing-kids- new-worlds business. and the startup-capital- for-barbers business. and the this-won't- hurt-a-bit business. because we don't just work here. we live here. these are our families. and our neighbors. and by changing lives we're in more than the energy business we're in the human energy business. chevron. geico's been saving people money and who doesn't want value for their dollar? been true since the day i made my first dollar. where is that dollar? i got it out to show you... uhh... was it rather old and wrinkly? yeah, you saw it? umm fancy a crisp? geico. fifteen minutes could save you fifteen percent or more on car insurance. welcome back. we are in the chairs this morning taking a look at the other stories catching our attention. we know that the health care insurance companies were onboard originally with the obama administration's plans to go ahead with the health care overhaul. at this point things -- >> keep your friends close and your enemies closer kind of. >> at this point it is getting testier and there are -- some real back and forths. over the weekend, in his saturday radio address president obama said the administration recently asked an insurer to stop systemcally dropping coverage of women who are diagnosed with breast cancer. now, he did not name any names but wellpointe's ceo took offense. wellpointe has been the only insurer called out by the media and president and says that this is unfair and not based on fact. she wrote a letter to president obama sunday saying that his statement grossly misrepresents the facts to be absolutely clear, despite your claims, wellpoint does not single out women with breast cancer, period. she says the attacks have to end. things have gotten out of control. >> they were made the example on premium increases when the debate was still going on. and some would argue that they helped the democrats tip the issue into their favor. >> right. wellpoint went to california and asked for a 39% increase in prices there saying they weren't making money and needed to raise premiums by 39%. that's gotten struck down. not been allowed to do that at this point because apparently there was mathematical errors in in the formula they put forth in the filing. that's being debated back and forth now. they say they are not making money in california. that, in fact, it is costing them money. >> so the risk is so awful. >> right. this is going to be get a little more contentious. we are going to see what happen was this. brailley is first one to come back and come out swinging. >> yeah. other good piece i liked is in the journal today. everybody still is trying to get a sense of what happened on thursday. and when that first trade happened where we saw the -- good fat finger? >> exactly. journal has a theory about 2:15, universa, the big hedge fund, made a $7.5 million options trade, stocks would decline. that forced barclays to hedging their positions and sold some. i wouldn't -- i wouldn't go so far to say journal says univers a is patient zero -- >> but point to that as being one of the potential tipping points the response is -- they could not have caused the meltdown. we reached a critical point in the market and poised to collapse. but -- just -- points to some of the structural deficiencies of one player can go -- relatively moderate sized bet on options. given where we are. that could have pushed the dow down. there could have been other factors as well. the hunt continues. >> we have the perfect guest here to talk more about this. he's calling for answers to last week's stock shock. congressman kanjorski is holding a hearing today. before he does, he joins "squawk" is and is with us right after this. bailout euphoria fades. trillion dollar european rescue plan helping the dow log its biggest gain in over a year. a different story this morning with investors selling and the euro sliding. >> questions linger about last week's flash crash. congressman paul kanjorski joins us ahead of today's hearing on what caused the market's dramatic drop. what to do now. bp testing out new openings as it tries to stop the massive oil leak in the gulf. its executives head to capitol hill to answer questions about what went wrong. those stories and more as the second hour of "squawk" begins right now. good morning. welcome back to "squawk box" on cnbc. i'm becky quick with carl quintanilla. gentlemen is out today. joining us is congressman kanjorski, chairman of the house financial services subcommittee on capital markets and will be holding a hearing this afternoon on what many are now referring to as that flash crash which saw the dow plummet nearly a thousand points during the last trading day. last thursday. congressman, this is pretty phenomenal. this is something we are still scratching our heads trying to figure out what happen. >> really shocking. so are we, becky. i love to come here this morning to tell you -- to hear all about it and everybody has been to be enlightened. truth is we don't know a great deal more than we knew thursday. and i think i talked to mary shapiro an hour and a half after it happened to the various markets. something we do have to get to the bottom of. we can continue on. one of the officials did tell me that it could happen at any time in their estimation because they don't know what caused it. >> it is a very scary, frightening thought. we will dig deep near that. congressman kanjorski is with us the rest of the program. forbes' ceo steve forbes will join us. >> taking a look at equity futures. we are giving back a little bit of what we got yesterday as some people rethink or at least think more about the european union umf bailout. futures are close to their session lows. down a little more than 120 points. couple of headlines. toyota beat forecasts with its 4 -- q profit. toyota says the stronger yen and european debt crisis are among the reasons it sees profit below forecast. the obama administration proposing to split up interior department agency that overseas offshore drilling. the reports say that interior secretary ken salazar will urge the minerals management service be split into two. move is in response to the oil spill. one agency will be charged with inspecting oil riggs and investigating oil companies. the other would oversee leases for drilling and collection of royalties. greece will reportedly submit a request today for the first installment of that aid package. the greek finance minister said the government will be asking for a total of roughly $25.4 billion. big gains for north carolina et cetera in monday tradinging. the futures this morning are pointing in the option direction. joining us right now from the cme is todd colvin of mf global. and, todd, this morning, the futures have really turned around. not giving back all of the gains from yesterday but down triple digits for the dow futures. is this a case of people getting very concerned? looking into some of the devil in the details with this package or is it something a case yesterday a lot of people gone short into the weekend and needed to straighten that out. >> i think it is a little bit of both. we certainly saw knee-jerk reaction sunday night and monday after the announcement of the eu bailout package which seeing the s&p up 50 handles overnight, after the declines we saw last week, seemed to be a little bit much and i think that more of a normalization needs to occur here. we need to kind of get to an area where we can consolidate and get through a lot of the details with what's going on. risk, especially the european union, remains very elevated. yesterday afternoon moodies said they would downgrade to junk status. not only the euro declined to the levels of last week but saw the treasury market recap some of the losses that they have had sustain overnight. risk is out there. and now we are just trying to find out where it needs to be priced. safety and risk aversion is going to dominate today's trade. >> are there economics signs that can judgment in and take over? is this going to be case of watching what happens in europe? launching what happen was the euro? >> it is going to be a lot of things here. i think that when it comes to looking at where speculation lies currencies are the first way to look at it. euro rising over sunday night and monday from 126 to the dollar up to 130. now back to 126. tells me that, you know what, the euro bailout was -- is a good thing or was perceived as good thing and positive thing. when you get down to the brass tacks of it, nothing changed as far as the sovereign debt risk goes out over there. they still have a lot of details to hammer out. companies have to make a lot of changes. that's going to be hard to do. >> yeah. todd, obviously, there's still -- a lot of questions that -- remain. are there still questions that remain about last week's crash in the markets on thursday that intraday drop? >> there will be questions about that, i think, for months to come. essentially it looked like a computer generated sell-off. and -- if you take -- put brakes in there and in order to stop the market from making the declines, what you do is take away some of the open market price discovery that makes the markets what they are. nobody wants to see the dow go down a thousand points in 30 minutes and cause investor panic. while at the same time we need to let north carolina et cetera operate on their own and it is -- it is important that that invisible hand be able find its eke lib reup and it did on friday when the stock market rallied down 350 at the end of the day which almost felt like a winner after being down a thousand. >> thank you very much. it is good talking to you. >> thanks. the financial services subcommittee on capital markets looking for answers to last thursday's stock drop. congressman kanjorski will be here the rest of the program. chairman of the committee. so we don't have -- do we have a clue? do we have theories? do you have a theory? >> no. financially -- some of the regulators have theories. but nothing definitive enough to rely on that's it. actually, carl in the most interesting thing that i find is that as last speaker just indicated, it may be months before they have a credible idea of what happened. it is sort of frightening to think that the investor may be in limbo not knowing the stability of the market for months. one of the reasons i called the hearing, one of the reasons i am happy to be here, is to make sure you know, we all recognize that this is going to be a long process. it happened before. littler jolts. we haven't quite traced it all back. we had it over the weekend. and additional set of witnesses, gary gensler, they had some problems in the futures market. but -- i hope that out of all of these regulators and experts that we will bring in and the two marketplaces that we will get some answers that will at least be stable. >> what do you think you need to develop -- like the ntsb, isn't it? is a plane crashes. i don't know. maybe it is as serious given the amount of money some people may have lost because of it. but you have to start digging. and -- what is it that you need, do you think, to develop some kind of credible leading theory about what happened? >> well, we need everybody to be up front. i -- you know, i saw on some of your program friday, and to see the -- arguing about it. i mean, that's -- what we are interested in is having a market that works. when we say a market, not -- the stock exchange or nasdaq but all of the market that works. and the american people need that because we just about to get on to really a nice recovery in the united states. we have to get capital moving quite well. safety. >> what did you think watching both -- grifeld from the nasdaq and niederfeld, who do you think is right? >> if it gets down to who will be a fall found, they were having the beginning of a good food fight. and -- i don't think we need that, quite frankly. i want them to -- if they are at fault, if they hadn't -- had mistakes and got glitches in the system, lay them out for us the new york stock exchange, procter & gamble as an excuse -- or as an example, procter & gamble didn't trade below $50. it traded at $37 on some of the -- some of the electronic exchanges. now, the nasdaq says that is because the nyse put in these 90-second speed bumps along the way. shouldn't have done that. we were the ones that said something smells wrong and we are going to stop and investigate. which do you think of those two scenarios? >> that's one of the big issues we have to get to. they have to be careful to be using the same rules. you can't have a soccer coach and a football or soccer referee and football referee on the same field. it is going to be a tough game for somebody. and -- apparently, we have allowed through self-regulation the exchanges of set their own rules out there to how they gauge themselves. that was all well and good when we had normal trading and we had specialist on the floor and you had to time to make adjustments. today with instantaneous trading, the mathematics of it was frightening, how far things can go. that's -- two of the things we are looking at from the regulators. >> do you want to take the committee in that direction? in terms of slowing down trading overall, or would you rather fix this issue and allow people to -- the speed at which they trade to be the same? sustain that. >> i don't want to take the committee. i don't think that's up to the committee or for congress to be the regulator. i think the regulators have to be the regulator. i think we have to have players that meet on an equal plane. and that's what we want to -- we want to get the stability there. i think that the congress, though, has a responsibility of oversight. and if you really look at the crisis over the last several years, maybe last decade, part of our problem, everybody's -- who is at fault, who did what, a good part of what we didn't do as a congress was to -- do the oversight that's necessary. part of the reason for that is a very complicated oversight. it is not easy. our -- our -- our need to work in that field is extensive compared to the way it was just five, ten years ago. but we -- we have very -- we are very confident right now, probably the most competent regulators i have seen in 25 years, i think we want to work with them. that's where we invited them in. up haven't seen many of us or any of us, for that matter, castigating anyone. that's unusual for congress. usually love to get up there and nail somebody. it is your fault. did you something wrong. no, we are all -- i think we are trying to be responsibly aggressive. >> is there a plan as far as you know if -- if this thing -- if this happens again today, or in the next week, month, two, months? >> they have to have a plan. they had a meeting yesterday to regulators -- the regulators and treasury. and i think dash i wasn't party to the meeting. i had been briefed on it. and as i understand it, they are going to work around to whether they need emergency rules. s about we have to send a message out here to the investor over the next three, six months until the final postmortem is done. i mean -- you know, the average person doesn't want to get out there and see their stock drop a thousand points, 2,000 points overnight without an explanation. >> yeah. so you are talking about additional circuit breakers, putting everybody on this system where we will slow things down if you see a massive drop. >> right. something happens like that, and everything uniformly happens so we can bring it down to find out what it is or straighten it out, that will be a lot better than one exchange making a judgment to do something and another making an office judgment. you are going to get out of balance and lack of ek e qualibrium. part of why i want to have the hearing i'm a great believer that knowledge sets you free. and to the american investor, they should have the right to see inside and find out what the problems are as well as any of us. we don't have some special reason that we should know and they shouldn't be allowed in. you know, and -- i don't want to cause panic or fright. but it could be anywhere from a cyber attack to an alien invasion. to just stupid programming, okay. >> regulates alien -- >> i don't know. clark has a book out. i'm about to get it and see. >> you know, what confuses is me the idea that the exchanges have agreed to cancel some trades. anything that was 60% or greater deviations starting at 240. which -- why 60%? there are bad trades. the procter & gamble trade down 37%. >> i would be damned annoyed. how about if you made a deal like that, thinking you had it and had somebody trade off and sell it at another deal, and now you are short and didn't even know it, you can't cover it. particularly with procter & gamble. the swing, that could wipe you out. >> why 60%? >> all the people that sold -- market in general, down because it was -- >> right. >> i have to get out thereof. >> yeah. i'm curious to find out how many program trading was going on the and to with a extent? i would imagine a lot of the hedge funds and quit funds have a tremendous programs that -- procter & gamble drops 18 points, wow. i mean -- you know, as a matter of fact, you probably should fire your programmer if you didn't have a program to buy. >> liquid name. talking more about finreg and where that is headed and in the segments to come. great to have you here the rest of the show. any comments or questions, we would love to hear what you would like us to ask the congressman as well. our address is squawk@cnbc.com. still to come, executives from bp and two other comes bofd in the massive gulf oil spill are going to try to tell congress what they think what went wrong. unwon't be surprised to hear they don't think it is their fault. from financial regulation to last week's flash crash. steve forbes weighs in on the events moving the markets. european debt crisis. the state of the financial system. whether or not the president's economic stimulus plan is finally taking hold. oof! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh aflaaac!!!! oh yeah! that's it! aflac. we've got you under our wing. a-a-a-aflaaac! now the answer to today's aflac trivia question. in this bright future, you can't forget your past is a song lyric made famous by what artist who died on this day in 1981? the answer, bob marley. >> yesterday we had the biggest day for the dow in more than a year. just about 14 months. and this morning, whether it is a natural counteraction or illustration that people have had time to ponder the bailout package in europe, we are down not quite to the session lows but well off fair value by the -- about 115 points. european markets also taking a by of a sting. yesterday a lot were up 5%, 6%. some individual up 7%. ecb has no plans to publish a regular tally of the new bond buying program. the bank started buying government bonds yesterday as part of the plan to resolve the european debt crisis. and meantime, germany has approved its part in the rescue. german share is expected to be worth about 123 billionure nose loan guarantees. so of all the companies -- countries that are holding their weight, no question germany is pulling the most. >> yes. and, in fact, mark et cetera may have dodged a greek tragedy with the nearly $1 trillion bailout package to help stabilize europe but there are other worries on the horizon. joining with us his outlook is steve forbes, ceo of forbes. guest co-host today congressman kanjorski. steve, thank you for joining us this morning. it is great to see. >> did you good to be with you. thank you. >> we are a day after the bailout package. we saw the markets soar yesterday but we are see something pullback today. and seeing the euro pulling back from its stabilization, too. do you think that this is because people are really looking into what this package means and whether it will solve the problem? >> i think that people realize that this will solve the problem short term but it does not get to the systemic problems that put western europe, especially southern europe, in such a pickle. greece has very serious systemic problems, including a convoluted tax code. spending binges and the like. and so, yes, short term, this will get us out of it. if they don't get the systemic problems, they are starting to do that, but on the tax side they are doing the worst thing which is raising taxes, instead of simplifying the code, something like a flat tax, as long as they don't get the systemic problems, europe will be under a lot of pressure. as you know, becky, we have our own greeces in this country we have to face up to. my home state of new jersey is facing up to it but states like california and illinois and new york, they are all grappling with these things and who knows what municipalities out there are also having greece-like problem. >> do you think the problems here in the united states, though, do they have the potential to become what we have seen greece become? >> well, if you grossly mishandle them or use t.a.r.p. money to use a bailout instead getting the systemic problems, yes. dealing with the -- what caused the crisis in the first police, you just don't deal with the symptoms. you have to deal with the underlying causes. and as your co-host this morning, guest host this morning can testify, one of the things that made -- disaster of at that time, early 2009, almost bring the system down, was this kreez thing called mark-to-market accounting which wasn't finally dealt with until march of 2009. and when it was from pressure from congress, that's when the markets turned. you have to get to -- systemic causes, taxes, regulations, labor laws that sea ain't employment, especially among younger people ask and this will pass quickly. >> do you think mark-to-market. what do you think about that, is this part of the problem or not? this has been something that steve has been bringing up to our viewers for quite while. we had a debate earlier in morning about whether you can put off reality in terms of looking at prices on things. >> well, i think you have to do pragmatic things. i happen -- i respect steve a great deal for agreeing with me on mark to market because i was the driving force there. and i'm getting scared now, steve, because i'm seeing seeming to agree more with you. >> this can't be good. >> no, this is dangerous. we tend to become nonhuman and we get very mechanistic in rule making. the fact of the matter all the roles and all the laws are made by man and they need to be constantly dealt with and not manipulated but adjusted. so that the system works effectively. >> that's a fine line between adjustments and the manipulation. >> absolutely. on mark to market, i think steve's absolutely correct. all we did there was by making that rule adjustment with the standards board is gave some -- some equity positions to the bank by allowing them to adjust the value of the shares they held or the -- materials they held within the account. that was very wise. other than that, you could have frozen them and then you would have to come in with external money and the cost of the recovery program would be would have been huge. now, after having done that, when recovery comes, we are going to have to tighten and adjust and probably move a little further along. >> countercyclical. >> that's right. >> entire move. steve, do you think that the -- the euro bailout package, at leastsomething in terms of helping the banks because they own so much of that debt. does this give them more time to try to raise capital and be in a position where they could handle it if they do eventually default? >> this is a situation where this is a bank bailout. the -- more than a greek bailout. and i think that there what they should have done was a more microscopic approach and say what institutions may be in trouble? what do you do to make sure that this does no become a contagion. and again, not dealing with the systemic problems. i think the german public certainly understands that. you saw tonight their regional elections on over the weekend. where they repudiated the government. and again, you have to get liberals love to use the word root causes. root causes here are -- going to -- their tax laws and their labor laws and their regulatory laws. making -- greece makes it very difficult to set up a legal business which is one at least one-third of their economy is informal. and again, if you bring these things out into the open, make it simple set up a legal business, have a simple tax code that actually can be enforced, that country would get back on its feet. >> they don't pay taxes, right? >> well, it is a national sport. goes back to the bis automan empire, greek tax collectors, back at the time of independents, you can trace this thing way back. but again, i think that if you have a simplified system and greece considers the flat tax several years ago and decided not to do it, i think because people realize that they have actually ended up paying some taxes, but not to compare the two, but as you know, becky, russia -- one thing they did right a decade ago is put in that flat tax and collections doubled and in a couple of years, not only because the economy started to revive but because it was very simple to collect. >> so -- you know, obviously the ecb is not working line. whatever they do is going to impact us in some way. steve, is stronger dollar going to hamper our recovery? >> no. as a matter of fact, the dollar is not getting stronger. all you have to do is look at the commodities market, price of gold which you have here with the dollar and euro. and there is a 98-pound week link versus a 92-pound weekling. neither will be lifting heavyweights in the olympics. the treasury and federal reserve are oblivious to need for a stable dollar. and the -- european central bank should have the same thing that they have been a little less bad than we have but not by much. >> until sunday night. >> they begin to drink the -- the kool-aid as well. we should have learned it from the 1970s when we went in the opposite direction in the early '80s we got a long sustained boom. this should not be, carl, partisan. after all, bill clinton was a strong dollar president. and -- george w. bush was not. this president so far has not been. so there's plenty of blame to go around. the key thing is you have to get a stable dollar. 0% interest rate which does not good for small businesses. and constantly weak dollar encourages commodities and currency speculation, hinders recovery. no, we are not going to get to the world series in economic growth in terms of sustained growth with when we are doing now. >> steve, thank you very much. it is always a pleasure talking to you and look forward to seeing you in street studio soon. >> thank you, becky. thank you, carl. >> still to come this morning, many consider them the backbone of the economy. so how are small businesses feeling with the recovery? we will talk to the chief economist from the national federation of independent business with the latest measure of business sentiment in just a moment. toyota successfully drawing customers back into the show room. see some profits speed xwum ps bumps on the horizon. euro getting back to 126. some of the stories we are following this morning, greece is expected today to ask for the first installment of the aid package from the imf. they would use the funds to renew the ten-year bond. issue is coming due on may 19th. bp launching new attempts to contain the massive gulf oil spill. it is using a so-called top hat astrodome. much smaller funnel than the huge seal contain many dome that failed too do the job over the weekend that comes as executives from bp, transocean and halliburton head to capitol hill today for a senate hearing looking into the causes of the spill. good news and bad news for google. new rankings show the android software is the second most popular smart phone operating system behind rim's blackberry. the displacing iphone maker apple. sprint now says it will not sell google's nexus one phone following a similar move by verizon wireless. you always enjoy the horse race between mobile phone operating systems because you are a frustrated consumer in your own life. >> i am not the first adapter. i watch how these things play out. i'm a follower, not a leader when it comes to these things. >> you want it to be clean of too much data so it is fast. >> yes, exactly. the national federation of independent business is out with its latest read on the state of small business. our senior economics reporter steve liesman is here and has the data and a special guest. >> look forward to this every month. trouble was small business. it continues with tin decks for small business optimism nudging up in april. remaining out of the press level. index from the nfib rose to 90.6. that remains ten points below the level you would want for usual growth. nine of ten components rose. nearly all remain at low levels. bill, i have learned how to read the survey from you. it is not really the change. it is the level here. level remains depress. >> the level certainly is important when we do our models. level that it goes in. change is good. it was said i should be more optimistic about the numbers. a four-point judgment subpoena a good jump. the point is it left us back where we were in january. so, you know, we are still at a very low levels. we have been here for 24 months. and we need to see some pickup here. >> what's the outlook of -- is there any change at all in what small business expects to happen with the economy over the next six months? >> those were the three components of the index that actually improved. one was expected to be real sales. gave us a nine-point judgment and the outlook for business conditions, six months out, gave us an eight-point jump. then we had an improvement in the reports on profit trends. now it is only 30% more who say profits are headed down than up than 40%. >> let me get the champagne. so, i mean, you know, we are headed in the right direction here. >> how about jobs, bill? everybody else is hiring but small business is just not coming to the party. >> they aren't. i think that's showing up in the numbers as well. we -- you know, we had -- i think negative one here. that means one percentage point is more planned increase employment and planned to cut it than to increase it over the next three months. we did see, you know, improvement in the firing. that is we are not reducing work force. stage is set to go ahead and created jobs. but we still have 15 percentage points more reporting negative sales trends than positive sales trends. 29% said that sales was their top problem, down from 35. that's good. but, you know, that's the huge issue here. >> bill, let's step back for the details of the various here. give us your sense of what it is going to take here to get small business hiring and spending on capital spending and what it means for the economy now that they are not. >> well, the -- what it is going to take, of course, is more -- more business, more consumer spending, and showing up and in the shops. that's their main complaint. they are not going to hire a worker that cannot generate enough sales to pay for itself. you know, we see capital outlays that virtually record low levels for 35 years survey victory. that's important for the economy. i mean, we generate half of the private gdp here and we are not doing anything. except fixing leaks and, you know, and maybe replacing things that brick on the capital spending side. we need to see a good reason to spend money and then we will hire. >> you can't see it, bill, but carl has as into around his head and becky is reaching for a gun. everybody is just ready to -- >> the expectations -- that's first thing that has to happen. let's hope that in may, we turn those expectations into some hiring and capital spending. i'm crossing my fingers on this. maybe i will shave my mustache. >> wait, wait. this is news. this is your first bit -- first optimistic takeaway from a survey in 24 months, bill. are you serious about this? i really want to know. >> no. i do think it is good. you have to have people -- feeling more favorable about the future before they will commit money this. that's the key. it looks like those components did improve substantially. and they are still very weak historically but, hey, when you get eight, nine-point change in the component thaents a good pickup. it didn't bring the overall index up much. but next time i think we will be seeing a movement in the real variables. capital spending, inventory, hiring. >> bill, thanks very much. >> thanks, steve. >> feeling all better now. >> it has been a while. >> it has been -- numbers have been sticking. >> they are not spending, not hiring, not doing -- little bit of optimism for first time in a very long time. did he have his -- he had his mustache. >> he did. he said he may shave it. >> interesting. got to go back and do the correlation between having a mustache and not having a mustache. >> thanks, steve. >> my pleasure. we will check some of the future and overseas markets. an eye on the euros. back to -- close to the levels before we saw before the bailout. cftc reviewing market activity to try to get to the bottom of last week's panicked sell-off. we will talk with bart chilton. take a look at futures this morning. yesterday was obviously an amazing day for the dow. biggs gains on the point and percentage basis, 14 months. we are going to give some back this morning as people think -- longer and harder about the eu bailout and we obviously see less short covering than we saw yesterday. it has taken its toll across all sorts of commodities as well. the dollar is getting stronger, though. as the euro comes back to earth. take a look at euro dollar down to 126. we were above 130 for a little while this time yesterday. a look at what the euro has done over the past year. then european markets which had just astronomical gains yesterday morning are down anywhere from 1% to 2% this morning. pair sis down a little more than that. we talked about the fact that some of the french banks are the -- among the most that are on the hook the most. >> yesterday the at this time jock gen was up by 20% p some of those were getting a big sigh of relief after the package came in. >> yeah. talk more about it later on when we come back on "squawk." bart chilton on what may have caused the thousand point dow drop last thursday and how we can prevent future meltdowns and the chance to trade movie futures. you heard about this? >> no. >> pick a movie you think will do well. buy futures in that. >> can you short it? think lit do po-- it will do poorly? this one will be a stinker. >> check out what's still to come on this morning's show. "squawk box" returns right after this. ♪ well, look who's here. it's ellen. hey, mayor white. how you doing? great. come on in. would you like to see our new police department? yeah, all right. this way. and here it is. completely networked. so, anything happening, suz? she's all good. oh, my gosh. is that my car? [ whirring ] [ female announcer ] the new community. see it. live it. share it. on the human network. cisco. but we're also in the showing-kids- new-worlds business. and the startup-capital- for-barbers business. and the this-won't- hurt-a-bit business. because we don't just work here. we live here. these are our families. and our neighbors. and by changing lives we're in more than the energy business we're in the human energy business. chevron. treasury secretary geithner meeting with regulators and executives to pin point the cause of last week's flash crash. mark chilton is commissioner at the commodity futures trading commission. the cftc briefed geithner on the investigation into the jaw-dropping sell-off. it is good to have you back on the program. good morning. >> good morning. good to be with you. >> what did you tell the secretary and how aggressive -- how long are you in your investigation? >> well, first of all, i-want to compliment the secretary and chairman shapiro and gentzler and everybody's staff working 24/7 on these issues. but, you know, what i'm saying is that -- i think that the fact that we don't have the final answers, we don't know exactly what started this cascade, shows that highlights we have some issues. we need to do better and we also need some additional regulatory tools. so we have to keep working on it even though we have been working hard so far. >> how do you -- how do you have recommendations for more regulatory tools without knowing what the cause was? >> well, there are a couple of things that i think are obvious. and chairman kanjorski knows this because he worked so hard and such a leader it. that's the dark over-the-counter markets we can't regulate. and just to give you an idea of the size of these things, the regulated futures markets blgt for about $5 trillion in trieding annually. but these dlashg over-the-counter-markets, they are $600 trillion traded annually. we are a small percentage of what we see. those over-the-counter dark markets can impact prices on the critically important markets. so the bill that chairman kanjorski and the house passed and the bill of the senate's considering now are really critical to getting that sort of authority to see things that we currently don't see that could impact markets like i think they my have last week also. there are many other things that can be doing with regard to computer technology and things we can do with regard to the fail safe circuit breakers which weren't so safe and failed. we could do without legislation. there are things we need with legislation, too. >> do you think these dark markets are part of what happened thursday? >> i think that they had something to do with it. we are looking at a lot of things. we have requested, as you can imagine, more information from many traders and entities. trying to see what's going on. but we have this whole big blind spot and, obviously, people are trading in venues not transparent and that's what the regulatory reform bill to pass the house is being considered in the senate would do. as a matter of fact, if there was one thing in these regulatory reform bills i think is critical, it is -- having authority over these dark markets. >> absolutely. i'm going to bottle you and take balk to washington with me. >> thank you, zblir you know, we need that type of enlightenment down there. instead we are talking about -- around the periphery. a big thing on developing the exchanges and getting the dark markets lit up, vitally important. there's nothing we can do in-law nor can the regulators do well if we don't bring the system into the daylight. you are absolutely correct. we are just lucky it has not been worse than we had on thursday. >> yeah. the markets, mr. chairman, did show some resiliency. those people -- i heard exchange officials say this. i heard some of the investment bankers who say look, orderly markets have volatility and that's just the way it goes. but the volatility we saw last week, i think, is totally unacceptable. and whatever the impetus was for -- whatever the impetus was for the cascading impact, regardless of that, it was clearly fuel injected by the computerized -- i call it fintech, the size and speed at which the trades were made, ten years ago we wouldn't have been seening that roller coaster ride that we saw last thursday. we need to get a better handle, guys, on what actually this technology is doing and the a algarhythmic trading and trading that occurs in nano seconds. if we don't get a better handle of what's going on with fintech, we will have it working against us. s we want technology working for us and add liquidity and need it to be able to add venues and access the these markets. and also, importantly, data trails. not just for exchanges and regulators. but for consumers. >> speaking of which, are you using your enforcement division? can you subpoena people? what can you find out? mine, given the powers of the cftc? >> well, what i -- cane speak specifically about any enforcement action or what we are doing but i can tell you that the full resources, and i mean everything that we have at the cftc, you are looking at, looking at tens of thousands of documents, we are looking at hundreds of thousands of trades. and trying to get to the bottom of it. as i said at the top of this, you know, the fact that we don't have the answers right now, shows that we need to be doing more. both internally and, as i say, with financial regulatory reform. >> we will be watching closely. thanks for your time. good to talk to you. when we come back, we are going to look ahead to toyota. there are bumps potentially in the road. the company beating forecasts for the last quarter. its outlook falling short as it encounters speed bumps along the way. details straight away when "squawk box" comes right back. ♪ throughout our lives, we encounter new opportunities. at the hartford, we help you pursue them with confidence. by preparing you for tomorrow. while protecting what you have today. you've counted on us for 200 years. let's embrace tomorrow. and with the hartford behind you, achieve what's ahead of you. toyota's profits beating estimates. remains cautious on its outlook. phil lebeau joins with us the details. surprising numbers given where the company has been this year. >> yes. surprising, carl. also when you look at their forecast, some are looking at it saying that's it? that's all your forecasting. we will get to that in just a little bit. let's take a look at the quarterly number for the month or quarter ending in march. that's also the fiscal year for toyota when it ends. profit in the fourth quarter, just over a billion dollars. net income for the year ended in march. $2.2 billion. here is the part people are scratching their heads about. projection is a $3 billion operating profit by year-end 2011 and many were saying hmm, we think you should be closer to $5 billion or $6 billion. that's roughly half of what many on wall street and around the world were expecting. toyota sales down 7.7% last year. i know we focused primarily on the united states but keep in mind they had recall issues also over in europe as well. and as for the impact of those recalls, toyota says they only lost 50,000 to 100,000 in terms of unit sales. that might surprise people. some people think that it is probably a little higher than that. that's what toyota is going with now. the cost of the recalls, just under $2 billion. as you take a look at toyota, and where it is at, ceo of toyota, admitting they are in the midst of a terrible time right now. he says that we are in the middle of the storm. i am feeling that we can see clear skies in the distance. but should they be more profitable skies? some believe they should be. that's the reason why you take a look at the bid ask. slightly lower today. many believe that they should be expecting a profit of closer to $5 opinion 5 million or $6 million for the fiscal year ending in 2011. take a look at shares of the toyota. hovering in that $75 to $80 range. i don't think that will change dramatically. conference calls coming at 9:00 eastern this morning. hopping on that call. we will see what toyoda has to say. >> are you using this as a proxy to read other automakers as well, what they might be telling us in the weeks to come? >> probably not. because it is so muddy, carl. it is hard to use this as a proxy. i mean, all of the issues surrounding toyota, they are centric to that company in terms of the recalls. not only in the u.s. but in europe. they have production issues they have to straighten out as well. so it is a little hard to use these guy as as proxy. nissan which reports tomorrow morning may be closer to being a proxy for the entire industry. >> i wonder -- do you -- do you get the sense the business -- industry is once again getting too dependent on sales incentives? kinds of things we told them to break their habit of years ago. >> interestingly, mar kri oni doing fourth quarter financials for chrysler said he doesn't see anything too crazy out there right now. so -- many people believe that while we see rich incentives relatively speaking, we are not seeing the beginning of what we might expect sometimes in this time of year and incentive wars. so i think that perhaps everything is going to hold steady here for a little bit. the industry still is trying to find that base improvement and it is slowly picking up but nobody is expecting things to ratchet up dramatically. >> maybe it is the conservatism people are waiting and watching. >> i think that's a big part of it, becky. >> okay. phil, thanks. we will be listening as you tell us what happens on that conference call as well. up next, closing the curtain on the greek drama. does that open up a buying opportunity? and is the u.s. economy stronger than anyone thinks? we are going to put that on the table next here at "squawk." toyoda. the bulls rage on wall street. 400-point blast for the dow. did the shock and awe create a buying opportunity? search for truth. why can't you find out the problem? this is the transparency the public has to look toward? flash crash. financial crisis in europe. wild swings in the markets. ceo of td ameritrade will tell us how retail investors are dealing with the market stress. >> the pressure! i can't take it! >> "squawk box" begins right now. >> spooky music this morning. welcome back to "squawk box." this is cnbc. we are first in business worldwide. i'm becky quick. carl quintanilla is here. paul kanjorski is joining us. there's a mystery out there. he's going to get to the bottom of it today. with hearings to bring people before him to find out exactly what happened last thursday. maybe that's why we are playing that spooky music. he will get to the bottom of it. let's get to the top stories in the headlines. u.s. equity futures showing a big reversal after yesterday's major gains. right now you are talking the dow futures down by over 90 points below fair value. this comes after a 400-point gain for the dow yesterday. it is coming off the biggest one-day gains. in more than a year yesterday. also, in our headlines this morning, greece's likely to submit a request today for the first installment of an aid package from the eu and from the imf. that money will be used in part to refinance abten-year bond matures next wednesday. toyota beating forecast. returning to profitability in fourth quarter. the company still see as storm lingering. in its forecast, it is looking for slower than expected profit recoveries this year. blaming a stronger yen and europe's debt problems as well. a conference call will be taking place soon. phil lebeau will be listening in. executives from bp and halliburton will testify before the in the today. in testimony suggests that the executives will blame one another's companies for the rig explosion and failure to control the oil slick. the bulls raged on yesterday. the dow up 404 points. until you saw futures this morning, we are down 84 off the lows but still giving back yesterday. turn to ed, managing director at quantitative management associates. jason trened. good morning to both of you. jason, what is the more accurate market? yesterday's or today's? >> i think that -- yesterday's is the more accurate. certainly -- i don't know if it is particularly fashionable after last week's volatility to be very bullish. but the way we are looking at things, i -- i believe that there's -- really a margin of safety in current equity evaluations that mix me a buyer. and -- i do think that there is a chance that investors may rotate towards higher quality, large cap stocks as a result of what's happening in the last week or two. by the same token, boy, i tell you, carl, it is hard for me to get bearish. given current valuations. we are putting a fair market value anywhere between 12, 30 and 1400 if you use very, very modest earnings expect takes for next year. >> your take over the past few months has been -- you have to be long until the bill comes due. right? >> right. >> that's right. >> your argument is the bailout in europe delays that even farther. we can dance more, i guess is the takeaway. >> i guess, you know, carl, you can be right. i feel uncomfortable because it is very unusual for me to have -- shorter intermediate view different than the long-term view. my irony is europe's problems are creating more of a bid for our own long term treasury securities which, i think ultimately would be a disaster but keeps long term interest rates low and takes the pressure off oil. keeps the dollar stronger. all of those things are good for financial as nets the u.s. >> does that not sound like an addict that has gotten one more fix? it is good when you -- you need one and get one. >> i think that the -- problems we are facing right now, especially in greece, europe in general, giving the united states a chance to react to its own problems. we have a same basic issue of too much government spending and too tax revenue to pay for it. we have an economy much better shape and a lot of global competitiveness. so we have a chance to use the next couple of years where i think we are starting to see evidence of the sustainable recovery in the united states to use that time to fix some of the underlying issues if we have the political will to do go do you think the banks in europe have the muss tool recuperate given this opportunity the way ours did here? it seems like the biggest threat right now is that they somehow blow this up, this chance. >> well, the key to the bailout package, i think, the markets are concerned, it showed that at least there was the will and the -- the -- >> after we got on the phone and screamed at them. >> well, that's right. >least there was -- because up to that point looked like they would increment themselves to the nowhere. looks like now there's a least some willingness to recognize how big the problem is and how important it is to address it immediate. >> i are you putting -- are you putting new money to work? is this a -- a chance to buy these levels here stateside? >> we have basically about the same portfolio construction the last year or so. we have been generally overweight, riskier assets, overweight stocks compared to bonds with bond markets overweight and high yield and those -- those bets hurt us yesterday or i should say last week. but yesterday, of corks, bounced back. i still think that -- the -- prices are riskier assets are actually fairly low and i think also that the -- reminded us friday we got very good news. out of the labor market. >> i was going to say, isn't it a stretch to think that investors are going to go straight back to looking at our budding bullish economic data when they are being hammered over the head with stuff about europe? >> well, i think it is a fair point, carl. one of the amazing things about this rally is thatat there has been virtually no retail participation in it whatsoever. at least on the equity side. all of the flows, last year, it was -- something like 37-1 closed income versus equities. this year more than 17-1. last week's volatility certainly doesn't help. but at the margin, think if you con to get somewhat better economic news and one thing that hasn't been discounted is better employment numbers. if those happen for the next four, five months, people could start to feel a little bit better about putting money to work. i do think that, you know, i think ed is right. we have 0% interest rates and you want to like risky assets but i do think that if retail investors come back, they will gravitate more towards i would say the big ugly. you know, the -- companies with two, three letters in the symbol that pay a dividend yield, high quality large cap companies. >> congressman are we maybe whistling past the graveyard, though? if we still have the concerns about the systemic problems that may be in the system after what we saw last week, i mean, how quickly does this have to get resolved? to bring back retail investors like jason is talking about. >> hopefully as soon as possible. now i think there's a lot of underlying strength in our economy and it is being reflected by the predictions we are hearing this morning. and steve's report. what we are trying to do is make sure that we don't get some bad glitches that scares the living bejesus out invest wror and they run. that could set back the market. i'm not pessimistic that will happen. >> have you heard from your skits that have real concerns about what happened last week in the markets. >> you know, what i'm find sing most people want to have the most optimistic view of what happened. it was just some little thing this will -- the people will straighten it out and it is not systemic. and -- i -- i hope we hear that type of testimony today. that -- it is something that we can go on with and recognize that we have that fix. i was going to ask the question, though, on thursday, could that have gone up a thousand points for the same reason that it went down in your estimation? or is it only a one-way trip dropping out at the bottom. >> well, the -- looks like -- of course, you will hope to find out more today but it looks like it was some kind of a trading problem where there was an extreme lack of liquidity. everybody was on one side of the trade. it turned out that this was -- everybody was on the one side of the trade on the sell side and nobody to buy. theoretically the same thing could happen on the buy side but in market history, big -- much more rare than -- big spikes up are much more rare than big spikes down. >> on how we can do it again and again. how we can replicate this process. are you avoiding -- are you avoiding europe? are you avoiding the euro? avoiding even u.s. multinationals to europe? >> we are trying to be underweight europe relative to emerging markets where there are also big issues but i think better longer-term opportunities. i think the risk reward is better there compared to stylish mash et cetera. >> we will see what happens today. jason good to talk to you. thanks for coming here. how the retail investors are handling the wild market swings. we will talk to the ceo of ameritrade. up next, another american titan. this time it is apple. gang gadgets, the mac, the cool factor. it is all led by the man in black. steve jobs. one time underdog is now calling the shots. we will go to the core -- joe would love the apple jokes -- when "squawk" continues. she has this thing about bugs. no, no, no... i do not have a thing about bugs. i have a thing about bugs in our house. we used to call an exterminator. ugh... now i go ortho. home defense max. i use it once inside to kill the bugs. stops them dead. guaranteed. and outside to keep new ones from moving in. that's up to 12 months protection against bugs. and 12 months of keeping our house to ourselves. until your mother comes. right. ortho home defense max. defend what's yours. the futures under pressure. not as much as what we saw earlier. this is a snapback after we saw massive gains yesterday when the dow was up by 400 points. >> we con our special weeklong coverage this week of american titans with a look at a company that epitomizes innovation. casts itself as underdog but comes out on top. we are talking about apple. melissa lee is outof its fifth avenue store in manhattan. >> good morning to you guys. the noise in the background, we are on live tv in the middle of, no. it seems now that apple can do no wrong from the launch of its ipad. 1 million sold since the launch on april 3rd to the continuing success of the iphone as well as the ipad. today we asked the critical questions and challenge some of those apple heads and apple fans out there. first of all, will the ipad be all that? or will it be a product miss? what happens to the company when ceo steve jobs leaves the company? perhaps most importantly are apple's best days behind it? ♪ more than three decades apple redefined consumer technology. >> macintosh is small and friendly. almost cute for a computer. >> reporter: taking share from market leaders and creating devices consumers didn't even know they wanted. >> they are the market. they are leading that market and creating it at the same time. >> reporter: smashing the notion of personal computing and redefining it as mobile computing. from the iphone which forced change in smart phone form and function across the industry -- >> so much more intimate than a laptop. >> reporter: -- to the latest, its ipad. 1 million sold and counting. device that's not a netbook or e-reader but potentially threatens both. can the a ipad uniquely apple and sleek white forum and teach queen function keep the men tum going? >> not often a good idea to bet against the house of jobs but it is not a sure thing. >> reporter: is this man, steve jobs, whose you can'ty ability to read consumer needs, actually the company's greatest liability? >> steve jobs taking a medical leaf of abgenerals untsence. >> reporter: jobs linked with am's greatest products. without him, does apple lose its midas touch? >> tech no, ma'amy can be darwinian. >> reporter: we will have more coverage of apple all day on cnbc and "american titans" on cnbc.com. we will talk about apple versus the world. whenever apple enters the category seems to make those industry participants shudder. that's coming up at 9:40 eastern time. of course, we also want to hear from you and ask you the question that i asked you guys at the top or apple's best days behind it. so you can text us and at twitter, you can go to facebook and, of course, cnbc.com to participate in our ongoing all-day discussion. carl and becky, back to you. >> melissa, thank you very much. we are going to be watching through the day and -- i like that. that's a good way to get apple ready and get them to bring them in on these questions. >> i think that's melissa's ipad. >> is that yours? >> actually, this is not mine. this is mine. this is a pad. not an ipad. >> very nice. we like it. >> all right. melissa, we will be watch dag zblsh it is cool. >> it is cool. i have to say, i'm -- i'm getting drawn in with these things. i may be an early one, if not a first adopter. melissa, we will be watching through the day. thank you very much for that. we appreciate it. >> yes. coming up, getting caught between the flash crash and euro bailout. making his way to the set right now is fred thompson. he will tell us how the retail investor is dealing with the pressure these days. take a look at the futures. the futures are down by almost triple digits this morning. the dow futures off by close to 100 points below fair value. after yesterday's big gains, up 400 points. we have seen a lot of increased volatility in these futures. we will con to monitor this through the morning. last week 'market tailspin left investors in panic. regulators clamoring for some sort of better protection across all exchanges. joining us to talk more about this is fred tomczyk the president and ceo of t.d. ameritrade. our guest host today is congressman paul kanjorski. he is a member of the house financial services committee and chairman of the subcommittee that will be holding hearings today to try to get to the bottom of this. thank you for coming in today. >> my pleasure. >> what do you think happened last week? what -- you watched this all play out. and your systems remained and held in place. what do you think happened? >> well, i'm not quite sure what happened yet. certainly there was a bit after shock in the system for a period before 15, 20 minutes where we saw severe crash and then it came back relatively quickly. but it was still down on the day. not sure what caused it yet. but i don't -- i think we have to get to the root causes. i think we have to find out, you know, what exasperated it. we have to look at changes to keep it from happening again. >> what kind of structure changes? have you congressman kanjorski in front of you. >> people are talking about make -- it makes a lot of sense to me. look across the various markets, whether it is the equity markets, the future markets or the options markets, they all are correlated. i think it has to work across all of those and we have to have a market structure where all of the exchanges apply those rules and regulations consistently. it can't done on one exchange and not on another. that causes problems. and i think we are see something of the results of that. >> you mean some of the speed bumps like the new york stock exchange had in place. you think its procedures should be implemented across board. >> something like that. some kind of a circuit breaker both at the mark i level and at the stock level. i think that makes sense given what happened. >> nasdaq's ceo was on the air friday and said that he thinks that that exacerbated the problem having the 90-second time-outs at that time new york stock exchange. what do you think? >> i think what -- what exasperated it was the fact one exchange had it and the other onenot. that's the inconsistency we can't have in the market structure. >> why is the idea of a time-out or a -- a circuit breaker or speed bump? why is that a better solution than just allowing things to go as quakely as possible? >> well, as you let things go, it can get carried away. and it can cause -- it can damage many retail investors. i think that retail investors always want the market to be transparent and to be liquid. to be cost-effective. and -- to -- you know, standardized. you can -- you know what to expect. when have you those types of event, you let it fall off and no buyers in the market and nobody providing the liquidity that's never a good thing. >> have you seen any kind of loss -- loss in confidence in -- online trading in general? in terms of volume levels since thursday? is it too early to tell. >> we haven't seen a pulloff in volume. volume heavy on friday. obviously thursday was a very big day. our systems did perform very well. i mean, some markets have been using centers did have issues generic to the market. but we have seen investors continuing to come in. in fact, prior to last week, you know, we saw -- an increased bullishness on the -- behalf of the investors. >> we can probably argue pretty safely that if it happens again, you may see a drop-off. right? >> i think it is a question about the whole market and the integrity of the market is a functioning properly. that's what spooks some of the retail traders right now. >> do you have any idea whether or not we can devise a electronics specialist? somebody will make a market when that happens. >> i would like to think that but, you know, i think electronic trading and whatnot, they are all good things for the market in terms of the efficiency and -- execution. but having said that, there has to be time-outs whenever something is really -- in the market. there has to be a way to pause for second and then come back. >> have a human look at it? >> i don't know whether it is a human or not or whether you can program it in. you know, i think markets are -- become so robust and frequency of the trading and number of players since regulation has been put in. it has gotten a lot more complex. even across markets and so some of the reports that i hearsay this, originated in the futures mark it, and stowe getting that consistency and making sure that there is a mechanism to step in here, i think it is important. >> how do we and the congress force the regulators to come together not having a single regulator like the uk? involved with six, seven and eight regulators. how do we get them to be consistent? >> i'm not quite sure other than through laws or -- you know, getting them in the same room. recognizing it is in the importance -- very that they all have apply these consistent. >> in other words, that's your problem. not his. you deal with that. let's see. i had a point. do you have any -- what was it like behind the scenes on thursday? were you -- were you at your desk and you got a call on our red phone and had to run to the war room? what? >> as -- as of what happened, actually, i was in one of our board meetings, believe it or not. our board was there. i was checking my blackberry because our chief operating officer was giving a presentation on all the investments we made in technology. infrastructure so it was a -- it was a good moment for him. but as i -- i stopped him to explain it to the board, he quickly had his technology there and said no, we are fine. all of our systems are stable here. >> right. there must have been some heads turning in the room. right? this does not happen every day. >> no. this does not happen every day. i think what surprised everybody, i don't think it -- when it came off, i don't think that's what worried people with what was going on in europe. i think the -- when it went from -- i think, 300 to 400 and very quickly to a thousand, that caused people to get a little bit concerned. >> why wasn't the -- why was the fall precipitous in terms of what -- why didn't it glide down over an extended period of time? it just seems like -- they went over a cliff. >> that's where i do think some of -- one exchange moving one way and not the other is -- and then all of a sudden, some liquidity providers backing away a bit. because there was something strange in the market. it can't be right. and i think that's what causes those types of events. >> nobody wants to catch the falling knife. everybody backs away and pulls their hands back of your business model in part relies on the idea of very speedy trades and doing things electronically and get things done quickly. and yet, some of the problems people are saying is that there's -- there should be some sort of a sound barrier, there should be some sort after limit. we spoke with john najarian. it was something senator warner told us yesterday as well. do you think that there is a limit that there -- there should be limits even though we could move faster, there should be limits set up on how much trading can get done and how quickly? >> i'm not sure if i agree with that. it is very hard to, you know, sort of say i want to slow down progress. but there has to be positives when something seems really abnormal. there has to be a way to step in. >> fred, thank you very much for joining us today. we appreciate your time. >> yes. thank you. >> when we come back, this morning, the greek tragedy crisis averted or just pushed down the road? plus, is financial reform just turning into a bailout plan? we will talk about that with the congressman and a lot more of the top stories of the morning when request squawk" continues after break. welcome back to "squawk box" on cnbc. first in business worldwide. we are one hour away from the opening bell. the day after markets rallying on that euro bailout. they are giving some of it back. we will talk to the head of -- head to the trading pits of chicago soon after this. and then check out the cure for the greek tragedy. will it be enough to keep the crisis at bay? former treasury department insider weighs in. blues, art cashin puts the flash crash and euro bailout into perspective like only art can do. greece's expected to ask for the first installment of the aid package today. $25 billion worth. the aid from ty mf and european union will help greece refinance a ten-year bond issue that comes up due next week. also small business owners, they are slightly less pessimistic. the monthly optimism index from the national association of independent businesses rose by 3.8 points last month to 90. 6. it is not enough for a strong recovery but the first above 930 in the last 18 months. opec boosting for world oil demand. it sees 2010 demand growing by 950,000 barrel as day over last year. that compares to a previous forecast of about 900,000. it is the third month in a row that opec has raised that estimate. >> fed chairman beirne will brief lawmakers today on the situation in europe and on the ecb's response. steve liesman joins us with the few details. >> the fed. >> fed as well. >> little bit of additional trance parenty, burned once, burned twice, fed feels like it needs more information. bernanke will head to the hill today and give a closed-door briefing to senators on the senate bank committee at 9:30 on the international situation as you can read it is a fed's response. what the fed did is fed opened up the swap and reopened the swap lines with canada, europe japan and switzerland. there will be new transparency measures across the swap lines and it will go -- first of all, post the contracts that it has with the central banks. first time that's ever been done. also will report swap line drawdowns on a weekly basis. before what it did, it did inaggregate by month. now weekly by central bank. another couple of quick federal reserve headlines. jeffrey lacquer speaking at this hour and saying the economy is on a, quote, sustainable upward t trajectory. policymakers, he says, should not wait too long to raise rates for fear of inflation. i think the bigger news here is bernanke is coming out there and they are -- being more proactive. before they get slapped by congress for being secretive and putt something stuff out there ahead of time. enough for you, congressman? >> good for me, steve. >> okay. >> you are a good fed. aren't you? they learned their lesson politically. at least. >> i think they have done one of two things. every time that they have kept things secret, there's really not any real reason to keep them secret. very little market reaction. when they came out -- people received the -- money from aig payoffs, there was no really -- downside to it. and the other thing is that they find that when they try to do good, it is seen as doing bad when they keep it secret. i think learn theed when they head into the political mess, that they are better off being more transparent, like a regular politician can be or should be anyway. >> you know, it spawns conspiracy theories. >> exactly. >> they remain that way. i'm a great believer that one, tell as much as you can. absolutely. as fast as you can. and people -- they can handle it. we -- we get this elitism that oh, you can't handle that. that's too big for you. then it starts in categories and i think a lot of -- members of congress suspect that the federal reserve says well, the congress can't handle this either. maybe they are right. i don't know. i won't make that argument. the truth is it caused a big problem when we passed the rescue program. if we had been absolutely forthright with the american public, we wouldn't have had fear of not being able to do it again if we had a second hit. we would have had a methodology to operate. >> as it turned out you think members of congress felt like dupes because -- they weren't -- they weren't told enough detail? >> no. their constituents weren't told enough. so they were able to politicize the issue. some taking the position of -- look, today in are arkansas, senator lincoln was being called bailout branch. instead of being called savior or saint, if she hadn't supported the, quote, rescue plan or bailout, where would we be 16 months since it happened? she's being castigated, bob bennett lost his seat in utah because of it. and yet, we should actually be -- memorandumoralizing these people for dar. >> just we don't know enough of what happened? in general, population does not know enough of how close we were to going off the edge? >> absolutely. absolutely. we have had that -- inconsistency for 18 months now and it is -- and those who -- people in the congress that aren't closely connected with the financial services, they feel that liberty to blame everything from cras to fannie and freddie. if they all have some -- >> fannie and freddie had some -- had some huge, huge implications, too. american taxpayer is on the hook for more for freddie and fannie than anybody else. >> but they were not a cause of the problem. they -- they were involved intricately in the market because of their signs. but they -- to blame them for being there, they were the cause. >> didn't they believe to a huge bubble and housing prices and -- the idea that people were going to get very low interest rates and be able to qualify for these things and the federal government would continue to push for homeownership even in some cases it didn't make sense? >> but the best economic minds in the country when they -- were consistent with alan greenspan,al april greenspan testified in '05 before my committee direct question. you need -- needn't worry about -- >> without having -- without having the federal funds to back it up, economists can think all they want. still not help -- >> you know, becky -- let me call your attention to fannie and freddie didn't get into the securitized market. they were already bailing out of it. it was the private wall street market that really took over from about 2004 until the crash in '08. that was really done on wall street. >> you know, what's interesting here is that -- people have used each political party used the facts that -- for their own care. i think -- i think that the story is much more in the middle here. on the one hand, fannie and freddie on the back end, using portfolio, provided essential liquidity even during that '04, '05, '06 period. it wasn't the majority of it. it wasn't the total cause of it. look at -- well, yeah, mine point is that the liquidity it provided enabled what happened in subprime. but -- >> i would say difficult to point to any one factor. >> that's my point. people used that explanation, fannie, fredly provided some liquidity to the market to say the market was not at fault. wall street made plenty of mistakes -- >> i'm not making that argument i know you are not. >> my point is there's plenty of blame to go around. >> why should fannie and freddie give -- >> they shouldn't be excluded. they shouldn't be hung up if you fix fannie and freddie, you will fix the problem because you are not. >> i don't think that's the case. >> they enabled everybody. >> wall street was taking the pills themselves. >> i want to bring in santelli. >> rick has a few thoughts on it. >> i kept thinking rick and scott nations, too. santelli wants in. let's open his mike. are you giving me the silent treatment? >> this could be a story. >> you know what, there's no way i'm even commenting on that conversation. i think in november we will let the world decide whether ed freddie and fannie were enabl enablers. i was doing mortgage in the '80s through '99 when i joined cnbc. the implicit subsidy through the financing and all the enabling through the politicians on both sides of the aisle, they were absolutely at the epicenter. i remember example once for an insurance company told me that they wanted to sell spdas for a certain price annuities. we did the research on them. you are selling something that cost a buck for 80 cents. their comment was, but everybody else is selling them for 80 cents. fannie set that bar and they really did cause -- they created a need, they created a securitization process, and they created an internal subsidy where nobody could keep up with them and that's -- unless they reduced the potential of -- >> rick -- >> risks. >> you are saying they institutionalized the problem? is that it? >> without a doubt. they have public money to do it cheaper than anybody else could finance it. >> rick in -- beginning in '04 because -- >> '04, it was already pretty much the system was baked into the cake. >> that's not right, rick. >> listen to richard baker. richard baker tried to get reforms. i'm not saying when the paper was created. i'm talking about a machine that made the sauce arnlgs started o forming it in the '80s. >> who -- >> just put out the worst assistant sausage in '05. >> whose sausage went bad? private label stuff that went bad or was it the government guaranteed stuff that went bad? >> you know what -- >> private label. >> think right now, stop a minute. we can make this easy. we are still making the sausage. what do you say about in a? >> i don't think that's the relevant conversation with what we are dealing with. >> it is. because it is the same thing that was going on all along. we let them do what they want. we talk right above the problem. you don't include them in reform. nobody dissects them. this isn't a -- it is a mechanical monster. >> let me say that we are including them in the reform. that's another -- >> come on. >> misnomer. we are going to do fannie and freddie reform. we can't do it in the present bill. >> after the election. >> no, no, no. nothing to do with the election. it is too complicated. already people are complaining it is 1,600 page. >> you think taxpayers that go to work to pay the money you are subsidizing, it will end up a half a trillion, do you think they think complicated is an excuse? >> they did with the health care act. that was part of the reaction they had p. we have to -- >> right. that was too complicated. we have all these unintended consequence requests. you know, one line in '99 regulation created a lot of the over-the-counter derivatives. 26 pages of the one-liners. kenny youngman rise up from his grave. >> take my wife, please. scott, really quickly, you want to comment on where we are in the futures this morning. and what it says about yesterday's action? does it invalidate it in part or not? >> i think the market has realized when you are bailing out an entire country, all of greece, you have a lot fewer tools than you do when bailing out aig. let's face it. you can't take an 80% equity position in greece. what the eu is doing, piling debt on top of debt, largely because those are the only tools they have. but that does not help the euro. income fact, we see the euro pretty much back below the levels we had hoped it would be at. when the dollar is stronger, u.s. stocks, u.s. bonds, u.s. base commodities, they all get cheaper. that's what the market is doing now. >> scott, thank you for that. congressman, have you ever thought about having rick testify in front of the committee? >> if rick agrees, we can have steve and rick at the same time and they can explain exactly what happened to america 18 months ago. >> we can explain what didn't happen, that's for sure. >> you don't even need a microphone. >> that would be useful. we will hear them across the halls of congress. >> i think it would be a useful conversation. >> rick, scott, thanks. >> next, we will have more on financial reform bill. and did the world really avert a greek tragedy? we have that discussion plus a trip to wall street. recently a whole new kind of cloud came to st. cloud, minnesota. ask me what a cloud feels like... and here are the first real people to sleep on those brand new clouds. ask me what it feels like to be comforted by a cloud. a new tempur-cloud supreme... by tempur-pedic... ask me why we love our cloud... ask me how it's soft as a cloud... and still supports me. ask me why this is a million times better than my pillow-top. a pillow-top may look nice and puffy, but underneath are hard metal springs--- ask me why it's 'bye, bye, pillowtop!' bye, bye! the new tempur-cloud is the plushest, softest, tempur-pedic ever, and it comes with a 20 year warranty. ask me where i'd like to be right now... ask me how many people i'm gonna recommend this to... tempur-pedic brand owners are more satisfied than owners of any traditional mattress brand. ask me how to take the first step to your own cloud... take the first step! call for your free information kit with dvd. call the number on your screen or visit tempurpedic.com/cloud. tempur-pedic. the most highly recommended bed in america. despite bipartisan support some are are calling the financial reform a bailout bill. joining us is john taylor, professor of economics at stanford university. he is the senior fellow at the hoover institution and former treasury undersecretary for international affairs. our guest host today is congressman paul kanjorski. he's a member of the house financial services committee and chairman of the subcommittee holding hearings today. professor taylor, thank you for joining us today. >> thank you. >> we want to talk about the situation in greece. you think that -- first of all, the greek greek situation has been averted but maybe only temporarily, there are still problems out there? >> well, this -- bailout package doesn't rely address the problems of the debt and deficits coming out of greece now and potentially out of spain and portugal. it basically tries to postpone, i think, what will be inevitable which is from restructuring of the greek debt. but more importantly what i'm seeing now is the involvement of the european central bank in the agreement to help support some of the troubled country's debt. that raises lots of questions about the european monetary system going forward. >> postponing the inevitable, though, may not necessarily be a terrible situation that allows investors and banks to maybe shore up, put capital in and get ready for what's coming instead of dropping it on next week. >> of course that's what people always hope with these bailout packages. so often they don't work. then they lay the seeds for the more troublesome things. encouragement of risk taking, the -- encouragement of what think think is irresponsible government behavior. and the part of some of these countries to run up the deficits and it really rewards this behavior and -- then puts in place, even more debt, of course, because this -- this trillion dollar package is more debt. it is not less debt. and then it gets involved in the european central bank in this action, raises questions about, unfortunately, their credibility and their independence as well. >> john, should american taxpayers be concerned that the involvement of the imf and the use of federal reserve swap lines might actually end up costing american taxpayers in the european bailout? >> well, i think they should be concerned about the fed's involvement in this. and -- it is not so much for the reasons you indicate. but it is the fed's balance sheet will help expand again. we have been trying to reduce the size of that balance sheet because of inflationary pressures. plus it involves the fed in this action which, again, i think raises questions about its independence. the fed has been concerned and others that -- by being involved in the fiscal policy or now -- international bailouts that it won't be able to do it its important job of keeping the overall economy steady. so i think that there should be a concern and i think a full accounting of what those swap funds are going to be used for. >> john, congressman kanjorski. you are being -- giving us the negative argument why -- let me pose the question. forgetting we -- not do what we are planning to do or was done, what would you suggest be done? what should have been done in your estimation? >> with respect to europe, i think that the sooner that the greek debt problem could be restructured, the better it would have been. i think that's still going to happen. most outside objectors think that will happen. almost every case there is a an attempt to postpone it and then things get worse. early on, in fact, i think it is still possible. an orderly restructuring -- i don't mean a -- orderly restructuring would be the answer. >> it wasn't very orderly in the streets of athens the other day when 100,000 people were rioting and i think ten people died. that was -- >> that's right. >> that's right. >> i agree, congressman. that's it. the point is that's because they are realizing they will be paying a lot of this debt, even more in the future to other parts of europe. outside of their country. that's part of the reason. not only are they going to have to reduce the government spending, what they are going to owe more money. so -- a more sensible approach would be to start to think about restructuring the debt. i guess in an orderly way so you prevent some of this backlash. >> john, you mentioned that concern about the fed's involvement is warranted. does this mean the fed should have let the europeans do this on their own? if that were even possible? >> quite frankly, think that would make more sense. it is possible. the last time that they started the swaps was back in december 2007. that didn't prevent the financial crisis which occurred a year later. the swaps may have been useful in the midst of the crisis. but it didn't prevent it. and the same kind of swaps were available then. i thusy that, in fact, the situation is much less severe by any objective measure than it was in 2007. so -- you also see the market reaction. you know, you got a little appreciation of the euro early yesterday morning. basically lost all that ground again. >> yes, yes. >> since -- i think the opening of the markets in -- markets in- here in the united states probably are going to see a little pullback as well. i think people are starting to understand what this package is about. they're learning about some of the dissension even within the european central bank. >> no, we're learning a lot about how german parliament works. that's for sure. >> yeah. >> do you think -- can you foresee a day where central banks -- well, where policy in general is normalized, so to speak, or are investors going to living for years or decades with governments that come in and by choice or necessity change the rules in the middle of the game? >> you know, i just hope so much that we're go to change this and get back to normal, if you like. but this step is going in the other direction, unfortunately. the fed bringing back its balance sheet to normal levels, getting back to regular monetary policy, not helping particular firms or particular sectors, as you say, not changing the rules of the game, that's what we have got to strive for. the economy was working well in most of the '80s and '90s until we started moving in this very interventionist direction. so i have hope. i'm working on it. we're trying to do some alternatives to the bailout research here at stanford and other places too. the chapter 11-f code for the bankruptcy i think will help some of this so there is more of a rules-based rule of law operation and not all these government interventions. >> real quickly, the fed remains at zero. the balance sheet, about $2.5 trillion. is the fed behind the curve in your opinion? >> i don't think right now with respect to the interest rate it is. i think the question is whether it is going to be behind the curve going forward. you know, you do see some pretty good growth numbers coming out. quite frankly saw some good growth numbers in europe and the rest of the world. i think it is not behind right now. i would like to see them getting their balance sheet down, more quickly, even perhaps before they start raising interest rates, which will still be a ways off. >> professor taylor, thank you very much for your time today. we appreciate it. >> thank you. >> when we come back, we'll get the cashin perspective with art cashin. 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[sigh] ah... the efficient life is the good life. count down to the opening bell on wall street with art cashin, director of floor operations at ubs financial services. good morn. y you write this morning about the victory for the bull was not unqualified yesterday, right? >> yeah, they missed out in the volume department, the volume was still below the sell-off volume of thursday and friday. that's a bit of a disappointment. and i think you're seeing some of that reflected in the pullback this morning. i think it pulls back more about the idea that people are realizing that despite the rescue package in europe, it can be very painful. we still haven't seen how the greek citizens will take it. we'll know more tomorrow. i think there are some strikes scheduled. >> yeah. there are a couple scheduled for morning, our time. i wonder if you think, though, investors are getting used to that and if more unrest in the streets there has the impact it did last week. >> well, certainly we'll see how big it is, but let's get down to the point. if they're not going to accept austerity, that's a huge moral hazard, in portugal, in spain. listen, if he can still get his allowance without cleaning up his room, why do i have to? so you're go to see that kind of problem. >> you got a cold? >> yeah, i'm getting a little bit of a summer cold -- late spring cold, i guess. >> you look good. that's all that counts. >> well, thank you. >> a visual medium. we'll see you later, art. >> feel better, art. >> thank you. >> up next, a final role call with paul kanjorski. obby noises] how well are you diversified? what do you mean? well, i've got stocks in every sector, but that didn't seem to help when they all dipped, and keeping my money in the bank is getting me nowhere. look at commodities. they're a different asset class altogether. there can be better tax benefits than stocks, too. really? really. how did you get started? talk to lind-waldock. call lind-waldock, the premier futures broker, at 800-445-2000 and see if commodities are right for you. tomorrow on "squawk", bob corker of the banking committee in the middle of the battle over financial reform will join us at 8:40 a.m. tomorrow on "squawk". always good it hear from the senator from tennessee. >> let's continue our discussion with our guest co-host today, congressman paul kanjorski, the chairman of the capital markets subcommittee. later today, you're going to be holding a hearing and calling the s.e.c.'s mary shapiro, gary againstl l gensler. what are you going to be asking? >> hopefully they can be as succinct as possible so everybody can understand what happened and i'm not sure that they're going to be able to tell us what happened, but we do want to pose the question, what are you going to do about what happened and when will we know what happened so we can take appropriate action, if it is necessary, that the congress take some action to change the law. >> you brought up the idea earlier that we need transparency because without it all kinds of rumors start circulating. can we get an answer, do you think? >> i'm not sure. from the indications of the briefing i had yesterday, it seems that it is going to be much more than just days. it is going to be weeks or months. but i think we have to stabilize -- we're okay now. it seems the markets are functioning. what happens if it happens again? >> congressman, thank you so much for your time today. we'll be watching later this afternoon. >> looking forward to it. >> safe travels back. our thanks to the congressman. join us tomorrow. "squawk on the street's" coming up next. live from the financial capital of the world, this is "squawk on the street." buckle your seat belts, here we go again. good morning, everybody. i'm mark haines. >> i'm erin burnett. front and center, we were worried about this yesterday. what goes up sometimes goes down, although not down as much. at least as it went up yesterday. that's what the futures are showing. after the big market rally, people little hungover, shall we say, maybe they popped the champagne corks too early on the bailout celebration, mark. >> right now the s&ps are down 13.40, 14 points below fair value. here is one of the reasons why, europe is having second thoughts about this bailout package and is down across the board. germany not so bad. 1.3% loss, but as you can see, london and paris are down 2.25%. >> and shares of toyota, this is an interesting one, mark. you can see toyota's going to open up higher. why, mark? because earnings better than expected. now, they did predict a slower than expected recovery, but they are putting that down to the issues in europe and the strength of the yen. all of that is linked together. interesting, though, it wasn't a comment on the issues the cars have had with the braking or acceleration, sorry, or any issues of the u.s. economy. so maybe that's a good thing. anyway, the conference call is just starting. phil lebeau is on