Transcripts For CNBC Squawk Box 20090915 : vimarsana.com

one year later, b of a saird saved merrill and the government rescue plan was put in motion. president obama s message to wall street? more oversight of the financial system is coming. the markets, there s a mixed picture in europe and asia. u.s. equity futures are trading slightly below fair value as squawk box begins right now. good tuesday morning. welcome to squawk here on cnbc. i m carl quintanilla with joe kernen. becky will be joining us later in the show. influential analyst and air reanna huffington. and the question, rightly asked by i said i know where becky is. and they said, oh, is she one of the most powerful women or is she covering? nothing would surprise me. in this case, she is covering, but we may send someone here to cover here. although if she does make the list, i hope she comes on this program first. you would think she would, don t you? you would hope to. a arianna, have you been on the post lately? yes. you look at her and drudge, and somewhere somewhere you can find a grain of truth somewhere between the two, right? theater. our top headlines this morning, citi plans to unload some of the government s 34% stake in the company. the bank confirms to our steve leisman that it has a plan and discussions could be happening soon. the company is considering a secondary share issue along with a government selling portion of its stake. i think i ve seen some comments from parsons. i think he s optimistic this can happen and the taxpayers can make a return on their investment. and who wants to be a 34% government owned entity? i guess it would be issuing more new shares. and we re talking billions and billions. we re not talking 0 billions in this case. the government had seven. total outstanding shares, it hats to be 20 billion or more. if you can issue more, presumably, each share of even more. anyway, we ll see. new york attorney general andrew cuomo reportedly could bring charges against bank of america s ceo and is cfo. cuomo is probing potential securities violations related to the merrill deal and it comes after that judge decided no-go on the settlement and he s quoting people, what cynical means and this settlement is both i don t know. there were some poetic, flowery language. he s not going to cut mustard. then we have a busy day on the economic front. at 8:30 eastern, we have ppi. if boekky were watching or listening she s very immature that i said ppi. headline producer price index is expected to have jumped 1% last month. the core component is seen ticking higher by 0.1%. and auto retail sales are likely to get a boost from the cash for clunkers program. anyone get their money yet, do you know? in terms of the dealers or the dealers. we should have mike jackson. the gain is expected to be just 0.4% ex autos. and we have the new york fed s report on activity since the empire state. it s expected to show a rise to 14 versus 12.1 in august. let s get a check on the markets. i wouldn t say flat action overseas, but there hasn t been a lot of movement either way. had interesting action in asia. long cob was closed for a while because of weather of all things. we ll see what happens as the numbers, as joe pointed out, come out today. oil, we ll get inventory data from api. the ten-year note, we ve seen the yield creep down over the past couple of days. now, sill around 3415. the dollar is hovering above those seven-month lows. the pound is doing relatively well after the uk prices were up for the first time in two years, joe, which is saying something. and finally, with a generally stronger dollar, gold today is down 2.30, $998.80. let s get overseas this morning, maura fogarty is in singapore with the latest on asia. first, let s see what s going on in london with louisa bojesen. good morning. the home price states, part of the reason we re seeing that jump this time around is the amount of stock coming on to the market. we re still seeing a supply got, so that has an impact. i want to show you the european markets. you indicated we re looking at slightly flattish trade. that is indeed the case. we had a weaker than anticipated zew data out of germany rising by less than expected. this is a measure of investor sentiment. we ve is seen some of the weakness creeping in as opposed to the last time. what s pulling us down? well, we re seeing some spelling taking place in the insureses. maura, how is it looking out of singapore? yeah, you know, louisa, we saw asian markets here edging higher, despite rising trade between the united states and china. let me give you you a quick update date on that. asia is saying the wto is abusing trading data. the ministry saying that ex ports of tires from china to the united states actually fell during the first half of the year. meantime, they re saying they re going to raise this issue at the g-20 summit in pittsburgh next week. in shanghai today, the composite shrugged off trade dispute concerns. that s another one-month closing high for shanghai. a lot of it is data today showing improvement in the form of investment flow into china. in hong kong, it was a shortened day because of a severe tropical storm. we only saw the market closing in the afternoon session and saw hang seng sliding by 0.1%. japan, the nikkei 225 managed to gain about 0.2% as exporters reed rose on the back of a steady yen against the u.s. dollar. japan s new prime minister y you ukio hat yam ma formally takes office tomorrow. but we have reports that fujii will be the new finance minister. he is known as a fiscal conservative. south korea and taiwan saw their indexes rising to the highest close in 14 months. despite the fact that some of these markets here may be treading water, we re seeing a nice rally overall for these markets in the year so far. that s how asia has performed today. back to you stateside. maura, thanks for that. it was a year ago today that bank of america bought merrill lynch. president obama marked the anniversary with a speech on wall street yet yesterday and then sat down with our own john harwood. we will create an oversight council to bring together regulators from across markets to coordinate ask share information to identify gaps in regulation and to tackle issues that don t fit neatly into an organizational chart. we re going to bring everyone together to take a longer view sxa broader view to solve problems before they become crises. john harwood joins us from washington this morning. john, not always easy to get some news out of the president on a one-on-one. but you managed to get a couple of good developments from the man himself. well, there were a couple of things that i found particularly interesting. one of them was we discussed whether or not he saw a need for a second stimulus, given the signs of economic recovery. he said he was strongly inclined against a second stimulus imagine, and he s looking for ways to bring down the unemployment rate without adding to our budget deficit. he addressed those china trade tensions that you were just talking about a moment ago, that he was confident that he could keep this tit for tat under control, that we weren t headed for a trade war with china, which i think is significant because we are just a week away from the g-20. one of the other things i talked with him about, carl, was the fact that he went to new york, he gave that speech, he sort of admonished wall street. but we all noticed that he didn t make it over to the floor of the stock exchange, as some past presidents, including george w. bush have done. he said no slight intended. i wasn t trying to send a signal with that. it was simply that i know i create quite a instructus whenever i go anywhere. nothing symbolic, as he said. i heard you yesterday john, when you were asked if you could get one question out of him under truth serum and it was how aggressively to i asked him about the promise that he has made that his health reform plan is not going to add one time to the deficit, even though he wants to cover another 30 million people beyond those who now have health coverage and i gave him kind of a give me a break question because so many people are expectical that the government can do that and simultaneously bend the cost curve or not add to the deficit. and he said, look, that is exactly what we re going to do. he talked about the mechanisms he s going to use to do that, the elements of his health care plan, the insurance excise tax, to squeeze down and foster best practices in health care delivery. it s all a big challenge. but he s pretty determined to tackle it and we ll see whether he can pull it off. you mentioned health care. it looks like we are going to get something from baucus as early as tomorrow, right? yep. it doesn t look like he s going to get the more conservative of the three of the republican members of the gang of six. but democrats are confident that he s going to move something out of the finance committee as early as next week, which means we ll get to the senate floor relatively quickly, early october, and that follows the path that the president has laid out to try to get something done late next year. their members don t want to get out on a limb for nothing on some of the more controversial proposals. but it seems to me that there is some headway, some progress, even though big issues like exactly what sort of language is there on a government or public option. the viewpoint has said that he expects something to get to the president by thanksgiving. i would imagine you would say the likelihood of that is pretty high? it does seem pretty high. democrats have pretty good majorities in the house and senate. you do have some divisions, but fewer divisions than there used to be, and i do think there s enough desire to do something and fear of what will happen if we don t get something done because all democrats, remember what happened in 1994. in fact, yesterday president obama had lunch with former president clinton. and i asked him about whether or not president clinton thought he was going to succeed where the clinton presidency failed. he said, well, it s different from 1993. we agree on that. so that s the way they re looking at it. interesting. we ll be hearing more of that sound that you got yesterday, john, later in the morning. good to talk to you. sounds good. in other corporate headlines this morning, home depot is going to start selling martha stewart-branded products when the deal with k-mart ends. among the deal you ll find patio furniture and new closet organization systems, which we could use. systems. i ve seen some on tv. have you seen those, some of those gadgets for organizing your closet? coat hangers that collapse? yeah. they collapse and then you move them together. macy s will continue selling martha stewart s line of textiles. they also have kitchen wear and housewares. mu martha stewart will join us live tomorrow morning on squawk box. aums yop. you know what? i said she should be in that list of powerful women. you did say that. you saw becky, she s going to be on from california. yeah. so she s up. she s probably getting up right now. no. she s up. she said i am watching and i did hear you say oh, she wrote you and not me? no. she wrote you, too. you don t check enough. so you know what? producer price index from here on out. i will never i may say cpi, but never again never again? nope. producer price index from now on. she s watching in california at 3:00 in the morning. she s going to work. that s right. because she is going to be on at 5:00 in the morning. that s right. mattel is moving its listing from the nyse to the nasdaq. three-letter symbols are the nasdaq. so you can t tell if it s nasdaq or new york any more. exactly. the company decided to switch because it mooefd believed the nasdaq technology and offerings increased the value. they plan to open temporary holiday stores in terms of taking market shares. they will set up 350 independent stores. that s an interesting graph, literally. and you see you went from mattel to toys are us, with sort of a toy-themed amazing. but the only thing about that store that is depressing is that there s so much empty retail pace in so many malls. anyway, coming up were your business traveler s forecast plus a market task force ready to take place. first, as we head to break, though, with here is what happened yesterday in terms of winners and losers. [ thunder rumbles ] what is the sign of a good decision? in the world of personal finance, it s massmutual. find strength and stability in a company that s owned by its policyholders. ask your advisor or visit massmutual.com. welcome back. time now for our business travelers forecast. scott williams of the weather channel is here this morning. good morning, scott. good morning, everybody. as we focus in on areas that we are watching four your business travel on this tuesday, mainly around the arklatex, that s where we continue to find that upper air low bringing scattered showers and storms around jackson, mississippi, through memphis, little rock and even as far east as the atlanta metro area. so you might want to call ahead there if you are flying out of the world s busiest airport later on. temperatures in the lower 60s, so a comfortable start to your morning. as we move into the nation s capital, temperatures generally in the lower and mid 60s. loolg at your overall tuesday travel, finding scattered showers and storms in places around oklahoma, moving into arkansas and louisiana, delays possible. atlanta, dallas, and the houston area moving into salt lake city. quickly touching on a typhoon moving through south china here, making landfall around hong kong. so continuing to watch it move generally toward the west-northwest and weaken, but heavy rainfall is expected there. back to you. scott, thanks for that. scott williams over at the weather channel. chrysler is expected to have a weak september. dealers are expected a droop in sales due to unusually lean inventories from bankruptcy proceedings and a long summer shutdown at plants. the entire the industry is experiences a slowdown, of course. but analysts say chrysler seems to have the worst sails sales expected to fall more than 50% of the industry average. carmakers gathering this week, our phil lebeau will bring us a live report from there in the next hour. speaking of transportation and europe, the french government is reportly set to announce a $7 billion to $10 billion investment in rail freight. a french newspaper says the government wants to develop rail infrastructure and railroads in france in order to compete with road freight. and i was just talking to carl. i ve got to we re not going to do chairs, i don t think, are we? i don t know. stiglet s is over in france talking to sarkozy. joseph stiglitz? right, right, he has some crazy ideas. some are not so crazy. don putman name is here, too. and john lonski, too. and john lonski. but instead of using gdp to measure the health of your economy, they said, listen, this is europe. we ve got so many social benefits. we can t grow. we usually have 10 purs unemployment. we ve got entrenched labor laws. we can t hire anyone. so we ve got these entrenched industries, as well. we need a new system to measure here. social benefits one add that in there, rich, creamy sauces, wine, you would add wine and whether it s a good vintage. mistresses, how many, i mean, all of those things we have all of those things here. we could easily do this, couldn t we? we could be doing 5%. we wouldn t even be in a recession. if you work four days a week, you add how much on there. remember what he tried to do initially? sarkozy tried to get to 35 hours, that you re not allowed to work longer than 5 hours. tried to get rid of that. the truckers blocked the roads in france. the idea, to work more than so now, they re both there, they re like high-fiving sarkozy. they re like the fastest growing country on the planet now because of time. if you re not going to grow what you anyway, now for a was that effective at all? that was good. it was anti-europe and we have with european viewers. it s stupid to are we seen in france? i think we are. i think we are. not my more, maybe. joining us for a check on the markets, john lonski and john harman. john, why not get a 5% gdp rate based on six weeks of vacation in the summer? well, i say why not? of course, unfortunately, you can t eat from your vacation time. you can t clothe yourself or shelter yourself if you re not working for an extensive period of time. it s a cute idea, but doesn t make any sense longer term. well, they have a quote there that if the measurements if we re measuring the wrong things, does it do into gdp, defense systems, weapons, you strive for these things. why measure them at all? i don t know. you know, people should be aware of the fact that in your current team in the united states, especially consumer spending, there s a lot of noncash outlays. for instance, if you have paid off your mortgage, they basically acue an implicit rent that you pay to yourself in gdp and that helps to stabilize consumer spending. i think the whole notion that the politicians will change the definition of what we measure, that s an american tradition. what if you make a better croissant? it s worth a little more, too. an economist would say yes. john, there are a bunch of numbers coming today. what are you expecting from the producer pricing index? it s going to jump. it will probably claim by 1% monthly. but that steep increase will almost entirely inte the consequence of high energy and food prices. if we strip that out, ppi might be down by 0.1%. what about the empire state? well, that s going to be important. that showed surprisel strength in previous months. if it did so back in september, it would show the early view. retail sales, though, that s coming utah for the month of august. that s going to get a big lift from cash for clunkers. we think what we take out auto dealership sales, we ll be looking at a relatively healthy climb by retail sales of between the 5% and 1%. don, we have seen the s&p up 53%, i think, from the lows and there are two clearly defined camps, with one that says that we re underestimating the comeback that we get from the recession, from the great recession, whatever you want to call it. the other one says that this is just built on sugar, on a sugar buzz from government programs and it s not sustainable. that s right. and i think the open question is demand. the global question is the resurgence for demand. the optimistic viewpoint says that demand is coming roaring back. we re going to stack up inventory in the supply chain. we re going to be producing like crazy. and that is a very optimistic point of view. there s still a lot of bad news. we initially saw it in commodities, right? we did. since then, it s taken it s taken a bounce. i think our guys think there s about equal chance of 10% up and 20% down. and that says that we re sort of skewed. now, the problem is stuck? yeah, on equities and in particular, u.s. equities. john, don mentioned inventories. wholesale inventories weren t all that reassuring. people look at bdi and say all those companies that were planning on christmas and holiday sales, you don t see those goods coming out of china right now. let s not forget, we re coming off the worst drubing from sales since the 1930s. it stands to reason that businesses will be cautious about restocking inventories until they re fairly assured that indeed there s going to be customers for replenished inventories. they would rather be too late than too early at this point? correct. that s also right. that also goes for rehiring new workers. they re in no great rush until, again, they are convinced that whatever res in orders they experience will be long last postponing. like that rockwell plant, hiring 12 workers. that stopped the presses up in wisconsin. right. paulson was on last night, jim paulson. i was so good after i listened to him. and he said, look, rebuilding inventories, you re going to have to hire a few people. and then if there s any demand from consumers, it s probably going to kwm fiker than other people think. i think ice optimistic in this place. we also need for resurgence in capital expenditures. we need for private investment to step in and buy the things that really make a difference. our productivity numbers are continue to rise as we continue to make existing use of plant equipment. i think we have another three or four quarters before you see that reluctance. ilgs think in a couple of sectors, commercial real estate particularly, we have capitulation points coming. we have points where people have been hanging on with their fingernails and we have another sort of wave of bad news that has yet to make its way through the market. so long-term, we have climbed up to the point where we can see it a little bit. but we now need demand. a lot of it was financed by commodities. thanks, john. thanks, don. when we come back, we ll get you to the stories, get to wall street, as well. also, one year ago, lehman was officially filing for bankruptcy, b of a, busy saving merrill. and 20 years ago, this picture of jeffrey sonnenfield was taken later. but it s 20 years later. jeff sonnen feld will join you in a moment. i ve been growing algae for 35 years. most people try to get rid of algae, and we re trying to grow it. the algae are very beautiful. they come in blue or red, golden, green. algae could be converted into biofuels. that we could someday run our cars on. in using algae to form biofuels, we re not competing with the food supply. and they absorb co2, so they help solve the greenhouse problem, as well. we re making a big commitment to finding out. just how much algae can help to meet. the fuel demands of the world. even more freedom to the freest country on earth. so why should you be penalized for talking to someone, just because they re on another network. shouldn t you be able to call any mobile. on any network, at any time? it s a free country. knock yourself out. announcer: introducing the revolutionary any mobile, anytime. now on the sprint network you re free to call 250 million mobile phones nationwide without worrying about the meter running. only from sprint. the now network. deaf, hard of hearing and people with speech disabilities access www.sprintrelay.com. today marks one year since the fall of lehman brothers. and from its aftermath. here now with more on who are some of the saints, the sinners and the survivors of the past months, here we have the associate dean of yale school of management joins us on set this morning. jeff, it s good to see you. always. you point out we ve spent so much time talking about the big dynamics o of the past year, we forget about the people that have had to make individual choice peps jamie dimon. can you stand to get one more tribute on this guy? but in fact, he s one person who in the flesh exceeds the billing. he has the ta mayorty of 2 1/2 years ago to share down the paulson and bernanke and to say, you know, this is bigger than subprime, this is bigger than real estate. he said, we re taking a look at our portfolio. people laughed at him. he left money on the table. he had the courage to act and he also, when he speaks before congress, with incredible clarity, if you think of him side by side say, ken lewis, at bank of america, it s one person that does their homework. are they the ying and nan of the whole mess? i think sad by ken lewis, who is an honorable guy and a smart guy made a lot of missteps. in terms of saints, you look at sheila bair and judge raycoff, right? what sorts of qualities are you talking about these are the kinds of people who took independent positions. they didn t follow a herding instinct. sheila bair has managed to offend both administrations that she points with. obviously as a bush administration appointee, she is now with the obama team. she s not so sure that she likes some of the things back under paulson. in fact, as the one who wanted to raise the limits on protection of our accounts up to $250,000 per account before others saw it and she s had some continue vishroversial roles. judge raycoff, he s incredible. we come on the screen to some of us who didn t know his background before in the mci case where he had the wish list of the best government practices. but now, he has the courage to stop the train. to say, wait a minute, why is it the original folks who suffered, the shareholders, no you have to pay again? that is why the s.e.c. has done this before, with an admitted math of billions of dollars of fraud, the folks, the bad guys there had a couple million dollars of penalties, way too light. who wound up paying it? the shareholders. why hank paulson? he s a tough one. these are not people these are people capable of redemption. these aren t people that we think of in terms of a bernie madoff. these are people that are sinners in that they made some pretty bad steps. hank paulson, going into this weekend from last year, to know the have anticipated how tangled these institutions are, he s been doing this his whole life. but beyond that, he was wise to the concern in a subtle way 2 1/2, 3 years ago, he wanted to study the difficulty of the competitiveness of u.s. markets. he got completely side tracked and, you know, there s issues there, but he transferred the whole vapsed issues. when the issue was risk and not regulation, jamie dimon told him that. this is a perilous game your playing. i can remember after bear stearns, dick fold was in the chapter as a guy who had managed through this and had not gotten into the same situation as jimmy kayne. i said you don t know six months from now whether and there was a perception of dick fuld who had been smart enough to avoid everything. and he took jimmy kain s place. dennis kozlowsky was the next jack welsh for a long time. you guys said that. bernie everest was bar room these guys, some of them, jeffrey, are one step away from listen to me, joe nocera might take the same position. dick fuld, yes, he showed up for work, a big triumph compared to jimmy kain. and it s hard to believe just over a years ago, but it wasn t just the playing cards a couple of times, but actually in the conference call, the earnings can all caught in august, he actually walked out the door and left with people asking him questions and there was just silence. i think the cfo had to answer questions to an empty seat. so dick fuld is one of the heroes. that exist. it s still in print, right? yeah. joe nocerro sometimes gets it right, but other joes get it wrong. you know, morning joe and and he was finding other people to cut off their heads. he was going through generations, cohorts, everybody else s fault. to this day, it s ervel s fault. yeah. he was interviewed with reuters last week. have a couple of drinks, run around. you never know when you re the next guy to you should not name a street after someone until they re dead. and i love pete rose. we have pete rose, right in the middle of that pleas, it was a little weird driving down pete rose way. analysts always tell you what happens after the fact. i ve been saying this about jamie dimon for years. i ve been fans of these people for a long time. i couldn t get jack voguel to buy american express at 8 the last time he was on. the important lesson here is and i think jack vets a great example of it. in his last book, enough which was written by one of our correspondents is he talks about the importance of character. that s what s left out of the equation here. we have individuals pulling leverage. we re looking at the issues that have to do with the ideologies of market risk and capitalization or do we have moral hazard or too big to fail? everything is nonpersonals if we don t have individuals. it s human beings making good calls and bad calls. jamie dimon was courageous. wells fargo, they were huge and, of course, in the mortgage business, but not in the bad stuff sxp and i think these people should be celebrated for making the right calls. and some of them, you know, chris dodd survived the spike. my favorite was the white night eliot spitzer. yuth could ever happen to him. wait until he s in the it s. e-mail us! coming up, becky reporting from california. when i was told i had diabetes, i felt amazingly boxed in. (announcer) joe uses the contour meter from bayer. (joe) my meter absolutely adapts to me and my lifestyle. i m joe james, and being outside of the box is my simple win. (announcer) now available in five vibrant colors. if saving money happened as automatically as everything else? at bank of america, it practically does. use the bankamericard power rewards visa credit card and earn rewards like cash back with every purchase. cash you can put into savings. or even use to help pay down your credit card balance. it s one of the many ways we make saving money in tough times a whole lot easier. coming up, we have kevin ferry and he s reading the futures this morning. plus, look who is camped out in the squawk board room. freaked out call me now for your free readin. real estate morguul richard le frak. he is so popular with viewers, he has his own theme song. he s a judge at beauty packageants. also becky is reporting from california. the best ask brightest minds in business and investment are gathering here at fortune s most powerful women s conference. they re talking about what went wrong a year ago and how we prevent that from happening a year ago. arianna huffington is here with thoughts on what the president had to say. tens of millions of dollars have been spent right now from lobbyists, trying to undermine reform. you know, my argument concern is that this is not capitalism. that when you have a few banks becoming bigger and bigger and now having 50% of the mortgages and two-thirds of the credit contents, why 92 small banks have gone bankrupt, this is not a sustainable free ender prize situation. that and much more. could someone toss me an eleven sixteenths wrench over here? here you go. eleven sixteenths. (announcer) from designing some of the world s cleanest and most fuel-efficient jet engines. to building more wind turbines than anyone in the country. the people of ge are working together. creating innovation today for america s tomorrow. thanks! no problem! was it really for fun, or to save money on heat? why? don t you think nordic tuesday is fun? oh no, it s fun. you know, if you are trying to cut costs, fedex can help. we ve got express options, fast ground and freight service you can save money and keep the heat on. great idea. that is a great idea. well, if nordic tuesday wasn t so much fun. (announcer) we understand. you need to save money. fedex we are joined by arianna huffington of the handcuffen ton post. what did you think of the speech he laid out? there was a moment when the transcript said, when he was urging wall street to embrace reform and not fight it and the president changed the form and said embrace reform, not resist it, which is indicative of his mind-set. he really believes he can convince wall street to stop resisting. but in fact, wall street is not just resisting form but from the consumer protection agency, it s very actively and aggressively fighting reform. what would you like to see happen let s just say over the next six months. should the president focus on health care first, the economy, should it be what s happening with financial regulation? or is it acceptable to try and do all these things at once? i think, becky, that one of the reason the president has faced so much resistance and anger on health care, this has become a proxy about the bailout. people are angry about the bailout. as the president said during his speech, the american taxpayer has been disorder pay for the bailout and also shoulderering the fallout. that s a very tough position to be in. so health care was going to be the next big government intervention. so i can understand why the public doesn t trust the government is going to do a better job there. i don t agree with them but i can see that point of view. that s why i m saying it s not a right, left issue. joe and carl are back in the studio. anything you d like to say to them? i miss you guys. next time i ll bring you cookies. thank you for joining us. thank you, becky. thanks. i like those cookies. you did like those cookies. great cookies. the second time you got mad at her. the second time, didn t make a big impression. she did come back the third time. a jump-start. chronos management standing by. you have some viewpoint on equities, kevin. it certainly has been confound ag lot of people that are smart or at least they are pretty sure they are smart but it keeps going higher and higher regardless of there being nothing no underpinnings, according to them. the smartest guys in the poor house. that s right. what is it, you don t have enough money to prove the market wrong. you d be broke by the time it goes your wachlt you can t force the market into doing you what want it to do. the other thing, if you start and talk about risk, put things in terms of risk or what could possibly go wrong, you immediately what people hear is you think it s going down. that means you think it s going down today. you have to put it in perspective. i think good analysts, good people out there looking out for their customer funds are not caught up in that. they do the homework and do the research and come up with the conclusions they come up with. we ve been more inclined to say we ve been in a window of opportunity since august where most of what could go well would happen. what others brighter than me have labeled the sweet spot. in other words, rising equity and prices and better data don t push rate structures, interest rate structures higher. i think that s what the window we re in, but it s a window that only stays open for a certain amount of time. writes the risk, in the ten-year or s&p? well, that s a great question, because i think that the community sets itself up for a one or the other type of result. but i think the real risk lies in the pricing of where we have things like the ted spread and other measures of risk outside of gold as gold has already moved and most importantly short rates. we have a short rate structure that is based on an emergency situation that no longer exists. and so we re that window that the fed says is a considerable period of time is that nervous period of time for the market. once it becomes evident we have stabilized the short rates, five years inv to make an adjustment. we have to go. corporate and junk, have they made the move now or are they still cheap? i think they are priced back to a world nearing perfection, joe, it s hard to believe. thanks, kevin. okay. see you later. when we come back, some top stories. our guest host, the regime endary real estate investor speaking out on industry, economy and global financial system a year after the investment world changed forever. back in a second. welcome to progressive.com. you must be looking for motorcycle insurance. you re good. thanks. so is our bike insurance. all the coverage you need at a great price. hold on, cowboy. cool. i m not done for less than a dollar a month, you also get 24/7 roadside assistance. right on. yeah, vroom-vroom! sounds like you ran a 500. more like a 900 v-twin. excuse me. well, you re excused. the right insurance for your ride. now, that s progressive. call or click today. tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action tdd#: 1-800-345-2550 you know i have to see what s going on. tdd#: 1-800-345-2550 and when i pull the trigger. tdd#: 1-800-345-2550 .i ve got to get the best price out there. tdd#: 1-800-345-2550 (announcer) try the new schwab.com tdd#: 1-800-345-2550 for yourself. tdd#: 1-800-345-2550 call 1-888-4schwab tdd#: 1-800-345-2550 or visit schwab.com/trader today. tdd#: 1-800-345-2550 course a trade doesn t always work out my way. tdd#: 1-800-345-2550 but when it does. tdd#: 1-800-345-2550 .man. do i love that feeling. . the month that shook the world one year later. we re pog to have to do financial regulatory reform to make sure this doesn t happen again. what else did president obama tell john harwood? more of his interview straight ahead. the aig meltdown, an insurance giant gets a life line from the fed while lehman goes belly up. elijah cummings critical of the bailout then, critical now. has anything changed since those september days? from financial disaster to political disaster. are you all right? impeached, indicted, disgraced. now former illinois governor rob blagojevich is telling his side of the story. there s a time and place for everything. that day will soon be here. join us live the second hour of squawk box begins right now. good tuesday morning. welcome to squawk on cnbc. i m carl quintanilla along with joe kernen. becky is in california covering the most powerful women s summit. she ll join us. richard lefrak of the lef k lefrak. we re talking real estate. we ll talk more real estate today. is this on the way down. it s on the way down. it is? not house prices. house prices are getting stable. some headlines but not near the control room today. we may. i come out here then start doing them eventually. eventually i m going to do it out there. let s look at futures below fair value. a little weakness in asia, relatively steady around the world. some of our top stories, citi plans to unload the government s 34% stake in the company. steve liesman mentioned a plan to u.s. treasury officials. there have been no talks or negotiations between the sides. we could have talks soon. andrew cuomo s office preparing to file charges in the next couple of weeks several high-ranging executives at b of a. cuomo probing potential violations related to that merrill deal. president calling for responsibility in new regulations. it s been a year sense the fall of lehman and bailout of aig. marked a week of turning points on the market, did a speech on wall street yesterday. then sat down with our chief washington correspondent john harwood who joins us this morning with more. what did you get one-on-one he did not say in the speech itself. we talked about china trade. he said he was confident we would not have a trade war, despite the tit for tat that broke out before the g-20 meeting. he s against a second stimulus. wants to add jobs without adding to the deficit. that s very important to him. he also talked about some of the lessons he learned or wall street hasn t learned in his view since the financial crisis of a year ago. you know, i d asked him at that time almost exactly one year ago what he was prepared to give up on his agenda for all the space from the financial bailout. he said nothing. that was not a mistake for him to do that. he needed to do health care reform, health care reform to put the economy on a stable foundation. one of the principal things has to do with economic reregulation. the lesson he learned is we can t see a repeat of what happened in the past. take a listen. john, i m not sure we have the tape quite yet, but i want to follow up on a point. given the things on his gend ashes, health care, climate change, now financial regulation. did you get a sense he will have to make some choices, some things will have to go? yes. he ll make choices in the contours of those programs. but it doesn t appear any of those marquis items will be set aside. there is a question on energy, climate change, whether or not in fact his most ambitious, capping carbon emissions will be done before copenhagen to revive the kyoto process in copenhagen. in each case, inc. he ll make compromises to get something done. energy, he ll make compromises to get something done but i don t think priorities will lag. especially on financial regulation for wall street. even though that has slipped now, it s not doing to happen in calendar 2009, i think you ll see a very aggressive push in 2010 in advance of those 2010 elections helped by the fact that the senate banking chairman chris dodd is in a difficult race for re-election. has he a powerful incentive to legislate on this area. even though there are disagreements, he wants less of a central role for the federal reserve as systemic risk regulator than say barney frank does in the house of representatives. he is going to make some compromises across the both sides of the capital house and senate and also with republicans. he s working closely with richard she willlby of alabama. some notable names that skew left, maureen dowd and another. not enough rocky, too much spot. this rope-a-dope strategy where he appears to let the agenda get away from him only to come around with a game winning speech in the end is wasting time. are those fair? to be honest with you, i think that s a little bit peanut gallery stuff. if you re looking at what president obama has to face in terms of the congress, he s gotten some flack for the strategy of letting congressional committees fill in the details on health care reform. that doesn t strike me as a bad strategy. of course you remember what happened with president clinton. he came up with a big, fat bill, congress said no thanks and democrats got whacked in the 1994 election. by taking the strategy that he has done, which is begin with some very broad principles that he articulated in the campaign, fill in some of the blanks after in that speech to congress last week, he had seen four out of five committees move the legislation, senate finance committee, they are going to mark up next week. i think he s on track to get what he wants, although he will make some compromises around the edges. richard, any thoughts on how he s done or how he s been perceived? well, he is on television a lot. yes. i kind of said he s on a little more than seinfeld right now. seinfeld is hardly ever. we want to hear from our president. he s our leader. we want to hear from him. sometimes you get anesthetized when it s too often. the wall street regulation, you have this problem they don t want to regulate congress at the same time. they don t want to give up their authority over these different committees. they need regulation in congress to kind of figure out to simplify everything. that s right. there was some i think the president will be on some of the morning shows, too. in a lot of speeches, john, it s overload, isn t it? no? well, the white house recognizes that the best salesman they have got for policies is president obama and they are going to use him. now, people can raise questions where you overuse or ride that horse too long. but you know, so far i think he s correct when he says we re closer to getting comprehensive health reform than any other previous president has been. if he doesn t debt it. everybody will second-guess every aspect of his strategy. looks like he has a decent chance to do it. thanks. let s turn to our guest host for more detail. richard lefrak of lefrak organization. i m interested in the story of commercial real estate, commercial-backed mortgages. it was three years ago, how much did they pay. $5.4 billion. so you get a mortgage on that. you don t own it. actually i think the capital, a little over $6 billion. they raised several hundred billion dollars of reserves. for people in the rest of the company it s huge an 11,000 unit apartment house complex in a prime site in manhattan on 80 acres. bought by whom. a group of investors which they have been very successful at in the past. buying from whom again? buying from metlife. was it the largest commercial real estate deal at the time? at the time it was. i think after the equity office portfolio. now set up the story, bought for $6 billion. what s it worth now? the subject of a little controversy. i d say right now i think there s an appraisal on it, somewhere between $2 and $3 billion. a guy owns a house under water but you ve got a mortgage of these mortgages aren t 30-year though, are they? no, these mortgages aren t 30 years. the problem is whether there s enough income to service the debt and i doubt there is enough income. who would give you a new mortgage for something worth a little over $2 billion. the question is where will the loss fall? where is it going to fall? essentially on some of the investors. if the equity, some of the debt holders and conceivably even the first lien holders on the property. this is the poster child. this is happening around the country with other commercial real estate. a lot of community and regional banks have this. tremendous number still in the hands of the community and regional banks. that s why on friday night we see a news flash. exactly. what s of interest is not that the class of investors who bought these mortgages for invested in these properties is suffering, because that s not necessarily, you know, joe the plumber or joe six-pack who is out there trying to service a home mortgage, what s interesting is that collectively, the failure of all these community banks and regional banks will be as great a cataclysm to the economic structure of the country than the failure of a systemically sensitive big banks. if you think about it for a minute, if you have all the money that was put into the big banks to save them, if the small banks collectively all fail it s like we put it in one pocket and it fell out of the other. you say there s not enough may not be enough income to service the debt. is that because rent has come down? yes. rent has come down. they face the very difficult lawsuit there over some very arcane regulations that they may have not complied with, although it wasn t, you know, by any means intentional on their part. but you re not arguing there would be another economic because of some parcel of land in manhattan. no. after lehman, there s no place to go to get the shadow banks applied, cnbs applied something in the neighborhood of $7or $800 billion dollars. now zero. where is that money come from? you tell me. what are you going to do? tremendous reordering of ownership in the business, a complete recapitalization in the business. losses will fall on equity. losses will fall on debt. and in the instance of the local and commune and regional banks, those losses will create tremendous pressure on the fdic. and eventually those banks that often lent small businesses and individual communities will disappear. who is going to take their place? if you want the economy, if credit is individuals, small businesses coming from those institutions, who is going to take the place to provide that credit? certainly you re not going to jpmorgan, bank of america, right, or wells fargo and say i own three dry cleaning stores, i need a $300,000 loan to finance new equipment or something. it s just not there. so in the end, the small businesses are creating the jobs. these banks were providing credit for small business space, then real estate cataclysm will fall heavily on those people. that s why i believe that the regulators have to have some interest in the matter. we ll turn to this. in your view, the fed doesn t really care about this. we ve got to go now. okay. we ll come back. got their eye on other stuff. right. little stuff. there may be no more crucial topic than that. right. here is a guy, while he s here, talk about this other stuff but we can try to understand, worry about something else. got any comments or questions? we d love to hear from you. our address is squawk@cnbc.com. when we come back, he s been indicted, impeached, created a media frenzy. the former governor of illinois will talk about his policy in his book. the governor is in the studio. time for today s aflac trivia question. on this day in 1978, mohammed alli became the first fighter to win the heavyweight boxing title for the third time after defeat what boxer? the answer when cnbc squawk box continues. aflacc it s the protection you need to stay ahead of the game. exactly! aflac. we ve got you under our wing. aflac, aflac, aflac. aflac, aflac, aflac now the answer, on this day in 1978, mohammed ali became the first fighter for win the heavyweight boxing title for the third time after defeating what boxer? the answer, leon spinks. former illinois rob blagojevich has a new book out in which he responds to the allegations that resulted in his impeachment and federal indictment on 16 charges of felony. he joins us now, author of the governor. good to see you, governor. good morning. why are you doing this? in advance of the trial itself given most people wait until that is resolved before they come out. because a terrible thing has happened to me and my family. i ve been falsely accused of things i didn t do. when you re an innocent person and you know what the truth is, and you have a responsibility to the people who hired you, because i was elected by the people twice as their governor, never lost an election, when they vote for you that s an act of trust, it s important to let them know you didn t break their trust, let them down. i didn t do the things i ve been falsely accused of doing. i m looking for the highest mountain top i can find to shout it out. write that book and have a chance to be on programs like yours. it s highly personal. almost like a diary. is there any risk it will corrupt your defense? the traditional thinking of the lawyers is you shouldn t do this. whatever i write in the book is obviously subject to a court of law. this conversation could be hazardous potentially. if you tell the truth, does it matter if it s today or six months. the truth is i ve been maligned and wronged. i was not trying to sell the seat for financial gain. the prosecutor mutilated the truth. there are taped conversations. they used the conversations to twist things, has gone into court to prevent me from talking about the tapes. the truth is on the tapes. i was in the process of writing the book, the day before i was arrested i directed my chief of staff to work with rahm emanuel, to work on a deal though create 500,000 jobs, expand health care to thousands of people and not raise taxes, guaranteed by the democratic leaders in my state. one of the things you write on the president, he is now president of the united states like zeus in greek mythology on mount olympus. i m vicarus who flew too close to the sun and hit the ground. they have distanced themselves. in fairness to president obama and the democrats who the day before were friends of mine and mutual supporters of each other, they don t know what the truth is. they have been told something that isn t the truth. based on what they know, they not unreasonableably want to get away that. you have a brand-new president elected. the country needs dramatic improvement. this president needs to get to have to a running start, not mired in a scandal. i understand with why they are doing what they are doing. i understand. there s a bigger purpose. the president has to serve the people. i remember a quote, this seat is worth something. i m not going to give it away for free. what else could that mean? what s your story? i m not going to give it away for nothing. i know what you think comes next. i wish i could tell you but i m prohibited by the accuser from telling you. it s not what they are suggesting by any means. in chicago politics, is this the way it s done in chicago? is that what you re saying? that s the idea that comes from all of this, this is not new, unique, the way it s done. not a great indictment on chicago, illinois or indirectly if you re selling a seat for financial gain, you should go to jail. i wasn t doing that. i never intended to do that. it s false and it s a lie. it s one thing to make a deal to further legislation. to help people. that s politics. that s how the process works. his accuser said abraham lincoln would roll over in his grave. he doesn t know history. abraham lincoln would applaud. he knew there was a barter process, legislative process, if you can create jobs through works, ab happen lincoln called it internal improvement, not raise taxes, i was going to hold my nose, point the daughter of my political nemesis, who i have disdain for, that was the best i could do for illinois. it is not about financial gain. hate to do with politic, serving the people of illinois and discussions how i can be helpful related to health care. governor, if the modus operan operandi, would you say there s a whole pattern of criminality in your structure. you guys make it sound like this is unique to chicago. we re in new jersey now. i m afraid we re out of time? can i say one thing? president obama and president clinton make a deal. she s going to get out of the race, he s going to raise $10 billion. then she becomes secretary of state. that s politics. everybody thinks that s natural. this is unique to how it works. it s a prestory i m going to read it. it s an inspiration to me. still ahead this morning, one year after the government stepped in to save aig we re going to talk to one of the toughest insurers about what s next. congressman elijah cummings will join us. as we head to break, take a look at oil prices this morning. you re watching squawk box on cnbc, first in business worldwide. goodwrench. we roll out the blue carpet for drivers of these great gm brands. we can do the small things, the big things, just about everything. right inside your gm dealership. find out more at goodwrench.com. [ telephone rings ] [ ring ] [ catch the wind plays ] what is the sign of a good decision? in the world of personal finance, it s massmutual. find strength and stability in a company that s owned by its policyholders. ask your advisor or visit massmutual.com. any comments or questions, drop us a note. our address, squawk@cnbc.com. when we come back, top stories and how the markets are sagging this tuesday. in the meantime the most widely held stocks and how they performed in yesterday s session. you re watching squawk box. welcome back. a look at the futures. relatively weak for most of the session. asia was weak. europe mildly in the red for most of the morning. some of the top stories, citi plans to unload some of the government s 34% stake in that company. the bank confirms to steve liesman the plan is there s no negotiation between the two sides. we could get some discussions happening soon. president told nbc s john harwood the financial market will be vigorous, require capital markets, president talked about how the failure of one firm could bring down the entire system. there are certain factors of the financial system like derivatives, they currently have no regulatory oversight whatsoever and we need to set those up. so what we want to do is position our rules in such a way you don t end up in a situation where your only choice is financial meltdown on the one hand or taxpayers having to gauge the huge bailout. the auto industry goes to europe this week. the frankford auto show, found phil lebeau with big highlights. that phil, he ll do anything for cnbc. a trip to europe look. at him. he s smiling, acting like he s actually having fun. good morning, phil. good morning, joe. this is one of the huge auto shows of the year. there are four big ones, detroit, tokyo, beijing and this one. this year the talk no doubt resolves around what s happening with opal, today the company unveiling it s new as tre sedan. a lot of discussions by the new owners, magna to cut 10,500 jobs. also discussion how well general motors will work with this new partner magna. gm has put a lot of investment into vehicle design and architect you re through opal how will that work now that magna is their partner owning 55% of the company of the other thing you notice at the show this year, a changed attitude. in the last year auto shows were a frankly somber affair. that s not the case this year. there s a much more upbeat atmosphere, if you will. nobody believes the rowsy times are coming around the corner immediately, but there is more optimism here. there s also a lot of talk about future technology. a ton of electric vehicles being unveiled here, including, guys, just a half hour ago, chairman and ceo of nissan unveiling electric vehicles they are planning to use. pluggins are big. you ll see the first plug-in prius coming out from toyota. big talk, combination of things. one, worst is over for automakers. two, electric vehicle, it s coming. some of the technology we re seeing here today shows it s only a matter of years before we see these vehicles out on the roads. guys. phil, thanks for that. enjoy frankford. how long are you there? we ll be here tomorrow and we ve got a couple of surprises with you. i picture him with a beer stein in his hand? in three or four hours. said they were partying, right? thanks. phil lebeau. try to get make work in over there, if you could. our conversation continues this morning with our guest co-host richard lefrak, president of the lefrak organization. looking over your notes, richard, one of the things i thought was interesting, for the first time in 15 years, you don t have building under construction. electricians on the ground. electricians, plumbers. what does that say? why is that? well, it says two things. one, there s very little financing available. more importantly, it says demand has dried up so severely, even if i look a year or two down the road, i can t see the need for anymore facilities, any more square footage to be built, even though i own land in manhattan, land in new jersey, and land, actually in los angeles that s all developable right now. commercial real estate is not overbuilt, is it? it s yes, it s overbuilt because vacancies hit highs. not like the housing industry. that was part of the silver lining it wasn t overbuilt. prices going down. it had not been supply had not been added at the frantic pace that occurred in the 90s when we had the big meltdown the last time or the 80s when we had a meltdown. it was not an issue of supply. but in the midst of all this efficiency when they are cutting jobs, they don t need office space. when a retail business is sagging, they don t need more shopping centers. right now we have historically as high a vacancy rate or looking forward to as high a vacancy rate in the commercial real estate space as we ve seen, i believe, in a very, very long time. what was your point about why the fed is less concerned with this? because i think that the ownership is much less politically sympathetic group. in other words, the owners of the general growth, the mall company, they are sophisticated, sophisticated investors who should have known what they were doing. that s quite different than some guy who got rope-a-doped into buying a hole. you take commercial banks and all the local people can t get loans, seems like it eventually gets down to mainstream anyway. it actually does get down to main street. following along, making your points for you. thank you, because i didn t want to work here today. yes, it s because the average community lives is aided by these banks and these banks are happily invested. you would urge the fed to get more put an eye on this ball? i think they are aware of it. i just think they are hoping that the severe slope in the yield curve will help some of these banks if they kick the can down the road, will help some of these banks get through by recapitalizing their balance sheet. we re getting out now, not getting in. frame our position. the fed, we re trying to put back on make of the involvement. they have made an effort now with the talf. the talf debate take hold too well in the real estate space as of yet. that s one thing they are trying to do to lubricate the system there. in the end it s going to be about jobs, you know. if we have a vigorous recovery in jobs, the real estate business will follow. it will follow. people might argue commercial real estate lags, companies are lean and mean, hyper sensitive to any uptick in demand. right. stocks, s&p cracked 1050, stocks are up, discounting thaek. if that s an indication that the job market is going to improve dramatically, then real estate will improve at some point in the continuum. if the robustness of the stock market is directly related to the robustness of profits, which is directly related to the fact corporations got lean and efficient in a hurry by getting rid of people, then real estate will continue to suffer. it s derivative of the job. when warren elizabeth warren was on the other day and grilling geithner, secretary geithner, one of the points she made were bad assets are still all over the place. we haven t got rid of them, don t know where they are. stress test gave us some idea about them. you re trying to get involved. have you done anything yet? has money changed hands? no. money didn t change hands. we did bid on a package of fdic assets about two weeks ago. we expect to hear what the results of that auction were. it could very well be there was vigorous bidding thain auction and that vigorous building will establish values for some of the toxic was this one of the first? this is one of the first ones. it was you and wilbur. yes and that could be the beginning of something positive. that could certainly be the beginning of something positive. when we get an indication of value, that could be very helpful to understanding what some of these assets are worth of the assets they put up for auction were still residential mortgages, home loans inside one of the failed institutions. they were not commercial packages of loans. so that s yet that tale is yet to be told. it will give some indication of let s say value. the package was a billion three. the government was permitting the fdic leverage and the partnership was part of it. i believe i don t have the facts completely but i believe they had a significant number of bidders. would that be a front page wall street journal in the next couple of weeks, what happened with this auction? i think it should be. and it might be. it might be. if the auction goes well, it s an indication of let s say positive news for the economy, or at least positive news for the balance sheets of the banks that hold some of this. you decide what to bid. you have a bunch of these little guys exactly. how did you know? i know you re not sitting there. you re judging beauty contests. you had a bunch no. i knocked on every door. how are you doing, fellas? the answer, there was something like 9,000 loans. they actually did go and examine every file. you re kidding. yes. those people had work to do on the weekend. the army and hudsucker project. a pile, they look through it. in the residential mortgage space, it s easier to make assumptions about a class of people than it is in the commercial mortgage space. commercial mortgage space every property is unique. really, you need your feet on the ground to do that. that s great information. that really is, don t you think? yeah. it is. i wish you d call us before this article appears. are you going to be mad if you don t win? no. sometimes the best thing is the one you don t i can t see you and wilbur ross paying more than you have to, knowing you guys. i don t think anybody wants to pay more than they have to. it s still about profit. walked in hear squeaking. matt end of the day, you know, it s a great opportunity. the actual interest, vigorous interest in this package shoes the yield now. when we come back this morning one year ago today uncle sam was saving aig. the problems were only just beginning. congressman elijah cummings has been a vocal critics of the insurer in the months since then. becky on the left coast covering the most powerful women s summit. now they are on the court getting tips from billy jean king on how to improve their backhand. heading inside to larry summers on tips to improve the financial system. we ll have more on that when squawk box comes right back. your you re watching squawk box on cnbc, first in business worldwide. : 1-800-345-2550 tdd#: 1-800-345-2550 you know, see what other traders are up to. tdd#: 1-800-345-2550 when everything feels right though, tdd#: 1-800-345-2550 that s when i get serious. tdd#: 1-800-345-2550 and the minute i get into something, tdd#: 1-800-345-2550 i already know when i want to get out. tdd#: 1-800-345-2550 of course, every now and then i ll talk with somebody tdd#: 1-800-345-2550 who knows what i m trying to do. tdd#: 1-800-345-2550 (announcer) switch to schwab today. tdd#: 1-800-345-2550 you ll get the tools, the technology tdd#: 1-800-345-2550 and the support to trade your way. tdd#: 1-800-345-2550 go to schwab.com/trader tdd#: 1-800-345-2550 or call 1-800-540-7304 tdd#: 1-800-345-2550 right now. tdd#: 1-800-345-2550 but opportunities can vanish like that. tdd#: 1-800-345-2550 .so most days, i m right there tdd#: 1-800-345-2550 when the market opens. it has been one year since the government stepped in to save a giant insurer, international group. the government taking an 80% stake in the insurer. elijah cummings has been a vocal critic on capitol hill. senior member of the oversight government reform committee. we have rebels and icon on squawk. i m going to put you in there. you re a frequent guest and we appreciate it coming on. at least the stock has shown some signs of life. we have to look at that as some sort of a positive, since we own it. i think that s a good thing. we saw where aig was a year ago. there s no question because of 180 billion worth of government funds aig not only was able to stay alive but now seemed to be moving on a course of profitability. that s a good thing. you re glad liddy is gone. i thought mr. liddy was not always forthright with me or members of the congress. that concerned me. the new president, i m impressed with him. he did concern me a bit when he was talking about cuomo, andrew cuomo a few weeks ago and said he was not deserving about being in the office. i think he ought to be careful about comments about public officials and even made comments about the congress. the congress are the very folks allowing him to have his job. there is a certain arrogance still there. but the jury is still out on the new administration will i think we are moving in a right direction. he s got employees probably demoralized, maybe saying a few things like that could increase moral. some companies you don t want necessarily a swagger but you don t want to operate from a defensive position. there is a lot of selling involved with insurance. i agree. you don t slap the very people that allow you to be in existence in the process. that s true. in the journal there s a troubling piece, a dennis berman article about the crown jewel, airplane leasing business of aig. it s very troubling, something is going to have to be done. did you get a chance to look at this and comment on what do you think is the right action here? i did. i saw it. i think that aig has just got to figure this one out themselves. i think we have done the $180 billion, that s a lot of money. i think the public is getting a little bit tired of bailouts. i think they are going to have to work it out. that s why we have a new president of a corporation. the president said yesterday one of the things we re trying to do is allow these companies to move forward so we don t have to micromanage them. i think they will figure it out. mr. he comes up with something and involves breaking off a piece of this, will congress get involved or will you let him have a freehand on what needs to be done? i think we ll have to cross that bridge when we get to it. i have confidence, in spite of what i said a moment ago, about his comments about congress and cuomo, i have a lot of confidence in this new head of aig. i think it becomes to the congress with a reasonable proposal, i think the congress will take a look at it. i think what we want is for aig to work it out themselves. we just saw folks who comica ei come out, talk about bonuses and pay given to folks on wall street. very interesting. congressman, one of the problems i guess one of the many problems, there hasn t been consistency in leadership of the company. now that ben is in there, sounds like congress is going to look past the fact he is arguably stubborn, a bit of a maverick, swears a lot, not always polite. are you going to look past that and give him the benefit of the doubt. i think congress has given him the benefit of the doubt since he was named. one of the first thins i was asked about was why was this guy going on vacation before he even started? basically what i said then was that, you know, if a man who is coming into a new position, he s earned a good reputation and we re going to give him the ben fet of the doubt. i think we ll continue to do that. at the same time, he needs to bring in his pr firms. he has three, last time i counted. one of the things you don t bite off the hand and slap the face of the very people allowing you to be where you are. congressman, thank you. when we come back we ll talk to greenberg, unanswered questions after the fact in the next half hour of squawk box. coming up also, names on the move this morning. you see that, they may have to move that really friendly he loves people. he s got a job any time from the orchestra which we haven t seen in a long time. we re first in business worldwide. could someone toss me an eleven sixteenths wrench over here? here you go. eleven sixteenths. (announcer) from designing some of the world s cleanest and most fuel-efficient jet engines. to building more wind turbines than anyone in the country. the people of ge are working together. creating innovation today for america s tomorrow. thanks! no problem! welcome back. home depot is going to start selling martha stewart branded products. among items you ll find on the shelves, patio furniture. also, a new type of closet organization system, which i immediately thought of carl in this case. because i haven t come out of the closet, what? no, because you re a clothes horse. and the 50 most beautiful people in people magazine. ten years ago. you re still beautiful. thank you. still beautiful. martha stewart is going to join us live tomorrow in studio at 7:15. let s take a look at some stocks to watch this morning. no orchestra. you thought i was leading up to. etna upgraded to buy ftn equity increasing prices more than other carriers following conversations with brokers, what ftn found out. cardinal health upgraded five. 31, had been 27. looks like almost there. yahoo! upgraded to outperform, market perform bernstein. target increased from 21 from 18. evaluation and current prices too low, implies operating business is worth $4.50 dollars. bernstein believes the market is not giving yahoo! sufficient credit forty 40% stake in alli baba. you asked for that. i did. i think she said both of them are something they aren t necessarily going to get rid of. we have to go. ebay upgraded. two times. if you want the animal orchestra, it says, e-mail us at squawk at squawk@cnbc.com, your mailbox will buzz throw in your jab at the man, trying to hold us down and not play it. when we come back hank greenberg will talk to us about aig a year after the federal bailout and a lot more to come in a moment. fithe same tools the pros use, so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you re busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online. trade like a pro. trade with fidelity. i ve been growing algae for 35 years. most people try to get rid of algae, and we re trying to grow it. the algae are very beautiful. they come in blue or red, golden, green. algae could be converted into biofuels. that we could someday run our cars on. in using algae to form biofuels, we re not competing with the food supply. and they absorb co2, so they help solve the greenhouse problem, as well. we re making a big commitment to finding out. just how much algae can help to meet. the fuel demands of the world. . aig one on the brink of collapse but the fed came to a rescue. hang greenberg has unanswered questions. he s with us live. becky checking in from the west coast. she s at fortune s most powerful women s conference. she s going to talk to influential banking analyst. when you have big financials not lending aggressively there s opportunities in the market all over the place. all that and breaking economic news. squawk box begins right now. welcome back to squawk box on cnbc, first in business worldwide. i m joe kernen with carl quintanilla. becky joining us from the most powerful women conference in carlsbad, california. i hope no one wants to comment on you, becky, because the e-mail system is locked up with people who want the on malorchestra. oh, no. it s locked up. don t even try to send anything now. we re overloaded. we overloaded the server. because they miss the animal orchestra. two up flippers for the animal orchestra. becky, are you at la costa, a? no. we are at the four seasons. four seasons. i see. in carlsbad. four seasons aviara. i know where that is. you know all the resorts. do i. you see the fireplace behind me, joe. yes. welcome, i m feeling a little lonely here. you guys didn t travel with me. i m upset about that. i have seats here. you could have joined us. just around the corner, morning joe is there. joe traveled with mika. thanks for leaving me hanging. the face is familiar but i can t place the name. i ve heard of mika. i know charles scarborough. guest host today, real estate titan, we have richard lefrak. he misses you. i miss him, too. if i didn t know you weren t going to be here, i wouldn t show myself. i ve been watching you all morning. it s hard to do but one retailer that i feel comfortable talking about without you here and you know what that would be, best buy. i do. nat screens. it s not articles of clothing and things like linens n things. you have? $0.37, looking at $0.42. light on earnings. revenue $11 billion raising their own view for the year, looking for $2.70 to $3, the street at $2.87. so the guidance on the street. q2 comp store sales down 3.9%. let s get a look at what might be behind those numbers. doesn t make sense, though, carl. if they are raising must be a nongaap number. i don t think 37 they are raising guidance for the year but the stock is called lower at this point. yes. they are giving everything else in non-gaap. for the year, what are they saying? $2.70 to $3 for the fiscal year non-gaap. they are raising guidance but missed by a nickel. let s see. jpmorgan joining us on the squawk line. looking at the quarter, the earnings definitely light, up $0.42, most people thinking $0.45, $0.47. really gross margin, comp 3.9. that is bullish, a positive. it will be interesting to see what they say about august trends. seems like consumer did pick up in august. definitely not a non-gaap number anywhere we re missing. it s 37 even though revenue is quite a bit above. did you say comp store sales above also? comp store sales above. raising. the margins were that bad to where they could have a $0.05 miss on the bottom. the whisper number was 45 or 46. they are missing by $0.09. you were at 44. we were at 44, gross profit at 45.1, they came in at 44.4. their guidance with $2.70 to $3. the street is at $2.86. they are looping in the midpoint already. what causes those margins to be so low? that s the nature of the beast. i m trying to look through now, it s inflationary, price competitive sector. you re not attaching laptops or loss leader, they are not making money when they sell you a laptop unless they sell you a service, warranty or accessory. you say they are chasing inventory now. how many retailers can we say that about? actually a lot now are starting to chase inventory. i think it s across the spectrum from apparel to aspects of the home to aspects of the office super stores, now consumer electronics. the companies were so bearish in their outlook. you ve seen quite a recovery in august in terms of how consumer spending trends picked up. now they look into the back half of the year with back to school behind them. look at holiday and say sales are going to be better than originally thought. december price target is 43. yeah. goes to the mid-40s, you might turn more. my december price start 43 we generally roll them over into the next year. i do think you think about this space and the innovation and slowing and commoditization everything from tv to laptop to digital camera, it is hard to think in 2010 how best buy doesn t lose share to the likes of walmart and amazon. even as they picked up from circuit city. chris, thanks for that, the quick analysis. it is down at the open at least. almost 4%. go to becky in carlsbad. becky. all right, guys. we are in carlsbad at the fortune s most powerful women s conference. as we were talking before, this is a conference very focused on what s been happening in the economy. last night the president s economic adviser, top economic adviser, larry summers spoke to the group about the critical days last september. he addressed the group. guys, after making a very quick joke about the comments he made that got him in trouble in harvard about women in science, which by the way drew a laugh from an all female crowd he jumped into what was happening in the economy. he said he would not go back and send guess the decisions made one year ago. he said without having been there, it s not fair to do that. he said when he heard the news lehman was going to go under, he was shocked. on that sunday afternoon when i learned that the decision had been made that lehman would go bankrupt, that i was very surprised and very, very nervous. you know, what could have been done, what the other options were, i m not in a position to second-guess. i think, one, we really were in uncharted territory in the economic area we got to the brink of kind of armageddon. fortunately we ve been able to pull back very substantially from that. now, how many public action should be taken in the future is still up for debate. but summers said at this point we have definitely turned a corner when it comes to the economy. i don t think anybody is ever going to forget this episode. we re certainly seeing things nobody thought we would ever see. but i think we ve turned a very important corner from rescue to recovery. all right. summers also says that because we were so aggressive in getting involved in some recovery efforts, t.a.r.p., government jumping in and bailing out make of these companies, he says we are going to be getting to the exit strategy sooner than we would otherwise. he wouldn t say when that comes, but you can see the signs all around you, talk about how tarp money is paid back, how at this point the administration doesn t think they will have to go back and ask for a second t.a.r.p. package from congress. he pointed to all these things as signs we are coming to some sort of a turn in the economy. guys, when we come back, a little later we ll be hearing from meredith when, getting her thoughts on what happened a year ago, where we stand now, what she sees happening in the financial industry. joe and carl, i ll send it back over to you. thanks, beck. i guess we re tight on time. aig one year after the monday that shifted the world, former aig hang greenberg still has a lot of questions a year after the government bailed out aig. he ll join us next on squawk box. there are engines. and then there s the twin-turbocharging, 365-horsepower-generating, ecoboost engine in the all-new ford taurus sho that has the thirst of a v6 with the thrust of a v8. we speak car. we speak innovation. introducing the all-new taurus sho from ford. drive one. we saw where aig was a year ago, and there s no question that because of $180 billion of government funds aig was not only able to stay alive but now seems to be moving on a course of profitability. and so that s a good thing. one year ago today, uncle sam bailed out insurance giant aig. now here with more, hank greenberg, former chairman and ceo of aig. chairman and ceo of vb star and company. good morning, mr. greenberg. thanks for coming in. did you see the interview with congressman cummings earlier? i did. your relationship with the congressman and efforts of congress, positive or is it a net positive when those guys get involved or not? i mean, they have to be involved? they have to be involved. i testified before congress. yes. you tell them what you think is right. your thoughts on the new ceo. you heard mr. cummings saying we re giving him the benefit of the doubt. he s a good man. i ve known him for quite a number of years. he s a competent executive. are you back in the fold of aig? that s what the newspaper said, you re back maybe advising the company on certain things, more than liddy, right? it s a fair statement. i think where you left it, if bob wants advice, i ll be glad to talk to him. he needs a lesson in pr. you think he needs one, congress, everybody maybe needs one? yeah. i think that s not the relevant issue with pr. what is the relevant issue, we ll get to the other situation in a second. what else? joe, i think the relevant issue is put aside the past for a moment as to how they got where they are. what do you do going forward? as long as the government owns 80% of the stock, it s a nationalized company and nobody is going to invest really in a nationalized company. so you have to really look at the plan they have to liquidate the company. what they did sell sold for below book value. who got that? foreign companies. that was not a great strategy. so you have to look at what is a better strategy. that is to rebuild aig. i ve been saying that from the beginning. in order to do that, you have to restructure the government debt ant 80% ownership. we could then rebuild the company. i m not suggesting you don t pay back the taxpayer but you ve got to do it in a way that will create more value for everybody, including the government. earlier richard made the point off camera that a lot of stuff was sold at the lows. at the bottom. at the behest of who? i assume congress. and the administration. right. a lot of those positions have improved in the last six month dramatically and there were probably billions left on the table, hundred billions. as a matter of fact, the information i have, so much owed, they haven t paid a loss on the super senior aaa. not a loss. the issue came out of collateral call. all that is in the past. deal with the past, somebody who is right and wrong. why would you think the future, whomever you blame for the initial problem, why would it change this time around? because what they did didn t work. it failed. if you want to pay the taxpayer back, you ve got to have a plan that has a reasonable chance of doing that. but they did fail. there s no question about that. do you expect to sway them to do it differently? that s not my job. that s benmosche s job. you think he s competent? i think when he has his hands around it, he can make a good case. if he wants any support, i ll be glad to do it. is there any doubt in your mind that the worst losses are behind them? you say the worst losses in what area, the insurance area or what area? is the economy going to continue to improve? if the economy continues to improve, there should be some improvement. no guarantee of that. there s no guarantee of that. also there is a pr issue with respect to the company. you know, it s 80% owned, a nationalized company. who wants to invest and who want to do business with it. look, it s got a great franchise worldwide. there s no company like that in the world. so it can be resurrected. i believe that. i believed that from the very beginning. you know, i was a customer of aig, we ve been a customer of aig for decades. many many years. decades. there was no question in the property and casualty space they were the best property and casualty insurer in the market, without there was no number two. that s exactly right. hank, did you build the ilsc business as well? yes. in good times, that s an incredible we bought it very small and built it into the largest airline leasing company in the world. you can t let them go off and do everything they want and buy every airplane manufactured. you ve got to control it. so at this point you look at the state of the industry, boeing had a delay on a new jet, was almost glad because so many carriers aren t ready to take delivery. it s not a great time for that company. it s going to need some work of we just heard congressman cummings say you re on your own with that hope fully. congress probably going to step up and do anything or the administration. how do you say how do you keep it from losing more value? well, there are many countries around the world, rich ones, who have an interest. i think you can put something together. you ve got to do it very thought fully and carefully. you don t want to lose all the appreciation value in selling off things. so it has to be structured properly. we had a plan years ago, when it reached a certain size, what will you do. is there any way you could get the government at this point to maybe help with the refinancing some of the debt? do you think there s no case for that at this point? there s no way to do that in congress or the administration? no. i believe it can be done. it has to be done. not by the government. the government has to restructure. they will have no value there. there is no equity value in the company. just because it would be better, doesn t mean they will do it. congress thinks we ll go somewhere else. you want the taxpayer paid back. right. the only way to do that is rebuild the company, restructure the company. i m not saying forego the debt, have you to restructure it. you talk about forgetting the past, does that mean you re willing to forego the payment to counter-parties. i m not suggesting that. someone else will do that. a good investigative reporter will do that. the facts will come out at some period in time. it has to. let s save the dealing and go forward. why spend time pointing fingers. let that be done by somebody else. i m more interested in seeing the company go forward. got to run. thanks for coming in. good to see you. hank greenberg. when we come back, breaking economic news, consumer price index when we come back. it doesn t cover everything. and what it doesn t cover can cost you some money. that s why you should consider. an aarp medicare supplement insurance plan. insured by united healthcare insurance company. it can help cover some of what medicare doesn t. so you could save up to thousands of dollars. in out-of-pocket expenses. call now for this free information kit. and medicare guide. if you re turning 65 or you re already on medicare, you should know about this card; it s the only one of its kind. that carries the aarp name see if it s right for you. you choose your doctor. you choose your hospital. there are no networks and no referrals needed. help protect yourself from some of what medicare doesn t cover. save up to thousands of dollars. on potential out-of-pocket expenses. with an aarp medicare supplement insurance plan. insured by united healthcare insurance company. call now for your free information kit. and medicare guide and find out. how you could start saving. little edgy. some stable action mostly asia and europe. coming up retail sales coming out, producer prices, bernanke talking with brooking institution. we think he ll have q&a. a lot going on. best buy numbers. we ll get reaction to the numbers coming up when we continue in a moment. squawk box coming right back. your you re watching squawk box on cnbc, first in business worldwide. welcome back to squawk on cnbc, first in business worldwide. about an hour from the opening bell on wall street. talking about the year anniversary of lehman and b of a buying merrill, the government trying to rescue aig. but news continues to flow out. that s fine. stocks to watch, down a little bit, missed epps. they missed earnings per share, beat on revenues. comp store sales a little better. margins were weak. that s what every bhoed is pointing to. they would have to be weak. if whisper numbers up 44 and 45, estimate was 41, 42 and you owned 37 on better than expected revenues, revenues above and you still missed by $0.08 or $0.09, you know how it was. not all, talking about laptops. where you imagine prices more cutthroat. they got a lot of market share as circuit city went away. now they are fighting with the walmart store. you put a laptop on a table. it s not actually on your lap, is it? depends where you re sitting. do you have a laptop. do i. do you some of i have the net book. that s the new it s too small to put on your lap. we have numbers coming out later on in a couple of seconds. retail sales for august, give awe sense of how things are going, back to school, what holiday shopping may mean. producer price index looking at prices in the company. rick santelli, cme in chicago, rick in the studio. let s get the fumbles. there s a litany of numbers producing prices month over month, 1.7. that s more than we were thinking about. that s a little more. no revisions up one-tenth no revisions to minus one-tenth on core and minus nine-tenths on headlines. 2.7, good numbers, autos up 1.1. no revisions last month. if you take out autos, up 1.6. actually a third number, empire manufacture, it improved 12.08 to 18.88. 8s are wild. generically all the numbers were higher than expected. on the inflation front i m not sure people want to see higher inflation numbers but i think they feel higher inflation numbers. what s the aftermath? interest rates moving up on this data. not huge but several basis points. guess what, equities moving up. we ve moved from up three to up 13 in the do you futures. back to you. i think we re almost above fair value at this point, are we not? even yesterday we were low for most of the day and closed up again, rick. amazing. it is amazing. once again, you know, i think gravity will enter the picture at some point. many people have alluded to the spring and summer of major years like 87, how equity markets can move along. i believe the nasdaq doubled in price seven months prior. just interesting things to look at. every time we say there s nothing backing it up, we get a fedex or number like this. every once in a while we do get something to justify some of the good feelings we have, rick. absolutely. when you sprinkle the data around, there s always going to be some of it, of course, that goes in better lock step. of course there s other issues to consider that aren t released every month like the value of toxic waste within the banking system a year later. let s get some reaction from steve, popeye. thanksish joe. appreciate it. all day yesterday you had nothing to say about it. it s improving. that s why? no, that s not why. if it was getting worse, i wouldn t have yes, you would have. wouldn t he have? weigh in on how nice a guy is. one day there will be an affliction of his. i promise to go to town. you can t back away. he s had afflictions and i haven t said anything, of the kind we don t talk about on television. i didn t call you left eye liesman, waterfalls. i had work to do, geithner, lots of things to do. what a time to happen. yeah, i know. it probably was related, the whole stress thing, dealing with guys like can i just talk about the clunky retail sales report. that s the good thing. trying to figure out what i was trying to do before we talked about the core. gasoline sales up a little bit. let me give you numbers there. you had all the cash for clunkers thing which came up as well. i saw a 10 number when it came to retail sales. 10.6 on automobiles. so that was a big part about it. so what we have, we had before this report came out, economists thinking two things. woin is payback in september. not only from the elimination for cash for clunkers, we also had the back to school tax holiday stuff. payback in september, that said, what we re on track for is a positive third quarter when it comes to consumer spending. again, the notion out there now is payback in the fourth quarter. i am not concerned about ppi. i m concerned about inflation as anybody should be, but when i look up the chain, let me get you some numbers on that. when i look at what s called intermediate and raw goods, unprocessed goods, core goods less food and energy, crude good, minus 30%. intermediate minus 8. consumer and wholesale level is plus 2.3. what that tells us, there is still some deflationary forces in the pipeline. inflation may be a story for a year out. these numbers suggest they are not within the current year. if you are the staff economist at procter & gamble and you ve been on the fence about recommending a big new purchase of inventory, do these numbers make you want to sign? they would suggest that now is the time decent time to be gathering intermediate and crude goods for inventory. p & g may be a bad example only because they are a staple. the question is what do you do now as a retailer for christmas. how do you forecast what the demand will be, how much on the shelf? this is a really interesting question, a key thing for confidence. watch imports. a lot of stuff comes from china. a lot of stuff has to be done six weeks in advance to get a shift here. aren t you going to make manufacturers, inventories at that point? the manufacturers, the exporters finance it. nobody wants to be a hot potato. that s a really good point with i guess you call it a clawback. you don t sell it, you can put it back. consignment. consignment is the word they use. exactly. just a nation of pawn shops right now. exactly. we don t have time to talk about anomalies in the market. all right. thanks, rick. thank you, joe. you re welcome. appreciate that. thanks, joe. becky, what have you got coming up? i just want to say, steve s eye looks much better, too. there you go. coming up, guys, citigroup wants to get out from under the government s thumb. we ll talk more about that. will that change the hearts of investors who follow this stock? joining us, influential financial analyst meredith wh whitney, joining us after the break. we ll be right back. your you re watching squawk box on cnbc, first in business worldwide. tdd#: 1-800-345-2550 bout trading. tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn t matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don t know, fish and chips. tdd#: 1-800-345-2550 i ll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i m onto something i ll check it out, tdd#: 1-800-345-2550 you know, see what other traders are up to. tdd#: 1-800-345-2550 when everything feels right though, tdd#: 1-800-345-2550 that s when i get serious. tdd#: 1-800-345-2550 and the minute i get into something, tdd#: 1-800-345-2550 i already know when i want to get out. tdd#: 1-800-345-2550 of course, every now and then i ll talk with somebody tdd#: 1-800-345-2550 who knows what i m trying to do. tdd#: 1-800-345-2550 (announcer) switch to schwab today. tdd#: 1-800-345-2550 you ll get the tools, the technology tdd#: 1-800-345-2550 and the support to trade your way. tdd#: 1-800-345-2550 go to schwab.com/trader tdd#: 1-800-345-2550 or call 1-800-540-7304 tdd#: 1-800-345-2550 right now. tdd#: 1-800-345-2550 but opportunities can vanish like that. tdd#: 1-800-345-2550 .so most days, i m right there tdd#: 1-800-345-2550 when the market opens. welcome back, everybody. citigroup plants to unlo plan unload a stake in the company. there s been no negotiations between two sides, discussions could happen soon. the company is reportedly considering a secondary issue $5,000 along with the government selling a portion of its stake. new york s attorney general andrew cuomo could bring charges against bank of america s ceo and cfo. cuomo probing the deal. we re at the world s most powerful women s conference. our next guest is a complete mover and shaker when it comes to the financial list, also on the list of most influential women. founder and ceo of meredith whitney advisory group. meredith, good to see you this morning here. i don t feel like i m moving and shaking that well. you re doing it. you re saying things, talked about where the market has come. one of the things, a year ago, a year after lehman fell apart. we re trying to figure where we stand now. when we talked last week you were do you remember, kicking the can down the road for the financials. yeah. the banks now are doing everything they can to keep loans on the books and not write them down. as a friend of mine calls it, they are extending and pretending with loans. and richard, good to see you. it s just a matter of time. loan modifications work, great. commercial real estate modified like crazy and has been for a couple of years. it s hard to see that working so well. hard to see a lot of the real estate, residential real estate programs working so well. the bank core earnings are going to, because we re closer to the date when people thought, okay, a core number for 2011 is x or core number for 2010 is x. clearly a core number for 2010 is not x, it s x minus a lot. the banks are, you know, earning money by lowering borrowing low and investing in front of the government. the government buys securities and they are able to take that ride and make money. larry summers last night says as he sees it, we have definitely turned a corny. how do you match up his analysis with your analysis of what s happening in financials. i m sure i would preface by saying on a relative basis we ve turned the corner and not going over an abyss. one thing larry summers spoke about and every time he speaks, what s going on on main street. how is the average american affected. are they more secure than they were in their jobs last september or october but there s not a lot of job creation going on on main street. liquidity for consumer and small business is still contracting. it s very difficult to get the engine moving without a lot of government support within that. so you slowly wean government support. that s going to be the test everyone is watching starting in october. i guess the big question, is this a jobless recovery. larry summers answered that, probably not. do you look at this as a potential jobless recovery. where do jobs come from in once companies become more productive, do they go back and say i want to become less productive? you move on. have you to have a revolutionary application to hire people. and so is manufacturing shortly if the country becomes protectionist we ll build up manufacturing capabilities. that is a good thing? no. a lot of the areas we think will bring us back from the abyss, which is technology, don t require a lot of manpower. it s difficult to see. one thing that is abundantly clear from the world i look at is there s not a lot of free capital for small business innovation. small business period. that s half the workforce. you know richard lefrak is a guest host today. i do. big fan. richard has a question for you too. hey, meredith, there s a school of authority the affordability index of housing has improved so much that at the bottom level the house prices have really stabilized. i know that s not been your view. what do you think about the idea about the fact housing has become much more affordable especially below a level. i think at the if you look at the per unit basis, low level loans have sold. the loans coming out of foreclosure, that s been the real movement in the home area. the high dollar units have not sold. look, people are still shopping at walmart. people will go after value. aggregate basis, i think that home ownership is still less attractive to the average consumer. if it s a heavily discounted basis and you re getting 50, 60, 70% off the evaluation, that s compelling. has to be a compelling argument for the investor. meredith, let s talk about the news of the day. we mentioned citigroup interested in unloading the government stake. is that a good sign? very careful to say he couldn t describe the timetable. sure, everyone would be interested in getting a monkey off your back and get out of the government, i m sure the government wants the city off its dole, it s a question of how they do it. sell assets? i ve been arguing for a long time you have to have a yard sale of sorts with the assets you can sell, not necessarily the ones you want to sell. i think in this, had to sell assets for two years now. those assets had to evolve in terms of pricing. so, you know, we ll see what they can sell. international assets have not been as compelling on the market as they could. x, a big asset, but that s declined. not selling at a big gains. a lot of big things, come up with dough, raise capital with investors. stock has performed. core problem with citi, the investment they need to get to the next level is cumbersome. also we mentioned bank of america cuomo is circling, looking at things. the judge threw out that deal with the s.e.c., called it contrivance designed to provide the s.e.c. with the facade of government. what does this add up to? judge is not happy with bank of america. he s been consistent with his comments on bank of america. it s just there s still the problem child of the bank. they are still getting the most heat in terms of press relation. can t leave goldman out, they get a lot of heat in terms of press relation. yeah, just to me, so much has transpired inside of a year. i just want to move on. i think most people are tired of it. $39 million is not a lot of money in the context of the bank of america. we ll see what happens. i m not a legal expert but the guy has an axe to grind with bank of america. thanks for getting up early. we love to have you on squawk box and we ll see you soon. send it back to you, joe, carl and richard, back to you. thanks. check in in a little bit. should mention although retail sales are strong, have you seen kroger? revenues $1.90, $2. street looking for $2.05. blaming changes in consumer behavior and some other economic factors. private label? when we come back, the day that shook the world. one year later lehman on the brink, b of a buying merrill, aig looking for the life line. art cashin was on the floor for all of it and has the traders edge when we come back. i ve been growing algae for 35 years. most people try to get rid of algae, and we re trying to grow it. the algae are very beautiful. they come in blue or red, golden, green. algae could be converted into biofuels. that we could someday run our cars on. in using algae to form biofuels, we re not competing with the food supply. and they absorb co2, so they help solve the greenhouse problem, as well. we re making a big commitment to finding out. just how much algae can help to meet. the fuel demands of the world. time for the trader s edge, one year later. art cashin is director of floor operations at ubs financial services. i have in my hand ss a copy of e journal from a year ago. it s incredible to read the headheadline. crisis on wall street is the top. bank of america buying merrill is the second story down below. oil was $101. the dow was just above 11 thousand thouchlt seems like it was yesterday, doesn t it? absolutely. and some of the worst part of the crisis came after that. the commercial paper market freezing up, people preparing to take trillions of dollars out of money market funds, the fed had to rush in and say wait, wait, wait, keep your money in there, we ll guarantee them, at the same time, the fed forgetting the fdic was only guaranteeing $150,000 out of the banks so we saw money run out of the bank, just an incredible period. so many times we talk, it s short-term dynamic, but are you of the mind we have fixed or tried to fix the problem by compounding it with more problems or that net/net we are ahead of where we were a year ago? we re ahead of where we were, let s say, going into march. because things continued to worsen. we had a change in administration, people didn t know if it was going to be a change in policy. i think that we remained, unfortunately rather vulnerable here. they filled the patient with so much medication to stop the hemorrhaging, the hemorrhaging looked like it stopped, but now we ve got to kind of unwind all that medication the patient is on without doing any more damage. that s going to be tough. that could come in an explosive way? or it could come as roubini told us yesterday, a death of thousand cuts. do you have any sense of which it will be? i always worry about a geopolitical surprise? we can get one of those. we can get another round of bank failures in eastern europe or somewhere else. if you look, the reports out today are that bank credit continues to drop at a precipitous rate, maybe as bad as it did during the early part of the recession. so we re not out of the woods by any means. every morning, bernanke gets up and turns on the tv and starts to read his newspapers an wonder what surprise is coming next. things will turn the futures around are retail sales. fedex last week, all these things keep happening that seem to be building support for where the market has gone. if you re panning for gold, you can always find a nugget somewhere, joe. i will tell you this, i ve been doing this nearly 50 years, okay? i find there are times to be cautious, the market can move ahead. last year, you used to tease me. he wanted me to buy into it you don t have to buy it into it or cap lidge late but since july we re up a lot. no question about it. i certainly missed that but as rick pointed out, nasdaq nearly doubled between the irrationasi exsewage brans and when the markets topped out. you look at 14,000, that was crazy. 6,0 6,000, that was crazy. it s hard to look at the current fundamentals and try to determine where the market should be. well, you can try to do some fair value pricing. they can go further. but for now, they re overvalued and overbought. art, we ll talk to you tomorrow or the day after or hopefully hopefully. art cashin. next, mrth martha stewart going home. squawk box is coming right back. you know why i sell tools? tools are uncomplicated? nothing complicated about a pair of 10 inch hose clamp pliers. you know what s complicated? shipping. . for a low flat rate. that s not complicated. come on. how about.a handshake. alright. priority mail flat rate boxes only from the postal service. a simpler way to ship. there are car radios. and then there is the voice-recognizing, text-out-loud-reading, turn-by-turn-direction-giving sync system. in the all-new ford taurus. sfx: ((sync beep)) please say a command. read message. highway 8 closed. update route. turn right on silver road. we speak car. we speak innovation. introducing the all-new taurus from ford. drive one. welcome back to morning joe. i m joe scarborough. i m very exstitd have becky quick with me. it s great to have you here. it s great to be here. can i just say, the best part of this is you telling don t you do this to me. that i m the real morning joe. die not say that, joe kernen. i wanted to bring him over. joe travels with mika. so again, leaving me hanging here. so that s what you get for that. that looks like a cardboard cutout. that guy is so tall and handsome it s really me. it s really him. i can t believe that. so what s going on,