Transcripts For CNBC Squawk Box 20120217

get a deal in greece. >> what a beautiful segue. >> is citigroup gone -- they take them out. so it's like no, no, no. aig? i'm not familiar with that name. cisco. >> cisco is in it. that's why the dow is doing better. the s&p, i think they stay in it. >> 500 stocks. >> the question is where apple should be. don't sell it. i watched all our people say don't sell it. >> would you put apple in the dow? >> no way, not now. >> i understand that but -- >> tank the dow. >> they may announce it today. the guy who decides to do these things, he does. he knows. >> there's a board of -- >> he's the guy -- he's the poor front man who has to justify -- so you're going to talk about -- what is it you're talking about? a catalyst for the rise? >> i was going to help explain why the stock market has been rising in the past 24 hours and that has been a function according to the great scriptwriters at cnbc of optimism about a deal in greece. >> you know what, so it has something to do with what's happening in europe. >> that's why i'm saying such a great segway. >> it almost sounds like you're being sarcastic and that's not your thing. sarcasm is dote main of losers. don't go there. don't go there. >> little miss sunshine. >> what do i do about the show? >> we're winners on this show? >> optimism about greece, a spokesman for the greek government saying that athens expects to get eu approval by monday to begin a debt swap with private holders. european equities trading higher on 0, hopes greece may avoid a messy default. we talked about this before, many times before. >> is this going to be a head fake or not? are we really going to see something over the weekend before we get to monday and what happens to stocks if we don't see something? >> our good friend michelle caruso cabrera will be joining us to hopefully answer that question and give us a look at what we need to be watching out of greece. >> i feel germany's pain in this. i do. it almost looks like you're throwing good money at bad again. the more you look at the deficit, how it grows and the debt service they're not going to -- this will allow them to pay the bills that come due but no one really thinks that they're -- >> the real problem will be -- they want more austerity. they want them to be coming in and feeling a lot of pain. if you look at what happened in the fourth quarter it was down 7%. that's a loss of more than a quarter of their economy every year they continue at this pace. >> i was thinking the other day -- because howard dean, that conversation i had with him got played up everywhere when he said this is what happens when you try to do austerity too quickly. and in greece it's not their money that's keeping them afloat and, to me, it's amazing that people could still say, i want my money from the government when the government has no money and they have to get all their money from other countries. of course then there is china with us -- giving us money. at least we can print money. we can devalue the dollar, whatever we have to do. they don't have that choice. so they don't have any money. how do people expect to get pensi pensions, all these checks, when there is no money unless the germans give it to them? the germans aren't babysitters. >> what would happen if they went back, went back to the drachma and started printing? could they even pay off the old debts that they have because those are in euros, right? >> no. >> you say forget it, we're defaulting. interest now on we're using the drachma. >> that's why it would be messy. >> they would have to default. people default -- russia defaulted. they come back. that's the way, but they can't because of the eu. >> it's a five to ten year project. >> but they can't. they're unable to. >> in this case. >> do you have any other unbelievably compelling script things is this. >> nothing in the script but i do have a comment on china because i saw a chart yesterday which surprised me. trivia question for the table. what percentage of our debt, u.s. debt, is owned by china? we always talk about how china owns us. >> between 25% and 30%. >> is it less? >> less. less than 15%. >> really? >> there's two different numbers and one of them was under 10%. but 9%, and i thought that was fascinating. >> that's been a change because of the fed getting so involved over the last few years. i think it use d to be closer t 25%. >> 50% of the debt is still hours. >> that's because we've been printing money. >> we talk about how china owns us and when you look at the charts -- >> are they number two and then japan? >> they are number two. in terms of just overall -- >> but that number has changed drastically. >> that i don't know. this was a new chart. >> that surprises me -- it does surprise me but i would bet that number has changed drastically. >> still a lot of people -- we still need to kiss this guy's butt, this xi jinping. >> xi. >> it's not 11? that's kim jong-il. this guy's name is not eleven? you know what i'm talking about? >> i know exactly what you're talking about. the roman view. >> everybody is kissing this guy's butt. they are. weigh all have to. that's one of the things. as you point -- the other thing that i was amazed that you need to see, have you seen how health care costs have come down drastically since 2002. we don't talk about that. that's in the -- and there's a chart. >> this i don't understand -- i don't understand because -- >> but do you know why it's come down because of hmos and multistate competition. >> yes. >> over here. it's below the supply side. look at the chart. look at that chart. it's still growing too quickly. >> it's still growing and that's what people say. it looks like it's growing by about 4%. yes, that's down from the 9% to 10% that we have been looking for. the idea you are still paying an increase of 4% every year, that's still going to kill you. >> since you're talk iing about what's in the papers, did you see this story about what google has been doing? >> yes. that really bothered me. >> that's unbelievable. >> if you think that you can opt out and that you can protect your privacy and people aren't going to be watching and they find a way to get around it and eventually we'll fix it -- >> i don't know what you are talking about. >> google is tracking where you are physically on your iphone through advertisements and how they are actually encoding certain pages that are being transmitted to you. >> if i have an iphone. >> even if you have your privacy settings set to they're not supposed to be doing it. >> they found a work around that cheats on the privacy thing. >> and this is really -- >> off the deep end. >> the second of a big security issue in the past two weeks revealed because the other thing that's come out is there's a number of applications that get approved by apple that were actually taking people's phone numbers, contacts, right off of your phone and storing them on their system. >> it's outrageous. >> even though apple supposedly thought that the programs were secure so that they wouldn't be doing this. i think this is going to be a big issue. >> would this qualify for doing evil? >> yes. >> as opposed to not doing evil. >> and what do they do with it? >> i don't know. >> they are collecting this when you are telling people they can have their privacy and collecting this information anyway, that is absolutely a violation of the trust. >> rob wild writes, joe, it looks like the pounds are just falling off of you. don't go too fast. let me -- thanks, robert. two -- >> you're fat. >> someone yesterday at lunch said your audio guy is unbelievable. >> brilliant. john is great. john la font. >> you're fat. >> getting less great. less funny. two key u.s. economic reports today at 8:30 eastern, we have cpi at 10:00. the index of leading economic indicators. becky mentioned futures but let's check on the broader market. my 30% thing is like clock work the way it's working considering i started it in october and we're up 23% already. >> this is bad because this is the seven-week high. >> this is something to think about in terms of gdp, in terms of, you know, andrew, with the election. if this goes to 120, gas to $4 or $5, all bets are off. and there is -- it is early. you don't want as a -- i don't know where you stand on the next presidential election but if you were someone who wanted the president to be re-electeded you would maybe warn with about peaking too early in terms of -- i don't think that's going to happen because the economy is going to rebound, it is, and this is a four-year high. so four years ago the market was here so it's taken four years to get back to where we were. you would think that we've made enough of a base and saved some money, deleveraged a little, you would hope. >> and if oil prices continue to climb like this. it that really cuts into the consumer's pocket. it was above $102. >> becky and i read morning money every morning. >> you think i don't read that? i didn't read it this morning. >> this morning one of the reports, though, was about how february numbers, job numbers, are going to be an abomination. >> well, it's based on the philly fed index. there's a jobs component and that has been very closely tracking the private sector jobs number and base d on yesterday' philly fed numbers they are looking at this and thinking, okay, this spells a 50,000 number for february jobs and that could be really concerning. is it february jobs or january jobs? the number we get -- february jobs that we get in march. >> so you saw oil. look at the ten-year note which continues to do absolutely zero. it's been at 2% for so long. i wonder how long that lasts. let's look at the dollar whether it's up based on this whipsaw that we've been seeing with whether greece -- bless you. >> excuse me. >> and that got gold which is then hovering in the low 1700s. nbia claims that it has new evidence of widespread mortgage origination fraud at countrywide. they are hoping to bolster its lawsuit accusing the mbia unit of inducing it forri risky mortgage backed securities. mbia is asking the new york state supreme court to force countrywide to turn over a variety of documents. also, allied financial is weighing a sale of all or part of its auto lending and banking businesses. and ipo reportedly looks increasing ly remote. the u.s. government is looking to get back $17 billion in bailout money and ally is already in the process of selling its mortgage unit. of course ally is the old gm financial. chrysler, by the way, is withdrawing an application for a u.s. government loan worth more than $3 billion. the loan was aimed at trying to help the company make more fuel efficient cars and trucks but in a statement chrysler calls the terms too restrictive. the automaker says that it is confident in its own ability to try and adopt new technologies and make competitive products without government assistance. >> time for the global markets report. ross westgate standing by in london. ross, good morning. >> hi. good morning to you. stocks are a little bit higher as we approach the u.s. not quite up to the session highs at the moment. advance e advancers outpacing decliners by around about seven to two. more reports and speculation that on this friday there will be a deal next monday. we've been here, i think, for at least the last five weeks on a friday but stocks are higher as you see. a quarter percent higher for the ftse 100. the ftse mib about 0.6%. this is where we believe we're at. greeces has detailed how they're going to get the extra 325 million euros of savings that the troika has demanded. we now believe that the ecb has to come to some sort of an agreement that it will give back greek debt at the price enabling greece -- not taking a haircut but -- not taking a profit, i should say so enabling greece to save more money on that and some of the german politicians have stepped down from this demand too much an escrow account for greek receipts to ensure that they do pay back some of their interest and we also are still not quite sure, though, whether or not the bailout moneys will come in dribs and drabs. these are things to be decided. slightly disrupted today by the fact the german president was forced to resign because of some improper payments when he was governor of one of the states that goes back a long while. now the president, just to remind everybody, is a figure head. it's the chancellor, angela merkel, who of course has power. what it does do is disrupt her time and efforts on trying to sort out an agreement for greece with the rest of the eurozone members. she was due to fly this morning for a meeting with mario monti. that has been canceled. as a result she now has to spend considerable next few days trying to get agreement on a replacement for the german president so it's a political headache she could do without. at the same time it may also decrease her chances of elections next year in germany bearing in mind she was the person that advocated mr. wulff to become the german president in the first place. the german politics are front and center today as they have been most of the week except today it's internal as opposed to how the politics may impact the eurozone. stocks are higher right now ahead of the u.s. open. back to you. >> ross, does that mean that this could potentially keep us from getting some sort of a deal with greece over the weekend? the market begs a lot of that into the cake yesterday. if this means that we don't have a deal by monday on greece, is that something that could happen because of the german internal politics? >> well, bear in mind that this week what we've seen is an escalation in the politics of the crisis with the greek president telling the german finance minister not to be so aggressive and keep his nose out of internal affairs and it's been mario monti, of course, who has been trying to smooth things down and say we're all europeans and we all need to work together so i think the meeting was going to be quite important. and she needs to come to some kind of an agreement on what the german position is on this greek bailout. now, you know, obviously if she is spending now more time working on the german presidency, that's less time she has got to devote to deciding what's going to happen with greece. there's no suggestion as yet, that means we won't get some agreement at the euro group but undoubtedly they have to make their minds up a lot quicker. >> it's my guess, at least my gut tells me, if there's not a deal by monday we could see that coming into play in the markets and we could see a sell-off. what do you think? >> well, maybe, but we've been here every friday for the last five weeks. >> yeah. >> haven't we? >> so there's never really a deadline. >> and we care less and less, don't we, because the framework is in place. we know theoretically what the agreement should be. we just have to get there. and so i think there's a sense there's an agreement. it would be a delay not because of disagreement but because she has another internal political situation to deal with rather than it's a delay because we haven't got necessarily an agreement. >> all right. there's the voice of reason. don't pay attention to the head fakes. stay the course. all right. >> you get to the point how many times can we say we've got an agreement coming on monday when you're here on a friday? >> you don't care about greece. jamie dimon says zero. >> but do we? >> it was a great -- it was a great -- >> no, but what about what happens with portugal and the rest of them? >> portugal -- portugal is okay, too. >> eu is okay? >> the same. rain in spain. >> what about italy? >> they're okay. >> everybody is going to live at home for a while. it's hard to start a business. this guy is good. the new guy is good. he's a technocrat. >> ross, have a wonderful weekend. >> you, too. >> okay. see you later. what are you doing sunday? >> sunday? >> yeah. the 19th. >> oh. >> yeah. the 19th. what are you doing on the 19th, your birthday. your birthday, sorkin. >> i know. i was thinking. >> what are you doing? >> we're going to dinner. >> that's nice. happy birthday. i may send you an e-mail. >> thank you. >> we could talk to you on 0 monday. >> we're out on monday. >> we're back on tuesday. >> it's amazing how young you are. you were writing for "the new york times" in high school, right? >> don't be too nice. >> no, no, no, people know it's not real. you were writing for -- how old? >> by the way, talking about not real, one other thing, another person came up to me yesterday and asked about the helicopter. they really believe -- and they really believe -- you must really be rolling in it. this is a pretty serious person. >> why did they -- he's leaving now. you might as well stay now. >> i told him to stay. i told him to stay. >> it sounded like he was just leaving. >> i want to beat the traffic out of the city. >> can you tell us how old you will be? >> i will be 35 years old. >> that's sickening. really. it makes me nauseous. so young. >> don't be nauseous. >> it's amazing. amazing. >> i don't know about that. >> it is. it is. >> you're only 34. >> you have a movie. you have a huge book. >> it's all good. >> it is all good. >> everybody is trying. it's all good. >> we'll talk more about your birthday. don't think you're off the hook yet. >> cramer's is right around now, too. we'll have to look that up. >> that's your favorite day. >> yeah, because cramer gets older than me that day for the next ten months. >> when we come back on "squawk" the payroll tax cut heads to a vote on capitol hill today plus we're going to get a preview of this morning's key economic numbers but first -- >> you missed it, february 10th. >> we can still wish him a happy birthday. first on this date in history, today is the third anniversary of the stimulus that president obama insisted would bring the u.s. out of the recession. $787 billion for tax breaks, unemployment checks and shovel ready projects to create jobs. >> we needed a shovel. right now as we head to a break check out the global market headlines. so uh this is my friend frank and his, uh, retirement plan. one golden crown. come on frank how long have we known each other? 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[ gasps ] ♪ [ male announcer ] get a retirement plan that works at e-trade. welcome back to "squawk" on this happy friday. though not particularly happy given where the futures are but it's only marginal. the s&p 500 -- >> we're basically -- we'll take what we can get. making headlines this morning, a deal to renew a payroll tax cut for 160 million u.s. workers is expected to pass congress today. the house will be voting first. the package would renew expiring jobless benefits for long-term unemployed and prevent a steep pay cut for doctors threatening medicare patients. president obama will visit a boeing plant in washington state today. i know joe will enjoy this and outline new steps to boost u.s. exports. he's going to call on congress to continue financing the national export credit agency crucial to the goal of doubling exports by 2014. >> do you think? it's going to be like carrying it in on their shoulders. now to the markets, joining us michael, managing director from chicago-based spectrum and the chief economist at fao economics. what do you make of this, michael? are we at a four-year high? i don't see a lot of people saying, wow, it's going up another 20% or 30%. most people are ready to sell into most of this or, no, are people believing this and they're ready to buy at this point? >> i think people have very nice, short memories and for those reasons they love taking profits while they have the chance but, joe, you know as much as i do how i love levels and right now at least on a long-term chart of really big retracement for me is a five-year weekly because it takes in the old highs and of course those dreary lows that we saw and lo and behold the last level until we get to 100% is 76% and what is that level? 1361 on the s&p so we're knocking on the door and, again, as i mentioned that's a weekly chart so if we settle above it we potentially have a breakout in front of us. one of the things that i look at on this recovery is how silver has traded because gold gets the limelight but really there's not just more industrial uses for silver but there is the entire incentive of supply short isages and for that reason 3409 is a big level for me and we're also on that door and lastly before i talk about everything that's ascending higher, one of the things overseas that really keeps getting in the news is the way that the italian long bond has been trading in. as you've noticed it's below the 5% yield and, again, that could be because of governmental implications and just better austerity measures or better government control by leaders but, again, that's one of the strangle holds that is calming fears as you are starting to see how the euro had one heck of a day yesterday when we had a 129 the handle and now we're right back above 131. volatility in the market but there are key indicators that give us optimism. >> i bet you could watch the italian bonds and not the pay attention to greece and watch what happens there and know more about the whole prospect. so silver and equities are coupled then, right, michael? do you think that gives equities a better chance? that's weird, too. that's not always been that way. >> it's a lot better correlation right now than you're seeing between crude oil and equities which has been the sign. crude still has a ways to go to get to those upper levels, the same kind of chart, 105. i don't know if you get that high. >> the thing about resistance levels, they're perfect for technicians because it means you're going to have trouble getting through them so you could explain if it goes back down and then if it does get through then it's likely to go higher so you can explain if it gets higher. if it gets through, it goes higher. and you're right both times but you've told us nothing. anyway -- >> no, joe, that's where you sell it, though. that's the whole point. >> perfect. it's the perfect -- it's either going higher or lower or could still say the same. claims yesterday great, right? you've been talk iing about it r a while. >> really good. the economy and these jobs numbers. look at jobless claims, look at household jobs, the payroll jobs, the edp survey. all of the jobs are pointing in the same direction. too many people are spending time talk iing about the unemployment rate and what it's doing and participation. the jobs numbers per se, things related to jobs. >> what about the fed, the ph philly fed index. >> i thought february would be wad. >> well, that number went down but the hours part went up. it was strong. month to month i don't know that you want to make a lot about those things. i like the philly index. i think it's a good index. it has good cyclical properties. it's a good indicator. >> the suggestion from some people is that if you see things drop off, employers have hired everyone they need at this point and they're not going to hire anybody else until they see demand pick up. that's why you may have seen that with the philly fed. what do you make of that? >> if you look at inventory behavior you see inventories continue to be built at a rate slower than sales are going up. so the ratios are still going down. and if you look at the sales themselves, the sales are still growing but they're not accelerating. and so there isn't any reason for firms to increase inventory and that gives you production. if you don't need inventory, demand hasn't been that strong yet. we're all looking it at the great jobs numbers. we're waiting for the economy to kick up hoo tinto the next year. >> we're just making ordinary growth. the philly fed index might take on -- when you look at these indicators and when you put them -- i looked at them as a percentile in their historic range. how often is it higher, lower, in the cyclical range. everything was near 50%. so it's like, well, what do you say about that? >> when does either oil or gas prices really hit your radar and you start saying, whoa, this is something i need to worry about? >> there's two sides to that. if the economy is growing then people will be able to deal with the energy prices. if it's not, they won't. it's a simultaneous thing. it's a chicken and egg thing. the chicken and feed thing. the feed is too expensive, the chicken isn't big. >> someone wrote in and said becky is wrong about this, the chicken and egg. >> experts wrote in and said i was right including senator rob portman who took my side. >> we know the egg was first. >> we don't. >> it came from a dinosaur and turned into a chicken. >> i didn't know we would talk about the dyno/chick theory or i would have done more research on this. >> bob, thanks for getting up early with us. >> we have a thing now, it's fun. it started with the ties, and you did that on purpose, right? >> see, my wife made me wear th this. she wanted me to wear a tie you couldn't make fun of so i'm wearing this tie instead of the one i picked out. >> say hi to her. >> she said, do you really want to wear that tie. here we are talking about my tie. >> but you do like to get comments about your ugly ties. you do it for a reason. >> they're not ugly ties. i'm not responsible for your taste. >> i know. i know. >> thank you, bob. >> and, thank you. are you all right? >> yeah. >> happy birthday. >> we'll get the inside line on the industry as we prepare for our newsmaker of the morning, wells fargo ceo john stumpf will join us live. first, we have a little bit of sports buzz for you. phil mickelson will carry the lead into the second round of the northern trust open today. >> no way. >> yes. mickelson fired a 5 under par 66. that included a 35 foot chip for birdie on the final hole. >> whoa. after his last round at pebble was a 64. and now he follows that up with a 66. >> hunter mayhan -- >> that's freddie who has won a lot. >> they share sengd. they are one stroke ahead of jonathan bird. they sound awesome tonight. and when i do find it, i share it with the world. you landed the u.s. tour ? 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another friday with a monday ahead of us? >> that's what we're waiting to find out, the big european ministers begin chatting on sunday with a conference call that on monday in theory they meet face-to-face to decide whether or not greece is going to get 130 billion yeuros worth of new loans. here is the dilemma. bottom line you see there. if they go through with this deal as previously projected the debt to gdp will still be above 120% and that violates one of the dictates they put out. they want it to be better than that. so what do you do if you're a european finance minister to solve the dilemma? do you give them the loan anyway? do you look the other way? this has the advantage of solving the immediate problem which is greece has this 14 billion euro repayment. you get past that and figure out what to do. you could not give them the loans at all if you want to improve the debt to gdp ratio. don't give them any more debt. remember, these are loans and not grants. i don't see a lot of willingness on this part by europeans at this point. there are advocates who say rip the band-aid off quickly. this in the end will be better for them. or find the money to get the debt to gdp down to 120%. do you get it from the private sector? you told them you would lose 50% and now 70%, 100%. do you go to the ecb, the imf? greece owes money to all of these people, and say you are going to take a cut. do you go back to the greek people and say you're going to take even more wage cuts or do you do all of the above? the other possibilities, you could do a bridge loan. you give them the money for the march 20th payment that would be really crazy because you would reward every single hedge fund that got in at 30 cents on the dollar and then you would increase greece's debt by 7 billion euros. you could give them a bridge loan to pay off the banks and get that side deal done then march 20th is solved and then figure out what you're going to do from there. they could completely punt. then decide they're going to bring in mer-cozy. >> is the bridge deal realistic? >> it depends on which one. if you want a bridge loan to pay the march payment, i think it's a stupid idea, right. it increases greece's debt. you reward the hedge funds and you lose zero credibility and the hedge funds come back and they do it to you all over again the next time around. >> if if you had 130 billion euros -- >> you would not give it -- >> would you give it to greece? >> no. >> i don't think i would. >> it's like the bush administration saying i need to give some money to the autos to keep this going and leave the problem for somebody else. the other question this raises beyond the money is what do you do about the politicians, meaning you have this set of politicians who have agreed to this but what happens to the next group who says, you know what, they agreed to it but we're not going to play along. >> that's why a bridge loan. >> or you do an escrow account. that way you can just avoid them completely and make sure you divert the money. >> are you doing this report again throughout the day? >> yeah, why? >> will you change -- >> i know what you are going to say. >> will you change dilemma? it should be one "l." there's not a lot of things that are diller. >> i knew you saw that, too. >> there are people at home going -- >> do they not -- >> i know. and none of us say anything and then they think they're all idiots and i want them to nope at home we are not all idiots. about everything. about everything. >> morning tv is radio. they are not looking at the screen. >> sirius is fine. >> just between us -- >> i was going to tell her after. >> you were going to tell her after? that's a better idea. sorry. >> so the ultimate question, too, do the markets care at this point? you have this discussion with ross. a messy situation on march 20th, i don't think is necessarily scary to the markets. if you decide not to give greece the money at all, you are getting down to a question of whether or not you want greece to stay in the euro that will push that question very, very quickly. i don't know if the markets are ready for that because that means redenomination of contracts and all kinds of ripple effects. >> and it means it affects the european banks back in their home countries. >> well, in theory a lot of that stuff has been dumped, right? >> down to such a -- >> to a small amount. we think a lot has gone to hedge funds. french banks and german banks. remember, first they wrote down 21% and then 50%. and then were you only getting the money back over 30 years, right? so in theory a lot of it has been felt through but ultimately do you want to find out? >> i guess we will. >> yeah, we might. we just might. >> michelle, thank you very much. in the meantime u.s. banks trying to shield themselves from head winds blowing in from europe and the winds of change in washington. joining us now to talk about the financial sector the managing director of u.s. banks and specialty finance at credit suisse. we have you here to talk about the banks overall, first up, but we also want to talk about wells fargo. >> sure. >> why don't we talk with the banks overall. a lot are sitting in better positions? >> the capital positions of u.s. banks have nearly doubled the last three to four years as they rebuilt equity positions and the fed has incysted on higher capital. >> is this a point where you would buy into most of these stocks is the question? >> i think there are a number of the large banks that actually are quite inexpensive, jpmorgan is selling just over intangible book value. >> okay. so you like those two better than all the rest? >> better than most of the rest. >> what about wells fargo, and we ask you this because we have john stumpf coming on. >> as a bank it is probably the best bank of the large banks. the irony is because it has so much cheap deposits, deposit costs with 22 basis points, it's very hard for them in a low rate environment to keep ratcheting them down as the yields on their assets fall and so they've had margin pressure. an okay margin in the fourth but pressured through most of 2011 and will continue to be through 2 2012. >> when you say the best, do you mean better than jpmorgan? people put them neck and neck. do you say no? >> from the standpoint of being a community bank and a regional bank but just very large, they are probably somewhat better than jpmorgan. jpmorgan does a good job integrating the businesses across and so they do a good job integrating their investment bank with their commercial bank so they do a better job than most of that. but with wells is kind of like just a very large community bank which tends to have higher returns than larger banks. >> so a low rate environment, if the fed doesn't raise rates until 2014 what does that mean? >> their net interest will be flattish. two-thirds of the earnings increase we are projecting comes from lower expenses so they're taking down their expenses. a lot of that coming from a merger -- the acquisition of wachovia in 2009. and so we're hopeful that they can do that. it hinges on whether they can get that done. >> what happens if rates go up sooner than 2014, if the economy turns around and suddenly mid-2013 we're looking at higher interest rates? >> most banks will benefit. nearly all banks and wells will be one of the beneficiaries. >> so this is a bank that you would be buying as interest rates start to climb or is it a bank you start to buy as you think interest rates -- >> as you think the economy is improving. now all the banks have done better because of better expectations for the housing market. and wells -- >> net-net do you wish you hadn't bought is this. >> if i implied that, i didn't mean to. >> you didn't. i remember that -- i remember the biggest high flyer was goldman west and these people were out in l.a. thinking they could do no harm. i can't remember their names. >> herb and marion. >> who was the ceo? he said this is the home run acquisition and they almost took wachovia to zero and they still owned golden west. it was like buying the remnants anyway which had all the fancy bells and whistle mortgages. >> the advantage wells had, they were able to mark those loans down and they took 40% of those option a.r.m. loans and marked them down 40%. when rates fell, they were able to go into the borrowers and give them a discount and actually refinance them into a real loan. so they've actually benefited from that. they were helped clearly by the low rate environment. >> wachovia couldn't have survived to do that. >> in 2008 you started having liquidity issues and those kill banks faster than credit issues. >> do you think wells ultimately needed the bailout? >> i think there were a number of large banks that did not. wells was certainly one of them. >> did not? >> did not. >> so that's what they've said, too. >> that's what they've said, too, but others said because of the things you are talking about -- >> here is the thing. they could have raise that had money on their own. they raised money to support that. that's why i'm confident saying that. >> we do have ford to lack at. it's a different industry, but there are companies that can survive on their own if they do the right things without t.a.r.p., without auto bailouts. if they're run well -- >> absolutely. >> that's why it's too bad. >> you agree with what wells management said at the time which is -- i think it this just makes everybody look bad. >> i think so. you contrast that with jamie dimon who said i'll take it for the good of the country, which i think, you know, was probably the right attitude at the time. >> jamie probably wishes he hadn't at the time because he did take it. you know where he took it for the good of the country and still takes it pr wise which is too bad because he was the greatest risk manager throughout that whole -- >> absolutely. >> no credit for being a great risk manager. you get demonstrations at harvard when you try to speak there. >> he took a $350 billion failed back and paid the fdic $2 billion. it would have cost them $60 billion or $70 billion. if you have any comments or questions about anything you see here on "squawk" shoot us an e-mail. see us on twitter. we haven't talked about twitter that much today. the ceo of wells fargo will be our special guest host starting at 8:00 a.m. eastern. first as we head to break, a look at yesterday's winners and losers. bravo. >> i loved that. >> it was great. >> it was pretty good. >> well, it wasn't bad. >> there were parts of it that weren't very good. >> it could have been a lot better. >> i didn't really like it. >> it was pretty ternl. >> it was bad. >> it was awful. >> boo! >> it was great. >> boo! welcome back. much. u.s. equity futures at this hour are roughly flat. dow futures up by two points. s&p down by one point. this is after the dow is closing yesterday at its highest level in just about four years. so a lot of momentum heading into this. we'll see what happens as we head into a long three day weekend. fbi agents arrested john kinnucan at his oregon home. it's part of a broad based insider trading probe. details of charges will be made public this morning. a source tells cnbc that the charges involve securities fraud. kinnucan made threats against fbi agents, assistant u.s. attorneys and cooperating witnesses. those alleged threats are not part of today's charges but they could be raised during the bail hearing. joe? >> still to come on squawk you surely received more than a few requests. today we'll connect with reid hoffman, linkedin's ceo. social media, hot ipo, have you ever said yes to a linged in person. >> i'm on linged in. >> once you do that you're inundated. >> no. this is one of those one us have to be careful who you let in. >> i don't want to link in with anyone. >> we can talk to him about how many friends he has. coming up next week another star stud lineup of heavy hitters in business world. tuesday top money minds. wednesday, "squawk" masters meredith whitney. thursday, morgan stanley's steven roach. "squawk box" is the place where the biggest names in business start their mornings. it all starts tuesday at 6:00 a.m. eastern. 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[ male announcer ] introducing spark the small business credit cards from capital one. get more by choosing unlimited double miles or 2% cash back on every purchase, every day. what's in your wallet? linking up with linkedin. the company's co-founder reid hoffman shares his thoughts on the future of social networking. >> bulls on parade. could investors keep riding this down momentum? the analysis you want to hear before the start of the trading day. the showdown over taxes and the budget. ranking members from both sides of the aisle square off as the second hour of "squawk box" starts right now. good morning and welcome to "squawk box" on cnbc. i'm concern along with andrew ross sorkin and becky quick. here are some of your morning headlines. the house and senate are expected to vote on a deal to extend the rest of the payroll tax important the rest the year like 10 months. it's expected to easily pass in the house but seeing resistance in the senate. makes no sense. democratically controlled. without the deal the cut would expire at the end of the post. the postal service is proposing major changes in an effort to save $22 billion. it includes cutting jobs, raising first class stamp prices to 50 cents and extending delivery times for long distance mail. the proposal would need congressional approval. chrysler cancelled it's request for a government loan. fund were intended for development hybrid and electric vehicle. chrysler said the terms of the loan was overly restrictive. the futures are indicated up about 14 points so far after a nice gain yesterday. >> nice gain. talking about nearly four year high close. >> but it wasn't one of those -- it was over 100 points. >> for this year? for this year that's saying something. >> yeah. hey, you know preaching to the choir. >> mr. 30%. >> i'm ready. >> part of the reason the stock market has been rising there's hopes for a greek bailout deal once again. some political developments in germany may distract from that effort. let's head overseas where ross westgate has the latest out of europe. we know we're waiting for monday. waiting for monday. we're seeing what's happening there. right now it seems like people are still saying they are willing 0 to take a chance. >> we have been here before. nothing ever happens on monday. maybe next monday will be different. 4-1 advances out pace decliners here on the dow jones. merkel was supposed to go to italy for a meeting to dot the is, cross the ts on a bailout package which would be agreed on a euro group meeting and signed off. that got cancelled because she had to deal with the german president who is resigning because they want to scrap immunity for him when he was a state leader and some favors he gave. she will deal with something of a constitutional crisis and they have to find a new president. he doesn't have any power, more ceremonial head of state. that's distracted her attention on getting final agreement on greece. what we think will happen is greece has presented details of how it will get the extra 300 million euros and more cuts to satisfy the troika. germany won't push for payments in drips and drabs. we're not sure whether the escrow account has gone away. the ecb is willing to take a cut on some of its bonds or in other words make a profit on them to help greece out. these are elements that are coming together. the question is whether the agreement gets delayed because angela merkel doesn't have time focus on it because of politics. the markets, the ftse up nearly a quarter. that's where we stand. we leave to it the weekend and another monday to see whether we can get it delivered this time around. back to you. >> thanks, ross. appreciate it very much. if there's a tech company that helps to keep in touch with your friends, find a new job, pay your bills or just waste time at work -- you don't like me saying that -- chances our next guest had a little something to do with that. joining us is reid hoffman executive chairman and co-founder of linkedin and partner at graylock partners and author of a great new book which i have proudly read, "the startup of you." i want to talk about the interesting people fund. i've just given that facebook is in the news. you're an investor in facebook. you can't talk about it per se. i'm curious broadly about this whole social media way of, we were at your book party last night. one. guys from groupon was there. you have investment in zynga. you're on the board of zynga. do you feel there's a bubble of any sort? honest conversation. do you feel like things are a little out of hand here? >> well, when people say bubble they think that there's an overvaluation based on metrics or future expectations. and i don't really spend a lot of time thinking about it. you guys do. public market, stock valuations. i think about industry transformation. i think the internet we're still in the very early days in how people navigate their lives. the whole point of web 2.0 they can take their online identities and navigate their lives in better ways. connect with friends. navigate their career space. we're at the beginning of the transformation of people's lives. i'm very bullish. >> you lived through the late '90s. you saw what happened. and there was still a lot of room to grow but a lot of those companies in part because of their valuation, in part because of how much money they were spending to build their businesses, they ended up falling down upon themselves. >> also i think the difference between the first wave of the internet and this wave is that business models are much more solid. there it was like companies went public on description of what would happen in the future as posed to fundamentally, look this is a good revenue stream, this is a reasonable cost structure. if you look at the current wave of companies, you know, i don't know which ones i can speak of. yelp is going out reasonably soon has good fundamentals in the business. >> reid, just explain to him how all this stuff works. >> we started with you in 2003 and i was facetious, i said everything had already been invented on the internet by then. obviously it hadn't. now you're in stakes in all these incredible places. you made the point off camera that all of this technology is feeding on itself to create more innovation and more opportunities for similar things. so you could, reid hoffman can start again in 2012? >> yes. >> would it be social media or are we missing the next big -- because a lot of people missed this. >> i think what happened is most people, they thought the consumer was dead. they were wrong in 2002-2003. all these new major companies, facebook, twitter, linkedin got started around that time frame and are things that can change people's lives and have great businesses. for example, even just from "the social network"ing side we at graylock invested in a company which is social networking for k-12. students and teachers. similar kind of thing you have a facebook or linkedin network. we believe this can grow to be very big. when we think of something that cab massive category that changes people's lives that's an investment. >> what's after social networking? >> we always look for great entrepreneurs that bring us interesting ideas. not our ideas it's their ideas. the things that i tend to look for is networks, platforms and marketplaces. an investment i made was into a rent b, where people can rent an apartment, couch, castle. anyone can turn their own space into a mini hotel. it's a marketplace that transforms the world. these opportunities are still out there for great entrepreneur, clubber idea and the thing that millions of people or hundreds of millions of people can interact with. >> when you start looking at investments because you look at all the different companies you're involved with, are your incredibly lucky or are you putting money around in a lot of different places? brilliant i should say. are you just brilliant for coming up with this? seriously how do you come up with these ideas if you're not spreading money. is this like buying lotteriy tickets >> you're not always right in placing bets. if you're right about a couple key ones everything else works. now, part of the reason people seek flown you because you help them. you can't put it every where because you have to be a good partner. money is the ultimate commodity. so why do they want money from you? they want money from you because you can help them. you try to pick the ones because you only have a certain number that you think have chance of being massive. >> is there a certain criteria that you use in terms of how you look at a particular investment. i think back to remember peter teal said about a year ago one of his criteria for knocking you off on his list you have to be under 28 years old and i don't want your salary for the ceo to be over $100,000 because his experience was that if you were over that age and you made more money than that you didn't have the drive or that you wouldn't have the passion to do it. >> he invested in linkedin and that worked out pretty well. >> you were older. >> yes. >> are there specific things like that that you think about when people come to pitch you >> there's very little absolute but generally speaking a person has to be focused on building a great product. they have to have a drive for how it gets to hundreds of millions of people. a curiosity for learning. like in the book, being in permanent beta. i'm constantly evolving and figuring out what's going on. then i want has to be, you know, something that's a unique idea that could fit a role in all of our lives. >> also for you has to be digital? >> yes. which includes mobile. >> what happens if there's no internet component but just mobile? >> mobile includes internet. all basically -- it's all of us. >> can you explain to joe the difference between what linkedin is and what facebook is. >> that won't help. in need you to tell me what facebook is. >> there are many now social platforms and what i'm curious about is why one platform doesn't ultimately win the game and that you can create sort of smaller networks within that one platform. >> you can do a, like a linkedin in type subunit for facebook, right? >> i understand the specialty element but i'm curious why one network hasn't won that game? >> there's a simple metaphor. we have different aspects of our lives. you don't live here at the office. your bed isn't behind the cameras. you have one aspect where you have barbecue friends, share vacations, another where you work, you do analysis and work with colleagues. the difference between facebook and linkedin is your difference between home and social life and work life. there's not one thing for everything. we have different aspects. we have different problems. not just trying to stay in touch with friends, play zynga games or am i trying to find out who is an expert is in open source. if you type open source into the facebook and linkedin you get different results. >> can you talk briefly about this interesting people fund and how you think about that? this is the most interesting thing in the whole book. >> well, the essential thing is one of the key things for adapting in the modern world is to make sure that you are having a healthy set of connections with the relationships around you. and part of it is to actually deliberately invest in soft assets. so set aside some money to say who are the people that i should go out the lunch with. who are the people i should travel to go talk to. those people we can help each other in terms of figuring out what's going in the industry, companies, what we should be doing with our careers, jobs, which tools and techniques we need to have, these sorts of things. setting aside an interesting people fund is like setting aside some money saying i'm deliberately investing in myself and alliance with people in this way. >> thank you, reid. i appreciate it very much. >> when we come back european stocks hitting a 6 november month high. dow and nasdaq are hitting multiyear highs. we're less than a high of dow 13,000. steve liesman crunching the numbers on ditcheds and wages. >> dividends is one of the bright spots of the u.s. economy, all those dividends of companies start to add up and shove in people's pockets. are they in danger because of higher taxes. we'll talk dividends, taxes, politics when "squawk box" comes back. optionsxpress, where you can trade your favorite products, all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com. the dow is within 100 points of 13,000. the nasdaq at its highest level since december of 2000. let's talk about the markets. tongue in cheek earlier ben i said i love resistant levels for technicians because they can say 1360 on the s&p if i want gets through it it will go higher. so you got it all. i was right either way. >> i think anyone who is talking resistance levels at this point probably is not in on that runup we've been seeing on the long side. they are fading it and throwing darts at this point. for the most part we've seen a strong rally off that 1300 level. we're also see strength in the dollar. that 80 even level the dollar was touching off. one think i noticed is that markets while there's a couple of things one is that when markets are trernding like this you tend to see very characteristic type activity within that trend and that's what we're seeing right now. we're seeing four or five days of balance and one strong vertical day up and another four or five days strong vertical balance up. you can fade it if you want. basically, you're just throwing darts. the other thing i want to point out in terms of the bears that have been fighting this. a great trader or a good trader i knew years ago came to me once and said to me one thing that's helped him avoid major down side activity in terms of p and l and fading moods and enjoying major upside activity in terms of p and l has been saying to himself over and over again that this type of a move can continue on a lot longer and a lot further than i think so. i think this is typical of what we're seeing now. we're in this low interest rate environment. this is fairly typical and rem reminiscent what we saw in 2010 but good buy side activity. a lot of demand present. traders are looking for that cpi number coming out at 7:30 central time. hour and 15 minutes from now. right now with stock indis, future products trading up at 13556 level and s&ps were holding right there this is accepting the value at these levels. >> great. all right. that's pretty definitive. i catch your drift. appreciate it. have a good weekend. all right. right now we've been talking about some of those issues and some of the things we've been watching with tax. steve liesman is here and he has more on what he just teased. >> one of the bright spots of the u.s. economy has been the surge in dividends. let's take a look at what's happened. it's been pretty unprecedent. come over here. this is the big number. almost 20% plus year-over-year increase in dividend from the s&p 500. now take a step back and the chart looks random until we overlay recessions on it. take a look. following recessions you get the spike in dividends, did not happen in 1990 but take a look right here at 2000 another spike and then this huge down decline and now a return. i want to focus on this part right here. what happened there? two things happened right there. first president bush cut taxes on dividends down to 15% and right around there microsoft paid a huge dividend, something that shows up in the charts now. one company moving the dial on a national figure. let's take a look at dividends versus wages. you can see here a big trough from the recession and now it's come back. how much has it come back? take a look at wages. up 475 billion on a base of 6.2 trillion. that's not a lot. but look at this surge here in dividends, 264 billion from trough on a base of 550. that's about 50% in my book here. wages have become less and less over time a portion of total personal inkhomeini paired to dividends which are on the rise. 51% now. dividends 6%. government transfers 18%. employer contribution like the employer part of health care 12% and interest income. let's take a look at what's happened since 2007. the changes in the source of income. president of clearman bernanke two saves minus 3.3%. government transfer, a lot of that is unemployment insurance up four percentage points and wages down 2.4%. why would president obama want to tax dividends more, raise that tax important the wealthy on dividends? guess what? it's increasingly where the money is. take a look at the next chart if we can get there. there we go. this is dividends versus wages a percent of total income. you can see it's rising here north of 6% now and for wages it's down below 52%. so why do you tax it? maybe there's an ideological reason but that's where the money is. the question becomes this year or next will you have a surge in dividend payments ahead of what could be a tax change on them? joe. >> steve, thanks for that. still to come this morning we're on washington watch ahead of the long president's day weekend plus wells fargo ceo john stumpf joins us to talk about financials, housing and the economy. it's a special one hour event beginning at 8:00 a.m. eastern time. 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"squawk" will be right back. ( ♪ [ horn honks ] ♪ oh, those were the best of days ♪ ♪ i still feel the summer rays ♪ that graced our backs as we went down the lane ♪ [ horn honks ] [ male announcer ] when your car is more than just a car to you, the right insurance matters. are you getting the coverage options you need and the discounts you deserve? for an agent or quote, call 800-my-coverage or visit travelers.com. welcome back to "squawk box." among the stories that we're following on this friday morning, google and others have reportedly been bypassing privacy settings for people who use it on iphones. a special code was used that works around a user's preference not have web browsing habits tracked. 3m is planning to contribute $1 billion to bolster their pension plans. they are trying to deal with low interest rate environment. a big payoff for the former director of the broadway musical "spiderman." producers will pay royalties for the full run of the show. that amounts to already about $10,000 a week. amazing story. among the catalysts for yesterday's rise, optimism about greece. a spokesman for the greek government saying athens expects to get eu approval on monday to begin a debt swap with private bond holders. european equities trading higher on hopes that greece can avoid a messy default and you can see european markets there. we got green arrows across the board. one of those fridays where we're told we'll get a deal monday. will there be disappointment on monday? >> today we got economic reports to look forward to in the u.s. a couple of key ones at 8:00 eastern. january consumer price index. at 10:00 the conference board releases its index of leading economic indicators which by all indications should be pretty good given the action in the stock market and some other key metrics to compile that average. what's coming up? >> what is coming up. giving businesses a freeway to connect with customers. what's next for twitter? joe's favorite online site, i know you spend a lot of time there. we'll take a closer look at the platform's efforts to turn its popularity into profitable dollars and we're minutes away from welcoming a special guest to the set, wells fargo ceo's sum sum will be talking about housing and the global economy all that on "squawk" when we return. ♪ where the sun never goes out ♪ ♪ and the sky is deep and blue ♪ ♪ won't you take me american flight 280 to miami is now ready for boarding. ♪ there with you fly without putting your life on pause. be yourself. nonstop. american airlines. sadly, no. oh. but i did pick up your dry cleaning and had your shoes shined. well, i made you a reservation at the sushi place around the corner. well, in that case, i better get back to these invoices... which i'll do right after making your favorite pancakes. you know what? i'm going to tidy up your side of the office. i can't hear you because i'm also making you a smoothie. [ male announcer ] marriott hotels & resorts knows it's better for xerox to automate their global invoice process so they can focus on serving their customers. with xerox, you're ready for real business. the house and senate set vote to today on an extension for the payroll tax cut. here with more, peter ross kin and congresswoman allison schwartz, democrat from pennsylvania and member of the house budget committee. i'm ready to just embrace the bipartisanship. i'm not going to be cynical that gees we got two months and now ten months. it's a start isn't it congresswoman? >> yes, i believe it is. i'm on the conference committee. we did what we were asked to do which is to find a way forward to help make sure that 160 million americans got a 2% payroll tax cut, continued to the end the year. and that we were able to continue the unemployment compensation. and to make sure that medicare recipients, our seniors had access to their physicians and we got it done and it was a compromise, got done in a timely fashion. we hope, i hope that it passes the house. i believe it will. and it's not been easy to fine that common ground. so, you know, i'm glad we were able to on the conference committee and maybe it showing a way forward for this next year. >> congressman ross kin, normally this is where things got weird. normally republicans if you talk about tax cuts that's normally something they feel pretty comfortable with. that's why a lot of people think maybe the pr battle got muddled on the gop side of things. it's hard to explain why you try to block a tax cut when it's normally, you know, right in your wheelhouse. >> well in the december proposal that the house passed with republican support, the tax cut was there and now we're supporting this tax cut. so the notion of not supporting tax cuts for the middle class is a mischaracterization of our opinion. this is a pathway forward and importantly it does give a sense of predictability. these ought not be done on an eight week basis. like many other tax provisions we'll be dealing with them at the end the year. >> pr doesn't have to be accurate. just the feeling that people had after watching something happen and i mean you would agree with me that the republicans screwed this up. you ended up on the wrong side of things on this. maybe you shouldn't have. it almost looks like cops that can't shoot straight. it's a tax cut. >> it's a tax cut. we're for it and we're ready to -- >> now you sound like john kerry. we were for it before we were against it. now we're for it. >> we were for the one in december. we're for the one now. we'll pass it. it's a good thing all the way around. >> how about the budget? go ahead, congresswoman. >> we're in a good place right now and we're both proud of that, i hope. let me say that december was a tough time for the republican side. they've been fighting for a year to make sure the tax cuts for the very wealthy would continue. they were a little unsure about the middle class. i'm glad they found a way to gordon. >> i'm sorry i start this way. i got to draw the line on this. okay. >> you wonder where the problem is. >> this is my fault. let's get to where you guys can argue and that's about this budget or maybe you won't because i heard democrats say republicans, congresswoman both say this is just a -- i can't use the word but it's a political document but it doesn't move the country forward at all at a time we desperately need to move forward. >> well i'll say that's simply untrue. this budget that the president presented to us builds on what he's done in the past which is three fold. is to make sure we have a balanced approach to deficit reduction which means we have to do spending cuts which we're committed to and also figure out a way there's more revenue produced in a fairway. secondly we have to make sure that we continue this recovery, that we don't do anything that hurts recovery, very dramatic, we're already doing spending cuts. no dramatic changes, the uncertainty that was created all last year really hurts. third we have to make the kind of investments that will grow this economy. make sure that america is economically competitive, that we grow particularly in innovation and skilled workforce and in manufacturing, all good trends that we're in now but we need to continue those investments so we not only don't fall behind but we continue to grow this economy. >> this started out so well congressman roskan. unfortunate failure that will make our economy worse, let's see. job destroying policies of president obama. increasing taxes. why don't you say it. >> look, i think there's a lot of concern about the president's budget, a lot of democrats have echoed that concern and i think it's a swing and a miss on a whole lot of levels. first, it's got another trillion dollar deficit. the same president four years ago said he was going to cut the deficit in half. it continues a real aggressive assault on medicare spending and it's manifested through the new health care law. and then finally it also relies on massive new tax increases. i think the most telling thing is when the secretary of the treasury went to the budget committee yesterday and admitted to the committee he has no long term plan for deficit reduction but says all he knows he doesn't like the house gop plan. now that's not the type of leadership, that's why this budget is getting laughed off the editorial pages. >> i can shoot holes in all of this. this is a ten year plan, and of course when you talk about medicare what the republican plan is to end medicare guaranteed benefits. there's no question about that, to make sure any increase in the future fall on the backs of individual seniors to figure out on their own at least $6,000 per senior already anticipated and going up from there. there's some tough decisions and choices in this budget. but the fact is that it is a plan. i was at the budget committee. i'm on the budget committee. the secretary was very clear that this is a balanced approach that will grow the economy and deal with our deficit in a fairway and make sure we grow this economy and we have to -- that's what this plan is. it's a clear plan. the republicans they don't like it. it's true. but that doesn't mean it isn't a plan that will go this economy, help make sure our tax spoil fair to middle class americans and that it actually encourages businesses to grow jobs right here in america. that's what this is about. it is a difference in opinion about how we do this. slashing and burning medicare, making sure we only protect the wealthy, this is really not the way to go. >> as to medicare the ways and means committee heard testimony not long ago from the trustees that said it's going bankrupt. medicare as we know it is over. we have to deal with the reality of that. and that's the hard type of decision-making we need to move forward. i think what the president has done is really double down on a failed policy, it's a failed stimulus, we're on this three year anniversary, unemployment was supposed to peak at 8%, we're supposed to be well in the sixes by now and my home state is well over 9%, illinois and in just think most folks look at this and says the president made a political decision to move forward with a political document that's not really substantive. $4 trillion in new debt doesn't do it. >> we would love to be able network with you. the president has reached out to the republicans over and over again. i hope we can work together to find common ground. peter admits they gave up on medicare. >> i'm not admitting we're giving up. >> we met that promise to our current and future seniors. ways we're moving ahead to get better value for our tax dollars. the president has some tough choices in the budget but we start with a commitment to our seniors in this country. that's where we should start and end. >> the only plan that saves medicare is the house republican plan. that's the only one on the table. >> you save medicare by destroying it it's not what seniors want in this country. >> up guys like each other too. >> yes, we do. >> this is what i'm worried about. >> we're going to work on this. really there's a real difference in ideology. >> thank you. we appreciate it. thank you. were they holding hands? >> no. >> we make them. >> i know. that's our fault. >> nobody knows that. >> why do you have to advertise? >> i think people -- i think people need to know that there's more to us than meets the eye. they don't realize. i haven't ridden in a helicopter. >> you're working your way there. >> i am if you don't keep going? you know what? it's hard to go back and trace how things get started, these little things. you brought -- you brought up, it was in a joke. i did it was a joke and it's worked. this is a huge contribution that you made this helicopter thing, right? >> this will go down in wars. >> all that stuff. now it's a helicopter. >> have to work that into the year end reel too. make sure it lives forever. big news from twitter. partnering with american express as it expands its advertising business. our very own july jan borstein joins us. twitter is getting serious about making money. they are partnering with american express. they are opening the door for anybody with a credit card to buy ads. twitter is expanding its advertiser base from its 3,000 current big brands to 10,000 amex small businesses in march and later this year to everyone. small businesses will log into twitter and then twitter will promote tweets and accounts. advertisers only pay for performance. twitter charges when they gain followers or people engaged with their tweets. ceo says that based on tests, small businesses are thrilled with the results. >> they've been banging down our door for the last two years wondering when wild provide them access. it's a simple next step to go to them and say here's an opportunity now, just to amplify what you're already doing. >> reporter: american express card members are getting first access to this system and am exwill give adwlars 100 in free twitter ads to the first 0,000 card members and merchants that sign up. >> it's big win for these small businesses that they have a new way of reaching customers in a very timely authentic way using tweets. it's a big one for american express we can add value. >> reporter: twitter had an estimated $140 million in revenue and that number is expected to double this year. we'll have to see how last twitter can grow its top line when anyone can sign up to advertise. coming up i'll have more on my exclusive interview with mr. costello on where twitter is now. >> thank you very much. coming up at the top of the hour, the winning ways of wells fargo. growing its investment business to becoming the nation's largest mortgage originator. right now they originating one out of three mortgages. we'll talk to the ceo, john stumpf at the top. hour. we'll be joining us, guest hosting for an hour pap lot of ground to cover. "squawk box" will be right back. >> up next on "squawk box" don't start your day without knowing the names that will make you money. joe has your list of stocks to watch right after the break. one golden crown. come on frank how long have we known each other? go to e-trade. they got killer tools man. they'll help you nail a retirement plan that's fierce. two golden crowns. you realize the odds of winning are the same as being mauled by a polar bear and a regular bear in the same day? frank! oh wow, you didn't win? i wanna show you something... it's my shocked face. [ gasps ] ♪ [ male announcer ] get a retirement plan that works at e-trade. we'll be joining us, guest the orchestra. the animal orchestra. someone else started it. i saw the potential of it. i egged it on. i saw the potential to annoy carl and annoying viewers and it was so great that i had to run with it. gillian is the first one on the list. some patients involved in a trial suffered a relapse after finishing treatment within a month. it's akin to the hiv cocktail, made great strides for hepatitis c. you're supposed to get to zero viral load. when it comes back in a month that's not the thing that's supposed to happen. you look at gilead and the move in that stock you might say it's a little biotech company what's the big deal? it's a $41 million biotech company. to cut off 20% of the market cap you're talking about a huge market cap loss just based on this that you're seeing. general mills sees third quarter 54 to 56 cents below expectation. which had been at 60 cents. recent u.s. volume weakness will affect the results and 2012 full year view has been cut to 2.53 to 2.76. heinz reporting, says here -- you got to watch "squawk box" because it says here that the company best known for ketchup. yeah. yeah. does that help with you this story? >> a little bit. >> okay. so with that in mind that this is a ketchup maker reported quarterly profit of 95 cents a share. excluding items of 10 cents above estimates. the results were helped by strength in emerging markets. >> those little new ketchup packs. have you looked at those. >> what are they? >> you can squeeze it out in a new way and doesn't get all over the place. it's fantastic. >> the packaging? >> the packaging is huge. >> i like smashing it. >> can you tell me the difference between ketchup and catsup? >> i can't. >> hunts and heinz sunshine the same. one is ketchup and one is catsup. i would like to know what heinz is known for. campbell, this company is best known for soup. i heard about that. i used to have chicken and noodle. campbell's -- maker of -- reported 64 cents a share, two cents above expectations and making some progress in its efforts to stabilize the u.s. soup business. applied materials reported fiscal first quarter profit of 18 cents a share. six cents ahead of expectations and revenue. also the consensus and also protecting a good second quarter above street estimates. finally -- did you used to watch when we talked about nordstrom? >> no. >> whenever we used to talk about nordstrom, this goes back five or ten years, we would always play a very somber, melancholy piano from nordstrom's. this is the theme song we used to play. how long did it take, john, three seconds. you do this. you know the silent film is coming back this year too and there were times where things weren't as flush at nordstrom and they got rid -- he's always there playing the piano in the shoe department. it's a piano. no, no. it's a real piano player. >> there are some nordstrom's identify walked into that have the piano and keys move and nobody sits at it. >> oh, my gosh. they got rid of the piano player? >> $1.11 a share. two cents above estimates. forecast for the current fiscal year short of consensus. gross profit margins would fall. >> did you know there was a supreme court case ketchup versus catsup involving the two condiments. >> i didn't know that. >> they were invented but the case stemmed from an argument among american consumers on the correct spelling and the word pronounced ketchup. began over 500 centuries. >> why did you decide to talk about nomofobbo. >> it's something that joe suffers from. >> what do you have to come back to the office for. you leave your cell phone. >> only time something i need to come back for. >> fear identified in 2008. fear of being out of mobile phone contact and it's on the rise. when they first came up with this and did a study back in 2008, 53% of people who surveyed said they suffer it from. now 66% of people in the uk. >> it means you don't have your phone on you or you can get a cell signal. >> you're worried about losing your phone and not having access. >> on the flight to, out to the west coast, i couldn't find it for a half hour and i thought i had left it in the terminal and the feeling that overtook me with my entire chest -- because i would have been out, unable -- they can't -- it was on a saturday. can they sync up a new blackberry and send to it overnight. >> they can but you'll be without it for 24 hours. >> we were doing the show out there. it's frightening. >> average people check their phones 34 times a day but i think that's a low estimate. >> we get a lot. 34. >> an hour. >> up next, what we really been waiting for all morning long the ceo of wells fargo, john stumpf is our special guest for the remainder of the show. we'll talk about what america's largest mortgage originator is doing to be successful in tough economic times. 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[ baby crying ] ♪ what started as a whisper ♪ every day, millions of people choose to do the right thing. ♪ slowly turned to a scream ♪ there's an insurance company that does that, too. liberty mutual insurance. responsibility. what's your policy? ♪ amen, omen the economy, lending and financial regulation our guest host for the next hour, wells fargo chairman and ceo john stumpf. >> wells fargo wagon is a coming down the street oh, please let it be for me. >> getting america back to work. >> i can't believe you drove around all day and there's not a single job in this town. nothing. zip. nada. >> unless you want to, w who rk hours a week. break being economic data. >> you want to hear the most annoying sound in the world? >> consumer price index numbers due out at 8:30 a.m. eastern. we'll have the data and instant market reaction. third hour of "squawk box" starts right now. ♪ >> welcome back to "squawk box" here on cnbc. first in business world. join us. john stumpf is here. i'm joe kernen along with becky quick and andrew ross sorkin. andrew? >> we'll do a quick look at the headlines. house and senate are to vote on an extended payroll tax cut for the rest the year. it's expected to pass early in the house although it's seen running to some resistance in the senate without the deal the cut would expire at the end of this month. signs of optimism in greece this morning. spokesman for the greek government says athens expects to get eu approval monday to begin a debt swap with private bond holders, european equities trading on higher that greece can avoid a messy default. we heard this on fridays before and waited with disappointment on mondays. u equities at this hour, european markets looking up too. the u.s. not so bad actually getting better. dow would open bullpen 25 points higher. >> today's guest host making a very rare one hour appearance today, john stumpf is the ceo and chairman of wells fargo -- >> it's big. it's big and i worry, john, because when your picture -- a full size picture goes on forbes and says this guy is the best ceo in the banking business, where do you -- is there -- i'm worried something -- how do you go -- isn't it all downhill from here? >> i get to come here. >> right. that's not usually the audition to be on the cover of "forbes" but it helps. a lot of people don't know that you're compared to george bailey too. they don't think of a banker, they think george bailey from "it's a wonderful life" that's coming on and now it's, you know, eat what you kill and derivatives and securityizing everything so there's no risk and big pay packages. you tell all your associates you then customer not to make money for the bank. that stills works? >> we don't say we don't want to make money for our shareholders but that starts with our customers. the result is we make money. i don't know any company that's successful long term that does not put their customers first. we're after all the result of the success of our customers. and we practice that over a long period of time. we didn't do option arms. it wasn't good for our customers. it wasn't good for them or the banks that did that. >> you know, when you read the article in "forbes" it will say you say things like this and then point out you have no idea how corny it sounds. for a banker to say that, you say it totally sincerely at this point but the industry is thought of in ways now by the general media that they can't believe you can be serious to talk that way, right? >> it's not according to our customers or according to our people. culture is so important. and you know we live and work in our communities. we're across more communities. we have more people in the u.s. on the banking side. one in 500 americans works for wells fargo. it makes sense. it reso napts with customers, putting them first, helping them succeed financially, investing in our communities. this stuff reso napts. it might make sense on wall street but it makes sense in the long term. >> half the assets of jpmorgan and you're the biggest market cap. return on assets is well above -- >> 125. >> this must mean you have great people that are making decisions on investments and the like but you think some of the stuff you're talking about, translates into these other metrics that you can see tangible results. >> i know it translates. what we try to do in our company is get decision-making as close as customers to possible and make sure that people believe that they are actually running a business and helping so they can make decisions and they can react to markets. i don't set rates and rules and all these sorts of things at the top of the house and say go do it. we hire people who are engaged. who are involved. and that's where it happens. >> when wall street gets a bad name do you say we're not part of wall street or do you say that wall street has been unfairly targeted. >> well we are clearly part of financial services and some of what the people feel about wall street or banks in general is earned. some of it we did not do a good job as an industry. but, i think we'll rebuild the reputation one customer at a time, one community at a time. it's not going to be a big, you know, advertising campaign of some type. i'm not against advertising but people want to see action and they want to see, you know, banks acting responsibly, but it's the whole industry. there are lot was nonbanks or shadow banks that were some of the worst abusers. >> talk about what that means. people hear these phrases and may not understand some of the things that wells fargo has done in terms of meeting with customer, in terms much meeting with people who have trouble with their home loans. >> we're the only company that has forgiven over $4 billion principal to help over 470,000 families to stay in their homes. 470,000 families. last couple of weeks ago we announced something called neighborhood lift. we put $15 million into los angeles. i met with the mayor last week. this is grant money to help families who cannot afford a home to beltway home. it was over subscribed in a couple of days. we're doing the same thing in atlanta. there's lots of things we're doing. we're the second or third largest corporate give in america. our team members we're the 12th largest employer. we give back. >> your members are employees. >> team members or team members. employees are employees. team members are aseptembers to be invested in. >> up mean employee. >> team members. >> up can't say employee. >> they are part of a team. >> okay. >> you know we think together. we work together. >> when you forgave the principal, $4 billion and giving back principal and the interest payments on these there are a lot of people in the industry say no way you can forgive principal that that changes the equation. why do you do that. >> did you voluntarily do that than to be forced to do it by the government? >> it's something that it's not for everyone because there are 70 million homes in america, 50 million have a mortgage, 20 million do not. 45 million are current. 5 million are not current. for our customers, where we owned the mortgage we thought it was one tool, not for everybody, in certain situations, a forgiveness makes sense. and in the case we thought it did -- a case where the entire neighborhood is under water, it's never going to come back or likely not to come back. >> you'll lose money anyway. >> that's right. and someone is in that home, they have a job, they can pay something and it makes sense in that case. it's not for everyone. >> so, this is a business decision, this is not about looking out there and saying we have empathy and giving this away. >> don't think you can do a modification without having some empathy. i read letters every day from customers who are hurting and it tears your heart out. we're trying to help in every way we can. we can't help were. but i'm very empathetic. >> the settlement that was reached last week does what for the marketplace and the bank system? >> there's no silver bullet or one thing we can do to fix house. if there was one we could have done it by now. the $26 billion does help. it helps. what will happen here a lot of different things hopefully the rental program will happen. we're doing now h.a.r.p. two. we're funding underwater mortgages. we're now taking applications to refinance people who are deeply under water but have high rates and have always been current. the $26 billion will put money in the state's pockets and people's pockets. we'll do modifications that we've been doing. so it helps. it's not everything. but it will help. >> what happened with all this documentation. when you sit around and think to yourself how did this happen, right? how did it get to this point? >> so, it's pretty understandable when you think about you have all these mortgages and all of a sudden within a very short period of time you have all these delinquencies and foreclosures and you have 20 some states that are judicial foreclosure states, some that are not. within the ones that are judicial foreclosure there's different rules. some are arcane. that being said we would not as an industry or company staffed up to handle that. we should have been. here's the point. even though we made technical mistakes, we don't know of any customer who lost a home -- >> that was point. >> it was dotting is. >> your take on the big new york time piece that all banks were simon the greed. no one was in there that wasn't delinquent. >> 85% of the foreclosures in san francisco had some kind of faulty technicality and my point to joe is dotting the i and it was ridiculous because nobody was out of their home unfairly. >> up only say that -- >> i was going to get there. >> look he's on the other side of this. he's lived through this. i'm curious as a ceo when you see what's happened and he's the one dotting every i. >> one last one. i think of -- i love that money and i think of george bailey. he makes point. do you want all these people in potter's field renting and never getting ahead or do you want home to have one of these new house. that was the attitude of us as a nation. of different administrations that went across party line that everybody should be in a home, it's the american dream. and once again am these great intentions turned into something that took everybody, almost took everybody down. i'm glad that you said i do everything that we can but i also want to make sure our shareholders are taken care of. is that what allows to you make the right decisions and the bottom line sue can't just -- everybody can't afford a home. >> correct. that is right. and there's no question public policy, fannie and freddie made a role in this. good intention. home ownership went higher than it should be and now it's lower. we went from 70% to 64%. in the last four years. >> 66. >> we wanted to get to 75, though and it seemed like -- can't work. >> unfortunately everybody got hurt. i want to go back. one final thing. on the technical things. even those these are technical defaults we should do them right and that's why we settled on this. better to give money to homeowners now than to fight this in the courts and give to it lawyers. >> yeah. anything is better than giving to it them. right. all right. lot more dome. what's wrong? what. >> my dad is a lawyer but that's okay. >> so is mine from wells fargo ceo john stumpf. >> i want to ask you more about fannie and freddie when we come back. when we come back we'll have more of today's top stories and jobs in america. the problems ahead for job-seekers and what it will take to bring down the unemployment rate. how america can and should succeed at this. gallop organization ceo jim clifton will join us next. he's the author of the book "the jobs war." and chief executive network direct or and billy sear on beverage trends, innovation and future of business. >> i think about where the beverage industry will be in five years. first products will be much more natural than the products we have today. second you'll find things that are much less calories. third is there's this sense of exotic appeal. benefit r beverage industry is an affordable part for consumers pap lot of that is under attack. costs have gone up. the other side is indulgence. there's tax on bottles, sugar sweet beverages. the question becomes with all these challenges on the affordable side and indulgence side where will the industry go? 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[ male announcer ] ducati knows it's better for xerox to manage their global publications. so they can focus on building amazing bikes. with xerox, you're ready for real business. ttd# 1-800-345-2550 let's talk about the typical financial consultation ttd# 1-800-345-2550 when companies try to sell you something off their menu ttd# 1-800-345-2550 instead of trying to understand what you really need. ttd# 1-800-345-2550 ttd# 1-800-345-2550 at charles schwab, we provide ttd# 1-800-345-2550 a full range of financial products, ttd# 1-800-345-2550 even if they're not ours. ttd# 1-800-345-2550 and we listen before making our recommendations, ttd# 1-800-345-2550 so we can offer practical ideas that make sense for you. ttd# 1-800-345-2550 ttd# 1-800-345-2550 so talk to chuck, and see how we can help you, not sell you. ttd# 1-800-345-2550 welcome back to "squawk" on this friday morning. jobs numbers have been improving slightly month to month but there's still a staggering number of unemployed. our next guest says it's time to step up the fight on job loss. joining us now is jim clifton, ceo of the gallop organization and author of a new book "the coming jobs war." great to have you on the set. >> good to be here. >> so, actually i was going ask you about the book, but i really want to ask you about the jobs numbers if i could, which is do you think currently the numbers that want we just saw last month or last week rather about last month will hold up? we just had this conversation about two hours ago about whether actually next month we're going to see because of the participation rate ultimately a number that looks a lot uglier. >> well, you know the bls, the 60,000 interviews a month and they do it in the second week of the month. gallop mirrors that with 30,000 interviews throughout the whole month. so it's sort of live. right now we show unemployment going back up. this morning. if you go to gallop.com you can see this morning's score. no way it will go down. if you had to bet, if you had to bet famous $10,000. you bet on getting up close to 9. >> over the next couple of months? >> now. >> right now? >> absolutely. >> just because more people are coming back in the workforce. >> i don't think so. because we also ask how many people are actively looking. i think it's going to go back up. the next report. >> when we look at different polls and you hear what gallop says, rasmussen says this, are the samples not big enough. are the questions different? how do we get such a divergence between whole numbers and then i want to get to what you just said and that's the president's numbers. we're under the impression that it's back to 50. you just said for gallop it's 44 for approval. >> yeah. maybe 45 this morning. >> 44 to 45. that's a difference of either real or not. >> we do meticulous sampling throughout the month. we do a sample of 30,000. most of the other polls i won't mention them do only like 1,000. so the representation that the gallop has over the month is really accurate. another thing you'll see is where you see some poll going up to 50%. that's just flying around with variation sample rates. so gallop is trying to be real responsible with giving us the exact number. you can see this every single morning. see unemployment, approval rating, can see obama versus romney, obama versus -- >> you still like romney at this point? >> a little bit. given the unemployment data, gdp data, it makes sense to see the president's approval rating go back up to 50%. you mentioned off camera that there are gallop picks up headwinds that the president is facing. what headwinds are you talking about if the trend is down on unemployment and up in gdp and the stock market, what headwinds? ideological headwinds? >> no when you have an approval rating of 44 or 45% you never win. you need to be 50 plus. >> republicans are trying very hard. nobody is at 50 plus. >> say other presidents. if you go back over the last eight presidents, to win you need to have an approval rating of 50 plus percent. >> this would have to continue. is it all based -- would gallop -- >> this is a different election. historically you never win. >> is it all the economy? we heard that some times. even they talk about these cutoff rates for unemployment but if it's headed in the right direction we've seen where it twaent lut number it's the direction where the economy is headed that can bring the win behind a president. >> when you have unemployment at 20%, you know, if you add them together, it makes all of us just one degree off of somebody that's unemployed. so if it does -- if unemployment does go back up, i'm sure it will, then it touches so many more people. we picked that up in our polls. >> in book you talked how there's 30 million people who don't have good jobs in this country. and that 18 million people -- am i wrong on this number? >> no. 30 million. >> the question is 18 million don't have jobs at all of your 30. correct? >> no. 18 million have no hope of getting a job. >> what you describe as a good job. >> yeah. >> my question then becomes how do you get any of those 18 million people and what percentage of those 18 million could eventually get good jobs. what do you have to do? >> well, i don't quite know where to start with this. we were talking about this off camera. there's about 60 trillion gdp. if you do the math on this over the next 30 years it will go to 200 trillion. who gets the 140 trillion of incoming stuff. sales, customers and all that kind of thing. the united states of america has to keep winning its big share. we're 25% of 60 trillion right now. but jobs follow customers. nobody knows this, only john and i know this. but jobs follow customers. nobody in washington knows this. jobs follow customers. not the other way around. and so until 6 million small businesses start growing a little bit the jobs won't come back and they just have a problem with confidence. as soon as their confidence comes back a little bit. >> if we can get stinky bankers to lend them money. i'm sorry you're still here. >> that's not true. >> we're lending. >> i know. this is the debate we've had for two years. >> it's regulations and more specifically, so if you say how come you don't have confidence to those 6 million ceos that got up this morning it's absolutely regulations. more specifically about environment and health care. >> only 20% -- >> you have to push back on that. i can't just clap so you need to push back. >> those are real issues. how do you fix health care and that becomes the challenge. >> jim, you seem so outspoken on this that when i look at gallop i would have to say, do you ever get -- you just put the results, right? none of your personal opinions go into the numbers that come out of gallop? >> that's our, that was our founder's mission. >> you'll continue that. >> but when we say how many of you are having great amount of difficulty getting a loan from a bank, that's 20%. so that's really not the problem. about 20% of -- >> that probably wasn't wells fargo. >> 20% people should have trouble getting a loan. >> that's the historical average where you see that where people just don't have basis for bringing in a loan. >> they make their case. >> wow. >> we got leave it there. we got to have you back. a lot more to talk about. >> between now and the election nice to have gallop in. >> thank you for being here. new bet. >> coming up, more on today's top stories and government's latest read on inflation. data will come in at 8:00 eastern. b "squawk box" will be right back. coming up next week. tuesday top money minds. wednesday "squawk" masters meredith whitney anne winblatt. wednesday marvin roach. "squawk box" is the place where the biggest names in business start their mornings. it all starts tuesday at 6:00 a.m. eastern. hey. did you guys hear... ...that mary got engaged? that's so 42 seconds ago. thanks for the flowers guys. [ both ] you're welcome. oooh are you guys signing up for the free massage? [ both ] so 32 seconds ago. hey guys you hear frank's cat is sick? yeah, we heard. wanna sign the card? did you know the guys from china are in the office... [ speaking chinese ] [ male announcer ] stay a step ahead with the 4g lte galaxy s ii skyrocket. only from at&t. ♪ [ cat meows ] ♪ [ acoustic guitar: pop ] [ woman ] ♪ i just want to be okay ks ] ♪ be okay, be okay ♪ i just want to be okay today - ♪ i just want to know today - [ whistles ] ♪ know today, know today - [ cat meows ] - ♪ know that maybe i will be okay ♪ [ chimes ] travelers can help you protect the things you care about... and save money with multi-policy discounts. are you getting the coverage you need... and the discounts you deserve? for an agent or quote, call 800-my-coverage... or visit travelers.com. welcome back to "squawk box", everyone. in our headlines this morning online review service yelp plans to sell $100 million in stock. they wait a minute to sell 7.2 million shores at $12 to $14 each. and china's ipo market as slipped. china has not been an easy market for apple. issues that suppliers factories over wages and working conditions. andrew. >> coming up, breaking anybody news, consumer price index data. "squawk" is coming rights back with that and a lot more. welcome back. we literally are just seconds away from the data, rick santelli standing by at the yme. >> up .2 on cpi month over month if you strip out food and energy core. also up .2. these are darn close to expectations. one could argue headline was expected to be maybe a smidge higher. if you look at the year-over-year numbers, kint ever interesting. year-over-year headline is 2.the. a tenth lower than the 3% we were looking at. if you look at core a different story. 2.3 versus 2.2. and granted that's only .1. an important .1. that brings these year-over-year core numbers to three year highs yesterday in ppi you're looking at -- actually it's longer, it's 2012. i have to get my math right since the mid-'08 era. leading indicators are yet dome. not a market mover. obviously the big story today is, you know, it's friday and a three day weekend. what does it mean? rest and relaxation and another story that everything is going to be taken care of in greece. i have no reason to have a claim one way or the other but the be market certainly is looking at some of the smaller issues whether it's a swap on the ecb which some say is a technicality like peter bookvar. here we are over 2%. we're testing the upper end of the range not only in ten year. boom yields are up. the dollar index under a little pressure but the currency relationship between the euro and the dollar like chasing your tail. it's really in a much tighter range than many would like to hope for considering it's an easy way to try to trade what's going on in europe. back to you. >> for more on the data let's get to steve liesman. you're looking at stuff. >> yeah. so we did have this owners equivalent rant has been which is what they use for housing, been running about 0.2. you put together yesterday's housing starts report which shows they are building multifamily and you have that decline in the vacancy rate. i made a chart but it didn't make it in time. it was a late idea. you have vacancy rates come down. inflation portion of housing come up. i was hoping spiral up nearly a percentage point. there's a lot of inflationary type in here. medicare up 0.3. recreation up 0.6. no deflation in this. rick is right we haven't seen this since 2008 or mid-2008. and i think it's just something that bears watching the core in the ppi was hot yesterday and we'll see whether or not we got some concerns about inflation, something that i think everybody agrees can move quickly and the fed would have to reverse course pretty fast if that were to happen. >> you think they will reverse course? >> think the pressure would be very strong on them if you got a situation where you were running 4%, 5% and didn't look like the top was going to come off, still looked like it was running. >> at that real admission? >> oil and gas. i don't know if it's an admission. their view of the world which is not shared by many people but is shared, i think, by the conventional wisdom in economics is that when you have a lot of slack in the economy it's hard to have inflation. the place they've been absolutely right is in wages. right. you've had very muted wage gains where they have been less right is in overall inflation and prices where we talked about this the other day there's been more inflation than the doves have predicted and less inflation than the hawks have predicted. nobody had the dynamic exactly right. there's a fear we'll repeat the '70 situation, high unemployment and inflation but a fear also you have a 30 situation where you have deflation and that's not good for anybody. >> our guest host is john stumpf, ceo of wells fargo. john you have to look very closely apartment what's happening with the interest rates here in the united states. when he an analyst on earlier this morning that says wells fargo is the best managed bank but said you have the disadvantage of having being tied so closely to interest rates because you have such a big base of people who are putting in money there and it's hard to get ahead when you're dealing with low interest rates. where your betting where interest rates will be. >> we try not to bet on interest rates. banks do best -- we make our money some on margin, some on fees for service. short rates are low and long rates are high and higher rates are the best place to be. today we have a steep yield curve but we have very low rates. so our total cost for deposits are $925 billion, around 20 basis points and as assets are priced down it compress that largely. over time that will normalize. but in the meantime we're trying not to taking it in rate bets, trying to offset liabilities with our assets and making sure that we don't have a situation. but my point is, i think the economy is a bit stronger than just like steve was saying, unemployment is coming down. at least the official rate is coming down. business starts are doing better. we're seeing more applications for small business loans from peak to trough we were down 60%. today we're back up 20%. so there is some activity. >> still a big gap. >> still a big gap. >> horrible gap. >> directionally the right way. >> has that direction increased rabidly over the last quarter or so or gradual. >> this is gradual. one of the tough things about recoveries they are not linear. good news gets over reported and so does bad news. >> are your saying joe is wrong you're not a stinky banker. i thought that was unfair. >> i'm talking about everybody else. >> joe is still right. >> talking about everybody else. >> i brought that chart about the philly fed that spooky relationship. no reason for the philly region to point the way for national unemployment but there it is. the employment component of the philly fed and overall national jobs number feign look at the very end there's the divergence. the component fell. >> what happened yesterday with the philly fed the jobs exponen component showed a gain of 50,000 in the private payrolls. but that would be way off from what we've seen and i guess the question -- we just had the gallop ceo who said based on his numbers unemployment could go to 9%. >> i want to ask john about that. have you seen credit quality improve with the better jobs numbers because we could have all this discussion about regulations and deleveraging if people have jobs they make better credit. is that showing up on your books >> yes. in our small business book we look at 66 different industries. 30 of them are back to pre-recession performance as far as delinquency. 22 will be back this year 14 will not. on the consumer side most of our consumer books are back to pre-recession kinds of delinquency numbers. so jobs -- i used to be a collector. i started out as a repo person. unemployment, death, unscheduled medical payment or divorce are four things that happen. three nothing has happened to. it's all about jobs. if you have a job people pay their bills and that's the same way it was a 35 years ago. same way today. you'll fix housing. you'll fakes lot of these things. if you fix jobs. >> don't try to start something here. >> with rick we didn't have a lot of time. i was going say rick he's talking about these people that overestimated inflation. he was talking about you because he thinks you're so well -- >> didn't mention that. >> that's who you were alluding to. i didn't say it. >> i would more talking about charles plosser or richard fisher on the one side. >> we know who you are, rick. >> rick i was not insult ug. >> guys we don't need to fwigt this. pretty simple. pretty much most of what i've been trying describe is the dynamic that the hatter would be inflation. really just look at gas prices. i'm talking about -- >> 5% year-over-year. >> and, you know, i'm going to try to bring some new skills to the party. at 11:20 today i'll practice and dome all the politicians in d.c. exactly how easy it may be to smash 4 trillion off the deficit. the best way, when somebody asks you, joe, how do you get to hollywood bowl you say practice. i'll show a skill politicians can use to practice getting rid of 4 trillion. >> 11:20. >> we built a sealed booth so nobody can see what we're doing and secretly do that at 11:20. >> i love that, rick since you've taken over. wonderful. i'll be watching today at 11:20. thank you, rick. thank you, rick. >> thank you steve. >> thanks steve. >> you criticized john. what can i tell you. i was giving the facts. >> don't start things between people. it's not nice. >> he's an imposter. >> he's the only guy allowed to instigate a fight. >> i'll go back into my hole. >> when we come back we'll have more from our guest host, john stumpf. next week may be short because of the president's day holiday but "squawk box" has a huge lineup. five days of guests cramed into four days. "squawk box" will be right back. n your advisor does so you can get a deeper understanding of what's going on with your portfolio. we know all this because we asked you, and what we heard helped us create pnc wealth insight, a smarter way to work with your pnc advisor, so you can make better decisions and live achievement. ♪ [ male announcer ] the 2012 m-class continually monitors blind spots, scans the road to reveal potential threats, even helps awaken its driver if he begins to doze. so in the blink of an eye it will have performed more active safety measures than most cars will in a lifetime. introducing the all-new 2012 m-class. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. 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[ male announcer ] you do, business pro. you do. go national. go like a pro. welcome back. our fweft host again today is john stumpf, the ceo of wells fargo. we talked a little bit in this last block about what happens when interest rates rise because when interest rates are low like they are it really affects the margins for a bank like where you have such a big deposit base. the analysts we spoke with earlier today says he thinks wells fargo is the best managed company. he said he would hold off on buying the stock because he wants to see when interest rates come up. right now the bet is sangt rates would rise before 2014, but what would happen at your bank if they rose in 201 like mid-way through the year. >> you would have an expansion of the margin. i don't agree with the thesis we're not a good buy because interest rates are low. we're doing a lot of different things. we're doing mortgage, one in three mortgages. but from a margin perspective, when rates rise our deposits would rise in their costs so savers would get more. savers are paid a huge price in this recovery. and, you know, just talk to anybody. >> we hear that from retirees. >> they would rise plus your assets would rise and your assets would rise faster than your liability. you would have an expansion in the margin. i start with the customer. and again customers have, savers have paid a big price. >> how hard is it today for a customer to gate loan. goes back to the stinky banker argument. we haven't talked about this issue in any real depth, meaning -- >> i hear that all the time. listen, i grew up. my first job besides being a collector, i was in the banking business where i was lending money opinion you don't need to convince bankers in america to make loans. we love making good loans. on the other hand you can't talk to us long enough to make us a bad one intentionally. so, you know, today we have about 925 billion deposits in our company and 770 billion loans. we're typically 100% loan deposit. i would like to make 150 billion of loans. that would be terrific. i have money sitting on the sideline. today it takes one person to say yes and two people to say no. we have second looks. when you talk to small business or any kind of company, they are saying getting a loan is not the number one issue. now there is an issue on the mortgage side. half of mortgage originators today do not make loans to anybody other than a prime credit. >> why is that? >> because they are concerned about repurchase. about the buyer of the mortgage putting it back on them. putting it back for two reasons. defect. there's a defect in the documentation or a default. if you're not sure you can do things right and cross every t and dot every i the best way to protect that is just only do prime credit. we do the full spectrum because we believe we have that. so we need to make sure we work with regulators and owners of mortgages such as we don't have the unintended consequence of eliminating credit for people with some blemish on their credit record. >> fha, fannie and freddie account for something like north of 90%. >> in fact almost the only game in town. >> we hear all the time and again you know what you're talking about because wells fargo is one out of three mortgage originations right now in the country. if we were to privatize fannie and freddie or if the government was to pull out of that market what would that mean in terms of people's ability to get a mortgage? >> i think fannie and freddie need to be reconstituted. they have been in conservatorship since 2008. nobody expected that happen this long. so whatever we do i think we can start that process. i don't think there's a political will to do it this year. doesn't mean we can't get going. i think one. keys is to make sure whatever we do is not so radical and so off the rails that it would hurt housing. so start some things early, put more private capital in front. i still think the government needs to be involved in some way because there's $10 trillion of mortgages in this country. add that to credit card debt, auto debt, commercial debt, there's not enough liquidity. so you need a secondary market. and i think there is where the government can play a role. it should be explicit. they should get paid well for their risk and it should be a catastrophe kind of risk support such that enough private capital would stand in front of any situation. >> you're on record to say you're not too big to fail. >> we're not. >> you're bigger than jpmorgan. you're not too systemic to fail or -- >> first of all, there's so much myth around this. if i screw up or our company or our team screws up, our company, we should fail. failure is an important part of capitalism. and simply have to just look at the capital stack, first wipe out your common stock holders, then your preferred stock holders, then your unsecured credit tore, then secured credit tors. these plenty of money there to cover any scenario. we're not too big to fail. we're 8% or 9% of our gdp. banks are 200% to 300% of their host country gdp's. if you look back at 2008 when all the stuff happened, you know, we bought wachovia. without any special help. >> but i think the question is asked, if you got a call, put yourself -- pretty you're jaime d diamond. if you found out wells fargo was going out of business tomorrow what would happen to the system? >> i don't know anything would happen to the system. lehman failed on the 15th of september and what happened to the system until t.a.r.p. came which was announced the 13th of october. what happened in that month? i mean i don't know -- i'm not saying there shouldn't be some special facility -- >> what happened aig went under. right. >> no, no. aig went under two days after lehman brothers. credit markets fell apart. the stock market fell apart. money market business fell patient. goldman sachs and morgan stanley into -- made them bank holding companies. >> at that time you're talking about a nonbank and they didn't have -- they didn't believe they had the system in which to unwind. from thepoint. >> from the banking perspective, we've always had a regime in how to do this through the fdic. so i don't buy that. banks are not too big to fail. >> what would you have done with gm and chrysler? >> those are policy issues. it sure seems to have turned out quite well. >> i know it has. in a perfect world, capitalism doesn't work unless you allow failure. four made it. we made an -- are there times -- there's times to make an exception? >> i think there always are exceptions to every rule. and if you have everything moving one direction -- i'm not being critical of all that happened in 2008. these were scary times. i know today our industry -- in fact, wells fargo has more capital than i think we've had ever in our history. the industry has much more capital. that's one of the strengths of the united states. our banks are either in very good shape or relatively good shape. these feed the rest of the world. wouldn't want to trade our banking system for others. we might argue how we got here. that's a really big strength for the country. >> i always bring up too big to fail. notice how i do that? >> you get a royalty. >> i don't get a royalty. i should. >> you do. >> working with you is my royalty. >> john stumph is chairman and ceo of wells fargo. more to come. we'll be right back with a lot more. tdd# 1-800-345-2550 there are atm fees. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees. tdd# 1-800-345-2550 no monthly account service fees. tdd# 1-800-345-2550 no hidden fees. tdd# 1-800-345-2550 and we rebate every atm fee. tdd# 1-800-345-2550 so talk to chuck tdd# 1-800-345-2550 because when it comes to talking, there is no fee. [ horn honks ] ♪ oh, those were the best of days ♪ ♪ i still feel the summer rays ♪ that graced our backs as we went down the lane ♪ [ horn honks ] [ male announcer ] when your car is more than just a car to you, the right insurance matters. are you getting the coverage options you need and the discounts you deserve? for an agent or quote, call 800-my-coverage or visit travelers.com. welcome back to "squawk box." about up where it was. we're looking at about 23 points for the market. if it were to open it would open higher after a big gain yesterday. maybe today is the day for 13,000. we'll see. >> we got the news in. >> did you hear john? he talked about the diversified businesses of wells fargo. a lot of horses, different horses pulmoiling the coach. >> it just comes out. he doesn't have to think. >> do you want to sing the song? >> i don't want to ruin your ratings. it's an iconic symbol. seventh or eighth oldest brand in the country still in the same business. >> wells fargo's stagecoach. >> like a great clint eastwood movie or something. when we come back, we'll get final thoughts from our guest host today, wells fargo ceo john stumpf. "squawk box" is coming right back. ♪ our machines help identify early stages of cancer and it's something that we're extremely proud of. you see someone who is saved because of this technology, you know that the things that you do in your life, matter. if i did have an opportunity to meet a cancer survivor, i'm sure i could take something positive away from that. [ jocelyn ] my name is jocelyn, and i'm a cancer survivor. [ mimi ] i had cancer. i have no evidence of disease now. 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