Transcripts For CNBC Squawk Box 20130910

When he made an offhanded comment about what it would take to solve this through diplomatic reasons. Well talk more about that. Just a moment. But a new cnbc wall street journal poll finds 60 of americans are against striking syria. John harwood will join us with that in a moment. But first, andrew has a rappup of the days headlines. The big one being apple. Apple holding a major media event today. Its expected to update you with its lineup of iphones. The company will likely announce it has penetrated the Worlds Largest mobile carrier, which is china mobile. In the run up to the party, in the past two weeks, apple has made buyups. Twitter is preparing to get public. They have purchased public Advertising Company mopub. The deal is expected to help automate ad buying on tweter. Unclear what the means to advertise on target. Chinas factory output grew at its fastest pace in 17 months. And investment and consumption beat market forecasts. Lets get back to the story of the morning, which is syria. President obama will be addressing the nation at 9 00 eastern time. John harwood joins us with a preview now and a look at the new wall street journal poll as becky was saying, showing 60 of americans do not favor striking. John. Not surprising, andrew. Thats wa weve seen in other surveys and thats what weve heard from members of congress. When you ask people, should the United States strike syria . You get about six in ten says first of all, they want their congress meven giving the authority. He says he has the constitutional authority. Another 60 say now, if you define it as cruise missiles launched from navy ships, the support creeps up, but its still under 50 with a majority opposed. And when you talk about president obamas ratings on handling syria, two to one negative, and lo and behold, theyre looking at a pretty good picture here and i think theyre going to take it and ride it for a while at least while they test it and see if its credible. You said that really well, john. Stumbled on yeah. And michelle, first lady, i am checking to see whether who the source of that was. The source of that was the president , so i guess he knows, right . He kind of alluded to 245, that his wife is against it, too, right, john . Well, look, the president was against he spent two years trying to stay out of syria. Yeah, right. But hes always had this reluctant to be involved. His hand was forced. He went right at the last minute when everybody expected him to use force unilaterally, he backed away from it. And i think a lot of that was from inside him. He decided to go to congress. Congress said, hey, we dont want this. And lo and behold, you cant tell what happened exactly yesterday, but the president said he talked about this idea with putin at the g20, the kerry simply throw it offthecuff not expecting it to be taken up . I dont know. But this has not be a strong period of the president s strong leadership over the last couple of week and hes landed in a place that seems to be purposeful . What kerry has done . Yeah. Thats really hard to tell. The understand cases were its something he never intended to be taken up. He kind of snapped. He said well, ill tell you what they can do but then he followed up by saying hes never going to do that. Richard haas, the former Bush National security adviser told me yesterday, this is worth testing. Could you do it . Thats the question. Do we know where they all are . Can we identify them . Its not easy to see quester them. Could we get them under some kind of international and the longer it takes us who firth out the logistics, it puts off a senate volt and all true. All true. Which is why one of obamas foreigner advisers was telling me yesterday, it would have to be coupled with some sort of a commitment to a political conference. The United States and russia have been talking about a geneva conference to end this war. If you have a real move talking about something credible on chemical weapons, then you might have something. Certainly, were going to explore this for a while. Theyre not going to vote in the senate this week, which i can tell you you is a huge relief for all these senators saying, yeah, if we have to vote for you to do the authority, i guess we can do it. But we really dont want a vote. And just as the president didnt want to go ahead, the members of congress didnt want to vote for it, either, and now they dont have to for a while. France wants if people who were responsible for the last chemical attack to be brought to justice and brought up against charge in front of an international court, as well. And i guess those are things maybe more complicated, but, john, take a lot of time to put together. Yeah. And im sure people are going to add more on to it to give it the appearance of credibility. Asadz might not want to appear in front of a court on that. Theoretically, it goes up to him. I think theyre over there laughing, kind of, but i dont know. I dont know, john. Well see. But you know what . No one really wanted me included, no one relate wanted to open the hornet aes nest. So weird. Everybody is sort of get what they want, but it doesnt feel like a vick toir for some reason. It certainly does not feel hike a victory. Its like a game where theres 20 turnovers and your team ultimately wins, but its ugly. The team is going to by taking president obamas address to the nation live 9 00 p. M. Eastern time and you can see it right here on cnbc. The president has a lot more gray hair than in that picture now. Lets check on the markets this morning after a big day yesterday. A lot of it was on john carry. Yeah, thats right, the idea that there might be a way to get out of the bulls without having an attack. It was the best day in almost two months nrt dow. And yesterday we couldnt tell, andr andrew, whether he was serious with the weapons ban, we couldnt tell whether he was sardonic, whether he was surprised, because his face didnt change. Nothing changed when he said that because he cant move any part of his face now. Ive given you 24 hours to come up with something. Why dont you say there but for the grace of god go you, groupie kernen . Something. Ive been thinking about it. Its in the front of my mind all the time. Never mind. Lets check out the that would be too entertaining if you did. Lets look at the oil boards this morning. Oil, this is not entertaining when its still above 100. But its down 1. 06 on this. Lets get to Ross Westgate who is standing by in london. Ross, good morning. Good day. Good to see you. Weve taken our phones from you, tweer 9 to one advancers outpacing dexwlieners. The uk market yesterday was around around service points. Really about is now. We are doing better in germany and france, as well. The ftse mib is up 1 . Well get into that in just a second. Lets show you whats driving us firmer this morning. Weve got autos doing very well. 2. 5 . Frankfurt motor show is on at the moment. All the executives there as you mute expect coming out with positive noises. The key thing is, besides they talk about key things in asia, we for the first to him they pointed some rooshgs about the inn market, as well. Chinese industrial product up 10. 4 . Its the best performance since 2012. A lot of that investment, growth, retalt sales edging higher, as well. Those two things helping fears about any kind of hard landing in china hes away. Resources doing well. There are those sectors at the moment in negative territory, either. As far as bond markets are concerned, this is interesting. Spanish yields, 4. 48 on the tenyear. The italian yields, 4. 501 . Its the first time span yash yields have lower than the others. Sylvia berlusconi is looking at being kicked out of his party. That could mean the government will collapse. Most people think they wont, but you have to keep your eye on that over the next day or so. Thats where we stand in europe. With that, back to you. As we mentioned near the start of the show, it is a big day for apple. The Company Hosting its first major event since june and a possible announcement with china mobile is waiting in the wings. Is there any surprise were going to hear about today at all . Thats a great question. Its become such a sport to redifficult wh predict what apple is going to do. The last 40 years, this company has reinventsed how you incident every act with computer twice. How many people are out there you just said 40 years . 30 years. I was thinking im getting ahead of myself a little bit. Im looking out the next ten years and saying this company is going to regenerate the computing industry. But the point is, everyone is so unlike apple. Theyre completely done, they have nothing new in their roster. The effe the engineers have nothing else that theyre testing out. I cant prove it because, oh, they havent had any new products in a whole year. Wait a second. Can microsoft be reinvented, too . Yeah, it does not seem particularly likely. Clearly, they understand that they nationwide to reinvent. So theyre transforming and becoming a hardware company. But i think its going to be a pretty tough rode to hoe from microsoft here. You just said a parity video of a new commercial for the 5s apple iphone, you said you didnt think there was a lot goc on. Here at apple, we have break boundaries. We have a found a way to save millions. We call it the iphone 5s. The s sands for same. We think youre really going to love it. Take a look. Isnt it revolutionary . This is sort of the great critique of apple, which is that every year they come out with the same device and they put a new name on it and its marginally better. But thats my point. In the last ten years, they have three new segment thats came organically. They didnt acquire entry into the phone business. They didnt acquire becoming the biggest media seller outside of walma walmart. So i dont subscribe to that view that the company isnt innovative. Theres not a tech company that i know, not even google, that dont produce any revenues. But everything that happenel has done has created new revenues and real earnings. Today will be interesting because i think that, you know, the critique is reasonably fair. Theres not likely to be any leaps and boned. What is the factory worth . We work its worth 700. And you dont have to get a whole lot of earnings growth. When the stock was 700 the last time, it earnings had grown 60 pir60 . Earnings are down 0 year on year. So the real question is not how well china mobile does in the first quarter, how will the 5s does in the fist quarter, but do we have a couple mr quarters of sustained groth and when is that new segment for apple going to come out . We will see if it happens today. Throw it sounds like its unmriekly. Thank you for coming in this morning. Appreciate it. When we come back, why some of the nations biggest banks are warning of a slowdown and cutting jobs. Fist, sports news. In movend night football, the Philadelphia Eagles won their first game under chip kelly, beating the washington redd skins. Michael vick had a pair of touchdowns he ran in. He ran seven dimes for 55 yards. Then the Houston Texans rallied for a 3128 victory over the san diego chargers. Randy bullock fired a 21yard field goal. In tennis news, are a fayel nadal won his second u. S. Open tennis title beating novak djokovic. This is the 13th grand slam title for nadal. Right now as we head to a break, lets check on the National Forecast with the weather channels alex wallace. Alex. Good morning to you. Hot times ahead through the middle of the week. Temps well into the 90s as well as st. Louis and chicago. Were going to see some of this heat building to the northeast. Highs here will be 10 to 15 degrees above average today. D. C. , 94. Well see the 90s spread up into the boston area as we head into tomorrow. But there is some relief in sight. Cooler air will come on in. By the end of the weekend, look at these temperatures. Huge drop off here in the northeast. Going from 90 to 60s across new england. Whats your weather update. Its time now for the executive edge. Shareholderses are urging the tech gientds board to consider Allen Mulally. This is a name we have been talking about for over a week. And mike lawrie. We talk about mulally in the past. Lawrie is maybe someone you dont know quite as well. But he is at cfc right now. I think he just joined last year the first year for a first year turn around. I like mulally. I liked him personally, but i wasnt sure this is the right thing. I thought you needed a tech vision. But ive talked to some more people in the business and i think what they need is an inspirational leader and it doesnt matter whether they understand how to code or understand any of those issues. Well see. I like the idea of going back to someone who is almost like a lou gershner type. I liked it from the getgo because i think hes the type of guy who could really sit down and take a different look at the place and maybe bring in some new blood and i think thats a good thick. Who is the cfc . Mike lawrie . He has worked at a variety of different positions. He was in europe at a company there. Value act, is that the hedge fund . He knows, he was there at value act for i think about a year or so. So those guys know him pretty well. I think the biggest problem theyre going to have with that is he is only about a year into a multi year turn around at cfc. I think it would be harder for him to walk away from that than someone like Allen Mulally who has gotten things under control and did what he set out to do. Who is the other guy . Woz or whatever. Wozniak. He chased the ledgeend of steve jobs a little bit at this point. And he points out that he never wrote any code, either, i dont think. Great. Steve didnt write any code. Theette he was a marketing guy. Yes chased at jobs being, you know, all the accolades because he was i mean, its the same thing. Exact same thing. Exact same thing. Maybe the iphone is to be the iphone 5es. People will point on to allskully as a play where that was supposed to work. He went to the most amazing thing about him, he comes on the show now. Yeah, he does. And he looks good, too, if you notice. He does. He was going to do what we do all the time. Theyre going to do what we were able to do now. I dont think you can do it with your blackberry, but we can do it with an iphone. Send things, print things. Oh. Can you . Yes. I love that piece. Ive got good reasons for this. Lets talk about another story on the front page of todays wall street journal. It takes a look at mortgage lenders and home buyers being squeezed by a rise in Interest Rates. A number of banks are cutting jobs and theyre warning of declining profitability in the home loan business. Just yesterday, wells fargo said it expects Mortgage Loan originations to drop by 30 in the third quarter. Jpmorgan warned that it expects to lose money on its Mortgage Origination business in the second half. Bank of america laid off 2,100 employees largely because of its decline and refinancing activity. Gentlemen, i guess we had to know that this was coming. The average Mortgage Origination for a new one on 30 years i think is about 4. 75 . I chalk this up to breaking news, air has oxygen in it. This is what happened when Interest Rates go up. Yeah, but 30 . But its a short time decline. Youre going to see it bottom out next year and then they expect it to pick back up in 2015. Jpmorgan, what did they say . Theyre not even going to make money . Theyre laying off thousands of people in the Mortgage Business if you look at these companies. But these are just the mortgage divisions. Its not like the bank is going under or not about going under, but theyre still very profitable enterprises. Yeah, but you had a mortgage bubble, a mini bubble that built up and people were trying to get in before rates went higher. Bank of america is laying off people as part of their larger part of their strategy. Larger strategy. And i sometimes think issues like this become cover for larger strategic alternatives. That could be the case. Plans that theyve had in place for some time, anyway. Our next story is for all you road warriors out there. Theres a column in todays New York Times that talks about growing pains for the airport check program. This program was designed to give eligible flyers a quick past through airport security. Its only operating through about three airports and its only available at certain terminals, as well. Last week, the is the sa announced an expansion of prechecks. It will add 60 new airports by tend of this year in addition to more airlines. Have either one of you signed up for that . Its precheck on global entry. This is one of those cry me a river stories. I used it. When it works, it really works. When it doesnt, it doesnt because the airport doesnt have the service. Which is fine. Its going to get there. I dont understand the you said it worked once. Theres a guy in the piece, it didnt work for him. I dont know where hes traveling. It didnt work for him at new york. 50 times a your. Certain terminals at new yar and term terminals dont. Thats one of the major airports around. But if youre at one terminal and you change planes to another terminal, the poirnt is like, thats great. The guy at the airline said its not my problem, its the tsas problem. If its the government side running the precheck program, what do they care . Are you precheck . Im not. Im not. They more or less check the i. D. Now i know what fbo is. Oh, yeah. There were so many letters being talked around. What does private even mean . Im not even lying. I didnt know what the fbo was. You know the great line when the father bricks his son into the jet blue plane and the kid looks around and going, what are all these people doing on the plane . Who are these people . Who are these people. Can i order a coke from any of them . We have details, first on cnbc, right after this. And then at 7 00 iron, our newsmaker of the morning, sandy weill will talk about breaking up the banks. What he told tuesday last time he visited us just about 13 months ago. Well talk about new regulations five years after the financial crisis and his plan to change the world. First, though, as we head to a break, take a look at yesterdays winners and losers. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Lecocacola is partneringg. With nashville parent and charlotte parent magazines, along with the mayors of those cities, in the fit family challenge. A Community Wide program that offers free classes that inspire families to get out, enjoy moving together, and even track their activity online. Its part of our goal to inspire more than three Million People to rediscover the joy of being active this summer. See the difference all of us can make. Together. Good morning and welcome back to squawk box here on cnbc. Im joe kernen along with becky quick and andrew ross sorkin. Were about 20 minutes away from our newsmaker of the morning, former citigroup boss sandy weill. Lets talk about some of the days top stories. Harry reid is delaying senate vote to authorize the use of force against syria. He says he consulted with the president , fellow democrats and republican leadership, all of those people, before slowing the timeline for the vote and it came late yesterday as the president did a round of interviews with the major news networks. You have to take it with a grain of salt initially, but between the statements that we saw from the russians, the Statement Today from the syrians, this represents a potentially above development. And my preference consistently has been a diplomatic resolution to this problem. You savannah was so nice, but she was tough. She was good. Maybe the president hasnt told susan rice or john kerry or on nancy pelosi or because theyre all confident that the vote is done. But when she asked him, are you confident . He copped to it immediately and said no, im not confident at all that i can get the votes. So i guess good. Nobody wants hes the one that can admit it. All the others have to all the cards fall. I guess the cards did fall because he admitted it yesterday. And then he even said something been you know, his family and himself. So meantime, an nbc news wall street journal poll this morning, its a better number than it was before. 60 are against striking syria. I thought 70 , 75 . And then the congressional calls, 90 10 were talking about. President obama so going to address the nation tonight at 9 00 eastern and i wonder what hes going to say. Now hes got to rewrite it. We have a new picture with the gray hair, too. Thats better. Thats better. Have you seen the i probably would have preferred the old commercial. The picture where the guy starts in the kitchen and it works all the way up to where he own tess restaurant and someone walks by and throwing flour in his hair. And the president is definitely i think the president does. Im shocked i dont age. But people that dont see themselves every day, they might notice i on do look different. Termtwo president s age in eight years. It hasnt been eight years yet, but its been five. Its a tough job. Courtney reagan joins us with details. Good morning to you, becky. Apple is not the only big Company Making an announcement today. Walmart is going to announce the largest brick and mortar smartphone tradein program in the u. S. Just in time for consumers to trade up to the new iphone, whatever it may look like when we get it. Starting september 21st, in 3600 walmart and sams club locations, consumers can trade in their old smartphones and obtain credit to be immediately applied to the purchase of a new smartphone. Over 60 of customers are now telling us that the program of tradein that a retailer offers could influence where they purchase their next phone and over 50 of customers are telling us that theyre going to do a tradein the next time they get a new phone. So the time was right for us from a customer perspective. We also have built a program that we think is the lowest cost and the best value and the simplest program in the market. The Smartphone Consumer is a valuable one to many retailers and right now its a growth spot. The category has been an under performer for the category. They have taken share in each of the last three increments. Walmart isnt the only one offering a tradein program. Others offer cash or credit for used smartphones. Jeff summers, vp of ebay marketplace says the iphone 5 is now selling for an average of 430. Sellers can do whatever they want with that cash. Its not just tied to having to be used for the purchase of a new smartphone. And we have seen serious changes. Providers are shaking things up. People want to be able to trade in the phones more quickly and get back in the store, too. Exactly. So with walmarts program, theyre hoping you trade in that incentive for that crash tradein value right away. Theyre hoping that we know that food foot traffic. I dont think they anticipated that they hold so much value. An iphone 5 going for 430 on he auto bay or 300 at walmart arent you worried on ebay that the stuff is stolen . Iemp sure thats an issue. Walmart says their program is is he have easy. Is it broke. . Does it turn on . Is this screen cracked . What this they doing . Though they send it to an Exchange Partner and they recycle or refurbish the phone. So walmart itself does not resell the phones. Coming up, fast were faster and fastest. Youve heard about quantum physics, what about quantum computing . We head towards the singulairty this century. Download all your brain. Im kicking out some parts, right now. Parts is parts. Stay with us. Welcome back to squawk box. A big day to explode, so is silicone. Silicone is approaching its computer limits. Our next guest offers a solution, quantum computing which could handle the tidal wave of big data coming our way and can do it thousands of times faster than todays computers. His Company Created the first and only commercial quantity item computer in operation today. Good morning to you, vern. Good morning, andrew. Explain this. I always thought moores law, we could keep going and keep going and keep going and i thought we could do it on silicone. When do we hit the outer limit on silicone . Theres a variety of opinions on that. Some people say it could be five years, it could be ten years, but it will happen. You get down to such tiny increments, it will run out of the ability to adapt. And in terms of what you can do with quantum computing, one of the questions that came up as i was thinking about it talking to you is this idea that the ns is a, for example, has been apparently able to sort through all sorts of data over the past decade that we didnt know about. Do you think theyre doing that with regular standard chips or do you think that theres something going on that we dont know about . Because it sounds like theres a lot of data that has to be competed. Yeah, i really cant speculate on that. But i know that algorithms are a very important part of the computing mix. So i think part of wa folks like the nsa have done have developed clever algorithms to do things. You can put a lot of smart people on a problem and achieve a lot that you can with just algorithms alone. Never underestimate the power of good developers. And in terms of what dwave can do, you say a decade ahead of basically all of your competitors. How is that possible . And wa do you mean by that . Well, we are. Weve built the first commercial quantum computer. Most of the all of the other quantity item computing efforts are laboratory efforts and theyre moving science forward. Its important. But the inspiration of our founder, majoritidy rose, was to basically build a quantity item commercial computer with Venture Capital. Take it to the Venture Capital market, raise money, have a sustained effort. Weve shipped our First Computers to nasa, wells fargo. You can draw a logarithmic Straight Line on human achievement. One thing that gets exciting is when machines can do the planning and the design of new machines. Some of the design, i know. Is that feasible in ten years where we can sort of pass the baton to things that are perhaps even smarter than us and more able to go where we dont even know were going to go . Well, its start to go some extent now where you have a field called Machine Learning, which is a branch of Artificial Intelligence where youre actually using the Artificial Intelligence to program a computer. So its very i remember as a stockbroker, a Company Calls symbolics. I remember them well. Yeah. Never worked. And its taken much longer. Its hard to do. There are other people that say that theres an evolutionary copyright on the brain that well never be able to simulate that. No, i dont think thats true. And i think the ai field has made a lot of improvements. It was earlier, back in the symbolic stage. But today, Companies Like google, they use an enormous amount of Machine Learning and thats how they achieve advantage. So its a really important technique today. So youre seeing the reemergence of Artificial Intelligence. Quantum computing a technique that will help that. How big are these computers physically . People are talking about we keep reducing the size of on these chips. I want to know what a dwave chip looks like. Our chip is the size of a normal chip, the size of your fingernail, but the apparatus is a 10x10 room. Theres a lot of shielding. It has to be at almost absolute zero in a magnetic vacuum. So we have to have this very rare environment. So the size of the machine is really all about the shielding and the cooling. The chip itself is very small. Same size as the normal chip. Look ten years out. Do you see a time when you dont i dont remember because i wasnt there, the bick vacuum computers, is there going to be a day when you dont need a 10x10x10 room . Oh, yeah. Well reduce this over time. The exciting thing about our technology, its super conducting. That means it generates no heat. As this computer sails over time, and he could with have millions and millions of bits, it adds no more heat. That is the problem with moorers law, the heat generated by that. This could be revolutionary in terms of heating and cooling and providing a solution to data centers over time. Okay. President , ceo of dwave, thank you for joining thus morning. Thank you. Silicone valley is up in northern you know where silicone valley is. Yes. That set the tone earlier. Thats in beverly hills. Thats literally silicone valley. Thats not dirty. Normal people get implants. I thought you were going to the movies and then i thought you were going to unemployment, the Unemployment Rate had a little to do with the adult film industry. Who is the fourth guy . Which is feeding the silicone industry. I wonder how the doctors are doing. It is related. Honestly, but someone did blame some of the bad employment reports on on the adult film industry. Right. Did you see the latest is but it isnt totally and the latest is theres a fourth hiv case, apparently. Yeah, with okay. A number of squad ward moments. Still to come, the newspaper headline that had us squawking this morning, including a squirrel cooking contest. But first, lets take a peek in the green room. Look whos here. Former citigroup boss sandy weill is here to talk about breaking up the banks. No topic is off the table. Hes going to join us for two hours starting at 7 00 eastern time. [ tires screech ] [ male announcer ] 1. 21 gigawatts. Today, thats easy. Ge is revolutionizing power. Supercharging turbines with advanced hardware and innovative software. Using data predictively to help power entire cities. So the turbines of today. Will power us all. Into the future. Man sometimes its like were still in college. But with a mortgage. And the furnitures a lot nicer. And suddenly, the most important person in my life is someone i havent even met yet. Who matters most to you says the most about you. At massmutual were owned by our policyowners, and they matter most to us. As you plan your next step, well help you get there. Welcome back, everybody. Were in the chairs where we get to talk about the stories that have caught our eye this morning. And i dont know if you saw it yet, but on the front page of the wall street journal, theres a story about how walmart is a little worried that theyre going a little too cosmopolitan. Theres a store manager who wants to try and make sure he gets back to the red neck roots of this company. And to do that, he wanted to make sure his store in arkansas actually comes up with this whole cool thing of a squirrel cookoff. This is the second year theyve done this. They have a squirrel cookoff there and came up with all different ways. Confirms. Cooking or no, men cooking squirrels. Men cooking squirrels. Last year tastes like chicken . Last year the dishes included squirrel hajalapeno squirrel poppers. This year, the winner was had things like caribbean jerk squirrel, but the winner was squirrel sausages. And the guys who won last year won with squirrel sliders. They said, look, i dont think people like eating anything that looks like a they dont like eating food that looks like a rat. So the clue the whole key to this thing is making sure you grind it up. What do they say the taste is like . I dont know. I have a lot of questions. It would be gamey, im sure. But my question is how many squirrels does it take . Two, hopefully youre using fresh squirrels not squirrels that you find that have already been hit on the side of the road. Here are the rules. For the contest, each twoperson team had couple of hours to prepare. No less than 80 of the meat must be made of squirrel. No squirrel yeah, why would you eat brains of anything . No, you wouldnt. Thats a dangerous game. Theyre scary. And you saw some of the disease. Yeah. There were people exposed to it. By instruments and hopefully they were autoclaves. But never been an example, i dont think, a transmission of that from one person who had it. But the brains, never get into that. Theyre scary enough because theyre not alive. Theyre kind of like viruses but theyre just pieces little pieces of chemistry. Its a column today about what paper would the column happen to be in . It would be in the New York Times, it would be my column. Your column. Its a hypothetical game. What wouldve happened if we saved Lehman Brothers . Its five years later, the anniversary. How wouldve history changed had we done that . And we always think about in the context of dominos, right, that if lehman fell, what would happen to aig, and merrill and everybody else. Gave a talk at the university of chicago and said we are thinking about it all wrong. Its not dominos at all, its like popcorn and that it didnt matter if you saved Lehman Brothers or not because ultimately if you just take one of the kernels off, all the others still pop. Thats interesting because youre right, we that thought about it as dominos and talked about it for dominos. I think its correct. I think more i thought about it and spent time on this column, i think if we had saved lehman, how hard it would have been to save everybody else. The politics would have been that much more difficult because by the time you got to aig, you would have expended more capital and then you would never have been able to get t. A. R. P. Or at least the number or the magnitude. My daughter has a column in Huffington Post today. Its called i dont have one. So if im going to shamelessly selfpromote one. Shes the head of a nation. She gives all the information. Im going to be competing with her. And its funny because they found reasons that theyre more creative, theyre actually doing something more important with their time when theyre putting things out. Its the same enabling blackberry thing. I actually its good i have a blackberry. I am a member of that its pretty cute. And shes the president of procrastination . Shes the president of that entire procrastination. I thought i had a lock on that. It has to do with knowing homework on a thursday and doing it on a monday morning. Sandy weill when we come back. Stick around. ] staying warm and dry has never been our priority. Our priority is, was and always will be serving you, the American People. So we improved Priority Mail flat rate to give you a more reliable way to ship. Now with tracking up to eleven scans, specified delivery dates, and free insurance up to 50 all for the same low rate. [ woman ] we are the United States postal service. [ man ] we are the United States postal service. [ male announcer ] and our priority is you. Go to usps. Com® and try it today. [ male announcer ] and our priority is you. Especially today, as people are looking for more low, and no calorie options. Thats why on vending machines, were making it easy for people to know how many calories are in their favorite beverages, before they choose. And were offering more low calorie options, including over 70 in our innovative cocacola freestyle dispensers. Working with our Beverage Industry and restaurant partners, were helping provide choices that make sense for everyone. Because when people come together, good things happen. He shocked the Business World a year ago. I think what we should probably do is go and split up Investment Banking. Now sandy weill is back. Well talk banks, dodd frank, the financial crisis and who he thinks should leave the fed. A special interview you can see right here on squawk box and its only on cnbc. Along with joe kernan and becky quick, we have a great show for you this morning. Were going to get to the main event in a couple of minutes. See how the market is setting itself up this morning. The dow looks like it would open up about 52 points higher. The nasdaq up a little over 13 points. Lets get you through the morning headlines. President obama conceding he may not win congress gnat support for military action against syria. The president was asked to act without congressional approval. I think its fair to say i havent decided. Im taking this vote in congress and what the American People are saying very seriously. The answer is no. That was what we were talking about just before, joe. Eamon javers is going to join us shortly with more on the president s interview on nbc and what people can expect in the president s address to the nation later this evening. I dont know. But the comps are out. The comps are out and its weird, looks like global comps were up 1. 9 which was above the estimate of. 4. In the u. S. , comps were up. 2 which was below the 1. 1 that analysts were looking for. Global is above, u. S. Is below. Europe is the big surprise. Supposed to be down. 7 , and it was up 3. 3 . And i have no idea why. They benefitted from the introduction of blended iced beverages in the uk, strong premium food events in the uk and in russia and emphasis on Core Products in france. Even in france. You know what their core product for france. Freedom fries . Yeah, french fries. They make these french fries that, yeah, that was big over there. In the u. S. , the comp sales were up 0. 2 . They say it was dampened by the challenging environment in the United States. People going to mcdonalds because of maybe its gas. Dollar menu . Well look at the mcdonalds situation. Up 1 in the premarket. As the program progresses, in the meantime, apples big event is about six hours away. Expected to release new versions of the iphone at an event in cupertino. Also, jc penney now being sued by upscale coffee press maker. Do you have one of these . Claims penney promised to showcase the product at the socalled store within a store. The strategy that was at the center of former ceo ron johnsons vision for the retailer. It says that penney failed to deliver on that promise. So far, no comment from penney this morning. Do you not have a keurig . I dont. We have an espresso machine. No surprise. No keurig. My wifes the coffee drinker. Oh, thats right. Tea. Tea. Herbal tea or something. I have a coffee here and a diet coke. Lets talk about twitter. Twitter making the largest acquisition to date with purchase of the mobile ad company for a reported 350 million. That purchase will bolster twitter ad sales as it prepares for a potential initial public offering. Estimates twitter will make over 100 million from advertisements. Thats more than half of the Global Advertising revenue. Mopub. I made that up, i never heard that. You know that firm, right . The engineering firm. Im not kidding, Morrison Forrester and they advertise oh, mofo. No one at that place said anything when they were they hired the firm, advertising firm, were going to put a big campaign out were going to call ourselves mofo. Win the future . Yeah, win the future, that was a good one too. Wtf. Walmart trying to get a piece of the smartphone upgrade pie on the same day apples expected to introduce a new iphone. The retailers announced a new smartphone tradein program thats going to start september 21st. Customers will get credits of 150 to 300 credits on their mobile. At the same time, walmart is trying to go down scale, right . Right. I think, you know, if you are what you are. Be comfortable with what you are. Youre not target, youre walmart. A guy in arkansas worried theyre getting too far away from what he called the redneck roots. Not too comfortable with it. Lets get to our newsmaker of the morning. It was over a year ago that wall street legend sandy weill sat on this set and shocked wall street and us with his call to break up the banks. Listen in. I think what we should probably do is go and split up Investment Banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something thats not going to risk the taxpayer dollars, thats not going to be too big to fail. Joining us onset this morning is sandy weill, former chairman and ceo at citigroup, also the chairman of the overseers, thank you for being with us. My pleasure, becky. Thank you. It was 13 months ago you sat down with us and andrew and i our chins kind of hit the ground when you talked about breaking up the banks. We had nothing to say. We were stunned into silence. It was terrific. A rare occasion when you can make us shut up. I just wonder, what reaction you got when you came out as someone who built up the banks who was the guy who created this. Who then turned around and said its time to break them apart. What reaction did you get . A lot more positive reactions than i thought i might. I didnt get many reactions from wall street, which i think is very understandable. I think when you think back over 15 months since i was here the last time, a lot of the things we talked about have happened and gotten even worse. Like, for example, the attack on anybody called a banker. I mean, that continues today and it really continues to progress and not a very good way. And second, we still dont have any regulations. There is no volcker rule. Dodd frank isnt completed. So nobody knows what the rules of the road are going to be. And thats a bad thing, i take it. Well, i think its always good to know where youre going. And we as a country dont know where were going in a lot of different places, especially in the financial industry. Would you still say the banks need to be split apart . I think i would say the same thing i said before that if the way the regulations come down do not allow entrepreneurship and do not allow people in the financial industry making mistakes. Then, i think and because of risking taxpayer money, i think thats going to make our financial industry completely in effective. And we really in the financial industry led the growth in the whole world. We help convert capitalist countries. More than 1 billion people have come out of poverty into the middle class. Which is helping everybody. You could do that with the investment banks. You could have the commercial banks going back to doing medical repoortgages and busined things like that. Yeah. I think that if the rules come down so that banks cant really perform this function or Investment Banking parts of the bank cant, then i think they should have the option of being able to split apart so that they can do but there would be carve outs for when they need to be part principal for whatever amount of time. And what would be procolluded you wont have without them having the risks. How do you determine . Theres certain times where youre not trying to be part of the well, it didnt go in 1999. And youve and Elizabeth Warren has admitted it would not have stopped the financial crisis. Maybe some good lending standards for commercial banks might have stopped the financial crisis. Well, i think a lot of things might have stopped the financial crisis. Right. But this wouldnt necessarily. I was looking for an analogy when you first said because i wasnt in that day. Thats why i said it that day. I was like thats like so and so saying thats like because you were such i said off camera, i watched you build shearson and sell that and i was a stockbroker and i watched you do it again with a can company, basically, right . The way you did it. Its incredible. But youre the one that brought the investment banks to the commercial. They didnt think of it. You did it, youre responsible for this. I finally came up with, thats like Anthony Weiner saying no more texting of selfies anymore. I thought it was really is that what you think . Thats what i did . No, im saying i was trying to come up with thats like so and so you were almost the father of the super bank. Well, i think the super bank so have you found religion . No, i think youve got to look at what the world is like you wouldnt have done that you wouldnt do it again if you had to do it . Not in this environment. So the environments changed. Help clarify one thing. This is something ive been thinking about literally since i saw you last. Youve made the case that we should break up the banks on an economic theory that its actually better for the banks, better for the industry. But at the same time, youve commented that we need to do it to save the taxpayer and the potential risk. I think that the taxpayer and the potential risk can be mitigated great degree by good regulation. Its not very hard to do. We have a book thats 800 or 900 pages called dodd frank in very small print. My eyes are corrected to 2020 with glasses. I cant read it its so small. You were saying, you dont agree, for example, with Elizabeth Warren, or at least you dont agree with Elizabeth Warrens reasons for breaking up the banks, but you do want to break up the banks. Im trying to understand. What im saying is that if the banks cannot perform their function, which i think help lead the United States to be a leader in our in the Global Economy and in the world, were going to lose that position to other countries. If we dont do something. If our government puts in regulations where we can attract the best and brightest people. Look, the United States is really a creative place. Look whats happening in Silicon Valley. The people that went to wall street, a lot of them, were bright, creative people. Now youre arguing against regulation, sandy. Im not arguing against i think regulation its more than that. Bringing it back would be a lot more regulation. Are you saying thats what we should do . I think good regulation is important. Go all the way . Is that what you said last time . No, what im saying well, its been a year later and the problems have gotten worse. The banks have had a very good financial period in time because Interest Rates have been at zero. Theyve been very steep yield curves. So its not hard for a bank to make money. But these Interest Rates at zero is not a very good thing for the country longterm because its killing retired peoples incomes. Its killing the Pension Funds which have big deficits. And these deficits are only growing because they cant make the so dodd frank is the wrong way to do it . Is that what youre saying . Well, i dont know what dodd frank is going to do yet. What i think is we should have regulations, for example, that look toward what the leverage ratio should be based on risk weighted assets and be able to understand those assets because the fed now has oversight of all the institutions so they know everybody, what everybodys doing and one of the things they should look at is concentration as it relates to how you value those assets. Off Balance Sheets. There shouldnt be any off Balance Sheet. You can do all that without yeah, if the rules are right. For example, theres no reason for off Balance Sheet. The problem with the financial industry is you need more transparency. If you dont have transparency, people arent going to understand. When the confidence goes, which we saw what happened with Lehman Brothers. All of a sudden, there was no markets and that broke the buck in the money market fund. I said, why do you think he decided to come out then and say it. How did he get to that place in his head where he wanted to change his view. I went back and was looking. There was a time when john reed wrote an editorial. 2009. And you were quoted as saying i dont agree at all. I dont agree with his reasons. Can you walk us through some of the permutations of how you got to this place . Yeah. I think very simply, what i saw was people in the industry really feeling terrible. I mean, everybody participated in this Great Recession and the development of the Great Recession. Whether its the regulators or Rating Agency or wall street. Individual. People not paying attention. And a tremendous excess in one specific area. But people were shooting at this industry, it became harder to attract people. People were leaving the industry. And i basically felt that the United States should be a leader after this Great Recession which we helped the world get into. You would think we wouldnt be given another chance. But no other country could rise to the front and be the one that was leader. Everybody wanted the United States to be the leader again. And i felt that for us to be in that position, we really had to go and make the financial industry vibrant. They were going to be killed because they cant make a mistake. I dont understand where you are right now. Once and for all it sounded to me, if you just raise lending standards and capital requirements, we wouldnt need dodd frank. It could be in dodd frank, should be in dodd frank. Youre not saying we need to separate all Investment Banking from commercial banking. We dont have to if we have the right regulation. If we have the wrong if we have regulation that precludes Investment Banking operating in a way that it can be constructive, then i think we should do Something Different and let them split up if they figure thats the best way they can provide their services. Okay. Because it is hard to there are some advantages to letting commercial banks do some of the things that investment banks do, right . If you could there are. But the cultures are very different. Right. Well, you were the one that decided to put the cultures together, right . Right. I did. And the company did really great. I mean, in the five years after the merger, citigroups earnings went from 6 billion a year to 18 billion or 19 billion a year. I have my own ideas on how that happened. You werent there anymore either. And someone there that probably shouldnt have been there. I was there for the first five years. A lawyer, wasnt he . A name that shall not be mentioned. Dont say it. Listen, i made a big mistake. Okay. All right. You got me. Im starting to understand. You didnt like my answer. Probably just i bring him up wherever i can. Chuck prince . No, Anthony Weiner. Sandys going to be with us. Yeah. Lets get off the weiner business. All right. All right. Fine, usually we have a little bell. I love that when they ring it when you said. John kerry statement during a News Conference sparking the idea of putting syria and letting some International Inspectors actually sequester the chemical weapons. Apparently the president talked about this with putin at the g20. Not with everyone around, kind of on the sidelines. Anyway, hes going to speak to the nation. And the futures right now are looking pretty good up about 60 points after an up day yesterday back above 15,000. Welcome back to squawk box. Were watching the shares of mcdonalds. Fast food chains august store sales rising above expectations. But u. S. Sales fell short of analyst consensus. And i admit it, i we saved monopoly money for a medium fries. We saved the monopoly pieces. But if we went when we were on vacation and forgot the medium fries at home, we thought about medium fries, its pathetic, but its free. It is, its good. But despite the monopoly. Didnt do as well. Didnt do as well as expected and blamed a difficult environment here. Right. Right. Oh, this is me. President s push for a military strike against syria taking a bit of a detour. Yeah, i guess thats well see if its just a detour for the eventual end. Im starting to wonder. After russia and syria embrace the suggestion made by secretary of state, john kerry. Watch this during the News Conference yesterday. He can turn every bit of his chemical weapons to the International Community in the next week, all of it. Without delay, full and total accounting before that. But he isnt about to do it. You could thats good instead of the quote, eamon, were joined by eamon javers joining us from washington. If you read that just as a quote, you wouldnt really see what he was doing there. He was kind of like, oh, you want to know one thing . Well, he could do this totally unlikely impossible thing. And now its turned out that were talking about him. Yeah, look. It felt very much like an off the cuff comment by the secretary of state yesterday. Sort of throwing it out there. Hes not likely to do that. Well, now he is. We see the proposal from the russians tentatively embraced by the syrians they might do that, come up with some mechanism whereby they could secure the chemical weapons in syria, take them out of that country. Whether or not thats a stalling tactic, a delaying tactic, some kind of negotiating gambit, sort of up in the air right now. Last night when the president talked to Savannah Guthrie of nbc news, he also tentatively embraced this idea and it might be a diplomatic way out. Take a listen to the president last night. You know, i think what were seeing is a credible threat from the United States, supported potentially by a number of countries around the world has given them pause and makes them consider whether or not they would make this move. And if they do, then this could potentially be a significant breakthrough. The president also said, though, that youve got to take this with a grain of salt. Hes going to wait to see what the details are there. Meanwhile, the french are moving ahead with the resolution in the u. N. That would put some legal underpinning to this proposal. And here in the United States, the senate is delaying a planned vote scheduled for tomorrow that had been expected on this war resolution in syria. The president scheduled to address the nation tonight. And as of right now, its unclear of what exactly he will say. Are we at the brink of military action in syria or not . Its going to depend on a fluid and diplomatic situation around the world, guys. All right, eamon, thank you. You bet. Well be watching tonight. Cnbcs going to carry president obamas address to the nation. Itll be live right at 9 00 p. M. Eastern time. When we come back, we have much more from our guest host. Former citi chairman and ceo sandy weill. Including a closer look at how philanthropy has changed the world. A major new donation that sandy and joan weill are making. This is 100 million donation. Its launching a 300 Million Campaign coming at an incredibly important time because were watching cuts coming from the government to the sciences. When we come back, we have sandy weill and the dean of the medical school. Well talk with both of them when squawk box comes right back. Time now for todays aflac trivia question. Who edited Michael Jacksons autobiography moonwalk . The answer when cnbc squawk box continues. On your recovery . Yo, yo, yo. Aflac. Wow. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . 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Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Dont tell mom. Dont tell mom. Dont tell mom dont tell mom. Okay. Dont tell mom. Dont tell mom. Dont tell mom . Yeah. The best stories youll ever tell start with, dont tell. Dont tell dad. Start yours in the new santa fe. From hyundai. Now the answer to todays aflac trivia question. Who edited Michael Jacksons autobiography moonwalk . The answer, Jackie Kennedy onassis. I did not get that one right. Welcome back to squawk box this morning. In the headlines, mcdonalds is reportedly their august global same store sales increased 1. 9 well above analyst estimates. Europe saw much better than expected sales. Also, president obama set to address the nation tonight on possible possible military action against syria. He told nbc news he may not have enough support to win congressional approval for such a move. Did say the possibility of syria surrendering control of the chemical weapons is a positive development. And microsoft being urged to put chief executive alan mallali on the possible short list. That list comes from three of microsofts top 20 investors who want to see a turn around expert at the helm when ballmer steps down. The futures are indicated higher this morning. This comes after a gain of about 140 points for the dow yesterday. That was the best day the markets had in two months. All the way back to july 11th. Its the first triple digit gain since august 1st. And the dow futures up above fair value. Oil prices have continued to decline. Down by another 1. 5 , still up at 107. 88 for wti. But, again, as syria looks like it gets put on the back burner for the moment, that brought down oil prices. The yield on the tenyear note back at 2. 96 . And if you take a look at the dollar, youll see at least at this point the dollar is stronger against the euro at 1. 3241. Gold prices, with all this talk about syria, starting to sound like were not going to see anything happen immediately. Down to 1,367 an ounce. When we come back, we have the dean of the medical college. Shell join us with sandy weill to talk about philanthropy and how it can help the world. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Therell be the usual presentations on research. And development. Some new members of the team will be introduced. The chairman emeritus will distribute his usual wisdom. And you . Well, youre the chief life officer. You just need the right professional to help you take charge. Welcome back, everyone. This is a new feature were adding to squawk box this morning. This is way to profile large philanthropic efforts in attempt to change the world. Joan and sandy weill are announcing an additional 100 million donation to the cornell medical college. To date, their donations amount to over 600 million. Thats the most given by a single donor. Joining us to talk more about it is the dean of the Cornell Weill medical school and, of course, our guest host this morning, sandy weill. Lets talk about this donation, 100 million. What made you decide to give this money to the Cornell Weill school right now . Well, i think really simple. About two years ago or just under two years ago, lori became our dean. She was introduced to me by jim robinson who was on a board of Pharmaceutical Company with her. And when one looked at the tenure on this board and how this company went from being also ran in the business to a company having the best pipeline of new products. I said, this is terrific. If we can get somebody who really understands research and knows how to evaluate it and knows how the money should be directed. This makes it much easier to think about investing in that kind of enterprise. I think she is that person. And i think that a lot of us really believe in her ability to attract the best and brightest scientists and have a communication build a society of new researchers with no walls between working on Metabolic Diseases or im working on cancer or cardio but they all talk to each other and work together. I think its done phenomenally well over the last 15 years, 17 years. We finished a campaign where we raise 1. 3 billion and had over 150 donors give us over 1 million, which i think is an incredible broad based support. Really, sandy, you raised over 2 billion over the last 15 years. 2. 7 billion. Excuse me. Whos counting . Right. One of the most wonderful things about being Weill Cornell, is our overseer sandy weill who is immensely engaged with the school. Sandy gives resources but, you know, he really gives his heart. And he and i get together all the time, we talk strategy, we talk directions to the school, we talk about the financial constraints we have now this is an interesting time, government is cutting back on spending. This is a scary time. You may have seen Francis Collins comment in the New York Times that 2013 is the bleakest time weve seen at the nih, the government funding agency. We have a decrease of about 20 in real dollars over the last decade in funding. So we have scientists who cant run their labs anymore. We are going to lose the next generation of scientists because theyre looking at the environment saying why should i do this . Im going to spend all my time writing grants, trying to raise money and im not going to raise money. What sandy has understood is we need and what we need is not to count Government Support for the majority of our funding. We have to diversify we have to partner in innovative ways with pharmaceutical companies with the private sector. And, you know, were incredibly dependent on philanthropy. Our board of overseers, our donors have been unbelievably generous to us. When you hear of the sequester talk, does it concern you to see across the board cuts like that . You think this is just the new reality . I think were really in a new reality. I mean, if people dont recognize that our federal government doesnt have a lot of money to invest in new things anymore, theres no state, no city, no governmental entity has that money. So its not just medical science, but theres less money for education, theres less money for the arts as well as for science and health care. And if thats going to be the case, theres really a need for Public Private partnerships more than ever. And people are going to find out when you have a partnership with the private sector, they are much more demanding. And theyre going to want to see a return on their investment. When you hand over 100 million, what do you expect to see back . What kind of checks and balances and what kind of results do you see . I would well, youre going to see it over time. And these things dont happen in a short period of time. But i think we want to see were going to hire really bright people. We just spent 650 Million Building a new research building. And that building is just bricks and mortar. What we really need is the right people there. And i think that i believe and i think our board believes that excuse me, that loris going to be able to attract the right people to do that. But also i wanted to say that a persons first gift to any institution is really just the beginning. If the institution doesnt perform, theyre not going to get the third gift, the fifth gift and the seventh gift. And thats really how it works. Just a little pressure, thats all. Theres a lot of pressure. This gift is really transformative for us. I kind of feel like a kid in a candy store because this 100 million is going to let us really take breakthroughs that we make in the laboratory and research and translate them into new cures and treatments for patients. And this is actually a remarkable time in medical research. We now have next generation tools, next generation imaging capabilities that will actually allow us to do this, to take what we learn in the laboratory and bring it to our patients. Laurie, talk about Precision Medicine. So what im really excited about, becky, is Precision Medicine, and Precision Medicine is the approach that now really is the future of medicine. So based on your genetic profile, we can come up with drugs tailored for your unique genes, for your dna to treat your diseases. Were doing this first in cancer, its been done in cancer. And we were recently fortunate to recruit the head of our cancer center. Youll be able to do this in all diseases. Well have kids coming in and getting their genome sequenced and well figure out their risk profile. Well say to a kid, you have the genes that might predispose you towards like Angelina Jolie has talked about. That might predispose you to diabetes. Lets keep your weight low and Blood Pressure low and check your blood sugar all the time to treat this as soon as possible. Thank you very much for joining us today and sandy, of course, will be with us for the rest of the program. But thank you for making this announcement here today. When we come back, new colors, new app, and rumors about a cheaper phone. What will apple actually reveal today at the big event . We have jon fortt there. Keep an eye on shares of blackberry today. Apparently approached several large canadian investment firms for funds to take the smartphone maker private. But new reports say those efforts are being rebuffed. Squawk box will be right back. Lecocacola is partneringg. With nashville parent and charlotte parent magazines, along with the mayors of those cities, in the fit family challenge. A Community Wide program that offers free classes that inspire families to get out, enjoy moving together, and even track their activity online. Its part of our goal to inspire more than three Million People to rediscover the joy of being active this summer. See the difference all of us can make. Together. You really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . Welcome back to squawk box. At 1 00 p. M. Eastern time, jon fortt is there waiting for the unveil. Hes joining us now in cupertino, california. Good morning to you. Yeah, good morning. Were looking for apple to strike a balance between something that will gain market share and something that will maintain margins. Take a look at the chart and the stock is testing the highest level since january on hopes for new products with a little assist from carl icahn and his twitter account. What should we expect . Well, the iphone 5c, the worst kept secret from apple in a long time. Theres been images of those floating around the internet about five colors. Thats going to be the star of this show. A lower priced iphone. Where will it be priced . The iphone s, due this time of year. Usually that gets a better camera. Maybe some enhanced wireless capabilities. We expect details of exactly where and when this iphone will launch. The quarter ends at the end of september. Any days of shipping they get in before that are positive. Then, of course, the ios seven could be launched as soon as a couple of weeks. Needs to be cheap enough to gain market share for apple and strengthen the ecosystem, but not so cheap it depresses margins and thats the trick. So theres a range of potential iphone prices. Heres the scenario. Usually the latest iphone, the top of the line costs around 650 before its subsidized by a carrier. The one thats a year elold, is usually 100 less, thatll be the 550, maybe the 5c around 450. Will they keep the 4s to gain some share in emerging markets maybe offer a version of the 5c thats 100 bucks cheaper with low grade wireless . Well see. Thank you very much. When we come back, well continue our exclusive interview with citi chairman and ceo sandy weill. Market moves and, of course tonights president ial address, squawk box will be right back. Welcome back to squawk box. Our guest host this morning is banking legend sandy weill the former chairman and ceo citigroup. And i wanted to talk to you about a couple of names in the headlines these days. People you know, i imagine some viewers would like to get your views on. The first is Larry Summers up potentially for mr. Bernankes job. Hes often sort of put in the bob ruben camp. Is he the right choice . I think Larry Summers is terrific. I think hes incredibly bright. He gets criticized, though, for being part of what some people describe as the deregulatory of the 1990s. Fair, unfair . Well, he was the head of the treasury secretary. The reason it didnt go before that is that ruben and greenspan were having a big fight as to who should control the national banks. And rubin felt it should be the treasury because thats political and that would help the president getting reelected. And greenspan felt it should be controlled by the fed which is more independent. And larry, i think, was able to work out a compromise which worked for both. Thats interesting. Thats not something people have explained. And it happened very fast. So thats a little counter to what people say to him not being able to build a consensus. Or if you say hes controlled by bob rubin, his position was entire entirely different. He can weigh positions. I think he would be a great innovative leader. And i think thats what we need. Let me ask you a quick question about bob. You mentioned before our last break or two breaks ago that you thought that chuck prince was one of your greatest mistakes. Right. Where do you put bob on that . And do you put him in the same camp . When bob worked at citi when i was there, he was in the office next to me. I think he was fantastic. And the reason i think his thoughts about most things were very different than mine. He got me to think more about decisions that i was making and before i made those decisions, he didnt have he didnt tell me, he told me what he thought but i didnt most of the time i didnt do what he thought. But it helped me doing something better. Unfair that he gets blamed or lumped in, then, with chuck prince . I cant tell you because i wasnt there then. Let me throw out one other name in the headlines, jamie dimon and jpmorgan. Right. And they are consistently in the headlines these days for all sorts of problems. How do you look at whats happened to jpmorgan . Are they being the attacks on jpmorgan, is that fair . Is that unfair . Its a hard one. I think that jpmorgan did better than any company through the recession and came out of it stronger. I think jamie made some mistakes and statements that he made about, you know, tempest in the teapot and stuff like that. He got people coming after him. And its i think fashionable to go after bankers. So jamie, jamies turn about is now. And hes got, you know, learn how to handle it. If you could go back, would you wish that some of what happened hadnt happened and that he had been there instead of chuck prince . Oh, i think no question. You wish . Sure. Did you ever talk about what actually happened . What was it . With jamie . Yeah. In my mind, i think very simple. He was doing very well, and he thought he was ready to run the company and he probably was. But only problem was i wasnt ready to retire. And, you know, so began to not cooperate and that was not a good way to try to run a business. And when i was 65, we did the merger with citi, which i think turned out to be you guys were a great partnership. Is that really true . Yeah, its true. Its true. Whats the story . A little fight on the dance floor. Shoving match, fight on the dance floor. You still think hes a great manager . I think jamie is very smart, and i think he knows the business probably as well the whole business as anybody thats in the business. There was a debate last spring about whether there should be a chairman or whether he should split those roles and there should be other oversight over the bank. Where would you come down on that . Having been the chairman and ceo for a long, long time, the boards are very, very powerful, and a chairman understands that he serves at the pleasure of the board and shareholders. So i think its much better model to have the same person being chairman and president and ceo or chairman and ceo than splitting those two positions. And if you look at they were trying to copy something in europe which where you look at the countries in europe that have the split relationships, they not only havent done better, theyve done worse. Youve got the test tube results. We can see how it worked over there. We want to be european. They seem so european. Sandy, what was your experience as a chairman . Pardon me . What was your experience as a chairman . It was terrific. Because we we really had very good people on the board. We got the boards to blend between the old travelers and citi to really be one board by and large. Bet you like being the chairman and ceo, better, right . Oh, absolutely. Because you can set the agenda. Also, its very important to have a very strong lead director who understands the business. And its your job to educate the board members. And if they dont understand the business, they shouldnt be on the board. And the financial business is very difficult. Have you talked to jamie . Not recently. No. But im open to receive a call if he calls me. Jamie, if youre watching, youve got the phone number. Were going to have more with sandy throughout the 8 00 hour and got a lot more to get to talk to you about but were glad youre here. Thats right. More with sandy weill in the next hour. Also, is apple right for the picking. The stock and the companys big event in cupertino today. And syria in focus in washington and on wall street. The president will address the nation tonight. We get you up to speed on any developments on a possible deal from the country to give up its chemical weapons. Squawk box will be right back. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Then i think they should have the option of being able to split apart. The problem with the financial industry is you need more transparency. If you dont have transparency, people arent going to understand. The whole system is based on confidence. Well talk about the future of banking in america five years after the financial crisis. A special hour of squawk box starts right now. Welcome back to squawk box here on cnbc. First in Business Worldwide, im Andrew Rosssorkin. Our guest host this morning, sandy weill the former chairman and ceo of citigroup. And, of course, lots more to come from sandy. But first, your morning headlines. The big one being president obama set to give a prime time address tonight making his case for military strikes in syria. The president telling nbc he hasnt decided whether to strike if Congress Says no. Meanwhile, a russian solution that would avoid military action is now gaining traction. The plan would require syria to cede control. And later expanded by kerrys russian counterpart. Syrias foreign minister said the government is willing to comply with the plan. President obama talked to nbcs Savannah Guthrie about the proposal last night. You have to take it with a grain of salt initially. But between the statements that we saw from the russians, the Statement Today from the syrians, this represents a potentially positive development and my preference consistently has been a diplomatic resolution to this problem. President obamas going to be addressing the nation at 9 00 p. M. Eastern tonight, which you can watch right here on cnbc. Also in Corporate News this morning, walmart introducing the largest brick and mortar smartphone tradein program in the United States. Starting on september 21st, consumers will be able to trade in their old smartphones at 3,600 walmart and sams clubs locations, an instant credit from 50 to 300 to be immediately applied to the purchase of a new smartphone. Over 60 of customers are now telling us that the program of tradein that a retailer offers could influence where they purchase their next phone. And over 60 of customers are telling us theyre going to do a tradein the next time they get a new phone. The time was right from a customer perspective. And we also have built a program that we think is the lowest cost and the best value and the simplest program in the market. Apple, verizon, at t, ebay and others also offer cash and credit for used smartphones. And you can get those phones, theyre selling on ebay, by the way, for an average price of about 430. And finally speaking of smartphones, apples big event is about six hours away. The Company Expected to introduce new versions of the iphone at an event at 1 00 p. M. Eastern time and apple could be announcing a Distribution Deal at an event in china later today. Two apple analysts in about ten minutes about all of that. And finally, watching shares of mcdonalds, the fast food chains august same store sales rising 1. 9 , beating expectations of. 4 . U. S. Sales, they fell short of analyst consensus. Becky, over to you. Thank you. Why dont we take a look at the markets. Yesterday, the dow up yesterday, the dow is indicated to open up by about 70 points this morning. Yesterdays runup was the best in almost two months. Youve got to go back to july is 11th to see a run of 140 points. Yesterday, the nikkei up sharply. And overnight, closed up another 1. 5 higher. Shanghai composite up by about 1. 1 . In the early trading in europe, youll see that, again, a lot of the same sort of momentum. In germany, the dax up by 2 , ftse up by about 1 and all coming as the thought that any action in syria is going to be further not sooner. It was 13 months ago that wall street legend sandy weill sat on the set. With his call to break up the banks. I think what we should probably do is go and split up Investment Banking from banking. Have banks be deposit takers. Make commercial loans and real estate loans. And have banks do something thats not going to risk the taxpayer dollars. Thats not going to be too big to fail. More from our guest host sandy weill, of the Weill Cornell medical college. Hopefully you saw that interview we had a little while ago. Im glad im here this time. You do have a much more nuanced view. Im going to try to summarize a little bit. It provides a capital that allows us to deliver the prosperity for this country. I dont think if you could figure out a way to do it quickly and easily with good regulations, youre open to a lot of different things, basically more capital and, you know, better lending standards. Absolutely correct. But the to tarnish bankers and put them all in the same penalty box, which we talked about earlier doesnt help anyone. Or they cant trade and theyre not going to be able to trade. What will happen to our Capital Markets . Right. How do you determine what is for customer and for your own account . I also picked up on listen closely and, you know, people that are saying, look, the sequesters killing basic science and its really bad for science. You said this is the new reality. Right. We need Public Private partnerships, with need philanthropy, the corporate sector to step up. You also said the private sector, they hold people accountable for the money they put into things. Sort of implying it isnt the accountability with the public sector. Therell be more. Yeah, therell be more. With all of that in mind, i look at the fed. Has there ever been a fed thats been this activist . And do you think it has been a net posztive to be this involved with the private sector . Has it gone beyond the point of helping where its hindering the private sector . I think if the fed and treasury didnt act the way they did in the bottom of the crisis right. Our conversations would be very different. And when did they overstay their welcome, the fed . I think theyre doing keeping rates too low too long. A year too long . I dont know. Theres qe1. But keeping shortterm Interest Rates zero and having the return on sixmonth treasury bills being one basis point is not a good way. Were forcing people to take more risk. And were forcing the wrong people to take more risk. Were forcing the Pension Funds in the United States to take more risk, to get the kind of return they need. Were forcing individuals to take more risk because, you know, theyre not getting a return over the rate of inflation. And they should. When they announce the as a banker and someone who knows i hope they start tailoring this thing back. Do you remember what your thought was when that was shock and awe. I think that was good then. This was only how long was that . Six months . More than that. A year . So weve had 12 times 85. And the deficit has gone from 1. 3 trillion to 500 billion. That was a sequester that everyone hates so much. Theyre not going to raise rates. No, theyre going to stop the taper. Maybe another year and a half away. I think they should loosen the shortterm rates. Thats way off. Theyre talking about 2015 or 2016 for that. I think keeping rates that low affects everything else. And how steep a yield curve can you have . And i think its really unfair to savers. Savers are paying the price. Front page of the wall street journal today, lenders, buyers feel rates squeeze. Some of the big banks are saying that actually theyre going to start losing money, laying people off as a result of all this, right . Thats the flip side. Well, i think of the, you know, if they go back on the buyback program, qe3, i think youll see even a steeper yield curve if they keep rates at zero. Ultimately. Well, weve seen the tenyear go from 1. 6 to 3 in a very fast period of time. Once this thing starts, you know, and 3 tenyear is way below the longterm average. What about which i think was more like 5 . Youve seen the size of the Balance Sheet now. U. S. Balance sheet. The feds Balance Sheet and what its grown to. Its big. It is very big. Its profitable. It is profitable, but what if we start losing money on it. If freights went up enough, all the bonds theyre holding would be worth much less. Correct. But i dont think they mark to market. Yeah, probably not. The other banks but can they were not past the point of no return. We can extricate ourselves from this . I think so. And well be okay . I think our economy has done incredibly well. When you think about all the uncertainties about taxes, ability deficits, about what the government policy is going to be, how much free cash is in corporate Balance Sheets today that theyre not spending because theyre unsure of the future and yet the economys growing, its not just Housing Market going but housing prices increasing, automobile sales are terrific, whats happening coming out of Silicon Valley and other places with new ideas and new products, its unbelievable. Happens nowhere else. If you were in charge of the executive branch and the legislative branch that would be good. It would. How would you fix things . You think the economys doing pretty well and its being held back. Is it being held back or selfinflicted . I think i would look at the tax code, which everybody so weve got to fix that . Is a problem based on the world today. Corporate tax code. The corporate and the individual tax cut. I mean, theres too big a spread between the bottom level of workers and the top level. I think you dont make that better by taking money from the top and giving it to the bottom without any benefit which is what we talk about sometimes. I think if you want to really squeeze the difference, we should change our immigration policy and let these people that get their ph. D. S in the United States from foreign countries, give them green cards, youll have more bright people competing for those jobs which will drive down the top, create more new companies, more new places that can hire people. And reduce the spread between the bottom and the very successful. Well, were going to when are we going to do the corporate individual tax reform . Are you optimistic . God knows. Im not optimistic. I think we have a couple more elections maybe to go through before Republican Party becomes one party again. And then theyre going to be the ones that need to help orchestrate that . Well, usually its been the opposite party that does the things that makes things better. So you know, maybe youd have a democrat in the government that understands more and leads the reform with a guy that talks like this with, perhaps the republican congress. You want to go back to the clinton years . I think the clinton years were pretty good. They were pretty good. He loved the best years we now know, i think he understood the private sector and valued the private sector. And look what hes done with his foundation. Right. And, you know, he is very, very, very good. Thats the smartest family in america. All right. Sandy, well have more time, like all this, we dont mention certain people, we do it the names you dont need to name him. What are you going back to valdemort . Yeah. Apple expected to unveil the latest iphone later today. Rumored to announce a Distribution Deal later today. Squawk box will be right back. You really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . Welcome back to squawk box, everybody. In the futures this morning, we have been watching them and they are indicated higher, in fact the dow futures up about 75 points above fair value, s p up by about 9 1 2. News from crocs, the company cutting the Current Quarter earnings and revenue outlook because of weakness in the americas region. Crocs does say it expects a recovery in 2014 based on prebookings from wholesale customers. I dont understand because my Children Wear crocs. I dont wear those crocs, they make other crocs that look like the real shoe ones . Theyre like canvas, sneakers that dont have the ties and they got a bottom and theyre dorky but i wear them every day. And i got a new pair. Youre shocked not like giligan shoes, skipper. So you could go out in cargo pants and crocs and your wife is going to she likes to walk 20 feet ahead or 20 feet behind with the kids. Its not a good situation. I agree with her. Thank you, sandy. Lets talk about apple. Its, of course, their big day. The Company Expected to unveil its newest iphone. An announcement may come with china mobile limited. Tom fort, the technology and telecon analyst. Good morning. Good morning. Tom, im going to go to you first. Is there any surprise we might get today at all beyond the s, the 5s, the 5c, and maybe this announcement this evening which may be more important about the foray into china . It doesnt seem like theres going to be many surprises. I would have thought they would have had a bigger screen on the 5s, but that doesnt look like its going to happen. I guess the big news is theyre going to come out with a lower end device, the 5c, well call it c for color and potential a Distribution Deal in china. Is that big enough . If theres no surprise today, the stock has already run. Ive always looked historically, it seems the stock runs and on the announcement, people sell because theyre depressed its not even more surprising. Yeah, you see oh go ahead. Andrew . Youve seen how the company can pull back. But at the same time, we think about the longterm story here. By any valuation measure, the companys patently undervalue still. Shortterm pullback, this is still a buy, even if theres a one more thing type moment. The 5c, the potential china mobile deal, being able to access emerging mobile markets for the first time in a way should be good thing for the stock no matter what. Tom and andrew, heres the question. For me, at least. Forget about whats on the table today. Since were going to assume we know. Both of you seem to think the stock is undervalued based on where we are today, do they need to do anything else . Is the answer they dont need to do anything else at all . The way i think about it is the 60 billion i would say that you can see the company its going to drive it higher were jumping on each other, tom . Apologize. The 60 billion repurchase creates a floor for the stock but really its going to be innovation that drives the stock higher. Id still like to see something potentially in the watch category or in televisions because i think those would be new verticals for the company and could make a big difference. But i think todays a good start for apple on the innovation front. Ill throw a little curve on it which is carl icahn. Does he matter in terms of where the stock goes . Outside the fact he can make headlines, i dont think so. The stake he has in apple isnt enough to effect board room change. But at the same time, i think hes right. The company is too cheap. And, so, you know whether or not the market will recognize that or not, i dont think thats something that carl icahn can necessarily influence, but at the same time, this is a company that i think is worth buying in a market thats been on a run lately. If tim cook were to give back a boat load of cash to shareholders, how would that change the perception of the company . Andrew . Well, i think it would obviously help. I think the companys cash balance is has been one of the biggest drags on the economy so far. Especially a relatively low share price, upping the ante is a definite win. You can look at this company and the potential uses for cash when you have an undervalued stock like apple. Just buy it back. Tom, andrew, were going to leave it there. Thank you for your perspective. Well see what happens at 1 00 p. M. Eastern time today when apple makes its announcement. Thanks again, guys. Thank you. So the a. P. Says the foreign minister, syrian foreign minister has accepted the proposal, russias proposal to place the chemical weapons under International Control for subsequent dismantling. Wow. Yesterday they said it was a good proposal, i guess today is actually accepting and saying they would agree to the terms. Exactly. And i guess the question becomes how do you enforce it . And you know why syria accepted. Dismantle . Yeah. And the reason syria accepted it is to uproot u. S. Aggression. I dont know. Again, though, its the foreign minister. Does he speak for and then how do you do it . And how long does it take to do it . Remember the weapons inspectors in iraq . I mean, they were in and out thats why the markets are up today. Yesterday and why theyre up again today because they figure this is going to be a Long Time Coming if ever. I would hate to get played by assad, wouldnt you . Oh, i think so. But i think we got ourselves in not a great place. Id hate to get played by them, you know. You know . Id rather be played by him than than go in. Anyway, coming up, much more from our guest host sandy weill and then, up next, a new location for krispy kreme. What country will soon be home to the countrys newest donut shop. Breaking news for you. The first krispy kreme shop will open in moscow on wednesday. Partnering with a russian Restaurant Owner to open 40 moscow locations. The opening on thursday brings Krispy Kremes International Presence to 22 countries. When we come back, its been five years since the fall of lehman. So has dodd frank banking regulation made the industry safer or crippled the governments ability to respond to crisis . Do we know what all the rules are yet . Steve liesman next with a special report. [ indistinct shouting ] [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. From td ameritrade. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Welcome back to squawk box here on cnbc. First in Business Worldwide. Im joe kernan along with Andrew Rosssorkin and becky quick. Our guest host is sandy weill former chairman and ceo of citigroup. Lots more to come. Heard from sandy quite a bit. First lets get a check on the futures this morning. S p indicated up about eight points so far. The Dow Jones Industrial average, of course, comprised of 30 well known stocks, up 66 points on the session today. Up 86. But fair value is up 19. And then we have the nasdaq up about 16 points or so. And today, youre going to want to keep a sharp eye on the dow jones because there are three new stocks in the dow jones. Its not 33, though, its going to be 30, but look at whats happening. Goldman sachs is being added replacing bank of america. Visa is replacing hewlettpackard and nike prespo chango. Is alcoa representative of anything, really, in this economy . Nike, the biggest apparel maker on the planet. Nike, Goldman Sachs and visa are going. The index changes, the companys saying were prompted by the low stock price of the three companies slated for removal and index committees desire to diversify the sector and the Industry Group representation. Its the bow tie man. Its david who is going to join us and i bet he is wearing a bow tie when he comes on today. And maybe some of his picks will fair better than putting aig in right before the financial crisis. That was like a homer simpson, doh and hewlettpackard. How does hewlettpackard represent the dow at this point . But you know whos still not in . Google or apple. How much do you think this is worth to those on the up side or the downside . I dont know how it works. You have to sell theres more s p based funds. The stocks the ones going in are more volatile than the ones going out. The ones kicked out. Sandy, youve been there. Dow component. In and out of the dow, you know what happens when stocks move in. They dont consult you on it. But is it a big deal to be part of the dow . I think it is. Its great pr. Youre known everywhere, you talked about all the time because its an average of 30 not 500. Its why we talked about alcoa even though no one thinks alcoa. Visa and goldman are well in the hundreds too. They have some big daily moves. Nike, i guess nike has split recently because its down in the 60s. But if you like markets that go higher, dont you feel better about these stocks than the old ones . Who wants to have hewlettpackard in the dow . I dont think thats the way they look at it. Maybe they dont. They want it to represent the current economy. And bank of america also jpmorgan. That sort of balances that out. There are people who think theyve put in stocks they put in stocks that have good prospects. The indices go up. Is alcoa ever going up again . Is hewlettpackard . Thats its an open question. And bank of america, you saw what happened there, that was, what, a 50 stock that, you know, now struggles to stay near the teens. What were you going to say . I dont remember. Okay. As we continue to mark the fiveyear anniversary of the collapse of Lehman Brothers and the aig bailout, we tackle the most important question, what happens next time . Joining us right now with a look at whether we are any safer, how the law has changed and whether dodd frank can prevent another disaster is steve liesman. Thanks. Regulators insist the Banking System is safer than it was in the dodd frank financial reform law will make another panic like lehman less likely. If it happens, they say itll be more orderly. Critics contend the banks are bigger now than they were around lehman. The law isnt finished and as written does not end too big to fail. Heres what is, indeed, different now. More capital is required of the banks. Greater liquidity is required, stress tests are now institutionalized. They happen every year. There is an army an army of financial monitors out there and financial monitoring. Resolution plans are required. Socalled living wills and theres now authority. What is known as title two or the bankruptcy for banks. Pretty much the only bipartisan part of dodd frank. I asked paul volcker about this and hes a big fan. The institution would have failed in the sense the stockholders will get nothing, managements will be replaced d and maybe secure creditors too. But Unsecured Creditors will be at risk depending upon what asset value is left when the thing is unwound. Thats pretty plain language. And seems to but nobody believes it. Well nobody believes it. Theres still a subsidy nobody believes it. So heres title ii, guys. Management is removed. Holding companies are thrown into a receivership, the subsidiaries put into new companies. Creditors bear losses, theres a clawback provision, they can go back to the banks and claw back money for the taxpayers and the fdic treasury provide a liquidity facility to finance those subs over the time while theyre doing the workout. Thats the part where critics say youve essentially entrenched a taxpayer bailout. Now some dodd frank critics also contend theyre concerned they have tied the governments and feds hands too tightly and wont be able to respond the next time theres a crisis to which the response is, hey, thats the whole point. Here are the new rules that tie the governments hand. The fed is prohibited from individual bailouts, socalled 13. 3 emergency authority. We said a lot of that during the crisis. The fed needs the treasury approval for broad bailouts and treasury prohibited from using that Economic Stabilization fund which was used to stabilize the money markets. More criticisms include the failure so far to deal with the wholesale funding market like money markets and whether too big to fail has ended. And its great we have sandy here this morning. Let me ask you this question, do you think investors in banks, the providers of the secure or Unsecured Creditors debt. Are they trading as if there will be a taxpayer bailout next time . Or trading do you think theyre aware of that title ii, that bankruptcy process for banks that calls for them to be essentially wiped out . I dont think its really a big factor at the present time. I think nobody really knows what to do until we finally get the what is dodd frank going to say, what is the volcker rule going to say and what other regulations going to be that relate to how a bank has to operate and run its Balance Sheet. I think a lot can be helped if we develop bonds that banks could sell that would be automatically converted into equity if there was a problem that could preclude that kind of stuff. It sounds like what youre saying is backing up what jack lew told us at our summer conference is lets get the rule in place and see if too big to fail has ended and if we need other stuff. Do you agree with that idea . I do. I think its fascinating but i ultimately think that no matter what its actually harder to bail out a bank today than itll ever be. Why . The politics make it impossible. Thats what you want, right . Its a very difficult corner. I think its great we did the bailout and the government got all their money back plus a profit on the financial now have we tied the governments hands too tightly so they cant come in . I dont think we know whose hands are tied. We may have tied, you know, depending upon what the volcker rule says a bank can do or investment bank, its going to determine how they run their business. What is the leverage ratio . Does everything have to be on the Balance Sheet, do you need complete transparency. Do we look at the model for bank reserving against loan losses, which is a stupid model. The banks will all cut back their loan reserves right before the crash. Steve, thank you. My pleasure. Was it interesting . It was. Great. Listen to this, when we come back, well have more on the three dow components being added to the dow. Goldman sachs, visa, nike. That is todays move even though this doesnt happen until after the close of trading on friday, september 20th. Three dow components on the way out. Bank of america, hewlettpackard and alcoa. Sandys right. Much more volatility for those coming in than those going out. When we come back, the chairman of the s p 500 index committee. Plus, lessons from the financial crisis five years later. We will talk with the former chairman and ceo of National Financial partners. By the way, also happens to be the daughter of our guest host sandy weill. Welcome. [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. [ male announcer ] these days, a Small Business can save by sharing. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. Welcome back. Five years ago, the u. S. Banking system suffered a huge blow from the financial crisis. And crisis and with us now to talk about some lessons that she might have learned. Bringing the business back from the brink, she is the former chairwoman and ceo of National Financial partners, firm she sold earlier in july. Also the daughter of our guest host, sandy weill. Do you like chairman or chairwoman . Chairman. Always go straight chairman . I did. I did. What were the lessons for you . You did bring this business truly back from the brink. Our whole Management Team did. But i just remembered being in chicago with all of our firms when aig was blowing up. So if youre in the business of selling multiple Insurance Products and the big carriers have lost the confidence of the buyers, thats a bad place to be. But we really hunkered down and i think a lot of it happens before you go into a crisis. And we really had three big themes. One was be relevant to our clients and our employees. Did we matter in the scheme of things. And providing insurance and Risk Management and 401 k , that all mattered. The second was we were on a big mission to build up our recurring revenue. And so when we entered the crisis, we really had the kind of cash flow that we needed. And the third was to be diversified because any one business can change. Your planning has to begin before that. But we saw our Life Insurance business erode prior to the crisis. So we actually as it occurred, that meant that our debt structure was really getting out of whack. So we hunkered down, used our cash flow not for acquisitions, which was a big part of our business. But instead to pay down that debt as quickly as we could to cut expenses, to do everything we could to right size our capital structure. But at the same time, we had people out with clients. We rebranded ourselves, reorganized ourselves to really make it and continue to make it an Exciting Company to work for even through the crisis. We needed the banks and the banks being nimble with us was critical too. And we financed our whole structure. Its interesting, i would say generally, yes, dad. I do think that entrepreneurialism and the ability to move is very, very important. I think thats a key part of it and i think the banks are being strangled. You know, theres no question in that. Whats been so interesting to me is dealing with small companies. I left the big banks in 1997. And i think another reason to be kind of optimistic about the u. S. Today is that managers that came out of that crisis were incredibly seasoned. Theyre budgeting, thinking about higher Interest Rates, stress testing themselves in a much smaller environment. They can move, they can be innovative. Theres real quality. The flip side is people now feel emboldened, survivors, got through to the other side. I think they know theyre seasoned. Nobody cared whether mfp failed or didnt fail except for us. The businesses we acquired, the Management Team, the kids born in the environment. We cared but everybodys talking about lehman and aig. I would disagree with that. I think good managers came out of that seasoned and understand it. I dont think anybody feels emboldened in the industry. I agree. I think quite the opposite. And i think one of the reasons im optimistic on the market not just because of the innovation, but i think companies can deliver so much quality to their clients by being more innovative and we did, unfortunately, downsize the company. And thats sad when youre losing jobs. At the same time, we wont hire some of those jobs again because its so much more efficient. Forces you to rethink how you do things. So i actually think people are not emboldened, theyre smarter. There was a little hesitation as if you agree. Have you been talking about this issue for aening lo time . Weve talked on and off . And debate . Always. Thats why were so much fun together. Dont you think im lucky to have a daughter like that . Absolutely. Were all lucky. Weve been talking about it. Three had to leave to make room. Goldman sachs is being added, visa and nike, the three being kicked out, says it right there, bank of america. It should say replaced, fired, no. Hewlettpackard and alcoa. Joining us now david blitzer, chairman of the s p 500 index committee. How much more will the markets be moving around with these highpriced stocks, david . I dont think its going to move around that much. Realize that weve taken out the 3 weight with this move. I think we have made a big step in terms of improving the index. Its price weighted and its only 3 . The average price across these three stocks about 14. Compare that to the average cost of the index which is probably 50, 60 thereabouts and the highend about 180 some odd at ibm. You added one in the mid60s. Thats right. Thats going to be exciting. Well, itll give us a better index, i think. David, why did you swap bank of america for Goldman Sachs. Theyre both in the financials. Why Goldman Sachs over bank of america . Looking at the financials in there, youve got bank of america, jpmorgan chase. These two companies are very comparable. Theyre quite close together. Yes, they both do Investment Banking but both do a number of other things. Goldman sachs continues to be focused on Investment Banking. And this gives us a broader representation across the Financial Sector than we had before. You still got a lot of tech. And its probably a good idea to get rid of hp. But you know where im going. So weve got microsoft, intel, cisco. But one is missing, two are missing. Ibm . Yeah. Ibm. Thats kind of tech still, i guess. But google and apple. Google some day, had more of less of a consumer stock, but that is a big part of our economy now. You had to think about it, didnt you . We had to think about it but the arithmetic doesnt work. Theres about eight or ten stocks well north of 200 in the s p 500. When you look at them all, you can tell me about priceline, but thats got a fourdigit price. Berkshire would be better, id love to see you do that. Yeah. The arithmetic doesnt work. I guess we could build a price weighted super colossal index. If google split, youd put them in . Split two or three times, googles around 800 youd put them in then . Ill tell them. Well look at it but we never tell anybody in advance. But definitely well look at it. Why not change the weighting, that would allow you to do some of this. Weve talked about that. And when youve got an index out there for 100 and some odd years, youll have to be careful about what you do. But in the longterm, theyre not talking tomorrow but in the longterm, i would say theres nothing thats off the table. And, you know, were willing to talk about that. Weve talked about it in the past and well keep talking about it. Will i be back here tomorrow morning telling you we changed the weighting, im quite sure i will not be telling you that. What happens in terms of price Stock Movement on those that get added and taken off in the shortterm . In the shortterm, you probably see some impact thats a little bit similar to what you see in the 500. The ads will pop up, not permanently, but for a few weeks. It will drop down. It all sort of comes out in the wash over time. Dow changes happen far less often than s p changes. So its much harder to have a statistically sound kind of a statement. On the other hand, a statistica sound kind of statement. On the other hand, seeing two or three stocks go in and out at the same time is much more common in the dow. Back in 2004 i think it was the last time we had three in, three out. Weve had a number of two for twos since then. Sometimes you i just worry that youve seen stocks get universally loved and you can see how often that calls the top of the market and you guys unfortunately with aig and maybe a couple other situations and even hp to some extent, you pick them when things are good and youre calling the top of the stock, thats one of the problems. But finally with alcoa, 8 billion market cap and its not a part of the u. S. Economy anymore, is it . What did it do for us . Probably is brought down the average price, which is not what you want it to do. No. Alcoa, materials nichol used to be oo dow ca component, didnt it . Yes. You can go way back and find all kinds of strange names that came in at times. The economy evolved. Thats why were looking at stocks now that are established. Visa, which is a Big Technology company, one of the two leaders in International Payments technology i thought a disneycomcast switch would have made sense as a bigger, more tentacles, more powerful, more, you know, just a Better Business model, better management. Thats neither here nor there. Thats the kind of thing if i proposed a company that im closer to in that sense. We stay away from that. I forgot. Youre right, i should have recused myself. Coming up, much more. The dow swap, visa, nike, alcoa, Hewlett Packard on the way out. You know who is going to love this, cramer. Without the thinking that makes it real . Whats a vision without the expertise to execute it. And the financing to make it grow . Whatever your goal, it can change more than your business. It can change the future. Thats why, at barclays, our ambition is to always realize yours. Welcome back to squawk box. The dow looks like it would open 50 points, the s p a little over 8 points and nasdaq 15 points. Recapping the stock story, three new stocks in the dow industrial average, Goldman Sachs, visa and nike. Coming up, well get the last word from our guest host sandy weill. Back in a moment. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Lets gets back to our guest host, sandy weill, for the last word. You look at all the changes happening with the dow. A bigger presence for financials, Goldman Sachs coming in and visa as well. When you look at those stocks, what do you think of the financials . I think goldman and visa broaden the financial participation over bank of america . Over bank of america, certainly. Do you ever buy any stocks besides citi . Yes. Which ones . None of your business. I thought id try. Can you help us grade Michael Kovack . I think hes terrific. I think hes the right person for the job at this time. I think he knows all of the businesses. I think the leading the top people in the Company Respect him. Was he there when you were there . Yeah. I know him very well. And is he running the place youre finally happy . Because . With citys management. We could have owned wachovia, couldnt we . Shouldnt we have . Look at what happened to wells fargo. Wow. And we kept it in business without a contract. Okay. Sandy weill, thank you for being here today. Its good to be back. It was great and we hope to have you on more frequently. We appreciate it very, very much. You looking for a job . Im sure we can give you a job. Make sure you join us tomorrow. Squawk on the street begins right now. Good tuesday morning. Welcome to squawk on the street. What a day we have ahead of us. The president speaking tonight on syria, futures reflecting hopes that war perhaps is little less certain, an apple announcement, a shakeup in the dow jones, in asia, more upbeat Economic Data from china and take a look at oil as well. Big selloff as