Transcripts For CNBC Squawk Box 20130916

In asia overnight, equities markets were a little bit mixed. The hang seng was up by 1. 5 . Oil prices are down another 1. 34. Thats probably because of what youre seeing happening in the dollar. Look at the ten year note before we get to the dollar. The ten year note is yielding 2 point poip 482 . The yield getting pressed down. Take a look at the dollar. The dollar is down against both the euro, the yen and the pound. Right now the euro is at 1. 3353. Oil would be going up. Oil is going down on syria. On syria is coming even further up to the forefront. If you take a look at gold prices this morning, up slightly. Up by 7. 40 to 1,316 an ounce. Andrew. Thank you. What a weekend. I remember five years ago we had one weekend and now we have another one. Its not the same. With Larry Summers out of the race, will president obama pick janet yellen . Is donald kohn a candidate . Tim geithner says he doesnt want the job. We have three guests joining us. We have ben white back. Ill start with you, john. What do you think really happened over the weekend . What was the last sort of domino to get this to take place . Syria, i think. I think what happened was Larry Summers was the president s choice. The president Still Believes he was the best person for the job. Larry has accumulated controversy over the years. The white house didnt believe those were serious controversies. As you had senators recommending him. There was a big campaign against larry. When they started getting close up on the fiscal fights and the syria controversy began consuming the administration, everybody lost energy for a big confirmation fight and that would have started in the Banking Committee where you have a three seat democratic advantage. If you got to the floor, everyone was pretty sure that Larry Summers would be confirmed. I think if push came to shove they would have gotten him out of the Banking Committee. It was too much trouble for them. Tony, how did they miss play this so badly. Can we show this to the camera here . This is the cover of the national review. There are people out there who would say from day one this was not going to work. I think it was one of those people. Nothing against Larry Summers. Im a troesh ri guy. Both great candidates. The white house really wants Larry Summers. I would say, thats great. I understand that. Whos their second choice . The opposition to him is deep and personal and at some levels very is it really going to be yellen . Is the president going to feel like he kneels threatened. I think the safest choice is yellen. I think its still a possibility until somebody rules it out is that you keep the best guy for the job in the job. He said he doesnt want to stack it. I would bet a lot of money on it. Hes very youth full. Weve replaced them with more of the recent pictures. John, the president didnt need support to bomb syria anymore. I dont see why syria had anything to do with it. When you said ive been seeing this all along, watching your assets, you are now a proxy for the far left now. You know, joe, part of the reason larry didnt get confirmed is because he didnt get confirmed is because he wasnt nice to people and i hope youre taking notes. I thought my support do you think john kernen can win Senate Confirmation . What about this . I also took this from this. Is there any question now what wing of the Democratic Party really is calling the shots right now . Shouldnt we caught every editorial i see about these nasty republicans in the house not wanting to compromise on anything, is there any question now, if Larry Summers is too conservative or too much of a too close to the banks, too much for deregulation, too much this, too much that, that shows you where the core, the center of this party is to this point. If i could just jump in on that. I think what we didnt talk about on friday, john tester said he needed to hes not exactly the left wing. Ive had him on and he is. In a lot of situations he is. Hes not sharon brown. She never weighed in. She was going to be a no. You dont know that. Oh, yeah. She was going to be a no. The point is that its not all liberal democrats that are against him. Some liberal democrats. If there was any question about how the market would react, what song should we play . Let the go times roll, the cars. Roll roll out the barrel. Not that different. Maybe liberal democrats are pro stock market. Not that different. John, we know that theyre pro employment and less so on inflation at this point. And, you know, i said earlier, lets see where we all know what we are. Were getting 200 points. Im feeling okay about this today. Hopefully there will never be any math or science that needs to be done on the fed from here on out. Gosh. Thanks, larry. I have to go to bed on one question. This is the don cohn question. If you believe that tim geithner is the guy thats actually whispering in the ear of the president on who gets the nomination, my sense is he actually likes don cohn a lot more than he likes janet yellen. Do you agree with that . That may be. I dont think tim geithner is very enthusiastic about janet yellen. I talked to folks in the white house, they said yellen is by far the most likely pick. Dont expect a lot of surprises. Dont expect it this week. I thought obama would be talking about economics all week. Doesnt look like that will be the case. If they moved quickly that they wanted summers you had four people on the Banking Committee. He did the same thing on susan rice. He says i want this person for this job. Let people organize opposition and then they kill it. They could have gotten summers through. The first problem is this was politicized. It was allowed to hang out there far too long. Then is the answer okay if you have 200 economists, and then if you have 200 senators campaigning for janet yellen, but do you really turn around and say, you are acting like bad children and ill reward you and let you go what you want. It became clear they couldnt get democrats on board for syria. They wont get them on board for summers. They dont want to cut deals for represent karns on banking and on the floor. Thats good. Theyre not in the mood to cut deals. Tony, how does it happen . Thats what i want to know. Does the white house, somebody back channel to Larry Summers . Thats what i think. Im going to send you a draft of the letter that you are going to send the president. Ive seen that sort of thing happen. Not a draft of the letter. Larry is a professional. Hes been around the block a few times. Im sure he got a call from someone very high in the white house, probably mcdonough or mcdonough asking tim geithner, his friend and former colleague to let larry know that its probably up. Larry could have come to the same conclusion himself after seeing tester go south and to make that decision. Couple points on that. First of all, everybody was counting the same votes and seeing the same political developments. Secondly, one of larrys former colleagues reminded me that he has a very keen sense on whether to pull the plug on Something Like this and reminded me that he left promptly before the potential for getting blamed for the 2010 elections. How disappointed is he and given all the Political Capital Larry Summers used and the president used, what happened . Roger altman came on and so many people came out in support of Larry Summers. I assume he was working the phones to make that happen. I think Larry Summers wanted the job and his allies within the administration wanted the job. On the question of whether he was pushed, somebody i talked to yesterday said i was shocked that this happened and unhappy that it happened. Somebody at the white house . Yes. And that suggested to me that maybe it wasnt a direct push from dennis mcdonough. Im not convinced that there was a Whisper Campaign to do it. I think he saw the writing eon the wall. There were a lot of people that were very surprised. You guys, just on friday we had former treasury secretary hank paulsen on the show. He said one of the reasons he liked larry even though he was not saying one way or the other, one of the reasons he liked him was because he had a very close relationship with the president and he said from his own experience that close relationship with the president was absolutely key. Is there someone else you look at who has a close relationship if its not geithner and if its not bernanke and if its not going to be summers . I think the short answer to that question is, no, theres not. Its ben. Its probably ben. Hes the only one. Geithner is the one who has that relationship. Hes made it clear hes not interested. Ben white. If a part of the campaign against larry and it was a part was to say how could you pass up a highly qualified woman whos serving in the number two job who has all the credentials, the market likes, how could you turn away from that person for somebody like larry given the controversies associated with him, it will be awfully difficult for them to then say, well, yeah, we didnt take larry but were not taking janet either. I cant see them passing given the nature of the opposition that they have just responded to, cant see them going past janet yellen. Look, the parties move far left from the clinton years. Thats my take. Sorkin, im listening to you. If you Start Talking about anything other than mens underwear, i dont think youre an authority on anything. I know. When they asked you to write that piece for the New York Times, did you think will this undermine my credibility in the financial matters . What are you wearing today, boxers, briefs, little tube im wearing my tommy johns underneath, but i will say i didnt think they would get on they put it on the cover. It was on the cover. Mens underwear, by andrew l. Sorkin. I talk about these undershirts. You know how this happened. There we are. All right. Well, youve been talking about the fed, Monetary Policy for the rest of the day and everybody is going to think about i wonder if hes chafing, bunching up. I dont know, andrew. Whos managing this career of yours . I guess lets say youre a renaissance man. Can you talk about it all. Im going to have to start consulting with you all. Youre the only person thinking intensely about this. I guess you dont read your old paper. You didnt see the New York Times . I saw it. Theres a real zeal to your interest in this issue. All right. Whatever. Hes wearing that undershirt too. Thanks, guys. Coming up, continuing coverage of monday morning market rally. Yellens pretty good. Yellens pretty good. We know who the short term heroin addicts in the market wanted. Dow up 192 points. Former treasury official roger altman. Hes a strong supporter of Larry Summers as fed chairman from the old republican Clinton Administration. And an extended conversation with former congressman barney frank and former senator chris dodd five years after the financial crisis. Capital to make it happen . 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. If youre just weighing up, the numbers are up almost 200 points. Futures up 194 points on the dow. 20 points up on the s p 500. That will get us a retracement of half of the recent pull back that we saw based on syria and the tapering. The ten year this morning, that should be interesting. 2. 8, thats not too bad. And the dollar which was up on friday on the nikkei report that it was going to be Larry Summers name this week is giving back some of those gains on the fact that janet yellen is more dovish than Larry Summers. They say theres no difference. Theyre saying that there are times in the past if you read what she said, she was not always rubber stamping the additional accommodations. If you look at what theyve said about qe 3, Larry Summers has indicated that he thought it was not as effective anymore and not really worth you werent getting the bang for your buck anymore. Summers has been the opposite. Yellen has been the opposite and she has been out there saying that maybe we need this for an extended period. Wheres leaseman. Hes on at 7 00. He has quotes where she was hesitant to come on with more accommodations in the past. Obviously the markets think there is a difference. Yeah, right. I think it all comes down to qe 3, whether youre willing to taper or whether you focus only on whats happening in the employment picture. There have been a lot of thoughts that shes of the opinion that qe 3 can help push the employment. The most celebrated fed chief of all times probably fulker. Price stability shouldnt have anything to do with employment. Read what krugman says. Read that part of the sort of analysis on the left of things think we need more accommodation, more stimulus, more, more, more, more, more. You can see why it happened this way. I think bens probably right. Well have senator warren on today. I think we knew she was going to be in. I think so. When you start doing the math on that, four of 12 democrats on the senate Banking Committee. At that point you absolutely have to have some republicans that get on board to do this. Maybe it got a little too messy when you start looking at the numbers. These guys know exactly how to break it down. Even the wall streeters, you think of them as somewhat conservative. Show them 200 points, theyll sell out. You were ready. Yellens great. Have her on, perfect. Well talk to Steve Weissman began coming up at 7 00 because he has really done the numbers and done the survey with economists to break down who comes out on top in which categories. Well have him coming up at 7 00 eastern time. Its time for the executive edge. First up today, former barclays boss bob dimon is asking for a shakeup of the rules. Hes joining those in criticizing the lack of progress in ending too big to fail and an apparent change of heart for the risk that barclays was taking in the lead up to crisis. He admits the leverage was too high. He argues reg dwu la tori advances have helped cut the risk but he says we need to work on this. Dimon is right on this issue. Forget about the crisis. Before that he wanted global regulation. The problem for bark glas or any european bank, any asian bank and any u. S. Bank, we have this global arbitrage going on. Then you have to get concerned about deutsche bank. Unless you have a global regulator, which youll never have whos going to cede control to some global the folks in new york city cant get along with the folks in albany. The fact that well have this on a global basis is crazy. Were saying the title of your book and weve got a thing at the bottom that has the. Too big to fail. Why are you dinging . This was your idea again. So how long are you in the penalty box before you can come out and start saying things . Bob diamond, when did he quit . Was it a year ago . It was a year ago, yeah. About a year ago. Yeah, he quit about a year ago. Quit, resigned, pushed out about a year ak over libor. Okay. Still has credibility. On this particular show i think he has a lot of credibility. All right. Lets talk about a new nbc news wall street journal poll that finds americans are still unconvinced about obama care three and a half years after it passed congress. Only 31 of americans say that the new Health Care Law is a good idea. 30 say they understand the law and how it will affect them while 69 say they do not. Heres an interesting point, too. 52 believe that the cost of their health care will go up as a result of the law. Some difficult dynamics and i think approval rates dropped another 5 . That may be in relation to what we heard last week about the union. The aflcio saying they have some issues with it, too. Both sides, whats interesting is you might say, wow, its never budged from this. So you would think inherently theres something wrong with it. The liberals would say that the right has been talking down obama care, spending money to undermine the law. The left has got hollywood types selling obama care and it still comes down at about 30 . Theres something deeply unpopular about the whole notion. Its confusing. I have to admit. I still dont understand it. I feel like ive read it all. This is going to be the perennial problem. You mean you dont understand why people dont like it, andrew . Thats what you no. Im not sure most of the people here in d. C. , i think if you actually asked them, even people who have written parts of it will tell you they dont understood it. If they understood it they would like it. I know what youre saying. John harwoods been saying that. The American People, theyre so no. They dont know whats good for them. Luckily we have an administration that does know like your guy, bloomberg does know whats good for them. We better take our medicine and say, thank you, sir, may i have nother . Only i hope that the viewer appreciates the sarcasm. Let me tell you about the next story. Youre finally getting it. Two years is how long its been. Businesses getting a break from the i. R. S. About deductions. I dont know a whole lot about deductible asset repairs. Fedex had a big win in terms of repairing some of the jet engines, this is something that they could legally deduct. Im not are you the expert on that . No, im not. Youre preparing for that . Me and the irs or the irs and i, were peacefully coexisting at that. Lets leave it at that. Im surprised fedex, fred smith has said things in the past. Im surprised they got a break. That was an oversight at the irs. Is the irs back to objective, do you think, andrew . Where are you on that . Do you think we can breathe easily now . I dont know. Now that theres no politics involved anymore . I think its hard well, i dont want to get audited. Careful. Careful. Im going to hold my tongue. Careful. Wait until de blasio gets there. When we come back this morning, well get back to the markets because again the futures are indicated sharply higher this morning. Up about 190 points for the dow. Up 20 points for the s p futures. This comes after news that Larry Summers has dropped out of the race for fed chairman. Markets are looking a the this as yellen much more dovish financial chief. Well talk about what is next for the market when we come back. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your Information Safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. 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. Good morning. Welcome back to squawk box on cnbc. John concern than with becky quick and Andrew Ross Sorkin. Larry summers withdrawing his name from consideration as fed chairman. The Global Markets are taking notice. Dow futures up nearly 200 points. 191 points now above fair value. The rest of the averages looking to open significantly higher as well. The dollar is down against the yen at this point. And the euro. Joining us right now is naraman barivish. Also phil orlando from federated investors. Phil, the markets reaction to this is that they see yellen as a much more likely person to be dovish as fed chairman. Is that how you see it . Absolutely. The market had i think two areas of concern. One was that from a process standpoint dr. Yellen was not even vetted, that Larry Summers seemed to be the foregone conclusion from the president s standpoint. Second point is that yellen, who is one of the architects with bernanke and the rest of the fed, is expected to be a more dovish person to maintain continuity. There was risks that dr. Summers would take the policy too quickly and that would potentially hurt the markets or the economy. I get the kneejerk reaction. The idea that the fed could be more accommodative under yellen versus summers. There are a lot of people who said its time to pull qe. It absolutely is time to pull qe. The question was because summers didnt have any ownership of this policy, he might come in and eliminate the policy right then. Come in, people thought he would walk in and say, forget it. 85 billion gone immediately . That was absolutely the concern. As ridiculous as that sounds, that was the concern. Yellen would maintain a data dependent nature to the decision and would move it into the middle of next year based upon the continuation of relatively strong data. Naramin, yo you are an economist. Would he have steve weiseman coming on to talk about this. Do you see a big difference between summers and yellen. I think the operative word here is continuity. With yellen well get continuity. With summers there was a question of what he was going to do and when he was going to do that. Markets are breathing a sigh of relief saying, okay, were going to get this sort of continuity, a phasing out of qe. We can debate about the timing. I think its that sense of we know what to expect and of course markets as you know dont like uncertainty. This is a little more assuming yellen gets it, were all assuming she gets it sure. But that this is more familiar and thats more comfortable. Do you worry about inflation down the road . At this point, no. I mean, the fed obviously, you know, has a lot of control in the long term in terms of what happens on inflation, but theres still a lot of disinflationary forces in the economy. A lot of excess capacity keeping prices down. Even though oil prices are high, not terribly worried about them in the next two or three years. In the next four or five years, yes, thats a different story. Phil, in the last month the market started dropping on concerns about whats going to happen with the fed, whats going to happen with qe with this next meeting this week, whats going to happen with syria. All of those risks and all of those concerns got pushed away with the major move weve seen and in todays bill too. Whats the right level . Is the level were at now the right one and dont worry about all of those concerns . Were those concerns right . Were about halfway through a difficult season. The president had a finite amount of Political Capital. The syria issue, summers issue seemingly resolved. What we have on the immediate horizon is the debt ceiling issue late september, early october. We havent completely cleared the decks but we have cleared two of the significant things concerning the marketplace. Again, did you miss your opportunity . Was that your pull back . Not necessarily. We thought from the late july period with the s p at around 1700, we thought we could see a move back potentially as low as 1600. We came halfway through that. We got to 1640, 1650. We have two issues out there. The market could come back again into that low 1600 level. At this point were being a little bit cautious but once we get through those fiscal issues, then we think weve got some better prospects for a rally at the end of the year. We havent even talked about the fmoc meeting this week. Do you think theyll begin to taper . Were in the camp that think they have to wait. Most of that has to do with the employment picture which is very cloudy at this point. Yeah, the economy is looking a little percy. The economy isnt looking great. The last reading we got was a little troublesome because they revised down the prior two months and the Unemployment Rate went down because of a bad reason but to say Labor Force Participation dropped to a 35 year low. Thats only been three years thats the case. Thats the only reason its going down for three years. We have people who said the market is absolutely set up for at least 10 billion, theres no way they dont do at least 10. You think they do nothing . You really do . I really do given some of the uncertainty weve been talking about here, i think they wait. I think the data arent saying do it now. Theres no clear indication of you have to do it now. We can do it now mp with yellen going in, nobody will question it. We can go to 1 a easy. There you go. There you go. Bill, what happens to the Market Reaction if they actually dont taper when the market was expecting it to happen . Is that a good thing be or bad thing . I think thats a little bit of disappointment. Were in the 10 billion camp. We think the driving issue is that bernanke is leaving at the end of january. He wants to get the ball rolling. He has the press conference. He has the press conference. He loves the press conference. Thoef been feeding this to the market for the better part of the last three or four months. Were mentally conditioned for a 10 billion taper. We want to see it and get the ball rolling. 10 billion is not going to destroy the market. Philipp, thank you very much. Well talk to you again soon. Yesterdays shocking news, Larry Summers removing his name for the running from fed chairman five years ago yesterday when Lehman Brothers collapsed. Well talk all things financial when we come back. In the next hour, the men behind dodd frank regulation. Former congressman chris dodd will join us. Take a look at futures. They are now trading sharply higher. 200 points better than fair value. Were back in just a moment. We are marking an anniversary today. Five years ago today Lehman Brothers collapsed. One of the most wellknown faces of the financial crisis, hes still somebody people dont know where he is or what hes up to. Dick fuld was a star on wall street. The longest running ceo of any firm. In 2007 he mounted a Vicious Campaign against short sellers that he said were trying to put lehman out of business. What i really want to do is i want to reach in, rip out their heart and eat it before they die. Five years after lehmans collapse, fuld is chastened. He has a small Consulting Firm in manhattan, no high profile clients or none that are saying. One warns his tarnished reputation. He ran up legal bills into the millions of dollars, much of it paid for by the lehman estate. The d. O. J. And s. E. C. Dropped their investigations after they concluded they didnt have enough evidence against him. Fuld has kept a low profile. Occasionally hes been seen dining at the four seasons with former colleagues and peers and hes been spotted on the weekends flying coach to one of his homes in florida. While he rode his lehmans stock from 1 billion to 56,000, hes not exactly poor. He has a greenwich mansion worth over 8 million and he sold his park avenue apartment and art for 46 million. He sued his former soninlaw over 13 million for a loan for an apartment. Fuld and his lawyers didnt return calls. He has told others he is still consumed thinking about Lehman Brothers. What could i have done differently . In certain conversations, what could i have said . What should i have done . And i have searched myself every single night. This is a pain that will stay with me for the rest of my life. And i think it is a pain that is going to stay with him for the rest of his life. All of his friends do say that he thinks about it literally every single day. In the meantime, as the financial crisis took root, t. A. R. P. Discussions took focus. Our next guest was a frequent guest on squawk box. One comment in particular went viral. Just tell the American People, the cavalrys arrived, were home. Joining us now with more, paul kemp is the former congressman and chairman of the Capital Market subcommittee. Can you believe its been five years . Do you remember that . It was a compressed period of time because of the activities that were going on, but it was i spent 26 years in congress and the reward of those 26 years were basically in that fiveyear period. Did the cavalry arrive . Given the fact that five years later were talking about too big to fail, possible risks in the system, did it work . Oh, in my mind theres no question that it worked. I mean, if you compare the American Economy to almost every economy in the world, were much better off. We wouldnt have been that way except that we didnt constrict what people could do, what decisions could be made and we went wholeheartedly at the problem. Did t. A. R. P. Work . We had dick kavosovich on last week. What happened after t. A. R. P. Came . If you watched the markets they went the opposite. Adding 15,000, thats confidence in the system. Thats what dow is today. It went down as low as 7,000. In five years you can go from 7,000 to 15,000, you have to conclude theres been infusion. Is everything clear and all the problems over . Hell no. If you could do it again, what would you do differently . Well, ive given this some thought since i agreed to be on with you, andy. Our problem is really reflective of whats sick about the whole system right now. It isnt t. A. R. P. Or it isnt the crisis. Weve gone through those before. Our problem is there is a large element of the American People that have lost faith in the government, Economic System that weve had and the political structure is disastrous. Its no longer are we going to work together, are we going to solve a problem, its how can we torpedo the other guy regardless of his ideas. My greatest worries, given the situation in washington, these bailouts if we believe they worked, we could not have gotten them through. Oh, i agree. Very tough today. Its deadly up there. The majority within the Majority Party is very theyre not going anywhere. Theres nowhere they can make them go to change. You cant have in our system when you step back, i think im giving this out of 26 years in the congress, we dont pass laws by 51 or 52 of the elected body. The laws pass and are successful in the United States when you get a consensus of about 75 to 80 of the peoples elected representatives. We cant get that today. Given your career in congress, 26 years, when you think about what happened to Larry Summers. The politization of that issue, do you think it was right . Do you think it was wrong . Would you have been happier if larry got the job . Where would you have come out . Hes a friend of mine and i like him and hes very bright, but he also is somewhat of a lightning rod. He certainly attracts liking from people and the system. Im not at all sure that we dont need a lot of people. The one thing i had a great deal of respect for bernanke, he was a laid back fella. He had strong opinions, strong positions but he got laid back. I think the Federal Reserve chairman should be that way. He shouldnt try to be commander . Chief. Do you take yellen or don cohn . It really doesnt we have an abundance of capable people in the country. Theres no problem. Any one of the mentioned people would have been great for the spot. To see more commonship with the president and the congress, i think getting someone whos less contentious in that role is much better. I would go to either of the two. Congressman, five years later, thank you. Thank you for your service to the country. Thank you. Appreciate it. Still to come on squawk box this morning, weve got global stocks rallying on word that Larry Summers has pulled out of the race. It is right, i dont know if it should be. U. S. Futures 200 points above fair value. Well speak to roger altman, an outspoken supporter of Larry Summers. Stay tuned. Well be back with squawk box after this. Welcome back, everybody. If you are just waking up this morning, take a look at whats been happening to the u. S. Equity market right now. The dow futures up by 188 points above fair value. The s p futures are up by 20 points. This is Larry Summers has pulled his name from the fed race. If you take a look at the tenyear, the yields gotten pushed back down this morning. Yielding 2. 817 . The dollar has dropped. Last week, there was a report in a japanese newspaper that summers would be named this week. That pushed the dollar up this morning, you can see its giving back some of that. The euros at 1. 3343. Extraordinary venture, a Nonprofit Organization aimed at employing young adults with autism. Theyre holding a meeting for Employment Opportunities for individuals with autism. Greg and laurie ireland are founders of extraordinary ventures. I guess, first thing id ask you, i saw some disturbing data on adults with autism. And even being less employed at this point than adults with other disabilities. And its i dont understand why that would be the case since so many kids with people with autism. Theyre highfunctioning very intelligent. And what holds them back at this point . So because autism affects social interaction and communication both verbal and nonverbal, sometimes the social landscape or the environment in which the job is, they need some practice and they need to be able to develop some skills so they can work in those environments. I think thats part of the challenge. Because intelligence wise, theyre mainstream, many, or even above mainstream. Seems like there would be jobs that didnt entail i dont want to just say that other disabled adults are doing busy work. Right. But you would think that autistic people might even have the ability to do something more than what you would normally think of as a i think they actually do have that ability. But it takes training in terms of understanding what their skills are, playing to those strengths and then also mitigating some of the challenges that they may have. And so extraordinary ventures and what the Ireland Family foundation has done along with Autism Speaks is really to go throughout the country and understand different Small Businesses that really capitalize on the strengths of those with autism. How will it what do you need to do . To get it going . What do you need to do to get businesses to understand that you need internships, do you need someone to get a chance . I think theres all of that, but our project extraordinary ventures has focused on starting our own businesses and the dream is that they would become selfsufficient and sustainable over time. And we employ not just highfunctioning people. We employ the entire spectrum of people with developmental disabilities. So we started some businesses, weve had some failures, weve had but weve had great success. For instance, we started a laundry business. We live in a college town chapel hill. So one employee goes and picks up and drops off laundry. The employees do the laundry, they fold it and others are in the marketing role. Just depending on what their abilities are. So were trying to capitalize on their abilities. We dont charge less, were not a charity. We charge the same amount for doing laundry that other people do. But its a job that, for instance, our population is very well suited to. We just saw our own son as he was getting older as he was getting older, there was nothing very, very little opportunity for people with developmental disabilities. And a group of parents and myself in our area, we thought the governments not going to be rushing in here in this bad economy to throw money at it. And the big corporations are doing what they do. But we really have to depend on ourselves. And thats kind of the way we always looked at it. We started these businesses. How many people do you employ in the business . We have 40. 40 people. And we started six years ago. And it took about three years to ramp up to 3 or 4 employees. You know, its like any other startup. That was our experience. And suddenly we caught traction a few years ago when we hired actually, we took a page out of the teach for america model and we decided that we were going to hire people right out of college to actually manage the organization. So we have people like tom call paige morrow at extraordinary ventures who are in their young 20s and thats thats also an interesting dynamic because thats the socalled los angeles generati lost generat. Unemployed people, they have an opportunity to learn while managing a business like ours and its a win win and they turned it around in almost two years and suddenly we have 40 employees. And laundry is one of the businesses. What are a couple of the others . We have a gifts business. For example, we make premium candles. Really nice candles, scented candles. And the way it works is we had an employee who loved to cook. So we again, these young entrepreneurs said, well, gosh, lets tap into that. And they set up the activity as a recipe. So the person comes in to work in the morning and sees it. They need to make honeysuckle, for example. And heres the step by step instruction and they go about the task. This is what people who have autism are best at. If you organize things, if you if you adjust, they dont adjust as well to our mainstream life. So if you adjust the business to take advantage of the people, this is what really works. Great. Appreciate it. Thank you. Appreciate you coming in. Thank you. And lisa, this is one way, i guess theres another way with businesses that are already around. Weve seen some terrific businesses throughout the country, Small Businesses are an important piece. Then Large Businesses and corporations also need to be employing people with autism. Tremendous strengths they have and were trying to really be able to highlight those strengths so more people with autism can be employed. Thank you. Thanks. When we come back, well talk more about this mornings top story. Larry summers has pulled out of the race for the fed chairman job. U. S. Equity futures are indicated sharply higher right now. Dow futures up by about 185 points above fair value. Among our guests, summers supporter roger altman will be joining us in a little bit. Plus pimco boss mohammed elerian. S 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. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Larry summers out of the running for Federal Reserve chairman. Who will shake fed policy and what it means for your money. Market analysis is just ahead. Creators of the wall street reform and protection act are going to join me for a special interview. Their thoughts on where we stand five years after the financial crisis and the risk that still exists. Will the fed taper this week . We get you ready for what could be the most important fed meeting the markets have seen in quite some time. The second hour of squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernan and Andrew Ross Sorkin who is in washington, d. C. This morning. Andrew will be joined by chris dodd and barney frank, the cocreators of the wall street reform and protection act, the most significant reform after the 2008 financial crisis. Well hear from them in a few minutes. Our top story this morning, Larry Summers bowing out of consideration for fed chief. The former clinton treasury secretary called president obama yesterday to notify him. And in a later to the president following that call he wrote, i have reluctantly concluded that any confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the administration or ultimately the interests of the nations ongoing economic recovery. This morning, the futures are reacting to the idea that you could be seeing yellen seen as a dovish replacement as fed chief. You can see the dow futures up by 180 points. S p futures up by 18 points. Steve liesman joins me with interesting numbers, the latest cnbc september fed survey. You have quoted you have all of these quotes where she was not always just a rubber stamping more accommodation. Where she was worried about it or hesitant about it. Youve constantly sort of pushed back that she was more dovish. Why are we up 200 points . Im not saying i liked it. Ive been a big yellen backer. I liked the 200 points. I didnt know we were going to get 200 points. Changed his mind. Yeah. Let me see whats great about joe, he changed his mind i think were all prone to do that. Im saying all of us, its not requesting what we are, just what our price is. Yeah. I get that. I know that joke. Yeah, exactly. I tweeted out over the weekend that the market is having wrongly assumed that summers was more hawkish than yellen. Now rallying off the false assumptions. When you have an opinion, you stick to it no matter what. No matter what. So let me just ive got i want to get to this report. Real quickly. If i was going to give you two people. One who has been a central banker for most of the past two decade in the fed, the other whose most recent job was in the white house, which one would you say would be the more hawkish one . Probably the one that was in the fed, i guess. In the fed . Yeah. Right. So that was the concern among a lot of central bankers who i talked to was that larry as brilliant as economist everyone thought he was was more beholden to the political side which theoretically in Monetary Policy is the concern. I always figure someone who was actually at the fed and had been part of these decisions would be guilt ridden at this point for what and would want to go to the other way. From the future, the prospects of the dollar and i would feel guilty and have to get to tapering as quickly as i could. I dont know if you care, but before our friend has a heart attack, i better get to this report. Is he talking in your ear . No. Because of the news about summers over the weekend, were releasing a day early part of the fed survey. And it shows in no uncertain terms, the market by a 21 market expected president obama to appoint summers as the next fed chair. But as a whopping 51 margin wanted vice chair janet yellen. 47 wall street economists, strategists and Money Managers responding on thursday and friday. We asked who would obama choose . 58 to 30 , summers over yellen. Who should obama choose . Yellen, 56 , summers, 12 . John taylor got more votes than Larry Summers at 16 . In general, participants thought summers would be more hawkish than yellen, but their assumptions went further than Monetary Policy. Bernanke and former vice chairman don cohen in ten categories. The overall score, summers finished last behind bernanke, yellen and cohen. Political and communication skills, Monetary Policy expertise, that was a slam dunk, yellen over summers. Respect from other International Financial officials, ability to manage a financial crisis and banking regulatory expertise. Summers was graded higher in only inflation and expertise. It wasnt a knock against summers, the market graded yellen higher than summers. Financial markets and inflation. Those might be the two id put at the top of the list. To go with the flow and being all about price stability instead of this dual mandate which we see they can try and try and try. Going nowhere, fast. Your point is you would want a fed chair. My idol for fed chairman is volcker not you know and i think were building up this huge situation were going to need volcker 2. 0, within five years. Whatever. Within five years, that means five years of policy. Five years of it. No, were eventually, i wish we can make it worse with the reckoning well have to deal with. Make it worse by staying accommodative. Yellen is a Firm Believer in this output gap concept. The idea that inflation is not a threat as long as we have massive unemployment and unused capacity in the economy. Thats the way she looks at the world. And over the last five or six years, its proven to be the better way to look at the world to predict inflation outcomes than it has the idea that we flood the but joe, the other theory hasnt worked very well. The idea that because the fed worked in the 80s didnt it . It was in the 70s. Thats when we enacted it and the 80s we got the benefit of it. Weve got to bring in roger altman. Joining us roger altman founder and chairman of ever corp. Partners. Deputy treasury secretary. Roger, i immediately tried to say this is a prime example that people like you and people in the Clinton Administration are now on the far right of this party you have now. That the center of this party is skewed so far left that where Larry Summers looks like a deregulatory deregulation minded banking, you know, crony capitalist that is totally unacceptable to the people that are running your party now. Well, joe, i think its unfortunately, its testimony to the continued fallout from 2008. And the continued deep antipathy on the part of the public towards wall street and the broader financial community. And that played out here in a perception, i dont think it was right, that larry was too close to wall street and that during the clinton years he had participated in certain decisions which resulted in financial deregulation, which are looked back on and seen as having contributed to the events of 2008. I think you also saw here the degree to which the president has just for the moment, at least, exhausted his Political Capital over syria. And we saw that had there been a vote over the syrian air strike resolution, it would have failed. But there wasnt, though, and he doesnt need the republicans for syria anymore. Its off the table. No, but theres continued theres some fallout from the process that occurred over syria. And i just think at this point, no one in the white house has told me this, but i think at this point the white house was not going to take on another struggle. Thirdly, as we all saw over the past few weeks, even a couple of months, this turned into a public campaign. Ive never seen anything like that involving the Federal Reserve and i am still a bit mystified as to how it got to that. But i dont think that turned out to be helpful to anyone including larry. And the factor which is off in my view that larry was not the worlds most cooperative guy and would have been difficult to work with. Janet yellen is exceptionally qualified as are some of the others that are possibles. But if the president moves to nominate her, were all going to be fine because shes going to be a steady hand and a firm hand. It was selfinflicted and im talking about the politization. I think they thought if they put the trial balloon out enough and show and you saw the president the white house did it like three or four times where they brought them out and the huffington post, you know, ran two weeks of all negative summers coverage and put it out again and the democrats complaining to the president. And he said, look, i like Larry Summers. He kept trying to sort of soften up the opposition with the trial balloons and then it finally became clear it wasnt going to work. Well, sometimes trial ballooning things like this is not the right not an effective approach and it was not in this case. Not sure well ever know exactly how that all happened, but the way it played out wasnt helpful to anyone. And the other point id make this reflects the degree to which the Federal Reserve itself has become politicized. I think thats really a shame. Even if bernanke, ben bernanke would have been nominated by a third term. I think that would have been a bruising confirmation with republicans, a number of republicans opposed to it and probably a pretty close vote. I think last time there were more than 30 votes in the senate against him. So it shows the degree to which the Federal Reserve following 2008 has been politicized. And that is not helpful. Is there anything to the point that we hear about the tea party and how the rift is so wide now in washington for getting anything done. You dont think this points at all to the notion that the Democratic Party has moved far too left maybe following the way obamacare was handled on such a partisan level . I mean, both sides have moved into their respective corners and, you know, but we dont hear that nearly enough. Its not the Democratic Party that elected, that ran bill clinton that you were part of. Well, joe, the political scientists will tell you that thats true in the sense that the center, each party on the democratic side, the republican side, has been hollowed out by gerrymandering and other longer term processes like that. I think theres some truth in that. This, i think, more than anything else reflects that the public remains very angry over the events of 2008. Very angry at wall street. All those wounds are very fresh. Too many people sought out the movie to the social network. I love the way i love larry in that. You know, those two twins deserved it. Well, the way he slapped down the winklevosses. Yeah, i loved them from that. I dont know, we wanted to cover Larry Summers in the as fed chairman. So its hurting us, hurting me, joe kernan, personally, that we cant dont you think it would have been fun to cover . Youve got to admit. Well, i think janet yellen will be a strong no i dont. Shes consensus builder. I want a tyrant. All right, thank you. Good to see you today. Lets get to washington, d. C. Andrew is there this morning. With two special guests. Andrew . We do have two special guests, joe, who have been commenting throughout these interviews. Were going to get to them right now. Im joined by two key figures whose names are synonymous with post crisis reform. Former congressman barney frank is also with us this morning. We, of course, are going to be talking about financial Regulatory Reform. But given the news over the week, weve got to get your thoughts on Larry Summers taking his name out of the race. Im going to go to you, mr. Dodd, only because you approve bernanke you could have been doing this this time around. Could have been. Summers not this congress. Would summers have made it through . I think ultimately might have. I think president s normally get their choices in these matters. Its not a lifetime appointment. It would have been difficult to speculate about that. I think he probably, in the end, it would have been ugly, it would have taken a long time. But my guess is youd have to say the president gets the choice in this matter. Barney, you were saying before you thought this was the right decision no. No . Not the right decision. Oh, i think larry made the right decision given the senate opposition. Given, first of all, and chris is the expert on what happens in the committee. Its hard to get to 60 in normal circumstances. Im afraid one day the senates going to catch fire and theyre going tos asphyxiate because thy cant get votes to adjourn. Maybe i have mixed feelings about the outcome. But the point is this, of all the places where you dont want a prolonged confirmation, its the Federal Reserve. And the markets overly sensitive to when the fed chairman what do you think of joes question about the polarization about the parties, about the polarization of the Democratic Party in that this is how we this is where we are. This is Elizabeth Warren. No, it reflects joes polarization more than the democrats. Its not an equal polarization. Yes, there has been some movement. The republicans have moved much further to the right. They have moved much further to the right than the democrats to the left. Joe does not like to see this fighting, but he also doesnt like janet yellen because shes a conciliator and not a tyrant. I think joe is a hard man to please for some of us. But, no, i think the democrats are, in fact, much closer. Look, in 2008, long after bill clinton, what were going to talk about. George bush sends bernanke and paulson up to congress and says were having a terrible crisis. I need you to do something thats pretty unpopular. And giving us a lot of power and we democrats, chris and i at the urging of harry reid and nancy pelosi work very closely in a bipartisan way. And never gotten that kind of treatment from the republicans. Okay. My quickly, andrew, i think both parties, i think if i could change one law. If i could change one thing, its redistricting and roger sort of alluded to it in his comments. The redistricting how the congressional map is drawn is to me as harmful as anything to our country and the polarization of politics. It doesnt explain the equal problem in the senate. I would do that but throw in because they come over. Were going to take a quick break. Ponder this, if yellen was in charge of 2008, do you think she would have been able to persuade you to pursue the bailouts . Well talk about that in a moment. More with senator dodd and congressman frank in a moment. Strong Market Reaction this morning as Larry Summers withdraws his name for consideration, has the next fed chairman. Squawk box returns right after this. 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 this morning. President obamas going to be giving a speech today on the state of the economy in the rose garden. Using the fifth anniversary of the collapse of Lehman Brothers to highlight signs of recovery and warn against potential market rattling fights over the federal budget and the nations debt ceiling. And theres Larry Summers in all of this. Were discussing financial reform and more with our special guests here with me in washington this morning. The coauthors of dodd frank. The president of the Motion Picture association of america and former United States senator chris dodd. Also former u. S. Congressman barney frank. Hey, guys, thank you for being here. Its five years later. Its remarkable. Five years later today. We had hank paulson on a friday. We were talking about this during the commercial break. A lot of people look at what he did during the crisis and say hes an american hero. Do you agree with that . Well, look, if youre beginning your mark of september of 2008 when the thing had cratered and were looking over the brink. When ben bernanke says to barney and i in the night of september, its going to melt down here and abroad. Then, yes, did a good job of working through that, getting the t. A. R. P. Done, setting things up. But, you know, this problem didnt were talking about five years ago. This problem began, you could identify the problems emerging in 2005, 2006. Jim bundting and jack reed had hearings in 1996. Almost all of 2008, even with bear stearns on st. Patricks day, we did virtually nothing. You couldnt get the attention of the Bush Administration on these matters. So, i love hank, he did a good job in a critical moment. But this problem could have been a lot less than it became had we acted earlier to step in. And ill go to my grave believing that. Youre friends with hank. I had a better experience with him. He testified before the committee when i chaired on a number of cases. Famously, by the way, my job to some extent in 2007 was to defend paulson and bernanke against the conservative republicans who didnt want them to do anything about bear stearns, glad they let lehman fail, though, i think they tried to stop it. One of the things that strikes me and i mentioned the Business Community. The Republican Party has become over the past few years a center of attack on the fed. Not just on kwquantitative easi, but trying to help with the crisis. I think its very much not to encourage people who do that, but we the biggest and chris is right about the duration. People forget this. In 1994, the Congress Passed the homeowners equity protection act which said to the Federal Reserve, stop the kind of mortgages they should be giving because people should be paying them. He mistakenly said, no, the market can handle that, refused to use in fairness, you did support housing and pushing housing no, i did not. You did not. You think thats not fair . Why not . First of all, the republicans control the congress from 1995 until 2006. So people think i stopped tom delay from doing something. If i stopped tom delay from doing something, we wouldnt have gone to iraq and he wouldnt be on dancing with the stars. Secondly, though, my position was we should be doing low income people rental housing. But in terms of home ownership, ive been skeptical. And we did try in 2004 democrats in the house tried to pass a bill, took the lead on this to stop the bad mortgages and delay said you cant do that. When hank paulson says that ultimately every financial crisis is a function of bad government policy, a lot of blame has been cast at the bankers, the blame has been cast at Credit Rating agencies, regulators, what have you. Where do you in congress and the senate take responsibility . Do you . Yes, well, first of all, i disagree with that its bad government policy. There was bad government policy in the late 90s and 2000. But it was a failure to stop the Business Community from doing things they shouldnt have done. It wasnt so much regulation as deregulation. Thats an important point. They didnt a single regulation. Congress may have let this go on too long. But i was on a panel the other day with bill thomas, two of the republicans who were on the financial crisis commission. They agreed with me that the Community Reinvestment act which some conservatives blame had zero to do with this. Didnt force anything. Fannie and freddie did facilitate what the private sector initiated. Were going to come back with more from both of these gentlemen. Going to talk about whether too big to fail exists. Back to you. Thank you very much. In the meantime, wed like to show you where the markets are this morning because owl of this news about Larry Summers pulling his name for consideration for fed chair have the futures at this point indicated open higher by about 18 poi0 points. Well have much more on the Larry Summers decision to take his name out of the hat when we come back. Also, were getting ready for a huge fed policy meeting this week. We get the perspective from traders in a few minutes. Stick around, squawk box will be right back. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your Information Safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. I know what youre thinking. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. In our headlines this morning, a complex system of pullies and counterweights have begun pulling the Costa Concordia cruiseship up from where it capsized in 2012. The goal is to raise it to a vertical position for eventual towing. 32 people were killed after the captain steered it too close to the coastline in italy. Markets surging after a little more clarity on who may be the next fed leader. Larry summers taking his name out of the race. Equities are responding by pushing sharply higher this morning. Were going to talk fed, markets and much more when squawk box comes right back. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Welcome back to squawk box, everyone. In our headlines this morning, Packaging Corporation of america is acquiring fellow product maker boise for 12. 55 a share in cash. Thats about 1. 3 billion. Also, an ipo filing for chrysler could come this week. Told the Financial Times that all the necessary documents are ready to go. If that filing occurs, the ipo could occur before the end of the year. And the saudi prince says he will not sell any of his stake in twitter when it goes public. Invested 300 million in twitter back in late 2011. He calls twitter a strategic investment saying its Growth Potential is tremendous. Well be getting a fresh batch of data this morning. Economists are looking for a rise of 0. 4 after an unchanged reading back in july. Joe . Markets expected to surge this morning on partly, i guess, on the news that Larry Summers is out as o possible successor to ben bernanke. Joining us to talk currencies, bks Asset Management and kevin gittis. And ill start with you, matt, because oil is down. You would think if summers exit was bad for the dollar, why is oil down . Yeah, exactly. Weve seen three weeks ago we were at 105 and popped up on the potential for military intervention. And weve seen that risk premium unwind. Whatever is happening with Larry Summers is nothing to do with the crude mark. Does have something sood with currencies, doesnt it, boris . Or not so much in your view . My first thought is i think they should form a club as investors best friends. Without their withdrawal, it created a huge run. For currencies, it had a very positive effect on currencies, on the pound, the aussie dollar and the risk currencies. They popped up on the assumption he was viewed as much more hawkish, yellen is viewed as dovish. Going forward right now for currencies, the biggest focus is fomc to see if their going to commit to a taper. I think its very interesting that as the case for taper becomes much less because the u. S. Economic data has been going the wrong way. I would find it very surprising if they commit to a hard core move on taper at this point. Got a start, though. They do have to start. I think if they start at 10 billion, the market would absorb that with less of an angst than if they went for fullcourt press with 20 billion. 10 billion. God forbid they go for 10 billion, what are we going to do . J. J. Was played by jack, obviously. I saw jack the mayweather fight. Did you see him . Hes so cool. Meanwhile, mayweather tbe, best ever, i think after watching that. Anyway what about bonds . Why would yields go down today . I didnt quite understand that because we dont really have much of a hawk headed for fed chairman now. Well, we did take about six out of the tenyear on the news. And what the market is saying is that no taper. Well, given the choice, i think there still will be a small taper. But i think given the choice between the two candidates that janet yellen is a known, maybe more dovish. I think shell surprise you she may be more hawkish than people think. But what that means is were in no hurry to stop this from happening and the economy and Inflation Numbers are supporting the continuation of the fed. Kevin, if and becky knows how to pronounce vigilantes, but if the bond vigilantes were still around, they should be running up yields right now on the long end of things because weve got someone in there thats going to potentially in their view lose control of Monetary Policy by being too dovish. I guess thats not what were seeing, is it . Well, no, because the counter to that and well see some more numbers to that this week, the counter to that is the lack of inflation. Really and recently, we have it theres so much slack in the market right now, theres not causing real price pressures where you would think that raising rates theres a reason to take rates even higher and that is the fear of inflation. As long as thats out of the picture, the bond market will be more patient and we can see how this plays out. Also the economic numbers have not been great and the jobs numbers, as well. Markets okay right now. Yeah. Im also worried were going to talk to our guests, were going to leave it here, but i feel bad for president obama. I mean, you know, its almost he lost power, looks like here. And putin made him look bad and maybe the joe, he had two great decisions not made by him, actually. I know. Well, maybe they were oh, so youre happy what, youve got your long stocks . We get a day of no, i think yellen has been one of the best forecasters in the fed and the continuity is positive. So, yes, i think those things are good. All right, guys, were going to get back to our esteemed guests in washington. Okay, joe. When we return to washington, were going to have much more from our guests of the hour, cocreators of the financial Regulatory Reform act, former senator chris dodd and former congressman barney frank five years later. Also, the fed in focus this morning, market rally on the news that Larry Summers has withdrawn his name from consideration as the next fed chairman. Plus, a big fed meeting ahead as the markets get ready for tapering. Could it happen this week . All those questions and more, weve got answers when squawk returns. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. I got this. [thinking] is it that time . The son picks up the check . [thinking] im still working. Hes retired. I hope hes saving. I hope he saved enough. Who matters most to you says the most about you. At massmutual were owned by our policyowners, and they matter most to us. Whether youre just starting your 401 k or you are ready for retirement, well help you get there. [ 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. Welcome back, everybody. Were talking this morning with former senator chris dodd and former congressman barney frank about the fiveyear anniversary of the collapse of Lehman Brothers and the financial crisis. And thank you very much again for joining us this morning. Thank you. Dodd frank did a lot of really important things, but one of the most important, i think, is it requires the Federal Reserve to oversee Financial Companies not necessarily banks. But Financial Companies and any other Nonbank Financial Company that could be seen as systemically important. I know already that there are insurers out there that have been lobbying to say that they should not be regulated by the Federal Reserve. And i guess when you look back at lehman and aig, some of the key components that took this country down, this financial hardship, do you think some of those Insurance Companies will not be regulated by the fed and how much of a problem do you think that is . Well, i hope not. As a major provision of the bill, the legislation only requires there be four meetings a year of the Financial Services oversight board. Theyve already met some 30 times, by the way. I admire the fact that theyre understanding the value of having the capacity to bring regulators together to discuss with each other not only product lines but also institutions that pose systemic risk. Exclude these major Financial Institutions from that consideration. I think itll be a major, major flaw. Obviously aig, what better case do you have . Remember, these are all investment banks that caused the major problems. Not commercial banks. They were not the cause of the major crisis that we went through. So this is a major provision of the bill, i hope it doesnt get lost or eroded. Let me pick up from chris and venture into an unnecessary thats why having reenacting glass seagal would not have prevented that. Neither would be affected. Neither would countrywide. By the way, Elizabeth Warren, she says that, says it would not have changed the outcome. Other reasons. Im a great admirer of elizabeth, but chris is absolutely right. First of all, aig was an insurance company. But one of the things we did in the bill was we dont regulate institutions, we regulate activities. Because if you regulate, you know, by institution, they do something else. And, yes, lets put it this way. If you are a Casualty Insurance company, a Life Insurance company and all you do is write insurance and pay off when people die and invest then you probably wont have any real supervision. The thing people have to remember is that insurance is unusual in america. Its the only major industry which is not generally regulated at the federal level. Its been for many years for political and other reasons that was a problem because you could go shopping around for a regulator. If you did not have which is exactly what aig did. Right. And they had the office of supervision, which we abolished. I had an alternative of abolishing it. I wanted to call it the office of if anythifig leaf dispensati. If you do not have the fsoc with major Insurance Companies, theres no National Regulation of them at all. Question for you, though, Elizabeth Warren who you agreed with recently, you disagreed on a bigger topic. Shes wrong about that, and i respect elizabeth immensely. If you try to do what we did in the fall of 2008, its against the law. Forget whether or not you could get it done politically. I dont think you could come close to getting it done. But our legislation prohibits what the federal government did in the fall. And ill tell you over and over again. These funeral plans, the requirement that you lose your job that the institution pays for all of this, is the law of the land. Ive heard these people say ive asked them, whats not going to happen . Heres what the law says as chris pointed out. In the first place, yes, there were some institutions that were so big that if they fail and cant pay their debts, itll cause problems. And you dont think the government would be forced, then, to step in you think politically it wouldnt happen. Youre not too big to fail. Youre too big to fail without impact. Before the government can step in, youre abolished. As chris said, the directors the board of directors, shareholders are wiped out. Then after that has been abolished. As i said, we had death penalties in our legislation four years ago. But in our bill, not the health bill. The Death Penalty is for big banks and what happens then is the secretary of the treasury is empowered to pay some of the debts and paulson said, look, of you got to give me the power to pick and choose. I shouldnt have to pay all of the debts for aig and none of the debts as for lehman. Heres the key thing, the secretary of the treasury is mandated by our statute to then go to Financial Institutions with 50 billion or more in assets and recover every penny. So, yes, we step in, but first by abolishing the institution and then by making the other Financial Institution well, by the way, that works, but only if all the other banks are still around. If you have a true crisis. First of all, weve never had that. Isnt that what 2008 was . Oh, please, 2008, lehman failed, aig was in trouble, but hank paulson had to force wells fargo and jpmorgan and goldman to take the money. Says that t. A. R. P. Was a failure. Lets stick with your point, andrew, please dont change the subject. The fact in 2008 most of them were solvent and said we dont need help dont want it, itll stigmatize it. But the point is supposedly with the total collapse of everything, i cant tell you whats going to happen. But i do say this, we have never had that scenario. Weve never had a situation where everybody collapsed. In 2008, a couple collapsed and the others you just wrote a column that it wasnt popcorn, it was dominos. You said it was a popcorn that they were bubbling up separately. I flip and flop, thats what happens. You do. Hey, congressman, frank. I know you have an ear piece in and you heard what some of my comments about Larry Summers. And im just you know, i heard you said the republicans have moved further right. But here you have a democratic president. Shouldnt he be allowed to have the fed chairman that he wants should i feel bad. And i think it actually lessened lessens his power to some extent. I know you feel bad you say you feel bad. Its not the republicans that arent going to confirm him. They dont confirm anyone else. But this is your own party that wouldnt have confirmed i want to respond. First of all, you say you feel bad. I hope your wires are insulated because the crocodile tears might cause that to be a short circuit. The point is this, there are two separate questions. Was he the best choice . And should people vote to confirm him . If i would have been a senator, i would have voted to confirm him. I do believe that president s deserve that power. I do think also that roger altman had the better part of the conversation with you. I do think that was more specific to public anger over 2008. A leftwood move ive got to ask you one more thing, because i love when youre on and thank you for coming on today along with senator dodd. But when you say it was impossible for the democrats to do anything to sort of reform the system from 95 to 06, should i also take it that now the republicans on the clinton economy from 95 to 06 because it was a Republican Congress . No, they dont own the clinton economy. Just the crisis . No, im going to quote what i quoted before when you said to me, hey, congressman, this is cable not c span, you know, except a little distortion. Yeah, were never one to take advantage of the air waves on cable. I was specifically talking about mortgages and fannie and freddie. The bad things of the republicans fault and the good things thats a caricature you wont find me saying that. From 95 to 2006 it was the republicans who would not act on fannie and freddie, and 2007 when chris and i took over, we then working with paulson put the legislation in that put a stop to it. Thats a very specific point. Not a general one. All right. All right. You always win. I have a slightly different question. Which is ultimately when you think about where we are five years later, should have anyone gone to jail . What would happen . When you look at what the government has done from a regulatory standpoint actually enforcing laws both in terms of writing the new stuff and enacting the new stuff or enforcing the old stuff. We lawsuits, youve come out with comments you think thats crazy. We made Jpmorgan Chase take over bear stearns, and i think to force them to take it over and then sue them because of things that were done before the takeover. Not only unfair but reduces your ability to get another company to do a similar thing in the future. You say were never going to need to do another thing in the future. No, i said were not going to have the same kind of crisis. You may still have to resolve a particular institution. That doesnt mean were going to let it ultimately fail. Chris, real quick, do you agree with that . I do. Again, i think the fdic has done one of the great contributions, done every friday afternoon and banks open up on monday mornings and done with continuity and no shocks. So in my view bear stearns to me, though, people sort of forgot. I think we came precariously close to declaring a bank holiday for the First Time Since the great depression. And it was a fire sale and to me, in many ways maybe bear shouldve failed in march. If they failed in march, we might have been able briefly the fdic has been good and we use the fdics expertise in shaping our liquidation authority. Sheila bair was a big piece of it. Were going to slip in a quick break and continue the conversation. Im going to send it back to becky. Back to becky. Thank you, andrew. When we come back, were going to wrap things up from washington with chris dodd and barney frank. And more on Larry Summers with drawing his name from fed consideration. Well take a closer look at who is still in the running and what they bring to the table. Robe Grover Norquist will be joining us. Were back in washington, d. C. Live with the two men responsible for the financial reform act. And my question is when you think about where we are in that act as little of it would have been implemented. We didnt anticipate the republicans taking over the house and choking off the funds. The Commodity Futures Trading Commission got the largest increment of new authority other than the Consumer Bureau because derivatives have been left alone. And they were given derivatives and i think hes done a good job. The republicans in the house have refused adequately to fund the cftc. They get all these comments, the conservative court in d. C. Makes them do a thorough analysis and they dont have enough money to do it. The biggest single reason is the inadequate funding for the cftc. And youre not blaming the banks for pushing back . You do to a large extent, but im more optimistic than others are. Jack lew has indicated by the end of next year the big one left is the volcker rule. But barneys right, i regret we didnt have the funding, there are members not about to give up their authority over that. But thats and the other thing i wish we couldve done, i proposed it in the fall of 09 and that is to consolidate under a single predential regulator. People talk about youve got to take the little bank. The Smaller Banks politically wouldve killed any effort to put them into the same regulator within national banks. That was a political fact of life. There have been arguments made that your bill at some level has slowed the economy, slowed the banks down, do you believe that . Well, look at the numbers. Theyre having record years, theyve gone its incredible the success stock market on march 9th 2,000 points was 6,500. Four months after t. A. R. P. It was that far down. When you look back at when you approve that 700 billion plan, do you think that was a success . Oh, yeah. Gosh, yeah. Ill go to my grave believing that. For that bill in the senate, 7524. Judd gregg, my partner in all of that, thats the reason we had the strong vote on that and rewrote the bill. Paulson sent us a 200page bill at 1 30 in the morning, give me 700 billion. The country rightfully was outraged. You dont get credit in politics for disaster averted. None of us couldve benefitted from that politically. Gentlemen, we really appreciate it. Well have much more about Larry Summers decision to take his name out of the hat as the next fed chairman. I am today by luck. I put in the hours and built a strong reputation in the industry. I set goals and worked hard to meet them. Ive made my success happen. So when it comes to my investments, im supposed to just hand it over to a broker and back away . Thats not gonna happen. Avo when you work with a schwab financial consultant, youll get the guidance you need with the control you want. Talk to us today. Pcentury link provides reliable yit Services Like multilayered Security Solution to keep your Information Safe secure. Century link. Your link with whats next. Welcome back. Its all about you. Welcome back, steve liesman. Welcome back to squawk box here on cnbc first in business worldwide. Im joe kernan along with becky quick and Andrew Ross Sorkin. I wanted him to write a letter, you know, to harvard for my kids to get in. Its about me too. This affects me. Youre happy our top story this morning, u. S. Equity futures sharply higher. Yesterday, a former white house thats what were talking about. Former white house economic treasury secretary, he withdrew his name to be considered for the next fed chairman. We want to know i think someone told him take a walk, larry. Janet yellen is now the presumptive front runner, considered more likely to continue the monetary policies than Larry Summers. I think, im serious, i think that the president loses something within his own party here. It wasnt the republicans that werent going to let him in, it was his own people that he was unable to corral. And i dont think thats ever good if you cant appoint the people you want. It was out there for a long time too. They knew it was going to be a problem from the start. They knew it was going to be a problem and then they never went away. They started this campaign and it just got friday was the final straw. They kept thinking they killed it and the president would say, no, i want summers and did another campaign. It seems crazy that four Democratic Senators on the Banking Committee crazy to me that the president cant say, yes, youre doing this. A trial balloon out to your own people. Call your people in. The question i have is who is advising the president . And if theyre giving him the right advice, is the president listening . The president now looks far to the center compared to the center of his party at this point. To make the president look like not a progressive, youve got to be pretty progressive to make the president suddenly look like hes tacked to the center because he hasnt. Anyway, not that i can tell. So you see where the Actual Center of the party is at this point. Its out there with Elizabeth Warren and jon tester and tester isnt supposedly except that, joe, in the space time continuum. You think its gone so far democrats have gone so far to the left its met up with wall street. That, i mean, it is a curious set of bedfellows. The market is up. The market loves not summers as the Democratic Left did. For the near, shortterm, kneejerk reaction im just having fun with joes my fun is that now it proves that Interest Rates definitely arent going to go up because the president is now the economys just going to be in the toilet for the next three years because the liberals are now in charge so were going to keep tapering forever accommodating forever. I would make this point that yellen may have a set of beliefs and you can believe whatever you want about her. I think theres times shes been more hawkish than shes given credit for. But things change they were more similar than people thought. It wouldnt have been that big of a difference. But things when you become chairman. And one thing im sure about yellen, she will run a Consensus Committee very much the way bernanke did. I think summers wouldve done the same thing. I think you have people that would rise to the occasion. The hard core vigilantes that think were going to lose control now. Where are they . Yeah. Inflations coming back. I would think the 30year yield. Im trying to think of what country they would think would be safe. They wouldnt go to antarctica. Right. The coldest ever. Maybe theyre building a bunker below the bunker they built. But i want to give you more information from our cnbc fed survey about what the market thinks about who the next chairman should be and what they think about cohen versus yellen. But first, i want to remind you what we reported in the last hour. America by a 21 margin expected obama to appoint summers but 5 to 1 margin wanted janet yellen. Economist, strategist and money manager surveyed on thursday and friday. 58 said summers would be appointed by obama, 30 said yellen. Who should they choose . 56 yellen, summers, just 12 below, by the way, john taylor. But looking at the next two apparent leading candidates, yellen and cohen. They were asked to grade summers, yellen, bernanke and former vice chairman on ten categories. Yellen wins by a bit, Monetary Policy expertise, yellen, unemployment concern, yellen, two categories, yellen, but kohn wins on Financial Market respect and Financial Market expertise, inflation concern and banking regulatory expertise. Bottom line is that from the markets point of view, kohn versus yellen is a tougher call than summers versus yellen. Heres the serious problem obama has now in my opinion, how does he stand next to the diminutive yellen and say shes the best person for the job after months after letting the market believe he thought summers was the best person. And reports saying she wasnt being vetted. Looked like she wasnt getting a lot of love from the obama administration. Any way he picks kohn. I think its possible. Thats an insider politics game and sure its going to be yellen. The gender police, if he picked kohn what about laura tyson . I love yellen. I love yellen. Please. Its not my favorite thing to do. Did we get an actual reaction out of joe . He is the economics columnist at the Washington Post and greg epp who is economics adviser at the post. What do you think, is yellen going to be at the person at this point . Well, it certainly seems she ought to be the front runner. And when you consider how highly qualified the two candidates are, i mean, in my view, you would have done well with either. But now that larry has pulled his name out, i cant think of a good reason why the president wouldnt go with yellen. Other than the fact that through this whole process with the last few months, the people who are backing summers seem to have doubts about her for reasons i dont fully understand. So there are those other names out there. Maybe the president tries to twist geithners arm into changing his mind. But the path of least resistance in terms of nomination would be to appoint janet yellen. You see it as antiyellen not pro summers. I thought it was totally they liked larry, they felt comfortable with him. I didnt think it was anything against yellen. I dont think so, except in the process of trying to explain why they thought Larry Summers was the best person for the job, people would ask, well, give us good reasons why janet yellen isnt as good as him on this. I think a lot of people are making big issue of the gender thing. Im not sure that did her a lot of favors in the end. This is a person superbly qualified irrespective of gender issues. I doubt if anyone questioned her science and math ability. That probably was not in the equation. Was it, greg . She was she taught at berkeley. Look at you nobody teaches at berkeley who isnt really good at math. Neil, how about you . Who is your choice . Yellen you think the front runner . Yeah, absolutely the case that yellens the front runner. I dont think you can rule kohn out at this point. This has happened rapidly. This process was mismanaged from the beginning. The white house allowed these expectations. Then they kind of get out word that Larry Summers is a front runner. I think we should wait a few days to let things settle down. But for now, yellen does seem to be the front runner, but lets acknowledge what we dont know at this point. Tony fratto threw out an interesting idea. He said what its bernanke, convince him to stick around. There is a very compelling political case for bernanke. It doesnt cost obama anything. He continues not to fully own Monetary Policy if he reappoints bernanke. I just think from a combination of the way this has been handled that bernankes off the table and i think from a personal standpoint to say he could the one idea, i dont know if tony mentioned this, but it would be an interim bernanke. I think that stops from happening. You wouldnt have to taper right away either. Yeah, but i think bernanke believes its time to taper. Well, its a sixyear appointment. But you can step away if you feel like it yourself, cant you . Yeah. Im not sure how it works, but i think the president could nominate and with an understanding it was a temporary thing and bernanke can step away he can say never mind, im here for another six years. Someone told him, youve been here long enough. It has been said. Any one of these names, yellen and neil and greg, ill throw this out to you, are there hurt feelings . How closely would that be working with the president . The fed chair meets with the president a few times a year. Much closer with the treasury secretary, white house economic advisers. You know, that said, look, these are all grownups. No matter what happens, i think if janet yellen is the fed chair, im sure shell have bruised feelings over the last few months. Shes a prow, s, she would come and lead politically. Susan rice back for secretary of state, he keeps having these favorites and then some discontent builds on capitol hill and he doesnt make the nomination. Didnt happen. This was his own party. The other one was the republican. Its totally i agree with you. This seems to me to have more resemblance to the debacle over syria where he didnt Read Congress very well either, including members of his own party. Thats two in a row. Thats a really good point you make which is that summers had the quality of not being enamored to the Democratic Left, but the right didnt like him either. You didnt gain any points. I think harwood was saying in the 6 00 hour, they were going to have to give up votes to get republicans. They didnt feel like doing that with the budget ceiling on the way and these other votes. Budget ceiling. Hey, greg. Quick question for you, which is youve seen the markets, theyre spiking on this assumption that yellen gets the job. If she doesnt get the job, it goes to kohn, what happens to the markets . I dont know. When i see what the market did this morning, i got to believe this is less about an assumption that they think Larry Summers would have been hawkish and more about the uncertainty they dont know what the policy would be. And if janet yellen is not the nominee, that same uncertainty would prevail. People would say, well, were going to get a Monetary Policy that we dont understand yet. Why dont we think he was bernankes guy during the financial crisis. Sure, we havent heard from him in years. One of the let me say one thing, quick. One of the bizarre things about this process is that larry was essentially criticized very deeply on a number of fronts while very few people actually heard from what Larry Summers own views on what Monetary Policy and regulation were. And i think people who have studied, feel he wouldve dovish. One of the mysteries of this process is how people can form such firm views on so little information. And if the president nominates another person about which there are big unknowns, theres going to be that same risk. All right, gentlemen. Oh, youve got to thank. Thank you. Well see you later. Ill see you at 8 30. Andrew yeah . Im going to phrase this nicely. Why did you laugh when i said lets get back to our esteemed guests when you had congressman frank and you kind of laughed. Is it because you know me too well . I didnt it wasnt in my voice. I didnt know if it was a little bit might be. I said lets get back to our esteemed guests. I know whats going on. You do, dont you . I think i know whats going on in your head. Esteemed is an interesting word for you to use. Dont undermine me. Thats bad, andrew. Meanwhile, did you were you working dodd for some movie premieres . Oh, we were talking movies. Take and were were going to go to premieres, take pictures, hang out with the stars. I knew you were working him. Too big to fail 2 is going to be a great premiere. The sequel, right. Coming up, without congressional action, the government expected to run out of money to pay its bills next month. Were going to talk to Grover Norquist, founder for americans tax reform. And were going to talk to pimco about the yellen effect on the markets and the treasuries. I thinks he was the yellen guy probably all along. Right now as we head to break, check out the squawk box market indicator. Here at fidelity, we give you the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box this morning. Live in washington, d. C. Today, five years after the financial crisis. But theres another fight over the debt limit and it is looming with the federal government expected to run out of money on october 1st without congressional action. Grover norquist, founder of americans with tax reform joins us now with more. Good morning to you. Good morning. Is there a path . Any path here in washington to actually get through this . Oh, absolutely. I think this is a lot easier than the last time we did it in 2011 and 2011 ended well. We got a compromise. You want 2. 5 trillion in higher debt ceiling, mr. President. You have to have 2. 5 trillion in spending restraint over the decade. Thats the deal, were holding to it, we have sequester. Its working we go back in again, the president will want 1 trillion, or he may want to take it past the next president ial election. 2 trillion or 3 trillion, okay. What are you asking . I think youre likely to have some sort of changes in longterm entitlement spending. Stuff that wont affect obama or his team now. And the democrats go along with that . Well, the alternative is to have spending restraint shorter term and theyre more offended by that. Meaning spending they control now. Thats one option, the other would be to delay obama care, not end it but delay it a year. President s delayed pieces of obama care for Insurance Companies, for Large Businesses, for labor unions. Why not for the individual mandate . If democrats say no, you say what . Meaning democrats have called you an obstructionist. To higher taxes. Im not the first person to say that. Yeah. If the democrats say no to the things youre proposing, where do republicans land . Well, because the white house wants something too. The white house is up set with the spending restrictions of the sequester. The mandate for individuals. Right. Saves taxpayers 35 billion in a year. Okay. You could trade that for some spending on domestic discretionary stuff. So the president has desires, as well. Remember, its the president who always says i will close down the government if you dont do x. And the question is, what x is. Clearly the republicans have offered to do it just a few months out. Theres one other thing i think the republicans will ask for and get. That is that from now on the internal workings of treasury where they come up with the magical number that the governments going to run out of money. Back in 2011, it was january and then it was april and then it was june. They kept moving. You want to see theyre either lying or theres a lack of confidence. Lets see the bank accounts, assets, how much gm stock do you have, how much could you sell . Joes got a question. You believe october 1st is a phony date . Yeah, it has been in the past. Id be pleasantly surprised if it wasnt. But lets open the books so people can see how youre making that decision. All right. Who would you who would the republicans actually be negotiating with . You remember during the deal, talks with boehner. Some people said boehner couldnt deliver his people if he needed to on those talks. Other people noted that the president seemed to have deal almost done. And he couldnt deliver it either. Given whats happened with summers where that was the president s guy and we again see that hep doesnt control the far left of his party. Who would you can the president make a deal now on entitlements . He can look, boehner needs to talk to his caucus obviously. He cant just do something individually. He talks to the caucus. We got a very good deal in 2011 that saved real dollars for taxpayers. It really made changes and has made the country put in a better financial footing. The president signed it and the Democratic Senate went along with it. So we know that we can get an agreement. The left objected to it. And the reason i called it obstructionist is i worked with congress and say lets not raise taxes as part of the agreement. And the republicans said were not raising taxes, well cut spending, do many things, raising taxes is not part of it. Sometimes when people say we fail to get an agreement in 2011, they dont finish the sentence. They fail to get an agreement that raised taxes instead of cutting spending. Is the far left emboldened now . Thats possible in the senate and you certainly see harry reid staking out a position on tax reform, which some people thought might get wrapped into debt reform. Its not ready from the Democratic Senate because harry reid says he wants higher taxes. Its not where the house is, its not even where the president says he is. So youre right that harry reid is hanging out a more left position these were all senators that did this with summers too. He doesnt have the senate anymore and hes got the Republican Party in the house. Will you weigh in on that debate . Sure. Yellen kohn, did you want Larry Summers, by the way . Its interesting because Larry Summers i knew none of the above. If you had to pick one, i thought summers would have been okay of the three. The challenge is that you have here is the president has no working relationship with any republicans, not just the House Republicans but Senate Republicans which is normally you could reach in. John mccain has worked with him. John mccain has worked with him on syria. John mccain offers to come into any conversation where youre doing stuff im not sure that this job is the one that mccain would focus on, tends to focus on syria. But he doesnt and the people not just the president doesnt have these relationships, the white house doesnt have these relationships with the democrats but dont have one with republican senators. Its a problem five years in. They dont have working relationships with senators. Before we let you go, youre involved in some kind of marijuana debate on taxes. You want taxes for for dont want taxes on anybody. Slightly complicated, very serious, theres a giggle factor when we discuss marijuana. There are 22 states that have Legal Marijuana dispensaries for medical reasons, okay. But at the national level, federal tax level, in 1982, they said present law is if somethings illegal and you have to pay taxes on the illgotten gains from being a bank robber or something, you can deduct your normal and ordinary business expenses. If youre a marijuana smuggler, you can deduct your costs. Well, we now have Legal Marijuana dispensing at the state level but they cant deduct the cost of employees, the cost of renting a building. Their tax rates 87 as opposed to 35 . So what i commented on the other day is, look, theres a bill being put forward by a democrat from oregon. Lets treat them the way we treat everybody else, 35 tax rate, not 85 . Thank you for that, grover. Well make our way over to colorado at some point. Coming up, mohammed elerian expects big moves as the market prices in the expectation of janet yellen as the next fed chairman. Evelopment. 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. 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. Still to come this morning, well have more on Larry Summers withdraw from consideration as fed chair. Up next, well talk about the yellen effect on the yield curve. Plus, Rick Santelli will bring us numbers from the Empire State Survey and this mornings reactions in the markets. The dow futures up about 186 points above fair value. Squawk box will be right back. [ cows moo ] [ sizzling ] more rain. [ thunder rumbles ] [ male announcer ] when the world moves. Futures move first. Learn futures from experienced pros with dedicated chats and daily live webinars. And trade with papermoney to testdrive the market. All on thinkorswim. From td ameritrade. Welcome back to squawk box. Were seconds away from the Empire State Survey numbers. Rick santelli standing by at the cme in chicago. Steve liesman with us onset. Hey, rick. Hi. 6. 29 is septembers read. For the manufacturing index. The last time we were at a level of 6. 29. We dont have to go back far because mays number was minus 1. 43. Obviously its a bit of a disappointment. Im not sure this number would change the complexion of strength in equities, slight reversal. Fairly decent size reversal with the fixed income markets. We all know the reasons. It seems like its autumn for summer. Back to you. I couldnt help but think whether you could have made it to washington to be on the set with andrew with barney frank and chris dodd, rick. I dont know. Im not sure all the champions of free markets, absolutely. My favorite line was that from 95 to 06 they really couldnt do anything about the housing crisis or fannie and freddie because the republicans were in charge. So barneys hands were tied during that period, rick. Oh, yeah. I dont think the housing crisis wouldve ever happened with sort of the intimation there. Well, you know, so much of it gets revised and synthesized and cloroxed they end up with these comments in the paper. His stance on regulation rubbed some of the progressives wrong. You know what we lump everything together whether it was andrews interview on taxes. Listen, theres good regulation and theres bad regulation. To look at things and say hes pro or against, its just silliness and we continue to do it every cycle. You know what my complaint was about Larry Summers . It wasnt the issues he was somewhat involved in. I agree with conventional wisdom there. That wasnt the issue was letting these derivatives go without coming on exchanges. Very specific issues. And writing bad regulations or getting rid of regulations is too generic like taxes. I hate to say this, dont take this as an insult, but where you are right now is really to consensus i hear from republicans like peter fisher who we had on a few days ago. The gentleman who got rid of the 30yearlong yeah, but he also did that too. But the issue is not that we deregulated, but we got rid of one regulation and didnt put another one in its place. No regulation was not the answer. And if you think about the greatest mea culpa, saying i thought the derivatives would receive regulate and i was wrong. And thats where we are at right now. And theyre trying to put the derivatives on to exchanges as they say. And the concept of the dodd frank bill is to replace it with something. Thats the defense of that bill right now. Yeah, no, i dont disagree. I just think replacing it is not the way to go. And i think derivatives largely would selfregulate. Theres just a couple of linchpins in there that we didnt have correctly. You know, you have to have some type of audit trail for the products. I think that was the significant issue and i think the other issue is that the implied versus explicit branding of gses where everybody from Larry Summers to mr. Clinton, alan greenspan, they were highly aware of that. Anybody alive in the 80s that monitored the Mortgage Market was highly aware of the special hands that were being dealt to the gses and to plead ignorance or think regulation got off skew is just not correct. They were proactively driving this train down the wrong track even though the wrong track didnt have any speed limits on it either. Barney frank had answers on all that. Said the private sector absolutely drove the what happened with fannie and freddie. They were just accommodating what the private sector wanted. No, no, the private sector was accommodating the mandates of the gses as formed out by mandates for home ownership. Thats not what they said. Yeah, of course not. They built the factory to build a sausage and the private sector youre talking to me friday on this event put on by the group acknowledged that political pressure and political policies played a role in fostering the housing bubble. I dont think he puts it all on the gses, rick. They were accommodating. Just said it, steve, on the air. Said the private sector drove what fannie and freddie, what happened there. Youd be surprised. He could spend the rest of his life trying to explain it. Everybody with a pulse that was in the markets in the 80s and 90s understand mr. Franks role in all of this. Its weird, because theres all these things on youtube, obviously. But he he just told us again that he was never a big promoter of housing. He was oh, roll the dice with the gses he was never a big promoter of housing, a big promoter of rents, he says. And barnum and bailey hated clowns, i understand. I think everybody in washington was about home ownership. That the real estate lobby cut across parties, cut across how could you say and now everybodys like, well, maybe renting is not the worst thing in the world. Theres a whole change in how people think about rental properties and whether or not maybe thats a good goal that the government should be involved in helping lowincome folks have more rental housing and building that. But back then and cut across parties, it was well, steve, thats the point, though, and joe, i think youre going to disagree with me, it did cut across parties. That was the big issue. It may have started under clinton. Im not saying that bush wasnt fully involved in that. They all were. I know. Why would i disagree with that . It was societal. Everybody that benefitted from having their house, the piggy bank benefitted also. I dont like when it comes down to being wall street. Thats the revision history of the New York Times. Joe, its the same right now. Think our new labor secretary, its still going on, its just gone algoryhthmic. I want to pick up on what joe said because one of the dangers not dangers, one of the interesting things, i think that comes from this discussion of the crisis is whether or not markets are prone to these excesses on their own. Right. Or must they have some political impetus . And i think that people think that, you know, the markets would not have gone so crazy if not for the political motivation. And if we have learned any lessons about unintended consequences of things like pushing housing and then the market yeah, Barney Franks right, the private sector did all the work, that doesnt mean they werent pushed down the road. Ive even said thats why we build crystals. We cant build them here. If one piece of dust gets into weve got to build them in outer space. The free market, its never totally free. And in theory, if it was, if it was out in space where there were no government intervention, everything should work. Thats what free market people believe. Others think that the free market is inherently flawed in some way. Well, thats the lesson some have taken. Theres referees on the field. But you dont want the guy should be. Have you ever seen where the guy runs into a referee and gets tackled by him . Thats not good for anybody, for the sport. Especially when he cant get up. All right. Thanks, rick. I was thinking about you, though. I was thinking about you with i dont think they would have come on, though, if santelli was there to be honest with you. Well i dont think do you think barney shies from anybody . I dont think barney would have been there, he wouldve. He comes to play. He was amazing you know i tried to moderate a panel, andrew, with barney on it last friday and im telling you barney ended up moderating. I think we asked him, who would be interviewing him, Andrew Ross Sorkin. Oh, sure, well drive ourselves. Its andrew, well be there. He interviews himself. Exactly. Hes a little bit liberal for us no, im kidding. Coming up, mohammed elerian. Hes a yellen person. I dont know where they stand on this stuff. They dont like qe, maybe they like summers. I think hes not a big qe fan. The pimco boss is going to share his thoughts on Larry Summers withdrawing his name from consideration of the fed chair. Janet yellen, is she the front runner . Yeah, thats what harwood tells us. Here at fidelity, weu the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. In fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. Im monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. The world is changing faster than ever, creating new opportunities for those who stand ready to seize them. In a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, our flexible, collaborative approach helps forwardlooking companies not only run better, but 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 now more than ever, the future belongs to those who challenge the present. Welcome back to squawk box, everyone. The futures are indicated higher. Dow futures up by about 176 points, above fair value. S p up by about 18. In our headlines this morning, paper product stocks are jumping in this mornings premarket trading after Packaging Corporation of america announced a deal to acquire rival Boise Incorporated for 1. 3 billion or 12. 55 a share. Thats a 26 premium to fridays close. Larry summers pulling his name for consideration as the next fed chair. Joining us for more on the impact on the markets and yield curve, mohammed elerian, also a squawk market master. And you wrote last night that we should expect some pretty significant market moves on monday. You were right. What happened . Very easy, becky. On friday night when the market closed, Larry Summers was the front runner, his views on Monetary Policy werent well known. And as survey showed, the market believed he was quite hawkish. Yesterday, orders turned around, yellen regained status as front runner. Which the market takes well, the yield curve gets anchored, the front end does well. Repression of volatility, the equity market, the credit market like that and what you get is a broadbased rally. Thats what were getting this morning. I know that makes sense to me in the shortterm. I understand why the market is in favor of this idea, at least for the shortterm. Over the longer term, if were talking a year down the road, where do you think the fed would be with yellen at the helm in terms of what theyve done with qe, where they are in terms of moving on rates . And how will the market react to that . We discussed a lot about that in investment committee. Whoever comes in wont have as much room for maneuver as people expect. I think what youre going to see Going Forward for the fed is a few things. First, they will taper. Theyll taper small to begin with but they will taper. This week . We think this week is more probable than not probable they will taper. And call it 10 billion to 15 billion reduction. Secondly, theyre likely to favor the Mortgage Market, which means theyll taper more with treasuries in proportional terms. Thirdly, theyre going to leave themselves quite a bit of wiggle room because the futures so uncertain. And finally, theyre going to evolve the Forward Guidance. Theyre going to try to strengthen the Forward Guidance in order to minimize the impact of markets on the taper. A year from now, will we be through the tapering . And turning the sites on whether the next six months theyd like to start raising Interest Rates again . Most likely well be either through or mostly through the taper. I dont think you can see an increase in Interest Rates because the economy remains weak. I think the reason why youre going to see the taper is not because of the declared victory on the economy. They havent. Its because theyre worried about what mr. Bernanke has called the cost and risks. The collateral damage, if you like, of using blunt instruments to impact markets. I guess we get back to the question of will the bond market react kindly to this . Will it go along in a relatively smooth fashion as it has to this point . Or will you get the point where vigilantes come in and i said vigilant vigilantes. Will you get to the point where they say, hold on, were going to move the markets ourselves. So weve already had a major repricing of the bond market. I mean, look at the tenyear gone from 160 which was an artificial level to 281 this morning. That was traders following what they thought the fed was telling them. That was being signaled to traders. That wasnt traders reaching their own conclusion and pushing the fed. Correct. And it was investors betting on a fed put that would be there forever. There were also things, people in the carry trade, the reaction to the pressure of volatility. All of these technicals and all these flows that were accentuating the message from the policy makers. So now weve adjusted quite a bit. And the question becomes do you believe this economy is near escape velocity . Do you believe the technicals, which are pretty nasty have run their course . And if you do, then theres likely to be less Interest Rate volatility at the front end of the curve. The back end of the curve is a different issue, becky. My biggest question, mohammed, when does the market get a mind of its own again, when does the fed dictating every single turn that the bond market makes . Its going to take time. Remember how deeply the fed has gone in this experimental territory. Thats why People Like Us have been uncomfortable because they are distorting markets, they are distorting resource allocation and they are contributing to excessive risk taking. But if its simply a matter of time, i would suggest that the fed wins. If its not a matter of time, if the fed loses control at some point because there are investors who start making up their own minds of this. I guess thats my question. Do you think it plays out smoothly over an extended period of time, or do you think that one of these situations arises where the beast bites back . So the beast has been biting back, right . So the fed succeeded in buying time for the system and recovery of the Housing Market is a perfect example of something that wouldnt have happened without the fed. It also has bought time for the economy to heal. Thats the good news. The bad news is that policies becoming increasingly ineffective. You cannot repress Interest Rates forever without causing damage and i think the fed realizes that. The wedge is being withdrawn very slowly, mohammed. And thats the thing, the wedge that keeps the market up even though the economy the market doesnt deserve to be where it is because the economys down here. But if youre withdrawing it at 10 , 12 at a time, you only need 12 economimprovement to k things where they are. Its not cold turkey. Youve got another year to recover where it can warrant where the stock prices are on their own. There may never be a day of reckoning for the wedge being pulled out. Youre right and i suspect thats what the fed was hoping. We are going to reinforce to our guidance. The only thing i would tell you is markets focus on terminal values. Its a journey story. Some would say did a terminal pricing right away anyway. Correct. Who knows where it should be based on how crappy the economy is. 3 s not bad. Were all looking forward to the day where were going to assess market valuation based on fundamentals and based on technicals rather than based on overall it was pimco for or guest qe . You were against it . We thought the Immediate Intervention was needed to normalize markets. We thought the fed was being too ambitious in trying to deliver outcomes on its own. Against it. Mohammed thank you. Great talking to you. Thank you, becky. Coming up, were setting up for a big week on wall street with a key fed meeting starting tomorrow. Up next, well check in with jim cramer for a list of stocks to watch ahead of the trading week. Tomorrow, scott mcnealy, the former chairman of sun microsystems. Wednesday, we talk to Goldman Sachs chairman and ceo lloyd blankfein. Then on thursday, dunne, and wachovia ceo bob steele. And wait until you see who we have lined up for friday. Watch squawk box all this week starting at 6 00 a. M. Eastern. Welcome back to squawk box. Lets get to the new york is stock exchange. Jim cramer joins us. 15576, the douchlt we are within spitting distance of another new high. Syria is out of the way. I just read something that says assad has a history of diplomatic initiatives that buy time. I dont think anything is happening there. Taper is coming but maybe it is only 10 billion. That was or big worry. Is there any reason now and even bonds, back to 28 or whatever it is. It looks like all systems go, no . I think a lot of people are totally incorrectly positioned here, joe. We are shorting the housing stocks very aggressively. People shorting the banks believing that when summers comes in, the taper you just turned on, a reputation of bernanke. I dont think yellen gets it. Long shot, stanley fisher, who was the mentor of Larry Summers. If the president likes summers, he should go for fisher. I just saw that in a mark grand piece that the dark horse could be stanley fisher. We dont know everything. We dont know whether there was something he didnt like about yellen or whether he promised the job to summers. What could he possibly not like about Janette Yellen . It does beat me. She is so popular. That would be crazy. People would be like, youve got to be kidding me. What was he thinking with Elizabeth Warren on that committee . A harvard woman professor versus summers . I like warren a lot, because she is a rabble rouser and she tries to get things going. She is a junior senator. She has a lot of conviction about who is good and who is bad. If everybody is over on one side, it starts tipping a little, i think that part of the Democratic Party is now holding more i said, maybe i dont feel bad for the president but not being able to pick your own guy who was a former treasury secretary in the democratic that we remember. The level of power, you are dead right, the taper is a canard. We dont really need that. We could have good earnings. When i saw those Interest Rates go down today, i said, geez, you can go back into a whole cult war. Maybe housing comes back. When we come back, we are going to talk stocks, commodities and a lot more. Den anytime gartman will join us. Squawk box will be right back. [ female announcer ] youre the boss of your life. In charge of long weekends and longer retirements. Ask your financial professional how lincoln financial can help you take charge of your future. Welcome back. Joining us on the phone with his thoughts on Larry Summers dropping out of the fed chair race. Dennis gartman, buy gold, buy stocks, short the dollar. What else, dennis . Im not sure one wants to get to buying gold. You had a huge rally overnight. It has already given most of the gains up. Stocks on the other hand are doing better. Likely to continue to do better. Its amazing that falling on your sword as mr. Summers has done is this supportive. Indeed, it is. Stocks are going to run strong. The dollar, im quite convinced, is in very difficult circumstances. Money is moving away from u. S. Dollars. It is finding its way into nonu. S. Dollars dollars. It is finding its way into the aussie and the kiwi. It is finding its way into canada. That is likely to continue z if we hear yellen is not a certainty, my sources say she is not. Does this all turn itself around again in the markets. Im really not sure. I have a sneaky suspicion. First of all, lets say miss yellen clearly is the frontrunner. She may be nothing more than a stalking horse. We heard mr. Cramer talk earlier about the fact that mr. Fishers name is in the hunt. Thats pronbably a logical name except for the age involved here. He is only seven older than i am. There are other names that will be in the hunt. It will be hard to stop what seems to be a ground spell swell of support for janet yellen right now, it is time for squawk on the street. Good morning. We are on pace for our best market open since early july. As Larry Summers withdraws his name from consideration for the fed. Welcome to squawk on the street. Im carl quintanilla, david faber. With that summers news and a tentative agreement on syria, he looks to gap up more than 1 for the third time this year. The tenyear yield down to 2