Transcripts For CNBC Squawk Box 20131011

Stocks soaring yesterday on all of this news about a potential deal out of washington. Yesterday, the market was up by better than 2 . A gain of 323 points for the dow. Thats one of the best market days all year. The futures this morning after that big rally are actually, believe it or not, indicated slightly higher. Barely up there, but you did see a downturn earlier in the futures that turned around after it looked like a deal was at least a very good possibility. As for the publics opinion on the whole situation, americans are saying fire them all. Theres a new nbc news wall street journal poll that finds the majority wants to toss out the entire congress. Just 14 say the nation is headed in the right direction. Thats about 0. 5 of who felt that way just a month ago. 78 call the country on the wrong track. That tells you a little bit about how bad things got in the last couple of weeks and that might tell you why the two sides sound more willing to negotiate. John harwood is going to join us with more in just a few minutes. But now, andrew, over to you. Thank you, becky. For all the people that want to throw everybody out, i imagine in a couple of years they wont throw everybody out. Jpmorgan and wells fargo, jpms numbers expected to hit the tape about 7 00 a. M. Eastern time. Well bring them to you here on squawk. Analysts are looking for a share of revenues at 1. 79 aboutel. And were going to have a preview from a banking analyst at 6 15 eastern time. Conference calls on both of these earnings are going to be what everybody is going to Pay Attention to, including whatever settlement on the jpm side we get or get close to. Joe. This poll will have harwood on. I saw brian talk about it last night and then release the numbers. Also saw costellos report. Did you see that . I saw that. On the first week of trying to sign up. There are literally places where they went over it and thousands and like one person. I was listening to an npr report. It was a pretty scathing report on how things i dont know whether theyre trying to help, you know, light a fire under the administrations butt or whatever it was, but it was very negative. Because the clock was ticking. People who are expecting to bfr covered by january 1st, this clock is ticking. The numbers do show republicans getting more of the blame, but the numbers are bad for everyone involved. This is the one i got that the headline was ask about the current budget battle and they emphasized 70 said republicans in congress are putting their political agenda ahead of whats good for the country. Right. How about the president . What percent . I dont know. 51 . A majority of people asked think that the president is putting his political agenda ahead of whats good for the country. 51 is not a good number, is it . You can win an election. A lot of numbers are still kind of representation of that same election, the numbers that were there. 51 is the number that or 52 is the number that you win. I wonder how quickly Public Opinions change if it looks like the government is reopened, if they sit down and talk. Obviously, the markets have huge sold will i i think theyll be just as unhappy. But no one has switched Party Affiliations based on the latest correct. And its still 52 48. If youre a republican and sits around and goes, you know what . I hate these guys so much, all of a sudden i love the democrats. And if youre a democrat, even if youre frustrated with how you think theyre approaching it, you dont say, well, actually, i have to tell you i love ted krooudz now because you just dont. You would think but they dont even well, independents might be swayed by it. But if youre an independent and 31 of them blame obama and 54 bers blame congress, if the independents come down, maybe a few more right. But then there are still going to be people everybody is holding their nose on this. But there will be still people who look, some are more fiscally conservative and they can see some merit they just dont lie how this was done . You tell me, i think most of the establishment in terms of the republicans, whether its the same betters or others are upset. Most of the what . Most of the establishment of the Republican Party but another one norbert said he was mad at ted cruz. Theres solidarity on the left and on the right. The republicans want something and the democrats want something. Ross westgate probably will talk about the rutgers outcome. Was that big in london, the rutgers louisville game, ross . That was huge, as you know, ross. Royal blue. And the giants, 06 of. Yes. I dont know, was it detroit or oakland . I dont even know. Those are the only two games i know. Detroit won. Theres a third. Theyre going to host a third game now, a third regular season game in london next year. Youre going to get a team. Ive seen them Start Talking about theres so much of it is on tv, anyway, and since you people are coming around to what the real football what football actually is. Would you rather watch a nothing to nothing soccer game or a 5148 Football Game . We have action in our sports, ross. Yeah, but it takes so long to play. How long do you have to be in a stadium to watch an nfl game . Youre drinking beer and having hot dogs. What, do you want to get in and out . Do you want a 15minute game . 60 minutes of action spread out over hours. Ross, these games start on over here, we start in the parking lot at 6 00 a. M. With beer. And brats. Well, theres nothing wrong with that we job pe. I knew id get you on that. Its more akin to rugby. Lets mott worry about the sport. Lets just stay in the parking lot. Here we are, were three hours into the trading day, joe. 63, advancers jourt pacing declineser. 92 points higher. Not quite as big of a move as we saw stateside. And today, weve had some gains. Not fwig moves, around 0. 7 today. Xetra dax up 0. 7 . Kwet ra dax up 0. 3 . Cac 40 up 0. 1 . Ftse mi byup 0. 18 bers. Banks up around 0. 6 . Financial services are stronger. Youve got health care up along with basic resources. A little weaker in telecoms and utilities. Well see what happens with the dollar and the commodity prices, as well. One company that is in big focus today is royal mail. Yes, the British Government told a 52 stake in the royal mail, which is its main delivery post in this country. And the issue price was 330, up 35 on the open. Currently trading at 4 pounds 39. Investors couldnt get enough of this. 800. 20 times. Its the conditional trading at the moment. But big, big interests in getting a slice of that. And the government is taking about 1. 7 been pounds out of that po pay down their debt. Would did have an auction out of italy. Italian yields, 4. 29 . We saw the lowest yields there since may and on the 15year, the lowest level since february, as well. Its a pretty good demand for per r per r perrefereeal debt out of europe. John, the latest poll numbers show why the two sides may be willing to talk to each other. Well, no, they showed why republicans are giving in on their position. This is a poll that shows its bad for everybody, bad for the economy, bad for the public mood, but its worse for republicans and a lot worse. I saw this was the lowest marks in the history of journal polling. If you look at what happens, like big picture, president obamas Approval Rating actually went up since the crisis began. Support for funding obama care went up. Republicans have the lowest Approval Rating in the history of the wall street journal poll. Republicans are under water by 20 points in terms of evaluations of their performance. And excuse me, guys, i have a cold. When you ask about whos to blame, by 53 to 31, the American Public says that republicans in Congress Rather than president obama are to blame. During the Clinton Gingrich standoff in 1995, the proportion of americans who blame republicans never got to 50 . Youre kidding me. Its over 50 . Didnt gingrich lose his speakers . Didnt he have to step down from the speakership after that . It was a couple years later. Yes, he did. On every measure, it shows impact for everybody, but its a lot worse for republicans. You know, john, the way that theyre going about trying to achieve their end is probably what youre talking about there. But i bet you ask it in a way that this looks at what the underlying arguments are about. And ill bet you theyre not nearly as polar. But it didnt help their cause. But theres a lot of people that we want to get started on dealing with these unfunded you happen, these unfunded promises that we made. Sure. But all im saying is the country is still split on whether we should be pieg more money from china to spend on infrastructure or whether we should start looking at handling entitlements and everything else. Bill mcenturf, the republican pollster said basically the result of this episode has been a political boomerang for republicans. That is the proportion who want to defund obama care has gone down. The ones who want to fund it has gone up. And in a question that we ask consistently a question. Is government doing too much or should government do more . The proportion of people who say government should do more has gone up since this happened. Its now 52 say government should do more. 44 say it just means stay open. Its 47 says stay shut, 53 says stay open. And one of the reasons that this is worse for the republicans in congress than it was for gingrich in 1995 is that in 1995, gingrich and clinton passed a bunch of spending bills, so the shutdown was partial. This is a circumstance where even though some exceptions have been made, no spending bill has been passed. It is a broader shutdown with more impact. So when you ask people, have you and your family been affected by the federal shutdown . In 1995, the note that we got over a couple of months was 18 . The number in this poll, 31 . John, people are feeling it and they dont like it. What i dont understand and maybe i dont get it, what is possibly going to happen over the next month or two months . What are the three things again . Poly anna, ignorant, naive, whatever, im all of those things. When you say well negotiate over these things, they wanted to negotiate over these things the whole time. Im not sure what the big deal is here. The democrats have been willing to negotiate, republicans have not wanted to. Im not sure thats true. I think republicans wanted to negotiate over tax reforms, too. No. No. Both sides have wanted to do this. Nobody has ever got it to the table. No, no, andrew, youre not paying attention. The republicans made a demand. They said were not going to pay you, senate, unless you pass the budget. The Senate Passed a budget. They asked to go to conference with the house and have a negotiation. The house was unwilling to go to the conference. And the reason that theyve been unwilling to go to the conference all year is that under the rules of conferences, republicans were worried that the outcome of the conference was not going to be what they wanted. So they resisted. Yeah. They didnt feel like they have enough leverage in conference, right . Yeah. If you go to conference and the conference doesnt wrap up in a certain period of time you go with the senate, right . You lose the ability on the house floor to control what goes to the floor. So they have been resisting having a conference. And the reason, why have they been resisting having a conference . Because they thought they were going to lose. Well, yes, but theres a more specific reason than that. Their strategy has been to squeeze very much the domestic the discretionary parts of the budget, which are not the longterm budget problems. Theyve gotten to the end of the road on that strategy. In fact, they cut those so much that when they put their own Appropriations Bills on the house floor to try to pass them, they couldnt pass them because not enough republicans thought there was enough spending in those bills. So if you then go to entitlements, which is where the real problem is, guess what . Thats not very popular. Thats medicare and Social Security. That is so theyre not pushing that discussion. That has been paul ryans point for a long time and thats what he anged earlier this week in an oped. That kind of gets you back to that position. But both sides are looking for the way that they can get the most out of it. On andrews underlying question, becky, ive also been a polyanna. I totally have been someone who looks at the potential grand bargain and says thats obviously in the interest of the country, they need to do it. But it is difficult because if you go big, if you go after medicare and Social Security in a serious way, democrats are going to insist on tax revenues. Well, if the republicans say no to tax revenues, you cant have a grand bargain. So what paul ryan has been talking about is a down payment bargain, something smaller. Now, thats not going to be the easiest they can get it, which they should be able to get it, a rational negotiating strategy should be able to produce that. It will be lesser entitlement reduction and no tax revenue or maybe some user fees or things that, you know, are kind of quasi revenue. That is what could happen in a deal. But thats where were different, john. And i think thats how we see the world differently is if you add in the obama care taxes and the tax hike that the democrats got last year, you add all that in, to a lot of people with how much government has grown just in general in the last 10 or 20 years in terms of, you know, how much it actually is doing, it seems much more reasonable to some people that we should just handle our entitlements and not even be talking about more revenue at all because youve got your revenue. Yes, thats the philosophic difference. Ive heard a lot of people say democrats are the ones who are unreasonable by not be willing to take on entitle manies without troog to go back to the revenue well where you and probably others would say, its not an unreasonable demand. They keep calling it a balanced plan. And that means theyre going to raise more revenue and were going to be at 60 or 65 marginal rates with state taxes and everything else. Joe, you are right there the. You just put your finger on the nub of it. But then it requires you to make a choice. I know that. If youre concerned about the size of government, the safety net or the size of the debt. The safety net is for the people that truly need it, it should be really big. And then for other people that maybe, you know, i dont know, it seems like we dont you know, europe has a different system. Theres a safety net for people all the way up to probably the 90 of the people. And that takes away, you know, the ability to earn your own success. Extreme positives. What youve just outlined, joe, is the precisely the nub of the problem. And its the reason why we havent been able to get a deal. Its because the people on the right and the people on the left, they both have a lot of clout sxp the people on the right, their concern is not really the deficit and longterm debt. It is the size of government. And the problem is, the people who believe in the size of government that we have is large enough to prevent them from reducing the size. If they decided to focus on the debt and deficit, they could come to even republicans, recipients of medicare love their medicare. I understand all the ironies and the incongrewties of i dont know what were going to do. I plan on living forever. I dont know, its going to get more and more expensive. How about for you guys on the panel . Whats more important, debt and deficits or size of government . I think they go hand in hand. No, but theyre different issues because if the issue is debt and deficit, then you say, okay, revenues and options and i can make a deal with democrats. If you say its the size of government, then you say forget about it. No more revenue. Thats in the way of fund. If the government can work like i dont think it can. If the government can work with the private sector with accountability and people having to report to someone to keep i mean, look at the way this thing has rolled out. We are giving our producers heart attacks. Yeah, we are. Thank you, john. We are going to move on and have a quick conversation about jpmorgan and wells fargo, which are kicking off their earnings for the Financial Sector later on this morning. Here to talk about winners and losers and what he sees ahead, eric wastrom from sun trust. How are you . Good morning. How are you . Help us with this. Were going to get jpmorgan at 7 00 and wells fargo right after that. We know i think everyone has a sense of what the numbers are going to look like, but maybe you could shed light on that. But everyone i think is waiting for the Conference Call and what ultimately we hear about this settlement. Is that going to be the big news today . Well, i think youre right in that its certainly what the market is hoping for. Although i dont know if jpmorgans management is really prepared to speak about it. Obviously, its a particularly sensitive topic. I mean, it looks like from the media reports we were headed for. Kind of resolution, but it seems like those conversations have been suspended with the Government Shutdown and the doj currently current staff obviously not functioning. Let me read you something that dick bove just row. He said the predominant view of jpmorgan is once the bank makes a large settlement, all activity returns to normal and the bank returns to 20 billion net. He says while ive not adjusted my earnings estimate yet, i do not share this view. I believe the shortterm earns of the have been can be affected by the changes being forced on the company. Is that the rye or whong . Im not sure if i agree or not here. What weve seen with the volcker road rule and some of the other models, the Business Model has change. So i think i end up agree, dick that the outlook for jm morgan and its peers is that the future is not particularly like the recent past. And when we look at this quarter, total revenue is expected around 23. 4 billion. Whats your number . My number is ahead of that. On the whole nod of a fikly strong quarter, but i vary from the consensus on a few different items. And when you look at out after this quarter, is this a flip or do you think it gets better or worse from here . Well, you know, i think the conversation that you just had poses one of the major questions, which is what is the macro back drop heading into the Fourth Quarter into early next year . I think our view was that, you know, the 2014 was not going to be a fan ft take year for the macro economy, but it should be stable. Obviously to the extent that these issues arent resolved, the outlook gets worse. So, on obviously, that will have a big influence. Eric, give us one thing to look for in the wells earning report that we should be paying attention to. Two, one is asset growth and the other is the msr evaluation. I think both of those could end up pushing the numbers ahead of consensus. Thank you for joining us this morning. Thank you. Coming up, why new york city mayor Michael Bloomberg is getting dragged into a fight in mexico. First, though, squawk sports news. The Detroit Tigers downed the athletics 30 in oakland. To advance of the American League championships. Justin varlander, who has time to date super models while doing this worked eight inninges and gave up only two hits and Ma Gill Cabrera belt add tworun homer. The tigers now play the red sox in a classic American League matchup. Its great, the st. Louis, l. A. And the other two. This is turning into a really good baseball needs it. They could use about news. But boston is always fun and now they have those beards. Welcome back, everybody. Its time for the executive edge. Michael bloomberg is ooig being dragged into a mexico soda tax hike. The Mexican Government waits to raise tax on soda. Mexico has the highest soda consumption and now has higher obesity ads than the United States. Some of the ads target bloomberg. His charity has contributed potentially to mexican protax groups. Although i think what really happened is he set aside millions of dollars. I aplow whats going on in mexico. I do, too. I love it and i think its the right thing to do. They drink like 43 how much do they drink every year on average . More than 43 liters or gallons. I forget what it was. 43 gallons. I guess were three for three because i dont care what the mexicans do in terms of taxes. I dont. They can tax things, not tax things, they can go wild, do whatever you want. Hold on. I have a question for you. This goes to a free market this is one of those instances where i say the market isnt working. Well, heres the problem with this. They create incentives. Theres a lot of money thats been put into advertising in mexico to fight this tax and the people in favor of this tax cant get time on the spaces or billboards because the television stationes and billboard advertisers dont want to alien ate companies that give them a lot of money. Taxes isnt great, but i would prefer this to making all the producers have a certain size bottle and change all the manufacturing 23589s the way bloomberg tried. If you want to make it more expensive tore people to consume sugary drinks, that moves down the list on how okay. Great. I agree with that. Lets talk about the second story. The ft is reporting that google funneled 12 billion of royalty payments to bermuda last year. That is a quarter mon more than it did in 2011. The tech giant has been at the center of an International Corporate tax controversy. It earns foreign income in ireland and theres crazy schemes from there. The uk is particularly incensed about this. Its sales happening in the uk and have been final United Statesed in ireland. Eric schmidt testified in the uk. Theres articles every which way. This is the issue thats going on in the u. S. In many ways about where were moving moenl. Money goes to the places where it can most quickly move. All kinds of arguments about why you need to change the tax codes. Right. When we come back, stocks tracking every twist and turn out of washington. We will ask what the latest means out of washington when we come back. Its a growing trend in business do more with less with less energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Lawmakers in washington showing an ability to resolve all these things. Yesterday, a glimmer of hope saw stocks rebound and get back maybe half of what they lost in this latest government induced debacle. Joining us now, karen and thomas, i want to start with you, thomas. Youve got a 1675 s p target. At the worst, you look at this as a way to maybe deploy some dry powder. Hopefully you would have something and be able to buy more. I mean, thats right, voe. I think the only person who should be raising cash right now would be someone whos got a much higher exposure to markets than what theyre comfortable with. But otherwise, you know, i think there are a substantial portion of the risks that are reflective. And we could see them in the hedge funds, mutual funds data. Its about where it was in august of 2011, people people have derisked. We havent disowneded a default. Theres still substantial risks out there, but i dont think the risks are so great that we need to liquidate our decisions. No. From here, its 5 . Certainly if you got a pullback and that 1775 would represent 10 or so by the end of the year, you would want to jump on with both hands. Thats right. I think that the market is still capable of hosting a receipt good rally of relief when we get resolution. But as you said, you know, i think theres a chance of volatility in the next couple of weeks. I dont think its smooth sailing. Well start in november. Yes. Tom, im unclear why you dont think were going to have some form of a slowdown more broadly in the economy as we get ahead of the holiday season. All of this will be dragging out in the press and on our show and in the media every single day. I dont think people are feeling particularly brilliant about all ooh this. I dont want to throw a well blanket on it, but if the market was trading on the economy instead of qe, maybe that would make a difference. Yeah. People who are on hotels, people who are booking travel, they say there might be some slowdown, really. Yes. Its pretty hard to figure out what the second older effects of the shutdown is which is what everything youve described and everything thats being reported in the media. I think its going to come in the back drop of what would have looked like itself would have been pretty good results for companies. But i think the up shot is it gives us somewhat of an insurance possibility when it comes to monetary policy. I think the markets are going to feel like, well, this is going to give the excuse for easier money for a bit longer, its still a pent up demand story. A lot of these are temporary disruptions and i think thats why the markets are going to show some relief. Plus were going to be gelling with yellen. I would probably add the zero go go out to 2025. Things are things that you anyway, margaret, im trying to decide how to view what weve seen in the credit markets in the last month. My take is that theyve been amazingly doe siel and i because you watch it so closely, you see the you know, you see a onemonth bill go up to the highest level since the crisis. And it looks like oh, my god, because youre watching it so closely. But a quarter point versus 5 in the crisis, does it really matter whether it doubled or triple it when were at 25 basis points . I think its more an indication of the stretch in the front of the market due to the debt ceiling debate. We did see selling of the october the tbills surrounding the date. And i think most people went through the two sets and figured out what could be impacted. Rooet right now were seeing debt being pushed into the november date. While its not overall stress, it is indicative of whats going on on the front end. The problem is the risk reward is a onemonth bill. At the same time, youre risking the chance that you have a bond that hasnt paid. And in that snaredo, most people think that the treasury would extend the maturity one day at a time and you really dont know how long that maturity will be extended. There are National Security issues involved and what we did see is we saw government mutual fund selling both sets. We saw people going through. There are collateral pools looking for those bonds and rather an unwillingness to take those securities as collateral. The i was looking at a threemonth or two. And i dont follow it as closely as santelli or you, margaret. Four basis points . For real, four basis points . Well, everything is expected to be solved by then. So the front end is still held down by the fed on hold and i think yellens credibility and in addition to that the belief that they will keep rates low for a long time. It doesnt look like a lot of stress on the system or a lot of angst. I dont know, it just seems like if you know, if you were really to gauge the probability of something really bad happening, i dont see how they could be down there. You know . Yeah, i agree. With regard to, you know, the stress states, i think that, you know, the kicking the can of six weeks really just pushes the issue into november for the front end of the bond markets. But certainly youre not seeing any real stress out of the curve and bonds from this situation. That should be interesting to watch the yield curve based on the time frame these guys start putting on how long they raise it for so we can prepare for the next you know, for the next argument that we know is coming at some point. And we can watch it on one month, six months, anyway, thank you, margaret. We appreciate it. They wrote beemo into the script for me, margaret, so that i dont andrew and i appreciate that. I might see it and i might say beamo and i may not. Beemo is a frisbee company. You dont have anything to do with that company. You would have said Something Like beeemo. Man, is my brain anyway, coming up, washington is the key drivers in stockses right now. Well get the latest from capitol hill when republican kevin brady joins us next. Plus, a very big morning for bank results. Well hear from jpmorgan and wells fargo. Earnings season, it is open for business. Were back in just a moment. 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 . Wroib to squawk box. In washington, capitol hill staffers negotiated late into the night. There is another meeting this morning between senate and republicans. Joining us now is kevin brady. Congressman, what do you think the odds are that, a, the government will be open by monday and that, b, we will have some sort of res lug to the debt limit . Good morning, becky. I dont know the timetable, necessarily. I think the negotiations are pretty encouraging. I think the appropriate, look, lets buy six weeks to come together with a solution on the debt ceiling, lets put the Budget Committee back together among between the senate and the house final resolution to our budget figures for the next year and then finally, lets Start Talking about how do we open the government and what that final solution is on the debt ceiling. I think this could be a break through. The idea of defunding obama care seems to be completely off the table at this point. Do you think that that move to try and do that hurt your party in these negotiations and hurt you with the public . You know, there is a lot of speculation about that. I do know that no president in modern history has ever repealed a major signature law that was just passed. So that clearly was a bridge too far. Our frustration, obviously, with is that law and its impact on the economy, small business, on patient care itself. But going forward, i think the bigger issue is how do we really start tackling the sustainability of washingtons finances . Theyre just nowhere near where they need to be. We need some real changes. And historically, the debt ceiling as tough as it is, and i can tell you we are not going to fall on this debt, absolutely not. But were not going to have a blank check. We have to make some changes. This has traditionally been a historical opportunity to have some discussions. I hope theyre fruitful. At this point, obama care might not be quite as expensive as you thought. Apparently you have to cover about four people so far. I dont know if you need to defund those four people that have been able to sign up at this point. Those four people will get a sweet deal probably from that. But boy, the numbers that came out yesterday were awfully for the white house disappointing. 51,000 for the first month. That works out to a little over a million in the first six months. The white house was shooting for seven million. So theres a real problem there. And i saw a report last night. They all said youre not ready. The code is not there. It is not there. It would have been good for the white house to think of some kind of way you know, they did it with corporations, some kind of way to come to a and it probably would have been good for you guys not to give them a delay, to let us all see how poorly this was handled. You were both on the wrong side of the issue. It may be. But what we know is i lead the Health Care Committee on wayes and means. Two weeks before the rollout, the white house has not sent successfully a pile of exchange in the process. I think one of the smartest things both kaerts could do is say today, give americans a choice. If people want to go into this plan as an option, terrific. But back off the mandate. Let this thing work itself out. Give people a choice at this point congressman, the 30 or so congressmen of your colleagues who were dead set on defunding obama care andparty . Well, i would disagree that there are 30 members of the house willing to go over the debt ceiling. Republicans are not supportive of breaching the debt ceiling. We want to see this resolved sooner rather than later. 30 people could not pass a clean cr. There you go. Under any terms. Yeah, well, theres a big difference between the two issues. Truth is, back home, i can tell you people are so upset about this new law. Businesses are certainly are, families are, they see special treatment for many, but not equal treatment for themselves. You think they will go along . Or are they going to go kicking and screaming with any deal . It is hard to know at this point. What i do know is weve got to find a way out of these backtoback financial crisis. I think the country is tired of it. Later today, a vice chairman and i are holding a hearing with two economists. About how do you find a way forward . How do we tackle the longterm challenges of the country without this crisis after crisis . I think thats the big issue at this point. Congressman, thank you very much for your time today, we appreciate it. Thank you. Still ahead on squawk box this morning. A man who needs no introduction and never minces words, veteran corporate leader jack welch will sound off on the fight in washington. Plus, Quarterly Results from two big banking giants, we have jpmorgan and wells fargo. Well have the numbers and instant analysis. Stick around, squawk box will be right back. Next week, we have a huge lineup leading up to thursdays debt ceiling deadline. On monday, former citigroup chairman dick parsons, aetna ceo and erskine bowles, deficit destroyer. And on wednesday, three hours with Warren Buffett. You cant afford to miss squawk box next week starting at 6 00 a. M. Eastern. 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Eastern time. He tried to do something similar before he suggested you dont make donations to these folks. Hes really nonpartisan. Its a rise above kind of thing to do. Its only directed at congress. No, its not. Hes had conversations with the white house too. He wants them to hes had conversations with the white house and patty murray in the senate and with paul ryan. Those two words, stand strong. Were going to be back in a moment. Weve got Quarterly Results from dow component jpmorgan. Its a growing trend in business do more with less with less energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. Welcome back, everybody. Jpmorgan just out with its earnings. Looks like the company came in with the net income of 1. 42 a share. Thats when you exclude litigation expenses and reserves that were brought back through. The street was looking for 1. 17. Of course, with litigation expenses and the release reserves, youre looking at a loss of 17 cents a share. Revenue came in at 23. 9 billion. Do you remember earlier this week we had people on that said the reason theyre going after jpmorgan is because theyre so the money. They make so much money. Bill daly. Yeah, right. So is this good or bad they beat expectations . Actually, if you do the lower number and did you see the litigation expense . Thats a pretty big number. Its a huge number. 7. 2 billion. While we have strong underlying performance across the businesses, they go into how the number one ranked in just about everything. We continue to evaluate our legal reserves. With escalating demands and penalties from multiple government agencies, we thought it was prudent to significantly strengthen them. We expect our litigation costs should abate and normalize over time, but they may continue to be volatile over the next couple of quarters. They earned 1. 42. Their Legal Expenses are wiping out the profit for the quarter and then some. And theres no we will talk a lot more about jpmorgan. But just right off the bat. The stuff with jamie dimon, what do you make of it . Youre afraid to youll get audited if you Say Something and youve got plenty of money to worry about. Watch what you say. I dont mind being audited either. Its the piggy bank. And if you cross these fellas down there and dont play ball, you get nailed. Thats just the way they play. Shouldve never said im barely a democrat at this point. He shouldve never said that, right . Well, seems that lloyds done a good job of signing up as a good democrat. Blankfein because hes been in the clear. And hes saluting fue im sure he has his concerns about the way things are being hes a businessman. Im looking from a distance. I mean, the facts jpmorgans a piggy bank right now. Im not sure whether its the regulators and the white house. Goldman sachs is a piggy bank too. They havent gone there for a while. Yeah. Let me tell you about a few more comments that jamie dimon makes. This is more than you might have expected to hear from him given how much the government has come after him at some point. He says the board continues to seek fair settlement and one that recognizes the extraordinary circumstances of the bear stearns and Washington Mutual transactions undertaken at the request or encouragement of the u. S. Government. So hes continuing to kind of talk about and weve had a lot of guests who have come on from hank paulson to Warren Buffett who have said they dont necessarily think its fair to go after these companies for things that happened before they took over the companies. Your thoughts on the idea i mean, lets face it, they asked them to do that. And they did it and now theyre getting whacked in the head for it. But its a tough game down there, ill tell you that. Its not puff ball. Let me give you the not huffington post. Im not going to mention that guys name that writes for rolling stone. It would be the biggest fine in history. Jpmorgans in the paper every day. Every day for some regulatory concern. By definition, jamie dimon must be responsible for a lot of the problems so he should go. Yes or no . No, he shouldnt go. You crazy . With all this thats happening . He bought a bag of junk and hes tried to clean it up. And every time he cleans it up, he gets nailed again. You have made the point that he even before the government induced him or asked him for help with, you know, to try to bail these out. He was eyeing these cheap assets, something he wanted to no, no, no i quoted an article to hank paulson that made that point. That is not a particular point i im making. Okay. No im you cant be indemnified. I think they should have indemnified him. They should nailed him right there. But they didnt. And therefore he did take on that risk. And what do you do about that . And it becomes complicated. Im with jack. You rob the bank because thats where the money is. If youre the government, thats where the money is. So then the perception that the average man on the street has reads about jpmorgan every day, can could you point to the regulators being overzealous and say its not necessarily jpmorgan is in the wrong but these guys are basically shaking down shaking the money tree . Well, hes tried to make that point. Made it again. Becky just read that quote. Hes trying to articulate a point and walk a fine line. In this crowd, you dont want to youve got to play a pretty which crowd would that be . Thatd be the administration. All right. I need to know what youre actually saying. Who knows who this crowd is. Could be us, could be i know who youre talking about. But youre right. Back how many of the fines that spitzer was finally able to raise were Just Companies saying, look, i dont want to go any further with this and ill pay you off just to leave me alone. Look, settling has been for a long time. You can settle and not plead guilty to anything. Right. And you can pay the money and get them off your back. Looks bad. But heres one question. Weve got to get to quick headlines. Is there a deterrent effect. Meaning jpmorgans announced theyre going to spend 1. 5 billion on more lawyers and compliance, which im not sure necessarily is a good thing. But maybe it does prevent similar things like this happening in the future . Do we look at it and say, okay, maybe its actually forced the hand and if they had only sued them for 1 billion or tried to slap them on the wrist that that kind of structural step would not have been taken . Look, 1. 5 billion more is not going to solve the bad actor doing this and that in london or somewhere else. You youre not going to the regulators were sitting in their offices. They had regulator almost one regulator per one trader standing over them. You cant regulate against bad behavior if they have it. Now, i dont think the bad behavior occurred here by jpmorgan and the mortgage issue on the trading thing, they had a bad actor. Lets face it. You cant stop a bad actor. It should be easy to go after individuals, i dont know how much it changes behavior to set up big fines that companies pay. Its the shareholders money. May be shareholders that werent there at the time it happened. We read the papers every day and watch how many Government Back actors pop up all over the place. Whether its over here in this agency or that agency. And that didnt say the administrations bad because thats happened. That says you cant manage bad actors that well. This is a larger conversation because people will then say and were boring people by no, i dont think were boring people. Jack, you never bore people. Lets do some headlines and come back to this conversation. In the headlines this morning, the fiscal gridlock has put america in a very bad mood. According to the latest nbc news wall street journal poll, only 14 of americans say the nation is headed in the right direction, thats half the reading of a month ago and the lowest since the financial crisis. Get this, 53 blame Congressional Republicans for the Government Shutdown, 31 blame president obama. The u. S. Is about to become the Worlds Biggest Oil producer according to the International Energy agency, overtaking russia for the top spot in 2014. Its grown at dramatic rates, china replaced the u. S. As the biggest oil importer. And Howard Schultz is on a oneman mission to end washingtons gridlock. Hes circulating petitions in Starbucks Stores calling on lawmakers to end the shutdown, end the debt ceiling battle. Coming a few days after. He instituted a promotion that gives a free coffee. You want a free coffee . To anyone that buys someone elses beverage as a way of showing lawmakers how americans can support and connect with each other. So everyones getting a coffee on me this morning. So hes saying he wants these guys to work things out. Its his point. Thats his suggestion. I think thats good. The rise above. Yeah, i hadnt thought about that. I think thats nice, thats good. All right. We get it. Sarcasm is dripping. We all want that. You dont need to come in and save us, howard. Im buying you a coffee. Here. You know what is implied and you say hes assigning equal blame. Hes contacted the white house, contacted patty murray. Its not just about the House Republicans hes been talking to. All right. Our guest host for the next two hours is jack welch. Executive chairman of the jack welch institute. You were at the old mother ship for how long at ge . 40 years. Not everyone knows your legacy there because theyre new. People are aging, dropping out of our key demo and other younger people are moving into our key demo. What was revenue when you started at ge . 25 billion. And when you left . 130 billion. So that was good. You were only ceo for 20 years. The stock when you took over was adjusted at a buck, wasnt it . It went up 4,000 . Oh, but whos counting . Im guessing. Im winging it. Was it 4,000 . 4,007, or something. So i made the point with john harwood, our guy earlier that we do these polls and the theyre as good as you can get in terms of the quality of the poll. But the question that youre asking people, i think it has more to do with maybe they dont like the method to what theyre doing. But i think you could get a more even split if you ask people, do you want the government growing more and taxing more and spending more . Or do you want to actually, you know, start getting our house in order. I think you get a much more even split if you ask that. Maybe the republicans went about it wrong, but dont you think most of the country wants us to get our house in order . Of course you do. But these polls end up being whos the best marketing manager. They cant market anything. They come out of the white house and make a statement thats nothing and then harry comes out and takes the stage for a while and talks about all the bad things they did. Its crazy. Weve got the worst marketing in the Republican Party you can imagine. Looked like a trap, didnt it, that the white house set for these guys . I think they put themselves in there. They put themselves in these things. But they loved it. Negotiation 101. You sit across the table. First of all, you put yourself on the other side of the table and say what can they do, what cant they do. You get the lay of the land. The second thing you do is make an offer that they will accept some in that range, and youd be willing to take. And the third thing you want to do in a negotiation, you want to end up as you walk out the door with a win win. Now, both sides went down the wrong path. The republicans take on the president s signature bill and they say defund it. By definition, thats not sitting across the table and saying what will they take . And can we work with that . And then the republicans, the president says i will not negotiate. Thats not a position that the other side can accept either. So youve got two guys breaking the basic rules of negotiation. And then you end up with the president he changed 15 regulations at least from the time it was law. So this is law. Law is enforced bill regulation. And he changed the employer mandate, put congress in. Did that whole series of things. So he says i wont negotiate. One side changes the law as it was approved, the other side sits there like like. I mean, there are so many ways that this could have been marketed. The which part . The republicans couldve marketed the president s behavior. He was able to call them right wing, nuts, terrorists. You pick the words that were used. Right. They could have brought the nih victims of this thing, right to the stage, mr. President , i have funded nih and look at these children. Look at them. Please, mr. President , accept this. Come on. You can he did so many he gave them so many chances to come back. He changed all these rules arbitrarily. Because one of the big problems we have in generalness argument, the presidency has become too powerful relative to congress. Thats been happening for a long period of time and its accelerated. Hold on you think it predates the Obama Administration . Yes. Its been happening. Absolutely. You think the president has more power now. Because some would argue the reverse is taking place. Some people are wrong. Lets put it that way. The facts are he can arbitrarily legislate around congress on clean air, change the game. Change the game for carbon. With the epa, voter i. D. Has been approved by the supreme court. Right. So they can do it by legislation. The nlrb, all of a sudden they pop up and appoint i love that is the New York Times take, though. That the president because the house has tried to stop them on anything he wants to do, suddenly the house is more powerful. Thats a joke. You go through the things hes able to do and has done through holder, there mccarthy, through solis before. You say this predates the Obama Administration. I think early in the bush administration, a bit in the clinton administration. Is that because of the growth of the regulatory agencies . And the ability look at what the president does. The irs scandal. I dont know where he was. Slaps it away. And the republicans sit there and have these hearings. That could be bad actors, governments not able to control bad actors too. But it doesnt come out that way. He slaps it away. Jim clapper goes up to congress and tells them that the United States is not as safe as it used to be. Try that one for size. Whats the president s main job . Keep the state faafety of the c. The last sequester thing, they had 48 predictions of what would happen. 11 proved out to be true. By the washington post. Weve got a lot more to talk about. Come on. Nothings changed for executive power. Executive power has always been there but you think hes wielding it. I dont blame him any more than the last guy. They have said i want to continue this conversation when we come back. So do i. In the meantime, were watching shares of jpmorgan, the Company Coming out with Quarterly Results. The number, the net income number was 1. 42 a share. The estimate was for 1. 17, but that 1. 42 did not include litigation expenses or reserves. Well get reaction from the street after this. Squawk box will be back after a quick break. People welcome back. Jpmorgan reporting Quarterly Results moments ago. Joining us on the squawk news line, the banking analyst. Surprised by this, the expected and what do you make of the legal reserve issue . Well, it was going to be interesting to see how much they could actually put away this quarter. Because they didnt have a settlement in hand or at least we dont know of a settlement in hand. So they must be pretty close and must know that their estimate would let them put about 9 billion away to address this and to build reserves in expectation those settlements are near. So you think the reserve number is pretty much what they think the settlement must be. If it comes in higher, how does the market react . Doesnt mean it cant come in higher. Just means this point, this is what theyre comfortable with. They wouldnt be any less than this. So when youre setting up reserves, its a minimal number, not a maximal number. They basically put away one quarters worth of earnings. Relatively break even once you get past the litigation reserve they took. So jamie said he expects those legal costs to abate and normalize over time. We also i read earlier on the 6 00 hour from dick bove who said, look, longterm, this is going to have an impact on the company. That things may not normalize. Not on the legal cost issue but to the extent that they were on a trajectory that you cant see my hand now but looks like its going to the moon that things are going to become a little tougher. Only in the sense that, you know, what we had was announcement of incremental resources theyre putting in place. These large signs are tone at the top address. That the regulators are putting on jpmorgan to make sure its big enough that it gets their attention throughout the organization, theyre putting the resources they put up, tighten up the controls, such as, a lot of these things you said earlier, these issues dont reoccur in the future. 20 seconds. Is jamies job in jeopardy . No, weve been through that battle. I think thats behind them. I think thats one of the reasons theyre addressing this so aggressively. It has the confidence of the board, of the shareholders. If you look at fundamentals, theyre Still Producing around, you know, take out all the noise, about a 15 return on tangible common equity, which is worth much more than what the stock price shows today. Hes trying to clear the decks, hes taken a page out of Brian Moynihans book, which is clean things up, get your fundamental reported and youll get the benefit from it for your shareholders. Who are you liking in the nlcs, marty . Say that again . Who do you like in the nlcs. Well, the national league, well have to go with the dodgers. Okay. Just wondering. He has a special relationship with them. We might have a little connection there. You got good seats . Well, im in mississippi, so im quite a bit away, but we keep it up through the company. This is were definitely go big blue. Im worried about ole miss, by the way. For those who dont know guggenheim owns the dodgers. Anyway, hoping for a good game. Coming up, most powerful woman in banking, beth mooney joins us. Squawk box will be right back. Time now for todays aflac trivia question. Virgin records founder Richard Branson credits his success to a career move he made 40 years ago when he signed what artist . The answer when cnbcs squawk box continues. On your recovery . Lps you focus yo, yo, yo. Aflac. Wow. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . [ japanese accent ] aflac. Love it. [ under his breath ] hate it. Helps you focus on getting back to normal . [ as a Southern Belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. Uh huh. [ under his breath ] i am so fired. Youre on in 5, duck. [ male announcer ] when youre sick or hurt, aflac pays you cash. Find out more at aflac. Com. [ male announcer ] when youre sick or hurt, aflac pays you cash. Customer erin swenson ordebut they didnt fit. Line customers not happy, im not happy. Sales go down, im not happy. Merch comes back, im not happy. Use ups. They make returns easy. Unhappy customer becomes happy customer. Then, repeat customer. Easy returns, im happy. Repeat customers, im happy. Sales go up, im happy. I ordered another pair. Im happy. both im happy. Im happy. Happy. Happy. Happy. Happy. Happy happy. I love logistics. Virgin records founder Richard Branson credits his success to a career move he made 40 years ago when he signed what artist . The answer, mike oldfield. It is estimated that the wildlife economy estimates to about 144 billion annually. But the Government Shutdown is now threatening the beginning of hunting and fishing seasons. There are over 37 million hunters and anglers in the United States accounting for 1. 5 billion in revenue. Through the licenses they would normally be getting because of this Government Shutdown right now, 329 wildlife refugees are closed to hunting. About 270 will closed to fishing and many of these areas were under pressure already thanks to the sequester, which included a 27 cut to the budget. What does this mean to business . It means retailers who depend on the beginning of this annual season could get hit if the shutdown continues. Almost 86 billion in direct hunting and fishing related sales occur each year. Names like Dick Sporting goods, cabela could be names to watch over the next few weeks. Still to come this morning, wells fargo ready to report. Well get the numbers at the top of the hour. But before we do, well meet the most powerful woman in banking, the ceo of key corp. , beth mooney will be joining us. Squawk box will be right back. Its a growing trend in business do more with less with less energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. Welcome back to squawk box this morning. In the headlines, weve heard from jpmorgan chase, now were going to be looking forward to wells fargo at the top of the hour at 8 00 a. M. The bank expected to earn 97 Cents Per Share for the Third Quarter on revenue of nearly 21 billion. Also, the ongoing Government Shutdown taking three reports off the Economic Calendar today. Prices wont come out at 8 30 eastern time nor will september inventories at 10 00 eastern. But we do have jack, so you can watch him. Were also going to see the university of michigans preliminary october Sentiment Index at 9 55 eastern time. Also, some more hopeful signs that the debt limit standoff will end. Treasury secretary jack lew and ben bernanke told the g20 officials last night that the debt ceiling standoff will end before the october 17th deadline. Do you believe that . I dont know. Thats according to russias finance minister who attended a dinner held in conjunction with the Imf World Bank fall meeting thats taking place in washington. Becky . Our guest host today is jack welch. Hes executive chairman of the jack welch institute. Jack, we just mentioned all of the economic numbers were not getting right now. We dont have a good read on things. The job numbers have been skewed from computer problems even before the shutdown. But you have a pretty good read on whats happening in the economy just from all of the business youre involved in. Can you tell us what youre seeing right now . In 2013, we are seeing just what we saw in 2011 and 12. We get ready for launch and then it rolls over. I mean, we had if you asked our ceos and a variety of companies im involved with, what second half of the year would look like in may. They were all on ward and upward. Thought it was really going. At the end of june, in the middle of june, it started to roll. And we had every business im associated with still growing, but at a they all will miss their Third Quarter. And things have really sort of flattened out. And we seem to lose momentum every year in one of these quarters. Its the Second Quarter in 11, the Fourth Quarter in 12. And now looks like the Second Quarter in 13. So we never take off in this recovery. What happened . A lot of times we talk about and blame washington, blame uncertainty. Is it that or Something Else . You know, its tough to really pinpoint. When we look at what at whats going to happen going forward, ed lezier had a great piece where he talked about unemployment. In terms of a number of people working age that are employed. We really have now 58 of the people of working age employed. Weve had a tradition of 63 or above. So you can talk about that silly unemployment rate, which you and i have had debates on over the past. That isnt the measure of what the Economic Activity in the country is. Its 58 of the people of working age are now working. It used to be 63 before the recession. We havent gotten millions of people back to work. And the other thing thats happening is we used to have churn. People used to be thrown out, fired, they used to be downsized because the company had troubles. Or they quit. No ones quitting these days. Were down 30 a year in churn. So no ones leaving. As a result, no ones coming. Were down 30 in churn. People are hanging on to their jobs, theyre afraid to go businesses youre associated with no, in the country. Oh. I want to go back to politics for one second if i could. Yeah. Which is youre republican and traditionally the Business Community has been focused on the republicans, has been considered republican. Theres a number of people who have come out in the past couple of days given whats going on in washington and said that the Republican Party has moved away from the Business Community. This is the head of the nfib who says there clearly are people in the Republican Party whom in the Business Community and interest of the Business Community, the jobs and numbers they represent dont seem to be their priority, dont really care what the nfib thinks, chamber thinks, probably dont care what the round table thinks. We saw it. You saw it. I saw it, read it, got it. I want to know from somebody who cast his lot with the Republican Party whether you think thats accurate. And by the way, theres other people, lobbyists for the retail federation, same thing, the ideological brand of conservatism. They jumped over to the obama side. I dont think they are jumping over to the obama side. Im trying to understand what you think is going on here. Not much. Not much. I hang out with these guys all the time and i dont see theyre so irritated over aca. I dont see any suddenly they think higher taxes regulates, they think thats all the answer now. Most of these. Joe, do you think democrats are jumping away, the moderate democrats over the aclu . No, we talked about since 6 00 hour. I dont think the democrats are becoming republicans so quickly and i dont think the republicans are becoming democrats so quickly. But there may be some people in the middle that move. I dont know. And i just dont know where parts of the Business Community are when it comes to im in the middle and im not moving and there are a lot of people in my crowd. I just dont i see this as more fear tactics. Does it change the dynamic, though, in terms of the way the chamber, the business round table, the others in terms of donations, in terms of who they support, in terms of how that works . Do you think its the most antibusiness president and this isnt fresh in your mind . When you sit around the table. With regulations, epa, keystone, all the stuff suddenly you think the way this debt ceiling negotiation has gone and theyre deciding to abandon the Core Principles of private sector . No, i dont think that. But i think there are some people among the Business Community that look at whats taken place and say its ludicrous. Man, i wish we werent having this debate and we wouldnt be having this question over the debt ceiling and it was done in a different way. I think there are people in the party that say that. Ceos that say that. Well, theres no question, but they dont have any alternative. Whats the alternative . Negotiate with harry reid . Theres a left brain and right brain. Theres cat people and dog people. Youre never going to get people to say i love Big Government and i think Big Governments the answer. You wouldnt argue that the Republican Party has split at all . And that there is an ideological split . There are people that want no, no, no youre right. There are people people in the Business Community. People that are too far right, taken it too right. And on the left. Theres scorched earth guys on both sides. I think if you look at why the republicans lost the last president ial election and the challenges theyre going to have in the next one is to get through the primaries, youre going to have to run i dont know how long that lasts. Particularly with social issues. And if you run that far right i agree. And the tea party was spawned by the way the aca was passed. Thats what got all these guys energized was when not a single republican vote came when controlling 17 . Youre right theoretically. But the facts are, running companies, and not one of them is going to pull the lever differently than they were before. I agree. But i question that the money gets steered back so you think theres a right thats gone too right that somehow the money gets steered towards people who are going to try to bring the party back closer to the middle. You think thats happening. You dont think theres been a migration from Business Leaders that supported obama the first time around . The migration has been one way. Its been that way it hasnt been that way. How many of you know that are still saying, wow, im glad i did that. There are Business Leaders who had supported obama who are now supporting republicans. Im just saying at the same time, there seems to be another debate going on within the Republican Party where there seems to be a pushback. And im just sort of no one likes the way right and no one likes the way left. But this is a way overstated righthand column, front page propaganda. Thats what that is. Thats scaring people. Thats just trying to get them what was your point . Thats putting out something on the righthand side. Its the New York Times, youre saying things we already know. But back to the 58 . I know. But back to the 58 . Corporations have learned how to make the same amount of money with fewer people. And technology has a allowed them to do it. And globalization overseas. And i can think of a lot of other things that have happened for why were at 58 that might not have to do with regulation and government do those jobs come back . Yeah, are they gone and is it nobodys fault theyre gone because of technology and globalization . No, if you were running at 1. 7 time gdp. Thats not going to if we get a 3. 5 to 4 gdp growth, a lot of this discussion will go away. Right. And we do it through energy which is what youve talked about before. Through energy, absolutely. Let me go back to another point, which i think is when you sit around a table and you listen to the costs of obama care in terms of the 26yearold issue, it ranges from 2 million to 7 million a company. When they take that, what do you think they do to get the 2 million to 7 million back . They look at layoffs, cuts, et cetera. So when you have these costs going, there are consequences. Obama care is just another cost. So now how do you deal with that cost . Right. You deal with it through ways of attrition and productivity that you look for. So the people that that 30hour week thing, that just cost people jobs. Theres an oped piece and theres a piece in the journal today from a gentleman that runs a restaurant on cke or something. And hes right on the button. Temporary workers were added in the first half of the year because people didnt want that cost. Right. If youre a ceo, youre not thinking politics, youre thinking, damn, i got hit with 7 million. How do i make it up . And who gets hurt . The workforce. Okay. That article should have been brought up. You shouldve brought that up yesterday. It was yesterdays article. It was yesterdays article. But we didnt have jack here. But okay. All right. Its a once and for all but translate that to the actual sitting around the table, which i did this week and watch guy after guy tell you the cost increase that hes incurring. Right. Because of the 26yearold issue. And what are they going to do . Theyre going to you see it every day. Spouses are being pushed off of coverage. All right. You see all of these things that impact workforces. So once and for all, all your guys, your 20 guys, are they not jumping over to deblasio because of this . Theyre not going into the fund are you sure . Hes going to have to leave. Theyre not going to deblasios . Most of them dont live in new york. All right. Wanted to one more time find out. We will continue the conversation with jack welch, but up next, beth mooney, among the most powerful women in banking. Well speak to her next about what it means for financial. Take a look at futures, we do have a minor green arrow. Dow looks like it would open up about 5 points. Squawk box coming right back. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. To find you a great deal, even if its not with us. [ ding ] oh, thats helpful well, our company does that, too. Actually, we invented that. Its like a sauna in here. Helping you save, even if its not with us now, thats progressive call or click today. No mas pantalones the ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. Jpmorgan chase reporting earlier, earning 1. 40, 1. 42. And jamie dimon saying the bank continues to seek a fair and reasonable settlement with the government. Up next, wells fargo, theyre expected to report at the top of the hour. Well have those numbers and the reaction when they hit. We should get a better look, maybe, at all things housing related with wells fargo. Yeah, 30 of the mortgage market. Yep. American banker is out with the list of the 25 most powerful women in banking. Awarding our next guest the top honors. Beth mooney is the chairman and ceo of keycorp. , and thanks for joining us this morning. Good morning. We had the celebration last night at the waldorf astoria, it was a big night. Does it make it difficult to do your job in the spotlight like this and being pointed out . Or is it business as usual . Its business as usual but i think its good for women in our industry as well as business to see the american banker honoring the 75 most influential women in our industry and gives a lot of determination to those coming behind us to work hard and aspire for things. Ive been watching your stock price and its done incredibly well, up over 40 over the last year or so. What is happening in the industry right now . Finding new revenue, is that the biggest challenge . Well, its a balance of two things. I was listening to your commentary earlier and i was going to agree with jack, this is an economy that feels like its stuck in second gear. And so its really a combination of you have to find new revenues as well as really work on your efficiency. So its a two levers all the time. How do you grow . How do you get more revenue and what can you do to bring down your cost . Because the bottom line needs both at this point in time. Theres no tail wind in this economy. What why do you think that is . Jack was just kind of pondering what he thinks is happening in the economy. What happens from your perch as a bank where youre making loans and bringing in assets . Well, what were seeing is continued caution among our business clients. I think it was well put when you said that every year people have a much greater expectation for growth and than they end up ending the year with. And our clients would echo theyre putting their thoughts into 2014 now. So borrowing for expansion is less but our clients are doing well. Theyre highly liquid. American business is very profitable. But it is still a very muted economy. So we do not see a lot of demand in what you do see. Banks are highly competitive for the good assets, good loans and good customers. You have to grow your own capabiliti capabilities, grow your revenue and invest in being productive. What do you think about the nomination of janet yellen to head the Federal Reserve . If she is as dovish as some people have expected, what does that mean for your business . Well, i think its going to be a continuation of the fed policy. Shes obviously been part of the dialogue, part of the debate and part of the Decision Making of the fed. I see it as a consistency a policy coming out of the Federal Reserve. I think from she was an unspoken hero as the most powerful central banker she will become and. And as vice chair, i think it indicates a desire to keep consistency and policy. What did you think of the policy . I think it had been very accommodative to support markets and growth. Has it worked . I always say, how can you prove the alternative . Like, do you do you worry about the exit . If rates were to go up a point on the long end, we know how many own those bonds and we know its 2. 3 trillion globally. Is it going to be a messy exit strategy . Or was it all going to be okay and it was worth it . Chairman bernanke says theres an accent. And very soon if you ask me to speculate, thats all i would be doing, that were going to start tapering. I think theres pressure on the long end of the curve already. You can see some desire for long rates to go up. And im not sure a sustained low Interest Rate environment is what this economy needs anymore. I do think there is a quality and a strength into this economy that just falls short of true growth. But it is strong. I dont see the Downside Risks in the economy that i would have seen in the prior years. No inflation with no inflation, do you do it . Joe, if you think about janet yellen. Hes talking about she has over the years talked about jobs more than inflation or anything else. If she believes in jobs, shes not looking and bernanke has commented on this. Youre not looking at the unemployment rate. Looking at 58 of the people working and its down from 63 . Thats where theyre going to measure against. I would argue that the tapering is likely to be later than earlier. If you think of where we are today with her appointment and focus on jobs and the 58 of the working force. That working force working, youve got to believe youre more likely to be later than earlier. I would agree with jack. On that point, if youre going to use the primary metric being jobs related, theres nothing in the data that would suggest its time to start tapering. I dont know how they balance that with the underlying strength of the economy even though, like i said, stop on second gear. It is true as we talk to our business clients, we are not hearing people talking about hiring. You think oh, go ahead. No, i was going to say quick question, which is, you know, we just at jpmorgans earnings, we just had wells, youre a smaller bank than some of those. Do you have different views on too big to fail than they do . Were certainly in a different size group. But i will tell you, we are a Regional Bank. The way i look at it is banking is an ecosystem and i think part of the financial industry in this country and part of our global distinctiveness is to have this wide array of banks meeting different needs, having capabilities. You dont think youre at a competitive disadvantage . I dont think thats healthy for the ecosystem but i also like being a midsized Regional Bank because i think it is a very nimble and competitive position. We shouldnt sell short, though, 88 billion in assets. So, beth, thank you very much for coming in. Thank you. Appreciate it. Congratulations. When we come back, hes ripped up the governments credit card on the floor of the senate. Whats his plan to get the country back on the fiscal road to success . Well talk to senator tom coburn in the next hour. Squawk box will be right back. With the government in shutdown mode, we wanted to book a guest with negotiations. We called darrell from the living dead. It was a nobrainer. My day just keeps Getting Better and better, dont it . 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 . Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. Coming up, republican senator tom coburn of oklahoma. Squawk coming right back. At farmers, we make you smarter about insurance. Because what you dont know, can hurt you. What if you didnt know that posting your travel plans online may attract burglars . [woman] off to hawaii what if you didnt know that as the price of gold rises, so should the coverage on your jewelry . [prospector] ahh what if you didnt know that kitty litter can help you out of a slippery situation . The more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum ido more with less with buless energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. The presidency has become too powerful relative to congress. One more hour with jack welch. Plus i think ill just tear it up. Its time we quit borrowing money. Senator tom coburn says the u. S. Will not default on its debt. Hell join us at 8 30. After his last squawk box interview, paul krugman called us zombies. Lets do it. Well, we called in an expert. Theres go to be a way. Darrell dixon from the walking dead will join us onset. Earnings alert, wells fargo reporting were going to dig through the report with an analyst. The third hour of squawk box starts right now. Welcome back to squawk box here on cnbc first in business worldwide. Im andrew ross sorkin. Our guest host all morning, jack welch, and weve been having a lot of fun together this morning. We are waiting, i should say, for wells fargo to report its earnings that usually comes around 8 00 eastern time. And it is out right now. Joe . Oh, oh. Well, i didnt want you to come to me. Yeah, im just telling you it is out. 99 cents a share is the number that is the first one to appear on the screen on 20. 48 billion. Better than expected. 97 was expected. 20. 48 is i think they were looking for 20. 973. A lot of times the revenue number with banks can be affected like the bottom line number which sometimes makes it hard to do apples to apples comparisons. 975 million, provision for credit losses, 75 million. A noninterest expense of 12. 1 billion. I havent actually clicked into the press release yet for commentary. Well take a quick look and see what our squawk friend say about all this stuff. But referring to it as continued strong results in record net income. I guess 5. 6 billion was the number if you use not the per share number. That was up 13 from the year ago period. The diluted earnings is also a record. But revenue was actually down from the year ago period, down from 21. 2 in the year ago period. Some of the commentary, you know, weve been looking at this, wells fargo has huge in terms of homes and mortgages packages and weve been looking for commentary they might offer to suggest whether things had been turning or not. Because when Interest Rates spiked, we did hear a lot of commentary about how this pushed business down, especially on a quarter over quarter business. The improvement in the Housing Market has been beneficial to our customers and significantly contributed to our broadbased credit improvement in the quarter. Doesnt say anything at all about very specifically in terms of the rates. Although, the cfo tim sloan says as expected mortgage banking revenue was lower in the quarter and the recent increases in Interest Rates, reduce refinance volume. But offset by improved credit and lower expenses. Yearoveryear, strong loan growth, double digit increases. And they continue to build on the capital and return toer shareholders through buybacks and dividends. Things look like theyre Getting Better. Return on equity. The quick jump that came. Return on equity up 69 basis points. Can you you did at general electric, you had someone else do the actual numbers, right . You were overseeing all of the operations, but do you want to comment . Is that a good number for a bank . You know, i think its pretty good in this economy coming back. I think its pretty good. Whats the key metric you would use for a company like wells fargo would you think . Nonperforming assets . Earnings, return on assets. Yeah, the ones we already gave. You want to know anything else . No. No, i think the stocks up. The stocks up. Just caught it. The facts are that it did slow when the rates spike and now its coming back a little bit. Right. And its interesting. Itll be interesting to see what they say on the call. At least in the comments in the press release, it didnt suggest that things are dangerously low or dropping below what people already anticipated. So maybe thats good news. Well see what they say. Heres Third Quarter mortgage applications. 87 billion. A year ago, 146 billion. Wow. So that but when we had bank of america on, at least one of the numbers. Brian moynihan, right, a 40 decline. Which the fed heard too. A lot of that had been refinancing. And that was one of the things we said. They got down 40 on even though its been a great. Youre going to have three steps forward, two steps back in the Housing Market. When you see 40 , it gets your attention and you dont want rates to go up too much more that quickly. Well have much more on wells fargo still ahead and were going to dig through the report with an analyst in a few minutes. That guy at Sandler O Neil partner theres other big stories. Jpmorgan reported better than expected earnings, revenues were roughly in line. The Bank Increased litigation reserves, though, jamie dimon says he expects litigation costs to abate over time. They continue to be volatile over the next several quarters. And that reserve, by the way, 9. 2 billion effectively wiping out any profits for that quarter. Lets get a quick check on the markets. Stocks soared on hopes of a deal out of washington. This morning, to work on a deal and you can see futures at this hour are up on expectations that maybe we do get oh, things turned around. We were up before, now the dow is off, looks like it would open off about 10 points, nasdaq off about 8 points and the s p 500 off marginally 1 1 2 points. We were up five points. If it was a 15point swing in the s p then wed be excited. Our guest host is jack welch. The executive chairman of the jack welch institute. And weve been talking about the economy. We just had beth mooney on and you asked her a key question as she was leaving the set. A keycorp question. You asked her if she was seeing some of the Midwest Industries really start to roll over in terms of not being as profitable. And she answered affirmatively, which is exactly what im seeing across industrial america. Now that this economy has micropockets that are absolutely you cant look at the overall economy. Autos are good, oil related businesses are good. Cities are good. Boston is redoing the whole water front. And looks like construction site. The whole water front is huge. So there are pockets of activity in this economy that are strong. But you will have a gdp if i had to pick one. But probably betting on the downside more than the upside. 1 1 2 to 2 versus 2 to 2 1 2. For this year . No, the Third Quarter. The Third Quarter. And where we come out in the Fourth Quarter. Thats what i was going to say, what do you think the real Economic Impact of the whole situation will be in the Fourth Quarter and first quarter. Itll have a modest impact. 83 of the governments working. It hasnt had a big impact. You dont think its affecting psychology whether people are going to buy, go on vacation this winter . Try getting reservations at all of these restaurants. I was in europe. I spoke to probably 10,000 people over four days a week ago. One person, one business person asked me about this shutdown. Not one. Questions all day. Because they assumed it would be resolved . And they do business. Theyre asking how to deal with the Democratic Party at this point. Oh, stop. Isnt that what . Oh, okay. These were europeans. They were already democrats. They didnt have to switch. There was no switching going on. But theres a lot of optimism. The same optimism that was here. And if you go from negative two to plus. 4, it feels good. And thats what theyre feeling over there. There was incredible optimism in europe. Really feeling that theyve got the troubles behind them to a great extent, which we have we felt that way in may. Right. Amazing. Guys buying greek banks. Putting money in the greek bank. Did you ever think it would happen again . These things all have cycles. So, yes, i mean, look what happened here and everybody jumped back in. Right. Right. But, you know, greece is not its a nice place but they dont have quite the ability for spain feels better. Unemployment youth is still a disaster. And thats a problem for all of us. We got that here. I mean, when you have youth not getting jobs because people arent quitting and doing other things yeah. The churn effect you talked about. We have our own brand of that. Not the same numbers, but its bad. Its bad. Jack, how do we ever hit escape velocity. We keep were on the verge of hitting stronger growth and it hasnt happened year after year. A government that truly comes to work. Ive told you this before. That agency after agency comes to work without an attitude of get the bastards, but how do we help them grow . That will change it. Youll get epa, youll get labor, all of these agencies working towards making this economy great versus get the bastar bastards, control them, regulate them, do this to them. Thats the reality. The comments by exxon that this is a morally bankrupt company and the sooner theyre out thats the attitude. I mean, that is the issue. Youve got an administration that frankly doesnt like business. Whether you want to call and thats whats going to change. In the end, that comes down to the righthand column. Thats why people arent changing. Four years ago you said every regulation, everything done should be viewed with the through the prism of jobs. Right. And they didnt listen. Just the opposite. So if you get an attitude, get the bastards versus grow the economy youll get the bastards and you wont grow the economy. And thats how you end up with 58 of the population, working age population. Right. Thats how you get it. Thats weve been in the 60s for years and now were at 58 . That is absolutely it. You cant get escape velocity from this economy. Theres a story in the wall street journal today talking about how the poverty levels are starting to level off for some. But this is still not good news. Youre talking about 15 of the americans that fall below the poverty line and a rising percentage of those who fall into deep poverty. Something like 6. 6 of americans who fall into that deep poverty. Part of this is trying to find jobs that maybe dont exist anymore. If youve lost some of the manufacturing base, you lost the higher paying jobs you can get without a college education. How do we fix that problem . You get it through growth, becky. All of these things go away with growth. They dont all disappear, but you get enormous momentum, attitude, excitement, et cetera. That changes the game. And instead of this cost, do you think its good for morale . It might make a few people happy this guys fine, that guys fine. This guy carbon comes out. This happens. All of these regulations, do you think that makes people feel good . Might make somebody who is an activist feel good, but doesnt get the general population feeling good when their bosses have to when you impose a cost on business, the ceo has to go find that cost somewhere else. Youve got to understand that. If a guy gets whacked and has a budget and it costs him ten, hes got to go find ten. And where does he look . Over here, over here, maybe people not buying. Every one of these has a consequence. The idea that you can 11 billion, 5 billion, or 2 billion. And its no impact on employment, its crazy. The ceo sits there with a number. Hes got to meet it. He goes into other pockets of the company and who gets hurt . Unfortunately, the less advantaged of all of us. Right. Were going to continue this conversation with jack. Hes our guest host for the program today. Coming up, wells fargo out with Quarterly Results minutes ago. Up next, well dig through the report with an analyst at 8 30 eastern time. Senator tom coburn on why he thinks we shouldnt fear the debt ceiling. And then the man of the hour. Joe, where are you running to . Is he here already . The star of amcs walking dead is going to join us when we come back. Its darrell. Your representatives in congress have failed to compromise, failed to do the job you elected them to do. So we called someone who is used to dealing with deadweight. Sorry, brother. Coming up on squawk box. Darrell from the walking dead will join us onset. You dont owe us anything. Dont miss it. Opportunities arent always obvious. Sometimes they just drop in. 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Also, wells fargo posting Third Quarter earnings just moments ago joining us now on the squawk news line to break down the numbers is scott. Good morning, scott. Thanks for having me. Give us the headline from your perspective. Yeah, couple good, couple bad as you might expect from the industry. Let me start out on the good things. So first, you know, they reported 99 cents. That beats the consensus by a couple of pennies. Importantly, though, that allows them to do theyve had 15 straight quarters of re. At leas perspective, theyre still finding ways to make their numbers. Two, credits still improving. Thats obviously a very good thing. They released about 900 million of reserves, thats about 4 cents better than we anticipated. The credit environment continues to produce some tail wind here. And third, theyre attacking the expense base. Expenses down 1. 5 better than we had thought and thats definitely key given the soft revenue environment. Having said that, couple of things. Mortgage down as you would expect. We knew that was going to be the case. But its just going to be a rough ride. More than you expected . No. Thankfully the cfo had given some sort of telegraphed some things into our quarter. Im looking at originations down about 30 . Thats exactly in line with what they had thought. Bad but not surprise. Margins still under pressure, it was down about eight basis points. Unfortunately, twice as much as we wouldve thought. I think as long as we stay in this low environment, thats going to remain a head wind. Finally, a tough environment to generate core loan growth. Theyre generating about 2. 5 analyzed loan growth which is not what you want to see at this point in a socalled recovery. Just give us your sense of what this means for the Housing Market given wells role in the Housing Market as an originator. By far the number one in the industry. Theyre an excellent read through for whats going on elsewhere. You know, i think at this point, we dont have anything to suggest that credit is going to start to roll over in housing. Thats a good thing. Having said that, theres a rule of thumb that for about every 100 basis points, increase in Mortgage Rates affordability goes down by about 10 . So, you know, at a time when were supposed to be in a recovery, higher rates at the long end of the curve arent helping things. I dont think were really rolling over significantly in terms of overall pricing, but were not making any easier for people either. Did we lose scott . Scott was making a very good point. Oh, you can hear him . We can hear him. I cant hear a word hes saying. Im still here, guys. Hopefully you can hear me. Im hearing nothing. Your batterys probably done. Plug into the hard line. Are you able to hear me now . Weve got you, scott. Its not you, its us. Trust us. Scott, youre back, i can hear you. Thats not the first time ive heard that im afraid. Usually not a flattering comment. What can i do. But i was saying for every 100 basis points in rates, about 10 . At a time were supposed to be improving, were certainly not helping things im afraid. Did you see their numbers this morning . I dont cover them. I took a brief look at the numbers as you can imagine. Looks like youve got the big litigation reserve in there. Jpmorgans a bit of a unique animal in that theyve been under this regulatory attack for so long. To the extent the market has perhaps some resolution here to some of those costs, it cant be a bad thing. Scott, one of the things why is wells fargo stock down in the premarket . The issue is that and while they beat on a headline basis, there are going to be questions about quality. I made that comment that reserve relief is where about 900 million. And tend not to pay a higher multiple. What they want to see is revenue growth. And in the face of this pressure on mortgage, on margins, slow loan growth, thats not something that people would necessarily consider highquality earnings. Right. Scott, thank you for joining us. And i couldnt hear you, but you could hear the rest of us. And it really wasnt you. It really was me. I appreciate that, guys. Thanks a lot. Senator tom coburn says the United States will not default on its debt even if we pass the debt ceiling deadline in congress. And then, norman, darryl dixon. Usually right among the top three with the cross bow and hes cool. He lost his brother last year. Were going to talk to him a little bit about meryl and how hes getting on without him. But meryl was kind of he turned out good in the end. He will join us on the set to kick off the hit show. [ banker ] sydney needed some Financial Guidance so she could take her dream to the next level. So we talked about her options. Her valuable assets were staying. And selling her car wouldnt fly. 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The opcw is currently overseeing the destruction of syrias chemical weapon arsenal. Jpmorgans stock, andrew, is called higher by 60 cents yes. I dont mention the names of irrelevant media entities. And theres one in particular where they will call jpmorgan an International Crime syndicate. A major International Crime and they think its funny and cute and, you know, theyre so edgy and everything. So now theyre saying that by reporting the results were positive and that the stocks up so were enablers of these capitalist pigs. These are your this is why i try to bring you over to the normal side of reality. The one that and i try. Jpmorgan is an institution, the Financial System is important, they provide capital for entrepreneurs and prosperity increases. Its stupid. Are they communists . Do you understand where does that come from . Are they sandinistas . I do not represent this line of thinking. Dont be afraid to trash them just because theyll Say Something about you. Im afraid. Very afraid. I know, they are nasty. Theyre haters. The twittersphere is a dangerous place. Were not going to say who it is. But is a black board made, right . Oh, now youre giving away clues. Dont go there. I know. When we come back. Were going to have much more with our guest host jack welch. Plus details from the jpmorgan media call. Well be right back. Its a growing trend in business do more with less with less energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. A confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Welcome back to squawk box this morning. Kayla tausche joins us with details from the media call that just took place. Theres always news made on this call and especially with the legal issues hitting jpmorgan this quarter, of course, that was top of mind. How much in total it has actually stowed pay way for legal issues. That number is 23 billion. That is a huge number and i think thats pacifying some investors who were worried that they could eventually get caught. They also said that the settlements could be up to 5. 7 billion, costs and Legal Expenses included above that 23 billion number. But that is lower than theyd expected previously. Yeah. And previously said 6. 8 bill n billion. So its a big number. They said this is a new reality but they do hope their reserves that they have to set aside each quarter will start to abate. They couldnt comment on the status of the settlements but said ultraimately the number waa board decision. There was a spicy comment in the press release about how they want to get the credit for the bear stearns and Washington Mutual deals. They did it at the behest of the government. Its particularly noteworthy now theyre in the middle of these talks and thats still the line hes taking. Real quick. Do you think theres going to be a true Global Sentiment that captures everything. The this, the that no. Is it just going to be the mortgage piece . No, i think its going to be the mortgage piece. Thats why they say its the new reality. Theyre going to continue having some of these issues. They say theres going to be no effect on management change. That is the first question that was asked right at the top of the call. Jamie, of course gave up his chairmanship of one of the subsidiaries, they said that was in consent with regulators trying to meet some regulatory demands there. But that we shouldnt expect any other management changes. No changes to capital plans, dividends, buybacks, what have you. In business you define the market. What is the market . Theyve just defined it for the regulators. 23 billion there. Sitting there going how do we get it . How do we go into the piggy bank and take the 23 out . That doesnt create jobs. Back to our earlier discussion. Thats traditionally why the regulators ask for that number but they never make banks disclose it to the market because they know that as soon as you know what that piggy bank stands at, thats what theyre going to go after. Are you kidding me . What a party this is going to be. Weve got 23 billion to go get. Whos getting it . Which agency . Last comment, i know you have to move on, but he did comment on the debt ceiling saying theres no way our country can default on his debt. Thats all he said about that. Thanks, kayla. I wondered what he felt about that. He says he doesnt want them to default on the debt . Says the country cannot default on its debt. Contrarian view. Exactly. All right. Lets get the treasury secretary, talk about jack lew testifying. Our next guest argues that the debt ceiling does not even exist. Joining us now with more, senator tom coburn, a member of the banking committee. Senator, its good to see you. Did you watch secretary lew the other day . He went to great pains to dispel the notion theres a way of prioritize payments. Was he telling us something thats not true . Or dissembling in some way . How is that different from how you see it . Well, every federal agency can manipulate things to the advantage of the president right now. They dont want us to believe that we can handle it. Its been four years since the president s had an appropriations bill on his desk. That shows you how Dysfunctional Congress is, we wont pass bills. And my point is if you always raise the debt limit, theres really not a limit. And the debt limit is the one thing that will force reality on congress that we have to deal with our unfunded liabilities. Why do we even have it . Thats a good point. All we do is raise it. Why even have it . Its always been raised. And over half the time its been raised to along with Something Else used as leverage. So i guess the leverage does work. But the point is, we have a debt limit out there. Its the International Financial markets. And when they dont see us addressing the very real problems, the thing thats causing us to continue to have deficits, then theyre going to price our securities in such a way that we cant afford them. And so what we have to do and the reason im kind of hard over on the debt limit is theres nothing going on right now that makes the politicians make the tough choices to prioritize things. And thats what we ought to be saying is why arent you fixing medicare . Why arent you saving Social Security . Why arent you reforming medicaid in a way that makes it much more efficient and gives better access . And as you do that, why arent you trimming the other 250 billion to 350 billion a year of pure waste and fraud and duplication. Maybe the president hasnt done the whole cr thing. That shut down the government. Youre right, why have the only reason to have a debt ceiling is to because youre always going to youre never going to not raise it, but you would want to have some discussion about how to slow the rise in debt every time you get up to it again. That would be the reason. Or dont have one at all. But you dont shut down a government and it is affecting some people. Joe, i agree with you. I wasnt a proponent of that strategy. But we are where we are today. And but, again, id make id make the point that we have not sent the president regular appropriation bills in four years. Yep. Plus you had the president and harry reid hadnt put them on the floor. You had the president who voted against raising the debt limit in 2006. And he says, oh, its a mistake and i wish i hadnt. Okay. Now the tables are turned, it was good for the goose, not good for the gander. You had him there where he had done it. But when you shout down the government, it puts everyone in is blame will be assigned to the republicans on that. I agree with that. But i think its irresponsible to shut down the government, one. Number two, its irresponsible not to pass appropriation bills to give our federal managers the capability. Number three is its irresponsible to let people at the end of the year waste money so they can use it or lose it syndrome here in washington which was billions in the last two days of 40 billion was spent because theyre afraid if they didnt spend it, they wouldnt get it next year. Were out of control and id make one other point. You wouldnt invest in a business that had 128 trillion in unfunded liabilities and assets of 94 trillion and also a 17 trillion in actual debt. All right. And thats where we are today. Weve got you, senator. Theyre calling you a denier. Debt denier, i see that. Its weird, we get religious with climate change. Theres deniers, heretics, birthers, its all so weird right now. I dont know, maybe go back and Practice Medicine and oklahoma might be i dont know. Might be. You chose this life for yourself. But i appreciate it. Thank you, senator. We appreciate seeing you today. All right. Coming up, daryl from the waugh dead will jowalking dea. Maybe the biggest guest id say weve had on squawk box coming up. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. When we come back, well have more from our guest host jack welch. Plus two stocks to watch. Well recap the reports from jpmorgan and wells fargo right after this. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. 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. You either know that music or you dont. Amc networks kicking off the much anticipated season four, the walking dead this sunday night at 9 00 p. M. Joining us now on this. Star of amcs walking dead. Great to see both of you. Both of you gentlemen. I didnt watch at the very first season because zombies you didnt . I didnt understand. I mean youve never ive watched repeatedly since even on the marathon days, black and white, ive seen that too. But then reading about youve almost changed the whole Business Model for dramas on tv. There was a time where the show that followed walking dead that talks about the episode was getting higher ratings than any other drama on any other network. It has been a phenomenal. Its been one of those shows people have been passionate about for the reasons we hoped they would. We knew the core zombie fan would be engaged. Its a drama about survival. The choice youd make if you were the last dozen people on earth. What would you do . Would you stay or go . Lead or follow . And i think people really sort of responded to those. And you would think if you were to describe the plot of the show, its like, okay, how many episodes can you get out of that . Youve got i think ive talked to josh about this. Youve got the rights to this all yourself. You dont even share it and the comic books will go on forever. This could go on for 50 years. Robert kirkman who created the comic book and series, they had their 100th edition of the comic book celebrating that this week at comicon. Its been a Great Partnership for us to have the source material but also be able to veer from it. I saw shane in some movie, but norman, you dont want to get killed in this thing. Please dont get do you know about the last show of this year . You dont, do you . I mean, i know a bit of a story line. But theyre very good at making us wait our turn. Are you out of the prison this year . We do hes my boss right now, i dont know what i can tell you. Sort of carry the cross bow. Do you have an agreement with these guys . Im smiling just trying to get through. Its cool. Hes phenomenal. Hes fantastic. You move me when you you that was pretty good. You dug deep when you saw him his body. It was a hideous looking im going, oh, this days going to be hard. And, you know, we love the cast are such good friends with each other. We are a big family. Dont get too attached to anyone. You do, though. You do, though, you get attached to these people and we shoot down in georgia in our own little bubble and were very fond of each other. So when one person dies on the show, one character dies actually, if you dont shoot them in the head, they live forever anyway. Just have a bunch of pets. Right. Like the governors daughter. Uh. I want to know what you think of the role of netflix. Sure. The success of many programs on your own network. Sure. Vince gilligan said the large success was because people caught up on netflix. I think some people for the first season of your show caught up on netflix. Madmen, huge. You watched our marathon, watched the black and white versions. Theyve been a great partner of ours, but its one of many ways we try to get people back to the water cooler event. Someone earlier on the show talked about ecosystem in finance we talk about ecosystem in television where we say the live water cooler event is still the moment. But then after that, you really start your own engine to go all right. How do we get the marathons to work . Vod on our Cable Partners to work . You had a marathon last night. Is that all leading up to the premiere . Every episode airing, we did the same with breaking bad. Its been a Great Success story and netflix is one part, but our partners starting with itunes the next day. What does that say about vod and Binge Viewing and the success you think the netflix or amazons will or will not have where theyre not dependent on sort of a live sunday night where everybody has to watch. Well, i think, you know, something about even the word water cooler. That live sunday night still works. These guys put together the highest rated show in television and people are showing up on cable. You know, black and white, you know, casablanca. I said, amc, are you kidding me . Madm madmen, breaking bad. There are more than just your Little Community in this post apocalypse world. You should be doing another there is going to be another show, right . We have a companion series in development and its just that. And we get the question, thats whats happening there, whats going on elsewhere. Atlanta i know is the epicenter. But you are you totally happy with whats happened . Youre an artist, did you want the notoriety. Did you want to be somebody in a zombie tv show that became so famous you cant go get a starbucks . I mean, its definitely my favorite show ive been on so far. And the thing with television, too, you have weve had four years to develop these characters and tell these stories. So the writers know our characters so well and the actors know the characters so well. Sometimes if you have that much time, you can weave your way around and drop these little seeds as youre doing it and sometimes they turn into trees and story lines and its very fulfilling. The one word or one line fear the fight the dead, fear the living. That sums it up there. Youve got to worry about the zombi zombies, theyre always around but its the living that are well, the walking dead, if you read robert kirkman, the forward to his comic book compendium talks about how its not a story about zombies, its about survival and its about, again, choices you would make that are so, you know, at the core. What would you do if you were the last person on earth . What would you do to fight for your family . Would you observe the laws that were the laws . And are they still the laws . Absolutely. How do you come up with another act . I would say a second act. Youve had so many already. What do you follow this up with . This is thriving and were excited for this. And mad men comes on right after it, but we have a Development Slate that goes 52 weeks a year. We have new shows next year. Whats the show about the software guy . Sure, yeah. Theres a show thats coming next year called catch fire. Entrepreneur, silicon this is i think it will be. Walking dead might not be. Can it have the draw that zombies does . I think thats the goal always. We set out to create pop cultural relevance with everything that we do. You know, one of the things im most proud of besides the fact that the walking dead is so successful is it can live on the same network that has but all with the through line of quality. Thats the goal. Youre an artist. You do photography. You could have foreseen a life where you just have galleries and people see your work, right . Was this a means to an end . This wasnt the end you were thinking of . I remember reading the pilot. It was so different and it was i knew it would be great. To tell you the truth, i watched amc shows pretty much only before i was on amc. Its true. It had such heart, this story. Like charlie was saying, everyones clock is ticking and its your two feet on the ground and what are you going to fight for and who are you going to fight against . It sucked me in. You really changed. Did you know darrell was going to be other than rick, youre probably the guy now. I dont know what happens to carl in all this. I dont know. Darrell sort of has a different story line. He was destined to become his brother. I didnt want to say racist things and take drugs and do the things my brother did. I sort of tried to play him where i was embarrassed of what happened growing up. This opened up a new zone where theres a sense of worth. World war z, the whole genre is on fire right now. You know what, if theres ever an activity that kills our grid for about a year and a half, i dont want to be standing there in my house like with a spear when everybody else has got cross bows. And im also getting a generator thats not as loud. Why are you able to get some of these dramas that some networks cant . I wont say that about nbc. You just did. Youre blacklisted. Nbc had a great couple weeks. We all develop with one goal in mind, which is to create great television. In any do you think the bar is different . Were certainly in a different business on the cable side than the broadcast side. By definition theyre trying to be broad. Were trying to serve certain target audiences. Great having you. Other than bicycle zombie or well zombie, you are the number one pick for someone to bicycle girl, if we could have had her just dragging her with her arms or something. We have the action figure. Im ready for talking dead, my friend. If i do talking dead, will you come on . And if the world goes down, im coming to your house with the generator. I was implying. I registered, took me nine months, im prepared. Im just going to call sol. There you go. Excellent. Thanks, guys. Is this good enough for amc for you guys . Our guest host all morning has been jack welch. Up next, who will be the next ceo of microsoft when we return. The pursuit of a better life for our children is something we all share. But who can help prepare them for the opportunities ahead . Who can show them how to build on your success, but not rely on it. Who can focus on making your legacy last for generations to come . That someone is a Morgan Stanley financial advisor. And were ready to work for you. Ido more with less with buless energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. Lets get back to our guest host for the last word, jack welch. We didnt get to a few issues today. One of the them is the microsoft succession story. One of the thoughts i liked was mulally. Do you have any thoughts about who could step in . Without question i dont know the inside candidates but i think if they had one, with the exception of the guy that was running nokia elan . Yeah. They would have announced it when steve made his decision, i would think, a normal transition, steves leaving, his, mr. X. I love alan, i know him at boeing, i know him from ford, hes done a hell of a job, hes a great guy. I happen to think theres a better guy. Who . Sam panasano. Hes 62 years old. 60 is the new 50 so i tell him hes 52 years old. Hes coming from a hardware company. He knows the industry in his toes. You think hed take the job . Thats another question. But if i were the microsoft board, id back a truck up to his house, a brinks truck, and id say pick out what you need here out of the brinks truck and come and take this job. Sam is a great leader, probably one of the best leaders by far in the last decade. He knows the industry. People like him and respect him. He did the bloomberg research. Review . Yup. Hes just a great guy and he knows the industry in his fingertips. He knows big data and all that stuff. But youre probably talking about someone who is more of a restructuring person than a visionary. No, he grew the hell out of the place. But lou was the guy who was the visionary behind . No, he was there as a lieutenant. He knows that, hes been through there. The last then years hes been ceo growing that company in the toughest market there is. He could have been a lumbering old, big Server Company and instead hes turned into a Nimble Company with a great market valuation. You asked me who i would pick. There are other people im sure and there may be internal candidates i dont know about. The question is going to be who is going to take it with the two guys staying on the boar, td. Two ceos on the board. You think they both should be off . No. I dont think think bill should be off. I learned from my predecessor. He gave me the keys and said go get it. I did the same thing. Ballmer is still one of the largest shareholders. He owns 4 . Thats a different situation, you have a founder. It will definitely have an impact on the attractiveness of the job, to an outside candidate. What about the idea of gates himself coming back . I dont know but i think hes so involved doing good work with his foundation that i cant see him back. I dont know, though. I have no personal information. And the inside candidate will be thrilled to get the job with bill and steve still there. An outside person you dont want some young gun, a 20, 30yearold, even a Mark Andreesen type, visionary. Sam has done a hell of a job taking this company, hes strong in big, big data, the word cloud doesnt scare him. Jack, thank you so much for coming in. That does it for us today. Right now its time for squawk on the street. Good morning and welcome to squawk on the street. Im david faber with kelly evans and scott wapner. Were live from the new york strange. Carl quintanilla and david faber off today. We are opening with potentially a lowpe