Transcripts For CNBC Squawk On The Street 20170320

Fbi director james comey will take questions about russia and wiretapping allegations. Well speak to security insiders about what to expect and potential fallout from todays hearing. Plus, former ambassador to russia will break down the current relationship between the u. S. And russia. And why we could be in for a surge of mergers and acquisitions and what it means for the markets. First up, from russian hacking activities to the president s wiretapping allegations, fbi director james comey will face questions at a House Intelligence Committee at a hearing set to begin in about an hour from now. Our eamon javers is in washington with the latest. Good morning, eamon. Good morning, carl. A high stakes moment for fbi director james comey up here on capitol hill today because we expect in the House Intelligence Committee he is going to be asked whether or not there is an fbi investigation into allegations that russia attempted to influence the United States election back in 2016 and what that investigation has produced so far. He will want to as fbi directors generally do say he cant comment on the investigation or the existence of it because traditionally they dont confirm or deny existence of investigations. But hes going to be ham strung by the way he and the fbi handled the Hillary Clinton email investigation in the heat of the president ial Campaign Last year. Heres what comey said back in july when he was asked about the existence of an investigation into Hillary Clinton. In this case given the importance of the matter, i think unusual transparency is in order. Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgment is that no reasonable prosecutor would bring such a case. So that was this summer. And then going into election day comey also opened up this investigation into whether or not there were additional emails that had been found on Anthony Weiners laptop and talked publicly about that disclosing the existence of that investigation in a letter to members of congress up on capitol hill. So he will be expected by democrats to say today whether or not theres an investigation into donald trump, the Trump Campaign and any connections they may or may not have had with the russian hacking attempts. So thats one area of controversy. The other one of course is the president s statement that he felt that barack obama had wiretapped trump tower. You can expect that comey will be asked about that today. And expected to give an answer yes or no, did this happen, did it not, will he go eyeball to eyeball with donald trump and say the president was in fact wrong when he accused barack obama of that . Thats another thing were going to be waiting for. All of this high drama today comes in the context of james comey himself who was appointed fbi director in 2013. And fbi directors, guys, have a tenyear term. So hes pretty insulated here from the political pressure and has suggested he wants to stay even though there are calls for him to go after the way he handled the election, guys. Back to you. A lot of moving parts. Well see what he says, if anything. Eamon javers in washington. For more on what we can expect from todays hearing lets bring in two Cyber Security experts, Harvard Kennedy school Cyber Security project and former director of Cyber Security for the secretary of defense. Also with us is marc kerr, cofounder of sinac and former technical director of the nsa. Gentlemen, welcome. Good to have you both on our headline story here, michael. So what do you expect to learn from fbi director comey today . Well, thanks very much for having me. I think the two main stories are going to be wiretapping and russias active measures on wiretapping. I look for director comey to use more cautious language than has been used over the weekend, but to basically say theres not been any evidence discovered so far. And on russian hacking, lets hope he confirms that there is in fact an investigation underway. And look for the republicans to push the conversation more towards the leaks of information and focusing on that rather than russian activity and evidence of collusion. Mark, how much can he reveal openly about any investigation into the russian hacking of the u. S. Election, the alleged hacking . Right, right. So in this case i dont expect a whole lot of detail about the active investigation. But i think the bigger story here and this comes from some of my experience at the National Security agency is how the russians have tried to influence our elections through disinformation. They routinely do this. This is part of their m. O. Weve seen this in the russiangeorgia war. Weve seen this lately in sweden trying to influence the nato countries and their election processes. So i hope that he spends some time talking about their disinformation efforts. Michael, hell surely face some questions about whether the fbi is opening an investigation into President Trumps own contact between the Trump Campaign or some of his advisors contacts, especially in the wake of the resignation of mike flynn, his National Security advisor. What do you expect comey to say here . I expect him to say very little. Publicly. And i think youll want to look at how the democrats try to get him to talk at least about how the russians have acted over the summer. If hes not willing to confirm what the subject of an investigation is, maybe his assessment about how our european allies are currently being threatened by russian active measures. Democrats are going to try to get at this from a number of different angles, but ultimately i dont expect comey will be very forthcoming about details. Mark, i wonder, i mean, we just heard that sound bite from last summer where he talked about unusual transparency. Are we still in an age of unusual transparency . And can congressman schiff make him bend in ways we wouldnt ordinarily see an fbi director bend . Well, look, i think weve seen over the past six months things come out in the news that ordinarily would not be talked about openly. So i think while director comey will try to prevent more information going out into the public sphere, we will see that envelope pushed a little bit further. But i hope we can maintain the integrity of the investigation. So, michael, i mean this whole thing has become so politicized. Were talking about democrats and republicans posturing. Have you ever seen anything like this when it comes to a split and an open public hearing from intelligence agencies . I have not. And its a shame that the issues like this have become politicized, that Cyber Security has become politicized. This is usually the geek stuff, which i love so much. But here the politics really has gotten the best of it. So the first step is to try to get the politics out of it, focus on the facts and where the evidence actually leads. But i do think that the fact that the russians even tried to influence this election through Information Operations is itself such a flagrant foul that we really do need a strong Public Accounting and a Greater Public awareness about what happened and what the threats continue to be. Yeah, i guess im wondering, mark, just where all this goes, whats the upshot going to be . What we learn from today how this ultimately is resolved coupled with the charges that we saw related to the russian spies and the yahoo hacking. I mean, its all sort of coming together. And its hard to figure out where we end up. What can you tell us on that front, mark . Right. So were going to end up with some awareness, hopefully, in the country around russias influence operations. They traditionally try these covert incidence operations through pushing news stories and trying to get news out there that hurts one Political Party or another. So i think more awareness is one outcome. And then hopefully, you know, with the indictment of some of the Russian Hackers and the shaming really of some russian cyber operators, you know, we can start to see some improvements in our detection capabilities. And id love to see Companies Take a more adversarial approach to preventing breaches. You know, all of this comes out of the problems we have with Cyber Security and not being able to stop some of these hacks. So if we start to be more proactive, take an adversarial stance and start to train more folks in this skill set, we can hopefully prevent some of these breaches. Well see what we learn today on that front, guys, thank you so much for joining us. Michael sulmeyer and mark kuhr. Meanwhile, markets beginning a new week of trade after the nasdaq hits new alltime intraday high on friday. All three major indices posted gains in a week where the fed boosted rates. This week on squawk on the street minneapolis president kashkari the lone dissenter against that hike defended his stance. If were coming short on inflation and the job market shows more signs of slack, my question is why do anything . Why not allow this to continue until we see that were actually reaching maximum employment . Weve heard from evans today, harkers going to be with liesman in a few moments. But largely his point is Labor Force Activity is not resulting in core inflation. Also, he says the feds target should be a symmetric target. If it goes to 23 no big a deal than it would if it were 17. Right, lets let the economy run harder which was a talking point for Janet Yellens for briefly last year. I think the markets takeaway here and both from kashkaris said the fact he dissented to the dovish direction and the fact janet yellen did not sound note of urgency about getting a lot more done than the market expected, i think the takeaway is its not like theyre on some kind of headlong campaign to get to some version of normal. Thats not just looking at the same data points theyve been looking at before. So i think that the maybe counterpoint to what kashkaris saying is maybe not that much has changed about conditions, but its another year of growth, another year of job gains, another year of at least slightly tight labor markets and another period without a shock, so why not move . I think what these fed president s need to start answering questions on is trade. And how would they respond to a potential trade conflict or trade war. This has become front and center after a weekend where g20 finance ministers met in germany and changed the language of their communique which is sort of wonky and doesnt necessarily recollectfully direct policy but largely symbolic. They took out a promise to not take out protectionist measures against each other. This was Steven Mnuchin our treasury secretarys first attendance and clearly reflects the Trump Campaign promises that hes going to fight against fairer trade. That theyre not against free trade but certainly opens the door to implement tariffs or Enforcement Actions against trade and youre getting a global split with germany and japan on the other side of that argument. Yeah, reports that the commerce secretary met with the president in maralago over the weekend and that were going to start to see hard evidence of those policies in the next few weeks now. If you want to be checking off the boxes saying Campaign Promises met, trade is an easy one. Its a short path there if you want to do that. Yes, but what will be the Economic Impact . Without a doubt. Still to come on this show, more views from the fed. You will want to tune in for Philadelphia Fed president Patrick Harker in exclusive interview coming up later this hour. Also taking a look at u. S. Equity futures under a little selling pressure coming off of the seventh upweek out of eight for u. S. Stocks. Dow futures down 4. 5. Much more squawk on the street live from post nine here at the nyse when we return. The command performance sales event is here. Experience exciting offers on our most elevated suvs ever. Get up to 2,500 customer cash on select 2017 models for these terms. Experience amazing at your lexus dealer. Fbi director james comey expected to face some tough questioning before the House Intelligence Committee this morning focusing on wiretapping, election tampering and lot more. For more this morning lets bring in former ambassador to russia, former deputy secretary general of nato, mr. Ambassador, good morning to you. Its good to have you. Good morning. Not often we get an open intelligence hearing quite like this one. I wonder what are you going to be listening for . Well, im listening for more information, more details about what the russians actually did to interfere in our elections because thats the big issue here. We still dont know all the answers. The intelligence agencies agreed on sort of the bottom line, but exactly how serious this threat is and how we prevent it from happening in the future and help our allies prevent the same thing is what im interested in. But of course there are a lot of suspicions regarding the Trump Campaign, whether contacts represented collusion of any kind. So far we dont know any information to confirm that. Hopefully these hearings will clear up whatever suspicions still exist. How does comey balance the need to protect an investigation if one is ongoing . And at the same time protect the reputation of his people at the fbi . Well, thats a tough line for him to straddle. Hopefully well get more information particularly about the russian hacking. But given that theres so many questions that have been fueled by the coverup by some members of the administration and the campaign, hell have to at least clear up some of the biggest misconceptions so that the suspicions dont linger. The Trump Administration needs to get op with defining a policy towards russia. This is an important relationship and all these suspicions i think are getting in the way of the real challenges that we face in dealing with a very aggressive russia. On that front, you know, we were just talking about a trade riff developing among g20 nations after the finance ministers met this weekend. Theres also on oped, mr. Ambassador, in russia today white house meeting with trump was catastrophic for merkel, talking about some of the sort of more nuanced lights there. How is russia looking at all of this . And how does it effect our future relationship with it . Well, i dont think the meeting with merkel was catastrophic, but its in the russians interests to try to portray it as that because their Main Objective is to divide the United States from its allies, to weaken europe, to weaken nato. So any signs of differences of view on policy on how to deal with russia is music to their ears. So theyll try to sort of throw salt on the wounds as much as they can. What this Administration Needs to do is look ahead, figure out what it needs to achieve with russia, get the allies to line up with us so we can form a united front. Otherwise if were divided were lost. Ambassador, you mentioned you would like to hear more detail about russian potential interference in our election. I wonder to what degree we can even expect a lot of detail even at the end of this, even if its a lot of well, russia does this to adversarial, where does it ultimately get to an end point of saying this was something di si decisive or not. That may be something we can never fully agree upon. I think it will be a judgment call of reports and testimony, but i think what we have to remember what the russians did may not have been entirely the scale, ambitiousness, Strategic Focus on undermining one candidate went beyond anything weve ever seen before. They may try the same thing in france and germany, which have big elections this year. So we really need to understand so we can protect ourselves, whether its hardening our networks, getting social media to be much more vigilant about both labeling fake news and taking it off, if they can find a way to take these things off the network before they go viral. Otherwise were going to be victims of disinformation, propaganda, manipulation, which no democracy should put up with. We look forward to learning a lot more in the next few hours, mr. Ambassador. Thanks for your time. Good to see you. Youre welcome. Ambassador alexander vershbow. When we return, potential surge in m a activity. And look at futures, little change to down slightly. Dow futures just turned positive up two, s p down less than two. More squawk on the street live from the nyse straight ahead. it just feels like anything is possible here in upstate new york. at corning, i test smart glass that goes all over the world. But theres no place like home. Theres always Something Different to do like skiing in the winter, jet skiing in the summer. We can do everything. New york state is filled with bright minds like samanthas. To find the companies and talent of tomorrow, search for our page, jobsinnewyorkstate on linkedin. Search for our page, adios, honey, hasta la vista, baby. singsongy im a fat guy in a little coat. Fat guy in a little coat. That rug really tied the room together. Any questions . Bueller . Bueller . Stream all your entertainment. Introducing at ts new unlimited data plans. Plus, get the amazing new iphone 7 on us. Guyhey nicole, happening here . This is my new alert system for whenever anything happens in the market. Kids a natural. But thinkorswim already lets you create custom alerts for all the things that are important to you. Shhh. Alerts on anything at all . Not only that, you can act on that opportunity with just one tap right from the alert. Wow, i guess we dont need the kid anymore. Custom alerts on thinkorswim. Only at td ameritrade. Stocks and ceo confidence at historic highs. Are we going to see a surge in m a this year . Thats the question mike is asking in his column on cnbc pro this week. Already some various headlines suggesting theres more to come today. You know, its been a steady drum beat. I think, you know, we had a nominal record in m a volume last year, it was over 4 trillion. Sounds like a lot, sounds like youve had some big deals obviously like at ttime warner, other inklings today. But i think relative to the economy and size of the stock market globally youre well below prior peak levels. Youd expect at this point in a bull market youd actually be more active in addition to the fact stock prices are at record highs, debt markets are incredibly generous right now in terms of buying any kind of high risk paper. Ceo confidence as carl mentioned high. Regulators netnet probably more friendly to big deals than not. Maybe that cat liezs things. And investors have been rewarding acquirers. Going up Something Like 4 on the first day. That sort of shows you that the market craves some of this activity. So i think the big question is with all these things lining up what would it mean if we didnt get kind of a historic surge in m a . Would it mean theres this continuing defensiveness or caution in boardrooms . Basically they want to buy back stock, maybe they feel theyve gotten the message m a doesnt always add value. Thats one of the questions we get when it comes to the repatriation debate. If its allowed to be brought back in the form of Corporate Tax reform at lower rate, if it goes to deals, thats not necessarily friendly for job creation. Its not. Weve been hearing more and more its going to buybacks. I think jamie dimon called it qe4, right . Yeah, i think the Companies Bringing back tens of hundreds of billions in aggregates would be the type to make strategic acquisitions, big tech companies. But does that really get the economy going or flush more cash into investors hands and they do with it what they will . Yeah. Those are the independent investment advisory, the market kind of telling you they expect pipelines to get busy. Good column. Mike tweeted it out earlier this morning. Go on his feet and check it out. Also ahead exclusive with philly fed president Patrick Harker. Liesman has that in just a few minutes. Kevin, meet your father. Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin trusted advice for life. Kevin, hows your mom . Life well planned. See what a Raymond James Financial Advisor can do for you. The newly advanced gle can see in your blind spot. Ok lets call his agent. Im coming over right now. [ dinosaur roar ] onboard cameras and radar detect danger all around you. 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Its considered pretty vulnerable when it comes to some trade tensions rising, which happened over the weekend and when it comes to the border adjustment tax. Were told the senate is increasingly against that, perhaps why nikes also had a pretty strong comeback. Its a company that produces all of its sneakers abroad. So that would be an impact. And its been interesting that its been a good stock this year because its as you suggest, sara, its not at all in tune with the policy hopes that are out there. In fact, a lot of the kind of good old traditional Growth Stocks that are not policy dependent have been working. Apples up 20 . A lot of the big tech names as well. That earnings calendar aside its been argued were in sort of an information vacuum. The fed has had its say, were waiting for q1 earnings. Sort of legislatively were sort of in a Holding Pattern as well. Is that why were flat since the beginning of the month . First of all 11 fed speakers this week, so maybe nothing of tremendous relevance is going to be out there. Theyre going to kind of keep reinforcing the message most likely, but i think, carl, thats kind of one of the reasons the market has been internally taking a rest. Its been backing off. You see the transports are 5 below their alltime high whereas the s ps less than 1 below. So youre starting to see a little bit of divergence in there. I dont think its necessarily a huge concern unless some catalyst doesnt come along to reenergize things. It reminds me of last december where it looked like you were about to have a genuine pullback at the index level and just happened internally. Small caps corrected and the rest of it. Thats where i would say if you look at what the strength has been sort of propelled this market to highs, its defensive sector, real estate, telecommunications, utilities, not big banks and cyclical stocks that drove this market higher post election. Maybe thats the reflection that the trump agenda has stalled a little bit and looking further out. Were going to find out. Obviously in addition to yellen thursday there will be a vote in the house on health care as the speaker plays a bit of poker with various caucuses. Theres the opening bell at the big board, global payments, a provider of Payment Technology services celebrating its 16th listing anniversary. At the nasdaq virginia based hometown bankshares. Mike references transports. An upgrade of alaska air at stifel saying some of these airlines are cheap enough. If you believe the numbers, theyre really cheap, thats just the question. I think people have wanted to use the airlines as a way to play a rebound in the transports because rails certainly dont look cheap and all the rest of it, but its interesting they seem to be moving as they have now for a while with oil as opposed to against oil. So thats been a big challenge for the market is whats the message of the decline in crude. Energy stocks have been underperforming crude before this pullback in the commodities. So its definitely a big reason for top line caution. Energy the worst performing sector now. Crude oil down another more than 1 . Big decliner in europe as well dragging on the major averages there, those energy stocks. You mentioned upgrades and downgrades, not a lot of Corporate News but there is an upgrade for tiffany which i noted after some strong earnings last week. This came from will yar blare to outperform, they see better visibility now when it comes to the tiffany business, underlying business coming up against easier comps flt although still flagging the new York Flagship store for tiffany which shares a block with trump tower. This is a company thats still having to work with the secret service and the nypd and seeing negative sales growth for the Flagship Store which makes up about 10 of net worldwide sales for the company. Its kind of hard to explain to someone who isnt in manhattan, but its a mess. You avoid the whole area if you can. Yeah. Also though related to some degree is you hear these reports that tourist travel to new york is down. Yes. And thats actually another big piece of tiffany and other Big Department store sales at least for the flagships here. The spoke over the weekend pointed to big earnings last week, tiffany, oracle and adobe, not only had good results but stocks reacted in kind. Adobe to me is the epitome of these companies that look expensive but are so reliable right now and theyre these kind of big dominant platform companies. They look at the other new highs last week, things like visa and mastercard and of course facebook was up there too, those are 2015 stocks, right . That was when you didnt expect a lot of growth in the world and you were buying these things. But i do think the response to the earnings especially with an oracle where its still kind of a show me story modestly encouraging. Disneys adding the most points to the dow by itself, its one of the winners. Had a good weekend. Beauty and the beast opening weekend, setting a march record 170 million in north american ticket sales. Mike santoli and the daughters liked it. They all liked it. Absolutely. This was already expected to be a very big weekend. It somewhat outperformed it. Whats interesting to me is when it filters into the view on disney, if you go back two years ago, the street was amazingly over confident about the durability of espn in a cable bundle and didnt really pay up for studio earnings. Now its almost flipped. People say, wow, they have these studio franchises. This is one in secrets of many animated features theyre going to make into live action. Well, this is the you have marvel and all the rest. Seems like its almost too predictable that they have this long runway of potential hits out there. This is what iger has struggled to convince investors where the value is. Theyre focused on espn declining subs and this has been the growth story in the box office and transferring to consum Consumer Products and parks. I still think theres a bit of hesitancy on investors part to pay up for what is still somewhat hit driven, not like people paying cable bill every month. And also people comparing it to frozen. Frozen came out of nowhere. Nobody expected it to be this multiyear phenomena and happened that way. Amazing open for beauty. By the way yeartodate disney is number ten on the dow with 7 , 8 . But its hard to compete when apples up 20 for the year. It is. Its pretty much at a 52week high, disney, though not back to that year and a half ago high. We mentioned m a, sprouts getting some play bloomberg in report they might be in preliminary talks with albertsons whole foods as well. Albertsons is private equity owned so this would be further tieup in that industry. The reports suggest that the talks are preliminary. Sprouts has been a growth story in an otherwise pretty boring and lower sales growth environment for grocery. Youve got food deflation hurting the big grocers, but sprouts has the organic stuff and thats working. So it has growth. Jeffries says if we do see some kind of sale it gets a 26 price target, takeout target for that stock though thats just a speculation from an analyst report. We dont have a price at this point. Clearly its moving the stock on top of an already big move we sort of saw out of nowhere on friday. It would be a tougher competitor for the likes of kroger if you saw albertsons, safeway and sprouts under one room. One of the elements of this potential m a surge idea sara is that if nothing else makes it hazardous to short stocks. And sprouts has been a pretty crowded short. Its a 12 mobileye was another one, everyone says its expensive, a gimmick story and then maybe a takeout. Totally squeezed. More m a deal talk at least from unilever on the other side of the pond, reports from british papers theyre prepping more than 7 billion worth of sales from its food brand specifically the spreads business for unilever. Of course this comes after that failed bid by kraft heinz to buy unilever looking at potentially the attractiveness of its food portfolio. They estimate the total spreads business has sales of just under 3 billion in 2016, about 24 of the Unilever Food division. I dont know how much we can trust these british papers on this sort of thing but clearly unileefr u unilever is looking closely. Yes. Certainly also spotlighted by the bid lower growth, less attractive business. So dows down eight largely dragged lower by financials and oil. Those are not working today. Lets get to bob pisani on the floor. Hey, bob. Good morning, carl. Happy monday everybody. Lets look at the sectors moving slightly more defensive tone to the market. Remember health cares been a leader along with technology throughout the month here. So Consumer Staples leading right now. Health care on the upside. Techs been the big Market Leader through the month up about 2 . Thats flat right now. Banks and energy have been the disappointment both down about 2 . Show you that in a minute. Remember, most sectors are up or down about 0. 5 on the month, s p up about 0. 5 , but energy and banks are the disappointments here. Energy stocks moving to the downside. Theres not a lot of news out today on energy. Inventories we know are still high, rig counts were rising. We saw that on friday. That trends continuing. But you can see most of the major oil names still to the downside. Xle, theres your etf for energy, thats the disappointment down 2 for the month. And really has been straight down if you take a look at the xle for the whole year its down about 8 for the year. Of course oil hasnt been able to get towards that 60 range where a lot of Companies Need to go to meet their earnings expectations for the year, particularly big oil and thats been the story all throughout the year. The stock market successfully assessed out oil prices were not going to be going up right now. As for the market internals right now, i know theres a lot of anxiety. We talked about this on friday. But most sectors are bell above 200day moving average. Advance decline line for s p is still near highs, sentiment remains pretty bullish overall particularly at the corporate level at the investor level. So overall the i dont see any big immediate causes for decline in the markets here. Take a look at the iwm. Last week a lot of hand wringing about the rustle 2000 and it was underperforming for a couple of weeks, but thats what this market does, underperformers eventually come back. Russell was underperforming for a long time, but last week after the fed meeting it too bounced back. Its up on the month just shy of where the s p is moving. Transports we talked a lot about them, weak this month down about 3 . Most of thats due to the airlines. And weve had better news recently concerning some of the spring bookings for the airlines. I wouldnt be surprised if that started to turn around as well. Big discussion was about the tenyear last week, tenyear yield 2. 5 , lowest level in nearly two weeks. But everyone here the bank etf down a bit for the month, down about 2 . Most of the bank stocks are 3 or so off of their historic highs. Certainly no cause for any great alarm, no great technical deterioration at least not yet. Finally, theres plenty of breakouts on the upside. We talked last week at the end of last week about the Home Building industry, a multiyear breakout. Take a look at the itb, thats the Home Building etf. That hit the highest level since 2007. Even though sales may not be as great as people think they want to be, the earnings reports are terrific for all these companies. Right now the dow down 13 points. Sara, back to you. Bob, thank you. The u. S. Dollars trading at a sixweek low. Lets head to the bond pits. Rick santelli at the cme group in chicago. Rick, good morning. Good morning, sara. And shes absolutely correct. Saras correct about the dollar index. And we will get to that. If you look at a oneweek of tens, you can see theres been some deterioration. The lead up to both employment, Central Bank Meetings including our own gave us a bit of a peak. Yeartodate for all the rest of the charts you see on a yeartodate chart we setting at 2. 44. Were hovering about five basis points higher than that with our highest yield close for the year, a whisker over 2. 60. The range for the year 2. 30 to 2. 60. And theres a lot of ground in consolidation from 2. 30 all the way up to that mid 2. 40s level. If we look at whats going on overseas, a bit of a different picture in europe. Especially the twoyear, the schatz. Lets look at a yeartodate. Remember it wasnt that long ago intraday we were flirting with minus 100 basis points. On a closing basis that was closer to minus 96. Currently at minus 76. You can see it sold off. Its yields have increased about 20 to 25 basis points. If you look at bund yields, theyre a whole different pattern than our treasuries. Something we want to monitor especially with mario draghi, quantitative easing shifting gears a bit in april. If we look at the hyg, always a good proxy for the stability within the fixed income markets of course. We see the lesser credit etf representation here reverse, getting back a lot of what sold off ongoing into those events. And finally, the dollar index. As we hover right above par, keep in mind that this is down 2 on the year, it settled at 102. This chart doesnt look good especially considering janet yellen is on the road to normalization. Back to you. Rick, talk to you in a bit. Rick santelli in chicago. When we come back, exclusive with Philadelphia Fed president Patrick Harker, talk about the road ahead for Monetary Policy and the economy in the age of trump. As we said, oil and financials dragging the dow down ten points. I am benedict arnold, the infamous traitor. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound investors paying close attention to comments from Federal Reserve officials following last weeks fed rate hike. Our Steve Liesman has more for you from philadelphia this morning with a special guest. Good morning, steve. Sara, thanks very much. Im here at the Philadelphia Federal reserve with president Patrick Harker for his exclusive interview and inaugural cnbc interview. Thank you for having us. Thank you for coming to philadelphia. You voted to raise rates. Yes. Why . I felt coming into this year i thought three raises made sense, we dont want to be behind the curve but dont want to rush either. We have time to increase over the course of this year and i thought having one in march just made sense given the data weve seen. Were still below the inflation level. And one of your colleagues, Neel Kashkari, dissented in part due to inflation, how do you feel . Obviously theres a lag and we have to be concerned about not getting behind the curve. Core is at 1. 7 . Obviously our target is actually headline, so i think were there and were moving in the right direction. There will be a little bit of an overshoot, and thats okay. And thats appropriate. So its not overshoot of inflation above 2 . Yeah, its not a ceiling. Its just a target. And what you need to be concerned about is not so much the number itself but the momentum. So people often think its a threshold or its whats the exact range, to me its more of what it feels like. Is it accelerating . Is it decelerating . We want to stay around 2 . And i think were pretty close to that. And the momentum is in the right direction. On the other side of Neel Kashkari are those who think maybe youre behind the curve. Do you have any concern at all right now that inflation might be getting starting now and getting some momentum . No, i dont see it getting that momentum yet. Although as the labor markets continue to tighten, that is something well have to watch. Have you yet factored in any possibility of fiscal policy into your forecast and into your rate forecast . No. Because i dont know exactly what they are. And i emphasize they because its no one policy that matters. Its a collection of policies that matter. So, for example, if we have Corporate Tax reform, which makes sense to me, but we also raise trade barriers that might hurt some industries here in the u. S. , whats the net effect of that . Well, the devils in the details, right . Until we see the details of what that all means, its hard to factor it into a forecast. But some of your counterparts, oecd and imf have all raised, the market seems to have raised its forecast, why is the fed right in waiting . Well, again, i think i cant speak for the fed. I can only speak for me. I dont know exactly what those policies are yet. Once we see something that looks like it is likely to be voted upon successfully and the president approve, then i can factor that in. But right now i dont know what they are. When you think about things like tax cuts for individuals, tax cuts for corporations, additional infrastructure spending. Right. Are all of those things if they were to pass would cause you to raise your level of gdp . Oh, yeah. Also along with rate hikes . Oh, yeah, potentially. Again, the devils in the details. We need to see exactly what that is. Right now as you know Consumer Confidence is high, Business Confidence is high, our Manufacturing Business Outlook Survey here in philadelphia has hit a 33year high. But confidence has to translate into action. Have you seen it yet . No, not to a large extent. Not on the business side. When i talk to Business Leaders throughout the district and throughout the country, they want to see the specifics just like i do before theyre willing to make those investments. But if those plans or if it becomes law and it raises output, is that fair to think maybe one should be thinking about more than three rate hikes this year . Possibly. I mean, i wouldnt rule anything out at this point, but we need to see how this plays out. Are you a person who likes to hike rates at press conferences or does it not matter to you . No, to me i think every meeting should be a live meeting. I think its prudent fiscal policy that in the case we have to act either on the upside or the downside, we can do that and were not constrained to just press conference meetings. Another tool in the feds toolbox is the Balance Sheet. Sure. Will the fed announce a plan this year or currently discussing a plan to thinking about reducing the Balance Sheet . Yeah, we are discussing it. To me i think once we get well north of 1 , so we have some i got to stop you there, whats well north . I dont know yet to me it comes back to whats the health of the economy at the time. Right. That number should not be a trigger or a target. It really is saying whats the momentum of economy. Once i feel like the economy continues on this path of strengthening and were solidly in that zone, then we can stop reinvestment. Can i nail you down a little bit on that though . Sure. Is well north of 1 between 1 and 1. 5 . Somewhere in that range. I dont know yet. Again, to me its not just that number but its also what were feeling in terms of momentum. Do you have a number in your head and a time period that is the right level for the Balance Sheet . So were working on that too. I mean, the Balance Sheet of course consistes of liabilities with respect to outstanding currency, account with the treasury and reserves. It fundamentally comes down to what level of reserves do we want to effectively manage Monetary Policy and that is an area of active debate and discussion. Do you have a feeling about the makeup of the Balance Sheet . Should it only be treasuries . I think the mix has served us well right now. I tend to think that weighting more toward treasuries is a prudent policy going forward. I wouldnt say we would completely get out of mbs, but i think theres a definite tilt toward more treasury and less mbs. I have one more question about a project here that you guys are involved in which deals with the issue of there are jobs in this country. Right. And the people are not close to those jobs, theres mobility issues, we cant fill a lot of the jobs. Tell us what philly fed is doing in that regard . So our mandate the last part very seriously as well. We need to bring more people into the workforce. There are people out of the workforce for a long time because they dont have the right skills. What were seeing in this job market is there are jobs, lots of jobs, but people dont have the skills to fill them. And a lot of these jobs dont need a college degree. Theyre truck mechanics and welders and so forth. We need to focus on three things, how to bring the jobs to the country and to this district, get the skills that people need to fulfill those jobs and then also have the infrastructure, the housing, the transportation so people can live near the jobs or get to the jobs. Patrick harker, thank you very much for joining us. Thank you. Philadelphia fed president , Patrick Harker. Back to sara at the new york stock exchange. Sure. Steve, thank you for bringing us that interview with the new philly fed president , our Steve Liesman, that was the first time we heard from him making a compelling case to stay flexible, not get too excited about the optimism we see inside the confidence surveys and investors outlook when it comes to fiscal policy because as he said the devils in the details and you could just as easily see trade barriers offset some of the stimulus from lower taxes for instance. So hes waiting and seeing. Interesting to hear him talk about what some say is a divergence between sentiment and investment on the part of companies. Also, got kashkari saying Balance Sheets and active discussion, now were asking president s about the composition of the Balance Sheet. Right. Definitely being talked about. Not now, but soon. Its going to happen. When we come back, well count down to fbi director comeys testimony before the House Intelligence Committee. Dows down three points as we start a busy monday. Dont go away. Whether youre after supreme performance. Advanced intelligence. Or breathtaking style. Theres a cclass just for you. Decisions, decisions, decisions. Lease the c300 sedan for 389 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. upstate new york is a good place to pursue your dreams. At vicarious visions, i get to be creative, work with awesome people, and we get to make great games. what i like about the area, feels like Everybody Knows each other. And i can go to my local coffee shop and they know who i am. Its really cool. New york state is filled with bright minds like lisas. To find the companies and talent of tomorrow, search for our page, jobsinnewyorkstate on linkedin. Fbi director comey will begin his testimony in just a few moments before House Committee on intelligence. Also in washington today, the founder of microsoft, bill gates, will visit the white house for a meeting with the president. Gates last week wrote a blog post entitled how foreign aid helps americans, arguing, quote, aid delivers phenomenal benefits and for a bargain. Here was gates after his last meeting with the president back in december. We had a good conversation about innovation, how it can help in health, education, impact foreign aid and energy, and a wide ranging conversation about the power of innovation. So we dont think this one is going to involve the pool spray sort of the handshake. Well see what we get at about 11 00 eastern time. We think he would want to underscore his points about foreign aid. Sort of contrasting world views here, gates is like the ultimate globalist giving pledge guy. Its not exactly in tune, but interesting to see if they at least want to come out and say theres been some Common Ground set. Meantime the president is already distracted with these hearings. Hes already been tweeting up a storm this morning ahead of fbi director jim comeys testimony on capitol hill about links and fake news. President has an extraordinarily busy day meetings with tillerson, ryan, gates, the iraqi Prime Minister before going to kentucky tonight to try to sell the health care plan. By the way, been mentioned this month is the 31st anniversary of the microsoft ownership. Yes. And only two s p down since then xerox and aig. Wow, i would have bet xerox. Aig is a tough one. The fbi director in front of the House Intelligence Committee after break. Dows up three. Hi, im frank. I take movantik for oic, opioidinduced constipation. Had a bad back injury, my doctor prescribed opioids which helped with the chronic pain, but backed me up bigtime. Tried prunes, laxatives, still constipated. Had to talk to my doctor. She said, how long you been holding this in . laughs that was my movantik moment. My doctor told me that movantik is specifically designed for oic and can help you go more often. Dont take movantik if you have a bowel blockage or a history of them. Movantik may cause serious side effects, including symptoms of opioid withdrawal, severe stomach pain and or diarrhea, and tears in the stomach or intestine. Tell your doctor about any side effects and about medicines you take. Movantik may interact with them causing side effects. Why hold it in . Have your movantik moment. Talk to your doctor about opioidinduced constipation. If you cant afford your medication, astrazeneca may be able to help. Youre looking at a live shot at the House Intelligence Committee about to hold its first hearing on russias potential involvement in the 2016 election. Fbi director james comey will be there answering questions shortly. Were going to take you there live. In the meantime, welcome back to squawk on the street. Im Carl Quintanilla with sara eisen, mike santoli at post nine of the new york stock exchange. David faber is off today. Quick check on the markets. Obviously muted action as a lot remains unanswered regarding policy, regarding markets, even regarding the fed, which youre going to hear a lot this week fed speakers out in force, already three under our belt today. Lets get straight to eamon javers for our top story. Hes in washington with what we can expect from the House Intelligence Committee hearing this hour. Eamon, what should we look for . Good morning, sara. The fbi director has a decision to make here. Hes got to decide, one, if hes going to flatly say that the president was wrong when the president accused barack obama of wiretapping him in trump tower. We expect that he will be asked to address those claims by the president of the United States and will he flatly say that they were inaccurate. Theres reporting that the fbi director has gone to the department of justice and asked them to push back on that claim by the president of the United States. They havent done that. So thats one decision hes got to make. The other one here is whether or not hes going to confirm the existence of an investigation simply into this whole russia mess to begin with. The fbi director has been very wary of confirming that so far saying you simply dont confirm or deny existence of investigations as a matter of policy. Of course he did do that last fall when talking about the Hillary Clinton email case. So democrats will put him under pressure this morning on that. As for the president of the United States, hes been tweeting out this morning a couple of thoughts. This is obviously a hearing that is on his mind. Heres what the president tweeted earlier today. He said james clapper, former intelligence chief and others stated there is no evidence potus colluded with russia. This story is fake news and everyone knows it. The president going onto say the democrats made up and pushed the russian story as an excuse for running a terrible campaign. Big advantage in Electoral College and lost. So theres a lot here at stake for the president. For House Democrats the key is going to be how far do they push this line of questioning, how much do they ask for here. Some have suggested they want to see the president s tax returns as part of this investigation. Will they go down that route today as well . And how much cooperation are we going to see between the democrats and the republicans on this panel in such a highly partisan and politicized atmosphere . So a whole lot to watch for, guys, as we wait for the fbi director to take his seat in the hearing room. Wow, there are already so many layers here, eamon, as you mentioned. The questions about wiretapping, theres flynn, theres sessions, to add the tax returns makes it seem like this is a catch all, nothing with thematic purity. Thematic purity nothing been a strong suit for committee, members particularly in the house can go off in wide ranging tangents. Well see how disciplined they are today as they go through their questioning of these two officials and how much the officials want to reveal about whatever they know about the situation. Remember, the head of the nsa is going to be there as well. And also remember that all of these members or many of these members have had the opportunity to be briefed in private by james comey in closed session. So this is the open session version of those private meetings that theyve had in the skiff up on capitol hill, the sensitive compartment information facility where they can discuss highly classified matters without fear of bugging or wiretapping, ironically. In this case this is going to be done in full view of the public. So what will they say here different if anything from what they said there. We think its relevant, they want Corporate Tax reform, deregulation, maybe not so much obamacare, but the president has stated they have to get through Health Care First for those other things to happen. Right. On capitol hill. And i bring it up because the president doesnt he still have a rally in Northern Kentucky tonight to try to help sell the Gop Health Care plan . My parents are already getting robo calls in cincinnati about this. I just wonder how much his mind is going to be on these hearings. Hes been tweeting about it all morning long given theyve got a full and ambitious agenda here with stocks marching in place. Yeah. Thats a question for the white house. You know, how much mind share does this take . If youre an investor watching this proceeding in washington, you want to know how much of the white houses time and energy is spent on the russia issue as opposed to on the tax issue, on regulatory reform, all the things that the white house said it wanted to do coming in . Or how much do they get bogged down sort of in scandal mode here . As you see theres the fbi director there and the head of the nsa to his left. You also saw devon nunes, the chairman of the Committee Beginning his opening remarks. How much does all of this captivate the attention of the officials in the white house who otherwise would be pushing forward on a whole range of topics that wall street might want to see happen. Thats a question weve seen other white houses in past years struggle with as scandals kind of erupt and take over their ability to focus on everything else. This white house says this is a nothing burger, the president tweeted that out this morning. They say they are not concerned about where this is going. Eamon, dont go too far. I know you wont. For more on this were joined this morning by michael mcfaul, igor volovic, good to have you both with us today. Eamon calls it a nothing burger, we have had the white house put this in a partisan frame. What are you listening for first and foremost . Well, first of all, i want to comment on the nothing burger tweet. Because i think President Trump is making a big mistake in going back to say that the russians did not interfere in our elections. And everybody agrees that they did. The entire all the Intelligence Agency do. Mr. Clapper, who he cites to say there was no collusion is the same mr. Clapper that says there was russian meddling. So i think its just a strategic mistake. And from somebody who focuses on National Security, i find it really alarming that the president of the United States will not acknowledge that our sovereignty was violated. Would you expect comey to back him up today . Mr. Comeys already backed him up on that. So if they should ask him on the record just to clarify it so that the American People can see him testify, but remember the fbi signed up to that statement, a unanimous statement that was put out in december that the russians interfered in our elections. Igor, how much freedom does either comey or rogers have to back him up as the ambassador suggests . Well, i think whats important to understand is atri bugs is ultimately illusive in cyberspace. The internet is an anonymous space. What we understand about cyberspace observations is inherently deniable. We dont dress our troops and send them into battle, but in cyberspace exception becomes the rule. Everything done in cyberspace is not attributable. Throw the door open on how digital fingerprints ultimately fungible, that false leg operations are the norm in that space. So to say that based strictly on digital fingerprints or Digital Forensics we can say that russia meddled in our elections, i think thats not enough. Ultimately we need all the other intelligence, and im sure that director comey will share some of that or at least allude to it this morning because ultimately cyber is just not enough. You need a totality of evidence and i think thats what were going to have to rely on. Youre suggesting smoking gun is not attainable in this universe. Certainly not in cyberspace. As ive mentioned, cyber digital fingerprints are ultimately fungible. So weve seen i think reading it throws a door open on what cia has been doing. Lets understand that this type of capability firmly in the hands of over 100 countries around the world that are recognized as having offensive cyber capability. We really dont know what theyre looking at in the Intelligence Community. I think theyre probably examining the totality of evidence. All the other sources, i think human intelligence probably playing a piece of it playing a role in it. So i dont know that we have what we have in hand today is enough to make those determinations, but hopefully the testimony this morning will allude to some. Mr. Ambassador, just looking at a big picture, the president and some on his team have undermined some of the credibility in our intelligence agencies. And thats sort of this recurring theme, questioning some of the u. S. Institutions, Democratic Institutions that are so core for our country. Do you expect us to learn anything on this front today . Do you expect jim comey to try to restore some of the credibility in the fbi . And will it work . Well, first of all, i just have to radically disagree with your other guest. I understand the difficulties of at attribution. It wasnt just attribution the Intelligence Community put out when they put out their unanimous report i want to keep emphasizing that, they all agreed that the russians interfered in our elections. So i find it very disturbing that were still debating that, an issue of National Security. Do you want to respond, igor . So im not of course. So im not suggesting that cyber attribution was the only piece of it. As i mentioned i think the totality of evidence was examined. Im certainly not contradicting the agencies in the Intelligence Community so whats the point . The point is that we havent seen any of that evidence. And im hoping that this morning well hear about some of it. And then the general public will have a better understanding of what that means. What we mean by interference and to what length russians have gone to actually interfere in our elections. And if they actually have any effect on our elections apparatus. We have seen russia has had a history of these types of operations, we see going back to meddling in ukrainian elections last year. Ultimately did not have any known effect, elections went through and ultimately certified, but no particular effect was made. So lets keep an open mind thats just not true. Mr. Ambassador, go ahead. No known effect, im sorry, igor, but thats just not true. Why did mr. Trump bring up wikileaks data hundreds of times during the election . He thought that it had an effect. The data that people have supported that there were voters that did not come out that usually come out for the Democratic Party candidate because they thought that Hillary Clinton somehow stole the election from bernie sanders. I mean theres lots of political scientists studying that shows it had an effect. Whether it had the effect is much harder to prove. To say it had no effect, i think most people radically disagree with that conclusion right now. So i was referring to let me direct you to wiretapping. Oh, im sorry, i thought we were talking about the american elections. Mr. Ambassador, we had panetta say on the wiretapping allegations that its time the president accept a responsibility that he has made a mistake. Nunes here throws a caveat in there, he says its possible that other surveillance was used against trump and his associates. What do you think we learn about that element today . Well, i think mr. Comeys going to be very careful about what weve just been discussing, right . Because he does not like to discuss Ongoing Investigations. But i hope he will put to rest this silly controversy that weve been having, especially about president obama, right . And we need to distinguish between those two things. President trump accused the former president in a very personal way, he called him bad and sick, that he had personally wiretapped trump tower. We should be able at the end of today to say that did not happen. And at the same time be able to say and maybe not quite as definitively that there may have been other investigations that the fbi was conducting, and by the way may still be conducting, looking into collusion, looking into relationships between the Trump Campaign and russian officials. So you do expect comey, mr. Ambassador, to say publicly that the fbi did not conduct wiretapping . Im hoping and expecting. I know this is going to be a huge decision for him to make, whether to do that. Remember his current boss is the president of the United States, not the former president. But hes in a position to do it. Its his organization that would have been asked to do this. And i just hope in the name of facts that he will do it. Igor, assuming we do get perhaps some clarity on this set of issues trying to spin it a little bit ahead in terms of potential responses or at least some interpretation of methods of procedures, congressman schiff has tweeted out here that the Intelligence Community has concluded the russians will interfere again. So is there a way to sort of put up defenses or have some systemic potential response to potential future threats . Certainly, well, lets understand something about the United States National Cyber defense. Most of our Critical Infrastructure and really general infrastructure is in private sector hands. So when weve seen the recent indictment of the officers and hackers for the yahoo breach, that actually took two years. So attribution not and investigations like this take a long time and positive attribution is ultimately elusive. When we talk about what we can do about it, we can definitely encourage more privatepublic cooperation, encourage private to invest more into Cyber Security. In the same period of time last year about 445 billion were lost due to cyber crime and cyber penetrations. So the scale here is different. The bad guys are definitely on the attack and theyre on the offensive and theyre actually winning. So we need to invest more into Cyber Security and provide a level of guidance and central coordination between the u. S. Government and private industry. I think thats one of the big keys to this. Were in the midst of an extremely long Opening Statement here. Were going to take a break and look forward to the q and a after that. Mr. Ambassador, igor, thank you so much. Appreciate it. Good discussion. When we come back were going to continue to monitor this for you. As you can see fbi director james comey getting ready to testify here on russias potential role in the 2016 election. Well monitor the proceedings on capitol hill and take you there live as soon as it starts. Also getting a quick check on stocks at this hour. Coming a little bit higher, dow up almost only 18 points. S p remains negative. And the nasdaq also a little changed coming off seventh week of gains for the s p and nasdaq out of the last eight. More squawk on the street straight ahead. Any hacking in connection with this nations election system is something we take extraordinarily seriously. The whole of government. And so it is something the fbi is spending a lot of time on right now to try and understand. So what are they up to and what does it involve and what is the scope of it to equip the president to decide upon the appropriate response. And so thats one of the reasons i have to be very careful what i say about it. That work is ongoing. We should make clear that sound of fbi director comey last december. We are now awaiting comey and nsa director Admiral Mike Rogers to begin testifying on capitol hill. Our john harwood here to help us separate multiple layers, were not even talking gorsuch yet. Good morning, john. Good morning, carl. You know, there are multiple layers. Thats one of the fascinating things about this. It reflects the polarized politics were in now. Were having an Intelligence Committee hearing today with comey, mike rogers as you mentioned, where the two parties are approaching the subject of the hearing even in different ways. So to democrats theyre wanting to explore what the russians did and whether the trump team was involved in that. What republicans are emphasizing is what was leaked to the press about President Trump, about the surveillance or the investigation that was going on by the fbi, by the Intel Community into russian interference, potential contacts between Trump Associates and the russians. And then youve got this additional layer of this outlandish accusation that the president made against his predecessor that he had wiretapped him. Now, thats been discredited. And the Intelligence Committee, chairs both house and senate, have said theres no evidence for that. Nevertheless thats another dimension of this hearing. But i think everyone is going to be focused on james comey, what he says about the existence of an ongoing counterintelligence investigation into what russia did, whether or not there is any evidence of collusion, although i wouldnt expect even if there were him to say that in a public setting like this. But he could signal the house seriously he takes this investigation and then of course the issue of the leaks which republicans are going to try to tease out. So, john, just putting all of this into context beyond the questions that we get and the answers that we get from todays hearing, weve got gallup with a new Approval Rating showing its at a new low, 37 approve of President Trumps job. 58 of americans disapprove. Youve got the market here continuing to sort of drift higher near highs as weve seen these confidence surveys turn up. How important is our events like today going to be when it comes to sort of setting out the agenda for the Trump Presidency and what we can expect next . Sara, i think youre raising something extremely important, which is the broader backdrop is that you have a president who started at historically low levels of popularity. He has this investigation ongoing, dont know where its headed, dont know how serious its going to end up being. But its extraordinary that a president faces an investigation like this so early in his term. And then youve got the backdrop of policy changes, which hes seeking, which the markets and the Business Community are very much looking forward to. But its unclear whether those are actually going to materialize. We will expect to have a vote later this week in the house on the republican replacement for obamacare. We dont know if we can get the votes for that in the house. And even if they can its fate in the senate is highly doubtful. And then youve got after that the question of Donald Trumps budget, a new budget resolution that would permit republicans to go under favorable parliamentary rules to try to achieve tax reform, cut the Corporate Tax rate, maybe overhaul the entire tax system or maybe not. All of those things suggest that youve got this confidence level in the markets that could be in for a reckoning with Donald Trumps difficulties both politically and potentially depending on what james comey says, legally. John, we got mike santoli here as well. Not to put mike on the spot, but i wonder how much the market is Spring Loaded to respond to any headline that suggests any element of this is in the past, right . Right. Can be put to bed somehow. I guess im wondering about the rhythm of this, right . Even if we get confirmation theres an Ongoing Investigation, it doesnt necessarily become daytoday congressional business, right, that this is going on. So i dont know how much more youre talking about, you know, depleting of political capital, impeding what congress would otherwise do on a business measure. My interpretation of how the markets approaching policy is its sort of cutting to the chase and saying worst Case Scenario is status quo. Best case is we get help on taxes and deregulation. So i dont know that were necessarily on pins and needles for every little weeks progress on that, but at some point you have to imagine patience runs out in terms of the hope for something good. And also we were looking at the journal did a piece on how small caps have underperformed so far this year. They were the big drivers of the trump rally post election, mike, this idea that deregulation and tax cuts would be great for some of these smaller domestically facing companies, well, now that theyre underperforming maybe thats a sign that the stalled agenda and some of the question marks about timing and implementation are starting to have a market impact. The core trump trade that really worked in the first five weeks after the election has not been whats getting the market to the new highs. You want to pull back say net bullish market finding a way to go up not contingent on whats happening in washington at the moment anyway. John. I think thats a fascinating point because if in fact mike is right and status quo worst case being the status quo is kind of the floor underneath the market, then that suggests maybe were in a more stable market environment and drain some of the stakes out of hearings like this. Adam schiff is busy, youre not seeing him on this shot, but hes busy making a very lengthy Opening Statement, which some on social media are comparing to Rachel Maddows opening monologue. John, i wonder, can you characterize the strength of the call from either party for a special prosecutor or a select committee on this . I dont think its very strong right now. You have certainly democrats demanding it, some republicans have. But i think attention is shifting now to both the House Intelligence Committee hearing that is taking place in public today and also the senate intel committee, which i think is generally seen to be as the more serious one, a little bit more bipartisan. And i think people are investing their people who want to see this matter investigated to wherever the evidence leads are investing their hopes more in these intel committees than the idea that theres going to be an outside counsel or prosecutor. John, a lot of people watching today are also looking, i think, for how sort of loyally the gop, the republicans backup President Trump when it comes to both of these issues. And the question of how loyal they are to him, how much they are going to continue to stand behind him on issues like russia where you have many prominent republican senators like john mccain and Lindsey Graham talking tough on russia and not necessarily buying into this narrative. And i just wonder how closely aligned they are going to be with the president today in this hearing and beyond that. That is the right issue to watch. I think what i would say about the environment over the last few weeks is the ground has softened under President Trump among republicans. But it hasnt collapsed. You have republicans who are weary of some of the drama of this white house, weary of the tweet generated controversies, also some legitimately concerned over what russia did, the president s policy toward russia and whether or not any of the president s associates were involved. John, lets get to mike rogers. During the 2016 u. S. Election and want to assure the committee that my team is doing its best to fulfill the various requests of this committee to support your Ongoing Investigations into this subject. Over the past weeks nsa has been working closely with the committee to provide you the information that you require for your investigation. And i can assure you we will continue to do so. When we last met in january we discussed the classified version of the january Intelligence Communitys assessment on assessing russian activities and intentions in the recent u. S. Elections. Today, more than two months after we issued this assessment, we standby it as issued. There is no change in our confidence level on the assessment. Of course the specifics of this assessment need to remain classified to protect sensitive sources and methods. So today i will limit my discussion to information in the Public Domain and that of the publicly released Intelligence Community assessment. I hope you will understand that there are some issues i cannot discuss in an open session. Nor will i be able to provide specifics in some areas. As the committee fully knows the Intelligence Community has a longstanding policy of not discussing surveillance targeting information in particular cases. As to do so would invariably open the door to compel further disclosures in litigation or release of classified information, all of which would be harmful to our National Security. Like the committee, we are also greatly concerned about leaks of classified information. As they can reveal the sources and methods we employ to provide intelligence to american policymakers and war fighters and generate advantage for our nation while protecting its citizens and interests and their privacy. I also want to assure the committee that we take very seriously that obligation to protect u. S. Persons privacy. The suppli this applies to all stages of foreign intelligence, but id like to emphasize one area in particular, the dissemination of u. S. Person information. We at nsa have strict procedures in place to make sure that our reporting and the contents of our reporting are disseminated only to those that have strict needtoknow for valid purposes, which primarily means in support of the development of Foreign Policy and to protect National Security. I do want to specifically mention that among the collection of authorities that we have to target foreign actors in foreign spaces, fisa section 702 and executive order 12333 have been instrumental in our ability to produce the intelligence made available to the committee and others in gathering the significant facts of foreign activity in this election cycle. It would be difficult to overstate the breadth and scale of malicious cyber activity occurring today. Our adversaries, including nation states, have not rested in trying to penetrate government systems, steal our private industries intellectual property and make even greater strides towards the development and achievement of cyber attack capabilities. We have a hard working and dedicated team at nsa that works every day to generate insights on this activity and to thwart its effectiveness. But Cyber Defense is a team sport and one of nsas strongest partners in this effort is director comeys team at the fbi. And im glad to be able to describe here today how we are working together to help protect the nation and our allies to include providing a better understanding of russian intentions and capabilities. In light of the ic assessment and findings, i welcome your investigation into overall russian activities targeting the previous u. S. Elections. Nsa continues to employ rigorous analytic standards, applying them in every aspect of our intelligence reporting. Our analysts have consistently proven to be reliable and thorough in their technical and analytic efforts in providing our policymakers and war fighters with ammunition to make informed decisions to protect our nations freedom and ensure the safety its citizens. Russian targeting of u. S. Systems and those of our friends and allies around the world, to share that information with our ic colleagues and foreign counterparts and to produce unbiased, unprejudiced and timely reporting of the facts in their entirety. I look forward to your questions. Thank you, admiral rogers. Director comey, youre recognized for five minutes. Chairman schiff, members of the committee, thank you for including me here to this hearing. I hope we have shown you through our actions and our words how much we at the fbi value your oversight of our work and how much we respect your responsibility to investigate those things that are important to the American People. Thank you for showing that both are being taken very seriously. As you know, our practice is not to confirm the existence of Ongoing Investigations, especially those investigations that involve classified matters. But in unusual circumstances where it is in the Public Interest it may be appropriate to do so. As Justice Department policies recognize. This is one of those circumstances. I have been authorized by the department of justice to confirm that the fbi as part of our Counterintelligence Mission is investigating the russian governments efforts to interfere in the 2016 president ial election. And that includes investigating the nature of any links between individuals associated with the Trump Campaign and the russian government and whether there was any coordination between the campaign and russias efforts. As with any counterintelligence investigation, this will also include an assessment of whether any crimes were committed. Because it is an open Ongoing Investigation and is classified, i cannot say more about what we are doing and whose conduct we are examining. At the request of congressional leaders, we have taken the extraordinary step in coordination with the department of justice of briefing this Congress Leaders including the leaders of this committee in a classified setting in detail about the investigation. But i cant go into those details here. I know that is extremely frustrating to some folks, but it is the way it has to be for reasons that i hope you and the American People can understand. The fbi is very careful in how we handle information about our cases and about the people we are investigating. We are also very careful about the way we handle information that may be of interest to our foreign adversaries. Both of those interests are at issue in a counterintelligence investigation. Please dont draw any conclusions from the fact that i may not be able to comment on certain topics. I know speculating is part of human nature, but it really isnt fair to draw conclusions simply because i say that i cant comment. Some folks may want to make comparisons to past instances where the department of justice and the fbi have spoken about the details of some investigations. But please keep in mind that those involve the details of completed investigations. Our ability to share details with the congress and the American People is limited when those investigations are still open, which i hope makes sense. We need to protect peoples privacy. We need to make sure we dont give other people clues as to where were going. We need to make sure that we dont give information to our foreign adversaries about what we know or dont know. We just cannot do our work well or fairly if we Start Talking about it while were doing it. So we will try very, very hard to avoid that. As we always do. This work is very complex. And there is no way for me to give you a timetable as to when it will be done. We approach this work in an open minded independent way, and our expert investigators will conclude that work as quickly as they can. But they will always do it well no matter how long that takes. I can promise you we will follow the facts wherever they lead. And i want to underscore something my friend mike rogers said. Leaks of classified information are serious, serious federal crimes for a reason. They should be investigated and where possible prosecuted in a way that reflects that seriousness so that people understand it simply cannot be tolerated. And i look forward to taking your questions. Thank you, director comey. Admiral rogers, i first want to go to you. On january 6, 2017, the Intelligence Community assessment assessing russian activities and intentions in recent u. S. Elections stated that the types of systems russian actors targeted or compromised were not involved in vote tallying. So my question as of today, admiral rogers, do you have any evidence that russia cyber actors changed vote tallies in the state of michigan . No, i do not. But i would highlight were a foreign intelligence organization, not a Domestic Intelligence organization. So it would be fair to say we are probably not the best organization to provide a more complete answer. How about the state of pennsylvania . No, sir. The state of wisconsin . No, sir. State of florida . No, sir. State of North Carolina . No, sir. State of ohio . No, sir. So you have no intelligence that suggests or evidence that suggests any votes were changed . I have nothing generated by the National Security agency, sir. Director comey, do you have any evidence at the fbi that any votes were changed in the states that i mentioned to admiral rogers . No. Thank you. Admiral rogers, i know that there is a leak of information regarding director clapper and former secretary defense carter were looking at relieving you of your duty, are you aware of those stories . Im aware of media reporting to that. And those stories were leaked as soon as you had visited with president elect trump, is that correct . Yes, sir. I was asked if i would be prepared to interview with the Trump Administration for a position, which i did. Did the leak of that information at all impact your ability in your assessment that you did for the Intelligence Communitys assessment on january 6th . No, sir, if i spent time in this job worrying about unsourced media reporting, id never get any work done. Thank you, admiral. Director comey, i remain extremely concerned about the widespread of legal leaks that you just referenced in your testimony. Just for the record though, i want to get this on the record. Does the unauthorized disclosure of classified information to the press violate 18 usc 793, a section of the espionage act that criminalizes improperly handling or transmitting National Defense information . Yes. Would an unauthorized disclosure of fisa derived information to the press violate 18 usc 798, a section of the espionage act that criminalizes the disclosure of information concerning the communication intelligence activities of the United States . Yes, in addition to being a breach of our trust with the fisa court that oversees our use of those authorities. Thank you, director. At this time im going to yield to mr. Rooney who chairs our nsa Cyber Committee for questions. Thank you, mr. Chairman. Id like to direct my questions first and foremost to admiral rogers to convey my thanks to the many men and women for their dedication at the nsa for keeping our country safe as well as i want to talk about the recent media stories that may have led to confusion in the public about what the nsa is and is not legally collecting and the safeguards the nsa has put into place to protect personal data. So id like to clarify as the chairman of the subcommittee on the nsa recently got to meet your deputy, admiral, last week out at the nsa. We visited and spoke some of these things. What we can talk about here today publicly if you could go into, if you cant, you cant, but i think this is important for the people in the room and listening outside understand, is it true that the nsa would need a court order based on probable cause to conduct electronic surveillance on a u. S. Person inside the United States . Yes, sir. Just to be clear the section of the fisa that is expiring later this year, thats 702, which well be talking about a little bit, cannot be used to target u. S. Persons or persons in the United States, is that correct . Yes, sir. Section 702 focuses on nonu. S. Persons outside the United States primarily, correct . Yes, sir. Do you believe that the section 702 is important and valuable for u. S. National security . Yes, sir. So its safe to say that without having this tool it would be a threat to our National Security . It would significantly impact my ability to generate the insights i believe this nation needs. In the media theres a lot of reporting about something called incidental collection. Can you talk about what incidental collection is . Yes, sir. Incidental collection is when we are targeting a valid foreign target, for example. And in the course of that targeting we either get a reference to a u. S. Person or suddenly a u. S. Person appears as part of the conversation, thats what we call incidental collecting. And what do you do when Something Like that happens if theres a u. S. Person part of an incidental collection, what kind of safeguards are put in place to make sure that so it depends specifically on the Legal Authority that were using to execute the collection in the first place, but in broad terms realizing again it differs by the authority were using to conduct the collection, we step back and we ask ourselves first are we dealing with a u. S. Person here, is there something that we didnt expect to encounter that weve now encountered . Well ask ourselves what leads us to believe that it is a u. S. Person if we come to the conclusion that it is a u. S. Person, then we ask ourselves are we listening to criminal activity, are we seeing something of imminent threat or danger, for example, or are we just receiving something that has nothing to do with any of our valid collection authority. Based on that well then take a series of actions. In some case we will just purge the collect, make no reporting on it, not retain the data. Its incidental collection has no intelligence value and wasnt the purpose of what we were doing. In some cases then if we believe that there is intelligence value, for example, whether its a reference to a u. S. Person as an example in a scenario, in our reporting then we will mask the identity of the individual. Well use a phrase like u. S. Person one or u. S. Person two. And i would remind everyone that for our purposes, u. S. Person is defined very broadly. That is not just a u. S. Citizen. That is a u. S. Corporation, that is a ship or aircraft that is registered in the United States, that is an internet protocol address, for example. So its not just a particular individual, if that makes sense. The term for us is much broader because its designed to ensure our protections of u. S. Persons. The procedures and protections you talked about are required and approved by the fisa court, is that correct . Yes, sir, and the attorney general. And you mentioned in your Opening Statement that for that kind of information to be disseminated outside of your agency in the nsa that that dissemination would be strictly on a needtoknow basis, is that correct . We use two criteria. Is there a need to know in the course of the person or group that is asking for the identification, is there a valid need to know in the course of the execution of their official duties. Like who would that be . It could be another element with the Intelligence Community, it could be another element within nsa, it could be a military customer, for example reading some of our reporting it could be a policymaker, i apologize, there was one other point that i wanted to make but ive lost the thread in my mind. If i jump in in a moment lets get back to masking briefly. You spoke about masking and trying to keep a u. S. Persons identity con saled and when it is disseminated, we often talk about in the Intelligence Community about the exceptions to how if somebodys masked, how you unmask them, what would the exceptions to that masking be before its disseminated . Again, we use two criteria, the need to know of the person requesting and official actions and duties and the second part was is the identification necessary to truly understand the context and the intelligence value that the report is designed to generate. Those are the two criteria we use. Is that identity of a u. S. Person communicating with a foreign target, is that ordinarily disseminated in a masked or unmasked form . No, it is normally disseminated, if we make the decision that theres intelligence value and were going to report on it, it is normally disseminated in a masked form. Again, as i said, we use a reference, u. S. Person one, u. S. Person two. I would highlight if you look at the total breadth of our reporting, reporting involving u. S. Persons at all is an incredibly small subset in my experience of our total reporting. Who normally in the nsa would make the decision to unmask . There are 20 individuals including myself who i have delegated this authority to approve unmasked requests. And does the level of approval change depending on the reason for unmasking . If it was something or somebody say really important would that matter . Its not necessarily designated in writing that way certainly by custom and tradition at times requests will be pushed up to im the senior most of the 20 individuals, request will be pushed to my level say, hey, sir, we want to make sure youre comfortable with this. So 20 people, you know, what procedures or safeguards are put in place to make sure that those 20 people are not unmasking, you know, wrongly . So they retrieve specific training, theres specific controls put in place in terms of our ability to disseminate information out of the databases associated with u. S. Persons. Okay. Lets run through the exceptions quickly through a following hypothetical. If the nsa collects a communication where a target under surveillance is talking to a u. S. Person, how would the nsa determine whether disseminating the u. S. Person information is necessary to understanding the foreign intelligence or assess its importance . So first well try to understand the nature of the conversation, is this truly something that involves intelligence or National Security implication for the United States . Or is this just very normal reasonable conversations in which case we have no desire to have any awareness of it, its not applicable to our mission. And i say in that case normally well purge the data. Well ask ourselves is there criminal activity involved, is there potential threat or harm to u. S. Individuals being discussed in the conversation, for example. If there was criminal activity involved, what would you do then . If when we disseminate if we decide we need if theres criminal activity, well disseminate the information and if the fbi or other criminal activities are on the reporting stream in some cases i also will generate a signed letter under my signature in specific cases to department of justice highlighting what we think we have is potential criminal activity. But because we are not a Law Enforcement or justice organization, were not in a place to make that determination. Okay. Based on that, again, hypothetically, if the nsa obtained the communication of general flynn while he was communicating with the surveillance target legally, would you please explain how general flynns identity could be unmasked based on the exceptions that we discussed . Sir, im not going to discuss even hypotheticals about individuals. Im sorry. If i could make reference to a the Washington Post article that i have here from february 9th which states let me say what it is and ill ask if youve read it or if youve seen it. Which states National Security under Michael Flynn privately discussed u. S. Sanctions against russia with the countrys ambassador to the United States during the month before President Trump took office. Contrary to public assertions by Trump Officials current and former u. S. Officials said, the article goes onto say that nine current or former officials who were in senior positions at multiple agencies at the time of the call spoke under the condition of anonymity to discuss intelligence matters. Did you read this article . I apologize, sir, its not an article that references nine particular individuals it doesnt necessarily ring a bell. Ive certainly seen plenty of media reporting that, but again, im not going to comment on specifics. Just basically under the breadth of that article when we hear that nine former current or current officials had spoken to the press under the condition of anonymity and we heard director comey and the chairman speak of this as a potential crime, a serious crime under the espionage act, assuming that if this article is accurate, who would have the position who would be in a position to request the unmasking of general flynns identity . Would that be you . I would have the authority to do that. Who else would . The 19 other individuals. Would that include director comey . Im talking about in the nsa alone . Within the National Security agency and were talking about nsa reporting. But would people like director comey also be able to request that . Yes. And the attorney general and director clapper, are those type of people also on this list . Again, in yes, they would be generally speaking [ everyone talking at once ] not going to talk about the specifics of an individual or a hypothetical scenario, sir. Heres what im trying to get at. If what were talking about is a serious crime, as has been alleged, in your opinion, would leaking of a u. S. Person who has been unmasked and disseminated by Intelligence Community officials, would that leaking to the press hurt or help our ability to conduct National Security matters . Hurt. Okay. If it hurts, this leak, which through the 702 tool, which we all agree is vital, or you and i, at least, agree to that, do you think that that leak actually threatens our National Security . If its a crime, and if its unveiling a masked person, and this tool is so important that it could potentially jeopardize this tool when we have to try to reauthorize it in a few months, if this is used against the ability of us to reauthorize this tool, and we cant get it done because whoever did this leak or these nine people that did this leak, create such a stir, whether it be in our legislative process or whatever, that they dont feel confident that a u. S. Person under the 702 program can be masked successfully and not leaked to the press, doesnt that hurt, that leak hurt our National Security . Yes, sir. Can you think of any reason why somebody would want to leak the identity of a masked person . No, sir. I mean, i have raised this directly with my own workforce over the course of the last few months to remind everyone, part of the ethics of our profession, not just the legal requirement, but the ethics of our profession as intelligence professionals is we do not engage in this activity. And ive reminded the men and women of the National Security agency, if i become aware of any such conduct, there is no place for you on this team. Its unacceptable to the citizens of the nation [ everyone talking at once ] well, i think as we move forward, obviously, i think what youre speaking of is the sacred trust that the Intelligence Community has with the American People and with the people that are representing them here on this dais. And if we i think that its vital that for those who break that sacred trust, if they are not held accountable, whether it by the nsa internally or by the fbi through conviction or investigation prosecution and conviction through the Attorney Generals Office of that crime, it is very difficult for us to be able to keep that sacred trust to know that what were doing is valid and what were doing has no nefarious motivations, and to us to be able to keep america safe without violating the constitutional protections that we all enjoy. Mr. Chairman, im not sure how much more people i have left. I just wanted to congressman, can i make one comment, if i could . I apologize. It comes to mind based on your question. I just want to remind everyone, in general, fisa collection on targets in the United States has nothing to do with 702. I just want to make sure were not confusing the two things here. 702 is collection overseas against nonu. S. Persons. Right. And what were talking about here is incidentally, if a u. S. Person is talking to a foreign person that were listening to, whether or not that person is unmasked. I just want to make sure we understand the context. Right, right. Thats all. And whether or not somebody in the Intelligence Community that we put the trust in is going to leak that information to the press for whatever reason. And im not even going to get into the gratuitous, you know, what that reason may be, but its really going to hurt the people on this committee and you all in the Intelligence Community when we try to retain this tool this year and try to convince some of our colleagues that this is really important for National Security. When somebody in the Intelligence Community says, you know what, the hell with it, im going to release this persons name because im going to get something out of it. Were all going to be hurt by that, if we cant reauthorize this tool. Do you agree with that . Yes, sir. Mr. Chairman, do i have enough time to talk about the letter the committee sent . The committee sent to you on march 15th a letter to admiral rogers and to director comey. Have you had a chance to look at this letter . I think that youve actually yes, sir. I, in fact, have given you a reply on the 17th. Right. Just real quickly, because i dont want to take up any more time. Can you give us a sense of how many unmasked u. S. Persons identities were disseminated by the nsa from june 2016 to june 2017 . No, sir. As i have indicated, were in the process of compiling that information. I will provide it to the committee, but until that work is done, i am not going to comment can you tell us whether any of those disseminations broadly involved u. S. People relating to president ial candidates donald j. Trump or Hillary Clinton and their associates in 2016 . I wont answer until i complete the research, sir. Assuming that the nsa disseminated unmasked u. S. Persons information relating to the trump or clinton campaigns, would that have been a reason for such unmasking . I apologize. I dont truly understand the question. Let me just move on to the next one. All right. Along those lines, if the nsa had wanted to disseminate unmasked u. S. Persons information related to either president ial campaign, who in the nsa would have approved such disseminations . Again, it would have been 1 of the 20. And i provide that in my official response to the committee. I outlined the procedures, ive outlined the specific 20 individuals. Thank you, admiral. I appreciate your answers. I look forward to working with you on the subcommittee moving forward. And mr. Chairman, i yield back. Gentleman yields back. Mr. Gowdy is recognized. Thank you, mr. Chairman. Director comey, we will begin this line of questioning, then well finish it the next round. Fisa and other similarrelated counterterrorism programs have been described, even this morning, as vital, critical, and indispensable to our National Security, and many of us on both sides of the aisle believe fisa and similar counterterrorism programs prevent terrorist attacks and save american lives. But fisa and other surveillance programs are intentionally designed to preserve the privacy of u. S. Citizens. They are intentionally designed to ensure the information is collected and used only for legitimate National Security and criminal investigative purposes. There are statutory safeguards. There are warrants based on probable cause. There is a fisa court that is involved. There are audits on the back end. And we think so highly of this material, it is a felony punishable by up to ten years in federal prison to unlawfully disseminate it. All of this was done to make sure this information gathered remains protected as it relates to u. S. Citizens. The way i view it, director comey, the American People have an agreement with their government. We are going to give you the tools to keep us safe, even if it infringes on our privacy some. Were going to give you the tools. And government in return promises to safeguard the privacy of u. S. Citizens. And when that deal is broken, it jeopardizes American Trust in these surveillance programs. So, let me ask you, do you agree fisa is critical to our National Security . I do. Do you agree programs like fisa were intentionally designed to safeguard the identity of u. S. Persons . Yes. There are other important elements of it, but thats the primary goal, i believe. It woman an afterthought. It wasnt an accident. These are intentional safeguards that we put in place to protect u. S. Citizens, is that correct . Correct. Do you agree much of what is learned from these programs is classified or otherwise legally protected . All fisa applications reviewed by the court, collectioned by us pursuant to our fisa authority is classified. The dissemination of which is a felony punishable by up to ten years in prison . The dissemination unauthorized dissemination. Unauthorized dissemination of classified or otherwise legally protected material punishable by a felony up to ten years in federal prison. Yep, yes, as it should be. All right. In january of this year, the Washington Post reported, according to a senior u. S. Government official, a named u. S. Citizen and i will not use the name a named u. S. Citizen phoned the Russian Ambassador several times on december the 29th. In february of this year, the Washington Post reported nine nine current and former officials who were in senior positions at multiple agencies at the time of the call spoke on the condition of anonymity to discuss intelligence matters, and that officials began poring over intelligence reports, intercepted communications, and diplomatic cables. In february of this year, the New York Times reported a u. S. Citizen whose name i will not use discusses sanctions with the Russian Ambassador in a phone call, according to officials who have seen a transcript of the wiretapped conversation. And again in february of this year, the New York Times reported on a phone call involving a u. S