A busy day in washington plus, the president is abroad, hes in paris for his third foreign trip were going to hear from him multiple times in the next few hour what retail pain target boosts its outlook as traffics improving. And a live and exclusive interview with the cbs chairman and ceo, Leslie Moonves in the next few minutes busy day on capitol hill fed chair yellen returns for a second day of testimony, later in this hour, this time before Senate Banking her comments on rates sparked the dows rally to that record high also this morning, Senate Republicans set to unveil their revised Health Care Bill, and the cbo will release its analysis of the president s fiscal 18 budget. Some questions about whether or not the House Freedom caucus is going to vote for this, unless there are specifics on Corporate Tax rates and more well, look, i still think that its interesting that the fed comes to capitol hill and the second comes were looking at the data, we may do this, do the right thing if it slows down and you have all of these congressmen, were going to get this bill through, get that ball, were going to do this, and its credibility versus lack of credibility i continue to believe that congress will give you nothing in 2017 of substance and i am kind of surprised, i was surprised that janet yellen was i need two rate hikes, according to my view, because of job growth and shes talking about maybe no rate hikes, which is just music to the ears of people who are concerned that perhaps were not getting enough job growth. And i found her i thought it was very surprising. It was like, i didnt expect any surprises. And we gt oot one and the market rewarded you. Because the banks are the losers in that scenario she was very impressive. You would rather have it the other way . You dont care that f. A. N. G. Is back above the 50day now, f. A. N. G. Theres an etf doing f. A. N. G. Im being paid nothing, even though i created that, which is a scandal in itself. It is amazing how well everything did on the banks. But i will say, its better that the bank stocks were down ahead of the quarter, because you know how often they go down when they report but, yeah, i want a bankled rally. I do not want an nvidialed rally. And yesterday, we have the drug stocks that are doing well, we had the cyclicals, but the facebook, amazon, netflix, and alphabet, netflix and nvidia. And i dont want that group to get crazed when that groups crazed, the rest doesnt do well well, yesterday, everything more or less, did well, except as, you say, the financials. But, yeah, the real craze may have been in technology. Facebook was up, over 2. 5 there was no real news i mean, everything was building steam. Youve got a lot of guys, frankly, who are short some of those names. Who is short facebook what, someone evan spiegel . I dont think einhorn is, but he certainly isnt doing particularly well, in his latest story. You have to just talk about the negative people. Yeah, i talk about the negative i feel bad for him like i feel bad youve got the nasdaq comp up 25 over the last area whats wrong with that its broad no, look, please, im positive i just want to see the i like the jpmorganled rally more than i like the netflixled rally i care about whos the generals. I know you do i know. I want eisenhower in there. I dont necessarily want mcarthur or certainly not westmoreland. Understood. By the way, nasdaqs 52year low set yesterday today. I looked at all the tweets this morning and that was the most cogent tweet, because what that said was, look out, because weve. Straight for a year. Thats really impressive really impressive. I mean, too good to be true. The s p is up 13. 5 over that time the nasdaq is up from the s p by 12 . But people now i have to refute you know, i have to refute no, you dont the multiples are nowhere near where they were in 2000 and the growth rates are a lot more real and theres actual crash being created by most of these companies, other than perhaps a couple that have become publicly recently that we have talked a lot about. And theres no more king income not that were aware of, but fraud by its very nature is very difficult to detect. Can we knock on some wood right now. Right now. You mentioned you dont have high legislative expectations, but mulvaney does have an oped today in the journal theyre calling it maganomics, right . The administrations path to 3 . And he walks through, again, tax reform, deregulation, infrastructure, fair trade, cutting government spending. Well, yeah, okay, thank you i thought that was very interesting that theres a lot of people against the steel tariffs, like unified against the steel tariffs, make the Steel Companies basically national security. And thats going to be the line in the sand about whether hes going to get you know, doing whether President Trumps going tariff or going nontli nontariff fighting back versus non but the two countries most hurt that would be china and south korea our pals in south korea. Jim, do you get this question a lot . Because i do why does the market keep going in the face of what seems to be dysfunction in washington, the inability of the Trump Administration to really get anything going in terms of its overall proposals, things heating up with north korea, the possibility still of significant tariffs when it comes to steel and or a possible even trade war, growing income inequality you can go through the list of things that people feel are weighted that we arent making progress on. And yet they say, why does the market keep going up thats the question im asked the most i always say, listen, we had a huge runin with gridlock with the previous president the earnings are coming through rather remarkably. The earnings i think youre going to be pleasantly surprised, and thats because augus augus asias better, europes better exvenezuela the rest of the world is doing quite well, and when the rest of the world is doing well, we do well im glad you answered that for me, now i can answer them. The International Company is the Leader International companies are doing great. Look at pepsico in terms of pepsico coming right back. You dont have the big currency hit anymore. Procter gamble could have a good number. Were going to start finding out a lot more tomorrow. By the way, speaking of turnarounds, retail, targets up the Company Announced the Second Quarter earnings will come in at the higher end of its Prior Guidance and that comps will be positive Brian Cornell says, quote, weve seen additional broadbased improvement in traffic and category sales trends in the Second Quarter, despite continued challenges in the competitive environment. The range was 95115 the streets 106 but they see traffic improving this was an Empire Strikes back call, basically they waited until after the data lives in brick and mortar, amazon prime, and cornell came out and expectations finally got too low. Now, i will tell people who want to buy jump tonight retail bandwagon, you need one other company. Youve got to have macys come out. Youve got to have a kohls come out. Somebody, somebody has to come out besides just cornell, so we know it isnt Just One Company and then you will have a short squeeze. It wont be a rip your face off short squeeze, but a meaningful short squeeze if one like, macys ceo, he loves the show. Look, they all love the show he should come out today and say, look, our july 4th you know, fireworks, we had fireworks. Our numbers are up and i think that the margins could not be we can get that story told, were going to have a short cover rally in the rth and its going to be good some of these underlying players, too, though that rent the real estate, two of the retailers have been suffering, the reits. And theres also a theme, though, that says that theyre doing just fine, too federal realty is getting beaten up and frankly they are not seeing the decline in per square foot sales or in loss of leases. You know, this is where anchors chat anchors are chatting theyre going out of those malls. And when they come in, they go 16 square, but go into 30. Any one of these anchors that leaves, while were chatting, you know, theres a lot of chatter about anchors leaving and then they raise numbers. Thats what happened with federal realty anchor chat. They talk about ten minutes amazing to think that macys, back to that, is only a 6. 4 million market value trades at seven times earnings kohls trades at six times earnings macys has a 7. 1 yield yeah. Youre right. Yields more than the bonds. I know, dont buy the bonds dont you buy the bonds no why not. You buy the common right although the bonds have the real estate behind it but we need to hear something from macys. We need to hear that that july 4th sale was really big and that the traffic is good. Traffic is the life blood. Macys has to come out marcus ld to us, the market is good. We need to see how well gander does. But the analogy that it would be kohls kohls has to come out and say something. I think kohls is doing well with under armour, doing well with nike. Nike had a great quarter it would be great for kohls to come out and do what Brian Cornell did. It would be great. These guys all watch the show. They should be minding the store, but weve got to go, because the anchor chat is over. Stay with us. We have an important interview lets get to julia boor stun sun valley is kicking off, thec. Thanks so much for joining us here this morning. My pleasure my pleasure. Theres certainly a lot to talk about here in sun valley first you had some news this morning. A Big Partnership between cbs news and the bbc what is this about is this about responding to President Trumps criticism of the news media i dont think it has anything to do with President Trump its two phenomenal News Organizations and to have the power of bbc, that brand along with the cbs brand in news, i think two of the greatest brands in history, and it just gives us the ability to cover the world much more thoroughly, where we might have a couple of people,thal have an entire bureau so i think across the board, its great for both companies and were very excited about it. Well, with Jared Kushner and ivanka trump here right now, theres certainly been a lot of talk about politics, more than usual here in sun valley what the policy changes that youre watching that are going to most impact your bottom line . Is it tax reform or is it the ability to say buy more cbs channels, more affiliates . No, look, look, obviously, theres deregulation obviously, theres talk of tax reform theres a lot of big business things that are on the table, that will help all businesses there. Whether they come to fruition, we dont know. Obviously, its a more userfriendly fcc than it is before somebody whos very open to broadcasters and we like that, as well. And the Trump Administration, you know, while adding to business, obviously, has posted some challenges for our News Division so its a very interesting time and a lot of chatter about that. And what about the fact that theres a lot of talk about how with this light regulatory touch, we can see more m a are you having any talks here . Not really. Not really sun valley is always a nice dance and everyone likes to talk about the big deals that have been done here before. I havent seen anything unusual happening or anything of any substance. It may be that im clearly not aware of but it gives you a chance to catch up with a lot of people. Theres a lot you look at what your relationship were is with companies and what they were a year ago. And you know, its a very interesting time were hearing a lot about the pressure on big meetings to consolidate. Obviously, we have at t buying time warner. Everyone wonders whats going to happen next. Wouldnt cvs benefit from having more scale by merging with a lionsgate or another pure play company . You know, were really happy, weve been saying nor a wile, with the hand we have right now. Were in a very strong position, top trend dollars, top comp dollars for everybody. Were able to sell our content all over the place we look at ourself as a multiplatform content company the fact that we had add more content to us if the right deal were available, well look at it but frankly, were plague a very good hand. Were in strong shape. So we dont feel the need to expand or do anything like that. But want the potential to buy something. If, cest, time warner were forced to sell cnn as part of its acquisition by at t, would you be interested in buying . We would always look at Something Like that. Cnns a very worthy News Organization you know, its something that could enhance cbs. But i dont think thats on the table right now. You know, if it came up later on, it would be something we would look at. You would look at it . Okay, jim, do you want to jump in here yeah, les, jim cramer, always great to see you you look relaxed and tan hi, jim all right, october 12th of this year, the eagles will play. It will be a tire you had night football, you will be having it as well as the nfl network and amazon the players get tired. What can you do about improving thursday night football, getting the players somehow more rested. I dont know how you do that and why cant i watch it on amazon i only want to watch it on cbs you want to watch it on cbs youre older like me, jim, so you do return to cbs look, its october 12th. These are young, great athletes. Thursday night football is going to be better, the matchups are better this area i think the nfl was down a lot last year, and i think thats what youre referring to but i think this is going to be a much better year the matchups are good. Theres a lot of football up there. Obviously, football, the nfl is experimenting with the amazons and the verizons and all those other things, and thats going to be the wave of the future youre going to be able to watch it on cbs or watch it on your iphone now, les, yesterday, we interviewed robert kraft, owner of the new england patriots, and we asked him about the decline we saw in regularseason nfl ratings last fall. He said that they were making changes to have fewer, shorter ad breaks, as a way to hold on to viewers fewer ads, that would be terrible for cbs, wouldnt it . Because thats your most valuable ad time were not going to reduce ads. Theyre just going to be refigured in a different way so perhaps instead of there being five breaks, there are four breaks that are slightly longer. But youre right, were paying over 1 billion a year, as are our competitors. The ad things are better i think the nfl is looking for ways to speed up the game. How do they handle injury timeouts, et cetera, et cetera. I think everybodys looking to improve their product, including the nfl. David leslie, its david. Julia was pressing you a little bit on consolidation in the industry and i realize i havent talked to you in so long that i havent spoken to you since viacom and cbs did not happen im curious, when you think about that combination, which for a while was, of course, discussed and even encouraged my your Controlling Shareholder, why was it something that you did not, at that time, want to pursue and looking back six months later, is it still something you feel as though it was a good decision not to pursue yeah, you know what we all decided together and ultimately, the Controlling Shareholder, the rodestones decided, the companies were better off operating individually viacom, obviously, appointed a new ceo and theyre doing fine and its been beneficial for us. Obviously, as we g doo down the road and get retransmission advisories, it is better for us to be independent and were very happy that decision was made and i think viacom has, as well. I think it worked out well for everybody. It was something we looked at very carefully but as i said, the Controlling Shareholder ultimately decided that it would be better to be separate and leslie, you and i have discussed many times, of course, the evolution of your industry, it happened a lot this year in terms of the proliferation of skinny bundles and over the top programming possibilities. Cbs is on all of them. You always say that. Im curious to get your perspective, though, on some of the other networks out there is there going to be a need amongst some of your competitors to consolidate as a result of not being must have, not being a part of those skinny bundles or of those over the top packages you know, i cant comment on them, david. As you said, we are everywhere so if somebody cuts the cord and decide to go on one of the virtual mvpds, its actually a positive for us. Because the new deals that we have with hulu or youtube are beneficial to us, financially spop we, as you saso we are eved want to be everywhere. Some of these other networks may be challenged in that they arent mustsee. Having the nfl, have 60 minutes, having colbert, having big bang makes us a must have on every platform and the newer the platform, the more we get paid so we sort of like the evolution thats happening we think it proves to be it will be a growth area for us in the future youve been making this sorry sorry, leslie i mean, you do sell a lot of syndicated stuff, though, to other Cable Networks thats a very important and profitable part of your business do you worry at all about their ability to continue to pay up for some of those cbs shows . Whether it be hawaii 50 or anything like that into the future you know what the Cable Networks that were selling to are not having trouble getting carriage what youre talking about is some of the smaller ones but by and large, our bigger deals with the bigger Cable Networks that arent as challenged by these possibilities going forward. And you know what, as long as we keep doing the content that were doing, there are dpogoingo be places to buy it. A few years ago, as the syndication market got worst in cable, along came netflix and amazon paying amazing prices for our syndicated programming weve been fine and that area has grown for us yesterday we heard from your rival and cnbcs parent company, nbc, that they secured 8 to 9 volume increases in the upfront ad sales period. This is a very important period for your whole industry. Can you tell us how your sales are going . The upfront sales were terrific we were very pleased our volume was up, you are o cpms was up mid to high Single Digits across the board. Prime was strong obviously, latenight, colbert, has been really doing really well and cbs this morning has done well in a variety of day parts, our numbers were way up. Nbc had a very good upfront they were selling a lot more, a lot wider in terms of cable. Theyre also selling the olympics this year but we were very pleased i think the market was stronger than people anticipated. In april, as you know, all the advertisers sell you the upfront is going to be terrible and we say its going to be good it ended up being very good. Can you give us any numbers on how many subscribers you now have for your direct to consumers . Im not giving you numbers, but stand by until our earnings on august 7th. We may have more information but im very pleased and were ahead of projections we look forward to hearing some numbers then. Cbs ceo les moonves, thank you so much for joining us here in sun valley guys, back over to you julia, well hear from you later on today when we come back, well get cramers mad dash, count down to the opening bell, take another look at the premarket, get to some calls we havent got ton. An upgrade to ap or snveat stifel that and a lot more when squawk on the street continues you know what that was, right . I know, i know. You always have the dwoogoods. Jets and sharks, baby doesnt lack like that anymore. Theyre running around no, it doesnt. I know. I know what a great play, what a great movie. And bernstein, the best. Yes okay, david dont forget sonheim. He was there. Oh, my gosh, sonheim out of west side story into mad dash you know target was the revenge of bricks and mortar stifel comes out and says the risks to snap are overstated and they are relishing the opportunity. In this theres a subtle moment, a little subtlety in this call. I talked about this with carl yesterday. He tweeted it. The implication was, dont fear the lockup expiration as much. A lot of its done by insiders i think the next thing that happens is the insiders come out and say, were not selling not at these prices. If anything, were buyers. That gets the short squeeze going. Then they do the little thing about how were doing a lot of short form and weve got the advertisers galore well talk about, i dont know, procter or colgate next thing, back to 17 as they say, you know what, our stock is cheap. Then after that, its, whatever. Its, whatever. They need to take that money and buy it did you see bobby codek on yesterday . It was skbrimpressive take two is up 45 . But they own the nba rights straus owns the nba rights and some people say those teams could be worth somewhere near, eventually, the price of an actual nba team. Thats too overstate, but i put it out there right now, my playbook, issue a statement, theyre not sellers here, theyre buyers, that we get it and they got to do it when tonight got it. Tonight theres going to be a rumble tonight, tonight. All ight. Were done here. Tony and miaar, signing off. Well be back after the bell where to get in. Where to get out. If only the signs were as obvious when you trade. 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Youre watching cnbc squawk on the street, live from the Financial Capital of the world the opening bell in about 90 seconds. There is a lot going on today. Obviously, we just heard from Julia Boorstin out in sun valley but we do expect to get a revised Health Care Bill out of the senate, potentially a cbo score on the 2018 budget the president is in paris today for the bastille day celebration, which actually is marking the 100day anniversary of the u. S. Entry into world war i. Well get pictures of trump and macron in a moment great to see it, whether you like trump or hate him, the relationship is back on in a way that i did not think was possible a lastminute trip. The scheduling happened with not a lot of preparation futures have been pretty steady. Weve talked about the bid in tech once again. Upgrades as some downtrodden names, guidance thats better than expected, retailers david asked me why we can continue to go higher. Its a lot of that its a great description of whats going on. Very positive. Lets get to the opening bell here and get the s p at the bottom of your screen. And the big board at tennessee capital, celebrating the ipo of its Third Special purpose acquisition company. Over the nasdaq, it is ambi circus, starting in war for the planet of the apes, opening this weekend, distributed by fox. Reviews have been pretty good. If it rains, ill go. Otherwise, im gardening this is a really interesting take i like a take where it says that stocks are going down, like a stat and lake a target target, youve got to be careful. Unless another retailer comes out and says theyre seeing the same thing, it will be a one off and wont get the group moving but i do like the fact that theyre circling back. We had some good china data twhthat we forget. China has been very, very strong of late. A couple of summers ago, china was the reason we were headed the down we need to stay focused on that opening every night. We have some terrific action going on in everything thats not a bank, but its in the financials theres just a nice broadbased rally. And you know, some stocks have been just sensational, like a paypal weve seen that in other upgrade today. Just incredible. The only tech stock that people worry about is seagate i can handle that. Periodically the disc drive companies are not that good. My Charitable Trust owns western digital. I think they get the toshiba flash. Seagate is the worst s p err rig eerr who gets the toshiba flash . Western digital because they got that restraint superior court. People dont understand the power of one tro how i mean, there have been ive tried to get tros, theyre not easy to get. Seagate is the worst s per number two is delta today. Does miss by two cents with 1. 64. They see q3 rising from 2. 5 to 4. 5. That was disappointing versus United Continental heres an interesting stat from the day they pulled that guy off, that stock has been the best in the group. That was the signal to buy United Continental could you run the tape come on . That tape isnt just run when you mention it i think we ran it out even though its digital, it somehow just decomposed. I reiterated my buy right now it doesnt even actually exist as a physical thing. If nvidia were running this thing instead of humans, it would be up there right thousand would have heard you . Maybe you need to identify the doctor in question or not with nvidia they would have figured it out . A really incredible piece today i read about tech, nvidia chips allowing for the alley, third stage to have drying it means if youre going below 37 or less on a divided highway, you dont have to really pay attention. Thats nvidia. You dont have to pay attention. You can do a crossword puzzle. I still i know there are people who are driving their teslas crosscountry who are barely touching anything at this point they have stage ii. Youre supposed to youve got to focus if youre you keep your eye on the road apparently they can watch movies i know that one guy, it ended very unfortunately for him, because of the white truck well, i just think that this is nvidia with five big chips in the new alley the head saying, you better tell people to buy nvidia thats why i named my dog. Theres the fed chair on the left side of your screen getting seated for her testimony in front of Senate Banking, day two of her testimony theres been some discussion in the journal today about whether draghi could use jackson hole to set the stage for an unwind of qe in 2018 that would be something im looking for that but that would be a sign that europe is open for business. Thats very positive and i know davids got news yeah, a couple of things. One is one that jim and i have discussed quite often, which is this impending battle, potentially, between paul singer and Warren Buffett paul singer, of course, of eliot, waurren buffett, you know a 9 billion bid he had for encore jim had the ceo on mad money earlier this week. Elliott comes back as a large creditor and says were going to buy 9. 3 billion, a 3 increase over where you are a bankruptcy judge will probably say, thats better for creditors. I did want to add that eliot, im told, has hired the Investment Bank of mollus to raise the equity and perhaps some debt associated with the bid that they are going to mount. So they continue to move down the road, jim, of putting together a consortium. By the way, there may be another Bidding Group out there. Its unclear to me, yes. To bid 9. 3 billion, as theyve said they would. Theyve got to get all of this together before august 10th when the bankruptcy judge is most likely going to rule on or see whether or not they accept the 9 billion from buffett. Dollar wise, that would be better, but you also have to consider, as well, likelihood of close and whether the Texas Utility commission would be happy with it or not they say theyre going to continue to ring fence oncor, jim. Theyre not going to want board seats. They continue to mount, at least at this point, this alternative to mr. Buffetts bid we know, he doesnt raise, he just walks away. Right now, whats important, that people have to understood, because this is like one of the biggest utilities out there, is that that the ceo said, show me the money. If he gets mollus, that money is raised in a day, because thats how good this project is and mollus will be moving with all intent and speed to put together the necessary funds for that 9. 3 billion bid. Nice scoop. Something else i wanted to hit as well in the world of m a, which we all know, theres really not that much going on, one name that has certainly gotten a decent amount of speculation involved in it, although some of that may have come out is tesaro, a biotech inhibitors, a new line of cancerfighting drugs. It has been for sale in fact, it was the wall street journal on may 31st that reported tesaro reporting a sale and speaking of people who were involved in potential bids for the company, they had an expectation, those bids were due this week. But sources close to the process indicate that there is nothing imminent at all. And the best way to put it at this point would simply seem to be, to say that the expectations that the company had in terms of price were not met by the incoming expressions of interest they got from potential bidders. Those companies thought to have included perhaps at some point, a gilead, perhaps a bristolmyers or even a roche. A number of other companies as well not necessarily astrazeneca or pfizer that are moving on their own in oncology, but it doesnt appear to have met what were the Price Expectations going in, as you take a look at donald trump and i think macron there i did wanted to get that out there on the market place on tesaro astrazeneca, there was a lot of talk that ceo might be going to tenna thats big i thought astrazeneca had the edge a company would buy this company if the Ovarian Cancer drug is as great as some thought. Its thought of as a strong drug but not Strong Enough to be able to merit a bid . Youre talking about a potential premium above a 7. 4 billion market value and then im also told there was an in the money convertible you have to include. You go from 7. 4 to 9, but really closer to 11 billion. That is a big number, what they may have wanted. Will any of these shift and take a look at Insight Pharmaceuticals . I dont know. But i think its the word from people familiar with the process for the potential sale of tesaro,ly reported at the end of may by the wall street journal. A nice scoop, too and now that stock is down about 8 this morning, tesaro. So im going to start booking on tesaro, then dont confuse people with tesaro and tosoro. But numbers youre raising, even as you blast tesaro, im going out with tosoro. There continues to be a lot of interest in oncology. And i assume you saw the frontpage treatment that new drug got from the times. Im trying to book them, right now. Who n novart novartis by the way, the president will head to elysee palace later on today therell be a press conference around 2 00 p. M. Eastern time. Two and two, two questions from the french media and two questions from the american media. Who knows what he might get asked about later on nvidia, just to bring it up again, jim, is now up seven days in a row and i was just doing a little math its up 18 , off of the 138 it hit on the fifth yeah, remember, it was knocked down by andrew leften. He came on scott, the judge, and said he thought the stock was running away i said, lets not forget, this could be the next intel. The Artificial Intelligence is powering voice, powering autonomous cars, and we dont talk enough about atv, a activision remember, take 2 withheld a game its so lifelike adobe is using their chips to be able to use Artificial Intelligence yao it mimics you. Nvidia is on a different plane its like intel in 1993 when it just left the pack left the pack. The only games i see are the video game those sports, nba it already looks lifelike you say its going to keep increasing i got call of duty, i have call of duty addicted guys and say, this is not call of duty, but we probably is to cut away to france. Thats the president s first public event since hamburg we have not seen him stateside between this and the g20 last weekend. This was a lastminute trip to celebrate bastille day hell have dinner tonight at the eiffel tower in a few moments, i think theyre going to visit Napoleon Bonapartes tomb before the bilateral and prmess conference later on today he might be asked about this russia thing, continues to dog him, donald trump jr. On the cover of Time Magazine this morning. Yeah, with someosomeones go that at both napoleons tomb are and the restaurant are fabulous places to go to. And i think this is a surprise trip that does make it so its harder to just to continue to talk about russia for a couple of days. It keeps it takes the steam out of the story, with i think, to some degree well find out a lot more later on today about what he may get asked and what his answers may be in the meantime, walmarts leading the dough, up about a percent. But the index is up about 16 points lets get to bob pisani this morning. Hey, bob good morning, guys. We have a modest gain in the markets. The leaders today are retail as target has upped their numbers for the Second Quarter, talked about better than expected outlook. Tech stocks are leading the way. Bank stocks are up, and energys basically on the downside. Thats really been the story so far for the quarter. We saw Brian Cornell had a very interesting comment, saying falling better than expected results in the First Quarter this is the ceo of target. Weve seen additional broadbased improvement in traffic and category sales trends in the Second Quarter, despite continued challenges in the competitive environment. Thats helping the retail groups macys up a little bit, as well. Walmart also on the upside the rally yesterday has spilled overseas we have nice bumps up in india, in hong kong this morning, south korea, taiwan weighted emerging markets are breaking out. We are hitting new higs and in some cases historic highs s as e rally overseas has continued on. Indias up and closed at an historic height. Hang seng was up 17 and korea closed at an historic high taiwan, up 20 so far this year. Brazil, so the emerging markets are breaking out the emm is the Exchange Traded fund for this. Its had a lot of volume recently and thats a twoyear high breaking out in the emerging markets space weve talked about the banks that are going to be happening tomorrow everyone keeps say, why does the market keep going up the market keeps going up because earnings keep going up here is a twoyear chart of the earnings estimates we saw we were in an earnings recession this time last year. Q1 and q2. We came out of that. And its a Straight Line up. Were going to essentially do close to 10 , earnings expectations for year over year growth, for this quarter thats the Second Quarter. Right now, its at 7, but it will go up and how long are we going to get 10 Earnings Growth year over year thats the big question for the market, but this chart is why the market keeps going up. The markets trade on forward earnings expectations. And they have been improving dramatically now, theres the three things that matter about this earnings season that were going to standard tomorrow. The three groups that matter, right now, the two biggest ones have nice expectations for Growth Technology is the biggest sector in the s p its about almost a quarter of the entire s p 500 heres the president and the president of france looking in here and seeing whats going on, of course, with their ceremonies right now. The important thing here, technologies, financials, and energy stocks, all expecting modest gains here and were all seeing moves up in the market related to that. Well see what goes on here. Right now, the dow industrials up 7. 5 points. Carl, back to you. Lets get to Rick Santelli in the meantime and check out the bond markets in chicago. Good morning, rick good morning, carl. Lots going on. Well start on this side of the pond wow, rates moved up a bit. But you can see we have a lot of ground to make uh, wbut were still kind of above 230, 227 area open the chart up to december, lets pick that date for bunds its the last time the bunds were this close to 60 basis points a lot of this has to do with a rollover issue yesterday, there was just 4 billion bunds for sale adding to a much more liquid, larger issue the roll popped rates a little bit. Its normal. But its also normal to pay especially close attention to when these things happen, to see how the role affects the market. And sometimes, it pushes you in a technically significant area, as this has. Now, lets look at our yield curve, because it sounds to me like the fed is going to be paying a whole lot more attention to it, as they do the tradeoff between affecting the short end with rate hikes and potentially changing the Balance Sheet, which could be more of a curve steepening effect. See tens minus twos. Forget what it means just look at levels. We have to trade at no matter what it means. 100 seems to be the area that most traders would reference as a pivot. Now lets look at the pound versus the dollar. Yes, we know that theres been some raising of rates by Central Banks. You know, you look at the bank of canada and then consider whats going on with the pound it is starting to do better and finally, euro yen. Hottest fx trade on this floor still hovering right under 130 some of the best levels. David, back to you thank you very much, Rick Santelli lets get to yellen in front of the Senate Banking committee and senator crapo. Some additional suggestions or ideas that the commission could consider to reduce the burdens in this area yes, wed be happy to do so thank you very much next, of our hearing last monthr rule he noted that there is room for eliminating or relaxing aspects of implementation regulation that dont directly bear on the volcker rules goals can you elaborate on the volcker rule we look forward to working with the other agencies that have a role in rule writing. Its a very complex rule, partly reflecting the legislation, but i think we could find ways to reduce the burden and it should be a multiagency effort and many of us are aware that the multiagency effort has been slowed down, simply, many of us believe, because of the complexity of getting five agents, four or five agencies i think thats true to all dpragree on the same thing. Yes what do you think about the idea of having a designated lead agency on this issue quality. I think thats something that congress could certainly consider if one agency has a larger regulatory role with respect to those institutions, mich natural for it to take the lead thank you at our last hearing, you told me, we would like our Balance Sheet to again be primarily treasury securities, whereas we had substantial holdings of mortgagebacked securities however, the fmocs plans to reduce the Balance Sheet include initially not reinvesting 6 billion of maturing treasury secretary securities and 4 billion of Agency Securities per month. Suggesting that the fed may wind down its securities portfolio. Is that accurate ultimately, when the caps are fully phased in, my guess is that they wont be binding and that theyll move down to the rate that the principle is received on them it will be a long process, i should say, to go back to an old treasuries portfolio, even after weve come to the point where our Balance Sheet has been reduced to as low a level as we expect to take it. Well still have substantial holdings of mortgagebacked securities so beyond that, we will be running further running down mortgagebacked securities and replacing them with treasuries, so it will be a lengthy process, but the fmoc and committed to a primarily treasuryonly portfolio in the longer run. All right i appreciate that. And with that, ill yield back 18 of my seconds and go to you, senator brown. Setting a High Standard thank you, chairman. Stree history teaches us that when congress does big things, labor law reform and Social Security with franklin roosevelt, and Lyndon Johnson with medicare, that congress two or three years later goes back to those issues bipartisanly and makes modest changes to fix them. Something weve been asking for several years, asking republicans to do with the Affordable Care act. Theyve notten to work with us bipartisanly to make min adjustments. The same with dodd frank weve seen a House Financial Services committee that wants wholesale destruction. Of course, we will work bipartisanly on making the kinds of changes that will do what senate chair yellen has spoken about in making those reforms. I wanted to preface with that. Mada madame, you previously stated you do not expect a financial crisis in our lifetimes, setting aside the delicate question of your and mine and all of our life expectancies, is that predicated on maintaining the strength of the current regulatory structure well, let me state what i think i should have stated originally when i meat that comment. I believe we have done a great deal since the financial crisis to strengthen the Financial System and to make it more resilient. I think we can never be confident that there wont be another financial crisis, but we have acted in the aftermath of that crisis to put in place much stronger capital and liquidity requirements for systemic Banking Organizations and the Banking System more generally. I think our stress testing regime is forcing banks to greatly improve their Risk Management and Capital Planning. Its giving assurance that even if there is a very significant downturn in the economy, that they will be able to function and provide for the credit needs of the economy and we have greatly increased our monitoring of the Financial System for a broader range of risks but let me say, we can never be confident that there wont be another financial crisis, but it is important that we maintain the improvements that have been put in place that mitigate the risk and potential damage. Thank you i just want people listening not to read your answers from the chairman about moving on reform and moving, that there is some urgency to that and we do want changes, we want them to be modest let me sort of further paint that picture with this question, if in light of your comments to me, that you may not expect another financial crisis in our lifetimes, but the importance of a good regulatory structure diminishes the chances dramatically well, if so, if the recommendations of the treasury report that youre familiar, that, obviously, the way it was written, you didnt seem to have a lot of input in. The recommendations of the treasury report that weaken regulations on the lowest bank, including lower Capital Requirements and fewer Consumer Protections, if those were adopted, would you have the same level of confidence that you just repeated and said earlier soildnt be in favor of reducing capital for the most systemic banks and Consumer Protections . I think those are important, as well. There are a lot of things in the treasury report that we agree, that mirror things that were doing on our own, to tailor appropriately tailor regulations and i apologize but for those banks, its critically important to maintain the capital standards. So if we were to adopt im sorry to interrupt if we were to adopt the treasury report recommendations, it would more likely result in a potential financial crisis well, some of them, yes okay, okay, okay. Last question i wanted to ask you. That is chair yellen. Obviously, responding to a question about a statement she had made before in europe about there never being another financial crisis in our lifetime stating that we can never be confident of that. But they have acted in the aftermath of the last one. Theres no reason to even mention complacency. I want to mention before we go back and i get jettisoned that ive been checking with a bunch of retailers it is during the quiet period, so its highly unusual to get comments, but im getting the word i mean, that some of these companies did better did better and yesterday i mentioned, by the way, one that i thought that shouldnt have been knocked down was walmart i think thats doing incredibly well i we know from marcus ligmones hays doing very well. Im getting a sense traffic is better, food is better, and it does matter for all in other words, as target goes, maybe some of the others go. Thats important, because thats been the weakest end of the market and when you see these other stocks play these stocks are cheap. Based on the destruction that amazon prime did to their common stocks, off trade here im not talking about an investment, but you have a trade. And i want to know about nordstroms and if nordstroms is still going to be able to go private. Funny you mention that you have i have nothing on nordstroms are you going to tesaro it . No. Thats a new verb tesaro something . It means destroy. Tesaros now kind of consolidated at lower levels okay, well, im going to consolidate you at lower levels if you do that to nordstroms. Got a new high on Restoration Hardware today, too. Thats a short squeeze of phenomenal proportions gary bought 1 million worth of stock at 25, 26. That was as good as the steve wynn cold shot when he bought millions of dollars at 55, 56. And jack dorsey starting to look better on his buy. On his im warming up to dorsey himself because of the amazing because square has to be bought by something just so easy the stock goes up and suddenly you warm up to is there Something Else involved in this business that i dont know about, other than higher and lower prices . Is there some sort of up or down what jefferson . Its about stocks, suddenly, hes gone. So rude, so rude. Ghandi favor. Whats tonight . Gandhi faivor. Zpr theres a biotech stock that is going to be able to be jim, well see you tonight. Mad money, 6 00 p. M. We will take a break and when committwe come back, more yellen no, go back to the hearing. Heres chair yellen at Senate Banking. Your words. In addition to these few unusual reductions here, is it possible that certain easpects of foreign economy, as far as slow growth in china are artificially lowering our influence in inflation in this country . Or what is it . Whats going on here do you know, and if you know, what do you what do you believe . Well, with respect to the Global Economy, weve been through a period in which theres been a substantial appreciation of dollar and that depressed for quite some time import prices, but that trend has now come to an end and import prices are rising at a modest rate so, i dont see the Global Economy as, at this point, mainly responsible for the low inflation readings as i indicated in the quote that you mentioned, i do think there is some special onetime transitory factors these unusual changes reflecting the move to unlimited data prans for cell phones and large declines in some Prescription Drug prices there may be more going on and were watching inflation very carefully in light of low readings i think its premature to conclude that the underlying inflation trend is falling well short of 2 . I havent reached such a conclusion we are watching data very carefully. And i would say i regard the risk as being twosided with respect to inflation on the one hand, we are seeing low Inflation Numbers for several months on the other hand, we have quite a tight labor market and it continues to strengthen and experience suggests that ultimately, although with the lag, were not seeing very substantial upward pressure on wages, but we may begin to see pressures on wages and praises as slack in the economy diminishes i see the risk with respect to inflation being twosided and with respect to how that bears on policy, most of my colleagues and i, when we lacked at this matter in june, even recognizing that weve had several months of low inflation readings, and that were focused on trying to understand it, have felt that it probably remains prudent to continue on a dpraul path of rate increases but its something well watch very carefully and i want to emphasize that Monetary Policy is not something thats set in stone and if our evaluation changes with respect to inflation, that will make a difference this economy has been in expansionist mood for quite some time a lot of economies say this is a mature economy would you disagree with that do you believe this economy has got a lot more zip in it well, weve had a long expansion and the Unemployment Rate is now at really quite low levels in an historic sense. But i do not believe that expansions die of old age. There are shocks that impact the economy and a negative shock could end the expansion, but i dont see anything inherent in the nature of the expansion that suggests that it will come to an end anytime soon my times about gone. What significance of the lower price of oil and gas in our economy . I know you exclude some of this from your basic monthly calculations, but it does have something to say and do about our economy, because so many things go into oil and gas well, its the low prices of oil and gas have translated into the goods of households overall, very positive in the country . I think on plans, its a positive now, oil prices have rebounded off their very lows, and thats meant the drilling activity has picked back up again, and thats something that is supporting investment spending and demand in the economy thank you, senator menendez when you were here last in february, we discussed the Economic Impact of loss in access to Health Insurance you said that large scale loss of access to Health Insurance could have a Significant Impact on Household Spending for goods and services, that could also impact job mobility, make it more people for people to leave jobs for new positions or to start a new business, because they would be risking their access to Health Insurance is that a view you still hold today and if so, could you explain why . So i really cant quantify any of those effects, but clearly spending on health care is an important aspect of Household Budgets and changes there. Could have an effect on spending on what range of goods and services in the economy. And access to health care is important. I think Research Suggests that a certain amount of socalled job lock reflects a desire of workers to hang on to employerprovided health care. I cant tell you quantitatively, however, how important that is you mentioned that possible changes in fiscal policy and other policy in the United States represents a source of Economic Uncertainty right would you include potential changes to our Health Care System as one of the factors causing uncertainty in the Economic Outlook yes, i think fiscal policy, policies generally are associated the level of policy uncertainty is quite high at the moment so i certainly believe that if a possible 22 million more americans are uninsured by 2026, that its going to cause premiums to skyrocket for middle class families and those nearing retirement, that theyre going to have an impact on the economy. New jersey alone would see a million more uninsured under the republican proposals a 40 increase in uncompensated care, 18. 5 billion lost in federal funding. The elimination of nearly 100,000 jobs, i think that has an impact in the economy let me move to a different topic. What would be the consequences of weakening or eliminating, as some have suggested, the Federal Reserves full employment mandate, particularly for those workers, many of them minorities, that have been left behind in the recovery and continue to face barriers in the job market i believe that the strengthening of the job market that weve seen over the last several years has been particularly beneficial to minorities our Monetary Policy report points out this isnt the first time weve done this, that even in the socalled full employment economy, unfortunately, africanamericans and hispanics typically have higher Unemployment Rates, substantially, so a but what would be the elimination or weakening of your full employment mandate mane to those communities. If the Federal Reserve eliminated the full employment mandate that the fed has, or weaken that as one of your core missions, what would be the consequence . I do believe that its an important mandate that keeps us focused on the labor market and wanting to ensure strong performance. Of course, we also have a price stability mandate. Now, inflation has been running below our 2 objective now for many years, and so, there has not been a conflict our price stability and employment mandates and im not suggesting that but aisle simply suggesting, if you were to eliminate or weaken that, wouldnt that have negative consequences . It most likely would. And let me ask you, finally, how does we see rising levels of Household Debt, widening inequality, a neutral Interest Rate at historically low levels, and to me, its critical that the fed have the ability to respond in the event of an economic decline how does below target Inflation Impact Household Debt . And what signs do you see of inflation coming close to the feds 2 target, let alone exceeding it by dangerous amounts. So, as i said, i think the risk with respect to inflation are twosided. But were very aware of the fact that inflation has been running below our 2 objective now, for many years and were very focused on trying to bring inflation up toll our 2 objective thats a symmetric objective and not a ceiling. We know from periods in which weve had deflation, which, of course, we dont have in this country, but something that has a very adverse effect on debtors and can leave debtors drowned in debt we dont have a situation nearly that serious, but it is important when we have a 2 inflation objective to make sure that we achieve it and make sure were focused on doing that. Thank you, mr. Chairman thank you, mr. Chairman thank you, chair yellen, for being here, as well. Thank you for your accessibility. Weve had a number of conversations, were not always on the same page, but your accessibility is always appreciated. The last time we chatted, we talked a lot about the unwinding of the fed portfolio which is about 4. 5 trillion or so. I think at the beginning of the crisis, it was under 1 trillion can you just talk for a few minutes on the timing of the unwinding and if you have a target number at the end, when would you see us getting there i think my question is to remain to the impact that your objective will have on south carolinians who are looking for ways to improve their quality of life and that coupled with the Interest Rate environment may have a negative impact on firsttime home buyers, as well as those retirees that have much, if not all of their money, in the market. So my your comments, i would like to apply to those two specific groups, as you discuss this for a few minutes okay. So let me see if i can be responsive to that our intention is to shrink our Balance Sheet and the quantity of reserves in the Banking System in a slow, gradual, predictable way. And we have set out a concrete and detailed plan for how to do that and it involves reducing the extent to which we reinvest principle payments that we receive on our holdings of treasury and mortgagebacked securities so when we set the plan into effect, we will set caps on the amount of reinvestment that we allow to occur the caps will gradually rise over time, and our Balance Sheet will gradually run off as a consequence of reduced reinvestment we want to make sure we manage this in a way that is not destructive to financial markets, and in part for that reason, we have tried to set out increasingly clearly and in great detail, how we intend to proceed. So once we trigger this process, expect it to run in the background, not something that well be talking about a lot from meeting to meeting. It will be a predictable process. Now, we think that our purchases of assets did have some positive effect in depressing longer term Interest Rates so over many years, as our Balance Sheet shrinks, we would expect to see some change in longer term Interest Rates as opposed to shortterm Interest Rates. But of course, we will take that into effect, namely a staeepenig in the yield curve in how we set the federal fund rate, which will become is now and i hope will remain our primary tool fo adjusting the stance of Monetary Policy and we will set that, as always, with a view towards trying to achieve maximum employment and price stability finally, you mentioned our Balance Sheet was around 1 trillion prior to the crisis, and thats true. But its important to recognize that although our Balance Sheet will shrink appreciably during the process as well as quantity of reserves, i have no expectation going back to Balance Sheet thats small one of the factors influencing the size of our Balance Sheet i have about a minute left, so i hate to cut you off, but i want to go to insurance. Let me just say this as we talked about the skpre depressing of Interest Rates, which can be very positive for firsttime home buyers, its very negative for those retirees who are depending on the return on their investments to produce their livable income, so to speak. On the insurance side, we talked about the importance of having insurance expertise on fsoc. Mr. Woodalls term expired september 21st or thereabout today, the way we have it structured, we could be absent of any insurance expertise on the fsoc would you support legislation to another i know that you dont necessarily get involved with politics, but would you support legislation that would head in the direction of making sure that the insurance increaexpert stays on the fsoc . I think its important for fsoc to have insurance expertise and exactly how you go about accomplishing that, i dont have a specific recommendation, but thank you, maam. My time is about out i want to encourage my chairman, Ranking Member brown to continue their work on making is sure that the fsoc that that continuous recommendation. Thank you, chair yellen its great to see you again. Its great to be asking somebody a question that doesnt have to deal with russia you know, chair yellen, recently i know the fed moved proactively to scale back the qualitative portion of the ccar test and i know former member too reconci turillo, supported many changes on ccar, folding ccar into the annual or traditionally so its not dual hatted but i do think that ccar for the largest institutions is important and in a sense not broadcasting the methodology youre going to use before you do the test is important i would like to get your views on that. And how you see the either that continuing reform, which i know youve already gone ahead and moved proactively for banks. Do you see more reform and is there some plan . I believe our stress tests and ccar have very substantially strengthened the largest banking firms. And i think we have, in the process, gained assurance that these firms have enough capital to survive a very adverse stressful scenario, while continuing to provide for the credit needs for american households and businesses. Weve looked carefully at ccar and how we conduct the stress tests and were continuing to do so and have open to making changes, but let me say that conducting these stress tests and making sure that firms have the capacity to be able to meet our Capital Planning expectations, which ccar has facilitated is critically important to having a sound Financial System i cant really see our putting the models into the Public Domain we have been making public the results of the stress tests, i think. Thats an important part of transparency, thats strengthened Market Participants understanding of the strength and weaknesses of particular Banking Organizations. And i think its something thats helped to provide market discipline we have tried to make it less burdenso burdensome, as you have noted for the under 250 billion institution. I think its conceivable if one day the largest institutions were to show on a regular basis that they havent placed very strong Capital Planning standards that meet our expectations that, perhaps, we could change the qualitative portion of the review, for some of them, as long as we had that assurance. But that remains an open question and this is a core part of our supervision thats essential and i commend in terms of moving up to 250 and i even say, there may be regional banks that would sbrn slightly higher that might be afforded some relief and i would argue that its less about kind of annual basis and more, would be more triggered by, on the qualitative piece, if they change their line of business or introduce a series of new products obviously, the sifis, i think, need this and i agree with you that broadcasting a methodology on the front end might not be the right best way to go can you speak for a minute, one of the ways we saw in the crisis was, a lot of Financial Transactions moved into the shadow Banking System . In a sense, and we tried to scoop a lot of those pack into 2008 but capital moves fairly quickly. Where do you see the shadow Banking System in 2017, where there may be vulnerabilities or areas that we ought to reexamine so were constantly looking for vulnerabilities and recognize that risk can move outside the regulatory perimeter. I dont stliomething specifical to highlight i would note with respect to shadow banking, the changes with respect to money markets mutual funds have reduced what was very important in destabilizing risk. We have made a number of changes with respect to the Triparty Repo market that have reduced risks there. So i do see changes that have been made with respect to shadow banking that have diminished risks, but we are on the lookout for areas where new risks may be emerging thank you, senate chair welcome back. Much has been made about the slow pace of the recovery over the last eight years one aspect of the recovery that doesnt get as quite as much coverage is the geographically distributed nature of the recovery its been concentrated primarily in larger metropolitan areas, in fact, if you look at Small Business creation, just 20 counts in this country have accounted for over half of all Small Business creation. This is in contrast to 25 years ago, in metropolitan counties with more than a million people. Growth in new businesses was only 3. 9 . And in counties with fewer than 100,000 residents, it was 8. 4 whereas in this recovery, Small Business creation in metropolitan counties of more than 1 million is 4. 8 unfortunately, in small accounts of fewer than 100, its negative 1. 2 in arkansas, we call counties with fewer than 100,000 people counties theres only 7 out of 75 that have 100,000 people. On page 19 of the most recent report, the fed states that measures of Small Business Credit Demand have remained weak amid stable supply i understand that banks Small Business lending is weak and its never really recovered to precrisis levels. In your testimony, you also attribute the outcome to weak Small Business demand for credit and you say that the supply of Small Business credit is stable. But how do we know that the weak Lending Demand is the cause of this weakness in Small Business lending and that at least to a degree, a contributing factor is not the supply of Small Business loans being caused by the decline and the number of Community Banks in places like rural arkansas so we have a number of surveys including our regular survey on lending standards and Banking Organizations that helps us try to distinguish between demand factors that may be affecting the growth of credit and supply factors and the statement that demand is weak is partially based on that information. We do have surveys like the National Federation of independent business that regularly queries smaller businesses and asks them about the problems that they face. And a very small number cite inability to gain access to credit as a significant factor reflecting their businesses, thats affecting their businesses but Community Banks are important sources of supply of credit, especially in rural areas to Small Business and we are very committed to working to reduce the burdens that these fillers face from regulations, so that they can, they can thrive and they can meet the needs of consumers and Small Businesses in their communities. Does your study and analysis show what Small Businesses do in places like Cleveland County and dallas county, arkansas, when their small Community Banks cles or maybe are acquired and their presence is reduced to an atm location so if youre a Small Business there and you used to rely on your small bank in cleveland or dallas county, that bank is no longer there, whats the most common avenue for them to try to seek financing im not aware of data that bears on that. There may be something, but if there, i may get back to you on that all right thank you so much for your testimony. Thank you. Thank you, senator shelby, and madame chair, thank you for your leadership. Its great to have you here. Last time you were here, we talked about the Economic Situation in the country specifically as it related to wage growth, and even as weve seen fairly steady job growth, we continue to see very sticky, stagnant wage growth and you indicated that that is partly a result of low productivity even though over decades, even when we had higher productivity, we saw very unevenly distributed wage growth. And our mentioned we knead to do more in the way of investing in education, job training, things with apprenticeships, twoyear community colleges, four years and i know youve made comments about that recently. And i just hope as we look at the budget here in the United States senate, we keep that in mind and additionally, the need to focus on modernizing our national infrastructure, which is another area of productivity growth where i think we could make some progress and i wish, in fact, wed started here in the congress, working with the white house on that kind of Bipartisan Initiative so i may follow up with you on that my questions do relate to some of the comments made by the Ranking Member senator brown reminded us on the eve of the financial crisis, most people were predicting sunny skies and clear sailing. Didnt see the storm clouds ahead. And thats why we put in place some of these safeguards, these guardrails to try to make sure the economy could grow, but without undue risk in the system yes and that obviously is the subject of ongoing debate now. So i just have a couple of questions relating to the guardrails, the safety procedures we put in place orderly lick days ago authority that was part of the dodd frank. Do you believe its important to maintain and preserve that provision . I believe its essential to maintain orderly liquidation we saw during the crisis that the absence of way to resolve a nondepository institution, a systemic financial institution, in an orderly way, led to a massive intensification of the crisis now, i agree that bankruptcy should be the preferred root for resolving firm thats in difficulty and congress and dodd frank mandated living wills and that we should work on the ability to resolve these firms under the bankruptcy code. I believe weve made a great deal of progress in getting firms not only to file these living wills, but also to think systemically, as in the course of their regular business, how they need to be organized to make them resolvable, in the event of distress. We have put in place rules to ensure the most systemic firms have sufficient concern loss absorbency, that they could be recapitalized by bailing in debt holders in a situation where they encounter substantial losses but what bankruptcy should be the preferred route to resolve such a firm, title ii is a very important safeguard. We cant know exactly what the circumstances would be at the time that a firm encounters distress and tashat is a very workable approach that i believe we absolutely need thank you one other question relating to some of the safeguards that were put in place, because some have proposed eliminating either the leverage ratio or the capital buffer, former governor turillo said not that long ago, plying a simple leverage ratio for panks in allowing them to escape dodd franks Capital Structures would allow banks to ditch safe assets in favor of riskier ones to boost profits. In other words, he and many others have said its important to maintain both of these measures in order to prevent undo risk in the system. What is your view . So i agree with that. A simple leverage ratio basically imposes a capital charge on a junk bond thats identical to the charge thats imposed on holding a Treasury Bill and that type of system can result in banks taking on a great deal of risk so, i believe riskbased capital should be the most important form of capital regulation thats what should be bonding. And i see a leverage ratio as a backup catchall thats there as a builtin susspender. We have a ratio that applies to the most systemic banks. These two things do need to be calibrated appropriately so that the riskbased capital is whats binding, and we are looking at the calibration of that supplementary leverage ratio, because it may be that it is high, for example, that it affects the custody banks and may be having some unintended adverse consequences but both need to be in place and need to be appropriately call pra ibrateed thank you thank you for being here and for your service i have two quick questions for the first one, im very concerned about global debt. The institute of International Finance recently reported that their estimate of total global debt is 217 trillion or more than 300 of global gdp. Do you agree with that, directionally . So i havent heard that number, that could be, i dont have that number well, of that 60 trillion is estimated to be sovereign debt we have about 20 trillion of the 60 trillion with a that as background, the four large Central Banks also have their largest historic Balance Sheets, as youve said before japan, china, eu, and u. S. Have collectively, close to approaching 20 trillion now, of Balance Sheet size as you talk about reducing the size of the feds Balance Sheet, you coordinating with these other Central Banks and looking at emerging market debt, particularly the 300 billion thats coming due by the end of 18, relative to the size of your Balance Sheet here in the United States . Well, i wouldnt say coordinate we certainly consult with one another and try to make sure we meet regularly and discuss our policy approaches, make sure that other Central Banks understand how we are looking at our economies and policy option s, so i think the major Central Banks understand the approach that others are taking but trying to ask in an aggregate sense how much debt is outstanding is something that were not doing. Our economies are in rather different situations while we all encounter weaknesses the bank of england, the United States, we all resorted to purchases of longer term assets to support growth. I would say the United States is further along in the process of normalizing Monetary Policy, at least in the bank of japan and the ecb. Are you concerned about the emerging market debt with so much of that denominated in dollars today . Well, it is a risk. A significant amount of that is in china, but thats not the only country where there is substantial corporate denom dated debts. And certainly, that is a risk that weve considered that affects the Global Economy with regard to the feds spleet, its currently about 4. 5 trillion, senator scott just asked earlier, and i didnt quite get the answer, is there a directional limit or a target that you have set at this point for the size of that Balance Sheet . You did say that you didnt see a 1 trillion spleet again, but is there a target and a time period that you could discuss publicly about the size of that Balance Sheet . So we dont have a target for the ultimate size of our Balance Sheet. What weve said is that we expect the quantity of reserves in the Banking System, which is now a little bit over 2 trillion, to shrink considerably how small reserve plabalances w become when were done with this process is something we dont know a lot has happened over the last decade to affect the demand for reserves and as this process occurs, we expect to learn more about how the demand for Banking Organization has changed but i do want to point out that the overall size of our Balance Sheet depends not only on the quantity of reserves but on other nonreserve liabilities, importantly including currency and back in 2007, the stock of currency jounding is around 700 billion. And it now stands closer to 1. 5 billion. So even if reserves were it wouldnt go. Soyou talk about a long recovery its been very weak, but very long almost nine years. The typical recovery in u. S. History is about 58 months, about five years the question i have is with Consumer Confidence right now being at a 13year high, and yet consumer debt, as you just mentioned, has risen again in the last couple of years, back to approaching 100 of household include, what are your concerns relative to the strength of this market and the monomonetary or fiscal policy thats coming out of washington over the last couple of years, and even this year, relative to a potential correction in this longstanding recovery, the weak recovery. And does the economy have energy to pop and recover from this extended period of weak Economic Growth so, i do have a reasonable level of confidence that the expansion can continue, and were trying to put in place a Monetary Policy that will facilitate that. Often, previous downturns following expansions have reflected inflation rising to levels that are acceptable, forcing a tightening in Monetary Policy and we have a very different situation now. With inflation running below our target, rather than above it of course, as i said, we are attentive, not only to downside, but also to upside inflationary risks, and we are focused on that with respect to consumer debt, i think households are generally in a stronger position mortgage debt is has declined significantly, relative to Household Income student debt has risen enormously but a lot of the expansion of debt is among a higher income households with strong creditworthiness and the burden of debt payments relative to Household Income is low. So i, of course, there were risks in some areas there, but overall, i wouldnt point to Household Debt as something that is, you know, flashing red on financial thank you thank you, chair senator warren . Good to see you again, chair yellen i want to follow up on the letter i sent you last month, urging the chair to remove the wells fargo Board Members, who served during the banks fake accounts scandal and i appreciate the response you sent me earlier this week, which acknowledges that you have Legal Authority to remove these Board Members and confirms that youre willing to use that authority if its warranted. And thats the question i want to ask today how could removal of these Board Members not be warranted, given the facts that we already know the 2008 financial crisis showed that the big banks had completely inadequate Risk Management systems and after the crash, the fed established tough new rules for Risk Management. Those rules imposed higher Risk Management standards on bigger and more complex institutions, which means that wells fargo by law had to meet a very High Standard so lets lay this out. The wells fargo board of directors is ultimately responsible for Risk Management at the bank. Is that right, chair yellen . That is a responsibility. So the board is responsible and heres what theyre responsible for under the feds own regulations. Making sure that there are, quote, processes and systems to spe grate Risk Management, with management goals in its Compensation Structure and making sure there are, quote, processes and systems for ensuring there are effective and timely implementation of actions to address emernling risks now, wells fargo didnt come close to meeting those requirements they established impossible crossselling goals and put up a Compensation Structure that put enormous pressure on employees to open accounts, new accounts for existing customers and despite a mountain of evidence that these incentives were leading to the creation of fake accounts, the board did nothing for years. The result was thousands of employees opening more than 2 million fake accounts. So, can you explain to me how the wells board can possibly have satisfied its obligations under the feds Risk Management regulations . So im not prepared to discuss in detail what is confidential supervisory matter. I will say that the behavior that we saw was egregious and unacceptable and it is our job to understand what the root causes were of those failures and as ive agreed, we do have the power, if it proves appropriate, to remove directors. A number of actions have already been taken and we need to conduct a thorough investigation to look at the full record, to understand the root causes of the problems and we are certainly prepared to take enforcement actions, if those prove to be appropriate. Bewell, i appreciate that, chair yellen, because we already know a lot thats just in the public record. And that wells, itself, has already admitted to. And that, in fact, wells fargos own board commissioned an investigation by the law firm, sherman and sterling, and found that the board was far too differential to wells executives on Risk Management issues and ignored several red flags about the scope of the fake account scandal. So theres already a lot out there in public. And heres what worries me time after time, big banks cheat their customers and no actual human beings are held accountable. Instead, theres a fine, which ultimately is paid for by shareholders, not by executives and certainly not by directors of the board and nothings going to change at these big banks if that doesnt change you know how i know that, for a fact is because in 2011, the fed fined wells fargo 85 million more illegally steering mortgage borrowers into costlier loans. And the fed specifically said those illegal practices were caused by, quote, incentive compensation and sales quota programs, and the lack of adequate controls to manage the risks resulting from these Program Programs so the fed fined wells in 2011 for failing to manage the risks resulting from bad compensation practices and what did wells do . For the next four years, immediately after that fine, the board signed off on incentive compensation practices that led to the creation of 2 million fake accounts. Fines are not working with these giant Financial Institutions if Bank Directors who preside over the firing of thousands of employees for creating millions of fake accounts can keep their jobs, then i think every Bank Director in this country knows that they are bulletproof. And that poses a danger to the rest of us every single day. You have the power to change the culture on wall street i know you care about this issue. I hope you will use that power thank you thank you, senator rounds excuse me, senator sasse thank you madame chair, thanks for being here im very concerned about the most recently available data on job openings and job hires, as you probably know. There are 6 million open jobs in america right now, and yet job hire numbers are falling i hear about this from Nebraska Businesses every week, when im home the difficulty they have in finding and retaining talent what do you think the most prominent causes are of the mismatch between job openings and job seekers right now. So it is commonly the case that with an Unemployment Rate as low as we have now, that Many Employers would have vacancies and regard them and report that theyre hard to fill in fact, the fraction of firms reporting that jobs are hard to fill is in a way an alternative to the Unemployment Rate as a measure of labor market slack. So with a 4. 4 Unemployment Rate, you would expect that there would be many firms that would find this. That said, i agree there is job mismatch that there are kinds of jobs that firms have had a good deal of difficulty in filling i often when im asked about productivity growth and problems in the labor market, talk about the importance of worker training programs, education, we routinely here that there are jobs, for example, in manufacturing. But ones that require skills that those who are losing jobs dont have and i often when i travel, look at programs that have been devised in different parts of the country to try to enable workers who are having a tough time finding jobs, fill jobs that are available and ive seen examples of nonprofits partnering with state and local government and with local businesses, community colleges, to put in place programs that are linked to Job Opportunities that fill that gap, with a tight labor market, i hear many more firms telling me that they are doing their own training, putting in place and expanding any programs to try to fill these vacancies thank you for that. A im trying to get my hands around whether or not this is a new normal and somehow Economic Growth is going to solve this problem or whether we have a set of cultural issues or institutional issues around midcareer job retraining in particular so nick iberstotd has data that shows that primeaged male Labor Force Participation rates have been declining weve gone from 24 to 55yearold males unparticipating in a seepingly quaussyinvoluntary way from 4 to pushing 15 today do you think this is the new normal well, weve had many decades of declining Labor Force Participation by prime age men and i think this reflects a whole variety of adverse trends, related particularly to technological change thats eliminated many middle income jobs, those that can be replaced by tlblg, combined with Global Outsourcing and production and the individuals that have lost those jobs have found it difficult to acquire the skills necessary to be reintegrated into the labor market. And many individuals with less education are finding it difficult to be placed in jobs that are middle income jobs. So this perhaps intensified during the recession, but its a much longerlasting trend. And you know, weve seen now, unfortunately, this is likely tied to the opioid crisis. Its tied to the problems that many communities have, the break you know, weve even seen an increase in death rates due to deaths of despair, suicide, drugs pardon me jumping in in these communities so this is a very serious matter i think there are social maladies all around this that would be valuable to unpack with your input if we had longer rounds, i would also ask you some questions about the new multiyear economy were headed to and that this institution is not at all nimble but before im out of time i want to ask you just one question on trade. Corn exports from the u. S. To mexico have fallen 7 , just in the last five months obviously, mexico has been exploring other trading partners theres an attempt on mexicos part to turn from the u. S. Towards brazil for certain grains and other commodities do you think that the u. S. Rhetoric around increasingly protectionist tone is having a direct effect now on people trying to prenegotiate other trading partners and do you have historical examples of moments like this where were not yet in a trade war, but seem to be speaking in a way that we might go there and were already seeing effects on certain Agricultural Commodities and exports. I am going to pass, if you dont mind, on this question i mind a little bit you know, i think this is a matter thats well outside the domain of Monetary Policy and really is a matter for congress and the administration well, i was going to ask you to keep your response short, anyway so, thank you, chair yellen. Senator donnelly thank you, mr. Chairman and madame chair, thank you for your service to the country. We greatly appreciate it thank you, senator. This is a subject that my colleague, senator sasse, touched on a little bit, and then you mentioned my state, like many others, is in the midst of a severe opioid abuse epidemic hoosiers of all ages and backgrounds have been exacted. Family, friends, personal addictions and it not only impacts health outcomes, but has a real consequence on economic and Employment Opportunities the National Employment rate is at 4. 4 , but the Labor Participation rate has gone down people talk about the aging population, this and that. How much of a factor do you think the opioid abuse situation has been so i do think it is related to decline in Labor Force Participation among prime age workers. I dont know if its causal or if its a symptom of chair yellen in front of the Senate Banking committee this morning, talking in large part about the spleBalance Sheet, tr to manage that in a way she says is not disruptive to financial markets, although it will shrink appreciably, no expectation that it will go back to the size it was before the financial crisis. Fed on the lookout for areas of emerging risks and saying that they recognize that risk, can, in fact move outside of regulatory parameters. Were going to monitor more headlines from her testimony in the meantime, the president and french president macron are at the president ial palace in paris for their upcoming News Conference and bilateral to set us up for that, eamon javers on what we can expect good morning, eamon. Dpoorgood morning, carl we just saw a few moments ago a warm hand shake between the two president s at the elysee palace. Theyve been moving around downtown paris a little bit today. A little while ago. Doing touring while hes in town now down to the Serious Business theyre going to have that bilateral meeting. Theyre going to have a two and, two a press conference where they take two questions from the domestic press, two questions from the Foreign Press well see who the president calls on there you would imagine that most of the mainstream reporters will want to ask about russia, the donald trump jr. Emails and all of that. The white house might seem see fit to call in reporters that might not ask about that. That is all very carefully stagemanaged. So well watch to see how receptive they are to a question on that topic. Obviously, the two president s today dealing with issues of syria and terrorism, international cooperation. So a lot on at agendaa here for this meeting which was scheduled to coincide with bastille day in france well be coming back to you within the hour. Were joined by senior contributor larry kudlow he is here at post nine us with. Also former chief economistist to joe biden, cnbc contributor Jarrod Bernstein what do you think the pred will be president will be asked and if he is asked, what would he say . As little as possible look, im not part of this story. Donald jr. Should have never taken the meeting, thats point number one on the other hand this honey pot woman lawyer was not associated with the russian government or if she was we have no evidence of that. The other lawyer involved in london is a complete whacko. Basically, i think they were shaking down some trump people for their own cause which is human rights and adoption. By the way, i might favor that cause. I wouldnt have done it this way. I give donald jr. Credit for being transparent. He knows he made a mistake and hes been transparent. Can we talk about tariffs and taxes and growth and Interest Rates . Which do you not think have been buffeted at all about it russian news i assume. Nothing i dont see any evidence of it all right michael may disagree. I dont see any evidence that the markets care about this story. Apparently not. We have record highs to day on the transports in india, south korea, hong kong, turkey and greece there you go. All time or multiyear high. So what is important to you from a policy stand point right now taxes, for a change. Thats a shock. Trade trade, okay . The administration is four score. I want to underscore this for the tax cuts theyre trying to figure out best way to play it wlch, wheth they go for the tax cuts first or the whole package together. Starting in august, frankly. Theyre very much in favor of ending the august recess vacation youve heard me say that a lot i think they should take all four weeks plus july 4th weekend. Lots of disputing going on inside the administration regarding trade. Trade is now a big issue and as far as miss yellen goes, if i were she, i would restrain the restraint. I would restrain i would go very slow because inflation indicators and the open market are not showing anything the actual numbers are falling what she needs, she wont say this she needs trumps tax cuts to spur the economy and so real Interest Rates will go up and she can follow them up if she keeps doing peck, peck, peck on this, i dont know why she has to do it now she did say as long as we have a 2 inflation target, we have to work to achieve it which does suggest that, you know, there is some folk us in that area and maybe thats one of the things thats going to stay their hand because theyre getting too aggressive on the rate front. Look, if the Federal Reserve is in a Normalization Campaign which they clearly are, there is an argument that says fiscal policy just puts more pedal to the met naal in a way that the d would feel compelled to push back on. This is a fed that consistently says the Unemployment Rate is already below the natural rate that theyre comfortable with and, yes, theres the weak inflation issue. Yellen very clearly was scratching her head about that so while im completely with larry on a Monetary Policy critique, i agree that its really hard to make a case for why youd need to raise rates given the lack of wage pressure and inflationary pressure. I also think that given where the fedis, fiscal stimulus right now at least if its not connected to obvious supply side factors like maybe infrastructure or increasing labor supply hold on, larry or increasing, you know, somehow increasing the supply side as secretaries of t aspects, i dont think the fed is looking for that. Jarrod that, is exactly what the tax cuts are designed to do. That is exactly i mean im so stunned by that comment. Look if, i do say myself, theyre directly, directly aimed at promoting the supply side of the economy which is capital stock, formation, business investment, productivity and wages. And none of that is inflationary none of. That and yellen is wrong, by the way, more people working and if they get a pay hike that, is not inflationary inflation is bad money and youd see that in the markets with commodities soaring and gold soaring and the dollar collapsing but none of that is happening. So my point is she ought to wait and let the supply side tax cuts kick in and then she can normalize more. So if anybody believes the supply side tax cuts story that youve been telling for so many decades, we would be having a different discussion right ow. Im sure janet yellen doesnt believe it i thit go to the kansas plate with you that was the latest example of a tax cut experiment that completely blew up in the face of all kinds of these claims about how youd boost the supply side of the economy. So i just think that if youre sitting at the Federal Reserve, youre probably more concerned about, you know, trillions of dollars in tax cuts that are allegedly offset by a 3 growth rate that theyre sure isnt going to materialize before you answer and the debt implications therein. Before you answer this is not goodbye were going to take a short break. Everyone always okay the left loves to talk about kansas im going to talk about some other tax cuts states. Theyre going to tease them dow up is three points well take a short break day two of Janet Yellens appearances on the hill. We have yellen on the hill and watching for a bunt score out of the cbo. Expectations for a revised senate Health Care Bill. The president , of course with, macron in paris. Emmy nominations coming out. A lot to get to. Mike s you were about to make a point yes i love jarrod. But the obsession by my left of Center Friends about kansas really, okay, kansas may have gotten ahead of the skis they also had a complete agriculture and Energy Commodity collapse which hurt their economy. However, what about tax cuts and very positive growth results in wisconsin, in ohio, i made a list in, iowa in, North Carolina in, maine. How about this im going to give credit to a democrat andrew cuomo who slashed the Corporate Tax in new york state and actually it worked pretty well and then im going to ask jarrod to please commit to memory my book jfk and the reagan revolution which, of course, describes the Great Success of lowering marginal tax rates. Look, youve got a good point there on that last bullet point there. You take marginal rates down from 90 , 75 down to 40 , i guarantee youre going to see some kudlow effects. When were talking about going from 40 to
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