SUNDAY MORNING FUTURES

Kick-starting jobs and the economy in the 2nd half of 2014

Business experts explore ways to spark growth

 

This is a rush transcript from "Sunday Morning Futures," May 25, 2014. This copy may not be in its final form and may be updated.

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MARIA BARTIROMO, HOST: The stock market near record highs but job creation's still near lows. What's the disconnect? Good morning, everyone. I'm Maria Bartiromo. This is "Sunday Morning Futures."

What is it going the take to kick start this economy? We will talk to a corporate power house and an industry legend in just moments.

Speaking of jobs what of the 42,000 jobs the Keystone Pipeline project promises to bring? Washington pretty much saying wait until after the midterms. But will Canada's patience run out before then? I'll ask the CEO of TransCanada, the corporation behind the Keystone Pipeline, what his plans are right now.

It looks like open season on telecom mergers. The latest, AT&T and DirecTV, how would this impact your home entertainment, not to mention your monthly bills? We'll delve into all the convergence going on in telecom and cable as we look ahead on "Sunday Morning Futures."

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BARTIROMO: Good morning. Multibillion dollar deal, acquisition activity this year up 60 percent, a record high stock market and next week another reading on where we are in this stalled economy with the release of the next GDP report out on Thursday.

My next guests know a thing or two about creating jobs and growth. Joining us right now, first, he was the senior executive for more than two decades at General Electric, running power systems. He served as the chairman and CEO of Home Depot for five-plus years and he ran Chrysler for three years during its toughest days.

Today Bob Nardelli is still leading and he's investing through his company, XLR-8 and is senior adviser to the CEO of private equity fund Cerberus Capital Management.

And Ernst & Young America's managing partner Steve Howe leads the Americas for the global powerhouse and is advising some of the biggest and most important companies in the world today about strategy, deals and growth at their companies.

Gentlemen, good to have you on the program.

UNIDENTIFIED MALE: Thanks, Maria.

BARTIROMO: Thank you so much for being here.

So Bob, let me kick this off with you because you've seen so many ups and downs in terms of economic cycles, in companies that you've run.

How would you characterize where we are right now? Where do you see growth in this economy?

ROBERT NARDELLI, FOUNDER, XLR-8: Well, I think we have a number of mixed indices out there and indicators. I think we're certainly seeing oil and gas. As you mentioned in your lead-in, certainly telecommunications. I think it's a race as to who's going to own the home, who has the single port of entry with the content.

I think health care and all the health services. So I think there's a number of very strong positive areas. And yet there still is some concern and uncertainty in others. And certainly the unemployment level is a big concern to me and I'm sure a lot of people that we've got to get the GDP going to be able to pull these men and women into the job market.

BARTIROMO: Particularly as so many of them have just give up. They've stopped looking.

I'd like to think of the Memorial Day weekend, Steve, as the unofficial kickoff to the second half of the year.

What kind of a second half are you expecting based on the conversations with leaders around the globe?

STEPHEN HOWE, MANAGING PARTNER, EY AMERICAS: I would say a good one, Maria. I think bullish. There's creeping confidence in the United States. Emerging markets around the world maybe more volatility but the U.S. economy is moving ahead strongly. And I think companies cut costs. I think they've put capital together and now there's more deal activity. There's divestiture activity. There's IPO activity.

Some sectors more than others, but I'd say it looks good.

BARTIROMO: You're absolutely right, a lot of activity out there with deal flow. We're going to get into that with you.

Plenty more to talk about with Bob and Steve.

But first let's get a look at some of the factors behind this economy that seems to bump along the bottom. FOX News senior correspondent Eric Shawn joins us live.

ERIC SHAWN, FOX NEWS SENIOR CORRESPONDENT: Good morning, Maria, and good morning everyone.

Washington' tax place have apparently chased trillions of dollars out of our country and that means lost jobs, economic growth and prosperity for many Americans.

The U.S. corporate tax rate stands at 35 percent and that has motivated some of the largest American corporations to park their money overseas in countries that grab much less of a tax bite than we do.

Some of the largest multinationals and even turned their backs on our nation altogether. As of last year, nearly $2 trillion has been stored by American companies outside of our borders. And Bloomberg News says that's an increase of more than $200 billion from the year before.

The top five are GE, Microsoft, Pfizer. Merck, and Apple. In fact, the group Citizens for Tax Justice says the majority of Fortune 500 companies, 301, permanently invest offshore and says, quote, "some have managed to avoid virtually all taxes on these profits."

And there's also the strategy known as inversion, where a U.S. company buys a smaller foreign one and then reincorporates as a non-U.S. form to avoid U.S. taxes. Pfizer is now pursuing British pharmaceutical giant AstraZeneca and could move to reincorporate in Britain to save an estimated $1 billion in U.S. taxes each year if that deal goes through.

And then there are those who say Americans also lose out to foreigners in those high-tech so-called STEM jobs, the special visa work jobs for science, technology, and engineering but some others say that there is no shortage of qualified Americans for those posts.

The Senate bill, meanwhile, is aimed at trying to stop the corporate practice of inversions, that for two years. But even if the company does proudly remain American, it seems more and more are putting their money where Uncle Sam simply cannot grab a piece of it.

Maria?

BARTIROMO: All right, Eric. Thanks very much. All great points.

Back with Bob Nardelli and Stephen Howe.

What about that, Bob? You have run many multinational corporations. All of this, what these companies are doing, is probably in the confines of legality. It's not like they're breaking the law by avoiding U.S. taxes. So how should tax reform change?

NARDELLI: Yes. There is no question. I think it's important to state that this is all legal. It's all within the confines. I think the other thing we should talk about is how U.S. corporations might be disadvantaged in competing in similar sectors where their headquarters are off shore. And you talk about General Electric, going against Siemens, going against Ahlstrom (ph) and of course when they're going to the market they have a heavier burden on the tax rate.

So I can understand why corporations are keeping money offshore either to invest in offshore acquisitions as we heard, maybe to invert and move the headquarters and save eve more tax. So we have got to do something in Washington to really encourage the repatriation, therefore the reinvest and recapitalization. I think the energy policy will encourage more manufacturing jobs to come back as energy costs go down.

BARTIROMO: Yes, but Steven, people are so frustrated with our leaders playing politics instead of leading. We have been talking about the possibly and the need for tax reform for so long. Why can't we get it done?

HOWE: Well, it is politics, Maria. I'm afraid we do need tax reform. Our system is outdated but it's probably not going to happen until the next election cycle. But the fact that the discussion is happening is a good thing. This is an issue of global competitiveness. Our companies based here cannot compete unless something is done about it. So inversions are going to happen. If it doesn't, if they are not unlocking some value, then the activists will be after them. So I think this is going to continue to put the spotlight on the right issue. And eventually will turn the corner here.

BARTIROMO: What about activists? You have seen a number of activists come and try to make change and effect change at companies. They want -- you had Carl Icahn pushing Apple to pay back more in terms of buyback and a dividend. You've got everybody from DART and even GE was rumored to have activists pushing Jeff Immelt to do something. In other words, the largest of the large being pushed by shareholders.

HOWE: No question about. And I think they're having an impact. You know, we talked about tax; we're seeing divestures and spinoffs, activist driven. This is here to stay, too, you're right, bigger companies, more of them aligned with institutional shareholders in many cases. Companies and their boards have got to be on their game. If you're not driving the value the activist is going to come find you.

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BARTIROMO: You have got --

NARDELLI: Yes, I think no company should feel insulated from that regardless of their size. You mentioned some big names. And I think these activists are no longer intimidated by size. And they are flexing their muscles and going in and acquiring a position. And I think what companies should do is a self-assessment. Where are they vulnerable? And if they are penetrated, if you will, or the activists do make a move, what are they going to do to handle that? And is there a more homogenous way, less combative way to work with them and try to get resolution?

BARTIROMO: You mentioned earlier that you're seeing growth and energy and I know you're also investing there. But you ran Home Depot for so long and have a great sense of the housing market.

What's your sense of the second half of the year?

NARDELLI: Well, I think we've had -- we certainly had a strong first half in the recovery. I think the second half -- we could certainly see some slow down. We saw the numbers today, are -- were OK, but not necessarily robust. They were within expectations and forecast.

But I think housing is a clear indicator of consumer confidence and economic recovery. So I would be -- keep a watchful eye on housing for the second half.

BARTIROMO: And in terms of the deal, you mentioned all that deal flow, what's behind all of these mergers we're seeing?

HOWE: Well, I think ,again, companies have done the right thing since the downturn. They have streamlined. They've gotten themselves in good shape. They've built capital. Now they see an economy that is improving. So we're seeing this deal activity again, bigger deals being announced now. And it's good to see as well as the smaller IPO activity growth companies.

BARTIROMO: Because they're looking for growth in a slow growth environment overall.

Gentlemen, it's been great having you on the program. We so appreciate it.

UNIDENTIFIED MALE: Thank you. Have a great memorial weekend.

BARTIROMO: And to you, very much. Bob Nardelli and Steve Howe.

Will a merger mania undermine the quality of your home entertainment and Internet service or is it much ado about nothing? The pending AT&T-DirecTV deal as we look ahead on "Sunday Morning Futures."

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BARTIROMO: Welcome back. Congressional lawmakers promising to hold hearings on AT&T's proposed $48.6 billion acquisition of DirecTV. Just months after Comcast's $45 billion plan to acquire TimeWarner Cable. Megamergers can transform industries as air travelers know all too well. But would massive telecom mergers affect our home entertainment service the way airline mergers impacted the industry so many years ago?

Jessica Reif Cohen is managing director and senior media and entertainment analyst with Merrill Lynch, the leading analyst on this segment for many, many years.

Jessica, good to have you on the program.

JESSICA REIF COHEN, MERRILL LYNCH: Thank you. Love to be here, thank you.

BARTIROMO: So all of this consolidation from DirecTV and AT&T to Comcast and TimeWarner Cable.

Can you explain what is behind this? I feel like we're back in the '90s where we're seeing so many deals in cable --

COHEN: Absolutely. Well, scale matters. It really does matter. In the case of Comcast specifically , they are going be in 24 of the top 25 markets. And over 40 of the top that the and that means a lot of things for them. They can go into SME, the small and medium enterprise business which directly goes after the telco businesses so they need to get bigger.

Over time they are going to get into wireless. Mobile video is much bigger.

What do they do with advertising? Do they go after national ad dollars? I think this is -- we're on the cusp of targeted advertising making a big difference. Comcast has just rolled out electronic sell-through and all of the studios are talking about what a fabulous impact it has had for television and film products.

We are seeing content being used in many, many different ways. And again, scale matters because you want to reach the most consumers with the best product and be able to offer it across multiple platforms.

BARTIROMO: So scale matters, meaning the bigger you are, the better positioned you are in TV, in broadband, Internet, content.

COHEN: Wireless.

BARTIROMO: Wireless -- we have one player that will basically be our entertainment everything?

COHEN: Obviously that's what they are hoping. They would hope to get you -- I don't usually use the word sticky, but they'd hope to have you for their suite of products. Just again, going to Comcast because they have been so innovative. They have really changed the television landscape in the last few years.

So with their Xfinity platform, I think most New Yorkers can't wait to get this product because what we've seen is a fantastic search and recommendation engine. It is a very different user interface than we have ever had in New York or that people will get in L.A., et cetera.

So they are going into the biggest markets and what they found so far is that people are finding 40 percent more channels. They are watching more channels. And the usage has gone -- In Nielsen homes it's typically five and a half hours per day per home which already seems crazy.

In Comcast Xfinity homes it's 7.6 hours.

BARTIROMO: They're watching television for seven-plus hours?

COHEN: It's everybody in the home. They're finding 10-11 people are taking their devices into bed and they can see the usage going from the television to the devices..

BARTIROMO: Let me ask you about sort of the downside of this. Should our customers expect to see higher bills? Given the fact that you have got one provider supposedly that may very well control your TV, your broadband, your wireless, will my prices go up?

Already we're paying a lot for my cable bill. That price goes up?

COHEN: I think the -- all of the proposed mergers will come with conditions, that's for sure. In many ways this may actually help on the cost side.

Programming costs have been growing roughly 10 percent or double digits, some 10-12 percent per sub over the last 10 years, I want to say. And so from a programmer perspective, they're really nervous. But it's inevitable. Costs can't keep going up at this rate. So it may actually help the biggest cost, which is programming, to slow down.

BARTIROMO: It's an interesting point to really explore because today in an area of the economy being retail, people are spending less and less on consumer goods but they are still paying a lot on their cable bill. And that's where customers put their money in oftentimes. And that's getting expensive.

COHEN: It is expensive except if you think about what you're paying --

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BARTIROMO: -- getting more products and you're getting more usage.

COHEN: People watching so much more and in so many different ways.

In many ways, as much as the programmers will contest and howl over these big mergers, the reality is that the big companies with the best quality content, their content is being used in many different ways and it's becoming more valuable. So this electronic sell-through program, digital, the margins are higher. Finally there is competitors to iTunes.

BARTIROMO: Yes. Oh, that's true. That's a good point. So if iTunes has a market --

COHEN: -- like a billion dollars in revenue. And all of a sudden, Comcast is coming along and others will join in. They don't own the market. Others will come along and so you are downloading more, you're watching it and renting it, owning it.

BARTIROMO: Before you go, go look ahead for us. Looking ahead, what are the catalysts for this? What should we be looking at in terms of the catalyst? When do these deals close? Would you invest here based on catalysts ahead?

COHEN: Well, typically when you see these type of megamergers that companies go into kind of deal limbo. And until we get closer to approval and know what the conditions are, I don't think they can collapse, but it does have an impact. This does kind of put a lid on the stocks.

Having said that, you want to own -- you want to own Comcast when this deal closes. They're going -- once the TimeWarner Cable shareholder vote happens sometime late summer, this summer, then Comcast significantly increase its buy back. You want to own -- so you'll see bigger capital returns. You will see more services. You'll see a lot. All they did so far, all the companies we have talked about so far are cost synergies. What are the revenue sense synergies? We think they'll be significant.

BARTIROMO: All right. We will leave it there.

Jessica, great to have you on the program.

COHEN: Thank you.

BARTIROMO: Thank you so much, Jessica Reif Cohen, joining us.

As you remember those who gave their lives for our freedom this Memorial Day weekend, we are taking you inside a program supporting the family members who serve on the home front. Plus the Keystone Pipeline, the CEO of TransCanada is with me today on how long he is willing to play the waiting game as we look ahead on "Sunday Morning Futures."

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BARTIROMO: This weekend we honor those that gave the ultimate sacrifice for our freedom. The holiday takes on more weight this year as we watch the scandal unfold at the Department of Veterans Affairs and we struggle to improve the treatment that our service men and women receive when they return home from overseas.

But even when the V.A. can treat our troops, their families need to make do on their own regardless. This is where my next guest comes in.

Fisher House provides lodging and other services that military families cannot afford. Ken fisher joining us right now.

Ken, good to have you on the program.

KEN FISHER, CHAIRMAN AND CEO, FISHER HOUSE FOUNDATION: Thank you for having me.

BARTIROMO: Thank you so much for not just joining us but really for what you do. Explain to our audience the program. All we have been hearing are such bad treatments of our veterans and actually Fisher House is just a complete opposite of that.

FISHER: Well, it's something that works.

We build houses, homes away from home. For families, wounded personnel or veterans to stay in for no charge for as long as the hospital stay dictates. It's a public private partnership that has worked for 21 years the way it works is we build them. We gift them to whichever branch they will serve, including the V.A. and they agree to staff, operate and maintain them in perpetuity.

So it's we have been doing this as I said for 21 years and it actually works in the V.A. system. We have had a great partnership with them. SO in this sense we enjoyed that partnership.

BARTIROMO: Most people don't realize the struggle that families are enduring when their sons and daughters and husbands and wives are overseas fighting for the freedom of the USA. There is enormous other part of the story of families.

FISHER: That's right, Maria. Families serve also. We hear so much about the whole soldier, especially when they're wounded. And families make sacrifices, military families, when their loved ones are deployed they make sacrifices that the average American has no concept of at all.

And so what we try to do is in addition to our core mission is we try and bring to light these sacrifices and their plight and honor their sacrifices by making this program work as well as it does.

BARTIROMO: What needs to be done, do you think?

What do the rest of us need to understand better about our military men and women and their families and how might the public be able to help?

FISHER: Well, I think we've made great strides in honoring them -- the current scandal in the V.A. notwithstanding. We've become very mindful of their sacrifices. It's not uncommon to walk up to a service man or a woman or someone potentially wearing a hat that says "I'm a Veteran" and thank them for their service.

But that's great but they have to be more than words.

BARTIROMO: Yes.

FISHER: They have to be done. They have to be backed up with deeds. And that's what we do. Thanks for your service is not enough anymore.

BARTIROMO: What would you like to see at the V.A.? Knowing that your program works with the V.A. and it's been a positive one, you see the headlines. We know what's going on there.

What's going to move the needle on that situation?

FISHER: Well, unfortunately, it's taken a while to get these reports. I mean, right now, we've got the whistleblowers and the allegations and so forth and calls for resignations and so forth. I think at this point I'd like to see what these reports hold. The problem right now is that they're moving fast enough. And I think that exacerbates the issue because every day some -- there's another story that breaks. And there doesn't seem to be a sense of urgency. And I would like to see the issues put front and center in a meaningful way. Reform is not something that happens one item at a time. And if -- you know you look at what happened and these senseless deaths that have come, let's put some meaning behind them and reform this system. It can't just be meaningless.

BARTIROMO: And we need the truth. We need to know what's going on in order to really get something done. So that's step one.

Ken, it's been great having you on the program. Thank you.

FISHER: By the way, I just want to tell you that we enjoy another partnership with Sobieski, who's helped us in many ways build houses and promote what we're doing. So I wanted to say thank you to them as well.

BARTIROMO: I'm glad you did. Shout out there. Ken, thank you so much.

FISHER: Thanks.

BARTIROMO: Have a safe Memorial Day.

TransCanada's patience wearing thin; the CEO of TransCanada will join me next.

Will he wait for Washington or build a different pipeline and scrap Keystone altogether as we look ahead on "Sunday Morning Futures."

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SHAWN: Life from America's news headquarters, I'm Eric Shawn. Chilling surveillance video emerging at the deadly shooting rampage at the University of California Santa Barbara, people ducking and running for cover in that deli when Elliot Roger opens fire. One person was shot and killed there.

Authorities say Roger shot and stabbed his victims in multiple crime scenes killing a total of six people and injuring 13 before killing himself.

Thousands of students held a vigil lasts night to remember the victims.

Pope Francis is now in the West Bank, celebrating mass in the town of Bethlehem. It's the second leg of his three-day pilgrimage through the Holy Land, the pope making a plea for peace calling the current stalemate there, quote, "unacceptable". The pontiff also invited the presidents of Israel and the Palestinian Authority to visit the Vatican next month.

I'm Eric Shawn. Now back to "Sunday Morning Futures." And I will see you at 12 noon here on the FOX News channel.

BARTIROMO: A decision in Washington on the Keystone Pipeline project becoming less and less likely before the midterm elections. The Senate proved unable to pass an energy bill earlier this month. It would have forced a vote on Keystone. Now that remains in limbo.

How long will Canada's patience hold out? Joining me right now to talk more about it is the president and CEO of TransCanada Corporation, Russ Girling.

Russ, good to have you on the program.

RUSS GIRLING, PRESIDENT AND CEO, TRANSCANADA CORP.: Well, thanks for having me.

BARTIROMO: Thank you so much for joining us.

So how long are you willing to wait? Give us the status check of where we are with Keystone?

Where we're at is, well, we're over 2,000 days in, which is really longer than it should have taken with 17,000 pages of analysis all that point to the pipeline should get built. Your question of how long, well, our patience lasts. We've been very patient today. This has been a tough and frustrating process.

But I'm a believer that at the end of the day the right thing will occur. Marketplace needs transportation capacity right now. That void is being filled by railcars, which is less efficient and potentially more dangerous to the public.

That will continue to grow if we don't get these pipelines built. So you need to get them done. The marketplace is demanding it and TransCanada will remain committed to it as long as the marketplace remains committed to it. And for the foreseeable future, I don't see that changing.

BARTIROMO: I know that this is totally laced with politics, but do you think it's partly the rail contingency that doesn't want this built? They want to continue that business of carrying oil and gas by rail car?

Or is this environmentalists who are saying heavy crude from Canada is dirty?

What's the big pushback?

GIRLING: One hundred percent the latter. I don't think that the rail industry in any way is lobbying or trying to thwart the development of pipeline infrastructure. We work hand in hand with the rail industry and actually -- in fact, we're looking at alternatives to Keystone right now that will bridge the gap to when it gets built, a rail terminal in Alberta and one at Cushing, Oklahoma, or Steel City, Nebraska, to make sure that we can move that product that is growing every day from Canada and from the Bakken as well to market.

So we work with railways. They understand they have their own -- we have a common interest in sharing pipeline safety. The issue is anti-fossil fuel activists who want to make sure that all oil stays on the ground and primarily in this case their focus is on keeping -- trying to keep the oil sands in the ground, which it is a misguided approach.

BARTIROMO: Because of course the oil sands are not going to stay in the ground. That oil is going to come out in Alberta.

What are your options? Let's say that politics continues here and Keystone, the rest of this pipeline is not built, what do you do then?

GIRLING: Well, I think as I mentioned, firstly the industry has responded. Production is growing in Canada by 600,000 or 700,000 barrels a day, production in the U.S. up by 1.5 million barrels a day, 2.5 times the size of Keystone . And we have seen all of that move on to the rails and that will continue, as I said.

As far as other pipeline options Canada's got two options to the West Coast. We're building, working on building a large million barrel a day project to the East Coast. Once you get water borne then you put it in tankers and you can move anywhere in the world including back into the United States, into the Eastern Seaboard of the United States or into the Gulf Coast. You don't require presidential permit for any of that movement.

So the marketplace will figure out its way around all of these inefficiencies and difficulties through the regulatory process.

BARTIROMO: There is a movement right now to get this -- some decision making out of President Obama's hands.

Do you think that could be happening? And then you would, you know, divert all of this political situation?

GIRLING: Our approach has not been one of getting this involved in politics. I would actually like to get it extracted from the political process.

That said, we are supportive of any process that will allow us to get to a decision sooner rather than later. The Department of State has concluded that this project is -- essentially can be managed from an environment perspective. It doesn't create GHG emissions. It is safer than the alternatives. It's very clear on all of those fronts. So we should be able to move to a decision as quickly as possible. And we support anything that moves us in that direction as quickly as possible.

BARTIROMO: So why do you think that the State Department has come out, I believe, with several reports saying that this is safe and this can be done safely, then what's holding it back?

GIRLING: Well, that's a good question. And I don't have the answer to that. If I did, I might be able to advance this faster.

You know, obviously that's the frustrating part for us is that we have done everything we possibly can. We have jumped over every hurdle, through every hoop that's been put in front of us. We have got 59 conditions from the pipeline regulators who said 17,000 page analysis, now it's just five reports. All that have pointed in the direction of approval. Yet we continue to wait. And I don't have an answer as to what gets us over that finish line.

BARTIROMO: Yes. Let me ask you, you have other deals in progress as well, you've got other projects that you're working on, Energy East.

What's the potential for that project?

GIRLING: Well, I think the industry has responded, as I said. Production is up. We need more than Keystone. We need multiple pipelines. Production in just the last four years has grown 2.5 times the size of Keystone. So we need other projects. Energy East is another project that will come out of Western Canada, deliver crude to Eastern Canada.

Most people don't know that Eastern Canada imports about 700,000 barrels a day from other places. And a good chunk of that actually comes from the U.S., from the U.S. Bakken, and goes into refineries in Nova Scotia.

So if we can build a pipeline that will take Western Canadian crude to Eastern Canada as well be able to access the water. Both in -- we got a port -- a plan for backing a port plan for New Brunswick, if we can get on the water, then we could get the Eastern Seaboard in the United States and hit the Gulf Coast of the United States.

So there are many alternatives that the producers and refiners are looking at to get around this current delay in the pipebuilding and pipeline in construction.

BARTIROMO: In terms of Keystone specifically, have you spoken to counterparts in China, in India as a backup?

If in fact this oil does not make it into the United States or for the rest of the pipeline being built, are you prepared to take the oil, the product to China and Asia?

GIRLING: There's great interest all over the world. And the notion that the oil sands is going to stay in the ground is totally misguided. We have seen not only the Asians but the French, the Norwegians, the British, the Americans, all investing heavily in development of the Canadian oil sands.

That product will get developed. It will make it to export points and it will go to its most logical markets, the United States, Europe and Asia. It's a product that the world wants. And Canada is going work its hardest to deliver it as responsibly as it can.

BARTIROMO: Absolutely.

Russ, it's good to have you on the program. Thank you so much.

GIRLING: Thank you so much for having me.

BARTIROMO: Now with a look at what's coming up on "MediaBuzz," let's check in with Howard Kurtz, top of the hour.

Howie, good morning. What are you working on?

HOWARD KURTZ, FOX NEWS HOST: Hi, Maria. I have got an exclusive interview with Mariel Hemingway on how she and Ed Begley Jr. got caught in a videotaped sting with a fake Middle East oilman orchestrated by conservative activist James O'Keefe (ph). But we're going to focus on the V.A. hospital scandal. Why it took so long for the mainstream media to put this story front and center and why this scandal seems to have resonated with the public with the press in a way that many of the other administration scandals have not.

BARTIROMO: Yes. That's certainly one of the big stories. It makes me remember what Jeff Zucker said the other day at CNN. I wonder if you covered this. And that is he said he's not going to get bullied into covering Benghazi.

KURTZ: Yes. A really interesting comment by the CNN president is if Benghazi is completely a partisan issue. Obviously it's been politicized to some degree. But with this V.A. hospital scandal, it seems to me that Democrats as well as Republicans, even President Obama says he's mad, are focusing on how bad this is, the way our veterans are being poorly treated.

BARTIROMO: Yes, absolutely. Thanks so much, Howie. We will see you in about 20 minutes, top of the hour on "MediaBuzz."

Back to one of the top stories of the day and that is the recall crisis going on at General Motors. A lot of vehicles with the deadly ignition problem are still on the road. Who's going to fix the mess? Our panel on that.

Plus the Keystone Pipeline and a lot more as we look ahead on "Sunday Morning Futures."

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BARTIROMO: Welcome back. OK. Wrap your brain around this one. Since the 2009 auto bailout, GM has sold 12.1 million cars and trucks in the U.S.. In that same timeframe it has recalled 13.8 million vehicles.

The Feds fining GM the maximum $35 million but keep in mind the auto giant made over $30 billion -- or generated over $30 billion revenue last quarter alone.

Is raising fines even really the solution here? I want to bring in our panel.

Ed Rollins was principle White House adviser to President Reagan in both his terms and has been a long-time strategist to business and political leaders. He is also a FOX News political analyst.

Jon Hilsenrath is the chief economics correspondent for "The Wall Street Journal," of the word on the Fed is John's specialty.

Good to see you both. Thanks so much for joining us.

This is -- these numbers are mind-boggling, Ed, in terms of the auto recall.

Are there cars that have not been recalled at GM?

ED ROLLINS, FOX NEWS POLITICAL ANALYST: I'm sure there are. And the idea that you say you're going to do a recall and getting them in the shop and actually getting people to make that change is pretty dramatic.

I think it has damaged GM dramatically and I think obviously the new president there is trying to get this thing out of the way. But I just think if you're going to buy a new car and you basically -- which will help move this economy forward, are you going to go buy a GM car? It's not like one or two, it's been a dramatic recall effort. It wouldn't give me confidence.

BARTIROMO: Yes. It's troubling to see that number of cars recalled, John.

JON HILSENRATH, CHIEF ECONOMICS CORRESPONDENT FOR "THE WALL STREET JOURNAL": I think (INAUDIBLE) a lot of those cars were made before the bailouts. But it points to something -- we look at the bank bailouts. It seems like Citigroup is always in the middle of bank bailouts.

GM seems to be always be in the middle of auto crises in this country.

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HILSENRATH: -- companies are going to get their acts together.

BARTIROMO: Yes. And of course at the end of the day, it's the public that gets angry and upset. And then it causes social unrest.

So from auto to oil, let's take a look at what's happening in the energy space because this is one space that everybody says is the low hanging fruit in terms of the big opportunity for job creation in this country, yes?

HILSENRATH: Absolutely.

ROLLINS: I think this deal that Russia and China just concluded last week is dramatic. First of all, it diminishes any sanctions we try and put on Russia at this point in time. Clearly the whole shift to Asia, which the president's talked about, Russia has done it. Russia's actually made a deal. We've not made a deal. And so my sense is it's dramatic.

And we're still sitting there, not making a decision on the Keystone pipeline, which is also a dramatic message.

BARTIROMO: Well, look, Putin met with the prime minister of China?

HILSENRATH: Spent two days with him in Shanghai and they walked away with a 30-year deal valued at $400 billion for natural gas supplies that are equivalent to what the State of New York consumes every year.

This was the biggest business news that happened in the past week, happened in Shanghai. I think it's remarkable.

ROLLINS: And gigantic construction on both sides.

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BARTIROMO: Wow.

HILSENRATH: The United States is -- the Obama administration is talking about a pivot to Asia. We have this conflict with the Russians, Putin turned around after 10 years of negotiations, he did a pivot and walked away with a deal that is very good for the Russians and also good for the Chinese.

BARTIROMO: Meanwhile the Europeans can't stick to any sanctions and deepen the sanctions because they're afraid. Last week we reported that Putin said, look, you know what, Ukraine, you're going to pay cash and you're going to pay up front for our natural gas.

Who the heck knows if he's going to do that with the Europeans?

ROLLINS: Your two strongest customers and you're Russia and selling gas and it's Germany, strongest economy in Europe and China, one of the strongest economies in the world, you've got two pretty good customers. You can basically finish in pretty strong --

HILSENRATH: Putin just protected his flank. So if there is pushback out of Europe, he's now got a huge customer in the East in the form of China, which is desperate for energy supplies. And these are clean energy supplies so the Chinese, the Chinese are willing to pay up for it. Although they actually got a great deal in this case from the Russians.

BARTIROMO: All right. We will take a short break. More on this with John and Ed.

This holiday weekend the unofficial kickoff to the summer season or the year's halfway mark and yet still we're bumping along the bottom.

What is it going to take to jumpstart the economy and where are the jobs? The panel will weigh in on that as we look ahead on "Sunday Morning Futures."

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BARTIROMO: Welcome back. We're back with our panel, Jon Hilsenrath, Ed Rollins. Also joining us is Steven Rattner, he is chairman of Willett Advisers, former counselor to the U.S. Secretary of the Treasury. Steve, thanks for joining the conversation.

STEVEN RATTNER, CHAIRMAN, WILLETT ADVISERS: Thanks for having me.

BARTIROMO: Good to see you.

Let me ask you about the economy and where we are. Tim Geithner just out with his book, "Stress Test." It's been seven years since the dark days or six years since the dark days.

How would you characterize things?

RATTNER: Actually, I'm in the middle of reading Tim Geithner's book, and it gives you nightmares. It just brings back all of the fear and how close we really came to the abyss. And I think Tim is a real American hero for what he did.

And we're a long way back. We're not all the way back. We're in a slow growth economy for a whole bunch of reasons. And I don't really see that improving a lot. But at least we're growing.

BARTIROMO: You know, part of the real stimulus and the boost to this economy, Jon, as you know, has been the Federal Reserve and the QE1, QE2, QE3. We're coming to the end of that now.

HILSENRATH: Right. I think we're in a period with the markets and the Fed where there's a calm before a storm. Interest rates have been incredibly stable. Long-term interest rates have come down a bit. Stock markets have been stable.

The Fed is heading towards a battle later this year over when to start raising interest rates. That hasn't kicked in yet, but we see it as the unemployment rate continues to fall.

As that comes down, there's going to be a really intense debate, I think, in the second half of the year, and that could really unsettle markets and finally create a little volatility after it's been so settled for so long.

BARTIROMO: It's really interesting because when you look at the stock market trading near all-time highs there are just no risks on the horizon. Everything's great, right?

Or look at the bond market and they're really looking -- the bond market is telling you that there are risks out there when you see where interest rates in the 10-year, for example, hitting 2.48 percent. That was an important milestone that we reached last week.

What do you think the bond market's saying, Ed?

ROLLINS: Well, 90 percent of the companies reported in the quarter very minimal -- no one met their expectations. So my sense is it's telling you there's a real lack of confidence. And I think as Steve points out, this is a very slow recovery. It's not meeting anybody's expectations. Nobody knows how long it's going to take us to get back to where we should be.

BARTIROMO: Was that something you focused on, the yield?

RATTNER: Well, I think what the bond market is saying is that it's really worried about what's going on in most of the developed world. That you have a slow to non-existent recovery in Europe. I think the jury is still very much out on Japan and whether Prime Minister Abe's reforms are really going to work.

So there's a flight to quality. There's a flight to Treasuries as the safe haven in a potentially deflationary world and a slow recovery here.

I've been pleasantly surprised at how well the stock market has taken the Fed's signals so far. So I'm cautiously optimistic the Fed will be able to work its way through this without unnerving the markets. But we'll see.

BARTIROMO: Because companies are sitting on so much cash.

RATTNER: Well, that's part of it. But I think in the context of the size of the markets the amount the Fed is tapering is really not a huge deal. I think the prospect of interest rates rising is definitely out there but it's still a long way away.

And I think the market is focused on the fact that although earnings are not growing fast they're at least -- they seem to be -- they seem to be reasonably solid.

BARTIROMO: Yes.

HILSENRATH: You know, Maria, I think we're at an important point in the next couple of months where we're going to really get a read on this economy. A lot of people expected a big pickup in growth this year. It hasn't happened yet in part because of bad weather.

We have to see in the next few weeks of data whether it materializes.

BARTIROMO: We've got still to come, we'll take a short break. Then the one thing to watch for as we look ahead on "Sunday Morning Futures." My panel will weigh in.

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BARTIROMO: And we are back with our panel.

What is the one big thing to watch for the week ahead or weeks ahead? Stephen Rattner, Jon Hilsenrath, Ed Rollins. What are you watching?

ROLLINS: The Ukraine election today is very, very important. And obviously it will make a difference whether the Russians feel they can get someone they can deal with or whether they continue the tactics they've had.

The more important thing domestically, though, is the V.A. crisis. If this continues for another week or two, which I think it can, this is going to put this presidency in trouble.

BARTIROMO: Jon.

HILSENRATH: Unemployment rate was 6.3 percent in April. We're getting new numbers after Memorial Day. If that keeps coming down, it could wake up the bond market and the stock market.

BARTIROMO: And that means higher --

HILSENRATH: If it keeps coming down we could see interest rates going up.

BARTIROMO: That's a negative for the stock market.

What do you think, Stephen?

RATTNER: I think the key issue is the U.S. economy. I'm watching every bit of economic data that comes out trying to figure out if Jon is right or that we may accelerate; we may not. And just see where we're headed.

BARTIROMO: All right. So more economic data with GDP out on Thursday.

That'll do it for "Sunday Morning Futures." I'm Maria Bartiromo. Have a safe and healthy Memorial Day, everybody. A heartfelt thank you to our troops for your service.

"MediaBuzz" with Howie Kurtz begins right now.

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