tonight on the kudlow report, breaking news, obama shifts bailout nation t.a.r.p. money to small businesses. well, is this a campaign payoff? why not across the board tax cuts for everyone? plus, i am sick of aig bonuses and their whole story. how about an exit strategy instead? is the fed deflating the stock market. how about a real accounting by congress. congress could surprise on the upside, and how about gm selling little green go carts. fasten your seatbelts, "the kudlow report" begins right now. good evening, everyone. i'm larry kudlow. welcome back to "the kudlow

report," where we believe free market capitalism this is best way to prosperity. breaking news, team obama considering using t.a.r.p. funds for small business loans, obviously, a few questions like, uh-huh? where does this come from? is it economic panic in the white house? besides campaign contributors, who is going to get this money exactly and how are they going to get it and what are the criteria? with us is a financial reporter with the "washington post" which broke this story a short time ago. welcome to the program, benjamin. give me a few hints here. what's the story as you understand it. >> the administration has been talking for a while about the importance of funding small business, as part of its economic recovery program. we've known that for some time. what's new here, they're talking about considerably expanding the amount of money available to small businesses, using some of that 700 billion funds congress

approved in the file to increase the size of small business administration's program that makes what are called working capital loans to small business, basically money to virarious miscellaneous businesses. >> i'm sure you know there's been a debate in congress, as the banks pay down their t.a.r.p. money that money should go to taxpayers in the form of debt reduction, whereas the treasury department wants to keep the money alive and not bury it in debt reduction. is there any sense how much money we're talking about here. >> the discussion is in the early phases, to give you a sense of context, the program in questions, the 7-a lending program does about 12 to $15 billion of business a year you doubled that, it would be about a $15 billion increment. that would be sizable but still sizable small share of the remain i remaini remaining bailout funds. >> do you think this debate of a second stimulus package, first

of all, is this a second stimulus package. >> a lot smaller than the first stimulus package. if it is -- but it does have one quality in common which is this is not an attempt to fix the plumbing, banking system, this is handing water out directly to the people who need it. it is stimulative in that sense and goes directly out to small businesses and say, here's the money you need to operate, we're not getting it to you through the banking system, we will try something a little bit more direct. >> how are they going to do this? >> sba loans take a long time. it's government sponsored credit. how -- who, how, where and why? i guess that's what's got me puzzled. it would seem to me, this is a value judgment i will make editorially. if you had $30 billion in spare cash or some such number, why not hand it across the country in terms of tax cuts and let everybody decide how to spend it? let's go back to the sba. how will we get this stuff done, get it out the door and who will get it?

>> we don't know many of those answers. the basic idea is there are millions of small businesses across the country that can't get money from banks right now either because of their credit profiles or because banks have cut back on lending, they can't get the loans they need to keep people working for them, buy inventory, finance their activities, the small business administration already does some lending of that kind. if they had more resources, they might be able to expand it, keep people employed and small business humming and small businesses going. >> do you think this is panic in the white house, we've been in this discussion, first they thought unemployment might peek at 8 or 8 1/2%, you know it's at 9 1/2%. the president himself said it's going through 10%. are they panicking now? >> they have been talking about the importance of small business lending a long time. we're a couple months away from the im mention of anything that would look like this. there's not any quality of hasty action about it, we can say that much for certain. >> you think this is a real

shift in their thinking? it seems odd to me after joe biden said we misjudged the economy and the president overseas says we didn't exactly misjudge it but the information was flawed. then the unemployment rate comes in, everyone's turned pessimistic and laura tyson talked about a second stimulus package and paul krugman is on their case because he wants them to spend more money. is there a shift going on? is there panic inside the west wing. >> there's no question we vastly expanded from the original use of the sandwi$700 billion bailo from banks and insurance companies, automakers. if we now start spending it on small business, the distance we would have traveled between the original concept and where we would then be, it would be pretty significant. no question you've seen a real evolution in the administration's thinking about what is possible and what is appropriate and what would be helpful to the economy. >> benjamin applebaum, weight

po -- "washington post," we appreciate this, short notice. thanks so much. >> my pleasure. to the stock market, the stocks dropped, sending the s&p 500 to its fourth straight weekly loss. my particular worry is the fed has deflated the money supply and that in turn is deflating the reinflation play in e stock market. it's been energy and commodities, industrials hurt the most. we will get to that later on after we cover another big business story today, mainly after 40 days and 40 nights, gm has risen from bankruptcy but can they make money with little green go carts? let's go to fill lebeau, he has the full report. phil, what can you tell us? i know you had big interviews today. >> reporter: it has been a very busy day at gm headquarters today. we'll talk about whether or not gm makes green go carts in the future. the big question is can general

motor motors thrive and succeed now that it has a chance outside bankruptcy. the ceo said it comes to changing the culture at general motors and changing the focus to the customer and cars people want. i asked him isn't that trying to teach an old dog new tricks? here's what he had to say. >> we simply have to prove ourselves. have to see what we do and what results we have. that's how we'll prove ourselves. your point is you can't teach an old dog new contribution is true. i pointed out to my management team einstein's definition of insanity, doing the same thing over and over again and expecting different results. we know we have to change. >> reporter: it will be a leaner general motors. that's for sure, shed ded bill n billions of dollars in drupt and $20,000 of jobs in the u.s. and

one executive scheduled to retire at the end of the year, sticking around and taking a larger role in the company, this man, bob lutz taking over marketing and communication and will also begin reviewing general motors advertising plan. when i talked to mr. lutz this afternoon, he made it clear, everything is on the table and he expects to be a disruptive force. >> i've always been disruptive. i've always believed in very clear and honest communication. i never hide my motives or objectives. i'm not a good politician. i believe in the frontal assaul assault. >> absolutely. >> yes, it does ruffle feathers, i think we're at a stage in the company when we really need to do that. >> reporter: for more on why bob lutz is the key to whether or not general motors can change its culture, become a company that is nimble and respond quickly, check out the blog behind the wheel.cnbc.com.

i know you and i disagree whether or not general motors can thrive in an environment where fuel efficiency is at a premium. i have to tell you for the first time i am covering this company there is certainly a different step for all the executives within this company. they understand, they have a second chance here. let's see if they can make that step last for a while. >> i think the world of bob lutz by the way. he's a long time opponent to cafe fuel standards because he knows it's done harm to the industry. did you talk to him about the products and whether they will replace the cobalt. the treasury department said cobalt will not work and have to go back to the drawing board and come up with a fuel efficient car to help the car company meet cafe fuel standards. what will happen to this? this could be key to their future. >> reporter: it is key. remember they have the cruise on the way, a global small car once built in the u.s., same as the

once built in korea and ones built in european. what you will see for those and other small vehicles, they're on the way. bob lutz said everything will be reviewed here, not just he is an charge of marketing and communications, he will have everything under his purview from the time the vehicle, they start saying this is what we want to build all the way through trying to sell those vehicles everything coming through his jurisdiction. >> does bob lutz believe they can make these smaller fuel efficient cars profitable. you have to do a certain amount at the low end in order to give them the room to get the higher profit mid-size and suv like my escalade hybrid, which is a great machine, by the way, but they can't use those, they have to do the little go carts in order to get to the escalade. >> reporter: wait a second. they can use greater fuel efficiency for trucks and suvs and crossovers. that's one perspective, one part increasing the cafe standards at general motors. they also have to build more small vehicles, they're doing

that with the cruise and other vehicles on the way. bob lutz believes they can sell those small vehicles. bottom line is this, it doesn't matter what you're talking about in terms of any automaker, it's a small market for small vehicles in the united states. >> yes. >> reporter: very small, doesn't matter who it is. >> i agreement i think the whole public is rebelling againsts the government planners that impose these cafe mandates, i'm with you 100%. you know me, i like some horsepower, phil, i like horsepower, i'm an american, red blo blooded. you are, too, from the midwest. i got to get out of here. you had a long and great day, appreciate your report. >> reporter: thanks. >> let's get to the market. cnbc correspondent scott cohn has the rundown on today's action, not all that great a day and not all that great a week, what can you tell us. >> you, larry, do have horsepower. let's get that straight. >> i hope so!

no cafe fuel standards for me, buddy. >> you're also mr. mustard seed. it's a little clear the market got a little ahead of itself on hopes for a quick recovery. consumer sentiment measured by the university of michigan not seen since the beginning of the year with the consumer sentiment number that came out took a whole lot of air out of this market and never did come back. big loser was jpmorgan chase. this bad economic news is not good for the financials. chevron is close behind as losers go, issued a profit warning, rising crude hurt the company business, raw material cost for refining. this doesn't help either. look at the price of oil now, falling hardeneding below $60 a barrel, get it on one end and then the other. next week, johnson & johnson and goldman sachs and thursday, jpmorgan and ibm and goog. friday, bank of america, our

parent company, ge and citigroup. let's all get rest this weekend, larry, next week will be a busy one. >> scott, i tell you, i'm a little worried about the economic situation in the short run. i have no doubt recovery is out there, may take longer. i love the banks, i think next week's earnings reports from the banks could make or break the stock market outlook. >> it's interesting what you were saying about the deflating of the currencies and what that does. that's raw material costs, you talk about banks. we'll see how that goes, you know, a lot of worries about what's going on with treasuries with the dollar. that figures into it as well. >> scott cohn, thanks very much. we'll talk about all of this with our market gurus in two minutes. coming up on the program, baling out small business. uh-huh? obviously a few questions on this one like where did this come from? we will drill down with our panel, jerry boyer, rob and joe. somebody has to explain to me, the state is going to extend

credit to small business, how can i pony up? and kudlow 101, why i am concerned the fed has deflated the money supply and in turn deflated the stock market rally and deflation trade for commodities and energy and selling treasury bonds. a lot of hedge funds have lost a lot of money in the last month because they bet wrong on momentum. "the kudlow report" has momentum. we'll be right back to cover it all. get ready, folks, sign up, small business loans, you to, too, can get the ta.a.r.p. money for you backya backyard. nnouncer) this is nine genations of the world's most revered luxu sedan

this is a history of ove 50,000 crash-tested cars. this is the world record for longevity and endurance. and one he most technologicalladnced automobiles on the planet. is is the 9th generation-class. this is mercedes-benz. you cod buy 300 bottles water. or just on brita filter. ( drop plinks ) brita-- better for the envirme and your wallet.

the $100 cream. flabbergasted wh we creamed the $700 cre! hydrates better than 32 the .

baling out small business, is this panic from the white house? look at what laura tyson had to say a short time ago from cnbc's "fast money." >> let's think about trying to direct credit to those parts of the economy particularly hard hit. we've already seen that in the housing package that the obama administers put in effect and

beginning to have an effect. we can imagine using some funds for small business in sbca type situation. you have to think about how can you unlock credit to certain sectors of the economy. >> okay. it's our money, lets not lose sight of that. our money, maybe we should get it back. let's discuss this late breaking news to see if there's stock market and economic content. we have cnbc contributor and syndicated columnist, jerry boyer, and robert and joe, chief u.s. economist at deutsch bank. jerry buoyer, i love this, laura tyson right off the top, direct credit, did you get that? how about direct credit to you and me and every one around the country. these guys will go to any length to control spending and control the economy. they don't want to liberate it with an across the board tax

cut, which is the most sensible thing to do. >> right. that is the most sensible thing to do for the economy. this is the saul olin ski playbook, you don't let a crisis go to waste. they want capital. they have walking around money. it will be a giant slush fund. t.a.r.p. is now obama national bank. now, obama -- >> whoa! >> we now have a huge giant trillion bank directly under control of the executive branch of the government. >> robert, what do you think of this? i was thinking out loud, i don't know what the details will be, first, i'm not a great admirer of the small business administration, they had loan troubles for years even when i was working in the office of management and budget. maybe if a guy is a campaign contributor, he ts the money, if you didn't,ou don't gethe money. what's your take onthis?

any stock market take this. >> for the stocmarket, i dot think there's a take. most won't be trading on what most businesses are lookingat. the pink sheet, that has the kind o companieshat may g this loan small nesses do add t the number of job a it does employ pple. in that regard, it's a positive thiss a edistribution of wealth going on a. l of peopl that are ver wealthy dnot like it. i do like it because if you stomach the process you have to go through get a oan. think it's a good thing. g companies with high quity credit, they have access. caterpillar offershe world, united technologies of the woges do haveaccess. this is opening ear avenue, venue for small business owners. it will shut them down, it will slow down small business hiring because they will all wait to find out what this program looks like. >> they are now. they're in this process of not having the capital to do

anything. >> now, you will delay it another couple of months to find out if they can reach into the honey pot. >> i'd like to be more optimistic and think this will actually help. >> robert, i think you make a couple good points. i think this is one of the great slush fund operations of all time. i got to tell you, this t.a.r.p. money was never intended for this purpose. they have to go back to congress and go through rigamarole. the white house must be panicking, you can see it with the joe biden stuff last sunday on news talking shows, the president has to address it with his summit meeting in russia, first denying it, now putting this thing out, this is their form of a second stimulus package, i'm sure it will grow over time, joe. is it possible people are getting too bearish about the economy? maybe this is a turning point, as soon as the white house throws in the towel, it's time to buy stocks. >> it's possible. the stimulus package i initially was all for has not played out the way i saw it. i think a second stimulus

package would be really terrible. i think the treasury market at that point would probably punish the administration for another package. the first wasn't very effective. it's vulgarism as we said before. it's possible people are getting too pessimistic. even in our forecast, we see there is some light at the end of the tunnel, a slow slog upward, i would leave well enough alone, get out of the markets, let them heal on their own. >> i want to buy another minute and a half to my wonderful producers that want to close us down, you guys will come back. i want to close on this point. joe. our friend, mike, a great contributor to cnbc and this program, you know him well, he makes the case, you look at the money market spread, what not, credit market and credit bond spread narrowing enormously today's story is completely unlike it was a year ago in 2008. this stock market correction is backed up by very promising bond market rallies and corporate bonds and also at the lower end

of the curve. therefore, joe, darta makes the case profits in the next year, 2010, i'm not talking this next month or quarter, profits will improve and the stock market is a buy. what do you make of mr. dart ta's analysis? >> i think he's right. credit spreads are key. the markets are working again, i think mike is right, if not a year, six quarter, it's getting bett. >> here here. i agree with him and i think he's right on and rta is right if you want to do somethi with that stimulus out there, look at the 10% already spent and we have a slight improvement in the economy so far, we're not out of the contraction yet but on the road to recovery. take that 90% that hasn't been spent and redistribute it in that stimulus package, take that money and really turn it into good use building bridges and roads and schools. >> no, return it! return it! that's good use, give it back to us, we'll use it.

>> treasury yields will come down and mortgage rates will come down. >> i have a stimulus package called across the board reduction in marginal tax rates for everybody. by the way, jerry boyer, i will be wrong, no way that will happen, i acknowledge that. i say put it on the table. i'm willing to overlook the deficit if the money is spent on lower tax rates so people can have their own money my friend charlie rangle is saying rich people will pay a surtax to finance health care and senate side talking about raising capital gains and dividends and tax rate on people above and beyond what obama is saying to finance health care. what you have here, robert is right, you have real redistribution, just not the redistribution he's looking for. this stuff is all anti-growth. every piece. they're going to be raising taxes above england, france, germany and italy in order to support nationalized health care, which jerry, strikes me as a social policy, has nothing to

do with economic growth. >> yeah, redistribution is a redistribution from the edge to the center, from the market to politics. that doesn't work, it's corruption. we're frozen because of it. the worst thing right now is more stimulus. the stimulus is keeping us from having a boom of a recovery and why we are having such a weak recovery because of the stimulus. >> hang on, much more work to do. is the fed deflating the money supply and therefore the stock market? i want to go into this in mike kudlow 101 because i think there's a reason why the reinflation trade has backfired and market has offset 8% in the last month or so. "the kudlow report" is coming right back. i believe in free marke market capitalism, i say you should get to see your own money new york times city the sbca or other bureaucrats in washington d.c. we'll be right back to explain.

christmas capitalism capitalism

the stock market is the cause of this correction there. are a lot of reasons stocks correct including the fact they went up 40% and we're due for a correction. let's check this out. first of all, on the board,

reserve bank credit, the ultimate monetary base, the fed's balance sheet. what you got, they put in about a trillion in the september, october, november, early december period. since then, it has leveled off. no new money has been created. no new money has been created, now, 6 coming on 7, almost 8 months. that changes the game. all the threat of monetizing the debt is suddenly off the board. the marketplace itself, financial world has improved enormously, the crisis is over, many of the feds liquidity facilities have been paid down and although they are buying treasuries and mortgage backs, they're not really replacing, just replacing the liquidity facilities, not adding new money. the inflation play has changed. let's go to m2, not the most perfect but a good measure of the money supply. look what has happened here. when the fed was boosting the

balance sheet, m2 surged to over 20% growth at an annual rate. now, as the fed has stopped printing new dollars, this has fallen and m2 basically zero in the last 13 weeks. this makesed change. the inflationists are out the window because bernanke seems to be, at least by implication, producing an exit strategy. this story is not over and will go on for a while. i want to bring in joe. we'll put joe's chart up, if i have this one. credit market debt. your chart, what is your quick take? do i have my basic technical facts right they have stopped printing new money. >> you're exactly right, everything you said is spot-on. >> you're okay with that part? >> absolutely. >> does that have any economic impact or do you think it's just me? you have a, the fed has become less stimulus, does that mean

the economy's going to be slower to recovery? >> i think it's possible, larry. i'd like to see that balance sheet grow more and reflect the credit markets while better are still broken. as you pointed out, the feds' balance sheet hasn't grown the last seven months. >> b, maybe the private marketplace doesn't want the money, the use of money other turnover velocity of money is still slowing. that's not a great thing either, is it. >> no, it's not, larry, generally a sign the economy will stay soft. >> before we get to joe's chart, let me go back again. let me go back to this. i want to review the bidding. the fed stopped printing new money. it's been flat seven months, this is their balance sheet. the second point i want to make is let me go back, the m2 money supply has slowed markedly, not

fa fallen, means it has slowed. joe, credit market debt, i will draw the arrow, has fallen like a stone. what does that mean? this is your chart. >> right, larry. what it shows, the credit market in '07 produced annual growth over 4 trillion. in the last quarter for which we have data, the first quarter of this year, that growth rate slowed to only about $700 billion. it's a decline in the growth rate about 3 $1/2 trillion. a lot of that reflects the fact securitization market is shut down. that's the lost credit the economy ideally needs to have replaced. normally, we like to see it coming through the balance sheet but the fed hasn't gone far enough. >> you're basically saying the absorption, the contraction of private credit has not been replaced by the fed's own credit, that's one of the bottom lines of this? >> that's right, larry. also why the 10 year yield has rallied so much, because the treasury at the moment is not competing with the private

market for capital. >> people have gotten clobbered, my pal, dougy, is a shrewd market guy, one of the hedge fund trades in the spring and early summer was to sell treasuries they got as high as 4%. all of a sudden they rallied back to 3 1/2, i don't know where they closed today, 3.40 something that trade has completely unwound, the gold trade unwound, buy oil trade, buy commodity stocks, buy energy stocks, i'm saying there's something going on here, the fed has not been completely clean abou about. >> i agree with you. >> they're deflating the money supply. and the government could sell bonds there, not competing with anybody. >> we may see 10 year yields go through 3%. >> there's moral lin that one. hang on, we may do some more with joe and the rest of our gang. earning season is heating up. is it really that important? i think it's a bit overrated, i

will tell you this, bank earnings coming out next week will be hugely important. as we talked about last night, i like the bank story with this steep upward yield curve even a banker can make money borough at zero and lending at 5 or 6%. we'll talk about that in the market segment. you may have seen our new logo. we get a good picture of that. look at that baby, supply sider on the top, free market can tallism on the bottom with our own cnbc epluribus enum right smack in the middle. hang on, how to keep america on the right path with prosperity. hang on, we will be right back. ♪

sometimes the best way toet closer... is to get as f away from it all as possie. don't let erectile dysfunion get in the way. ♪ va viagra! viagra, america's most prescribed ed treatment can help you enjoy... a more satisfying sexual e. ready to talk to your doctor? find out how at viagrcom

ask your doctor if youart is healthy enougfosex. as imay cause an unsafe drop blood pressure. side effects may ilude headache, flushing set stomach, and abnormal visio avoid long-term injury morehan four hours. stop taking viagra andl your doctor right ay. if you experience a dden decrease in vision or hearing. 20 mlion men have had the "vgra conversation." ask your docr if viagra is right fou. ♪ viagra!

welcome back. we're still here. thank you, joe, for that extra duty. good stuff. give me a quick take, are you worried about this shrinking money supply story and the fact the reinflation trade has gotten slammed in the last month during this correction? a lot of hedge fund guys bet on it, they've gotten slaed, i want to get your te on it.

>> i think joe makes a great point. one of the probls is securitization market. when youk who's buying this per from theecuritation process, nobody wants to buy credit card loans and automobile backed loans and nobody wants to buy riskyeteorologist backed loans, the process designed to help this move forward and nobody wanted to participate in it. >> there's not much they cano. do y think they're right to shrink the groh of the money supply like they have? >> it's kind of strange, i don't think inflation is the sto near term. >> they might be making a mistake. >> i think they are making a mistake. you will eventually see a concern about inflation. now is not the time. >> a couple years away minimum. jerry boyer, what's your concern about the stock market. there's a recovery out there some place. i think michael darta is right.

it might be near term and might be slower. what's your take? >> this four week bear market, this mini bear we had correspondents almost completely with the ubra plan. that's what slammed the inflation play. they ran the printing press. the money goes where? it goes into excess reserves. you've seen the chart of excess reserves. it's off the chart. that's where the money is stuck. the fed could print some more and expand their balance sheet. until the fed take the excess reserves and deploy them into the economy, we won't get the recovery and inflation and won't get the bull. >> michigan sentiment was down today, down more than anybody thought. i think people thought it might rise slightly. the other interesting data point, trade balance has fallen more than many years and some think you could have either flat or slightly positive second

quarter gdp because the trade balance has shrunk so much and because maybe inventories won't be as bad as we fear. is it possible we will see a positi positive gdp in the preliminary report which comes out what in about ten days. >> larry, i love john but i always seem to disagree with him. i think it's possible but inventories are weak. trading adds to gdp but trading could be greater. we've seen a lot of weakness in manufacturing and wholesale anniversary and wouldn't be surprised next week if we see the same thing in retail sites. i don't think we're positive yet. >> bob, back to you, i'm real big on the banks and my favorite play. i want your honest opinion about that, agree or disagree, particularly as we go into the earnings season and get a handful of big bank earnings reports next week, in my opinion could really determine the whole

outlook for the summer stock market. where do you come out on. >> it s&p, they're expecting a decline of 35%. i don't think you will see that again, many of the analysts have these estimates expecting a rather dramatic decline. haven't really factored in the fact the economy has shown slight improvement. i think the guidance they're getting from the corporations they cover hasn't been fully cleared to them and haven't been able to pass the information to the analyst and analyst estimates too low. >> better or worse. >> better. i think you will see a repeat what happened in the first quarter where 67% of the companies -- you're right with the financials, that's key to the recovery the next couple of weeks, you will see a better earnings environment for the bank. >> you think it could help. >> banks may surprise on the upside is that what you're coming on. >> exactly. >> i happen to agree with you, not everybody does. quick, techies, big techs coming out, intel next week.

a lot of people say this is tech's moment to provide leadership, what do you think. >> agree. i think you will see a liftoff on some tech and will be the winning sector in the overall market. >> jerry boyer, we will dodge a bullet, cap and trade, dead in the water, last thoughts. >> stops in the senate, thank heavens, it's gone. >> get a little sba credit creation. those central planners know better than we do, give them credit, they're smart guys. >> they've done so well so far, why not give them more. >> thank you. you guys are great on a friday night. i could almost get optimistic on this story because i do think bank profits will lead the way, i think this economy is slower to recover. aig bonuses are back next. i'm so sick of it. no end game in sight. i will have a wee bit of editorial comment. first, let's check in with my friend, dennis neal, the one and only brilliant dennis neal to

see what he cooks up at the top of the hour. >> i will speak up in defense of those aig bonuses and the obama posse herd riding herd on too many businesses and what some are call iing o-bum-ogate. >> he wasn't looking at what you think he was looking at. >> we are "the kudlow report." we'll be right back. announcer) we speak c

and guess ? the car listens. you say call nina,

you get nina. you say play puccini 12 sony speakers... you say get to the game, you t there step by st with our voi activated sync technology, we speakhe 2010 ford fusion. get in... and drive one. e speak one financial lauage. companies onhe planet the langge of exchanging. together, wee helpg to shape the exchangingorld. se euronext. weng the exchanging wld.

as though we didn't have enough last winter, aig now owned by the government and run by the government once again talking about bonuses, retention bonus, i don't know, if you're as sick of this aig bonus story as i am, i am totally sick of it. a couple quick points. yes, i believe in contract law. if contracts were written during the government takeover period, shame on the government. let me tell you, there's no end game in sight. we own aig, we are pouring all this money, we must have what $150 billion and rising. does anyone know when this is going to stop or is it always going to be a wholly own company by sunkle sam? if it is, we can't pay them the

way they would be pained the private sector. if it's not, we have to have a clear game plan and exit strategy to get aig and these lousy bonuses completely off the books, that's what i think taxpayers want. i know that's what i want. right now with government backing, aig is writing new insurance, they're mucking up the whole insurance world because they're getting cheating money from uncle sam and gives them a disadvantage in the private sector. it escompletely wrong. i am sick of aig and i think it's becoming an example of t.a.r.p. and bailout nation. coming up on this program. some people say a group of bipartisan lawmakers calling on obama to audit the fed. you know what? i think it's pretty good idea, something definitely worth exploring. the fed has not done a great job in the last couple years or the last ten years, so we have a

famous congressman, michelle bachmann and former dallas fed head, bob matier, who we're going to discuss this quietly on a friday evening. what's wrong with auditing the fed? they're the people's central bank. i am the people's kudlow report. back after this. lower hotel booking fees mean you get a lower total price. plus, if another orbitz customer then books the same hotel for less, we send you a check for the difference, automatically. ( clunks ) ( coins splashg ) why tossut your money? swit to sprint. save $475 a year with the simply everything plan and get the blackberry curve 8330 smartphone for just $49.99. deaf, hard of aring and people witeech disabilities cess www.sprintrelay.com the me tools the pros use,

soou can be a disciplined ader. by selecting from eight advanced triggers, your order gets executed even when you're busy. and with tiling stops to help you ckn profits and minize risk, you can be confident in youstrate, no matter which way the market mov. find out why me and more active traders are turnin to fidelity for a smarter way to trade online. trade like a pro. ade with fidelity. well, get on out of that departme store and into covergirl olast. no department ste longwear gives you so mandifferent ways to last through breakfaslun. more choices, more shades, more outlast.

ick toda as you may know, in the news, congress is talking about auditling tuditing the fed.

fed has botched policy for two years, the tech bubble and housing bubble. why shouldn't they be accountable? look at the damage they've wrought. with us we have republican house member michele bachmann who sent this letter to the president today. there it is. and we have former dallas reserve bank president robert, the ceo of the fed. congress is getting uppity when it comes to the fed. i'm not so sure they should be uppity when it comes to the fed. what's your take. >> i think it's important we get transparency and also answers as well. all we're asking for is that the fed be audited, the results of the audit be given to congress before 2010. there's a whopping 242 members on the bill to ask that the fed be audited, clearly more than enough to pass the bill.

>> it's a gao audit, is it not. >> yes. >> what would the audit emphasize? i know this will be an expense audit and have a lot to do with the fed's activities there, hyper t.a.r.p. activities with banks and so forth. will it also be a policy performance audit. >> we want to know the basic numbers on the books. i think we'd like to also go to the latter as well, your latter point as well. i think it's important, we've never had an audit like this before, larry. now, when we're looking at president obama, whose recent proposal is to expand the fed's authority over private industry, certainly we need to have an audit of the feds. >> bob, two in ten years, the housing and tech bubble, you don't think the fed has accountability. >> i don't think you can blame those two bubbles on the fed.

the fed basically has done a very good job. >> you think immack cue lat inception. only the fed creates money, you taught me that. >> when you create money, it's odd for it to go to one market and have inflation in one sector and deflation in another. that's basically what happened in the housing sector and to some extent in the stock market boom. nobody ever gave the fed the instruction it was out there to stop bubbles in this first place. >> michelle, you hear it. >> robert mcteer is a very sound thinker, michelle, i'm sure you know that. you hear these defenses. he's foxtrotting all over the stage. i love the guy. michelle, what about this other issue congress itself is to blame because they've give a dual mandate, you should fight inflation and unemployment. there's no real trade-off between the two. how about the fed protecting our money for a change, like the dollar, wouldn't that be a good idea? >> it would be a wonderful thing, what i'm hearing from my

constituents, what members are hearing across the country. people are fearful their dollar isn't worth a dollar any longer and the that's a very important factor. >> they're not so confident about these government planners. we'll come back and give mr. mcteer totally equal time along with michelle bachmann. i don't know, i like this audit thing but i think congress has to take blame because they never made it clear how and what the fed should be doing day in and day out. i will be back monday morning on "the call," 11:00 as always. i want us to be accountable to you and want e ds to be acuntable to you as well. ♪ on s knowo ame ♪

♪ watching in sw motion ♪ as yoturn to me and say ♪ take my breath away (announcer) ge locomotives. custers love them almost as much as we love making tm. ♪ my love nnouncer) innovation t for america's tomorr. know that connectivity is about reaching further, faster than anyone ee.

togethwe're helping to shapthexchanging world. ny euronext. powering the exanging world. atticks to your teetso well you caeven drink water with it . new crest whitestrip advanced seal. get a dramatically whiter smile whilyou do just about anythi. satisfaction guaranteed. i just gave you soat the restau. yea i know. i threw them ou.

old! they are roller mites. they're as good as new. d these days we can't affordo be wasteful. saving mutes..... .....saves money. a. nnouncer) only at&t'faly talk with rollov and saving minutes save money. get the lg neon fr at&t, now only $29after mail in rebate we're talking about a fed audit. how about that a little accountability. michelle, there's a new story that may we place this story, that is team obama will now use t.a.r.p. money, i don't know if you got wind of this, the "washington post" broke it at the beginning of our show. team obama is going to use t.a.r.p. money, and i don't know, maybe you have to give a

campaign contribution. what do i think about this. >> i think it's a bad idea the way the others were a bad idea. injecting government into the private sector has proved to be a bust not a boom. i think honestly, larry, we would have seen a recovery months ago if the federal government wouldn't have made a lot of these extraordinary actions. >> what do you think of that, robert mcteer, a pretty hash indictment. >> i agree with two-thirds of it. i believe the help for the banks was helpful and disagree that the automobile industry shouldn't have occurred. >> bob says it was good idea to help the banks, do you. >> i just read two days ago, an arizona state university said today, after all this intervention, government now control controls or owns 30% of all private business profits in the united states. that's before we nationalize health care. so the direction that we're

going and it's not positive. so i'm very concerned about that. >> robert mcteer, switching t.a.r.p. money into small business loans, you don't like that. you will draw the line. you don't want the fed feds performance audited. it is independent but part of the u.s. government. >> hold on. the fed has been audited by outside auditors for several years on continuing basis. >> not the government audit. >> no. it's been a private outside auditing firm. on the current audit, it's my understanding, what they're looking swoorlook looking into is mr. bernanke's comments and relationship with mr. lewis on the bank of america merrill affair. if they want to look into that, i have no objection at that i take mr. bernanke at his word. i sat beside him for three years and i believe him. however, let's say he put undue pressure on him, he did it in te