good evening. >> good evening, to you, tyler. a lot of people i spoke to today said we were overdue for a correction, and it didn't just happen today, it started friday, because it's all about the consumer right now, how healthy the consumer is, and we started to see the selloff after we saw the drop. so today we saw the momentum, the ball gathering steam. let's take a look at the damage here, tyler. we saw drops of at least 2% across the board for the three major indices. you can see the dow off 2%, the nasdaq off by 2.7, and the s&p 500 down by 2.5%. but don't cry too much, because if you put it all into context since the early march low, actually over the last five months, we have gained about 45% for the s&p 500. so as you say, this might just be a little bit of a healthy correction. let's take a look at some of the stocks that did drop today, financials took it on the chin. they made their way lower despite the fact they got some data on credit cards, saying the credit card defaults are

stabilizing, and yes, plastic is still fantastic. elsewhere, we also got a disappointing earnings report from the second largest home improvement retailer, lowe's today. they did come in with a worse than expected 19% drop in the second quarter, but what made the street really nervous here was the fact that the outlook is disappointing. and what is important is the outlooks have generally shown a greater degree of visibility, haven't they? people have been saying it's been terrible the last quarter, maybe even the last half, maybe the last year, but things are getting better.. but the outlook is disappointing for lows and that is what is getting people really jittery. and we saw a big drop in the stock of home depot, which is its biggest rival and is reporting tomorrow. elsewhere, manufacturing data that was actually pretty encouraging. the new york fed says they're seeing reasonable growth for the first time since february, 2007. but, of course, in the greater context of a down day, people just shrugged it off. back to you.u. >> thank you very much. the down day on wall street gave bonds a boost today, as

investors fled from stocks seeking safety. cnbc's rick santelli joins us now with a look inside the bond market. rick? >> thank you, tiler. it was a big up price down yield day for treasuries in response to the softness in the equity markets. as you look at this intraday chart of ten-year note yields, it's interesting to see. but what is really interesting is the five-year, the mid part of the curve led the drop in dwreelds and the buying that was going on by investors nationally, and globally. it had a sense of. but the ten-year by the end of the day, when equities had no bounce to put forth, did play catch-up and ended up ten basis points lower. the next chart, a couple months, you can see these lowest yields in about a month, july 13th, a month plus. now, the dollar was also part of the safety game today. as a matter of fact, for two reasons. on the one hand, the china story, lower equities. definitely puts a question mark in some of the aggressiveness or the future aggressive

possibilities for commodities. so the tail wagging the dog, commodities, dollar denominee commodities moving down. but the dollar in and of itself is a safe harbor, as well, and you need the dollars to buy the treasuries. 2s, 5s and 7s next week. no supply this week, also maybe aiding and vetting that up side developing. back to you. >> rick, thank you very much. so what caused stocks to tumble around the world today, and are we seeing a healthy pullback or something more troubling? we have the director of tjm services, an options action contributor, and ron shaw of the global private equity firm gena ventures and bringing up the rear is art hogan, managing director at jeffries. since you are the last, the last go first. art hogan, do i need to be worried? >> tyler, it's interesting. you don't need to be worried. you need to be worried, it's august. we had a 50% move off our lows, we come in and have had a

modicum of confusion and certainly a modicum of concern over the consumer, and certainly what the asian picture looks like. two pieces of economic data out of japan and china overnight that we're concerned about. remember, japan just came out of a recession. they have actually put a positive gdp number on the tip, not as strong as we thought. the biggest concern is the consumer, a lot of data out of the consumer. last week walmart making the bottom line lows, and home depot tomorrow. so we're concerned how far we have moved in a short period of time. and the market is taking probably what would you have to characterize as a healthy pullback, and what's probably going to prove to be an extended bull market here. we're actually moving off, too. what we have been doing is pricing in the here and now and pricing in had growth in the future. we haven't seen top line revenue growth now, but in 2010. the market is moving off its heels and saying we're not going to price them today, we're going to price them tomorrow.w. >> ron shaw, art says it's a new

bull market.. can we really have a bull market if the consumer is as tend active as he and she seem to be these days?? >> we truly believe this recovery depends on increased consumer spending. that's going to be the key driver for us of. . the worst is behind us. the march lows, that's the worst, we're going to have sluggish growth until the consumer starts spending again. the big pullback, consumer, confidence and china. maybe people thought china would run us out of this recession, and i think the numbers speak for themselves. we have been talking on this show that china is a house of cards, waiting to fall. you know, the banks have overleveraged themselves, the local banks, to the companies there, the exporters. the exporters are facing contracting markets. consumers are not spending enough. so china is not going to lead us out of this recession. con spumer spending will. >> china a house of cards waiting to fall. do you agree with that? >> i think when you look at the

shanghai composite, it swings around like a rag doll. you look at it now, we have a 18% pullback in the china market. to me, that doesn't seem like a huge deal. yes, it was one of the components in causing our little correction that's beginning now, but we were due for a correction. so we were sitting there at the top of the hill just looking around for something to correct us of. the dollar started to rally, which the weak dollar trade is a crowded trade. when that starts to turn, it's going to be exacerbated when we start to squeeze the shorts out. we're seeing that happen right now. and all of that kind of is the recipe for correction. the reason i truly believe it's a correction is the dollar, one of the things causing the correction is rallying during this and gold is falling off. when people start to believe it's the armageddon trade again, gold will start to rally and the dollar and the stock market will fall at the same time. the little wrench in that is the vix index was up a great deal today. but i think that might be because what we have been through over the last year, maybe people are quicker to buy options or portfolios than in the past. >> tile e i would like to agree with that.

>> go ahead. >> we think it's all about the reset of the consumer that happened in september and october a year ago, and the crowded oil trade, which i think goes along with his crowded weak dollar trade and crowded bric trade. i can't believe that crowd developed this quick after as bad as it got crucified in the second half of last year. way too many people owning oil and materials, and et cetera. and then you've got a great move that's occurred in consumer stocks, like a nordstrom, for example. and we're due to get hit by profit-taking. and those two things are working together. but when people see the lower oil prices, we think it will actually invigorate the next leg of the bull market. >> bill smead, i want to come back and hear your prediction for the dow this year, and your very bullish prediction for dow next year. we're going to be rejoined by all of our team. everyone is coming back. so how to keep the summer sizzle in your portfolio. our bulls and bears are going to give us their hottest summer investment plays. plus, obama care on life

support. news that the hot-button public option may be dropped. it was good medicine for health insurance stocks. they soared today. robert reich says it's bad medicine for you. we'll debate.. and the president wants to shorten drug patents. will that save money? or cost lives? "the kudlow report," coming right back. some people buy a car based on the deal they get. others by the car of their dreams. during the lexus golden opportunity sales event,

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welcome back, everybody, to the kudlow report. we'll dive back into our bull-bear tusel. big, gary and ron are still with us.. bill, let me start with you. you think the dow can do how well this year, and how well next year, and where would you be putting money to maximize your chance of taking full advantage of what you see as a fairly strong rally? >> at the start of the year, tyl tyler, we thought upscan this

year, and 20 to 30% next year. and went lower the first two months, so maybe a 15 to 20 goal for this year and 20 to 25% for next year. and as far as putting money in, there's some neat research out about the value side of the s&p index. energy is way underrepresented in value, and consumer staples and health care are way overrepresented. you can buy low-price earnings ratios, great balance sheets, and great dividends in the drugs and some of the consumer staple companies. >> ron shaw, what do you think? would you be putting money into those sectors? >> we have a slightly different opinion in the market. again, we're a private equity firm, so we're not stock tickers, believe in longer term strategic play. we tend to like the american companies that have realized the growth overseas. we like an bottom laboratories, we like know venue 'tis, companies that have been able to successfully go overseas, acquire assets,ent great them.. the growth will come from overseas. >> art hogan, how about you?

you think that american corporations are poised for a long phase of pretty good growth, right?? >> i really do. i think we've gotten to a right size in corporate america.a. we have cut costs to the bone. i think any top line revenue growth will be a driver for growth in the s&p 500 and all of corporate america. i think three different places right now. energy is going to be a winner.. it's going to be a winner on three fronts, not the least of which is the short term, middle term and long term demand is going to be the picture there, and we'll see inflation in 2010. some companies to stay away from, the worst is mind because of how bad that gets. i think health care investments comes back, and look at technology as a consolidating sector. the bottom 90 companies in technology, and pay consolidation, and ratio in technology. >> ron shaw, i think you would disagree on energy with art hogan, would you not? >> i believe energy, is a good sector, but we look at service companies, we like, for example, transformer businesses, manufacturing companies that

support the energy industry. but we do not believe in the commodity sector or the energy industry. >> and art, you're nodding of. do you agree with that? >> no, i would play further downstream. you certainly don't want to be just commodity-dependent. because what's happened now is we have had a commodity go from $150 to $35 back up to $70. and it has a lot to do with how much your earning capabilities are now. i would be international and not oil based and domestic. >> we disagree, tyler, in we think the only transaction is in the chevron part of the world, the large integrated, and we think there is a tremendous amount of faith invested in the idea that all those smart cars and priuses you see on the road, that's a permanent trend, there does a dramatic 10 to 15-year seismic shift for gasoline in america, and that is going to turn a lot of interest on its ear. >> jim, you have been very

patiently listening to the three must can he tears. what do you believe is right and wrong. >> this wasn't the part of the recession that is going to take a long time to come out of this. the consumer is wound more than anything in our lifetime. so i think it's taking away from things like any sort of consumer discretion. but i don't expect 15, 20% returns in the next ye year-and-a-ha year-and-a-half. every time we get to something where everything seems great, we're going to get another shoe dropping, whether it be real estate, commercial real estate, or the consumer. that will be going on for a long time. the last time you bet against the american consumer, you lost. so remember, this is a temporary shift. you'll see the american consumer come back. >> never like this. >> unvested they have been for 15 years. >> but it's never been like this before. i mean, in our lifetime. the consumer has never been the way he feels right now. >>is always different -- >> my wife may keep the spending going. she is going pretty good. >> i've been out there trying to stimulate the economy.

we will learn a heck of a lot more as we get into the holiday spending season about the held and get attitude of the u.s. consumer. jim, ron, bill and art, thank you. thanks very much. be sure to watch us tomorrow. former presidential candidate steve forbes is bullish on america and he joins us live on "the kudlow report," ready to share his own stock strategy. coming up next, the public option. might be off the table. can health care be reformed without it? howard dean says no, and he is ready to debate. much "the kudlow report" comes right back. and here is president obama sounding off on so-called death panels. >> i know what it's like to watch somebody you love who is aging deteriorate. and have to struggle with that. the notion that somehow i ran for public office or members of congress are in this so they can

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it was a day of a lot of red arrows on wall street, but let's take a look at some green arrows in health care, and healthy insurance stocks today. and there they are, magically. i call, they appear.

united health, aetna, humana, and we willpoint all moving higher. it is the so-called public option dead? it was all the talk on the talk shows all weekend. team obama sending to what to many seem like mixed signals. conservatives, democrats concerned what it might mean for you and your health care. nbc's steve handelsman has the latest from washington. >> thanks. they complained down at the white house, this is a stampede of stories. the fact is, though, this fight is so close, so intense, so much at stake that the president's one line over the weekend with the word sliver in it did reshuffle this debate over the public option. >> president obama did not mention a public option today as he talked health care. >> no one is going to take away your benefits, that is the plain and simple truth.h. >> but you get benefits for the uninsured. the president had fought for

government insurance until he seemed to give up on saturday. >> the public option, whether we have it or we don't have it, is not the entirety of health care reform. this is just one sliver of it. >> one sliver? whether we have it or not? conservatives are celebrating. >> the administration is hearing loud and clear that people in this country don't want a government takeover of their health care. >> what do we want? >> health care! >> but many democrats insist on a government plan.. >> trouble is, you can't really have reform without a public option. what a public option is essentially what veterans have and people over 65 is, medicare. and it works really well, and is much more efficient than the private insurance industriful. >> insurance claims new rules meet the government's rules. >> subsidizing, helping hand for working families to make sure they can afford it. >> but the public option is still the hot topic today at town halls. >> he said people call it what they choose to.

well, i will call it socialized medicine, because that's exactly what it is. i'm sorry? >> it's better than nothing. >> well, you said i could talk -- >> is government coverage dead? white house says no. but tyler, in his the president's very own health care reform article, barack obama doesn't even mention the public option. >> steve, what's the latest? i know you've been talking to people in the white house and the administration all day long. >> well, in air force one on the way back from the western trip, it was gibbs, the white house spokesperson who called this a stampede of stories. they said, look, president obama has never been about a public plan. it's about health care reform that they have said again and again, tyler, has to cut costs, improve care and include more people. they say the president still believes a public option is one of the best ways to do that, but

they say that's not the message he wants to send, that this is about the public option. he is still for it. they claim they're not backing off. >> all right, steve, thank you very much. so public option, dead on arrival or not? and can health care be reformed without it? without it. excuse me. joining us now to debate is democratic presidential candidate, governor howard dean, author of "howard dean's prescription for real health care reform."." he is a cnbc contributor and former labor secretary. robert reich, the author of "super capitalism." peter mauricy from the university of maryland, and james glassman, former  undersecretary of state, and president at the world growth institute. welcome to you all. jim glassman, let me begin with you. has health care reform never been about a public option? that's what steve handelsman just said. >> no, i don't buy that. it was about a public option. but more important, it's about more government control, and

it's about raising health care costs. those are the two things that americans don't like, and that they have in large numbers revolted against. i think it was imminently predictable. much the president needed to get this thing through before recess, he didn't do it, and now he has got a big problem on his hands. >> so is the rhetoric, peter, suggesting to you that the president has come to his senses? >> no, i don't believe he has come to his senses at all. he still believes the public option is the best way out. and what i think they're looking for is the trojan horse. these nonprofits that the moderate senators are talking about, you watch. in order to put together a coalition to say that is a public option will make those nonprofits quake -- after all, the post office is not part of the government anymore.e. but a visit to the post office is like a visit to the e motorcycle motor vehicle. you watch, the post office, america's health care, it's going to be a public policy

disaster. >> governor dean, i think you would disagree.. i am just going to light the candle. go ahead. >> well, the most interesting g comment was the comment the gentleman made about socialized medicine. if it the public option is socialized medicine, we've had socialized medicine in this country for 45 years, called medicare, and most people really like it. it's called veterans' affairs benefits, most people really like it. so look at congress, and go down stairs to see the doctor with no fee or walter reed hospital. so i think the question is what can't people have what people over 65 choose to have it? this is giving people choices again. right now we're stock in this monopoly. the health stocks went up today when the market was going down 200 points. why? because they could make more and more money. well, that money has to come from some place, and it comes from the pockets of americans who are buying health insurance. so it's simply a better way of getting efficiency for health care. >> secretary risch, do you agree that you can't really have

anything that passes for health care reform without a strong public option as part of it? >> well, first of all, the public option is on life support right now after this weekend. i think it's very clear we're sending out signals of retreat. on the public option. and why the retreat? i think largely because the insurance industry and a lot of other industries in the health insurance-related complex, including drug and pharmaceutical generally and medical supplies, all of them in the public option are a real threat to their bottom line. they did not want to have their profits trimmed.d. that meant that the public option would be effective, as howard dean just said, in terms of getting people better quality and lower cost health care, that's not what a lot of these companies really want, that they -- they have been in business to make money. so obviously, they lobby against the public option.. >> bob -- really, it was not the

health insurance companies that stopped this. it was individual americans who were upset at what they were seeing. look, most americans liked the plan that they have now. they don't want to see more government involvement in their health care. it ain't perfect, there's no doubt about that. but they're scared about government involvement. and as far as what governor dean was saying -- let me just finish. as far as what governor dean was saying, it is not true that medicare is an efficient system. >> but medicare costs have been going through the roof. >> and the reason that americans like medicare, is because they pay in. they think it's their policy. they put, you know -- you but a lot of money into medicare as part of your payroll taxes, and people feel it's theirs.. and the same way they feel social security is theirs. >> let me get peter get a quick vote in. and then over to dean. >> people say that their

employers recognize that they can pay the 8% tax if they have a payroll of $50,000 per person or $75,000 per person per year, they can pay the 8% tax, shut down their health insurance program, and foster an employee into the public option. and, you know, robert gibbs hit it on the head. he said, we want competition for the private sector. the problem with this administration, it simply doesn't believe in the private sector, it wants the public option as a trojan horse to drive humana and the other side of business. it's no wonder their stocks were up today. they don't have to hedge -- for the gill teen right now. >> senator dean, the floor is yours. >> as a factual matter, they don't really compete.e. there is an anti-trust option. >> you should look at the run on employees. >> i think that's a good idea. what president obama originally imposed was the public option, plus being able to pick the public option. let's go back over to medicare.

medicare overhead is 4%. the best profit nonand the best for profit is 20%. they have to pay return on equity, they have to pay advertising costs. they've got to pay ceos $20 million. these are things that medicare doesn't have to pay, and that's why it's more efficient than private sector. >> let's take a break here. stay with us, everybody. this is a hot debate. coming up, president obama wants shorter patents on drugs. this may save some bucks.s. but will it cost lives?s? we'll discuss that. and then the global hunt for tax-dodgers. how much can the irs expect to recover from secret off-shore accoun accounts. "the kudlow report." these days, when you have to spend,

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and welcome back, everyone. president obama wants to make prescription drugs cheaper for consumers. and here's his way to do that. >> drug companies are fighting so they can keep essentially their patents on their brand-name drugs a lot longer. and if we can make those patents a little bit shorter, generics get on the market sooner, ultimately, you as consumer will save money. >> >> here is the question, will shorter patents save money or

cost lives? back with howard dean and robert reich, steve morici and jim glassman. senator dean, will shorter patents cost lives?s? >> first of all, unorthodox views of the democratic party and secondly i worked for a law firm which represent some of these concerns. and the answer is, i don't think shorter patents will save lives, and i don't think longer patents will kill people.e. you've got to find a balance.e. most of the research and development -- this is the only company that pays its full bill on research and development. if you kill research and development in this country, these drugs won't be invented. the generics are great, 75% of all drugs are medicare part d in the program are generic, but you've got to have incentive for pharmaceutical companies and biological companies to make these new extraordinary compounds that really do save lives. so i don't want to get too dramatic. you need to find a reasonable, thoughtful fee and position

here. >> so how long should a patent last, jim glassman? >> well, 20 years. and the president is a little wrong on this. there is no nuance to change the length of a drug patent. through is after a period runs out, should a company have an exclusion period lasting five years or seven years, as the administration wants and as i want, frankly, or should it last 12 to 14 years as the drug companies want. and there is this period where engineer eric companies could not -- or effectively could not. what is happening is that five-year period has applied since 1984, since the hatch-waxman act which has worked very well for conventional drugs. in other words, there is competition now with generics, everybody knows that, that's driven prices down. but you have also had a lot of innovation over the last quarter century. now the question is, should that same rule be applied to

so-called buy logic drugs, which are very expensive, things that cost $48,000 a year and that sort of thing. and these are great drugs, no doubt about it, and i believe we need patent protections for innovation. the question is, how much beyond that and i think right now, the president needs to show that he really wants to hold drug prices down and hold competition up. and by doing -- by having a five to seven-year exception, not this ridiculous 12 to 14 years -- 34 years in total, that's the way to do it. >> peter, you jump in, and then i want to go back to risch. >> well, drugs are very expensive to develop these days, and the longer the period of time of monopoly, the less they need to charge to get their money ow. if we shorten the period of time of protection, then it's simply going to have to charge for. the less r & d, and develop fewer drugs, and then more people will die, simply because the drugs that could have been developed were not. also, if you shorten the length

of time and cost to charge for, more people won't be able to get their hands on the drug. this is a very difficult and sticky issue. >> it appears no one wants to short enlength of time. all that people want to do, people like me, is to apply the same rules to biologic drugs, as to conventional drugs. do you disagree with that? >> i think the amount of time should be similar to the cost of developing them, which is very high. >> i think we're all overlooking the fact that the national institutes of health financed by taxpayers are a major contributor to research and development in the pharmaceutical industry. no other industry has this degree of financial health and rnd, and perhaps the military and some of the defense contractors. and i want to just go back to what jim was saying, because i agree wholeheartedly. we have seen too many drug prices in many years on very, very small, almost technical changes that didn't really mean very much, but kept the patents going, and kept the generics

out, which is a tremendous problem for a lot of people in terms of affordability. >> let me step in for a second. that's why you need a compromise. you ought to end the game-playing at the end of the patent life, over small matters, and licensed patent. the damage we have already done -- there is a bill coming up -- the idea that you can buy and you have to get a decent, unfettered patent obligation or patent privilege for people who invent this stuff. and i think it is true, bob, that the national institute of health and others do a lot of reserve, but the private sector does most of it, and most of it is done by drug companies. >> don't you think, governor dean, that the president is going to have a hard time making the case that even saving or holding costs down for health care if he doesn't step up to the plate on this issue? that is 12-year exclusion has passed two committees, the senate and in the house, and the president really has not been

very tough on this. it seems to me, this is a place where he ought to take a stand. >> yes, a different game, though. the small molecule drugs for the conventional pharmaceutical companies are not the same as generics. they're much more complicated. you can't make a generic version. you have to test that to make sure it's safe. so it does need more time. >> we're out of time. governor dean, thank you very much. bob reich, always good to see you. peter morici and jim glassman. gentlemen, wish we had more time. coming up, eight cities, $100 million man. would you like to know him? to have that kind of money. how much is too much when it comes to executive comp. and should uncle sam have the power to claw back what's already been paid. and tomorrow night on the kudlow report, the green of jet fuel. we're joined by ren tech ceo to take a look at a way to change

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welcome, everyone. or welcome back, i should say. of citi's $100 million man, andrew hall drew a $9 million

payday, causing scrutiny of corporate compensation.. how much is too much? and should the federal government have the power to clawback executive comp. that's already been paid? joining us now, director of the office of investment. cio and jim petikuka, money and politics columnist. gentlemen, welcome.e. let me start with you. jim, i've got to say that i think high executive pay is the achilles's heel of american capitalism. i think it is a real weakness s and the kind of thing that is ultimately going to be too irresistible for populist members of congress to avoid going after. that said, i am really troubled by the idea that the government would come in and effectively abrogate employment contracts by trying to claw back money that

was contractually agreed to by a company. >> you mean it bothers you to cross out the hundreds of years -- yeah, i think it should. what bothers you more? going back and trying to claw back compensation from companies which have already paid back our money, or going after somebody like andrew hall? he wasn't the problem. he made money. he made, what, $600 million, he took home a lot of money. are those the problems? is that why we're in trouble right now? i don't think it is. i think this is misplaced and it's an easy scapegoat, because it has a populist player. it's easy to do. >> i think you're right. >> dan, here is a publicly traded company that is more public now than it's ever been, because the public owns it. >> that's right. >> if ever there is a right for the federal government, the taxpayers to go in and say wait a minute, i'm coming at you. >> well, exactly, and i think by way of context, what you should remember here, the top nine firms taking out the bailout

money had $33 billion in bonuses. we're talking about firms that are in some cases still active but for the taxpayer back stopping them. so when we talk about contracts, that's really sort of cool comfort for our members who are partial to checkive bargaining agreements, and who have had those contracts ripped up. who are now making $8 an hour instead of $10. so for them to worry that the contract -- it rings hollow.. >> tell me why the afl-cio or unions or shareholders, broadly speaking, haven't gone after companies for years and years and years that have been paying these high and to many people's eyes, outrageous amounts to -- these are not the founders of these companies. these are the employees of the companies. >> well, to the taxpayers now, these are the hired help. they work for the taxpayer now. and we have been going at this. we have a website, paywatch.org that for ten years has been sounding the siren on pay packages, and not just pay

packages, but the incentive structure on pay packages where you are traders getting all of the up side of their contract and the taxpayers are getting all of the down side. so, yeah, we have been setting the need for governance and d strong directors and boards to structure these. >> isn't the right way for this to gsolved for the shareholders to stand up, they're the ones who own these companies and say enough is enough, or pension funds or to disinvent from those companies that are paying too much for their -- >> right. let the market work. and it appeared to be working before for companies. so they're doing great, why stir things up. and now they don't seem quite so profitable and now you might want to take a more active approach. but you don't want these companies to be the hired help. i mean, you do want them -- and i know -- >> wait a second. >> that's what they said about this hole. i think we're -- >> you're going to go to a hedge fund and take a --

>> workers in this country are sick and tired of ceos who say that we're going to take the company hostage and unless you give us our money, we're going to go away and take the company with us. >> everyone is competent -- >> right -- >> the automakers -- >> the bonus -- make those -- the bottom line is -- >> your point, tyler, at citigroup, received no competence -- they continued to serve. >> i agree with that point. the shareholders have to jump in and take care of that. >> dan and jimmy, thank you very much for joining us. coming up, the global hunt for tax dodgers. what does the irs expect to discover from secret off-shore accounts. we'll talk with one attorney who represents off shore accounts. what it all means when "the

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a a a a a a a a a a a a a a a . have we seen the end of the second let off shore bank accounts? the irs and the justice department now in an all-out global hunt for tax dodgers. our hampton pearson joins us with the details. good to see you. >> and it looks like tyler, they're going after switzerland. the u.s. and swiss government have reached an agreement that could lead to the u.s. turning over at least 5,000 names of

americans with secret swiss bank accounts reportedly used when paying taxes. the justice department tells us details are coming any day now. back in february, the world's secretary largest wealth manager turned over 250 accounts and paid a $780 million fine to settle charges on nearly $20 billion in off shore accounts. experts say this next stage agreement opens the door to a possibly wider probe. the irs is offering to reduce penalties and lessen the prosecution if you come in on september 23 already.y. they officially wanted 50,000, now they'll get at least 5,000. >> if you don't come forward now, and make yourself compliant, you do run the risk of a criminal allegation against you, and that leads to all kinds of possible jail consequences, as well. so it's really a no-brainer. if you have noncompliant off

shore account, now is the time to come forward. >> not just the u.s., the global recession has other governments cracking down on global tax evaders and france and germany are also taking another look. >> joining us now, scott michael, a partner with the law firm, kaplan and driesdale, busy representing clients with ubf and other overseas accounts.s. thank you for being with us. as i look at what is now going on between the irs, justice and ubs, how big a deal is this?? is this the end of swiss banking as we know it? >> well, this is an enormous step in the united states that breached swiss bank secrecy, this quickly, at this level of magnitude. the turn that occurred in february was, as you mentioned, 250, 285 names, but now with the united states attaining access to substantially more names than

that, as well as with the swiss government agreement to conform its information exchange agreements with the united states, the international standards, i think we're beginning to see the erosion of bank secrecy, not just in switzerland, but in other countries around the world that have protective bank secrecy rules. >> is this a good thing in the long run? >> well, certainly for the united states, it is. there are taxpayers who for whatever reason have put money in foreign accounts, some of them inherited the money, and is it's not their fault that they were put there. but there is a lot of money that is out there, and undeclared foreign accounts, and the irs is welcoming these people back into the system, and hoping to be able to tax these assets year after year. >> how likely is it the justice or the irs might pursue other swiss banks or other banks with swiss ties? >> that's a good question, because the swiss government

participated in the negotiation to resolve a case, and so you have to think they have given their approval to the sort of general template that we're going to hear announced later this week. now, you know, whether or not the irs will be able to use that template or other swiss banks is an open question. but i would think there are people in the justice department and the internal revenue service who are planning those very next steps. >> how much money, scott, is the irs looking to get back in the case here of the ubs situation? >> well, i heard estimates as much as $15 billion more located in undeclared ubs accounts. i don't know cha anybody really knows what the right number is. i think the irs is hoping to deliver a very big number at the end of the settlement initiative, so it can demonstrate, i think both to congress, the internal revenue service and the tax law enforcement community generally that this program was a success.

>> so scott, we've got about a minute left. the question is, how can the swiss government or swiss bankers say that we are still swiss bankers, and do what they have done in this case, which is to turn over records to another country's law enforcement and tax officials? >> well, the swiss will tell you that the united states has agreed to use the tree process as opposed to simply using strong-arm techniques to enforce an irs summons -- served on ubs here in new york. so the swiss do consider that somewhat of a victory. because they will require the united states and other countries to observe the treaty process which grants certain due process rights to affect effect holders in switzerland. so they will say the process is still there, but it is a significant breach. >> thank you very much, scott michael.l. hampton pearson, thank you very much. your swiss bank account is safe,

i think. you're going to be just fine. former presidential candidate steve forbes will be with us tomorrow night. we'll see what the markets hold tomorrow after roughly 2% losses today. broad-based decline, across the board for nasdaq, s&p and the dow. from larry kudlow and all of us athe cnbc, thanks so much for watching. tyler matheson. see you tomorrow.

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