gun it, mick. (announcer) sign up today and get a netbook for $199.99 after mail-in rebate. with built-in access to the nation's fastest 3g network. only from at&t. hey, it's great to see you're back after that accident. well...i couldn't have gotten by without aflac! is that different from health insurance? well yeah... ...aflac pays you cash to help with the bills that health insurance doesn't cover. really? well, if you're hurt and can't work, who's going to help pay for gas? ..the mortgage, all kinds of expenses? aflaccafcccc! it's the protection you need to stay ahead of the game... exactly! aflac. we've got you under our wing. aflac, aflac, aflac... aflac, aflac, aflac

tonight on the "kudlow report." marking the end of camelot, the liberal lion of the senate, ted

kennedy dies from brain cancer, may he rest in peace. does this end the government's takeover of health care? a decade of debt is creating big doubts about the dollar. the president's budget doesn't even tell half of the sorry debt story according to former u.s. comptroller general david walker. why is new york's labor leader now chairman of the new york federal reserve? is this going to be trouble? strong economic stats today for new home sales and business investment? is it a v-shaped recovery with rising interest rates coming soon? what will that mean for stocks? should money market mutual funds be regulated like banks. >> think fidelity, vanguard, you may own one of them? we'll debate it. fasten your seat belts, the "kudlow report" starts right now. .

good evening. i'm larry kudlow. welcome back to t"the kudlow report" where we believe free market capitalism is the best path to prosperity. today's top story is the passing of senator ted kennedy, the liberal lion of the senate who died last evening at the age of 77, may he rest in peace. one key question is whether his passing ends the government's trying to take over health care. now to john harwood. hello. >> reporter: thanks. senator ted kennedy called health care the cause of his life. over a career in the senate lasting nearly 50 years, you can count the ways, voted to create the original medicare program in the 1960s. later frustrated trying to extend universal coverage to all americans. didn't stop working, partnered with republican senator orrin hatch on the children's insurance program and worked with republican nancy castle bam make making it stay with workers after they lost their jobs, at least for a while.

the question is whether the senate and washington will burnish is leg gas said in extend it by creating universal health care under barack obama. despite lot of pessimistic predictions, i think democrats are still in a reasonably strong position to accomplish that, larry. back to you. >> john, thanks very much. >> there's a big surge in home sales last month, more indications the market may be turning the corner. diana has more. >> sales of newly constructed homes rose for the fourth month in a row, up 9.6% in july. inventories fell from 7 1/2 month supply to the lowest since 2007. the lowest number also fell the smallest since 1993. prices are down with the median price down to 210,000 dollars of a newry constructed home. these bullish numbers sent the home building stocks higher even

as analysts question whether this teupturn may be temporary. >> we also got a strong number today from business durable goods orders and all this stuff signs of a potential v-shaped recovery that may come out of the blue and economists may not be ready for it. listen to what famed investor byron byron wien told me. think it will be impressive. inventory levels low, comparison easy, i think you will have 4 and 5% quarters coming up. people will feel this is really a v-shaped recovery. >> there you have it. the question is is the recovery coming sooner, stronger than most folks think including the economist profession and what does this mean for stocks and also what it might mean for ben bernanke's interest rate policies, joining us brian westbury, first trust chief economist author of the upcoming

book "it's not as bad as you think." i love that and our great friend, joe bat tag lyia of nicolaus. let me ask you, when you go to sleep and dreaming, do you dream of a v-shaped recovery. >> absolutely. i was on the golf course the other day, i thought i hit a v-shaped shot, turned out i hit a sprinkler head. i see this everywhere i look, whether housing numbers, durable goods, ism reports, copper prices, oil prices, baltic freight shipping index, the stock market. this economy is bounced off a panic low and we are seeing a very powerful spurt of growth here. i think it will carry us well into 2010. >> you can see that chart durable goods orders out today, the three month moving average jumping out nicely. we have the core investment

number subject to misinterpretation if we can get that up on the full screen, the capex-number. the oddses for july fell slightly only because june was revised up substantially. if you smooth a little bit, you're growing at almost 40% annual rate. i think we also have a picture of the new home sales that came in surprisingly strong today and really looks like the housing decline has ended. joe, weigh in for us on the very-shaped recovery. >> the only place you don't see the v-shaped recovery is income growth because there isn't any, job growth because we're losing jobs and level of indebtedness is too big and now evidence the government will increase the debt prospectively. you think of the economy itself, it lax that kind of get up and go because there's too much indebtness still needs to be worked off. by boomers are exiting the

stage of the big spending cycle and actually look to save more. interest rates aren't changing much and no tax incentives anywhere for capital to be employed incrementally. we can celebrate the bounce from the bottom always anes in a severe fall. if auto sales go back to a million a month because of cash for clunkers that's 12 million annual rate. the old rate was 17. housing, we're celebrating 430,000 starts for new homes. the old peek was a million, 5. >> we've been through the data. >> no, you didn't. you didn't go through this data. you only went through brian's v-shaped recovery. i'm trying to articulate -- >> we will put the charts up on the screen there. is no question factually the growth rates from the low base are rising. you cannot dispute that. >> no, i'm not. you shouldn't interpret. >> it that's an important point,

joe b. >> that's fine. >> i was reading the notes. you have turned more optimistic now, you are no longer predicting recession, is that true? >> no. we have a recession that lasts sometime through the third quarter here, looking for a less than 2% growth rate on quarterly basis well below our potential as economy. >> what is next year's growth going to be? >> not much better than this, quite frankly, i am concerned return on investment will be lower. >> you feel the recession has ended, that's basically your point a change in your point of view. all right. i want to get that out on the table. >> that's fine. >> brian wesbury, what is your growth estimates. >> we were 3 to 3 1/2% in the third quarter and 4% in the fourth quarter and 4 1/2% next year and think it will be a very strong bounce and will last 12 to 18 months. in truth, brian, that is a stronger forecast than joe's so relatively speaking, you're the v-man. i go back 25 years, in the

reagan recovery of the 1980s, first couple of years growing close to 8% at annual rate off the bad bad recession of '80-82. >> exactly, you go back to 1907, the last real panic we had in our economy, we fell at a double digit rate and rebounded almost 15% growth in late '08 and '09. this is a little bit weaker. today's data on durable goods have made me want to raise my forecast for the third and fourth quarter, i haven't done it yet but we could see that 4 to 5% growth rate here in the second half of this year. >> larry, you bring up the reagan years. i want to contrast it with 1979, i think it's appropriate. we had very high tax rates and now have very low tax rates supposed to be rising soon. we had high interest rates and those came down materially to affect behavior. we had savings rate at 10% opposed to zero and the leverage in our economy was significantly lower than today. all this activity we're talking about is being stimulated by

government programs left and right that are unending. that's why that deficit is becoming bigger and bigger as an issue. >> i want to get to that. i absolutely want to get to that. the whole budget tax thing and budget problem. >> joe b. in your 2% forecast does the fed raise rates and if so when? >> no. i think the threat is more deflation than inflation. it's showing up in ppi and cpi and pressure company's ability to pass on price increases, pressure their margins and that's why the v-shaped recovery crowd is looking for dynamic change in earnings power over the next two years. i understand how you would reach that conclusion, i put that in 1 in 4 chance of outcome. we have more moderate growth earnings with flat year next year which makes stock valuations different. >> brians s wwesbury, does the start raising rates sooner? what's the impact of that? what i'm trying to set up, i know important bears like my

great friend, dougy cass. he thinks the stock market has peeked this year. one of the reasons, he's looking for economy growth and closer to joe b. and dougy feels the economy might have a bump up in the third quarter but will putter out. what i'm asking you is a different scenario, in the v-shaped scenario, with much stronger growth and no economic putter, what happens to interest rates and does that threaten the stock market? >> this is a great question, larry, i think a very important one. it reminds me of 2003 and 2004, when the fed was at 1% interest rates and people were worried when they raised them, it would hurt the stock market. if you go back and look at that period, fed raised rates. i think that's what can happen now. these rates are too low. we still believe the market is

40% undervalued. we in our valuation model use a much higher discount rate. we're using a 5 1/2% 10 year treasury yield instead of the 3 1/2 roughly we had today. >> you're not fearful of the interest rate. >> no. >> i would guess you would welcome it to protect the dollar and inflation? >> absolutely. the rising rate would be kind of confirming evidence the economy strength is here to stay. >> a few years back brian wesbury endorsed the fed tightening interest rates and wanted short term rates to go higher before the market collapsed and we have a debt crisis. now we have a continuing debt crisis, the government is adding more to that debt, you see rates move higher here and you send this economy over the edge. that's why ben bernanke is stuck between a rock and hard place. >> i can't believe that at all. when i was saying the fed should raise rates was 2001, 2002 -- >> no. you -- >> i said it consistently --

>> you said it with unemployment. >> you keep interrupting me, that's great. go ahead. >> let me ask you, i have a couple of important topics to cover. i will ask you for a "lightning roun round". let's go to issue of dollar and interest rates for ben bernanke, he's just been re-upped for a second term. he'll be confirmed. is it going to be helicopter ben or is it going to be king dollar ben? protect the dollar and inflation rate without asset bubble and inflating ben or helicopter ben. >> there's no evidence he's anything but helicopter ben. he's sitting on $2 trillion of toxic assets he has to work out of. he will pay banks interest on reserves and endorsed. >> you're voting for helicopter ben. i have to go real fast. you're going for helicopter ben. brian wesbury. helicopter ben or king dollar ben? >> i think it will be very

difficult for the fed to raise interest rates in here. they should be doing it right now. it will be difficult because the unemployment rate is high. we have a populist political environment right now. when you have pop pewism, it's difficult. >> a tough call. >> brian, stay with you. the new york's labor leader is now the chairman of the federal reserve bank of new york. this is a story, i saw it as a big editorial on invest"investo business daily" a day or two ago, nobody is talking about this, the guy is anti-business, pro-regulation, doesn't like bank, now the chairman of the fed's main branch in new york. is this a nuisance, trouble? what is this, brian? >> probably a nuisance. the equivalent historically is putting williams jennings bryant charge of the fed, he would have canceled the gold standard and flooded money into farms so we have more inflation. that's the worrisome thing, lots

of people that think a little bit of inflation, 5, 6, 7% is good for our economy. i'm afraid that's been the position of the labor unions a long time. >> joe b., i have more work to do. joe, let me come back to your budget topic, very very important. we will cover it in detail later in this program, i want to ask you, as spending government spending goes from roughly 20 to 25% of gdp, that's a huge number for this country, as our borrowing, public borrowing goes from about 40% to 80% of gdp, what is the impact on the american economy, in your judgment? >> in my judgment, you ultimately crowd out the private sector. my judgment, you distort pricing for all asset classes, which is not good and lastly, you reduce american competitiveness and rates of return on investment here which ultimately puts pressure on the dollar and makes growth rates elsewhere more appealing to capital around the world. for the u.s. to lose that position is a very scary thought. >> it's basically depressant on

growth, brian and makes every dollar of money supply more inflation airy. what happens on the tax side? i don't know about health care. i will leave that as the last question for both of you. we know that the top tax rates are going up in 2011, we know that. and so are the tax rates on investors, capital gains, dividends and top earners. what does that do to economic behavior in next year, 2010? do you come in and beat the tax hike? what happens. >> it accelerates it. people move as much activity as they can in 2010 and out of 11, where the tax rates will be higher. this is the biggest question. we know health care is there, we know cap and trade are there, we know these tax hikes are there, sort of like hurricanes lying off the shore. the question is are they going to hit us or not. we don't know yet. you have to wait. as a result, between now and the end of next year, we will have a boom, whether there's lots of people that are worried about

it. i think, by the way, conservatives are making a huge mistake -- >> me, too. >> arguing all these hurricanes will hit and kill us and everything else. >> take it a day at a time. the organic economy is self correcting. interesting, brian, on this point, i just got attacked by bruce bartlett who used to be a conservative says i was looking for better growth a year or two ago. >> you're assuming. >> saying i'm shilling for obama now, i think the economy will recover. joe, last question, the passing of ted kennedy, may he rest in peace, lord knows, does this change your expectations about big regulating high tax and high spend health care takeover by the government? >> no. it will be used as sort of club to try to force this to happen with a new name called kennedy health care reform and it will be a very expensive distorted program that adds to that deficit number. >> they will try to do that but they changed the rules in

massachusetts. they need another election. they won't have the votes in time. i think this lowers the odds of it. >> that's good. gentlemen, you covered great ground. i really appreciate it, joe and brian, two of the best of the best. coming up, the whole foods health care thaw continue, should the ceo have spoken out against obama-care? let the guy be heard. it's a free country and happens he's a free market capitalist. obama's $9 trillion decade of debt is sewing doubts about the dollar. that is another corollary problem to this terrible debt. it's like collateral damage. stay with "the kudlow report."

hi, may i help you? we're shopping for car insurance, and our friends said we should start here. good friends -- we compare our progressive direct rates, apples to apples, against other top companies, to help you get the best price. how do you do that? with a touch of this button. can i try that? [ chuckles ] wow! good luck getting your remote back. it's all right -- i love this channel. shopping less and saving more. now, that's progressive. call or click today.

despite controversy over a ceo speaking out against obama, whole foods is thriving. rebecca has the full story.

>> thank you, larry. while there is controversy over that op-ed, john mackey wrote there is no controversy over this company's returns over 200%. it's about location location like these at the university's campus that play to the affluent and educated audience health conscious and found a value proposition working well with consumers and changing demands a. number of items on whole food shelves are actually less expensive in some cases than the competition. that's winning over in terms of sales. here in new york, we're looking at 2 million dollars a week for the average whole foods store, $100 million over the course offer an entire year, where as the competition, well, larry, they're getting clobbered. their sales, 20 million dollars a year. as you can see, whole foods, at least for now, is a winner. >> remembbecca jarvis, thank yo very much. i want to way in personally.

mr. mackey is clearly a superior ceo, doing a great job, his shareholders happy with him, customers happy with him, employees happy with him. therefore the idea of attacking him because he speaks out in favor of a more free market approach to health care is nonsense, it's a free country. this guy is a free market c capitalist, wants choice, private sector competition, wants individual consumers to get the tax break to buy insurance, wants to deregulate insurance across state lines, as far as i know, these are crucial elements, wants to put tort reform in to reduce insurance costs for practitioners. these are key elements to any compromise. i am glad a ceo is speaking out in free market terms. no one can fault him for that because it's a free country, plus his company is doing great. anyway, coming up on "the kudlow report." >> the white house is forecasting a $9 trillion decade of debt. former chairman david walker said the real picture is worse

worse worse, closer to 56 trillion. will that crush the dollar? adam boyton will join us to drill down on this key topic. going from the decade of debt to doubting the dollar. collateral damage. we must cover this f. introducing the all new chevy equinox. with an epa estimated 32 miles per gallon. and up to 600 miles between fill ups.

it's the most fuel efficient crossover on the highway. better than honda cr-v, toyota rav4 and even the ford escape hybrid. the all new chevy equinox. (announcer) we understand. you need to save money.

are working from the road using a mifi-- a mobile hotspot that provides up to five shared wi-fi connections. two are downloading the final final revised final presentation. - one just got an email. - woman: what?! hmph. it's being revised again. the copilot is on mapquest. and tom is streaming meeting psych-up music - from meltedmetal.com. - ( heavy metal music playing ) that's happening now with the new mifi from sprint-- the mobile hotspot that fits in your pocket. sprint. the now network. deaf, hard-of-hearing, and people with speech disabilities access www.sprintrelay.com. on the front page of today's

"wall street journal," the government gone wild with a decades of $9 trillion on the taxpayers. but the government is now raising doubt about the u.s. dollar. how big is the fall-out from washington's spending spree? here is david worker former comptroller and ceo of the peterson foundation and adam boynton, formerly of douche beu bank. i have a quick question, is the united states bankrupt, out of money? >> we're not out of money because we can always print money. we're in a deep fiscal hole, monetary policy is very loose. i have lot more confidence in the fed turning the corner when the economy turns around than the congress an president. >> another currency story. the numbers that come out, total debt was raised by 2 trillion in the stroke of an eyelash, customer stroke, so much to $9

trillion. the whole history of the united states was 7 trillion in debt and increased that by adding another $9 trillion. your point, you're saying the unfunded entitlements liability are not in that number and that's where we should keep our eye? >> the fact is our problem is not the current level of deficits and debt the off balance sheet obligations, we have tens of trillions of dollars in unfunded promises, 38 trillion for medicare alone, to the promises between social security and medicare grow 2 to 3 trillion a year even with a balanced budget and nobody is doing anything about it. >> adam, what is the impact? you're a current strategist guy. creating too many dollars is the surest way to drive down the currency's value, i think you would agree with that. what is the influence of the debt and borrowing story, dave

walker is describing. >> when we look at currencies over a long period of time one of the things that keeps currencies weak is risk. that's two things, currency deficit and fiscal deficit. the size of the fiscal deficit means the dollar will remain weak a number of years. no doubt. >> how do you translate that into pressuring the fed not to create too many dollars. >> a combination of two things. when we had the financial crisis, policymakers acted aggressively, the right thing for the time. the question now as the economy starts to recovery, we need a strategy to reign the deficit in otherwise there is no hope for the dollar and the dollar will continue to remain one of the weakest currencies. it's about responding to the times. if we see recovery we need to think about fiscal consultation. >> dave talk to me about fiscal consultation. i think global investors know

full well what you both are talking about. too bad the white house and treasury are not addressing this. i see no plans, dave walker, zero, to put limits on spending and borrowing, i see nothing nor i do see reform plans for entitlements you describe. until that happens, i don't see how this dollar can prosper. >> so far, the plans are to grow government and expand commitments and at best pay for them over the next ten years even though the cost might escalate dramatically and we're not doing anything to fund the promises we already don't know how we're going to pay for. here's what i think will happen. the administration and congress will try to get health care reform and get something modest and hopefully form a fiscal commission that will set this stage for grand bargain in the future. that's what's needed. >> one way or another aren't we going to have to tighten our belts on health care programs? you can extend requirement on

social security and medicare, at some point you have to go to benefit side you can't keep taking it out on health care and diluted shares. the working population supporting retirees is insufficient. the problem i have while our government in washington won't admit this to the american public, everybody knows it. no wizard of oz and investors around the world know, too. >> we have to change the formulas, have to change the payment system, have to better target taxpayer subsidies for medicare, better target tax preferences for employer provided health care. we have to do all those things and more. keep in mind you can't reduce health care costs by expanding coverage. that's an oxymoron. >> adam, you're a bear on the dollar, i take it. this troubles me enormously. what can ben bernanke, if the economy has a v-shaped recovery, will interest rate hiked by the

fed rescue the dollar. >> not if they beat the fed to the bunch. that's the risk, europe is recovering fairly. we in deutch bank, we think they will do it. the fed will have tout hike the acb. the history out of the last two session is fed is slow to act. >> in effect what i'm hearing from both of you this is quality of the american credit and financial system is suffering because of the failure to do anything about it. that's what i'm hearing from both of you. adam, in monetary terms, if the dollar will suffer, inflation prone policy if the dollar keeps going down, doesn't that impoverish consumers and business, dollars in our pocket are worth less, harder to keep him porting? this puts bernanke between a rock and hard place. >> it does. the inflation between weaker

dollar is fairly long variable. from the fiscal point, we had an exit strategy from ben bernanke published a few weeks ago. that's what we need on the fiscal front. you don't need the action yet but do need some sign is there an exit strategy for fiscal policies. >> dave walker, when you talk to people in washington as you do, a fiscal exit strategy, entitlement exit strategy, i have to tell you my instinct is creating new entitlement will not solve the existing problem. what is the fiscal exit policy? what can you tell families paying 35,000 dollars a year per household in government spending. >> president obama said about a month ago in an interview with fred hyde of the "washington post" it may take some extraordinary commission in order to set the table for a grabb grand bargain. i think it is. you need a commission to go outside the beltway with people credible, listened to, to tell

the truth to the american people and set the table for tough choices on statutory budget control, social security, medicare, tax reform. all you have to do is set it up, don't have to make them implement it right away. >> i think sometimes -- this a little snide, sometimes we need lawsuits to end prof lesscy and fiscal soundness and force the government to get the financial house in order. >> we need and amendment to limit credit cards. >> there you go, what i'm trying to go in my own way. more commissions are great. you and i have seen a lot of commissions. adam a pleasure to have you on the program, hope you return, dave walker, same to you. coming up, america struck oil, 150 years ago tomorrow, 150th anniversary of the first oil find. you will tell us about peak oil and prices and other topics.

cash for clunkers is in the can. who are the big winners and why are some new car owners having buyer's remorse. we need constitutional authority to create fiscal soundness. that's where this is going to lead. fithe same tools the pros use,

so you can be a disciplined trader. by selecting from eight advanced triggers, your order gets executed, even when you're busy. and with trailing stops to help you lock in profits and minimize risk, you can be confident in your strategy, no matter which way the market moves. find out why more and more active traders are turning to fidelity for a smarter way to trade online.

here now with big winners and losers from the recently completed cash for clunkers program, phil lebeau, hello. >> thanks, larry, cash for clunkers is over and the federal government is calling the program wildly successful. 690,000 vehicles were bought through the program as people traded in gas guslers. the top five includes only one american model, ford focus. of the manufacturers, toyota sold nearly 1 out of every 5 new model. followed by gm, ford, honda and nissan. there's an indication some people who bought a new car may be having clunker remorse. according to cnw marketing research, a survey of 1,000 clunker buyers found 17% have sorm serious doubts about making a purchase of a new car because it will add $275 to 350 dollars a month to the family budget,

which is already stretched. that's this latest on cash for clunkers, back to you. >> thanks very much, bill. i want to say editorially, a lot of the foreign car makers are made in the united states, especially honda civic. you see how the u.s. government bungled the paperwork and money created for this program and you have to ask yourself, do we really want to take over the entire health care sector? cash for clunkers probably worked but looked worse than the post office. anyway, let us move on. drill drill drill, one of my favorite man tras. we first did it 150 years ago tomorrow right here in the usa. here to talk about the future of oil, she wrote about in the current issue of foreign policy magazine, cnbc global dan, of ihs cambridge energy resources. the author of "the prize" a fabulous book, reissued. i will say titusville, that's

probably not right. where was the first oil. >> that's right. titusville. >> it was titusville. >> you'll love a group of free market capitalists in new haven and new york decided to take a flyer, first of all on the notion you could use this stuff called rock oil to replace whale oil and secondly, you could drill for the stuff. they were just about to pull the plug on it when tomorrow, 150 years ago, the well struck oil. >> and changed the economy and everything else. the debate still goes on. >> changed a lot. >> one thing hasn't changed. you probably read this former mit professor, michael lynch, op-ed piece the day before yesterday, he said peak oil, we're running out of oil, said this for 150 years, seems to never changed. >> he said peak oil is utter nonsense and poppycock. this is a big story with oil prices rallying through $70,

what's your thoughts about peak oil. >> i think it's this same. turns out this is the fifth time the world has run out of oil. markets do work, new resources get discovered. i thought that article was pretty much on target. >> he's talking about -- i was just going to say, he names a number of reserves out there that can be mined and brought up above the ground, something like 2.5 trillion barrels equivalent. that's a phenomenal number. thomas ma thomas malphus rest in peace and limit the growth, rest in peace, i'm all for renewable sources, drill drill drill, shale, gas, especially nuclear, do you agree lynch is right, we have oil to last us i don't know how long, hundreds of years? >> yeah. we have a very large resource actually probably much larger than 2.5 trillion barrels there.

are risks but the risks are above ground, politics, what governments do, hurricanes all these other things that can a disrupt things. the more you look at it, the notion we will run out soon was not borne out by the analysis of the fields. i think he's onto something. >> the oil market has oil contracts that have become a financial instrument. i agree with that. a lot of this trades as hedge against the dollar. that is something fairly new. what does that tell you about the price of oil? >> well, you know, i was listening to your segment carefully on the dollar. if we are in a dollar crashing, that will be factor that will drive oil prices up. i think we've seen that we saw that happen last year, and the last three or four years, it's this notion now oil has a split identity, physical commodity in those cars, whether clunkers or

efficient cars, also as a financial instrument based upon what happens to the dollar? what happens to inflation, what expectations are for the global economy, what we're seeing played out today. if you're looking at physical fundamentals for oil, they don't support the prices. >> the editor of the "fortune" magazine a long time ago, about a year. oil approaching $150, shawn said it costs about $50 of barrel around the world to lift the extra barrel of oil. if you give them a certain profit amount, maybe $70. it is $71.43. on the other hand, if you have 2 1/2, 3 trillion barrels out there that can be discovered and lifted, that would cut the price of oil, would it not? >> that would. it all takes time to develop that, negotiations for government a lot of other things. what you look at is see there's about 6.5 million barrels a day

of capacity. it is true is there consensus $70 is good for consumers and producers and good for people who want to invest in the future, including free market capitalists. >> i love free market capitalists but hate a weak dollar. if we don't defend the dollars, we'll be living with another oil shaw. >> that could be one of the factors that really drives it ahead. a weak dollar brings a lot of very scary things in the global economy, including what happens to global commodity prices. >> thank you very much. congratulations on the foreign policy and reissuance of the book. coming up, it got a little easier to buy a bank. the fdic eased regulations on private investors who want to take over a failing bank. paul volcker says it's time to regulate money market mutual funds just as you would a bank. what will that mean for your money?

i bet lots offer you out there are invested in money market cash funds. is it ready for new regulation. "the kudlow report" does not want it regulated. i'm racing cross country in this small sidecar,

but i've still got room for the internet. with my new netbook from at&t. with its built-in 3g network, it's fast and small, so it goes places other laptops can't. i'm bill kurtis, and i've got plenty of room for the internet. and the nation's fastest 3g network. gun it, mick.

(announcer) sign up today and get a netbook for $199.99 after mail-in rebate. with built-in access to the nation's fastest 3g network. only from at&t.

in major win for private equity funds, the sec eased restrictions for buying a brift bank. >> thanks, larry. this afternoon, they took an outside the box approach to stop the drain on the insurance fund triggered by an almost epidemic we' wave of bank failure, 81 and counting, the worst since '92. the key change lowering capital requirement from 15% to 10%. the standard for a well capitalized bank is 5%. the fdic board says this policy change does strike a balance.

a controversial source of strength provision, which would have put private equity investors on the hook for more capital if a bank failed, that was dropped. the fdic says these new guidelines will be reviewed every six months. back to you. >> great stuff, hampton that is an opening. we'll see private equity funds coming to inpick up these failing banks think is a darned good thing. moving ahead, former fed head paul volcker is back in the news. says he wants to see money market mutual funds treated the same as banks in regulatory terms. let's get a quick taken from our distingui distinguished guests, tony, and peter marici. here's the quest yes or no. we will come back and deal with this in great depth. should these money marngt mutual funds be regulated like banks. >> absolutely. they have large systemic risks

and take on many regulations such as activities of banks. >> the funds are already tightly regulated by the sec. they're doing just fine, don't need regulation. >> i'm not a big regulator. isn't the sec sort of the dummies of regulation? >> larry, the money fund regulations have withstood the test of time over the last 30 years, these have been rock solid investments. the money fund regulations are now the envy of the world. >> we will come back and look at this. we have to look at the reserve primary fund that went down last fall and helped trigger a world financial collapse.m. we'll be right back.in nce. you're good. thanks. so is our bike insurance. all the coverage you need at a great price. hold on, cowboy. cool. i'm not done -- for less than a dollar a month, you also get 24/7 roadside assistance. right on. yeah, vroom-vroom! sounds like you ran a 500.

more like a 900 v-twin. excuse me. well, you're excused. the right insurance for your ride. now, that's progressive. call or click today.

we're back with tony and pete tempt we're talking about a pr proposal to regulate money market funds. most of you out there probably invested one way or another in these money market funds. black rock, fidelity, vanguard. everybody's in money funds. peter, let me ask you this, the reserve primary fund that broke the bank that a minute they had to default because the holdings in commercial paper went down. this was the key point of the whole financial meltdown. i don't know how much they lost, i don't know if you know, how do we avoid another calamity like

that, peter? >> essentially, we have to insure the deposits. when they broke the buck, there was a run on these and the treasury had to step in with fdic insurance. they don't have a reserve the way banks do so understood cut the banks. if they will take money and deposits the way bank, do subject them to the same reserve requirements, level playing field, will lower the return, but won't snuff them out and still be a vital important point of the commercial paper market. >> tony, i want to ask -- if you don't mind me calling you tony. >> sure. >> it's pretty good these guys don't have to go to market to market. the whole business about net asset value, peter called breaking the buck, they mark to the book value of the asset when it's scheduled to mature. for trading instruments, mark to market is this usual here, maybe not for toxic assets, in the

main. doesn't this give money market mutual funds a tremendous advantage? >> a couple points. the primary fund to your earlier question lost $785 million, a minuscule amount of the total 3.6 trillion in money market funds. you divide that out to .0001. in fact, the collapse was caused by the collapse of lehman brothers, aig and everything else burning around it. the money market was the last group standing. >> they owned the asset backed commercial paper what you're saying and may have owned the straight commercial paper. go ahead i. didn't know it was as low as $7500 million but in the scheme of things, that's not much. you're not worried this could happen again. they don't have lines of credit to the fed, don't have the reserve requirement, don't have the kind of regulatory oversight, you think that's okay? >> the primary difference between money market funds and

banks is the money market funds invest in short term instruments of only the very highest credit rating. in fact, the cost method of accounting in these funds keeps the net asset value at a dollar. banks on the other hand perform a very valuable function making intermediate and long term loan, banks make car loans and mortgages, going out 5, 10, 20, 30 years. the longest investment a money market mutual fund is currently allowed to make is 13 months and average investor is even shorter. >> peter, do you agree with anthony about the safety and soundness? 3 $1/2 trillion worth, everybody at one time or another is involved. the bank themselves owns cash funds and jpmorgan. do you think they are as safe and sound as anthony. >> it's not matter if they are safe and sound, the fact they can break the buck. the primary reserve was the

second 2001 do it. there was no backstop or insurance program the way with bank a lot of ordinary investors threatening to pull their money out a run on these things. if we have to guarantee them the way we do banks, we have to come up with reasonable reserve requirements as we do with banks. if we want to start to classify financial institutions according to the kinds of loans they make and reserves gwen loin that basis, i'm open to that the notion these guys have no reserve requirement but the treasury backs up their deposits just like the bank, puts the banks at incredible disadvantage and grossley unfair. >> we're almost out of time. 15 seconds, why don't the money market funds set up insurance funds? they could do it voluntarily. why not? >> no need to. they manage their portfolio very short and maintain net asset value. >> i have to leave it there. you're both great. peter and tony.

catch me tomorrow morning on "the call" with amanda drury. welcome to the now network. right now five coworkers are working from the road using a mifi-- a mobile hotspot that provides up to five shared wi-fi connections. two are downloading the final final revised final presentation. - one just got an email. - woman: what?! hmph. it's being revised again. the copilot is on mapquest. and tom is streaming meeting psych-up music - from meltedmetal.com. - ( heavy metal music playing ) that's happening now with the new mifi from sprint-- the mobile hotspot that fits in your pocket. sprint. the now network. deaf, hard-of-hearing, and people with speech disabilities access www.sprintrelay.com. of the world's most revered luxury sedan. this is a history of over 50,000 crash-tested cars... this is the world record for longevity and endurance.