downturn. next sentence, to conditions in financial markets have improved furtherer and the housing sector has increased. the fmoc was talking about an economy that was lefing off. but ben bernanke and policymakers gave no clue as to when the fed might raise interest rates. the fmoc still expects weak economic conditions to persist and so it will keep the funds rate at a, quote, exceptionally low for an extended period and it expects inflation to remain subdued. among the biggest drags on the economy -- job losses and tight credit, putting a drag on consumer spending. the fed did reiterate its plan to purchase $1.2k5 trillion in mortgages, but there is an extension from the end of this year to the end of the first quarter in 2010. larry? >> all right, hafr ton, thank you very much for that update. now let's swing over to the stock market. matt nesto has the full drill down. action selloff, reaction, hello,

matt. >> stocks ended up down far second straight day here. a dramatic turnaround in the final 90 minutes. the dow giving back 170 points to finish down 81 at 9748. we're still up about 2.5% for the month of september. today, though, financials, energy, materials, cyclicals, all the biggest drag in the marketplace, looking at the dow. names like jpmorgan, the worst there, down 3% on the session. but cat, cisco and pfizer were all close behind in terms of the giveback today. goal miners like new mont in the materials space, down 6.3%. a few pockets of strength included ford, at&t and general mills, out with better than expected results. and then tomorrow it's research in motion's moment in the

spotlight with their third quarter fquar quarter earnings. >> what did the fed mean, when did they mean it and why did the market sell off? is it helicopter ben ore king dollar ben? jim paulson of wells capital management, and cnbc reporters rick santelli and steve liesman. never has so much talent been assembled since thomas jefferson dined alone. jim, let me go to you first on this one. 170 will have point turnaround from up to down on the dow jones. in brief, mr. paulson what do you make of it? why did happen? >> well, larry, i think the fed left a statement today that i think sounds pretty good for the stock market. i think they bassically said they see the return of real growth without really inflation or interest rate pressure for the foreseeable future. i think the market initially did react positively to that and

went up to 9900 on the dow. i don't really know why it sold off except sellers took advantage of that quick run to raise some profits. and then momentum took over for the rest of the day. i really don't know a reason. >> did the market give the fed a bronx cheer, you know, a little one of those. you know the old story from chicago. they got it out there, too. and why? i mean, was this a helicopter ben easy money, we're going to keep printing money, we're going to keep buying bonds forever. is that what's going on here? the market is getting sick and tired? no defense of the dollar, which seems to be a pornographic word to the central bank, rick santelli? >> i think you pretty much summed it up. i also find it interesting, i agree with mr. chanos, if you look at the way all the markets moved and then had a knee-jerk move back, you saw that in the dollar. they went down and up .. the equities went up and down.

one area that stayed consistent before, during and especially afterthe statement are interest rates. they moved lower. i think that's very important to keep an eye on, especially at a time where we have a new turnstile of buyers, larry. they're the kind of d disenfranchised money market guys that are now showing up in droes. >> let me just -- let me just focus on that point. interest rates moved a bit lower today. the ten year is well under 3.5%. is that because market people think the fed is going to keep buying? all right, it's not treasuries, but they're going to be buying mortgage bonds. they've got another, what, $400 billion or $500 billion to buy. is china buying because the market is going down and the yuan is stable? what is going on with the treasury rally? >> i think we're recycling. the fed comes in. they buy the agency paper. the money they dump that on the fed. goes into a much more quality

product into the treasury market. so add that into all the other reasons they're buying, it's kind of ironic. they should probably slow down the purchase program. they make the transition. there's so many buyers. >> they're basically saying the recession is over. that was in the statement. why do they have to finish up buying up all these mortgages. another $500 billion. isn't their job done? and might the market be rebelled against all this loose money, cheap money, pornographic dollar from the fed standpoint? >> how much time do you have left? it's 7:38 into the show. i don't agree with almost anything that's been said, except for maybe the part that began good evening. and after that, you kind of lost me. i don't believe the dollar is pornographic to the fed.

i just don't think it's the central part of the party. >> it's ir relevant to the fed. >> i barely had 15 seconds relative to the eight minutes of disagreement that i have, rick. it's not irrelevant. it's something that's important to the extent that it affects the forecast. i think this was a good statement today. i think it begins what i would call the analogy between bernanke and obama. obahle ma wants to get out of iraq and bernanke is trying to get out of the markets. it was well received in credit markets. the dollar you failed to mention, rick, actually went up on this. although i think that was part of a broader thing that had to do with oil and stocks in the dollar that's been going on. >> hold on. >> can i at least get 40 seconds in? >> you've got to give him his due. >> begin a discussion of withdrawal from the markets and the market, the one that i really care about is the mortgage market. and the credit markets received the language --

>> in all seriousness, though. let me ask you a nonideological common sense question. if the fed says to the world, as they clearly did in their statement today, as hampton p r pearson reported and you know better than anybody, if the economy is healing why do they have to keep buying these bonds and creating this money? that's a common sense question. go ahead, give me that. >> you take an antibiotic, you've got to take the full prescription otherwise you get the disease back again. hold on, let me finish. >> even if you walk around doubled over because the prescription was too strong? >> it's a super bug a super virus. >> their take is that markets are still -- and the economy are still both fragile. and they believe, and i know you guys disagree, the mistakes made in the past were to withdraw stimulus and accommodation too early. >> listen, john -- >> 1:30 to counteract eight minutes of your --

>> let me ask you a question. i have read this statement three times. i've even read between the lines. i even translated this into a foreign language and there's not one mention of gold, and there's not one mention of the dollar. and do you know why? i think the fed agrees the weak dollar only hurts americans if they're on vacation which is ludicrous. >> let me put something up on the full screen. hold on one second. there is a debate -- let's put this up on the full screen. there is a debate -- there are some people in the stock market saying the fed hinted they're going to be tight fisted. let me look at last month's language and let me get to today's september 13 language. here's what they said a month ago. the federal reserve will employ all available tools to promote recovery and price stability, meaning they'll buy everything in sight. now today they had a slight

change. today, september 13, no, september 23, whatever date today is. the federal reserve will continue to employ a wide range of tools to promote recovery and preserve price stability. i want to go around the horn on this. mike, is there a change between whied ranging tools and all available tools? does wide range of tools imply a steve liesman-like exit from iraq and afghanistan or not? >> no, i read the statement over and over again and i think it's a very dovish statement. it's very bearish for the dollar in the long run. he says here with resource slack they're doing a curve analysis. if you look back in history, we've had very high rates of unemployment, we've also had high rates of inflation. in this country. >> let me go back to jim paulson, i want to ask you if

you think that moving from all available tools to wide-ranging tools means anything. that'sstion number one, jim, real quick. then i have a second follow-up, go ahead. >> i don't, larry. >> right. it's just too ridiculous. it's just too silly, right? >> it doesn't fit. >> go ahead, jim. >> i don't really think is the dollar that weak? i look at the dollar and it's up slightly from where it was a year ago. i think the most you can say is dollar stability here. it went up on a safe haven premium when the crisis is ending it came back down to where it was. >> did you know the s&p 500 is down nearly 50% since the beginning of this century as measured against the u.s. dollar? >> the dollar index is off 15% the last six months, james. 6 if you go back -- >> all that was is because the economy improved. >> i think -- everyone in the world -- all right, so you

disagree. that's fine. let me ask you a second point on the dollar. this comes from my friend david malpass, smart economist and contradict tor to this show. i'm especially interested in how steve liesman and rick santelli and the rest react to this. since jean-claude trichet stook over, the impact on the u.s. stock market has been def tating. german stocks up 87%. the u.s. dollar, minus 3%. u.s. dollar stocks minus 3%. in other words, they have prospered with a strong currency. we have not. we have gone nowhere. i think that's something as a stock market guy for you to consider, because of the incipient inflation pressures, which may just come back to bite

the u.s. in the derriere. >> well, i guess i disagree a little bit. i see a great benefit from that weaker dollar. i would suggest the dollar was probably overvalued in 2002 and has come down and as a result of that, larry, we have been adding about a percent to u.s. growth in this country for the last couple of years now to real gdp growth that would not be there had we not had some dollar weakness. >> jam, we just came out of a deep recession. let's be serious. let's switch around and get everybody involved in this. the cheap dollar and the easy money fed, wasn't that the prime contributor to the housing bubble, the commodity bubble and the energy bubble? that doomed our whole economy. i don't see the cheap dollar payoff, rick santelli. >> look around. there is a cheap dollar payoff. i think it's equity prices for one thing. i think equity prices are responding but, you know, you

asked about those words in the statement. i think as grown men, the rorschachness of this whole thing is overwhelming that we're mincing words. i think the most important thing that happened tid was even the fed meeting. i think it was the interview with the new head of faj. they fogobbled up a boat load o mortgages and guess what? larry, if somebody was trying to buy a piece of property you were selling even if they had a good credit score would you take 3.5% down? be honest here. >> of course not. >> so why should the tax papers do it? it's reprehensible. >> let stay with this that the fha may be going bankrupt. the whole program is law flaued. that may undermine ginnie mays. >> there's a new closet for the skeleton. >> so you're saying the threat of the federal housing administration bankruptcy where the government is throwing money at people with no down payment

and thus no responsibility and maybe no affordability -- >> they want to raise it up. they want to do more. >> and they want to keep throwing more at it. that's a very interesting point. why don't you react to that. that's a very interesting point. >> it's the same thing. we have to have a huge issuance of treasuries. there is no fund for these agencies, fha. there's no fund for the fdic. it's just more and more treasury issuance and it's going to yield much, much higher. >> at the end of the day, the fha is backed by the fut faith and credit of the u.s. government. >> steve liesman, you're thinking, if i get this right, that actually it isn't so much that the dollar is too weak. it's that the foreign currencies are too strong. that's the other side of the coin. i think there are people in the u.s. treasury who would agree with you. can you elaborate? >> i would suggest the dollar weakness is a product of a couple things. export policies by trade partners such as europe and asia. the u.s. lives in a world where a lot of countries, they link

their currency to the dollar. so the terms of trade do not change, even though the balances change. so, for example, the huge deficit we've been running with china that currency cannot adjust to that because the chinese government won't let it. the big geopolitical question in this world today from an economic standpoint is who will eat the u.s. trade deficit. it's a $700 billion figure and the question is, will europe allow it to be eaten? will asia take a piece of it? we are going down to a point of much more balanced trade, and part of that adjustment -- >> only because of the recession, steve. >> wait, mike, wait. nobody is saying that. you're missing the point entirely. this out of the whack business of 6% of our gdp cannot stand and will not stand. we must adjust. part is going to be through consumption. part is going to be through the dollar. >> what did you just say? by a weaker currency? we broke the trading ban with the yuan in 2005.

let me make a point. we broke the trading ban with yuan in 2005. the dollar depreciated by 20%, and the trade deficit with china exploded. because we can't balance -- no, no, only because of the recession. >> and what about the issue, though? but steve, if you ran a chronically cheap currency policy, i don't care who you are, whether it's the euro around 2000-2001 or the british pound many years ago, don't you risk that capital leaves the united states and goes to where the currency stability risk is lower? and doesn't that drain whether i can quiddity from the american economy? apart from the inflationary consequences, it takes money out of our economy and damages our recovery. isn't that a factor in this? >> i'm sorry, larry. i approach this from the point of 6% or 5% from gdp of trade deficit will not stand. it must adjust. that is what the -- >> how about creating more of

the products that the rest of the world wants to purchase? >> how do you do that -- >> you gut kut taxes -- >> let me fin ash sentence for god's sake. how can you expert your way out of this if your currency cannot adjust to the difference in the terms of trade? you can not. you must have in part a weaker currency, in part -- >> rick santelli -- >> there is no number. it's fiat currency. >> rick, for the -- fiat currency, that there is part of the problem. >> what number would you defend in that part of the world. >> rick santelli for the ordinary person out there, when the dollar falls and oil prices go up and gasoline prices go up, isn't that one of the killers for the last recession? it wasn't all the credit crunch -- >> $147 oil really was a function, not of wild-eyed speculators, of which pretty much all traders may be except

for the government would fall in that category. but yes, the weakening dollar fuelled interest in trading because they could see everybody trading energy could see we weren't going to defend it. it was a proxy trade. the play on that. and the same dynamics are true today. and you know it's just a ticking time bomb. >> and this is where i totally agree with mike pinto. the fed seems to have not learned the price signals in the open market coming from oil and commodities are very important. they're ignoring that once again at their risk. >> jim paulson, i ask you, i take it you are going to remain a bull through this, though? today's correction notwithstanding, is that right? >> yes, absolutely. i think the fed is saying what i think is likely next year. we're going to have kind of a sweet 2010, made up of the return of real growth without inflation, without interest rate pressure. and if you don't have that inflation next year, the fed doesn't have to quickly respond

and you can have real growth without the interest rate uptick. >> fair enough. what's the inflation risk? >> it's tremendous. it's going to be very salient. can i -- >> write it down. what's your inflation number. >> with gold over $1,000 -- i might add a basket of commodity -- >> let's go, mike. >> how much inflation might one fear in the next 12 months? >> i think it's going to be much higher than the nominal year on the ten-year rate and it's going to happen within the next six months. >> what's the number? >> 4%. >> jim paulson, you've got to get out of treasury. you've got to sell treasuries. >> core inflation between 0% and 1%. and wages are going to 2% next year. >> oil is going to be up $110 by december. >> rick santelli, this segment is getting out of hand. i want to give you the last word, rick.

>> i don't think the government's metrics for inflation much in the next six months but i think a lot of commodities we use every day are going to rise in price and interest rates are going to remain ti remain tame. equities remain strong. until things get better than all the better dynamics are going to blow up with higher interest rates and maybe a strong dollar, which is going to turt thurt th equity markets. >> you're so right. i want to chime in. the recovery may come on much sooner and faster. a barn-burner recovery is possible. >> even with a weak dollar? >> and that combined with a weak dollar i think spells real problems jim paulson even for the stock market. so the clock may be ticking. gentlemen, you've been terrific. i think we got all our positions on the table. michael pinto, rick santelli and steve liesman, thank you so much. more on the fed from senator jim bunning. he's going to tell us why he believes mr. bernanke has it all wrong. mr. bunning is a prominent fed

critic. but first, sarah palin. now get this, sarah palin was a hit in hong kong, attacking the fed for creating a bubble, criticizing obama's chinese higher tariff and calling for lower taxes across the board. "the new york times" gave her a good write-up. next we'll talk about sarah and the g-20. there's a combination. you're watching cnbc, first in business worldwide.

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mahmoud ahmadinejad speaking at the u.n. president obama made his first address at the u.n. this morning. good evening. from the u.n., this was the first address by barack obama as president hp's still in his honeymoon period, seen by these delegates as a kind of superstar. he tried to capitalize on that by giving tough talk.

president obama says he's gotten the u.s. more involved in solving world problems like global warming and aids and in his first address to the u.n., bluntry demanded that other nations do their part. a. >> this cannot solely be america's endeavor. those who used to chastise america for acting alone in the world cannot now stand by and wait for america to solve the world's problems alone. >> there's never been a precondition for ending settlements. >> but the president bushd back. >> we continue to emphasize that america does not expect the jitcy of continued israeli settlements. >> arab and their friends trust this president, said an arab journalist. >> muz lips would like to think as a son of a muslim, he is a mud limb.

so they're happy with him and will give him the benefit of the doubt. >> even libya leader gadhafi had nice things to say before blasting the united nations for failing to prevent wars. street demonstrators protested against go ahe against gadhafi. others protested ahmadinejad being in new york. he struck a defiant tone before his u.n. speech. >> remind you that mr. obama is not the first president here who believes iran is is a threat. >> but the president's commitment -- >> the united states stands ready to begin a new chapter of international cooperation -- >> is to yuan fi the united nations against iran getting nuclear weapons. >> now we're seeing live pictures to ahmadinejad speaking

to the united nations. president obama a short time ago this afternoon at his hotel met with a key player, russian president medvedev who in the past said he favors more of a carrot than a stick approach trying to get the iranians putting aside whatever nuclear program they might have. and this is a new program tonight. he says he's now open so more strict sanctions against iran. he talks with the world's 20 wealthiest nations. the president gave a hint as to the g-20 in pittsburgh. he says he wants to rekindle the man but stick to the rules of the road that he's trying to

promulgate down in washington down at g-20. china, the g-20 and even sarah palin. there's a great mix for you. there was a blog today calling obama's speech a post-american speechl. he said the u.s. is going to run its foreign policy through the u.n. way too much and he said it's an exercise in multilateralism, not in our best interest. do you think that's a fair assessment? >> it's not. there are things we have yet to learn about how obama is going

to conduct foreign policy, but that seems construed to me. >> i think josh is probably making too big a projection of real action pursuant to a pretty speech the one thing that's consistent about this president is he loves to give a gorgeous speech but he rarely follows it up with really doing something. we're going to come back and look at the g-20. we've got to look at china and sarah palin who had some shots across the bow of her own. this is "the ckudlow report."

joshua, with great humility, what's the name of your book? >> it's called age of the unthinkable. >> we have dick armey, the co-chairman of freedom works. no fed exit strategy according to some critics. no fiscal spending and deficit exit strategy and a little bit of a trade war with china on their chinese imported tires. i always think of the g-20 as the g-2. what does this mean? no exit strategy? a minitrade war? how do you see it?

>> the president is going to be seeing a president who about eight weeks after the g-20. it's an important multilateral forum, but most of the bilateral stuff that's going to go on is going to be positioning for that meeting. it's very different than the last meet welterweight had. it's unclear if the economy around the world is going to change. you have a bunch of nations getting together. they're going to be catching their breath to some degree. we don't necessarily know if the financial crisis is over, a lot of uncertainty about fut chur of the world and it's an opportunity for leadership to articulate and what in the u.s. vision the next steps ought to be and what they're expecting of partners moving forward. >> china has sabre rattled and there's no suggestion that we really care about that. they have also sabre rattled by our fiscal spending, deficit and

borrowing. can the u.s. have a successful engagement as joshua is suggestioning at this pittsburgh meeting in china. >> part of the treasury and the fed, william mc-chessey martin must be turning in his grave right now. right now, the trade is focused on the american dollar instead of the japanese yen. this is unbelievable. china is being asked to hold an enormous amount of wealth in a dollar declining value. they're product to do that. you find the rest of the world unwilling to take the dollars off their hand. china saying i want to hold this wealth in assets of real value of the substantive assets. they start buying real property in the united states and we have the same phenomenon that we observed a few years ago with the japanese buying up

disneyland and whatever they can get their hands on. >> joshua, you know, whatever -- there may be some superficial rhetorical patch work done in the g-2 relationship, but where there's smoke, there's fire. where there's talk about selling dollars to buy gold and other commodity, i've got to believe they're doing some of that, joshua. i don't think that's going to hurt the american position at all. i don't think it's going to help the american position, but i think it does help the chinese position. >> i think the fact that they've already started diversifying, not only in the sense of diversifying their bond hold,s but also out into resourcing. it's not only sensible but likely to continue and accelerate. i'm not sure it's the thing to be the most worried about. i think the impending trade conflicts are now spreading into other areas are probably more significant. they hint at a kind of concern. an inability to resolve issues as they emerge. the current issues are important, but it's something that will get resolved in a 24, 36-month time horizon.

the immediate problem can erode the trust in the bilateral relationship. it's a sort of protectionism. one of the things that can maybe come out of this is an attempt to build a mechanism to resolve these disputes without having them escalate to the kind of sanctions we've seen so far. >> dick armey, they're giving a big speech in hong kong to a big investment group, french sponsored. even the new york times said she was compelling. now she's calling for lower taxes across the board. she blames the fed for the asset bubble. she totally disagrees with the chinese imported tire protectionism. is she saying things you agree with on economic policy? >> right now she stands in that public figure in america that's made the host sense in the last two weeks. with the possible exception of you and me, of course. >> can sarah palin mount a comeback this way? >> i have no idea. >> you want to stay away from

that altogether. >> on this trade, how much of a threat is it to world recovery? >> these battles accelerate. it's important not even to begin them. these fires start very small and spread very quickly. i would hope they find a way to resolve this, not something that spreads to a broader front. >> an american exit strategy on excess spending, borrowing and money creation. in my lifetime, dick. >> right back to where we always were. the federal government has got to restrain spending. the treasury has got to get focused on that, and the fed has got to focus on its singular duty to stabilize the dollar. that's all they have to do. get back inside the box.

>> all right, we're going to leave it there. thank you very much. dick armey, thank you very much. coming up, powerhouse fed watcher jim bunning is going to join us right after the break. he's got a few opinions about bernanke in general and the fed's actions today. we are looking for a fed strategy and a stable dollar. d-o-l-l-a-r. we'll be right back. would you like a pony ?

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all right, we welcome back powerhouse fed watcher kentucky republican senator bunning. thank you for coming back on the show, sir. >> larry, glad to do it. >> i want to ask you in your judgment, knowing what you know down there and following these issues closely is there a conscious policy by the treasury and the fed to just let the dollar fall? >> it seems that way, but i hope it's not that way. it seems like the treasury and the fed could care less about the dollar standing in the world. and it is affecting our economy. it's affecting everything that we do. >> i mean, some people say that as the dollar declines it's good for economic growth on the export side. but a lot of other critics say, you know, it just means people move their capital out of the

u.s. that takes money out of the economy. it hurts us and risks inflation. is there a debate down there in the senate about dollar policy? >> not right now. there's an awful lot of debate about health care, about global warming, about controlling what's happening on wall street, but there's no debate about the dollar. >> i mean, sarah palin was out today, blaming the fed. she said they created a bubble that sank the economy. the decline in the dollar caused oil prices to go up $150 and helped sink the economy. why is it we can't get a sensible discussion in this country in the halls of congress about the u.s. dollar? >> well, first of all, larry, i don't believe we're getting a separate view from the fed and the treasury. unfortunately, i believe the fed has become an arm of the treasury.

and i know proechl has reappointed ben bernanke to be the fed chief. but in all respects in the last two years, including the bush administration, the fed and the treasury were one. and in all of the bailout bills and stimulus package and everything else, ben bernanke was an arm of the u.s. treasury, whether it was henry paulson, or whether it is tim geithner. >> senator in that view, has the fed lost control of the money supply? are they just too loose in did today's policy statement have any effect on your thinking? >> we, the policy statement is unchanged, obviously. the extensions on what they were buying and how long they were buying it. but the basing philosophy is that the money is going to stay in circulation until the fed

says, you know what, i don't know if they've got enough chutzpah to take the money out of supply because they worry about the effect on the economy. >> isn't it kind of after replay of a mistaken theory that hurt us in the 1970s? and also in the prior decade with the money creation and bubble creation. are we repeating past mistakes here? >> it look like it. can i ask you one question? >> yeah. >> do you think the fed is going to be quick enough pulling the money out to get the oversupply of money that's in circulation to quell inflation when its ugly head appears? >> you know, when i read the statement today, sir. i appreciate your asking that. when i read the fed statement today, they removed any reference to the commodity rise or the oil rise. they did not mention the u.s. dollar. and it just seems to me like they're targeting the unemployment rate, and that means that they are going to

overstay their easy money welcome. and the risks of another public from inflation and whatever are substantial, senator bunning. i just for the life of me wish the senate banking committee and so forth would have a full open discussion of the value of the u.s. dollar which constitutionally, as you know, is celebrated to the congress. >> yes, it is. we have to have the cooperation of the fed in not having an easy money policy that destroys the value of the u.s. dollar worldwide. >> i agree with you, sir. anyway, not enough time to go through this. maybe you ought to hold a hearing. just have a hearing. people will show up. can't thank you enough, sir. life, liberty and the pursuit of stock markets. famed investor jim chanos is going to be here. we've got a few questions for him on this whole story. please don't go away. you're watching "the kudlow report." we'll be right back.

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all right, let's welcome james chanos, chairman of the coalition of private investment companies and founder and president of canocos associates. did i get that right? >> yeah. >> you're a great friend. tim geithner up on the hill today talking about financial regulation. but my question to you is, right

now, are taxpayers financing high risk proprietary trading by banks in is that's what's happening in this country? >> of course they are. the pseudoinvestment bank-commercial bank hybrids in some cases are still leveraged 20 to 1. and they're treying with basically tax-payer-backed deposits. >> also implicitly, too big to fail. i don't here geithner resolving too big to fail. so in effect, if these banks are too big to fail, yeah, they're trade for their own account. just don't do it at my taxpayer expense. isn't that part of this issue? >> it is, and to be fair to geithner, he did address it in his testimony today with stronger language. >> do you think he'll take out

too big to fail? >> i don't think anybody is taking out too big to fail yet. this is an administration and congress still cowed by the financial institutions. every time they say jump the government says how high. it's remark thabl we still haven't embarked on substantive reform. >> all right. what's your solution to the proprietary trading. what should we do, jim? >> we should first split the activities. traditional lending and deposit taking i think has its -- it's an important function of the economy. that should be backed by deposits with a guarantee, with high premiums, by the way. the bigger you are as an institution, the more systemic risk prone you are, the higher your premiums should be. >> so traditional commercial banking.

everything else, we saw it in the old days, the securities business should not have that. >> so you're talking about some kind of repeal. you want to trade, trade. i mean putting glass steegle back in, i mean, separating putting the chinese wall up and get the tax pairs out in financing these risks. >> one of the biggest problems, larry, that hasn't been examined, in all the things about accounting and asset values and mark to market was these guys failed banking 101. they took on risky, ill liquid long-dated assets of questionable value and financed it in the overnight market basically. and that's a violation of banking 101. >> and a violation of taxpayer

rights. i wish we had much more time on this. jim chanos, thank you very much for coming on. coming up, my last word. somebody's got tot think about too big to fail and why are taxpayers funding high-risk trading?

welcome to progressive. how may i help you? i'm looking for a deal on car insurance. i think i might have a coupon in here. there's an easier way. we've got the "name your price" option. you do? follow me. you tell us how much you want to pay, and we'll build you a policy that fits your budget. and i still get great coverage? uh-huh. go ahead. you're the boss. i'm the boss of savings. more like the c.e.o. oh, oh. no glass ceiling. the freedom to name your price.

my last word tonight is very simple. i want to see king dollar. i want to see stable money. that will lead to stable lice pryces. that will lead to economic growth and prosperity.

ronald reagan did it in the '80s. bill clinton and robert ruben did it in the 1990s. i don't want oil bubbles. i don't want housing bubbles. i don't want consumer pocketbooks to fail. give me a stable currency of ball. it's part of the american constitution, and it will help us grow our economy. i'm larry kudlow. see you tomorrow at 11:00 a.m.

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