>> welcome back, the s&p 500 replacing heinz. you know my charitable trust likes that stock. like i said, there is always a bull market somewhere. i'm jim cramer. see you tomorrow. the new intern chief at the irs told congress today he will fix the quote serious problem end quote at the agency. but every day, those serious problems seem to multiply and tonight, there are new accusations that point the finger at the irs chief counsel who, by the way, is an obama appointee. we have the latest on this video that everyone is talking about, irs workers at pricey conferences making pricey videos and doing dance routines, all on the taxpayer's dime. the other big story tonight, senator frank lautenberg of new jersey passed away this morning. puts governor chris christie on the spot. he gets to choose the next u.s.

senator. i say it should be steve forbes, but we will weigh all the option, all those stories and more coming up on "the kudlow report" beginning right now. good evening, everyone, i'm larry kudlow. welcome back to "the kudlow report" t.irs scandal is heating up. up with of the key players, republican congressman darryl issa had this to say about how high up this thing could go. >> the administration is still, their paid liar, their spokesperson, he is still making up thins about what happens in calling this local rogue. there is no indication. the reason that lois lerner tried to take the fifth is not because there's a rogue in cincinnati. it's because this is a problem that was coordinated in all likelihood right out of washington headquarters and we're getting to proving it. >> all right. let talk about this whole thing and how high up the food chain

we can say. here now is guy benson, the political editor. media editor with the national review and our distinguished co-host of the evening aei kris visiting chancellor ed kunard. author of the book "unintended consequences." you filed a story light this afternoon on nro. you are pointing the finger at william wilkins the chief counsel of the irs, who is a political apontee. tell me about that. >> well, we don't know that wilkins will be implicated in this scandal w. dough know the more we know about the irs scandal, larry the worse it gets for them. from their original explanation that this was a couple of rogue employees in cincinnati, that has been completely exploded. first we went this one up to lois lerner in d.c. the head of the national review showed that a team of lawyers in the

technical unit known as tax law specialists were guiding this all along. now, today, we learn a source in the irs gave us a partial list of the 88 computers that investigators are looking at. includes the computers of irs chief counsel william wilkins who is one of the two political appointees aside from the irs commissioner in the obama administration, his two deputies and 14 other people. >> why would they be looking at his computer? what do they know? first of all, who is doing the investigations? the fbi? >> there are several -- we don't know which investigative committee asked to lock at wilkins' computer. there are several investigations going on right now. there is an investigation by the oversight committee, an investigation by the house ways and means committee. an investigation by the senate finance committee and lastly an investigation by the irs. so there are four concurrent

investigations going on right now, including a criminal investigation looking into whether there was any criminal wrongdoing in all of this. however, it is interesting that they are looking at one of the top figures, all of the irs as well as his deputies. >> guy benson, let's stay with kill kins wilkins for a moment as ileana related, his computer is being looked at whichever group is investigating it. he is an obama appoint iand he is also formerly a lawyer for reverend jeremiah wright of the trinity united church, defending an obama speech years ago because there was a nonprofit and he got paid. what do you make of this wilkins character? his name really hasn't come up yet. >> it hasn't that much. she also a former democratic staff on capitol hill. so he's a partisan democrat, not that that necessarily matters all that much. what's interesting too about his position, if he's the chief counsel of the irs.

let's say he knew about the dating back farther than the agency has let on, then the next question that logically follows is, well, if he is the chief counsel, who is he telling? who is he talking o? as a top lawyer, you'd think he'd want to keep his top bosses informed. >> he told the deputying is treasury, i have worked there, he told timothy geithner the former treasury secretary and i will believe wilkins went to the white house to tell the white house counsel who then told the chief of staff who then they say didn't tell obowl t. point i want to ask you, guy, there a lead here? or are we stopping? in other words, is there a fence jump into the white house or do we stop at the irs? >> we don't know that yet. we're going to have to wait and see what comes down. what we did find out today, larry the house oversight committee released transcripts, partial transcripts of some of the deposition they've held with lower level irs employees who are taking to the woodshed all

of the initial arguments and excuses offered up by their bosses him remember they originally said this was perhaps just two rogue employees in cincinnati and it had nothing to do with political motivations. that was even in the i.g. report. well, now we have evidence of people testifying on the ground from cincinnati saying, no, no, this was directed from washington. they were at times micromanaging the projects. and we saw piece by piece -- >> one guy. >> -- that it was targeted towards if right. >> there is no question, ed, kuhn kunard, looking at the piece the cincinnati excuse is gone, that, in effect, the irs, washington operation, at whatever level. i'm in the going to indict kil wilkins yet. we don't know that. certainly, walk was heavily involved. as somebody watching this, what do you think? >> they didn't trace it back

that far, but i can't see it's not possible it wouldn't go higher up. part of the reason is you would be looking at statistical averages as a lawyer inside the irs and saying those are the things the measures that determine whether are you discriminating or not. those are commonly used measures. how would they not see they were getting out of bounds in terms of normality. i think it would have to go up. >> ileana, i am looking at this, we all have our bias, i want to say, you are heavily inside the irs. you are talking to cincinnati people who said they were micromanaged by washington people and that there were half odozen offices around the country involved. is that true? is that fair? >> i would add two things to the way you characterized what i have reported. the first is that we have irs employees in cincinnati saying they were basically brow beaten by washington in order to follow

their directions and to give them cases. >> is this the seven cases they were asked to provide, is is that what are you talking snabt. >> exactly. >> that request came from washington? >> absolutely. they were asking for very specific cases to be handed to them. >> why would they do that, why? >> i think perhaps they wanted to look at what specific tea party groups were doing and manage tea party cases, if the transcripts are to be believed. >> question, play herbs donors? >> one employee said he was so, he or she was so fed up by this practice, he was applying for other jobs as early as 2010. the other thing i would add is that william wilkins did visit the white house during this period and we need to know what happened. >> when did he visit? >> i have in my notes here, wilkins visited the white house in december of 2010, he had a meeting with the president in december of 2011, he had a

meeting and two other meetings in late 2011 with deputies to the president. subpoena those guys. we need to know what happened in those meeting, given what we know now. we can't say this doesn't go to the white house. >> guy benson, i want them subpoenaed. i don't know, how, where when, why, they should all be subpoenaed with the threat of grand jury, with the threat of criminal action. every single one of them. i want to go up the ladder. i want to know what stephanie cutter knew, for example. i want to know what rob neighbors knew the legislative in the white house. i don't think how you can do this without subpoenaing them, guy. >> you are probably right. we might get to that point at some stage of this game. of course, even subpoenaing them, getting them to come before congress is no germany tee they will say anything as we learned from lois lerner. >> a special counsel can use a grand jury. that's the thench i want the congress to do its job. i have no problem with that. i'm saying at some point,

empaneling a grand jury raises the level of seriousness for all these players and they will have to talk. >> i think that's probably right. although, i think that the.that the "wall street journal" editorial board made last week is very well taken, which is if you jump into a special prosecutor, then that gives an excuse for political obfuscation from the administration hiding behind the ongoing investigation, the purpose of the special prosecutor isn't political accountability. it's legal accountability. we really need both in this case. >> i think you can get both. i didn't agree with that article. i, myself, cake out with special counsel along with peggy noon nan and other counsel. i think you can have your cake and eat it too. we appreciate it. ed kunard is staying with us the entire show. ileana johnson will return later on in the program. another big story, new jersey governor chris christie has a chance to make a big impact not only in his state but on national politics as well.

who is he going to choose to replace senator frank lautenberg who passed away this morning. we will look at that next up. we had a strong rally on wall street. right now this evening the focus may be on japan's sinking futures on top of its 16% correction. i wonder if and when japan will affect our own stockmarket. that's my concern. the tokyo market opposite at the top of the hour. . we will have a preview for you. please don't forget, free market capitalism is the beth path to pros speempltly say this for the nth thousandth time. i'm kudlow. wroik. .

frank lautenberg died today leaving his legacy as the last surviving world war ii veteran. he also leaves a vacant senate seat in new jersey. governor chris christie will be appointing that temporary replacement. who will christie choose and will have affect his own political plan for 2016? let bring in a communications director and noerm press secretary to the house majority leader eric cantor when i first med brad.

he is with me on the set. all right. brad, i will give you a choice, off the top of your head, who is the favorite for mr. christie to pick? >> there is a lot of selectionsin new jersey. larry, you are a jersey boy, are you probably as excited about the pick as i am. if you look, former governor kaine, who would be a statesman-like pick who i think would be a very good place holder to hold out the senate seat. the picks beyond that, leiutenant governor kim gudano. joe cirillos. john programnick, a republican senator leader in the house. tom cane, jr. so you can see, governor christie has a lot of options from which to choose. >> i want to ask you what the inside politics are. the politics of the politics here. for example, i am told tom cane, jr. doesn't get along. one boivenlt second point, does

chris christie have to placate conservatives around the 1 country who will be watching this, a litmus test, visa -- visa 53 president obama or do you think she worried about hit own election and will appoint at left of center republican? >> i think if there is one thing chris christie demonstrated is that he's always going to do what he thinks is best for the people of the state of new jersey. he's a jersey guy through and through. so i think he will pick whoever he feels will best represent new jersey and the senate. >> that's a copout. you are an outspoken guy. i want one better than that. come on. >> look, politically, i think 2016 is a long way off. i think it's an eternity as far as someone's political career goes. so, look, i think he's looking for the next year, who would be the best person to serve out senator lautenberg's term. i think it would a mistake, one he is well aware of to look

forward to 2016. now i do think chris kiss chris see the a conservative, i think he is likely to pick one of the more conservative option he hassed a his disposal. i would caution a contive -- conservative new jersey looks different. >> i agree. no one is talking about my pal steve forbes who i sincerely believe would be a great senator. steve forbes i say quite seriously, but from your van tage point, what do you think he should pick? >> i'd say tom cane, jr. i think his platform is being pragmatic and handle a compromise in the center. so i think he has to pick somebody who is electable in the state of new jersey. >> i heard this rumor. can you both weigh in on this. brad, this is real snidz inside politics. leiutenant governor kim guidano. am i pronouncing her name right? >> yes. >> christie would appoint her

and tom cane, jr. to be a leiutenant governor. you'd have a movement up the political ladder. what down about that? >> it's a three-way trade. governor christie knows these folks quite well. i'm sure he is having those types of discussions. one of the real inning things is should the special election occur this year the democrats are going to be in real trouble. have you rob andrew, frank paulone and cory booker with no real like for each other who are geerk up to run against each other. that primary, 2013 or 2014, could be 75 days of just pure brutal democratic-based politics. >> in fact, we don't know when the special election is going to be. ail want to say, brad, i want a tax cutter, a spending cutter, an obamacare cutter, a deregulator. governor christie who believes in all of those things should show his best stripes. in other words, it's not just

politics. it's issues, it's policy. >> i agree with you. if you look at the people of new jersey, they do not support obamacare according to public polling. they support lower tax, they face one of the highest taxes in the country. they support reg larks larry, you and me both have a yearning for an economic growth. those are all qualities i am sure governor christie will look for in his pick. >> thank you very much. >> thank you. >> i hold you to your pick, but you didn't make a pick. so i can't hold you to anything. >> that's the genius. >> i understand. all right. now, call it the incredible shrinking hedge fun, investors are pulling billions out of steven crohn's capital right now as the government's insider trading pro finally spooked his big money clients. seema mody joins with us those headlines and more next up. . steven crohn's capital right now

violent protests in sirria it started as a simple demonstration to save only trees it's now gotten much out of hand. >> good evening, larry. it's the fourth straight protest in istanbul and riot police continue to use tear gas against the protesters. it started on friday night when police used force on a group of nonviolent protesters trying to prevent trees cut down in a park. since then, it has grown into a much larger movement against the

prime minister. turkey's stockmarket also fell more than 6% today. in other news, united airlines is trying to get frequent flyers to stay loyal with the new sub prescription service. -- subscription service. you can get a flat price starting at $349. today could be a bad day for sac capital and its founder stephen cohen. investors are withdrawing billions of dollars from the fund tcht company expects to lose a billion dollars in outside money, they are fighting insider trader charges. that's the latest. >> ed, i want you to talk to me, are you from the private equity business. here's a case of unsubstantiated government charges are knocking this guy's fund out. what do you make of it? >> i don't like anybody tried in the court of public opinion. i think it's dangerous, there has been a history of overreach

f. they are insider trading, i think it's important to the track them down, make an example out of them. i'd like to see it done in private, not in public. the market hack swifter dealing out justice than the justice department could hope to be. >> customer money is moving out. everyone is reporting that. i think that's fair. he will keep something opened like a family office to manage his own money withcy considerable, 8 or $9 million. is that right? >> yes. >> i'm wondering if the sec has made a deal with him already, that's what i'm wondering. >> i would assume not. the money they are gunning for is him and the money from insider trading. if you don't retrieve him, you put one or two of the traders in jeopardy? it seems like a misfire if that happens. >> what does a hedge fund guy as these charges become public, not conclusively proven, what can they do? even the whole concept of

insider trading is subject to litigation these days. >> well, what can steve quoen do? >> anybody. anybody in this situation. what can he do? he's a sitting duck. >> i think he's a sitting duck to being tried in the court of public opinion. you would hope throughout history he has managed this firm carefully to root out information used to make money as opposed to looking the other way. >> you are a private equity guy? in there yes. >> what would happen if they found something out of the blue, what if the authorities came after private equity and they were wrong? >> you mean genuine, i think it would take down the firm. >> take down the firm. is there something wrong with that? >> absolutely. i think these things need to be conducted as privately as they can be. they have every incentive to do the opposite. >> it's all political. these guys will run for office later on. we seen this a million times before. >> i think that's dangerous. it's not to say a lot aren't highly professional and do the best they can.

>> that's part and part. i don't know the inside facts. with rehere reporting. seema mody, thank you very much. all right, let's move on, thanks, seema. now, this video, this is a video to stop all videos. this opened an entirely new front against the irs. check this out. $50 million bucks over just a two-year period to pay for conferences and so-called training videos. we also have the latest in today's irs hearing on capitol hill and a new report explains just how one sidedly partisan irs workers really are. this will blow your mind. their politics are all left coming up on "kudlow. ". vo: traveling you definitely end up meeting a lot more people but .

the already scandal-plagued irs is back in hot water tonight. this time for its lavish spending and the dance boondoggle. correspondent john har owits joins us with all the details. good evening. >> good evening, larry, this video provided new fuel to the controversy. it provided picture of what ordinary people might see as goofy irs conduct that had been

lacking from the targeting scandal. we also have details coming out from an irs inspector general report about some of the conference spending $50 million in spending over a three-year peefrd including 135,000 for speakers at a conference. correspondent on the other hand, there was a hearing on capitol hill today that allowed the new irs, acting economy, danny per fell to -- owe werfel to turn the corner by talking about the thens he is thing differently. he got this question at the outset about whether the scandals have cost the irs the public trust. >> do you feel like the irs has betrayed the trust of the american people? >> i do, mr. chairman. i think thinking about this in terms of my primary mission is to restore that trust. >> and minister werfel even made friends on the committee by talking about the fact that he did not believe more money is the answer for rectifying the

irs when he gave that comment. the house appropriations chair hal rodgers liked that a lot. >> mr. werfel, i'm beginning to like you when you say you don't want more money. that's music to my ears. i'm sure the cramer feels the same. >> of course, larry, there are more irs hearings ahead in both the house and the snoochlt we have to see whether darryl issa and the others investigating this are going to be able to pin it to the white house or to officials in washington higher-ups in washington. he did get some aggressive pushback over the weekend from the former white house senior adviser who brought up some criminal charges in darryl issa's own past, which is an indication that the white house is saying you want to have a full volume fight over integrity and honesty? be careful what you wish for. >> well, okay. thank you, john harwood from washington, d.c., we appreciate it. now, we will bring back ileana johnson and ed conner from aei.

ed, i read your foreign affairs piece about america's growth and so forth. one of your biggest beeves is we spend too much money and we should cut spending. is there a better example than this? i mean, is that possible? >> than this? >> i mean, trees the tax collectors and they're going to be the obamacare collectors. there they are doing goofy, whacky stuff in pull public view? >> yeah. individuals do whacky stuff i suppose. i think the spending issue is a big strategic issue. maybe this is a tactical problem. we certainly need to address the tactical problems as well. >> we saw this with the gsa, though, same stuff. some of this stuff is these greiss staying in the presidential suites, $1,500 bucks a night, this is arrogance, this is bureaucratic arrogance. >> i think when you don't have competition, speng gets out of control. competition is what reigns it in, i believe.

>> ileana, it's not necessarily jer bhan -- germane, this is its own issue, it seems to me. we are now finding this all over the government, this bureaucratic spend thrift arrogance where they think they are accountable to nobody. >> well, the point i think you have heard a lot of conservatives make, larry, especially tea party groups is that big government tend towards corruption. and that's the point you see them make about the irs scandal. that's the point you've heard them made about trusting the irs with obama care. it can't be trusted because this is what you get from big government. i think the same point applies to the lavish spending on these conferencesch that's not limited to the irs. you mentioned the gao scandal. a bizarre querk of all this seems to be these groups really seem to have a pen chant for music and dancing. we saw at the gao, you know, spend on line dancing, the irs

doing the cupid shufflech they must be calling -- >> a lot of pent-up something. i don't know what it is or they're on smpg. i don't want to know anything about it. there is just something bizarre. i don't know if these groups get together, the gsa and irs. who knows if you are have an s in your name. let's talk about this. you guys stay with me. democratic heavy irs. democratic heavy irs always going to distrust the tea party. in fact, all bloody federal bureaucracy has taken five giant steps to the left in years. senior political analyst tim carney. your column here. the democratic heavy irs will always distrust tea parties is an absolutely brilliant column. now they give all their money to drootic candidates. -- democratic candidates. is that what you found? >> overall, contributions traced to the irs went something to 1

to democrats. if you focus in on the cincinnati office which was posed with political speech, nonprofit. i found 75% of those donations when to the democrats. focusing just on last election, every penny i can trace to that office when to the either shar odd brown from ohio or president obama. >> how can these people, therefore, scrutinize conservative applications for tax exempt funds? how is such a thing remotely possible, putting aside who is lying, who is not lying, the basic bias here. >> i troy to assume no intent or conspiracy. imagine doing their best job possible. their job is to say who is too political and with who is a social welfare group? i got e-mails from angry irs officials after my first column on them saying how is it a social welfare pursuit to be a tea partier?

these guys are just politics. they're trying to shrink politic, they're trying to end my job. how is that social welfare? you see a bunch of democrats, union workers surrounded by democratic union workers, they are saying who is pursuing social welfare? of course, there will be a bias no matter how hard they try to overcome it. >> this is a fifth column. that's the point i am looking at. this is not just limited to the irs. all these unionized bour rockcracys, i say, them, basically think the same way. do they not? am i being unfair? >> i won't use the term fifth column, larry. i will say it is a special interest group charged with pursuing the public interest. that's the problem. they do not want smaller government. they do not want the government to have a stronger goerkt hand with the unions. they do not have the same interest in lower taxes an than the american does, because it's their bread and dollars.

government workers unions be a huge part of our bureaucracy, that's problematic. you see it in the donation, the national treasury employees union, something like 95% of that union's campaign contributions last election when to the trats. >> one wonders about the relationship of the person running that union and the goings on and the white house. ileana unionson, have you ever heard of a republican government union that might be fair? is there such a thing? it's an oxymoron. seriously, have you ever heard of such a thing? >> i think tim's column was the column on this issue. national review did a similar study on the irs more broadly and found in the last two elections, in 2008 irs employees gave almost $50,000 to barak barak and about $1,950 to john mccain. >> $1,950 vs. 50 graventd ed

conner, tell me, as a citizen, as a busiessman, what do you make of this and how to solve it? >> i guess i'm surprised they aren't bending over backwards to avoid bias because of the appearance o bias these kind of statistics show. and this is a hotbed political issue. so you would have think that lawyers would have been on top of this area, scrutinizing it. not just for the fiscal averages, but the guidelines used for these organizations which were ballooning, mushrooming the money coming in. they were genuinely trying to sort through what is legitimate and not legit massachusetts you can't make conservative organizations the only test cases or the predominant cases. >> i think the problem have you there is a problem that you had in larger news organizations in the '60s and '50s. you still have with them today, is their perception of fairness is to pursue consumer groups more doggedly. this is what lois lerner told

me, she just thinks that republican groups are more likely to skirt the laws. so her perception of fairness is to pursue them, to hold them to a higher standard, pursue them more, that's fair to her. >> tim carney, you think these government unions that give money to democrats will bend over backwards to be fair? >> i think that no matter how hard they try to be fair and i try not to imput motives, no matter how hard they try to be pair fair, if you are a bunch of republicans surrounded by democrats you are in a bubble. it is hard for the see how they are trying to pursue the good. it's easy to suspect, maybe these republican guys, you see that all the times, liberal media critics are saying let's stop being even handed, the right is nationally than the left. >> i got to tell you, this is one small but important reason why i believe i put a column out on this last weekend, full

fledged tax reform and syndications would at least take some of their power away, not all. but it would at least take some of their power and automatic chronism and insidism that you write about, tim, let's curb that. tim carney great work. ileana johnson, national review. now, a serious question are americans losing their appetite for risks? where have the spirit of entrepreneurs really gone? we will tell you how to fix this problem coming up next. no risk-taking. some people are never satisfied with a good idea. because they know that things can always be better. well, us, too. introducing the redesigned 44-mile-per-gallon-highway

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the entrepreneurial spirit is about all you got, live the dream of what this great country of ours. that risk-taken spirit appears to be fading. in 1982, according to census data, new companies accounted for roughly half of all u.s. business. unfortunately, by 2011, that number dropped to over a third. where have all the entrepreneurs and risk-takers gone? here from bank of america, currently president of macrostrategy, david malmass and

former reagan secretary treasurer with us ed conner who recently penned how to fix america, which tools we should be using. ed, let me begin with you, you wrote about this. you probably saw the huge article in the "wall street journal" today. what is wrong? we are not taking the risks. we don't have the animal spirits, why is this? in there let's talk about the financial crisis. i think it was misdiagnosed as a temporary loan to demand as a temporary risk taking, sure, we can grow, but off a lower base, when you do that, you turn to stimulus to increase growth, yet increase spending 25%. you blew a huge hole in the budget. you started successful investors and inflating the money supplies, a way to solve the problem. are you digging yourself a deeper hole. you are dialing downwards, you see it in all the statistics. >> unfortunately, david malmass, this is longer than the recovery cycle. i agree on it on the inadequate fiscal monetary policy.

unfortunately the volume of the work force that used to be in these small start-up business, the volume of the start-up businesses, the volume of venture capital. all that stuff is down. >> right. it's down stins since 2000. dig capital -- digacapital. the federal reserve have been keeping it low. the benefit comes at the expense of the small businesses. there is a rechannelling of credit to the big guys. the second thing is as the government spends more money and lends more, they're in the markets all the time. so entrepreneurism in america is government orpted. one of the big job growth areas is writing these grant proposals to get money from the government, through the small -- >> the green energy. >> how the lending programs from the neck '. >> look, i'm a guy that believes

in creative destruction. joseph schumper, the country did nor of that in the 18th century and the 19th century and the 20th century than any other country in the world. it looks like it slowed to a crawl. that's what troubles me. >> troubles me, too, larry. two big sets of government errors, in the 2000s, we had artificial incentives for every entrepreneur to get into the housing bubble and the financial bubble t. engineers and so forth. >> a basic waste of money. >> waste of money. because of regulatory distortions based on government errors. then we -- >> instead of giving it to inventer, i don't mean to interrupt. >> exactly. >> wasted money to create all of this paper, not backed by anything, three-quarters of the time screwing your own customers in the derivative market when that capital could be going to

entrepreneurs, venture capitalists and the american machine would go back up again. >> we double down on the error, we say the problem is capitalism is bad. so we'll have national health care. what we have is not only a massive tax increase through obamacare but a goldberg monster. nobody can physical out what the massive execution risk. so the threshold for a small business to start and higher up, particularly in a world where we have competitors. like china, that we didn't have back in the reagan administration is murderous. it's killing the entrepreneur. >> there are some pluses, energy is a plus. the whole fracking revolution is a plus. came out of the blue. now, some of those companies were small companies, harold hans in north doerkts his was a very small company. we got to give him credit. the trouble is there is not enough of. that that's my problem. >> well, that's great for fertilizer, larry, but the argument this is going to start a manufacturing revival doesn't make any sense. we had the drop in natural gas price, manufacturing is still the weakest part of the economy.

>> ed, does amazon and google and outfits like that, facebook, do they qualify as the kind of entrepreneurship? >> yeah, i think employment comes from small companies growing large. when you look at the small companies that have grown large, they are largely in the information technology sector. they are emerging in energy as well. so i don't think it's the donut shops creating the employment. it's fairly stable. it comes and grows. it hasn't grown as rapidly as the information technology sector has. >> we will come back talk about this, even related to the current numbers out today. please stick around. we got much more to do. we had a nice rally to end the day on wall street a. new day is about to start in tokyo. market's been in a steep sell-off mode lately, as you know, we will get a live report from asia and talk about when and if japan starts hitting our stocks next. i work for 47 different companies. well, technically i work for one.

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12k3w4r6r7b8g9s. all right. japan's benchmark nikkei index extends its correction to hit a new six-week low. where is it about to open? josie joins us from cnbc asia, what is going on? kaori? >> it looks like we can see a moderate pullback. futures are expecting the cash market to get up trading in about 7 minutes time.

the dollar yen is still below the moderate bounce in the financial stocks particularly some of the big boompgs, that stock is looking like it could rebound especially after this big sell-off, four sessions in particular where many of these banking stocks are trading below the levels we saw in april when the bank of japan announced it is easing measures. people are telling this morning things could be a lot calmer, especially in the morning trading bought the prime minister of japan is set to announce the so-called third arrow of his structural reforms on wednesday time here in japan. those are likely to include some kind of corporate measures to try and lure foreign direct investment. this is really the structural reform, the regulatory reforms, excuse me, many of the financial suggests, in particular, and some of the foreign investors have been waiting for. so people tell me things could be a lot calmer in the morning and futures, larry, this morning are suggesting as such.

back to you. >> mr. thanks, cnbc's kaoir. david malpass, they will cut corporate taxes like they should corporate tax rates? >> no, she was talking about incentives, which i think is different tan rate cuts. >> why don't they cut tear rates? >> because the minister of france is in an us a territory mode. they are raising the value-added tax. i think they're going to wrong way on that. some of these third arrow structural reforms might be actually very useful and growth oriented if aba pushes forward. >> ed conner, we had the ism out today. it fell below 50. it's not a catastrophe. it fell below 50. my.is the this, even though wall street said oh, goddy, good i, the fed will be stimulus forever. it's in part because american businesses are not making capital investments. this is about manufacturing and

capital investments. it's been weak. i think we have a chart. it's been basically descending the last six or eight months, is is that true? even though they are profitable and have cash? >> i think when you look at the six. they have enormous, historically high profit mar jirngs they're stuk stuffed full of cash. the business investment is way below where it would historically be especially at this point in the cycle. it's for automatic reason, we are coming out of the crisis. we've created an environment where a lot more risk associated with it. we have done a lot of structural problems identified by the crisis. i don't think dodd-frank img presses. the likelihood of a bank run and the damage that can do to our economy. we see the same high levels of risk we didn't see before the financial crisis. we haven't addressed that. piled on additional things that increase the amount of risk and companies said we need to be careful an cautious. >> ed goldman, in brief, how do you create a lot of jobs that

create incomes if businesses are not investing in their own infrastructure, in plants, of their office buildings and so forth. if they won't invest capital good, how do you create jobs and income? >> here's a factoid, industrial machinery is down 3% year on year as of april. it's a depression in manufacturing investment. the reason for, as david has been talking about a long time, i think has a lot to do with fed policy buus if you make so so cheap, it's much more profitable for them to by back their own shares or re-arrange the debt shares in their titanic balance sheets. >> like investing in derivative, not quite as bad. >> exactly. in the absence of fiscal and regulatory incentives to put brick on top of mortar and hire labor, monitoring policy just leads people to play with their balance sheets t. market likes it, the alternative is 3% corporate bonds, 2% corporate

treasuries. it's still a terrible economy. my worry, japanese market worry is at some point the fed is going to say, this ain't working, we got to taper off. >> you had said tapering off was a bthing. >> right. people will make decisions based on actual profitability rather than the availability of capital to the big guy. the god news here is there is a lot of money and profitability out there. so if there were a good message from the government that it actually wanted businesses to invest, they would be able do it. we just haven't had that message. not on the monitor policy side. not on the fiscal policy. tax reform in the u.s. is not going anywhere. so that's what's got us bogged down. regulatory problems are immense. >> ed conner, if things are so bad, why are they so good? in other words, the stockmarket has had a fabulous run. it's not just the fed. profits as you noted before have

been terrific. cash flow has been terrific. pristine balance sheets tcht money may be overseas. i got 20 seconds, when is it going to come in? >> i think two things happen on the stockmarket, people look forward and see high profits for a long time. they discounted low interest rates. you get a high valuation. >> not optimistic. thank you, i'm larry kudlow. we will be back tomorrow evening on "the kudlow report." thank you. a friend under water is something completely different. i met a turtle friend today so, you don't get that very often. it seemed like it was more than happy to have us in his home. so beautiful. avo: more travel. more options. more personal. whatever you're looking for expedia has more ways to help you find yours. the healthcare law gives us powerful tools to fight it... to investigate it... ...prosecute it...

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