a stunner, christine day is retiring from lulu, don't know how to value it. be careful though. i'm jim cramer and i will see you tomorrow. "mad money." i'm jim cramer, and i will see you tomorrow. we still have so many questions about the nsa surveillance bombshell, but no abuses have yet been reported because the special court stops the nsa from listening to your phone calls and going into your e-mails, or at least that court is supposed to stop it. the other big question surrounding the leaker himself. who is this guy edward snowden? are we supposed to believe that a high school dropout got a top security drop, and why is he now in hong kong? he ought to be decades long in jail, and famed analyst meredith whitney is here. she gives us a new map of prosperity for living and working in the usa, and i love it. for all of these stories

tonight, we have a very distinguished panel. you won't believe it. former minnesota governor tim pawlenty and congressman kevin brady, head of the joint economic committee today joins mayor did i whitney for the entire hour. this is "the kudlow report." and we begin right now. first up tonight, until last week it was a secret weapon in the war on terror, the massive gathering of phone and internet data for millions of americans. now tonight there are legal challenges mounting against this practice. nbc's pete williams joins us now with the details. good evening, pete. >> reporter: well, there have been freedom of information requests for years about this, and there have been attempts to sue over these programs, but now the aclu has joined with the yale law school to ask the court that issues these orders that allows the government to get the data from the phone companies, they have asked the court to disclose previous orders that clarify the legal and

constitutional basis of this program, and they also want to know about a separate program that allows them to get these business records from the phone companies, so this is another attempt by the aclu to mount another kind of challenge or at least begin to get some clarification on the legal theory here. i were describe this, larry, as a legal long shot though because the rules of the foreign intelligence surveillance court have always been secret, and it doesn't seem likely that even though the government has been talking about this around the edges and even though there have been leaks, that the government will now decide to declassify a great deal of information about this or that the court would decide to do it, but it is nonetheless another run at it. >> pete, what was the separate program that you were talking about that they were suing to get information? >> well, the internet program, the so-called prism program in which the government can ask internet service providers or internet communication companies, hey, here's a site or a chat room or an e-mail drop that we want to keep an eye on.

they can do that, watch it in realtime and go back and look into the servers for past e-mails, that's the second program that they want to know the justification for. >> great stuff. many thanks. nbc's pete williams. appreciate it. as always, the big question for me tonight is whether the nsa surveillance is the right thing to do for america. by the way, the latest pew research poll says 62% of americans think it's more important for the federal government to investigate terrorist threats even if they intrude on personal privacy. very interesting. let's get right to our distinguished guest panel, former minnesota governor and now the ceo of the financial services roundtable. that's tim pawlenty. chair of the congressional joint committee, texas republican kevin brady and acclaimed financial analyst meredith whitney, author of the new book "fate of the states." let's go to this right away. tim pawlenty, let me just go to you. is this the right thing for america, including the facer court that goes along with this?

>> bipartisan both under president bush and now under president obama and parties in congress supporting it, number two, congressional notification, number through court supervision at multiple levels. you don't get to the specific intermitt details unless you get to the warrant stage, so if you're going to have a program like this, this one seems to meet all of those elements. now what you do have on the other end of the continuum is concerns about privacy. you don't want to shove those aside, but you've got to strike the right balance. in that balancing it appears on the facts that we know them today that they tried to strike the right balance. >> i mean, no abuses have been reported. >> right. >> this guy just leaked the program. didn't report any abuses. kevin brady, let me ask you, one of the things governor pawlenty said that's important to me, the fisa court that's responsible for putting the warrants in if there's probable cause, it seems the court protects me from the government from listening to my phone calls and tapping in or reading my e-mails. am i right about that? is that the safety thermometer here? >> yeah, absolutely.

that's the difference between the air traffic controller looking at a pattern of flights around the country versus them listening in on your conversation while you're on the plane, completely different. the court is the safeguard that protects you and i from that type of intrusive listening, unless there is cause for it, which i think is exactly the right balance. the bottom line, intelligence is the front line on the war on terror. we've got to be very good at this and relentless in it. it's important we hit the right balance. >> meredith, these two gentlemen are basically in favor of it. i want to ask you your view because there are personal privacy issues. there's also trust issues, particularly after this irs scandal. people leak in the federal government in very senior positions. i'm not going to put political blame. i'm just going to say we learned there's a lot of leaking. what do you think about this? >> it all sounds great on paper when you think about national security being at the front line, but when it happens to you it's a different story, and so we don't know where the boundaries are. it's been pretty covert plan, at

least beyond the understanding of most americans, and i think it's one more thing. look, d.c. looks really messy right now, and i think it adds one more thing to the issue of who is -- who is in charge and where are the governors here? no gun intended. >> you think this has a stock market impact? >> i don't. i think a lot of people on wall street are just like, come on, d.c., get your act together. that's more of an impact than anything else. >> anything going to happen here to change it? >> well, i hope one thing that happens they get this lyric and throw him in prison. >> right. >> how does a 29-year-old who doesn't finish high school, who doesn't pass his military entrance exam, works you know, on paper wouldn't qualify for many basic jobs in the country get to this position? >> that's exactly where we're going next. >> all right. >> we have a special report and then we can come on. everyone stay put. still plenty of questions, precisely what governor pawlenty said about this 29-year-old who says he's nsa whistleblower. cnbc's eamon javers joins us now with the details. good evening, eamon. >> reporter: good evening, larry.

well, 24 hours later there's still a whole host of the questions about edward snowden, the man at the center of this global intelligence mystery. a lot of questions about who he is and why he did this. let's review a little bit about what we know about snowden as of right now. he's a 29-year-old i.t. contractor who worked at booz allen hamilton. he was stationed in hawaii for the company. he's been with the company, the company says, for less than three months, and in an interview with the london "guardian" newspapers published on sunday he said he leaked the americans so that americans can debate the spying program that their government is engaged in in their name. what we still don't know about edward snowden at this point is where is he now? at the time he gave the interview, he said he was in hong kong. is he still in hong kong? could the united states extradite him from hong kong, and how would the chinese government respond to that request? those are unknowns at this point. also, how did he advance from a relatively low-level security guard job description to an intelligence agent who was

making, he says, $200,000 a year analyzing technology for booz allen hamilton? that's a real mystery at this point. still unresolved questions about that and then, of course, what are his future plans? he spoke in the interview of perhaps going to iceland and asking for asylum there, but at this point, larry, we don't know what his plans are, and, of course, we don't know what the u.s. government is going to do to try to perhaps prosecute, perhaps extradite him from whatever foreign country is he lands n.larry, a lot of questions still remain at this point. back to you. >> many thanks to eamon javers. let's go right back to our panel. governor tim pawlenty, let me read a few notes. 29-year-old high school dropout now, he worked for the cia at one point. he had a security -- he started as a security guard at the nsa, not analyst. he was a security guard. then somehow he became an nsa analyst and a contractor in japan and hawaii three weeks

ago, and then worked at booz allen for three months in a brief period of time. i just don't understand it. >> and i don't either. it starts with this analysis that you just laid out, larry. in order to get the protection, of whistleblower, you have to report illegal or inappropriate conduct. based on the nakts that we know today, there doesn't appear to have been a legal violation by the federal government. the legal violation is by this mr. snowden. >> right. >> again, the questions you raise. if any of that is true, he goes from, you know, high school dropout to being the gaddian -- >> actually a security guard before he became an analyst. >> there is at least mismanagement or a very weird story underlying all of this, and we need to find out what that is. >> meredith, can we extradite him? we have a history of extradition from hong kong. they usually play ball with us. if they do, this guy will go to jail for three decades at least. >> way beyond my pay graids grade. >> what do you think, kevin brady? >> there's got to be more to

this story. i don't know how he had a sea change in his values in three months at booz allen. secondly, not like they hired a recent graduate without security clearance from university of aclu. this was a cia worker, had to have some experience, i would think, to be vetted into that company. there's got to be more to this than what we're seeing. >> he and others think that he's a hero. what did i see on one of the websites. 20,000 names have already been signed to a petition calling him a hero, and just more, his heros, according to reports, are daniel ellsburg who let the pentagon papers go and bradley manning who did wikileaks. >> just because he's 29 and just because he started his career as a security guard doesn't discredit him from being potentially, you know, an important whistleblower or leak. it doesn't prove that he is, and we don't have enough information to say one way or the oh, but, you know, look at all the young

kids in flip flops and hoodies in silicon valley. just because they happen to be 14 or whatever, they all look 14 to me, it doesn't discredit them from the jobs that they are doing. >> the thing that blows -- you're right. you're dead right, it doesn't discredit him automatically though i'm a little suspicious, no high school education. he started out as a security guard, but let's put that aside. no abuses have been reported so far. no abuses, and i can see if there were irs abuses, you know, the irs sticking it to tea party groups and conservative groups who were trying to get a 501-c4. but none of that kind of thing is coming out of this. >> that's exactly right. it's not as if you have somebody that said i saw an illegal act or an abuse of power and, therefore, i'm going to be a whistleblower. here you have this person, as you described him, saying i know better than president bush, i know better than president barack obama. i know better than the members and leaders of congress who have been notified on a bipartisan basis, i know better than level one of the fiza court and know

better than level, one, two and three of the court, and no withstanding all of that i'll endanger the security of united states of america by self-declaring a hero and while i'm doing it, according to the "washington post" article, i'm going to embed a code so a foernt price, a foreign enterprise can know it's me so i can get foreign protection as this unfolds. so if he's so confident in his legal position as a protected whistleblower, why is he hiding in hong kong? why is he hiding potentially in iceland? >> you think more evidence is coming out. >> i'm hopeful there is. only thing worse than policy-makers overreacting to one instant of abuse are they overreacting to no instances of abuse which is the case here? >> we are protected. i mean, there is evidence that this whole operation has protected us. it may not be perfect. it didn't protect us against the boston marathon bomber, but in the main, we have been very blessed and protected and i'm going to say this nsa surveillance program is part of it. >> could be.

look, it's been in place, you know, for over a decade now, so more americans, as you showed, feel it's working. you know, how many times is it frustrating to take off your shoes going through security? you do it and it's part of what you feel safer as an american forks you know. you don't want to think, you know, your phone calls are being tapped but if they are for the better purpose, so be it. >> to that point, meredith, allegedly 1,400 references from this prism program made their way into the president's daily intelligence brief and you don't get into that information unless it's material. >> of course. >> we lost a little sound on the floor so we might want to pick that up. i want to ask you quickly, meredith. the booz allen angle here, booz allen, i didn't really know this. has become a top ten defense contractors, and they got $5.8 billion of revenues, most of it comes from the defense industry. $1.3 billion comes from intelligence alow. that's a staggering thing. that's a hell of a business. can that last? >> you know, i don't think that

it's -- you've got to think that that's pressured, but look at a lot of the war on terror has been outsourced effective. i mean, this is sort of the state of affairs that the u.s. government is in, and the defense department is in. it's -- it's pretty -- it's -- >> this is the new high-tech contractor. >> yeah. >> in other words, it's not your old -- not your father's or grandfather's defense contractor. it's high-techie stuff that's becoming defense contractors. >> i think it's everything, right? you'll take contracts wherever it can be, and the government is the biggest -- has got the deepest pockets these days, right? >> we'll leave it there. i hope this kid goes to jail for at least three decades being a traitor. by the way, let's just move on. which states, this is a great story, which states are ripe for more economic growth, and which ones are facing what could be economic disaster? that's what meredith whitney's new book is all about. we eel ask her about valuable forecasting. i love what she's saying. lost results and lost analysis. we're going to talk taxes and fracing, and you won't believe it. later on in the show, are we

making the same mistakes on housing and mortgage markets that helped cause the financial collapse in the first place? you won't believe who is getting government-backed loans these days? government-insured loans? meredith and the rest of our distinguished panel will come back and talk about that. don't forget, folks. free market capitalism, it is still the best path to pros parrot, and this kid's best part should be right to jail. i'm larry kudlow. we'll be right back. tomorrow, michelle caruso-cabrera in mexico one-on-one with carlos slim. with an empire under threat where does the world's richest man see new opportunities now? a cnbc exclusive tomorrow evening on cnbc. it's monday,

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. all right. in her new book meredith whitney sees decades of gains on the horizon for states like texas and oklahoma and others thanks to in part fracing energy revolution, plus low taxes, plus right-to-work laws. she also warns about places like new york, california, arizona, nevada, florida. i'm going to put in illinois. i haven't had a chance to read the book. >> you can put in illinois and new jersey as well. >> because you're worried about the pension fund. we continue now with meredith whitney, author of "fate of the states," that's the name of the book and also our other distinguished members of the panel, former minnesota governor tim pawlenty on the good list and texas congressman brady who is on the good list. taxes, energy, right to work.

what are your other criteria? >> it's managing your fiscal situation so the current, you know, ideally you want current revenues covering current expenses, and i think it's an emprice of public-private partnerships. so many things go into this, and at the rao of all of this what does it mean to be a taxpayer? are you getting more for your tax-paying dollars or less? in the states that are doing well because of all of the things you mentioned, great tax policies, you know, a very fortunate benefit from exposure to the natural gas and oil revolution in this country that's been so powerful, right to work certainly has been a big, big benefit for so many states. you know, and, you know, attractive taxes, right, because anybody can move from one state to the other, that all makes certain states more attractive than others, so rich people and businesses movement businesses are moving now. rich people will follow and say, look, i love connecticut, but i'll tell you, i'm getting a better deal in florida. >> and you've got this --

central corridor, a central corridor. what, does that rub down the middle of the country and where does it go? midwest, mountain west, north and south dakota, colorado, utah, wisconsin, texas, indiana, ohio, that's where it is. >> that's where it is. >> it's not california. it's not new york and not illinois. >> it's not california, and as frustrating as this can be, the states that are in the worst fiscal situations are the most frustrating politically, right, so california which is, you know, deep -- they say they have a surplus, but they are deeply underfunded in their pension, their pension liabilities, not to mention the fact that they are cramming down all these expenses to the local municipalities that can't afford those expenses has monterey shale to frac and really turn around that state. pennsylvania in a bad situation, you know, liberated their fracking laws. new york, you know, is -- >> they won't do it. >> they don't have the courage to do it. this is me, not you. governor cuomo does not have the

courage to take on the young kennedy, joe kennedy jr. and upstate new york is suffering. it's been suffering for decades and decades and decades. >> what is so tragic about all of this stuff is rich people can move. people in need cannot move. you look at hurricane katrina, why people didn't vacate the city. they didn't have cars or money to vacate the city, and so you see littered across the country basically ghost towns that are inhabited by primarily poor people, you know, in poverty, and then very rich communities, so the country divides further and further along have and have not lines and it's immoral. >> did tim pawlenty's minnesota make the good list? >> minnesota's done some really great things, and i think under his -- his leadership you were tough. you were really tough. you drew a tight line, and you stood by it, and i think the state has -- has -- you know, has a lot to benefit from it. of all the politically unpopular moves that you made, the current governor benefits from it.

you took real courage with your positions, and it's not -- it's not usually attractive because, you know -- >> what's your responsible? >> he's smiling. >> my response is thank you, beginning to smile. i like that. it's very good. go ahead. what's your response to meredith? >> i think, really i'm a fan of her work, meredith's work over the years, and i think this new book will be a great read, "the fate of the states," but we also have commodities there, eggland and the ability to produce commodities and the food and food processing industries as one piece of the puzzle, but i also say in minnesota, maybe a little bit of an exception in the sense that it's more like massachusetts politically, and we had to bend it. we had to change the culture. >> and you vetoed it, as i recall. that was huge. >> set a record for vetoes in a single session. >> just what we need right now in washington. that's a separate subject. >> anyhow, minnesota is a brue state, and we tried to bend it back to center, center right. it wasn't easy but we made some progress. >> kevin brady's texas. he's on the good list. his governor is really out

there. >> he's out there in the faces of the other guys. governor perry has agreed to come and co-host with me. talk to me about texas and i want meredith to react. >> the states with the lower taxes, balanced, right to work, flexible work force has an automatic advantage and states that are drawing in the innovation are starting to create the jobs as well. key to energy development. amazing technology improvements that are occurring at every point in the energy sector in space which is why states like new york that turn this away are making a huge mistake because these are jobs from the very unskilled to the highest research phds that whole spectrum for families >> exactly. >> with you can you get on the good list even though you don't have a fracing energy revolution? >> of course you can. i don't recall there being a huge fracing revolution in the state of indiana. he took incredible courage, the fact he was re-elected again, mitch daniels of indiana, really turned that state around so that the state has the third lowest

public debt per capita in the country. i mean, also, he was a great pioneer for public-private partnerships so he, you know, leased the indiana toll road and raised close to claar 4 billion and plug that had back into infrastructure and created jobs. he's credited for turning things around. >> bill daley, bill daley, who has had a lot of jobs. he was chief of staff under clinton, briefly chief of staff under obama. bill daley may run for governor of illinois on the issue of making solvent the pensions and the health care benefits because illinois is in such bad shape. they just keep jacking up taxes, driving people out. >> exactly. >> and their present discounted value of the deficit that they are going to incur for these benefits is just enormous. >> i wish him a lot of luck, but it is so difficult to turn states around like illinois and new jersey that have been basically looting the coffers of future taxpayers for decades, right? california, this is a phenomenon just in post-2000. for illinois, for new jersey, it

goes back decades past. he's going to be beating his head against the wall, just like rahm emanuel is as well with the teachers union in chicago. it's a real tough challenge. christie, i think, has got to be frustrated. >> that's what i've got to ask you. did you interview governor christie? >> i've met him several times and he's so ambitious about what he wants to do for new jersey and so frustrated by trying to get anything through the legislature. one of many ideas that christie has is sharing services, collapsing municipalities, so we live, you know, five miles from each other or two miles from each other. we share a library. we share schools, we share a fire dis, police. >> that's a good idea. >> it's a great idea. >> and they can share the liabilities. >> nobody wants to do it. >> you were going to say. >> what a contrast between the states in washington. president obama says i can't balance the budget white house higher taxes and can't get the economy going and can't deal with entitlements. the states, look at governors like this, balancing the budget without raising taxes, some

lowering them, and economies are recovering and on the plus side. >> you've got red state governors like mary fallon and sam brownback and mike pence, a whole flock. i know you didn't write the book as a political book but it basically divides i think red states versus blue states. >> i did not write the book as a political book but it divides along red and blue states, and it doesn't mean that blue states are not capable of making change, so if you look at san jose which is a blue district. chuck reed, the mayor, really turned their pension program around. again, it's not a partisan issue. i think a lot of the reasons why the red states are in better positions basically because they are naturally agrarian states and they have been through booms and busts, and they have -- they have by default been much more fiscally conservative. >> the policies -- by living culturally in boom and bust cycles, your policies are -- >> this isn't going to change, that's what you're saying. this didn't happen overnight, and it's not going to shift overnight. in other words, we're in for a long shift in population and

business. >> i just look at business migration. it's there, and people are moving to texas. silicon valley businesses are starting new businesses in texas because of the ease of operation. >> right. >> has nothing to do with energy. it's ease of operation. >> got to get out. great stuff. you made the list. nothing but praise. >> it's a tough state in minnesota. >> i know, i know. let's move on. apple was the focus of the tech heads today and the stock market, was there anything at the apple developers conference that made a big impact? we have that story for you next up on "the kudlow report."

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all right. apple held its worldwide developers conference today. let's go over to bertha coombs for a look at what apple showed off. good evening, bertha. >> reporter: good evening, larry. apple ceo tim cook and co unveiling new products in getting better battery life for devices. cook showed off a new sleek macpro desktop and amped up graphics performance. meantime, the battery on the new mac book air laptop will reportedly run all day without a charge, and the new ios 7 has a new graphic look, and as expected an ad-supported streaming radio service built into the new itunes. the market yawned at the news, but apple's marketing chief took a dig at detractors. >> can't innovate anymore, my

ass. >> reporter: innovative perhaps. one big change for the macoss. no more cats. they will be replaced with mavericks which is a surfer favorite near half moon bay. >> bertha coombs, thank you very much. thank you for that quote. very interesting. meredith whitney was the woman who saw that the housing bubble burst all over wall street as well as the big banks. that a couple years ago so what do you think now in the rest our panel think now about a disturbing new trend in government-insured home loans. we're talking mortgages for 3% down, wrong. borrowers who had foreclosures in the recent past, wrong. bad documentation, bad credit. we'll have that story for you next. tim pawlenty especially on the hot seat because it concerns a financial roundtable on kudlow. place stay with us. g business r♪ ♪ build! we're investing big to keep our country in the lead. ♪ load! we keep moving to deliver what you need. and that means growth, lots of cargo

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all right. first up, the federal housing administration has learned nothing, that's my personal view. it's lending to low-income home buyers with weak credit scores. they have a lot of recent foreclosures, and only 3% down payments. i want a 20% down payment, and by some estimates the fha may be $115 billion in the hole right now in terms of their contingent

liabilities. all right. think of that. 115 billion. back with my distinguished panel tonight. former minnesota governor, now ceo of the financial services roundtable tim pawlenty, chair of the congressional joint economic committee, that being texas republican kevin brady, and acclaimed financial analyst meredith whitney, author of the new book "fate of the states." tim pawlenty, i want to go to you first because you're going to be involved in these back end financial issues. the federal housing authority, the fha, is doing things that nobody else is doing right now in the federal government, and they are doomed to get in trouble. what's your take on this, and can you do anything about it from your perch? >> let me start by saying there should be no excuse for poorly underwritten loans and mortgages, so whether it's the fha or somebody else, if you're doing things with poor underwriting, that shouldn't be tolerated. this underscores the need for measured and appropriate fha reform. we should acknowledge the important historical role the fha has played for first-time home buyers and for others who

haven't been able to reach, you know, the housing market in the past, but we need to have the fha on a sustainable, responsible path, and that's why we'll look at things like increasing the minimum requirement for down payments. >> right. >> bringing down the maximum loan amount. >> right. >> and get it on a sustainable path. >> my wife and i have never bought a property whether it's a condo, apartment or a home without putting 20% down, never, never, never. i've tried, and they have -- and i have good credit scores. meredith, i want to go to you on this because, look. i'm an optimist on housing. i like the numbers i see on sales and like the numbers they see on prices. there's good things going on but this fha thing, another government mistake. >> the biggest government mistake with respect to housing is the fact that there's not a clear housing policy out of washington, so there was -- we all know there was a very clear housing policy under clinton and frank raines, get homeownership up, but we don't know where the government wants homeownership to go. we just want to -- i would say

the fha is taking a classic page out of playbook of the past two administrations which is kick the can. >> that's right. >> let's not deal with structural solutions, let's just kick the can. it's so dangerous because you move one liability, one risk, just down the deck to another area, and the taxpayer is always on a line for this. so it's absolutely maddening. >> kevin brady, look, i mentioned that number $115 billion. now, that is from a federal reserve-like stress test. that's where that number comes from. other estimates are very high though. on an actuarial basis, based on what they have already done and what the risks are for the loans, for the insurance loans they have already made, it's 13 billion in the low end and 65 billion on the high end. those are big numbers. >> yeah. >> those are very big numbers. >> yeah. why are we playing musical chairs with bad mortgages. 40% of these are subprime mortgages, those proven to not have been able to fulfill their earlier mortgage in a very short

timetable. those stress tests are real, which means the taxpayers have a huge risk going forward, and it's the government repeating the mistake. >> can you imagine right now, serious point, head of the joint economic committee, can you imagine a $100 billion hit? >> no. >> it's beyond the scale right now given what we've gone through. >> yeah. >> that's unbelievable. >> and the fact that the fha is not learning. they got in trouble in the '90s. they have been in trouble in a long time. >> right. >> there's really no strong policy. really no strong policy. >> there is no policy other than let's just -- >> give it away. >> let's give it away. free pizza for everybody. >> they are taking the position of fannie and freddie and other old h.u.d. policies and that's not what the housing insurance is for. tim pawlenty, government, gse reform, fannie mae and freddie mac, are we going to unhinge them? are we going to unhinge them from the federal government? >> we should. now, these are massive enterprises, and so it needs to be done wisely, and this is a situation where you want to measure twice and cut once, but clearly they are insolvent.

we need to move them from what they have been, gses, government-sponsored entities and something closer to and connected to private markets and private enterprise, and there's a series of proposals, some in the house and some in the senate, but our hope is that we'll see gse reform sometime in the next year or two. >> what i gather though and i'm not real liking this, kevin, and i'll going to you on this. there's going to be a government reinsurance fund that will backstop all the fannie and freddie papers. that may work, i don't know what the details are, but color me skeptical, that you'll get private capital, the old private mortgage insurance coming back into that market as long as the government is the ultimate backstop. i just don't see it. >> no. exactly right, implied or implicit guarantee gives the government the advantage in the marketplace. >> that's where we were. it was an implied guarantee in the first place. they are just calling it reinsurance. big deal. what's changed here, meredith? >> zero, sadly zero is changed, and we expect jobs to be

created. we expect homeownership to really rebound as opposed to just rebound after an extraordinary low level. so if you look at arizona as an exam. really strong housing market. still down are 45% from the peak so we're real not talking about a muscular rebound in housing at all. the only way we'll get that is if we make structural change which nobody wants to make in d.c. >> if you want to keep the 30-year mortgage, and most americans would like at least that option, with the ability to refinance, then you do have to ask who is going to, you know, lend money over 30 years. >> what's wrong with private investors? >> well, we want to make sure -- >> before fannie and freddie squeezed them all out. when i was in washington working for reagan in the early '8 '80s there were private poverty insurers and they got crowded and squeezed out by fannie and freddie run in the '90s in particular by the department of housing and urban development. >> october money will flood in and others will say if you have a 30-year mortgage you've got to

have at least some sort of government back stop after four or five or six private dominoes fall. that's the debate and people are arguing it both ways and for a lot of people, a lot of people looked at this and said you're not going to have 30-year mortgages. >> why do we need the 30-year mortgage in the first place? we either only country in the world that has a 30-year mortgage and we're subsidizing it as taxpayers. >> there sees some who would say, look, don't need that anymore. roll your mortgage every five years. a lot of americans would say we kind of like the 30-year mortgage. >> one quick one for you, one quick one. i'm worried about the position your financial services roundtable is going to take. dodd/frank. you believe two things, number one, it's going to work and number two, it's not too big to faith. i just want to remind our viewers and everybody here, including you, that dodd/frank bill has 848 pages, and 243 rules and still counting, and i believe, sorry, that that is stifling credit creation. why are you backing dodd/frank? >> larry, we are trying to make dodd/frank better.

we don't think it's going to be repealed. we're saying there's a lot of problems and concerns with it and it should be improved. as far as too big to fail which is the label put on certain big banks by some. >> you know it's true. >> no entity should be too big to fail. every entity should be allowed to fail. the question is make sure though when they do fail that you have a mechanism. >> i've got a bank expert here. you think no entity is too big to fail, honest answer, meredith? >> i think that -- no, i think there are clear entities that are too big to fail at this point because we're not make the right structural change. >> boom. we'll leave it right there. now, moving on, i made my mea culpa on ben bernanke' couple of months ago but a lot of conservatives still don't agree. we're going to go right to the joint economic committee chairman, fed critic and my dear friend kevin brade on this controversial point. will he agree with what mitt romney told me last week? >> we'll be spending $750 billion a year on interest.

now, that's more than we spend on national defense. that's the price we're going to pay for the largesse that's coming from the fed . tomorrow, michelle crewo-carrera in mexico one-on-one with carlos slim. with an empire under threat where does one of the world's richest men see new opportunities now? a cnbc exclusive starting 6:00 eastern on esbox. [ shapiro ] at legalzoom, you can take care of virtually

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taper talk is on the tip of everybody's tongues so in a cnbc flash poll we asked top strategist, money managers, when should the fed begin tapering as in tightening? before friday's job report the feds -- they said the feds should begin tapering in november, but after friday's job report, respondents said the fed should wait to take their foot off the pedal until january of next year. wasn't that great a report. my own view briefly, given the anemic recovery in jobs and elsewhere the slow growth of the money supply, the fed should not taper until well into next year. we don't want a double-dip recession here the way europe has one over there because their central bank is way too tight. a hat tip to my pal jim petrocukies who wrote a very good article. back to our panel. congressman kevin brady, i don't like the idea of the fed trying

to manipulate interest rates, but i'll say this. we need to grow the money supply faster and grow nominal gdp faster. europe hasn't done it. they have actually are sinking their money supply and they are double dipping. they have had six negative quarters in europe. i don't want to risk that with the fed. >> not an uncommon feeling these days. my concern is how healthy can this economy be if not last two weeks we've had the markets globally for two days based on just a few muddled words by chairman bernanke, and then the market actually rallies because the jobs report isn't good. that's not the sign of a fundamental recovery in america and i still think, getting that business capital off the sideline and invested is the key. the fed is not addressing that. >> we need tax reform. we need regulatory reform. >> i don't think that's the problem. >> the fed can produce money but not jobs. i basically agree with that. but i will say this. as inefficient as the fed policy has been and the way it distorts risk because they manipulated

the interest rate, it's the only game in town right now. it's the only accommodative stimulative game in town, and i don't want to go the route of europe. europe has -- double dip. six straight negative quarters in europe. you know why one why in the european central bank. the money rate is falling, the growth rate is falling and the interest rate too high. >> it's the only game in town or perceived that way because the fed has to do something for the economy. >> yeah. >> and as a result the white house and congress does not have to step -- >> as clumsy as it may be. >> accept the responsibility and remove the roadblocks from regulation and terrible tax code. they are not doing that. >> i thiwhat is your membership saying about this fed controversy? >> our members like stability and predictability? if you're going to deploy capital and make large investments and bets in a economy you want predictability and stanley. some people are concerned about

an oversupply of money potentially triggering inflation. >> i was an inflation hawk, i was, two years ago. had kevin brady on this show and the radio show all the time. the fact sin flakes has gone down, not up. the fact is the money they are creating is not really circulating through the economy, so i apologized to bernanke. on the air and in a couple of columns. it may be clumsy, but i think he's doing the only thick he can do which is to keep the money flowing, and meredith, i'm worried, if he starts cutting back, it's going to come too early. >> i wish you hadn't turned your stripes on that one because i think there is very real inflation for americans. >> really? >> cost of medical prescriptions through the roof, the cost food, the cost of meat and the cost of so many household items is through the roof. >> pced is 1% year on year. the dollar is rising. >> there's no wage inflation. >> all right. >> and there's certainly no home

price inflation. >> commodities haven't done anything. >> commodities haven't tanked, right. >> relatively stable. >> they are stable off, you know, off of inflated levels. >> i'm putting everything on the table. i'm saying with food, with energy, by the way, my radio audience agrees with you. they think there's a big inflation coming. that's what i said. i was wrong. the data show i was dead wrong. >> can i finish? >> yes, please. >> i don't think that the texas economy is dependant upon cheap money to do well. in fact, since the credit crisis the texas economy has grown 50% faster than the national average. >> right. because they got better fiscal policies. >> because they are not -- they are not -- we're not -- we're no longer a financial services-based economy. moving into an energy and manufacturing-based economy. >> that's one of the problems in new york city. >> exactly. let's let that tracks its happen and not hold on to cheap fixes which are entirely related to cheap money. it's not going to fix any problems. it's not going to create jobs.

it's -- it's wishful thinking, and it makes us fat and lazy as americans. >> all right. >> you're the chairman and you've done some great path-breaking work on rejigger the fed's target analysis and we welcome that. if you could wave a magic wand, congressman kevin brady, what would you have the fed do at the meeting coming up next week? >> give clear communications to the market of how they are going to taper off and after that dealing with securities in place and not having chairman bernanke turn squarely to the white house and congress saying it's time to remove the roadblocks. stock market is doing great, main street, joe six pack is doing terrible because of some of the fed policies. >> not in texas. not in a lot of points in the country. >> my point is what's ailing the economy, the fed can't cure. >> exactly. >> if we had the taxias model running the economy, then i would say to the fed stop easing, i totally agree with you on that point, but, unfortunately, it is not a texas

model. i don't know what it is. it's a certainly democratic model from western europe. anyway, let us move on. how serious is the cyber hacking threat right now? that's a new specialty for our guest tim pawlenty, and he will give us an update on what we're facing and where we're going. i'm kudlow. please stay with us.

after a landmark two-day summit this weekend, a cyber security stumbling block remains between president obama and his

chinese counterpart. the white house says continued cyber attacks coming from china could strain economic relations between the world's two biggest economies. indeed, they k.back with tim pawlenty, kevin brady and meredith whitney. let me go right to you, tim pawlenty. a lot of the hacking is at banks, right at banks. what do you make of this? >> this is a growing problem, larry, and it's accelerating rapidly and one in which we need legislation. the house did a great job in passing a bill in this area. the senate hopefully will do the same or something similar, but the szish attacks on banks and industries, not stealing intellectual property but stealing digitally stored information -- >> coming from china, coming from the china red arm? >> coming from china and other places. >> what other places? >> just based on public account, you might think to the middle east, might think of the ukraine, might think of some college kids, you know, in colorado. >> what do you think about this? >> we were hacked several years

ago and we're a small firm by an eastern european country. banks are going to be, you know, target number one, and i know it's something that they are incredibly concerned over. the u.s. government is obviously incredibly concerned over it, too. it's a massive threat. >> i've got to give you the last word, kevin brady. did anything change after this u.s.-chinese summit, piracy, cyber attacking, did anything really change? >> i don't think they tackled the real trade barriers and real relationship barriers. the truth is if we don't get serious about cyber security we're going to get our clock cleaned. >> why doesn't the president give a full bore speech on that subject in the chinese do not like to be embarrassed in front of the world? why doesn't the president give a full bore speech on this? >> to the president's credit, he did mention this in his state of the state this year, and he issued an executive order that did what it could. we need legislation to finish the job. >> not in a 20, 30-minute

speech. chinese understand bad publicity. >> at what point does the u.s. counterattack? >> when do we counterattack? we can't counterattack. we're americans. many thanks to the distinguished guests on the panel, tim pawlenty, kevin brady and meredith whitney whose new back, "fate of the states" is available now. tomorrow we'll speak with stephanie link from the street and rebecca patterson from jpmorgan. i'm cud low. we'll be back. maxwell is not. he's on geico.com setting up an appointment with an adjuster. ted is now on hold with his insurance company. maxwell is not and just confirmed a 5:30 time for tuesday. ted, is still waiting. yes! maxwell is out and about... with ted's now ex-girlfriend. wheeeee! whoo! later ted! online claims appointments. just a click away on geico.com.

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>> tonight on the car chasers, a big buyer comes to town... talk about making an entrance. in search of american muscle cars. >> wow. >> but will i be able to get him to open his checkbook? >> now i realize why the distance is here. it's harder to reach over and slap you in the face. >> [laughs] and later, meg and i head to l.a... >> ♪ california >> in search of movie and classic cars in the city of angels. >> so this is ryan gosling's car. >> but getting 'em back to l.a. in one piece... >> pretty big fiasco. >> may be easier said than done. they broke my lock? you gotta be [bleep] me. my name is jeff allen. i buy, fix, and flip cars. but i don't do it alone. i've got perry... meg...