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CNBC "Kudlow Report" - Transcript

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MR. KUDLOW: Senator Lindsey Graham, Republican from South Carolina, it's just great to have you back on the show.

SEN. GRAHAM: Thank you.

MR. KUDLOW: Because we have so much respect for you, we're going to give you your own segment after this brief commercial break.

SEN. GRAHAM: Wahoo!

MR. KUDLOW: Let me tease it sir. (Laughs.) I know. Let me tease it. Mr. Obama's State of the Union last night, do you give it thumbs up or thumbs down on a quick answer?

SEN. GRAHAM: A middle, about half way in between.

MR. KUDLOW: But is that half way in between leaning lower, or is it leaning higher? You know, I have my thumb out sideways. Is it a little above the line or below the line?

SEN. GRAHAM: Above the line.

MR. KUDLOW: Above the line. All right, very statesmanlike. Lindsey Graham's coming right back after this. He gets his entire segment to talk Obama and banks. "The Kudlow Report," we're going to have a couple more segments, too. Please stay with us.

(Announcements.)

MR. KUDLOW: As promised, Senator Lindsey Graham, Republican of South Carolina, gets his very own segment.

Hello, Senator Graham. Thank you, sir.

SEN. GRAHAM: What about a t-shirt, too?

MR. KUDLOW: (Laughs.) Okay. You were kind of favorable towards Obama last night. And I'm the first guy to admit I liked his positive tone. But Senator Graham, an awful lot of conservatives are saying today this is the biggest expansion -- the biggest expansion -- in government spending, government regulations maybe since the 1930s. Your thoughts, sir?

SEN. GRAHAM: Accurate. But part of the goal last night was to try to inspire the American people, to give them a sense of confidence that we can get out of this mess. And in that regard, I thought he did a good job. But when you listen to what he said, he talked about climate change and energy independence, and he never mentioned nuclear power, Larry. And he never mentioned offshore drilling. You cannot have an honest, candid conversation about solving the climate change problem and energy independence unless you put nuclear power on the table. He never mentioned in his speech that we're going to solve Social Security and bring about closure on that issue. He just mentioned it in a glancing way. And I still don't know what he means about banks other than we're not going to let CEOs fly around and build big bathrooms. So quite frankly, the details of the speech were lacking, and parts of it were almost disingenuous. You cannot honestly talk about climate change and energy independence if you do not consider nuclear power, put it on the table, and he did not.

MR. KUDLOW: We learned this afternoon, Senator, a $634 billion budget entry for universal health care coverage. Most experts are now saying, including the Obama people, it's going to come to $1 trillion. We could be talking about government spending as a share of GDP to reach West European levels of 40 percent or higher. So many studies by the IMF and others have said governments that spend more, countries produce less. Isn't this something that everybody has got to worry about?

SEN. GRAHAM: If you look out into the future in 2050, we're going to have 300 percent to GDP in terms of debt. So the spending in this, he's spent more in a month than we spent on Katrina, Iraq and Afghanistan. And there is a role for jump-starting the economy through spending, but not a $787 billion bill that creates more government than it does jobs. There is a role to help banks, but not an endless supply of money without accountability. You know, the thing that's missing in this whole debate is public confidence. You know, if there were a need for a TARP III, you would get very few votes, if any, because we all felt like we were burned. I voted for the first TARP package because I was told we were going to take the money and buy up these toxic assets and clean up this banking mess. Instead, we gave a bunch of money to banks, and the stabilization that I was hoping for has not occurred. Now, Bank of America has a very positive outlook. But what I am worried about is the ability to help banks now is going to be lost if we do not have a game plan that people can buy into, and the same with housing.

MR. KUDLOW: On that game plan, I was crushed, I was absolutely crushed to hear you come out in favor of bank nationalization the other day on one of the Sunday talk shows.

SEN. GRAHAM: Yeah.

MR. KUDLOW: And I invite your attention, and I'm sure you know this. We've already nationalized Fannie. We've already nationalized Freddie. We've already nationalized AIG. They're all trading as penny stocks. They're an the government dole forever, and no one even knows what government regulator is overseeing it to get rid of it and sell it off. Why are you for nationalization, sir?

SEN. GRAHAM: Well, here's what I'm for. I'm for breaking a cycle that puts the taxpayer at risk. The best thing to do is keep every bank in the private sector. People like Bank of America are giving me great hope that we're going to have a recovery in the banking sector. We're going to do a stress test, and we're going to find more about these banks than we know now. It seems to me if the bank fails the stress test in a major way, you've got to make one of three decisions -- let it fail, continue to capitalize it, hoping that it would get better down the road, or if it's so-called too big to fail, you've got to stop throwing good money after bad. The AIG is a good example of where you spent $160 billion on an organization that's worth 1 billion (dollars). How do I go back to South Carolina, Larry, and say, we're going to give more money to AIG? There is a way to liquidate these --

MR. KUDLOW: There's no end to it. There's no end to it. And who the heck is running it? Does the FDIC run it? Is the Treasury running it? Is the Fed running it? You are running it, Lindsey Graham as a senator, because they're going to be permanently on the public dole.

SEN. GRAHAM: That's a bad deal for the taxpayer. I don't need to be running the insurance company, and I don't need to be running a bank. But there are some banks that can, you know, if they fail the stress test and you're throwing good money after bad, sell the good part off to the private sector, do the RTC treatment to the toxic assets. Get out of it as the government, get some of your money back, stop this printing money like there's no tomorrow.

MR. KUDLOW: All right. Senator Lindsey Graham, certainly deserved his own segment, no question.

SEN. GRAHAM: (Laughs.) And a t-shirt.

MR. KUDLOW: You're wonderful to come back on the show, Mr. Graham. Thanks ever so much.

SEN. GRAHAM: Thank you, Larry.


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