we will look into it. will it increase small business loans to grow the economy and create jobs? we have the ceo of the michigan ladder company. profitable, wants to expand, but he can't get a loan. we will hear his story. we will preview tomorrow's fomc update on interest rate policy and the fed announcement comes at 2:15 p.m. recession ended last june. the economy is growing at 4%. why is bernanke still running an emergency zero interest rate policy? potential trade-in currency war between the usa and china. house members threatening trade sanction it is the china currency is not revalued higher. china's response -- up yours! my thought, never polka stick in your banker's eye. fasten your seat belts, everybody. "the kudlow report" begins right now. good evening. i'm larry kudlow. welcome back to "the kudlow report" where we believe free market capitalism is the best path to prosperity. my thoughts on the money, politics news of the day. which is financial regulation from senator christopher dodd of connecticut. while there is a lot we don't know yet reading through his facts sheet, it suggests the possibility that his approach could end too big to fail. it could end bailout nation. at least for financial institutions. now, regret fwli, no mention of fannie mae and freddie mac. while the losses mount. there's no particular mention of aig which is improving, i guess, selling off assets but i wouldn't let them have a nickel's worth of bonuses while they are t.a.r.p. ed. we will talk about that in a few minutes. connecticut attorney general richard bloomemthal, how to stop it. limiting the trading and risk and funeral plans for self-extension and extinction and fdic shutdown process. a possible fourth fed bank-up rate. liquidation possible wes panel of three bankruptcy judges. so you know what, you look at this thing. the fed could break them up, they could limit their risk, and bankruptcy judges could put them into liquidation. i don't know the details. i don't know how this will turn out. it could be constructive. if, in fact, dodd spells the end of too big to fail, if, if, if i would score this as a big step for free market capitalism. yes, i would. stocks today shrugged off the dodd plan. the dow did rise 17 points. most of it late in the day. bank stocks basically flat. some of the big ones that will have the biggest trouble with this bill, goldman sachs, morgue ann stanley, citi, lost 1% to 2%. i would not necessarily draw conclusions. consumer financial protection plan. oh, my gosh. that's just going to be off in its own little area. that could be a problem. i don't like the u.s. president appointing the new york fed president. i don't like the proxy access. that would force public companies to lust various rival slates for elections and boards of directors. that stuff is a bunch of liberal left union-type interest group anti-capitalism and i hope it fails. the big point in the dodd thing the takeaway today, is if too big to fail is really going to end, if we are really going to end bailout nation, then i repeat, this has to have my support. it is a very good thing. it is, in fact, much more free market capitalism in our banking system if i believed this stuff. i want to hear from my panel of bankers. i want to hear from the small business leaders. they are all going to tell me what this thing could really mean to them. let's get right to it. let's get an overview from nbc's steve handelsman and he joins us now with the details. steve handelsman, do i believe senator christopher dodd, do i believe him? >> well, here's one thing, larry, you can believe for sure. he can't snap his fingers and make it happen. it has to pass on capitol hill. and connecticut senator chris dodd, not running for re-election, claims he got republican input as he put together his plan but also admitted that here in washington today, he does not have bipartisan support and his plan falls short of what president obama said he wanted. significantly. when chris dodd presented his plan today, he stood alone on capitol hill and announcing the new thin red idea to preparent the kind of meltdown we saw 18 months ago. >> the legislation will bring transparency and accountability to exotic instruments like hedge funds and derivatives that far too long lurked in the shadows of our economy. these activities left investors open to tremendous risks and didn't even know existed. billions of dollars were traded while perhaps the better word is gambled behind closed doors. this, too, must stop. >> the dodd plan envisions a new government financial stability oversight council, even potentially break up huge companies like aig. forcing industry to pay for its failures. creating a consumer watchdog in the federal reserve system. president obama who demanded more ambitious restructuring called the dodd proposal, quote, a strong foundation. but mr. obama said, quote, he would take every opportunity to strengthen the bill. in washington speak that's not a compliment. republican senator bob corker opposition, saying the bill, quote, introduced a number of policies i cannot support. but dodd called passing the bill urgent. >> every day we delay is a day we are unprepared for what's around the corner. >> if hay gets his way, this would be the biggest financial overhaul in america since the new deal. >> i guess -- i don't know. i just -- you know what? i have to ask -- first of all, thank you very much. i have to ask my panelists if i should believe this. my question right off the top, did, has senator christopher dodd got some free market religion? ending too big to fail. ending bailout nation for financial institutions. thanks and whatnot. that's the big question tonight. let's get the reaction. rock is the chairman and ceo of nickl nicklas. and we welcome todd harris, ceo of the michigan ladder company. tom, i i'm going go to you first. before i get to the experts, you got yourself a nice old ladder company. you get profitability. i read your story in "the wall street journal" today. terrific story. regained profitability and would like to develop aluminum and ladders, created jobs, willing to expand out there in michigan. you can't get any loans to do it. now at the end of the day, all of this highfalutin washington academic policy debate, can you get a loan? why not? what's blocking you out there? >> good evening, larry. thank you for having me. the fundamental problem is that while there's a lot of things. the economy certain sly a big factor. while we are profitable in 2009, 2008 was a very challenging year for us. when you go to bank, you know barngs are fundamentally risk averse. more risk averse now than they were prior to the last year and a half. and we -- when companies like us walk in with income statements and balance sheets that look worse than what they did before, banks are getting more and more pressure from regulator asks scrutinizing the loans that they make, i think it is more of a challenge for companies like us to get money to finance some of the projects we would like to do. >> what are you going do? i would say backdrop, i see ladders, i don't know what those ladders you made. reading the story, you would like instead of importing them from where, from mexico, and china a you would like to make them yourself. you are going to create at least 20 new jobs which is what the great thing small businesses do. what do you do now, sir? >> we manufacture wood ladders here like we have for 109 years. we import the fiber glass and aluminum from a number of contractors in various countries. what we would like do is actually assemble the fiber glass and aluminum ladders here. we looked at that and sourced the machinery and equipment. we know it needs to happen in terms of retooling of the plant and sourced the parts and components. they now -- it is a question of coming up with the funding for the machinery, equipment, to retool the plan and for working capital. if we can't find a loan, we are left to fund this thing in -- project internally, and right now given everything that's happened, even though we were profitable in 2009, 2008 as a challenging year. projects like this compete with our normal working capital, that we need to fund, you know, buying the material we need for production now and sales and so forth. it will take much longer to do that. >> in a sense you are at the cruise bell of the entire american economy. making ladders is a classic great small american business. god bless. frank, community banker, you make -- i was trying to organize this. you make him a loan? listen to him. a good business. >> sounds like something we would is port. the problem he is having what i have been talking about in the past is that regulatory pressure on banks today is forcing banks to take this attitude they can't make new loans and regulators are going to come down on them like a hammer and if they try to -- >> even smaller banks like yours. >> absolutely. even small banks like ours. and mass nothing to do with tom's business as all to do with what the regulators think we should be lending, where we should be lending, what types of loans we should be making, and the cre concentration is probably affecting -- >> what's cre? >> commercial real estate concentration. probably affecting him because the bank that he's dealing with probably has a concentration and regulators are saying you have to stop lending. we stopped lending to everyone. it doesn't matter whether his is a good business or bad business. we stopped all lending. that's the problem in the regulatory reform package today. even though i love the fact about the too big to fail issue and may finally get resolution that which we desperately need. this consumer financial protection act definitely -- >> elizabeth warren, harvard law school will have her own empire inside the fed. >> will make it worse. >> she's probably going to have her own wing inside the fed. fed will finance her with her earnings from the -- >> larry, isn't this -- >> this is in the bill. like cia. nobody could touch him inside the cia. no one will be able to touch elizabeth war zblen isn't this just like cra? isn't this the same where we had to make loans to the people that couldn't pay them back? isn't that what the consumer financial protection agency is ultimately going to do? forces them to make loans. >> i love that point. brilliant lady. i disagree with her on almost everything under the sun. ron, let's go to you. too big to fail. you heard the smaller community banker. now i want to go to the haifa lutin stuff. does the dodd bill signal an end to too big to fail and bail out nation? i believe that if it does, then this is a great public servant by christopher dodd. democrat, republican, liberal, conservative, if that's the case, if he's leading down the road and bankruptcy judges in here and he has resolution authority in here, this would be a free market contribution. what do you make of it, ron? >> absolutely. you know, rhetoric was fabulous. you know, holding here the bill. i did read the thing. it is 1328 pages of things that won't get done and make sense. the real problem here is it is where the adage comes up, don't let the economy of good or let perfect be the enemy of what's possible. we need simple basically simple reforms. this bill is the detail and bureaucracy is unbelievable. >> what about the too big to fail? i know there's a lot of left wing dribble in this bill. i understand that. that's all it is. dribble. look, i'm reading this thing. financial stability oversight council, okay, they are going to regulate nonfinancial companies and they are going to regulate the big banks. listen to this. discourage excessive growth and complexity. volcker rule which would limit trading, right, limit private equities and so forth. they are going to limit proprietary trading and funeral plans in here. right? total extinction. banks have to show how they are going to become extinct if they are in trouble. orderly shutdown. liquidation procedures and panel of three bankruptcy judges and must convene and agree within 24 hours that a company is insolvent and finally, bankruptcy. it says most large financial companies are expected to be resolved to the normal bankruptcy process and that's what i wanted two years ago! >> larry, larry. >> do you think that will work? >> it better be because we have to end too big to fail and bailout nation. we have had the fdic process and some of the issues that have to be relooked at is the fact that what business can get unsecured government guarantee fund i bet the ladder company guy would like that. he can't get to it make ladders. a bank gets it. but a bank should take those insured deposits and make loans. that's what needs to be relooked at. so that we can get the credit flowing in this country again. we have an fdic resolution process. we do have bankruptcy for banks. the simple thing -- >> and -- and, by the way, it explicitly says that not only for the big banks but for the big nonbanks, it explicitly raises the issue. i want go to mark on this. mark, you are a think tank expert on this. it says the next -- next aig, they are going down. it says that right in here. they finger aig and said the fed will have the resolution authority and i presume that this three bankruptcy judge bankruptcy process, mark, do you believe this? are they really going to do this? are we going back to a free market? i don't for a minute. i think you need to look past this summary and i'm going say agree fundamental issue should be too big to fail pund the bill, ending too big to fail is wiping out shareholders and replacing management and you need to propose -- on creditors where the institutions are insolvent and this bill allows creditors to be bailed out. it makes the fdic's debt guarantee program they set up during the emergency a permanent feature. so i am very concerned. you have to think about it. with any financial institution, 90% of whatever of your capital structure is debt. we are essentially telling the debt holders you don't need anything to worry about. so i don't see just closing down a company, firing management and wiping it off the holdsers efficient. it is not a bad start. >> you know, we might save a couple of hundred billion. we might save a couple billion. let me ask you, bailing out creditors, what is your read on this? there is aderive particular section with counterparties? credit default swaps and other things now. do they know how to value them? do they know how to put more cash and cole at ram behind them? will we continue to bail out? aigs counterpart. do you think that's going to be gone, too? is that practice going to continue? >> i i would say given that they are creditors, my read of the tax of the bill is that's still allowed. you know if you are a counterparty and have a margin, i think that you can get bailed out under this bill and not guaranteed you will get wiped out. >> that's good. that's good. that's what i want. that's what you want. ending to big to fail could be the greatest contribution to free market capitalism and since -- milton friedman -- >> i'm -- my read of the bill is it doesn't. my read is the bill it does not enforce loss owes creditors that need to happen. that you could come in here and we have this fund that's paid for by the industry and you know, people are going to look at that fund like they look at the fdic. well, i to lend this institution and it goes down. i will get paid back. there is a fund here. i think the important part of that is you need to have that market discipline on the part of creditors. one of the things that stops institute -- should stop constitutions from becoming too big to fail is that when they take the rest of your practices, their debt cushion goes up. the more debt freddie and fannie -- more -- >> unfortunately, this thing does not deal with fannie and freddie. that's one of the largest -- >> even worse, exempts them. >> why do i have to be subject to this bill? there's 8,195 banks in this country. 8,000 of them are community banks. >> but you can -- you are not too big to fail. you are fdic -- >> that's my point. none of these things in this bill have anything to do with the banks in this country. why we won't be painted with the same brush? why is that banker that wants to make tom's loan -- >> i think americans love small bankers. they love community bankers and hate the big banks. they hate the fact the government is -- this -- look -- >> reform package will affect us. affect -- >> how, why, when, when? >> increase regulatory. >> from? >> everyone. the fed, lit come from the fr dic and come from a new age. >> i consumer financial -- >> which either they do separately or they are going to do on its own. or they are going to put it underneath the federal reserve. it does not matter where they put it. it is still a new age say that will have a completely different mission other be the safety and soundness. >> elizabeth warren gets her own wing of the federal reserve. bob, you talked to your banker about this bill? do you think about this bill? i know you are not an expert. i appreciate that very much. what do you -- just your -- you are sitting here and listening to this conversation. let me ask you this. do you want too big to fail to stop? do you want bailout nation to stop? >> yes. there's no question that has to end. i mean on the one hand, either the government needs to bail everybody out or which it simply can't afford do or stop picking and choosing businesses and industries it is going to bail out. it is simply not fair to the rest of us, quite frankly. in terms of what what's in the bill and not in the bill i don't know. but i am always very cautious to listen to what, you know, the receipt rick and what politicians have to say. we have to watch very carefully what they actually do. because there is a big difference between what they will say and what gets covered in the press and what they actually do with the bills. that's the part that concerns me. >> i want to just go back to you on this -- we are going to have a quick whiparound. what do you do next? you have your business plan, you want to make the ladders. you need credit. can you go to another bank? can you go out of state? what do you do here? this is a small business dilemma. we see this time and time again. it is one of the key aspects of the economic recovery that ain't happening now. what do you do next? >> in this i would just tell you, a story that hob told time and time again across the country. we are but one example of this company going through the problem. in terms of what we, not going to other banks are an option. you know, it takes a while really to -- excellent relationship with our bank of ann arbor. they have been a great partner and the relationships and business -- is really what has gotten small and medium-sized businesses through this dilemma. the relationship we have with our suppliers and relationship we have with our customers and the relationship we have with our bank. to just go to another bank and to start that process all over again is a time consuming and very involved process. it is not as easygoing to another bank. i suppose certainly that is an option but as i said, our banks -- >> you -- if you -- tom, if you stayed profitable, let's say in the first six months of this year, will your bank of ann arbor take another look at you? >> i think they would the. mine, our bank, you know, very good relationship with them. we talk to them on a continual and regular basis. i think that as the situation i am proves i think that if they could, they would probably make this loan. i certainly can't speak for them. but i am quite confident when i say that we have an excellent relationship with them and i no i they feel the same way about us. >> tom -- >> would you like to meet frank? this guy is one of the best b