CNBC "The Kudlow Report" - Transcript

Interview

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MR. KUDLOW: (In progress) -- getting ready for a congressional credit card attack. With us now, Senator Bernard Sanders, independent from Vermont, my intellectual nemesis.

Mr. Sanders, it's wonderful to see you. Wonderful to see you. Thanks for coming back.

SEN. SANDERS: Good to be with you, Larry.

MR. KUDLOW: Now, you're a cosponsor I guess with Senator Dick Durbin, number-two man in the Senate. You guys want an interest rate cap on credit cards. I'm sure you know this, but in case your history has left you, the last time we had this was 1980 and the Carter administration caused the worst recession since the Great Depression. You want to try that again, seriously?

SEN. SANDERS: Well, Larry, I don't think I quite agree with your analysis. Larry, the reality is that usury rates used to exist in states throughout this country until 1978 when the Supreme Court decision made them irrelevant. And what happened as a result of that is that large financial institutions went to states like South Dakota and Delaware where there were no usury rates and then proceeded to charge Americans off-the-wall interest rates for their credit cards. Right now, what you are seeing is that at a time when the American people are bailing out Wall Street, when the Fed is giving large financial institutions loans at zero interest, what you're seeing now, Larry, are millions of people paying 20, 25, 30 percent interest rates on their credit cards. That is immoral!

MR. KUDLOW: I have some sympathy with your populist point. I actually do, okay. But I want to tell you, in economic and business terms, I think you're dead wrong, with all due respect, Senator. If you slap interest rate controls which are price controls, you're going to get rationing, you're going to get an evisceration and an evaporation of any credit card credit. And guess what? You are going to sink the economy. They're going to wind up saying, Senator, you know this, they're going to wind up just giving it up to the very wealthiest people, they're going to cut it off for everybody else.

SEN. SANDERS: Larry, I think we have heard that tune before about --

MR. KUDLOW: That's the way business works!

SEN. SANDERS: Whoa, whoa, whoa. Larry, about deregulations, government is terrible. We left your friends on Wall Street alone and they turned out to be greedy, reckless and acting in illegal ways. And the American people no longer trust Wall Street to do the right thing unregulated.

MR. KUDLOW: This is not a question of greedy Wall Street people.

SEN. SANDERS: It is a question of greedy.

MR. KUDLOW: I don't want to debate you. I don't even want to defend them. I'm saying on general business practices, any time you slap price controls on a business, profits go down and they stop producing. It works for credit cards, it works for any financial services. You know this. If they're experiencing defaults, Senator, and you say to them, you've got to keep your rates low, then the defaults keep rolling in, they're going to lose more money, and they're going out of business.

SEN. SANDERS: Larry, thou protests too strongly.

MR. KUDLOW: This is just business principles. These are all basic microeconomic and business.

SEN. SANDERS: No. What business principle is now is that people are paying double in terms of interest rates what they were paying 20 years ago.

MR. KUDLOW: Because their default rates are higher. This is a bad recession. Not everyone is, but the best credits are doing fine.

SEN. SANDERS: Wait a minute, Larry. You should read some of the messages that I am getting, e-mail messages that I'm getting, letters that I'm getting from people in Vermont and all over the country. Bank of America, for no apparent reason, when they're being bailed out by taxpayers, when they're getting zero-interest federal loans, they are doubling the rates of millions of people.

MR. KUDLOW: Mr. Sanders, I don't disagree with that.

SEN. SANDERS: And you think that's appropriate?

MR. KUDLOW: No, I do not, sir. I hate recessions. I am a pro- growth guy. But I'm trying to say to you, if you think you can control prices, whether it's oil, natural gas or bank credit card rates, I am telling you they have risks, they have to pay for those risks. If you put a lid on that, if you put a lid on that then the credit is going to evaporate and the economy is going to have the most vicious double-dip recession we've ever seen.

SEN. SANDERS: But Larry, in all due respect, you have been telling people on your show for years that government should not be involved in regulating Wall Street.

MR. KUDLOW: I don't think this is regulation. This is business practices. You can't regulate prices.

SEN. SANDERS: Of course you can. That's what usury rates are about.

MR. KUDLOW: Mr. Sanders, price controls, give me an example. When have price controls ever worked?

SEN. SANDERS: Well, Larry, states have price controls, if you like, in terms of usury rates which in fact did work and kept interest rates down.

MR. KUDLOW: All right. I've got to leave it there. Mr. Sanders, I appreciate it, sir. It's great to see you.

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