What follows below is an unofficial transcript of my interview on Kudlow & Company last night with Senator Jim Bunning (R-KY). Mr. Bunning is a Republican member of the Senate Banking Committee.

Kudlow: Senator Jim Bunning, Republican from Kentucky, not happy today with either Treasury man Paulson or Fed head Bernanke. Now, Senator Bunning, here’s what you said at the hearing, taking direct aim at Treasury man Paulson’s bailout plan for Fannie and Freddie. Take a listen to your own words.

[Senator Bunning's remarks at yesterday's Senate Banking Committee hearing: “When I picked up my newspaper yesterday, I thought I woke up in France. But no, it turned out it was socialism here in the United States of America. And very well, going well. And the Treasury secretary is now asking for a blank check to buy as much Fannie and Freddie debt or equity as he wants. The Fed’s purchase of Bear Stearns assets was amateur socialism compared to this.”]

Kudlow: All right. So Senator Bunning, I heard two things, Republican socialism and a blank check. Could you expand on that?

Bunning: Well, both are true. The administration is absolutely wrong in bailing out Bear Stearns and Freddie and Fannie. And the Secretary of the Treasury, and the complicity of the Fed chairman to these two things, you’re absolutely right, we have socialism in the Republican Party and this administration.

Kudlow: Did you think that Ben Bernanke, you had some unkind - I won’t say unkind, let me just say you had some spirited discussion with him. Has Bernanke thrown the dollar over the side? Has Bernanke thrown inflation targeting over the side…

Bunning: Yes.

Kudlow: Is he too obsessed with this Republican socialism?

Bunning: Absolutely. He threw the dollar over the side when he lowered the rates to 2 percent and have kept them there. And we’re not going to have an increase in an election year Larry. You can mark it down somewhere, wherever you mark things down, it’s going to be January or February before we have an increase in the Fed Funds rate which we need desperately to shore up our dollar. If you don’t care about the dollar, let Ben Bernanke do his thing.

Kudlow: Well, stocks went down again today. Gold went up, even though the oil went down. I think Bush was the only guy that got it right with his drill, drill, drill. He’s trying to prod Congress. But let me ask you this. Coming back to Mr. Paulson, and his so-called bailout of Fannie and Freddie. Did you get any satisfaction, you asked him specifically about blank checks and credit cards. Did you get any satisfaction from Paulson?

Bunning: The only thing I got from him was doubletalk. And the doubletalk was that they didn’t want to put a limit, because they didn’t think they were going to use it. And my question was, well then why do it at all?

Kudlow: If we give them some backing and guarantees, as we apparently are, then shouldn’t we have the willingness, the ability, and the right, to totally restructure their operations…

Bunning: Ahhh…

Kudlow: For example, they have an inside portfolio which is like a little hedge fund. It’s about $700 billion dollars. Shouldn’t we do something about that? That’s the ultimate taxpayer hook, isn’t it?

Bunning: That’s the hook.

Kudlow: Did Paulson say anything about that?

Bunning: No, he didn’t say anything other than to keep Freddie and Fannie like they were. Or are.

Kudlow: So let me get this right, if we keep them like they were, with $5 dollar stock prices we are now giving them a total U.S. full faith and credit guarantee? And then they can go ahead off and pay themselves fat salaries and bonuses? Is that the deal here?

Bunning: Well, I don’t know if you heard Chuck Hagel today. But he said $15 million dollars to mismanage Freddie and Fannie as badly as they have mismanaged it? And the boards on each of those GSEs getting paid the prices they’re getting paid? No, that’s not America. You get paid when you do something right! You don’t get paid when you do something wrong.

Kudlow: Well I think that’s called moral hazard. We’re rewarding bad behavior.

Bunning: That’s exactly what we’re doing. That’s what we did with Bear Stearns.

Kudlow: Who’s gonna pay for this, Senator. Who’s gonna finance this?

Bunning: The good old U.S taxpayer always gets stuck with the bill.

Kudlow: All right. Senator Jim Bunning. Appreciate it. Good to see you.

Bunning: Thank you, Larry.

Kudlow: Great stuff. Take care. Many thanks to Mr. Bunning.