This is a rush transcript from "Your World With Neil Cavuto," October 2, 2008. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Now, forget today's sleep-off. If this House rejects the bailout tomorrow, the markets could have a tantrum and tank, something that Jack Kemp says we just cannot afford.

The former Republican vice presidential nominee joins me right now.

When we were last on FOX Business Network, he scared me, because he yelled at me a lot, and we argued.

(LAUGHTER)

CAVUTO: Jack, always...

JACK KEMP, FORMER U.S. CONGRESSMAN & HOUSING AND FORMER URBAN DEVELOPMENT SECRETARY: Hey, Neil.

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CAVUTO: It's always good to see you, my friend.

KEMP: Thank you, sir.

CAVUTO: All right, now, this is -- we got the Senate approving this last night.

KEMP: Yes.

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CAVUTO: And we still had a sell-off. What -- what gives?

KEMP: Well, I think it was pointed out in that previous comment that there's a lot of uncertainty about the House of Representatives, my old buddies on the political right of the spectrum, and, of course, the economy.

I saw today, in "The Wall Street Journal," the manufacturing index had the biggest one-day -- one-month drop in 25 years.

CAVUTO: Indeed, it did.

KEMP: And auto sales are off 30 percent in the last month. So, there are some real concerns...

(CROSSTALK)

CAVUTO: But, really quickly, what do you think? A group of Republicans are leading this effort in the House, your old haunt, Jack, saying they would seek an amendment to significantly reduce the size of the package, an almost impossible and unlikely task, or successful task. So, if this were to go down in the House, and not -- not get approved, what then?

KEMP: I think it would be a big mistake.

And I -- as I told some friends of mine on the center-right of the political spectrum -- first of all, let me say, I owe you an apology. I just looked at the Fed statistics for bank loans, and they are not what I said they were. So, my hat is off to Neil Cavuto for making a claim that there are still loans being made, albeit...

(CROSSTALK)

CAVUTO: But, see, Jack, when you yelled at me, you...

KEMP: I didn't yell at you. I never yell.

CAVUTO: Well, you did, and you scared me.

KEMP: Oh, yeah, right.

CAVUTO: Now -- no, I'm only kidding.

KEMP: You have never been scared. But let me make this point.

CAVUTO: But I want to address a bigger point that you mentioned, and it was a very profound point, that...

KEMP: I should never have said that. I should have never apologized.

(CROSSTALK)

(LAUGHTER)

CAVUTO: All these capitalists, and folks like you, you are the guy behind Kemp-Roth, big tax cuts, free markets, such, and these other things.

KEMP: Right.

CAVUTO: And now you're are all like lemmings on this big-government thing. What is the deal?

KEMP: Not really. Not really.

This is -- it's not a bailout. It's a rescue plan or a workout plan. Look it, we are increasing deposit insurance from $100,000 to $250,000. What is that, but a recognition that the Federal Deposit Insurance Corporation needs to lift the cap?

My friends on the right want more insurance to be bought, nonetheless, by banks. But that is basically having the government stand by. The government is standing by to make sure that money market funds are secure.

So, in effect, we have already made a platform underneath certain elements of the market. And I would just add, the government needs to step in, with Treasury, to make sure there's a floor under falling real estate values, particularly residential and housing values.

CAVUTO: Why? Why does the government need to do that?

(CROSSTALK)

CAVUTO: Why not let the markets, however hellish it might be, and however hellish it might be tomorrow, Jack, if the House rejects it, let her rip?

KEMP: Wow, let her rip, like the hissy fit we -- you called it on Monday.

CAVUTO: Well, what do you call today? Is it a hissy fit over the economy?

(CROSSTALK)

KEMP: It's not a hissy fit.

(CROSSTALK)

CAVUTO: No, no, I'm saying, when you kowtow...

KEMP: This is a serious...

(CROSSTALK)

KEMP: I'm not yelling.

CAVUTO: I'm saying, when you kowtow to the markets, Jack, is that a mistake?

KEMP: This is a market.

The stock market is a market. Money market funds being pulled out and put into T-bills is a market.

CAVUTO: Absolutely.

KEMP: The price of oil going up is a market.

People are concerned. And Congress should act, irrespective of, this is not the type of bill Jack Kemp or Neil Cavuto would have written. But it should be passed. And I think it should be done with dispatch, with alacrity, with speed.

CAVUTO: You don't believe that in your gut. You are just so afraid...

KEMP: Yes, I do.

CAVUTO: No, I will tell you why don't, because, in your gut...

KEMP: Well, wait a minute.

CAVUTO: No, it is not in your DNA.

But everyone has put the fear of God into everyone else, Jack, saying, if you don't, there's going to be hell to pay and, my God, the world is going to end.

(CROSSTALK)

KEMP: No.

CAVUTO: And you know better.

KEMP: Look, let me say one thing to you.

The Wall Street Journal, Investor's Business Daily, Barron's, Steve Forbes, Steve Moore, Larry Kudlow, Jack Kemp, Art Laffer, all the guys who...

(CROSSTALK)

CAVUTO: No, no, no, not Art Laffer. Art Laffer is not for this. The others, like you, are zombies. They are zombies. And they are going to for this.

KEMP: No, we're not.

CAVUTO: Yes, you are.

KEMP: And I know -- but, pointing that aside, everybody who did the support that we needed back under Ronald Reagan to get America moving again, and I fear the biggest problem is not just the bailout, or the rescue plan. It is what happens to the economy.

And I think there is where McCain has got to make the point that the Obama plan to raise taxes on investment capital will cause a serious exacerbation of any recession or downturn in this economy.

CAVUTO: All right.

KEMP: We really need the type of rate reduction on corporate income, acceleration of depreciation...

CAVUTO: All right.

KEMP: .. .and the type of plan that McCain has that will keep us out of the type of depths of a recession that I see forthcoming, if we don't do something.

CAVUTO: Got you.

Jack, it is always a pleasure. Thank you very much, Jack Kemp, the former Republican vice presidential candidate, the man behind Kemp-Roth. All right.

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