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CNBC Exclusive: CNBC Transcript: Former Defense Secretary & Former CIA Director Leon Panetta on CNBC's "Closing Bell with Maria Bartiromo" Today

Monday, 1 Apr 2013 | 5:57 PM ET

WHEN: TODAY, MONDAY, APRIL 1ST

WHERE: CNBC'S "CLOSING BELL WITH MARIA BARTIROMO"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Leon Panetta, Former Defense Secretary & Former CIA Director today on CNBC's "Closing Bell with Maria Bartiromo." Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?play=1&video=3000156890.

All references must be sourced to CNBC.

MARIA BARTIROMO: MY NEXT GUEST CAN PROVIDE UNIQUE INSIGHT INTO THE SITUATION OUT OF NORTH KOREA RIGHT NOW. UNTIL FEBRUARY 12TH HE WAS THE NATION'S SECREATARY OF DEFENSE AND PRIOR TO TAKING THAT ROLE IN 2011 HE HEADED UP THE CIA WHERE HE OVERSAW THE CAPTURE AND KILLING OF OSAMA BIN LADEN. HE HAS BEEN VOCAL ABOUT A NEW THREAT CYBERSECURITY CALLING IT A POTENTIAL CYBER PEARL HARBOR FOR THE UNITED STATES. FORMER DEFENSE SECRETARY LEON PANETTA IS HERE RIGHT NOW EXCLUSIVELY. MR SECRETARY IT IS GOOD TO HAVE YOU ON THE PROGRAM. THANKS FOR YOUR TIME.

PANETTA: NICE TO BE WITH YOU MARIA.

BARTIROMO: LET'S FIRST TALK ABOUT NORTH KOREA HOW CONCERNED SHOULD THE WORLD BE RIGHT NOW?

PANETTA: I THINK WE'VE GOT TO BE VERY CONCERNED ABOUT THE PROVOCATION, THE LEVEL OF PROVOCATION THAT NORTH KOREA IS ENGAGED IN. THEY ARE IN THE PROCESS OF TESTING ICBMS. THEY'VE ALSO BEEN TESTING NUCLEAR WEAPONS. THE KIND OF PROVOCATION AND BELLACOSITY THEY'RE SHOWING NOW WITH THEIR RHETORIC RAISES A LOT OF CONCERN. IT JUST MEANS THE UNITED STATES AND OUR ALLIES JAPAN AND SOUTH KOREA HAVE TO BE VERY FIRM IN SENDING THEM A MESSAGE THAT WE ARE GOING TO DO EVERYTHING NECESSARY TO DEFEND OUR SECURITY AND DEFEND OUR TROOPS.

BARTIROMO: WHAT IS THE MOTIVE HERE? WHAT DO THEY WANT? AND THEN I WANT TO ASK YOU ABOUT CAPABILITIES. DO THEY HAVE LONG RANGE MISSILE CAPABILITY THAT THEY SAY THEY DO?

PANETTA: MARIA WE'VE HAD A CYCLE OVER THE LAST 50 OR 60 YEARS IN WHICH NORTH KOREA HAS ENGAGED IN A PERIOD OF PROVOCATION AND THEN A PERIOD OF ACCOMODATION AND THEN GONE BACK TO PROVOCATION AND ACCOMODATION. THAT'S HAPPENED TIME AND TIME AGAIN. THEY ARE CLEARLY IN A PERIOD OF PROVOCATION NOW. A LOT OF THIS IS AIMED MORE PROBABLY ON THE INTERNAL SITUATION IN NORTH KOREA. AIMED AT IMPROVING THE NEW LEADER'S CREDIBILITY, HIS CREDENTIALS AS A LEADER. BUT AT THE SAME TIME SINCE THEY HAVE CAPABILITIES AND DEVELOPING THOSE CAPABILITIES I DON'T THINK WE CAN TAKE ANYTHING FOR GRANTED. THE US, SOUTH KOREA AND OUR OTHER PARTNERS IN THAT REGION HAVE TO BE VERY PREPARED IN THE EVENT THAT SOMETHING COULD HAPPEN HERE. I THINK THE GREATER LIKELIHOOD IS MISCALCULATION AND IF THEY DO SOMETHING THAT ESCALATES QUICKLY THAT'S THE GREATER DANGER.

BARTIROMO: AND WHATEVER HAPPENS PLAY OUT THE CHESSBOARD FOR US IF YOU WOULD IN TERMS OF UNINTENDED CONSEQUENCES OR ACTUALLY FRANKLY INTENDED CONSEQUENCES. FOR EXAMPLE IS CHINA ON THE SIDE OF NORTH KOREA? DO THEY HAVE NORTH KOREA'S BACK?

PANETTA: YOU KNOW THERE HAS BEEN A LONG HISTORY WHERE CHINA PRETTY MUCH WATCHED THEIR BACK AND PROVIDED THEM THE SUPPLIES THEY NEED IN ORDER TO MAINTAIN WHATEVER POOR ECONOMY THEY HAVE. BUT IN RECENT MONTHS THE REALITY IS THAT NORTH KOREA HAS BEEN PRETTY ATAMENT AGAINST EVEN CHINA AND THAT THEY REFUSE TO EXCEPT ENVOYS TO NORTH KOREA THEY REFUSE TO LISTEN TO CHINA AND AS A MATTER OF FACT CHINA JOINED US IN THE UNITED NATIONS IN ISSUING THE SECURITY RESOLUTION THAT IMPLEMENTED MORE SANCTIONS SO THE RELATIONSHIP BETWEEN NORTH KOREA AND CHINA ISN'T VERY GOOD AT THE PRESENT TIME EITHER AND THAT FRANKLY ADDS TO THE CONCERN BECAUSE NORTH KOREA IS BECOMING EVEN MORE OF A ROGUE REGIME AS A RESULT.

BARTIROMO: BUT WHY CAN YOU READ INTO IT A BIT FOR US? WHY THIS RELATIONSHIP AND AGAIN WHAT DOES HE WANT THE NEW LEADER THERE?

PANETTA: LISTEN THAT'S BEEN A VERY GOOD QUESTION. I THINK THE REALITY IS THAT WE DON'T HAVE AS MUCH INSIGHT AS WE SHOULD WITH REGARDS TO THE INNERWORKINGS OF WHAT HAPPENS IN NORTH KOREA. THE HISTORY HERE IS THAT THESE LEADERS ENGAGE IN THIS KIND OF PROVOCATION. THEY ENGAGE IN THESE KINDS OF BELLACOSE WORDS AND THREATS AND THEN AFTER THAT THEY USE IT THEY BELIEVE AS A WAY TO THEN NEGOTIATE WITH US TO TRY TO SEE IF THEY CAN NEGOTIATE SOME KIND OF BETTER RELATIONSHIP. WHETHER THAT HAPPENS NOW, WHETHER THIS LEADER WILL USE THIS AS A WAY TO ULTIMATELY GET BACK THE DIPLOMATIC TABLE NO ONE REALLY KNOWS. THAT'S THE BOTTOM LINE. WE REALLY DON'T KNOW WHAT HIS MOTIVATION IS AND WE REALLY DON'T KNOW WHAT HIS INTENTIONS ARE. AND THAT'S THE GREATEST CONCERN OF ALL.

BARTIROMO: LET ME ASK YOU ABOUT ANOTHER CONCERN AND THAT IS OF COURSE CYBERSECURITY. YOU SAID THAT THE UNITED STATES IS FACING A POTENTIAL CYBER PEARL HARBOR THIS COULD BE ONE OF THOSE SLEEPING GIANTS THAT IS OBVIOUSLY INCREDIBLY IMPACTFUL HERE. WHAT DID YOU MEAN BY THAT?

PANETTA: WELL I'VE BEEN VERY CONCERNED BY IT BECAUSE CYBER TECHONOLOGY OBVIOUSLY THE WHOLE CYBER SPACE THING IS A TREMENDOUS FRONTIER FOR OPPORTUNITY BUT IT COULD ALSO BE THE BATTLEFIELD OF THE FUTURE. THE REALITY IS THAT WE ARE DEVELOPING THE KIND OF TECHNOLOGY NOW THAT CAN VIRTUALLY CRIPPLE A NATION. YOU REMEMBER HURRICANE SANDY THE POWER WENT DOWN IN HURRICANE SANDY THEY LOST THEIR 911 CAPABILITIES THEY LOST THE ABILITIES FOR GAS STATIONS TO PROVIDE GAS AND BANKS TO PROVIDE MONEY, FOR HOSPITALS CLOSING ALL BECAUSE THE POWER WENT OUT. THE REALITY IS THAT WE NOW HAVE AND OTHER COUNTRIES ARE DEVELOPING THE CAPABILITY TO CRIPPLE OUR POWER GRID, TO CRIPPLE OUR FINANCIAL SYSTEMS AND TO CRIPPLE OUR GOVERNMENT SYSTEMS. THAT COULD CREATE TREMENDOUS DAMAGE AND PARALYSIS TO THIS COUNTRY AS WE SAW IT JUST FROM HURRICANE SANDY. SO THAT'S THE CONCERN THAT'S THE THREAT. AND THE REALITY IS ALTHOUGH WE HAVE SEEN A LOT OF EXPLOITIVE ATTACKS ON CYBER IN RECENT MONTHS AND YEARS THE CONCERN NOW IS THEY CAN TURN FROM ESPIONAGE TO DESTRUCTION AND THAT'S WHY I THINK WE HAVE TO BE REALLY PREPARED TO DEAL WITH THAT BOTH IN THE PRIVATE SECTOR AS WELL AS IN GOVERNMENT.

BARTIROMO: HOW MUCH IS THE THREAT OUT THERE IN TERMS ON A DAILY BASIS? I THINK I WAS TALKING TO SOMEONE IN THE BANKING SECTOR THAT SAID THAT THERE ARE SOMETHING LIKE 200,000 EFFORTS A DAY IN TERMS OF TRYING TO HACK INTO PEOPLE'S YOU KNOW, BANK ACCOUNTS OR THEIR FINANCIAL SYSTEMS. SO CAN YOU CHARACTERIZE FOR US IN TERMS OF HOW SEVERE THIS IS ON A DAILY BASIS?

PANETTA: THE FACT IS THAT THERE ARE LITERALLY HUNDREDS OF THOUSANDS OF ATTACKS THAT ARE AIMED AT THIS COUNTRY. WHEN I WAS AT THE C.I.A. WE SAW LITERALLY HUNDREDS OF THOUSANDS OF ATTACKS COMING AT THE C.I.A. SAME THING IS TRUE AT THE DEFENSE DEPARTMENT. SAME THING IS TRUE WITH OTHER AGENCIES AND NOW WE HAVE SEEN INCREASED ATTACKS GOING ON IN THE PRIVATE SECTOR. THE BANKING INDUSTRY, THE FINANCIAL INDUSTRY, THE HIGH-TECH INDUSTRY – ALL HAVE BEEN TARGETS OF INCREASING ATTACKS. A LOT OF THAT IS EXPLOITED. GOING AFTER OUR INTELLECTUAL PROPERTY, GOING AFTER TRADE SECRETS, GOING AFTER COMMERCIAL INFORMATION. BUT WE HAVE ALSO SEEN DENIAL OF SERVICE, IMPACTING ON OUR BANKS AND THAT MEANS THAT CUSTOMERS HAVE BEEN AFFECTED BY THOSE KINDS OF CYBER ATTACKS. THE REAL CONCERN IS WHEN THEY TAKE A DESTRUCTIVE MODE. WE SAW SOMETHING LIKE 30,000 COMPUTERS VIRTUALLY DESTROYED WHEN A VERY SOPHISTICATED VIRUS ATTACKED ARAMCO IN SAUDI ARABIA. IN SOUTH KOREA, JUST RECENTLY, WE SAW ABOUT 32,000 COMPUTERS THAT WERE TAKEN DOWN AS WELL. THAT'S THE KIND OF CONCERN THAT I THINK WE HAVE TO BE AWARE OF. I REALLY DO BELIEVE THAT THE PEARL HARBOR OF THE FUTURE COULD BE VERY WELL A CYBER ATTACK ON THIS COUNTRY.

BARTIROMO: NOW I RECOGNIZE THAT WE HAVE TO BALANCE A WAY TO PROTECT AGAINST THESE THREATS WITH PEOPLE'S PRIVACY, BUT DO YOU WORRY THAT IN FACT THE WAY WE ARE GOING ABOUT IT, DO YOU WORRY ABOUT ANY BREAK IN PRIVACY? THE DRONES OUT THERE. THE FACT THAT THERE IS NO PRIVACY, FRANKLY.

PANETTA: OBVIOUSLY, CYBER HAS PRESENTED A WHOLE NEW ARRAY OF CHALLENGES AND THE FACT IS THAT AS A RESULT OF HACKING, PRIVACY HAS BEEN IMPACTED SERIOUSLY. BUT BEYOND THAT, I THINK WHAT IS NEEDED HERE IS GREATER TRANSPARENCY. THE PRIVATE SECTOR IS THE TARGET OF A LOT OF THESE ATTACKS. WE HAVE TO HAVE A PARTNERSHIP WITH THE PRIVATE SECTOR TO BE ABLE TO WORK AGAINST THESE KIND OF ATTACKS, TO PROVIDE BETTER SECURITY. THAT IS WHY IT IS VERY IMPORTANT THAT CONGRESS PASS LEGISLATION TO PROTECT THESE COUNTRIES AND GIVE THEM SOME IMMUNITY FROM LAWSUITS SO THEY CAN SHARE THAT INFORMATION WITH GOVERNMENT. WE HAVE TO HAVE A STRONG PARTNERSHIP HERE IF WE ARE GOING TO DEFEND THIS COUNTRY BOTH IN THE PRIVATE SECTOR AS WELL AS IN OUR GOVERNMENT.

BARTIROMO: SECRETARY, LET ME SWITCH GEARS. MOVE ON TO ONE OF THE BIGGEST SUCCESSES IN YOUR CAREER OF COURSE AND THAT IS THE CAPTURE AND KILLING OF OSAMA BIN LADEN. IS AL-QAEDA STILL A THREAT?

PANETTA: I THINK WE HAVE DONE A GREAT JOB AT WEAKENING WHAT I WOULD CALL CORE AL-QAEDA LEADERSHIP PARTICULARLY LOCATED IN WHAT WE CALL LA FATA IN PAKISTAN. WE REALLY HAVE SERIOUSLY IMPACTED ON THEIR ABILITY TO PLAN THE KIND OF 9/11 ATTACK THAT WE SAW. BUT AT THE SAME TIME, THERE ARE ELEMENTS OF AL-QAEDA THAT HAVE DEVELOPED ELSEWHER – IN YEMEN, IN SOMALIA, IN NORTH AFRICA, IN MALI – AND I THINK WE AS A COUNTRY, HAVE TO MAKE SURE THAT WE CONTAIN THEM WHEREVER THEY GO BECAUSE THEIR PRINCIPLE INTENT REMAINS ATTACKING THIS COUNTRY AND FOR THAT REASON WE HAVE GOT TO DO EVERYTHING NECESSARY TO MAKE SURE THAT AL-QAEDA NEVER GAINS A FOOTHOLD ANY PLACE ON WHICH TO CONDUCT THOSE KIND OF ATTACKS.

BARTIROMO: AND OF COURSE YOU AND THE ENTIRE STORY IMMORTALIZED IN THE FILM "ZERO DARK THIRTY." JAMES GANDOLFINI PORTRAYED YOU. HOW ACCURATE WAS THAT MOVIE?

PANETTA: MARIA IT IS HOLLYWOOD AND YOU KNOW IT IS A GOOD MOVIE, BUT I THINK PEOPLE HAVE TO UNDERSTAND THAT WHAT TOOK PLACE IN REALITY TOOK TEN YEARS, A LOT OF TEAMWORK BETWEEN THE INTELLIGENCE AGENCIES AND MILITARY AGENCIES AND I'M AFRAID YOU CAN'T REALLY TELL THAT STORY IN A TWO HOUR MOVIE.

BARTIROMO: JAMES GANDOLFINI PORTRAYED YOU IN THE FILM AND HE SAYS THAT HE APOLOGIZED TO YOU FOR HOW HE LOOKED AND HOW HE SPOKE. HE WAS JOKING ABOUT IT – WHAT DID YOU THINK?

PANETTA: HE WROTE ME A NICE NOTE AND WE TALKED ON THE TELEPHONE AND HE SAID YOU KNOW BECAUSE YOU ARE ITALIAN, I'M A LITTLE CONCERNED ABOUT HOW YOU MIGHT REACT TO THE WAY I PLAYED YOU IN THE FILM. I SAID, WELL DON'T WORRY ABOUT IT, IT IS A MOVIE I UNDERSTAND. I'M GLAD THEY PICKED AN ITALIAN AT LEAST TO PLAY ANOTHER ITALIAN. AND HE THEN SAID YOU KNOW I WAS REALLY WORRIED ABOUT THE AMOUNT OF SWEARING THAT I DID AND I SAID YOU KNOW, THAT IS THE ONE THING YOU GOT RIGHT.

BARTIROMO: HEY I'M WITH YOU ON THE ITALIAN THING YOU KNOW THAT. LET ME ASK YOU – HAS TOO MUCH INFORMATION BEEN PUT OUT THERE ABOUT THE CAPTURE AND KILLING OF OSAMA BIN LADEN? DO YOU THINK TOO MUCH IS OUT THERE? I MEAN OBVIOUSLY LOTS OF FINGER POINTING IN TERMS OF WHO IS TALKING TO THE MEDIA AND WHO WROTE ABOUT IT. WHAT IS YOUR TAKE ON THAT?

PANETTA: I THINK FROM THE VERY MOMENT THAT THE OPERATION WAS SUCCESSFUL AND WE WERE ABLE TO ACCOMPLISH THAT MISSION, I THINK WE ALL KNEW THAT IT WOULD BE VERY HARD TO CONTAIN SOME OF THE ELEMENTS OF WHAT TOOK PLACE IN TERMS OF THE EFFORT TO DEVELOP THAT PLAN. HAVING SAID THAT, I THINK WE HAVE TO PROTECT AREAS OF CLASSIFIED INFORMATION BECAUSE THOSE OPERATIONS CAN ONLY WORK IF WE ARE ABLE TO PROTECT THE CLASSIFICATION OF INFORMATION THAT SURROUNDS THOSE OPERATIONS. YOU CAN'T DO THAT IF EVERYBODY KNOWS WHAT YOU ARE DOING. SO I AM A LITTLE CONCERNED ABOUT THE AMOUNT OF INFORMATION THAT CAME OUT ON IT, BUT I ALSO UNDERSTAND THAT THAT'S THE WORLD WE LIVE IN.

BARTIROMO: RIGHT. EXACTLY. THAT IS WHY I ASKED. LET ME ASK YOU MR. SECRETARY, FINAL QUESTION HERE. NOW THAT YOU ARE OUT OF WASHINGTON, WHAT IS YOUR ASSESSMENTS OF HOW WASHINGTON IS HANDLING THE ISSUE? FOREIGN POLICY AS WELL AS ECONOMIC POLICY – THE BUDGET AND THE DEFICIT. I KNOW AT ONE POINT IN YOUR CAREER YOU SERVED AS CHAIRMAN OF THE INFLUENTIAL HOUSE BUDGET COMMITTEE.

PANETTA: MARIA, I REALLY WORRY ABOUT THE DYSFUNCTIONALITY IN WASHINGTON. I TRAVEL AROUND THE WORLD, OTHER COUNTRIES DON'T QUESTION OUR CAPABILITY – OUR MILITARY CAPABILITY, OUR TECHNOLOGY, OUR MEN AND WOMEN IN UNIFORM – THEY KNOW WE ARE THE STRONGEST POWER ON EARTH. BUT THEY DO QUESTION WHETHER OR NOT OUR DEMOCRACY CAN FUNCTION AND I WORRY ABOUT THAT. THE FACT IS, WE ARE FACING A NUMBER OF CRISES – PARTICULARLY ON THE BUDGET AREA AND FOR WHATEVER REASON, BOTH REPUBLICANS AND DEMOCRATS ALIKE CANNOT COME TOGETHER TO FIND THE SOLUTIONS THAT ARE IMPORTANT TO OUR FUTURE. I REALLY DO THINK WE ARE ON THE CUSP OF A STRONG ECONOMIC RECOVERY. WE ARE VERY CREATIVE, WE ARE INNOVATIVE, WE HAVE A GREAT AMOUNT OF TALENT, GREAT WORKFORCE, GREAT RESOURCES. BUT I THINK IF WE CAN'T GOVERN – IF WASHINGTON CANNOT DEAL WITH THESE ISSUES, WE MAY VERY WELL BE A COUNTRY IN DECLINE RATHER THAN IN RENAISSANCE.

BARTIROMO: ABSOLUTELY. MR. SECRETARY IT IS AN HONOR TO TALK TO YOU. THANK YOU SO MUCH FOR YOUR TIME AND THANK YOU OF COURSE FOR YOUR INCREDIBLE SERVICE TO OUR GREAT COUNTRY.

PANETTA: THANK YOU VERY MUCH MARIA.


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