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CNBC EXCLUSIVE: CNBC TRANSCRIPT: JOHN HARWOOD, CNBC'S CHIEF WASHINGTON CORRESPONDENT, SITS DOWN WITH SPEAKER OF THE HOUSE NANCY PELOSI TODAY

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Speaker of the House Nancy Pelosi today, Thursday, May 14th. Excerpts of the interview will run during CNBC's "Power Lunch" (12PM-2PM ET), "Street Signs" (2PM-3PM ET), "Closing Bell" (3PM-5PM ET) and the interview will run on "CNBC Reports" (8PM-9PM ET).

All references must be sourced to CNBC.

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HARWOOD: On cap and trade, a lot of people say might be able to get it through the House, cannot pass the Senate, it's not going to happen.

Rep. PELOSI: People say that all the time. You know, when I became speaker, my flagship issue that I announced was energy security and climate change issues. And I established a special select committee to deal with those issues that Mr. Markey chairs. They said, `You'll never pass an energy bill. Don't embarrass yourself. You put it out there, you'll lose for sure.' And I knew the more that the special interests said that, the better chance my prospects were for success because they did not want it to come to the floor. We passed that. It was the first time in 32 years that we had an emissions standard. President Bush signed it into law.

HARWOOD: So does that mean that you do think the objections to cap and trade are special interest scare tactics?

Rep. PELOSI: Well, I'm just saying that people may not know. What we've tried to do in this process, and I think that Congressman Wax--Chairman Waxman and Chairman Markey have been masterful in terms of listening to people, addressing their concerns. Because, as I said, we're all going down this path together. We're not saying what's the--that one of us thinks should go, we have to go down together. And perhaps they have some misconceptions. Some people don't believe that global warming exists. I know--I just heard of a story of a head of a major firm who said he doesn't believe in global warming, and his role will be to prove that it's not happening. Well, it is happening and, in order for us to be internationally competitive, we have to develop the technologies to make energy cleaner, to reduce cost, and again, in terms of our national security, reduce our dependence on foreign oil. So I feel very confident about the path we're going. The public is so far ahead of the Congress and some of the people that you're suggesting. Doesn't mean you don't listen to their ideas, see what their objection is and see if you can reconcile, that it might be legitimate or it might just be the agents of the status quo who have long reigned in Washington, DC. But a new day is here.

HARWOOD: Well, speaking of the status quo, health care is a big issue on the president's agenda. The administration acknowledges that you need more revenue beyond what they can save in the system, maybe a trillion or $2 trillion to cover everyone. President Obama proposed limiting the itemized deductions for people who make over $250,000. Senators say, influential senators say we're not doing that, and they're talking instead about removing the exclusion from employer-provided health care. Your chairman in the House, Charles Rangel, says not doing that. Where are you going to get the money for this?

Rep. PELOSI: Welcome to the legislative process where all kinds of ideas are on the table and everybody has to prove their worth or effectiveness as we go forward. Suffice it to say that we will have, as the president has called for, quality, affordable, accessible health care which will reduce cost.

HARWOOD: So what is the...

Rep. PELOSI: Reduce costs and allow people to have the health care that they have if that is their choice. So the...

HARWOOD: Soda taxes is what we're talking about here?

Rep. PELOSI: We have to wait--we have to wait and see. We haven't gotten a report from the Congressional Budget Office to see what the costs are that are involved. Put everything on the table and see how it competes, how it works. That you have to--when this health--this has to work and so it not only has to pass but it has to work.

HARWOOD: A soda tax is actually a possibility?

Rep. PELOSI: Everything on the table.

HARWOOD: Everybody's been looking at how much money is left from the TARP, which I know was unpopular with your members, the $700 billion. A little over $100 billion is left and some may be coming back from large financial institutions. But if we had a financial setback and the president and the chairman of the Federal Reserve came to you and said, `We need more money to prevent the financial system from going under,' could you get the votes for it?

Rep. PELOSI: Be very hard. Be very hard. You know, we worked in a very bipartisan way with President Bush. His own party deserted him on this to produce the votes for the TARP. Our members are--were not happy about what--that credit is not flowing the way they think it should, that people are using the money as a cushion. And we'd suspect that they would do some of that. But I think people want to see more results in their neighborhoods, and all of this is not getting down to where people are. So it would be very hard. I would hope that that would not be a request the president would make.

HARWOOD: You would think that the 700 billion is it. Do you think it's impossible to do?

Rep. PELOSI: I never say anything is impossible. But I will say that the doomsday scenario that was presented to us by the Bush administration insisted that if we did not pass legislation we would have no economy within four days. You know, that should have come in sooner. But they couldn't get the votes on the Republican side. Our members are not happy about how the TARP was implemented by the Bush administration. It's better now under the Obama administration, but there is not a big appetite for more TARP funding, no.

HARWOOD: As you know, the administration is pushing for new regulation for Wall Street and the financial industry.

Rep. PELOSI: Yeah.

HARWOOD: What is Washington's role? Or does Washington have any role in regulating the compensation, the pay of financial executives, of any executives in this country?

Rep. PELOSI: The anger that you saw from the American people and reflected in Congress was about compensation for AIG officials who were getting bonuses after we had put in a hundred and, what, $80 billion of taxpayer dollars and other--and Fed money, then they gave bonuses to some of the people who got us in this situation. So when you're talking about taxpayers bailing out a company and then getting--people who brought the company down getting these bonuses. Some didn't. Some, I think, probably should have their--you know, earned a bonus. Whether they should be using taxpayer dollars is another thing. Anyway, having said that, as the--I think we have to not paint everyone with the same brush, that we reward success of the entrepreneurial spirit. I come from California where we reward the entrepreneurial spirit, and risk taking, responsible risk taking is part of that entrepreneurial spirit. And it--I believe that we think--I think it should be rewarded. Sometimes it works, sometimes it doesn't. But it has to be responsible. So I think what you will see Washington do, what we--as we go forward with regulatory reform, that some of these subjects will be brought up. I think the more important priority is how we calibrate the regulatory reform and not overreact to what happened but recognize that these financial institutions had no discipline, no supervision, no regulation, and that's one of the reasons we're in the situation that we're in today. So I'd rather keep our focus on how we calibrate the regulation, not overdo it, be sensitive to the markets, reward success...

HARWOOD: So you don't want to go too far on executive pay. You think that Washington's role is very limited in that.

Rep. PELOSI: No, I would think it's up to them. You know, I think so. But I also think that there should be some common sense in the business community and not this arrogance of incredible compensation. The disparity in...

HARWOOD: Are dollar caps inappropriate?

Rep. PELOSI: I would not be one to go to that path. But if people are taking taxpayer dollars, then they have--they've taken themselves into another realm. It deserve--it has to be a full conversation, and I don't think, again, that we should paint everyone with the same brush. I think we have to reward entrepreneurial spirit and some risk taking, but responsible. But we have to stop the situation where we nationalize--we nationalize the risk and we privatize the gains, and the arrogance that goes with, `Well, I'm entitled to this even though my country--company is down the drain.'

HARWOOD: As you know, everybody's talking about this issue of torture...

Rep. PELOSI: Yes.

HARWOOD: ...and your role, the briefings, you had that press conference earlier today.

Rep. PELOSI: Yeah.

HARWOOD: Karl Rove wrote in the Wall Street Journal today that you weren't telling the truth.

Rep. PELOSI: Yeah.

HARWOOD: But it's not just coming from conservatives. Jon Stewart the other night on "The Daily Show" had a segment that raised questions about your account in April said that you hadn't known about waterboarding. Do you understand why some people feel misled by your previous statement?

Rep. PELOSI: No, I...

HARWOOD: And is it hurting your leadership?

Rep. PELOSI: Absolutely not. The--Karl Rove is going to say what Karl Rove--Karl Rove has said, so why even go there? Karl--Jon Stewart, I'm a big fan, I watch him every night and mocking Congress is just stock and trade of what many of those shows do. But the fact is is that the CIA misled the Congress in how it briefed us. They did not tell us that--they specifically said waterboarding wasn't being used when they knew that it was. And also I was informed that there was a briefing, but I was--it was one that the techniques that they--some of the techniques they had discussed were now being employed. But I was not briefed on that and the specifics of what they were. But the, you know, the Republicans are having their fun. They conceived, developed and implemented techniques that were counter to our beliefs as a country. Some people question their effectiveness and that, but the fact is they were wrong. And the fact is also that I have been a champion for human rights and fighting torture and funding for torture victims way early in my career and am...



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