When: Today, Thursday, Sept. 27, 2012
Where: CNBC’s “Closing Bell with Maria Bartiromo”
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with CIT Group Chairman & CEO John Thain today, Thursday, Sept. 27 on CNBC’s “Closing Bell with Maria Bartiromo.”
Following is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000118862.
All references must be sourced to CNBC
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MARIA BARTIROMO: JOINING ME RIGHT NOW IN A CNBC EXCLUSIVE IS CIT CHAIRMAN AND CEO JOHN THAIN. GOOD TO SEE YOU.
JOHN THIAN: MARIA IT IS GREAT TO BE HERE.
BARTIROMO: I BET. THIS IS YOUR FORMER STOMPING GROUND RIGHT THE NEW YORK STOCK EXCHANGE.
THAIN: IT IS. IT'S GREAT TO SEE EVERYONE HERE. IT'S GREAT TO SEE YOUR NEW SET. YOUR SET IS WONDERFUL.
BARTIROMO: THANK YOU SO MUCH. RIGHT IN THE MIDDLE OF THE ACTION. LET'S GET THIS FIRST STORY RIGHT OUT OF THE WAY UP FRONT. THERE WAS A REPORT YOU'RE LOOKING FOR A BUYER OF CIT. ARE YOU SHOPPING THIS FIRM AROUND RIGHT NOW?
THAIN: THE ANSWER IS ABSOLUTELY NOT. AND I HAVE TO SAY I LIKE FOX NEWS I HAVE BEEN ON NEIL CAVUTO’S SHOW IT’S VERY DISAPPOINTING THAT THEY WOULD AIR A PIECE THAT THEY DIDN’T FACT CHECK AND IT IS NOT TRUE.
BARTIROMO: OK SO YOU ARE SAYING THERE WAS A PIECE THAT THEY SAW THAT MAYBE YOU WERE SHOPPING IT AROUND AND THEY JUST SORT OF CREATED A STORY?
THAIN: IT IS NOT TRUE IT IS ABSOLUTELY NOT TRUE.
BARTIROMO: NOW THERE IS A STIFEL NICOLAUS ANALYST WAS SAYING HERE IS A COMPANY THAT HAS POTENTIAL FOR A TAKEOUT HE SAID IT WOULD BE A GOOD ACQUISITION FOR WELLS FARGO EVEN THOUGH IT WOULD BE A 33% PREMIUM. HAVE YOU ACTUALLY HAD CONVERSATIONS WITH WELLS FARGO.
THAIN: SO OF COURSE I WOULD NEVER COMMENT ON ANY PARTICULAR TRANSACTION OR ANY PARTICULAR DEAL BUT THE NICOLAUS GUYS THEY ARE SMART GUYS IT IS JUST THEIR IDEA.
BARTIROMO: IT IS THEIR IDEA. SO THEY ARE LOOKING AT THE FIRM AND SAYING HOW COULD YOU GET MORE VALUE OUT OF CIT RIGHT NOW.
THAIN: WELL THAT’S WHAT THEY ARE SAYING AND THEY ARE ACTUALLY SAYING IT MORE FROM – THEIR PIECE IS MORE FROM WELLS POINT OF VIEW.
BARTIROMO: DO YOU HAVE THE CAPABILITY TO BEST COMPETE WITHOUT GETTING BIGGER? CAN YOU BE A STANDALONE COMPANY GOING FORWARD?
THAIN: THE ANSWER IS ABSOLUTELY. SO ONE OF THE THINGS WE HAVE DONE OVER THE LAST 2.5 YEARS WE HAVE REPAID OR REFINANCED 31 BILLION DOLLARS OF DEBT WE NOW ORIGINATE 90% OF OUR US BUSINESS IN OUR BANK OUR COST OF FUNDS IN THE BANK WE’RE RAISING ONE YEAR CDS AT 1.1%. SO OUR FUNDING COSTS NOW ARE COMPETITIVE WITH PRETTY MUCH ANYONE.
BARTIROMO: ISN’T THAT INTERESTING THAT EVEN THOUGH RATES ARE WHERE THEY ARE YOU ARE FINE IN TERMS OF THE COST OF CAPITAL WHERE YOU ARE WITHOUT HAVING TO NEED LOWER RATES.
THAIN: WELL YES, THAT'S ABSOLUTELY TRUE. AS A MATTER OF FACT, HIGHER RATES WOULD ACTUALLY BENEFIT US BECAUSE OUR ASSETS WOULD ADJUST FASTER THAN OUR LIABILITIES.
BARTIROMO: YOU'RE OUT WITH A STUDY ON THE MIDDLE MARKET BUSINESS. I WANT TO GET TO THAT IN A MOMENT. BUT GIVE ME YOUR TAKE ON WHAT'S
GOING ON RIGHT NOW. BECAUSE THE FEDERAL RESERVE OBVIOUSLY HAS BEEN PROVIDING A LOT OF STIMULUS. THIS MARKET HAS BEEN ON FIRE. DO YOU BUY INTO THE MOMENTUM OUT THERE, OR IS THIS JUST NOT CONNECTED WITH THE FUNDAMENTALS?
THAIN: SO WE HAVE A LOT OF VIEWS INTO THE ECONOMY. WE LEASE RAIL CARS. WE LEND INTO THE MIDDLE MARKET. WE DON'T HAVE MUCH CONSUMER
BUSINESS, BUT WE DO SEE THE RETAILERS BECAUSE WE'RE THE LARGEST FACTOR IN THE U.S. SO MY READ OF THE U.S. ECONOMY IS IT'S GROWING, BUT IT'S GROWING SLOWLY. AND IT IS NOT CREATING A LOT OF JOBS.
BARTIROMO: RIGHT. WHY? WHAT IS GOING TO MOVE THE NEEDLE ON THAT?
THAIN: WHEN WE TALK TO OUR MIDDLE MARKET COMPANIES, THEY SAY THEY'RE CONCERNED ABOUT THE ECONOMY. THEY'RE CONCERNED ABOUT TAXES.
THEY'RE CONCERNED ABOUT REGULATION AND THEY'RE CONCERNED ABOUT HEALTH CARE COSTS.
BARTIROMO: AND OF COURSE THE HEALTH CARE LEGISLATION HAS MEANT A BIG INCREASE IN THEIR COST OF HEALTH CARE. I WANT TO GET BACK TO THAT. BECAUSE THIS IS A REALLY IMPORTANT SEGMENT OF THE ECONOMY. BUT FIRST LET ME GET YOUR TAKE ON THIS BECAUSE FORMER FDIC CHAIRMAN SHEILA BAIR COMING OUT WITH A NEW BOOK. YOU’VE HEARD ABOUT—IN IT. SHE'S VERY CRITICAL OF A NUMBER OF WALL STREET EXECUTIVES DURING THE FINANCIAL CRISIS INCLUDING YOU. THIS IS THE PART THAT SHE WRITES ABOUT YOU. “THAIN, WHOSE BANK WAS DESPERATE FOR CAPITAL, WAS WORRIED ABOUT RESTRICTIONS ON EXECUTIVE COMPENSATION. I COULDN’T BELIEVE IT. WHERE WERE THE GUY’S PRIORITIES?” WHAT’S YOUR RESPONSE TO THIS SHEILA BAIR BOOK?
THAIN: FIRST OF ALL, I HAVEN'T READ THE BOOK. SO ALL I CAN RESPOND IS TO THE ONE LITTLE BIT. YOU KNOW, ONE OF THE ISSUES THAT WE WERE WORRIED ABOUT AT THE TIME WAS IF YOU TAKE GOVERNMENT MONEY, HOW MUCH SAY DOES THE GOVERNMENT HAVE IN HOW YOU RUN YOUR BUSINESS? AND I ACTUALLY THINK THAT THAT TURNED OUT TO BE VERY TRUE. THE GOVERNMENT GOT VERY INVOLVED IN HOW THE BUSINESSES WERE RUN, INCLUDING COMPENSATION.
BARTIROMO: INCLUDING COMPENSATION AND THE USE OF CAPITAL. HOW ARE YOU GOING TO SPEND MONEY ON SOMETHING YOU THINK IS GOOD FOR THE BUSINESS WHEN THE GOVERNMENT SAYS NO, NO, NO, WE DON’T AGREE? YEAH, AND THAT'S THE CASE WITH AIG, THE CASE WITH GENERAL MOTORS. ALRIGHT LET ME GET TO THE STUDY YOU HAVE DONE ON THE MIDDLE MARKET. WHAT WAS THE MOST COMPELLING THING THAT YOU LEARNED FROM YOUR MIDDLE MARKET CUSTOMERS DOING THIS STUDY IN TERMS OF FINDING OUT WHERE THEY ARE IN THE LENDING WORLD?
THAIN: SO THERE WERE TWO REALLY INTERESTING THINGS. FIRST OF ALL, OUR MIDDLE MARKET CUSTOMERS ARE GENERALLY OPTIMISTIC ABOUT THEIR BUSINESS. EVEN THOUGH THEY'RE WORRIED ABOUT THE ECONOMY, 87% OF THEM SAW THEIR BUSINESS GROWING IN THE NEXT 12 MONTHS, WHICH IS
GREAT. THE SECOND THING THAT WAS INTERESTING IS THEY SAID THAT THEY WERE SATISFIED WITH THEIR ACCESS TO CAPITAL AND ACTUALLY SATISFIED WITH THE COST OF THE CAPITAL.
BARTIROMO: WHICH TOTALLY POO-POOS THE IDEA THAT BANKS ARE NOT LENDING.
THAIN: RIGHT, SO THE PROBLEM IS NOT THAT THEY DON'T HAVE ACCESS TO MONEY. THEY DO. THEY PROBLEM IS THEY'RE WORRIED ABOUT THE ECONOMY OVERALL AND TAXES AND HEALTH CARE AND REGULATION.
BARTIROMO: WHEN YOU SAY SMALL BUSINESSES AND YOUR MIDDLE MARKET, WHAT ARE WE TALKING ABOUT IN TERMS OF-- WELL I KNOW THEY'RE NOT PUBLIC COMPANIES. SO YOU CAN’T REALLY COM-- WHAT'S THE NUMBER OF EMPLOYEES? HOW BIG ARE THESE BUSINESSES?
THAIN: SO THE RANGE OF THEM IS BETWEEN, WITH REVENUES, BETWEEN $25 MILLION AND $1 BILLION. ALTHOUGH, IN OUR SURVEY, HALF OF THEM HAD REVENUES LESS THAN $100 MILLION. FOR THE MOST PART, THEY HAVE LESS THAN 500 EMPLOYEES. THEY ARE PRIVATE, FOR THE MOST PART. AND IF YOU LOOK AT THAT ENTIRE GROUP OF COMPANIES, THEY GENERATE ABOUT $6 TRILLION DOLLARS OF REVENUES IN THE U.S. AND EMPLOY 30 MILLION PEOPLE.
BARTIROMO: THIS IS THE CRUX OR THE NUCLEUS OF THE U.S. ECONOMY, SMALL BUSINESSES. WHAT DID THEY SAY IN THIS STUDY ABOUT THEIR PLANS TO HIRE? BECAUSE THIS IS THE BIGGEST ISSUE RIGHT NOW IN TERMS OF BUSINESSES ADDING NEW HEADS TO THE PAYROLL.
THAIN: THAT'S ABSOLUTELY RIGHT. UNFORTUNATELY, WHAT THEY SAID WAS LESS THAN HALF OF THEM SAID THEY WOULD BE ADDING EMPLOYEES IN THE NEXT 12 MONTHS.
BARTIROMO: AND THAT'S BECAUSE OF THE UNCERTAINTY OVER TAXES, THE UNCERTAINTY OVER HEALTH CARE. YOU GOT A GREAT WINDOW INTO RETAIL.
WALK US THROUGH SOME OF THE OTHER SECTORS. WHERE DO YOU SEE THE STRENGTH IN TERMS OF THIS GROWTH POTENTIAL AND WHERE THE WEAKEST PLAYERS IN TERMS OF SECTORS?
THAIN: RIGHT NOW, THE STRONGEST SECTOR IS THE ENERGY SECTOR. WITH ALL THE FRACKING THAT’S GOING ON, ANYTHING RELATED TO FRACKING. WE HAVE RAILCARS THAT CARRY SAND. YOU CAN'T GET THEM. THEY'RE VERY, VERY VALUABLE RIGHT NOW. ANY TYPE OF CAR THAT REALLY IS ASSOCIATED WITH THE ENERGY SECTOR. THAT'S ONE OF THE HOTTEST SECTORS RIGHT NOW.
BARTIROMO: AND LOOK WHERE OIL IS. THAT MAKES SENSE WITH THE MOMENTUM THERE.
THAIN: RETAILERS, IT'S MORE MIXED. SOME OF THE RETAILERS ARE DOING OKAY. SOME OF THEM ARE NOT. IT'S MUCH MORE OF A MIXED PICTURE IN THE RETAIL SECTOR.
BARTIROMO: THE INTERNATIONAL STORY, IS THAT PART OF THEIR BUSINESS? OR IS THIS LARGELY A DOMESTIC SET OF COMPANIES WE'RE LOOKING AT?
THAIN: NO, THESE COMPANIES ARE PRIMARILY DOMESTIC. MOST OF THEIR BUSINESS IS IN THE U.S. MORE THAN HALF OF THEIR EMPLOYEES ARE HERE IN THE U.S. AND SO THIS IS PRIMARILY A U.S. BASED.
BARTIROMO: GIVEN YOUR BACKGROUND, YOU WERE THERE AT THOSE MEETINGS AT THE FEDERAL RESERVE DURING THE FINANCIAL CRISIS. HOW DOES IT FEEL TO YOU TODAY VERSUS WHERE WE WERE IN 2008?
THAIN: WELL, IT'S MUCH, MUCH BETTER. 2008 WAS AN INCREDIBLY DIFFICULT TIME, CERTAINLY THE WORST PERIOD OF TIME IN MY CAREER. EVEN THOUGH EUROPE STILL HAS A LOT OF PROBLEMS AND THE EU HAS NOT SOLVED ITS PROBLEMS AND YOU'RE SEEING THAT BUBBLE BACK UP AGAIN IN BOTH GREECE AND
SPAIN, THE WORLD ECONOMY IS STILL IN A MUCH BETTER PLACE TODAY THAN IT WAS IN 2008.
BARTIROMO: WE SHOULD POINT OUT THAT CIT TOOK MONEY FROM THE T.A.R.P. FUNDS LIKE ALL OF YOUR COLLEAGUES IN THE BUSINESS. CIT TOOK $2.3 BILLION IN T.A.R.P. FUNDS. IT HAS NOT BEEN PAID BACK YET. WILL THAT HAPPEN? DO YOU HAVE PLANS TO PAY BACK THIS MONEY? WHAT KIND OF GOVERNMENT OVERSIGHT HAVE YOU BEEN SEEING THAT RELATES TO WHAT WE TALKED ABOUT EARLIER?
THAIN: THIS WAS BEFORE MY TIME. BUT WHAT I UNDERSTAND HAPPENED WAS THERE WAS A GENERAL AGREEMENT BETWEEN THE TREASURY, THE FEDERAL RESERVE, AND THE FDIC THAT CIT WOULD BECOME A BANK HOLDING COMPANY, IT WOULD GET $2.3 BILLION OF T.A.R.P. MONEY AND IT WOULD GET ACCESS TO THE FDIC TEMPORARY LOAN GUARANTEE FACILITY. AND OF THOSE THREE THINGS ONLY TWO OF THEM HAPPENED. THEY DIDN'T GET ACCESS TO THE
TEMPORARY LOAN GUARANTEE FACILITY. AND THEN THEY EVEN AFTER THE GOVERNMENT PUT THE $2.3 BILLION OF T.A.R.P. MONEY IN, THE COMPANY WENT BANKRUPT. PART OF THAT BANKRUPTCY, OF COURSE, WIPES OUT ALL SHAREHOLDERS, THE PUBLIC SHAREHOLDERS, THE EMPLOYEES, AND THE GOVERNMENT MONEY.
BARTIROMO: THEN YOU CAME IN?
THAIN: I CAME IN AFTER THAT.
BARTIROMO: AND SO IN TERMS OF GROWTH AT CIT, WHERE DOES IT COME FROM IN THE COMING COUPLE OF YEARS?
THAIN: ALL FOUR OF OUR BUSINESSES ARE GROWING. OUR TRANSPORTATION BUSINESS, WHICH IS RAIL CARS AND AIRPLANES, OUR LENDING INTO THE MIDDLE MARKET IS GROWING. WE FINANCED COMPUTER EQUIPMENT, TELEPHONE EQUIPMENT AND COPIERS. AGAIN, MOSTLY INTO THE MIDDLE MARKET. AND THEN WE ARE THE BIGGEST FACTOR IN THE U.S.
BARTIROMO: AND FINALLY, DO YOU THINK SOME OF THIS TIGHTENING ON THE PART OF THE SMALL BUSINESS IS THIS MIDDLE MARKET, IT'S GOING TO LOOSEN UP AFTER THE ELECTION?
THAIN: I THINK IT DEPENDS. IT DEPENDS, A LOT NO MATTER WHO WINS. WHAT DO WE DO ABOUT DEALING WITH THE FISCAL CLIFF? WHAT DO WE DO ABOUT DEALING WITH TAXES, PARTICULARLY ON MIDDLE MARKET COMPANIES? AND WHAT DO WE DO ABOUT THE DEFICIT?
BARTIROMO: JOHN, IT'S GREAT TO HAVE YOU ON THE PROGRAM. THANK YOU SO MUCH.
THAIN: THANKS, MARIA.
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