WHEN: TUESDAY, AUGUST 28 AT 5:00 PM ET
WHERE: CNBC'S "KUDLOW & COMPANY"
The following is the unofficial transcript of a CNBC interview with former Massachusetts Governor and Presidential hopeful Mitt Romney on CNBC's "Kudlow & Company" today at 5:00 PM ET. All references must be sourced to CNBC.
In the interview with CNBC's Larry Kudlow, Romney discusses economic policy as well as his new national healthcare plan, the housing downturn, the credit crunch and regulating hedge funds and private equity.
LARRY KUDLOW, host: Governor Mitt Romney of Massachusetts, presidential candidate on the Republican side, who is surging in the polls, actually. Governor, welcome back to KUDLOW & COMPANY.
Governor MITT ROMNEY: Thanks, Larry, good to be with you.
KUDLOW: All right, thank you, sir. I'm obliged to begin with what has become a front-page story. Senator Larry Craig of Ohio was caught in a police sting operation in the men's room of the Minneapolis Airport making sexual advances to another man. He's pleaded guilty to a disorderly conduct at the moment. Mr. Craig's one of your Senate leaders. I believe he was your Idaho state chairman. What is your comment on the Craig problem, sir?
Gov. ROMNEY: Well, very disappointing. Once again, we've found people in Washington have not lived up to the level of respect and dignity that we would expect for somebody that gets elected to a position of high influence. Very disappointing. He's no longer associated with my campaign, as you can imagine. He resigned just today. And you know, he was one of those who was helping my effort, and I'm sorry to see that he has fallen short.
KUDLOW: One of your backers, radio talk show host Hugh Hewitt, he's a great friend of mine, has called for Mr. Craig to resign from the Senate. Are you going to ask him to resign from the Senate? Will you make a public call on that?
Gov. ROMNEY: You know, I haven't made a call on that at this stage. You know, I haven't seen the allegations yet, I just heard that there was a guilty plea and he submitted a resignation as my liaison in the Senate. And you know, I'm very disappointed that he has--he's disappointed the American people.
KUDLOW: You know, there's a whole flood of stories on this, which I think to some extent may be a test of leadership in this primary. The Idaho Statesman has a devastating article about Craig, so does The Washington Post, so does Roll Call. Apparently, a couple years ago, a professional man close to the Republican Party reported having oral sex with Craig at Union Station in Washington in 2004. Apparently, there are allegations and charges going back to 1982, where Mr. Craig was forced to deny having sex with pages. Isn't this the sort of thing that reminds us all of the Mark Foley episode last fall, before the elections, that was devastating to the Republicans?
Gov. ROMNEY: Yeah, I think it reminds us of Mark Foley and Bill Clinton. I think it reminds us of the fact that people who are elected to public office continue to disappoint, and they somehow think that if they vote the right way on issues of significance or they can speak a good game, that we'll just forgive and forget. And the truth of the matter is, the most important thing we expect from elected--an elected official is a level of dignity and character that we can point to for our kids and our grandkids, and say, `Hey, someday I hope you grow up and you're someone like that person.' And we've seen disappointment in the White House, we've seen it in the Senate, we've seen it in Congress. And frankly, it's disgusting.
KUDLOW: Governor, if there were a President Romney, and you heard this, and your staff briefed you on some of the past allegations and charges, and there seems to be something of a cover-up, a silence on this with regard to Craig, would you not call for him to resign from the Senate?
Gov. ROMNEY: If--you know, I don't know the circumstances right now of his setting, and so I really can't call--make that call without having reviewed it, Larry. I will review that, and we'll give you a call on that. I certainly felt that Bill Clinton shouldn't have stayed in office. But you know, with regards to this setting, why, we'll take a close look at it.
KUDLOW: Actually, on that Clinton point, you threw Clinton in with the Craig episode and the Mark Foley episode. Could you just expand a little bit on that for us, sir?
Gov. ROMNEY: I'm not sure I need to. I think we've all heard the story about Bill Clinton and the fact that he let us down in his personal conduct with a--with a White House intern. And that strikes me as another one of these extraordinary acts of falling short of what America would expect of elected officials, particularly one who should be held to a higher standard.
KUDLOW: Do you think the Monica Lewinksy, impeachment and so forth, she was indicted--he, Mr. Clinton, was indicted in the House, he was not convicted in the Senate, Governor, does that become an issue again in this presidential campaign?
Gov. ROMNEY: I don't think so. I think the experience of the--of mine in the political world is that the things that we've heard about in the past, we tend to forget and not bring back up. But obviously, the continued parade of sexual misconduct in Washington, DC, is something which is very disturbing to America's families. And when you're trying to raise children, and you have stories like the ones we've seen over the last several years coming out of Washington, that's very troubling. And I expect that people should be held to a higher standard, and that is something I'd expect to see in this particular case as well as in other cases that have proceeded it.
KUDLOW: You know, a friend of mine was on the phone this morning. A friend of mine was saying to me, you know, if you don't do these things, then you don't get into any trouble. Why do you think it is that we still get these kinds of news items coming out of Washington, DC? Elected officials, instead of just not doing them, they are insisting on doing them. What does it say about our culture? What does it say about the morality of public figures?
Gov. ROMNEY: Well, it does say, in my view, that some people in the public sphere expect that once they've been elected to something, they're prominent, that they're--that they're above the law, that they won't get caught, that people will give them a break, that they--that they somehow can live a different morality. And the truth of the matter is, if there's a different morality they should live, it should be a high--a higher level of morality. And if they've been involved in any discretion in their life, they should cease that discretion by the time they become elected, and should try and set an example in the way they live, which is consistent with the things they say. And you know, that's hard for everyone. But certainly, expecting people to live a life consistent with the dignity of the office to which they're elected is something which the American people should be able to count on.
KUDLOW: All right. Let's move on. We've got a problem up here on Wall Street, as I'm sure you're aware. There's a certain credit crunch, a loan freezing going on. The subprime mortgage virus continues to spread. The commercial paper market, short-term loans to corporations, is virtually dysfunctional. What would a President Romney do about this?
Gov. ROMNEY: Well, first of all, the key actor right now is going to be the Fed. They're obviously taking a close review of what's occurring, and taking, I think, appropriate action to make sure that the credit crunch and the results of the subprime mortgage collapse do not spread too far throughout the economy. That's, of course, the great risk here, that what happened in one section of the credit economy will spread throughout the financial markets, and the Fed'll have an overall impact on the--on the national economy. That does not have to be the case. And I think the Fed is taking the kind of action you'd expect. And from the Secretary Paulson and from the president, you should expect a continuation of calming and perspective-type comment pointing out that, in fact, our economy is performing well, our level of unemployment is very, very low, our businesses are highly successful, profitability is high, and that there's no reason for alarm. But there is reason for action and for vigilance, and that's something which we're seeing from the Fed.
KUDLOW: Why do you suppose Fed chairman Ben Bernanke's taken so long to slash the key federal funds target rate? There's almost a Hamlet-like coinage about this. I'm sure you know that the majority of adjustable rate mortgages--and I'm not talking about the subprime issues, those are going down, there's nothing they can do. But you've got middle class people who are servicing their loans very nicely, thank you very much. They're money-good loans, they're money-good people, but they do suffer from ARMs, and they're tied to the federal funds rate either directly or indirectly through the primerate. If Mr. Bernanke slashed that rate by 50 or 75 basis points, a lot of Americans would breathe easier, probably would help confidence, probably help sustain the economy. What do you think's taking Mr. Bernanke so long?
Gov. ROMNEY: Well, I'm sure he wants to deliberate and determine exactly whether the action he would take would cause more harm than good. I expect that you can except of an independent agency that they will take action which will be designed to stabilize our economy and to keep this credit crunch from spreading. I think the action they took to date was appropriate, and I hope that you'll see action consistent with that to provide relief to the credit markets.
KUDLOW: All right. You know, a lot of stuff going around Congress and on the presidential campaign, we've heard a lot about using Fannie and Freddie as the possible liquidity additions. We've also heard of some punitive, very restrictive legislation about mortgage lenders, almost Sarbanes-Oxley-like regulations. And even regulation that would be so punitive they'd open up mortgage lenders to trial lawyers.
Question, sir: Is this the time for Washington activism? Is there a government solution for this mortgage loan issue?
Gov. ROMNEY: Well, you know, there are so many actors at fault in this subprime mortgage meltdown that it's hard to know where to begin. But the first thing you have to do if you're in Washington is make sure you do no harm. And this is a circumstance where I think one of the faults that exists, or existed, was that the mortgage lenders did not necessarily have the kind of information and warnings to give to consumers that they should have been giving, and that's probably Washington's fault. That there should not have been an--or there should have been an insistence on the kind of information and the risk assessment that homeowners needed to understand before they found themselves in the setting they're now--they're now locked in.
At the same time, I'm not going to be very, very concerned about investors, very sophisticated investors, and rating agencies who also may have made some errors in judgment as to the credit worthiness of instruments they were--they were rating or purchasing. That's not something for Washington to get in the middle of. But I do think there's a role to make sure that borrowers, if you will, homeowners and borrowers, understand what they're getting into. But let's not put in place a Sarbanes-Oxley. That's cost us enormously as an economy in some respects. Section 404 has probably hurt, particularly in the emerging markets sector of our economy, a lot more than it's helped.
KUDLOW: Senator Clinton wants a billion-dollar bailout fund to help individuals, and also up here on Wall Street, or actually out in California, well-known bond manager Bill Gross has suggested a refinance corporation, like the 1930s, or a resolution trust corporation, which helped with the S&L mess in the early '90s. You have any thought on those dollar bailouts? RTC, RFC...
Gov. ROMNEY: You know...
KUDLOW: ...is that what we need here?
Gov. ROMNEY: You know, your heart goes out to the people who signed up for loans that they now can't get--reach, or meet the obligations for. And so finding ways to soften the blow that they may feel is something which I'm certainly sympathetic with. But I have not seen a proposal at this stage which I'm ready to endorse. I don't--I don't think it's a good idea for the government to look to bail out investors and corporations that knowingly got into this kind of a setting, and I also think that Fannie Mae and Freddie Mac have accounting problems of their own that need to be sorted through before we have them take on a substantial additional, you know, risk portfolio. And so, you know, I think we have to act with some care and caution here.
KUDLOW: You know, a couple weeks ago, you were campaigning in New Hampshire, I believe Nassau in New Hampshire, a reporter asked you about Senator Clinton's economics. Here's what you said, quote, "That's out with Adam Smith and in with Karl Marx." It's an interesting quote, sir. Would you like to expand on it?
Gov. ROMNEY: Well, yeah, it's sort of tongue in cheek. But there's some truth to it, and that is that Hillary Clinton has said that we have always been a, quote, "on your own" society. And there's some truth to that. We're--we believe in individual initiative, we believe in incentives, we believe in the Adam Smith theory of how to build a strong economy. And she said it's time to end that and to move to an economy based on shared responsibility. She called it a "we're in it all together" society. Well, that doesn't sound as much like Adam Smith as it does like Karl Marx, and that's why I made the comment. It's a bit of a joke, but there's truth in it. And I don't think Hillary Clinton fundamentally understands how the private sector and our economy works. And I've spent 25 years in the private sector. I have some understanding of what causes jobs to come and leave, why businesses grow, why they shrink. And an "all in it together" society, with
higher taxes for corporations, which she also is calling for, that's a mistake. She says corporations need to pay their fair share, and that...
KUDLOW: Is it possible, just on this point, you have such a distinguished business record, one of the founders of Bain Capital, itself a private equity fund. It's done very well. Is it possible nowadays with these private equity funds and even hedge funds, kind of in, I won't say disrepair, but in the public view, the populist view, not very popular nowadays. I remember years ago when you first ran against Senator Ted Kennedy in 1994, he attacked you for being a party of--to restructuring and job losses. Does this private equity fund background of yours, as distinguished as it is, might that be a problem in the presidential campaign if you were the GOP nominee?
Gov. ROMNEY: You know, I think it will always be considered a plus to have somebody who is president of the United States who understands how the economy works. We're in a global competitive race with nations around the world to make sure that we have good jobs here and that we're the nation of growth and vitality. And frankly, we've got three people on the Democratic side who are all running for president, not one of whom has ever had any experience, really, leading or managing. And you know, the government of the United States is the largest enterprise in the world with millions of employees, trillions of dollars in revenue. These guys have never run a corner store, let alone run an enterprise. And it would be helpful in this country, particularly as we face the competitive array that we do, to have somebody that understands how jobs are created, why businesses decide to locate where they do, why they leave. And that's something I certainly understand.
KUDLOW: All right. Have you come out of the proposals coming out of the Democratic Congress to raise taxes on hedge funds, private equity funds, venture capital funds and so forth?
Gov. ROMNEY: Yeah. I don't think it's a good idea to raise taxes. My view is make the Bush tax cuts permanent. Kill the death tax once and for all. I also have a special savings rate for middle income and modest income individuals on their savings, which will be for interest dividends and capital gains. That tax rate is zero. I want people to be able to save their money and invest in America's economy, tax-free. So my policies are just the opposite of the Democrats. I want to lower taxes, I want to lower marginal rates across the board. I want to lower taxes for corporations. We're high relative to our competition around the world. We want to create jobs. The best thing we can do for the economic vitality of our citizens is make sure that we have vibrant and thriving employers and taxing them at such that they go to other nations is not the right way to go.
KUDLOW: Let's turn to the last one, quickly, sir. You've put out a major health care proposal. You're relying more on private markets, but a lot of people, including The Wall Street Journal editorial page, raised an eyebrow. As governor of Massachusetts, your health care plan imposed an insurance mandate on all individuals. That mandate apparently is not part of your new thinking. Why did you change your mind?
Gov. ROMNEY: Didn't change my mind at all, Larry. What I said is that I'm going to allow each state to create their own program and that I would like the federal government to give each state the flexibility to create the program they think is best for their state. In my state of Massachusetts, I think the individual mandate will work. Time will tell. Other states may want to copy it. I would--I'd applaud those that do or that--if they come up with something that they think is even better. The key is let the states make the decision. I would never have suggested that the federal government put in place a one-size fits all program for all states. States are so different and their populations are so different that we have to allow them to craft programs that work for their states. But I'm proud of what we did in Massachusetts. What we've proved is you can get insurance for all your citizens without a government takeover, without new taxes, without socialized medicine, and in my view, the course that I've laid out is the right course for America. It is not Hillary-care. It is a--it is a plan to get people insured and to have health insurance finally more affordable for Americans, but without having government play the heavy hand that she would suggest.
KUDLOW: Some people have said that these pay or play sanctions on businesses in the Massachusetts state health care plan in effect was a de facto tax hike. Is that a mistake that you made and you're not going to want to repeat that if you are elected president?
Gov. ROMNEY: Well, I didn't make that mistake. I vetoed it. It was overwritten by the legislature. It's a pretty modest fee. I think it's $22 a month. So it's a tiny fee relative to providing health insurance, but the legislature put it in. I don't think they're collected a dollar on it yet, so it's not a huge factor and actually the various industry groups in
Massachusetts were not vehemently opposed. They all supported the bill when it was completed. But I think that was an error in the bill and that's why I vetoed that provision.
KUDLOW: And last one on this, apparently, you have not included interstate health care insurance as part of your reform. A lot of people think interstate, you know, if you're in Massachusetts, you should be able to go to California or Arizona or wherever to buy the lowest cost health insurance that fits your needs. Why did you avoid that interstate reform?
Gov. ROMNEY: You know, it's something that we can consider down the road. I'd like to see states reform their own markets and what I'm a little fearful of is that if you say to people in New Jersey, for instance, `Hey, go ahead and buy a program from Nevada,' that the people in New Jersey won't get the benefit of the directed networks, if you will, that come by having an in-state solution, number one. And number two, if you start having people buying products from around the world or around the country, you know what's going to happen next. Washington's going to say we need to regulate this market. We're going to have a Washington insurance regulation authority. They're now going to impose rules on insurance around the country. I think we go down the slippery slope once we let Washington get into the middle of this. So I'd like to see the states reform their markets. That's what my plans says. States, get your markets to a competitive level and then I create federal incentives to do that. But if that didn't work, why we could always consider letting people buy from across state lines.
KUDLOW: Governor Romney, you're surging in the polls. I noticed, by the way, in the pay for play entry prediction market, you've now moved comfortably into second place behind Rudy Giuliani. You had a nice win in the Iowa straw poll. Others are pointing to your poll improvements in South Carolina and Illinois and elsewhere. I guess my last question is, can a businessman, can a former successful financier become president?
Gov. ROMNEY: I sure hope so. I'm working awful hard to make that the case, Larry. I really--I really think that people want to see that an individual has heart and passion, but they also understand the challenges that America faces. You understand this. We face some unprecedented challenges in this country, economic, competitive challenges, but also a challenge from global jihad and then we have our own domestic spending problems, our oil problems. We're using too much foreign oil. Look, we got real challenges in this country. People want somebody who's not just talk, but that actually gets the job done. And in the private sector, if all you can do is talk, you lose your job. I've learned in the toughest part of our world...
KUDLOW: All right.
Gov. ROMNEY: ...how to get the job done.
KUDLOW: Governor Mitt Romney, thank you for coming back on KUDLOW & COMPANY. All the best, sir.
Gov. ROMNEY: Thanks, Larry, good to be with you.
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