CNBC Exclusive: CNBC's Jim Cramer Interviews Senator Hillary Clinton on "Mad Money w/Jim Cramer" (Transcript Included)

Charlie Neibergall

Secretary of State Hillary Rodham Clinton (AP Photo/Charlie Neibergall)

When: Wednesday, April 2nd at 6PM ET
Where: CNBC's "Mad Money w/Jim Cramer"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Senator Clinton. During the interview, Senator Clinton discusses her new plan unveiled today on keeping jobs in the U.S. and her thoughts on Paulson's plan, among other topics.

All references must be sourced to CNBC's "Mad Money w/Jim Cramer"

JIM CRAMER, host: Senator Clinton, welcome back to MAD MONEY.

Senator HILLARY CLINTON: Thank you, Jim, it's great to be back with you.

CRAMER: Excellent. What can--what can the Federal government do to promote jobs when it costs so much to hire new people, and companies, especially public companies, are concerned that there will not be a return on investment given the state of the economy right now?

Sen. CLINTON: You know, Jim, that's exactly the question we tackled today at a job summit that I held in Pittsburgh. I want to make the research and development tax credit permanent. I want to increase it. In fact, I'd like to double it. I want to use the successful example of the new market tax credit and have one that is focused on green jobs and make sure that, you know, we're really looking at the industries that we can grow and incentivize. I think it's important that we quit subsidizing the companies of the past or the companies that are doing really well without our money, like the oil companies, and, instead, we shift that money into clean, renewable energy. I'd like to see us do a bonding program to try to rebuild America, put thousands of people to work. I'm big on trying to insource jobs instead of outsource jobs. How do we provide incentives like getting everything out of our tax codes that encourages somebody to move a job overseas...

CRAMER: Right.

Sen. CLINTON: ...and instead shift those, you know, incentives and those tax dollars right back here at home.

CRAMER: OK. Now you're in Pennsylvania. Pennsylvania happens to be home to the largest untapped unnatural gas field in this country, a clean fuel, the Marcellus Shale. When I hear your comments about oil and gas, I'm wondering whether you are not crimping the power of very good natural gas drillers to spend money in Pennsylvania and to put people to work in high paying oil and gas jobs.

Sen. CLINTON: Well, not at all. You know, I supported increased drilling in the Gulf of Mexico. I support, where appropriate, gas and oil. Now, obviously, we have to try to figure out how to improve our technology so that we minimize the damage that is often a consequence of drilling. I am a big supporter of moving rapidly to try to figure out how we're going to develop clean coal technology, carbon sequestration and storage. There's a lot that we could be doing, but Jim, we're not doing any of it on a big enough scale. You know, we're not taking the hard look that I'd like to see us do to develop a strategic approach to energy, to new jobs, to our infrastructure, to the health and bioscience fields. You know, we are losing ground every day. And you know, you've got a lot of businesses that, you know, you follow.

CRAMER: Right.

Sen. CLINTON: And if you look at the balance sheet in terms of pluses and minuses do we stay and invest here, we don't have a permanent R&D tax credit. We're always, you know, trying to rush around, figuring whether we're going to extend it for another year. That is nuts. If we're serious about creating jobs and having a competitive economy with a strong middle class for the future, then we've got to have leadership in the public and the private sector that comes together and says, `What do we need to do? Let's get about doing it. Let's be smart about it.'

CRAMER: OK.

Sen. CLINTON: But for goodness sakes, let's get under way.

CRAMER: Right. Now you are campaigning in Pennsylvania where nearly one-sixth of all manufacturing workers depend on exports. Why risk tinkering with NAFTA when Pennsylvania job growth depends on NAFTA?

Sen. CLINTON: Well, I think that we have some advantages that we want to continue when it comes to NAFTA and other trade agreements, but we also have to take a hard look at what we're going to do about those sectors of the economy and regions of the country, Pennsylvania, part of upstate New York that I represent, Ohio, Michigan, we know them, are disadvantaged. Now, it's not all NAFTA, let's be serious. But it is the failure to have core labor and environmental standards. And the reason that's important, Jim, is because we've got to lead the world, not follow. And if we begin to focus on labor and environmental standards, we're going to have to deal with China, for example, with scandals or problems like we see with the production of heparin. Why do we have contaminated heparin that has caused the death of Americans? Because neither the Chinese government nor the American companies had to live up to any standards. So this is not only about saving jobs, although I think that we'll get some benefit from that.

CRAMER: Right.

Sen. CLINTON: But this is about raising the standards of the global economy so that when you're in the hospital with somebody who you care about who's got a blood clot, and they're on some, you know, medicine like heparin, we know that there's a supply chain that is up to our standards.

CRAMER: But aren't you concerned, President Clinton brought in NAFTA, which then created--there's a dramatic increase, 32 percent of Pennsylvania's top two trading partners, Canada and Mexico, all since NAFTA. I hear what you're saying. I understand the heparin issue, I understand the safety issues, but you're talking about 233,000 workers in Pennsylvania who work for foreign companies. You are, I think, slipping down the slippery road of protectionism. We would end those high-paying jobs if we got protectionist in this country.

Sen. CLINTON: Well, we certainly don't want to end any high-paying jobs, but even a distinguished economist like Paul Samuelson has said that we ought to be smart about what we think comparative advantage means in the 21st century. I'll give you a quick example. I commissioned a study along the New York/Canadian border because I kept hearing from my farmers and my small businesses, they were having trouble getting their products into Canada. Why? Because there were hidden objections and obstacles. You know, everybody looks at the treaty known as NAFTA and says, `Well, this should work.' The problem is the word doesn't sometimes filter down.

CRAMER: OK.

Sen. CLINTON: We've got a problem with South Korea and autos. You know, we entered into a memorandum of understanding in the mid '90s. They were going to open up their markets. They still haven't done it. I'm tired of being a patsy. I believe in free trade and competition. But, you know, "Fool me once, shame on you; fool me twice, shame on me." We're got to get starting to be smarter and more strategic. I want the world's economy to increase and expand, but I want Americans to understand what it's going to take for us to be competitive and not be disadvantaged from the get-go.

CRAMER: You mentioned some trading partners that have been, I'd say, less than ideal, and yet here we are going hat in hand to China for sovereign funds, to Dubai for sovereign funds, to many Southeast Asians for sovereign funds. Why don't we have a sovereign fund in the United States?

Sen. CLINTON: Well, you know, Jim, this is a great question, but why are we going hat in hand? Well, in large measure, because we've so messed up the economy and the federal budget in the last seven years. You know, now, I mean, I know enough to realize that having a balanced budget and a surplus is not the end-all and the be-all, but it does give you some control over your fiscal destiny, which we have totally abdicated. How do you get tough on your banker? How do you deal with sovereign wealth funds that are unregulated giant pools of money? The United States is being put in a disadvantageous position because of bad fiscal policy, because of inadequate monetary policy, because of too little, too late to deal with the home foreclosure crisis, trying to catch up on the credit crunch. I mean, what is going on here? We're supposed to be the primary engine of economic growth and shared prosperity in the world. Our house is in total disarray. So yeah, we're going hat in hand to sovereign wealth funds...

CRAMER: OK.

Sen. CLINTON: ...to bail out our businesses, and we're going hat in hand every single day to governments to keep us from going into bankruptcy as a nation. We've got to get this straightened out.

CRAMER: Well--OK. Let's talk specifics. Why has Congress not moved to use the FHA to assist homeowners to, right, refinance their loans? How about an FHA guaranteed program for the poor and for bad neighborhoods?

Sen. CLINTON: I'll tell you what, that's exactly what I have proposed, and maybe we'll get some movement. Both Senator Dodd and Congressman Barney Frank have been in the forefront of this. We ought to convince the Republicans and the administration to understand that they just can't ignore or slow walk this crisis any longer. Because, as you've talked about on many occasions, you know, when you've got a foreclosed home or a vacant house in a neighborhood, you're going to undermine housing prices. You're going to undermine confidence. Home values are going to drop. You know, we can't keep treating the symptoms. Thirty billion dollars for Bear Stearns. Well, what about the $30 billion to try to prop up the housing markets? Keep people in their homes? Get back to restoring confidence so people will want to buy homes and refinance them again. So when you look at the proposal that's been made, I'm all for going to an auction, but with an FHA guarantee, a back-up. We did it before, some years ago, with the, you know, the home loan corporation.

CRAMER: Right.

Sen. CLINTON: We need to be looking at something like that again.

CRAMER: Right. We're in emergency times here. How about waiving the penalties and demands of repayment with interest of those who use their 401k or their IRA to fund home purchases or to stay in their homes?

Sen. CLINTON: I would open that up. You know, I have a proposal for an American Retirement Account, which is an universal account, like a 401(k) and you can use it for much broader range of purposes without penalty because what we want to do is incentivize savings and when people save, especially if it's tax-free savings, we want to give them a chance to make what are reasonable, you know, decisions, like buying a home, sending a kid to college. So let's be smart again about how we try to get Americans moving back toward wealth creation. And if we lock it up and we say you can't spend it without a penalty, I think that works against an individual. It also works against the larger economy.

CRAMER: OK. You mentioned Bear Stearns. Would you have let Bear Stearns go? They were a bad actor. They were highly overleveraged. This was an organization that is considered to be, I think, the hazard of the system. Would you have just let them disappear?

Sen. CLINTON: You know, I'm not going to second-guess the Fed because I, obviously, don't have privy to all the information, and my understanding is it was more about the ripple effect, the cascade of, you know, disaster that would've flown from that. And so, you know, action probably did have to be taken. But I think it's fair to say that we're still just looking at one end of this problem. We're not looking at the deeper problems, the failure of oversight, the, you know, the real dismissal of warnings like the ones I made a year ago.

CRAMER: Right.

Sen. CLINTON: That, you know, that we were heading toward a lot of trouble. So there's enough blame to go around. Everybody has contributed to this. Let's not compound it. Let's start to take some action, both by the regulatory authorities, the administration and the Congress. Let's show that we're a grown-up country and we can take care of business again. That's what I think people are looking for.

CRAMER: Right. Senator...

Sen. CLINTON: Instead of this, you know, downward drift.

CRAMER: How can you reconcile the diminution of the SEC under Treasury Secretary Paulson's new regulatory scheme and the ascension of the Federal Reserve's role in regulation given the fact that the stated purpose of the SEC is to regulate, and Fed Chairman Bernanke has no desire to regulate?

Sen. CLINTON: Well, bingo. I am with you all the way. I think if we're going to begin to cope with the new challenges to a regulatory framework in this new global economy and it goes beyond Bear Stearns.

CRAMER: Right.

Sen. CLINTON: It even goes beyond this housing crisis. I mean, we just have to figure out that we've got to regulate our economy and try to figure out a global framework and we need institutions like the SEC to be strengthened, not weakened. We've got to look to empower and give teeth to enforcement mechanisms, and we've got to give terms of office and real suport for professionals who are put into those positions so they're not subject to the political winds and whims.

CRAMER: Oh, OK.

Sen. CLINTON: I think the Fed does need some additional regulatory authority. If they're going to open the discount window to noncommercial banks, which they have done, then they're going to have to provide more oversight.

CRAMER: Good point.

Sen. CLINTON: So there are some different roles here that have to be looked at.

CRAMER: Why was the government, the Federal government, the president, so slow to realize that we had a major cancerous problem on our hands with the economy and now with home mortgages, which then led to a vast wave or foreclosures, a big drop in home values, massive losses to financial insitutions at the same time that Ben Bernanke, Hank Paulson and President Bush all assured that the fundamentals were sound?

Sen. CLINTON: I know, because after every speech I made criticizing them, that's what I would hear that I was, you know, alarmist, and there was nothing wrong, you know, `We're fine.'

CRAMER: That was their rap. Anybody--I did it. They just told me, `Listen, you're an alarmist flake.' I don't know. Those who of us who did it turned out to be darn right.

Sen. CLINTON: That's right. Well, we were pretty prophetic. Look, I think, Jim, the problem was ideological, number one.

CRAMER: Right. They want laissez-faire.

Sen. CLINTON: A lot of people...

CRAMER: It's 1847 all over again.

Sen. CLINTON: It's laissez-faire, that's right. You know, we're just not going to interfere, let the market work its magic. Well, we haven't done that since the Great Depression. You know, we haven't done that since Teddy Roosevelt started busting trusts, and thank God we haven't. But now we're in a new world where we've got to have much more oversight and transparency in order to figure out how we're going to navigate these kind of choppy dangerous waters. So it was ideological. It was also, I think, a false sense of security that the existing processes understood what they were doing. But the fact is, as you know so well, nobody understands these new financial instruments. I mean, maybe there's three guys in a basement somewhere.

CRAMER: No, I've checked on those three guys. I know them. They're clueless, too.

Sen. CLINTON: They don't know. They don't have any clue.

CRAMER: Let me ask you. We set up Fannie Mae in this country, it wasn't a Democrat organization or a Republican, but we set it up so when we have a housing emergency, it's able to step in. Would you continue the administrative policy of keeping the jack boot...(unintelligible)...on Fannie Mae's neck, or would you let Fannie Mae play a role, even though they have bankrolled some not great loans?

Sen. CLINTON: Well, look, I think, again, it's an ideological aversion to anything that's quasi-governmental.

CRAMER: Yeah. It is.

Sen. CLINTON: And that's nuts in my view. So yeah, I would look for a more robust role, but I also would, you know, point some fingers at Fannie Mae, as you just did in what you said. You know, some of their financial mismanagement, the exorbitant salaries paid to people. Come on. I mean, it was practically a guaranteed program. That's not the kind of entrepreneurial energy that creates great wealth that should be rewarding managers...

CRAMER: Right.

Sen. CLINTON: ...for doing a job that, you know, frankly is not rocket science. So there's been all kinds of problems that are going to have to be addressed. We--we need a couple of things. Number one, we do need a new oversight regulatory framework, but it's got to be not just American, it's got to be international because we're so interconnected now. Number two, we have got to have a different attitude from both the public and the private sector about what it is we're trying to do. We're always closing the barn door after the horse has left.

CRAMER: Right.

Sen. CLINTON: You know, it's not going to kill our markets if we ask tough questions, if we call people in and you know, grill them, if we have an aggressive SEC. That is not going to kill our markets, that is going to save the golden goose. I don't see how many more of these problems we're going to have to cope our way out of if we don't begin to be pre-emptive and pro-active instead of waiting for the...(unintelligible).

CRAMER: As a wolf shearer, as a wolf shearer, I hear and I say, `Well, wait a second. A Democrat in the White House, maybe you're going to kill my profits. Maybe it'll be bad for Wall Street to have a Democrat.'

Sen. CLINTON: Well, all I would say is ask what happened during the 1990s. You know, best thing that happened to the economy was a Democratic president who actually understood something about economics, who realized you've got to find a balance.

CRAMER: Right.

Sen. CLINTON: People, as I recall, did very, very well.

CRAMER: Yeah. We made a fortune in the '90s. It was darn good.

Sen. CLINTON: One hundred percent.

CRAMER: We didn't get a lot after NAFTA, though.

Sen. CLINTON: Not--but it wasn't--but it wasn't just you guys who did it. The whole economy lifted--was lifted up.

CRAMER: I agree.

Sen. CLINTON: We had 22.7 million new jobs, and it wasn't just middle class people who thankfully had rising incomes, poor people got lifted out of poverty. That's the way America's supposed to work.

CRAMER: Totally true.

Sen. CLINTON: I mean, I think you and I are such believers in the American dream because we know what it can mean in our lives and the lives of people we have seen. You know, but it seems like something happened. People get theirs and all of a sudden they forget where it came from. We have this great system in America, and it has to be self-correcting. It has to be constantly held up to scrutiny because human nature being what it is, everybody's going to push the envelope. You don't think everybody's going to try to get as much as they can? That's who we are as human beings. That's why you need balance.

CRAMER: OK.

Sen. CLINTON: You need self-regulation and corrective mechanisms within the market and you need a government that is a good partner to make sure we don't kill the golden goose.

CRAMER: Senator Hillary Clinton, thank you so much for coming back to MAD MONEY.

Sen. CLINTON: It's always fun. Thanks a lot, Jim.

CRAMER: Thank you. Senator Hillary Clinton coming from her Pennsylvania portion of her campaign. We'll have more later. Senator Clinton, thank you so much.

Sen. CLINTON: Jim, it's great to talk to you.

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