CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO INTERVIEWS OPPENHEIMER & CO EXECUTIVE DIRECTOR MEREDITH WHITNEY ON CNBC'S "CLOSING BELL" TODAY

WHEN: Today, Monday, December 1st at 3:43 PM ET

WHERE: CNBC's "Closing Bell"

Following is the unofficial transcript of a CNBC interview with Oppenheimer & Co. Executive Director Meredith Whitney, on CNBC'S "Closing Bell" today.

All references must be sourced to CNBC.

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MARIA BARTIROMO: I'M JOINED BY MEREDITH WHITNEY. SHE IS EXECUTIVE DIRECTOR OF EQUITY RESEARCH AT OPPENHEIMER. NICE TO SEE YOU AGAIN, MEREDITH. SO WE JUST HEARD HANK PAULSON TELL US WHERE HE THINKS WE ARE. LET ME GET YOUR TAKE ON THAT. WHERE ARE WE IN THE DOWN CYCLE? YOU HAVE BEEN AMONG THE FEW AND FIRST REALLY TO PREDICT HOW TOUGH THINGS WOULD GET.

MEREDITH WHITNEY: WELL, HANK PAULSON COULD CHANGE HIS MIND, RIGHT, LIKE HE'S DONE SO MANY TIMES. BUT WITH ALL DUE RESPECT TO HANK PAULSON, IT'S BEEN AN INCREDIBLY FLUID SITUATION. ONE THING'S CLEAR. AND I FOCUS A LOT ON THIS TODAY -- YOU HAVE HAD A MARKET THAT'S BEEN SO SHUT DOWN BY THE SHUTDOWN OF THE SECURITIZATION MARKET. SO THAT'S IMPACTED THE HOUSING MARKET. WHAT YOU HAVEN'T SEEN YET, DIGESTED BY THE MARKET, IS BANKS PULLING LINES FROM CONSUMERS. AND ACROSS THE BOARD YOU SAW THE BIG BANKS THAT COMMAND SO MUCH OF THE MARKET SHARE OF KEY PRODUCTS LIKE MORTGAGES AND CREDIT CARDS, START TO PULL LINES IN THE THIRD QUARTER. AND THAT'S GOING TO CONTINUE INTO THE FOURTH QUARTER AND THAT'S GOING TO CONTINUE INTO 2009. SO YOU'RE GOING TO START TO SEE THE CONSUMER REALLY GET STRAINED ON THEIR CREDIT CARD LINES. PEOPLE THINK THE NEXT SHOE TO DROP IS THE CREDIT CARD, CREDIT COSTS. MEANING THE CHARGES GOING UP. NO IT'S THE CREDIT CARD LINES BEING PULLED BY BANK LENDERS IN ANTICIPATION OF WORSENING CREDIT, FUNDING PROBLEMS AND THEN REGULATORY CHANGES ON THE HORIZON. SO JUST WHEN A CONSUMER'S LOSING THEIR JOB, THAT'S THEIR FIRST SOURCE OF CASH, THEIR FIRST SOURCE OF LIQUIDITY, THEN THEY LOSE THEIR SECOND BIG SOURCE OF LIQUIDITY WHICH IS THEIR CREDIT CARD LINE. 90% OF CREDIT CARD USERS REVOLVE ONE TIME A YEAR. 45% REVOLVE MANY TIMES A YEAR. YOU CUT THAT BACK AND YOU REALLY DO DAMAGE TO U.S. CONSUMER SPENDING.

BARTIROMO: THAT'S SOMETHING THAT MENTIONED IN YOUR OP ED TODAY IN THE FINANCIAL TIMES. LET ME ASK YOU, YOU THINK THEN, THIS GETS WORSE, NUMBER ONE, IS THAT SORT OF ANTICIPATION PRICED INTO THE MARKET?

WHITNEY: NO WAY. I THINK, FIRST OF ALL, FROM MY GROUP ESTIMATES ARE SO -- MY ESTIMATES ARE 30 TO 50% LOWER THAN STREET ESTIMATES. GOLDMAN SACH IS HAVING A CONFERENCE THIS WEEK. I WOULD EXPECT PEOPLE TO PRE-ANNOUNCE INTO THAT CONFERENCE -- YOU KNOW LOOK, YOU'RE WORKING OFF OF LOWER ASSET BASES, COMPRESSED MARGINS, AND HIGHER CREDIT CALLS, OF COURSE EARNINGS ARE GOING TO BE LOWER. I'LL TAKE AS EXAMPLE, LIKE J.P. MORGAN'S JAMIE DIMON. WHEN HE SPOKE AT THE MERRILL CONFERENCE, I THOUGHT HE SHOUTED FROM THE TOP OF THE MOUNTAIN THAT 2009 WAS GOING TO BE A TOUGH YEAR YET ESTIMATES REALLY DIDN'T COME DOWN.

THEY HAVE TO COME DOWN FOR THE GROUP. ON THAT BASIS, THE STOCKS ARE VERY, VERY EXPENSIVE.

BARTIROMO: I WANT TO ASK YOU ABOUT THE OP ED THAT YOU WROTE. BEFORE WE GET INTO THAT, YOU SAID ESTIMATES HAVE TO COME DOWN. GOLDMAN SACHS TODAY, THE ESTIMATES CAME DOWN. THAT STOCK IS REALLLY TAKING A HIT TODAY, AMONG OTHERS. GOING INTO THIS CONFERENCE NEXT WEEK, WHO'S GOING TO PREANNOUNCE IN YOUR VIEW? WHO ARE THE EASY ONES, THE LOW HANGING FRUIT THAT PREANNOUNCE?

WHITNEY: WELL, I DON'T KNOW IF THEY'LL NECESSARILY PREANNOUNCE, BUT THEY'RE GOING TO GUIDE A LOT LOWER. AND THAT COULD BE EVERYONE. I THINK J.P. MORGAN'S GOING TO SAY MORE OF THE SAME. I WOULD SAY EVERYTHING SINGLE FINANCIAL IS GOING TO COME OUT AND SAY WE'RE GOING TO KITCHEN SINK. WELLS FARGO, AS AN EXAMPLE, THEY'VE GOT ELEVEN CHARGES IN THE FOURTH QUARTER ASSOCIATED WITH THEIR WACHOVIA PORTFOLIO. BUT THEY'RE GOING TO PROBABLY KITCHEN SINK THE FOURTH QUARTER AS WELL TO TRY TO BOLSTER RESERVES. THE BANKS HAVE STOOD VERY UNDER RESERVED FROM A HISTORIC BASIS.

BARTIROMO: YOU WROTE THE OP-ED IN THE FINANCIAL TIMES TODAY AND YOU WENT THROUGH FOUR IDEAS FOR SOLUTIONS. YOU'VE BEEN LOOKING AT THIS FOR A LONG TIME. LET'S GO THROUGH SOME OF THOSE SOLUTIONS THAT NEED TO HAPPEN IN ORDER TO ACTUALLY PERHAPS SEE SOME KIND OF A TURN IN THE BOTTOM. NUMBER ONE, YOU SAY RE-REGIONALIZE BANKS. WHAT DOES THAT MEAN?

WHITNEY: WELL IT MEANS THAT OVER THE PAST 20 YEARS, AS THE FINANCIAL SYSTEM HAS MODERNIZED, SO MUCH OF THE BANKING SYSTEM, BIG PRODUCTS LIKE CREDIT CARDS AND MORTGAGES, HAVE CONSOLIDATED NATIONALLY. SO FIVE LENDERS CONTROL TWO-THIRDS OF THE MARKET AND MORTGAGES. FIVE LENDERS CONTROL TWO-THIRDS OF THE MARKET AND CREDIT CARDS. SO WHEN THOSE LENDERS DECIDE TO PULL BACK, EVERYONE FEELS THE PAIN.

BARTIROMO: TOO MUCH CONCENTRATION?

WHITNEY: TOO MUCH CONCENTRATION. IT USED TO BE YOUR LOCAL LENDER KNEW YOU. YOU KNEW YOUR CUSTOMER. AND SO YOU HAD LOCAL LENDING. YOU KNOW THE REGIONAL BANKS, THE SMALL REGIONAL BANKS HAVE CLEAN BALANCE SHEETS. ARE NOT IN THIS TROUBLE BUT THEY'VE LOST THIS SKILL SET EXPERTISE. THE PROCESSING/SERVICING OF UNDERRATING CREDIT CARDS. AND SO THEY'VE THE CAPITAL TO LEND OUT, THEY DON'T HAVE THE SKILL SET. WE'VE GOT TO GET MORE OF THE REGIONAL BANKS LENDING.

BARTIROMO: NUMBER TWO, YOU SAY IS EXPAND FDIC GUARANTEE FOR BANK DEBT?

WHITNEY: SO MANY OF THE BANKS ISSUED FDIC GUARANTEED BANK DEBT LAST WEEK. SOLD LIKE HOTCAKES. IT WAS A GREAT FUNDING VEHICLE FOR THE BANKS BUT IT EXPIRES IN JUNE. SO, BANKS NEED TO KNOW THEY HAVE A LONGER RUNWAY OF ACCESSING CHEAP CAPITAL.

BARTIROMO: SO THAT THEY DON'T HOARD THEIR CASH?

WHITNEY: BECAUSE RIGHT NOW THEY ARE HOARDING -- ANY SEMI-CONCIOUS BANK MANAGER IS HOARDING THEIR CASH AND LIQUIDITY.

BARTIROMO: NUMBER THREE IS DELAY ACCOUNTING RULE IMPLEMENTATION. THE ACCOUNTING RULE CHANGE.

WHITNEY: YEAH. I THINK FAS 140 IS A HUGE MIRAGE. IT HAD GOOD INTENTIONS, WHICH IS BRING OFF-BALANCE SHEET ASSETS ON BALANCE SHEETS SO FOR GREATER TRANSPARENCY. BUT ONE OF THE BIG ASSETS, THE EASIEST ASSET THAT COMES BACK ON BALANCE SHEET IS CREDIT CARD ASSETS. IT'S MORE EXPENSIVE FOR BANKS TO RESERVE AGAINST THIS. BANKS CAN'T AFFORD IT AND PLUS THERE'S BETTER GRANULARITY OF TRANSPARENCY OFF-BALANCE SHEET AND WHAT'S CALLED MASTER TRUST CREDIT REPORTS.

BARTIROMO: INTERESTING, BETTER CLARITY OFF BALANCE SHEET. AMEND PROPOSAL TO UNFAIR AND DECEPTIVE LENDING PRACTICES.

WHITNEY: THIS IS A VERY NERDY, CREDIT CARD SPECIFIC BILL WHICH HAS A LOT OF GOOD INTENTIONS LIKE, GIVE A CUSTOMER A LONGER PERIOD OF TIME TO PAY THEIR CREDIT CARD BILL. DON'T DO ABUSIVE PRACTICES LIKE TEASER RATES WHERE I LURE YOU IN WITH ONE RATE AND THEN CHARGE YOU ANOTHER FOR YOUR BALANCE. BUT THERE'S ONE BUT VERY VERY DANGEROUS CHANGE IN HERE, WHICH IS BY THE WAY ALREADY BEEN ACCEPTED BY THE THREE REGULATORY BODIES THAT COVER THE CREDIT CARDS. SO THIS IS GOING TO GO INTO EFFECT AS IS AND BE DANGEROUS, WHICH IS, IT ELIMINATES, DRAMATICALLY REDUCES, A LENDER'S ABILITY TO REPRICE AN UNSECURED CREDIT CARD LOAN. ALL THE BANKS THAT I SPEAK TO, ALL THE BANKS WHO SAID THIS WILL END IN UNINTENDED CONSEQUENCES, AND I THINK THE BANKS PULLING $2 TRILLION AT LEAST OF CREDIT CARD LIQUIDITY FROM THE SYSTEM IS VERY DANGEROUS FOR THE U.S. ECONOMY.

BARTIROMO: LET ME SWITCH GEARS AND GET YOUR TAKE ON WHAT HAS HAPPENED OVER THE PAST TWO WEEKS. WE SAW THE GOVERNMENT COME IN, SUPPORT CITIGROUP, THAT SACKED RALLIES OFF THE LOW OF $3 AND CHANGE. NOW BACK UP TO CLOSE TO 7 OR UNDER 7, REALLY. WHAT DO YOU THINK ABOUT THE CITIGROUP PLAN AND DO YOU THINK THAT THAT STOCK HAS SEEN THE WORST?

WHITNEY: I DON'T THINK THE STOCK HAS SEEN THE WORST. I THINK THAT THE PLAN FOR EQUITY SHAREHOLDERS WAS SO GENEROUS AND THEN THE CONVERSE OF THAT IS-- WAS SUCH AN AFFRONT TO U.S. TAXPAYERS, THAT I DIDN'T WANT TO COMPLAIN ABOUT THINGS ANY MORE. I JUST REALLY WANTED THE MAIN MOTIVATIONS OF WHY I WROTE THIS OP-ED PIECE TO TRY TO PROVIDE SOLUTIONS BECAUSE BEING NEGATIVE ONLY GETS YOU SO FAR. CLEARLY THE GOVERNMENT APPRECIATES THAT THESE BANKS NEED MORE CAPITAL. AND THEY CAN'T RE-CAPITALIZE ALL THESE BANKS THEMSELVES. SO THEY LEFT THE WINDOW OPEN FOR EQUITY BECAUSE THEY KNOW THAT THE PRIVATE INVESTOR, YOU AND ME, HAVE TO BUY SHARES OF THESE COMPANIES TO ULTIMATELY RECAPITALIZE THIS SYSTEM. SO BANKS LIKE CITI AND OTHER -- THE BIG BANKS, CAN'T FAIL BECAUSE LOOK, YOU'D WIPE OUT MOST OF THE INSURANCE DEPOSIT THAT COVERS THEIR DEPOSITS. IT WOULD BE A DISASTER FOR THE SYSTEM. CERTAINLY FOR CONFIDENCE. SO YOU KEEP THEM ON WHAT I WOULD DESCRIBE AS A METHODONE CLINIC TYPE OF REHABILITATION. BUT I STILL THE GOVERNMENT SHOULD HAVE GOTTEN MUCH MORE FOR ITS MONEY. I UNDERSTAND WHY THEY DID IT THIS WAY, BUT THERE'S NO GUARANTEE THAT INVESTORS ARE GOING TO COME BACK AND RECAPITALIZE CITI WITH THEIR OWN SHAREHOLDERS.

BARTIROMO: DO YOU THINK THE FIRM IS GOING TO EVENTUALLY NEED MORE CAPITAL AND AS A RESULT THE STOCK TRADES DOWN BECAUSE OF THIS ACKNOWLEDGEMENT BY THE MARKET THAT WE'RE NOT DONE HERE?

WHITNEY: EVERY SINGLE BANK THAT I COVER, PARTICULARLY ALL THE LARGE BANKS, WILL NEED MORE CAPITAL BECAUSE THIS STILL IS JUST PLUGGING HOLES. ANY OF THE EQUITY CAPITALS NOT GOING TO CREATE NEW GROWTH OR -- ALL OF THE BANKS ARE CONTRACTING THEIR BALANCE SHEET. SO THERE'S NOT A DOUBT IN MY MIND THAT ALL OF THESE BANKS ARE GOING TO NEED MORE CAPITAL.

BARTIROMO: FINAL QUESTION, AS WE APPROACH THE CLOSE AND THE MARKET IS DOWN 600 POINTS. IS THAT WHAT'S BEHIND THIS CONTINUATION OF A SELLOFF IN EQUITIES? WHEN WE FIRST TALKED LAST WEEK, WHEN WE WERE DECIDING WHEN YOU WERE AVAILABLE TO COME ON THE PROGRAM, I THOUGHT, MAYBE AT SOME POINT SHE'S GOING TO MAKE AN AGGRESSIVE CALL AND TURN POSITIVE HERE. WHAT IS IT GOING TO TAKE FOR TO YOU TURN POSITIVE?

WHITNEY: IT'S EASY. WHEN YOU SEE LIQUIDITY COME BACK IN THE SYSTEM AND THE DENOMINATOR EXPAND, MEANING BANKS START TO LEND AGAIN, MONEY GOING TOWARDS GROWTH, YOU SEE THAT THE SYSTEM IS SHRINKING, MORE MONEY COMING OUT OF THE SYSTEM. IT'S LIKE IF YOU TAKE OIL AND GAS OUT OF AN ENGINE IT STOPS. LIQUIDITY IS COMING OUT OF THE ENGINE, AS AND A RESULT, THESE BANKS HAVE TO SHRINK TO GROW. SO YOU'RE GOING TO HAVE TO SEE -- AN EXAMPLE WOULD BE IN 1998 WHEN INVESTORS CAME BACK TO THE SECURITIZATION MARKET, AND THE BOND MARKET IN 2002, 2003, THE SYSTEM REALLY GOT GLOBALIZED AND PETRO DOLLAR MONEY GREW HAND OVER FIST. SO YOU SAW LIQUIDITY CAME BACK INTO THE SYSTEM. I DON'T KNOW WHAT IT'S GOING TO BE BUT THE SYSTEM IS SHRINKING NOW AND ONCE IT TURNS THE CORNER-- THAT WILL PRECEDE NUMBERS IN THE COMPANIES WILL PARTICIPATE. I HAVEN'T MISSED A BOTTOM YET. SO I THINK THAT THERE'S TIME HERE. I CAN'T WAIT UNTIL WE GET THERE.

BARTIROMO: PETRO DOLLARS ARE ALSO SHRINKING. YOUR SELL RIGHT NOW, THE BIGGEST SELL IN THE FINANCIAL SERVICES GROUP WOULD BE?

WHITNEY: WELLS FARGO.

BARTIROMO: WELLS FARGO. MEREDITH GREAT TO HAVE YOU ON THE PROGRAM.





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