CNBC EXCLUSIVE: CNBC TRANSCRIPT:CNBC'S MARIA BARTIROMO INTERVIEWS MEREDITH WHITNEY TODAY ON "CLOSING BELL"
WHEN: Today, Thursday, February 19th
WHERE: CNBC'S "CLOSING BELL" 3-5PM ET
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Meredith Whitney today on CNBC's "Closing Bell" 3PM-5PM ET.
All references must be source to CNBC's Maria Bartiromo.
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MARIA BARTIROMO: OUR NEXT GUEST HAS BEEN ON POINT WITH HER OUTLOOK FOR FINANCIALS. JOINING US NOW IN ANOTHER CNBC EXCLUSIVE, NOW RUNNING HER OWN FIRM, MEREDITH WHITNEY, FOUNDER & CEO, MEREDITH WHITNEY ADVISORY GROUP. MEREDITH, NICE TO HAVE YOU ON THE PROGRAM. CONGRATULATIONS ON LEAVING OPPENHEIMER, STARTING YOUR OWN FIRM.
MEREDITH WHITNEY: IT'S A COMPLETELY DIFFERENT WORLD TO HAVE YOUR OWN FIRM AND IT'S A DREAM COME TRUE. I'M SO EXCITED ABOUT IT.
BARTIROMO: I'M SURE YOU ARE. LET ME ASK YOU ON YOUR VIEWS OF WHERE WE ARE RIGHT NOW BEFORE WE TALK ABOUT THE FIRM. YOU HAVE BEEN SO RIGHT IN THIS MARKET. DO YOU THINK THE WORST IS AHEAD? WHERE ARE WE IN THIS DOWN CYCLE AS FAR AS BANKS ARE CONCERNED?
WHITNEY: WELL WHAT'S HAPPENED IN A LOT OF THE PRIOR WEEKS COMING INTO THIS IS - AND I LOVE THIS ABOUT THE HUMAN SPIRIT - PEOPLE HAVE BEEN HOPEFUL A GOVERNMENT PLAN CAN REALLY MAKE A DIFFERENCE. AND THE REALITY IS THAT YOU'VE GOT YEARS AND YEARS WORTH OF LOANS UNDERWRITTEN WITH FAULTY ASSUMPTIONS. THOSE ARE CAR LOANS, CREDIT CARD LOANS, OBVIOUSLY MORTGAGE LOANS AND THOSE HAVE TO WORK OUT THROUGH THE SYSTEM. AND THERE HAS TO BE A GROUP OF CONSUMERS THAT LOSE CREDIT. A LOT OF CONSUMERS WILL LOSE ACCESS TO SOME OF THEIR CREDIT. SO AS THE DENOMINATOR SHRINKS IT'S VERY PAINFUL FOR THE CONSUMER. IT'S VERY PAINFUL FOR BUSINESSES AND IT'S PAINFUL FOR THE BANKS THAT HAVE LENT TO ALL THESE GUYS. IT HAPPENED THE BIG BANKS THAT GO DOWN EVERY DAY BECAUSE THE CONCENTRATION OF LOANS IS SO CONCENTRATED WITH THOSE GUYS.
BARTIROMO: WHAT DID YOU THINK ABOUT THE TREASURY'S PLAN TO HELP THE AILING BANKS? I READ YOUR RESEARCH AND YOU SAID TELL ME MORE MR. GEITHNER. A LOT OF PEOPLE SAID IT LACKED SOME DETAILS. WHAT IS YOUR VIEW OF THE PLAN AS WE KNOW IT TODAY?
WHITNEY: I THINK THAT THERE ARE SO MANY PEOPLE WHO ARE SO HOPEFUL ABOUT THIS ADMINISTRATION REALLY MAKING A DIFFERENCE AND PUT SO MUCH FAITH INTO THE ADMINISTRATION. WHAT I THOUGHT WAS A MISTAKE OF THE PROPOSAL WAS IT UNDERESTIMATED THE INTELLIGENCE OF THE AMERICAN PEOPLE BECAUSE IT WAS BUILT UP OBVIOUSLY TO BE THIS GREAT SAVING GRACE
BARTIROMO: SOMEBODY SET THOSE EXPECTATIONS.
WHITNEY: SOMEBODY SET THOSE EXPECTATIONS. AND THEN THERE'S NOTHING BEHIND IT. I THINK WE WILL GET TO THE BOTTOM WHEN WE ADDRESS ALL OF THE ISSUES THAT ARE OUTSTANDING. STILL SOME OF THE OBVIOUS ISSUES HAVEN'T EVEN YET BEEN ADDRESSED AND THAT'S WHAT MAKES ME STILL NERVOUS. THERE ARE SO MANY CONSTRUCTIVE THINGS THAT I WOULD LOVE TO SEE GOING ON BUT WE'RE STILL DEALING WITH THE SAME ISSUES OVER AND OVER AGAIN. WHICH IS PRIMARILY THROWING GOOD MONEY AFTER BAD. THE MORTGAGE FORECLOSURE HOLIDAY, THE MORTGAGE MODIFICATION. THAT PRESSURES BANK CAPITAL. THAT DOESN'T DO A GREAT JOB PUTTING MORE LIQUIDITY INTO THE SYSTEM. AND WHAT WE NEED TO DO IS AT LEAST STOP THE DENOMINATOR FROM GETTING SMALLER. SO AT LEAST STOP CREDIT FROM DECLINING. IF WE JUST MODERATE THE SUPPLY OF CREDIT THAT WILL MAKE A DIFFERENCE.
BARTIROMO: SO WHAT WOULD BE THE BEST WAY TO RE-CAPITALIZE THE BANKS AND GET THAT CONFIDENCE BACK. IS IT BUYING THOSE BAD ASSETS FROM THE BANKS, IS IT THE GOVERNMENT BUYING STAKES - I'M GUESSING YOU DON'T WANT TO SEE NATIONALIZATION
WHITNEY: I DON'T WANT TO SEE NATIONALIZATION. THERE ARE SOME BACK WHICH DIDN'T GET INTO A LOT OF THE MESS AND WANT TO LOAN. THE PROBLEM IS THEY'VE GOT SUCH A SMALL MARKET SHARE OF THE CONSUMER PIE, OF THE CORPORATE PIE, THAT FOR THE GOVERNMENT TO SUPERCHARGE THE REGIONALS AND ALLOW THEM TO HAVE THE CAPITAL TO ACTUALLY ACQUIRE OTHER BANKS AND MAKE LOANS, THAT WOULD BE A FABULOUS IDEA. IT'S A SMALL STEP TOWARD PROVIDING LIQUIDITY IN THE SYSTEM. BUT AGAIN, THE BIGGEST PROBLEM, IS THE MARKET SHARE FOR ALMOST ALL LOANS IS SO CONCENTRATED AMONGST THE CITIS, THE JP MORGANS, BANK OF AMERICA, WELLS FARGO, AND THE LIKE THAT YOU'VE GOT TO DISAGGREGATE THAT MARKET SHARE CONCENTRATION AND THAT WOULD BE PUTTING GOOD MONEY - NONPUNITIVE CAPITOL INTO THESE BANKS BECAUSE THE TARP MONEY THAT HAS GONE INTO BANKS SO FAR HAS BEEN HIGHLY PUNITIVE CAPITOL, TO GET THE SYSTEM MOVING. AND THEN YOU START TO SEE M&A ACTIVITY. I THINK YOU WOULD RELIEVE THE BURDON OF ALL OF THESE BIG BANKS THAT DON'T HAVE THE EQUIPMENT TO REALLY GROW THEIR LOAN BASE ON A NET BASIS. AND YOU'D SEE HEALTH COME BACK INTO THE MARKET. BUT I HAVEN'T HEARD ANYTHING LIKE THAT ADDRESSED IN DC.
BARTIROMO: WE'RE LOOKING AT SOME OF THESE CHARTS POF THE BANKS TODAY. WELLS FARGO AT $12.17 A SHARE. CITIGROUP AT $2.53. WOULD YOU BE A SELLER OF THESE STOCKS AT THESE LEVELS? IS THERE A VALUE TO BE FOUND TO THESE COMPANIES AT THESE LEVELS?
WHITNEY: IT'S NO SURPRISE TO YOU I WOULD BE A SELLER OF CITIGROUP HERE. A LOT OF THESE BANKS DON'T MAKE MONEY, AND CITI I THINK LOSES A LOT OF MONEY CONTINUING. RIGHT? SO THE GOVERNMENT'S GOING TO HAVE TO KEEP PROVIDING CAPITAL.
I DON'T KNOW THAT THE GOVERNMENT WILL PROVIDE ANY MORE CAPITAL TO CITI. BUT AS AN EXISTING SHAREHOLDER YOU'RE ALL BUT WIPED OUT. SO I THINK THERE'S REAL RISK IN OWNING NAMES LIKE CITI. THE EARNINGS POWER FOR A LOT OF THESE BANKS WITH LEGACY POSITIONS AND CONSUMER LOANS THAT WERE UNDERWRITTEN WITH FALSE ASSUMPTIONS DIMINISHES ON A DAILY BASIS BECAUSE THE CONSUMER GETS INCREASINGLY STRAPPED. A LOT OF THESE BANKS HAVE ONE SET OF EXPECTATIONS AND THE MARKET IS DEVOLVING. SO FOR AN EXAMPLE, A TROUGH HOUSE PRICE EXPECTATION THAT STARTED LET'S SAY SUMMER OF 2007 AT 10% HAS NOW GONE UP TO 30%. WELL, IT LOOKS LIKE PEAK TO TROUGH HOME PRICES ARE GOING TO BE CLOSER TO 40%. AND SO THEY HAVE TO KEEP PLAYING CATCH UP, THAT MEANS THEY HAVE TO KEEP BOOSTING RESERVES, AND THEIR EARNINGS POWER IS DIMINISHED WHICH MEANS THEY ARE NOT GROWING CAPITAL AND THEY CAN'T MAKE MORE LOANS. THEY HAVE TO KEEP SHRINKING THEIR ASSETS. AND THEY'RE GOING TO EARN LESS. I THINK MOST OF THE BIG BANKS WILL BE LUCKY IF THEY BREAK EVEN OR EARN A LITTLE MONEY THIS YEAR.
BARTIROMO: SO I WANT TO SELL ALL THE BIG BANKS. HOW DO I MAKE MONEY ON THE SHORT SIDE, THEN?
WHITNEY: ON THE SHORT SIDE, CITI TO ME IS STILL THE BIGGEST RISK POSITION OUT THERE. I THINK THEY'RE COMPANIES THAT YOU KNOW CAN'T EARN THEIR DIVIDENDS AND YOU KNOW THINGS ARE DEVOLVING. I DON'T THINK ANY OF THE BANKS I COVER WILL CONTINUE TO PAY THEIR EXISTING DIVIDENDS.
BARTIROMO: SO YOU THINK THE MAJOR BANKS, YOU'RE TALKING THE MAJOR BANKS, JPMORGAN, THEY'RE GOING TO CUT THEIR DIVIDENDS?
WHITNEY: I THINK THERE'S GOING TO BE PRESSURE. IF JPMORGAN CAN GET THROUGH THIS AND MAINTAIN ITS DIVIDEND I WOULD LOVE TO SEE IT. I THINK JPMORGAN IS IN THE SAME SOUP AS EVERY OTHER BANK AND EARNINGS PRESSURE IS GOING TO BE TREMENDOUS. NOW, THEY ARE WELL CAPITALIZED. THERE'S NO QUESTION ABOUT THAT. BUT IT'S A QUESTION OF EARNINGS POWER. AND IF THEY CHOOSE TO DIP INTO THEIR EARNINGS TO PAY THEIR DIVIDEND IT WOULD BE ULTIMATELY THEIR CHOICE. THEY'RE CLEARLY A SURVIVOR, AND THANK GOODNESS A LOW COST OPERATOR. BUT THEY'RE REALLY IN A STAND-ALONE POSITION PAYING A DIVIDEND THANKFULLY THEY NEVER RAISED IT A LOT SO THEY DIDN'T HAVE THE IMMEDIATE URGENCY TO CUT IT.BUT THEY COULD AS WELL. I THINK IT'S GOING TO BE ON THE TABLE.
BARTIROMO: IT STILL FEELS LIKE THE RESPONSE FROM THE GOVERNMENT LEVEL HAS BEEN VERY MUCH PIECEMEAL. YOU KNOW, YOU HAVE AN IDEA HERE, YOU HAVE AN IDEA -- BUT NO ONE REALLY BELIEVES THERE'S A COMPREHENSIVE PLAN IN PLACE. IS THAT THE WAY YOU SEE IT? ARE WE STILL IN THIS PIECEMEAL TYPE PHASE?
WHITNEY: UNFORTUNATELY. YEAH, I'D RATHER HAVE A THOUGHTFUL PROCESS ADDRESSED THAN SORT OF ONE IDEA HERE AND ONE IDEA HERE. I DON'T KNOW WHY GEITHNER CHOSE TO ACCELERATE AN ARTICULATION OF A PLAN WHEN THEY CLEARLY WEREN'T READY. AND I THINK THAT, AGAIN, THE CONFIDENCE IS BEHIND THE OBAMA ADMINISTRATION AND THEY'VE REALLY GOT TO RESPECT AND HOLD DEAR THAT CONFIDENCE AND NOT CONTINUE TO OVERPROMISE AND UNDERDELIVER, WHICH IS WHAT YOU HAVE HERE.
BARTIROMO: IS IT FAIR TO BELIEVE THAT SOME OF THESE FIRMS ARE GOING TO TRY TO RUSH AND PAY THE TARP MONEY, OR IS THAT UNREALISTIC TO BELIEVE? YOU KNOW, THERE ARE THESE REPORTS THAT GOLDMAN SACHS, JPMORGAN WANT TO GIVE THE MONEY BACK.
WHITNEY: ANYONE IN THEIR RIGHT MIND WOULD WANT TO GIVE THE MONEY BACK AT QUICKLY AS POSSIBLE. THEY COULD SELL ASSETS OR EXPECT THAT THE CAPITAL MARKETS RETURN IN A VERY V TYPE REFORM OR RECOVERY AND PAY THINGS BACK. THOSE ARE TWO COMPANIES THAT'LL PROBABLY PAY BACK SOONER THAN OTHERS. BUT THREE YEARS MAY BE OPTIMISTIC. THIS IS PUNITIVE CAPITAL. I HOPE THE BEST FOR THEM. BUT I THINK IT'S GOING TO BE -- I'M GLAD THEY'RE SAYING THAT BECAUSE AT LEAST THAT SUGGESTS THAT THOSE MANAGERS WANT TO STAY AT THOSE COMPANIES AND DON'T WANT TO BE EFFECTIVELY A GOVERNMENT MULE FOR LONGER THAN THREE YEARS.
BARTIROMO: AND SOME OF THE TALENTS WILL GO TO OTHER BOUTIQUE FIRMS. YOUR NEW FIRM. YOU'RE TALKING ABOUT RESEARCH INVESTMENT BANKING AND CAPITAL MARKETS ACTION. TELL ME HOW YOU GET THERE. TELL ME WHAT YOU ENVISION FOR THE NEW FIRM.
WHITNEY: WELL, WHAT I DO AND WHAT I LOVE DOING IS RESEARCH. SO THAT'S A VERY PORTABLE BUSINESS. SO I'LL DO THE EXACT SAME RESEARCH, WHICH IS WHAT I LOVE. MACRO AND STRATEGY AND COMPANY SPECIFIC, INDUSTRY SPECIFIC RESEARCH. BUT NOTHING WILL CHANGE ABOUT MY RESEARCH OTHER THAN THE FACT THAT I USED TO COVER, YOU KNOW, 25 COMPANIES, NOW I COVER 10 BECAUSE 15 HAVE GONE UNDER. SO REBUILD MY COVERAGE LIST. AND THEN I'M SO EXCITED TO PROVIDE ADVISORY SERVICES TO THE BANKS WHO ARE GOING TO MAKE IT AND THEN COME BACK FROM THE ASHES, AND THAT WILL BE A LOT OF FUN.
AND AGAIN, I REALLY WANT TO BE A PART OF THE RECONSTRUCTIVE EFFORTS. AND IN THE CAPITAL MARKETS BUSINESS THERE'S JUST A LOT OF LOW-HANGING FRUIT OUT THERE. WHY WOULDN'T I DO IT? SO IT'LL BE NEAT. I'M REALLY EXCITED ABOUT IT. AND AFTER YOU BROKE THE NEWS, I DIDN'T KNOW WHETHER TO LOVE YOU OR HATE YOU BECAUSE MY PHONE WENT NUTS YESTERDAY. AND THEN I GOT BESIEGED BY RESUMES. WHICH IS GREAT. WHICH IS REALLY NEAT. I'M ABSOLUTELY OPPOSED TO THIS TYPE OF ATTITUDE, WHICH IS THE SORT OF BOTTOM FEEDER DISTRESS MARKET ATTITUDE THAT A LOT OF MANAGERS HAVE AND THEY SAY OKAY, WHERE ELSE ARE THEY GOING TO GO, I'M NOT GOING TO PAY THIS PERSON BECAUSE THERE'S NO ONE ELSE WHO'S PAYING ON THE STREET. I THINK IN THIS ENVIRONMENT YOU CAN GET BETTER PEOPLE AND IF YOU PAY THEM FAIRLY AND GIVE THEM -- THEY'RE EXCITED AS OPPOSED TO VULTURE BUYING. YOU PROMOTE A MORE SUSTAINABLE POSITIVE CULTURE. GOLDMAN'S HISTORICALLY DONE THAT. I DON'T WANT TO BOTTOM FISH FOR TALENT. I WOULD NEVER WANT TO BE TREATED THAT WAY AND I CERTAINLY WOULD NEVER TREAT PEOPLE THAT WAY.
BARTIROMO: THANKS, CONGRATULATIONS, MEREDITH. MEREDITH WHITNEY ADVISORS GROUP. WE'LL SEE YOU SOON.
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