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CNBC TRANSCRIPT: CNBC'S ERIN BURNETT INTERVIEWS MORGAN STANLEY CEO & CHAIRMAN JOHN MACK AND GOLDMAN SACHS CHAIRMAN & CEO LLOYD BLANKFEIN TODAY ON CNBC'S "POWER LUNCH"

Goldman Sach's Lloyd Blankfein and Morgan Stanley's John Mack
Goldman Sach's Lloyd Blankfein and Morgan Stanley's John Mack

WHEN: Today, Friday, March 27th at 1:45 PM ET

WHERE: CNBC's "Power Lunch"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Morgan Stanley CEO & Chairman John Mack and Goldman Sachs Chairman & CEO Lloyd Blankfein today on CNBC's "Power Lunch."

All references must source CNBC.

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ERIN BURNETT: YOU'RE CLOSER TO ME, JOHN. LET'S START WITH YOU. WAS THE MEETING PLEASANT, ANY TENSION? HOW WOULD YOU DESCRIBE IT?

JOHN MACK: THERE WAS NO TENSION. IT WAS ALL ABOUT COOPERATION. IT WAS ALL ABOUT, WE HAVE PLANS IN PLACE, EITHER THROUGH SECRETARY GEITHNER'S PLAN OR TALKED ABOUT HOW ARE THE BANKS DOING ON LENDING. IT WAS ALL ABOUT GETTING THE ECONOMY GOING AGAIN AND THE BANKS TAKING A CRUCIAL ROLE IN MAKING SURE THAT HAPPENS. THERE WERE SOME ISSUES ON - IN THE SENSE OF WHAT'S THE RIGHT REGULATORY FRAMEWORK, WHICH WE TALKED ABOUT BRIEFLY. BUT IT WAS ALL ABOUT WORKING TOGETHER. IT WAS VERY ENCOURAGING.

BURNETT: MR. BLANKFEIN, I KNOW HE WENT AROUND THE TABLE AND ASKED EVERYONE. YOU GOT A CHANCE TO SAY SOMETHING. WHAT DID YOU CHOOSE TO TALK ABOUT IN THAT MOMENT?

LLOYD BLANKFEIN: EVERYBODY WAS PRETTY MUCH ON THE SAME PAGE, ONE OF COOPERATION. I THINK WE REALLY WANTED THE PRESIDENT TO UNDERSTAND, WHICH OF COURSE, HE DID UNDERSTAND THAT WE RECOGNIZE THAT OUR INTERESTS ARE ALIGNED THAT WE ONLY DO WELL IF THE ECONOMY DOES WELL. AND I THINK IF THERE IS A BIG LESSON OUT OF THE IS, YOU CAN'T DISTINGUISH MAIN STREET AND WALL STREET. AT THE END OF THE DAY, WE NEED A GOOD ECONOMY FOR OUR BUSINESSES TO GROW. AND WE ALL KNOW THAT MAIN STREET NEEDS BANKS TO LEND AND PARTICIPATE. IF I TRY TO DRAW OUT A SPECIFIC POINT, I TRIED TO TALK ABOUT THE EFFECT THAT ALL OF THE RECENT CONVERSATIONS HAVE HAD ON THE INTERNATIONAL SIDE. WE'VE ALSO LEARNED THAT YOU CAN'T SEPARATE THE INTERESTS OF THE UNITED STATES FROM THE INTERESTS OF ITS GLOBAL COUNTER PARTS.

BURNETT: I WANT TO ASK ABOUT A COUPLE OF THE KEY ISSUES HERE, PUBLIC/PRIVATE PARTNERSHIPS. WE'VE BEEN HEARING THERE'S BEEN A LOT OF DEBATE IN THE WHITE HOUSE AND TREASURY AS TO WHETHER THEY WILL WORK. NOW THERE IS A LOT OF DEBATE ABOUT WHETHER THEY'LL WORK FOR PRICING, WHETHER THEY WILL PLAY BECAUSE THEY'RE CONCERNED ABOUT COMPENSATION RESTRICTIONS, AND WHETHER PEOPLE WILL SELL BECAUSE THEY ARE WORRIED ABOUT PRICE. YOU BOTH, HYPOTHETICALLY COULD BE ON EITHER SIDE OR BOTH SIDES OF THAT. ARE YOU GOING TO SELL ASSETS INTO IT? ARE YOU GOING TO HAVE INVESTMENT FUNDS INVEST?

BLANKFEIN: IN OUR BUSINESS, BECAUSE OF THE BUSINESS MIX AND BECAUSE OF MARK TO MARKET, I THINK MAYBE JOHN IS IN A SIMILAR SITUATION, WE JUST DON'T HAVE A LOT OF CONSUMER ASSETS. WE WOULD HAVE GOTTEN RID OF MOST OF THESE ASSETS. I DOUBT WHETHER WE'RE A BIG SELLER INTO THE POOL. BUT WE'RE LOOKING AT PARTICIPATING ANY WAY WE CAN, WHICH MAY BE AS AN INVESTOR.

BURNETT: YOUR COMPENSATION IS ALREADY RESTRICTED. YOU DON'T HAVE TO WORRY ABOUT THAT, AS NON T.A.R.P. BANKS. WHAT ABOUT YOU, MR. MACK?

JOHN MACK: THE WAY IT'S SET UP RIGHT NOW, THE ONLY ASSET WE COULD SELL WOULD BE OUT OF OUR UTAH BANK, AND THAT IS NOT WHERE THE BULK OF OUR ASSETS ARE IN OUR BALANCE SHEET. JUST LIKE LLOYD, WE MARK TO MARKET. I'M NOT SURE WE WOULD BE A SELLER WITH MARK TO MARKET. WE WOULD LIKE TO SEE IF, THE ONE THING WE COULD HAVE, IF IT'S A BANK HOLDING COMPANY, YOU CAN SELL ASSETS WHEREVER IT IS, NOT JUST IN YOUR UTAH BANK. SO WE DIDN'T TALK ABOUT THAT IN THE MEETING.

BURNETT: THE PUBLIC-PRIVATE PARTNERSHIP DIDN'T COME UP?

MACK: IT WAS DISCUSSED BRIEFLY IN THAT THE MARKETS HAVE EMBRACED IT, THE MARKETS REACTED VERY FAVORABLY. OTHER THAN THAT, WE GET INTO DETAILS OF THAT.

BLANKFEIN: AT THE END OF THE DAY, IT'S A GOD IDEA. BECAUSE IN A PUBLIC-PRIVATE PARTNERSHIP, THE EQUITY IS GOING TO BE ON THE - PRIVATE INTERESTS ARE GOING TO PUT IT UP, WHICH MEANS THEY'RE PRICING IT. THEY'RE TAKING THE FIRST LOSS. ANYBODY WHO INVESTS IN THAT PARTNERSHIP MUST BELIEVE THE U.S. IS NOT GOING TO LOSE MONEY ON ITS LENDING BECAUSE THE EQUITY GOES FIRST. SO INSTEAD OF HAVING THE GOVERNMENT PRICE IT AND THE GOVERNMENT MANAGE IT, YOU'LL HAVE PRIVATE INTERESTS MANAGE IT AND PRICE IT.

BURNETT: LET'S TALK T.A.R.P. BOTH OF YOU ARE IN A POSITION WHERE YOU CAN RETURN IT. YOU HAVE SPOKEN RECENTLY ABOUT WANTING TO RETURN IT, AT LEAST BY THE END OF THE YEAR, BUT IT'S BEEN WIDELY REPORTED THAT MAYBE EVEN BY THE END OF APRIL. AS SOON AS THE STRESS TESTS COME BACK, YOU WOULD PAY BACK THE 10 BILLION. IS THAT WHAT YOU'RE PLANNING TO DO.

BLANKFEIN: WE HAVEN'T SAID DIRECTLY. BUT WHAT WE SAID IS, AND WHICH IS THE CASE, IS THAT THE T.A.R.P. MONEY WAS NEVER INTENDED TO BE PERMANENT CAPITAL. AT THE END OF THE DAY, IT'S IN THE INTERESTS OF THE TAXPAYERS AND IN THE INTERESTS OF THE SYSTEM TO HAVE THAT RETURNED WITH INTEREST. AND IN OUR CASE, ALSO TO BUY BACK THE WARRANTS ASSOCIATED WITH OUR BUSINESS, GET A BIG RETURN AND RECYCLE THAT MONEY ELSEWHERE IN THE ECONOMY. EVERYBODY WANTS US TO DO THAT.

BURNETT: ARE YOU NEGOTIATING WITH TREASURY NOW TO DO THAT QUICKLY?

BLANKFEIN: THERE IS NO QUICK ABOUT THIS BECAUSE WE HAVE TO WAIT UNTIL THE STRESS TEST COMES OUT. BUT WE CERTAINLY DIDN'T HAVE TO EMPHASIZE OUR INTEREST. I THINK IT'S IN EVERYONE'S INTEREST THAT WHEN SOMEONE CAN RETURN IT, THAT THEY DO SO.

BURNETT: WELL, YOU'VE GOT THE CASH, WHAT ABOUT MORGAN STANLEY?

MACK: IT WAS CLEAR IN THE MEETING, ESPECIALLY WITH SECRETARY GEITHNER THERE, WHEN THAT MONEY WAS FIRST TO THE BANKS, IT WAS MADE VERY CLEAR TO US BACK IN EARLY OCTOBER, THAT THE FEDERAL RESERVE, TREASURY, ET CETERA, SAW THINGS IN THE ECONOMY AND BANKING SYSTEM THAT LLOYD AND I SEE PIECES OF. BUT WE DON'T SEE THE ENTIRE PICTURE. SO THAT MONEY WAS PUT THERE TO MAKE SURE THAT WE HAVE STABLE BANKS. I THINK THE ONLY CONVERSATION THAT WE TALKED ABOUT IN THERE, AT LEAST WHEN I WAS TALKING, THAT HAS TO BE THE NUMBER ONE PRIMARY FOCUS. DO OUR REGULATORS WANT US TO PAY THIS BACK? ARE WE ABLE TO? THE ANSWER IS YES.

BURNETT: BUT THEY DON'T WANT YOU TO. THAT'S THE PERCEPTION. YOU MAYBE COULD, BUT MAYBE THAT WOULD HIGHLIGHT ANOTHER BANK THAT CAN'T.

MACK: I DON'T THINK THAT'S AN ISSUE.

BLANKFEIN: I THINK THEY WANT US TO PAY IT BACK. IF WE'RE ABLE TO PAY IT BACK - AND BEING ABLE TO PAY IT BACK MEANS, THAT YOU WON'T CURTAIL YOUR ACTIVITIES AS A SUPPORTER OF THE ECONOMY. BUT IF YOU COULD OTHERWISE LEND, IF YOU OTHERWISE HAVE ENOUGH CAPITAL, IF YOU CAN OTHERWISE RAISE CAPITAL IN THE PUBLIC MARKETS, WHY WOULD THE TAXPAYERS WANT THEIR MONEY TO SIT WITH GOLDMAN SACHS WHEN IT CAN BE DEPLOYED ELSEWHERE IN THE ECONOMY?

BURNETT: DO YOU FEAR THOUGH, IF YOU GIVE IT BACK AND THEN SOMETHING HAPPENS, ANOTHER LEG DOWN HAPPENS IN THE ECONOMY AND THEN ALL OF SUDDEN YOU WISH YOU DIDN'T GIVE IT BACK.

MACK: THAT WAS NOT THE FOCUS OF THIS MEETING. IT REALLY WASN'T. IT WAS ABOUT WORKING TOGETHER, SPEAKING UP ON ISSUES THAT WE THOUGHT WOULD SLOW DOWN THIS RECOVERY. IT WAS TO MAKE SURE THAT THE BANKS WHO ARE LENDERS, LIKE B OF A OR WELLS, CITI, ET CETERA, JP, THEY'RE VERY ACTIVE IN THE MARKET AND MAKING LOANS. WELLS FARGO TALKED SOME OF THE MORTGAGES THEY'RE MAKING, HOW MUCH RE-FIS THEY HAD, HOW MUCH MONEY THAT PUTS BACK IN THE MARKET. THE CONVERSATION WAS MUCH MORE ON WHAT ARE WE GOING TO DO?, HOW ARE WE GOING TO DO IT? WHAT ARE THE ISSUES? AGAIN, COMPENSATION CAME UP AS AN ISSUE. AND I THINK THE PRESIDENT IS KEENLY AWARE OF HOW AMERICA FEELS ABOUT WALL STREET COMP. WE'VE TALKED BRIEFLY ABOUT THAT. IT WASN'T FIRM BY FIRM, WHAT ARE YOU GOING TO DO? AS A GROUP, WHAT ARE WE GOING TO DO TOGETHER TO WORK WITH THE WHITE HOUSE AND WITH THE PRESIDENT'S LEADERSHIP AND HIS STAFF TO WORK WITH THEM? SO IT WAS ABOUT MAKING PROGRESS.

BURNETT: WILL THERE BE THE INDUSTRY SITTING DOWN TOGETHER AND COMING UP WITH NEW SPECIFICS IN TERMS OF COMPENSATION? THERE IS A BIG ISSUE AROUND THE COUNTRY. IN A FEW WEEKS, THERE COULD BE ANOTHER HEADLINE THAT WOULD DISTURB PEOPLE AS MUCH AS AIG. IS THERE ANYTHING THAT THE GROUP WILL DO?

BLANKFEIN: I THINK WE'VE PUT OUT - I KNOW WE'VE PUT OUT SUGGESTIONS. I WROTE AN OP-ED IN WHICH I PUT OUT WHAT I THOUGHT WERE THE APPROPRIATE PARAMETERS FOR COMP WHICH BASICALLY CAN BE REDUCED TO, THE MORE SENIOR YOU ARE, THE MORE EQUITY AND FOR LONGER. SO THAT YOU ALIGN THE INTERESTS OF YOUR COMPANY WITH THE INTERESTS OF THE INDIVIDUAL OVER A VERY LONG PERIOD OF TIME. AND THAT IMBEDS A CLAWBACK FEATURE BECAUSE IF EQUITY GOES DOWN, THE COMPENSATION YOU THOUGHT YOU HAD DISSIPATES.

BURNETT: I KNOW YOU HAVE THAT AT MORGAN STANLEY. BEFORE WE GO, I MUST ASK ONE QUESTION OF EACH OF YOU. LET ME START WITH YOU. YOUR STOCK IS HIGH AGAIN. BACK UP NEAR 100.

MACK: NOT HIGH ENOUGH [laughs].

BURNETT: YOU'VE GOT T.A.R.P. MONEY. THE REAL QUESTION ON WALL STREET AND EVERYONE WANTS TO KNOW THE ANSWER. ARE YOU GOING TO RAISE EQUITY AND WHEN?

BLANKFEIN: WE'LL HAVE TO GO - YOU KNOW, LISTEN, WE'LL CONSULT WITH OUR REGULATORS WHEN - WE'RE VERY ANXIOUS FOR THE STRESS TEST RESULTS TO COME OUT.

WE HAVE OUR OWN OPINION ABOUT WHAT OUR SITUATION IS. WE NEED TO HEAR WHAT OUR REGULATORS' OPINIONS ARE.

BURNETT: SO AT THE END OF APRIL IS WHEN WE CAN EXPECT TO HEAR EITHER WAY.

BLANKFEIN: THE MIDDLE OF APRIL.

BURNETT: THE SAME WITH YOU?

MACK: I THINK I NEED TO TALK WITH MY BOARD FIRST ABOUT WHAT WE'LL DO VERSUS TALKING TO YOU BECAUSE AS MUCH AS I LIKE YOU AND CNBC, I'M REALLY NOT GOING TO GO THERE.

BURNETT: THANK YOU BOTH.



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