CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S ERIN BURNETT SITS DOWN WITH KENNETH CHENAULT, AMERICAN EXPRESS CHAIRMAN & CEO, TODAY ON CNBC'S "STREET SIGNS"

ERIN BURNETT: WE ARE HERE IN SUN VALLEY. FIRST, A RARE AND EXCLUSIVE INTERVIEW WITH THE CEO OF AMERICAN EXPRESS. KEN CHENAULT JOINS US NOW. KEN, IT'S WONDERFUL TO SEE YOU. I KNOW WE SPENT SOME TIME TOGETHER ON THE PANEL THIS MORNING TALKING ABOUT THE ECONOMY. I WANTED TO START OFF WITH YOU HERE WITH WHAT IS REALLY THE BIGGEST QUESTION OUT THERE. YOU SEE IT IN THE MARKET EVERY DAY, ARE WE IN AN ECONOMIC RECOVERY AT THIS POINT OR NOT.

KEN CHENAULT: I THINK IT'S WAY TOO EARLY TO SAY WE'RE IN A ECONOMIC RECOVERY. I THINK WHAT'S IMPORTANT IS THAT AT LEAST WHAT WE'RE SEEING IS SOME STABILIZATION. IF WE THINK ABOUT WHERE THINGS WERE LAST FALL WITH THE CREDIT MARKET SEIZING UP, IT WAS A FRIGHTENING SITUATION. SO STABILITY I THINK IT S IMPORTANT. I THINK THAT'S BEEN VERY HELPFUL. WHAT I WOULD SAY IS THERE ARE SOME SIGNS THAT POTENTIALLY COULD LEAD TO SOME GREEN CHUTES. FOR EXAMPLE AS I LOOK AT OUR BUSINESS AND I LOOK AT CARD BILLINGS FOR THE LAST SEVERAL MONTHS, WE'VE BEEN IN THE SAME RANGE. WE'VE HAD DOUBLE DIGIT DECLINES BUT NOW WE'VE HELD.

BURNETT: NOW YOU'RE AT ZERO. SO IT'S NOT LIKE YOU'RE CELEBRATING, WE'RE DOWN TWENTY AND NOW WE'RE DOWN TEN.

CHENAULT: I WISH I WAS TOTALLY FLAT BUT

BURNETT: RIGHT.

CHENAULT: WE'RE OFF A DOUBLE DIGIT DECLINE BUT HAVE NOT SEEN ANY FURTHER DECLINES BUT WE HAVE NOT SEEN ANY INCREASES. BUT TO HAVE SEVERAL MONTHS OF STABILITY AND BILLINGS I THINK IS ENCOURAGING BUT WOULDN'T CHARACTERIZE IT AS A RECOVERY. IF WE CAN GO FOR ANOTHER TWO OR THREE MONTHS AND START TO SEE SOME BUILD, THEN THAT'S GOING TO BE PRETTY ENCOURAGING. I THINK WITH RESPECT TO CREDIT, WHAT WE ARE SEEING , WHILE WRITE-OFFS ARE GOING UP, THEY ARE GOING UP IN GENERAL FOR THE INDUSTRY. THERE ARE ALWAYS SOME OUTLIERS, BUT THEY'RE GOING UP IN GENERAL FOR THE SECTOR , BUT AT A SLOWER RATE. WHAT'S GOING TO BE VERY IMPORTANT IS TO EXAMINE THE ROLL RATES AND CREDIT PERFORMANCE OF COMPANIES WITH RESPECT TO SECOND QUARTER EARNINGS THEN WE'LL GET A MUCH BETTER IDEA IF THERE'S BEEN A TURN ON THE CREDIT SIDE.

BURNETT: SO IT INTERESTING. IT SOUNDS LIKE THERE'S SIGNS OF STABILIZATION THAT'S ENCOURAGING BUT ITS NOT REALLY FAIR AT THIS POINT TO CALL THEM QUOTE ON QUOTE GREEN CHUTES, I KNOW WE WERE LAUGHING THIS MORNING

CHENAULT: THAT'S RIGHT.

BURNETT: WHAT WORD WOULD YOU USE? BUT CERTAINLY WOULD NOT BE AS STRONG AT THIS POINT.

CHENAULT: IT WOULD NOT BE GREEN CHUTES. I THINK WHETS IMPORTANT IS THAT THIS HOUSING CRISIS AND THE COLLAPSE OF THE HOUSING CRISIS WAS UNPRECEDENTED AND HAD A MAJOR IMPACT. AS OPPOSED TO DIFFERENT DOWN TURNS . THE IMPACT ON THE HIGH END AFFLUENT SPENDER HAS BEEN SUBSTANTIAL. SO CLEARLY DISCRETIONARY SPENDING HAS BEEN IMPACTED BUT ALSO NONDISCRETIONARY SPENDING HAS BEEN IMPACTED. I THINK WHAT IS IMPORTANT IS AT LEAST WE'RE HAVING SOME STABILIZATION.

BURNETT: WHEN YOU LOOK AT WHERE WE GO FROM HERE FOR AMERICAN EXPRESS, ARE YOU NOW PLANNING FOR FURTHER AHEAD? WHEN YOU TALK ABOUT NINE MONTHS AGO YOU WERE JUST TRYING TO GET THROUGH THE DAY. AND YOU GOT 3.4 MILLION DOLLARS IN T.A.R.P. MONEY AND YOU PAID THAT BACK IN JUNE AND VIEWERS HAVE SEEN THAT ALREADY. BUT WE JUST WANT TO MAKE SURE WE PUT THAT ON THE RECORD. WHAT IS YOUR PLANNING HORIZON NOW. YOU'RE SAYING IM HOPING FOR A FEW MONTHS OF STABILITY. ARE YOU NOW PLANNING OUT THREE MONTHS OR PLANNING OUT A YEAR?

CHENAULT: I THINK WHAT'S VERY IMPORTANT IN TIMES OF UNCERTAINTY AND DOWN TURN IS THAT'S WHERE YOU FOCUS ON THE OPPORTUNITY. YOU'VE GOT TO PLAN FOR SHORT TERM BUT YOU ALSO HAVE TO DO IN THE CONTEXT OF THE LONG TERM. IF WE GO BACK SEVERAL MONTHS AGO I HAD THREE PRIORITIES FOR THE COMPANY, STAY LIQUID, STAY PROFITABLE AND SELECTIVELY INVEST IN GROWTH. WE HAVE MADE PROGRESS AGAINST EACH OF THOSE. GOING FORWARD, I SEE VERY SUBSTANTIAL OPPORTUNITIES THAT WE'RE GOING TO INVEST IN AND HAVE BEEN INVESTING IN. ONE IS IF WE LOOK AT THE PENETRATION OF PLASTIC AGAINST CASH AND CHECKS EVEN IN THE U.S., IT'S AT A 45% LEVEL. IF WE LOOK IN THE INTERNATIONAL MARKET.

BURNETT: SO THAT MEANS 45% OF THE PEOPLE WHO COULD HAVE A CREDIT CARD IN THIS COUNTRY WHO COULD HAVE A CREDIT CARD HAVE ONE. IS THAT SORT OF WHAT THAT MEANS?

CHENAULT: THAT'S RIGHT. THAT MEANS 45% AND YOU THINK IN A MARKET LIKE THIS -- THAT EVERYBODY WOULD HAVE CREDIT CARDS. SO THE PENETRATION OF PLASTIC AGAINST CASH AND CHECKS AT 45% IN THE U.S., 25% IN OUTSIDE THE U.S. AND THEN YOU LOOK AT SMALL BUSINESS AND YOU LOOK AT MIDDLE MARKET AND YOU HAVE PENETRATION LEVELS OF 15% AND UNDER --

BURNETT: HOW MUCH MONEY WOULD YOU SAY WE'RE INVESTING IN OPPORTUNITY? HOW MUCH MONEY IS THAT ACTUALLY MEAN YOU'RE PUTTING ON THE TABLE AND WHERE?

CHENAULT: I'M NOT GOING TO REVEAL WHAT OUR OVERALL INVESTMENT LEVEL IS ERIN, BUT WHAT I WOULD SAY IS WE ARE INVESTING SUBSTANTIALLY AND HAVE BEEN THROUGHOUT THE YEAR. YES WE HAVE CUT BACK SELECTIVELY ON INVESTMENTS AND WE ARE CERTAINLY NOT INVESTING AT THE SAME LEVEL WE DID LAST YEAR. BUT WE ALSO BELIEVE THAT WE HAVE SOME VERY STRONG OPPORTUNITIES. ONE IS AS WE LOOK AT CO-BRANDS, WE HAVE A MAJOR INVESTMENT THAT WE'VE MADE IN OUR DELTA NORTHWEST CO-BRAND PORTFOLIO, WE THINK THAT PROVIDES SUBSTANTIAL OPPORTUNITY. BUSINESS TO BUSINESS IS AN AREA OF SUBSTANTIAL OPPORTUNITY BECAUSE THE REALITY IS IN A DOWN TURN TURN COMPANIES WANT TO UNDERSTAND HOW THEY SHOULD PURCHASE IN A MORE EFFICIENT WAY AND WE IN FACT HAVE THE PRODUCTS AND SERVICES THAT CAN HELP THEM DO THAT. WE HAVE A BUSINESS WHERE WE PARTNER WITH BANKS ISSUING AMEX ISSUED CARDS. THAT'S A BUSINESS WE'RE INVESTING IN.

BURNETT: YOU MENTIONED CO-BRANDED. IT IS RATHER WELL KNOWN THAT CITIGROUP IS LOOKING TO SELL ITS CO-BRANDED CARD BUSINESS. ARE YOU LOOKING AT IT?

CHENAULT: THE REALITY, WHAT I HEAR IS THAT THE FOCUS IS ON THE PRIVATE LABEL BUSINESS AND FROM OUR STANDPOINT, WE'RE VERY FOCUSED ON A HIGH END AFFLUENT CUSTOMER AND WE THINK THAT A CO-BRAND REWARDS PRODUCT IS REALLY THE BEST WAY TO REACH THAT CUSTOMER.

BURNETT: DOES CITI HAVE THE BUSINESS?

CHENAULT: CITI HAS A RANGE OF CO-BRANDS AND I OBVIOUSLY WOULDN'T WANT TO COMMENT --

BURNETT: I MEAN HYPOTHETICALLY.

CHENAULT: WHAT I WOULD SEPARATE OUT FROM THE CRITERIA, WHAT WE WOULD LOOK AT, IT WOULD HAVE TO BE IF THE ECONOMICS WERE ATTRACTIVE, IT WOULD HAVE TO BE A HIGH END CO-BRANDED PRODUCT BUT NOT A PRIVATE LABEL.

BURNETT: BECAUSE IT SEEMS TO ME CITI IS ONE EXAMPLE. BUT IF WE'RE YOU, YOU HAVE CASH, YOU'RE TAKING DEPOSITS NOW, YOU'RE TECHNICALLY A BANK WITH CDS, YOU HAVE MONEY AND YOU'RE SELF-FUNDING. GE'S CREDIT BUSINESS HAS BEEN FOR SALE FOR A WHILE. YOU REALLY COULD GO IN AND HAVE YOUR PICK OF THE LITTER. ARE YOU WAITING BECAUSE YOU ARE THINKING PRICES WILL GO DOWN FURTHER TO BUY MORE CARD BUSINESSES?

CHENAULT: I THINK WHAT'S IMPORTANT FOR US, WE SET OUT OUR STRATEGY, WE NEED TO MAKE SURE IT IS ALIGNED WITH WHAT THE OBJECTIVES ARE AND WHAT WE ARE INTERESTED IN IS AFFLUENT HIGH SPENDING CUSTOMERS WHO ARE HIGHLY CREDIT WORTHY. WE HAVE TO BE VERY SELECTIVE AND CAREFUL. AND THE REALITY IS, WE HAVE A SUBSTANTIAL NUMBER OF ORGANIC GROWTH OPPORTUNITIES. NOW, LAST YEAR WE PURCHASED GE'S CORPORATE CARD BUSINESS. THAT WAS A VERY ATTRACTIVE BUSINESS. IT HAS GONE VERY WELL FOR US.

BURNETT: IT WAS GOOD FOR US WITH AMERICAN EXPRESS . WE SWITCHED TO AMEX ON THE CORPORATE FRONT. I MUST SAY.

CHENAULT: WELL GOOD. I HOPE WE'RE SERVING YOU WELL.

BURNETT: I DO USE OTHER CREDIT CARDS AS WELL. I WILL SAY TO THOSE OUT THERE. NOW LET ME ASK A FEW QUESTIONS ABOUT CREDIT CARD REFORM. CREDIT CARD REFORM IS SOMETHING THAT HAS HAPPENED AND NOT YET TAKEN EFFECT. A LOT OF CONCERNS ABOUT WHAT EXACTLY MIGHT HAPPEN HERE.YOU HAVE BEEN VOCAL IN SAYING YOU'RE VERY CONCERNED ABOUT THE CREDIT CARD REFORM ACT. IF YOU COULD CHANGE IT, WHAT WOULD YOU CHANGE?

CHENAULT: HERE'S WHAT I THINK IS IMPORTANT. I REALLY DO WANT TO EMPHASIZE THIS. I BELIEVE VERY STRONGLY THAT THE CREDIT CARD INDUSTRY NEEDED TO BE REFORMED. I THINK THERE WERE PRACTICES RELATIVE TO BACK END PRICING AND RELATIVE TO CERTAIN TYPES OF FEES. I THINK THERE NEEDS TO BE MORE DISCLOSURE AND TRANSPARENCY. I WAS VERY SUPPORTIVE OF THE PRESIDENT'S MOVE TO REFORM THE CREDIT CARD INDUSTRY.HOWEVER, IN SOME AREAS, I THINK IT WENT TOO FAR. ONE EXAMPLE WOULD BE THE MORE LIMITED OPPORTUNITIES TO DYNAMICALLY PRICE, BECAUSE RISK BASED PRICING IS IMPORTANT. WE LIVE IN A DYNAMIC ENVIRONMENT. IF SOMEONE'S FINANCIAL SITUATION CHANGES DRAMATICALLY AND YOU DON'T HAVE THE FLEXIBILITY OF THE PRICE, WHAT'S GOING TO HAPPEN. THE VERY PEOPLE WHO NEED CREDIT WILL NOT BE ABLE TO OBTAIN IT AT THE SAME LEVEL AND IT WILL BE MORE EXPENSIVE. FOR OUR COMPANY, YOU DON'T ECONOMICS ARE SET UP DIFFERENTLY. 80% OF OUR REVENUES ARE GENERATED FROM CARD FEES SO WE ARE NOT AS RELIANT AS ARE OTHER COMPETITORS ON SPREAD REVENUE. BUT FROM A PUBLIC POLICY STANDPOINT I HAVE A CONCERN THAT AS WE'RE TRYING TO RESTORE THE ECONOMY, BECAUSE CONSUMER SPENDING IS TWO THIRDS OF OUR ECONOMY, AND I THINK WHAT'S VERY, VERY IMPORTANT IS THAT WHEN WE PUT IN REGULATION, THE QUESTION NEEDS TO BE ASKED, WILL THIS REGULATION RESTORE CONSUMER CONFIDENCE AND IN FACT IMPROVE THE ECONOMY. I HAVE A CONCERN THAT THIS REGULATION, PARTS OF IT, MAY STIFLE THE GROWTH THAT WE NEED IN OUR ECONOMY.

BURNETT: I MEAN, THAT THE LEGISLATION COULD STIFLE IS IMPORTANT AND SOMETHING I THINK A LOT OF PEOPLE IN WASHINGTON SHOULD BE THINKING ABOUT. DOES THIS MEAN THOUGH WHEN YOU SAY IT WON'T AFFECT AMERICAN EXPRESS SPECIFICALLY AS MUCH AS YOUR COMPETITORS. DO YOU THINK THERE WILL BE A MAJOR CARD COMPANY IN THE COUNTRY THAT FACES DISTRESS AND WHETHER THAT ENDS UP IN SOME SORT OF A BAILOUT OR SOMEONE'S FORCED TO BUY IT. WE HEAR ABOUT WRECKAGE DELINQUENCIES, WE HEAR ABOUT AN ACT THAT MAY END UP CAUSING REAL PAIN TO SOME COMPANIES. IS THAT GOING TO BE AN OUTCOME?

CHENAULT: I THINK AT THE END OF THE DAY THE MAJOR CREDIT CARD COMPANIES WILL FIGURE OUT A WAY BASED ON THE SERVICES THEY OFFER AND THE PRICING THAT THEY PUT IN PLACE TO MANAGE THESE CHANGES. WHAT WE'VE GOT TO ASK OURSELVES, WHAT'S THE IMPACT ON THE ECONOMY. AND I THINK THAT PUBLIC POLICY ISSUE SHOULD BE THERE. I DO NOT BELIEVE THAT MOST CREDIT CARD COMPANIES WILL IN FACT GO OUT OF BUSINESS. I THINK SOME CARD COMPANIES WILL HAVE DIFFICULTY. I THINK MOST OF THE MAJOR COMPANIES WILL BE ABLE TO MANAGE THROUGH THE CHANGES AND LET ME EMPHASIZE WHILE OUR SITUATION IS VERY DIFFERENT, WE'RE GOING TO BE IMPACTED. BUT WE JUST WILL NOT BE IMPACTED AS MUCH AS OUR COMPETITORS.

BURNETT: THE SAVINGS RATE. WE TALKED ABOUT THIS ON THE PANEL AS WELL. WHETHER YOU BELIEVE THE GOVERNMENT NUMBER EXACTLY OR NOT, IT HAS GONE UP. AND YOU ARE THE PERSON WHO PERHAPS IS MORE AT STAKE THAN ANYONE ELSE. HOW MUCH MORE IS IT GOING TO GO UP? AND WHEN WE COME BACK TO WHAT YOU THINK IS GOING TO BE AN EQUILIBRIUM FOR SAVINGS IN THIS COUNTRY, WHAT'S THE NUMBER?

CHENAULT: HERE'S THE THING. I CAN'T CERTAINLY PROJECT OUT WHAT THE LEVEL OR GROWTH OF WHAT THE SAVINGS RATE WILL BE, I THINK WHAT'S IMPORTANT THE PENULEM IS SWINGING BACK AND IT NEEDED IT.

BURNETT: AND YOU THINK ITS GOING TO STAY?

CHENAULT: I THINK ONE OF THE PERMANENT CHANGES WE'RE GOING TO SEE IS THAT PEOPLE IN THE UNITED STATES WILL SAVE MORE AND I THINK THAT'S CONSTRUCTIVE.I THINK WHAT'S HAPPENING IS, WHAT WE'RE SEEING IS A REBALANCING OF THE HOUSEHOLD BALANCE SHEET. AND I THINK THAT WILL CREATE A FOUNDATION SO THAT WE CAN THEN RETURN TO SOME SPENDING GROWTH.

BURNETT: AND, FINAL QUESTION. THE U.S. ECONOMY.WHEN IS YOUR BEST GUESS AS TO WHEN IT ACTUALLY GROWS AGAIN. NOT ZERO. WHEN DOES IT ACTUALLY HAVE A GREEN ARROW IN FRONT OF IT ON GDP?

CHENAULT: AGAIN. VERY HARD TO PREDICT. WHAT I WOULD HOPE IS THAT WE WOULD START TO SEE SOME IMPROVEMENT SOMETIME IN THE SECOND HALF OF 2010. BUT AGAIN, THAT DEPENDS ON JOBS, ARE THEY BEING CREATED, VERY IMPORTANTLY CONSUMER CONFIDENCE. AND IF THAT HAPPENS, TERRIFIC, BUT THAT'S NOT HOW I'M PLANNING TO MANAGE MY BUSINESS. THE WAY I'M MANAGING OUR BUSINESS IS WHAT ARE DIFFERENT SCENARIOS, GROWTH SCENARIOS AND WHAT ARE DIFFERENT SCENARIOS OF CONTRACTION AND HOW DO WE IDENTIFY THE OPPORTUNITIES TO GROW? ONE OF WAYS TO DO THAT IN AN UNCERTAIN TIME IS TO PROVIDE CUSTOMERS WITH UNPARALLELED SERVICE BECAUSE THE REPUTATION AND BRAND OF COMPANIES, I THINK WE HAVE AN ADVANTAGE THERE.

BURNETT: ALRIGHT KEN CHENAULT. WE VERY MUCH APPRECIATE YOUR TAKING THE TIME.

CHENAULT: THANK YOU VERY MUCH ERIN.

BURNETT: KEN CHENAULT THE CHAIRMAN AND CEO OF AMERICAN EXPRESS.





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