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FIRST ON CNBC: CNBC TRANSCRIPT: CNBC'S MARY THOMPSON SITS DOWN WITH SPECIAL MASTER FOR TARP EXECUTIVE COMPENSATION, KENNETH FEINBERG, TODAY ON CNBC'S "SQUAWK BOX"

Kenneth R. Feinberg, the Treasury Department's special appointee for executive compensation.
AP
Kenneth R. Feinberg, the Treasury Department's special appointee for executive compensation.

WHEN: TODAY, THURSDAY, DECEMBER 17TH

WHERE: CNBC'S SQUAWK BOX

Following is an unofficial transcript of a FIRST ON CNBC INTERVIEW with Kenneth Feinberg, Special Master for TARP Executive Compensation, today on CNBC's "Squawk Box."

All references must be sourced to CNBC.

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QUINTANILLA: MEANTIME, EXECUTIVE COMPENSATION, AS YOU PROBABLY KNOW, BEING BILLED AS A MAJOR REASON WHY B OF A'S SEARCH FOR A FEW CEO TOOK AS LONG AS IT DID. THE MAN IN CHARGE OF CRACKING THE WHIP ON EXECUTIVE PAY, KEN FEINBERG JOINS OUR MARY THOMPSON ON A FIRST ON CNBC INTERVIEW. MORNING, MARY.

THOMPSON: GOOD MORNING TO YOU, CARL. AS YOU SAID THE SPECIAL MASTER FOR EXECUTIVE COMPENSATION, KEN FEINBERG, JOINING US THIS MORNING. THANKS FOR JOINING US. THE LAST TIME WE SPOKE WAS ON FRIDAY. SINCE THAT TIME, YOU HAVE ONE LESS COMPANY ABOUT TO BE UNDER YOUR WATCH. CITI IS UNDERGOING AN EQUITY OFFERING. WHAT'S YOUR OPINION ON THAT?

FEINBERG: I THINK IT'S WONDERFUL. THE PRIMARY OBJECTIVE OF THIS T.A.R.P. COMPENSATION PROGRAM HAS ALWAYS BEEN TO GET THE TAXPAYERS THEIR MONEY BACK. AND IF BANK OF AMERICA AND CITI, BETWEEN THEM, ROUGHLY $90 BILLION, ARE PREPARED TO REPAY THE TAXPAYER, THAT IS EXACTLY THE OBJECTIVE OF THE PROGRAM.

THOMPSON: CITI HAS BEEN QUITE CLEAR THAT ONE OF THE REASONS THEY'RE DOING THIS EQUITY OFFERING NOW IS TO GET OUT FROM UNDER YOUR WATCH. DO YOU THINK THAT THIS HAS BEEN IN WAY HARMFUL? BECAUSE SOME PEOPLE WOULD ARGUE, THEY'RE DOING IT A LITTLE TOO SOON. THE DEMAND HASN'T BEEN THERE. THE DEMAND FOR THE STOCK WASN'T STRONG ENOUGH TO ALLOW TREASURY TO COME IN AND SHARE ITS SELLS CONCURRENTLY. DO YOU THINK YOUR ACTIONS HAVE BEEN HARMFUL OR HELPFUL HERE?

FEINBERG: IF EXPERTS AT THE FEDERAL RESERVE AND EXPERT AT TREASURY BELIEVE IT IS APPROPRIATE FOR CITI TO EXIT THE PROGRAM, THEY EXIT THE PROGRAM. IF AS I READ TODAY THE TREASURY HAS SOME RESERVATIONS, THOSE RESERVATIONS WILL BE CONSIDERED. I'M DEALING STRICTLY WITH EXECUTIVE COMPENSATION AND NOT WITH THE QUESTION OF WHETHER OR NOT CITI EXITS THE PROGRAM OR NOT.

THOMPSON: IN A RECENT INTERVIEW PRESIDENT OBAMA SAID THAT WALL STREET STILL JUST DOESN'T GET IT WHEN IT COMES TO EXECUTIVE COMPENSATION. YOU'VE WORKED MORE CLOSELY WITH SOME OF THESE FIRMS RECENTLY. DO YOU THINK THEY'RE GETTING IT?

FEINBERG: I THINK THE LIMITED NUMBER OF COMPANIES THAT I'M -- THAT ARE PART OF MY MANDATE, I THINK THEY ARE GETTING IT. THEY'RE WORKING CONSTRUCTIVELY WITH ME. THEY'VE BEEN VERY CONSTRUCTIVE. WE'VE REACHED ACCOMMODATIONS. WHETHER OR NOT THE PRINCIPLES THAT I'VE ENUNCIATED WILL HAVE A MORE PERVASIVE IMPACT AMONG WALL STREET GENERALLY, THAT REMAINS TO BE SEEN, ALTHOUGH I DID NOTE THE OTHER DAY, AS DEPUTY SECRETARY WOLEN POINTED OUT THAT GOLDMAN BEGINNING FIRST STEPS TO GET IT IN TERMS OF THEIR BONUS STRUCTURE AND THAT'S ALL TO THE GOOD.

THOMPSON: YOU POINTED OUT LAST WEEK THAT THE REASON YOU LIKE GOLDMAN'S NEW STRUCTURE, AGAIN, FOR ONLY 30 OF ITS TOP EXECUTIVES IS THEY HAVE TO HOLD THE STOCK FOR FIVE YEARS. WOULD YOU LIKE TO SEE THAT IMPLEMENTED WITHOUT WALL STREET,A FIVE-YEAR HOLDING PERIOD?

FEINBERG: EVERY COMPANY IS DIFFERENT. IN OUR PRINCIPLES WE HAVE SOME WE HAVE FIVE YEARS, FOUR YEARS, A THIRD, A THIRD, A THIRD, TWO YEARS, THREE YEARS, FOUR YEARS. I THINK EVERY COMPANY HAS TO ADAPT THE PRINCIPLES TO THEIR OWN UNIQUE CIRCUMSTANCES. BUT I THINK THE NOTION OF LIMITED CASH, NO GUARANTIES, LONG-TERM STOCK, THAT'S THE WAY TO GO.

THOMPSON: I WANT TO SPEAK ABOUT ANOTHER COMPANY UNDER YOUR WATCH, THAT BEING GENERAL MOTOR. THE COMPANY'S CHAIRMAN ED WHITAKER RECENTLY SAID THAT PAY CONTINUES TO BE AN ISSUE IN THE COMPANY'S SEARCH FOR A CEO. HOW ARE YOU WORKING WITH GENERAL MOTORS TO ALLOW THEM, YOU KNOW, TO PAY THE PERSON WHO WILL HELP THEM MAINTAIN AND IMPROVE THEIR COMPETITIVE POSITION IN THE WORLD?

FEINBERG: I DON'T BELIEVE IT WILL BE AN ISSUE. GENERAL MOTORS HASN'T COME TO ME YET PURSUIT TO THE LAW WITH THE NAME AND PROPOSED COMPENSATION PACKAGE. SO THERE'S NOTHING FOR ME TO ACT ON UNTIL I RECEIVE A SUBMISSION FROM GENERAL MOTORS. BUT I'VE MADE IT VERY CLEAR, THAT GENERAL MOTORS AND THE OTHER TOP RECIPIENTS MUST, UNDER THE LAW, REMAIN COMPETITIVE. IF THAT MEANS THAT COMPENSATION MUST REFLECT THAT COMPETITIVE DYNAMIC, ALL TO THE GOOD.

THOMPSON: I BELIEVE I HAVE A QUESTION -- OR A CARL FROM CARL. GO AHEAD.

QUINTANILLA: THANKS FOR BEING WITH US. THANKS, MARY. KEN, MARY MENTIONS GOLDMAN, WHICH I THINK YOU MIGHT AGREE, IS A MODEL FOR SOME IN TERMS OF LOOKING WHERE THE STREET'S GOING TO GO LONG TERM ON PAY PRACTICES. WHEN THEY HAVE SAY ON PAY IN AN ADVISORY ROLE, ARE YOU WILLING TO GO OUT AND SAY THAT THAT DOESN'T QUITE GO FAR ENOUGH? SHOULD IT BE MORE BINDING TO THE BOARD?

FEINBERG: REALLY, WHEN IT COMES TO SAY ON PAY AND CORPORATE GOVERNANCE GENERALLY, I DEFER TO CONGRESS, TREASURY, I DEFER TO OTHERS. MY ROLE IS LIMITED TO THE DETERMINATION AND CALCULATION OF ACTUAL COMPENSATION. SO I'M NOT PREPARED TO PASS ON THE LEGITIMACY, THE VALUE, THE PROS AND CONS OF SAY ON PAY TODAY.

QUINTANILLA: SO YOUR ROLE IS TO GET YOUR JOB DONE. YOU'RE NOT THERE TO PROVIDE GUIDANCE ON HOW WE SHOULD BE DOING THINGS IN THE FUTURE ONCE THIS WHOLE MESS IS TAKEN CARE OF, IS THAT FAIR?

FEINBERG: THAT IS FAIR. BUT UNDERSTAND, MY ROLE IS JUST ONE ASPECT, AS YOU WELL KNOW, OF A WHOLE LIST OF REFORMS DESIGNED TO DEAL WITH COMPENSATION AND EXCESSIVE RISK, CORPORATE GOVERNANCE, REGULATORY REFORM IN THE HOUSE AND THE SENATE, MY ROLE IN DETERMINING COMPENSATION, FOREIGN GOVERNMENTS THAT ARE LOOKING AT VARIOUS WAYS TO REINS IN COMPENSATION. SO YOU'VE GOT TO LOOK AT THE WHOLE COMPREHENSIVE LIST TO SEE HOW GOVERNMENT IS TRYING TO DEAL WITH THIS PROBLEM OVERALL.

THOMPSON: WHAT ARE YOUR THOUGHT ON WHAT'S HAPPENED OVERSEAS WITH THE TAX THEY'RE PUTTING ON PAY IN PROPOSING IN THE UK? DO YOU THINK THAT'S AN APPROPRIATE STEP TO TAKE?

FEINBERG: WHAT I'M READING IN THE NEWSPAPERS, WHAT I LIKE ABOUT BRITAIN AND FRANCE AND MAYBE OTHER COUNTRIES, THEY'RE DOING SOMETHING. I'M NOT SAYING THAT THE TAX IS THE WAY TO GO OR OUR APPROACH IS THE WAY TO GO. THE SECRETARY OF THE TREASURY MADE IT VERY CLEAR AT THE G20, EVERYBODY IN A GLOBAL ECONOMY MUST BE CONCERNED ABOUT EXECUTIVE COMP. HOW EACH COUNTRY DEALS WITH THE PROBLEM IS LESS IMPORTANT TO ME THAN THE FACT THAT EACH GOVERNMENT IS, IN FACT, DOING SOMETHING.

THOMPSON: YOU'RE SPEAKING ON A PANEL TODAY TALKING ABOUT REINVENTING THE ROLES OF CAPITALISM. WHAT ARE SOME OF THE RULES YOU'LL BE SPEAKING ABOUT THAT YOU'D LIKE TO SEE REINVENTED IN THE WAKE OF THIS FINANCIAL CRISIS?

FEINBERG: LET'S LIMIT THE AMOUNT OF BASE CASH SALARY. LET'S ELIMINATION THE NOTION OF GUARANTEED COMPENSATION UNRELATED TO PERFORMANCE.LET'S TIE INDIVIDUAL COMPENSATION TO COMPANY -- LONG-TERM COMPANY SUCCESS SO THAT EACH OFFICIAL HAS A VESTED INTEREST IN THE OVERALL STRENGTH OF THE COMPANY AND LET'S ELIMINATE EXCESSIVE RISK.

THOMPSON: AGAIN, OTHERS WOULD ARGUE, THAT'S EXACTLY WHAT LEHMAN DID. A NUMBER OF THEIR EMPLOYEES HAD THEIR PAY TIED TO LONG-TERM STOCK, THEY HELD ONTO THEIR STOCK. IT DIDN'T PREVENT THAT COMPANY FROM FAILING OR TAKING RISKS.

FEINBERG: I'M NOT SAYING THAT EXECUTIVE COMPENSATION AND THE PRINCIPLES THAT I'VE DEVELOPED ARE THE ONLY WAY TO GO HERE IN TERMS OF AVOIDING AN ECONOMIC MELTDOWN. THERE ARE, AS YOU KNOW, BETTER THAN MOST, THERE ARE MANY REASONS THAT UNDERLIE THE LEHMAN FAILURE QUITE APART FROM EXECUTIVE COMPENSATION. AND I THINK THAT LOOKING AT MY ROLE IN A VACUUM IS A MISTAKE. I'M JUST ONE PART OF AN OVERALL AGENDA TO REFORM COMPENSATION AND AVOID EXCESSIVE RISK OF THESE COMPANIES.

THOMPSON: ONE OTHER THING WE'LL BE WATCHING THAT YOU HAVE AN IMPACT ON WILL BE THE 2009 BONUSES AT CITI, WHICH YOU STILL HAVE OVERSIGHT ON. THEY'RE GOING TO BE PULLED FROM A FIXED POOL THAT'S GOING TO BE DERIVED FROM SOMETHING. WHAT IS IT THAT IT'S GOING TO BE DERIVED FROM? WILL IT BE REVENUE? WILL IT BE EARNINGS?

FEINBERG: RIGHT NOW OUR REPORT SAYS IT WILL BE DERIVED FROM BOTTOM LINE EARNINGS, BUT WE HAVE ACKNOWLEDGED WITH CITI AND WITH EACH COMPANY WITH THIS POOL CONCEPT THAT THE DEFINITION OF WHAT CONSTITUTES THIS POOL OF AVAILABLE COMPENSATION, BONUS COMPENSATION, HAS TO BE WORKED OUT WITH EACH COMPANY IN OUR OFFICE AND WE PLAN TO DO THAT.

THOMPSON: I BELIEVE JOE HAS A QUESTION. JOE?

KERNEN: MR. FEINBERG, BACK TO EUROPE, JUST FOR A SECOND TO TALK ABOUT YOUR PHILOSOPHICAL VIEWS ON WHAT WE'RE TRYING TO ACCOMPLISH HERE NOW. IN YOUR VIEW, WE'D LIKE TO ALIGN COMPENSATION SO THAT IT DOESN'T CAUSE RISKS TO THE ENTIRE SYSTEM OR BREED RISKY BEHAVIOR SO IT'S ALIGNED WITH PERFORMANCE. HOW DO YOU ALIGN THAT WITH WHAT HAPPENED IN EUROPE? EVERYBODY ACROSS THE BOARD, 50% ARBITRARY WINDFALL TAX ON BONUSES. THAT ALMOST APPEARS PUNITIVE. HOW DO YOU MAKE SURE THIS ISN'T DONE IN A PUNITIVE WAY OR A POPULIST WAY TO MAKE SURE NO ONE MAKES ANY MONEY?

FEINBERG: GREAT QUESTION. FIRST OF ALL, I TAKE NO POSITION ON WHAT ENGLAND IS DOING OR FRANCE. I'M MORE INTERESTED IN WHAT I HAVE TO DO UNDER A STATUTE PASSED BY CONGRESS. WHAT I'M TRYING TO SO DO IS -- THERE'S NO VINDICTIVENESS WHATSOEVER TO THIS PROGRAM HERE IN THE UNITED STATES. NONE. ZERO. WHAT I'M DOING IS TRYING TO, AS YOU SAY, ALIGN INDIVIDUAL CORPORATE OFFICIAL INTEREST WITH THE LONG TERM, NOT THE SHORT TERM, THE LONG-TERM INTEREST OF THE COMPANY. SO LET'S GIVE THESE OFFICIALS MORE COMPENSATION IN THE FORM OF STOCK, WHICH CANNOT BE SOLD FOR THREE, FOUR, FIVE YEARS. AND OVER THAT TERM, HOPE AND BELIEVE THAT THE OFFICIALS' INTEREST ARE ALIGNED WITH THE LONG-TERM STRENGTH OF THE COMPANY.

KERNEN: DO YOU THINK IT'S IRONIC THAT SO MANY COMPANIES HAVE ACCELERATED EFFORTS TO EXIT THE T.A.R.P. JUST TO AVOID THE COMPENSATION CAPS? I MEAN, THAT'S KIND OF A -- I MEAN, WE'RE ACCOMPLISHING WHAT WE WANTED, BUT IT'S IN KIND OF A PERVERSE WAY.

FEINBERG: WELL, YOU SAY IRONIC AND PERVERSE. I WOULD SAY THAT I -- I WOULD SAY THAT THE GOAL OF THE T.A.R.P. EXECUTIVE COMP PROGRAM ALWAYS WAS, AND THE SECRETARY OF THE TREASURY HAS POINTED THIS OUT TIME AND TIME AGAIN -- THE GOAL HAS ALWAYS BEEN, THE TOP PRIORITY, GET THE TAXPAYERS THEIR MONEY BACK. AND THAT IS EXACTLY WHAT WE'RE DOING WITH BANK OF AMERICA. I HOPE WITH CITI. MAYBE SOME OF THESE OTHER T.A.R.P. RECIPIENTS. AND THAT IS THE PRIMARY OBJECTIVE.

THOMPSON: YOU KNOW, YOU SPEAK ABOUT HOW IMPORTANT IT IS TO ALIGN LONG-TERM COMPENSATION WITH THESE EMPLOYEES' OVERALL PAY. HOW DEEP SHOULD THAT GO IN THE MANAGEMENT STRUCTURE? YOU'RE OVERSEEING THE TOP 100 EXECUTIVES. SHOULD IT GO DOWN TO ANYONE WHO IS AN EMPLOYEE IN THE COMPANY?

FEINBERG: EACH COMPANY IS DIFFERENT. MANY COMPANIES HAVE TOLD ME THAT ALTHOUGH THE STATUTE TALKS IN TERMS OF 26 TO 100, THAT THEIR OWN PAROCHIAL COMPENSATION PROGRAM DOESN'T STOP ARBITRARILY AT 100. IT MAY BE THE PRINCIPLES I'M ENUNCIATING GO 26 TO 1,000 OR 26 TO 5,000. THAT'S UP TO EACH COMPANY. I CAN ONLY CONSTRUE THE STATUTE THAT LIMITS MY AUTHORITY. WHETHER THE COMPANIES THEN USE THOSE PRINCIPLES WELL BEYOND 100 IS UP TO EACH COMPANY.

THOMPSON: YOU KNOW, WHEN I LISTEN TO THIS, THE ONE THING THAT I'M THINKING IS, PART OF THE PROBLEM WE SAW, THESE HUGE PAY PACKAGES IN THE PAST COUPLE OF YEARS WAS BECAUSE OF STOCK OPTIONS. STOCK OPTIONS WEREN'T PART OF YOUR PLAN. IF YOU DO SEE A RALLY IN THE STOCK MARKET, WHERE WE COME BACK TO THE SAME THING WHERE PEOPLE FIVE YEARS FROM NOW WHO RECEIVED THESE STOCK GRANTS PULLING HOME HUGE PAY PACKAGES ONCE AGAIN AND WILL THE CYCLE START ALL OVER AGAIN WITH PEOPLE COMPLAINING THAT IT'S A BAD THING TO GO HOME WITH A MULTIMILLION DOLLAR PAYCHECK, EVEN THOUGH YOUR INTERESTS WERE ALIGNED WITH THE COMPANY AND ARE REFLECTIVE OF THE COMPANY'S PERFORMANCE?

FEINBERG: FIRST, STOCK OPTIONS ARE PROHIBITED BY THE STATUTE.

THOMPSON: AS I SAID, THESE ARE THE STOCK GRANTS GIVEN RIGHT NOW.

FEINBERG: SECOND, IF AT THE END OF FOUR YEARS OR FIVE YEARS A COMPANY CORPORATE OFFICIAL'S STOCK IS WORTH DOUBLE TRIPLE QUADRUPLE BECAUSE THE BECAUSE THE OVERALL HEALTH OF THE COMPANY HAS QUADRUPLED, OR WHATEVER, I THINK THAT'S PRECISELY WHAT WE ARE TRYING TO PROMOTE HERE. AND I'M LESS WORRIED, FRANKLY, THAT THERE WILL BE A WINDFALL FIVE YEARS FROM NOW THAN I AM IN REINING IN CURRENT EXCESSIVE RISKY COMPENSATION PRACTICES AND TRYING TO PUT IN PLACE SOME PRINCIPLES THAT WILL NOT ONLY BE MANDATED AS TO THESE COMPANIES THAT I HAVE JURISDICTION OVER, BUT HOPEFULLY WALL STREET GENERALLY AND WE'LL HAVE TO SEE HOW THAT UNFOLD.

THOMPSON: I KNOW BECKY QUICK HAS A QUESTION.

QUICK: YES, MR. FEINBERG, WE'RE WATCHING THE T.A.R.P. MONEY GET PAID BACK AT A RAPID FIRE PACE, BANK OF AMERICA, WELLS FARGO, CITIGROUP, ALL PAYING BACK AND NOW A STORY IN THE FINANCIAL TIMES THAT AIG IS LISTING ITS ASIAN ASSURANCE UNIT, IS GOING TO RAISE UP TO $20 BILLION, THEY CAN START PAYING THE MONEY BACK. DO YOU THINK YOUR JOB IS GOING TO WRAP UP MORE RAPIDLY THAN ANYBODY EXPECTED. HOW LONG DO YOU EXPECT TO BE IN THIS POSITION?

FEINBERG: UNDER THE STATUTE I SERVE AT THE PLEASURE OF THE SECRETARY OF THE TREASURY. AND THE JURISDICTION OF MY OFFICE. CONTINUES UNINTERRUPTED UNTIL ALL OF THE PERTINENT T.A.R.P. LOANS ARE PAID BACK TO THE TAXPAYER. FROM WHAT I GATHER, EVEN THOUGH SOME HAVE ACCELERATED THEIR PAYMENTS, LIKE BANK OF AMERICA AND CITI, OTHER COMPANIES THAT ARE SUBJECT TO MY JURISDICTION ACKNOWLEDGE THAT IT'S GOING TO TAKE A GOOD DEAL LONGER, NO MATTER WHAT. SO I THINK THAT THE OFFICE OF THE SPECIAL MASTER WILL BE AROUND FOR SOME TIME TO COME.

THOMPSON: IF YOU WERE ASKED, WOULD YOU DO IT AGAIN?

FEINBERG: YOU DO NOT SAY NO TO THE SECRETARY OF THE TREASURY.AND IF SECRETARY GEITHNER ASKS YOU TO DO SOMETHING, I SUGGEST YOU DO IT. AND I SERVE AT HIS PLEASURE. AND I'M GLAD TO DO IT.

THOMPSON: WE WANT TO THANK YOU FOR COMING IN.WE'VE BEEN SPEAKING WITH KENNETH FEINBERG, THE SPECIAL MASTER OF COMPENSATION FOR THE U.S. GOVERNMENT. THANK YOU.

FEINBERG: THANK YOU

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