FIRST ON CNBC: CNBC TRANSCRIPT: CNBC'S "SQUAWK ON THE STREET" SITS DOWN WITH SENATOR RICHARD SHELBY, TODAY, MONDAY, MARCH 15H

Senator Richard Shelby
Senator Richard Shelby

WHEN: TODAY, MONDAY, MARCH 15H AT 10:20AM ET

WHERE: CNBC'S "SQUAWK ON THE STREET"

Following is the unofficial transcript of a FIRST ON CNBC interview with Senator Richard Shelby today, Monday, March 15th at 10:20 AM ET on CNBC's "Squawk on the Street."

All references must be sourced to CNBC.

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BURNETT: IN LESS THAN FOUR HOURS, DEMOCRATIC SENATOR CHRISTOPHER DODD WILL BE REVEALING HIS PLAN TO OVERHAUL WALL STREET. REPUBLICANS SEEM TO WANT MORE TIME FOR MEMBERS TO STUDY THE MATTER. SENATOR SHELBY IS LEADING THE CHARGE ON THAT FRONT, HE'S RANKING MEMBER OF THE BANKING COMMITTEE AND HE JOINS US NOW HERE ON SET. SENATOR SHELBY, WONDERFUL TO HAVE YOU.

SHELBY: THANK YOU.

BURNETT: CHRISTOPHER DODD HAS MADE THE ARGUMENT, WHICH SENATOR CORKER'S AGREED WITH, THAT HE'S ONLY GOT 60 DAYS, AND THEY NEED TO GET A BILL OUT THERE AND HE'S WILLING TO LISTEN TO WHATEVER YOU HAD TO SAY, BUT HE NEEDS TO GET A BILL OUT THERE NOW. DO YOU AGREE WITH THAT OR DO YOU THINK HE'S EVEN RUSHING TODAY'S ANNOUNCEMENT.

SHELBY: WELL, HE'S THE CHAIRMAN AND HE CAN SET THE AGENDA, BUT AT THE END OF THE DAY, I BELIEVE TO PASS A BILL OFF THE FLOOR OF THE SENATE, HE'S GOING TO HAVE TO HAVE A LOT OF REPUBLICAN HELP, NOT ONE, NOT TWO, BUT A CRITICAL MASS. AND SENATOR DODD AND I HAVE TALKED ABOUT THIS ON MANY OCCASIONS. WE WERE TALKING THE OTHER DAY, AND I BELIEVE THAT, ALTHOUGH I HAVEN'T SEEN THE BILL, I THINK HE'S GOING TO INCORPORATE SOME OF THE IDEAS THAT WE HAVE SUGGESTED, AND MAYBE IT'S THE BEGINNING OF REAL NEGOTIATIONS BETWEEN THE DEMOCRATS AND REPUBLICANS. BUT WE'LL HAVE TO SEE AS THE BILL UNFOLDS STARTING LATER TODAY.

BURNETT: AND I KNOW MARK AND I HAVE A LOT OF QUESTIONS ON SOME OF THE SPECIFICS, BUT I WANTED TO JUST HIGHLIGHT SOME OF THE THINGS PEOPLE ARE BRINGING OUT TODAY THAT THIS IS GOING TO BE IN THE DODD PROPOSAL, GET YOUR REACTION TO IT. ONE OF THEM IS THIS ONE, THAT THE NEW YORK FEDERAL RESERVE GOT TOO POWERFUL, AND SO NOW, INSTEAD OF HAVING THE BAT BOARD PICK WHO'S IN CHARGE AND THAT PERSON'S IN CHARGE OF THE BIGGEST BANKS IN THE NATION THE PRESIDENT WILL MAKE THAT CHOICE. WHAT DO YOU THINK?

SHELBY: I HAD MADE THE SUGGESTION TO SENATOR DODD AND OTHERS ON THE COMMITTEE SEVERAL MONTHS AGO THAT WE SHOULD IS KNOCK OUT THE CONFLICTS IN CHOOSING WHO'S GOING TO BE THE NEW YORK FED CHAIRMAN. AND THE OTHER RESERVE BANK CHAIRMANS. IN THIS PROPOSAL, FROM WHAT I HEARD THIS MORNING ON TV AND I HAVEN'T SEEN THE LANGUAGE SENATOR DODD IS PROPOSING THAT THE PRESIDENT ONLY APPOINT THE NEW YORK FED CHAIRMAN BUT NOT THE OTHER RESERVE BANKS. I THINK THAT WE NEED TO LOOK AT THAT VERY CAREFULLY. BUT I DO BELIEVE THAT ANYWHERE WE CAN KNOCK OUT OBVIOUS CONFLICTS OF INTEREST, WHERE SOME OF THE BANKS HELP CHOOSE THEIR REGULATORS, THAT BELIEVE HAPPENS AT THE FEDERAL RESERVE BANK OF NEW YORK AND THE OTHER RESERVE BANKS, THAT THAT SHOULD BE DEALT WITH. I KNOW THAT'S PART OF THE 1913 FEDERAL RESERVE ACT. IT WAS A COMPROMISE LEGISLATION THEN.

BURNETT: RIGHT.

SHELBY: BUT IT'S OBVIOUS CONFLICT TO ME.

HAINES: IN A LETTER SIGNED BY ALL BUT ONE OF THE DEMOCRATS ON THE COMMITTEE DATED, I GUESS THIS IS FRIDAY, YOU SAY PARDON ME WHILE I SEARCH FOR THE SENTENCE I'M LOOKING FOR, "WE UNDERSTAND YOUR BILL WILL CONTAIN SEVERAL PROVISIONS WHICH WILL ADDRESS ISSUES THAT HAVE NEVER BEEN SUBJECT TO THE COMMITTEE'S REVIEW OR EXAMINATION." WHAT ARE YOU REFERRING TO THERE, SO THAT WE HAVE A CLEARER VIEW OF WHAT'S AT ISSUE?

SHELBY: WELL, I'M SURE THAT THERE'S ALWAYS CLUTTER. I HAVEN'T SEEN THE BILL, BUT NEITHER HAVE WE. NOBODY HAS. BUT THERE'S ALWAYS THINGS THROWN IN THAT WE NEVER HAD HEARINGS ON, AND WE WANT TO MAKE SURE OF THAT. I DON'T WANT TO, YOU KNOW, NEGOTIATE THE BILL ON TV TODAY, BECAUSE I HAVEN'T SEEN IT, BUT I CAN TELL YOU THIS, IF SENATOR DODD AND THE DEMOCRATS REALLY WANT A SUBSTANTIVE BILL, WHICH A LOT OF US WANT, I BELIEVE WE CAN GET IT. WE CAN WORK TOGETHER. IF THEY WANT TO JUST PUSH POLITICS, THAT'S ANOTHER THING. BUT THE TOO BIG TO FAIL AND A RESOLUTION OF THAT IS SOMETHING THAT SENATOR WARNER AND SENATOR CORKER HAVE REALLY WORKED ON. A LOT OF US ARE VERY CONCERNED ABOUT THAT. I HAVE WORKED ALONG WITH SENATOR DODD AND OTHERS ON THE CONSUMER FINANCE PIECE, AND THERE ARE A FEW STICKING POINTS DERIVATIVES, CORPORATE GOVERNANCE AND SO FORTH, BUT WE PROBABLY CONCEPTUALLY MAYBE AGREE ON 85% OR 90% OF A BILL. IT'S A QUESTION HOW DO WE MOVE IT FORWARD.

HAINES: WHAT ABOUT THIS ISSUE OF CONSUMER PROTECTION? WHERE DO YOU STAND ON THAT? DO WE NEED IT? AND THEN YOU GET INTO A TURF WAR, WHO SHOULD DO IT.

SHELBY: ABSOLUTELY. A CRUCIAL QUESTION RIGHT NOW. DO WE NEED IT? WE'RE ALL CONSUMERS, BUT I DON'T THINK WE NEED A FREE-STANDING CONSUMER FINANCE PRODUCTS DIVISION OR FREE STANDING WHERE IT HAS ITS OWN RULES, ITS OWN ENFORCEMENT, BECAUSE SOONER OR LATER, IT'S GOING TO RUN INTO THE QUESTION OF SAFETY AND SOUNDNESS, YOU KNOW, HOW HEALTHY A BANK IS, AND THEY COULD BE WORKING AT ODDS AND SO FORTH. I PROPOSE THAT IT BE OKAY TO BE PART OF THE FED, OUR FDIC, BUT THAT WE HAVE A COUNCIL OF REGULATORS HERE THE FED, FDIC, THE COMPTROLLER, A STATE BANK AND SO FORTH, TO OVERSEE THIS, BECAUSE AT THE END OF THE DAY AND THE BEGINNING OF THE DAY, THE SAFETY AND SOUNDNESS, THE CREDIT WORTHINESS OF A BANK IS KEY TO THE FUTURE. WE'RE PROBABLY GOING TO LOSE I HOPE WE LOSE NONE, BUT WE COULD LOSE 300, 400, 500 BANKS THIS YEAR, SO, SAFETY AND SOUNDNESS IS ON THE CONSUMER, WHICH IS ALL OF US' MIND.

BURNETT: HOW WOULD YOU FUND THIS ISSUE, AND THIS IS ANOTHER BIG ISSUE, OF WHO GETS CHARGED, RIGHT, THIS TOO BIG TO FAIL ISSUE. IF A BANK IS HUGE AND BY THE WAY, ALL OF OUR BIGGEST BANKS HAVE GOTTEN BIGGER IF YOU WERE TO HAVE A FAILURE, AND LET'S SAY BANK OF AMERICA, LET'S PICK IT HYPOTHETICALLY HOW WOULD THIS BILL PREVENT THAT FROM WRECKING THE ENTIRE SYSTEM?

SHELBY: WELL, THAT'S CENTRAL TO WHAT WE'RE TRYING TO DO HERE. I BELIEVE THAT TOO BIG TO FAIL IS CRITICAL. THAT IS, WE SHOULD NOT HAVE IT. THAT WHAT WE'RE TRYING TO DO, AND WE HAVEN'T SEEN THE DODD LANGUAGE TODAY, BUT I'VE SEEN LANGUAGE THAT WE'VE BEEN WORKING ON, THAT WE'RE TRYING TO HAVE A RESOLUTION AUTHORITY THAT WHERE NOTHING IS TOO BIG TO FAIL. AS VOLCKER SAYS, IF IT'S TOO BIG TO FAIL, IT'S PROBABLY TOO BIG TO EXIST. BUT I DON'T THINK BEING BIG IS NECESSARILY BAD. I THINK BEING BIG AND THINKING YOU'RE GOING TO BE BAILED OUT BY THE FEDERAL GOVERNMENT, THE TAXPAYER IS VERY BAD.

BURNETT: HOW WOULD YOU

SHELBY: SO, WHAT WE'RE TALKING ABOUT, ERIN, IS HOW DO WE GET, YOU SEE, SOMETHING LIKE DEBTOR IN POSSESSION MONEY. GEITHNER, THE SECRETARY OF THE TREASURY, HAS ONE VIEW ON IT. SENATOR CORKER AND WARNER AND OTHERS HAVE ANOTHER. IT'S GOT TO BE RESOLVED. SOME PEOPLE BELIEVE IF WE SET ASIDE MONEY, AND YOU KNOW, WE CHARGE THE BANKS, THE BIG BANKS, TO PUT A POOL OF MONEY IN, THAT THAT IS SETTING UP TOO BIG TO FAIL IN THE FUTURE. WHAT WE WANT TO DO IS SEND OUT THE MESSAGE THAT NOTHING'S TOO BIG TO FAIL.

HAINES: SO, WHAT SORT OF TIMETABLE, SINCE YOU'RE CONCERNED ABOUT THE TIMETABLE, AND I THINK EVERYBODY CAN UNDERSTAND THAT CONCERN, YOU KNOW, WHAT IS THAT OLD SAYING? ACT IN HASTE REPENT AT LEISURE, SOMETHING LIKE THAT.

SHELBY: ABSOLUTELY.

HAINES: WHAT WOULD BE AN ACCEPTABLE TIMETABLE FOR YOU?

SHELBY: WELL, I DON'T WANT TO PUT A CALENDAR ON ANYTHING. WE HAVE BEEN DEALING WITH THIS OVER A YEAR NOW. I WENT TO THE WHITE HOUSE IN FEBRUARY LAST YEAR WITH SENATOR DODD AND MET WITH THE PRESIDENT ON THIS. WE HAVE HAD HEARINGS. I THINK WE BASICALLY KNOW WHERE WE'RE GOING. IT'S A QUESTION HOW DO WE GET THERE AND WHAT AVENUE. APRIL'S COMING UP IN A FEW WEEKS. I DON'T BELIEVE YOU CAN RUSH THIS BILL THROUGH. IT'S 1,000 TO 1,200 PAGES. NOBODY'S SEEN IT YET, THE PROPOSED BILL. AND I HOPE THAT WE CAN RESOLVE THIS. IF SENATOR DODD AND THE DEMOCRATS AND THE PRESIDENT WANTS A BILL, A GOOD BILL, WE CAN WORK AND MEET HIM AT LEAST HALFWAY.

BURNETT: SENATOR DODD MAKES A POINT, THOUGH, THAT THEY'VE SPENT HUNDREDS OF THOUSANDS, MAYBE, AT LEAST TENS OF THOUSANDS OF HOURS ON IT THE PAST YEAR. PEDAL MEETS THE METAL, YOU MAY NOT HAVE SEEN THE EXACT LANGUAGE, BUT ALL OF YOU KNOW WHERE THE OTHER ONES STAND. HE SAYS LOOK IF WE ARE GOING TO GET IT DONE THIS SESSION, NOT PUSH IT OFF PAST MIDTERMS YOU HAVE 60 DAYS.

SHELBY: WELL WE'VE ALL SPENT, ERIN, THOUSANDS OF HOURS, NOT JUST THE DEMOCRATS, THE REPUBLICANS, THE REPUBLICAN STAFF, MEMBERS

BURNETT: RIGHT

SHELBY: AND SO FORTH, BUT YOU CAN'T PUT A CALENDAR ON ANYTHING IN WASHINGTON. YOU CAN MOVE IT OUT OF THE COMMITTEE, I HAVE NO DOUBT THAT DEMOCRATS CAN MOVE THIS OUT OF THE COMMITTEE, THE QUESTION IS CAN THEY MOVE IT OFF THE FLOOR. I SAY THEY WON'T BE ABLE TO DO THAT UNLESS WE MEET CRITICAL MASS, THAT IS A LOT OF REPUBLICAN HELP

BURNETT: DAVID

FABER: SENATOR SHELBY, DAVID FABER, I'M JUST CURIOUS WITH THE ADVANTAGE OF TIME NOW HAVING PASSED SINCE THOSE CRAZY DAYS IN SEPTEMBER AND OCTOBER OF 2008, WHEN YOU LOOK BACK AT SOME OF THE DECISIONS YOU HAVE MADE, SOME OF THE DECISIONS YOU SAW MADE BY TREASURY AND SOME OF THE FED, DO YOU HAVE ANY REGRETS OR DO YOU BELIEVE THAT WE CHOSE THE RIGHT COURSE

SHELBY: WELL, IF YOU LOOK BACK, I OPPOSED THE BAILOUT OF THE BANKS, THE BAILOUT OF THE AUTO COMPANIES, I'VE ALWAYS THOUGHT THAT NOTHING IS TOO BIG TO FAIL. I HAVE TO GIVE CREDIT TO A LOT OF THE BIG BANKS, AND SMALLER ONES TOO, THAT HAVE PAID THIS MONEY BACK, PAID THE WARRANTS BACK, BUT STILL OUR BANKING SYSTEM IS NOT IN GREAT SHAPE. THIS ONE IS GOING TO BE A TRYING ONE FOR A LOT OF BANKS. SOME OF OUR BIG BANKS ARE STILL SICK

FABER: DO YOU BELIEVE ULTIMATELY THAT WE WOULD HAVE BEEN BETTER OFF HAD WE ACTUALLY ALLOWED THINGS THAT WERE BIG TO FAIL BACK THEN?

SHELBY: I DO I THINK WE WOULD BE BETTER OFF, LOOK AT LEHMAN. NOBODY WANTS ANYTHING TO FAIL, BUT EVERYBODY THOUGHT THAT THE SKY WOULD FALL WHEN LEHMAN WENT UNDER, BUT IT DIDN'T AND IF OTHER BIG BANKS HAD GONE UNDER, THE SKY WOULDN'T HAVE FALLEN. IT WOULD HAVE BEEN DARK FOR A FEW DAYS, BUT THIS COUNTRY IS RESILIENT AND WE'VE GOT OTHER BANKS THAT ARE STRONG AND WE COULD STEP IN AND SAVE THE SAY STILL

HAINES: THANK YOU, DAVID. THANK YOU, SENATOR SHELBY

BURNETT: GOOD TO SEE YOU

SHELBY: THANK YOU

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