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Jennifer Dauble
Bill Clinton



Following is the unofficial transcript of a CNBC EXCLUSIVE interview with former President Bill Clinton today, Friday, May 14th. Excerpts of the interview will air throughout CNBC's Business Day programming and the full interview will run on CNBC's "Closing Bell with Maria Bartiromo" today at 4PM ET.

All references must be sourced to CNBC.

MARIA BARTIROMO, host: Mr. President, good to have you on the program. Thanks so much for joining us.

President BILL CLINTON: Thank you, Maria.

BARTIROMO: A CGI media event. Is this the first time you've done midyear?

Pres. CLINTON: No, we've been doing it a couple of years. We find it's a good thing just to kind of take stock of where we are, and it gives us a way of organizing building up energy during the year, and lets people have a little head start on preparing their commitments for the meeting in September. This year we did it a little differently. We opened up with four CEOs talking about what they did in their companies to try to affect the larger world and why it was a part of their business mission. Cherie Blair made a commitment to try to provide huge numbers of cell phones to women entrepreneurs in developing countries.

And then we went into these action networks. We've now organized these action networks around things like women and children's development, Haiti, energy. And the people that work there work all year long--in very small groups, but they help each other. Then they bring in other people. And so they--it gives them a way to keep in touch with each other all year long. One man said to me after it was over, he said, `You know, I'd have to travel for two months and spend a fortune to be in touch with all these people that I get to work with now on a regular basis because of this.'

So this--we just sort of take a little time out in the middle of the year, the middle of our year, from September to September, and have a meeting and talk about where we are.

BARTIROMO: Which is why so many CEOs come to the Clinton Global Initiative. We know that they're coming here more than any other conference because they get that networking time to meet colleagues.

Pres. CLINTON: Yeah. Yes, they--and it's really quality stuff. It's not--they're not just talking, they're doing. And these--I think more and more in the corporate environment, they want to be doing and to be seen to be doing, you know, serious, serious work, whether it's in energy or development or health care, whatever. And these people, you know, they're very serious about it. If you listened to the CEOs from Aetna and Travelers and Honeywell and Pfizer today--Pfizer, the CEO, Jeff Kindler, has been more involved with the CGI over a long period of time--but all four of those executives have serious missions, where they're not only, you know, empowering their employees and having the company give money to certain things, but they actually are trying to integrate into their business model ways to make the world a better place and create more customers for themselves in the process.

BARTIROMO: I want to ask you about what you got out of that CEO panel today, but first, what are you feeling about the corporate sector these days? I mean, it--were--there seems to be vibrancy coming from the corporate sector, but at the same time it's coupled with this feeling that there's so much pressure coming out of Washington, that this administration is anti-business. Do you hear that?

Pres. CLINTON: I hear it. I don't think it's true. I think a lot of this has been focused on--first on the financial regulation bill and the rhetoric surrounding it, maybe even more than the specifics in it; and secondly the controversy swirling around the SEC action and Goldman. But I think that the business community is coming back in America, and what I'm most concerned about right now that's not in the headlines is that many of our banks, including, you know, the community banks and not mega banks, they have now $1 1/2 trillion in uncommitted cash reserves, uncommitted to loans. Which means, in theory, at very conservative ratios, they could make $15 trillion in loans tomorrow and the whole world recession would be over in a nanosecond. Now, I don't think there's $15 trillion worth of good loan demand out there, but there is a lot. And the small business sector, which has been the generator of most employment in America, needs access to credit.

There was a story in the press two days ago about a Taiwanese-American who developed a new battery that's more efficient than the traditional lithium battery for cars, and it's--it got 100-mile-a-gallon hybrid, this guy did, and he couldn't get anybody to finance and manufacture them solely in America till he--so he had to put two in China, and finally they had so much success he's opening a third plant, this time in Michigan. But he wanted to put all three here. So I think that a lot of the banks, for understandable reasons, are a little edgy about getting back into lending. But it kind of reminds me of the cat that sits on a hot stove, then it won't ever sit on a cold one. You know, that's the one thing that's kind of holding us back. We need to have some breakthroughs. But I think that, in general, most Americans are still--they believe in the business community, they want to see the private sector come back, and they know that with a deficit as big and with the debt having been added to so much in this decade, that we're going to have to get out of the rest of this economic slowdown through private sector job growth.

BARTIROMO: But there's also pressure coming from investigations. I mean, does it--does it seem to you that Wall Street crossed the line? Is Wall Street broken? How are we going to get trust back in the system?

Pres. CLINTON: Well, I think...

BARTIROMO: And did they do anything wrong?

Pres. CLINTON: First of all, all I know is what I've read in the press, and I see that there are a lot of firms now that are being questioned by the SEC. I said the other day, and some of my friends got a little hot at me for saying it, that based on what I had read in the press about the--of Goldman and the CEO, it didn't seem to me that that was illegal, what they did. If we don't think it's advisable for people to be gambling one step removed on derivatives because it adds to instability in the marketplace, then there are plenty of ways to deal with that without claiming that it's illegal. You can simply say that you can't have derivative trading in those areas, or you can simply raise the margin requirements significantly, or you can do what I think will be done with the securitized home mortgages, saying that the people that issue the mortgages, the original extender of the loan, have to maintain some position in the securities; that is, they can't get rid of all their risk, because that's one of the things that caused this bubble to get out of hand.

So I think that--you know, I think that what we ought to do is have an honest conversation here about what really happened, how to fix it and how to get what's best about vital capital markets. We--one of the reasons people like doing business in America is we have very vital, flexible, fast-moving capital markets. I think that requiring--avoiding the leverage you had with Bear Stearns at 34-to-1, that'd be a good thing. Most people understand we shouldn't do that again. I think saying that the securitized home mortgages wound up spinning the bubble too fast, and you shouldn't sever the connection totally between a person that makes their loan and the risk that the loan won't go bad, that's defensible. But I think to lower the rhetoric and talk about the facts, that's how we ought to deal with this.

BARTIROMO: So what did you get from the CEOs today on that panel? Clearly they're putting on their hats of doing good. That's why they're coming to CGI; they want to give back. Right?

Pres. CLINTON: Yeah.

BARTIROMO: I mean, did you get pledges? Tell me what you heard from them in terms of...

Pres. CLINTON: Well, what--first of all, they're involved with us in an ongoing basis, but like, for example--and let me just say, what I've tried to do more and more is to get business people to think about making money in different ways. That is, I'm grateful when they make contributions, and I'm very grateful when they send their people out to do work, you know, whether it's Travelers in the schools or Pfizer training health care workers, or whatever. I'm grateful for that. But when they change their business model, they can really change the world. For example, Pfizer became the first large pharmaceutical company to partner with my foundation in a poor country, and--because they make the only drug in the world to treat tuberculosis and people with AIDS that doesn't make the people so sick they can't function anymore. So it's not like there's a substitute, there's no generic drug. They cut that price 60 percent, and in return for that, we got subsidies and sold it to a couple hundred--we're going to sell it to 250,000 or so people who wouldn't otherwise get it. We're going to save a couple hundred thousand lives with that drug. Pfizer's still making money at a lower margin, but a much bigger volume. That's the kind of thing that I get from them. They're looking for ways to do this.

Aetna has routinely been voted the most admired health insurer, but they know that the administrative cost of health care is too high. So I asked the head of Aetna today, I said, `Is this health bill going to lower the administrative costs because you don't have to spend time figuring out who not to cover?' He said, `Yes, but only if we get electronic medical records.' So he's out there trying to drive a change that will still allow him to make money but at lower prices to other people because the waste factor will be eliminated.

And, you know, Honeywell. A lot of people don't know this about Honeywell, but they're one of the big energy service companies. They'll come in and look at the--CNBC's office building and tell you, `If you do these 35 things you'll cut your utility bill by 30 percent,' and they'll guarantee it. So they're pursuing a business model that helps us to achieve the goal of reducing our greenhouse gas emissions in a way that increases the bottom line and increases jobs.

That's the thing I got out of it. These guys are always thinking about how they can take the world's problems and turn them into opportunities. And I think that is very important. And that also keeps their employees happier, they say. When their employees--they talked a lot about, you know, importance of having their employees be proud of what they do. So when they help alleviate poverty, when they help fight climate change and they help deal with health care crises, it's more rewarding, and their productivity goes up.

BARTIROMO: But what's your take on the expense of health care? Last time we spoke you said to me, `Health care will pass. There's no doubt in my mind.' You were right. But a lot of people come back and say, `It's costing me more money.' Corporations are worried about the expense in 2011.

Pres. CLINTON: Well, I think--what I think is that we need some sort of bipartisan effort now, like the one the president inaugurated--or when he appointed Senator Simpson, the former Republican leader, and my former chief of staff, Erskine Bowles, to head this deficit reduction commission. We need--we need to say, OK, here's the law. We're beyond politics. It's not going to be repealed because they can never get two-thirds votes to do it, and the president would veto it. So we need to talk about, now that we've covered everybody--so you don't have any in--financial incentive to waste a lot of money not covering people--what do we need to do? How are we going to move to electronic medical records? How can we get away from pay-for-procedure medicine to pay for health care? The Mayo Clinic costs less than 70 percent of comparable plans in America, even though it gives very good outcomes. Why? Because you enroll and you pay them to keep you healthy. Do we need medical malpractice reform, and if so, what kind do we need? Should we make it easier for doctors to self-insure in large numbers, even across state lines? Because when they do, then their malpractice premiums always drop, since only a tiny number of doctors commit the vast majority of the malpractice. We need to get into the stuff that will bring the costs down without undermining the quality. And that, I think, is very important. We need to invest in the things that will make us healthier. Two-thirds of the costs are from management of chronic diseases. Already obesity alone costs another $150 billion to the system. How can we take that out?

So that's where I think we are now. I think that--and we need the business community involved. And this is something where everybody can be on the same side, because whether they were for or against the bill now, no one has a vested interest, really, in seeing this money be spent in a way that will make us totally uncompetitive.

BARTIROMO: Senator Simpson came on my show and said he believes that this is actually going to--the health care plan in place right now, the health reform--is going to increase costs. So we're still looking at what this means.

Pres. CLINTON: Here's what I think. I think it will--it will cost more to provide insurance for the people that don't have insurance. And the government's paying subsidies, and then people will pay out of their pocket. But I think that the purchasing cooperatives for small businesses and individual policies will lower the cost per policy. And I think that covering everybody with a--and having a basic framework of what's covered should, unless there's a total breakdown in way the insurance business is run state by state, should dramatically cut the administrative costs of health care. Keep in mind, we spend about 30 cents on the health care dollar on paperwork. And that's 11 cents a dollar, or about $215 billion more than any other country spends. Now, that's not just--that's private insurance companies hiring people, that's employers complying, and it's providers complying. All my doctor friends in relatively small practices have doubled or tripled their administrative costs in the last two or three years. Those are the things that should go down. And if those savings flow, that will more than offset the cost of hi--you know, covering more people.

BARTIROMO: Under your leadership, this country had a budget surplus. We were enjoying boom times. Let me get your take on what it will take to actually put a dent in the deficit. I mean, an informed conversation, in your opinion, on tax reform would be really valuable to our viewers.

Pres. CLINTON: Well, first I think it's important to look at where we are. I supported the stimulus package when it passed the Congress because the economy was still contracting. And I was afraid if we didn't provide some money to state and local governments to keep the teachers and the health care workers working, they would either lay people off, which would make the economy contract more, or raise taxes to keep them on, which would make the economy contract more.

BARTIROMO: Which they did.

Pres. CLINTON: Yeah, but not as much as they would have if this stimulus hadn't passed. I supported giving some tax relief to middle-class people so they could go to the grocery store and keep their local grocer in business. And I supported investing in infrastructure and energy projects because we need to create some jobs. But the thing that made me wary about it--and I would've done the same thing, but the difference is, we now are borrowing half of our deficit spending not from ourselves or our own bond buyers, but from foreign governments. So we are, in effect, mortgaging out a lot of our sovereignty, I think, if we keep exploding the debt the way we are. Now, that portion of the deficit annually attributable to the stimulus will go away when normal economic growth returns. About half of the annual deficit will go away. The rest of it is embedded again.

And since upper-incomes people's relevant tax burden was raised to help pay for health care, it's unrealistic to think that we can basically solve this whole thing from cutting spending and just raise an upper-income taxes. We're going to have to have more growth. I think we're going to have to have more taxpayers, which is why I favor, in a disciplined way, a immigration reform and letting more immigrants come to the country. I think it would make more jobs for people who are unemployed, not fewer. We're going to have to look at different tax systems that are not easily evadable, and that make us more competitive.

I think they ought to look at a progressive value-added tax, just because--and I think it's important the American people understand this--most of our competitors have tax systems like this. If you have a value-added tax, you put a little revenue to the collector, you lower the income taxes, corporate and personal, and you put a little revenue collector on every stage of sales in a product or service, but if it is exported, you don't pay the last price. It's exempt from the value-added tax. And when a foreign good comes into this country, they do pay the last stage of the value-added tax. So when we export American products to countries with VAT taxes, our products pay that even though our corporations have already paid an income tax, already paid whatever other burdens. So if we could figure out how to do that, it would make us much more competitive with our exports. And since I believe this cleansing process, this awful process we've just been through gives a great chance to bring manufacturing back in America, I'd like to see that looked at.

Then I think the other thing you got to do is you just got to be more disciplined in controlling spending. You just can't--but it's important to recognize that all these things are related. For example, if you don't want Medicare to eat us alive--Medicare's a much bigger problem than Social Security, by the way--if you don't want it to eat us alive, you got to do

something to stop the cost drivers in health care. We can't keep doubling the cost of health care after inflation every decade. So my view is, control spending on an annual basis, work on health care costs, get more taxpayers, and try to have the most competitive possible tax system. And eventually you've got to really enforce these pay-as-you-go rules. You just--America...

And then the American people have to take responsibility, too. They've got to know, you just can't keep saying you want more government than you want to pay for. And borrowing money from overseas, it's just not right. It's bad for our kids and grandkids, and it puts us in a very vulnerable position going forward. We're not--you know, Greece is vulnerable because they're small. And they've been viewed as profligate. But essentially, in an international world where people can put their money in a nanosecond anywhere they want to,

I simply don't think we can afford to keep exploding this debt. And I think you're going to--the Democrats, we're more socially progressive, but we're also going to have to be fiscally conservative, I think. I just don't think that it's fair for America to take any other course.

BARTIROMO: But do you think the Greek situation can be contained?

Pres. CLINTON: I do. I wish that the European Union and the International Monetary Fund, all the people--I think Strauss-Kahn's a very smart guy. I wish that this response had occurred two months ago, because I think if it had it would've been much cheaper to do. You know, I dealt with a lot of this. We had Mexico, Brazil twice, the Asian financial crisis. And the--my inclination was always, if you're going to have to do something, go do it in a hurry. Send the right signal to the bond markets. Get the fix in and it'll be less costly. The longer you wait, the more expensive it is and you still have to do it. So I think it can be contained. And I think that, if they want to preserve the euro and they want the European Union to hold together and gradually have more economic and political integration, they have to do this. Now, a decision was made, basically by European leaders when I was president, to go with the common currency first before they had a total economic or political union. It was the only practical option they had, I think. But when they did it, this became perfectly predictable. I mean, you know, I--you can say whatever you want about the particular problems of Greece, something like this was going to happen because of the vast wealth disparities within the EU, and how the political systems have are dealing with this crisis. It's just hard to hold a common currency.

BARTIROMO: Which is what was the criticism as it was being formed, right? So many different economies and one currency.

Let me get your take, real quick, on...

Pres. CLINTON: But still, if they can make it through this, if they can keep going, they still--man, within 10, 20 years, they could be in great shape.

BARTIROMO: The BP oil spill.

Pres. CLINTON: Uh-huh.

BARTIROMO: Does this change the conversation in this country in terms of drilling offshore?

Pres. CLINTON: I think so. I think that most Americans still know there's a lot of offshore drilling which has been safe, but the problem is--and there may be some specific problems with the people who did the drilling for BP and the way the--and some of the things that were not reviewed, based on the facts that I've read and the coverage in The Wall Street Journal and and The New York Times and other places. All I know is what I read in the press about that. But what we learned about this, I think it's important, is that people who want to drill for oil but don't want it messing up their shores had generally thought, `Well, we'll just push it further offshore.' The problem is that when you--the further offshore you push it, the deeper you make it, the drilling. And then the more pressure there is going down, and the more difficult it is to navigate. You see how much had to be done with robots, for example, after this spill occurred, how hard it was to just make the housing that they tried to put over the spill to get the oil up to fit. So I think that we're going to have to re-examine the technology here, and we may see what happened, whether, you know, what mistakes were made either by the regulators or by the company doing the drilling. But my guess is is that you will still see some offshore drilling, and you'll see more caution about it and more care with it.

And it--we won't just automatically assume that the further out it is, the safer it is. It may be that the closer in it the safer it is. We'll just have to re-examine it. And I don't think we can know enough now, because both BP and the US government and all the people locally are focused on stopping the spill or containing its consequences. So I think we got to wait for the dust to clear on this a little bit.

BARTIROMO: What would you like our viewers to know about CGI, the September meeting? What do you want business people and investors to walk away, now that we're midyear?

Pres. CLINTON: I want them to know that it's a unique opportunity to come and be part of a worldwide network of people where they can meet not only other business leaders and wealthy individual philanthropists, but a lot of the leaders of emerging countries that are here for the United Nations, and heads of nongovernmental groups, both in the United States and from all around the world, including some of the poorest countries in the world, who are great innovators and who are doing great things. And that if they come to our meeting, they--almost no matter what they're interested in, there'll be an opportunity for them to go meet people who are interested in the same things and to actually make specific commitments that will change the future. And that we are literally trying to create a global network of people who just do things, who just ask, `How can I do this in a way that will get the desired results?' And I think it's important. I think we--people have talked enough without action. We do a lot of talking, but not very many speeches, and it's all very action-oriented. And most everybody finds it rewarding and interesting.

BARTIROMO: Final question, Mr. President, and it's about Wall Street. Under your leadership, Glass-Steagall came down, backed by Rubin, I guess, Treasury Secretary Rubin at the time. Now we're talking about financial regulatory reform, separating proprietary trading. Should Glass-Steagall be put back in place?

Pres. CLINTON: Well, the answer to that is, I haven't seen a case made for it. That is, I have said previously that I regret that I didn't try to regulate derivatives more, and I think that was a mistake. And I think we can see the contribution that some kinds of derivatives made to our current financial trouble. It's not clear to me that the repeal of Glass-Steagall did make a contribution to this current financial problem. If you look at it, the nonbank banks were already up and going before Glass-Steagall was repealed. One of the things that I thought would happen that didn't is I thought that Glass-Steagall might permit some local banks to stop some of their lenders from failing by converting their loan to a temporary equity interest, which we had same--done before. I thought it would stabilize the economy of America. I don't think it worked that way, but I'm still not sure that any of these real problems we had were aggravated by the repeal of Glass-Steagall. What happened was we had too much leverage. There was--there wasn't enough collateral to support the aggregate value of a loans out. And I said at the beginning of this program, Bear Stearns at 34:1 was the--sort of the poster child for that. And then you were--we cut the cord between making the loan and being at risk for the loan by securitizing and bundling--bundling and securitizing the home mortgages. And if you look at it, the UK and Ireland, they were more leveraged than we were, and no derivative problem. They tanked. Canada, which is an agricultural economy. You can't have an agricultural economy in today's world without derivative trading for--on agriculture. They did fine because they had tougher margin requirements, less leverage, and you couldn't offload all your risk.

So I'm still not sure--I mean, I'm open to it. If someone could actually give me an example of where I would made a mistake...


Pres. CLINTON: ...I would do it. I think this is a fact-based world. But I think the real problem is that the regulatory system broke down, not that the repeal of Glass-Steagall--which simply recognized the fact that the world had already moved beyond it--caused this.

BARTIROMO: No doubt about it.

Mr. President, would you like to add anything else?

Pres. CLINTON: No. I'm glad to be with you. Thank you.

BARTIROMO: Thanks so much. Appreciate it.

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