Transcript courtesy of Bloomberg Television
U.S. Treasury Secretary Jack Lew sat down today with Bloomberg Television's Chief Washington Correspondent Peter Cook and said that Europe should look to the United States as an example to get its economy moving: "We still have more work to do, but I think we're in a place now where the example of the United States is actually a good one."
Lew said, "Europe does need to look at what it can do to get the engine of growth moving again...The world needs Europe to grow."
Highlights below and full transcript available upon request.
Lew on what he is looking forward to at the upcoming G-20 meeting:
"We in the United States have taken tough actions to get our economy moving, and we're seeing positive results. We're seeing economic growth. We're seeing job creation. Not as fast as we'd like, but it's moving in the right direction. Our financial system has stabilized. We've got better capitalized banks. We've been making the point at these meetings that Europe does need to look at what it can do to get the engine of growth moving again. The world needs Europe to grow. We've been making the case to some of the emerging economies, China in particular, that they need to go through the internal reforms to get their economy moving. These have been friendly conversations. I think we have a common interest in a world where there's growth so that we can have the benefits within our benefits and across our borders and see job creation. And those are the kinds of conversations I look forward to having at the G-20 meeting."
On whether Europe should follow the U.S. as an example to get its economy moving again:
"We've been clear that things that we think worked in the United States were a combination of fiscal policy that was decisive and it helped get the engine of the economy moving. We've had monetary policies that have been effective. If you look at the world four years ago and the world now, very different; Four years ago, the world looked at the United States and it looked at the financial crisis and there was a lot of explaining to do as to how that had happened. Well, four years later we're growing, again, not as fast as we'd like, but steadily in the right direction. The core of our economy is recovering and the resilience of our economy is clear. In spite of its noise, the resilience of our political system has led to policies that have been effective. We still have more work to do, but we're in a place now where the example of the United States is actually a good one.
On whether the U.S. is in any position to offer Europe adequate economic policy recommendations:
"I never miss an opportunity to say that we are relentlessly focused on people looking for work in this country, making sure that they have the opportunity to find work. So the fact that we've made enormous progress does not mean that we're all the way there. You look at the core economy. It's growing in the neighborhood of 2 percent right now. It looks like it might be growing a little faster at the end of the year. This was a year with tremendous headwinds. We had a payroll tax cut that went away. We had spending cuts that took effect. Notwithstanding those very strong headwinds from government policies, some of them intentional, some of them unintentional, the core economy is growing at 2 percent."
"If you look at Europe, 2 percent is far beyond their expectations. And the headwinds won't be there next year, so we should be doing better as we get to the end of the year, the beginning of next year. This is not an occasion to say the work is done. And I've never said that the work is done. We need to be very cognizant of the fact that we have to invest in our own country in order to make sure that everyone who wants a job has a job. We have to worry about education. We have to worry about research and development. We have to worry about infrastructure. And that's a lot of what will be the subject of the debate as we work through the fiscal issues in the remainder of this year."
On making a stop in Greece this coming Sunday:
"The president will be meeting with the prime minister of Greece in August. He'll be coming to Washington. It's a chance for me to have some conversations with the prime minister and the finance minister. It's a chance to check in, and I'm looking forward to the conversations on Sunday... I've been following Greece pretty closely for the last couple of years. I think that it's clear that Greece has moved in a very important direction in making reforms that they needed to make. They've got difficult decisions ahead of them, and I think it's great that we have the chance to spend a couple of hours catching up and hearing where they are and how they see the prospects.
On the possibility of Greece asking the U.S. for financial help:
"I think that the Europeans have been dealing with the issue of Greece and it is obviously primarily a European challenge. But we have stayed in close contact with the Greek government throughout, and I think it's important that we continue that conversation. And being in the area is a chance to check in on a Sunday, and I think it's just a good use of a few hours."
On whether the U.S. government is making more progress toward a grand bargain than the public knows at this point:
"We talk on a constant basis to Democrats and Republicans, and we will continue to talk to all the members of Congress who are looking for a sensible way to solve some pretty serious fiscal challenges. What we have right now is a very different situation than we had in 2011. We've got a great deal of deficit reduction in place. We made the decision to cut spending in the Budget Control Act and we reduced discretionary spending by over a trillion dollars. We made the decision at the beginning of this year that we would take the top tax rates back where they were before the Bush tax cuts. That brought in $600 billion. You look at the combined savings of all of that with the internet on it. It's about 60 percent of the challenge."
"We then saw the across-the-boards cuts that are known as sequestration kick in, and that pretty much established the savings. It just did it in a way that's not very good for the economy and it did it in a way that's not good for investing in our future. We've got a lot of work to do to debate these issues, and we look forward to finding reasonable people to engage with who care about making sure that we have a strong economy in the future, who care about having strong defense in the future... there's still a lot of work to do. I think the fact that people still want to talk is a good thing. But I think there's still a lot of work to do."
On whether he will need to negotiate with Speaker Boehner and Republicans over the debt ceiling:
"We have been very clear. The negotiation in 2011 over the debt limit led to a very bad outcome. It led to the sense that the United States was debating should we or shouldn't we default. It introduced for the first time in our history a serious notion that there was a point of view that default was an acceptable option. It is not an acceptable option. I think the Congress learned that in 2011. And the president has been clear we will not and cannot negotiate over this question of whether or not there should be the option of defaulting. Congress just has to raise the debt limit because all that does is pays the bills that we've committed to. And for the first time in our history, we can't introduce the notion that that will not happen, that the United States will not pay its bills."
"We remain very open to the kinds of discussions that would bridge the gaps on fiscal policy. We've shown in the president's budget that we're willing to go more than halfway to put on the table tough entitlement reforms, tough revenue policies. We need that engagement, and we need it in the context of fiscal policy, but not in negotiating over the debt limit."
On two new proposals [Jeb Hensarling's and Warner-Corker's] in Congress to try and address what to do with Fannie Mae and Freddie Mac:
"If you look at these two proposals, in the Senate you have a bipartisan effort which we've been engaged in the conversations over. We've also been engaged with the chairman and the ranking member in the Senate. And they're looking for a way to accomplish goals that very much reflect our goals. One is to make sure that the American taxpayer is never left on the hook for an unbounded risk if there were another problem in the future. We can't repeat what happened in 2008. Secondly, that we have to get private capital back into the mortgage markets. And that's something that we need to work together on. And third, to maintain access to credit for people who are creditworthy to be able to get mortgages. I think that if you contrast what the conversation in the Senate is to the conversation in the House, it's kind of interesting that one is a bipartisan conversation and the other is not. This is going to require a bipartisan solution, and we look forward to being part of it."
"it's important that there be a bipartisan solution and important that it address the core issues that I just went through. There are details in all these proposal that are going to require more work and we're going to have to scrutinize, but that reflects the principles that the administration has laid out and it's the kind of direction that we have to go. Details obviously matter."
On whether he is more confident that Mel Watt will win confirmation following Rich Corday's confirmation:
"I'm delighted that Rich Cordray was confirmed. You look at a guy like Rich Cordray, who's now heading the consumer agency as the confirmed head. He won broad support on a bipartisan basis. He's got the support of even industries he regulates. He's done a great job. So the distraction of delay there is behind it. Mel Watt's an outstanding nominee. He was just today reported out of committee. That's an important step forward. I was talking the other day with Erskine Bowles, who said to me when they were in school together at North Carolina he was the smartest kid in the class. He's somebody who should be confirmed. He's been a good congressman. He has a background in the area, and we need a confirmed head of the FHFA. And I'm hopeful that he will be confirmed."
On what will it take to end debate over Dodd-Frank:
"It is critically important that we implement the outstanding pieces of Dodd-Frank quickly. And I've set the end of this year as a deadline for getting the major pieces in place. I think we're going to hit that deadline, and I think the sense of urgency is shared by all the agencies. We're going to see capital and leverage standards at a place that gives a real assurance that institutions can handle the risks that they undertake. We're going to see mortgage rules that are clear. We're going to see progress on the Volcker rule so that it's finished. We've got a fair amount of work ahead of us, but since the day I stepped into office as treasury secretary, I have made it right at the top of my list of getting to work. I in fact went from my swearing in in the Oval Office to chairing a meeting of the Financial Stability Oversight Council, and I haven't let up since. I am determined that we will do as much as we need to end too big to fail. And that's what we're in the process of doing."
"When we cross the finish line and we implement the last pieces of Dodd-Frank, we have to maintain every day vigilance to make sure that we're still keeping up with a constantly changing financial system. So we don't get to take off a day or a year. We're going to have to say on the job."
On whether he is willing to concede that leverage ratios proposed by Basel will put large US banks at a competitive disadvantage:
"We've seen in the last couple of weeks, two significant regulatory bodies, the Federal Reserve and the FDIC, put out proposed action that would very much increase the leverage ratio from the minimum set in Basel III. I think that the policy is a sensible one. It's a policy that says we're going to get to the level where institutions have to bear the burden of their own risk and have to have the capital in place to do that. It's important to look at the Basel rules as what they were designed to be, a minimum, not a maximum. And our policy in terms of financial regulation has been to seek harmonized rules as much as we can across the international community, and that's what Basel III is, but also to try to drive a race to the top to have the best system in place that others will emulate. We're seeing in many areas that that's happening where the rest of the world's catching up to the United States. We did have a serious financial crisis in 2008. We did take the most serious action to get ahead of it and to protect the system for the future, and I think we should be the leaders in the world driving things to a high standard."