Treasury Secretary Steven Mnuchin's full interview on supporting economy during crisis

[00:00:00] Speaker 1: Joining us now is Treasury Secretary Steven Mnuchin. Mr. Secretary, thank you so much for coming back on Squalb in the Street. Jim, great to be back with you. Okay, I want to give you a chance for a do-over. We saw a remarkable weekend, resurgence in shopping, so many different places, and going out. Can we possibly take off the table that the next number will be worse than this one? Maybe leave it open that perhaps we've gotten some improvement? [00:00:27] Steven Mnuchin: Well, Jim, I wouldn't say it's a do-over. I said it could be. So I think the economic models are very difficult to predict this situation since this has nothing to do with normal economic factors. This has to do with a closing of the economy and an opening of the economy. So to me, it's, you know, first of all, let me just say we're very sympathetic to all the workers who this is impacting. And if the numbers are worse next month, you know, we understand that. But I think the numbers are going to be getting better as we go into the summer and we reopen the economy. And that's the important issue here. [00:01:01] Speaker 1: Now, we're discovering phase one pretty much being completed. We've got phase two now, which is another whole level. What can we do? What can the government do? How much money should the government spend to make it so phase two incorporates all the new rules, the new safety rules, which turn out to be quite a burden for most of the businesses? [00:01:21] Steven Mnuchin: Well, Jim, the really important issue is Congress worked very, very quickly with the administration and the president on an unprecedented $3 trillion package. And we're just getting that money now into the economy. So we are having the second round of the PPP actually being dispersed. We now have over 140 Americans who got direct payments, either direct deposit or checks. We have lots of money going into the economy because of the facilities that the Fed has announced with the Treasury. We've unlocked the bond markets. So you have companies like Boeing being able to borrow unprecedented amounts of money. And I think this is going to have a big impact on helping the economy. And now what the president has said is, let's step back for a few weeks. Let's be very considerate in what we do in the next round before we go consider spending another trillion dollars or more of taxpayer money. But the president is determined we'll do whatever we need to do. [00:02:25] Speaker 1: Well, can you tell the president first, PPP, I think, has been a phenomenal success. There were obviously some people who took advantage of it and you've weeded them out. But at the same time, PPP has unveiled some situations that I think the president really would be great to step into, which is the disparity of states. We've got Elon Musk trying to open a factory and he can't open a factory where really hundreds of people will be employed. Many people in New York are taking what's known as the Tennessee Pledge because we don't know how to open restaurants where we have to whip out half the chairs. And you have to take somebody's temperature when they come in, ask a series of questions. Why would it be great if the president gave us directives about what the White House thinks we should be doing? [00:03:07] Steven Mnuchin: Well, the president has given directives in what we should be doing. And we've put out a set of guidelines and then we're working with the states. And most of the states are all cooperating. I must say, I agree with Elon Musk. He's one of the biggest employers and manufacturers in California. And California should prioritize doing whatever they need to do to solve those health issues so that he can open quickly and safely where they're going to find, as he's threatened, he's moving his production to a different state. [00:03:39] Speaker 3: Mr. Secretary, there's been so much debate around whether or not states that have, quote, been poorly run deserve as much aid as those that, quote, have not. Are there parameters that the White House is developing to determine how well a state's been run and whether that is a factor in ongoing aid? [00:03:57] Steven Mnuchin: Well, there's ongoing discussions on this. But, you know, I've heard very clearly from the president and the Republicans that we are not bailing out state pensions and other things. And I haven't heard from the Democrats that they're willing to do it. They want to throw a lot of money at this problem. But I think it's very clear there is not going to be bipartisan support that bails out states from previous problems. And one of the things we did last week at the president's direction, I think it was very important, we gave a lot of money to the states. We created more flexibility. So we said they could use that money for firemen, first responders, and policemen so that in no uncertain terms, the states didn't have to lay off those people because they were having budget issues. We're also very quickly opening up the lending facility that the Fed, working with the Treasury, so states that have cash flow issues can borrow. And as you know, with interest rates very, very low, states can borrow this money. Some of them would have to make changes because they do have balanced budgets. But this is a one-time situation that is quite different. But we'll be working with Congress to discuss these issues and many important issues like the liability issue. We want to make sure that if businesses open up, there's not frivolous lawsuits. [00:05:18] Speaker 4: Mr. Secretary David Faber, but in listening to you answer that question, it sounds as like you don't view the state's fiscal problems as something that needs to be dealt with. Immediately. Immediately. I mean, there are so many states facing significant shortfalls as a result of a fall in sales taxes. And it's not just New York, obviously, where the costs have been enormous. But the likes of Nevada or Florida or Louisiana, states that rely a lot on sales tax, they're facing big budget shortfalls that could require them, therefore, to lay off workers. Why isn't that something that you would view with immediacy that needs to be addressed? [00:05:56] Steven Mnuchin: Well, let me be clear that the CARES Act gave a lot of money to the states. And that money was intended not for lost revenues. It was intended for COVID-related issues, since that's really what the priority is. Having said that, we just gave them a lot more flexibility. So not only can they use it for direct COVID-related issues, but we've given them flexibility for first responders, so that in no uncertain terms, the men and women who are out there helping us fight this terrible disease, the policemen, the firemen, the hospital workers, the first responders, we want to make sure in no uncertain terms they get laid off. Now, the issue of lost revenues is a complicated issue. These are taxing authorities on their own. Different states tax different ways. Some states have more issues. Some states have less issues. So this will be something that I continue to discuss with the president and we discuss with Congress. [00:06:53] Speaker 1: Mr. Secretary, there's an opportunity here that you once said you would take on our show. Never thought it would happen. You said if we ever got negative interest rates, if we ever got interest rates so low, basically, the short term and the long term are the same, then you would not hesitate to refinance. What an unbelievable time to do just that. You could save trillions of dollars without having to raise any taxes at all. Why not take it? You understand the bond market better than anyone that's been in the government for a long time. [00:07:20] Steven Mnuchin: Well, Jim, we're absolutely doing that. So let me be clear. One of the things I've said is one of the reasons I do feel comfortable with us spending all this money is because interest rates are very low and we're taking advantage of long term rates. I know at times we've talked about 50 years and 100 years. And when we looked at the market, you know, there just wasn't as much demand as we thought. But right now we've launched the 20 years. So between 10 years, 20 years and 30 years, we're borrowing an awful lot of money long term so that we can lock in this $3 trillion for a very, very long period of time. So we're being careful and balancing. We obviously don't want to disturb the markets too much. But we're going to take advantage of refinancing all of our debt to make sure that we have very low rates. And I think that's something that's a great opportunity for us. [00:08:13] Speaker 1: Refinance existing debt where you would buy back debt, capital gain free, and then use these low rates to do that where you would save trillions more? [00:08:23] Steven Mnuchin: I don't think we need to buy back debt, Jim, just because of the amount of debt that we have that short term that does roll off and the amount of debt that we're using for these deficits. I think we have tremendous opportunities without needing to buy back debt. But I assure you, we are very much focused on low rates and taking advantage of locking this in for a long period of time. [00:08:44] Speaker 1: Mr. Secretary, could you please tell the mortgage companies, look, we think that you ought to do mortgage forbearance, perhaps lengthen what the mortgages are. There's some non-Fannie Mae paper out there that could lead to evictions. There are lots of retailers and restaurants that could be in a lot of trouble because they can't afford the rent. Real estate investment trusts in trouble. What a great opportunity to be able to say, you know what, guys, come on. This is a time for forbearance. This is the time where you must lose some money in order to be able to save our country. [00:09:12] Steven Mnuchin: Well, Jim, I completely agree with you. And during the mortgage crisis, the financial crisis, lenders worked with borrowers. I think Mark Calabria has done a great job at the FHFA working with Fannie Mae and Freddie Mac on forbearance guidance. And the secretary, Carson, has done a great job on Jeannie Mae and FHA. And we've encouraged private market lenders and banks to follow. Now, obviously, we're not going to tell them what to do because these are private contracts. But I think the majority of the banks are following these for their own portfolios. And on a lot of these loans, I think what they're doing is tacking on the payment to the end. So we understand that it's going to be hard for many borrowers to kind of make up two or three payments. So we'll get tacked on to the end. And we're monitoring the mortgage markets very carefully. So I'm quite pleased with how this is working. [00:10:08] Speaker 3: Mr. Secretary, Jim brought up negative rates. The Journal, of course, over the weekend said the Fed is unlikely to use it. People predicting that Powell's appearance tomorrow will essentially say as much. Does Treasury agree? [00:10:21] Steven Mnuchin: Well, I want to be very careful. I am not going to comment on the Fed's action on interest rates. That's up to them. And that's consistent with my view. But I can assure you we have plenty of issuance at zero that we will take advantage of at those rates. So from my standpoint as being a borrower, we're going to take advantage of zero rates. [00:10:49] Speaker 4: Speaking of the Fed, and it's David again, Mr. Secretary, where are we on the various programs that you were helping to backstop with what was over $450 billion where you were going to take the first loss? Some of it was allocated. A lot remains unallocated, and it's not clear exactly how active the Fed has yet been on Main Street lending or aid to the states that you talked about in the form, of course, of credit. Give us an update here on what the Fed's doing and what your expectations are for those unallocated funds that came from Treasury. [00:11:21] Steven Mnuchin: I think the Fed and the team at Treasury has just done an outstanding job working around the clock, getting these facilities up and running. Several of them are up and running. As you said, there are several more that we expect that will be up and running over the next couple of weeks. We have literally daily calls with the Fed on the working teams working through this. And as you pointed out on purpose, I allocated half of the funds, and I kept half of the funds in reserve since I don't know which one of these markets is going to need more money. So as opposed to allocating it out all in advance, I thought the strategic important thing is let's allocate a lot of money, then we'll see where we need money. If we need to put more money in Main Street, we obviously have the ability to do that. As I said, on the corporate facility, we wanted to provide a lot of money there. My expectation is in how the markets have opened up, we're going to need to spend a lot less money there. But I can tell you I'm authorizing a wire this morning going into the secondary corporate facility. It's on its way out. And we expect these facilities all to be up and running very quickly. And, again, I just want to commend the amazing team of professionals at the Fed and at the Treasury who have been working around the clock to create these and market stability. [00:12:45] Speaker 4: But is there one, Secretary, that one of these programs that you think already the Fed has been most active? And, you know, to your point, they haven't really had to intervene in the corporate bond market very much, it wouldn't seem, because it opened up simply on the prospect of them actually being involved. [00:13:02] Steven Mnuchin: Well, let me be clear. These facilities were supposed to be backstops. So this was intended to be backstops. So you saw the initial facilities around commercial paper and money markets took in some volume. Once we did that, it's quieted down. Again, it created stability in those markets. As I mentioned, the corporate bond markets, when we announced these, the corporate bond markets were completely stuck. They became unlocked. You look at the PPP facility, that's up and running. So small lenders are able to access the Fed facility. The Main Street facility, the Muni facility, we expect to be up and running soon. We're working on TELF. So, look, in the perfect world, we announce all these facilities, the markets work, and we don't need to use them. But they're there, and they're going to be ready, and they're going to serve as backstops. So we make sure that American business and American workers have access to liquidity. [00:13:58] Speaker 1: Mr. Secretary, I keep hearing one word, and it's a word that people tell me you will not use, and it has to do with PPP. 75 percent goes to workers, but people want flexibility. They want to give it to the workers, but you go from law firm to law firm to law firm. Business person, business person, business person. They don't know what to do. They need guidance. And they all want the program to succeed, but they don't know how to execute on it. [00:14:24] Steven Mnuchin: Jim, I disagree with you completely. They do know how to execute on it, and it's working great. Ninety-nine percent of the loans were two million and less to very small businesses. As you know, there's a small number of loans around public companies and things like that. But this program is working great. It's getting money to the workers. And on the 75 percent, let me just comment, the way Congress designed this, eight weeks of payroll plus 25 percent of overhead. If Congress wants to change that rule, I'm happy to work with Congress if there's bipartisan support to do that. But the 75 percent test was just a clarity on a test that was clear in the way that Congress designed this program. But, again, like anything else, if we need to make technical fixes as we see different issues, I think one of the things we're particularly sympathetic to are the restaurants. Yes. Many of the restaurants are just beginning to open up and have said that, you know, they'd really like to hold the money. They can't do that. That's not something we can do. But we'll look at a technical fix. So we're working very clearly. But this program, let me tell you, this is going to help about 60 million Americans get back to work. [00:15:37] Speaker 1: Mr. Secretary, I could not agree with you more. I think it's an unbelievable program. We just want there are certain industries that are more difficult. And if they give us flexibility from Congress, it will really be a home run. Secretary Mnuchin, thank you so much for joining us. Thanks, Jim. Great to talk to you. [00:16:01] Speaker ?: Thank you.