WEBVTT - BONUS EPISODE: Janet Yellen Speaks To Bloomberg

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<v Speaker 1>We're pleased to be joined by US Treasury Secretary Janet Yellen.

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<v Speaker 2>Thank you so much for joining Bloomberg TV here in Japan.

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<v Speaker 3>Thanks for the invitation.

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<v Speaker 2>Excellent.

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<v Speaker 1>So unfortunately for you in a way, what is looming

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<v Speaker 1>over this G seven meeting is these concerns coming out

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<v Speaker 1>of Washington, the debt ceiling negotiations, as well as still

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<v Speaker 1>tremors in the banking industry.

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<v Speaker 2>I want to start with the debt sailing.

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<v Speaker 1>Sure, of course Wall Street is very concerned about this.

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<v Speaker 1>There is that X state approaching that you laid out

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<v Speaker 1>potentially as soon as June first, But there's an assumption

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<v Speaker 1>on Wall Street that if there's no negotiated deal after

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<v Speaker 1>June first, Treasury will still maintain payments on securities.

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<v Speaker 2>Is that assumption correct? Look, you know, all I.

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<v Speaker 3>Can say is that there is no satisfactory solution for

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<v Speaker 3>the United States, a solution that will be good for

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<v Speaker 3>the economy and financial markets other than con gris acting

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<v Speaker 3>to raise the debt ceiling. There are potential different paths

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<v Speaker 3>that could be taken if it doesn't happen, but there

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<v Speaker 3>is not a single thing that can be done that

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<v Speaker 3>will save the United States from considerable economic and financial damage.

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<v Speaker 1>But this plan was outlined back in twenty eleven, and

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<v Speaker 1>you were there at the FMC meeting about it, and

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<v Speaker 1>it said that treasury principles and securities would be paid.

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<v Speaker 1>Is this something that at least for contingency plan has

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<v Speaker 1>been discussed with the president.

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<v Speaker 3>So my understanding I was at the FED in twenty

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<v Speaker 3>eleven is that this plan was never presented to the

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<v Speaker 3>President and never approved.

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<v Speaker 2>And would you present it now? Look, we would.

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<v Speaker 3>We were working full time to work with Congress to

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<v Speaker 3>raise the debt ceiling. That's where our focus is. We

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<v Speaker 3>know that the only good outcome is one in which

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<v Speaker 3>Congress act acts, as it has many times, almost eighty

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<v Speaker 3>times since nineteen sixty, to raise the debt ceiling. What

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<v Speaker 3>global markets and American households and businesses need to see

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<v Speaker 3>is that we have a Congress that's committed to paying

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<v Speaker 3>the bills that we have incurred as a consequence of

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<v Speaker 3>our legislation. That we're not a dead beat country, and

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<v Speaker 3>if Congress fails to do that, it really impairs our

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<v Speaker 3>credit rating. We have to default on some obligation, whether

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<v Speaker 3>it's treasuries or payments to Social Security recipients. That's something

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<v Speaker 3>America hasn't done since seventeen eighty nine, and we shouldn't

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<v Speaker 3>start now. We've not discussed what to do if that

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<v Speaker 3>doesn't occur with the president. Our focus is on getting

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<v Speaker 3>it done because, as.

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<v Speaker 1>You know, treasuries are the bedrock of a global financial system,

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<v Speaker 1>and the asset managers I speak to the investors, they

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<v Speaker 1>don't have the luxury of not contingency planning, So at

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<v Speaker 1>this point should they assume that debt may not be

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<v Speaker 1>serviced if there's no deal.

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<v Speaker 3>Look, if Congress doesn't raise the debt ceiling, we face

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<v Speaker 3>economic and financial catastrophe one way or the other. And

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<v Speaker 3>that's why our focus is on making sure that Congress

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<v Speaker 3>does raise the debt sealing. I feel that that's something

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<v Speaker 3>we're going to succeed at doing, and we're working hard

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<v Speaker 3>to make sure that gets done.

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<v Speaker 1>As we get closer to June first, will you alert

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<v Speaker 1>Congress on a more precise date?

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<v Speaker 3>Yes, I will update Congress as we have available information, But.

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<v Speaker 2>Anything new now or still June first, Well.

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<v Speaker 3>What I've said is early June, and potentially as early

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<v Speaker 3>as June one. As we get closer, I may be

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<v Speaker 3>able to provide more refined guidance. But you know, there

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<v Speaker 3>is a lot of uncertainty about the exact level of

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<v Speaker 3>cash balances and payments that we have to make from

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<v Speaker 3>day to day, and so there remains a level of

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<v Speaker 3>uncertainty about precisely when we would run out of cash

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<v Speaker 3>to be able to pay the government's bills.

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<v Speaker 1>Jamie Diamond was on Boomberg TV yesterday and he said

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<v Speaker 1>he set up a war room for contingency planning.

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<v Speaker 2>Are you actively speaking to executives?

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<v Speaker 3>I have talked, not within the last few weeks, but

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<v Speaker 3>earlier around the time in January when I sent my

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<v Speaker 3>first letter, I talked to a number of bank executives.

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<v Speaker 3>More recently, I've talked to leaders of business businesses in

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<v Speaker 3>different sectors of the economy, and I will be meeting

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<v Speaker 3>with senior bankers next week when I get back. But

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<v Speaker 3>I want to understand how they're thinking about the debt ceiling,

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<v Speaker 3>and what I'm hearing is that it is a grave

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<v Speaker 3>source of uncertainty. That is one of the things that

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<v Speaker 3>businesses are really concerned about, one of the biggest sources

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<v Speaker 3>of uncertainty in terms of many big American businesses.

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<v Speaker 2>That's where we're hearing too at Bloomberg.

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<v Speaker 1>How frustrat Are you potentially that these bank executives are

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<v Speaker 1>speaking to are not putting pressure on Congress, particularly Republicans.

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<v Speaker 3>Well, you know, Wall Street executives and American business people

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<v Speaker 3>have always spoken out about their concerns about the debt ceiling,

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<v Speaker 3>and I think it's appropriate for them to talk about

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<v Speaker 3>how they see the debt ceiling is impacting the American

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<v Speaker 3>economy and the global economy. So those voices, we want

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<v Speaker 3>to hear voices of people who will be affected by this.

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<v Speaker 1>On top of all this, there's still some tremors in

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<v Speaker 1>the banking system. In two months almost to the date,

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<v Speaker 1>we've had four US lenders fail, But the administration continuously

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<v Speaker 1>says that the banking sector is sound and resilient. Is

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<v Speaker 1>that a fair assessment when you look at the regional

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<v Speaker 1>banking sector, Well.

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<v Speaker 3>The regional banks have been under some stress, but I

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<v Speaker 3>think the banks that have failed have had some very

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<v Speaker 3>unique characteristics that have made them vulnerable. The banks that

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<v Speaker 3>failed tended to have substantial losses marked to market losses

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<v Speaker 3>on their whole to maturity portfolios. So although they're regulatory

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<v Speaker 3>capital wasn't impaired, their tangible equity was diminished and they

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<v Speaker 3>simultaneously had a very high proportion of uninsured deposits, and

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<v Speaker 3>that profile is.

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<v Speaker 2>Not very common.

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<v Speaker 3>But look, a lot of banks, particularly regional banks, are

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<v Speaker 3>seeing their earnings come under pressure. The amount that they're

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<v Speaker 3>having to pay for deposits is rising, and in many

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<v Speaker 3>cases their investments are at lower interest and their stock

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<v Speaker 3>prices are coming under pressure. But most banks now, even

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<v Speaker 3>including the ones that are seeing pressure on their stock prices,

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<v Speaker 3>have solid liquidity, would be able to manage paying off

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<v Speaker 3>uninsured depositors if they were to flee.

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<v Speaker 2>Are you confident no other regional or small lenders will fail.

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<v Speaker 3>I don't want to talk about the situations of individual banks,

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<v Speaker 3>but what I see is a banking system that overall

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<v Speaker 3>is well capitalized, still has very solid earnings, and we've

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<v Speaker 3>improved the available liquidity to the banking system and think

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<v Speaker 3>that banks are going to be able to survive this.

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<v Speaker 3>But we're monitoring this situation very, very carefully.

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<v Speaker 1>The other big elephant in the room at this G

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<v Speaker 1>seven meeting is, of course China, and you spoke about

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<v Speaker 1>this yesterday, how you're working with your peers to look

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<v Speaker 1>out outbound investment. Potentially when it comes to China, this

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<v Speaker 1>would add on to what the United States has already

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<v Speaker 1>done with export.

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<v Speaker 2>Controls and sanctions.

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<v Speaker 1>And you recently gave this speech about China and how

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<v Speaker 1>the US views economic policy, and what you made clear

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<v Speaker 1>is that national security concerns will be paramount even if

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<v Speaker 1>it becomes to economic concerns.

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<v Speaker 2>That's right.

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<v Speaker 1>I'm curious why the US still has tariffs on China

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<v Speaker 1>if that is an economic benefit to many US consumers.

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<v Speaker 3>Well, look, you know there was a so called three

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<v Speaker 3>oh one action that was filed against China for unfair

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<v Speaker 3>trade practices, and China was found guilty of three oh

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<v Speaker 3>one violations, and those tariffs were put on place as

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<v Speaker 3>retaliation for unfair trade practices. The Trump administration arrived at

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<v Speaker 3>an agreement with China that might have led to lowering them.

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<v Speaker 3>China didn't carry out their part.

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<v Speaker 2>But are there any national security concerns about No.

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<v Speaker 3>That's upholster that's not a national security concern. That's unfair

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<v Speaker 3>trade practices, so that's not national secure already related, we

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<v Speaker 3>do have concerns with some of the practices that China

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<v Speaker 3>is engaged in with respect to trade and investment, whether

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<v Speaker 3>it's forced technology transfer, massive subsidies to industries, that really

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<v Speaker 3>distort patterns of international trade.

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<v Speaker 1>Yeah, and that'll be a big topic as well when

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<v Speaker 1>President Biden meets with the other leaders in Hiroshima, but

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<v Speaker 1>also on China. I know that you're looking forward to

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<v Speaker 1>potentially going to Beijing, you said at the appropriate time.

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<v Speaker 1>We now have your counterpart in place, Holy Fong. He's

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<v Speaker 1>been there for several weeks, So are there any plans

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<v Speaker 1>in the works.

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<v Speaker 3>I expect to travel there. I can't tell you what

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<v Speaker 3>the date is. We have a number of senior American

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<v Speaker 3>officials that are likely to go. We need to sequence

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<v Speaker 3>them appropriately, and well, you'll be there. I don't know

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<v Speaker 3>who will be the first, but we're working with the

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<v Speaker 3>Chinese and discussing among ourselves with.

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<v Speaker 1>The appropriate So yes, though with Hulifong or you're just

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<v Speaker 1>going to wait too seem in person.

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<v Speaker 3>I haven't had contact yet with my new counterpart.

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<v Speaker 1>And if I could ask one final question, Madam Secretary,

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<v Speaker 1>I know you're staying on for the remainder of the

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<v Speaker 1>Biden administration, but President Biden also announced he's running for

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<v Speaker 1>twenty twenty four. Would you consider another four years at Treasury?

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<v Speaker 3>Well, look, I was really thrilled to be asked to serve.

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<v Speaker 3>I've really enjoyed the position I have. I have a

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<v Speaker 3>lot of work to do, and that's a topic I

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<v Speaker 3>have not yet given any thought to. But I would

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<v Speaker 3>like to stay until the end of his first term

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<v Speaker 3>and continue on the important agenda of work that we

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<v Speaker 3>have at Treasury.

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<v Speaker 2>Okay, so not to know yet, maybe twenty twenty four

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<v Speaker 2>and beyond.

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<v Speaker 1>Janna Allen, US Treasury Secretary, thank you so much for

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<v Speaker 1>your time.

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<v Speaker 3>Pleasure.

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<v Speaker 2>That was the US Treasury Secretary.

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<v Speaker 1>Of course, Janet Yellen here at the G seven meeting,

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<v Speaker 1>And of course what's overshadowing all the work her and

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<v Speaker 1>her peers are talking about is what's emanating out of Washington,

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<v Speaker 1>and that is still this overhang on the debt ceiling.

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<v Speaker 1>As we are now just three weeks away from as

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<v Speaker 1>soon as we can hit that X state June first,