Speaker 1: Bloomberg Audio Studios, podcasts, radio news. I'll turn it over
Speaker 1: to my colleague Saliah Molson, who is live at the
Speaker 1: Treasury Department with the new Secretary, Scott Beston Seleiah, thank you, Kayley.
Speaker 2: I'm here with US Treasure Secretary Scott Besson and Washington.
Speaker 2: Mister Secretary, thank you for joining me. So good to
Speaker 2: see you, mister Secretary. We are inside the cashroom at
Speaker 2: the Treasure Department. It is almost impossible to overstate how
Speaker 2: important the work that is done in this building is
Speaker 2: the US financial system. Yet right now there is widespread
Speaker 2: concern about the DOGE team's access to sensitive payment systems.
Speaker 2: Are you worried at all that that access and that
Speaker 2: tinkering of the payment systems could affect the Treasury's market
Speaker 2: or cause any disruption?
Speaker 1: Good? Well, so, Leiah, thank you for asking me about that,
Speaker 1: because there's a lot of misinformation out there. First of all,
Speaker 1: when you say the DOGE team, these are Treasury employees
Speaker 1: a two employees, one of whom I personally interviewed in
Speaker 1: his final round. There is no tinkering with the system.
Speaker 1: They are on read only, they are looking. They can
Speaker 1: make no changes. It is an operational program to suggest improvement.
Speaker 1: So we make one point three billion payments a year,
Speaker 1: and this is two employees who are working with a
Speaker 1: group of long standing employees.
Speaker 2: The letter that the Treasure Department sent earlier this week
Speaker 2: talked about how the team currently does not have access
Speaker 2: to change the system. Have they, at any point this
Speaker 2: year had the ability to make changes.
Speaker 1: Absolutely not. This is no different than you would have
Speaker 1: at a private company. And by the way, the ability
Speaker 1: to change the system sits over at the Federal Reserve,
Speaker 1: so it doesn't even lie in this building. So they
Speaker 1: could make suggestions on how to change the system, but
Speaker 1: we don't even run this system.
Speaker 2: And if they ask for if they request the ability
Speaker 2: to change the system, would you grant that.
Speaker 1: No, Again, they have no ability to change the system.
Speaker 1: I have no ability to grant that change. That they
Speaker 1: can make suggestions, then it would go to the Federal
Speaker 1: Reserve and just like any large erp system, there would
Speaker 1: be tests, there would be this, there would be that,
Speaker 1: and then the Fed will determine whether these changes are
Speaker 1: robust or not.
Speaker 2: As the Secretary of Treasure, you also oversee the IRS.
Speaker 2: Do you know what kind of access the team has
Speaker 2: to IRS data or individual taxpayer data.
Speaker 1: Well, I'm glad you asked that too, because look, THERIRS,
Speaker 1: the privacy issue is one of the biggest issues, and
Speaker 1: over the past four years we've seen a lot of
Speaker 1: leaks out of there. The IRS systems are quite poor.
Speaker 1: When I started in college in nineteen eighty I learned
Speaker 1: the program in COBAL. I think there are twelve different
Speaker 1: systems at the IRS that still run on COBOL. But
Speaker 1: as of now, there is no engagement at the IRS.
Speaker 2: And if they request that access, would you sign off
Speaker 2: on that request?
Speaker 1: They haven't, so we'll take that when it comes to it.
Speaker 1: I think there is a lot to do there, but
Speaker 1: the president was elected with a big agenda and to
Speaker 1: the extent that getting the IRS in better shape is
Speaker 1: part of that. Sure, because look, with the IRS, what
Speaker 1: am I concerned about? I am concerned about collections, I'm
Speaker 1: concerned about privacy, and I am concerned that the system
Speaker 1: is robust and customer service.
Speaker 2: But do you think that if they ask for access,
Speaker 2: that is something you would consider signing off on.
Speaker 1: There are a lot of things I'd consider, But look,
Speaker 1: we're in the middle of the tax filing season right now.
Speaker 1: Even with the government outs that are being that expire
Speaker 1: at midnight tonight. We have been mandated that the IRS
Speaker 1: customer facing employees that they're not eligible for that until
Speaker 1: May fifteenth, So I don't imagine anything's going to go
Speaker 1: on at the IRS until then or beyond.
Speaker 2: Elon must just a few half an hour ago tweeted
Speaker 2: out that Treasury needs to stop approving certain payments. Has
Speaker 2: your staff tried to block any payments here at Treasury?
Speaker 1: We have not, and I'm glad you asked that too.
Speaker 1: And just to put in perspective, Elon and I are
Speaker 1: completely aligned in terms of cutting waste and increasing accountability
Speaker 1: and transparency for the American people. I believe that this
Speaker 1: Dove program in my adult life is one of the
Speaker 1: most important audits of government or changes to government structure.
Speaker 1: We have seen that. When I was in my twenties,
Speaker 1: we had the Grace Report, and there's some great suggestions
Speaker 1: that came out of that never implemented under Clinton and Gore.
Speaker 1: I think it was to government efficiency or reduce government.
Speaker 1: Nothing happened. So President Trump came in, there's a big agenda,
Speaker 1: and I think that there are gigantic cost savings for
Speaker 1: the American people here. And I think It's unfortunate the
Speaker 1: way the media wants to lampoon what is going on.
Speaker 1: These are highly trained professionals. This is not some roving
Speaker 1: ban going around doing things. This is methodical and it
Speaker 1: is going to yield big savings.
Speaker 2: At any point, would you heed what Musk just tweeted
Speaker 2: and stop payments from coming through Treasury?
Speaker 1: Well, most of that happens above us, that it comes
Speaker 1: from the departments and the agencies. We are doing a
Speaker 1: complete review, and I want to emphasize to you and
Speaker 1: everyone watching that it is an operational review. It is
Speaker 1: not an ideological review. We want to make sure that
Speaker 1: the American people are getting the best practices, and I
Speaker 1: don't think that's happening right now.
Speaker 2: The systems here at Treasury they're known to be a
Speaker 2: little antiquated, but very very sensitive, but also they're working.
Speaker 2: I'm hearing you. At Bloomberg, we hear a lot about
Speaker 2: investors being concerned that this could hit markets in some
Speaker 2: way or start to cause a loss of confidence. What
Speaker 2: as a long time hedge fund and investor like, do
Speaker 2: you have a response to those concerns.
Speaker 1: People shouldn't be concerned that at Treasury we move deliberately
Speaker 1: and we fix things. That's the way we work. So
Speaker 1: everyone should know that all the payments are going to
Speaker 1: be made, they're going to be in good order, and
Speaker 1: at the end of this review, they're going to be
Speaker 1: substantial savings for the American taxpayer.
Speaker 2: Mister Secretary, you have experience in currency markets, and now,
Speaker 2: as in your new role, you oversee US currency policy.
Speaker 2: I'd like to ask you what does a strong dollar
Speaker 2: mean to you.
Speaker 1: Well, first of all, the strong dollar policy is completely
Speaker 1: intact with President Trump, and I'm very happy at his
Speaker 1: Economic clob of New York speech in August when he
Speaker 1: re emphasized the importance of maintaining the dollar reserve currency status.
Speaker 1: But let's think about what does a strong dollar mean.
Speaker 1: It really means four things. One that when we think
Speaker 1: about a fiat currency, a piece of paper is credibility.
Speaker 1: So a strong dollar is credibility and a rule of
Speaker 1: law that is backing it up. Two, it means a
Speaker 1: composite price in the screen the Bloomberg Currency Index, that
Speaker 1: is the dollar moving up against that. Three, it is
Speaker 1: a bilateral price. So what's important to remember is the
Speaker 1: dollar is either weak or strong versus something else. So
Speaker 1: we want the dollar to be strong. What we don't
Speaker 1: want is other countries to weaken their currencies to manipulate
Speaker 1: their trade. And then fourth that we want to have
Speaker 1: the best policies that create the environment for a strong dollar.
Speaker 2: Let's talk about other nations and how they manage their currencies.
Speaker 2: The President has asked for a tariff study from several
Speaker 2: of his cabinet officers or incoming cabinet officers do April first,
Speaker 2: and the Treasury piece of that is to assess how
Speaker 2: to handle when foreign nations manipulate their currencies. Do you
Speaker 2: see any evidence of manipulation in foreign exchange rate markets
Speaker 2: right now?
Speaker 1: Well, we'll wait till the study comes out, But I
Speaker 1: think just intuitively, you and I could agree that when
Speaker 1: you see the accumulation of these large surpluses, that there
Speaker 1: is not a free form trading system that's going. It
Speaker 1: could be due to the level of the currency. It
Speaker 1: could be due to trade restrictions, it could be due
Speaker 1: to some interest rate repression policy. So it could be
Speaker 1: any of those.
Speaker 2: Are there any countries that you're monitoring or watching specifically
Speaker 2: right now? I know the President in the past has
Speaker 2: labeled China as a currency manipulator. Do you see any
Speaker 2: other nations that need to be closely watched.
Speaker 1: Well, I think we'll see on April first. And as
Speaker 1: you know that China's the most imbalanced unbalanced economy in
Speaker 1: the history of the world, and they are in a
Speaker 1: deep recession right now. They're experience in deflation and they're
Speaker 1: trying to export their way out of that, and we
Speaker 1: can't allow that. We want fair trade, and part of
Speaker 1: that is taking a strong position on the currency and
Speaker 1: the terms of trade.
Speaker 2: Yesterday, the Treasure Department had its first quarterly refunding since
Speaker 2: you were confirmed. Do you have any plans of looking
Speaker 2: at how the Treasury's debt issuance strategy comes together.
Speaker 1: Well, I think the good news is that the trajectory
Speaker 1: of the borrowing is dropping, so I was very happy
Speaker 1: to see that. It's one of the few good surprises
Speaker 1: I was left by the previous administration. So the trajectory
Speaker 1: is good, and the government's well financed into the third quarter.
Speaker 1: And I believe that as it becomes apparent that the
Speaker 1: present's agenda is working, that we'll see a great deal
Speaker 1: of non inflationary growth, and I think that that will
Speaker 1: help us calibrate what the debt policy should be but
Speaker 1: I don't foresee any changes in the issuance for the
Speaker 1: foreseeable future.
Speaker 2: And what about the process. Do you think that tea
Speaker 2: BAC is the most effective way of getting feedback from markets?
Speaker 1: Well, I want to thank all the members of tea
Speaker 1: BAC who are here this week. They are a very
Speaker 1: elite group. I think that maybe over time we need
Speaker 1: to think about the style of engagement. It is turned
Speaker 1: into more of a research think tank than direct market engagement,
Speaker 1: and that's going to require some changes from both sides.
Speaker 1: I believe when tea BAC was originally started, it was
Speaker 1: supposed to be a market feedback mechanism, a little less
Speaker 1: of a think tank, and we've been assigning research projects.
Speaker 1: So I think there's some recalibration on both sides. But
Speaker 1: I think that whatever we do, tea BAC will still exist.
Speaker 2: Mistress Secretary you said yesterday in an interview that the
Speaker 2: Trump administration is more focused on long term deals than
Speaker 2: what the Federal Reserve is doing, which is a bold statement.
Speaker 2: I want to ask, how do you plan to keep
Speaker 2: a lid on yields considering the deluge of debt issuance
Speaker 2: that is coming down the pike, and also some of
Speaker 2: the inflationary risks that are ahead.
Speaker 1: Well, one of the things I wanted to emphasize is
Speaker 1: that we are not focused on whether the FED is
Speaker 1: going to cut not cut. What we are focused on
Speaker 1: is lowering rates, So we are less focused on the
Speaker 1: specific of rate cuts and how do we get the
Speaker 1: whole curve down. I mentioned that the tenure I believe
Speaker 1: is the important price to focus on its mortgages. It's
Speaker 1: long term capital formation. So look, I think with the
Speaker 1: President's policies of energy, dominance, deregulation, and non inflationary growth,
Speaker 1: I think that the tenure is going to naturally come down.
Speaker 1: And then look, on top of it, we do get
Speaker 1: some big savings on the spending side from the dose programs.
Speaker 1: Like let's think of a naive formula government equals spending
Speaker 1: minus taxes for my entire career and beyond, maybe even
Speaker 1: back to pre FDR the government equal spending minus taxes.
Speaker 1: The S the Republicans that we liked spending, We just
Speaker 1: wanted to raise it less. The Democrats want to raise
Speaker 1: it more taxes. Democrats want tax increases. We want tax cuts.
Speaker 1: What nobody's singing about is what if the S actually
Speaker 1: went down. What if it actually goes down because of
Speaker 1: everything we're doing right now?
Speaker 2: But what about the inflation concerns that are stumming from
Speaker 2: the tariffs and tariff threats.
Speaker 1: Uh, Look that I'm not sure that where this narrative
Speaker 1: the tariffs for the country putting on the tariffs is inflationary.
Speaker 1: That we could have a small one time price adjustment
Speaker 1: that as we saw in Trump one point zero, that
Speaker 1: the deregulation and the other policies we stayed right around
Speaker 1: the Fed's target level. So I'm unconcerned about that. I
Speaker 1: think especially that China, now given all their excess capacity,
Speaker 1: will no matter the level of the tariffs, will end
Speaker 1: up eating quite a bit.
Speaker 2: There's a lot of uncertainty around tariffs. We see them
Speaker 2: threatened or signaled, and that they're taken back. It appears
Speaker 2: as if this administration might be unfriendly to businesses.
Speaker 1: Is that right? Really? I think it's just the opposite.
Speaker 1: I think this is the most pro business administration in history,
Speaker 1: and everything we are doing is going to increase the
Speaker 1: after tax return capital and as result, working Americans will
Speaker 1: have very high real wage growth. That what we've seen
Speaker 1: over the past four years is the government and government
Speaker 1: adjacent sectors providing the employment growth. And why have we
Speaker 1: experienced a supportability crisis? First there was a massive spending
Speaker 1: met by increased regulation which caused inflation, and then government
Speaker 1: and government adjacent jobs do not call real wage growth
Speaker 1: because they move up at CPI. So I think that
Speaker 1: we are going to not only be business friendly, but
Speaker 1: very very friendly for working Americans.
Speaker 2: We're seeing companies already under some stress from the tariff threats,
Speaker 2: China is investigating Google, and also, as you know, are
Speaker 2: well aware that business is like to be able to
Speaker 2: plan ahead, but with so much policy uncertainty, that predictability
Speaker 2: factor is gone. That all points to a little bit
Speaker 2: of a tougher environment.
Speaker 1: Well, look, I think the best thing we can do
Speaker 1: for predictability is make the tax cuts and jaw back permanent.
Speaker 1: That would be the single best thing we could do
Speaker 1: for predictability. We can go back to the one hundred
Speaker 1: percent expensing and add some new features that I think
Speaker 1: business is going to be very happy with. But again
Speaker 1: the most important thing is that it filters down to
Speaker 1: working wages, which is what we saw the President Trump's
Speaker 1: first administration, hourly workers did better than supervisory workers.
Speaker 2: Well, let me ask you about the tax plan. Then,
Speaker 2: on the campaign trail, Trump floated no taxes on tips
Speaker 2: and cutting the corporate rate and a lot of other proposals.
Speaker 2: How are you going to juggle which campaign promises are
Speaker 2: high on that the priority list for the bill, considering
Speaker 2: how costly everything would be.
Speaker 1: Well, that we're just starting the process now and that
Speaker 1: we'll do what President Trump will give us his priorities.
Speaker 1: But I can tell you the real priority is fixing
Speaker 1: this affordability crisis for the American people. And when you
Speaker 1: think about no tax on tips, no tax on Social Security,
Speaker 1: no tax on overtime, potentially putting back in auto loan deductibility,
Speaker 1: all of those benefits accrue to the bottom fifty percent
Speaker 1: of income earners in America if they have really taken
Speaker 1: it the between the eyes for the past four years,
Speaker 1: and that that's unsustainable. Uh.
Speaker 2: Before I let you go, mister secretary, I want to
Speaker 2: ask you if you have had your m uh traditional
Speaker 2: weekly meeting with FED Chair Powell.
Speaker 1: Yet we did that. I did an away game over
Speaker 1: the FED. We we had a very nice breakfast. Uh.
Speaker 1: Chair Powell and I don't know each other well, so
Speaker 1: it was very constructive.
Speaker 2: How do you view that relationship involving the two agencies
Speaker 2: are and buildings are supposed to work very closely together.
Speaker 2: And you've had some criticism in the past of his work.
Speaker 1: Uh. And as I said at my hearing, everything I'm
Speaker 1: gonna talk about is things FED the Fed's done in
Speaker 1: the past actively monetary policy. I will not comment on,
Speaker 1: and I'm sure he's going to do the right thing,
Speaker 1: so there'll be no criticism. All right.
Speaker 2: Well, mister Secretary, thank you so much for joining