Unfortunately for you, in a way, what is looming over this G7 meeting is these
concerns coming out of Washington. The debt ceiling negotiations as well as
still tremors in the banking industry. I want to start with the debt ceiling.
Sure. Of course, Wall Street is very concerned
about this. There is that date approaching that you
laid out potentially as soon as June 1st.
But there is an assumption on Wall Street that if there is no negotiated
deal after June 1st, Treasury will still maintain payments on securities.
Is that assumption correct? Look, you know what?
All I can say is that there is no satisfactory solution for the United
States. A solution will be good for the economy
and financial markets other than Congress acting to raise the debt
ceiling through potential different paths that
could be taken if that doesn't happen. But there is not a single
thing that can be done that will save the United States from considerable
economic and financial damage. But this plan was outlined back in 2011
and you were there at the FOMC meeting about it and it said that Treasury
principles and securities would be paid. Is this something that at least for
contingency plan has been discussed with the president?
So my understanding was at the Fed in 2011 is that this plan was never
presented to the president and never approved and presented.
Now, look, we would do what we were working full time to
work with Congress to raise the debt ceiling.
That's where our focus is. We know that the only good outcome is
one in which Congress act acts as it has many times, almost 80 times since 1960
to raise the debt ceiling.
With global markets and American households and businesses need to see is
that we have a Congress that's committed to paying the bills that we've incurred
as a consequence of our legislation that we're not a deadbeat country.
And if Congress fails to do that, it really impairs or credit rating.
We have to default on some obligation, whether it's treasuries or payments to
Social Security recipients. That's something America hasn't done
since 1789 and we shouldn't start now. So we've not discussed what to do if
that doesn't occur with the president. Our focus is on getting it done because
as you know, treasuries are the bedrock of the global financial system.
And the asset managers I speak to the investors, they don't have the luxury of
not contingency planning. So at this point, should they assume
that debt may not be serviced if there's no deal?
Look. If Congress doesn't raise the debt
ceiling, we face economic and financial catastrophe one way or the other.
And that's why our focus is on making sure that Congress does raise the debt
ceiling. I feel that that's something we're going
to succeed in doing and we're working hard to make sure that that gets done as
we get closer to June 1st. Or you alert Congress on a more precise
date. Yes, I will update Congress as we have
available information, but nothing new now or still June 1st.
Well, what I've said is early June and potentially as early as June 1, as we
get closer, I may be able to provide more refined guidance.
But, you know, there is a lot of uncertainty about the exact cliff full
of cash balances and payments that we have to make from day to day.
And so there remains a level of uncertainty about precisely when we
would run out of cash to be able to pay the government's bills.
Jamie Dimon was on Bloomberg TV yesterday and he said he set up a war
room for contingency planning. Are you actively speaking to executives?
I have talked not within the last few weeks, but earlier
around that time in January, when I sent my first letter, I talked to a number of
bank executives. More recently, I've talked to leaders of
business businesses in different sectors of the economy.
And they will be meeting with senior bankers next week when I get back.
But I want to understand how they're thinking about the debt ceiling.
And what I'm hearing is that it is aggrieved source of uncertainty.
That is one of the things that businesses are really concerned about.
One of the biggest sources of uncertainty in terms of many big
American businesses. That's where we're hearing, too.
At Bloomberg, how frustrated you potentially that these bank executives
you're speaking to are not putting pressure on Congress, particularly
Republicans? Well,
you know, Wall Street executives and American
business people have always spoken out about their concerns about the debt
ceiling. And I think it's appropriate for them to
talk about how they see the debt ceiling is impacting the American economy and
the global economy. So those voices, you know, we want to
hear voices of people who will be affected by this.
On top of all this, there's still some tremors in the banking system.
In two months, almost to the date, we've had four U.S.
lenders fail. But the administration continuously says
that the banking sector is sound and resilient.
Is that a fair assessment? When you look at the regional banking
sector, well, the regional banks have been under some stress.
But I think the banks that have failed have had some very unique
characteristics that have made them vulnerable.
The banks that failed tended to have substantial
losses marked to market losses on their hold to maturity portfolios.
So although their regulatory capital wasn't impaired,
their tangibles equity was diminished and they simultaneously had a very high
proportion of uninsured deposits and said profile is not very common.
But what a lot of banks, particularly regional banks, are seeing their
earnings come under pressure. The amount that they're having to pay
for deposits is rising. And in many cases, their investments are
at lower interest in their stock. Prices are coming under pressure.
But most banks now, even including the ones that have that
are seeing pressure on their stock prices, have solid liquidity, would be
able to manage paying off and insured depositors if they were to flee.
Are you confident no other regional or small lenders will fail?
Well, look, I don't want to talk about the situations of individual banks, but
what I see is a banking system that overall is well capitalized, still has
very solid earnings, and we've improved the available liquidity
to the banking system and thinks that banks are going to be.
Able to survive this, but, you know, we're monitoring this situation very,
very carefully. The other big elephant in the room at
this G7 meeting is, of course, China. And you spoke about this yesterday, how
you're working with your peers to look out outbound investment potentially when
it comes to China. This would add on to what the United
States has already done with export controls and sanctions.
And you recently gave this speech about China and how the U.S.
views economic policy. And what you made clear is that national
security concerns will be paramount even if it comes to economic concerns.
Senator, I'm curious why the U.S. still has tariffs on China if that is a
economic benefit to many U.S. consumers?
Well, look, you know, there was a so-called 3 or 1 action that was filed
against China for unfair trade practices.
And China was found guilty of 3 or 1 violations.
And those tariffs were put on place as retaliation for unfair trade practices.
The Trump administration arrived at an agreement with China that might have led
to lowering them, trying to didn't carry out their part.
But is there any national security concerns about clothing or upholstery?
That's not that's not a national security concern.
That's a unfair trade practices. So that's not national security related.
We we do have concerns with some of the practices that China has engaged in with
respect to trade and investment, whether it's forced technology transfer, massive
subsidies to industries that really distort patterns of international trade.
Yeah, that'll be a big topic as well. When President Biden meets with his the
other leaders in Hiroshima, but also on China, you I know that you're looking
forward to potentially going to Beijing. You said at the appropriate time.
Yes. We now have your counterpart in place.
He's been there for several weeks.
So are there any plans in the works? I expect to travel there.
I can't tell you what the date is. We have a number of senior American
officials that are likely to go. We need to sequence them appropriately.
And will you be the first? I I'm I don't know who will be the
first, but we're working with the Chinese and discussing among ourselves
with the approach any song we call yet style with Hooli Fong or you're just
going to wait to see him in person. I haven't had contact yet with my new
counterpart. And if I could ask one final question,
Madam Secretary, I know you're staying on for the remainder of the Biden
administration, but President Biden also announced he's running for 2024.
Would you consider another four years at Treasury?
Well, look, I I was really thrilled to be asked to serve.
I've really enjoyed the position I have. I have a lot of work to do.
And that to top, I have not yet given any thought to, but I would like to stay
until the end of his first term and continue on the important agenda for
that we have at Treasury.