Sunday, 08 June 2025

If You Have ANY Doubt About ANYTHING In The Trump Administration, Watch This Right Now (Part 2)…

100 Percent Fed Up
Hits: 20

This is Part 2 of a series I first brought you yesterday.

If you missed that, please start here:

If You Have ANY Doubt About ANYTHING In The Trump Administration, Watch This Right Now…

And now for Part 2!

We started yesterday with Howard Lutnick, but Scott Bessent is equally compelling.

These two men, plus Elon Musk, plus a bunch more, have truly created the Dream Team of financial experts and plain old business "killers" who are setting everything aside to save this country!

As with Lutnick, I didn't know a lot about Scott Bessent before this appointment, but he truly has an incredible history....

While I don't necessarily love this, sometimes you have to keep your friends close and your enemies closer, so Bessent has a history of working with George Soros and Stanley Drunkenmiller (two icons in finance) and he learned from them with boots on the ground for decades, including the one time they "broke the Bank of England" with a trade.

Trust me folks, this is a guy you want on our side working for President Trump!

First, let's start with a couple shorter clips:

And:

Now the full interview....

You can watch right here, plus I'll post the full transcript below if that's better for you:

Backup here if needed:

FULL TRANSCRIPT:

Chamath: Okay, we are here in Washington DC in front of the White House, having spent the afternoon with our friend David Sacks, our friend Elon Musk, and others. We are here to learn about the debt, the deficit, what's going on in DC, and we have an incredible interview lined up with Scott Bessent, Treasury Secretary of the United States. It was amazing, and it’s been an amazing afternoon, and we’re really looking forward to it. It was amazing. Well, this is the pre—the intro to the video—it will be amazing. It’s not the pre, let’s just—what the—we’re going to pretend it’s the pre. It was amazing. It will be incredible. It was incredible.

But how cool is the White House? And here’s a bell. I’m pretty sure—I’m pretty sure the bell—I cannot even describe to you the day we had running around. It’s incredible, running around room to room in the White House. One of the best days of my life. It was one of the best days of my life. It was incredible, incredible. I think this bell is probably pretty important. Can you guys get a shot of this bell? I don’t know what it is, but it’s really important. Yeah, the White House—the people, to a one, super kind, super open, super curious. I mean, did you feel it? I—you felt accepted. Yeah, I felt—but I got free soda. They have a soda machine where you can make any Coca-Cola flavor you want in the White House. It was pretty cool. I took some, uh, hummus, I wrapped it on Creeper’s face, I punched him in—it was a cool afternoon. And, uh, this is—what is this, the East Wing of the White House? And we took a walk from the West Wing all the way over to the East Wing to the portico. And then we—we snuck in—well, we didn’t sneak in, we walked in—and then we’re walking around the East Wing. We went to all of the private rooms. I got great photos—we’ll slice them into this video. And then some Secret Service dude comes up and he’s like, “What are you guys—what are you doing here? This is the residence of the president. You have to get the hell out.”

He’s like, “You need to go downstairs now.” So we got kicked the hell out, but it was an incredible, um, incredible tour. Super great. Yeah, anyway, we’re excited for this interview with Scott Bessent and hope you enjoy it. All right, besties, I think that was another epic discussion. People love the interviews. I could hear him talk for hours. Absolutely. We crush your questions in a minute. We are giving people ground truth data to underwrite your own opinion. What do you guys think? That was fun, pal. Well, today’s a really important day—Scott’s background, what drew him to equities, the role of macro investors. Friedberg: We’re joined by the 79th Secretary of the Treasury, Scott Bessent, and this is an opportunity that we wanted to take as part of a longer-form way of explaining to people not just how the economy works, but in a little bit more detail—where are we in this moment in time? Where are we with deficits, tariffs, the budget, economic, monetary, fiscal policy? How do we make sure that we all understand the plan to make America great again? So, Scott, thank you for joining us. Scott Bessent: Good, thanks for having me. I actually want to start with—let’s go back in the way-back machine. So, South Carolina—your father was a real estate developer. Tell us where the passion for finance came from. Uh, well, um, I don’t know where finance in particular came from. As you mentioned, my dad was a real estate developer, and he was kind of a boom-bust kind of guy. So I think that’s where my passion for risk management came from. But, uh, I was very fortunate—went to Yale, wasn’t sure what I wanted to do in 1980 when I got there. Probably you all can imagine this, but there used to be these things called punch cards, and we had just—the Yale computer system had just gone from punch cards to screens. I was going to think of being a computer science major, maybe a journalist, because people actually used to read newspapers. So, punch cards and newspapers from the way-back machine.

And, um, I got an internship at—just for an individual—and he taught me the investment business really well. And—who was that? His name is Jim Rogers. He’s famous. He was George Soros’s first partner. Uh, he had just completed an around-the-world motorcycle trip and written a book called Investment Biker. Fascinating guy. And, um, I did the investment business, and I thought, this is really what I like because it’s quantitative—so I get to use my quantitative skills—but you’re also constructing a narrative. Um, and it’s also like human emotions. And you were trading equities, bonds, everything—currencies? Uh, well, I started out with equities, and I did that for several years. And then I actually ended up at Soros Fund Management. I worked for a fellow who’s my mentor, Stan Druckenmiller, who’s incredible. I think he’s on—he’s more than 40 years now, never a down year. And, you know, when you’re sitting next to him, I think, what am I doing all day? And notorious for going all-in several times in his career—all-in, all-in. And only when he’s right? Yes, well, I—but he is the best at changing his mind, that’s right, of anyone I’ve ever seen. So Druck has that famous adage, “Invest, then investigate.” Well, he has several, and I’m trying to get him to write a book because he has so many of these great things.

Uh, maybe you will press him. Um, but “investigate”—“it takes courage to be a pig,” right? Right. So, uh, and then I was hooked on markets because, again, it was everything—it was quantitative, it was qualitative, and it’s real-time. You get real-time feedback all the time. And you could have a long-term view, but then you’re trying to gauge the short term against that. And, you know, I loved it. And, uh, for 35 years, I got into—I did what’s called macro investing. So, uh, eventually I was trading currencies, bonds, commodities, the equities, uh, some credit. And I got to travel around the world meeting leaders and trying to figure out what the next move was in policy. I think this is important because I’ve spoken with folks who, um, trade in macro, and a big part of the role of being a macro investor, macro trader, is really knowing where central bank action is going to be. Really knowing how government bonds are going to move and spending time with economists—not just central, but around the world—and learning a little bit about how capital is flowing all over the world. Is that kind of the right way to describe that role of being a macro investor, just for folks? Yeah, you know, it’s a lot of that. There’s another great macro investor called Bruce Kovner, and he had this saying that he said, you know, “I succeeded because I could imagine a different future and believe it could happen.” So the key is to believe it could happen and then manage the risk. So, you know, could you imagine, like, what would happen if the Iron Curtain came down? What would happen? I mean, you all do it as venture capitalists, but, like, you know, how could the world live in a different state? Okay. Chamath: Well, let’s hold that idea and double-click for us to ’92. It’s probably one of the most famous moments where the broader world at large met macro trading, and this is really where you and Druck and Soros basically broke the back of the Bank of England. And it’s really an interesting window into assessing all of these things. So can you give us the conditions on the ground at that moment and what new reality you saw for England, and then it would be great from there—we’ll contrast and compare to America today.

Scott Bessent: Good. So, uh, it’s a great historical example, and it also kind of brings in three dimensions. So I was the analyst, Stan was the portfolio manager, and then, in a way, George was the risk manager. Okay. So I was running the UK office. I was on the ground in the UK, and I had this light bulb go off. And, you know, I thought—kind of the fulcrum thought, or like my differentiated view—was that the UK had just had a big housing boom. And UK mortgages at that time—they didn’t have long-term mortgages, they were all floating rates. So if the Bank of England raised rates on a Wednesday, your mortgage went up on a Friday. Yeah. Uh, the UK had hooked into something called the Exchange Rate Mechanism. They had to balance versus the Deutschmark. They had to stay within a band. Um, I noticed that if they raised—or I thought if they raised rates to try to stay in the band and protect the currency—it would be unsustainable because British homeowners would get bankrupted. Stan’s great feat of analysis was figuring out that, gosh, these bands set up this incredible asymmetric bet because I can push them up against one side of the band, and their mandate is just to push me back to the other side. So we just lose two and a half percent. And, um, you know, Stan tells this great story of, like, telling George Soros, “Oh, well, you know, here’s what I want to do.” And he says he told him, and George says, “Well, how much do you want to do?” And he said, “Probably 100% of the fund.” And he said Soros gave him this really sour look.

And he thought that he had said something wrong. “Why wouldn’t you do three times that deal?” So, uh, but anyway, it was, um—we pushed them against the band. The Bank of England, the British government, uh, had to buy this unlimited amount of pounds. And they started raising interest rates, and this was September of 1992. And, uh, you know, eventually they just weren’t able to sustain the pressure from the high rates and came out. And then the asymmetric risk-reward was—we made about twenty-something percent in a day. Yeah. Right. And back to what was really Stan’s genius is—I don’t know if either of you play backgammon, but in backgammon, there’s the move after the move. And so Stan—we’d made all that money, and we were kind of euphoric. Okay, now what? Because there’s going to be the trade after the trade. So we made that much in a day, but then it was actually the trade after the trade—and this isn’t well publicized—I think we made another 20% during the rest of the year. Wow. So, in that moment, what you’re really observing is that the real economy is somewhat dislocated—maybe meaningfully dislocated—from the financial economy you’re operating in. And I think you’ve said this now many times, and you’ve basically used the terminology—the Main Street-Wall Street dichotomy. How do you observe the moment in 2025? Maybe what rhymes with the early ’90s or other periods where you’ve been trading actively? Well, look, I think it goes back to—something that’s unsustainable is unsustainable. And, um, one of the reasons I’m sitting here now is, uh, about 18 months ago, I went to see President Trump. I’d known the Trump family for 30 years—I’d never known the president that well—but to tell him that I want to get involved in the campaign. Because I was so alarmed with what the Biden administration was doing with the debt and deficit—endless stimulus, endless spending, endless spending. But endless spending when we were in, like, solid economic territory, or not in a war. First time—first time ever.

And I thought it was very cynical because I actually thought, well, we’re going to spend, spend, spend, and then there’ll be no choice but to raise taxes. So you’d go into this equilibrium that you could just never get out of, and you become kind of a European-style social democracy—you know, the malaise. And, you know, I also think that we’re very cynical on immigration, right? Because if you take kind of the stated number—12 million—the president’s number—22 million—I don’t know what the truth is, kind of lean toward the president. But it was, “Oh, we’re going to let all these people cross the border. You can’t ever make them—the problem’s too big to make them go home.” But I like to stay in my finance lane. So the finance lane was—we’re going to just go to the point of no return and kind of inflict these progressive financial values on the country. There’ll be no way out. Very meaningful wage suppression in that period. And you had an equity market that was incredibly well-bid just because the money supply was just always there. Well, it was always there, and you had these distributional aspects. Because, back to your question—Wall Street versus Main Street—that it was driving me crazy when Vice President Harris said, “I’m going to fight for the middle class.” And she’d eviscerated the middle class—or these policies, inadvertent, intentional, had eviscerated the middle class and really the bottom 50%. So, you—we’re in this—because purchasing power goes down, inflation went up. Well, per—if you didn’t have assets, right? So, uh, that’s really important. I think people don’t understand this—that if you had stocks, if you had assets, your assets inflated. But if you didn’t, the cost of everything inflated, but you didn’t have the ability to purchase because your wages don’t go up. Yeah, and they—not only did inflation go up, but if you look—uh, Jason Trennert has this thing.

I think he calls it the Everyman Index. And, um, so CPI went up about 22% during the period, but the Everyman Index was up over 30—35%—because the bottom 25%, the bottom 50% of wage earners have a different basket than we do, and it inflated much faster. Used car prices, car insurance, car insurance, rent, groceries. And you—like, not only is it unfair, but it’s just unstable. And great civil—civil issues, societal issues. And so—yes. But, sorry, as you guys got into looking at this—I, and I, remembering and talking about this in the summer of ’23, I think it was—or ’23—yeah. And what was the point of view on what should have been done at that point in time, and then how much farther did it go, how much longer did it last? Well, I think what happened—the Democrats will tell you that the big spending bills were needed for rescue. Yeah. And I would say in March of ’21, the economy didn’t need rescue—was already in recovery, right? So these were rescue-size packages. And even Larry Summers—I remember there was a great debate between Larry Summers and Paul Krugman—and Summers, I think, said, “Look, this is at least 900 billion, a trillion too much.” And the Federal Reserve was—summer of ’23—’22—Federal Reserve was very slow off the mark. And, you know, we ended up—and you know, again—imagine top 10% has assets, stock market is flying. You’re in the bottom 50%, you have no assets, but you have debt. Yes. So your credit cards are up—mortgages—impossible to buy a house. House prices had gone through the roof due to COVID. So it really did, like, end the American dream. And—but we’ve been suffering these distributional effects. Scott, what—what is the American dream today, do you think?

Uh, look, I think the American dream is what it’s always been. But after World War II, I think 90% of American families—uh, the children made more than the parents. Now—now I think it’s 50/50. But, you know, it’s to own a home, it’s financial security, it’s to, uh, some level of comfort. It’s purpose in your work, it’s to be able to support your family, uh, to be able to have choices, to not have to work two jobs. I made a remark at the Economic Club of New York last week—two weeks ago—and Mike Pence decided he was going to troll me. Because I said the American dream is not built on cheap goods, right? And he said, “Well, yes, it is.” And, you know, I just say, “Vice President Pence, this ‘let them eat flat screens’ economic policy—that doesn’t—isn’t what people want.” They—we—they don’t want the baubles from China. It’s like the old—they want progression. People want progression. I mean, I remember reading—um, there’s a—uh, I think Jonathan Haidt had some work on this a long time ago—where happiness is measured by your change in net worth or income per year. It doesn’t matter what your absolute levels are—by all these socioeconomic kind of surveys that they do—that feeling like you’re having some progression in life is what folks are looking for. And I wonder whether—solving for that—we created a system. And I—I’d love your point—your read on this. That we said everyone should own a home—that’s the American dream—and in order to do that, people put most of their net worth into a home. 60%, I think, of middle-class net worth is tied up in their—in a single asset. And then, in order to get them to feel like they’re progressing, we’ve created a system of loans.

And a system of kind of economic and fiscal policy that ultimately drives the value of the home up every year. Now we’re kind of in an unsustainable housing bubble—most people can’t even afford to buy a home. What did we get wrong there, and how does that affect what the American dream should look like going forward? Well, I think a lot of it is scarcity. Because what you’re talking about is, like, out in San Francisco—super tight zoning laws. So there’s scarcity for homes. If you think, like, Ivy League education—all of a sudden you gave all these people access to Ivy League educations. You brought in international students, but the number of degrees awarded at Harvard, Yale, Princeton probably hasn’t changed very much since the 1950s. So you created just this demand for scarce things, which leads to this anxiety. Um, but you—you also created, I think, a sense of hopelessness. Through—’cause if you’re—“I can’t access—I will never get—I will never be able to pay down my student loan. I will never be able to afford a home. I can never see my income growing to give me access there.” Yeah. And, um—so is that—is that a dereg solution? Is that the—well, I think the first—the first part of it is it’s a data problem. Because in order for the government—I mean, the one thing that struck me about—I think this Trump 2.0 administration—is I think you have a better beat on the fact that this data is not as reliable as other administrations would say they were in order to do whatever it is they wanted to do anyway. So it’s sort of like, “Let me just find the data that justifies what my action is.” Um, and part of why you can’t—I think—tell this story is, do you trust the GDP numbers? Do you trust non-farm payrolls? Do you think these are reliable enough for you to act on behalf of the United States? No, look, they’re subject to big revisions over time. And I thought one of the big mistakes the Biden administration made—and thank goodness they made it—was they refused to—they went with the numbers, not what the American people were feeling.

They said, “No, it’s a vibe session, and you really don’t understand how good you have it. This has happened, this has happened.” When—when in reality, I was on Meet the Press yesterday, and there’s something that said, “Well, the American people don’t believe Donald Trump’s doing enough on the economy.” And I told the host, I said, “You know, the one thing I’m not going to answer is that they don’t know what they’re talking about. I have to have respect for how they feel, and then we need to go back and look at what is causing this anxiety.” So that’s what we’re going to do. Friedberg: So let’s peel the onion back. What do you think is causing this anxiety? Where are the levers that maybe the federal government can control in releasing some of the pressure, and what are more market functions that just need to clear up some of these— Scott Bessent: Well, look, I think there—we’re trying to do three things. And I think you may have talked about it last week—week before—the three legs on the stool. Three legs on the stool. And from the outside, you intuited that very well. I would do just a little refinement on that—that’s what I was going to ask you—yeah, just tell me where I was right and wrong. But you were adjacent to everything, okay? So, uh, on one—uh, we are trying to bring down this massive federal debt, cut the spending—but in a controlled way, because you can’t do it all at once. I don’t like to repeat private conversations with the president, but I’ll repeat this one because I think it’s very—it really illustrates where his head was at. First time I went to see him—saw him at Mar-a-Lago—and walk in the door, and he said, “Scott, how are we going to get these debt and deficits down without causing a recession?” Fantastic. And that’s exactly where we are now—how are we going to get the debt and deficits down, not cause a recession? And I said, “Sir, um, when you win—you didn’t get us here—we’re going to set a goal. By 2028, we want to get back to the long-term average.” We’re going to deflate it slowly, and long-term average being about 3% deficit to GDP—about three—three and a half percent deficit to GDP. And, you know, like I keep saying, the US—we don’t have a revenue problem, we have a spending problem.

Because we are averaging right about 18% revenue—and I’m talking about federal government—federal government only—we’re at about 18%. And Biden administration blew it out—blew the spending out to 25%. Normally, it’s about 21—21 and a half. We have 2% inflation, nominal GDP—it’d take real GDP—is 18%. So we get nominal GDP 3.8%, and it all works out. Yeah. And it was very—I had, uh, one of the heads of one of the Singapore sovereign wealth funds here last week. Guess what Singapore spends? In terms of spending to GDP—deficit—3%. Uh, they have no deficit, but they spend 18%—18%—18%. And he said, you know, he said, “We have a lot in common with the Trump administration. We like small government, we don’t like immigration—illegal immigration—and we like personal safety.” Which I thought was very interesting. Sorry, so let me just, um, understand—so deflating government spending is key. But the big challenge has been that we have now accumulated 30-some-odd trillion dollars—nearly—of debt. And the interest on that debt has started to grow. We now have to pay $1.2 trillion in interest payments per year. So that starts to consume more of the spending budget that we have at the federal level, which means we can spend less on the rest of the federal government’s programs—meaning you have to cut a lot more than you otherwise would have. Which is what makes it so difficult and so painful. Is it realistic that you can get Congress to act in the way that Congress needs to act to get to the level that we need to get to, given the high interest payments and the high debt level that we have?

Yeah, and with this Republican Congress—uh, and look, I’m not sure what a deficit hawk is, but I think I would qualify as one. And, uh, a lot of the Republicans—I actually have to coax them—you can’t do this all at once. I was with one of the congressional budget committees two weeks ago, and, you know, they really want to cut this fast. And I said, “You do realize every 300 billion we cut is about a percent of GDP? So you could—” So we are trying to land the plane, right? Uh, well, and the plan—because that’s really what I’d like to talk about today—I think there are three plans here. But plan one—we’re going to delever the government via the spending. Uh, we are also going to shed excess labor from the government. So on that side—and then on the other side, we’re going—we’re going to deregulate the financial system. The regulated financial system’s really been what I call a regulatory corset for a long time. And as we deregulate that, then the private sector can relever. So government deleveraging, private sector releveraging—and the employment, or the folks who lost their government jobs, will be picked up by the more productive—but this—sorry, this is really important. And I think this is the most critical thing—I’m really glad we got the chance to talk today. Because I hear so much about the conversation on any one of these topics independent of the others, and there’s a relationship between them that I think is critical to understand—on how this administration is aiming to drive an economic recovery that is not inflationary, is sustainable. And also will allow people to have the American dream in a way that they can’t have access to today. Yeah. And the—so part of fixing the affordability crisis is—what can—and we come back and talk about it if you want—but where can we get prices down? You know, like, eggs are easy—or—but the other side of getting prices down is getting real wages up. So on getting real wages for working people up—it goes back to the Main Street versus Wall Street. And the second plan is to reorder the international trading system and bring manufacturing jobs back to the US. And you have—reinvigorate the middle class. Because—again—through tariffs? Well, to use tariffs where they’re needed to bring other countries into line and to create an economic incentive to onshore for some industries and some supply chains. Well, so there’s tariffs—then I think there are three other things we can do, which are the centerpiece of the administration. We can have low and predictable taxes. We can substantially, uh, slash regulations—because regulations are the equivalent of—that’ll drive investment dollars—private investment dollars—and predictability in regulations.

Uh, and then, uh, cheap energy, right? And—sorry—what is the relationship between the tax cuts and, um, the getting to 3%—three and a half percent deficit as a percent of GDP? Especially because the CR unfortunately gave folks a “get out of jail free” card because we kept the—you know—$2 trillion cap for the next— Uh, yes. Uh, but you’ve got to have—we—I’ve been in this building, I think this is my seventh week. President Trump’s been back at the White House for eight weeks. So you actually do need time. So what—a lot of people who weren’t happy about the CR—but shutting down the government wouldn’t have been productive either—politically or economically. So—sorry—does tax cuts get made up with tariffs, or does tax cuts get made up with cutting government spending? Well, tax cuts will—so tax cuts and deregulation will, uh, change the growth trajectory. If trend line has been 1.8—if you can move the growth to three or above, right? Then you really change the trajectory. And if you can, um, keep expenses flat—or do the unthinkable and cut expenses—then you can really—so this is important. So—sorry—government revenue as a percent of GDP can go lower if you have lower expenses and a faster-growing economy? Yes, I think that’s, like, really important for folks to understand—that relationship. And so, in isolation, tax cuts might reduce revenue, but when done with reduced government spending and deregulation and a reordered international trade model, you theoretically will accelerate economic growth in this country. Increase government revenue overall, even with a lower tax rate—that’s kind of the theory, right? And, you know, I’ll tell you—shame on me—I was in the investment business 35 years. I talk very confidently that CBO scoring says this, and it turns out—I didn’t know—you know—what—about CBO scoring? Like, when you’re on this side of the wall, you realize how crazy it is. It’s crazy. So—just quite a gameable system? It’s a—yeah, it’s very gameable. And one of the most gameable parts of it is—in normal CBO scoring—so we’re calling—we’re saying that we want to renew the tax cuts, right? We’re actually just renewing the current tax regime, right? But somehow, after they expire, then they go back to the old rate. Spending never changes—like, spending never has to get renewed. And I think when I look and think about a mental model—and how do systems work, how do they break down? One of the things that has caused this spending bulge is this idea that you never had to rescore spending. Oh, it’s nuts. And the incentive model is—when you have a constituency that you represent as an elected representative that’s earning from that spending—they’re telling you, “If you want to get reelected, make sure my earnings stay and get me more.”

And then every year, you’ve got a set of elected representatives whose—you know—primary objective in a democratic system is to go in and get more money for their constituents. How do we solve that fundamental problem? How do you think about that? Well, you’ve got to deal with a second—do you actually think that that’s true? Do you think that most politicians are here to just get money for their—good question. Yeah, yeah—I mean, it’s—it’s OPM—it’s other people’s money. But they—Danny DeVito had that movie—yeah. But you would regard that as being a good politician—like, you brought home the bacon for your district—that—because the CR—a lot of people didn’t like it, but one of the things that a lot of people didn’t like—there were no earmarks in it. Like, how dare they? Totally—the Christmas tree bill that kind of shows up at the 11th hour where everyone gets a little bit. Yeah. Can you talk about—so we talked about this deregulation as this one very important lever, right? So how do we add 50, 100 basis points of growth back in? We’re going to do it through deregulation. How do you undo the financial corset, as you said? What are the—what are the sort of three or four big ideas that you’d like to affect? Yep. So, um, we are reexamining all—all the bank regulations. And why—why are they there? Why do banks have to—I can’t remember—it’s five or 7%—to hold treasury bills? What are the regulations? Why do—I had a whole group of community bankers—or small banks—here last week. And why do they have to hold the same amount of capital that JPMorgan and Wells Fargo and Citi hold? When they don’t have the complexity—they don’t have—why do the regulators—one of these small bankers said, “Well, you know, Bank of America does it this way.” Well, Bank of America has a trillion dollars in deposits. Yeah, this was $183 million. But when you look at the regulatory overhang of some of these things—Basel I, Basel II—you have all of these frameworks. And then, as a result, all these organizations that are running around trying to help you administer this complexity—all it does is just lower economic activity in the end. Well, and—but it’s—I know you all talk about incentives a lot—back to incentives—what’s a regulator’s incentive? Just to keep, like—keep tightening the corset. They don’t care about growth—they don’t care about the—uh—common sense. Turn off—turn off every risk—it’s their job. If you had to create a metric, then, to say, okay, here’s how we’re going to measure this undoing of the financial corset—is it sort of the lending velocity by private lenders so that the private releveraging can occur? Is that a good way to think about it—or is rates a way to think about it? Well, it doesn’t have to be rates—but if we do all the things I was just talking about—if we deregulate, if we have cheap energy—if we shed excess labor from the government, if we get government spending down—then rates—inflation should come down, rates should come down. Yeah. Uh, but on the question of how are we going to measure it—I don’t have any problem with private credit. Yeah. Like, I actually think it’s exciting—the dynamic—it’s dynamic, it meets the business where it is. Yeah, I agree. And the strength of the US financial system is the depth—and now the breadth—but you could see that what’s happened—that so much lending is being pushed outside the regulated banking system—that tells you it’s overregulated. Yeah, right.

So now, um—once we—so one test will be—how has bank lending—especially small, regional, small banks, community banks—that come undone? And these small banks—the small banks and community banks—they’re 70% of loans—they’re 40% of small business loans. And that’s one of the reasons Main Street’s been stifled. So can you talk about, then, how you will work with the Fed in sort of the change of all of this financial—you need to—and do you need to work with Congress, too, to make these changes? And also just generally—maybe your thoughts on just the Fed in this process—of helper, foe—like, where do they stand? Well, the Fed—I 100% support the Fed’s autonomy in monetary policy. Yeah. I don’t agree with it all the time, but—right—that’s how it is. It’s how it is—it’s how it is. And, um, so—and I’ve said I won’t comment on prospective policy—I can talk about their mistakes in the past, which have been numerous. But I think—like with any system—as it expands beyond sort of the core—uh, I actually think that some of the things they’ve done in regulation, some of the things they’ve done—kind of climate and DEI—some of the things—maybe even non-standard monetary policy—uh, threatens their independence. And I want them to stay strong, robust, and independent on monetary policy. On regulation—I think that they have—they have been much too harsh on—especially the smaller—smaller banks, medium banks. Uh—so there are three main bank regulators. There’s the Fed, Office of the Comptroller of the Currency—OCC—and the FDIC. And then there are other regulators—the SEC, CFTC—but the banking regulators at the federal level are those three. Here at Treasury, we have something called FSOC—and Financial Stability Oversight Council. And, um, I chair that—and via that, the President’s Working Group—uh, which is another convening mechanism that I plan to just keep pushing for—you know—safe, sound, and smart deregulation. Like—why are we doing this? Why are we doing that? And you—again—that there’s a capital charge to banks for buying treasury bills—totally. So I actually think there’s a chance that if we take—it’s called the supplementary leverage ratio—if we take that away—it becomes a binding constraint on banks.

We might actually pull Treasury bill yields down by 30 to 70 basis points—every basis point is a billion dollars a year. Can we talk about that for a second? So I think—and I’ve said this for a year, probably—but one of the biggest mistakes that I think Janet Yellen affected was this continued issuance of money on the short end of the curve to finance these deficits. Which gives you—you inherit an incredibly difficult challenge. I think over the next nine months, I think there’s like nine or ten trillion that has to get refinanced. Do you want to talk about that? Yeah, look, I thought that when rates were low, you’re supposed to term out rates—exactly. And instead, the Treasury—for the past few years—has pulled rates in. And I think part of that was to keep rates lower—that they changed the issuance schedule. When rates moved back up towards 5%—I, um, have maintained that policy—but I’m maintaining it because—let’s go back to David’s question. Of when—when are you going—when are we going to see the results from this—the getting the government spending under control? And I don’t think the markets recognize it yet—like, you know—again—if we do—they don’t—they’re not sure what to believe. I mean, we hear this commentary a lot—like, what do you really—what—people—there’s just a lot of uncertainty—there’s a big spectrum of opinions there. Yeah—like the central value tendency—you’re right—the central value tendency—like, what’s the center of it? Because the range of outcomes is so broad. And, you know—like, we know—we know there’s a problem there. We know there’s waste, fraud, and abuse—quantify it—quantify it. So I think as we are more able to quantify it, we will get credit for it. So let me go back—so outside of waste, fraud, and abuse, as it’s termed—I want to go back to the question I asked earlier—how much does this administration need Congress to act to get to 3 to 3.5% deficit to GDP? And what’s your read on the Congress—and how willing and able they are to take the action that’s needed here?

Yeah, I think there are a lot of headlines—especially after the CR—about the Democrats being in disarray. And media—like, media likes to write about disarray. I think the under—or untold—story here is Republicans have, for a change, actually been very disciplined. That—and I think a lot of that—President Trump is kind of shepherding the party, shepherding the movement. Because imagine—he said, “Oh, that Mike Johnson will never get reconciliation instructions out of—he’s got such a slim majority.” Well, he did it—he did it. Yeah—that he’ll never be able to pass a clean CR—he did it—he did it. So let’s see what happens with the budget. So we need Congress to be our partners on the budget—they’re very engaged—the House and the Senate—that everybody recognizes that if we don’t get this done—it’s going to be the biggest—it’s past fail. It’s the biggest tax hike in history. Where does DOGE come in? Well, DOGE—that’s the cost-cutting. And it’s the first time we’ve really ever had businesspeople looking at it. This Clinton-Gore Commission that we hear a lot—like, or hear a lot about—I think it was a bunch of business school professors. But here, you’ve got real CEOs—you got Lutnick, you got Bergquam, you got Elon—I mean, this cabinet is stocked full of experienced operators that can go in and identify where there’s an opportunity for saving the taxpayers money and still getting the results. Well, it’s that—and we had this crypto council meeting the other day, and I was sitting—I was looking—it was myself, Secretary Lutnick, and Kelly Loeffler—everybody was a market person—like, forget business—like, we—and—but with DOGE—that—I am completely aligned with what Elon’s doing. And everyone says, “Well, do you have to do it so fast? You have to do it.” I—like I said, I’ve only been in this business for seven weeks—I’ve only been in DC for eight weeks—but the thing I can tell you is—if you don’t move fast, the vested interests will weigh you down. Like, the quicksand will come up—or the claws get—the claw—yeah. Everybody’s got lobbyists—everybody’s got—I mean, think about it—within a 10-mile radius of here, 25% of the GDP of the US pulsates through here—pulsates—every day.

And everybody wants to just skim a little. I said to, uh, Elon—and we were in a meeting—and I said, “You know, people are mad at you ’cause you’re moving their cheese.” And he goes, “It’s not their cheese—it’s the American people’s cheese.” 100%. Every dollar spent goes into someone’s pocket—and that person’s going to fight tooth and nail to get that dollar to keep flowing into their pocket. And it’s a—it’s a very—like, there is no winning in Elon’s role. There’s—every single time he takes action, there are people that are going to come after him. That are going to come after the administration—there’s no—and obviously gets recast, reclassified in the media as being something different—but there’s nothing but downside as you make these changes to individual organizations that participate. And then it takes a while for the flow of that money to find its way—or those individuals to find their way—back into the productive private economy. That’s where I think there’s a big gap and a big challenge in the perception of the actions that are going on with the changes right now. Is—everyone sees the cuts, but they don’t see the benefits—and that’s nine months, 12 months, 15 months down the road. And that’s a really hard thing to reconcile for most. Yeah. And I’d say there are a couple of things, too, is—one—like, everyone’s hearing “cuts,” and they think they’re government services—that’s right—that’s right. And they’re not. I keep saying—it’s the Department of Government Efficiency—not government extinction—not government elimination. And—can we make it run much better with fewer people, with fewer costs? And—you—I don’t want to demonize any of these federal employees. ’Cause I tell you—in this building—I’ve been so impressed with the quality of the people. I would have hired them in my private firm—they are great public servants. “I need you to stay for the weekend, and I need a 25-page memo in 72 hours that’s super high quality.” I actually think—what—when all this is done, there will have been two big savings. One will have been on these contractors—sure—which—totally—we were just talking about this—we were with Elon just now—with an incredible stat. He said—I’m not going to name the firm, so that I don’t want to—but he said this one organization gets 98% of their revenue from— It was in the newspaper, so we can say it—it’s Booz Allen—we were talking about this. And then—but then we were going through the numbers on the other firms—and it’s just—the whole thing—what kind of risk management is that, by the way? Yeah, yeah—but it tells you that they didn’t manage the risk—that’s right.

Tells you how entrenched they believe they were—and how good it is for them—and how good it is—you’re absolutely right. And the way the grift works—you can only have six-month contracts—but there are people who have had 40 six-month contracts—incredible—like, they’ve been in situ for 20 years—incredible. And it’s this whole—I’m so happy there is transparency and visibility into this—if for nothing else—the administration providing this level of insight and data—I think is so important for taxpayers and individuals in this country to see—to recognize—and, importantly, to understand just how much of this grift is going on.

Load More

This is a Guest Post from our friends over at WLTReport.

View the original article here.


Source link

Search