Transcripts For CSPAN Natl 20240706 : vimarsana.com

Meetings in washington, d. C. This spring, semi for news held the World Economy summit, featuring biden officials, and ceos. In this portion, the director of the National Economic council talked about the economy, inc. Failures and inflation. Hi. Everyone having a good time . I made it just in time. My train got here at 11 50 one. We are thrilled to be with all of you. Thank you for the time. Before we get started, you have not done a ton of interviews is given this in this position but as i was reading i found something that i thought would be interesting to everyone who does what you did before this job. This is your 2014 commencement address. You told graduates to take risk to travel, to live richly and you said after you graduated i didnt require furniture, i shared leave and seasons with ws characters, i was pretty handy with a can opener. I slept in a rentacar more than i like to amend. And i around the globe. That is your unique perspective you come into this job with. How has it made you think about your responsibility and what really is an extraordinary moment for average americans that are the one struggling the most where they about inflation, whether were talking about what the banking crisis will mean. What it does is i always think about who are we making policy four. I always try to remember the people i meet when i travel around the country and we are making policy for hardworking americans. When we make decisions and there are no easy decisions in these jobs, the president is always focus on middleclass hardworking americans and houses going to bring down costs for them, hows it going to create breathing room. How is he going to create good jobs in their neighborhood is it going to create good jobs in their neighborhood . Got essential you have been central with i just sat down with jamie dement last week and i asked him a question i will ask you which is is america Banking System safe and secure for all the folks youre talking about . The Banking System is very sound. It is stable. The core the Banking System has a great deal of capital. That was put in place in the wake of the 2008 global crisis. It serves as well as well. There were banks not managing their risk and they failed. The president took strong actions along with secretary of treasury and banking regulators. Those actions reassured americans the deposits are saved per year at the Banking System is sound. It was also important to the president that the executive of those banks be held accountable and very important taxpayer money not be at risk. Quads are the questions as Many Americans feel like all their deposits are going to be insured. Nikki haley we took targeted action in the case of two banks that were poorly managed and took unacceptable risk. Those were targeted actions. They were strong actions but they were targeted on very specific. Should we see another bank failure that depositors are not protected at every level . Lael we have seen a playbook. It works very well but it is relevant for banks that fell. More broadly, there is a question that may be address over a longer period of time where the fbi c has taken it upon itself to do is study and think more broadly she did think differently about deposit insurance and that is only slower track. Should there be is to link at all or should it be raised . Do you believe the biggest of the banks that are too big to fail, that should be more progressive in they should contribute more to the fund . Lael we said in terms of making up any losses to the Deposit Insurance Fund which is done through banks fees not taxpayers, the Community Bank should certainly be exempted. It contribute to this instability and it would be a disproportionate burden. With her more so exactly how the fees are how exactly the fees are tailored to something the fbi seat with the site but what was Community Banks not have additional burdens. Do you think therell be more Bank Failures this year . Lael what is important is that banks have now seen some of the stresses that the two failed banks were under their shrink of their belly sheets and convincing depositors and investors that they have a good strategy in our risk managing effectively. If a bank is not effective in doing that and i think you might still see some investors pushing harder. I think this is very much individual set of banks that took unusual risk so investors are just very attuned to those risk and Bank Management know they need to show they have viable business models. Youre saying it is possible there could be more Bank Failures this year, not probable . Lael generally speaking, i cannot speak to this supervision of the super of the banks but i can say generally speaking we have seen deposit outflows stabilize, all the indicators that one would look at have improved over the last few weeks. Theres a reason to think the situation has stabilized. We will see earnings soon as well. By the things i think is important everyone knows is that when senate bill 2155 was passed which brought back some of the regulations for banks was under 250 billion in assets, to roll back some a daughter frank. He wrote about it and i read what you wrote in your warning signs to your colleagues who supported and you said todays actions go beyond what is required by law, it weakens the safeguards before they have been tested, i am concerned the roles go beyond the requirement and we can safeguards against vulnerabilities that cause so much damage in crisis. Lael yes, hindsight is a bit of a thing but you saw something a lot of people did not appreciate how can we use that now . When those strong safeguards were put in place, it strengthens the Banking System. Weakening the safeguards that liquidity management, Capital Buffers to absorb losses, Strong Living will for when a banks fail. All of those things were moved or weekend for banks in a size class with a two banks failed. With the benefit of hindsight it is a lesson, but with the benefit of a post of the cost and the cost is now apparent. We did see failures that led to ripples throughout the system. Poppy we talk about the cost do you believe if the bill had not passed and dodd frank remain the same for all of the banks that they would not have failed . Lots of people including jamie dimon and other say no. Lael the president worked with the Bank Regulators and the department of treasury and put out a list of reforms. They do not actually require changing the law. But call on regulators to put back in place the strong safeguards. Do i think the quiddity stress test would have liquidity stress test would have a supervisors that uninsured deposits were a huge percentage of deposit, which is really unusual in silicon valley, i do. Poppy they had not undergone lael did not have liquidity requirements, they had not had a single one. Do i think a capital stress test for Interest Rate increases couldve made a difference . I do. Those are the reforms the president had recommended. Poppy wanted things striking in watching svb play out that six times had regulators told you have matters requiring attention and the bank did not that it turns out in 2021 there was a federal issue that is just guidance. It does not have to be enforced. My question to you, should the public note when the bank ignores regulators six times in a row . How do you wait the benefit of the republic public knowing and the risk of sparking a run on the bank if you make that public . Lael it is one of the issues the Federal Reserve really needs to take seriously. What happened was not just roles or weekend but a change in supervision. With messaging that fewer issues should be escalated, examine or not be in this closet banks, in retrospect we know that was a mistake. Poppy did you push against that when you were there . Lael that was a portfolio that belonged to a colleague and so it was not my place. Do i think supervision clearly needs to be strong . We learned that and is a part of the recommendations the president put forward. Poppy lets talk about inflation. Cpi cpi came in lowest level since 2021. That is good. Do you think the fed has been at this point nearly Impossible Task or can more be done on inflation while managing this banking issue the policy . Lael we are seeing inflation coming down. It is come down about 45 since the peak but we still have more work to do. That cpi print today is the lowest annualized print we have seen since may 2021. In categories, where starting to see consistent decrease in areas like used cars, things that matter to American Families but there are still a lot of work to be done. Where going to see in the month ahead helping cause coming down because whole thing because coming down because rentals is coming down. The trajectory is a good one on inflation. In where the economy is headed, we are seeing moderation. Where are seeing a transition to study, stable growth. We saw a nice job reports which had both continued job staying and increase participation by prime age americans in a moderation in wage increases. All of that suggest the economy is on a good trajectory for inflation to come down while Growth Continues at a moderate path. Poppy whose job is it to get inflation down . Lael the fed, congress, the white house. Im happy to say i checked and egg prices are down. I purchased them this week than i did. Can you tell i do shopping for my family . It is really a combination. The Monetary Policy tools the Federal Reserve but we have important work we are doing on the supply side of the economy. For instance, president introduce important policy to bring esalen prices down to 35 a month for seniors insulin prices down for 35 a month for seniors and we are seeing Companies Make that place for all americans. There are gas prices something the president works hard on and the gas prices at the pump down 1. 40 relative but opec plus movements are frustrating the efforts. The announcements of are illadvised but prices at the pump are still down. The present focuses on those areas where we can make a material difference like a drug prices that will continue to push and give americans more breathing room. Poppy are you in the camp with those who said they believe a recession in u. S. Is slightly more likely because of the banking crisis in terms of credit tightening, lending . Lael i think that banks are showing some signs of pulling back a little bit uncredited. That could do some of work for them but in terms of what i see in the economy overall, it is a remarkably resilient economy. If you think about it, the American Economy has sustained two historic shocks over the last two years, a Global Pandemic and a massive global commodity price shock associated with russias war. Despite that as you have seen with the child support, 3. 5 job report, 3. 5 unemployment. Dissipation rate higher than prepandemic. The Participation Rate higher than prepandemic. It suggests resilience the other piece i think it is just beginning to work its way through the economy is a set of three historic bills that are going to lead to a transformation of the u. S. Economy into the future. Poppy do you believe the banking crisis and has made a recession in u. S. More likely than if it had not happened . Lael what we are seeing in the data is continued resilience. Poppy is that no . Lael we are seeing good signs across the board even with the banks doing what they need to do in terms of shoring up there balanced sheet. Poppy just so i understand what your position is in banks that ignore regulators, guidance that should be mandated but it is not right now. Should the public be made aware when the bank takes six times ignores what regulators tell us . Lael the Bank Regulators have to calibrate in a consistent way what guidance they make public or the banks need to make public and what guidance is not made public so there is escalation. That is where the Federal Reserve to decide but i do think it is Good Practice for the public to be aware. Poppy the public should know at some point . Lael the public should generally know how well a bank is managing so that is why liquidity requirements removed, bank Capital Requirements, stress tests that do not apply to these banks, those things should help the public test and continue to investigate the resilience of their. Poppy you can understand why and the best there should know what is going on in a bank in inflation risk by depositors should not have to be digging for that . They should be given a heads up. Lael that is what stress tests, liquidity requirements, Capital Requirements are intended to do. Poppy lets talk about the debt ceiling. Are we going to default . Lael i think this is pretty straightforward. Year after Year Congress raises or suspends the debt limit. It is a normal part of their responsibilities that needs to happen. It is clear. There is nothing good that can come from over the debt limit. It is important and it happens every year that the administration, the senate, house sit down and work through a budget. My hope is those two things both happen. Poppy we all hope but im concerned about how close we are getting to the brink and you talk to the leaders on wall street all the time and what they are telling me is even if we do not cross the brink member will have been a decade ago . The markets fill it, we feel the pain before it happens and it weakens america in the eyes of the world. Lael i think the president has been clear on this. Congress needs to find a way to lift the debt limit and the consequences of not doing so would be very dire. But it is doable. It has been done in every previous instance. We put a budget on the table. We are transparent about our spending about areas of cause. About fiscal trajectory, for scores possibility and revenue. And we are ready to have a conversation about the budget. Poppy you are ready to have a conversation about the budget and we understand negotiations about future spending which republicans and the white house are not about paying bills we agree to which is the debt ceiling but it has been the position of the white house it will not negotiate and i wonder if forming a hard no on negotiating even if the cost is the fall . Lael the white house, the president is looking forward to have a over the budget. The difficulty is if you need to have a budget come forward from the house to have that conversation. The best we can do is put our own budget out which we have done to get a sense of where we think the Priority Areas are for spending, for revenues, the trajectory on fiscal responsibility but we cannot have a discussion about that unless we also have a proposal on the others. Poppy can you give us a sense of where you are willing to agree on the cusp republicans want . Lael it is hard to do because i did not know what that proposal looks like. We have had two or three different proposals floating around. None of them have the specificity theyll be normal in a Budget Discussion and so it is hard to say that we have something we know is going to be a proposal. We look forward to that. Poppy joe manchin road in a recent wall street journal oped it is clear biden to pursue any logical agenda rather than face the present danger facing our nation. Lael we put a budget on the table that has deficit reduction over 10 year horizon. They see massive reductions in deficits the last two years. The president has a strong record on fiscal response ability and we have a set of tax proposals that will raise revenues and again, it is a negotiated discussion over the budget and so we would love to start a conversation with a proposal on the others. Poppy you do not believe we hit the point of the default . Lael it is clear we cannot do that. We simply need to see Congress Move forward to raise or extend the debt limit and of course, have conversations about what forward to spending and revenues plan should look like. Poppy on artificial intelligence, check gpt, the explosion of it. Goldman sachs came out and talk about the 200 million jobs lost from ai. How do you think about that if you think about the labor market . Lael i think we are just beginning to really understand the farreaching applications of this profound potentially transformative technology. It could brink opportunities, it will also certainly brink risk. Bring risk. President and i have met with members of the technology community, really starting to go down the path of having a conversation where together we decide what the path forward might look like. To support responsible innovations but make sure that is balanced by strong safe guards. Poppy that is interesting there because dell told me last week essentially just because we could does not mean we should. Just because we can do this with ai does not mean we should do all those things right away because of what it means for jobs. Do you agree with that . Lael i do think there are important risk here. Yes, absolutely. We need to make sure there are important safeguards we all agree and put those in place so that some of those risk that are quite sobering our address at the outset. Poppy i really appreciated and i will tell you i disagree with your statement you said in another commencement speech, central bankers are told by design. I do not agree with that at all. This is fascinating. Thank you very muc