WHEN: Today, Friday, November 20
WHERE: CNBC’s “Squawk on the Street”
Following is the unofficial transcript of a CNBC interview with United States Treasury Secretary Steven Mnuchin on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Friday, November 20. Following are links to video on CNBC.com:
All references must be sourced to CNBC.
JIM CRAMER: Treasury Secretary Steve Mnuchin joins us now. Mr. Secretary, thank you so much for coming on Squawk on the Street. Always good to see you.
SECRETARY MNUCHIN: Always good to be with you, Jim and I'm glad to be on to explain this because I think it's really pretty straightforward and people are missing the issue. The Treasury and Fed have worked incredibly close together and these programs have been enormously successful. And let me just remind people, you know back in March when the markets were stuck, even before the CARES Act was passed, the Fed working with the Treasury, we activated the commercial paper facility, the money market facility, we activated the primary dealer facility. These were all done with money that the Treasury has in the Exchange Stabilization Fund. And then, as part of the CARES Act and again, you know, we couldn't be happier, enormous bipartisan support on the CARES Act, 96 to 0, 100 to 0, Congress entrusted Treasury with $500 billion. It was really unprecedented. And that money could be used to work with the Federal Reserve and with direct loans to airlines and national security companies, and we announced a series of other facilities with the Fed. And as you recall, I was in the room. I negotiated these documents. I worked very closely with Mike Crapo and Pat Toomey. We negotiated this specific language. And on the Fed facilities, the $450 billion that Congress gave me, it was very clear that the congressional intent is it expires on December of this year. It's very clear in the law. So, Chair Powell and I have been discussing this for the last few weeks, in deference to the Fed, I said that the facilities that we funded with pre-CARES funding, the Exchange Stabilization Fund, I would extend. So commercial paper, money markets, primary dealers and things like that, for the abundance of caution, even though they're not being used, and the CARES money that expires at December 31, that was merely simply following the intent of the law so it wasn't a decision on whether we needed these or we didn't need these. But let me just put this in perspective, all those other facilities, we only have about $25 billion of loans outstanding. And to the extent that we need to do more, we have over 750 billion of firepower between the what's in the Exchange Stabilization Fund and what the Federal Reserve can do going forward. These can be reactivated so markets should be very comfortable that we have plenty of capacity left. And Mark Meadows and I will be working with Mitch McConnell and Kevin McCarthy, and hopefully the Speaker. There's $500 billion of money that Congress appropriated, that is now expiring. We have 130 billion of PPP money sitting around. We need Congress to re-appropriate these funds. We could do 500 billion of fiscal response immediately that won't cost taxpayers any more money and let's spend it on small business PPP loans, you know, there are a lot of people who are still struggling although parts of the economy are roaring back, parts of the economy, small businesses, restaurants, travel and other need more help, and that’s where we want to put this money. But this was a very simple thing, we're following the intent of Congress.
CRAMER: Well, if it's simple Sir, what I want to do is play just a bit of an interview with Chicago Fed President, Evans, that we just had that, that Steve Liesman had, that I think puts the issue in a different light. If we can just listen to that, sir, it will really help things.
CHICAGO FED PRESIDENT CHARLES EVANS (Recording): I think our, you know, 13(3) facilities have been very helpful they, you know, perform a backstop role for, you know, when markets find themselves in a more challenged situation when Main Street Lending could be impeded, the banks have been important for helping now. There's a lot of design put in place and I think that backdrop role might be important, you know, for quite some time so it's disappointing.
CRAMER: So, sir, I mean obviously the discrepancies, not necessarily speaking for the Chairman, but is a very distinguished member of the Fed and says that this is disappointing, how do you react to that?
SECRETARY MNUCHIN: Well, nothing against him and I and I watched the interview, when it was live. What I would say is, you know, I'd ask him to go read the law, which is very clear, or ask him to call up you know the chair of the committee. It was very clear now I think what the Fed has said, and again, Chair Powell and I have discussed this extensively. If it weren't for the fact that these were expiring, you know, all of the things being equal, the Fed always likes to keep their tools outstanding. But again, this is not a political issue. This is very simple, and really that the story is, let's go re-appropriate $500 billion. I mean, corporations don't need this money. This has been a great success we don't need to buy more corporate bonds, we, you know, kind of the municipal market is working. People are able to borrow lots of money in the market as I said we've only done $25 billion and to the extent these need to be reactivated, we have over $800 billion of capacity so I consider that to be a pretty good bazooka and Congress trusted us with this money and we're going to follow the law, and that we're asking Congress, please go re-appropriate this money for areas of the economy and people that really need it.
CRAMER: Alright so headline, New York Times this morning, Mnuchin to end some Fed aid programs, limiting Biden's options. Does it limit Biden's options?
SECRETARY MNUCHIN: Well, again, the options are the options. We have capacity, whether it's myself or somebody else. These, these can be reactivated with Exchange Stabilization Funds and, you know, I just remind you, there were a lot of people, you know, on the Democratic side who questioned giving me $500 billion that I could quote, “Do with whatever I want.” So, I find it kind of ironic now that I'm being prudent and returning the money to Congress like I'm supposed to that people are questioning that but again we want Congress to re-appropriate this money, and we got plenty of capacity left if we need to use it. And this has been a great success story look at where the markets were in March, look at where they are now. Companies like Boeing that we thought were going to be able to have to borrow from the government went and borrowed 10s of billions of dollars in the public markets
DAVID FABER: Secretary Mnuchin, it’s David Faber. You're making cogent arguments I think many people would agree with, but we live in a very weird world right now where there are quite a few who see anything that is done in your administration as an attempt potentially to make life as difficult as possible for you, for President Trump's successor, of course, while the President continues to fight the outcome of the election. What do you say to those people? What is the upside here? Is it the return of the money that you keep talking about and the re-appropriation of it?
SECRETARY MNUCHIN: Look, I think this has been a great success story and what I want people to focus on is, you know, Chair Powell and I and the Fed and the Treasury, these have worked. And the best part of them working was the mere announcement that we had $500 billion that we could go do $5 trillion if we needed to, that opened the markets. So, the mere announcement that was the bottom of the market. And as the Fed has always said, these are emergency tools. When the emergency is over, let's put them away. Well, the, the medical emergency may not be over but I think we'd agree, the financial conditions markets is, is the financial conditions are in great shape, corporate bonds have come in, municipals have come in, mortgages have come in, the stock market has rebounded and, you know, I'm hopeful because we have been a very good steward of this money and these tools that down the road, whether it's 5, 10, 20, 30 years from now, that there's needs to use these tools that Congress will have the same confidence in future Treasury Secretaries and Fed Chairs as they've had it us.
SECRETARY MNUCHIN: And again, I would just highlight - the law is very clear the intent was this part of it expires in December. Let's go use this money for things in parts of the economy that need it. We don't need this money to buy corporate bonds, we need this money to go help small businesses that are still closed or hurt, no fault of their own, or people who are going to be on unemployment and unemployment is running out.
FABER: Yeah. You know, this all was passed, of course during a very dark moment, when we were headed into potentially what ended up being sort of a so-called lockdown for a bit as the virus raged out of control but Secretary Mnuchin, unfortunately right now, the virus is raging out of control as well and I think the uncertainty that we see right now, may be equal to some of the uncertainty that we had in mid-March. And so, some people wonder well why not just extend it? What's the downside to just keeping things as they are, and at least being ready for unexpected occurrences given that this virus unfortunately is still with us and as bad as ever?
SECRETARY MNUCHIN: Well, again, let me just clarify, the facilities that didn't use CARES money, we've extended in the abundance of caution, and the facilities that used CARES money that have a December 31 expiration, we're following the intent of the law, which we think was pretty clear. And we're saying to Congress, go spend this money and help small businesses and people that really need it. Now as it relates to the virus, you know, I would say, we are in a very different situation. We have two companies that have vaccines that have been approved, we have more in the works. We're going to have mass distribution of vaccines. We have massive amount of testing, we have ready testing that can be done now in 15, 20 minutes with very, very high certainty. So, I think, as a result of Project Warp Speed and the President's commitment where we use CARES money to make major investments in health, we're in a different situation. There will be an end in sight, yes to this virus because of the great progress that the administration has made.
FABER: All true, all true Secretary but we did 197,000 cases yesterday and 2,000 deaths and it's only going one way right now with Thanksgiving looming. I mean, you know, the next few weeks could be really ugly.
SECRETARY MNUCHIN: Well, we hope it won't and again you know we're working on mass distribution of the virus. And again, to the extent that markets need support. We and the Fed can work together in the future. But, as you said, the people that really need support right now are not the rich corporations, it's the small businesses, it's the people who are unemployed. Those are the people we need to help for the next few months while we restore and reopen the entire economy and get the vaccine distributed.
CRAMER: Okay Mr. Secretary, why can’t you just agree with the Restaurant Act, target some other places that are just hospitality, get this done in the next month because you know, as it gets colder, these institutions and these companies, small business, they're all going to close. It's too cold. What can you do for them?
SECRETARY MNUCHIN: Well, you know, I understand that the democrats didn't want us to do anything before the election because they didn't want to do something that could be helpful to the President, but I had hoped, now that we're past the election, that the democrats would work with us. Again, during the CARES Act, we had incredible bipartisan support, and we'll be redoubling our efforts to sit down and try to get something done, that's really what's important. And what the economy needs is now more fiscal support and again, as it relates to these facilities, all we're letting do is the ones that were supposed to expire at the end of the year will expire, the ones that don't were renewed and $500 billion, Jim, you know, we want to go spend that money for people who need it.
CRAMER: Well can you pledge that later today you'll sit down, or at least have a dialogue – courteous dialogue -- with Speaker Pelosi about trying to get this done?
SECRETARY MNUCHIN: Well I can tell you Mark Meadows and I will be speaking with Mitch McConnell and Kevin McCarthy this morning, and we are going to come up with a plan to sit down with Pelosi and Schumer, and try to get a targeted build on for the people that really need it and hopefully the Democrats will work with us, and hopefully that'll get done.
CRAMER: Well, I echo your analysis of what happened with Boeing, but it's interesting I speak with all the executives in the airlines. They need a big Thanksgiving, sir. They need a big one. It's got to put in some money in their coffers. They're losing hundreds of millions of dollars per month. But the lead story in the Journal – CDC calls on nation to avoid holiday travel. I mean, what are we going to do, if two weeks from now, the airlines come back to you and say you know what, it was – we didn't make it. We need help.
SECRETARY MNUCHIN: Hey, Jim, I will tell you, you know when we were negotiating the deal, we had enormous bipartisan support for the airline workers, so we were going to spend more money for the airline workers to keep them employed. It's no fault to the airlines that they're shut down because of this, and the Democrats refused to bring that to the floor on a standalone basis. We could have saved tens of thousands of jobs, and we could put those people back to work in using part of this $500 billion. Again, lots of airline workers lost jobs, no fault of their own. And I can tell you I had lots of calls from both Democrats and Republicans, urging us to pass that standalone legislation.
CRAMER: All right. Again, I want to just go back to what The New York Times is talking about. This is a notion that you are hindering President Elect Biden's ability to use the central bank's vast powers to cushion the economic fallout from the virus. I hate to just play politics on you, but that is what The New York Times says. That you are hindering the next President's powers.
SECRETARY MNUCHIN: Not surprising from The New York Times. You know, I've seen other misleading stories from them. It's unfortunate. Again, what I would say is, read the letter that we sent to Powell. It was very clear. Again, we're not trying to hinder anything. What we're trying to do is follow the law, as we're supposed to. We extended the facilities, there's been a great success. Let’s re-appropriate the money, let's get it done.
FABER: Secretary Mnuchin, were you surprised that Powell responded not, you know, not in your favor in a sense and said no, we don't want you to do that?
SECRETARY MNUCHIN: Again, I'll let Chair Powell speak for himself, and again, we've had lots of conversations. Again, I think what the Fed has said is that the interpretation of the law is up to us. They weren't in the room. That's not their job. I think, as it just relates to the facilities, again, they'd always like to keep things open. And that's why in deference to them, you know, I kept four of the facilities open even though nobody's going today to a commercial paper facility or money market facility. But they're there in case the Fed needs to use them. And again, we got a lot of firepower left. If we need to reopen other facilities with non-CARES funding.
FABER: You know, Secretary, the municipal liquidity facility in particular, I know those markets are working fine, but the New York MTA needs $12 billion. And they need it fast otherwise they're going to have huge service cuts in an area that contributes I think as much as 13% to GDP. I mean, that could be a little scary, couldn't it? How are we going to deal with getting the aids needed to these municipalities before there are massive cuts in terms of jobs and/or dislocations in the municipal bond market?
SECRETARY MNUCHIN: Well the MTA has a real revenue problem, obviously. And you know, the MTA would like to get grants from the government. They really don't want more debt. But again, the MTA can borrow in the market, they’ve borrowed some money from the facilities, they’ve borrowed money outside of the facilities. The markets are open for them. And again, I don't expect that to be a problem. But again, let me just say, there is a big difference between grants and loans. And the areas of the economy right now that are really hard hit, like the MTA, you know, they need to work with the state and federal government on how they're going to get grants to go forward.
CRAMER: All right, but let's go back to a statement that Chairman Powell put out earlier this week. “The Federal Reserve would prefer” – this is in response to what you did. “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still strained and vulnerable economy.” When you spoke with Chairman Powell, he did he not articulate this view and suggest that you are ill-advised in the actions that you're taking.
SECRETARY MNUCHIN: He has never said I’m ill-advised in the actions that I'm taking. We've spoken extensively. He understands my view of the congressional intent, and again, I'll let him speak for himself and clarify his remarks. But Chair Powell and I have a very, very close working relationship. And again, I think what people should be focused on – this has been an incredible success. Let's not focus on a couple of facilities that hardly were used. Okay. Again, very small use in the Main Street facility, in the municipal facility. And again, Main Street companies need grants. They don't need more loans right now.
CRAMER: All right, look. And I am going to say it was an incredibly successful policy. PPP, which is I know yours, was amazing at how many jobs it preserved. There is no doubt about it that you worked in a bipartisan way to do – to save millions of jobs in this country and that the money that was trapped with the Fed was doing nothing but backstopping. But once again, Phil LeBeau, who is such a great reporter for us says, right now, Airlines for America says the U.S. airlines are collectively losing $180 million a day. Mr. Secretary, why would we think about getting rid of these programs when we know, like with Boeing – which you saved Boeing that Sunday night by doing nothing you had already backstopped it – why not keep this backstop so that you, I don't want to single out any particular airline, but that Boeing move is brilliant. Don't you think we need to keep these same things for the airlines?
SECRETARY MNUCHIN: Well Jim, again, I just want to clarify, we have lent the airline billions of dollars every single one of the major airlines. Pretty much took direct loans that they have from the Treasury. They're sitting there, they're on standby. They haven't drawn them down, they're there in case they need to use them. That money is allocated, we're not giving that money back. And again right now the airlines have plenty of liquidity. They don't need to borrow more money. The problem they have is, there's no business. They needed to let go of all these people because people are telling people not to travel. And again, enormous bipartisan support for more payroll support for the airlines, that's what the airline CEOs want. None of the airline CEOs would have accessed any of these Fed facilities going forward. And small businesses – we have $130 billion of PPP money. I could send that out tomorrow, Jim, you know how difficult the restaurants are having time. Let's get Congress to act. Let's send out that $130 billion. That's lots of jobs.
FABER: Finally, Mr. Secretary, the weeks ahead as we know from here are going to be certainly momentous ones and important ones. Your successor may be announced very soon by President Elect Biden. Are you going to work with your successor? What can you tell us in terms of any plans for a transition given at this point at least the Trump administration has been resistant to doing anything in terms of that transition?
SECRETARY MNUCHIN: Well I think you know the media is not the ones who call it. There is a process to certify. And when this is certified and when the transition is certified, of course we will work with whoever is the appropriate people to work with.
CRAMER: Okay. Mr. Secretary, just a pure political issue. We're hearing that Janet Yellen may be in the ring for successor. If she did get – if things are certified and she got that job, would you be happy?
SECRETARY MNUCHIN: Again, it's not appropriate for me to comment on, you know, being happy or not being happy in my own personal views of who the potential Treasury Secretary should be. You know, again, if things get certified, we'll obviously work closely with whoever it is. And, you know, that's what's been done in the past. But for the sake of the Fed and Treasury, we want Congress to re-appropriate this money.
CRAMER: All right. Well, Mr. Secretary, it's been a great pleasure over the years to be able to get you to come on. You're a straight shooter. PPP, we owe you great deal. I know you're not supposed to editorialize like that, but what the heck. I know it's been a great program to many others to help small and medium sized business. Big step there. Thank you so much for joining us on “Squawk on the Street.”
SECRETARY MNUCHIN: Thanks, Jim. Appreciate it.
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