00:00But this letter was remarkable for a couple of reasons.
00:02I mean, you had at least, well, you had the three living former Fed chiefs, Ben Bernanke,
00:07Alan Greenspan, and Janet Yellen, sign off on this letter.
00:11But it was also an interesting hodgepodge of other people from other administrations
00:14from both sides of the aisle.
00:15Phil Graham used to run the bank, a Republican used to run the Banking Committee, Glenn Hubbard,
00:19Greg Mankiw, Christina Romer was on this letter, Bob Rubin, and also Jack Lew, of course,
00:25who was Treasury Secretary, and then, of course, Chief of Staff for the White House for a few
00:28years.
00:29That's right.
00:29You had four former Treasury secretaries sign on to this letter.
00:33And I'm pleased to say that one of us, one of them joins us now.
00:37His name is Jack Lew, as Romain mentioned, former Treasury Secretary and former U.S.
00:41ambassador to Israel under President Obama, now currently a professor of international
00:45and public affairs at Columbia University.
00:48Secretary, fantastic to have you with us.
00:50I want to start with the first line of this letter, that the Federal Reserve's independence
00:54and the public's perception of that independence are critical for economic performance.
00:59And it's that part I want to talk about, because that's something we basically take as gospel,
01:04that the independence of the Federal Reserve really matters for this economy.
01:08But, Secretary, tell us concretely why exactly that relationship exists and is so important.
01:14Well, it's good to be with you, and that sentence is really the core of the reason that so many
01:21of us got together overnight to sign that joint statement.
01:26And it's the reason you see central bank governors around the world and people from the Republican Party
01:32in Congress and former members joining as well.
01:36The confidence that the public has in the Fed is crucial to expectations and the ability of the Fed
01:44to use its tools in an effective and a convincing way.
01:49You know, we've learned the lesson from international experiments with central banks
01:54that were not independent.
01:56And it's not a good history.
01:58And as Treasury Secretary, part of your job is to help other countries understand that they're
02:04not going to help themselves if they have their central bank subject to political controls.
02:10I remember when I was at Treasury, that issue came up in Turkey.
02:14It didn't end well for Turkey when they had political decisions made on their monetary policy.
02:19I mean, their inflation rate has been roughly 10 times ours.
02:23So these are core, core issues in terms of the stability of the U.S. economy.
02:29I actually think that it's settled the nerves of markets and observers that so many people came out to say
02:37that this was not an acceptable way to treat a central bank.
02:42And we can talk more about the specifics of it.
02:46But if you view this not as a question about a building improvement, but using legal prosecution
02:54to try to put pressure on the central bank chair, that's a terrible precedent.
03:00I am curious, though, just about this idea of trying to affect policy as the White House is trying to do.
03:05And there's always been this interesting relationship between the Treasury and the Fed,
03:09particularly given the Treasury or at least the Treasury Secretary's link to the person in the Oval Office.
03:14I am curious as to why you cannot achieve your aims as president through mechanisms other than the monetary policy mechanisms
03:24that this administration seems to be so focused on.
03:28So I think every president has views on where interest rates should be.
03:33Every Treasury Secretary has views on where interest rates should be.
03:37And there's nothing intrinsically inappropriate about sharing those views.
03:41You know, when I was Treasury Secretary, I had a weekly meeting with Ben Bernanke and then with Janet Yellen,
03:46and we shared confidential views on everything from fiscal to monetary policy to geopolitical issues,
03:53you know, to whatever was on our minds.
03:56The question is, are you trying to pressure the central bank to make decisions
04:02that are not based on the central bank's independent judgment based on the data?
04:07You know, right now we're at a time where the data is not straightforward.
04:12You could see in the outcome of the last Fed meetings, it was a close call.
04:17There will be differences of views.
04:20The question is, is the judgment being made based on the central bank's best understanding of the data?
04:27Or is it a politically driven move which is suspect in markets and around the world
04:34because it doesn't reflect that independence?
04:38Well, Secretary, you made an interesting point that you think about this specific incident,
04:43this specific probe into Jerome Powell, that it seems like markets basically shook it off because, as you said,
04:50there was a lot of pushback from both sides, basically bipartisan expressing discontent with this move.
04:57And I wonder, you know, what the recourse is here.
05:00If we continue down this path of eroding Fed independence in a meaningful way,
05:04whether or not it will be markets that will be sort of the ultimate disciplinary action here.
05:09Look, I hope it doesn't get to the point where we have to see the market response to kind of a clear demonstration that it's crossed the line.
05:19The fact that overnight we were, it was not just a group of Democrats.
05:24You had former Secretary Hank Paulson, you had Greg Mankiw, Glenn Hubbard, Phil Graham signed on.
05:31You know, I think that says a lot about broadly held the view is that inappropriate political pressure
05:40and coercion on the central bank is not a good thing.
05:45So I'm hoping that the response to it is is a bit of a lesson.
05:49Yeah. But Jack, Jack, can I just stop you there?
05:52Because, I mean, you raise an interesting point here about the signatories on this.
05:56But I do want to sort of draw some distinctions between some of those names on the list, which are certainly, you know, no offense,
06:03people from a different era of how Washington worked.
06:06And we're now looking at a Washington that's run by a completely different cohort of people who sort of look at the cooperation
06:12and bipartisanship that was kind of a hallmark, particularly when you were working in Congress,
06:16whether it's for Tip O'Neill or for the liaison group with Greenspan solving Social Security.
06:21These are sort of bipartisan efforts.
06:23And that bipartisan, as I'm sure you know, that bipartisanship seems to have completely dissipated from Washington.
06:28Do you ever see any hope that we will see a little bit more cooperation amongst the administration,
06:34Congress people and other folks out there to get things done?
06:37Or is this sort of distinct bifurcation that we've seen over the last a few presidential administrations just what we're going to have to live with?
06:46I sure hope we do see a return to some bipartisanship.
06:49Obviously, this is not a moment where one would seem very realistic to say it was immediately on the horizon.
06:56But the challenges we have as a nation need to be faced in a bipartisan way.
07:02I mean, you look at something like Social Security.
07:04I was a young aide to the Speaker of the House, the liaison to the Greenspan Commission.
07:09I'm proud to this day of having been part of solving Social Security's fiscal problems for more than half a century.
07:19Now, we're less than 10 years away from some action having to be taken.
07:24I hope we don't wait until we're six weeks away.
07:27That won't leave great options.
07:29It can't be resolved except in a bipartisan way.
07:32You look at our overall fiscal position.
07:37It's going to require bipartisanship to come up with some mix of measures.
07:42To talk about raising taxes right now, one would sound like they were from another planet.
07:48But that's going to have to be part of the conversation, as will some action on spending.
07:54So to put everything on the table means everyone has to come to the table.
07:58And we haven't had that bipartisanship for a while.
08:02I will say this about the 1980s and the 1990s.
08:06I remember both decades being seen as the most partisan ever.
08:10I remember when Phil Graham was a Democrat, you know, when he left to vote for the Reagan economic program.
08:15I worked for Tip O'Neill at the time.
08:17I remember when, you know, we faced the government shutdowns with Newt Gingrich.
08:23And just a couple of years later, we're sitting at a table passing the balanced budget agreement.
08:28So you can come back from the brink of partisanship.
08:32I hope it doesn't take a crisis to bring that about.
08:36Well, getting back to the broader question of Fed independence, I do want to point out that you think about what's going on with Fed Governor Lisa Cook.
08:44You were part of the group of Fed and former Fed and Treasury officials who signed a friend of the court brief in September in support of Governor Cook, who Trump is currently trying to fire.
08:55And I mean, I do think it's interesting that this extends beyond just the Fed chair himself and jawboning about interest rates in the direction that the president would like them to travel.
09:05It extends to the Board of Governors as well.
09:09Look, I think it's a very important question that's going to come before the court very soon.
09:16I hope that the court, you know, continues as it did in a footnote in a recent case to say that removal of Federal Reserve Board members can only be for real cause.
09:32And that's not been proven in the case of Lisa Cook.
09:37I think reaching to a kind of strained investigation into perjury, you know, anyone who's testified before Congress has answered questions to one degree of fullness or another.
09:51It takes way more than somebody saying you didn't fully answer my question to even get close to that.
09:58So the notion that this investigation is going that way to me just suggests that the legal tools prosecution is being used to send a signal.
10:10And it's very important for there to be a counter signal.
10:13You know, the Fed has to be treated in a way that respects its independence and it can't be coerced through legal attacks.
10:23It's very important for us.
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