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okay we are here in Washington DC in
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front of the White House having spent
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the afternoon with our friend David Saxs
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our friend Elon Musk and others we are
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here to learn about the debt the deficit
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what's going on in DC and we have an
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incredible interview lined up with Scott
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Bessant Treasury Secretary of the United
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States it was amazing and it's been an
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amazing afternoon and we're really
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looking forward to it it was amazing
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well this is the pre the intro to the
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video it will be amazing
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it's not the pre let's just What the
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We're going to pretend it's the pre it
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was amazing it It will be incredible it
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was incredible but how cool is the White
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House and here's a bell i'm pretty sure
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I'm pretty sure the bell I cannot even
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describe to you the day we had running
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around it's incredible running around
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room to room in the White House one of
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the best days of my life it was one of
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the best days of my life it was
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incredible incredible i think this bell
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is probably pretty important can you
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guys get a shot of this bell i don't
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know what it is but it's really
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important yeah the White House the
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people to a one super kind super open
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super curious i mean did you felt it i
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You felt accepted yeah I felt But I got
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free soda they have a soda machine where
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you can make any Coca-Cola flavor you
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want in the White House it was pretty
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cool i took some uh hummus i wrapped it
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on Creeper's face i punched him in it
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was a cool afternoon and uh this is what
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is this the east wing of the White House
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and we took a walk from the west wing
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all the way over to the east wing to the
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portico and then we we snuck in well we
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didn't sneak in we walked in and then
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we're walking around the east wing we
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went to all of the private rooms i got
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great photos we'll we'll we'll slice him
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into this video and then some secret
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service dude comes up and he's like
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"What are you guys What are you doing
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here this is the residence of the
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president you have to get the out." He's
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like "You need to go downstairs now." So
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we got kicked the out but it was an
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incredible um incredible tour super
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great yeah anyway we're excited for this
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interview with Scott Bess and hope you
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enjoy it
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all right besties i think that was
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another epic discussion people love the
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interviews i could hear him talk for
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hours absolutely we crush your questions
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in a minute we are giving people ground
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truth data to underwrite your own
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opinion what do you guys think that was
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fun pal
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Well today's a really important day
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we're joined by the 79th Secretary of
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the Treasury Scott Bessant and this is
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an opportunity that we wanted to take as
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part of a longer form way of explaining
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to people not just how the economy works
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but in a little bit more detail where
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are we in this moment in time where are
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we with deficits tariffs the budget
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economic monetary fiscal policy how do
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we make sure that we all understand the
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plan to make America great again so
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Scott thank you for joining us good
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thanks for having me i actually want to
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start with let's go back in the way back
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machine so South Carolina your father
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was a real estate developer tell us
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where the passion for finance came from
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uh well um I don't know where finance in
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particular came from as you mentioned my
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dad was a real estate developer and he
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he was kind of boom bus kind of uh guy
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so I think that's where my passion for
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risk management came from but uh I I was
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I was very fortunate went to Yale wasn't
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sure what I wanted to do n 1980 when I
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got
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there probably you all can imagine this
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but uh there used to be these things
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called punch cards and we just gone the
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Yale computer system just gone from
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punch cards to screens i was going to
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think of being a computer science major
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maybe a journalist because people
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actually used to read newspapers so
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punch cards and newspapers from the way
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back machine uh and I
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um I I got an
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internship at just for an individual and
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he taught me the investment business
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really well and I And who was that his
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name is Jim Rogers he's famous he was
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George Soros's first partner uh he uh
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had just completed an around the world
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motorcycle trip and written a book
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called Investment Biker right and fa
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fascinating guy and um I did the
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investment business and I thought this
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is really what I like because it's
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quantitative so I get to use my
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quantitative skills but you're also
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constructing a narrative um and it's
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also like human emotions and you were
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trading equities bonds everything
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currencies uh well I started out with
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equities and I I did that for several
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years and then I actually ended up at
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Soros Fund Management i worked for a
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fellow who's my mentor Stan Draen Miller
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who's incredible but I I think he's on
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he's more than 40 years now never a down
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year and you know when you're sitting
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next to him I think what am I doing all
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day and notorious for going allin
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several times in his career all in all
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all in and uh only when he's he's right
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yes well I but he he is the best at
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changing his mind that's right of anyone
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I've ever seen so Duck has that famous
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adage invest then investigate well he he
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has several and and I'm trying to get
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him to write a book because he has so
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many of these great things uh maybe you
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will press him um but invest investigate
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it takes courage to be a pig right right
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so uh and then I I was hooked on markets
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because again it was everything it was
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quantitative it was qualitative and it's
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real time you get real- time feedback
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all the time and you you're could have a
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long-term view but then you're trying to
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gauge the short term against that and
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you know I I loved it and uh for 35
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years I've got into I did what's called
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macro investing so uh eventually I was
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trading currencies bonds
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commodities the equities uh some credit
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and I got to travel around the world
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meeting leaders and trying to figure out
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what the next move was in policy i think
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this is important because I've spoken
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with folks who um trade in macro and a
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big part of the the role of being a
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macro investor macro trader is really
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knowing where central bank action is
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going to be really knowing how
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government bonds are going to move and
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spending time with economists not just
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central but around the world and
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learning a little bit about how capital
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is flowing all over the world is that
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kind of the right way to describe that
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role of being a macro investor just for
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folks yeah you know it's it's a lot of
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it's a lot of that there's another great
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macro investor called Bruce Ker and he
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had this saying that he said you know I
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succeeded because I could imagine a
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different
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future and believe it could happen so
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the key is to believe it could happen
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and then manage the risk so you know
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could you imagine like what would happen
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if the iron curtain came down what would
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happen i mean you all do it as venture
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capitalists but like you know how could
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the world live in a different state okay
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well let's hold that idea and double
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click for us to 92 it's probably one of
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the most famous moments where the
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broader world at large metro trading and
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this is really where you and Duck and
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Soros basically broke the back of the
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Bank of England and it's really an
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interesting window into assessing all of
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these things so can you give us the
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conditions on the ground at that moment
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and what new reality you saw for England
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and then it would be great from there
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we'll contrast and compare to America
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today good so uh it it's a great
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historical example and it also kind of
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brings in three dimensions so I I was
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the analyst
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Stan was the portfolio manager and then
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in a way George was the risk manager
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okay so I I was running the the UK
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office i was on the ground in the UK and
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I I had this light bulb go off and you
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know I thought kind of the fulcrum
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thought or like my differentiated view
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was that the UK had just had a big
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housing boom and UK mortgages at that
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time they didn't have long-term
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mortgages they were all floating rates
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so if the Bank of England raised rates
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on a Wednesday the your mortgage went up
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on a Friday yeah uh the UK had hooked
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into something called the exchange rate
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mechanism they had to balance versus the
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Deutsch mark they had to stay within a
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band um I noticed that if they raise or
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I thought if they raised rates to try to
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stay in the band and protect the
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currency it would be unsustainable
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because British homeowners would get
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bankrupted uh Stan's great uh feat of
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analysis was figuring out that gosh the
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these bands set up this incredible
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asymmetric bet
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because I can push them up against one
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side of the band and their mandate is
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just to push me back to the other side
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so we just lose two and a half%
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and um you know Stan tells this great
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story of
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like telling George Soros oh well you
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know here's what I want to do and he
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says he told him and George says well
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how much do you want to do and he said
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probably 100% of the fund and he said
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Soros gave him this really sour look and
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he thought that he had said something
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wrong why wouldn't you do three times
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that deal so uh but anyway it was um we
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pushed them against the the ban the Bank
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of England the British government uh had
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to buy this unlimited amount of pounds
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and they started raising interest rates
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and this was September of
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1992 and uh you know
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eventually they just weren't able to
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sustain the the pressure from the high
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rates and came out and then the
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asymmetric riskreward was we made about
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20 something% in a day yeah right and
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back to what was really Stan's genius is
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I don't know if either of you play back
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gammon but in back gammon there's the
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move after the move and so Stan we'd
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made all that money and we were kind of
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euphoric okay now what because there's
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going to be the trade after the trade so
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we made that much in a day but then it
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was actually the trade after the trade
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and this isn't well publicized I think
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we made another 20%
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during the rest of the year wow so in
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that moment what you're really observing
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is that the real economy is somewhat
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dislocated maybe meaningfully dislocated
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from the financial economy in your
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operating and I think you've said this
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now many times and you've basically used
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the terminology the main street wall
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street dichotomy
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how do you observe the moment in 2025
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the maybe what rhymes with the early 90s
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or other periods where you've been
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trading actively well look I I I think
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it goes back
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to something that's unsustainable is
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unsustainable and um one of the reasons
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I'm sitting here now is uh about 18
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months ago I went to see President Trump
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i'd known the Trump family for 30 years
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i'd never known the president that well
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but to tell him that I want to get
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involved in the campaign because I was
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so alarmed with what the Biden
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administration was doing with the defic
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debt and deficit
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endless stimulus endless spending
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endless spending but endless spending
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when we were in like solid economic
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territory or not in a war first time
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first time ever and I I thought it was
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very cynical because I I actually
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thought well we're going to spend spend
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spend and then there'll be no choice but
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to raise taxes so you'd go into this
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equilibrium that you could just never
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get out of and you become kind of a
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European style social social democracy
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you know the malaise and you know I I
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also think that we're very cynical on
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immigration right because if you take
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kind of the stated number 12 million the
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president's number 22 million i don't
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know what the truth is kind of lean
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toward the president but it was oh we're
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going to let all these people cross the
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border you can't ever make them
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problem's too big to make them go home
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but I like to stay in my finance lane so
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the finance lane was we're going to just
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go to the point of no return and kind of
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inflict these
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the progressive financial values on the
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country there'll be no way out very
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meaningful wage suppression in that
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period and you had an equity market that
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was incredibly well bid just because the
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money supply was just always there well
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it was always there and you had these
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distributional aspects because back to
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your question Wall Street versus Main
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Street that it was driving me crazy when
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Vice President Harris said "I'm going to
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fight for the middle class." And she'd
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eviscerated the middle class or or these
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policies
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inadvertent intentional had eviscerated
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the middle class and really the bottom
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50% so you we're we're in this uh
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because purchasing power goes down
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inflation went up well per if you didn't
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have assets right so uh that's really
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important i think people don't
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understand this that if you had stocks
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if you had assets your assets inflated y
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but if you didn't the cost of everything
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inflated but you didn't have the ability
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to purchase because your wages don't go
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up yeah and they not not only
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did inflation go up but if you look uh
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Jason Trinard has this thing I think he
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calls it the everyman index and um so
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CPI went up about 22 during the period
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but the everyman index was up over 30
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35% because the the bottom 25% the
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bottom 50% of wage earners have have a
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different basket than we do and it
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inflated much faster% used car prices
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around car insurance car insurance rent
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groceries and you like not not only is
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it unfair but it's just unstable and
00:15:03
great civil civil issues societal issues
00:15:06
and so yes but sorry as you guys got
00:15:09
into looking at this I and I remembering
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and talking about this in the
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summer of 23 I think it was or 23 yeah
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and what was the point of view on what
00:15:23
should have been done at that point in
00:15:25
time and then how much farther did it go
00:15:27
how much longer did it last well I I
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think what happened the the Democrats
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will tell you that the big spending
00:15:34
bills were needed for rescue yeah and I
00:15:38
would say in March of 21 the economy
00:15:43
didn't need rescue was already in
00:15:45
recovery right so these were rescue size
00:15:48
packages and even Larry Summers I
00:15:52
remember there was a great debate
00:15:53
between Larry Summers and Paul Krugman
00:15:56
and Summers I think said "Look this is
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at least 900 billion a trillion too
00:16:01
much." And the Federal Reserve was ve
00:16:04
summer of 23 22 Federal Reserve was very
00:16:09
slow off the mark and you know we we
00:16:12
ended up and you know again imagine top
00:16:16
10% has assets stock market is flying
00:16:20
you're in the bottom 50% you have no
00:16:22
assets but you have debt yes so you
00:16:25
credit cards are up u mortgages
00:16:28
impossible to buy a house house prices
00:16:31
had gone through the roof due to COVID
00:16:33
so it really did like end the American
00:16:36
dream and but we we've been suffering
00:16:40
these distributional effects scott what
00:16:42
what is the American dream today do you
00:16:44
think uh look I I think the American
00:16:46
dream is what it what it's always been
00:16:49
but after World War II I think 90% of
00:16:53
American families uh the the children
00:16:57
made more than the parents now now I
00:16:59
think it's 50/50 but you know it's to to
00:17:02
own a home it's financial security it's
00:17:06
to uh some some level of comfort it's
00:17:12
purpose in your work it's the to be able
00:17:15
to support your family uh to be able to
00:17:18
have choices to not have to work two two
00:17:22
jobs i I made a remark at the Economic
00:17:24
Club of New York last week two weeks ago
00:17:28
and Mike Pence decided he was going to
00:17:31
troll me and because I said the American
00:17:33
dream is not built on cheap goods right
00:17:37
and he said "Well yes it is." And you
00:17:40
know I I just say "Vice President Pence
00:17:43
this let them eat flat screens economic
00:17:47
policy that doesn't is isn't what people
00:17:50
want they we they don't want the bobbles
00:17:53
from China it's like the old they want
00:17:55
progression people want progression i I
00:17:57
mean I remember reading um there's a uh
00:18:00
I think Jonathan height had some work on
00:18:03
this a long time ago where happiness is
00:18:05
measured by your change in net worth or
00:18:08
income per year it doesn't matter what
00:18:09
your absolute levels are by all these
00:18:11
socioeconomic kind of surveys that they
00:18:13
do that feeling like you're having some
00:18:15
progression in life is what folks are
00:18:17
looking for and I wonder whether solving
00:18:20
for that we created a system and I I I'd
00:18:23
love your point out your your your read
00:18:25
on this that we said everyone should own
00:18:27
a home that's the American dream and in
00:18:28
order to do that people put most of
00:18:30
their net worth into a home 60% I think
00:18:33
of middle class net worth is tied up in
00:18:35
their in a single asset and then in
00:18:37
order to get them to feel like they're
00:18:38
progressing we've created a system of
00:18:40
loans and a system of kind of economic
00:18:42
and fiscal policy that ultimately drives
00:18:44
the value of the home up every year now
00:18:46
we're kind of in an unsustainable
00:18:48
housing bubble can most people can't
00:18:49
even afford to buy a home what did we
00:18:52
get wrong there and how does that affect
00:18:54
what the American dream should look like
00:18:55
going forward well I I think a lot of it
00:18:57
is scarcity because what what you're
00:18:59
talking about is like out in San
00:19:03
Francisco super tight zoning laws so
00:19:06
there there's scarcity for home if if
00:19:09
you think like Ivy League education all
00:19:12
of a sudden you gave all these people
00:19:15
access to Ivy League educations you
00:19:19
brought in international students but
00:19:22
the the number of degrees awarded at
00:19:24
Harvard Dale Princeton probably hasn't
00:19:26
changed very much since the 1950s so you
00:19:30
you created just this demand for scarce
00:19:33
things which leads to this anxiety um
00:19:37
but you you you
00:19:39
also created I think a sense of
00:19:42
hopelessness through cuz if you're I
00:19:44
can't access I will never get I will
00:19:47
never be able to pay down my student
00:19:48
loan i will never be able to afford a
00:19:49
home i can never see my income growing
00:19:52
to give me access there yeah a and um
00:19:57
so is that is that a dereg solution is
00:19:59
that the Well I think the first the
00:20:01
first part of it is it's a data problem
00:20:03
because in order for the government I
00:20:06
mean the one thing that struck me about
00:20:09
I think this Trump 2.0 administration is
00:20:12
I think you have a better beat on the
00:20:14
fact that this data is not as reliable
00:20:15
as other administrations would say they
00:20:17
were in order to do whatever it is they
00:20:19
wanted to do anyway so it's sort of like
00:20:21
let me just find the data that justifies
00:20:23
what my action is um and part of why you
00:20:26
can't I think tell this story is do you
00:20:28
trust the GDP numbers do you trust
00:20:30
non-farm payrolls do you think these are
00:20:32
reliable enough for you to act on behalf
00:20:35
of the United States no look that
00:20:37
they're subject to big revisions o over
00:20:40
time and I thought one of the big
00:20:42
mistakes the Biden administration made
00:20:45
and thank goodness they made it was they
00:20:48
refused to they went with the numbers
00:20:51
not what the American people were
00:20:53
feeling they said "No it's a vibe
00:20:56
session and you really don't understand
00:20:58
how good you have it this has happened
00:21:00
this has happened." When when in
00:21:03
reality I was on Meet the Press
00:21:06
yesterday and there's something that
00:21:09
said "Well the American people don't
00:21:10
believe Donald Trump's doing enough on
00:21:12
the economy." And I told the host I said
00:21:15
"You know the one thing I'm not going to
00:21:17
answer is that they don't know what
00:21:19
they're talking about i have to have
00:21:21
respect for how they feel and then we
00:21:24
need to go back and look at what is
00:21:27
causing this anxiety so you that's what
00:21:30
that's what we're going to do so let's
00:21:32
peel the onion back what do you think is
00:21:34
causing this anxiety where are the
00:21:37
levers that maybe the federal government
00:21:40
can control in releasing some of the
00:21:43
pressure and what are more market
00:21:45
functions that just need to clear up
00:21:46
some of these dis Well look I I think
00:21:50
there we we're we're trying to do three
00:21:53
things and I I think you may have talked
00:21:56
about it last week week before the the
00:21:59
three legs on the stool three legs in
00:22:01
the stool and and from from the outside
00:22:04
that you intuited that very well i I
00:22:08
would do just a little refinement on
00:22:10
that that's what I was going to ask you
00:22:11
yeah just tell me where I was right and
00:22:13
wrong but the you were adjacent to
00:22:15
everything okay so uh on on one uh we
00:22:19
are trying to bring down this massive
00:22:22
federal debt cut the spending and but in
00:22:26
a controlled way because you can't do it
00:22:29
all at once i I don't like to repeat
00:22:32
private conversations with the president
00:22:34
but I'll repeat this one because I think
00:22:35
it's very the it really illustrates
00:22:39
where his head was at first time I went
00:22:41
to SE into seam saw him at Mara Largo
00:22:44
and walk in the door and said "Scott how
00:22:47
are we going to get these debt and
00:22:49
deficits down without causing a
00:22:52
recession?" Fantastic and that's exactly
00:22:55
where we are now how are we going to get
00:22:57
the debt and deficits down not cause a
00:22:59
recession and I said "Sir um when you
00:23:02
win you didn't get us here we're going
00:23:06
to set a goal by 2028 we want to get
00:23:10
back to the long-term average we're
00:23:12
going to deflate it slowly and long-term
00:23:16
average being about 3% deficit to GDP
00:23:18
about three three and a half% deficit to
00:23:20
GDP and you know like I keep saying the
00:23:23
US we don't have a revenue problem we
00:23:26
have a spending problem because we are
00:23:28
averaging right about 18% revenue and
00:23:32
I'm talking about federal government
00:23:34
federal government only we're at about
00:23:36
18%
00:23:37
and Biden administration blew it out
00:23:40
blew the spending out to 25 normally
00:23:43
it's about 21 21 and a half we have the
00:23:49
2% inflation nominal GDP it take real
00:23:54
GDP is 18 so we get nominal GDP 3.8 and
00:23:58
it all works out yeah and it was very I
00:24:01
had uh one of the heads of one of the
00:24:03
Singapore sovereign wealth funds here
00:24:05
last week guess what Singapore spends
00:24:08
the in terms of spending to GDP deficit
00:24:12
3% uh they they have no deficit but they
00:24:15
they spend 18% 18% 18% and he said you
00:24:19
know he said we have a lot in common
00:24:21
with the Trump administration we like
00:24:23
small government we don't like
00:24:24
immigration illegal immigration and we
00:24:28
like personal safety which I thought was
00:24:30
very interesting sorry so let me just um
00:24:32
understand so deflating government
00:24:34
spending is key but the big challenge
00:24:37
has been that we have now accumulated 30
00:24:40
some odd trillion dollars nearly of
00:24:43
debt and the interest on that debt has
00:24:46
started to grow we now have to pay $1.2
00:24:50
trillion in interest payments per year
00:24:52
so that starts to consume more of the
00:24:55
spending budget that we have at the
00:24:57
federal level which means we can spend
00:25:00
less on the rest of the federal
00:25:01
government's programs meaning you have
00:25:04
to cut a lot more than you otherwise
00:25:06
would have which is what makes it so
00:25:07
difficult and so painful is it realistic
00:25:10
that you can get Congress to act in the
00:25:13
way that Congress needs to act to get to
00:25:16
the level that we need to get to given
00:25:18
the high interest payments and the high
00:25:19
debt level that we have yeah and w with
00:25:22
this Republican Congress uh and look I I
00:25:25
I'm I'm not sure what a deficit hawk is
00:25:28
but I I think I I would qualify as one
00:25:31
and uh a lot of the Republicans I
00:25:34
actually have to coax him you can't do
00:25:36
this all at once i I was with the one of
00:25:39
the congressional budget committees two
00:25:42
weeks ago and you know they really want
00:25:44
to cut this fast and I said you do
00:25:46
realize every 300 billion we cut is
00:25:50
about a percent of GDP so you you could
00:25:53
so we we are trying to land the plane
00:25:57
right uh well
00:26:00
and the plan uh because that that's
00:26:04
really what I'd like to talk about today
00:26:05
i think there are three plans here but
00:26:07
plan one we're going to delever the
00:26:11
government via the spending uh we are
00:26:14
also going to shed excess labor from the
00:26:17
government so on that side and then on
00:26:20
the other side we're going we're going
00:26:23
to deregulate the financial system the
00:26:25
regulated financial systems really been
00:26:28
what I call a regulatory corset for a
00:26:31
long time and as we deregulate that then
00:26:35
the private sector can relever so
00:26:38
government deleveraging private sector
00:26:40
releveraging and the employment or
00:26:44
the folks who lost their government jobs
00:26:47
will be picked up by the more productive
00:26:50
but this sorry this is really important
00:26:51
and I think this is the most critical
00:26:52
thing i'm really glad we got the chance
00:26:54
to talk today because I hear so much
00:26:56
about the conversation on any one of
00:26:58
these topics independent of the others
00:27:01
and there's a relationship between them
00:27:03
that I think is critical to understand
00:27:05
on how this administration is aiming to
00:27:07
drive an economic recovery that is not
00:27:10
inflationary is sustainable and also
00:27:13
will allow people to have the American
00:27:15
dream in a way that they can't have
00:27:17
access to today yeah and the so part of
00:27:21
fixing the affordability crisis is what
00:27:24
can and we we come back and talk about
00:27:25
it if you want but what where can we get
00:27:27
prices down you know like e eggs are
00:27:30
easy or but the the other side of
00:27:32
getting prices
00:27:34
down is getting real wages up so on
00:27:39
getting real wages for working people up
00:27:42
it goes back to the main street versus
00:27:45
Wall Street and the the second plan is
00:27:49
to the reorder the international trading
00:27:53
system and bring manufacturing jobs back
00:27:56
to the US and you have reinvigorate the
00:28:00
the middle class because again through
00:28:03
tariffs well to to use
00:28:06
tariffs that we're needed to bring other
00:28:10
countries uh into line and to create an
00:28:13
economic incentive to onshore for some
00:28:17
industries and some supply chains well
00:28:19
so there there's tariffs then I think
00:28:22
there are three other things we can do
00:28:24
which are the centerpiece of the
00:28:26
administration we can have the low and
00:28:29
predictable taxes we can substantially
00:28:33
uh slash regulations because regulations
00:28:37
are the equivalent of that'll drive
00:28:38
investment dollars private investment
00:28:39
dollars and predictability in
00:28:41
regulations uh and then uh cheap energy
00:28:46
right and sorry what what is the
00:28:48
relationship between the tax cuts and um
00:28:53
the getting to 3% three and a half%
00:28:55
deficit as a percent of GDP especially
00:28:58
because the CR unfortunately gave folks
00:29:01
a get out of jail free card because we
00:29:03
kept the you know $2 trillion cap for
00:29:06
the next alone uh yes uh but you got to
00:29:12
have we we I I I been in this building i
00:29:15
think this is my seventh week president
00:29:17
Trump been back at the White House for
00:29:19
eight weeks so you actually do need time
00:29:23
so what a lot of people who weren't
00:29:26
happy about the CR but shutting down the
00:29:28
government wouldn't have been productive
00:29:30
either politically or economically so
00:29:32
sorry does does um tax cuts get made up
00:29:36
with tariffs or does tax cuts get made
00:29:38
up with cutting government spending well
00:29:41
tax cuts will so tax cuts and
00:29:44
deregulation will uh change the growth
00:29:48
traje
00:29:51
uh if trend line has been 1.8 eight if
00:29:54
you can move the growth to three or
00:29:56
above right then you really change their
00:29:59
trajectory and if you can um keep
00:30:02
expenses flat or do the unthinkable and
00:30:05
cut expenses then you can really So this
00:30:08
is important so sorry government revenue
00:30:10
as a percent of GDP can go lower if you
00:30:13
have lower expenses and a faster growing
00:30:16
economy yes I think that's like really
00:30:18
important for folks to understand that
00:30:20
relationship and so in isolation tax
00:30:23
cuts might reduce revenue but when done
00:30:25
with reduced government spending and
00:30:27
deregulation and a reordered
00:30:29
international trade model you
00:30:31
theoretically will accelerate economic
00:30:32
growth in this country increase
00:30:34
government revenue overall even with a
00:30:36
lower tax rate that's kind of a theory
00:30:38
right and and you know I'll I'll tell
00:30:40
you shame on me i I was in the
00:30:42
investment business 35 years i I talk
00:30:45
very confidently that CBO scoring says
00:30:48
this and it turns out I I didn't know
00:30:50
you know what about CBO scoring like
00:30:52
when you're on this side of the wall you
00:30:54
realize how crazy it is it's crazy so So
00:30:56
just quite a gameable system it's a Yeah
00:30:58
it it's very gameable and one of the
00:31:00
most gameable parts of it is in normal
00:31:03
CBO scoring that so we we're calling
00:31:08
we're saying that we want to renew the
00:31:09
tax cuts right
00:31:11
we're actually just renewing the current
00:31:14
tax regime right that but somehow a
00:31:18
after they
00:31:19
expire then they go back to the old rate
00:31:24
spending never changes like spending
00:31:26
never has to get renewed and I think
00:31:29
when when I look and think about a
00:31:30
mental model and how does systems work
00:31:33
how do they break down one of the things
00:31:35
that has caused this spending bulge is
00:31:38
this idea that you never had to rescore
00:31:41
spending oh it's nuts and the incentive
00:31:44
model is when you have a constituency
00:31:47
that you represent as an elected
00:31:49
representative that's earning from that
00:31:51
spending they're telling you "If you
00:31:53
want to get reelected make sure my
00:31:54
earnings stay and get me more." And then
00:31:57
every year you've got a set of elected
00:31:59
representatives whose you know primary
00:32:01
objective in a democratic system is to
00:32:03
go in and get more money for their
00:32:05
constituents how do we solve that
00:32:06
fundamental problem how do you think
00:32:08
about that well you got to deal with a
00:32:10
second do you actually think that that's
00:32:11
true do you think that most politicians
00:32:13
are here to just get money for their
00:32:15
Good question yeah yeah i mean it's it's
00:32:17
OPM it's other people's money but they
00:32:21
Danny DeVito had that movie yeah but but
00:32:23
you you would regard that as being a
00:32:25
good politician like you brought home
00:32:27
the bacon for for your district that
00:32:31
because
00:32:32
the the CR a lot of people didn't like
00:32:35
it but one of the things that a lot of
00:32:37
people didn't like there were no
00:32:38
earmarks in it like how dare they
00:32:40
totally the Christmas tree bill that
00:32:43
kind of shows up at the 11th hour where
00:32:44
everyone gets a little bit yeah can you
00:32:46
talk about So we talked about this
00:32:49
deregulation as this one very important
00:32:51
lever right so how do we add 50 100
00:32:53
basis points of growth back in we're
00:32:55
going to do it through
00:32:56
deregulation how do you undo the
00:32:58
financial corset as you said what are
00:33:00
the what are the sort of three or four
00:33:02
big ideas that you'd like to affect yep
00:33:04
so um we are
00:33:08
reexamining all all the bank regulations
00:33:11
and why why are they there why why do
00:33:15
banks have to I can't remember it's five
00:33:17
or 7% to hold treasury bills what are
00:33:21
the regulations why do I I had a whole
00:33:23
group of community bankers or small
00:33:26
banks here last week and why do they
00:33:29
have to hold the same amount of capital
00:33:32
that JP Morgan and Wells Fargo and City
00:33:35
hold when they don't have the complexity
00:33:39
they don't have why do the regulators
00:33:42
one one of these small bankers said
00:33:45
"Well you know Bank America does it this
00:33:47
way." Well Bank America has a trillion
00:33:48
dollars in deposits yeah this was
00:33:51
$183 million
00:33:54
but when you look at the regulatory
00:33:55
overhang of some of these things Basel 1
00:33:57
Basel 2 you have all of these frameworks
00:33:59
and then as a result all these
00:34:01
organizations that are running around
00:34:03
trying to help you administer this
00:34:05
complexity all it does is just lower
00:34:07
economic activity in the end well and
00:34:09
and but it's I know you all talk about
00:34:11
incentives a lot back to incentives
00:34:13
what's a regul regulator's incentive
00:34:17
just to keep like keep tightening the
00:34:20
corset they don't care about growth they
00:34:23
they don't care about the uh common
00:34:27
sense turn off turn off every risk it's
00:34:30
their job if you had to create a metric
00:34:31
then to say okay here's how we're going
00:34:33
to measure this undoing of the financial
00:34:35
corset is it sort of the lending
00:34:38
velocity by private lenders so that the
00:34:41
private releveraging can occur is that a
00:34:43
good way to think about or is rates a
00:34:44
way to think about it well it it doesn't
00:34:46
have to be rates but if if we do all the
00:34:49
things I was just talking about if we
00:34:51
deregulate if we have cheap energy the I
00:34:54
if we shed excess labor from the
00:34:57
government if we get government spending
00:34:59
down then rates inflation should come
00:35:02
down rates should come down yeah uh but
00:35:06
the on the question of how are we going
00:35:08
to measure it i I don't have any problem
00:35:12
with private credit yeah like I I
00:35:14
actually think it's exciting the dynamic
00:35:17
it's dynamic it meets the business where
00:35:18
it is yeah i agree and the the strength
00:35:20
of the US financial system is the depth
00:35:23
and now the breadth but you you could
00:35:26
see that what's
00:35:28
happened that so much lending is being
00:35:31
pushed outside the regulated banking
00:35:33
system that tells you it's overregulated
00:35:36
yeah right
00:35:37
so now um once we so one test will be
00:35:43
how has bank lending especially small
00:35:47
regional small banks community banks
00:35:49
that come undone and you these small
00:35:52
banks the small banks and community
00:35:54
banks they're 70% of a loans they're 40%
00:35:58
of small business loans and that that's
00:36:00
one of the reasons Main Street's been
00:36:02
stifled so can you talk about then how
00:36:04
you will work with the Fed in sort
00:36:08
of the change of all of this financial
00:36:11
you need to and do you need to work with
00:36:12
Congress too to make these changes and
00:36:14
also just generally maybe your thoughts
00:36:16
on just the Fed in this process of
00:36:19
helper foe like where where do they
00:36:21
stand well the the
00:36:24
Fed I 100% support the Fed's autonomy in
00:36:29
monetary policy yeah i don't agree with
00:36:31
it all the time but right that
00:36:34
how it is it's how it is it's how it is
00:36:38
and um so and and I've said I won't
00:36:42
comment on perspective policy i can talk
00:36:44
about their mistakes in the past which
00:36:45
have been numerous but I I think like
00:36:49
like with with with any system as as it
00:36:53
expands beyond sort of the core uh I I
00:36:57
actually think that some of the things
00:37:00
they've done in regulation some of the
00:37:02
things they've done kind of climate and
00:37:05
DEI some of the things may maybe even
00:37:07
non-standard monetary policy uh
00:37:10
threatens their independence and I want
00:37:13
them to stay strong robust and
00:37:15
independent on monetary policy on
00:37:18
regulation i I think that they have they
00:37:21
have been much too harsh on especially
00:37:26
the smaller smaller banks medium banks u
00:37:30
so there are three main bank regulators
00:37:32
there's the Fed off office of control of
00:37:35
the currency OC and the
00:37:37
FDIC and then there other regulators the
00:37:41
SEC CFTC but the banking regulators at
00:37:45
the federal level are those three here
00:37:48
at Treasury we have something called
00:37:51
FSOC and financial stability oversight
00:37:54
council and um I chair that and via that
00:38:00
the president's working group uh which
00:38:03
is another convening mechanism that I I
00:38:07
plan to just keep pushing for you know
00:38:10
safe sound and smart deregulation like
00:38:14
why are we doing this why are we doing
00:38:16
that and you again that there's a
00:38:19
capital charge to banks for buying
00:38:21
treasury bills totally so I I actually
00:38:23
think there's a chance that if we take
00:38:26
it's it's called the supplementary
00:38:28
leverage ratio if we take that away it's
00:38:32
it becomes a binding constraint on banks
00:38:34
we might actually pull Treasury bill
00:38:37
yields down by 30 to 70 basis points
00:38:42
every basis point is a billion dollars a
00:38:45
year can we talk about that for a second
00:38:47
so
00:38:49
I think and I' I've said this for a year
00:38:51
probably but the one of the biggest
00:38:53
mistakes that I think Janet Yellen
00:38:55
affected was this continued issuance of
00:39:00
money on the short end of the curve to
00:39:02
finance these deficits which gives you
00:39:06
you inherit an incredibly difficult
00:39:08
challenge i think over the next nine
00:39:10
months I think there's like nine or 10
00:39:12
trillion that has to get refinanced do
00:39:13
you want to talk about that
00:39:15
yeah look I I I thought that it that
00:39:18
when rates were low you're supposed to
00:39:20
term out rates exactly and in instead
00:39:24
the the Treasury for the past few years
00:39:27
has pulled rates in and I think part of
00:39:30
that was to keep rates lower that they
00:39:34
they changed the issuance schedule when
00:39:37
rates move back up towards 5% i I um
00:39:42
have maintained that policy but I'm
00:39:45
maintaining it because let's go back to
00:39:48
David's
00:39:50
question of when when are you going when
00:39:53
are we going to see the results from
00:39:55
this the getting the government spending
00:39:58
under control and I don't think the
00:40:00
markets recognize it yet like like you
00:40:03
know again if we do they don't they're
00:40:04
not sure what to believe i mean we hear
00:40:07
this commentary a lot like what do you
00:40:08
really what we people there's just a lot
00:40:10
of uncertainty there's a big spectrum of
00:40:12
opinions there yeah like like the the
00:40:15
central value tendency you're right the
00:40:18
central value tendency like what's the
00:40:20
center of it because the the range of
00:40:23
outcomes is so so broad and you know
00:40:27
like we know we know there's a problem
00:40:30
there we know there's waste fraud and
00:40:32
abuse quantify it quantify it so I I
00:40:35
think as we are more able to quantify it
00:40:38
we will get credit for it so let me go
00:40:40
back so outside of waste fraud and
00:40:43
abuse as it's termed I want to go back
00:40:46
to the question I asked earlier how much
00:40:48
do does this administration need
00:40:50
Congress to act to get to 3 to 3 12%
00:40:54
deficit to GDP and how what's your read
00:40:58
on the Congress and how willing and able
00:41:01
they are to take the action that's
00:41:03
needed here yeah I I I think there are a
00:41:06
lot of headlines especially after the CR
00:41:08
about the Democrats being in disarray
00:41:10
and media like media likes to write
00:41:12
about disarray
00:41:14
i I think the under or untold story here
00:41:17
is Republicans have for a change
00:41:20
actually been very disciplined that and
00:41:23
I think a lot of
00:41:24
that President Trump is kind of
00:41:27
shephering the party shephering the
00:41:30
movement because imagine he said "Oh
00:41:34
that Mike Johnson will never get
00:41:37
reconciliation instructions out of he's
00:41:41
got such a slim majority." Well he did
00:41:43
it he did it yeah that he'll never be
00:41:47
able to pass a clean CR he did it he did
00:41:50
it so let's see what happens with the
00:41:53
budget so we need Congress to be our
00:41:56
partners on the budget they're very
00:41:58
engaged the House and the Senate that
00:42:01
everybody recognizes that if we don't
00:42:03
get this done it's going to be the
00:42:04
biggest it's past fail it's the biggest
00:42:07
tax hike in history where does Doge come
00:42:10
in
00:42:11
well
00:42:13
Doge that's the the cost cutting and
00:42:16
it's the first time we've really ever
00:42:18
had business people looking at it the
00:42:20
this Clinton Gore Commission that we
00:42:22
hear a lot of like or hear a lot about i
00:42:25
I think it was a bunch of business
00:42:26
school professors and but here you've
00:42:30
got real CEOs you got Lutnik you got
00:42:32
Bergam you got Elon i mean this cabinet
00:42:34
is stock full of experienced operators
00:42:38
that can go in and identify where
00:42:40
there's an opportunity for saving the
00:42:42
taxpayers money and still getting the
00:42:44
results well it's that and we we had
00:42:47
this crypto council meeting the other
00:42:49
day and I was sitting as looking it was
00:42:52
myself Secretary Lutnik and Kelly
00:42:54
Laughler everybody was a market person
00:42:56
like forget business like we and but
00:43:00
with Doge
00:43:03
that I am
00:43:05
completely aligned with what Elon's
00:43:08
doing and everyone says "Well do you
00:43:10
have to do it so fast you have to do
00:43:11
it." I I like I said I've only been in
00:43:14
in this business for 7 weeks i've only
00:43:17
been in DC for 8 weeks but the thing I
00:43:19
can tell you is if you don't move fast
00:43:22
the vested interest will weigh you down
00:43:26
like the the the quicksand will come up
00:43:29
or the claws get the claw yeah
00:43:32
everybody's got lobbyists everybody's
00:43:35
got I mean think about it within a 10 10
00:43:39
mile radius of here 25% of the GDP of
00:43:43
the US pulsates through here pulsates
00:43:46
every day and everybody wants to just
00:43:49
skim a little i I said to uh e Elon and
00:43:53
we were in a meeting and I said "You
00:43:55
know people are mad at you cuz you're
00:43:57
moving their cheese." And he goes "It's
00:43:59
not their cheese it's the American
00:44:00
people's cheese." 100% every dollar
00:44:02
spent goes into someone's pocket and
00:44:04
that person's going to fight tooth and
00:44:06
nail to get that dollar to keep flowing
00:44:07
into their pocket and it's a it's a it's
00:44:10
a very like there is no winning in
00:44:12
Elon's role there's every single time he
00:44:15
takes action there are people that are
00:44:17
going to come after him that are going
00:44:18
to come after the administration there's
00:44:20
no situ and and obviously gets recast
00:44:24
reclassified in the media as being
00:44:26
something different but there's nothing
00:44:29
but downside as you make these changes
00:44:31
to individual organizations that
00:44:33
participate and then it takes a while
00:44:35
for the flow of that money to find its
00:44:38
way or those individuals to find their
00:44:39
way back into the productive private
00:44:41
economy that's where I think there's a
00:44:42
big gap and a big challenge in the
00:44:44
perception of the actions that are going
00:44:46
on with the changes right now is
00:44:48
everyone sees the cuts but they don't
00:44:49
see the benefits and that's nine months
00:44:51
12 months 15 months down the road and
00:44:53
that's a really hard thing to reconcile
00:44:55
for most yeah and I I'd say there are a
00:44:57
couple of things too is one like
00:45:00
everyone's hearing cuts and they think
00:45:02
they're government services that's right
00:45:04
that's right and they're not i I keep
00:45:07
saying it's the Department of Government
00:45:10
efficiency not government extinction not
00:45:13
government elimination and can we make
00:45:16
it run much better with fewer people
00:45:19
with fewer costs and you I don't want to
00:45:23
demonize any of these federal employees
00:45:24
cuz I tell you in this building I've
00:45:27
been so impressed with the quality of
00:45:29
the the people i I would have hired them
00:45:31
in my private firm they are great public
00:45:34
servants i need you to stay for the
00:45:36
weekend and I need a 25page memo in 72
00:45:39
hours that super high quality i I
00:45:42
actually think what when when all this
00:45:46
is done
00:45:47
there there will have been two big
00:45:49
savings one will been on these
00:45:51
contractors sure which totally we were
00:45:53
just talking about this we were with
00:45:55
Elon just now with an incredible stat he
00:45:57
said I'm not going to name the firm so
00:45:59
that I don't want to but he said this
00:46:01
one organization gets 98% of their
00:46:03
revenue from it was in the newspaper so
00:46:05
we can say it it's booze Allen
00:46:08
we were talking about this and then but
00:46:10
then we were going through the numbers
00:46:10
on the other firms and it's just the
00:46:12
whole thing what kind of risk management
00:46:14
is that by the way yeah yeah but but it
00:46:16
tells you
00:46:18
that that they didn't manage the risk
00:46:21
that's right tells you how entrenched
00:46:23
they believe they were and how good it
00:46:25
is for them and how good it is you're
00:46:26
absolutely right and and the way the way
00:46:29
the grift works you can only have
00:46:31
six-month contracts but there are people
00:46:33
who have had 40 six-month contracts
00:46:36
incredible like they've been in situ for
00:46:38
20 years incredible and it's this whole
00:46:42
I'm so happy there is transparency and
00:46:45
visibility into this if for nothing else
00:46:47
the administration providing this level
00:46:50
of insight and data I think is so
00:46:52
important for taxpayers and individuals
00:46:55
in this country to see to recognize and
00:46:57
importantly to understand just how much
00:46:59
of this grift is going on it's
00:47:01
frightening and I'm glad that it's like
00:47:03
being addressed and and the American
00:47:05
people can see if they want it so this
00:47:07
is what I was going to ask you let's
00:47:08
just say that some somehow the Borg
00:47:11
slows this whole thing
00:47:13
down you know what people say is that
00:47:16
the conventionalism well then the only
00:47:18
place to look will be things like
00:47:19
entitlements
00:47:21
good question yeah do you do you think
00:47:23
that that's true
00:47:24
well I I
00:47:27
I think that now that the cat's out of
00:47:31
the bag that the American people are are
00:47:34
not going to stay with this is that you
00:47:37
may maybe again here may maybe in the
00:47:41
Northeast Corridor um there's some push
00:47:44
back but when I've seen the polling data
00:47:47
and the rest of the country does not
00:47:49
want this to stop and this
00:47:51
administration's not gonna stop yeah
00:47:55
the courts they're trying to throw sand
00:47:56
in the gears with the courts and how
00:47:59
some judge can say "Oh all these workers
00:48:02
have to come back in." And but I I also
00:48:06
think we've moved really quickly now i
00:48:09
think when we start putting out some of
00:48:12
the ane anecdotes and the the messages
00:48:16
and talk about what's happening like I
00:48:19
I'll talk about it i I'll be talking
00:48:21
about it soon but there there's one very
00:48:23
large department that everybody deals
00:48:25
with on April 15th that their help desk
00:48:29
is fully staffed 24/7 365 days a year
00:48:33
they have the same number of people on
00:48:36
Christmas Eve as they have on April 14th
00:48:40
wow this is this this by the way is
00:48:42
something that I've seen being a
00:48:43
lightning rod theoretically every dollar
00:48:45
you spend on the IRS you get $3 back or
00:48:48
whatever it is that's not necessarily
00:48:50
true like I just want to be clear that
00:48:52
there's you can still get all your tax
00:48:54
revenue at the federal level but you
00:48:55
don't need to waste well look I I mean
00:48:58
I'd be the ultimate chump if I said "Oh
00:49:00
we're going to cut spending." Yeah but I
00:49:03
also cut revenues with with the IRS
00:49:06
which Treasury controls my my three
00:49:09
goals are very simple revenue
00:49:12
enhancement privacy and customer service
00:49:15
totally you know there's a there's a
00:49:17
body of knowledge that says if we just
00:49:19
fed in and by the way four or five of
00:49:22
these companies can do this now if we
00:49:24
just fed in this entire federal tax code
00:49:26
into these AI models what you can give
00:49:29
to Americans is a very guaranteed
00:49:32
resolute ability to file taxes with the
00:49:34
assurance that there is no waste fraud
00:49:36
and abuse and now all of a sudden you
00:49:39
take this incredible weight off of
00:49:40
people's shoulders um you know sometimes
00:49:43
it is said that you get audited for
00:49:45
almost political reasons it seems like
00:49:47
you know uh people that not almost we
00:49:51
have a big we we we had a big
00:49:54
announcement on Tuesday and we brought
00:49:57
in the 200 Biden whistleblowers who they
00:50:01
uh have a lot to say about who gets
00:50:03
audited who doesn't they're going to be
00:50:05
sitting in this building working on IRS
00:50:09
the matters and understanding exactly
00:50:12
how these audits get triggered how these
00:50:15
political witch hunts happen and trying
00:50:18
to the change the ethos of the building
00:50:23
and again
00:50:25
99% of the people at the IRS are good
00:50:28
people it's just like all these other
00:50:30
agencies where they're they're bad folks
00:50:32
but to your point this is where
00:50:33
technology can create um very reliable
00:50:38
guard rails for the American citizen
00:50:40
where it's like okay well if this model
00:50:42
says I owe $1,000 in tax this is it i'm
00:50:45
not trying to change anything i've fed
00:50:47
it all the software first and you just
00:50:50
know let me go back to entitlements
00:50:53
um I talked last week on our podcast
00:50:56
about social security mhm social
00:50:58
Security has a $2.7 trillion balance
00:51:01
which is just a basically a Treasury
00:51:04
bond that's owed that they can't trade
00:51:06
out of should Social Security have
00:51:08
invested in the S&P or invested in
00:51:10
equities and why don't we turn Social
00:51:12
Security into a sovereign wealth fund
00:51:14
and invest it for the benefit of all
00:51:16
Americans going forward yeah I I I
00:51:19
think there there's the optimal then
00:51:21
there's the
00:51:24
possible george W bush tried to
00:51:27
privatize social security and you I I
00:51:30
saw your your numbers listened to your
00:51:32
numbers going way back 1971 1971 and
00:51:36
with 15 16 trillion that we'd have I I
00:51:40
don't know what the numbers are since W
00:51:42
tried it they'd be substantial we we
00:51:45
wouldn't be thinking about a problem in
00:51:49
a few years but I think now you got to
00:51:52
play the hand you're dealt i think we
00:51:54
are dealt the social security uh hand
00:51:57
and I think maybe we could re-engineer
00:52:00
it if we could create the sovereign
00:52:02
wealth fund and have that on the other
00:52:05
side there are a lot of philanthropists
00:52:07
who are looking at baby bonds so if you
00:52:10
can create a some kind of an investment
00:52:15
account for newborns then that would run
00:52:19
on a parallel track to social security
00:52:23
so that would be compounding the other
00:52:26
thing would be a safety net yeah but
00:52:28
it's still sitting in treasuries on the
00:52:29
other side y and that's where there's an
00:52:31
opportunity not just to drive up returns
00:52:34
but participate in the American economy
00:52:36
and give all Americans today the ability
00:52:38
to know that they have some
00:52:40
participation in the American economy
00:52:41
rather than having their retirement
00:52:43
funds being sitting as a loan to the
00:52:45
federal government for spending which I
00:52:47
think could be a big dramatic change i
00:52:49
don't know if they need to be
00:52:50
independent but I I I would I think it's
00:52:52
a it's a real opportunity for us are you
00:52:54
are you excited by the idea of the
00:52:56
sovereign wealth fund i I am and I'm
00:52:59
excited by the idea like this is pres
00:53:03
President Trump everything he does isn't
00:53:05
in a straight line but I guarantee he
00:53:09
has a destination in mind and the idea
00:53:13
that he's going to be the first
00:53:15
president in generations who is going to
00:53:20
he wants to create assets for the
00:53:21
American people not just debt yeah yeah
00:53:24
so he wants to take the debt down and
00:53:26
then this idea of assets there was a lot
00:53:29
of talk about this economic deal we're
00:53:31
going to do with Ukraine that would have
00:53:33
gone in the sovereign wealth fund right
00:53:35
yeah
00:53:36
government has big stake
00:53:39
in Fanny May and Freddy Mack
00:53:42
when it comes out of conservatorship
00:53:44
where does that go where where does that
00:53:46
go
00:53:47
as you mentioned Doug Doug
00:53:49
Bergam did great work when he was
00:53:52
governor of North Dakota north Dakota
00:53:55
has the equivalent of two state
00:53:57
sovereign wealth funds and for I don't
00:54:00
know are they 7 8 900,000 people i think
00:54:03
they had $25 billion right and Alaska
00:54:06
permanent the Alaska permanent but all
00:54:09
all that's from the natural resource
00:54:11
money going in so to the extent we
00:54:14
start the other day when the sovereign
00:54:17
wealth fund was announced President
00:54:19
Trump surprised me in the oval and said
00:54:21
"Could you make a few remarks?" And I
00:54:22
said "Well we're we're going to we're
00:54:24
going to mo we're going to mobilize the
00:54:26
asset side of the balance sheet." And
00:54:27
all the gold books said he's going to re
00:54:29
he's going to revalue the gold i I can
00:54:31
say today we're not revaling the gold
00:54:33
but what we are going to do is Doug
00:54:36
Bergam at Interior every other
00:54:38
department head is looking for the
00:54:41
assets that we can mobilize so if if we
00:54:45
have energy leases federal government
00:54:47
own back to the housing shortage federal
00:54:50
government owns a lot of land in
00:54:52
downtown urban areas can we or in
00:54:55
suburban adjacent things in in Nevada
00:54:58
and Utah can we use that land yeah do
00:55:01
you see a wave of privatizations as a
00:55:04
way to sort of both pay down the
00:55:05
deficits and debts and also just to that
00:55:07
that's important to me like why put in a
00:55:09
sovereign wealth fund versus pay down
00:55:11
the debt help help kind of do the
00:55:13
finance math for us on Oh could you
00:55:14
think you get a higher return right
00:55:17
well anything anything that beats our
00:55:19
current return our current interest rate
00:55:22
yeah i mean not not that I'm keeping
00:55:24
score not that I watch it closely but
00:55:26
the 10-year Treasury today is 428 428
00:55:29
yeah so um it's responding well can can
00:55:33
we can can we do better Yeah than four
00:55:35
can we do better than 428 and I think
00:55:38
with this group and this cabinet and if
00:55:40
we can put in right right now we're
00:55:43
working on the the study group for the
00:55:46
sovereign wealth fund and we want to do
00:55:47
best practices we're talking to people
00:55:50
around the world we're talking to
00:55:51
investment people uh we're talking to uh
00:55:54
a lot of the other big sovereign uh
00:55:58
funds and we're going to do best
00:55:59
practices and we want this to be a
00:56:02
legacy event totally dan Lo made this
00:56:05
comment that the Australian
00:56:06
superanuation they've got 30 managers
00:56:08
and they have as much in their on their
00:56:11
balance sheet today in their fund than
00:56:14
Social Security does about $3 trillion
00:56:16
and they have 7% of our population yeah
00:56:19
no it's incredible it's incredible it's
00:56:21
incredible and I was with one of the
00:56:23
Middle Eastern funds and you know I said
00:56:26
something about oil revenue we haven't
00:56:29
had an an injection into the fund in 20
00:56:33
years why was this such a miss for
00:56:34
America what happened in the United
00:56:36
States was that we took every excess
00:56:38
dollar we had and we invested it in the
00:56:40
future we bought in we built
00:56:42
infrastructure what happened that kept
00:56:44
us out of this model where others were
00:56:46
so successful and clearly have now
00:56:50
gotten ahead of us and their their
00:56:51
people have a greater kind of safety net
00:56:53
than we do yeah i I I think it it was
00:56:56
just this idea of it it was supposed to
00:56:59
be a safety net not some kind of
00:57:01
prosperity ramp
00:57:03
the old age and survivors disability
00:57:05
insurance fund that's what it's called
00:57:07
right under social security you uh
00:57:09
you've mentioned cheap energy as a
00:57:11
critical part of this holistic program I
00:57:14
think three times now where do we make
00:57:18
mistakes in that path where energy gets
00:57:20
out of control what what do we need to
00:57:22
do to make sure that energy actually the
00:57:24
the incremental cost of the electron
00:57:27
basically goes to zero well I I think
00:57:29
the biggest challenge we're having right
00:57:30
now is trying to get private sector to
00:57:35
lock in for some things that might not
00:57:39
have a payoff for 5 10 years and how do
00:57:43
we avoid student body left student body
00:57:45
right with administrations coming and
00:57:47
going so we're we're trying we're we're
00:57:49
working on well this is an incredibly
00:57:51
nuanced and I think an important point
00:57:53
because we have this very vibrant as you
00:57:55
know tax equity and transferability
00:57:57
market that allows a lot of these
00:58:00
organizations to make these five and 10
00:58:02
year investment cases and you know for
00:58:04
all the issues with the IRA of which
00:58:06
there are many I think the one narrow
00:58:09
aspect that it did was um it calmed the
00:58:13
markets about the future of those
00:58:14
specific ITC credits and transferability
00:58:17
and And it's a critical thing because
00:58:18
there was a report you probably saw it
00:58:20
but you know FK said 90 plus% of our
00:58:24
incremental electrons as of
00:58:26
December were from sources that were
00:58:29
leveraging these ITC credits and that
00:58:30
transferability so to your point we have
00:58:32
this very delicate balancing act of
00:58:34
making sure we but but there there's the
00:58:37
the tax side but then the regulatory
00:58:40
side with with fossil it's tougher
00:58:43
because it crosses a lot of state lines
00:58:45
there's a lot more permitting right
00:58:47
a lot less permitting for solar farms
00:58:50
for wind for geothermal
00:58:52
yeah and nuclear uh nuclear is going to
00:58:55
be a big part of it but it it's not
00:58:57
going to happen tomorrow we got to fix
00:59:00
the supply chain and the regulatory well
00:59:02
we got to fix the supply chain we got to
00:59:04
fix the regulatory
00:59:07
um I we've got to decide which model are
00:59:11
we going to go with and you know I I'm
00:59:13
told that you you two probably know more
00:59:15
about nuclear than I do but he loves it
00:59:19
i hate it okay well no I don't hate it i
00:59:21
mean I I like I like nuclear i just
00:59:22
think it's 10 years away he's a loser
00:59:24
don't listen to him yeah he doesn't
00:59:25
really It's just not an investable thing
00:59:27
for the
00:59:28
next but it's important because the
00:59:31
question is when it becomes one that's
00:59:33
when we know we've fixed the problem but
00:59:34
but but to to the point that it's not
00:59:37
investable that's where the government
00:59:38
needs to step absolutely i 100% agree
00:59:41
with you like we that's where we have to
00:59:44
bridge to to the technology we have to
00:59:47
do the time arbitrage and also I'm told
00:59:51
especially with the smaller plants that
00:59:55
you that you need to cluster them and
00:59:58
you got to find somebody who wants to
00:59:59
cluster them and all that and um let me
01:00:02
ask you one more question as we kind of
01:00:04
get to the end but uh what's been the
01:00:06
most surprising thing for you in this
01:00:07
role since you've um since you've been
01:00:09
in office uh the national security
01:00:11
aspect that I I would say 40 50% of my
01:00:16
day uh Treasury does a lot of national
01:00:19
security work whe whether it's cifhious
01:00:22
in terms of uh foreigners who want to
01:00:26
buy US assets whether it's sanctions
01:00:30
whether it's OFAC anti-money laundering
01:00:34
we we've just designated the Mexican
01:00:37
cartels as foreign terrorist
01:00:40
organizations we President Trump over
01:00:43
the weekend launched a very aggressive
01:00:47
strike on missile strike on the Houthi
01:00:51
assets well underneath that we had
01:00:54
already been working for several weeks
01:00:56
on their bank accounts i see so or
01:00:59
anyone who is adjacent to them the
01:01:01
Iranians supply the Houthis
01:01:05
with the their
01:01:08
ecosystem previous to my getting here uh
01:01:12
Treasury had disrupted the ecosystem so
01:01:14
much that uh the Iranians used to hand
01:01:17
them cash now they're just handing them
01:01:19
here take take this oil tanker and try
01:01:22
to sell it right so like there there is
01:01:25
the ability to to break that down when
01:01:27
you go home and you're talking to your
01:01:29
kids you're talking to your husband and
01:01:31
you're
01:01:32
like "This was so cool." There must be
01:01:36
these moments where you're like "This
01:01:37
was so cool do you have any anecdotes
01:01:40
that you you're comfortable sharing
01:01:42
where you're just like this is like I
01:01:43
can't believe I'm doing this job uh well
01:01:45
uh there have been several but a a good
01:01:48
example my family was actually there
01:01:51
because after the inauguration I I asked
01:01:54
President Trump may I bring my family in
01:01:57
say hello get a photo and we're we're
01:01:59
sitting in the oval so it's myself my
01:02:02
11year-old daughter uh my spouse
01:02:05
15-year-old son and the President
01:02:09
Trump's having a great conversation with
01:02:11
them and and then he said "Oh Scott
01:02:14
while you're here let me call in these
01:02:17
other two people and we need to discuss
01:02:19
this." So they actually got to see
01:02:22
government being done live so you there
01:02:26
there's that um I I you know I I have to
01:02:31
say I I think the the moment with um
01:02:36
President Trump Vice President Vance
01:02:38
President Zalinski was kind of a once in
01:02:41
a-lifetime thing in the Oval Office i
01:02:43
hope it's once in a lifetime and they um
01:02:47
but you know I I was sitting there kind
01:02:49
of in the front row of history i I vice
01:02:52
president Secretary Rubio myself on the
01:02:55
sofa and watching President
01:02:59
Zullinsky do what I thought was the the
01:03:03
biggest diplomatic own goal in history
01:03:05
yeah yeah i think you said it very well
01:03:07
in in TV afterwards it really really was
01:03:09
based on and you you said because you
01:03:11
were there you tried to negotiate with
01:03:13
him in Kev it was a very escalated I
01:03:16
think you use the word escalated or high
01:03:17
high decibel conversation high decel yes
01:03:21
yeah so but it kind
01:03:24
of my my job for 35 years was to be
01:03:28
outside the room try to put my ear to
01:03:30
the door maybe lift myself over the
01:03:32
transom figure out what the leaders
01:03:35
needed to do were going to do and then
01:03:38
how it would affect the markets and now
01:03:42
it
01:03:43
it's fantastic and amazing and
01:03:46
stimulating and a little scary being the
01:03:49
person in the room who has
01:03:51
to what should we do what can we do
01:03:54
how's it going to affect the markets
01:03:56
how's it going to affect the real
01:03:57
economy that what what's it going to do
01:04:01
to working people in America so how do
01:04:03
we fix affordability
01:04:05
um we're just going to have to go
01:04:08
through and where where's the problem
01:04:11
what's the
01:04:13
solution in terms of like are are the
01:04:17
insurance markets broken right what can
01:04:20
we do there there's been no in I I've
01:04:24
been involved in the house building
01:04:26
business there's been no technological
01:04:28
change in house building in 50 years
01:04:31
maybe 60 some of the building codes go
01:04:33
all the way back to the Chicago fire
01:04:35
right so what can we do that the way we
01:04:40
categorize housing it's stickuilt or
01:04:44
modular mhm is there something in the
01:04:47
middle prefab because the more that
01:04:49
comes out of a factory the more that is
01:04:52
standardized that neighborhoods from DC
01:04:57
from DC to Bethesda to PTOAC to like you
01:05:02
could be in contiguous neighborhoods and
01:05:05
if they're different municipalities
01:05:07
they'd all have different building codes
01:05:09
not zoning building yeah and why is that
01:05:12
like it they're adjacent why do the
01:05:14
houses have to be so is there some kind
01:05:17
of window guidance that the federal
01:05:20
government can give in terms of the more
01:05:23
that comes out of the factory the
01:05:25
cheaper it'll be the faster we can make
01:05:27
it things like that is there pressure
01:05:29
that you could apply or influence you
01:05:31
can apply one of the things you
01:05:32
mentioned earlier was just you know take
01:05:34
San Francisco there's an artificial
01:05:36
constraint that's created by the zoning
01:05:39
paradigm and it's not clear how you
01:05:41
unlock that you know maybe is it up to
01:05:44
private citizens to sort of like have
01:05:45
regime change at the local level um but
01:05:48
how do we sort of unclog that part of it
01:05:51
to marry up with this kind of stuff
01:05:52
because it would be great if you could
01:05:54
just build up in many places yeah well I
01:05:56
I I think there are a lot of things
01:05:57
where you can look around and
01:06:00
find what's
01:06:02
interesting that some what's something
01:06:05
that's interesting that's being done
01:06:06
somewhere so I I lived in Greenwich
01:06:10
Connecticut for a while may maybe the
01:06:11
richest suburb in America there's a ton
01:06:14
of multifamily there very expensive very
01:06:17
nice multifamily there's some affordable
01:06:20
housing but Greenwich is not all 10
01:06:25
acres and a horse farm
01:06:29
the state of Connecticut has put in a I
01:06:32
guess it's a law that every municipality
01:06:37
has to allocate 10% of vacant land to
01:06:41
multifamily and if the zoning board
01:06:45
won't give you a hearing you as a
01:06:47
developer you as a nonprofit for housing
01:06:52
can go over the top and go to Hartford
01:06:54
and then Hartford will give you the
01:06:58
authority well no no town wants the
01:07:02
state doing on their behalf so now the
01:07:04
towns negotiate yeah so like I I think
01:07:08
that there are a lot of things that that
01:07:10
can be done again on on insurance is
01:07:13
there something that I I've been
01:07:17
thinking about is there something the
01:07:18
federal government could do for
01:07:19
California where we come in
01:07:23
everyone's paying homeowners insurance
01:07:26
then there's reinsurance on top of that
01:07:28
then I think the California reinsurance
01:07:31
companies called Fair on top of that so
01:07:34
it's a well it's a separate plan but
01:07:36
yeah yeah but but it it's it's a you're
01:07:39
stack you're stacking it so is there
01:07:42
something we could do where you put
01:07:44
another layer of private money in there
01:07:47
and then the federal government is the
01:07:49
fifth risk trunch right but if the
01:07:53
federal government comes in can we
01:07:55
mandate down here proper hygiene changes
01:07:59
in the building code well changes in the
01:08:01
building code changes in brush cutting
01:08:04
right and material choices yeah right
01:08:06
right yeah makes sense great so I I
01:08:09
think there's a lot if we And obviously
01:08:11
energy I mean just getting back to
01:08:12
affordability right energy costs come
01:08:14
down i took the words out of my mouth no
01:08:16
no no no but I mean energy costs are
01:08:19
energy costs but then there's also the
01:08:22
for food the transportation cost of
01:08:25
getting it to the to the grocery store
01:08:27
everything that that's made out of
01:08:29
petroleum products so I I think we we
01:08:33
can do that and um you know I think
01:08:36
there's a lot to do
01:08:38
and it shouldn't be too hard so we're
01:08:41
actually we should probably be
01:08:43
announcing it in about 10 days we're
01:08:45
going to have an affordabil
01:08:46
affordability zar but it's going to be
01:08:48
someone with a lot of experience in
01:08:51
supply chains figuring out what are a
01:08:55
lot of the quick fixes we can do because
01:08:58
back to the question
01:09:01
what really has people
01:09:03
anxious inflation for now is
01:09:08
actually pretty quiet in and
01:09:12
um but the affordability has gotten so
01:09:16
away from everyone that how can we bring
01:09:20
that down
01:09:21
yeah good for all our friends at home
01:09:24
who talk a lot about the conversation
01:09:28
about climate change and carbon-f free i
01:09:31
think one of the things that I always
01:09:33
point out to people is the cheapest way
01:09:35
of driving energy production in this
01:09:37
country is that there's a low carbon or
01:09:39
carbon-f free alternative that's out
01:09:41
there that's actually cheaper than
01:09:42
standing up new new plants um and
01:09:45
there's an acceleration i don't know how
01:09:46
much this administration thinks about
01:09:48
that relationship but it seems to me
01:09:50
like if we can unlock energy production
01:09:52
costs come down and this economy
01:09:54
transitions well it transitions and I
01:09:56
think it's also not being dogmatic
01:09:59
like I I I saw what the Biden
01:10:01
administration did with EVs i I have an
01:10:04
EV i can't wait for it to come off lease
01:10:06
and but also have a hybrid and I think I
01:10:10
fill it up maybe three times a year
01:10:12
totally but this administration had a
01:10:14
jihad on hybrids because there it it
01:10:18
they didn't pass the purity test so they
01:10:21
were picking winners and losers in a way
01:10:22
that a lot of us were left scratching
01:10:24
our heads yep and cheap I think cheap
01:10:27
energy solves a lot of problems i I I
01:10:29
think it'll a and uh cheap
01:10:33
energy is energy security too 100% cuz
01:10:37
that that's why Europe's kind of over a
01:10:39
barrel literally and it's a it's why the
01:10:43
Russian war machine hasn't again
01:10:46
literally run out of gas and to the
01:10:48
extent that we believe we're in an
01:10:50
existential arms race for technical
01:10:52
supremacy it's really on one dimension
01:10:54
which is AI and that
01:10:56
is so needy of energy so if we don't
01:11:00
pull all of these issues together and
01:11:02
realize that we need to basically take
01:11:03
the incremental cost to zero whatever we
01:11:05
do we need to create the incentives and
01:11:07
package it all together i mean we can't
01:11:08
we can't compete manufacturing as
01:11:11
without energy without we certainly
01:11:12
can't compete without energy yep yeah i
01:11:14
mean we're we're we're not going to
01:11:16
crush labor like China and some other
01:11:19
countries have done so we got to crush
01:11:21
the energy price right exactly right and
01:11:23
when you're in the Oval what are the
01:11:24
truths and misconceptions of the
01:11:26
president meaning on the outside and
01:11:28
what people know or don't know oh how
01:11:31
about this i we we had a lot of um
01:11:35
foreign leaders come in and I I knew
01:11:40
someone in in the in one of their
01:11:43
entouragees i won't tell you which one
01:11:45
but afterwards he comes up to me he goes
01:11:47
"Holy crap." He goes "He's really smart
01:11:50
president Trump has perfect recollection
01:11:52
because he was talking about something
01:11:54
that had happened in that country 30
01:11:56
years ago and he said and he really So
01:11:58
the President Trump listens he is
01:12:02
judicious he is just taking it all in he
01:12:05
likes to see how people react
01:12:08
um it it's just incredible executive
01:12:11
skills uh yeah and the other thing too
01:12:17
that he he's tough but I went in and I
01:12:21
showed him we were talking about
01:12:22
something the other day and I said "Well
01:12:24
you know this is going to cause some
01:12:26
layoffs." He goes "Well let let's try to
01:12:29
fix it." Yeah yeah let's try to fix it
01:12:32
so I I always say he really regards
01:12:35
himself as the mayor of America right
01:12:39
330 million people he wants to be
01:12:40
personable to everyone and he cares
01:12:42
deeply about all of them and he doesn't
01:12:44
care whether you're Elon Musk or the the
01:12:49
guy cutting the rose garden but you're
01:12:52
his constituent
01:12:54
great well Scott thank you so much for
01:12:56
taking the time this has been a
01:12:57
wonderful a pleasure and we really
01:12:59
appreciate the insight yeah and thanks
01:13:01
for the service and thanks for doing the
01:13:02
role good thanks appreciate it thanks
01:13:04
[Music]
01:13:11
thanks i'm going all in
