Bloomberg TalksTreasury Secretary Janet Yellen said there are no “red lights flashing” for the financial system, and reiterated her view that the US economy has reached a soft landing even as job growth weakens. She speaks with Bloomberg News’ David Gura at the Texas Tribune Festival.
Bloomberg Audio Studios, podcasts, radio news.
Thank you all for being here. It's a real pleasure.
If someone ha said to me, you're gonna interview the Treasury Secretary and a church, but not have been on my not have been on my bingo card. I also recognize there's a major football game happening at this particular time. Greatful we could be here as well. Secretary Yell needs no introduction. I'll very quickly run through the pertinent biography. She has the trifecta Treasury Secretary, former Federal Reserve Chair, chief Economic advisor to President Clinton as well, and along the way, president of the Federal Reserve Bank of San Francisco. The accolades are many of the CV is long. We can move past it quickly, and before we get to this, there's a lot to talk about before we.
Get to that. Some light fare.
And I use the pun intentionally when I said to friends I was interviewing you. Everyone is interested in where you go to eat on these trips, and I noted here in Austin, one in a million wa a Burger.
And I have to ask.
About that because there was such a frenzy when you went to California, and stopped it in an out burger, And let's create a little contrary.
Let's have a hard conversation. How was the burger?
They're both terrific in different ways, and loved that it was excellent.
I promise my editor would make some headlines here today.
We're going to try to barbecue before we leave excellent.
I'm not gonna let that go by.
Let's start a bit by talking about the economy. I had the pleasure of tagging along with you yesterday. You visited an IRS processing facility here in Austin. We saw a lot of sorting machines. You asked about your tax returns from nineteen seventy one, if they still have them. And after I had a chance to ask you about the latest jobs data and about the economy one hundred and forty two thousand jobs at it last month downward revision of the jobs numbers that we've seen prior to that, unemployment rate catching down slightly to four point two percent.
You told me afterward, the labor market looks healthy to you.
There will be a lot of people who wonder about that, wonder about how the economy is doing, the jobs market is doing, in particular, given this prolonged fight the FED has been having against high inflation and worry about the consequences. Explain why you feel like it is healthy yet.
So, what I see when I look at it the economy broadly speaking, is very strong growth, deep into a recovery, with the economy operating it basically at full employment. We're still seeing three percent growth roughly over the last year, and it continues. Consumers spending, investment, spending, solid, inflation coming down substantially and I believe headed back to the feds two percent goal. And what I describe is a strong, solid labor market. Clearly, the pace of job creation has gone down, and that's something we should expect. The unemployment rate has moved up somewhat off it's very low level of I think it got down to three point four percent, but it's not common in the United States to have unemployment rates in the foes.
And it's what.
I think of is a full employment economy. We're seeing continued decent pace of hiring, fewer job openings, a lot fewer. But there was an enormous amount of disruption in the labor market we.
Saw during the pandemic.
So the labor market is less hot than it was in the hiring frenzy that took place as the economy opened up after the pandemic.
But one hundred and forty thousand jobs.
This is what you expect in an economy where you don't have a lot of unemployment and jobs need to be created for new entrance to the labor force. So nobody knows exactly what that magic number is. What do you need to see in terms of monthly job creation to hold the unemployment rate steady? But my guess is we're seeing something in that region, and I think this is what most people would call a soft landing. Now, I will say when you see the pace of job creation diminishing over time, what I'd love to say see is that it stabilizes roughly where it is now, and we have to be careful to make sure that it's not going to weaken further. But when you think about what will drive at the pace of consumer spending, that's important and that remains quite solid.
We're not seeing layoffs. We're seeing.
Less frenzy in terms of hiring and job openings, but we're not seeing meaningful layoffs. Unemployment insurance claims remain at very low levels, so I'm attentive to downside risk now on.
The employment side.
But what I think we're seeing and hope we will continue to see, is a good, solid economy.
You say, many people would call that a soft landing. So that is the FED being able to get high inflation under control without triggering a deep downturn or recession. Right, many people would say that. Do you say that as well? Do you think that it's Are you fairly confident that we're going to get done?
I think what we're seeing now is consistent with that, And you know, while there are risks, it really has been amazing to be able to get inflation down as meaningfully as we have. And I'd say also, wages are going up at a decent clip, and real wages adjusted for inflation are rising, and they've well, a lot of especially low income households, are under stress.
Aspects of the cost.
Of living for them are genuinely challenging, and it's our administration's top priority to try to address that. It's still true that wages have gone up since before the pandemic in real or inflation adjusted terms, and continue youing to rise at a decent base.
Economic policy makers just gathered in Jackson, holl Wyoming. You didn't go this year, You've gone in the past many times, and I was thinking as I watched.
All of that unfold.
You know, a big takeaway from that is, wow, policymakers have managed to pull this off, or so it seems.
There hasn't been a recession.
Inflation has come down dramatically, And I want to draw on your experience as an academic economist and a policy makers. What's the message from that to future policymakers about what's worked here? How much of this was I won't call it dumb luck, but fortunate that it happened. Are we any closer to understanding why it worked out the way that it has?
So, you know, shocks occur to the economy, and sometimes they have very unique features. And so when you ask do we under what do we understand and what are the lessons? You know, each shock in each situation needs to be under stood in its own terms. And aside from typically wars where goods are in short demand and you see bursts of inflation. Fortunately there have been few, but there have been some episodes In the United States. This was a very unique episode.
Some of the.
Inflation came from supply side shocks.
That were related to COVID.
We found the automakers had just a shortage of semiconductors they couldn't get. They couldn't get the semiconductors they needed to produce cars, so things like cars were an absolute shortage. There was a huge change in the character of demand in the US economy associated with the pandemic. People no longer going out to eat in restaurants, cooking at home, working from home, wanting to expand and improve their work spaces their homes, pushing up house prices and rents, and demand for goods going through the ceiling to the point where we saw ships lined up in the major ports in California and other parts of the country couldn't unload their cargoes. So there were a lot of supply shocks, and that led to some steep price increases. Then we had Russia's attack on Ukraine that led to for a while spiking energy and commodity prices.
And part of.
What we've seen is inflation come down as the economy is adjusted to those shocks, and I think that's part of why we haven't needed to have a recession. You know, when the fed Titans and causes it causes the recession. It's often because the labor market itself has become overheated and they feel they need to loosen up the labor market in order to get inflation down. And we did see a very tight labor market for a while, but it's gradually cooled in a way that should not necessitate a recession. Wages are rising a little bit under four percent at a pace that is consistent with two percent inflation and significant productivity growth. So all of that looks all of that looks good. So this has been a unique thing, you know, I think when I think about lessons, one of the lessons that my colleagues and I had in responding to the pandemic is we know, when you have a deep downturn in the economy, if you don't do something to address unemployment, it can leave.
People out of the labor market.
Out of jobs, scarred in ways that will have a.
Permanent impact on their lives.
And getting people back to work is important in order to avoid.
This kind of scarring.
And so we were very focused on trying to create jobs, and I really don't think that was a mistake at all. We've enjoyed about the fastest and larger recovery of any advanced country that's experienced this shock. And well, we did see a spurt and inflation, and you know, we're concerned about the cost of living. It's a high priority every country. So or a burst of inflation, it's something that was probably unavoidable.
Given this shock.
As I listened to you talk about catalysts for high inflation, you didn't mention companies. And I'm sure you've heard the conversation that's happening now about whether companies have been contributing to this. Are there mechanisms that could be put in place to deal with price gouging? Let me ask you, as an economist, do you think that that is a reasonable response and is it a necessary response at this point in time?
So to me, inflation is largely ongoing a matter of supply and demand, but it is important to have competition in the economy and benefits to consumers very substantial from having an active anti trust policy. From our earliest days, the Biden Harris administration has been focused on enforcing existing anti trust policy to maintain competition in our economy, which benefits consumers.
And so with respect to price gouging.
It can be a lack of competition, or sometimes after a shock, you have a snow snowstorm and the price of shuffles can go up or slaves.
As I know from having kids, sled sled prices tend to rise. You know, when the forecast calls for a snow.
Forty states have laws against that. And that's that seems relevant to me.
I'd like to talk about the work that you've done internationally and domestically kind of equal parts. And you know, I look at what you've done as Treasury Secretary. You approached it kind of like a diplomat. Treasury secretary is a diplomat, And I want to start by asking you about your experience on US China relations. So I didn't go on the trip with you there that you took to China, but I followed the coverage of it. And aside from the five thousand articles about the magic mushrooms that may have been on the meal that you that you ate there, she don't have to address here, and you've a dressed that money. There was this other thread that came out, and that is you were able to carry a tough message to your counterparts and they seem to if not like you, hear you out, spend time with you. These meetings, as they often do when you meet with counterparts in China, last almost days, they last hours. And I was thinking of something that I saw Alan Blind or your former colleague at the FED say about you, and that is Janet Yellen makes an argument on the merits, and she sticks with it, and she's good at articulating an argument in a way that doesn't leave people on the other side hopping mad at her. What is your secret as you think of embracing this role as a diplomat, what has made you particularly i'll say particularly good or have the facility for.
Well, well, thank you for the compliment. I've seen.
This sort of diplomatic initiative, both with China and with other countries as really critical because we need to work together collaboratively to solve every global problem that we face, from climate change to Russia's aggression to issues that we have with China. And during the previous administration, I'm sorry to say, our alliance is fred and you know it was America first, and that should really never be America alone, and it was necessary to rebuild alliances, is to work with allies around the world, and that's been a broad that's been a broad effort, and I think we really have succeeded. And perhaps we'll talk about this, but when Russia attacked Ukraine, we had an alliance that came together in a matter of a day or two to strongly counter what Russia was doing. We've stayed together and we've worked together to address and this is broad effort G twenty or larger, to address climate change and problems afflicting poor countries around the world, to address pandemics, created a pandemic fund, knowing there'll probably be another pandemic unfortunately, and we need to be better prepared we were for COVID. So on many different fronts, we have tried to rebuild alliances, and with respect to China, relations had really deteriorated during the pandemic, and we went for a period of close to two years without any meaningful senior level contact between US and Chinese, and that was really a very dangerous state of affairs. President Biden met with President she In Bali. I was at that meeting, and they agreed that it was important to re establish relationships, and that means having honest conversations about the things that we're concerned about. It could be, of course, for the defense. In foreign policy side, it's things like Taiwan and the South China see. For us, it's some of the tools that we think constitute unfair competition or macroeconomic policies that China is following that we see as having negative impacts on the United States and other countries. These are things we need to discuss, honestly, so we try to re establish relationships. Before I went to China, I set out three basic tenets for our relationship. First, that we have national security concerns, and we're really that's not an area where we can compromise. We intend to address those concerns. What we can do, though, and I've found that this has been helpful, is to explain carefully what those concerns are, to try to we dress them in the narrowest possible way so that addressing these concerns doesn't drift into taking actions intended to harm the entire Chinese economy or the Chinese people, and explaining how we have drawn those lines. Also giving the Chinese an opportunity if they feel we've gone too far and really broadly harming their economy, to explain what their concerns are and to respond and to listen and if you know, occasionally just something that we do because there's a legitimate concern there.
So that was one tenant.
The other is to say, look, we've got economic issues where we disagree, but what we agree on is we do have deep trade and investment relations with China, and that's benefiting many Americans. Americans who are involved in export industries. We're selling goods to China, people who have jobs with firms that are investing in China and operating in China. We benefit from much of the trade and investment that's going on. And it is not a zero sum game. It is a win win type of situation. But the trade and investment has to be fair, and we have grievances and one of the topics we're discussing intensively now, I guess I call it over capacity. China has a unique economy in which they are savings rate, so the amount of their GDP that they save is over forty percent.
This is really rare.
Among countries around the world.
I don't know of any.
Developed country with anything like that. Consumer spending is very low, as the share of the economy in comparison with any other country. And for a country that's trying to develop, having this huge pool of savings to invest, that's a great thing. And they invested in infrastructure, and they invested it in housing and property. But you know, there are only so many bridges and roads that it makes sense to build, and they did that, and they built a lot of houses and live incule with many or not many are unfinished, and there are a lot of problems there, and so it doesn't you're lived with forty percent of your economy. You're saving and what are you going to do with all those savings? And they've basically made a decision they want to channel.
That into advanced manufacturing.
And you know, there are a lot of countries, not just the United States, but Europe and developing countries like India or Brazil or Mexico that are producing and have good jobs in these industries, and when you have massive subsidization, it undercuts jobs in many places. So we need to discuss this in a sensible way, and we have and they're willing to listen. And you have set up working groups and economic and a financial working group. But the last piece of it is that we also need to collaborate. The world needs that from the two largest countries, and there are global challenges we face, like climate change or debt burdens in poor countries that are really stopping development dead in its tracks. We need our multilateral development banks to operate in a better and more efficient way to help poor countries round middle income countries around the world.
And we need to work together on these things.
Or if there is a financial crisis it spills across borders. We need to if something happens, be able to work together. And so we also agreed we're going to try to do that, and we've been doing this very effectively.
Do you foresee going back there as Treasury secretary? Do you need to go back there?
I certainly may go back there. I, you know, would welcome a visit by my Chinese counterpart, and my guess is that we will have, one way or another a visit. His team will be traveling very soon to China to discuss economic issues and carry this forward.
One last question before we move on to Russia and Ukraine. You mentioned that relationship had deteriorated and frayed. You have knitted it back together so much as you've been able to how fragile is it is you look ahead to a new administration, whichever one that may be. As you listen to those who counsel for less engagement with China as opposed to more, how worried are you about the integrity of it and it kind of falling to the wayside in the way in which it had before.
Well, I do think it's possible. I think this is something that needs to be prioritized.
And nurtured, and.
We need to continue to talk to one another at all levels, from the most senior down through staff of places like treasury, where there are lots of issues. They don't rise to the top level, but we need to work together. And as we saw it during the pandemic, and we have enough differences, and without a chance to discuss them and put them in context, it's certainly possible for tensions to rise.
So this is something that.
Really requires ongoing attention.
I hope that it would get it.
Pivoting to Russia and Ukraine, you mentioned how quickly and allies came together to impose sanctions and economic restrictions on Russia after its invasion of Ukraine. The US has imposed more sanctions under this administration than anyone in the past by a mile. And there are critics who say, maybe we've gone a little far down that road, maybe they're not as effective as you might hope.
What do you say to them.
It's a rare day when I go to my computer, open the inbox and don't see something from Treasury about sanctions on that particular conflict, maybe in South America. It is a tool that the Treasury Department, yes, under you, but under your recent predecessors as well, have been relying upon more this kind of financial warfare, economic warfare.
Well, I think it can be a potent tool when used in the right context. You know, clearly there are cases where you use sanctions and you're not successful in stopping activity that you'd like to punish. You know, perhaps North Korea is a case in point. We have imposed high costs on the country, but it hasn't been sufficient to establish the goal. But in many cases I think sanctions are effective. You know, the dollar is the world world's currency. It's used for all around the world for transactions, and for countries to be able to do that and transact with the rest of the world, they need to operate and through correspondent banks in the United States or elsewhere.
And the threat to cut off.
Institutions in other countries from the dollar based international financial system is a very serious sanction. We we've used that intensively. But you know, in the case of Russia and Ukraine that you asked about that this is a situation where we felt, you know, we certainly don't want to be boots on the ground, and we do want to do something that's going to be as effective as we can make it. We're focused on two things. One is, we want to the maximum extent possible to cut off Russia's access to military goods, to goods to conduct the war or to rebuild its own military complex. And second of all, we want to constrain their revenue. So the very first thing we did, and we agreed on this in record time, is we immobilized the assets of the of the Russian Central Bank that lift at least in Europe over you know, maybe in total, in total over three hundred billion dollars of Russian assets.
As a subject of robust debate whether or not to do that, Am I right.
Well, we decided to do that. The g and agreed to do that in the span of less than twenty four hours, so there may have been some discussion within those twenty four hours, but it was pretty pretty rapid decision making.
On that, and we had strong.
Allies and we were all agreed that we needed to respond in the strongest possible way to try to stop this attack and impede Russia's attack. But we've had some innovative things that we have done. What we wanted to do was to go after Russia's revenues and to make it more difficult for Russia to do the spending that's necessary to conduct the war. And Russia's most important source of revenue comes from its global oil sales. So everyone focused right away on let's impede Russia's global oil sales. The problem with that is that if we diminished Russia's supply of oil onto the global markets, Russia is an important enough oil producer that this could send prices skyrocketing, not only in the United States but all around the world, including in port countries that are really just can't afford to have higher energy prices. So we knew that we had to be very careful and it could At first, it was how on earth can we possibly cut into this revenue stream without harming everybody around the globe. And eventually my team came up with the idea that we would try to limit the price that Russia was getting for the oil that it was selling, but we wanted to maintain Russia's incentives to sell the oil. So we devise something we called the price cap on Russian oil, and we had sanctioned companies, whether it's financial institutions, insurance companies. Much of the global oil trade. Tankers that carry oil need insurance. Western companies, the United States, Britain, the European Union. Their insurance companies provide most of the insurance they need. Trade financing, much of it comes from Western banks, and we realized that because these inputs, these financial inputs, were critical to Russia in maintaining its.
Global oil sales.
But what we could do was say, Okay, you can go on supplying these things to Russia so they can sell oil, but you can only do it if you charge if Russia is charging less than a price. We would determine per barrel of oil, and we started off with sixty dollars a barrel, and it was essentially outlawed to assist with it. Insurance or anything else. Tankers couldn't carry the oil, and we in the first year of putting this in effect, Russia's or our revenues fell by forty percent and they continued to supply oil. So it was nobody had ever really tried anything like that, and it took a long time to convince countries around the world that this was a workable or good idea. I mean, what happens with sanctions is.
That over time they work less well.
Countries look for ways around it, and Russia began to invest in their own insurance, in having a fleet of tankers.
They started selling.
Oil, mainly to India and to China, and we've had to come up with new ways to address that, but we have worked together and I think we've had an impact. Well.
Last question on this point, I saw that the IMF is sending a mission to Russia for the first time since this conflict, and I wonder if that's something that you back or agree with that at a time when the US and its allies are imposing these sanctions and fighting this economic fight against Russia, does it make sense that that international body that the US does play such a key role with is doing that at this point.
Well, Russia is not getting resources from the IMF, and my guess is that I would object strongly to that. But Russia is a member of the IMF and participates. And I'm not sure what the purpose if the mission is, but the IMF routinely, on an annual basis, evaluates the economies that are members members of the organization, and I wouldn't object to that.
We're going to move from international to domestic, and I'm going to, in the hope of breaking some news, ask you a question that I'm sure you're not going to answer, but I'll ask it anyway, and feel free. Feel free to have some water as I give this long preamble. But a big story right now in this country is whether a Japanese company should be allowed to buy US steel, which is this iconic American steel manufacturer. And the President has reportedly said that once a report by a committee that you chair that assesses economic risk and security risk, once that report has delivered his desk, he will go against that deal. Vice President has said as much as well. There's the preamble, Can you give us any update on the status of that of that report or the timing of it.
So no, I have to do my role, which is to say that this group called SIPHIUS, the Committee on Foreign Investment in the United States, operates operates in a way that we cannot talk about any specific transaction at all.
I can't even tell.
You whether or not this this transaction is under review, although it has been widely reported that it is.
That I'll tell you, I'll go ahead, go ahead, So I'm not.
Going to comment on the specifics what what I will what I will say is that foreign direct investment in the United States is really important and by and large has been a huge positive for US, and it is a priority to maintain an open and healthy environment for foreign countries to invest in the United States, just as we're investing in many countries around the world. So that is the positive value. On the other hand, foreign investment in the United States can impose national security concerns, and siphius's role is to use the expertise of multiple agencies to try to identify any national security risks and to provide the President with advice on whether or not there is a way to.
Address these risks.
And it is an agency that takes that role very very seriously, and we try to present the President with the best of valuation they could have. But I say that Ciphius's advisory to the president, and ultimately it's the president's decision.
Let me, with trepidation, take one more bite at this apple, and that is to say, can you share anything about the calculus that that committee goes through. I saw that Larry Summers, the former Treasury secretary and your former student at Harvard, said yesterday it's important to take into consideration how a company's products might be used in the American economy. So here I'll say, if it's a steel manufacturer, how that might affect the automotive industry in the States. Is that part of what you consider the sort of knock on effects or downstream effects of a deal?
Well, as I said, the focus is on national security. Is there a national security concern? But it could be economic, So we you know part of that is supply chains or supply chains at risk. Sometimes you know one might work or that an investment could somehow endanger supply chains that could potentially be taken into a camp.
All right, we'll move on and let me I wanted to ask you about deficits in preparation for this I went back and watched your confirmation hearing, which happened at such a critical and difficult moment in this country's history. And what's fascinating is at that time your message was we need to go big, We need a big fiscal spending package to get us out of the doulgrums of the pandemic.
And at the same time.
You said that the Treasury Sectory has to be a voice for fiscal sanity and you pledge to do that. A lot of people will think of you as a deficit hawk. Do you still consider yourself to be a deficit hawk? And I think of this moment when look, the economy seems to have come around, inflation is lower, the job's market looks good. Is it time for a kind of fiscal reset in this country?
Well? I do think we have to be on a sustainable fiscal course, and I feel my job is Treasury Secretary is to monitor that and to make recommendations that would be consistent with a responsible fiscal path. Look, when the economy is suffering from a huge downturn, it can even be ultimately deficit reducing. To spend a lot to address it get the economy back on track. That aids tax revenue over the long term, of course, it has to be temporary spending, and of course, since the pandemic has ended, spending has declined for all of those programs. But a challenge we face in the United States is that the level of tax revenue has declined in comparison with historic norms. That's partly because of the twenty seven Team tax cuts, the Jobs Cuts, the Job and Tax Act, parts of which expire in twenty twenty five.
I'll call it the Trump tax cuts, even though I know that you won't, but for everyone's familiarity with how it's commonly called, these are expiring in the coming months, and.
You know that was something that reduced tax revenues. Then we have an aging population and three huge programs, Social Security.
Medicare, and Medicaid.
As the population ages, just leaving the rules of all of those programs in place, they the spending on those programs goes up.
And as you start looking.
Out ten twenty years ahead, even if you think that our fiscal situation is okay right now, that aging of the population and expansion of those programs can put us on a financial path, a fiscal path that's not sustainable. So right now, although the numbers of how large the federal deficit is, you name them, it can seem scary, Can.
I name one quickly?
Sure?
Congressional Budget off is saying US fiscal deficits projected to equal or exceed five and a half percent of GDP every year out to twenty thirty four, and the CBO also noting deficits have not been that large or remain that large for more than five years in a row since at least nineteen thirty.
That is scary. I mean, it strikes me as scary.
Well, I think the deficits need to be brought down to the point where the interest costs on the debt remain manageable, and they remain manageable over the long run. And I would say historically the United States has rarely had interest costs and I mean in inflation adjusted terms that exceed two percent of GDP. That's we're living within that now. At the interest costs on the debt are not you know, they're well under two percent. And President Biden and Vice President Harris delivered a budget to Congress that continues that over a ten year horizon. Now, President Biden has signed into law a trillion dollars worth of deficit reduction. He's raised. He's put in place a corporate alternative minimum tax that Congress agreed to. He's enabled Medicare to bargain with pharmaceutical companies to bring down drug costs, which is some thing that's lowered pharmaceutical costs for Americans and also lowered resulted in greater revenue lower expense for the government. But he's proposed three trillion dollars in additional deficit reduction over the next ten years in his most recent budget. And important pieces of that are tax fairness in two respects. One is looking to corporations and wealthy and high income individuals to pay their fair share, and they benefit from many things like a very low and sometimes nonexistent capital gains taxation, restoring high higher income tax rates on the richest Americans, not on people learning under four hundred thousand dollars. But other important part of that is making sure that our internal Revenue Service actually as the resources to collect the taxes that people are obligated to pay. And a shocking number is that current estimates say that on the close to a trillion dollars a year of taxes are simply not paid their due. That's called the tax gap, the difference between what is owed under our current laws and what is being collected, and that comes close to a trillion dollars a year.
We fought really hard for the.
Internal Revenue Service to get the resources it needs to collect those tax revenues, because what's happened over decades is that the IRS has been so starved for res sources that they could neither collect the taxes that are due. They're so starved that the audit rates on high income individuals, complex partnerships, corporations, big corporations they felt pitifully, I mean so close to zero that you could be pretty sure that if you cheated on your taxes, you wouldn't get caught. And what happened is a disproportionate share of enforcement money went into making sure that poor people who get the earned income tax credit don't cheat. And that was really a situation that had to be changed. In the Inflation Reduction Act. We succeeded in getting a multi year eighty billion dollars for the Internal Revenue Service. Of course, the other aspect of IRA performance is that anybody who tried to contact the IRS on the phone you know, by the time people finally got through, it really wasn't fun to be an IRS customer representative. The typical person when they actually got a human on the phone, wo'd start by screaming at that person about how frustrated they were that they had spent the entire day on hold waiting for the phone to be answered.
I don't know how many people here.
Over the last year or two have tried to call the IRS, but what I can tell you is, as a result of an eighty billion dollar infusion, customer's service has been transformed. We went from a twenty percent rate of answering telephone calls to this last tax sees in eighty eight percent in three minutes or less.
And we have a few minutes left before I get to my last questions. Do you do your own taxes? I've always wondered, are you?
For most of my life?
I have, but it's gotten complicated.
It's got a little more complicated, But most of my life I've been to do it yourself.
For the last of means, we have just some sort of broader macro questions, And one that I've thought a lot about is where you see risk when you look at the global financial system. Now, what concerns you? What are things that you're keeping an extra watch on, being extra vigilant about, you know, is it private? Actually, are there things that you're worried about or think that that merit more attention.
Well, just so, for a year ago, year ago March, really unexpectedly we saw in the United States what could have turned itself into a systemic bank run type of situation in which two banks, Silicon Valley Bank and Signature, had large quantities of uninsured deposits and suffered losses in their investment portfolio that gave rise to runs on the deposits in those banks at a speed we had never ever seen in the United States.
Another moment when you have a robust debate in a very compressed period of time.
We worked very hard that weekend to make sure that we didn't end up with contagion to the rest of the banking system. And you know, this is something we thought was no longer a problem. So you know, even in the core part of our financial system, the banking system, there are steps we need to take to make sure that banks have adequate liquidity to be able to deal with that, to mitigate that risk but there's much less regulation of the financial system outside the banking system, and there are risks there. And I had something called the Financial Stability Oversight Committee.
You can talk more about that than the other committee.
Well, it was created in the aftermath of the.
Financial crisis to attempt to systematically survey the financial system, to try to identify and address risks, and we do that on a regular basis. Money market funds have created risks. I think we've now hopefully successfully dealt with that, but there are a few areas outside core bank that remain of concern. And globally, of course, the system is connected. Cybersecurity is a huge is a huge and growing risk.
We're working on that.
But overall, I would say for the US, the kinds of metrics that we would monitor that would summarize risks, whether it's asset valuations or the degree of leverage.
Things look good. There are not I don't see red lights flashing.
I went through your biography at the top in broad strokes, and I wonder, now, as we approach the end of President Biden's tenure, your tenure in this job, I should ask, is there any world in which you are in this job after January twenty fifth, or are you done at the end of this administration?
Probably done, But we'll say.
What surprised you about it?
Maybe perhaps beyond the difficulty of dealing with Congress, what surprised you most about about doing this particular job.
Well, I don't know that this wasn't really a surprise, but one of the things I noticed right away I hadn't really spent any time at Treasury. I spent a lot of time at the Federal Reserve. But the quality of the workforce of the federal workforce is just excellent. And you know, they've taken a fair amount of abuse, people accusing federal employees of waste, fraud and abuse, not being competent or good at their jobs, the Dark State and all of that. You know, we have a federal workforce people who are deeply dedicated to the mission of public service, who are immensely knowledgeable, and who are really dedicated and working hard to try try to improve life for Americans. And this is like a huge resource, a capital asset for the American people. And it is impressive what people are willing to give. I mean, I just give you recent example. Treasury has many different responsibilities, but when Congress passed the Inflation Reduction Act, huge set of new tax incentives created to promote clean energy, and the burden that creates in terms of writing rules on everything from electric uh, you know, tax credits for buying electric cars to credits for developing hydrogen that's clean to use in heavy industry in normer miss burden of tax writing and the people, the people in this office, you know, thanksgivings would go by, Christmas would go by, people not getting vacations twenty four to seven. And complex technical work to understand the science and the public policy Inteagency work to figure out how do you design incentives that will be effective, that are administrable. You know, the dedication that you see of wanting to get this right and having the ability to do it. I mean, this is really it's impressive, and it's been one of the joys of my job, the civil service, the appointed appointed people, and really really an impressive.
Last question, Madam Secretary, is as you approach the end of your tenure, probably what are one or two things on your very long to do Listen, we've kind of touched on all of these things within your remit and that you're working on that you want to get done or feel that you have to get done before there is a change in leadership.
At Treasury, well, for example, we're working very hard to complete the rule writing that we need to do. There are huge programs that we're administering both the Treasury and in other agencies. We have the Semiconductor and Chips Act and been hearing a lot here in Austin about the difference this is making in terms of the investments and growth that you're seeing. Rebuilding America's infrastructure of bridges and rail and roads, and the internet. Getting the internet make sure that everybody has access. We need to continue implementing this well. And you know, we continue to generate in areas where we care a lot about.
The Congress hasn't.
Legislated the programs that the President and Vice President have put forward. So housing is a huge issue. Affordable housing in many parts of the country critical priority.
We need to use every tool we.
Have to promote that agenda, and we are it's important for Congress to act to provide for additional construction of affordable housing.
But we need to use.
Every tool we have, and we're doing that. Childcare, healthcare. You know, there are things that the executive can do, and their area is still left to address.
This has been a real treat to have an hour with you. Thank you very much, and thanks to all of your
Life for helming as well.
