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00:00I'm joined now on set by Steve Mnuchin, the former Treasury Secretary here for the Qatar Economic Forum.
00:03Great to see you once again.
00:05Yes, Steve. Sorry we've kind of pivoted there.
00:06Pleasure. It's always nice to be with Jenny.
00:10Specifically and directionally.
00:11You guys know each other, right?
00:14There's so much conversation today is going to center on investment in the Middle East
00:17in light of the crisis that we've been seeing unfold here over the last many months.
00:20I'm curious, as you've observed it, as an investor, what has changed as you look at flows?
00:25Has the appetite for investment in the Middle East not petered out but stalled as a result
00:29or the uncertainty that still exists there when it comes to the conflict?
00:31Well, let me just say the most important issue for the region is the situation with Iran.
00:39And I believe that President Trump will have a solution to this.
00:45American leadership is very important.
00:48We need to make it clear to the Iranians the strait is open and will be open
00:52and that they can't hold it hostage.
00:54So I think there's no question that short-term investment on the moment is obviously on hold.
01:01But I believe this issue, longer term, will all be a lot safer with President Trump
01:07dealing with Iran and the nuclear issue.
01:09Do you think the president, do you think this administration has dialed in enough?
01:14Do you think they have the right people dealing with this issue?
01:16I do.
01:17I think they have a whole-of-government approach.
01:19Obviously, the president himself is very involved.
01:23The vice president is involved.
01:24Secretary Rubio, although he's not always front and center,
01:27is clearly very involved in his travel to the region.
01:31And I think there's just no question that hopefully it won't require more military, but it may.
01:37And the U.S. can open the strait so that there's traffic, and it will.
01:43Let's zoom in a bit.
01:44So you're with Liberty Strategic Capital.
01:46You're looking at prospective investments.
01:47How do you view the Middle East right now and its investability?
01:51Again, I think there's a short-term issue and there's a long-term issue.
01:54I think actually on the longer term, all of this bringing the Mideast together is an important issue.
02:03And I think in terms of Israel and its Arab neighbors and the Abraham Accords,
02:10I think this is all a positive step in the long term.
02:13But I think in the short term, obviously, it has an impact.
02:17I mean, I think nobody expected the amount of activity there is.
02:22And again, I expect President Trump will resolve this issue.
02:26As you look at where and how these countries are investing,
02:29a lot of them are trying to get away from a single-economy base.
02:32They were already doing this, right, trying to diversify their economies.
02:35Do you think this latest conflict and the prolonged nature of it,
02:38is that forcing the investments, forcing the issue,
02:41maybe more than it would have if everything was free-flowing through the strait?
02:46Again, I think there's a short-term issue and a long-term issue.
02:49You know, look at Qatar.
02:50Obviously, the fact that LNG, to a large extent, has been stopped,
02:55that's not an issue just for Qatar.
02:58That's an issue for the whole world.
03:00We need this energy supply.
03:01It's important that there is free access in the strait.
03:05And I think that will be restored.
03:08I'd love to pin to your last job and kind of get your observations
03:11of what your successor is doing now, Scott Bessendon,
03:14the job and his interventions that he's made in the bond market.
03:16And without having you get granular first,
03:18I just wonder how you approach the kinds of decisions like he's making,
03:22whether to intervene in the bond buybacks in the end, for instance.
03:26For a Treasury Secretary, how does one think about the need to do that
03:29and his ability to do it?
03:30Well, I think Scott's doing a terrific job overall.
03:33He's obviously front and center in the China discussions.
03:36That's the most important issue.
03:39I'm sure that Iran and AI will be top on that list.
03:43China worked with us very closely on the sanctions on Iran.
03:48They agreed with the sanctions.
03:50There's no question in Trump 1.0, they were buying very little oil.
03:55I think that China is a very important factor in being part of the solution with Iran.
04:02So I think those are really the large issues.
04:05As it relates to the buyback, I mean, quite frankly,
04:07the buyback program came in under Janet Yellen.
04:10I didn't even realize we had a buyback program until Scott activated it.
04:15I think the bigger focus is really what he does with issuance.
04:20And I think it would be a reasonable approach with interest rates going up this much
04:25to, on the margin, have less long-term borrowing and more short-term borrowing.
04:32There's a difference in approach, I think, though, between the two of you.
04:35And Secretary Bessett recently had this kind of now infamous quote,
04:38I am the house now, right?
04:40Basically daring currency markets kind of move against him.
04:43I just was curious about your take on that.
04:45Look, different people have different ways of presenting things.
04:48Scott was in the currency markets.
04:50I never traded the currency markets.
04:52I was more a fundamentalist.
04:56You know, I think that there have been times when the U.S. has intervened in the markets,
05:01and I think he's doing this to support Japan.
05:04But as I say, here in New York, we have the Treasury Secretary scheduled to meet with his
05:08Chinese counterparts.
05:09I just want to go back to what you were talking about a moment about the importance of that
05:12relationship.
05:12And I wonder what insight you can give us into sort of what those negotiations are like.
05:17And as you've watched this evolve, look, we're still talking about industrial overcapacity.
05:20That's been the case for many administrations now.
05:23Are you optimistic that we're at a point at which there can be inroads when it comes to
05:26issues like that with the Chinese?
05:28Well, this really goes back to Hank Paulson, who started, you know, what became the economic
05:34dialogue.
05:34And for the Treasury Secretary really to be front and center in this relationship, even
05:40more so than traditionally the Secretary of State.
05:44So I think Scott's leadership is very important.
05:47I think he successfully helped set the tone for the last meeting between President Trump
05:51and President Xi.
05:52I think there are always important issues with China.
05:56I think China has very significant economic issues.
06:00They have their population is going to shrink by hundreds of millions of people.
06:03They have their own very difficult economic issues with an aging population.
06:10So I like the U.S.'s hand.
06:12I think our economy is doing quite strong.
06:16On the margin, he's going to have to manage things like trade versus things like Iran sanctions
06:22and AI.
06:23But I think it's very important.
06:25And I would expect that President Trump will ask President Xi to help us in Iran.
06:32And I think they should.
06:32And if they don't, Scott and President Trump should put strong sanctions and let's lock
06:39out their banks.
06:40I do want to ask you when it comes to AI, if you think there's any chance of kind of
06:45a
06:46mutually agreed treaty on guardrails for this technology.
06:49Or is the competition between Chinese and American AI just too strong for either side to agree
06:54to that or do you even trust that the other side would abide by it?
06:57Well, I think the first issue is domestically we need to create our own mechanism on AI.
07:04And I do think it's important the president now just created the AI force.
07:09When you see these four leaders coming out of all the AI companies and saying this race to
07:14the end is an important issue, I do think there needs to be constraints.
07:19So I think the first issue is really for us to get consensus in the U.S. of what we
07:24do.
07:25Look, China and we were always going to be frenemies.
07:28There's things we agree on.
07:29There's things we're going to compete on.
07:31I'm not sure whether we had an agreement, how enforceable.
07:35But I do think conceptually no different than the nuclear issue.
07:39And again, China worked very closely with us on North Korea in term one.
07:45I think we need to have a general understanding with China.
07:48And AI has to be on the discussion list.
07:50As we wrap up with you here, of course, a lot of conversations at this event over the
07:54course of this week are going to center on sanctions in the degree to which you can kind
07:56of tighten economic ice on a country like Iran.
07:59What did you learn about that in practice from being Treasury Secretary?
08:02Just the effectiveness of that as kind of a method to get people to the table and to
08:07change their behavior.
08:08They're very effective.
08:10They are.
08:10The dollar is the reserve currency of the world.
08:13I always said with that comes huge advantages and huge responsibilities.
08:19And because sanctions are so effective, we have to be careful how we use them.
08:24But I think in the case of Iran, we should have maximum sanctions.
08:30Scott is enforcing them.
08:32And that includes China.
08:34And if that means cutting off Chinese banks from the U.S. dollar system, that would be
08:40the result.
08:40But when you look at sanctions as a way to change behavior, and you look at two of the
08:44most sanctioned regimes, I think of Iran, I think of Cuba.
08:47And this isn't, you know, specific to this administration.
08:49I got in a shouting match at a press conference with President Biden saying, you know, Russian
08:54sanctions didn't work the first time.
08:56What makes you think they're going to work the second time?
08:57And it doesn't really seem to change the behavior of these regimes, does it?
09:02Can you point to any change on this?
09:03I don't agree with that at all.
09:04I think in the case of President Trump's first term, the Iran sanctions were working.
09:10There were multiple times that we were contacted by the Iranians that they wanted to negotiate.
09:16There was no question.
09:17We had the world working with us.
09:20When President Biden announced sanctions on Russia, they weren't enforced.
09:24He was more worried about gas prices than he was about using sanctions.
09:29So I would say sanctions do work, but they need to be enforced.
09:33When you say you're going to use them, you need to force them through.
09:37Stephen Nushin, great to see you.
09:38The former Treasury Secretary.
09:39We didn't even get a Fed question.
09:41You want a Fed?
09:41Hold on.
09:42We have time.
09:42We have a minute left before I can buy you.
09:45Same question I put to Jenny.
09:46How do you feel about the war's tenure thus far?
09:48Do you have sufficient clarity about his approach?
09:50I know he's somebody that you've known for a while.
09:52I like Kevin, and I think he's a great leader for the Fed.
09:55I think he positioned himself ahead of the last meeting that he made it very clear if the
10:02inflation numbers didn't come in, he was going to raise.
10:04So I think he had no choice.
10:05He had to raise.
10:07Having said that, if I were Fed chair, I would make it clear that things are on hold for now.
10:12I mean, one, I do think core inflation is doing better.
10:16I think there's no question that the energy shock is having a big impact on all this, and
10:22I think it would be completely inappropriate for the Fed to raise in front of an election.
10:26So I think they should take their time and pause.
10:29If he does have to raise rates again before the end of the year and makes that decision,
10:33do you think he will lose the confidence of the president?
10:35Would he lose your confidence?
10:37Well, as it relates to my confidence, it depends on how the numbers come in.
10:43And I do agree with Kevin that he's not using the dot plots.
10:48I mean, I always thought this issue that Fed chairs or Fed members know where these things
10:54are going to be a year or two.
10:55I mean, it is a way of signaling, but I think they can signal to the market through speeches
11:00and other mechanisms.
11:02So I agree with him not predicting the future.
11:05Having said that, you know, I think he should be cautious in raising rates.
11:11I think the economic issues are being highly influenced by the Mideast.
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