Jack Lew on ending Fannie Mae & Freddie Mac
Treasury Secretary Jack Lew talks with CNBC’s Steve Liesman about the “melt down” in the government sponsored enterprises and the debate over the debt limit.
there has been suddenly a bunch of talk about reforming fannie mae and freddie mac. there is a bill from senators corker and warner that you haven’t had a chance to comment on. hat the way that the administration wants to reform fannie mae and freddie mac, what is in the senate bill right now? yes, i think that the conversations that senator corker and senator warner are having are very important. first of all serious bipartisan conversation. it’s a conversation we’ve been part of and working with them as we’ve been working with the chair and ranking member of the committee. i think there is a set of principles that are very important that we have to make sure that we never again end up with the failure like fannie and freddie where the taxpayer is left holding the bag for an unbounded amount of risk. we also need to make sure we ve a private financing of mortgage market in this country that’s restored. we have too little private financing of mortgages right new. we need to go back to private financing of mortgages. and we need to make sure that there is access to credit for borrowers who are wedding who worthy because owning a home is part of the american dream. i think that’s the general goals of corker and warner. that’s what we’ve been working towards. and i hope that this bipartisan conversation can continue and be successful about that. staying on fannie mae, a prominent nent member of this audience asked me to ask you why do you need to take all the dividends. why are there no dividends or no distributions left for some of the shareholders and some the bond holders? steve, i have to just remind you and everyone in this room that just four years ago, fannie and freddie were melting down and the taxpayer was put in a position where it was not clear what the limits of risk being taken were. it was set up in a way to save our financial system and it was set up in a way for taxpayers to get repaid. i think that it has worked and i have to note just on a sad note that herb allison had such a strong hand in designing these programs passed away this week and he was a great american who did great service to this country. i appreciate that. back to the issue. is there room for compromise here with some of the private sector stake holders? you know there is litigation on the matter. we can settle it now. let me move on. when we spoke if n. may, you said we would not reach the debt ceiling til at least labor day. has that changed and are we any closer towe would not reach the debt ceiling until at least labor day. has that changed and are we any closer tosaid we would not reach the debt ceiling until at least labor day. has that changed and are we any closer to avoiding a debt showdown? that is still where we stand. it’s 00 bit jush that the secretary of treasury has to look at day to day cash flows because artificial deadlines like the debt limit create the necessity, not just to see what our general condition is, but will we hit a day when social security checks have to be paid or disability or military retirement checks have to be paid and not have enough money in the bank because we hav enough money in the bank because we have the debt limit. and steve, the debate over the debt limit in august 2011 and the months over that is one of the most damaging self-inflicted wounds that i have ever seen washington inflict on itself and the country. it can’t happen again, and the congress has the do its job and extend the debt limit. no question about incurring new obligations, but it is a question of whether we pay the bills that are authorized in the past. congress has kept that commitment, and this country has kept the commitment for over 237 years and it can’t stop now. and so will we have a deal in the 11th hour and 59 minutes or some way to avoid the train wreck? well, the congress is clear that the president has made clear he won’t get into the negotiation like 2011 to the question of whether to take a default is on the negotiating table, because it is not. congress has to do its work. when you came in, and you up to the naivete, and what do you think of that? well, thank you for the extensionaivete, but something has to happen by the end of the year to fund the government for the next year. i hope what we have is an agreement that will replace some of the damaging cuts of sequestration to have a kind of recognition that building a better growth of america and future of growth of jobs that we have resources available for infrastructure and education and research and development, and there are a lot of things that there are bipartisan agreement on and we can work through in the time that remains. we have a package in place that essentially accomplishments the amount of deficit reduction that we set out for the ten-year period, but the question is composition. we remain of the view that medium and long-term entitlement and revenue review is the right approach. it looks like sequester is going to play itself out, and it is not going to be derailed which you were optimistic would happen in the spring? well, i think that there is still time for congress the act to address some of the issues that i have addressed. i hope there is a bipartisan agreement to try to do what is in the best interest of the country, and of the best interest of the economy and best interest of americans who want a middle-class income for
Jack Lew: ‘We need to use all the tools in Dodd-Frank’
Treasury Secretary Jack Lew talks with CNBC’s Steve Liesman about the controversy surrounding financial reform and ending too big to fail.
you’re arguing dodd-frank ends too big to fail, but there’s a lot of controversy about that. why don’t we need glass-steagall to be returning? sdl what i’m arguing is we need all theed tools in dodd-frank to make sure we’ve ended too big to fail. that’s why the rules and provisions that are are implement this had year are so important. that’s why what’s happened in the last 60 days is so important. i think there is a shared goal between what i’m saying and what many of the senators are saying which is that it’s unacceptable to be in a place where too big