"Face the Nation" on May 7, 2023
Interview
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Good morning.
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Instead of being at the depths of the ocean, I'm merely drowning. I mean if that - that tells you any - so, my level of optimism is from complete and utter pessimism, anything could get done, to some level of modest pessimism now.
What's changed since that interview is that the House acted. We passed a debt ceiling increase with a Republican plan attached to it. It talks about growth, spending restraint --
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But we did. It's a narrow House. It's going to be a narrow vote. But we - we dealt with growth, we dealt with immediate spending and long-term savings. So, a balance program here.
Now, we've sent this over to the Senate. The president said, show us your plan. We've not only shown up with a plan, we've passed a plan.
The Senate can't do it now with 43 senators saying we're not going to go along with the Schumer plan for a clean debt ceiling increase, the Biden plan, and now the Biden -- President Biden has to come to a table for a negotiated solution. He needs to listen to his economic advisors, not his political advisors, and take this very seriously given the late stage that we're currently in.
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It looks a lot like the bill that we passed out of the House. It touches growth. It touches --
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Well, we sent a significant large bill that brings down the cost of government by $4.5 trillion over the next decade. It's big, yes, but we sent growth, short-term cap steel (ph) on spending so we can fund our government for the next two years without drama, and then long-term savings. So, a pairing of one, two, and three, that's what a deal looks like.
I've talked to a lot of senators, a lot of Democrats and Republicans in the House and the Senate, to try to see what a deal would look like. And at this stage of the game, the one key ingredient I don't have is what the administration would come to terms with. We have to have something that can pass, that addresses our fiscal house at a time where we have record inflation and record federal spending, and we need to have something that can both pass with Republicans and Democrats.
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You're saying this to a member of the House that actually passed a debt ceiling increase and a president who would not have a second meeting with the speaker of the House. The first meeting was February 1st.
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We're 100 days past. Everyone knows in divided government you have to negotiate. And the president says, he will not negotiate. So, the absurdity of the position the president has put himself in where he is playing politics with the economy is markedly different than previous debt ceiling increases where Republicans have been viewed as the recalcitrants. We've actually done something and the administration says we're not going to talk.
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A hell of a statement on a day like today -
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Which shows that it's all about politics for this administration -
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Not about economic stability.
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And that's what we did by passing a plan. The president did not think we could pass a plan out of the House. So, therefore, he said, it's a clean debt ceiling or nothing. And so debt -- a clean debt ceiling is now off the table with Republicans in the House and Senate saying, time to negotiate between the speaker and the president. That's all we're saying.
The speaker has not laid down a red line. Those -- that's been done in previous iterations of the debt ceiling by Democrats and Republicans in the legislative branch.
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He didn't do that. There are no red lines other than the fact that we must address our fiscal house at a time where federal spending is up 40 percent from pre-Covid levels. I think it's a reasonable thing for us to do. And, in fact, that's what the American people say -
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Three out of four Americans say the president shouldn't negotiate with the speaker to address our fiscal house.
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I think everything's on the table at this point. The key thing that has to be in this equation is addressing our fiscal house, short term and long term.
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Yes. And the way we have to do this is, I agree with Michael Barr, the vice chair of the Fed's review, we have to provision for liquidity more quickly for these smaller banks. We have to make sure that we have a healthy banking arrangement across the whole spectrum. And we have to ensure the banking models can exist in a society where bank runs can happen more quickly than ever before.
But let's get to the fundamentals here. If we look at the reason why these banks, the three of the 30 largest banks in America failed in the last two months, it's because of interest rate sensitivity of their balance sheet, which means they misjudged inflation. The Fed misjudged inflation. They've admitted it. They're behind the curve. The administration has been asleep at the switch for the supervisors of these institutions. But the root cause of this is inflation. And if we can address inflation -
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It gets to the disease rather than functioning -- addressing the symptoms.
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Absolutely.
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And they're going to be in.
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Two weeks before the House Financial Services Committee. And this is going to be an important hearing. In the next two months, the House Financial Services Committee will have the CEOs of these failed institutions. We're going to have the regulators in, including Secretary Yellen and Chair Powell. At the end of June, we're going to have our Humphry Hawkins hearing to hear from the chair of the Federal Reserve, Jay Powell. Those are important dates in this calendar, especially given the state of banking in America today.
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Unfortunately, we're not out of the woods. But what depositors need to understand is, since 1933, when we enacted and created the Federal Deposit Insurance Commission, insured deposits have never had a penny of loss. We have 99 percent of the accounts in America are under the insured deposit cap level.
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And so 99 percent of the deposits in America are safe and sound. What we have to do is address, over a period of time, the safety and stability of smaller banks, in a time where the market is judging their business model, their interest rate sensitivity and the assumption that regulators are going to require a lot more capital for these banks to exist, they're making big assumptions. But the stability of the accounts, they're there.
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