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Interview with Steven Mnuchin

The following is an edited transcript of an interview between the Financial Times and Steven Mnuchin, US Treasury secretary, on Monday, April 17, 2017. 

FT — One of the things that came up at the [G20 meetings in Baden-Baden, Germany, last month] was the border adjusted tax, and Germany’s economy minister threatening to take you to the WTO if you implemented it. Is that still an issue for you going into this week’s Spring Meetings in Washington? 

SM — No. We have ongoing discussions with all these countries and I don’t expect this to be just a repeat of previous issues. Specifically on tax reform, we’ve been busy working on tax reform since I got into office. We have a giant department of over 100 people here who are crunching all different types of scenarios and looking at a lot of different alternatives.

I think the president’s priority of tax reform is middle income tax cuts, simplifying personal taxes, making our business tax system more competitive. We have one of the highest corporate tax rates, combined with this concept of worldwide taxation and deferral. Which, not surprisingly, leads our companies to either be uncompetitive or leave trillions of dollars offshore.

So we have been working on the issues of tax reform. Border adjusted tax is just one of the many things that we’ve looked at, and have under consideration. 

FT — We have the impression that while the border adjustment tax is technically still on the table even people who support it think it’s not going to be part of an overall deal. Is that fair? 

SM — I think what I’ve said is there are aspects that we like about the border adjusted tax, and there are aspects that we don’t like. It has implications to the currency. It has implications to consumer prices. There are things we do like about it on the trade side. I would say we’re more focused on the policy at the moment than we are of WTO compliance. There’s no reason to worry about WTO compliance until we decide. And I think what I’ve said before is we’re working closely with the House and the Senate on an overall tax plan. And before we have a consensus on a bunch of different issues, this is just one of the pieces. It would be premature to discuss this as one piece alone. 

FT — Is it fair to say that you have a parallel track? You have a ‘if Obamacare gets repealed and replaced’ tax plan, and then an ‘if it doesn’t get repealed and replaced’ tax plan? 

SM — Well, I think as you’ve heard the president say, even recently, he continues to focus on if we can get healthcare done. And there are a lot of taxes that would be taken care of in Obamacare. I think it’s fair to say if Obamacare doesn’t get done, and we switch to tax reform, there will be some of those taxes that are taken care of, but most likely not all of the taxes. 

FT — Just jumping back to the border adjustment briefly. 

SM — You guys love this border adjustment. Love it. 

FT — Here’s why we love it. It raises arguably over $1tn of revenue. So, if you don’t have that element there’s a huge hole in the plan. 

SM — It’s just one of the ways that you can raise $1tn. And I might add, people refer to the $1tn net that it raises, but you need to understand it’s actually something like $5tn on one side, and $4tn on another side in round numbers. So, it has very big implications to the economic system. There may be other ways to get to that $1tn, which we’re exploring. And again, that’s not to say we’ve taken it off the table. It’s just one of many things we’re looking at. 

FT — What other options are there to raise $1tn? It’s not easily done. 

SM — I would just say that there’s a lot of options. 

FT — I take it from that that you’re very much wanting to ensure these are proper tax reforms, fiscally neutral tax reforms, rather than potentially deficit expanding. 

SM — One of the things to understand is the president’s big focus, and my big focus is about creating economic growth. And I think you know that I travelled with him on the campaign for the last year, and I was intimately involved in developing these economic plans.

Economic growth is our number one priority. The difference between 1.8 per cent GDP and 3 per cent GDP compounding is staggering. So, whatever issues we have in this country, growth helps solve a lot of those issues.

There could be as much as close to $2tn difference in revenues under different growth scenarios. So, I think we’ve talked about this before. We believe in dynamic scoring. I think you guys know what that is. There are different models for dynamic scoring.

What’s clear is that we will support something that doesn’t increase the deficit, with growth. That doesn’t mean, obviously in the case of static [scoring], that it’s going to be deficit neutral. 

FT — So, you’re talking about 3 per cent trend growth potentially. That’s what really nets huge . . .

SM — My comment is what we are focusing on, and what we think the right thing to focus on is, what are the policies that are going to create economic growth? Tax reform, regulatory relief, infrastructure investment. Those things combined, we think can create 3 per cent growth. 

FT — But the accusation will be that you’re retrofitting, effectively, 3 per cent growth on to your economic plans in order to avoid some of the tougher measures. 

SM — I’m not saying that. I haven’t said what we’re doing. Again, just to be clear, there’s only two things I’ve said. One is, when you calculate whether it’s deficit neutral or not, there’s a bunch of different calculations and a bunch of different models. That’s issue number one. Issue number two is, I’m just pointing out the magnitude of what economic growth does. So, when you talk about $1tn, border adjusted tax, these things, economic growth creates lots of revenues. So the reason why we’re focused on economic growth is that’s what creates opportunities for the middle class. That’s what creates economics to get the US in a sound place. 

FT-— On the Obamacare issue, one of the lines you heard from people was that there wasn’t enough preparation . . . What are you doing differently this time to get your ducks in a row on tax? 

SM — I wasn’t really involved in the Obamacare situation. I knew what was going on, but I’ve got a lot to do here in Treasury. So there’s things that I’m super focused on. Perhaps some of the lessons learnt in healthcare carry over to taxes, but I’m not sure that they all do. 

FT — Does the renewed focus on healthcare raise the risk of August being an unrealistic deadline? Because certainly a lot of people in Congress [say that]. 

SM — What I said from day one was that August was an aggressive deadline. I think that we’re now shooting to have the plan in place, but I think at this point it’s unlikely that we’re going to have a plan passed before August. Just given where we are and the delays that went on other things. 

It doesn’t mean that we’ve given up on it, but I would say that realistically it started as an aggressive timeline, and it’s fair to say that it’s probably delayed a bit because of the healthcare. 

FT — But do you still think it could be something which is in time for 2017 tax returns? 

SM — Absolutely. And I go back to saying it’s a big part of the president’s agenda to create economic growth. 

FT — One last tax question. One of the other very contentious parts of this plan is interest deductibility in terms of corporate tax bills. Again, potentially quite lucrative in terms of revenue. Are you worried that that again is going to be too contentious? 

SM — Well, again, there’s two components. When people talk about the House GOP plan, they refer to it as the border adjusted tax plan, but there’s really three packaged components. One is the actual border adjusted tax. The other is the elimination of interest deductibility. And the third component is effectively the automatic depreciation of capital goods. In rough terms, the interest deductibility and the automatic depreciation offset each other in terms of revenues.

One has a revenue gain, one has a revenue loss. Those three components are important together. If you have arguments that you want to make that it should be WTO compliant, you definitely need those other two pieces attached to it.

So, if you had a border adjusted tax and you didn’t have those other two components, it would be pretty clear that it’s not at all WTO compliant. So those go as part of what I would say the House GOP plan [is]. Again, we’re looking at all of those components, but if you want to do one, you have to do the others with it. 

FT — And what’s your immediate short-term strategy in terms of working with the House leadership? Are you looking to get started on that next week? 

SM — Again, we’ve been having weekly meetings with the House and the Senate, both at the senior level, as well as the staff. As I said, we’re looking at different things. 

FT — I’m just wondering what you expect this week from the Spring Meetings? This question of currency has obviously been there, both in terms of China and the question of whether it’s manipulating or not, but also in terms of the president and his comments on the dollar. Do you think a strong dollar is good for the US economy? And how should we reconcile your past comments with those of the president? 

SM — Well, let me start on the last part, because again, I’ve been pretty consistent in my comments, and I think he’s been pretty consistent in his comments. What I’ve talked about is the long-term value of the dollar. And as the world’s currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing. It’s a function of the confidence and the strength of the US economy.

I think it’s fair to say that in terms of currencies, we’re the most independent. We have a separate Federal Reserve. Although I meet weekly with chairwoman Yellen, the Fed’s monetary policy is independent of us. So, my comments on the dollar have been focused on the long-term [value] of the dollar. The president’s comments, which again, I agree with, over short periods of time, the strength of the dollar creates certain issues which hurt our exports.

And I think that’s what he’s referred to. Which is, again, factually correct . . . We don’t intervene in currency markets. So the strength of the dollar is a little bit like the strength of the stock market. In my mind it’s a function of the confidence in the potential of the US economy and the current state of the US economy, particularly relative to the rest of the world. 

So that’s currency. The currency report . . . I would commend the staff of the Treasury who did a lot of work on this. And I think that although the conclusions may be similar to previous reports, if you actually read the report, the details are very different. And we’ve made it very clear in the past where people have been doing, or countries have been doing things. We’ve been very clear on that, and we will continue to monitor those actions. 

For the period of time that we wrote the report, and again, there’s a 2015 law and there’s a 1988 law . . . that go through certain tests. I think it’s pretty clear, for the period of time, to manipulate a currency you have to be doing it to disadvantage the United States. To the extent you manipulate a currency that advantages the United States, it’s not currency manipulation. This is a defined term.

I don’t think that’s inconsistent with — and everybody’s focused on the president’s comments during the campaign. The president’s comments during the campaign reflected previous periods of time. And now that we’re here, I think both the combination of the facts, and the combination of what the president said, and how China is working with us . . . But I commend the Treasury staff in what was a lot of work. And not just the conclusion, but going through all the details. And yes, we have commented to Christine, one of the IMF’s most important roles is to focus on world currencies. 

FT — You say you don’t intervene in foreign exchange markets, and yet some people in the markets took the president’s comments last week as him talking down . . .

SM — Absolutely not. Absolutely not. I disagree with that completely. 

FT — OK. So that’s not part of the strategy? To talk down the dollar? 

SM — No. The president was making a factual comment about the strength of the dollar in the short term. And by the way, when we talk about an intervention, and we even noted this in the report, there’s a big difference between talk and action. 

FT — On the IMF, what specifically would you like to see the IMF do with regard to currency? When you talk about greater vigilance, what do you mean? And do you have any specific countries in mind? 

SM — No. Again, I think we were pretty clear in the report about where there are issues. We’ve had direct conversations with the countries, and we have direct conversations with the IMF as what we see their role as. Having said that, I’ve seen a bunch of things in the press about some contentious issues between the IMF, or Christine and me. I’ve had a series of meetings with her now, getting to know her. We’ve been a huge part of the IMF since its creation, and we’ve both had public comments and private comments in regards to what they should be working on. 

FT — You said, because China’s working with you. Can you flesh out a little bit more on what is China doing? Because it seems to me that Donald Trump is the first president who has linked economics/trade with national security. I don’t remember previous presidents doing that in recent years. 

SM — Well, let me just make a comment overall. I guess this was the week before last, that was obviously one of the most interesting and impressive weeks of the president’s time. Which started with the Egyptian visit, which I did participate in, both the lunch at the White House, and then a separate meeting that I had with him and his economic team.

The Jordan visit, I did not participate in, but that obviously was the next important part of what the president did that week. I did participate in a serious of NSC discussions. I think you know, because of the terrorist financing activities, the Treasury participates in these discussions.

And then obviously there was a lot of preparation for the China visit, which could not have gone better. From my perspective, first of all, I think the dialogue between both presidents was very important. I think on the economic side, Secretary Ross and I are going to be co-leading what is an economic dialogue with them going forward, encompassing all the economic issues, including trade and investment.

As you know, I think although we shared some initial information, I think the most important part is that we agreed with our counterparts that we would work on a 100-day plan. That’s already in the works. They’ve shared information with us, and we’ve shared information with them. There will be meetings at the staff level this week to continue that work, with the idea that I think we’ll see real progress on the economic fronts with China.

I think you also know the president has emphasised the work with North Korea, and the strategic issues. My involvement in that is from a sanctions standpoint. So, we’ll be working very closely with our counterparts. I’ve mentioned that there are sanctions that we’ve rolled out on North Korea. There will be more sanctions that we roll out on North Korea. 

FT — Directly on North Korea, as opposed to secondary sanctions on China? 

SM — Correct. North Korea, obviously individuals or entities . . . These sanction programmes are extremely important. It’s one of the most important parts of my job. Last week we rolled out sanctions on human rights violations on Iran. There will be more sanctions on Iran, on non-nuclear issues. Again, we are going to monitor Iranian behaviour very carefully. There will be significant sanctions rolled out on Syria. I think in the near term, over 200 in terms of size and scope on Syria and Syria-related entities. And this is an important part of what we’re doing. 

FT — On China, was there discussion at the summit, or in subsequent meetings, about potentially putting secondary sanctions on Chinese entities or individuals who deal with North Korea? 

SM — I think at this point there are very, very productive discussions with our counterparts. And I think that with co-operation as it relates to North Korea, that’s obviously our primary focus. 

FT — Just to follow up on sanctions, you said more than 200. 

SM — That’s correct. 

FT — In the near term. Are those 200 individuals, or companies? 

SM — A combination of individuals and entities. 

FT — OK. And in the near term? 

SM — The next couple of weeks. So, they’re in the process of being cleared to be rolled out. 

FT — That’s purely Syria we’re talking about. 

SM — That’s purely Syria. 

FT — Do you have a similar number on North Korea? 

SM — I don’t. North Korea, we’ve started rolling them out, and North Korea will be more of a rolling process. 

FT — So, still on China. The FX report did have some strong words towards China on protectionism, inward investment, that sort of thing. What’s their response when obviously there’s a perception of the US itself as more open to protectionist measures than previous administrations? 

SM — So, I saw this morning’s article [in the FT], and I echo Secretary Ross’s comments. And I was at the centre of this storm at the last G20. We have one of the most open markets that exist, if not the most open market that exists, for trade and investment.

The only area we have on investment is I obviously chair the [Committee on Foreign Investment in the US] process, and for national security reasons we have the right to block certain investments. I would also comment, in the CFIUS process, there are times when we indicate to companies that we’re going to block them. And they can either withdraw them, or we can send them to the president.

It’s a confidential process. So without making any comments for you to take away, when we’re blocking things and when we’re not blocking things. I just want to emphasise it’s not that every decision we make has to go to the president. 

FT — But also with Westinghouse, you also have a new situation where it seems to be that there is a pre-process which is . . .

SM — I’m not going to comment on specifics of Westinghouse. As I’ve said, the CFIUS process is confidential.

But let me just finish this point and then I’m happy to come back to other things. I spent a lot of time on the communique. I’d like to say this was my first one of these. I’m used to, in the business world, you have meetings, and then at the end of the meetings you have a press release that reflects what you talked about. 

This process is a little different. You negotiate the communique way before you get there. I think the emphasis that I was trying to make was that we believe in free and fair trade, but these have to be reciprocal agreements. What the president won’t stand for is where things are disadvantaged to the American workers and it’s not reciprocal.

Where Secretary Ross is looking at, under the executive order, a lot of these trade agreements . . . And we’ve said, we are going to look to re-negotiate trade agreements where necessary. It’s because there are aspects of many of these trade agreements that are not free and fair and reciprocal.

So, my comment on protectionism was more on the comment of we expect this to be two way, free and fair trade. Particularly for people who have big surpluses with us. And if we can’t address those issues, we reserve the right to be protectionist. That’s slightly different. And again, we’re talking about, we start over here, some people start over there. So I think that’s kind of what Secretary Ross was emphasising yesterday, and what I emphasised on my previous trip . . .

FT — Can I ask, just quickly on CFIUS? Is there any talk about changing the CFIUS process to make it broader? Not just looking at national security, but looking at economic security? 

SM — There’s certain legislation, proposed legislation in Congress and certain things. I would just say that we do work with the Congress as they want to propose certain things on a staff level, of suggesting certain things that we think may be better for it. That’s up to Congress. 

FT — What’s your broad view on whether it needs to be tweaked? 

SM — There are definitely certain things in it that should be tweaked. I think we want to make sure that we have the right tools to enforce the intent of the mandate. 

FT — Can I just follow up on [CFIUS]? You talked about the need in trade deals for reciprocity. One of the things that people on the Hill talk about is the need for reciprocity in terms of a CFIUS process, in other words sectors that are not open to investment for US companies in China should likewise be scrutinised heavily here in the US. Do you think there’s a need for greater scrutiny in terms of reciprocity of investment? 

SM — I would just comment again on our dialogue with our counterparts in China. There are certain things that we’re looking at that could be done quickly, there are certain things that we’re looking at that can take 100 days, there are certain things that we’re looking at over a one-year horizon. Investment is definitely one of the areas that we’re in discussions with — I would say the trade surplus for the moment is a slightly bigger focus than investment. 

Our objective — other than national security issues — our objective is not to cut off investment in the United States, our objective is to make sure that US companies can invest abroad. Same thing on trade. Our objective is to increase exports, not necessarily decrease imports. The best way to shrink these gaps and create economic growth is, as I say, to expand exports. And there are many cases where there’s things that we have that make sense for us to grow. 

FT — Do you see a need for a bilateral investment treaty between the US and China? 

SM — It’s definitely on the agenda of things that we’ll be discussing. I think there’s things we can open up, I think there’s areas we can open up even without a full-blown bilateral investment agreement. 

FT — Such as? 

SM — Without commenting on specific sectors, there are sectors where clearly we have expertise, and there’s also technical issues I think that we’ve talked about, whether it’s technology companies, and things along the lines of making sure that when US companies go over there their intellectual property is protected. 

FT — One quick one on tax, then I want to ask about financial regulation. On tax what we haven’t heard a lot of recently is the whole issue of repatriation, and the possibility of a deemed repatriation, which can, under previous plans, be used towards infrastructure. Is that one of the policy measures that you’re looking at at the moment? 

SM — Just to break that into pieces. I think the president has been consistent, that as part of the tax plan we want to create something that is going to bring back trillions of dollars from overseas. And by the way, from discussions I’ve had with lots and lots of CEOs that have cash overseas, they want to bring back that money. So without commenting on specifically whether it’s deemed or not deemed, the plan will clearly have a part of it that encourages and motivates companies to bring back that money, and we think that money will be re-invested in the US, and will create lots and lots of jobs. 

Aside from that, I think the president has said it’s a major focus of his to do infrastructure spending, and we’ve talked about spending a trillion dollars on infrastructure. I think it’s fair to say we don’t want to do something that creates a trillion-dollar deficit, so we’ll be looking at how we fund infrastructure spending. That will be a combination of public/private partnerships, that could be a combination of on-balance sheet and off-balance sheet. There’s a lot of different things that we’re looking at. Whether infrastructure is attached to tax reform or not, it’s something we’ll look at and take into consideration. 

FT — Do you think it’s do-able? 

SM — I’m just saying it’s something we’re looking at. We haven’t made any decisions. But I would say infrastructure is a major focus of the president. We’ve had lots of groups in, focused, and have built a team around infrastructure. Gary Cohn is leading that, out of the White House, on an inter-agency basis. I’m working very closely with him on how we finance the infrastructure programme; it’s a big priority of the president’s. 

FT — Yes, but you’ve talked about I think $200bn of direct spending on infrastructure, as part of the trillion . . ? 

SM — I would say it probably entails a couple of hundred billion. Whether we pay for that through tax reform or we pay [through] other things, there’s a series of things that we’ll look at. 

FT — On the campaign trail the president talked a lot about inversions. What are you thinking in terms of policy on inversions, and is there going to be any movement on that? 

SM — I’ll just make a comment on why do people do inversions. Because we have a highly uncompetitive business tax system, that it’s not a surprise that our tax system incentivises companies to do that, and as part of tax reform that is obviously one of the things we’re looking at — if you just start with the premise, if our system is more competitive, it won’t encourage inversions. But why people do inversions is definitely right up there on the list of things we’re looking at. 

FT — But you’re not planning to do anything punitive in the meantime? 

SM — No. Our focus is to deal with all these issues in the context of tax reform . . . Before we go off this week’s meetings, two of my priorities is to talk at these meetings about — one we’ve talked a lot about: fighting terrorist financing and sanctions, that would be something that I continue to talk about with my counterparts. The other area will be cyber security. I’m very interested in cyber security from the standpoint of protecting the financial system, and making sure that we work together on these issues. At Treasury we have a big financial infrastructure between us and the IRS, so cyber is a very important internal issue, but I also chair various different committees, where I’ve already had — actually I think it was in this room — all the major regulators, the Fed, the Secret Service, all the internal agencies as it relates to protecting financial infrastructure.

That’s a big priority of mine, and we will continue to talk about that with our international counterparts to co-ordinate and focus with them.

FT — Just before we move beyond this week, two quick questions. One on Greece: do you believe the IMF should be participating financially in the latest rescue of Greece? And secondly, on the World Bank, Jim Yong Kim the president has, for a couple of years now, been starting to make the case for a capital increase at the Bank. Do you believe the World Bank needs a capital increase? 

SM — I am shocked that it took 42 minutes for you to ask me about Greece. 

FT — It’s strategic restraint. 

SM — I see that, I see that. I’m sure we’ll be having some private discussions on Greece this week. I’ve obviously been getting briefed privately on it. We are encouraging the IMF to have discussions with our European counterparts about it. As I’ve said before, we think this is primarily a European issue, although it is something we’re monitoring, because it is important to the world economies and the world financial markets. It would be premature for me to comment on any IMF participation or the overall plan. We are hopeful that there will be something in the near future that deals with the Greece situation. But it would be premature for me to comment on any specifics of the IMF or otherwise. There is not a specific plan that has been presented to me, although as I said we have had private conversations. 

FT — This is just a step back to set a baseline for the next few years. Do you believe the IMF has a role in lending and helping rich nations that are going through financial crises? 

SM — It’s not, in my mind, their primary objective. Whether it has a role or not — we have a complicated world economic system. The Greece issue has now been going on for a significant period of time, it’s a complicated issue. I don’t want to use Greece necessarily as an example of what should be going on. There’s a history of the IMF in Greece, and as I said, we’re monitoring the situation closely. 

FT — And just on the World Bank and the capital increase? 

SM — The World Bank, we had a productive lunch [last] week on the World Bank. This is an area that I am beginning to have more exposure to. I think it’s very preliminary to talk about any capital issues. I think, we do have, right now, very significant ongoing commitments to the World Bank. One thing that I was very impressed with at the World Bank in these discussions — I forget the acronym — the private entity, ILC is it? IFC. Exactly. There’s so many acronyms of all these different entities — you guys have much bigger history than I do on this.

I was very pleased to hear about the progress that they’ve done, and I think it’s a great opportunity for them to take their expertise and blend it with private capital. One of the things we are in discussions with the World Bank on, and our counterparts, is contributions around women empowerment funds, public/private partnerships on this. So I’m very encouraged by the World Bank in particular figuring out how they can take their expertise and leverage it. I would say on the capital issue it’s preliminary, A, and B, they’ve got plenty of room for commitments at the moment. 

FT — Some of the president’s comments recently have been interpreted as suggesting that he’d be open to reappointing Janet Yellen as chair of the Fed next year. Would you similarly be open to considering a second term for her? 

SM — I meet weekly with her, we have very productive discussions, I think there’s a history of a relationship between the Treasury and the Fed working together. I’ve been very pleased with that relationship, and working with her to date, and it’s been very productive. Actually I was sitting in the president’s office when he was giving that Wall Street Journal interview, so I was there when those questions were asked, and I’d make the same comments that he did. We are open-minded, and it’s too early to make any decisions, but we’re open-minded. 

FT — She’s certainly associated with quite a stable monetary regime, she is not a hawk. Certainly the president doesn’t want to see a hawk put in the Fed, from what his comments suggest? 

SM — I would say for the moment, we are focused on three positions that we have to fill at the Fed, and that’s our priority at the moment. And there are three very important positions starting with the vice-chair for supervision . . .

FT — On financial regulation there’s been this renewed discussion of a Glass-Steagall Two, it would be very helpful to get your views on that. 

SM — There’s been a bunch of things in the press on this, so let me just clarify this. This is something that I worked with the president on during the campaign. And what we were very specific on, when we talked about — this was in campaign speeches — a 21st century Glass-Steagall. And we were very clear in saying that. We do not believe in going back to the old version of Glass-Steagall. That’s old. Banks and investment banks have obviously changed dramatically since that period of time.

The financial issues that existed when Glass-Steagall was originally created are very different today. I think the most important issue, as it relates to this, on the combination of banks and investment banks, is that right now I don’t think there’s a major investment bank that’s not a bank holding company, in the US. 

And having investment banks and banks provide the liquidity for financial markets is one of the most important functions that they do. One of my concerns about the Volcker rule is that there are aspects in the definition of the rule that are limiting liquidity in secondary markets. The equity market is an agency market; many of these other markets are over-the-counter principal markets. So one of the things I’m very focused on in my role at FSOC is re-looking at, with the regulatory agencies, the definitions of the Volcker rule, and making sure that it provides proper liquidity. That’s one of the things that has come up already in our review of the financial reforms under the executive order, and we’ve begun to have discussions.

I don’t think a full rollback to Glass-Steagall makes sense, and that’s why the president differentiated that by saying a 21st century version of Glass-Steagall, and not going back to a full rollback. 

FT — One model that is something more akin to ringfencing within the groups, rather than the kind of stricter separation. Is that something which is slightly more appealing? 

SM — It’s one of the things we could consider. I would go back to saying a full separation would clearly create very big issues for liquidity in the financial markets, but we will look at, as part of financial reform, different types of things. More broadly on the EO, the president signed the EO, we’re doing a lot of work internally. Dodd-Frank is part of this, but it’s actually much, much broader than Dodd-Frank.

I think we’ve hosted 16 different meetings that have probably had 50 or 100 people in each one of these, between staff and everything else. We’re having discussions with all the regulators, but we’re also having discussions with all the industries, so that when we come back and make recommendations to the president, it’s not just what people in this building think. We will have received feedback from lots and lots of external sources to understand where regulatory reform has hindered doing business.

I do believe in financial regulation, I think banks specifically in the US that have FDIC insurance should be properly regulated, so you don’t put the taxpayer at risk. I think that we’re in a period of time where there is at times competing issues between the different regulators, that’s one of the things we want to focus [on], and at times, too much regulation that’s gone too far in the other extreme to hinder lending and hinder growth, and we’ll be coming back and making recommendations. Certain things could be done by the regulators, certain things may require executive orders, certain things may require legislation, and we’ll be making comments on suggestions of all of those. 

FT — Competing issues between the regulators — can you be a bit more specific? 

SM — I would say in a lot of times — you have multiple regulators. I think in many times they all work well together, I think in certain times there’s different regulators who are going in and it could be as simple as co-ordination, it could be as more complex as different interpretations. 

FT — the Volcker rule: I’ve forgotten how many regulators would need to agree with each other to change it. 

SM — One of the primary roles of FSOC is for me to be able to bring the regulators together and focus on different issues. The Volcker rule will be one of the things we’re looking at now. Cyber security, whether it’s through FSOC or through other inter-agencies, those are very big issues. I don’t know how FSOC was used historically, people focus on FSOC on the designation process — I intend to use FSOC as a very important tool as part of the administration’s policies to make sure that there is proper co-ordination across the different regulators . . .

FT — On legislative change in the financial regulatory area, there was, in the House, discussion of imposing stricter rules on the Federal Reserve, under chairman Hensarling’s bill. I wondered if the administration is supportive of stricter Taylor Rules being imposed on the Fed, or an audit-the-Fed-type arrangement. 

SM — In my role there has been a history of not commenting specifically on the Federal Reserve. We have a very productive relationship with the Fed, in an effort to maintain the independence. I’m not going to comment specifically on legislation or anything else. 

FT — But ultimately the president needs to decide whether he wants to veto a policy. 

SM — That is obviously correct. I’m just saying I’m not going to publicly comment on it in my role. 

FT — Can I just shift back to tax reform for a second. What is the earliest that we could see a plan rolled out? 

SM — I think it depends, and the president has talked about how we sequence this relative to healthcare and other things. It’s high on the agenda, there’s discussions going on now, behind the scenes, it would be premature to give you an exact date. 

FT — Not an exact date, but it’s not going to happen within a month — or can you give us any sense of . . ? 

SM — I think to get this done before August would be highly aggressive to not realistic at this point, in terms of passed and signed on the president’s desk. That doesn’t mean that we couldn’t see this rolled out before August, and again, I would say, this is high on the agenda. I expect this to get done in 2017. I don’t expect this to get past that period of time. 

FT — And likewise, do you expect infrastructure will be done in 2017? Because there’s been conflicting — it’s next year, it’s this year…? 

SM — I can’t comment exactly on the timing of that. I think you will see things beginning to happen in 2017. Gary Cohn is really the primary person working on infrastructure — but we are working on financing with him. 

FT — Most of the Trump administration’s senior people have never worked in Washington before. 

SM — Including the president. 

FT — What’s been the biggest surprise for you, spending two and a half months here? What have you learnt? 

SM — It’s two months in a couple of days, first of all. Not that I’m counting. There’s more similarities between this and business than I expected. So one that I would comment on is: the Treasury has a lot of operational functions in it. There are many issues here that are very similar to businesses in terms of what we have to manage, and lots of different operations that we run. We run, obviously, everything from the printing of the money to collecting of the taxes to literally the fiscal agent of dispersing funds. There’s a huge operational component.

And the things I’ve learnt in business in terms of processes and decision making are actually much more similar than I thought. I think in terms of working in a team, despite any of these issues that are in the press today, in the administration we work very closely. So economic issues, Gary Cohn, myself, Secretary Ross, we meet regularly. Mick Mulvaney, we meet once a week, we talk about economic issues. Gary and I obviously both worked at Goldman Sachs together, there was a team culture in Goldman Sachs.

So similar to business, there are a lot of issues where you need to work through a bunch of different issues, have priorities, and try to get a consensus. So I actually say there’s more similarities than differences, and I think having new approaches, so if you talk about the executive order that we’re doing on financial reform, we’re running this like a business project management. This is no different than if we were looking at a strategic review within a big company. I would say the other thing is that I think this administration is very different than the previous administration — we have a lot of outreach. So again, no different than in business.

In business you go out and you listen to your customers, you listen to your shareholders, you listen to your regulators. You take feedback. There have been hundreds of business people, small businesses, big businesses, that have come through here and come through the White House. This is an administration that is listening. So when we do things — and again, I think this is very similar to what you do in business — you go out and you listen and then you make decisions, and ultimately the president’s job, no different than a CEO, he takes in lots of input and then he makes a decision. 

FT — By issues in the press, you mean palace intrigue type things? 

SM — Yes.