WHEN: Today, Tuesday, April 28, 2020
WHERE: CNBC’s “Squawk Box“
The following is the unofficial transcript of a CNBC interview with Treasury Secretary Steven Mnuchin on CNBC’s “Squawk Box” (M-F 6AM – 9AM) today, Tuesday, April 28th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2020/04/28/watch-cnbcs-full-interview-with-treasury-secretary-steven-mnuchin.html.
All references must be sourced to CNBC.
BECKY QUICK: All right. The Paycheck Protection Program, or the PPP resumed, yesterday with a new influx of $310 billion from the federal government that is intended for small businesses. For more on this right now, let’s welcome Treasury Secretary Steven Mnuchin. And Mr. Secretary, thank you for joining us today.
STEVEN MNUCHIN: Good morning. It’s good to be with you.
BECKY QUICK: It’s good to talk to you. You know, I was hoping we could start with a little bit of a dive into how you see this program, what’s happened? There has been a lot of outrage out there as people found out some big companies had applied, things like Ruth Chris Steakhouse, Shake Shack, AutoNation–some of their car dealers getting money in this program and there have been reports in the media about big banks putting those big companies first in line in front of small businesses. I know you’ve come out and said this was intended for small businesses that don’t have access to the public markets, but I just wondered if you’ve had a change in your thinking on how this should be used as this whole situation evolved, as the market’s kind of firmed up a bit, or if this was something you thought from the very get-go and you think some of these big companies and big banks are in the wrong and were bad actors in this situation? How did this evolve?
STEVEN MNUCHIN: Well, let me first say, I really think the program has been an incredible success. It’s impacted over 30 million workers so far. And by the time we get through this funding I think it will have impacted over 60 million workers, which as I’ve said before is about half the private work force supporting small businesses. That was always the President and Congress’s intention, and that’s what we’re delivering on. I think it is unfortunate that there’s a small number of companies that have created a lot of publicity that took loans. I think it was inappropriate for most of these companies to take the loans. It was clear there was a certification. We don’t think that they ever should have been allowed to. We put out an FAQ clarifying the certification and saying that if they paid back the loans in two weeks so that we could reprocess that money, they would have no liability. Otherwise they would have liability. And I must say I’m encouraged by the number of people that paid them back. I never expected in a million years the Los Angeles Laker, which I’m a big fan of the team but I’m not a fan of the fact they took a $4.6 million loan. I think that’s outrageous, and I’m glad they returned it, or they would have had liability. And let me just say, I’m going to be putting out an announcement this morning that for any loan over $2 million, the SBA will be doing a full review of that loan before there is loan forgiveness. So, we will make sure that what was the intent for taxpayers is fulfilled here. But let me just say, again, the program, overwhelming success, 1 million of the loans so far are for companies under 10 people.
BECKY QUICK: What do you think the impact has been in terms of trying to keep people employed? Have there been people who have gone and had to file for unemployment or do you think this program has saved a lot of people from actually having to do that and kept them in their workplace?
STEVEN MNUCHIN: I think it saved a lot of people. And I think for those people on unemployment it’s going to bring a lot of people back. As a matter of fact, we’re having a small business event at the White House today, where unlike the Lakers stories, we’re going to hear stories of great small businesses who this really saved their business. And I can tell you, you know, the number of emails I get from people who send on the stories of a legitimate small business that was about to close their doors that is either keeping their people on or rehiring people, or businesses that have to close their doors because through no fault of their own, the city shut down business is going to bring back those people. So, as we reopen, these companies will have the liquidity to pay their workers.
BECKY QUICK: It occurs to me that not every part of the country is dealing with this equally. There were a lot of states that closed down later than others and there are obviously others that are opening up quite a bit earlier. Are any of these funds going to be directed to the areas that are most hard hit to try to make sure that the businesses that are forced to close for a couple of months already and could consider to see a long closure, would those businesses be prioritized?
STEVEN MNUCHIN: Well, we’re absolutely working on that. And we want to make sure that this money is getting to where it should be. And let me say, I’m highly encouraged that the average loan size is coming down. Matter of fact, the average loan size in the backlog was less than 100,000. I’m also encouraged, we’re — I’m on a call every day where we have over 100 CDFIs that are making loans. We think we’re going to increase that to 400. So, particularly in communities that have been hardest hit, we make sure they get that money. We’re going to do what we need to do to make sure everybody is treated fairly in this program.
ANDREW ROSS SORKIN: Mr. Secretary, what do you tell people who say, Look, some of these companies maybe should or shouldn’t have tried to get this money? But do you blame the banks, the banks that issued these loans to them given the rules that you had spelled out or were the rules themselves not clear enough?
STEVEN MNUCHIN: The rules were very clear. But let me also say the certification was a certification by the borrower, and one of the things we did is we wanted to make it very easy, the banks were really middlemen here. The banks were not required to do the diligence. I really fault the borrowers who made these certifications. Now, there were some banks early on who put things up on their website and prioritized their customers. We immediately told them that was wrong. They took it down. So, you know, I want to be very clear: it’s the borrowers who have criminal liability if they made this certification and it’s not true. And as I said, we’re going to do a full audit of every loan over $2 million. This was a program designed for small businesses, it was not a program that was designed for public companies that had liquidity. Again, the certification was very clear in saying that if people had other sources of liquidity, they could not take this loan.
ANDREW ROSS SORKIN: Right. Mr. Secretary, though, what do you say about those larger companies that may be returning those loans but the true effect of it is they’re going to continue to furlough employees? To the degree that this is an Employment For All program, you know, Shake Shack is not necessarily going to now put people back on the payrolls, whereas, had they had access to some of these loans if you felt they were properly eligible, despite whatever liquidity you think they might have, they may decide as a business decision not to bring people back, whereas, the smaller companies who would have access will bring people back knowing that they’d get the loan ultimately forgiven and would keep people in their jobs.
STEVEN MNUCHIN: Well, again, let me just be clear the purpose of this program was not social welfare for big business. The purpose of this program was to help small business. It’s a small business program, and it was meant for small businesses that didn’t have liquidity. Now, there are a lot of big businesses who are doing the right thing and keeping their people on the payroll. Some of them are cutting their payroll a little bit, in terms of not paying people as much. But there’s plenty of businesses that have been impacted by this that are doing the right thing for their employees. And, again, every business has to decide what they want to do. Every business owner has to decide. You know, if you’re a private equity firm, if you are a venture capital firm and you want to support your companies and you want to support your employees, I would expect most of them that have the liquidity will support it. Obviously, there are businesses that were terribly impacted by this where people can’t do that. But, you know, I want to comment, many businesses are doing the right thing for their employees and this business, this small business, again, we’ve impacted 30 million workers that would not have otherwise been able to be paid because 50% of our economy is truly small businesses.
ANDREW ROSS SORKIN: Alright. And, Mr. Secretary, the other question I get asked all the time, I’m curious if you do too, how this bailout differs or is similar to the T.A.R.P. Bailouts after 2008 and whether taxpayers ultimately are going to get paid back as they did after 2008? Given the grants that are involved and the loan forgivenesses that are involved, can you imagine a scenario where taxpayers actually get their money back in the traditional sense of people paying these loans back and getting interest for it?
STEVEN MNCUHIN: Well, this is a completely different situation than the financial crisis. I mean, this is a situation — business had nothing to do with this. This was the fact that the silent killer, this virus showed up in the economy, that we had to close down major parts of our economy for health reasons. And, really, the businesses had nothing to do with this. So, this was not bad business decisions like in the financial crisis. This was not over-levered real estate. In this program, there’s a very significant part of these programs that are grants, as in the PPP. There’s enhanced unemployment insurance, which is meant to protect workers that got laid off by companies. There’s our direct deposits. We’re over 100 million payments of direct deposits and checks and now sending pre-paid debit cards, so we want to get those out to people. So, this is unprecedented liquidity being pumped into the system. Now, there is a component of this which–where we can work with the Fed, which is an investment to support lending facilities we made loans. We’re in the process of making loans to airlines, national securities. On those, I do expect we’ll get paid back. But a big component of this is an investment in the U.S. economy and U.S. workers to support them through this difficult time that they had nothing to do with.
BECKY QUICK: Mr. Secretary. Let’s talk a little bit about the states and municipalities that are also struggling and have said that they need the money. We spoke with New Jersey Governor Phil Murphy yesterday who said he had some productive conversations with you over the weekend about what that money can and can’t be used for. Let’s just use New Jersey as an example. They say that they’re going to run out of cash in four to six weeks, if they can’t use some of that federal money for other things than what they feel like they’re allowed to right now. Where does that stand? And how should these states and municipalities be thinking about this?
STEVEN MNUCHIN: I’ve had multiple conversations with Phil and I’m glad he characterized them as productive. I’ve also spoken to many other governors, I’ve participated with the President and Vice President on video calls with the governors. As you know, there was a chunk of money, it’s now all been sent out, to the states and the cities to cover them for coronavirus expenses. And, again, we’ve been clear that to the extent people have to use police to enforce coronavirus issues, public safety, things like that, that they could allocate that money to the coronavirus issues, but that this was not about lost revenues, and that’s the way the bill was written. We’ve also worked with the Federal Reserve. I think you saw yesterday, expanding the Federal Reserve facility to states and cities for liquidity problems. Because we know just as we push back tax revenues, they did. Which we’ll deal with liquidity situation. And I think, as you know, the President said that we’ll have a debate in Congress, in the House and the Senate, to consider this issue going forward. But, you know, there are issues this isn’t going to be just a federal bailout of the states. On the other hand, this will be an ongoing discussion.
ANDREW ROSS SORKIN: Mr. Secretary, there’s been a raucous debate about whether the Federal Reserve should buy stocks. What do you think?
STEVEN MNUCHIN: I’m not going to specifically comment on what the Federal Reserve should or shouldn’t do in the future, but I would say I think that’s highly unlikely.
ANDREW ROSS SORKIN Let me ask you a different question. It’s about buying stocks but in a different way. It’s actually corporations buying back their own stock. There’s also been a raucous debate in this country about buybacks, companies that bought back their stock over the past several years and didn’t have a Rainy Day Fund for this moment. Do you have a view on that? Pepsico, for example, today said they were actually going to buy back stock and we’ve heard from other companies saying they plan to buy back stock.
STEVEN MNUCHIN: Well, I would think in this period of time most companies are announcing that they’re cutting their dividend and they’re cutting their buyback programs because they are investing in their business. And I think that’s the right thing to do. Now, there may be a few times where, you know, companies are performing so well even through this that they have excess capital that they’re looking at capital allocation. but I would expect that that’s a very, very small part of the situations and I think, as you know, we’ve put restrictions on any of these direct government programs. So, if we’re making direct loans to airlines or national securities or we’re making direct loans in the Main Street program, there are restrictions on compensation and share buybacks. So, we think that’s the appropriate thing to do.
BECKY QUICK: Mr. Secretary, just quickly going back to the issue with the states. I understand that some of these states have gotten a little piggish. I’ve heard about the President of the Senate in Illinois asking for, I think, $10 billion to bail out the pension fund that’s been underfunded for decades there. That seems ridiculous. But what do you think personally about whether the states should be allowed to use those funds from the lost revenue in terms of keeping teachers on, firemen, or policemen on the job as we continue to look at these states that have been shut down and hit the hardest? Is that fair, in your choice? I realize that’s not the way the bill was written but would you advocate for the states to use the bill that way?
STEVEN MNUCHIN: As you said, in the two extremes, I think states that were mismanaged, you know, this shouldn’t be a bailout of states that were mismanaged because of a coronavirus. I would also say states that had specifically large expenses as a result of the coronavirus, like New York and New Jersey, I think it was the right thing that the federal government gave them money for the coronavirus expenses. The issue about lost revenues is something that needs to be debated and discussed in the House and the Senate. I think, you know, every single one of these bills we’ve done has been done on an overwhelming bipartisan support in the Senate. The last two times you either had a 96-0 vote or you had by unanimous consent which was, again, everybody supporting it. So, these will be discussions we’ll be having with both the House and the Senate.
BECKY QUICK: Secretary Mnuchin, I want to thank you for your time today. We do appreciate it.
STEVEN MNCUHIN: Thank you.
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Emma Martin
CNBC
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