WHEN: Today, Friday, March 25, 2022
WHERE: CNBC’s “Squawk Box”
Following is the unofficial transcript of a CNBC exclusive interview with United States Treasury Secretary Janet Yellen on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Friday, March 25th. Following are links to video on CNBC.com: https://www.cnbc.com/video/2022/03/25/treasury-secretary-janet-yellen-esg-movement-is-not-creating-our-energy-problems.html, https://www.cnbc.com/video/2022/03/25/treasury-secretary-janet-yellen-i-see-a-lot-of-strength-in-the-american-economy.html and https://www.cnbc.com/video/2022/03/25/treasury-secretary-janet-yellen-on-crypto-i-have-some-skepticism-but-there-are-benefits.html.
All references must be sourced to CNBC.
ANDREW ROSS SORKIN: As we’ve been talking about all morning, the big news this morning, President Biden announcing a joint task force to bolster energy security for Ukraine and the European Union. The primary goal to diversify supply of LNG and curb Europe’s reliance on Russia for its energy. Joining us right now an exclusive interview this morning is Treasury Secretary Janet Yellen. Madam Secretary, thank you for joining us.
SECRETARY JANET YELLEN: My pleasure. Thanks for the invitation.
SORKIN: So as we were just discussing, energy is the big topic and I want to understand from you how you reconcile the administration’s climate goals right now with what clearly is a shift in posture around energy and fossil fuels.
YELLEN: Well, the climate goals are very important and there’s no change in that. If anything seeing what’s happening because of our dependence on global markets for oil and to some extent natural gas just emphasizes the importance of making the transition that will shield us from events in Russia, global developments that can negatively impact oil markets. We really want to move and see the need all of us, the United States and our allies, to move quickly to renewables that will give us a safer and more independent energy picture.
SORKIN: But clearly in the short term, that’s, that’s not going to work and clearly there’s going to be an effort to push for more fossil fuels. Jamie Dimon, JPMorgan’s CEO, telling the administration that they need to create a Marshall Plan around fossil fuels and energy. What do you think of that?
YELLEN: Well, I don’t really want to get into what happened in a private meeting, but I certainly agree that we are looking very carefully at the global energy situation. We have banned Russian oil imports from the United States, but our dependence isn’t very high. We recognize how important Russian oil and natural gas imports are for our European partners and they recognize and we recognize how important it is to reduce that dependence to the maximum extent possible in the short run, which goes to this morning’s announcement by President Biden about our enhanced cooperation on LNG, but it’s not possible to completely eliminate that dependence certainly this year.
SORKIN: Do you think the investor class has to rethink its position on fossil fuels? And I say that only because there has been a real shift towards ESG over the past several years, and whether that idea needs to be suspended to some degree, relative to what’s happening now and the national security issues that it is either creating or has created.
YELLEN: I don’t think that the ESG movement and the emphasis on climate change is creating the problems that we have. If anything, the problem is that we haven’t moved as rapidly as we should have. Europe and the United States would be less exposed to the pressures that this conflict is putting on our energy markets if we had greater reliance on renewables, so that remains firmly appropriate as medium- and longer-term goal but in the short run, our ability to punish Russia for really the horrific acts that they’re committing in Ukraine and to degrade their power and influence in the world economy. It would be greater if there were less dependence on Russian oil—
SORKIN: But in the immediate term—
YELLEN: So looking for substitutes.
SORKIN: One of the things that’s happening in the United States for example is the SEC just put out a notice about proposals around climate disclosure.
YELLEN: Yes.
SORKIN: Do you think some of those policies shift in terms of either timing or otherwise as a result of what we’re seeing right now?
YELLEN: So I was heartened to see the SEC proposal. It’s something that the Financial Stability Oversight Council is focused on, our partners around the world and the investing community really want information that can guide their investments. You see an increasing number of American investors including banks that have commitments to net zero by 2015 and they need the kind of information that’s consistent and transparent to let them make investment decisions. Those goals haven’t changed, the need for globally comparable information remains a high priority and I think the SEC has crafted a very good proposal, I was really very pleased to see them put it out.
SORKIN: Let me ask you a question about globalization. Larry Fink this week said globalization may be over and that this new war between Russia and Ukraine has become a flashpoint and that American companies doing business in certain countries, actually even China and I’m thinking about big companies like Apple that are doing business there, clearly, China appears to be an ally of Russia may have to rethink where they’re doing business. What do you tell American business leaders this morning who are thinking about where their supply chains come from, and the politics of where those supply chains come from?
YELLEN: Well, we do have to and this is not just because of the Russia Ukraine situation, but this became evident in the pandemic that may be American businesses have focused on efficiency and organizing supply chains in ways that lower costs but impair resilience, and resilience of supply chains is a high priority for the administration. And so, to an extent, that, that will lead to some reallocation of where production is placed.
SORKIN: But how much of that is about resilience, which was an issue we talked about in the context of the pandemic, versus politics and national security.
YELLEN: Well, national security is also important, and we recognize the need to consider having an appropriate trade policy that protects our national security interests. But when you say this may be the end of globalization or something that extreme, I really have to push back on that because we’re deeply involved in the global economy. I expect that to remain. It is something that has brought benefits to the United States and many countries around the world and we certainly don’t want to go to a system in which the United States is, loses, loses those benefits. So there may be some rethinking to promote national security.
SORKIN: You’ve put a number of sanctions obviously on Russia, but would you consider sanctions on China as an ally of Russia at this point?
YELLEN: So I don’t think that that’s necessary or appropriate at this point. We as senior administration officials are talking privately and quietly with China to make sure that they understand our position. We would be very concerned if they were to supply weapons to Russia, or to try to evade the sanctions that we’ve put in place on the Russian financial system and the central bank. We don’t see that happening at this point. And it’s really up to China to make make sure that they understand this complex situation that they face.
SORKIN: Becky has a question for you. Becks?
BECKY QUICK: Thanks, Andrew. It’s very good to see you, Secretary Yellen. Just a question about how the economy is faring right now because the markets have been kind of roaring higher on some of the economy and then there are these questions about inflation and what the Fed does next. You see the tax receipts coming in every day. Is there any sign of weakness anywhere in this economy?
YELLEN: I honestly don’t see it, you know, we have an immensely strong job market. Growth over the last year has been extraordinary. Job creation remains very high. When you look at the balance sheet of the typical American family, it is in very good shape. Consumer spending is strong and tax revenues who frankly been surprising to the to the upside, you know, helping us in a plan to reduce deficits. We’ll be releasing the budget shortly. So, I see a lot of strength in the American economy. Inflation is high and, you know, the the Fed certainly has a role to play there.
SORKIN: But what do you think about the global economy more broadly, and where we fit in at? This is the Dallas Fed President earlier this week quote, “If the bulk of Russian energy exports is off the market for the remainder of 2022, a global economic downturn seems unavoidable.” I would imagine if that’s unavoidable, it’s unavoidable for us as well.
YELLEN: So we are seeing pressure on commodity prices because of the Russia Ukraine situation. And it’s importantly oil and natural gas, but also other commodities, and I am concerned about spillovers to countries for example that are heavily dependent on wheat. Wheat prices have been soaring. And I think it will likely reduce the prospects for global growth over the next year. But we’ve got a good strong US economy. We’re a net exporter of oil. Oil prices obviously impose significant burdens on American families, but it’s also likely to unbalance, be offset in the impact on spending by faster drilling expense, you know, expenditures,
SORKIN: How high do you think oil prices could get at the pump?
YELLEN: Listen, I, there’s a lot of uncertainty about it. They’re not as high in real terms as they were earlier earlier in the century. And the, you know, it’s conceivable that they could move higher, but we’re doing everything that we can working with our partners to ensure adequate global supplies to make sure that Europe is well supplied with oil and natural gas and to protect American consumers to the extent possible, but when the 11th largest economy, you know, faces sanctions because of their horrific behavior in Ukraine, there just are going to be spillovers that are unavoidable.
SORKIN: President Biden, by the way, said last night about, overnight I should say, about sanctions that they would not prevent the continued invasion. Do you think and Secretary I should say Secretary Mnuchin, your predecessor, said that he would have moved faster on sanctions. Do you think that sanctions could have had a greater effect had they been put in place earlier?
YELLEN: Well, we hope that they would have a deterrent effect and certainly prior to the invasion, President Biden made abundantly clear to President Putin that if he invaded Ukraine, that there would be very significant consequences and hope that that might affect his calculus. Clearly, it didn’t. But I do think there’s some chance that it will affect his calculations going going forward and the pain that Russia’s experiencing I think well exceeds anything that they expected and I think, a realist looking at rushes long term economic prospects, the prospects for its defense sector, and all of its, you know, competitive export activities, we have to see that the export controls and financial controls are going to degrade economic performance in Russia for a long time.
SORKIN: How much do you think the sanctions on the oligarchs influence Putin’s behavior?
YELLEN: Well, you know, I’m not a political expert on Russia. But, you know, I think the oligarchs probably have some influence on the thinking of the President Putin and they have provided resources that enable Putin to carry out a war like this so influencing, you know, the sanctions that we’ve put on them I think are appropriate and hopefully will matter but as you know, we announced new sanctions, yesterday I guess it was, that will impact Russia’s defense sector, make it very difficult for it to import parts and supplies that it needs to be competitive. So eroding Russia’s power to have a defense sector, a high technology sector that’s competitive over time, advanced semiconductors, access to those have been cut off by export controls.
SORKIN: One of the oligarchs that wasn’t sanctioned in the same way as many of the others was Abramovich and the view was that was done because he was going to act as a mediator. Russia now says he’s no longer acting as a mediator. First of all, can you speak to his role as a mediator?
YELLEN: No, I honestly can’t. I have heard that reported as well. We are continuing to sanction individuals as well as looking at broader sanctions on sectors and I would hold open the possibility that certainly not take off the table the possibility that he or other individuals could face sanctions in the future.
SORKIN: More sanctions now that he may not be acting as a mediator, meaning does his position as a mediator or not change—
YELLEN: I’m not going to comment on the calculus about exactly what determines if he is or isn’t sanctioned. I just say that it remains a possibility.
SORKIN: Joe’s got a question for you, Madam Secretary.
JOE KERNEN: Madam Secretary, you were very positive on on the US economy and looking for even any weak spot. So we saw Chair Powell go a quarter point and then come back and say maybe 50 basis points is going to be necessary. A lot of people think that the Fed is behind, is behind the eight ball right now and being able to actually raise rates to the extent that they need to. Would you have gone 50 right away and do you think 50 since you think the economy is so strong and rates are so low? Do you think that we’ll go 50 at some point in the future and should have done it already?
YELLEN: So, you know, that used to be my job and it’s what I spent a lot of time—
KERNEN: But you were so good. You were so good at it. What would you be doing?
YELLEN: Well thanks. I—
KERNEN: What would you be doing right now?
YELLEN: Much appreciated. My job in my current position is to emphasize how much I respect the independence of the Fed and—
KERNEN: But you would be such a great help. I’m sure he would love, I’m sure he’d love some, give him advice, maybe not on on “Squawk Box,” would you give him advice, maybe whisper something in his ear and what would that be?
YELLEN: Well, he and I meet regularly as all Fed Chairs and Treasury Secretaries have for as long as I’ve been in this business, and we have a very good and strong relationship.
KERNEN: Okay, okay.
YELLEN: But it’s up to the Fed to make these these decisions and I respect the decisions they make.
KERNEN: Alright, alright.
SORKIN: You have another question for Becky.
QUICK: I do, thank you. Madam secretary, the Fed, as you mentioned, is going to do its own thing and decide how much to raise rates but it does sound like those rates may raise more rapidly at least than the market was anticipating. The CBO is estimating that the government’s going to be paying something like $545 billion a year just in interest payments based on where interest rates stand and where they’re predicting they’re gonna stand over the next few years. If that goes up by even something like 50 basis points, I think that that amount jumps by about $94 billion a year. What do you do because this is where it kind of lands back in your lap, how do you budget for this? Where are you expecting to see interest rates in terms of what you might be able to fit in the budget on what the government will pay in its interest payments?
YELLEN: Well, you know, Becky, if you look at last year’s budget, what you’ll see is a projection that over time, interest rates would rise back to more normal levels. I mean, obviously, interest rates have been at rock bottom levels below most estimates of neutral for a very long time. And where there may be differences in the details, CBO and the administration in its budget, projected rising interest rates one way, way I think is quite good to measure the burden of the debt is by looking at net real interest payments on the outstanding debt and over the last couple of years, that burden has actually been negative and as interest rates rise back to more normal levels and you can see this in the budget we put out last year, we’ve project somewhat higher, but still historically low burden of the debt in terms of net interest payments. So, this is not unexpected. It’s been it’s something that’s incorporated in our projections.
SORKIN: Two quick final questions for you. One couldn’t get through an interview without asking about crypto but in particular, Russia just said that they would accept Bitcoin as a payment for their energy resources. What does that say to you about where we are in the crypto conversation?
YELLEN: Well, crypto is obviously grown by leaps and bounds and it’s now playing a significant role, not really so much in transactions, but in investment decisions of lots of Americans. And the President just issued a couple of weeks ago an executive order tasking us and other agencies with thinking about the regulation of crypto.
SORKIN: Does that mean you’re less skeptical about it than in previous, I mean, we’ve been talking about it together for a long time now and I think you’ve had a skepticism about crypto, crypto technology.
YELLEN: I have a little bit of skepticism because I’m, there, I think valid concerns around it. Some have to do with financial stability, consumer investor protection, use for illicit transactions and other things. On the other hand, there have been benefits from crypto and we recognize that innovation in the payment system can be a healthy thing. We would like to come out eventually with recommendations that will create a regulatory environment in which healthy innovation can—
SORKIN: And finally, cyber is the one thing that everybody’s worried about, especially given what’s happening in Russia right now.
YELLEN: Yes.
SORKIN: Is there an industry or industries that you’re particularly concerned about?
YELLEN: Well, we are worried about the energy sector and also focused especially in this building on the financial sector. We have a robust program to work with financial firms at Treasury to monitor and quickly inform financial firms about threats that are detected or firms experienced and we—
SORKIN: How confident are you then that we’re—
YELLEN: You know, cyber is a real risk. And we, we recognize that we have vulnerabilities, and we’re doing everything we can to be to be prepared to deal with that into up our defenses but, you know, this is, this is a significant risk.
SORKIN: It’s a longer conversation. We appreciate you being with us this morning, Madam Secretary.
YELLEN: My pleasure.
SORKIN: Thank you so very, very much. Nice to see you in person.
YELLEN: Thanks Andrew, nice to see you as well.
