Treasury Secretary Paul O’Neill
[Sorry, the video for this story has expired, but you can still read the transcript below. ]
JIM LEHRER: A Newsmaker interview with the Secretary of the Treasury, Paul O’Neill. Mr. Secretary, welcome.
PAUL O’NEILL: Thank you.
JIM LEHRER: The President said there has been a shock to the economy. Give us a feel for the magnitude of that shock now as it looks over a week later.
PAUL O’NEILL: Well, Jim, I think we don’t really know yet how long, how big the shock is going to be or how long it’s going to last. If you look at ground zero, which I had an opportunity to do on Monday, the emotional feeling that one has in seeing that close and not you through the eyes of television it’s just overwhelming. And there is just no doubt that the devastation there is complete and total and what your tape was showing you for individual business, a very real thing.
But when you think about the rest of America and you think about the crops growing in the fields and people going to… back to work as the president said this last Monday, and doing their work and providing goods and services to each other, I think that the direct damage to the American economy is isolated in the sense of ground zero, is isolated there, and it’s obviously severe and in a human sense really compelling. In a ten trillion dollar economy we have got a lot of other activity going on.
I think the base question that we have got to deal with here, because economically there is so much about expectations and confidence, how quickly we recover our sense of emotion, I think on September 10 we were beginning to move out of a very low level of economic growth and now what we have got to do is assess what else we might do and need to do in order to get ourselves moving back on that growth path, Jim.
JIM LEHRER: Well, one of the measurements, of course, is the stock market. It was down another 144 points today. Does that concern you?
PAUL O’NEILL: I would like for it to go up every day. And of course I don’t like it going down 144 points. But earlier in the day it was down 400. In the last half hour of the market today the Dow Jones Industrial Average recovered over 200 points. So I think the important thing, most important thing about the market is, the U.S. exchanges are operating.
It is a phenomenal thing that the people involved in making markets were… when they were at ground zero were able to recover in a short period of time. It’s a huge victory over the terrorists.
Now, where should we be in terms of what we would like to see for levels in the stock market? Everyone anticipated we were going to have a runoff of maybe as much as 10 percent; Monday was only minus 7 percent. Today was minus 144 points. Tomorrow may bring something better. But I think what’s important is the long-term resiliency of the American economy is there and I said the other day, I should not as a regular practice make forecasts but I believe our economy is so strong compared to all of the other economies in the world, the American people are such a great people and we know how it create productivity, we will have new highs in our market indices in the foreseeable future.
JIM LEHRER: How important should the average American, you’re talking about confidence and whatever, how important should the average American feel the stock market is to the recovery, to our getting over the shock?
PAUL O’NEILL: Well I’ll tell you, these days even though some Americans may not know it they are investors in America through company pension funds and the 401Ks and all the rest of that and 70 or 80 percent of us have some wealth tied up in the stock market and so we should all care about it. We all contribute….
JIM LEHRER: So it’s important?
PAUL O’NEILL: Absolutely, because we all contribute to the reason for it. And it’s an index over time of how well we’re doing as a country. We have been doing well, we will do well again; we will grow faster again and we will do it soon.
JIM LEHRER: The airline industry, America Airlines, 20,000 layoffs today, I read something just a moment ago, they expect 100,000 people total in the airline industry to be laid off; that doesn’t count the 30,000 from Boeing and other manufacturing companies that are being hit here. What is the federal government prepared to do to help these people?
PAUL O’NEILL: It’s a subject we are been working on the last several days. I think we need to work against a set of principles in all the sectors that we need to be concerned about, and the airlines industry is not the only one, we need to first start with what’s the immediate need — the airlines need cash. They need liquidity; we should give them liquidity and we should do it quickly.
JIM LEHRER: Give them money and loan guarantees — whatever?
PAUL O’NEILL: Money.
JIM LEHRER: Money.
PAUL O’NEILL: I think we shouldn’t fool around and we shouldn’t do things that complicate the issue. If they need money, we should give them money. At the end of the day a loan guarantee is a substitute for money. We ought to give them money and we need to figure out a way that gives them money without making them prosperous independent of this tragedy that’s happened to them and to the rest of the country. So we need to give them money…
JIM LEHRER: In other words, compensate for what they’re losing as a result of the tragedy –
PAUL O’NEILL: Right.
JIM LEHRER: — but for nothing else?
PAUL O’NEILL: Well, no – no –
JIM LEHRER: No?
PAUL O’NEILL: — there are some other things we need to do. I believe we need to socialize the cost safety and by that I mean, we, the people of the United States, need to pay for a secure system of safety for airports and airliners, so that we can all rest easily. And when we when we get on a plane, we know we’re going where we intended to go and we’re not going to get hijacked.
And I think we should effectively tackle ourselves to provide security for air transportation in this country; we should do the same for air marshals. And there is another thing we need to do: We need to accept as a societal burden the insurance cost of terrorism. So we shouldn’t expect the airlines to suffer the cost, which is enormous in its potential, for acts of terrorism; we need to accept that cost, including those costs associated with terrorism that happened last week.
JIM LEHRER: So we’re talking, the airlines asked today for $17 billion. That sounds cheap laying out what you just said?
PAUL O’NEILL: Well, I don’t think so. You know, I think…
JIM LEHRER: I don’t mean cheap. I mean, it sounds that $17 (billion) may not pay for everything you outlined?
PAUL O’NEILL: Well, I don’t think so, Jim. I think maybe we can do this for less than what the “ask” is at the beginning.
But I think in all of these things we should operate from principles and what the principles produce in terms of a bill, that’s what we should do. I don’t think we should… we shouldn’t decide that we’re not going to have complete safety because it’s costs too much and we shouldn’t decide is that we’re not going to give the airlines cash liquidity in the short-term because it costs too much.
JIM LEHRER: All right. Beyond the airline industry, the President is going to address the Congress tomorrow and the nation tomorrow night, lay out some, I guess a stimulus package, is that right, that goes beyond the airline industry?
PAUL O’NEILL: Well, I don’t know. You know what, one of the things that my good friend, Alan Greenspan, and I have been talking about is, we think we need to assess where the economy is and how it feels for a little bit of time and see what kind of data we’re getting before we lurch off into a massive stimulus program. Right now there is an energy to go and take action, and the kind of things we need to look at, we need to talk to people who run major credit card businesses and find out what the level of activity is.
I had a little conversation today with one of the major people, and they told me a week after the terrible events, their credit card activity is running about 20 percent lower than it was at this time last year.
Now we need to watch over the next week or ten days, or two weeks, and see if there is a recovery and people go back to normal spending patterns and the rest and assess how much stimulus we need. I think we should not rush to judgment about these important issues, because the arguments we were having a few weeks ago about not overspending, still have a validity. We need to be balanced and careful about the decisions we make for those things that are immediate, like airline liquidity, we need to do it right now. For things that should take little bit more judgment we need to be careful.
JIM LEHRER: So, in a nutshell, if people are expecting the President of the United States to lay out some detailed economic stimulus package tomorrow night, they’re going to be disappointed?
PAUL O’NEILL: Well I wouldn’t say that. You know the President is a free agent and I think he values my advice, but he takes his own. And so what he says tomorrow night I think we’ll all be interested in looking at. And a suspect that he will lay out maybe some principles of what we should be thinking about in the event there is a decision made that we need to have a substantial stimulus. And I must say I have some ideas of my own — how would I craft a stimulus program — which I’m not going to tell you.
JIM LEHRER: So I shouldn’t ask, right?
PAUL O’NEILL: No, no, please don’t ask because I’m not going to tell you about it. But of course there are some things that could make a difference that would really provide stimulus in the event that we need to pop more money out.
JIM LEHRER: But the President hasn’t asked you for your ideas yet?
PAUL O’NEILL: Oh, yes, indeed, but I’m not going yes indeed but I’m not going to reveal them here, Jim.
JIM LEHRER: Whether your ideas or somebody else’s ideas, does kind of tax relief – cutting capital gains taxes or payroll taxes?
PAUL O’NEILL: Let’s look at the principles of where we are. Up to this period through this year our economy has been running at a lower rate than we would like — not because of weakness in the consumer sector. Consumers have been doing well. Housing starts have been run inning at a very good level. Automobile sales have been running at a very good level.
The weakness in our economy this year has been on the investment side. Companies have not been investing at the rates that they were in the last four or five years. And so the weakness in our economy has been on the investment side — not on the consumer spending side. And so if you work from a set of principles, you ask yourself the question, what is it that we could do that would add to the investment side of our economic equation?
And there are a variety of ways that one can think about that problem. And so I think, again, we need to work from principles. You know, there are advocates of a whole host of things that are so familiar they almost are not worth talking about. And I think one of things, again, we need to be careful in this circumstance, is that we not try out everybody’s favorite idea which they’ve been trying to get enacted for the last 50 years and it gets swept into the vanguard of now is our chance. And we need to be careful about what we do.
JIM LEHRER: Finally, Mr. Secretary, the Treasury Department is involved in tracing money.
PAUL O’NEILL: Yes.
JIM LEHRER: And some new measures were announced by your Department about trying to find the money of terrorists including Osama bin Laden’s. What’s the most dramatic thing you’re going to do differently now?
PAUL O’NEILL: Now we’re going to do several important things, Jim.
The first thing we’re going to do, which we have need to do for a long time, is we’re going to take the handcuffs off ourselves so that we have an ability to use the information sources of the nation security agency and the CIA and the FBI and all of the other law enforcement agencies, include those of the Treasury Department, which include Customs and Alcohol Tobacco and Firearms officers, and we’re going to collect a list and are already in the process of collecting a worldwide list of known terrorists and suspected terrorists, and we’re going to go after them in every possible way we can with the information sources that are available to identify the connections they have with financial markets, with telephone companies, with credit card companies, and systematically take their financial means away from them.
JIM LEHRER: I know you’re new to the job. It’s a difficult question, but as a result of what happened on September 11, and you know reviewing what the Treasury Department was doing, were you disappointed in what you found in this area?
PAUL O’NEILL: No… Well I’ll tell you what, for the last 15 maybe even 25 years, this nation has had a program aimed at so-called money laundering, which is trying to get at evildoers who are moving cash around the world economy.
And there has been an enormous amount of activity upwards of $700 million a year spent on this subject. And when I began asking the question of what have we gotten for the money we spent, I must say I was very disappointed that over this 25 year period of time, there’s one famous case that produced a significant amount of money that was caught.
And I think, you know, this is a general point, that too often there is an acceptance of activity for progress. And I believe we should not tolerate that in peacetime or in wartime. We should insist that we get value for money spent. And I think there is no doubt we’re going to do that now. And it’s importantly going to be possible do it, because we’re going to stop the idea that we can’t use all of our assets, because we can’t chase people into their rat holes and get them because of their civil liberties.
JIM LEHRER: So some civil liberties are going to have to go by the board?
PAUL O’NEILL: Well, I think for those people who are known terrorists, we shouldn’t grant them the use of our civil liberties to extend their, their petulance, if you will.
JIM LEHRER: All right. Mr. Secretary, thank you very much.
PAUL O’NEILL: Good to be with you.