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CNBC Excerpts: CNBC Exclusive: CNBC's Steve Liesman Speaks with Treasury Secretary Jack Lew Today

WHEN: TODAY, FRIDAY, MAY 10TH

WHERE: CNBC'S BUSINESS DAY PROGRAMMING

Following are excerpts from the unofficial transcript of a CNBC EXCLUSIVE interview with Treasury Secretary Jack Lew today, Friday, May 10th. Excerpts of the interview will run throughout CNBC's Business Day programming today. All references must be sourced to CNBC.

Lew on Europe:

TWO CHALLENGES WE'RE GOING TO MAKE THE CASE TO THE EUROPEANS TO DEAL WITH IS: ONE, IS HAVING EUROPEAN ECONOMIES GROW MEANS THEY NEED TO GET THE RIGHT BALANCE BETWEEN THEIR BUDGET POLICY RIGHT, SO THAT THEY CAN GET GROWTH MOVING. THE OTHER IS THEY HAVE TO FIX SOME CREDIT MARKET ISSUES SO THEY CAN GET CAPITAL FLOWING INTO SMALL AND MEDIUM SIZED ENTERPRISES THAT DO THE HIRING. THAT'S PART OF THE MESSAGE I BRING.

Lew on a Global Recovery:

WE DON'T AGREE ON EVERYTHING. BUT I THINK THE FACT THAT THE U.S. ECONOMY IS PERFORMING MUCH BETTER IS SOMETHING THEY'VE NOTICED. I THINK THE FACT THAT THE ACADEMIC LITERATURE IS, YOU KNOW, BEEN EVOLVING A LITTLE BIT IS SOMETHING THAT THE WORLD HAS NOTICED. YOU KNOW, THE REALITY IS FOR A GLOBAL RECOVERY TO GO WHERE IT NEEDS TO GO, IT CAN'T BE LED BY THE UNITED STATES ALONE. EUROPE IS GOING TO HAVE TO DO BETTER. COUNTRIES LIKE CHINA ARE GOING TO HAVE TO DO BETTER.

Lew on the Sequester:

I WOULD JUST CAUTION YOU, MYSELF AND OTHERS NOT TO LET CONVENTIONAL WISDOM BECOME SELF-FULFILLING. YOU LOOK AT THE LOGIC AND THE ANALYSIS. IT IS SO CLEAR THAT THE RIGHT THING TO DO IS TO REACH A SENSIBLE COMPROMISE ON A PACKAGE THAT WOULD REPLACE THESE CUTS, WHICH ARE BAD POLICY WITH GOOD POLICY. THAT WE'RE GOING TO KEEP WORKING HARD AT IT.

Lew on Japan:

LEW: JAPAN HAS GROWTH ISSUES FOR A LONG PERIOD OF TIME THAT WE'VE ENCOURAGED JAPAN TO ADDRESS. SO AS LOGN AS THEY STAY WITHIN THE BOUNDS OF THOSE INTERNATIONAL AGREEMENTS, I THINK THAT GROWTH IS AN IMPORTANT PRIORITY.

LIESMAN: SO I HAVE TO ASK ARE THEY IN THOSE BOUNDS?

LEW: YOU KNOW, I'M GOING TO JUST REFER BACK TO THE GROUND RULES AND THE FACT THAT WE'VE MADE IT CLEAR THAT WE'RE GOING TO KEEP AN EYE ON THEM

Lew on Systemic Risk:

WE IDENTIFIED A NUMBER OF AREAS OF SYSTEMATIC RISKS. WE ARE GOING TO KEEP OUR EYE VIGILANTLY ON ALL THOSE AREAS OF SYSTEMATIC RISK. YOU KNOW, SOME OF THEM ARE EMERGING AREAS. THIS YEAR CYBER THREATS WERE ONE OF THE AREAS OF RISK WE IDENTIFIED. I THINK IF YOU COMPARE NOW TO A FEW YEARS AGO, THERE'S A MUCH HIGHER LEVEL OF AWARENESS AT THE TREASURY SECRETARY FINANCE MINISTER LEVEL, AT THE HEAD OF STATE LEVEL. IT'S SOMETHING WE JUST HAVE TO BE VIGILANT WE KEEP OUR EYE ON WHAT ARE THE RISKS OF TODAY AND TOMORROW.

Lew on Risks in the World:

IN THE RECENT REPORT OF THE FINANCIAL STABILITY OVERSIGHT COUNCIL, WE HAVE MADE IT CLEAR THAT THERE ARE RISKS IN THE WORLD THAT WE ARE WORRIED ABOUT THERE ARE RISKS IN THE HOUSING FINANCE SECTOR, THERE ARE RISKS IN THE SHADOW BANKING AREA AND A NUMBER OF OTHER IMPORTANT AREAS. SO WE ARE GOING TO CONTINUE TO FOCUS ON THE AREAS OF SYSTEMIC RISK THAT OUR POLICY IS DIRECTED AT.

Lew on Fannie Mae:

UNDER THE TERMS THE FEDERAL GOVERNMENT WENT IN TO HELP FANNIE MAE AND FREDDIE MAC, THEIR PROFITS COME RIGHT BACK TO THE TAXPAYER. SO, AS THEY MAKE MONEY, IT'S GOING INTO THE FEDERAL TREASURY. THEY HAVE NOT YET PAID BACK THE TAXPAYER, BUT THE GOAL IS TO PAY TAXPAYERS BACK. I THINK THAT IT'S A LITTLE COMPLICATED WHY THIS PAYMENT IS BEING MADE BUT IT REFLECTS THE FACT THAT THEIR CORE OPERATIONS ARE MORE PROFITABLE, WHICH IS A GOOD THING.

Lew on the Future of Housing:

WE ALSO NEED TO LOOK AT THE FUTURE OF HOUSING FINANCE TO MAKE SURE WE HAVE A SYSTEM THAT BALANCES TWO VERY IMPORTANT CONCERNS. ONE IS ACCESS TO CREDIT FOR QUALIFIED BORROWERS SO WE CAN KEEP HOMEOWNERSHIP AS AN IDEAL FOR THE AMERICAN FAMILY AND KEEP CONSTRUCTION GOING. ON THE OTHER HAND, MAKE SURE WE DON'T CREATE EVER AGAIN A SITUATION WHERE THE TAXPAYER HAS TO ASSUME THE RISK FOR DECISIONS THAT ARE MADE BY COMPANIES THAT ARE TAKING RISKS THEY SHOULDN'T BE TAKING.

Lew on the Debt Ceiling:

WE'RE NOT GOING TO HIT THE EFFECTIVE DEADLINE UNTIL ATLEAST LABOR DAY. THE STATUTORY DEBT LIMIT WILL BE REACHED IN JUST A FEW DAYS WHEN IT EXPIRES ON MAY 18th. BUT BECAUSE OF THE EXTRAORDINARY MEASURES THAT ARE AVAILABLE AND THE CASH FLOW THAT WE NOW CAN PREDICT, IT WILL BE NOT UNTIL AT LEAST AFTER LABOR DAY.

Lew on Congress and the Debt Limit:

CONGRESS SHOULD DEAL WITH THIS RIGHT AWAY. THE FACT THAT THEY HAVE MORE TIME SHOULD NOT PUT OFF DEALING WITH THIS.THE UNCERTAINTY THAT'S CREATED BY PUTTING THIS OFF IS NOT GOOD. I DON'T THINK THAT IT'S IN THE INTEREST OF THE U.S. OR THE WORLD ECONOMY FOR CONGRESS TO WAIT UNTIL THE LAST MINUTE AND CREATE A SENSE OF ANXIETY.

Lew on Unemployment:

WHILE GROWTH IS -- IT'S ENCOURAGING, IT'S NOT SUFFICIENT. OUR POLICIES ARE AIMED AT WHAT CAN WE DO TO GROW THE ECONOMY MORE AND CREATE MORE JOBS. WE HAVE A PARTICULAR CONCERN THAT THERE IS A DISPARITY BETWEEN SHORT AND LONG TERM UNEMPLOYMENT. WE HAVE TO MAKE SURE WE DON'T LEAVE BEHIND THE LONG TERM EMPLOYED. EITHER THE YOUNG, WHO HAVEN'T MADE IT INTO THE WORKFORCE OR OLDER WORKERS WHO ARE BEING PUSHED OUT OF THE WORKFORCE AND HAVE A HARDER TIME COMING BACK IN.

Lew on Sequestration:

WHEN I LOOK AT SEQUESTRATION, WHICH WAS A POLICY THAT WAS DESIGNED NEVER TO TAKE EFFECT, IT WAS DESIGNED TO BE SO UNPLEASANT THAT A BALANCED ALTERNATIVE COMPROMISE WOULD BE WITHIN THE REACH OF THE POLITICAL SYSTEM, ONE OF THE THINGS THAT HAS TO BE UNDERSTOOD ABOUT IT IS THAT IT TAKES A HALF OR MORE PERCENT OUT OF OUR GDP WHICH TRANSLATES INTO 750,000 FULL-TIME EQUIVALENT JOBS. IF THERE WAS A POLICY PROPOSED TO AFFIRMATIVELY CREATE HALF A PERCENT OF GDP GROWTH AND CREATE 750,000 JOBS, YOU'D BE A HERO FOR COMING UP WITH THAT IDEA.

Lew on the Deficit:

2 1/2 YEARS AGO WE WERE LOOKING AT THE NEED TO REDUCE THE DEFICIT BY $4 TRILLION OVER TEN YEARS. AND EVERYONE WAS SAYING, NO WAY IT CAN BE DONE. WE REACHED BIPARTISAN AGREEMENTS ON MULTIPLE OCCASIONS ON HOW TO CUT SPENDING AND RAISE REVENUE TO DO $2.5 TRILLION OF THAT $4 TRILLION OF DEFICIT REDUCTION. WE'RE MORE THAN HALF – ALMOST 60% OF THE WAY THERE. TO GET THE REST OF THE WAY THERE REQUIRES A BIT OF MOVEMENT ON BOTH SIDES. THE PRESIDENT HAS INDICATED HE'S PREPARED TO MOVE. WE NEED FOR REPUBLICANS TO MOVE A BIT.

Lew on Health Care:

HEALTH CARE COSTS KEEP RISING AS A PERCENTAGE OF GDP. IF WE CAN SLOW THAT RATE OF INCREASE AND BRING RATE OF GROWTH MORE INTO LINE WITH GENERAL ECONOMIC GROWTH, ITWOULD BE A GOOD THING FOR ECONOMY. I THINK THE AFFORDABLE CARE ACT WILL HELP WITH THAT. IT MAKES SURE PEOPLE HAVE ACCESS TO PREVENTIVE CARE SO WE END UP WITH LESS NEED FOR COSTLY TREATMENTS DOWN THE ROAD. THOSE THINGS DON'T HAPPEN INSTANTANEOUSLY.


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