WHEN: Today, Wednesday, April 15th
WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC interview with Treasury Secretary Jacob Lew and CNBC's Sara Eisen today, Wednesday, April 15th on CNBC's "Closing Bell" (M-F, 3PM-5PM ET). Following is a link to a portion of the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000371400. The full interview will be available in its entirety on CNBC.com.
All references must be sourced to CNBC.
SARA EISEN: Mr. Treasury Secretary, thank you so much for having us here on the eve of the I.M.F. Global World Bank Meetings.
JACK LEW: It's great to be with you, Sara.
SARA EISEN: So, let's kick it off with the U.S. as the engine of growth in this economy. I.M.F. did downgrade, though, their forecast for U.S. growth by half a percentage point this week for the year. Do you agree with that call?
JACK LEW: Well, I think if you look at what the I.M.F. and others are looking at, it's continued strong growth in the United States. The I.M.F. forecast is still in the three plus range. And I think, you know, as I talk to business people around the world and my colleagues, my counterparts around the world I don't hear a lot of questions about whether or not the United States is strong and continuing to be headed in the right direction. There are a lot of concerns about the global economy and the disparate performance between the U.S. economy and other parts of the global economy. And I think one of the big topics of conversation in this week at the I.M.F. meetings will be how to make sure that there are more pockets of growth and with stronger and more sustainable growth around the world. I've been saying for some time that it is extremely important for the U.S. to be doing well. But it's not sufficient for the global economy for the U.S. to be outperforming all the other economies. Other economies need to perform as well. And for that to really happen, it means that all the policy levers that governments have need to be used. It means the fiscal policy, monetary policy, the reforms that are so important in so many countries need to be put into effect. And the more you use all three levers at the same time the more effective it is. That's one of the things we have proven here in the United States was a pretty dramatic turnaround in our economic performance.
SARA EISEN: Monetary policy. I was going to say more monetary policy? Is that maxed out all around the world?
JACK LEW: Well, no. I mean, I think the important thing is for all the levers to be used and not to excessively rely on any one of the levers. There is a lot of reliance right now on monetary tools. There needs to be in some areas more use of fiscal tools, in other areas more use of the reforms, in some a little bit of both. The economic performance will always be better if you use all the three levers and not just excessively rely on any one.
SARA EISEN: There is a question, though about the U.S. consumer. We got another disappointing data release this week, March retail sales. Are you surprised to not see a bigger boost to consumption from what we've seen, in terms of cheap gas prices?
JACK LEW: You know that is a series that tends to be quite volatile. It moves around from month to month quite dramatically. I think the one thing that's unquestionable is that U.S. consumers have moew cash in their pocket because of lower energy prices lower gas prices. For the average family, it means hundreds of dollars, if not more, of extra cash that they have. The question of what they do with that cash is a bit of a puzzle that we're all trying to understand. Obviously, the short-term economic benefit is greatest when it leads to immediate demand, immediate consumption.
SARA EISEN: They spend it.
JACK LEW: But there's also benefit to households fixing their balance sheets and either reducing their credit card debt or helping to save for an additional capital acquisition. And I think it's too early to say what consumers have decided to do. I think at the beginning, when energy prices came down, there certainly was a sense that consumers were waiting to see if this was going to last for a while. Now that we're several months in, I think we still would have to wait a bit to be able to answer what have consumers decided to do. But in the medium and long term, it's a good thing for the economy if consumers are-paying down their debts and strengthening their family balance sheet.
SARA EISEN: So, how long do you expect this soft patch that we're in, that we're coming off of in the first quarter, to last?
JACK LEW: You know, I think that obviously, the first quarter had some pretty unique things going on, between a pretty rough winter, a port strike in the West Coast. All of the forecasts that I see show for the remainder of the year to be pretty strong. And there's no if you look at the trajectory of economic data over the last year, year and a half, it has been consistently trending in the in the upward direction. And confidence is still high. I-feel pretty confident that the economy will do well for the rest of the year. And you know we're going see from week to week and month to month data that's a little bit noisy. That's always the case. We all know when you look at those nice, straight lines in detail, they'll always go up and down a little bit.
SARA EISEN: Well, one factor that's not helping is the strong dollar. I know what you're going to say, a strong dollar is in the best interest of the United States, especially when it reflects strengthening economic fundamentals, versus other economies.
JACK LEW: I guess I've been consistent.
SARA EISEN: Don't you have to say that, though? That's the policy.
JACK LEW: I think when you look at the -- what we were just talking about, the performance of the U.S. economy versus economies around the world that's the real story. The real story is that—
SARA EISEN: But it's not helping us. It's hurting us. Everything—
JACK LEW: Well—
SARA EISEN: --and you look at what corporate America is showing during earnings, industries, it's hurting the economy—
JACK LEW: I think if you look—
SARA EISEN: --no question.
JACK LEW: --overall at the U.S. economic performance, the U.S. economy is strong and it is, in comparative terms to other economies around the world, stronger. You know, there are pushes and pulls in different directions. So-one can easily say if any one thing was led to more strength, it would be stronger. But there's a lot of other factors at work as well. I think that the focus of this week's I.M.F. meetings is actually very important. It's how do we make sure that there's stronger growth around the world? That would actually lead to currency values you know, changing a bit. It would also lead to more demand, which would be a good thing for the global economy and for the U.S. economy. But the world can't rely on is U.S. demand to be the single engine for growth going forward the arithmetic just doesn't work. And the global economy is too large. And it is incumbent on policymakers to look at how do we grow demand and how do we have consumer-driven, not just export-driven, growth models in place? And that's one of the important conversations we'll be having this week at the I.M.F. meeting.
SARA EISEN: But given the lumpy and uneven growth that we're seeing around the world, if the dollar does get even stronger from already, from unprecedented news that we've seen in a relatively short period of time, would you consider doing something about it?
JACK LEW: Well, I think that the questions of monetary policy I will leave to the Federal Reserve. That is where those decisions are appropriately made. My core responsibility is to focus on the strength of the U.S. economy. I think we have a strong U.S. economy. I think to the extent that other economies around the world were stronger, it would actually help to address the disparity in currency values. It would also add to the gross demand in the world, which would help both the global economy and the U.S. economy. You know, I think that the fact that our economy is doing better than other economies around the world is a very different situation than if we were seeing the kinds of policies that are put in place to gain unfair trade advantage. We've been very clear. Policies that are designed to gain unfair trade advantage are unacceptable and we'll push back on them bilaterally, multilaterally. But what we're seeing today is a situation where it's a stronger U.S. economy than it is you know, in other parts of the world, which is why the focus has to be on using the policy tools in other parts of the world, getting other parts of the world to catch up in terms of demand and growth.
SARA EISEN: Well, while we're on the markets, we have had two of your predecessors, two previous Treasury secretaries, on CNBC just in the last few days, warning about liquidity risks, warning about the fact that regulators like yourself need to appreciate just how vital the role of market makers are when it comes to, "managing risk and providing liquidity." That was Hank Paulson on our air this morning. Do you share those concerns?
JACK LEW: Look, I think that liquidity of U.S. markets has been a source of great strength. Certainly, our Treasury markets are the deepest and most liquid in the world. And it's part of what it adds to the strength of the U.S. economy and the strength of the U.S. I think when you look at you know, the factors that are at play, in terms of the what's happening in the markets today, there's an awful lot of things going on that have been changing. I have heard questions raised that suggest that there may be just one thing that is driving the, you know, kind of evolution of economic – the economic environment. There are many things at work. There's – we're in a recovery period where we're coming out of low interest rates into a world of more normal interest rates.
SARA EISEN: But I think specifically – I'm sorry to cut you off. But I think specifically, the concern was if we were to go through another crisis again, I think Jamie Dimon of J.P. Morgan voiced this, it looks like there are liquidity issues. Events like what happened on October 15th in the bond market, for instance, make us vulnerable.
JACK LEW: Yeah. Look, I think if you look at October 15th, we've looked pretty hard at October 15th.
SARA EISEN: What happened?
JACK LEW: October 15th there were a lot of things going on. There was a period of several days leading up to October 15th where there was heightened sense of risk around the world for health reasons and geopolitical reasons. There were large market participants who had to cover positions. And there were a lot of transactions driven by that. And there was a huge amount of electronic trading activity. And going back to what I was about to say, it reflects the evolution of the market. And I think that there are a number of people who have jumped to a conclusion that somehow regulatory policy was the reason for what happened on October 15th. I actually don't believe that that was the predominant factor at work on October 15th. There were a lot of other things at work. I think we have to look at all the things that are changing. Having liquid markets is a very important part of the U.S. economy. We are constantly watching the factors that are at work that affect market liquidity. But we have to look at all of the factors that are at work and the evolution of electronic trading and the shift of activity from one kind of platform to another. And you know I think that one ought not to jump to conclusions as to what the you know, was at work on October 15th. And I think some have been a little quick to jump to a conclusion. But with that said, we focused on the health and liquidity of markets. It is a source of an enormous importance and strength. And we will continue to keep our eye on that going forward, and to work with those who will participate in the market to understand it and to see whether there are responses that are appropriate.
SARA EISEN: It's a little bit of déjà vu. Because I have to ask about Greece again. Here we are, another deadline rising, Greek bond yields. Do you think that the Greeks are going to be able to work out some sort of last-minute deal, again with the creditors, before they run out of money?
JACK LEW: Well, obviously there has been a lot of focus on each of the sequential deadlines. And it would be a good thing for this to get resolved in a way where it wasn't going from deadline to deadline. We have been consistent with all of the parties here, with the you know, what are called the institutions that are been supporting Greece and with the Greek government. But everybody has to move off of the kind of hard positions and rhetorical positions and do the hard work, rolling up your sleeves, making the line-by-line decisions of what can be done, where can there be a meeting. It is in no one's interest, certainly not Greece's, for this to become a crisis.
SARA EISEN: Can we handle it, though? If they have to default?
JACK LEW: I think that there shouldn't be any illusions that it would be a kind of pain-free event in Greece. It will be a painful event in Greece. I think, that equally, there ought to be you know a concern that we don't know what happens when and if a dramatic event like that were to occur. There have been a lot of events that people thought could be managed, that it turned out afterwards were more challenging. So, I think that it's a good thing that the technical work is underway. It should've gotten underway faster. It wasn't helped by some of the hard rhetoric that was going back and forth. We have been trying to persuade all parties to just kind of lower the volume and put the technical people to work. Because this is going to get resolved by going through a lot of boring lines of specific detail, not by having speeches made. And that's been the message we've given quite consistently to all parties.
SARA EISEN: And finally, just last thing on the news of the day, here on what happened with the European commission and Google, charging Google with violating some antitrust rules. What's your reaction to that? What's the significance of that charge?
JACK LEW: I've said, I've read the initial press reports. But I can't make a comment based on that. So, I'll have to leave that to others.
SARA EISEN: Understood. All right. Well, thank you so much for taking the time.
JACK LEW: Thanks for being here.
SARA EISEN: Appreciate it.
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