GO
Loading...

CNBC EXCLUSIVE: CNBC TRANSCRIPT: FEDERAL RESERVE BANK OF ST. LOUIS PRESIDENT & CEO JAMES BULLARD ON CNBC TODAY

Jennifer Dauble
Thursday, 27 Sep 2012 | 4:32 PM ET

When: Today, Thursday, Sept. 27, 2012

Where: CNBC’s “Closing Bell

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Federal Reserve Bank of St. Louis President & CEO James Bullard today, Thursday, Sept. 27 on CNBC’s “Closing Bell.” Following is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000118835&play=1.

All references must be sourced to CNBC.

BARTIROMO: JOINING ME NOW IN A CNBC EXCLUSIVE ST. LOUIS FEDERAL RESERVE PRESIDENT JAMES BULLARD. THANK YOU SO MUCH FOR JOINING US.

BULLARD: HI, MARIA. GREAT TO SEE YOU.

BARTIROMO: SO YOU WERE AGAINST FURTHER STIMULUS BY THE FED. YOU'VE TALKED ABOUT THAT MANY TIMES. WHY SO NEGATIVE ON THIS FURTHER STIMULUS? WHAT IMPACT DO YOU SEE THIS CONTINUANCE OF BOND BUYING HAVING ON THE ECONOMY? WHAT ARE YOUR CONCERNS?

BULLARD: ON THE TIMING OF THE DECISION, I DIDN'T IT REALLY THINK THE COMMITTEE HAD A GOOD CASE FOR TAKING A REALLY BIG ACTION RIGHT AT THIS JUNCTURE. HOWEVER, AS YOU KNOW, I'M NOT REALLY, YOU KNOW, CONSTANTLY OPPOSED TO TAKING EASIER ACTIONS. I JUST DIDN'T THINK WE HAD THE CASE RIGHT AT THIS MEETING. I WOULD HAVE KEPT IT IN OUR POCKET FOR A LITTLE BIT AND REALLY SEE IF THE GLOBAL SLOW DOWN IS GOING TO IMPINGE ON THE U.S. ECONOMY AND WHAT THE NEXTSTEPS IN EUROPE ARE GOING TO BE. WE'VE SEEN THAT HEATING UP IN THE LAST COUPLE DAYS. I WOULD HAVE LIKED TO HAVE TAKEN MORE OF A WAIT AND SEE POSTURE ABOUT THIS AND THEN GO FORWARD FROM THERE. ON THE ACTUAL ACTION -- GO AHEAD. OKAY. ON THE ACTUAL ACTION, I THOUGHT THE COMMITTEE DID SOMETHING I WANTED TO DO A LONG TIME AGO, AS LONG AGO AS 2009 AND 2010, WHICH IS DO THIS MEETING BY MEETING APPROACH ON BALANCE SHEET POLICIES. SO WE'VE COMMITTED TO BUY A CERTAIN AMOUNT IN BETWEEN THE MEETING AND THEN REVIEW THE DECISION AT THE NEXT MEETING. THE PRESUMPTION IS CONTINUATION VALUE FROM THAT POINT ON, BUT I THINK THIS IS A BETTER APPROACH TO POLICY. IT'S MORE THE ANALOG OF INTEREST RATE POLICY WHERE WE WOULD TAKE A 25 OR 50 BASIS POINT MOVE AND MAKE A DECISION AT THE NEXT MEETING. MARKETS IMMEDIATELY WILL PROJECT OUT BASED ON WHAT THEY THINK IS GOING TO HAPPEN IN THE ECONOMY, WHAT OUR FUTURE POLICY WILL BE. I THINK THAT'S A BETTER WAY TO CONDUCT POLICY AND SOMETHING I'VE BEEN ADVOCATING FOR A LONG TIME.

BARTIROMO: I GUESS RATHER THAN BEING COMPLETELY WIDE OPEN AND OPEN ENDED, WHICH IS WHERE WE FIND OURSELVES TODAY. LET ME GET YOUR TAKE ON THE LATEST DATA THE SECOND QUARTER GDP REVISED DOWNWARD TODAY. 1.7% NOW GOES TO 1.3%. OBVIOUSLY AN ANEMIC STORY. WHAT WOULD YOU LIKE TO SEE OUT OF POLICY, NOT NECESSARILY MONETARY POLICY, BUT PERHAPS FISCAL POLICY THAT ACTUALLY WILL MOVE THE NEEDLE IN TERMS OF GROWTH IN THIS ECONOMY?

BULLARD: WELL, I'D LIKE TO SEE A DEAL ON FISCAL POLICY THAT WOULD PUT THE HOUSE IN ORDER FOR THE U.S. I DON'T KNOW IF THAT'S JUST AROUND THE CORNER OR WHAT, BUT THAT'S DEFINITELY WHAT I'D LIKE TO SEE. I THINK THE SECOND QUARTER GDP NUMBER WAS WEAK, BUT WE KIND OF ALREADY KNEW THAT THE SECOND QUARTER WAS SLOWER THAN THE FIRST. I DO THINK WE'RE STILL ON TRACK FOR 2% GROWTH IN THE SECOND HALF OF THE YEAR AND A LITTLE BIT FASTER NEXT YEAR. I ALSO THINK THAT UNEMPLOYMENT WILL CONTINUE TO TICK DOWN HERE THROUGH THE END OF THE YEAR AS IT DID IN THE LAST JOBS REPORT.

BARTIROMO: BUT TO YOU THINK THINGS HAVE WORSENED THE LAST COUPLE MONTHS?

BULLARD: WELL, WORSENED IN WHAT RESPECT?

BARTIROMO: IN TERMS OF GROWTH IN THE ECONOMY. HAS THE ECONOMY WORSENED? JOB CREATION WORSENED?

BULLARD: NO -- WELL, I THINK THAT, YOU KNOW, AS FAR AS GDP, IF YOU GO OFF THAT, I THINK GDP WILL BE HIGHER IN THE SECOND HALF OF THE YEAR THAN IT WAS IN THE SECOND QUARTER. THERE HAS BEEN A PATTERN IN THE LAST COUPLE OF YEARS WHERE THE FIRST HALF WAS WEAKER THAN THE SECOND HALF OF THE YEAR. WE'LL HAVE TO SEE HERE WHETHER THAT KIND OF PATTERN PERSISTS. WE DO HAVE THIS GLOBAL SLOW DOWN GOING ON, AND THAT IS CONCERNING. EUROPE IS IN RECESSION. ASIA HAS SLOWED DOWN. GLOBAL GROWTH IS SLOWER THAN MOST PEOPLE ANTICIPATED AT THE BEGINNING OF THE YEAR. THE QUESTION I THINK FOR THE U.S. IS TWOFOLD. IT COULD BE THAT THE U.S. IS A WINNER IN THAT GAME WHERE WE GET THE FLIGHT TO SAFETY, LOWER INTEREST RATES HERE AND WE DO PRETTY WELL THROUGH THAT. OR IT COULD BE THAT GLOBAL GROWTH DRAGS DOWN THE U.S. AND SENDS US INTO A SLOWER GROWTH ENVIRONMENT OR EVEN RECESSION. SO I THINK WE WANT TO LOOK AT BOTH OF THOSE POSSIBILITIES. I WOULD HAVE WANTED TO SEE MORE DATA ON THAT AND SEE HOW THAT'S UNFOLDING BEFORE WE TOOK ACTION.

BARTIROMO: I'M REALLY GLAD YOU BROUGHT UP THE FISCAL DEAL. WE'VE BEEN TALKING ABOUT THIS SO MUCH ON THIS PROGRAM, THIS FISCAL CLIFF HAS MANY ECONOMISTS EXPECTING WE'LL DIP BACK INTO A RECESSION IN 2013 BECAUSE WE WILL GO OVER THE FISCALL CLIFF. OBVIOUSLY NO DEAL BEFORE THE ELECTION. PROBABLY LITTLE ACTION AFTER THE ELECTION AND THEN IT'S A 2013 AFFAIR. IS THAT WHERE YOU STAND WITH THE ECONOMY, DIP BACK INTO A RECESSION GIVEN WHERE WE ARE WITH THIS FISCAL CLIFF?

BULLARD: WELL, THE CBO'S ESTIMATES SEEM TO SUGGEST THAT. IF IT WAS JUST A NO DEAL ALL AROUND, GDP WOULD DECLINE IN THE FIRST PART OF NEXT YEAR. I CONTINUE TO THINK THAT DESPITE ALL THE BRINKSMANSHIP, THERE WILL EVENTUALLY BE SOME KIND OF DEAL. OBVIOUSLY IT WON'T BE WHAT EVERYBODY WANTS. IT WILL HAVE TO BE SOME KIND OF COMPROMISE. IT MIGHT BE HARD TO SEE IT RIGHT NOW. BUT I THINK THERE WILL BE SOME KIND OF DEAL. WHAT'S BAD FOR THE U.S. ECONOMY IS THAT OUR POLITICAL SYSTEM INSISTS ON BRINKSMANSHIP IN ORDER TO SOLVE THESE KINDS OF PROBLEMS. IT WOULD BE MUCH BETTER IF WE COULD GET A BETTER METHOD OF GETTING TO THESE KINDS OF SOLUTIONS. I DON'T SEE IT NOW.

BARTIROMO: YEAH, LET ME GET YOUR TAKE IN TERMS OF WHERE WE GO FROM HERE. A LOT OF PEOPLE ARE WORRIED ABOUT THE FED STIMULUS, THE WAY YOU HAVE BEEN, BECAUSE THEY SAY AT SOME POINT RATES WILL SKYROCKET. AT SOME POINT, YOU GET A SPIKE IN RATES AND THEN IT'S JUST TOO LATE BECAUSE IT HAPPENS FAST AND FURIOUS. WHEN WOULD YOU EXPECT THAT?

BULLARD: WELL, UNFORTUNATELY WE CAN'T KNOW EXACTLY WHEN THAT POINT WOULD OCCUR, BUT IT IS A BIG CONCERN FOR ME AND REALLY I THINK ANYBODY WHO'S INVOLVED WITH MONETARY POLICY THAT YOU MIGHT FACE A SITUATION WHERE INFLATION EXPECTATIONS START TO GET OUT OF CONTROL AND THE RATES START TO GO UP QUICKLY AND YOUDO GET INTO A CRISISY SITUATION. WE HAVE SEEN IT RECENTLY WITH MAJOR COUNTRIES INCLUDING ITALY AND SPAIN. WE SHOULD NOT BE COMPLACENT ABOUT THIS POSSIBILITY. MY COLLEAGUE CHARLIE PLOSSER HAS EMPHASIZED THIS, AND I WOULD ENCOURAGE MY COLLEAGUES TO NOT GET COMPLACENT ON THIS DIMENSION.

BARTIROMO: SO FORMER NATIONAL ECONOMIC COUNCIL DIRECTOR LARRY LINDSAY WAS ON TODAY. HE HAD A BIT TO SAY ABOUT THE FED. I'D LIKE YOU TO LISTEN TO THIS AND GET YOUR REACTION.

*****

SOUND:

BECKY QUICK: IT'S ALWAYS BEEN THE BOND MARKET THAT CREATED THE CRISIS AND SAID YOU'RE GOING TO CHANGE YOUR WAYS AND YOU ARE GOING TO CHANGE THEM TODAY.

LINDSAY: BUT AT $85 BILLION A MONTH IN FED PURCHASES THEY'RE BUYING THE ENTIRE DEFICIT.

******

BARTIROMO: DO YOU THINK HE'S RIGHT?

BULLARD: IT'S AN IMPORTANT THING. YOU DON'T WANT TO GET INTO WHAT WE CALL THE FISCAL DOMINANT REGIME WHERE THE FISCAL AUTHORITY OR THE CONGRESS AND THE PRESIDENT, THEY'RE BORROWING A LOT OF MONEY AND THE FED'S ROLE IS TO KEEP THE INTEREST RATES LOW. THAT WILL END IN TEARS. THAT IS A BAD POLICY. I'M FAIRLY CERTAIN THAT NONE OF MY COLLEAGUES ON THE FOMC ARE INTERESTED IN GOING THAT DIRECTION. WE'RE GOING TO PURSUE MONETARY POLICY THAT IS THE RIGHT ONE FOR THE NATION, BUT IT'S NOT ONE THAT'S TRYING TO ENABLE IRRESPONSIBLE FISCAL POLICY.

BARTIROMO: WHAT ARE YOU HEARING FROM BUSINESS MANAGERS OUT THERE TODAY? RICHARD FISHER ON THE FED YOUR COLLEAGUE ON THE FED HAS SAID MANY TIMES BUSINESS MANAGERS ARE HOLDING BACK FROM SPENDING OR ADDING HEADS TO THE PAYROLL BECAUSE OF THE UNCERTAINTY. THEY DON'T KNOW WHAT TAX RATES ARE GOING TO BE NEXT YEAR. DO YOU AGREE WITH THAT?

BULLARD: YEAH, THERE'S NO QUESTION. MY BUSINESS CONTACTS SAY THE SAME THING HERE AROUND THE EIGHTH DISTRICT. THE UNCERTAINTY AROUND THE FUTURE TAX SITUATION IS SERIOUS. THE UNCERTAINTY AROUND THE FUTURE OF THE U.S. ECONOMY IS A SERIOUS DAMPER ON INVESTMENT. I THINK UNCERTAINTY ABOUT HEALTH CARE AND HOW THAT'S GOING TO IMPACT BUSINESSES IS ANOTHER ISSUE, SO THEY OFTEN SAY THEY CAN'T GET ENOUGH CLARITY TO KNOW, YOU KNOW, WHETHER THEY SHOULD MAKE A MAJOR INVESTMENT. SO YOU'RE TALKING ABOUT BUSINESSES WHERE, YOU KNOW, THEY MIGHT BE COMMITTING HUNDREDS OF MILLIONS OR BILLIONS OF DOLLARS. THEY NEED TO GET CLARITY TO REALLY PENCIL IN HOW THEY THINK THEY'RE GOING TO BE ABLE TO PROFIT FROM THAT KIND OF AN INVESTMENT IN THE U.S. HAVING A HARD TIME SEEING THAT RIGHT NOW.

BARTIROMO: WHAT WOULD BE THE MOST IMPORTANT POLICY YOU COULD SEE THAT WOULD ACTUALLY MOVE THE NEEDLE AND GET BUSINESSES TO HIRE AGAIN? WHAT'S THE MOST IMPORTANT POLICY FROM YOUR STANDPOINT RIGHT NOW?

BULLARD: I THINK IT WOULD BE BEST TO, YOU KNOW, GET THE TAXES DOWN ON THE TABLE THE WAY WE WANT THEM AND IF THE U.S. COULD SHOW THAT -- THE CONGRESS COULD SHOW THEY HAVE CONSENSUS, EVEN IF IT'S -- MAYBE NOT THE COMPLETELY IDEAL POLICY, BUT THEY HAD CONSENSUS AND YOU KNEW WHAT THE TAXES WERE GOING TO BE IN THE FUTURE, THEN BUSINESSES WILL GO AHEAD AND MAKE THEIR BETS BASED ON THAT TAX CODE. WHAT THEY DON'T LIKE IS THE NOTION THEY MIGHT INVEST IN A BUSINESS, THE BUSINESS MIGHT EVEN DO WELL, POSSIBLY BECOME A TARGET AND GET TAXED IN THE FUTURE. THEY DON'T WANT TO BE IN THAT KIND OF A SITUATION. SO I THINK THAT THAT'S INHIBITING INVESTMENT. I'LL SAY ONE OTHER THING ABOUT THIS TOPIC, WHICH IS ON THE TECH SIDE, YOU SEE QUITE A BIT OF ACTION. IN TECH, PEOPLE JUST CAN'T WAIT. THEY HAVE ALL THE SAME UNCERTAINTY, BUT THE TECHNOLOGY IS MOVING SO QUICKLY THEY HAVE TO GO AHEAD AND MAKE THE INVESTMENT. IN OTHER SECTORS OF THE ECONOMY, THEY'RE WILLING TO BE MORE PATIENT AND THE HAVE MORE OPPORTUNITY TO BE MORE PATIENT AND MAYBE MORE OPPORTUNITY TO INVEST OVERSEAS. SO THOSE ARE ALL FACTORS THAT ARE WEIGHING ON THESE KINDS OF BIG INVESTMENT DECISIONS.

BARTIROMO: MR. BULLARD, GOOD TO HAVE YOU ON THE PROGRAM. THANK YOU FOR YOUR INSIGHTS.

BULLARD: ALL RIGHT. THANKS A LOT, MARIA.

About CNBC:

With CNBC in the U.S., CNBC in Asia Pacific, CNBC in Europe, Middle East and Africa, CNBC World and CNBC HD+, CNBC is the recognized world leader in business news and provides real-time financial market coverage and business information to more than 395 million homes worldwide, including more than 100 million households in the United States and Canada. CNBC also provides daily business updates to 400 million households across China. The network's 16 live hours a day of business programming in North America (weekdays from 4:00 a.m. - 8:00 p.m. ET) is produced at CNBC's global headquarters in Englewood Cliffs, N.J., and includes reports from CNBC News bureaus worldwide.

CNBC also has a vast portfolio of digital products which deliver real-time financial market news and information across a variety of platforms. These include CNBC.com, the online destination for global business; CNBC PRO, the premium, integrated desktop/mobile service that provides real-time global market data and live access to CNBC global programming; and a suite of CNBC Mobile products including the CNBC Real-Time iPhone and iPad Apps.

Members of the media can receive more information about CNBC and its programming on the NBC Universal Media Village Web site at http://www.nbcumv.com/mediavillage/networks/cnbc/