WHEN: Today, Wednesday, July 25th
WHERE: CNBC's Capital Exchange event in Washington D.C.
Following is the unofficial transcript of CNBC’s Kayla Tausche’s sit down interview with Rep. Jeb Hensarling (R-TX), Chairman, House Financial Services Committee, today at CNBC’s Capital Exchange event in Washington D.C.
All references must be sourced to CNBC’s Capital Exchange.
KAYLA TAUSCHE: And thank you Tyler. Before my current life in Washington I covered Wall Street. And there's very little overlap. But one of the constants is Chairman Hensarling who was very vocal, very active in the Wall Street community back when I covered that. And now I've had the great pleasure of-- of getting to know you a little bit better down here. What is the next phase of your career?
JEB HENSARLING: Work less hard and make more money and spend more time with my family, most importantly.
KAYLA TAUSCHE: And what does that mean doing? Is that staying in Washington? Or is that going--
JEB HENSARLING: It means--
KAYLA TAUSCHE: --back to Texas?
JEB HENSARLING: --under our ethics rules I really can't plan my future until I leave.
KAYLA TAUSCHE: Are you glad to not be campaigning right now? And to be trying to make laws on the home stretch instead?
JEB HENSARLING: Well, you know, you-- y-- your career goes through phases. And early in your career you practice a lot of politics and a little bit of policy. And as time goes by, you practice more policy and less politics. So I enjoy having more time-- to work on the policy. But -- I-- I-- I've enjoyed it. I mean, it's-- it's been a passion of mine. I enjoy getting out in the Fifth District of Texas, rural East Texas, good folks there so I miss some of that. But-- you know, it allows us to get some-- some bills. I-- I-- I'm happy to say we're probably one of the most active if not the most active and productive committee-- on the Hill. And-- I take some pride in that. But that does take away from your work in your district.
KAYLA TAUSCHE: What would you say your legacy is, at this point?
JEB HENSARLING: If by legacy, how will I be remembered once I leave, I have no legacy. I know of nothing that is as soon forgotten as a former member of Congress. So I know that. And I'm at peace with that. But--
KAYLA TAUSCHE: Legislatively.
JEB HENSARLING: You know, I don't spend a lot of time thinking about that. We produced a lot of bills. I think at the end of the day they've had a marginal beneficial impact on the plight of the working man and working woman-- to lift themselves up again. As Mick spoke about earlier, I would say that it is an American right to have 3% plus economic growth. And if you look at the history of America, all of our job creation, almost all of our job creation-- almost all of our disposable income increases, all of our poverty reductions, 80% of that takes place in 3% plus growth years. And-- our committee among other things represents the capital of capitalism. And so our ability to facilitate capital formation-- and help working families-- have more disposable income, help entrepreneurs reach their American dream. I think the cumulative impact-- I-- I-- I do believe when I look myself in the mirror I'll say, "You know what? Due to our efforts, not my efforts, our efforts collectively, some of which has been bipartisan as I look at my ranking member-- I think we moved the needle." I think we moved the needle some. And I-- I take some-- some solace in that. But will I be-- no. No-- nobody remembers former members of Congress.
KAYLA TAUSCHE: Your current-- effort, JOBS Act 3.0, a bipartisan effort, I know is something that you care deeply about. Protections for angel investors, making it easier for companies to go public. Why do you think we need that now in the economy?
JEB HENSARLING: Well, I think there's a couple of different reasons. Number one, I'm just very concerned-- I'm the father of two teenagers. And when they're in their peak earning years, I'm convinced that the companies that will drive the economy at that time haven't even been born yet. And so I'm concerned as I see-- kind of this diminution of entrepreneurship-- in America. I think the data I saw as recent as 2016-- entrepreneurship was, like, at a generational low. IPOs were at a 20-year slide, at about a 20-year low. Now we've seen a come back after-- 2016. But haven't made up the lost ground. A lot of us think-- in terms of competition with China. China 2025, 36% of all IPOs now-- companies that are IPO-ing in China. We're down to 11% in the U.S. Was at Silicon Valley recently and, you know, we've got people saying, "You know, it's just a whole lot easier to go public in China than it is the U.S." And if we're gonna compete, we somehow have to make sure that we have again-- I-- smarter regulation. I don't always think the dichotomy is between regulation and deregulation. I think the dichotomy is between smart regulation and dumb regulation. I also think there always has to be a balance. You know, it's-- it's-- it's the cost benefit analysis. What does this regulation do? How will it impede-- you know, will it impeded capital formation? Will it impede job growth? Ultimately what is the impact upon job creation, GDP, disposable family income? And I don't think we do a good job when regulations are promulgated-- in-- in doing that cost benefit analysis. And so ultimately again where are the Amazon and-- and Googles of the future, where are they gonna come from? And as I said before, I still think America's garages have too many old cars and not enough new start-ups.
KAYLA TAUSCHE: But do you get the sense that anyone in the Senate shares your view on prioritizing this?
JEB HENSARLING: Well, number one-- never underestimate the Senate's capacity to do nothing. So-- you know, I think there's a couple. But I don't-- I enjoy sleeping at night. And if I worried about what the Senate did, I would never sleep at night-- did or didn't do. So all I know is we put this-- package in the best position-- to pass. Again there's a lot of really good right-wing bills I could have put in this package. She wasn't gonna let me do it. So those were dropped. And Maxine and I-- had a very good forthright negotiation over about three weeks. And it was a strong bipartisan package. Some bills were originated by Democrats-- most by Republicans. She wanted some language modified. We-- we modified some language. But it was-- it was a good honest negotiation because I wanted a strong bipartisan package.
KAYLA TAUSCHE: But without--
JEB HENSARLING: So you're asking me what's the Senate gonna do.
KAYLA TAUSCHE: --say, ten Senate Democrats on broad.
JEB HENSARLING: Well-- again--
JEB HENSARLING: --I'm not oblivious to the fact that it takes ten Senate Democrats to do it. The-- they're gonna vote on it one way or the other. So they will get the chance to register their yeas and the nays. So-- no, I can't control what the Senate does. All I can do is put the package in the best position-- to pass in the Senate. And then they're gonna do what they're gonna do. And I'll sleep well at night. And life will go on. But if they care about-- what many of us care about-- then I-- I-- I think they'll pass it. And I take some solace that-- the usual suspects didn't immediately train their fire on the--
KAYLA TAUSCHE: Who do you consider--
JEB HENSARLING: --package.
KAYLA TAUSCHE: --to be the usual suspects?
JEB HENSARLING: I think I've said enough.
KAYLA TAUSCHE: In the last 24 hours, we've heard a chorus of Republicans, but not you yet-- chastise the $12 billion relief package for the U.S. farm community. It would seem to be antithetical to everything you've been fighting for in your career. And I'm curious--
JEB HENSARLING: It is.
KAYLA TAUSCHE: --how you received the news yesterday. What your initial thoughts were.
JEB HENSARLING: Well-- I was busy yesterday. So I received the news quite late. So I'm just somewhat incredulous. Well, w-- number one, let me back up. For most Americans, they have the best economy of their lifetimes. And I believe it is principally due to one man, President Donald Trump. And a global trade war threatens all of that prosperity. And if we lose all that prosperity, it will be principally due to one person, President Donald Trump. So I admit that at the end of the day maybe his trade pro-- policies, negotiations, I hope and pray it proves to be brilliant. But at the end of the day-- and I'm sorry the Mick Mulvaney still isn't here-- there's many things I like what I hear from the administration and what the president said at the G7. Words are one thing, deeds are something else. And what I saw was on the one free trade agreement that's been modified in Korea, we didn't break down trade barriers. And so I question, "What is the end goal here?" If the end goal is what the president's Tweet was early this morning as-- as Mick articulated it, then I say, "Go, Mr. President. Go." But what we saw--
KAYLA TAUSCHE: But he also thinks--
JEB HENSARLING: --in Korea--
KAYLA TAUSCHE: --tariffs are the greatest --
JEB HENSARLING: I'm having trouble--reconciling those two. I do not-- tariff-- a tariff is a tax. So we have a policy now that is taxing the American consumer and then bailing out U.S. farmers with welfare. I don't get it. I don't agree with it. And I also think as a matter of preserving, strengthening Article I of the Constitution, I would say for decades, both parties are guilty of this. Congress after Congress has shoveled more power out of Article I of the Constitution into Article II. And then we throw up our hands and say, "Gee, I didn't know he had all this power. How can he just do this with the stroke of a pen?" Well, that's our fault. That's our fault that this happens. So, I thought Barack Obama had too much power. I think that-- Donald Trump has too much power. And I think that Congress needs to reassert their authority. And last I read the Constitution, it's Congress that has authority over tariffs. It's Congress that has authority over trade. And we ought to take some of that back. And so again my concern with what the administration is doing is several fold. Again-- the answer I'd like to see is the ability of Americans to export more, not import less. But again that's not what we saw in Korea. In Korea we saw the imposition of a quota and an extension of a 20-year tariff. That is not helping American consumers. It's not helping American businesses. It's not helping the steel producers in the Fifth District of Texas who take imported steel and fabricate it into either shelving or steel buildings. They're concerned as the price of their feeder stock skyrockets. And they're concerned about potential lay-offs-- and competitiveness. So again, maybe the president's strategy proves to be brilliant. But number one, I don't think the president should have this much power. Number two, this administration needs to clearly articulate, not just with their words, with their deeds, what the end goal is of trade. I would also call on the administration to drop any pretense of using 242 to say that my 11-year-old Honda Accord is a threat to national defense. Occasionally it's a threat to my checkbook, but it is not a threat. It is not a threat to national defense. It will undercut the administration's credibility. And I think you will see, if the administration does that, members of both sides of the aisle rise up and begin to start taking back some of their Article I powers. And then I also would call the administration-- I'm not sure they've done their careful calibrations again to understand how many U.S. businesses are adversely impacted by these tariffs, how U.S. consumers are adversely impacted-- by these tariffs. And so—
KAYLA TAUSCHE: Have you had that conversation with the president, with his advisors? And do you feel like that message has landed?
JEB HENSARLING: You know, I don't think I've spoken with the president probably in six weeks, maybe eight weeks. I don't remember. I-- I-- I've had these conversations. I've certainly had these conversations-- with members of his administration including Mr. Mulvaney, including the Secretary of Treasury. So I have a little bit more access to them than the president himself. But I've articulated my views to the-- to the president.
KAYLA TAUSCHE: On this farm relief package though, I mean, ten years ago you were one of the leading voices coalescing Republicans against the financial bail-out in 2008. And at the time you said, "How can we have capitalism on the way up and socialism on the way down?" If Congress bails out some--
JEB HENSARLING: Pretty poetic, wasn't it?
KAYLA TAUSCHE: --firms and sectors, how can it say no to others? Is this the same thing?
JEB HENSARLING: Yes. Yes.
KAYLA TAUSCHE: Even though it's $12 billion versus--
JEB HENSARLING: Yes, it's a bail-out.
KAYLA TAUSCHE: --$700 billion.
JEB HENSARLING: It is a bail-out. It is a bail-out based upon these policies. And-- listen, I say this as one who grew up on a farm. My dad was a farmer. My granddad was a farmer. Believe it or not, you can make a living out of agriculture and not get taxpayer subsidies. You can do it. My family is proof of it. And when I look at a federal debt-- I-- I gotta tell you. You didn't ask the question. But as I get ready to leave Congress, don't have too many regrets. But my inability to convince my colleagues of the peril of an unsustainable national debt, that-- that will be the top of my regrets. And every single bail-out ultimately is gonna be borne by our children and our grandchildren. Again, the answer is trade not aid. So yes, this is a bail-out. I'm opposed to it.
KAYLA TAUSCHE: But if the price of poultry when your dad was farming-- plummeted because of government policies and the government came to your family's farm and offered you a few hundred thousand dollars to offset that, to make him whole, would you tell him not to accept that?
JEB HENSARLING: Well, I-- it's-- it's a hard question. It's a good question. I would say that frankly-- those government policies-- did impact our poultry farm. Because what it did was it made the price of feed more expensive for our chickens. But no, my family didn't go to the government and ask for a bail-out. What we tried to do-- and again our voices were quite small. But-- to say, "Let the free market work." That would be my answer. But again last I looked-- my iPad is awash of reports saying that we have an unsustainable spending trajectory. We have an unsustainable national debt. And something that is unsustainable has a tendency to stop. So, I don't think America's ever gonna be Greece. I don't think America is ever going to be Detroit or some of the other terrible bankruptcies. But we've seen the face of national bankruptcy, and it's frightening and it's scary. I don't think that will be the nation as a whole. But I do think with-- if we don't change the trajectory we're on we are destined to be a second-rate economic power, a second-rate military power, and I would argue a second-rate moral authority w-- as we become the first generation in America's history to leave the next generation with a lower standard of living.
KAYLA TAUSCHE: I wanna give the audience--
JEB HENSARLING: That's not right.
KAYLA TAUSCHE: --the opportunity to ask a couple of questions. But while we get the microphone ready, does anyone have questions for Chairman Hensarling? I have a question for you which is –
JEB HENSARLING: Apparently I put them all to sleep.
KAYLA TAUSCHE: As we're-- as we're talking about bail-outs.
JEB HENSARLING: Either that or maybe I frightened 'em.
KAYLA TAUSCHE: Would you consider in hindsight the TARP program to have been a failure?
JEB HENSARLING: I gotta tell you, that's a hard one. I do think again that that was born principally of-- of government policies that help erode traditional prudential underwriting standards. There was a legitimate crisis that needed to be responded to. This is part of the rationale of why we have a central bank. It is part of why we have-- there are 13(3) exigent powers. But there was a need to add liquidity-- liquidity into the system. And they went far beyond that. They went far beyond that. And I-- I'm not sure. History will tell at some point, you know, whether we ultimately were better off or not better off. Clearly we had to have liquidity injections which is again the business of the Fed and has been since 1913. But the bail-outs of the individual businesses, that concerns me. Because with that comes some modicum of government control. And what I think we've seen for the last decade is a lost decade of economic growth. And-- families have been held back-- again, there's a big difference in the lives of the American people, particularly those trying to lift themselves out of poverty, trying to get ahead, a huge difference between 1.5% economic growth and 3% economic growth. And I think ultimately what we have seen is a drag on economic growth and a certain amount of-- of uncertainty. And I think it has allowed the tentacles of the federal government to get into the reaches of credit allocation which I think to be a bad thing. I do not want credit to be politicized. I do not want credit to be allocated by Washington politicians. That frightens me greatly. And I think that unfortunately TARP has helped facilitate that.
KAYLA TAUSCHE: You're clearly still very fired up about deregulation, deficit spending, the national debt. So I will ask you--
JEB HENSARLING: I'm old but I'm not dead.
KAYLA TAUSCHE: I will ask you in closing, is there a role in this administration where you feel you could have a bigger impact on those issues that you would consider?
JEB HENSARLING: Well, I think you know I was considered for one job in the administration. Somebody else got it. And I was flattered to be--
KAYLA TAUSCHE: That would be--
JEB HENSARLING: --considered.
KAYLA TAUSCHE: --Treasury Secretary.
JEB HENSARLING: I was flattered to be considered. And life has-- life has gone on.
KAYLA TAUSCHE: What about-- FHFA?
JEB HENSARLING: Well, that one would be intriguing to me-- I must admit. Fannie and Freddie reform has proven to be somewhat vexing. But I sense that-- I plan to-- hop up-- hop into the pickup truck, put Washington in the rear-view mirror and drive home.
KAYLA TAUSCHE: We appreciate you spending some time with us and wish you the best of luck.
JEB HENSARLING: Thank you.
KAYLA TAUSCHE: Chairman Jeb Hensarling, thank you.
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