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CNBC Transcript: National Economic Council Director Larry Kudlow Speaks with CNBC's Kelly Evans on "The Exchange" Today

WHEN: Today, Monday, March 23, 2020

WHERE: CNBC's "The Exchange"

The following is the unofficial transcript of a CNBC interview with National Economic Council Director Larry Kudlow and CNBC's Kelly Evans on CNBC's "The Exchange" (M-F 1PM – 2PM) today, Monday, March 23rd. The following is a link to video from the interview on

All references must be sourced to CNBC.

KELLY EVANS: Well, a month later we're in a completely different situation obviously. With me right now is the White House's National Economic Council Director Larry Kudlow, joining us by phone. Larry, it is good to have you here. Do those words echo in your ears?

LARRY KUDLOW: Well, look, when I said that, this is right after the President boldly put travel restrictions on China. When I said that, it was true, factually. Only about 50 cases. Now, I don't believe anybody could have predicted or expected the kind of dramatic surge that we have been doing as this thing takes over. I'm just saying I'm as good as the facts. The facts change. Of course, I have changed my view. But that's what I was trying to communicate at the time. It was in hand and it was contained. Now we're way beyond that. Again, nobody could have predicted or expected this. And we're working on, you know, we're working on this financial package to try to keep the economy going again. That's the important point.

KELLY EVANS: Absolutely. Larry, there's two other comments you made that people I know are a little upset about it was in late February saying that, you know, you could look at the market, the stock market, take a look at it, it was cheaper than it was. That was 35% ago. Telling David Faber, you know, you should go to work, go about your business. America should stay at work. I mean, why -- was there anything that you guys were told at the time that indicated coronavirus needed to be taken more seriously or not? Or were you not given that information? Help us understand.

LARRY KUDLOW: Well, again, the situation overtook a lot of things, and we have had to change our strategy just like every other country in the world had to change their strategy. So, regarding the market, right now I would probably make the same point-- Secretary Mnuchin has made at this point, other people have made this point. If you are a long-term investor, I would bet on America and I would stay in the market and I might want to buy. You have a 30% Dow. We have been through these things before, Kelly, 1987, 2008. I think it's -- the market becomes more attractive. Price-earnings multiples will come down. Again, that's not the key point now. But again, for long-term investing, I always stay with America. And the key point right now, if I can get back to the financial assistance package, this is the largest main street financial assistance program in history, main street. Alright. We're talking about helping individuals and families and small business and the workforce. And again, if you are a solvent company at the beginning of this year, January 1st, you're going to be solvent. We will make sure you will be solvent on July 1st. Okay. We will keep that -- good businesses in place. And in particular, in particular, I want -- the Federal Reserve lending program, which they have expanded under 313 with the Treasury Department, they have now done a great job. They have expanded this to small businesses, student loans, automobile loans, credit card loans, money market funds, commercial paper and a variety of other points. The key point is this is a transparent program. The treasury's exchange stabilization fund provides the equity so the Federal Reserve can make the funds and the loans will get to main street. The loans will get to the small business which then can continue to pay the workers very rapidly. That's the key point I want to make here. And I think that's why this bill has got to pass in order to shore up the economy and bolster the economy so we can get through this. I think it is a matter of weeks and months. It is not years. That's why this package is so important.

KELLY EVANS: Larry, why do you think that -- let me, I guess, phrase it a little bit differently. We hear now this discussion by the President but by others, about whether we should keep this economy sort of open, so to speak and functioning as much as possible, or whether we need to shut down things entirely in order to contain the human toll, which threatens to overwhelm the health care system. Can you explain to us what the swing factor is? In other words, at what point do we determine that it's safe enough for the country overall or for region by region to go back to work? Are we going to quarantine just the most vulnerable population? What does that mean when we say we will reassess and see whether the economy is going back to normal? What will make that determination?

LARRY KUDLOW: Well, I'm not the health expert. We're going to look at a lot of things. I think what the president is expressing, and I have heard this from a lot of very smart people active in the economy and the markets. At some point, you have to ask yourself whether the shutdown isn't doing more harm than good. In economic terms, perhaps even in health terms. And again, I'm not the health expert. I think, as my friend Scott Gottlieb wrote in the Journal today, widespread testing, we are now embarked on massive testing programs, will probably help to isolate, as you say, geographically. Maybe that's what we have to focus on. I don't want to make any commitments here. I'm just saying people are asking whether the shutdowns are not making the patient worse. I can't answer that, Kelly. It is not my place to. But I think it is an appropriate question. And again, I come back to this financial assistance package. I want to keep -- I want to keep the small businesses open. I want to keep the workers working. I want to keep the payrolls intact. And we're willing to do whatever it takes, working with these assistance programs, working with the Federal Reserve and the Treasury programs. This is the essential point. Let's -- this is an incredibly difficult challenging period. No question about it. It's completely different than it was a month or six weeks ago. Everybody knows that. I don't think we should have to harp on that point. The point is from here, can we keep the U.S. economy going? Can we bolster the economy? Can we help the workers and the families and the small businesses? I believe this package is incredibly important. The sooner they get it done, the faster it's going to start helping it. This will hopefully get us through the next bunch of weeks where we think the worst difficulties may lie.

KELLY EVANS: Absolutely. So, let me think about the access to this money. This is one of the main questions coming up from people. That say how? Where do I go to get the money? Is it to my bank because it's going to be a small business administration funds? Or is it, as you just referenced, something that comes from the Federal Reserve? Again, does that go through a local bank? I mean, how does this work? Where should people go?

LARRY KUDLOW: Well, it's a good question. I think the Federal Reserve lending will run through the markets, first of all. You have got a lot of securities that they're backstopping right now, asset-backed securities. Secondly, the assistance will probably run through the banks. Most of it will run through banks that will get it into the small and medium businesses. And they can -- that can be done pretty fast. Because, remember, the Treasury and the U.S. government is backstopping. We are essentially guaranteeing this. So those will be the two avenues. Now, the other parts of the package, the $3,000 per family, for example, I think most of that is going to run through the IRS, and that will be a rapid delivery system. Unemployment compensation, where we, you know, plussed it up so that unemployment insurance will be equal to your wages, that will run through the unemployment system. Some of that might run through the IRS. I think those delivery systems have to be worked through. Could be done fairly rapidly. But I think the banks are going to play a big role. And I think the reason that the exchange stabilization fund is so important is that provides the equity from the Fed's lending programs. That provides the guarantee for it. And that's why, talk about, you know, slush funds and so forth, it is just not the case. Again, this is the largest main street financial assistance program in history. It is covering everybody. It is not just a couple of companies. It is going to cover the whole broad-based economy. And it's going to fund small and medium businesses as much as, more than anything. That's half the economy right there. So, you are really going right after it. And it will be broad-based and it is not going to be limited to a few corporations. Not at all.

KELLY EVANS: Are there strings attached to the corporate lifelines, let's call them, that have to do with buybacks, that have to do with employee retention, things of that nature? And will the taxpayer participate on the upside, is there going to be equity? Because like TARP, we made a ton of money on that ultimately with the government so to speak buying in at the lows. What are the strings that you would attach to this, if any, in this package or can that all continue to be worked out?

LARRY KUDLOW: Well, I think it's going to be worked out. I think some of those conditions will be attached. I myself particularly like the taxpayer taking a piece of equity in these loans, as you noted. That turned out very well ten years ago or so. And could well be tried again. Warrants are a possibility. I don't want to get ahead of the story, and I don't want to get into too many of the details because those are under discussion. Other conditions may enter in or it may not enter in. I don't want to get into that. But I kind of – myself, personally, I kind of favor the taxpayer equity because we will get paid back by this, as the economy will recover. I mean, the prayer here, Kelly, is that we are talking weeks and months not years, okay. I don't know that. I can't predict that. And that's why I said, you know, my containment remarks four, six weeks ago were based on facts. Today the facts are much, much worse. I get that. On the other hand, a lot of the experts believe it's going to be a matter of weeks and months. And if that is the case, then this assistance program will bridge us to the other side, and there could be a strong recovery. There could be a snap back. The economy was very strong, as you know. January and February were very strong months before the virus took off. We're hoping to pick up where we left off, and that's why we want to maintain the payrolls and the individuals working and the small businesses. You know, you can't have a good job unless you have a good business to work at. So, both sides will be impacted. And that's the hope that we have. We get to the other side of this, we will come back very strong. America usually does.

KELLY EVANS: Well, and that's why we're watching so closely obviously all the action on Capitol Hill this morning, Larry. One final question is there are smart investors I talk to who look at the credit markets and say it's going to get worse in the stock market before it gets better. Is there a plan? We have already broken the glass. Right?  We have fiscal stimulus going. The Fed's thrown everything that it has there. Is there a further plan, a backstop if the stock markets look a whole lot worse in the near future? Or do we just have to accept this is part of the process of discounting this hit to the economy which some think could be 30% to 40% in the second quarter?

LARRY KUDLOW: Well, look, you know what, Kelly, I'll cross those bridges when we get to them. Let's do this one step at a time. Let's get this financial package, I'm calling it a mainstream package, that's basically what it is, to help the workforce and to help families, okay. Let's keep the businesses that were solvent at the beginning of the year solvent through the summer. Alright. Let's keep the assistance programs in place. I don't want to make any forecasts on that. We could conceivably come back with more or as you implied before we might have a different strategy. Right now, we're committed to this financial assistance. Nothing in my view, nothing is more important than this financial assistance package that is before us. I hope they do get a vote today.

KELLY EVANS: Larry, I just have to ask you on a personal level before we go, what is your number one regret about this past six weeks? Is it the CDC didn't do a better job of telling you guys what was going on or getting the tests ready? Is it that – when you look back it, I mean, so much time was lost. I understand we haven't been through something like this before in the U.S., but Asian countries had. What is kind of the one thing you just sit there going, if only we had done this different or someone had just told us or we had--? What is that one thing or maybe there are multiple things?

LARRY KUDLOW? I wouldn't. This is a hard, difficult decision. Have we ever been in a to sis like this before? No. Or at least not in my time. I have been through a whole number of crashes and downturns and this and that, nothing like this. I'm not going to pick apart. I'm not going to second guess. I think we have to look ahead. I think, you know, people in this administration have been working very, very hard. We've got really smart people, the health people are working hard, our economic teams are working hard. We're dealing with the unknown and we're doing the best we can. So, I'm not going to single out one thing. This is what it is. And we're trying to cope with it as best we can. Virtually the entire country is mobilized. The president -- the president has been, in my view, he has been a terrific leader in this. He was early with the travel restrictions, and he was early with the task force. And we have been early in communicating and working with the private sector and trying to develop remedies and therapies and vaccines. And he was early with the European travel restrictions. We have done what we can. Things turned out to be much, much, much tougher than anybody dreamed possible. So, I don't want to get into the blame game or the second-guessing game. We are doing the best we can, mobilizing America's resources. And I think if you look down through history, Kelly, America's resources usually work out very, very well and we are capable of dealing with problems and coming out the other side in even better shape than we started.

KELLY EVANS: Yeah. For me it is not the blame game. It is lessons learned. Unfortunately, this is probably not the last time we will deal with something like this. Hopefully it is the last for a while. But coming out the worst month of the market since 1931. I just don't like these kind of stats, you know.

>> Well, you just have to move through it. Again, I can't predict. All I know is we have completely mobilized. It's government-wide, but it's country-wide. It's America wide. It includes the smartest people in the private sector, it includes the scientific and medical community, it includes the economic thinking. We're just doing the very best we can. I think you have to keep your chin up. And I think you have to have a lot of faith that we will get through this. I personally believe we will. You know I'm an optimist. And I work through with you and others when we were broadcasting during '08 and '09 and '10, we came out of that and we got even better. In recent years, the economy picked up. I will give the president's policies -- before this tragedy, the economy was doing extremely well. By all accounts. There is no reason why we can't pick it up from there. There is no reason why we can't get through this period. And these large market declines can reverse themselves very rapidly, Kelly. And over time, that's the history of the U.S. stock market. It takes its hits, sometimes brutal hits, but it manages to come back and grow. That's why I think long-term investing is still a good idea.

KELLY EVANS: All right. Larry, thank you for your time today. We appreciate it very much. Big day. Had a lot of them lately. Larry, thanks. Larry Kudlow is the National Economic Council Director.  

For more information contact: 


Jennifer Dauble
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Emma Martin 
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m: 551.275.6221