WHEN: TODAY, WEDNESDAY, APRIL 1ST
WHERE: CNBC'S "SQUAWK ON THE STREET"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Richard Fisher, Dallas Federal Reserve President, today on CNBC's "Squawk on the Street."
All references must be sourced to CNBC.
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LIESMAN: THANKS, MARK. NOT MUCH, NOT MUCH. WE'RE HERE IN DALLAS FOR AN EXCLUSIVE INTERVIEW WITH THE DALLAS FED RESERVE PRESIDENT RICHARD FISHER. THANK YOU FOR JOINING US, PRESIDENT FISHER.
FISHER: THANK YOU FOR HAVING ME.
LIESMAN: THANK YOU FOR HAVING ME HERE IN DALLAS.LET'S START WITH THE DATA. CAME OUT KIND OF IN LINE WITH WHAT WE'VE SEEN.A LITTLE LESS BAD THAN WHAT WE'VE SEEN BEFORE. HOW DO YOU PUT IN CONTEXT A 36 ISM, HOUSING NUMBERS THAT ARE STILL VERY, VERY DEPRESSED BUT NOT GETTING ANY WORSE?
FISHER: WELL, OF COURSE, THESE ARE BACKWARD NUMBERS BUT WE'RE AT THE END OF THE FIRST QUARTER OR THE BEGINNING OF THE SECOND QUARTER. THE POINT IS I THINK -- THIS IS MY VIEW -- THAT THE FIRST QUARTER WAS EQUALLY BAD OR MAYBE SLIGHTLY WORSE THAN THE FOURTH QUARTER. AND OBVIOUSLY WE'RE UNDER DURESS RIGHT NOW, BUT EXPECT A GRADUAL LIFTING OF PERFORMANCE GETTING LESS WORSE AS WE GO THROUGH THE YEAR. BUT STILL I EXPECT NEGATIVE GROWTH FOR THIS YEAR AND IMPROVEMENT IN THE SUBSEQUENT YEAR.
LIESMAN: CAN YOU WALK US THROUGH THIS QUARTER BY QUARTER. IS THERE A POSITIVE GROWTH QUARTER BUILT INTO YOUR FORECAST?
FISHER: YOU KNOW THAT ECONOMIC FORECASTING WAS INVENTED TO MAKE ASTROLOGY LOOK RESPECTABLE. I THINK IT IS A MATTER OF TONE. RIGHT NOW I SEE NO CONFIDENCE OUT THERE. PEOPLE ARE DEFERRING EXPENDITURES, CAP-EX, THAT DYNAMIC IS STILL IN PLACE. I EXPECT THAT TO BE GRADUALLY ALLEVIATED AS WE GO THROUGH TIME DUE TO OUR PROGRAMS AND FISCAL POLICY AND OTHER MEASURES. BUT RIGHT NOW I THINK, STEVE, TO TALK QUARTER BY QUARTER DOESN'T MAKE A LOT OF SENSE TO ME. THE POINT IS WE'RE DOWN, I EXPECT A GRADUAL LIFTING.I DON'T THINK WE'LL GET INTO POSITIVE TERRITORY.PERSONALLY THIS IS MY VIEW, UNTIL 2010.
LIESMAN: WHY IS THERE NO CONFIDENCE? THE GOVERNMENT HAS ANNOUNCED ALLOF THESE PROGRAMS, $800 BILLION OF STIMULUS.THE FED HAS A SERIES OF PROGRAMS IN THE TRILLIONS OF DOLLARS. HAS THE FED, THE GOVERNMENT NOT BEEN EFFECTIVE IN COMMUNICATING THE PROGRAMS COMING AND IS THE MARKET SIMPLY NOT DISCOUNTING IT CORRECTLY?
FISHER: I HOPE WE'VE BEEN AFFECTED. WE'RE CERTAINLY AHEAD OF THE CURVE AND YOU'VE SEEN OTHER BANKS NOW FOLLOW US. THAT'S THE KEY POINT. THE GLOBAL ECONOMIC SITUATION HAS IMPLODED. AS YOU'VE SEEN THE NUMBERS THAT HAVE COME OUT FOR GLOBAL GROWTH ARE NEGATIVE NOW. AND I THINK THERE'S AN OVERALL BAD MOOD IN TERMS OF THE WORLD AT LARGE. SO THERE'S A GREAT QUOTE I LIKE TO QUOTE FROM JAMES MADISON, ONE OF THE FOUNDING FATHERS.THE CIRCULATION OF CONFIDENCE IS AS IMPORTANT AS CIRCULATION OF MONEY OR GOLD.SO WE'RE PROVIDING THE MONEY FUNCTION RIGHT NOW.THERE'S AN ENORMOUS AMOUNT OF STIMULUS IN THE ECONOMY, BUT THERE'S DEEP CONCERN. THERE'S A LOT OF FOG OUT THERE, THEY DON'T KNOW WHETHER IT LEADS TO A BOX CANYON OR A NEW BRIDGE IN THE SUNLIGHT. AND TIME WILL TELL.
LIESMAN: DO YOU FEEL THAT EUROPE HAS BEEN LATE TO HELPING OUT THE GLOBAL ECONOMY AND THE EURO ZONE AND DO YOU NEED MORE HELP FROM OVERSEAS CENTRAL BANKS THAT GET THE ECONOMY AND THE GLOBAL ECONOMY GOING?
FISHER: AS YOU KNOW, TRICHET WILL MAKE AN ANNOUNCEMENT TOMORROW AS TO WHAT THE ECB HAS DECIDED. THAT'S THEIR BUSINESS. I DON'T MAKE POLICY FOR THEM. I WORK WITH THE FEDERAL RESERVE OF THE UNITED STATES. I DO FEEL WE WERE AHEAD OF CURVE.I HOPE THE MARKETPLACE APPRECIATES THAT.
LIESMAN: IS THE UNITED STATES ON THE FISCAL SIDE DOING ENOUGH IN THE WAY OF STIMULUS IN YOUR MIND TO GET THE U.S. ECONOMY GOING?
FISHER: IT'S DOING A LOT IN THE WAY OF FISCAL STIMULUS.AND AGAIN, WE'RE NOT FISCAL AUTHORITIES.WE DON'T HAVE THE POWER TO TAX AND SPEND. THAT'S THE CONGRESS. BUT CLEARLY THERE'S AN ENORMOUS PROGRAM UNDER WAY.IT NEEDS TO BE FINANCED.THAT'S PART OF WHAT WE ARE ABOUT. AND I THINK AN AWFUL LOT IS BEING DONE, BUT YOU KNOW THE PRIVATE SECTOR CREATES JOBS IN THE END THAT ARE SUSTAINABLE.THAT'S WHERE THE CONFIDENCE IS BEING REINSTILLED. THIS IS AN ATTEMPT TO JOLT THE ECONOMY THROUGH FISCAL STIMULUS AND THROUGH THE MONETARY POLICY THAT WE'RE PURSUING.
LIESMAN: YOU HAVE SAID THAT THE FEDERAL RESERVE NEEDS TO BE CAREFUL NOT TO MONETIZE THE DEBT OF THE TREASURY.YET THE FED JUST RECENTLY PURCHASED $300 BILLION OF TREASURY. ISN'T THE FED DOING JUST THAT, MONETIZING THE DEBT?
FISHER: FIRST, IF I MAY BE SO BOLD AS TO CORRECT YOU --
LIESMAN: PLEASE.
FISHER: WE HAVE PURCHASED 17.5 BILLION SO FAR OF U.S. TREASURIES SINCE WE MET. WE HAVE ANNOUNCED THAT WE WOULD BE BUYING UP TO 300 BILLION OVER A PERIOD OF SIX MONTHS. THE DESK ANNOUNCED IN NEW YORK WILL ANNOUNCE TODAY THAT TWO-WEEK GOING FORWARD, THAT'S THEIR BUSINESS TO ANNOUNCE. BUT THIS WAS DECIDED BY COMMITTEE. EVERYBODY PUTS IN THEIR VIEWPOINTS.AND THAT WAS THE CONSENSUS OF THE COMMITTEE AND THAT'S WHAT WE'RE PURSUING.
LIESMAN: BUT WHY ISN'T THAT MONETIZED IN THE DEBT? BACK IN FEBRUARY, YOU SAID SPECIFICALLY WE HAVE TO BE CAREFUL NOT TO MONETIZE THE DEBT.
FISHER: I FEEL VERY STRONGLY ABOUT THAT. WE HAVE TO BE CAREFUL NOT TO BE PERCEIVED AS MONETIZING FISCAL LARGESSE TO THE DEGREE THAT WE CREATE INFLATIONARY IMPULSES GOING FORWARD. NOW IT'S THE DECISION OF THE COMMITTEE THAT WE WOULD PURCHASE 300 BILLION OVER A SIX-MONTH PERIOD AND I SUPPORT THAT DECISION ONCE THAT DECISION IS MADE. THE POINT IS NOT TO IGNITE THE EMBERS OF INFLATION GOING FORWARD. EITHER BECAUSE OF PERCEPTIONS OR BECAUSE OF REALITY. AND I THINK WE ARE FULLY AWARE -- AND I'M NOT UNIQUE.EVERY MEMBER OF THE COMMITTEE FROM THE CHAIRMAN ON DOWN FULLY AWARE THAT THAT IS A PERCEPTION RISK AND A MORAL HAZARD AND WE'LL HAVE TO MANAGE IT.
LIESMAN: OBVIOUSLY THIS $300 BILLION IN TREASURY PURCHASES WAS AN HISTORIC MOVE BY THE FEDERAL RESERVE ALONG WITH $750 BILLION IN MORTGAGES. WE HAVE TO BREAK SOON AND TALK MORE ON THE OTHER SIDE OF THE BREAK, BUT IF YOU COULD, WHY 300?WHY NOT 400?WHY NOT 200? HOW DID YOU ARRIVE AT THE NUMBEROF 300 BILLION?
FISHER: THAT'S THE NUMBER THAT WAS ARRIVED AT.
LIESMAN: BUT WHY? WAS THAT A NUMBER DESIGNED TO DO SOMETHING? AND I GET AT THAT BECAUSE WE SORT OF UNDERSTOOD WHY YOU WOULD DO A QUARTER OR 50 OR 100, THE MARKETS HAD A KIND OF CALIBRATION ON THIS. WE DON'T HAVE ONE. MAYBE YOU CAN EXPLAIN TO US WHY 300 BILLION?
FISHER: THAT WAS THE NUMBER DECIDED BY THE COMMITTEE ALONG WITH ANOTHER HUGE TRANCHE OF MORTGAGE BACKED SECURITIES.THE TOTAL IS 1.75 TRILLION. A SIGNIFICANT NUMBER.
LIESMAN: AND IS IT ENOUGH, YOU THINK? HAVE YOU BEEN PLEASED BY THE MARKET REACTION?
FISHER: SO FAR THE DESK HAS EXECUTED WELL. THEY'VE DONE IT AT DIFFERENT POINTS OF THE MATURITY SPECTRUM. CONTINUED TO DO SO.AND I THINK SO FAR THE MARKET SEEMS TO HAVE GREETED IT WELL.
LIESMAN: PRESIDENT FISHER, WE HAVE MUCH, MUCH MORE TO TALK ABOUT. WE'LL TALK ABOUT THE DALLAS ECONOMY, THE U.S. ECONOMY AND MORE ABOUT THE FEDERAL RESERVE ON THE OTHER SIDE OF THE BREAK.BUT NOW BACK TO MARK AT THE NEW YORK STOCK EXCHANGE.
BREAK
LIESMAN: ERIN, THANKS VERY MUCH. PRESIDENT FISHER DURING THE BREAK WE'LL TALK ABOUT THE SPECIAL PROSECUTOR FOR THE T.A.R.P. WHEN IT COMES TO HIRING OVERSEAS INDIVIDUALS. WHAT ARE YOUR THOUGHTS ON THAT?
FISHER: WELL, AGAIN, THIS IS A DECISION MADE BY POLITICAL AUTHORITIES. AND THE QUESTION IS HOW IT WILL AFFECT OUR OPERATIONS OF DIFFERENT PROGRAMS THAT WE'RE TRYING TO PUT FORWARD. AND THIS IS A BRIGHT, YOUNG, 39-YEAR-OLD PROSECUTOR, OFTEN PROSECUTORS HAVE AMBITIONS. I TRUST THIS GENTLEMAN IS JUST DOING WHAT HE SHOULD BE DOING BEST. BUT THERE IS A QUESTION A LOT OFMARKET CHATTER TODAY ABOUT WHETHER OR NOT THIS WILL INHIBIT PEOPLE WILLING TO BORROW IN THE DIFFERENT PROGRAMS THAT WE'VE PUT FORWARD.DOESN'T AFFECT THE COMMERCIAL PAPER FUNCTION BY THE WAY. BUT NEW PROGRAMS, THE TALF AND SO ON.
LIESMAN: ALREADY SOME BANKS ARE SAYING THEY WANT TO GIVE BACK THE T.A.R.P. MONEY. ARE WE MAKING A MISTAKE BY MAKING IT TOO TOUGH FOR THE BANKS TO TAKE THE T.A.R.P. MONEY ESPECIALLY WITH QUESTIONS WHETHER THEY CAN HIRE OVERSEAS INDIVIDUALS?
FISHER: I'LL QUOTE JAMES CARVILLE WHEN HE SAID HE THOUGHT IF HE COULD BE REINCARNATED BECAUSE HE WOULD COME BACK AS THE BOND MARKET BECAUSE HE'S MORE POWERFUL THAN THE POPE OR THE PRESIDENT. THIS IS A TENSION THAT EXISTS BETWEEN POLITICS AND THE NEED TO EXPRESS ANGER AND ALSO TO PURSUE POLICIES ACCORDING TO POLITICAL DICTATES. WHAT THE BOND MARKETS REQUIRE AND WHAT THE CREDIT MARKETS REQUIRE IN ORDER TO RESPOND EFFICIENTLY. I THINK THIS KIND OF TENSION WILL BE IN PLACE UNTIL THIS ALL GETS SORTED OUT. THIS IS ONE OF THE ISSUES RIGHT NOW THAT'S UPSETTING MARKET OPERATORS.
LIESMAN: I THINK I HEAR WHAT YOU'RE SAYING ON THAT. LET ME ASK ABOUT THE REGION WE'RE IN, DALLAS.
FISHER: THANK YOU.
LIESMAN: A LITTLE LATE TO THE RECESSION PARTY. BUT THE CONCERN IS THAT IT LINGERS A LITTLE BIT LONGER. WHAT IS THE OUTLOOK HERE? AND THE ECONOMY DID DIVERSIFY QUITE A BIT. NOT AS ENERGY INDEPENDENT. DID THAT HELP IT STAY OUT OF RECESSION FOR A WHILE?
FISHER: ENERGY GOT DOWN TO ONLY 4% OFOUR OUTPUT IN THIS REGION WHICH IS MAINLY TEXAS, SOME LOUISIANA, SOME NEW MEXICO. WE OPERATE 40% OF THE RIGS IN THE UNITED STATES BUT THAT'S ONLY 4% OF OUR ECONOMY. THESE HIGH PRICES GOT UP TO 8%. THAT'S WHERE ROUGHLY IT IS RIGHT NOW. SO WE'RE A DIVERSIFIED ECONOMY. I HAVE THE PLEASURE OF BEING THE HEAD OF THE FEDERAL RESERVE DISTRICT, THE ONLY ONE IN AMERICA THAT CREATED JOBS LAST YEAR. OVER 70,000 JOBS NOT VERY MUCH.WE HAVE 10.6 MILLION PEOPLE AT WORK HERE IN TEXAS ALONE. WE'RE THE LAST IN, BUT I BELIEVE BASICALLY LIPO ACCOUNTING LAST IN, FIRST OUT.THE CUT WILL BE LESS THAN THE REST OF THE COUNTRY. IT WILL TAKE LESS STITCHES TO REPAIR. AND I'LL TELL YOU WHAT WE'RE DOING RIGHT NOW WHETHER ITS THE GOVERNOR OR THE BUSINESS COMMUNITY HERE, GOING OUT AND RECRUITING FROM DISTRESSED AREAS THE BEST COMPANIES, THE BEST FOR OUR ACADEMIES AND WE'RE GOING TO TAKE ADVANTAGE OF THIS DOWNTURN ELSE AND OUR RELATIVE STRENGTH, WE'LL COME OUT MUCH STRONGER THAN EVERYBODY ELSE.
LIESMAN: YOU MENTIONED HIGH OIL PRICES, WHICH SORT OF RAISES THEQUESTIONS ABOUT YOUR VOTES IN 2008. YOU DISSENTED FIVE TIMES EITHER WANTING TO KEEP RATES UNCHANGED, NOT LOWER THEM, OR TO INCREASE RATES.DO YOU THINK THOSE ARE MISTAKES YOU MADE BACK THEN?
FISHER: NO. THEY WERE MY OPINION. I DON'T BELIEVE IT WAS SO MUCH THE PRICE OF MONEY AS IT WAS THEACCESSIBILITY OF CREDIT.BUT I DEFER TO THE WISDOM OF THE COMMITTEE. EACH OF US PUTS OUR OWN INPUT, WE ARGUE OUR VIEW.SPOINTS AND THERE'S A DECISION MADE AND I RESPECT THAT DECISION. I DON'T BELIEVE I WAS WRONG WE HAD ENORMOUS INFLATIONARY PRESSURES UP DURING THE SUMMER.NOBODY FORESAW THIS DRAMATIC TURN THAT TOOK PLACE IN THE GLOBAL ECONOMY.NOT ANY SINGLE CENTRAL BANKER THAT I'M AWARE OF ANYWHERE IN THE WORLD. BEN, TO HIS CREDIT, I BELIEVE, WAS AHEAD OF THE CURVE. I THINK HIS INSIGHTS WERE VERY HELPFUL THERE
LIESMAN: DO YOU THINK STILL IT'S THE AVAILABILITY OF MONEY AND NOT THE PRICE OF MONEY? AS IN SHOULD THE FED NOT BE AT ZERO, DO YOU THINK?
FISHER: WE ARE AT ZERO. WE'RE BETWEEN ZERO AND 0.25%. SO OTHERS ARE COMING IN OUR DIRECTION.BUT IT IS STILL A QUESTION OF HOW THE CREDIT MARKETS FUNCTION. I HAVE BEEN FULLY SUPPORTIVE OF ALL THE TOOLS THAT WE'VE BROUGHT TO BEAR HERE TO GET THE MARKET FUNCTIONING AGAIN. WE DO HAVE A RESPONSIBILITY FOR FINANCIAL STABILITY.
LIESMAN: THERE'S BEEN DISCUSSION ON THE FEDERAL RESERVE BOARD THAT THEY SHOULDN'T BE OUT THERE TARGETING INDIVIDUAL CREDIT MARKETS. ALL THESE WHATEVER ALPHABET SOUP OF PROGRAMS THAT YOU GUYS HAVE. INSTEAD THE IDEA OF BUY TREASURIES, BUY MORE BROADLY THROUGH THE OPEN MARKET SYSTEM, DO YOU THINK THE FED OUGHT TO SCALE BACK SOME OF THOSE INDIVIDUAL CREDIT PROGRAMS AND GO TO A MORE BROAD SUPPORT AS IN ADDITIONAL PURCHASES OF SECURITIES?
FISHER: I'VE BEEN VERY SUPPORTIVE OF OUR MORTGAGE BACKED PROGRAM IN PARTICULAR. WE'VE DRIVEN THAT RATE DOWN TO HISTORIC LOWS.I THINK IT'S VERY HELPFUL, IF YOU TALK TO HOME BUILDERS THEY'RE ENORMOUSLY GRATEFUL. WE'VE BEEN SEEING SOME REGENERATION OF ACTIVITY AT LEAST A BURNING OFF OF INVENTORY THERE. AND I THINK THAT PROGRAM HAS BEEN PARTICULARLY SUCCESSFUL. THE COMMERCIAL PAPER PROGRAM HAS BEEN SUCCESSFUL AND IS WINDING ITSELF DOWN ACCORDING TO THE HEALTH OF THAT MARKET.THAT'S WHY IT'S BEEN GOING DOWN ON OUR BALANCE SHEET BY SMALL AMOUNTS BUT STILL IMPROVING. SO I THINK THOSE PROGRAMS HAVE BEEN VERY, VERY EFFECTIVE. AND I FAVOR THEM.
LIESMAN: WE'RE GOING TO RUN OUT OF TIME HERE AND I'D BEERY MISS IF NOT TRYING TO DRAW ON OUR EXPERTISE IN THE TRADE SECTOR.YOU'RE A DEPUTY TRADE REPRESENTATIVE. YOU WENT WITH PRESIDENT CARTER, AS YOU SAID TO ME A LONG TIME AGO, HOW SERIOUS IS THE THREAT OF PROTECTIONISM? AND WHAT WOULD YOU TELL THE G-20 LEADERS RIGHT NOW THAT NEEDS TO BE DONE TO WARD OFF THAT THREAT?
FISHER: I THINK ACTIONS SPEAK LOUDER THAN WORD.IT IS NOT JUST WHAT THEY SAY, IT'S WHAT THEY DO.I'VE SAID IT BEFORE, I'LL SAY ITAGAIN. PROTECTIONISM IS THE CRACK COCAINE OF ECONOMICS.IT GIVES YOU A HIGH RIGHT AWAY, BUT IT'S INSTANTLY ADDICTED. WE'VE BEEN THROUGH THIS SO MANY TIMES HISTORICALLY, I UNDERSTANDTHE DESIRE TO PROTECT YOUR OWN. WE WOULD DO THIS FOR OUR OWN FAMILIES IN THE CASE OF A FIRE, WE PROTECT OUR OWN FAMILIES FIRST. BUT WE HAVE TO BE AWARE THAT WE LIVE IN A GLOBAL NEIGHBORHOOD. I THINK THE G-20 LEADERS NOT ONLY HAVE TO SAY THE RIGHT THING, MAKE SURE THEY'RE GOING TO DO THE RIGHT THING.I DON'T EXPECT A WHOLE LOT OUT OF THE G-20 MEETING.
LIESMAN: WHAT WOULD YOU EXPECT OVER THE NEXT SEVERAL WEEKS?
FISHER: THE INTERESTING THING IS THESE ARE PEOPLE SEEING A NEW AMERICAN PRESIDENT, A DYNAMIC NEW AMERICAN PRESIDENT. THEY'RE SIZING HIM UP. THEY'RE ALL TRYING TO GET TO KNOW EACH OTHER BETTER IN THIS FORUM.THESE COLLECTIVE FORUM, ARE PRETTY MUCH PREBAKED THE STATEMENTS ARE PRETTY MUCH PREDRAFTED. THE PUBLIC HAS TOO HIGH AN EXPECTATION FOR ACTION TO COME OUT OF THEM.IT IS REALLY THE MOOD HOW THEY FEEL ABOUT EACH OTHER. I EXPECT HIS BILATERAL MEETINGS WILL BE MUCH MORE PRODUCTIVE.
LIESMAN: PRESIDENT FISHER, THANK YOU FOR YOUR TIME.
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