WHITE HOUSE ECONOMIC ADVISER PAUL VOLCKER: The meeting wasn't public, so it can be broadly understood. He emphasized the importance of obviously getting sustainability of the economic recovery, which we hope and believe started in the third quarter. But we've got to move to an economy that can produce more jobs. I think that means to be sustained over a period of time, he emphasized strongly this morning, we need to improve our export ability and capacity. That means more manufacturing. There was discussion of the importance of infrastructure. And there was considerable discussion of how can we take advantage of, so to speak, of the need for a green economy, where we do a lot of the innovation. But can we build upon the innovation that's a strength of the united states into actual production. and there was considerable talk about retrofitting buildings, save a lot of energy, at the same time give some jobs.
BARTIROMO: This is a really interesting point. Everyone's looking at the economy trying to figure out where the jobs come from next. Let me ask you, going into 2010, with cap and trade on the table and health care spending and most people expecting higher interest rates, do you think policies need to be changed in order to incentivize companies to actually create these jobs?
VOLCKER: I think in those three areas I talked about, particularly in the area of retrofitting, I mention that because that's an area you might generate quite a few jobs among the people that are not now employed. It doesn't take new technology. It doesn't take anything new and innovative, it takes the energy to get done more rapidly. what's already being done on a small scale can be done more rapidly on a big scale.
BARTIROMO: What is your sense of where we are right now? We had the GDP report out on Friday showing 3.5% growth. Was that largely government spending, or do you think this is sustainable? How do you see things right now?
VOLCKER: I think the stimulus program contributed to it. it was not largely government spending in a technical sense. We had the inventory picture changed because inventories have been reduced rapidly in the earlier quarters and not being reduced now. Certainly not at the same speed. housing is at the bottom. It showed a little recovery. so you have a variety of forces, recovery and investment. Things that were down. But we're still very near the bottom.
BARTIROMO: Exactly. Today we had more evidence of that with CIT group declaring bankruptcy. do you think that will have an impact given that it's such an important lender to the retail sector?
VOLCKER: I am not an expert on CIT I think they tried very hard to make this as smooth as you can possibly make it, and CIT will remain in business and continue their important function.
BARTIROMO: I was reading about your comments recently as far as commercial banks versus investment banks. Do you think we should be treating the banks as utilities, pure lenders and not in the business of investment banking?
VOLCKER: Pure lenders is an exaggeration of what I'm saying. I think the banks are the core of the financial system and they should pay attention to their knitting, which is taking deposits, making loans, moving money around, helping people invest their money, do some underwriting. They've got plenty of things to keep them busy.
BARTIROMO: Would you like to see a separation of some of the riskier?
VOLCKER: I would like to see speculative capital markets stuff done in the capital markets and the banks do their business.
BARTIROMO: Tell me how you would like to see financial reform.
VOLCKER: I need to make a speech, and then I'll tell you.