Return to Transcripts main page
Interview with Treasury Secretary Jack Lew; Silicon Valley Gold Rush
Aired February 22, 2014 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN HOST: A decided arc of progress. That is what Treasury Secretary Jacob Lew sees when he looks at the U.S. economy.
Good morning, everyone. I'm Christine Romans. This is YOUR MONEY.
Forced budget cuts, debt ceiling brinksmanship, and a government shutdown held the economy back last year, but this year begins with the rarest of rare of Washington traits, compromise. Still, too many Americans say they are struggling in the economy.
In an exclusive interview, Treasury Secretary Lew tells me he is focused on helping those at bottom of the income ladder climb out of poverty.
(BEGIN VIDEO CLIP)
JACOB LEW, TREASURY SECRETARY: I don't believe it is right for people to work for 40 hours and take home pay that's below the poverty line. The president made it very clear that as a country, we have to make sure that if you work full-time, you're at least at the poverty line.
ROMANS: You can get that done this year? You think that you can -- I know the president has done an executive order on it, you know, in a small sliver of the federal workers --
LEW: We're going to keep pushing at it. You know, it's obviously not in our power to force Congress to act. But we can make the case for it. And we can have the American people make the case for it. And we're going to continue pressing because it is the right thing to do.
ROMANS: The CBO report this week really gave the people who are against it what they feel is ammunition. You know, it would be a job loss, it would be a poverty alleviation program on the backs of small businesses who have to pay for it.
LEW: You know, I think if you look at the report, it also showed that it would take almost a million people out of poverty. There are a lot of views on the economics of the minimum wage. I know that the studies done by a number of people, including Nobel laureates showed that it has the opposite effect. I tend to think that they're right, but we have time for that debate.
ROMANS: Someone who's had your job, Larry Summers, he's been writing that we are becoming a "Downton Abbey" economy. Do you agree with him? LEW: I don't think we have to be. I mean, you know, I think it's more of a prediction than it is an assessment. And I think if you do the right things, we can create opportunity.
One thing about American people generally is if they are doing well, they don't begrudge other people. They want to change to have a middle class job and we can solve that problem.
ROMANS: What do you make of the twist of the income equality discuss? Over the last couple of weeks, you've got billionaires and almost billionaires and venture capitalists and, you know, titans of real estate who are saying that we need to emulate, the middle class need to emulate the top 1 percent.
LEW: You know, I think you can find people who will say a broad range of things. I don't pretend that we're going to solve what was a 30- year trend in one year or two years. But we can make a lot of progress, and we can make sure that we expand the access to opportunity.
I do know that we have multiple issues that we have to deal with. It is important to extend unemployment benefits, because people who are looking for work who can't make ends meet, through no fault of their own because we went through the worst economic crisis since the Great Depression, they need a little help while they're working for work. And, frankly, our economy needs the demand.
ROMANS: The money goes right into --
LEW: The money goes right into the economy. So, it's good economics and it's the right thing to do.
ROMANS: So, you've been a year on the job. On a scale of 1 to 10, how is the economy doing?
LEW: I think the economy is doing pretty well. Obviously, we want it to do better, obviously. But you look at the last year, we got a lot done. I don't want to overstate the situation. It's going to be challenging to do hard things.
We'll see when everyone gets back after this break and can we do some more? Obviously, it's an election year. So, it's not going to be as possible with the fall and summer as it would be in other years.
ROMANS: Can you get immigration reform done --
LEW: I think immigration reform is something where there is a bipartisan majority that wants to take action. And I think that it is something where the direction of policy, you know, is clearly an interest.
I know that there are a lot of statements out of Washington that there are disputes even within the Republican Party. But, you know, I think it has certain attributes that make me feel that there's going to be action at some point in the not that distant future. I don't know if it's the next few months or the next year or two.
And, you know, immigration reform will even help us deal with the entitlement issues because it grows the economy. It grows the payroll tax base and it helps to support Social Security and Medicare financing.
ROMANS: So, now, we have this. You're going to G-20 in Sydney with sort of this new -- I guess my expectations have been so low for Washington that I don't want to overstate the thaw in the relations with the two parties and getting things done in Congress, but you go there against backdrop of raising the debt ceiling and getting big legislative issues out of the way.
What are you going to tell our colleagues there, what are you going to tell about the health of the U.S. economy and America's leadership, I guess? What's the message for them?
LEW: I think the United States goes to the world community as a leader both in terms of showing how you respond to an economic crisis, in terms of getting the economy moving again and how do you respond to a financial crisis in terms of reforming your system, to protect your citizens and your consumers and your institutions.
I think that our message to the world will continue to be the rest of the world needs to look at what it can do to promote growth and demand. We're going to do our part. We're going to try to do even more. But there has to be broader attention to increasing demand and growth.
ROMANS: Coming up, you just heard America's treasury secretary strongly endorse raising the minimum wage and insist the administration is making progress creating good middle class jobs. Shocker. Not everyone agrees.
Carly Fiorina is the former CEO of Hewlett-Packard, a former Republican Senate candidate. We're going to get her take on it, next.
ROMANS: Real progress made, but still more work to be done. That's how Treasury Secretary Jack Lew described his view of the American economy.
But my next guest says the question is not whether we have made progress, it's -- why aren't we doing better?
Carly Fiorina is the former CEO of Hewlett-Packard. Today, she chairs the charitable organization, Good360. She also ran for the Senate. She advised John McCain and Mitt Romney during their presidential runs.
Carly, nice to see you today.
You know, the treasury secretary strongly argued for raising the minimum wage. I want you to take a listen to what he said.
(BEGIN VIDEO CLIP)
LEW: I don't feel it's right to work for 40 hours and take home pay that's below the poverty line.
(END VIDEO CLIP)
ROMANS: For him, it is an issue of economic justice. You know, the Congressional Budget Office this week says it would lift nearly a million people out of poverty, raising that minimum wage. But it would cause 500,000 jobs. At the same time, you've got companies like the Gap, Carly, who are voluntarily to raise -- to pay their workers more than the minimum wage, just this week, saying they were going to raise wages for 65,000 people.
So, should the federal government force companies to do it or do you think companies are going to start -- more companies are going to start doing it like Gap?
CARLY FIORINA, CHAIRMAN, GOOD360: Well, I think -- first of all, the many, many companies pay above the minimum wage. And as demand rises and as productivity rises, wages rise. We know that.
I understand the appeal of the minimum wage. And I even understand the ethical argument. The facts are the minimum wage increase helps people who have a job. It doesn't help people who don't have a job.
It particularly doesn't help people who are low skilled, who need an entry-level job to perhaps work their way up. You know, a lot of executives at places like Burger King started flipping burgers. They started an entry-level job.
ROMANS: There has to be a place to go to from that job. That is the issue of social mobility in this country.
FIORINA: Of course, of course.
ROMANS: And the fact that we used to have this big factory middle, that we don't have the middle we used to. You know, I talked about those middle class jobs, you know, investing in training, investing in education and infrastructure. You know, he says these are not partisan issues.
I hear this from both sides. I hear about how our education system needs to be better. We need to make sure we are matching the right skills with the right workers. I hear both sides say that, Carly, but I see it working on the margins
How do we work together to get people the right skills and the right skills with the right jobs?
FIORINA: Well, I think it is an important question. It shouldn't be a partisan issue. First, we have plenty of educational choices and options and facilities in this country. We should be making progress for example on using our community colleges more aggressively to match the skills they teach with employers in the area. There is bipartisan support on that.
I, for the life of me, cannot understand why progressives are against school choice and voucher programs. Indeed, if you look at families, you will see across the political spectrum, parents want their children to have choices. They as parents want to have choices. They don't want to be stuck in an underperforming school.
And for the life of me, I cannot understand why it's a partisan issue to hold teachers to a level of accountability.
ROMANS: You know why, they believe in the K through 12 system. They believe in the right to an equalize public school education that everyone should have that.
FIORINA: I agree with that, I agree with that.
ROMANS: That model. They don't want to start freelancing around -- so, you know what -- those two sides are entrenched.
Let's talk income equality, though, here because this is really the big theme. You know, he admitted you're not going to solve the problem, the treasury secretary told me this, you're not going to solve a 30-year trend in one or two years.
But I'm telling you right now, in San Francisco this week, you could smell the money, right? Facebook buying WhatsApp, it's a company that didn't exist five years ago. Buying it for $19 billion.
But people don't get angry about, right? They don't get angry about the couple of guys becoming the sliver of the top 1 percent. That's the American dream, right? Building something from nothing and selling it for bundle.
FIORINA: Right. That's right.
ROMANS: What's your take on all these noise between the 1 percent versus the 99 percent? You know, you got this Silicon Valley is really kind of an example of it. People are complaining about high -- you know, sky high real estate values because of the 1 percent Silicon Valley.
But what are you making of this? Is this class warfare?
FIORINA: Well, first of all, I think most Americans don't begrudge success that's hard fought and well earned. And so, when somebody like Mark Zuckerberg becomes wealthy, people say, yes, that is the American Dream.
Of course, people need to remember when they look at Silicon Valley, that one of the reasons people can be successful in Silicon Valley is because they also can fail in Silicon Valley. There are lots of failures in Silicon Valley beyond the huge successes of things like Facebook and WhatsApp.
The other thing I would say, however, is income inequity has worsened under President Obama. In large measure it's worse because we are destroying jobs and not creating jobs, not creating enough jobs, and because the quantitative easing of the Federal Reserve has so pumped the value of the stock market and equity assets. And those assets generally are held by the top 1 percent.
So, what we need to be doing is creating more jobs. You talk about lack of middle class jobs. Approve the Keystone Pipeline. It would create middle class jobs.
Stop the war on coal. It would save middle class jobs.
Stop crushing small businesses who create most of the middle class jobs with regulation and complex tax code. I mean, this is how the economy works.
So, on the one hand, I understand the appeal of a minimum wage increase. I understand the appeal of extending unemployment benefits. But neither of those things will create a single job.
And meanwhile, the policies of this administration are holding job creation back.
ROMANS: Nice to see you, Carly Fiorina.
FIORINA: Thanks for having me.
ROMANS: All right. One lucky lottery winner nabbed the $425 million jackpot in Silicon Valley. But that looks like chump change compared to the mega deal we just talked about. The real winners are the newly minted tech billionaires. More on them, next.
ROMANS: In Silicon Valley, you can almost smell the money. There's a drought in California, but here is what's growing -- ideas and newly minted billionaires. Facebook just bought WhatsApp for $19 billion. The company that didn't exist five years ago. It only has 55 employees.
That makes WhatsApp more valuable than Chipotle, Marriott, Bed Bath & Beyond, Campbell Soup, and Mattel. These are household names. They've been around for years. They have tens of thousands of employees.
So, what is WhatsApp? It's a social network that's also an app, that's also a messaging system. It let's users send messages but avoid texting fees. A lot of Americans may have never heard of it, but guess what? Hundreds of millions of people around the world, youngest people have.
I want to bring in CNN's Laurie Segall. She's been talking to insiders with knowledge of the deal. And here's what's just so facing. You know, in business, something is worth what someone else will pay for it.
And, clearly, Facebook would pay $19 billion for WhatsApp.
LAURIE SEGALL, TECHNOLOGY CORRESPONDENT, CNNMONEY: You know, it's a numbers game, when you look at it. Four hundred and fifty million monthly and let me emphasize this, active users. People are using this quite a bit.
We might not be using it here in the United States, but around the world, many folks have completely replaced SMS with this app, with this messaging app. You know, they are adding a million users every day. Also, it's a defensive move.
You know, they don't want Google having this kind of company. And if you do the math, Facebook is spending $42 per user, for WhatsApp user. Do the math, when Facebook bought Instagram, they spent $30 per Instagram user. WhatsApp is growing a lot faster.
So, this is an investment they want to make.
SEGALL: It's very much as Mark Zuckerberg saying, I want to connect the world, but he also wants to be in the hands of all these users all around the world.
ROMANS: Right. And he's gone from founding Facebook to now buying up, acquiring some of those other ideas.
Tell us about the guys behind this billion-dollar deal.
SEGALL: Oh, it's such an interesting story. It's also an immigration story. It's a rag to riches story.
Jan Koum, who's one of the co-founders, he immigrated to Mountain View when he was a teenager. His friends will tell you he barely spoke English at the time. He spent time at a welfare center because his mother was on food stamps.
You know, he was also speaking to sources about when he signed this deal, when actually decided to sign his papers for the Facebook deal, he went back to that same welfare center where he spent so much time with his mother who has since passed away. They said he had tears in his eyes as he was signing it because it was very much the American dream.
His cofounder also has an interesting story. He met his co-founder Brian at Yahoo! They left. Brian left and actually applied for a job at Facebook and they rejected him.
I want to read to you a tweet from 2009. Brian said, "Facebook turned me down. It's a great opportunity to connect with some fantastic people. Looking forward to life's next adventure."
And I will say he found that adventure. Twitter also rejected him. He tweeted that in 2009.
So, obviously, they're doing very well, as you look at it. ROMANS: I'd say so. And I think they're all going to stay onboard. Part of that sales price involved them staying there for a few years because really Mark Zuckerberg wants their talent and their talent works in Silicon Valley.
So nice to see you, Laurie Segall.
ROMANS: All right. I'm telling you, there's a gold rush on in Silicon Valley, great ideas. Money to back them.
I was in San Francisco last week, I'm not exaggerating when I say you can smell the money. I'm not kidding.
I want to bring in Mark Suster. He was right in the middle of it. He's been on both sides of these big deals. First, he was an entrepreneur. Now, he's a venture capitalist.
And he tweeted this about the WhatsApp deal. I love this tweet, Mark. "Zuck, guts of steel." Only you didn't say guts. I'm saying guts because I won't say the other word.
But you think this was really a strong, smart move. Why?
MARK SUSTER, VENTURE CAPITALIST: Well, let me say this -- the future battle of the Internet is mobile. We're going from a tectonic shift from the web to mobile.
And mobile is actually one of the most important aspects is WhatsApp. It's the way that people communicate. It's the way global people communicate, 450 million per month, adding 1 million per day.
SUSTER: So, if you want to be relevant in the future, you have to be relevant in mobile and Facebook had to be there.
I want to say that WhatsApp founders are some of the smartest in our industry. In fact, they're putting the CEO on the board of Facebook, which says a lot.
SUSTER: But what they're really buying here is lock-in. There's called network effect when all these mobile people are communicating with one another on one application, it's very difficult for them to leave and do other thing so what they're really buying is the lock-in.
ROMANS: Pull back from the curtain on the funding side. I mean, when you're looking to invest? Are you looking for the idea? Are you looking for the person? Are you worried about the fickle-changing nature of what people in mobile like?
I mean, pull back from the idea and how you find the money to get to it. SUSTER: The pace of change on the Internet is staggering. The Internet and mobile is staggering. So, what you're investing is an extraordinarily talented team that matters above everything else.
Why? Because if everything changes as quick as it's changing if you don't change it speed of lightning you miss out. Look at Mark Zuckerberg. The fact the Facebook is still relevant is because Zuckerberg has been able to change and make bold moves like buying Instagram.
So, we're looking for amazing talent.
ROMANS: So cool that somebody who is doing extreme Frisbee a couple -- three or four years ago, you know, grew up in this country as a teenager on food stamps. You know, met a good friend. That's just cool. Only in America can that happen.
Mark Suster, thanks so much for joining us. Nice to see you.
SUSTER: Thank you. Appreciate it.
ROMANS: Coming up. No more waiting for downloads, lags in streaming, or messages that won't go through. Google coming to the rescue. See if your area is one of the lucky ones getting a major upgrade, next.
ROMANS: Barbie's new gig a recall in the freezer section and sweet gifts for Oscar nominees. Give me 60 seconds on the clock. It's "Money Time."
ROMANS (voice-over): Bad habits are back. Household debt jumped last quarter for the first time since 2008, mostly because of new mortgages. But it also includes credit cards, auto and student loans.
Check your freezer. Nestle recalling two varieties of Hot Pockets. Certain boxes of Philly steak and cheese flavors may contain bad meat recalled by the U.S. Agriculture Department.
Don't feel bad for Oscars losers. They'll head home with plenty of swag. This year's gift bag for nominees is worth more than $80,000, loaded with luxury items including a $16,000 hair transplant system. Plus, trips to Japan, the Rocky Mountains and Mexico.
Forget the swimsuit, Barbie's got a new gig, entrepreneur. Mattel unveiled the doll in New York. Barbie wears an elegant chic pink dress. She carries the essential tools of startup life, a smartphone, tablet and briefcase.
Those gadgets will perform a lot faster in a handful of U.S. cities. Google bringing what it calls fiber Internet to nine new moat tremendous areas. Google says it's 100 times faster than broadband.
(END VIDEOTAPE) ROMANS: What's more annoying than a slow download? How about a parking ticket. But now, there's an app that might let you get out of it. Fixed allowed you to take a photo of your citation, plus, and any evidence that would help your case. And then the company's team of legal researchers fights the ticket for you.
If you win, you pay 25 percent of the ticket price. If you lose, you pay nothing.
Right now, Fixed said only available in San Francisco. But the company hopes to expand.
Until then, you'll have to pay up or fight it yourself. But what if you didn't have to? We wanted to know, what would you pay to be able to park anywhere?
UNIDENTIFIED FEMALE: Maybe $200 a month, I think, probably would be the max.
UNIDENTIFIED FEMALE: Probably a couple hundred. To park wherever I wanted, absolutely.
UNIDENTIFIED FEMALE: Parking tickets add up quickly.
UNIDENTIFIED FEMALE: Limited real estate, a lot of people fight for it. That's why I don't own a car.
UNIDENTIFIED MALE: Two-fifty for the day, I'll park on the sidewalk. How much they charge for that.
UNIDENTIFIED MALE: What would I pay? Five dollars.
UNIDENTIFIED MALE: I'd pay $10 an hour.
UNIDENTIFIED MALE: Five dollars, that's it. They try to give tickets anywhere.
UNIDENTIFIED MALE: Like 50 bucks.
UNIDENTIFIED MALE: It costs like, what, 40 or 50 bucks to park in a garage in Manhattan --
UNIDENTIFIED MALE: No.
UNIDENTIFIED MALE: I'd pay at least $10.
UNIDENTIFIED MALE: A thousand dollars. If I lived in New York City, I'd probably pay a heck of a lot more.
UNIDENTIFIED FEMALE: Maybe $300, beyond that --
UNIDENTIFIED MALE: I'd like to see them tow this truck out.
(END VIDEOTAPE) ROMANS: Coming up on a brand new YOUR MONEY at 2:00 p.m. Eastern, more of my exclusive interview with Treasury Secretary Jacob Lew.
"CNN NEWSROOM" starts right now.