Obama Officially Nominates Jack Lew for US Treasury Chief; US Economic Recovery
RICHARD QUEST, HOST: Tonight, we are all about nominations. The nomination for the US Treasury Secretary goes to Jack Lew. The nominations for the Oscars are out. We speak to the producer of "Les Miserables."</s>HUGH JACKMAN AS JEAN VALJEAN, "LES MISERABLES" (singing): My sister's child was close to death --</s>ERIC FELLNER, CO-CHAIR, WORKING TITLE PICTURES: It is categorically a financial benefit if your film is still in release.</s>QUEST: And the nomination to take over from Silicon Valley, it's Silicon Alley here in New York. I'm Richard Quest at the New York Stock Exchange where I mean business. Good evening. The president's loss is America's gain. So is the result of the announcement in the last hour that Jack Lew, the White House chief of staff, is to be the nominee for Treasury Secretary, who will be taking over from Timothy Geithner if he is confirmed by the US Senate. The president made his announcement to the media a few moments ago. Mr. Lew is currently the chief of staff. The president said it would be a loss when he leaves that post.</s>BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Although a lot of work remains, especially to rebuild a strong middle class and offer working folks new pathways to rise into the middle class, our economy is better positioned for tomorrow than most of those other countries hit by the financial crisis. The tough decisions Tim made and carried out deserve a lot of credit for that. So I understand that Tim is ready for a break. Obviously, we're sad to see him go, but I cannot think of a better person to continue Tim's work at Treasury than Jack Lew.</s>QUEST: Now, Jack Lew is a consummate Washington professional, a budget director, the White House chief of staff, he knows where everything -- where all the bodies are buried in the US capital, some would say. When he said and when he took the nomination, he said he was very grateful.</s>JACK LEW, US TREASURY SECRETARY NOMINEE: If confirmed, I look forward to joining the Treasury Department, whose people are legendary for their skill and knowledge. It's a team that I've collaborated with closely over many years and have come to respect greatly. Finally, thank you to Ruth, Shoshi, Danny, Zahava and the kids for your endless tolerance with the demands of a schedule that tests all family patience. And thank you, Mr. President, for your trust, your confidence, and friendship.</s>QUEST: Jack Lew, the nominee to be treasury secretary. Here on Wall Street, the Dow is just up 45 points. It hasn't really moved much since we got that announcement. We'll be talking to Ken Polcari in a second or two why that might be the case. Firstly, let's talk about Jack Lew and the nominee as treasury secretary in the wider picture. Ali Velshi is with me. Good afternoon, Ali. Not a huge surprise, well-leaked, well-forecast. Is it going to be a smooth nomination?</s>ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: It probably is. He'll get a few questions. His name's Jacob, you call him Jack, he's 57 years old. He has headed the Office of Management and Budget, which is the administration's budget department, basically, twice: once under Clinton, once under Obama. He's got an illegible signature, but the bottom line is, this is a guy who, like Geithner four years ago, who was able to hit the ground running because we were in a banking crisis back then, and Geithner had been in those rooms where they had made the decisions to let Lehman Brothers go, to talk to the central bankers, to talk to the head of the banks, Lew has been in those rooms where they've made budgets. This guy understands budgets and every detail about them. There's some carping from the right about the fact --</s>QUEST: Why?</s>VELSHI: -- that he's too tight with President Obama. The guy's the treasury secretary. If you didn't win the election, the guy who did gets to choose who he wants in his midst. So, he's going to get this nomination, he'll get some questions --</s>QUEST: Hang on!</s>VELSHI: -- but he's going to get the nomination.</s>QUEST: Don't -- calm yourself, Mr. Velshi, calm yourself. When we put the nomination, though, into context --</s>VELSHI: Yes.</s>QUEST: 2007, 8, and 9 required somebody with deep financial knowledge --</s>VELSHI: Correct.</s>QUEST: -- of markets. Are you saying that that is no longer --</s>VELSHI: Correct.</s>QUEST: -- the principle requirement as the issues --</s>VELSHI: Yes.</s>QUEST: -- become more budgetary and fiscal?</s>VELSHI: That's right, that's exactly right. Right now, we do have a crisis, and it is a budgetary crisis. Imagine if we had a budget, the United States, which we have not had since April of 2009. We have these so-called "continuing resolutions." Every year they say the budget's just going to be a continuation of last year's budget. If we actually had a real budget, you wouldn't have a debt ceiling crisis, you wouldn't have a sequestration crisis, you wouldn't have had the fiscal cliff. You would have just had the Bush era tax cuts to deal with. So the bottom line is, our crisis right now in the United States, the thing standing in the way of strong growth, is budgetary. And Jack Lew understands that. I'm not saying you have to be on his side and that Republicans have to agree with the way he does things, and many don't. But at least he knows the terms of reference in the way that Tim Geithner understood the terms of reference last time a treasury secretary was appointed.</s>QUEST: OK. Finally, before we get the new man, let's look at the old. Is there a general feeling -- I know that I certainly think that Tim Geithner did a fairly spectacular job --</s>VELSHI: Right.</s>QUEST: -- holding everything together during those crucial years of 08, 09, and 10. He might not have been, perhaps, the most charismatic or lively treasury secretary --</s>VELSHI: Right.</s>QUEST: -- we've ever seen, but he certainly held things together.</s>VELSHI: Yes, absolutely. And Jack Lew is probably also not going to come across as the most charismatic and lively fellow around, but that's not the point at the moment. In fact, his obsession with budgetary matters is even more arcane than Tim Geithner's obsession with financial and central banking matters. But the point is, you do need a technocrat in that job. You do not need -- so, I want to bring back one example. Think about Baker. Baker -- James Baker, who was Reagan's treasury secretary, there's a guy who had no financial experience, either, but he was both a politician and a technocrat. Jack Lew has a lot of political experience. He understand you've got to get Congress on side in this country to get budgets done. I think you might actually find this to be a very interesting play.</s>QUEST: Ali Velshi, who remembers the James Baker treasury, which proves he's older than he actually looks.</s>QUEST: Ali, we'll talk more about it.</s>VELSHI: Very good.</s>QUEST: Many thanks. Here on the floor of the stock exchange, the Dow's up just 45 points. When we need to bring politics and Wall Street, the financial world, we need to bring it all together, there's one man that we turn to, it's always my good friend, Ken Polcari, who joins me. Good to see you.</s>KENNY POLCARI, O'NEIL SECURITIES: Hello Richard, nice to see you.</s>QUEST: You've got a bit of a suntan, you old thing.</s>POLCARI: Ah, yes, a little bit.</s>QUEST: A little bit of a suntan. Right. Jack Lew, treasury secretary. You and I have argued and discussed and debated the issues. Will Wall Street applaud this?</s>POLCARI: Listen, I think he's been out there, that name's been out there, Wall Street's kind of ho-hum to it at the moment. I think what they're going to do is they're going to allow it to go on, we'll see Jack Lew probably confirmed. And then Wall Street will make its decision once we get into these budget battles, because for sure, he should be confirmed before the end of the month, and then he's going to get thrown right into the budget battles, and Wall Street will make a decision on whether Jack Lew was the right choice or not based on how these battles go --</s>QUEST: But to --</s>POLCARI: -- because they are expecting --</s>QUEST: -- would they have preferred -- but would they have preferred the consummate insider? Somebody from the Street? The CEO of a Goldman or whatever?</s>POLCARI: I think the Street certainly would have preferred somebody on the inside, but I think we're in a different place. At the time that Timothy Geithner came in, we absolutely needed someone like Timothy Geithner. The world is a little bit different today, we're in a different place, a safer place. And so it's going to be more about policy and budget and negotiation, and Jack Lew, apparently, brings that to the table. So, I think Wall Street is ready to sit back and see how it goes. The assistant will be a Wall Street guy.</s>QUEST: Now, we need to talk about wider issues than just this. The markets are doing remarkably well.</s>POLCARI: Right.</s>QUEST: Not just today, but if we look, we're virtually at multiyear highs, 2007, 2008 highs. What's driving this?</s>POLCARI: I think there's a couple of things that's driving it. I think that there's a much-improved sentiment, certainly here in the States, I'll tell you that on a --</s>QUEST: What does that mean, much improved?</s>POLCARI: I think people are expecting -- they feel that the US economy in fact has started to stabilize, and they are starting to see better days ahead. Now, is it all -- is it all roses right at the moment? Not yet, but the sense is we're getting there. Certainly, China and Asia are starting to turn around.</s>QUEST: But yet, there's such a budgetary problem.</s>POLCARI: Right.</s>QUEST: If there's such a fiscal cliff, if there's so many debates and disputes still to take place --</s>POLCARI: Right.</s>QUEST: -- why are we back to where we were?</s>POLCARI: Because I think the Street thinks that we will get through those problems. I don't think the Street thinks we're going to come to the brink like we did a year and a half ago with the debt ceiling, or like we just did at the fiscal cliff. I think the Street is once again giving legislators a pass to do the right thing. And if it doesn't, if it doesn't happen, you'll see the markets sell off very quickly.</s>QUEST: Sell-off quickly, the Dow. Needless to say, my next question has nothing to do with giving advice as to where you should put a penny of your own money.</s>QUEST: No -- no. Where do you stand on this question of risk-on, risk-off bonds to equities in 2013?</s>POLCARI: I think you're going to see money come out of bonds and come right into equities, because I think the sense here -- you talk to analysts in this country and the story's been told that 2013 is going to be another good years for equities. Listen, don't forget, don't forget: 2012 was a year that nobody expected anything to happen, and we were up 14 percent at the end of the year.</s>QUEST: Right.</s>POLCARI: I think 2013 is going to be a good year for equities.</s>QUEST: 1961, that was even before I was born.</s>POLCARI: The year I was born.</s>QUEST: It wasn't, was it?</s>POLCARI: Yes it was.</s>QUEST: You're older than me?</s>QUEST: You're looking better.</s>POLCARI: Better-looking.</s>QUEST: Yes, that too. Ken Polcari here on Wall Street. When we come back in just a moment, live tonight from the New York Stock Exchange, the question of affordable phones and what's happening in Las Vegas at the Consumer Electronics Show. QUEST MEANS BUSINESS -- foldable phones as well as affordable phones in a moment.