Davos 2026: Treasury Secretary Scott Bessent 1/21/26

0:03What I do want to say is, same thing that I said after Liberation day on April 2nd, everyone take a deep breath, do not escalate, do not escalate, and President Trump has a strategy here, hear him out, and then everything will be fine. United States Treasury Secretary Scott Besant at the World Economic Forum in Davos, Switzerland. His message to pretty much everyone as President Trump's tariff agenda takes center stage at the annual meeting. Plus, the much-awaited decision. President Trump's pick for the next Federal Reserve chair. My guess is that the president will reach a decision maybe as soon as next week.

0:49The president's interest in implementing a cap for credit card interest rates and standing up to the world's largest defense contractors. In terms of the defense crimes. Look, these are these are no different than systemically important banks. They exist at the pleasure of the United States of America. They exist to serve our national defense. And they have failed. They have failed. I'm CNBC producer Cameron Costa. Squawk Pod reports from Davos 2026. U.S. Treasury Secretary Scott Besant begins right now.

1:31While at the World Economic Forum in Davos, our team broadcasts Squawk Box, of course, for three full hours every day. But they also catch up on and off camera with some of the world's most influential decision makers. Financiers, technologists, politicians, economists all convene in the Alps for a few days to swap ideas about what's working and what isn't in today's world. Sometimes, as is the case with heads of state in particular, presence in Davos is about, well, just that, being in the proverbial room, or in this case, snowy village, where conversations are happening. president trump will attend this year's world economic forum as he has in the past and this year as is often the case top of mind for many at the forum are comments from president trump himself concerns about america's effort to acquire greenland president trump's relationship with norway the awarder of the nobel peace prize but also a staunch supporter of denmark in the Greenland question.

2:41On the first day of Davos, Joe Kernan sat down outside in the Alps as is customary with U.S. Treasury Secretary Scott Besant. The president had not yet arrived to Switzerland, and the markets were mid-sell-off. Here's Joe. Good morning, good afternoon, good day, depending on the time zone. I'm joined by U.S. Treasury Secretary Scott Besant. It's a great pleasure to have you here. Joe, good to see you, Joe. Welcome to Davos. It's great to be here with you. You've been before. We've all been before. We're okay here. We like it after a while, right? It's okay. We don't turn into total globalists, but we understand it's important to be here.

3:22Yeah, well, it's good fresh air, Joe. And we have a great view. Before the president departed yesterday, his intention is to talk about the United States and the position of the United States in the global economy based on the last year and a half or whatever it is. And we're going to do that, but Greenland might have gotten in the way a little bit. What do you think about the comments, just the most recent ones, about Norway? I can interpret them if you can. I can understand what he meant. Well, which comment? Because I think what the president wants to talk about, what I want to talk about, is that this is the one-year anniversary of the president taking office.

4:04We have the strongest economy in the world. We have the strongest military in the world. And the U.S. is back. And this is what U.S. leadership looks like. Before the president ever rests on his laurels, and many times he's moving on to the next thing. What I was leading to is I don't think it's a quid pro quo with Norway. I think it's, look, I've tried. I've had eight peace deals. I've settled them all through peace. This is essential for security for both the world, for the United States, for Greenland, for Denmark, for Europe. in one way or another, we've got to get to where we're going. And I think that was what his point was.

4:39Do you agree with that? A hundred percent. A hundred percent. I think it's a complete canard that there's any kind of equivalence with the Nobel Prize. This has been on the president's mind since his first term. It's been on the presidential mind for 150, 160 years. The U.S. has been trying to acquire Greenland. This is not something new, Joe. And things like this happen all the time. It's happening right now. Diego Garcia and Mauritius and the UK, things, territories change. And Denmark is not really in a position to defend Greenland. We fund NATO, most of NATO, so we're already defending it.

5:16So Joe, since 1980, the US has spent 22 trillion more on defense than the rest of NATO has. 22 trillion, that is approximately two-thirds of our outstanding government debt. So while the Europeans were building schools, having health care, we have been defending the world. And I think the president believes they should be paying their fair share. And he is trying to get in front of this. He's trying to get in front of it because Greenland is strategically important. It's strategically important for his Golden Dome project to protect the U.S. And he's invited Canada into that if they want to pay their share.

5:59and it is important that the US has control of Greenland and that will stop any kind of a kinetic war so why not preempt the problem before it starts. And likely in your view it would end in some type of diplomatic event not a not something more serious that I think that's the worst case scenario and the president always talks on the front end shock and awe I think and doesn't take anything off the table working on the negotiations on the back end or as a prelude to that? Well, look, I think the president should take every that everyone should take the president at his word. And I think the other thing, too, is just like with Liberation Day last year, not you, Joe, but the media has gone into hysterics.

6:46The Europeans are going to sell their U.S. assets. The U.S. is not a reliable partner. The U.S. is a reliable partner. I can tell you, I hosted at Treasury last Monday a critical mineral summit to try to get the rest of the world to move with the speed that the U.S. is to avoid this chokehold that China has on critical minerals. So we had our G7 partners, Mexico, India, South Korea, and Australia there. And this is what U.S. leadership looks like, Joe. There will be talk over here, no doubt, and I'm looking forward to the President's speech tomorrow about how this happens. And there's 10 % tariffs on February 1st, there's possible retaliation with a coercion principle that you would, at this point, urge the Europeans not to go that route, or at least for things to just cool off a little bit and try to do this through dialogue.

7:41Well, having worked with the Europeans, my guess is their next move will be to form a working group, the dreaded European working group. We've seen a lot of working groups over the decades. We've seen a lot of working groups. It's hard to make decisions in Europe. It is. And sometimes... Well, Joe, four years into the Ukraine war, they're still buying Ukraine energy. They are buying refined products from India made from Russian oil. So four years in, the Europeans are still financing the war against themselves. Let's talk about... But Joe, what I do want to say is, same thing that I said after Liberation Day on April 2nd, everyone take a deep breath, do not escalate, do not escalate, and President Trump has a strategy here, hear him out, and then everything will be fine.

8:33And when I hear people say the U.S. is in dire straits, there's chaos, et cetera, et cetera, I just list about five or six things. Stock market, new highs almost every week. I don't know about today because there's a lot of tumult around what we were just talking about. GDP, multi-year highs. Unemployment, basically we're at full employment. inflation 2.7 percent, depending on what you talk about, go down from as high as 9 percent. Southern border is secure. Trade deals all around the world. Trillions of dollars of investment flowing here. I was asked, where is the rub? Why so sad? Again, I think President Ted had an incredible year.

9:26He's done peace deals, trade deals and tax deals. We have the one big beautiful bill done on July 4th on the corporate side full expensing for equipment, for factories, for farm structures, for working Americans, no tax and tips, no tax and overtime, no tax and Social Security, deductibility of American-made cars. We're going to see record tax refunds. I'm also the IRS Commissioner. I can tell you we're going to see record tax refunds coming out in the fourth quarter for working Americans. We've had a capex boom up 12%. History will tell you capex boom always follows an employment boom. I'm not sure.

10:08We are the envy of the world. We have higher nominal growth than China. The top nominal growth are numbers that when you say it's hard to even grasp it. So 8 % is possible at this point. That's what it was in the last quarter. It was 7 or 8 percent. And we are moving along at a great pace. And again, the president's economic agenda was a three-legged stool, trade, tax, and deregulation. You know what's really kicking in now, Joe, is the dereg. That takes the longest. That takes the longest, but we're seeing it. We're seeing a treasury and the financial regulators safe and sound deregulation in the banking system, getting more lending into the regulated banking system.

10:56Oliver Wyman believes that we've created$2.5 trillion of lending capacity that can go. I have made a big push on Main Street with small banks, community banks, because they power Main Street. And I think Wall Street can do well, Main Street can do well, and I think we're about to see it in spades for 2026. When you said that in this term for the president that you could get, I guess, debt to deficit, or... Deficit to GDP. Deficit to GDP down to 3%. We were at 7%, were we not? We were, for calendar year 2024, we were at 6.9. calendar year 2025, 5.4. 5.4. So that's a combination of controlling spending and the higher revenues, substantial portion of that from tariff income.

11:54And 3 % is still possible by the end of... Well, at this pace, we may be there before the end of that. Let's switch to the Fed, because we've had a lot of comments recently. You don't know when the announcement's going to be made or what's there there's things happening today i guess that at the supreme court regarding the fed jay powell's planning to visit to watch the proceedings with lisa cook well a couple couple of things joe my my my guess is the the president will reach a decision maybe as soon as next week we've had substantial conversations about this we've run a process that started in september 11 very strong candidates.

12:39We're now down to four candidates. The president has personally met with all of them, and it's going to be his decision. In terms of the Supreme Court hearing, I believe, I'm not sure whether it's today or tomorrow, Jay Powell has announced he's going to attend. And Joe, I got to tell you, I actually think that's a mistake, because if you're trying not to politicize the Fed, for the Fed chair to be sitting there trying to put his thumb on the scale is a real mistake. And there's a lot to talk about, obviously, with Jay Powell. There's this great economy that you were just talking about. So obviously the Fed has managed rates to the extent that it allowed us to get to where we are right now, notwithstanding what we saw a couple years ago when maybe the Fed was too slow in the face of that inflation, the post-pandemic inflation.

13:35But there are other things that you've pointed to. Jay Powell is not just the chairman that sets interest rates. He runs this huge behemoth of an organization, unelected, that is a huge part of Americans, of their lives in this country. And you're a CEO and COO of that organization. And that's where you have some issues. Look, I think that the Fed's monetary policy independence is very important. I think that a lot of the issues around the independence are being created by the other things that are happening. So let's look. Under Chair Powell's watch, we will have seen between four to six governors and presidents have to resign for ethical issues.

14:20That's out of 19, Joe. If that happened at a Wall Street firm, CEO would be out. And we found out in hindsight most of the time. I'm not sure why. Not transparent. It's not transparent. And again, independence does not mean lack of accountability. The Fed has a special obligation to the American people because it influences their lives. But they are unelected. They are not subject to appropriations. They have magic money. They print their own money. This big cost overrun for the Fed building, they'll just print more. They'll just print more money. So I don't think there's anything wrong with some accountability.

15:02And look, just to be clear, the Federal Reserve is now losing$100 billion a year. $100 billion a year because of mistimed asset purchases. I think that was a big mistake. How does this resolve itself? I know that this isn't your purview necessarily, but do you see perhaps there are a couple of things that we wanted Chair Powell to make clear? If that were done, would the subpoena go away at that point? There's a delegation of senators coming. They're not going to, you know, Senator Tillis, I don't think he's going to be running for re-election, obviously, but he's saying they won't even bring up a nominee until this is settled.

15:44Well, a couple of things, Joe. I think that any of the four nominees are very, very strong candidates. Two, I don't know about you, if I got a subpoena, or if it wasn't initially a subpoena, it was questions from U.S. Attorney's Office, I would answer it. So perhaps these questions could be answered and we can move along. I'm not going to comment on an ongoing investigation. I think I saw another interview you did that we need, in your view, a Fed chairman similar to Greenspan that cannot get too agitated about a hot GDP number and think it immediately translates to resurgent inflation because of productivity.

16:30Well, it's clear that we are at the nascent stages of a productivity boom, not unlike the 1990s until all your viewers go back and read Bob Woodward's book Maestro about Alan Greenspan and how he correctly let the economy run hot that we had very substantial GDP growth we were able to pay down a lot of debt I don't know if you remember Joe but in the 90s into the 90s there was talk well what are we going to do if there's no government debt or what if we're going to do that there's not a deficit. And that would be a nice position to be in. But I do think it's important to have an open mind, let the economy do what it's going to do, understand that we are in a productivity boom.

17:17And let's see what happens. Because my prediction is that inflation is going to drop substantially this year. Observable inflation is very different than reported inflation. We're seeing rents drop. We're going to see health care drop. So, yeah, I think a very good chance the Fed's going to be back on target. Do you have any issues, and we'll wind down, but do you have any issues as a private sector, you know, free markets guy, 10 % on a cap on credit cards or, you know, lessen the dividends and stock buybacks for defense contractors or most favored nation for prescription drugs are all these things one-offs that the president thinks are just necessary in the current environment because it does go back on years of sort of classic conservatism some of these moves well that sort unfettered free markets have taken us to these gigantic trade deficits they have allowed china Paris, yeah.

18:21All these things are not classic. Well, free trade was not fair trade, and free trade doesn't work if you have a gigantic state actor who does not have the same system that you do. Same thing, if we look at most favored nation for drug pricing, what the president realized, and this was his vision and no one else's, for years the U.S. high drug prices had subsidized innovation. And it was, oh, this is the price we pay, we are subsidizing the rest of the world. And the president looked at these European, the national health systems and said, why are they paying less. So the idea here is equalization over time.

19:07The U.S. consumer will pay and our health services will pay less and the Europeans have to pay more. They've been free riding. In terms of the defense primes, look, these are no different than systemically important banks. They exist at the pleasure of the United States of America. They exist to serve our national defense and they have failed. They have failed. They are seven, many of them five to seven years behind on their deliveries. In the meantime, they're buying back substantial portions of stock rather than building new facilities. So I think it is a good idea to bring them to heel. How about the credit cards that when the president and Elizabeth Warren have a meeting of the minds over the phone, a lot of people on the right shutter.

19:53I think that there are a lot of things that we can look at with the credit cards in terms of their practices, in terms of their behaviors, and we'll see where that goes. And you know, in terms of Elizabeth Warren, even a...

20:12Occasionally, she could have one or two good ideas. But I would say that in terms of direction that the president, the administration, agree with many of Senator Warren's policies that the poorest members of society shouldn't pay the most, but she wants to control credit. She wants to put in more regulation. That under the banking practices that she championed after the great financial crisis, whether it was Dodd-Frank, we have lost 50%, 50 % of our small and community banks that power Main Street. So everything she has done has been the opposite. But again, I think it is not unreasonable to have a discussion on the practices of these credit card companies.

21:05That's a new world we're in. And enjoy yourself while you're here. I warned you about the Stockholm syndrome. I've been here many, many years. It hasn't happened to me at this point. I start feeling it a little bit being here with all the globalists but but I always bounce back once we get back to the great United States. Well Joe, we're here to spread the message of American prosperity. Come and join us. America first does not mean America alone. And I think I will not have Davos syndrome. Secretary, thank you. Good to see you. Good to see you. That was fascinating. It used to be Stockholm syndrome, Davos syndrome, but we all shake it off.

21:43So I want to know, what did you think? Who do you think is going to be the Fed chair now? Do you have any new? I have nothing. Nothing. No hints. I'm like Sergeant Schultz. Kevin, Kevin, and Rick. Rick Reeder. And he said four. He did say four. He was back to four after they were down to two. Reeder had a strong interview again. Yeah. I mean, there's a lot of nuance about what happens with Stephen Myron. I saw an interview before. Boy, he does not have to leave and go back to the NEC. He can stay, and it's a, Kugler's seat was a 14-year seat, so that does not have to happen. And what do you think of the Lisa Cook?

22:23The Lisa Cook, Jay Powell? I'm not going to say I agree or disagree with any of this, but I think it's odd that, I guess you'd want, as a team player, you'd want the chairman to be there. But I think what the Treasury Secretary said rings true, that if you were really independent, you wouldn't be there trying to put your hand on the scale what the Supreme Court does in terms of unless you feel like unless you feel like this is all lawfully affair unless it's pretext right but but then when you talk about law for that's that's sort of you know that that's ignoring all of the problems that uh that people that you know aren't doing it for lower interest rates people just looking at that Ellarion or looking at at Warsh or others that have criticized a lot of the things that have happened with the Fed.

23:06The Fed went along with Biden and weren't giving, were saying don't give loans to fossil fuel companies. No, the question is, I think you can be very critical of the Fed on the policy front, but then the question is whether you genuinely believe that the cases against Lisa Cook and now potentially in terms of this investigation by Jay Powell are appropriate or not. You don't necessarily have to look at both of those cases the same either. You could look at the two of those separately, but I guess, and I don't know how it happened. We talked, you know, Bill Pulte wrote in and Jeanine Pirro. We talked about whether the president, you know, was directly involved.

23:43He says he wasn't. But some of these people want to do things to curry favor. And by the way, the president has been very open. But J-Cow did ignore two or three requests from Pirro to answer to the cost overruns. And the president has been very clear about how he feels about Powell and the job that he's done. So if there are people who are looking here. It's just the problem with the interest. Everybody else has problems with just the way the Fed has been run for years. You know, some of the, you know, not transparent about four or five members that had to leave. Besson on another network made the point, if you had a corporation where four or five, out of 18 people, four or five of them had to resign because of, you know, things.

24:23Over the course of a decade or two, it happens. It was recently. I mean, you had, when was Kaplan? Was Kaplan under power or was it? Yeah, I mean, none of them, it's been, it's taken place over a period of time. I hear the point, I hear the concern, but the biggest criticism of the Fed is that they stayed, they kept rates high for too long. And now they're being criticized for not lowering. Others think that the extraordinary things for the money center banks, paying them to hold reserves, allowing them to make huge profits, that money doesn't get lent out to small businesses. But that's not necessarily a function of the Fed.

25:02I mean, it is to a degree. It's also a function of the Treasury Department. Yeah, okay. Well, from tomorrow. From tomorrow. Send it. You got some, give me some questions. I got them ready for you. You will? Yeah. When I ask them, I'm going to say, this is from Andrew Ross Sorkin. I know. Okay.

25:29Thank you for listening to this special Squawk Pod reports from Davos, Switzerland at the World Economic Forum. We have much more coming on the podcast this week, and there are already a few great episodes in your feed. Make sure you follow us here on Squawk Pod wherever you're listening now so you don't miss an episode. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin in Davos, in Times Square, wherever they end up. Squawk Pod is produced by me, Cameron Costa, Zach Valisi, and our Katie Kramer is on the ground in Switzerland this week. A big thanks to Julie Trass, our editor.

26:09Have a great day.