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Treasury Secretary Lew calls for longer-term view

·Editor in Chief
U.S. Treasury Secretary Jack Lew in Washington February 3, 2015. REUTERS/Jim Bourg

Treasury Secretary Jack Lew called for corporations and investors to focus on long-term goals and to eschew short-termism that some say has been detrimental to the economy.

Speaking Tuesday at the Long-Term Value Summit in New York, an invitation-only conference organized by McKinsey & Co., CPP Investment Board and BlackRock for CEOs of large companies and investment firms and board members, Lew outlined a theoretical plan that would refocus corporate America and Washington more on a long-term objectives, calling for trade legislation, tax reform, investing in infrastructure and education.

When interviewer Gillian Tett, US Managing Editor of the Financial Times, asked Lew how realistic it was to expect progress on all these fronts, Lew responded by saying “It’s always a challenge in Washington, D.C. to get these things done, but we have and will.” Lew said the next two to three months would be critical, particularly when it comes to the federal budget deficit.

When asked if shareholder activists were responsible for “short-termism” in the markets, Lew said it was hard to generalize about activists in one brushstroke. He pointed out that CEOs have both long-term and short-term concerns to address. “CEOs need to balance competing concerns,” he said.

Lew suggested if Congress was able to move forward on trade, tax reform, infrastructure and education, that would signal to corporate America that Washington was serious about long-term goals and incent CEOs to follow suit.

Foremost concerns
Lew spoke on a variety of other subjects as well. For instance, he said he was wary of enacting new regulations to solve perceived problems with high frequency trading. And when asked what his biggest concern was, Lew -- without pause -- responded “cyber security,” calling it “a new part of life.”

Speaking more generally about the global economy, Lew said that “if the U.S. had a wall around it, we would be fine,” meaning that the U.S. was the healthiest economy in the world. “Two years ago we were seen around the world as being the cause of economic problems,” he continued. “Now we are seen as the model economy.” How did that happen? The turnabout occurred because we have a healthy economic system to begin with and we took action and that action worked, he said, referring to moves the government made following the financial crisis, including TARP, the automaker bailouts and quantitative easing.

Lew also said he was concerned about income inequality, but that the cause was not the Federal Reserve's quantitative easing, as some have suggested. Rather, he said, income disparity has been a problem 30 years in the making. “We have a plan to grow the economy from the middle out,” Lew said.

As for U.S. companies seek to move their headquarters overseas, Lew observed that “the root cause of inversion is our corporate tax rate is out of whack with the rest of the world.” Tax reform is essential, he said, in a way that lowers rates, but closes loopholes so that it is revenue neutral.
Tett asked Lew if he was a betting man, how certain would he say he is that tax reform would happen, underscoring just how difficult it is to accomplish any kind of tax overhaul. Lew responded: “I’m not a betting man,” eliciting some guffaws from the audience.