Tags: treasury | lew | brexit | crisis

Treasury's Lew: Brexit Isn't Start of Another Financial Crisis

Treasury's Lew: Brexit Isn't Start of Another Financial Crisis
Jack Lew (US Treasury)

By    |   Monday, 27 June 2016 09:21 AM EDT

U.S. Treasury Secretary Jack Lew said the Brexit vote doesn’t signal the start of yet another global financial crisis.

Lew told CNBC that the U.S. economy is doing "pretty well."

Lew did admit that that the decision of British voters to leave the European Union is "an additional headwind" for the U.S. and global economies but "there is no sense of a financial crisis developing."

Lew said, "I am not saying there will not be an impact on markets but it has been an orderly impact so far."

Lew said it would be important for economic policymakers to signal that they are prepared to use the tools they have to promote economic growth and "not overreact to a volatile day here and there."

Signaling concerns that countries might try to intervene in currency markets for trade advantages, Lew said, "We have made it clear that unilateral actions to intervene would be destabilizing."

In a later appearance in Washington, the AP reported that Lew said that the Obama administration would work closely with officials in London and Brussels, the headquarters of the European Union, as well as with other major international partners to "ensure continued economic stability, security and prosperity in Europe and globally."

Lew said he has been in regular contact with finance ministers from other countries as well as financial market participants around the world and "we will continue to consult closely in the days, weeks and months ahead."

In his interview, Lew said the United States would not offer a suggestion on the timing for Britain's exit from the EU, saying that should be left up to Britain and the EU. He said what would be critical during the transition was maintaining confidence in financial markets.

Lew signaled that the Obama administration planned to keep pushing for a vote in Congress this year on the Trans Pacific Partnership trade agreement with countries in Asia. Critics have attacked the proposal as a trade deal that will lead to further loss of American jobs and both Hillary Clinton and Donald Trump have come out against the agreement.

Lew said TPP is "profoundly in the interest of American workers and the American economy" and said it would be a big mistake for America to "step away from the world."
He also expressed confidence that governments in the U.K., Europe, and the United States will be able to manage through the difficulties caused by a Brexit.

The challenge is to provide stability and promote growth, Lew said, although he acknowledged Brexit would be another economic headwind globally and in the United States.

Lew reiterated he believes a stronger dollar reflects a stronger U.S. economy, and greenback strength is in the interest of the U.S.

He also urged policymakers in Britain and other European nations and elsewhere should use all available tools, including fiscal and monetary policy and structural reforms, to boost global demand in the aftermath of the UK vote to leave the European Union, Reuters reported.

In prepared remarks to the Bretton Woods Committee, Lew said he will continue to consult with his finance ministry counterparts on market conditions in the coming days, weeks and months.

"As we move forward, it is important to stress that U.K., European, and global policymakers have the tools necessary to support not just financial stability - but also to promote economic growth," Lew said.

"And it is incumbent upon major economies to use all tools available — fiscal, monetary and structural reforms — to boost global demand and create the kind of inclusive economic growth that has been lacking worldwide."

Separately, Lew called on the Senate to take immediate action this week to address Puerto Rico's $70 billion debt crisis before the critical July 1 deadline for the island territory's next debt payments, Reuters reported.

"The Senate should take up the matter immediately," Lew said in a letter to Senate Majority Leader Mitch McConnell. "Delay will only jeopardize the ability of Congress to conclude its work before July 1, a critical deadline Puerto Rico's leadership has publicly highlighted for months."

If no action is taken, the crisis there will only ratchet higher, he said in the letter. Puerto Rico faces a deadline on Friday to pay off $2 billion of its debts.

The financially ailing island is staring down $70 billion worth of debt that it says it cannot repay in full, adding to its 45 percent poverty rate and rising emigration to the U.S. mainland that is also cutting into its economic growth.

The Republican-led U.S. House of Representatives already passed legislation to address Puerto Rico's debt before leaving Washington for the July 4 holiday break. The Senate is expected to recess at the end of this week.

The House bill, a rare piece of bipartisan legislation, would establish a federal oversight board to negotiate various debt restructurings while seeking to institute balanced budgets on the island, a U.S. territory with 3.5 million residents.

Lew called on senators to also pass the House measure — the "Puerto Rico Oversight, Management and Economic Stability Act," or PROMESA — this week to get it to President Barack Obama to sign into law before Friday's payment deadline.

The Senate, also controlled by Republicans, is expected to debate the measure this week, but Democrats have said they want changes — a move that could complicate its passage. A vote is expected this week.

(Newsmax wire services contributed to this report).

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U.S. Treasury Secretary Jack Lew said the Brexit vote doesn't signal the start of yet another global financial crisis.
treasury, lew, brexit, crisis
Monday, 27 June 2016 09:21 AM
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