Cameron Costa (2:12)

I'm CNBC producer Cameron Costa. Squakpod reports from Davos 2026. U.S. treasury Secretary Scott Besant begins right now. While 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, 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 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. On 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.

Joe Kernan (3:57)

Good morning, good afternoon, good day. Depending on the time zone. Joined by U.S. treasury Secretary Scott Bezin. It's our great pleasure to have you here, Joe.

Scott Besant (4:05)

Good to see you, Joe.

Joe Kernan (4:06)

Welcome to Davos.

Scott Besant (4:08)

Great to be here with you.

Joe Kernan (4:10)

You've been before. We've all been before. We're okay here. We like it after a while, right?

Cameron Costa (4:17)

It's okay.

Joe Kernan (4:17)

We don't turn into total globalists, but we understand it's important to be here.

Scott Besant (4:21)

Yeah. Well, it's good fresh air, Joe.

Joe Kernan (4:24)

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.

Scott Besant (4:54)

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. We have the strongest economy in the world. We have the strongest military in the world. And the US Is back. And this is what US Leadership looks.

Joe Kernan (5:12)

Like before the President ever rests on his laurels. And many times he's moving on to the next thing. I don't my, 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, for both the world, for the United States, for Greenland, for Denmark, for Europe. And one way or another, we got to get to where we're going. And I think that was what his point was. Do you agree with that?

Scott Besant (5:39)

100%. 100%. I think it's a complete canard and like there's any kind of equivalence with, 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 US has been trying to acquire Greenland. This is not something new, Joe.

Joe Kernan (5:59)

And things like this happen all the time. It's happening right now with Diego Garcia and Mauritius and the UK Things, territories change. Denmark is not really in a position to defend Greenland. We fund NATO, most of NATO, so we're already defending it.

Scott Besant (6:15)

So, 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 US and he's invited Canada into that if they want to pay their share. And it is important that the US has control of Greenland and, and that will stop any kind of a kinetic war. So why not preempt the problem before it starts?

Joe Kernan (7:09)

And likely, in your view, it would end in some type of diplomatic event, not a. Not something more serious. 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 is a prelude to that.

Scott Besant (7:29)

Well, look, I think the President should take every. 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. The Europeans are going to sell their US Assets. US Is not a reliable partner. US Is a reliable partner. I can tell you. I hosted a Treasury last Monday, a critical mineral summit, to try to get the rest of the world to move with the speed that the US Is to avoid this choke hold that China has on critical minerals. So we had our G7 partners, Mexico, India, South Korea and Australia there, and this is what US Leadership looks like, Joe.

Joe Kernan (8:16)

There will be talk over here, no doubt. And I'm looking forward to the President's speech tomorrow about how this happens. And, you know, there's. 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.

Scott Besant (8:40)

Well, having worked with the Europeans, my guess is their next move will be to form a working group. The dreaded European working group that we've seen a lot of working groups.

Joe Kernan (8:54)

It's hard to make decisions in Europe. It is. And sometimes.

Scott Besant (8:57)

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.

Joe Kernan (9:12)

Let's talk about.

Scott Besant (9:13)

But, but, but Joe, what I do want to say is. Yes, 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.

Joe Kernan (9:32)

When, when I hear people say the, you know, the US Is in dire straits, the, you know, there's chaos, et cetera, et cetera. I just list about five or six things. Okay, 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, full employment, inflation 2.7% depending on what you talk about, or down from as high as 9%. Southern border is secure. Trade deals all around the world, trillions of dollars of investment flowing here. I was asked where is the, where's the rub?

Scott Besant (10:18)

Why, why, why so sad again that I think president had an incredible year. He's done peace deals, trade deals and tax deals. We have the one big beautiful bill done on July 4th on the corporate side for full expensing for a corporate equipment, for factories, for farm structures for working Americans. No tax on tips, no tax on overtime, no tax on 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. So I'm not sure we are the envy of the world. We have higher nominal growth than China.

Joe Kernan (11:13)

Growth are numbers that when you say it's hard to even grasp it. So 8% is possible at this point. Well, that's what it was in the last quarter.

Scott Besant (11:22)

I think it was 7 or 8% 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 it. Treasury and the financial regulators, safe and sound deregulation in the banking system. Getting more lending into the regulated banking system. Oliver 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.

Joe Kernan (12:15)

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, sorry, deficit to GDP down to 3%. We were at 7%, were we not?

Scott Besant (12:34)

We were for talent for calendar year 20, 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.

Joe Kernan (12:53)

And 3% is still possible by the end of.

Scott Besant (12:56)

Well, at this pace we may be there before the, before the end of that.

Joe Kernan (13:00)

Let's switch to the Fed because we've had a lot of comments recently. You don't know when the announcement is going to be made or what. There's things happening today, I guess, at the Supreme Court regarding the Fed. Jay Powell is planning to visit to watch the proceedings with Lisa Cook.

Scott Besant (13:19)

Well, a couple of things, Joe. My, my guess is that 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. We'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's announce he's going to attend and I, Joe, I got to say 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.

Joe Kernan (14:10)

And there's a lot to talk about, obviously with Jay Powell is there, there's this great economy that you were just talking about. So obviously the Fed has, has managed rates to the extent that it allowed us to get to where we are right now, notwithstanding what we saw a couple of years ago when maybe the Fed was too slow in the face of that inflation, the post pandemic inflation. But 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 CEO and COO of that organization and that's where you have some issues.

Scott Besant (14:55)

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. That's out of 19, Joe. If that happened at a Wall street firm, CEO would be out.

Joe Kernan (15:24)

And we found out in hindsight, most of the time we're not sure why.

Scott Besant (15:28)

Not transparent and it's not transparent. And again, that 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, print more money. So I don't think there's anything wrong with some accountability. And 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.

Joe Kernan (16:14)

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, that we wanted Chair Powell to make clear. If that were done with the subpoena, go away at that point. Does.

Scott Besant (16:32)

There are.

Joe Kernan (16:32)

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 reelection, obviously, but he's saying they won't even bring up a nominee until this is settled.

Scott Besant (16:43)

Well, a couple of things, Joe. I think that any, any of the four nominees are very, very strong candidates. Two, I don't know about you, if I got a subpoena or if I. 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.

Joe Kernan (17:09)

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.

Scott Besant (17:29)

Well, 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, end of the 90s there was talk, well what are we going to do if there's no government debt? Or what are we going to do if 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 and let's see what happens because my prediction is that inflation is going to drop substantially this year. Observable flight inflation is very different than reportable and reported inflation. We're seeing rents drop, we're going to see health care drop. So yeah, I think a very good chance to find Fed's going to be back on target.

Joe Kernan (18:36)

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 cap on, 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 classic conservatism. Some of these moves, well.

Scott Besant (19:12)

Unfettered free markets have taken us to these gigantic trade deficits. They have allowed China to tariffs.

Joe Kernan (19:19)

All these things are not classic.

Scott Besant (19:22)

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 who that you do. Same 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 US high drug prices has 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, the US 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.

Joe Kernan (20:43)

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 shudder.

Scott Besant (20:52)

I 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, the, in terms of Elizabeth Warren, even a. Occasionally the. She could have one or two, but.

Joe Kernan (21:13)

I did a lot of expressions.

Scott Besant (21:16)

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.

Joe Kernan (22:03)

It'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's. 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.

Scott Besant (22:20)

Well, Joe, you know, we're. 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.

Joe Kernan (22:33)

Mr. Secretary, thank you.

Scott Besant (22:35)

Good to see you.

Joe Kernan (22:35)

Good to see you.

Unknown Panelist (22:36)

That was fascinating.

Joe Kernan (22:37)

It used to be Stockholm syndrome, Davos syndrome, but we, we all shake it off.

Unknown Panelist (22:42)

So 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.

Joe Kernan (22:47)

I have nothing.

Unknown Panelist (22:48)

Nothing.

Joe Kernan (22:48)

I know.

Unknown Panelist (22:49)

No hints.

Joe Kernan (22:49)

I'm like Sergeant Schultz.

Scott Besant (22:51)

Kevin.

Unknown Panelist (22:51)

Kevin and Rick. And he said four.

Joe Kernan (22:56)

He did he was back to four. Yeah.

Unknown Panelist (22:58)

After they were down to two.

Joe Kernan (23:00)

Reader had a strong interview again.

Unknown Panelist (23:03)

Yeah.

Joe Kernan (23:03)

I mean there's a lot of nuance about what happens with Steven Myron. I saw an interview before he does not have to leave and go back to the nec. He can stay and it's a Coogler's seat was a 14 year seat so that does not have to happen.

Unknown Panelist (23:20)

And what did you think of Alicia Cook? The Lisa Cook, Jay Powell?

Joe Kernan (23:24)

I'm not going to say I agree or disagree with any of these 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 with 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.

Unknown Panelist (23:41)

Of Unless you feel like, unless you feel like this is all lawful.

Joe Kernan (23:44)

Unless it's pretext.

Cameron Costa (23:45)

Right.

Joe Kernan (23:46)

But but then when you talk about law firm that's that's sort of, you know that that's ignoring all of the problems that that people that you know aren't doing it for lower interest rates. People just looking at that El Erian or looking at Warsh or others that have criticized a lot of the things that have happened with the Fed. I mean the Fed was went along with Biden and weren't giving were saying don't give loans to Fox.

Unknown Panelist (24:11)

The question is you could be very critical of the Fed on the policy front but then the question is whether you genuinely believe that the case is against Lisa Cook and now potentially in terms of this investigation Jay Powell are appropriate or not.

Unknown Panelist (24:27)

You don't necessarily have to look at both of those cases the same either. You could look at the two of.

Joe Kernan (24:31)

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. He says he wasn't. But some of these people want to do things the Curry favor.

Unknown Panelist (24:45)

Right. And by the way the president has.

Joe Kernan (24:47)

Been very open about did ignore two or three requests from Piro to answer to the cost overruns which and the.

Unknown Panelist (24:55)

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.

Joe Kernan (25:01)

Looking he's got just the problem with the interest rates. Everybody else has problems with just the way the Fed has been run for four 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 rescue, resign because of, you know, things over.

Unknown Panelist (25:22)

The course of a decade or two.

Joe Kernan (25:24)

It wasn't, it was, it was recently. I mean, you had, when was Kaplan, was Kaplan under power or was it.

Unknown Panelist (25:30)

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 criticism and now they're being criticized.

Joe Kernan (25:44)

Others think that the, the extraordinary things that 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.

Unknown Panelist (25:59)

But that's not necessarily a function of the Fed. I mean, is to a degree, it's also the function. Treasury Department.

Joe Kernan (26:04)

Yeah. Okay.

1-800-Flowers Announcer (26:06)

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Joe Kernan (26:06)

Trump tomorrow.

Unknown Panelist (26:07)

So Trump tomorrow.

Joe Kernan (26:08)

Send it. You got some, give me some questions.

Unknown Panelist (26:11)

I got them ready for you.

Scott Besant (26:12)

You will?

Unknown Panelist (26:13)

Yeah.

Joe Kernan (26:13)

When I ask him, I'm going to say this is from Andrew Ralsorkin.

Unknown Panelist (26:17)

I know.

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Cameron Costa (27:56)

Thank 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 feedback. 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 Felici and Arkady Kramer is on the ground in Switzerland this week. A big thanks to Julie Tras, our editor. Have a great day.

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