Bloomberg Podcasts Sep 20, 2026
With Steven Mnuchin, founder of Liberty Strategic Capital and former US Treasury Secretary
Steven Mnuchin says Kevin Warsh had no choice but to raise rates at the last meeting, and that the Fed should now stop.
The usual line from a former Treasury Secretary about a sitting Fed chair is that rate decisions are the Fed's business. Mnuchin gave a specific instruction instead: hold, because the inflation the Fed is chasing is an energy shock and because an election is coming.
"I think there's no question that the energy shock is having a big impact on all this, and I think it would be completely inappropriate for the Fed to raise in front of an election."
Steven Mnuchin, founder of Liberty Strategic Capital, on Bloomberg Podcasts, ran the Treasury Department through the first Trump administration, when the Iran sanctions he now wants reimposed at full strength were his department's to enforce, and he was on set at the Qatar Economic Forum as an investor rather than an official.
The full segment is covered here so you can skip it.
Here are the 8 arguments that matter.
Key Takeaways
The Fed should pause, because the inflation it is raising into is an energy shock and an election is close
He says the last rise was forced by the chair's own guidance, not by the data
Maximum sanctions on Iran, even if that cuts Chinese banks out of the dollar system
"And if that means cutting off Chinese banks from the US dollar system, that would be the result"
Sanctions failed in Russia because they were not enforced, not because sanctions do not work
Short-term Middle East money is on hold; the long-term case is unchanged and rests on Iran being settled
Qatar's halted LNG is a world problem, not a Qatar problem
Treasury should borrow shorter, not longer, with rates this high — and the buyback program he is credited with was not his
On currency intervention he and Scott Bessent are different animals: one traded currencies, the other calls himself a fundamentalist
The US should get its own AI rules straight before negotiating any with China, whose leaders he says are asking for constraints
1. Iran Is The Region's Issue
Asked whether appetite for Middle East investment had stalled as the conflict dragged on, Mnuchin did not answer on flows. He answered on Iran.
Everything in the region runs through one file
Well, let me just say that the most important issue for the region is the situation with Iran.
Steven Mnuchin
His claim about the Strait of Hormuz is that it is not negotiable and that the US has the means to keep it open.
The strait is open, and Iran does not get to hold it
We need to make it clear to the Iranians. The strait is open and will be open and that they can't hold it hostage.
Steven Mnuchin
That splits the investment question in two, and he kept returning to the split for the rest of the segment.
Short-term capital is parked; long-term capital is not
So I think there's no question that short term investment on the moment is obviously on hold, but, I believe this issue longer term will all be a lot safer with president Trump dealing with Iran and the nuclear issue.
Steven Mnuchin
Asked whether the administration has the right people on the file, he said yes and named Marco Rubio as the part of the effort that is less visible, along with the president and the vice president.
Force is still on the table
And I think there's just no question that, hopefully, it won't require more military, but it may. And The US can open the straight so that there's traffic, and it will.
Steven Mnuchin
2. Deals On Hold, Not Off
The anchor moved to his day job at Liberty Strategic Capital and asked how he rates the Middle East as a place to put money right now.
The long-term case is regional integration, and it is intact
I think, actually, on the longer term, all of this bringing the Mideast together is an important issue. And, I think in terms of Israel and its Arab neighbors and the Abraham Accords, I think this is all a positive step in the long term.
Steven Mnuchin
What surprised him was the scale of the fighting, not the fact of it. He said nobody expected the amount of activity there is.
Asked whether the conflict is pushing Gulf states to diversify away from a single commodity faster than they otherwise would, he took the question to Qatar's liquefied natural gas exports, which have largely stopped.
Stopped LNG is everyone's problem
Look at Qatar. Obviously, the fact that LNG, to a large extent, has been stopped. That's not an issue just for Qatar. That's an issue for the whole world.
Steven Mnuchin
3. Borrow Short, Not Long
Asked how a Treasury Secretary decides whether to intervene in the bond market, and specifically about the buyback program his successor has been using, Mnuchin declined the credit.
The buyback program was Janet Yellen's, and he had not noticed it
As it relates to the buyback, quite frankly, the buyback program came in under Janet Yellen. I didn't even realize we had a buyback program until Scott activated it.
Steven Mnuchin
The lever he would watch instead is the maturity mix of what Treasury sells.
With rates this high, shift borrowing toward the short end
I think the bigger focus is really what he does with issuance. And I think it would be a reasonable approach with interest rates going up this much to, on the margin, have less long term borrowing and more short term borrowing.
Steven Mnuchin
4. He Never Traded Currency
The anchor put to him a line of Scott Bessent's she called infamous, "I am the house now", read as a warning to anyone betting against the dollar, and asked what he made of it.
Mnuchin's answer was about temperament and background rather than policy. He named the difference plainly: Bessent came out of currency trading, and he did not.
Two Treasury Secretaries, two ways of talking to a market
Look. Different people have different ways of presenting things. Scott was in the currency markets. I never traded the currency markets. I was more a fundamentalist. I think that, there have been times when The US has intervened in the markets, and I think he's doing this to support Japan.
Steven Mnuchin
That last clause is the substantive part: he reads the current intervention as being aimed at supporting Japan rather than at the dollar itself.
5. Ask Xi To Help On Iran
With the Treasury Secretary due to meet his Chinese counterparts in New York, the anchor asked what those negotiations are actually like and whether industrial overcapacity can move after so many administrations of trying.
Mnuchin started with where the format came from.
The Treasury-led channel dates to Hank Paulson
Well, this really goes back to Hank Paulson who started what became the economic dialogue and for the Treasury Secretary really to be front and center in this relationship, even more so than traditionally the Secretary of state.
Steven Mnuchin
He said Bessent helped set the tone for the last Trump-Xi meeting, then argued the US is negotiating from the stronger position. His reasons were demographic: China's population is going to shrink by hundreds of millions of people, and it has an aging workforce to carry.
He likes the American hand
So I like The US's hand. I think our economy is doing quite strong.
Steven Mnuchin
The specific ask he wants made is not about trade at all.
Trump should ask Xi for help on Iran
But I think it's very important, and I would expect that president Trump will ask president Xi to help us in Iran, and I think they should.
Steven Mnuchin
If China refuses, his prescription is strong sanctions and locking Chinese banks out — the same threat he returned to later in the segment.
6. Get US Consensus First
Asked whether the US and China could ever agree a treaty on AI guardrails, or whether the race makes that impossible, Mnuchin said the first problem is domestic.
America does not yet agree with itself on AI
Well, I think the first issue is domestically, we need to create our own mechanism on AI. And I do think it's important the president now just created the AI force.
Steven Mnuchin
His evidence that constraints are needed is that the people building the technology are the ones asking for them.
The AI companies' own leaders are calling for limits
When you see these four leaders coming out of all the AI companies and saying this race to the end is an important issue, I do think there needs to be constraints.
Steven Mnuchin
On whether a deal with China could be enforced, he was doubtful about the mechanics and positive about the concept, comparing it to nuclear arms control.
Competitors and partners at the same time
Look. China and we're always gonna be frenemies. There's things we agree on. There's things we're gonna compete on.
Steven Mnuchin
An understanding, if not a treaty
I think we need to have a general understanding with China, and AI has to be on the discussion list.
Steven Mnuchin
7. Sanctions Work If Enforced
The last policy question was about sanctions themselves: what he learned about whether they actually change behavior.
The dollar is the weapon, and that is why it has to be used carefully
They're very effective. They are. The dollar is the reserve currency of the world. I always said with that comes huge advantages and huge responsibilities. And because sanctions are so effective, we have to be careful how we use them.
Steven Mnuchin
Careful does not mean light. On Iran he wants everything applied, and he is explicit about what that costs China.
Maximum sanctions, and Chinese banks lose dollar access if that is what it takes
But I think in the case of Iran, we should have maximum sanctions. Scott is enforcing them, and that includes China. And if that means cutting off Chinese banks from the US dollar system, that would be the result.
Steven Mnuchin
The anchor pushed back with the two standing counter-examples, Iran and Cuba, and with her own exchange with President Biden over whether Russian sanctions had worked the first time.
He rejected the premise outright
I don't agree with that at all.
Steven Mnuchin
His case is that the first-term Iran program produced approaches from Tehran.
Iran asked to negotiate more than once
I think in the case of president Trump's first term, the Iran sanctions were working. There were multiple times that we were contacted by the Iranians that they wanted to negotiate.
Steven Mnuchin
And that the Russia program failed for a reason that has nothing to do with sanctions as a tool.
Russia's sanctions were announced, not enforced
When president Biden announced sanctions on Russia, they weren't enforced. He was more worried about gas prices than he was about using sanctions.
Steven Mnuchin
The rule he draws from both
So I would say sanctions do work, but they need to be enforced. When you say you're gonna use them, you need to force them through.
Steven Mnuchin
8. The Fed Should Pause
With a minute left the anchor turned to the Fed and asked whether he has enough clarity on how the new chair operates, noting he has known him for a while.
He backs the chair
I like Kevin, and I think he's a great leader for the Fed.
Steven Mnuchin
His reading of the last decision is that the chair had boxed himself in with his own guidance rather than been persuaded by the data.
The last rise was guidance, not data
I think he positioned himself ahead of the last meeting that he made it very clear if the inflation numbers didn't come in, he was gonna raise. So I think he had no choice. He had to raise.
Steven Mnuchin
What he would do from here is announce a stop.
In the chair, he would say the Fed is on hold
Having said that, if I were Fed chair, I would make it clear that things are on hold for now.
Steven Mnuchin
His two reasons are that core inflation is improving and that the price pressure is coming from energy, which a rate rise does not reach.
Raising into an election would be inappropriate
I think there's no question that the energy shock is having a big impact on all this, and I think it would be completely inappropriate for the Fed to raise in front of an election.
Steven Mnuchin
Asked whether another rise before year-end would cost the chair the president's confidence, or his own, he said his depends on the data. He also backed the chair's decision to stop publishing rate projections.
He agrees with dropping the dot plots
And I do agree with Kevin that he's not using the dot plots.
Steven Mnuchin
Forecasting two years out was always a signaling device, and there are others
I always thought this issue that Fed chairs or Fed members know where these things are gonna be a year or two. It is a way of signaling, but I think they can signal to the market through speeches and other mechanisms.
Steven Mnuchin
The Middle East is now the dominant input
Having said that, I think he should be cautious in raising rates. I think the economic issues are being highly influenced by the Mideast.
Steven Mnuchin
Bonus Insights
China has enforced Iran sanctions before
China worked with us very closely on the sanctions on Iran. They agreed with the sanctions. There's no question in Trump one point o. They were buying very little oil.
Steven Mnuchin
North Korea is his precedent for an AI understanding
And, again, China worked very closely with us on North Korea in term one.
Steven Mnuchin
The Fed question was a repeat
The anchor said she was putting Mnuchin the same Fed question she had already put to Franklin Templeton's Jenny Johnson at the same forum, and got it in only because the segment ran a minute long.
Mnuchin's bottom line is that the Middle East is a timing problem rather than a thesis problem: capital waits, the Abraham Accords case survives, and the thing that decides both is whether Iran is forced to a deal. At home, he wants the Fed to stop raising and Treasury to borrow shorter.
Products, Companies & Tools Mentioned
Liberty Strategic Capital (His investment firm, and the reason the anchor asked him to rate the Middle East as a place to deploy capital rather than as a policy problem)
The US Treasury's debt buyback program (Started under Janet Yellen, he says, and switched on by Scott Bessent; he says he did not know it existed while he ran the department)
The Federal Reserve (Raised at the last meeting on the chair's own prior guidance; Mnuchin wants it on hold and agrees with dropping the dot plots)
Listen to the full episode
🔴 YouTube
Watch the full episode:
More Steven Mnuchin interviews and podcast appearances
If this was worth your time, send it to someone who has to have a view on this.
Get the latest market chatter as it happens: