Squawk Pod Sep 21, 2026
With Scott Bessent, US Treasury Secretary
Every Iranian airline in the world stops flying on September 23, Treasury Secretary Scott Bessent said, because anyone who fuels one, services its landing or sells a ticket for it loses access to the dollar system.
The frontier AI labs spent the previous week asking Washington for something close to the opposite arrangement: a shield against liability for what their systems do. Bessent said the administration will not give them one.
"These labs need to take responsibility for themselves. They can slow down anytime they want to."
Bessent, US Treasury Secretary, on Squawk Pod, spent 35 years as a macro analyst and investor before taking the job, and came to the studio from 12 hours of talks with China's vice premier, three days before Xi Jinping arrives in Washington.
The full interview is covered here so you can skip it.
Here are the 9 takeaways that matter.
Key Takeaways
The labs asked for a liability shield and were refused, on the argument that a firm claiming a 10% chance of an extinction-level event can simply slow down instead
His line on the trade the labs proposed: "that's good business for them, bad business for the American people"
The US and China have formalized an AI dialogue and will meet again in about two months in Shenzhen
The concrete piece is an incident line, so each side hears about the other's failures rather than reading about them
Bessent says the US is still ahead in AI and that his Chinese counterpart said so too, while calling the open Chinese models very powerful
Every Iranian airline in the world is due to be shut out of aviation services on September 23, enforced through access to the dollar
Three banks have been sanctioned, including the Dubai branch of Egypt's second-largest, which he says moved more than $1.8 billion to the regime
The 30-30-30 framework floated in Beijing is now Jamieson Greer's file, aimed at cutting tariffs on goods neither side treats as critical
The correlation between 10- and 30-year Treasuries and the oil price is one of the highest ever, which he reads as a reason rates fall once the conflict ends
He raised the size of Treasury's buyback because he judged the market was moving away from equilibrium, not because he thinks he can set the price
Banks are the model for AI defense, because they are attacked constantly and have pushed what they learned down to smaller institutions
He would not say whether he agreed with Kevin Warsh's quarter-point increase, and said the inflation that has shown up is in the headline number rather than the core
1. Twelve Hours In New York
Joe Kernen opened by asking what came out of the weekend's meetings with China's vice premier, held in New York three days before President Xi arrives in Washington. Bessent's answer started at the top rather than with any deliverable.
The working level runs on the leaders' relationship
So it was all day yesterday, Joe and I think what's important in terms of framing the talks is it all stems from the leaders very good rapport and relationship.
Scott Bessent
He said some of the deliverables from the meeting in Busan last fall have not been completely fulfilled, and that the two presidents may see each other twice more after this week, which he treats as the thing that holds the relationship steady.
The phrase he quoted from the other side of the table, implementing our leaders' consensus, is the one his counterparts repeat, and he described the working day that follows it.
The instructions come first, then twelve hours of detail
We follow the instructions and then we get down in the details and we spent about 12 hours yesterday doing that.
Scott Bessent
Asked whether he had raised reports about President Xi's health with the vice premier, Bessent said all things are go and that the president plans to greet Xi at Andrews Air Force Base.
2. A US-China AI Hotline
The hosts pressed on what the AI discussions actually produced, and whether guardrails the US puts up would be matched on the other side. Bessent said the first achievement is that the conversation now exists at all.
The mechanism has a name and a next meeting
Well, I think the important thing was to start talking. So to set up the dialogue, we've now formalized something called the USA China AI dialogues. We've agreed to meet again probably in two months in Shenzhen.
Scott Bessent
The second piece is an incident line: a permanently open channel so that each government hears quickly when something goes wrong on the other side. After that, he said, the two sides want to agree on what the leading dangers are — he named uncontrollable agents and non-state actors working in cyber and in bioweapons.
Becky Quick asked whether China has had incidents of its own. Bessent said of course they have, and that the nature of their system means they will not say so.
Powerful models, no transparency, and a ranking his counterpart conceded
But yeah, the Chinese models are very powerful. Even though they're open models, they are very powerful. The US remains in the lead and that was a very good acknowledgement that I got from my Chinese counterpart. They agreed that we are in the lead.
Scott Bessent
3. The 30-30-30 Goods Deal
Kernen asked about the suspension of higher tariffs on some Chinese imports, which expires on November 10, and whether anything concrete came out of the weekend. Bessent said the tariff expiry was a focal point and that he expects the stability of the past year to hold.
The concrete item is a framework that came out of the Beijing trip.
The trade file has moved to the US Trade Representative
So in Beijing this notion of a what we call a 30-30-30 trade deal for non-critical goods was floated and US trade representative Jamieson Greer has operationalized that.
Scott Bessent
Greer and his team spent most of the previous day with the Chinese side, he said. The idea is to find categories neither government treats as sensitive and take the tariffs on them down to most-favored-nation levels — more American agriculture, energy and medical devices going out, more everyday Chinese goods coming in.
4. No Liability Shield
Kernen asked whether Bessent agrees with the president's position of no restraints on AI, given how much of the administration's economic record is riding on it. Bessent said he leads on economic policy and then went straight at what the labs asked for the week before.
A 10% extinction claim and a request to be held harmless, in the same week
So imagine these labs came out or one lab in specific a sitting employee came out said there's a 10% chance of an extinction level event but then the labs also said take the liability off of our hands and we will not do that.
Scott Bessent
He said he agrees with an MIT professor he named that responsibility sits with humans rather than with the AI, and that the Hugging Face incident is OpenAI management's responsibility rather than a group of agents'.
The alternative to a shield is already available to them
These labs need to take responsibility for themselves. They can slow down anytime they want to.
Scott Bessent
Quick asked whether the government might define those liabilities more precisely, noting that Google has now had agents break out as well, and that a human doing the same thing would face legal consequences. Bessent said that is what needs to happen, and that the AI czar the president has discussed appointing is there to put shape around the question.
5. Defense Is The Other Half
Asked whether the biggest danger is agents, states or non-state actors, Bessent said all of them, and then named the thing he thinks is actually missing.
The frontier has been built out and the defense has not
I think it's all of the above.
Scott Bessent
His framing is that the frontier labs are national champions that have done extraordinary work, and that the resilience to absorb their failures has not been built at the same pace. Anthropic's origin, he said, was a group of people sitting in a park in San Francisco during the pandemic, and he has seen valuations from 1 trillion to 2 trillion dollars put on it five years later.
His own file is the financial system, and he thinks it already holds the template.
The banks are the model, because they are attacked all day
I think that our systemically important banks have done a very good job because they probably have the best cybersecurity in the world outside of the government because they are constantly attacked whether it's hundreds, thousands, millions of attacks every day and how can we use what they've learned and take that down.
Scott Bessent
The largest banks have pushed what they learned down to smaller ones, he said, and Treasury runs an AI workshop forum he called "gold eagle" to work on the same problem.
Where the effort has to go next
So I think the kind of the all hands on deck is the other side of the equation now on defense.
Scott Bessent
6. The Tail In The Valuation
Kernen asked the question an investor would: does a trillion-to-two-trillion valuation on Anthropic make sense to someone who knows markets, if liability is about to be enforced more strictly.
Bessent answered as an allocator rather than as a policymaker.
The arithmetic of a 10% wipeout, with a liability attached
Not only a zero, you're going to have a big liability. You probably wouldn't invest.
Scott Bessent
He said the real probability is very likely much smaller than the figure the professor and the OpenAI employee use, and that every valuation has to price the tail event whatever its size. What he objects to is who carries that tail.
His reading of what the labs proposed
And you know, that's good business for them, bad business for the American people.
Scott Bessent
7. Iran's Airlines Go Dark
Kernen turned to Iran and whether the regime can hold out through the midterms. Bessent would not put a clock on it.
No timetable, and no let-up
Well, Joe, I can't tell you whether it's one week, one month or six months, but I will tell you that we are pressuring them like never before.
Scott Bessent
Treasury's sanctions powers were widened after 9/11, he said, and five new authorities were implemented against Iran about a month ago, covering aviation, maritime, crypto and gold. The aviation one has a date on it.
A global shutdown with a date
On September 23rd, all the Iranian airlines, all the Iranian airlines will be shut down around the world.
Scott Bessent
How a US agency grounds aircraft it has no jurisdiction over
And how do we do that? That if they land, you cannot provide them with fuel, you cannot provide them with landing services, you cannot sell them tickets, or you will be knocked out of the dollar system.
Scott Bessent
The same logic is being applied to the banks that move the money. Three have been sanctioned: the Dubai branch of Egypt's second-largest bank, which he said funneled more than $1.8 billion to the regime, a Turkish bank he placed around 30th by size, and the external branches of Russia's second-largest.
The people running the plumbing are known to him
And what we're seeing here Joe is we've seen enablers throughout the world. We know who they are. They know who they are and we are putting a stop to it.
Scott Bessent
On China's role, he said quiet discussions work better than public ones and that the Chinese financial authorities, including the central bank's governor, have been engaged in the process.
8. Oil Now Sets Bond Yields
Kernen asked whether long rates around the world are rising for good reasons or bad ones — debt, growth, or something else. Bessent said the causes are hard to separate but that one relationship is doing most of the work.
The relationship he points to, and how strong it is
one thing I would point out, Joe, is that we have one of the highest correlations ever between 10 and 30-year bonds and crude oil price and the crack spread.
Scott Bessent
He said the R-squared since the conflict began has been high enough that he treats it as observable rather than as a story, and that it carries a forecast with it.
What he expects on the other side of the conflict
once we get on the other side of this conflict, which we will, I think the oil markets are going to be more supplied than they previously were and rates should come down.
Scott Bessent
Asked whether Treasury will keep buying longer-dated bonds, he said the buybacks are routine and that he had raised their size because the market had become illiquid and was moving fast.
What a Treasury Secretary can and cannot do to a price
You know, as I've said, I can't set the equilibrium price, but markets are never in equilibrium. They're either moving away from equilibrium or toward equilibrium. I thought that they were moving away.
Scott Bessent
9. The Press Ban Question
Kernen raised the ban on CNN, MS Now and Politico, noting that MS Now is CNBC's sister network and that answering hostile questions is something he regards as a badge of honor for American leaders. Bessent said he was in the Oval Office when it happened but knows little about it, and then made the argument in his own terms.
He applies the same word to the press that he applies to markets
Clearly for the legacy media, the equilibrium is so far out of kilter. What group is one of the few that is less popular than the US Congress?
Scott Bessent
His answer to his own question was the legacy media, and the reason he gave was perceived bias. He agreed with Kernen that the American people deserve good reporting.
The claim he makes for this administration
This president has been the most transparent president in history.
Scott Bessent
Kernen pushed back that presidents cannot control the press and that this is not something the country does. Bessent's reply went to what he says coverage is actually about.
His read on the incentive
Joe, you know the one thing I'm sure of the press cares more about the press than anything else.
Scott Bessent
He cited two examples: coverage of the White House Correspondents' Dinner, where he said the story became the reporters' own experience in the room rather than what happened, and the presidential pool's account of the aircraft incident in Ankara.
Bonus Insights
Thirty-five years outside the room, and now inside it
Quick asked what action the market might need from him. Bessent first corrected the idea that his advantage is money, and described the job change instead.
I see my job for 35 years as a macro analyst and investor was to sit outside the room, maybe have my ear up against the door sometimes, pull myself over, try to look over the transom and figure out what policy makers could do, should do, and will do. Okay. Now I am in the room.
Scott Bessent
The advice he gave after Liberation Day, and the scoreboard he keeps on it
He said he had told investors to take a deep breath, on the reasoning that the announced tariffs were the ceiling unless other countries retaliated, and that only China did. The market sold off, then recovered faster than it ever had.
The tariffs you were seeing are the highest tariffs you're going to see if there's no retaliation.
Scott Bessent
His conclusion on the people who sold into it was that "anyone who sold then just wasn't listening".
On Kevin Warsh's quarter-point increase, he would not take a side
Kernen asked whether the Fed chair had done the right thing and whether the credibility move was needed to keep the bond market calm. Bessent declined to say whether he agreed, said he and the president have confidence in Warsh, and said the balance to strike is inflation against growth. He said core inflation has not picked up so far and that the increase is showing up elsewhere.
Everything is in the headline inflation.
Scott Bessent
Stanley Druckenmiller
Kernen asked whether Bessent had spoken to Druckenmiller since his editorial. Bessent said they talk all the time. Kernen's follow-up, which of them had ever conceded a point to the other since 1988, got no answer from either side of the desk.
Two Chick-fil-As a month
Kernen offered to bring waffle fries next time. Bessent said he allocates himself two Chick-fil-As a month and that the discipline is hard for someone who grew up in the South.
Bessent's bottom line is that Washington is prepared to use access to the dollar system in two directions at once, closing the world's aviation and banking services to Iran while keeping a channel open to Beijing on AI incidents, and that the one thing it will not do is take the downside of the AI build-out onto the public balance sheet.
Products, Companies & Tools Mentioned
Anthropic (His example of an only-in-America story, founded by people sitting in a San Francisco park during the pandemic, and now carrying valuations he puts at 1 trillion to 2 trillion dollars)
OpenAI and Hugging Face (The incident he uses to make the responsibility argument: management's problem, not the agents')
Google (Quick's example that the pattern is industry-wide — agents that have broken out there as well)
People's Bank of China (Its governor is named as engaged in the quiet discussions over Iranian money flows)
Chick-fil-A (He allocates himself two a month, which he says is hard for someone from the South)
Other segments in this episode
Stuart Russell, UC Berkeley, on what the AI labs are telling Washington
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