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Lew to CEOs: It’s time to step up

Treasury Secretary Jack Lew says American CEOs need to “stop looking backwards” and think about “taking some risks” in a new interview with Fortune Magazine. Speaking at the Treasury Department in Washington, Lew discussed confidence, businesses relations with the Obama Administration and Russian sanctions. Here is an edited version of that interview:

Fortune: If the economy is improving, how come people aren’t feeling better?

Jack Lew: It takes a while not just to see that things are getting better, but also to have the confidence that they’ll stay better, so I don’t think it surprising that after the worst recession since the Great Depression it’s taken a little bit of time for people to realize that.

What message would you have to CEOs of the Fortune 500, and are you concerned that profits in the Fortune 500 are so robust while employment is lagging?

It’s important for firms have the confidence to invest in plants, equipment and people. They have to see the order books and profits to warrant that. We’re going to need some of that money to come off the sidelines. I think some of our business executives are concerned that they don’t want to get over-extended after the terrible experience they had with the recession. Each player has to play their role. Government has a responsibility that is a very important, and over the last six months we’ve seen the political debate in Washington settle down. But they [CEOs] also have their responsibilities; they have to look at what’s at the heart of the American economy and what’s made it the envy of the world. It’s a combination of innovation and entrepreneurship, and entrepreneurship means taking some risks and putting resources behind them. As confidence picks up, everyone’s going to have to stop looking backwards and look forward. And the future of the American economy is still very strong. When I travel around the world what I hear now isn’t the same I might’ve heard two or three years ago: I’m not hearing, ‘how did you cause the financial crisis?’ I’m hearing ‘how are you so resilient, how did you bounce back so well?’

Is your administration a business-friendly administration?

I think we are. I talk to CEOs all the time and I think they know that we actually want them to do well, and that we don’t view this as being an adversarial relationship. We’ve gone through a number of important policy processes in this administration that have been challenging. Financial reform was a once-in-a-generation experience that had a substantial amount of friction early on. CEOs want us to get to the finish line. They want to know what the final rules of the road are again. I think they know we listen to them. That doesn’t mean we always do what they want.

Are our economic sanctions and pressure on Russia working and forcing Putin to change course?

I think that the economic sanctions that we put in place have sent a very clear message that was received and understood everywhere. In almost every measure he has suffered from uncertainty and the imposition of sanctions since the invasion of Crimea and the activities surrounding Ukraine. Look at the Russian stock market and it’s down the Russian exchange rate and it’s down, look at the flight of capital from Russia, it’s at very high levels. Russia came into the year with a very low rate of growth it’s now teetering around zero and they know that with another round of sanctions it is almost certain to go negative. So I think these are factors that are part of the calculus. Remember that the purpose of the sanctions is not to hurt the people of Russia; the purpose is to change the decisions that the leaders make. We’ve made it clear we don’t want to impose more sanctions, but we are prepared to do so.