WEBVTT - 3M, Google, Bank Rules, Other 2H Catalysts 0:00:13.600 --> 0:00:17.600 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:17.640 --> 0:00:21.000 by the Litigation and Policy team at Bloomberg Intelligence, the 0:00:21.040 --> 0:00:26.360 investment research platform of Bloomberg LP. This podcast series examines 0:00:26.400 --> 0:00:30.160 the intersection of business policy and law, and today we'll 0:00:30.200 --> 0:00:33.440 be looking at the litigation and policy catalysts that we're 0:00:33.479 --> 0:00:36.400 watching in the second half of twenty twenty three and 0:00:36.440 --> 0:00:38.800 that we think will impact companies across a number of 0:00:38.840 --> 0:00:42.600 different sectors. My name is Elliott Stein. I'm a senior 0:00:42.640 --> 0:00:46.680 litigation analyst covering litigation in the financial sector, and I'll 0:00:46.680 --> 0:00:49.840 be your host for today, July seventeenth, twenty twenty three. 0:00:50.479 --> 0:00:52.920 If you have any questions about any of the matters 0:00:52.920 --> 0:00:56.880 we're discussing on today's episode, please don't hesitate to reach 0:00:56.920 --> 0:01:00.880 out to us at your convenience with questions. So we'll 0:01:00.880 --> 0:01:06.240 be discussing a handful of sectors and issues today. First, Jenrie, 0:01:06.600 --> 0:01:10.319 our senior antitrust analyst, will give us an update on 0:01:10.360 --> 0:01:15.240 the FTC's bid to block Microsoft's acquisition of Activision, and 0:01:15.319 --> 0:01:19.800 she'll also preview the Justice Department's upcoming trial in September 0:01:19.840 --> 0:01:24.920 against Google over its search business. Sticking with Tech, Matt 0:01:24.920 --> 0:01:29.600 Shettenhelm who covers TMT policy and litigation. We'll discuss in 0:01:29.680 --> 0:01:34.800 anticipated FTC rulemaking that threatens the targeted advertising business of 0:01:34.880 --> 0:01:39.720 companies like Alphabet and Meta, imperiling billions in revenue, and 0:01:39.840 --> 0:01:42.600 he'll also talk about the Supreme Court likely taking up 0:01:42.600 --> 0:01:46.160 a case that could shape Internet regulation as we know it. 0:01:47.040 --> 0:01:50.080 We'll then turn to financials and bring in Nathan Dean, 0:01:50.320 --> 0:01:55.240 our senior financials policy analyst, to discuss new capital requirements 0:01:55.360 --> 0:01:59.280 and post Silicon Valley bank rules that banks are likely 0:01:59.360 --> 0:02:03.840 to see. I'll discuss potential penalties that Swiss Bank QBS 0:02:03.920 --> 0:02:08.000 is likely to incur related to residential mortgage backed securities 0:02:08.400 --> 0:02:12.359 and our KAGOS issues that UBS inherited from Credit Suisse. 0:02:12.960 --> 0:02:16.600 And I'll also discuss key rulings in crypto cases, one 0:02:16.639 --> 0:02:19.440 of which came last week, and others that I expect 0:02:19.520 --> 0:02:22.080 to be issued in the second half of this year. 0:02:23.480 --> 0:02:26.480 After that, we'll turn to healthcare and Dwyane Wright, our 0:02:26.600 --> 0:02:30.240 senior healthcare policy analyst, will give us his thoughts on 0:02:30.280 --> 0:02:33.280 the government releasing a list of ten Medicare Part D 0:02:33.440 --> 0:02:36.400 drugs that will be subject to government price cuts, and 0:02:36.520 --> 0:02:41.239 he'll also discuss other potential rules targeting drugmaker revenue from 0:02:41.280 --> 0:02:45.760 Medicare Part D drugs cleared through the Accelerated Approval Pathway. 0:02:46.720 --> 0:02:51.600 Tis Walker, our senior healthcare patent litigation analyst, will preview 0:02:51.639 --> 0:02:57.280 an upcoming patent trial over Exelixis's cancer drug Cabometics, and 0:02:57.440 --> 0:03:00.960 last but not least, Holly from will discussed the Justice 0:03:00.960 --> 0:03:05.880 Department's upcoming trial against Teva over False Claims Act violations, 0:03:06.240 --> 0:03:08.840 and she'll also discuss an appeals court ruling that she 0:03:09.000 --> 0:03:14.280 expects in three M Earplug litigation. All of this research 0:03:14.320 --> 0:03:18.320 is available on the Bloomberg terminal at bi go And 0:03:18.560 --> 0:03:20.919 just a quick word about Bloomberg Intelligence for those who 0:03:20.960 --> 0:03:24.000 don't know. We are the investment research platform on the 0:03:24.000 --> 0:03:28.280 Bloomberg terminal, providing in depth research on industries, companies, and 0:03:28.360 --> 0:03:31.960 markets and delivering key data from bi analysts in their 0:03:32.000 --> 0:03:36.120 given industry. So with all that, let's get started with 0:03:36.160 --> 0:03:40.240 the content. Jen, Let's bring you in first to talk antitrust. 0:03:40.800 --> 0:03:44.240 Last week, Microsoft and Activision got a good ruling against 0:03:44.280 --> 0:03:48.480 the FTC, but it sounds like the FTC is appealing. 0:03:48.880 --> 0:03:50.839 And then you're also going to tell us a little 0:03:50.880 --> 0:03:54.560 bit more about the upcoming trial in the Justice Department's 0:03:54.600 --> 0:03:57.680 lawsuit against Google over its search business. So do you 0:03:57.760 --> 0:03:59.520 want to come in and tell us about these cases? 0:04:00.280 --> 0:04:01.280 Well, thanks Elliott. 0:04:01.920 --> 0:04:04.040 So for those of you not following the matter of 0:04:04.200 --> 0:04:07.480 Microsoft and activisions for post deal, it's been pending since 0:04:07.560 --> 0:04:10.960 January twenty twenty two and it's been a real roller coaster. 0:04:11.400 --> 0:04:14.320 So a few months ago this deal seemed really close 0:04:14.360 --> 0:04:17.040 to dead, but now it has new life. So what's 0:04:17.080 --> 0:04:20.760 happening is it's been cleared by about forty anti trust. 0:04:20.520 --> 0:04:23.200 Authorities globally, most with no conditions. 0:04:23.920 --> 0:04:27.240 The European Commission did clear with some commissions, and right 0:04:27.279 --> 0:04:29.720 now the only holdouts are the UK and the US. 0:04:30.360 --> 0:04:33.320 But in the US the companies have beaten efforts in 0:04:33.400 --> 0:04:36.200 court by the NTC to temporarily block the deal, so 0:04:36.279 --> 0:04:40.040 they are technically clear to cloaks. So UK is the 0:04:40.080 --> 0:04:43.360 only jurisdiction that stands in their way. And right now 0:04:43.480 --> 0:04:46.640 what they've done is they've offered up new remedies, or 0:04:46.680 --> 0:04:49.880 at least a new restructuring of the deal to the 0:04:50.000 --> 0:04:54.159 UK's Competition and Markets Authority, which is their anti trust agency, 0:04:55.080 --> 0:04:59.200 and that authority is reopened discussions and they think they 0:04:59.200 --> 0:05:02.080 need about four six weeks so I think the prospects 0:05:02.120 --> 0:05:05.320 for a settlement there are really good. We'll probably hear 0:05:05.360 --> 0:05:07.359 about that in about four weeks, and I think this 0:05:07.440 --> 0:05:10.159 deal is probably going to be able to close after that. Now, 0:05:10.200 --> 0:05:12.200 one thing is that they have an end date for 0:05:12.240 --> 0:05:15.560 their agreement as of July eighteenth, but they're probably going 0:05:15.560 --> 0:05:17.960 to extend that sometimes in sometimes in the next couple 0:05:17.960 --> 0:05:20.960 of days. Now the thing is in the US, the 0:05:21.080 --> 0:05:23.080 NTC could still pursue. 0:05:22.720 --> 0:05:23.520 A closed deal. 0:05:23.680 --> 0:05:25.840 They can continue to appeal, and they can seek in 0:05:25.960 --> 0:05:28.719 order to unwind it, but we think the agency's chances 0:05:28.680 --> 0:05:29.480 of success. 0:05:29.160 --> 0:05:29.839 Are really low. 0:05:29.880 --> 0:05:31.400 So at this point in time, I think the. 0:05:31.360 --> 0:05:33.240 Deal is going to close and it's good to go. 0:05:33.880 --> 0:05:34.040 Now. 0:05:34.080 --> 0:05:37.040 The second matter that Elliott mentioned is Google and the 0:05:37.040 --> 0:05:41.960 Department of Justice is basically has suit up for a monopolization. 0:05:41.320 --> 0:05:44.000 In the searge area and this trial is ready to 0:05:44.040 --> 0:05:45.680 start on September twelfth in a. 0:05:45.720 --> 0:05:48.520 Federal court in the District of Columbia. So what the 0:05:48.560 --> 0:05:51.200 Department of Justice is alleging, and by the way, there 0:05:51.200 --> 0:05:51.800 are also. 0:05:51.640 --> 0:05:54.400 Some states that have joined the Department of Justice, is 0:05:54.400 --> 0:05:58.799 that Google is unlawfully maintaining its monopoly in general search services, 0:05:58.839 --> 0:06:02.719 search advertising, and general search text advertising in the US, 0:06:02.800 --> 0:06:05.719 and this is because the company pays billions of dollars 0:06:05.760 --> 0:06:09.360 each year to distributors like device manufacturers such as Apple, 0:06:09.600 --> 0:06:13.240 or wireless carriers like AT and T, or browser developers 0:06:13.279 --> 0:06:16.960 like Mozilla to be the default search engine for. 0:06:16.880 --> 0:06:18.840 Their products or for their software. 0:06:19.240 --> 0:06:22.360 And what the DOJ says is that users rarely ever 0:06:22.440 --> 0:06:25.279 change the default search engine, so it gives that company 0:06:25.600 --> 0:06:29.680 a defacto way exclusivity and because of that, Google effectively 0:06:29.720 --> 0:06:33.040 homes the control search distribution channels, accounting for about eighty 0:06:33.040 --> 0:06:36.839 percent of general search quers in the US. Now, this 0:06:36.880 --> 0:06:41.279 is a pretty traditional theory under the antitrust laws, It's 0:06:41.320 --> 0:06:45.760 basically said the precedent is that exclusive agreements that tie 0:06:45.839 --> 0:06:49.000 up more than forty percent of available outlets can be illegal. 0:06:49.520 --> 0:06:52.800 But here the question is are these outlets really tied up? 0:06:52.880 --> 0:06:54.160 Is it real foreclosure? 0:06:54.600 --> 0:06:59.240 Because Google doesn't prevent users from changing their default search engine. 0:06:59.279 --> 0:07:01.440 Anybody can win and change. 0:07:01.200 --> 0:07:04.080 The default search engine being or duc dot Go anywhere 0:07:04.080 --> 0:07:05.320 they want to, and Google. 0:07:05.080 --> 0:07:07.279 Doesn't prevent that. So the question is going to be 0:07:07.279 --> 0:07:08.799 based on the evidence. 0:07:08.360 --> 0:07:13.280 And whether these default agreements search status agreements truly are foreclosure. 0:07:13.400 --> 0:07:15.840 If they are. I think the DJ has a really 0:07:15.880 --> 0:07:16.600 good shot. 0:07:16.320 --> 0:07:19.240 At winning this case, But even if that happens, I 0:07:19.280 --> 0:07:22.920 think the worst remedy would be that Google has. 0:07:22.800 --> 0:07:24.520 To drop these exclusive agreements. 0:07:24.800 --> 0:07:27.240 The DJ is seeking a break of the company, but 0:07:27.280 --> 0:07:29.600 it's highly doubtful that's what a judge would in goes 0:07:30.040 --> 0:07:33.520 just breaking up these exclusive agreements would target the harm 0:07:33.760 --> 0:07:36.640 and would be the least restrictive alternative, and that's usually 0:07:36.640 --> 0:07:39.080 where a judge would go on these kinds of matters. 0:07:39.120 --> 0:07:44.680 So all in all, probably not particularly impactful to Google, 0:07:44.800 --> 0:07:46.520 even if so. 0:07:46.640 --> 0:07:50.840 With that, back to you, Elliott, great, thanks for rot Jen, 0:07:50.960 --> 0:07:54.520 And just a reminder, we're recording this on July seventeenth, 0:07:54.720 --> 0:07:58.080 so when folks on the call say things like tomorrow, 0:07:58.680 --> 0:08:00.960 we're talking about July eighteen and by the time you 0:08:01.200 --> 0:08:03.720 listen to this podcast and maybe after that date. In 0:08:03.760 --> 0:08:07.440 any event, but with that caveat, Matt, let's bring you in. 0:08:07.520 --> 0:08:11.240 We're going to stick with tech. You expect the FTC 0:08:11.560 --> 0:08:15.600 to propose rules they're threatening the targeted ad business of 0:08:15.680 --> 0:08:19.320 companies like Alphabet and Meta, and you've also said that 0:08:19.360 --> 0:08:21.840 you expect the Supreme Court to take up a case 0:08:21.880 --> 0:08:25.280 that could shape Internet regulation. As we know. It sounds 0:08:25.280 --> 0:08:27.000 like super important stuff. Why don't you come in and 0:08:27.040 --> 0:08:29.000 tell us about it? Yeah? 0:08:29.000 --> 0:08:31.200 I think it could be an interesting second half for 0:08:31.520 --> 0:08:34.840 Internet companies in the policy space here, not just for 0:08:34.880 --> 0:08:39.120 the antitrust issues that GEN touched on, but while the 0:08:39.200 --> 0:08:43.720 FTC maybe has struggled in some of those enforcement actions, 0:08:43.760 --> 0:08:48.559 I think it's likely to try again to make rules 0:08:49.080 --> 0:08:52.160 to go directly after these companies, not through litigation, but 0:08:52.559 --> 0:08:56.120 by setting legal standards. So companies like Alphabet and Meta 0:08:56.160 --> 0:08:59.080 make hundreds of billions of dollars a year using data 0:08:59.360 --> 0:09:03.760 for ad and there are almost no direct legal limits 0:09:03.920 --> 0:09:07.240 in the United States on that. Congress has tried to 0:09:07.320 --> 0:09:10.600 pass a law to limit how they use data for advertising, 0:09:11.000 --> 0:09:14.280 but no bill has made it through the process to 0:09:14.320 --> 0:09:17.800 the finish line. That's where the FTC is likely to 0:09:17.880 --> 0:09:21.240 step in and likely moving ahead with the process in 0:09:21.520 --> 0:09:26.040 the second half of this year. It's likely to adopt 0:09:26.040 --> 0:09:29.240 the rules that go directly at when is it unfair 0:09:29.679 --> 0:09:36.079 or deceptive to use data, in this case for advertising purposes. 0:09:36.559 --> 0:09:39.920 The FTC first launched this rule making almost a year 0:09:39.920 --> 0:09:43.840 ago in August of twenty twenty two, and what we 0:09:43.960 --> 0:09:49.480 expect this in the coming months is the next key 0:09:49.720 --> 0:09:52.560 step in that process, and that's when the FTC is 0:09:52.600 --> 0:09:56.760 due to release a Notice of Proposed Rulemaking, when I 0:09:56.920 --> 0:10:01.800 expect they'll kind of more concretely set out what sorts 0:10:01.840 --> 0:10:05.559 of rules they envision. So far, they've been very open ended. 0:10:06.200 --> 0:10:08.800 I think we should have a much clearer sense of 0:10:08.880 --> 0:10:11.880 what they're going to go after, and this FTC has 0:10:11.920 --> 0:10:15.320 given us every indication that it will go big, that 0:10:15.400 --> 0:10:18.520 it will be aggressive in what it's trying to pursue. 0:10:19.000 --> 0:10:23.160 That will likely lead to an effort to push final 0:10:23.280 --> 0:10:28.080 rules in place in probably late twenty twenty four, and 0:10:28.080 --> 0:10:31.360 then you're going to see litigation over it following that. 0:10:32.200 --> 0:10:35.080 But the big development for this second half is I 0:10:35.120 --> 0:10:38.720 think we'll get a more concrete sense of what's in play, 0:10:39.040 --> 0:10:41.679 and I expect the FTC to be aggressive about what 0:10:41.720 --> 0:10:42.679 it's trying to pursue. 0:10:42.679 --> 0:10:42.920 There. 0:10:43.480 --> 0:10:46.319 The second thing that I wanted to highlight is another 0:10:46.800 --> 0:10:50.480 risk on the Internet policy front, and that involves the 0:10:50.600 --> 0:10:53.560 US Supreme Court. This doesn't involve the back end of 0:10:53.640 --> 0:10:57.560 the businesses from Meta and Alphabet how they use data. 0:10:57.679 --> 0:11:00.360 It involves the front end what you see when you 0:11:00.440 --> 0:11:04.920 go to their websites. States like Florida and Texas want 0:11:05.000 --> 0:11:11.439 to impose rules that control how the companies display content 0:11:11.520 --> 0:11:14.320 because there's a perception that the companies are biased in 0:11:14.440 --> 0:11:17.840 how they're presenting content, and so they have different ideas 0:11:17.840 --> 0:11:22.440 about how to regulate that, to mandate neutrality or to 0:11:22.559 --> 0:11:26.160 mandate that the companies operate like common carriers. And that 0:11:26.200 --> 0:11:29.760 presents a really big legal question under the First Amendment 0:11:30.360 --> 0:11:35.240 because the companies claim that they are protected as speakers, 0:11:35.720 --> 0:11:38.520 that they get to frame their message just as the 0:11:38.559 --> 0:11:40.679 New York Times or the Wall Street Journal gets to 0:11:40.679 --> 0:11:43.480 frame its message. But the Supreme Court has never really 0:11:43.559 --> 0:11:47.239 given a clear standard of how the First Amendment applies 0:11:47.840 --> 0:11:51.160 to regulation of the Internet. And so what I think 0:11:51.240 --> 0:11:53.360 will happen in the second half of this year is 0:11:53.400 --> 0:11:55.400 the Court is going to agree to take up this 0:11:55.600 --> 0:11:59.480 case about the Texas and Florida laws, and it's going 0:11:59.480 --> 0:12:03.320 to tee up a really important question about can these 0:12:03.360 --> 0:12:07.000 companies be regulated in how they display text. Is it 0:12:07.040 --> 0:12:09.520 the same as a newspaper or can they be regulated 0:12:09.600 --> 0:12:13.040 more aggressively, And it's all about how the First Amendment 0:12:13.080 --> 0:12:15.880 applies to that. So I think that fight's going to 0:12:15.920 --> 0:12:18.600 take shape in the second half of this year, and 0:12:18.640 --> 0:12:21.480 then I would expect a final decision by June of 0:12:21.600 --> 0:12:23.720 next year. With that, let me toss it back to 0:12:23.720 --> 0:12:24.720 you Elliott. 0:12:25.240 --> 0:12:28.400 Great, thanks a lot, Matt. All right, Nathan, enough tech 0:12:28.480 --> 0:12:31.920 for now. Let's bring you in and talk financials. The 0:12:32.000 --> 0:12:35.360 FED recently previewed new capital requirements that are come in 0:12:35.400 --> 0:12:38.480 for banks, and you also expect other rules to be 0:12:38.600 --> 0:12:41.960 proposed to address issues that became a parent during the 0:12:42.000 --> 0:12:45.600 regional bank issues in March and April. This is obviously 0:12:45.600 --> 0:12:47.719 a pretty big deal for banks. So why don't you 0:12:47.760 --> 0:12:50.080 come in and tell us more about what you're expecting. 0:12:50.480 --> 0:12:52.640 Yeah, So, if you're in the bank space, I highly 0:12:52.679 --> 0:12:55.640 recommend that you go to July tenth. There was a 0:12:55.679 --> 0:12:59.000 speech by FED Vice Chairmichael Barr on bank capital and 0:12:59.120 --> 0:13:02.800 this really laid out the endgame of what the regulators 0:13:02.800 --> 0:13:07.080 are going to do for the post SVB post BOZL 0:13:07.240 --> 0:13:10.840 three requirements. And I said endgame on purpose because the 0:13:10.880 --> 0:13:14.040 first proposal out there is known as the Bosle three endgame. 0:13:14.400 --> 0:13:17.400 And what this proposal does is it would raise capital 0:13:17.440 --> 0:13:21.280 requirements for the big banks. The general consensus view is 0:13:21.320 --> 0:13:25.200 about twenty percent. By what it would do is for 0:13:25.360 --> 0:13:28.760 every extra sorry, for every one hundred dollars of risk 0:13:28.800 --> 0:13:32.160 weighted assets. It would add two hundred basis points or 0:13:32.559 --> 0:13:36.719 two dollars to that. And so you know, this is 0:13:37.200 --> 0:13:41.000 one of those things where it was Basle. The Bossle 0:13:41.040 --> 0:13:44.679 three endgame is an international standard. It's already been designed 0:13:44.720 --> 0:13:47.160 in Europe. This is the American portion of it that's 0:13:47.160 --> 0:13:50.560 playing catch up. But you know the reason why the FED, 0:13:50.679 --> 0:13:52.520 or one of the when the FED went forward with 0:13:52.559 --> 0:13:55.200 this two hundred basis point increased the use words like humble, 0:13:55.559 --> 0:13:58.439 that the banking system needs to be humble now in 0:13:58.640 --> 0:14:00.680 within the BOSO three end game. There are two other 0:14:00.720 --> 0:14:05.200 things to keep a note is for firms trading activities, 0:14:05.600 --> 0:14:08.200 there's going to be new market risk capital requirements and 0:14:08.240 --> 0:14:10.680 this is going to hit the investment banks. It specifically 0:14:10.800 --> 0:14:14.440 is going to look at training books by these investment banks. 0:14:14.960 --> 0:14:18.040 We've heard anecdotally from the FED the capital requirements for 0:14:18.120 --> 0:14:21.960 specific desks could go up sixty percent. And it would 0:14:22.000 --> 0:14:26.000 also require standardization of credit risk models. So if you're 0:14:26.040 --> 0:14:27.960 Bank America or goldmin Sacks, you're not going to be 0:14:27.960 --> 0:14:29.400 able to use your own model. You're going to have 0:14:29.440 --> 0:14:32.440 to use the standardized credit risk model. So everything is 0:14:32.480 --> 0:14:36.600 now apples to apples. Now, the most important thing here 0:14:37.160 --> 0:14:40.400 to note is that if you were to take this proposal, 0:14:40.560 --> 0:14:43.360 you know, this two hundred basis point increase, it would 0:14:43.400 --> 0:14:45.560 wipe out pretty much all of the one hundred and 0:14:45.600 --> 0:14:48.000 twenty one billion dollars of access capital that the big 0:14:48.080 --> 0:14:51.880 gesips already have in play. However, the FED Vice chair 0:14:52.040 --> 0:14:54.880 also stated that he thinks that after a two year 0:14:54.920 --> 0:14:59.120 implementation period, if banks continue to maintain the profits that 0:14:59.160 --> 0:15:01.800 they have over the last few years, that they'll be 0:15:01.800 --> 0:15:05.640 able to get to this capital requirement without herming or 0:15:05.760 --> 0:15:09.400 being able to continue to pay out dividends. And that's 0:15:09.400 --> 0:15:10.040 the big question. 0:15:10.120 --> 0:15:10.280 Now. 0:15:10.280 --> 0:15:14.320 Obviously, when this proposal comes out, and we anticipate this 0:15:14.440 --> 0:15:17.200 to come out at the end of July or potentially 0:15:17.240 --> 0:15:20.800 in August via a virtual session at the FED, we'll 0:15:20.840 --> 0:15:22.840 know a little bit more. But right now that you know, 0:15:22.880 --> 0:15:25.160 the banks are, you know, not really thrilled about this 0:15:25.240 --> 0:15:28.680 a development, but you know, this was this was coming, 0:15:28.720 --> 0:15:32.320 This was actually planned prior to Silicon Valley. I should 0:15:32.320 --> 0:15:34.920 also note that this Bosle three endgame is applicable to 0:15:34.960 --> 0:15:37.440 banks that are one hundred billion in ups, so not 0:15:37.640 --> 0:15:40.000 just looking at Bank of America or Goldman Sachs. But 0:15:40.000 --> 0:15:43.680 if you're looking at fifth third, or you know, some 0:15:43.800 --> 0:15:46.920 of the smaller banks out there, like Citizens and so 0:15:46.960 --> 0:15:49.240 forth like that, this is also going to be applicable 0:15:49.240 --> 0:15:52.480 to them, probably just not on the same scale. The 0:15:52.520 --> 0:15:54.160 other thing that really keep in mind is that there 0:15:54.160 --> 0:15:57.680 are two other, really or three other major initiatives. Now 0:15:57.720 --> 0:16:00.640 this could come as part of the Bosle three proposal, 0:16:01.080 --> 0:16:04.560 or these could be separate proposals, but one is requiring 0:16:04.640 --> 0:16:06.760 regional banks to issue what is known as te LAC 0:16:06.840 --> 0:16:10.000 debt total loss absorbing capacity debt. Now, if you were 0:16:10.040 --> 0:16:12.160 to take the big bank t LAC rules, so the 0:16:12.240 --> 0:16:15.400 rule that's currently in place for the biggest banks, and 0:16:15.480 --> 0:16:17.640 apply it to the banks that are hundred billion and up, 0:16:17.680 --> 0:16:20.280 as we suspect the FED is going to do, you're 0:16:20.280 --> 0:16:22.280 looking at a six one hundred and sixty eight billion 0:16:22.360 --> 0:16:24.880 dollars in new debt that the regional banks have to issue. 0:16:25.480 --> 0:16:27.560 About ninety billion of that is for the banks that 0:16:27.560 --> 0:16:29.800 are hundred billion to two hundred and fifty billion, and 0:16:29.840 --> 0:16:31.640 then the rest is coming for those banks that are 0:16:31.640 --> 0:16:33.960 two hundred and fifty billion and up, like P and C, Truist, 0:16:33.960 --> 0:16:37.640 et cetera. Now, the regional banks. They're not thrilled about this, 0:16:37.800 --> 0:16:40.000 but from what we've heard, they're not as opposed to 0:16:40.040 --> 0:16:42.800 this as the big banks are to the capital requirements rule. 0:16:43.400 --> 0:16:45.120 But again it's something if you're on the credit side 0:16:45.160 --> 0:16:47.000 you should be paying attention to. We think this is 0:16:47.040 --> 0:16:49.880 going to come out right around the same side. We 0:16:49.960 --> 0:16:53.960 also are going to see changes to the accounting standards 0:16:54.000 --> 0:16:57.160 for what are known as available for sales securities. This 0:16:57.320 --> 0:16:59.480 is applicable to those banks one hundred billion and up. 0:16:59.560 --> 0:17:03.479 This is something in the Silicon Valley certainly was playing. 0:17:03.240 --> 0:17:03.720 A part of. 0:17:04.000 --> 0:17:05.840 And then you're going to see some more what I 0:17:05.880 --> 0:17:11.600 would call tweaks to the stress test framework. You're going 0:17:11.640 --> 0:17:15.440 to see minimal adjustments to the jiefs of surcharge and 0:17:15.440 --> 0:17:17.479 FED Vice chair Michael Barr said that you're not going 0:17:17.520 --> 0:17:21.600 to see any changes to the Enhanced Supplementary Leverage Ratio 0:17:21.760 --> 0:17:25.240 or the ESLR at this point. Now, like I said before, 0:17:25.280 --> 0:17:27.840 these proposals they need to come out fairly soon. The 0:17:27.880 --> 0:17:30.200 regulators need to get this done before the twenty twenty 0:17:30.200 --> 0:17:33.080 four elections because if you run, if the Republicans win 0:17:33.119 --> 0:17:35.960 the White House, you potentially could have a changing of 0:17:35.960 --> 0:17:40.040 the guard at the OCC and the FDIC, and so 0:17:40.240 --> 0:17:42.920 we anticipate the regulators will put these proposals out. You're 0:17:42.960 --> 0:17:46.199 probably looking at a sixty day comment period and then 0:17:46.240 --> 0:17:47.879 they're going to try and spend the rest of twenty 0:17:47.920 --> 0:17:50.440 twenty four putting this out there. As you can imagine, 0:17:50.480 --> 0:17:53.080 the banking industry is not overly happy about this, so 0:17:53.119 --> 0:17:55.439 they're going to be fighting this tooth and nail. But 0:17:55.520 --> 0:17:58.760 we're looking at finalization probably about a year from now, 0:17:58.960 --> 0:18:02.000 with a two year implement after that. We've got a 0:18:02.040 --> 0:18:05.560 lot more on the terminal available, but for right now, 0:18:05.560 --> 0:18:07.080 I'm going to push that back to you, Elliott. 0:18:08.080 --> 0:18:11.280 Great, thanks, Nathan, good stuff. All right, So we'll stick 0:18:11.320 --> 0:18:14.639 with financials and I'll jump in here to talk about 0:18:14.720 --> 0:18:17.440 some of the key litigation catalysts that I'm watching in 0:18:17.480 --> 0:18:20.000 the second half of the year. First, I think there 0:18:20.080 --> 0:18:23.400 is a good chance that UBS moves closer to settling 0:18:23.440 --> 0:18:27.440 with the Justice Department over a legacy residential mortgage backed 0:18:27.440 --> 0:18:30.760 securities case from the Financial crisis. Ubs is the only 0:18:30.800 --> 0:18:34.199 bank that didn't settle with the Justice Department, prompting the 0:18:34.320 --> 0:18:38.280 Justice Department to sue in twenty eighteen. The litigation has 0:18:38.359 --> 0:18:41.879 moved slowly, but UBS took a six hundred and sixty 0:18:41.920 --> 0:18:45.560 five million dollar provision in one queue for this case, 0:18:46.119 --> 0:18:50.320 suggesting the bank is gearing up for a settlement based 0:18:50.320 --> 0:18:52.760 on settlements by other banks over the same issue. I 0:18:52.760 --> 0:18:56.240 think UBS is likely facing the settlement of about two 0:18:56.240 --> 0:18:59.159 and a half billion dollars, so it's possible that the 0:18:59.200 --> 0:19:03.560 bank may still to take some additional provisions for this matter. 0:19:04.760 --> 0:19:08.600 I also expect UBS to settle government probes of Credit 0:19:08.680 --> 0:19:12.360 Suisse that stemmed from the Arcagos collapse in twenty twenty one. 0:19:12.800 --> 0:19:16.639 As I'm sure everyone knows, UBS bought its Swiss rival, 0:19:16.680 --> 0:19:20.080 Credit Swiese earlier this year, and as a result, Credit 0:19:20.119 --> 0:19:25.200 Sweez's multiple litigation issues are now UBS's problem to resolve. 0:19:25.840 --> 0:19:29.919 Among Archagos' prime brokers, Credit Sweez was the most exposed, 0:19:29.960 --> 0:19:34.280 given its outsized losses of about five billion dollars and 0:19:34.359 --> 0:19:38.560 its apparent risk management lapses. The Financial Times reported in 0:19:38.680 --> 0:19:41.560 June that the Federal Reserve could exact as much as 0:19:41.800 --> 0:19:46.080 a three hundred million dollars fine for Credit Sweez's failings, 0:19:46.160 --> 0:19:50.560 and the UK could seek up to one hundred million pounds. 0:19:50.800 --> 0:19:55.920 I think the SEC may also impose a fine, so 0:19:56.000 --> 0:20:00.120 Credit SWEE has reportedly only provisioned thirty five million dollars 0:20:00.240 --> 0:20:04.040 for fines related to Ourcagos, so it's possible that UBS 0:20:04.320 --> 0:20:07.320 will have to take additional provisions. Though I should note 0:20:07.560 --> 0:20:11.960 that UBS did take about four billion dollars in provisions 0:20:12.000 --> 0:20:15.639 for litigation and regulatory matters related to its acquisition of 0:20:15.720 --> 0:20:19.119 credit Suites, but it's unclear how much, if any, of 0:20:19.160 --> 0:20:24.200 that four billion dollars was related to our Chagos. Turning 0:20:24.240 --> 0:20:27.240 to crypto, we had a big decision in the SEC 0:20:27.400 --> 0:20:30.639 versus Ripple case last week, and that is going to 0:20:30.720 --> 0:20:34.160 have major implications for other crypto cases that we're watching, 0:20:34.600 --> 0:20:39.000 most notably the SEC's case against Coinbase. The issue in 0:20:39.000 --> 0:20:42.359 this line of cases is whether crypto assets or securities 0:20:42.480 --> 0:20:45.879 or not, since the SEC's jurisdiction over the crypto spase 0:20:46.240 --> 0:20:50.359 basically turns on that question. The Ripple ruling was notable 0:20:50.440 --> 0:20:53.719 because it said that only certain direct sales by Ripple 0:20:53.800 --> 0:20:57.640 of its XRP token were securities, but that sales by 0:20:57.720 --> 0:21:02.600 Ripple of XRP on public public exchanges we're not securities. 0:21:03.400 --> 0:21:07.040 The ruling also said that XRP itself is not a security, 0:21:07.080 --> 0:21:11.280 which is a major rejection of the SEC's theory that 0:21:11.400 --> 0:21:15.400 most digital assets are securities, and it underscores a point 0:21:15.400 --> 0:21:17.840 that we've been making, which is that a sale of 0:21:17.880 --> 0:21:21.240 a token in one context, let's say, for purposes of 0:21:21.359 --> 0:21:25.480 raising money, may be a security, but the sale of 0:21:25.520 --> 0:21:27.920 the same token in a different context, let's say, on 0:21:27.960 --> 0:21:31.040 the secondary market, might not be a security. And that's 0:21:31.040 --> 0:21:36.040 a critical distinction for platforms like Coinbase, which we expect 0:21:36.080 --> 0:21:38.840 will hit this argument really hard as it begins to 0:21:38.880 --> 0:21:42.080 mount its defense against the SEC in the second half 0:21:42.080 --> 0:21:46.160 of this year. Another crypto case that we're watching and 0:21:46.280 --> 0:21:48.679 in which we expect a key ruling in two h 0:21:49.200 --> 0:21:53.000 is gray Scales action against the SEC over the company's 0:21:53.040 --> 0:21:57.200 bid for a spot bitcoin ETF. Just as a reminder 0:21:57.240 --> 0:21:59.680 for maybe people who don't follow this space all that closely, 0:22:00.280 --> 0:22:03.640 Grayscale is a crypto asset manager and it's been seeking 0:22:04.000 --> 0:22:08.920 to convert its Grayscale Bitcoin Trust, known as GBTC into 0:22:08.960 --> 0:22:13.520 an ETF. The SEC rejected that application, and that prompted 0:22:13.640 --> 0:22:16.639 a lawsuit by Grayscale. The case was argued in March, 0:22:17.280 --> 0:22:19.600 which means we should get a ruin any day now. 0:22:19.760 --> 0:22:22.120 The ruins come out on Tuesdays and Fridays, so if 0:22:22.119 --> 0:22:24.679 you want to check the DC Circuit's website on those days, 0:22:24.800 --> 0:22:27.679 you can join me and refreshing your browser at eleven 0:22:27.720 --> 0:22:31.280 am every day on those days. Based on that oral 0:22:31.359 --> 0:22:33.880 argument in March, I do think Grayscale is a good 0:22:33.920 --> 0:22:37.600