Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.
Speaker 1: Over the years, Donald Trump has faced criminal investigations, special
Speaker 1: counsel inquiries, even impeachments, but none has stuck. That may
Speaker 1: be changing, as a flurry of witnesses, including Trump's former
Speaker 1: fixer Michael Cohen, have testified before a Manhattan grand jury
Speaker 1: considering criminal charges against the former president. This isn't a
Speaker 1: question of vindication. It's not a question, as I stated before,
Speaker 1: about revenge. This is my position is that at the
Speaker 1: end of the day, Donald Trump needs to be held
Speaker 1: accountable for his dirty deeds if in fact that's the
Speaker 1: way that the facts play out. That plus an invitation
Speaker 1: to Trump to testify before the grand jury, indicate that
Speaker 1: Manhattan District Attorney Alvin Bragg is close to an indictment.
Speaker 1: The first criminal charge is against a former president in
Speaker 1: our nation's history. Trump's reaction to it all has been predictable.
Speaker 1: These are which huntsees have been going on for a
Speaker 1: long time. They've weaponized justice in our country. It's a disgrace,
Speaker 1: and I think people are very angry about it. Joining
Speaker 1: me is former federal prosecutor Jennifer Rogers, a professor at
Speaker 1: NYU Law School. The prevailing view of most legal experts,
Speaker 1: including Trump's own attorney, is that he will be indicted
Speaker 1: in Manhattan. Do you agree, Yeah, that seems to be
Speaker 1: what's happening. I mean, the practice of the Manhattan BA
Speaker 1: is to invite descendants to participate in the grand jury
Speaker 1: at the end of an investigation, before they seek an indictment.
Speaker 1: And so they've been putting all the witnesses that they
Speaker 1: would need, you know, Michael Cohen and others into the
Speaker 1: grand jury, and they've invited Trump to participate, which he
Speaker 1: declined wisely, and so it does look like they're wrapping
Speaker 1: up with the grand jury. I mean, you know, you
Speaker 1: do an investigation, you talk to all these witnesses, there's
Speaker 1: no reason to actually put them in unless you're going
Speaker 1: to speak in indictment. And so it seems very much
Speaker 1: like that's where it's headed. His attorney's met with prosecutors
Speaker 1: recently to make their case against an indictment in a
Speaker 1: case like this. I mean, is there really any hope
Speaker 1: that they could change prosecutors' minds? No, No, not much.
Speaker 1: You know, it rarely happens in any kind of case,
Speaker 1: but in this kind of case. It's a fairly simple case. Factually, there,
Speaker 1: of course, is a tricky legal issue. I don't know
Speaker 1: if it's tricky as much as it's just not been
Speaker 1: done before, So it's a bit unknown whether the felony
Speaker 1: will hold up on heel if they get the convictions.
Speaker 1: But where everything is already known to the prosecutors, it's
Speaker 1: really just almost a formality. But you know, defense lawyers
Speaker 1: always want that chance to come in and make the pitch,
Speaker 1: and prosecutors are willing to give them that chance. So
Speaker 1: they did it and it didn't work, And all that's
Speaker 1: very predictable tell us about the legal theory they're going
Speaker 1: to try to use to the misdemeanor of falsifying business
Speaker 1: records into a felony. So in New York State, the
Speaker 1: falsification of financial records that prosecutors alleged was done here
Speaker 1: where they took this money that was paid to Stormy
Speaker 1: Daniels to keep her quiet before the election, and instead
Speaker 1: of just writing her a check from the Trump organization
Speaker 1: or Trump writing her a personal check, they instead had
Speaker 1: Michael Cohen pay her and then they paid him back
Speaker 1: from the business, pretending that it was for legal expenses.
Speaker 1: So that's the falsification of records that the Trump organization
Speaker 1: kind of hid all of these payments. That's a misdemeanor
Speaker 1: in New York State. So in order for it to
Speaker 1: be a felony, that crime has to be committed in
Speaker 1: conjunction with another crime, so in order to facilitate or
Speaker 1: to cover up a different crime. So what they are
Speaker 1: alleging here, we think is that this cover up was done,
Speaker 1: the falsification of records was all done in order to
Speaker 1: commit a campaign finance crime, meaning that this payment actually
Speaker 1: was done to benefit the campaign because had she come
Speaker 1: out and told her story in the week leading up
Speaker 1: to the election, he wouldn't have been elected. So it's
Speaker 1: a benefit to the campaign. The campaign hid that benefit.
Speaker 1: They didn't disclose it as part of the paperwork that
Speaker 1: they have to file with election officials. And so that's
Speaker 1: what they say is the second crime that the falsification
Speaker 1: crime facilitated, and that makes it a felony under New
Speaker 1: York day law. The Manhattan DA didn't bring charges against
Speaker 1: Trump in the criminal tax fraud case where they brought
Speaker 1: charges against his former CFO, Alan Weisselberg. Now they appear
Speaker 1: to be going after him with this untested legal theory,
Speaker 1: and it seems kind of odd to me that they
Speaker 1: would proceed with a novel theory in the first case
Speaker 1: ever against a former president. Yeah, it's hard to know
Speaker 1: how they assess their case and exactly what they're thinking.
Speaker 1: Of course, they know more about the case than we
Speaker 1: all know sitting outside here, but you know, I think
Speaker 1: that they're probably trying to assess it in terms of
Speaker 1: is this case something that we would charge someone else with?
Speaker 1: You know, yes, it's untested, but do we think it's right?
Speaker 1: Do we think that it will stand up on appeal legally?
Speaker 1: The issues with it being a former president make it
Speaker 1: really tricky in terms of what is a jury going
Speaker 1: to do once they're speeded. You know, when you have
Speaker 1: twelve people in the box, are we going to get
Speaker 1: twelve people who are going to be able to assess
Speaker 1: this fairly? But the untested portion of it is a
Speaker 1: legal issue on that front, it's more about is it
Speaker 1: going to stand up in front of the judges who
Speaker 1: will be affessing it. Can we get it through the
Speaker 1: trial court level? On appeal? Will the appellate court judges
Speaker 1: say that it meets legal muster? So I think they're
Speaker 1: probably just saying, listen, do we think this is a
Speaker 1: correct theory, and can we convince the judges of this.
Speaker 1: It's not really a jury issue. And then on the
Speaker 1: jury side, you just say, listen, if we think he
Speaker 1: has done this and we think that we would charge
Speaker 1: someone else with it, we should take a shot at it,
Speaker 1: former president or no, you know, he's not above the law.
Speaker 1: We should have that accountability. And then on the other
Speaker 1: case that's apparently still kicking around. It's definitely true that
Speaker 1: earlier last year, Alvin Bragg, the brand new DA at
Speaker 1: that time, decided not to go into the grand jury
Speaker 1: with the case about inflating and decreasing the assets in
Speaker 1: order to get benefits. But they say that investigation is ongoing,
Speaker 1: and a lot of it had to do with whether
Speaker 1: they were able to get the true and complete cooperation
Speaker 1: of Alan Weisselberg, which by all accounts they have not.
Speaker 1: So that kind of I think has more to do
Speaker 1: with that side of things. And listen, they may ultimately
Speaker 1: bring that case if they think that they can. Apparently
Speaker 1: they're still working, honestly, that's what the DA's office to say.
Speaker 1: So Trump has called this a politically motivated witch hunt,
Speaker 1: said he did absolutely nothing wrong and denied having an
Speaker 1: affair with the porn star Stormy Daniels, and said Bragg's
Speaker 1: inquiry was an effort to take down the leading Republican
Speaker 1: candidate in the twenty twenty four presidential election. I'm wondering
Speaker 1: if the fact that the former DA didn't charge Trump
Speaker 1: and Bragg, you know, as you just mentioned, may still
Speaker 1: but didn't charge him in that another case, can that
Speaker 1: be used by the defense in any way to say
Speaker 1: this is politically motivated. They kept on trying and trying
Speaker 1: and trying until they got him. Well, listen, this is
Speaker 1: of course Trump's playbook, right, Anything that anybody does that
Speaker 1: accuses him of anything is a politically motivated witch hunt.
Speaker 1: So this is kind of how he responds to everything.
Speaker 1: There's no evidence that anyone has gone after him for
Speaker 1: political reasons. When the DA, just prior to Alvin Bragg,
Speaker 1: cy Van was investigating, you know, they needed to do
Speaker 1: this investigation. You can't decide on charters until you know
Speaker 1: what you're dealing with. And they didn't finish. They didn't
Speaker 1: finish the investigation that they were focused on. They appear
Speaker 1: to put this one kind of on the back burner,
Speaker 1: probably because of the untested nature of the legal theory
Speaker 1: as far as the felony charge goes, and they focused
Speaker 1: on the other thing. Bragg thought they hadn't gotten there yet,
Speaker 1: so he switched gears. I mean, there's just nothing to
Speaker 1: suggest that it's political at all. This is just kind
Speaker 1: of Trump's play. And once you get to court, you know,
Speaker 1: he makes all of these statements in the public realm
Speaker 1: because you know, that's just how he works, and he's
Speaker 1: trying to influence ultimately with the public thinks, because they're
Speaker 1: the voters and also of course potentially the jury pool.
Speaker 1: But when you get into court it's a little bit different.
Speaker 1: You know, you can't just stand up and yell, which
Speaker 1: hunts all the time. If you're going to claim something
Speaker 1: like prosecutorial misconduct or that you are actually being targeted
Speaker 1: because of political reasons, you have to prove that in
Speaker 1: order to make that case in court, or the judge
Speaker 1: will say you can't make that argument. So once you
Speaker 1: get into the four corners of the courtroom, he won't
Speaker 1: be able to just without any basis at all, which
Speaker 1: there is none, claim that, so you know it'll be
Speaker 1: a little different once you're actually in front of the
Speaker 1: jury and the judge in this case. In the meantime,
Speaker 1: of course, he's just trying to kind of poison, if
Speaker 1: you will, the well a little bit with the public
Speaker 1: in terms of saying that which you always said. Some
Speaker 1: of the defense attorneys has said that this payment wasn't
Speaker 1: part of a campaign, It was to save face, to
Speaker 1: save Milania from any embarrassment, sort of a nuisance payment.
Speaker 1: Is that a defense for him in this case? So
Speaker 1: it's kind of interesting when people were talking about a
Speaker 1: pure campaign finance violation, like on the federal side what
Speaker 1: Michael Cohen pleaded guilty too. It would I mean, if
Speaker 1: you could convince the jury that the reason that you
Speaker 1: didn't report this as a campaign benefit is that that's
Speaker 1: not what it was to you, right, it was instead
Speaker 1: trying to cover it up for your wife or what
Speaker 1: have you, then yes, it would be a defense to that.
Speaker 1: I mean, I don't know if you remember way back
Speaker 1: that John Edwards case that was brought against Senator John
Speaker 1: and Edwards he was acquitted and the jury hunts on
Speaker 1: accounts of his case because he made that argument and
Speaker 1: apparently it was successful that the money that he paid
Speaker 1: to this woman he hid for personal embarrassment reasons and
Speaker 1: so on, not because of his campaign. The problem for
Speaker 1: Trump is that that only helped him on the piece
Speaker 1: of it that makes it a felony, right, So, I mean,
Speaker 1: he falsified the records of his organization in order to
Speaker 1: make this payment. By admitting now that he has made
Speaker 1: those payments, which he is doing basically by saying, oh,
Speaker 1: I did it for this reason, not for that reason,
Speaker 1: he's effectively admitting that he's guilty of the primary charge,
Speaker 1: which is the misdemeanor. So it's just now about the
Speaker 1: piece that makes the felony. And the question is do
Speaker 1: you believe that? I mean, is it really believable that
Speaker 1: in the run up to the election he does all
Speaker 1: of this just to keep it from his wife in public?
Speaker 1: I mean, a man who's been credibly accused of sexual
Speaker 1: assault and even rape by multiple people and he's so
Speaker 1: concerned about this one person. You know, it doesn't necessarily
Speaker 1: ring true, I think, although ultimately a jury will decide that,
Speaker 1: but it doesn't help him on the primary charge that
Speaker 1: the DA appears to be proceeding on. Anyway, Does the
Speaker 1: case hinge on the testimony of Michael Cohen, Trump's former
Speaker 1: fixer an attorney, and if so, what are the problems
Speaker 1: with his having pleaded guilty to the hush Bunny and
Speaker 1: lying to Congress and going to prison over it. So
Speaker 1: on the first question, if it hinges on him, I
Speaker 1: don't know exactly how much it hinges on him. I mean,
Speaker 1: certainly they put him into the grand jury, and they
Speaker 1: talk to him many many times, so it seems that
Speaker 1: at least they are strongly considering using him, or think
Speaker 1: that they might need him. I just don't know what
Speaker 1: else they have on the key piece of how much
Speaker 1: former President Trump actually knew about this. They obviously have
Speaker 1: the records, They have other people, I think who will
Speaker 1: talk about that. So it's unclear to me whether he's
Speaker 1: really really necessary and they couldn't proceed without him, or
Speaker 1: whether they think he just adds enough to make it
Speaker 1: worth it. You know, Listen, he's a difficult witness to
Speaker 1: put on because he has lied before and has been
Speaker 1: to prison. As you say, he's a convicted spellon. But
Speaker 1: prosecutors deal with this issue all the time, honestly. I mean,
Speaker 1: one of the things you sometimes stay instammation is Listen,
Speaker 1: I wish I could put on the witness stand, you know,
Speaker 1: rabbis and priests and ministers for you all. But those
Speaker 1: aren't the sort of people who get caught up in crime, right.
Speaker 1: I need to put on the stand people who can
Speaker 1: tell you about what happened here, people who this criminal
Speaker 1: sitting at the defense table associated with. So it's not
Speaker 1: uncommon for prosecutors to have to deal with a witness
Speaker 1: who has lied, who has admitted lying. If you lie
Speaker 1: for the defendant previously to cover up what the defendant
Speaker 1: has done and what you yourself has done, and then
Speaker 1: you come clean and then you're going in there and
Speaker 1: talking to them under oath, that's something that prosecutors can
Speaker 1: explain and do explain all the time. And that's what
Speaker 1: happened here. So you know, I think that they definitely
Speaker 1: have a shot at putting on Michael Cohen's testimony and
Speaker 1: getting a jury to believe it. And you do that
Speaker 1: by explaining what it is and also by corroborating it.
Speaker 1: You know how much corroboration is there. Michael Cohen says
Speaker 1: he was paid you know, periodically in this amount, and
Speaker 1: guess what you have the checks that support that, you know,
Speaker 1: and you kind of corroborate it by the physical evidence
Speaker 1: and the testimony of other witnesses, and you put it
Speaker 1: all together and say do you believe him? Yeah? You should.
Speaker 1: You're telling you the truth, and here's how you know that. So,
Speaker 1: you know, looks like they're going to use him. I
Speaker 1: assume that means that they think that they need him,
Speaker 1: and we'll see how it goes. What do you think
Speaker 1: of the fact that they call Stormy Daniels in to
Speaker 1: talk to them the prosecutors did, but not to testify
Speaker 1: before the grand jury. Yeah, it's it's interesting. I mean,
Speaker 1: I'm not surprised that they want to speak to everyone
Speaker 1: who might potentially be a witness or has some information.
Speaker 1: If they don't put her in the grand jury, it
Speaker 1: suggests she's not strictly next story. In New York State,
Speaker 1: it's different from the federal system. In the federal system,
Speaker 1: you can go into the grand jury with just one
Speaker 1: witness that can be your case agent, and they can
Speaker 1: testify about everything that they've learned about the case, including
Speaker 1: from other people and so on. In New York State,
Speaker 1: you can't put in hearsay. So if they thought that
Speaker 1: they needed something from her, that she's the only person
Speaker 1: who could provide they would have to put her into
Speaker 1: the grand jury really in order to get their indictment,
Speaker 1: So it suggests they don't really need her need her.
Speaker 1: Maybe they're just trying to assess whether they want to
Speaker 1: use her as an added benefit. You know, I'm not
Speaker 1: sure exactly why they were talking to her now, except
Speaker 1: that it again kind of highlights that they're really at
Speaker 1: the end of this thing. You know, they really are
Speaker 1: wrapping everything up and you know, wanting to talk to
Speaker 1: everyone and put their case fully together before they seek
Speaker 1: the indictment. So we'll see, it makes it kind of sensational, right,
Speaker 1: And the question is do you want to try to
Speaker 1: do this in this streamline a case is possible like
Speaker 1: the way that you would with any other case, I mean,
Speaker 1: bringing Stormy Daniels in to testify, because of course you
Speaker 1: won't have any personal knowledge about how the payments were
Speaker 1: done and how Michael Cohen was reimbursed and what Trump
Speaker 1: knew about those reimbursements and stuff. She's only brought in
Speaker 1: to say, you know, yes, we had sex, and so
Speaker 1: is that worth it in terms of making this even
Speaker 1: more sensational than it already is? So they might be
Speaker 1: mulling over that question. So if they do indict him,
Speaker 1: I mean, I'm sure there won't be a perp walk
Speaker 1: or handcuffs, But otherwise, will he be treated like an
Speaker 1: average defendant? I mean, can he be treated like an
Speaker 1: average defendant when he has Secret Service with him all
Speaker 1: the time. Yeah, I think he'll be treated like a
Speaker 1: very very important person, like an uber rich defendant, that
Speaker 1: sort of thing. They certainly will make an agreement with
Speaker 1: him to surrender at a certain time. He will not
Speaker 1: be arrested at six am with handcuffs, perp walks everything.
Speaker 1: As you say, He'll get to show up at a
Speaker 1: time that's agreed with his lawyers. He'll have to be processed.
Speaker 1: I mean, he'll have to go through the same steps
Speaker 1: and go before the judge and do everything like any
Speaker 1: other defendant in a sense. But they'll work that out
Speaker 1: with his lawyers, and they'll work with his Secret Service
Speaker 1: detail and all of that to make sure. You can
Speaker 1: kind of look to how FBI conducted the search warrant
Speaker 1: at Marologa, right, I mean, they went and searched his home,
Speaker 1: and you have to give the lawyers and you have
Speaker 1: to give the Secret Service detail a heads up and
Speaker 1: that sort of thing when things like that are happening,
Speaker 1: and that's what'll happen here. They're professionals, they'll be able
Speaker 1: to work it out, and so of course they'll be
Speaker 1: a Donald Trump mug shot. Yeah, yeah, for sure. And
Speaker 1: I mean obviously that mug shot will be on the
Speaker 1: front pages of every publication and so on whenever gets released.
Speaker 1: But yeah, I mean, all of that, of course happens
Speaker 1: behind closed doors, the processing and stuff, So it'd be
Speaker 1: great to see a camera in there, but that's not
Speaker 1: how it works. Going to be quite a case, thanks
Speaker 1: so much, Jennifer. That's former federal prosecutor Jennifer Rogers, a
Speaker 1: professor at YU Law School. The legal dominoes are being
Speaker 1: lined up and the collapse of Silicon Valley Bank and
Speaker 1: Signature Bank. On the federal side, the Justice Department and
Speaker 1: the Securities and Exchange Commission are looking into possible misconduct
Speaker 1: by SVB officers, according to Bloomberg sources. On the civil side,
Speaker 1: investors have filed their first class action lawsuits against both banks,
Speaker 1: joining me as attorney Jim Baar, president of CMBG Advisors.
Speaker 1: The Justice Department and the sec are investigating the collapse
Speaker 1: of Silicon Valley Bank. What kind of things do you
Speaker 1: think they're investigating? And is it unusual? So it's non
Speaker 1: unusual when you have a large collapse like this because
Speaker 1: obviously a lot of people are going to be yelling
Speaker 1: and screaming, think you know what happened? How did this happen?
Speaker 1: And they want to get to the bottom of it.
Speaker 1: So I don't think it's unusual from that perspective. The
Speaker 1: real question is what is it they're looking for here
Speaker 1: and what are the legal risks that are out there
Speaker 1: for the board of directors and you know, the other
Speaker 1: people working at Silicon Valley Bank. And the answer is
Speaker 1: that there's two aspects of this bank failure. There is
Speaker 1: the fact that there was a run on their deposits,
Speaker 1: where you have to have a certain amount of deposits
Speaker 1: obviously in order to have you meet your counter requirements.
Speaker 1: And the run on the bank obviously was a problem.
Speaker 1: But that begs the question, which is was there a
Speaker 1: reason a concern that all of a sudden had been
Speaker 1: underappreciated that came out. Because if there's an unappreciated risk,
Speaker 1: there's the depositor who are at risk, but there's also
Speaker 1: the investors who are at risk because people are buying
Speaker 1: the stock in the stock market, they're trading in the
Speaker 1: securities on the basis that they think it's a good investment.
Speaker 1: So when the stock has gone down as dramatically as
Speaker 1: it did and there was this risk, which is all
Speaker 1: these deposits could disappear, the question is was their mismanagement,
Speaker 1: was their fraud, was their negligence in the way that
Speaker 1: it was described in their financial statements, And that's what
Speaker 1: the SEC's focusing on. Apparently they're also examining stock sales
Speaker 1: that svb's officers may have made days before the bank failed.
Speaker 1: That is correct, So there's two issues there as well.
Speaker 1: So again, officers that own stock in a bank are
Speaker 1: able to sell, but one of the concerns is they
Speaker 1: have access to inside information and if they trade on
Speaker 1: that information, they're in an advantage. That the regular investment
Speaker 1: does not have access to that information, they're at a disadvantage.
Speaker 1: So the question is when the officers sell stock, did
Speaker 1: they do so appropriately or did they trade because they
Speaker 1: knew something bad was going to happen that other people
Speaker 1: did not, which is considered unfair. So we should point
Speaker 1: out that very recently they continued to tighten up the
Speaker 1: rules under which officers can sell. There are restrictions in
Speaker 1: terms of time periods, there are waiting periods. There are
Speaker 1: things designed to level the playing field so that officers
Speaker 1: are not able to take advantage of insight information and
Speaker 1: sell when no one else knows what's really going on.
Speaker 1: And in this instance, because those news rules were in effect,
Speaker 1: my understanding is that the officers did sell consistent with
Speaker 1: those new rules. But it still begs the question were
Speaker 1: they aware that there were more risks with the bank
Speaker 1: that have been otherwise properly disclosed in their financial statements?
Speaker 1: And if there were, then they have exposure. From that perspective,
Speaker 1: the SEC and the DOJ investigating after an incident like
Speaker 1: this or a few incidents like this, that's not unusual,
Speaker 1: is it. I mean, it doesn't indicate that anything really
Speaker 1: was done wrong. No, I think again, I've said this before.
Speaker 1: I don't like this mass hysteri where people jump to conclusions.
Speaker 1: We really do try to have a system that says
Speaker 1: innocent until proven guilty. And so the answer is that, yes,
Speaker 1: something this large is going to trigger an investigation, but
Speaker 1: that doesn't mean that there was nefarious activities like m RON. Also,
Speaker 1: we've had the first securities class action, the first of
Speaker 1: many I suspect, and this goes to what the officers did,
Speaker 1: so explain what the security class action is about. So
Speaker 1: when you have a stock decline in a precipitous manner,
Speaker 1: there's a whole industry of what we call plaintiff's attorneys
Speaker 1: securities lawyers that follow the stock market, and when the
Speaker 1: stock declines quickly, they often file what's called a class
Speaker 1: action lawsuit alleging that there was something materially misleading in
Speaker 1: the financial statements, either there was an omission or a misstatement.
Speaker 1: Now there's an old expression, bad facts make bad law,
Speaker 1: and also looking at something with twenty twenty hindsight. But
Speaker 1: what these lawyers have figured out is where there's smoke,
Speaker 1: there is often fire. So when a stock declines precipitously,
Speaker 1: it begs the question, if you had been disclosing your
Speaker 1: risks properly, why wouldn't the market react over time and
Speaker 1: bring the stock to an appropriate level. But if there's
Speaker 1: a precipitous drop, was there something you should have been
Speaker 1: telling people that you weren't, So, for instance, the fact
Speaker 1: that they had so much money in deposits that were unensured. Well,
Speaker 1: that's an unusual situation. Is it something that should have
Speaker 1: been disclosed? Was it disclosed? I don't know, but it
Speaker 1: begs the question was this bank at a higher degree
Speaker 1: of risk and other financial institutions because it had such
Speaker 1: a law large percentage of its money in non sticky deposits.
Speaker 1: And if that was the case, was it disclosed? Number one?
Speaker 1: Then number two? For instance, the bank had certain types
Speaker 1: of investments we focus on over those good investments in
Speaker 1: terms of buying T bills, You're buying T bills in
Speaker 1: a rising interest rate environment. That portfolio went down and
Speaker 1: valued dramatically? Was that disclosed? Should they have disclosed that
Speaker 1: they weren't hedging like other financial institutions. So what these
Speaker 1: class action lawyers are looking for is evidence in the
Speaker 1: financial disclosures with the sec the ten ks, the annual report,
Speaker 1: and so forth. They're looking for evidence that proper disclosures
Speaker 1: were not being made. Do you expect a rash of
Speaker 1: lawsuits requesting class action status? Yeah? I think what's going
Speaker 1: to happen is as more and more companies disclosed the
Speaker 1: true nature of their earnings. So again, if you're a bank,
Speaker 1: or you're a company that's been artificially making profits based
Speaker 1: on these low interest rates that we've experienced. As interest
Speaker 1: rates stay higher than people expect, what's going to happen
Speaker 1: is you're gonna have more and more companies reporting lower
Speaker 1: earnings and their stocks are going to get hammered. And yes,
Speaker 1: there will be lawsuits saying how could this happen? And
Speaker 1: I think we are just at the beginning of that cycle.
Speaker 1: A lot of people are looking at the rollback of
Speaker 1: the Dodd Frank under the Trump administration. Do you think
Speaker 1: if those rules had been in place that this would
Speaker 1: not have happened. So that's a great question, and the
Speaker 1: answer is will never know for sure, But we certainly
Speaker 1: know that these financial institutions in two and eighteen lobbied
Speaker 1: Congress to change dot Frank, to basically change the rules
Speaker 1: such that if you were a certain size institution, you
Speaker 1: were not one of the quote, really large banks. There
Speaker 1: was an ability to loosen up the regulations and allow
Speaker 1: less scrutiny by the regulators and broader flexibility in the
Speaker 1: guise of investments that you made and the man in
Speaker 1: which the company is being runned. And so that law
Speaker 1: was changed in twenty eighteen in Silicon Valley Bank did
Speaker 1: benefit from it, and as did by Play many other
Speaker 1: financial institutions, and that's what we're still waiting to see.
Speaker 1: Is the other shoe gonna drop? Because it does bang.
Speaker 1: The question are there risks out there with many other
Speaker 1: banks that have not been properly disclosed. My suspicion is
Speaker 1: that there are other banks out there where these things
Speaker 1: had not been disclosed. What's happening with SVB now The
Speaker 1: FDIC has stepped in and is essentially running the bank
Speaker 1: at this point, and they are looking to sell off
Speaker 1: pieces of the bank. My understanding is they had other
Speaker 1: divisions and operations that are also being marketed, and at
Speaker 1: this point, really what's happening is they're looking to see
Speaker 1: if there are institutions they want to take over the
Speaker 1: different aspects of the business, just like I don't know
Speaker 1: if you saw in Britain they sold the British subsidiary
Speaker 1: for a dollar or a pound. Yesterday, President Biden said
Speaker 1: the FDIC is in charge of the bank and all
Speaker 1: the bank officers are going to be fired and basically
Speaker 1: we're going to hold people responsible. Do you think that's
Speaker 1: really likely to happen? You know, just like when we
Speaker 1: look back to the two thousand and eight crisis, it
Speaker 1: started and you know, there were certain warning signs, and
Speaker 1: then there was Lehman and there was bear Stearns, and
Speaker 1: there's AIG's built if you go back, they started raising
Speaker 1: interest rates, right, So the first most vulnerable thing to
Speaker 1: blow is crypto. We had the fts situation. When credit
Speaker 1: starts drawing up, the people that are the most over
Speaker 1: leveraged and the most exposed, they're the first to fall.
Speaker 1: So it started with crypto. Crypto really fell and it's
Speaker 1: continuing to fall and go back and forth. Now technology, right,
Speaker 1: because technology also you had over extension and people having
Speaker 1: to go back and refining it. And so when you
Speaker 1: look at this from the government's perspective, they came out
Speaker 1: hard against crypto because looking back to the days where
Speaker 1: we had President Obama and the whole issues with Occupy
Speaker 1: Wall Street, there was a huge political backlash because no
Speaker 1: one went to jail and they bailed out the banks. Well,
Speaker 1: this time they're saying, we didn't bail out anybody with
Speaker 1: government money. The financial system is being taken care of
Speaker 1: by its own, meaning we're going to raise fees on
Speaker 1: banks to pay off the losses at Signal Bank in
Speaker 1: Silicon Valley Bank. That's the beginning and they can do that,
Speaker 1: and then they can also try to make examples of
Speaker 1: some of these executives to say, see, we're getting tough
Speaker 1: on this. We're not going to stand still like what's
Speaker 1: happening in crypto. What begs the question is if this
Speaker 1: spreads to other institutions, you're a lot more people exposed
Speaker 1: than just a few institutions. And then the question is
Speaker 1: what's the government going to do, Because at the end
Speaker 1: of the day, this is the government caused problem. The
Speaker 1: government kept interest rates artificially low, which led money going
Speaker 1: to risky assets, and investors are going to basically, if
Speaker 1: they're given money and they have to invest it, they're
Speaker 1: going to invest it one way or the other. That's
Speaker 1: what they do. And the government led up regulations, so
Speaker 1: you have a perfect storm. No regulation or limited regulation
Speaker 1: together with low interest rates is going to lead to
Speaker 1: a lot of loss of money. And then the government's
Speaker 1: going to have a lot of explaining to do. And yes,
Speaker 1: I think they're going to be looking for holding people accountable,
Speaker 1: but at the end of the day, I think it's
Speaker 1: all of the money going into politics. It's allowed these
Speaker 1: regulations to get rolled back, and it's the lack of accountability.
Speaker 1: And so I'm hoping what happens is that we do
Speaker 1: a deep dive like we did after the Great Depression
Speaker 1: when we adopted the thirty three and thirty four Act
Speaker 1: and what we started to do. If you read Obama's book,
Speaker 1: he said he didn't go far enough. Well that's true.
Speaker 1: Like the Guns of August. Barbara Tuckman's book, World War
Speaker 1: One never ended. World War two is a continuation. I
Speaker 1: don't think the recession of two and eight, two thou
Speaker 1: nine ended. We've papered it over with cheap money and
Speaker 1: rolling back regulation which allowed this party to go on
Speaker 1: in other twelve years. Well, guess what with a thirty
Speaker 1: one trillion dollars deficit and a FED balance sheet of
Speaker 1: ten trillion dollars, the party is over and it's going
Speaker 1: to be painful. Thanks so much for being on the show, Jim.
Speaker 1: That's Jim Bear, President of CMBG Advisors. The danger of
Speaker 1: forever chemicals has long been known. Environmental and public health
Speaker 1: advocates have called for federal regulation of PFOS chemicals for years,
Speaker 1: and so have lawmakers. Let's not beat around the bush here.
Speaker 1: The chemicals are toxic. They are known as forever chemicals.
Speaker 1: They do not easily break down. Instead, they accumulate in
Speaker 1: the environment and in the human body. You know, there's
Speaker 1: an old saying that says nothing lasts forever. Unfortunately, nothing
Speaker 1: that is, except for fluorinated chemicals. That was former US
Speaker 1: Representative Harley Ruda and Representative Debbie Dingle at a hearing
Speaker 1: of the House Subcommittee on the Environment more than three
Speaker 1: years ago. Public concern has increased in recent years as
Speaker 1: testing reveal p fos chemicals in a growing list of communities.
Speaker 1: The US hasn't regulated a new contaminant in drinking water
Speaker 1: in nearly thirty years, but on Tuesday, the Environmental Protection
Speaker 1: an Agency proposed the first federal limits on harmful forever
Speaker 1: chemicals and drinking water along away to protection, the agency said,
Speaker 1: will save thousands of lies and prevent serious illnesses. Journing
Speaker 1: me is environmental law attorney Joel Johnston, a partner at Hollestal.
Speaker 1: I want to start with having you explain exactly what
Speaker 1: are forever chemicals. So pfas, which are referred to as
Speaker 1: forever chemicals, are really quite a number. You know, there's
Speaker 1: probably hundreds of them that exist. They're used throughout every
Speaker 1: type of product virtually. They're used in raincoats, they're used
Speaker 1: in food packaging, they're used in rugs and textiles. And
Speaker 1: once they get into the environment, either through a release
Speaker 1: at say a chemical plant or a manufacturing facility, or
Speaker 1: simply through the breakdown of products, you know, wherever they are,
Speaker 1: these compounds get into the environment. They get into the soil,
Speaker 1: they get into the water, and we find that they
Speaker 1: get into people's bodies and they really don't break down
Speaker 1: efficiently at all, and so they're widespread use. And then
Speaker 1: the fact that they really don't degrade like a lot
Speaker 1: of other chemicals do over time means that they're just
Speaker 1: very very prevalent throughout the environment. We're finding and what
Speaker 1: are the health hazards that have been reported or discovered?
Speaker 1: So a lot of that is still being researched, but
Speaker 1: there have been confirmations that a number of these compounds
Speaker 1: are cancer causing with really no safe level of exposure.
Speaker 1: Others are linked to various types of reproductive health, cardiovascular issues,
Speaker 1: organ damage, and so forth. So how big a step
Speaker 1: is this for the EPA seems like it was years
Speaker 1: in the making. It has Benjie, And the reality is
Speaker 1: that PFA compounds have been identified as being problematic for
Speaker 1: quite some time, and with pretty overwhelming bipartisan support and
Speaker 1: I think support throughout even industry. What's happened is that
Speaker 1: in twenty twenty one the EPA, the administration laid out
Speaker 1: really a roadmap, if you will, of various actions that
Speaker 1: it was looking to take with respect to PFA's This
Speaker 1: is really just one of those, but I think it's
Speaker 1: a significant one in the sense that it really seeks
Speaker 1: to limit exposures through the way that so many people
Speaker 1: can annoyingly be exposed, which is through just water coming
Speaker 1: out of the faucet. And the impacts will be potentially
Speaker 1: significant on water utilities that identify that they've got problems
Speaker 1: with their supply. But you know, some water systems are
Speaker 1: going to have no issue. They don't detect them business
Speaker 1: as usual other than ongoing sampling requirements. Water systems that
Speaker 1: identify that they have these contaminants present in amounts that
Speaker 1: exceed the EPA's threshold that they're setting through this rule
Speaker 1: would be required to either clean up that water or
Speaker 1: to provide a new source of water tell us a
Speaker 1: little about the proposed rule. So the main brunt of
Speaker 1: these new rules is that if they are finalized, which
Speaker 1: the EPA would hope to do through the rulemaking process
Speaker 1: by the end of the year starting in twenty twenty four,
Speaker 1: essentially every water supply system in the country would be
Speaker 1: required to sample their water supply a number of times
Speaker 1: over the following twelve months to confirm that they do
Speaker 1: or do not have these compounds present. And as the
Speaker 1: rule is effectively drafted, what that would then require for
Speaker 1: those water systems that you know identify these compounds is
Speaker 1: either they need to remove the compounds from the water
Speaker 1: some sort of engineering filters, that kind of thing, or
Speaker 1: they would need to source new water. So that's really
Speaker 1: the brunt of it is a the sampling obligations to
Speaker 1: test and confirm and identify and then be if there
Speaker 1: are issues, the requirement to resolve those issues so that
Speaker 1: the levels present in the water supplier below the EPA threshold.
Speaker 1: How difficult will that be and how costly for water utilities? Well,
Speaker 1: the good news is that the Infrastructure Act has already
Speaker 1: started to provide funding for this type of sampling, specifically
Speaker 1: targeted at rural water systems, smaller water systems, and water
Speaker 1: systems in areas where the community just can't afford to
Speaker 1: take this on. But the sampling obligations are more comprehensive.
Speaker 1: For larger water utilities, the requirements are a little bit lower,
Speaker 1: for there's not quite as much sampling required for smaller
Speaker 1: utilities that supply I think under ten thousand people or something,
Speaker 1: and so you know that we're talking about sampling a
Speaker 1: couple of times a year from all throughout their system.
Speaker 1: So for example, where I live in Denver, Denver Water
Speaker 1: has got a lot of samples that they're going to
Speaker 1: need to collect, for example, all their storage locations and
Speaker 1: so forth. I think the bigger challenge is that some
Speaker 1: of the chemicals that are being regulated have been determined
Speaker 1: to have really no safe exposure level. Yet the technology,
Speaker 1: the current state of test doesn't really effectively allow us
Speaker 1: to test below the level that the EPA has had
Speaker 1: to set, which is very very low for some of these,
Speaker 1: you know, four parts per trillion, and the testing to
Speaker 1: determine compounds at that low of a concentration is complicated.
Speaker 1: And so I think that what we'll also see over
Speaker 1: time as you know, presumably that technology, those testing methodologies,
Speaker 1: you know, improve and get more accurate over time. This,
Speaker 1: as you mentioned, is a proposed rule. It has to
Speaker 1: be finalized. Do you think there'll be opposition from industry
Speaker 1: groups like the American Chemistry Council and water utility groups
Speaker 1: to some degree? Yes, you know, there are a number
Speaker 1: of states, I think six or seven states that have
Speaker 1: already passed fairly stringent regulations about PFA's main is one
Speaker 1: that has really banned them in any consumer product, whether
Speaker 1: they're added or not. California has got a number of
Speaker 1: fairly stringent regulations. So states have already been moving Some
Speaker 1: states have already been moving towards this. I think that
Speaker 1: it's the rule around drinking water is fairly hard to oppose.
Speaker 1: It doesn't directly cut into manufacturers. It's not, you know,
Speaker 1: regulating how much they can use in their factory or
Speaker 1: how they have to report it. It's really strictly addressing
Speaker 1: the exposure at the at the community drinking water level.
Speaker 1: I think that most water utilities support the rule, but
Speaker 1: are going to have some concerns I would expect about
Speaker 1: the testing frequency, the testing methodologies, and so forth. They
Speaker 1: want to make sure that those are pure reviewed and
Speaker 1: accurate and consistent. So I think what we would see
Speaker 1: from the manufacturing community our concerns about, you know, some
Speaker 1: of these compounds are pretty necessary in today's world, and
Speaker 1: there's not replacements for them in the moment. So I think,
Speaker 1: especially with food packaging, it's been a challenge to you know,
Speaker 1: get the pfas out of all of the types of packaging.
Speaker 1: And so I think that that's where we tend to
Speaker 1: see the pushback, not so much on allowing unbridled use,
Speaker 1: not so much opposition to restricting them in drinking water,
Speaker 1: but concerns about, you know, in ways where they can't
Speaker 1: be avoided, and also with respect to, you know, for
Speaker 1: the water utilities, making sure that the that the next
Speaker 1: step if they have an issue is fairly clear. I'll
Speaker 1: give you a quick example. Utah, for example, has been
Speaker 1: sampling their water supply systems and they discovered a number
Speaker 1: I think two or three of their water water systems
Speaker 1: had issues that exceed this threshold that was published in
Speaker 1: the EPA rule the other day. One of those systems
Speaker 1: is Park City, and in Park City, they're attributing the
Speaker 1: PFA levels in their drinking water to the use of
Speaker 1: ski wax, particular types of flora based ski wax, and
Speaker 1: so they're moving and may have by now banned the
Speaker 1: use of that particular type of ski wax. So these
Speaker 1: are so prevalent that it's those types of uses that
Speaker 1: I think industry is resistant to restrictions on because of
Speaker 1: this idea that there's nothing to replace it. Thanks for
Speaker 1: being on the Bloomberg Law Show. That's environmental law attorney
Speaker 1: Joel Johnston, a partner at hall Estill. And that's it
Speaker 1: for this edition of the Bloomberg Law Show. Remember you
Speaker 1: can always get the latest legal news on our Bloomberg
Speaker 1: Law Podcast. You can find them on Apple Podcasts, Spotify,
Speaker 1: and at www dot Bloomberg dot com, slash podcast, Slash Law,
Speaker 1: and remember to tune in to The Bloomberg Law Show
Speaker 1: every weeknight at ten pm Wall Street Time. I'm June
Speaker 1: Grosso and you're listening to Bloomberg