1 00:00:02,880 --> 00:00:05,840 Speaker 1: The current chairman of the SEC is Gary Gensler, who 2 00:00:05,880 --> 00:00:09,480 Speaker 1: headed the CFTC under President Obama. Gary is a former 3 00:00:09,520 --> 00:00:12,360 Speaker 1: partner at Goldman Sachs, a former professor at M I T, 4 00:00:12,920 --> 00:00:15,920 Speaker 1: and a very well recognized expert on the financial markets. 5 00:00:16,160 --> 00:00:18,040 Speaker 1: I had a chance to sit down with him recently 6 00:00:18,239 --> 00:00:21,000 Speaker 1: to talk about some of the key issues facing the SEC, 7 00:00:21,400 --> 00:00:24,720 Speaker 1: including how to regulate cryptocurrencies and how to deal with 8 00:00:24,760 --> 00:00:29,200 Speaker 1: the enormous new technologies affecting our markets. Your main principle 9 00:00:29,240 --> 00:00:32,640 Speaker 1: though the SEC, as I understand it, is fairness and 10 00:00:32,760 --> 00:00:37,040 Speaker 1: disclosure and equity. Everybody is treated the same. Everything is fair, 11 00:00:37,080 --> 00:00:40,720 Speaker 1: everything is disclosed, and do not rate the relative merits 12 00:00:40,720 --> 00:00:43,320 Speaker 1: of investments. That's the principle, right, yeah, I mean we 13 00:00:43,320 --> 00:00:46,960 Speaker 1: we talk about it as a three part mission investor protection, 14 00:00:47,159 --> 00:00:51,720 Speaker 1: which embodies much of what you just said, facilitating capital 15 00:00:51,760 --> 00:00:56,200 Speaker 1: formation companies that are raising money entrepreneurs, but also those 16 00:00:56,240 --> 00:00:58,800 Speaker 1: of us who are homeowners and take out a mortgage. 17 00:00:58,840 --> 00:01:01,840 Speaker 1: We are issuers as well. We're raising money. And then 18 00:01:01,880 --> 00:01:04,959 Speaker 1: that which is in the middle fair, orderly and efficient 19 00:01:05,000 --> 00:01:09,040 Speaker 1: markets investors, capital formation, and then the markets in the middle. 20 00:01:09,160 --> 00:01:12,440 Speaker 1: So since the Great market recession, the Great Recession of 21 00:01:12,440 --> 00:01:14,360 Speaker 1: two thousand and eight and two thousand nine, at which 22 00:01:14,400 --> 00:01:17,080 Speaker 1: time you were then the head of the CFTC, which 23 00:01:17,080 --> 00:01:21,120 Speaker 1: regulates commodities and futures. Since that time, the markets have 24 00:01:21,280 --> 00:01:26,000 Speaker 1: changed dramatically because of technology developments. Are you thinking that 25 00:01:26,080 --> 00:01:28,800 Speaker 1: the SEC and other regulators have been able to keep 26 00:01:28,840 --> 00:01:33,080 Speaker 1: up with all these technological changes. It's it's a real challenge, David, 27 00:01:33,560 --> 00:01:38,440 Speaker 1: for across our government to stay up with the remarkable innovations. 28 00:01:39,280 --> 00:01:43,240 Speaker 1: The last time we updated our rules for the stock markets, 29 00:01:43,280 --> 00:01:46,160 Speaker 1: the equity markets was in a significant way, was in 30 00:01:46,200 --> 00:01:49,840 Speaker 1: two thousand and five, and sixteen years later. Those rules 31 00:01:49,880 --> 00:01:53,120 Speaker 1: that may have been fit for purpose, then are they 32 00:01:53,200 --> 00:01:56,480 Speaker 1: really ready for the twenties? And nearly half of our 33 00:01:56,520 --> 00:01:59,960 Speaker 1: stock market does not trade in the transparent what's called 34 00:02:00,200 --> 00:02:03,640 Speaker 1: lit exchanges like the New York Stock Exchange or NASTAC, 35 00:02:04,080 --> 00:02:07,080 Speaker 1: but they're in dark polls or their host salers. So 36 00:02:07,120 --> 00:02:09,480 Speaker 1: I've asked staff, well, what can we do to update 37 00:02:09,520 --> 00:02:13,840 Speaker 1: these markets for thees given the rapid change of technology. 38 00:02:14,480 --> 00:02:17,520 Speaker 1: So let's talk about that particular change. You have said, 39 00:02:17,560 --> 00:02:20,040 Speaker 1: and others have said that the markets are supposed to 40 00:02:20,080 --> 00:02:22,440 Speaker 1: be equitable and fair to everybody, but so much on 41 00:02:22,520 --> 00:02:25,800 Speaker 1: the markets are now controlled. Some people say by limited 42 00:02:25,919 --> 00:02:29,080 Speaker 1: number of market makers who may not give everybody the 43 00:02:29,120 --> 00:02:32,079 Speaker 1: fairest price. That's the argument that some people make. How 44 00:02:32,120 --> 00:02:33,400 Speaker 1: are you going to deal with that? And is it 45 00:02:33,520 --> 00:02:38,519 Speaker 1: a big concern or is it a modest concern? Well, um, 46 00:02:38,560 --> 00:02:42,080 Speaker 1: it's it's important I think an agency like ours to 47 00:02:42,400 --> 00:02:47,320 Speaker 1: constantly bring up today our rule set, So I would 48 00:02:47,360 --> 00:02:50,000 Speaker 1: say it is a central concern if I can use 49 00:02:50,040 --> 00:02:54,400 Speaker 1: a different word than you did about our regular investors. 50 00:02:54,400 --> 00:02:58,280 Speaker 1: And we've seen an increase of retail UH participation, but 51 00:02:58,320 --> 00:03:02,640 Speaker 1: are regular investors as well? Is the big institutions having 52 00:03:03,080 --> 00:03:06,760 Speaker 1: efficient markets? And are they getting what's called best execution? 53 00:03:06,800 --> 00:03:09,560 Speaker 1: We wrote a rule years ago about that you're supposed 54 00:03:09,560 --> 00:03:12,400 Speaker 1: to get best execution out of your broker. And is 55 00:03:12,440 --> 00:03:15,960 Speaker 1: that happening when, as you said, a few wholesalers are 56 00:03:16,080 --> 00:03:19,160 Speaker 1: buying the order flow and and a lot of that's 57 00:03:19,200 --> 00:03:23,200 Speaker 1: getting concentrated around a few host salers. Let's talk about 58 00:03:23,200 --> 00:03:26,840 Speaker 1: some other technology changes since you were lasting government. One 59 00:03:26,880 --> 00:03:29,959 Speaker 1: of them is something called us spack um uspac is 60 00:03:30,000 --> 00:03:32,959 Speaker 1: a new device to enable somebody to go public without 61 00:03:32,960 --> 00:03:35,640 Speaker 1: going through the normal I P O process. Does that 62 00:03:35,960 --> 00:03:38,400 Speaker 1: offend you that people are going around the I P 63 00:03:38,520 --> 00:03:40,600 Speaker 1: O process you have at the SEC or do you 64 00:03:40,640 --> 00:03:44,360 Speaker 1: say okay as long as some disclosure occurs. But I 65 00:03:44,400 --> 00:03:48,560 Speaker 1: think that uh we we at the SEC are committed 66 00:03:48,600 --> 00:03:52,800 Speaker 1: to be technology neutral and innovations uh like special purpose 67 00:03:52,800 --> 00:03:56,520 Speaker 1: acquisition companies, which actually have been around for quite some time. 68 00:03:56,880 --> 00:03:59,480 Speaker 1: It's just they took off in the last two years 69 00:04:00,040 --> 00:04:02,280 Speaker 1: and and there's been hundreds of them, as you know, 70 00:04:02,560 --> 00:04:06,080 Speaker 1: and well over a hundred billion dollars raised through these 71 00:04:07,320 --> 00:04:12,600 Speaker 1: fundamentally blank check companies. UM, what we're looking at is 72 00:04:12,640 --> 00:04:16,720 Speaker 1: how do we guard the public not just in disclosure, 73 00:04:16,839 --> 00:04:21,560 Speaker 1: but also there's very significant fees the sponsors generally take 74 00:04:21,600 --> 00:04:26,040 Speaker 1: about as a promote. They have two years to invest 75 00:04:26,080 --> 00:04:29,039 Speaker 1: the money. Uh. They're encouraged to invest the money because 76 00:04:29,080 --> 00:04:33,120 Speaker 1: they want to get that uh. And then what sort 77 00:04:33,120 --> 00:04:35,680 Speaker 1: of conflicts does that set up? What due diligence are 78 00:04:35,680 --> 00:04:40,800 Speaker 1: they doing when they're buying those target companies. Having said that, 79 00:04:41,040 --> 00:04:44,520 Speaker 1: we're looking at how we can bring some greater disclosure 80 00:04:44,760 --> 00:04:48,800 Speaker 1: transparency and deal with some of those inherent conflicts. Now, 81 00:04:48,800 --> 00:04:51,960 Speaker 1: there's another issue that has arisen, which is called gamification, 82 00:04:52,520 --> 00:04:55,400 Speaker 1: which is to say people are making a game out 83 00:04:55,400 --> 00:04:58,160 Speaker 1: of trying to buy stocks, and very young people are 84 00:04:58,480 --> 00:05:01,080 Speaker 1: caught up in it. You have very very on day traders. 85 00:05:01,320 --> 00:05:04,880 Speaker 1: Are you worried about this phenomenon? So, if I could 86 00:05:04,920 --> 00:05:07,560 Speaker 1: take just a step back, we live in the ties 87 00:05:07,920 --> 00:05:11,920 Speaker 1: in a new digital age where where applications on our 88 00:05:11,960 --> 00:05:17,040 Speaker 1: phones can use massifcial amount of data and then predict 89 00:05:17,200 --> 00:05:20,479 Speaker 1: our behavior. And this is true outside of finance and 90 00:05:20,560 --> 00:05:24,000 Speaker 1: inside of finance. Outside of finance, the streaming apps figured 91 00:05:24,000 --> 00:05:26,520 Speaker 1: out a while ago that I'm kind of a romcomp 92 00:05:26,600 --> 00:05:30,880 Speaker 1: type of guy. Okay, that's figured out now in this space, 93 00:05:31,040 --> 00:05:35,280 Speaker 1: whether it's a robo advisor or a brokerage app, if 94 00:05:35,279 --> 00:05:39,839 Speaker 1: they figure out by giving you David Rubinstein a certain signal, 95 00:05:39,960 --> 00:05:43,279 Speaker 1: a certain color, a certain prompt of behavioral prompt that 96 00:05:43,400 --> 00:05:46,760 Speaker 1: you might trade more or you might buy a higher 97 00:05:47,240 --> 00:05:51,520 Speaker 1: revenue product for them, there in lies and potential conflict. 98 00:05:51,560 --> 00:05:56,080 Speaker 1: What do we do when the digital algorithms are maximizing 99 00:05:56,160 --> 00:06:01,039 Speaker 1: for the company's revenues rather than our return earns. And 100 00:06:01,120 --> 00:06:04,440 Speaker 1: so we're trying to think that through. It's not just gamification, 101 00:06:04,520 --> 00:06:06,920 Speaker 1: it's a little bit more than that. It's whether there's 102 00:06:06,920 --> 00:06:12,120 Speaker 1: a conflict between the app and our investment returns. CEOs 103 00:06:12,200 --> 00:06:15,760 Speaker 1: today are more outspoken than they used to be about 104 00:06:15,760 --> 00:06:19,360 Speaker 1: public policy issues. Is that something that the SEC thinks 105 00:06:19,440 --> 00:06:21,960 Speaker 1: is a good thing? Or should CEO is just worry 106 00:06:22,000 --> 00:06:24,919 Speaker 1: about the share price and earnings and things like that, 107 00:06:25,040 --> 00:06:28,640 Speaker 1: or should they comment on voting rights or climate change things? 108 00:06:28,800 --> 00:06:31,560 Speaker 1: What do you think CEO should do? We hear from 109 00:06:31,680 --> 00:06:35,600 Speaker 1: market participants. That helps us be better at what we do. 110 00:06:35,640 --> 00:06:41,360 Speaker 1: We hear from advocates all across the market and all 111 00:06:41,400 --> 00:06:44,920 Speaker 1: across the political spectrum. That helps the five of us 112 00:06:44,960 --> 00:06:47,320 Speaker 1: in a commission to hear from the public. So, whether 113 00:06:47,360 --> 00:06:51,440 Speaker 1: it's a chief executive officer or it's somebody who's buying 114 00:06:51,440 --> 00:06:54,960 Speaker 1: the first fifty shares of stock in a company, do 115 00:06:55,080 --> 00:06:57,960 Speaker 1: we benefit from hearing from folks? And and my my 116 00:06:58,160 --> 00:07:02,839 Speaker 1: call list are made public on a monthly basis, you'll 117 00:07:02,839 --> 00:07:06,120 Speaker 1: see that some CEO is getting get in touch. They 118 00:07:06,160 --> 00:07:09,440 Speaker 1: want to They want to say something about Maybe it's 119 00:07:09,480 --> 00:07:12,880 Speaker 1: about equity market structure, maybe it's about climate risk disclosure. 120 00:07:12,920 --> 00:07:15,600 Speaker 1: Maybe it's about what we talked about earlier about spacks 121 00:07:15,720 --> 00:07:20,320 Speaker 1: or crypto. And we don't have to necessarily agree. We 122 00:07:20,440 --> 00:07:23,640 Speaker 1: try to when we disagree, to disagree agreeably. As my 123 00:07:23,720 --> 00:07:27,240 Speaker 1: uncle Norman used to say, UM, but but it's helpful 124 00:07:27,280 --> 00:07:31,239 Speaker 1: to hear from UH people in the markets. So today, 125 00:07:31,600 --> 00:07:34,880 Speaker 1: what would you like Most people who are not knowledgeable 126 00:07:34,880 --> 00:07:37,960 Speaker 1: about the SEC but are watching this interview, they want 127 00:07:38,000 --> 00:07:39,560 Speaker 1: to learn a little bit. What would you like them 128 00:07:39,600 --> 00:07:45,080 Speaker 1: the most know about the SEC? Markets work best when 129 00:07:45,080 --> 00:07:48,160 Speaker 1: we have rules of the road. I think that those 130 00:07:48,200 --> 00:07:52,239 Speaker 1: of us at the SEC are entrusted UH to ensure 131 00:07:52,400 --> 00:07:55,840 Speaker 1: that the markets is the best they can are, free 132 00:07:55,840 --> 00:07:59,520 Speaker 1: of fraud, free of manipulation, that you as investors get 133 00:07:59,560 --> 00:08:03,400 Speaker 1: to decide what risk you take. Now, many companies that 134 00:08:03,440 --> 00:08:05,800 Speaker 1: are based in China are now traded I think in 135 00:08:05,840 --> 00:08:08,640 Speaker 1: the New York Stock Exchange or NASDAC, but they are 136 00:08:08,680 --> 00:08:12,520 Speaker 1: not subject, as it turns out, to accounting oversight in 137 00:08:12,560 --> 00:08:15,600 Speaker 1: the same way that American companies are. Are you worried 138 00:08:15,640 --> 00:08:17,440 Speaker 1: about that? Is there anything you think you can do 139 00:08:17,480 --> 00:08:20,840 Speaker 1: about that? Was? You and I are both Baltomore boys, 140 00:08:20,960 --> 00:08:24,800 Speaker 1: so we both remember fondly Paul Sarbans, who was our 141 00:08:24,880 --> 00:08:28,440 Speaker 1: senator here in Maryland for well I think thirty years 142 00:08:29,040 --> 00:08:33,800 Speaker 1: and and Paul and Republican Mike Ox that came together 143 00:08:34,440 --> 00:08:38,920 Speaker 1: in two thousand and two. President UH George W. Bush 144 00:08:39,240 --> 00:08:42,240 Speaker 1: worked with them when something called the Sarbanes ox The Act, 145 00:08:42,280 --> 00:08:45,840 Speaker 1: and there was another basic bargain. That basic bargain was, 146 00:08:45,880 --> 00:08:49,040 Speaker 1: if you wanted to raise money from the public, not 147 00:08:49,160 --> 00:08:51,880 Speaker 1: only did you have to provide financials that were audited, 148 00:08:52,480 --> 00:08:57,240 Speaker 1: but your auditor had to be subject to inspection. Basic bargain. 149 00:08:57,520 --> 00:09:02,640 Speaker 1: So to your story is, nearly twenty years later, companies 150 00:09:02,720 --> 00:09:06,920 Speaker 1: from fifty plus jurisdictions have allowed their books and records 151 00:09:06,960 --> 00:09:10,480 Speaker 1: to be looked at, inspected in essence the auditors to 152 00:09:10,520 --> 00:09:15,920 Speaker 1: be audited. Two jurisdictions have not, China and Hong Kong. 153 00:09:16,920 --> 00:09:21,600 Speaker 1: And so Congress last year said, all right, enough is enough, 154 00:09:21,920 --> 00:09:24,199 Speaker 1: and they set a three year clock in place, a 155 00:09:24,320 --> 00:09:29,120 Speaker 1: three year clock year one that if we can't work 156 00:09:29,200 --> 00:09:32,800 Speaker 1: this out, if the auditing firms of these China related 157 00:09:32,840 --> 00:09:36,880 Speaker 1: companies don't open up their their work papers, then what 158 00:09:37,000 --> 00:09:40,120 Speaker 1: Congress said, then we have to suspend trading. That these 159 00:09:40,120 --> 00:09:43,960 Speaker 1: companies should not be able to access US markets through 160 00:09:44,080 --> 00:09:47,680 Speaker 1: our stock exchanges in the like. So you're too modest 161 00:09:47,720 --> 00:09:52,000 Speaker 1: to point this out, But Senator starbins principal staff person 162 00:09:52,080 --> 00:09:56,000 Speaker 1: drafting this Starbins Oxley was Gary Gensler. So you know 163 00:09:56,240 --> 00:09:59,679 Speaker 1: this all pretty well, right, Yeah, there were there were 164 00:09:59,720 --> 00:10:04,880 Speaker 1: other involved as well, and I learned working for a senator. 165 00:10:04,920 --> 00:10:07,080 Speaker 1: I mean it was all there. If it went well, 166 00:10:07,120 --> 00:10:09,720 Speaker 1: it was theirs. But if it went pear shaped, of 167 00:10:09,760 --> 00:10:13,520 Speaker 1: course it was maybe the staffs um but yes, I 168 00:10:13,559 --> 00:10:16,040 Speaker 1: do know it. It was. It was after Enron and 169 00:10:16,120 --> 00:10:18,680 Speaker 1: world Com failed, and so Congress stepped in and said 170 00:10:18,679 --> 00:10:21,800 Speaker 1: they had to change this and up up the game, 171 00:10:22,520 --> 00:10:26,959 Speaker 1: up the rigor with regard to auditing in the United States. So, 172 00:10:27,040 --> 00:10:29,560 Speaker 1: as you pointed out, both both of us were from Baltimore, 173 00:10:29,640 --> 00:10:31,560 Speaker 1: though we didn't know each other growing up. I'm a 174 00:10:31,760 --> 00:10:34,839 Speaker 1: you know, ten years plus older than you. So you 175 00:10:34,960 --> 00:10:37,880 Speaker 1: I grew up in Baltimore. Were you in a very 176 00:10:37,920 --> 00:10:40,680 Speaker 1: wealthy family or was it a blue collar family? What 177 00:10:40,840 --> 00:10:43,920 Speaker 1: kind of family was it? Well, neither of my parents 178 00:10:43,920 --> 00:10:46,640 Speaker 1: went to college. In fact, my grand folks didn't. Three 179 00:10:46,640 --> 00:10:49,120 Speaker 1: of them didn't even go to high school. But my 180 00:10:49,200 --> 00:10:53,040 Speaker 1: dad started a small business out of UH with his 181 00:10:53,160 --> 00:10:56,719 Speaker 1: mustering out pay after World War Two. And while I 182 00:10:56,800 --> 00:10:59,400 Speaker 1: never had more than I think three dozen employees, it 183 00:10:59,520 --> 00:11:02,319 Speaker 1: was a ven in business in the bars of Bottomore 184 00:11:02,360 --> 00:11:05,600 Speaker 1: and so forth. It sent all of us UH kids 185 00:11:05,640 --> 00:11:09,640 Speaker 1: to college. It helped pay down the mortgage over the years. Uh, 186 00:11:09,679 --> 00:11:14,679 Speaker 1: and um, we we lived a good life around this 187 00:11:14,760 --> 00:11:17,720 Speaker 1: small business and through the community of Pikesville that I 188 00:11:17,720 --> 00:11:20,679 Speaker 1: grew up in. So you were four other siblings, one 189 00:11:20,679 --> 00:11:22,960 Speaker 1: of whom is your twin brothers that right? Yeah, I 190 00:11:22,960 --> 00:11:25,360 Speaker 1: have an identical twin brother. Watch out if he goes 191 00:11:25,440 --> 00:11:28,960 Speaker 1: on TV. So who's smarter? Are you or your twin brother? 192 00:11:29,200 --> 00:11:33,760 Speaker 1: How Rob is? So you went to uh, Pikesville High School, 193 00:11:33,760 --> 00:11:35,679 Speaker 1: a very well known high school in that area. I 194 00:11:35,720 --> 00:11:37,600 Speaker 1: assume you're near the top of your class. And you 195 00:11:37,640 --> 00:11:41,520 Speaker 1: went to University of Pennsylvania undergrad Is that right? Yeah? Yeah, 196 00:11:41,640 --> 00:11:43,920 Speaker 1: Rob went there as well. We both went to Wharton, 197 00:11:44,360 --> 00:11:46,720 Speaker 1: had a faithful decision. He had gotten in a little 198 00:11:46,720 --> 00:11:49,440 Speaker 1: earlier than I and I was. I was accepted. We 199 00:11:49,440 --> 00:11:52,160 Speaker 1: were both kind of math kids, and I was accepted 200 00:11:52,200 --> 00:11:55,080 Speaker 1: to M I T and Uh, my twin brother had 201 00:11:55,080 --> 00:11:57,680 Speaker 1: gone to Wharton already accepted, and then on a faithful 202 00:11:57,760 --> 00:12:00,680 Speaker 1: day decided to go the same place. It's worked out 203 00:12:00,720 --> 00:12:02,600 Speaker 1: for me and I ended up at m I team 204 00:12:02,600 --> 00:12:05,880 Speaker 1: many years later. So, so you graduated after working and 205 00:12:05,920 --> 00:12:09,680 Speaker 1: then you went right to Goldman Sachs. Yes, I joined 206 00:12:09,679 --> 00:12:11,880 Speaker 1: a group called the Merger and acquisition area. It was 207 00:12:11,920 --> 00:12:15,440 Speaker 1: about a dozen people headed by Steve Friedman and Jeff 208 00:12:15,480 --> 00:12:18,800 Speaker 1: Blasi at the time, who you might have later known, uh. 209 00:12:18,840 --> 00:12:21,920 Speaker 1: And then it grew. It was throughout thees grew rapidly, 210 00:12:22,120 --> 00:12:24,720 Speaker 1: and you became one of the earliest or youngest partners 211 00:12:24,720 --> 00:12:28,520 Speaker 1: at Goldman. Is that right? I was honored to uh 212 00:12:28,880 --> 00:12:31,199 Speaker 1: make it into the partnership while I was in the 213 00:12:31,280 --> 00:12:34,600 Speaker 1: merger and acquisition area. That's right. So you're a partner 214 00:12:34,600 --> 00:12:36,600 Speaker 1: at Goldman. You're making a great deal of money by 215 00:12:36,679 --> 00:12:39,920 Speaker 1: any normal human standards. Why did you leave Goldman? Sachs. 216 00:12:41,000 --> 00:12:45,080 Speaker 1: I my time there was I spent eighteen years there. 217 00:12:45,160 --> 00:12:47,480 Speaker 1: I did a number of things, not just this merger 218 00:12:47,480 --> 00:12:49,760 Speaker 1: and acquisition area, but I went to the trading side. 219 00:12:49,840 --> 00:12:52,920 Speaker 1: I went and helped run part of the back office. 220 00:12:53,840 --> 00:12:59,280 Speaker 1: It was really just a remarkable experience and opportunity. But 221 00:12:59,360 --> 00:13:03,760 Speaker 1: I felt I felt some connection to public service, maybe 222 00:13:03,840 --> 00:13:06,479 Speaker 1: as a as a kid that was a class treasurer 223 00:13:06,520 --> 00:13:10,520 Speaker 1: and lost for senior class president. UM. I always had 224 00:13:10,600 --> 00:13:14,679 Speaker 1: this connection and I thought public service was uh something 225 00:13:14,760 --> 00:13:17,800 Speaker 1: if I had the opportunity, I wanted to be part of. Well. 226 00:13:17,840 --> 00:13:22,319 Speaker 1: One of my mentors, uh, one of my bosses at 227 00:13:22,360 --> 00:13:26,880 Speaker 1: Goldman Sachs. Bob Rubin had been chosen by President Clinton 228 00:13:27,080 --> 00:13:29,760 Speaker 1: first to be as National Economic Advisor and later as 229 00:13:29,800 --> 00:13:34,080 Speaker 1: Treasury Secretary and UH Secretary. Reuben knew I'd be a 230 00:13:34,120 --> 00:13:37,920 Speaker 1: soft touch for service, and when President Clinton won a 231 00:13:37,960 --> 00:13:42,240 Speaker 1: second term, UH, an opportunity arose. I I guess I 232 00:13:42,400 --> 00:13:46,160 Speaker 1: competed for it, but an opportunity arose, and I went 233 00:13:46,280 --> 00:13:50,680 Speaker 1: down to the Clinton Treasury as an Assistant Secretary for 234 00:13:50,720 --> 00:13:53,760 Speaker 1: Financial Markets. And I haven't looked back. It has been 235 00:13:53,920 --> 00:13:57,160 Speaker 1: It's been a terrific twenty four years. So after you 236 00:13:57,320 --> 00:14:01,040 Speaker 1: left the Clint administration when it ended, UH, did you 237 00:14:01,080 --> 00:14:02,960 Speaker 1: decide to go back in the investment world or what 238 00:14:03,000 --> 00:14:05,840 Speaker 1: did you do? Now? The first The first thing I did, 239 00:14:05,840 --> 00:14:09,520 Speaker 1: along with a colleague from the Treasury Department, is we 240 00:14:09,559 --> 00:14:12,280 Speaker 1: wrote a book. UH. We We thought of it as 241 00:14:12,280 --> 00:14:15,599 Speaker 1: a common sense book on investing, which really was promoting 242 00:14:16,000 --> 00:14:19,440 Speaker 1: the use of low cost index funds for people that 243 00:14:19,600 --> 00:14:23,800 Speaker 1: have UH just their their retirement savings and saving for 244 00:14:24,560 --> 00:14:27,640 Speaker 1: their futures. So that was the first thing. And then 245 00:14:27,640 --> 00:14:30,720 Speaker 1: I started working with Plus Sarbanes on that what you 246 00:14:30,800 --> 00:14:36,000 Speaker 1: said became this accounting law called Sarbanes Oxley and then 247 00:14:36,360 --> 00:14:39,560 Speaker 1: ultimately President Obama is elected and he asked you to 248 00:14:39,560 --> 00:14:42,160 Speaker 1: be the head of the CFTC. Is that right? Yeah? 249 00:14:42,200 --> 00:14:48,760 Speaker 1: I had been working on UH then's UM Senator Clinton's campaign, 250 00:14:48,840 --> 00:14:51,800 Speaker 1: the two thousand and eight campaign as a senior advisor. 251 00:14:51,880 --> 00:14:54,840 Speaker 1: So I was particularly honored that he that he reached 252 00:14:54,840 --> 00:14:58,680 Speaker 1: out and his you know, gave me the opportunity to 253 00:14:58,720 --> 00:15:01,760 Speaker 1: serve once again. So when you head of the CFTC, 254 00:15:02,040 --> 00:15:04,560 Speaker 1: as I mentioned earlier, we were going through a recession, 255 00:15:04,640 --> 00:15:06,640 Speaker 1: so you had to pick up a lot of pieces 256 00:15:06,640 --> 00:15:09,160 Speaker 1: of failed investments and so forth. Was that a more 257 00:15:09,280 --> 00:15:12,800 Speaker 1: challenging position than the one you have now? Um? At 258 00:15:12,800 --> 00:15:18,160 Speaker 1: the SEC They're they're they're both remarkable organizations. The CFTC 259 00:15:18,440 --> 00:15:22,640 Speaker 1: is of course smaller, and the CFTC is interesting. It 260 00:15:22,720 --> 00:15:27,160 Speaker 1: was set up to oversee commodity futures or derivatives for 261 00:15:27,320 --> 00:15:30,240 Speaker 1: corn and wheat, and then in the nineties seventies it 262 00:15:30,360 --> 00:15:34,400 Speaker 1: was expanded to energy products and yes, interest rate products 263 00:15:34,400 --> 00:15:38,240 Speaker 1: and and even the S and P five hundred stock future. 264 00:15:38,360 --> 00:15:42,800 Speaker 1: So so these these these derivative products, but an innovation 265 00:15:42,880 --> 00:15:46,680 Speaker 1: had come up called swaps and swaps which are very 266 00:15:46,720 --> 00:15:51,320 Speaker 1: similar to UH futures. Another form of derivative had not 267 00:15:51,480 --> 00:15:54,680 Speaker 1: been regulated, and in the middle of that crisis, that 268 00:15:54,800 --> 00:15:57,920 Speaker 1: two thousand and eight crisis, credit to fought swaps and 269 00:15:58,000 --> 00:16:02,960 Speaker 1: swaps lead to some of the the instability in our markets. 270 00:16:03,400 --> 00:16:06,840 Speaker 1: So working with Tim Guitner, working with Mary Shapiro at 271 00:16:06,840 --> 00:16:10,680 Speaker 1: the SEC, working with all the members of Congress actually 272 00:16:10,720 --> 00:16:16,320 Speaker 1: across the aisle, we cobbled together reforms for this swap market. Now, 273 00:16:16,960 --> 00:16:19,880 Speaker 1: you had a very impressive career, and it's still very impressive, 274 00:16:19,920 --> 00:16:22,040 Speaker 1: but at one point you had a tragedy. Your wife 275 00:16:22,040 --> 00:16:25,120 Speaker 1: passed away and you had to raise your three daughters 276 00:16:25,200 --> 00:16:28,360 Speaker 1: essentially by yourself. So how did you do all that 277 00:16:28,400 --> 00:16:30,800 Speaker 1: while you were doing all these other things. Well, I'm 278 00:16:30,800 --> 00:16:32,480 Speaker 1: not sure I did it all that well, but I 279 00:16:32,560 --> 00:16:35,520 Speaker 1: was actually off the grid. So we lost Francesca in 280 00:16:35,560 --> 00:16:38,320 Speaker 1: two thousand and six. She had first had cancer when 281 00:16:38,360 --> 00:16:41,200 Speaker 1: we were Uh, I guess you'd said kids. I mean, 282 00:16:41,760 --> 00:16:44,760 Speaker 1: she wasn't but thirty when she first had cancer and 283 00:16:44,800 --> 00:16:47,920 Speaker 1: we were dating. We were blessed to go on and 284 00:16:47,960 --> 00:16:51,080 Speaker 1: get married have three wonderful daughters. But we did lose 285 00:16:51,120 --> 00:16:55,000 Speaker 1: Francesca to cancer in two thousand and six, and I 286 00:16:55,040 --> 00:16:57,880 Speaker 1: was kind of off the grid, and uh, for three 287 00:16:57,960 --> 00:17:01,480 Speaker 1: or four years, pretty much stay at home dad or 288 00:17:01,640 --> 00:17:03,760 Speaker 1: your daughters, any of them now influence to go in 289 00:17:03,800 --> 00:17:10,959 Speaker 1: the financial services world. No one's a remarkable uh artist, 290 00:17:11,000 --> 00:17:15,040 Speaker 1: a political cartoonist and artist, ones a PhD and culture anthropology, 291 00:17:15,040 --> 00:17:19,560 Speaker 1: and one's working in immigration law. So President Biden, he 292 00:17:19,600 --> 00:17:22,080 Speaker 1: asked you to head up the SEC. Were you interested 293 00:17:22,080 --> 00:17:23,600 Speaker 1: in doing that? At the time you were teaching m 294 00:17:23,640 --> 00:17:25,960 Speaker 1: I t UM. You finally got your taste of m 295 00:17:26,000 --> 00:17:28,240 Speaker 1: I t So why did you decide to leave m 296 00:17:28,280 --> 00:17:31,040 Speaker 1: I t and coming and run the SEC? One when 297 00:17:31,040 --> 00:17:33,960 Speaker 1: a president asked you to do something, It's really hard 298 00:17:34,000 --> 00:17:35,879 Speaker 1: to say no. Let me let me just say that. 299 00:17:35,920 --> 00:17:39,600 Speaker 1: But it's also just an incredible privilege and an honor. 300 00:17:40,520 --> 00:17:44,760 Speaker 1: I've been around capital markets my whole adult life, uh, 301 00:17:45,040 --> 00:17:47,240 Speaker 1: starting as I said, as a twenty one year old 302 00:17:47,240 --> 00:17:51,800 Speaker 1: at Coleman Sachs, and here some four decades later, I've 303 00:17:51,880 --> 00:17:55,560 Speaker 1: asked once again to serve. It's a hard thing to 304 00:17:55,600 --> 00:17:57,760 Speaker 1: say no to. I will say this though, being a 305 00:17:57,760 --> 00:18:03,200 Speaker 1: professor UH at m I is an incredible experience, the 306 00:18:03,320 --> 00:18:07,000 Speaker 1: vibrancy of that student body, the faculty, the stayff so. 307 00:18:08,000 --> 00:18:11,359 Speaker 1: But even there, I was studying the intersection of finance 308 00:18:11,400 --> 00:18:13,800 Speaker 1: and technology. I was spending a fair amount of time 309 00:18:14,400 --> 00:18:19,439 Speaker 1: on that intersection and the new innovations around fintech and 310 00:18:19,440 --> 00:18:25,040 Speaker 1: then more precisely around artificial intelligence and also cryptocurrency sort 311 00:18:25,040 --> 00:18:28,439 Speaker 1: of that it's started with the Setosian Nakamoto white paper 312 00:18:28,480 --> 00:18:31,040 Speaker 1: thirteen years ago. Well, let's talk about that. You did 313 00:18:31,080 --> 00:18:33,800 Speaker 1: teach an M I t about things that you don't 314 00:18:33,840 --> 00:18:38,399 Speaker 1: like to use this word cryptocurrency, I guess, but essentially cryptocurrencies. 315 00:18:38,600 --> 00:18:40,800 Speaker 1: What is the SEC doing about that? Is? Is it 316 00:18:40,880 --> 00:18:45,560 Speaker 1: is are cryptocurrencies are security or are they not a security? 317 00:18:45,640 --> 00:18:47,880 Speaker 1: Is it a currency or is it? What is it? 318 00:18:47,880 --> 00:18:52,760 Speaker 1: It's clear if if you're using this new technology to 319 00:18:52,880 --> 00:18:55,919 Speaker 1: raise money from others and those other people that the 320 00:18:55,960 --> 00:19:01,240 Speaker 1: public are anticipating profits based on the efforts that that 321 00:19:01,280 --> 00:19:05,200 Speaker 1: brings it into this what's called an investment contract. Congress 322 00:19:05,240 --> 00:19:08,439 Speaker 1: back to back to nineteen thirty three and nineteen thirty four, 323 00:19:08,840 --> 00:19:12,920 Speaker 1: Congress painted with a very broad brush, David. They painted 324 00:19:12,920 --> 00:19:16,280 Speaker 1: with a broad brush to protect the public from fraud 325 00:19:17,160 --> 00:19:20,320 Speaker 1: when people were raising money from the public, and the 326 00:19:20,359 --> 00:19:24,120 Speaker 1: public is in anticipating a profit based on those individuals 327 00:19:24,200 --> 00:19:27,480 Speaker 1: raising the money. So it look it depends on the 328 00:19:27,520 --> 00:19:33,960 Speaker 1: facts and circumstances. It depends obviously on each individual uh token, 329 00:19:34,359 --> 00:19:38,600 Speaker 1: But many of these, uh, maybe even the majority of 330 00:19:38,640 --> 00:19:42,000 Speaker 1: them are tokens raising money from the public, where the 331 00:19:42,040 --> 00:19:46,080 Speaker 1: public is anticipating profits based on the efforts of the 332 00:19:46,720 --> 00:19:49,720 Speaker 1: others that promoters. So should we anticipate that you will 333 00:19:49,760 --> 00:19:53,080 Speaker 1: have regulations clarifying what the sec is going to do 334 00:19:53,200 --> 00:19:57,720 Speaker 1: on cryptocurrencies and related kinds of things in the near future. 335 00:19:59,119 --> 00:20:03,919 Speaker 1: I actually think it's it's it's pretty clear. Uh. My predecessor, 336 00:20:04,000 --> 00:20:07,760 Speaker 1: Jake Clayton uh said this more than once that he 337 00:20:07,800 --> 00:20:10,040 Speaker 1: thought it was pretty clear that many of these tokens 338 00:20:10,080 --> 00:20:12,680 Speaker 1: maybe actually his words where he hadn't really seen many 339 00:20:12,760 --> 00:20:18,960 Speaker 1: that weren't securities. What what we've asked the trading platforms, 340 00:20:19,000 --> 00:20:23,440 Speaker 1: the lending platforms, the other various venues to come in 341 00:20:23,640 --> 00:20:27,800 Speaker 1: to work with us to get registered under the securities laws. 342 00:20:27,840 --> 00:20:30,880 Speaker 1: Because of a platform has fifty or some of them 343 00:20:30,920 --> 00:20:35,359 Speaker 1: five hundred tokens on their platform, probabilities are they're not 344 00:20:35,520 --> 00:20:40,719 Speaker 1: all uh, non securities. How do you get ideas from 345 00:20:40,720 --> 00:20:42,800 Speaker 1: the White House? I mean, you were appointed by the president, 346 00:20:42,840 --> 00:20:45,639 Speaker 1: you're the head of an independent agency, but of the 347 00:20:45,640 --> 00:20:47,960 Speaker 1: White House, House policies, do they call you up or 348 00:20:48,000 --> 00:20:50,119 Speaker 1: you basically once the president the point of view, you 349 00:20:50,119 --> 00:20:53,119 Speaker 1: don't see him. Again. We work very closely with the U. S. 350 00:20:53,160 --> 00:20:56,840 Speaker 1: Department at Treasury, with the other financial regulators, of course 351 00:20:56,880 --> 00:21:00,760 Speaker 1: they're sibling market regulator, the CFTC and the back regulators 352 00:21:00,760 --> 00:21:05,280 Speaker 1: in the Federal Reserve. And I'm I'm a member of 353 00:21:05,280 --> 00:21:09,359 Speaker 1: something called the Financial Stability Oversight Councils again, something Congress 354 00:21:09,400 --> 00:21:13,160 Speaker 1: set up after the o A crisis. And yet we're 355 00:21:13,160 --> 00:21:17,320 Speaker 1: an independent agency where if we write a role and 356 00:21:17,400 --> 00:21:20,720 Speaker 1: certainly if we do enforcement actions, we we don't. We 357 00:21:20,840 --> 00:21:23,640 Speaker 1: don't check in with the White House. And that's by 358 00:21:23,840 --> 00:21:28,480 Speaker 1: Congress's will. Congress wrote the law that way. And um, 359 00:21:28,640 --> 00:21:32,080 Speaker 1: so there's a certain independence from that. Uh, that daily 360 00:21:32,760 --> 00:21:36,240 Speaker 1: back and forth with President Biden. Isn't calling you saying 361 00:21:36,280 --> 00:21:39,120 Speaker 1: good job, Gary, You're really doing a good job there right, Well, 362 00:21:39,160 --> 00:21:42,720 Speaker 1: you know, I wouldn't, I wouldn't probably uh want to 363 00:21:42,720 --> 00:21:45,640 Speaker 1: disclose any of that. But that's a that's a would 364 00:21:45,680 --> 00:21:50,000 Speaker 1: be a pretty unusual president sec uh Chair. I mean, 365 00:21:50,040 --> 00:21:52,959 Speaker 1: I know my predecessor may have played golf or something, 366 00:21:53,000 --> 00:21:56,480 Speaker 1: but that's not happening here. Speaking of golf, how do 367 00:21:56,560 --> 00:21:59,000 Speaker 1: you stay in shape? You look like you're pretty fit. 368 00:21:59,080 --> 00:22:00,840 Speaker 1: I mean, well, how do you percise or stay in 369 00:22:00,880 --> 00:22:03,720 Speaker 1: shape when you're chamber of the SEC. Well, you're kind, 370 00:22:03,800 --> 00:22:07,879 Speaker 1: You're kind to say that. I've been a lifelong uh runner, 371 00:22:07,960 --> 00:22:10,840 Speaker 1: and I learned a little bit of athleticism that decision, 372 00:22:10,880 --> 00:22:13,520 Speaker 1: that faithful decision to go to University of Pennsylvania because 373 00:22:13,520 --> 00:22:16,359 Speaker 1: my twin brother was there. Because also I ended up 374 00:22:16,359 --> 00:22:19,880 Speaker 1: being at cocks In for crew, and I learned from 375 00:22:19,920 --> 00:22:22,800 Speaker 1: coach Ted Nash this incredible sense of he was an 376 00:22:22,800 --> 00:22:26,840 Speaker 1: Olympic horseman and Olympic gold medalist, this incredible sense of 377 00:22:26,840 --> 00:22:30,119 Speaker 1: of of that it's important to think about our body 378 00:22:30,160 --> 00:22:32,280 Speaker 1: as well. So I try. I even to this day, 379 00:22:32,280 --> 00:22:34,439 Speaker 1: I try to still get out and run. I'm not 380 00:22:34,480 --> 00:22:38,359 Speaker 1: as good a runner as I once was. Um, I've 381 00:22:38,400 --> 00:22:40,679 Speaker 1: done a fair amount of biking in my life, and 382 00:22:40,760 --> 00:22:44,200 Speaker 1: mountain climbing and trekking. My eldest daughter and my youngest 383 00:22:44,240 --> 00:22:46,320 Speaker 1: daughter and I have all sort of trek together. My 384 00:22:46,680 --> 00:22:50,400 Speaker 1: middle daughter, the anthropologist doesn't like that bit, but these 385 00:22:50,440 --> 00:22:52,240 Speaker 1: are some of the things I try to do. So 386 00:22:52,400 --> 00:22:54,760 Speaker 1: the pleasure of being the Chairman of the SEC is 387 00:22:54,760 --> 00:22:56,960 Speaker 1: what you've obviously been trained for it. Why do you 388 00:22:57,040 --> 00:22:59,639 Speaker 1: enjoy doing this? Because it's a twenty four hour day 389 00:22:59,720 --> 00:23:01,800 Speaker 1: kind of job, you're always gonna have critics. Why do 390 00:23:01,840 --> 00:23:04,080 Speaker 1: you enjoy this job? I assume you do enjoy it. 391 00:23:04,359 --> 00:23:07,720 Speaker 1: You know, I do enjoy it, David. I think, Look, 392 00:23:07,720 --> 00:23:11,480 Speaker 1: everybody's gonna find their passion. I was intrigued and interested 393 00:23:11,520 --> 00:23:14,720 Speaker 1: in finance. I was my twin brother, and I guess 394 00:23:14,840 --> 00:23:18,760 Speaker 1: got you know, gift of math and numbers, and but 395 00:23:18,880 --> 00:23:22,040 Speaker 1: I was also always like felt like that what we 396 00:23:22,119 --> 00:23:26,399 Speaker 1: can do to leave our world a better place? You know, 397 00:23:26,480 --> 00:23:28,520 Speaker 1: when when when when we get to the end of 398 00:23:28,520 --> 00:23:31,199 Speaker 1: our lives and look back, it's our family, it's our 399 00:23:31,240 --> 00:23:33,760 Speaker 1: loved ones, it's our friends, And to me, can we 400 00:23:33,840 --> 00:23:37,240 Speaker 1: leave the world a little bit better off? And that's 401 00:23:37,320 --> 00:23:39,720 Speaker 1: that's what motivates me in this job. Can we can 402 00:23:39,760 --> 00:23:43,480 Speaker 1: we do something that's better for working families or people 403 00:23:43,560 --> 00:23:47,120 Speaker 1: starting out in their life, saving and investing for their 404 00:23:47,160 --> 00:23:51,320 Speaker 1: future and tip the scales a little bit in their 405 00:23:51,400 --> 00:23:56,720 Speaker 1: favor away from the folks in the middle. So does 406 00:23:56,760 --> 00:23:59,880 Speaker 1: your twin brother ever say you did a better job 407 00:24:00,000 --> 00:24:02,359 Speaker 1: and I did, or then he did and your career. 408 00:24:02,440 --> 00:24:04,800 Speaker 1: Does a twin brother say you've got a little lucky 409 00:24:05,280 --> 00:24:07,320 Speaker 1: Or does he ever say I was really smarter than you. 410 00:24:07,400 --> 00:24:09,000 Speaker 1: I just didn't want to be the chair of the SEC. 411 00:24:09,400 --> 00:24:13,520 Speaker 1: What does he say about this? Um? Rob's a terrific 412 00:24:13,600 --> 00:24:16,520 Speaker 1: friend and a terrific brother, and he says usually just 413 00:24:16,960 --> 00:24:20,760 Speaker 1: gare go get him. Thanks for listening to hear more 414 00:24:20,800 --> 00:24:23,840 Speaker 1: of my interviews. You can subscribe and download my podcast 415 00:24:23,880 --> 00:24:26,600 Speaker 1: on Spotify, Apple, or wherever you listen.