WEBVTT - Todd Phillips on Basel III, Chevron, Crypto 0:00:15.560 --> 0:00:18.560 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:18.560 --> 0:00:21.759 by the litigation and policy team at Bloomberg Intelligence. We 0:00:21.840 --> 0:00:25.480 are the investment research platform at Bloomberg LP. Bloomberg Intelligence 0:00:25.480 --> 0:00:28.720 has five hundred analysts and strategists working across the globe 0:00:28.720 --> 0:00:31.920 and we are focused on all major markets. Our coverage 0:00:31.920 --> 0:00:34.159 includes over two thousand equities and credits and we have 0:00:34.200 --> 0:00:37.040 outlooks at more than ninety industries, one hundred market indices, 0:00:37.040 --> 0:00:40.440 currencies and commodities. Essentially, if it's in your portfolio, we 0:00:40.520 --> 0:00:44.000 cover it. This podcast series examines the intersection of business 0:00:44.000 --> 0:00:46.400 policy and law. And I'm Nathan Dean, an analysts with 0:00:46.400 --> 0:00:48.440 Boomberg Intelligence covering financials policy. 0:00:49.080 --> 0:00:51.360 And my name is Elliott Stein and I'm an analyst 0:00:51.400 --> 0:00:54.080 with Bloomberg Intelligence covering financials litigation. 0:00:54.520 --> 0:00:57.320 Our guest today is Todd Phillips, Assistant Professor of Law 0:00:57.360 --> 0:01:00.200 and the Robinson College of Business at Georgia State University. 0:01:00.560 --> 0:01:03.520 These areas of expertise include bank capital and financial regulation, 0:01:03.680 --> 0:01:07.560 deposit insurance, derivatives and securities, market structure, and the laws 0:01:07.600 --> 0:01:11.840 governing federal regulators. Before entering academia, and Phillips served as 0:01:11.840 --> 0:01:15.040 an attorney for the Federal Deposit Insurance Corporation, the Administrative 0:01:15.040 --> 0:01:18.240 Conference in the United States, the ioshoppers representatives, and the 0:01:18.240 --> 0:01:21.320 Center for American Progress. And if you've watched the CFTC 0:01:21.480 --> 0:01:24.680 or the ICEC or the House Financial Services Committee, you've 0:01:24.680 --> 0:01:29.920 seen Todd testify and provide expertise and information to both 0:01:29.920 --> 0:01:33.640 the regulators and the policymakers. Todd holds a jd from 0:01:33.640 --> 0:01:36.280 the University of Michigan and a BS at economics and 0:01:36.280 --> 0:01:39.800 political science from Arizona State University. So Todd, thank you 0:01:39.920 --> 0:01:41.520 very much for joining and welcome to the Votes and 0:01:41.600 --> 0:01:42.360 Verdicts podcast. 0:01:43.440 --> 0:01:44.960 Thank you, guys, glad to be here. 0:01:45.440 --> 0:01:47.760 So Todd, the first question we always ask is about 0:01:47.760 --> 0:01:49.880 our guest and their history. And I just read your 0:01:49.920 --> 0:01:54.280 official bio, but I'd love for our listeners to understand 0:01:54.320 --> 0:01:57.560 what actually brought you to the financial regulation sector, and 0:01:57.640 --> 0:02:00.480 especially what made you go into consumer advocacy and your 0:02:00.520 --> 0:02:02.520 work of the fdi C in the House and so 0:02:02.560 --> 0:02:03.160 forth like that. 0:02:04.640 --> 0:02:09.120 Yeah, So, I'm originally from Arizona. I really came of 0:02:09.160 --> 0:02:13.120 age during the Great Financial Crisis, and as your I 0:02:13.120 --> 0:02:15.959 guess older listeners know, Arizona was one of the states 0:02:16.000 --> 0:02:20.400 that was hit really really hard. I saw quite a 0:02:20.440 --> 0:02:25.000 few people lose lose everything they had built, really due 0:02:25.000 --> 0:02:28.400 to no fault of their own, just due to the 0:02:29.440 --> 0:02:33.760 faults in the financial system that we observed, and I 0:02:33.800 --> 0:02:38.640 wanted to dedicate myself to ensuring that something like that 0:02:38.760 --> 0:02:43.760 never happened again. The way I thought about doing it, 0:02:43.760 --> 0:02:44.799 the way I found to do it was to go 0:02:44.880 --> 0:02:48.680 to law school and to work in financial regulation, and 0:02:48.720 --> 0:02:52.399 I've been here ever since. It's been a really crazy 0:02:52.520 --> 0:02:58.040 ride with the ups and downs since the financial crisis, 0:02:57.600 --> 0:03:01.239 but it's great. I'm glad to be in this work 0:03:01.800 --> 0:03:06.440 speaking to folks like you, and as you mentioned, working 0:03:06.440 --> 0:03:09.079 for agencies testifying on the Hill. It's just been a 0:03:09.080 --> 0:03:09.840 great experience. 0:03:10.720 --> 0:03:13.440 Hey Todd, this is Elliott. You know I always enjoy 0:03:13.680 --> 0:03:16.680 reading your tweets and getting your insights, and you've also 0:03:16.720 --> 0:03:21.160 published several papers recently. And one of the papers you 0:03:21.200 --> 0:03:23.360 published recently, I don't know if it was a paper 0:03:23.480 --> 0:03:26.240 or an article technically, but I have to do with 0:03:26.360 --> 0:03:28.919 Chevron defference. So I want to start by asking you 0:03:29.080 --> 0:03:32.880 about that, since there are a pair of cases pending 0:03:33.000 --> 0:03:36.360 in the Supreme Court that the conventional wisdom expects will 0:03:36.400 --> 0:03:40.360 sort of curtail, if not get rid of Chevron deference altogether. 0:03:41.720 --> 0:03:44.040 I know a lot of our listeners are familiar with Chevron, 0:03:44.080 --> 0:03:46.720 but for those that aren't, I'll just explain it briefly. 0:03:46.720 --> 0:03:49.920 It refers to one of the most important principles in 0:03:50.000 --> 0:03:53.720 administrative law, named for a nineteen eighty four Supreme Court 0:03:53.800 --> 0:03:59.000 case Captions Chevron versus the Natural Resources Defense Council, and 0:03:59.040 --> 0:04:01.680 in that case, the courts set forth a legal test 0:04:02.120 --> 0:04:05.920 for when courts should defer to an agency's interpretation of 0:04:05.960 --> 0:04:10.720 a federal statute and and the holding the decision held 0:04:10.720 --> 0:04:14.160 that if a statute is ambiguous, courts should defer to 0:04:14.200 --> 0:04:18.440 the agency's interpretation so long as it's reasonable. And just 0:04:18.480 --> 0:04:21.960 as a shameless plug for BI for Bloomberg Intelligence, I'll 0:04:21.960 --> 0:04:25.240 mentioned here that our litigation and policy team has recently 0:04:25.279 --> 0:04:27.800 put out what we call a deep dive on the 0:04:27.839 --> 0:04:31.680 demise of Chevron deference and the various sectors and policies 0:04:31.680 --> 0:04:35.640 that will be most affected by the Supreme Court's anticipated ruling. 0:04:36.279 --> 0:04:39.760 So again, the conventional wisdom, of course, is that Chevron 0:04:39.800 --> 0:04:45.120 defference has been good for democrats, since democratic regulators tend 0:04:45.160 --> 0:04:47.880 to be more aggressive in terms of rule making and 0:04:47.920 --> 0:04:51.039 as a result, judicial deference to those regulators is a 0:04:51.080 --> 0:04:55.360 good thing in that view. But in your article from 0:04:55.440 --> 0:04:58.920 early May, I think you make a really interesting point 0:04:58.960 --> 0:05:02.039 that I think all also gets overlooked a lot, and 0:05:02.080 --> 0:05:05.080 that point is that Chevron deference has not been good 0:05:05.160 --> 0:05:09.479 for progressives when it comes to banking laws because crudential 0:05:09.560 --> 0:05:13.719 banking regulators like the OCC historically have taken an expansive 0:05:13.839 --> 0:05:18.080 view of the conduct that commercial banks are allowed to 0:05:18.080 --> 0:05:20.720 engage in, and courts have had to defer to those 0:05:21.240 --> 0:05:24.960 OCC regulations. So you know, the article is called Chevron 0:05:25.120 --> 0:05:27.800 and Banking Law. What's good for the goose isn't good 0:05:27.839 --> 0:05:30.680 for the gander. You published it in the Yale Journal 0:05:30.760 --> 0:05:33.159 on Regulation. I'd love it if you could, you know, 0:05:33.200 --> 0:05:35.599 sort of walk us through your article in some more detail, 0:05:35.880 --> 0:05:39.560 because again, I do think you make a very underappreciated point. 0:05:40.680 --> 0:05:43.400 Yeah, thanks for bringing this up, Elliott. So you know, 0:05:43.560 --> 0:05:48.159 as you mentioned, Chevron stands for the principle that if 0:05:48.200 --> 0:05:53.080 there is an ambiguous statue, courts are to defer to 0:05:54.440 --> 0:05:57.120 the executive branch, to the agency is to figure out 0:05:57.120 --> 0:06:03.080 how to interpret it. Recently, you know, it has been 0:06:03.920 --> 0:06:11.360 progressives really championing Chevron deference as the key to ensuring 0:06:11.480 --> 0:06:18.280 that strong progressive policies that push forward progressive values are implemented. 0:06:19.640 --> 0:06:22.120 But that hasn't always been the case. In fact, the 0:06:22.160 --> 0:06:25.640 original Chevron case in the eighties was about the Reagan 0:06:25.680 --> 0:06:34.080 administration's EPA trying to roll back some strong regulations from 0:06:34.160 --> 0:06:38.200 the prior Carter administration, and in that case, the Supreme 0:06:38.240 --> 0:06:40.400 Court said, sure, we'll let you go ahead and do 0:06:40.480 --> 0:06:44.360 this roll back. The argument I make in the piece 0:06:45.480 --> 0:06:51.479 is that progressives today are really wrong to be arguing 0:06:51.680 --> 0:06:57.280 that Chevron really is good for progressive values. I've spoken 0:06:57.320 --> 0:06:59.880 to a lot of folks in the environmental space who 0:07:00.080 --> 0:07:03.960 say that we need Chevron to allow the EPA and 0:07:04.000 --> 0:07:10.640 some of the other environmental agencies to solve the climate 0:07:10.680 --> 0:07:13.880 crisis and do all sorts of other really progressive minded things. 0:07:14.400 --> 0:07:18.680 And in the piece I argue that in banking we 0:07:18.760 --> 0:07:23.679 already have really really strong progressive banking laws on the books. 0:07:23.960 --> 0:07:29.960 The National Bank Act of eighteen sixty four really constrains 0:07:30.080 --> 0:07:36.880 what national banks are allowed to do. Congress further in 0:07:36.960 --> 0:07:42.040 the Glass Stegal Act of nineteen thirty three made clear 0:07:42.400 --> 0:07:46.720 that for state banks, they're also significantly constrained in what 0:07:46.760 --> 0:07:50.440 they can do, really limiting them to the quote unquote 0:07:50.480 --> 0:07:55.840 business of banking. And the piece goes through how starting 0:07:55.880 --> 0:08:01.800 in the eighties up through the early two thousands, bank 0:08:01.880 --> 0:08:07.680 regulators across both political parties use Chevron deference to expand 0:08:07.800 --> 0:08:13.120 the activities that banks could undertake. They expanded that definition 0:08:13.320 --> 0:08:16.520 of the business of banking with the approval of the courts, 0:08:16.920 --> 0:08:23.600 to allow banks to engage in derivatives activities, to offer 0:08:23.760 --> 0:08:30.840 products that mirrored securities investments. They allowed banks to issue 0:08:32.160 --> 0:08:37.360 deposit products that mirrored s and P five hundred index funds. 0:08:37.640 --> 0:08:43.120 So it gave you the same economics of investment of 0:08:43.200 --> 0:08:46.760 investing through a banking lens. And the courts blessed all 0:08:46.800 --> 0:08:49.480 of these things. And one of the things I argue 0:08:49.640 --> 0:08:55.520 is that it's this expansion of banking law under the 0:08:55.600 --> 0:09:01.400 Chevron lens that really led the Great findancial Crisis in 0:09:01.400 --> 0:09:03.840 two thousand and seven two thousand and eight to occur. 0:09:03.920 --> 0:09:07.640 It was this expansion of what banks could do under 0:09:07.679 --> 0:09:11.880 the lens of Chevron that caused all of the calamity 0:09:12.360 --> 0:09:18.079 that we saw in the mid odds. And so this 0:09:18.160 --> 0:09:25.240 piece really is a plea to my fellow progressive scholars 0:09:25.240 --> 0:09:30.080 and advocates to just not take Chevron deference as a 0:09:30.160 --> 0:09:35.400 de facto progressive good and promoting progressive values, but that 0:09:36.880 --> 0:09:41.960 we can and should make strong arguments without relying on Chevron, 0:09:42.360 --> 0:09:46.240 that agencies can do good things, or that courts should 0:09:46.280 --> 0:09:52.880 constrain agencies from doing bad things without Chevron. As you noted, 0:09:53.760 --> 0:09:57.959 the Supreme Court's currently figuring out what to do with Chevron, 0:09:58.040 --> 0:10:02.000 whether to keep it going in the future. We should 0:10:02.040 --> 0:10:04.320 have an opinion about that coming out within the next 0:10:04.360 --> 0:10:08.520 month or two. And I imagine that we will have 0:10:08.800 --> 0:10:12.520 a whole new world when when that happens, and we're 0:10:12.559 --> 0:10:16.719 going to have to figure out how to make progressive 0:10:16.840 --> 0:10:20.960 policy arguments without Chevron. And this is one way to 0:10:21.000 --> 0:10:21.280 do it. 0:10:21.840 --> 0:10:24.800 And and what do you think, uh, I mean, if 0:10:25.080 --> 0:10:26.440 you had a crystal ball, what do you think the 0:10:26.480 --> 0:10:28.640 Supreme Court is going to do? Like, where are we 0:10:28.679 --> 0:10:30.840 going to be after after this decision? That we're going 0:10:30.880 --> 0:10:33.760 to be sort of back in skidmore difference land where 0:10:34.840 --> 0:10:38.760 the courts, you know, sort of factor in all the 0:10:38.840 --> 0:10:44.080 different you know, possible interpretations but don't necessarily refer to 0:10:44.080 --> 0:10:45.760 to the agency or the executive branch. 0:10:47.440 --> 0:10:52.720 So I imagine that we will generally be back in 0:10:52.840 --> 0:10:56.880 skid Moore Land. Yeah, so what what Skidmore Difference says 0:10:57.240 --> 0:11:01.600 is that courts are the final arts of the decisions, 0:11:02.679 --> 0:11:08.359 but they are allowed to or should take into consideration 0:11:09.000 --> 0:11:13.000 the reason arguments of the agencies. If the agencies can 0:11:13.000 --> 0:11:17.440 make a compelling argument about why a statute should be 0:11:17.440 --> 0:11:22.720 interpreted a particular way, then courts should, you know, interpret 0:11:22.720 --> 0:11:25.280 it that way. One of the things I'm sure that 0:11:25.360 --> 0:11:29.880 your listeners are concerned about, and it's something I'm concerned 0:11:29.880 --> 0:11:33.400 about too, is what happens to all of the court 0:11:33.440 --> 0:11:40.000 cases that relied on Chevron. We have thirty forty years 0:11:39.400 --> 0:11:43.840 of precedent right now where courts have been applying Chevron 0:11:44.400 --> 0:11:49.000 to existing statutes like the ones I talked about with 0:11:49.000 --> 0:11:56.440 the Business of Banking, and if when the Court Constraints 0:11:56.480 --> 0:12:01.960 revises overalls Chevron, all of those cases are are likely 0:12:02.000 --> 0:12:05.720 going to have to be reinterpreted anew or under a 0:12:05.800 --> 0:12:10.040 new test that the Supreme Court puts forward. And and 0:12:10.120 --> 0:12:12.760 let me tell you, that's that's going to be a mess. 0:12:12.800 --> 0:12:15.560 I really don't know what's going to happen. I would 0:12:15.640 --> 0:12:18.000 love to be able to give the listeners some better 0:12:18.080 --> 0:12:21.800 sense of what the world will be like. 0:12:22.480 --> 0:12:25.080 It's fair. I mean, you know, if we'd all be 0:12:25.120 --> 0:12:27.199 billionaires if we knew exactly what was going to happen, 0:12:28.320 --> 0:12:31.200 you know exactly now. But I think you make a 0:12:31.240 --> 0:12:33.959 really good point. Just one last question on this, because 0:12:34.160 --> 0:12:38.200 in your art, in your in your article, you also 0:12:38.559 --> 0:12:42.160 said that you know, nevertheless, you hope Severn deference survives 0:12:42.200 --> 0:12:46.000 as unlikely that as that seems to be. But I'm 0:12:46.040 --> 0:12:47.920 wondering how you sort of thread that needle hoping for 0:12:47.960 --> 0:12:50.360 it to survive, but also you know, making the point 0:12:50.400 --> 0:12:53.760 that it has been sort of bad for the banking industry. 0:12:54.880 --> 0:12:55.160 Yeah. 0:12:55.200 --> 0:12:58.720 So I think from a from a philosophical perspective, I 0:12:58.960 --> 0:13:03.760 think that Chevron defference really does make sense if a 0:13:03.800 --> 0:13:10.720 statute truly is ambiguous, if courts really don't can't figure 0:13:10.720 --> 0:13:16.120 out what Congress intended when it wrote a statute, in 0:13:16.200 --> 0:13:21.280 my mind, it makes sense for the other elected branch, 0:13:21.480 --> 0:13:26.439 the executive branch, to have interpretive authority over that rather 0:13:26.520 --> 0:13:32.800 than giving it to unelected judges. So I think from 0:13:32.840 --> 0:13:37.360 a philosophical sense about just interpretation of law and the 0:13:37.520 --> 0:13:42.320 role of judges, I think Chevron makes sense. Even though 0:13:42.600 --> 0:13:45.200 you know as the article talks about, I think Chevron 0:13:45.240 --> 0:13:47.240 has been really really bad for banking. 0:13:48.400 --> 0:13:50.800 So I'd like to take the conversation over to a 0:13:50.840 --> 0:13:53.160 topic that our listeners know pretty well, and that's the 0:13:53.200 --> 0:13:56.760 Basle three endgame. For those of you who don't know 0:13:56.760 --> 0:13:59.199 what the Basle three endgame, you know, this is what 0:13:59.280 --> 0:14:02.760 if you've watched the NFL, you know you saw commercials 0:14:02.760 --> 0:14:05.240 on this. This is the last remaining piece of the 0:14:05.280 --> 0:14:11.000 Basil three Accords that set international standards for bank capital. Now, 0:14:11.360 --> 0:14:15.160 in July of twenty twenty three, the financial banking regulators, 0:14:15.160 --> 0:14:17.760 so this is the FED, the FDIC, and the Office 0:14:17.760 --> 0:14:20.080 of the Control or the Currency, proposed to rule that 0:14:20.080 --> 0:14:23.160 would increase capital requirements by as much as nineteen percent 0:14:23.240 --> 0:14:26.920 for those globally systemic banks like Bank America, City Group 0:14:26.920 --> 0:14:29.920 in JP Morgan, regional lenders you know, in our analysis 0:14:29.920 --> 0:14:32.600 could see around a five percent increase. Now, there's been 0:14:32.640 --> 0:14:35.960 intense industry pushback to the proposal, and we've seen statements 0:14:35.960 --> 0:14:38.920 from both the FED Chairman and the FED Vice chair 0:14:38.960 --> 0:14:41.840 Michael Barr that broad im material changes are coming. 0:14:42.200 --> 0:14:42.360 You know. 0:14:42.440 --> 0:14:44.760 JP Morgan went as far in the most recent earnings 0:14:44.760 --> 0:14:47.880 called by stating they felt the proposed capital requirements would 0:14:47.960 --> 0:14:51.280 drop by fifty percent in the next version. So my 0:14:51.400 --> 0:14:54.960 question to you is, Todd, should these broad and material 0:14:55.040 --> 0:14:58.680 changes come. If they are coming, what do you think 0:14:58.720 --> 0:15:02.440 the regulators are going to do? And do you think 0:15:02.520 --> 0:15:05.280 the regulators will finalize the rule or do you think 0:15:05.400 --> 0:15:07.480 reproposals in the cards. 0:15:08.680 --> 0:15:15.240 Yeah, so I am a proponent of what the banking 0:15:15.240 --> 0:15:19.640 agencies originally proposed. I think that we do need very 0:15:19.680 --> 0:15:25.640 strong capital requirements above what is in existing law. That 0:15:25.760 --> 0:15:28.080 being said, I'm not going to dwell on that because 0:15:28.120 --> 0:15:32.120 that's just not going to happen. It's clear from Vice 0:15:32.200 --> 0:15:40.240 Chair bars statement that the agencies are doing broad reconceptualizations, reconsiderations, 0:15:40.800 --> 0:15:43.680 and we're going to see something. My prediction is we're 0:15:43.680 --> 0:15:46.640 going to see something significantly rolled back. I'm not going 0:15:46.640 --> 0:15:49.520 to prognosticate about what we're going to see. I think 0:15:49.560 --> 0:15:55.920 that is a political compromise that's going to need to happen. 0:15:57.800 --> 0:16:00.440 As an aside, one of the things that I think 0:16:00.480 --> 0:16:06.000 has been missing from the discussion about what a revised 0:16:06.080 --> 0:16:10.480 endgame is going to look like. Most media has focused 0:16:10.520 --> 0:16:13.880 on the political dynamics of the FED, and one thing 0:16:14.120 --> 0:16:19.000 I want to make clear to your listeners and perhaps 0:16:19.080 --> 0:16:22.800 reporters who are listening, is that this is a regulation 0:16:22.880 --> 0:16:27.120 that's really going to that is by necessity going to 0:16:27.200 --> 0:16:29.840 include a vote of the FED, vote of the FDIC, 0:16:30.120 --> 0:16:33.320 and a vote of the OCC And so whatever we 0:16:33.480 --> 0:16:37.560 see is going to have to have it's going to 0:16:37.560 --> 0:16:40.240 have to get the vote of J. Powell, and it's 0:16:40.240 --> 0:16:42.000 also going to have to get the vote of row 0:16:42.080 --> 0:16:46.640 hit Chopra on the FDICE. And I don't know how 0:16:46.680 --> 0:16:52.840 they're going to thread that, but just conceptually, I think 0:16:52.920 --> 0:16:55.520 what we're going to see is something that can get 0:16:55.560 --> 0:16:59.440 the approval of those two by necessity, just the way 0:16:59.480 --> 0:17:01.320 that the vote of the agencies is going to have 0:17:01.360 --> 0:17:02.320 to shake out. 0:17:03.960 --> 0:17:06.480 How do you think I don't want to use the 0:17:06.520 --> 0:17:08.439 word screw up, because this is not a screw up, 0:17:08.480 --> 0:17:12.639 but how did we get to a situation in terms 0:17:12.720 --> 0:17:15.399 of you know, this was probably the biggest thing that 0:17:15.440 --> 0:17:19.240 the FED was going to do under the Biden administration. 0:17:20.240 --> 0:17:24.119 And it comes out, it's proposed, and you see this 0:17:24.200 --> 0:17:27.639 industry push back, you see moderate Democrats pushing back and 0:17:27.680 --> 0:17:29.840 so forth, and it's almost like they're having to do 0:17:29.880 --> 0:17:33.240 an about face here. You know, was this a situation 0:17:33.359 --> 0:17:36.720 of an own goal or do you think that what 0:17:36.840 --> 0:17:39.159 the FED originally And I'm using the FED here just 0:17:39.160 --> 0:17:41.120 because you know a lot of it, Like you pointed out, 0:17:41.160 --> 0:17:45.840 it's a free agency. But you know, how did we 0:17:45.880 --> 0:17:49.280 get into a situation like this where the proposal going 0:17:49.280 --> 0:17:52.040 from proposed to finalized could change so drastically? 0:17:54.600 --> 0:17:59.800 So this is not abnormal or doing you know a 0:18:00.119 --> 0:18:03.919 revision is not abnormal. It's the way the rule making 0:18:03.960 --> 0:18:08.960 process is supposed to work. The rulemaking process is governed 0:18:08.960 --> 0:18:13.240 by the Administrative Procedure Act. Congress enacted it so that 0:18:13.359 --> 0:18:17.800 agencies would have to issue your proposal, receive feedback from 0:18:17.840 --> 0:18:21.360 the public, and only then can they finalize a regulation. 0:18:22.240 --> 0:18:26.760 And that's exactly what's happening. So I don't think I 0:18:26.760 --> 0:18:30.320 wouldn't call this an about face. I would call it, 0:18:30.800 --> 0:18:35.880 you know, the normal process working. Okay, But to your 0:18:35.920 --> 0:18:42.760 point about how how there was so much pushback, my 0:18:44.400 --> 0:18:54.520 understanding is that endgame really is Michael Barr's not white whale, 0:18:54.560 --> 0:18:57.000 but like it is the thing that he came into 0:18:57.040 --> 0:18:59.320 the position wanting to do. It's the thing he has 0:18:59.359 --> 0:19:01.840 been pushing or it's the thing he wants to do 0:19:02.440 --> 0:19:07.600 before he leaves the job. And because it's something that 0:19:07.800 --> 0:19:11.159 has to be voted on by the three agencies, my 0:19:11.320 --> 0:19:17.919 understanding is that the the rule is further to the 0:19:18.040 --> 0:19:23.160 left than it might otherwise have been because of the FDIC. 0:19:25.560 --> 0:19:30.000 And so, you know, I don't know exactly what happened, 0:19:30.400 --> 0:19:34.159 but I can imagine a situation where, you know, the 0:19:34.240 --> 0:19:37.159 three agencies move further to the left than two of 0:19:37.200 --> 0:19:40.600 them were comfortable with in order to get the FDIC 0:19:40.800 --> 0:19:42.680 on board, and said, all right, we'll see what kind 0:19:42.720 --> 0:19:47.040 of comments we get. We are receiving the comments, and 0:19:47.520 --> 0:19:51.679 there is some very significant pushback, and I imagine the 0:19:51.720 --> 0:19:55.160 folks at the FDIC who wanted to push it further 0:19:55.200 --> 0:20:01.280 to the left are are likely see this and thinking, okay, 0:20:02.080 --> 0:20:04.919 we need to moderate in order to ensure that this 0:20:05.000 --> 0:20:06.840 actually gets across the finish line. 0:20:06.920 --> 0:20:09.679 You know, you made it sound like I was just 0:20:09.760 --> 0:20:13.440 imagining myself when I negotiate with my child over at bedtime. 0:20:13.880 --> 0:20:15.919 You know, I always say something that I know that 0:20:15.960 --> 0:20:17.480 I'm not going to get, but I still get a 0:20:17.520 --> 0:20:20.040 push for it because there's going to have to be 0:20:20.080 --> 0:20:23.600 some negotiation, and virtually I'll get to a point that 0:20:23.920 --> 0:20:25.920 we're both agreed on that you will go to bed 0:20:26.000 --> 0:20:29.159 by this point exactly. But you know, I guess my 0:20:29.240 --> 0:20:31.760 last remaining question before I turn it back to Elliott 0:20:31.840 --> 0:20:34.720 is Bloomberg News is reported that they can finalize this 0:20:34.760 --> 0:20:35.280 by August. 0:20:35.280 --> 0:20:39.560 Do you think that's feasible? I don't know. So the 0:20:39.640 --> 0:20:43.760 industry has been pushing for them to do a reproposal. 0:20:44.040 --> 0:20:47.440 Reproposals not going to happen. It's it's just not going 0:20:47.480 --> 0:20:53.800 to happen. They are going to make changes based within 0:20:53.840 --> 0:20:56.480 the original framework. They are going to do everything they 0:20:56.520 --> 0:21:01.359 can to make sure it is legally compliant. That takes 0:21:01.359 --> 0:21:05.720 a while, and I don't know about by August, but 0:21:06.240 --> 0:21:09.720 I do imagine it will get done this year before 0:21:09.760 --> 0:21:10.240 the election. 0:21:11.000 --> 0:21:13.840 And do you think there's any chance the rule gets 0:21:14.040 --> 0:21:17.760 watered down so much that the industry decides not to sue. 0:21:18.080 --> 0:21:20.840 It sort of feels like litigation these days is inevitable 0:21:20.880 --> 0:21:23.240 whenever a rule is finalized. 0:21:25.280 --> 0:21:28.280 No, I mean, I think the industry is absolutely going 0:21:28.359 --> 0:21:31.280 to sue. And if you saw what happened with the 0:21:31.320 --> 0:21:37.040 SEC's climate disclosure rule, the SEC weakened it by excluding 0:21:37.119 --> 0:21:42.680 scope three. It seems in part to try to avoid litigation. 0:21:43.280 --> 0:21:46.920 And what did we see litigation happened. I mean, BPI 0:21:47.400 --> 0:21:50.480 has hired Eugene Scalia, who is one of the top 0:21:50.920 --> 0:21:58.399 administrative litigators in the country. You don't hire Scalia to 0:21:58.440 --> 0:22:05.439 not sue. I can't imagine that this rule gets finalized 0:22:05.480 --> 0:22:09.479 without a legal challenge. The other thing I note is 0:22:09.520 --> 0:22:14.960 that there are what thirty something banks to which the 0:22:15.040 --> 0:22:19.640 endgame rule will apply, maybe more, And it only takes 0:22:19.720 --> 0:22:22.439 one to sue. I mean, I think everyone's predicting that 0:22:22.480 --> 0:22:25.879 it's going to be BPI that sues. But if the 0:22:26.000 --> 0:22:30.040 consensus is that, you know, BPI shouldn't, it only takes 0:22:30.080 --> 0:22:34.480 one to actually, you know, pull the trigger and file 0:22:34.600 --> 0:22:36.360 the documents challenging the rule. 0:22:36.440 --> 0:22:38.919 Yeah. I tend to agree with that. And you know, 0:22:39.040 --> 0:22:43.480 litigation keeps me in business. That's good too. All right, 0:22:43.560 --> 0:22:48.280 let's turn to crypto and talk a little bit about 0:22:48.280 --> 0:22:53.200 the SEC's enforcement action against Coinbase. As I'm sure most 0:22:53.240 --> 0:22:56.480 of our listeners know, the SEC sued Coinbase in June 0:22:56.560 --> 0:22:59.880 of twenty twenty three, alleging that the company was operating 0:23:00.000 --> 0:23:04.240 as an unregistered exchange broker in clearing agency, and one 0:23:04.240 --> 0:23:07.159 of the company's arguments for getting the case dismissed was 0:23:07.200 --> 0:23:12.280 that the enforcement action violated the Major questions doctrine again 0:23:12.320 --> 0:23:15.720 for listeners who don't know. The Major questions doctrine is 0:23:15.760 --> 0:23:18.960 a recently articulated Supreme Court doctrine that says that if 0:23:18.960 --> 0:23:22.760 an agency seeks to decide an issue of major national 0:23:22.920 --> 0:23:27.000 or economic significance, its action must be supported by clear 0:23:27.119 --> 0:23:32.080 congressional authorization in a statute you and others filed in 0:23:32.359 --> 0:23:35.520 amicus brief. Some say amkus. I still say amicus an 0:23:35.520 --> 0:23:39.119 amicus brief in the case arguing that the SEC's enforcement 0:23:39.160 --> 0:23:43.320 action should not and does not trigger the major questions doctrine. 0:23:43.359 --> 0:23:48.960 And indeed, when Judge Bala ruled on Coinbase's motion a 0:23:49.000 --> 0:23:54.080 few months ago, and she rejected Coinbase's major questions argument, 0:23:54.480 --> 0:23:58.159 and she essentially adopted your reasoning at least part of it. 0:24:00.040 --> 0:24:02.120 Can you walk us through your arguments that you made 0:24:02.160 --> 0:24:05.000 in your amaricus brief in why the major questions doctrine 0:24:05.000 --> 0:24:09.119 should not apply to enforcement actions like the one against Coinbase. 0:24:10.280 --> 0:24:16.879 Absolutely so, I think you explained the major questions doctrine well. 0:24:17.200 --> 0:24:19.960 The one thing I would add is that in the 0:24:20.040 --> 0:24:26.119 opinions articulating it West Virginia versus EPA, the Supreme Court 0:24:26.720 --> 0:24:31.680 made clear that This is a principle or a doctrine 0:24:32.400 --> 0:24:36.840 meant to get at separation of powers and ensure that 0:24:37.400 --> 0:24:44.040 the legislature writes legislation, the executive brings enforcement actions, and 0:24:44.119 --> 0:24:49.960 the judiciary adjudicates cases and what and the Major Questions 0:24:50.000 --> 0:24:56.720 doctrine therefore applies to agency actions where the executive is 0:24:56.800 --> 0:25:01.480 kind of usurping the role of the legislature. And my 0:25:01.600 --> 0:25:07.480 co author bo and my argument is that, well, there 0:25:07.720 --> 0:25:11.760 is no separation of powers issue here with the SEC's 0:25:12.040 --> 0:25:18.919 crypto related enforcement actions because Congress wrote a law, wrote 0:25:18.960 --> 0:25:22.560 the Securities Act of thirty three, in the Exchange Act 0:25:22.560 --> 0:25:28.360 of thirty four, the executive branch, the SEC is bringing 0:25:28.400 --> 0:25:33.920 an enforcement action. An enforcement action is just the prototypical 0:25:35.000 --> 0:25:40.960 article to executive action, and they're asking a court to adjudicate, 0:25:41.040 --> 0:25:44.239 which is exactly what courts are supposed to do. So 0:25:44.440 --> 0:25:48.639 there is no separation of powers violation here. It's just 0:25:49.240 --> 0:25:52.960 every branch of government doing what that branch is supposed 0:25:52.960 --> 0:25:56.879 to do, and therefore the Major Questions doctrine doesn't apply. 0:25:58.200 --> 0:26:02.199 As you noted, Judge Fela seems to have agreed with that, 0:26:02.520 --> 0:26:06.840 and I appreciate it. I will also note that it 0:26:06.920 --> 0:26:10.800 seems like the crypto industry has also bought our argument, 0:26:11.040 --> 0:26:13.879 and we've seen the last couple of lawsuits that have 0:26:13.920 --> 0:26:18.320 been filed that Major Questions doctrine. The Major Questions doctrine 0:26:18.359 --> 0:26:25.920 hasn't been raised, which is great. The question, I think 0:26:26.040 --> 0:26:29.480 is what the Supreme Court will do. As I think 0:26:29.520 --> 0:26:33.000 you guys know from Twitter, I've been saying that the 0:26:33.040 --> 0:26:38.320 crypto industry's play here is to bring lawsuits in Texas 0:26:38.359 --> 0:26:41.080 and the Fifth Circuit Court of Appeals, which is clearly 0:26:41.119 --> 0:26:45.879 the most conservative court in the country, seems like they 0:26:45.880 --> 0:26:49.280 want to create a circuit split where the Fifth Circuit 0:26:49.359 --> 0:26:53.200 rules one way on crypto and DC in New York 0:26:53.840 --> 0:26:58.280 rule another way, and that circuit slit will cause the 0:26:58.320 --> 0:27:02.439 Supreme Court to uh to take up the case and 0:27:03.119 --> 0:27:06.800 rule on the issue of crypto for what it's worth. 0:27:06.920 --> 0:27:09.720