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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Gary Gensler, he's a former chairman the Security Is and

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Speaker 2: Exchange Commission, Professor of Practice of Global Economics and Management

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Speaker 2: at MIT. Did you ever study under Stanley Fisher? Did

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Speaker 2: you have the privilege?

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Speaker 3: I got to know stan Fisher, a terrific public servant.

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Speaker 1: I got to know him when he served here at

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Speaker 1: the US he.

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Speaker 3: Was in international finance. I also got to know him

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Speaker 3: a little bit when he ran in the Central Bank

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Speaker 3: over in Israel.

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Speaker 2: Katie Greifeld called me up earlier this morning and she said,

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Speaker 2: and folks, Gus the horse is okay in the heat.

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Speaker 4: It's serious.

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Speaker 2: And Katie said that the horses are doing fine this morning.

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Speaker 4: And Katie said, can you do the entire interview on crypto?

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Speaker 2: And I said, over Mike, with all that's going on

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Speaker 2: from the Genstler to the Atkins SEC, we're going to

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Speaker 2: get crypto out of the way now, folks. And I'm sorry,

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Speaker 2: Gary Ginsler, it is breaking. It got Chris Giles in

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Speaker 2: the ft this morning highlighted the Bank of International Settlements research.

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Speaker 2: I adore Raphael Hour's work at BIS.

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Speaker 4: I got rogue off.

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Speaker 2: In chapter seventeen eighteen and nineteen going after stable coin.

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Speaker 2: We need a Guenstler update. What are we getting into

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Speaker 2: with tether and stable coin?

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Speaker 3: So Tom, I couldn't agree with you more about your

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Speaker 3: earlier statement. There are so many bigger items going on

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Speaker 3: in this economy. The tariffs, immigration, frankly, a whole attack

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Speaker 3: on science funding, a lot of things that are gonna,

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Speaker 3: I think hurt long term economic growth. And that's why

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Speaker 3: I joined Simon Johnson and other colleagues from the Center

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Speaker 3: of Economic Policy Research to do a book, a rapid

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Speaker 3: response book about the economic consequences. But in that book

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Speaker 3: you're asking about stable coins. It's interesting the worldwide dollar mark,

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Speaker 3: it's about forty five trillion.

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Speaker 1: That's when you added thing up.

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Speaker 3: Forty five trillion dollars and stable coins are about a

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Speaker 3: quarter trillion. And so you know, the question is is

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Speaker 3: Scott Bessant, Secretary of Treasury right he says that's going

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Speaker 3: to grow to two trillion. It starts to say, what's

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Speaker 3: the use of.

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Speaker 1: One of these? We already have digital dollars.

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Speaker 3: You and I, we all Lisa earlier were saying, I

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Speaker 3: don't understand stable coins.

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Speaker 1: We have stable coins.

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Speaker 3: They're called us dollars, deposits, money market funds, and so forth.

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Speaker 3: The only thing that these companies are offering is an

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Speaker 3: alternative way to move dollars outside of the banking system,

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Speaker 3: which means outside of sanctions, outside of any money laundering laws.

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Speaker 3: And so that's the real risk. It could undermine the

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Speaker 3: US GEO politically.

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Speaker 2: Let me, Paul's got any questions. Let me get this

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Speaker 2: in right now, because I think it's so important. The

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Speaker 2: bravest book in my career here was Ken Rogoff, The

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Speaker 2: Curse of Cash.

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Speaker 4: He got death threats off that book.

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Speaker 2: It's nothing more than a use for criminal activity. It

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Speaker 2: replaces illegal one hundred dollars bills in briefcases.

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Speaker 4: How simplistic is that statement that I just made.

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Speaker 1: Well it you're talking about these stable coins.

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Speaker 4: Stable tether, stable coin, the whole thing.

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Speaker 2: It's nothing more than a walk around the sec and

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Speaker 2: the rest of the financial.

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Speaker 1: World looks stable coins.

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Speaker 3: Tether was invented early on about ten and eleven years ago,

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Speaker 3: to be the equivalent of the poker chip at the casino.

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Speaker 3: You could use it to move crypto versus crypto because

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Speaker 3: these large exchanges couldn't get bank accounts, and so instead

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Speaker 3: you could sidestep any money laundering in sanctions. At a

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Speaker 3: quarter of a trillion dollars, it's starting to be somewhat meaningful.

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Speaker 3: And here's the cool question, the interesting economic question. Who

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Speaker 3: gets the interest payments? Who gets the float the three

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Speaker 3: and a half or four percent on you know, for

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Speaker 3: every billion dollars, that's thirty five for forty million dollars

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Speaker 3: of interest, And who gets that interest? I'd rather have

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Speaker 3: a money market fund where I get the interest the investor.

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Speaker 5: Gary the economic consequences of a second Trump administration of

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Speaker 5: preliminary assessment. We're six months into the second administration of

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Speaker 5: President Trump. There's lots of unique economic policies coming out

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Speaker 5: of Washington.

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Speaker 1: Let's start with tariffs.

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Speaker 5: When I was in business school, tarrorifts were kind of

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Speaker 5: a targeted thing you'd do once in a while if

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Speaker 5: somebody was dumping steel or something else in there.

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Speaker 1: We've never really.

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Speaker 5: Seen them as a whole policy across the globe, across

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Speaker 5: all of our trading partners. How do you think about

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Speaker 5: the President of Trump's economic policies pocusing on strategy on tariffs.

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Speaker 3: I think and thank you for mentioning this book that

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Speaker 3: we did together.

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Speaker 1: It was a Rapid Response book.

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Speaker 3: But overall, all our experts said tariffs are going to

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Speaker 3: put downward pressure on economic growth and upward pressure on inflation.

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Speaker 1: And that's the history of these things.

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Speaker 3: We have seen worldwide movements to tariffs, and it was

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Speaker 3: right before the nineteen thirties Great Depression, and Congress got

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Speaker 3: in and weighed in and so forth. And I would

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Speaker 3: remind listeners that tariffs are only on goods, not on services.

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Speaker 3: And about ninety percent of workers in the US are

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Speaker 3: working outside of the manufacturing field. And one of our authors,

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Speaker 3: Michael Strain, wrote an excellent chapter, and Michael says it

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Speaker 3: won't even help manufacturing because manufacturers have to buy all

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Speaker 3: these goods, these intermediate goods from overseas and the tariffs

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Speaker 3: will be higher. So I don't think the tariffs are

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Speaker 3: going to help. I think they're going to hurt and interestingly,

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Speaker 3: they're going to particularly hurt also in rural communities because

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Speaker 3: rural communities have to sell their farm goods, their agricultural

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Speaker 3: products overseas. So it doesn't even necessarily help the president

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Speaker 3: in some of his political base in rural states.

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Speaker 5: A lot of I'm just going to you know, preempt

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Speaker 5: a lot of email I'm going to get today in

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Speaker 5: my social saying.

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Speaker 1: We haven't seen any of it.

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Speaker 5: Tariffs are working, just find inflation's not there or is

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Speaker 5: it just too early?

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Speaker 1: So it's a bit early.

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Speaker 3: But I'd say this to any listeners, You've just had

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Speaker 3: the largest tax increase that you've had in generations. Average

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Speaker 3: tariffs in the US were two point three percent. Globally

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Speaker 3: adding everything up two point three percent, and that was

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Speaker 3: even after the first Trump administration raised tariffs.

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Speaker 1: In China they are now over ten.

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Speaker 3: Percent, so the overall teriff rates have gone up fourfold.

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Speaker 1: That's a big tax increase.

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Speaker 3: It takes time, but the International Monetary Fund lowered our

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Speaker 3: growth estimates for this year a full point, so you

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Speaker 3: know we're seeing that happen, right.

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Speaker 4: I've got to ask.

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Speaker 2: We got all sorts of topics to talk to with

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Speaker 2: Gary Ginsler, Former's Securities in Exchange Commission Chairman, and MIT

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Speaker 2: out with.

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Speaker 4: The wonderful what do you call it? Like a kindle book?

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Speaker 1: Is there like a well, it's a real book.

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Speaker 3: We do have it physically, but it's online at the

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Speaker 3: Center for Economic Policy Research, which is a remarkable organization

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Speaker 3: in Europe, and you can get it for free right

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Speaker 3: at the CEPR website.

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Speaker 4: Wonderful. So we'll get that. I'll get that on LinkedIn

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Speaker 4: and Twitter as well. So I got to get this straight.

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Speaker 2: You're at Pikesville High School, you end up at Wharton,

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Speaker 2: you do better than good in your academics. The world's

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Speaker 2: imploding in private credit, right, Paul, Sure, everybody needs a valuation.

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Speaker 2: You have to be the first call for the University

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Speaker 2: of Pennsylvania. Do you have any handle on the new valuation?

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Speaker 2: The mark to market a private credit? And dare I

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Speaker 2: say private equity as well?

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Speaker 3: Well, you're kind. I mean, the University Pennsylvania is terrific.

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Speaker 3: I'm at MIT now, so I just have to give

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Speaker 3: that shout out. But in terms of private credit, look,

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Speaker 3: this is a field about give or take two trillion

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Speaker 3: dollars of lending and assets under management that has come

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Speaker 3: peeded with commercial banks, and we made sort of a

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Speaker 3: conscious decision to move some of these risks out of

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Speaker 3: commercial backs and into private credit.

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Speaker 1: I think it's good.

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Speaker 3: It's competition in the capital market.

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Speaker 4: Am I really look to the Chase of Sloan. You're

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Speaker 4: at Sloan with a piece of chalk in your and

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Speaker 4: what's the haircut? Right now on private credit, is it

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Speaker 4: eighteen percent? Is it greater?

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Speaker 3: Or if you're talking about valuations, it really depends on

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Speaker 3: what the large companies, the Apollos and the Blackstones and

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Speaker 3: so forth, how have they valued it so that if

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Speaker 3: they're valuing it properly, then it's not a haircut. But yes,

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Speaker 3: they usually charge higher interest rates.

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Speaker 5: Gary, how do you think the US should from a

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Speaker 5: trade perspective and economic policy perspective, deal with China?

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Speaker 1: Right now?

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Speaker 5: It feels like the globalization trend that you and I

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Speaker 5: and Tom grew up with that seems to have lost

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Speaker 5: a lot of steam. It's out of favor now. Maybe

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Speaker 5: that's a short term trend. I don't know, But specifically

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Speaker 5: with China, how do you.

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Speaker 3: My experience, and we had to negotiate when I was

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Speaker 3: at the SEC, a big consequential, transactional situation. Can China

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Speaker 3: keep their companies in the US stock market? And China

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Speaker 3: was not playing ball and following the rules about inspections.

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Speaker 1: We were able to sort that through.

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Speaker 3: And my experience is as you treat them with respect

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Speaker 3: and dignity and consistency, and this oscillation, this big volatile

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Speaker 3: changes of policy I think is not doing the US. Well,

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Speaker 3: I think, yes, the President is a risk taker. I

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Speaker 3: respect that he is a fundamentally He's come into office

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Speaker 3: very determined and he wants to readjust with China.

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Speaker 1: But I think China is very savvy.

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Speaker 3: They're going to be able to compete with this in

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Speaker 3: artificial intelligence, even if we clamp down on export controls

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Speaker 3: and they have those rare earth minerals that they're a to,

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Speaker 3: they have leverage points, is what I'm trying to say.

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Speaker 2: I've got to go to a new topic here, But

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Speaker 2: Gary Goenster, to get to that topic, I used AI.

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Speaker 4: I went to Gemini here and.

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Speaker 2: I tipped in the difference between the Genstler and Atkins SEC.

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Speaker 2: First of all, Gary Gensler, with all as you mentioned,

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Speaker 2: Paul Esteemed at GOLDBN Sachs is Paul, and I would

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Speaker 2: editorialize you would be on a shortlist to run any

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Speaker 2: major firm in America. Fine, Gary Gensler on AI, what

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Speaker 2: are our kids? What does Lisa Mataio need to know?

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Speaker 3: Well, I would say this it's one It's been around

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Speaker 3: at least ten years even longer, so it's not just

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Speaker 3: new with open AI and chat Chept two, it's the

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Speaker 3: most transformative technology of the time, and I find myself

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Speaker 3: thinking I'm more of the optimist. I think there'll be

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Speaker 3: a lot of new productivity that comes from this, but

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Speaker 3: also a lot of changes in the job market.

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Speaker 1: Bloomberg will be different.

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Speaker 3: Bloomberg Radio maybe not so different, all right, but I think.

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Speaker 1: It will be very different.

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Speaker 3: And so I think the US versus China is an

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Speaker 3: interesting thing. The big hyperscalers, the big you know, CHAP,

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Speaker 3: GPT and Gemini and so forth. Those companies are competing

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Speaker 3: with China, and China's got natural.

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Speaker 4: Deep deep seek whatever it is.

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Speaker 1: Yeah, well they have deep seek, but they have something else.

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Speaker 3: They have one point four billion people, so they have

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Speaker 3: data advantages over we're big, but we're only three hundred

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Speaker 3: and forty million people.

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Speaker 2: Let me go to what I was on with a

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Speaker 2: Gemini here and also the AI effort of Bloomberg, and

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Speaker 2: that is the shift from the Genstler sec over what

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Speaker 2: Paul Atkins has been charged by the President of the

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Speaker 2: United States. You're going to tell me collegially that the

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Speaker 2: ven diagram of Gensler and Atkins is pretty tight. There's differences,

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Speaker 2: but there's a collegial agreement.

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Speaker 4: Baloney.

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Speaker 2: People see this, Gary Gensler, it's a sharp shift that

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Speaker 2: we're seeing right.

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Speaker 4: Now, is it.

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Speaker 3: Look, elections have consequences, and I have a deep respect

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Speaker 3: and you're right, I'm going to be respectful. Chair Atkins

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Speaker 3: has served at the SEC not once but twice before.

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Speaker 3: He knows the agency well, and I think whether it's

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Speaker 3: Republican or Democrat, what this show is focused on is

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Speaker 3: the markets, the capital markets, and the capital markets do

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Speaker 3: best when there's rules of the road. And that's been

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Speaker 3: true for ninety years, and that's what's really critical.

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Speaker 1: Now.

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Speaker 3: The SEC has shrunk about twenty percent, so it's not

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Speaker 3: as able to surveil the markets and make sure that

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Speaker 3: it's free of fraud and manipulation.

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Speaker 2: Where are your shadows right now? If we go to

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Speaker 2: a more what's the word swashbuckling?

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Speaker 4: Is that right?

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Speaker 1: Yeah? Swashbuckling works. That works if we go to a more.

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Speaker 2: Trumpian SEC. Where are the Guenstler's shadows now? Within Global

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Speaker 2: Wall Street? Where's the leverage, the thing, the portfolio insurance

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Speaker 2: of eighty seven prizes of August nineteen ninety eight, where's

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Speaker 2: the shadows for you in the system?

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Speaker 1: Look?

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Speaker 3: I think that overall it's much beyond the Securities and

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Speaker 3: Exchange Commission. It's in terms of the whole financial markets,

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Speaker 3: you probably will have a tendency the greater leverage, meaning

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Speaker 3: more borrowing. But we are also in a heightened risk

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Speaker 3: environment geopolitical, as we lay out in this book, we

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Speaker 3: are pulling back the US from global alliances. So there

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Speaker 3: is definitely a bit more inflation risk, There's a lot

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Speaker 3: more leverage in the system. Investors are less well protected

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Speaker 3: with the Frankly, this sort of a large dismantling of

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Speaker 3: something called the consumer financial the CFPB, and so investors

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Speaker 3: have to be a little bit more.

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Speaker 1: Aware.

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Speaker 3: There's more risk in the system, big risk, and there's

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Speaker 3: also I would say the US dollar is under pressure.

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Speaker 3: It's down ten percent this year so far. And this

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Speaker 3: is in the environment where the stock market has been

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Speaker 3: quite resilient. You know, we're almost at near all time highs,

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Speaker 3: and so that investors have to say, is there more

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Speaker 3: downside rest than upside potential.

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Speaker 5: Another big area of change within the second Trump administration

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Speaker 5: has been immigration. How is that impacting effectively shutting down

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Speaker 5: the southern border, How does that impact the US labor market?

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Speaker 4: Do you think?

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Speaker 2: So?

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Speaker 3: It's interesting again in our book, this economic consequences of

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Speaker 3: the second Trump administration a preliminary assessment. We have a

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Speaker 3: really interesting chapter or in this question and overall the

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Speaker 3: forecast is that it will cut growth by about one

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Speaker 3: point seven to one and a half percent, and in

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Speaker 3: terms of the labor market itself, interestingly, it's going to

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Speaker 3: hurt rural America a lot. Now, rural America will also

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Speaker 3: be hurt by medicaid cuts because believe it, medicaid is

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Speaker 3: more used raw America than an urban America. And also

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Speaker 3: the tariffs, so there's like a triple threat to rural America,

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Speaker 3: which again politically it's an interesting conundrum for this White

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Speaker 3: House what to do. But on immigration, I would say

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Speaker 3: it's a downward pressure on the economy these policies, in

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Speaker 3: addition to the downward pressure from tariffs.

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Speaker 2: Gary, I want to get this in. I think it's

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Speaker 2: too important. And this goes to your colleague, the Nobel laureate,

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Speaker 2: Simon Johnson and.

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Speaker 1: The wonderful friend in college in.

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Speaker 2: The heart of the world blowing up for me personally,

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Speaker 2: and there was Andrew Ross Sorkin's wonderful book, and any others,

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Speaker 2: rogy rajam Out at booth. That's a Chicago. That's a

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Speaker 2: school gary out in Chicago.

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Speaker 4: You may not be familiar with that.

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Speaker 2: But Simon Johnson's monograph Thirteen Bankers was the definitive book

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Speaker 2: to described the moment where we lost control in five six,

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Speaker 2: where the SEC opened the flood gates to certain transactions

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Speaker 2: and leverage. Are we at a risk now where we

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Speaker 2: could repeat what Professor Johnson wrote about chapter four of

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Speaker 2: Thirteen Bankers. This is the piece of paper that open

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Speaker 2: the risk gate floodgates? Can we do that again?

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Speaker 3: Look, I think we're human Tom and humankind we eb

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Speaker 3: and flow on risk. The financial system written large.

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Speaker 1: Is in good shape. But will it.

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Speaker 3: Tend towards greater borrowing against risk assets? And that's when

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Speaker 3: you have challenges. And I think we have a US

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Speaker 3: dollar that people have some question about. You have inflation

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Speaker 3: moving up, you have greater leverage, and you have a

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Speaker 3: tremendous amount of uncertainty policy and geopolitical uncertainty. And those

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Speaker 3: are times you can see, you know, I'll call them

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Speaker 3: spills on Aisle five. And you know financial spill hills

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Speaker 3: on all five hurt millions of Americans.

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Speaker 1: When you lose your jobs or your mortgage rates go