Transcription
Joining us right now is Jay Clayton, who's the US Attorney for the Southern District of New York. He's also, of course, the former SEC chair. Uh, about a million things to talk to you about. Um, you've been focused on markets for most of your, your life, by the way. You're holding a nice copy there of 1929, so God bless you for that. Um, I'm curious as you're looking at, and you, you just done some crypto, uh, cases and some other things that are taking place. How, how much of your time right now is focused on the markets in this job running the Southern District versus all of the other sort of other crimes in America right now?
>> I, I, you know, percentage a quarter, um, but, but laser-focused on market integrity.
>> Right?
>> That's this, that is, that is where, where this office has traditionally had a big impact. It's where the people who work there want to have a big impact. We've had some recent cases not just in the crypto space, but in the, uh, what I would say is in the securitization space, uh, fraud, right?
>> Um, and people should know we're watching. Um, we're watching in the pre-IPO market, we're watching in the markets where pricing is not as transparent. Um, we're watching an area that I'll just, I'll just say right now that's bothering me. I'm gonna look at it a lot more closely.
>> Small-cap Chinese stocks that are listed, the pump-and-dump activity that I, that I think I...
>> Right.
>> Bad.
>> Where are they listed?
>> Uh, here.
>> On the NASDAQ?
>> Yeah.
>> Yeah.
>> How do you feel about, uh, by the way, in terms of chicanery and fraud?
>> People look at meme coins and, you know, sort of pump-and-dump schemes. There's lots of conversations going on online, uh, where people are talking about pushing something up and down. It's sort of done out in the open and sort of not.
>> I, I look, I think it's done way too much out in the open. You, you know that when I was at the SEC, we focused on coins that were securities and people engaging in the, the type of behavior...
>> Right. That was how you know is happening back then.
>> I wish that I had this book when I was describing what was going on in the ICO market, that initial coin offering market, because that's exactly what was going on.
>> Do you think that's still going on right now, though?
>> I don't think it's going on as much. Um, I don't think it's going on as much. Hopefully not.
>> Right? Um, you know, it's, we can't have markets that retail folks access where what there are forces that are defrauding them on a systematic basis. That's just not, that's just not America. And whether it's a securities or, you know, some other wire fraud or what, but, but systematic fraud against a retail person,
>> That's bad. Um, I don't think we've talked about this, but you could put your SEC hat on, or you could put your new, your new hat on. You know, the president has talked about this idea of getting rid of quarterly earnings calls and results in that form and doing it just twice a year.
>> You have some people who say this is great. Companies should think more long-term. They're spending too much time, too much focus on, on, on, um, on earnings, trying to either hit their numbers or just even just focused on the process around it. And then there's other people, including, by the way, Ken Griffin, who's out there saying more transparency is better. You don't want to take away that kind of transparency.
>> Two, two things that I think I would think Ken would agree on, everybody would agree on: senior management at public companies spends way, way too much time preparing for quarterly earnings, getting ready. If you look at a really well-run private company, like Ken's company, you know, how much does he spend preparing for an analogous, um, event? And how much time do you have to spend if you're, you know, a large-cap public company? It's, it might be 10x.
>> Right?
>> But the information is probably no different. It's just all of the process that we have added on to quarterly reporting. I don't want the senior management team in a 90-day quarter spending 10 days on reporting.
>> So, here's the question, though.
>> Maybe two.
>> But well...
>> Let's, let's free up those.
>> But part of the question becomes then, if you have, uh, reporting only, only twice a year,
>> The argument is that some of the quote unquote professional investors will ultimately either have more access to corporate management, they'll have more access to information, they'll be buying satellite data and other things that that most people can't get access to. And when it comes to either inside information or other types of things that the market won't know it in the same way, they'll be people, the companies will sort of stunt the news.
>> Better. We can't have asymmetric material information. You can't have some market participants knowing, um, you know, how the company's doing between periods and others not. We have plenty of rules to prohibit that. Companies file current reports all the time. They file earnings statements. The, the, re, the real question is, you know, have we gotten into this cycle, um, where one day in time matters so much? You know, if I have a sale on, you know, October 29th versus I have it on, you know, November 2nd, does that make or miss the quarter? And, and, and that kind of mentality. The president's absolutely right that that's not the right kind of mentality.
>> Have you, uh, noticed Beyond Meat?
>> No. 50 cents, uh, a couple of days ago. Closed yesterday at $3.62 and it's indicated $7.
>> Yeah. 669's the...
>> Yeah. 669. Oh, there it is. Uh, it's a bid and an ask, but it's, uh...
>> On news?
>> No. Meme. Yeah. News that it's a meme stock.
>> Yeah.
>> That's basically. I mean, ever since the pandemic, sales have not... I don't know. We've tried it a few times. I think it was, uh, it wasn't for me. It's P-based, PA-based. Uh, just to be clear. No, but this is the kind of thing that...
>> Yeah.
>> It's a Reddit thing, I think.
>> The meme stock craze and the...
>> It's coming back for you. You have something to do.
>> Maybe, maybe we'll take a look at it.
>> But you, you're talking about Chinese penny stocks. That's, that's fun.
>> Well...
>> Your work is never, never done.
>> The work is never done.
>> I'm going to let you...
>> Vigilance.
>> He's here.
>> You... Well, I have a couple questions.
>> He's here. Go for it. Well, let me ask one New York question. We've been talking about the mayoral race here in New York, and I'm curious. I, I don't know if you, in your, your role, are allowed to comment on what you think is, they're not just going to happen, but what the implication of it is for the financial industry and, and, and for industry at large here.
>> Let me, let me tell you, a longtime, you know, New York resident, love the city. I, I wanted this job that I have because of the impact you can have on the quality of life of New Yorkers. Um, we had the height of big city competence with Mayor Bloomberg. Things worked well. Everything worked well. We have been living off the tailwind of the Bloomberg administration now for a long time. My, my big worry is, are we going to continue to have a decline in competence in city government? I think that's what people should be asking themselves. I mean, there are, there are many systems in the city that are not working effectively. One that is, and one that's the most important to me, is the New York Police Department. New York Police Department is not only the best police department in the country, it's the best police department in the world.
>> Right.
>> Whoever the mayor is should make sure that the New York Police Department continues to use technology, continues to use crime prevention, and continues to be...
>> That, that gold star. They do. They do more for this city than any, any institution I can think of.
>> All right. Now, go. Joe wants a question. I want...
>> You. Well, he's here. He is.
>> Okay. So, who deserves to be the subject of a grand jury? Does Comey, from what you know about...
>> I'm, I'm... You can ask, but I'm, I'm not, I'm not going to comment on this.
>> Okay. Do you, are you, does it concern you that this looks like, uh... All right. You did a law fare to me. I'm going to do law.
>> I'm, I'm gonna, I'm gonna, I'm gonna back up. Um...
>> Okay.
>> What do I think about when I go to work? That people have confidence in the Justice Department.
>> Okay.
>> That is, that is, and that's an area where we ought to be focusing. And...
>> So you're concerned, then?
>> I'm concerned over the, over not, I'm not talking about today. I'm concerned over the past period.
>> Of, and I've been on all sides of it. I've been subjected...
>> Uh, investigations, companies that I've been with, I've been defending people against the Justice Department. Yeah. I...
>> We should go to work every day.
>> Yes.
>> Behaving well.
>> Can I ask one question? A number of, a number of the cases that, that Joe's referring to, there were people inside the Justice Department that didn't want to bring those cases or thought that, or said that they didn't think they were appropriate to bring. And then obviously, we as the public read these headlines about how the head of those, you know, the head of those districts gets replaced by somebody who's obviously close to the president, and then all of a sudden the case is being brought. And I think we're all trying to understand how we're supposed to think about that, and whether that either undermines the credibility of the whole thing or not.
>> Look, I, I'm not going to comment on specific cases. That's not, um, appropriate.
>> That's why I was doing it in a sort of general area. I want, I'm going to ask you each one.
>> Let's... No, but let me, let me say something that I think is important, and that is members of the bar, prestigious members of the bar.
>> Mhm.
>> I don't think that they have been, not, I don't think, I don't think that the leaders at the bar have scrutinized the Justice Department enough in the prior administration.
>> Okay.
>> And are you saying you think the Justice Department was weaponized?
>> I'm, what I'm, what I'm saying is, we have very prestigious lawyers who make lots of money and are very smart people, and they stayed silent during, um, the, what the prosecutions of Donald Trump there. You did not hear from them.
>> No.
>> Well, from now on, that's, that's what I, that's what I deal with every, from now on. We're going to start doing it though.
>> That's, and... Oh, yeah. That's great. Yeah. That's, that's... Does that satisfy you?
>> From... No.
>> Well, let me ask you a different one.
>> But, but, but think about that.
>> But that you're just doing what about is...
>> I mean, I, I don't want to put words in your mouth.
>> No, that's what they tell me. I'm doing what about is...
>> Jay? That's what you're saying. The, the Justice Department was weaponized in the...
>> Or, or, but we have the law schools, leaders at the bar, people who know the law. You know, it's, people looked to them as leaders of thought, leaders, and they stayed silent.
>> While what was happening?
>> While, while the cases against a former president of the United States were proceeding apace.
>> So where, where do we wind up with this? Like, do we...
>> We're going to fight. We're going to do what America does. We're going to fight our way through it. We're going to be honest, transparent, and fight our way through it. But, but part of the question then is, should, is if each, if each presidency ends up thinking that they're weaponizing against the previous one...
>> Well, correcting for mistakes.
>> Arguably correcting for mistakes. Or, but look, like, I, I will tell you, I read the news yesterday about the president, I don't know if it's true, seeking $230 million or whatever it is, and maybe he's going to give it to charity or whatnot. My preference, personal preference, would be if he wants to seek, um, you know, an apology or something from the Justice Department, I think that would be fair. I think that asking, asking the money from the taxpayer becomes very, very complicated because then all of a sudden the taxpayer is on the hook and they're saying, what, what's going on here? Like, you understand.
>> But you have your pre-canvas, the American people.
>> Right.
>> The personal preferences are vast.
>> You'd rather it go into solar panels or something, I guess? The 230...
>> Well, the windmills.
>> No, I just think it's very hard. I think it's very hard for the president to...
>> Perpetrating it.
>> I just think it's very hard for the president to negotiate with people appointed for a settlement like that, and so all of a sudden...
>> So you think he can shake down his own Justice Department because he appointed...
>> By default, even if you don't think he can, the perception will be that he can.
>> Right. That's...
>> I get that.
>> And so that just seems like a bad idea.
>> Especially if he's going to keep the money. But...
>> Maybe he'll use it for some of the gold plating in the ballroom.
>> Which you're okay with?
>> That's what he said. No, that's what he said to the ballroom is...
>> You want to talk about the book?
>> Um...
>> Or are you tired of the book?
>> I'm not tired of the book. I love talking about the book.
>> Are you crazy?
>> I love talking about the book. Um, the one thing that I'm curious about as it relates to the book is how much you think that the system has more or less guardrails than what was taking place back then.
>> Uh, much more guardrails, much more transparency.
>> And do you worry at all about something...
>> Markets. Market integrity relies on data and information. I mean, going back to the earlier point we had, like, do you have good data? Do you have good information? Do you know how much leverage is in the market? Do you know, do you know liquidity, whether there's liquidity?
>> One of the big issues is so much of the market has moved into the private market space, and now we're going to do this sort of quasi-private market, public market thing where so much of the private market instruments, without the same kind of disclosures, are now going to be put inside of instruments that'll be made available to public retail.
>> Yeah. There, there's, there's a point that I think is is worth making, and if you look across the crisis that we've had, this, this one...
>> Was the credit, the, the bubble, the effects went deep into the consumer.
>> Right.
>> The consumer took themselves out of the game after the crash, and that's what caused the deep...
>> Same thing in 2008.
>> Right.
>> That the housing crisis went deep to the consumer. What was, what was done in 2020 when we shut down the economy? That was, we made sure the consumer or did not get off the field.
>> Right.
>> Now, did, did we overdo it after that and spend too much? I think, I think the jury has come in, but we kept the cons... Um, when you're looking at where do we stand and trying to look forward and look for risk, that is one of the variables you really need to look at is how much is the consumer exposed...
>> To the activity that you're worried about directly or indirectly.
>> Well, let me throw one last one at you. Uh, everyone talks about AI.
>> Talks about AI bubble financing, all of these data centers. We talked this morning about this Blue Owl transaction with Meta, effectively Meta offloading a huge amount of of the risk to Blue Owl.
>> Interestingly, I think they have four-year lease deals. They guarantee it for 16 years. I don't know whether you think those are going to be good deals in the end or bad deals, and they're all levered.
>> Yeah. What's interesting about those, and Torsten has a has a note out this morning that's very interesting, is that capex expenditure, um, in those areas has continued despite higher rates.
>> Right.
>> And it's not because it's rate-agnostic.
>> Interesting.
>> What, what, what it's financed by is the magnificence. They, the, the financing irrespective of rates. And then, you know, the other private lenders are coming along. It's very interesting as opposed to capex in other areas.