EP08 | Beyond The Brink | Gensler BONUS clips| 4/24/23

The transcription is a discussion on the SEC's approach to cryptocurrency regulation. The host and a guest criticize the SEC for targeting regulated exchanges like Coinbase instead of offshore deregulated exchanges like Binance. They also question the efficiency of the SEC's proposed rule on equity market structure, arguing that it prevents brokers from sending retail orders to wholesalers offering better prices. Additionally, they argue that the SEC risks fixing what isn't broken by regulating private funds that have shown impressive returns. The guest accuses the SEC of trying to slow down the growth of the cryptocurrency industry and failing to compete with the so-called "dark markets." The SEC chairman defends the agency's actions, citing jurisdictional challenges with offshore exchanges and the need for a level playing field. You're listening to the Vida Broadcast Network, discussions that matter. Thank you for listening. Beyond the Brink is partnered with Swan Bitcoin. Choose Swan Bitcoin because it's easy and inexpensive, and the best form of financial protection if you're hit with a disaster. It's perfect for both new and experienced Bitcoiners. Set up a Bitcoin savings plan and never miss out on the dips. Get a free book, Embedding Bitcoin, the technology behind the first truly scarce and decentralized money, and $10 of Bitcoin when you use our affiliate link, vidabroadcastnetwork.com forward slash beyond. That's vidabroadcastnetwork.com forward slash beyond. The shows on the Vida Broadcast Network are those of the host, guest, and callers only, and do not necessarily reflect those of the staff, management, or advertisers of Vida Media or the Vida Broadcast Network. Welcome back to Beyond the Brink. This is a bonus video regarding the coverage that we're doing on the SEC. So we've got a couple of clips that we weren't able to play on the original video, so here we are. We're going to pick up with Representative Emmer, I believe. Yeah, yes, and he kind of ripped him a new one, called him an incompetent cap on the beat. I think, yeah, he's hot, too. So let's see. Let me share my screen. Chair Gensler, I have a lot of questions and a limited amount of time, so if you could keep your answers to either a yes or a no, that will allow us to get through as many as possible, sir. From your perspective, is it more difficult now for the digital asset industry to access financial products and services in the United States than it was, say, two years ago? Sir, I've lost one of those businesses. Come on. They came into compliance, I think. I'm reclaiming my time. The answer, sir, is yes. Do you think you and the SEC have had a role to play in that? I think we have a role to protect the American investor and the capital markets. Reclaiming my time, sir. You have played an obvious role in that. During your tenure at the SEC, how many rules has the SEC finalized that actually accommodate the existing regulatory framework and are specifically to the digital asset industry so the crypto market can come into compliance? It's our rule books that are on the books for years, so we have not finalized any new rule specifically with regard to crypto. We've proposed some things in best execution. We have also... Sir, reclaiming my time, the answer is zero. And how many enforcement actions has the SEC levied against digital asset companies during your tenure, sir? I think it's probably 40 or 50. The answer, sir, is about 55. My understanding is that the biggest crypto failure in history is probably FTX at $9 billion. Were you the chairman of the SEC when FTX collapsed? Yes. And how many times did you meet with FTX prior to their collapse? I think my public record shows two. You met with FTX at least twice. That's right. And arguably, the second biggest crypto failure in history was Terraluna. Who was the chairman of the SEC when Terraluna collapsed, sir? We had brought... You were, sir, reclaiming my time. You were. There are five members on the commission. Do you believe your speeches and interviews are to serve as the official position of the SEC? I can only speak for myself when I'm speaking... Again, sir, in a statement on the SEC website, you are quoted saying, the Kraken staking-as-a-service enforcement action should make clear to the marketplace that staking-as-a-service providers must register. But again, you haven't provided any rules for how that can be done. I must remind you, your public statements are not regulations. It's not responsible to expect the American people to assume your statements are a substitute for rules. Do you agree with this statement regarding the digital asset industry? The SEC needs additional congressional authorities to prevent transactions, products, and platforms from falling between the regulatory cracks. I think that it's a largely noncompliant field. Sir, again, I asked you to comply with my questions. It needs more money. I'm asking you if you agree with that quote, and I'm going to tell you, I'm quoting you from an August 3rd, 2021 article where you, and I believe you told Congressman Hill earlier, that you need congressional authority to regulate stablecoins, and stablecoins happen to be a significant percentage of the crypto market. So the question is, when were you telling the truth to Mr. Hill or to me? You've got to start answering these questions in a more transparent manner, sir. Does it concern you, by the way, that your approach to the digital asset industry is actually driving this industry out of the United States? We're trying to drive it to kaboom. And if they're not complying with the laws, then they shouldn't be offering their products. Reclaiming my time. Madam Chair, I would like to enter into the record this Wall Street Journal article from April 14th, 2023, detailing China's ploy to open its banking system to crypto firms in an effort to seize an opportunity created by our hostile regulatory environment, which, Mr. Chair, you're a big part of. Without objection. Look, Chair Gensler, FTX was domiciled abroad and so is Binance, yet American consumers still had access to both. You can't really think that pushing this industry abroad is going to protect American consumers when it hasn't several times in the past on your watch. You say the crypto market is rife with noncompliance. However, existing SEC rules make no sense for blockchain-based companies and following them would actually kill these businesses. Your regulatory style lacks flexibility and nuance, and as a result, you've been an incompetent cop on the beat, doing nothing to protect everyday Americans and pushing American firms into the hands of the CCP. Your intention to work against SEC mission and put American investors in harm's way has been made very apparent, sir. It's been a year and a half since you've appeared before this committee. You need to answer to Congress about the issues that you've had with the SEC staff union, the work environment you've cultivated at the SEC that's led to hemorrhaging of senior staff, the intellectual inconsistency of your regulatory treatment towards Bitcoin spot ETFs and your politicization of capital formation opportunities, your treatment of certain specs, and that's just to name a few. Thank you. I yield. Now, had we played this in one and a half speed, you would have kept hearing, I reclaim my time. I reclaim my time. It was hysterical. I mean, hearing it in regular time was also very good. I tell you, he reminds me of, for some reason, he reminds me of Chris Parley. Yeah, a little bit. Reenacting this, but he mentions that article detailing China's ploy, and I wasn't able to find that original article that he submitted, but I did find a couple articles, and I'll link one in the description box, and also there's a full transcript of that exchange that I'll also link up for people. I mean, he was making some real solid points, and he seems a little bit pissed off. I think to make it easier for people to find the reference to the China state affiliated banks, that's in Hong Kong. Yeah. That's where they were doing that. Okay. Okay. Yeah, anyway. Another thing, creating job security by increasing regulation. Why this is all happening is that these agencies do not know how to deal with cryptocurrencies, and that by their own design, it is to keep all of these regulators out of this. And it's not for nefarious purposes. We do need some clear regulations for cryptocurrencies that would be considered securities, but when you're looking at something like Bitcoin, Bitcoin was designed so that we don't have this unnecessary meddling in the creation of fractionated reserve currencies and all of these kinds of things, fractionated banking that we are experiencing, and why our dollar is now worth 99% less than it was when the dollar first was off of the gold standard. Yeah. It doesn't need these agencies. It's self-regulated by thousands and thousands of validator nodes that have normal people's machines running these validator nodes. If they're not all agreeing with each other, you're not going to have consensus, and so then the blockchain won't be able to run. And it's been running seamlessly without problems since its inception. Nice. Yeah, they definitely want to stifle any… Yes, it's startling. And they're trying at every turn to stop it, and, you know, it's taken a long time. I've been studying on this for several years now, and it's a lot of information, and there's a lot of responsibility if you're going to hold crypto. You need to… Yes. But, you know, I mean, when I first journeyed into, and this is off the topic slightly, but I just want to say, when I first journeyed into this whole space and I started learning about Bitcoin, Bitcoin, when you learn about Bitcoin, it forces you and inspires you to learn about money and the history of money and understanding things at a deeper level where, you know, before we're just kind of, you know, we used… We just never… I never really thought about where money came from and how it was created and who was controlling. And so, you know, I started looking into it. I'm like, my goodness, you know. It leads to many rabbit holes. And I'm just… Yeah, this is incredible what's going on right now. I'm so thankful that I'm paying attention and I'm hoping that I can inspire others too. So, I've got another clip here. Mr. Richie Torres, he is asking why they're targeting the American regulated crypto exchanges instead of the offshore deregulated exchanges. You're trying to protect us, but are you really trying to protect us? Yeah. No, this is a good clip too, I think. Mr. Gensler, there are areas on which we do see eye to eye, like the need to disclose climate change risk or the need to understand the immense implications of the unfolding AI revolution. I'm going to offer, however, observations about three areas about which I've heard concern and then have you respond as you see fit. First on the subject of crypto. The lesson learned from the collapse of FTX is that companies that bear the characteristics of FTX, offshore deregulated over-leveraged companies, have the greatest risk of losing customer funds. In a world of scarce enforcement resources, one would think that the FCC would prioritize enforcement actions against high-risk companies that resemble FTX, offshore deregulated over-leveraged companies. Instead, it appears the FCC has done the opposite. Instead of targeting an offshore deregulated exchange like Binance, you've chosen to target an onshore regulated exchange like Coinbase. Instead of targeting an offshore deregulated stablecoin issuer like Tether, you've chosen to target an onshore regulated stablecoin issuer like Paxos. It seems like your enforcement priorities ignore the lessons learned from the FTX failure. Second on the subject of equity market structure. If a broker sends a retail order to an exchange, the broker would be in compliance with your proposed rule. But if the broker sends the retail order flow to an off-exchange wholesaler, the broker would be out of compliance with your proposed rule, even if the wholesaler is offering a better price than the exchange. And therein lies what seems to be the perversity of the proposed rule. It strikes me as perverse to tell a broker that you cannot send retail order flow to the wholesaler who is offering a better price and, therefore, a better execution. On the third subject of private funds, both New York State and New York City retirement systems are heavily invested in private funds. The New York State Common Retirement Fund invested about $29.5 billion in PE and over the course of 10 years saw an annualized return of 10.12%. The New York State Teachers Retirement System invested $14.7 billion and over the same period saw 16.6% in annualized returns. The New York City Employees Retirement System invested $6.5 billion and over the course of 10 years saw an annualized return of 15%. So when I see returns as high as 16.6%, which seem impressive, there's a question that comes to mind, does the SEC risk fixing what ain't broken? So those are three observations, and you're free to respond. Yeah. If it ain't broke, don't fix it. That's a standard saying, but our government likes to fix things that aren't broken. Yeah. Yeah. You're exactly right. They sure do. That's a lot of money that they've had invested in these private funds too, and I'm just blown away by the lack of information for the people and how they're making all these decisions for their friends, basically, or people at the higher levels that are controlling. There's a reason why they're wanting to change this. I'm not exactly sure why, but I appreciate Mr. Torres calling him out on that, and he's a Democrat, and he's agreeing with the Republicans on this. I mean, I don't know how friendly they are. I don't care because I don't follow that politics of it. I'm just noticing that across the board of this hearing, there were quite a few from both parties raising significant alarm to what Gary Gensler's SEC is doing. Right. And I'm happy to see that, but we'll see what ends up happening. So let's see. When it comes down to cryptocurrency, there isn't a left and a right. There are many people on the left side who understand cryptocurrency and what it is about. Yep, exactly. You're free to respond. Sorry, I didn't mean to cut you off. No, it's okay. Yeah, no, you're right. This is not a left-right thing. It is not, no. This is about our money and our survival, man. So you've got all kinds of people that are curious and supporting of cryptocurrency. Let's see what Gary says. I thank you, and let me try to do them in kind. In terms of crypto, you're right that U.S. investors are accessing the crypto markets, both onshore companies and offshore. Our jurisdictional reach is to both if they're U.S. investors that are participating in that. But let's be clear, you have the authority to take enforcement action against offshore deregulated exchanges? We do. It takes longer to build the investigative files. It takes longer sometimes in cooperation with offshore enforcement authorities to pursue that. And it is, frankly, more challenging to actually get subpoenas complied. I just want to say it sounds like, you know, a policeman that's easier to sit at the end of the road by a bar to catch people than it is to actually go out and catch people committing, like, crimes, you know? It's like a speed trap. It's much easier to surveil Americans than it is, you know, to do your real enforcement work. This is not to chastise people, but we are here because we've had generations of complacency, and we're now at a point to where we're at the brink, okay? We're at a brink. And this is why all of this is coming to the attention of everybody now. And now it's crunch time. Oh, my gosh, we've got to do something about this. People have been clamoring about this stuff for years. And who knows, Bitcoin, cryptocurrency may not have even come about if we didn't have these problems to start with years ago. I agree. So anyway, what do we have up next? It takes longer. Good answer. In terms of your second area about the efficiency in the capital markets, one area is these individual investors and individual investors placing, as you described, these market orders. And what we did was put out a proposal and said, if that proposal is getting at least the middle of the market, at least mid part or better, it's fine. But if these individual small dollar orders were not doing that, either they're sent to a regulated exchange or put it into competition. But we're going to get feedback on it. And it's one of the four rules we put out. It might be the one that I think we've gotten 5,000 plus comments on already. I guess maybe I'm missing something because you hold the exchange as the gold standard of competition. But if the wholesaler is offering price improvement relative to the exchange, like I'm failing to see something. So one of the things is... Like if the wholesaler were offering a worse price, then I would consider that a failure of competition and I would see the reason for your rule. But if it's offering a better price, are we fixing what ain't broken? So we don't have a level playing field right now between the dark markets that are probably a third to a half of the market on any given day. And what you denounce is the dark markets are outperforming what you consider the gold standard. Well, this again makes me think you're trying to slow down. You can't stop what's coming. It's already happening. You're calling it the dark market, even calling it the dark market, because they are not at a level where they can compete with it. So they need to stop it and they need to call it something bad. This guy's problem. I love it. He's got a few minutes, another 20 seconds left. That's where I'm confused. So I'm saying that the dark markets actually have different rules of the road. They don't have the same minimum income. So we're trying to harmonize that. On your last note. The gentleman's time has expired. Yeah. He ran out of time to answer the last question. But I found that, I mean, I don't know. I don't know everything. I'm by no means an expert in any of this stuff. And so, you know, if I misspeak on something, I apologize. But I just put together things that I come across. And I just see this as yet another way of them. They're telling you what they're doing. They're labeling things. You label something a dark market, then anybody that hasn't followed this stuff, they're going to be like, oh, crypto's bad and they got the dark markets. We're trying to protect you guys. And, you know, and they just can't compete with them. And, you know, he's wanting a level playing ground because they're not ready yet. And quite frankly, shame on you guys for not being ready because this stuff's been in the works for a really long time. Oh, they've known it. It's not that they're not ready. Yeah. They just, well, I think with innovation, if you think about, this is what I started speculating. So you can't have all of this stuff unless you have, you know, work. When I'm talking about innovation and with the technology and all of that stuff, you have to have super smart people that know how to build things and know how to code and know how to do all these things. And in the past with industry, I think they were able to control these people. They'd pick the few winners and losers or whatever. They'd pick that out. They'd pick the winners. They'd pull them under their umbrella, right? And they would make them, they're like a, quote, made man or whatever. Like you're going to be the face of this. They're going to pick somebody to be the face of something. And then they got all the worker bees doing what they do, but they're able to control them. With the crypto industry, I'm thinking these guys, these guys, men and women that are creating this stuff and they're working on it, they're all about being open source, right? Sewage technology, I mean, Bitcoin, open source. You can see, you can't stop it. And why on earth would anybody who's super duper intelligent and has something that can help humanity, no matter where you're at in this digital asset space, why the hell would they want to go under the umbrella of the government and be beholden to them and be told what they will and will not do when they know that they can create something? And guess what? My friend Joe and my friend Sarah and whoever, they know how to do this stuff. And if we band our resources together and our thinking caps together and I build this and you build that and, hey, we can have a bridge and we can join together, that's what's happening. And they can stop it. And so I don't know. That's just what I see with this whole thing. It's incredible. Let's see. The next clip that many may not have seen is by, I think it's Mr. Stile. Is that how you say it? Yes. Chairman Gensler, the 2013 CFTC Inspector General Report raised concerns about your use of personal e-mail to perform official CFTC business. Have you used a personal e-mail address to conduct any SEC business? No, and if I ever – there are some people that occasionally over the course of time inadvertently send me something and then I just forward it to the SEC. So you've not used a personal e-mail address while at the SEC. Have you used multiple e-mail addresses at the SEC to conduct SEC business? I have two SEC e-mails. They're both on the website, both stored and retained. Thank you very much. Do any members of your senior team or subject matter experts have digital wallets or own digital assets? I don't believe under our ethics role they do. Do you own digital assets or have a digital wallet? I don't own any crypto assets. All of my securities holdings are actually digital because they're held by a broker-dealer and they're digital there. Have you ever owned bitcoin or another digital asset? No. And so maybe here, I'm guessing most folks on your senior staff, I'm guessing you included have bought or sold stocks, but none of them have owned or none of them currently own crypto assets but are in the process of making rules and regulations on crypto assets. That be a fair assumption? I couldn't speak to that. I actually at MIT taught a course called Blockchain and Money. I taught multiple courses called Crypto Finance and other courses as well. But you didn't own any crypto? But he didn't buy any crypto. You taught the course, but you weren't a user in the product. Come on. Come on, man. I did not own crypto assets. They're a highly speculative asset. I'm not asking for your view on it. I'm just saying you're in the business now of making rules and regulations regarding digital assets, but you've taught a class on it. You've never personally owned a digital asset, any crypto, including Bitcoin. The only digital assets I have is my bank account and my brokerage accounts, but no crypto. Very good. Thank you. He says have, not had. He's kind of glanced over that one. I don't know of anybody at MIT that do not have some Bitcoin. I don't know that personally. It's just what I've heard from some very famous people who go to MIT. I mean, he taught about this. I mean, he would have to be, I don't know. Melissa, this is like economics professors that teach about Keynesian economics and how good it is to work on a credit-based system, and this is where we're at. So it's quite possible that he taught about blockchain technologies and had nothing to do with it. That's pure academic right there. This is an academic who does not apply themselves in the real economy, and there are many academics like that, unfortunately. I would say, though, that, I mean, you have to learn it well enough to teach it. Of course. How could you not? You have to understand the relativity of that in the real economy, though. Yeah, true. I'll tell you, there are people that teach real estate that don't. They'll teach the real estate law, meets and bounds and things like that that have nothing, nothing to do with the real estate market. It goes on in every sector of the economy. Yeah, they talk a good talk, but they don't walk the walk, really. That's right. Well, this next clip is a shorty, a goody but a shorty, shorty but a goody. Mr. Davidson has some questions for Gary. Let's hear what he has to say. In advance of today's hearing, Did you coordinate acceptable responses with Senator Elizabeth Warren? No, I'm speaking on my behalf. Did you coordinate with Democratic staff? And I ask because it happened before, and I want to be clear whether you operate of your own accord or whether there is some sort of coordinated approach to the damage that you're inflicting on America's capital markets. Liz, let's go right into this next clip here while I've got the screen share going. All right, well, I have a few quick questions where a yes or no answer will suffice. Chairman Gensler, part of the SEC's mission is to protect investors. Does the SEC review pre-IPO documents? What? Pre-IPO documents, you're supposed to, if you're going to take a company public, the staff of the SEC does review those to see that they're in compliance. Correct. Is Coinbase a publicly traded company? I'm sorry? Coinbase, is Coinbase publicly traded? Yes. All right, so the SEC allowed pension funds and retail investors to invest in a company, Coinbase, that you apparently, from prior remarks, believe was engaging in illegal activity. All of their activities were laid out in their public filings in the S-1 prior to the IPO. You did say that you believe Coinbase is selling unregistered securities, correct? Again, I'm not going to speak to any one. No, but you said that they're selling unregistered securities. This is your call to comment. I think with all respect, I'm glad you're finding that because I'm trying to be very careful. He's been trying to be very careful, and he looks forward to you finding that. The other thing, don't you notice how they only got five minutes to ask their questions or whatever, and he does a really good job of looking dumb and delaying because that just takes up time, right, every time you're quiet? We'll help refresh your memory. In the Kim Kardashian settlement, the SEC stated that Ethereum Max is a security. She reached a settlement for promoting an unregistered security. The unregistered security is Ethereum Max. Have you charged the issuers of Ethereum Max for offering an unregistered security? We reached a settlement with a celebrity, Ms. Kardashian. So we built Ms. Kardashian. Have you said that Ethereum Max is an unregistered security? That's what Wells notices are all about. Well, and this is another example of problem, reaction, solution. So I'm pretty sure she probably was already in it. This is an expected thing that they've done, and they're still selling Ethereum Max. So, you know, he got $1.26 million settlement. It's ridiculous. People that offer it, we did in that settlement. Yes, sir. Okay. It's still trading. Yeah. What about Ethereum? Is Ethereum now a security? I heard your exchange. They've been in place since 2015. You say in your statements that there's clarity in the market and the rules are clear. Just come on in. Come on in. You can't even answer the question. You say XRP is a security? We're in court and active discussions and litigation on that. You're in litigation because you do say it's a security. Look at the smirk on his face. I know. Let's move on a little bit. You say that no qualified custodian banks would effectively be unable to provide crypto asset-related custody as a result of punitive capital impact under accounting provisions in staff accounting bulletin 121. Do you agree that the bulletin should be amended? I think that the staff addressed an accounting issue and appropriately saw that crypto assets held in custody today are not segregated or not bankruptcy remote in bankruptcy and should be appropriately put on public company financials. I wish I had time to go into the ESG rule and everything else, but Chairman Gensler, your record of failures to protect investors and abuses of power make it clear that we need to restructure the Securities and Exchange Commission. The failures are many, but let me cite some of the abuses. You have a rule within two proposals a month. You inappropriately provide inappropriately short comment periods. You have unworkable and unlawful ESG disclosure mandates on the market. You have essentially a Hotel California rule for crypto where you can check in anytime you like, but you can never leave. You have endless discovery with no resolution and no clarity for the captives in the market. You have unworkable proposals for overhauling equity market structure, a de facto ban on crypto through proposed custody rule. You have high staff turnover, unhappy people leaving your office, and unhappy companies and capital leaving our country. To correct a long series of abuses, I'm introducing legislation that removes the Chairman of the Securities and Exchange Commission and replaces the role with an executive director that reports to the board where all authority would reside. Former chairs of the SEC will be ineligible under my proposed bill. And this isn't just my take. It resonates across the political spectrum. The American people want democratic access to capital, retail investor participation. You can't just exclude retail investors from markets and claim it's for their own good. Our markets need to function and flourish, and I yield back. So, you know, he's asking, is Ethereum a security? And this is going to be really blurry, but I just want people to hear what he said. Ethereum, when it was first promoted in 2014, I believe, passed this test. And the word passed means that you are a security. Just a little vocabulary thing. You want to fail the Howey test, by the way. Like, if you are a venture capitalist and don't want to be regulated, you want to fail this test. But to pass the Howey test, Ethereum in 2014 exchanged Bitcoin for ETH. It was an investment in a common enterprise at that point in time, a 20 or 21-year-old Vitalik Buterin running an Ethereum foundation out of Switzerland. It was one group. An expectation of profits. They had no functioning network. It was just an idea. This is when Ethereum was a proof-of-work model. Right now it's proof-of-stake, and it is less decentralized than it ever was now. But we all know Ethereum really is a security. It's probably going to pass as a commodity, but not because of the way it's structured. It's just because of politics. That's my opinion. Yeah. When it takes 32 ETH to go ahead and become a validator node, that means that only a select group of people can afford to be in that, whereas Bitcoin, it is open to all. You can run a validator node on a little raspberry pie in your home. Right? Yeah. And it doesn't cost anything. What? It doesn't cost anything? It doesn't cost anything to run a validator node in your home, assuming that you would have some Bitcoin that you would run on your own node. But having a node available so that it's in close proximity to somebody else who is doing a trade and want to run it through the closest network, the closest node, so that you start getting validation, you know, the consensus. You need to have so many, what, six validated nodes that are in consensus with the trade before it is actually recorded onto the blockchain. Okay. So I believe it's six. But to be a validator node with Ethereum, it takes 32 ETH. I mean, ETH is, what, about $1,800 today? I think so. Yeah. Right. So it's going to take thousands and thousands of dollars just to be able to play. That takes out many, many, many, many people. That would be more than a whole coiner, if you will. And so people who are trying to become a whole coiner, like own one Bitcoin, which is, what, about $28,000, it's going to take you quite a bit more ETH just to be able to validate a node. Much more than a whole coin. Much more than a whole coiner. So I have a couple of more clips that we can sneak into this bonus episode. There's two things that we had skipped over earlier that I was bummed out about. And one is this Mr. Himes clip. And this covers his concerns regarding the private versus public market. And he expresses how the private is overtaking the public market. So I thought that that was a good one to share. And then the other one has to do with the real estate. And I really wanted to show that. And so if we have time, I'll show that one as well. Let's see here. I've long been concerned by the fact that an awful lot of our capital markets are migrating to private markets. You mentioned it in your testimony. You point out that the amount of liquidity in the private markets now exceed actually the banking system in size. If you look at public versus private market offerings since 2009, registered offerings are more or less flat since 2010 anyway, and exempt offerings are really skyrocketing. The challenge there of course is that individual retail investors by and large can't invest in private offerings. I worry that profitability and good deals will migrate to those private offerings that accredited investors and institutional investors, that's a term of art for people with substantial amounts of money, can invest in. And retail investors will be left with an increasingly small set of opportunities to invest in the American capital markets. So with my two minutes remaining, Mr. Chair, I think it's fair to consider the possibility that the regulatory structure, which I have long supported around public offerings, creates some arbitrage for issuers versus the exempt market. So I just want to give you two minutes to reflect both on the proposals that you've made with respect to market structure, but also overall, big picture, are there things that we can be doing along the lines of the JOBS Act or anything else that would hopefully reduce some of this arbitrage between the public and private equity markets? Let me start by, I think that the American economy is benefited both by vibrant, robust public markets and private capital markets. My dad never had to tap the private capital markets of like today, but he ran a small business with 30 or 40 employees and he didn't tap the public markets. I was at Goldman Sachs for many years before it was a public company and I was a big company that tapped only private markets. So I think both have a role to play. In terms of our regulatory agenda, what we're trying to bring is greater efficiency and competition in the asset management of private capital, this $20, $25 trillion of assets under management by hedge funds and private equity and the like, and through greater transparency of their fees, their performance, and their side letters where they might be having different deals. And this is really going to help the retirees in all of your states because most of your states are invested in private equity and in hedge funds as the limited partners. It helps the state treasurers, it helps the endowments, it helps the people behind that. If we can bring greater competition in a field that probably has just 2%, it would be half a trillion dollars a year in revenues to the asset managers. This is what I meant earlier. It's important that our capital markets work for investors and issuers, not the middle. I just get concerned when I hear private versus public and I don't like the two working together. Public-private partnerships is just another euphemism for fascism. And every time that that's been done, you can see that all around the world where you've had public-private partnerships and then they become nationalized businesses. The private is then gone. They become public businesses, or I should say the business of the government, and I don't know of any government that knows how to run a business. Well, and the thing is is that this is what they're trying to do with this crypto space, the digital space. Yes, this is very threatening to the ruler class. Well, if you have – so, I mean, it's a tricky situation, the whole public-private partnership thing. The problem is, I mean, I think it's good you have the – you have private industry doing certain things and they're looking out for number one. And so then you think, okay, so you've got to have some kind of institution or governmental agency or whatever that is supposed to stand for all the people to work in concert with these private entities or whatever. The problem is they end up controlling these private entities and they operate under the guise of being private, but they're really a governmental extension or extension of the government. And then they take out – they combine forces. They pretend like they have all these laws and rules that you can't combine your forces and all that kind of stuff so you can't get too strong, but yet they do it secretly, covertly to where they knock out all the little guys. And, I mean, it's just frustrating how they do this stuff over and over and over again and the average person is just living their life and they're not really paying attention until it's too late. Well, it's mob rule. We have mob influence. I don't care what you want to call it. Mob is probably the street term. Cartel, whatever you want to call it. You know, it's that mentality where you just don't have enough and you've got to have more. And money, the control of money is controlled, what is it, by about the top 1% has, what, 98% of control over the entire world. I believe that's what we did on a previous show. So they want it all. They do want it all. What we have is just a meager existence of what they think we can have and now they want to pull it back. There's just too many of us eating meat and doing all these other things that they just don't want us to do. So how much time do we have left here? We should probably get this wrapping up here. Yeah, we don't have much time. How much time is that real estate one? Well, it's a Mr. Casting clip and it's under three minutes. I'm not sure if it's one that I played already or not, so that could be a problem. But I suppose I could try to see if it's what I'm looking for. And then if it's not, then we just don't play it. Yes, you're familiar with the term information asymmetry? Yes, I am very much so. There was a report from Nature Climate Change recently that said that real estate in the United States is estimated to be overvalued by $121 to $237 billion due to unpriced flood risk driven by climate change, with low-income households facing the greatest risk of losing home equity, as was the case in the 2007-2008 housing crisis. Can you speak to how your proposed rule would address that informational asymmetry between folks who are aware that they're overpriced and folks who are not? I mentioned it about Chair Rayburn and President Roosevelt. They were trying to address information asymmetries that the public didn't have full, fair, and truthful disclosures from companies accurately describing their risk. That's what we're doing here in this proposed climate risk, so that the investing public better understands the risk when they buy or sell a security. Okay. When I'm done here, I'm going to run to the science committee, so you'll forgive me if I dump into the science side here a little bit. There was an article in the Washington Post, I think it was just last week actually, that talked about the effect of climate change in coastal communities in the U.S., found that recent hurricanes Michael and Ian were both made much worse by warming oceans. Federal tide gauges, this number was shocking. In Louisiana, the sea level is eight inches higher than it was in 2006 when Hurricane Katrina hit. Just since 2006, it's eight inches higher. NOAA has said that they expect two feet of additional sea level rise on the Gulf Coast by 2050, so if you buy a home in Pensacola today, it'll be underwater before the mortgage is paid off. I could go on. There's data from First Street that there's more than 400,000 properties, more than a third in West Virginia, that are at risk of severe flooding. Is it logical to assume that purely profit-driven companies are going to seek to offload that risk onto less sophisticated players? Of course they will. Yeah. Public companies, which is the only thing they're going to do. Telling you what they're going to do. Manage their risk, and this has become an important risk, and it's a risk that investors want to understand how they're managing it, whether, as you say, they're defraying it or offloading it on others, or they're retaining it inside. It's about disclosures of how they're managing that risk like they manage other risks. Okay. What do you think? This is stuff I know a lot about. This is why I wanted to play that clip so bad. What this says to me, if you have the financial capital and you're not able to be insured and you have enough down payment, if you will, or you can self-finance yourself, you're more than welcome to have a property right along the shoreline with all of the intended risks that might come along with it. Even if you're not at rising sea levels, there are times when we have huge tidal flows, and there's a lot of things involved with why that might happen. I happen to live on the West Coast, and I've seen this happen in a little town called Pacifica and a beautiful little restaurant called Rockaway. It's right there on Rockaway Beach. And every once in a while, you would see waves come right up to the breakwater. That was kind of scary, especially if you're in the restaurant. Okay. That's just something that's part of the risk. Your average everyday purchaser is not going to be able to get the insurance. If the insurance is not available, they're not going to be able to get the loan, so I don't understand why they're at risk. The other people who have the financial capital to be at risk, they understand that risk and they're willing to take it. If I can give you a case in point, Eric Bolling, he used to be with Fox Business. He had lost his home during the floods that happened after the hurricane that hit New York. I can't remember the name of that hurricane. And there was tremendous tidal flows that came into New York, and it took out the New Jersey shoreline, if I remember correctly. It took his home out, and his home was worth about $250,000. And he said on air, he goes, that's my risk. He goes, I'll probably have to rebuild that. If I wish to rebuild it, it will be on my cost. Now, he knew that, and he had the ability to repay that. Living in a wildfire area, if you don't have – if you're not able to get insured, let's say you already own a home, for instance, maybe you own the home free and clear, and you're now in a wildlife – a wildfire area, and you're no longer able to get insurance, you are self-insuring yourself. If you have a wildfire come through, you're not going to get covered. You just understand that. So there are inherent risks that happen in life. And I think way back when, before we had all of these risk models in place, and people came up with their own homesteads, there were risks. Landslides, torrential rains, floods, you name it. Swollen rivers. There are natural disasters. What this is, it's about capital markets that are so worried about losing their share. Maybe they shouldn't be doing loans in them. Yeah, that's a good point. Don't loan. If somebody wishes to go and build someplace, then let them self-fund. It's a free country still. Yeah, and anybody that was in those areas that have the potential for their property values to go down. I mean, the way I was looking at it, with the narrative over climate change and, you know, believe it, don't believe it, whatever. Whether you believe it's an organic, natural occurrence, or whether you believe they're intentionally manipulating the climate and weather through different things that they're doing and pretending that they don't do. They're projecting these types of disasters or at least putting it into the minds of folks that this could possibly happen. And so, you know, if you're starting to hear that and you believe that that's something that's real, you're not even going to look in that. You're not going to risk it. Even if you can afford the insurance, unless you really have enough money to, you know, compensate yourself for any losses that you have, you're probably going to stay away from those types of places anyway. Well, you know, think about New Orleans. I mean, how many times has that had to be rebuilt? And they're below sea level. That, to me, is kind of like a no-brainer. Why are you moving there? Maybe you're moving there because of work or whatever the case is. Then you understand the risks. But if it's by choice because you think it's such a beautiful area, then it is your choice. But do you understand you're moving to an area that is inherently below sea level? Yeah. So you're having the seas not come up onto the shoreline because you've got a huge levee stopping it. They have that in the Bay Area, too, in San Francisco. Just another word about real estate that people need to understand is it's a highly disclosed industry. So whether you're working with traditional lending or even portfolio lending, which is more private lending, there are disclosures up the kazoo. Credit reports, the real estate loan application in and of itself, the 1003, is quite intensive, asks for a lot of information, and then you've got to bring in your financial records. So you're pretty much getting a physical, if you will, when you're putting in a loan application. They're looking at your ability to repay and what your reserves are. You have to have more reserves as a purchaser than maybe the bank has to have on hand. So this is a bunch of gobbledygook. What they're trying to do is gobbledygook and put out a message to people about climate change. And, yeah, the climate is changing. It's been changing since, I guess, since the Earth had been inhabited. But the question herein lies, are we causing man-made climate change? And that is the big unknown question. Yeah. Yeah. Well, and either way, if you're able to use it as a tool to push your agenda, I mean, I think it's clear. You're listening to this hearing where he specifically said he's making his decisions based on what those guys want, the ones that are controlling your money. And who's controlling those money? The Black Rocks and Vanguards, right, and Aladdin Software, they're telling you what the agenda is. And you best be playing fair with us, Gary, or you're not going to be in your position anymore. Well, we'll have to do a deep dive on why they might want these coastal areas to not be inhabited or to drive people away from there and maybe more to more of a 15-minute area. Who knows? I don't know. Oh. I don't know. Oh. Well, we sure thank you guys for watching. I'm glad we were able to do a bonus show with all these clips. Yes. We will put the information in the description box below. And we'll see you next time. Adios. We'll see you. Have a great night. Take care. Thanks for watching. Music. You've been listening to the VEDA Broadcast Network. We appreciate our listeners. We understand your time is valuable, and we're thankful that you chose to spend some of that time with us. VEDA Broadcast Network is at the beginning of an exciting journey, one that is shared with you, the listeners. Together, we will grow and learn from each other. Please reach out and let us know what you would like to talk about. You can find us at our website, vedabroadcastnetwork.com, or find us on Twitter, Facebook, and True Social by using our handle, at VEDA Broadcast. That's at VEDA Broadcast. Music. Music.