Sound On: Trump Special Counsel, Crypto Crisis

they will also bring some pain. People were pretty you know, in shock by those common Floomberg sound On with Joe Matthew on Bloomberg Radio, there is another Welcome to the fastest hour in politics, with another special council announced by the Department of Justice to investigate Donald Trump, the documents of mar A Lago, the effort to overturn the twenty election.

Will it be different this time? We talked with two experts, Rebecca roy Fee of New York Law School, former District Attorney for New York County and former Watergate prosecutor Nick Ackerman later f t X SBF and the a b C's of the crypto crisis, in a special conversation with Bloomberg's Joe Wisenhal, columnist and host of the Odd Lots podcast. Looking forward to it. I'd call it a Friday news dump, but it happened around lunchtime. Does does that count when

it's at noon? It was to something in the afternoon. Attorney General Merrick Garland, in a hastily scheduled announcement here he is, I'm here today to announce the appointment of a special council in connection with two ongoing criminal investigations that have received significant public attention. Uh huh d J

T Donald J. Trump. Garland determined that it was in the public interest here for yes, another special council to oversee criminal investigations related to Trump deciding whether to bring charges, and,

as he indicated, timing is everything. Listen again, Based on recent developments, including the former president's announcement that he has a candidate for president in the next election and the sitting president stated intention to be a candidate as well, I have concluded that it is in the public interest to appoint a special council. Yeah, so, John or Jack as you will hear him, refer to Smith the new

special Council under the order signed today. Since eighteen he has served as Chief prosecutor for the Special Court in the Hague charged with investigating adjudicating war crimes in Kosovo. He is a former acting U S Attorney. Uh. This

is going to be something. And we start our conversation to get a sense of what this means and what we can expect, having of course gone through the Motor probe already had a special counsel with this same Now former President Rebecca Royfi joins as professor of law at New York Law School. Former assistant District attorney for your county. Rebecca,

it's really great to have you back. I have some really pretty straightforward and simple questions for you to start with, and and to begin with, why announce a special counsel? People watched what happened last time. Uh, and and remember back to ken Starr, they're not used to seeing these

lead to a lot. Why now? First of all, thanks for having me, And yeah, you know, I think that the purpose here is to try to create a separation between the politically appointed Attorney general and this highly sensitive, highly charged investigation into the former president. You raise a good question into well, you know, how effective is that separation actually? Will people really look at this and think this is an independent investigation, and you know, I think

Attorney General Garland has to hope so. And I think there are some set of people who will always assume that any investigation into the former president is politically motivated, as he as already and will no doubt continue to suggest.

But hopefully there are some people who will view this as a sign that this further stage of the investigation is being conducted by somebody who is a career prosecutor and really doesn't have uh course in the race, and in that way can act as a more independent, um and hopefully more legitimate source of this investigation and if if it ends up happening, prosecution to be clear, for some of our listeners probably hearing about this as they're you know, coming out of work or just beginning to

pay attention here, uh, this will this will bring oversight to this Special Council of the two investigations the January six insurrection of the Capitol, including any role that Trump may have played, as well as the documents case, the president's handling a classified documents after he left office. So those are the two cases. Well, does that mean that Merrick Garland will not be connected to them? Will there be a firewall between the Special Counsel and the Attorney General.

I think a firewall is an exaggeration. The Council is really embedded um within the Department of Justice, but there are levels of separation that make it such that this investigation is insulated from direct control by the Attorney General. Okay, got it. Now what do you know about Jack Smith, the investigator you mentioned? We have a serious contender here,

a life a lifetime prosecutor, and experienced prosecutor. But you know, my goodness, this this sounds like deep experience when we're talking about war crimes, and Kosovo not not the typical candidate for such a role. Yeah, I mean, you know, I think it's interesting. I first of all, I think one of his strengths is that people don't know much

about him. He has a kind of anonymity, and that makes it more likely that he will be seen as a you know, kind of a career prosecutor who's just doing his job, rather than somebody who has any political, uh connection ends or investment in the outcome of the case. So I think that's probably why they chose him. As you said, he has a lot of experience, and I think that that's you know, important and both for his you know, projecting his reputation and also for actually doing

his job. And the experience in the international criminal court is important. Of course, he's looked into, you know, war crimes, he's looked into investigate likely investigated heads of state, and so he has some experience with you know, how sensitive these kinds of issues are and can be. He helped to convict the former governor of Virginia, Bob McDonald. He's not a stranger. It's a political corruption, if if I can call it that. But you know, it's interesting, Rebecca.

A lot of people thought she's after the mid terms. Merrick Garland comes out with an indictment following the documents case. Is this what's happening instead of that he made this decision instead of to announce an indictment today to a point a special counsel and create the distances that a fair well, you know, I don't think that he has decided that an indictment is necessarily um the way to go.

I don't think that. I think if you're you know, if you're handing something over to a special counsel, I think it's because there are you seriously think an indictment might be warranted, and you know, I don't imagine that he would have handed this over to Jack Smith thinking to himself, yeah, Jack Smith will wind up this case

and do nothing. So I think it's reasonable to conclude that the Attorney General thinks that there are, um, you know, some serious criminal conduct and potential charges that are warranted. But I doubt that he has reached a conclusion because you know, he's relying on Jack Smith for his judgment in that regard. I wonder does this slow he mentioned,

you know, this will help agents continue their work. Will it slow things down as this architecture is put in place, or does it accelerate the investigations that are already running. You know, that's a great question. I don't really think it will slow things down much. You know, obviously, the as he explained in the press conference, some of the investigators who have been working on this case for a long time will continue on and they can create continuity.

So all that really needs to happen is that, uh, the new special counsel needs to be briefed on everything that's going on. But that really can happen at the same time as they're progressing so my guess is if it slows things down, it's really not by a significant amount. And um, you know it can proceed pretty much on pace. I want to bring people back, uh, not very long to the former Special Counsel Robert Mueller as he was

announcing the results the Mueller Report had finally concluded. Listen, and as that fourth in the report after that investigation, if we had had confidence that the president clearly did not commit a crime, we would have said so. We did, not, however, make a determination as to whether the president did commit a crime that day let down a lot of people who were hoping that this would lead to an indictment

or some sort of criminal charge. He mentioned at that time that because it was outside the scope of his of his authority, but he would not be the one to bring charges. Is that going to happen again? Does this have to go back to the d o J, back to the Attorney General for that determination. No, this is entirely different because now Donald Trump is no longer president.

So what happened there was that the special counsel Special Counsel Mueller had no had no power at least interpreted his role as having no power to indict because you cannot, at least in his interpretation, indict a sitting president. And that's why he didn't come to any conclusion, because he figured, well, you know, people want to know the facts, and the exactly the proper way of holding him responsible is impeachment, and then once he's out of office, a set of

prosecutors can proceed if they want to proceed. But of course things are different right now because even if president, even if the former president is a candidate, he has announced his candidacy in his campaign, he's not the president, and so there is no barrier to indicting him here. And so it's well within the job description of the special counsel to determine that charges are necessary and to bring those charges through a grand jury. So I don't

think we would end up seeing that again. So the talk about the timing of Donald Trump's campaign announcement this week, he was saying, you know, he thinks he's bringing himself some protections potentially by doing this. Legal protections means nothing in this case, right, I mean, it means nothing. You know, it certainly has um political meaning, and it certainly makes the job of the special counsel harder. But in terms of its ultimate effect on whether or you know, on

the decision whether to charge, it doesn't. It doesn't bear on that. We're learning a lot as we as we do this all over again. But do you have a gut check that that this leads to something meaning full and if it does in the throes of a presidential campaign, you know, I, I really don't know. It's hard to

read the tea leaves. I would say that what we can conclude is that Attorney General Garland thinks that there's at least substantial evidence of criminal conduct here and that it's worth an independent person taking a look at that. Two separate cases mean two separate results, or is this all kind of be folded into one massive investigation. My guess is it's it's going to be one investigation, although it is two distinct pieces of that investigation. So how

that proceeds, I'm not entirely sure either. We have a lot to learn yet. I hope you're going to come back and walk us through it. Rebecca. It's very great to have you back, very helpful to hear your insights. Rebecca roy Fee, Professor of law at New York Law School, has been very helpful to us as we've worked our way through a legally challenged existence. Here for Donald Trump, the former assistant d A for New York County, and up next former assistant US Attorney and former Watergate prosecutor

Nick Ackerman. He's been there. Does it go that far again? We'll find out. Coming up on the fastest hour in politics with breaking news on a Friday. This is Bloomberg breaking news now as we learned that Elizabeth Holmes is sentenced to eleven years for Thearo Nos fraud. The headline just crossing the terminal now order to spend more than

eleven years in prison. Of course, this is a pregnant Elizabeth Holmes for fraudulently building her blood testing start up Sarous into a nine billion dollar company that collapsed in scandal. We've been waiting for this all day. The sentence imposed by US District Judge Edward de Villa. This came out of San Jose, California, and a lot closer to the fifteen year term that prosecutors asked than what Holmes lawyers saw that they were looking for either home detention or

eighteen months in prison at most. We are going to go straight now to Bloomberg's June Grosso, the host of Bloomberg Law, who is with us in the clutch, June, It's great to have you with us. A surprised by this number. I am surprised, actually, Joe. I mean, as you say, the prosecution asked for fifteen years. Homes made the ridiculous request for eighteen months home detention, but the U. S.

Probation Office asked for nine years. So it's very close to what the prosecution asked for and more than the probation office asked for. So I think it is. It's a tough sentence, and I think you know sentence. It's not only punishment, but it's deterrence. And the judge is sending a message an example to the world that startup. What happens to a pregnant, thirty eight year old woman

facing a sentence like this? How does law enforcement handle this? Well, First of all, I think the judge, I'm sure I don't know what's happened at this point, but the judge, I'm sure it is going to let her remain on sale until she has her child. And knowing the amount of litigation that that she has been doing in this case, I think that will be years before she actually goes to prison, because she's going to appeal the sentence. There

are other appeals. I mean, she has her team litigated every single thing in this trial that's possible to litigate. She um, she has and you know, it's curious and you can't really a lot of people thought, well, the judge might give her a little time off because she has a toddler at home and she's pregnant again. Other people said it's her choice to get pregnant, and the judge can't really take that into consideration. So there's sort

of a split on that. But I have to tell you that in the letters that that we're sending her, her her how should I say, her better half, her boyfriend, her h sent sent uh, you know, a letter with all kinds of colored pictures of her and him and the baby and and all this, and um, there was to be a little tabloid e. Do you want to be a little tabloidy for me? Okay? So, the the US Probation Office, which there's also a question of how much she's going to pay, the prosecution, asked for eight

hundred thousand. The Probation Office asked for five in fifty thousand, which is supposedly more than she had, but they intimated almost said that she's hiding some assets and that there are family members i e. Her boyfriend who is the heir to a hotel fortune, that are trying they're trying to avoid subjecting those assets to the judgment of the court. So there was a sort of a little bit of a tabloid e element of it here. And then then she came back for lawyers came back and said, are

you saying that she has to marry him? It gets very very uh tabloids. Billy Evans goes as partner from what I'm here. By the way, No, I'll try to remember that myself. Uh. If you're just joining us, we do have breaking news on this Elizabeth Holmes sentence. It is just out and it's quite more severe than a lot of people expected here. Uh when we're talking about this going ahead as as you know, a criminal punishment, June, I just wonder how much of this is an example

to Silicon Valley for instance. You know, there was an idea here that the judge wanted to make an example out of her, even as she said she was devastated by her failings. She said she was here to stand and take responsibility for paraos. It was her life's work. It didn't seem to make a difference. Well, you know, the thing that the judge is thinking about is the hundreds of millions of dollars that she built investors out of.

And yes, it is is deterrence to say to you know, to give her this tough sentence, and this is is really a tough sentence to give her this sentence, and to warn other people who are involved in startup to you know, to not to embellish, to tell the truth as there as they're trying to get investors. I mean, she told all these things. I mean she did some she did some wild things. I mean she on her letter head took letterhead from Walgreens and write aid and

sake things. I mean, really a lot of things were done. And it's easy to look back now and say, oh, she's a nice woman who has a child and another coming, but you have to remember what she did in building up that blood testing startup into this nine billion dollar company that collapsed in scandal. And you know, it's it was unrealistic to think that she was going to get home detention for that, I mean, the judge would not

be sending the right signal. And I think it will be interesting too is to see now remember her former boyfriend, um Sonny Belwani has also been convicted. It will be interesting to see how much the judge gives to him, how it compares to this. Maybe you did give her a little bit of a break because she was Maybe he wanted to give her fifteen years and he gave her less. But you know, I think this was going to be caught up in so many appeals and so

many different kinds. Any kind of motion she can make. She has the money to spend on litigators making those motions. Juhen, the judge asked, and I'll leave you with this A couple of important questions as the sentence was delivered. Was there a loss of a moral compass? Here? Was it the intoxication of fame? What do you think? I think it was probably a little bit of both, but mostly

a loss of a moral compass. I mean, some of the things she did, we're just just something that an average person when you're one to one with someone you couldn't do. And you if you listen to some of the especially in the belt Wanni trial. They brought in a lot of the investors and some people who were sick and were fooled by this machine. And it really was tragic what she did. It was more than just a company that failed. I mean, she hurt people and

I think she lost She just lost her moral compass. June, thanks for jumping on. I'm sure you're going to have a lot more to say about this. The host of Bloomberg Lodging Grasso with us just as the news breaks here eleven years Uh, pretty remarkable to consider here in the Elizabeth Holmes case. We'll see obviously how this pans out. Will have a lot more for you over the course

of the evening here on Bloomberg Radio. I'm Joe, Matthew and Washington are other big story today came only hours before that sentencing, and that was the announcement of a special counsel by the Department of Justice, Attorney General Merrick Garland. Uh coming forth with very little warning today in a news briefing. I won't call it a news conference because I don't believe there were any questions answered. That has

kept us moving through this hour. In a great conversation with Rebecca roy Fee that we turned now for help with Nick Ackerman, the former Watergate prosecutor, former assistant U S. Attorney in the Southern District of New York, is with us now. It's great to have you with us here. Nick. I appreciate the time when you hear the term special council, it almost makes you break out in a sweat when you're used to these. At this point in Washington, they've

become a lot more common they were around the time Watergate. Well, I mean Archibald Cox was really the first special water prosecutor to be appointed in a long time. I mean, I don't really think there was much precedent before that for appointing a special counsel as special prosecutor. Well, so where do you think we're going here? Um, we've got two different cases. Will they both be investigated and resolve simultaneously? I think they're gonna take their course as to I'm

not sure it's gonna be simultaneous. But clearly Merrick Garland believed that there was an appearance of a conflict of interest in the sense that he's beholden to President Biden, that's his boss. Um, Donald Trump is running against his boss and so I think what he really did was put the charging decision in the hands of somebody who was completely independent and independent of him, UM and the

department and so UM. What he's done is essentially provided total independence to this person to make that decision, which I think was probably the right thing to do. UM. But it also shows the seriousness of both of these investigations. I mean, if Garland thought that neither of these investigations amounted to anything, he wouldn't bother to do this. So if I were Donald Trump, this is not a positive fact. And I also might add that this is not going

to slow down these investigations. UM. This is pretty analogous to what I experienced when I was with Archibald Cox. He was fired, the staff, all the assistant special prosecutors hung in there, and Leon Jaworski came in and we never lost a beat. I mean, he just came in, he was briefed by all of us, he read the grand jury testimony, were appropriate, he made the decisions. I don't think we lost any time whatsoever, And I think

that is exactly what's happening here. So that's really important. Actually, we were talking about that whether this would slow or potentially accelerate the pace of these two cases. And how long it takes to build the infrastructure of a Special Council's office. Well, I don't think there's gonna be much infrastructure. No, No. When Jorsky came in, he didn't bring one single person with him. He kept the entire staff and everybody just kept doing what they're doing. And I would imagine that's

pretty much what's going to happen here. They're not going to start investigating this from scratch. I mean, I think Merrick Garlin made it pretty clear that he's going to take over what is there, that the people who are running these investigations know what they're doing. They're all independent, um, And simply the Special Council here is going to be charged with ultimately making the charging decision. That's that's the key here. This is very limited. This is not why

even um, you know the Mueller investigation. I mean, this is something where he's stepping in to ultimately make the decision ye or nay as to indicting on either or both of these cases. Well, with that said, a lot of this has been made public, right, We've been hearing about the documents case in mar lago. Now for a couple of months, with a lot of leaks, we've been hearing about obviously January six and excruciating detail through the January six Committee, and I realized d o J has

had its own track on that. But with what you've seen and based on your experience with cases like this, I can't ask many people that a question like this on the planet, is there enough evidence to convict Um?

It certainly seems like there is. I mean, at least on the January six it certainly seems like based on what the January six Committee has done, they have presented plenty of evidence, firsthand evidence of Trump's knowledge intent, emails that have come out that, for example that Judge Carter released in California against John Eastman Um. I think there's evidence there, and you've got to look at the whole picture, though, and that is what we don't have at this point.

I mean, the Department of Justice has a lot more information than we do. People have been put before the grand jury. They've got two cases that are extremely significant, the Proud Boys and the Oathkeepers. Or you've got three cooperating witnesses with the Oathkeepers. You've got to cooperating witnesses with the Proud Boys. We don't know what they're telling

the Department. We don't know what they're saying about, for example, Roger Stone, who is on the scene on January if with both the Proud Boys and the Oathkeepers and could be the connection to Donald Trump. We just don't know, um, and I don't think we're gonna find out until unless there's an indictment. This is incredible, Nick, I mean you appreciate the politics at hand here. This is all going to resolve in the middle of a presidential campaign. How

are we going to get through that? Well, it's just gonna happen. I mean, how does the Department of Justice get through that to maintain credibility? I mean, this is gonna be the most divisive moment potentially in our history. Well, but that's that's all the more reason to have somebody who's if they're going to pull the trigger, it should

be somebody who's independent that makes the decision. And it's not somebody who is in a sense subservient to the President of the the United States who's running against Donald Trump. I mean that that's the key here. Wow, So you say, good call um, Yes, I think this was the right thing to do. UM. It's sort of a hybrid on this whole Special Council idea. UM, with the notion it's not somebody who's coming in and start an investigation from scratch.

He's coming in basically to make a decision. He's going to be overseeing this and you will ultimately be the person to either pull the trigger or not. And UM, you know, there's a lot of other stuff going on, including this investigation in Georgia that also right, I could have an impact on the prosecut's rail decision here with respect to the January six material to set up a weekly conversation with you. I hope you're all right with that. Listen,

it's an honor to have you. Nick Ackerman, former Watergate prosecutor. Thank you Nick for being here. Former Assistant U S Attorney Southern District of New York. Voices of experience. You hear on this program that you're not going to hear

anywhere else. What a week it was for Crypto. This is what I thought we'd be leading with today until we heard about the announcement from Merrick Garland, now a CFTC commissioner is urging whistleblowers in the crypto industry to come forward in the aftermath of f t X, the implosion of f t X, saying tipsters have previously received

millions of dollars for their help. Now we haven't touched this story because it's been such a crazy week with mid terms of the Trump announcement in our fastest hour in politics here, but that changes right now because of course this leads over into politics right SBF was a big donor, but that also involves potential regulatory changes here in Washington, not to mention the overall freak out in the markets that have come from this, And that's why we want to talk to our friend Joe Wise and Fall,

the co host of Bloomberg's Odd Lots podcast. The Stalwart is back with us now, Hey, Joe, thank you for having me as this FDx bankruptcy moves forward. And I know that's even got its own complexity. As we keep reading these wild tweets from Sam Bankman free, do you have any sense yet of the amount of damage done when you pull back and look at this and think of the last year that crypto has had. This is being compared to Enron, to Lehman, but a lot of

us are having trouble quantifying the damage. Maybe that's because we're right in the middle of it. I mean, I think it's hard to say. You know, one way to simply think about it is just the numerous billions that have been lost in the price of various coins. But I think it is an existential moment for the crypto

industry specifically. It's like, look like when Enron collapsed, I don't think anyone was like, oh, well, this is the end of energy, right, and when Lehman collapsed, maybe, but I don't think there are many people like, oh, this is like the end of like banking. I mean there was maybe there was some view that like the nature of Wall Street was like fundamentally going to change, and maybe it even kind of did. But I think in this case, it's like, wait, is there like is this

the end of crypto itself? And I think that part of like the whole crypto story has been this idea. It's like, you know, it's an endless front run in a way, It's like everybody wants to get in before everyone else. It's like people wanted to get in before the institutions and so forth, and the institutions are gonna look at this and says, we have someone we thought we knew and could trust. It was the professional and had a great finance pedigree at James Street. And if

we can't trust him, who is there? And so I think this is like an existential moment in a way that maybe some of those others even were. Well, so are you surprised there has not been more carnage in you know, in the big ones in bitcoin for instance, it hasn't fallen out of bed i am And actually a lot of these coins are still above where they were like in June. And this is a thing that many people in the industry are talking about. It's like,

what are they following more? It's kind of weird and everyone's like, you know, with the pace of the news flow over the last two weeks, everyone is trying to scratch their head and sort of figure out, like why aren't coins following more? And my understanding there is no one has any good answers. It kind of feels like there's very little liquidity on these markets right now and there's not many people buying, but there's also not many people selling. Tell me more about s BF. I know

when it. When it comes down to just three letters, you've got to be important. You have them several times on the podcast. On one in particular, I went back to listen again to the April two episode when You Sat Down, in which he said this, there is a huge tidal wave of money trying to come into the space, is what I would say, just you know, gobbling jobs of it, that that sort of has been desperately you know, sort of like trying to to to like find its

way in desperate gobs and gobs. Has this collapse change the way you listen to that statement now? I mean no, because in a way it sort of fits with like, like, here's the thing that I keep going back to think about. It's like everybody sort of thought, oh, he's SPF as a genius, and he went to M I. T. And he was a quantitative trader at Jane Street, and maybe the facts are true, but what he describes in that

clip is not that sophisticated. You have the gobs and gobs of money, and so you want to get in front of it, right. You want to be there before the gobs and gobs of money so that the gobs and gobs of money buy up the coins that you bought yesterday. Excuse me? So, like, does that sound like a trading strategy that like uh genius mathem. Find No, it sounds like a pretty crude trading strategy. And it's even necessarily wrong. It's just in a particularly like subtle

or sophisticated. And so what also sounds misguided when everyone is losing billions of dollars? Now, well that's true, because yeah, I mean it's certainly not. There aren't gobs and gobs of money today, so us not clear that there even gob gobs on money by April. I mean, the market had peaked in November and we had a pretty even By April, we had a pretty sharp sell off. But you know what's interesting, is okay, So we published that

at the end of April. Two days later, after that episode came out, they held Crypto Bahamas, which was a conference that FTX put out in the Bahamas near their offices, and he was on stage with Bill Clinton and Tony Blair. Where he was they were wearing suits, He was wearing T shirts, shorts and sandals, and it was sort of the scond of moments like here's this guy and just a week ago on a podcast. He didn't describe his

company as a Ponzi scheme. He didn't even describe crypto as a Ponzi scheme per se, but he did describe a pretty big element of it in terms that could be like fairly likened to a Ponzis game. And then a week later he's talking to two former heads of state in the case to player former prime minister, and you know, it's like this kind of a moment, but I do think like it has been one blow after another. Not long after that conversation, we had to blow up

of Luna. Three are its capital Celsius voyager Um block Fine Voyager on life support. So it didn't take long before those gobs and gobs of money did not materially. He talked about the concept of yield farming I learned about I never heard that before this happens. Maybe that says something about me, But you know, subscribe to odd Lots, you'll learn a lot um. He described it as a sort of magic box. Here here's how he said it.

It's a box and you can take it token, take a theory, and you can put it in the box and take it out of the box like you put it in the box, and you get like, you know, an IOU for for having put it in the box, and then you can redeemed that I owe you back out for the token. So so far, what we've described is the world's dumbest e t F or a d R or something like that. It's a it doesn't do anything but let you put things in it if he

so chose. And then this protocol issues a token we'll call it whatever ex token and X token promises that anything cool that happens because of this box is gonna ultimately be usable by you know, governance vote of holders X token. Are we getting closer to where things went wrong here? Well? So I would say three things about that, maybe four. There's a lot there that he said. So I'll say the first thing. My thought is that at

a minimum, that's very cynical. And my interpretation of SBF as like I sort of like what he was doing was that he did not I never got the impression that he was like a big crypto believer. And if you listen to like, you know, you people who are into crypto are like really into it, right. They think it's gonna change the relige, Yeah, religion or it's going to like change how corporations and governments operate. I never

got that impression from SBF. I always got the impression that he saw a chance to make lots and lots of money. And so when I listened to that, I was like, Okay, here he's like describing a pretty cynical characterization of like what crypto is right now, like a

magic money box. But doesn't matter because being in the service of that, providing a market exchange for these boxes is like a very profitable business, but a cynical one because it didn't sound like someone who wants to really make the case for like the underlying activity that's been happening. It's also interesting that not once this sort of like poor quality of the books. So, you know, with the bankruptcy and we're learning, well, what did FTX and ELM

me to have as their assets? A lot of it was exactly what was described there, which is these tokens that they themselves controlled, are they more or less basically and through the magic of the box, were able to inflate the veil you beyond like any sort of like reasonable pricing in the market. And so they're like, oh, we have billions of UH dollars worth of assets on

our books. Okay, that's good, but the only way we get there is via these tokens that we issue that we are priced nominally at billions in market camp but realistically could never be sold into the market at anywhere near these levels. So I think that like there's quite a bit in there in that answer that helps sort of us understand where we are today. Absolutely, And then of course the follow on is the reaction from Washington

what kind of regulation? I assume this accelerates the conversation, but do they know what they're doing at the SEC or the CFTC and preventing something like this from happening again, Yeah, it's a really good question. I mean, I think that I think there's two schools of thought here. So there's one is, uh, Okay, we need to write we need to come up with new regulation, which I guess it's not that controversial. It's always how it is right, people lose a lot of money and uh, then the then

the regulators come in. The flip side is that this happened on an offshore exchange outside of the jurisdiction of u S regulators, and the entities that were sort of like we you know, crypto entities that are in the US, you know, haven't had the same fate, and be like it's a little unclear. I guess you could say, why crypto deserves new regulations. We already have regulations. Right, You're not allowed to steal people's money, violate terms of service.

If you are a broker, there's certain obligations you have, Like, there are a lot of laws that capture all of this. So I think there is another view out there that rather than rushing to write new regulations specifically for crypto, a lot we enforced the laws that we already have. And you know, there's a widespread view that a lot

of these tokens are in fact securities. Um, so we have a securities regulator, it's called the SEC, and there's already things that SEC can do if it deems certain assets to be securities in terms of disclosure requirements and so forth. And so one view is that, well, let's just have the uh, let's just divide these up. Maybe some of these tokens our commodities and should be traded more, should be regulated more by the CFTC. Maybe some our

securities trade by the SEC. Maybe the brokerages like coin base should be like regulated like a you know, a traditional broker like a Schwab or something like that. And so I do think there's a view of like, well, let's just start getting more aggressive about putting these things in the categories that we already have loss for Did you miss an opportunity to do your remote broadcast from the Bahamas? It's funny, you know, uh yeah, kind of we were invited not I bet you were. Yeah, They're like,

why don't you do a lot? We didn't make it work, you know, we uh you know, weren't gonna like fly all the way to the Bahamas. And just wonder if that's a warning sign when when it's coming from the Bahamas, you know, why do you do an episode on stage or it didn't happen. Um, there's a reason. There's a lot of this that's offshore. And I do feel for a lot of you know, people have lost a lot of money and had like their life savings completely ruined people.

But on the other hand, like you know, you're dealing with a offshore entity outside the scope of like most established regulators who are in the business of like sort of like facilitating de facto casino of sorts. So the there's some sort of uh your uh, you know, buyer beware here spending time on a Friday with Joe Wise and fall on the fastest hour in politics. Big questions, by the way, about what happens with the lawmakers who received millions of dollars from s b F campaign donations.

In the case of Dick Durbin, the Senator from Illinois, he'll contribute the money to charity, apparently from SPF, but next will be the hearings. Recipients of those contributions say they are prepared to grill s BF about why his crypto exchange suddenly crashed. He donated tens of millions of dollars, the politicians second largest donor to the party this election for Democrats, So standby. That'll be a show coming up.

We'll get to fed speak and the doom scroll this week. Boy, it was one after the other, leading minute to wonder, do you have to damage the job market? You have to force unemployment to rise to stop inflation? And if the answer is yes, what's the point of the dual mandate?

That's where we pick up with Joe. This is Bloomberg, So no with Joe Matthew on Bloomberg Radio and they asked Flever Lang and Rocky three for his prediction to what's your prediction for the fight with prediction, Yes, prediction m sort of like j. Powell. While higher interest rates, slower growth, and software labor market conditions will bring down inflation,

they will also bring some pain to households and businesses. Yeah, these are the unfortunate costs of reducing inflation, and it's starting to look like the pain is going to be more real. Some of the comments we heard this week, uh from Fed officials, you know, the Bullard comments about going to a seven handle freaked out the market. I was more taken by Kansas City Fed President Esther George looking at a labor market that is so tight. This

is a quote. I don't know how you continue to bring this level of inflation down without having some real slowing and maybe we even have contraction in the economy to get there. I've I've asked about this before. The fact of the matter is you might have a dual mandate, But isn't that a false promise? You have to break

the job market to beat inflation? You know, that is the that is the that is the widespread view of many economists that history is pretty strict on this that when you have extremely elevated inflation, you know that there's no painless way to do it. That you don't get this immaculate disinflation so to speak, that you need to have layoffs and there need to be a meaningful number. Now, the hope would be, I would say, the hope is,

this is a weird time. We just had a once in a century pandemic, and we have had major disruptions in the past. We tend to it's a historical phenomenon. We do have higher higher inflation after wartime typically is common because again you sort of similar story or major disruption to supply side capacity. You have all this investment that went into munitions and factories for the war, and

then they're not there. You know, then the soldiers come back and then there isn't the productive capacity to supply them. There are examples, and so the hope would be, and so the question to some extent is, well, why do

we have this inflation. Do we have it because there was this huge disruption to society, in which case maybe a lot of inflation comes down to a normalization or do we have the inflation because the Fed kept rates too load too long and the government spend too much money in checks and so now we have to have the pain. I think we're still kind of in that debate, And honestly, funny, it depends what party you're intends to determine your answer to that question, right. I do think

there's a big political element. But on the other hand, I will say, you know, look, there's a lot of like sort of like mainstream democratic economists Larry Summers, Jason Fermant among them, who are in that camp that the Biden administration did too much. Sure that j Powell was too easy for too long. But I will I but

these questions are always like really political. Absolutely, if you talk to a Democrat on Capitol Hill, and unfortunately we do this every day here sometimes uh it's you know what, I'll tell you, this is a global problem, this is a supply chain problem. Look at other countries. Why we're not alone in this? And Republicans say, you know, Joe Biden poured gasoline on the fire with the American Rescue Act, And you tend to think the truth might be somewhere

in between. Yeah, and there a lot of you know, I think economists don't know that. I've seen all these studies like six transitor embedded or who knows how about what we saw on the campaign trail. Sometimes you can learn from the argument when when politicians are campaigning, and certainly when voters actually go to the polls. Uh, if people blamed if Americans blamed Democrats for this, wouldn't it have gone worse? Well, I will say this, and again,

you know, what do I know about politics? I don't know anything, but I will say this. You know, the inflation is pretty bad, right, It's at the highest level in like four decades, and the Republican Party chose to run many candidates whose core position was like cha lunching the results of election. It's like, yeah, that was like a number of Republicans like made that a big thing. It's like maybe real introspectation because there is a big problem, right,

Inflation is a real issue. And in a way, you know, I think a lot I think the Republicans sort of assumed that that they wouldn't have to like really try to like fight that point, because so obvious everyone's gonna punish the Democrats for inflation. So they ended up with like a lot of candidates that didn't really talk about that they like talked about like Trump and changing how people vote and stuff. If the messaging had been better, you're saying it could have been a different result. It

could have been. I mean, it's just weird. Did the like for as bad as inflation is? Did can anyone point to say or Republican proposal or story about how to address it? And I don't. I don't think I heard any You know, I heard a lot about investigating the White House. I heard a lot about Hunter Biden's laptop, or you heard a lot of blame on inflation, but maybe not. But now you don't hear a lot of solutions.

So I do wonder if like maybe Republicans were a little bit um in retrospect, naive about the sales job that they had to do and they should have done more. Are these FEDE officials George Bullard doing the job by speaking and freaking everyone out right now? Or is this the real indicator of how bad it's going to hurt next year? No? I mean, look, monetary policy is works through financial markets, and paulic has talked about this a lot that it's not really the rate per se that matters.

It's you know, if if you raise rates and the stock market weekend and credit conditions tightened and so forth, and that constricts demand. And so if you just talk about it, you're conducting monetary policy. Every one of these speeches is a conduct of monetary policy. And so trying to like, we're in this interesting moment where it looks like the feed is going to downshift from a series of seventy basis point hikes to fifty basis point hikes.

And Waller had a speech this week, I think where he liked it to take you off an airplane where it's like you go really hard in the beginning, and then you get to like a cruising altitude and then you like you ease up a little bit. It doesn't mean you're like easing by the getting off the ground is like the really hard part that takes a lot of like fuel and stuff like that. Then you can glide a little bit. So, you know, we're in this sort of interesting moment, and there are signs that inflation

is maybe cooling. You know that last CPI report was encouraging. We've had oil prices, commodity prices coming down, some signs that food prices maybe easing. But what the FED does not want to see is the FED does not want the market and investors to look at signs of easing, look at signs of downshift, and say party time. We're

gonna go buy stocks, right, because that's the worry. I was like, well, what do we accomplish a here if everyone just gonna go buy stocks again and bit up financial markets and and speculate again that we're just gonna be right in the same boat that we were a year ago or six months ago. So the feed is in this position now where it's like, Okay, how can we acknowledge that there's some shift in the general trajectory without letting things get out of hand and for everyone

I say party time. And so I kind of think that's what you're getting from some of these speakers, which is like, yes, we're gonna hike a little less fast than we have been, but don't use this as an excuse. No more spending, you know, fifty on the bitcoin. Okay, Like that's sort of like the message. So is Mr T right? Yeah? I mean you know what, I hope not. Like,

here's the thing. It's like you have two camps. So you have the camp to say, Okay, we need labor market pain um in order to bring down inflation, and then you have another camp to say, these fed rate hikes are going to crush the labor market and make things worse. Right, the Dovish viewed, it's like, and I kind of hope that there is this middle ground where everyone turns out to be wrong. That the hawks are wrong, that we need higher unemployment in order to uh defeat inflation.

That would be nice. And I hope the doves are wrong, that the higher rates and the aggressive pace of hiking that we've seen in the series of seventy bases point hikes crush the labor market. And so the dream scenario is one in which inflation does come down, but also the rate hikes never really did much to the labor side. Way too early to say that. But I don't think there's a I don't think that. I think it's a non zero a chance that that's the outcome here, non

zero chance. I don't think it's zero. From your lips to God's ears, I hope. So let's get a beer next time I'm in New York anytime, any time I love talking to you. I always enjoy it. The great Joe Wisenthal. His podcast is called Odd Lots. Ours is called sound On. You should give it a try, you know, subscribe, share it with your friends. I can just keep thinking of him down there in the Bahamas, you know, hanging with SPF. It never happened, but I could use a

little time of the Bahamas, don't you think. I mean? What a week? Not just the volatility on Wall Street we hear about from Charlie Pellett, the scary fed speak, whether we finally got through the mid terms, Republicans take the House. Nancy Pelosi retires as speaker. Donald Trump announces his next presidential campaign. I could keep going just this week. Carry Lake loses the Arizona governor's race to Katie Hobbs. Lawyers up for a fight. Adam Fresh concedes to Lauren Boeberg.

Did you hear that? By the way, Yeah, I'll take up Margarita, and I'll meet you back here on Monday. Holiday week Ahead, we'll have Rick and Jeannie on the fastest hour in politics. Thanks for spending time with us. This is Bloomberg