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Gary Gensler, he's a former chairman the Security Is and Exchange Commission, Professor of Practice of Global Economics and Management at MIT. Did you ever study under Stanley Fisher? Did you have the privilege?
I got to know stan Fisher, a terrific public servant.
I got to know him when he served here at the US he.
Was in international finance. I also got to know him a little bit when he ran in the Central Bank over in Israel.
Katie Greifeld called me up earlier this morning and she said, and folks, Gus the horse is okay in the heat.
It's serious.
And Katie said that the horses are doing fine this morning.
And Katie said, can you do the entire interview on crypto?
And I said, over Mike, with all that's going on from the Genstler to the Atkins SEC, we're going to get crypto out of the way now, folks. And I'm sorry, Gary Ginsler, it is breaking. It got Chris Giles in the ft this morning highlighted the Bank of International Settlements research. I adore Raphael Hour's work at BIS.
I got rogue off.
In chapter seventeen eighteen and nineteen going after stable coin. We need a Guenstler update. What are we getting into with tether and stable coin?
So Tom, I couldn't agree with you more about your earlier statement. There are so many bigger items going on in this economy. The tariffs, immigration, frankly, a whole attack on science funding, a lot of things that are gonna, I think hurt long term economic growth. And that's why I joined Simon Johnson and other colleagues from the Center of Economic Policy Research to do a book, a rapid response book about the economic consequences. But in that book
you're asking about stable coins. It's interesting the worldwide dollar mark, it's about forty five trillion.
That's when you added thing up.
Forty five trillion dollars and stable coins are about a quarter trillion. And so you know, the question is is Scott Bessant, Secretary of Treasury right he says that's going to grow to two trillion. It starts to say, what's the use of.
One of these? We already have digital dollars.
You and I, we all Lisa earlier were saying, I don't understand stable coins.
We have stable coins.
They're called us dollars, deposits, money market funds, and so forth. The only thing that these companies are offering is an alternative way to move dollars outside of the banking system, which means outside of sanctions, outside of any money laundering laws. And so that's the real risk. It could undermine the US GEO politically.
Let me, Paul's got any questions. Let me get this in right now, because I think it's so important. The bravest book in my career here was Ken Rogoff, The Curse of Cash.
He got death threats off that book.
It's nothing more than a use for criminal activity. It replaces illegal one hundred dollars bills in briefcases.
How simplistic is that statement that I just made.
Well it you're talking about these stable coins.
Stable tether, stable coin, the whole thing.
It's nothing more than a walk around the sec and the rest of the financial.
World looks stable coins.
Tether was invented early on about ten and eleven years ago, to be the equivalent of the poker chip at the casino. You could use it to move crypto versus crypto because these large exchanges couldn't get bank accounts, and so instead you could sidestep any money laundering in sanctions. At a quarter of a trillion dollars, it's starting to be somewhat meaningful. And here's the cool question, the interesting economic question. Who
gets the interest payments? Who gets the float the three and a half or four percent on you know, for every billion dollars, that's thirty five for forty million dollars of interest, And who gets that interest? I'd rather have a money market fund where I get the interest the investor.
Gary the economic consequences of a second Trump administration of preliminary assessment. We're six months into the second administration of President Trump. There's lots of unique economic policies coming out of Washington.
Let's start with tariffs.
When I was in business school, tarrorifts were kind of a targeted thing you'd do once in a while if somebody was dumping steel or something else in there.
We've never really.
Seen them as a whole policy across the globe, across all of our trading partners. How do you think about the President of Trump's economic policies pocusing on strategy on tariffs.
I think and thank you for mentioning this book that we did together.
It was a Rapid Response book.
But overall, all our experts said tariffs are going to put downward pressure on economic growth and upward pressure on inflation.
And that's the history of these things.
We have seen worldwide movements to tariffs, and it was right before the nineteen thirties Great Depression, and Congress got in and weighed in and so forth. And I would remind listeners that tariffs are only on goods, not on services. And about ninety percent of workers in the US are
working outside of the manufacturing field. And one of our authors, Michael Strain, wrote an excellent chapter, and Michael says it won't even help manufacturing because manufacturers have to buy all these goods, these intermediate goods from overseas and the tariffs will be higher. So I don't think the tariffs are
going to help. I think they're going to hurt and interestingly, they're going to particularly hurt also in rural communities because rural communities have to sell their farm goods, their agricultural products overseas. So it doesn't even necessarily help the president in some of his political base in rural states.
A lot of I'm just going to you know, preempt a lot of email I'm going to get today in my social saying.
We haven't seen any of it.
Tariffs are working, just find inflation's not there or is it just too early?
So it's a bit early.
But I'd say this to any listeners, You've just had the largest tax increase that you've had in generations. Average tariffs in the US were two point three percent. Globally adding everything up two point three percent, and that was even after the first Trump administration raised tariffs.
In China they are now over ten.
Percent, so the overall teriff rates have gone up fourfold.
That's a big tax increase.
It takes time, but the International Monetary Fund lowered our growth estimates for this year a full point, so you know we're seeing that happen, right.
I've got to ask.
We got all sorts of topics to talk to with Gary Ginsler, Former's Securities in Exchange Commission Chairman, and MIT out with.
The wonderful what do you call it? Like a kindle book?
Is there like a well, it's a real book.
We do have it physically, but it's online at the Center for Economic Policy Research, which is a remarkable organization in Europe, and you can get it for free right at the CEPR website.
Wonderful. So we'll get that. I'll get that on LinkedIn and Twitter as well. So I got to get this straight.
You're at Pikesville High School, you end up at Wharton, you do better than good in your academics. The world's imploding in private credit, right, Paul, Sure, everybody needs a valuation. You have to be the first call for the University of Pennsylvania. Do you have any handle on the new valuation? The mark to market a private credit? And dare I say private equity as well?
Well, you're kind. I mean, the University Pennsylvania is terrific. I'm at MIT now, so I just have to give that shout out. But in terms of private credit, look, this is a field about give or take two trillion dollars of lending and assets under management that has come peeded with commercial banks, and we made sort of a conscious decision to move some of these risks out of commercial backs and into private credit.
I think it's good.
It's competition in the capital market.
Am I really look to the Chase of Sloan. You're at Sloan with a piece of chalk in your and what's the haircut? Right now on private credit, is it eighteen percent? Is it greater?
Or if you're talking about valuations, it really depends on what the large companies, the Apollos and the Blackstones and so forth, how have they valued it so that if they're valuing it properly, then it's not a haircut. But yes, they usually charge higher interest rates.
Gary, how do you think the US should from a trade perspective and economic policy perspective, deal with China?
Right now?
It feels like the globalization trend that you and I and Tom grew up with that seems to have lost a lot of steam. It's out of favor now. Maybe that's a short term trend. I don't know, But specifically with China, how do you.
My experience, and we had to negotiate when I was at the SEC, a big consequential, transactional situation. Can China keep their companies in the US stock market? And China was not playing ball and following the rules about inspections.
We were able to sort that through.
And my experience is as you treat them with respect and dignity and consistency, and this oscillation, this big volatile changes of policy I think is not doing the US. Well, I think, yes, the President is a risk taker. I respect that he is a fundamentally He's come into office very determined and he wants to readjust with China.
But I think China is very savvy.
They're going to be able to compete with this in artificial intelligence, even if we clamp down on export controls and they have those rare earth minerals that they're a to, they have leverage points, is what I'm trying to say.
I've got to go to a new topic here, But Gary Goenster, to get to that topic, I used AI.
I went to Gemini here and.
I tipped in the difference between the Genstler and Atkins SEC. First of all, Gary Gensler, with all as you mentioned, Paul Esteemed at GOLDBN Sachs is Paul, and I would editorialize you would be on a shortlist to run any major firm in America. Fine, Gary Gensler on AI, what are our kids? What does Lisa Mataio need to know?
Well, I would say this it's one It's been around at least ten years even longer, so it's not just new with open AI and chat Chept two, it's the most transformative technology of the time, and I find myself thinking I'm more of the optimist. I think there'll be a lot of new productivity that comes from this, but also a lot of changes in the job market.
Bloomberg will be different.
Bloomberg Radio maybe not so different, all right, but I think.
It will be very different.
And so I think the US versus China is an interesting thing. The big hyperscalers, the big you know, CHAP, GPT and Gemini and so forth. Those companies are competing with China, and China's got natural.
Deep deep seek whatever it is.
Yeah, well they have deep seek, but they have something else.
They have one point four billion people, so they have data advantages over we're big, but we're only three hundred and forty million people.
Let me go to what I was on with a Gemini here and also the AI effort of Bloomberg, and that is the shift from the Genstler sec over what Paul Atkins has been charged by the President of the United States. You're going to tell me collegially that the ven diagram of Gensler and Atkins is pretty tight. There's differences, but there's a collegial agreement.
Baloney.
People see this, Gary Gensler, it's a sharp shift that we're seeing right.
Now, is it.
Look, elections have consequences, and I have a deep respect and you're right, I'm going to be respectful. Chair Atkins has served at the SEC not once but twice before. He knows the agency well, and I think whether it's Republican or Democrat, what this show is focused on is the markets, the capital markets, and the capital markets do best when there's rules of the road. And that's been true for ninety years, and that's what's really critical.
Now.
The SEC has shrunk about twenty percent, so it's not as able to surveil the markets and make sure that it's free of fraud and manipulation.
Where are your shadows right now? If we go to a more what's the word swashbuckling?
Is that right?
Yeah? Swashbuckling works. That works if we go to a more.
Trumpian SEC. Where are the Guenstler's shadows now? Within Global Wall Street? Where's the leverage, the thing, the portfolio insurance of eighty seven prizes of August nineteen ninety eight, where's the shadows for you in the system?
Look?
I think that overall it's much beyond the Securities and Exchange Commission. It's in terms of the whole financial markets, you probably will have a tendency the greater leverage, meaning more borrowing. But we are also in a heightened risk environment geopolitical, as we lay out in this book, we are pulling back the US from global alliances. So there is definitely a bit more inflation risk, There's a lot
more leverage in the system. Investors are less well protected with the Frankly, this sort of a large dismantling of something called the consumer financial the CFPB, and so investors have to be a little bit more.
Aware.
There's more risk in the system, big risk, and there's also I would say the US dollar is under pressure. It's down ten percent this year so far. And this is in the environment where the stock market has been quite resilient. You know, we're almost at near all time highs, and so that investors have to say, is there more downside rest than upside potential.
Another big area of change within the second Trump administration has been immigration. How is that impacting effectively shutting down the southern border, How does that impact the US labor market?
Do you think?
So?
It's interesting again in our book, this economic consequences of the second Trump administration a preliminary assessment. We have a really interesting chapter or in this question and overall the forecast is that it will cut growth by about one point seven to one and a half percent, and in terms of the labor market itself, interestingly, it's going to hurt rural America a lot. Now, rural America will also be hurt by medicaid cuts because believe it, medicaid is
more used raw America than an urban America. And also the tariffs, so there's like a triple threat to rural America, which again politically it's an interesting conundrum for this White House what to do. But on immigration, I would say it's a downward pressure on the economy these policies, in addition to the downward pressure from tariffs.
Gary, I want to get this in. I think it's too important. And this goes to your colleague, the Nobel laureate, Simon Johnson and.
The wonderful friend in college in.
The heart of the world blowing up for me personally, and there was Andrew Ross Sorkin's wonderful book, and any others, rogy rajam Out at booth. That's a Chicago. That's a school gary out in Chicago.
You may not be familiar with that.
But Simon Johnson's monograph Thirteen Bankers was the definitive book to described the moment where we lost control in five six, where the SEC opened the flood gates to certain transactions and leverage. Are we at a risk now where we could repeat what Professor Johnson wrote about chapter four of Thirteen Bankers. This is the piece of paper that open the risk gate floodgates? Can we do that again?
Look, I think we're human Tom and humankind we eb and flow on risk. The financial system written large.
Is in good shape. But will it.
Tend towards greater borrowing against risk assets? And that's when you have challenges. And I think we have a US dollar that people have some question about. You have inflation moving up, you have greater leverage, and you have a tremendous amount of uncertainty policy and geopolitical uncertainty. And those are times you can see, you know, I'll call them spills on Aisle five. And you know financial spill hills on all five hurt millions of Americans.
When you lose your jobs or your mortgage rates go