Mulvaney on Crypto, the CFPB, and More

acting CFPB director. This is the inaugural episode of this podcast series, and we're obviously really excited to have as our first guest someone who has seen Washington from the inside from multiple perspectives and who can give us a lot of unique insights about the intersection of Washington and business. So Director Mulvaney, welcome, and thank you very much for joining us.

impressive resume. We thought it'd be interesting for you to tell us and our listeners you know, how you got to where you are, which role you like the most, which role was the most challenging, and then maybe also tell us about what you're doing now.

get older, I cannot remember people's names. But I remember going through that committee hearing going, wow, you know, I haven't heard of that job since what's his name? David Stockman had it in the nineteen eighties under Ronald Reagan. But boy, does that sound like a really cool job. And I did a little bit of work with Rick Perry in twenty twelve, which included, by the way, debate prep. Please don't tell anybody that, but I was hoping if Rick had become president, to be the O and B director.

Then I worked with Rand Paul in twenty sixteen with the same sort of understanding. And then I ended up getting the job from somebody that I didn't even work for to get elected, which was with Donald Trump. The job is the job that I think many people think they are getting when they get elected to Congress. It is one hundred percent policy all of the time. It's the real nuts and bolts of how the government works. I mean for geeks, for budget geeks, for numbers geeks,

for government geeks. It's just heaven. And that was the best job I think I ever had. It's not surprising, by the way that that transitioned into the chief of staff position. I think that has happened half a dozen times in my lifetime. In fact, I think the last four administrations had chiefs of staff that had previously been directors of the Office of Management Budget. There's a reason for that. We you talk about if you want to.

But that was the best job I think I've ever had in my entire life and enjoyed every single minute of every sixteen hour day.

is fine. I mean, that's that's the way the pendulum swings. The Europeans don't like Trump any more than the Americans do, it seems, but they don't care about the politics. They just want to make money. So I'm doing a good bit of that. I was involved in Crypto fairly early. I don't remember when we started the Caucus David Schweiker and I started the Blockchain Caucus I twenty thirteen, fourteen. I can't remember. All I remember is that bitcoin was

exactly two hundred dollars when I started the caucus. I did not buy any because I thought it was a conflict of interist I had staffers who did, who have now since retired. They're very thankful for that, I think. And I got involved in crypto very early on and

have stayed involved in that. I'm on the board of the Digital Chamber of Commerce in Washington, DC, one of the leading trade associations for blockchain and crypto, and so I'm advising a couple of smaller startups in the in the navigating the crypto world, and that has been fun. So I do a good bit of television radio, including with you folks. Always enjoy being on Bloomberg, both both on audio and on video, but again mostly just trying

to figure out what to do. I don't know what I do for a living, Elliott, but I do know it takes all of my time.

remember what it was. And it was a young woman there who introduced me to the crowd for the first time to this thing called bitcoin. And as she sat there and she described it sort of this introduction, introductory lecture on what what bitcoin was, I'm like, you know, what there's there's a good bit of overlap there between what bitcoin is and what a gold standard could be.

And so I talked with her afterwards and started doing a little bit research, and that's when I discovered the underlying technology of blockchain and bitcoin is fascinating to me. I think it's I think it's interesting. I don't invest

in it. I've never owned a bitcoin in my life, but it was blockchain that really really got my attention because as they sitting there doing the research trying to figure out what this was, this distributed ledger of technology, I'm like, you know what, this has the potential to take every three party transaction in the world and make it into a two party transaction. I had practiced law for a while, did a lot of real estate, and know what a three party transaction is. Know what escer is,

Know why we have a register of deeds. Those are all three party transactions. I've been Washington financial services learning about credit card companies work three party transactions. In fact, when I'm not on the radio talking to people in public, I say pretty much all of our interactions accept sex or probably three party transactions in the world. And someone pointed out that some sex is three party transactions. But we've probably wandered off the topic now.

I still believe that. By the way, I think that crypto has sort of become a distraction on top of blockchain, but I think that the underlying technology and the concept is one of the most earth changing things that I've been involved with in my entire adult career.

talking about bills. You know, I just it's really a two part question, and the first part is is that you know, you know, many in the cryptocurrency industry have called for this new regulatory framework AA aka there's we have a new asset class. And then you have others like SEC Chairman Gary Gensler who have said that, you know, three nineteen thirties era securities laws still applicable. You know, does there need to be a renewed regulatory framework from Congress?

And if so, you know, what do you think that should that look like? Should it define what a security is versus a commodity? Should the SEC get more power or should the CFTC power? And I guess the third part to my two part question is do you think something can pass in this new divided government.

Arkansas in charge. French is probably one of the if not the most capable members of that Financial Services Committee on the Republican side. So clearly McCarthy McHenry has a great deal of trust in him. And I think what Patrick would tell you if he were on this podcast is, look, there's not very many bipartisan topics right now in Washington. Maybe antipathy towards China, maybe you know, distrust of big tech.

But the third one would be an interest in digital assets doesn't mean you're for it, doesn't mean you're against it. It's just you're sort of looking at it. Both parties want to know more about it, and that's a good sign. Why is that a good sign because as of right now, let's call it digital assets is sort of the asset

class is not politicized. Even despite some Republican efforts to try and and taint the Democrats with the Sam Bemmerfried financial contributions, the bottom line is still that this is not perceived as a Republican topic or a Democrat topic. And that's a really, really good sign for the likely chance of having a decent piece of legislation. The FTX thing was certainly a big deal. Did it move the needle, you know, listen. I was in Switzerland last week at

a digital conference, had some great conversations. Was talking to Anthony Scaramucci, who overlapped with for eleven days, which has now become a term of art. Eleven days in the White House is called a mooch. And you know, he's been in crypto for a long time, and he and

I have discussed this before. I posited the thesis that FTX was going to make it more likely that the CFTC would fall out of favor as the as the chosen lead regulator, and that would give more strength to the SEE, and Anthony disagreed and said that he didn't see it that way at all. He thought the CFTC still sort of had was in the ascendency on where Congress wanted to put the lead regulatory authority. So I think the jury's very still much out on that. I

prefer the CFTC, if for no other reason. Then you know your question had a little bit of a bias in it. You know about a nineteen thirty three security regulations, but it's not wrong. Gensler is anti blockchain crypto, and I don't want a regulator who's anti I want a regulator who is interested in seeing what they can do to encourage innovation, to encourage growth, to protect consumers, but not to make the unilateral decision that this asset class of that asset class is good or bad. I want

the market to do that, not a regulator. So if you asked me, is that SEC versus CFTC, I come down the CFTC sign but mostly because it's Gensler and not and not just because the institutional entity of the SEC. There was three parts to you two part question. I can't remember what the first part was. I was going backwards. If you if you remember, we can do it. That go on.

sort of an overused word. I think what you're looking for is clarity from the government as to how it's going to treat an asset class, how they're going to do rule making, what their purposes are. And I think that's more important to focus on. I don't blame this SEC for the FTX situation. I blame Sam Bankman Freed in his his in his in his group. I don't see FTX as a crypto thing. I see FTX as

a is a fraud thing, is a theft thing. Bernie Madoff was in a regulated industry and Round was in a regulated industry, and they still figured out a way to break the law and steal people's money. So folks, are you know bad people are always going to do that. Of course, I say that these are allegations and not proven, so I don't want to get sued, you know, So we'll say, you know, assuming the allegations are true, as we sort of as we couch this discussion. But I

don't blame the SEC for SBF's behavior. I blame him for his behavior. And I don't think that any particular guardrails would have stopped somebody who seems to have been that intent on taking people's money. So no, I don't look at the government as protecting us from all ills in life. I do think it's incumbent upon the government to give business clear guidelines. It's one of the things, by the way, the industry has been requesting for the

very from the very beginning. I was in a small business committee in twenty and eleven and we had a hearing laid in that term. So it's probably early twenty thirteen on asset classes. And all the industry wanted at that time is tell us what we are. That was it. And I think at that time and that you did ask this question about you know, is it a security,

is it a commodity, is it something else? And I remember doing research at the time that I think it was the Germans who created its own separate asset class, So it wasn't this or that, it was its own things. That's what I want the government to do. Sometimes you want the government to make a decision even if it's wrong, because at least if they make a decision, you can plan and you can go forward. That that's not certainty, that's clarity, and that's what I think it's incumbent upon

the government to give. And I think that's what the industry is looking for, has been looking for, and will continue to look for. Maybe with this new Republican Control of Financial Services Committee and the still bipartisan interest in the industry, we will get clarity out of the government, out of this Congress.

has been. I don't want if we say fraud, but that's that's that's where the that's where the land mines have been, and there's never been a circumstance of a you know, a major decentralized problem. I think that's where the industry is going. It's it creates some interesting challenges because the decentralized system looks a lot less like you know, the traditional banking system. So then the question becomes, you know, how do you how do you reconcile those two things?

How do you take decentralized finance and and put it that that square peg in a round hole. You asked me earlier about some of the work I'm doing overseas. I worked for a company called the astrap Protocol which is doing k y C and a m L for DeFi, and it's a it's a fascinating technology, and I think there's a lot of folks looking at how do we take this new looking thing of DeFi and and put it in the the the you know, sort of the the square peg in the round hole of of what

we've got right now. So I think if once folks figure out how to do that, take all the benefits of what we see in with blockchain, but figure out a way to meld it into the more traditional sort of environment, I think that's gonna be a huge success. You saw the DJ announce a money laundering case I think just yesterday against a Russian crypto firm. If you can do KYC, if you can do a m L properly,

that kind of stuff doesn't happen. So that's why I think folks like Astro and some of the other folks that work with are in an interesting place at the cutting edge, because I think that's where the that's where the future is going.

at it as well. If SBF was in it and he was lobbying hard for the CFTC, that will carry a taint and that will push the needle over towards the SEC. And if I had to put words in his mouth, and I want to make clear that I'm doing that. I hope I'm not violating any confidences that

I don't think our conversation was off the record. I think if I had to put words in Anthony's mouth, it would be fundamentally the CFTC is still the right place to do it, and and the SBF situation with FTX won't change that, and that the CFTC is still the right place to do it, and that will ultimately prevail on the merit. So again, I think it's it's

the exact right conversations that you want to have. When you try to sort of looking at the industry, you get two different respectives and the folks make up their own mind. I'm sure Congress is going through the same analysis. I'm sure there's members of Congress like, yeah, you know, I was sort of leaning towards CFTC, but boy Sam Peg mcfreed like that, and he's a really he could he could be a real distraction here. So let's go

look back and look at the SEC. And there could be other folks look at it and say, you know what, I don't care what FTX is all about. I think that was a fraud case. I still think CFTC is right, let's push it in that direction. I think that the conversation that I had with Anthony last week is probably, you know, in a nutshell sort of analogous to a lot of what's going on on the hill.

a change today. But that that's neither here nor there unless you want to talk about it. But really I want to. I want to talk more about the Fifth Circuits ruling in October, which was you know, pretty monumental. It was in a lawsuit by payday lenders challenging the CFPB's payday rule, as you know, and the Fifth Circuit

vacated the rule. But more, you know, more importantly, I guess was the reason behind the ruling, and that was that the Fifth Circuit held that the the CFPB's funding structure is unconstitutional because it comes out of the Federal Reserves funding and not directly from congressional appropriations. You know that that's a pretty big decision. It's likely to have profound implications for the future of the CFP. B You know, you're a former director of the or acting director of

the Bureau. You've also been an outspoken critic of the CFPV so I'm curious to hear your thoughts about the Fifth Circuits ruling.

and omb. Those are interesting days, and I'm like, Okay, I'm gonna go over and run this place. I'll read the statute and then the first line it says, Congress creates the Bureau of Consumer Financial Protection. You know, like, boy, you really think maybe the name of the of the entity should should match what Congress created. So apparently that was that was heresy of the highest order inside the building. But that's not your question. I uh, you want to

talk about the Fifth Circuit decision. I was actually in National Airport I don't know, three weeks ago, going through security and I hear this voice behind me and says, hey, Mick, can I turn around? And it's Richard Cordray, who was my predecessor as a director, and we had a really brief conversation about that. Of course, the the you know, the sell A law decision had comeing out, had to come out out of the Supreme Court. I can't remembers

two years ago. And another piece of the cfpb uh the status of the director and the unconstitutionality of the statute as it dealt with the whether or not the president could could fire the the the director of the or of the organization. But anyway, rich and I had a good conversation about the funding. I think it's a fascinating decision, you know, of all, but I don't like the fact that the CFPB is funded out of the Federal Reserve. Keep in mind folksh aren't familiar with this.

It's it's a little bit arcane piece of the CFPB history, but it's a very interesting insight into what the CFPB was created to be, not just what it was created to do, but to be. It was created it's brainchild most folks know of Elizabeth Warren. It was created to be outside of politics. Her attitude was that if you allowed politics to influence this, then sometimes the Republicans would have control and sometimes Democrats would have control, and that

was not good. That you needed to have something that was outside of politics. So she aided almost or at least something that was sort of strived to be the perfect left wing permanent bureaucracy with people that were hired entirely by the left and then thereafter couldn't be fired,

that had almost zero accountability to Capitol Hill. One of my favorite days of my entire professional careers when I went down to testify to Congress, and my opening comment was, I'm here to testify, but I don't have to because you folks put in the statute that language that suggests that I don't even have to be here to talk to you. I'm doing it, but I'm not obligated to do it. That's how far removed the CFPB is from Congress. And of course a big piece of that was funding.

Instead of giving Congress, as it has with almost every other aspect of the executive branch of government, control over the spending, it took that away. The CFPB Act dob Frank took that away from Congress and essentially said, look, the CFPB gets its money automatically as from the Federal Reserve, and it has the right to draw down on a

certain formula. And it is not an exaggeration, guys, not an exaggeration to say that at any time during my directorship, I could have written, handwritten on a napkin, please give me eight hundred million dollars okay, walked across the street or down the street to the Federal Reserve, given it to the right people, and they would have had to give the money to the CFPB. That that was the funding mechanism that was set up, and that's what's under

attack in the in the fifth Circuit. That being said, I'm I haven't read the opinion. I fully admit that i'd be curious to know what the unconstitutional nature of that is, because we do that already with the Federal Reserve. The Federal Reserve is outside of the appropriation system of Congress, and I'd be curious to see how the Supreme Court, I assume it's going to take In fact, I think it already has taken it up or granted sert that.

get funding. So I think I think that's the concern, that this double layer. But I'm curious. So, you know, let's say the Supreme Court does take it. Let's say they affirm it. Let's say the current funding mechanism is unconstitutional. You know, how difficult do you think it would be for you know, sort of what happens next, Like the CFP would have to go through the normal appropriations process. How difficult do you see that being.

treated as as something that's on appropriations for Congress. It's a really good quest question and goes to the larger issue. Then larger issue is this is this is this whole thing constitutional in the first place. I never liked the place and folks. I'd like the people, but I never liked the idea. I shouldn't say that I like the idea of having one stop shopping for consumer protection. Somebody

asked me. I did an interview I don't know about a year ago, and they said, what one nice thing can you say about Elizabeth Warren and the CFPV part of Dodd Frank And I said, the idea of having a single regulator when it comes to anything is really really powerful, And I think, good. You know that when I do work with all these European companies, they always

ask me, well, you know, who's my regulator? Like, what do you do, and they tell them like, well, you've got four or five or six different regulators that they just drives them nuts. The concept of this one regulator, I think is an admirable sort of goal. That being said, this is the worst possible way to achieve it. And I really, really really wanted instruction from the White House to shut the place down and lock the doors and just pay the folks because I had to pay them legally,

but not not allow the thing to exist. And that was in the middle of the Mueller investigation. I remember the White House counsel at the Times look at me and said, Mick, I got bigger things to worry about the CFPB, just go over there and do what you can. And so we were that close to actually shuddering the place and seeing what happened after that. But that goes

back to your Dunkin Donuts question. So as it was why I did that because it was a very interesting relationship with the with the organization when I was there, because I didn't like it from the get go.

we're not gonna be nasty about it. Have you all had lunch and your constituents for the most part, And you know, we'd get your get your coffee, donuts, and you know, sit and chat about the issues, and you can protest you want to, and you know, we'll go about our business. So I figured we'd do that, and I we're gonna was gonna take these donuts to the protesters on my way to work. I go to work fairly early. I think I was there at seven or seven thirty in the morning, and I had all these

donuts and there were no protesters yet. And I got credit, by the way, for bringing the employees, the folks who worked there donuts on my first day, and we got good press out of that, But the truth of the matter was it was for the protesters who didn't show up until nine o'clock. And what I learned later was that these were protesters for hire and that they weren't

supposed They weren't on the clock until nine o'clock. So it was a little bit different than the folks I dealt with back home, and that was that was a really interesting insight into how to Washington works. The protest for higher business is a cottage industry in Washington, DC, and I think that's just an absolutely fascinating sort of sidebar to how the town works.

So it's being handed down in the family the clearly Krispy Kreme over Duncan every single time.

to compromise on this. I cannot believe Biden is getting a free pass on his comments about how he's not going to negotiate on this. You're not going to negotiate on it? What's the justification for that? The law is what the law is, which is that you have a debt ceiling. Why do you have a dead ceiling? So that now now and then you have to raise it. You have a discussion about why you have to raise it.

That's why we have it. If Biden is right and you don't have any negotiations and there's no compromise at all, I'm raising the dead ceiling, then the dead seling doesn't need to be there at all. Now. I know a lot of Democrats feel that there shouldn't be a debt ceiling law, but there is one. And last time I checked, you know, there's swarmed up and hold the Constitution and the law is what the law is. So it's a very strange position to take, and I cannot believe he's

getting as much a free pass as he is. Should he give in to everything the Republicans are asked going to be asking for the dead Celing Absolutely not, because the Democrats control the White House in the Senate. So I mean, if you want to do the simple math, you know it's a two third one third type of deal. The Democrats get a little something, the Republicans get a

little something. Against how it gets raised. It's absolutely going to get raised as much as the former Tea Party House freedmcock of Sky and me says, Look, I don't think we should raise it at all, and I think we should look at prioritization of payments because the one thing that Washington lacks is a cost benefit analysis view on life. They never measure one project against another. They just measured against what they want, and they never have

to cheer use between two or three things. That's how you get thirty one trillion dollars of debt. And by the way, both parties have done that to us, not the Democrats alone that have put us here. So I think it's going to be great whaling and gnashing of teeth, as there always is on every government shutdown and every debt sealing crisis. There's going to be all these horror stories written about defaulting on the debt and what it means for the world economy and the reserve status of

the currency and all that. And that's just you know, media hoping for a plane crash because it sells more newspapers than a plane landing on time and safely. But I think, you know, the last sixty four times we've done this, we've done it, and I think the sixty fifth time, and I'm making up that number. I can't remember howy times we raise it is going to be the same. Is there going to be political negotiations? I hope. So that's how that's how the government is supposed to work.

And I hope if anybody, if anybody refuses to negotiate, that they get called out for violating the spirit of the law, if not the letter.

what would you think? I guess what is what's going to happen with specifically in your old committee, the House Financial Services Committee and some of the other House committees in terms of ESG and how banks are CEO is going to be testifying? Is there going to be legislation? And what is I think the Republican goal for this year.

not a political creature. Okay. We are in the business of making widgets. We want to make widgets as well as well as we can to increase returns to our to our owners, to our shareholders to keep our employees safe and employed and so forth, and we don't get involved in stuff that's outside of our lane. That is

changing dramatically with ESG. And it does not surprise me that, you know, the Republicans, because they're on the short end of the stick here, are pushing back by saying, look, you want to get involved in politics, welcome to the game. We'd like to come down and testify next week and tell us what you're up to, because that's that's the business.

And I have to imagine, I have to imagine that the folks have made the decision to go down this ESG road took that into consideration if they really thought, if the corporate leadership of pick a company that's heavily involved in the ESG, I won't pick on anybody in this podcast, said you know what, we think we're going to get involved on these social issues and we're going to be able to do it without any you know, pushback at all from some of our political friends. And watch.

That may be the most naive leadership mistake I've seen this century, but clearly it must have happened because now you're seeing that the one group there's only a couple of groups in Washington that have no friends right now. It is China, to a lesser extent, Big Tech, and then any major corporation that's going esg. They'll never do enough to satisfy the Democrats, and they've done enough to

upset the Republicans. The Chamber US Chamber of Commerce is perhaps the most poorly run organization politically that I have ever seen in my entire life. They've managed to alienate their base and not pick up any friends on the other side. And that is really, really, really hard to do. It's almost like you have to set out to do that.

In Washington, d C. There was an interview, there was an article the other day about the role the Chamber played, and the person who runs it now was asked, have they talked to Kevin McCarthy, you know, since Kevin was made speaker, and the person dodged the question, and I know the answer least I knew the answer is a couple of days ago, which is no chance. No Republican wants to be seen with the United States Chamber of Commerce right now. That actually hurts you in a primary.

That is a tremendous destruction of the brand, and it comes from getting involved out of you, getting out of your lane, getting out of your depth, and getting involved in politics, which is what ESG is. So it's a fascinating case study. Be curious to see where it goes from here. I don't know where corporate America goes for friends in Washington, d C. But it could be a long road back out of the desert.

of Lords. But that's another that's another question entitely, but there is a certain collegiality in a legislative branch that doesn't exist in the executivenchure, and it certainly doesn't exist necessarily even in business, which is a little bit more you know, executive sort of driven world. So I miss that. No, I don't miss the BS. I was in Washington. I was on the floor in fact, for a lot of the McCarthy stuff is in the chamber. I still have

that privilege, thankfully. Once you're a member, you can always go on the floor and participated in that. Was stunned by some of the similarities what it was like when I was there, and some of the differences, some of the personalities that were the same, and some new folks who would come in. So it's a fascinating dynamic. I find it very interesting. That's one of the reasons I enjoyed.

You know, whatever work I do, I still interact with Congress a good bit because it's just it's it's never boring. But no, I don't I don't want to make a living doing that. People ask me all the time if I'm going back into elected politics, and I'm like, oh, absolutely not. And I said one. I said, because I got tired of being nice to people that I don't like. I'm just too old for that now. And you have to do that in a legislative branch. And I'm not any good at it. So Kevin's good at it, and

he's managed to keep this conference together. You know, he asked that he'd be judged by how it finishes rather than how it began. I think that's right. I think the interesting corollary to that, though, wasn't finished yet. He's got to get through these next two years and and see what he can do, see if he can. You know, he's gonna, invariably, Matt Gates is going to make the motion to vacate the chair. That was the one thing that Matt wanted. Matt insisted on a one person threshold

for that instead of five. My opinion is that Matt did it because that gives Matt the ability to do it by himself, as supposed to having to convince four people to go along with him. So he'll be on TV, you know, three times a week. This year threatening to vacate the chair, because that's what a lot of us was about, was about getting people on TV, getting their Q ratings up, getting the social media, preparing them for running for higher office governor, senate, president, et cetera. That

kind of stuff that that high school crap. I don't miss, but it's certainly still prevalent in Washington, d C. And that's probably inevitable. So no, I don't I don't miss it, but I still enjoying watching it from a distance.

Mozart because it's an interesting change of pay. So if I had three pieces of music, that would be it deep deep, deep down in my heart, I know that I would want to put Pet Shop Boys on that list because I'm still an eighties music addict, but I would never admit that in public because it really undermines my my reputation, not with us.

taking the time to join us. As well as a reminder you can read all of our Bloomberg intelligence research on the Bloomberg terminal at THEI Go And with that, thank you and have a great day.