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We now commence a three-hour interview. Gary Gensler joins us now. He's a former chairman of the Securities Exchange Commission, a modest tenure of duty at Goldman Sachs as well. And critically, long ago and far away, writing legislation, Sarbanes-Oxley, well over 20 years ago. Gary, I've been dying to talk to you. I read all the wonderful comments on this life of Alan Greenspan. And I get the criticism about interest rate dynamics in 2005, 2006, and that. But, I'm going to go to a guy that you have a nodding acquaintance with, one S. Johnson up at MIT. I've quoted this many times, folks. Simon Johnson and His Majesties 13 Bankers. The SEC, not Gensler's SEC, final rule alternative net capital requirements for broker-dealers that are part of consolidated supervised entities, August 20, 2004. Gary Gensler, we can criticize Chairman Greenspan, but he had a lot of help in screwing us up into the financial crisis, didn't he?
Well, there is a broad mess. I don't know how else to say it. Policymakers across the spectrum, and the American public paid the price, and we exported, by the way, that crisis around the globe. But in terms of Alan himself, I worked with him closely in the late 1990s. Actually met Alan in the 1980s at a wonderful dinner at Larry and Billy Tisch's house in the mid-1980s. And Alan was a dedicated economist, a dedicated public servant. And look, Tom, none of us get everything right. And yes, in those key years going into that '08 crisis, there was too much leverage being built up in the housing market. Too much leverage being built up in the financial markets.
One final question and Chairman Greenspan just as Paul and I feel the news flow right now, Gary Gensler's just so important. He was in my estimate a market economist. I love what Greg Ip said, more accountant than theorist. Do we need more central bankers steeped in trucking data in Nebraska? I mean, do we need a more of a tinge of Alan Greenspan in our future economist types?
Well, I'll tell you the other thing about Alan having worked closely with him for three or four years, maybe not as closely as others, he also was really steeped in the financial markets. So, there's all sorts of different types of economists. And we've had leaders of the Federal Reserve that were lawyers. We've had leaders of the Federal Reserve that have come from all sorts of places. William McChesney Martin, famously from the 1950s and '60s, had run the New York Stock Exchange. Alan understood markets. He as a young guy used to trade futures in the old Chicago Mercantile type of futures markets. And I remember conversations with Alan about futures in the 1990s. And then when I took the role at the Commodity Futures Trading Commission, Alan and I would sometimes get on the phone. And he'd say, 'Well, this is how futures markets really work. And this is how energy markets.' And he'd be into the backwardization of the markets. That was remarkable about Alan. He I think he had a sense of financial markets. He had too much of a trust though in them to right themselves when there were imbalances. And there were big imbalances he navigated during the internet enthusiasm, but he didn't quite navigate that on the housing markets.
Paul Sweeney, you get lucky. You have Gary Gensler on and moments ago across the Bloomberg is a five-tranche SpaceX benchmark debt offering. Perfect timing.
Gary, we're at a time here in the markets where we're getting just these mega IPOs. SpaceX, you know, they went public and we've got Anthropic and Open AI. Does that send a signal to you and to others about where we are in this market cycle?
Well, I think so. You used the word signal. I use the word tell. Simon Johnson, who you mentioned earlier, he and I do this podcast and we just put one out on the mega IPOs just this morning on power and consequences. And I think the overall equity markets, like Alan Greenspan's 1990s equity markets, is funding this big burst of infrastructure build in AI. 750 billion dollars this year, up threefold in just two years. And to scale that, that's about 2.5% of our gross domestic product. And so then you have like SpaceX go public and maybe Anthropic and Open AI. We'll see. I think that's somewhat of a tell. Google raising 85 billion. And the markets have to digest this. And then there's valuation questions. You know, at a hundred, hundred forty times revenues without earnings. So, this will all sort out, but it also might be that six months from now we look back it was fine, but there's an equal and better chance that six months from now we look back and we say, as all those venture capitalists and sovereign wealth funds start selling those shares, that you see a downward pressure on the not just SpaceX, but the whole market.
You're up there at MIT, Gary, and as I understand, there's some pretty good engineers and computer geeks up there as well. What is kind of your understanding? What's the understanding up there at MIT just about AI today? Because initially, we in the marketplace, we just said, 'Let's just buy the chips.' But there's more to it than that. Market seems to be trying to discern some winners and losers. How do you guys think about that?
Look, there's thousands of remarkable research scientists and faculty here. So, I can speak for just maybe myself. And I think AI is the most transformative technology of our times, but we've had this before. If you go back over the last 200 years from canals to the internet to this. And what happens, and Ray Dalio talks about this, too. We get an overenthusiastic financial market support. And then at some point, we build so much infrastructure, we have a reckoning. And I think that's what you learn from history is that we tend to have reckonings. Now, is it a calamitous reckoning like with railroads in the 1870s where we had a disastrous recession? Is it a reckoning like after the 1920s, we had a big boom on electrification mostly in utilities? Or is it like the internet where you have a modest reckoning? Still a recession. And that's so, AI is transformative. One last thing, Paul. I think of it a little bit like a parlay bet. You know, there's the prediction markets. You have to have two things. You have to have AI hyperscalers and OpenAI be able to build the revenues. Right now, they don't have the revenues. And two, you need to build productivity in the economy enough for the capital markets to overlook all the disruption, all the companies that are going to be disrupting value with a successful AI.
We continue with Gary Gensler, the former chairman of Securities Exchange Commission. His commitment to Sloan, where he's won a couple like student trophies.
