Joining us right now for a wide-ranging conversation about market regulations, crypto, the future of capitalism, the law, and so much more. Jay Clayton, US attorney for the Southern District of New York. He is Wall Street's top prosecutor. He's a former SEC chair, of course, former CNBC contributor, and we should mention this is his first interview with us in his new role. Thank you so much for being back.
Well, it's nice to be back, and congratulations on 30 years.
Thanks. So, help us just understand what's happened with you over the last couple months because you got this job originally on an interim basis or blocked on an interim basis. Now you have it, the court says you can have it. What's going on?
It's, you know, it's permanent now. I'm in the role. I'm happy to be there. Got a great, great group of people. We're doing good things and full steam ahead.
Do you see yourself as the top cop for Wall Street? And people have always, I've always used that phrase for this particular role running the Southern District.
I'm not sure I really would pick that phrase for myself. Um, you know, I think, I think your job as the, as the prosecutor in, in the greatest city in the world, the greatest markets in the world, is to make sure people are playing fairly in those markets. You know, it's, it's, that's what it's really about.
Way to defund you then. Defund you as a cop, like defunding the police, if you don't think there's anything you need to do.
No, no, there's a lot to do. I just don't think you wear, you know, you wear a badge.
You don't need to, you don't need to approach it with capitalism as your enemy necessarily, which is, what are we at? We're at 40. Where are we? We're at 51% approve of capitalism. 39% are at social.
You know what, what is, what, okay, let's, let's go with, let's go with that label, the cop. What's your job? It's not to fight markets. It's to make sure markets work well. That is the, that is the devil's, and no, but, and work fair, but, but that is really important. You're having this debate on here about capitalism.
I mean, there, there is, there, there is no better system for allocating labor and resources over time than capitalism. And what, what do, what should we be doing in our job? What do I do at the SEC? It's where markets aren't working, where they're not revealing prices, where they're not letting people make good decisions. You go in there and try to work the market regulations. I don't see it as a default or a last resort or Americans finally do what they need to do when they finally do the right thing when they've tried everything. I don't see it that way. I see it as you can embrace capitalism and, and almost patriotically embrace capitalism because of what it's delivered for people around the world. Even in China, that's what's, that's what's taken all those hundreds of millions of people out of poverty is capital, their own kind of capital.
Let's compare Europe. Yeah. Yeah. To the US or Canada.
15, 20 years ago, same size economy. Europe took what I would say is an anti-market allocation.
GDP over 20 years. They're much poorer.
Let me ask you a question. And they have no less talent, right?
Let me ask you a question. Let me ask you a question about your role though and how you think about it in the following context. So we are going through what I would argue is a generational change in the financialization of our country, whether it's crypto, this idea that you're seeing private enterprise or private companies being quote-unquote tokenized so that the public can get access to it. You're now talking about private credit markets and private equity and venture capital that's going to be accessible to retail investors, ultimately possibly put into 401k plans and the like. All of that is going to be very dependent on a lot of these institutions marking to market their assets without necessarily controls over them in the same way that public companies have had historically. And I imagine that is going to be part of your purview because there are going to be people, for better or worse, that are going to be trying to play with the law.
Two things there that are really important. One is all American investors should have as much access to the American economy as possible. We have driven all retail investors into the cash equity markets. 10 companies are 30% of their exposure. That is not what I would, what I would call a diversified investment. Now to your point about how do, how do we ensure that the prices people are relying on are good. We should remember that there are certain things that you invest in that you do not expect to have mark-to-market prices every day. That's, that's part of private equity investing. It's part of private credit investing. Those types of investments are entirely suitable for 401ks, right? Where we can, we can easily devise rules that make sure they operate fairly even though, you know, day-to-day prices may not be the same as the cash equity market.
Right, but the, the reason I'm raising this issue is we, we're already doing it. I hope, and I hope it works. There's a whole bunch of what are described as semi-liquid instruments that are being created such that effectively these private funds are buying what might be described as illiquid assets, but are trying to create a liquid market for them. And part and parcel of that is going to be marking those assets in a different way than the way a classic company might be quote-unquote marked.
We, we don't have to talk in hypotheticals. Take what has happened in Australia with their superannuation funds. Every person in Australia gets allocated capital into both liquid and illiquid investments, and it has worked fabulously well. We can duplicate that in America, I think, very easily. It's been around 25, 30 years and they have solved their retirement crisis.
It's mandatory employer-employee contributions. So think of a mandatory 401k. You know, the employer has to put the money in. But for, you know, excessive hardship, you can't take it out. It's managed professionally, like well-managed pension funds are managed. And then at 65, you know, there you are with a, with a fairly substantial.
The reason I'm raising, Australia was pretty unusual in that it went without, they were way, they were way ahead of us, but they also went without a recession for an incredibly long period of time because they were heavily benefiting from the Chinese boom, economic boom that was there too. But that's, that's an interesting.
Board with this. Do, do you, you think there's lawfare going on between Trump and, and Powell and, and the Fed? I, I'm not going to, I, I am not. You should, I mean, you, you, you should be able to, to, to look at that and make some type of determination. Don't you think, Andrew? Get him. Get him.
Here's, here, here's something, here's something really important. Show me a man and I'll find a crime. The American people need to have confidence in their justice department. They need to have confidence in their district attorney's offices. They, they need to feel like the decisions that are being made are the decisions that the American people want. That, that's just fun. That's what I go to work with.
You're going to keep your job. I, I, I see that. You, you are a high-minded, very moral. I, I know you, ethical person. Nothing going on where you go, 'Whoa, two wrongs don't make a right. This is quid pro quo.' Whoa. This is. Huh.
Two wrongs never make a right, Joe. Let's, let's let the process play out.
Let me ask you a different question. One of the things. That was your question and you don't even want to talk about it. Well, no. No. I, I don't, for better or worse. You're doing Andrew's dirty work today. I don't think Jay's gonna answer sleeping with dogs. I don't think Jay's gonna answer the question. What doesn't mean it shouldn't be asked. You. No, I'm, I'm suggesting it should be asked. You yell at me all the time. You've asked the question and the great part about live TV is you get to see the answer. You get to see the answer. There was no, live TV is fun, right? My question to you is slightly different, which is one of the things that the leader of the, or the, the southern districts has often done is prosecute insider trading, and in this new world, and the new world being crypto, being tokens, being everything else, where is the line around insider trading in your mind today? Where's the, what is the line? Because you look at crypto and some people would say crypto is a commodity, sometimes it's a security, sometimes it's now with an ETF. So where, where is the line? Do you imagine over the next couple years that you're in this role that we're going to see prosecutions of insider trading as it relates to crypto? Maybe that's the question.
The answer is yes. I do expect it. I expect it on a fraud theory and on a manipulation theory. Just because something's not a security doesn't mean there aren't laws that apply. I mean, you know, general fraud, wire fraud, those types, those types of theories, you know, apply to non-securities markets all the time. And I think people sometimes say, okay, if it's not a security, it's the wild west. I would caution them not to think that.
