They're intended to be markets where you have to constantly be trying to do things better, and if you fall down on that job, someone else will come in and take your place.
Behind every major policy decision, every corporate strategy, every Washington power play, are the insiders shaping the game and the new rules to win it.
The Deciders with Pulitzer Prize-winning journalist Brody Mullins and veteran DC strategist Lisa Camuso Miller.
Welcome to The Deciders. Today's guest is Hester Peirce, Commissioner at the Securities and Exchange Commission and head of the SEC's crypto task force. Commissioner, thanks for joining us.
Thanks Lisa for having me. It's great to be with you. I have to start with my disclaimer which is that my views are my own views as a Commissioner and not necessarily those of the SEC or my fellow Commissioners.
Commissioner, so many of the people who have come on our show have had a mentor or someone in their lives who sort of helped them along in their careers. I imagine for you it's Chairman Paul Atkins. Can you tell us a little bit about him and how he's helped you along with your career?
Chairman Atkins was a wonderful person to work for. I worked for him when he was a Commissioner here and he just was not only smart but also a very kind person and has very clear views about what the right approach to regulation is. And it's fun to see him now putting that agenda into practice.
Commissioner, you also spent quite a bit of time in the Senate Banking Committee with Senator Richard Shelby during the 2008 financial crisis. I'm curious, what did you learn from that experience working for him during a time where the stakes were so high?
Yeah, it was a really high-stakes time and a time where I think you could not help but learning a lot. I had started in 2008 so it was unfolding rapidly at that point and seeing the consternation and the fear that really was across the financial system and also across the regulatory system. It was quite eye-opening. For me, the most important lesson was that it's really important for people to understand what their exposures are. So, private sector actors need to know what their exposures are so that when something happens they can get their arms around it quickly. I also think that an important companion to that is that they have to face the consequences of those decisions. I think we've often tried to take the consequences away and sort of put them onto the government's balance sheet instead of leaving them with the private actors who made those decisions. So, that was something that Senator Shelby I think really was a strong advocate for responsibility falling on the shoulders of the institutions that had made bad decisions.
Let's talk a little bit more about that. During that time some people were talking about bailouts for companies, others were talking about nationalizing the banks and you sort of pressed for this third approach that you're discussing which is sort of allowing companies to face the consequences of their decisions. I think you wrote at the time, 'Sometimes you have to allow some immediate pain in order to have a system that is more resilient.' Cutting to today, do you think there are companies or industries that should be facing the consequences of their bad decisions?
When we're talking sophisticated financial institutions, the expectation should be that they will bear the consequences of bad decisions that they make. So, part of what I love about the markets I regulate is they're markets that are very dynamic. There are new entrants coming in all the time and incumbents that are leaving when they don't make good decisions and that's part of the natural development of these markets. They're not intended to be markets where you get to sit on your laurels. They're intended to be markets where you have to constantly be trying to do things better, more efficiently serving the markets better, serving investors better. And if you fall down on that job someone else will come in and take your place.
So, in that scenario there'd obviously be some pain to regular Americans and consumers. Do you think Americans these days are willing to withstand some pain?
Well, I think we saw a lot of pain to Americans in the financial crisis but I do think one of the key issues was that financial institutions hadn't taken into account that there could be bad consequences of the decisions they were making and regular Americans were really hurt by that. So, I want to look at ways that we can lower regulatory barriers to entry but also make it easier for firms to exit when they're not providing Americans with the products and services that they want and need at affordable prices.
Commissioner, you've been running the SEC's crypto task force for the last year. Would you share with us some of the accomplishments and the challenges perhaps that you have faced over the course of that time?
Yeah, it's been a nice opportunity to try to write rules, set up the line so that people know what the lines are and then helping people who are within the SEC's jurisdictional lines to figure out how to interact with crypto assets on behalf of themselves and their clients. It's been a lot of work and we've got a lot of work still ahead of us but I'm very excited about the work and optimistic that we can continue to make progress.
For years you were sort of critical of the SEC decision-making really by suing companies rather than making policy. How have you under President Trump done things differently?
Brody, that's right. I mean I've been a critic of regulation by enforcement in the crypto area and in other areas. I think that when you try to use enforcement to write regulations it creates some very bad outcomes. One is people don't know ahead of time what the rules are and how they apply to their unique circumstances and so they're trying to get clarity but instead of getting clarity they get sued. So, what we're trying to do is again clarify when things are outside of the SEC's jurisdiction, work with people who want to do things that are consistent with the regulatory objectives, help them figure out how the rules apply to the new technology, and then of course enforcement is a tool that we always have at hand to go after bad actors and that's one that we haven't put away. We're just using it for more appropriate uses now.
We'll be back right after this.
There are moments that shape an organization's future, a policy shift, a crisis or investigation, a market shock. When that moment hits the clock starts. Markets move in minutes. Regulators, employees, and customers respond instantly. Narrative helps leaders respond with pace, engage stakeholders with precision, and position brands with perspective. So, when challenges emerge you can navigate complexity and lead with clarity before the narrative is defined for you.
Welcome back to The Deciders with Commissioner Hester Peirce. Commissioner, you have sought to be a champion for retail investors saying that ordinary Americans have been locked out of opportunities because you need to be wealthy in order to participate. What would you change?
Well, I mean if I had a pen that I could write the rules anyway I wanted I would get rid of the accredited investor definition altogether. I think it's really contrary to American principles to say to people, 'You can earn your money, you've worked hard for your money and you can use it for all manner of things but we won't let you access this one section of the capital markets especially now where so much of the growth of a company is happening outside the public markets.' Figuring out a way to get retail investors access to those markets is important. So, that's also part of what we're working on now at the SEC is trying to figure out what we can do to make it more likely that more companies will go public earlier in their lives and then will stay public.
Talk to us about safe harbor. Since 2020 you've been pushing hard for safe harbor really to let blockchain projects sort of have some regulatory relief until they get fully into the marketplace. Can you tell us about your wins recently on pushing safe harbor?
Yeah, what I was trying to do all those years ago was to say, 'Is there a way that we can enable people to get access to information while also not taking the position that these crypto tokens that are being sold are themselves always and forever going to be treated like securities.' So, what we've done now is the Commission put out a taxonomy that identifies when tokens are securities. It gets us to a better place of acknowledging that you can use a token in a fundraising but also providing some disclosure around that and walking people through how they can do that in a way that's compliant with the securities laws.
And on tokenization, can you explain to sort of regular Americans why this is important?
It's like in the old days you had your stock ownership recorded on paper certificates. We don't do much of that anymore and people moved to a non-paper version because that was more efficient in many ways and I think people are looking at blockchain the same way and saying if we tokenize securities are there more efficiencies that we can gain. And so, we'll only move to that system if the market collectively decides that makes sense.
The complexity of this issue is not lost on myself or on Brody and so we're really grateful for you sort of talking to us at a level that helps us better understand it but this seems to be sort of a trend and a through line in the way that you yourself communicate, and that includes using some creative names for your speeches. My favorite is peanut butter and watermelons. You're making a point about the financial middleman, but would you tell me a little bit more about why that has become your brand and way of communicating there?
Well, I think some of these issues can be a little bit impenetrable for a regular audience and frankly boring for a lot of audiences. So, sometimes I think bringing it home with telling a story can be helpful, and ultimately the capital markets are markets that belong to all of us. They're not the regulators' markets, and they're not the province of just a few Americans. They really are essential for the growth of the economy in this country, and I think trying to talk about these issues in more accessible ways is part of my attempt to say I want everyone to get excited about these markets, and I want them to not be scared off by the technical or boring nature of some of the terminology.
