Chairman, SEC
Gary Gensler: The Exit Interview | Big Take
Gary Gensler’s tenure as Wall Street’s top regulator is coming to an end, and the US Securities and Exchange Commission chair is reflecting on his time at the agency.
In an interview with host David Gura, Gensler responds to his critics, discusses his concerns about AI, China and crypto — and shares the advice he gave President-elect Trump’s pick to replace him.
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About Gary Gensler
Gary Gensler, former chair of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), has been active in media appearances discussing securities regulation, prediction markets, and artificial intelligence. Regarding the SpaceX IPO, Gensler said the offering represents a shift in corporate governance, noting that insiders will not have a traditional lock-up period and that shareholders cannot sue the company but must go to arbitration. He stated that these risks "have to be understood by shareholders." On the topic of quarterly earnings reports, Gensler opposed a proposal to move to semi-annual reporting, calling it "a solution in search of a problem" and arguing that transparency is important for capital markets. Gensler has been a vocal critic of expanding the CFTC's authority over prediction markets and sports betting. He argued that Congress did not intend for the CFTC to become a national regulator of sports betting when it passed the Dodd-Frank Act, and said states should regulate such activities. He also warned about the risks of AI, stating that "we will have a financial stability event" if banks and trading shops rely on the same AI models, and that threat actors will use AI to probe for vulnerabilities. Regarding insider trading in prediction markets, Gensler said Congress should prohibit government officials and their families from trading on these platforms, calling it "too hard to police this and to enforce it rigorously."
Transcript (38 segments)
✨ AI-enhanced transcript with speaker attribution
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Narrator0:01
Bloomberg Audio Studios podcasts radio news. Gary Gensler has less than two weeks left as Wall Street's top cop as the chair of the US Securities and Exchange Commission. He took the job in April of 2021, not too long after the GameStop short squeeze, and during Gensler's tenure the SEC has taken action against a number of high-profile crypto executives. These folks, a lot on protecting investors, which is central to the agency's mission. Bloomberg's Jonathan Ferro asked Gensler about that in the context of crypto and meme stocks in his first interview with Bloomberg as SEC chair just a few months after he started.
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Jonathan Ferro0:43
Gary, what do you do for a group of investors that don't want your protection?
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Gary Gensler0:46
Well, I'm going to be animated every day in this job by working families, and working families need the protection.
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Narrator0:53
Gensler's approach to enforcement in the world of crypto especially made him unpopular. He maintains most cryptocurrencies are in fact securities and therefore are subject to regulation by the SEC. President-elect Donald Trump campaigned in part on getting rid of Gensler.
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Donald Trump1:09
On day one, I will fire Gary Gensler and appoint a new SEC chairman.
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Gary Gensler1:17
I didn't know he was that unpopular.
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Donald Trump1:25
Well, I didn't know he was that unpopular. Let me say it again: on day one, I will fire Gary Gensler.
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Narrator1:38
Well, Trump will not have to do that. On November 21st, Gensler announced his decision to step down on inauguration day at noon, which led to much rejoicing in the world of crypto, at least on TikTok.
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TikTok User1:51
Oh my God, it's finally here! Gary Gensler officially resigns from the SEC. This demon has been torturing the entire crypto industry for like three to four years, literally regulating through enforcement and going after nearly every major crypto company in the United States.
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Narrator2:10
This week I went to Washington to interview the SEC chair. It's the third in a series of conversations I've had with members of President Biden's administration who were leaving government, including Treasury Secretary Janet Yellen and Secretary of State Antony Blinken. Let's go now to Bloomberg News's David Gura, who is sitting down with the outgoing chair of the SEC over in Washington. David, over to you.
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David Gura2:32
Thank you very much, and welcome to our listeners and viewers worldwide. I'm here with Chair Gary Gensler in his office in Washington, D.C. Great to speak with you.
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Gary Gensler2:38
Great to be with you, David.
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David Gura2:40
Part of it was live on television and radio, but we kept the conversation going when the cameras cut away. I asked him to reflect on his time as the US's top securities regulator and what it's like to be called out by the past and future president, along with the world's richest man, and what's next for the SEC.
I'm David Gura, and this is The Big Take from Bloomberg News. Today on the show, an exit interview with the 33rd chair of the US Securities and Exchange Commission, Gary Gensler. His views on crypto, on AI, on China, and what advice he has for his successor. I want to start first just by asking you how you're feeling here with less than two weeks left in your term. You have been subject to a fair amount of taunts, some vitriol. How have you processed all of that?
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Gary Gensler3:31
Yeah, you walk into this central square and you debate these important things for 330 million Americans. I've worked over the years with Hillary Clinton on a number of campaigns, and I remember Hillary saying once, like, if you're not willing to be attacked, you can't go into the public square and debate policy. And so I think it's part of our great democracy. It's a great privilege to be in a role like this, but what's remarkable about this role is it oversees the $120 trillion capital market, which touches everything in our economy because you've got to raise money for most of what we do in our economy, and people save. You ask about the attacks and things like that, that's what public policy is about.
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David Gura4:21
You came into this job, you gave a big speech in which you analogized the crypto world to the Wild West. I guess that makes you the sheriff. So as you get ready to hang up your spurs, is it less of a Wild West than it was as you leave this office?
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Gary Gensler4:37
My daughters, if they ever watch this interview, will ask, 'Where are your spurs, Dad?' I think that we've done some good things. Look, I came in, my predecessor Jay Clayton, who was in this office, had also tried to address this new emerging part of finance. Jay was trying to address it, and he brought 80 enforcement actions in this area. We've brought about 100 in our four years. Consistent. I've been around finance for over four decades, and everything in the markets trade on a mixture of fundamentals and sentiment at any given time. But I've never seen a field that's so much wrapped up in sentiment and not so much about fundamentals. And these 10,000 to 15,000 projects, many of them will not survive. They're like venture capital investments, they're not going to survive. But there are also a fair number of small pump-and-dump schemes and other things in this. And of course, we lived through a few years where, you know, they became notorious, but they're in jail, the Sam Bankman-Frieds and Do Kwons, where tens of billions of dollars were lost by investors.
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David Gura5:53
Settle something for me, because I think when you came into office, a lot of people looked at your immediate background, having researched a lot of digital assets, worked on them at MIT, and thought that you would be perhaps a champion of them. Has there been an evolution in the way that you approach crypto over that transition from academia to here, or while you've been here? People think you are somebody who's adamantly opposed to it.
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Gary Gensler6:08
Here's the evolution: when you're in academia or when you're not in this job, you can study something and observe it, as I did, and try to teach students what's the value proposition about this new technology, what's the value proposition of this new investment vehicle. But then when you're in this job, this is a chair of a five-member commission over roughly 5,000 people, that's a law enforcement agency, and this is a field rife with challenges and non-compliance with the securities laws. You take an oath of office, you do what you can to protect the investing public.
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David Gura6:54
On that note, we saw in this last election cycle $135 million spent by crypto companies on races across the country. Did you notice that very few, if any, actually advertised on crypto? Does that give you concern, the role that the crypto industry is playing not just within these halls but across Washington, across the country in those races?
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Gary Gensler7:16
I just think of everyday investors. I think it's very consequential to everyday investors that we put in place rules that insiders of companies, senior executives, can no longer just file a plan on a Monday when they had material non-public information and sell their stock on that same Monday. But we put in place rules that they will have to wait 90 days. And why 90 days? Because then they might release that material non-public information. So I think that's what we really focused on, and that everyday investors have benefited from that.
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David Gura7:54
Let me pivot to risks, and you've sounded the alarm about artificial intelligence at the SEC. You gave a big speech at Yale Law School, you did one at the National Press Club. It's something that you're clearly thinking about. I even wrote about it when I was at MIT.
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Gary Gensler8:08
There you go, four and a half years ago. We are facing now four years where one geopolitical consultancy says we're having AI unbound, that there will be less regulatory interest in AI. What are the consequences of that as you see it to the financial markets, not having anything close to a robust regulatory regime for AI?
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David Gura8:24
It's very dramatic advancements. I think it's going to transform so many parts of our economy in good ways. We are automating this, and the Industrial Revolution was automating this and this. And for those that couldn't see, I meant we're automating our brains and not our biceps, our biceps and our thighs. And I think it will boost productivity, but there'll be a lot of disruptions in terms of the capital markets, in terms of finance. I think about the challenges of the conflicts: if your robo-advisor, are they giving you advice on behalf of the asset manager or you? And who are they putting first? And it could be in some opaque mathematical formula deep inside the algorithm.
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Narrator9:22
Another challenge facing the agency: it could see its budget slashed under the incoming Trump administration, which has promised to reduce spending on government agencies across the board. That's in a moment. SEC Chair Gary Gensler has already announced he's leaving his job at noon on inauguration day. It's been well established that President-elect Trump would not have left him in the job. I wanted to ask Gensler about Trump's plans for the SEC and other agencies.
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David Gura9:58
The ethos, it seems, of this administration is to cut staff and cut bureaucracy here in Washington. What would that mean for this agency if you had to guess?
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Gary Gensler10:05
I think it would be unfortunate because we're already spread too thin. We get 40 or 50,000 tips, complaints, and referrals a year. A year. Now, back to an earlier subject, I think 18% of those are from the crypto field, and at any given time we only have the staff to maybe investigate some small portion. So we're constantly triaging.
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David Gura10:32
Has there been an SEC Doge summit? Has anyone working for that new Elon Musk, Vivek Ramaswamy outfit come to the agency to talk about potential changes?
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Gary Gensler10:43
I think you know, and it might sound familiar to what Antony Blinken told you: there's one president at a time, there's one commission at a time. I'm proud of this agency, but that would be for folks to do after January 20th. They'll take that up at that point in time.
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David Gura11:03
Looking ahead, have you had a conversation with Paul Atkins, your presumptive successor here? And if so, what did you stress to him as most important to think about as he would take over the helm of this agency?
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Gary Gensler11:13
Paul and I did catch up. You know, he knows this agency. He's worked at this agency, two chairmen I believe, and he was a commissioner for six years. And so I won't say all the things privately, but Richard Breeden was the first person to hire Paul into the agency. Richard was chair under President Bush number 41, and I shared with Paul the advice that Richard gave me coming into this job. And Richard said, 'Remember, every single day in the job is one day closer to when you will join the former club.' And you can take that a number of ways, but I took that as Richard's way of saying every day is such a privilege, use it well, use it on behalf of the American public. And so that was my main advice to Paul.
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David Gura12:07
A sort of big-think question just about financial regulation and the US's role in the world. You've said though the US equity markets are the deepest, most liquid in the world. We can't take that leadership for granted. At this moment of transition, there will be some, I imagine, who wonder just about the certainty of regulation in this country and how the US holds on to that position of prominence or preeminence in the world. Are we doing ourselves a disservice, are we shooting ourselves in the foot by having these kind of radical changes in leadership of regulatory agencies? So it went from Jay Clayton to you, you had your own regulatory agenda, now we'll go presumably to a Paul Atkins one, and he'll prioritize certain things, maybe push other things to the wayside. Investors love certainty. Is there an inherent lack of certainty in the way that we have financial regulation in this country that's detrimental?
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Gary Gensler12:54
I think democracies are a very good thing. The American public gets to speak through their votes as to who sits in seats of consequence, like I sit in. I think what's really important for regardless of who's in this seat is that you can't take for granted that we're going to be number one. And that our capital markets might be the deepest and liquid now, but if they get more costly, if they get rickety and unstable in any way, if they favor certain folks rather than having a really competitive environment where you have equal and open access to the capital markets, full access I should say, and fair access, then we could give up our mantle. And it relates to the dollar's role in the world. A lot of people talk about the dollar as a reserve currency. I say that's interesting, important maybe, but it's really about our capital markets that are 40 to 45% of the world's capital markets. Our stock market is $60 trillion in size. The French stock market, the UK stock market, three trillion, two to three trillion. We have single companies that have market values more than that. Even the Chinese stock markets, maybe at 12, 13 trillion. But we can't take it for granted. Got to keep it good disclosure, free of fraud, manipulation, and really have as best you can competitive all-to-all trading. And then markets go up, markets go down, and you know, people get to decide what risk they want to take.
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David Gura14:42
Lastly, what's next for you? Do you have plans for what you'll do come January 20th when you leave this job?
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Gary Gensler14:47
I don't have anything to announce on this program. It really is a remarkable agency, and I want to hand it off well to the next team. And I'm very focused, of course, on the staff, the great staff here, over these next 10 days as well, and then hand it over to others that will have the privilege, as Richard Breeden said, that each day is one day closer to when they join the former club.
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David Gura15:21
Sure. Gary Gensler, thank you very much.
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Gary Gensler15:23
Thank you. Appreciate it. Thank you.
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David Gura15:29
This is The Big Take from Bloomberg News. I'm David Gura. This episode is produced by David Fox and Jessica Beck. It was mixed and sound designed by Alex Siguara and fact-checked by Adriana Topia. Our senior producer is Naomi Shaven, who also edited this episode with Aron Edwards and Megan Howard. Our senior editor is Elizabeth Pondo. Our executive producer is Nicole Beamster-Bore. Sage Balmann is Bloomberg's head of podcasts. If you like this episode, make sure to subscribe and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back next week.