1 00:00:05,120 --> 00:00:07,320 Welcome back everyone. I am Cass PNC. 2 00:00:07,320 --> 00:00:09,480 I'm joined as usual by my partner in crime, Mr. Bennett 3 00:00:09,480 --> 00:00:11,880 Tomlin. It's wonderful to be talking to 4 00:00:11,880 --> 00:00:13,320 you for an extended period of time. 5 00:00:13,320 --> 00:00:14,960 Today we're recording two episodes. 6 00:00:15,200 --> 00:00:17,840 Right now we're going to be talking about banks. 7 00:00:17,840 --> 00:00:21,240 We talked about a bank in the last episode, Deltek, and this 8 00:00:21,240 --> 00:00:24,040 episode we're going to be talking about regional banks in 9 00:00:24,040 --> 00:00:26,560 America. We're going to revisit the 10 00:00:26,560 --> 00:00:30,000 banking crisis from last year. I I think we should go over it a 11 00:00:30,000 --> 00:00:32,159 bit. I, you know it has been a a a 12 00:00:32,159 --> 00:00:34,960 year since we had Rohan Gray on to to talk about it. 13 00:00:35,280 --> 00:00:37,840 If you are interested in that discussion, which I think was 14 00:00:37,840 --> 00:00:41,480 valuable and insightful when it comes to moral hazards 15 00:00:41,480 --> 00:00:44,360 insurance, all of this stuff, give it a listen. 16 00:00:44,560 --> 00:00:47,280 If not you know we're going to just quickly go over some of the 17 00:00:47,440 --> 00:00:49,160 the talking points that we had in that. 18 00:00:49,440 --> 00:00:54,120 But I also want to discuss, I know we're no banking experts, 19 00:00:54,120 --> 00:00:58,880 but I I do want to see what our opinion is as to the lessons 20 00:00:58,880 --> 00:01:02,240 learned and the takeaways that were made. 21 00:01:02,320 --> 00:01:06,800 And whether the future for community banks, regional banks 22 00:01:06,800 --> 00:01:10,760 and larger banks, too big to fail banks, I suppose, looks 23 00:01:10,760 --> 00:01:14,080 bright or looks bleak. Where do you want to start, 24 00:01:14,080 --> 00:01:15,400 Bennett? Because there's a lot of places 25 00:01:15,400 --> 00:01:17,160 we can start here. I think one of the most 26 00:01:17,160 --> 00:01:20,000 interesting places to start with this is as you mentioned, the 27 00:01:20,000 --> 00:01:23,040 bank in trouble right now is New York Community Bank Corp, which 28 00:01:23,040 --> 00:01:25,920 merged with Flagstar. And what makes them interesting 29 00:01:25,920 --> 00:01:29,160 is they were struggling quite severely. 30 00:01:29,480 --> 00:01:32,480 They got a billion dollar investment led by one of my 31 00:01:32,480 --> 00:01:35,600 least favorite people on earth, Steven Mnuchkin today, which 32 00:01:35,600 --> 00:01:38,600 should hopefully allow them to continue operating. 33 00:01:38,840 --> 00:01:41,000 Hopefully it allows them to continue operating in a way 34 00:01:41,000 --> 00:01:43,080 where Steven still loses all of his money. 35 00:01:43,400 --> 00:01:45,200 That's my goal for this investment. 36 00:01:45,800 --> 00:01:48,880 I doubt it. But what's what's interesting 37 00:01:48,880 --> 00:01:54,200 about it is that Flagstar was the entity which acquired a lot 38 00:01:54,240 --> 00:01:58,560 of the Signature Bank assets after their difficulties. 39 00:01:59,040 --> 00:02:02,120 And so that's the crypto connection that initially jumps 40 00:02:02,120 --> 00:02:06,080 out at me is that we saw Signature Bank became Signature 41 00:02:06,080 --> 00:02:09,759 Bridge Bank after its failure. As is typical, those assets were 42 00:02:09,759 --> 00:02:12,920 then acquired by Flagstar as Flagstar was merging into New 43 00:02:12,920 --> 00:02:17,640 York Community Bank Corp And now we've had kind of this chain of 44 00:02:17,640 --> 00:02:21,520 failures chase this set of assets up the chain, right? 45 00:02:21,960 --> 00:02:24,600 Silvergate fails, which puts more pressure on Signature, 46 00:02:24,600 --> 00:02:26,520 eventually causing Signature to fail. 47 00:02:26,520 --> 00:02:29,840 So Signatures assets get bought by Flagstar which eventually 48 00:02:29,840 --> 00:02:32,320 after it merges with New York Community Bank Corp ends up in 49 00:02:32,320 --> 00:02:36,280 this situation where they need a billion dollar let's call it a 50 00:02:36,280 --> 00:02:39,080 lifeline. And it's kind of funny at least 51 00:02:39,160 --> 00:02:42,880 to me that it's that same in part set of assets that have 52 00:02:42,880 --> 00:02:45,200 been passed along that chain the entire way I. 53 00:02:45,200 --> 00:02:48,000 I just imagined being one of these customers and how 54 00:02:48,000 --> 00:02:51,680 infuriating would be like imagine having this is what I 55 00:02:51,680 --> 00:02:55,480 said to to Bennett before. Imagine having $300,000, you 56 00:02:55,480 --> 00:02:59,760 know having over the insured amount in a bank account at 57 00:02:59,760 --> 00:03:03,640 Signature Bank and then they fail and the FDIC swoops in and 58 00:03:03,640 --> 00:03:06,600 you're thinking like Oh no, I lost like $50,000 like a 59 00:03:06,600 --> 00:03:10,240 significant sum of money if that's my all the money that I 60 00:03:10,240 --> 00:03:12,760 have. And then the FDIC eventually 61 00:03:12,760 --> 00:03:16,160 assures you like, no don't worry we're giving everybody their my 62 00:03:16,160 --> 00:03:18,680 like it's going to be fine. And also this this other bank is 63 00:03:18,680 --> 00:03:21,800 moving into swoop up assets everyone's getting everything. 64 00:03:22,360 --> 00:03:25,520 So you you kind of let out a a sigh of relief you think OK good 65 00:03:25,760 --> 00:03:29,480 my $300,000 is safe again. Maybe you didn't learn the 66 00:03:29,480 --> 00:03:34,280 lesson because of this, to not just get a sweep account or have 67 00:03:34,280 --> 00:03:37,520 more than one bank or you know. Or get insurance on the 68 00:03:37,520 --> 00:03:40,160 secondary market like we should Be explicit if you're if you're 69 00:03:40,160 --> 00:03:43,080 a rich person and you have uninsured deposits, you can go 70 00:03:43,080 --> 00:03:45,480 to like insurers and buy insurance. 71 00:03:45,600 --> 00:03:47,840 Sure. So, so there's multiple ways to 72 00:03:47,840 --> 00:03:49,440 go about this. There's a lot of different 73 00:03:49,440 --> 00:03:52,400 things you can do to alleviate these, these risks and these 74 00:03:52,400 --> 00:03:55,360 issues if you have over $250,000 in the account. 75 00:03:55,600 --> 00:03:58,880 But imagine being someone who didn't learn that lesson from 76 00:03:58,880 --> 00:04:01,400 that first failure and now you're having to deal with that 77 00:04:01,400 --> 00:04:04,680 stress again of like, Oh no, is my bank going to fail? 78 00:04:04,680 --> 00:04:08,680 And just to be that person to see the two banks you're banking 79 00:04:08,680 --> 00:04:13,120 with fail within a year of each other Pretty much, right. 80 00:04:13,120 --> 00:04:16,000 So it's not a failure, but to me it might as well be. 81 00:04:16,200 --> 00:04:19,200 If you need a single individual to come give you a lifeline to 82 00:04:19,200 --> 00:04:21,839 me, that means your bank has has ultimately failed. 83 00:04:22,640 --> 00:04:25,080 We we we should be clear. It's not just Steven. 84 00:04:25,080 --> 00:04:28,760 His firm is bringing about half the total with 450 million, but 85 00:04:28,760 --> 00:04:30,600 it's filled out with with a bunch of other firms. 86 00:04:30,600 --> 00:04:32,680 Still horrending like. Citadel and preference and 87 00:04:32,680 --> 00:04:33,720 whatever. Yeah, no. 88 00:04:33,720 --> 00:04:37,600 Listen, any situation where you start to feel like Steven 89 00:04:37,600 --> 00:04:41,800 Mnuchkin might be like your hero might be the solution to your 90 00:04:41,840 --> 00:04:44,560 problem instead of a problem Citadel, you're in deep shit. 91 00:04:44,880 --> 00:04:47,600 If you're relying on Citadel as your hero, you are definitely in 92 00:04:47,600 --> 00:04:49,240 trouble. What I'm saying is more to the 93 00:04:49,240 --> 00:04:53,160 effect of like, you're kind of teaching a really horrible 94 00:04:53,160 --> 00:04:57,080 lesson to any distracted investor. 95 00:04:57,080 --> 00:05:00,080 To anybody. Not even investor, just 96 00:05:00,080 --> 00:05:02,720 somebody. And this is going to get to a 97 00:05:02,720 --> 00:05:04,920 bigger point that maybe we'll make a little bit later. 98 00:05:04,920 --> 00:05:08,120 But to me, most of what these banks are supposed to be 99 00:05:08,120 --> 00:05:12,200 providing, I understand the mechanisms they engage in now, 100 00:05:12,600 --> 00:05:14,960 and a lot of it is speculative nonsense. 101 00:05:15,120 --> 00:05:17,680 But largely what they're supposed to be doing is 102 00:05:17,680 --> 00:05:20,600 providing a public good. They're supposed to be giving 103 00:05:20,600 --> 00:05:25,440 people access to, access to a place to store their wealth, 104 00:05:25,840 --> 00:05:30,200 access to vehicles that could earn them conservative amounts 105 00:05:30,200 --> 00:05:35,040 of interest or higher, more speculative amounts of interest, 106 00:05:35,240 --> 00:05:38,440 if that is what they're seeking. But overall, the goal is to 107 00:05:38,440 --> 00:05:42,440 bring a community in, bring a bunch of individuals together 108 00:05:42,760 --> 00:05:46,760 and work with them and provide them something that is very 109 00:05:46,760 --> 00:05:49,680 important everywhere in this country, everywhere in the 110 00:05:49,680 --> 00:05:54,600 world, and it is a public good. And so I like I reflect on that 111 00:05:54,600 --> 00:05:59,800 and I just think they're really not performing their duty and 112 00:05:59,800 --> 00:06:03,320 the lessons being taught to these people who are using these 113 00:06:03,320 --> 00:06:06,560 banks aren't good lessons. Like if you're if you should 114 00:06:06,560 --> 00:06:10,320 only have $250,000 in these accounts, then we need people to 115 00:06:10,320 --> 00:06:13,320 be responsibly behaving with their money in different ways 116 00:06:13,320 --> 00:06:16,080 than just throwing it all into one single account. 117 00:06:16,280 --> 00:06:19,600 And that is not the lesson being taught when signature fails and 118 00:06:19,600 --> 00:06:22,040 you say never mind when Silicon Valley Bank fails and you say 119 00:06:22,040 --> 00:06:24,760 never mind when when these banks fail and you say don't worry 120 00:06:24,760 --> 00:06:27,840 about that legal limit that we said was necessary. 121 00:06:28,480 --> 00:06:31,680 But then you continue to pretend that that that that is the 122 00:06:31,680 --> 00:06:34,960 enforceable legal limit. I have no idea what lesson 123 00:06:34,960 --> 00:06:36,800 you're even teaching, other than you're lying. 124 00:06:36,840 --> 00:06:39,520 I think we got into this really well in our episode with Rohan 125 00:06:39,520 --> 00:06:42,400 naturally, where we talked about how banking is this 126 00:06:42,760 --> 00:06:45,640 extraordinarily unique industry, right. 127 00:06:45,840 --> 00:06:49,320 It is the only industry in the United States that's allowed to 128 00:06:49,320 --> 00:06:51,640 take deposits of people's money, right. 129 00:06:51,960 --> 00:06:55,120 Lots of other places can extend loans and do the rest of like 130 00:06:55,120 --> 00:06:57,880 the banking business. But the taking of the deposits 131 00:06:57,880 --> 00:07:03,320 is a uniquely bank activity and like that has this like strange 132 00:07:03,320 --> 00:07:06,920 effect on the way we treat banking, both in like how we set 133 00:07:06,920 --> 00:07:10,120 up the FDIC and how we deal with the insurance, how the Federal 134 00:07:10,120 --> 00:07:14,280 Reserve provides the quiddity. But also like the strange 135 00:07:14,280 --> 00:07:18,000 crossroads you or cross heads you end up with in some moments 136 00:07:18,000 --> 00:07:20,600 in the banking industry. And we you see this in the great 137 00:07:20,600 --> 00:07:23,720 financial crisis, right? And the movements afterwards, 138 00:07:24,040 --> 00:07:28,040 where it is reasonably straightforward to make an 139 00:07:28,040 --> 00:07:32,600 argument that the bailouts after the great financial crisis did 140 00:07:32,720 --> 00:07:36,760 more good than harm by preventing knock on financial 141 00:07:36,760 --> 00:07:40,240 consequences due to the failures of some of these institutions. 142 00:07:40,400 --> 00:07:44,000 However, that still leaves us at where we were when we were 143 00:07:44,000 --> 00:07:47,560 talking with Rohan. If you're in a situation where 144 00:07:47,560 --> 00:07:52,120 the state where the taxpayer funds are being effectively 145 00:07:52,120 --> 00:07:56,640 extended as this de facto guarantee that these firms, 146 00:07:56,640 --> 00:08:00,360 these institutions need to continue existing and will 147 00:08:00,360 --> 00:08:04,200 continue existing and the state is willing to step in to ensure 148 00:08:04,520 --> 00:08:08,000 they continue to exist. Then it is only reasonable that 149 00:08:08,000 --> 00:08:10,880 there are additional expectations placed on those 150 00:08:10,880 --> 00:08:14,520 firms and those institutions because they are, they are 151 00:08:14,520 --> 00:08:16,960 filling that role. And so when we had Rohan on one 152 00:08:16,960 --> 00:08:19,760 solution we talked about was like this restructuring a 153 00:08:19,760 --> 00:08:22,720 banking where you change how the deposits are held so that you're 154 00:08:22,720 --> 00:08:24,920 able to offer the that full insurance. 155 00:08:25,160 --> 00:08:28,080 And when banks fail, like they just fail and get wiped off and 156 00:08:28,080 --> 00:08:30,400 the deposits are still insured and you don't actually need to 157 00:08:30,400 --> 00:08:33,159 worry about the people, the bank, the equities, whatever 158 00:08:33,159 --> 00:08:36,840 that can all end up worthless without harming the individuals. 159 00:08:37,480 --> 00:08:40,320 But, and you were getting at this before we were got, before 160 00:08:40,320 --> 00:08:45,200 we got on, you were I think frustrated with the way the 161 00:08:45,320 --> 00:08:49,960 expectations of the stock market and the fiduciary duty 162 00:08:49,960 --> 00:08:53,600 executives are meant to hold till shareholders often seems at 163 00:08:53,680 --> 00:08:56,840 odds with responsibly managing a bank. 164 00:08:56,840 --> 00:08:59,560 I broaden this because to me it's important that I mention 165 00:08:59,560 --> 00:09:02,520 other things in in this sense because I do think that banking 166 00:09:02,520 --> 00:09:05,240 is a public good. I do think that things like 167 00:09:05,240 --> 00:09:11,280 electricity, water like things that are going to you know even 168 00:09:11,280 --> 00:09:16,160 like I I I guess I understand more with like pharma, right. 169 00:09:16,160 --> 00:09:20,200 Like, as much as I might not like farm like pharmaceuticals, 170 00:09:20,280 --> 00:09:25,320 I understand needing to profit to put the not that they all do 171 00:09:25,320 --> 00:09:29,400 this, but profit so that you put a lot of that money back into 172 00:09:29,400 --> 00:09:34,240 doing research and development so that you can help help people 173 00:09:34,240 --> 00:09:38,400 that way. Like, are banks doing that right 174 00:09:38,400 --> 00:09:40,920 with their profits? Are they putting the money back 175 00:09:40,920 --> 00:09:44,720 into finance to change it so that it's better for everyone? 176 00:09:45,000 --> 00:09:49,960 Are electricity companies putting a ton of money into R&D 177 00:09:49,960 --> 00:09:54,000 instead of maintaining the lines and making sure that there's not 178 00:09:54,280 --> 00:09:58,040 giant wildfires in California? Like, no, I don't think they 179 00:09:58,040 --> 00:09:59,520 are. I don't think that's where those 180 00:09:59,520 --> 00:10:02,640 profits actually are going. And if those aren't where the if 181 00:10:02,640 --> 00:10:06,800 the profits aren't going into fixing the system, if it's 182 00:10:06,800 --> 00:10:10,480 broken, then what are you? Why are you profiteering? 183 00:10:10,840 --> 00:10:16,760 Why is this something that needs to be traded in in a public like 184 00:10:16,760 --> 00:10:20,600 on the New York Stock Exchange? Why does it need to be traded on 185 00:10:20,600 --> 00:10:24,760 the NASDAQ? Like, it's crazy to me that we 186 00:10:24,760 --> 00:10:31,360 simultaneously expect these banks to be protecting customers 187 00:10:31,640 --> 00:10:36,120 and building communities and helping, helping people. 188 00:10:36,280 --> 00:10:38,360 Fiduciary duty, you mentioned that right? 189 00:10:38,360 --> 00:10:41,240 Fiduciary duty. These people have a duty to you 190 00:10:41,560 --> 00:10:43,840 to protect your money. But they also have a duty to 191 00:10:43,840 --> 00:10:47,160 their shareholders. This, this, like how can you 192 00:10:47,160 --> 00:10:49,040 possibly make those two ends meet? 193 00:10:49,360 --> 00:10:52,600 And I don't think you actually can And that's where I go. 194 00:10:52,600 --> 00:10:57,320 Like what what are we doing and have we have we learned anything 195 00:10:57,320 --> 00:11:00,160 in the past year? We you know you you and I were 196 00:11:00,160 --> 00:11:03,520 talking before and I was saying this regional banking crisis 197 00:11:03,520 --> 00:11:08,000 just essentially just never ended and like if this bailout 198 00:11:08,000 --> 00:11:13,400 if this buy in for for investing in in Flagstar this is not the 199 00:11:13,400 --> 00:11:15,040 end of this. And you were like well maybe it 200 00:11:15,040 --> 00:11:18,920 is and I'm like in what sense in what sense do we not see this 201 00:11:18,920 --> 00:11:21,000 happen again because all it takes. 202 00:11:21,000 --> 00:11:24,200 We've seen how little it takes it's it takes this there's a 203 00:11:24,200 --> 00:11:27,600 bank run which as you've said there's ways to actually protect 204 00:11:27,600 --> 00:11:29,720 customer deposits in situations like that. 205 00:11:29,840 --> 00:11:32,520 And then there's things where it's like it's already outside 206 00:11:32,520 --> 00:11:37,520 the scope of a bank run when now we're talking about the stock 207 00:11:37,520 --> 00:11:40,920 price just plummeting, whether or not the assets are there, 208 00:11:41,040 --> 00:11:43,920 whether or not like they're not toxic assets. 209 00:11:43,920 --> 00:11:47,600 Like I had an argument with with another friend of the show back 210 00:11:47,600 --> 00:11:51,440 when Silicon Valley Bank was already toast and First Republic 211 00:11:51,680 --> 00:11:55,600 was looking really bad. I love I loved First Republic. 212 00:11:55,600 --> 00:11:58,040 They like my mom had banked with them. 213 00:11:58,240 --> 00:12:01,560 She always had talked about how great they were and I saw what 214 00:12:01,560 --> 00:12:03,480 was happening to them and I said it doesn't matter. 215 00:12:03,720 --> 00:12:05,440 Doesn't matter if the customers love them. 216 00:12:05,640 --> 00:12:08,160 Doesn't matter what the banking experience has been forever. 217 00:12:08,400 --> 00:12:11,520 First Republic is going to get crushed now because it is just a 218 00:12:11,520 --> 00:12:14,280 symptom of this disease. And this person was like no that 219 00:12:14,280 --> 00:12:17,760 like their their book is better. Their assets are better. 220 00:12:17,920 --> 00:12:20,280 They don't have the same issues that Silicon Valley Bank has. 221 00:12:20,280 --> 00:12:23,160 And I said it doesn't fucking matter. 222 00:12:23,280 --> 00:12:26,320 And I hate to say this because they should have been right. 223 00:12:26,640 --> 00:12:29,200 They should be right. If the book is better and the 224 00:12:29,200 --> 00:12:32,640 assets are better, the the efficient market would say that 225 00:12:32,640 --> 00:12:34,480 they're right. And I'm wrong. 226 00:12:34,720 --> 00:12:38,320 And yet, First Republic was dead like a week later. 227 00:12:38,320 --> 00:12:40,680 I think that the point you're making there is really 228 00:12:40,680 --> 00:12:44,720 interesting because there is this potentially really strange 229 00:12:44,720 --> 00:12:49,240 feedback loop where the struggling stock price, the 230 00:12:49,240 --> 00:12:53,920 struggling equity value of like the equity value of the bank, 231 00:12:54,480 --> 00:12:59,400 even if the assets and liabilities are seemingly okay 232 00:12:59,480 --> 00:13:03,080 solvent, whatever. You can end up at a point where 233 00:13:03,080 --> 00:13:06,840 because people start pulling their deposits in reaction to 234 00:13:06,840 --> 00:13:09,880 fear from the stock price, declining equity, things like 235 00:13:09,880 --> 00:13:14,960 that causes the bank to go from safe to unsafe because of this 236 00:13:14,960 --> 00:13:18,440 drop in the stock price that might be unrelated to the actual 237 00:13:18,440 --> 00:13:20,520 like assets over liability of the bank. 238 00:13:20,800 --> 00:13:22,960 And that is a problematic tension. 239 00:13:23,200 --> 00:13:25,680 And I think that we were really trying to get at this when we 240 00:13:25,680 --> 00:13:28,080 had Rohan on. And it's one of the things that 241 00:13:28,360 --> 00:13:32,480 frustrates me a bit with the banking system is because that's 242 00:13:32,480 --> 00:13:37,640 bad people, people should not be expected to assess their bank's 243 00:13:37,640 --> 00:13:40,760 solvency before they deposit money. 244 00:13:40,880 --> 00:13:44,040 That's not a reasonable expectation, apparently, even 245 00:13:44,040 --> 00:13:46,440 for top flight venture capitalists, right? 246 00:13:47,880 --> 00:13:50,360 So we've established that no one can do that. 247 00:13:50,760 --> 00:13:53,920 Even investors, apparently. Not even bank executives. 248 00:13:53,920 --> 00:13:57,240 Even even the top minds of a generation, apparently. 249 00:13:57,240 --> 00:14:00,320 That's not reasonable. The solution to me ends up 250 00:14:00,320 --> 00:14:05,360 feeling like if you want to have investment banking banks doing 251 00:14:05,360 --> 00:14:08,760 lending, things like that, you need to somewhat disconnect 252 00:14:08,760 --> 00:14:11,640 those activities from risk to depositors. 253 00:14:11,800 --> 00:14:14,720 We talked about that with Rohan is by basically restructuring it 254 00:14:14,880 --> 00:14:17,440 so that they have to hold certain assets to cover those 255 00:14:17,480 --> 00:14:20,720 with certain insurance to cover it and changes in how the FDIC 256 00:14:20,720 --> 00:14:23,680 is capitalized to manage that. I think that gets part way 257 00:14:23,680 --> 00:14:25,600 there. The other solution I'm a big fan 258 00:14:25,600 --> 00:14:27,400 of is things like postal banking, right. 259 00:14:27,560 --> 00:14:30,200 When you are, when the state actually directly offers a lot 260 00:14:30,200 --> 00:14:34,560 of these services to people, you kind of put a floor on how bad 261 00:14:34,600 --> 00:14:38,600 other banks can be because there's this like easy broadly 262 00:14:38,600 --> 00:14:41,160 available alternative, right. If you're worse than the postal 263 00:14:41,160 --> 00:14:42,880 banking, you won't get enough deposits. 264 00:14:43,080 --> 00:14:45,560 And without changes to the banking structure, you can't do 265 00:14:45,560 --> 00:14:47,960 all your risky shit unless you're convincing people to put 266 00:14:47,960 --> 00:14:50,240 deposits in, you're somewhat limited, right? 267 00:14:50,240 --> 00:14:53,280 There's structural limits on how much you can do and stuff like 268 00:14:53,280 --> 00:14:56,240 that. And so like there are partial 269 00:14:56,240 --> 00:15:00,120 solutions there. But it does feel like especially 270 00:15:00,600 --> 00:15:04,680 post great financial crisis, we've created a system that 271 00:15:05,120 --> 00:15:09,880 makes it so you can't prosecute these big entities because the 272 00:15:09,880 --> 00:15:13,760 knock on risks of that risk financial damage to many, right? 273 00:15:13,960 --> 00:15:17,520 Lenny Breuer said that when he was Obama's head of DOJ, when we 274 00:15:17,520 --> 00:15:20,640 consider these prosecutions, he said he did the right thing and 275 00:15:20,640 --> 00:15:23,520 not going after any of these people because the consequences 276 00:15:23,520 --> 00:15:25,560 would have been better than any benefit that would have been 277 00:15:25,560 --> 00:15:28,920 brought by those prosecutions. And regulators down the line 278 00:15:28,920 --> 00:15:30,560 generally seem to agree with that. 279 00:15:30,840 --> 00:15:35,080 The Federal Reserve, the OCC and the FDIC very much prefer a 280 00:15:35,080 --> 00:15:38,440 consent order to not getting the consent order right. 281 00:15:38,440 --> 00:15:41,240 They want you to agree, sign off and say you're going to make 282 00:15:41,240 --> 00:15:43,240 these changes and all these things. 283 00:15:43,240 --> 00:15:47,560 And so because of that, there is this kind of as long as you're 284 00:15:47,560 --> 00:15:53,640 not too bad, for too long, too blatantly, you'll kind of skirt 285 00:15:53,640 --> 00:15:55,600 on by. Yeah, too big to prosecute, 286 00:15:55,600 --> 00:16:00,720 which is kind of crazy, I guess It's exactly what you're talking 287 00:16:00,720 --> 00:16:02,320 about. If these people are saying we 288 00:16:02,320 --> 00:16:06,560 can't prosecute people for for white collar crimes at banks, 289 00:16:06,560 --> 00:16:10,080 because basically if we do that, there's going to be bank runs 290 00:16:10,080 --> 00:16:13,080 and then all the banks are going to have bank runs and then 291 00:16:13,080 --> 00:16:16,440 everybody's screwed, well then that points to a broken system 292 00:16:16,440 --> 00:16:18,360 to me. And that isn't just a person 293 00:16:18,360 --> 00:16:21,320 saying I didn't go after them. Let's move on. 294 00:16:21,520 --> 00:16:24,120 That's actually someone saying I didn't go after them. 295 00:16:24,120 --> 00:16:26,600 The system's broken. We need to fix it. 296 00:16:27,040 --> 00:16:30,400 And the if, and we have not done that, I guess is what I'm 297 00:16:30,480 --> 00:16:34,000 whether we're talking about prosecuting people for crimes or 298 00:16:34,000 --> 00:16:38,200 we're talking about simpler things like ensuring that 299 00:16:38,320 --> 00:16:41,480 depositors don't get hurt when a bank fails, right. 300 00:16:41,480 --> 00:16:44,760 These very, very important things have been completely not 301 00:16:44,760 --> 00:16:47,160 addressed. And that that's after Silicon 302 00:16:47,160 --> 00:16:52,200 Valley Bank which was one of the bigger regional banks in America 303 00:16:52,680 --> 00:16:56,960 had this insane collapse occur and the knock on effects were 304 00:16:56,960 --> 00:17:01,040 very real because it was First Republic, it was Pack Pack W it 305 00:17:01,040 --> 00:17:03,640 was like there was a bunch of these, it was signature, it was 306 00:17:03,640 --> 00:17:07,880 a bunch of banks actually big big regional banks that got 307 00:17:07,880 --> 00:17:10,680 screwed. And now a year later we're still 308 00:17:10,680 --> 00:17:12,880 dealing with the ramifications of this. 309 00:17:13,200 --> 00:17:18,240 And no, no process has changed. Nothing about the system has 310 00:17:18,240 --> 00:17:20,520 changed. Even when the FDIC had to go in 311 00:17:20,520 --> 00:17:23,240 and say never mind, forget the insurance limits, even when you 312 00:17:23,240 --> 00:17:26,839 had regulators essentially shitting themselves, you had the 313 00:17:26,839 --> 00:17:30,160 Fed freaking out. You had everyone scared in this 314 00:17:30,160 --> 00:17:33,160 moment. But then we move on like nothing 315 00:17:33,160 --> 00:17:35,280 happened. You actually probably remember 316 00:17:35,280 --> 00:17:37,280 better than I do, because you were older than I was when it 317 00:17:37,280 --> 00:17:40,480 was happening. But Arthur Andersen, their 318 00:17:40,480 --> 00:17:43,680 prosecution, we've talked about Arthur Anderson on here before 319 00:17:43,680 --> 00:17:45,520 for their role in World Common Enron. 320 00:17:45,760 --> 00:17:49,120 But their PR push after the prosecution, when they were 321 00:17:49,120 --> 00:17:52,120 working on appealing eventually all the way up to the Supreme 322 00:17:52,120 --> 00:17:55,960 Court and getting a lot of it reversed, their PR push was this 323 00:17:55,960 --> 00:17:59,360 is a firm of 26,000 innocent people, right? 324 00:17:59,560 --> 00:18:03,120 You can't go after us. You can't do that because most 325 00:18:03,120 --> 00:18:05,040 of these people didn't do anything and you wouldn't want 326 00:18:05,040 --> 00:18:08,320 to hurt them. And that sentiment has become 327 00:18:08,320 --> 00:18:11,800 deeply embedded in a lot of like the regulatory state and things 328 00:18:11,800 --> 00:18:15,280 like that, where that is a serious consideration made by 329 00:18:15,280 --> 00:18:21,440 SCCCFTCOCC and DOJ individuals before they bring a case. 330 00:18:21,800 --> 00:18:23,840 And even recently in cryptocurrency. 331 00:18:23,840 --> 00:18:27,600 I was struck by some of Christopher Blodgett's comments 332 00:18:27,640 --> 00:18:31,680 in a deposition related to the SEC case against Finance US 333 00:18:32,000 --> 00:18:36,240 where he was kind of complaining that the SEC suit against 334 00:18:36,240 --> 00:18:41,200 Finance US was a near mortal blow that led to them needing to 335 00:18:41,200 --> 00:18:45,160 lay off 200 people and all these things and basic and that they 336 00:18:45,160 --> 00:18:49,160 lost 15 out of their 20 market makers and all these banks cut 337 00:18:49,160 --> 00:18:51,160 them off. And all this and the kind of 338 00:18:51,160 --> 00:18:56,920 insinuation seems to be that like the SEC caused all this 339 00:18:56,920 --> 00:19:00,480 damage, destroyed our thing, and have yet to even prove their 340 00:19:00,480 --> 00:19:05,240 case right. And like that tendency for firms 341 00:19:05,240 --> 00:19:10,680 to so heavily emphasize the cost of any kind of regulation, 342 00:19:11,240 --> 00:19:15,600 oversight, anything seems deeply embedded in a lot of our 343 00:19:15,600 --> 00:19:17,120 corporate and regulatory culture. 344 00:19:17,120 --> 00:19:20,240 And I don't really have a good feeling and how to solve it. 345 00:19:20,240 --> 00:19:22,680 Well, I mean, it's funny to me that, you know, it didn't work 346 00:19:22,680 --> 00:19:24,240 for Arthur Anderson. Right. 347 00:19:24,400 --> 00:19:27,160 I mean, it kind of did, though. They never went bankrupt. 348 00:19:27,280 --> 00:19:28,920 Yeah, all their assets just got bought. 349 00:19:29,360 --> 00:19:31,520 Yeah, fair enough. And they lost their accounting 350 00:19:31,520 --> 00:19:33,680 license, right? And Accenture still exists. 351 00:19:33,680 --> 00:19:36,680 And like if you read the stories of people working there, the 352 00:19:36,680 --> 00:19:39,960 consulting site had a ton of huge conflict of interest issues 353 00:19:39,960 --> 00:19:42,480 and stuff like that that were never addressed. 354 00:19:42,560 --> 00:19:45,640 I don't know either, but I will say that like, I guess this this 355 00:19:45,640 --> 00:19:49,840 even gets into like Trump stuff with him where the Supreme Court 356 00:19:49,840 --> 00:19:51,760 sidestepped the the actual issue. 357 00:19:51,840 --> 00:19:54,280 And the Supreme Court sidestepped the issue in Arthur 358 00:19:54,280 --> 00:19:56,240 Andersen too. I don't know if you remember. 359 00:19:56,240 --> 00:20:00,360 That is when it came up to them. It the the reason the charges 360 00:20:00,520 --> 00:20:03,920 got dismissed was because of the way the judge instructed the 361 00:20:03,920 --> 00:20:06,320 jury. And they found issue with 362 00:20:06,320 --> 00:20:08,960 specific jury instructions and how broad they were. 363 00:20:09,160 --> 00:20:11,680 And that was enough to basically overturn the conviction. 364 00:20:11,680 --> 00:20:13,120 Yeah. And then the government wasn't 365 00:20:13,120 --> 00:20:15,880 going to go for a retrial because Arthur Andersen's 366 00:20:15,880 --> 00:20:19,120 partners had put so much money into this, like, broad PR thing 367 00:20:19,280 --> 00:20:22,480 that had gone like all the way up into like a blue. 368 00:20:22,480 --> 00:20:25,720 Dobbs was really pushing it and stuff at that point, that it had 369 00:20:25,720 --> 00:20:28,640 started to reshape the narrative around those type of things. 370 00:20:28,640 --> 00:20:31,680 My point here being the the question for a lot of these 371 00:20:31,680 --> 00:20:35,520 things becomes for Trump it would be something like is he 372 00:20:35,520 --> 00:20:40,440 allowed to break any law because of presidential immunity for a 373 00:20:40,680 --> 00:20:45,160 large company, for a bank or a bank for that matter, with 374 00:20:45,360 --> 00:20:47,000 millions of customers, let's say. 375 00:20:47,080 --> 00:20:49,560 Are they immune? You know, Do they not need to be 376 00:20:49,560 --> 00:20:52,760 transparent? Because actual transparency will 377 00:20:52,760 --> 00:20:56,000 hurt people more. And and I'll tell you, I know 378 00:20:56,000 --> 00:20:58,640 that you and me have the same feelings about this, right? 379 00:20:58,880 --> 00:21:03,040 You and me know that to us, the answer is that's insane. 380 00:21:03,120 --> 00:21:07,480 That's insane. Like, yeah, I'm sorry if every 381 00:21:07,480 --> 00:21:10,280 bank is doing something atrocious. 382 00:21:10,360 --> 00:21:13,200 The answer isn't OK, well let's just hide it for a while and fix 383 00:21:13,200 --> 00:21:16,680 it. It's expose this to sunlight and 384 00:21:16,680 --> 00:21:21,560 let's work on a solution. If every cryptocurrency exchange 385 00:21:21,600 --> 00:21:24,040 is front running their customers or something, these are all 386 00:21:24,040 --> 00:21:26,000 hypotheticals. Yeah, it's not all of them. 387 00:21:26,320 --> 00:21:28,960 Yeah, exactly. If these things were happening, 388 00:21:29,000 --> 00:21:32,320 I want them to be exposed and I want the people in charge of it 389 00:21:32,320 --> 00:21:35,880 to be properly punished. And yeah, do I expect the public 390 00:21:35,880 --> 00:21:38,840 to be concerned? Do I expect them to maybe close 391 00:21:38,840 --> 00:21:42,400 accounts at certain places that are consistently awful in how 392 00:21:42,400 --> 00:21:44,400 they treat their customers or how they've screwed their 393 00:21:44,400 --> 00:21:46,880 customers over? It's always shocking to me that 394 00:21:46,880 --> 00:21:50,960 Wells Fargo is still publicly traded, even like, that's crazy. 395 00:21:51,000 --> 00:21:54,800 But whatever, right? Like something needs to change. 396 00:21:55,240 --> 00:21:58,160 And I think the part that is disheartening to me, you never 397 00:21:58,160 --> 00:22:00,960 expect things to change, certainly not for the good. 398 00:22:00,960 --> 00:22:04,360 As you get older and older and more conservative and lame like 399 00:22:04,360 --> 00:22:08,560 me, you hope still. And when I see crises like this 400 00:22:08,560 --> 00:22:13,080 happen, and then I feel like the lesson learned again. 401 00:22:13,080 --> 00:22:16,360 Silicon Valley Bank signature These aren't small banks. 402 00:22:16,360 --> 00:22:18,520 They weren't small. They were big. 403 00:22:18,800 --> 00:22:23,240 And to see them fail so quickly and to just like, I feel like 404 00:22:23,240 --> 00:22:25,080 everyone's forgotten about it, like it. 405 00:22:25,080 --> 00:22:27,160 No one talks about it. There's no congressional 406 00:22:27,160 --> 00:22:29,560 hearings about Silicon Valley Bank anymore. 407 00:22:29,560 --> 00:22:32,080 There's no like, no, no congressman is making. 408 00:22:32,480 --> 00:22:35,880 I mean that should still be the main issue for a congressman in 409 00:22:36,240 --> 00:22:39,800 my in in California. We should be talking about the 410 00:22:39,800 --> 00:22:42,200 finance sector and the banking crisis. 411 00:22:42,880 --> 00:22:45,560 That should be an an election issue this year. 412 00:22:45,920 --> 00:22:48,320 I'll tell you, no one fucking cares. 413 00:22:48,320 --> 00:22:49,880 And that's crazy. I don't know. 414 00:22:49,880 --> 00:22:52,760 I guess I just wanted to record us on this because I am 415 00:22:52,760 --> 00:22:56,960 disappointed because I I feel like there was a moment that 416 00:22:56,960 --> 00:23:01,280 could have been capitalized and things could have changed, even 417 00:23:01,280 --> 00:23:03,720 if only a little bit and we missed it. 418 00:23:03,800 --> 00:23:06,000 Yeah. The last thing I kind of want to 419 00:23:06,000 --> 00:23:09,360 add to my previous rant about like the nature of the public 420 00:23:09,360 --> 00:23:12,600 private partnership in banking and the state's role in it is 421 00:23:12,600 --> 00:23:17,040 that like the state ends up kind of borrowing bank capacity to 422 00:23:17,040 --> 00:23:20,360 fulfil certain functions, right? Like financial monitoring of 423 00:23:20,360 --> 00:23:23,880 criminals is primarily like initially done by banks filing 424 00:23:24,080 --> 00:23:27,320 SARS and things like that, reporting, likely structuring 425 00:23:27,320 --> 00:23:29,360 and things like that. There aren't enough government 426 00:23:29,360 --> 00:23:32,960 investigators to be like investigating most of that kind 427 00:23:32,960 --> 00:23:34,640 of stuff and so they rely on banks for that. 428 00:23:34,760 --> 00:23:37,560 And then we saw during Trump's administration, I'm thinking of 429 00:23:37,560 --> 00:23:41,200 like the PPP loans and the CARES Act payments and things like 430 00:23:41,200 --> 00:23:43,320 that. A lot of the administrative and 431 00:23:43,320 --> 00:23:46,600 managerial expectations for those were shifted on to the 432 00:23:46,600 --> 00:23:49,680 banks instead of the state. And so there was kind of like 433 00:23:49,680 --> 00:23:55,280 this and even in like 2008 or 2009, the great financial crisis 434 00:23:55,560 --> 00:23:59,800 like it's the the government needed enough of these banks to 435 00:23:59,800 --> 00:24:02,720 exist in order to inject the liquidity because you need 436 00:24:02,720 --> 00:24:06,080 someone to take the liquidity and go buy the things in the 437 00:24:06,080 --> 00:24:08,400 market, right. And so the banks were fulfilling 438 00:24:08,400 --> 00:24:12,920 that role. I get nervous whenever the state 439 00:24:13,240 --> 00:24:17,520 capacity depends on private entities and the private 440 00:24:17,520 --> 00:24:21,960 entities end up starting to become powerful enough that they 441 00:24:21,960 --> 00:24:24,960 have significant influence over the state right? 442 00:24:25,200 --> 00:24:29,160 And that relationship can become deeply problematic. 443 00:24:29,200 --> 00:24:32,200 And this gets into many of our rants about regulation in 444 00:24:32,200 --> 00:24:35,520 general in the revolving door. And I think banking regulation 445 00:24:35,520 --> 00:24:39,560 is like one of the ones that's been most stricken by that over 446 00:24:39,560 --> 00:24:42,520 its history, where the people regulating the banks have most 447 00:24:42,520 --> 00:24:46,240 commonly come from the banks and often go back to the banks. 448 00:24:46,280 --> 00:24:48,120 Yeah. And this is at like the end to 449 00:24:48,120 --> 00:24:51,880 be to be fair also this is like an issue with a lot of 450 00:24:51,880 --> 00:24:55,000 regulatory bodies in general. We've talked about this with 451 00:24:55,000 --> 00:24:57,920 like, with like the SEC. Even if we get into the history 452 00:24:57,920 --> 00:25:00,880 of the SEC, it's like at the beginning, I can see how having 453 00:25:00,880 --> 00:25:05,520 Joe Kennedy and a host of other bigwigs come in and say, like, 454 00:25:05,920 --> 00:25:07,840 we're here to protect you, citizenry. 455 00:25:07,840 --> 00:25:11,920 I could see how that could work in like 1934 or whatever. 456 00:25:11,920 --> 00:25:13,800 You know what I mean? Like, maybe I get it. 457 00:25:13,800 --> 00:25:17,760 But now the way that they operate and what they provide 458 00:25:17,840 --> 00:25:22,160 for the public at large, like it's pretty difficult to 459 00:25:22,160 --> 00:25:25,640 suggest. I I would imagine the public 460 00:25:25,640 --> 00:25:30,520 that cares about the SEC is probably disapproving of the job 461 00:25:30,520 --> 00:25:33,840 they're doing. And most of the most of them 462 00:25:34,200 --> 00:25:38,240 don't even care about the SEC as a government entity because it 463 00:25:38,240 --> 00:25:41,600 littles. So it like it matters so little 464 00:25:41,600 --> 00:25:46,120 to them in their everyday life. And either way, that's kind of 465 00:25:46,120 --> 00:25:50,560 like not the best like for especially if your job is to 466 00:25:50,560 --> 00:25:53,240 patrol markets like that isn't the best reputation. 467 00:25:53,680 --> 00:25:56,240 See, And it's funny to me that you mentioned Joe Kennedy and 468 00:25:56,240 --> 00:25:59,560 the founding of the SEC there, because you can even kind of 469 00:25:59,960 --> 00:26:04,280 pitch that moment or imagine that moment as like they didn't 470 00:26:04,280 --> 00:26:07,120 want any more Pacora Investigations or similar, 471 00:26:07,400 --> 00:26:08,840 right? They didn't want their names 472 00:26:08,840 --> 00:26:11,400 being dragged in front of Congress every week and every 473 00:26:11,400 --> 00:26:14,160 reporter like, printing all these documents that showed 474 00:26:14,160 --> 00:26:17,440 these deals and whatever. And so by having a regulator in 475 00:26:17,440 --> 00:26:21,440 charge of it, an entity they can like, exert influence over over 476 00:26:21,440 --> 00:26:24,400 time, you can make sure that that kind of thing isn't in the 477 00:26:24,400 --> 00:26:26,800 Congressional Record every week, you know? 478 00:26:26,880 --> 00:26:29,400 And I think this really brings us to our final point, which is 479 00:26:29,520 --> 00:26:32,080 obviously there is a solution to this and it's CAS coin. 480 00:26:32,840 --> 00:26:36,240 CAS coin. After the multiple bankruptcies 481 00:26:36,240 --> 00:26:42,160 and business failures and fraud charges and settlements, we're 482 00:26:42,160 --> 00:26:46,400 here to stay. And I do have ideas that I think 483 00:26:46,800 --> 00:26:49,000 a lot of politicians are willing to hear me out on. 484 00:26:49,000 --> 00:26:53,880 I know that a lot of I, you know what I know a lot of big names 485 00:26:53,880 --> 00:26:56,920 own cast coin in general. So, you know, take it with a 486 00:26:56,920 --> 00:27:00,040 grain of salt, but credible sources have told me credible. 487 00:27:00,080 --> 00:27:02,920 Sources have told me there's only 40 cast coin left on over 488 00:27:02,920 --> 00:27:04,080 the counter trading desks.