59:00 mins

The Problem Podcast

Live Call-In Show With Jon: On Stocks, Fox, and More!

It’s our first-ever live call-in event! We’re joined by friends of the show Dave Lauer, CEO of Urvin Finance and creator of We The Investors, and David Dayen, executive editor of The American Prospect, to talk about the SEC’s newest rule proposals, PFOF, and the crypto collapse. Plus, we field listener calls and questions about the media, the Fox News lawsuit, and more—including a little love advice.


Live Call-In Show With Jon: On Stocks, Fox, and More!

Bonus Episode 02

Jon: Welcome to the future motherf***ers! We’re streaming Live!


Jon: Hey! It’s me, Jon Stewart. What’s happening? This is the future. We’re gonna be streaming live. We got guests and we’re gonna be taking your questions live. This is incredible or as we used to call it: radio. I don’t know what the — the March 3rd on Apple TV+. “The Problem with Jon Stewart” is coming back. We got six episodes we’re very excited about that. Tonight we’re gonna be taking a calls. You can call us at (712) 566-7839 or Jon 712, Jon Stew, I guess stew beef was taken. I don’t know if it was taken or not. Oh, sh*t! Well, you know what, we’re gonna test this right off the top. We’re gonna take a call just to make sure this works. We got a fellow by the name of David from Chicago. He’s gonna —

Caller (David): Hi, how are you? 

Jon: Are you, are you David? 

Caller (David): I’m David. Nice to talk to you. 

Jon: And are you from Chicago? 

Caller (David): Yeah. Chicago area.

Jon: David, let me ask you a question. 

Caller (David): Yes.

Jon: How does it feel to step into the future? [DAVID LAUGHS] This sh*t is happening David. Happening!

Caller (David): That’s right. I feel like I’m in a DeLorean. [JON LAUGHS]

Jon: You are in a DeLorean, my friend. What is your question to show that we are taking questions?

Caller (David): Excellent. Well, thank you for taking my question. My real question is with all the time you spend debating Mr. Papa O’Reilly.

Jon: Bill O’Reilly. Correct. 

Caller (David):You know, in air conditioned theaters and stuff, I guess what I really wanna know is, does this settle the debate that he came from bullsh*t mountain, I mean with this Fox defamation lawsuit and all that stuff going on. Did you win the debate?

Jon: David, first of all, it’s an excellent question and thank you for asking. The question is, did with the Fox defamation case and all the things that came out proving that they are in an incipient terrible fraud perpetrated upon the people. Did I win my debate with Bill O’Reilly. Here’s the only thing. I don’t like to speak ill of the dead. As we know, O’Reilly [DAVID LAUGHS] passed away four or five years ago, so I don’t, but I would say if he were here today, if you were still with us. 

Caller (David): [DAVID LAUGHS] Mm-hmm.

Jon: I would say David, yeah, motherf***er. 

Caller (David): That’s right.

Jon: Well David, thank you so much for calling and proving that point, but we’re gonna get into, we got a lot of stuff to get to in terms of the market, in terms of stocks. I’m gonna bring in our two guests. We got Dave Lauer, who as you know, is the CEO of Urban Finance, and has the We The Investors Movement. We also have David Dayen, editor of American Prospect. Gentlemen, welcome!

David Dayen: Hey, Jon. Thanks.

Dave Lauer: Thanks.

David Dayen: Thanks! Thanks for this entry into the future.

Dave Lauer: Yeah.

Jon: Guys, I can’t even, by the end of this, my guess is we are all gonna have personalized jet packs. [LAUGHTER]

David Dayen: Sounds about right.

Jon: And we’re gonna be flying around. Alright, here’s where I wanna start [JON CLAPS] the SEC has introduced a spate. Spate I tell you. Of new rules trying to get a handle on being more transparent. Trying to get a handle on lit markets, unlit markets, bringing a little bit of fairness, bringing some transparency, trying to get ahold of PFOF. I’m gonna jump in and tell you guys I — Dave Lauer, I’d like you to go through a couple of the rules that you think are most crucial. I’m gonna jump in and say I am a skeptic. The amount of hoops that have to be jumped through before any of these regulations pass any kind of muster seem extraordinarily high, and I think they’re just gonna wait the SEC out until a new chairman comes in. But Dave Lauer, tell me what  some of these new recommendations are to control the markets. Tell me which ones have the most promise and tell me which ones you believe will fall by the wayside.

Dave Lauer: Sure, And you know, thanks for having me and thanks for covering this. I agree. it’s a spate of new rules, 1600 pages of rules. Um —

Jon: Have you read all 1600 pages? 

Dave Lauer: Unfortunately read, yeah. Um, I, my life is not nearly as exciting, I think, as yours.

Jon: I just sit around watching “The Last of Us” so continue. [DAVE LAUGHS]

Dave Lauer: And the rules themselves are relatively simple, they’re very tiny parts of these proposals. The economic analysis and the you know, the justification based on the law and the SEC’s mandate makes up the majority of it because as you, I think rightly point out, the SEC knows that they are going to get sued. So, even if this process goes as smoothly as possible, they propose the rules; there’s about a three month comment period, which ends at the end of March, and we are gonna be running a comment letter campaign, and we’re gonna fill those comment files with comments from individual investors as we have in the past. And these rules will, if they were to pass and go into effect, would really significantly transform markets. They would disintermediate a lot of firms, they would make markets more efficient. They would increase competition. They would ensure that individual investors and institutional investors are able to find each other, which is gonna be, which would be a big change. Um, and ––

Jon: And it would level the playing field supposedly for retail investors.

Dave Lauer: It would, yes. So there, today, there are a set of rules because the rules today were written by retail brokers, internalizers, Bernie Madoff had huge influence on these rules. 

Jon: Why wouldn’t he?

Dave Lauer: Yeah. Yeah. Why wouldn’t he of course right.

Jon: Well, this gets to the point. So the, you know, it really goes to that. David Dayen, I think one of the interesting things about this filing, and I think Dave Lauer pointed it out is there’s a few rules, but there’s 1,600 pages. A lot of this is data driven. And I’ll tell you one particular point that jumped out at me. All we have heard about payment for order flow, and the reason why these billions of dollars have to flow to Citadel, and all these other companies is that is price improvement. Boy, the price improvement that you get as a retail investor. It’s just shockingly wonderful having nothing to do with, the tick or whatever else it’s going. The data seems to counter that argument, and suggests that is in fact the opposite. Have you looked into any of these new rules, and what are your thoughts on these types of things?

David Dayen: Well I mean, I would start by saying, I think it’s amusing that we’re having kind of this freak out now around this is gonna sound off topic, but I swear it’s on topic about —

Jon: [JON LAUGHS] No problem.

David Dayen: — about ChatGPT and like AI and these bots that are gonna take over all creative industries whatsoever. And the funny thing is that we kind of already have that in our markets. I mean, we have algorithms that do the vast majority of trading, and note with very little participation, from retail investors in many cases. And this is sort of you know, if you had a fear of AI that was going to, you know, put people out of work or you know, it doesn’t have to be a bad thing necessarily, right? It could be a leisure creating exercise, but in this case, this is sort of how not to do it. The way in which, in the past couple decades since technology has really taken over our markets.

Jon: Mm-hmm. 

David Dayen: This is kind of the, what not to do —

Jon: Yeah.

David Dayen: — portion of this. And the SEC rules represent an opportunity to get back. It’s great to hear from Dave that there’s going to be, you know, a mass campaign to make their voices heard because I mean, so often in this process of implementing rules, it’s dominated by special interests. I mean —

Dave Lauer: 100%

David Dayen: — most of the time —

Jon: Almost entirely.

David Dayen: — 90% —

Dave Lauer: Almost entirely. 

David Dayen: — 99% of all comments usually come from those in the know and they’re the ones who have the ability to walk in the door at the SEC and, you know, just get inside the heads of —

Jon: And lobby Congress as well. 

David Dayen: Lobby Congress and get them to also put pressure on SEC commissioners and things like that. So it’s great to hear that they’re going to be involved in the process. And I think that’s also the good.

Jon: Dave Lauer, how confident are you that the retail investor’s gonna have a seat at that table because, and how much of this is just a formality that they’re going to do a three month comment period, but they’re really, look, God bless the SEC for trying, I guess, but as it shows, the only people they’ve been able to go after so far are Kim Kardashian and Martha Stewart. [LAUGHTER] I mean, you know, they don’t seem to wanna take — 

Dave Lauer: They don’t even have money for coffee, Jon.

Jon: They don’t even have money for coffee, but they don’t seem to take on powerful interests very often, and I appreciate that they’re putting on these rules. But which rule do you think has the best shot at changing the dynamics of a skewed market.

Dave Lauer: So, you know, these rules are going after probably the most powerful firms in the industry. So I really gotta say, you know, I have a lot of respect for the chair’s office and what he’s trying to do with these rules. He is, I’ve seen the SEC through many different administrations and he is the first one who’s come in and is willing to take them on. Will it be successful? It’s really hard to say. I think the most impactful rule would be what’s called the order competition rule, which says that no longer, retail brokers can no longer just send all their orders to Citadel and Virtu. They have to expose those orders on a lit market to open competition.

Jon: Transparency.

Dave Lauer: Correct. You know, get it on the lit exchange. Get it out of the dark markets, get and end payment for order flow. Um, and there —

Jon: Dave, why not just kill dark markets? It seems like they’re taking a very indirect pathway by saying, “Well, we’ve got a new competition rule of transparency.” Why not just come and say, “Everything’s gotta be lit?”

Dave Lauer: I, you know, I agree with you. We’ve been pushing the SEC for that. We’ve been saying this is way too overcomplicated. Just put in a trade out rule, just like they have in Canada. Just like they have in the UK. Just like they just passed in Singapore. Very simple and it doesn’t, it takes two sentences. It’s literally a two-sentence rule. And we’re gonna push. Look, I think we have an opportunity. These are initial proposals. We were talking to Gary Gensler yesterday and we had a seat at the table. Retail investors, individual investors now have a seat at the table.

Jon: OK.

Dave Lauer: And we’ve established ourselves that Citadel and Virtu and Robinhood and Schwab do not represent individual investors; they represent their own profits, their own revenue, their own annual bonuses, and I think we’ve really completely changed that narrative. And so, you know, I think the, what the chair said was, “These are our initial proposals if you have better ideas, if you can justify them, put them in the comment letter.” I believe he’s being honest. We’ve talked to other SEC commissioners who are receptive to this. So, you know, I think that this is the biggest opportunity in 17 years since Reagan’s mess was passed to change the rules of the market. And, you know, it’s a long process though. That, but that’s how the law works. You know, he is beholden to the Administrative Procedures Act. They have to put the proposal out, comment, then they’re gonna adopt the rule and then they’re gonna get sued, right? These firms are gonna sue them. So if you don’t think he’s taking on powerful firms, you have to explain why they’re going to sue him to prevent these rules from coming into place because you know this is going to —

Jon: Right. 

Dave Lauer: — save retail and institutional investors, three and a half billion dollars a year. Just off this mythical price improvement that is not price improvement and they’re not getting the best execution.

Jon: Well if these rules are going to save three and a half billion dollars for investors every year then that just shows this is a system that is toxic, and has to change at some point. And David Dayen, perhaps the idea would be then, let’s see where the biggest pushback is because wherever the largest pushback is on the rules, you can probably lay a pretty clean bet that those are the rules that are gonna have the greatest impact towards fairness and transparency. 

David Dayen: I don’t think it’s gonna take too long for you to figure out where the biggest pushback is gonna be. [ LAUGHTER] I mean, it’s gonna be from Citadel, it’s gonna be from Virtu, it’s gonna be from these market makers who take an incredible amount of income out of the system and you know so we already know where the problems are. The problem is they’re also, you know, that money, connotes, power and they have that and they’re gonna use the court system to try to use that to their advantage. They’re gonna use the comment period to their advantage and we’ll see where it ends up. But I think Gensler is making an attempt. I mean, I don’t think this comes outta Jay Clayton’s SEC. I don’t think this comes out of even Obama’s SEC Commissioner, Mary Schapiro, or people like that.

Dave Lauer: We’ve been talking to them for that long. 

David Dayen: Yeah. Well, there you go. 

Dave Lauer: And it’s gonna come from Congress too. You know, I saw David, your recent article on crypto, you talked about McHenry and Huizenga, and they’re leading the charge against this. They’re publishing op-eds. 

David Dayen: Oh, yeah. 

Dave Lauer: Against this, they’re in the pocket of, you know, these firms just like, you know, they’re in the pocket of these crypto firms.

Jon: So you’re suggesting that there may be some congressional interests that are in the pocket of these larger, [LAUGHTER] interest. It’s the first time hearing about it. I hope you can see the shock. I dunno if you can see it, I got my glasses. 

David Dayen: It’s an obscure dynamic. 

Jon: You see, I got the little, I got a circle light for the first time, so I’m very excited about that. You know why I have a circle light? I’m an influencer. [LAUGHTER] We got ourselves a call here from Ross from Virginia Beach. He’s a market maker or no, he’s not a market maker. He wants to know if a market maker, hey, Ross, are you there from Virginia Beach? 

Caller (Ross): Yep, I’m here. 

Jon: Ross, ask your question to Dave and David and then I’ll answer it cause I’m the expert. [LAUGHTER]

Caller (Ross): Um, yeah, my question was about failures to delivers or FTDs, which —

Jon: Sure 

Caller (Ross): — someone can, you know, take someone’s money and not deliver the shares that they are owed.

Jon: Well, listen and this is gonna get us into the MMTLP, which you know, is, the internet is a fire with MMTLP, but I don’t know if you’re talking specifically about that case, Ross, or do you just mean in general when people are delivering, you know, I guess this would also fold into naked shorts and people selling preferred shares that they don’t have and then not delivering them to, once they do. Is that sort of the general idea, Ross, or are you talking more specifically? 

Caller (Ross): Generally speaking, generally.

Jon: Dave, you want to, you want to take that on in terms of the FTDs and, and how those are gonna be in affected?

Dave Lauer: Yeah, and that was, it was actually the first question that we asked chair Gensler yesterday in our Q&A. It’s something that everyone in the online investor community really cares about. And you know, what’s happening is as Ross said you go to buy stock and in your broker, it says you own that stock.

Jon: Mm-hmm. 

Dave Lauer: But whoever sold it to you fails to deliver those shares. It’s very antiquated from when paper certificates were actually being delivered. Now, there are legal fail to delivers. So firms like Citadel and Virtu claim what’s called a bona-fide market maker exemption to reg show, and they don’t have to locate when they have to sell you shares. And that is the Bernie Madoff exemption —

Jon: Why would they? Why? [DAVE LAUGHS]

Dave Lauer: Yeah. 

Jon: Why would you need to be able to locate the share you’re selling people?

Dave Lauer: Imagine, right? Yeah. 

Jon: It makes no sense!

Dave Lauer: And there’s a really, there’s a huge problem in this rule in that there are loopholes to it. So in theory, you have to eventually deliver, you have to get bought in if you don’t deliver. But there are ways that these firms use to kick the can down the road; through manipulation or loopholes, they use options, contracts. They use other means to shift it. They use what’s called X-Clearing. It gets complicated, but what it comes down to is they sell something that they don’t own. Even Gary Gensler admitted it’s according to their statistics, it affects 1% of all stock transactions. I’ve seen other numbers that say 3 to 5%, and I’ve seen other numbers —

Jon: Well sh*t, even 1% would be —

Dave Lauer: Even 1% would be too much.

Jon: — an outrageous amount.

Dave Lauer: Yes, you know a multi-trillion dollar —

Jon: That’s a 1% fraud.

Dave Lauer: Right, right. It’s really crazy, especially in a modern electronic marketplace. It doesn’t make any sense anymore. And so, you know, these are some of the reforms that we’re pushing for, but I agree, FTDs are a huge problem, and it’s a really, it’s a flaw in markets that if people can, if these firms can continuously fail and never deliver. You think you have your, these shares, you don’t. And it also inflates the float of companies. So what it creates extra supply of shares.

Jon: Well, it’s great way for them to generate capital. 

Dave Lauer: Right.

Jon: I mean, they can generate a tremendous amount of capital. And maybe that gets us into without — and thank you so much Ross, for checking in with us. I wanna go out to Jimmy Ray from — I’m gonna f**k this up. Mendocino, is that correct? California? Jimmy Ray. 

Caller (Jimmy): Can anybody hear me? 

Jon: Oh, Jimmy, we can hear, Jimmy, your voice is coming through the dulcet tones, my friend. You sound like Johnny Cash coming out of Folsom Prison. 

Caller (Jimmy): Sorry about that, had to clear my throat.

Jon: Please. 

Caller (Jimmy): Oh, man. Um, so Mr. Stewart yes. Mendocino County, California. The Green Triangle. The question that I have is, are you aware of a situation whereby a ticker that formally traded under the symbol MMTLP —

Jon: Yeah. 

Caller (Jimmy): — recently went private.

Jon: Yes. They flipped it. Now they trade under, it’s basically the same company under a different name. It’s like when they switched the Darren’s on “Bewitched.” [LAUGHTER] Really the inverse of that. It’s the same company. They just changed the name.

Caller (Jimmy): Well, what happened is the company actually went private and the shareholders still don’t have their shares and they —

Jon: That’s right. 

Caller (Jimmy): — were not allowed the opportunity to liquidate their positions in the two days prior to when they were supposed to.

Jon: And this is, I assume you’re talking about and I believe FINRA halted the trading on it. 

Caller (Jimmy): Yes. 

Jon: And there’s apparently 65,000 or so shareholders out there who were left kind of holding the bag on a company that flipped from public to private. David Dayen, do you know something about this? 

David Dayen: I think those shareholders are all in the chat. Like every single one. [JON LAUGHS] 

Dave Lauer: They do that, yeah.

Caller (Jimmy): We’re an army and we come on strong.

Jon: Yeah, I mean, now this is an example of —

Caller (Jimmy): Dave. Dave, you know me.

Dave Lauer: Is that Andrew?

Caller (Jimmy): Dave spoke to me two days ago. Hi, Dave. [LAUGHTER]

Jon: Beautiful. So, and we have a little thing, MMTLP is a crime scene. So listen, I’ve read about this case. It does seem awfully strange that a public company can, decide to go private, get preferred share prices, some of them, as you said, without the transparency of knowing if somebody really, if it was naked, shorting or whatever it was. And suddenly, now —

Caller (Jimmy): That’s exactly what we believe it was. 

Jon: And now there’s a failure to deliver. And you’ve got a ton of people –– 

Caller (Jimmy): Yes.

Jon: –– who grabbed something at, and I think it was maybe $12 a share at one point, and now it’s just —

Caller (Jimmy): Yes, sir. It was.

Jon:— it’s evaporated. So, Jimmy Ray, I’m gonna put the question to Dave Lauer and thank you so much for that call Jimmy. Dave Lauer you know, look, I don’t wanna say there’s always fire where there’s smoke, but geez, there’s an awful lot of smoke here. And, even if it’s not the thing that everybody thinks it is, a market without transparency on that makes it very plausible that something arise going on.

Dave Lauer: Yeah. You know, look, it’s a terrible situation. There’s no way around it. A lot of individual investors have been hurt by this and they’re angry and I understand that, and I hate to see it. There’s honestly — there’s nothing worse to see than this situation. I unfortunately don’t think the explanation is as sort of cut and dry as they do. And, you know, that doesn’t mean that I’m right about it, but from my perspective, you know, what happened was that there is a mistake in understanding that they were going to have more days to trade this stock, and part of it is based on the complexity of these systems and the complexity of what are called corporate actions. And, you know, anyone in the industry who would’ve seen the action that explained this going private transaction would’ve said, “Yes, trading is gonna end on this day.” But because the company was not clear about that and online there was a lot of misinformation, people thought they were gonna have two more days. Fine. FINRA stepped in and halted the stock because once it spun off the private company, the rights to that private company were no longer carried by that symbol and that symbol ceased to have value. And so to have allowed it to trade for those two days would’ve mean that there was nothing being traded. Now, they hate me. They hate me when I say this. And I, [DAVID LAUGHS] it’s honestly, I hate to have to say it because I don’t want to be the target of all this online abuse, but, you know, that’s besides the fact —

Jon: But Dave —

Dave Lauer: that there are definitely bad things happening here for sure.

Jon: To push back a little bit though, I understand, but somebody —

Dave Lauer: And FINRA should be more transparent about what’s going on.

Jon: That’s my point. FINRA —

Dave Lauer: Absolutely.

Jon: — was not transparent about it in any way, which is where a lot of these theories then end up flourishing. But beyond that, somebody, if there is a window that people thought was two days longer, somebody should be liable for that change. 

Dave Lauer: Absolutely! And I think, you know —

Jon: And that shouldn’t be the investor.

Dave Lauer: — No. I honestly think that this should, that there’s a lot here that the issuer and the executives and the issuer should have done differently, and for some reason they’re not being held accountable. And people are pointing the finger at FINRA when, because they think FINRA changed some dates when that’s not how any of this works. But then suddenly, FINRA was subjected to lawsuits right off the bat when this went down. And so I think FINRA can’t come out and talk about it because now they’re in the midst of, you know, this litigation. But it’s a terrible situation and there is no transparency and it’s this OTC symbol.

Jon: Listen, let’s not pretend that FINRA is in the business of shutting trades down.

Dave Lauer: No, no. 

Jon: So when something this anomalous happens and nobody will give you an explanation, and a company that was public, that just generated at $12 a share, a s***load of capital flow suddenly shuts it off, and nobody can grab that money back anymore. Wouldn’t you most naturally go to the fix is in?

Dave Lauer: Oh, I mean, I really, I think FINRA should have been out in front of this. I think they should have been much more clear with what they did. I think people believe they haven’t received shares, if that’s true and I have not seen evidence of that, but I’m not doubting that there might have been naked shorts in the symbol and people might be stuck without shares. If that’s true, then this is going to go to the courts. There’s going to be litigation and it will all come out, right? So eventually, everyone will be made whole.

Jon: What would be the other explanation for the failure to deliver then on those 65,000 folks?

Dave Lauer: Well, I mean the other explanation would be that they actually, you know, they have placeholders from their brokers. Most brokers that they’re holding this through do not have this, the capacity to handle private shares. This is a very unusual situation. And what they need to do is they need to take these shares and directly register them with the transfer agent. Something we might talk about later and something we spent a lot of time on yesterday with Gary Gensler. But, you know in, if they can directly register their shares with the transfer agent, then they will absolutely have their actual shares in this private company. If that’s, you know, I think the problem is a lot of people thought that they weren’t gonna get stuck with these shares because they were gonna be able to sell them after that date. But again, unfortunately that’s just not how it works. And that’s not how, you know, the system works.

Jon: David Dayen how much of this then points out sort of the general idea of, this market is so overly complex and so easily manipulated and taken advantage of on the margins at 1% of the trades doing this, or half of the trades, that there’s so much skim in the system. And that simplifying it would be to the detriment of the market makers and all these other folks.

David Dayen: I mean, this is memory lane for me. [JON LAUGHS] About seven years ago, I did this long series on it was a different market maker. It’s a market maker called Knight that was involved in some things in the over-the-counter market. My understanding of an MMTLP is that it moved from Nasdaq to the new CUSIP, that is in the OTC market. If you go to the website of the pink sheets, which is like one aspect of the OTC market, there’s a warning on it that, that essentially, if I can paraphrase, says “Whatever you do, don’t come anywhere near this market.” Like, that’s pretty much what it says on there. [DAVID LAUGHS]

Jon: Right.

David Dayen: I mean, my dad took me to the racetrack when I was, I think 11 and I think more of him as a responsible parent than if he introduced me to the OTC market. You know, I mean, it’s a Wild West out there, and it has been for a long, long time. But these things absolutely happen. I mean, you see, one thing that I saw in that report many, many years ago was you see these fails to deliver and then there are stock splits or reverse stock splits where the CUSIP changes, right? And so those old fails to deliver can never be reconciled because it’s with an old stock, essentially. An old CUSIP —

Dave Lauer: Yeah

David Dayen: And so you have these aged fails that exist on somebody’s balance sheet and some market maker’s balance sheet, and there’s nothing you can do about it. You know, that’s a situation where it, who knows what is actually going on there, why they’re creating this massive increase in inventory through these aged fails. But in this case, the fact that the individuals were not allowed to end up trading a stock that they were previously allowed to do business in. I mean, I do think, I mean, FINRA is a self-regulatory organization. There’s definitely some things in the past that make me a little skeptical of their, I think you should be skeptical, frankly, of their pat answers for this saying that everything was above board. But this is a Wild West.

Dave Lauer: I don’t like having to defend FINRA. Don’t get me wrong. You know, it’s —

Jon: Right, right. 

Dave Lauer: —it’s frustrating. Like, they’re here to protect the brokers. The brokers pay for FINRA. That’s where all their money comes from. It’s a very a huge conflict of interest. They have —

Jon: Oh no, it’s like the commissioner of football. When the commissioner of football comes out and he makes some sort of standard ruling and you’re like, “I think that just sounded like you were just protecting the owners,” and ultimately you realized, “Oh, right, cuz he works for them.” That’s really their boss, and that’s FINRA’s boss.

Dave Lauer: Real quick, back to the new rules for example, like one of the rule proposals is the best execution rule. And it’s not different than FINRA’s, but it’s the SEC taking BestEx over because up until now it’s been FINRA’s responsibility to police BestEx and as FINRA told me, trying to enforce BestEx is like trying to nail Jell-O to a wall. They haven’t brought BestEx cases, they haven’t enforced it because it’s a very conflicted system where you have the brokers —

Jon: And none of these people will be fiduciaries. They refuse to be fiduciaries anyway, so you know, what’s the f***ing point at some point. But then David, does that make you skeptical when the SEC says they wanna start regulating on crypto? And you’ve got, you know, talk about the Wild West I mean, there’s all kinds of action going on in there, and an increasing complexity like we saw with FTX that shows, boy, the, we’re really on fragile ground when it comes to this type of thing. What’s your feeling on the SEC making moves into the world of crypto?

David Dayen: Well I think in the last two months they’ve been extremely aggressive, and they are finally following through on their contention that most, if not all, of the digital assets that are being sold are unregistered securities. And they have said that for a year they have given the crypto industry more than enough time —

Jon: So their argument is these are securities.

David Dayen: These are unregistered securities, which means that the crypto firms have not registered them with the FCC, which would give the disclosures to the investors, would give other investor protections. And they have given the industry years, frankly, to get into compliance, to make these things, securities and to do the various paperwork. And the industry just flat, said, “No, we’re not going to do that.” And that gives Gensler no choice but to say, “OK, well we’re gonna go after you.” And he’s done it. He’s done it with Genesis and Gemini. He’s done it with Kraken where he said he basically had them end what is called staking, which is where you leave your digital assets in an exchange and you get some sort of payout for that. It’s like, and he’s also done this. He said that he’s going to sue one of the largest stablecoin issuers but the issuer of finance —

Jon: Is there any reason why all the names of these companies sound like everyone was high when they came up with them? [DAVID DAYEN LAUGHS] Is that something — 

David Dayen: You’d have to ask your guy from Mendocino County on that one. [LAUGHTER]

Jon: What is going on? David do you have any updates? We had a caller on deck. Mary from Boston. Mary, are you there? Is Mary there? Mary from Boston? Mary going once, going twice. 

Caller (Mary): Yeah. 

Jon: Mary from Boston! 

Caller (Mary): Yep. 

Jon: How are you?

Caller (Mary): Hi! I am well. How are you?

Jon: Mary, thank you for asking. I’m, doing quite well. A little pensive. You had a question concerning FTX, is that correct? 

Caller (Mary): Yes, I did. 

Jon: Please. 

Caller (Mary): Yeah, so I first heard about the scandal when you did the online video with you and David, and I think that was right before the congressional hearings, but I feel like I haven’t heard a lot about it since in the news. So I was just wondering where do things stand with that case and with the company as a whole?

Jon: Thanks, Mary. 

David Dayen: Few things, including a really interesting thing that happened today. You know, so the company FTX which is holding sort of the bankruptcy, managing the bankruptcy, has asked for a lot of money that has been, you know, littered around including into politicians’ hands, they’re asking for it back. And this is where the FTX story [JON LAUGHS] has really turned into a political corruption story. Today’s indictment of Sam Bankman-Fried, I don’t know if you read it, but it lays out a massive straw donor scheme. And what that means is that because there are certain limitations whether because of reputation or because of actual FEC limits, on the amount of money that you can give, Sam Bankman-Fried was giving money to other people to then give to politicians to basically get around the minimal restrictions that there are in campaign finance. And they have him dead to rights. If you read this lawsuit they have emails — 

Jon: Which by the way, it takes about as lazy an idiot to get caught in a campaign finance scandal. Like why not just be a normal s***head and start a Super PAC and then you can just funnel like the rest of these guys, tens of mil. It’s like when you read about, this is the, how much money has Ken Griffin donated to politicians? Tens of millions of dollars.

David Dayen: And it’s unaccounted because it’s all dark money, right? 

Jon: Exactly!

David Dayen: It’s dark money and it’s unaccounted, but Bankman-Fried, in addition to doing dark money stuff, also did stuff that was on the books and did it completely illegally, and the FEC, which is by the way, split between Democrats and Republicans, which is why they get almost nothing done.

Jon: And has done nothing. Nothing ever.

David Dayen: It’s designed to fail. If they’re suing you, right? I mean, if they’re figuring out the scheme, you’ve done something incredibly wrong. 

Jon: I don’t even think they’re figuring it out, quite frankly. I think he’s an easy patsy. I really do. I think Sam Bankman-Fried with this whole Chauncey Gardner act and everything else. They’re gonna get him on every fraud known to man, and he’s gonna be the head they put on a pike and say, look at what we’re doing about the corruption in campaign finance. It’s all nonsense, and it’s all a red herring because the truth is that system is just a giant f***ing hose of dark money and unregulated campaign donations from every powerful player from here to Timbuktu. 

David Dayen: So you’re saying he’s like the Martin Shkreli of campaign finance.

Jon: Yes! That’s exactly what I’m saying that he’s a wonderful sort of something to put up on your, a notch on your bedpost when it comes to that. But the truth is, how can you look us in the eye and say you’re doing something about campaign finance when these hedge fund billionaires and all these other folks are putting tens of millions, sometimes hundreds of millions of dollars into our elections with no ramifications. 

Dave Lauer: Yeah it’s all legalized bribery, right? And so if you do it this way —

Jon: Exactly. Thank you. Exactly.

Dave Lauer: — you get caught. But if you do it this way, oh fine. No problem.

David Dayen: You don’t. Everything’s fine. Yeah, but I mean, I do think that the FTX debacle did motivate Gensler to finally move from the warnings about unregistered securities. The warnings about fraud in the markets, and go to, “OK, we’re gonna go to litigation now.” And by the way, he’s doing all this without any new regulations, any new legislation that has been put together, we know how to police fraud. It just takes the will. And what we’ve seen in the last month or two is that will coming from the SEC, in my view.

Dave Lauer: And, and don’t forget the resources that it takes, right? Like I remember when, when all this started and the Southern District of New York came out and they’re like, “If we were to actually enforce every rule that’s broken and deal with every facet of this case, it would consume our entire office.” Right. So these guys, these fraudsters have every resource that they could possibly want, and all the best lawyers and the regulators and the, you know, enforcement divisions are pretty underpowered.

Jon: But didn’t they, just to push back very quickly. Didn’t they give the game up a few years ago when they made the decision to no longer prosecute those cases criminally and just go after fines? I mean, when you’ve got a bank that is caught laundering money for drug cartels, and they get a fine, you basically, they’ve made billions on that. And, what the government says is, “OK, come on, give us 3% of that.”

Dave Lauer: Yeah, and then it’s the shareholders paying the fine, right?

David Dayen: You’re talking about a, you’re talking about HSBC who literally created boxes of the same size that would fit into the windows in Mexico for the drug cartels. I mean, they were very integrated.

Jon: They got a fine and they’re still doing business. 

Dave Lauer: This was actually when, when we talked Gensler yesterday, this was the very last question I posed to him. I said, “What does it take to lose your ability to operate as a broker dealer.”

Jon:Thank you! 

Dave Lauer: What does it, what do you have to do? 

Jon: Why doesn’t FINRA revoke licenses? Why doesn’t it do anything? 

Dave Lauer: I don’t understand it at all, and I sit on a FINRA committee where I, three times a year I meet them and I sometimes yell at them. I give them my thoughts and advice. And I’ve made this exact point at the last meeting too, and I said it, I was like, I can’t understand how all these broker dealers who manipulate markets, who defraud investors who you know, misrepresent launder money, but they don’t lose their ability to operate. It’s mind boggling. How do you think there’s any deterrent effect whatsoever?

David Dayen: And it’s more than their ability to operate. It’s their personal freedom. I mean we’ve seen a lack of accountability for fraud deception in financial markets for going on 30 years. I mean, ever since, you know, Lincoln Savings and the S&L scandal where they put a thousand bankers in jail. We have been 0-fer since then, pretty much when we had the largest collapse financial collapse in recent history in 2008. So, you know, SEC has the ability to revoke your license, but they don’t have the ability to put you in jail. They have to team up with the DOJ to do that.

Jon: That’s right, but think about the resources. 

David Dayen: This is more of a DOJ problem just as well.

Jon: And the resources that you have to make one of those prosecutions on financial and propriety and get a fine back are pretty much the same resources it would take to get a referral to DOJ, and put that thing through with some real teeth, put some people in jail for the crimes they committed —

David Dayen: Which is why you only get this in the egregious cases like the Sam Bankman-Frieds of the world, right? 

Dave Lauer: When it’s easy. It’s a slam dunk.

David Dayen: But what I have been hearing is that post FTX, a guy who follows us pretty closely told me yesterday. Post FTX, what you really need in these cases is an insider, somebody to talk to tell you exactly what was going on inside there and to give you the documents and all that stuff. 

Jon: We’ve got Michael Lewis’ next book! It’s gonna be a guy who flips in a crypt. It’s gonna be crypto bomb.

David Dayen: Funny enough, Michael Lewis was down praising FTX and Sam Bankman-Fried at that little shindig he did in the Bahamas. He was like claiming to write a book about Sam and so now he’s stumbled on this. Anyway, my point is, since the FTX collapsed, we’ve seen more insiders willing to talk, and that is driving some of the activity here — 

Jon: Right. OK

David Dayen: — when you’re talking about the SEC. So you know, that is somewhat promising. I mean, the other promising thing is that the banking regulators came out and said, they put a guidance out to the banks that basically said, “You should be extremely cautious before putting any kind of investment in crypto right now.” And that hives off this problem, which is still a problem. I mean, a lot of investors in it, and they’re gonna get hurt. But it’s probably not going to spread out to the broader banking system in the same way. And that, is, you know, unlike what we saw in 2008 when derivatives and in from housing related security did spread out. 

Jon: Sure. Which at that point was infected by Fannie Mae and everybody else. But David Dayen, American Prospect. Dave Lauer, CEO of Urban Finance. Thank you guys both for joining us. We got about 15 minutes left. I’m gonna open up the phone lines… Did I just say open up the phone lines like I’m on a f***ing telethon? There’s a few people who’ve lined up some calls that wanna talk about other stuff, and in our remaining 15 minutes, I wanna do that. Anna Marie from Newberg, New York, you’ve got a little something you wanna talk about there. What do you got?

Caller (Anna Marie): Hi, Jon. 

Jon: Hello? 

Caller (Anna Marie): Yes, can you hear me? 

Jon: I can. 

Caller (Anna Marie): Hi.

Jon: Hello… You’re very enthusiastic. What are you thinking? 

Caller (Anna Marie): Yeah. So I’m horrified and intrigued by the recent revelations about Fox News.

Jon: Ah. 

Caller (Anna Marie): From the Dominion lawsuit. 

Jon: Yes. 

Caller (Anna Marie): Yeah. 

Jon: You’re horrified and intrigued. Horrified in that your suspicions were met, or that you didn’t know that they were a fraudulent organization, a Trojan horse sent to destroy America from the inside, dividing the country through lies, and fabrication?

Caller (Anna Marie): Horrified that the proof is clear as day.

Jon: So explicit.

Caller (Anna Marie): Yes. That it’s so, it, yeah, it’s, you know, kind of grossly and egregiously explicit. Like it’s insulting what they’re doing. You know, it’s so obvious, kind of as you and the law professor talked about on the recent podcast, like —

Jon: Yes. That’s correct.

Caller (Anna Marie): — you wouldn’t even teach it. It’s such an obvious scenario. So I guess I’m wondering like outside of kind of a legal framework as like citizens that consume media and other kinds of corporate media that might not be quite as transparent, you know, and may not, you know, have this kind of discovery, you know, a lawsuit of this nature, right like CNN.

Jon: Yeah. Well listen man, this what we got, those emails from Fox News is like a Project Veritas wet dream. I mean, these guys go through —

Caller (Anna Marie): Yes.

Jon: — a five month sting operation to get an associate producer at CNN a little tipsy to come out and go, “I never really liked Donald Trump.” And they’re like, “Score! This is huge.” But the truth is there is no organization like Fox News. It was built explicitly to subvert the institutions in this country. It was built explicitly to lie to the American people to create a false narrative and a sideways narrative. They would throw Chris Wallace on there every now and again just to give it a patina of respectability. But it is doing exactly what it was designed to do, and I think the only remedy because nobody is gonna take it, is a “Game of Thrones” situation where whenever you see Fox News, you just shout, “Shame! Shame! Shame!” [CALLER LAUGHS] You probably can’t see my face right now, but I was making the shame face, and working it through there. But Anna Marie, thank you for the call and I appreciate you keeping an eye on them. But boy did we see that one f***ing coming a mile away, the Fox news situation and the strangest thing to me, and I ask you guys out there, is to watch now after these revelations, everyone walking around as though the world hasn’t changed. As though we know nothing new and pretending as though this is all business as usual and still taking seriously the points that they bring up as though they’re not, I mean, for God’s sakes, Rupert Murdoch sent an email explicitly stating to the head of Fox News, “We have to do whatever we can to help Donald Trump and the Republicans.” I don’t understand why we don’t just treat them like the Cartoon Network at this point but apparently the rest of the media somehow is finding themselves to chicken s*** to make that happen. But Nathan, from Providence! Nathan! I’m gonna go to Nathan from Providence. I don’t know what he wants to talk about, but I like the name Nathan. Nathan was my grandfather’s name, Nathan from Providence, and it is my son’s name, and so I am awfully predisposed to liking you. Nathan from Providence, Rhode Island. 

Caller (Nathan): Well thank you very much. I hope to leave a good impression. So my question is, should Rule 34 or better known as the filibuster be blown up? And if so, should we pack the Supreme Court with four justices to 13 and end any possible judgeship we possibly can?

Jon: Look at Nathan jumping on the extra Democratic measures to take care of that! Look, as far as the filibuster being abolished, I, me personally the pathogen is already in the court tributary. So the toxic nature there, whether it’s nine or 13 or whatever you wanna stack it with, that will come back and bite you in the a** because the toxicity and the politicization of our court system is already underway and again, already part of the strategy to create a parallel universe of courts and let me say this in the troubles, and I refer to them now as the trouble. The post 2020 election shenanigans as the troubles. I give credit to the court system as much as they’d been manipulated and politicized over the years. They held the line for democracy in a way that nothing else did in this country and without them —

Caller (Nathan): That’s true. 

Jon: — what it showed was how far and ahead they are of the media in this country. If the media is part of that. That is our — part of the immune system of democracy. Whereas the media would take credulously all these allegations. The court system was the one who said, “Um you know, this is all bull****, right? So unless you want to go to jail, I suggest you get outta my courtroom.” So changing the way the courts go, I don’t know, changing the filibuster, I never understood what it was doing there in the first place, and I would absolutely — yeah. 

Caller (Nathan): It’s just the whole thing with the coming back to bite us in the a**. I feel like that’s gonna be the case no matter what we do. We know for a fact Republicans have always been willing to turn everything, you know, back around. It’s like, I don’t think we should let that fear stop us from getting —

Jon: Listen. The Democrats are not immune to shenanigans. I mean, it, any gerrymandering map that you saw of New York state this year would tell you that the Democrats are not afraid to go like, “What if we made this district look like a falafel sandwich.” And you know, whatever they wanted to do, and so bad that the courts actually restricted it. And they ended up losing quite a few seats in Congress and probably control the House of Representatives courtesy of New York Democrats overstepping their mandate and trying to create something ridiculous.

Caller (Nathan): Yeah, that’s not too good. [CALLER LAUGHS]

Jon: Alright, Nathan. Well thank you so much for calling in there and being with us. Really appreciate it and take care of that. I just, it’s such a good one. Alright. Steven from Irving, Texas we’re gonna go out there. This, it is so crazy that this is all over the country. Just nuts. Steven, what are you doing there?

Caller (Steven): Hi. Um, yeah, hi. I’m doing well. 

Jon: Alright.

Caller (Steven): Um, I don’t really have like a political question, but —

Jon: That’s OK Steven, what’s on your mind? Unburden yourself my man!

Caller (Steven): Yeah. Um, wow, I can’t believe I’m talking to you. Well, so it, during Christmas my aunt knew this, she told me this girl she knew who grew up and so like she gave me her phone number and we’ve been talking and in January, she is in residency as a pharmacist in —

Jon: She’s a pharmacist in Boston?

Caller (Steven): Yeah. 

Jon: And you live in Texas?

Caller (Steven): Yeah. Uh, yeah, it’s, I mean, that’s one of the difficulties, but yeah, it’s her second year in residency.

Jon: And your question is, should you move to Boston and become a pharmacist? 

Caller (Steven): No, I’m, well, I’m a software engineer, so I have a lot of flexibility. And I’m willing to do like a lot if she’s, if she’s the right person. But, um — 

Jon: Steven? 

Caller (Steven):  Yeah. Right now.

Jon: Yeah. Is she the right person?

Caller (Steven): Well, that’s where the problem, that’s why I called, actually. Um —

Jon: Wait for real? That’s why you called? I’m gonna help you find out if she’s the right person? 

Caller (Steven): No, no.

Jon: Oh.

Caller (Steven): There’s just there’s just like, so we’ve been, we went on the date when I flew out to Boston and we hung out um, but, and she’s been telling me she’s been like, swamped and right now she’s like not able to survive like she, well, she’s like barely taking care of herself right now in residency. It’s just like —

Jon: It’s very different. Residency is the worst. It’s the worst. 

Caller (Steven): Uh, yeah. Yeah. 

Jon: Plus she has a whole pharmacy at her disposal, so I’m sure that’s not helping. That’s not helping. 

Caller (Steven): Yeah. She’s very sweet and kind. And I know she’s like being honest when she tells me, like she told me, I think like right now she doesn’t think she can like be in a relationship, um just because of like how demanding it is. And I totally understand. Um, but like, I guess like I want to give her support and like because like I still do care for her and not, and like I have been like calling her like once every two weeks and we’ve been talking and like just as friends and. I guess like in terms of support. Sometimes like with everything she’s going through — 

Jon: Steven, is your question here are you being foolish by pursuing this woman when she just wants to be friends? And I’m gonna have to give it to you straight from the heart, Steven.

Caller (Steven): Yeah.

Jon: Uh, yes. 

Caller (Steven): OK.

Jon: And here’s what I would suggest you do. Start driving around Irving, Texas and visiting the pharmacies there. You’re gonna meet a nice, very kind, lovely pharmacist. One who is no longer in residency, who has the time, and you will meet the pharmacist of your dreams within driving distance. And I think that’s gotta be the way to go, Steven, because believe her when she’s telling you these things. And thank you so much for the call, Steven. I do, appreciate it. I do think that we may be the only YouTube livestream that has gone from FTX and the market maker rules laid out by Gary Gensler in the SEC to whether or not pharmacy residents are being truthful when they tell you, “I’m just not ready for a relationship right now.” I think that’s one. I think even Dr. Drew would’ve pulled his groin making a transition like that on these various things, we’ve only got a few more minutes and can I say this? This is delightful. This whole YouTube Live radio s***. Delightful. We’re gonna change the world. One like is, YouTube likes or is that Facebook? One of them’s liked. Let’s talk to Spartak. Spartak Abramov —

Caller (Spartak): They’re always gonna rely on a man. 

Jon: Spartak! [FEEDBACK] Spartak!

Caller (Spartak): Oh my God.

Jon: Oh my God Spartak, what the f***.

Caller (Spartak): Hey, what’s up Jon? 

Jon: I’ve been trying to talk to you Spartak. [FEEDBACK] Are you there? He’s gotta bounce. 

Caller (Spartak): I’m so excited. 

Jon: So you gotta turn down your computer Spartak. 

Caller (Spartak): I am a longtime listener. 

Jon: Spartak, you gotta turn down your computer, we’re getting the bounce back. There you go, brother. What’s your name? Spartak Abramov? 

Caller (Spartak): Yes Spartak Abramov like —

Jon: Can I tell you something?

Caller (Spartak): What’s up?

Jon: If you are not a hit man from Estonia, you are missing your calling [CALLER LAUGHS] because that my brother is, that’s a bada** name.

Caller (Spartak): It’s hard to be Russian right now though.

Jon: Are you Russian, my friend? Not to worry. It’s not the Russian people. It’s the, your leader is getting a little Peter the Great on everybody, but it’s not you at all. What can I do for you, Spartak? Where in New York are you from? 

Caller (Spartak): So that’s exactly why I wanted to call because I wanted, Take away from the hard topics that you addressed, and lighten the mood. 

Jon: I appreciate that. 

Caller (Spartak): You know?

Jon: You’re a good man. 

Caller (Spartak): And just ask like a different sort of question — 

Jon: Yes, sir.

Caller (Spartak): — that relates to your method of research. In general, how do you choose the topics to address and how does your team in general, go back to research a particular thing? 

Jon: Spartak, that is an excellent question. So here’s generally how we do it. Do you know what a whippet is Spartak? A whippet where you huff, let’s say Reddi-Wip cans. So we’ll sit around and we’ll do a few of those and then generally they’ll spin me around as many times as they can and point me to a board where we’ve just written random letters and we’ll just spell stuff out. And that’s generally yeah, you’re not buying that. I think Spartak is gone. I think he’s, once he heard whippet, he probably ran down to the bodega, grab himself a little something. Actually we got a great research team. What we basically do is come up with what bothers us the most. And throw it out there on the board and try and make a little something there. Alright, we’re gonna go to the last question. Here we go. What does this last about an hour? OK, here we go. Matt from Roanoke, Virginia, the mystery of Roanoke, Virginia. Matt, are you there? 

Caller (Matt): Yes, sir, I am. How are you?

Jon: Very well. What’s your question there, my friend? 

Caller (Matt): I can’t compete with Loveline with Jon Stewart, but uh —

Jon: How f***ing crazy was that? I’d want to give that boy a hug. I felt terrible for him, he’s lovesick for God’s sakes. 

Caller (Matt): Yeah, I know. I think you gave him the hard truth. It’s good.

Jon: Ah, you gotta do what you gotta do.

Caller (Matt): I know you gotta wrap up, you’re a national icon. You got things to do. But I’m getting tired of paying attention of everything. And I’ve been really passionate about politics. I’ve participated a lot. It’s been two decades. It’s just too much anxiety, too much depression. I can’t do anything about Ohio, the train rail. I can’t do anything about the earthquake in Syria. Why should I even watch the news? Like I’ve gotten to this existential crisis where so much of my identity is based off caring about things that are going on in the world, but it’s —

Jon: — Matt, I so appreciate where you’re coming from and I’ve been there a million times. But I gotta tell you, Matt, you take yourself a break. You go get yourself a pint of the Haagen Dazs, the Tom and Jerrys. The Ben and Jerry’s. Whatever you want to get, or go to a hookah bar. Whatever you need to do to clear your mind, to do a little care on yourself, but you don’t give up, Matt, because you don’t know what will be the spark that lights the flame that creates the change. Incremental or otherwise Matt, there are people on the ground working day in and day out tirelessly to bring about one small change. And what I would suggest to you, my friend, is f*** national, get local. So forget about watching the news and getting upset about Ohio. Go down to your local food bank and go, “Hey man, once a week, you guys need anything? Because I’ll be down here to hook you up.” And it’ll fill your heart and it’ll remind you that you, my friend, can make change yourself in your neighborhood that is relevant and righteous. And it will fill your cup, my man. It will fill it. And, I know this existential crisis. I suffer from it myself. Fill your cup, my brother. You can do this.

Caller (Matt): Tiny victories. Thank you. I appreciate it sir.

Jon: Yes! The quiet activism of living pleasantly. Matt from Roanoke, thank you so much. We’re gonna end it. That’s our show. Thanks to Dave Lauer, CEO of Urvin Finance, creator of We The Investors. David Dayen, Executive Editor of the American Prospect. And thanks to everybody who called in, check out “The Problem.” New shows starting on March 3rd on Apple TV+, and we’ll do this again because quite frankly, it’s fun and easy. Bye bye.


Jon: “The Problem with Jon Stewart” podcast is an Apple TV+ podcast and a joint Busboy Production.