Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're inside the ICE House, our podcast from Intercontinental Exchange on Markets, Leadership and Vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years.
Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism right here, right now at the NYSC and at ICE's exchanges and clearinghouses around the world. And now welcome inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
I'm a nostalgic guy. I think a lot about history and milestones and the stuff that went before. So how does one mark the passage of time? Typically, through days, months, weeks and years, the turn of the calendar or maybe milestones in life like birthdays, new schools, changed jobs and moving to a new city, or how about podcast episodes or maybe midterm or presidential election cycles, a war, maybe even a pandemic.
On that score, the year's 2020 and 2021 have become synonymous. With our guest today, the passage of time can be marked through everything I just mentioned. Congressman French Hill, the five term representative from Arkansas's second district first joined the podcast in July, 2018, really just when we were getting started here on Inside the ICE House. Needless to say, a lot has changed in those past five years. Let's take stock a little bit. Since our first meeting here in the library back in 2018, representative Hill has won three additional congressional elections in the natural state.
His home state governor at the time of our last meeting, Asa Hutchinson is now a presidential candidate joining Mike Huckabee and my old boss, Bill Clinton, trying to make the move from the mansion at 1800 Center Street in Little Rock to 1600 Pennsylvania Avenue in Washington. And in that same span, representative Hill has had a front row seat to watch the end of former President Trump's term and the first half of President Biden's term bisected of course by the January 6th insurrection at the US Capitol, which so radically flew in the face of the American tradition of the peaceful transfer of power.
And through it all, of course, Congressman Hill has served in office throughout the tumultuous Covid-19 pandemic and the outbreak of the ongoing war in Ukraine. To use pandemic language, what an unprecedented five years it has been marked by these defining moments in which Congressman Hill has been representing our Arkansas in our nation's capital. In a minute, our encore conversation with Congressman French Hill on his congressional service since we last spoke, the debate and passage of the debt ceiling legislation, the evolution of the debate over digital assets and the challenges in US foreign policy, that's all coming up right after this.
Our guest today, French Hill, has represented Arkansas's second district in Congress since January, 2015. He serves as vice chairman of the House Financial Services Committee and as chairman of the subcommittee on Digital Assets, Financial Technology and inclusion. Congressman Hill is also a member of the House Permanent Select Committee on Intelligence and the House Foreign Affairs Committee.
And somewhat unique and refreshing among his colleagues, Mr. Hill has extensive experience in the realm of financial services, having served as founder, chairman and CEO of Delta Trust and Banking Corporation. Prior to his congressional service, he began his career in public service as the Deputy Assistant Secretary of the Treasury for Corporate Finance and Executive Secretary of the President's Economic Policy Council under the Bush 41 administration. Talk about nostalgia for the good old days. Welcome back to the ICE House Representative Hill.
French Hill:
Josh, great to be back, wonderful to be with you and just it's a pleasure to be back at the New York Stock Exchange.
Josh King:
What brings you back in town this trip?
French Hill:
Well, I had a little political business to take care of in the state and then spent some time today in New York seeing friends and doing a little media early this morning. And it's hard for me to come to New York and not come by and see you and my friends at the New York Stock Exchange.
Josh King:
You're no stranger to the city. As we talked about it the last time, you've been coming here for decades. What's your favorite stuff to do when you've got a little extra time in the city?
French Hill:
Well, one of my favorite places to go is someplace no stranger to the New York Stock Exchange is I had lunch today at the Morgan Library and went through their new exhibits on drawings from France and drawings from Fontainebleau. It's really a great collection and it just reminds me of the importance of American history across the street from the New York Stock Exchange at One Wall Street and then all that transpired in JP Morgan's library.
Josh King:
Well talk about Morgan and talk about history. When you were last on, we played an ad in support of your campaign in 2014 about a historic old car, old blue, and you got back behind the wheel for another spot in the recent campaign. Let's take a listen.
French Hill:
It all began with old blue.
Speaker 4:
My dad's been driving old blue since before I was born.
Speaker 5:
It's embarrassing.
French Hill:
Kids are out of high school now, but I'm still here driving old blue. Some things will never change, Washington's a mess. But for the past four years I've been your voice fighting for change, rising above the dysfunction and noise to deliver real results for Arkansas families. I cut taxes for families and businesses helping create good jobs in a booming economy.
And now wages are growing at their fastest level since the great Recession. But look, our work isn't done. We must continue to steer our great country back on the right track. This means lowering the cost of healthcare, ensuring that families that have a preexisting condition are covered and protecting social security and Medicare. I'm French Hill and I approve this message because I'm not quitting on old blue and I'll never quit fighting for the good people of Arkansas
Josh King:
French, I watched that ad this morning and you're trying to keep your eyes straight on the road, but certainly the cameras are rolling. Did your constituents look at the ad and say, Congressman, we're worried about you getting in an accident as you're rattling off your legislative accomplishments?
French Hill:
Well, the best part about it, I did have my seatbelt on and I was not texting, so I made it through the ad shoot.
Josh King:
Since you first ran for 2014, you've now run and won five campaigns and your last campaign you trounced, Quintessa Hathaway, 60%, 35%, which is a lot more comfortable margin than your 2014 race when you beat Pat Hayes, 51.9 to 43.6. What are the few key differences between your various campaigns and how has the district evolved over the years, you think?
French Hill:
Boy, that's a great question because it has evolved. Arkansas was the last southern state essentially to become red. Texas may be, I would consider being the first state under John Tower and Bill Clements in the late '70s and early '80s. And Arkansas, due to the leadership frankly, of your old boss, Bill Clinton stayed in the democratic camp for a long time, but by 2010 and then in 2012 it went all red.
So my first campaign, I felt very confident that I could beat Pat Hayes, long time Democratic mayor for North Little Rock, been in office 25 years. It was a close race, but I felt like the voters were becoming more conservative center right and it's continued to grow that way. The Republicans have a super majority now in the state legislature. They have all five constitutional seats and our congressional delegation is 100% Republicans.
So it's definitely gotten more red, Josh. Redistricting, and this is fun because you are a history buff, this is the first redistricting 2020 as controversial as people want to make it around the country that were done by Republicans since 1872 during reconstruction. So if you have any complaints about the congressional districts in Arkansas up until this point, they were all done by democratic legislatures and democratic governors. So that my district is slightly more Republican in that redistricting. Not dramatic, but slightly more so.
Josh King:
That district was held in democratic hands for 20 years from 1991 to 2011 between Ray Thorn and Vic Snyder. And is there anything that a democrat can do to sort of try to create a blue wedge in this state at this point? Or is it locked up you think?
French Hill:
I think it really has. We're going through a phase where I think right now it's center right, it's solidly Republican. And you see now at the most important level of politics in America are counties, our County Quorum Courts is what they're referred to in Arkansas. Those are seeing people change party identification and simply running now as a Republican or you have Republican competition at that level. So at the county level, you're now seeing more Republicans elected. The exception of course is the county, my home county, my hometown of Little Rock, Arkansas is very democratic and the Quorum Court is as well.
Josh King:
Regardless of party affiliation, French, I was talking to my Little Rock buddy Steve Ranell this morning who marveled at your ability to transition from a community business leader in the Rotarian community to an office in the Capitol. And we certainly need more French Hills with business acumen in Congress. What advice do you have to listeners who think they might be more effective in their seat in their hometown than say George Santos?
French Hill:
Oh, boy. Well pretty much anyone in the phone book maybe on that, but no offense, but look, here's the way I look at that. 750000 people are in each of these congressional districts approximately, and they work and they elect somebody. And you hope that it's elected on a clear, transparent, fair election with all the information you need to know to make that choice.
And that's why you see leadership in Congress a little reluctant to see what I've seen a lot of both under Nancy Pelosi and under now, even under Kevin McCarthy, which is this retribution issue where we're supposed to reach across the aisle and discipline somebody in another party. McCarthy's been very reluctant to do that. Speaker Pelosi was not. Did it routinely because she just plain disagreed with somebody, but you're really violating a 200-year precedent, which is that parties are to discipline their own.
So in the case of George Santos representing here part of Southern New York, he's been referred to the ethics committee and was prior to the recent indictment. And that works its course. That's deemed fair, a more fair way to go about that sort of reaching across the aisle. But as I say, I've seen it now both parties and I don't like it and I think a lot of people don't care for it.
Josh King:
But the broader question is sort of answering the call to service and you had a good life and you were a pillar of the community and you thought you could be effective in Washington and you put yourself out in old blue and asked for the voter's support. And we all benefit from the great amount of financial services experience that you bring compared to the other guy and plenty of other people who sort of see a couple terms in Congress as a stepping stone to a gig on Fox News. How can we get more French Hills in Congress?
French Hill:
Fair point. Yeah, I chased down the rabbit hole you led me to.
Josh King:
Sorry.
French Hill:
I saw the rabbit go down. I couldn't resist. I'm 10 feet underground right now, chasing that story. But look, I'm a recidivist. This is my third tour of duty in Washington. Each time I came up, I served in Washington the people and then I returned to the private sector and that'll happen again here at some point. I served two years in the Senate, on the Senate Banking Committee staff for John Tower of Texas and then four years for President Bush 41.
And was proud at mid-career to step away from the private sector, again, take that 35 years then or 30 years of experience in finance and bring it to Washington specifically. It's why I worked so hard as a freshman to get on the House of Financial Services Committee is I wanted to take that economic policymaking experience and practical investment banking and commercial banking experience and bring that to the debates. And I think I have made a contribution there, which is one that I always encourage people with private sector experience, please come run for public office. We need your practical viewpoint.
Josh King:
So French, on a tougher note about what's happening back in the district on March 31st this year, a catastrophic tornado touched down in Little Rock. I want to hear a little bit from my friend Phil Lipof reporting for ABC News that day.
Speaker 7:
Go, go, go!
Phil Lipof:
Earlier, the emergency unfolding in Little Rock, Arkansas.
Speaker 9:
Take your tornado precautions now. You're looking live right now north of Little Rock, that is the lowering and there's a tornado in there. This is not a drill, this is confirmed.
Speaker 7:
It's going to hit the radio tower. Go.
Phil Lipof:
Storm chasers tracking the massive fast moving twister as it heads into the north side of the city of 200000 people. This neighborhood taking a direct hit, downing trees, shearing roofs, splintering homes, and tossing vehicles everywhere.
Speaker 7:
I hear glass breaking, all this kind of stuff, man, it'd come through so fast within a matter of seconds it's just dead silent. And then you come outside and you see all this.
Phil Lipof:
Little rock's fire chief telling ABC News, there are significant injuries.
Josh King:
Talking to Steve Ranell, French, he said everyone was amazed there weren't more injuries than actually happened, but he still said that the drive to his mother's house that used to take 10 minutes, then took an hour and a half. But even more amazing still was how neighbors helped neighbors in the aftermath. How's everyone doing now?
French Hill:
Everybody is doing well, they're in shock, but God is good because really only one older man in the Amboy section of town lost his life. A tree fell on the house and killed him, and it's a miracle. It was at 2:30 in the afternoon, basically on a weekday. Plenty of notice, lots of notice. People on TV, radio, their cell phones were going off. And I think that accounted for a lot of the personal safety and the fact that people were at work or still possibly at school or in transit.
And it's an amazing story of neighbor helping neighbor. One Entergy employee I met with was such a great story. He was off that day. He lives in an apartment complex right in the center of the storm. He's kind of wracked early afternoon, he is not working, he's in his bed. The sirens go off. Instinct says, get under the bed.
His whole roof of his apartment complex was torn off. He took one day off and then he spent the next three weeks, 16 hours a day helping people get their electricity back on. And that's a classic American story of his responsibility, neighbor, helping neighbor. But it's devastating and I hate it. These were neighborhoods I grew up in as a kid that were the worst hit.
And it's changed the topography, but we're all blessed that so few were seriously injured and only one killed there. Now in when Arkansas, we had more injured. And what devastated us, we record this, we've just heard about Amarillo, north of Amarillo and Perryton, Texas, Jake Ellzey, Congressman Jake Ellzey's hometown was hit this morning and no siren notices. So we're blessed by these notification systems.
Josh King:
Widening the aperture a little bit to the nation as a whole. During Covid-19, the New York Stock Exchange made the unprecedented move to close its trading floor for nine weeks and move our market model to a fully electronic platform. Now we quickly reopened the floor, but learned some valuable lessons. What was it like serving the house during that time and how has its operations been changed by Covid?
French Hill:
Boy, it was an out. It was just like for a lot of Americans, honestly, it was a dystopian experience. I didn't believe in proxy voting. Speaker Pelosi authorized it. I still don't believe it's constitutional, not worth debating here. I believe a quorum has to be established by physical presence. I recognize all the concerns about that. So as a result, I flew to Washington every week back to work, and I would be on a full American or Delta Airlines flight. I know you usually quote the stocks symbol at this point in the show and they're empty. It's a visit, a traveling nurse with her backpack and one or two other people. And it was like that for weeks.
Josh King:
In the midst of the pandemic, we also witnessed another presidential election. Talk about another transition from President Trump to President Biden inside those same halls of government. Where were you on January 6th?
French Hill:
January 6th, I was in my office in the Longworth building and I had just eaten lunch and we had gotten a warning on our cell phones around 11 o'clock eastern time about these bomb threats at the Democratic National Committee and the Republican National Committee. And they'd closed the Cannon building, which is near the Republican National Committee offices, that got everybody's attention.
I'd been in the capitol all morning, I'd met with minority leader McCarthy that morning and out of the front of the capitol, we saw the protestors out the window and went back to my business. But just as I was about to walk over to the Capitol to listen to the Arizona debate, we got the word to stay in our offices and it began. And I could hear the tear gas canisters going off and could look out my window and see the south lawn of the Capitol from the Longworth building. And I was in disbelief.
Josh King:
As I mentioned in the intro, you spent over a decade before he got to Congress, as the founder and CEO and chairman of Delta Trust and Banking, how is your career making sure that you could actually make payroll, serve your customers, stay solvent, lent itself to your role as vice chair of the House Financial Services Committee and your role in Congress generally?
French Hill:
Well, I'll start with Congress, generally. It's about customer service. And being in Congress is about constituent service, being in touch, listening, representing the people, using your judgment as we've been. That's our principled goal. If you're elected to public office, we're electing you to not do everything we agree with, but to use your judgment. So I think that's the same case in running any kind of a business. You have that fiduciary obligation. So I've taken that to my work generally.
In my role in financial services, it's about how do we create a diverse, effective financial services system that does not concentrate power in too few hands. And this has been of course a theme of American history, a theme of American government policy. But technology has driven so much consolidation in American business generally and finance specifically that I think what we're trying to do is make sure that government mandates government regulation, government policy doesn't make it too hard to become a public company and that companies stay private for too long.
We have 50% fewer public companies than when I graduated from Vanderbilt, but that's also true over here in finance where we keep concentrating that authority in fewer and fewer hands. The secret, I think, to one of America's great economic secrets of America's success has been this diverse, small, large, medium-sized financial system of credit unions, banks, small banks, community banks, entrepreneurial banks, large, sophisticated global banks, all rolled into one. And the same can be said for the insurance business and for the investment business. And I think that's given America a lot of strength.
Josh King:
But in finance, if as you say, the goal is to have a diverse system and avoid consolidation in too few names, this year's seen a number of high profile failures with Silicon Valley Bank, Signature Bank, my own bank, First Republic, which has resulted in the entire sector coming under pressure. What role should and does Congress play in remediating the situation and preventing something like this from happening again?
French Hill:
First, I think that we have some unprecedented reasons for the failure, particularly of Silicon Valley, a lack of urgency and supervision with no laws being passed or added or subtracted, meaning they just did not do their job. Secondly, a management strategy that is classic bad decision making that most bankers would accept as bad decision making, which is able to be seen in full flight by looking at their financial statements over those two years.
And then thirdly, customers, where's the customer's responsibility in being a good monitor and good fiduciary for their own resources that you would really put $200 million in your checking account in one bank. That seems like not a smart thing to do to me. So our policy should be, and I've argued this even since the '08 crisis, we should qualify a much broader list of people to buy failed institutions and not have them be concentrated in the FDIC, a couple to the top, say 10 banks. Couple of ideas.
One, we've statutorily said you have to come up with the least cost resolution when a bank fails, true enough. But in the case of your bank, First Republic, we did two things. We waived the deposit cap on JP Morgan Chase and because it was going to be the least cost solution. So my suggestion is we ought to pre-qualify people to buy banks that are failed and also pre-qualify them for merger capabilities so that if you have an outstanding executive, outstanding capital system, we ought to encourage them to be out there in line to acquire another institution, failed or not. And that would, I think, broaden the potential owners. And we saw it in spades, obviously back in 2008.
Josh King:
We talked about French, how you've cut your teeth in your career here a little bit. You've visited here many times in your role of Congress. I think the most recent visit was April 17th when Speaker McCarthy delivered his economic address live from our boardroom. I want to just take a quick listen to a part of that speech.
Kevin McCarthy:
So here's our plan. In the coming weeks, the house will vote on a bill to lift the debt ceiling into the next year, save taxpayers trillions of dollars, make us less dependent upon China, curve our high inflation, all without touching social security and Medicare. Simply put, it puts it on a fiscal responsible path in three ways, it limits, it saves and it grows.
Josh King:
Limit, saves and grows. I watched the coverage of that event play out for days and it really did set the stage for Speaker McCarthy's, ultimately successful negotiations with President Biden. What were your impressions of that day and why was it important to take the debate out of Washington sometimes like he did right down the hall from here?
French Hill:
Well, it was a great day for our country and for Speaker McCarthy, and he purposely wanted to come to the private sector, to the heart of America business, the New York Stock Exchange in New York, to lay out that message that we've got to go back to a pre-pandemic outlook on spending. If we're serious about fiscal stability, if we're serious about treating our kids with respect and if we're serious about being the reserve currency of the world, we put all that at risk when we don't have an organized fiscal situation.
We're running one and a half trillion dollar deficits a year. And between the pandemic, say 2019 and today, discretionary spending in our country, it's 40% higher. I mean it's 40, it's we're spending two trillion more per year than we were when I joined Congress. Now, a lot of that was essentially, I'll use the term greenlighted and expanded in the pandemic and in the early years under Speaker Pelosi and Joe Biden's spending plans.
All we're saying is we're trying to flatten that growth curve out, which is what the speaker came here to talk about. And he wanted to get business to align with us and our thinking limit, save, grow, and do that for the long haul. And all this was was an opening act, a tiny first step in a much tougher journey, I think.
Josh King:
A tiny first step in a much tougher journey, French. But when the legislation passed, president Biden sat down at the resolute desk in the Oval Office for his first such address to the nation. Just want to take a little listen to that comment.
Joe Biden:
It would've taken years to climb out of that hole and America's standing as the most trusted, reliable financial partner in the world would've been shattered. So it was critical to reach an agreement and it's very good news for the American people. No one got everything they wanted, but the American people got what they needed.
We reverted an economic crisis, an economic collapse. We're cutting spending and bringing the deficits down at the same time. We're protecting important priorities from social security to Medicare, to Medicaid to veterans, to our transformational investments in infrastructure and clean energy. I want to commend Senator Speaker McCarthy, he and I, and our teams, we were able to get along, get things done. We were straightforward to one another, completely honest with one another, respectful with one another.
Josh King:
Bring us inside the room as best you can, Congressman Hill. I've heard you say Bloomberg Television, that President Biden essentially got nothing out of this bill, and yet still about two thirds of Senate Republicans voted against the Debt Ceiling Bill. What happened here? A case of politics as usual or something bigger, perhaps an opportunity that both sides can negotiate and find a court?
French Hill:
Well, this is the secret of our legislative history in America. We have to do that. And I thought Speaker McCarthy did a fine job by bringing Republicans to the table with a plan that he highlighted here at the New York Stock Exchange. And as you said, that set the stage for negotiation with the president, but the president for 100 days did not engage. And I think that's what's frustrating to me as somebody who's watched politics for a long time now.
We're where we are, but we could have gotten there a lot sooner and had a lot less drama. And it reminds me of John Boehner's famous expression, which is Congress moves very slowly until it doesn't because that was clearly the case here. But we asked for $2 trillion in spending cuts, I mean, we asked for $4 trillion in spending cuts. We got $2 trillion of spending cuts.
We asked for 10 years to cap that growth at 1% a year to try to let us get back to some spending priorities. We got six. We asked for a whole variety of things, but in each instance we did get the president to compromise on some of his principle priorities. And so from that point of view, what I think Joe Biden ended up getting out of it was a debt ceiling increase that allowed him to continue on with his administration. And I would argue that's typically what happens when you have an opposition power in the Congress.
Josh King:
Well, 100 days could be seen as a long time and waste of time, but ultimately it did get done by the date that we all knew was going to be the deadline. And coming out of it, Speaker McCarthy and President Biden could both create a sense of a victory lap for both of them. If that is any kind of a blueprint for how the two sides can come together and negotiate, even if you think that Biden just got what he needed, tick off some other things you think that McCarthy and Biden could work on together.
French Hill:
Well, I think the rest of the year is going to be challenging, but we have to go through the appropriations bills, we have to pass 12 appropriations bills, we have to get those through the Senate. That's what we've set as a goal for House Republicans. But we also have a federal aviation authorization renewal. This is a farm bill year and potentially the farm bill could be a place where the president and Speaker McCarthy could collaborate to get a good farm bill through.
We do that every five years. So there are a number of legislative objectives to do this year, but I'd say the toughest Josh, is going to be getting a spending deal even though the president and the speaker have set that top line spending, we still have to do the details now.
Josh King:
Still have to do the details and we're going to talk about some of those details in a second. After the break, Congressman French Hill and I talk about his recent work on the House of Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, as well as his view on World affairs and some of the things going on overseas, Ukraine, China, that kind of stuff. It's all coming up right after this.
Welcome back. Before the break, I was talking with Representative French Hill about his recent campaigns and congressional service since he last joined our Inside ICE House podcast back in 2018, as well as the highly discussed banking crisis and the Debt Ceiling Bill. You chair the Subcommittee on Digital Assets, Financial Technology and Inclusion, and you are also a co-sponsor of The New House Bill introduced on June 2nd to create a market structure for digital assets to help identify which assets might fall under either the SEC's or the CFTC's jurisdiction. Congressman, can you give us a little overview of what is now called the Digital Asset Market Structure Discussion Draft?
French Hill:
So we want America to lead innovation, and if we think about the 1990s, Congress took a proactive stance to deregulate telecommunications, which gave us all the choice that led to the cellular revolution. And they also agreed not to tax the internet or regulate the internet, that in fact they would simply tax and regulate things that went on on the internet, that it would run in the background.
So as we think about Web 3.0 and distributed ledger technologies and blockchain technologies applicable to all businesses of all shapes and sizes, we want to make sure America's just as innovative today as they were in those blossoming days of the internet in the 1990s. Big picture right now, I would argue we're not, we're behind the United Kingdom, we're behind the EU, we're behind Singapore, we're behind some other jurisdictions, and these are jurisdictions that we respect. This is not the case where somebody is using a cryptocurrency in El Salvador or The Bahamas.
Not that we don't respect those two countries, but I mean these are big marketplaces like the EU. So we want that and we believe we don't have it under existing law. For example, in the commodities regulatory space here, there is no spot market for Bitcoin, for example. There is no definitions inside the commodity space for dealing in a digital asset of any kind. So the CFTC actually is asking for this regulatory framework and authority. The presidential working group has identified it as an issue. The FSOC, the Financial Stability Oversight Council has identified it as an issue.
And over in stable coins where you would use a dollar based fiat money backed dollar stable coin, that's a tokenized payment on a distributed ledger network, that's not regulated. So our view is let's craft that innovative framework. Let's use the Securities and Exchange Commission and the CFTC as the basis for that and allow Americans to innovate here, keep that innovation here, keep that oversight here, protect investors here, protect consumers here, because clearly that has not been happening in the past.
And if the SEC claims they're the cop on the beat, I've seen no evidence of that because they let FTX end up with the largest set of creditors in history and collapse, taking down billions of dollars of American investments. And so that was to me, the impetus to now get bicameral bipartisan and support for this kind of work.
Josh King:
Is the SEC the only impediment? Everything you say sounds rational. What are the roadblocks to getting enough bipartisan support in the House and Senate to pass it into law?
French Hill:
Well, we've had excellent technical assistance from the Treasury, from the Federal Reserve, from the Comptroller of the Currency, which regulates national banks. We've had some technical assistance from the Securities and Exchange Commission, but we need more. We've had excellent cooperation with the Agriculture Committee, which we're doing this in tandem with because for a lot of listeners, our commodities regulatory system's actually overseen by the House Agriculture Committee, not the Financial Services Committee.
So we're working cooperatively on this. And the last time we got to have this much cooperation was post Dodd-Frank in the international swaps regulation. So I believe we've got a good direction, we just need to make sure that we work together to do this because if we don't, we're leaving America in an uncompetitive position and we're leaving investors confused, innovators confused, and actually fearful frankly about current SEC enforcement potential. And we're leaving consumers hung out without knowing what the rules are. And that's not a good place. So it's my hope that Chairman Patrick McHenry, of the Financial Services Committee, ranking member Maxine Waters, can collaborate with our agricultural colleagues and bring this to the house floor.
Josh King:
In early March, you offered remarks at a hearing entitled, coincidence or coordinated, the administration's attack on the Digital Asset Ecosystem. I'm going to quote you here. You said, "I was glad to see ranking member Waters call the Treasury, Fed, CFTC and the SEC to get together with Congress and address digital asset regulation. We can't have agencies trying to front run the legislative branch," you said. In the same week you introduced the bill and held a hearing, the SEC sued digital currency exchanges, Binance and Coinbase. How does the SEC's actions impact your proposal?
French Hill:
They don't impact it directly, but they illustrate the need for our proposal. Does that make sense?
Josh King:
Sure.
French Hill:
In other words, I don't think we should ever do regulation by enforcement, not at the New York Stock Exchange, not at Delta Trust and Banking Corporation. I think it's, I don't want to say it's un-American, but it should be unnecessary. And only in the most dire circumstances should one go there. And perhaps you could say that, and I would argue if you think these are dire circumstances, if you're an enforcement attorney at the SEC, it's because you don't have statutory authorities to do this in the right way.
And we believe we've crafted a process that leaves the SEC having the right tools to determine this is a security. This is not a security. This should be trading inside the securities rules or this should be trading over in the commodities space or it shouldn't be even regulated. It's just not relevant. And bringing those definitions, bringing that oversight, I think is precisely what we need to make sure that America can lead the way for that next generation of technological development.
Josh King:
You mentioned all the creditors that FTX left in its wake a couple of minutes ago. The topic was a major focus of our recent episode with CME Group's chairs Terry Duffy. He and my colleague Chris Edmunds had appeared before congress months before the FTX collapse warning of the potential and later realized risk of the proposals that Sam Bankman-Fried had been putting forward. I want to listen a little bit to Terry's remarks in that hearing.
Terry Duffy:
Under false claims of innovation that are a little more than cost-cutting measures, FTX is proposing a risk management light clearing regime that would inject significant systemic risk into the US financial system. The FTX model would come at the expense of proven risk mitigation practices, market integrity, and ultimately financial stability.
In fact, the FTX proposal would significantly increase market risk by auto liquid by potentially removing up to $170 billion of loss absorbing capital from the cleared derivatives market, eliminating standard credit due diligence practices, and perhaps most importantly, destroying risk management incentives by eliminating stakeholder capital requirements and mutualized risk.
Josh King:
Do you think that legislation like your digital asset market structure proposal, that government might be prepared to prevent another FTX like collapse from happening?
French Hill:
I do. And I think our draft legislation reflects all of Terry's concerns. I really do. I think it addresses precisely the things that he's expressing concern about that were absolutely missing in some of the promotion by FTX in the Capitol of last year. So I think that's an important, a critically and important point that he raises.
Josh King:
How did Sam Bankman-Fried get the foothold that he did and get so close to his goal?
French Hill:
Josh, I'm going to sound like a much younger version of Charlie Munger here, but we have a complete dearth in our society right now of due diligence, whether it's who you vote for or reading a bill before you vote on it or you make an investment. I mean, I was flabbergasted by who had given money to Sam Bankman-Fried for his proposal. And I even read in quotes in the Wall Street Journal where people said, well, we didn't do due diligence because we relied, I'm not going to name the company, but a very well known Silicon Valley based venture capital company made a very significant contribution, so we know they know what they're doing.
Well that's the height of not doing due diligence or taking your own fiduciary responsibility. So he made a great presentation and I think being on the cover of Forbes Magazine that summer, I guess it's just the halo effect that this guy's a revolutionary successful person. And that's precisely, I think the person, somebody like Charlie Munger might run away from.
Josh King:
Well, if Charlie Munger were doing due diligence on another thing that is captivating a lot of our attention these days, they might be the threats that are posed by artificial intelligence. In 2019, as ranking member of the House Financial Services Committee task force on AI, you helped lead the newly formed task force in its first hearing entitled Perspectives on Artificial Intelligence: Where We Are and The Next Frontier in Financial Services. French, where is Congress now in passing legislation to protect the American people from what might be the potential threats of AI?
French Hill:
First of all, big picture. Every committee is going to engage here in their areas of jurisdiction to think about AI, how it can be used, how it can be a force for good, how it can be a force for concern, the ethics around it, how to measure the oversight of it. So I think Congress is very engaged. I credit again, Kevin McCarthy for this. He's asked every committee chairman to learn about this.
He's actually invited AI experts to the house to testify and participate in round tables with both Democrats and Republicans. And he has asked every armed services committee member and intelligence committee member to go to MIT and take a course in AI. So we want to raise the level of understanding there so that people can have the right oversight mentality. In our early task force hearings of just a few years ago, we talked about can it be a force for good, will more people have more credit availability to them by virtue of AI mining big data to offer a better, more affordable credit product?
And at the same time answering the question, can that be done more fairly with less bias and more successfully? And I think that's what you'll see the due diligence by each committee in their areas of jurisdiction.
Josh King:
Let's turn for a minute before we begin to sort of wind our way back here, French to issues that are outside the United States. In May you released draft legislation to force Russia to pay for its war damages in Ukraine. What's your stance on the US' involvement in the Russia, Ukraine war, and to what extent should we be allocating as many American resources as we are right now?
French Hill:
Well, my argument has been, there are many reasons why Vladimir Putin chose to go into Ukraine. And one of them was that we were not unified and not forceful enough under President Obama's leadership and the EU's leadership back in 2014. It opened the door that there was a tepid response vis-a-vis Putin going into the Donbas region. And the pullout of America in Afghanistan was such a, I think, emotional and financial and military catastrophe that sent the wrong signal around the world.
So I'm a strong believer that we should be supporting the ejection of Putin from Ukraine with our allies. And I would say three things. One, do we have full accountability on the money that's being spent by American taxpayers and European taxpayers for that matter? Two, can we channel Jim Bakker, former Secretary of State, Jim Bakker, former Secretary of Treasury, my old boss, Nick Brady, and make sure we've got every commitment we can from freedom loving countries around the world to help pay for this and minimize the impact on the American taxpayers outside of our military support.
And thirdly, we do need to make sure that we send a message of global unity in Asia and in Europe and around the world against a UN security council member attacking a sovereign country because this will send a signal to Beijing that's critically important.
Josh King:
Talking about Beijing, in April, you traveled to Taiwan with a bipartisan delegation led by Foreign Affairs Committee chairman Michael McCall. Tell us about that visit as well as the two bills that you're working on, the Taiwan Conflict Deterrence Act and the Save Act, which were reported on a committee in February.
French Hill:
Well, I believe that while military deterrence is important in East Asia, and you certainly see that with the Philippines re-engaging with America, I was working for President George H.W. Bush when we were encouraged to leave the Philippines by the then Philippine government, Clark Air Force Base and Subic Bay, and now we're being invited back in in partnership with the Japanese and the Koreans and others in the region.
Asia is concerned about China's provocations, particularly in the Taiwan Strait because 80% of Seaborne freight passes through the Taiwan Strait bound for Japan or Korea. And so we know about military deterrence and we're seeing that in our partner countries like Australia, the Philippines, the Quad, India, Japan, Korea. But economic deterrence is what I believe is one of the most important things. So anything we can do to deter bad behavior is what I want to. So my two bills do that.
The Taiwan bill directly says that if you threaten militarily Taiwan, we're going to cut off your access to the US, your visas, your ability to travel here, your money in the United States if you're a CCP leader. And that's directed directly at that top echelon. And the Save Act is part of the effort to, like you see a lot of New York Stock Exchange companies taking on their own, which is to build a more resilient supply chain, less dependent on China.
The biggest deterrent for China coming across the strait in my opinion, is economic deterrence. And the people of Taiwan feel the same way. President Tsai's impressive. She quoted Margaret Thatcher, she quoted Winston Churchill. She's in sync with the Taiwanese people who by and large want the status quo. They want their democracy, they want their economic freedom, they want their productivity.
They don't mind being connected in this historic way to China, but they don't want to be absorbed by the mainland and they don't seek independence. These are tiny minorities according to Financial Times, polling on the island of under 10% for either unification or independence. So the vast majority want that, and I think they're willing to fight to keep it and help drive that deterrence, both economic deterrence and military deterrence.
Josh King:
As we wrap up, Congressman, on a personal note, my friend Steve Ranell reminded me that your amazing daughter's just graduated from med school and headed to Birmingham for her residency and mazel tov on that. My dad just passed away at the age of 92. Community pediatrician for 50 years in his hometown in Newton, Massachusetts. The direction of the healthcare economy was dispiriting to him as his career wound down. What's the world of medicine you think your daughter is going to encounter when she gets to Alabama?
French Hill:
Well, Liza Hill is an extraordinary young woman. She'll be an amazing successful physician. She's going to. Her goal is to complete four years of residency at Birmingham in OBGYN and then become a pediatric gynecologist. And that's her dreams since she was in fifth grade. So she's headed for that dream. What's exciting to me, Josh, about people who pay that heavy price to go to med school and residency and fellowship, all those years of study is they're about taking care of people.
They're not studying the payment system. What we ought to do for them is reform our insurance system and then reform our hospital regulatory system to bring freedom and choice back to more people. And we just are stumbling around on that, looking for a solution. So what inspires me, just like your dad started his career, he ended his career frustrated with what he found, paperwork, bureaucracy, couldn't do what he wanted to, and I get it, but for Liza Hill, it's about caring for people and being on the cutting edge of innovation.
And that's what medicine's all about, the Hippocratic Oath and their passion for it. And fortunately they don't take a class in how they're going to get paid. I think it would be dispiriting to them. So they're focused on medicine. I wish her well, if she's going to be a magnificent doctor.
Josh King:
Luck to that. And I can't wait to see how that turns out. As we leave this episode, sometimes we also take leave of the New York Stock Exchange and take our show on the road, which we did last week to Bentonville to ring the opening bell with our friends at Walmart, NYSE, ticker symbol WMT, Delta Airlines mentioned earlier, DL. Let's go back to Bentonville to hear a little bit of the announcement of his presidential candidacy from Governor Hutchinson.
Asa Hutchinson:
I was born in the old Bentonville Hospital. My first law office was across from the square from where we stand today. I tried jury trials in this courthouse behind us. I built Bentonville's first FM radio station. I served as Bentonville's city attorney, but most importantly, this is where Susan and I started our family and spent some of our happiest years living on 15 acres of rocks and hills west of town in a double-wide mobile home.
Josh King:
Like Bill Clinton before him, is it still possible for a kid from a double wide mobile home in Arkansas to make it to America's home in the White House, or is that now a place reserved for real estate millionaire's son from Queens? And what are your thoughts on the Republican field taking shape and where do you see the 2024 race headed? Does Hutchinson have a role to play?
French Hill:
Well, first, Asa's spent eight years as governor, successful career in the House of Representatives, youngest US attorney in American history, appointed by President Reagan. Remarkable career and a great public servant. I think absolutely. That's the beauty of America is that we have this diversity of people who can rise to the top job, but it's a long hard battle to get there.
I think Asa plays a role in the campaign because he is a successful governor. I think traditionally successful governors, as you well know, have a great road to the White House capability. My personal vision about 2024 is I wish both parties would nominate somebody younger. And it's just the way I feel. It's just a personal opinion. And I would love for somebody who could serve two, be eligible to serve two four year terms because I don't like the direction of our economy.
I don't like the direction of our regulatory policy, our spending policy. I've tried every year I've served in Congress to head it in a better direction as one member of the legislative branch. And so that would be my hope is that we have a vigorous debate and some new voices enter that debate from both political parties.
Josh King:
We haven't seen many voices on the democratic side who are ready to rise up and challenge President Biden, except kind of an interesting set of comments from Robert F. Kennedy, Jr. But some interesting talent coming through and some younger talent coming through on the Republican side.
French Hill:
I mean, I know listeners really have seen replays of Tim Scott's inspirational message from South Carolina and sort of this Chris Christie post governorship, post presidential run several years have gone by and Chris Christie, I thought answered questions really well the other night. So we've got some great people.
I've served with Nikki Haley, I thought she did a very good job at the United Nations. So I love the fact that our bench is deep and broad. It's black, it's white, it's male, it's female, it's younger, it's dynamic, including some people who chose not to throw their hat in the ring. And I would just urge my friends on the Democratic side of the ledger, reach out, let's see what you've got at your bench, because right now I don't consider Bernie Sanders a bench.
Josh King:
You were sitting behind this microphone in 2018. You've come back in 2023, five years later. Please sir, don't be a stranger. Will come back next year and sort of see where all this is headed and all the things that we talked about?
French Hill:
Wouldn't that be fun? Great to be with you, Josh. Thanks.
Josh King:
Always, Congressman Hill, thanks for coming. And that's our conversation for this week. Our guest was Congressman French Hill, the representative from the Second District of Arkansas. If you like what you heard, please rate us on iTunes so other folks can know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us at ICE House podcast. Our show is produced by Lauren Sullivan and Pete Ash with production assistance from Liam Wolf. I'm Josh King, your host, signing off from the library of the New York Stock Exchange. Thanks for listening and we'll talk to you next week.
Speaker 1:
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