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.
Speaker 1:
The dream drivers that have made the NYC an indispensable institution of global growth for 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 NYC and at ICE's exchanges and clearing houses around the world.
Speaker 1:
And now welcome, inside the ICE House, here's your host, Josh King of Intercontinental Exchange.
Josh King:
The worst thing you want is regulation written in a crisis or upon the popping of a bubble. This statement was offered by the former chairman of the US commodities futures trading commission, the regulator we call the CFTC and our guest today.
Josh King:
Chris Giancarlo recorded last year before a gathered group of FinTech innovators, regulators, and others at the recent Horowitz's Inaugural A16 Crypto Regulatory Summit. Not surprisingly, considering the setting in the heart of the VC world in Silicon valley, he was speed about how to develop regulation, a deliberately careful process for the fast paced amorphous world of Bitcoin and other FinTech innovations.
Josh King:
In the months, since he gave that speech, Chris completed his tenure on the commission, including serving the last two years as its chairman and returned to the private sector where he recently dusted off the same axiom in an essay in the publication Risk, which is currently making the rounds on the screens and tablets of financial leaders around the world.
Josh King:
Unlike the more headline grabbing topic of crypto, Chris' new piece deals with the less well traveled topic of central counterparty clearinghouses, or CCPs that govern the movement of capital through clearing and risk management for commodity and financial derivatives and credit default swaps. To build on an analogy seized on by our recent podcast guest, Patrick Young, CCPs are the kidneys and liver of the global economy.
Josh King:
You don't really feel your kidneys and liver working away inside your body, but just try to go about your business without those organs functioning as designed. They're fundamental to the entire system's health. When they fail, the shit hits the fans so to speak. And the same is true in a manner of speaking for central counterparty clearing houses.
Josh King:
So you've done your service to your country in the financial system and happily back in private practice. Why sound the alarm now? Chris was sparked back into action by proposed guidance issued by the Financial Stability Board, the Basil based international body formed after the G20 Summit in 2009 that monitors and makes recommendations about the global financial system on how to handle the potential failure of a CCP.
Josh King:
This guidance, it's actually major surgery to a body. Like our liver and kidney that are actually functioning well in these most turbulent times. Chris' piece argues that going under the knife for some elective maintenance while fighting a severe attack on the system is an unnecessary risk considering how little is understood on how COVID is affecting and will continue to affect the global economy.
Josh King:
But we'll let him explain. You see, one of the reasons that we started Inside the ICE House was to provide a platform to distill the complex issues affecting the markets into a podcast-size discussion. Today's conversation will take us deep inside several topics that we've previously covered on our show, including regulation, clearing and the complex infrastructure that supports trading.
Josh King:
Joining us as our trail guide is Mr. John Carlo, whose experience in public service and the private sector has put him in the forefront of these topics for four decades. Our conversation with Chris on why now is not the time to change the rules on CCP resolution, his take on some top topics of regulation and his work as co-founder of the Digital Dollar Foundation to get the country ahead of the curve on issuing a tokenized US digital currency. That's all coming up right after this.
Speaker 3:
And now a word from Ron Delia CEO of Amcor, NYSE ticker, $AMCR.
Ron Delia:
Today is a really big day for Amcor. We've been around for 160 years. After so much time, it takes the passion and dedication of our people around the world and it takes resilience and we have lots of that at Amcor.
Ron Delia:
Well, our aspiration is to be the leading global packaging company and that means winning for our customers, our people, our investors and the environment. We have a big pledge around sustainability and we really hope to change the world as we look forward. Amcor, now listed on the New York Stock Exchange.
Josh King:
Our guest today, J. Christopher Giancarlo is senior council at Willkie Farr & Gallagher LLP and co-founder of the Digital Dollar Foundation. Previously, Chris was chairman of the US Commodity Future's Trading Commission following his confirmation by the US Senate in August, 2017.
Josh King:
He was originally nominated to the CFTC by president Obama in 2013 and served from June, 2014 until July of 2019. Before entering public service, Chris managed the 2005 IPO of GFI group as its executive vice president. Chris, welcome Inside the ICE House.
J. Christopher Giancarlo:
Great to be with you, Josh.
Josh King:
I assume it's not Willkie Farr & Gallagher's office. It's 787 Seventh Avenue, given all the things that are happening in New York, both with the coronavirus and the recent unrest. Can you start by telling us where you're connecting to us from and how you've adjusted to this decentralized new normal?
J. Christopher Giancarlo:
Sure. My wife and I have a house in suburban Bergen County, New Jersey, just outside of New York city. It's an old Victorian that we restored about 20 years ago and raised our family here. It's been very comfortable during the crisis, the COVID crisis to work from home although I certainly miss getting in and out of the city every day.
Josh King:
I'm in a similar circumstances Chris. We're often in this house that we usually use for weekends to ski at Windham. Now it's been the seven day a week home and you sort of discover a lot of things about hanging out with your family at whatever ages and try to take up new instruments or try your hand at gardening. What have been some happy discoveries for you during this period?
J. Christopher Giancarlo:
Well, it's funny that you should mention instruments. I'm an avid stringed instrument player. I play the guitar and banjo, and tinker with a little piano. Two of my sons are also musicians. My youngest son is a fledgling drummer, terrific drummer. My other son, Luke, has picked up a guitar. We've had some fun making some music together. We need to do a little bit more of it, but we've certainly enjoyed it.
Josh King:
You tweeted an old picture a couple of weeks ago, I think of maybe 10 years ago, you fronting for some band. Are you getting the band back together?
J. Christopher Giancarlo:
Well, it's hard. The band activities face to face are hard in this, but we had... The band is called The Slacks and we've played together for years before I went down to Washington. We recently reunited for a gig at a great venue in the historic Hudson Valley called the 76 House and had a couple of hundred people there and it was a lot of fun. I think it was one of the last gigs they did there before shutting down. We look forward to doing it again when things reopen.
Josh King:
You tweeted out a condolence a few weeks ago in the passing of the great Fred Willard known of course for his improvisational comedy in best in show. This is spinal tap, giving a tour of the band and plugging the Four Jacks and a Jill appearing nightly at a Ramada outside Kansas city. Is this place in the Hudson River Valley, sort of like that Roadhouse that Fred Willard was talking about?
J. Christopher Giancarlo:
Probably is just like the one that Fred Willard was talking about. That's one of my favorite scenes from one of my favorite movies. That is the greatest and Fred was the greatest. We'll miss him.
Josh King:
Watching your speeches in person a couple of years back, FIA Boca and in Chicago, I sense how much you loved your job at the CFTC and especially getting out there and visiting with the industry players. Will there be a time do you think when the industry will get together again like that to share ideas and debate the issues that you've had to put in risk?
J. Christopher Giancarlo:
Yeah. Thank you for that, actually for noting that I truly did really enjoy serving as chairman of the CFTC. It's... Look, I'm a big believer. If anybody's read anything I've written, I'm a big believer in markets. I think markets are a part of a free society. It's how a free society establishes the value of the things that they use and consume and rely on.
J. Christopher Giancarlo:
It's also where people that have a dream go to realize that dream and realize their work in the marketplace. I think the trading goes back and as long as humans have been on this earth and marketplaces are a place for free expression of their ideas of value, now and in the future. It was a wonderful experience and it was a wonderful experience traveling around the country to over two dozen states, meeting with folks in our agricultural commodity markets as well. That was great.
J. Christopher Giancarlo:
Yeah. Look, all things... The Bible teaches us there's a time for everything under heaven. There's a time for strife. There's a time for peace. These too, the times we're living in, will pass and society will go on, markets will resume. Markets have actually continued quite brilliantly throughout the COVID core crisis and with the unrest we see now, I think that markets will reflect this in some way or other and we will pass through these times as well.
Josh King:
Talking about when you first started watching the markets, you grew up right across the river from where we normally record the podcast and the New York Stock Exchange and our library. You were there in Jersey city with four brothers. One of whom I should note is the CEO of Pure Storage listed on the NYSE under the ticker symbol, $PSTG. What did Mr. And Mrs. Giancarlo do that led you to follow your path into financial law?
J. Christopher Giancarlo:
That's a great question. I'm actually the black sheep of my family. Most of my people who are medical of people, my father, my grandfather, my great-grandfather were doctors and my mother and grandmother were nurses. And so medicine has been in my family and one of my three brothers is a physician as well. My daughter's a nurse.
J. Christopher Giancarlo:
I was a bit of a black sheep to go into financial markets. I remember actually learning about the markets on the Sunday afternoon, sitting on the floor of my grandfather's house, where he would show me the stock tables and the bond tables.
J. Christopher Giancarlo:
He was a very simple man, but invested in utility stocks and taught me that. I was very interested in it. I found law, the intersection of law and markets and technology to really be the core of everything I've done in my career. It's been a fascinating coincidence of those three areas in everything I've done.
Josh King:
All that preliminary stuff seemed to be leading to sort of the late aughts and the financial crisis that the country and the world found itself in. In the speech that I cited in the introduction, you talked about a conversation you had with a senior FED member during the financial crisis that showed this disconnect between the regulators and the markets.
Josh King:
Did your experiences and what you saw in 2008 inform your decision to serve your country when eventually President Obama nominated you into the CFTC?
J. Christopher Giancarlo:
One of the reflections I've had over 40 years is that so much of the public dialogue about regulation is couched in terms of quantity. There's somehow more regulation to certain sectors of society, to a particular point of view is a good thing and to another section of society, more regulation is a bad thing. And not enough regulation to one is a bad thing or vice versa.
J. Christopher Giancarlo:
Quantity is the wrong way to look at regulation. I'm saying that for someone who's been looking at markets and regulation for 40 years. It's not about quantity. More is not necessarily better. Less is not necessarily better. What matters is the quality. We need to look at regulations, how apt are they for the policy trying to be achieved. One of the things we found out in the 2008 financial crisis, it wasn't that there was not enough regulation.
J. Christopher Giancarlo:
It's just that what was there was not well suited for the crisis we had. The example that you point out Josh is I think a very good one. My firm GFI Group, by the way, also that was listed on the New York Stock Exchange. We had taken that company public in 2005 and we had grown it into the world's largest trading network for a type of derivative known as an over-the-counter swap.
J. Christopher Giancarlo:
We have become the biggest platform for a type of swap called the credit default swap. For your listeners, perhaps who have heard nothing else about credit default swaps, they probably have heard that it played some role in the crisis. Well, in fact, what was happening in the days before Lehman Brothers collapse in September of 2008, was that the cost of using these instruments to ensure against a failure of a bank was becoming increasingly expensive by the hour.
J. Christopher Giancarlo:
My firm received a call from a senior Federal Reserve New York Fed official asking what we were seeing in the market. The reason they were calling around to platforms like mine is because they actually didn't have a very good immediate gauge of what was happening in the market and was clear that the regulators needed a better way of assessing what was happening.
J. Christopher Giancarlo:
But here's the point I want to make, at that point in time, it was perceived that the failure of Lehman Brothers, that there was over 400 billion of protection written against the failure of Lehman brothers. And from that, they extrapolated that if Lehman fell, then the amount of protection perhaps written against Morgan Stanley might be 600 billion and JP Morgan may be a trillion.
J. Christopher Giancarlo:
And so they anticipated that a complete failure of the banking system. But we now know, after the case analysis, that the net exposure of a failure of Lehman Brothers would've been less than 9 billion.
J. Christopher Giancarlo:
If we knew then that the failure of Lehman would've been 9 billion, the Fed could have written a check, but we didn't have that policy choice. Why? Because we didn't have that analysis. We didn't have that data.
J. Christopher Giancarlo:
It was not a failure of not enough regulation. The failure was we didn't properly have a way of gathering the data and analyzing the data. Well, let's fast forward today. If that data had been recorded on a blockchain and using distributed ledger technology, we would know immediately what the net exposure was, is and we could do something that's properly tailored about it.
J. Christopher Giancarlo:
I could go through instance after instance of where it's not a question of more regulation, it's a question of well calibrated regulation that's done in a holistic fashion where regulators see the entire picture and can make decisions that are well-crafted as opposed to piecemeal one piece at a time and each piece does not interact well with the other pieces and therefore, you don't have calibrated regulation, you've just got a massive regulation that has all kinds of unanticipated consequences. Regulation is about smart, well crafted, well, calibrated regulation based upon good data, not more or less. More or less is irrelevant. It's about whether it's crafted well.
Josh King:
What were the factors that were going into Chris Giancarlo's head to say, "If they ever let me take over the CFTC, here's the priorities I'm going to bring to that body."
J. Christopher Giancarlo:
I was there in the middle of the crisis. I saw the lack of deep understanding of the markets. I then watched Congress take up what became the DOD Frank act and I wound up going to Congress and giving testimony several times almost as a market expert to explain how the swaps market worked.
J. Christopher Giancarlo:
What I saw was actually he what emerged in Dodd-Frank was actually a pretty good piece of regulation or I should say a pretty good piece of legislation in Title VII of Dodd-Frank which is the swaps provisions. And when they passed in the summer of 2010, I issued a statement commending President Obama and the Congress for passage and said, "This is good legislation. Now let's get it implemented right."
J. Christopher Giancarlo:
Well, unfortunately, over the next several years, I saw its implementation by the CFTC and in some cases, they got the implementation right. In other cases in my view, they were getting the implementation wrong. Now, they were doing it out of the best intentions, but what they were doing is taking what they knew which was the listed derivative markets and imposing that on what they didn't understand as well, which is the over-the-counter markets.
J. Christopher Giancarlo:
It would almost be like saying, "Wow, we like the way equities trade let's make bonds trade the same way." Well, anybody that knows the bond market knows it doesn't trade like on the New York stock exchange, the way equities do. It's a different market, it has different dynamics. The CFTC was making that same mistake. I was pretty outspoken about my views on this. In 2013, I was actually kind of surprised when the Obama administration asked me to serve on the commission and to their credit, they were fully conversant with my criticisms, but they also understood that I supported the underlying law.
J. Christopher Giancarlo:
It was about getting the implementation right, not about rejecting the law itself. And so I was delighted to serve on the commission. I did as a minority commissioner for my first two and a half years. And then in January, 2017, I was made acting chairman and to my great surprise, in August of 2017, I was unanimously confirmed by the Senate a second time, this time as chairman.
J. Christopher Giancarlo:
And not a lot of Trump nominees had received unanimous confirmation, which proved either Congress didn't know what the CFTC did or I hadn't pissed off enough politicians during my first two and a half years. Probably, it's a little mixture of the two. I really didn't go to Washington to begin a political career. I went to Washington really focus on markets. During my first two and a half years, I think I succeeded in staying market-focused and not politically focused and so I do think that I, not entirely, but I think that folks saw me as somebody who was really market-focused to try to get it right.
J. Christopher Giancarlo:
I never deviated from my point of view that we shouldn't try to repeal that portion of Dodd-Frank and I think that folks, perhaps on the other side of the aisle saw me, at least as someone who was going to stand up and remain consistently in support of the law even if I felt it could be better implemented.
Josh King:
So moving from history, kind of now to the present, Chris, if you try to navigate the acronyms of this industry, it seems like the price of admission to even participating and it can confuse the hell out of a relative newcomer like me differentiating organizations and regulations like the CFTC, EMIR, MiFID II, ESMA, the ECB. There was a recent tweet by Sean Tuffy who asked, "Who would win? ESMA," which listeners should know as the European Securities and Markets Authority, "or the SEC," which most folks should know as the US Securities and Exchange Commission. And you answered something completely different. What did you say?
J. Christopher Giancarlo:
The CFTC.
Josh King:
You expect the three organizations to meet in a dark alley and you're going to come out victorious. What did you mean by that?
J. Christopher Giancarlo:
Look, I think the CFTC is one of the finest agencies in Washington and I feel that way for a number of reasons. The United States is the only major economy to have a separate regulator just for derivatives.
J. Christopher Giancarlo:
The Europeans don't do that. The British don't do that. None of the major Asian economies do it. It's quite remarkable. But then again, the United States has the world's largest derivative markets by a country mile. What are derivative markets?
J. Christopher Giancarlo:
Well, derivative markets are not equity markets. The markets that are overseen by the Securities Exchange Commission are the markets for capital formation and capital transfer. That is somebody with a great idea that needs capital can find somebody with a lot of capital, but not necessarily a best way to put it to use and they can exchange that capital for an opportunity to participate in the upside.
J. Christopher Giancarlo:
That's a capital formation market. It also works with debt. It's a way of lending money in a marketplace. And the SEC rightfully oversees that market. And because all of us have our 401(k)s or not, all of us, many of us have our 401(k)s invested in that market. The SEC op looks out for retail investors. That's not what the CFTC does.
J. Christopher Giancarlo:
The CFTC oversees markets for risk transfer. That is, an enterprise with risk, say the risk of oil prices going up or the risk of oil prices going down, the risk of wheat prices going down, the risk of exchange rates changing. Can exchange that risk to someone who's willing to bear it in return for a fee. Risk transfer markets are vitally important to American agriculture. They're vitally important to American manufacturing. They're vitally import important to American exports and imports.
J. Christopher Giancarlo:
Our derivative markets are largely than any of the other world's derivative markets by a country mile. They're one of the key reasons why the dollar is the global reserve currency, because the world holds dollars that can easily hedge the risk in our derivative markets. Derivative markets are a global export product and they have a unique regulator called CFTC.
J. Christopher Giancarlo:
Its origins go back to the 1930s, just like the SEC. It was created as an independent agency in 1970s and it's a very specialized, focused... I like to say that if the securities exchange commission is the US Army, the CFTC is the Marine Corps where an agency with a great esprit de corps with great expertise and a real specialized expertise that really is one of the foremost regulars.
J. Christopher Giancarlo:
It's no surprise that it was the CFTC that more quickly than any other agency and in many cases, better than other agencies implemented the reforms that come out of the financial crisis. As I said earlier, many of them are working well, some of them need some better calibration. But overall, the CFTC did a fine job of implementing the reforms. As I say, I'm very proud to have served in that fine agency.
Josh King:
Now, there's no equivalent of the CFTC in Europe and if we focus across the pond, EMIR 2.2 has been criticized for leading to market fragmentation if it gets implemented. What are your thoughts on EMIR 2.2 as it's currently drafted? How do you think tighter regulation by the European Union of Global Markets is going to impact the future of global capital markets and the interconnectedness between all of them?
J. Christopher Giancarlo:
Josh, I said earlier that I think one of the intellectual flaws in the approach to regulation, this notion of measuring it on quantity and not quality. Another intellectual flaw is the notion that global reform should seek a level of identical across the globe. And that's driven by firms naturally wanting to have the ability to trade in different jurisdictions.
J. Christopher Giancarlo:
But I think it's also driven by the notion that there are details of reform that should be identical. Yet, the reason why that's a flawed approach is because our markets are so fundamentally different. Derivative markets in Asia have nowhere near the depth and sophistication and breadth of US Markets. With great respects to my friends in Continental Europe, their derivative markets are nascent compared to US derivative markets.
J. Christopher Giancarlo:
And so the notion that we would all adopt the same regulatory implementation really is just a flawed way of looking at it. What we need to think about is not identicality across borders. We need to think about interoperability across borders. Different jurisdictions should adopt regulations that are well suited to their jurisdiction and then make sure we've got interoperability.
J. Christopher Giancarlo:
To the point about Europe and MiFID II. I recognize that a lot of what was driving European reform was to bring more trading into Europe. They saw this as a part of industrial development policy, to use regulation as a way to draw it. And then that's fine. They have every right to draw their regulation as they think will be beneficial to their markets.
J. Christopher Giancarlo:
If the choice is identicality, how can we get there when that's not part of what we're trying to do in our regulatory reform efforts as the world's largest markets? We've got to think about interoperability. I salute my colleagues in Europe for seeking to put in reforms that work to their jurisdiction, but they can't then expect that other jurisdictions are going to approach it from an identicality approach.
J. Christopher Giancarlo:
There's this notion of something called the Brussels Effect that's been written about and the term was coined by a professor at Columbia Law School about how Brussels sometimes uses regulation in order to export their approach to reform.
J. Christopher Giancarlo:
I think that that may be fine as a competitive tool, but it's not something that as overseers of the world's largest most sophisticated markets, we should allow to be imported and imposed upon our markets, which serve global marketplaces.
Josh King:
So if the CFTC should emerge victorious in this bar room brawl of regulators, do you see then if you try to extrapolate out more market activity being driven to the US as a reaction to what you're saying? Do you think in this particular case of the UK, it has an opportunity at the end of this transition period to sway themselves more toward a US style regulatory framework than one tied to Europe?
J. Christopher Giancarlo:
Another false narrative is that there's a race to the bottom in regulation. Well, if that were true, Zimbabwe would have the world's greatest capital markets. That's not true at all. In fact, capital does not seek the location of the lowest regulation. Capital seeks the place of the best regulation.
J. Christopher Giancarlo:
That's why four decades in the United States corporations incorporated in Delaware, not because Delaware has got this enormous economy, but because Delaware corporate law was considered to be the best balance between investor rights and efficient corporate formation.
J. Christopher Giancarlo:
The same is true about market regulation. Our goal as a US regulator was never to make our regulation either easier or minimalist or to try to attract capital by lowering protections.
J. Christopher Giancarlo:
Our goal was and should always be how do we get the best? How do we get the best balance of investor protections along with the ability to have efficient markets? If we do that, everything else takes care of itself. I think one of the reasons why the United States has the world's largest, most sophisticated, deepest and most broad derivative markets is because historically, we've been successful at finding that right balance, not looking at it as a competitive game that we need to lower protections, but trying to find the best balance and the world's capital and the world's risk hedging will follow if we get that balance right.
Josh King:
So now, as we sort of move into some of the topics that are really honed in on your recent paper and risk, the EU's Open Access proposal will see derivatives traded on one exchange, but then potentially cleared by a clearing house not tied to the exchange in question. No doubt, this regulation will impact trading and clearing significantly. What are your thoughts on it?
J. Christopher Giancarlo:
Well, look, it is the US practice in derivative markets to have a fixed tie between the exchange and the clearing. That has worked well in the United States. But it has not been the global model. It's more often than not there's a greater degree of fungibility and that model has worked in other markets.
J. Christopher Giancarlo:
If I'm going to be true to my principles, that we need to focus on what works in our markets and let others focus on what works in their markets, I'm not going to be a critic of the European's approach to this. I'll watch it with great academic interests and see how it develops. But I also don't feel as I've been quite right, that the Europeans should focus on what works for them and not export that elsewhere.
J. Christopher Giancarlo:
Our track record speaks for itself in terms of the market structure that we've adopted in the United States over, not just decades, but centuries.
Josh King:
Now focusing on the United States, Chris, it's widely known that you had some differences politically, stylistically with prior CFTC chairman, both Gary Gensler and Timothy Massad. For our listeners, can you share how you used their decisions to define what would be a different path for you as chairman?
J. Christopher Giancarlo:
Yeah. A difference of substance and difference of style, difference of substance is in the area of some of the swaps rules that Chairman Gensler drove through that I think quite frankly, as I say, were misconceived and mis-implemented. I didn't have as many substantive differences with Chairman Massad at all. Although we certainly disagreed over the approach to source code in a proposal called Reg AT where Chairman Massad proposed that the CFTC should be able to take trading algorithm software without a subpoena.
J. Christopher Giancarlo:
I felt that that was basically... A subpoena requirement is foundational. It goes to our US constitution and that was not acceptable. But generally, Tim Massad and I substantively worked very well together. It's a difference of style though. Unquestionably, I felt that the emphasis of the commission should be on something I called market intelligence. My goal was to make sure the CFTC was the most sophisticated in its understanding of markets, not just in a historical way, but in current developments.
J. Christopher Giancarlo:
We built a new market intelligence unit at the commission that didn't exist before. We introduced weekly briefings of not just the commissioners, but other agencies in the federal government on all the ongoing activities we were seeing in markets that we oversaw and traced and tracked developments in terms of market structure, new entrants into the market, current trends, published some excellent research.
J. Christopher Giancarlo:
I felt that the only way a commission can be effective, not just in overseeing, but also in writing the new regulations was to make sure that we fully understood market developments. I think that if... I hope if my time at the helm stands for anything, it's repurposing the agency in terms of its market intelligence.
J. Christopher Giancarlo:
Somebody asked me early in my term, was my intention to be more business friendly. And I said, "It was never in my intention to be business-friendly. My intention was to be market intelligent and market focused." And if we were market intelligent and market focused, everything else would just take care of itself.
Josh King:
Another one of your well-known contributions in your time at the helm at the CFTC to US capital markets was your contribution to the rollback of Dodd-Frank, which included some softening of the regulations concerning the swaps industry, which we started talking about.
Josh King:
In your testimony before the Senate appropriation subcommittee and financial services, you said that the final position limits rule and I'm going to quote, "Must be responsive to the public comments and ensure that regulatory barriers do not stand in the way of longstanding hedging practices of American farmers, ranchers, producers and manufacturers who depend on our market."
Josh King:
You also said that the CFTC's implementation of swaps trading rules was inconsistent with the Dodd-Frank Act by being too prescriptive, too burdensome, too modeled on futures markets. Tell us about your thought process that led to these statements and decisions during your tenure and as well as you're thinking regarding the impact of this on exchanges and what you hope this will lead to from other regulatory jurisdictions.
J. Christopher Giancarlo:
The title of the Dodd-Frank Act was the Dodd-Frank Wall Street Reform Act. And yet as I traveled the country and met with farmers and ranchers, I kept hearing the same question, "Why are you guys proposing position limits on a series of agricultural products and agricultural activities that are only going to hurt our ability to hedge?"
J. Christopher Giancarlo:
Well, I operate on the basis that a position... Congress expected us to come up with position limits, but the very first cracks at it that were done by my predecessors were way too restrictive of ordinary bonafide hedging activity and agricultural and other commodity markets. So I was determined in moving forward with the position limits, that it would really focus on where Congress intended to focus, which is large trading activity in sophisticated derivative markets and would take a appropriate recognition of bonafide hedging activity in our Ag markets.
J. Christopher Giancarlo:
We advanced the ball, I think, considerably and think the commission is moving forward with some work that we left on the table when I left and I'm confident, I think that position limits will see reality. And I think there'll be a fast improvement over what had been first introduced under my predecessors.
J. Christopher Giancarlo:
In terms of swaps execution, it was one of the areas where I felt that there was a degree of mis-implementation going on, that the commission was using futures based models and seeking to superimpose that on over-the-counter markets. Over-the-counter markets or over-the-counter markets for a reason, because either the sizes or the nature of the instruments don't lend themselves to central order book execution. They need a degree of negotiation.
J. Christopher Giancarlo:
I think that the very first set of rules that came out the commission didn't recognize that. The SEC long had experience with over-the-counter markets. The CFTC until Dodd-Frank had no experience with over-the-counter markets. And sometimes, I thought that I heard them perhaps misunderstand over-the-counter to mean under the table as if there was something inherently wrong with over-the-counter markets.
J. Christopher Giancarlo:
That's something we can spend a lot of time talking about misunderstandings, but I think we went a long way during my term there to make the staff much better understanding of the nature over-the-counter markets and why regulation there needs to be much less prescriptive and much more general in its approach over-the-counter market transactions.
Josh King:
You stepped away about a year ago. What was some of the unfinished business that you regret not being able to get done during your tenure?
J. Christopher Giancarlo:
I'm the type of person when I go into a casino with $500 in my pocket, when the $500 is gone, I walk out. I always intended to spend a five-year term at the commission. I also didn't intend to spend six or seven years. I was very clear with both the folks in the Obama team, but also in the Trump team that 2019 would be the year I left.
J. Christopher Giancarlo:
I always knew that I would get as much done as I could and I would leave things in better shape than I found them from my successor. And my successor could then even to build on what we started or go in a direction that he or she felt was appropriate. But certainly, I knew we would do what we had to do as much as we could on that timetable. I was very clear with the people I recruited to the agency that I would be leaving in 2019.
J. Christopher Giancarlo:
And I followed through on that. You always leave. You can never stay long enough to get everything done. I don't think anybody in public service every finishes everything they set out to do. If you think you will, you'll never leave. And so there were things that were not complete, but a lot was done.
J. Christopher Giancarlo:
I think we changed very much the tone. One of the things I'm very proud of that you'll never hear about is when I arrived at the agency as chairman in January 2019, the agency had never once done a disaster drill. Now, as someone who professionally lived through both 9/11 and super-storm Sandy, I realize the old Army motto is, "You fight as you drill," is very important. You handle a crisis as you've been trained to do. But if you've got no training, then you don't know what to do first when the crisis hits.
J. Christopher Giancarlo:
At least once every six months during my two and a half years as chairman, we conducted an agency-wide all four office drill in a different disaster scenario. We used terrorism, we use a market breakdown, we used a computer glitch.
J. Christopher Giancarlo:
Unfortunately, we didn't use a pandemic. But we used everything else we could think of, which actually just goes to prove why you do these drills, because you cannot think of everything that can happen. But if you do consistently have an approach to how to handle a crisis, you're in better stead. I hope and I think that as a result of all that drilling we did, the CFTC was in a much better place to cope with the current COVID crisis than it perhaps it might not have been had we not started doing those drills during my time at the agency.
Josh King:
You fight as you drill. After the break, we'll talk with Chris Giancarlo about fighting as we drill and is recent writing in Risk Magazine that's causing a stir. That's right after this.
Speaker 3:
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Josh King:
Welcome back. Before the break, Chris Giancarlo, senior council at Willkie Farr & Gallagher and the former chairman of the CFTC, and I were discussing how his career prepared him for government service and his current position on a number of important regulatory and geopolitical issues that continue to shape the markets.
Josh King:
After departing the CFTC, Chris, you embarked on a range of ventures, which included exploring your crypto interests a little bit more and getting back to your legal roots by joining Willkie Farr as their legal counsel. Why did you choose to head over to Willkie?
J. Christopher Giancarlo:
Willkie is a terrific firm. I'm very excited about joining them. Willkie was our council when I was at GFI Group before going to the CFTC and worked with us on a number of transactions and other matters and I got to know some of the partners there and really enjoyed working with them.
J. Christopher Giancarlo:
But Willkie's got a great tradition of bringing in public officials after their government service and joining the firm, including its namesake, Wendell Willkie, who had been a presidential candidate in 1940 and joined the firm right afterwards and then went on to do a whole bunch of public service for the United States during World War II. And, and after, as well as Mario Cuomo joined Willkie after his governorship.
J. Christopher Giancarlo:
And so on both sides of the aisle, Willkie has been willing to bring in people like me and give us a platform for a service from the private sector, but still with an eye toward official sector responsibilities.
J. Christopher Giancarlo:
I came away from the CFTC with sort of a working thesis and that thesis is that just as if you look around, you see our bridges and our tunnels and our airports and our mass transportation systems that were once state of the art have been allowed to age and decay and too many cases become obsolete.
J. Christopher Giancarlo:
The same is true about a lot of our financial market infrastructure including some of our financial market regulation. That state of play comes at the same time as the second observation. And that is we are truly going through a new wave of the internet. The first wave of the internet was the internet of information that started with things like Wikipedia, Netscape navigator, but it progressed to social media and online retail.
J. Christopher Giancarlo:
But the next wave of the internet is going to be equally transformative. This wave is what they call the internet of things, the internet of value, the digitization of value in which all the analog things of value in our global marketplace are going to be transformed into digital representations and tokenized as to the actual representation of what they are and then programmable with smart contracts and artificial intelligence.
J. Christopher Giancarlo:
We really saw this the first stages of this when I was at the CFTC and we saw as first commodity shipments and logistics going to a distributed ledger technology. And then the emergence of derivatives on digital instruments and digital assets and new exchanges like ICE's owned backed opening up that we're focused on building marketplaces for new digital assets.
J. Christopher Giancarlo:
As that new digitization of value comes upon us, waves across us, these financial infrastructures that are decades old are really going to struggle to cope with that. That observation really underlies almost all the work I'm doing since leaving the CFTC.
J. Christopher Giancarlo:
I'm chairing the board of Common Securitization Solutions, a joint venture between Freddie Mac and Fannie Mae that's looking at the process of securitizations and how they are handled and processed. There's a lot about that that is antiquated and there's a lot about that that is right for moving into a digital format and a blockchain-based distributed ledger format. And so that's something of great fascination to me.
J. Christopher Giancarlo:
If I could lend my hand to moving that along, I'd be delighted. I'm also serving on the board of the American Financial Exchange, which has launched a truly American-based alternative to LIBOR called AMERIBOR, which is a benchmark based upon a risk-weighted lending market that will be a perfect compliment to SOFR, which is a risk free market, both of which will make very good substitutes for LIBOR as LIBOR goes away in the next several years.
J. Christopher Giancarlo:
I'm on the advisory board of the Chamber of Digital Commerce. I'm involved in a project out of Switzerland called Lykke, which is looking to this COVID crisis as a opportunity for a lot of innovation in delivery systems, logistic systems, in payment structures and including even economic forecasting. We're looking to award prizes for innovators in this area.
J. Christopher Giancarlo:
And then finally, I've launched the Digital Dollar Project. First of all, we created a foundation along with my brother, Charlie Giancarlo who's a veteran Silicon Valley entrepreneur, Daniel Gorfine, who was my chief innovation officer at the CFTC, which by the way was another first. The first ever Chief Innovation Officer. And then David Treat at Accenture.
J. Christopher Giancarlo:
Accenture has come in on a pro bono basis to support the Digital Dollar Project. We've created an advisory board of 30 of the United States leading experts and everything from AML KYC anti-money laundering to payment systems to central banking to commercial banking to privacy issues to advise on this.
J. Christopher Giancarlo:
Last week, we launched the first ever white paper laying out what we believe is a roadmap to a US central bank digital currency that we think would enable us to Future-proof the dollar for this new digital wave that's coming.
Josh King:
This is an amazing post government service career CV that Chris Giancarlo has put together in about 12 months. And I want to dive a little deeper into a lot of the activities that you're taking on.
Josh King:
Let's start though with this recently authored op-ed in Risk that defining the rule takers and the rule makers and you're pretty passionate about that divide. Help us understand why you wanted to go on the record about that now.
J. Christopher Giancarlo:
As I began this conversation, it's not about quantity when it comes to regulation, it's about quality. It's about regulation being well-calibrated to the facts on the ground. And it's also about regulation being done in a holistic manner that recognizes all the facts in the marketplace.
J. Christopher Giancarlo:
Risk, if you think about risk, risk is never extinguished. What risk is it's transformed, it's moved, it's transferred. Risk is in the marketplace is like think about a balloon that's got air and it's tied at one end. If you squeeze one end, the other end expands. If you squeeze that end, the other end expands. Risk is moved, it's not extinguished.
J. Christopher Giancarlo:
When we think about risk in a marketplace, we need to think about it in a holistic fashion. By squeezing at one end, where is it going to pop out in the other end? The people that are doing the squeezing are the ones who have to own responsibility for that risk.
J. Christopher Giancarlo:
The Financial Stability Board, which the CFTC is not a member of and therefore cannot bring its depth of understanding in derivative markets to bear, it has an observer status, but it's only granted by the chairman on a meeting to meeting basis. It could be long term, it could be short term one. One doesn't know. The Financial Stability Board is a recommendation body.
J. Christopher Giancarlo:
It has no jurisdiction to make regulations and yet the financial... It's dominated by central bankers and it's dominated by government finance ministries. It's not heavily influenced by market regulators. Certainly not derivative market regulars like the CFTC. Therefore, when the FSB takes up a matter, there are going to be natural constituencies that are well represented, constituencies that are not well represented.
J. Christopher Giancarlo:
The FSB has recently decided that it's going to focus on one of the elements of risk in a derivative clearing house or in a clearing house. And that is the risk of how losses are allocated if the derivative house needs to be wound up in bankruptcy.
J. Christopher Giancarlo:
But by only focusing on that end, it's a matter of squeezing the balloon at one end without being conscious of where the risk will pop out in another end. The squeezing is being done by an agency that's not ultimately responsible for that end result. I called it an agency, but by a body that's not responsible for that end result and by a body that is overrepresented by certain interests and not by others. That's why my op-ed said the FSB is the wrong body to take this on.
J. Christopher Giancarlo:
We don't have global government. We still have national government. If there is a bankruptcy in a US clearinghouse, it's going to be US agencies that are going to have to step in and take responsibility for it, not a global recommendation body.
J. Christopher Giancarlo:
So it's the wrong body to undertake this. It really needs to be done in the United States and it needs to be done by an agency that's under political supervision because as I said, in my op ed, it's a question of not if an ox gets gored, it's a question of who ox gets gored. And in political choices, when an ox gets gored, there needs to be political accountability for that decision.
J. Christopher Giancarlo:
The other point I made in my op-ed is now is not the time to start reprogramming the allocation of losses at any part of the life cycle of a clearing house because that will have ramifications of what participants in the marketplace do during the crisis.
J. Christopher Giancarlo:
This is the kind of thing you plan during peace time, not during war time. What I'm afraid the FSB is doing right now is in the middle of war time, trying to rearrange allocation issues, which will have unintended consequences.
Josh King:
We are in the middle of war time. It is a crisis. In the wake of COVID-19, obviously Congress, the federal reserve and frontline regulators have been discussing ways over here to provide relief for businesses and safety in our financial system.
Josh King:
One idea being discussed now is providing the highest level of protection for customer funds in our clearing system by allowing DCOs to deposit US dollars and dollar denominated securities at the Fed overnight. You had a strong focused on clearing during your time as chairman and on the issue. Can you tell us a little bit more about why it's so important?
J. Christopher Giancarlo:
Well, it's so important that it was on my radar screen during my entire tenure at the CFTC. It's so important that I raised it repeatedly with my colleagues in the administration and also at the Federal Reserve. It's so important because our clearing houses need to know that the collateral they collect from their members is held in the safest form possible and that is on an account at the Federal Reserve.
J. Christopher Giancarlo:
Now, we're not talking about too big to fail, we're not talking about bailouts. We're simply talking about holding critical capital, which underlines those institutions. You began the show talking about clearinghouses being the kidneys of the financial system.
J. Christopher Giancarlo:
Well, we're talking about keeping those kidneys healthy so they can do their job. And we keep them healthy by keeping the funds that they hold on account in the safest place possible and that's in the Federal Reserve banks.
J. Christopher Giancarlo:
Remember, clearing houses are not in the business of taking risk. Clearing houses, if they're done right are risk neutral. Their clearing members are the ones who are taking risk. If done right, they make money for their depositors and for their shareholders, but they only do that by taking risk. The clearing houses do well for their shareholders by collecting fees, but not by taking risk.
J. Christopher Giancarlo:
Their job is to be risk-neutral. I sometimes think that when you have right regulators that more familiar with bank interests as opposed to clearing houses, they don't fully understand that distinction, which is why market regulators like the CFTC and the FDIC, which Congress has given responsibility for the bankruptcy of clearing houses need to be the ones making these balanced decisions because ultimately, they're the ones who are going to be responsible for any results of those decisions.
Josh King:
You mentioned the Digital Dollar Project as part of your long stream of activities since leaving the CFTC. There's some discussion in Congress of including a Digital Dollar as part of the CARES Act though, it was ultimately not included in the final bill.
Josh King:
Several bills have been introduced in that both the house and Senate regarding the introduction of a US digital dollar Chris. So this project of which your co-founder recently published a white paper on the topic, why did you start the project and how are you hoping to move the conversation?
J. Christopher Giancarlo:
Sure. There's a lot of talk about the digital dollar and some of it refers to something different than what we're talking about. Part of our purpose in the white paper was that it lay our cards on the table and talked about exactly what we're talking about.
J. Christopher Giancarlo:
What we're talking about is digital money. Just as a paper dollar in your wallet, when you hand it to someone, they can hold it up to the light, ascertain for themselves that it's a real dollar. And by handing it over, they have that money and you don't have that money. You require no bank to verify your identity or their identity or play any other role. It's a direct transfer.
J. Christopher Giancarlo:
We're talking about something exactly the same, but in digital format that once it's transferred, it's done and it exists in digital format by itself, not necessarily on some bank's ledger somewhere, but in the same hand.
J. Christopher Giancarlo:
So I'll give you an example. Right now, a granddaughter in the Philippines can send her grandmother who's working in Philadelphia, a photograph of her self on her 10th birthday and it's there in an instant and it is the photograph.
J. Christopher Giancarlo:
But if her grandmother wants to send a $100 back to our granddaughter in the Philippines, that may take 10 days and cost her seven to 17%. And when it arrives in the Philippines, it's on a bank register. It's not necessarily $93 in her granddaughter's hands.
J. Christopher Giancarlo:
We're talking about the ability to send money as easily as you could send a photograph and in the same form that when it arrives, it is the very thing that it said to be. It's a dollar. That's the notion of a CBDC or a Central Bank Digital Currency and that's what we're proposing.
J. Christopher Giancarlo:
Now, there are many attractive use cases for something like this, but one of the most attractive is to address the issue of 25% of our fellow citizens not being fully included in our financial system because they don't have full access to banking services.
J. Christopher Giancarlo:
Yet only 5% of our fellow citizens are without a mobile phone. If the ability to have a mobile phone means the ability to hold money, that would go a long way to addressing some of the concerns that Congress had with what it called its Digital Dollar Wallet Idea.
J. Christopher Giancarlo:
And that idea was to bring the under-banked into the system by granting them accounts operated by the Federal Reserve, to which benefits could be directed to which they can have access. I commend those efforts. They are addressing a great need that we have in this country. Yet, those efforts are really based upon the old accounts-based system, which is fine. It's served for several centuries, but we're talking about something different. We're talking about something in addition to the accounts-based system, something that's digital money.
J. Christopher Giancarlo:
Remember why did the accounts-based system grow up in Venice in the 15th century, it grew up because carrying money around was simply too hard and too dangerous. The bank said, "We'll take your money, we'll put it on an account and then we'll deal with other banks and tell them you're good for the money and there will be all these corresponding banks."
J. Christopher Giancarlo:
Well, that was only built because physical money was too hard to move around and too dangerous to move around because it could be stolen. Now, with technology, money can be moved around. What we're talking about is a digital monetary system that would be a compliment to the accounts-based system and perhaps someday might actually replace it, but probably no time soon.
Josh King:
You and I were chatting a little bit before we went on air about the horrible unrest we've seen in cities across the country in the prior week. You mentioned the applicability of the Digital Dollar Project to have a different perspective on what we're seeing today. How do the two intersect?
J. Christopher Giancarlo:
I can't begin to do justice to the situation we have and I'm not qualified to understand it or speak to it. What I can say though is that one element of it is that we have to admit that we have sectors of our society that have been excluded from full access to our financial system and excluded from full access to our growing digital marketplace.
J. Christopher Giancarlo:
You and I easily connect through Skype, we've got other tools available to us. We have full WiFi access. A lot of sectors of our society have been left out of this new digital divide. I believe that this new wave of the internet can and will provide new means for inclusion of that society. One of the ways is through digital money. We can bring people into the financial system that don't have long experience with banks and may have anxiety about bank relations, but if we could find a way to get them direct payment of salaries, direct payment of whether it be government benefits or other benefits directly to a mobile device.
J. Christopher Giancarlo:
As I mentioned earlier, only about 5% of our population are without connectivity, 25% are without bank access. So if we can use this new technology to deliver faster, better, more immediate benefits, payments to them and they can have immediate access and ability to buy goods and services with that money without gatekeepers, whether they be banking institutions, check hashing facilities, global remittance facilities, all of which take a fair charge for simply the fact of moving money around or verifying identity.
J. Christopher Giancarlo:
I believe that this new technology of digital money can provide a lot of benefits. I don't begin to think it can address all the issues we have, but it can at least address a small part of those in issues which have some degree to do with financial exclusion and technology exclusion for parts of our fellow citizens
Josh King:
The story somewhat buried, Chris, in the ongoing pandemic and domestic issues dominating the headlines is the ongoing geopolitical maneuvering between the United States and China.
Josh King:
In the early spring, China announced that it had expanded trial of the digital Renminbi advancing a state-run digital currency that has been in the work since 2014. Any lessons that we can learn from their efforts and will it be possible to bridge the gap to ensure the US central bank digital currency will hold the same position in the global economy that the physical dollar does?
J. Christopher Giancarlo:
Josh, thank you for giving me an opportunity at the beginning of this interview to lay out some fundamental principles, because now I can go back and draw upon them. You'll recall that one of the things I said is not all markets are the same and not all economies are the same, not all currencies are the same.
J. Christopher Giancarlo:
China has everything to gain and little to lose by experimenting with the digital RMB. Why is that? Because it's currency is not a global reserve currency. Because China is looking to harness new technologies like 5G technology at its belt and road initiative to bring countries into a financial inclusion zone that they dominate.
J. Christopher Giancarlo:
I understand that, it's clear and they have to do what they have to do for their economy and their currency. But the United States is in a very different position. Our currency is the global reserve currency. Our central bank is the central bank to a lot of the world.
J. Christopher Giancarlo:
Our currency is the dominant global currency. We need to approach this with our eye on what China's doing, but with an approach that is still very tailored to things in the United States. Another difference, when China does big things, whether it's to build a blue water Navy or to build a digital RMB, it's driven by the communist party, which tells 43 million Chinese party members to read the same book and to act on that book about building distributed ledger technology and crypto and a digital RMB.
J. Christopher Giancarlo:
We don't operate that way in the United States. When we do big things, whether it's a space program or building the internet, we do it through a series of public and private partnerships. We often have a messy process of building a national consensus that something is worth doing. And then when we set our mind to doing it, we marshal the best from both the private sector and the public sector and bring it to bear. We bring it to bear with our values of free enterprise of the rule of law, of a zone of privacy and respect for privacy rights.
J. Christopher Giancarlo:
That's the way I think we'll go about building a digital dollar and it'll be unique to the way we do things. If we do it right, I think it could be enormously successful. What we mustn't do, I think, is get caught up in a debate of who's going to win a race and get there first. This is not about going first. The United States shouldn't go first because we have more to lose and less to gain.
J. Christopher Giancarlo:
What we should do is make sure that the future of money reflects those age old us notions of the rule of law, of respect for privacy rights, of free enterprise. If we get those concepts built into the future of money, we'll have won, not necessarily because we got there first, but because we got there in the right way,
Josh King:
When you were serving on the CFTC, you earned this reputation for your interest in crypto. People called you crypto dad and your willingness to incorporate technologies like the blockchain into the financial playing field. When did you first realize that this was a topic that couldn't be ignored and how much further do you think the deliberately slow process of government needs to go to fully embrace its potential to supplant traditional order? I was right in the thick of watching the CFT deliberate back. Then it took a long time, Chris.
J. Christopher Giancarlo:
Yeah. I've always believed in the transformable nature of technology, the way technology transforms society. Technology is like a blowing wind. You either head into it and take advantage of it the way an airplane does or you get blown away by it. But you can't stop it.
J. Christopher Giancarlo:
For those who were encouraging this CFTC to say no to Bitcoin futures, my response was, "That's not responsible." What good would that have done? We cannot turn our blind eye to technology innovation. What we need to do is harness it. What we need to do is innovate with it. We need to think about it and say, "How can we use this in a way that's better for our fellow citizens and not let it wash over us and let others take advantage of it and bring their values to bear?"
J. Christopher Giancarlo:
That was always my mission at the CFTC was to understand how technology was changing the nature of our markets and to bring a degree of market intelligence and a willingness to experiment and a willingness to try to harness that innovation for the good of markets, for the good of society.
J. Christopher Giancarlo:
That remains my mission today. I think the CFTC was an ideal platform for that. And I'm pleased to see that I think that it's continuing down that road.
Josh King:
In an interview with The Coin Telegraph, you said that one of the things that a crisis does is it stimulates imagination in innovation. During peaceful times, people aren't faced with the tension in a normal way of doing things. And then suddenly, you have a crisis like this, that puts enormous tension on traditional processes.
Josh King:
Tell us more about how technology, especially crypto and the blockchain can provide solutions to the economic struggles worldwide.
J. Christopher Giancarlo:
Sure. Necessity is the mother of invention. What we saw during this crisis was the government said, "Okay, the way we were are going to cope with the potential for millions of lives to be lost and our healthcare system to be overwhelmed own is we are going to deliberately dial down the economy and then hopefully bring it up back later on."
J. Christopher Giancarlo:
To offset that dialing down of the economy, the government said, what we're going to do is provide direct financial benefits to people who are going to lose their income as a result of the dialing down of the economy. Well, guess what? When you've got 25% outside the banking system, you suddenly see that if you're using the banking system to distribute benefits, you're going to struggle to that last 25% that are not included in the banking system.
J. Christopher Giancarlo:
I think that the crisis revealed a limitation in the policy tools that are available to the official sector during this crisis. What does that suggest? Well, we need other policy tools that will allow for direct distribution of benefits during a crisis without relying on bank activity, ergo, a digital dollar.
J. Christopher Giancarlo:
Had we in place a US digital currency payments could have gone not weeks away, but instantaneously to people's mobile app, wallet apps on their mobile devices and even better, they wouldn't have to then go convert that into either Fiat money or handle checks that themselves might have issues of COVID exposure, could immediately go into online commerce.
J. Christopher Giancarlo:
The online retail sector is a Fiat exclusionary zone. You can't transact in Fiat online. You need to have some access to some degree of bank activity to transact for the most part online. Well, a digital dollar would allow for Fiat activity, digital Fiat activity online, which would be a great benefit to that large percentage of our population that are outside the banking system.
Josh King:
You went back to school, Chris, during the pandemic, specifically your alma mater at Skidmore College joining professor Catherine Hills' course on entrepreneurship. Entrepreneurship, you wrote, remains a core life skill and enduring social good in a free market economy. Based on what you're seeing in the students at Skidmore and among the next generation everywhere, do you think the future's in good hands?
J. Christopher Giancarlo:
Look, I think as someone who is closer to the end of my professional career than at the beginning, I think we always worry as to whether the next generation has the tools to make their way.
J. Christopher Giancarlo:
I'm sure my parents worried about me and my grandparents worried about them and I think we'll worry about them. I've got three adult children of my own in their twenties and they are remarkably sensitive, I think, to the challenges of our times and yet well equipped for them, I hope.
J. Christopher Giancarlo:
I hope our next generation and I think they are. I think they've come of age at a time of great challenge, but I think their open mindedness will serve them well. Having said that, I do think entrepreneurial skills are an absolutely essential training for life. Whether that's in a large corporation or whether that's as a self-employed person, one needs to think entrepreneurially about the challenges.
J. Christopher Giancarlo:
Every crisis reveals opportunities to do things better. So doing things in a free market economy to earn a livelihood from doing that. I encourage all students, whether you're in school or out of school to sharpen your entrepreneurial skills in a free market economy, which by the way, I think is the only way to realize one's dreams in life is in free markets. In a free market economy, entrepreneurial skills serve one very, very well.
Josh King:
Well, I hope if nothing else, Chris, that you and the Giancarlo kids will continue to hone your instruments and you can resume playing gigs in the lower Hudson River Valley. And I'll meet you somewhere between the Catskills and Bergen County and catch your gig.
J. Christopher Giancarlo:
Great, Josh. Let's do that.
Josh King:
Thanks so much for joining us Inside the ICE House.
J. Christopher Giancarlo:
Really been fun. Thanks a lot.
Josh King:
That is our conversation for this week. Our guest was Chris Giancarlo, senior council at Willkie, Farr & Gallagher, former chairman of the CFTC. If you like what you heard, please rate us on iTunes so other folks 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 @ICEHousePodcast.
Josh King:
Our show is produced by Damon Level, Weronika Slomka and Pete Ash with production assistance from Rebecca Mitchell and Ian Wolf. I'm Josh King, your host, signing off in the Library of the New York Stock Exchange, the remote branch here in the Catskills of upstate New York. Thanks for listening. Talk to you next week.
Speaker 1:
The information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE, nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of the information and do not sponsor approve or endorse any content herein.
Speaker 1:
All of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
