The Problem With Jon Stewart - Jon Talks Stocks and Ukraine

Episode Date: March 3, 2022

We’re back on Apple TV+ with brand-new episode “The Problem With Stocks,” and we’re celebrating on the podcast the only way we know how—by interviewing former SEC commissioner Rob Jackson. (We’re bad at celebrating.) We get his thoughts on why the market isn’t held accountable and is less regulated than casinos. Robby Slowik and Rob Christensen join Jon to give their thoughts on the Russian invasion of Ukraine and how Ukrainian president Volodymyr Zelenskyy went from comedian to courageous leader. Not to mention their recommendations for the cleanest restrooms in New York City.Words in this episode you may not know but should know:Arbitrage is exploiting a price difference of the same asset. It’s like buying avocados at the supermarket for $1 each and selling them at the hipster farmers market for double.Dark pools are private exchanges for trading securities that are not accessible by the investing public.Options trading is buying and selling of options, which are essentially contracts that give you the right to buy or sell a stock at a certain price by a certain date. It’s basically betting on a stock price going up or down. So if you purchase an option instead of buying a stock, it means that you are buying the option to buy a stock if it hits a certain price. This can lead to issues, because if your bet fails, you’ve lost all that you’ve invested. Whereas if you bought actual stocks, regardless of the price, you still own that asset.Payment for order flow (PFOF) is when brokerages such as Robinhood route the buy and sell orders of retail investors to big market makers such as Citadel and Virtu instead of sending it directly to the stock market. This deal helps brokerages make hundreds of millions of dollars every year.Retail investors are individual, nonprofessional investors who are buying assets with their own money.Securities are any tradable financial asset: stock share (equities), bonds, investment funds, pensions, etc.The Securities and Exchange Commission (SEC) oversees securities exchanges, brokers, investment advisors, and mutual funds to create fair dealings, disclose important market information, and prevent fraud.Bildungsroman isn’t relevant to our episode, but do you remember that from English class? You need to know it. Please google it.For more words and definitions, visit https://theproblem.link/glossary To watch our stocks episode, visit https://theproblem.link/AppleTVWe want to hear from you! What did you think of our Stock Market episode? Have a question, comment, or criticism? Call our hotline: [phone]CREDITSHosted by: Jon StewartFeaturing, in order of appearance: Rob Christensen, Robby Slowik, Rob Jackson, Alexa LoftusExecutive Produced by Jon Stewart, Brinda Adhikari, James Dixon, Chris McShane, and Richard Plepler.Lead Producer: Sophie EricksonProducers: Caity Gray, Robby SlowikAssoc. Producer: Andrea BetanzosSound Designer & Audio Engineer: Miguel Carrascal Senior Digital Producer: Kwame OpamDigital Coordinator: Norma HernandezSupervising Producer: Lorrie BaranekHead Writer: Kris AcimovicElements: Kenneth Hull, Daniella PhilipsonTalent: Brittany Mehmedovic, Haley DenzakResearch: Susan Helvenston, Andy Crystal, Anne Bennett, Deniz Çam, Harjyot Ron SinghTheme Music by: Gary Clark Jr.The Problem with Jon Stewart podcast is an Apple TV+ podcast, produced by Busboy Productionshttps://apple.co/-JonStewart

I think we can all agree the problem with John Stuart is his fucking computer doesn't work and I have to restart it all the time. Uh, man, you, you download one porn site from the internet and suddenly, you know, these days people are streaming and we don't download them anymore. You might want to look into that. We've made some changes. We'll send you some links. You know, I would truly appreciate that.

Yeah. Hello everybody. Welcome. Welcome to the podcast. It is the problem with John Stuart. First of all, we're talking with Rob Christensen and Robbie Slough, who are, uh, two of our writers, fabulous individuals, uh, and we are back on television as well. Yeah.

Baby. Yes. Our episode drops March 3rd. So, uh, please, uh, DVR. Is that what people do now? I was going to say VHS, but that's clearly the wrong initial. Back to streaming. Same as the point.

It's streaming. Streaming again. I got to look into this. The Apple TV plus show is on and our first show is on Wall Street and payment for order flow and the GameStop issue and the Apes and we talked to the SEC chairman, Gary Gensler. And here's what we learned. And I'm just going to say this straight up and spoiler alert to the entire audience. Everything is copacetic.

The whole system. It's all cool. It's all good. It's very balanced, very fair. So you're welcome. No notes. Yeah. We fixed it just by, just by investigating it.

Turns out it didn't even need fixing. It's just all fucking square, dead on, no shenanigans. You know what the, and this, I did not realize that when you go to the Wall Street, uh, headquarters, the New York Stock Exchange, right? In Latin above the doorway, this is true. It says no shenanigans. No follow up questions. It says no shenanigans.

And so, uh, everybody, all the brokerage firms, all the big boys, they all walk in there and they all nod to each other with that sense of a communal. Everything's on the up and up today, boys. Let's do this thing. So like that doesn't make me feel good. What if you went to a coffee shop and there was a sign up for the employees that said, please don't spit in the coffee? Are you confident then that the coffee is not spit in or is there a reason that sign needs

to be up? First of all, Rob, I want to thank you for taking what I said at face value as opposed to the ludicrous sarcasm that it was. And second of all, I don't know, last time you've been to a Starbucks, but, uh, if you go in the bathroom, it does say employees must wash hands. So it, I, I think that those obvious, uh, hygiene questions are actually have to be written out. Yes.

They do. Yeah. And there's a regulator who's paid one 30th of what the baristas are paid to ensure hands are being washed. There is no one, uh, as far as I can tell that is checking. I think it's a directive that they assume is I'm going to go with it's the honor system. They put everybody in, in the Starbucks on the honor system. Yeah.

And capitalism as well. I think, I think capitalism and Starbucks are the two systems in the nation right now that work on the honor system, the only two as, as a matter of fact, by the way, the Starbucks bathroom, if I can just take a quick digression, generally very well maintained. I have always, huh, and I say this to all my fellow New Yorkers. If you truly have to take a shit and not listen, Starbucks are everywhere. I can, I cannot say the same about Dunkin Donuts in terms of the bathroom hygiene in New York city, but Starbucks Starbucks better access to bathrooms, bathrooms.

I'm going to, I'm going to take the converse, uh, point here and say, you absolutely do not want to walk into a Starbucks bathroom unless you, uh, you have no choice. And even potentially the street might be a better choice. Well, look at you. Oh, I'm sorry, Mr. Rockefeller, not all, not all of us can, uh, take the time to go take a shit at the Met. You know, maybe a pen, cote d'enne, uh, a pret-a-manger. Isn't it sad though, do you remember that time in, in, in your life in New York when

you first got there, where that truly was, like you would have to line up which public places would allow you, uh, to go in there and, and do that because man, there were those nights where you just couldn't get on that. The subway was later. You couldn't get a cabin. You're just like, I'm just going to run into this diner and you know what, let me get the cheeseburger deluxe just so they will allow me. Yeah.

Yeah. There's always the stereotype that, that New York just reeks of piss and it does because there, there's not a lot of options for people. There really isn't. So Robbie, if I may push back on you and, and not say it reeks of piss, but there's, I think you're forgetting, you know, imagine walking through the subway with that smell, but Gershwin is playing in the background. Oh, I see.

You have, you have to romanticize these things. Right. Yes. The big, the big apple. Yeah. Thank you. The city that never sleeps and apparently, uh, is taking a diuretic, the city, the city that has a diuretic.

You could use the restroom here. You could use it anywhere. Uh, how are you guys doing? We are, we are taping this by the way a little bit early. I am heading down to DC early in the week, um, trucker convoy and, uh, uh, but I am going to be down there. So we're taping this on Friday. So the things that we discussed now may have completely changed, fundamentally changed from

the time that we are talking about them to the time that people listen to them. I think like a week from now, is it like a week from now? Yes. So I wanted to very much talk about, uh, the, the events, uh, in Ukraine and in Russia, but Lord knows, man, uh, six days from now, I mean, that's, that's a lifetime, but I'll tell you what will not change in my mind. This, uh, Vladimir Zelensky fella, boy, I mean, yeah, we, we are comedians and we know the general brand of cowardice that runs through our business and the, you know, that, that

fake Brigadio, that comes from standing on stage and heck, you know, having a heckler and destroying him with a microphone. What this dude is doing, it is incredibly moving. I mean, it's, it's, we're watching Shecky green transform into Churchill. Like his grace and, and I don't know if you've, have you listened to any of the speeches that he's given? Yeah. Remarkable.

I mean, it's powerful. Yeah. Yeah. But just the grace and the Klitschko brothers that are over there, I mean, boy, what a terrible time to kind of notice the, the real spine of, of this country. I wish it was, uh, not in such terrible circumstances, but, uh, as a, do you guys feel any of that as a comedian? You know, does that resonate with you guys at all?

I can say as I, I mean, yeah, what's funny, I guess, is that for the past like four or five years, comedian gets kind of worn with a bit of a mark of shame in a lot of ways. You know, like, Wait, past four or five years, try 40 or 50, always form a show business. It's, it's, uh, uh, strippers, geeks, comics. I think we're the, we're, we might be the lowest form of, of show business. It's because we're half stripper, half geek. And that's, I think that's probably right.

Yeah. So watching this guy, you know, stand up and you know, communicates on such a human level to say, you know, attack, attack this region, the region where my best friend's mother lived, where I cheered alongside you at the European cup, you know, really just dropping the political bullshit and connecting on this, I'm a human being, you're a human being level. It was so touching. I mean, in many respects, like they are, they are brethren. Yeah.

It's, it is, you know, uh, New Jersey attacking Staten Island. Like it's, I mean, it's just the weirdest, you know, there's so much shared history. And I, we've never seen something like this in our, our modern era. Listen, no one's going to excuse the larger countries and some of the imperialist inventors that we go on and, and some of the false justifications that we make for it. But generally there will be a period of an attempt to paper over, uh, bald nationalism or crass economic interests with some high-minded rhetoric about something. Putin was just like, yes, uh, we're going to go in and kill everybody.

They're just like, wait, what? It's full bond villain. And I can't, there's all these articles. Why is Putin doing that? There is not a single logical reason to justify this. You know what I keep thinking of? I sort of keep thinking of the comics table at the cellar and, and the idea that somebody from that little round table has been forced into this incredible feat of courage and statesmanship.

And I sort of imagined, you know, you know, when you're sitting around the comics table and everybody's telling their horror stories, like, I once opened that a fud ruckers. And there wasn't even a, people are just coming in and using the fucking fixings bar and like Zolensky's at the table, you know, and you're all telling your horror stories of gigs and things. And he's just like, uh, I was, uh, attacked by, uh, the third largest army in the entire, in the entire way. And then everybody's just going to be like, oh, why do you guys always bring that up?

Yeah. Yeah. The Booker at the Chuckle Hut shorted me 30 bucks. So I've been through it. I once did a Roger Paul gig in Rochester. They didn't feed me for three days. And he's like, uh, they had the, uh, missiles pointed at, I mean, it's, it's, it's just the courage and the humanity that, I think I'm also shocked at the humanity that they're

displaying. Yeah. That it's not, they're not responding in hatred and in anger. They're responding in, in care, in like, look, I don't know if you saw there was a video, it's heartbreaking of a man saying goodbye. Yes. He's sending his daughter away and he's going to stay and, and it's a boy. I, I, there's a part of me that truly hopes that this is where the social media algorithm

will shine. There's a part of me that hopes that as if boy, if anything can go viral, let it be this, let it be these speeches, let it be these moments and, and let that in some way build momentum to end this. That would be. Yeah. I am, I am praying for that, but it's just, it's so dystopian that we are like, please algorithm favor the right side of history.

I'm going to tell you something, man, artificial intelligence fucking owes us. Yeah. It's driven, it's driven me down so many rabbit holes that it's got to give me something. It's got, it's got to provide some measure of redemption for itself that if it can, you know, take this moment, but, but boy, and I just feel, you know, you're watching a guy drive a country over a cliff in real time. And I don't, listen, I don't think this ends well for anybody, but I also don't think it ends well for, for Putin and the Russian people.

I feel like he is driving the Russian people over a cliff. He is, he's going to hurt them economically, psychically in so many different ways and for fucking what? For nothing. For nothing. And they're going to get hurt bad in this. I mean, there'll be a pariah country without out in the inability to access dollars and trade with the West.

It's going to hurt. It's going to hurt them so badly. And I just, even emotionally, it, it looks like the kind of psychic wound that a country is going to be hurt. And I understand he's feeding them a whole nonsense of we're demilitarizing and denazify. What was it? Denazification. Yeah.

First of all, the guy who runs it's Jewish. Yeah. Like Zelensky's, he's a Jewish guy. I don't, I don't, you going to denazify him? Is that what it's called now? I'm pretty sure it's the inverse of that. But fuck, man, you know, not to sugarcoat it and not to suggest that we have any deeper nuanced understanding of the relationship between those two countries, because as Americans,

I can assure you, we do not. We only learn geography when somebody is bombing somebody. I mean, that's, that's the level of attention that we pay on the world stage, but. And that somebody is usually us. And that somebody is usually us. And then all of a sudden, everybody's an expert on where Kabul is. Yeah. And nobody else knows.

What do you think? Does a guy like Trump now go like, how do they, how do they turn that? Do they turn that with the, I guess the turn is just like, this never would have happened with me because he knows I'm strong and you're like, well, maybe he never would have happened with you because he knows that he wasn't up against anything when you were there. So he didn't need to do anything. I don't fucking know. I think Trump's already said something like I alone can fix this Russian problem, which

is. It's not really true. Yeah. Yeah. Well, and that's the talking point, right? 2014 Crimea, you know, Obama, Crimea, now Biden, and of course that's the talking point. Where's the talking point on, yeah, we had $400 million worth of armaments that we denied them because you wouldn't do an investigation into, you know, Hunter Biden or some shit.

Listen, those guys all have, we used to call it ballsheimers. Was these guys that say fucking horrendous things and then have the balls to pretend like they don't remember ever saying, and man, you go back in the archives. This is what we used to do at the Daily Show. You go back in the archives and you go, this, this, this, this, and you play it and you think like the shame would somehow be like the groundhog, you'd see a shadow and have to fucking disappear for six weeks. No.

Shame is not an emotion that exists in that universe. Yeah. And that's so crushing to what, that's why the fact that you lasted what, 16 months? 18 years at the day, at a certain point I would be like, welcome last night, Mitch McConnell said this six years ago. He said the opposite. Here it is. Here it is.

Here's Taurus Kranz. Good one to tell me that. Well, it does, you know, because at a certain point you, what's wearing on you is impotent rage. Right. Because if you're not playing, right, because a lot of them are playing. A lot of them are creating an urgency and a rage and an upset that they don't actually feel.

It's, it's performative. You know what I mean? Yes. But if you're feeling it every night and as best we could, we tried to make a show that was really feeling it, visceral, not, not performative. The lack of movement towards the world that you would prefer to live in sort of begins to, to, to, to wear you down a little bit to the point where I don't know if people can see this as a visually, if they're watching this.

But this looks like a time lapse of Robby is where we started, Rob is where I was in the middle of it, and here I am now. We get, there's so many, that makes me feel good. The descent of man. This is the descent of man. Gives me some hope. Maybe I'll grow some hair back, you know. I got to tell you Rob, that if you keep that beard going, you could just, you could roll

that baby right around to the top. That's the plan. Cut. Here's what you do. You roll it around to the top, just cut out the face, nobody's, nobody's the wiser. Robby, have you ever been able to grow a beard of that strength and character? I can actually grow pretty, pretty big, but like you, it's, it looks more rabbinical than anything else.

I go from zero to rabbinical in 11 days. If I don't keep, the minute, like what he's got going there is like there's a certain menace to it. There's a little bit of, like if you see him in a bar, you'd be like, I'd like to check out that guy's tattoos and also his criminal record. This man is chopping wood in front of his, in front of his cabin and we're trying to get him back to, not after what you guys did to me in Tajikistan kind of beard. Well, anyway, this is an amazing month for us.

We got four, I think really wonderful episodes. We start with Wall Street, we go to climate change, and then we go to, I believe the media. By the way, let me say this about the media. These types of stories, Ukraine, a war, this is what they're actually built for. And when they are matched with their purpose and there is a story equal to it, boy do they deliver. And they have done a magnificent, a job of bringing this story, the reality of this story to the public.

I have been wildly impressed and it just shows you what they are capable of when a story is at the level of urgency that they pretend everything else is. And boy, it's almost, it's a little heartbreaking because you see just like how talented and how committed and how involved they can be. But when left idle or when left to the currents of their ratings overlords, how their natural and innate abilities are perverted into something way more damaging. But fuck man, I don't know if you've been watching the coverage, but they have been on, I believe the phrase is motherfucking point.

Yeah. Yeah. I, you said everything perfectly, so I'm not even going to piggyback on that. Yeah. Let me just say except for Fox. Those motherfuckers won't be satisfied until the Axis powers get together and have us joining the other teams. Yeah.

But, and we got that. And then we got, of course, the episode that we end with race, which apparently is in no way a tinderbox. And folks, we fix it. We solve it. Yeah. Race, no problem. Robbie.

I'm sorry. Spoiler alert. Son of a bitch. The two white guys with the same name. We did it. We handled race. By the way, this is an all, this is an all Rob episode because I don't know if you know this.

So the person that we talked to in terms of the stock market, this gentleman Rob Jackson, who was a commissioner at the SEC in the episode, the Apple TV plus episode, we do talk to the current SEC commissioner, Gary Gensler, to find, get some answers. And then Rob can explain to us why we didn't get any of those answers and has really good insight into why the securities and change commission is not able to accomplish the goal of accountability for the stock market. And I think really gives you a really nice insight into that, that I hope the episode kind of jins up as well.

By the way, there's going to be a lot of terms in the interview that may not be familiar to you. They certainly were not familiar to me. And to be quite honest with you, I'm not sure they're familiar to me even now because my brain is mush, but if you're looking for those terms or any of those meanings, we've got them listed in the episode description so you can just plop in there and you can see them to your heart's content. So let's, let's go to this young man Rob, a different Rob than the Rob's.

And by the way, on stock market theme, because the point was you're getting, you're getting robbed by white guys. If we were a morning show, I would have hit a tremendous amount of noise things. All right, here we go. We're talking with Rob Jackson, former commissioner of U.S. Securities and Chains Commission. We were talking about the challenges that are facing the SEC. It's basically the only difference between Wall Street and Las Vegas is Las Vegas is incredibly well regulated.

If you cheat there, they will fucking throw you out. With Wall Street, they cannot keep up. And so the question is, how do you create accountability when over the past few years, it's almost as though the SEC, they haven't given up, but they've acquiesced to the way of we're not going to really send too much to the DOJ. We're just going to see if we can collect a few fines, continue along our way and go along to get along. So John, I think to be fair to the SEC, as you point, as you pointed out.

These are folks who are underfunded and undermanned. As Gensler pointed out to you during the Trump administration, they had a decrease in their workforce of 5% while the stock market exploded. So asking these guys, getting mad at the SEC because they don't have enough money to do the job of holding people accountable, in my mind, it's a mistake. You bring up an excellent point. They don't have the money or the resources. But if you are tasked with a certain job, you can either raise holy hell that it's money

or you can change your model. I brought up this idea of the apes. It stands for all people equal. These guys are the amateur retail investors. They shared stock tips on Reddit, became a force behind GameStop and AMC and all those various kind of more populist stock movements. They have discovered a lot of the inequities and unfairness and outright cheating within this Wall Street system that's not very transparent and is not very open, especially to the retail

investor. When I brought up this idea of let them be a crowdsourced way of identifying things that can help you target them more easily, he was like, we have a whistleblower program. The whistleblower program has given out $7 million. It was all very by the book. You're getting your ass kicked, throw out the book and let's come up with some interesting and novel ways like you got to figure it out. So listen, I think that's very fair and there's a whole host of things that they can and should

be trying and one of them, by the way, is using social media and trying to understand what investors are seeing and making sure that they have investigators who are thinking through those alternatives. But John, I want to say something else, which is the regulated entities, they have lawyers, good ones. And if you go outside the box, they'll sue you and win. Now, your episode's about the stock market, right? It's about payment for order flow.

It's about the exchanges being for-profit businesses. So we tried to make some rules about that and a couple of days after we announced them, I'll bet in the Wall Street Journal from the chief executive officer of the New York Stock Exchange, why we're suing the SEC. Why were they suing the SEC? Because we wanted to make some changes to the transparency and the governance of exactly the issues you were discussing on the show. So we decided we wanted to make some changes.

We made those changes into a rule and they took us to court and beat us. And I got to say, John, whatever you want to say about the SEC, when they go outside those lines, the regulated finance industry has really good lawyers. And by the way, not for nothing, but some of their lawyers used to work at the SEC. And many of them. Absolutely. And these guys go into court and they often are able to keep the SEC from doing its job. I think it's a huge problem.

So that's what I'm saying. It's like one of those Wild West towns, one sheriff, but the sheriff changes every day because they keep chasing out the old sheriff. And then there's a new guy in there. There's a revolving door between corporate America and the SEC, it's self-regulating. In a large extent, payment for order flow is rife with conflict of interest. There's all kinds of non-transparent fund transfers that don't go on. The retail investor has difficulty seeing how much of the market is shorted.

With GameStop, they were holding, I think, a short position of the 140% of the entirety of the company. So within all those parameters, the sheriff in that town has to come up with another way of approaching things because it's very clear what they have decided is we're going to neuter the SEC to the point where we're comfortable paying whatever tariff they impose on us to give us the patina of a well-regulated industry is not well-regulated. It's not well-regulated. And you're absolutely right that the fines that these companies pay, just the cost of

doing business for them. That's absolutely right. And what I would say, John, is if we want to have a conversation about how to fix that problem, that conversation's got to include doing something about the amount of money the finance industry gives to Congress. Because as we discussed earlier, the amount of money that's spent by the chamber of commerce and the business roundtable on these congressional races is so astonishing and completely non-transparent that what we end up with is a system where members of Congress don't want to fund the

SEC to do its job. It's a capture. They've been captured. Listen, John, when I was at the SEC, every day I had a calendar that tells me what I'm doing that day. Half my calendar is meetings with industry, their lawyers, or their lobbyists. And by the way, I was a guy who spent more time than most actually meeting with investors rather than the industry or the lobbyists.

So that was interesting. So you've got these two polarities. One is capital formation, where you're trying to create a system where there's enough trust in it that people will invest their money into businesses, and those businesses can use that capital to make investments in infrastructure and hire people and all those things. But the other is investor protection. But it seems very clear that investor protection is, again, a facade to really help lubricate and facilitate capital formation.

You know what I don't understand? What I don't understand is when people talk about those two goals being intentional with each other, why is it intention with capital formation to protect investors? Rob, preach! Preach! So my mind, if you keep people from getting screwed over, that'll help capital formation. If you make people believe that the market actually works and is in the casino, that'll help capital formation.

But unfortunately, I think the way people are thinking about it in Washington is you have to choose. Either you make things inexpensive and easy to rip people off, or you make them expensive and companies can't get money. And I always thought this was a false choice, man. I think it's even more sinister than that. I think if you look at monetary policy, where they keep interest rates near zero so that you really have no other choice in terms of savings other than to flood the money into

the market, which inflates all the assets of the market, you have pension funds that are allowed to gamble with hedge fund operators. So the money that people are saving for their retirement gets flooded into the return that those people get on the games that they're playing in the backroom casino far dwarf what they're giving to the pension holders. And what it says to me is not only are they not protecting investors, they are actually lubricating the chutes to get investor money to help them play their casino games. And they refer to it as dumb money.

Again, it looks like a scheme to get dumb money so that their system of stocks gets overinflated. Not to mention the whole derivatives and other nonsense that goes on behind the scenes that's really not transparent. I noticed in your episode that some of your staff asked you what it must have been like to earn 5% on a savings account. Like that's like a relic of the past. And you made a point that I thought was important, which is it's no longer politically tenable to govern while the stock market falls.

No question. And no question. Because the truth is Gary Gensler shouldn't be in favor of the market going up or down. Gary Gensler should be in favor of the market being fair and protecting the people who are trying to save for their retirement. And I think at a human level, he does feel that way. But the political reality is that if the market goes down, he's going to be blamed for that. And that's not a tenable way to be the sheriff.

That's not a way that a regulator can do their job. It's one of those situations where the people that are the insiders of the market resent the retail investors. They really resent this game stop, you know, that they got a little taste of their own shorting medicine and they got put in a short squeeze by the retail investors. They really hate that. But it was, I thought, interesting that the reason that they were upset with the retail investors is that they weren't playing fair and they weren't paying attention to the fundamentals

of the market. And the balls of the insiders of Wall Street to say that they play by the fundamentals of the market is stunning. I think either completely dishonest or completely divorced from the reality of what exactly is going on in the stock market. And I think you hit it on the head. It's untenable for monetary policy to drop the value of the stock market. It's untenable for the government to have any control over how the casino in the back

room operates. We're at the mercy of greed, like flat out greed presented as free market capitalism. It is not a free market. I don't even know if it's capitalism. It's certainly crony something. The good news about that is that anybody who's serious about a free market, about actual sort of a libertarian way of thinking about this, knows that the stock market system we have is broken.

I'll tell you something else. When I was on the SEC and we made rules to rein in the stock exchanges, I had bipartisan support for that. We lost in the courts, but even members of Congress would say, you guys are doing the right thing because this is not a free market, John, when one side is paying another side to get dumb money order flows into a particular place where you can trade against them for profit. That's not a free market.

And hyperinflating the volume and making their money skimming each trade. I think that's right. I want to note something that I think is worth noting. Paying for order flows is a real problem, but you talked about it with stocks. Now on stocks, that market has been very, very well developed over years. I'm not saying it's a perfect market, but it's a market that works reasonably well. The market where Robinhood really makes its money. The market where payment for order flow is a great source of profit is the options market.

There you really make money. Why is the options market more lucrative for them than the other? Is that because there's even less transparency or regulation? Yes. There is more room in between the bid and the price for an option in which they can make money. Right. There's more room for options than there is for stocks.

So explain to people options trading is just the buying and selling of options. Basically you're just betting on a stock to go up or down, but not the actual stock. It's a bet. Right. Now, why is the option give them more leeway on price? A short way to put this is that dumb money is dumb when it comes to stocks, but it's even dumber when it comes to options. Jesus.

That is they have more room on options because they're going to be able to turn around and find another order that's even wider apart and they'll be able to make the difference. And they'll get that difference. That's right. And it's not illegal for them to take that difference. Not only that, it's called price improvement because you see the, no, John, they're doing you a favor. You seem ungrateful.

I'm fucking Orwellian. So it's called price improvement because what they're saying is there's a price on the, there's a bid and they ask on the exchange. Here's what it looks like. And as long as we get you something inside here, we did better for you. So when do they establish that range? And is the range different for options or for stocks? Like will they give you for an option, a bigger range?

Yes. Okay. So that's where they get the money. Okay. And yes. And just to say a little more about that, I think you might ask, hey, Rob, where's the range you didn't come from for stocks, say? And the answer is the stock exchanges have what's called a sort of public data feed that

are required by law to maintain it. It's got a bid and an ask. And it tells everybody, here's what the bid and the ask are for stocks during the day. That public feed is, as I say, it's run by the exchanges. Over time, the exchanges became for-profit vehicles. And they figured out, you know, that public feed, maybe we should have a private feed that's better. Oh, for fuck's sake.

That's faster. And they do. And they charge fees for it to Wall Street. So is that when these companies put up a microwave tower or they move their servers closer, are they trying to jump that feed? Yes. And also what they'll do is they'll, the New York Stock Exchange itself will make updated feeds more available, quicker, faster data, better information.

And the brokers will pay for that data so that they can trade ahead of the feed as well. So if you're a retail investor, the feed that you're getting is almost like a glimpse into the past. It's a bit of a time machine. Like when you're seeing that stock ticker on the television, it's like seeing the light of a different, a distant star. The light you're seeing isn't the light of now, it's light from some time ago. In a way, that's right.

And not only that, John, but you might say to me, hey, Rob, who runs the public feed? Boom. Who runs the public feed, Rob? The New York Stock Exchange. Motherfucker. That awesome. And they're for profit. And they are selling a better private feed.

So what incentive do they have for the public feed? When I was in office, I gave a speech where I said, this is sort of like Barnes & Noble run the public library and then being surprised that the library sucks. Right. Because they're trying to sell a different problem. So then the question becomes, can the retail investor get the private feed? Or is that something that is only attainable to the large bore investors and hedge funds and things like that?

It's so expensive that it's almost always a ladder. And not only that, but the SEC has done a relatively poor job in getting transparency as to why these prices are what they are and how they get set. And by the way, we tried to change that on the SEC too. And what do you think the New York Stock Exchange did, John? I believe they might have sued you. They sued us. And won.

That one's still in court. That one's still in court. By the way, while we're talking about this, here's something else. We said the New York Stock Exchange and other exchanges like it, they're for profit now. When they make mistakes, they get sued. We're talking about flash crashes and things like that. All kinds of situations, they get sued. And when they get sued, what they do is they tell the court, we're immune from sue because

we're a regulator, you see. So they get the benefit of being for profit, but also get to claim being a government-like entity when they get sued. They're a utility when they need to be a utility and a private company when they need to be a private company. So this brings us to another area of accountability. You have financial news networks that are 24 hours a day, seven days a week, which have tremendous resources, a ton of financial journalists, certainly people that absolutely

understand to a tee the things that you're saying and the criticisms that you're raising, but you never hear it on air. The things that you're saying seem like scandals that can be addressed through good journalism and through tenacious kinds of muckraking. But those financial networks, they remind me of like, if you ever go to a, you're staying in a casino and like they have that TV channel, that's the casino channel, and Suzanne Summers is always on it like, blackjack is fun and easy, and you can make millions. The financial news networks are abdicating what would appear to be their primary function,

which is to hold to account these enormous financial institutions. I think that's absolutely right. I think we saw that in 08, 09, and I think there was somebody who asked some pretty hard questions to Jim Kramer on that subject. I don't recall that because I was pretty drunk during that time, but I've since sobered up. I see. And I think it was important that those questions got asked, and let's face it, John, what's good about being a journalist is that you have people you can talk to.

And if you go on TV and make life hard on them, it's harder to get them to talk to you. And I think that's a big part of what creates that conflict in financial journalism today. There are some very good journalists who are prepared to hold Wall Street to account, but not as many as we need, that's for sure. And that strikes me as the lowest bar of entry to somebody that would call themselves a financial news network. It's very clear that the apes have uncovered all kinds of shenanigans and inequities and a two-tiered system that they don't have access to.

And I don't think any of it would come as a surprise to the financial journalists who work in those networks, and yet they don't seem to have an interest in exposing them and correcting them. Now, I think that's right. And again, I think there are folks who do that kind of very difficult journalism, but I don't think those are the folks with a ticker at the bottom of their screen. I think the folks that have a ticker at the bottom of the screen want to deliver in general news about the second-by-second development in the market, and they want the news to

be good. And in general, I think that's the way they report it, and we see that in market behavior. I don't see a lot of hard-hitting interviews there where people are coming on and getting asked really hard questions about, is this the right system, and how do you make your money, and do you feel good about the way you make your money? The journalists that cover finance should be asking the same questions that the SEC is asking. Their interests should be aligned.

I think that's right. And by the way, there are folks out there who do that kind of work, but they're not the folks who have the biggest microphone. And I have to be honest, John, I think that's why, if you look at something like 08, that's why it took so long for the journalists to accept that that's what was happening. Because everybody was on the phone telling them, it's going to be fine. It's going to be fine. And let's face it, John, we said earlier, it's not tenable for politicians to preside

over falling stock markets, and it's not great for financial journalists either. People don't tune in to hear the sort of difficult sober truth about, hey, you know, we're kind of in a little bit of a bubble here. That's not what they're looking for. I think that the markets we've created are increasingly volatile and increasingly fragile, and we learned that the hard way at the start of this pandemic, John, because at the beginning of the pandemic, before it became clear that Congress and the Federal Reserve were prepared to act aggressively, the stock market went on a terrible, terrible right.

And it was only the existence of these policies you've just described that led it back to the market we have now. And I think people who aren't in the day-to-day Wall Street games see that and think it's bullshit and they're right. It's not been the American experience or system that the government sits back with a canada money and bails out investors who made mistakes. But that's the world we have now, twice, John, twice in ten years. The U.S. government has intervened in private enterprise and bailed them out from their

mistakes while inequality is risen. I'll give you an example. When I was on the SEC, 2018, 2019, 2020, airlines, which were doing very well at the time, did a huge amount of stock buybacks. Right. And what they decided was, look, we think the stock's cheap. We've got extra cash. We'll buy back some shares.

Then a pandemic happens. Bad for travel, John. Now they have a problem. Now, in my view, what's the solution to that? Well, maybe you shouldn't have been buying back stock last year. And maybe we need to have a bankruptcy process where the executives and everybody else who made those decisions actually lose some money because of what just happened. What happens instead?

Right. What happens instead is the U.S. government gives them a cannon full of money and bails them out. And I got to tell you, John, if you know you're going to get bailed out, I don't blame you for doing stock buybacks when times are good. No, they're acting in their own best interest, which makes sense. That's right. I mean, it's not as though they're not.

But the stock buyback issue for the airlines was an enormous one. They were so flush with cash based on the monetary policy, and when they did all those stock buybacks and when they got hit again, what did we do? We bailed them out again, right? That's right. And yet the individual traveler or those kinds of things can never do it. And the reason they always give you is moral hazard. For apparently, if you bail out an individual, it is moral hazard.

But if you bail out a corporation, it's the free market at work. And that's why it's so frustrating to hear people say, we can't help retail and we can't help the worker because that's socialism, and that's the government picking winners and losers. But we pick winners and losers all the time, and we feed those winners, cannons filled with money. That's absolutely right. And this is why when I was on the SEC and people would come into me and make a free

market argument. I mean, I have to say, I admire the husband in being J.P. Morgan and coming into my office and saying free markets because I'm like, listen, man, I was there in 09. You got a $25 billion check. Yeah, ain't nothing close to it. And that's the thing that also strikes me is there's no strings attached, for the most part, to any of this money.

And so in a pandemic, the Fed can say, we're not going to collect any kinds of drawdown fees from the banks in terms of bounce checks or overdraft fees or any of that shit. We're not going to collect any of it. And the banks can go, great, because we're going to keep doing that and just keep it. We're not going to pass those savings onto the consumer. We're just going to use that as a business model. It's funny you say that, but there's sort of two ways to think about this. Number one, the government should get out of the business of handing bags of cash to

corporations. But if they can't get out of that business, they should at least drive a better bargain. When they gave all that money, I don't understand why they didn't have some kind of, and 20% of this has to be low interest loans to small businesses. Right. Now, to be fair, they did do the Paycheck Protection Program, which had some features that were like that in small businesses. But that was much later.

That was in the pandemic. I'm talking about the two that, listen, I thought the pandemic relief was much more geared on a Keynesian level and stimulated family. It made much more sense to me a lot of what they did. I think- Me too. It may have been poorly constructed and there might have been some fraud with it. But it made much more sense.

But you saw immediately the narrative was, if you give people $600, they'll never come to work again. You lazy fucking Americans, you essential workers that have been pounding it out on the front lines of a deadly respiratory virus just to make sure that everybody's avocados come in. If I give you $600, all of a sudden, you're going to be like, hello, Easy Street. I'm never working again. It's a bonkers narrative that money corrupts the worker, but it only elevates the corporation.

It's the fair thing to do, but it's also the economically same thing to do to understand that money's equally capable, if not more so, of corrupting a corporation. To the degree that you keep handing them this money when there's trouble, they're going to keep acting like people who are going to get money when there's trouble. Take that short-term gain. In the future, where do you see the future of accountability, the future of regulation, and maybe even the movement of retail investors as a powerful force to recalibrate this market? First of all, if you want more accountability on Wall Street from the SEC, the first thing

you have to do is get some transparency around the money finance gives to Congress. Job one. Job one. Because you looked at Gary Gensler and you said, you're taking coffee donations and you're up against Jamie Dimon. Right. I don't like your chances. The retail investor, they're at a real disadvantage and you're the sheriff and you're outgunned.

I walked into your coffee room today. There's a little sign that says, coffee donations, welcome. We're at the SEC. Yeah. Holy shit. Now, we could use some more resources. That is for sure. How outmanned are you?

Are you an abacus in a calculator world? Are you analog in a digital world? It's hard. It's hard. Look, we have about a $2 billion a year budget here. We spent about $350 to $400 million a year on technology, which is probably what one of the top five or six banks spend in a few weeks on technology. I feel like the SEC is put in an impossible position.

Of course, you're right, but Congress makes sure that he doesn't get money, that he needs to do that job. I think we should point our attention where it belongs, which is to the degree that you can give money in secret to support political campaigns, corporations are going to do that and it's going to influence policy. The first thing I would do would be to say, the SEC can and should have a rule that says, if you spend money on politics, you got to disclose that to your investors. Now, as I pointed out to you before, Congress has written a law saying the SEC can't make

that rule because they like the money they're getting from corporations. If it were up to me, if I were in this administration, it would be my first, second, and third priority to get rid of that rule and to let the SEC do its job. This is purposefully obtuse. Our financial system is designed to be a labyrinth that is impenetrable by anybody that is not a part of it. That's right. The first thing you have to do, in my view, is get that money out of the system.

That's first. Second, I think once you get these resources into the SEC, this is not a sexy answer, but I think it's the right answer. It's a technology issue. You heard Gensler say that they're spending $200, $300 million a year on technology. I was at the SEC. I saw some of that technology at work, and it's great, and the people work very hard, but that's what Citadel and JP spend on technology in a month.

That's not a serious technology spend. You'll have to have the SEC catch up on things like that if you want to get those, and then I think you're right. I think there is some degree to which the American public and retail investors need to be able to talk to the SEC and help them figure out how to move forward on these things. I know the SEC is learning from the GameStop and AMC experiences, but if I'm being honest, I think if we don't get political money out of the system, we're unlikely to be able to do any of that because it'll continue to be Congress's view that the SEC shouldn't get

the budget they need for the accountability you want. I think it's also a shift that the stock market is not the heartbeat and pulse of the American economy. Our economy is 70% consumer spending and a ton of small businesses, and the truth is these publicly traded companies are a portion of it, but a distorted view of what the health of the real American economy is, and yet it's the ticker that you see on TV all day long, and it gives the false impression that the stock market is our country's economy. I think that skewed picture is what makes it so politically difficult to change anything.

I think that's right because as we said earlier, it's just not politically feasible as a strategy for someone to come out and say, you know, the stock market's kind of high. We've been on a bull run for like 10 years. Maybe that's not a thing. Maybe the Fed monetary policy is kind of hyperinflating this thing. So my brother worked at the, I think it was at UBS for a while or maybe Morgan Stanley, and then he went to the stock exchange, and he has tried to explain some of this shit to me, and he's probably the smartest person I've ever met, and he'll even draw shit on

a napkin, and I'll still just be like, I don't know what's happening here. It's set up to be that complicated so that it's very, very difficult to understand and fix. In terms of your optimism of any of those things changing, what would you say is the most likely to be put into place if any of them? I'm hopeful that in this administration, and maybe even this Congress, people are going to say, you know, we shouldn't have a law that stops the SEC from shining some light on corporate spending on politics.

Now who knows this negotiation I think it's going on right now, the appropriations discussions, but I have to say more and more that law seems like an untenable position for people to take, and I'm hoping it'll change. And if it does, then it'll be up to Gensler to make a rule that gives some transparency on political spending, and I think he will. Right. Anything else within the context of this episode or within the context of accountability within the Wall Street system that you wanted to get out there before we let you go?

Well, you said one more thing on the show that I think is worth talking about. You said it doesn't seem like a lot of individuals get held accountable when some of these things happen. It seems like the company pays a fine and everybody moves on. And I think that's right, John, and I think it's become a problem for the credibility of the SEC and the markets more generally. I think when people break the securities laws and walk away with not just their freedom, but their reputation intact, people get the sense that there's no, why would I listen

to the SEC? Why wouldn't I be Elon Musk and just do whatever I want? Because they'll settle with me and I'll write a check. And I'll move on. It's the big. It's the price to do in business. Exactly right. That's got to change, man.

And whether it changes through an act of Congress or through an SEC that's willing to take people to trial, it's got to change because the idea that people can extend a middle finger to the market sheriff and then move on after they pay a big, to my mind, that's the kind of thing that leads people to say, this is not a fair game, this is rigged. And not only that, it's not only sort of financial crimes or financial shenanigans or those sort of murkier areas of, was that insider trading or was that front running? Did you get a little bit of a jumper and advantage there? It's money laundering.

It's the kind of shit that puts people away for 20 years, for 30 years. And if a bank does it, even with drug cartel money, all right, jeez, that's a, you know what, we're going to levy a big fine on that one. But then they just keep doing business. That's right. That's right. And one more, if you were going to do more on this, I think what you might do is on trading of stocks by members of Congress.

They tried to regulate that just last week, I think, and Congress was like, nah, we're pretty happy with how things are. Look, I'll tell you right now, when I was on the SEC, the first meeting you have when you get that job is here are the ethical rules. And they sat down with it. I'm a guy who only owns mutual funds. I don't trade stocks out. They sit down with me and they say, just so you know, you can trade stocks whenever you

want. You just have to disclose it to us after you're done. And I remember saying to the lawyer, are you fucking crazy? What? I'm a commissioner of the SEC. You want to let me trade stocks? Are you insane? Right.

Like, I'm not going to trade stocks just because I don't want to look like the guy that you would be if you were trading stocks as an SEC commissioner. Guys that run the regional Fed, the very organization whose monetary policy has been inflating stock assets, those guys can trade stocks. In my view, that is bad for everybody because never will it be the case where guys like you and me are going to look at those trades and be like, ah, I'm sure it's a coincidence or not. It's a coincidence that they divested all of their funds of pandemic stocks just as this

thing was cracked up. And that's bad for everybody. It doesn't make any sense at all to let Fed officials, members of Congress, their staff, it doesn't make any sense at all to allow them to trade like this. It's bad for everybody. It's bad for me that they let me trade and I didn't. And they shouldn't. So that's a law that I think could pass and will actually because even members of Congress

know that being in a position where people are asking you a year later about trades during a pandemic is bad. Excellent. All right, my friend. Well, thank you so much, Rob, for joining us. Thank you, Jim. We very much appreciate the conversation. I'm sure it'll be a continuing conversation and should get fixed somewhere around April

from what I understand. So we should be in good shape. We'll check back in after that. But thank you so much for joining us. Thanks again, Joe. So I got to tell you guys, Rob Jackson, he's one of those guys where you're like, oh, you could use your powers for good or for ill. Like he's sharp, but he's fast talking and there's a little bit of like, he seems very

forgiving of the SEC in a way that I probably am in no way. Yeah. I mean, we don't care. We just want the playing field to be fair. And it seems like the more I learn about the stock market, the less I know about the stock market, I get more confused and more confused until it's like, all right, I don't know what I just bought. No clue.

It's amazing how much like grownups and government agencies get to be like, you don't get it. It's hard. It's really hard. Right. But I don't think they're going to be able to try, you know? Well, that was the whole thing. It's like, you know, if he could just get more resources. And my point was you could give them all the resources in the world, but if they don't

change their thinking, the thinking is what feels very rigid to me, that, you know, you're up against organizations that are always going to be better financed than you and always going to be more agile than you. And we've got to rethink the idea of regulation. I really think regulation should be simplified and the government should complete like the government role should not be regulating minutia. It should be regulating the general confines and parameters of the game. Sure.

And I thought the apes, man, the shit that they uncovered, let them be a tool for transparency. They're way more active than the SEC. They're way more committed than the SEC. They're way more idealistic than the SEC. Use them. Yeah. And the things we learned, I think, while like learning about writing this episode, just the insane advantages that these, you know, high frequency trading companies have.

Like someone, one of the people we spoke to, he said something that absolutely blew my mind, which is these guys have the capability to trade in microseconds. I didn't know what that was. So it's a millionth of a second. And then basically said, the amount of time that elapses between one minute in microseconds is the same as seconds in 37 years. It's like when you see the stock ticker, you're watching what companies were worth in the 1830s. You're so far fucking behind.

Yes. Meanwhile, these guys have doubled down on speed and move their stuff closer and that half millionth of a second gets them a micro penny. Every transaction. Like it's fucked. It's wild. Yeah. It's an unwinnable game.

Yeah. I got to tell you something. I agree with you guys and I believe in both of you. Well, I got a stock tip for you then. A few things I need you to put a lot of money into as fast as possible. You know what? Take the diker heights out of the boy, but you cannot take the boy. Oh, wait.

No, let me reverse. Yeah. I don't remember. I think, let me say this to people that have been listening to the podcast on a regular basis or on not, check out this Wall Street episode because I think you are going to dig it. For me, it was revelatory, infuriating at times, but also kind of a story of, you know, we're so mad at the retail investor.

Boy, are they, in my mind, they are the hero of this story. And if we use that energy properly, I think they provide a real pathway to equalizing these markets. We got to figure out a way to hear from people. And also, you know what I really like when people listen to the podcast and get fucking and angry at like, what's wrong? And a lot of times it's experts and then we interview them. And it just starts to build this much more complete picture.

So all the Wall Street folks that are going to get really annoyed at us, well, me, man, put it out there and hopefully then we'll have you on the podcast and you can set my sorry ass straight. Yeah. Come on in. Wouldn't that be a nice title for a podcast? Set my sorry ass straight. Trade market.

Done. All right. In the interest of fairness, this is what we call the fairness doctrine. There has been a preponderance of Rob's on this episode. One might say it's propaganda. It's propaganda. Yeah. You see what I did there?

So our only non-Rob participant will be our writer, Alexa Loftus. She's got her segment, Let Me Distract You. It's going to take our minds off the stock market and some of the more depressing headlines with some less depressing headlines. So here's Alexa Loftus with Let Me Distract You. There's some stressful news out there, i.e. the headlines are bad. It is really bad. I'm talking real yo-oh situations.

So let me distract you for a moment with some calming headlines that are the audio equivalent of seeing a butterfly land on a baby's nose. A dog house that was hit by a meteorite has sold at auction for $44,000. This is great news because it means I can probably pelt any household object with a rock and make some quick cash. Honestly, what is the difference between a rock and a meteor? It's story? Uh, whatever.

Pass me some gravel. Virgin Galactic will fly you to space for the price of a house. Now you can ask yourself, do I want the security of home ownership for me and my family for generations or do I want to risk my life to float around with a bunch of randos? Hot off the press from the New York Times, everything you need to know for the perfect couch nap. Take it for me. You only need one thing for a perfect couch nap and that is for it to be unplanned.

And finally, one of the world's oldest porta-potties was discovered in Sicily. This comes months after archaeologists were probably like, something smells like shit. Thanks for letting me distract ya. I'm Alexa Loftus. Now, feel free to go back to the doom scroll. And that's it. That's our show. Thanks to Rob Jackson.

Thanks to Rob Christensen. Thanks to Robby Slowick. Thanks to all the Robs for joining me today. For more content from The Problem, check out the newsletter, subscribe at our website. It's TheProblem.com. Check out the Apple TV Plus show. It's back on Apple TV Plus for the next, it's week to week for the next four weeks. Watch me grow my Ted Lasso Mustache in real time.

First episode is going to be on the stock market. Check it out. Link in the episode description. We'll be back next week until then, goodbye.