Former SEC Chair Gary Gensler Talks AI Hype, IPO Outlook

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**Tom Keene** (0:07)
We now commence a three-hour interview. Gary Gensler joins us now. He's the former chairman of the Securities Exchange Commission, a modest tenure of duty at Goldman Sachs as well. And critically, long ago and far away, writing legislation, Sarbanes-Oxley, is well, well, well over 20 years ago. Gary, I've been dying to talk to you. I read all the wonderful comments on this life of Alan Greenspan.
And I get the criticism about interest rate dynamics in 2005, 2006 and that. But I'm going to go to a guy that you have a nodding acquaintance with, one S. Johnson up at MIT. I've quoted this many times, folks. Simon Johnson and his Magisterial 13 bankers, the SEC, not Gensler's SEC, final rule, alternative net capital requirements for broker dealers that are part of consolidated supervised entities, August 20, 2004
Gary Gensler, we can criticize Chairman Greenspan, but he had a lot of help in screwing us up into the financial crisis, didn't he?

**Gary Gensler** (1:22)
Well, there is a broad miss. I don't know how else to say it. Policymakers across the spectrum and the American public paid the price. And we exported, by the way, that crisis around the globe. But in terms of Alan himself, I worked with them closely in the late 1990s, actually met Alan in the 1980s at a wonderful dinner at Larry and Billy Tisch's house in the mid 1980s.
And Alan was a dedicated economist, a dedicated public servant. And look, Tom, none of us get everything right. And yes, in those key years going into that OA crisis, there was too much leverage being built up in the housing market, too much leverage being built up in the financial markets.

**Tom Keene** (2:16)
One final question and Chairman Greensman, just as Paul and I feel the news flow right now, Gary Gensler is just so important. He was in my estimate a market economist. I love what Greg Ip said, more accountant than theorist. Do we need more central bankers steeped in trucking data in Nebraska?
I mean, do we need more of a tinge of Alan Greenspan in our future economist types?

**Gary Gensler** (2:45)
Well, I'll tell you the other thing about Alan having worked closely with him for three or four years, maybe not as closely as others. He also was really steeped in the financial market. So there's all sorts of different types of economists. And we've had leaders of the Federal Reserve that were lawyers. We've had leaders of the Federal Reserve that have come from all sorts of places. William Machesney Martin, famously from the 1950s and 60s, had run the New York Stock Exchange. Alan understood markets. He, as a young guy, used to trade futures in the old Chicago mercantile type of futures markets. And I remember conversations with Alan about futures in the 1990s. And then when I took the role at the Commodity Futures Trading Commission, Alan and I would sometimes get on the phone and say, well, this is how futures markets really work. And this is how energy markets, and he'd be into the backwardization of the markets.
That was remarkable about Alan. I think he had a sense of financial markets. He had too much of a trust, though, in them to write themselves when there were imbalances. And there were big imbalances he navigated during the internet enthusiasm, but he didn't quite navigate that on the housing markets.

**Tom Keene** (4:00)
Paul Sweeney, you get lucky. You have Gary Gensler on. And moments ago across the Bloomberg is a five-tronch SpaceX benchmark debt offering. Perfect timing.

**Paul Sweeney** (4:12)
Gary, we're at a time here in the markets here where we're getting just these mega IPOs, SpaceX, you know, they went public, we've got Anthropic and OpenAI. Does that send a signal to you and to others about where we are in this market cycle?

**Gary Gensler** (4:27)
Well, I think so. You use the word signal.
I use the word tell.
Simon Johnson, who you mentioned earlier, he and I do this podcast, and we just put one out on the mega IPOs just this morning on power and consequences. And I think the overall equity markets, like Alan Greenspan's 1990s equity markets, is funding this big burst of infrastructure built in AI. $750 billion this year, up threefold in just two years. And to scale that, that's about 2.5% of our gross domestic product. And so then you have like Space Echo Public and maybe Anthropic and OpenAI, we'll see. I think that's somewhat of a tell. Google raising $85 billion. And the markets have to digest this. And then there's valuation questions, you know, at 100, 140 times revenues without earnings. So this will all sort out, but it also might be that six months from now, we look back, it was fine, but there's an equal and better chance that six months from now, we look back and we say, as all those venture capitalists and sovereign wealth funds start selling those shares, that you see a downward pressure on the, not just SpaceX, but the whole market.