WBD649 Audio Transcription

The Regulatory Threat to Bitcoin with Jason Brett

Release date: Monday 24th April

Note: the following is a transcription of my interview with Jason Brett. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

Jason Brett is a former FDIC regulator who worked through the 2008 Global Financial Crisis. In this interview, we discuss the Restrict Act, a proposed piece of US legislation that could enable the Secretary of Commerce to shutter access to Bitcoin. We also talk about Operation Chokepoint 2.0, the banking crisis, and whether Bitcoin is a threat to the banks.

“What’s keeping me up is I don’t really know if the ‘banking crisis’ is over, we’ve done another temporary measure. But it was a process of many months, and then a couple of years where maybe we’ll face the repercussions, like you said, of we overcorrected in 2008, but we didn’t necessarily solve the problem at the time. And if it happens at a later date, maybe this is that later date to pay that check.”

— Jason Brett

Interview Transcription

Peter McCormack: Good morning, Jason.

Jason Brett: Good morning, Peter.

Peter McCormack: Welcome to Bedford.

Jason Brett: Yes, I am so excited to be here.

Peter McCormack: Well, we're really excited to have you here.  We're trying to create a bit of a thing here in Bedford.  Bedford's becoming a bit of a place for Bitcoin and it's a shame you're not going to be here on Monday, because my team's about to win the league.

Jason Brett: Maybe.  I'm definitely looking forward to going to Saturday's match, even though it's an away game, but I understood Monday's the place to be, so I might have to move a couple of hills, not mountains.

Peter McCormack: Well, listen, if you're here on Monday, you might have a chance to see us win the league.  It's a bit complicated.  Basically, if we win on Saturday and Chenecks win, it's going to go to Monday.  But if we win and I think they drop points, we've won the league on Saturday, but I think both are going to win.  But if you're here on Monday, you've got a very good chance of seeing us win the league.

Jason Brett: Well, I have to tell you one quick thing if I could, just as any time in a new city, I was taking a cab over to the train and I was learning from the cab driver, I was asking him what his take was on Bitcoin, that kind of thing.  He was like, "Oh, it's interesting", you know.  I said, "I'm going out to do this podcast.  There's this guy who actually has a football team that's in Bedford".  He's like, "That's pretty cool".  "And he has a bunch of Bitcoin sponsors, the companies that are sponsoring", and he goes, "Oh, that's terrible".

Peter McCormack: So, we're really careful with this because I don't want to ram Bitcoin down people's throats.  We are a Bitcoin team, but you can come along, you can enjoy a game, you can buy a beer and watch the football and go home and not really pay attention to the Bitcoin thing.  At the same time, if you want to come to one of our meetups, you can come along, you can learn about Bitcoin and people do do that, but we're not forcing it down people's throats, because I don't want to be known as "that local Bitcoin moron"; I want people to support the team.  But I really don't want local people buying Bitcoin and losing money.

I mainly say to people, it's on our website, we've got, "Why you should not buy Bitcoin", and so that article's really about why you should learn about Bitcoin, and that's what we really wanted to be about.  But listen, if you come, we would love you there.  I think you might actually be the first person who's been on the show to actually come to a game.

Jason Brett: Okay!

Peter McCormack: And listen, if you can come, you will have a really great time.  But if we don't win the league on Monday, you're never fucking coming again, just to be clear!  Anyway, listen, I absolutely loved the last show we made and when Danny said you were coming back, I was really excited.  It's because I'm a huge fan of The Big Short film and there's one specific section in it, because the film highlights everything that's going on with the Financial Crisis. 

But there's that bit in the film, I think it's right near the end, where the family are packing up their car and moving out, they've basically lost their home, and it's showing you the real-world impact of what's happened, and I think that's what was great about the last show, is that you're somebody who's experienced it.  You worked at the FDIC and you showed us all those videos about what happened, and there was real context to it.  So, yeah, we made that show and then since then, what the fuck, man?!  

Jason Brett: I did not expect the locusts to come out again so soon.

Peter McCormack: Okay, so not everyone would have listened to that last show, Jason, and if you haven't, please go and check it out, it's well worth listening to, but can you just give us a little bit of a TL;DR on who you are and your background?

Jason Brett: Sure, yeah.  So, I started out as a junior analyst at the FDIC in 2008, literally in the division of finance and then the division of capital markets.  So, I dealt with both the bank failures of IndyMac Bank and also Lehman Brothers, Washington Mutual, Wachovia.  And then I went on to do bank examinations for the FDIC for safety and soundness and consumer compliance for about four years, then I went to work at Treasury, which was in Obama's Making Home Affordable Program with the Treasury, to make sure the banks were helping people so there wouldn't be things like Robo foreclosures, keeping people in their homes, so compliance examiner.

In about 2016, I switched into the world of Bitcoin doing policy and regulatory areas.  It's been an amazing journey to have transitioned from the innards of the banking world to what this value proposition is that we have here.  I've been loving it ever since.

Peter McCormack: And what clicked for you with Bitcoin?

Jason Brett: It goes back to what I experienced in 2008, when it hit me, and nobody, you, nor anybody, was really talking a lot about the problems with the Federal Reserve, the FDIC and the lack of trust that people started to have in the financial system; that was the crack.  And so when I saw Bitcoin, I was like, "This is a new proposition for trust that people could look to", as opposed to individuals at the top of the banking system that could potentially put all these people at risk.  And like you say, whether it ended up people being homeless or losing their jobs, there are real impacts to everyday people when decisions go awry at the top of any financial system.  So that was, yeah, the pull-in for me, ever since, it's been like that.

Peter McCormack: And you had a good time at Clubhouse.  Is that still a thing; are people still using Clubhouse?

Danny Knowles: It's still a thing.  The thing is dwindling quickly.

Peter McCormack: The American HODL house!

Jason Brett: I'll tell you one thing about Clubhouse though, if you want to go in in the evening time, American evening time, about 1:00am to 6:00am, you can find Junseth pretty regularly hanging out in Clubhouse for hours!

Peter McCormack: Maybe I'll go and check it out again.  But look, I had it before and I had it on my phone and what would happen is, I'd be there working and I would get these alerts, so it would be like, "American HODL's on", and I'd always jump in, and it was such a distraction I had to switch the alerts off.  So, maybe I'll go back, but listen, anyway, great to have you back on the show, really enjoyed the last show we made and I think you're a really important person to the space and a really important person to speak to, because you've worked on the inside so you're not ideologically driven, and you understand with a historical context what happens in the banking system and what happens when things go wrong.

So, I really wanted to get you back on the show and talk to you about a few things, but I've got a setup from this and we're going to be talking about Choke Points, and I want to talk about a specific film; have you seen Kindergarten Cop?

Jason Brett: Yes.

Peter McCormack: You know the little bit where the kids give the performance?  That was kind of my opening understanding of the historical context of America, that bit where they stood forward and they spoke, I always kind of remembered that.  And years later, I travel to America a lot and I've become a real big fan of America and American history and the establishment of the Republic.  I've done everything I can to understand what happened during the Civil War, I've read the Constitution, I've read the Federalist Papers, and I just find it a real fascinating evolution of a country, or the creation, the establishment of a country and how it tried to establish itself in a different rule of law, a different way from say the UK.

I'm going to basically refer to this quote, and it's the Abraham Lincoln quote, it's from the speech, the Gettysburg Address, but just bear with me.  So it was, "Democracy as a rule of the people, for the people, and by the people, this being a democracy, is a form of government in which the rulers are elected by the people, the citizens of the country elect the government to rule the country, and the elected government work for the welfare of the people".  I just feel like America now is a very, very long way from that.  And so, listen, that's just the framework, I hope that makes sense, but that's the framework I want to use for this interview.

Jason Brett: Well, I agree with the concept that there are certain powers now that have been shifted back to the leaders in America that are contrary to that concept, or at least allow for the ability to avoid the idea that it needs to be in the people's best interest.

Peter McCormack: Well, listen, I don't believe the US Government, or the people who work within the government any more and also in part the Fed, I think the people who work for the Fed, they are trying to do their best sometimes, but I don't believe that the elected officials are now working for the best for the people.  So, listen, I'm going to want to get into the RESTRICT Act, and I haven't paid a huge amount of attention to it; I just saw some stuff online about TikTok being banned and didn't pay too much attention to it.  Then I saw somebody put something on Twitter about how the RESTRICT Act could be used against bitcoiners, so it's a subject we definitely need to touch on, and I think the starting point would be for you to explain what the RESTRICT Act is.

Jason Brett: Sure.  So, the RESTRICT Act has been introduced just in the Senate, but I think it's important to note from the outset that despite all the criticisms, it has 26 Senators who have already signed on as co-sponsors to the bill, bipartisan, so that's very significant because there's only 100 Senators.  So, you have 26% of the entire Senate that's agreeing with this bill and willing to put their name on it.

What the RESTRICT Act does is it gives powers to the Secretary of Commerce, and allows the Commerce Secretary to determine if there is a "critical infrastructure", which is a term that was coined under the Patriot Act in 2001 after 9/11; a critical infrastructure that could be subverted or used by foreign adversaries in a way that would disrupt or potentially threaten the national security of the United States.

So, this is not a new concept as to what the Commerce Secretary should do.  Think about it a lot in terms of the framework that we've had before, and talked about with Bitcoin in terms of sanctions.  Sanctions come from the Department of Treasury, which is the OFAC, Office of Foreign Assets Control.  And what OFAC does is they stop individual persons, or they talk about countries in terms of where an entire country might be a particular threat.  What the Commerce Secretary could do under this bill is any, let's talk about TikTok because that was the framework that it was sort of provided in, TikTok is owned, a majority-controlled owner, 50% or more, by China.

Peter McCormack: Sorry to interject here, but isn't it that all companies in China are 50% owned by the Government?

Jason Brett: All of them in China?

Peter McCormack: I'm pretty sure it's not 50% of companies; companies are 50% owned by the government, it's a regulatory requirement.  Is that true; do we know that?

Danny Knowles: I don't know right now.  I don't believe so, but …

Jason Brett: I don't know, and I should say the bill makes it clear it could be the country, it could be a company that's clearly controlled by the company, in other words somebody who's running that company that's controlled by China.  But either which way, let's just say TikTok is either controlled by an individual who's controlled by China, or China itself; it could be China, Russia, Venezuela, Cuba, Iran and North Korea.  So, those are the six countries under this RESTRICT Act.

Peter McCormack: That's all those countries that when I go to America, you have to tick if you've been to any of those countries!

Jason Brett: Yeah, exactly!  So, it's a new paradigm because remember, with the RESTRICT Act, the acronym, which I don't remember completely, but the ICT is Information, Communications and Technology.  So, where does that bring us to in terms of Bitcoin and the threat to really anything that's on the internet?  To me, Peter, this is a really interesting point in our civilisation, because if you take a step back and think about this from a broad perspective, there's a new battlefield, and the battlefield is almost this cyber warfare.  We're talking about whether there's hacks, there could be ransomware.  China shut off the internet initially when it came out, so we've almost now come full circle where we in America are saying, "Well, if something's being developed by China that's just purely over the internet, is that something that's a threat to the United States?"

That to me is a very interesting paradigm to think about this, that the US is now at least thinking, "Gee, there could be a threat if somebody in, or China itself, owns an app like TikTok and can cause enough disruption in the United States, maybe swing an election, whatever, with the influence that it has".

Peter McCormack: I mean, it is a real threat and, look, I am a big proponent of free speech, but we just recently interviewed a chap called Ahmed Gatnash, and he works for a human rights organisation who's trying to progress human rights in the Middle East.  And he talked a lot about Arabic Twitter and the conversations that happen in Arabic Twitter.  And, there's a mass dissemination of propaganda that comes from authoritarian states who disagree with the context of the conversations.  And he said that's basically made Arabic Twitter unusable.  That ultimately led to a conversation that we ended up having about Pegasus and the murder of Jamal Khashoggi.  But this is the real threat of what's being disrupted.

Jason Brett: Yes.  Let's go back for a second to Tornado Cash.  Remember with Tornado Cash, people should be able to move in their Bitcoin and move it out and stay anonymous, and anonymity is something that's an American value, to one degree or another.  The Federal Papers, you mentioned at the beginning of this show, was written under anonymous pseudo names to help create all that, so that's an important thing.  But when you have this concept that you could be influenced, or that Bitcoin might be used by another country to do something, so in the example of Tornado Cash, it was pretty clear North Korea was using money, washing it through Tornado Cash, and then buying nuclear weapons.  And there's been pretty direct evidence that a lot of that is happening.

So, the question we have to ask ourselves is, we want the benefit of anonymity, I don't want to know your business financially, you don't want me to know your business, vice versa; that's a respected, almost universal truth.  But at the same time, we have this world where everything's online, so how do we also protect to make sure that we don't end up living under North Korean rule, because they're able to figure out how to get so much of the Bitcoin and do so much funding; and I don't know the answers.  This is the setting for where I think you think you see things like the RESTRICT Act coming to fruition, because I think right now people are just guessing at, "Hey, what's the solution?  Maybe just ban it, maybe just shut it off".

Peter McCormack: Well, I always find the people that have the most simple takes as the most naïve or almost the most difficult ones to deal with, like when I'm having a conversation on Twitter and somebody comes in with this super-binary, simple take, I actually find it quite naïve.  And, look, the thing is it doesn't matter whether I am a proponent of democracy or not, or I agree with government or not, these are complicated issues, we know this.  There are dangerous people, there are adversaries out there; they are trying to disrupt democracy, they are trying to spread disinformation, we know this is happening.

So, this is where I want to focus my attention on; it's not, "What is the Patriot Act, or the RESTRICT Act?" it's, "How is it going to be weaponised against Americans?" because we know the Patriot Act was and has been weaponised against Americans, and we know that the RESTRICT Act will also be weaponised against Americans, and to me that is just antithetical to what democracy is.

Jason Brett: Yes.  And I'll tell you, there is a division in Congress about the RESTRICT Act.  Some have said it's gone too far.  If we go to the idea of how the RESTRICT Act might actually shut off Bitcoin, this is a notion of shutting off TikTok, not an individual user of TikTok.  So, it empowers the Secretary of Commerce to sit back and say, like you just talked about in the first part of what you were saying, "There are all these threats out there and we just need to shut it down, so we've got to keep them out.  Maybe there's some people in America that like using TikTok and they share cat videos, but you know what, we'll leave that to YouTube and everything else.  This is something that has to be done for national security, because they might swing an election".

Bitcoin, the same premise of, it's not me sending you Bitcoin, but it could be said that maybe North Korea or China is using Bitcoin so well or so good that in America, the Secretary of Commerce could say to them, "I'm shutting off the Bitcoin protocol, meaning no one in America is allowed to use Bitcoin, the Network"; not necessarily hold Bitcoin, but just you can't use the network any more, which by default means we probably couldn't send via Bitcoin and it would probably be written to ban Lightning as well, even though it would be offchain. 

So, that brings you to a question of, again, I'm laughing because I'm just thinking of the enormity of this, from where we went from China to not using the internet to shut everyone else out, to now here we are saying the US can't use certain things on the internet because of what China might do.

Peter McCormack: And it's an ironic flip.

Jason Brett: So, it's very broad; that's the problem with the RESTRICT Act.  Other people have been talking about something called the DATA Act as an alternative.  That just focuses on the privacy, in other words how your privacy might be deprived by TikTok, not necessarily a national security angle.  People are talking about that more.  But the problem with the RESTRICT Act, it's so broad, it could include Bitcoin.  And to me, I think Bitcoin needs to be something separate from the rest of the internet because of the value that it proposes and because it works like money.

Recently in a Twitter thread, it had been mentioned that Natalie Smolenski and I had written this sort of resolution for Bitcoin in the State of Texas.

Peter McCormack: Love it!

Jason Brett: Yeah, oh yeah, fantastic.  And I wrote the first draft, but it would not have gone as far as it would have without Natalie, because now it's actually up for potential loading.  And the whole idea of that is that there has to be certain protections for people who have Bitcoin in the United States, and I believe at some point, we're going to need some sort of constitutional amendment to do that, because you're talking about not just the right to privacy, but the right to property, you know, you're owning something, what does that mean?  The ability to mine Bitcoin and coded speech.  Yeah, all these things have the ability to be able to have imagination, do what you want to do.

So, Bitcoin's a little big unique, and I say that to illustrate how the RESTRICT Act in this case is so broad that it could include anything.  And that goes to the second point of what you just said, Peter, which is that's the thread of it, right; we're trying to stop the national security issue.  But are we then just taking everyone else's -- could later, someone with malintent who takes over the government, use the RESTRICT Act to shut down certain activities that they don't like in the US?

Danny Knowles: I think there's also a massive hypocrisy in it, because we know Cambridge Analytica interfered with elections using Facebook, and if it's a US-domiciled social media network, they don't seem to care.  But now it's China, that's altered.  And I understand, it's a thinly-veiled surveillance tool, but do you think this would have happened if it was a US social media platform?

Jason Brett: Not a bill like this.

Peter McCormack: But they can haul them from Congress.

Danny Knowles: True.

Jason Brett: Yeah, there's much more.  Think about how a lot of people in Congress literally hate Facebook and accuse them of issues relating to child sex-trafficking and others creating the forms.  I mean, they have to answer to Congress directly, so that is something.  The irony, I can't help, but Cambridge Analytica being, what, from England?!

Peter McCormack: But there is a big difference between TikTok and Bitcoin though, in that when they ban Huawei, or if they ban TikTok, what they're really doing is stopping surveillance, because they are tools which are owned by China.  And therefore, when people are using TikTok and making a cat video or a dance video, or someone in Congress is doing that, that is a surveillance tool that sends data directly back to China.  But if they ban Bitcoin, they're not actually stopping data going back to China.  So, what they're really only doing is banning Americans from using Bitcoin.  They're not harming the network, they're not changing how the network works, they're just really harming Americans.

Jason Brett: And Americans will probably still be using it, let's be honest.  So, yeah, they would just be harming US individuals.

Peter McCormack: Okay, can we just go back a section.  Half our audience is in America, but half of it isn't.  Can you just explain what an act is in itself and how does it work; how does it get through Congress, how does it get through the Senate?  Because, I feel like every time I see an act, and maybe there's loads of them, but every time I see an act announced, it seems to be some massive, important legislation.  It's almost like it marks an important period in time where something important is going to change.  Can you just explain how it is and how that all works?

Jason Brett: Well, so the act is typically a name given to a bill that becomes law.

Peter McCormack: Every bill that goes through all the time?

Jason Brett: Yes.  They're all given names and they're all usually chosen because it's a good acronym for something that they want to explain publicly.  But typically it will, I don't know that you actually have to have it called an act at the end of a bill.  But essentially, it goes through Congress and it's introduced by either one of the 435 Members of Congress or 100 Members of Senators.  And by the way, whichever house it comes out of, that means that really anybody can put an act out about anything.

Peter McCormack: Oh, so it can come from the Senate or the House?

Jason Brett: Or the House, yeah, either one can introduce it.  But introducing it just means that it's been introduced.  Then it has to usually go through a committee and then it is voted on by one of the Houses, where you need a majority, and then it would have to be voted on by the other House.  And then if there's a disagreement between the way they vote on it, they have to have a conference to say, "Well, we agree on it, but for this point and that point".  And if they can then come to an agreement, then they send it over to the President. 

The act at that point is passed.  It's up to the President to enact, in other words bring that legislation into where it is actually law, or the President can choose to veto it.  Congress would then have an opportunity to try to overrule that veto, but it's a much higher standard than just the majority to overrule a veto.

Peter McCormack: Interesting.  So, we were trying to figure this out earlier, because we thought it might go to the House first and then to the Senate, or to the Senate first and then the House.

Jason Brett: It can go in either direction, yes.  The RESTRICT Act has been introduced only by the Senate, and that's actually an interesting point about the RESTRICT Act, because nobody in the House has yet chosen to introduce it after it started getting all this flak.

Peter McCormack: Oh, interesting.  Okay, so can you just help me a little bit more, or the listeners outside of America, but can you explain what the difference is between the House and the Senate?

Jason Brett: Well, so just here, think House of Commons, House of Lords.  The Senate is the House of Lords; Congress, House of Representatives is like your House of Commons, except that the Senate used to not be elected directly by the people.  It was elected typically by the state legislatures.  That changed only about 100 years ago, where now it's the popular vote that elects you as a Senator.  The US Senate is considered the greatest deliberative body in the world, which there's a little bit of humour in that, because it means they discuss and deliberate over things for years and years and years and they move a lot slower.

So, I think the House of Commons and the House of Lords was probably the template where they set up the Senate and the House in the US.

Peter McCormack: So, with the House of Lords, the rulers are not elected here.

Jason Brett: Right, exactly.

Peter McCormack: And look, I have issues with that as well, but not everyone agrees, and this is a debate here.  Some people think they should be elected, some people think they should be appointed, and I think the debate is around that these are important decisions they're having to make, and the people who think they should be appointed are the ones that think the voting public don't know enough or don't understand enough about the things, or the decisions they're going to be making.

Jason Brett: And that's where the Senate was.  Again, I think the Senate was never intended to be like the House of Lords but, "Let's break away from, it won't just be appointed, but you have to have the state let people elect, to kind of vote on it".  But it's, I mean, US Senators are naturally held to a higher standard.  They're not supposed to be doing these things, but there's always the inquiries of what they actually are and aren't doing.

Peter McCormack: So, Danny brought this up this morning with regards to naming conventions, because the Patriot Act is like, "Yeah, fuck yeah, America, we're patriotic", whereas the RESTRICT Act is a bit like, "Yeah, fuck you, we're just going to tell you what you can't do!"

Jason Brett: Yeah.  So, Congressman Warren Davidson, who I've had on Clubhouse, he has a great name.  It's the KYC Act, which is the Keep Your Coins Act, and that's a very interesting way of saying, because it happened after the Canadian trucker controversy, where he said, "No US agency can essentially take away your Bitcoin or stop you from using it".

Peter McCormack: And you know what, he's one of the few elected officials that I look at in the US and say, "You know what, he's an honest person, he knows what he's doing".  It's a bit like Cynthia Lummis.  There's the occasional ones, and maybe it's because they're bitcoiners, but they're the rare examples of people that I do trust. 

Jason Brett: Yeah.

Peter McCormack: Okay, let's go back to the Patriot Act, which came following 9/11.  Can you explain what it was designed to do and how it's been weaponised against Americans?

Jason Brett: Yeah, so the Patriot Act after 9/11 came down to what was critical infrastructure, meaning phones and everything.  So the idea was, with the planning of 9/11, you had people who were training in Florida to fly planes into buildings, and there was clearly communications used with phones in a way where it was felt like, had those been monitored in some way, these private transactions, private phone calls, that maybe we could have stopped 9/11.

So, the Patriot Act was designed, with its good intentions, to monitor really everybody's conversations in the country; but when I say everyone I mean, but with the intent of saying, "We really need to watch closely what's going on, because if there happens to be 12 people from some foreign country", let's just call them the green people, "that want to bomb us, we can hear their conversations, we can see what they're planning and we can act ahead of time".  Because, the threat with 9/11, talk about the US making history, was quite a unique threat if you think about what they did to turn our own infrastructure against us, taking over airplanes, taking down the two Trade buildings.  I mean, that had people terrified.

But in those moments of terror, I think the problem with the Patriot Act, of course, is that it was the Bush Administration, it was the Republicans as what were they doing to then watch Democrats or others?  That's a question, you talk about movies, I really like Dark Knight with Batman.  And if you remember at the end of Dark Knight, where they try that thing where he can just see all the conversations to try to figure out where the Joker is, and at the end of the movie, Morgan Freeman kind of sets the whole thing on fire and says, "No, this is just not worth it to just see what other people are doing"!

So, that's really again, I think, still a question of, I don't want 12 terrorists in the country plotting all these things, using UPS trucks, or whatever they might be conspiring to do against our country, but I also don't want the fact that if I want to talk to my wife on the phone, talk to my friend or talk to you, that someone's listening to that conversation who might have a personal grudge against me, because of the party I'm affiliated with, or because of whatever my politics might be.  And that's where it gets to be weaponised.

Peter McCormack: But repealing acts is also very rare.

Jason Brett: Very rare, if not impossible.  I mean, the most likely thing would be to amend it, to make it not as damaging.

Danny Knowles: I was 10 when that came in, so I've got no idea what the --

Jason Brett: 10 when the Patriot Act…?

Danny Knowles: Yeah.  So, what did people in America think, the general population?  Were they for this, because it was like, "Terrorism; we need to fix this"; or were there a lot of people pushing back?

Jason Brett: There were some Democrats who were already starting to push back on it, because they saw the broad powers.  But the US moved quite quickly through the government, as far as establishing powers.  It's a great movie with Christian Bale, I can't think of the name of it, where he reprises the role of the Vice President Cheney, and some of the things he did when he took over, because he had this view of what the President's power should be, which is very broad.  And that's what essentially allowed the Patriot Act to essentially go, but he was establishing all these powers the government needed to have to take control and do certain things in these times of stress.

I still remember, you being 10, I'm aging myself, but I was probably 28 or 29 when 9/11 happened and I was volunteering after that, down at the Trades, and the National Guard was moving in and out, and I was just doing things like giving them water, or whatever, before they go back to the site, and I was talking to some of the other volunteers.  Bush had just given his speech at Ground Zero 9/11, and that's where Bush took the microphone and he's like, "We're going to knock those people's buildings down because they knocked our buildings down", and at first my initial reaction was, "That's great, yeah, let's get them back!"

Peter McCormack: "Fuck yeah!"

Jason Brett: But there were other volunteers I was with who were Democrats who were immediately worried by that kind of statement.  In other words, how is he going to politicise all this to do the things he wants to do?  And I think Iraq is the scariest of that.

Peter McCormack: And do you know what, there was a lot of sympathy for America at the time, and 9/11 was huge, it was the worst terrorist attack in history.  And so, when the US entered into Afghanistan, whether or not you agree with war, there was a lot of sympathy towards it.  I think the turning point was when America entered Iraq, because we knew we were being lied to, we knew what was happening there.  There's actually a really good documentary about it, it's called Turning Point.  If you haven't seen it, I recommend going to see it.  But that is where the political support, or the support for the politics or the politicians who were making the decisions, I think that's where it all changed.

Okay, so just going back to the RESTRICT Act, why don't they just ban TikTok; why do they need an act for it?  We have it here in the UK.  I just read this week that TikTok has been banned for government officials to use, so why can't they just ban it?

Jason Brett: I believe the US brought in a policy where they said government workers couldn't use TikTok and they shouldn't have it on their phones, and there was even pushback from White House staff that apparently really enjoyed TikTok!  But they said, "I don't care, it's going off your phone".  But the private sector is a differentiating factor in what the RESTRICT Act does, and I think a similar impact or feeling amongst people here in England would be that it reaches out to the private sector and says no one can use it.

Peter McCormack: So, is this just the plan then, that TikTok is just going to be banned in the US?

Jason Brett: Yes, that's what the RESTRICT Act would enable the US to do, is to say the Secretary of Commerce, that's in charge of all business, is to say to all private sector outlets --

Peter McCormack: So, how much power does that Secretary of Commerce have?

Jason Brett: So, the Secretary of Commerce generally is pro-technology and pro-business.  So, when I say that, they're tasked with things like making sure the US is leading the way in technology.  That's come into question under Bitcoin because of some of the policies, so people have been looking to Commerce to say, "You should be pushing us to learn more about this technology and how we can use it". 

But the Secretary of Commerce has power over business matters, international import/exports, really what all businesses do.  And so, it's a little bit of a twist, because typically they're supposed to be advancing our economy, but now we're saying, "Well, the Secretary of Commerce should also be able to eliminate dangers because of this new digital economy that exists".

Peter McCormack: So, I think this is the treat of what Bitcoin presents, in that Bitcoin takes you out of the economy within the US.  Like, if part of the US economy, or part of the financial system is breaking, you just get moved from one part to the other.  So, you could be in dollars and you could go into equities; but the problem with Bitcoin, which I think is the threat to the digital economy, is that when people go to Bitcoin, they're essentially exiting that and they're entering a new kind of decentralised economy?

Jason Brett: Yes, but I mean the same could be said maybe if you went and bought gold; like, are you exiting the "system"?  But what's important is the system.  So, what's important to understand about these banking crises is that the system consists of the Federal Reserve, the FDIC and the OCC, in a lot of what they determine about what should happen with banking in America.

Peter McCormack: OCC, that's the Office of ….?

Jason Brett: Office of Comptroller of the Currency.

Peter McCormack: Oh, wasn't that the guy from OneWest?

Jason Brett: Brian Brooks.

Peter McCormack: Oh, and he ended up at Coinbase.

Jason Brett: Brian Brooks was at Coinbase, he then went to work as the Acting Director of the OCC.  He's the one that helped write out interpretive letters to allow the custody of Bitcoin at banks, the using of stablecoins for payments and actually using blockchain networks as part of a bank's system of conducting transactions.

Peter McCormack: And he's an ally?

Jason Brett: Absolutely an ally.  In fact, he was asked a question in a hearing one time, where he was asked, "What's monetary policy" or, "What's the value of the US dollar?" and his answer was, "Whatever the Federal Reserve decides to do".  And when he was asked about the cryptocurrency industry, he said, "Well, Bitcoin is different, it's an asset class.  People choose to buy it, hoping maybe it goes up or down.  All the other coins are essentially networks that people are gambling in to see if they grow or not".  He didn't call it a shitcoin, but essentially I would call him absolutely an ally, in terms of the banking system needs to support the Bitcoin economy, it needs to be there as a service to it, and he's spoken out very much against what he saw happen with the way the regulators coordinated about the latest banking stuff.

I don't want to jump ahead, but I would say though that with OneWest, Brian Brooks got that job because Secretary Mnuchin was his partner with the OneWest transaction, and the word off the street is that Mnuchin felt a little screwed by Brooks, because he brought Brooks in because he was an old friend from OneWest, and didn't expect him to go crazy about Bitcoin with all these things!  So, he quickly became annoyed with Brooks' stuff, but Brooks didn't stop doing it.

Peter McCormack: So first, fuck Mnuchin.  I get Brian Brooks, he was probably just trying to do the right thing; but Mnuchin absolutely exploited the FDIC programme and so fuck him, people lost their homes.  But that's a conversation for another day!  So, I want to talk about Elizabeth Warren's anti-crypto army, because in some ways as bitcoiners, we have an anti-crypto army, we've got an agreement with her there.

Jason Brett: So, I think I know there's an interesting alignment there, but hopefully no one will think Senator Warren is their friend when it comes to Bitcoin, because she's been very outspoken about the energy Bitcoin uses too and said, "Bitcoin must be stopped".  I don't know when it happened for her group, but somewhere in her office, she made this decision that instead of going after the banks and Occupy Wall Street, the next thing was to go after Bitcoin.

A lot of it, what I've noticed is, the progressives in the US really do see Bitcoin as an enemy.  They see it as something that won't necessarily help minorities.  They see it as just a bunch of white men who are making a bunch of money, and a new thing but under the old guise of, "Let's figure out how to rip off pool people", and that's the way they think about it.  In fact, one of the conversations I've had with them when I reach out and talk is, they say to me that they want privacy.  They said, "Can we get Bitcoin, but we can just put it in our pocket, like don't have it on a blockchain, because we don't want the government tracking us?"  So, that's their opting out of the crypto world.  But they do like the idea that we need to empower people, and I think that's where they've leaned not for a CBDC, but for sort of a Treasury digital dollar system that will do things like with welfare, social security, Medicaid, and make it easier to get that into the hands of people who are poor. 

So, I think Warren basically picked up on this anti-Bitcoin, anti-crypto noise, saw it as a way of galvanising her troops, and has been doing so ever since.  I don't know really who those people are that would be "anti-crypto", except maybe the Bitcoin maximalists and people in regular businesses, that they won't even have webinars any more on cryptocurrency, or talk about it in any professional discussion, because they're so frustrated by it.

Peter McCormack: This is why I think the work of Jason Maier is so important.  Look, I've talked a lot about him on the show, but we are not going to convince progressives and liberals to get into Bitcoin through conservatives.  We need people like Jason writing his book and talking to people on their level.  It's not just him; you've got to look at the work that Avik Roy's been doing at FREOPP.  They are an institution which writes about equal financial opportunity.  They also are proponents of Bitcoin.

I know some of these people still think Bitcoin's going to make the rich richer, and it could do, but it can also be a leveller.  And other people near the bottom, who get a chance to get on early, could also benefit from this.

Jason Brett: Yeah, there's an opportunity for these poorer people to participate in a system.  And I think that Senator Warren is contradicting herself, because if you listen to what she said when she started this whole notion of anti-crypto in general, but now the anti-crypto army, is she pointed to what happened with the FDX scandal.  But she said, "Banks would have done this better.  Had they been under the banking system, they would have had the regulations, the regulators there to stop them from falling apart like this". 

Senator Warren has been the most anti-bank person ever, against Wall Street.  So, it was amazing to hear her actually defend the banking system in America, saying it just needs more regulation.  We are absolutely on the same team in terms of FTX, and she's got a point.  This is where I know I'm "Regulatory Jason", but there is a need for regulators in one degree of another.  Even if the regulators are financed by the banks' fees, or whatever, to have somebody there who's almost this consultant, but can also blow a whistle, it's not perfect, but it's better than somebody using QuickBooks, right, and doing whatever they want in the Bahamas.

Peter McCormack: Yeah, well it's a funny time to be defending the banks.

Jason Brett: Yes.

Peter McCormack: We don't need to get into the detail of what actually happened recently, I've covered that with Caitlin Long and Lyn Alden, and anyone who wants to check that out, please go and check out the show notes.  But I just want to get your general take of what's been happening with the likes of Credit Suisse, Silicon Valley Bank, etc.

Jason Brett: I have so much respect for Caitlin's and Lyn's opinions on all this, giving the details to it.  What I would say, just from putting my regulator's hat on is, it's an over-correction from 2008, just the way 2008 was an over-correction from the Great Depression.

Peter McCormack: Well, hold on, that's some take!  We're going to have to go back a step.  Okay, you need to explain this to me.  2008 was an over-correction from the Great Depression?

Jason Brett: Yeah, sure, absolutely.  So, Ben Bernanke, who was the Chair of the Federal Reserve at the time, it's well known he was a student of the Great Depression.  He studied it night and day, understanding what happened.  And his determination, he said this publicly, is that credit stopped flowing in America, 30% of all the banks shut down, 9,000 banks shut down during the Great Depression.  There was a seizure of credit, you couldn't get a loan to start a business, you couldn't get a loan to get a house, business wasn't able to flow, and that's what really caused the US to go into this collapse and required the new deal with FDR.

So, with 2008, that was under Ben Bernanke's watch.  He said, "We have to avoid a Great Depression scenario at all costs, so we have to make sure there's a flow of credit".  Thus, if you recall, and Caitlin Long's explained this, all the Federal Reserve programmes that started adding up this huge debt were created in 2008, really out of, this isn't a bad reflection on Bernanke, but out of paranoia of, "If credit doesn't keep flowing in the economy, we're going to end up like the Great Depression".

That's where, to me, the over-correction was the bloated Federal Reserve balance sheet we have now, because the idea was you've got to make sure everyone can get credit, everyone has to keep getting homes, everyone has to keep starting businesses, get jobs.  If we lose that, then we end up back to the devastation of the Great Depression.  Was that the correct take; let's just avoid the Great Depression?  It kind of was.  I mean, it wasn't like, "Let's proactively figure out really what's going on with this housing market?" but the economy did reach a point where if certain measures weren't taken in 2008, things really would have been shut down.

Peter McCormack: But we need corrections.  We all know, what's his name?

Danny Knowles: Oh, Ray Dalio.

Peter McCormack: Ray Dalio, okay.  So, we've all seen his video that talks about economic cycles, but we need corrections.  If we don't allow corrections to happen in the economy, we're just kicking the can down the road.  And if we don't allow for the contraction, we're going to head to a much bigger contraction down the line, but we can't escape that.

Jason Brett: Absolutely.  I mean, that's to me why I say I think it was an over-correction.  It wasn't necessarily the solution for what was happening in 2008, but it was a solution to avoid 1933 all over again.  And I think moving to where we are today, my argument about the current thing that's happened with banks is saying, this was an over-correction to what happened in 2008.  So, we just talked about OneWest, but back to that it was IndyMac Bank. 

IndyMac Bank was a huge bank failure in the West Coast, it had a bunch of subprime mortgages.  We watched the videos together, we saw the people on the streets, everything was falling apart, because they reopened the bank on Monday, remember that?  We showed it was Monday, it was chaos, CBS News is criticising it, the FDIC is contradicting itself.  Martin Gruenberg, who's the Chair of the FDIC now, was the Vice Chair of the FDIC in 2008.  So, he was the same person who's now overseeing this crisis.

I don't have what Ben Bernanke said about the distinction between the Great Recession of 2008 and the Great Depression that was an over-correction.  What I can tell you is what I saw him do over that weekend, with rising it to an emergency, a systemic crisis, where he backed all the deposits of Signature Bank, of Silicon Valley Bank, and said all the depositors are going to be made whole, and that by Monday morning it was all basically done; people were putting in more money into those banks because they thought it was even safe than JPMorgan Chase because of the promises. 

That's where you saw Gruenberg saying to himself, this is me but I believe this is right, is he had to avoid what happened in 2008 with the YouTube videos and the IndyMac Bank.  They knew if Monday morning happened, 9.00am, there'd be total chaos, so they had to control the situation, they wanted everyone to stay calm, and this is now where it gets very dangerous, in my opinion, but also interesting from the perspective of, it was more of a social media crisis on Twitter this time than YouTube.  And it happened so fast, how can the regulators react in time?

There's no bank to go to; some people maybe still go down to a bank branch, but everyone just goes to do things over their computers.  So to me, I think that was a bit of an over-correction, because now we've put out this notion that not just $250,000 deposits should be insured, but there should be insurance on every single dollar in the system.

Peter McCormack: I think it was Troy Cross who recently came on Twitter and I think said that, "The entire US Banking system is now fully reserved"!

Jason Brett: That's right!  And that's what's sad is of course it's not.  I mean, the FDIC, the Deposit Insurance Fund, the DIF, only has approximately 1.3% of all of the insured deposits out there.  So, if you're added to the insured deposits, you're going way below 1% of everything that's out there, which is why, Peter, I'm saying that the problem we're having with UBS, that ended up acquiring Credit Suisse because they were in trouble, you're going to continue to see these matchmaking events happen.

Think about it; the minute UBS took over Credit Suisse, everyone got calm.  The minute you have these banks, Silicon Valley bought by another bank, everyone gets calm again, because the minute all of those deposits are owned by another bank, you're then insured again, you're under the system, it's okay, you don't have to worry if you're over the $250,000 limit.  And they have to do it according to the least cost test at the FDIC, which was overruled that weekend.  You're supposed to do it so it's the least impact to the Deposit Insurance Fund.  They said, "It's not going to be borne by the taxpayer"; that means it's going to be borne by bank depositors, because the banks aren't going to pay these fees without passing it on to the customers of the bank.

So, what you ultimately have is you're going to see large banks absorb mid-sized, regional banks whenever one of them is in trouble in the future, because that's the only solution.  They're not going to pay out the insured depositors, because the FDIC fund will just run out of money.

Peter McCormack: And some of this has started happening.  It's like when you first started to hear about these bank loans that were being offered, you started thinking, "Oh shit, man, this is going to happen again".

Jason Brett: My friends and the people that knew me, I was very scared over that weekend.  It hit me.  I thought about our show, I'd just talked about all this, so there was very much this feeling there's a…

So, I know that we have the Bitcoin maximalists that don't believe in banks at all, but the vast majority of people believe in the banking system and see that as trust.  And a lot of people don't realise when you put money in the bank, it isn't really yours any more, but they still think, "Well, it's just my money".  And when you lose that trust, the trust in banking, that's where I started to see -- and that's why I think these larger actions were taken by both the Treasury Secretary, the Board of the Federal Reserve and the FDIC, to do this systemic risk intervention, because they knew that the trust was on the line.  And so I was a little nervous, but also very interested, as I was kind of in 2008, because I think we are so close to that line that could get crossed, where the public may stop trusting banks, right.  When does that happen; and what happens after that happens?

Peter McCormack: So, you're going to end up with a situation like Argentina, where people don't want to leave their money in a bank.  I was out in Uruguay and I met a guy and he was saying to me that, I think it was his mum or someone, when she bought a house, she bought it with cash.  She used to leave the cash in her house.  I think it's this weird story, like she almost went out with it strapped to her, sellotaped to her; I'm sure I've got this story right.

But look, we're seeing it already.  USDC deposits are down something like $9 billion.  Danny can probably check this and tell us.  People are not trusting these banks, they're not trusting them and they want to get their money out, and I get it.

Jason Brett: That's right.

Peter McCormack: Losing your deposits would be catastrophic.  To me, to my father, it could be catastrophic to anyone, and we don't want to see a full-blown repeat of 2008.

Jason Brett: I don't necessarily agree.  I think we still could have a full-blown 2008.  We've had these happen in a matter of days, and what's important is this is the 15th anniversary of the 2008 Crisis.  If you recall, it was March 2008 when Bear Stearns was saved by the government, everything kind of went all normal until in July, later in the summer, IndyMac failed.

Peter McCormack: Wasn't it Lehman after that?

Jason Brett: Lehman was after IndyMac, yeah, because Lehman was in September when they went down.  So, there could be things going on that we're just not seeing yet, that could bubble up.  That being said, I think we're out of the woods for now.

Peter McCormack: Temporarily?

Jason Brett: Temporarily.

Peter McCormack: So, what would have happened if they hadn't have done it?

Jason Brett: If they hadn't, that means that you would have had a lot of unhappy people, like the Peter Thiels and the venture capitalists of the world, who'd be pointing to data saying, now you have all these venture capitalist companies and the people who are working for them, couldn't make payroll, lost all their money, pictures of people packing up out of their house and leaving their house and the trauma that would have been, sort of what you would have probably seen shown a lot of.  Would that be correct?  I'm not sure.  But I do definitely agree that during that weekend, there was a lot of pressure from Silicon Valley itself to save the deposits of Silicon Valley Bank.

But that was also, I think to me, slightly self-interested because you also had people who -- well, 97% of the people at Silicon Valley Bank had more than $250,000 of assets.  So I mean, can we just start calling this a rich person's bank; can we just get over this!  It wasn't the normal grandmothers, people who were retired parents who have their money in a bank and $200,000 maybe; they should understand what that FDIC insurance was.  You have people who were running operations that $250,000 is not necessarily even of consequence.  But $2.5 million or $50 million and suddenly, you only had it in one account; that's not very smart, but then all of that's in jeopardy.  That's like you're losing your fortune.

Danny Knowles: But if you're a company with $50 million in the bank, you can't spread that around enough.  What are you meant to do; put it into Treasuries?

Peter McCormack: Well, you would need like 200 bank accounts.

Jason Brett: Yeah, a lot of these businesses don't necessarily operate off the notion that you need FDIC insurance.  I'm not saying they don't deserve it, but the FDIC insurance is set up pretty clear; it's $250,000 for just one business.  If you're an individual, you can have a joint account, you can have your beneficiaries receive it through a trust.  You can get almost $2.5 million of coverage if you do it right as an individual.  Companies don't get that benefit.  I don't think companies get the benefit in a deposit scheme in the UK.  I know it's like £80,000; isn't that as an individual?

Peter McCormack: I don't that, but it's a fair question. 

Jason Brett: And it's £80,000; that's it.  The UK's kind of stingy on it, they don't give you these options; it's per person.  So, you have £80,000 at the bank in pounds, you have £90,000, you lose that £10,000.

Peter McCormack: But you can have that with a number of banks.  So, if you've got £800,000, I think you would have to have ten bank accounts.

Jason Brett: At different banks.  If you mean different banks, yes.  But within one bank, you can have more than just the $250,000.

Peter McCormack: So, this is where it becomes a scary thing, because I'm trying to operate a business and I've got to make payroll; and even if payroll's £80,000, I have something called a cashflow, I've got to manage that, and I can't be in a situation where I'm risking not being able to make payroll.  And so, I start to have to think about how I de-risk this for my business.  Do I have multiple bank accounts; do I even start storing money in Tether?  These are things that scare me.  I'm trying to operate a good business here.  And also, what happens at the end of the year if we're profitable and we make a good margin; what am I going to do with that money?  Do I leave it in the bank; do I withdraw it; do I keep it in Tether; do I put it all in Bitcoin?  I can't leave it all in Bitcoin because Bitcoin itself is volatile.

But to go back to the point that you made, what would happen if this was a different bank, if this was a community bank, if this had been mums and dads and grandmas and local businesses, where 97% of them had under $250,000.  Do you think they'd have saved it?

Jason Brett: No.

Peter McCormack: Of course they wouldn't.

Jason Brett: Well, they wouldn't necessarily have gotten more than $250,000, their deposits, unless it was bought to another bank.  What I guess I'm saying is the constituency of Silicon Valley Bank and to the point of businesses having to make payroll and things like that, plus what their argument was is we have to remember, it wasn't just Silicon Valley and Signature, it was Silvergate that had wound down its operations.  So the argument, the FDIC Chair with Gruenberg said -- we just had Silvergate wind down operations on the 8th, it was a Wednesday.  Friday, we see SVP come down.  Signature on Sunday was going down.  What if there's some contagion risk?

So, with that small bank example, it's called small, mid-size, community bank example, if there is a contagion risk, like a couple of other banks around it, then maybe they would have.  But in principle, I don't think they'd save any one bank's depositors beyond $250,000 if there wasn't.  But this is a huge change again, Peter, because now you have people debating saying, "We should take the cap off", that just all deposits should be insured.  That's a regular conversation now in the US, which blows my mind, because I've lived under this idea of -- I try to say, "You understand you're talking about insurance".  I always try to remind people, if the bank fails, like if you have a car accident, that's when the insurance pays in.  You mean, no deductibles, no anything, just anything could happen and you're going to pay?  There's just not enough money in the system.  Why would anyone believe in that insurance regime?

Peter McCormack: So you're now incentivising people to take risk.

Jason Brett: Yes, the moral hazard, yeah.

Peter McCormack: And they also would have pissed off a few of their donors if they hadn't have rescued them.

Jason Brett: Yeah.  And I think that's why ultimately, with Signature Bank being closed by New York, and there were some questions about that, the one thing that I think's come up in this bank crisis is, what about those $4 billion of digital asset deposits that didn't go back out to the bank from Signature; they held back that amount, and the Signet that supported a lot of the crypto asset companies.  And I think the way the FDIC might look at it is, "They should be lucky they're getting any of their money back, because we protected all of their deposits.  So, yeah, we don't let them in the banking system, but we're cutting them a cheque for $2 billion.  Good luck, Godspeed".  They don't see it as a problem, they're just saying, "We don't want that kind of risk in our banking system.

Peter McCormack: And this is the new paradigm we're in now.  It's almost like in every scenario, wherever there's risk or failures or breakdowns, there's this infinite money printer to fix the issues.

Jason Brett: There is.  I will say, to your point, and I think it's very interesting, is the idea that Tether is attractive, because Tether is something that can be accepted by a lot of people; it's proving itself as that medium of exchange.  Tether's really just backed by the US dollars that it has, it's sort of that whole concept of proof of reserves that came up.  But Tether is an interesting proposition, that USDC is trusted so much by many, and then it broke its peg, but now trying to move along, so USDC's okay also.

I mean, I use these stablecoins with my business and send it in and out for payment, I did it just the other day.  So, it's not something that should be necessarily a bad thing that we're looking to these.  What's interesting is the type of US dollar that we're looking for; it's no longer the $100 bill or the cash in the mattress, it's on your thumb drive with Tether, because you don't know what's going to happen with the bank.  But if you have Tether, it technically is a bearer deposit.

Peter McCormack: So, following the collapse of Silicon Valley Bank, it's suggested that they stepped into Signature early and that Signature wasn't about to fail.  Now, I get it, there could have been some contagion risk that was analysed, that they were worried about what would happen, so they stepped in early, but there have been suggestions that this is part of this Operation Choke Point 2.0, which by the way at first, I just thought this was just bitcoiners being paranoid.  Now, I'm just like it's fucking everywhere, so what do you feel about that?

Jason Brett: I've never heard of a bank being closed on a Sunday.

Peter McCormack: Well, isn't that to stop the Monday?

Jason Brett: It is to stop the Monday, that's the over-correction.  But before that, what my point is is I don't remember FDIC closing any banks other than on a Friday, it's just not done.  The joke is that the FDIC can come, audit your bank, but if they're showing up on a Friday, you're looking for a new career.  So, that's the common standard.  If we look at that for a moment, what I think it calls into question is, it's a state chartered bank, so what did the New York Department of Financial Services look at or decide about?  Perhaps there was a little bit of anti-crypto sentiment about it, and looking at what happened not just with Silicon Valley, but the fact that you have -- it's too many S banks -- Silvergate being wound down, so maybe there is this contagion risk and it's applied to crypto firms.  So, to be safe, we feel like we need to shut it down, so they reached out to the FDIC, they looked at it, they probably did look at the Monday scenario, what it would look like if it actually opened up on Monday, and they felt that it would fail. 

Also, I think we'll learn more.  There's always this thing, it's called the Material Loss Review in the US, where they review what happened during this whole process of the bank being closed, but I'd love to know how many people were withdrawing money from Signature over the weekend, because nothing stops you.  It won't happen until Tuesday, but you can start a process, so maybe they saw the amount of withdrawals that were going to hit.  That's the only thing I can think of that would justify it, because it was happening on a Sunday.  I don't know too much how you spend your Sundays here in the UK, but in the US people are going to church, they're watching football; they're not going down to their local bank!  So, clearly, there were a lot of extra factors to say on a Sunday, "We need to close".

That's why I think the question is that Barney Frank brought up, who was on the board, who said, "I think this is a little bit of an attack on crypto".  I think that's a little bit of a signal here of saying maybe there was this determination in the NY DFS's mind, a fair determination, that crypto is a risk to the banking system, because you had Silvergate fail and you had Silicon Valley Bank taken out, that, "To be on the safe side, we need to pre-emptively close the bank".  But that's the key though, the pre-emptive part, and that's where you have to remember; with Signature and with Silicon Valley Bank, I hear a lot of people talking and it's incorrect because they keep talking about, "Well, they're just going to show that the least cost test won't be met.

So, the FDIC's least cost test means if you close down a bank, you have to make sure it's going to be the least cost to the taxpayer Deposit Insurance Fund, and there are certain present value discount rates you have to run to figure all this out.  The FDIC Board and the Federal Reserve Board voted, and it's a law, to override that least cost test, and that's what Treasury Secretary Yellen said, is that the FDIC and the Federal Reserve Boards can make a recommendation here to say it doesn't matter, and that's how they backed all the depositors, that's why there's going to be a $20 billion hit to the FDIC Deposit Insurance Fund.  You've probably heard that number because of what's happening with the Silicon Valley Bank, but that doesn't matter because this was all done under an emergency situation, which again takes us back to the Patriot Act, the RESTRICT Act, the, "What do we do in times of real crisis?" and do we end up with something that's way too broad that people decide to --

Peter McCormack: It's like we're in permanent crisis at the moment.

Jason Brett: Yeah, but what I would say is, there's a question on people's mind that we'll never know, which is, would Signature Bank have made it out?  If you remember, what was it; Silicon Valley Bank, one of the banks had a huge run that they were able to survive for a couple of months.

Danny Knowles: Silvergate did really well.

Jason Brett: Silvergate, right.  They had been hit and they took all those FHLB, the Federal Home Loan Bank, loans that saved them, so they were able to weather it.  But we didn't give Signature a chance on Monday to say, "Will they weather it or will they end up bankrupt?"

Danny Knowles: And Silvergate wound themselves down and made every depositor whole I think; is that right?

Jason Brett: Yes.  Silvergate just shut down its operations eventually, but we didn't give -- we'll never know if Signature Bank had a fighting chance or not on Monday.

Peter McCormack: So, do you think Operation Choke Point 2.0 is a real threat, and do you think it is a coordinated reaction?

Jason Brett: So, my take on Operation Choke Point 2.0 is, Operation Choke Point, the first one, that was after payday lenders and all these buying guns and things like that, it was done very secretly, there wasn't anything openly from the Administration that we need to do this.  The funny thing to me about Operation Choke Point 2.0, and I keep trying to tell everybody this is, it's out there.  The White House put out a memo, you can go back, it says, "The risks to the crypto system", I think it says, "of January".  And in that memo, the White House says, "Cryptocurrency is a risk to the banking system of the United States.  Everything should be done to keep that risk out of the banking system.  We shouldn't be encouraging people to use crypto in banking".  It's all there.  So, yeah, I think there is a Choke Point 2.0 and there's a memo in the White House that just tells everybody.

Now the question is, regulators like the Federal Reserve and the FDIC, they're supposed to be independent, but they're going to be influenced.  They are an independent agency.  If the White House does an order, they don't have to follow it.  The Treasury would have to, but the Federal Reserve, FDIC, have this privilege of being an independent agency, so they don't necessarily have to listen to the President.  But I think they can be influenced by them.

Peter McCormack: Yeah, and look, this is one of the things that I think is frustrating, or I think gets lost in translation, is this kind of confusion between Bitcoin and crypto.  And when people talk about crypto being a threat to the economy, yeah, maybe it is, maybe there would be such a massive bull run following by contraction, that could lead to some difficulties in the economy and there could be huge losses and we don't know how much leverage would be in there.  But I think a lot more needs to be done to separate Bitcoin as an asset class from crypto.  And, look, I would happily sit down with any senator and talk to them about this and explain to them, "Look, I'm anti-crypto.  This is why I care about Bitcoin and why Bitcoin is important, because I think most of it is bullshit and it's become a real frustration for me".

This is where I'll give a nod to the maxis, because for years they've been doing this, they've been saying, "Bitcoin, not crypto" and, "Bitcoin, not blockchain"; they've been creating that separation.  But when you hear it discussed in Congress or in media, there's a blurring of that; not always, but sometimes there is a blurring.  You've got these centralised institutions that are muddying the conversation regarding Bitcoin and I don't think that's helping anyone.

Jason Brett: Well, I think the issue with crypto, if we can separate it this way, is that crypto is susceptible to the same issues that banks can be susceptible to, but then it's almost even more dangerous because there aren't regulators overlooking it.  Exhibit A is Sam Bankman-Fried.  A lot of people tried to say Sam Bankman-Fried is the anomaly, he's the Bernie Madoff and did all this stuff, and isn't really a result of the fact that he wasn't regulated and he was trying to change regulation.  To me, that's more of a psychopath who's trying to change regulation in the Congress while he's doing all this really bad stuff behind the scenes. 

But when you look at crypto, to me it's trying to do things in a different way, with computers and information technology, DeFi and all that stuff, but in a way that there's still centralised people involved that can really mess you up.  With Bitcoin, you don't have that.  You don't have the potential of mirroring the way the banking system works now, of where a few individuals or a group of people could somehow impact your wealth.  That's where I think you can start that division, and I think that's an important and valid one.

That's why I've been pushing with Texas with Bitcoin, the resolution, because the immediate criticism that's going to come up is, "Why are we just saying this for Bitcoin?"  Well, Bitcoin's proven itself to be different than anything else.  There hasn't been anything else that's come along yet to be and act just the way Bitcoin does.  So, there's something to be said maybe that shows you how maybe corruptible we are as humans, that we need to put something that runs now in this fair system into computer language, where we won't have certain people taking advantage of other people, and everyone has a fair access and can use it.

That's the thing.  We keep talking about the risk of Bitcoin to the banking system.  It's been called "a threat", but the banking system has a lot of other threats.

Peter McCormack: And it's important to explain what that threat is.  It's a threat to the banking system a bit like how Netflix was a threat to Blockbuster.

Jason Brett: Absolutely.  What I guess I'm trying to say is, when I look at the 2008 Financial Crisis, that was a failure of the larger banks that allowed Bitcoin to be introduced.  So, it's almost like Blockbuster had a bad moment and people realised Netflix.

Peter McCormack: And the ratings agencies with their ratings and the failure of the regulators.  2008 was a failure of multiple institutions or bodies or businesses, but the threat now is they're threatening innovation, they're threatening Bitcoin.

Jason Brett: Yes, that is correct, it disintermediates the banks; you don't need the banks the way they function today.  It threatens the banking industry.

Peter McCormack: Yeah, exactly, which might not be a bad thing.  And listen, if I could store all my bank deposits in a hardware wallet, a bit like I do with say my Bitcoin, if I could just do that, I would.  And I also think about stablecoins, but I don't trust them, I've got an issue with stablecoins.  Can they be censored; can they be shut down?  But I don't like the banks either. 

I mean, I go into one of my bank accounts and I want to withdraw £2,000, they're asking me what it's for and it's like, "Hold on, I didn't ask you what you were going to do with it when I deposited it with you, but you want to know what I want to do with my money, it's like, "Fuck you, this is none of your business".  And I've had so many bank accounts closed down and closed down for different reasons; closed down for telling them that what I spend my money on is my business.  I've even had one closed down because one of my sponsors was a crypto company.  Fuck these people.

Danny Knowles: But I don't think stablecoins fix that, because you just rely on someone else's bank then.

Peter McCormack: Yeah, that's what I mean.  I have to trust Tether's relationship with their bank.

Jason Brett: I can't argue that, yes, in that degree Bitcoin is definitely a risk.  But to me, it's more of a threat than a risk.  To say Bitcoin is a risk, like you said, it's an innovation, it's something that could be done much better.  But here's the thing, Peter, and if we did some design thinking for a second, let's just say all the banks are gone and we're just operating with Bitcoin.  How do people get homes?  This is where we have to really think about maybe there's -- to me, I'm not an all-or-nothing kind of person.  I think Bitcoin really can become mainstream in a fast way, use it on the weekends, whatever.  Maybe people still need, or there still is a use for banks, because people still are willing to put some of their deposits there, not just limit it all together; because they know that part of it is, they also might need to go to that bank for a loan to get a house that they can't afford.

Peter McCormack: I'm with you on all of this, but Bitcoin is a threat, and when I say threat, I don't mean necessarily it's going to destroy the banks, but it is a threat.  But I think you need both.  Like my father over there, bless him, he's not going to be able to set up a Bitcoin wallet, he's not going to be able to manage his private keys and my daughter isn't.  But she's got a bank account now, she's got a card, she can go and tap it, she can make payments.  So, I think we need both.  But I also think we need them to stop fucking with our money.  If these banks are failing, let them fail, stop interfering.

Jason Brett: Well, it's interesting when you talk about the banks fucking with our money, because Silicon Valley Bank, it's a horrible thing that happened, but it's so ironic if you think about the fact that it was related to interest rate risk, meaning that it was the Federal Reserve raising rates that caused one of its own banks to end up failing.  The irony of that is, talk about too many cooks in the kitchen; you're trying to raise rates to stave off inflation, and what bothers me a lot about that, and to your point is, interest rate risk is one of the most basic risks that you learn. 

In my bank examiner school, there's this thing called the CAMELS Rating; it's Capital Assets Management, valuing the management of the bank, Earnings, what the Liquidity is like, and S is Sensitivity.  S is sensitivity to interest rate risk, so it's literally one of the six major factors that every regulator evaluates a bank on when they go see, and there's a broad history of banks having problems when the Fed starts raising rates.  So, somebody was asleep at the switch on Silicon Valley Bank to allow all that to happen; someone should have been alarmed immediately, and we'll learn this later.  That's why I keep going back to, keep in mind any time that requires a material loss review, there's a material loss to the FDIC Insurance Fund, we'll learn all about it.  I'm not necessarily saying it was real misconduct, but if it was incompetence, that's really scary.

Peter McCormack: You know what I want, Jason?  I want to be able to store my money in a place that I trust, and I like Custodia, I like what Caitlin Long's trying to do.  I think a 108% reserve backed bank, I want to be able to use a service like that, I want to be able to go to a place and say, "Here's my money, store all of it and charge me for that.  Be my custodian".  I want that, that's all I want.  I don't want to have any risk, I don't want to go into a place and think they're fucking with my money, I don't want to go to a bank and find out they're bust one day.  And do you know what, if I use a bank and they fail, great; let them fail, because I trusted them, but please, just stop fucking with our money.  Let the economy work the way it's meant to work.

Jason Brett: I absolutely agree.  The problem is, it's so interesting you said that, because if you look at Caitlin Long and what she's trying to do, it's really important, because there is this notion by a gentleman named E Gerald Corrigan.  E Gerald Corrigan was the right-hand person to Volcker at the Fed, so Federal Reserve Bank.  And he wrote this essay, and the essay is very famous, it's called Are Banks Special?.  And the argument the Federal Reserve put forward is, banks are special, meaning they're different than any other industry, and it came up with a different paradigm for how we need to view banks.  It said, "Banks need to be the transmission for the monetary policy of the Federal Reserve", like the transmission gears, think about almost like a car.  In other words, we need to be able to control people and how they're spending their money.  So, that's a key instrument that a bank plays, because we can raise or lower rates and the banks will follow suit as we need them. 

So, they're a transmission gear to monetary policy, we have the FDIC insurance that protects them, banks are special because they can get loans from a discount window at the Federal Reserve, so if they're having a problem they can get loans.  It's essentially defined the way banks are viewed.  Banks didn't used to be viewed this way.  It's really a creation since 1913 with the Federal Reserve of how we view banks.  Back in the 1894 California Gold Rush it was, "Hey, I just got all this gold and I want Peter as a customer.  I've got to prove to him I have the best vault at my bank.  It will be 100% backed, I've got all your gold, but you want to know, do I have the best vault?"  So, the banks that succeeded were the ones that had the best vaults and kept the robbers out. 

That's what we're now down to in a digital world here.  It's people like Caitlin Long coming in saying, "This is not what banks were intended to do if people want to save money".  But there's an argument that's still talking about this transmission belt of the monetary policy that's saying, if you're putting deposits in, Peter, don't you remember, what's that famous movie?  It's a Wonderful Life.  You put some money in the bank and then this other person can take that money and go get a home, and that's the one question about the world you're envisioning, which is not a criticism because you're right, you should be able to do that.  But then everyone's going to say, "But then, how is that other person, who doesn't have enough money to go buy a house, where are they going to get the mortgage?" and that's where that whole vision of banks from E Gerald Corrigan comes into play and where we have to question what should a bank be able to do, and how can people afford homes?

Danny Knowles: I saw a tweet a couple of weeks ago.  It might have been Lyn Alden, but I could be wrong.  It said, "Banks aren't really banks, they're basically long-duration bond funds".

Peter McCormack: I mean, look at Bitcoin custody; what do they do?  They're competing on trust, whether it's COLDCARD or Ledger or Trezor, they're competing against custodial centralised services, you know, which one do you want to use?  There's multisig solutions, everything that you have with your Bitcoin, however you want to store it, is a competition on trust.  And it's a bit like what you talked about with the Gold Rush; which banks would you use; how would you know which ones to trust; which are the most secure?  That's all it is, there's different incentives out there.

Look, I maybe just want a full-reserve bank, but does that mean we're going to get rid of other banks with free services?  No, because not everyone's going to want to pay for that.

Jason Brett: Absolutely, and I think that if anything, because you have the 100% reserves, there's certainly a way to do that.  And again, what is borne in crisis, whether it was 1913 to not let banks have crises, or 2008, people have needs and we are having the version of the digital gold rush, where people are looking for that security.  That's where Caitlin Long's bank is likely to win.  What happens is, when our political system -- the economy becomes part of that political system and you quoted Abraham Lincoln at the beginning of the show.  Abraham Lincoln started the national greenback currency to try to raise money for the Civil War.

It's very interesting, I don't know if you know this, but the Secretary of the Treasury at the time wanted to put, "In God we trust" on those greenbacks, which exist now.  But back then, that didn't go through.

Peter McCormack: Was it, "Full faith"?

Jason Brett: "Full faith and credit of the United States Government".  But it does now say, if you look, it says, "In God we trust", but it didn't say it back in 1863, or whenever that was issued, because Abraham Lincoln said, "I'm just giving them a piece of paper".  He even knew.  He's like, "This isn't gold, this isn't silver", and he actually told a parable where he said, "I'm sorry, Peter and Paul, I can't give you gold and silver today, so please accept what I'm giving you", but he did that in the idea of, "We have to win the war, we have to solve that".  And so, that's when we faced these issues that override the issue of a gold rush, of needing the vault, of saying, "But hey, we have to raise money because we have to keep the whole country together".  It's not that much different than now, right?  Nation states, Bitcoin; what's the balance between the two?

Peter McCormack: Well, there's a lot going on here, there's a lot we've discussed today, Operation Choke Point 2.0, we've got the expansion of the BRICS nations, we've got banking failures, we've got people looking to use alternative currencies.  It's a really weird time and there's been a lot going on.  It's great for us, we get to make a lot of interesting content.  But just to finish off, what is the stuff that you are thinking about right now; what is keeping you up at night?

Jason Brett: What's keeping me up is I don't really know if the "banking crisis" is over.  We've done another temporary measure, but it was a process of many months and then a couple of years where maybe we'll face the repercussions, like you said, of we over-corrected in 2008, but we didn't necessarily solve the problem at the time.  And if it happens at a later date, maybe this is that later date to pay that cheque.

Peter McCormack: Jason, thank you for coming on, really loved having you here.  Is there anything I've not asked you about that you think we should have covered that we haven't?

Jason Brett: No.

Peter McCormack: Well, we did it!  Jason, great to see you, man.

Jason Brett: Great to see you, Peter.  Thanks for having me on the show.