 Today, I have the distinct pleasure of speaking with Dr. Michael Pivovar. How are you today? I'm doing very well, Tracy. Thank you very much. I know you're in high demand, so we're just going to hit you with the questions. We're all dying, dying to ask you. So number one, this is my personal favorite from our audience. If President Trump calls you and says, how to deal with the COVID-19 virus, what would you recommend for our markets? We'd love your number one piece of advice, please. Sure. Even in my background, the number one piece of advice would be keep the financial markets open. The financial markets are playing a critical role in the response to the crisis. They're providing liquidity for people who need cash right now to be able to sell their financial assets and turn it into cash and use it to do things like meet, pay roll or their mortgage payments or things like that. They're providing opportunities for people who want to step in and use this as a buying opportunity and to put a floor on the prices right now. And the other thing they're doing is that they're giving both investors and policymakers critical information in terms of price discovery. So it's not only the fact that the overall market averages tend to have wild swings. So last week, they were very much down. This week, we've had more of a recovery. But also, we're getting very good information about the relative prices of various industries and various firms in the equity markets in particular. But also, I know your audience is very much interested in various commodity prices in terms of what the future is going to look like in terms of future earnings, of companies or aggregate demand and supply conditions for various commodities. And so the markets are providing great information not only for investors, but for policymakers as they think through the response to the crisis, whether it's financial assistance or economic stimulus or those types of things. So my first piece of advice is do whatever we can to keep the financial markets open. They seem to be working very well. The equity markets, even though we had them hit the circuit breakers last week, I think it was four times on the downside. I think that's actually evidence that the markets are working. We've seen no stresses in the infrastructure around the trading of that. The futures market also is providing very good information for various commodities and interest rates. We saw that there was a failure of one particularly small clearing firm. It had a particular bet on the VIX and they went down. But what we saw there was that the post financial crisis reforms in terms of members of clearing houses and taking care of their portfolios and winding them down and selling them off, that is all working very well. We saw that the Federal Reserve has stepped in in the credit markets and the Federal Reserve is providing along with Treasury much needed liquidity in those markets, whether it's the repo markets or the money markets, the commercial paper market, even in some cases the corporate bond market, to keep those markets open and making sure that there's enough liquidity in those markets so that the prices that are produced from that are informative, like I say, for investors and for policymakers and also allow people to liquidate their assets, to use it as a buying opportunity and to maybe hedge some existing positions. We both have dealt with a lot of brokers over the years. I would say having them work from home could be a major benefit for all of us. It's amazing how people are looking at what does this mean in terms of people are going to be having to be working from home. The Securities and Exchange Commission has done some relief for some of the trading firms and for some of the market makers in terms of some of the compliance issues they have to deal with. Normally we think about some of the brokers and the trading desks of the broker-dealers, the large firms. They have to record every conversation and the chats and all those sorts of things for confirmations for trades and they've given some relief for the fact that people are working from home and trying to work through these issues. We saw that the New York Stock Exchange for the first time in its history has kept its market open at the same time closing the trading floor and they went to fully electronic trading on Monday. They announced it last Wednesday to give traders time. They did testing over the weekend and by all accounts, trading has gone on fine in the markets. There's some volatility in the markets but that seems to be the good volatility, the fundamental volatility, not the bad volatility, the transitory volatility. You've made some excellent points, numerous ones in fact. The digital media market, for instance, the online trading, the infrastructure for handling that yesterday, you actually hosted on behalf of your role as the executive director for the Milken Institute a debate with five former SEC commissioners that was hosted by George Stout, correct? Well it was actually five former SEC chief economists and I was the one former commissioner who was there and the reason why they wanted me is because turns out I'm only the third PhD economist to be a commissioner at the Securities and Exchange Commission in the entire history of the agency. It's mostly lawyers which makes sense because they're the ones who write the security and enforce the securities regulations in accordance with the law but I always found it, my background of being an economist was very helpful to me in my role there and you're right. We hosted a webinar, it was actually hosted by the Georgetown University Center for Financial Markets and Policy where I'm a distinguished policy fellow and what we wanted to do was have a public conversation about the importance of keeping the markets open and so the title of the conference was should markets be closed and there was an emphatic no among all five of the former SEC chief economists and myself for the reasons that I just described. They provide particularly the equity markets and the bond markets, the capital markets in general provide liquidity, they also provide price discovery and then two of the panelists were also former commissioners at the CFTC and they talked about the importance of leaving markets open so that people can manage their risk. Risk management strategies are important not only for financial institutions but for end users who have to hedge their exposure to various commodities and I know your audience is very interested in rare earth minerals and those types of things and so keeping those markets open is very, very important not only for the speculators in those markets but also for the hedgers in those markets so that the producers, the end users can keep producing the products that you and I have to buy that now we have to get delivered to our house that we can't actually sometimes buy in the grocery stores. Okay well the bankers we're talking to say there's plenty of money out there and they're looking for places to put it so because of your various rules can you talk to us a little bit about the public private integration of funds and some of the ideas that Milken Institute is currently dealing with to deal with this pandemic? Yeah so we're doing some exciting work at the Milken Institute so I run what's called the Center for Financial Markets and within the Institute there's seven different centers some of them are health related and they're on the front lines of what's going on in the COVID-19 pandemic for example our Faster Cures Center is working very closely with a lot of the people who are developing the vaccines and we actually have a vaccine tracker on our website where people can go there and see the various developments that are going on for the various firms that are working on not only vaccines but also some of the therapeutic things that are involved with that. The Center for Financial Markets what we try to do is make sure that the markets work for people who need them and when they need them and that they provide access to capital particularly for economically disadvantaged individuals but also throughout the economy and you mentioned public private partnerships we had started on an initiative even before the COVID-19 crisis that we call resilient infrastructure financing and what that what that project is basically about is that we know that there's a great need in the United States to improve our infrastructure and here in Washington DC at the federal government level it's almost become a joke where people say oh it's infrastructure week again right and and the federal government can really never get its act together in terms of Congress and the president thinking through funding various infrastructure initiatives at the same time there's many smaller projects that state and and local municipalities need to fund and so before the crisis we were thinking about things like wastewater treatment plants and not only in terms of you know redoing those or coming up with you know and replacing those but there's this notion of what we call resilient infrastructure and so if you think of California if you want if California is going to invest in something they're gonna be really concerned on the front end now about making it resilient in terms of the next wildfire or the next earthquake or if you're in one of the coastal states thinking about you know the next hurricane or the next flood and so there's a lot of municipalities that are interested in doing some sort of resilient infrastructure whether it's replacing old systems like wastewater treatment plants that are 30 40 50 years old very bad for the environment use a lot of electricity with something that's more resilient and then maybe even some newer projects like rolling out infrastructure for 5G and the exciting developments that that's gonna bring to us and so those are things we were thinking of ahead of time and so why are we involved at the Milken Institute well these municipalities want to do it but they're basically tapped out in terms of their resources they can't fund it themselves in many cases you know even if you have something like a wastewater treatment plant that's gonna get funding over time from people paying their water bills or their sewer bills they need upfront money and they're not able to tax people to get that upfront money and so that's where the role of public-private partnerships come in and we have a number of sponsors and stakeholders that that represent the investment community across the spectrum from the largest of the large ones so think sovereign wealth funds pension funds down private equity funds venture capital funds impact investors philanthropy capital and many of them are interested in doing impact investing or sustainability investing and some are just interested in just you know making a good return and so we talked to them and we say look there's all these potential for public-private partnerships out there and they say well yeah these individual projects are they're too small maybe they're 20 50 million dollars but if we could get a portfolio of maybe ten of those together and you're talking 200 to 500 million dollars now it becomes very interesting and so we embarked on an initiative where we were bringing we're bringing together state and local government officials on the one side who have these projects that need financed and the and the and the providers of that financing and trying to figure out what the needs are and match those together and see if we can come up with a concept for things like term sheets that could be replicable from one municipality to another to then make these public-private partnerships really work and so we're just at the early stages of that we're going through we're talking to the investors and saying what do they need we're talking to the state and local government officials and trying to teach them the language that investors speak because they don't typically do that and we're gonna have a series of events we had planned on doing a big rollout at our May global conference which is our big event that we our flagship event that we do every year we have delayed that conference until July for obvious reasons and we're thinking about doing something virtually the first week in May that we're calling our you know resilient infrastructure week on that so to the extent that you know your your subscribers and listeners are interested in those public-private partnerships stay tuned on that okay well I'm gonna tell you right now I'm gonna receive a lot of emails with how do I get in contact with regards to this program so please do keep us updated so speaking of resilience though with your background you talked to us a little bit about how public companies right now should be handling the regulatory disclosures we're seeing a lot of confusion on that front and the public companies some are going under rocks I mean we're seeing some very interesting behavior do you have any advice because we do agree with you that we should keep the markets open any comments on that yes the the first comment is to the extent you have any questions either you the firm or your outside counsel should call the SEC the Securities Exchange Commission I know that you know the the I sort of laugh at myself when I say you know when I tell people you know the first thing you do is call your regulator right that's usually the last thing people want to do and I get that we saw after the finance you know so there's always been a balance between the regulator and the regulated entity whether it's a public company or or think a broker dealer or that sort of thing there's a balance between sort of confrontation and collaboration right on the one hand you want to collaborate with the industry because you get the you can find out what are emerging issues and work with them on the other hand you have some bad actors and there's some some confrontational issues what we saw was that pendulum really swung after the financial crisis there was you know it swung to the confrontation side right the joke was you know the beatings will continue until morale improves right and you saw all kinds of enforcement actions after the financial crisis that time has passed we have a new chairman in there Jay Clayton we have a new director of division of corporation finance Bill Hinman who are very much on the collaboration mode and to the extent anybody has any questions about any of their filings in terms of deadlines or in terms of getting relief call the SEC and work with them we saw if you look at the SEC's response and you can go to their website sec.gov and on there you can find they have a running list of all the different types of regulatory relief that they've given to regulated entities whether it's public companies whether it's mutual funds exchange traded funds broker dealers exchanges whatever it is they've got a running list on there early on the first people coming to the SEC even before the the COVID-19 hit our shores where people that had either supply chains in China or had various operations in China that needed to be audited and so they were worried about what happens if the if they're outside auditors can't go in and provide the audits and give it you know an unqualified opinion and so the SEC put out some guidance on that it was the division of corporation finance in conjunction with the the office of the chief accountant and then then people started coming to them while it's earning season well we need to put out our earning statement but we're you know we're really uncomfortable about providing earnings guidance but the market may view that as a negative signal if we don't provide earnings guidance going forward so can you give us some comfort and so those discussions have been happening and that's what I'm saying more of a collaboration mode that this that the SEC has had is having those discussions and working through those those those issues with issuers and so to the extent that anybody has any unique situations that haven't already been addressed contact the SEC call them email them they're there they want to work with people through this process as quick as possible and if you've seen the recent statements by Chairman Clayton individually on the website he put out a statement about the importance of keeping the markets going particularly for public companies and the statement he recently did yesterday I think it was at the financial stability oversight council meeting reiterating that it's something that they want to work with issuers as much as possible well I can't thank you enough Michael for joining us today and I had several other questions but I think what I'd really prefers in lieu of your role in the leading market-making firm in New York or the New York Stock Exchange if you have any advice out there for the public company CEOs we have quite an audience of public company CEOs here and investor intel that you can provide them during this time yeah so it's important to write so one of the things you know I make that mistake often is when we talk about the importance of markets you know liquidity prices we think of it from an investor's perspective but also from the from the public company's perspective right why do they go public because they want that access to the capital they need that to fund their operations right and then once they go public why do they choose a particular exchange NASDAQ or the NYC or the listing exchanges and then if you choose the New York Stock Exchange why do you choose a particular designated market maker and you mentioned I'm an advisor to GTS which is the largest designated market maker on the New York Stock Exchange and they are they've been fully prepared to move electronically for a long time they fully believe in the NYC's model which is a combination of electronic trading plus human intervention in particular time so for example when a company IPOs and they're building the book for the initial round of trading that can take you know anywhere from 20 minutes to two and a half hours I think was the record for Alibaba to get that book ready to go with the order book ready to go to begin trading and there's a lot of human intervention on that that now is taken into the electronic realm GTS and the other designated market makers are fully prepared to do that it may take longer to do things like that but they can continue to trade in this environment it's important to note that even before this environment both if you think of the whole trading ecosystem whether it's the New York Stock Exchange itself the designated market makers GTS and the like or the banks and the broker dealers who actually send the trades or even go further to the asset managers who send the trade to their brokers they all as regulated entities have had what are called business continuity plans in place and they always get updated when something new happens so think September 11th think Superstorm Sandy think things like you know a blackout in in in New York or or the you know the northern part of the United States and now they've been reviewing those in light of the sort of the public health systems that are going so far so good right the business continuity plans seem to be working and and the markets are generally working well I know GTS they're they're working through the issue a lot of trading is automated right now and you have human intervention but you know they're gonna they're just doing it from different locations and and you know maybe some of the more manual things are a little bit slower to get done but you know that's to be expected you know it's doing a lot you know like doing things like Skype interviews and those sorts of things right we can get it done it's not as great if as if we were there together in person but you know it works well thank you again for your time and it's been a real pleasure all right thank you very much this was great