CNBC’s full interview with U.S. Attorney for the Southern District of New York Jay Clayton

[0:00] Join us now, Jay Clayton, United States Attorney for the Southern District of New York [0:04] and former SEC Chairman of my date to the Correspondents Association dinner. [0:10] But like so many people, it's just a meet and greet. [0:16] People are everywhere. [0:18] And you, after I got on your hotspot, you left me, and I had no Wi-Fi initially. [0:23] And then it was a couple minutes later when everything happened. [0:26] So I talked to you later in the evening. [0:30] You can recount what happened. [0:31] You went to a place where there actually were important people, and you were swept away with them? [0:36] I was swept up with a number of the people because I was standing out. [0:39] You would have been swept away anyway. [0:41] You're a Southern District. [0:42] You're an important person. [0:43] I mean, they left me for, you know, they're not getting me out of there. [0:47] It's the office, not the man. [0:48] It's the office, not the man. [0:50] But you went to a secret, undisclosed location with everybody else. [0:53] Yeah. [0:54] But let me say something that I think we were there. [0:56] Right. [0:57] And I've seen the reporting. [0:58] We all got caught up. [0:59] I want to make two things clear. [1:02] They've been reported, but I think undressed. [1:04] The first is the response of law enforcement. [1:06] And the president has championed the response of law enforcement. [1:09] But think about this. [1:11] Obviously securing the president and the first lady, the cabinet members, all the other people there. [1:15] You know, they did that. [1:17] They neutralized this person without a single, let's just call it civilian, being harmed. [1:24] That is a remarkable exercise when you think about it. [1:28] Everyone's talking about how crowded it was and the like. [1:31] And I'm trying to, you know, there'll be experts, but I kind of looked at the tape. [1:36] In less than a minute, or around a minute, from the time first noticed to being neutralized, maybe we'll find it a little longer, a little less. [1:43] But not a single person got hurt. [1:49] With all that response, all of those people heavily armed and everything, to me that was truly remarkable. [1:54] You had, like, they did an amazing job. [1:58] The second thing I want to say is, you know, I was close enough when I got swept up to see the president of the United States under this kind of personal pressure and the pressure of the nation. [2:08] And the American people would be so proud. [2:11] You know, what are the things that are going through a president's mind in times like this? [2:16] You know, we don't want our way of life altered. [2:18] It's kind of paramount, right? [2:20] I mean, this was an event to celebrate the First Amendment. [2:23] The rights of all Americans to get together in the public square, exchange ideas. [2:27] And to be protected in doing that. [2:31] And this was clearly jeopardizing them. [2:35] Jeopardizing the ability of all these poor people to get together. [2:37] I mean, think about the conversations that were going on in that room. [2:41] And all people exchanging ideas. [2:42] People of different stripes and the like. [2:44] And the president was like, this, we can't alter our way of life. [2:48] And he's thinking about the safety of himself, safety of his cabinet, safety of the First Lady, continuity of government. [2:54] And at the end of the day, back to where I started, the safety of the people in the room. [2:59] And with all of that, it was like, okay, we really want the show to go on. [3:04] We really want to show that we can't be cowed. [3:07] He was on his way back in his mind. [3:10] And we kept hearing that he wanted to come back. [3:13] But it was a crime scene. [3:14] It didn't seem like it was going to be possible. [3:16] It's all of those things. [3:18] But his commitment to the First Amendment, to not letting our way of life be changed by people, was so palpable, so clear. [3:28] You know, at the end of the day, if it was only the president's safety, he would have gotten back up on that stage. [3:35] But it was everybody else. [3:36] Yeah. [3:37] And for, I don't remember, I think it happened at 8.30. [3:42] I don't think we left until after 10. [3:45] So we were waiting, fully thinking, he's coming back. [3:50] Wait a second, he's being, you know, people are saying that it's, you know, there was a guy on the floor. [3:55] At that point, we thought someone, they were calling it a body. [3:59] And this was real. [3:59] It was not. [4:00] But there was never panic? [4:03] No. [4:03] Like, you know, we can go back through history of events that are congested with crowds of that size. [4:08] 2,600 people. [4:09] Crowds of that size where panic ensues, concerts and the like. [4:13] Stampede. [4:13] And so the Secret Service gets all of their, you know, protective people away without causing any kind of panic like that. [4:23] Truly, truly remarkable. [4:25] It was. [4:26] And they knew where every single, they had a seating chart where every single, and they went over the top of tables to find people and take them out. [4:34] And it was also a measured response later in the evening from the president about the kind of speech he had planned on giving and the kind of speech that he would give if he does have a chance next time. [4:46] Because we were all together there. [4:48] But here's a time of immense pressure. [4:50] Yep. [4:50] You know your life's under threat. [4:52] And you have the most, and you can agree or disagree with policy, you have the most transparent president of the United States in my lifetime getting up there and saying exactly what was going through his mind, exactly what he was thinking, how decisions were made, and engaging with the American people. [5:08] I thought that was, you know, that's another decision he made. [5:10] He said, I'm going to talk to the American people. [5:12] I thought that was incredibly, incredibly powerful. [5:14] Okay. [5:15] We talked about the 60 Minutes interview. [5:18] I don't know whether you saw that as well. [5:20] There has been a, I can remember times where the name of the perpetrator wouldn't even be released, so there would be no publicity associated with it. [5:31] So people wouldn't use that as a motivating factor. [5:35] Also, the ravings of a lunatic, is that normal to read and to call them accusations or alleged and to read that? [5:45] I thought that was beyond the pale yesterday. [5:47] I think that we all need to take a step back. [5:50] I need to take a step back. [5:53] Everybody in the media needs to take a step back and say, you know, are we amplifying hate and fringe elements in exercise? [6:01] You really, you don't, you don't know the answer to that? [6:03] We are. [6:03] Yeah. [6:04] People are. [6:04] I know. [6:05] But let's, let me tie this to a recent event. [6:09] I mean, this was horrible. [6:11] Amplifying somebody like this is message, you know, just stupid. [6:16] Let's just call it what it is, stupid. [6:17] Okay. [6:19] We had a case in the Justice Department last week, the Southern Poverty Law Center. [6:25] The case, at bottom, and these are allegations, but at bottom, the allegations are that this organization was creating hate in order to expand their mission of combating hate. [6:37] If that's going on, and it is, it's going on in America. [6:42] It's going on through organizations like that. [6:45] It's also going on with foreign actors funding these types of organizations because they want us to fight with each other. [6:54] So everybody needs to take a step back and say, who is causing me to have these emotions? [6:59] And are we, are we creating an environment where those emotions are causing us to do things that are harmful to the American public? [7:08] I want to switch gears for a second to Jay Powell, if I could, for a second, because I'm curious where you land on this. [7:19] So it appears that that case has ended as of Friday, but there's still the question mark about whether Jay Powell is going to remain on the board of the Federal Reserve for the next two years, which he's eligible to do if he decides to. [7:33] And he appears to have suggested, at least previously, that it wasn't just the end of the case that would make him step down, but a sense that he was exonerated. [7:44] And there's two elements to this that I want to ask you about. [7:47] One is Puro effectively said, look, if there's new evidence that comes or if there's a reason that warrants it, we can come back and bring this case again. [7:56] So that therefore sort of leaves on the table the possibility that he's not exonerated and this is not over, in which case maybe he would stay in this role. [8:04] And then the second, which is a legal question, is whether you think that Puro should appeal the subpoena, even the subpoena, the subpoena issue in the case, even if she doesn't plan to bring the case. [8:16] But for legal reasons, for precedent, whether she needs to appeal the subpoena issue in the case that the judge ruled against. [8:24] So those are two sort of, one's a legal one, one's a sort of philosophical, maybe they're combined. [8:29] I got you. Let me add something to the context that's important. [8:33] You have an inspector general now inserted into the mix, an inspector general Horowitz, who everyone respects, who's going to get to the bottom of the issue, which is why are these costs? [8:46] He was doing that from the beginning. [8:47] No, but it's now reporting to Congress, focusing on it, you know, exigent that he does his job and we figure out whether there are costs overrun. [8:55] So that's that's an important part of the context. [8:59] Janine Pirro, terrific person. Look at the job she has done in Washington. [9:05] I mean, crime gone. [9:06] She was on the crime scene last night, you know, taking charge, filing federal charges. [9:13] Unbelievable. I have tremendous respect for her. [9:16] But she's she's going to handle this in the right way. [9:19] The question, the narrow legal question you ask is not whether they're going to enforce the subpoenas, which she has addressed. [9:26] It's a it's a question of whether the judge's basis for his ruling is one that should stand. [9:31] And then therefore the question becomes, do you believe that she needs to continue the appeal process over that, even if she is not planning to pursue the case? [9:40] That happens because, you know, you don't want a precedent that you think is incorrect out there, particularly on these types of things. [9:47] I am not as familiar with it as she is or as as the main justice folks are. [9:52] I'll let them make that decision. [9:53] Jay, the fact of the southern poverty, you heard their defense. [10:02] Is there any possible way that to get people inside these hate groups that you're paying informants for information so that you're able to fight the hate better? [10:14] The sums that we're talking about that were funneled to these organizations, is it possible that that was that was a legitimate use of funds to try to get inside the hate? [10:24] Because that's what they immediately say that no defenders of of what we're talking about here. [10:30] Is that possible? [10:30] Well, let me let me let me say their allegations. [10:32] They're going to get approved out in court. [10:35] You know, a grand jury returned this. [10:39] I think it's appropriate for me to take a little bit of a step back and put this in context. [10:42] The amount if I want to if I'm asked to authorize the spending of money on informants or this type of exercise, [10:51] the rigor that we go through and the audit trail and the approvals all up through the system as to whether that is that is the right thing to do. [11:01] Nothing like that was happening. [11:04] You know, instead, it's actually the other way around setting up shell corporations to hide this. [11:08] If you look at the if you read the indictment, the indictment spells out clearly that those corporations made statements to the bank that the indictment alleges were not true. [11:18] That's not why those. But do you believe it just but just just do you believe they were informants or not? [11:25] I believe. Look, if you read the if it's just because you're an informant doesn't mean you're not a whole lot of other things. [11:32] OK, that's and that's that's what's that's what is clearly alleged in the indictment. [11:38] No, I read the indictment. You're giving people money to do a whole bunch of stuff. [11:42] I understand that. The question is whether you genuinely believe in your heart that the people at Southern District, [11:50] at the Southern Poverty Center actually are trying to incite, like want the violence to be incited or whether they actually are trying to get informants [12:00] and then are effectively lying around the edges. Of course, that's what we're saying. [12:05] But people are saying that they are ginning up the hate. [12:09] Now, that's why that was why I asked him. You don't need to re-ask it. [12:13] That that is the question. Do you believe that they're doing this legitimately, you know, to get an informant in there or are they ginning up their own [12:23] business? I am going to try to. I am going to take a step back from this case. [12:28] I'm going to let because I really believe they are. But let me say this. [12:30] I absolutely believe and I believe to a certainty that there are many groups who do exactly that. [12:37] That's what I mean. That they gin up hate, gin up distrust, gin up controversy in order to raise money. [12:43] to then say they're doing something about it. And that's disgusting. [12:49] So I guess the answer is yes to you. You don't. I don't know. [12:53] I mean, it just seems so antithetical to what any of these places should be about. [12:58] Andrew, follow the money, follow the incest. And I'm a big follow the money kind of guy. [13:02] You know, but no, no. The question is, what is the money being used for informants in a genuine way or not a genuine way? [13:08] And that's, I think, going to be very hard. There are times I admire your cynicism and times when I wish you had more cynicism. [13:14] You know what I mean? Throw some cynicism at this one. [13:17] Jay, let me ask you about the open A.I. trial that's starting today, that federal trial. [13:22] What what should we watch for this? What do you anticipate? Walk us through the legal expectations, what this is going to mean. [13:29] I think there are there are two things going on here. One, I will call civilian to civilian. [13:36] OK, was was Musk wronged in the way he was enticed to support and provide money to the organization? [13:47] And then another one is the charitable issue. [13:51] You know, this this was an entity that was started for a charitable purpose. [13:54] We have the state of Delaware, the state of California involved here. [13:57] The judge has addressed that that hasn't really been talked about that much. [14:00] But when can a charity switch to being a for profit entity and how does that take place and who are you supposed to protect when that takes place? [14:12] Is the public getting a benefit here and who determines whether the public benefit is appropriate enough, too little and the like in this type of situation? [14:21] That's a big issue going forward. [14:22] I mean, going back to to the Southern Poverty Law Center case, one of the disturbing things for me and should be disturbing for the public is we're subsidizing that in the tax breaks that these entities receive. [14:35] These 501c3 entities raise more money because the American people are willing to give them a tax break. [14:44] So do you just on that point, do you think 501c3, do you think all charities should be investigated on this? [14:51] I don't think we should take that. I don't think all charities should be investigated, but I think that we need to look at the regulations, the reporting, the representations that you make. [15:00] I know the Treasury is doing that. You know, people should tell us, you know, believe it or not, there's a Treasury regulation that does allow you to not report as payment to somebody payments to informants. [15:15] But those informants, and let's just say they're genuine informants, they still have to record that on their taxes. [15:20] They ain't recorded as an informant payment. [15:24] Were they doing it? [15:26] Not that I've seen. [15:28] Okay. It'll be very interesting to see. [15:29] Right, no, no. Andrew, if I say, you know what, Andrew, come talk to people, give me information, here's a sum of money, you're going to report that to the IRS. [15:39] Right. And you're saying that those informants were not. [15:41] I don't, I have no, I have no indition that they did. [15:44] So, we'll just, we'll end on, can we end on. [15:47] Did the one guy record on his taxes? Six grand taking the fall? [15:51] Yeah, right, exactly. [15:53] So, we'll end on prediction markets, because every week, something else, just, I see it, and it just seems like the whole thing is just out of control. [16:01] It's just, you're never going to be able to police inside information. [16:05] You're an SEC guy. [16:08] We do it really well around securities. [16:11] What's going to happen in this whole industry? [16:13] Is it okay what's happening? Is it, isn't there going to be? [16:15] No, I don't think the, I don't think the American public thinks it's okay that somebody takes a government secret and trades on that. [16:23] Now, you know. [16:24] It's just rife with, with the opportunity to know something that you shouldn't know and to make lots of money on it. [16:29] Yes, it is. [16:30] And I don't see, it covers so many different things. [16:33] You've got to, you know, with stocks or opts or whatever, you know, futures. [16:37] That's with, it's a really narrow little universe to have to look at. [16:41] You have to look at virtually everything in the world and decide whether somebody knew something to be able to have made this. [16:46] One of the key things in securities and commodities is the information that you're using. [16:54] Is it, is it information that you have a duty to keep confidential and not profit on? [16:58] And, and at, at bottom, at the nub of it, that's where we need to start looking at these things. [17:05] Because we, the horses before the cart or whatever it is, they're out there. [17:08] We're doing it and no one really thought this through. [17:12] But let's, let's start with that. [17:14] Does the person have a duty to keep it confidential? [17:15] I had a bet on a couple of words you were going to say and I'm, I'm trying to get you to say it. [17:21] You're trying to. [17:22] It would have had a huge payoff of, uh, like, like the president's interview. [17:27] There are people betting on whether he'd say Iran wants a deal or whether he'd say Barack Hussein Obama or, or whatever. [17:34] I mean, that's crazy that we're betting on things like this, isn't it? [17:38] I would agree with you, Joe. [17:39] Do you think that there should be rules in place, very specific rules in place? [17:44] Apparently the president, by the way, not only said that he is not in favor of, of this whole world, [17:49] which is surprising to me because I think people thought that given his son's involvement in this, that it was being blessed. [17:56] He was basically saying, I don't like any of it. [17:57] But apparently they told White House official members not to, not to be betting on what they're hearing. [18:03] The question is whether you think that there should be a broader restriction on all government employees. [18:08] I don't know what, what you think they, where, where do you think the line should be? [18:11] I, I clearly think, you know, national secrets, the types of things in the case that we charged, um, related to the raid on Venezuela, those have to be protected. [18:21] You, you, you can't. [18:22] Well, that's just top secret clearance. [18:24] Top secret, right. [18:25] You can't signal. [18:25] That should never be out there. [18:26] To the, to the market. [18:27] Right. [18:27] I, I guess I'm asking a different question. [18:29] Do you think there should be a broad ban that says if you work, if you're a government official of, uh, some sort of, uh, politically exposed person, I don't know what you want to classify them as. [18:39] In the White House, in Congress, wherever. [18:40] Having a, uh, having a polymarket or, or Cal-she account or what have you is verboten. [18:46] Yeah, I, I think we should definitely consider that question, whether it's an outright ban or limitations. [18:54] But I, look, I'm going to put my private sector hat on. [18:56] If I were running, you know, or a, a member of a financial institution's management, I might just say, you know what, until this gets sorted out. [19:06] They're going to do it themselves. [19:07] But we've talked, we've talked about this for a very long time. [19:10] I've always thought, in the same way that you might argue polymarket and Cal-she should say, you're, these are, this is a politically exposed class of people. [19:18] And we're just banning them either from our platform completely or from certain types of trades. [19:23] You could do that. [19:24] But I've always thought, we talked about it when you ran the SEC, that if you were a broker, a broker, you're, if you're Morgan Stanley, Goldman Sachs, Merrill Lynch, whatever it is, that you would say, my client is a politically exposed person. [19:35] There's a certain policy for how these people are going to trade that, and we're going to take it upon ourselves to do it. [19:42] They don't. [19:44] Look, you, you know where I am as a citizen on this, which is members of Congress, people in sensitive government positions. [19:50] They should actually have a very limited window every year, with exceptions for hardship, where they can trade. [19:56] Other than that, you know, be fixed, be exposed to the American economy, join with your fellow Americans. [20:03] You know, day trading when you're in one of those positions makes no sense. [20:07] We've got to go. [20:07] Jay, thank you.