Bill on Secure Freedom Radio 12/6/21
Frank Gaffney (00:00):
We’re back and a pleasure to say we are joined by Bill Walton, a man that is a frequent guest of this program. In fact, just about every week, we talk with him about matters involving his particular background and expertise, finance, and what things happening in that domain mean for all of us. Oftentimes, a special focus is China, and that will be the case today. Bill Walton has been a successful financier in his own, right on Wall Street with the Allied Capital Corporation. He has been a leader of the conservative movement at the Council for National Policy. And he is these days, the very accomplished host of a terrific television podcast, the Bill Walton Show. And I commend it to you very highly. Bill, it’s good to have you with us as always, sir. Welcome.
Bill Walton (00:54):
Great, great to be with you, Frank.
Frank Gaffney (00:56):
Much to talk about in your domain. Bill, there was a webinar that our committee on the present danger in China held on Thursday of last week. I was very pleased that you were one of those who made a presentation. I’d be interested in your take at large, but also specifically about the topic that you addressed, which was as a former master of the universe, as they say yourself, what are these capitalists on Wall Street thinking when they take steps that underwrite the mortal enemy of this country with their client’s money?
Bill Walton (01:34):
Well, first, Frank, let me commend you for the webinar. The group of people we had on the call just absolutely nailed all the risks that the Chinese Communist Party presents to us and to its own people. And I think we’re now in the last five, six years, more and more and more of us are growing aware that they’re not exactly benign force. Meanwhile, my colleagues on Wall Street are tending to behave like it’s still the nineties, or at least either early two thousands and they’re proceeding a pace to do as much business as they can with China. I think at 70,000 feet or 35,000 feet, what they see is the 70 trillion of investible assets that some people project would be on the table by 2030 in China. And they’ve also been raising capital for Chinese companies to the tune of almost 3 trillion.
And of course the fees on that have been enormous. And so what you’re seeing now is still a rush of U.S. financial services companies to go into China, JP Morgan, BlackRock, of course, and then Citigroup just joined the crew just this last week filing for a right to have a wholly [inaudible 00:02:49] financial investment subsidiary there. So it is two different worlds. And if you ask me to characterize their attitudes. Well, I used two words last week in the seminar, it was cynicism and greed. I think I should have added arrogance. They just see that they’re above nation states when it’s come to allocating capital. I think we’re going to have to be watching them and working to reign and their behavior in China.
Frank Gaffney (03:19):
Yeah. Cynicism, arrogance, and greed is an unhealthy combination. It seems to be for our country for sure. But let me just ask you, Bill, there’s a lot of talk at the moment that it’s not so much back to the nineties as it’s forward to what Charles Schwab of the world economic forum likes to call “the global reset” by which, as I understand it is meant the idea that the world is going to be reordered and it will be run by capitalists, the masters of the universe. And in some combination it seems the Chinese communists, and it’s not entirely clear to me why the capitalists think they’re going to prevail in that situation. But talk a little bit about that dynamic and whether it’s at work here as well.
Bill Walton (04:13):
Well, I think most of the investment firms, investment banks feel that they’ve got a special relationship with the Chinese Communist Party. Last year, for example, last summer, when the party cracked down on tech companies and tutoring companies and some other companies that were out of favor. And so their stock prices crater, there was a big selloff in the market naturally. But what happened was the key people from some of the securities firms, JP Morgan, and I think BlackStone, and some of the other companies doing business, there were summoned to a private meeting with the party officials saying, “Don’t worry, it’s all going to be okay, we’ll take care of you.” And they emerge from that meeting recommending that investors double down their investment in China. And so they-
Frank Gaffney (05:00):
I think BlackRock, particularly, was one of those.
Bill Walton (05:05):
Frank Gaffney (05:06):
Larry Fink [crosstalk 00:05:08]
Bill Walton (05:08):
The history here is that BlackStone founded BlackRock and then BlackRock spun off, so Stone or Rock, I get it confused because I know both the firms pretty well.
Frank Gaffney (05:19):
Right. Well, the point is that what the Chinese have established, it seems to me is increasingly their ability to call the tune. In fact, now Bill, as I’m sure you’re aware, the party in China, the Chinese Communist Party that is, has been essentially putting on notice, not just financeers, but American businessmen more generally that they must tow the party line and not just tow it, but literally speak about it, talk it up, propound it in Washington and other circles. And I guess the question is, is it possible that capitalists who are doing their bidding may find themselves in a position that fellow travelers or those who have aided and embedded these Marxists in the past have found themselves in which is to say dead?
As it happens, Bill, just this morning, a friend of mine sent me a video about a famous interview that a prominent KGB defector from the old Soviet Union, by the name of Yuri Bezmenov gave in which he talked about not only the methods by which the communists take down countries like ours. Four phases, he calls it demoralization, destabilization, crisis, and then normalization, which is to say when they’ve sexually taken over and he says in every case, there were people who were part of this revolutionary moment who suddenly far from successfully translating their help to it into dominance after the takeover, the communist revolution, what have you, they’re all lined up and shot.
And he said, that will happen, absolutely, to Americans who are currently playing ball. In that case, he was talking about with the Soviets. And I think it applies equally to those who are playing ball currently with the Chinese communist. Your thoughts?
Bill Walton (07:30):
Well, I think that’s certainly true for any Chinese nationals that are doing business there. Even Chinese nationals living here in new United States, working in the investment business or any other business are subject to the long arm of the Chinese Communist Party, if they have relatives living back in the country. I think people who are not Chinese may be less aware of the risks. And part of that I think is timeline perspective. Most of the people in the investment business are thinking more short-term certainly than the Chinese Communist Party and their feeling is if they can get in and get the fund raised and do pretty well, they’ll make money while the sun shines. And I think they’re being given all sorts of assurances that, well, we’re maybe cracking down on these other people, but you’ll be okay.
We can go back to the French Revolution and the Russian Revolution. And there are a lot of aristocrats in both Russia and France prior to those revolutions that were supporting their aims. Well, take a look at what happened. There’s something called the guillotine. And then of course the Russian Czar was assassinated or shot with family. So that-
Frank Gaffney (08:42):
A lot of whites wounded up in the gulag. No, it does, indeed. So Bill Walton, let me just come back to something you touched on a moment ago there, whether the bloom is coming off the rose with respect to investing, at least in the Chinese tech companies, ride sharing apps conduct in all of this has been emblematic of real problems with American investors in Chinese companies that are controlled, let’s be clear, by the Chinese Communist Party. Remind us what happened to DiDi, back when it did its IPO and what’s it up to at the moment? And what does it suggest about how Wall Street is perceiving, not just that company, but perhaps others as well?
Bill Walton (09:31):
DiDi is the ride sharing firm in China, analogous to Uber here. And DiDi really, I think, foolishly decided they were going to go public in the United States, in the New York Stock Exchange without really getting a pass from the Chinese Communist Party. Well, that didn’t last. They cracked down on them and they’ve now ordered DiDi to de-list from New York Stock Exchange. And they’re probably going to end up moving over to the Hong Kong Stock Exchange. But the issue for a company, any company of that size and DiDi at its peak, I think, had a market cap is 68 billion. It’s now down to 38 billion. And I think it’s, last I’ve checked, I think it’s fallen further from there. And if they moved to the Hong Kong Exchange, which is not nearly as liquid or has as many investors involvement, they’re never going to get the valuations they get here in the United States.
But the other piece that we need to be mindful of is the SEC, much to my delight, is implementing its rule that requires Chinese firms to submit their audits to the auditors here in the United States. Basically, PCAOB, Public Company Accounting Oversight Board. And it’s not just the numbers, the pieces of paper, the balance sheet, but it’s all the work papers. And the work papers include emails and include confidential information about technology and other sorts of relationships that these companies have that go into the audit process. Chinese don’t want that. And they’re concerned that what they’ve been up to will be disclosed through this process. And so we’re going to see massive shift of Chinese companies out of here trying to go to Hong Kong. Of course, if I know my friends in the investment banking business, well, they’ll try to get creative instantly to figure out ways to do workarounds here and maybe there’s-
Frank Gaffney (11:33):
And one of those, Bill, that our colleague Roger Robinson has been warning about for some time is through the sale of A shares in Chinese capital markets, Hong Kong, or mainland, which then get picked up by Larry Fink and his friends and put into index funds. And so it can continue to tap into American investors who are unwitting of the extent to which they may be exposed to real risk in this fashion. And this comes at a moment, Bill, as you know, when an outfit that looks out for consumers, it’s called Consumers’ Research, been around since I believe 1929, has taken a very high profile role in warning about these kinds of practices.
Specifically, they’ve run a spot about what Larry Fink personally is doing in this regard and Will Hild, I think his name is, the executive director of the outfit sent a letter to 10 U.S. governors whose states are deeply invested in China with BlackRock, particularly, warning them from a consumer’s perspective that there are problems with protecting investors. There are problems with human rights values. There are problems with national security associated with what Larry Fink is up to with A shares. There’s some 4,000 of them now in our markets and other investment vehicles, is that the kind of workaround that you’re anticipating. And if so, should we be shutting that down rather than allowing the Chinese essentially de-list and then come in through the back door?
Bill Walton (13:17):
Frank, you ought to take a bow on this one because the work you’ve been doing and with the other people in the webinar… what the Consumers’ Research people responded to was the U.S., China economic and security review commission, which detailed the abuses that were going on and they alertly read it and reacted and felt like American investors ought to understand what the risks are. But I think what’s happening here is everybody’s beginning to understand that their investment dollars are not just going into sort of Coca-Cola and maybe that’s not a great example, or Walt Disney, because both those companies are pretty woke. But in any event, they didn’t realize quite to the extent what they’re invested in Chinese companies and what the risks were there. And yeah, they did send a letter to the state of Washington, Florida, New York, Oklahoma, about the extent of exposure they had. And it’s really, I think, a signal to ordinary people who read this, they have some 2 million subscribers that they got to be talking to their stock broker about what’s in their portfolio.
Frank Gaffney (14:29):
Well, as you know, Bill, one of the things that we launched with this webinar on Thursday was a new campaign aimed at trying to arouse the public once they are aware of this problem. And when I say the public, I mean the roughly 150 million Americans who are now in the capital markets that they most likely have some of their portfolios invested, whether they want to or not, in Chinese companies, including some probably that are directly tied to the People’s Liberation Army, which threatens all of us needless to say.
This is at the MadAsHellCampaign.org. You can see both the webinar there and also sign a letter to President Biden, urging him to end this practice of underwriting with our money. The most dangerous enemy this country has ever faced, point one and point two, to designate the Chinese Communist Party as the transnational criminal organization that it is.
We think these are two signal things this President could do, and we need to get the American people, as I say, now joining together to try to counteract what, you’ve given me credit for it, I don’t think I deserve it, but I think the Committee on the Present Danger of China certainly does, Bill, in trying to help with some of the great people who spoke at this panel, including yourself, get the word out as to what’s being done with our money and see if we can bring it to a stop.
Bill Walton (16:14):
The thing that was delicious about this is he makes the point that BlackRock is virtue signaling in the United States. They’re talking about all this glorious ESG investing they’re doing while in the meantime, investing in China, which was one of the worst ESG offenders in the world.
Frank Gaffney (16:32):
[crosstalk 00:16:32] Environment social justice governance not so good in China. Bill, we have to leave it at that. Thank you so much for your time today. As always, we’ll look forward to visiting with you again next week. In the meantime, I know you’ll keep up the good work at your Rappahannock Investments outfit, and you will be on our mind as we watch these very important developments over this week.
Next up, we’ll talk a bit more about all of this with Gordon Chang, get his take on it and more, right after this.