On September 29, Kevin O’Leary, Chairman of O’Leary Ventures and ‘Shark Tank’ investor, offers a detailed analysis of the government shutdown, crypto regulation, and the commercial real estate crisis on Fox Business show Varney & Co. (which is hosted by Stuart Varney).
Government Shutdown: A Non-Issue for Investors
Kevin O’Leary expressed that he is not overly concerned about a government shutdown from an investor’s standpoint. He believes that the market is largely indifferent to such events, as they usually get resolved within a short period, typically around 10 days. O’Leary clarified that a government shutdown is not a debt default but rather a result of politicians failing to cooperate. He emphasized that when such shutdowns start affecting the daily lives of voters, politicians usually find a way to resolve the issues. He also noted that the shutdown is more damaging to politicians’ brands than to the market, as it exposes their inability to govern effectively.
As CryptoGlobe reported earlier, on 30 September, the United States Senate narrowly averted a government closure by approving a temporary funding bill just three hours before the federal agencies were due to shut down.
As reported by CNBC, President Joe Biden immediately enacted the legislation, ensuring that federal operations continue for an additional 45 days. The provisional funding solution, formally referred to as HR 5860, provides extra time for both legislative chambers to solidify their budgetary agendas. The bill, consisting of 71 pages and orchestrated by House Speaker Kevin McCarthy, designates money for emergency relief but does not offer any fresh financial support for Ukraine’s continuing strife with Russia.
Earlier on the same day, the House of Representatives had given the green light to the short-term funding measure, passing it with a 335 to 91 vote. The House plans to recommence its lawmaking sessions on the upcoming Monday.
Digital Currency Regulation: Stifling Innovation
Kevin O’Leary expressed significant concern about the state of digital currency regulation in the United States. He attended a recent digital currency hearing and was struck by the level of criticism aimed at SEC Chairman Gary Gensler. O’Leary described the atmosphere as one where Gensler was “fried like a chicken,” emphasizing the intensity of the scrutiny. He expressed frustration over Gensler’s approach to regulation, stating that it is causing the U.S. to lose its innovative edge in the crypto space.
O’Leary revealed an upcoming development in Abu Dhabi that could potentially shift the center of crypto innovation away from the U.S. According to him, Abu Dhabi is planning to launch a new digital currency exchange called M2. This exchange aims to be fully compliant and is backed by billions of dollars, offering transparent and stable ownership. O’Leary emphasized that M2 is designed to replace both FTX and Binance, two major exchanges that have faced regulatory hurdles in the U.S. He argued that M2 could become the new standard in digital currency exchanges, particularly because holding cryptocurrencies like Bitcoin requires an exchange for liquidity.
According to a report by The Daily Hodl, he said:
“This hasn’t been announced yet, but in Abu Dhabi, they are planning to launch a new exchange to replace both FTX and Binance, and they’re going to get billions [of dollars] on it called M2. [It is going to be] totally compliant, backed by billions of dollars, incredibly stable, ownership transparency and it can be used by anybody in the world legitimately on a compliant basis… It’s going to become the new standard in exchanges because you can’t hold Bitcoin without an exchange for liquidity.“
Furthermore, O’Leary mentioned that two bills related to digital currency are currently going through Congress, and Gensler is blocking them. This has led to a lot of frustration among lawmakers who feel that the U.S. is letting innovation slip away. O’Leary argued that such developments indicate that innovation is shifting away from the U.S. to other countries like the UAE, making it a missed opportunity for the United States.
Commercial Real Estate: A Looming Crisis
O’Leary warned of a growing crisis in the commercial real estate sector, particularly concerning regional banks. He explained that many buildings are financed with debt raised at lower interest rates, and now they are facing refinancing at much higher rates, making them uneconomic. O’Leary pointed out that this situation could put significant pressure on the loan books of regional banks, which could, in turn, affect small businesses. He also mentioned that the debt was raised for these buildings at rates of 3-5%, and now they are dealing with 9-14% in refinancing them, making these buildings uneconomic.
A Plan to Protect Payroll Accounts
To mitigate the impact of failing regional banks, O’Leary endorsed a plan proposed by Senator Hagerty. The plan aims to guarantee payroll accounts in these banks for up to $100 million for 24 months. O’Leary argued that this should be a bipartisan issue as it aims to protect jobs in America. He emphasized that this is not a bailout but a necessary measure to ensure financial stability and protect employment.
O’Leary’s Involvement in Washington
O’Leary mentioned that he visits Washington every month to understand the political climate better. He believes that being physically present in the halls of power is the best way to influence policy, particularly for small businesses. O’Leary stressed that merely writing letters or sending tweets is not enough; one has to meet the policymakers and their staffers to make a real impact.
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