Disney CFO Hugh Johnston & Fmr. SEC Chair Jay Clayton 2/2/26

15:20Hugh Johnston:We're learning more about the cryptocurrency business connected to President Trump's family. The Wall Street Journal reporting saying that lieutenants to a top government official and member of the United Arab Emirates royal family reached a deal literally just days before President Trump's second inauguration last year to buy a half billion dollar stake in the Trump family's crypto business, World Liberty Financial. This comes months before the Trump administration approved the sale of advanced AI chips to the UAE. And if you remember, the prior administration would not sell those chips to the UAE.

15:55Hugh Johnston:The journal says that deal resulted in close to$190 million flowing to Trump family entities. The White House didn't immediately respond to a CNBC request for comment but it told the journal there were no conflicts of interest surrounding the deal. A World Liberty spokesman also told the journal that President Trump had no involvement in the deal. But again, there's a question about when you have private enterprise and you're in the government, what the role of all this should be. Clearly, obviously, the President's kids have this business, but President Trump is part of that business. And then, of course, and specifically And specifically, just to make one point on this, the issue is when you have foreign governments effectively making investments in your company.

16:43Hugh Johnston:It's different if, I mean, to some extent, maybe different, or at least the conflict is less severe. Well, this guy, did he do it as a representative of the government or personally or what? The gentleman? No. It's the government. It's the sovereign fund. It's the government making an investment in... Because the way that the story was written, a lieutenant to a top government official and a member of the United Arab Emirates royal family. He was the one who negotiated the deal. Right. On behalf of the country. He made the investment. Oh, he made the investment for the country. I believe it was the Sovereign Wealth Fund that made the investment.

17:20Hugh Johnston:I don't want to misspeak about this. But, you know, the Wall Street Journal reporting was that. And then the question is, should that be disclosed? especially then when you're making separate deals about chips and other things.

17:34Jay Clayton:And then you're going to, you know, you'd have to find the quid pro quo smoking gun, probably like all these things.

17:40Hugh Johnston:They would say that is the quid pro quo.

17:46Jay Clayton:Well, that is, they would say that's... And the Trump White House says no, had nothing to do with that, right? What they say, that there was no conflict of interest surrounding the deal. I thought the latest thing was$4 billion of crypto wealth is accrued, I suppose. So this is the... I mean, look, whether you can find a smoking gun or not, there's the appearance of impropriety. And that's been the problem with all of these things all along. And we won't do any whataboutisms.

18:17Hugh Johnston:Disney's shares trading higher following quarterly results. The company benefiting from stronger than expected streaming profits. I want to talk about that and so much more. Hugh Johnson, Disney's CFO. Good morning to you. Good morning. We got to talk earnings, which we'll do. And we also have to talk a little bit about the succession planning. I don't know how much you can comment on that, but that's in the news right now about who may take Bob Iger's job. But let's start with the earnings piece of this. So the streaming piece, very, very positive. Exactly. Let's talk about that. But let's also talk about what you're seeing at the parks, Because that seemed like a bit of a more complicated story.

18:55Jay Clayton:Complicated, but strong numbers. Overall, the company really has a lot of momentum right now. And that is what I think is most encouraging about the quarter. And I think that's what you're seeing in pre-market. 5 % revenue growth is a terrific number. And it's pretty broad-based. Parks, streaming, even total entertainment grew revenue 7%. So I certainly feel good about that. The two big monetization engines, streaming and experiences, both growing profits strongly and well ahead of consensus. And in addition to that, the balance of the business is actually performing nicely. And on top of that, the creative engines are working well with the$3 billion movies that we had last year.

19:33Hugh Johnston:To the extent that Disney is an interesting barometer of the consumer, the reason I even was pointing out or saying it seemed more complicated, the park story. It seemed on the domestic park story that that was internationally great. Domestic seemed a little bit slower. And I was trying to just understand what's going on.

19:51Jay Clayton:Well, revenue was up about the same domestic and international. So we certainly feel good about that. In terms of the operating income, there's a little bit of choppiness. But that's largely because of the investments that we're making in those businesses. So keep in mind, we launched the ship in Q1. And we still grew revenue, or we still grew profits 6 % in the quarter in experiences. We're going to launch another ship now in Q2. and we're opening up Disneyland Paris, the World of Frozen and a lot of other attractions. There's a one-time cost attached to that. So the back half is going to be stronger for sure.

20:24Jay Clayton:But the fact is, the business has good momentum right now.

20:27Hugh Johnston:In terms of the streaming piece of this, streaming versus linear right now, that's the other big sort of question. You guys have always argued you need the linear piece to drive some of the content that lives in streaming. Yeah. Does that still hold?

20:42Jay Clayton:Yeah, very much. I tend to think of it as just two distribution channels for largely the same content. So consumers are going to shift as they choose to shift. And when they do that, we'll be there to catch them. So whichever way they want to go, I know you all are a subject of the split. But it's an interesting one because Warner Brothers is doing the same thing right now. Yeah, they are. So we feel good about the integration that we have at this point.

21:09Hugh Johnston:And Warner Brothers may or may not do that, depending on how the deal works.

21:12Jay Clayton:Is a drag on the business or no? I just think of it as one channel. And as consumers are making the shift, obviously it affects the numbers. But in totality, we feel good about it. You said it doesn't make sense for Disney. Do you think it makes sense for Comcast and Versant? Does it make sense for Warner Brothers? Yeah, I mean, I'm not going to try to comment on what everybody else's strategy is. I like where we sit. I like the hand that we've played. Even if you look at some of the evolutions that are happening in the business right now with Warner Brothers on the market. We really did that back in 2018 when we did the Fox deal and before that Pixar and Lucas and all of the acquisitions.

21:50Hugh Johnston:Do you have a perspective on the buyer, though, of Warner and what that ultimately means to the film business, for example, meaning the theater business and the like? Would you prefer Paramount as a buyer? Would you prefer Netflix as a buyer?

22:03Jay Clayton:I wouldn't say we have a strong preference one way or the other. That said, I do think the government is going to weigh in pretty heavily on that.

22:11Hugh Johnston:But the Department of Justice is going to call you. And they're going to ask you to weigh in and say, do you think that one is better than the other for your business? Yeah.

22:20Jay Clayton:And when they call, we'll share that news with them. So you do have a preference. Well, we'll take a point of view at the time. I would say this. Netflix would be an awfully big company at that point if the two came together. But if you look at what they're trying to do in a lot of ways, they're trying to do again what we already did, which was they have the distribution. They're trying to add more IP, which is something they said they didn't need, but evidently they do.

22:46Hugh Johnston:In terms of your spending on entertainment versus on the streaming side versus sports rights, how do you see that going forward?

22:54Jay Clayton:I think we'll probably continue to see an escalation slowly in both. We're at about the right levels. Sports are going to continue to get marginally more expensive, although I think we're through the worst of the inflation in sports. And then from a streaming perspective, I think you'll see us internationally continue to invest a little bit more. In the U.S., I think we have plenty of content. I think we're in a good spot. Can we talk succession? I'm not going to offer much. I mean, if we can keep it between the four of us, sure.

23:25Hugh Johnston:Just be too. Well, look, the news reports suggest that, A, Bob, as in Bob Iger, may want to step down earlier than the contract is finished, effectively, which means something will happen sooner. And that Josh is the likely successor.

23:43Jay Clayton:Yes, I've seen all those news reports as well.

23:45Hugh Johnston:And that Dana is not, for whatever reason. I'm just reporting what the reports say.

23:50Jay Clayton:Tell me, that's a very good summary, Andrew. It is an excellent summary of what's been reported in the news. Here's what I would say, Andrew. I think the board has really been very transparent about this process. I also think they've been very diligent. James Gorman and the entire board, I think, have spent an enormous amount of time on this. They previously said they would make a decision in the first quarter, and they're going to. The one thing I do want to add, though, is whomever the new CEO is, they're getting a business that has a lot of momentum. If you go back to what Bob said a couple of years ago in terms of the studios and turbocharging the parks and making streaming profitable, all that stuff has happened, and that's why you see the good results right now.

24:34Hugh Johnston:Maybe I'll put it in this context. Given now that you... Look, you were at Pepsi. You're now at Disney. You understand the skill sets that effectively require to run a business of this magnitude. dude. When you look, just take the names off the table. You know, there was a view that if you knew theme parks, you didn't know the entertainment business. This was what people used to say. And if you knew entertainment, you might not know the theme parks in the same way. A, what do you think of people who say that? And B, when you think long term about whatever you think Disney looks like, which of these businesses is ultimately going to be powering the company?

25:16Jay Clayton:I think they're both really important businesses. And the reality of it is when you have a new CEO, they rarely have all of it anyway. So I think we're fortunate in that we've got a couple of really terrific candidates. And whatever the board chooses, I think the team will actually rally around that person and the company will continue to perform really well. I mean, if you've got a really good theme park guy, if he ascends to the head of the company, you've got to find a really good theme park guy. You already had a really good theme park guy. Who knows if he's any good at running all the other stuff.

25:49Jay Clayton:So I don't know. It's tough. I wouldn't envy you. But think about it, Joe. That's true in almost any company unless they have a single business. I can't see how theme park has anything to do with all the other. People said that there's a little synergy. I know. I mean, I understand, you know, you create content and then you make a ride based on it or something. But that's, you know. It's pretty powerful, actually. That's what drives all the upside is all that I think. Let me ask about the theme parks very quickly, though. There is a question about attendance there. It was down in the September quarter.

26:18Jay Clayton:Right. But up in the quarter we just ended. Right. But is that a reflection of new theme parks from Universal and others down there? Is that a reflection of the American consumer? Where do you see people? I don't think it's much about the American consumer, Becky. We talked about Epic, the new park down there. And it's a good park. and frankly, we plan for it to have a bit of an impact, and it's playing out pretty much exactly the way we expected. So from that standpoint, no particular surprise. The American consumer, I would characterize it as the upper six deciles, which are the ones that are kind of most relevant to coming to Disney parks, are still doing quite well, and they're still spending on those types of things.

27:01Jay Clayton:It is and it isn't, though. Compare it to going to a Knicks game, and that's a couple-of-hour event. Even compared to going to the movies right now, it's a few thousand dollars, but it's a week-long vacation. So from that perspective, I think the value is actually pretty good. And the fact is the feedback we get from the people who go, they love it. And the people who go to the cruises, they really love it. It's 28 degrees in Orlando. That doesn't help. Let me look at the dailies. But California is 80.

27:29Hugh Johnston:Let me ask you a different question about the consumer right now. There is a big question mark right now about employment in this country. and whether we are about to hit some kind of inflection point with unemployment, whether you think it's AI or something else, and we talk about AI as well. Do you fear that? I mean, you saw the number of companies even in the last week that were laying off employees and what you think that portends for either folks buying the streaming service, going to the theaters, going to the parks. What does that look like to you over the next 12 months?

28:02Jay Clayton:Yeah, I mean, what we've seen is Disney tends to power through those things reasonably well, because the priority in terms of a vacation is something, obviously, if you're out of work for an extended period of time, that's a challenge. But for most people, they will prioritize a vacation, and particularly a Disney vacation is a high priority for families. And let's face it, once you tell the kids you're going to Disney, you're probably not going to reverse that one.

28:28Hugh Johnston:Do you think that you're going to see more moving around on streaming, for example?

28:31Jay Clayton:No, I actually don't. Streaming is still a relatively good bargain in my estimation compared to what people used to pay for cable. So if you think about cable when you think about having three or four television sets in your house, the cost of that relative to the cost of a couple of streaming services, streaming's cheaper and it's actually better because you get to choose what you want to watch and when you want to watch it.

28:52Hugh Johnston:And then let me ask you, since I mentioned AI, some people think that that is powering or at least adding to some of this unemployment question. When you think about the next year at hiring and how you guys are using AI, what does that look like to you?

29:07Jay Clayton:It hasn't affected hiring at all so far. I would tell you that. In addition to that, the way we think about AI is basically making our people more productive and actually more creative and building more and better products. Not really about employment at this point. And honestly, I do think right now There's a lot of talk about AI connectivity to jobs. I'm not sure that's exactly true yet. I think it may be more the fact that people are hiding a little bit behind AI for some of the things that are going on in the job market. You know, if you go back to the old statement, technology tends to get overrated in two years and underrated in 10 years.

29:42Jay Clayton:AI may fall into that bucket. Is there a model that you're using over Disney right now? We're thinking about it from five perspectives. Number one is managing the streaming product. Number two is managing the guest experience. Number three in the parks. Number three is managing labor. Number four is video creation and production. And then number five is, I'll call it the office.

30:06Hugh Johnston:But so you have a partnership, for example, with OpenAI for some of the characters and things that people can use. Correct. Over 200 of them. But longer term, does that mean that OpenAI is your model of choice that powers all of the five things you just discussed? No, we're not. Or are you using Anthropic for certain things? Are you using Gemini for certain things? We're very open on it right now.

30:25Jay Clayton:So we'll have a period of time where we're going to work exclusively with OpenAI, but it's a relatively short period of time. I think the reality is for a company like us, we need to let the models play out because it's not clear. And I wouldn't be surprised if there were multiple models rather than a single model going forward. Okay.

30:42Hugh Johnston:It's great to see you. Great to see you. Thanks for coming in. Thank you. Great to be here. Thank you. As always.

30:47Jay Clayton:Next up on Squawk Pod, we are joined by the U.S. Attorney for the Southern District of New York and former SEC Chair Jay Clayton. How he sees President Trump's nominee for Federal Reserve Chairman, Kevin Warsh, after months of uncertainty. Look, Kevin's a super smart guy. He knows that the balance sheet, the rates, reserves, they're all related in terms of what that means for ease or tightness of financial conditions. I think he'll be a very good communicator.

31:21Jay Clayton:Never bet against American grit or American energy. Through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost and a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. that's unstoppable energy

31:50Jay Clayton:it's smart to always have a few financial goals and a really smart one you can set earning cash back on what you buy every day and with Discover you can get this Discover automatically matches all the cash back you've earned at the end of your first year seriously all of it and we trust you to make smart decisions after all you listen to this show See terms at discover.com slash credit card. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading.

32:35Jay Clayton:Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. This is Squawk Pod with Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Stand Joe Biden in five seconds. Four, three, two, his mic, two. Good morning and welcome back to Squawk Box, live from the Nasdaq Market site in Times Square. Treasuries, after the announcement last week, and then reports about Trump making, I don't know, a joke. about suing Kevin Warsh if he doesn't lower interest rates. It'd be funny if we could just assume it was a joke, but you just never know a lot of times with what, is that suable action by a Fed chair if he doesn't lower rates?

33:27Jay Clayton:Could you actually, I think that does sound more like a joke than an actual, but that does obviously put pressure on the new Fed chair, but it shouldn't have picked a guy that, picked someone that was gonna do what he wanted

33:37Hugh Johnston:if he really wanted to control the Fed. But I go back to the idea that ultimately you have to, it's not just one human. It's the rest of the people, right? You have to get all these other people to get on board with you. We've never said that about the Fed chair. The Fed chair has always been able to do what he wants. Because they all get in line because that's what he has to do. Well, so that's the interesting part. Historically, they have gotten in line, but they all had a sort of, the relationship between them was actually quite good. The relationship going into this is going to be much more complicated.

34:09Hugh Johnston:Right. Well, that's what I'm saying.

34:11Jay Clayton:Jason Furman had a very interesting piece that he put out. He talked to several people and then actually put his thoughts down on paper. He was complimentary. He was. He said he is all in favor of Kevin Warsh and that he would not argue against him. But he did say that this is going to be a difficult thing for him to do, that he has to get in there and do all of these things. And he offered some advice along those lines. But he did say that he's happy to see Warsh in the position.

34:40Jay Clayton:Our next guest will weigh in on the future of the Fed, the state of business in New York City, and much more. Let's bring in Jay Clayton, U.S. Attorney for the Southern District of New York, former SEC chair. Should we televise during the breaks, do you think, or put it on a podcast? It would be must-see TV. Even more must-see. Cancelable. Those two go together. So I'll start with, you know, we'll talk about the Fed, but talk about New York City. is this the ghost of Christmas future? A administration that doesn't know how to shovel snow, doesn't know how to get homeless people off the streets so they don't die?

35:19Jay Clayton:I mean, is this, are we seeing Mamdani in slow motion already, do you think? I mean, look, this is the coldest winter that I can remember in New York. Like Rod Stewart's coldest winter. It was 14 years, and it was 14 years. It was. All right, but there is black snow everywhere that has not been taken away. It's not going to melt because it's never going above 32 degrees again. I remember living in Washington in the 90s when Mayor Marion Barry was the mayor and had no snow plows. And his comment was, God is our snow plow waiting for the sun. Maybe that's maybe that's what we're doing. So, all right.

35:55Jay Clayton:So you're not ready to take the leap. We'll go to the Fed. But I'm just wondering, I hope this isn't a, you know, a sign of you don't think so.

36:02Hugh Johnston:You know what? On this side, we'll give great. I have great empathy and sympathy for all the folks who are doing this work, only because they did a pretty great job of actually clearing stuff early. And the biggest issue right now is just getting some of this stuff off the sidewalks. But that is actually a very hard and labor-intensive thing to do that the city doesn't really have. We were in D.C.

36:21Jay Clayton:and all the streets were closing because they were still trying to dig out. And it's not leaving, so you need to move it. Let me jump in there. I'm not in sanitation or snow removal, but I am in law enforcement. And today, and everybody asks this, would there be a change in our relationship with the police department? Yeah. There has been no change to date with the new mayoral administration. That's good news. You know about taking out the Southern District. You know a lot about sanitation. How about Kevin Warsh? I think it's good we have a pick with uncertainty of when it was coming, who it was.

36:56Jay Clayton:And I really like the pick. I like Kevin a lot. I think he's got to do a good job. He's a known quantity. He's known quantity inside the building. He's a known quantity on Wall Street. Those are really good things. Do you take any of the market reaction that we've seen since the pick? Do you think that is significant or signals anything? I think it signals that he doesn't like the size of the Fed's balance sheet. Yeah, and he's talked directly about this. He's talked about asset valuations. And reducing the size of the balance sheet. And look, Kevin's a super smart guy. he knows that the balance sheet the rates reserves they're all related in terms of what that means for ease or tightness of financial conditions I think he'll be I think he'll be a very good communicator and you always you're fearless and you're a lawyer and you're a good lawyer so you don't you can always talk your way out of anything I've seen it I've seen you do it and you should see me in high school so let me ask yes so we're talking about this UAE deal so So a sovereign fund invested in a Trump family crypto venture before the inauguration.

38:03Jay Clayton:And then after the inauguration, the Trump administration okays some chip sales to the UAE, which the Biden administration says was not going to do it. I said, you need to find the quid pro quo and the smoking gun. And I was told that is the smoking gun. It's already there. And if the Trump administration says, and I'm not saying that it doesn't look bad or I'm not saying there's no conflict of interest, but if they say we looked separately at the security concerns that maybe the prior administration had, we have been convinced by blah, blah, blah, that that has been satisfied and this has changed and they have said this and this.

38:45Jay Clayton:You need to be able to prove quid pro quo before you can say it's quid pro quo, don't you? Yes. So do we have, is it quid pro quo? Can you tell me, because I was told definitively it's quid pro quo. It's right there. It's right before your eyes. Joe, wherever we calibrate the ethics rules, there are going to be people who are not happy. But there are two things that I think are really important, and one of them is congressional trading that we've been talking about. Are you changing the subject? No, I'm going to come back to this. One of them is congressional trading that we have been talking about for way too long, a very solvable problem, easily solvable problem.

39:19Another one is government ethics and your family.

39:22Jay Clayton:I think we should draw the line pretty clearly that adult children, other family members can continue to do their business. Should they be subject to transparency obligations? Maybe yes, maybe no. But we can't tell people that if you go into elected office, you and all your relations have to give up their businesses. Because then we're going to greatly shrink the size of experienced people. What if there was a wink and a nod? Well, that's why we have transparency and people can look into it.

39:49Hugh Johnston:I believe it's reporting. Here's a question for you, though. And I'm curious. You said that's why we have transparency. In this case, we have transparency because the Wall Street Journal reported this news. That's why we have transparency. By the way, another great credit, not just the Journal, but to the First Amendment and the idea that the press can do their job, hopefully. Absolutely. I say that in the context that there's a view right now that sometimes this administration has taken towards the media to either intimidate them from not doing their job. I mean, that is part and parcel of what is out there, at least it's something that people are worried about.

40:29Hugh Johnston:And I'm curious actually how you think about that, because the transparency piece of this, it was not transparent until this piece came out. And I think that the answer is my personal answer is I think it would be it would have been much better for this to have been disclosed. And then the public can make what they want of it. Congress can make what they want of it. And we can say it's fine or it's not fine or whatever, whatever everybody wants.

40:54Jay Clayton:You're going to find a person who's very comfortable with and in favor of transparency around financial disclosure. So I'm not I'm not arguing that. I think it's a very important part of being a public official is to have that kind of transparency. On the First Amendment stuff, look, First Amendment's a two-way street. The press does not get to take a view, report something, and then if somebody thinks it's wrong, say, oh, no, no, you're not allowed to say it's wrong. It's about public debate. Or if a journalist breaks the law, you can't say, hey, I'm a journalist. I can do whatever I want because I was, I don't know if that's where you were going.

41:32Jay Clayton:The First Amendment has its limits, right? And I've seen a lot of people, as Ethan Hawke, this is a country I'm now afraid to speak up in. As he's speaking up about being afraid to speak up, it's like you're fully able to say whatever you want.

41:48Hugh Johnston:But can I say, hold on, I just want to just stop us because we just had Hugh Johnson on it. I think we can agree with this. There was a moment earlier this year where Jimmy Kimmel said something that was horrific. He should not have said what he said, and he apologized for saying what he said. No, he didn't. And he didn't even admit that he said it. But hold on. I'm not going to. But as a result of what he said, which was, I think we could all agree, distasteful. And that's what we're talking about, distasteful. And false. But you are free to say, for better or worse, things that are distasteful.

42:22Hugh Johnston:Right. All of a sudden, we got into a situation where the head of the FCC was on television. effectively threatening the network. Right. Right. So this goes to what the issue is. And I just think we need to appreciate where we are and what's happening. That's just the context. I don't know if you, I don't think we can agree or disagree about the, those are just the facts. That's what's going on. So that's why people, to the extent that some people have that view.

42:52Jay Clayton:Andrew, everything you said, I agree with. If you're going to take away a license, there's a process that you go through. But there are reasons that you can do it. I don't want to litigate that case here. But I do think that people say, oh, I'm protected by the first men. If I go out and destroy a law enforcement car because I'm upset with law enforcement, that is not protected. 100%. If you do those types of... And look, your First Amendment right is not protected. The network can choose to fire you. but the administration threatening to use the power that they hold over the network to force them to do that.

43:31Jay Clayton:But that's a power that those powers are powers that we have protections for, whether it's the administrative process, the court process, and we should all recognize that.

43:40Hugh Johnston:Here's a complicated one for you. I don't know, maybe it's not complicated for you.

43:44Jay Clayton:We all should have some protection for government power.

43:46Hugh Johnston:So here's a question. So last week or over the weekend, Don Lemon gets arrested. He was inside a church where there were protesters. Some people, I mean. Blocking people from leaving. And no, the part of the people, the protesters clearly were trespassing. Yeah. It's I believe it's probably not legal to be in there doing doing what they were doing. it historically the justice department has not gone after quote unquote journalists who have been covering stories in this context it appears that they're including don lemon not as a journalist but as a protester as sort of part of the operation but and what that portends

44:31Jay Clayton:there's a lot beforehand that he was on record saying i'm going to go do this this and that right other thing and i don't know that's what i'm not i'm not going to talk about that specific case. That's not where I can go at that time. But you can't be part of what would be illegal activity. You can't be part of what would be illegal activity, throw a journalist code on and say, okay, now I've switched to being a journalist and then take it off. You can't. Law schools would have a wonderful time discussing that. How much participation can a journalist have quote unquote journalist in the planning and execution of something well the question is if

45:12Hugh Johnston:you're part of the planning and execution versus you are aware of the planning and execution and you are effectively embedded the way you might be either with the military or something else or you join in and the question is right and the question is did he join in right or not I think what's on camera is suggestive that he was reporting on it but other there's other

45:32Jay Clayton:perspective that's what let people out and I don't know I don't know that would all come I have a different way for you by the way I didn't know we were gonna have the and there was enough right the constitutional law here today told me how the grand jury stormy Daniels it's a real grand jury you know it we pick our grand juries and whether they're relevant or not based on our our own viewpoints this grand jury thought it was you know fair game to arrest Don lemon after after two judges I know but decided that said that they couldn't or shouldn't right right same thing with the and an appellate court said you should yeah I'm just saying it's super

46:14Hugh Johnston:complicated okay I've given one Epstein emails over the weekend right we have all of these emails we're all trying to make sense of these emails some of it seems you know a lot of the the emails are very, let's say, unattractive.

46:32Jay Clayton:Anonymous calls to the FBI about eating chips. I mean, some of it's just snuff films, eating. I want to say two related things, and the first is very serious, and that is victims of this type of behavior. That's all right. Okay? We at the Justice Department Southern District have spent the last 45, 50 days working around the clock trying to make sure that victim names are redacted. Some victim names have been posted. It's very unfortunate. We've worked over the weekend. We're trying to fix that. But we need to protect those victims for their own safety, for their own well-being. But also, it is very, very difficult to get victims to come forward in these types of situations because of public disclosure, public scrutiny, because some people put victims on trial.

47:22Jay Clayton:there is much more of this type of activity than I ever would have thought when I went to the Justice Department. We just had a guilty plea last week for a person who was very prominent in the New York community, banker, terrible behavior. People can look it up online. I'm not going to go into it. But we need to know that protecting victims is extremely important for the administration of justice so that we can actually have people who are willing to come forward.

47:51Hugh Johnston:One of the things that's happened is we now have all these questions when you read these emails and you don't know what's true, what's not. By the way, you read the stuff that was written that Epstein was writing to himself about Bill Gates with all sorts of allegations in it. You don't know whether he's a psychopath and he's writing real things, whether he's not writing real things. By the way, you see people's names. By the way, Kevin Warsh's name is mentioned in the thing next to, and I don't know if it's a victim or what, but there's a redacted name next to it. And so invariably some people say, well, who's he with?

48:25Hugh Johnston:What's going on here? The whole thing has opened up a complete can of worms. And I'm not saying it shouldn't. This is what the public and clearly Congress wants. But I also don't know what you think this portends in the future of how all of this gets litigated.

48:39Jay Clayton:There are lots of reasons why people wanted this. years of uncertainty, years of debate. But what this exercise shows now, and the second thing I want to say is these files are raw. When someone calls the Justice Department, when someone calls the FBI and says, I want to report a crime, you're required to take that information down. You're required to record it. Now, you don't know the veracity of that. You don't know the motivations. What you are seeing is the reason that we don't release this material on a rail. Well, that's what I was going to ask you. Should this material have been released?

49:14Jay Clayton:And I think it raises the question of, you know, where are the arrests? There's never been any of Jeffrey Epstein's clients who we've seen any arrests. Well, I don't, it should be the very exceptional circumstance, very, very exceptional circumstance where we release this material, for all the reasons you're seeing. The victim protection, paramount, but there are allegations in there that with 10 or 15 minutes of work, you can realize have no basis in fact. A lot of them. A lot of them. And just like the craziest, space aliens. I mean, it's crazy stuff. And to Becky's question, what I would encourage people to do is look at the internal Justice Department debates.

50:02Jay Clayton:Now, a lot of it is redacted because there's discussions of legal theories and victims, But it shows the process that the prosecutors at the time went through to decide who should or should not be charged. And it would be good if some of the legal journalists took a look at that and gave an assessment. You know, it's America. They get to assess whether we at the Justice Department did a good or bad job in those decisions in 2020 or back in the Florida case.

50:26Hugh Johnston:But you have a situation now where the public is looking at all these emails thinking, to Becky's question, why hasn't someone been prosecuted? You read through all this stuff and say, well, somebody should be prosecuted.

50:36Jay Clayton:And, Andrew, what I'm saying is with all that information, take a look at the there is a great deal of process inside the Justice Department when charging decisions are made. Prosecution memos are produced where the line prosecutors are tell people like me, the supervisors, here are the strengths and weaknesses of the various cases. Looking at those and you will have some insight into this. And one thing that I applaud Deputy Attorney General Blanche and the Attorney General herself is said to Congress, look, there are lots of redactions. The public can look at those redactions, but a member of Congress can come to the Justice Department with appropriate confidentiality arrangements and look at those documents.

51:19Jay Clayton:And that type of transparency, I think, is extremely important in this exercise. So as this plays out over the next several weeks, people get a chance to digest it. The public opinion on whether there should have been or should not have been somebody else charged or other investigations. Last thing I'll say is people are looking all over this. If there are criminal activities that have not been reported to us yet, we are very open for victims, their counsel, to come forward and point us in the right direction. crazy do you watch part of the bannon did you watch that interview with i had never seen i don't know jeffrey i've seen sort of talk and his new york accent all that stuff but at the end he says are you the devil incarnate yep and like actually it was like let me think about that um well what do you mean uh and he was almost open to the idea of saying yeah pretty much which was just so scary to me.

52:18Jay Clayton:The whole thing is, you know, it could be a horror film, I think. Well, I am sure there will be films. I have no doubt about that. All right. Thank you. Thank you. Thanks. And that's Squawk Pod for today, this Monday. Thanks for starting your week with us. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern. Get the best of our TV show right into your ears when you follow Squawk Pod wherever you get your podcasts. Please check out episodes of The Path with Becky Quick. That's our new series from the CNBC Cures Initiative on rare disease.

53:00Jay Clayton:There are two episodes out now available in your Squawk Pod feed. That's it. Have a great day. We'll meet you right back here tomorrow. We are clear. Thanks, guys.

53:21Jay Clayton:This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.