Senators will soon vote on the confirmation of Walter Joseph “Jay” Clayton to serve as chair of the Securities and Exchange Commission (SEC). Public Citizen believes Clayton fails the key tests of qualification for this important position, including those set out by President Trump himself. A qualified SEC Chair must represent the public interest, ideally with relevant experience, free of conflicts, and a zeal for protecting investors.
This position is critically important for investor protection and for the stability and effectiveness of our markets. The SEC is a vital Wall Street policing agency, created after the 1929 crash. When the SEC does its job well, investors can trust markets. Markets can efficiently direct capital to productive enterprises that help grow the economy. When the SEC falters, companies abuse investors, and markets can become rife with risks that lead to such calamities as the 2008 financial crash.
Will Clayton bring a public interest perspective to this position? No.
As an attorney with Sullivan & Cromwell, Clayton’s career has been devoted to helping Wall Street and major corporations. Many of these firms have been accused of abusing Americans, from Volkswagen, which was charged with gaming emissions standards, to Valeant Pharmaceuticals, which gouged those struggling with disease through massive drug price increases. He has served as counsel to banks, notably Goldman Sachs. In his campaign, President Trump highlighted Goldman Sachs’ role leading to the 2008 financial crash and pledged to “drain the swamp” in Washington of this and other Wall Street firms. Explaining his opposition to Clayton, Sen. Joe Donnelly (D-Ind), said “My priority is to make sure that our economy works for working Hoosiers — not Wall Street.”
Does Clayton bring relevant experience? No.
Other than his work for clients on mergers and acquisitions, Clayton brings no background in many vital SEC arenas. He has no rulemaking experience, and the SEC must still complete the implementation of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. In fact, Clayton said he supported changing this law, which is concerning since his job is to enforce Congress’ mandate on Wall Street reform.
He has no enforcement experience, and the SEC must confront what’s become a pandemic of misconduct. Nor has he demonstrated any zeal for enforcement. Asked to condemn Goldman Sachs’ misconduct, he declined. Sen. Robert Menendez, (D-NJ) said he was chilled by Clayton’s concern that “’even the commencement of an investigation can have significant adverse impacts’ on public companies.” Commented Sen. Menendez, “This, to me, is in essence what defines this nominee’s approach: Wall Street profits will always prevail over Main Street protections.” Sen. Catherine Cortez Masto (D-Nevada) added, “As former Attorney General of Nevada, ground zero for the housing crisis, I saw firsthand the hardship borne by hardworking families when our financial regulators don’t enforce the law. A key responsibility of the SEC is to ensure integrity of our markets and protect retirees and mom-and-pop investors from fraud. Unfortunately, Mr. Clayton has given me no reason to believe he will do that, and therefore I cannot support his nomination.”
Nor does Clayton have any management experience, and he would be overseeing 4,300 staff.
Is Clayton free of conflicts? No.
Clayton has worked for so many Wall Street firms that will come before the SEC he will be forced to recuse himself from major cases and on major issues. Sullivan & Cromwell represents many other clients, expanding the number that will force his recusal. During his nomination process, Clayton met with major figures with substantial issues before the SEC, including billionaires Carl Icahn, Peter Thiel, and Rebekah Mercer. That’s a vetting process that would hardly yield an advocate for the average American.
Can senators be assured that Clayton will protect investors, which is the SEC’s primary mandate? No.
In his confirmation hearing, Clayton “failed to describe, even in the most basic ways, what the SEC can do make sure investors get a fair shake,” according to Sen. Sherrod Brown (D-Ohio), and the ranking member of the committee. “Instead, he said he believes it is acceptable to have a market where companies can impose governance structures that upend shareholder rights as long as they are disclosed.” On the issue of corporate disclosure of political spending, where 1.2 million investors have petitioned for a rule, Clayton did not express support. Surely, an investor advocate in an administration claiming to rid Washington of deep pocketed special interests would embrace this basic reform.
The Trump administration has certainly lowered the bar for appointees, nominating individuals who profited from massive foreclosures, failed to pay taxes, abused workers, testified untruthfully to Congress, and more. Americans deserve better. Senators must not reduce their standards when considering the Clayton nomination.
Senators should send a clear message to the Trump administration that it will not accept another Goldman Sachs attorney who brings no experience to the majority of tasks in the chair’s portfolio, who will be so conflicted as to be sidelined for half his term on cases involving the leading Wall Street firms, and who fails to embrace the need for congressionally mandated reforms adopted to prevent another crash. A president who pledged to “drain the swamp” and specifically named Goldman Sachs as a firm with pernicious influence should send a nominee free of these disqualifications and instead one with demonstrated zeal to protect investors.
Should Clayton be the SEC Chair? No.