Democrats skeptical of President Trump’s nominee to head the Securities and Exchange Commission zeroed in on his ties to banks at his nomination hearing Thursday, saying that he would have to recuse himself from cases so often that he couldn’t enforce the law.
“If President Trump wanted to make sure that the SEC would have a hard time in going after his Wall Street friends, it seems to me you would be the perfect SEC chair,” Sen. Elizabeth Warren, D-Mass., told Jay Clayton.
The Democrats’ questions centered on Clayton’s representation of broad swaths of Wall Street as a lawyer for Sullivan & Cromwell and the SEC rules requiring recusals by commissioners when a case before them involves a firm they have represented in the private sector.
“I’m concerned that you may need to recuse yourself too often at a time when we need a strong, independent SEC chair on the front line of enforcement, not watching from the sideline,” said Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee.
Warren noted that, having represented Goldman Sachs, Deutsche Bank, Barclay’s and UBS, he would have to recuse himself in enforcement cases against those banks. His recusal, she suggested, would create a “deadlock” between Republican commissioners, who generally don’t favor strong enforcement, and Democratic commissioners, who do.
Furthermore, Warren said, firms might strategically hire Clayton’s former employer, Sullivan & Cromwell, to force Clayton’s recusal, in the prospects of lighter enforcement.
Clayton said he has discussed the possibility of recusals with ethics staff and that he believed it would not be a problem. He also disputed the suggestion that Republicans are lax on enforcement, and asserted that he is not a Republican, but rather an independent.
Some Democrats have sought to rally opposition to Clayton on the grounds that he is too closely tied to Wall Street firms to effectively regulate them. On Wednesday, independent Sen. Bernie Sanders of Vermont helped lead a rally outside the Capitol against Clayton’s nomination, calling him “the embodiment of the greed that nearly destroyed the economy” in the 2008 financial crisis.
Previously, Democrats raised concerns about the frequency with which Mary Jo White, the SEC chairwoman under former President Barack Obama, recused herself. Like Clayton, White previously had been a corporate lawyer representing financial firms.
