Jay Clayton will face tough opposition from liberals in his nomination to be President-elect Trump’s top markets regulator, partly because of his similarities with President Obama’s last Securities and Exchange Commissioner, Mary Jo White.
Like White, Clayton is a corporate lawyer who has represented businesses. And he represented Wall Street firms as a partner at Sullivan & Cromwell throughout the financial crisis. That, by itself, is enough to earn opposition from liberals who are increasingly skeptical about people from the industry joining the government in regulatory roles.
The two top Democrats on the Senate and House committees that oversee the SEC, Sen. Sherrod Brown of Ohio and Rep. Maxine Waters of California, did not delay in criticizing Clayton after his appointment was announced.
Neither lawmaker presented specific objections to Clayton. Instead, they simply noted his ties to financial firms.
The offices of both lawmakers declined to spell out their concerns in more detail. But a look at the recent record clearly indicates liberal dissatisfaction with the SEC’s ties to industry.
In 2013, Brown voted against confirming White to head the agency, citing her work as a securities lawyer for the firm Debevoise & Plimpton, working in litigation. In voting against her nomination, Brown explained that he didn’t question her integrity, but, “I do question Washington’s long-held bias towards Wall Street and its inability to find watchdogs outside of the very industry that they are meant to police.”
Other liberals were disappointed in White’s subsequent performance. In October, Sen. Elizabeth Warren, D-Mass., took the unusual step of asking Obama to fire her. Warren’s complaint was that White hadn’t done enough to try to pass a rule requiring corporations to disclose contributions to political nonprofit organizations. But she also had a laundry list of complaints related to what she viewed as White’s lax enforcement, and also to the times that White had to recuse herself from investigations because companies were represented by her husband’s law firm.
Those objections would apply also to Clayton.
Clayton has represented a sizable chunk of Wall Street, including Goldman Sachs, Barclays and Ally Financial, among other financial firms. He advised banks during the financial crisis when Wall Street was being bailed out and banks were undergoing fire sales to other financial firms to prevent collapse, and he represented firms undergoing mortgage fraud investigations.
Like White, he has a spouse at one of the major companies that would be affected by SEC decisions. His wife works in wealth management at Goldman Sachs, according to Bloomberg.
If Clayton were confirmed, he would be “the single most financially conflicted chair of the SEC in its history, by a lot,” said one Democratic adviser.
For a Democratic Party that is increasingly influenced by Warren, those facts are enough to oppose the nomination of Clayton, a position made easier by general opposition to Trump’s agenda. Skepticism of industry figures in regulatory posts may not have been the default in the past, but in the post-White years, it is.
“It is clear from Clayton’s resume whose side he is on,” said Andy Green, managing director for economic policy at the left-leaning Center for American Progress. “Any investor — from a family with a 401(k) to the manager of a pension fund — should be alarmed that someone so clearly aligned with bankers would head the SEC.”
