As we learned with the Great Recession-inducing stock market collapse almost a decade ago, when Securities and Exchange Commission (SEC) falls down on the job, there is a very real risk that it will take the global economy down with it. So if you have an investment portfolio, retirement account, mortgage, or (any plans to have a) job, you should be acutely aware of Trump’s terrible nominee to lead that organization, Jay Clayton. And because the integrity of our financial markets is so critical to our economy and security, there is hope that our Senators can be influenced to #resist Trump’s terrible nominee for the job, Jay Clayton.
The Trump Administration proposes to gut Dodd-Frank and roll back the cornerstone Investment Advisers Act of 1940 requiring financial advisers to adhere to a fiduciary standard. Those proposals are dumbfoundingly dangerous. And because that agenda is so short sighted and risky, perhaps it shouldn’t be surprising that Donald Trump appointed someone whose career has been predicated upon turbulent markets and shady trading. Jay Clayton is a longtime lawyer with Sullivan & Cromwell, the high aristocracy of Wall Street’s lawyering world. He’s spent much of his career advising Goldman Sachs, the epitome of cutthroat investment banking. Clayton managed Warren Buffett’s $5 billion investment in Goldman during the financial crisis and worked for Ally Financial, a bank that has been implicated in illegal foreclosures and racial discrimination.
Trump may trust Clayton to police Wall Street, but we the people have every reason to be deeply skeptical and to demand our Senators impose safeguards to ensure that he watches out for the public interest, not the private ones he has spent a career defending.
Apart from his own history with Goldman, his wife, Gretchen Clayton, is a wealth management advisor for Goldman Sachs, an activity that lies at the heart of the SEC’s primary mission of ensuring the transparency and basic fairness of American capital markets. With his household finances tied so firmly to the fortunes of Goldman, Clayton will likely have to recuse himself from any matter involving that firm.
“Who needs an SEC chief who has to stay on the sidelines for some of the most important cases the agency considers?” said Matt Taibbi from Rolling Stone, adding, “It's like having a police commissioner who has to cover his ears every time someone mentions the Crips or the Latin Kings.”
And we’ll be asked to take on faith that Clayton can approve industry-wide regulations without undue influence from Goldman, since matters of “general application” aren’t covered by recusal laws. Another way of putting that: Clayton can write rules that benefit Goldman Sachs, so long as they benefit other Wall Street firms too. How comforting.
At a minimum, Clayton should recuse himself from any matter involving Goldman Sachs, his client and his wife’s employer. But we all know that specific recusal is an inadequate solution to the incentive structures of systemic corruption.
Consider Clayton’s position on the main legal tool for combatting bribery, the Foreign Corrupt Practices Act (FCPA), a law the SEC enforces. In a 2011 paper, Clayton argued that U.S. firms faced an undue burden because foreign companies don’t face similarly stringent enforcement. Clayton also represented the Italian oil firm ENI in a bribery case alleging Nigerian officials were bribed with suitcases full of cash. There should be no nuance on bribery for our SEC Chair, and Clayton’s stances on the FCPA must be interrogated in his confirmation hearings, so that Senators can make an informed vote. It is our duty as citizens to hold our Senators accountable for how they vote.
An SEC chairman can’t change the law, but he can dramatically scale back its application, and Clayton’s record suggests that’s exactly what he would do. Clayton should lay out detailed views on this issue at his confirmation hearing, so senators can make an informed choice.
Having worked on Wall Street does not, by itself, disqualify anyone from working in the public sector. But people who want that honor should demonstrate a track record of listening to voices besides the nation’s biggest banks, and a broad respect for the laws Congress has passed in order to keep American capital markets fair, open and transparent.
All available evidence indicates that Clayton is conflicted to the bone and he will be compromised by financial, professional and social entanglements from day one on the job. If Jay Clayton wants to run the SEC, he should have to win the trust of retail American investors before the Senate gives him the job.
It is every responsible citizen’s responsibility to work to make Clayton’s confirmation as politically costly possible. Please write to our Senators and tell them to oppose Jay Clayton’s nomination to chair the SEC.