|© Andrew Harnik/AP File photo of U.S. Securities and Exchange Commission building.|
WASHINGTON, Jan 4 (Reuters) - President-elect Donald Trump said on Wednesday he intends to nominate Walter "Jay" Clayton, an attorney who advises clients on major Wall Street deals, to lead the U.S. Securities and Exchange Commission.
"Jay Clayton is a highly talented expert on many aspects of financial and regulatory law, and he will ensure our financial institutions can thrive and create jobs while playing by the rules at the same time," Trump in a statement.
"We need to undo many regulations which have stifled investment in American businesses, and restore oversight of the financial industry in a way that does not harm American workers."
Clayton is a partner in the New York office of law firm Sullivan & Cromwell who specializes in advising clients on public and private mergers and acquisitions and capital-raising efforts. He also helps companies navigate regulatory and enforcement actions, including a number of cases that involved mortgage securities.
Clayton has worked for high-profile clients, including the initial public offerings of Alibaba Group Holding Company and Oaktree Capital Group.
During the height of the 2008 financial crisis, Clayton also worked on major deals involving big banks, including Barclays Capital's acquisition of Lehman Brothers' assets, the sale of Bear Stearns to JP Morgan Chase, and the U.S. Treasury Department's capital investment in Goldman Sachs , according to his law firm's website.
By selecting an attorney who is deeply steeped in capital-raising deals, Trump is likely signaling that the SEC will be looking to scale back regulations that some critics see as burdensome and may be hindering corporate growth.
Many Republicans in recent years have criticized the SEC for focusing too much on enforcement, and not enough on its other missions, which include writing rules that help promote capital formation.
"In light of Jay's vast experience in capital formation, his appointment as SEC Chair is a strong positive signal the economy is a top priority of President-elect Trump and his team, and that the SEC will work together with Main Street to meet the country's economic goals of full employment and healthy growth," said Jonathan Macey, a professor at the Yale Law School.
Trump wants Wall Street lawyer Jay Clayton to head SEC
President-elect Donald Trump intends to nominate Wall Street attorney Jay Clayton to head the Securities and Exchange Commission, transition spokesman Sean Spicer said Wednesday.
Clayton, a partner with New York-based global law firm Sullivan & Cromwell, would succeed Mary Jo White, who announced in November that she would step down at the end of the Obama administration.
“Jay Clayton is a highly talented expert on many aspects of financial and regulatory law, and he will ensure our financial institutions can thrive and create jobs while playing by the rules at the same time," Trump said in a written statement.
"We need to undo many regulations which have stifled investment in American businesses, and restore oversight of the financial industry in a way that does not harm American workers," he said.
Trump reportedly had been considering Los Angeles lawyer Debra Wong Yang, a former federal prosecutor, to head the SEC.
Instead, he opted for Clayton, who joins other key Trump nominees with strong Wall Street ties, including Treasury secretary pick Steve Mnuchin and Commerce secretary choice Wilbur Ross.
Clayton’s work has included representing Ally Financial and two other unnamed large financial firms in connection with settlements of federal cases related to toxic mortgages or foreclosure problems, according to the firm’s website.
The SEC is the federal government's top watchdog for Wall Street and has expanded regulatory powers under the 2010 Dodd-Frank financial reform law that Trump has promised to dismantle.
“Jay Clayton is just the latest addition to the growing pool of Wall Street insiders that make up the Trump administration,” said Rep. Maxine Waters (D-Los Angeles), the top Democrat on the House Financial Services Committee. “As head of the SEC, Clayton will have the power to carry his pro-Wall Street agenda to the agency that is entrusted with regulating Wall Street.”
Clayton thanked Trump for the opportunity to head the agency. His nomination is subject to confirmation by the Senate.
“If confirmed, we are going to work together with key stakeholders in the financial system to make sure we provide investors and our companies with the confidence to invest together in America," he said. "We will carefully monitor our financial sector, as we set policy that encourages American companies to do what they do best: create jobs.”
Clayton’s work has included mergers and acquisitions, as well as regulatory and enforcement proceedings. Among his clients listed on his law firm's website are Goldman Sachs, Bear Stearns, and British Airways. Clayton also worked on the 2014 initial public offering of China's Alibaba Holding Group, which was the largest IPO in U.S. history.
Dennis Kelleher, president of Better Markets, a group that advocates for stricter financial regulation, said Clayton needs to favor Main Street over Wall Street as SEC chairman.
“While Mr. Clayton may be an excellent lawyer representing Goldman Sachs and Wall Street’s too-big-to-fail banks, America’s families need to know that he will represent them as zealously and as effectively,” Kelleher said. “He must lead without fear or favor and he must not bring the failed mind-set that ‘what’s good for Wall Street is good for America,’ which the 2008 financial crash proved catastrophically wrong.”
White, who was a former federal prosecutor, also worked for a top New York law firm before becoming SEC chair in 2013. Her clients included some leading financial industry firms and figures, including JPMorgan Chase & Co., former Goldman Sachs Group Inc. director Rajat Gupta and former Bank of America Corp. chief Ken Lewis.
Some liberals sharply criticized White for being too deferential to business interests. In October, Sen. Elizabeth Warren (D-Mass.) publicly called on President Obama to replace her, in part because she had not enacted rules to force companies to disclose their spending on political activities.
The first SEC chair under Obama, Mary Schapiro, also did not make friends among liberals during her tenure. They wanted her to be tougher in the wake of the financial crisis. Schapiro had been chief executive of the Financial Industry Regulatory Authority, or Finra, a nongovernmental, self-regulatory body for the securities industry.
Sen. Sherrod Brown (D-Ohio), the top Democrat on the Senate Banking Committee, was among those who had criticized White. He wasn’t optimistic that Clayton would be an improvement.
“It's hard to see how an attorney who’s spent his career helping Wall Street beat the rap will keep President-elect Trump’s promise to stop big banks and hedge funds from ‘getting away with murder,’” Brown said.
Jay Clayton, Wall Street lawyer, is Trump pick to lead SEC
President-elect Donald Trump's choice to be the next top cop of Wall Street is Jay Clayton, an elite lawyer who has defended big banks for their financial crisis-era misbehavior.
Clayton has extensive ties to Wall Street. He advised Goldman Sachs on its government bailout and his wife Gretchen currently works at the bank as a private wealth advisor.
Trump announced his SEC pick on Wednesday and explained that Clayton's background as a Wall Street lawyer will help unleash the "job-creating power" of the economy while still providing strong oversight.
"We need to undo many regulations which have stifled investment in American businesses, and restore oversight of the financial industry in a way that does not harm American workers," Trump said in a statement.
The SEC is responsible for rooting out financial crime such as fraud as well as ensuring capital markets are fair for all investors. "Robust accountability will be a hallmark of his tenure atop the SEC, and the financial security of the American people will be his top priority," the Trump statement said.
Clayton is currently a partner at the powerful law firm Sullivan & Cromwell and has advised on a slew of major deals, including the record-breaking Alibaba (BABA, Tech30) IPO and the sale of the NBA's Atlanta Hawks.
His law firm bio also notes that Clayton helped secure mortgage settlements on behalf of large financial institutions with the government.
It's not clear which specific banks Clayton defended. However, Sullivan & Cromwell's website said the firm represented Goldman Sachs, JPMorgan Chase, Barclays (BCS) and other banks against allegations that they fraudulently issued or underwrote hundreds of toxic mortgage deals prior to the subprime collapse. Sullivan & Cromwell similarly helped JPMorgan reach its $13 billion toxic mortgage settlement with the Department of Justice in 2013.
Clayton also has ties to Bear Stearns, the investment bank that collapsed during the financial crisis as its toxic loan portfolio spiraled out of control. He represented Bear in its fire sale to JPMorgan (JPM).
Additionally, Goldman Sachs (GS) hired Clayton to advise on the Wall Street firm's TARP bailout as well as the crucial $5 billion investment it received from Warren Buffett's Berkshire Hathaway (BRKA) during the crisis.
Clayton already has experience working with the SEC, albeit on the other side. In 2010, Clayton helped secure a $365 million bribery settlement with the SEC on behalf of Italian oil giant Eni (E).
If confirmed, Clayton said he wants the SEC to strike a balance between providing oversight and helping the economy.
"We will carefully monitor our financial sector, as we set policy that encourages American companies to do what they do best: create jobs," Clayton said.
Clayton would replace Mary Jo White, who is stepping down on January 20 even though her term doesn't expire until June 2019. Some liberal critics, led by Senator Elizabeth Warren, have claimed White didn't do enough to prevent business from pouring cash into politics.
While White spent her tenure trying to implement a wave of rules coming from Dodd-Frank, Clayton could be charged with helping Trump carry out his pledge to "dismantle" the reform law.
Clayton beat out former federal prosecutor Debra Wong Yang for the SEC job. While Yang is a star corporate lawyer like Clayton, she earned a reputation for toughness as a prosecutor by taking down a violent drug-dealing gang and investigating financial fraud.
Democrats strongly criticized Trump's selection of Clayton. Senator Sherrod Brown, the ranking Democrat on the Senate Banking Committee, knocked Clayton as an "attorney who's spent his career helping Wall Street beat the rap."
Adam Green, co-founder of the Progressive Change Campaign Committee, compared Clayton's nomination to allowing the "fox guard the henhouse on Wall Street."
On the other hand, the Investment Adviser Association, which represents SEC-registered firms, praised Clayton as a "highly regarded, respected and accomplished" lawyer who has a "deep understanding" of complex transactions and regulations.
Jaret Seiberg, an analyst at Cowen & Co., called Trump's selection of Clayton a "conventional choice" for a Republican president given his background at a high-profile law firm.
"He almost is from central casting," Seiberg wrote in a note.