President-Elect Trump’s SEC Chief Pick Has Strong Ties to Big Banks

News that President-Elect Donald Trump has nominated Wall Street defense attorney Jay Clayton as the next of Securities and Exchange Commission Chair is causing worries that a person who has legally represented big banks may soon be in charge of the agency of the federal government that is tasked with regulating the securities industry.

For example, Clayton was the attorney for Goldman Sachs (GS) when billionaire Warren Buffet gave the firm a $5B capital infusion during the financial crisis of 2008. He also represented Barclays (BARC) when it acquired Lehman Brothers’ assets and he was the attorney for Bear Stearns when JPMorgan (JPM) bought the firm in a fire sale.

Clayton’s wife Gretchen is a Goldman Sachs wealth management advisor and broker. This means that Goldman, one of the firms that he is in charge of regulating, is also providing income to his family through her salary and any bonuses. Although Clayton will have to recuse himself when there are any enforcement rulings involving Goldman, he won’t have to in rulemaking decisions of “general application” that could impact the bank as long as other banks are also affected.

Clayton is expected to be integral to President-Elect Trump’s attempts to get rid of parts of the Dodd-Frank Act, which is the financial reform legislation that went into law in 2010. In a statement about his nomination, Trump spoke about the need to unravel “many regulations” that he believes have hampered investments in US businesses.

The President-Elect is bringing in the very Wall Street insiders he spoke out against while he was running for office when he promised voters that he would “drain the swamp.” Among his other picks who are connected to Goldman Sachs alone: ex-firm partner and senior manager Steven Mnuchin for Treasury Secretary; Stephen K. Bannon, whom he appointed his chief strategist, was previously involved in acquisitions and mergers for Goldman; and current Goldman COO and President Gary Cohn is Trump’s choice to helm the National Economic Council.

Securities Fraud
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Trump to tap Wall Street lawyer Jay Clayton to head SEC, The Wall Street Journal, January 4, 2017

SEC chair to step down, clearing path for Trump to eliminate tough Wall Street regulations, Washington Post, November 14, 2016

Dodd–Frank Wall Street Reform and Consumer Protection Act

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