Last week I wrote about my concerns regarding Mary Jo White, the former SEC chair who was leaving her post, to return to her former law firm. Ms. White’s performance while SEC chair was abysmal. However my main concern is not her performance, rather it is the continual revolving door that exists in D.C.
I commented, “The latest in the revolving door soap opera is Mary Jo White, whose work as chair of the Securities and Exchange Commission under former President Obama was a bitter disappointment to those who hoped she would actually enforce banking laws. Ms. White is rejoining the corporate defense team at Debevoise & Plimpton, marking her sixth trip through the revolving door between various government jobs and her former law firm. The law firm represents many major financial institutions under federal investigation, and Ms. White will be assisting these clients to “manage their legal exposure.”
Her replacement, President Trump’s pick for chairman of the Securities and Exchange Commission, corporate attorney, Walter J. (Jay) Clayton, a law partner at Sullivan & Cromwell has worked extensively with Goldman Sachs and has stated he wants to promote growth by scaling back regulations. I mentioned as one of my concerns that he agrees with the President that Dodd-Frank, the legislation passed in the wake of the financial crisis to prevent another one, asks too much of banks.
Mr. Clayton is noted as one of the most conflicted potential appointees to the President’s cabinet for a number of reasons, not the least of which is his Goldman Sachs ties. Mr. Clayton has also represented eight of the ten largest Wall Street banks within the last three-plus years in several IPO transactions.
By the way, these are the very same banks “that are serially charged by the SEC for increasingly creative means of fleecing the public. If that’s not enough to conflict Clayton out of consideration to Chair the SEC post, then conflicts of interest have lost all meaning within the legal lexicon of the United States.”
The article goes on to say, “Clayton has been outside counsel to Goldman Sachs for years and is married to a Vice President at Goldman Sachs, Gretchen Clayton, who has worked there for 17 years. Under 18 U.S.C. § 208, the basic criminal conflict of interest statute, an executive branch employee is prohibited from participating personally and substantially in a government matter that will affect his own financial interests, as well as the financial interests of his spouse. This effectively means that the SEC Chair will have to recuse himself permanently from any matter involving Goldman Sachs.”
This means that a significant portion of Clayton’s family income while in office will presumably be coming from a company he is charged with policing. This is both far less common and a much bigger problem than you’d think. As one former congressional aide told Matt Taibbi of Rolling Stone, “Clayton will be the most financially conflicted SEC chairman in history.”
Senator Sherrod Brown (D-OH), who sits on the banking committee, had one of the most circulated quotes over this appointment: “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.'”
The banks Mr. Clayton has served are not Eagle Scouts. They are, for the most part, serial recidivists who are charged time and again by their regulators for breaking the law. They require constant oversight – which considering the circumstances, is doubtful Mr. Clayton can or will give. Mr. Taibbi comments “Even if Clayton recuses himself on decisions affecting his former clients and Goldman Sachs, the situation is ridiculous. Who needs an SEC chief who has to stay on the sidelines for some of the most important cases the agency considers?”
The Securities and Exchange Commission (SEC) does not have criminal powers. Its role is to bring civil actions against Wall Street lawbreakers. The SEC then refers potential criminal matters to the Justice Department so they can take action. I’d like to remind my readers of my involvement with the SEC, in July of 2008, before the bank bailouts began that October, when I warned them, in two days of testimony, of what was occurring at Citigroup and gave them over 1,000 pages of documents. The SEC interviewed my former boss, verified what I had told them and still buried my testimony and did nothing!
In fact, they locked up my testimony and documents, refused to release them in spite of numerous FOIA requests, some of these under Ms. White’s leadership! One of these requests was from Bill (William D.) Cohan, author of House of Cards, who wrote the NY Times op-ed exposing what went on at Citi, the SEC and the FCIC, “Was This Whistle-Blower Muzzled?”
To avoid releasing the documents under the FOIA requests, the SEC claimed that the documents were “confidential” and “trade secrets,” which included the fraudulent representations given to the purchasers of mortgage-backed securities, which were all printed off the SEC’s public website.
If they had released the documents the SEC would have acknowledged that our government knew what Citigroup was up to before they were bailed out to the tune of $45 billion in capital and $305 billion in toxic asset guarantees. Even though I also gave this evidence and testimony to the FCIC, which they believed deserved a criminal referral to then A.G. Eric Holder, he also ignored it.
So my question is, how can we expect Mr. Clayton to hold Wall Street banks accountable, when after his SEC appointment is over he will probably be returning to his former firm, and continue his work with Wall Street banks? How can we expect he would aggressively pursue his former clients or the current clients of Sullivan & Cromwell? How can we expect impartiality and firm ethical decisions? We’re setting the SEC up for failure and the administration couldn’t care less about justice!