Senators war over Wall Street during hearing for Trump’s SEC pick

Senators battled over Wall Street’s relationship with the White House Thursday during the confirmation hearing for President Trump’s pick to lead the financial sector’s top watchdog.

The three-hour Senate Banking Committee hearing featured little hostility toward Jay Clayton, President Trump’s nominee to chair the Securities and Exchange Commission, but plenty of partisan skirmishes over Wall Street.

Democrats repeatedly expressed concerns over Clayton’s deep Wall Street connections and the roster of financial sector veterans in Trump’s administration. Treasury Secretary Steven Mnuchin, White House chief strategist Stephen Bannon and National Economic Council Director Gary Cohn are all Goldman Sachs alumni.

Republicans countered that Clayton’s two decades of experience working with high-profile financial powerhouses made him a perfect choice to lead the SEC.

Clayton, a partner at law firm Sullivan & Cromwell, has worked on corporate mergers and acquisitions and capital markets offers for more than 20 years. He’s represented Goldman Sachs, where his wife is a vice president, and advised and guided several Wall Street titans through government enforcement cases.

Clayton assured senators he’d wouldn’t play favorites if confirmed and promised to recuse himself from potential conflicts of interest. In his opening testimony, he emphasized growing up in a small town in Pennsylvania and a lifelong interest in public service.

{mosads}Even so, Democrats were quick to raise concerns about his connections to Wall Street and friends at some of businesses with cases before the SEC.

“People worry about trusting the market with their hard-earned savings. That what you’re walking into, Mr. Clayton,” said Sen. Sherrod Brown (Ohio), the committee’s ranking Democrat.

“You spent your career protecting the biggest names on Wall Street, which creates a hosts of conflicts for this position,” Brown said. “Those people are already represented among the president’s friends, advisers.”

Clayton countered that his “diverse experience as a transactional lawyer” is a strength that gives him intimate familiarity with investment markets.

Republicans were quick to back up Clayton.

“It seems a little surprising to me that a person’s success in a field in which we’re asking them to run an agency would be a criticism,” said Chairman Mike Crapo (R-Idaho).

Both parties looked to channel the anger felt toward the Wall Street executives and the reckless behavior that led to the 2008 financial crisis.

Democratic Sens. Heidi Heitkamp (N.D.) and Catherine Cortez Masto (Nev.) pushed Clayton to consider tougher penalties for executives who unknowingly preside over illegal or dangerous financial transactions.

Republicans insisted that Clayton shouldn’t be judged on who he represented, but rather on his familiarity with those parties and how he represented them.

“I believe attorneys should not be judged by the clients they represent but by the quality of the representation which they provide,” said Sen. Richard Shelby (R-Ala.), a former Banking committee chairman.

“You watched some of your clients do some really jerky things,” echoed Sen. Bob Corker (R-Tenn.) “Someone like you … really knows the broad array of good actors from bad actors.”

SEC commissioners appointed by both parties have historically had extensive corporate law experience. Former SEC Chairwoman Mary Jo White led law firm Debevoise & Plimpton’s litigation department, which represented several high-power Wall Street firms, before leading President Obama’s SEC.

Democrats now say the stakes are higher with Trump’s sprawling business empire and obscured financial holdings creating unprecedented conflicts of interest.

Sen. Elizabeth Warren (D-Mass.) probed Clayton on how he’d handle Carl Icahn, the multi-billionaire investor unofficially advising Trump on regulatory reform. Warren said she worried Icahn could illegally use inside information from the White House to guide his investments and make billions, insisting Clayton pay special attention.

“The American people are counting on you,” said Warren. “I do not understand how we can have someone who continues to trade on the market and influence regulatory policy.”

Warren also asked Clayton if he’d met with Icahn and whether he’d still talk to him if an Icahn company or transaction was under SEC investigation. Clayton said he met with Icahn once after his nomination to discuss Icahn’s “general view” about investment, and that he’d be careful to comply with legal and ethical guidelines.

Clayton said that while “it’s important to talk to participants in the market of all types,” “if there is an ongoing investigation and there would be the appearance of impropriety, it may be inappropriate to have that conversation.”

“That is something that needs to be navigated very carefully,” Clayton said.