WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH) – ranking member of the Senate Banking, Housing, and Urban Affairs Committee – today took to the Senate floor to oppose Jay Clayton’s nomination as chairman of the Securities and Exchange Commission, emphasizing the need for a strong, independent watchdog to police Wall Street.

Brown noted that Clayton faces a host of conflicts of interest due to the long list of giant banks and corporations that he has represented as one of Wall Street’s top lawyers. Brown stressed that if confirmed, Clayton will have to recuse himself from participating in SEC cases involving his law firm and former clients – including Goldman Sachs and Deutsche Bank – for two of the four years he could serve as Chair.

“Americans deserve a Chair who will run the SEC on their behalf, not for the benefit of Wall Street banks and big corporations,” Brown said. “[Clayton] will be sitting on the sidelines on potential enforcement actions… That doesn’t sound like someone who will be in there fighting for the American people or working to protect America’s financial markets.”

Senator Brown’s full remarks as prepared for delivery are below: 

Floor Statement of Senator Sherrod Brown – Opposition to SEC Chair Nominee Clayton

May 2, 2017

Mr. President, I rise in opposition to the nomination of Jay Clayton to serve as Chair of the Securities and Exchange Commission. Americans deserve a Chair who will run the SEC on their behalf, not for the benefit of Wall Street banks and big corporations.

Far too many folks in this town have collective amnesia about the costs for the last financial crisis: $19.2 trillion lost in household wealth, more than eight million jobs lost, and more than15 million foreclosures. Those numbers don’t get smaller as time goes by.

I know that in Ohio, and all over the country, families want strong rules that prevent banks from doing as they please to enrich themselves at the expense of others, and then handing the bill for to the American taxpayer when they need a bailout.

The most basic duty of the Chair of the SEC is leading his fellow commissioners through tough issues and policing Wall Street -- and Mr. Clayton will fall short. Woefully short.

Mr. Clayton’s law firm and former clients will create a steady stream of conflicts for him, forcing him to recuse himself in cases involving former clients for two of the four years he could serve as Chair.

He will be sitting on the sidelines of potential enforcement actions against some of the biggest Wall Street banks -- Goldman Sachs, Deutsche Bank, Royal Bank of Canada, and UBS.

That doesn’t sound like someone who will be fighting for the American people or working to protect America’s financial markets.

This is not a theoretical concern. Former Chair White faced conflicts and recusals in more than four dozen enforcement investigations in her first two years. In those cases, big corporations – like Bank of America – used those recusals to their advantage when the Commission was deadlocked.

This undermines the Commission’s authority.

Instead of confirming the same kind of nominee we’ve had in the past, with dozens of conflicts and recusals, we should be considering someone who can actively work to protect investors.

At his hearing, Mr. Clayton failed to provide clear answers to questions about how he would approach enforcement matters.

He gave empty answers about punishing bad actors and individual accountability. Accounting fraud, selling toxic derivatives, and corporate foreign corruption usually involve senior management and happen because the tone from the top allows it to happen.

Mr. Clayton doesn’t see it that way. He spent his career representing – which means protecting – Wall Street banks.

That history guides his view on how SEC enforcement should work. According to Mr. Clayton, the SEC should proceed with caution even before opening an investigation, because even commencing an investigation “can have serious adverse impacts on respondents.” 

He has it totally backward. Not investigating companies that may be committing fraud or other abuses because it might create problems for them should not be the policy of the SEC – the agency charged with protecting investors and the markets. We saw this attitude before the financial crisis.

The failure to hold any individuals accountable for misconduct leading to and during the financial crisis shows that more could have been done.

I believe Chair White could have pursued more cases against individuals, and made clear that there are real consequences for abusing investors and corrupting the market.

But, under Chair White the SEC pursued a broad scope of enforcement cases and obtained judgements and orders of more than $4 billion in disgorgement and penalties in each of 2016 and 2015.

Unfortunately, under the current Administration, the SEC is already heading in the wrong direction on enforcement.

Acting Chair Piwowar began undermining the SEC’s enforcement division in his first month on the job. He reversed steps taken by the two previous Chairs that empowered the SEC’s enforcement staff to open and pursue investigations.

In his hearing testimony and in response to written questions, Mr. Clayton refused to commit to restore the SEC’s enforcement policies of the last eight years. Yet another example of how Mr. Clayton doesn’t plan to put ordinary Americans’ 401Ks ahead of Wall Street banks.

Mr. Clayton does not have a background helping working Americans invest and save.

Main Street investors need Mr. Clayton to represent them when it comes time for rulemaking and setting policy. But Mr. Clayton’s answers to Member’s questions failed to provide any awareness of the need to protect investors or preserve shareholder rights.

So while he wants to open the capital markets to more companies, Mr. Clayton doesn’t seem to care if the investors who provide capital are treated fairly. We need more accountability to shareholders, not less.

If Mr. Clayton is confirmed, he will also have to answer for the unilateral rollback of final Wall Street Reform rules that the Acting SEC Chair has undertaken.

Earlier this year, the acting chair asked for additional public comment on the final Wall Street Reform rules requiring disclosure of CEO-to-worker pay ratio.

Mr. Clayton will have the opportunity to do the right thing and restore Congressionally-mandated final rules. If he does, that will be a sign that he respects the rule of law and the intent of Congress.

If he does not, it will show us that he is taking the side of big corporations and that he views Congressional requirements as optional.

They are not optional and I will remind him that the SEC Chair works for all of the American people.

Mr. Clayton must understand that investors and other stakeholders need the important disclosures under the Wall Street Reform Act. I hope that as SEC Chair, he learns that other disclosures, such as details on corporate political spending, are important to shareholders and provide necessary transparency.

For years, Congress has funded the SEC below the levels requested by the Obama administration, despite more responsibilities and increasing market complexity and sophistication.

And based on his focus on protecting big banks, I fear resources that could be applied to expand oversight of brokers and advisers, or to review corporate accounting irregularities, will instead be diverted to rolling back the rules, in the hopes of creating more and more IPOs for Wall Street.

Public service is important and valuable, but it should not be viewed as a chance to push big corporations’ favorite policies, with the intention of landing that next important job or big paycheck.

With his background and his answers to the questions in the Committee’s hearing and questions for the record, I am not convinced that Mr. Clayton is the best person for this job. I will oppose his nomination.

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